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Why The Next Global Crisis Will Be Unlike Any In The Last 200 Years

Tyler Durden's picture


Submitted by F.F. Wiley of Cyniconomics blog,

Sometime soon, we’ll take a shot at summing up our long-term economic future with just a handful of charts and research results. In the meantime, we’ve created a new chart that may be the most important piece. There are two ideas behind it:

  1. Wars and political systems are the two most basic determinants of an economy’s long-term path. America’s unique pattern of economic performance differs from Russia’s, which differs from Germany’s, and so on, largely because of the outcomes of two types of battles: military and political.
  2. The next attribute that most obviously separates winning from losing economies is fiscal responsibility. Governments of winning economies normally meet their debt obligations; losing economies are synonymous with fiscal crises and sovereign defaults. You can argue causation in either direction, but we’re not playing that game here. We’re simply noting that a lack of fiscal responsibility is a sure sign of economic distress (think banana republic).

Our latest chart isolates the fiscal piece by removing war effects and considering only large, developed countries. In particular, we look at government budget balances without military spending components.

(Military spending requires a different evaluation because it succeeds or fails based on whether wars are won or lost. Or, in the case of America’s adventures of the past six decades, whether war mongering policies serve any national interest at all. In any case, military spending isn’t our focus here.)

There are 11 countries in our analysis, chosen according to a rule we’ve used in the past – GDP must be as large as that of the Netherlands. We start in 1816 for four of the 11 (the U.S., U.K., France and Netherlands). Others are added at later dates, depending mostly on data availability. (See this “technical notes” post for further detail.) Here’s the chart:

fiscal balance ex-defense 1

Not only has the global, non-defense budget balance dropped to never-before-seen levels, but it’s falling along a trend line that shows no sign of flattening. The trend line spells fiscal disaster. It suggests that we’ve never been in a predicament comparable to today. Essentially, the world’s developed countries are following the same path that’s failed, time and again, in chronically insolvent nations of the developing world.

Look at it this way: the chart shows that we’ve turned the economic development process inside out. Ideally, advanced economies would stick to the disciplined financial practices that helped make them strong between the early-19th and mid-20th centuries, while emerging economies would “catch up” by building similar track records. Instead, advanced economies are catching down and threatening to throw the entire world into the kind of recurring crisis mode to which you’re accustomed if you live in, say, Buenos Aires.

How did things get so bad?

Here are eight developments that help to explain the post-World War 2 trend:

  1. In much of the world, the Great Depression triggered a gradual expansion in the role of the state.
  2. Public officials failed to establish a sustainable structure for their social safety nets, and got away with this partly by sweeping the true costs of their programs under the carpet.
  3. Profligate politicians were abetted by the economics profession, which was more than happy to serve up unrealistic theories that account for neither unintended consequences nor long-term costs of deficit spending.
  4. With economists having succeeded in knocking loose the old-time moorings to budgetary discipline (see first 150 years of chart), responsible politicians became virtually unelectable.
  5. Central bankers suppressed normal (and healthy) market mechanisms for forcing responsibility, by slashing interest rates and buying up government debt.
  6. Regulators took markets further out of the equation by rewarding private banks for lending to governments, while politicians and central bankers effectively underwrote the private bankers’ risks.
  7. Monetary policies also encouraged dangerous private credit growth and other financial excesses, resulting in budget-destroying setbacks such as stagflation and banking crises.
  8. Budget decisions were made without consideration of the inevitability of these setbacks, because economists wielding huge influence over the budgeting process (think CBO, for example) assumed a naïve utopia of endless economic expansion.

Sadly, all of these developments are still very much intact (excepting small improvements in budget projections that we’ll address next week). They tell us we’ll need substantial changes in political processes, central banking and the economics profession to avert the disaster predicted by our chart. And we’re rapidly running out of time, as discussed in “Fonzi or Ponzi? One Theory on the Limits to Government Debt.”

On the bright side, a fiscal disaster should help trigger the needed changes. Every kick of the can lends more weight to the view expressed by some that the debt super-cycle – including public and private debt – needs to go the distance, eventually reaching a Keynesian end game of massive collapse. At that time, we would expect a return to old-fashioned, conservative attitudes toward debt.

As for the chart, it helps to flesh out a handful of ideas we’ve been either writing about or thinking of writing about. We’ll return to it in future posts, including one drilling down to the individual country level that we’ll publish soon.


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Thu, 02/06/2014 - 17:39 | 4409191 So Close
So Close's picture

Suppressing vol and creative destruction (esp. in finance) works.... until it doesn't.

Thu, 02/06/2014 - 18:34 | 4409454 Gankfest
Gankfest's picture

Eveyone loves a crisis! :P

Thu, 02/06/2014 - 19:36 | 4409710 Occident Mortal
Occident Mortal's picture

Martingale X Ponzi = Fiat

Thu, 02/06/2014 - 19:52 | 4409762 Offthebeach
Offthebeach's picture

Debt up a nation until the streets run red with blood, then buy.

After mass discount purchases, align with the nominal new leaders, have assets values multiply. Sell assets and loan into bubble. Cash out and encourage revolt.

Thu, 02/06/2014 - 21:49 | 4410203 stocktivity
stocktivity's picture

Oh great! Another fucking chart to show It's all Bullshit!!!

Fri, 02/07/2014 - 06:38 | 4410969 Sudden Debt
Sudden Debt's picture

you should see one of my wife's and tell me if it you still do

Thu, 02/06/2014 - 21:44 | 4410174 Errol
Errol's picture

This analysis fails to address the cause of the unprecedented spike up during and immediately after World War II:

the discovery of mind-bogglingly huge, near-surface regions of light, sweet crude oil in free flowing reservoirs.  The first was in Texas in the 1930s, the second in Saudi Arabia in the early 1950s.

This was a ONE TIME windfall for humanity, which we of course promptly squandered like drunken heirs.  Having ramped up agricultural production, population, and infrastructure as if this was a permanent new golden age for humanity, we will now be eaten alive by maintenance costs until the inevitible population collapse.

The over-arching condition will be contraction, for the rest of this century at minimum.  Invest accordingly.

Thu, 02/06/2014 - 17:43 | 4409201 newsguy68
newsguy68's picture

You Have Been Warned....


Federal Reserve Issues Warning, Bank Drills, Possible False Flag

Thu, 02/06/2014 - 17:55 | 4409249 Obama_4_Dictator
Obama_4_Dictator's picture

Call me a skeptic, but I've seen these types of warnings for years, and nothing....

Thu, 02/06/2014 - 17:58 | 4409265 Westcoastliberal
Westcoastliberal's picture

From other indicators I've seen over the last couple of months, I think we're very close now.

Thu, 02/06/2014 - 18:01 | 4409276 Obama_4_Dictator
Obama_4_Dictator's picture

I hear ya, but I also got all sorts of "indicators" in 2007, 2008, 2009, 2010, 2011, 2012, 2013, and now 2014....see what I'm saying....

Thu, 02/06/2014 - 18:15 | 4409353 cougar_w
cougar_w's picture

What you are witnessing is heroics. The central planners saw the signs too and rather than sit back and let nature take its course, they made a blood pact with the devil and have been sacrificing the future and burning through resources like mad men trying to forestall what is by all measures inevitable.

They could do this because we allowed them to, and they knew we would. They've done a little good for their own purposes, while digging a grave for the rest of us that will pretty much swallow 400 years of "progress" (yeah right) and probably 5 billion souls, before the ashes have settled down.

It's like this, see. The devil will let you run for a while but in the end he gets his due, and all the dodging you can do won't hold back the day forever.

You feel that hot wind at your back, making your hair stand up on end?

Yeah. He be right there.

Thu, 02/06/2014 - 18:25 | 4409407 BandGap
BandGap's picture

I have no idea what you mean but I gave you a +1.


Thu, 02/06/2014 - 18:54 | 4409538 FredFlintstone
FredFlintstone's picture

The last chapter of a very popular book says that this all does not end well.

Fri, 02/07/2014 - 08:27 | 4411046 TheInfoman
TheInfoman's picture

And Methinks its close at hand.

Thu, 02/06/2014 - 18:58 | 4409554 tip e. canoe
tip e. canoe's picture

have no fear, according to the Stuper Bowl commercials by Microsoft & Scientology,


Thu, 02/06/2014 - 21:19 | 4410124 jbvtme
jbvtme's picture

i hear the scientologists took out hoffman for being a fresh prick in "the master"...

Fri, 02/07/2014 - 02:30 | 4410820 tip e. canoe
tip e. canoe's picture

wouldn't surprise me

then again, little would at this point

all the more reason not to buy-in to anything they're selling, including and especially china white (and/or other assorted brandnames)

Thu, 02/06/2014 - 19:23 | 4409650 Keyser
Keyser's picture

It doesn't matter how much debt they rack up as they have no intention of paying it. War cleanses all debts. 

Thu, 02/06/2014 - 18:27 | 4409409 Winston Churchill
Winston Churchill's picture

Ignoring the cries of 'wolf' will get you eaten.

Just a matter of time.

Tick tock.

Thu, 02/06/2014 - 19:06 | 4409583 Obama_4_Dictator
Obama_4_Dictator's picture

Trust me, I'm not ignoring, been planning for years but these dire predictions are becoming old and I'm getting exhausted.  

Thu, 02/06/2014 - 20:03 | 4409818 maxmad
maxmad's picture

Thank you O_4_D  there will be a little something extra in your check this week:)



Thu, 02/06/2014 - 22:59 | 4410434 Tall Tom
Tall Tom's picture

Then the warnings are not necessarily for you. If you have been planning for years then you are prepared for the eventual outcome.


Then why concern yourself with the exact day that it happens and be at peace and content now...since you have been planning for years? You probably have it all down, right?


These warnings are for others whom may not yet have heard the clarion call to arms and battle.


They need to listen to this message also.


Everything that is published is not just published just for your sake. It is not all about you.


It is about OTHERS so that they may be made aware and prepare.


Time is growing short and we approach the Day of Reckoning with each and every passing day.


It is an eventuality which will happen. I am at peace with it. I am at total peace with it.

Perhaps it is you who need find that peace. Perhaps you are not as prepared as you need to be.

Preparation begins in the mind. Then it progresses to an outward manifestation and realization of what is needed for the problems you will face.

Think of this like ...oh...Dying. The final stage of Dying is peace and acceptance. You really are powerless over it.

Well our Economy and our Nation is DYING. Most have denied it, became angry about it, bargained with it, became depressed about it, then became at peace with it and accepted it. Most vacilliate between all of the first four stages until they accept it. That is when true preparation begins.


Yet I still read the articles because it tells me that the regression is continuing slowly and that I still have time.


Go out and live a little bit. Watch a movie. Relax a bit. Enjoy some life while you still can...if you are already prepared.


If you are not had best get prepared. The shitstorm that we have already been through will seem like the Good Ol' Days when the Shitstorm intensifies.

Thu, 02/06/2014 - 23:26 | 4410517 Obama_4_Dictator
Obama_4_Dictator's picture

One of the best posts I've read on here and every word of it true.

Thu, 02/06/2014 - 20:45 | 4409990 The_Ungrateful_Yid
The_Ungrateful_Yid's picture

Shit I have been hearing indicators since I was 10...nothing happens until the lights are out for good.

Thu, 02/06/2014 - 23:02 | 4410444 Tall Tom
Tall Tom's picture

Dying is a process.

Thu, 02/06/2014 - 19:07 | 4409580 LMAOLORI
LMAOLORI's picture



Serious question what do you make of the buffoon and the bailout king sounding the alarm? They're both insiders.


Henry Paulson, ‘Mr. Bailout,’ fears a new finance crisis is brewing



Thu, 02/06/2014 - 18:45 | 4409512 lasvegaspersona
lasvegaspersona's picture

The internet say the end will be February you know that's when it will be...not like all those other predictions....on the internet....

Thu, 02/06/2014 - 19:01 | 4409563 Dapper Dan
Dapper Dan's picture

At  4:37 pm to be precise.

Thu, 02/06/2014 - 20:43 | 4409973 Winston Churchill
Winston Churchill's picture

I will set my alarm clock, five minutes fast of course,would not want

to miss it.Whats the blast radius ?

Thu, 02/06/2014 - 22:30 | 4410362 TheReplacement
TheReplacement's picture

Ah man.  I was gonna see that guy about the thing at that one place at 4:38.  Paulie is not gonna be happy about this.

Thu, 02/06/2014 - 23:02 | 4410448 Tall Tom
Tall Tom's picture

At least you get 17 minutes to smoke a bowl.

Thu, 02/06/2014 - 17:43 | 4409204 buzzsaw99
buzzsaw99's picture


Thu, 02/06/2014 - 18:00 | 4409246 BLOTTO
BLOTTO's picture

i know, its like - lets fucking do this alreadyyy!


i dont wanna be a cripple in a wheelchair when shit goes down... I want to be able to help and contribute by fighting off the zombies...


Otherwise, just leave me behind so im not a burden and hold my crew back...and give me some firepower and a few grenades for the last stand.

Thu, 02/06/2014 - 18:04 | 4409293 dow jones 20000
dow jones 20000's picture

we'll give you some fire power and grenades and roll you and your wheelchair down a hill towards the front door of the Federal Reserve.

Thu, 02/06/2014 - 18:06 | 4409306 BLOTTO
BLOTTO's picture

Brilliant - that was good!


Leave me a couple of nuggets (green) too so i can get baked while rollin'...

Thu, 02/06/2014 - 23:09 | 4410466 Tall Tom
Tall Tom's picture

An attack on blowing up the Oil Refineries will do a much better job than removing the Eccles Building.


In that way all of the cities will starve as there is no fuel to move the foods to market. The subsequent riots and killings will remove the burden from the elite rather handily. /sarcasm


VIOLENCE IS NOT THE ANSWER. Give Peace a chance.


You will find not find in the World. That is the wrong place to seek it. And peace begins with you.

Thu, 02/06/2014 - 17:44 | 4409207 wmbz
wmbz's picture

The "can" kicking will indeed go the distance, ain't no stopping it now.

Thu, 02/06/2014 - 17:45 | 4409210 q99x2
q99x2's picture

When the people ran the FED out of town the first time. They went in and ran them out and then removed all of the furniture. But like the cockroaches they are they came back. Here we go again.

Thu, 02/06/2014 - 17:48 | 4409220 buzzsaw99
buzzsaw99's picture

+1 "market forces" are not the answer. abolish the fed, burn it down, salt the ground where it stood. problem solved.

Thu, 02/06/2014 - 22:31 | 4410366 TheReplacement
TheReplacement's picture

Somehow I don't think it is the building that is the problem.

Fri, 02/07/2014 - 00:22 | 4410644 Keyser
Keyser's picture

The problem is the reptilians that have infested the building.  

Thu, 02/06/2014 - 17:47 | 4409217 starman
starman's picture

We are all expandable!

Thu, 02/06/2014 - 23:11 | 4410473 Tall Tom
Tall Tom's picture

Yes. We are expandable. When I eat too much of the wrong foods then I expand.

Fri, 02/07/2014 - 00:24 | 4410648 Keyser
Keyser's picture

The price of expanding is going to go up exponentially with cattle herds at 1951 levels and prime farmland in California sitting idle due to no water. Just saying. It's going to get ugly out there. 


Thu, 02/06/2014 - 17:47 | 4409224 Carl Popper
Carl Popper's picture

Am I the only one who logs in to zero hedge 20 times a day? I have withdrawal if I go more than one hour without a fix.

Is there a 12 step program?

Thu, 02/06/2014 - 17:55 | 4409241 cougar_w
cougar_w's picture

Until you get to 220 times a day you got nuth'n on some of the rest of us. Self included.

Thu, 02/06/2014 - 18:52 | 4409527 FredFlintstone
FredFlintstone's picture

I have been on vacation the past 2 weeks in a nice warm climate, but have been getting my fix on a new iPhone. This is new for me and causing serious eye strain. Wife kept asking "what are you doing"? Hope she does't get wise to the addiction.

Thu, 02/06/2014 - 23:19 | 4410481 Tall Tom
Tall Tom's picture

I don't know. CP may be right. We can franchise it. Doom Porn Anonymous.


I never log out. I never turn my machine off.

Thu, 02/06/2014 - 17:55 | 4409259 Westcoastliberal
Westcoastliberal's picture

I think many of we "truth-seekers" do this as well. is a good resource too!

Thu, 02/06/2014 - 18:25 | 4409405 smacker
smacker's picture

If you keep the ZH cookie, you don't have to log in 12 times a day. Meaning that, even if you close the ZH browser, when you start it up again you're still logged in.

Good in'it :-)

Thu, 02/06/2014 - 19:13 | 4409600 RafterManFMJ
RafterManFMJ's picture

Yes there is a 20 step program and the first steps are buy food, gold, silver, guns, ammo, farmland, and boats of questionable reliability.

Sat, 02/08/2014 - 10:36 | 4409721 edotabin
edotabin's picture

ZH 24/7 baby, for a unique window to the world.


EDIT: ZH is always open in a browser window. Even if I decide "I've had enough" all I have to do is drive 1-2 miles and see "them" floating around aimlessly in the streets. It quickly reminds me why I am here to begin with.

Thu, 02/06/2014 - 20:12 | 4409853 walküre
walküre's picture

why do you logout?

Thu, 02/06/2014 - 20:25 | 4409915 Julian
Julian's picture

you need a paradigm shift Carl :)

Fri, 02/07/2014 - 00:17 | 4410635 20-20 Hindsight
20-20 Hindsight's picture

I was an ZH addict for almost two years.  I'm proud to say that I quit about a month ago and I'm starting to believe now that maybe the end of the world is not just around the corner after all.  You know, after you've heard the boy cry wolf hundreds of times and each time urging everyone to buy gold.. gold... gold... silver... silver... silver, you start thinking that maybe there's some kind of brainwashing going on here.  The big question is: WHO IS SELLING THE GOLD AND SILVER? Who are the individuals flooding this site with endless gloom and doom stories and why are they doing that, if not with vested interest? Once you begin to understand this, then you're immediately cured of your addiction to ZH.  No need for a 12-step program: a single epiphany will do.  You'll be amazed at how much time you suddenly have on your hands to do something more interesting and useful that reading countless stories telling us that we all fucked.


Signed: a former ZH addict.  

Fri, 02/07/2014 - 00:52 | 4410696 bunnyswanson
bunnyswanson's picture

Element of surprise is necessary.  But first, they need to get the guns.

No-Nonsense guide to International economy

The reason the globalists say that the middle class must be eliminated is because they consume far too much and are threatening the natural resources.  One family homes are a threat to sustainability.   The Agenda 21's sustainability project is going to free up 40 of US land mass and return it to nature.

Fri, 02/07/2014 - 06:31 | 4410962 BigDuke6
BigDuke6's picture

Me 2.

Following the doom and gloom has cost me thousands.

Thu, 02/06/2014 - 17:50 | 4409232 cougar_w
cougar_w's picture

Shorter: all was illusory.

Thu, 02/06/2014 - 17:50 | 4409233 RebelDevil
RebelDevil's picture

In otherwords, the West is Rome, AGAIN.

Thu, 02/06/2014 - 17:53 | 4409239 cougar_w
cougar_w's picture

Not entirely. Actually, we're in worse shape than Rome ever knew.

You need to really think about where things are at right now to get it.

When you get it, you want to cry.

Thu, 02/06/2014 - 18:08 | 4409326 RebelDevil
RebelDevil's picture

Refering to the fact that Rome had brutality and excitement, but the western world today has apathy - I agree.

Thu, 02/06/2014 - 18:26 | 4409399 AvoidingTaxation
AvoidingTaxation's picture

I've seen @ least 4 different new drones from France, UK, Iran and USA in the last week (+ the US Taliban Dog).

I start to think that we're going to witness a sort of skynet/terminator style of outcome, with a Fahrenheit, 1984, Brave new world twist.

How about Robocop? Detroit.
How about Google being the Devil?

How about so much porn but not so much Love?

How about the cashless society? How about Genetics?
It reminds me Babylon.

Basically the West is trying to outsmart the other Civilisations going straight to the Final Level.

Thu, 02/06/2014 - 18:35 | 4409450 cougar_w
cougar_w's picture

We were once untooled primates foraging for food among the grasses of the plains across Mother Africa.

It wasn't so long ago, actually. The world is slow and she probably only remembers us like that. All the rest has happened too fast for so slow a mind to embrace. So maybe she won't laugh too hard when we've fallen from this high place, and she'll still love us for being simple creatures moved by modest dreams.

So we got that.

Thu, 02/06/2014 - 19:09 | 4409589 AvoidingTaxation
AvoidingTaxation's picture



Tyler Durden: In the world I see - you are stalking elk through the damp canyon forests around the ruins of Rockefeller Center. You'll wear leather clothes that will last you the rest of your life. You'll climb the wrist-thick kudzu vines that wrap the Sears Tower. And when you look down, you'll see tiny figures pounding corn, laying strips of venison on the empty car pool lane of some abandoned superhighway.


Narrator: And then, something happened. I let go. Lost in oblivion. Dark and silent and complete. I found freedom. Losing all hope was freedom.

Thu, 02/06/2014 - 19:55 | 4409779 cougar_w
cougar_w's picture

All the world is Fight Club.

I think that was probably the point all along.

Thu, 02/06/2014 - 22:34 | 4410381 TheReplacement
TheReplacement's picture

AND we aren't France, which is nice.

Fri, 02/07/2014 - 05:47 | 4410937 22winmag
22winmag's picture

Surrender isn't in our lexicon.

Thu, 02/06/2014 - 17:55 | 4409256 yogibear
yogibear's picture

Bring it on. Buy more ammo, lock and load.

Thu, 02/06/2014 - 20:55 | 4410028 Professorlocknload
Professorlocknload's picture


Thu, 02/06/2014 - 17:56 | 4409264 lordbyroniv
lordbyroniv's picture

ROAD TO SERFDOM..........BITCHEZ !!!!1111111

Thu, 02/06/2014 - 20:00 | 4409799 cynicalskeptic
cynicalskeptic's picture

too small.   Think oil storage tank.  On fire.

Thu, 02/06/2014 - 18:01 | 4409290 lordylord
lordylord's picture
The Next Global Crisis Will...result in the biggest transfer of wealth and power to the State.
Thu, 02/06/2014 - 18:44 | 4409501 FredFlintstone
FredFlintstone's picture

Good, frightening observation.

Thu, 02/06/2014 - 18:04 | 4409304 cougar_w
cougar_w's picture

The original post has the right idea. However the reason the coming crisis will be unlike any other in 200 years (why 200 years?) is because the global economy didn't even exist in any form until the last 50 years.

Seriously. We've been off the edge of the map for that entire time, pretending we know exactly where we are going and how to get there. That's 50 years of experimentation while the human population rose from a sustainable 2 billion to nearing 7 billion.

Christ on a pencil -- whose bright idea was that anyway?

And of course let us not forget, during those same 50 years we managed to get nearly the entire rest of the world addicted to a range of really expensive and potent neuro-toxic hallucinogens like crude oil, sports entertainment, automobiles, cheap credit, high fructose corn syrup, tobacco, rock music, middle class suburban living, Disneyland, and diabetes.

7 billion people or so, most of them Jones-ing for our version of high-grade post-industrial smack. And the rest just in the way of the resulting consumer steamroller.

We suck.

There is going to be so much pain, I can't even imagine it. Well actually yes I can, but I wish I couldn't.

Thu, 02/06/2014 - 18:11 | 4409333 IridiumRebel
IridiumRebel's picture

I'm so glad I will get to see it!

Thu, 02/06/2014 - 18:16 | 4409365 cougar_w
cougar_w's picture

You know what they say; there's money in it on the way up, and then there's money in it on the way down.

Though at the actual bottom of it we might be wondering what all that "money" thing was supposed to be about anyway.

Thu, 02/06/2014 - 18:28 | 4409416 Spastica Rex
Spastica Rex's picture

We're living in the biggest transition since the Industrial Revolution, maybe since the advent of agriculture. I think it will be a very slow transition, however. I could very well be wrong.

Thu, 02/06/2014 - 18:21 | 4409389 1stepcloser
1stepcloser's picture

This is going to be soooo much better than halley's comet

Thu, 02/06/2014 - 19:32 | 4409691 Vendetta
Vendetta's picture

You betcha!  It will be like Hale Bopp teamed up with Heaven's Gate.

Thu, 02/06/2014 - 18:36 | 4409455 dexter_morgan
dexter_morgan's picture

be careful what you wish for. while necessary, ain't gonna be pretty

Thu, 02/06/2014 - 18:23 | 4409386 smacker
smacker's picture

The author is describing a fiscal crises that requires immediate and very substantial reductions in the size, scope and spending by government, to bring finances back into line.

Sadly, of all the possible solutions to this crises, the one that is not - and never will be - on the political agenda is this course of action. The political elites will not consider it. Ever. An addiction to ever higher state spending by US, UK & EU governments provides all the proof anyone needs.

We are doomed.

Thu, 02/06/2014 - 18:26 | 4409415 cougar_w
cougar_w's picture

So much will become unmade. Entropy looks on, and smiles.

Fri, 02/07/2014 - 05:37 | 4410935 SAT 800
SAT 800's picture

At least nobody will be trying to convince me I should be worrying about global warming. that;s something to look forward to.

Thu, 02/06/2014 - 18:32 | 4409442 Spastica Rex
Spastica Rex's picture

The American way of life is "blessed and non-negotiable."

That goes for those who live in Manhattan or Pacific Heights, too.

Thu, 02/06/2014 - 18:26 | 4409412 RockRiver
RockRiver's picture

Why isn't this glaringly obvious to enough citizens that true change is demanded?

Thu, 02/06/2014 - 18:39 | 4409471 NOTaREALmerican
NOTaREALmerican's picture

Because it worked and gives the appearance working now (and, who knows, might BE working).  

Most of the peasants know the Bling they've got now is A LOT LOT better than their parents had.   And, that's world wide.

The Chinese don't want to "go back",  I don't want to drive a 67 Ford Pinto again.   

What do you propose to change to?   And, do the sociopaths winning things now actually keep winning with this "change"?

Thu, 02/06/2014 - 18:53 | 4409530 gtb
gtb's picture

No such thing as a '67 Ford Pinto...

Thu, 02/06/2014 - 18:58 | 4409547 NOTaREALmerican
NOTaREALmerican's picture

Yeah,  it was a 67 Maverick.   Remember those?   Not sure how I typed "Pinto".  (Maybe a supressed fantasy).

Thu, 02/06/2014 - 18:42 | 4409488 graneros
graneros's picture

Oh look another fucking chart.  Well I'm convinced now.  Been looking at these things since Howard Ruff and his Ruff Times newsletter back in the 70's.  Ain't one of them been right yet.  Oh well maybe this one.

Thu, 02/06/2014 - 18:46 | 4409516 NOTaREALmerican
NOTaREALmerican's picture

Re:  Been looking at these things since Howard Ruff and his Ruff Times newsletter back in the 70's.

Yup.   I hear ya.   My dad was always waiting for "the end" too.

It's just another obsession.

Thu, 02/06/2014 - 18:41 | 4409492 Notarocketscientist
Notarocketscientist's picture

No - this crisis is going to be unlike anything EVER.  


We have run out of cheap oil - and if you watch this presentatoin from a mining engineer, you will understand that the industrial revolution is about to end


And he's got some back up from:


US Army colonel: world is sleepwalking to a global energy crisis

Mark C. Lewis, former head of energy research at Deutsche Bank's commodities unit highlighted three problems facing the global energy system: "very high decline rates" in global production; "soaring" investment requirements "to find new oil"; and since 2005, "falling exports of crude oil globally."


Lewis told participants that the International Energy Agency's (IEA) own "comprehensive" analysis in its World Energy Outlook of the 1,600 fields providing 70% of today's global oil supply, show "an observed decline rate of 6.2%" - double the IEA's stated estimate of future decline rate out to 2035 of about 3%.


Former BP geologist: peak oil is here and it will 'break economies'

Thu, 02/06/2014 - 18:44 | 4409502 SgtShaftoe
Thu, 02/06/2014 - 18:47 | 4409510 Unstable Condition
Unstable Condition's picture

Long Thorium reactors?


Thu, 02/06/2014 - 18:49 | 4409522 NOTaREALmerican
NOTaREALmerican's picture

I'm counting on dilithium crystals technology to pay off.  

I'm think of converting my forever stamp fund into a dilithium crystals startup.

Thu, 02/06/2014 - 19:10 | 4409594 Goldilocks
Goldilocks's picture

U Didn't Build That (3:44)

Fri, 02/07/2014 - 00:15 | 4410632 TheReplacement
TheReplacement's picture

Considering how the NSA has been used for industrial and probably economic/financial espionage it is likely he was telling the truth in a way that no outsider could comprehend at the time.

Fri, 02/07/2014 - 00:14 | 4410623 shutdown
shutdown's picture

This looming crisis will send humanity right off its rails. Out of the 7.2 billion human bloodsuckers running amok now, and with everything depleting right before our eyes, after this disaster strikes fewer than 10,000 human parasitic predators will remain. And if they're lucky they'll be eating weeds and ants.

Thu, 02/06/2014 - 18:45 | 4409500 Stock Jobber
Stock Jobber's picture

I don't get this chart.  The US has run budget deficits nearly every year since 1940.  Is he saying that until 1970 all budget deficits were attributable to defense spending? Or did other countries budget surplusses offset the US deficits?  Not sure what to make of this...

Thu, 02/06/2014 - 18:46 | 4409504 Z_End
Z_End's picture

This time it's different...

Thu, 02/06/2014 - 19:21 | 4409629 Fox-Scully
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Our alien ancestors must be wondering what the hell went wrong with this experiment since they have been closely monitoring the human race.

Fri, 02/07/2014 - 01:44 | 4410777 Keyser
Keyser's picture

No worries, they will just re-seed the planet with a different variant of DNA once the current batch of humans become extinct. 

Thu, 02/06/2014 - 19:29 | 4409677 Randoom Thought
Randoom Thought's picture

It is more like the fall of the Roman Republic condensed into 30ish years. Everything Rome did wrong, we are doing wrong, only faster... thanks to fiat money, high speed communications and central banks.

We even have out own succession of decadent despots... only O'bummer golfs while the US burns.

Thu, 02/06/2014 - 20:13 | 4409852 cougar_w
cougar_w's picture

I'm writing a novel. Well I'm pretending to. One of the central tenants of the story is that the periods of recorded human history (we are in one now, lasting since about 8,000 years ago) have numbered not one -- but thirteen. Each time we arise from simple beginnings to greatness dutifully recording our triumphs for what we suppose to be all eternity, and then in a great spasm of miscalculation we are utterly ruined to so great an extent that we lose all connection to what just happened.

And then our complex systems of governance, communication, travel, record keeping and traditional continuity decay almost immediately, because they were completely dependent on other system that were little more than a temporary agreement with the devouring laws of physics.

It's fiction, but only by the skin of its teeth.

The short of it is we begin again -- and again -- and again -- with no connection to the past and nothing to work with, from scratch as it were. We rediscover domestication, writing, societal organization. New languages, new religions are born from the scraps of something older but forgotten. As we do this we think once again that we are the greatest beings ever to tread the ground, ply the seas and fly the winds. And any vestige or hint of anything that might have existed before must be simple myth, fables, tales for children.

Thirteen times.

Actually, I'm not even certain that it is fiction. Some days I look around and I just don't know.

There is a character in the story. Her name is Darkatana and she is ancient beyond comprehension. I walk under the stars and moon at night and all the world seems ancient and tired, like we've been this way so many times -- too many times -- and I half expect her to step out from behind a tree and say You shouldn't know about that part.

Yeah. Go ahead. Try and surprise me. Just try.

Fri, 02/07/2014 - 00:24 | 4410645 TheReplacement
TheReplacement's picture

Don't worry.  It's not like you will live to see the end this time.  At best (or worst?) you'll die during it.  Party like it's 1999 BC.

Thu, 02/06/2014 - 19:29 | 4409678 walküre
walküre's picture

Print, print, print away ....

Profligate politicians were abetted by the economics profession, which was more than happy to serve up unrealistic theories that account for neither unintended consequences nor long-term costs of deficit spending.

In other words, we are mere lab rats in this greatest monetary experiement since the beginning of time.

Misallocation of capital and resources on a massive scale, never seen before. Ghost cities, ghost malls, ghost hotels, ghost autos, ghost ships (?). ghost CATs, ghost trains and ghost mines....

They've built like Pharaohs but worse. This is pyramids on fucking steroids and the ultimate pyramid scheme! They built 200 years worth of infrastructure and supply lines in 5+ years for a global population that is probably peaked and will be shrinking rather than growing further.

The host planet cannot sustain all the parasites feeding off its resources. There are severe water shortages, fuel shortages, seed shortages and livestock shortages. There are more weather related challenges to deal with than ever because populations expanded and settled in areas where floodings and severe weather conditions occur within 100 year cycles. Birth control and the spreading of terminal diseases, viruses crossing over from animals to humans and so on will do the rest.

All that in a nutshell. The deal was made 5 years ago to build, build, build, mine, mine, mine come hell or high water for future demand that may be here in a few decades. Not to mention, people are using less of everything and the increased cost of transportation has an adverse effect on all this mobility and transportation expansion. Airlines decreasing routes, rail lines meging and decreasing traffic, shipping lines pulling inventory because prices are collapsing and so on and so forth.

Long mothballs maybe?

Thu, 02/06/2014 - 19:36 | 4409705 gwar5
gwar5's picture

500 yr. paradigm shift taking place from Western to Eastern hegemony according to Niall Ferguson. Western hegemony will be gone and so will standard of living.

Thu, 02/06/2014 - 19:48 | 4409744 Aquarius
Aquarius's picture

Let me begin by stating that I agree with your overall thesis and bring a few minor points for your consideration to the comments section:

1. "Wars and political systems are the two most basic determinants of an economy’s long-term path." Comment:  Neither wars nor politics are systems. Modern wars (since Napoleon) are the last resort for tensions, frustrations, and expressed fear of incomptent and corrupt politically run governments that have no other way to appease their own populace and to retain their hold in Power. Obviously, and traditionally, War allows the politically bent schemers to ignore the laws that would normally place their necks at the mercy of Mdme. Guillotine.

2. Social systems of governments must, a priori, be in harmony with the highest ordering of the natural collective human behaviours of man which are defined as Theocratic, Republican and Monarchic and accordingly, if this is not achieved then, chaos rules supreme as today, and wars, slavery, killings, corruption, disorder become the Primary intense focus of the political sway and all that attached thereto.

3. There is only one acceptable "Economic Theory" - despite the some 30++ established "learned" schools of "economics" - and this is (these days) political expediency which, of course, corresponds precisely with the political focus (item 2 above) defined above. Economics is a deterministically organized sham; there is no science here, and nor will its pretenders permit the elements of "economics" to well established scientific scrutiny or discipline. Global economics is essentially run as a Ponzi; clearly seen as being in a state of collapse when the suckers leave the tables (with their money) and to be replaced by the wealth from productivity (of the people) as "credit" for the Banker. No commercial Casino, no matter how crooked, could survive by utilizing such antics.

4. The major error of our belief system is that, as you write, is that "politics" is a system. Politics is not a system, as it represents all that is ill in unaccomplished men and who seek fortune without productivity, the gains and wealth of the production of others, the expressions of psychopathic egoism in the sadistic imposition on their fellow man, and their sexually suppressed ignorance defining ideations of fantasy for personal engrandishment.

5. The established Banking system which began well over 5,000 years ago for the protection of the peoples through the untouchable and unassailable pillars of the Temple, has been captured and significantly manipulated so as to replace the three main foundations of society as mentioned in item #2 above. The higher ordering of the Bankers hierarchy through the Central Banks and upwards ensures absolutely, that Theocracy, Law and Monarchy are completely subservient to the Banking System (and it is a system) and run through an ordering of "Economists" as the apologists which bring "credibility" to the unwashed; Politicians who do the bidding and represent a very low-cost overhead for doing business; bureaucrats, as those that criminalize and enforce those who dare dissent, and the wannabees, who do the wet-work all answerable to a higher and silent Authority. A Parasite in its true nature, that will indeed kill its victim due to its own ignorance of the Universal Principles in play.

6. The "credit" which each form of government (Theocracy, Law and Monarchy - and any combination thereof) must bring to the governed Society (note: not State) is unique to each form and must be of the mechanism of leverage for the unique force that each form requires to establsh and maintain integrity, coherency, homogenuity, the pursuit of happiness, security and acceptance, in our global Society is absent or could be analogically compared to the illicit drugs such as 'Acid' and such like. Today, there is no essence of being; no integrity; no honour and no God. 

Today, World "leadership" is not only ignorant but incompetent (as well as corrupt) where the only credit any leader, and they are all political, brings and offers is ego, lies, theft and incompetence. There is no integrity in our world goverance today and it will fail; it is failing and rapidly so but as history shows us, we humans need to do a lot of suffering in order to move forward through learing our lessons.

The question begs: Where in the Education system of the USA, did those top officials (e.g. Clapper and Clinton, et al) learn to embrace Totalitarianism, Fascism, Bolshevism, Communism, which they are intent on imposing on the US and World populations? What schools did they attend?

"Neither heavenly nor earthly, neither mortal nor immortal have we created thee, so that thou mightest be free according to thy own will and honor, to be thy own creator and builder. To thee alone we gave growth and development depending on thy own free will. Thou bearest in thee the germs of a universal life."

Pico della Mirandola Oratio de Hominis Dignitate


Thank you,

Ho hum

Thu, 02/06/2014 - 19:52 | 4409750 OC Sure
OC Sure's picture

"How did things get so bad?"

Answer: The third central bank, The Federal Reserve.

"You can argue causation in either direction, but we’re not playing that game here."

This I think is the reason why you have missed THE point, or the cause. Causal identification does not fall within the category of games but instead belongs to the science of logic. The fact that their are effects is only be-cause there must be a cause of the effect. Cause begets effect; effect was born from a cause.

"Wars and political systems are the two most basic determinants of an economy’s long-term path."

Your first (and second) premise is tackling the effect and not the cause. And this is why you seem to have missed the point. An economy's long term path is determined by the productive labor of its participants [insert Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations here]. Regardless of the political system or peace status, it is always the producers/laborers who cause the effected path. To whatever degree that the political system supports or stifles their freedom to act and does enable or disable their productivity, it nevertheless is always the producer/laborer that does the doing and not the "political system." Of course by "political system" we mean those citizens within government whom are not engaged in productive labor but instead their livelihoods, THEIR long term path (also), is determined by the productive laborers as the productive laborers carry everyone else on their backs to go along for the ride no matter how fast or slow it is. The speed is of a direct inverse relationship between the weight and number of riders versus carriers.

If you intend to champion the cause of how to make things get good, then this is the point that needs to be identified as the cause: The third central bank, The Federal Reserve is how things got this bad. In fact, if you overlay a chart of the US dollar's value with your chart, then you will find that one causes the other, not vice versa.

There are not 8 reasons why things go this bad. There is only one cause; counterfeiting. There is only one solution:


Thu, 02/06/2014 - 20:44 | 4409987 AmericasCicero
AmericasCicero's picture

The inflationary statists will always come back.  Always searching for weaknesses to exploit.  Always trying to seize power.

Thu, 02/06/2014 - 21:25 | 4410134 OC Sure
OC Sure's picture

Yep. But remove the inflationary ablility and you remove the statism. The former feeds the latter.

Thu, 02/06/2014 - 21:06 | 4410084 FilthyPhil37
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Thu, 02/06/2014 - 21:41 | 4410184 Notarocketscientist
Notarocketscientist's picture

Toil for oil means industry sums do not add up (

Rising costs are being met only by ever smaller increases in supply

The most interesting message in this year’s World Energy Outlook from the International Energy Agency is also its most disturbing.

Over the past decade, the oil and gas industry’s upstream investments have registered an astronomical increase, but these ever higher levels of capital expenditure have yielded ever smaller increases in the global oil supply. Even these have only been made possible by record high oil prices. This should be a reality check for those now hyping a new age of global oil abundance.

According to the 2013 WEO, the total world oil supply in 2012 was 87.1m barrels a day, an increase of 11.9mbd over the 75.2mbd produced in 2000.

However, less than one-third of this increase was in the form of conventional crude oil, and more than two-thirds was therefore either what the IEA calls unconventional crude (light-tight oil, oil sands, and deep/ultra-deepwater oil) or natural-gas liquids (NGLs).

This distinction matters because unconventional crude has a higher cost than conventional crude, while NGLs have a lower energy density.

The IEA’s long-run cost curve has conventional crude in a range of $10-$70 a barrel, whereas for unconventional crude the ranges are higher: $50-$90 a barrel for oil sands, $50-$100 for light-tight oil, and $70-$90 for ultra-deep water. Meanwhile, in terms of energy content, a barrel of crude oil is worth 1.4 barrels of NGLs.

Threefold rise

The much higher cost of developing unconventional crude resources and the lower energy density of NGLs explain why, as these sources have increased their share of supply, the industry’s upstream capex has increased. But the sheer scale of the increase is staggering: upstream outlays have risen more than threefold in real terms over the past 12 years, reaching nearly $700bn in 2012 compared with only $250bn in 2000 (both figures in constant 2012 dollars).

Coinciding with the rise in US tight-oil production, most of this increase in upstream capex has occurred since 2005, as investments have effectively doubled from $350bn in that year to nearly $700bn in 2012 (again in 2012 dollars).

All of which means the 2013 WEO has the oil industry’s upstream capex rising by nearly 180 per cent since 2000, but the global oil supply (adjusted for energy content) by only 14 per cent. The most straightforward interpretation of this data is that the economics of oil have become completely dislocated from historic norms since 2000 (and especially since 2005), with the industry investing at exponentially higher rates for increasingly small incremental yields of energy.

The industry has been able and willing to finance such a dramatic increase in its capital investment since 2000 owing to the similarly dramatic increase in prices. BP data show that the average price of Brent crude in real terms increased from $38 a barrel in 2000 to $112 in 2012 (in constant 2011 dollars), which represents a 195 per cent increase, slightly greater in fact than the increase in industry capex over the same period.

However, looking only at the period since 2005, capital outlays have risen faster than prices (90 per cent and 75 per cent respectively), while in the past two years capex has risen by a further 20 per cent (the IEA estimates 2013 upstream capex at $710bn versus $590bn in 2011), while Brent prices have actually averaged about $5 a barrel less this year than in 2011.

Iran not a game changer

That prices have fallen slightly since 2011 while capex has risen by a further 20 per cent is a flashing light on the industry’s dashboard indicating that its upstream growth engine may finally be overheating.

Without a significant technological breakthrough reversing the geological forces that have driven the unprecedented increase in upstream investment over the past decade, prices will have to rise further in real terms from here or else capex – and with it future oil production – will fall.

It should also be emphasised that this vast increase in capex has occurred during a prolonged period of record-low interest rates. Once interest rates start rising again, this will put further pressure on the industry’s ability to make the massive capital outlays required to keep supply growing.

Of course, the diplomatic breakthrough achieved with Iran over the weekend could provide some much needed short-term relief to the market, as Iran’s exports could ultimately increase by up to 1.5m barrels a day if and when western sanctions were to be fully lifted. But this would not change the dynamics of the industry’s capex treadmill in any fundamental sense.

Even if global oil demand only grows at 1 per cent a cent a year, those extra barrels would be would be fully absorbed by the market within about 18 months. And that is probably how long it would take for Iran’s production and exports to return to pre-sanctions levels in any case.

Alternatively, if we take the IEA’s estimate that global production of conventional crude oil from all currently producing fields will decline by 41m barrels a day by 2035 (that is, by an average of 1.9m barrels a day per year), then Iran’s potential increase of 1.5m barrels a day would compensate for just 10 months of natural decline in global conventional-crude output.

In short, behind the hubbub of market hype about a new age of oil abundance, the toil for oil is in fact now more arduous and back-breaking than ever.

This should worry everybody, because with the evidence suggesting that consumers are reluctant to pay much above $110 a barrel, it is an open question what happens next to the industry’s investment plans and hence, over time, to the supply of oil.

Mark Lewis is an independent energy analyst and former head of energy research in commodities at Deutsche Bank; Daniel L Davis, a lieutenant colonel in the US Army, is co-author



Thu, 02/06/2014 - 21:42 | 4410189 Notarocketscientist
Notarocketscientist's picture

High energy prices = less consumption because everything including the fuel in your tank costs more = layoffs = less tax revenue = government cutbacks, layoffs and debt increases = less consumption = more layoffs = less taxes =====  economic death spiral.


Compounding the problem is the fact that a weak labour market means real wages drop - as they are across the world right now - that means everything is more expensive and your buying power is dropping at the same time.


Governments recognize this and are trying to offset with debt, easy lending (they are purposely inflating bubbles), lower interest rates and money printing.


Of course they will fail - because the disease is expensive oil.  And there is no substitute


The economic death spiral will accelerate when the QE and ZIRP no longer have any effect and the confidence game collapses.


This moment will be known as the end of the industrial revolution by the few who survive.

Thu, 02/06/2014 - 22:34 | 4410388 Notarocketscientist
Notarocketscientist's picture

No - this crisis is going to be unlike anything EVER.  


We have run out of cheap oil - and if you watch this presentatoin from a mining engineer, you will understand that the industrial revolution is about to end


And he's got some back up from:


US Army colonel: world is sleepwalking to a global energy crisis

Mark C. Lewis, former head of energy research at Deutsche Bank's commodities unit highlighted three problems facing the global energy system: "very high decline rates" in global production; "soaring" investment requirements "to find new oil"; and since 2005, "falling exports of crude oil globally."


Lewis told participants that the International Energy Agency's (IEA) own "comprehensive" analysis in its World Energy Outlook of the 1,600 fields providing 70% of today's global oil supply, show "an observed decline rate of 6.2%" - double the IEA's stated estimate of future decline rate out to 2035 of about 3%.


Former BP geologist: peak oil is here and it will 'break economies'


Fri, 02/07/2014 - 00:08 | 4410555 shutdown
shutdown's picture

The USA is converting into a frightening, well-armed, Third World dump. 

Thu, 02/06/2014 - 23:46 | 4410563 Fishhawk
Fishhawk's picture

Good catch, gtb.  Pintos were only made from 1971 to 1980.  I actually had a 76 Pinto for a while, used it as a commute car for a work site about 30 miles away, as it got real good mileage for that era, what with one of the first aluminum block 4 cylinders... engine had lost a lot of its zip by 80,000 miles, so used it to pay a house-sitter for the pets when we took a 10 day trip.  

Peak oil could have been manageable if some planning was involved, but the central planners today are only focused on theft, so that option is gone.  Ultimate crackup coming.

Fri, 02/07/2014 - 15:16 | 4412742 Khannea
Khannea's picture

This pretty much means that not even massive violent revolution and killing all the politicians and bankers will fix trouble the world is in.

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