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Must Read: UBS' Andy Lees On Why The US Economy Is, All Else Equal, Doomed
"With all the mess going on at the moment, I thought it was worth while stepping back a little and trying to look at the bigger picture." So begins Andy Lees' latest must read letter to clients whch explains succinctly virtually the entire story of where we were, how we got to where are now, how the current trajectory is unsustainable, why due to decades of capital misallocation anything that the Fed does now is essentially irrelevant, why our untenable debt pile does nothing but perpetuate an unsustainable ponzi scheme which will result in an unseen explosion in the true cost of capital: gold, and why the bond market will eventually, and inevitably, force an epic repricing in the cost of non-gold capital absent the arrival of the deux ex machina of real, actionable innovation that the Fed, and all global central planners, keep hoping for. Because the longer we keep plugging away with that worthless substitute, financial innovation, which is anything but, the greater the final collapse. Andy's conclusion: "Until the debt is cleared and capital starts to be properly allocated, economic growth per unit of additional debt will continue to sour. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy." Too bad than that this absolutely spot on observation reflects precisely the opposite of what the Fed is pursuing. Which is why, all else equal, and it will be unless the Fed is finally eliminated from existence, America, and the entire western way of life, is doomed... But don't take our word for it. Here is Andy.
Why are we here: simple - years of central planning resulting in the greatest experiment in capital misallocation in history.
We are in this mess because of excessive leverage and excessive consumption, financed by excessively cheap real capital – (not just Bernanke & Greenspan but further back to the end of the gold standard, and in fact even before that as it was this misallocation of capital that forced us off the gold standard in the first place). If capital had been allocated productively, then by definition debt would fall as a percentage of GDP. Total debt may rise, but efficient allocation of capital would always mean the economy would grow faster than the debt as it means you are making a positive rather than negative real return on that capital.
Whichever way you look at it, capital has been massively misallocated for years.
Corporate profits... or massive debt-funded ponzi scheme?
How can that be when corporates report massive profits? The profits are based on paying their workers a salary that meant they could only buy the goods they made by borrowing; in other words, a massive unsustainable ponzi scheme that could only ever end up with default. Without the household debt accumulation, there would be no market to sell their products to, and without paying the workers sufficient, the debt would always have to default.
This required a massive increase in financial innovation to keep the illusion of corporate profitability alive – (household debt was a way of delaying putting the true costs through the corporate P&L account and recognising the costs). Financial sector innovation is itself another form of capital misallocation, taxing people away from real innovation – (to keep the illusion alive, an ever greater percentage of economic output had to be allocated to this illusion machine) - helping add to the resource constraint we are in today.
If financial innovation, which we have so much of is not needed, what is the right kind? And why is it so sorely missing.
A lot of what are described as efficiency gains have been just the removal of levels of safety and the removal of innovation in the system. Innovation and ongoing operations are always and inevitably in conflict, with the most readily apparent conflict between short and long term priorities. A second handicap to innovation is the way efficiency is achieved by breaking down things into small repeatable tasks. This specialisation and repeatability is a company’s greatest strength, but it is also its greatest weakness. Innovation is neither repeatable nor predictable. It is non-routine and uncertain. (Book: The Other Side of Innovation).
The culprit: none other than the great moderation, and, now, ZIRP4EVA:
Low real interest rates support excessive consumption, taking money away from innovation and balance sheets. When the US started suffering from its peak oil in 1970, rather than innovation it turned to globalisation to tax the broader global resource balance sheet, just as Britain and Europe had done 100 years earlier through colonialism, and recently accelerated that with the WTO. Globalisation has always been about accessing resources.
Which bring us to topic #1 here, and everywhere else where economics is involved: cash flows.
This has been a factor mobilisation story on unprecedented proportions, but appears to have reached its conclusion as resource constraint has meant the “cash flow” to grease the wheels has started to become more expensive and constrained. Profit without productivity can only carry on for a finite period; we are now clearly consuming down our balance sheet or putting it through the P&L account.
So we are left with a massive amount of debt, a massive amount of capital and labour that is unprofitable in the world we face, and a balance sheet of insufficient resources to keep the illusion alive. The only thing that will get us out of this in the long run is innovation which will expand the balance sheet, expand the pie and create the jobs that people want.
How do we get rid of the debt? Are we in a debt trap whereby any interest rate hike will kill the recovery? Clearly it is going to be incredibly difficult, but low real rates are the cause of the problem, not the solution. I don’t personally see a zero rate trap, but we need to allocate capital far more productively than we are doing.
The cost of money itself is hugely important. How negative were real rates? When people talk of borrowing from the future, surely the same logic applies to the cost of capital. If we have had low or negative rates that supported excessive consumption, we now need to have high real rates to direct capital back to innovation and gradually repair the balance sheet. The real cost of capital has to go up. No matter how much fighting the Fed and Treasury do, the real cost of capital will rise. The bond markets have to be allowed to clear some of the debt and thereby remove some of this misallocation of capital.
It's not "debt trap", it is "Fed trap"
Does that mean we are trapped in a position whereby the Fed cannot raise rates? Quite frankly it doesn’t really matter what the Fed does; real rates have to go up, are going up and will go up. The more the Fed and the government misallocate capital, the more the real cost of capital will have to rise higher to compensate. The only thing that will get real rates down is either a massive new discovery of incredibly cheap fossil fuels or the innovation that delivers cheap fusion. Otherwise it is a case of the cost of capital rising and causing demand destruction.
Getting the central banks monetary policy inline with the real cost of capital in the market must be the first step to rectifying the misallocation of capital. One obvious thing would be for economists to stop ignoring CPI of food and energy as irrelevant as it is the fastest growing part of the economy. By ignoring it, they are turning what should be a smooth and relatively painless transfer of capital into an occasional out-of control collapse and transfer. Getting both a proper monetary and fiscal policy framework in place, based off genuine data rather than smoke and mirrors and fiddles must be the first priority.
Which brings us to where we are now: a massive, unsustainable ponzi scheme:
Whilst politicians and investors acknowledge that excessive leverage created the asset and debt bubble, they do everything they can to prevent a rational deleveraging or efficient allocation of capital. For the moment the best measure of the cost of capital is gold. For years gold fell as fiat money was printed and this unsustainable ponzi scheme established, however as that ponzi scheme now unravels, gold must go up. The scale of both the ponzi scheme collapse and gold appreciation will be huge.
The problem is total credit market debt is still increasing.
As Fitch recently highlighted, Chinese on & off balance sheet debt has expanded by nearly 40% GDP in each of the last 3 years. In other words, the misallocation of capital is continuing making the ultimate problem that much worse. China is now getting almost no growth per unit of additional debt.
With each additional unit of debt, we are digging ourselves a deeper hole to get ourselves out of. Surely it is better to at least slow the digging? If we can allocate capital productively at the margin – (we know where we need to start making real returns) – then once we can start making a positive return on that marginal debt, then it becomes easier to support the residual debt we have.
If Andy is right, the framework of the next great class class conflict is set: it will be between the productive private economy and the "unproductive economy." Yes: Marxist tensions are about to make a repeat appearance:
Private sector annuity rates will be tumbling and yet the unproductive public sector are still being given great pensions. We are taxing the productive private economy to give to the unproductive economy. This has to end. The idea of a European fiscal union fills me with dread as that would be locking this unproductive transfer into stone. Rather than keep kicking the can down the road, lets own up to our excesses and start putting the economy back on track. Don’t reward the rioters in London with yet another handout; force them to pay for the damage they have caused and the police time they have consumed.
Is Greenspan to blame for this dead end? Yes... but only so far. One can just as readily blame the traditional duel between short and long-termism, or what is known better as "it will be the other administration's/generation's issue." In other words, Washington is just as guilty as Wall Street, and that infamous private bank.
Why have we misallocated capital for so long? We can blame it on democracy, but bigger than democracy is the culture that forces politicians to favour the immediate status quo over the longer term good of the country. That culture then presumably comes down to poor understanding which comes back to low levels of education. We need to address these route courses.
His conclusion:
The real cost of capital has to rise. That will happen through default in one way or another. Debt has to be cleared. Multiple contraction is inevitable.
Financial sector innovation has to be squeezed by engineering and scientific innovation. Until the debt is cleared and capital starts to be properly allocated, economic growth per unit of additional debt will continue to sour.
Energy is the cash flow in this story. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy.
Nothing can be added to this.
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Hey Tidefighter, I pop up everywhere in computers. Why? Because I am a patriot. You on the other hand are apparently part of .......?
First of all, if you spent 25 years being a douchebag I wouldn't brag about it.
Secondly, who cares about facial recognition and recorded bank transactions? Dood, I sold a house, records galore, my primary residence, and I pay my taxes, so what's to hide? People sell houses all the time (used to anyway).
You're just not used to going into a bank without a ski mask. Are you hiding from something? Dood, you're talking about crawling on your belly like a reptile to avoid facial recognition cameras? What planet are you from? Gitmo?
Fair disclosure: I also go to casinos and travel out of the country a lot, with a lawful passport. Sue me, my paper trail, my facial recognition, and my profile.
As an investor and physician of many years, me and my profile should be very well known by now, and transacting much larger amounts would not be unusual for me, in case there were any silent alarms that went off. If I didn't do something periodically, my personal banker would probably think I'd died. The lawyer and his "high wealth" trust account for closing this real estate transaction also were liquid and well known to his own bank -- didn't matter.
Your attitude is precisely the problem -- which is, if a customer wants cash, they are treated like crooks because the banks don't want to give it up.
No, we now want our cash because bankers are crooks. It's our money and we are not gonna beg a middle man prick to take possession of it.
You're a banker without a minimal amount of cash on hand? Too bad, fucking go and get it monkey boy, and fast it up! If you have a problem with that then you're welcome to go out of business.
BTW, all the branches were indeed eerily empty.
Hell yeah!
Got your USD/JPY long yet? Intervention is about to hit from BOJ....
Where are you in the Pyramid of Capital System?
https://lonerangersilver.wordpress.com/2011/05/09/pyramid-of-capital-sys...
Trust me, Andy Lees is not who UBS trumpets to its retail clients. Today, UBS sent an email to retail clients titled "Sit Tight" and cited how equity valuations are cheap. This article by Lees is not the dominant opinion that is presented by UBS on a daily basis.
London riots coming soon to America.
Great article ZH!! Thanks.
Any way you slice it, VWAP, TWAP, POV, Arrival Price, Darkpool, ATS, HFT or whatever the fuck is out there, we are screwed. I am sorry for my little ones, parents that survived crazy DEM fucks for us to see this disgrace. In time we will face our worst fears.. Perhaps PF had it wright…time to fly..
Into the distance, a ribbon of black
Stretched to the point of no turning back
A flight of fancy on a windswept field
Standing alone my senses are real
A fatal attraction is holding me fast
How can I resist this irresistible grasp
Can’t keep my eyes from the circling skies
Tongue-tied and twisted
Just an earthbound misfit, I
Ice is forming on the tips of my wings
Unheeded warnings. I thought I thought of everything
No navigator to find my way home
Unladen, empty and turned to stone
A soul in tension that is learning to fly
Condition grounded but determined to try
Can’t keep my eyes from the circling skies
Tongue-tied and twisted
Just an earthbound misfit, I
Above the planet
On a wing and a prayer
My grubby halo, a vapor trail in the empty air
Across the clouds I see my shadows fly
Out of the corner of my watering eyes
A dream unthreatened by the morning light...
"misallocated capital" - an undirected innocuous phrase.
Capital allocated to military imperialism, zombie banks and corporate fascism - not so innocuous.
Let’s take this dog for a walk; shall we?
Why would anyone want to ruin “these” parties?
You are witnessing the collapse of the financial “Pyramid Schemes” called “Wall Street Free [social-lemon subsidy for the rich] Market Capitalism” and “Washington [self-serving demagogues] Consensus.” Why?
Because [after a while] every financial “pyramid” collapses. The “participants” on it can “no longer” contain the frauds and corruptions as well as sustain its business models, promises, and the debt inside it.
Few values are created. The “few” products that are created [and the “additional” borrow that is needed to acquire them] became less and less affordable.
Quick [simplified] examples:
U.S. Military:
· 1945 [peak of the WW-2].
We spent $64.5 billion dollars [in 2008 dollars: $957,356 billion dollars]
And employed 12,055,884 million military personnel = at a cost of $79,409.85 thousand dollars for each.
· 2010. Spent $1,030 trillion dollars.
And Employed 650,443 thousand military personnel = at a cost of $15,835,361.44 billion dollars for each.
Education:
· 2000 Federal budget: $9,951 billion of dollars / 2010: $146,660 billion. An increase of 137.3% [13.7% a year].
· Student loan debt [$932.220 billion dollars as of July 2011] surpassed “credit-card” debt [here].
The irony is that; high Scholl and college “participation-rate” are both declining [here and here]
Wages and opportunities “also” declining [here]
Job-market participation by college graduates is also declining [here]
Health-Care:
· In 2009, we spent $2.5 trillion dollars. That adds up to $8,047 for every man, woman, and child. 17.3% of GDP. We spend 3x more than South Korea; 2x more than Japan [here]. South Korea and Japan insures every single man, woman, and child.
· In 2007, we spent $2.26 trillion on health care. $7,439 per person. An increase of 8.1% for every man, woman, and child IN A RECESSION. Bernanke; “inflation is ‘only’ 2% a year.” Uhh. Whatever lie you say; Bernanke!
And largest U.S exports: Securitization
· Wall Street exported $27 trillion dollars [here] of AAA; pardon me, crap “home-mortgages” securitization [mostly to Asia and European Union].
Then, through Goldman Sachs, hide all Greek debt so Greece can enter the European Union to create havoc.
By acquiring U.S. debt and “buying” into Wall Street shenanigans, some of the Europeans nations too are bankrupted—not that they would not have being able to do it themselves.
So if you believe in any cooperation from Asia and the European Union in “this” coming depression and economic welfare, you have to have your head check out.
Who are we kidding…; but ourselves?
The U.S. collected $2,162 trillion dollars in tax in 2010.
We spent more in health-care than we collected in taxes to take care our nation. And, we “still” left 50 million Americans without health-care. 38% of them “working Americans” without health-care.
The military “alone” took 47.6% of the [total] taxed collected. And, I did not include about $18 billion dollars that “NASA” has for military purposes that I cannot verify.
And now we have “wealth-creation” in America by screwing people. Printing money [subsidies for Wall Street and the rich] labeled as “helping” the economy and “job” growth; when it is in fact, decimation labor, savings, and currency [the dollar, in ou case].
ke STFR If anyone got caught with their pants down over the last 2 weeks, they may have a chance to sell and at least break even.
Bernanke hasn't accomplished anything. The emperor has no clothes which is why the market started going South following the 1115am announcement. The buildup this morning was classic frontrunning but there was little participation of real buyers.
Then after the announcement the market turned and all hell broke loose again until 245pm when the PPT stepped in to recreate the upside momentum.
This is not sustainable and if we're lucky, many will get saved if they can liquidate into the rally and some can get a 2nd chance placing shorts into fall and winter 2011 when this market will continue to unwind.
I have absolutely no doubt in my mind that by now, every senior investor out there understands what is going on and just how ludicrous the actions of the CBs are. Money will continue to leave the markets, equity and bond markets. Money will continue to move into gold.
The tricks and gimmicks are becoming more and more obvious. Even the most ardent speculators will see that this gig is up and that the risk to potentially loose everything unless it's tangible is greater than ever.
245pm today, the PPT showed their ugly face. This is not a repeat of 2009 and 2010 where markets rallied with influx of freshly printed Benny bucks and market was anticipating growth to resume. There is no growth inside the US or Europe. There is less growth in China and other BRIC countries than 2 years ago.
Nothing has changed other than that manipulative efforts are becoming more and more obvious.
They had the chance today to let the market correctly respond to the Fed's policy statement. They didn't take the chance but with their manipulation, I think they blew it all to Smitherines.
Go long bullshit but beware of the quicksand.
methinks these early days in August 2011 will be remembered for a long time as the time that the Trust snapped in half. the critical mass may just well have been breached this go around. can't prove it with a boomberg chart, just a hunch.
Grow up dude! Apple is now the biggest company in the world. What could be wrong with that? Everything they make is literally critical to the universe operating properly so they will fix it...or Google will...maybe Twitter or Facebook...well one of them will.
Ah, for the good old days of 'trickle down' economics instead of the current 'gusher up' economics we live under today. Back in the day, everyone that wanted jobs had jobs and life was good. Sure there were some filthy rich f$%ks out there, but at least some of their dough trickled downward. We didn't sit around worrying that someone was filthy rich, we did our jobs, and we lived well. Now, the f^&king wealthy have bought and paid for the all the politicians (thanks McCain-Feingold) and we sheeple are stupid enough to believe those same politicians will turn around and 'soak the rich' that put them there. Instead, we're all getting soaked, no jobs, no growth, and all our f^&king money going upwards to the already filthy rich f%^ks via bailouts and QE bullshit.Our kids and grandkids will have to pay for all the excess, or revolt before then if they are smart. Real fucking nice.
Very sad.
if i were filthy rich, i would make sure i did all i could to make sure you all got enough crumbs to make sure you were happy with your shitty job and boring life and were busy enough to not care that i was living large ......why would TPTB ever Fuck up such a good thing ???
Because Ponzis always collapse. There are only so many favors to go around before critical mass.
If I were filthy rich I might consider employing you as a local enforcer to beat up the plebes every few days and collect protection money.
Greed mainly I suppose.
Howard Davidowitz is on Taking Stock Blomberg and he's just throwing out the lines like the U.S. not having a budget for 830 days amidst it's greatest financial crisis, no cuts to the budget until 2017, of course railing on the administration, said the U.S. needs to suffer and it'll take 10 years...
Classic.
I'm sure it will make it to ZH too. The media wars are strong these days.
Howard Davidowitz is on Taking Stock Blomberg and he's just throwing out the lines like the U.S. not having a budget for 830 days amidst it's greatest financial crisis,
- - - - - - - - - - - - - - - - - - - - -
Right; you just NOW catching on to that?
WHY, O WHY do you think S and P downrated our asses?
For a couple years now Dems have had NO budget ... do a Goog search for crying out loud.
Geesh ...
So, what catalyzing circumstance(s) will free the capital for the much needed reallocation into innovation. High cost innovation that pays people well so that they will spend and be taxed enough to pay down debt? Since the stores of cash in non-bank hands is not likely to be "reallocated" without some very unfavorable legislation (to those current owners of all that capital), I see a combination the government (once again being the R & D financier) spending, Gasp, AND debt write-downs by central banks.
That capital will never be reallocated here. It'll stay hoarded in the safest possible ways that ensure safe return of capital. That's the deflationary game. It'll also find it's way out of the US altogether.
When large fortunes are amassed they seek safety, not risk. Risk is a game for gamblers an losers, guys who watn something for nothing.
Spot on.
It's always about risk FIRST.
Something tells me it's worse that this. I think that the capital really never exited, and that most of what's going on is just filling in a quicksand hole. Yeah, there's SOME capital out there, but not enough to propel us out of this death spiral.
if the stats he uses as many here allude, are cooked, they are cooked in who's benefit? hello, discount them and now where you at?
I said it in another thread and one more time, so;
Energy is the cash flow in this story. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy.
Breakthrough? Ha, how about the biggest reset switch of all, war. wrap your minds around that.
if the stats he uses as many here allude, are cooked, they are cooked in who's benefit? hello, discount them and now where you at?
I said it in another thread and one more time, so;
Energy is the cash flow in this story. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy.
Breakthrough? Ha, how about the biggest reset switch of all, war. wrap your minds around that.
Short of war.
There is only one solution that has two parts:
DRILL NOW,,,,,,,,,DRILL HERE,,,,,,,,,,,DRILL EVERYWHERE,,,,,,
Part two:
Privatize the functions of Government.
(what else can can the beltway bandits do?)
It would be an understatement to call this view stupid. Breaking it down with logic produces this: let's be stronger by exhausing our resources quicker!
Apparently you're looking to grab "govt functions." News flash: when govt crashes nealy ALL of these functions will be gone!
BTW - there are no "solutions;" solutions are permanent, and there's nothing that's permanent.
Thanks for playing!
Historically, markets, short of manipulation, move sideways to down until they are punctuated by an innovation that creates a bubble.
There is nothing currently viable to create the next bubble.
Social media is an extension of the INTERNET bubble along with smart phones. Basic commodity plays.
I'm talking of true innovation. Maybe it will come from alternative energy or nanotechnology, I'm not sure.
I'm searching for the next bubble.
Capital will move very quickly when that innovation becomes viable and we will ride the wave again. Capital is desperately seeking this, and the cycles of boom and bust will likely become shorter as a result.
"Capital will move very quickly when that innovation becomes viable and we will ride the wave again."
And I'm sure that the energy an interest was there for the Easter Islanders up until they discovered that they didn't have any more trees left in which to transport their "innovations" :-(
Just saying that it isn't guaranteed, even if we click our heels together.
Let’s see:
1. Debt Ceiling = Fail
Greenspan’s MMT paradigm = CATASTROPHIC FAIL
2. ‘Austerity’ (‘Cutz’) = Recession Baked-in at best, stimulus mild to non-existent, bailoutz off-sheet so growing the systemic corruption … I won’t call it “moral hazard”, because, mere ‘hazard’ is a ludicrously far too passive a word for what’s happened already, and to come.
3. ECB monetises Italian and Spanish bonds = FAIL IMPLICIT!
(bring on the clowns! … oh … they did … hey, pass the popcorn …</munch>)
4. G7 Central Bank Gov’s coordinated Print = A-GREED setting of the ‘rulz’ for the Global Currency War to try and limit full-scale escalations - but as economic push comes to shove this ‘coordination’ will of course dissolve.
5. Fed ZIRP for 2 years = Inflation FAIL cometh
--
Personally, I feel debt-deflation and price-deflation are preferable to the current path – but only by the slightest amount.
EDIT: But I would add that I think NO ONE has a plan that werkes, because there actually IS no potential plan that werkes. So why continue to pretend that, that iceberg was "no biggie"?
Only one equation needs to be understood: BIG = FAIL
Reminds me of a perceptive one-liner comment in 2009 by Yves Smith (paraphrased);
"Has it occured to any one else that "Too Big To Fail" means you have in fact already failed?".
Will a shrinking Wall Street and sickly banks support this market? How bout a shrinking labor force faced with shrinking retirement benefits?
The 'American Economy' is doomed for multiple reasons. However there are primary and secondary reasons.
FED ponzi schemes, fiat money printing to the Moon, '11th marble' never repayable debt, off-shoring of all manufacturing jobs, etc are all secondary reasons.
The PRIMARY reasons America is doomed, is that the global Elites decided decades ago that their New World Order (of around 500 to 900 million total world population) doesn't include the nation of America as such, and so in 'getting there' America must be de-industrialized and depopulated.
The economic crash currently in rolling snowball stage, is just the start. For the really serious death-blows, there are other surprises in store. One of them involves a near total and irreparable destruction of the electricity generation and distribution grid, using means that are currently being implemented. Read through these:
http://www.jimstonefreelance.com/grid.html
POWER GRID TAMPERING WILL END AN ERA
http://www.newswithviews.com/Peterson/rosalind132.htm
COSTLY U.S. POWER GRID TESTS APPROVED WITHOUT PUBLIC CONSENT
http://www.nerc.com/page.php?cid=1|7|11
History of the NERC
http://www.ibtimes.com/articles/193644/20110806/solar-storms-earth-sun.htm
"Solar storms threaten nuke plants: Electric power outages could last for years or even decades."
(Preparing an excuse for why the grid will be going down permanently. "Natural causes! Wasn't us!")
I'm an electronics engineer. The original article is correct in its analysis. There is NO CONCEIVABLE reason for wanting to test splitting the grid into independent, phase-drifting segments, other than to achieve conditions under which a set of sudden circuit re-connections can completely destroy ALL the connected generating machines. Do this simultaneously with arrival of a solar CME (real or pretended), and the public would never know the disaster was deliberate.
This would be an unrecoverable social collapse scenario. No functioning heavy industry capable of rebuilding the major generating plants. Social chaos within weeks. Terminal.
You want to save America? Shoot everyone involved in the NERC proposal for those tests. Or better, interrogate them by whatever means, to find out who's behind this. Then shoot them all.
Real?
http://spaceweather.com/
At this time, however, we cannot rule out a glancing blow from the flank of the CME on or about August 11th. Stay tuned for updates.
Apparently NERC was given actual power in 2006 as part of the redundant department of terrorism department (aka Homeland Security).
"Infrastructure Security
NERC coordinates electric industry activities designed to protect the industry’s critical infrastructure from physical and cyber threats. Security is addressed in the daily operation of the electricity grid and in future planning of the grid.
NERC operates the industry’s Electricity Sector Information Sharing and Analysis Center (ESISAC) under the U.S. Department of Homeland Security and Public Safety Canada. ESISAC gathers information about security-related threats and incidents, and communicates it to government authorities."
It is a B/S Homeland Security organization used, along with all of the other Homeland Security organizations to take complete Federal dictatorial control of everything. As it stands now HSA can order the execution or imprisonment of everyone in the US without getting any approvals and We The People would have to take up arms to stop them. Obviously they would want the power to turn off electricity anywhere they wanted (as well as take away people's gun's so that they are defenseless against the dictator and his evil minions).
hmm ...could be true..
guess i'll lean more to off grid vs grid tied with home power system. I'm not an engineer and not enough time to evaluate this completely just now.
By a wide margin this seems the best, most accurate, and most succinct article I've read at ZH in the 9-12 mos since I found it.
Some people seem to understand the concept and others do not. The crux of the argument and equation as I undestand it, is as follows:
Labor creates value
Money creates debt not value (in our system money is only created through the creation of debt)
It is mathematically impossible to pay back all borrowed money because it is lent with interest.
However that does not mean that a country cannot grow its asset base and standard of living through the converiosn of labor into value OR that borrowing ever increasing amounts of money to purchase value from someone else is an appropriate allocation of resources.
All money and debt that is not used to increase value through labor decreases value through dilution and exportation to someone else. Importation of goods, exports value. Military escapades exports value. Financial wizardry contributes no value and is only parasitic in nature.
By the measure of value creation, the US economy would likely be far from the largest economy in the world because we create relatively little value through labor. (Using the iPod and retail sales as an example: it is impossible to consider the purchasing of value and marking up of the price as an increase in value. It does nothing positive for the US economy .... and the creation of money from money and money from debt without value adding labor is not an economic contribution simply a financial Ponzi scheme.
While I do agree with you, it is not simply labor that creates value. It is the combination of labor and the innovation, many times, derived from that labor, which has made the US the largest economy in the world.
Opportunity and necessity need to be aligned.
No one creates anything! We transform raw materials, that's it! Ideas and power are used to do this. Wealth is, I'm afraid, a pretty subjective term. But, without the raw materials (and I place stored energy such as fossil fuels in this mix) ideas are, well, power-less... and at some point we'll have to rely on more human power (I don't believe that TPTB can have small armies of people operating their paradigm- for a while perhaps, but not long-term, not sustainably; this doesn't preculde them from trying- it is, after all, THEIR system, they cannot relate to anything else).
Energy solution??? Thorium nuclear power. 100% safe. 100% clean. 100% US based, 10x the energy we have now from the same amount of coal.
Makes sense, so it wont happen.
Sounds scary.
I think I'll resort to burning my furniture, just to be safe. /s
Cause MIC needs reason to fuck with others under the guise of protecting our "Strategic Interests Abroad".
Oil is great political cover for Empire buiding..
Correct, makes sense, but will only happen once its politically expedient .
Thorium Bitchez!
It's everywhere, and enough for 10,000 years.
Reference for "enough for 10,000 years?"
And, you're playing with only one oar in the water unless you specify rates of consumption (growth is static? if so, then why bother with promotion?).
Not to mention the State economies being doomed......but at least some folks will do well.....
http://www.taxpayersunitedofamerica.org/NTUI/downloads/11910Pensionshand...
"How can that be when corporates report massive profits? The profits are based on paying their workers a salary that meant they could only buy the goods they made by borrowing"
Workers wages are entirely a separate issue fom the market value of the goods they make. Under this specious logic, workers assembling a 787 would have to be paid far more than workers making a less expensive airliner, and workers building the next nuclear powered aircraft carrier would get paid even more than either.
So, workers ONLY have to make enough to travel via humankind's most inefficient (read "unsustainable") forms of transportation? Wonder how airline bookings are going...
Meanwhile those who DO make enough to purchase one of these pieces of shit are practicing to be participants in the coming Guillotine games.
What fucking ever...
Today we hit a major turn. The economy, drunk with Trillions of printed Benny Bux, still sucking the last drops of Obama stimulus up through a straw, is now going to have to face the new day stone cold sober. Unfortunately, while everyone slept, the productive economy was crated and shipped overseas. And the whole era of 'print-and-shop' is suddenly gone with just one little word from the Fed: "No". But there's going to be hell to pay as the shock waves spread out.
WHy? Because the depression which so many are denying will come into clear sharp focus. And because the forces defending the status quo are stronger than ever. They'll be clinging to their wealth and power even tighter while the economy gets more and more anemic. That will create problems
Can you say...TOTALITARIAN SOCIALISM?
"Unfortunately, while everyone slept, the productive economy was crated and shipped overseas."
If we just keep repeating this shit it becomes true?
Yeah, we should still be making TVs and autos here in the US because, well, we know that they'll be necessary until the sun burns out. Ever think that this is all pet-rock shit and that we got suckers to buy it, just like suckers buying crap Treasuries? I don't think it's a good idea to want this shit back. Besides, a huge number of these jobs are being performed by robots.
Oh! I know! We'll get all those service center jobs back, the ones that respond to people irate over the COMPANY-X's_PIECE_OF_SHIT_PRODUCT?
No, no... we'll get those construction jobs back! Yeah, let's go for construction bubble II!
OK, seriously, let's ALL work for Apple (or Google), because, well, the majority of human cannot live without these fine products! Oh, shit! Got that backwards, over 4 BILLION people cannot afford these lifesaving devices! Well, there goes our hopes for market expansion!
Can we please get a post on this Dylan Rattigan clip.
Fucking balls out awesome.
http://www.youtube.com/watch?v=2Z1XOBDbIy0&feature=player_embedded
Consequences will never be the same.
They all start so rational and convincing. Yet they always end showing their true colors.
Unproductive economy of the public sector and its "pensions"? Don't make my ass laugh. What about the unproductive financial sector and their enlarged bonuses? I bet you the latter are far worse.
Hey, hey! We're not supposed to be peeking behind that curtain! Back to your room!
BOJ INTERVENTION IN
3..2.......1
Breakthrough technology?
I, for one, welcome our new robot overlords....
or in the alternative minging for bitcoin is fun!
Energy is the cash flow in this story. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy.
This helps explain why the government keeps trying to force innovation on the economy through their global warming agenda and ME policies. At any rate the next "innovative" achievement will be the ponzi of tomorrow and will do nothing to address the fact that a loaf of bread will be teetering on the brink of $19.95 a loaf, which should illustrate that innovation without sound fiscal policy is fruitless.
"This helps explain why the government keeps trying to force innovation on the economy through their global warming agenda and ME policies."
Government is a bunch of levers, it's a machine. It's like a gun, it doesn't kill people, it's those people who pull the triggers that do.
"innovation without sound fiscal policy is fruitless."
Absolutely! But... if there isn't sound fiscal policy can there be TRUE innovation?
Hacking Group Anonymous Vows to 'Kill' Facebook on Nov. 5
http://www.foxnews.com/scitech/2011/08/09/hacking-group-anonymous-plans-to-kill-facebook-on-nov-5/?test=latestnews
The fascists on Fox don't like anarchists. It's a perfect setup to thump people: and get MORE control over the Internet.
Finally someone gets it- Peak Oil bichchchchchchezzzz!
Anyone else waiting long in US cash for silver/gold weakness to follow?
There can be no GDP growth without growing energy production. In real terms our economy is now in perpetual recession. Unfortunately, this is hardly the environment for risk and innovation, it's more about survival in the face post peak collapse. The challenge will be to break the socialist shackles the central planners have put on us because innovation will certainly never happen without reward. I say a challenge because now more than ever the population will be suffering. To their own undoing they will demand redistribtion and confiscation of what little precious capital is left.
"There can be no GDP growth without growing energy production."
Would there be an amount that you'd be willing to bet on this statement?
Never mind, I don't like taking candy from babies...
Try this one on: jack up fuel costs (State changes economic force- energy is directed toward production), employ people making shit for real cheap (so that they can pay for their housing as required by their signing of the free-market contract), make imports expensive (devalue the hell out of the USD). Poof! No money going out, lots coming in- improved GDP! This equation happened in the US during WWII, you know, during the Greatest Generation's time! (NOTE: exports probably weren't that great, other than oil, but imports were definitely not robust as the primary industrialized countries were at war [mis-directed capital]).
Great Article, great insight. Think back to the night Paulson & Co., under W killed the free market. It was the night the American Dream Died and the status quo became the evil empire.
1) Dreams don't die (they're not mortal);
2) Never was a "free market" (name a time that there were no tariffs or other trade barriers);
3) The status quo is US (as in all of us); it's mass social hypnosis, it's the System; ANY system that is predicated on perpetual growth on a finite system is going to derail, doesn't mean that it's evil (though in order to keep the game going it DOES resort to evil-like shit, but you know, it's God's country so it's pretty much OK with the blessing of The Big Guy), but it doesn't mean that it's not stupid either.
Speaking of The Big Guy... "Go forth and multiply" Maybe things went wrong a couple of years before W?
I won't read any article with stupid headlines and you lost me with this one.
Apart from that ZH has done no serious analysis of how the S&P downgrade to AA+ will affect the FED's Interest Rates on their Debt repayments (the fed so far paid ca 3% on the 14 trillion Debt ) that makes 420 billion in interest per year,add that to the budget deficit that makes about 1.8 trillion Budget deficit for 2011 so the Fed had to Auction 150billion a month in Debt to manage the economy.
Now with the new Debt Ceiling and the S&P down-grade to AA+, that should bring Interest rates to 4% like Belgium and
that would bring Interest-Payments on say 15 trillion Debt to 600 billion (4%) for 2012.
I think Interest Rates will be more expensive for the FED and even though ZH has screamed for more QE unlimited, along with all the other momo's, I think the FED can not do much more than try to keep rates down and even that is limited. Besides, China and Europe won't take much more of this shit.
Anyway, I am disappointed with Zero Hedge, because they, like anyone else seem to just scream for more QE,
while attacking the Euro Zone, but at the same time hoping for more QE and USD devaluation, so Gold keeps going up.
Meanwhile there is really no serious objective analysis of the overall picture of the economy.
Like usual, everyone has their own agenta, nothing new here.
I just expected a bit more from ZH.
wr;)
Maybe if you go take a nap you're feel better?
Sorry, I don't care what YOU think of ZH.
Anyway, rock, hard place. I don't strain my brain over trying to create magical numbers, all that's needed to know is that that which cannot go on forever won't. Oh, and change is inevitable: I spend more time changing than whining about doing so (OK, I whine WHILE I change, but at least I DO something).
any chance of posting the full original article of Andy's?
I don't care if Ron Paul is 275 - I'm voting for the old fucker. He's the only guy with any meaningful answers.
Voting is a popularity contest. Think back as far as you can and you'll see that we've been programmed to vote as such: not that any of us here do so, just the general population (if only we could go back in time and make Edward Bernay's parents engage in something other than fornication).
275... he'd be dead, wouldn't he? Is that like necrophilia?
I don't need answers. I just need people to stop telling me that I should use THEIR answers! (to questions that aren't pertinent)
Only gullible assholes voting is what makes it a polularity contest. That plus the 2 party system. We're all going to have to get involved to straighten this shit out.
Ha, ha! If the person spewing BRICs-will-keep-the-world-afloat B.S. is still here:
Tata Power Said to Seek Government Help to Curb Plant Losses as Coal Soarshttp://www.bloomberg.com/news/2011-08-09/tata-power-said-to-seek-governm...
Perhaps Tata should be privatized? No, wait... (just fucking maybe, stuff ain't sustainable, perhaps?)
Speaking of low levels of education, "route courses"? Surely Lee meant "root causes." 'Nuff said.
Probably used a voice to text system and didn't proofread.
China’s Trade Surplus Surges to $31.5 Billion
http://www.bloomberg.com/news/2011-08-10/china-s-trade-surplus-surges-to...
Fantastic article!
its not just the US that is doomed... it is the whole abstract economy
'To see the role of the monetary system in this let us take a look at how this currently works: Basically, in the modern world there are places called ‘banks” that have computers in which many people have so-called “accounts”. In the accounts of these computers there are numbers, which are measures (in the US given as dollars) of how much “money” you own. A large proportion of humanity in fact does not have any such “account”, whereas some people may have 10.000 ($) associated with it. Others may have 10.000.000 or even 10.000.000.000 ($) associated with their names in these bank computers. Moreover, for a large number of people these numbers are negative because the banks have “lended” “money” to them. Thus there are huge differences in these numbers for different people despite the fact that people work approximately the same amount of time everywhere. Sometimes the numbers may be related to a service done by someone to the planet, but more often than not it is the other way around. Those that cause the most damage to our planet in fact often have the highest numbers in these bank computers. Regardless, the point to realize is that the numbers in these bank computers more than anything else defines a power structure, where those with high numbers dominate those with low or negative numbers. Money has no real existence, but the legal definitions of a society maintains a system of dominance based on these computer numbers.'
http://www.silverrevolucion.com/story.php?title=the-beginning-of-the-fou...
Damn, Im doomed again. This is the fourth fucking time i had to put my Sony 3D HDTV on hold. Im driving Best Buy fucking nuts.... Im doomed, I quote Arrius, "Judah Ben Hur, Let me die"
you lost me at making the rioters pay for rioting aginst the 1%ers.the 1%ers should pay for the damage they cause resulting ifrom their greedy quest for money and power.
allocation of resources will rebalance naturally when the misallocation of resources rewards the world with a new paradigm starting at zero once again or zirp will bring the cycle around to zero.
Dozens Of Coal Factories Forced To Shut Down In Response To Strict EPA Regulation
http://finance.yahoo.com/news/Dozens-Of-Coal-Factories-siliconalley-298637882.html?x=0
This guy talks like a little tweak here and a tweak there and some new energy sources will solve everything wrong with the economy. He disregards the ones who have broken our system and keep it broken for their own profit. What if someone does come up with a cheap, new energy source. It will just get allocated to the benefit of TPTB. And the average dull American will know or care.
in spite of the poor rhetoric and grammar, this article is truly astounding for its economic wisdom and excellence. zirp destroys capital. capital destruction signals a collapse of economic activity and a substitution of labor for capital but always at slave wages. the fed is evil and must be abolished as the parasitic banksters must not be allowed to proceed with their vile plans to annihilate the american economy.
Sieze all assets of Duke and Duke.
The author is correct that we are doomed but he fails to realize that growth through innovation or otherwise is also doomed. A finite physical world can not sustain infinite growth.
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