Archive for the ‘oil’ tag
by James Howard Kunstler
How hilarious is the Federal Reserve’s cattle drive of cash money (i.e. “liquidity”) into the stock markets? I’ll tell you: if that cash is outflow from bonds that pay ZIRP interest rates, then this attempt to stampede investment into the stock market is only going to succeed in ravaging the bond market and by extension the credibility of the dollar, the US banking cartel, and then the world financial system as a whole.
If bond-dumpers rush into stocks, then who are the next bond buyers at ZIRP? The USA can’t keep going without continuous bond selling. Somebody has to buy the darn things. The Federal Reserve is now buying around 70 percent of US issue — a lot of it via secondary market pass-thru shenanigans involving “Primary dealers” (a.k.a. Too Big To Fail banks, who get to cream off a premium when they flip bonds to the Fed — tidy little racket). If the other 30 percent of issue can’t find willing buyers at ZIRP then interest rates will have to go up. If interest rates go up, then interest paid out on bonds (that is “debt service”) by the US government will go up catastrophically, because the aggregate debt is so colossal and most of the debt is short term, meaning that in a post-ZIRP world the interest rate ratchets up automatically every 13 weeks as bonds roll over. The US will then only be able to pretend that it can service the debt at higher interest rates. Everybody in the world will recognize this — surely only increasing the velocity of the stampede away from bonds. The question is: how long can pretending to service debt go on before it is just called by it’s real name: default? Or, if countered with additional furious computer “money” creation: hyperinflation? Either way, of course, you end up broke.
This cattle drive into stocks is strictly a political gambit. The cattle are being driven to the slaughterhouse. It’s discretionary strategic national financial suicide. They’re driving up the stock markets for cosmetic purposes, to make it appear that an economic recovery is going on, and with the aim of setting in motion a self-reinforcing financial feeding frenzy in this rush to “equities.” By the way, in case my manner seems didactic today I am attempting to define my terms as I go along because most other financial bloggers seem to assume that ordinary people understand all their jargon, which I am quite sure they do not.
Returning to my point… the Fed and their auditors on Wall Street and in government, are jacking up the stock markets in the hopes of stirring up “animal spirits,” as the financial psychologists say, to put over the story that it equals a vibrant economy — which is nonsense, of course, to anyone who shoots a casual glance at the economic wreckage all around them. Anyway, since the stock market action these days is dominated by high frequency trading robots running on algorithms, where exactly would animal spirits even factor in? If anything the absence of real animal spirits in this action also implies the absence of its counterpart, animal survival instinct, of which human intelligence is an order. What can come of stirring up animal spirits among robots? A train wreck is exactly what.
Now, I ask you: at a moment in history when vast interlinked global financial markets have never been so unstable, so primed for unintended consequences courtesy of the diminishing returns of technology, so ripe for a massive, cascading “accident,” is it a prudent thing to fuck around with such crude PsyOps?
One other factor outside pure financials assures that US economic performance will remain impaired (that is, the kind of economic activity we regard as “normal” (suburban sprawl building, credit card “consumer” spending): the price of oil, which is inching up to the $100-a-barrel hashmark. Apparently that shale oil bonanza we hear so much about has not left the USA swimming in cheap oil. As a general principle, it’s probably safe to say that an oil price above $80 crushes the US economy. It drives up the cost structure of just about everything we make, do, or sell here, but of course the primary things that go up in price are food and motor fuel.
Hence, it’s tragically ironic that — getting back to official financial PsyOps — that one of the primary motives for the Fed keeping interest rates super-low in the first place (apart from enabling wild fiscal irresponsibility in government) has been to promote the housing sector — because in the reality of our time “housing” translates into building more suburban sprawl. How smart is it to promote more suburban sprawl at a moment in history when there’s no more cheap oil?
It is this kind of stupendous foolishness that is putting the USA on the path of an epochal systemic collapse.
I was at a talk recently where a well-known oil economist made an analogy.
He said that if you gathered up all the crude oil that people have ever pumped out of the ground since Col. Drake drilled his famous well in 1859, it would cover California to a depth of about 10 feet.
“Of course,” he said with a smile, “we don’t have to worry about California drowning under 10 feet of oil. Over the past 150 years, mankind has taken all that oil, burned it, harnessed the energy and put the combustion products into the atmosphere.”
Everyone in the room laughed… sort of. We got the thermodynamic point, which is that mankind uses a heck of a lot of oil, much of it via four-stroke engines and that well-known cycle: intake, compression, power and exhaust.
Why has mankind used so much oil? Because global population has risen for over a century, right along with oil use. “People are energy,” as Scott Tinker, the state geologist of Texas, says. And people like oil because it’s energy-dense. A little bit of oil goes a long way, if you use it right.
Of course, oil impacts the planet in many ways, good and not so good. Indeed, it’s fair to say that oil defines modernism, even modern civilization. Take away oil, and much else in our world goes away, starting with Big Government and its far-ranging military and police powers. Take away oil, and most of the world’s people go away, too, sooner or later.
Keep in mind that the world’s oil-dependent energy system has been a century and a half in the making. The world — as we know it — needs a constant oil fix, and that won’t change anytime soon. Not without a major dystopian catastrophe.
Enough introduction. Let’s look at some numbers. Every day, the world uses about 84 million barrels of crude oil. That oil, of course, comes out of the ground, from wells scattered pretty much everywhere.
Oil comes from the deserts of the Middle East, the frozen tundra of Russia and Alaska. Oil comes, in huge volumes, from platforms in the Gulf of Mexico and North Sea, and wells off Brazil and West Africa. And oil comes in dribs and drabs from stripper wells across the oil patches of America, Canada and many other locales. You get the idea.
These two graphs illustrate the sources and destinations of the world’s daily oil.
First, look at the production side graph. Note how overall global oil output has flattened out over the past five years or so. Is this the proverbial “Peak Oil” plateau, the maximum in global output that precedes a long-term decline?
Some people now hate hearing talk about Peak Oil. They won’t have a word of it. The so-called “fracking revolution” is supposed to solve our energy problems for a long time into the future. Between the Eagle Ford play, down in Texas, and the Bakken play, up in North Dakota, the U.S. is in tall cotton, energywise. Or so I’ve been told.
Indeed, lately, I’ve received snarky emails from some readers when I bring up Peak Oil. I’ve been accused of “living in 2005.” One reader asked if I knew that the U.S. “will surpass Saudi Arabia in oil output by 2020.” Well, yes. I received that memo. But there’s more to the story…
I’ve stated many times that the Peak Oil concept is a tool. It’s a lens through which one can observe the world of energy, both to figure out what’s happening now and to forecast possible future scenarios.
Besides, when it comes to Peak Oil, time will tell. I started thinking about Peak Oil back in the 1970s when I met the geologist M. King Hubbert at Harvard. It’s only been 35 years. I can wait.
Can Consumption Exceed Production?
Let’s get back to those graphs. Look at the one for oil consumption. There’s no recent plateau there, right? Globally, oil demand has been steadily growing. It’s pretty clear that more and more oil is moving and burning across the world.
When you compare the two graphs, there appears to be higher oil “consumption” than there is “production.” How can that be? Can the world use more oil than it produces?
The difference in production and consumption between the graphs is due to two main things. First is the growing supply of natural gas liquids (NGLs) — essentially “oil” from gas deposits, such as blowing down traditional gas caps, as well as the recent fracking revolution. Basically, the world supplements its crude supply with NGLs.
That NGL phenomenon will work until it stops working due to the dicey economics of what’s called “energy return on investment” (EROI). That is, at some point, eventually, somebody will figure out that they’re putting a barrel of oil in to get a barrel of oil out.
Whoops! Busted! At the end of the day, you can’t violate the second law of thermodynamics for long. Physics will prevail.
The second aspect of crude oil consumption exceeding production is a quirk of modern technology called “refinery gains.” In essence, down at the refinery, there are ways of transforming a barrel of crude into more than a barrel of refined product.
Here’s a graph that’s based on data from BP. The data show that crude oil production has hit a plateau in recent years at around 82-84 million barrels per day. Yet despite flat oil output, it’s apparent that refinery output has steadily increased. Why?
Refinery output has increased due to the proverbial “better living through chemistry.” That is, engineers continually figure out more ways to squeeze more barrels of refined product out of the same amount of raw material. More specifically, refiners take low-cost oil fractions — like distillates, which used to go to asphalt or bunker fuel — and upgrade them to higher-priced chemicals and fuels. More bang for the buck, more bucks for the barrel.
Who’s Burning Oil?
As the graphs up above indicate, oil consumption is growing fast in the Middle East. There, population has exploded in the wake of several decades’ worth of more babies and longer life spans. That, and there’s rapid, energy-intense industrialization all across the region. Plus, most Middle Eastern nations heavily subsidize energy use by the populace.
Of course, growing internal oil use across the Middle East leaves less oil available for export. Is that a problem? We’re about to find out. We’re exactly on the cusp of that thorny issue. Saudi Arabia’s so-called “spare capacity” is getting squeezed. It’s a problem, and it could transform into a really big problem in short order. Stand by.
The graph above also shows crude oil consumption growing strongly in Asia-Pacific, Africa and South/Central America. It’s the well-known story of how the developing world is… developing.
Billions of people are moving toward a higher standard of living. That requires oil.
That’s all for now. Tune in tomorrow for Part II of this discussion…
Byron W. King
Original article posted on Daily Resource Hunter
In this edition of the show Max interviews Gregor Macdonald from Gregor.us. He talks about the IEA’s report which expects the US to be the world’s largest energy producer by 2020. Gregor Macdonald is an oil markets observer, journalist, and data analyst, who writes on the challenge of energy transition.
by John Michael Greer
Over the course of this year, my posts here on The Archdruid Report have tried to outline the trajectory of America’s global empire and explore the reasons why that trajectory will likely come to a sudden stop in the near future. To bring the issue down out of the realm of abstraction and put them in the context of history as lived, I’ve returned to the toolkit of narrative fiction, and this and the next four posts will sketch out a scenario of American imperial defeat and collapse. The narrative takes place at some unspecified point in the next two decades; it’s probably necessary to say outright that is not how I think the end of America’s empire will happen, simply one way that it couldhappen—and thus a model that may help expose some of the vulnerabilities of the self-proclaimed hyperpower currently tottering toward history’s compost bin.
The news of the latest Tanzanian deepwater oil discovery broke on an otherwise sleepy Saturday in March. Thirty years before, a find of the same size might have gotten two column inches somewhere in the back pages of a few newspapers of record, but this was not thirty years ago. In a world starved for oil, what might once have been considered a modest find earned banner headlines.
It certainly loomed large in the East Wing of the White House, where the president and his advisers held a hastily called meeting that evening. “The Chinese already have it wrapped up,” said the Secretary of Energy. “Tanzania’s in their pocket, and there are CNOOC people—” CNOOC was the Chinese National Overseas Oil Corporation, the state-owned firm that spearheaded China’s quest for foreign oil. “—all over the place on site and in Dar es Salaam.”
“Is it close enough to Kenyan waters—”
“Not a chance, Mr. President. It’s 200 nautical miles away from the disputed zone, and that last clash with the Tanzanians isn’t something Nairobi wants to repeat.”
“Dammit, we need that oil.” The president turned and walked over to the window.
He was right, of course, and “we” didn’t just refer to the United States. Jameson Weed won the White House the previous November with a campaign focused with laser intensity on getting the US out of its long and worsening economic slump. Winning the country a bigger share of imported oil was the key to making good on that promise, but that was easier said than done; behind what was left of the polite fiction of a free market in petroleum, most oil that crossed national borders did so according to political deals between producer countries and those consuming countries strong and wealthy enough to compete. These days, more often than not, the US lost out—and the impact of that reality on Weed’s upcoming reelection campaign was very much on the minds of everyone in the room.
“There’s one option,” said the president’s national security adviser. “Regime change.”
President Weed turned back from the window to face the others. The Secretary of Defense cleared his throat. “Sooner or later,” he said, “the Chinese are going to stand and fight.”
The national security adviser gave him a contemptuous look. “They don’t dare,” she said. “They know who’s boss, and it’s too far from their borders for their force projection capacity, anyway. They’ll back down the way they did in Gabon.”
The president glanced from one to the other. “It’s an option,” he said. “I want a detailed plan on my desk in two weeks.”
Regime change wasn’t as simple as it used to be. That was the sum of scores of conversations in meeting rooms in the Pentagon and the CIA headquarters in Langley as the plan came together. Gone were the easy days of the “color revolutions,” when a few billion dollars funneled through Company-owned NGOs could buy a mass uprising and panic an unprepared government into collapse. The second generation strategies that worked so well in Libya and half a dozen other places—backing the manufactured uprising with mercenaries, special forces, and a no-fly zone—stopped working in turn once target governments figured out how to fight it effectively. Now it usually took ground troops backed up by air power to finish the job of replacing an unfriendly government with a compliant one.
Still, it was a familiar job by this point, and the officials in charge got the plan put together in well under the two weeks the president had given them. A few days later, when it came back signed and approved, the wheels started turning. Money flowed to CIA front organizations all over East Africa; Company assets in Tanzania began recruiting the ambitious, the dissatisfied, and the idealistic to staff the cadres that would organize and lead the uprising; elsewhere, mercenaries were hired and the usual propaganda mills went into action. The government of Kenya, the nearest American client state, was browbeaten into accepting American troops on its border with Tanzania, and a third carrier strike group was mobilized and sent on its way to join the two already within range.
It took only a few weeks for the government of Tanzania to figure out that its recent good luck had put it in the crosshairs of American power. One afternoon in early May, after a detailed briefing from his intelligence chief, the president of Tanzania summoned the Chinese ambassador to a secret meeting, and told him bluntly, “If you abandon us now we are lost.” The ambassador promised only to relay the message to Beijing, but he did so within minutes of returning to the Chinese embassy, and included a detailed and urgent commentary of his own.
Three days later, a dozen men sat down around a table in a conference room in Beijing. A staff member poured tea and disappeared. After an hour’s discussion, one of the men at the meeting said, “What is it that the Americans say? ‘Draw a line in the sand?’ I propose that this is the time and place to do that.”
A quiet murmur of agreement went around the table. In the days that followed, a different set of officials drew up a very different set of plans.
The port at Dar es Salaam, Tanzania’s capital and biggest city, was a busy place, thronged with oil tankers carrying black gold to China and its allies, and container ships bringing goods of every description, mostly from China, for the booming Tanzanian economy. In the bustle, no one paid much attention to the arrival of a series of plain shipping containers from Chinese ports, which were offloaded from an assortment of ordinary container ships and trucked to half a dozen inconspicuous warehouse districts along the coast between Dar es Salaam and the northern port city of Tanga. CIA agents watching for signs of a Chinese response missed them completely.
More generally, the number of container shipments to Tanzania and half a dozen other Chinese client states in Africa ticked up slightly—not enough to rouse suspicions, but then nobody in the US learned how many African companies found themselves facing unexpected delays in getting the Chinese merchandise they had ordered, so that other cargoes took the space that would have been theirs. Nor did anyone in the US worry much about the increased number of young Chinese men who flew to Africa during the four months before the war began. US intelligence did notice them, and their arrival sparked a brief debate at Langley—military observers, one faction among US intelligence advisors insisted, there to snoop on American military technology; military advisors, another faction claimed, there to assist the Tanzanian army against the American forces that were already gathering in Kenya.
Both factions were wrong. Most of the tight-lipped young men went to ground near those same warehouse districts between Dar es Salaam and Tanga, where the contents of those shipping containers were assembled, tested, and readied. Meanwhile, thousands of miles away, the Peoples Liberation Army Air Force (PLAAF) shifted six fighter wings, equipped with some of China’s most advanced aircraft, to Central Asian bases. The Chinese government had announced that it would be holding joint military exercises that August with Russia, and so the satellite photos of Chengdu J-20 fighters parked in the deserts of Turkestan got an incurious glance or two in Langley, and went into filing cabinets.
After years of budget battles on Capitol Hill, the US military was not quite so powerful or so swift to deploy as it had been in the last years of the twentieth century. Only two of the remaining eight carrier strike groups—CSGs, in naval jargon—were on station at any time, one in the western Pacific and one shuttling back and forth between the Mediterranean and the Indian Ocean; transport was a growing challenge by sea or air, and borrowing airliners from the civilian air fleet, a mainstay of late twentieth century Pentagon planning, was less simple to arrange now that air travel was only for the rich again. Still, the units assigned to the first phase of the Tanzanian operation—the 101st Airborne, the 6th Air Cavalry, and the 1st and 2nd Marine Divisions—were used to rounding up transport in a hurry and heading off on no notice to the far corners of the globe.
The first units of the 101st Airborne landed at Nairobi in the middle of May, when the heavy rains were over and the first riots were breaking out in Dar es Salaam. By the time President Weed gave his famous speech in Kansas City on June 20, denouncing atrocities he claimed had been committed by the Tanzanian government and proclaiming in ringing terms America’s unstinting readiness to support the quest for freedom around the world, all four divisions were settling into newly constructed bases in the upland country south of Kajiado, not far from the Tanzanian border. Alongside them, logistics staff and civilian contractors swarmed, getting ready for the two armored divisions, on their way from Germany by ship, who would fill out the land assault force, and the bulk of the supplies for the assault, which were on their way by sea from Diego Garcia.
Meanwhile three CSGs, headed by the nuclear carriers USS Ronald Reagan, USS John F. Kennedy, and USS George Washington, headed at cruising speed toward a rendezvous point in the western Indian Ocean, where they would meet the ships carrying the armored divisions from Germany and a dozen big supply ships from the Maritime Prepositioning Squadron based on Diego Garcia. Two Air Force fighter wings had already been assigned to the operation, and would arrive just before the carriers reached operational range; they and carrier-based planes would then take out the Tanzanian air force and flatten military targets across the country during the two weeks the armored divisions would need to land, join the rest of the force, and begin the ground assault. It was a standard plan for the quick elimination of the modest military forces of a midsized Third World country; its only weakness was that the US force was no longer facing a midsized Third World country.
In times of peace, August and September are the peak tourist season in East Africa; inland from the always humid coast, the climate is cool and dry, and the wide plains of the interior are easy to travel. Since plains in cool dry weather are among the best places on earth for an assault by tanks and attack helicopters, these were also the months the Pentagon’s planners assigned for Operation Blazing Torch, the liberation of Tanzania. Briefing papers handed to President Weed in late July sketched out the final details, and he nodded and signed off on the final orders for the invasion. The Secretary of Defense looked on from the other side of the room with a silent frown. He had tried several times to bring up the small but real chance that the Chinese might retaliate, and had his advice dismissed by Weed and mocked to his face by the president’s national security adviser and Vice President Gurney. As soon as this thing was over, he told himself for the fifteenth time, he would hand in his resignation.
Outside the White House windows, barely visible in the distance, a small band of protesters kept up a desultory vigil in the free-speech zone set aside for them. Pedestrians hurried past, ignoring the chanted slogans and the protest signs. It was another brutally hot summer day in Washington DC, part of the “new normal” that the media talked about when they couldn’t avoid mentioning the shifting climate altogether. Out beyond the Beltway, half the country was gripped by yet another savage drought; the states of Iowa and Georgia had just suspended payment on their debts, roiling the financial markets; eyes across the southeast turned nervously toward a tropical storm, poised off the Windwards, that showed every sign of turning into the season’s first big hurricane.
What many perceptive observers recalled afterward was the sullen mood that gripped the country that summer. Only the media and the most shameless of national politicians tried to pretend that the approaching war with Tanzania was about anything but oil; the president’s approval rating drifted well below 25%, which was still three times that of Congress and well above that of any credible candidate the other party had to offer; the usual clichés spewed from the usual pundits, but the only people who were listening were the pundits themselves. Across the nation and across the political spectrum, the patience of the American people was visibly running short.
Those who were dissatisfied had plenty of reasons. The intractable economic slump that had gripped the country since 2008 showed no sign of lifting, despite repeated bailouts of the financial industry that were each proclaimed as the key to returning prosperity, and repeated elections in which each candidate claimed to have fresh new ideas and then pursued the same failed policies once in office. The fracking boom of the early twenty-teens was practically ancient history; energy prices were high, and straggling higher; gasoline bumped against $7 a gallon that summer before slumping most of the way back to $6.50. None of these things were new, but they seemed to infect the national mood more powerfully than before. Shortly they would help spark an explosion—but there would be other explosions first.
At the end of July, the invasion task force assembled in the Indian Ocean almost two thousand miles east of the Kenyan coast. Fleet Admiral Julius T. Deckmann, commanding the task force, made sure everything was in order before giving the orders to sail west. A career officer with half a dozen combat assignments behind him, Deckmann had learned to trust his intuition, and his intuition told him that something was not right. From the bridge of the USS George Washington, his flagship, he considered the assembled fleet, shook his head, and ordered reconnaissance drones sent up. Real-time images from US spy satellites showed nothing out of the ordinary; data from the AWACS plane circling high overhead confirmed that, and so did the drones, once data started coming in from them. Deckmann’s unease remained as days passed uneventfully and the task force neared East Africa.
The fleet reached its assigned position off the Kenyan coast on schedule. Final news came via secure satellite link from Washington: the Air Force fighter wings had arrived and were ready for action; the Tanzanian Freedom Council, the puppet government-in-exile manufactured by the State Department, had called “the nations of the world” to liberate their country, a plea that everyone knew was directed at one nation alone; the CIA-led mercenaries who spearheaded the second, violent phase of the uprising had withdrawn from Dar es Salaam, leaving the local cadres to their fate, and were moving toward the Kenyan border to open the way for the invasion. Deckmann made sure every ship in his fleet was ready as the sun set in red haze over the distant African coast.
Very few of those involved in the war got much sleep, that last night before the shooting began. On the three carriers, and at two newly constructed airfields in southern Kenya, aircrews worked through the dark hours to get their planes ready for battle, unaware that other aircrews were doing the same thing thousands of miles away in Central Asia. Soldiers of the two armored divisions that had been brought down from Germany prepared for a landing in Mombasa most of them would not live to see. In Dar es Salaam and Nairobi, presidents met with their cabinets and then headed for heavily guarded bunkers; elsewhere in the world, heads of state read intelligence briefings and braced themselves for crisis.
Two hours before the East African dawn, the waiting ended. Two people ended it. One was Admiral Deckmann, barking out the orders that sent the first fighter-bombers roaring off the deck of the George Washington and the first Tomahawk cruise missiles blazing skywards. The other was an officer in a Chinese command center deep in central Asia, who watched the planes take off and the missiles launch, courtesy of a high-altitude observation drone—one of three that had been following the George Washington since it went through the Suez Canal, and were now stationed high above the fleet. As infrared images showed planes and missiles hurtling toward Tanzania, the officer typed rapidly on a keyboard and then hit enter twice. With the second click of the enter key, the Chinese response began.
End of the World of the Week #42
In the world of apocalyptic fantasy, an engineer’s degree is very often a passport to success. An engineer’s training focuses on figuring what can happen, not what did happen or will happen, and so engineers reign supreme in many fields of rejected knowledge; from creation science through the quest for ancient astronauts to past and present claims of imminent apocalypse, books by retired engineers are usually the most imaginative and least inhibited works on their eccentric subjects.
Retired electrical engineer Hugh Auchincloss Brown was a classic of the type, and had an even more vivid imagination than most of his peers. In his book Cataclysms of the Earth (1967), he argued that the amount of ice at the south pole was steadily increasing, and the excess weight would eventually cause the planet to unbalance and flip over in space, devastating the entire surface of the globe and leaving few survivors. Moreover, he insisted, this had happened before: the present Antarctic ice cap was “the successor to a long lineage of glistening assassins of former civilizations on this planet.”
Brown died in 1976, convinced to the end that the cataclysm was already overdue and might occur at any moment. His theory found eager listeners among late 20th century fans of apocalypse, but lost market share as better measurements made it clear that the ice cap on Antarctica is contracting, not expanding.
—for more failed end time prophecies, see my book Apocalypse Not
Issue N ° 63 is Available!
Global Systemic Crisis – The Five Devastating Storms In Summer 2012 At The Heart of The World Geopolitical Swing
- Public announcement GEAB No. 63 (March 15, 2012) -
In its January 2012 issue, LEAP/E2020 signalled the current year as that of the world geopolitical swing. The first quarter 2012 has, to a large extent, started to establish that an era was in fact coming to an end with, in particular, the Russian and Chinese decisions: to block any Western attempt at interference in Syria1:their stated desire, associated with Indiaespecially, to ignore or circumvent the oil embargo fixed by the United States and the EU against Iran2;the increasing tensions in relations between the United States and Israel3the acceleration of the policy of diversification out of the US Dollar led by China4and the BRICS (but also by Japan and Euroland5the premise of change in Euroland’s political strategy at the time of the French electoral campaign6and the intensification of actions and statements fueling the rising strength of trans-bloc commercial wars7In March 2012, we are far from March 2011 and the “hustling” of the UN by the USA/UK/France trio to attack Libya.
March 2011 was still the unipolar world of after 1989. March 2012 is already the post-crisis multipolar world hesitating between confrontations and partnerships.
Thus, as anticipated by LEAP/E2020, the handling of the “Greek crisis”9has quickly caused the disappearance of the so-called “Euro crisis” from the media headlines and market participants’ concerns. The mass hysteria maintained by the Anglo-Saxon media and the Eurosceptics during the second half of 2011 on this subject hasn’t lasted long: Euroland is increasingly asserting itself as a sustainable structure;10once again the Euro is in vogue in the markets and for emerging countries’ central banks,11the Eurogroup/ECB functioned effectively and private investors will have to accept a haircut of up to 70% on their Greek assets, thus confirming LEAP/E2020’s 2010 anticipation which then spoke of a 50% haircut when almost no-one imagined such a possibility without a “catastrophe” signalling the end of the Euro12. Ultimately, markets always yield to the law of the strongest… and the fear of losing more, whatever the students of ultra-liberalism may say. It’s a lesson which political leaders will jealously guard because there are other haircuts to come, in the United States, in Japan and in Europe. We will come back to this in this GEAB issue.
Central bank held sovereign debt (as a % of GDP) (2002-2012) – United States (in violet), United Kingdom (in grey), Euroland (in violet dots), Japan (in grey dots) – Sources: Datastream / central banks / Natixis, 02/2012
Contemporaneously, and that contributes to explaining the gentle euphoria which feeds the markets and many economic and financial players these last few months, due to it being an electoral year and from the need to make a good impression at all costs against a Eurozone which isn’t collapsing13, the US financial media have given us a remake of the “green shoots” story from the beginning of 2010 and the “recovery” 14 from the beginning of 2011 in order to paint a picture of an America “exiting the crisis”. However, the United States at this beginning of 2012 really resembles a depressing scene painted by Edward Hopper15 and not a glowing 60s chromo in the style of Andy Warhol. Just as in 2010 and 2011, the spring will for that matter be the moment of the return to the real world.
In this context all the more dangerous, as all the players are lulled by a dangerous illusion of a “return to normal”, in particular of the “restarting of the US economic engine” 16, LEAP/E2020 considers it necessary to alert its readers to the fact that summer 2012 will see the shattering of this illusion. In fact, we anticipate that summer 2012 will see the crystallization of five devastating shocks which are at the heart of the current process of world geopolitical swing. The black clouds which have been accumulating since the beginning of the crisis around economic and financial issues have now been joined by the dark clouds of geopolitical confrontation.
Therefore, in LEAP/E2020’s view, five devastating storms will mark the summer of 2012 and thus accelerate the process of world geopolitical swing:
. US relapse into recession against the background of European stagnation and BRICS slowdown
. dead end for the central banks and interest rate increases
. storm on the foreign exchange and Western sovereign debt markets
. Iran, the war « too far »
. new crash in the markets and financial institutions.
In this GEAB issue our team analyzes these five shocks of summer 2012 in detail.
At the same time, in partnership with the Anticipolis Editions, we are publishing a new excerpt from the book by Sylvain Périfel and Philippe Schneider, “2015 – The great fall of Western real estate”, at the time of the French version going on sale; dealing with the prospects for the American residential real estate market.
Lastly, we give our monthly recommendations targeting gold, currencies, financial assets, stock exchanges and commodities in this number.
Warren Edward Pollock interviews and has an open talk with leading author James Howard Kunstler. We are at a cultural moment where we are incapable or understanding reality. We are in a massive cultural denial. We must be sensitive to the hardships we are moving towards so we can make better choices. We are going to be dragged kicking and screaming to our destination. Technology Narcissism and Organizational Grandiosity are both movements of denial of what resides in the future paradigm. The hallmarks are denial the inability to tell the truth to ourselves are unfortunate symptoms of our times. We have a highly integrated economy with most of our activity reliant on cheap energy availability and inputs. The public has been bombarded by propaganda aimed at the voting public but biased to vested interests trying strenuously to loot and gather other peoples money for speculation. We are entering a period where we are going to have investment capital scarcities. Investment capital will be very scarce. Its going to become impossible to develop a technological solution set. Risk in our society has been wrongly priced.
Oil being the collateral of the reserve currency which requires sea empire. We just don’t want to know. There is a physical world and the monetary constructs are just a construct and esoteric layer. Complex systems we depend upon will break in the future and we see that process underway. Under these stresses all our systems are destabilizing at the same time with the money and banking system proving to be the most fragile complex system because its the most abstract. The Long Emergency and the Witches of Hebron talk about a world without a steady energy input. With MF Global we have a physical world effect due to monetary breakdown.
The North Korean failed idea or Juche “Self Reliance in Depravation,” comprehensive anticipatory design science and ephemeralization, or breakdown crisis. We debate the idea of technological advantage and disadvantage. What is a job? What is necessary for life support? How many people (and workers) are needed today? Will we see a great reset (the long emergency) which will kill off lots of people as we migrate into a low functioning society in the Witches of Hebron? There will be a great deal of human attrition with the Soviet Collapse being illustrative of the process. We talk about the reduction of population in Russia (and reduced life expectancy) as background noise in life. Disease starvation and a slow death will take the population down. Perhaps Dmitry Orlov is correct regarding the process of society collapse. James suggests that we will not see policy or protocol to correct the condition of earth being over its life-support capacity.
Well, he had to get up there and say something. In this particular winter of our discontent, the wispiest nostrums and baldest lies will do. America is not interested in reality. America is a nine-hundred pound man imprisoned in a fetid trailer bedroom begging for one more case of Little Debbie Cocoa Cremes before the front-end-loader bashes through the wall to haul him to intensive care. America just wants to hear another story about its own wonderfulness before that happens. America’s soul is so lost that it has disappeared into the same cosmic wilderness that MF Global’s client accounts were last seen entering.
Mr. Obama keeps telling nationwide audiences that “we have a supply of natural gas that can last America nearly 100 years.” That is just not true. If he believes it then he is either 1) getting treasonously bad advice from dishonest advisors or 2) not reading reports issued by his own agencies or 3) just making shit up. This was the same week, by the way, when the US Department of Energy dropped its estimate for the Marcellus shale gas play by 66 percent, while the estimate for all US shale basins went down 42 percent. The shale gas industry is another Ponzi bubble that is about to founder on a scarcity of investment capital. Just watch.
The “energy independence” trope is a lie, too. At least in the sense that Mr. Obama means – that we can run the suburban clusterfuck and all its accessories by other means than fossil fuels. He just says it because it makes voters feel better. By the time they find out it was just a story, he won’t need their votes anymore. Meanwhile, we’ll do nothing to prepare for a different way of life, and so, necessarily, the result will be an obscene scramble for power and resources that will leave a lot of people dead.
The topper for me, though, was the President’s cheeky announcement that he’d ordered the Department of Justice to form a “special unit” to investigate mortgage fraud and other lethal irregularities in the banking sector. The fact that his congressional audience did not bust out laughing shows what a convocation of craven and perfidious cat’s paws they are. Note to readers: the DOJ has a long-established criminal division fully empowered to prosecute all the familiar scams of our time from NINJA lending to the robo-signing of titles to MERS mortgage mischief, to the bundling and sales of booby-trapped CDOs – up to and including whatever Jon Corzine thought he was doing at MF Global.
Notice how lame the major newspapers and cable news networks were in responding to Mr. Obama’s impudent japery. None of them, including The New York Times, bothered to ask Attorney General Eric Holder what he’s been up to along these lines for the past three years. It is really hard to account for the stupendous incompetence of the news media in recent years. Of course, I’m allergic to conspiracy theories and the only explanation that adds up for me is the diminishing returns of technology. Among other untruths we’ve embraced collectively is the idea that computer-distributed information amounts to knowledge and understanding, tending toward judgment. Apparently, it’s only made our society much dumber and more irresponsible. After all, none of the supposed media watchdogs even asked The New York Times or The Wall Street Journal, or CNN and a hundred other outlets why they didn’t interview the Attorney General of the United States and ask him why he has not been taking care of the business now assigned to this special unit.
Not included in the State of the Union message was any reference to the provision in the recently signed National Defense Authorization Act that allows the US government to suspend due process of law and use the military to arrest and indefinitely detain US citizens on vague and opportunistic charges of “suspicion” You will remember a month ago when Mr. Obama signed the law and issued a “signing statement” that said his administration would not carry out these specific provisions. Did anyone notice that it is an impeachable offense for the president to state his opposition to enforcing the law? In which case, why isn’t there a bill of impeachment making its way through Congress right now?
I’ve had enough of Obama, though I voted for him in 2008. I won’t vote for him again. But I’m not altogether confident that any of us will be voting for anyone in the fall of 2012. Too many systems we depend on are spinning out of control. I suppose we will continue feeding ourselves a diet of lies and evasions until circumstances become so extreme that language itself loses all relevance and only real action will answer. I believe that moment is approaching in the yet-to-be-acted-out political uproars of the spring and summer. In the meantime, American leadership is bankrupt. Just accept the fact that America has no legitimate leadership. The vacuum is total and we know how nature feels about a vacuum.
My books are available at all the usual places.
by Jim Willie
The year 2012 has started out in strange ways. While celestial forces augur for rare tail events, the assurance of man-made events that stretch far into the extreme tail of probability are not only very likely but will be of a type to reflect the change in the global balance of financial power. The Paradigm Shift mentioned over the course of the last two to three years is at work, having moved into a higher gear. The gold is moving from the West to the East, along with the power. We will not see the process reverse in our lifetime. The sanctions set against Iran have been devised by a former global leader nation that is beset by insolvency, fraud, and lost integrity. The backfire has consolidated forces into a more fortified position against the USDollar. Trade increasingly is not being settled in US$ terms. The icons of the day are mere apologist public address systems attempting to rationalize and justify the deep insolvency and wrecked systems. The new normal is of a caravan file of broken cars and trucks sputtering down the road, using the false fuel of hyper monetary inflation and the offensive paint of phony financial accounting, the tell-tale sign being the ugly rancid smoke out of their tailpipes. The last insult is of the US Presidential election process, which is badly marred by obvious inconsistencies and anomalies. The vote count for the candidate that attracts the biggest crowds, attracts the biggest donations from corporations, and defies the financially teetering system does not match the final official tallies.
PREPARE FOR RARE DAMAGE OF TAIL EVENTS
In the probability world, a tail event is described as an occurrence far out in the small numbers of probability, extended on the tail of the curve of likelihood. In the quality control domain, the battle cry used to be Six Sigma, meaning the tolerated defect rate goal would be six standard errors, a rate in no way achievable. A quick check of the probability tables unmasks the lofty goal as one defect part off the assembly line in every 1.013 billion items. That is Six Sigma on the normal bell-shaped curve. However, in the world of phony finagled finance, such rare events are indeed occurring. The modern world has never seen such grotesque charred ramparts posing as financial structures, badly beset by the insolvency caused by the natural sequence of broken asset bubbles, aggravated by absent industry. In fact, the entire fiat currency system, where money is nothing but redefined debt, is an abomination destined for the ruin we see on such a tragic widespread level. The modern world has never seen such grotesque housing disasters, the dream of home ownership turned upside down, one quarter of American households owing more than the value of their homes. In fact, the entire housing dependence devised by Greenspan, where the USEconomy would lean not on industry but on rising home equity, serves as the calling card of central bank heresy. The heresy continues with the high priest ZIRP and bishop QE. Of course it ended in tears. The modern world has never seen such grotesque quicksand in sovereign debt for so many major nations. This goes far beyond Greece, Ireland, and Portugal, the symbols of small fry nations that few nations will make deep sacrifice for. In fact, as the sovereign debt spreads, it has become clear that Italy, Spain, France, and many other nations suffer from the sinking pressures that national securitized debt brings. As the sovereign debt loses value, the banking system sheds reserves valuation and goes insolvent, the credit engines stall, the economy falls into recession, the labor force loses jobs, the spending patterns falter, and the nation goes into a failure mode. See the Cauchy distribution in the graphic, which when the degrees of freedom grow unbounded, approaches the Gaussian normal.
Some important tail events of rare type are coming. Any attempts to control a Greek Govt Bond default will be fraught with high risk and deep peril. The equal necessity to control a default for Ireland and Portugal will be made obvious. The extension to Italian and Spanish Govt Bond losses in collateral damage will be obvious. The implications to Credit Default Swaps must also be handled, not possible in the same fraudulent manner as before with redefinitions and denied insurance awards. The contagion of vanished equity in the banking system will spread to London, New York, and Germany, in whose nations numerous banks will fail. It will be extremely difficult for the USDollar to ward off such powerful storm damage, and remain as the global reserve currency. Some distant maritime voices might regard my claims as premature and far-fetched, but their preoccupation with gold basis has left their voices mere reverberant richochets in the hinterland. The academic voices seem out of touch with trends, the loud laps on the rocks from waves of inflation hardly recognized for their damage from the remote seacoast. They seem unable to foresee the new found land that is forming in the East, divorced from the USDollar.
Bob Chapman On USAprepares Radio Show
– with host Vince Finelli – January 10, 2012
Iran is building a nuclear reactor because they are going to be out of oil in 14 years from now, in the process of the financial and economic collapse they (NWO) will have their third world war which will probably wipe out half of the world population. Also, an important discussion about business in foreign countries, control of your assets, a home and bank accounts outside the United States.
Oh, how I have dreamed of this delightful moment.
by Alfred Heinz
New York – USA
In a remarkable admission by former Nixon era Secretary of State, Henry Kissinger, reveals what is happening at the moment in the world and particularly the Middle East.
Speaking from his luxurious Manhattan apartment, the elder statesman, who will be 89 in May, is all too forward with his analysis of the current situation in the world forum of Geo-politics and economics.
“The United States is baiting China and Russia, and the final nail in the coffin will be Iran, which is, of course, the main target of Israel. We have allowed China to increase their military strength and Russia to recover from Sovietization, to give them a false sense of bravado, this will create an all together faster demise for them.
We’re like the sharp shooter daring the noob to pick up the gun, and when they try, it’s bang bang. The coming war will will be so severe that only one superpower can win, and that’s us folks.
This is why the EU is in such a hurry to form a complete superstate because they know what is coming, and to survive, Europe will have to be one whole cohesive state. Their urgency tells me that they know full well that the big showdown is upon us. Oh, how I have dreamed of this delightful moment.
“Control oil and you control nations; control food and you control the people.”
Mr Kissinger then added: “If you are an ordinary person, then you can prepare yourself for war by moving to the countryside and building a farm, but you must take guns with you, as the hordes of starving will be roaming. Also, even though the elite will have their safe havens and specialist shelters, they must be just as careful during the war as the ordinary civilians, because their shelters can still be compromised.”
After pausing for a few minutes to collect his thoughts, Mr Kissinger, carried on: “We told the military that we would have to take over seven Middle Eastern countries for their resources and they have nearly completed their job.
We all know what I think of the military, but I have to say they have obeyed orders superfluously this time. It is just that last stepping stone, i.e. Iran which will really tip the balance. How long can China and Russia stand by and watch America clean up? The great Russian bear and Chinese sickle will be roused from their slumber and this is when Israel will have to fight with all its might and weapons to kill as many Arabs as it can.
Hopefully if all goes well, half the Middle East will be Israeli. Our young have been trained well for the last decade or so on combat console games, it was interesting to see the new Call of Duty Modern Warfare 3 game, which mirrors exactly what is to come in the near future with its predictive programming.
Our young, in the US and West, are prepared because they have been programmed to be good soldiers, cannon fodder, and when they will be ordered to go out into the streets and fight those crazy Chins and Russkies, they will obey their orders.
Out of the ashes we shall build a new society, there will only be one superpower left, and that one will be the global government that wins. Don’t forget, the United States, has the best weapons, we have stuff that no other nation has, and we will introduce those weapons to the world when the time is right.
– End of interview. Our reporter is ushered out of the room by Kissinger’s minder. –