Friday, April 30, 2010

Greeks Bearing Gifts

Greece as the Trojan horse of the Euro is symbolism of the highest and most appealing kind. Appealing in an artistic sense as the Greek crisis may kill the Euro stone dead and that fear is starting to be expressed publicly. The Euro has only been around ten years and was touted as the glue that would bind Europe together, as the currency that would give the US dollar a run for it's money, as it were, in the field of international finance. Now the Euro is being torn apart by lack of flexibility and increasing government debt within the Euro-zone. The problem has been that the requirements for entry into the highly desirable unified currency system were that countries carry only three percent of gross domestic product in debt. Several countries fudged the numbers including Greece which "sold" debt to Goldman Sachs to hide it's existence. The election of the new Socialist government exposed the lie and since then all hell has broken loose.

The problem is that the creators of the Euro forgot to include a mechanism within the system to favor loans for countries facing bankruptcy and now the bankers of the Euro have no idea how to save Greece. Germany holds all the cards and is making noises about letting Greece go down, perhaps as a way to weaken the euro and create a better export market. In any event this crisis is expected to be followed by others in other Euro-zone countries and the question of how to save them is becoming more and more complex and urgent.

The trans Atlantic fiasco makes the US look good by comparison and pushes back the day the dollar might lose universal supremacy. But whatever else it does the euro crisis doesn't solve the debt problems in the US, which with a comparatively stronger currency now has a harder time exporting against countries using the feeble Euro. Greece's gift may be a return to individual currencies, which would be welcomed by a few of the residents of the zone, no doubt, but as a Trojan Horse the downgrading of Greece's debt to junk status might have unplanned consequences even in the US. I wonder if they will have to go back to drachma to inflate their way out of debt.

Thursday, April 29, 2010

Iran, China and Russia

The United States' Foreign Policy never ceases to amaze me inasmuch as diplomatic behavior seems to have more in common with school yard grudges than with adult diplomacy. Decades after the war in Viet Nam was lost relations remain prickly. The Cuban Embargo highlights the utterly specious basis for American foreign policy where personality trumps national self interest. Iran is another case in point where a revolution decades ago has produced a prolonged and ineffectual deep freeze between the two countries. Arguably this lack of communication could trip Armageddon this summer.


Israel it seems is having some serious worries about the role of Iran in the Middle East and has been making noises about going to war with Hezbollah in the Lebanon, and then moving on to Hezbollah's patron, Iran. This attitude is nothing new as the Bush Administration was having seven different kinds of conniption fits with both players years ago. what may make this year's posturing a little different, and perhaps a little more intense, is how other putative world powers are squaring off.

Mahmoud Ahmadinejad of Iran

China wants to trade oil for gasoline which would help Iran a great deal. Iran holds huge oil reserves but no refining capacity. If Iran sells oil to China and China sells refined product back Iran comes out a winner by a wide margin. meanwhile Russia is falling over backward to offer Iran nuclear technology. Whether or not it is as claimed, Iran's nuclear program is the pretext for the United States' next invasion.


A US invasion and occupation of Iran would offer numerous advantages for American imperial might: A bloody nose to China and Russia for "interfering" in US interests. An invasion would secure oil for western oil companies just as the Iraq war did. An invasion of Iran would put the US economy on a secure war footing which as far as I can see is the only way the United State's impossible debt burden can be eliminated.


One might be described as cynical for suggesting that war with Iran might be good for the economy but there are those who suggest President Roosevelt would never have been able to get the economy up and moving without the help of World War Two. And some scurrilous people have suggested the President allowed the attack on Pearl Harbor to go ahead with his knowledge, in order to get the US into the war. Be that as it may, a war with Iran might be just the ticket to eliminate the impossible federal debt burden and give this country another chance. Iran would be flattened but that would be their problem. We would have access to oil, our debt would be paid off and the more I think about it, the better war with Iran sounds. I am, regretfully, too old to be drafted for any such conflict were it to arise.

Tuesday, April 27, 2010

Printing Cash

The Chair of the Federal Reserve has apparently been caught on tape admitting that he has printed 1.3 trillion dollars in an effort to kick start the US economy. The idea was that the Fed would use the money to purchase Mortgage Backed Securities to help banks clear their backlog of useless "investments." A side effect of this purchase was to put the junk securities on the taxpayer's backs, but never mind that for the moment.
Fed Chair Ben Bernanke has been known as "Helicopter Ben" to some financial sceptics, who have long since expected the Federal Reserve to fly overhead and drop cash on the US economy. Now C-SPAN (Congress in Session, Public Access Network) has apparently shown the chair admitting to doing just that. The admission was reported by Greg Hunter on his site USAWatchdog and he is rather upset by the lack of attention this admission has provoked. Interestingly enough he draws a comparison between the health insurance reform bill and this financial bail out of the banks. The Health Reform plans might cost a trillion over a decade and Hunter asks, rhetorically of course, why not just print the cash and be done? It was the official plan for the mortgage investment garbage, so it might as well be used to pay for health care.


And guess what? Under Representative Ron Paul's questioning Bernanke pretty much confessed this same tactic of printing cash will be used to fund "mutual commitments " by the International Monetary Fund. The IMF is the world's lender of last resort and is expected to be called in to help out a whole raft of first world industrialized economies that are showing signs of economic stress- Greece, Portugal, Great Britain, and so forth for a start. So if this fund is to be augmented by several and various first world economies it seems likely that printing presses across the industrialized globe are going to be churning out money.


The Chair of the New York Fed, the Treasury Secretary's former job at the most powerful of the regional Federal Reserve Banks also told Representative Paul, a Federal Reserve sceptic of the highest order, that the fact that this nation's national debt is denominated in it's own currency is an enormous advantage. The main advantage of such a state of affairs is that it is technically possible to print one's way out of debt. So what Greg Hunter in his blog is suggesting is that we have been duly warned that helicoptering our way out of debt is the path chosen by our economic leaders. Which will debase the currency and that is provoking more talk of inflation. However one thing that surprises me is that if the Fed has already pumped 1.3 trillion into the banks to buy their mortgage securities and we've seen no easing of the credit crisis I am not at all sure inflation is on the cards.

Inflation is the undesirable state of affairs where a swelling supply of cash in the hands of businesses and consumers is chasing a steady supply of products and thus the costs of the products goes up to accommodate the increased cash flow, which in turn grows as wages rise to meet the increasing cost of the products being pursued by the cash. This becomes a problem as the vicious circle tends to spin out of control. Helicopter Ben seems to be trying to refill the coffers of the banks to enable them to lend once more but the tactic has failed. He's created 1.3 trillion dollars where there were none before and the money has had no visible effect on lending by the banks. That's not inflationary, that's just debasing the currency.

If we ignore the insistent talk of an economic recovery coming up very very soon, we must wonder what our currency will look like after our debts are paid and our national debt is current all thanks to the expedient of running the printing presses. Perhaps debasement versus inflation will just look like a semantic difference; it's likely the end result will be the same.

Monday, April 26, 2010

Banks And Mortgages

I have been puzzling for some time over the true state of real estate and I have been able to form no conclusions locally. Florida is a no tax state and relies heavily on property and sales taxes for it's income. The state sales tax is riddled with loopholes and property taxes have been in decline for some years now as the Great depression takes hold. Yet we hear that there is a recovery in the offing. The Monroe County School District is enacting cuts and laying off personnel, but the Superintendent tells his followers that next year things will be better as the economy is improving. I wonder why he thinks that, perhaps he is just hoping for the best and waiting to see if he has to pile on the bad news next year...

In the Florida Keys real estate has been among the most pricey in Florida. Certainly there are pockets of extreme wealth in the state but Monroe County has distinguished itself by reporting across the board costly homes for a very long time. Now prices are dropping but it's hard to tell what is really going on. Realtors say the market is picking up but "For Sale" signs have been a way of life around here for years. An acquaintance who works in a realtor's office was told just last week that her pay is being cut by a third. That doesn't sound good as far as sales are concerned but of course it could just be an office of incompetent Realtors. In any event home sales do not appear to be as rosy as indicated by the people involved in the trade.

Nationally the situation seems rather more dire. Reading a report in Counterpunch I was disturbed to see that mortgage refinance is proposed as one more way banks are scamming the public coffers. It seems banks are struggling to deal with many more foreclosures than they can handle. Apparently it takes banks an average of two years to gain access to home after the occupant stops paying the mortgage and even then the house is most likely going to be kept off the market. The reason is that if the banks put all their foreclosed inventory up for sale at once prices will tumble even further so they parcel them out. This is leading to speculation that the inventory of actual homes for sale is going to be considerably greater than current estimates.

Add to that problem the problem of dealing with delinquent mortgages and banks are apparently on the ropes. The housing crisis has frozen credit because banks simply don't have the capital to cover their housing losses and have capital to lend at the same time. It seems too that mortgage modifications are increasing at quite a clip and the fear is that with the spiralling home values they will end up , again, in foreclosure. The only thing is that there is a wrinkle in this little problem. The permanent modifications are guaranteed by the FHA so that if the modified mortgage fails the costs will be picked up by the taxpayers, not the original lenders. So once again we see banks dumping their toxic material on taxpayers.

When you also notice that Bank of America is offering the unemployed payment forbearance you get some inkling of how desperate the situation is for banks. I am wondering myself why we aren't considering defaulting on our mortgage. It's just a matter of my wife and I being too bourgeois, I suppose.Paying pur mortgage is starting to seem like a mug's game to me. The shenanigans that are going on across the country fill me with foreboding about the housing market and the fact the mainstream media keeps pushing economic recovery just makes me wonder all the more. High unemployment, toxic mortgages, failing commercial real estate and we are about to begin a recovery?

Sunday, April 25, 2010

Key West Bargain

I don't usually indulge my photography habit on this blog, but I liked this half moon and had nowhere to put it.I saw it in Key west while I was out walking the dog and we passed this sign. Why, I wondered did they drop the price to five hundred and fifty thousand. Why not half a million straight?
Two lots, sure, but it still looks like a lot of money for a tumble down shack. Doesn't it?

On the one hand we say these people have figured out the market has taken a dump and they have adjusted their asking price accordingly. On the other hand they have gone from an absurd asking price to a silly one. As a measure of understanding the reality of our new poverty this example doesn't make the grade. There again if I walk by here in two weeks it may be sold for full asking price. Reality is as reality does and real estate is the same.

Saturday, April 24, 2010

War Or Peace

From Robert Naiman in the Truthout Website:

Sometime between now and Memorial Day, the House is expected to consider $33 billion more for war in Afghanistan. This "war supplemental" is largely intended to plug the hole in Afghanistan war spending for the current fiscal year caused by the ongoing addition of 30,000 troops in Afghanistan, whose purpose is largely to conduct a military offensive in Kandahar that 94 percent of the people there say they don't want, preferring peace negotiations with the Taliban instead.
Of course, by itself the number $33 billion is totally meaningless. To make it meaningful, we need to compare it to something - what else could we do with $33 billion?
A recent missive from the AFL-CIO gives a compelling answer: we could use $33 put America back to work:
If the Local Jobs for America Act (HR 4812) becomes law, it will create or save more than 675,000 local community jobs and more than 250,000 education jobs, according to the latest estimates from the House Education and Labor Committee.

According to the House Education and Labor Committee, the bill includes $75 billion over two years for local communities to hold off planned cuts or to hire back workers for local services who have been laid-off because of tight budgets. The bill also includes $24 billion, already approved by the House in December, to help states support 250,000 education jobs, put 5,500 law enforcement officers on the beat, and retain, rehire, and hire firefighters.
Let's therefore put the two year cost of the Local Jobs for America Act at $100 billion, or $50 billion a year.
Now, in order to compare apples and apples, we need to convert the $33 billion for war in Afghanistan to an annual figure - note that the $33 billion just pays for the Afghanistan war through the end of the current fiscal year on September 30. There's some debate about when the Pentagon will actually finish burning through the money it's already been given; let's start our count on June 1. In that case, $33 billion pays for four months of war in Afghanistan, for an annualized cost of $99 billion.
In other words, the cost of the Local Jobs for America Act is half of the cost of continuing the war in Afghanistan.

Or we could look at it this way: supposed we decided to pay the two-year cost of the Local Jobs for America Act by shortening the war in Afghanistan. By how much time would we have to shorten the war? We'd have to shorten it by at least a year.
Now, if only there were a bill in Congress that would likely shorten the war in Afghanistan by at least a year.
Fortunately, there is. Last week, Senator Russ Feingold [D-WI] and Representative Jim McGovern [D-MA] introduced companion legislation "to require a plan for the safe, orderly, and expeditious redeployment of United States Armed Forces from Afghanistan." This legislation requires the President to establish a timetable for military withdrawal from Afghanistan. Since the current deadline for U.S. military withdrawal is nonexistent, I think it's fair to say that if this bill becomes law, the war is likely to be shortened by at least a year.
If you want your representatives in Congress to support the Local Jobs for America Act, and they say, "that's a great idea, but we have to pay for it," then encourage them to support the Feingold-McGovern bill.

Check out: http://www.truthout.org/ or click on my Web List.

National Bond Safety

Two graphs showing sovereign debt safety and returns. Norway has spend the past several decades setting aside income from North Sea Oil and has created a vast national reserve to fund social programs for their citizens. Britain spent their share pretending to be a world power.The losers column is not exactly surprising. Iceland is not however at the very bottom.That they should be a little easier to read is perhaps a sign of old age in this observer.

Friday, April 23, 2010

Blazing A Trail

Speculation is running rampant that Great Britain will be the next country to sink into a quagmire of public insolvency. Greece has scraped together a survival plan designed to preserve the Euro so the vultures are looking around to figure whose turn is next. The awful part about these failures of public finance is that the parties that helped engineer the failures stand to profit most from them. Investors bet the country in question will fail and make their bets (known as "short positions") public thus engendering a fatal lack of confidence that makes the short position a self fulfilling prophecy. And they take home the money they bet on the failure.

The main indicator of future failure in Great Britain is the presence in late 2009 of Goldman Sachs executives in the country meeting with financial leaders in government. That combined with a May 6th General Election is enough to drive speculation that Britain's government has been cooking the books with Goldman Sach's help just as they cooked the books of Greece previously. Things have come to a pretty pass when an investment banker's presence suggests financial thuggery might have been taking place.

Britain last had to get help from the International Monetary Fund in the mid-1970s and this time around it won't be an isolated incident. What this failure to function does tell us is that Britain, like the US, is teetering on the brink of becoming second class and slipping into irrelevance. No economy means no clout and begging for hand outs means our economy is in tatters. May 7th may mark the beginning of a whole new world after the British votes are counted. Where Goldman Sachs goes disaster is sure to follow. One would like to think the lawsuits building steam against Goldman Sach's thuggery will develop into a full blown shit storm from which there will be no recovery for GS. That would be nice, and then we could ignite the trail blazer who has been blazing far too many trails to disaster.

Wednesday, April 21, 2010

Peak Oil In Military Time

Tomorrow is the 40th anniversary of Earth Day when the power of student organizing was harnessed to make people think about the environmental degradation obvious to all. Clean air, clean water and government regulation to enforce a decent living envoironment for people grew out of that leaderless movement. Now Climate Change is upon us and no one really seems to know how this unpredictable change will affect us exactly. Harsher weather, unpredictable climates, storms and atmospheric violence, drought, famine and displacement.

Against this apocalyptic backdrop the only arrow we humans have in our collective quiver is the suggestion that we make changes, lots of them and in a hurry. So far the pace of change has been languid at best and half hearted mostly. Politicians have got in the way of course as the scientists fail hopelessly to make an irrefutable case of a likely scientific hypothesis. So we do nothing to alleviate any possible impact we may have on potentially catastrophic changes coming down the pike.


I justify my listlessness on the grounds I have no issue- I am child free and hence grandchild free also. Thus it is that whatever may happen in 2050 (the new benchmark- when I was a child everything was going to happen by the year Two Thousand, the social speculators told us) will have no impact on me. I will be dead in 40 years, and because I am human I try to ignore the possibility of evolving changes as we march toward that uncompromising deadline. Now however a group of thinkers in the US military have put their oar in and all those conformist anti-gummint types will have to hunker down even further as they contemplate a future that continues in the manner of the immediate past, all growth all the time they demand.

A shadowy military think tank called the Joint Operating Environment, whose job it is to contemplate what might go wrong and how to deal with it militarily is suggesting we are about to run out of surplus oil and not in forty years, but figuratively speaking tomorrow. Ranting on about government regulations is one thing, arguing with military planners is quite another.


The military thinkers suggest surplus production may last until 2012 when all oil produced will be sold for immediate consumption with none to spare. The inescapable conclusion if that suggestion is correct is that prices will rise, we all know that. By 2015 the JOE says capacity will be 10 million barrels shy every single day and considering we are around 82 million daily in production today that is a lot of shortage. Imagine price rises in response to that fiasco. And remember these are military people, not politicians nor scientists who are trying to figure out how to run the world's biggest military without energy. Because what we all know is that China will have the cash to buy the oil and we will have the debt.

We can hope that this paper made public now will spur debate of a serious kind but it probably won't. Peak Oil is still a vague concept not well know to the mainstream press and still mostly reserved for geeks like me who like to read a lot. So, is it time to dump the gas guzzler yet and prepare for a world where oil production cannot hope to meet demand? A good idea for you and me, but not so easy for a military on the move around the globe. Who are those pesky gadflies who keep predicting increasing resource wars to fund our need for energy? Whoever they are they have the US Military on their side now..

Tuesday, April 20, 2010

An Unexpected Spending Spree

Certain people are spending money and they shouldn't be. The statistics reported to the the federal Government indicate consumer spending is increasing and the hope is that these statistics show increasing confidence among we the people. in fact it appears that many among we the people are behaving rather strangely in the face of economic uncertainty.
breaking down the statistical anomaly I was intrigued by some information I discovered on the reporting of "same store sales." Part of the improvement in the economy was attributed to stronger sales in box stores around the country. It sure seemed plausible, if a little odd...people spending money when everything seems to be wrecked? Could things really be improving? It turns out the "same store sales" figures were being skewed by the closure of several neighboring chains which tend to share space in the same malls... Thus the closure of Circuit City would push more shoppers to a rival, say Best Buy, creating a surge in shopping in stores that survived the blood bath. So much for a surge in total numbers of shoppers shopping.
If we take that part of the equation with a pinch of salt we need to start scratching our heads at the news of a new round of consumer spending. This one seems to be real, that is to say people are actually spending money. The weird part is the assumption that these are people who are no longer spending money to pay their hopelessly underwater mortgages.I wish I could find it unbelievable but i find myself wondering if in fact this story may not be true. It seems that when mortgage holders finally give up they simply stop paying and turn their new found momentary wealth onto luxury spending instead, just like the good old days when homes were ATMs. Yes indeed, stop paying your mortgage and take a vacation instead seems to be the theme.
On it's face it sounds incredible that people would go on a spending spree when they decide to default on their mortgages, and the fact that the banks aren't yet interested in throwing them out of their homes won't mean much in the long run. But there it is, save yourself the hassle of paying for the roof over your head and go to Hawaii instead. The new bankruptcy paradigm for the homeowners under water on their mortgage. I wait to see what happens next.
We are currently seeing almost 4.5 million foreclosures on annual basis with one million repossessions expected this year. if trends continue there will be millions waiting to get kicked out yet spending, dare i say wasting, money in the meantime. My brain hurts.

Monday, April 19, 2010

Ashes To Ashes

Armageddon strikes from an unexpected quarter, was my first thought, as I read that people in England face shortages of grapes, baby corn and asparagus as the Icelandic volcanic eruption gathers steam, so to speak. This eruption at Eyjafjallajokull (ay-yah-FYAH'-plah-yer-kuh-duhl) volcano on the southern shore of Iceland is full of cataclysmic overtones which have not yet made themselves heard publicly. I wondered if perhaps the cloud of high flying volcanic ash will have to start smothering US airports and cities before the preachers come out waving the white flag of surrender to the forces of evil. Europeans are rather more pragmatic and are now wondering if they can fly their airliners anyway, above or below the ash, to ease the endless disruption of travel.

There is a delicious irony in that Iceland is the source of all the trouble. Icelanders built up a couple of their banks into impossibly sized lenders before the economic crash of 2008 and when they went out of business they took the high interest savings of millions of Dutch and British small time investors with them. Britain and Holland reimbursed their citizens for their losses and decided to demand reimbursement from little Iceland in turn. Citizens there held a quick revolution, booed and hissed at their leaders long enough to force a change and voted decisively not to repay the foreign governments for their losses. Now the unpronounceable volcano is backing up the referendum with ash.

Reporters have delighted in pointing out that historically large ash vents have had a hand in shaping the course of human events. Krakatoa in Indonesia was a huge 19th century damper on weather patterns for 5 years after the 1883 eruption. Mount Tambor also in Indonesia did the same in 1815, sending ash and sulphuric acid rolling around the world to horrid effect, eliminating summer completely in 1816. Some historians suggest the French Revolution was precipitated by starvation caused by inclement weather thanks to volcanic activity, and the Minoans of Crete are believed to have been eliminated suddenly and completely by the eruption and self destruction of Santorini. The list goes on, Mont Pelee in the Caribbean, Vesuvius in Italy and Etna in Sicily, not mention lava flows in Hawaii are a few of the better known eruptions but this latest effort from Iceland is giving us a 21st century taste of the power of Nature.Mt Pinatubo's 1991 eruption in the Phillipines was apparently three times as powerful as Iceland's, according to the Christian Science Monitor, but that eruptions failed to cause significant problems to white people in Europe and the Americas so it was greeted with a bit of a shrug by our nationalistic press .

This fresh one comes at a delicate time in human history as we all struggle with huge debts, shortage of credit (which means an absence of trust among ourselves) and rising political tensions in Israel and Iran, as those two countries trade insults and nuclear powered threats at each other. Europe can't seem to catch a break. I recall when Chernobyl blew up in that appalling nuclear disaster Europeans caught the brunt of the fall out (after thousands of Ukrainians and Russians bought the farm or enjoyed horrible mutilations) and we in the US looked across the water and enjoyed the distance from those troubles over there.

And who, if anyone, predicted more trouble from Iceland? What if a shortage of asparagus isn't the worst ill to beset the Europeans as the big bad plume of black ash continues to rise above thew Atlantic? Whatever next from which unexpected quarter?

Friday, April 16, 2010

Money Supply

The idea that we may be entering a period of high inflation seems to be the current thinking put about by people at the top of our economy, and I wonder about their pronouncements. Partly I wonder because I have grown to doubt their trustworthiness when it comes to manipulating our economy. If they say we are headed toward a period of inflation I suspect it's because they want it so. Partly I wonder about the likelihood of inflation in the face of a rapidly deflating economy, because our economy is deflating at his very moment.

The conventional view is that if allowed to run rampant inflation will eat away at the value of our currency and wreck any attempt to maintain economic stability. It will bring us to a round of price increases followed by wage increases in a futile attempt to keep pace. The examples of Weimar Germany, Argentina at the turn of this century and Zimbabwe a few years ago, are brought up ad nauseam, as though we too run the risk of wheeling barrows full of money into the street to buy bread. This I simply don't believe. The good news would be that my house mortgage would be reduced in value (just as the national Debt would too which leads me to wonder if this is all wishful thinking) if inflation picks up steam. Prices could increase in cost every day but my mortgage would remain fixed...which is the joy of inflation to those among us who owe money at a fixed rate!

With all the worry about runaway inflation at the forefront of everybody's mind we seem to have lost sight of the fact that at the moment our economy is deflating and even though the Federal Government is trying to stimulate a recovery by pouring trillions into public works after pouring tens of trillions into the banks all the public re-inflation of the economy has still left us with a sagging deflationary balloon. How much more money do we need to print and drop from helicopters to turn our deflationary economy into an inflationary one? I doubt the Fed can print enough fast enough to get that to happen. Here's why: we live and spend by credit not cash.

The classic definition of deflation is a marked drop in prices, though the best definition I have read involves the reduction of availability of credit. It's not an easy mental transition to make but if we consider the availability of credit to be the equivalent of money in our modern world, we see the shrinking of credit lines creating a deflationary spiral. For the past decades we have been living through expansion of credit lines, and most recently until the bubble burst, housing loans. Now that credit is being squeezed you will see deflation start to bite. Ignore prices because they will reveal nothing about the state of inflation. If people (known in our unhappy world as consumers) don't have access to credit they have no money (credit) to spend. In these conditions it doesn't matter how inexpensive items are, if there is no money/credit to buy them.

In classic economic theory an increase in the money supply leads to a spiralling increase in wages chasing rising prices. Now we have increasing unemployment (which traditionally drives down wages) and shrinking credit. How then can inflation threaten our economy? I dunno and I guess we shall see.

Monday, April 12, 2010

The Value Of Labor

I was in Josh's yard last week helping him pull weeds and trim bougainvillea, in an attempt to bring his jungle under control. It was a companionable way to spend an evening, as the sun declined in the sky and the temperatures were only modestly hot. My Labrador shifted a pile of pea rock to make a soft cool place to lie down and watch me was a I hoed weeds. We drank bottles of Yuengling and talked desultorily of this and that.

It was a thought that flashed through my mind as I pushed and pulled the hoe that came out of my mouth before I could stop it. "I don't think I'd like to have to take up landscaping if I were to lose my job." Josh looked at me with incredulity writ large across his face. "You're never going to lose your job!" he said to me. And he has a point after all. I have seniority and I work a job that so far cannot be replicated by a telephone service based in India. I wonder how long it can last, when i think about it some days. Perhaps, I suggest to myself, in a post technological world police response times will stretch out and an instant response to a 9-1-1 call will no longer be required or expected. Perhaps we will go back to an inefficient world where my skills will no longer be necessary to route help. Who knows?

At the moment it's Josh's profession that is under attack, teachers are an impediment to the wholesale destruction of living wages. So we hear how good teachers must be rewarded and "bad" teachers must be eliminated and the path to accomplishing this is by destroying unions. By and large I view the prospect with trepidation. My entire adult life has been a platform to observe the wrecking ball of well paid, first world jobs, all in the name of efficiency.

I have been an advocate of protectionism as I watched American jobs exported to Mexico, until Indonesia and China undercut the maquilladoras along the US border. I have remained an advocate of protectionism watching well paid jobs vanish in US industry. One has to wonder if an unemployment rate of 30% in Flint Michigan is better for the US than paying auto workers a living wage of $24 an hour. The answer seems obvious to me, yet people will crawl down my throat arguing that cheap consumer goods are the backbone of our economy. Perhaps, but they haven't got us anywhere good.
I am forced by circumstances to view a de-industrialised future in a new light, if indeed the American Empire is imploding and wealth is being sucked out of our country by sovereign debt, interest rates and all the rest. Some observers try to make the argument that China is on the cusp of a major implosion which seems unlikely to me- all that accumulated wealth and a dictatorship of the proletariat to tell people what's what should take care of any unexpected problems that might crop up. If they aren't benefits sufficient to head off economic failure one has to wonder what will have happened to the US by that stage.
I am trying to think of a de-industrialised future that may be better than our high tech immediate past. It might be nice to live in a world where speed and efficiency will be replaced by a more humane pace. Perhaps work will re-valued, perhaps not. Perhaps a more rural lifestyle will be better for us, but I have my doubts. After all, the wonderful world of saving labor wasn't so brilliant after cheap oil ran out, I can't believe any future dreamed up by the pschyopathic power mongers on Wall Street will be much better for we the serfs. America the Pastoral. Heaven help us.

Friday, April 9, 2010

Sovereign Debt

I find the term "Sovereign Debt" to be a peculiar turn of phrase for the 21st century, bearing as it does a rather courtly, 17th century air. The gloom and doom economists watching the Greek debt drama play out are invoking impossible debt levels to warn the world of impending failure. Worse than that, is the Bank for International Settlements announcing a world debt crisis of such epic proportions There Is No Hope. The numbers are actually quite impressive.


The Greek drama is bad enough with assorted International Monetary Fund help mixed in with some European Union help being proffered after a fashion. It may cost 20 billion Euro to save Greece from itself, but there is a suspicion floating around the halls of power that the German Chancellor, in a Machiavellian move to help her own economy, may be allowing Greece to flounder to reduce the value of the Euro. When the Europeans created their unified currency they required all nations to start out with similar levels of debt and made no allowances for individual countries to essentially go bankrupt.

Greece mucked the system up first (to everyone's surprise!) when a new Government was elected and announced the previous administration had been operating a scheme through Goldman Sachs to hide the true levels of Greek debt. The subsequent public catastrophe has set Greeks to rioting and Germans to announce they have no interest in saving Greece from itself. This tactic has devalued the Euro -down from 1.60 to the dollar to less than 1.30- all of which makes it easier for Germany to try to pull in some income from exports. Unlike the US Germany has carefully protected it's unionized industry and has something to sell to the world that is proudly made in Germany.

That Chancellor Merkel might be capable of such maneuvering is hideous enough, and cold blooded, if sensible. The other thing to note is that she can continue to manipulate her currency in ways the US cannot hope to. In a competition for the export market in durable (ie: valuable) goods, Germany has a big leg up. And if in the end Greece is saved, the gloom and doom economists point out there are other candidates for failure down the road, candidates whose feeble economies can be used to lower the value of the Euro. Ireland springs to mind as do Spain and Portugal, the group of failing nations fondly referred to as PIGS.

On the other side of the coin we have the venerable BIS referred to earlier, pronouncing the death by a thousand cuts of most advanced economies. The bank says national debt around the world is so huge there is not much to be done to save or repair the economic system as a whole. The Bank for International Settlements makes the point that stimulus spending has added to the debt burden and the only way out is drastic spending cuts.

Spending cuts of the magnitude suggested by the bank don't seem likely to happen in Europe or North America. Not least because drastic spending cuts will kill off any possible hope for a recovery. Levels of national debt are horrendous and growing larger all the time. Japan and Great Britain lead the way in numbers but Japan's debt has been sold almost entirely to the internal population which may help a little, especially if Japan can figure out an export market, perhaops India or China. The prospect of interest rate increases suggests to the BIS that debt service will become such a burden that default will surely follow. And one relatively easy way to default (without admitting to defaulting!) is to let inflation loos eon a national economy. The other classic way to deal with impossible debt burdens, not mention by the BIS, is to go to war.

All I see is a future that in no way can be said to be leading towards economic recovery. Even if the Stock Market's Dow Jones average is hovering around an impossibly high 11,000. as an indicator of economic recovery it makes no sense. We are all Greeks now, it seems.

Wednesday, April 7, 2010

Bank Pillage

From Global Research, a Canadian based site critical of the layout of the economy, these comments from David DeGraw:

The first thing people need to understand is that the economic crash wasn’t a crash for the people who caused it. In fact, these financial terrorists are now doing better than ever. In a recent report, titled “Social Inequality in America: Widening Income Disparities,” more evidence of the unprecedented transfer of wealth was revealed:

“As of late 2009, the number of billionaires soared from 793 to 1,011, and their total fortunes from $2.4 trillion to $3.6 trillion…. Despite the crisis, the list of billionaires has grown by 218 people and their aggregate capital has expanded by 50%. This may seem paradoxical, but only at first glance. This result was predictable, if we recall how governments all over the world have dealt with the economic crisis.”

The inequality of wealth in the United States between the economic top 0.5% and the remaining 99.5% of the population is now at an all-time high. The economic top 1% of the population now controls a record 70% of all financial assets. The point here is that while the economic crisis has been devastating for 99% of America, the Wall Street elite are awash in record breaking profits. The most profitable firm in Wall Street history, Goldman Sachs, just had their most profitable quarter in their 140-year history and Wall Street firms issued an all-time record breaking amount in bonuses.

All of this is occurring after giving these firms $14 TRILLION in taxpayer support - that works out to be $46,662 of your hard-earned money. That’s $46,662 for every man, woman and child in this country. If you have a family of four, sorry, your future just got robbed and you and your children just lost $186,648!

So what are all these firms doing with these record-breaking profits? Are they returning them into the tax system in which they came from, the tax system that was looted just to keep their scam running?

No!

Let’s start with Wells Fargo. After being bailed out with our money in 2008, their top five executives DOUBLED their compensation and each one of them made over $11 million in 2009. Wells Fargo CEO John Stumpf made off with a cool $21.3 million last year.

And now comes news that Bank of America and Wells Fargo will pay zero, yes ZERO in federal taxes for 2009. Bank of America will net a $3.6 BILLION benefit from the federal government in 2009. Wells Fargo, after $8 BILLION in earnings for 2009, will net $4 BILLION from the federal government.

So you and I are working our asses off just to make ends meet, paying 30% of our limited income in taxes, and gizillionaire John Stumpf’s company is paying ZERO in taxes so that he can personally swipe another $21.3 million of tax payer funds.

Al Capone is a dime store thief compared to this guy!

Well, to be fair, Mr. Stumpf is just a small-timer himself in this all-time greatest heist.

JP Morgan Chase made $12 BILLION in profit in 2009, as a direct result of our tax money - yes, I need to keep repeating this fact. These are profits that would not exist if it weren’t for our tax dollars.

It’s also important to point out that this is just the level of theft that has already occurred. However, as I also can’t stress enough, the theft still continues without any let-up.

Now comes news that JP Morgan is on the verge of getting a $1.4 BILLION tax refund! Yes, you heard me right, a $1.4 BILLION TAX REFUND. But JP is not alone in this latest theft. In total, the financial terrorists are due to receive $33 BILLION IN TAX REFUNDS!

Do you comprehend how depraved it is to give these people another $33 billion in tax refunds? I assume that they’re thinking that after stealing $14 TRILLION, another $33 billion really isn’t all that much. After all, last year, Goldman Sachs, the most profitable firm Wall Street history, only paid 1% in taxes, so what’s another $33 billion kickback among friends?

Let’s be clear about this latest $33 billion of which the US tax system is being robbed. What could we do with $33 billion?

For one, we could put over one million unemployed people back to work and pay them the average national median wage for the next year. Add the record-breaking $150 billion in bonuses (our tax money) that Wall Street handed out this past year to the $33 billion and guess what? We can now put over six million people back to work making the average annual wage! Do you think that would stimulate the economy? Green shots galore.

But why do that? Jamie Dimon needs another new 40,000 square foot mansion and Goldman Sachs needs to upgrade their fleet of luxury jets filled with the finest wine, champagne, cigars and hot tubs.

Maybe we could use that $33 billion to save some of the hundreds of schools that are being forced to close this year due to devastating State budget deficits. Or maybe pay the thousands of teachers who just found out that their jobs have been cut. How about using that money to feed the 50% of US children who need to use food stamps during their childhood to eat? How about using it to give a raise to the 15 million US workers who work 40 hours or more a week and still fall below the poverty line.

Wait, I know, how about helping the millions of Americans who have been foreclosed upon due to JP Morgan’s predatory lending schemes and illegal subprime “liar’s loans.”

And don’t even get me started again on how we can better use the $14TRILLION that Wall Street made off with…

Tuesday, April 6, 2010

Peak Oil Returns

The theory that easily obtained, relatively inexpensive oil is running out has made headlines once again, though not in the United States. Hubbert's Curve accurately predicted the end of oil autonomy in the United States in the 1970s and the theory has been used to predict the fading of the era of cheap oil. However the Peak Oil proposals have never gained much official attention. Until now, according to the website Seeking Alpha.

The early months of this year have seen some surprising changes of attitude across the Atlantic and in the Middle East. First to Kuwait where scientists at the University of Kuwait have been studying oil reserves and depletion rates. They suggest reserves are a third less than stated, around 900 billion barrels, and they have used what is known to statisticians (not me!) as a "multi-cycle Hubbert model" which predicts with greater accuracy they say, declining production rates of around 2 percent per annum. If that doesn't sound like much, combine declining production with increasing demand from India and China (who share one third of the world population between them) and price increases seem inevitable. This report, from the heart of oil production is the first acknowledgement from the Middle East that change is on the horizon- the due date on Hubbert's Curve is expected to show up around 2014.


Peak Oil has been a nerdy theory of diminishing returns supported by policy wonks outside the Establishment. The counter arguments have been simple enough, something like "more oil will always be discovered, technology will save us, alternatives already exist." The fact that we live in a world devoted to ignoring reality should have gone a long way toward giving these wonks credibility. The fact that they are ignored by power brokers in the US Establishment should have us all wondering about the expected impacts of Peak Oil. Instead it is the British Government that is taking measures, and in secret until recently.

The UK Task Force on Peak Oil and Energy Security met late last month with Government leaders in Britain and apparently drew up an agenda to deal with forthcoming oil shortages, expected within five years. Their conclusions were leaked and they make a scary list of problems.

As the UK's Guardian newspaper reported, the government intended to develop an action plan to contend with a near-term peak, and to "calm rising fears over peak oil."

Veteran peak oil analyst and task force member Jeremy Leggett explained: "Government has gone from the BP position — '40 years of supply left, the price mechanism works, no need to worry' — to 'crikey'." He urged the assembly to properly assess the risks of peak oil, and to immediately begin preparing for the end of globalization and an era of oil shortages in the West.

According to reports from attendees, the summit yielded some important conclusions:

Peak oil is either here, or close enough.
Prices will have to go higher as demand outstrips supply.
Governments will be forced to intervene to maintain critical levels of oil supply, and limit volatility.
Rationing measures may be unavoidable.
Electrification of transport must be pursued in order to reduce demand.
Communities will need to work quickly to reorganize around walking instead of driving, producing food and energy locally instead of importing, and generally try to reduce their need for oil.

As reported by Chris Nelder on the website Seeking Alpha.

This sort of action is currently unimaginable in the United States where the drive now is to reduce unemployment and restore the economy to where it was before the economic crisis reduced us all to paupers. And yet if you read the list of actions the British Government is considering as it works with leaders of industry to cope with the rigors of Peak Oil, don't they sound very much like the suggestions offered by the wonks in the world of blogging who have long since argued that changes need to be made to our way of life? Oh golly. What if they are right after all.

Monday, April 5, 2010

Debt and Deflation

I checked some figures relating to general indebtedness in the US and the numbers are quite startling. Household net worth were the dollars under discussion and in reviewing bursting bubbles of times past one notes that what seemed at the time to be a disaster was a mere blip compared to recent housing downturns. In the year 2000 household net worth in the US amounted to 42.5 trillion dollars. The cot com bust knocked off 1.6 trillion of that. Which sounds bad enough, God knows. Then check out the increase in household net worth during the housing boom years.


In the five years leading up to 2007 net worth increased by almost sixty percent from 40 trillion to 63 trillion dollars. Those were the happy days when we were told our homes were the equivalent of ATMs and were available for exploitation by way of home equity loans. Even those of us who declined the offer of easy credit still found ourselves in a world of apparent wealth. I never did understand how all those second mortgages would get paid off and I was scared away from increasing the debt carried by my house. But, even so, I never imagined a general, world wide collapse as a result of those ruinous debt policies. The encouragement to overburden oneself with debt was never a good thing. Unless were in charge of countrywide and raking in the bonuses...


The reckoning came in 2008 when it seems household net worth lost eleven trillion dollars in that disastrous sudden downturn. That was when everyone stopped spending money and banks stopped lending money even as they collected free taxpayer bail out cash. Finally Americans started saving what they could and setting aside money that previously was spent like water. The odd thing is that we are told that 70% of the US economy is generated by consumer spending. Yet, instead of helping consumers out with twelve trillion dollars of leveraged money, the Federal government throws it at the big banks who promptly declare a profit, reject any attempt at regulatory oversight and continue the fatal credit default swap policies that got us here.


If one listens to the gloomy section of the economic commentators there is half as much wealth destruction to come- another five trillion dollars of reduced home values. The stock market we are told is grossly over valued and likely to drop by as much as thirty percent even as commercial real estate loans made before the crash start to come due and will find themselves unable to re-finance. All of these negative prospects are reinforced by the generally gloomy view of a population that now seems to be busy not spending money. We are, most of us, declining to make large purchases which means that foreign countries that traditionally supply our every need find their factories stalled because they have no consumers to supply with "durable goods."


Add to all this the concern that countries who usually buy our debt are now slowing down those purchases and we find a future that looks much more bleak than the mainstream press would have us believe. If interest rates have to rise to persuade China and Japan to buy dollar debt there will be additional pressure on our economy. Yet the argument goes that the Federal Reserve cannot physically print enough money to revitalize our economy. The actual supply of cash seems likely to shrink, meaning there will be fewer dollars available to buy products. Which is the classic conundrum of the 20th century Great Depression, when cash money simply was not to be found.


At the time of the Great Cash handout to the banks Too Big To Fail, I wondered out loud why our leaders didn't simply use the twelve trillion to pay off first mortgages on all primary residential loans. Had they done that a handful of huge banks would have gone bust and served them right for creating this mess, while the US economy, consumer driven, would have sparked back to life, perhaps wiser and more cautious. Instead we are serfs and pay the price for the gambling by our economic leaders. I am inclined toward the position that deflation will murder our economy for years to come not least because the people in charge seem to benefit most from this terrible cycle of unemployment, mortgage destruction and general impoverishment. We seem to be along way from the days of having a government that responds to the needs of the people. I wonder what FDR would say about our current situation and the government's response?

Saturday, April 3, 2010

Drilling For Time

President Obama's announcement that oil drilling will be expanded in select areas (including in the eastern Gulf of Mexico, out of sight of Florida beaches) generated cries of dismay from environmentalists and moody denunciations of "Not enough!" from Republicans. Which indicated to me that the President has managed conveniently to mortar one more brick in Democrats' election strategies for this November. I read that the anti-abortion funding supported by executive order was a deal that allowed vulnerable Democrats to vote No to protect their election chances by bringing onboard sufficient anti-abortion Democrats to ensure the bill's passage. By such means are deals won on Capitol Hill.

The oil drilling decision seems like another of those politically motivated moves that may have positive spin for the election but one wonders if indeed the opposition has a point. The possibility of tar balls underfoot while strolling the pristine sugary beaches of Lee County should be enough to make that nest of conservative voters wonder if perhaps energy independance come sat too high a price, epseically as California's coast will see no new drilling in response to heated local opposition to any such notion. Should we expand drilling, one has to wonder?

In the past I was generally in favor of conservation and in opposition to expanded drilling, not least because drilling seemed unlikely to lead to anything other than increased consumption. I permit myself to wonder if perhaps this time around we might break that cycle and use any extra time purchased by expanded drilling to enable us to implement alternative energy strategies. On the one hand I would like to see energy consumption drop, on the other hand I am not sure how that is going to happen- I drive, I like air conditioning as much as any northerner needs winter heat, I like electric lights and the Internet... and so I wonder how we can move easily to a world powered by the relatively inefficient alternative energy supplies. We need time and we need money.

We've spent enormous amounts of future earnings bailing out the banks and we have waste ddecades ignoring future energy constraints. We see oil at $85 a barrel and rising and new oil discoveries are located in deep waters off Brasil and mexico and possibly the Falkland Islands. Not in places that are easy (and thus cheap) to exploit. I guess my feeling is that if we can rely on our leadership to use any extra time wisely, we can support expanded oil drilling as a way to help buy that time. Which seems rather iffy to me, until I see solar panels and wind generators sprouting as a matter of course in our lives, and natural gas powered engines filling up at the pumps alongside gasoline (not ethanol!). We'd better start soon as oil still holds the most concentrated supply of easily accessed energy we have ever seen and whatever does come next is going to have a tough act to follow.