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Guest Post: Why Our Currency Will Fail
Submitted by ChrisMartenson.com
Why Our Currency Will Fail
The idea that the very same economic forces that are currently plaguing Greece, et al., are somehow not relevant to the United States' circumstances does not hold water. As goes the rest of the world, so goes the US.
When we back up far enough, it is clear that money and debt are there to reflect and be in service to the production of real things by real people, not the other way around. With too much debt relative to production, it is the debt that will suffer. The same is true of money. Neither are magical substances; they are merely markers for real things. When they get out of balance with reality, they lose value, and sometimes even their entire meaning.
This report lays out the case that the US is irretrievably down the rabbit hole of deficits and debt, and that, even if there were endless natural resources of increasing quality available at this point, servicing the debt loads and liabilities of the nation will require both austerity and a pretty serious fall in living standards for most people.
Of course, the age of cheap oil is over. And as Jim Puplava says, the oil price is the new Fed funds rate, meaning that it is now the price of oil that sets the pace of economic movement, not interest rates established by the Fed.
However, of all the challenges that catch my eye right now, the one most worrisome is the shredding of our national narrative to the point that it no longer makes any sense whatsoever. I'm a big believer that our actions are guided by the stories we tell ourselves. To progress as a society, having a grand vision that aligns and inspires is essential.
But when words emphasize one set of priorities and actions support another, any narrative falls apart. At a personal level, if someone touts their punctuality but chronically shows up hours late, the narrative that says "this person is reliable" begins to fall apart.
Likewise, if a company boasts about being green but its track record belies them as a major polluter, the "green" narrative fizzles.
And at the national level, if we say we are a nation of laws, but the Justice Department selectively prosecutes only the weak and relatively powerless while leaving the well-connected and moneyed entirely alone, then the narrative that says "we are a nation of blind justice and equal laws" falls apart.
I wish this was just some idle rumination, but I see more and more examples validating the importance of alignment of narrative and behavior. Because when there is a disconnect between words and actions, anxiety and fear take root.
Unfortunately, there is quite a lot to fear and be anxious about in the most recent State of the Union address and GOP response.
State of the Union
The recent State of the Union speech by Obama, and its Republican response, are both remarkable for what they say as well as what they don't say. The summary is this: The status quo will be preserved at all costs.
Here are a few examples of the sorts of disconnects between rhetoric and reality that are absolutely toxic to the morale of all who are paying the slightest bit of attention.
Obama
Let's never forget: Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same. It's time to apply the same rules from top to bottom. No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody.
We've all paid the price for lenders who sold mortgages to people who couldn't afford them, and buyers who knew they couldn't afford them. That's why we need smart regulations to prevent irresponsible behavior.
It's time to apply the same rules from top to bottom? Is Obama aware of what Erik Holder is up to over there in the Justice Department? The robo-signing scandal alone has thousands and thousands of open and shut cases of felony forgery that can and should be applied to as many individuals as were directly involved, from top to bottom in every organization that was engaged in the practice.
Here's the reality. Under Obama, criminal prosecution of financial fraud fell to multi-decade lows during what is and remains one of the most target-rich environments in living memory.
(Source)
Obama
And I will not go back to the days when Wall Street was allowed to play by its own set of rules.
So if you are a big bank or financial institution, you're no longer allowed to make risky bets with your customers' deposits. You're required to write out a "living will" that details exactly how you'll pay the bills if you fail -- because the rest of us are not bailing you out ever again.
Has Obama checked with the Federal Reserve to assure they are on board with the new 'no bail out' policy? Because last I checked, they were the ones mainly involved in bailing out the big banks and providing swap lines and free credit to anyone and everyone that needed help, US or foreign.
To be fair, Obama can make no statement or claim about what the Federal Reserve can or can't or will or won't do. It is not under executive nor even legislative control. If, or I should say when, the Federal Reserve bails out the next bank or country or whomever, it's "the rest of us" who will be paying the bill -- in the form of eventual inflation.
Obama
[W]orking with our military leaders, I've proposed a new defense strategy that ensures we maintain the finest military in the world, while saving nearly half a trillion dollars in our budget.
Let's review the proposals for military spending then. The language above is nearly impossible to decode. What is really being said is that proposed defense increases have been scaled back, and that this is what is being called savings.
In 2000, Defense spending was $312 billion dollars. In 2012, the proposed budget calls for $703 billion, a 125% increase in 12 years.
What the plan he mentions really calls for is spending increases in 5 out of the next 6 years. The lone holdout is 2013, when the plan calls for cutting spending by a whopping $6 billion less than the amount already approved for 2012.
Somehow that all translates into rhetoric that implies cuts of "nearly half a trillion dollars."
As Lily Tomlin used to say, "As cynical as I am, I find it hard to keep up."
GOP Response
“The routes back to an America of promise, and to a solvent America that can pay its bills and protect its vulnerable, start in the same place. The only way up for those suffering tonight, and the only way out of the dead end of debt into which we have driven, is a private economy that begins to grow and create jobs, real jobs, at a much faster rate than today."
This platitude-laden set of ideas is blissfully blind to the role of energy in the story, the amount of debt in the system, and the fact that both parties have contributed equally over the years to the predicament at hand.
How exactly is it that the private economy is supposed to flourish here, with the Federal government borrowing more than a trillion dollars a year and oil at $100 per barrel? The simple truth is that the US government needs to begin borrowing at a rate lower than the previous year's economic growth. If GDP grows at 2%, then the total debt pile must not grow by anything more than 2%. That is the only way that the official debts can shrink relative to the economy.
GOP Response
“We will advance our positive suggestions with confidence, because we know that Americans are still a people born to liberty. There is nothing wrong with the state of our Union that the American people, addressed as free-born, mature citizens, cannot set right."
Last I checked, the original vote tally in the Senate on the National Defense Authorization Act, which empowered the armed forces to engage in civilian law enforcement activities and selectively suspended the habeas corpus and due process rights (as guaranteed by the 5th and 6th amendments to the Constitution), passed by a voice vote of 93 to 7 in the Senate.
It's kind of hard to swallow the idea that the GOP stands with Americans as "a people born to liberty" when their members are in perfect lock-step with the Democrats, chipping away at the most basic and cherished freedoms. There's no difference between the parties when both seem intent on limiting individual freedom and increasing the power of the government to reach into and examine our daily lives.
When Words Hurt
The above examples are not meant to pick on any one person or party or set of ideas, but to illuminate the profound gap that exists between what we are telling ourselves at the national level and the actions we are undertaking.
Again, it is the gap between what we tell ourselves and what we do that creates a sense of unease, anxiety, and oftentimes fear. When we hear words "X" but see actions "Y" over and over again, it is hard not to come to the conclusion that the words are meaningless; empty rhetoric designed with polls and focus groups in mind, but little else.
It is the blind obedience to the status quo that worries me the most, as it raises the likelihood that nothing of any substance will be done until forced by circumstances, at which point, like Greece, we will discover that the remaining menu of options ranges from bad to worse.
Left Unsaid - Our Missing Narrative
In neither Obama's address nor the GOP response do we hear anything about Peak Oil, a stock market that has gone nowhere in ten years, or the fact that with two wars winding down there ought to be massive savings from defense cuts that we can capture. There's lip service to the idea of using more natural gas to begin weaning us off our imported oil dependence, but no commensurate trillion-dollar program offered to rapidly build out the infrastructure necessary to utilize that gas in a meaningful way.
A more honest set of messages would note that mistakes were made, opportunities squandered, and priorities misplaced. It would note that the US is on an unsustainable course with respect to spending, debts, and liabilities. There would be an explicit admission that having your central bank print trillions in "thin air" money in order to enable runaway deficit spending is a dangerous and foolish thing to entertain.
Most obviously missing is a national narrative that is coherent and comports with the facts. Both parties basically imply that if we elect a few more of their type, do a little of this and then tweak a little of that, then we will get our nation back on track.
There is no call to a shared sacrifice for something greater. There is nothing to rally around except a laundry list of disconnected programs; a little something for everyone. There is no overarching theme under which everything else can be hung, such as a space race, a civil rights movement, or a massive upgrading of our national infrastructure.
A good narrative is one that inspires people and is based in reality but also asks something larger of us that we can share in. What is our vision for this country? Where do we want to be in ten years? How about twenty? How will we get there, and what will be required? What should we stop doing, what should we start doing, and what should we continue doing?
None of these things are on display, and all are badly needed if we are going to make the most of the next twenty years.
The Troubling Facts
Of all the facts that got skimmed over or avoided in the State of the Union extravaganza, the fiscal nightmare in DC was probably the most glaring. Yes, both parties have decided to talk about the deficit, but neither is giving the appropriate context.
For FY 2012, the federal government is projected to run a $1.1 trillion deficit. Let's compare that number to the projected revenues:
(Source)
The $1.1 trillion deficit is 42% of total revenues and 73% of all income taxes. That is, in order to spend what the US currently spends without going further into debt (i.e., to have no deficit), income taxes must immediately increase by 73%(!).
This is the sort of territory that, were the US any other country, would have already landed its debt markets -- and likely its currency, too -- in very hot water.
Historically, countries that have run deficits 40% greater than revenue for more than two years have experienced profound financial and political crises. The US is now in its fourth year of inhabiting this rare territory.
How can it keep doing this when every other country that has tried has gotten into trouble? Simple. The Federal Reserve has enabled such egregious deficit spending by buying up mind-boggling amounts of government debt. This has both kept rates low and created a lot of additional buying demand for Treasuries.
Exactly how much US debt is the Fed buying? Under Operation Twist, the Fed has bought anywhere from 51% to 91% of all gross issuance of bonds dated six years or longer in maturity.
(Source)
It is quite obvious that the Fed has been a major participant in the bond markets and a major reason why Treasurys are priced so high and offer so low a yield.
It seems that it is well past time to speak directly to the enormous fiscal deficits in a credible way, not merely bemoaning them being too high. And we're also overdue for an adult national conversation that it's unwise and unsustainable for a country to lean on its central bank to print up the difference between receipts and outlays.
Oil and Recoveries
There is a clear relationship between high oil prices and recessions, confirming the idea that the price of oil has the same impact on the economy as higher interest rates (perhaps even more so nowadays). Both are a source of friction. With higher interest rates, less lending and less consuming happens. With a higher price of oil, more money gets spent on energy, much of it sent to foreign producers of oil, and thus less money is available for other consumption.
Both higher oil prices and higher interest rates cause people to think a bit more before pulling the trigger on either ordinary spending or a big capital project.
Note that all of the six prior recessions were preceded by a spike in oil prices. In the case of the double-dip 1980's twin recessions, oil remained elevated after the first recession was (allegedly) over. Don't be fooled by the logarithmic nature of the chart below -- note that the typical decline in oil prices between the recession-inducing peak (blue lines) and the recovery-enabling trough (green lines) was a substantial 30%-50%:
(Source)
Also note in the most recent data that oil prices happen to be at roughly the same level that triggered the first recession in 2008 (the purple dotted line).
If we needed one simple chart to help us understand why trillions of dollars of stimulus and handouts are not causing the economy to soar, this is the chart that explains the most. High oil prices and recessions are highly correlated, and it's not too much of a stretch to postulate that economic recoveries and high oil prices are inversely correlated.
Note also that the above chart is not inflation-adjusted. If it were, it would show that there have been exactly zero recoveries when oil prices are near or over $100 per barrel.
For those counting on an economic recovery here to lift all boats and assist the bailout efforts, the burden of history is upon them to explain why this time we should ignore the price of oil.
I say we cannot. Policy planners and citizens alike should be ready for disappointing market and economic activity in response to the usual bag of printing, borrowing and delaying tricks.
Dead Ahead: A Currency Crisis
The State of the Union speech and GOP response neither accurately portray the true fiscal condition of the US, nor present a compelling narrative that speaks either to the realities of today or a future we might like to head towards.
The US is simply on a fiscally ruinous path, and neither party seems up to the task of laying out the story in a way that is mature, clear, and direct.
No recovery has ever been possible from oil prices this high, nor with debt levels this extreme, and it is quite improbable to think that both conditions could be overcome with anything less than a completely clear-eyed view of the true nature of the predicament faced.
Decades ago, Ludwig Von Mises captured everything discussed here elegantly:
There is no means of avoiding the final collapse of a boom brought about by credit expansion.
The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Our current dire fiscal condition, our leaders' dysfunctional unwillingness to address the flawed behavior that caused it, plus many other recent events both in the US and in Europe, point to the idea that a voluntary abandonment of further credit expansion is just not on the menu.
That leaves us with some final and total catastrophe of the involved currency system(s) as the inevitable outcome.
In Part II: Surviving a Currency Crisis, we explain what a currency is, what happens when a currency collapses, and, most importantly, how to position yourself prudently in advance.
At this point, time to prepare is your greatest asset. But as we can see from the precarious global economic situation described above, time is running out. Use what remains wisely.
Click here to access Part II of this report (free executive summary; enrollment required for full access).
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“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”
~ Vladimir Lenin
Chris is clearly on the FBI's terrorist list.
ummm... we ALL may be on that list...
The bigger the list the more meaningless it is.
Goebbels knew the fear that a list is being kept is the real and true power. Fear prevents people from taking action, which is far more effective than punishing people after they take action. Milton Mayer writes about it in his book, They Thought They Were Free.
I wonder if historians, like Mayer, that write about Nazis and Fascists are on the FBI terrorist list.
.......we are all not only on that list, but in the top 1%....
Then we are in good company. Here you can find another list of some militant American terrorists, men like John Hancock.
Imagine if Thomas Jefferson were alive today. He'd be indefinitely detained in a hurry.
Faith must be supported in times of crisis. So far there is the US military, which can kill anybody not selling oil in dollars, but can't really give you something good when you need it. How long can this be sustained? Maybe gold in hand would last longer.
Eat your peas & get your nose back to the grindstone you American Labor Slave!
So true.
Two things here:
A) What is being said in speeches, and what is being done, has been widening as a gap at a blistering pace. And people still can't figure out they are being lied to.
B) The Fed is the reason why we haven't totally collapsed yet because they've bought all these Treasuries, at a record pace. Who do YOU think owns the fucking country and runs the shit? Certainly ain't us, or even the muthafuckin' President.
OT, but not that much... trav7777, where are you? there is something I wanted to ask you... first:
Consumpion of Oil per capita
USA 68.672 bbl/day per 1,000 people
Two and a half times more than the
European Union 27.681 bbl/day per 1,000 people
"OT, but not that much... Trav7777, where are you?"
I think he's over on another thread, blobbing up or something.
right here, bruh...what's the question?
well, I broke it in four further down and with the conclusion: I'm not too worried about my American relatives' getting food on their tables, for quite a long time. Though you seem to be the expert on energy around and you have a similar energy=money opinion like Martheson (the author of this guest post). I'd be grateful if you give me your opinion on this.
Systems don't break down gradually, continuously. It's chaotic, there are discontinuities. It works till it hits a limit then stops. Say a particular distribution company goes bust, all their clients don't get supplies till they can switch. That may take out a local store in a small town.
It'll be patchy. Like a broken lightbulb flashing on and off. Things will go missing from shelves, come back, go missing. The edges will suffer first.
oh...got it.
Yes, there is lots of GDP to undo so we can still eat. We'll all be pretty poor.
There are other aspects of petrochem fertilizer that are troublesome, though, besides oil.
The backside of the depletion curve is unknown.
The Fed can't salvage the housing market in the US which is a bad sign for the big central bank policies. Doomed to failure.
http://confoundedinterest.wordpress.com/2012/02/08/mba-mortgage-refinance-applications-increase-as-mortgage-rates-fall-to-record-low-purchase-applications-unchanged/
second:
Consumpion of Oil (total per year 2009)
USA 18'690'000 bbl/day for a population of 330m
As much as the consumption of the next four biggest consumers
China, Japan, India and Russia for a total population 7 and half times bigger (2500m)
third:
Oil (37% of energy source) in the USA is used for:
72% Transportation, 22% Industrial use, 5% for Residential/Commercial use and 1% for Electric Power generation.
Transportation (28% of use) in the USA is coming from:
94% from Oil, 3% from NatGas, 3% from renewable sources
Transportation can be further broken down in 61% gasoline fuel, 21% diesel fuel, 12% aviation
Everyone conveniently leaves out that the US Military is the BIGGEST user of energy in the world.
This statement may be true, but would be more convincing with some documentation to back it up.
I never bullshit.
http://www.dailyenergyreport.com/2011/01/how-much-energy-does-the-u-s-military-consume/
Thanks. I knew it was significant but still surprised. I remember armor units at Ft. Hood during Graham-Rudman that couldn't run their M1s because they couldn't afford the fuel.
Tehran, Beijing to discuss ditching dollar
TEHRAN, Feb. 8 (MNA) – Iran and China will start talks in the coming days to substitute the dollar as the currency used to bilaterally trade oil, Mehr news agency reported on Wednesday.
[link to www.mehrnews.com]
Good thing we invaded the sovereign country, Afghanistan, and are still engaged there in the longest war in American history. Afghanistan sits between China and Iran. A pipeline would make it too easy for those chi.coms to liberate America's oil from Iran.
silk pipeline bitchez!
That little bottleneck just west of Langar reminds me of Thermoplyae...
FREE TIBET!!!
and, below, V.V.V caerus' linkV.V.V, if the afghan mineral 'survey' of last year is 'news2youse'
Rare Earth - Hey Big Brother - YouTubeZZ
On the trail of...Marco...Polo
u.s. identifies vast mineral riches in afghanistan - n.y. times
Wakhan pass, the narrow corridor route that the Polos took in 1273. Source of Amu Darya. Pamir put and Afghan call, during the Durand line Great game play between Russia and Great Brittain.
If you want LApis LAzuli its not far way the mines of Kafiristan, further south.
fourth and conclusion:
My conclusion: no worry about having US houses heated/cooled, US supermarkets stocked, hell, even agriculture is not really the issue.
The issue is that driving gasoline-motor cars for personal use (driving to work, for fun, for shopping) in the US will, at one point, decline. Either for market reasons or else. And no, there is no nation in this world that drives that much as the US.
By the way, Americans drive in average 13'400 miles per year.
Calculate yourself how much the gasoline costs. The new passenger car fuel efficiency "standard" is, for cars and trucks, around 25 mpg (9.5 L/100km), one of the worst fuel efficiency of the world.
I'll be very happy to be corrected in any way.
13,400 / 25 = 536 X 4 = $2144 a year
just dont see $2144 being the breaking point for US household
and at which price do you see a breaking point? that's what I'd like to understand
well considering that you are discounting that most of that driving is to go to work or for the purpose of working and allowing to put food on table and pay the bills , i would say $10,000
Two car family. 2k per car.
$300/month.
Last year I was commuting a long distance in a minivan. My gasoline expense for the month of May alone were $520. Then I moved to within a mile of a new job, and now I can walk to work if needed. I'm taking steps in advance to make sure my children will always be sheltered and well fed. Hopefully most of the folks on here are doing the same. Please do not depend on maintaining a long commute in the near future. Regardless of what happens to our economy, or oil prices more specifically, changing your environment to make yourself more secure financially is always a good idea.
Yes, but it's a bit awkward when you pick up your order at the Mickey Dee's drive-thru window....on foot.
Thanks, but no. My family eats food, and McDonald's does not qualify. haha
6k compounded. If you can make 7%. Just a couple of years & you have something useful.
Agreed! I've done more than significantly reduce my travel costs too. I've also paid down all of my debt except for a student loan that's at 3.5%.
Except that the price of fuel/transportation is compounded in every product for sale.
It's not just getting to the store - it's also the additional price in food and everything else.
No argument here. GM and Firestone went out of their way to get rid of trolley cars in most cities because they wanted to sell diesel bus fleets. After WWII, automakers sold us on "2 cars in every garage" and caused the creation of the suburbs and longer commutes. 100 years ago, regional rail lines that connected small communities were bought up and put out of business by the railroad tycoons. It's taken a long time to dig this hole we're in. Now we're screwed.
It is true that development of the suburbs created a bane to the future of America, but Americans have bought into it hook, line, and sinker. While a large segment of the middle class has bathed daily in arrogant exhubarance that they think they deserve (remember the cosmetics commercial and Oprah saying "I'm/You're worth it?). The middle class will wake up one day to find they live too far from work to get to their jobs, too far from the grocery stores to buy food, and too far from a plethora of other locations to acquire goods and services that they will need.
Another interesting thing that deals with the suburbs is package delivery, which has become a major part of the American economy. It will for the most part become unavailable because of the fuel expense to deliver to non-urban homes. People and companies that rely on them for income, will be SOL, and their businesses will collapes, ushering in, with the help of all the other horrific problems caused by high interest rates, inflation, and unavailability of natural resources (of course, tens of thousands of those employed by package delivery will lose their jobs, and the effects will ripple through the economy). People in the suburbs wishing to relocate to the city will be for the most part unable to sell their homes for all the same reasons (Hint: sell your house and move to the city ASAP).
My grandmother lived as a child on a farm through the Great Depression. Although her family was able to produce crops and livestock, it didn't do a lot of good. I once heard of a farmer who slaughtered a pig, but then couldn't sell it because no one had any money. So he ended up giving the pieces away to his neighbors for free to help feed them and their kids. The depression was very, very hard on my GM, and I could see how it affected her for her entire life. The burden that she felt back then is going to be felt by a lot of people in the US.
So, all in all the suburbs will be quite an impediment to an already failing economy and nation, but not too many people really understand this. People who are like-minded with Ralph can see that this is a glaring catastrophy just waiting to happen.
people had no choice but to go to the suburbs because desegregation and the Black Undertow forced them out. Look at Detroit 1967. Would you stay around that shit? Those cities reached a tipping point and progressively collapsed. Now detroit resembles Africa culturally more than the USA.
Even today, some inner cities are war zones (they train military trauma surgeons there). Without gentification, the suburbs were the only refuge for civilized humans trying to raise their kids in peace. As certain cities have gentrified, such as NYC and DC, civilized humans are returning.
Cheap oil just permitted people to run and hide from the truth in whitopias. That truth starts to peek out from under the rug during times of growing scarcity. We cannot afford any longer to subsidize a population that is a danger to everyone and everything around them. The costs are just too great.
Maybe it was the preference for more individual space in suburbia that caused the "need" for two cars rather than the other way around. Cause and effect is tricky sometimes.
Bicycling bitchez.
http://www.youtube.com/watch?v=VMnjF1O4eH0
Oh for goodness sake. "Fat Bottomed Girls" was a double A side with "Bicycle Race" which I think had the first and possibly only music video which featured naked women on bicycles.
Bicycling being on topic when it comes to discussions on personal transport and oil.
Averages are deceiving. The distribution will mean there are a smaller number of heavy users who are heavily influenced by the price. The heavier users may by definition be the ones who generate more economic activity. They are using more energy to do more.
There is even bigger problem than personal use of gasoline. The real problem is the agriculture in the US which is located mostly in the middle while consumers are far away in big cities in both coasts. That means a lot of long haul trucking and cargo flying for food. If there is an oil crisis and/or oil price rising skyhigh, most major cities would start experiencing food shortages eventually.
So in a way attacking Iran for example would be a suicide run for USA. It would blowback real hard domestically.
sounds like a win-win for Israel
The bigger issue with agriculture is that "Modern agriculture is the use of land to convert petroleum into food,"Bartlett (1978)
Take away all of the oil (and NatGas) based pesticides, fertilizers and processing and the crop yield goes down over 50%.
corrected? See, here's the issue. You stated FACTS. They were true. Therefore I have nothing to correct.
As oil supply declines, so will gasoline usage...note: this has ALREADY happened!
An inevitable corollary of the decline in supply of oil is that consumption will also decline.
Was there a question here somewhere?
No, I forgot the question: how fast? how steep?
indeterminate...if it's a decline like the LA basin, benign. If like Cantarell or Prudhoe, err...apocalypse?
I don't dispute that personal driving for purposes of pleasure is declining and will continue to decline, perhaps at quicker rates if gasoline breaches the $4-5 mark permanently.
Where I get a bit confused is why people think American fuel efficiency standards are so poor. Does anyone have links to MPG standards in other countries? Do they even have such a thing? How much of the loss in fuel efficiency is due to the requirement that American car engines be half-choked by emissions standards? How many other countries have emissions standards equal to the U.S.?
It always strikes me as odd to compare a country that spans 3,000 miles from coast to coast.....with european countries which are effectively the size of an average American state, and where everyone lives in much smaller footprints where everything is within walking distance of your residence, and where there are essentially only a handful (by comparison) of what could be considered 'interstate highways'. Doesn't it make sense that THESE are the reasons europeans drive small golf-cart-style cars that get 30-40 MPG, with much less restrictive emissions/crash standards, etc? If Europe was the size of the US, would their gasoline useage resemble what it is today? Would people live in the smaller footprints they currently live in?
Anyway, lots to think about, and I'm totally on board with the idea that 'driving for fun' will at some point become a pastime exclusively in the domain of the well-connected wealthy. If I had to hazard a guess regarding the gas-price-tipping-point that would generate a noticeable absence of personal driving, it would be the $5 mark. This would have to be a permanent price point, because I fully expect many Americans to sacrifice actual food for the sake of another tankful of gas.....for a short while. Once the mentality sets in that these prices aren't going anywhere but up, people will park their cars for everything other than commutes to work.
All of this brings up the equally interesting opposing factor however......in that major increases in the price of gas tend to eventually reduce demand to the point where the price must at some point recede. Now obviously if peak oil conditions reach the point where capacity drops faster than demand levels, we could have the scenario where people drive less and less, while the price continues to creep upward.
Unfortunately, if personal transportation eventually reaches the point where it idles into a corroded state of non-existence.....it just means that we will all be at the mercy of whatever government-provided 'solution' is implemented. New USSA = Old USSR?
No country on earth except the US makes giant 4 to 8 passenger family vehicles that aren't public or private busses that would carry twice the amount of passengers with the same weight of vehicle? Most countries penalize gas hogs at the purchase point and petrol stations with prices about 3x ours. You get a business tax break to purchase a vehicle in the US that weighs more than 6000 lbs and gets 10 or less MPG, even when you don't have a business that requires a vehicle at all. Gasoline prices are subsidized in the US because the oil companies don't pay our country for the oil they remove from national land or to clean up after their destruction? Each percentage point of gas price increase causes our GDP to go up and raise interest even more due to lack of payment on principal. Fuel standards are never made in DC, but are dictated by California because they are the only state that told the feds to screw off due to the smog.
We are a nation of obese folks that drive V8's a half mile to purchase a pack of smokes. Fat burns too.
In case you have not been to America we are spread out all across the Continent. Our People do not live all jammed up in towns like Europe. We have what are called suburbs and these can be as far from a persons work as 20 to 50 miles. If Americans can not drive where they want to go when they want to go America is finished growing. America was built on cheap energy and must have it to remain America. High gas prices will shut down America. If wages can not keep pace with fuel and food prices plus have enough left over to "spend" America is finished.
Article says it all.
I thought Ashcroft's DOJ was the worst in history. Holder has been 10000000x's worse. All this DOJ wants is money, pure and simple. Not justice.
Affirmitave "non" action at play...
It will end up being "multi-purpose".
They will increase the absorbancy for kitchen wipes besides toilet and wall paper.
i believe the dollar has already failed, but the Central Planners continue to force us to use it and most sheeple believe in it.
Close.
FOFOA: When I say the dollar has already hyperinflated in a near-monetary sense, I am talking about the number of dollars people, entities and even foreign nations think they have in reserve. Not in a shoebox, but in contractual promises of dollars to be delivered more or less on demand by somebody else. Claims denominated in dollars. This is how the vast majority of "dollars" are held; as promises to deliver more dollars.
http://www.bloomberg.com/news/2012-02-08/jobless-decline-masks-drop-in-u-s-labor-force-as-fewer-seek-work-economy.html
Thanks Bloomberg, late to the party as usual. Odd, even though the Chairman of the Federal Reserve disputes the numbers himself still no effect on the market. I guess Ron Paul is right, Bernanke has no credibility.
5000 years of recorded history basically show that platitudes and monetary devaluation simply do not work. At the end of the day, civilization is 6 meals away from degenerating in to survival of the fittest and damn any consequences.
Civilization is a thin veneer, just like State of the Union speeches.
Make sure that under all that veneer or under the velvet glove, there is something substantial, like steel.
Well now that the Super Bowl is over... Maybe FLOTUS can go down and wave the starters flag at the Daytona 500...
That ought to inspire everyone...
TERRORIST!!!!! TERRORIST!!!
".....servicing the debt loads and liabilities of the nation will require both austerity and a pretty serious fall in living standards for most people. ...."
said like a true bankster....no, the solution to excess debt is not perpetual poverty and servitude to the banksters - it is liquidation and loss....
the banksters were the fools who took unguarded and irresponsible risks - they took the benefits of debtomania and now they should suffer the losses...
fuck the banksters, fuck austerity, and fuck all the tools of suppression which these financial terrorists wield....
"...and fuck the fucking Diaz brothers. What did they ever do for us?
We are on the verge of collapse, but we need to try to keep America afloat while we attempt to fix the sinking European countries. Because if we all collapse at the same time, then panick will ensue. So be patient, there are a lot of countries waiting in line to fail. They all want to be bailed out and so are fighting to be next in line.
the world markets are on a tear.....especially the EMs....looks like the ELITE have decided that its really 2012 when the dollar dies....the insiders have got the news ...the nifty is flying ...
Our currency will fail due to it being debt-money, where future issuance must account for the interest on current debt being issued. Exponential growth in a finite world fails every time.
This stuff is not hard. It is easy.
pods
Perhaps one of the best thought out and rhetorically postumous items I have read in a very long time.
Collapse? Sure.
Causes? Check.
Question! When?
Nice article and dead on as it relates to the bizarro world where the Fed can puurchase unlimited amounts of treasury bonds from the same country that gives it's currency value.
Here we are 4 years on after the credit squeeze of 2008 and nothing has been done to correct the situation. Everything is OK in the eyes of most people, just a little hole in the road to prosperity.
I submit that as long as the world accepts the fraud that IS the Federal Reserve and it's buying of US debt, then DC will continue on it's merry way indefinately. Why wouldn't they? Everything is going just fine and the fact that the financial world is pure fantasy nowadays doesn't seem to bother all those out there that have billions to move around in search of ROI. After all, these are the people that should be calling foul. They have the money and power.
If I could ask one question it would be: How long before this travesty in waiting becomes a full blown disaster?
I honestly do not want the answer. The more time to prepare, the better off we'll be as aware individuals. Tick tock, tick tock, gentleman. Use your time wisely.
there is the saying "a currency is rejected abroad and then rejected at home". We all know about the countries moving away from USD; in Vietnam the US dollar use to be accepted for transactions between individuals along with gold, for the last few years people there only want gold, not US dollars.
When the next crisis comes, SDR's will be the reserve currency.
"Whys" are cheap. "Whens" ..... now that's the real trick.
OT I know, but I saw this and just had to share-
Scientists are investigating a bizarre white cobweb found on nuclear waste - amid fears it could have been made by a 'mutant' spider.
In a freakish echo of the Spider-Man comic strip, workers at a U.S nuclear waste facility discovered the growth on uranium last month.
The white 'string-like' material - never seen before on nuclear waste - was found among thousands of spent fuel assemblies submerged in deep pools.
Experts from Savannah River National Laboratory collected a small sample of the mystery material to run tests.
A report filed by the Defense Nuclear Facilities Safety Board - a federal oversight panel - concluded: 'The growth, which resembles a spider web, has yet to be characterised, but may be biological in nature.'
The webs were found at the Savannah River Site in South Carolina, a 300-square-mile nuclear clean-up facility owned by the U.S Department of Energy...
of course the story comes complete with the obligatory nothing to see here disclaimer from an expert and an information denial campaign from the USG...
Will Callicott, a spokesman for Savannah River National Laboratory, said in an e-mail that officials hope to collect a larger sample for analysis.
He added: 'Whatever it is, it doesn't appear to be causing any damage.'
Nobody from U.S. Department of Energy or Defense Nuclear Facilities Safety Board was available for comment..
great, on top of everything else now we have to worry about giant, freak, mutant, nuclear fire breathing invincible frankenspiders attacking...the truth is indeed stranger than fiction.
Spiders? Pfft! My vote is for Cthulhu.
So some kid touring the the nuclear plant on a school field trip gets bit by the the nuclear spider and becomes a real life Spider Man, then goes on to become a bad ass crony capitalism crime fighter or -- just our luck and more realistically -- someone who see opportunity at every turn and joins forces with Goldman Sachs and the rest of the banksters plus the worst of government and their lobbyists.
Great. Nothing to see here.
.
Greece = Illinois
Portugal = California
Spain = California
..but Timmay said it was never going to happen to the US... someone give the Eurozone crisis a news-break... it's happening in Illinois and California ...focus everyone
The "end of the world" scenario will never happen (financially speaking) because, like it or not, the "powers that be", the "MM's", the "NWO".....whatever you call the "bad guy" in your conspiracy theory, NEED us sheep to have enough money to "BUY THEIR SHIT."
Actually, a lot of them are on record as believing they need a lot less of us to make the system work more efficiently.
Exactly...can't believe the peeps here don't know about the Club of Rome.
Obama's narrative and actions parted ways about 10 minutes after he was elected...."Hope & Change" versus, Timmy, Holder, Ben, Paulsen, etc.
All the special interest groups are more firmly in charge than any time in our history and the average citizen is in a distant last place.
As an example, look how much Obama has done for Monsanto, including the latest FDA appointment....there are many other unseen roaches at large.
Our currency was always going to fail. It was built to fail since they inisted on it being intrinsicly worthless and printed into oblivion. Why doesn't anyone acknowlege this? There's only so many air craft carriers and nuclear missles you buy with it until they have diminishing returns on the stealing of stuff and forcing of 3rd world nations to accept it and that's why we need to kill and invade nations who refuse it. It's just a tool for the oligarchs. After they abuse it to death they'll just kill all of us and write the historical narrative on what happened however they want to. That's how they roll. In the mean time eveyone can be a Monday morning quarterback and make up different reasons for why it's failing but all you need to know is in this MF Global world IT IS INTRINSICLY WORTHLESS!
Financial services should not count as "production of real things by real people."
The fundamental "bargain" of representative democratic states is: "Vote for me and in return I'll steal on your behalf". Such a system is doomed, deservedly and desirably so. The previously separate states are now economically closely coupled via international finance, and the rate of state theft, inherently exponential, is now entering it's "hockey stick" phase which precedes the failure that must occur when it overwhelms the survival systems of the productive economy.
No doubt in my mind the point of no return was passed decades ago, the overshoot now is irreversible.
Predicting the failure point with accuracy is probably not possible, and not all that important if you accept that it is unavoidable.
Chris nails it. Hats off and thank you!
The title should be Why Our Currency Has Failed
http://zerohedge.blogspot.com/2009/05/annihiliation-of-dollars-purchasing.html
Outstanding article... the corporate kleptocracy has poisoned our society and there is no fix as they are in charge... all the politicians totally corrupted, both parties. Just a matter of time before the fall, and it will be dramatic... and they slime Ron Paul for his efforts to reverse course...
Other than that, how was the play, Mrs. Lincoln?
What would the price of oil be without the rampant speculation, the bona fide hedging exemptions, and the effects of The Commidity Futures Modernization Act? It seems our government and financial sector don't give a flying fuck what the effects of manipulated markets are. If you can make a killing in a recession or a depression, who cares about everyone else? And when you are given the sole authority to counterfeit, what can possibly go wrong?
Well... what would it be??
Please take into account that since 2005, the amount of oil on the market (i.e net exports) is down roughly 10%....
I'm convinced one day as a young senator somebody approached Obama and asked, "How would you like to be President of the United States?"
Excited at the prospect he accepted. At the time he was doing better than average but still driving a Chrysler 300M. The deal was probably something along the lines of a nameless ATM account with a few hundred million, total subordination and a Benley to drive afterwards. Most people would accept.
Still doesn't make it right- the bought and paid for nature of the consolidated wealth of individuals misallocating resources towards greater wealth accumulation. I don't really believe too deeply in handouts but for those citizens that work they should be paid above poverty and those with the drive should be able to make a comfortable living wage. It's pathetic CEOs make many hundreds of times the average worker's income not for innovating their products or services for what amounts to basic overhead accounting decisions.
Our currency? Hardly. It's Benron's currency.
Now, this currency should be a carrier of our purchasing power, but instead, it is the stealer of it.
Ron Paul is saying most of this, emphatically. The problem is generations of Americans have been dumbed down sufficiently to not even be able to understand the above post. A stupid population is dangerous in "a democracy".
How true. The glazed eyes and vacant, slack jawed stares I get when I try to explain some of what's going on to my friends and family are frightening.
I know the feeling and agree. It is frightening.
I'll one up it and say the dumbing down of America was by design.
Some of whom are already lost.
And they dare to call me a downer.
HAH. I cut them loose. I know which Family is still good to go and which are not.
"No people can be both ignorant and free."
http://policyandmore.blogspot.com/2012/02/krugman-and-american-high-school-wage.html
What drop in standard of living? My income has only dropped 87.2% since 2006. What's wrong with that?
what a waste of internet space. who the F. could possibly expect ANY Democratic president to retry the Malaise Speech all over again? That would be like a Republican saying Read My Lips and raises taxes. It just ain't gonna happen. The only exception would have been a Hillary Clinton, I can only suspect.
So is she running?
this article fails to have any insight to the well hidden adjenda that most of the political shortcomings are orchistrated and not just chaos. In order to see the big picture you must see where the larget global struggle is headed, west vs east over natural resources. Russia, china, iran, syria, n. korea, and a few small dictatorships are covertly battiling it out for the goods. Bi-flation is just a tool for our masters to put the squeeze on us slaves to maximize productivity. Fuck usuary math!
exactly - this is a global plan.
chris and other "middle of the road doomers" either have jumped down the rabbit hole and won't report what they have seen - or refuse to jump down the rabbit hole.
my guess - even on this list - the majority of posters 1) think 911 was as the gubbermint reported it and 2) believe the USA landed on the moon in the 60s.
the brainwashing at this point is at a molecular level.
Actually most posters here agree with you on the 911 con. I won't speak for others but I also agree with you on the moon landing hoax. Just point the damn Hubble at the landing sight and take some fresh pics for gods sakes.
I also agree that too many people excuse political blunders with incompetence. I personally think they are contrived, calculated and deliberate errors to serve some hidden agenda. What I don't agree with is the clashes of cultures. China and America are one through commerce and the inflation/deflation trade. Russia must have cut a good back door deal with the west after the cold war. Any disputes between the east and west is pure theatre again serving a hidden agenda. Real discord however still exists with a hand full of "rouge" nations, otherwise known as the axis of evil, where the west infiltrates the political landscape through arming and agitating "sovereign citizens" and calls it a spring. The center of this conflict is of course Israel which explains why North Korea can hang it's balls on the Presidents mouth without even the hint of any retaliation.
yep
i include iran on the same side as the globalists
there is going to be a contrived "oil shortage" soon (this year?) as the effects of peak oil are beyond papering over at this point and demand destruction is not keeping up with geologic declines.
can't go to war with something as esoteric as resource depletion - there must be a boogyman - and iran looks to be the likely volunteer
If you'll accept Hubbles photos (which wouldn't work) then why not accept NASA's photos of the lunar landing sites?
http://science.nasa.gov/science-news/science-at-nasa/2009/17jul_lroc/
Why Hubble can't do it..
http://hubblesite.org/reference_desk/faq/answer.php?id=77&cat=topten
WELL THAT'S JUST FUCKING GREAT
"How you'll pay the bills if you fail -- because the rest of us are not bailing you out ever again."
Yeah nice rhetoric, I seem to recall this is exactly what congress said when they voted against TARP. It's easy to talk the talk until the market wipes out half your savings. Now we have 'living wills' based on models based on projections based on crap. Like it was so obvious before the crisis what was going to happen.
So Obama says, "we're responcible now." My counterarguement is MF Global. Nothing has changed, nothing.
I found the political speaches the most compelling. For generations now we have had Decmocrats selling larger government as a solutions to nearly every problem, even those cause by government meddling. This has accelerated with Obama whose speaches promise freedom, but whose actions paint a portrait of somone who wants to transofmr the US into a European style socialist democracy where individual liberty is subordinated to the collective will of the electorate. Not to be outdone the GOP establishment is not much better. They are deternmined to ensure Romney is the dominant candidate because the are terrified of a Republican candidate that won't promise people things in return for votes. Even the more conservative Republicans like Santorum only want smaller government when it comes to economic issues they are fine with a massive war on drugs and a bloated military.
But, but, but the bearded one, Ben Bernanke is smarter. He studied the Great Depression and arrogantly assumes he knows better.
----------------------------------------------------------------------------------------------------
Decades ago, Ludwig Von Mises captured everything discussed here elegantly:
As Paul Craig Roberts observed, like Rome, American empire warfare will end when the dollar ends.
(Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal.)
So will entitlements...
http://silversenator2012.blogspot.com/
Micheal Pento has some funny things to say on
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/7_Ber...
"Oil and gold prices were both lower before the Counterfeiter-in-Chief read his prepared testimony before the Senate Budget Committee this morning. Mr. Bernanke reiterated his view that interest rates would remain near zero until the end of 2014, or until Jupiter aligns with Mars, whichever comes last. This gave the commodity markets a boost sending gold prices surging nearly $25 an ounce and oil prices up $1.50 per barrel.”
I like CM, he talks good sense, eloquently. But - I wish there wasn't always the ad at the bottom to enrol on his course/2nd installment etc. etc. The course, I would imagine wouldn't contain much more than a systematically laid out version of his well known views/postings/writings anyway...along the lines of:
Definitely:
- get some precious metals
- get some stores of food & general stuff for living
- get energy (and generally) self-sufficient as much as possible
- get/have a trade-able skill/service -get family group/reliable neighbours/small community involved & committed.
Nice to have:
- property/land in a safe-ish, out of the way, area, maybe a bolt-hole too.
- lots more of the above, or rinse & repeat to taste.
Apologies if I've missed some stuff out, I'm sure common sense & a bit more time could flesh out the lists/strategies etc.
And you will forever be known as the "hardest working man trying to get on the terrorist list"
I could care less for speeches.
The only speech I recall paying attention to was during 9-11 when Bush told us who did it and why, later with Bin Laden essentially telling everyone over radio "Nyah nyah nyah...."
That was the week I knew we are at war and nothing less than the very idea of America is at stake. If you must destroy America, you will not destroy the buildings and cities. You must kill each person who even holds Freedom in the heart and/or mind and have the means to be free.
There is no Doom, only those who take the time to assess the future and prepare. I have done what I can and continue to do so regardless. We have gone a month without water, electricity or gas delivered to the actual house in ice storms before. Several times tornadoes have destroyed our grid and it takes days or weeks. One time wires and poles were destroyed on my own road but due to battery and generator, I barely noticed. I just made sure that my home is not a lit beacon of warmth and hope in a cold, wet dark neighborhood. /sarc.
A fireplace or wood stove is the number one way to stay warm, clean water, cook food etc. If you live in a place overseen by Homeowners association or some other stupid shit, then you deserve what is coming.
I have literally kept about a dozen people warm and alive with a bit of tree here or there chopped up and shipped to thier home as a gift. Maybe someday if we need something, they might remember us. Otherwise there are dozens more trees on the land. And yes I do check them for radiation.
Take a small monitor and wave the stuff on the shelf in the local grocery. Watch the people around you, espeically ifyou get a hit of radiation. Still dont believe me? Wait for rain to finish and wave it over some of the water and rain left behind.
Take the time now while you have the ability, means and courage to change and relocate if necessary.
Everything you ever wanted to know about the 9/11 conspiracy theory in under 5 minutes.
http://www.youtube.com/watch?v=yuC_4mGTs98&feature=player_embedded
Ignorance is Strength
What's clear, whether we like it or not it will happen. And the sooner we accept it the sooner we can realize it's not the end of the world life goes on..
help! I'm failing and I can't get up.
I hate that word austerity. There are a lot of government workers who plug away enforcing the maze of regulations we have and they are useless. 2 inspectors came by yesterday and took a 2 hour lunch, we working folk eat on the run. Lets let all of those enforcers try to eke out a living as a small businessperson and we'll see which way they lean later regarding all these regulations. They are useless parasites on a productive society.
We cook our lunch at home, course we have to carefully plan around our iffy schedules. That's ok too. If there is no work for a month or two....
We found out the shake at McDees was like 3 bucks each. I know that we have been away for a while but not THAT long.
When I got to "of course the age of cheap il is over" I stopped. They are finding new oil and new extraction methods all the time, new sources of energy (plentiful gas) and other new technologies (gasify coal). Who knows what they will come up with next? There are plenty of problems, but some of them can be solved with technology (if government would just get out of the way).
I'm no economic expert, but I believe you're missing the point. Our dollar's value is being kept artifically high due to its petro dollar status. It is already worthless. In other words, what happens when nations no longer trade in US Dollars? The price of that oil, plentiful or not, just went through the roof. The problem is the ponzi scheme and debt based currency, not whether there is a lot of oil or the production rate of its extraction.
Good post Chris.
1.) Both parties corrupt and ineffective. Correct.
2.) Nothing being done to fix the problem. Correct.
3.) The math is not open for debate. Correct
Which leaves your follow up post. I hope you address the inevitability of a populist arising. Those who disparage FDR don't realize how close we came to Huey Long.
It's done. I've put so much thought into this and as of now have covered my shorts.
The simple reason is that Ben has super glued down CTRL and P on his keyboard.
I'll re-position after the elections and watch with joy when this dept bubble blows up in Bens face.
"National narrative" ?
"Shared sacrifice for something greater" ?
"A vision for this country ?"
What a load of collectivist CRAP.
The US is not supposed to be some FN "team",
but a nation of INDIVIDUALS pursuing THEIR OWN "narratives" and "visions".
You got some great plan on improve society ?
Then by all means, have at it.
But leave the state out of it
(i.e. don't force others to take part).
As a bumper sticker says:
MY FREEDOM IS MORE IMPORTANT THAN YOUR GREAT IDEA
Being someone that went from $40hr to unemployment to nothing and now survives off selling trinkets on ebay and occasional craigslist stunts(with people i've never met and thereby endangering myself)....I'd like to hereby announce that I have done my fair share of "decreased living standards". Any more cutbacks in my own little world would pretty much put me in crazy mode where anything is possible.
Casual encounters on craigslist is regarded mild prostitution.
I like CM and his analysis, but we diverge on his thesis of "coherent national narrative."
"To progress as a society, having a grand vision that aligns and inspires is essential."
That's what got us here already. Neocons really believe in the "America, City on a Hill" BS. The implementation of that vision is spreading freedom - democracy - at gunpoint.
After some great new American fuhrer determines this grand vision for us, do I Sig Heil at the start of the speech, or after it's over?
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