Monday, August 15, 2011

Had Enough Yet?

The systems of empire, totalitarianism, institutional slavery, indentured servitude, and the divine right of kings are concepts that have slipped into the trash bin of history.

We are at the threshold of yet another momentous change. It is hard to get your mind around it. There are many vested interests that are in the business of distraction in order to allow them to extract the last vestiges of what they have wrought. This weekend's Iowa nonsense and the media attention to it have the effect of exciting people of all the political spectrum into frenzies of irrelevant mind numbing excitation. The call to prayer, or the return to some imagined time in history when all was well cannot halt the inevitability of the end of an era.

What has quickened the process this time has been the global expansion of an economic system, desired by all, and demonstratively doomed to failure. The evidence is constant; the corpus, be it person, or company, (which have now morphed into the same "being") grows, (capital is drawn to capital), greed engorges the beast and it dies. The neo-liberal expansion of the multi-national corporation, the insatiable desire of the world's population to drive a car, and the most pernicious of all the elements in the drama, the expansion of debt as a "growth" lever all converge and the system collapses of its own weight.

The Economist publishes this world debt clock: 46 trillion and counting. This number is in current dollars and counts debt that we can see, obligations that are actually transparent. It does not take into consideration the debt obligations of say the entitlement obligations of future Americans, estimated to be 65 trillion dollars, to site just one example. We cannot cover this debt. It will be cancelled.

This is but an excerpt. The entire interview is on the WSJ website.

Disbelievers will have all the visual cues they need to reject the premise of this clip. Roubini has an accent and probably hair on his back. He is not a true American. Another darkie bringing the communist manifesto to light. Ironically China, the last great satan state, is closer to collapse after adopting the tenants of unbridled capitalism then it has ever been. It will not be able to sate the demands of the billions to drive that car.

For those with a sharp pencil and a keener understanding than I have are directed to the BIS. This is the world settlement clearing house that monitors debt and to the extent they can, the non transparent OTC derivatives that none of us understand. If you cruise around this site you will see that the value of derivatives (the instruments that precipitated the collapse of 2008) has actually increased to over 600 Trillion dollars in the last two years. You will also read that this is but the notational amount and their true asset value is only 20 some trillion. I don't understand it either. Here is what I know. They will all be settled or else. In the same way bond obligations, no matter how long they are kept off the books, will also be settled or else, default. In a rational world derivitives allowed a commodity producer to stabilize a price, say for a steer. A rancher owned a steer, an option was written of the future price of the steer, he delivered the steer, the option was cleared. What the geniuses who destroyed the world as you knew it did, was create a system of "Open Interest" which meant that persons could place side bets on the steer's price without any underlying interest in the steer. This is the easiest tell on the subject so if you have a problem here skip away. The impact will still effect you. You just won't know what hit you. And some of these bets, the poison ones placed on housing stock, already blew up and we are still paying off the gamblers. The argument is that if they default the world collapses. They will default, the world financial system will collapse.

Had enough yet?

We have to add in the problem of the underlying basis of the entire system, extractive economics. At exactly the same time that we are in a fiscal crisis, which is just a counting game, we have the all too real set of facts that the growth limits models of commodities that we extract from the earth to support all of this economic activity, predict that they are getting scarcer.

The following were excerpted from the NYT this weekend:

Can Jeremy Grantham Profit From Ecological Mayhem?

When prices go up and stay up, it’s not a bubble. Prices may always revert to the mean, but the mean can change; that’s a paradigm shift. As Grantham tells it, oil went first. For a century it steadily returned to about $16 a barrel in today’s currency, then in 1974 the mean shifted to about $35, and Grantham believes it has recently doubled again. Metals and nearly everything else — coal, corn, palm oil, soybeans, sugar, cotton — appear to be following suit. “From now on, price pressure and shortages of resources will be a permanent feature of our lives,” he argues. “The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value. We all need to adjust our behavior to this new environment. It would help if we did it quickly.”

here is his conclusion “But it’s never absolutely too late,” Grantham said. “It’s never too late to do what we can,” which includes making a lot of money you can use to try to protect whatever and whoever matters to you — biodiversity, family, nation, everybody.

He’s an impassioned environmentalist not only for the usual reasons but also because he believes humanity’s vexed relationship with the planet is the great economic story of our time. “This commodities thing may turn out to be the most interesting call of my career,” he told me. “I have no doubt we’re going to have a bad hundred years. We have the resources to gracefully handle the transition, but we won’t. We apparently can’t.”

The stakes couldn’t be higher. Grantham doesn’t dwell on the potential for disaster on an unimaginable scale, but it looms behind his measured language. The world’s population is seven billion and counting. “Whether the stable population will be 1.5 billion or 5 billion,” he said to me, “the question is: How do we get there?”

This is probably the darkest article I have read in my lifetime. Not the least because of the value free way it is reported. Within the article and this consultant's "letter" to his clients is the understanding that in a zero sum game, the world may collapse but you can profit from it, and, with the gains, put your money to work to secure yourself. But more insidious is his understanding that a stable earth will only support half of its anticipated population. How we eradicate the surplus is the issue. Implying, we can allow them to starve, or more likely, given our history, is we unleash the holy war on them and simply kill them off. This is the behavior of those "vested interests" I alluded to at the top of this post.

There are options to consider that you might want to contemplate. Nothing like world revolution. How about an adjustment of a few basic destructive behaviors that might take the pressure off the world. End the fiscal derivitives market immediately.

End the concept of "growth" and change it to sustainable regardless of how that term has been abused

End the practice of planned obsolescence, and redundancy

Constrict advertising and marketing

End the practice of inflation

Educate, educate, educate, to the realities of the world

End the auto-cracy

It appears Elizabeth Warren is going to run for the senate from Mass. Pity.

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