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Charles High Smith Explains To Chris Martenson Why The Status Quo Is Unsustainable

Tyler Durden's picture




 

In this week's Straight Talk episode, Chris Martenon interviews Charles Hugh Smith, both very insightful individuals who have repeatedly appeared on the pages of Zero Hedge with unique and always original perspectives. Of all issues that dominate CHS' outlook on the economy, society and politics, the top two items that keep Smith up at night are "demographics and Peak Oil...which cannot be massaged away by policy tweaks or financial engineering." Much more in the enclosed interview.

"Straight Talk" features thinking from notable minds whom the ChrisMartenson.com audience has indicated it wants to learn more about.  Readers submit the questions they want addressed and our guests take their best crack at answering. The comments and opinions expressed by our guests are their own.

This week's Straight Talk contributor is Charles Hugh Smith, who has been an independent journalist for 22 years. His weblog, www.oftwominds.com, is a daily compendium of observations and analysis on the global economy and financial markets, as well as notable political, social and cultural trends. Charles has authored a number of books across several genres, including the recent Survival+: Structuring Prosperity for Yourself and the Nation.


1. Of the many forces at play that you write about within the economy, society, and politics - which ones do you see as the most defining for the future? How do you expect things to unfold?

CHS:   Clearly, demographics and Peak Oil are forces which cannot be massaged away by policy tweaks or financial engineering. I think the exhaustion of Global Neoliberal Capitalism and State Capitalism is apparent, as is the bankruptcy of the two ideologies that more or less define our politics. The reliance on expansion of credit and State power is a dynamic with only unhappy endings.

There are also structural end-games such as Baumol's Disease at work: the inefficient sectors of the economy end up dominating the national income. Services such as healthcare, education and the Armed Forces become more productive at much slower rates than the overall economy. Looking ahead, the Empire (the hundreds of overseas military installations, the diplomatic and financial reach into every nook and cranny of the planet, etc.), healthcare and other entitlements will require most of the national income. That is an unsustainable trajectory, especially as Peak Oil/peak everything kicks in.

As readers know, I am intensely interested in dynamics which are subtle and not quantifiable. Since they can't be quantified, they are generally ignored. Yet they are very real, even though we may not even be conscious of them.

The reliance on propaganda, for instance, has become so pervasive that the notions of truth and honesty have been hollowed out. Nobody expects the President or Ben Bernanke to speak honestly, as the truth would shatter an increasingly fragile status quo. But this reliance on artifice, half-truths and propaganda has a cost; people are losing faith in government , in all levels of authority, and in the Mainstream Media—and for good reason.

The marketing obsession with instant gratification and self-glorification has led to a culture of what I call permanent adolescence. Politicians who promise a pain-free continuation of the status quo are rewarded by re-election, and those who speak of sacrifice are punished. An unhealthy dependence on the State to organize and fund everything manifests in a peculiar split-personality disorder: people want their entitlement check and their corporate welfare, yet they rail against the State's increasing power. You can't have it both ways, but the adolescent response is to whine and cajole Mom and Dad (or the State) for more allowance and more “freedom.” But freedom without responsibility and accountability is not really freedom; it's simply an extended childhood.

2. You’ve written recently that you expect us to enter deflation because the amount of QE dollars pale in comparison to the amount of bad debt still to be destroyed. How can you be so sure? Why should anyone trust the dollar as a viable long term unit of wealth preservation in an environment where the natural checks & balances of the interest rate mechanism is being subverted?

CHS:   Can I please have a softball question instead?

The words “deflation” and “inflation” are so loaded nowadays that I try to substitute “purchasing power” whenever possible.  Conceptually, we tend to lump all sorts of things into words which may or may not actually be related. So we have to separate asset deflation/inflation from resource/currency prices.

One way to understand this is to measure everything in terms of what an hour of work can buy, and how much real goods an asset can buy. If you sold your house in 1995, how many barrels of oil could you have bought? How about now?

How many hours of labor did it take in 1975 to buy health insurance? How about now?

This sort of analysis helps us understand that the average household has seen purchasing power stagnate or decline for 35 years, and that capital has seen its purchasing power rise. The Great Housing/Credit Bubble seemed to offer households a chance to “catch up,” and perhaps the lucky few who sold at the top and have been renting since did restore their lost purchasing power. But most households have seen their wealth decline.

There are so many moving parts to value and price that it's very difficult to make sense of deflation and inflation. I start with simple numbers: Americans have collectively seen their assets decline by about $12 trillion since 2007, $6 trillion of which is lost residential home equity. That has effectively destroyed the balance sheet of most homeowners with recent-vintage mortgages. 

As interest rates rise and the stock market rolls over along with corporate profits, then another $10 trillion or so of bond and stock equity will evaporate. Given a decline of $20 trillion, then the Fed's expansion of its balance sheet by $2 trillion doesn't seem so mighty or irresistible.

As for the dollar's long-term viability as a store of wealth: there is precious little evidence right now for its long-term future, but the value of a currency is a political process more than a financial one. A currency is a claim on a nation-state's income stream and viability, so if those are devolving then so too will the currency. 

Sentiment is so negative on the dollar that I expect the opposite to occur. How could this happen? A political change in 2012 might shift priorities and instill some confidence that the U.S. is actually ready to deal with reality.

That said, assets such as income property, productive land and energy will retain value whether the dollar is destroyed or if it confounds us all by stabilizing. Wealth held in any currency carries intrinsic risk, but over the next few years the dollar may surprise us by strengthening considerably. That would give those holding dollars a golden opportunity to transform paper into real assets which have been depreciated by the global depression.

You make a key point about interest rates being subverted. I suspect that State manipulation can only run so far, and then market forces and asset deflation will kick in.  Again, the high-probability catalyst in my view will be the public and political class's loss of faith in the Federal Reserve's manipulations of the economy. I expect 2012 to be a pivotal year. 

3. Do you think we as a society/world are going to pull back from the brink of collapse we appear to be teetering on? Or do you think it's more practical to plan for how best to pick up the pieces afterwards?

CHS:   There are numerous feedback loops at work and so things rarely proceed in a straight line. Governments will continue creating credit and money in hopes of overcoming the destruction of assets, and nobody knows how long that charade can continue. It may run longer than seems possible, just as the housing bubble ran for three years past what was already an unprecedented top.

I lean towards a “defense in depth” approach where we have an A, B and C response. What can we do in present circumstances to increase our resilience and sustainability? That would be A (the simple things like conservation and cutting expenses) and B (harder things, like creating a new income stream or moving closer to your job/source of income). Option C would be a plan of action if things fall apart. Even then, most of us might be better off staying where we are, if we have a social network of support and sharing.

4. There is no shortage of criticism for the mess we find ourselves in. Far more scarce but much more important are solutions. How does the world restore fiscal “soundness” and what needs to be done to set the stage for a rebirth?

CHS:   The reliance on credit rather than on capital will have to end, and that means the demise of the credit-based consumer economy run by the Central State and global cartels.

The State fiefdoms and corporate cartels have every incentive to maintain the status quo, so change will probably come from unconventional innovations. I'd like to see a private, asset-based global currency arise, for instance. Since it would not be a nation-state's currency, it would be relatively free of political intervention.

I tend to see parallel private-sector structures (opt-in, open-source) as solutions rather than counting on the bold revamping of status quo, Financial Power Elite-dominated structures. The incentives in these dominant structures are all to retain the status quo at all costs. So solutions which don't rely on their approval are more likely to occur.

5. How does the general citizenry take power back from the plutocracy you write about that has amassed a supermajority of wealth and power in the world?

CHS:   I think voting against conventional politicos who are indebted to the status quo Power Elites and voting for any politico who dares to speak honestly about power structures and sacrifice is worth a try, as it is essentially cost-free.

Voting for third-party candidates seems quixotic but as the public loses faith in the traditional sources of authority then viable third-parties might arise, at least locally.

“Starving the beast” by eliminating debt and financial churn is also a two-fer: it reduces the income streams of the Plutocracy and accumulates capital for households. A society without mortgages or credit cards would also be a society without “too big to fail” banks. Commercial credit of the sort needed for business does not require global investment banks or shadow banking empires.

6. In your book Survival+, you outline strategies concerned individuals can pursue to prepare for a tumultuous future. Can you summarize the key elements of your guidance for those yet to read the book? 

CHS:   The basic ideas are simple: the political, financial and resource structures of the status quo are unsustainable, and so dependence on the Savior State is not a viable survival strategy. The “new” model is actually an “old” model that has atrophied and been lost: self-reliance, resilience, reciprocity and transparent, opt-in organizations with clear lines of accountability.

I spend 2/3 of the book on the critique because I thought it was essential to explain the powerful yet subtle layers of our social conditioning that resist this sort of fundamental transformation: permanent adolescence, the growth of the Global Empire as part of the national identity, the substitution of consumption for productive work, the surrender of autonomy in favor of over-reliance on the Savior State, and the conquest of our politics of experience by marketing and propaganda.

This sort of “soft” conceptual analysis is alien in a culture that is so reliant on quantifying everything, and that is part of the crisis we face.

To give a real-world example: about one-third of the U.S. citizenry is obese and unfit. Extrapolate these trends even a few years and we're told fully half the populace will be at risk of diabetes. The consequences of this are horrific for individuals and society alike.

We know these trends are not good for us, but the majority of people find maintaining their weight and fitness to be essentially impossible tasks. While we are culturally conditioned to blame our own weaknesses for any deficiency in our response, I think social conditioning is the key factor. An economy/society dominated by marketing, instant gratification and a desperate (and highly manufactured) yearning for self-glorification is not a healthy society, and the illness of that society manifests itself in poor mental and physical health.

In effect, our society makes us ill if we “buy into” the marketing and political/financial fantasies.

We can't really fashion self-reliance and a new parallel way of productive living if we're trapped in an interlocking mess of destructive social conditioning.

The “Survival+” approach is an intrinsically hopeful one, because I know it is possible to free ourselves of the social conditioning that leads to ill-health, and to live on a small percentage of the energy we currently consume. 

For skeptics who say this is “impossible,” then I turn to the developing world for examples. People in productive, stable societies live quite nicely on a fraction of the energy we consume. The American lifestyle is not inevitable.

7. Every period of history feels unique and special to its inhabitants. Looking back through time, the sorry excesses of empire, maintenance of the status quo by the elites, and financial folly are quite commonplace. What, if anything, actually makes this period of time, troubling as it is, unique or different in the human experience?

CHS:   Clearly, Peak Everything and a very fragile system of global supply chains upon which industrial societies are totally dependent are two unique characteristics. All the efficiencies of these global supply chains are based on cheap, abundant oil and political stability. These two requirements are inter-connected, of course; when the U.S. finally stopped shipping oil to Japan in 1940, then the Japanese Empire had no choice but to launch a war of conquest aimed at resources such as Indonesian oil.

As political stability and these long supply chains devolve, then nation-states will increasingly have no choice but to expropriate resources nominally owned by corporations located 6,000 miles away. Once the supply chains are broken, then the dependent structures will have to adapt. Those that can't or won't will collapse.

Information itself is a supply chain which is exquisitely vulnerable to disruption.

The other unique factor is the proliferation of disruptive weapons, not just nuclear but biological and cyber weapons. China has every intention of “winning” any potential conflict with the U.S. by disrupting the U.S. military, society and economy via cyber-attacks on our infrastructure and communications. That ability to disrupt an entire nation via fiber-optic cables is new.

On the positive side, we as a species have never had such ubiquitous access to information, and to a global ability to fashion our own networks of sharing and cooperation. It is easier now than ever before to share what “works” and how it 'works” in specific situations.

The potential for open-source, transparent, scalable structures which operate in parallel with nation-states and global cartels is new. In the past, only nation-states and global corporations had the resources to establish these sorts of networks, and they were operated for the express benefit of the Elites at the top of the State and corporations.

What's also new is the widespread access to very powerful technologies. Computers and networks were once only accessible to small circles of specialists. Setting up supply chains or manufacturing were so capital-intensive that only a few organizations could afford to do so. This is still true for certain things such as computer processors, but a wide range of other productive work is now available to a much larger pool of humanity.

Innovative, appropriately scaled and sustainable technologies are not new, but global access to them is new.

8. What formative experiences in your life led you to create a blog like OfTwoMinds.com? What are your goals for the site?

CHS:   Since I'd been writing about housing and real estate as a freelance journalist for 15 years, it was a natural progression to push the sort of analysis I could never get published in the Mainstream Media onto the Web.

Writing for the public is something that I started in high school and it's manifested in various ways over the years.

In 1969-70 my good friend Colbert and I started an underground newspaper in Lanai High School. The administration assumed it was published by teachers, which was quite a compliment to a couple of 16-year olds. We printed it on the ILWU's mimeograph machine.

As an activist in the American Friends Service Committee (AFSC) and in our political party (a legal third party) in the 1970s, we had to constantly produce newsletters, leaflets and campaign material, so the process of communicating ideas and defining positions in writing became familiar.

A close friend and I started a print magazine in Berkeley in 1984 called VoltAge, with a focus on technology and culture. It was horrendously expensive to publish a magazine, and I could only fund one issue. But that experience gave me a taste for eclectic media that combines a variety of topics and perspectives under one roof.

Though I wasn't consciously aware of it, I guess those previous experiences gave me the confidence to see oftwominds.com as a platform for a range of ideas and analysis.

Lofty goals can sound awfully pretentious, but alongside that risk is the notion that big goals can inspire us to great things. I have four goals for oftwominds.com:

  • Promote serious journalism on the web by presenting issues which the Mainstream Media sidesteps, dismisses or whitewashes
  • Encourage an online role for what was once called “public intellectuals,” a category which has atrophied into MSM-approved academic pundits such as Paul Krugman and “entertainer”-type ideologues like Glenn Beck, both of whom parrot simplistic ideologies that are increasingly meaningless.
  • Contribute to the ongoing discussion of practical solutions for the interlocking crises we face
  • Construct an integrated understanding of the ideas and issues which interest me and my readers.

And when I can't do any of the above, I try to write something mildly interesting.

9. Many leading econobloggers came to the profession via unorthodox paths, but perhaps none so much as you: philosopher, social activist, freelance writer, musician. What about your idiosyncratic background do your attribute your success?

CHS:   How the site has gathered such a smart, world-wise readership has been a mystery, and I think the key ingredients that attract people are the two complementary threads which run though my apparently random interests and careers: an interest in the structure of problems, and a desire for a hands-on, practical grasp of how these structures work in the real world.

In our increasingly specialized world, few people seem to bridge the divide between a conceptual understanding and a practical understanding. All the things which have deeply interested me—building, urban planning, music, politics, gardening, health, fiction, journalism and financial analysis— have a conceptual framework that you can learn, but that doesn't mean you can actually build a house, play a chord progression, start a business, write coherently or make a profitable investment.

As we all know, the real world is messy, contingent, and unpredictable. So actually starting and running a small business that does millions of dollars of business is completely different from a pundit's simplistic view from 30,000 feet. That's one reason why the political class of the U.S. is so divorced from reality; they speak glowingly about “small business” with no appreciation for how difficult it has become to start a real-world enterprise.

Since I know about small business from experience, then it's obvious to me that small business is being strangled and will not be hiring millions of new workers.

We all want a coherent explanation of what's unfolding, and we also want practical suggestions on how to adapt. It's difficult to provide both, and the great thing about having a smart readership is that readers educate me about things I don't have any real-world experience in, such as healthcare.

So philosophy and hands-on working knowledge act as a sort of yin-yang unity: both are necessary to understand and navigate the real world.

The basic idea behind philosophy is to think clearly about issues and work from first principles. Even non-linear philosophies such as Taoism have first principles which illuminate and explain the whole. 

So my goal in any subject is to establish the first principles or assumptions, and then try to explain how each link in the thesis leads to various conclusions. Rather than accept ideas that are repeated as if they are true, we ask two questions: exactly how does this argument work, and cui bono—who benefits if we accept this as true?

That is also the core of good journalism.

But in addition to journalism—explaining, critiquing, asking questions—we all want and need practical solutions or pathways. I guess I have always been drawn to a hands-on understanding of how things work, and that is the thread which informs oftwominds.com. I think my readership appreciates that practical working knowledge only comes from long practice and a lot of mistakes and setbacks. 

Another way of defining these two complementary threads is to look at both as toolboxes. Ideas such as system analysis and evolution are tools which help illuminate the structure beneath the surface, and practical skills—breaking down tasks and gaining mastery one step at a time—give us tools for taking those insights into the real world.

Since I'm very average, and have no connections to wealth or power, I've relied on perseverance and enthusiasm. Maybe that carries over somehow to the blog.

10. What question didn’t we ask, but should have? What’s your answer?

CHS:   One such question might be: what are the foundations of my general optimism about the Great Transformation ahead?

One is the process of evolution has expanded from the genome to culture and technology. All species must adapt or perish, and individuals have to adapt to changing circumstances. At a system level, there are feedback loops, positive and negative, which mean extrapolating the present into the future is not very accurate. New feedback loops can be added, and the value systems of cultures can also adapt.

Self-criticism and honesty are essential to growth and learning. The American political and financial Elites are committed to maintaining the Status Quo at all costs, even to the point we have now reached that reality is replaced by simulacra.

But other elements of the society are actively questioning the Elites and our social conditioning. They are asking what part their own actions play in supporting and enabling the status quo. 

Honesty includes expressing anger, frustration, whining, and all the rest of human emotions. The idea that maintaining a veil of secrecy and stiff-upper lip “everything's fine, shut up and keep your head down” will yield positive results is wrong. That leads to discord, distrust, illness and madness.

The greatest strength of America, or any society, organization or individual, is open, honest self-criticism and questioning. We only change when we have no other choice, and to expect the status quo to adapt without fierce resistance is impractical. So rather than waste energy trying to change those structures doomed to collapse or devolution, we're better off establishing our own networks of support, cooperation and sustainability.

An honest appraisal will lead us to challenge all sorts of assumptions we have made about the nature of work, property, the economy, healthcare, the Central State and much else.

The choices will not always be clear-cut. I will end with a story about my friend

Dexter Cate. Dexter was committed to saving dolphins from being slaughtered, and he'd found no official interest in protecting them.

So he swam out alone, at night, in a raging storm, and slashed the nets trapping hundreds of dolphins that were to be killed the next day. He was imprisoned in Japan for destroying “private property,” that is, the nets. 

We all value property rights, but what was more important, the destruction of private property or the lives of the dolphins? The legal system was clear; the dolphins had no standing compared to the nets. Dexter chose otherwise.

What do we really value? Our answers will inform our choices in the transformation ahead.

Thank you for such thoughtful questions, and I hope I haven't put everyone to sleep in answering them.


 

If you have not yet seen the other articles in this series, you can find them here:

ChrisMartenson.com readers can submit their preferences for future Straight Talk participants, as well as questions to ask them, via the Straight Talk forum.

 

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Mon, 12/06/2010 - 16:01 | 783043 MnMark
MnMark's picture

How do we know that "peak oil" isn't "certain" in the same way that civilizational meltdown because of the Y2K problem was "certain" at the time?

Mon, 12/06/2010 - 16:25 | 783108 Internet Tough Guy
Internet Tough Guy's picture

Because there is "evidence". Look at oil production of every known reserve; they are all in decline.

What is your position on "gravity"? Are you sold on it?

Mon, 12/06/2010 - 17:07 | 783306 Biosci
Biosci's picture

And who was "certain" about a Y2K meltdown?  The biggest risk most rational people could see was maybe getting an electric bill that was for 100 years' usage instead of one month's.

On a separate note, shouldn't the earth's gravity decrease as we take those long chain hydrocarbons from beneath us, break them up, and shoot them into the air above us?

Tue, 12/07/2010 - 05:48 | 784897 Dabale arroz a ...
Dabale arroz a la zorra el abad's picture

No, as long as the resulting gases do not escape the atmosphere. Even if they did, we should burn a lot of it. Earth's mass: 5.9736 × 10^24 kg. So just for a 0,1% decrease in gravity, just 5.9736 × 10^21 kg of oil should be burnt and escape the atmosphere. That results in more or less 8,6 × 10^17 barrels. Say we consume 85 million barrels per day, at a constant rate that would mean more or less 10^11 days, that is, approx. 273 million years consuming oil. Since I don't think we will sustain this rate even 5 years (or never i f we already passed peak oil), I would't worry about that...

Yes, I have too much free time ;)

By the way, did you already contribute to the bank run?

Thu, 12/09/2010 - 01:06 | 791539 Bicycle Repairman
Bicycle Repairman's picture

"Look at oil production of every known reserve; they are all in decline."

And how is it we know?  Who told us?  Is it in their interest to tell us the truth?  Can we verify what they say? How do unknown reserves become known reserves?  Who makes that happen?  What are their motivations?

Thu, 12/09/2010 - 01:07 | 791546 Bicycle Repairman
Bicycle Repairman's picture

Who creates the evidence? 

What is the connection between gravity and peak oil?

Mon, 12/06/2010 - 16:32 | 783135 Citxmech
Citxmech's picture

Our ability to extract oil is either limited or it's unlimited.  If it's limited - peak oil is a certainty.  To argue that peak oil might not happen, is to argue that we will never reach a structural limit to our ability to pull oil out of the ground.

Mon, 12/06/2010 - 17:00 | 783271 Herd Redirectio...
Herd Redirection Committee's picture

There is still a big difference between being able to maintain current production levels and a rapid decline in production levels from here.  Yes, things will change, but we will see the increasing use of: trains, blimps, zeppelins, bicycles.

And a decrease in distance the average product spends in transit.  Where substitutes for oil are possible they will be sought.  We will increasingly use natural gas to make plastics, etc.

Charles is a great writer, although we all know having respect for someone does not mean being in complete agreement with them:  "That would give those holding dollars a golden opportunity to transform paper into real assets" 

Charles,  I think you want to transform  paper into real assets now, and then transfer asset classes once this 'golden opportunity' arises!  I think he is underestimating the derivatives timebomb, the proverbial Sword of Damacles, most of which is interest rate swaps, and CDS, so if interest rates go up those who have been profiting from swaps (Wall St banks!) will stand to lose a lot of money.

Since the Wall St banks run the Fed it is highly unlikely they would play Russian Roulette with 6 bullets.

Any way, Charles is right on the money with his comments about the media, they are at risk of extinction!

It is right in line with our latest PsychoNews story, Funny Money, Manic Markets & Obsolete Media

http://psychonews.site90.net

"Senator Bernie Sanders from Vermont delivered an amazing speech in the Senate on December 2nd that was right on the money in regards to the problems America (and by extension, the world) faces.

To quote:

"There is a war going on, and I'm not referring to the war in Iraq and Afghanistan"

"Against the disappearing and shrinking middle class of this country."

"Their [billionaires/Oligarchy] greed has no end"

"[there seems to be] very little concern for the people if it gets in the way of accumulating more and more power"

"top 1% of all earners earn 23% of all the income in this country"

"Exxon made $19 billion last year and paid $0 in taxes.  They got a refund..."
(12 minutes into video)

Sounds like Senator Bernie Sanders has been reading PsychoNews!"

Mon, 12/06/2010 - 18:19 | 783637 trav7777
trav7777's picture

Blimps?  ROTFL.  Helium peaked in 2002

Thu, 12/09/2010 - 01:11 | 791553 Bicycle Repairman
Bicycle Repairman's picture

Really?  Do you have a source for this?

Thu, 12/09/2010 - 01:10 | 791550 Bicycle Repairman
Bicycle Repairman's picture

So what is the total amount of oil in the earth? 

Mon, 12/06/2010 - 16:06 | 783064 ReallySparky
ReallySparky's picture

"CHS:   Can I please have a softball question instead?"

Dude,

      Who do you think you are? Ben Bernake?  This is not 60 Minutes.

Paaaaleeeeze.

Mon, 12/06/2010 - 19:22 | 783880 IslandMan
IslandMan's picture

RS, can't you see he was trying to be amusing ?  It was his way of saying, well, that's a difficult question.

Mon, 12/06/2010 - 16:09 | 783072 flacorps
flacorps's picture

Peak oil is indeed scary.  But it is made less so by possibilities of fusion in tokamaks and polywells, (and yes, perhaps even in palladium lattices in near room temperature cells), nuclear power from thorium; fuel from corn, cane and slime as well as ammonia and natural gas; wind, solar, hydroelectric, geothermal, tidal, coal (which we still have plenty of), and of course oil which we just haven't found yet.

Mon, 12/06/2010 - 16:33 | 783136 Blindweb
Blindweb's picture

look into Energy Return on Energy Invested

Thu, 12/09/2010 - 01:13 | 791557 Bicycle Repairman
Bicycle Repairman's picture

Do you know what the EROI for a uranium or thorium reactor is?

Mon, 12/06/2010 - 18:20 | 783641 trav7777
trav7777's picture

fusion...lol.  Still 10 years away.  And we're not looking all that hard.

See, the gov is cutting science to the bone while they spend on blowing shit up in faraway places and on Xray machines for airports.

Mon, 12/06/2010 - 19:37 | 783915 StarvingLion
StarvingLion's picture

Just another 10 years...hurry everyone, the world needs at least another 233 million aspiring physicists to get 50K in student loans to be payed off workin the fields by hand when its too costly to run tractors.

Thu, 12/09/2010 - 01:17 | 791566 Bicycle Repairman
Bicycle Repairman's picture

"And we're not looking all that hard."

Given Peak Oil and the need for American energy independence I find your statement hard to believe.  Do important people doubt Peak Oil?

Mon, 12/06/2010 - 19:25 | 783892 IslandMan
IslandMan's picture

Exactly !  But you forgot to mention the breeding of unicorns for the harvesting of their carbon-rich horns.

Mon, 12/06/2010 - 16:11 | 783080 wiskeyrunner
wiskeyrunner's picture

It's about time for the end of day ramp up into the close. followed by the overnight rise in the index futures.

Mon, 12/06/2010 - 16:15 | 783087 jdrose1985
jdrose1985's picture

Great read.

 

Since I know about small business from experience, then it's obvious to me that small business is being strangled and will not be hiring millions of new workers.

It's terrible out here. If you're relying on "consumers" to make a living, you're scared shitless right about now. Essentially the only growth I'm having right now is from people who have more money than they know what to do with. If you don't provide a vital service and you can't find these sort of people then you can pretty much kiss all your assets which are dependant upon infinite inflation goodbye.

Mon, 12/06/2010 - 16:19 | 783102 sagerxx
sagerxx's picture

Second that.  My wife & I own 2 small bizzes (high-end personal services) and although we were fairly okay until this past Summer, we're now hanging on by our fingernails.  Our customer base has slowly eroded and new business is very, very slow to appear.  I can say that we won't be creating any new jobs in the foreseeable.

 

Mon, 12/06/2010 - 16:20 | 783105 I am more equal...
I am more equal than others's picture

Peak oil?  How about peak M2 or M3.  We lived in a closed system.  Price is meaningless - value is everything.  Necessity is the mother of invention.  Peak oil will resolve itself through invention and market actions of higher price making other things - yet found - more financially feasible.  Peak money - dumping more into a closed system - will end bad for those who cannot own things of value - i.e., silver, gold. 

Mon, 12/06/2010 - 16:40 | 783156 Blindweb
Blindweb's picture

Except invention (R&D) takes energy.  Peak oil was in 2006.  Research will be cut as more energy must be diverted to maintain society.  The only possibility is for energy consumption to be slashed immediately to free up more energy for invention, i.e., we have to get back ahead the energy curve. 

Mon, 12/06/2010 - 18:21 | 783646 trav7777
trav7777's picture

shit...so if oil will just "resolve itself" why won't something we can conjure at will, M2, resolve itself as well?

Everything is fine, yes?

Thu, 12/09/2010 - 01:20 | 791572 Bicycle Repairman
Bicycle Repairman's picture

Perhaps many of our intractable problems are not technological, but economic, or politcal in nature.

Mon, 12/06/2010 - 18:33 | 783690 Biosci
Biosci's picture

We absolutely do not live in a closed system.  Closed systems are willed into existence to make the mathematics tractable.  The only thing even closely approximating a closed system on a human-detectable scale of spacetime is the solar system. 

Mon, 12/06/2010 - 16:21 | 783109 Francis Dollarhyde
Francis Dollarhyde's picture

Because it already happened. Even the IEA admits it now.

http://www.truth-out.org/peak-oil-happened-200665654

We've been stuck on a plateau since 2004. ~74m barrels/day. It's like a balloon, bumping along the ceiling. Every time demand goes up, so does the price, until enough demand gets priced out of the market that it can be satisfied with 74 million barrels per day. 5 years this has been going on.

Mon, 12/06/2010 - 18:31 | 783684 trav7777
trav7777's picture

but...but...I got banned from TF for suggesting that oil might be able to peak!  You mean to tell me douchinger was wrong???  But...he has his own website!!!!!11

I also was told that "they" would just "figure something out."  THEY better fuckin get to it, because my SUV is empty.

Thu, 12/09/2010 - 01:26 | 791585 Bicycle Repairman
Bicycle Repairman's picture

If oil prodution peaked in 2006, then why doesn't the market price of oil, natural gas and other energy sources reflect this fact?

Does the IEA know about what goes on in every country?

Mon, 12/06/2010 - 16:23 | 783115 DollarMenu
DollarMenu's picture

Mr. Smith claims that he has no connection to wealth or power.

I don't know about the wealth part, but as to power, he needs no connection.

His self-generated truth is power enough.

 

Mon, 12/06/2010 - 19:44 | 783940 StarvingLion
StarvingLion's picture

Charlie is fucking brilliant.  He's another "expert predictor" who is obviously so good that he needs to have a FUCKING DONATION button on his website.  Imagine that. 

Thu, 12/09/2010 - 01:30 | 791593 Bicycle Repairman
Bicycle Repairman's picture

What is Mr Smith's background?

Mon, 12/06/2010 - 16:25 | 783119 Miles Kendig
Miles Kendig's picture

The hymn always sounds sweet when it is sung from the same hymnal one sings from ...  The simple fact is that more and more folks are singing from the same hymnal

Mon, 12/06/2010 - 16:45 | 783191 Blindweb
Blindweb's picture

Excellent overall but...

The guy clearly doesn't understand evolution.  Evolution doesn't mean to get better, it means to adapt to changing circumstances.  Yes we will adapt, but  living standards and life expectancies will fall dramatically.  People adapted to the Dark Ages too.    

Mon, 12/06/2010 - 17:55 | 783535 Seer
Seer's picture

"Evolution doesn't mean to get better, it means to adapt to changing circumstances."

OK, what's better, dead-end (death), or continued existence?  I'd say that "getting better" means pushing out the evolutionary dead-end.

Thu, 12/09/2010 - 01:33 | 791598 Bicycle Repairman
Bicycle Repairman's picture

"I'd say that "getting better" means pushing out the evolutionary dead-end."

I don't understand what you are saying here.  Can you elaborate?

Fri, 12/10/2010 - 00:19 | 794834 DiverCity
DiverCity's picture

It's a typical mistake by those who, as you say, don't understand Darwinian evolution.  It's a mistake also made, however, by those who do.  The mistake is to believe that human evolution and evolution generally are on a progressive, upward arc.  It's a teleological view, if you will.  Richard Dawkins and Daniel Dennett of all people routinely make the same error.

Mon, 12/06/2010 - 16:46 | 783192 Nacho.Libre
Nacho.Libre's picture

I read his book, survival +.  It was, for the most part, pretty good.  It took me a while to read it, though, because he kept using the word "simulacra" or "simulacrum" every other sentence and it irritated me so badly I had to read it in spurts and then put it down for a few days and then take it up again. There was another word that was also very overused, but it escapes me right now, probably my subconscious trying to protect me.

Mon, 12/06/2010 - 17:50 | 783512 string
string's picture

Hahahahahaha... I'm going thru that process currently.

Mon, 12/06/2010 - 16:50 | 783193 BennyBoy
BennyBoy's picture

Money creation explained by cartoon video:

http://www.xtranormal.com/watch/7943877/

 

Or watch a Phd in economics create $30B and send it via email to an overseas country.

http://www.fedspycam@marrinerecclesbldg.fed

 

Mon, 12/06/2010 - 17:03 | 783284 6 String
6 String's picture

As interest rates rise and the stock market rolls over along with corporate profits, then another $10 trillion or so of bond and stock equity will evaporate. Given a decline of $20 trillion, then the Fed's expansion of its balance sheet by $2 trillion doesn't seem so mighty or irresistible.

For another 12 trillion to be lost by equity declines and bond losses, 80% of the value would have to get wiped out from here (there is only 15 trillion in stock and bonds in household net worth collectively).

If this type of decline happened, the U.S. would have to default on its debt obligations because there would be too little in tax revenues to service Government obligations, without printing endless amounts more of the greenback. The plunge police simply won't allow this kind of decline to happen only because they cannot.

Goldman will eventually be right, 4 trillion more: QE3, 4, 5, etc. We're well on our way torward hyperinflation.

Mon, 12/06/2010 - 17:14 | 783325 flattrader
flattrader's picture

In one of Smith's essays featured here in ZH he was quick to blame homeowners (a blanket assertion) for the foreclosure crisis along with corrupt origninators, lenders and servicers in one of his high and mighty moralistic rants about the US and everyone in it (execpt him I suppose) being complicit in the national kleptocracy.

It's as though he completely ignored the testimony of any number of robosigner and origninators who indicated they out and out lied to mortgage applicants about the terms and conditions of their mortgages...and of course he NEVER addressed the issue of wide-scale predatory lending.

We're all to blame-We're all bad...except for him.

He's the the worse kind of self righteous "intellectual".

Thu, 12/09/2010 - 01:46 | 791627 Bicycle Repairman
Bicycle Repairman's picture

Certainly there are people who did not participate in the scandal in any manner or form.  Yet as taxpayers we will all be called to account.  This is immoral.

Mon, 12/06/2010 - 17:14 | 783343 What_Me_Worry
What_Me_Worry's picture

He is so close to understanding how this will play out.  He certainly is lost when he thinks the purchasing power of the FRN is going to skyrocket in the years to come.  Apparently, he has never heard of the ben bernank.

US management will not change in 2012, at least not to those who aren't puppets of the oligarchs.  The candidates who run in 2012 will pander to those who agree with his ideas, though.

As long as the bread is plentiful and the circus is free, then the US will be allowed to continue burning in quiet indignation.

In closing, silver.

Mon, 12/06/2010 - 17:17 | 783364 Bearster
Bearster's picture

"I'd like to see a private, asset-based global currency arise..."

Ever heard of gold?

Mon, 12/06/2010 - 17:17 | 783365 Rockfish
Rockfish's picture

I wanted to post this on ZH this as good a place. New batch of suckers found. That haow i take it. 

 http://bb.mobile.cnbc.com/us_news/40495500

Mon, 12/06/2010 - 17:48 | 783435 CulturalEngineer
CulturalEngineer's picture

Don't want to be a nag but I'm convinced the Commons-dedicated Account* IS a central innovation necessary as part of a necessary path through the current dying paradigm.

*A self-supporting , Commons-owned neutral network of accounts for both political and charitable monetary contribution... which for fundamental reasons of scale must allow a viable micro-transaction (think x-box points for action in the Commons).

Not strictly because of the networked citizen lobbying capability provided by enabling the micro-transaction enablement... (there's a lot more power than might be apparent at first if you could press a few keys and give say 25 cents in support of some proposition or another... the $4 billion on the last election works out to about 65 cents a week per registered voter!)

But rather because of the nature of the voluntary, opt-in, distributed network that arises from that...

THIS ultimately trans-national, neutral network forms the basis for direct, peer-to-peer empowered association. And ultimately it's constituents, its owners will define that Commons... (for instance, wouldn't it make sense for there to be a button say to give 10 cents when you like an article here? no requirement... but a small enough and easy enough transaction that voluntary participation could change the entire dynamic of online publishing... speech IS a part of the Commons isn't it?)

P.S. I'm no idiot (maybe a little naive but not an idiot), I know that a goal for this network to ultimately be Commons-owned (and yet also profitable) poses some complications for investors... and this must be accommodated. But both the final ownership and for-profit structure are actually elements in its design for both best chance of success and, in fact as a counter-balance to private concentrations of power.... an important element.

LinkedIn http://www.linkedin.com/in/culturalengineer

Demo & FAQ http://www.chagora.com

Political Fundraising: Act Blue, Facebook and the Missing Network Imperative

http://culturalengineer.blogspot.com/2010/08/political-fundraising-act-b...

It's a civilization fundamental for scaled speech and association.

Mon, 12/06/2010 - 21:15 | 784222 blunderdog
blunderdog's picture

You've probably got it covered, but just in case you missed it, read Stephenson's Snow Crash.

Mon, 12/06/2010 - 17:47 | 783496 LeBalance
LeBalance's picture

I choose to take extreme issue with a word used here:

"As interest rates rise and the stock market rolls over along with corporate profits, then another $10 trillion or so of bond and stock equity will evaporate. Given a decline of $20 trillion, then the Fed's expansion of its balance sheet by $2 trillion doesn't seem so mighty or irresistible."

The word is "evaporate" and in the context used it might mislead one to think that there has been deflation and that assets have "gone poof."

This is a very very common stumbling block.  Have the bond and stock equity gone poof as CHS would have you believe?  Or has the value been transfered to stronger hands or sharper operators?

Ah yes, now we see!  Do we not?  The housing bubble that transfered wealth, the fiat currency that transfered wealth, any and all other examples also transfered wealth.

Some would have you believe (and may believe themselves) that wealth went "poof" just like other evidence and miraculous goings-on occured in the past.

Believe the school you like; stand with those who see the hand in the pocket, or stand with the pooftas!

(Please also pardon the gratuitous humor!)

Did I judge any actor?  I hope not.  I hope you can see this.

:) LB

Mon, 12/06/2010 - 21:22 | 784245 blunderdog
blunderdog's picture

There are at least two significant forms of "wealth," and one of them really can go poof.

Assets which can be defended, carried, and utilized as means of direct assertion of power are one form--these can't poof.

Logical structures which result in influence on (more realistically, control over) the minds of fellow men.  These poof all the time.

The derivatives consideration is very much closer to the second category than the first.  While I agree with your point about "transfer" in a specific way, I disagree in the most general sense. 

There was never a compelling reason for *anyone* to have believed that the potential promise of future return of a fictional unit of exchange from generations as-yet-unborn represented "wealth" in a meaningful sense.

But what do I know.  I'm just a dog.

Mon, 12/06/2010 - 18:10 | 783599 mwurst
mwurst's picture

Paul Krugman should be duct-taped to a chair and forced to watch this video until he gets his mind right. http://www.wimp.com/budgetcuts/

Tue, 12/07/2010 - 06:05 | 784901 OldTrooper
OldTrooper's picture

Ha, ha!  Thanks for re-setting that one.  I'm going to save that link for future use.

Do you really think the clockwork orange treatment would work with Krugman and his ilk?  I guess it doesn't really matter if it works or not - they'd be restrained from further mayhem while in the chair.

Mon, 12/06/2010 - 19:22 | 783875 StarvingLion
StarvingLion's picture

I'd like to see a private, asset-based global currency arise, for instance

So why does anyone in the middle class bother with this guy then.  Why are his articles being posted here?

Mon, 12/06/2010 - 23:21 | 784518 charleshughsmith
charleshughsmith's picture

Thanks to everyone who read my ramblings and took the time to comment.
"Phony intellectual"--isn't that a redundancy? :-)
I promise to edit out "simulacra" in future editions. Promise. Simulacrum... sorry, I couldn't help myself.
As for blaming homeowners--I've been saying the whole thing was a scam since 2005: 71 posts on the housing bubble insanity in 2005 and 06: http://www.oftwominds.com/wEssays.html
Isn't it rather lame to criticize those who told people to stay away from the 3-card monte game?

Tue, 12/07/2010 - 00:54 | 784692 Dehrow
Dehrow's picture

It's pretty cool to come across someone from a completely different era than me, yet has such similar thoughts as I do. Thanks for elaborating on them (the thoughts), and making them sound reputable.

Tue, 12/07/2010 - 19:41 | 787409 flattrader
flattrader's picture

CHS,

You warned people who read your blog posts--essentially those that don't need warning.

So that somehow makes those who got lied to and shafted kleptomaniacs?  Gullible, perhaps, at worse.

(I guess we should all start bringing lawyers with us to closings.)

You blamed innocent victims, identified them as theives and refuse to recongnize predatory lending exists.

That's what's lame.

 

Thu, 12/09/2010 - 01:59 | 791657 Bicycle Repairman
Bicycle Repairman's picture

"I'd like to see a private, asset-based global currency arise, for instance."

 

Would you object to gold being that currency?  If you do, could you elaborate on the form your currency might take?

Thu, 12/09/2010 - 09:51 | 792038 Bicycle Repairman
Bicycle Repairman's picture

Mr. Smith raises a lot of controversial issues, and more questions than answers.   This whole thread was more like a love fest as opposed to a discussion.

Fri, 12/10/2010 - 00:27 | 794844 DiverCity
DiverCity's picture

Dude, I got news for ya -- ain't nobody got all the answers.  Sooner you realize that the better.  Isn't it enough to raise thoughtful questions and make philosophically interesting assertions to facilitate self-examination and critical thinking?  Or should we rather be dependent on the propaganda machine to determine what we believe and how we act?

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