Beyond Bearish

Diamond Jim.........The Greek Debt Crisis and other Econ. Songs

2011-10-22T08:35:00.000-06:00

For those of you who aren't econ wonks, Diamond Jim is referring to Jamie Diamond, the head of J.P. Morgan Bank, and Glass-Stegall is a law that was repealed that separated investment banking (risky) from banks where actual people deposit their hard earned money.

The Greek Debt Song:

(Other clips by Merle Hazzard)

No saterical movie review would be complete without Hitler. But I think this is a lot how the Germans really feel:

This clip is actually better, but embedding was restricted by the uploader.

Also, on a more serious note, this is a great article, and brings up and discusses a point that is central to any real recovery, but has not even been mentioned by the talking heads, and that is energy, and it's relation to capital and labor. It is a bit if a read, but I think it pretty much holds the key to recovery. The talking heads might not get it, but if you look at the conflicts in the world you can see that some very smart people through out the world are fighting over it.

Congressman Ron Paul

2011-07-27T10:00:00.000-06:00

Congressman Ron Paul outlines his ideas. He doesn't have a chance, and I actually think if he were elected that he would be have an unfortunate 'accident'. But watch the clip and see if you don't think he makes more sense than anyone else.

Saudi Oil Reserves

2011-02-09T13:12:00.003-07:00

While it might be fairly quiet in Sweet Haven, it has been pretty busy in other areas. I haven't blogged on any new developments for the last few months as I thought that most of you that read this either are following developments on your own and are making preparations/plans/changes in your lives, or you really don't want to hear about any new developments and are happy with the 6:00 TV news version of the world. In either event, you probably don't need me yammering in your ear.

Except, maybe one more yammer. Or two. You know you can't eat just one..... I came across this article yesterday and thought that it was important enough to mention again, and to drag up and review the whole peak oil concepts one more time.

As a quick review of peak oil:

much, if not all of our prosperity and current standard of living comes from the use of huge amounts of energy, primarily from oil in total quantity, and from electricity in quality - which is also dependent on oil for much of it's production.
oil discovery's peaked in about 1961. We have been using more oil, world wide, than we have found since about 1983. You can't pump oil that you can't find.
for more discussion about this, take 'The Crash Course'. It might take you about an hour, and it should open your eyes.

Admittedly, this isn't much of a recap, but probably more than you have read or heard about lately. And now to the meat of the post. Yesterday, I came across this article:

Saudi Oil Blunder May Blow Lid Off Oil Prices

I don't know how you feel about WikiLeaks, but this information came from some of those diplomatic cables. If you have followed or studied much about peak oil, then this doesn't come as a big surprise. Oil reserves are calculated using probabilities that aren't usually disclosed in the news bite, and several different numbers can be given for the same field that could all be 'true'.

For example: Bill is a geologist who discovers a geological structure that he calculates has 50 million bbls of recoverable oil in it. He is a scientist at heart and the 50 million number has a 90% possibility of being proven. But there are some other data that show areas that might well contain another 25 million barrels, but not so much of a sure thing - maybe 75%. So Bills boss might well report a find of 75 million barrels. There are probably other structures that are nearby, or possibly connected that could conceivably produce another 15 million barrels. But the probability of that happening might be down in the 35-40% area. But, when the company president is reporting to the shareholders, it is pretty likely that he will use the 50+25+15=90 million barrel number to show how well things are going. All of the above estimates could be considered to be 'true' especially if the probability was reported, which it almost never is.

Also, the amount of oil that an OPEC country can sell without violating their quota is proportional to the amount of oil they hold as reserves. Amazingly, in the 1980's, the reserves of many of the OPEC countries would increase overnight, sometimes doubling. Since these are all sovereign countries, it is difficult if not impossible to see their data first hand, and so we must rely of educated guesses by geologists, some of whom worked in the various countries and have a fairly good idea of the recoverable oil.

I have to confess that when I first became concerned with peak oil, I was pretty innocent about the ways that a country could use money, markets and the military to give themselves a competitive advantage. I thought that gas would just get more expensive, more or less in a linear manner and that we would 'share the pain' with the rest of the world. I was unaware of how central banks use money creation and destruction as weapons, and how much economic activity is affected by energy prices. It's a complicated mix, and about the only thing that you can say at the end of the day is that the 'golden rule' prevails - those that have the gold make the rules.

Which brings us to what conclusion? My conclusions haven't changed. I'm afraid that we are coming to a point that could be graphed as the intersection of increasing world wide energy demand with decreasing world wide energy production. I'm really not sure what this will look like in our every day lives, but it is the point where our collective economy will peak. For me it is a given that we will all have to work harder, and probably be poorer. It's hard to say where all the money will flow, and who will be in control of what, when the dust settles fifty years from now.

Energy has been a good slave. Each day we (U.S.) use the energy equivalent of having 200 human slaves to do our work. Loosing 10% of that amount of energy would be the same as losing the work of 6 billion people, or pretty close to all the people on the planet (300,000,000 x 200 x 0.1 = 6,000,000,000). I just picked 10% as a loss number out of the air. I think that world wide we will see energy consumption losses greater than 10% in the next decade, but our mileage may vary. We live in a very powerful country, and we have a very powerful military and the reserve currency of the world. We might be protected for some time or we may not.

In 'The Magician's Nephew' Digory and Polly come upon a bell with a sign that read: 'Make your choice, mysterious Stranger - strike the bell and bide the danger, or wonder till it drives you mad, what would have happened if you had'. We are largely in the same situation. Whether we know it, or believe it, we are in a new world, a world of coming energy scarcity. And that isn't absolutely true either - it will be a world of energy scarcity if we continue to have an unchanged energy appetite.

When our kids were in high school, and were attending Seminary they were given certain basic guidelines that if followed, would help to protect them from a lot of the problems and temptations that they might be subject to. So when Annie and I would be giving them a drink from the deep well of our knowledge and experience, we would often touch on these same principles and they would roll their eyes a little and tell us something like: 'yeah we know!! Say your prayers, read your scriptures, pay your tithing and go to church.....' . Mostly we would all laugh at how easily good advice and sound principles can become a cliche, but still be true.

The sound advice that we have been given for living in these troubled times has been heard so often that it too has become a cliche, but is not less valid:

avoid unnecessary debt like a plague (we don't have much experience with plagues - think virulent stomach flu before you use your Visa.)
have a supply of food and water on hand (1 year food where possible) (water filters, chlorox)
have a 1 year supply of fuel for heating and cooking where possible (solar, propane, gasoline, wood)
strive to have as much home production as possible - garden, fruit trees, berries, bees etc.
seek learning and new skills. Learn how to build things, how to repair things (cars) etc.

Well, that is about it. I won't be harping on this for a while. You can believe it or not, just don't plead surprise.

Quantitative Easing Explained

2010-11-13T16:09:00.000-07:00

Easy to understand, but hard to believe. HRW is not a bad thing to have with this silliness going on.

Opening the BCCI Crypt

2010-10-12T12:14:00.000-06:00

There are no words. Well, maybe a scripture: Ephesians 6:12 It's a wicked world we live in. BCCI is the stinkiest of cheeses, and the ripest of roadkill.

This calls for some serious gardening, with maybe the plans for a small hen house and a little goat pen...... And maybe a grandkid fix would be in order as well.

Skyrider 'Saddle' Seat - More Passengers per Airplane

2010-09-15T12:03:00.000-06:00

Here you go. Reduce legroom to 23 inches from 30 inches, and you can put more people on the plane! Hmmm.... a new kind of Bottom Line?

Michael O'Leary's Idea of a Good Airline

2010-09-13T14:22:00.000-06:00

Ryanair's Michael O'Leary explains why air travelers are cattle. Hmmm.....dangerous and uncomfortable ideas.

Arizona, Borderlands and US-Mexican Relations

2010-08-03T12:20:00.001-06:00

This is an excellent article. It is one of the free articles that you can read at STRATFOR. I think that I have mentioned STRATFOR in earlier posts, but if not, I will now. STRATFOR provides intelligence reports and analysis for business, investors, and I suppose for political junkies that just like to know what is going on under the geopolitical hood.

On the touchy subject of immigration (both legal and illegal) George Friedman's analysis gave me a new perspective as to why we struggle so much with this issue. I'll try to be brief. If I'm not clear, please refer to the article as the 'Reader's Digest Condensed Version' will not be as good or complete as the original.

Significant points:

Mexico used to occupy what is now Colorado, Nevada, Utah, Arizona, California, Texas and New Mexico. The United States was weak economically and militarily before the Louisiana Purchase and when the Northwest Territory was ceded to the US by Great Britain . New Orleans was the key strategic city as it controlled the Mississippi River system and all the barge traffic and shipping to the interior of the country (US 1803-1804 Map).
The creation of the Republic of Texas pushed Mexico back from New Orleans (map) by several hundred miles. Annexation of Mexican holdings north of the Rio Grande allowed the US to tie the East and Left coasts together - a great strategic advantage.
To be profitable, this new area needed a cheap labor force. We (Federal Government) wanted a non-legal, cheap work force. Mexico wanted jobs for it's people and tactically encouraged their migration north.
The Federal Government was happy to allow this immigration to occur and to continue and to let the States bear the social and economic costs.
The Federal Government does not want to legalize the workers in the US, and does everything possible to keep the issue from being settled.
Mexican workers tend to hold to old loyalties and not become as integrated as immigrants from countries that are geographically distant.
These issues are not unique to the United States and Mexico, but occur world wide, wherever these same conditions prevail.

Well, I hope you find this as interesting as I did. It's not a unique situation, even though it is new to us. I think eventually we will move to secure the southern border, but there are powerful economic forces in play for the status quo to remain in place for quite a few years.

There Is A Reason These Pictures Aren't On the Evening News

2010-07-12T06:59:00.000-06:00

Until you see how oil in the Gulf impacts wildlife, it is pretty much an abstraction. Small wonder that these pictures survived at all. Kind of one of those things that we would like to lay at the feet of BP, but we all support, and even demand that the drilling continues. If you doubt this last statement, think honestly what your attitude towards off shore drilling would be if we were paying $8-$10 per gallon of gas.

A Thought Experiment: Iran

2010-06-30T08:52:00.000-06:00

Some of you will find this wildly confusing...actually probably everyone will at first as it seems to make no sense. But keep reading, each of the countries mentioned is a metaphor, and towards the end of the article it starts to come into focus. It kind of bends your mind around a corner, but then I guess that is what thought experiments do. For the record, I don't think that Iran is an innocent victim.... but then pretty much all leaders play the 'Great Game' mostly as a zero sum game, and for their own benefit.

A Thought Experiment: Iran
A whole bunch of American ships are headed to Iran, including one aircraft carrier. Some claim this deployment is “normal”, while others think it might be the first move in a U.S. offensive against Iran, either actual or diplomatic.

From the Iranians’ point of view, there’s only one way to look at this deployment: As another provocation.

American leadership—educated at the best schools and colleges, multi-cultural up the wazoo—don’t have a clue why Iranians feel beseiged. They have no idea why Iran acts the way it does. They don’t even realize that they don’t understand Iran’s motivations....... So perhaps a thought experiment is in order—for once, let’s try looking at the world from the Iranians’ point of view:

To begin: Let’s imagine some obscure Brazilian terrorist attacks China, way on the other side of the earth, literally. This Brazilian and his minions blow up the Forbidden City and the Great Wall, in one fairly spectacular terrorist attack.

We’re in America—this shouldn’t involve us. But as a consequence of these terrorist attacks, the Chinese—screaming for vengeance—deploy their sophisticated weapons and their millions of soldiers, and invade Canada. Supposedly, this Brazilian terrorist who attacked China is hiding out in the Great White North—which is why the Chinese are invading Canada.

We Americans express genuine sympathy for the Chinese’ loss. We decide to actually help the Chinese find the Brazilian terrorist! We even decide to help the Chinese with their conquest of Canada! That's how much we repudiate this cowardly terrorist attack.

But then, out of the blue, the Chinese leader—in a carefully choreographed official speech—declares our country part of an “axis of evil”. And with no provocation on our part—indeed, after we have helped the Chinese conquer Canada—they vow to wipe us out at the slightest provocation, presumably with nuclear weapons.

Then, the Chinese start to claim that Mexico, of all countries, was involved in the terrorist attacks against China. Nevermind that the Mexican leadership hates and fears the Brazilian terrorist. Nevermind that the Brazilian is an ultra-Catholic, who hates and distrusts the Mexican leadership for being born-again Baptists. Nevermind that there's no rhyme or reason for this alleged collusion.

The Chinese use trumped up and extraordinarily dubious “evidence” to back up this claim of collusion—they even claim that the Mexicans are developing WMD’s that they intend to use on China, which stirs the Chinese populace into a frenzy.

Then, the Chinese illegally invade Mexico, and outright occupy the country.

Our nation now finds itself besieged: There are a hundred-thousand odd Chinese troops in Canada to the north, and another couple of hundred thousand odd Chinese troops in Mexico to the south—all of them armed to the teeth. And back in China, they're hysterically screaming for “regime change in America”.

We in America know what the Chinese really want—they want our food. We’re the world’s breadbasket. And while China has plenty of food, they want more. They are unwilling to make their citizens pay fair market prices for food—so they want to capture our food, so they can feed their citizens at our expense.

Meanwhile, Venezuela—a country one tenth the size of the U.S. in terms of territory and population—is hell-bent on regional hegemony. Venezuela consistently antagonizes and provokes the U.S. with their undeclared nuclear weapons.

But what can we do? The Chinese support Venezuela with weapons, billions of dollars in aid money, and the full weight of their political and military power. Venezuela provokes us constantly, to the point of stationing three of their submarines—loaded with nuclear missiles—not fifty miles off America's East Coast. In easy striking distance of America’s major cities.

Meanwhile, back in China, the woman who is the current Foreign Secretary not only openly hates us, she once said that even a minor skirmish with Venezuela would result in the U.S. being "wiped off the face of the map"—meaning, presumably, a nuclear response.

We have no nuclear weapons. But we do have a whole lot of hate for both China and Venezuela—justifiable hatred.

America’s history (in this thought experiment) is inextricably tied to China's foreign policy. Back in 1953, China forcibly overthrew the democratically elected government of Dwight Eisenhower, in a covert operation known as Operation Ajax.

Then, China installed their puppet-dictator, Richard Nixon, who ruled for 25 years with an iron fist, using the SAVAK—Nixon's feared secret police, trained by Venezuela’s Mossad security agency, and China’s own CIA.

China and Venezuela kept the puppet-dictator Nixon in power for 25 years, using SAVAK to kidnap, torture and kill American freedom-fighters. Great American men and women were lost. People like Robert Kennedy, Martin Luther King, Jesse Jackson, Gloria Steinem, David Halberstam, Woodward & Bernstein, Bob Dylan, Willie Nelson, Ray Charles, Paul Newman, Francis Ford Coppola, Billy Graham, Jerry Falwell, Naom Chomsky, Jonas Salk, Harper Lee, even poor Rosa Parks and countless others were all tortured and/or killed by SAVAK, often with the assistance of Venezuela’s Mossad and China’s CIA.

While the flower of America was being tortured and killed, America’s breadbasket was being raped by Chinese and Venezuelean interests—from 1953 to 1979, they took our food and didn't pay a dime for it. Or else they “paid” for it by giving their puppet-dictator credit to buy Chinese weapons—weapons which their puppet-dictator then used against American citizens!

Finally, we Americans—after tremendous struggles—managed to overthrow the Chinese puppet-dictator in 1979. (And where did the murderous bastard seek asylum? His patron-state, of course—do we need any more evidence that he was their marionette?)

China declared us a “rogue nation” after we overthrew the dictator who had repressed us so horribly. Since then, 30 years later, the Chinese have been consistently trying to undermine our economy with sanctions and United Nations embargoes.

They’ve succeeded, too—our economy is not a fraction of what it could have been, had the Chinese not had this vendetta against us. They choke our economy, while threatening us with their overwhelming military power, and goad us with the Venezueleans just to annoy and humiliate us.

All because of our resources—the Chinese are so insane to possess what is ours that they will do whatever is necessary to take it away. That is why they hate us. That is why they have interfered unforgivably in our history. That is why they want to destroy our country, and turn it into their “protectorate”—so they can once again rape our land, and take away what belongs to us, and to our children.

They openly say that they want a “Chinese-friendly regime change”. They say they want “moderate Americans” to control our country—but the people they refer to as “moderates” are people who worked for the bloody dictator we overthrew. Our current leaders—members of the America-First/America-Free party, good Mormons one and all—sometimes are over-the-top, no one will deny it: Sometimes they say stupid things. But we trust them. We know they are our representatives—not Chinese puppets, like Nixon and his goons.

The Chinese claim that they invaded Canada and Mexico in order to find this Brazilian terrorist—but with all their power, they still haven't found him after almost ten years. Was there ever a terrorist? Or was it a false-flag operation? Did the Chinese themselves blow up the Forbidden City and the Great Wall, in order to have an excuse to invade the North American continent? Some of their own people publicly believe that the Chinese government staged the terrorist attacks as an excuse to invade the region—that should tell us something.

The Chinese plan to invade and/or destroy us—that is obvious. So we won't give them the chance: Instead, we’ll help the Mexican and Canadian insurgents. We’ll give them weapons and money, so we can buy time. Soon, our scientists will develop nuclear weapons of our own: Then neither the Chinese nor the despicable Venezueleans will ever again hold their nuclear sword to our throats with impunity. Soon, we will be able to strike back—and if they provoke us, we will strike back. Even if it means our own destruction.

After all, it’s a thousand times better to die free than to live on your knees. Living under the Chinese-controlled puppet-dictatorship taught us that. We won't let it happen again.

Here ends the thought experiment—but not the questions.

———————————

First of all, the more you think through America’s provocations and interference in Iran’s history, the more you can’t help but be impressed by Iran’s self-control. They’ve played their cards much better than either the U.S. or Israel.

Precisely because of all the foolish, pointless tauntings and provocations by the U.S. and Israel, I think it’s likely that—regardless of what they say—Iran is very busy trying to acquire nuclear weapons. Israel’s and the U.S.’s nuclear taunting guarantees that the only thing that will give Iran’s people and leadership peace of mind is a few dozen nuclear-tipped rockets. And they will in all likelihood acquire them—one way or another. Fear will drive them.

For now, Iran’s strategy of quietly but steadily fomenting insurgents in Afghanistan, Iraq and Palestine is the only sensible approach Iran can take. It has to keep America pinned down in those two quagmires while it develops nuclear weapons.

Because that’s Iran’s ultimate goal—obviously: From the point of view of Iran’s leadership, any other strategy would be irresponsible and foolish. The Iranian leadership want to protect their population from both the U.S. and Israel. From Iran’s point of view, only the acquisition of nukes guarantees their safety.

However, a nuclear Iran isn't a disaster—on the contrary: My own sense is, if and when Iran actually acquires nuclear weapons, regional tension will paradoxically ease—think India/Pakistan. And Iran is a far more stable country than Pakistan, with none of the territorial ambitions or frictions.

If and when Iran acquires nukes, the U.S. will realize it can’t fuck with Iran anymore—it has to negotiate. The same conclusion will be arrived at in Tel Aviv.

The danger zone, I think, will be that uncertain period before Iran for-sure has nuclear weapons—in other words, the period we are living in now.

It is conceivable that Israel will stupidly launch a pre-emptive strike, in a misguided attempt to “protect Israel” from Iran acquiring nukes. In fact, I would argue that this is a very possible outcome. This pre-emptive strike will bring about a nuclear retaliation by Iran—they’ll simply buy a few from Russia (which would be happy to sell them, if Israel starts launching nukes helter-skelter), and that will be that for Israel. Israel is smaller, and more concentrated. In any nuclear war, Israel will lose.

Now is the danger-time. And it will be the Americans and the Israelis—not the Iranians—who will pull the trigger on the regional suicide.
Posted by Gonzalo Lira at 1:55 PM
Labels: Middle East

A Look at Retail Gold Demand in China

2010-05-25T16:35:00.000-06:00

Just a thought.

Club K Shipping Container Cruise Missle System.

2010-05-07T16:40:00.000-06:00

I wasn't sure which blog would be the best for this, and while it is terrifying, it is amazingly clever from an engineering point of view. Kind of like a suitcase bomb, but their existence is more anecdotal.

There is another clip where a Russian general assures everyone that they would only sell these to reliable and well know end users.... and while that might be true, I can't help but think that they must not be the only ones with this technology, or that could build it.

Just knowing that these clips and others like it are out on the net must give people in the Iranian government quite a bit of satisfaction. On the other hand, those that are so ready to bomb Iran, or Syria....or you pick a country...back to the Stone Age should probably watch a few of these clips and ponder them.

What a world we live in. Makes me want to stay home and work in the garden.

The Great Con

2010-04-07T17:09:00.001-06:00

Same old story, but a really good explanation of how we got here, and what happened. It's a good dissection of the financial industry.

Visit msnbc.com for breaking news, world news, and news about the economy

In Dodd We Trust

2010-03-17T13:01:00.004-06:00

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

In Dodd We Trust

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Health Care Reform

Jon Stewart rocks.....

Getting the Story Right

2010-03-08T15:26:00.007-07:00

This post by Chris Martenson strikes a chord with what has been going through my mind lately, except he says it much better than I can.

He believes that a huge part of our economic problems has it's roots in our energy problems. Chris has a power point type presentation (The Crash Course) that explains the interactions between energy and our economy, and addresses the need we have in our economic system for constant growth, and how constant growth is not possible in a system that has a limit to resources. It is worth the time. But now, the 'Bedtime Story':

Chris Martenson:

New home sales fell apart in January, tanking to their lowest levels in nearly 50 years. This is not surprising to me. The economy is not doing okay, is not in recovery, and is sliding down a slope of excessive debt and decades of overindulgence and structural imbalances that will take quite some time to repair. And that’s assuming there are no exogenous shocks from oil scarcity or other resource issues along the way.

Despite everything that has transpired to reveal the deep structural flaws in our economy and its main theories, few in the media and government seem to be able to grasp the concept that the story has changed and that all efforts to perpetuate ‘the story’ will only prolong the agony and make things worse.

Let’s examine the evidence:

Economists surprised as new-home sales fall to lowest level in nearly 50 years

Thursday, February 25, 2010

Sales of newly built homes unexpectedly plummeted in January to their lowest level in nearly five decades, providing more evidence of the housing market's fragility.

Purchases of new single-family homes dropped 11.2 percent in January from December to a seasonally adjusted annual rate of 309,000, the Commerce Department reported Wednesday. Sales fell in every region except the Midwest, and the raw number of new homes on the market rose for the first time in nearly three years.

"No sugarcoating these numbers," Mike Larson, an analyst at Weiss Research, wrote in a note to clients. "They stink."

The figures are the latest in a string of mixed indicators about the housing market's health and renew questions about whether the federal government should follow through on its plans to soon end initiatives aimed at stimulating sales. Those efforts include a Federal Reserve program that helped pull down interest rates and a tax credit for first-time buyers and others.

It’s that last paragraph that gets me. The government has poured tens of billions of dollars into tax credits and loan modification programs in an attempt to coax more people to buy homes (or at least not vacate them), while the Federal Reserve has spent more than a trillion dollars buying up mortgages with the intent of driving down mortgage rates.

Of course, the lower the rate of interest, the more someone can afford to pay for a given house. The rule of thumb is that for every 1% change in mortgage interest rates, a roughly 10% change in the affordability of a house is registered. So the Fed mortgage buying program should really be named "the program to maintain house prices above what people can actually afford."

At this point, we might wonder if it is at all proper for the government/Fed to be responsible for controlling the housing market in this way. I say it’s not.

Further bad news slipped out in the market for existing houses, further underscoring the extent to which the housing tax credit probably did little more than accelerate a few purchases.

Existing-home sales fall 7.2% to 7-month low

Sales plunge at record pace after first expiration of tax credit

WASHINGTON (MarketWatch) - Resales of U.S. homes and condos fell 7.2% in January to a seasonally adjusted annual rate of 5.05 million, the lowest in seven months, and raising concerns about the durability of the housing recovery, the National Association of Realtors reported Friday.

Sales of existing homes have fallen two consecutive months after rising steadily through the fall on the back of a federal subsidy for first-time home buyers. The 16.2% decline in December was the largest on record; January's decline is the second largest since 1999, when the NAR began tracking consolidated sales of single-family homes and condos.

Not only is it clear that housing is not out of the woods, but also that whatever recovery there was came about largely because of the tax credit.

To see the official story on display, all one has to do is read practically any article about banking. In this one, where a sharp drop-off in bank lending is bemoaned, we see it on full display.

The decline in lending is a looming issue as the economy begins to recover. Companies start by returning to full capacity, filling open desks with new workers or running equipment more hours each day. But for the recovery to continue, for businesses to expand and employment to grow, lending must begin to expand, too.

Well, isn’t that just a fine systemic mess we’ve gotten ourselves into? In order for our economy to basically function at all, lending “must begin to expand, too.” We’ve bought into the collective story that money has to be loaned into existence, and the author of this piece is absolutely correct. Lending does have to expand, but the idea that there are other economic models where that is not the case is left out of that assessment.

Wouldn’t it be far better to have an economic model that could operate well, independently of whether it was expanding or even contracting?

This all gets down to whether we are pursuing the right story. I would guess that that one story line playing in the government/Fed goes like this:

“Housing is an important component of the economy that we’d like to see growing faster. Therefore, anything we can do to try and rescue housing is a good thing. If we fail to act, people will lose their homes, the economy will decline, and these things will be politically unpopular. Without credit expansion, our economy can't function. Even though low rates hurts savers and the prudent, it is more important that we artificially support credit expansion. Therefore our actions are warranted.”

I have some sympathy for this view and understand how it could ripple through the halls of power. It’s compelling, and it gives both politicians and bureaucrats the ability to exercise enormous power while looking like they are doing something.

However, I have a different story line, and it goes like this:

“The extreme run-up in housing prices was just a symptom of the largest, most ill-advised credit bubble in history, the impacts of which extend across nearly all asset classes. One effect of the credit bubble was that we lived well beyond our economic means for nearly two decades. To try and sustain that unsustainable condition with further borrowing and money printing is not only probably impossible, but it risks the complete destruction of our money itself. Worse, the larger story, that we are living well beyond the carrying capacity of the earth, is being utterly ignored.”

Those are very different stories. Where the governments around the world are attempting to return us to economic growth as fast as possible – any type of growth, they don’t care – I would be seeking to direct our energies in a far more focused fashion.

The most profound questions of all time are now, right at the surface, and we are wasting an opportunity to explore them. Questions such as, “How much is enough?” and, “What’s the role of the human on the planet as one of many organisms living within a complex environment?” are critical and demand significant attention.............

And here’s the crux of the issue: By ignoring the importance of energy in maintaining the complexity structure of our open-system economy, economists have done far more harm than good. The risk we face, the one that has attracted so many people to the ideas in the Crash Course, is very simply a large and possibly sudden loss of complexity - when, not if, the vast energy subsidy of the past 150 years begins to be withdrawn.

Because our economy is a complex (and not a linear) system, it is virtually impossible to predict how things will unfold in their precise details, but we can describe the basic process. Think of a wave crashing on the beach - we cannot predict every turbulent eddy or tossed bit of foam, but the fact that it will rise, crest, crash, and then retreat is known. Similarly, our economy is propped up by an exponentially increasing flow of energy and resources, like a beautiful and rising wave, and we can readily predict that it will pass a point of maximum height and structure and then devolve chaotically into a much lower and less organized state, unless more and more energy is pumped into it.

Hopefully, we can all appreciate that this is a most (if not the most) crucial turning point in history. We are about to run a very large experiment, where we take the largest and most complex economic system ever devised and starve it of the exponentially increasing flow of energy upon which it was entirely fashioned.

It’s very hard to overstate the significance of this. It will literally touch everything we do.

This is why there’s no “solution” out there. And it the reason why I am continually vexed by the recurring question, “What should we do?” because often it is posed in a way that implies a different question is being asked: "What can we do to maintain everything we currently see around us?” Unless a massive new source of high-quality energy is found, there is almost no chance of maintaining our economy in its present form.

And this is why I claim that the next twenty years will be completely unlike the last twenty years. They don't necessarily have to be terrible, but they certainly won't follow a similar trajectory.

It is critical that we understand that we are not facing a problem, but a predicament. Problems have solutions, while predicaments only have outcomes. You can solve the former but only manage the latter.

Since we have a gigantic predicament on our hands, and we cannot predict how things will evolve or devolve when our economic model is starved for energy, the only rational response is to try to build resilience into our most basic and critical operating systems.

At this point, I simply don’t think there is time to develop new, large understandings and hope they’ll penetrate our major institutions quickly enough. I think triage is called for, and, lacking better information, I would propose that we’d do best by concentrating our efforts on our most basic life support systems, with food, water, sanitation, and energy on the bottom of the ladder, and health care, education, and other basic services on the next rung up.

Conclusion

I started with a few interesting stories about housing and banking to illustrate the degree to which we are still very much in the clutches of the old story. With every passing day, week, and month that we continue to waste valuable time perpetuating the old story, we put ourselves at greater risk of a sudden and shocking crash of our economic system.

Without a functioning economy, all of our technological dreams, hopes, and desires will not come to pass. We will not fetch the last oil from 35,000 feet under the ground, we will not have ceramic batteries in every garage, and we will not seamlessly transition to a new economy. We will have none of that. Instead, we’ll most likely have a steadily worsening economy that sometimes slumps frighteningly, paralyzing our minds and sapping our will.

All of this will happen, unless we develop a different framework for understanding the way the world really works. In my mind, we could do worse than to simply focus on the energy flows, and, while we're building that story, conserve what we use and become careful stewards of what remains.

Energy is everything.

This is why, in my own life, I am focused first and foremost on getting my energy use and flows as redundant, resilient, and as low as I can. I think it’s the right thing for the world, but I also think it’s going to prove to be remarkably good economics for myself as well. We must become the change we wish to see. I figure if I can't change my own life, then there's no point in writing or talking about it as something other people should consider.

When I had the chance at the UK Parliament talk, I gave one “solution” (more of a ‘response’, really, but people like the word solution) – I proposed that we create a national or even international organization to study net energy and energy flows. It should be extremely well-funded and attract our best and brightest, so that we can answer such simple questions as, “Should we retroactively insulate existing structures, or should we build a new light rail system?” Because we only know the economics of that question, we can’t answer the most important question of all: "Which offers the higher energy returned on energy invested?"

Me again:

The bolding emphasis is mine, the italic are his.

That was kind of long, but it is a complex and complciated situation that we find ourselves in, and over-simplification will not do. I don't know how any of you see this playing out. What you believe will be your future will dictate what you will do with your time and your resources.

If you think that the 'green shoots' will take root, and that we will continue to live the lives that we have lived for the past 30 years, then you will have very different priorities than if you believe that our lives have already fundamentally changed with the peaking of oil production.

If you believe that we have strayed from the 'real' normal that we are all pretty used to, and that we will revert back to that normal, then you don't have to do a thing. Continue on as you have been. The tank is still full, and you are still a rich (comparatively) American

I suppose that you could believe that energy is everything - vitally important, and that our governement and other institutions are going to adapt in time to prevent any dislocations in our economy and lives..... but that is a real Fairy Tale....

That leaves us with believing that things are going to change, that energy will be scarce, and that will effect our prosperity. If you look on a map (here, or here) that shows unemployment, you will see that a good many areas are unaffected. You see that the roof has fallen in other areas. It's kind of granular.

How do you get ready for a change like this - one that has never happened before? I can't think of a better way than what Chris said :

"I think triage is called for, and, lacking better information, I would propose that we’d do best by concentrating our efforts on our most basic life support systems, with food, water, sanitation, and energy on the bottom of the ladder, and health care, education, and other basic services on the next rung up."

Food, water - yeah, we are working on that. Sanitation? What?.....well...maybe more water than just to drink for a day. Toilets need water, and if you are in a building that needs to have water pressure to flush, you could truly be SOL. Do you really have to worry about this?..... again, look at the unemployment maps. Some areas will not work at all and some areas will be fine.

Energy? What? Well, again, think of the map. Mike was out of power for a week with Katerina, and would have been pretty happy to have a generator. Power will keep being produced for a long time, but utility companies will probably become weaker and weaker financially. They will cut their parts inventory, and they will trim back on personnel and then when an ice storm comes, or a hurricane or something, response will be slower. The bigger the calamity, the bigger the wait. Could you heat your house in sub-zero for a week? Do you have drains in your water pipes that would let you drain them out and prevent them from bursting?

I'm sure you get the idea. It works the same way with transportation - nothing wrong with having a good bike....or electric bike....or mo-ped.

Then there is your own security - Yes, when seconds count, the police might be there in minutes. How are your door locks? Deadbolt? Do you have motion detecting lights? I don't, but they are on my list. Fire? How about some more extinguishers? Do you have a hose long enough to water down your house if your neighbors house caught fire? Communications? 2-Way Walkie/Talkie's might be handy. CB or short wave would be better. Right now, I have some of the '2'Mile FRS band 2-Ways. And an old CB in the shop that I have never hooked up - no antenna, no cables, but on the list. No short wave or scanner, but on the list.

This probably seems overwhelming. But work on it "line upon line, precept on precept". If your spouse thinks this is wild and crazy talk, I guess then just do what you can. But start now - it is Spring. Make a list. Plant a garden.

NJ Governor Chris Christie - NPR On the Record

2010-03-02T13:25:00.001-07:00

It's worth the time. Great Governor

Comedy Central to the Rescue on a Monday Morning

2010-03-01T11:29:00.002-07:00

Take that!! Bank of America!!

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

Make it Rain - Bank of America

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Vancouverage 2010

Whitehouse Visitor

2010-02-24T12:17:00.002-07:00

This is a compilation of Whitehouse visitors, their interactions, and their contributions. Not the sort of information that is given in a press release. In real estate they say three things matter: location, location, location. In politics it might be access, influence, and networking.

Here you have

who visited and their title
companies that people from Obama White House visitors have the most positions in
people and orgs that people from Obama White House visitors have donated the most to
donors that people from Obama White House visitors have received the most money from

This isn't to point the corruption finger at the Obama administration any more than I would point it at any other. But it is interesting to see the players, how they interact and how the money flows. "All is vexation, and striving after wind....."

Kind of like the Kitten and the Owl

2010-02-12T08:55:00.002-07:00

We have a lot of large trees in our neighborhood - poplars that reach up about 100 feet. Several years ago we came to realize that we had a large barn owl that either lived in the area, or at least visited for extended periods, and had developed a taste for kittens. Annie and J had a little kitten out in the yard and she was enjoying the grass and open space - little tail spiking straight up as she ran around. They heard some bird noises up in one of the trees and saw a hawk harassing the owl. I threw a plum at the hawk and he flew off, leaving the seemingly peaceful owl.

The kitten continued to romp, but as Annie and J looked up, they saw the owl watching the kitten with great interest, and flapping her wings with seeming anticipation. The kitten was hustled inside, oblivious to the danger. Talking to some neighbors and a avid 'birder' at work, I found that the neighbor had seen an owl take a half grown cat, and the birder told me that this was very likely to be true. Just some thoughts.

I thought this YouTube clip was kind of scary, and my mind went back to the oblivious kitten. :sigh Well, you can make up your own minds about the metaphor.

Maybe the Worst Surpreme Court Decision Ever

2010-01-24T17:19:00.002-07:00

Visit msnbc.com for breaking news, world news, and news about the economy

Olbermann is a little shrill, but I was appalled by this decision. I really don't know why corporations should have the same rights as actual people, but they do. It's a slippery slope that we are sliding down.

On the Lighter Side: Hitler Finds Out That Brown Won Kennedy's Seat Clip

2010-01-21T12:18:00.001-07:00

Maybe I was just in the mood for something funny, but I think they did a good job on the sub titles.

Current Excitement In Yemen: Larger Context

2010-01-20T07:46:00.002-07:00

Nothing is as simple as it seems, and I guess that goes double for anything in the Middle East. I don't know if you have been following the attacks on various al-Qaida training camps in Yemen. I don't know much about Yemen, actually, I don't really know much about any of the countries in South East Asia. Part of that is probably due to my lack of intellectual curiosity and rigor, and part of it is due to the large differences in our cultures and heritages that makes it as hard for me to understand the differences between the Shia and Sunni as it is for them to understand the difference between Mormon and Baptist and Catholic. So I guess that I don't expect a warm, natural empathy between us, and rather struggle to understand them. Vulcans, Klingons, Romulans..... I think I understand the extra galactic aliens better.

But no mind. Graham Summers does understand them, or at least does a better job. I don't know if you want to really wade through this article or not. It is a little like walking through quicksand. Mr. Summers unwraps the many layers of misdirection and hidden alliances and shows you how complex and complicated this situation is. Anyway, you have been warned. It isn't easy, but it is enlightening.

How AAA Ratings System Work

2010-01-19T07:52:00.000-07:00

Sadly this isn't much of an exaggeration.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Of Tinfoil and Conspiracies

2010-01-18T12:16:00.002-07:00

This is so bizarre that I thought you might want to read it. Your tax dollars at work.

It is hard to know who is playing with your head. This kind of takes you back to 'Friends', Season 5, disk 3 or 4: Phoebe-"But they don't know that we know that they know that we know".... and the messors become the messees"

Stephen Colbert = Comedy Central on Honor Derivitives

2010-01-18T05:07:00.003-07:00

The Colbert Report

Mon - Thurs 11:30pm / 10:30c

The Word - Honor Bound

www.colbertnation.com

Colbert Report Full Episodes

Political Humor

Economy

The best part starts at 3:30 with 'The Word'. Have fun.

This Iranian Incursion in Context - Statfor

2009-12-21T15:00:00.002-07:00

This is a great article about the incursion that Iran made into Iraq during the last week or two. They sent in a small group of highly trained troops, captured and oil field, raised the flag, lowered the flag and went back to Iraq. George Friedman tells us why this was a significant event. Easy read, probably about a 10 minute read. Have fun. (It's possible that you will have to register with Stratfor to access this article. Registration is free, and they have a section of these articles that are pretty good that are available without subscribing).

A Crude Awakening - Repost with comment.

2009-12-19T19:43:00.003-07:00

"A Crude Awakening" is a documentary on peak oil, and our how much of our economy is dependent on cheap energy. Expensive/scarce (renewable) energy and economic growth, at least the kind of growth that we are used to are mutually exclusive, at least as far as I can see.

A good film that can help put things into perspective.

(p.s. : Mike asked for the highlights:

The film strives to tell a story that just isn't mentioned in polite conversation in the United States. Our culture and are economy are geared to growth, and we can hardly conceive of a situation where we can not keep the growth going. But without energy, the ride slows, the music stops.

In the early part of the film Matt Savinar (Life After the Oil Crash Matt) points out that a barrel of oil contains about the same energy as 25,000 men working for (I think) an hour. We never even think how much energy that we use each day. How much is a gallon of gasoline worth? If you had to push your car the distance that one gallon of gas would take you, or even if you just had to find a different form of transportation (less convenient and less comfortable) how much would that be worth?

Oil is why we go to war. For those of you who think that we are after Al Queda, or that we were really thinking that Saddam Hussein had weapons of mass destruction, wake up and smell the coffee! We went to Iraq to secure the easiest to develop oil reserves in the world. We are in Afghanistan just to be there. Our being there disrupts Iran's plans to become a regional power. We threaten them from two sides, and are close to Pakistan to help keep them balkanized and to be ready to lock down their nukes if/when they implode. Oil is why we have the biggest Navy in the world. Oil is why we have 785 (approx) military bases throughout the world.

Oil is why there is food for most of the people of the world. When oil becomes scarcer, it is likely that whole nations will starve. This in turn will increase the likelihood of war. Does this have to happen? I don't think that it has to, but I think that it will, given the nature of the leaders of most of the counties of the world. If we were all to lay down our arms, power down as much as we can, and try to live in peace and harmony with each other as well as with the earth, I think we could avoid it. Human nature being what it is, our global economy being structured as it is, I think what will happen is a huge game of musical chairs where countries use every available weapon to secure as much oil as they need. The countries that can not compete will either have to adapt or to starve. When North Korea and Cuba were both faced with a shortage of oil, they adapted in different ways. North Korea developed the bomb while tens of thousands starved. Cuba dismantled their conventional agriculture and planted gardens everywhere (city roof tops, empty lots.... ). Don't think that I am in agreement with the government in Cuba in general, but in this area, I think they made the right choice.

This film makes it sound like we are in a hopeless situation. This is true in a very 'broad brush' sort of way. But we don't live in all the world. We just live in our own little spot. You can see this in looking at unemployment maps. There are areas in the nation where unemployment is close to 40% - but it isn't the two states that our family lives in. All the nations of the world will be playing the musical chairs game, and the U.S. is one of the biggest kids playing. Right or wrong, our lives will be much easier at least for a while, than many other parts of the world. I can't change how our nation, or any other nation plays the 'Great Game', I can just prepare my little tiny world so that I will be least affected. That is all that any of us can do. But this film shows us that we (humanity, and the United States in particular) are vulnerable. It is good to know if you have a weakness, at least you can work on it then.

Well, that is about all. I wanted to post this film mostly for a resource. I know it is long, but it is a complicated subject with many different views. Hopefully, this will bring some clarity.

The Twelve Days of Christmas - 12 Months of Default

2009-12-15T08:36:00.002-07:00

This is kind of a fun clip. Sad that a lot of people are going through it, but good to know that actually losing your house probably isn't the end of the world.

Comedy Central's Jon Stewart takes on Fox New's Gretchen Carlson

2009-12-10T09:12:00.003-07:00

Again, have fun.

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

Gretchen Carlson Dumbs Down

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Health Care Crisis

Comedy Central's Steve Colbert Takes on the FED

2009-12-09T11:24:00.003-07:00

Have fun. I did. :)

The Colbert Report

Mon - Thurs 11:30pm / 10:30c

Fed's Dead

www.colbertnation.com

Colbert Report Full Episodes

Political Humor

U.S. Speedskating

Neithercorp Report

2009-12-07T09:49:00.003-07:00

Wow, three posts in one day..... and no earth shaking headlines.

I haven't followed these guys at all - just read this article today, but it has a lot of links to back up their case. There isn't anything really new here for dedicated doomers, but it is pretty complete. It is a time to continue to be as uneffected by the economy as possible - unplug, powerdown, prepare, and not just in electrical sense...... same old stuff, different day.

Power to the People.... Right On

2009-12-07T09:06:00.001-07:00

Experiment: A family goes about their daily routines in a special house, not knowing that the energy they use is being generated by 80 bicyclists in a nearby warehouse, and that the BBC is watching the whole experiment. Interesting. Have fun.

Less Than 10% Unemployment......

2009-12-07T07:15:00.001-07:00

Hmmmm..... yes, and we are from the government, and are here to help. This is instructive, and kind of fun.

Play it Again, Sam.......

2009-12-01T10:35:00.002-07:00

I suppose that as every generation thinks that they have discovered sex, somewhat the same can be said of discovery of other behaviors and phenomenon common to the life experience. So it is with somewhat the same wonder that I read the embedded article. It covers economic crisis, inflation, deflation, default - the works, for the last eight hundred years or so. And guess what, it is pretty much human nature to spend more than you make until you go bankrupt. As countries mirror the millions that make up their population, we shouldn't be surprised that countries by and large can not control their budgets, and tend to go into default with consistency and persistence. We typically don't notice this as the cycle is decades long, and our memories are a lot shorter and face it, you can study this stuff but it is a lot like Mick's lizard..... you can live on it but it tastes like ......

I don't expect many (or even any) to read this. It isn't the easiest of reading, but there is a lot of interesting information. Maybe that makes you wonder just what I mean when I say that I find you and "interesting person", if this is the kind of thing that interests me..... well, no accounting for some people's taste. Good luck, and if you tackle it, you will probably find some wheat in the chaff.

This Time is Different

An Interactive Unemployment Map

2009-11-18T16:18:00.001-07:00

This is an interesting map. It tracks employment levels by county from January 2007 to September 2009. Fweeee.........

And Now a Response from the Economy

2009-11-13T18:41:00.001-07:00

Great song and lyrics. Happy Friday night.

Free Geopolitical Articles on Stratfor

2009-11-10T15:09:00.001-07:00

These are great articles. I hope you enjoy them. George Friedman is a smart man with a lot of understanding.

The Shell Game

2009-11-10T07:16:00.002-07:00

Marketwatch's Paul Ferrell has a 'must read' article on financial innovation - derivatives. It's been said that children tend to want instant gratification, and we adults pat ourselves on the back and tell ourselves that for the greater good, we can wait a bit for our rewards. If that is true, then there are no adults on Wall Street, and there probably needs to be some.

5 Things You Should Never Say to an Insurer

2009-11-04T06:46:00.002-07:00

Short easy article with good points. It doesn't meet the standard for G&D, but I didn't know where to put it.

More Cheery News: Japan

2009-11-02T10:41:00.002-07:00

It looks like Japan is near, or has crossed the financial equivalent of the 'event horizon' of a black hole. Countries have debt limitations just like people, and there is a point where your debt is too large to be paid back, or even serviced, by your income. Your options as a central banker then are to hyperinflate, or to default.

Japan has tried to ignite the inflationary fires for years, but the Japanese people are by nature, culture, and demographics a thrifty and hard working people, and they save rather than spend.

I don't know where and how this will play out. The Wizards behind the curtains have many more controls than I have, or ever could imagine. But when the 2nd largest economy in the world is in this kind of shape..... it is just hard to imagine it ending well.

Well, it is a little like volcano watching. It's probably better that we don't get too close.

Asset Inflation, Price Inflation, that the Great Moderation

2009-10-28T06:47:00.002-06:00

This article by Steve Randy Waldman gives a great explanation to an important question that was put to him by one of his readers:

"...it is not clear to me that it is well understood why inflation sometimes can be seen in consumer goods and sometimes is manifested in "asset price inflation". Do you have any ideas on this mechanism? I know some people deny there is such a thing as "asset price inflation". Do you have a theoretical basis for your ideas in this area?"

While you might not have had this question on the tip of your tongue, it is a pretty important one and gets right to the heart of the question of what central bankers do, and why we as working stiffs don't and won't get a raise. I hope it answers some questions.

Outsourcing Unemployment

2009-09-16T16:36:00.001-06:00

Hulu. Pretty interesting.

Debtor's Revolt

2009-09-09T08:33:00.001-06:00

Hmmm...... I'm sure they don't want this kind of thinking to catch on.......

Blue Pill/ Red Pill - The Crash Course

2009-09-04T12:15:00.003-06:00

I've stumbled across a new blog that you might want to look at. I'm not recommending him without reservation because I haven't read his posts in any great degree or detail. His name is Chris Martenson, and he seems to be one of those guys who is both really smart, and really good at explaining things.

Economics is devilishly complicated and often small and seemingly insignificant changes in laws or regulations can have surprisingly large consequences. Chris has a tutorial that I am enjoying a lot, called 'The Crash Course'. It is a series of well presented power point like clips that talk about math, money, inflation, government, etc. in an easy to understand and non-threatening manner. I like it because I can move the slide back a little when he has a point that I didn't quite get. You can go through the whole course or any section of it as much as you want to.

You might have to register at his site to get access to it. I had already registered before I clicked on the link... so I don't know. Registration is free and not painful. If you want to understand what money has become, how it is created, and how compound interest affects us all, it is as good of explanation and presentation as I have seen. I'm only about 50% done, but thought you might want to take a look. Seriously, if all the things that have been going on economically for the last few years have your head spinning, this will help you a lot. Have fun

Hitler Misses the Start of a New Bull Market

2009-08-21T15:35:00.001-06:00

Actually, I think he is over reacting, but what do I know?

Cars.Gov - Cash for Clunkers - Glen Beck's Take

2009-08-14T08:14:00.002-06:00

FYI. This kind of blew me away. Those of you that believe that there are no conspiracies... well, I don't know what to say. Have a nice day!

At War with the Plutocrats

2009-07-21T17:14:00.002-06:00

This is a very interesting article, and not too difficult.

My Dad used to joke around when he was feeling happy, that this must be how the 'Plutocrats' lived. As a kid, I didn't know quite what he meant, and really, I'm not sure that he meant anything especially political when he would say it. Somehow I thought Plutocrats smoked cigars, and that was enough to make me hate them. Cigars are vile, and anyone that had anything to do with them must be disgusting.

Maybe I was right for the wrong reason. Have fun.

All is Well in Zion, Yea, Zion Prospereth....

2009-07-17T09:04:00.002-06:00

I think we can safely say that the markets are fairly full of conspirators, and that Adam Smith's 'invisible hand' of the market has a whole different meaning these days. Go Glen!

Misleading Bureau of Labor Statistics Reports

2009-06-18T17:03:00.004-06:00

Sorry for the scatalogical metaphor. It is just such a perfect fit.

Please don't think that:

1. Anything is fixed in the economy, except the 'fix' is in, if you are in the right circles.

2. Anything is fixed in the energy arena. No new oil is being made, and very little new oil is even being looked for. Mexico's production is falling fast.

3. Energy doesn't affect the economy. Peak 'energy-per-capita' was around 1970. Watch 'Apollo 13' for a reminder of what we could afford to do with that much cheap energy.

That's about it. Continue your preparations and positioning your life for the changes that are coming.

Russia's Unique SVBR-100 Nuclear Reactor

2009-05-22T09:27:00.002-06:00

Despite all the concern and coverage of the financial problems, I believe that our (and by that, I mean the World's ) number one problem is declining energy. Some of you are no doubt thinking - 'Wow, he only has one string on his guitar, and it's still out of tune'.....

As the economies of the world began to unwind in the last year or so, the economic activity that drove much of the demand for oil and other energy sources was destroyed. The nations of the world depended on us ( the 'First World') to consume, and to consume at a high rate. When the the 'consumers' in the US finally ran out of money and ran out of money to service the enormous debt they had acquired, they stopped buying things..... just a little, but like a snow ball rolling down the mountain that just grew and grew. The stock market dropped and the retirement security of a generation evaporated by half. Worried that they wouldn't have enough to live in retirement, or that their jobs might be in jeopardy people started no only not going deeper into debt, but to pay off their debt, and to save. They stopped buying, and companies stopped ordering, and countries that manufactured things stopped shipping, and canceled orders for raw materials, and layed off people who also stopped buying things, driving places and consuming things.

I believe that this great unwinding had it's roots in the $4+ gas that people were buying at the time. In hindsight, it is possible to see that supplies were tight, but that a portion, and probably a critical portion of the cost of that energy was driven by speculation. But that speculative move couldn't take place today - due to demand destruction we have plenty of liquid fuels.

OK, so that took a while to get to the purpose of this post. You need to realize that energy runs the comfortable part of the world that we live in. If you only know this in a theoretical sense, you should probably unplug your self from time to time so as not to take things too much for granted. We had a short power outage the other day - maybe 20 minutes, but 'gasp'..... the computers were off - the Internet not available. Yikes!! Then end of civilization as we know it...

It wasn't even a cold winters night, or a really blistering summer day. It was only 20 minutes, not two weeks. The food in our freezer didn't melt, the milk didn't go sour. We didn't light a single candle, but that was a reminder to me. I was planning on taking a shower in the next little bit, and I thought 'hmmmm..... better not wait too long or the water will get cold.'

I work at a coal fired power plant. It is one of the bigger ones in the U.S. We supply about 30% of the power for one of the largest cities in the country. We burn 800 tons of coal per hour. That coal has to be dug out of the ground, loaded into trains or trucks and hauled to the plant. We then have to deal with a a lot of ash, and have to remove a lot of sulfur from the air, both of which take a lot of energy. Some insane people believe that we should also remove and 'sequester' all of the carbon dioxide that we are producing. I'm not going to do further down that road except to say that I think that would be a huge mistake. We are also really , really reliable as are most fossil fueled plant, and that is why you are not surprised when you flip the switch and the lights actually come on.

This availability and reliability are critical, and central to the lives that we lead, and probably to our survival. I don't think it takes a rocket scientist to realize that we can't keep up this rate of fossil fuel energy consumption. For a variety of reasons, mostly technical and probably boring, I also don't believe that renewable energy can ever be a direct substitute for the fossil fired plants that we rely on now.

Which brings me (Finally) to the whole purpose of this post - the Russian SVBR- 100 Nuclear Reactor. You might or might not have an opinion on nuclear power. I have watched and studied this issue for many years and have come to the conclusion that nuclear power can be both safe and economical. The Russians have built this great little reactor from the reactors that power their nuclear submarines. They have put a lot of thought into the design to make it safe, reliable and I think, economical. It is a breeder reactor, which is a type of reactor that can actually transform radioactive, but not fissile material into usable fuel. Read the article. It might be a little technical, but not too bad. Gail "the Actuary" Tveberg is a very, very sharp lady, and does a great job of sifting the wheat from the chaff of information, and making things understandable.

Obama's National Debt Road Trip

2009-05-22T09:00:00.001-06:00

Pretty eye opening.

The Wisdom Meredith Whitney

2009-05-17T16:18:00.001-06:00

If You Are Not Petrified, You are Not Paying Attention

2009-05-15T09:40:00.002-06:00

I have been watching the whole 'green shoots' silliness and there have just been no words. It is spring, but the only green shoots that you are really seeing is going to be (hopefully) in your gardens.

Pretty well said.

Visualization: Cutting $100 Million Dollars From the Budget

2009-04-30T21:16:00.001-06:00

This is great. Just a few minutes.

George Friedman - STRATFOR Part 2

2009-04-29T11:28:00.002-06:00

Why China Won't Dominate in the 21st Century.

George Friedman - STRATFOR

2009-04-29T07:03:00.002-06:00

This is a short and easy clip to watch, and not depressing.

George Friedman is a very smart guy (VSG). His company, STRATFOR provides CIA like intelligence information by subscription. John Mauldin (also a VSG) often features a STRATFOR analysis in 'Outside the Box'.

In this clip George is laying out his case for continued U.S. dominance on the world stage. It is nice to get a breath of fresh air once in a while. His main points are:

1. Even after de-industrialization we have a bigger economy than Japan and China together.

2. We control a continent.

3. We control the oceans of the world - the biggest Navy.

4. Developed economies are going to compete for labor in the next century due to declining birth rates. The U.S. rate is declining also, and is below the equilibrium rate, but we are good at integrating immigrants and will probably be able to maintain our position by continuing to import people from Asia and Mexico. That was kind of a new twist for me. Very interesting.

So, you might agree or not, but I guess Chinese and Spanish are good languages to learn.

This was the first of a series of interviews. Very interesting -food for thought. I expect that he will give his analysis on some of our problems as well in the next ones.

Free At Last (From the Outage)

2009-04-23T15:11:00.004-06:00

I have kind of lost track of the lastest, baddest news, and after going through this outage, I don't much care. I don't know if I will be posting much to this blog in the future. It is pretty evident that things are pretty poor the world over, that deleveraging and debt destruction are rolling along like a big rock down the mountain, and that we, as little ants had better just hunker down. That was about all that I had to say at the start of this story, but it was so complicated and we were/are so much in denial that I had to paint a fairly detailed picture.

But now the outage is over, and it is time to put both physical, mental and emotional energy into planting the garden and working on other like projects. So, I will bid you farewell for a while.

What Cooked The World's Economy

2009-03-15T11:31:00.002-06:00

What Cooked the World's Economy (Village Voice) is a great article. If you want to understand how this happened in a readable and not-to-technical format, this is a great article for it.

Amazingly it comes down to fraud. Fraud that was planted, watered, weeded, and winked at by Federal regulators, and by the Federal Government. Those who love to revile the Clintons will find a great deal of information that will be most satisfying. Those who love to revile George W. Bush & Company will scarcely find less. If you are of the opinion that our last two presidents, during last 16 years have planned and presided over the ruination of the world's economy, and almost destroyed our constitutional government, well it's almost like Christmas for you.

Running on Hope

2009-02-18T11:55:00.002-07:00

Running on Hope from Douglas Sarine on Vimeo.

You'll want to take five minutes to watch this.....it's kind of cute and not really threatening.

Government by Oligarchy

2009-02-15T13:40:00.005-07:00

Bill Moyers Interviews Simon Johnson from the Peterson Institute /MIT Sloan School of Management

When you listen to the talking heads on the news the feeling that you get is kind of like an asteroid has hit the earth.... Force Majeur.... it just happened. What can we do now??????? Simon Johnson has some interesting things to say that make sense to me. When you study our government, and who runs it and start to see the interrelationships, the influence, and effect of lobbying, you begin to get an idea the corruption has become almost ubiquitous, and that until we can purge the system and restructure it of the banksters, we really don't have a chance at fixing anything. These guys have pretty much stolen the government. They own it. Worse, they beleive that they should own it, that they add the value, and that they deserve the as many rewards as they can pry out of the system.

I'm sorry, but I guess I am a little too populist for that. Alabama said it better than I ever can. Indulge me a little, you non-country types. There is a message here that has not been heard for at least a generation in Washington. It might be a little corny, but I guess I like corn.

Stimulus Package Explained (Q&A)

2009-02-13T15:05:00.002-07:00

This is all from the blog "The Big Picture" by Barry Ritholtz. This is one of the better finance/economic blogs that I have run into. He is very good at explaining things, and he has a sense of humor:

"Sometime this year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. No, they are borrowing it from China. Your children are expected to repay the Chinese.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn’t that stimulating the economy of China ?
A. Shut up.

Below is some helpful advice on how to best help the US economy by spending your stimulus check wisely:

If you spend that money at Wal-Mart, all the money will go to China.
If you spend it on gasoline it will go to Hugo Chavez, the Arabs and Al Queda
If you purchase a computer it will go to Taiwan.
If you purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala (unless you buy organic).
If you buy a car it will go to Japan and Korea.
If you purchase prescription drugs it will go to India
If you purchase heroin it will go to the Taliban in Afghanistan
If you give it to a charitable cause, it will go to Nigeria.

And none of it will help the American economy. We need to keep that money here in America. You can keep the money in America by spending it at yard sales, going to a baseball game, or spend it on prostitutes, beer (domestic only), or tattoos, since those are the only businesses still in the US. "

Well, that last might be a little bit of a stretch, but not that much.

How Long Will the Recession Last?

2009-02-13T12:09:00.000-07:00

I watched a clip with Nouriel Roubini and Nassim Taleb (Predicting Crisis: Dr. Doom & the Black Swan) yesterday, and the talking heads that were interviewing them were so clueless and stupid that is just made me gasp. I don't know that they study, or what they know, but it was plain that they think that this is a cyclical recession, rather than a secular recession.

The President warns of a 'Profound economic emergency'

The Nation: ".....catastrophe by the end of June"

Yahoo News: "The Rise and (almost) Fall of America's Banks"

James Kuntsler: "All the old mechanisms that enabled our way of life are broken...."

New York Times: "Some of the Largest Banks Are Like Dead Men Walking"

The list of articles and stories is almost endless. I pass them on as a sample of the language that is being used to describe our common situation. It is strong and forceful - no excuses, no apology, and no backing down. No one is beating around the Bush anymore (although many would like to personally beat him, I think). That change is important. It is also important to realize that discussion of the economy and the recession has moved from the blogs to the Main Stream Media (MSM).

Sharon Astyk wrote 'Fast Train Revisited: What's a Doomer Chick to Do?' in her blog, Casabon's Book

She says that a lot of people call her a 'doomer' (and she is OK with that), but that she can't keep up with the news. It is worse than she can imagine. She says: "....

A while back, I wrote my doomiest post to date, when I sat down to compose a section of _A Nation of Farmers_ that described the changes in food and energy issues as of last April. I was so shocked at what the aggregate shift in our reality looked like put down on paper that I posted it as “We regret to inform you…”and I argued that we are, in fact, in the midst of a fast crash of our society. I wrote then,

“When climate change and peak oil thinkers run out of other things to worry about, there’s always the endless, inevitable debates about whether we are facing a “fast crash” or a “slow grind.” And I admit, I’m worried about my fellow environmentalists - because I think they are about to lose their favorite distraction. When no one was looking, we got an answer. Fast crash wins. And we’re in it now.

Wait a minute, you argue - that’s not right. If we were in a fast crash we’d be well on our way to living in a Kunstler novel. But we’ve still got cars, we’ve got food, things are slowing down, but at worst this looks like a slow grind - but the crazy lady at the blog is saying fast crash?!?!? .......it wasn’t until I began to write this introduction to the present food situation that I suddenly was struck by the fact that even a fast crash doesn’t always look fast when you live it - new normals arise and it turns out we assimilate faster than we panic.

You see, I’m starting to feel I can’t compete with reality - any actual attention to events as they unfold points up the fact that my own doomiest imaginings are being wildly exceeded.

Let’s see - California is broke, functionally insolvent, and has stopped paying for just about everything, including its state police. Remember how often they trumpted that they were the 6th largest economy in the world - well, that’s kinda like saying the UK is insolvent…oh, and that actually might be not so far from the truth too, since they just had to nationalize their banking system. We’ve lost at least 300,000 jobs in two weeks. The New York Times may be out of business by spring. While neither rain nor sleet nor hail will keep the postal service from its appointed rounds, money probably will, and they are talking about cutting out Saturday deliveries. Homelessness and hunger are rapidly on the rise, as are suicide and murder suicide.

There’s rioting in Russia, China, Greece, and massive worker demonstrations in France and Britain. Australia is seeing record high temperatures, while many of the rest of us struggle with record lows. California’s drought may be the worst in a century. And the already hungry are among the deepest sufferers of the food crisis. The New York Times, Fortune Magazine, Bloomberg - they are all starting to use words like “Biblical proportions” “Deep Depression” “Apocalypse.” It is getting hard to compete with the mainstream

And people aren’t really very angry yet. They should be - think about what 8 trilliion dollars could actually have bought us, had anyone cared as much about the people as they do about the banks, and about the wealth of the fortunate. At some point people will realize that it isn’t going to work - and their anger will be frightening - and just. The New Hampshire state legislature is currently debating legislation that would assert that if the US implements martial law or abrogates the Constitution, it will effectively dissolve the Union. While one wonders where they were the last eight years, this is being taken quite seriously, and it would have been unthinkable a decade ago.

Eight trillion could have paid for free health care for every American, cradle to grave for a century. Eight trillion was sufficient to cover the cost of almost all the mortgage debt - every American could have been given their house and the “foreclosure crisis” ended instantly. Eight trillion was enough to build renewable energy infrastructure that could have softened the crisis, to reinsulate our houses, to provide basic food and health care to the world’s poor. The same eight trillion we were told we didn’t have when it was needed by those who wanted educations, basic medical care, decent shelter, a home, hope, a decent life, we had a plenty for the banks and the wealthiest people in the world.

We’ve just spent 8 trillion dollars bailing out the banks - more than all the wars in US history, the Louisiana purchase and the space program combined. And what did we get for it? Bank of America and Citi are still teetering, the jobs are still being flushed daily. The estimate is half a million a month - every month.

Early on in this situation it was faux pas in many ways to talk about a recession. It was just rude. When it became apparent that this wasn't going to be just any old recession, the media started to stretch out the time frame from "the last 10 years" .... to "worst in the last 20 years", " worst in a generation...", "worst since World War II...", "worst since the Great Depression", and now finally, 'the worst.....we don't know what to do, nothing like this has ever happened before because we have never had a global economy'. We have gone from talking about a recession to a depression, and finally to a collapse.

Watch 'Titanic" and contemplate just where we are in the movie. Right now, I see the rich people getting on the lifeboats, and I feel that the rest of us are locked in steerage. The water is creeping along the floor.

SNL - Straight Talk - Stock Market

2009-01-16T22:34:00.002-07:00

Straight Talk - Stock Market
by senatork

This is pretty much the feeling that I get when I go to one of the seminars that we have from time to time on 401(k) investing.

Caclulate Your Financial Comeback

2009-01-08T10:16:00.002-07:00

Here is a calculator that will help you to calculate how long it will take you to get back to where you were in your portfolio, or 401(k). You can change the expected rate of return, the inflation rate. Pretty handy.

How High Will The Dead Cat Bounce?

2009-01-06T09:09:00.007-07:00

Jeff Saut, the Investment Strategist at Raymond James says that 'This market wants to rally...", and it seems that at least in the short run it does. Jeff wrote this on December 15, and since that time all of the index's have been edging up, ignoring what ever bad news comes their way.

I wonder - in the truest sense of the word - at this behavior. There is a deep belief that the market is a forward looking animal that has already discounted the bad news, and that the 'invisible hand' of the market will price all of the various financial instruments at what they are truly worth.

You don't have to read many financial articles before you come across someone that is touting the argument that the market really does know all. It seems to me to be somewhat suspicious and self serving and is set forth by those that manage a lot of money and do very well when no one looks to closely at what is going into the financial sausage that is being made. They reference 'The Invisible Hand' but I think that we have been subjected to 'The Sleight of Hand' as far as our markets go.

When I look past the headlines, there doesn't seem to be any healing or rebuilding going on. In fact, I don't see any fundamental improvements anywhere. Instead of being reassured, it bothers me a lot. Here is a sample of some of the articles that I have seen: (Note: I really don't expect anyone to read all of these, but there is some good information there).

Conventional Wisdom (This might be the best article in the bunch. Mr. Practical is very good.)

Don't Buy Wall Street's Latest Con (Also a pretty good article)

The LONG Recession

Survival of the Weakest

November Pending Home Sales at 7 Year Low

December Auto Sales Dive 36%: Drag Industry to 16 Year Low

No End to the Nightmare

Car Makers Bleak Year End Numbers

Toyota to Suspend Car Production In Japan

Automakers Fear a New Normal of Low Car Sales

Investors Dump $89Billion in Debt in Historic Fire Sale

Consumer Bankruptcies Surge 33% in 2008

Credit Card Companies Ready to Deal Over Debt

Bonds in 2009 - Mass Exodus Ahead?

A Million Layoffs Per Month? (Weirdly, many look at this as a sign that we are late in the crisis - the darkest hour is just before dawn........)

Pawnshops

More Than One Job Needed

College Degree No Shield as More Jobs Are Slashed

In Brutal Economy, More Sell Their Burial Plots

But never mind all that depressing stuff - We are in a Rally. How great is that???

How far will this rally take us? I have no idea. Mike/Mish Shedlock thinks the S&P might go to 1008 or possibly as high as 1080 before a sell of that will take it down to between 450 and 700.
Those are pretty scary numbers, and imagine, if you can, the debt unwinding that would happen with those valuations.

They say the market can remain irrational longer that a trader can stay solvent, so if you think that shorting the market is a good idea, realize that you are betting against the Federal Reserve and every other central bank in the world. Pretty deep pockets. If you think that being long in the market is a good strategy, realize that most of the books are cooked, and the shady assets are hidden as Level 3 assets and aren't on the books. Part of the plan by the Fed is that there is no transparency even while we are assured that is their goal. What you see probably isn't what you will get, but what you think you see in the infomercial that passes for financial disclosure today. So how can you tell who is blowing smoke and who isn't?

A couple of years ago, when I was just starting to understand about the markets I came upon a couple of articles that I had a lot of trouble figuring out. I know that there is a lot of things that I don't know - and especially about economics. There were two articles featured in John Mauldins newsletter, back to back on succeeding days. One was by a company called GaveKal Associates (I can only fine a rebuttal to their article that explains it fairly well), and one was by Bill Bonner (The Empire of Debt, who also writes the Daily Reckoning). The GaveKal article was so confusing and so intricate that I read it about three times, and still didn't get it. Reading Bill Bonner was a lot easier for me because, in a nutshell, he believes in the Law of the Harvest. I can relate to that. After that very puzzling experience that is what I go back to. If their arguments end up resting on the Law of the Harvest, or at least on a corner of it, I feel some confidence that I'm not being out-flanked by a smarty-pants.

Uncle Jay Explains th eNews

2009-01-04T22:33:00.000-07:00

As Howard Lindzon Says: When the Market is Broken, Watch Some Comedy

2008-12-18T06:42:00.002-07:00

Dead Cat Bounce

2008-12-12T06:56:00.002-07:00

A little gallows humor.

For you Taleb fans: I guess they do exist.

Immigration Animation

2008-12-11T16:09:00.002-07:00

It's a great animation. I wondered if it was just about the colors, but Ian seems like an interesting guy and geeky enough to have some quantitative representation about the dots. You might want to check out his blog at http://www.nlindig.blogspot.com/

Immigration to the US, 1820-2007 v2 from Ian S on Vimeo.

Predictions for 2009

2008-12-10T12:20:00.005-07:00

The actual title is "8 really, really scary predictions", but I thought that was a little redundant and maybe too general, as just about any 8 predictions for the next few years could have that title. Certainly, these aren't the 8 scariest predictions that I have heard.

Fortune magazine, CNNMoney.com..... pretty mainstream guys, not your professional gloomy publications, but more the business cheerleading type. This is a compendeum of opinions from some of the sharpest economic minds of today.

Nouriel Roubini is an economics professor at New York University, and has called this market about as well as anyone in the nation or maybe the world. Here is his summary:

For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It's better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It'll be hard and challenging enough. I wish I could be more cheerful, but I was right a year ago, and I think I'll be right this year too.

Bill Gross founded and rund PIMCO, one of the biggest bond funds. ( I know, it does sound like PIMPCO).

Investors need to recognize these titanic shifts in market and public policies and be content with single-digit returns in future years. Perhaps the most lucrative pockets of value are in high-quality corporate bonds and preferred stocks of banks and financial institutions that have partnered with the government in programs such as the Troubled Assets Relief Program (TARP). While their profitability may be restricted, their ability to pay interest and preferred dividends should be unhampered. Above all, stick to high-quality companies and asset classes. The road to recovery will be treacherous.

Robert Schiller - a Yale professor and co-founder of MacroMarkets, he called both the dot-com and housing bubbles.

In terms of the stock market, the price/earnings ratio is no longer high. I use a P/E ratio in which the price is divided by ten-year average earnings. It's a really conservative way of looking at it. That P/E ratio got up to 44 in the year 2000, which was a record high. Recently it was down to less than 13, which is below the average of around 15. But after the stock market crash of 1929, the price/earnings ratio got down to about six, which is less than half of where it is now. So that's the worry. Some people who are so inclined might go more into the market here because there's a real chance it will go up a lot. But that's very risky. It could easily fall by half again.

Jim Rogers predicted two years ago that the credit bubble would devastate Wall Street:

In my view, U.S. stocks are still not attractive. Historically, you buy stocks when they're yielding 6% and selling at eight times earnings. You sell them when they're at 22 times earnings and yielding 2%. Right now U.S. stocks are down a lot, but they're still very expensive by that historical valuation method. The U.S. market is yielding 3% today. For stocks to go to a 6% yield without big dividend increases, the Dow will need to go below 4000. I'm not saying it will fall that far, but it could very well happen. And if it gets that low and I'm still solvent, I hope I'm smart enough to buy a lot. The key in times like these is to stay solvent so you can load up when opportunity comes.

John Train of Montrose Advisors:

Investment opportunity is the difference between the reality and the perception. And since many equities are priced as though a depression might be on the way, many of them are attractively priced.

One approach I am comfortable with is owning shares in wonderful businesses that do well in all circumstances - Johnson & Johnson and the like. They rarely fly out of the park, but provide long, steady gains that will get you where you want to go. They often have huge cash hoards, e.g., Cisco, Apple, Microsoft, and Berkshire Hathaway, whose war chests exceed $20 billion. Or Hewlett-Packard, Google, Intel, or IBM, all in the $10 billion league. Such companies can take advantage of a weak market just as private investors would, with the difference that they know very well how much to pay for what fits their product line.

In the present environment I favor companies that can prosper in the lean years ahead. So, not Saks, but Wal-Mart; not Neiman Marcus, but Dollar General. Or specialists, such as Fastenal, Monsanto, or Schlumberger.

And when should you buy? In or near what I call the Time of Deepest Gloom, if you can spot it.

Meridith Whitney from Oppenhimer and Company - one of the BEST, she was among the first to warn that the big banks had big problems.

What happens in 2009? Frankly, it's hard for me to predict what's going to happen next week, never mind next year. What I will say is that I expect all these banks to be back in the market looking for more capital. We'll also have a wholesale restructuring of our banking system, probably toward the end of 2009. There will be banks getting smaller, banks going away, and banks consolidating. At the same time, though, I think you'll see more new banks created. We've already seen more applications. And it's a great idea: You start with a clean balance sheet and make loans today with today's information. Plus, right now you've got a yield curve that's good for lending.

I think the overall economy will be worse than people expect. The biggest issue will be consumer spending. If 2008 was characterized by the market impacting the economy, then 2009 will be about the economy impacting the market. It's already started.

All of these people have hope for an eventual recovery, but they also seem to be saying that things might well get worse before they get better, so be careful, keep your powder dry and actually have cash so that if and/or when the DOW falls to 4000 and there is blood in the streets (so to speak) that it is a buying opportunity and that you actually have some cash to use in on the blue light specials that will be available.

Where are the Breadlines?

2008-12-08T19:39:00.004-07:00

According to this article in Marketwatch, about 30 million Americans are now on food stamps, and I think that number is going to continue to climb as unemployment continues to climb. If we didn't have food stamps right now, we would see the breadlines all over.

We also are getting tent cities - Hooverville's if you will in many cities. One of these I think is in San Diego, and is just a parking lot. People that have lost their homes can park there, somewhat like a KOA. There are showers and places to cook. People sleep in their cars for the most part and are happy to do it. If you go to Youtube, you can find dozens of clips on this situation. This is just a sample, and not a solicitation for donations.

The old joke is that a recession is when your neighbor looses his job, a depression is when you lose yours. Last month over a 500,000 people lost their jobs, and it's just a start.

It's Inflation, But Not As We Know It

2008-12-08T18:56:00.002-07:00

As the central banks of the world quietly implement 'quantitative easing', or big time money printing, we all go to bed each night looking at economy crushing deflation and expect to wake up one morning and find that all of those trillions that have been minted out of thin air have gotten traction, and we are moving toward a hyperinflation.

Or maybe not. In this article, Peter Warburton discusses the difference between credit and money. This might seem a little esoteric, but it seems to be important. I'm not by any means certain that he is right, but he is the first person that has even attempted to explain how we built so much over capacity into the global economy with so little inflation - even with the money supplies of just about all the nations growing by leaps and bounds.

Disclaimer: In trying to understand this, I had to read the article several times, and very slowly, and then a couple of days apart. Even so, I think that I have some brain damage from the effort. My friends maintain that they don't notice a difference...... but I think they are being kind. Your mileage may vary.

Fred Thompson on the Economy

2008-12-02T20:35:00.001-07:00

A great plan, lots of sarcasm and wit.

Cartoon: Socialism for the Rich

2008-12-01T18:32:00.002-07:00

Pete Peterson (Former Sec. of Commerce and CEO of Blackstone) on Debt.

2008-12-01T07:42:00.002-07:00

Not too long or technical. Mostly just accumulated wisdom and basic common sense.

Job Market 2009

2008-11-10T12:02:00.002-07:00

Annie's sister sent her this video. I liked it. Enjoy

It's Time That We Live 'The Way Of The Wrench'

2008-11-03T14:18:00.005-07:00

There are going to be some major shakeups in the auto industry. Until very recently it was hard not to buy a car if you had a heartbeat and were even slightly warmer than room temperature. This was largely because the auto industry had actually become a financial industry. GMAC is going to become a bank now, for what that is worth.

What all this means in the future is anyone's guess. GM, Ford and Chrysler all look pretty shaky. GM and Chrysler are trying their best to merge, with Chrysler losing about 75,000 jobs. This merger isn't about making Chrysler or GM a better company, it is about saving Cerberus, the private venture capital company that bought Chrysler from Daimler a year or two ago, and is now totally on the hook. Some very rich guys are swinging in the wind and they would like a government blessing to get them off the hook and take Chrysler's rotting corpse off their hands and give them good money back.

So, buckle up for another wild ride. Seriously, I can't think that, short of the FED financing your next car, it is ever going to be easy to afford a new car in the future. So get out those shop manuals, buy some Harbor Freight Tools and turn the radio up.

"Subprime Disaster On A Deathbed

I have been saying for years that GM and Ford were headed for bankruptcy. It should now be perfectly obvious to everyone that both companies are insolvent walking zombies kept alive only because bond market participants keep throwing good money after bad.

GMAC is a subprime disaster on a deathbed. It is going to take thousands of dealerships to the grave with it. And those dealers will go bankrupt regardless of whether the government attempts to bailout the industry. The business model of "financing anyone who can breathe" will not return for decades no matter what Bernanke does.

Chrysler is not worth saving. For that matter neither is GM or Ford. Auto capacity is at ridiculous levels compared to demand. The reason demand got as high as it did in the first place is because of subprime lending from GMAC and others that is now blowing sky high.

Lending standards are tightening and unemployment is going to be rising for at least another year, most likely two or more.

Attempts by the Fed or the administration to "save the auto industry" will only make matters worse. Industry consolidation is badly needed as is a massive reduction in production capacity. Throwing money at the auto sector will delay the recovery as it would divert capital from more productive uses.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com to learn more about wealth management for investors seeking strong performance with low volatility."

Searching for a Metaphor

2008-10-24T17:26:00.003-06:00

There was a guy on a Yahoo market clip that got my attention. You know the kind of interview. The cute girl interviews a really geeky trader and he is all technical and she is trying to be, but not pulling it off.

He is talking about how insane people are for getting out of equities and how the DOW has tested the bottom at 8300, and we should be back on our way to 14,000 in a few days. It was surreal. It kind of reminded me of a guy at work that had a car for sale, posted on one of the bulletin boards.

It was about 8 years old at the time and he wanted $4600 for it or so, and the engine was shot. I asked him about it because I was still in my insane car fixing stage, and he said that yes, the engine was dead, and yes, he did want $4600 for it. I pointed out that the engine was dead. It didn't phase him. He said, "yeah, put a new one in it. The body is in great shape." That was one deal that was not hard to walk away from.

But this guy on the clip reminded me of that. I think we all have trouble revaluing things, and when conditions change quickly it is harder for us to adjust. Just forget to put oil or water in your car and all of a sudden it is worth between $100 and maybe $500. But that is almost impossible to understand. Hard to accept.

Go to sleep while you are driving, and when the car leaves the pavement, it ceases to be a car. It looks like a car, at least for a few seconds, but it isn't. It is really a roll cage for you, but in your mind it is still a car. It might be possible to make it back into a car, but it is not going to be worth it.

That is kind of what I think the whole nation is going through, and the richer they are, the harder they fall. We Small Time Cockroaches of the economy have known for years that we were on the short end of the stick as prices rose but wages didn't. We knew that we were taking on more debt but didn't see anyway out of it. All of my co workers knew that it was a lot harder for their kids to go to college than it was for them, and most of the kids ended up with big loans. Or their parents did, or both.

But the Tryanosaurs' of the economy, well not so much in the realization department. And now they just don't get it that the tipping point has been reached, the savings are depleted and the consumer is up to his eyes in debt. And likely pushed over the edge by high energy costs. Literally, the engine was run without oil.

Well, now oil prices have fallen, but the damage has been done. The engine only runs on about 5 cylinders out of 8, and not much power out of those. What a funny and strange time that we live in.

Risk Expert Nassim Taleb: This Is Probably Worse Than The Great Depression (Audio)

2008-10-22T15:29:00.002-06:00

Nassim Taleb is the man who wrote about the 'Black Swan' - the unexpected, or unseen event that destroys the system. He believes that our current crisis is possibly not only worse than the Great Depression, but worse than we have faced as a nation.

Here is the audio.

Here is a little metaphor from James Kuntsler:

To switch metaphors, let's say that we are witnessing the two stages of a tsunami. The current disappearance of wealth in the form of debts repudiated, bets welshed on, contracts cancelled, and Lehman Brothers-style sob stories played out is like the withdrawal of the sea. The poor curious little monkey-humans stand on the beach transfixed by the strangeness of the event as the water recedes and the sea floor is exposed and all kinds of exotic creatures are seen thrashing in the mud, while the skeletons of historic wrecks are exposed to view, and a great stench of organic decay wafts toward the strand. Then comes the second stage, the tidal wave itself -- which in this case will be horrific monetary inflation -- roaring back over the mud flats toward the land mass, crashing over the beach, and ripping apart all the hotels and houses and infrastructure there while it drowns the poor curious monkey-humans who were too enthralled by the weird spectacle to make for higher ground. The killer tidal wave washes away all the things they have labored to build for decades, all their poignant little effects and chattels, and the survivors are left keening amidst the wreckage as the sea once again returns to normal in its eternal cradle.

So, that's what I think we will get: an interval of deflationary depression followed by a destructive wave of inflation that will wipe out both constructed debt and constructed savings, scraping the financial landscape clean. There's no question that stage one is underway. But we can be sure the giant wave of money recklessly loaned into existence in just a few weeks time will wash back through the global economy leaving a swath of destruction.

And then what? The societies of the world will be faced with the task of rebuilding systems of fruitful activity, i.e., real economies based on productive behavior rather than the smoke-and-mirrors of Frankenstein-finance con games.

You know how you have those dreams where you are trying to run, possibly for your life and your legs just won't work.... or you are trying desperately to get some one's attention, and you just can't make eye contact, or you do and they look right past you.... dreams like that? That is how I feel about what is coming. I am in a dream where my children or grandchildren are running into the street..... I can see the speeding car from where I stand and I yell, and yell and yell, and sometimes in the dream the child looks back, or might even slow down a step or two. But the car keeps coming - fast and silent- and I just can't get to where they are to pull them out of the way.

The car has plunged into the river, and the kids are all asleep. The water is muddy brown, and it is night anyway. The windshield broke and the car is flooded and sinking fast. I am trying like a mad man to unbuckle seat belts and and pull sleepy, uncooperative children to safety, but some days I am not sure which way is even up, towards the safety of the air. I just know that we can't stay in this car any longer.

For the TMI File - The Law of Unintended Consequences

2008-10-21T10:04:00.002-06:00

I guess that I should be really appalled by this little snippet of information, but it just sort of struck me as funny. And somewhat appropriate in light of the New Economic Stimulus Checks that might come to us before the end of the year.

This was on Minyanville.com, which is a economics and market trading site that comes up with a lot of unexpected, and non-Main Stream Media (MSM) observations:

According to AIMRCo, the Adult Internet Market Research Co., the online porn industry reported 20-30% growth in membership rates this summer following the initial round of Ec-Stim checks in mid-May. That's normally the slowest time of the year for online porn, AIMRCo said, which is far more information than we need or want if you really think about it.

"Getting more people to buy porn was probably the last thing Bush had on his mind when he came up with his 'stimulus package,' but we'll take it," Jillian Fox of LSGmodels told United Press International in July.

Yeah. So, you can lead a horse to water, but you can't make him drink. Strange world.

Not Much is New Under the Sun

2008-10-17T12:13:00.002-06:00

It seems sometimes like there is actually news on the News. But that would probably be a conceit. People don't change much over time, and I think that all of the shananigans that go on today had a counterpart in years gone by. We (I) worry about the economy and the banking system. Here is a quote from Andrew Jackson as he revoked the charter on the Second Bank of the United States - a pre-FED FED if you will:

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the bread stuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."
-- Andrew Jackson
(1767-1845) 7th US President

Source: in 1836, Jackson forced the closing of the Second Bank of the U.S. by revoking its charter

Sunday Night Anxiety

2008-10-12T15:31:00.002-06:00

When I was a kid I hated school with a dedicated passion. The building, the books, the teachers, the administrators, and the system. Being an small and insignificant person, the System didn't really care, and every Monday I would be back in the classroom. But every Sunday I had hours of fight-or-flight feelings. Anxiety that something bad was going to happen and I couldn't do a thing to stop it.

Fast forward fifty years.....did I really type that? Can it be true. I guess so. Fight-or-flight is still with me, and maybe a little with you as you look at your accounts and 401(k) accounts. A good friend just returned from a week in the wilds to find his 401(k) now a 201(k) or maybe worse. I asked him if he saw the market tapes when he was gone and he said yes, and 'WHY DIDN'T YOU TELL ME THE MARKETS WERE GOING TO FALL APART'.... but not in a mean way, but he was really disturbed by the haircut that he took.

I told him that I had been telling everyone with any kind of body temperature that there were/are deep structural problems with our economy and that we were going to take a beating one of these days. He asked me what my 401(k) was in and I told him it was in money market since last November. More wailing and gnashing of teeth.

What else can be said? I have been blogging my little fingers off to tell anyone who would listen that there is trouble in River City. For the record, the trouble is still here. The bailout didn't work and won't work. The FED can still drop rates some but it isn't doing any good. But I am tired of worrying about it. The roller-coaster is on it's way down the first hill. It will be an exhilarating ride. Keep your arms and legs inside the car, keep a good hold on the safety bar, and no standing up while the ride is moving. Have as much fun as you can.

Black Monday

2008-10-01T11:41:00.005-06:00

This article by Mike Whitney is one that should be carefully read by anyone who wants to understand the current financial crisis. Color emphasis is mine.

Black Monday

By Mike Whitney

Today the US House rejected Treasury Secretary Paulson's $700 billion Emergency Economic Stabilization Act of 2008. Paulson said he has the votes, but Paulson was wrong. The House bucked the Paulson's claim that buying up the illiquid mortgage-backed assets from the nation's banks would be enough to save the financial system from an impending meltdown. The jury remains out on that question, too. Professor Nouriel Roubini, chairman of Roubini Global Economics, summed it up like this, "You're not resolving the two fundamental issues: You still have to recapitalize the banking system, and household debt is going to stay high". A large number of economists believe Roubini is right. The bill would not solve the underlying problems.

There is a crisis. The banking system is undercapitalized, the credit markets are frozen, and foreign creditors are beginning to slow their purchases of US debt. It's all bad. At the same time the number of casualties among the financial giants--Bear Stearns, Indymac, AIG, Lehman, Washington Mutual--continues to grow. Three more struggling European banks were added to the list of financial institutions that needed emergency government assistance this past weekend. It's no wonder Congress feels like they have to do something to stop the bleeding.

Before the stock market opened on Monday, the futures markets had slumped heavily into negative territory, while the TED spread, an indicator of stress in interbank lending, had widened to 3.19, a level that suggests another rocky week of trading ahead. Could this be another Black Monday?

Paulson's bill was designed to avert a system-wide crash by clearing the banks' balance sheets so they could resume extending credit to consumers and businesses. The hope was that massive infusion of capital would "turn back the clock" to the happy days of low interest speculation and bubble economics. Paulson is a "one trick pony" who firmly adheres to the belief that wealth creation depends on maximum leverage and an ever-weakening currency. But that world view is no longer applicable after reaching Peak Credit, where consumers are no longer able to make the interest payments on their loans and businesses and financial institutions are forced to curb their spending and dump their toxic assets at firesale prices. The system is deleveraging and nothing can stop it. Paulson has yet to accept the new reality.

Besides, there was no guarantee that the banks would use the money in the way that Paulson imagines. As one Wall Street veteran explained to me, "I don't see one penny of that $700 billion ending up helping the broader economy. I see it being used to prop up share prices so the insiders can salvage as much as possible when dumping their shares".

Indeed, the $700 billion is just part of a massive "pump and dump" scheme engineered with the tacit approval of the US Treasury and the Federal Reserve. Once the banksters have offloaded their fraudulent securities and crappy paper on Uncle Sam, they will do whatever they need to do pad the bottom line and drive their stocks up. That means they will shovel capital into hard assets, foreign currencies, gold, interest rate swaps, carry trade swindles, and Swiss bank accounts. The notion that they will recapitalize so they can provide loans to US consumers and businesses in a slumping economy is a pipedream.

The US is headed into its worst recession in 60 years. The housing market is crashing, securitzation is kaput, and the broader economy is drifting towards the reef. The banks are not going to waste their time trying to revive a moribund US market where consumers and businesses are already tapped out. No way; it's on to greener pastures. They'll move their capital wherever they think they can maximize their profits. In fact, a sizable portion of the $700 billion will likely be invested in commodities, which means that we'll see another round of hyperbolic speculation in food and energy futures pushing food and fuel prices into the stratosphere. Ironically, the taxpayers’ largesse will be used against them, making a bad situation even worse.

Then again, if a rehabbed bill isn't passed, no one can predict with certainty what will happen. Here's how Tim Shipman summed it up in "Bailout Failure Will Cause US Crash", in the UK Telegraph:

"Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.

One Republican said that the message from government officials is that 'the economy is dropping into the john.' He added: 'We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.

'What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.'”

The fear on Capital Hill is palpable, especially among the Democrats who have led the effort to pass Paulson's boondoggle ASAP. Speaker of the House, Nancy Pelosi, and fellow Democratic Party leaders, Chris Dodd, Harry Reid and the blabbering blowhard from Massachusetts, Barney Frank, did everything in their power to sandbag dissenters, quash resistance, and rush the bill to a vote without the usual deliberation and debate. Rep. Marcy Kaptur (D-Ohio) was one of many angry members of congress who lashed out at Pelosi's highhandedness. It's all caught on a one minute video:

Rep. Marcy Kaptur: "The normal legislative process that should accompany a monumental proposal to bail out Wall Street has been shelved. Yes, shelved! Only a few insiders are doing the dealing. These criminals have so much power they can shut down the normal legislative process of the highest lawmaking body in this land. All the committees that should be scanning every word that is being negotiated have been benched. And that means the American people have been benched. We are constitutionally sworn to protect this country against all enemies foreign and domestic, and yes, my friends, there are enemies....The people who are pushing this bill are the very same one's who are responsible for the implosion on Wall Street. They were fraudulent then; and they are fraudulent now.We should say No to this deal".

Republicans were equally furious at the way the Pelosi Politburo kept the rank and file out of loop as much as possible. Rep. Michael Burgess (R-Texas) summarized the feelings of a great many congressmen who felt they were being railroaded by Pelosi and Co: "We have seen no bill. We have been here debating talking points ...House Republicans have been cut out of the process and derided by the leaders of the House Democrats as "unpatriotic" for not participating in supporting the bill. Mr. Speaker, I have been thrown out of more meetings in the last 24 hours than I ever thought possible as an elected official of 800,000 citizens of N. Texas....Since we didn't have hearings, since we didn't have markup, let's at least put this legislation up on the Internet for 24 hours and let the American people see what we have done in the dark of night. After all, I have never gotten more mail on a single issue than on this bill that is before us tonight."

Rep Dennis Kucinich (D-Ohio) gave the best speech of the day railing against the financial industry and defending the interests of working class Americans.

Rep. Dennis Kucinich: "The $700 bailout bill is being driven by fear not fact. This is too much money, in too short of time, going to too few people, while too many questions remain unanswered. Why aren't we having hearings...Why aren't we considering any other alternatives other than giving $700 billion to Wall Street? Why aren't we passing new laws to stop the speculation which triggered this? Why aren't we putting up new regulatory structures to protect the investors? Why aren't we directly helping homeowners with their debt burdens? Why aren't we helping American families faced with bankruptcy? Isn't time for fundamental change to our debt-based monetary system so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the US Congress or the Board of Directors of Goldman Sachs?"

There was greater opposition to the Paulson bill than any legislation in the last half century. The groundswell of public outrage has been unprecedented, and yet, Congress, completely insulated from the demands of their constituents, continues to blunder ahead following the same pro-industry script as their ideological twins in the White House. There's not a dime's worth of difference between the two parties. Not surprisingly, neither Pelosi nor any of the Democratic leadership has even met with any of the more than 200 leading economists who have stated unequivocally that the bailout will not address the central problems that are wreaking havoc on the financial system. Instead, they have caved in to Bush's demagoguery and the spurious claims of G-Sax bagman Henry Paulson, a man who has misled the public on every issue related to the subprime/financial fiasco so far.

There are parts of Paulson's Emergency Economic Stabilization Act of 2008 that every US taxpayer should understand, even though the media is keeping those facts obscured. In sections 128 and 132; the proposed bill would have suspend "mark to market" accounting. This means that the banks would no longer be required to assess the worth of their assets according to what similar assets fetched on the open market. For example, Merrill Lynch just sold $31 billion of mortgage-backed securities for $6 billion, which means that similar bonds should be similarly priced. Simple; right? The banks need to adjust the value of those assets on their balance sheet accordingly. This gives investors and depositors the ability to know whether their bank is in bad shape or not. But Paulson's bill lifted this requirement and allowed the banks to assign their own arbitrary value to these assets, which is the same old Enron-style accounting scam.

Paulson's bill also proposed the "Elimination of FASB 157 and 0% reserves". This is just as sketchy as it sounds. FASB or Financial Services Regulatory Relief Act reads:

"Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011."

It's all legal mumbo jumbo to conceal the fact that the banks can continue to operate with insufficient capital, which is why the system is currently blowing up. It all get's down to this: The reason the system is exploding is because the various financial institutions have been allowed--via deregulation--to act as banks and create as much credit as they choose without a sufficient capital base. When one reads about massive deleveraging, this relates directly to the fact that under-capitalized businesses were operating with too much debt in relationship to their capital. That's it in a nutshell; forget about the CDOs, the MBSs, the CDS and the whole alphabet soup of derivatives garbage. They were all inserted into the system so Wall Street landsharks could expand credit without supervision and balance trillions of dollars of debt on the back of a one dollar bill. This is why Paulson wants to suspend the rules which would bring credibility and trust back to the system. After all, that might impinge on Wall Street's ability to enrich itself at the public's expense.

Nouriel Roubini sites a study by Barry Eichengreen, "And Now the Great Depression", which points out why Paulson's $700 billion plan is likely to fail:

"Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is NOT the most effective and efficient way to recapitalize the banking system.... A recent IMF study of 42 systemic banking crises across the world provides evidence of how different crises were resolved."

"First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury). In 25 other cases there was no government purchase of such toxic assets. In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased – as in Chile – dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets. Of course in most cases multiple forms of government recapitalization of banks were used." (Nouriel Roubini's Global EonoMonitor.)

In short, it wouldn't work. Nor was it designed to work. The bill was just Paulson's way of carving a silver canoe for he and his brandy-drooling investor buddies so they can paddle away to some offshore haven while the rest of us drown in a bottomless ocean of debt.

Mike Whitney lives in Washington state. He can be reached at fergiewghitney@msn.com

The Golden Rule

2008-09-30T16:02:00.002-06:00

This is just too good of an opportunity not to repeat the old joke about the golden rule - 'He who has the gold, rules'. And it seems like that is true. Funny, isn't it, how just about any financial adviser would not advise holding gold. Apparently this is true only for the unwashed and unworthy.

Your's in Irony

Sailor

The Wisdom of Et Caetaera

2008-09-27T09:02:00.004-06:00

Et Caetera posted of an experience that he had fairly recently where he almost walked off the edge of a cliff in the dark. They were camping, and he had only the faintest of warnings from the sound of the water below to stop him. He made the experience into a great metaphor for where we are headed at this time in history. He suggested that a better metaphor might be that we have already stumbled over the edge, and fallen to a ledge below, and are now in danger of calamitous fall - possibly a fatal fall.

I thought it was a great metaphor, and a great story. This is exactly what is happening to our financial system, and to our energy system. To expand on the situation just a little bit, imagine instead of walking in the quiet night by yourself, and hearing the warning sounds of the water below, imagine you are with a large crowd of people marching in the night, guided by drunks blaring directions with bullhorns, and a bunch of guards bringing up the rear with bullwhips, just to keep everyone moving, and in line. Just imagine.

You can't stop the crowd, you can't get good directions, you can't challenge the guards. The only thing that you can do is to edge out of the crowd, and hope that the guards miss you in the dark and confusion. You are still lost, you know there is a cliff out there, but at least you have a chance to find it, and maybe in the starlight, you might be even be able to pick your way down the rocks.

We have been counseled over and over and over and over to:
get out of debt.
get a years supply of food and fuel.
get a garden going and use our home production.
get skills - and education. I would add tools to that list.

The time is far, far spent. If you think that our society is going to function with the credit markets frozen, if you think this bailout is going to fix this mess, then I don't have anything more to say to you. Close this page, and go shopping.

More important and less advertised than the $700B bailout number (which is only a down payment, and actually is up to about$1.8T now if you start counting with the Bear-Sterns debacle) is another number - 79 million. This is the projected 2009 daily oil production, given recent large oil field depletion rates. We are currently using about 85 million barrels daily world wide. This is the start, and if production doesn't fall even quite this far, it is still likely to produce depression, famine, war, and very possibly pestilence. Money can be created in unlimited amounts by governments throughout the world - but energy doesn't work that way. It either exists, or not.

What to do? You can't stop the crowd, you know the cliff is ahead. Edge your way out of the mainstream. Plant a garden - as big a garden as you possibly can. Get your food storage. Learn to cook from scratch. Learn to cook with dutch ovens. Learn how to purify water. Make some provision to keep your house warm if the trucks don't get the coal to the power plants. Get out of debt. Get some bicycles, get in shape. Get busy. The time is far spent.

All the Money In Circulation?

2008-09-24T23:42:00.003-06:00

Well, it is almost midnight, and you who know me know that I am not a night owl. Except when the water has come out of the boiler, and I am covering the graveyard shift. Which is what is happening tonight.

The welders are cutting and fitting and it is almost lunch time..... and then I ran across this little article that put the $700 billion dollar bailout in perspective (Oh, and by the way, if you start counting at the Bear-Stearns debacle and continue to include the proposed bailout, it comes to about 1.8 Trillion. For those of you who like to balance checkbooks.)

My math skills are not so good late at night, but it looks like this guy's skills are fine. Draw your own conclusions. I don't know enough about economics to be anything but dangerous. But I don't know if Hank and Ben are doing so well either.

Glen Beck and Chris Martenson

2008-09-22T02:11:00.003-06:00

Glen Beck weighs in on this whole circus.

Chris Martenson has a short, free online course (audio) to help you get your head around this. It's 2 in the morning and I haven't got the juice to take it right now. I listened to Chapter 19: Future Shock and it is pretty good.

As Inugo Montyoa once said "Let me explain.....no, no, there is too much. Let me sum up....Count Rugen marries Buttercup in little less than half an hour....." This is an excellent explaination of the bailout, how it is being spun, and some of the little details that should concern us all.

So Much Happened, So Much is Happening

2008-09-21T17:50:00.006-06:00

I am don't know where to begin, or if it is really worth even talking about. This is an amazingly historical few weeks in the history of both the United States, and of the world.

Last week we came within spitting distance of a total meltdown of the global financial machinery. A major investment bank went broke, another major brokerage firm sold itself cheap and easy to avoid going bankrupt. One of the largest insurance companies in the world was given (alright loaned at almost no interest) 85 billion dollars so that they could have the time to unwind their positions and basically restructure themselves without going bankrupt. Stock exchanges all over the world registered huge losses. The DOW was down almost 1000 points in two days. Russia closed their stock exchange for two days to let things stabilize. Mexico, Brazil, Germany, Great Britain, Russia, China, Japan - all of their indexes are way down. Gold had record breaking losses and gains. Central banks throughout the world made hundreds of billions of dollars, euros, pounds..... you name it, available to the banks and it was like throwing a bucket of water on a sand dune.

Here is a graphic that I found on Marketwatch that show the 'Week that Was'

But, you say, the market in the U.S. finished almost even for the week. The good guys are winning and All is Well In Zion. Late in the week.... Thursday I think, the SEC outlawed short selling of several hundred banks, insurance companies, and brokers. This caused all of the short sellers of financials that were in the market to start buying financials at any price. Short sellers have a terrible reputation right now in the market, and are painted with the blackest of brushes. They look for stocks that they think have an artifically high valuation, and they sell it. When the price goes down, they buy it back at the cheaper price and pocket the money. Yes, sometimes there are evil rumors that are spread about (and often is is just the evil truth) that causes people to start selling. Short sellers are necessary in the market, and in truth operate a lot like crows, ravens, vultures and other eaters of the dead and dying. They clean up the mess.

Short selling has been banned in the UK, in Germany and probably a lot of other countries as well. Ban the shorts, and watch the market skyrocket. Does this mean it is fixed? Nope, insolvency is still insolvency and I think that is what you really have in the financial industry. The body is still warm, and the FED and Treasury have the patient on a heart lung machine..... They say 'where there is life, there is hope', so I guess that we have that much.

I really don't have much more to say about all of this. I guess that I wish us all luck. It is almost time to get ready for Monday, and then to go to bed. Sleep well, and wake.

Who Will Blink?

2008-08-12T06:47:00.002-06:00

FYI on Georgia and Russia.

Those Credit Default Swaps

2008-08-05T10:45:00.004-06:00

There is lot of misunderstanding about derivatives, what they are and how they work. The classification 'derivative' is about as broad as the classification of 'vertebrate' so the brush is pretty broad. In the last ten years or so a new class of derivatives have come into common use in the financial world - for good or evil, the Credit Default Swaps. I read several articles that explain these fairly well, and thought I would pass along the information as links to anyone who is curious. I realize not many will be. These aren't too hard to read.

Bill Gross from Pimco

Wikipedia

Chicago Board of Trade

Meredith Whitney On Financials

2008-07-16T07:04:00.005-06:00

Here is the link! What a sharp pencil.

Meredith Whitney is an amazing analyst. She can do arithmetic! (which I think is something that is in really short supply among the talking heads) She is very articulate and gives good explanations. She works for Oppenhimer. She startled with whole financial community by telling them that their houses were built on sand- and that Citigroup would be writing down a lot of the value of their holdings. That was a shocker for someone so young to do with such utter conviction. When Meredith sharpens her pencil, it is about the same as a ninja unsheathing a katana. (If you are a bank or other financial institution with something to hide.)

From her analysis I think it is easy to see that we are not done yet with the credit problems, and we won't be until the banks value their assets to the market, something they are loathe to do. Meanwhile, the housing market is busy reverting to the mean.... dropping prices to where people can afford to buy houses again without liar loans and all the other shananigans that have gone on during the last decade.

She is a very sharp young lady. Worth five minutes of your time if you want to understand this mess.

Gas Lines Coming This Fall

2008-07-15T15:52:00.004-06:00

Well, maybe. This is a long article, but very thoughtful. I have been watching the oil prices and the inventory numbers and thought it was kind of strange that the inventories have kept falling, but prices have only bumped up a little. I really should have been looking down the road a little to a change in weather or circumstances.

Last year I read that there are about 200 million cars in the U.S. The author was estimating that on average the tanks were probably about half full. He said that all it takes to make a nation wide fuel shortage is to have everyone think that they need to top off the tank. If the average top volume was 10 gallons, the delivery system would be sucked down by 2 billion gallons. That is a lot of product.

Good graphs, and graphics. It is kind of a long read but well worth it.

A Silver BB

2008-07-15T11:55:00.002-06:00

This is a great article on the possibility and economics of rail electrification. In the United States we have almost no non-oil based transportation in place. Alan Drake proposes the electrification of 36,000 miles of rail line in the U.S. and then goes on to analyze the costs and benefits.

I don't think that all of his proposals would work with our present system, but it is one of the best ideas that I have heard for a while. Ideas like this could give a Marsh Wiggle hope.

The article is a little long, and you have to read it carefully, but it isn't really that technical. Have fun.

The Gospel of Consumption

2008-07-10T14:45:00.002-06:00

I think you will find this article to be very interesting (and mostly not-threatening). It tells the tale of how we moved from thinking like our grandparents and great-grand parents (i.e. work and thrift are virtues.... a penny saved etc.) to where we are today - a 'consumer'. This concept was unknown before WWI, and the Great Depression. Have fun. I am always interested in your comments.

Shadow Banking

2008-07-02T15:25:00.002-06:00

This is kind of an eyeopener article. If you follow the financial press at all, you have heard of swaps, CDO's and other kinds of derivatives and you have probably read of the insane numbers associated with them. No one explains them, no one even defines them. Derivatives are the ultimate pejorative financial instrument, but you never really know why. This article told me more than any other single article that I have read.

Part 1
Part 2
Part 3

I don't know what you will conclude from this. Following the money leads me to believe that there won't be any effective regulation of the 'shadow' markets. They will remain off shore and protected. They will become more powerful, and the prime brokers will become political movers and shakers if they are not so already. They will remain behind the scenes and stir the pots of the world's trouble spots. I have been accused of being something of a marsh wiggle, but it is hard to see the sunny side of this situation.

RBS and BIS Warn of Market Meltdown

2008-06-19T20:38:00.003-06:00

The Royal Bank of Scotland, and the Bank of International Settlements have both issued warnings to the effect that the credit crisis isn't over, things are not getting better, central banks have their hands tied and in their opinion, a serious market sell off in the next few months is very possible. The BIS is saying it is very possible (and if they have come this far, likely) that we are entering a second Great Depression.

Big banks are not usually in the gloom business - they are cheerleaders. They cheer and cheer and whistle past the graveyard. For them to come to saying something like this is not like the Scout leader saying that 'Hmmmm..... Boys, you know, I think we are lost', it is like the Scout leader having the kids draw straws to see who gets eaten first. They don't talk like this unless they are staring into the abyss and the earth is crumbling under their feet.

My feeling is that if you have some money in cash, this is a good thing. If you have a your money mostly in stocks, it might be a good time to think of moving things around and taking a more defensive stance. My 201(k) has been in cash since last November. I call it my 201(k) because I took a sad beating due to too much trust during the dot.com sell off.

The Stupid Putnam Mutual Fund guys came and said, 'Hold on, don't sell. When stocks are down your payment buys more shares, and when it comes back you will be RICH RICH RICH' accompanied by a slightly hysterical laugh and a little spit running down their chins. Yeah. Go to finance.yahoo.com and pull up a 20 year chart of the NASDAQ and you will see that we are not back their yet. I think I lost about 50K. My plan now is to work until I am 70.

Anyway, you can all do what you want to. But I have learned a lesson and maybe I will miss a rally, but when banks of this stature are talking sell off........I will sleep a lot easier knowing I'm in cash. (Yes, yes, I know about inflation and that I am getting pounded when the dollar falls. But better to have money to be depreciated than to have the stocks tank and then have very much fewer depreciated dollars when (in despair) you do finally sell) Have fun.

An Introduction to Matt Simmons

2008-06-16T11:23:00.006-06:00

Matt Simmons is an investment banker that has worked in and studied the oil and energy industry in great detail. He wrote the book 'Twilight in the Desert' in May 2005. His main premise in writing this book was that he didn't believe the production and reserve numbers that have been given by Saudi Aramco. He believed that only one country had the reserves to have a cushion in the production of oil and that was Saudi Arabia. But SA is a monarchy, has tight security and doesn't allow auditors in to double check their numbers (actually no one does that). The Saudis have the largest fields, and the fields with the highest production.... but if they are fudging there 'oil in place' (reserve) numbers, then they might be at or near their peak production. He felt that when the Saudis went into decline, the world would be in decline.

He is a very bright guy, and is very data driven. I thought that I would provide this link for those of you who would like to know more, see some numbers, and get a good look at how inter-related energy production is with manufacturing, agriculture, and the economy in general.

Matt Simmons:Quo Vadis Energy?(Will Dawn Follow Darkness As Twilight Of Energy Fades?)

The Unknowns In 2008: “Is $120 Oil A Blessing Or A Curse?” And Has Oil Peaked

Oil And Gas “Rust”: An Evil Worse Than Depletion This one is good

Is Ocean Energy An Idea Whose Time Has Arrived?

The 21st Century Energy Crisis Has Arrived Also excellent

Are We Nearing The Peak Of Fossil Fuel Energy? Has Twilight In The Desert Begun? Excellent

The Peak Oil Debate As The EIA Turns 30

There is a lot of material here. Some of it is repeated. These are slide shows that went along with a speech, so he elaborated on each point. Still, there is a ton of good information here is you want to understand the times you live in, and what is likely to happen in the next few years.

Poor Harvest Anticipated

2008-06-10T20:22:00.001-06:00

In light of this, this.

Crude Oil and Natural Gas Data Browser

2008-06-10T06:53:00.002-06:00

You can see the production/consumption/import/export status of countries throughout the world quickly and easily at this site for both crude oil and natural gas.

There is at least one quirk - the map graphic for Belarus is the same for the Russian Federation, but the data are not the same.

The United Kingdom is an interesting case. They have recently become oil importers as production has declined in the North Sea fields.

Lots to learn here.

Guerrilla Gardening - Interesting

2008-06-09T15:55:00.004-06:00

In light of the last post, I thought I would share what lengths some city dwellers have to go in order to have a garden. Very ingenious actually. This guy is more about flowers than vegetables. Be sure to watch the video clip on making a 'seedbomb'

In the early 90's when oil was selling for around $10/barrel, the Soviet Union went broke. They did a lot of urban gardening, and that is what largely kept them fed. Dimitry Orlov was born in the USSR, and moved to the USA. He and his family kept up ties with friends and family and often visited there. He remembers that there was usually starchy, bulk foods available, but that if you wanted vegetables, or even things like pickles, you had better raise and process them yourself.

This was also the time when the USSR cut Cuba loose and told Castro that he had to fend for himself. It was a pretty hard time in Cuba. They went on a crash course in gardening, and blessed with a warm climate and a long growing season managed to avoid starvation, although there were hungry people for a few years. I understand that now Cuba has vegetables growing everywhere in the cities, even on the roof tops.

I thought these gardeners were pretty interesting with their 'seed bombs'. I guess if you want to do something bad enough, you will find a way. Here is the link to the GG website.