Eight Energy Myths Explained

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Posted on 23rd April 2014 by Administrator in Economy |Politics |Social Issues

Submitted by Gail Tverberg of Our Finite World blog,

Republicans, Democrats, and environmentalists all have favorite energy myths. Even Peak Oil believers have favorite energy myths. The following are a few common mis-beliefs,  coming from a variety of energy perspectives. I will start with a recent myth, and then discuss some longer-standing ones.

Myth 1. The fact that oil producers are talking about wanting to export crude oil means that the US has more than enough crude oil for its own needs.

The real story is that producers want to sell their crude oil at as high a price as possible. If they have a choice of refineries A, B, and C in this country to sell their crude oil to, the maximum amount they can receive for their oil is limited by the price the price these refineries are paying, less the cost of shipping the oil to these refineries.

If it suddenly becomes possible to sell crude oil to refineries elsewhere, the possibility arises that a higher price will be available in another country. Refineries are optimized for a particular type of crude. If, for example, refineries in Europe are short of light, sweet crude because such oil from Libya is mostly still unavailable, a European refinery might be willing to pay a higher price for crude oil from the Bakken (which also produces light sweet, crude) than a refinery in this country. Even with shipping costs, an oil producer might be able to make a bigger profit on its oil sold outside of the US than sold within the US.

The US consumed 18.9 million barrels a day of petroleum products during 2013. In order to meet its oil needs, the US imported 6.2 million barrels of oil a day in 2013 (netting exported oil products against imported crude oil). Thus, the US is, and will likely continue to be, a major oil crude oil importer.

If production and consumption remain at a constant level, adding crude oil exports would require adding crude oil imports as well. These crude oil imports might be of a different kind of oil than that that is exported–quite possibly sour, heavy crude instead of sweet, light crude. Or perhaps US refineries specializing in light, sweet crude will be forced to raise their purchase prices, to match world crude oil prices for that type of product.

The reason exports of crude oil make sense from an oil producer’s point of view is that they stand to make more money by exporting their crude to overseas refineries that will pay more. How this will work out in the end is unclear. If US refiners of light, sweet crude are forced to raise the prices they pay for oil, and the selling price of US oil products doesn’t rise to compensate, then more US refiners of light, sweet crude will go out of business, fixing a likely world oversupply of such refiners. Or perhaps prices of US finished products will rise, reflecting the fact that the US has to some extent in the past received a bargain (related to the gap between European Brent and US WTI oil prices), relative to world prices. In this case US consumers will end up paying more.

The one thing that is very clear is that the desire to ship crude oil abroad does not reflect too much total crude oil being produced in the United States. At most, what it means is an overabundance of refineries, worldwide, adapted to light, sweet crude. This happens because over the years, the world’s oil mix has been generally changing to heavier, sourer types of oil. Perhaps if there is more oil from shale formations, the mix will start to change back again. This is a very big “if,” however. The media tend to overplay the possibilities of such extraction as well.

Myth 2. The economy doesn’t really need very much energy.

 

We humans need food of the right type, to provide us with the energy we need to carry out our activities. The economy is very similar: it needs energy of the right types to carry out its activities.

One essential activity of the economy is growing and processing food. In developing countries in warm parts of the world, food production, storage, transport, and preparation accounts for the vast majority of economic activity (Pimental and Pimental, 2007). In traditional societies, much of the energy comes from human and animal labor and burning biomass.

If a developing country substitutes modern fuels for traditional energy sources in food production and preparation, the whole nature of the economy changes. We can see this starting to happen on a world-wide basis in the early 1800s, as energy other than biomass use ramped up.

Figure 1. World Energy Consumption by Source, Based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects and together with BP Statistical Data on 1965 and subsequent

Figure 1. World Energy Consumption by Source, Based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects and together with BP Statistical Data on 1965 and subsequent

The Industrial Revolution began in the late 1700s in Britain. It was enabled by coal usage, which made it possible to make metals, glass, and cement in much greater quantities than in the past. Without coal, deforestation had become a problem, especially near cold urban areas, such as London. With coal, it became possible to use industrial processes that required heat without the problem of deforestation. Processes using high levels of heat also became cheaper, because it was no longer necessary to cut down trees, make charcoal from the wood, and transport the charcoal long distances (because near-by wood had already been depleted).

The availability of coal allowed the use of new technology to be ramped up. For example, according to Wikipedia, the first steam engine was patented in 1608, and the first commercial steam engine was patented in 1712. In 1781, James Watt invented an improved version of the steam engine. But to actually implement the steam engine widely using metal trains running on metal tracks, coal was needed to make relatively inexpensive metal in quantity.

Concrete and metal could be used to make modern hydroelectric power plants, allowing electricity to be made in quantity. Devices such as light bulbs (using glass and metal) could be made in quantity, as well as wires used for transmitting electricity, allowing a longer work-day.

The use of coal also led to agriculture changes as well, cutting back on the need for farmers and ranchers. New devices such as steel plows and reapers and hay rakes were manufactured, which could be pulled by horses, transferring work from humans to animals. Barbed-wire fence allowed the western part of the US to become cropland, instead one large unfenced range. With fewer people needed in agriculture, more people became available to work in cities in factories.

Our economy is now very different from what it was back about 1820, because of increased energy use. We have large cities, with food and raw materials transported from a distance to population centers. Water and sewer treatments greatly reduce the risk of disease transmission of people living in such close proximity. Vehicles powered by oil or electricity eliminate the mess of animal-powered transport. Many more roads can be paved.

If we were to try to leave today’s high-energy system and go back to a system that uses biofuels (or only biofuels plus some additional devices that can be made with biofuels), it would require huge changes.

Myth 3. We can easily transition to renewables.

On Figure 1, above, the only renewables are hydroelectric and biofuels. While energy supply has risen rapidly, population has risen rapidly as well.

Figure 2. World Population, based on Angus Maddison estimates, interpolated where necessary.

Figure 2. World Population, based on Angus Maddison estimates, interpolated where necessary.

When we look at energy use on a per capita basis, the result is as shown in Figure 3, below.

Figure 3. Per capita world energy consumption, calculated by dividing world energy consumption (based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects together with BP Statistical Data for 1965 and subsequent) by population estimates, based on Angus Maddison data.

Figure 3. Per capita world energy consumption, calculated by dividing world energy consumption (based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects together with BP Statistical Data for 1965 and subsequent) by population estimates, based on Angus Maddison data.

The energy consumption level in 1820 would be at a basic level–only enough to grow and process food, heat homes, make clothing, and provide for some very basic industries. Based on Figure 3, even this required a little over 20 gigajoules of energy per capita. If we add together per capita biofuels and hydroelectric on Figure 3, they would come out to only about 11 gigajoules of energy per capita. To get to the 1820  level of per capita energy consumption, we would either need to add something else, such as coal, or wait a very, very long time until (perhaps) renewables including hydroelectric could be ramped up enough.

If we want to talk about renewables that can be made without fossil fuels, the amount would be smaller yet. As noted previously, modern hydroelectric power is enabled by coal, so we would need to exclude this. We would also need to exclude modern biofuels, such as ethanol made from corn and biodiesel made from rape seed, because they are greatly enabled by today’s farming and transportation equipment and indirectly by our ability to make metal in quantity.

I have included wind and solar in the “Biofuels” category for convenience. They are so small in quantity that they wouldn’t be visible as a separate categories, wind amounting to only 1.0% of world energy supply in 2012, and solar amounting to 0.2%, according to BP data. We would need to exclude them as well, because they too require fossil fuels to be produced and transported.

In total, the biofuels category without all of these modern additions might be close to the amount available in 1820. Population now is roughly seven times as large, suggesting only one-seventh as much energy per capita. Of course, in 1820 the amount of wood used led  to significant deforestation, so even this level of biofuel use was not ideal. And there would be the additional detail of transporting wood to markets. Back in 1820, we had horses for transport, but we would not have enough horses for this purpose today.

Myth 4. Population isn’t related to energy availability.

If we compare Figures 2 and 3, we see that the surge in population that took place immediately after World War II coincided with the period that per-capita energy use was ramping up rapidly. The increased affluence of the 1950s (fueled by low oil prices and increased ability to buy goods using oil) allowed parents to have more children. Better sanitation and innovations such as antibiotics (made possible by fossil fuels) also allowed more of these children to live to maturity.

Furthermore, the Green Revolution which took place during this time period is credited with saving over a billion people from starvation. It ramped up the use of irrigation, synthetic fertilizers and pesticides, hybrid seed, and the development of high yield grains. All of these techniques were enabled by availability of oil. Greater use of agricultural equipment, allowing seeds to be sowed closer together, also helped raise production. By this time, electricity reached farming communities, allowing use of equipment such as milking machines.

If we take a longer view of the situation, we find that a “bend” in the world population occurred about the time of Industrial Revolution, and the ramp up of coal use (Figure 4). Increased farming equipment made with metals increased food output, allowing greater world population.

Figure 4. World population based on data from "Atlas of World History," McEvedy and Jones, Penguin Reference Books, 1978  and Wikipedia-World Population.

Figure 4. World population based on data from “Atlas of World History,” McEvedy and Jones, Penguin Reference Books, 1978
and Wikipedia-World Population.

Furthermore, when we look at countries that have seen large drops in energy consumption, we tend to see population declines. For example, following the collapse of the Soviet Union, there were drops in energy consumption in a number of countries whose energy was affected (Figure 5).

Figure 6. Population as percent of 1985 population, for selected countries, based on EIA data.

Figure 6. Population as percent of 1985 population, for selected countries, based on EIA data.

Myth 5. It is easy to substitute one type of energy for another.

Any changeover from one type of energy to another is likely to be slow and expensive, if it can be accomplished at all.

One major issue is the fact that different types of energy have very different uses. When oil production was ramped up, during and following World War II, it added new capabilities, compared to coal. With only coal (and hydroelectric, enabled by coal), we could have battery-powered cars, with limited range. Or ethanol-powered cars, but ethanol required a huge amount of land to grow the necessary crops. We could have trains, but these didn’t go from door to door. With the availability of oil, we were able to have personal transportation vehicles that went from door to door, and trucks that delivered goods from where they were produced to the consumer, or to any other desired location.

We were also able to build airplanes. With airplanes, we were able to win World War II. Airplanes also made international business feasible on much greater scale, because it became possible for managers to visit operations abroad in a relatively short time-frame, and because it was possible to bring workers from one country to another for training, if needed. Without air transport, it is doubtful that the current number of internationally integrated businesses could be maintained.

The passage of time does not change the inherent differences between different types of fuels. Oil is still the fuel of preference for long-distance travel, because (a) it is energy dense so it fits in a relatively small tank, (b) it is a liquid, so it is easy to dispense at refueling stations, and (c) we are now set up for liquid fuel use, with a huge number of cars and trucks on the road which use oil and refueling stations to serve these vehicles. Also, oil works much better than electricity for air transport.

Changing to electricity for transportation is likely to be a slow and expensive process. One important point is that the cost of electric vehicles needs to be brought down to where they are affordable for buyers, if we do not want the changeover to have a hugely adverse effect on the economy. This is the case because salaries are not going to rise to pay for high-priced cars, and the government cannot afford large subsidies for everyone. Another issue is that the range of electric vehicles needs to be increased, if vehicle owners are to be able to continue to use their vehicles for long-distance driving.

No matter what type of changeover is made, the changeover needs to implemented slowly, over a period of 25 years or more, so that buyers do not lose the trade in value of their oil-powered vehicles. If the changeover is done too quickly, citizens will lose their trade in value of their oil-powered cars, and because of this, will not be able to afford the new vehicles.

If a changeover to electric transportation vehicles is to be made, many vehicles other than cars will need to be made electric, as well. These would include long haul trucks, busses, airplanes, construction equipment, and agricultural equipment, all of which would need to be made electric. Costs would need to be brought down, and necessary refueling equipment would need to be installed, further adding to the slowness of the changeover process.

Another issue is that even apart from energy uses, oil is used in many applications as a raw material. For example, it is used in making herbicides and pesticides, asphalt roads and asphalt shingles for roofs, medicines, cosmetics, building materials, dyes, and flavoring. There is no possibility that electricity could be adapted to these uses. Coal could perhaps be adapted for these uses, because it is also a fossil fuel.

Myth 6. Oil will “run out” because it is limited in supply and non-renewable.

This myth is actually closer to the truth than the other myths. The situation is a little different from “running out,” however. The real situation is that oil limits are likely to disrupt the economy in various ways. This economic disruption is likely to be what leads to an  abrupt drop in oil supply. One likely possibility is that a lack of debt availability and low wages will keep oil prices from rising to the level that oil producers need for extraction. Under this scenario, oil producers will see little point in investing in new production. There is evidence that this scenario is already starting to happen.

There is another version of this myth that is even more incorrect. According to this myth, the situation with oil supply (and other types of fossil fuel supply) is as follows:

Myth 7. Oil supply (and the supply of other fossil fuels) will start depleting when the supply is 50% exhausted. We can therefore expect a long, slow decline in fossil fuel use.

This myth is a favorite of peak oil believers. Indirectly, similar beliefs underly climate change models as well. It is based on what I believe is an incorrect reading of the writings of M. King Hubbert. Hubbert is a geologist and physicist who foretold a decline of US oil production, and eventually world production, in various documents, including Nuclear Energy and the Fossil Fuels, published in 1956. Hubbert observed that under certain circumstances, the production of various fossil fuels tends to follow a rather symmetric curve.

Figure 7. M. King Hubbert's 1956 image of expected world crude oil production, assuming ultimate recoverable oil of 1,250 billion barrels.

Figure 7. M. King Hubbert’s 1956 image of expected world crude oil production, assuming ultimate recoverable oil of 1,250 billion barrels.

A major reason that this type of forecast is wrong is because it is based on a scenario in which some other type of energy supply was able to be ramped up, before oil supply started to decline.

Figure 8. Figure from Hubbert's 1956 paper, Nuclear Energy and the Fossil Fuels.

Figure 8. Figure from Hubbert’s 1956 paper, Nuclear Energy and the Fossil Fuels.

With this ramp up in energy supply, the economy can continue as in the past without a major financial problem arising relating to the reduced oil supply. Without a ramp up in energy supply of some other type, there would be a problem with too high a population in relationship to the declining energy supply. Per-capita energy supply would drop rapidly, making it increasingly difficult to produce enough goods and services. In particular, maintaining government services is likely to become a problem. Needed taxes are likely to rise too high relative to what citizens can afford, leading to major problems, even collapse, based on the research of Turchin and Nefedov (2009).

Myth 8. Renewable energy is available in essentially unlimited supply.

The issue with all types of energy supply, from fossil fuels, to nuclear (based on uranium), to geothermal, to hydroelectric, to wind and solar, is diminishing returns. At some point, the cost of producing energy becomes less efficient, and because of this, the cost of production begins to rise. It is the fact wages do not rise to compensate for these higher costs and that cheaper substitutes do not become available that causes financial problems for the economic system.

In the case of oil, rising cost of extraction comes because the cheap-to-extract oil is extracted first, leaving only the expensive-to-extract oil. This is the problem we recently have been experiencing. Similar problems arise with natural gas and coal, but the sharp upturn in costs may come later because they are available in somewhat greater supply relative to demand.

Uranium and other metals experience the same problem with diminishing returns, as the cheapest to extract portions of these minerals is extracted first, and we must eventually move on to lower-grade ores.

Part of the problem with so-called renewables is that they are made of minerals, and these minerals are subject to the same depletion issues as other minerals. This may not be a problem if the minerals are very abundant, such as iron or aluminum. But if minerals are lesser supply, such as rare earth minerals and lithium, depletion may lead to rising costs of extraction, and ultimately higher costs of devices using the minerals.

Another issue is choice of sites. When hydroelectric plants are installed, the best locations tend to be chosen first. Gradually, less desirable locations are added. The same holds for wind turbines. Offshore wind turbines tend to be more expensive than onshore turbines. If abundant onshore locations, close to population centers, had been available for recent European construction, it seems likely that these would have been used instead of offshore turbines.

When it comes to wood, overuse and deforestation has been a constant problem throughout the ages. As population rises, and other energy resources become less available, the situation is likely to become even worse.

Finally, renewables, even if they use less oil, still tend to be dependent on oil. Oil is  important for operating mining equipment and for transporting devices from the location where they are made to the location where they are to be put in service. Helicopters (requiring oil) are used in maintenance of wind turbines, especially off shore, and in maintenance of electric transmission lines. Even if repairs can be made with trucks, operation of these trucks still generally requires oil. Maintenance of roads also requires oil. Even transporting wood to market requires oil.

If there is a true shortage of oil, there will be a huge drop-off in the production of renewables, and maintenance of existing renewables will become more difficult. Solar panels that are used apart from the electric grid may be long-lasting, but batteries, inverters, long distance electric transmission lines, and many other things we now take for granted are likely to disappear.

Thus, renewables are not available in unlimited supply. If oil supply is severely constrained, we may even discover that many existing renewables are not even last very long lasting.

WELCOME TO TERMINUS

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Posted on 6th April 2014 by Administrator in Economy |Politics |Social Issues

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“Life improves slowly and goes wrong fast, and only catastrophe is clearly visible.” Edward Teller

I was a late arrival to the Walking Dead television program. I don’t watch much of the mindless drivel passing for entertainment on the 600 worthless channels available 24/7 on cable TV. I assumed it was another superficial zombie horror show on par with the teenage vampire crap polluting the airwaves. Last year a friend told me I had to watch the show. I was hooked immediately and after some marathon watching of seasons one and two, I understood the various storylines and back stories. What the show doesn’t openly reveal is the deeper meanings, symbolism, and lessons we can learn from viewing human beings trying to survive in a post-apocalyptic world. In my opinion, the horror and gore is secondary to the human responses to horrific circumstances and the consequences of individual and group decisions to their survival.

As the end of season four approached, the disbursed characters were descending upon a place called Terminus. They were drawn by the intriguing and hopeful signs posted at various railroad junctions promising sanctuary, community and survival. Of course the name Terminus does not sound very inviting or hopeful. There are multiple possible meanings regarding Terminus. The Roman god Terminus protected boundary markers and sacrifices were performed to sanctify each boundary stone. The bones, ashes, and blood of a sacrificial victim, along with crops, honeycombs, and wine, were placed into a hole at a point where estates converged, and the stone was driven in on top. Maintaining boundaries and sacrifice are major themes throughout the series.

The show is set in the metropolitan Atlanta area of Georgia and the surrounding countryside. It just so happens that during the 1830s Terminus was the name of a settlement at the end of the Western and Atlantic railroad line. That settlement is now Atlanta. Terminus is also the title of the final poem ever composed by Ralph Waldo Emerson. The poem focuses on a conversation between the author and the god Terminus, discussing the author’s forthcoming death. The message of the poem is to resist fear and prepare for death. The destination is worth the journey.   

“As the bird trims her to the gale,

I trim myself to the storm of time,

I man the rudder, reef the sail,

Obey the voice at eve obeyed at prime:

“Lowly faithful, banish fear,

Right onward drive unharmed;

The port, well worth the cruise, is near,

And every wave is charmed.”

We are only given a short time on this earth and the end of the line will be the same for everyone. What matters is how we conduct ourselves during our own journey towards our personal Terminus. Have we served as a virtuous example for our children, sacrificed for others, and benefited humanity or have we displayed greed, avarice and selfishness during our trek through life? As we approach our own meeting with destiny, the actions and morality of individuals will matter. I don’t know the motivations of the writers creating the themes for the Walking Dead, but the show connects with me on a number of levels. I look around and see hordes of zombies everywhere.

Zombification of America

“The real hopeless victims of mental illness are to be found among those who appear to be most normal. Many of them are normal because they are so well adjusted to our mode of existence, because their human voice has been silenced so early in their lives that they do not even struggle or suffer or develop symptoms as the neurotic does. They are normal not in what may be called the absolute sense of the word; they are normal only in relation to a profoundly abnormal society. Their perfect adjustment to that abnormal society is a measure of their mental sickness. These millions of abnormally normal people, living without fuss in a society to which, if they were fully human beings, they ought not to be adjusted.” – Aldous Huxley – Brave New World Revisited

The vast majority of the population in the post-apocalyptic world of the Walking Dead is mindless zombies driven by only their need to feed upon human flesh. They are infected with a disease that disables the cognitive portion of their brains and leaves them as slobbering predatory zombies seeking to satisfy their vile needs. They are referred to as “walkers” or “biters” as they aimlessly roam the countryside seeking human flesh. Everyone bitten or killed by a zombie is infected and turned into a zombie. The only way to stop them is by destroying their brain. The relentless violence and gore is not for the squeamish, but is probably a realistic portrayal of the brutishness and harsh conditions that will overwhelm this country once the electrical grid goes down, fuel becomes scarce and the global supply chain fails. Our just in time society is about one week from chaos, lawlessness, starvation and death on a grand scale.

As I watch the hordes of hideous brain dead zombies shuffling across the apocalyptic landscape seeking to satiate their basest cravings I can’t help but see the parallels with the millions of mindless tattooed obese slobs waddling across mall parking lots past vacant store fronts staring zombielike at their iGadgets as they seek to satisfy their basest desires at Macy’s and Chipotle. A virus has overspread our country causing a vast swath of the population to gratuitously assuage their every want without thinking of the consequences. The sickness is caused by being imprisoned for twelve years in government run public schools, watching thousands of hours of propaganda emitted by the corporate media, viewing hundreds of brain cell destroying reality TV shows, reading and sending thousands of texts and tweets, and being overwhelmed by the delusional belief spending more than they make, saving nothing, and piling up mountains of debt is the path to success in our contaminated society.

In the show there is no clear explanation as to why the majority of the population have been infected and turned into zombies, while a tiny minority is unaffected and able to think critically and act rationally. It is revealed that all living people are infected with the zombie virus, but it remains dormant in a minority of the survivors. Death by any means triggers the virus and turns the corpse into a mindless flesh eating zombie. There are 318 million Americans and a majority of them fall into the category of zombies in my estimation. Every American has the zombie virus within them. It has been incubated by corrupt vote seeking politicians, control hungry government sociopaths, mind numbingly worthless public education, and the relentless dumbing down through corporate media propaganda and vacuous reality TV entertainment. Once cogent thinking aware citizens have been zombiefied into mindless impulsive consumers.

How can you not see the parallels between American society and the zombies in the Walking Dead? Walk down any city street in America and you see hordes shuffling along staring with blank faces and glazed over eyes at their iGadgets. Black Friday is identical to flinging a freshly slaughtered hog in front of the flesh eating zombies. Americans flock to malls across our apocalyptic suburban sprawl landscape and proceed to stampede, gouge, and punch their way to a fantastic bargain on a Chinese slave labor produced microwave they must have to cook their toxic frankenfood created by one of our corporate food conglomerates. The Black Friday crowds actually make the zombies from the Walking Dead seem well behaved. While the American zombies are shambling through superficial lives of pleasure seeking, mass consumption, and a delusional faith in debt based wealth, there is still a minority of rational thinking people who can control their impulses and resist the disease devouring our culture.

 

“Our economy is based on spending billions to persuade people that happiness is buying things, and then insisting that the only way to have a viable economy is to make things for people to buy so they’ll have jobs and get enough money to buy things.” ― Philip Slater                  

Collapse Will Be Sudden

“That’s the thing about the collapse of civilization. It never happens according to plan – there’s no slavering horde of zombies. No actinic flash of thermonuclear war. No Earth-shuddering asteroid. The end comes in unforeseen ways; the stock market collapses, and then the banks, and then there is no food in the supermarkets, or the communications system goes down completely and inevitably, and previously amiable co-workers find themselves wrestling over the last remaining cookie that someone brought in before all the madness began.” ― Mark A. Rayner – The Fridgularity

What you note after watching a few episodes of the Walking Dead is that collapse happened suddenly. Cities, towns, houses and highways remained relatively intact. The decay and deterioration caused by neglect and abandonment are the only visible signs that modern civilization has ceased. The show highlights the life-threatening difficulty of enduring on a day to day basis without the certainty of shelter, food, water, and fuel. The average asleep American isn’t prepared to last one week without the basics of modern life. They haven’t stocked any food, water or fuel in case of an emergency. Their normalcy bias keeps them from even considering the high likelihood of even a natural disaster caused by a hurricane, snowstorm, or earthquake. Recent examples of most people’s complete helplessness were the snow and ice storms that struck this past winter and hurricanes Sandy and Katrina. Without power and access to food and water, modern society breaks down quickly, with chaos, looting and anarchy only days away.

It is unlikely that collapse of civilization as we know it will happen due to some extreme event such as nuclear war, super volcano, or asteroid. When our central banker masters of the universe trigger the next financial system collapse, with no monetary bullets of debasement left in their pop gun, the resulting chaos when ATMs stop spitting out $20 bills and EBT cards for 47 million people stop functioning at Wally World will be epic. We got a glimpse into the future this past October when the EBT system went down in several states for a few hours on a Saturday afternoon. Zombies began to ransack Wal-Mart stores attempting to steal as much as they could get away with. Chaos, anger and criminal behavior was virtually instantaneous. A vast swath of EBT dependent zombies live in our numerous urban ghettos and when the EBT system goes down permanently violence will quickly erupt. Police will be vastly out-numbered, hungry mobs will become armed gangs of violent looters burning down their ghettos, ransacking and plundering businesses, stores and homes, and stealing everything that isn’t nailed down. Visualize the L.A. riots after the Rodney King verdict in every urban area in the country.

The fragility of our debt financed oil dependent just in time global supply chain system is beyond the comprehension of the average zombie American. They are too distracted by mass consuming the products dependent on that very same fragile scheme. They are clueless zombie-like dupes who believe $20 bills magically appear in ATMs, Funyuns and Cheetos miraculously materialize on Wal-Mart shelves, gasoline endlessly bubbles up from the ground into the hose they stick in their $40,000 monster SUVs “bought” with a 0% seven year loan from Ally Financial, and that enchanted plastic card with a magnetic strip empowers them to fulfill every craving like a zombie feeding on a dead carcass.

There is a worldwide currency and petroleum war being waged today as too much fiat currency is chasing a dwindling amount of cheap petroleum supplies. The developed world has experienced a century of relative illusory prosperity as cheap easy to access fuel and cheap easy to print fiat currency have led zombies to believe progress and prosperity are their god given right. The most highly educated zombies will be the most shocked when they realize the reality they believed was all an illusion. The Starbucks “Triple, Venti, Half Sweet, Non-Fat, Caramel Macchiato” crowd who isolate themselves in their 100% financed 5,000 square foot luxury cookie cutter brick McMansions amidst 200 other identical McMansions occupied by reclusive strangers in enclaves pretentiously named The Preserve at Meadow Lakes, and driving multiple leased BMWs, are about as prepared for a collapse of modern society as a helpless child. The suburban wasteland of strip malls, office parks, and fast food joints is completely dependent upon an endless supply of cheap oil and cheap credit.

The cracks in this delusionary foundation are visible for all to see as Space Available signs outnumber actual businesses, pothole dotted highways deteriorate, sewer lines crack, and houses in disrepair outnumber those being kept up. It takes money to keep a home from deteriorating and it happens to be in short supply for 90% of the population. Despite the non-stop money printing operation at the Fed and the mainstream media fantasy stories of shale oil energy independence, the suburban dream is turning into a nightmare. When the inevitable financial implosion strikes in the next few years, the illusion of progress will come to an end. The inner cities will explode in violence and will burn. The police will be helpless and scared. There will be death on a large scale.

Suburbia will turn into a lawless landscape where neighbors turn on each other, as they have failed to create real communities. The isolation and seclusion which have marked suburban existence for the last thirty years will contribute to the creation of criminal gangs looting and pillaging stores, businesses and unprotected homes. After the collapse the only people likely to survive relatively unscathed are rural folk. Farmers, ranchers and those capable of living off the land have the abilities to endure a breakdown in our modern society. These people are prepared, know how to use firearms and create communities of self-sufficiency. No one will thrive in the world coming our way, but those not dependent upon or tied to our modern societal paradigm have a better chance to survive.      

“If people feel lost and alone and helpless and broken and hopeless today, what will it be like if the world really begins to come apart at the hinges?” Brandon Andress – And Then the End Will Come!

Individualism vs Community

“The values to which people cling most stubbornly under inappropriate conditions are those values that were previously the source of their greatest triumphs.” Jared Diamond – Collapse: How Societies Choose to Fail or Succeed

Our society has always glorified rugged individualism. We celebrate individual accomplishments and make heroes of those who have gone it alone and triumphed either in business, politics, sports, or the arts. Overcoming tremendous obstacles and going it alone in the face of adversity has been the narrative Americans admire and seek to emulate. Even the reality TV shows about preppers focus on individuals who plan on going it alone when civilization enters collapse mode. These rugged loners take pride in individualism, build bunkers, amass small arsenals and stockpile food and supplies. They will likely survive the initial onslaught of collapse and first wave of violence. But how long can an individual expect to survive alone in a Walking Dead environment? The traits which were appropriate and rewarded in modern society will be inappropriate and fatal in a post-modern society. A lesson from the show is clearly that a community of like-minded individuals working together has a better chance at long-term survival than a loner. Just make sure you join the right community.

With hordes of flesh eating automatons roaming the countryside it was essential for the living to form communities in order to fend off the zombies, protect each other, provide shelter, and forage for food. An individual alone had no chance at survival as falling asleep would ultimately prove fatal if a zombie stumbled upon your camp. The group led by Sheriff Rick Grimes eventually creates a community within the gates of an abandoned prison. The irony of seeing mindless throngs of soulless killers attempting to breakdown the fences to get “into” the prison is not lost on the audience. At first, the occupants of the prison would leave on foraging/pillaging missions to nearby cities and towns attempting to find food, medical supplies, gasoline and any other essential necessities of life. Eventually Hershel, the wise old man of the community, convinced Rick that cultivating the soil, sowing seeds and growing their own food was the only chance for their community to thrive over the long haul. Working with your hands is refreshing to the soul. Jesus’ Parable of the Sower immediately comes to mind.

Hearken; Behold, there went out a sower to sow: And it came to pass, as he sowed, some fell by the way side, and the birds of the air came and devoured it up. And some fell on stony ground, where it had not much earth; and immediately it sprang up, because it had no depth of earth: But when the sun was up, it was scorched; and because it had no root, it withered away. And some fell among thorns, the thorns grew up, and choked it, and it yielded no fruit. And other fell on good ground, did yield fruit that sprang up and increased; and brought forth, some thirty, and some sixty, some an hundred. He said unto them, He that has ears to hear, let him hear. Mark 4:3-9

Some communities are evil at their core and will commit malevolent atrocities. Some communities will appear ethical, but when hardship strikes they will fall back to their wicked ways. Communities of those addicted to riches and wealth will ignore the pleas of the downtrodden and wail and gnash their teeth when their worldly wealth evaporates.  A fruitful community that chooses decent honorable leaders, adopts a moral code, treats all members with respect, encourages hard work and accountability, and plans for the future, will reap the benefits of sustainability and stability. Cultivating a good community is difficult, requiring sacrifice, compromise, hard work, difficult choices, and depends upon the goodwill of all members. Rick tried to become a farmer, but Carol saw the future clearly telling him, “you can be a farmer, you can’t just be a farmer”. A peaceful happy ending was not to be.

The community of Woodbury, led by a despicably evil man referred to as the governor, gave outward appearances of stability and health. But it was ruled through fear, intimidation, vindictiveness and evil. Leaders like the governor arise during desperate times when the weak seek someone who promises to save them and keep them safe. Leaders like the governor are far more savage, ruthless and dangerous than the flesh eating zombie hordes because they kill with malicious intent, fully knowledgeable of the consequences of their actions. Eventually good communities led by good people must stand up and fight bad communities led by evil men, no matter the consequences. Under dire circumstances and an uncertain future we will need to decide what kind of community we will be. What kind of people we will be. Will we fight for a better future for our children? Can we retain our humanity or will we become no better than the walking dead?   

Brutal: Hershel awaits his fate at the hands of The Governor on last night's The Walking Dead

“What fascinates me is not so much humanity’s engulfment in darkness, but what kind of culture we will construct from the rubble of this one.” Carolyn Baker – Collapsing Consciously: Transformative Truths for Turbulent Times

Who Are the Real Walking Dead?

The central question permeating the Walking Dead is whether the living can maintain their humanity amidst so much horror, brutality, death, and desolation. Can the living continue to show compassion, kindness, mercy and love in a world torn apart by disarray, violence, viciousness and despair?  Throughout the series those who haven’t “turned” still have the capacity to empathize, comfort one another, offer succor, and show mercy and kindness. But after enduring unending horrors, cruelty, death and sorrow, it appears some of the characters are “turning” into the very monsters pursuing them.

Every human being has their breaking point. The main characters must commit increasingly heinous acts in order to survive. The walkers have no choice. Their humanity was stripped from them by the virus. The living have a choice. The mental anguish pushes some (Lizzy) over the edge into insanity. Others (Michonne and Carl) are torn by guilt that they have become monsters. Carol justifies her ruthlessness as the only choice for survival – just like the walkers. The seismic shift occurs when Rick, seeing his son being sexually assaulted, goes full zombie and bites the jugular of his captor and relentlessly stabs his son’s attacker. Daryl kills one of the bad guys by crushing his skull with his boot. Many of the characters have made a choice to shed their humanity in order to protect their family and friends. As the series completes its fourth season we are left with a question. Are the zombies really the “walking dead” or are the living really the “walking dead”?       

Life is complicated and those seeking simplicity and consistency will be terribly disappointed. The future is not going to be bright for our empire of debt and delusions. Times that will try men’s souls are on the horizon. The choices we make as individuals and communities will matter. Every human being has the capacity for good or evil. We will be alone in deciding whether we gravitate toward the dark side of our character or whether we make a stand for all that is noble and decent. Retaining our humanity during the trials and tribulations that await us will be crucial to creating a community that is sustainable and a future worth living and fighting for. It is clear that Terminus is not a true sanctuary for all. It permeates evil. As all of the “good” people are herded into a single boxcar I couldn’t help but see the parallels of the Nazis herding the Jews into boxcars for their final destination. Passive submission to an evil authority never ends well.

As the door is slammed shut and the protagonists are reunited, Rick declares “they’re gonna feel pretty stupid when they find out.” Abraham then asks “find out what?” Rick’s “they’re screwing with the wrong people” response confirms his transformation from an ambivalent reluctant leader into a powerful figure who will do anything necessary to protect his family, friends and community. This Fourth Turning has yet to reach its bloody, violent, chaotic zenith. The popularity of shows like the Walking Dead is a sign of the darkening mood change in this country. With our fragile fraudulent finance driven eco-system teetering on the edge, the threat of collapse is ever present. Within one week of a financial system collapse we would enter a Walking Dead like scenario. Each American who hasn’t already been infected with the zombie virus needs to prepare now and decide what kind of person they will become as the collapse engulfs our society. We all exit this world as we entered it – alone. But we have the wherewithal to positively impact the rebuilding of our culture from the rubble of this one. Are you ready to meet the deadly trials ahead? The choices we make over the next decade will determine if this is the end of the line for our civilization or a new beginning..       

“We live together, we act on, and react to, one another; but always and in all circumstances we are by ourselves. The martyrs go hand in hand into the arena; they are crucified alone. By its very nature every embodied spirit is doomed to suffer and enjoy in solitude. Sensations, feelings, insights, fancies—all these are private and, except through symbols and at second hand, incommunicable. We can pool information about experiences, but never the experiences themselves. From family to nation, every human group is a society of island universes.” Aldous Huxley – Doors of Perception

DON’T CRY FOR ME, AMERICA

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Posted on 24th April 2014 by Stucky in Economy

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Jumping around the net …. just found this. So many similarities between Argentina back then and the USSA today.

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Don’t Cry For Me, America

In the early 20th century, Argentina was one of the richest countries in the world. While Great Britain’s maritime power and its far-flung empire had propelled it to a dominant position among the world’s industrialized nations, only the United States challenged Argentina for the position of the world’s second-most powerful economy.

 

It was blessed with abundant agriculture, vast swaths of rich farmland laced with navigable rivers and an accessible port system. Its level of industrialization was higher than many European countries: railroads, automobiles and telephones were commonplace.

 

In 1916, a new president was elected. Hipólito Irigoyen had formed a party called The Radicals under the banner of “fundamental change” with an appeal to the middle class.

 

Among Irigoyen’s changes: mandatory pension insurance, mandatory health insurance, and support for low-income housing construction to stimulate the economy. Put simply, the state assumed economic control of a vast swath of the country’s operations and began assessing new payroll taxes to fund its efforts.

 

With an increasing flow of funds into these entitlement programs, the government’s payouts soon became overly generous. Before long its outlays surpassed the value of the taxpayers’ contributions. Put simply, it quickly became under-funded, much like the United States’ Social Security and Medicare programs.

 

The death knell for the Argentine economy, however, came with the election of Juan Perón. Perón had a fascist and corporatist upbringing; he and his charismatic wife aimed their populist rhetoric at the nation’s rich.

 

This targeted group “swiftly expanded to cover most of the propertied middle classes, who became an enemy to be defeated and humiliated.”

 

Under Perón, the size of government bureaucracies exploded through massive programs of social spending and by encouraging the growth of labor unions.

 

High taxes and economic mismanagement took their inevitable toll even after Perón had been driven from office. But his populist rhetoric and “contempt for economic realities” lived on. Argentina’s federal government continued to spend far beyond its means.

 

Hyperinflation exploded in 1989, the final stage of a process characterized by “industrial protectionism, redistribution of income based on increased wages, and growing state intervention in the economy…”

 

The Argentinian government’s practice of printing money to pay off its public debts had crushed the economy. Inflation hit 3000%, reminiscent of the Weimar Republic. Food riots were rampant; stores were looted; the country descended into chaos.

 

And by 1994, Argentina’s public pensions — the equivalent of Social Security — had imploded. The payroll tax had increased from 5% to 26%, but it wasn’t enough. In addition, Argentina had implemented a value-added tax (VAT), new income taxes, a personal tax on wealth, and additional revenues based upon the sale of public enterprises. These crushed the private sector, further damaging the economy.

 

A government-controlled “privatization” effort to rescue seniors’ pensions was attempted. But, by 2001, those funds had also been raided by the government, the monies replaced by Argentina’s defaulted government bonds

 

By 2002, “…government fiscal irresponsibility… induced a national economic crisis as severe as America’s Great Depression.”

 

In 1902 Argentina was one of the world’s richest countries. Little more than a hundred years later, it is poverty-stricken, struggling to meet its debt obligations amidst a drought.

 

We’ve seen this movie before. The Democrats’ populist plans can’t possibly work, because government bankrupts everything it touches. History teaches us that ObamaCare and unfunded entitlement programs will be utter, complete disasters. Our government is enslaving future generations to poverty and misery. And they will be long gone when it all implodes. They will be as cold and dead as Juan Perón when the piper must ultimately be paid.

 

http://directorblue.blogspot.com/2009/11/dont-cry-for-me-america.html

HARRY REID – STATESMAN

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Posted on 24th April 2014 by Administrator in Economy |Politics |Social Issues

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Harry Reid Issues Statement On “Hateful Racist” Cliven Bundy

Presented with no comment…

Reid Calls For Leaders To Unite In Condemnation Of Cliven Bundy’s Dangerous Extremism

April 24, 2014 | Press Releases
“This is not a game.”

Las Vegas, NV – Nevada Senator Harry Reid released the following statement today on racist comments by Cliven Bundy reported by the New York Times.

“I used to live in North Las Vegas and it is home to some of the hardest-working people I have ever met – men and women who embody the American dream by working hard every day to build a better life for themselves and their families. By contrast, Cliven Bundy has spent decades profiting off government land while refusing to pay the same fair use fees as his fellow ranchers. Today, Bundy revealed himself to be a hateful racist. But by denigrating people who work hard and play by the rules while he mooches off public land he also revealed himself to be a hypocrite.

“To advance his extreme, hateful views, Bundy has endangered the lives of innocent women and children. This is not a game. It is the height of irresponsibility for any individual or entity in a position of power or influence to glorify or romanticize such a dangerous individual, and anyone who has done so should come to their senses and immediately condemn Bundy. For their part, national Republican leaders could help show a united front against this kind of hateful, dangerous extremism by publicly condemning Bundy.

“The bottom line is that elected officials and those in positions of power or influence have a responsibility to unite behind the basic principle that we are a country of laws, and that whatever our differences, it is unacceptable for individuals to use violence or the threat of violence to advance their radical views.”

WESTERN STATES HAVE HAD ENOUGH

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Posted on 24th April 2014 by Wyoming Mike in Economy

Finally! Some things were already in the works due to the sequester bullying by our imperious leader last year, but the Bundy event pushed our folks over the edge. Delegations from the big BLM states are meeting in Utah for the 2nd time in 2 weeks to determine the best way forward in getting our land back. Wyoming’s initial delegation included 7 legislators (all republican), 2 county commissioners & several irate taxpayers.

Wyoming passed a bill this year that included the following: (C) Shall consider methods for the federal government to divest public lands held within the state including consideration of legal action and congressional action; & (iv) Develop and introduce legislation as necessary related to the acquisition or management of public lands and legislative responses to federal policies and actions necessary to protect the interests of the state of Wyoming.

Tonight there is a webinar that I invite all to sign up and listen: http://webinarjam.net/webinar/go/2295/1019400731. 7pm Mountain Time, y’all are smart, do your own timezone math.

In Liberty,
Mike

Putin’s Secret Weapon – How Russia Could Take Down America Without Firing a Single Shot

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Posted on 24th April 2014 by Administrator in Economy |Politics |Social Issues

Putin’s Secret Weapon – How Russia Could Take Down America Without Firing a Single Shot

By Casey Research

Here’s a startling fact most investors have never heard: During the last financial meltdown in 2008, when the U.S. economy was on the brink, Russian leaders met with China to persuade them to dump the dollar – and destroy the world’s reserve currency.

Before they could act, the Fed pumped over $700 billion into the economy and delayed their day of reckoning. Still, the threat remains. China holds over $1.2 trillion in U.S. debt today. And with their Russian allies, they could drop the dollar at any moment. This excerpt from our eye-opening documentary called “Meltdown America” explains the severity of this imminent threat:

For the full story and to learn more about what could be “the early stages of the end of the West,” click here to watch the full version of this documentary.

You’ll hear the harrowing and true stories of three people who survived economic and political collapse in Zimbabwe, Yugoslavia, and Argentina… and discover how their powerful stories of hardship foreshadow what’s happening in the U.S.

Click here to watch this full-length documentary right now – it’s FREE!

LOOKS LIKE WAR TO ME

15 comments

Posted on 24th April 2014 by Administrator in Economy |Politics |Social Issues

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How’s that de-escalation going?

Obama, Kerry, and Biden – Dream team of Diplomacy

 

Demography + Debt = Doom

5 comments

Posted on 24th April 2014 by Stucky in Economy

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Let me introduce you to a blog I visit often; Gerold’s Blog.

It’s a long article, but an easy and interesting read. He even references Admin’s article “14 year recession”.

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A ‘Perfect Storm’ of demography and debt will economically and financially doom almost every country on earth. It will be TEOTWAWKI – ‘The End Of The World As We Know It’.

No, it’s not the end of life or even the end of civilization. However, when it’s all over, nothing will ever be the same and that includes the disappearance of much of the middle class.

On the other hand, as Jesse of ‘Le Cafe Americain’ writes “there is nothing we are facing or are likely to face, outside of an all out nuclear war, that was not faced by our fathers and grandfathers who faced two World Wars and a Great Depression in between.” Although nuclear war is highly unlikely, the alternatives are not very enticing prospects.

First, the good news. The storm won’t last forever. In fact, it may end sooner than many think. And, when it’s finished, life for many may be better than today’s slow economic strangulation, at least for those who stop self-medicating with their boob-tubes, Tweets, iGadgets and self-aggrandizing social media long enough to pay some serious attention and try to understand what’s happening.

The bad news is there will be much more pain before it ends unless you make an effort to understand what’s happening and why. Only then will you know how to protect yourself and loved ones from the storm. Otherwise, you risk becoming just another poor, nameless statistic. That would be both tragic and unnecessary because you can do things to prepare and avoid the worst of it. Keep reading. This is a long article, but what’s your life worth?
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Stupid Government

Governments and their handmaidens, the ass media, are trying to convince a dumbed-down, gullible public that we are recovering from the Global Financial Crisis; that they know what they’re doing and they can be trusted. Don’t believe it. Those neo-Keynesian idiots haven’t a clue what they’re doing and they can’t be trusted to run a lemonade stand let alone look out for your best interests.

Here’s but one of numerous articles titled, “Economic Bounceback Anticipated for 2014”. First, never trust forecasts. Second, it predicts happy days just as soon as the weather gets better. The Amerikan administration used to blame Bush, but that got stale so now it’s the weather’s fault. And, when that too, gets lame, rest assured they’ll dream up another excuse.

The chart below tries to spin a U.S. housing recovery. It’s titled, “Housing Starts Dip in January, Level off in February”. That so-called ‘leveling off’ is the tiny horizontal blue line on the extreme right of the chart. It’s so small it’s almost hidden by the red ‘averaging’ line.

US housing starts

Now cast your eye over the last 14 years back to 2000 and see how low today’s U.S. housing starts are compared to the last 14 years. So, who ya gonna believe; that bullshit headline or your own lyin’ eyes? Such is the ass media’s utter contempt for the public that they think we’re gullible enough to believe the crap they fling at us.

Furthermore, what little recovery there is in U.S. real estate is Wall Street snapping up homes to turn them into rental units. Some housing recovery! Canada’s real estate bubble hasn’t burst yet, but it’s coming.

Financial crises take a long time to play out and recover. How long? MoneyNews reports “The weakness of the recovery stems in part from the usual lingering hangover from financial crises, according to research by Harvard’s Reinhart and Rogoff. Their research shows that it takes a decade to fully heal … A decade is a long time. But a long time is not the same as forever.”

It also depends on how stupid governments are. As a political science major who has watched events unfold for many decades, I can assure you that no creature on earth is as stupid as a meddling government although unions come in a close second. (Disclosure: I once was a union member.)

Governments’ brainless bureaucrats lack the balls to proactively prevent problems because that would entail sticking their heads out and risk getting them chopped off. So, instead, they wait for problems to arise. Governments are reactive not proactive.

Furthermore, instead of determining the root cause of a problem (usually the government itself through its moronic meddling) they, instead, try to solve the results of a problem rather than the problem itself. You can fix problems; you cannot fix the results of a problem without creating ever more problems.

I’m also trained in the 6 Sigma continuous improvement program. One of the most powerful weapons in 6 Sigma’s ‘tool kit’ is DMAIC, an acronym that stand for Determine, Measure, Analyze, Improve and Control. With DMAIC, data and statistics are used to (first step) ‘Determine’ the root cause of a problem through measurement and analysis. Once the root cause is determined (admittedly easier said than done) only then can a process be improved. Like any recipe, if you don’t follow the steps in the right order, the results are disastrous just as baking a cake’s ingredients before mixing them will produce a mess, not a cake.

Governments’ brainless bureaucrats cannot understand this. They jump to conclusions about the cause of a problem and they almost always try to fix results. This inevitably creates more problems for the government to pretend to fix and to justify their existence. As I said, you cannot fix results. You can only fix problems and you cannot fix a problem if you don’t first determine its root cause.

For example, unemployment is a problem, isn’t it? No, actually, it’s not. Unemployment is the result of a problem so there is no ‘solution’ to unemployment unless the root cause of unemployment is determined and ‘Improved’.

President Obama recently launched the “Skills for America’s Future” program to “improve industry partnerships with community colleges and build a nation-wide network to maximize workforce development strategies, job training programs, and job placement.”

That sounds wonderful. However, contrary to popular belief, governments do not create jobs. Government meddling and over-regulation destroys jobs. What’s the point of training people for jobs that have been moved overseas? Well-paying jobs in manufacturing have been replaced with low-wage McJobs. The chart below shows low-wage jobs replacing mid-wage and high-wage jobs.

Low_Wage_Growth_615

Notice above how most of the jobs lost are in the mid-range.

The chart below shows how much high-wage U.S. manufacturing has declined since 1980.

US mfg 1941

Again, the problem is not unemployment; the problem is lack of well-paying jobs caused by outsourcing and by corporations’ short-sighted fixation on short-term profits thereby destroying their own customer base. In other words, more training won’t fix the jobs ‘problem’.

Problems Getting Worse

Inept governments have done nothing to fix the issues that created the Great Financial Crisis and the resulting recession. My previous article demonstrated we are overdue for another recession. This is also confirmed by Yahoo! as well as the National Bureau of Economic Research (NBER) and various other articles.

Since the problems that caused the last recession have gotten worse, the next recession will be morepainful than the last one despite so-called GDP growth.

For instance, the Too-Big-to-Fail banks have gotten larger than before thereby putting them at greater risk. National Review reports that since the year 2000, there are 29% more big U.S. banks and 24% fewer small ones as shown by the chart below.

large banks increasing

Not only are banks larger, but world-wide most banks, including central banks too, are insolvent (bankrupt) and starting to panic.

Another indication of a slowdown is the closing of so many retail stores. Even MacDonald’s is feeling the pain. In addition, inflation, especially in food, is getting worse which will further impact cash-strapped consumers.

I’ve outlined numerous other problems that have been ignored rather than solved in many previous articles so there’s no point repeating them ad nauseum.

It’s the Debt, Stupid

The single, major global problem is too much debt. Much of the commentary and analysis I read is misguided. Everyone’s talking about the consequences (results) of the problem yet few understand that the elephant in the room is too much debt.

Global debt has passed the $100 trillion mark, an increase of $30 trillion since 2007. To put this into perspective, global GDP is slightly more than $70 trillion. Here’s another perspective; global debt is 137% of global GDP. This is far beyond the 90% mark demonstrated by Rogoff and Reinhart (despite a few minor formula errors) as ‘beyond-the-point-of-no-return’.

The last Great Recession triggered by the Global Financial Crisis was caused by too much debt – private debt, government debt, corporate debt, Sesame Street debt, all kinds of debt – we have debt up the yin yang and it keeps growing.

The chart below shows that today’s mountainous debt level makes the debt prior to the last Great Depression look like a molehill. The debt/credit excesses of the 1920’s led up to the stock market Crash of 1929 and the Great Depression that followed. Can there be any doubt where today’s enormous debt level is leading?

Aubie BaltinOnce In A Century Opportunity-2014-03-18-002 (1)

Some of Aubie Baultin’s comments on the chart above are instructive:

“By 1982, with the memory of the 1930s Depression almost completely faded, policy makers once again began to “stimulate” the economy with borrowed dollars. By the mid-1990s we had exceeded the excesses of 1929 both in terms of the total amount of debt and in terms of stock prices.”

“As of 2014; there is currently 30% more debt worldwide than at the last peak in 2007 and we are experiencing one of the weakest recoveries of all time.”

“The bubble is much bigger than in 1929, [when] we as a people were much more self- sufficient and so the economic destruction will be worse damaging to the individual than in the 1930s!”

“We may have engineered a very anemic recovery and new highs in the stock market, but we haven’t solved the underlying problem of too much debt. Rather, we have made it much, much worse and that’s not even mentioning Derivatives in the Quadrillions.”

“When the boom ends, the accumulated debts do not.”

“A year before the 1929 crash, interest rates started rising while commodity prices fell indicating a risk of deflation – or collapse in prices. The same scenario is true today.”

“[China is] are probably in the worst trouble of all, as they discover that their Socialist Capitalism must still follow the Economic laws …”

“There isn’t a snowball’s chance in Hell that we will be spared the consequences of our leaders’ incompetence and corruption.”

I’ve already covered government’s incredible incompetence, but the corruption is all the new debt that has benefited the banksters and their cronies, but not the people. It has enriched Wall Street by impoverishing Main Street. Worse, as headlined by Washington’s blog, “By Choosing The Big Banks Over The Little Guy, The Government Is Dooming BOTH.” He further headlines “The Elite Financial Players Are Manipulating the Game So that They Get the Stimulus … and the Little Guy Gets the Austerity.”

Do you think this will ever stop? Dream on. The great ‘Vampire Squid’ will suck every drop of blood out of the system that it can. To protect yourself you must ‘Get Out of The System’ or GOTS as Jim Sinclair says.

Here is his GOTS checklist for those with wealth to protect.
1. Your equities are held in certificate form. [Gerold comment: paper stock certificates]

2. You have no Federal retirement funds. [Gerold comment: expect governments to confiscate pensions and turn them in to soon-to-be worthless government bonds. Cash out private pensions, take the tax hit and buy assets with the cash.]

3. You have no CDs and investments in bonds. [GIC’s in Canada]

4. You have modest money deposited among selected BRICs countries.

5. You store your own precious metals. [gold & silver]

6. You have no mortgage obligations.

7. You keep cash on hand for 6 months expenses.

8. You have no consumer debt at all.

9. You have a small hobby farm for protein and veggies outside of where you are living with no mortgage debt, set up green.

10. You have a gas, diesel or electric car with high fuel mileage for the farm.

11. You have a generator with large fuel capacity for the farm.

It’s not easy but the more you remain in the system, the more vulnerable you are to further losses, bail-ins and pension confiscation.

The Power of Demography

Demography (sometimes called demographics) is the statistical study of human population dynamics over time or space. The characteristics of a population include size, structure, density, distribution of the population and the changes resulting from birth, migration, aging, and death. Demographics is as powerful as it sounds and it has enormous predictive abilities.

One of the most powerful demographic cohorts in recent times has been the Baby Boom generation. Michael Snyder writes “The Baby Boomer generation is so massive that it has fundamentally changed America with each stage that it has gone through. When the Baby Boomers were young, sales of diapers and toys absolutely skyrocketed. When they became young adults, they pioneered social changes that permanently altered our society.” And, it’s not just Amerika affected by these demographics but most Western nations including Canada, Great Britain, Australia, New Zealand, much of Europe, etc.

Demography can forecast trends and patterns years and decades in advance. New York Post reports “Following the Baby Boom, which peaked in 1961, came the Baby Bust, a long slow decline in the birthrate. Those babies grew up and began spending in accordance with highly predictable patterns.

“People tend, for instance, to buy houses at about the same age — age 31 or so. Around age 53 is when people tend to buy their luxury cars — after the kids have finished college, before old age sets in. Demographics can even tell us when your household spending on potato chips is likely to peak — when the head of it is about 42.

“Ultimately the size of the US economy is simply the total of what we’re all spending. Overall household spending hits a high when we’re about 46. So the peak of the Baby Boom (1961) plus 46 suggests that a high point in the US economy should be about 2007, with a long, slow decline to follow for years to come.” And, that is exactly what happened; Western economies began their decline around 2007 with the recession beginning in the U.S. in December of that year followed shortly after in other Western countries.

In the birth-rate chart below, the Baby Boom is the red portion of the line that interrupted the gentle decline of birth rates.

US Baby Boom

There is much demographic tragedy on the left side of that chart. The high birth-rate in the early part of the 20th Century is due to high infant mortality. Families had many children because most weren’t expected to survive their early years. Also, the rapidly declining birth-rate after the First World War 1914 – 1918 comes from the unmarried “surplus women”
as a result of the war slaughtering so many “eligible” young men.

Japan is another case of obvious demographic trends that still eludes their government’s understanding. The New York Post quotes Harry S. Dent Jr. in “The Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014-2019” (Portfolio), “Japan’s stock market is still 65% below its 1989 peak. Their spending problem (currently being given a boost by a gigantic stimulus) is really … an aging problem.

“As the Japanese have hit their 60s and 70s, they became stingier. Artificial, forced spending like government stimulus is not going to spark real voluntary spending because that isn’t what old people do. They’ve already paid for their houses, cars and their children’s schooling. Merchants try to goose lackluster sales by cutting prices, which increases the incentive for people to save their money, expecting things will be cheaper in the future than they are today.

“That’s a deflationary spiral, and Dent sees it coming here next, and soon.” In other words, we will soon see that Japan’s massive QE, called “Abenomics”, is a greater disaster than America’s endless rounds of QE which failed to spur the U.S. into a real recovery. In the U.S. it’s sometimes called a ‘jobless recovery’. That’s nonsense. Even disregarding the Amerikan government’s fake unemployment statistics, a real recovery in jobs never happened because the economy never really recovered.

Stay tuned to China, too. We will soon see the disastrous effects of the massive Chinese QE of infrastructure spending and the construction of ‘ghost’ malls, rail stations and empty cities which proportionately dwarfed the U.S.’s QE. The Chinese defaults are already beginning. China’s demographic problems are unique; stemming from its decades-long ‘one-child’ policy resulting in a ‘Baby Bust’ far larger than the West’s.
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The Greying of the West

The Financial Times reports “The drop in the percentage of Americans at work in recent years is often cast as a story about the long-term unemployed who give up trying to find jobs.

“But the declining workforce participation rates, which have sharply reduced headline unemployment calculations in the world’s largest economy, could be related to a very different phenomenon: the greying of America.

“What is more, the trend is set to continue until around 2020 regardless of how the economy fares.” And, it’s not just the greying of America but most Western countries as well.

The jobless statistics are improving, but with more and more Boomers retiring the economy is impacted with fewer workers, less spending, less tax revenue thus straining the U.S. social security system and making it more politically unpalatable to fix. The chart below shows how the geometrical rise of social security cost is out of control.

Total Annual Cost of Social Security (1)

Boomers are retiring from relatively well-paying jobs and leaving a larger proportion of low-wage workers in the work force resulting in even less spending and further declining tax revenues. Furthermore, unfunded pension liabilities are increasing as are health-care costs as a result of this demographic trend. Even countries like Canada which does have a funded public pension plan will also suffer greater demands on the Canadian Pension Plan (CPP). In addition, Canada’s universal health care system will be strained to accommodate this huge cohort of aging Boomers.

As you can see, demography is a very powerful force affecting us all as well as our economy and our future. It is a testament to governments’ incredible stupidity that they have never understood the power of demographics nor have they been able to plan according to these very obvious demographic trends.

For example, forty years ago when the Baby Boom’s bulge in our population was reaching high schools there was inadequate classroom space to accommodate the increased student population. My high school went on a double shift with half the students going to school on the first shift in the early morning and the other half on the afternoon shift.

It’s not as though school boards and education departments couldn’t see it coming. High-school student didn’t just miraculously drop out of the sky. High school students came up through the primary grades. Administrators knew there was an increase in primary grade students, yet they failed to grasp that most primary grade students would go on to high school. Were they expecting that students would somehow disappear off the face of the earth?

Demographics also would have told them that they had built too many primary grade schools and many of these classrooms were no longer needed once the Baby Boom bulge had passed through. Administrators failed to anticipate this and did not plan for the gradual closure and consolidation of schools. Instead they waited until schools were half empty and then, with short notice, they began closing schools en masse. Needless to say, this enraged parents, many of whom would lose their neighbourhood schools. Never underestimate the power of government incompetence.

It is a testament to the incredible incompetence of governments’ brainless bureaucrats that they are incapable of learning from their past mistakes. Today, governments still don’t have their arms around demographics as we’ll see below.

Nowadays, 10,000 Amerikan and 1,000 Canadian Baby Boomers are retiring every day. That’s every DAY! It should come as no surprise that governments are inadequately prepared to sustain this social security safety net for very long.

social-security-benefits-graph

For example, since 2000, the U.S. population has increased 13%. As seen in the graph above, the social security beneficiaries have increased 28% and those on disability 100%. This is simply not sustainable yet nothing is being done about it.

Furthermore, most social security safety nets require a constant stream of funding from current workers which means a young workforce. However, many of the young are already burdened with a with a triple whammy:

1)They are working in low-wage jobs.

2) They are saddled with massive student debt.

3)They are paying much higher social security taxes than previous generations and yet they’ll see fewer benefits.

The impact on the young can be seen in the graph below on ‘household formation’ where the young can’t afford to ‘leave the nest’ so more and more are living in Mom’s basement.

Household-formation

MyBudget360 reports “You have more people living at home between the ages of 18 and 31 than you did during the Great Depression!”
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Unprepared for Retirement

A large number of Boomers are financially unprepared for retirement. They are working longer and their retirement age keeps increasing.

Boomers’ delayed retirement denies younger generations jobs and experience which will also have long-term negative impacts on the economy.

The graph below illustrates how unprepared Amerikan Boomers are. Notice the large discrepancy between ‘Average Retirement Amount’ on the left and “Median Retirement Account’ on the right.

us-retirement-accounts

MyBudget360 explains this as, “The average is a poor metric because it takes into account the few outliers with millions. The median shows us where half of people fall below and above and the picture isn’t pretty.”

“Since we have a massive cohort of Americans entering retirement age everyday having decades ahead to right the ship will no longer be an option.”

One of many reasons so few Boomers are unwilling and unprepared for retirement is the decline in defined benefit pension plans and the increase in defined contribution plans. In 1980, 60% of workers had defined benefit plans whereas today it’s fallen to 10% while the number of defined contribution plans (individual responsibility) has increased from less than 20% to well over 60% as shown in the graph below.

pensions

With defined benefit plans (“divine” benefit) the company would top-up any shortfall in the plan. With defined contribution plans, the individual was solely responsible. The graph above shows the defined benefits as the descending blue line and the rising red line is defined contributions.

With stagnantincomes more people are living hand-to-mouth and unable to save.

Real Disposable Income ST

As you can see from the chart above, the trend is clearly downwards.

Tyler Durden of Zero Hedge says, “We may not know much about “Keynesian economics” (and neither does anyone else: they just plug and pray, literally), but we know one thing: when real disposable personal income drops by 0.2% from a month earlier, and plummets by 2.7% from a year ago, the biggest collapse since the semi-depression in 1974, something is wrong with the US consumer.” And, with central banks’ Zero Interest Rate Policies (ZIRP), those who could actually save earn practically nothing in interest.

CBS reports “roughly half of U.S. families don’t have a single dime set aside for retirement.”

Many people find it, “hard or impossible to save because of their precarious situations — unemployment, stagnant income, impossible health costs or other factors.”

“… perhaps the biggest obstacle to saving for retirement in the United States is that wages for nearly all Americans have been stagnant for more than 30 years — a trend that has continued following the housing crash and the weakest post-recession recovery in U.S. history.”

MoneyNews reports, “There are no documented examples of an economy that had to emerge from a financial crisis while simultaneously absorbing the effects of an aging population, noted Harvard University economist Carmen Reinhart, who has researched eight centuries of crises with her colleague Ken Rogoff.” In other words, the situation is far worse than we realize.

Depression May End in 2020?

Many believe the recession/depression began about 2007 (myself included) but there’s considerable evidence to think it started even earlier. Many signs point to the year 2000. Jim Quinn of the Burning Platform calls this the “Fourteen Year Recession” that began with the bursting of the DotCom bubble.

We’ll have to wait for future historians to cast their vote. If this is a typical Depression and it began in the year 2000 and Depressions last an average of twenty years then 2020 (the anticipated “reset”) may see us clawing our way out of it. That’s, of course, assuming this is a typical Depression and not the ‘new normal’. Only time will tell. In either case, it’s wise to prepare as outlined below and in my previous survival articles.

Investment Suggestions

In a slower growth world with aging demographics, an investor needs to think outside the box used by his grandparents or even his parents by focusing on yields or dividends rather than equity appreciation (rising stock prices). This also means educating yourself in investing and not relying on traditional ‘buy and hold’ techniques.

An investor must be prepared to change investment strategies as resource and commodity prices change. This means paying a lot more attention and being nimble. It also means going against the herd (nothing new there).

Our owners, as George Carlin called them, will continue blowing asset bubbles for their cronies that can be profitable for investors mentally prepared to buy when fear is greatest and sell when euphoria is highest (not new, either but mentally difficult). Also, consider stocks in companies more likely to improve productivity rather than those that rely on an ever-expanding customer base.

Some of the most important investment lessons I’ve learned the hard way are:
1) Patience.

2) Don’t be afraid to sit on the sidelines because you don’t need to be fully invested all the time.

3) Small losses are better than hope because that can result in larger losses. Hope is not a plan.

4) Ignore the daily noise. Stock markets fluctuate and the reasons given by the ‘talking heads’ is meaningless babble.

5) Ignore ‘hot tips’. Educate yourself and make your own decisions.

6) For lots more, see my hard-earned stock investing lessons.

James Gruber suggests, “investment opportunities in areas which provide solutions to some of problems of ageing demographics and resource constraints. Robotics to improve work productivity, for example. Biotech to help us live (and work) longer. Healthcare technology which helps mitigate rising healthcare spending. And in agriculture and renewable energy as resources constraints become more urgent.”
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Social Warfare – Divide & Conquer

Demography lends itself to generational and social warfare as our ‘owners’ and their ass media minions encourage groups and generations to fight and flame and blame each other rather than the real enemy. Republicans fight their own Tea Party, Democrats fight Occupy Wall Street, the young blame the old, the old disparage the young, liberals blame conservatives and on it goes.

We hear much about the ‘top 1%’ getting wealthier at the expense of poor little us, but that too is part of our owners’ divide & conquer strategy. It looks increasingly like the top 1% are being positioned as the next patsies to be fleeced by desperate governments. Meanwhile, they make convenient targets for our hatred and to distract us from real issues. It’s not the top 1% or even the top 0.1% whose wealth is increasing, but the top 0.01% as per the chart below.

Inequality1

Note that this chart tracks percentage not nominal dollars. It’s only the top 0.01% (red line) whose percentage of wealth is increasing. Those are our ‘owners’, not the banksters; they’re just the bag men. It’s not the Warren Buffets or George Soros of the world; those are just the front men. It’s the nameless and faceless few families who are never seen in public that control the puppet strings to which we all dance and, the more indebted we are, the harder we dance.

Yet we blame everyone else. We blame immigrants who generally aren’t afraid to work hard and show up the rest of us. We blame Muslims, the Jews, etc. We blame everybody except ourselves. When we point a finger, we conveniently forget that there are three fingers pointing back at ourselves. Never underestimate our incredible ability to avoid accepting responsibility for ourselves.

So much for the land of the ‘free and the brave’ who have allowed themselves to become a dumbed-down, self-medicated, digitally-addicted nation of sheep coerced by uniformed thugs and governed by corrupt, paid-for leaders. That’s why I spell Amerika with a ‘K’ rather a ‘C’ in memory of a nation that has willingly surrendered its freedom for the illusion of security and received neither.
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The Real Enemy

The real enemy is both ignorance and debt and especially the ignorance of the pernicious effect of debt in creating debt-slaves that elect politicians that support a central bank-controlled financial system of usury and inflation that robs us of the purchasing power of money. Once you understand that, you can prepare and avoid the worst of the storm.
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How to Prepare

- Reduce your debt, get out of debt and stay out of debt

- Keep only as much money in the bank to pay your bills and avoid future Bail-ins.

- Stay away from banks altogether. Use a Credit Union. They’re slightly safer, friendlier and easier to deal with.

- Buy assets. Depending how much money you have; if you’re wealthy, buy the company rather than its stock because stock markets crash.

- If you have medium wealth, buy cheap land (admittedly hard to find) as well as hard assets and gold.

- If you have small wealth, diversify into one ounce silver coins, long term food storage and durable necessities like toilet paper, garbage bags, etc. In other words; stockpile.

- Even if you have only a little money, there are things you can do to protect yourself and your loved ones. Educate yourself. Stop watching the boob-tube. It rots your brain. There are many alternate sources of information.

- Re-read Jim Sinclair’s GOTS checklist above.

- If you understand nothing else then understand this: money is NOT real. Money is simply an agreement, an IOU that eventually will be worth less than toilet paper. You need to copy Warren Buffet and convert your money into tangibles, real stuff, real assets that the governments cannot confiscate.

As Yogi Berra once said, “It’s tough to make predictions, especially about the future.” However, many ‘hard money’ financial analysts predict the ‘Great Levelling’ in about 2016 and the ‘Great Reset’ in about 2020. That’ll be here before you know it. The levelling will be the time of loss and confiscation. The reset will be the new currency, just like the old currency and you can bet it will be created to their advantage, not yours.

So, you must protect yourself by preparing for it as outlined above. If not, you’ll be just another statistic. It’s your life and your choice.

Remember the mantra:
We cannot borrow our way out of debt.
–We cannot spend our way to prosperity.
–We cannot pretend our way out of trouble.

Lord knows, they keep trying …

Gerold
April 5, 2014

http://geroldblog.com/2014/04/06/demography-debt-doom/

 

KEYSTONE PIPELINE

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Posted on 24th April 2014 by Administrator in Economy |Politics |Social Issues

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POLICE BRUTALITY VIDEO OF THE DAY

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Posted on 24th April 2014 by Administrator in Economy |Politics |Social Issues