Archive for December, 2010
The Alex Jones Show – for Thursday December 30, 2010
Thursday December 30, 2010
Alex talks with libertarian political commentator, activist, proponent of the Austrian School of economics, and chairman of the Ludwig von Mises Institute, Lew Rockwell. Rockwell served as Ron Paul’s congressional chief of staff from 1978 to 1982. Alex also talks with former newspaper journalist and New York Times best-selling author, Jim Marrs. Marrs is the author of The Trillion-Dollar Conspiracy: How the New World Order, Man-Made Diseases, and Zombie Banks Are Destroying America, The Rise of the Fourth Reich: The Secret Societies That Threaten to Take Over America, and other popular titles. Alex covers the latest news and takes your calls.
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Alex Jones Talks to Jim Marrs & Lew Rockwell
December 30, 2010
If We Close Our Eyes, The Monster Will Go Away
Refusing to face the need for radical change and adaptation only makes the eventual adjustment more traumatic and less likely to succeed.
As an initial reaction to unwelcome crises, denial serves a psychological purpose.Closing our eyes and hoping the Monster will go away is the first stage of eventual acceptance and engagement with unwelcome reality.
Clinging to denial sets up pathology, anger and collapse. If we continue to keep our eyes closed, and demand the Monster go away because we don’t want to deal with change and challenge, then we either detach ourselves from reality altogether (a pathological psychosis perfectly depicted in the classic film Sunset Boulevard) or we rage in fear and dread at the challenge/Monster, as if it is somehow unfair that change has occurred without our express permission.
The longer we close our eyes and hope the Monster will magically go away when we finally open them, the more likely our eventual collapse.
As a nation, two years after the demise of the status quo, we are still closing our eyes hoping the Monster goes away. Frequent contributor U. Doran recently sent meHiding a Depression: How the Government Does It by Daniel Amerman, a blow-by-blow description of how Federal and state spending has expanded to replace the private-sector GDP which has vanished.
The article notes how this massive replacement of the private sector by Federal (borrowed) spending has gone largely unremarked.
In other words: if we close our eyes and borrow 10% of the nation’s GDP ($1.4 trillion) every year (or perhaps more accurately, $2 trillion a year) from now on, then when we finally open our eyes the Monster of change and challenge will have magically vanished and everything will be as it was before the Monster’s terrible appearance.
Yes, this is childlike. We have turned to the Central State as our Mommy and Daddy who will save us from the Monster.
Unfortunately, our own desires and derangements are feeding the Monster that is threatening us with change–a dynamic illustrated by the classic sci-fi film Forbidden Planet.
The more we cling to our deranged dependence on systemic fraud, exponential expansion of credit, corporate cartels/political Plutocracy, Central State largesse, corporate-media propaganda and a financial system that breathes misrepresentation of risk, the stronger the Monster becomes.
A close friend has been consulting for a long-successful private enterprise. Like many if not most businesses which started small and grew into a successful niche, the company’s very success is the wellspring of its limitations: the owners cling to haphazard, anachronistic ways of doing business cobbled together in the distant past rather than risk change (and losing control over anything, even if serving customers demands new systems and some delegation).
As a result, the limitations of the inefficient, failing parts of the company will doom the entire enterprise as soon as a competitor enters their niche. And since the entry of a competitor in a profitable niche is inevitable, then the willful blindness of the company’s founders/managers to the need for adaptation is dooming the company to a desperate make-or-break convulsion at a later point, when competition will force a rapid adaptation which may be too frantic to be successful.
This is an excellent analogy for the U.S. economy and society. We fear adaptation, even as we sense it is necessary and inevitable. We want to cling to the past for as long as we can, even as this dooms us to a convulsive, forced adaptation in the future that is likely to fail for the very reason that it has been put off until the last frantic minute.
The Titanic offers us a timeless analogy for denial and a frantic, too-late acceptance of grim reality. Had the doomed ship’s leadership actively accepted the challenge to save as many lives as possible, then lifeboats would not have been sent off half-full. The sea was calm; boats could have been safely loaded beyond their designed capacity, and crude life-rafts might have been lashed together. As poor a solution as a lashed-together assemblage of buoyant materials would have been welcomed as a better alternative than certain death.
But instead, the “plan” was to maintain a veneer of normalcy: the band played on, even as the bow sank lower into the unforgiving icy water.
Fed chairman Bernanke, Treasury Secretary Geitner, President Obama and Congress are all ordering the band to play spritely tunes of rising holiday spending, endless borrowing, and the carefully crafted propaganda of Fed manipulation, statistical legerdemain and happy-talk about how the Monster will be gone when we open our eyes.
Since we are feeding the Monster with our very denial and derangements, then that is impossible. The longer we keep our eyes closed, hoping we can avoid any meaningful change, any meaningful adaptation and any meaningful sacrifice, the more fearsome and powerful the Monster becomes.
If we insist–childlike, petulant, resentful of reality–on keeping our eyes closed in 2011, then we are dooming ourselves to facing a much fiercer and more powerful Monster in 2012. We can’t escape the confrontation, and the longer we put it off, hiding under our bed, wishing it all away, the more likely our panicky collapse when reality forces our eyes open.
The crush of long workdays and events has caused me to fall behind my email once again, so please allow me to thank everyone who sent their holiday greetings and best wishes to me: thank you for your kind thoughts.
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Of Two Minds is now available via Kindle: Of Two Minds blog-Kindle
Searching for the Truth in an Age of Disingenuousness
On the last day of the year, I like to think back about the truths I learned this year. Some were revealed accidentally, others were the work of challenging data analysis. We happened upon some Truths during deep contemplation, and occasionally stumbled across them accidentally.
And of course, there was Wikileaks.
Regardless of your method, if you sought the Truth, with a little digging, you could find it. Its not pretty, it destroys some long held and cherished myths. But if you are an investor, you should got through this process on a regular basis.
If you can identify where the masses subjective view of reality is wrong, and then time when they begin to realize this, there are good investment returns to be had. A bonus of this process is some small measure or personal enlightenment.
Corporate America took over the political process via their exhaustive lobbying efforts. What was once a Democracy is now a Corporatocracy.
The corrupt US Supreme Court provides a sympathetic venue for creating corporate rights never envisioned by the Founding Fathers; Congress is a wholly owned subsidiary of America, Inc. The White House talks a good game of smack, but genuflects in order to beg for job creation.
Politicians do the bidding not for the people, but for the corporate establishment. Those people who want to blame the barking, snarling government for all the woes of the world do not want you to look further up the leash to see who is giving the commands. These corporate apologists pretend to be philosophers, but in reality they are mere Fellatrix, bought and paid for by their lords and masters.
Fearing a corporate takeover of the nation isn’t nearly as radical as it sounds. Thomas Jefferson reviled the idea of big corporations: “I hope we shall…crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and to bid defiance to the laws of our country.” Jefferson knew the influence bankers could have on a nation’s soul, and he was horrified by it.
No less a figure than Dwight D. Eisenhower — five-star Army general, Supreme Commander of the Allied forces in Europe during World War II, responsible for planning and supervising the successful invasion of France and Germany, who then became the 34th President of the United States from 1953 until 1961 — warned that “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.” He knew it was not just the military, but the entire existing corporate structure that sought to take advantage of their influence in order to thwart legitimate competition, skew Federal contracts, and exempt themselves from taxation and regulation.
What might Eisenhower have said about the bailouts, and enormous decrease in banking competition?
The surprising thing about this anomaly is that there are enormous incentives to find the objective truth. Often, it seems like the reality gets buried under a mountain of conflicting interests, with power and money and influence on one side and we the people on the other.
However, the credit crisis and collapse has taught us one very important lesson: If you continually search for that nugget of reality, if you are willing to roll up your sleeves and sift through the vast mounds of horse shit that Wall Street and Washington regularly serve up, there is indeed, a pony somewhere in there.
That is your job in 2011: Go find the pony . . .
Previously:
The Left Right Paradigm is Over: Its You vs. Corporations (September 27th, 2010)
Seeking the Truth — Or Obscuring It? (August 20th, 2010)
Delusions of Finance: Why Most Models Are Wrong
By Gail Tverberg
I wrote this post almost a year ago, and originally posted it at The Oil Drum. It is a write-up of a talk I gave in October 2009 at the Biophysical Economics conference in Syracuse, NY.
In October 2009, I participated in the 2nd International Biophysical Economics Conference at SUNY-ESF in Syracuse, New York. Charlie Hall had written to me, inviting me to come and give a talk. Specifically, he wanted me to go back to my post from January 2008 called Peak Oil and the Financial Markets: A Forecast for 2008 and explain why my forecasts had turned out pretty close to correct, while many others widely missed the mark. The title he suggested for the talk was Delusions of Finance.
My financial forecast really has implications for beyond 2008, so I added some more forecasting thoughts as well. In this post, I would like to share this presentation with you.
I am a casualty actuary by training and spent many years doing forecasting and modeling as an insurance company employee and later as a consultant to insurance companies. Many of these companies were small medical malpractice insurance companies that provided insurance for a group of hospitals or physicians. Medical malpractice claims are notoriously slow to be reported and to be paid, so we had to forecast many years of reporting and payments, (and corresponding investment income). These models were used both for determining appropriate insurance rates and for determining balance sheet reserves for these companies. Quite often I was involved in putting together models for proposed new companies in order to estimate likely capital requirements. I was also prepared a lot of estimates of the likely impacts of medical malpractice reforms.
All of this didn’t really give me any special training for making financial forecasts relating to peak oil, but it did give me a lot of practice with making forecasts and trying to think outside the box. I needed to figure out what was unique to each situation, and figure out a way to model it. I hadn’t gone through the standard MBA training, but I had bumped up against a fair amount of it along the way.
My background goes back far enough that I had a chance to see how badly insurance companies fared back in the 1974 period, when oil shocks affected insurance companies. One of my former employers went bankrupt, and another one nearly did. I could see that if a similar situation happened now, other financial companies would likely be affected as well.
Quite a bit of the rest of this presentation is fairly self-explanatory, especially if you have seen some of my other presentations, so I won’t provide too much in the way of comments.
Slide 3 This is a link to the full post. You may want to read it, if you haven’t previously.
Slide 4 My later slides explain these points more fully.
Slide 5 
Slide 6 
Slide 7 If you stop to think about it, there a quite a few differences in the way the economy functions in a period of economic growth and in a period of economic decline. The assumption of continued economic growth by traditional economists (who don’t consider resources and their limits) has been so strong that most have not even considered what the economy would look like in a period of long-term decline.
Slide 8 Many have observed that there would have been defaults, even without peak oil, because of the reckless lending that had been done. I would contend that at least part of the reason the lending had been done was to give the illusion of growth, when there really wasn’t much apart from that generated from very loose lending standards. Furthermore, even if loose lending standards were part of the problem, the problems related to peak oil made it worse (and can be expected to cause more problems in the future).
Slide 9 When there isn’t a problem like peak oil (or limits to growth in general), debt defaults are in fact pretty much independent. That is why the system for determining insurance charges to be included in the interest rates charged for loans worked pretty well until peak oil came along. In the absence of peak oil, a homeowner or businessman defaults because of some particular problems he or she has. Past history is likely to be predictive of the future, because while there are different individuals defaulting, the average number of defaults will tend to be pretty stable from year to year.
Slide 10 It is possible that there will be some loans in a declining economy, but their use will be much less widespread than we see today. Their cost will also tend to be higher.
Slide 11 When lending is increasing, businesses have more money to invest in new plants and equipment and homeowners find it easy to get loans of new homes or for home improvements.
Slide 12 
Slide 13 As countries cut back their stimulus funds, the decline in credit available may be especially severe. I noticed this article this morning:
Lenders warn of mortgage shortages
Britain’s banks and building societies have warned that they will have to slash mortgage lending and raise rates on home loans if the government insists on prompt and full repayment of the £300bn they have received in state support since 2008.
Slide 14 In the US, homeowners used their homes as a piggy-banks when home values were rising. They could refinance their homes, remove the built-up equity, and buy new cars, furniture, and other things. When there are fewer home buyers (because of less loan availability), and continually declining values, the effect is reversed. [Note: The decline in consumer credit outstanding has continued in 2010.]
Slide 15 Credit problems are really what are likely to spread the lack of oil to a much broader reduction in fuel use, essentially through growing recession. This recession may affect OECD to a greater extent than non-OECD, but there are such great links between the two that I expect eventually all will be affected. This reduction in fuel use is likely to be described in the press as “reduced demand”–which it is, but because of recession induced by credit contraction (ultimately going back to lack of growth in oil supply).
Slide 16 
Slide 17 
Slide 18 I am sure that some trade will continue, even if countries have financial problems. But it seems to me that a very large amount of trade is needed to keep up our system at the current level. High tech equipment would seem to be hardest to create with local materials alone. We can make simple things, like wheelbarrows and shovels with recycled steel, but it is not clear that precision parts for things like computers and other high-tech equipment can be made without exactly the right imports from around the world, and factories set up with the right controls.
Slide 19 These changes could start very soon. It is hard to know precisely how things will play out.
America’s Corporate State Media
The Merger of Journalists and Government Officials
Glenn Greenwald on why MSM journalists are shills for the regime.
The Poverty Of Ambition: Why The West Is Losing To China And India
The last 10 years have been the worst for Western civilization since the 1930s. At the onset of the new millennium North America, Europe and Oceania stood at the cutting edge of the future, with new technologies and a lion’s share of the world’s GDP. At its end, most of these economies limped, while economic power – and all the influence it can buy politically – had shifted to China, India and other developing countries.
This past decade China’s economic growth rate, at 10% per annum, grew to five times that U.S.; the gap was even more disparate between China and the slower-growing E.U., Yet periods of slow economic growth occur throughout history — recall the 1970s — and economies recover. The bigger problem facingWestern countries, then, is a metaphysical one — a malady that the British writer Austin Williams has dubbed “the poverty of ambition.”
This lack of ambition plagues virtually every Western country. The ability to act has become shackled by a profound pessimism that according to a recent Gallup survey contrasts with the optimism found not onlyin rising states like China, India and Brazil, but also deeply impoverished places like Bangladesh.
Attitudes have consequences. The rising stars of the non-Western world — from the United Arab Emirates to Singapore and China — are building cities with startling new architecture and bold infrastructure. Their entrepreneurs are expanding their operations across the planet.
Of course, you can chortle at the outrageous overbuilding in places likeDubai,but the Western world might do better to appreciate the scope of their ambition. Indeed, for years New York’sEmpire State building, erected during the Depression, was derided as ”the empty state building.” Today it’s visionary developers like Iraqi-born Istabraq Janabi who are planning unlikely new structures even in troubled places like Ramadi, Iraq.
The difference in ambition can be seen clearly at airports, which now serve as the entry halls of the global economy.A traveler to John F. Kennedy Airport, Heathrow, Charles De Gualle LAX or Dulles passes through decayed remnants of fading late 20th century buildings and technology. In contrast, airports in Dubai, Hong Kong and Singapore offer clean, ultra-modern facilities with often impressive design.
The West’s retreat from space exploration further underscoresits metaphysical poverty. Today, Europe and the U.S., the world’s historic leader in the field, are cutting back on plans to explore the cosmos, which has included a manned operation to the moon. President Obama wants NASA to focus more on issues regarding climate change instead. In contrast,the rising countries of Asia, notably China and India, have begun plans for manned flights to the moon and beyond.
This divergence is not about resources; it is about the growing conviction in the West that moving forward is an illusion or, as the British academic John Gray’s puts it, “progress is a myth.” Victorian empire-makers and intellectuals, like their republican American successors, believed perhaps naively in the potential of humanity, economic and technological progress. Today our intellectual and political classes have gone to the other extreme.
The West’s politics are in the grips of two profoundly retrograde mentalities. One, a small-minded conservatism, harks back to the “golden” age of the 1950s when Western power faced only a flawed Soviet challenge. The idealistic but flawed commitment to imposing democracy by force of the Bush years has faded; it has been replaced by an obsession with taming a bloated public sector. While this focus may be justified, it is fundamentally more reactive thanproscriptive.
The Left, which once portrayed itself as the bastion of scientific rationalism, increasingly embraces neo-druidism, a secularform of nature worship. This tendency’s roots can be traced back to the “Limits to Growth” ideology of the early 1970s which projected, mostly mistakenly, that the planet was about to run out of everything from food to oil. Concerns over climate change have transformed this dismal sentiment into a theology, with carbon emissions treated as a form of original sin.
The anti-progress nature of the new Left is unmistakable. Rather than seek ways to controlclimate change, suggests The Guardian’s George Monbiot, environmentalism is engaged in “a battle to redefine humanity.” Monbiot believes the era of economic growth needs to come to an inevitable denouement; that “the age of heroism” will be followed by the decline of the “expanders” and the rise of the “restrainers.”
Europe, particularly the U.K., suffers acutely from metaphysical angst. Once touted as the newgreat power by its leaders and their American claque, the E.U. is quickly dissolving along cultural and historical lines; this is especially evident in the division between the resilient countries of the north (something like the Hansa trading states of the late Middle Ages) and the weaker countries along the periphery. For the most part, Europe no longer seems capable of doing much more than finding ways to control an unaffordable welfare state without tearing about its social net. The once cherished notion of a multi-racial “new” Europe largely has dissolved as immigration has devolved from a source of demographic and cultural salvation to a widely perceived threatto the E.U.’s economic and social health as well as security.
Such defeatism usually has less success in the United States. But America’s “progressive” left increasingly resembles its European cousins. Obama’s science advisor, John Holdren, has been a long-time advocate of the ideaof “de-development,” the purposeful slowing of growth in advanced countries in order to protect the environment. The critical infrastructure needed to accommodate upward of another 100 million Americans — new dams in the west, intelligent development of our vast natural gas reserves and building new cities, airports and ports – are not at the center of either party’s platforms. These could be financed largely with private sources, given the right incentives.
Fortunately the West’s declineis not at inevitable. China, India, Vietnam, Brazil, South Africa all deserve their day in the sun, but this does not mean that Americans or Europeansshould cower in the shadows. Western countries still possess much of the world’s cutting-edge technology and leading companies; the combined GDP for the E.U., North America and Oceania stands at over $33 trillion, almost five times that of India and China together.
More important still, the political and cultural institutions of the West — with their liberal values — represent the best hope for a stable world of self-governing peoples. Does anyone in the West, particularly the progressives in the media and academia, really want a world run by Chinese despotism?
The currentfinancial crisis should serve as both a warning and a spur for a new focus on economic expansion. But this can only occurif the West can restore its belief in its future. This does not necessitatea return to the colonial attitudes of the past, but rather a keener appreciation of our unique human, physical and political advantages.
Onlythe United States –by far the richest, largest and most populous Western nation — can leadsuch a revival. For one thing, the U.S. remains the world’s leading immigrant magnet and most diverse large country, all of which makes it the natural center of an evolving global society. Although immigrants pose some serious issues, University of Chicago scholar Tito Sananji notes that the U.S., along with Canada and Australia, seems to be doing a better job educating their newcomers than the continental European states.
The U.S., Canada and Australiaalso possess resources, most critically food, that could benefit from growingdemand indeveloping countries. Both North America and some European nations — notably the new Hansa of the Netherlands, Germany and Scandinavia –remain world leaders in scores of industrial endeavors, as well as technology- and culture-based industries.
Together these Western countries can do much more to shape the global future than is commonly understood. But to do so this century they will need how to recover the animal spirits that drove their remarkable rise in the last.
Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History
The Alex Jones Show – for Wednesday December 29, 2010
Wednesday December 29, 2010
Alex talks with Author and researcher Webster Tarpley and attorney Phil Berg about Chris Matthews’ comments on Obama’s birth certificate. The Health Ranger and publisher of Natural News, Mike Adams, talks about the recently passed food bill. Alex talks with Porter Stansberry of Stansberry & Associates, publisher of the Fleet Street Letter, the oldest English-language financial newsletter, and Fleet Street Letter, the oldest English-language financial newsletter. Additional guests include Mark Stepnoski and Tony Szamboti from the Buildingwhat? campaign. Alex covers the latest news and takes your calls.
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Tim Binnall Interviews Bix Weir
Financial analyst Bix Weir joins BoA:Audio for his first interview concerning the ‘Road to Roota’ conspiracy theory he has been researching for the last three years. Bix will detail what the ‘Road to Roota’ entails, how he discovered it, the players behind it, and a timeline for events as they may unfold. We’ll also discuss the economy in general, the inherent problems with a fiat money system, the debate over returning to a gold standard, the story of Yamashita’s Gold, how silver fits into all of this, and what people should be doing to prepare for the potential collapse of the economy. It’s an educational, entertaining, and somewhat terrifying edition of the program that will have you watching the mainstream financial news with a more jaundiced eye, as Bix Weir takes us down the ‘Road to Roota.’
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Oil Juggernaut Unleashed
By Giordano Bruno
Neithercorp Press 12/29/2010
The prevalence of crude is undeniable. You might dabble in green-think cultism or you might drive an obnoxious monolith of a Hummer (what I like to call an “overcompensation-mobile”), but neither philosophy of consumption dares to contradict that this world runs on oil. Petroleum is used in the manufacture or shipping of almost every industrial product on the planet, and even many agricultural goods. Therefore, it behooves the public to seriously consider the ramifications of oil price and its underlying effect on the entirety of our economy. Even minor increases holding over an extended period of time cause economic reverberations that can be felt for years afterwards. Financial and social adjustments to commodity inflation can sometimes take decades if the event is historically unprecedented. Petroleum is a foundation ingredient, it is energy itself; the higher its cost, the greater the cost of every other product we use, and the worse off our financial structure is. Period. There is no scenario yet experienced by any nation in which oil inflation actually benefited the masses or the overall economy, even in countries that sell oil!
Americans have had a small taste of the tensions involved in an oil crisis, during the 1979-1980 Iranian snafu, and the massive gas spike of 2008, but these events are nothing compared to the steamrolling inflation we are soon to see at the pump in the next couple of years. Let’s examine why…
OPEC Ready To Let Oil Run Wild
At the writing of this article, oil stands at around $91 a barrel, still below our prediction during the summer of $100 by the end of 2010, but already a 30% increase over the $70-$75 average we enjoyed in the middle of the year. Anyone who believes that prices will even out or fall over the course of 2011 should take note of the heavy press coverage on the statements from OPEC representatives over the past couple months. The Middle East has made it quite clear this winter that $100 a barrel is not just possible, it is a certainty:
http://www.reuters.com/article/idUSTRE6BN16A20101225
The illusion underlying the OPEC statements, however, is that the current price rise is completely under their control. This is not the case. In fact, the nearly $150 a barrel plateau we witnessed in July 2008 will seem like a quaint memory not long from now, primarily because the factors involved in today’s petrol valuation are much more systemic and violent; rooted in a snowballing devaluation of Western currencies, instead of the traditional influences of supply, demand, or even speculation.
The recent comments of Kuwait’s oil minister that “the global economy can withstand $100 oil” are, of course, also disingenuous on a couple levels. First, the global economy is in dire straights and riding the wave of a convoluted “recovery” built on fiat and fantasy. $100 oil will only bring the illusion crashing down as the public realizes the true effects of long term inflation in prices, and the sales of goods begin to falter even further than they already have. Second, oil will NOT stay at $100 for very long, so the suggestion that we can “withstand” such a price is rather irrelevant. Essentially, OPEC is losing its ability to reign in or stabilize gas at a reasonable cost due to the crumbling dollar, and so, they have decided to raise rates to offset dollar devaluation while attempting to change the definition of what “reasonable cost” is. They admitted as much back in October:
The key here is the dollar and its inevitable demise, which the establishment is trying desperately to hide until the last possible moment. Over the next year we are likely to be buried in a deluge of excuses, half-truths, and lies, all meant to divert attention away from the word “inflation” as the masses begin to question just what the hell is going on.
The Real Reason You Were Robbed At The Pump
Many factors can determine the ascent of gas prices, and this is where confusion arises in today’s market, and propaganda begins to take root. In 2008, the historic march of oil costs was blamed primarily on “speculators”, commodity investors who buy up petroleum with no intention of actually using it, thereby creating a false sense of scarcity in the market and driving up prices artificially. This was, for the most part, what really happened.
Another cause of oil increases is the natural reduction of global supply in the face of rising demand. An American economy running on all cylinders would necessitate greater supply and a higher price if that supply is insufficient.
Essentially both triggers are dependent on the fact of scarcity, engineered or legitimate, in order to cause price spikes. Neither trigger is applicable in today’s market, where currency weakness is the central determinant, yet these are the arguments we are hearing and will hear more of as we are fleeced at the pump through dollar devaluation. Below are a few MSM articles which promote the supply/demand tall-tale, including announcements by the IEA (International Energy Agency) claiming that economic rebound is the culprit:
http://www.latimes.com/business/nationworld/wire/sns-ap-us-oil-prices,0,6876017.story
http://in.reuters.com/article/idINN1919750020101119
The “recovery” argument in terms of oil demand is obviously laughable to those of us in the Liberty Movement and alternative economic research, but to those who base their entire view of our financial health on the meanderings of the Dow, recovery certainly seems plausible.
The truth is that the stock market is the LEAST reliable indicator of economic strength, especially during major fiscal downturns. The Great Depression was blatant proof of this, but the smoke-and-mirrors magic show has been elevated to a new level today by the introduction of quantitative easing measures by the Federal Reserve. Most intelligent financial analysts have been crying foul for a couple years now over these monopoly money injections, and have pointed out that a substantial portion of the funds are being pumped into stocks in order to create a zombie market; a kind of “Night of the Living Dow”, a market that has diminished real investment and relies almost solely on constant formaldehyde-like fiat transfusions from the Fed and the government. In fact, Charles Biderman of the investment research firm ‘TrimTabs’ recently announced on CNBC (of all places) that after two years of investigations into capital inflows into stock markets, his conclusion was that retail investors have quit stocks, and the only thing holding up the Dow today is the Federal Reserve itself:
This shows that the stock market indexes cannot be trusted to glean proper information about recovery (or a lack thereof), but what about other indicators? The Consumer Metrics Growth Index, produced by the Consumer Metrics Institute, is a proven leading indicator of GDP and of market movements. Its accuracy is owed to its close tracking of consumer spending, not just in retail stores, but also web sales. Consumer spending makes up about 70% of the U.S. economy, and is thus a much more reliable litmus test for overall financial health than manufacturing data, which is what the government has been using to gage current growth and future trends since 1937 (back when manufacturing actually counted for something in this country). This means that the Consumer Metrics method is far more up to date with the functions of the modern American economy. According to the CMI index, the U.S. has been on a negative growth curve since the end of 2009 which is equal in severity to the credit collapse of 2008, but much longer and more pronounced:
As you can see in the chart above, whatever recovery we thought we had in progress during 2009 ended quite abruptly, a temporary jump in economic activity likely inspired by the printing press free-for-all initiated by the banker bailouts. How many trillions were pulled out of thin air and dumped into corporate banks and stocks just to conjure than one short lived moment of false hope? We still haven’t received total disclosure from the Fed on this, nor will we until a full audit is initiated.
Remember housing values? That vital gauge of U.S. economic health that mainstream media pundits have been calling a bottom on every month for the past two years? Well, prices still haven’t bottomed yet, and now they are expected to decline continuously through 2011:
http://aim.search.aol.com/aol/search?s_it=nscpsearch&q=Housing+prices+fall
What about durable goods? That market should be hopping if a rebound is in progress, right? Nope. Durable goods are experiencing a substantial decline, similar to that which occurred during the plunge of late 2008 and early 2009:
So, to get to the point (as if it is not painfully obvious); there is no recovery! I don’t care how often CNBC, MSNBC, FOX, or CNN, pull skewed data and automaton analysts from their ghastly dungeon of disinformation, the fundamental dysfunctions of the American economy remain unchanged. Therefore, it is outrageous to insinuate that a “recovery” is to blame for rising oil prices.
The next natural step in the rebound contention is to suggest that it is actually a heightened demand in the burgeoning economies of developing nations like China that is driving crude values to the max. That would be a clever redirection IF one could show that Chinese economic policy was having a meaningful effect on crude markets. In reality, the latest Chinese policy changes (which effect the consumption and demand of the entire country) have had little sway over most commodities, including oil.
A perfect example is the recent surprise Christmas announcement by China that their central bank would be raising interest rates yet again in a vain attempt to combat price inflation. Rate increases usually signal to global investors that capital flows will tighten, and less money will be available in the system, meaning demand will fall and so will prices. Mainstream pundits for the most part called for a negative effect on commodities, especially oil. No such effect occurred. In fact, gold has spiked in value and oil has held strong at $91 a barrel. If Chinese demand was the primary cause of oil inflation, then such an announcement should have made some kind of visible impression on crude, but nothing came of it…
Oil consumption in the U.S. imploded in 2008, 2009, and 2010:
http://politicalcalculations.blogspot.com/2010/06/us-per-capita-oil-consumption-plummets.html
Oil consumption around the world suffered a severe decline in the third quarter of this year:
http://blogs.worldbank.org/prospects/category/tags/world-oil-demand
OPEC has stated that there is no supply shortage and that wells will run at current capacity. The data seems to support their claim. There is no scarcity of oil, and demand has only fallen over the past three years. So, what is causing crude values to rocket towards $100 a barrel?
There Will Be Blood
Since oil is widely traded in dollars, it is perhaps the commodity most sensitive to dollar inflation. If supply and demand (real or imagined) are not the acting players in the current oil climb, then we are left with only one other option; currency devaluation. As we have covered in past articles, commodities across the board are tearing towards historic highs, while global demand for goods continues to fall. Oil is no exception. Establishment economists in the U.S. and in most of Europe have avoided the dollar collapse issue like Lyme disease, but other nations around the world will not. OPEC has been expressing concerns over dollar weakness and openly suggesting dropping the dollar peg since 2007:
http://www.cbc.ca/world/story/2007/11/18/opec.html
http://www.gata.org/node/5984
http://www.ameinfo.com/138821.html
In 2008, the U.S. government was fully aware of discussions by Arab nations to depeg from the dollar and move to a basket of currencies (think SDR’s), and even “greenlit” such decisions by suggesting we “did not necessarily need Gulf support for our currency”:
http://www.arabianbusiness.com/ditching-dollar-peg-boon-for-region-49383.html
In an investment conference in Saudi Arabia in 2008, Alan Greenspan himself suggested that Gulf States would be better off dropping the dollar:
http://english.aljazeera.net/business/2008/02/200852514494345842.html
In 2009, writer for The Independent, Robert Fisk, reported that he had received insider information that OPEC nations along with China, Russia, Japan, and France, were engaged in rather clandestine meetings in an effort to drop the dollar for international oil trades:
http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html
Little credence was paid to this report by most of the MSM, but today China and Russia have already dropped the dollar for all bilateral trade. How long would it take to position a country to decouple from the dollar, from planning phase to implementation? Two to three years perhaps? With the Federal Reserve’s QE2 in full swing, I believe OPEC nations will soon follow. The dollar peg would otherwise ravage export dependent countries, especially oil producers.
Extreme oil prices pummel more than just our wallets; they also strike our cultural psyche. Those people who found a way to ignore the signs of economic collapse until now will discover that they cannot avoid the icy reality of the gas pump. When those digital dials spin past the $5 mark before pouring out even one gallon of unleaded, I suspect people will be generally pissed. This is why the establishment media is oozing with oil disinformation and demand rhetoric now. It is an attempt to “vaccinate” the masses against inflation in the future; to redirect their anger towards a false cause and effect scenario. It has long been my concern that the speculation induced gas spike of 2008 was, in fact, a deliberately engineered event; a staged price vault meant to condition Americans to passively tolerate the very real dollar disintegration and hyperinflation which would eventually occur later down the road. When crude prices race towards $150 a barrel once again, does anyone really doubt that the MSM will bring up “speculators” as the villain? And, more importantly, does anyone doubt that the rest of the world will blame the actual trigger; the fading Greenback?
You can contact Giordano Bruno at: giordano@neithercorp.us
