The Daily Reckoning PRESENTS: Even though he's never been asked to make a commencement address, that does not stop Bill Bonner from offering up a few words of wisdom to the world's new graduates. It may not be what they want to hear, but his advice is something they should all heed. Read on...Class of '09: You're Screwed!by Bill BonnerLondon, EnglandLast weekend, we journeyed to Boston to attend a college graduation. Thousands of callow scholars were on display. Each was handed his papers...and then marched out of the hockey stadium. To the tune of 'Pomp & Circumstance,' wearing a long, red robe, he entered the outside world solemnly...like a patsy joining a poker game. So far, not a single major university has asked us to make the commencement address. Nor a minor college. Not even a school of cosmetology or taxidermy. But here at the Daily Reckoning headquarters in London, protected by a broad ocean and a narrow reading of the First Amendment, we will give them - and UK graduates too - advice no one asked for."Plastics," was the advice given to college graduates in Mike Nichols' '67 film. But that was when there was still hope for America's manufacturing sector. Even then, it was too late. The percentage of GDP from the manufacturing sector fell for the next four decades, from over 20% in the last '60s to barely 12% last year. Better advice would have been 'derivatives.' They stank just as bad, but they were much more profitable. While only 8% of GDP, finance accounted for 40% of corporate profits in 2007. And derivatives grew from nothing to a face value of 16 times the GDP of the entire planet.But your elders are always giving you bum advice. "You cannot decline the burdens of empire and still expect to share its honors," said Pericles to the class of 430BC. He lived during a time not unlike your parents' era in the USA - when Athens was on top of the world. But vanity got the better of him. He launched an attack on Sparta that backfired badly. He soon died of plague and Athens was not only ruined, but enslaved. Athens' 'golden age' turned to lead. Young Athenians should have shrugged off the burden rather than accept it. You should do the same.
"...as much as $77 trillion of post-’09 earnings must be stolen from the future in order to pay for the liquor your parents drank..."When you were born 20-some years ago, the nation's total debt per person was less than $90,000 - adjusted to '09 dollars, of course. While that was a lot of money, it was nothing compared to what was coming. Now it's $186,717 per person - more than twice as much, in real terms. Fortunately, private debt is not inheritable. But it comes to you as a lien against property. Instead of paying off their mortgages and leaving you a house, free and clear, the baby boomer generation spent the 'equity' in their houses even faster than they got it. House prices rose. But mortgage debt rose faster. While your grandparents owned 80% of their houses, by 2007, the typical homeowner only really owned 4 rooms of an 8-room house. And then, when house prices fell, so did his remaining equity...to the point where one out of six homeowners in America is now underwater. You could still eventually inherit a house, but you may have to scrape the barnacles off the front porch. But that's not even the half of it. While your parents had control of the US government they allowed themselves a little larceny. Add the unfunded retirement and healthcare benefits they voted for themselves to the official national debt, and together they are scheduled to cost your generation 4 times the total annual output of the US. This is over and above the private debt they accumulated. Some of this debt can be carried. Some will have to paid down. But as it stands, as much as $77 trillion of post-'09 earnings must be stolen from the future in order to pay for the liquor your parents drank...the bombs they dropped on god-forsaken foreigners...and the interest on their debts. So, forget about saving for a European vacation or a house of your own. Even if every penny of your savings - and every other American's savings - are put to the task you will still be paying for your parents' expenses all your life. But wait, there's more! The burden is getting heavier. Federal budget projections show an additional $7 trillion in deficits over the next 10 years. Described as the cost of fighting recession, the present generation buries its own mistakes under cash that the next generation hasn't even earned yet. Today's bankers, businessmen and speculators are being bankrolled by you - tomorrow's bankers, businessmen and speculators. Today's homeowners get a helping hand...from whom? Tomorrow's homeowners - you. Today's employees get a boost too. Same story. Where do you think the money came from to pay Wall Street bonuses this year? How do you think GM stays in business...and Fannie Mae...and AIG... Who pays those salaries? Who pays to keep troops all over the world and keep old people supplied with new drugs? Who pays for hundreds of billions' worth of 'shovel ready' boondoggles? You will. At least, that's the plan. The luck of one generation is the curse of the next. Like Pericles, your parents inherited a dollar; they leave you a peso. They took over the strongest, richest, most competitive nation in the world. And like Pericles they minded everyone's business but their own. Now, not only does the US owe money all over town, its government puts out trillions more in IOUs every year - each one with your name on it. You're not even out in the real world yet, and you're getting the bill for 50 cents of every dollar the feds spend - almost none of it earmarked for you. But that is the thing about the real world your teachers probably forgot to tell you about. It is more unreal and fantastical than anything you studied. Here's what's real: You've been dealt a bad hand. From the bottom of the deck...your parents have slipped you some nasty cards. Our advice? Fold 'em. Get up from the table before they clean you out. Enjoy your weekend,Bill BonnerThe Daily Reckoning
The Sinking Titanic: Interview with Michael Ruppert
by Lars Schall, posted May 23rd, 2009
Editor's Note: Both Mike's new book "A Presidential Energy Policy: Twenty-Five Points Addressing the Siamese Twins of Energy and Money" and his 2004 "Crossing the Rubicon" are currently available. -Matt
Lars Schall: Mr. Ruppert, you’re about to publish a new book. What is the title of this book and what is it all about?
Michael C. Ruppert: A Presidential Energy Policy: Twenty-Five Points Addressing the Siamese Twins of Energy and Money is a book addressing what an American President should be doing and saying about energy issues free from ideological, political, or other mental restraints. It is a simple and stark analysis of the world's current energy picture written for those with only a High School education that quickly and clearly cuts through the nonsense we have been sold about energy, money and growth. It also has wide appeal for planners and leaders (especially local) in all countries. Energy behaves the same way everywhere. German foresight on energy issues -- in particular its aggressive implementation of Feed-in-Tariffs -- has offered some very positive innovations that I have recommended be adopted by President Obama here in the U.S.
QUESTION: When and through what did you begin to take interest in Peak Oil? Had there been all at once a nightmarish vision like "the Road to the Olduvai Gorge" in front of your eyes?
Michael C. Ruppert: I was first exposed to the concept of Peak Oil by geologist Dale Allen Pfeiffer shortly after 9-11. I was struck by how simple and clear the actual science was; how easy the issue was to both comprehend and validate using nothing more than basic math and simple logic. It was absolutely a nightmarish vision then (and still is) but it explained so much about geopolitics, macro economics, war and the markets that I jumped into it right away. -- We are still on the Road to the Olduvai Gorge and that is precisely what my book seeks to prevent.
Years have gone by since then. Even though major newspapers like the New York Times admit these days that the end of cheap oil is near, they rather avoid to discuss the underlying consequences of Peak Oil. How would you explain those consequences? Isn’t Peak Oil somehow the end of globalization?
Peak Oil is not just the end of globalization. I was saying clearly that globalization was dead five years ago. It was obvious. But Peak Oil is potentially the end of the human race and that outcome is perhaps just a few years away unless the human race essentially throws every ideological sacred cow out the window and starts with a fresh piece of paper. There are around five billion people alive today that were not sustainable before oil came along. There is no combination of alternative energies (nor will there ever be) that can possibly sustain the edifice built by oil. In the industrialized world there are ten calories of hydrocarbon energy involved in the production of every calorie of food. Our soils have been little more than infertile sponges onto which we throw massive amounts of chemicals derived from oil and natural gas.
The most dire consequences may lie in food production, anyway. Agriculture depends a huge deal on oil. At From the Wilderness (FTW) you had the thesis that we are "eating fossil fuels". Can you explain those relations a bit?
In our world a farmer drives an oil-powered machine to plow fields. He or she then drives another oil-powered machine to plant seeds. Water for irrigation is -- in most cases -- pumped by electricity generated by coal, natural gas, and oil. Germany has made great strides in electrical generation through Feed-in-Tariffs which have exploded solar and wind generation but they do not resolve the whole equation. After seeds are planted and irrigated the crops are then sprayed with pesticides (derived from oil) and fertilizers (produced from natural gas). To harvest the crops the farmer then drives another oil-powered machine. Then oil is used to transport the food to processing plants and for subsequent distribution. Food is often wrapped in plastic (also oil) and frequently treated with chemical additives also derived from oil and gas.
Globalization has only compounded the issue by shipping food all over the world (wasting oil) for the sake of profit rather than sustainability. I live in California and can go to a market and find strawberries from Chile while Southern California grows great strawberries. This pattern is the same for most food consumed in industrialized countries. This only happened because cheap labour costs and less-stringent regulation became more important than common sense. Money overcomes logic every time. But just watching globalization end will not solve the problem. As I have said for years, globalization dies with cheap energy. There's little point in fighting it anymore unless the struggle is in pursuit of a unified energy vision.
The financial mess we’re in: Has it something to do with Peak Oil, too? Is there this systemic crisis because we are heading towards the end of the Age of Oil – and no one is telling the public so?
The current economic collapse is a combination of two things. First, the current global economic paradigm -- governed by fractional reserve banking, fiat currency, and compound interest (debt based growth) -- is inherently and by definition a pyramid scheme. Money is useless without energy. One cannot eat a dollar bill or crumble it up and throw it in his gas tank. Each of the trillions of dollars created out of thin air since the fall of 2008 is a commitment to expend energy that cannot and will not ever be there. The Laws of Thermodynamics prevent this. I applaud the decision of Chancellor Merkel to resist the temptation to achieve a temporary solution by printing money endlessly. I am German by ancestry. My great grandfather migrated to the U.S. from a small town in Essen called Ruppertsburg at the turn of the last century. German pragmatism and realism on energy has been apparent to me since my first visit to Germany in 2003. It is not perfect and must be improved, but I have seen more clear thinking on the subject in Germany than in any of the 13 countries I have visited. That is actually not as good a thing as it might sound. There can be no "recovery", no return to growth (which is what the economic paradigm demands), without energy.
Why is this not discussed openly: The dinosaurs of the old paradigm -- who are about to pass into extinction -- cannot admit this because it would have an immediate effect on the financial markets which are already dying. People would stop buying stock if they understood that a return to growth is impossible. I think, however, that on a more fundamental level the dinosaurs just cannot see their own impending extinction. They are incapable of mental and spiritual evolution which all of our survival depends upon. They cannot adapt. As the global environment changes forever, from the related issues of climate change, energy shortages, and economic collapse all dinosaurs can do is die. That's what Darwin so clearly proved with regard to all life on this planet. Those species which cannot adapt must go extinct. We see billionaires and dinosaurs disappearing or losing money everywhere. Even Warren Buffet and George Soros are losing money because they cannot grasp that infinite growth is not possible. The term "sustainable growth" is perhaps the greatest oxymoron ever coined and an instant indicator of imminent Darwinian deselection for anyone who uses it. I keep a safe distance from such people.
Mainstream media all over the world is corporate-owned; a dinosaur by definition. In America CNN is owned by Time-Warner; CBS is owned by Viacom; NBC is owned by General Electric, ABC by Disney; the Wall Street Journal is owned by Rupert Murdoch and Newscorp, ad infinitum. All large press outlets sell stock and -- far worse -- are tied into a global derivatives bubble now estimated at $700 trillion in notional value that not only is collapsing: The Mother of All Bubbles.[4] Telling the truth to the people means that people will stop buying GE, Time Warner, Viacom and Newscorp stock so that is the last thing mainstream media can acknowledge.
Those who produce, edit and report the "news" are corporate citizens rather than human beings. They have chosen to murder their own children to protect their current jobs (the food they receive from an abusive parent). Being of German ancestry I am sensitive to issues about being willfully ignorant (cowardly) in the face of great evil. I am also aware of and grateful for the White Rose and von Stauffenberg and his heroic colleagues. I have felt like these great Germans must have felt for many years now. I still owe a great debt of gratitude to my old friend Andreas von Bülow from Köln[5] who graciously exposed me to authentic German culture. I have lost contact with Andreas and his wife Anne and I pray they are well. Now we find that this blindness is an inherent part of humans in all countries and the one thing that must and will go extinct with the Old Paradigm. [Source]
But the dinosaurs are losing their grip. Since the start of the collapse of industrial civilization, corporate-owned media has become something of a joke. "Check the tire pressure on your resume" is about the best advice they can offer. Then they say, "We think we have hit the bottom, so buy stock and don't pull your retirement out of the markets" while at the same time issuing reports that show that we are nowhere near a bottom and that everything is getting worse. Who can trust such nonsense. There must be a great German word that means idiotic, contradictory and bullshit at the same time. [Kokolores]
The money that is spend in billions and trillions these days will be needed in the struggle with the consequences of Peak Oil – and will be gone. Forever. Doesn’t make that a collapse of industrial society inevitable?
The collapse of industrial civilization within the next five to ten years (perhaps sooner) is inevitable. It is the degree of collapse, what is destroyed in the collapse, how many people will have to die in the collapse, and what will survive the collapse that I and many others are fighting for now. That is what every human being should be concerned about and nothing less. Pursuing options while not rapidly disengaging from the current economic paradigm of infinite growth is the only real issue confronting the entire species. To not do that will be literally to consign unborn generations and those under 40 to death or a living hell.
QUESTION: Mr. Ruppert, if we know something for sure about 9/11 it is the fact that the world public was rather misled. Information on TV and in the newspapers was very one-sided and incomplete. What does this tell us about the handling of the situation we are facing now in 2009? And hasn’t 9/11 itself become a major distraction from the collapse of industrial civilization?
Few have done more detailed investigation of the 9-11 attacks than I have. Even though Rubicon is in the Harvard Business Library and has sold around 100,000 copies in two countries, it has never even been acknowledged by my government. 9-11 was a predictable event and it was motivated precisely and solely by Peak Oil and nothing else. I believe I proved that conclusively in Rubicon which has never been challenged; only ignored. It is absolutely too late to go back and seek justice for the crimes of Richard Cheney and George W. Bush. I believe they were counting on that. It would be literally a waste of energy. Oil and natural gas can only be burned or consumed once. The present crisis is so severe that we cannot waste oil, natural gas and the limited energies of human consciousness to go back there.
QUESTION: At the end of Crossing the Rubicon you stated this scenario:
We have to pay for $100-(or higher) a-barrel oil somehow. Why don’t
we just print the money? Anyone who has heard of the damage done
by inflation and hyperinflation to those least able to cope with it
should think back to Germany’s Weimar Republic in the 1920s.
There is no need for you to rewrite this passage insofar it seems like this recession wants to prove you’re right, don't you think?
Weimar-style inflation is inevitable in the United States, especially as major economies start to disengage from the dollar. I predicted this at least six years ago. It is only a matter of time. Here is the basic sequence of events I see coming: FDIC insolvency, Treasury default on T-bills and all Treasury notes, the end of the dollar as the global reserve currency, hyperinflation, insolvency and bankruptcy of the Federal Reserve which is a privately-owned bank. That will be followed by the eventual collapse of the United States government. All of these things are inevitable in my opinion and could happen in full in as little as three years. The dinosaurs refuse to accept this because they won't question a monetary ecosystem which they created and which has allowed them to thrive from the Garden of Eden until now. Those who wish to survive and understand the issue will do whatever they can to disengage from a Titanic that is clearly sinking by building local lifeboats, tailored to their local needs.
Fortunately, there are many things that can be done, independent of government action, and that's why A Presidential Energy Policy was written.
QUESTION: In February of this year, the International Energy Agency (IEA) in Paris put out a forecast in which they are predicting an even bigger economic crisis in years to come. According to the IEA, the reason for this is the cancelling of new investments into new drilling projects by the major oil companies. In the case of rising demand in 2010, the oil price could explode, inflation could rise and the result could be that world economic growth would likely come to an end. Let us talk about the infrastructure problem first: Why do you think big oil doesn’t invest anymore in new projects?
All of those projects, whether for deep sea oil or in pursuit of alternative energies were only profitable when oil was at or near $100. All over the world, energy infrastructure is crumbling as a result of collapsed oil prices making it unprofitable to invest in infrastructure or alternatives. A few years ago Robert Hirsch of SAIC wrote a study for the U.S. government warning of the crisis which stated clearly that the time to have started preparing for this was 30 years ago.[8] He examined scenarios in which preparations were begun twenty, ten and zero years before Peak. All scenarios were catastrophic. His observations were only confirmations of warnings issued by Vice Chancellor David Goodstein of Cal Tech which said clearly in his book that it takes thirty years and a lot of money to change an energy infrastructure. Mankind has waited until the last minute and there is no money left. It's that simple. People have been warning about precisely this moment since 1949 when the great M. King Hubbert laid this landscape out for all to see. There is little or no money left for essential infrastructure investment and the infrastructure cannot be rebuilt under the current economic paradigm. As Dutch economist Martin van Mourek said in 2003, "It may not be profitable to slow decline." He was absolutely correct and I knew it the instant I heard him say it in Paris. [Source]
And now let us talk about the oil price spike. In 2006, you and Michael Kane wrote an article for FTW called "The Markets React to Peak Oil. Industrial Society Rides an Unsustainable Plateau before the Cliff", in which you were writing about the Bumpy Plateau. You’ve explained it like this:
Recent price swings – both up and down – have been predicted as a
part of the Peak Oil scenario for years. I saw the first hard predictions
of the bumpy plateau in 2002, and they made good sense.
WHAT IS THE "BUMPY PLATEAU"?
Here’s how Colin Campbell described it when FTW contacted him for
this special report:
1. Price shock (as the capacity limit is breached)
2. Economic recession cutting demand
3. Price collapse (the market overreacts to small imbalances between
surplus and shortage)
4. Economic recovery (followed by increased demand)
5. Price shock (as the falling capacity limits are again breached)
Simply put, everything is triggered by the inability of the planet to
increase supply beyond a certain point, regardless of demand. That is
the definition of peak. Peak is still peak whether it leads to sharp and
immediate fall off or to the bumpy plateau we are now seeing. Source
Is this model still the procedure after which "everything is triggered"? Is it the Bumpy Plateau that the IEA is talking about for 2010? And was it the Bumpy Plateau we have witnessed already in 2008?
We are on the bumpy plateau right now. The description and predictions offered by Campbell and many others were very good but only two-dimensional in that they addressed price and demand only. I think my greatest contribution on top of their pioneering work has been to thoroughly explore and illuminate the corruption of the economic paradigm, the significance of derivatives [Example] and to introduce that as a third factor. This has allowed me to make astonishingly accurate predictions for a decade now. The implosion of the derivatives bubble which has only just begun may prevent any real or even temporary "recovery" from ever taking place. All the energy spent on a "recovery" in the infinite growth paradigm will have been wasted. One thing I am also certain of is that there won't be many bumps in the bumpy plateau. As soon as any kind of recovery begins, it will collide instantly against the brick wall of diminishing energy. We have passed Peak I am certain. The IEA has virtually admitted all this. After the last bump it is straight down the cliff back to the Stone Age unless people take action immediately.
QUESTION: In 2001, when the Bush Administration came to power, the broader public did know nothing about Peak Oil. The Bush Administration did. In your book “Crossing the Rubicon” you point to a speech by Dick Cheney that he delivered in London at the Petroleum Institute in 1999. [Source] Mr Cheney was the CEO of Halliburton back then. He was in the loop, right?
Cheney was the loop. There is an abundant record that the most powerful policy-making institutions have known about Peak Oil since at least the 1970s. That includes our CIA, [Source] leadership in Russia, Britain, China and Japan. My studies suggest that Germany understood it best and has done the most to address it implications over the years.
QUESTION: An important topic of your research with regard to 9/11 are the unknown records of the “Energy Task Force” run by Dick Cheney, the National Energy Policy Development Group. In Crossing the Rubicon you wrote:
. . . the deepest, darkest secrets of September 11th lie buried in the
records of the US National Policy Development Group (NEPDG) which
began its work almost the same day the Bush administration took
office and produced its final report in May of 2001, just four short
months before the World Trade Center ceased to exist.
Can you explain this in more detail for those who have never heard about this before?
It's explained in detail both in A Presidential Energy Policy and in Crossing the Rubicon. Essentially the NEPDG appears to have been set up, almost from the first day of the Bush administration, to find out how much oil was left, who had it, and how it could be obtained (bought or stolen) to support U.S. hegemony, U.S. consumption, and the monetary paradigm. Those things are all dinosaurs anyway and they are dying in the New Paradigm as they must. The fact that the NEPDG records have been kept secret from the American people who paid for it is one of the greatest crimes of all time. Seeing those records now would save a lot of duplicated effort in trying to inventory how much oil there is left.
The figures on oil reserves quoted by producing nations and companies are as fraudulent and cooked as the books on mortgages, banking, and even Bernie Madoff. The Saudis cannot hide the fact that they have passed Peak anymore. I prove that in my new book. The world's largest energy investment banker Matthew Simmons proved it before I did in his book Twilight in the Desert. I have proved the same thing a different way. If Saudi Arabia has passed Peak then the whole world has passed Peak. It was Peak Oil that was driving Dick Cheney's Task Force and nothing else.
QUESTION: Is there a chance that we will ever know about the real content of the NEPDG files?
I hope so. That's what I have called for in A Presidential Energy Policy.
QUESTION: You are known for using this quote by Benito Mussolini:
Fascism ought more properly be called corporatism because it is the
perfect merger of power between the corporation and the state.
Isn’t Dick Cheney a perfect example for this? He did made a whole lot of money as a main-shareholder of Halliburton through the foreign policy of the Bush Administration, didn’t he?
He shouldn't be singled out. The Bush-Cheney administration had its "base". Some of that base is shared with the Obama administration. The Bush-Cheney administration, knowing that collapse was coming, looted the U.S. economy on behalf of its base. It was perhaps the largest wealth transfer (theft) in history. I predicted and warned about each step in precise detail for eight years. [Source]
I was dead-on accurate and there's a clear record to prove that. And I suffered for it. I was harassed, sabotaged, my offices were burglarized and my computers smashed in 2006 prompting me to flee the U.S. for four months. What did we Americans do as Bush and Cheney rode out of town with all that wealth? We gave them a parade and called it inauguration day.
Beyond Peak Oil as a motive for the Bush Administration to "arrange" the thing that we know as "9/11", you wrote extensively about the importance of Afghani drug traffic. Since the military engagement of NATO forces in Afghanistan, the profits from heroin trade are at an all time high, aren’t they?
The global drug trade is evolving. I won't go back now and explain what happened between 2001 and today. The global drug trade was estimated by me to be generating around $600 billion a year in total revenues in 2004. That was fine as long as the infinite growth bubble appeared to be functioning. Drug cash was chased by banks and major corporations like General Electric, AIG, Philip Morris, Citigroup, etc. back then. Europe was no exception. But now the collapse of a $700 trillion derivatives bubble has changed everything. What was a lubricant to allow further expansion of the bubble in 2001 is today less than the minimum monthly payment on a credit card.
The reason why the U.S. is having all this drug violence now is, I am certain, because U.S. banks are crying for all the illegal cash they can launder to service the "minimum monthly payments" on their derivative exposure. The drug violence is here because all over Mexico the word is out on the streets, "Get a kilo of grass across the border and you get $500." It's a stampede because Mexicans are starving. That is because their largest oil field Cantarell is collapsing and oil revenues have plummeted. It always comes back to energy and money.
Who knows how many drugs are being consumed now? Personally, I don't think it is significantly higher than it was five years ago or twenty-five. I have written extensively -- citing scientific studies -- that only about 10% to 12% of any given population is susceptible to addiction. The rest of the people may use drugs but will never get addicted because they realize it's not beneficial. They don't like it. One does not create addicts by pumping more drugs into a society. One only feeds that fixed percentage who are susceptible to addiction. That is what is called a captive market under the current monetary regime.
QUESSTION: Let’s take a look at this news article from Reuters, please:
Reuters: UN crime chief says drug money flowed into banks
The United Nations' crime and drug watchdog has indications that
money made in illicit drug trade has been used to keep banks afloat in
the global financial crisis, its head was quoted as saying on Sunday.
Vienna-based UNODC Executive Director Antonio Maria Costa said in
an interview released by Austrian weekly Profil that drug money often
became the only available capital when the crisis spiralled out of
control last year . . . Source
Can you comment on this?
As Claude Rains said in Casablanca, "I'm shocked! There's gambling going on in this establishment."
QUESTION: Mr. Ruppert, we are talking here about Organized Crime at the top ranks in finance, economics and government. One might think: “Well, has it ever been different before?” In my opinion the main difference is that Organized Crime is nowadays almost officially part of the game – it isn’t really hidden anymore. One example for this is the manipulation of the stock market by the infamous Plunge Protection Team (PPT). Can you explain how the PPT works, who is involved and why its existence isn’t just a “conspiracy theory”?
The PPT is overwhelmed now. This collapse has been a tsunami that has rendered the PPT largely ineffective. It had the ability to intervene artificially to prevent market collapses when it was only billions of dollars involved.
Now that we're dealing with trillions the PPT is of little interest. Broadly speaking, the U.S. Treasury (almost a proprietary of Goldman Sachs) has become in itself a PPT with increasing ineffectiveness. The U.S. is currently having the biggest "Sucker Rally" there will ever be.
QUESTION: I would also like to talk a little bit with you about gold under the circumstances of Peak Oil. I remember you have written a while ago that the "new" wealth is gold – which is the 'old' wealth. What do you mean by that precisely?
Look, the fact is that when the FDIC and the Federal Reserve go insolvent, gold will be the only place left to turn. Proposed new currencies cannot solve the problem. They will only destroy evidence and people by chasing the mirage deeper into the hole. New currencies will only recreate the same problem in a different and more vicious form. For seven thousand years the human race has chosen only one option as a universal store of value in hard times -- gold. To protect against inflation -- gold. I have seen many reports saying that there is five times more paper gold than there is physical gold out of the ground. Gold is finite. It cannot be printed. It has a connection to the earth. I strongly advise all my readers to buy and hold physical gold and have done so for years. The human race does not have to stay with gold forever. But it will help those with it to survive and function economically as collapse unfolds.
QUESTION: Another question, straight and dry: Is the gold market manipulated, and if so, how?
Absolutely gold prices have been manipulated. For the best discussion of that I recommend the Gold Anti-Trust Action Committee (GATA) and Le Metropole Cafe
QUESTION: You have said over and over again during the last years: "As long as you don’t change the way money works, you change nothing.' For example you wrote recently in an open letter to President Obama: 'All you are doing is buying time to prevent the collapse of a totally dysfunctional marriage where the mother (the government) kills the children (us) to save her relationship with the father (the way money works).' Two simple questions: How does money work, and: How should it work in future?
These are addressed clearly and succinctly in my book.
QUESTION: In order to sum our interview up so far: What we need is a paradigm shift. How should it look like, besides a change of the way money works?
The way the paradigm shift should occur and what it should look like is a discussion for the entire human race. I choose not even try to answer that. I do offer some ideas on how to start the dialogue in the book.
QUESTION: Let us take at the end of this interview a look into the future. Ten years from now: Give us your best case scenario, please.
There is a mass awakening of human consciousness; the equivalent of mankind taking the red pill from the movie The Matrix. We stop chasing an impossible notion of infinite growth and begin to change our minds about life and what it means right now. We accurately, clearly and fearlessly accept and embrace the crisis and begin implementing available solutions today. We stop feeding the economic beast which has no option but to kill us in order to save itself. Maybe instead of four or five billion people starving and or dying in resource wars, or in nuclear exchanges over resources, we can reduce that number to two or three billion and also identify, redefine and preserve the best parts of human civilization for the generations that follow. We find a way to live in balance and true sustainability with the planet that gives us life and all the life that we share it with.
QUESTION: And now give us your worst case scenario, please.
Human extinction and the possible extinction of all life on the planet, either as a result of climate collapse or a global nuclear exchange over energy.
The coming situation of Peak Oil will be a turbulent event. When I got you right, you argue in "Crossing the Rubicon" that the Patriot Act and the cut-back of the Posse Comitatus Act were implemented by the American government to prepare itself against civil unrest during the 'hard times' of Peak Oil. Is your country heading into a future where freedom is again a privilege, not a given right? And why should people in Europe and around the world be very interested in the freedom of the citizens in the United States?
I disagree with the Russian analyst who predicted a civil war here. [Source] Civil wars are defined by geographic boundaries. I do however think it inevitable that the United Sates will dis-integrate and there are clear signs of that beginning right now. But what's going to happen here is no different than what will happen all over the world. As human industrial civilization collapses everything will be governed by a force as powerful and unyielding as gravity. That is geography. Things do not break up. They break down. They get smaller. Problems in Essen or the Rhineland will be different from problems in East Prussia or Bavaria. There will be massive social unrest here but I do not believe it can be accurately predicted how that will play out. There can be only one end result.
Everything will revolve around what is within 50 or 100 kilometers of where one lives. The reason why the United States is so important is because my country still exerts so much political, social, economic and cultural influence around the world. In writing "A Presidential Energy Policy" I not only recognized the difficulties we face here but the fact that if the United States can change, if it can drop the suicidal notion of infinite growth and its defense of a corrupt and murderous economic paradigm, then the whole world will be that much more empowered to save itself . . . country by country, region by region, and neighborhood by neighborhood
The Daily Reckoning PRESENTS: Yesterday, the Dow had its best day since the beginning of April...the sun is shining, the birds are chirping...and all seems right with the world - at least on the surface. James Howard Kunstler is here to clean off those rose-colored glasses, and give a dose of reality. Read on...
The Bottom...?
by James Howard Kunstler
Saratoga Springs, New York
Euphoria managed to out-run swine flu a few weeks ago, as the epidemic- du-jour, with "consumer" confidence jumping and the big bank stocks nudging up. The H1N1 virus fizzled for now, at least in terms of kill ratio, though we're warned it might boomerang in the fall with a vengeance. No one was surprised to see Chrysler roll over like a possum on a county highway, but the memory of their muscle cars will linger on like a California surfing song. Here in the northeast, where Sundays are not spent at the NASCAR oval, the spring foliage reached the tenderly explosive stage and it was hard to feel bad about anything.
For now, the "bottom" is in - that is, the bottom of this society's ability to process reality. It may continue for a month or so, but events are underway that are beyond the command of personalities. We're done "doing business" in all the ways that we've been used to, but we just can't get with the new program. Let's count the ways:
1. The revolving credit economy is over. It's over because we can't increase energy inputs to the system, which is one way of saying "peak oil." Of course hardly anybody believes this right now because the price of oil crashed nine months ago, along with global manufacturing and trade. But nothing has changed on the peak oil scene - except perhaps that ever more new oil projects have been cancelled for lack of financing, which will boomerang on us (even if swine flu doesn't) in the form of much lower future oil production. In any case, the credit fiesta is over, and the "consumer" economy with it, because industrial growth as we have known it is over. It's over globally, too, though all regions of the world will not experience its demise the same way at the same rate.
The Asian nations may swap things around a while longer but China is basically up the creek without a paddle. They have less oil left than we have (which is saying, not much at all) and they won't corner the rest of the global oil market without starting World War Three. Meanwhile, they're running out of water and food. Good luck becoming the next global hegemon. Oh, and Japan imports 90 percent of its energy; India over 80 percent. Fuggeddabowdit.
Credit will not vanish everywhere overnight - even in the U.S.A. - because it is not distributed equally everywhere. But it will vanish in layers, and here in the U.S.A. a very broad layer of the lower and middle classes are now losing their access to it in one way or another - personally, in small business - and they will never get it back. Anyone who intends to thrive in the years just ahead had better plan on doing it on the basis of accounts receivable - and what they receive might not even necessarily come in the form of U.S. dollars. It may come in the form of gold or silver or in the promise of reciprocal services rendered.
This has enormous implications for two of the items in which our credit-dispensing operations are most deeply vested: houses and cars. Unfortunately, these are exactly the things that economic life has been based on for decades in our nation, which leads to the next categories:
2. The suburban living arrangement is over, along with all its accessories and furnishings. Taken as "all of a piece," the suburban expansion was one sixty-year-long culmination of hypertrophy. We did it because we could. We won a world war and threw a party. We had lots of cheap land and cheap oil. It made lots of people lots of money and all its usufructs have become embedded in our national identity to the dangerous degree that the loss of them will provoke a kind of national psychotic breakdown. In fact, it already has. The completely unrealistic expectation that we can resume this way of life is proof of it.
The immediate problem is that we can't build anymore of it. The next problem will be the failure of the stuff that already exists. The first stage of that is now palpable in the mortgage foreclosure fiasco and, just beginning now, the tanking of malls, strip centers, office parks and other commercial property investments. The latter will accelerate and become visible very quickly as retail tenants bug out and weeds start growing where the Chryslers and Pontiacs once parked. The next stage, which involves large demographic shifts in how we inhabit the landscape, has not quite gotten underway.
3. The Happy Motoring fiesta is over. You'd think that with Chrysler crawling into the bankruptcy court, and GM just weeks away from the same terminal ceremony, the news media would begin to suspect that the foundation of everyday life in this country was cracking. Instead, all we hear is blather about "market share" shifting to Toyota. News flash: not only will we make fewer automobiles in the U.S.A., but Americans will buy far fewer cars made anywhere. We'll keep the current fleet moving a while longer, but when it's too beat to repair, we won't be changing it out for a new fleet - despite all the fantasies about hybrids, plug-and-drive electrics, and so on. The masses will be too broke to buy these things. What's more, they will be very resentful of the shrinking economic "elite" who can afford them. And, anyway, our roads and highways are destined to fall apart very quickly because there is no way we can sustain the necessary rate of normal maintenance. Meanwhile, we remain completely un-serious about public transit - even about fixing the vestiges that still exist. The airline industry, of course, will be toast inside of five years.
4. Our food production system is approaching crisis. There's no way we can continue the petro-agriculture system of farming and the Cheez Doodle and Pepsi Cola diet that it services. The public is absolutely zombified in the face of this problem - perhaps a result of the diet itself. President Obama and Ag Secretary Vilsack have not given a hint that they understand the gravity of the situation. It is probably one of those unfortunate events of history that can only impress a society in the form of a crisis. It also happens to be one of the few problems we face that public policy could affect sharply and broadly - if we underwrote the reactivation of smaller, local farm operations instead of shoveling money to giant "agribusiness" (or Citibank, or Goldman Sachs, or AIG...). I maintain that this may be the year that the crisis gets our attention, because capital is suddenly harder to get than fossil-fuel-based fertilizer.
All these epochal discontinuities present themselves, for the moment, as a season of muted "hope" and general apathy. The days are suddenly mild. We've resumed old and happy habits of grilling meat outdoors and motoring to those remaining places that were not blanketed with franchised food huts and discount malls. We have a new, charming president with an appealing family. Newly-minted dollars are flowing to the "shovel-ready." The new bad news is less bad than the old bad news (or seems to be). And the year just past has been such a bummer that our hard-wired human nature tells us that good things must be just around the corner.
Personally, I think a lot of good things await us, but not the ones we're expecting - not a return to buying Slurpees on credit cards. It will be very salutary to leave behind the junk empire we've accumulated and move into an epoch of quality and purpose. For the moment, though, our hopes reside elsewhere.
Regards,
James Howard Kunstler
for The Daily Reckoning
The Daily Reckoning PRESENTS: Trend forecaster Gerald Celente describes the history of the future, envisioning how "The Greatest Depression" will look from the perspective of someone in 2012. Read on, and see how he recommends you prepare for the worst...Looking Back on The Greatest Depressionby Gerald CelenteKingston, New YorkOn average, world trade fell 31 percent in January 2009. To varying degrees, recession and depression gripped globally."The outlook for global consumption remains bleak. Exports are likely to remain lackluster until global consumers regain their appetite for consumption," wrote Jing Ulrich, managing director at JPMorgan in Hong Kong, in response to the dire data.To track and make practical use of trends requires critical analysis of not only the data but also of the interpretations arising from the data. This becomes particularly essential when interpretations express a virtual media consensus. "Whenever you find that you are on the side of the majority, it is time to pause and reflect," advised Mark Twain.A case in point: On the surface, Ms. Ulrich's assessment above does not seem unreasonable. It is a theme expressed, with minor variations, by a majority of economic analysts reported by the media. But that assessment rests upon a set of false or questionable assumptions. The first assumption was that all consumers need to do is "regain their appetites" for exports. But it has nothing to do with "appetites." Consumers were broke. They were no less hungry for products - they just didn't have the money to buy them.The second assumption was that once consumers started consuming again exports would regain luster. Implicit in this statement was that as exports grew, economies would rebound and everything would go back to normal. This "normal" refrain was endlessly repeated, not only by economic analysts, but by politicians and business leaders.Unquestioned was not only the inevitability, but also the virtue and desirability of a return to "normal." What was normal?Normal, prior to "The Greatest Depression," meant unchecked over consumption and over development made possible by the availability of cheap money and easy credit.On the consumer end, "normal" was a death wish, "shop 'til you drop" - an obsessive compulsion by the profligate many to spend money they didn't have but had to borrow. The spending spree extended to buying expensive new cars rather than affordable used ones. It had people building extensions and making home improvements when neither were necessary. It meant buying a McMansion when a Cape Cod would do. Splurging on expensive vacations, elaborate weddings and extravagant bar-mitzvahs to impress family and friends. Borrowed money financed a major lifestyle upgrade that otherwise could not have ever been imagined, but that corresponded to what most people considered the "American Dream." Borrow to the limit now, and pay sooner or later was "normal."On the commercial/financial end, "normal" was also the obsessive compulsion to endlessly acquire, not merely upgrade. Borrowed billions, lots of leverage and little collateral provided financiers and developers with the power to acquire ever more money, assets and prestige - through mergers and acquisitions, building developments, equity market speculation and predatory business practices that gobbled up or drove out the competition. Give or take a bit of regulation and self-restraint, this was the "normal" the popular new President promised to return to.Which brings us to the third assumption, and arguably the most important which was that the crisis - inability of banks to lend and businesses to borrow - was mainly responsible for the economic disaster. As President Obama put it, "Our goal is to quicken the day when we restart lending to the American people and American business, and end this crisis once and for all."
"To promote policies encouraging people to take out more loans and sink still deeper into debt was abnormal, not 'normal.' The abnormal had been renamed the normal."He said, "You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll." Sounds positive, doesn't it? Ease the "flow of credit." Make it easier "to get a loan."But what the President meant and did not say was ... take on more debt, borrow more money. Sound familiar? Turn back the clock. Remember the advertisements at the start of the decade encouraging Americans to take out home equity loans, to buy new cars, to move up from a starter home into the dream house? With interest rates at 46 year lows and credit flowing, the public were suckered into betting on their futures with borrowed money they could only pay back as long as they had jobs, could make payments and the economy didn't collapse.But when they lost their jobs, they couldn't make payments and the economy began to collapse. Total unemployment (including discouraged workers and those with part time jobs looking for full time) was nearing 15 percent. In the fourth quarter of 2008, the net worth of American households fell by the largest amount in more than a half- century of record keeping. By February 2009, the foreclosure rate was up 30 percent from February 2008.What Mr. Obama promised as the solution was, and had been, the problem. The country was already overwhelmed with debt ... debt that it couldn't pay back. In what way could incurring more debt "end this crisis once and for all"?It was a plain fact; the flow of easy credit produced a torrent of debt. In 2009, private sector credit market debt was 174 percent of GDP. Household debt-service ratio was at an all-time high. US households had 39 percent more debt than income. (In 1962, consumers had 37 percent less debt than income. To promote policies encouraging people to take out more loans and sink still deeper into debt was abnormal, not "normal." The abnormal had been renamed the normal. Instead of encouraging people to live within their means, cut back, save money, and distinguish between "wants" and real needs, the official policy was to turn on the credit tap and flood the world with more debt.The sanity of the policy was never in question. Arguments raged only over the quickest and most effective way to turn on the money spigot.Everyone was looking for someone, somewhere, for rescue, and most eyes were turned to the United States. Even though the US was blamed for the flagrant economic abuses that brought on the crisis, given its economic clout and Superpower status, America was still looked to for the leadership needed to pave the way to recovery.With its globally popular new president, hopes ran high that American know-how would know how to fix the problem ... as though it were an intellectual exercise that could be solved by applying the correct economic formula. No such formula existed. Yet so desperate was the world that it placed its hopes on the very people responsible for the deregulation of the financial industry largely blamed for the crisis. The deregulators now occupied key positions within the cabinet of that globally popular new President.Billionaire investor Warren Buffett added a military dimension, dubbing the meltdown an "economic Pearl Harbor." Buffett called on Congress to unite behind President Barack Obama, comparing the economic crisis to a military conflict that needed a commander-in-chief. "Patriotic Americans will realize this is a war," he said. If it was an economic Pearl Harbor, the enemies were Fannie Mae, Freddie Mac, A.I.G., Countrywide, Bank of America, Merrill Lynch, Citigroup, Bear Stearns, and all the other banks, brokerages, speculators, insurance companies, hedge funds and leverage buyout specialists that had launched the sneak attack on the American economy.It had nothing to do with patriotism, unless being a "Patriotic American" meant appeasing and rewarding the enemy with trillions of dollars of taxpayer money and not being allowed to know where the money went.
Fed Refuses to Release Bank Data,Insists on SecrecyMarch 5, 2009 (Bloomberg) - The Federal Reserve Board of Governors receives daily reports on bailout loans to financial institutions and won't make the information public, the central bank said in a reply in a Bloomberg News lawsuit.The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast "a stigma on recipients of more than $1.9 trillion of emergency credit from US taxpayers and the assets the central bank is accepting as collateral.The public had been cozened into believing:
That disclosing the identities of the recipients would poorly reflect upon their public image and therefore their ability to function. Secrecy, on the other hand, allowed them to continue making disastrous decisions, while bamboozling clients who would not know they were dealing with incompetents - who stayed in business only because of huge taxpayer-financed infusions of corporate welfare.The "too big to fail" had to be bailed out by taxpayers in order to keep "the credit markets from seizing up." But the consequences of seized up credit were rarely if ever spelled out.Many financial analysts no less "expert" than those pushing through the bailouts were convinced that allowing the credit markets to seize up would, in the long run, prove far less costly than endlessly printing money and pouring it down a plush-lined sink hole. Buffett was wrong. It wasn't a "war" at all. It was a criminal case, or should have been, but the accused took a financial Fifth Amendment - the right to remain silent, since any statement made could be used as evidence against them - and got away with it.When, at a hearing before the Senate Budget Committee, Fed Chairman Ben Bernanke was asked, "Will you tell the American people to whom you lent $2.2 trillion of their dollars?" He answered, "No."Regards,Gerald Celentefor The Daily ReckoningEditor's Note: The above is excerpted from The Trends Journal, which is published by Gerald Celente. The Trends Journal distills the ongoing research of The Trends Research Institute into a concise, readily accessible form.To learn more about The Trends Journal, click here.Gerald Celente is also founder and director of The Trends Research Institute, as well as the author of Trends 2000 and Trend Tracking. Celente has made many media appearances including Oprah, CNN, The Today Show, CNBC, Good Morning America, NBC Nightly News, and has been cited in publications such as the Economist, Chicago Tribune, LA Times, Entrepreneur, and USA Today.
"...as much as $77 trillion of post-’09 earnings must be stolen from the future in order to pay for the liquor your parents drank..."When you were born 20-some years ago, the nation's total debt per person was less than $90,000 - adjusted to '09 dollars, of course. While that was a lot of money, it was nothing compared to what was coming. Now it's $186,717 per person - more than twice as much, in real terms. Fortunately, private debt is not inheritable. But it comes to you as a lien against property. Instead of paying off their mortgages and leaving you a house, free and clear, the baby boomer generation spent the 'equity' in their houses even faster than they got it. House prices rose. But mortgage debt rose faster. While your grandparents owned 80% of their houses, by 2007, the typical homeowner only really owned 4 rooms of an 8-room house. And then, when house prices fell, so did his remaining equity...to the point where one out of six homeowners in America is now underwater. You could still eventually inherit a house, but you may have to scrape the barnacles off the front porch. But that's not even the half of it. While your parents had control of the US government they allowed themselves a little larceny. Add the unfunded retirement and healthcare benefits they voted for themselves to the official national debt, and together they are scheduled to cost your generation 4 times the total annual output of the US. This is over and above the private debt they accumulated. Some of this debt can be carried. Some will have to paid down. But as it stands, as much as $77 trillion of post-'09 earnings must be stolen from the future in order to pay for the liquor your parents drank...the bombs they dropped on god-forsaken foreigners...and the interest on their debts. So, forget about saving for a European vacation or a house of your own. Even if every penny of your savings - and every other American's savings - are put to the task you will still be paying for your parents' expenses all your life. But wait, there's more! The burden is getting heavier. Federal budget projections show an additional $7 trillion in deficits over the next 10 years. Described as the cost of fighting recession, the present generation buries its own mistakes under cash that the next generation hasn't even earned yet. Today's bankers, businessmen and speculators are being bankrolled by you - tomorrow's bankers, businessmen and speculators. Today's homeowners get a helping hand...from whom? Tomorrow's homeowners - you. Today's employees get a boost too. Same story. Where do you think the money came from to pay Wall Street bonuses this year? How do you think GM stays in business...and Fannie Mae...and AIG... Who pays those salaries? Who pays to keep troops all over the world and keep old people supplied with new drugs? Who pays for hundreds of billions' worth of 'shovel ready' boondoggles? You will. At least, that's the plan. The luck of one generation is the curse of the next. Like Pericles, your parents inherited a dollar; they leave you a peso. They took over the strongest, richest, most competitive nation in the world. And like Pericles they minded everyone's business but their own. Now, not only does the US owe money all over town, its government puts out trillions more in IOUs every year - each one with your name on it. You're not even out in the real world yet, and you're getting the bill for 50 cents of every dollar the feds spend - almost none of it earmarked for you. But that is the thing about the real world your teachers probably forgot to tell you about. It is more unreal and fantastical than anything you studied. Here's what's real: You've been dealt a bad hand. From the bottom of the deck...your parents have slipped you some nasty cards. Our advice? Fold 'em. Get up from the table before they clean you out. Enjoy your weekend,Bill BonnerThe Daily Reckoning
The Sinking Titanic: Interview with Michael Ruppert
by Lars Schall, posted May 23rd, 2009
Editor's Note: Both Mike's new book "A Presidential Energy Policy: Twenty-Five Points Addressing the Siamese Twins of Energy and Money" and his 2004 "Crossing the Rubicon" are currently available. -Matt
Lars Schall: Mr. Ruppert, you’re about to publish a new book. What is the title of this book and what is it all about?
Michael C. Ruppert: A Presidential Energy Policy: Twenty-Five Points Addressing the Siamese Twins of Energy and Money is a book addressing what an American President should be doing and saying about energy issues free from ideological, political, or other mental restraints. It is a simple and stark analysis of the world's current energy picture written for those with only a High School education that quickly and clearly cuts through the nonsense we have been sold about energy, money and growth. It also has wide appeal for planners and leaders (especially local) in all countries. Energy behaves the same way everywhere. German foresight on energy issues -- in particular its aggressive implementation of Feed-in-Tariffs -- has offered some very positive innovations that I have recommended be adopted by President Obama here in the U.S.
QUESTION: When and through what did you begin to take interest in Peak Oil? Had there been all at once a nightmarish vision like "the Road to the Olduvai Gorge" in front of your eyes?
Michael C. Ruppert: I was first exposed to the concept of Peak Oil by geologist Dale Allen Pfeiffer shortly after 9-11. I was struck by how simple and clear the actual science was; how easy the issue was to both comprehend and validate using nothing more than basic math and simple logic. It was absolutely a nightmarish vision then (and still is) but it explained so much about geopolitics, macro economics, war and the markets that I jumped into it right away. -- We are still on the Road to the Olduvai Gorge and that is precisely what my book seeks to prevent.
Years have gone by since then. Even though major newspapers like the New York Times admit these days that the end of cheap oil is near, they rather avoid to discuss the underlying consequences of Peak Oil. How would you explain those consequences? Isn’t Peak Oil somehow the end of globalization?
Peak Oil is not just the end of globalization. I was saying clearly that globalization was dead five years ago. It was obvious. But Peak Oil is potentially the end of the human race and that outcome is perhaps just a few years away unless the human race essentially throws every ideological sacred cow out the window and starts with a fresh piece of paper. There are around five billion people alive today that were not sustainable before oil came along. There is no combination of alternative energies (nor will there ever be) that can possibly sustain the edifice built by oil. In the industrialized world there are ten calories of hydrocarbon energy involved in the production of every calorie of food. Our soils have been little more than infertile sponges onto which we throw massive amounts of chemicals derived from oil and natural gas.
The most dire consequences may lie in food production, anyway. Agriculture depends a huge deal on oil. At From the Wilderness (FTW) you had the thesis that we are "eating fossil fuels". Can you explain those relations a bit?
In our world a farmer drives an oil-powered machine to plow fields. He or she then drives another oil-powered machine to plant seeds. Water for irrigation is -- in most cases -- pumped by electricity generated by coal, natural gas, and oil. Germany has made great strides in electrical generation through Feed-in-Tariffs which have exploded solar and wind generation but they do not resolve the whole equation. After seeds are planted and irrigated the crops are then sprayed with pesticides (derived from oil) and fertilizers (produced from natural gas). To harvest the crops the farmer then drives another oil-powered machine. Then oil is used to transport the food to processing plants and for subsequent distribution. Food is often wrapped in plastic (also oil) and frequently treated with chemical additives also derived from oil and gas.
Globalization has only compounded the issue by shipping food all over the world (wasting oil) for the sake of profit rather than sustainability. I live in California and can go to a market and find strawberries from Chile while Southern California grows great strawberries. This pattern is the same for most food consumed in industrialized countries. This only happened because cheap labour costs and less-stringent regulation became more important than common sense. Money overcomes logic every time. But just watching globalization end will not solve the problem. As I have said for years, globalization dies with cheap energy. There's little point in fighting it anymore unless the struggle is in pursuit of a unified energy vision.
The financial mess we’re in: Has it something to do with Peak Oil, too? Is there this systemic crisis because we are heading towards the end of the Age of Oil – and no one is telling the public so?
The current economic collapse is a combination of two things. First, the current global economic paradigm -- governed by fractional reserve banking, fiat currency, and compound interest (debt based growth) -- is inherently and by definition a pyramid scheme. Money is useless without energy. One cannot eat a dollar bill or crumble it up and throw it in his gas tank. Each of the trillions of dollars created out of thin air since the fall of 2008 is a commitment to expend energy that cannot and will not ever be there. The Laws of Thermodynamics prevent this. I applaud the decision of Chancellor Merkel to resist the temptation to achieve a temporary solution by printing money endlessly. I am German by ancestry. My great grandfather migrated to the U.S. from a small town in Essen called Ruppertsburg at the turn of the last century. German pragmatism and realism on energy has been apparent to me since my first visit to Germany in 2003. It is not perfect and must be improved, but I have seen more clear thinking on the subject in Germany than in any of the 13 countries I have visited. That is actually not as good a thing as it might sound. There can be no "recovery", no return to growth (which is what the economic paradigm demands), without energy.
Why is this not discussed openly: The dinosaurs of the old paradigm -- who are about to pass into extinction -- cannot admit this because it would have an immediate effect on the financial markets which are already dying. People would stop buying stock if they understood that a return to growth is impossible. I think, however, that on a more fundamental level the dinosaurs just cannot see their own impending extinction. They are incapable of mental and spiritual evolution which all of our survival depends upon. They cannot adapt. As the global environment changes forever, from the related issues of climate change, energy shortages, and economic collapse all dinosaurs can do is die. That's what Darwin so clearly proved with regard to all life on this planet. Those species which cannot adapt must go extinct. We see billionaires and dinosaurs disappearing or losing money everywhere. Even Warren Buffet and George Soros are losing money because they cannot grasp that infinite growth is not possible. The term "sustainable growth" is perhaps the greatest oxymoron ever coined and an instant indicator of imminent Darwinian deselection for anyone who uses it. I keep a safe distance from such people.
Mainstream media all over the world is corporate-owned; a dinosaur by definition. In America CNN is owned by Time-Warner; CBS is owned by Viacom; NBC is owned by General Electric, ABC by Disney; the Wall Street Journal is owned by Rupert Murdoch and Newscorp, ad infinitum. All large press outlets sell stock and -- far worse -- are tied into a global derivatives bubble now estimated at $700 trillion in notional value that not only is collapsing: The Mother of All Bubbles.[4] Telling the truth to the people means that people will stop buying GE, Time Warner, Viacom and Newscorp stock so that is the last thing mainstream media can acknowledge.
Those who produce, edit and report the "news" are corporate citizens rather than human beings. They have chosen to murder their own children to protect their current jobs (the food they receive from an abusive parent). Being of German ancestry I am sensitive to issues about being willfully ignorant (cowardly) in the face of great evil. I am also aware of and grateful for the White Rose and von Stauffenberg and his heroic colleagues. I have felt like these great Germans must have felt for many years now. I still owe a great debt of gratitude to my old friend Andreas von Bülow from Köln[5] who graciously exposed me to authentic German culture. I have lost contact with Andreas and his wife Anne and I pray they are well. Now we find that this blindness is an inherent part of humans in all countries and the one thing that must and will go extinct with the Old Paradigm. [Source]
But the dinosaurs are losing their grip. Since the start of the collapse of industrial civilization, corporate-owned media has become something of a joke. "Check the tire pressure on your resume" is about the best advice they can offer. Then they say, "We think we have hit the bottom, so buy stock and don't pull your retirement out of the markets" while at the same time issuing reports that show that we are nowhere near a bottom and that everything is getting worse. Who can trust such nonsense. There must be a great German word that means idiotic, contradictory and bullshit at the same time. [Kokolores]
The money that is spend in billions and trillions these days will be needed in the struggle with the consequences of Peak Oil – and will be gone. Forever. Doesn’t make that a collapse of industrial society inevitable?
The collapse of industrial civilization within the next five to ten years (perhaps sooner) is inevitable. It is the degree of collapse, what is destroyed in the collapse, how many people will have to die in the collapse, and what will survive the collapse that I and many others are fighting for now. That is what every human being should be concerned about and nothing less. Pursuing options while not rapidly disengaging from the current economic paradigm of infinite growth is the only real issue confronting the entire species. To not do that will be literally to consign unborn generations and those under 40 to death or a living hell.
QUESTION: Mr. Ruppert, if we know something for sure about 9/11 it is the fact that the world public was rather misled. Information on TV and in the newspapers was very one-sided and incomplete. What does this tell us about the handling of the situation we are facing now in 2009? And hasn’t 9/11 itself become a major distraction from the collapse of industrial civilization?
Few have done more detailed investigation of the 9-11 attacks than I have. Even though Rubicon is in the Harvard Business Library and has sold around 100,000 copies in two countries, it has never even been acknowledged by my government. 9-11 was a predictable event and it was motivated precisely and solely by Peak Oil and nothing else. I believe I proved that conclusively in Rubicon which has never been challenged; only ignored. It is absolutely too late to go back and seek justice for the crimes of Richard Cheney and George W. Bush. I believe they were counting on that. It would be literally a waste of energy. Oil and natural gas can only be burned or consumed once. The present crisis is so severe that we cannot waste oil, natural gas and the limited energies of human consciousness to go back there.
QUESTION: At the end of Crossing the Rubicon you stated this scenario:
We have to pay for $100-(or higher) a-barrel oil somehow. Why don’t
we just print the money? Anyone who has heard of the damage done
by inflation and hyperinflation to those least able to cope with it
should think back to Germany’s Weimar Republic in the 1920s.
There is no need for you to rewrite this passage insofar it seems like this recession wants to prove you’re right, don't you think?
Weimar-style inflation is inevitable in the United States, especially as major economies start to disengage from the dollar. I predicted this at least six years ago. It is only a matter of time. Here is the basic sequence of events I see coming: FDIC insolvency, Treasury default on T-bills and all Treasury notes, the end of the dollar as the global reserve currency, hyperinflation, insolvency and bankruptcy of the Federal Reserve which is a privately-owned bank. That will be followed by the eventual collapse of the United States government. All of these things are inevitable in my opinion and could happen in full in as little as three years. The dinosaurs refuse to accept this because they won't question a monetary ecosystem which they created and which has allowed them to thrive from the Garden of Eden until now. Those who wish to survive and understand the issue will do whatever they can to disengage from a Titanic that is clearly sinking by building local lifeboats, tailored to their local needs.
Fortunately, there are many things that can be done, independent of government action, and that's why A Presidential Energy Policy was written.
QUESTION: In February of this year, the International Energy Agency (IEA) in Paris put out a forecast in which they are predicting an even bigger economic crisis in years to come. According to the IEA, the reason for this is the cancelling of new investments into new drilling projects by the major oil companies. In the case of rising demand in 2010, the oil price could explode, inflation could rise and the result could be that world economic growth would likely come to an end. Let us talk about the infrastructure problem first: Why do you think big oil doesn’t invest anymore in new projects?
All of those projects, whether for deep sea oil or in pursuit of alternative energies were only profitable when oil was at or near $100. All over the world, energy infrastructure is crumbling as a result of collapsed oil prices making it unprofitable to invest in infrastructure or alternatives. A few years ago Robert Hirsch of SAIC wrote a study for the U.S. government warning of the crisis which stated clearly that the time to have started preparing for this was 30 years ago.[8] He examined scenarios in which preparations were begun twenty, ten and zero years before Peak. All scenarios were catastrophic. His observations were only confirmations of warnings issued by Vice Chancellor David Goodstein of Cal Tech which said clearly in his book that it takes thirty years and a lot of money to change an energy infrastructure. Mankind has waited until the last minute and there is no money left. It's that simple. People have been warning about precisely this moment since 1949 when the great M. King Hubbert laid this landscape out for all to see. There is little or no money left for essential infrastructure investment and the infrastructure cannot be rebuilt under the current economic paradigm. As Dutch economist Martin van Mourek said in 2003, "It may not be profitable to slow decline." He was absolutely correct and I knew it the instant I heard him say it in Paris. [Source]
And now let us talk about the oil price spike. In 2006, you and Michael Kane wrote an article for FTW called "The Markets React to Peak Oil. Industrial Society Rides an Unsustainable Plateau before the Cliff", in which you were writing about the Bumpy Plateau. You’ve explained it like this:
Recent price swings – both up and down – have been predicted as a
part of the Peak Oil scenario for years. I saw the first hard predictions
of the bumpy plateau in 2002, and they made good sense.
WHAT IS THE "BUMPY PLATEAU"?
Here’s how Colin Campbell described it when FTW contacted him for
this special report:
1. Price shock (as the capacity limit is breached)
2. Economic recession cutting demand
3. Price collapse (the market overreacts to small imbalances between
surplus and shortage)
4. Economic recovery (followed by increased demand)
5. Price shock (as the falling capacity limits are again breached)
Simply put, everything is triggered by the inability of the planet to
increase supply beyond a certain point, regardless of demand. That is
the definition of peak. Peak is still peak whether it leads to sharp and
immediate fall off or to the bumpy plateau we are now seeing. Source
Is this model still the procedure after which "everything is triggered"? Is it the Bumpy Plateau that the IEA is talking about for 2010? And was it the Bumpy Plateau we have witnessed already in 2008?
We are on the bumpy plateau right now. The description and predictions offered by Campbell and many others were very good but only two-dimensional in that they addressed price and demand only. I think my greatest contribution on top of their pioneering work has been to thoroughly explore and illuminate the corruption of the economic paradigm, the significance of derivatives [Example] and to introduce that as a third factor. This has allowed me to make astonishingly accurate predictions for a decade now. The implosion of the derivatives bubble which has only just begun may prevent any real or even temporary "recovery" from ever taking place. All the energy spent on a "recovery" in the infinite growth paradigm will have been wasted. One thing I am also certain of is that there won't be many bumps in the bumpy plateau. As soon as any kind of recovery begins, it will collide instantly against the brick wall of diminishing energy. We have passed Peak I am certain. The IEA has virtually admitted all this. After the last bump it is straight down the cliff back to the Stone Age unless people take action immediately.
QUESTION: In 2001, when the Bush Administration came to power, the broader public did know nothing about Peak Oil. The Bush Administration did. In your book “Crossing the Rubicon” you point to a speech by Dick Cheney that he delivered in London at the Petroleum Institute in 1999. [Source] Mr Cheney was the CEO of Halliburton back then. He was in the loop, right?
Cheney was the loop. There is an abundant record that the most powerful policy-making institutions have known about Peak Oil since at least the 1970s. That includes our CIA, [Source] leadership in Russia, Britain, China and Japan. My studies suggest that Germany understood it best and has done the most to address it implications over the years.
QUESTION: An important topic of your research with regard to 9/11 are the unknown records of the “Energy Task Force” run by Dick Cheney, the National Energy Policy Development Group. In Crossing the Rubicon you wrote:
. . . the deepest, darkest secrets of September 11th lie buried in the
records of the US National Policy Development Group (NEPDG) which
began its work almost the same day the Bush administration took
office and produced its final report in May of 2001, just four short
months before the World Trade Center ceased to exist.
Can you explain this in more detail for those who have never heard about this before?
It's explained in detail both in A Presidential Energy Policy and in Crossing the Rubicon. Essentially the NEPDG appears to have been set up, almost from the first day of the Bush administration, to find out how much oil was left, who had it, and how it could be obtained (bought or stolen) to support U.S. hegemony, U.S. consumption, and the monetary paradigm. Those things are all dinosaurs anyway and they are dying in the New Paradigm as they must. The fact that the NEPDG records have been kept secret from the American people who paid for it is one of the greatest crimes of all time. Seeing those records now would save a lot of duplicated effort in trying to inventory how much oil there is left.
The figures on oil reserves quoted by producing nations and companies are as fraudulent and cooked as the books on mortgages, banking, and even Bernie Madoff. The Saudis cannot hide the fact that they have passed Peak anymore. I prove that in my new book. The world's largest energy investment banker Matthew Simmons proved it before I did in his book Twilight in the Desert. I have proved the same thing a different way. If Saudi Arabia has passed Peak then the whole world has passed Peak. It was Peak Oil that was driving Dick Cheney's Task Force and nothing else.
QUESTION: Is there a chance that we will ever know about the real content of the NEPDG files?
I hope so. That's what I have called for in A Presidential Energy Policy.
QUESTION: You are known for using this quote by Benito Mussolini:
Fascism ought more properly be called corporatism because it is the
perfect merger of power between the corporation and the state.
Isn’t Dick Cheney a perfect example for this? He did made a whole lot of money as a main-shareholder of Halliburton through the foreign policy of the Bush Administration, didn’t he?
He shouldn't be singled out. The Bush-Cheney administration had its "base". Some of that base is shared with the Obama administration. The Bush-Cheney administration, knowing that collapse was coming, looted the U.S. economy on behalf of its base. It was perhaps the largest wealth transfer (theft) in history. I predicted and warned about each step in precise detail for eight years. [Source]
I was dead-on accurate and there's a clear record to prove that. And I suffered for it. I was harassed, sabotaged, my offices were burglarized and my computers smashed in 2006 prompting me to flee the U.S. for four months. What did we Americans do as Bush and Cheney rode out of town with all that wealth? We gave them a parade and called it inauguration day.
Beyond Peak Oil as a motive for the Bush Administration to "arrange" the thing that we know as "9/11", you wrote extensively about the importance of Afghani drug traffic. Since the military engagement of NATO forces in Afghanistan, the profits from heroin trade are at an all time high, aren’t they?
The global drug trade is evolving. I won't go back now and explain what happened between 2001 and today. The global drug trade was estimated by me to be generating around $600 billion a year in total revenues in 2004. That was fine as long as the infinite growth bubble appeared to be functioning. Drug cash was chased by banks and major corporations like General Electric, AIG, Philip Morris, Citigroup, etc. back then. Europe was no exception. But now the collapse of a $700 trillion derivatives bubble has changed everything. What was a lubricant to allow further expansion of the bubble in 2001 is today less than the minimum monthly payment on a credit card.
The reason why the U.S. is having all this drug violence now is, I am certain, because U.S. banks are crying for all the illegal cash they can launder to service the "minimum monthly payments" on their derivative exposure. The drug violence is here because all over Mexico the word is out on the streets, "Get a kilo of grass across the border and you get $500." It's a stampede because Mexicans are starving. That is because their largest oil field Cantarell is collapsing and oil revenues have plummeted. It always comes back to energy and money.
Who knows how many drugs are being consumed now? Personally, I don't think it is significantly higher than it was five years ago or twenty-five. I have written extensively -- citing scientific studies -- that only about 10% to 12% of any given population is susceptible to addiction. The rest of the people may use drugs but will never get addicted because they realize it's not beneficial. They don't like it. One does not create addicts by pumping more drugs into a society. One only feeds that fixed percentage who are susceptible to addiction. That is what is called a captive market under the current monetary regime.
QUESSTION: Let’s take a look at this news article from Reuters, please:
Reuters: UN crime chief says drug money flowed into banks
The United Nations' crime and drug watchdog has indications that
money made in illicit drug trade has been used to keep banks afloat in
the global financial crisis, its head was quoted as saying on Sunday.
Vienna-based UNODC Executive Director Antonio Maria Costa said in
an interview released by Austrian weekly Profil that drug money often
became the only available capital when the crisis spiralled out of
control last year . . . Source
Can you comment on this?
As Claude Rains said in Casablanca, "I'm shocked! There's gambling going on in this establishment."
QUESTION: Mr. Ruppert, we are talking here about Organized Crime at the top ranks in finance, economics and government. One might think: “Well, has it ever been different before?” In my opinion the main difference is that Organized Crime is nowadays almost officially part of the game – it isn’t really hidden anymore. One example for this is the manipulation of the stock market by the infamous Plunge Protection Team (PPT). Can you explain how the PPT works, who is involved and why its existence isn’t just a “conspiracy theory”?
The PPT is overwhelmed now. This collapse has been a tsunami that has rendered the PPT largely ineffective. It had the ability to intervene artificially to prevent market collapses when it was only billions of dollars involved.
Now that we're dealing with trillions the PPT is of little interest. Broadly speaking, the U.S. Treasury (almost a proprietary of Goldman Sachs) has become in itself a PPT with increasing ineffectiveness. The U.S. is currently having the biggest "Sucker Rally" there will ever be.
QUESTION: I would also like to talk a little bit with you about gold under the circumstances of Peak Oil. I remember you have written a while ago that the "new" wealth is gold – which is the 'old' wealth. What do you mean by that precisely?
Look, the fact is that when the FDIC and the Federal Reserve go insolvent, gold will be the only place left to turn. Proposed new currencies cannot solve the problem. They will only destroy evidence and people by chasing the mirage deeper into the hole. New currencies will only recreate the same problem in a different and more vicious form. For seven thousand years the human race has chosen only one option as a universal store of value in hard times -- gold. To protect against inflation -- gold. I have seen many reports saying that there is five times more paper gold than there is physical gold out of the ground. Gold is finite. It cannot be printed. It has a connection to the earth. I strongly advise all my readers to buy and hold physical gold and have done so for years. The human race does not have to stay with gold forever. But it will help those with it to survive and function economically as collapse unfolds.
QUESTION: Another question, straight and dry: Is the gold market manipulated, and if so, how?
Absolutely gold prices have been manipulated. For the best discussion of that I recommend the Gold Anti-Trust Action Committee (GATA) and Le Metropole Cafe
QUESTION: You have said over and over again during the last years: "As long as you don’t change the way money works, you change nothing.' For example you wrote recently in an open letter to President Obama: 'All you are doing is buying time to prevent the collapse of a totally dysfunctional marriage where the mother (the government) kills the children (us) to save her relationship with the father (the way money works).' Two simple questions: How does money work, and: How should it work in future?
These are addressed clearly and succinctly in my book.
QUESTION: In order to sum our interview up so far: What we need is a paradigm shift. How should it look like, besides a change of the way money works?
The way the paradigm shift should occur and what it should look like is a discussion for the entire human race. I choose not even try to answer that. I do offer some ideas on how to start the dialogue in the book.
QUESTION: Let us take at the end of this interview a look into the future. Ten years from now: Give us your best case scenario, please.
There is a mass awakening of human consciousness; the equivalent of mankind taking the red pill from the movie The Matrix. We stop chasing an impossible notion of infinite growth and begin to change our minds about life and what it means right now. We accurately, clearly and fearlessly accept and embrace the crisis and begin implementing available solutions today. We stop feeding the economic beast which has no option but to kill us in order to save itself. Maybe instead of four or five billion people starving and or dying in resource wars, or in nuclear exchanges over resources, we can reduce that number to two or three billion and also identify, redefine and preserve the best parts of human civilization for the generations that follow. We find a way to live in balance and true sustainability with the planet that gives us life and all the life that we share it with.
QUESTION: And now give us your worst case scenario, please.
Human extinction and the possible extinction of all life on the planet, either as a result of climate collapse or a global nuclear exchange over energy.
The coming situation of Peak Oil will be a turbulent event. When I got you right, you argue in "Crossing the Rubicon" that the Patriot Act and the cut-back of the Posse Comitatus Act were implemented by the American government to prepare itself against civil unrest during the 'hard times' of Peak Oil. Is your country heading into a future where freedom is again a privilege, not a given right? And why should people in Europe and around the world be very interested in the freedom of the citizens in the United States?
I disagree with the Russian analyst who predicted a civil war here. [Source] Civil wars are defined by geographic boundaries. I do however think it inevitable that the United Sates will dis-integrate and there are clear signs of that beginning right now. But what's going to happen here is no different than what will happen all over the world. As human industrial civilization collapses everything will be governed by a force as powerful and unyielding as gravity. That is geography. Things do not break up. They break down. They get smaller. Problems in Essen or the Rhineland will be different from problems in East Prussia or Bavaria. There will be massive social unrest here but I do not believe it can be accurately predicted how that will play out. There can be only one end result.
Everything will revolve around what is within 50 or 100 kilometers of where one lives. The reason why the United States is so important is because my country still exerts so much political, social, economic and cultural influence around the world. In writing "A Presidential Energy Policy" I not only recognized the difficulties we face here but the fact that if the United States can change, if it can drop the suicidal notion of infinite growth and its defense of a corrupt and murderous economic paradigm, then the whole world will be that much more empowered to save itself . . . country by country, region by region, and neighborhood by neighborhood
The Daily Reckoning PRESENTS: Yesterday, the Dow had its best day since the beginning of April...the sun is shining, the birds are chirping...and all seems right with the world - at least on the surface. James Howard Kunstler is here to clean off those rose-colored glasses, and give a dose of reality. Read on...
The Bottom...?
by James Howard Kunstler
Saratoga Springs, New York
Euphoria managed to out-run swine flu a few weeks ago, as the epidemic- du-jour, with "consumer" confidence jumping and the big bank stocks nudging up. The H1N1 virus fizzled for now, at least in terms of kill ratio, though we're warned it might boomerang in the fall with a vengeance. No one was surprised to see Chrysler roll over like a possum on a county highway, but the memory of their muscle cars will linger on like a California surfing song. Here in the northeast, where Sundays are not spent at the NASCAR oval, the spring foliage reached the tenderly explosive stage and it was hard to feel bad about anything.
For now, the "bottom" is in - that is, the bottom of this society's ability to process reality. It may continue for a month or so, but events are underway that are beyond the command of personalities. We're done "doing business" in all the ways that we've been used to, but we just can't get with the new program. Let's count the ways:
1. The revolving credit economy is over. It's over because we can't increase energy inputs to the system, which is one way of saying "peak oil." Of course hardly anybody believes this right now because the price of oil crashed nine months ago, along with global manufacturing and trade. But nothing has changed on the peak oil scene - except perhaps that ever more new oil projects have been cancelled for lack of financing, which will boomerang on us (even if swine flu doesn't) in the form of much lower future oil production. In any case, the credit fiesta is over, and the "consumer" economy with it, because industrial growth as we have known it is over. It's over globally, too, though all regions of the world will not experience its demise the same way at the same rate.
The Asian nations may swap things around a while longer but China is basically up the creek without a paddle. They have less oil left than we have (which is saying, not much at all) and they won't corner the rest of the global oil market without starting World War Three. Meanwhile, they're running out of water and food. Good luck becoming the next global hegemon. Oh, and Japan imports 90 percent of its energy; India over 80 percent. Fuggeddabowdit.
Credit will not vanish everywhere overnight - even in the U.S.A. - because it is not distributed equally everywhere. But it will vanish in layers, and here in the U.S.A. a very broad layer of the lower and middle classes are now losing their access to it in one way or another - personally, in small business - and they will never get it back. Anyone who intends to thrive in the years just ahead had better plan on doing it on the basis of accounts receivable - and what they receive might not even necessarily come in the form of U.S. dollars. It may come in the form of gold or silver or in the promise of reciprocal services rendered.
This has enormous implications for two of the items in which our credit-dispensing operations are most deeply vested: houses and cars. Unfortunately, these are exactly the things that economic life has been based on for decades in our nation, which leads to the next categories:
2. The suburban living arrangement is over, along with all its accessories and furnishings. Taken as "all of a piece," the suburban expansion was one sixty-year-long culmination of hypertrophy. We did it because we could. We won a world war and threw a party. We had lots of cheap land and cheap oil. It made lots of people lots of money and all its usufructs have become embedded in our national identity to the dangerous degree that the loss of them will provoke a kind of national psychotic breakdown. In fact, it already has. The completely unrealistic expectation that we can resume this way of life is proof of it.
The immediate problem is that we can't build anymore of it. The next problem will be the failure of the stuff that already exists. The first stage of that is now palpable in the mortgage foreclosure fiasco and, just beginning now, the tanking of malls, strip centers, office parks and other commercial property investments. The latter will accelerate and become visible very quickly as retail tenants bug out and weeds start growing where the Chryslers and Pontiacs once parked. The next stage, which involves large demographic shifts in how we inhabit the landscape, has not quite gotten underway.
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3. The Happy Motoring fiesta is over. You'd think that with Chrysler crawling into the bankruptcy court, and GM just weeks away from the same terminal ceremony, the news media would begin to suspect that the foundation of everyday life in this country was cracking. Instead, all we hear is blather about "market share" shifting to Toyota. News flash: not only will we make fewer automobiles in the U.S.A., but Americans will buy far fewer cars made anywhere. We'll keep the current fleet moving a while longer, but when it's too beat to repair, we won't be changing it out for a new fleet - despite all the fantasies about hybrids, plug-and-drive electrics, and so on. The masses will be too broke to buy these things. What's more, they will be very resentful of the shrinking economic "elite" who can afford them. And, anyway, our roads and highways are destined to fall apart very quickly because there is no way we can sustain the necessary rate of normal maintenance. Meanwhile, we remain completely un-serious about public transit - even about fixing the vestiges that still exist. The airline industry, of course, will be toast inside of five years.
4. Our food production system is approaching crisis. There's no way we can continue the petro-agriculture system of farming and the Cheez Doodle and Pepsi Cola diet that it services. The public is absolutely zombified in the face of this problem - perhaps a result of the diet itself. President Obama and Ag Secretary Vilsack have not given a hint that they understand the gravity of the situation. It is probably one of those unfortunate events of history that can only impress a society in the form of a crisis. It also happens to be one of the few problems we face that public policy could affect sharply and broadly - if we underwrote the reactivation of smaller, local farm operations instead of shoveling money to giant "agribusiness" (or Citibank, or Goldman Sachs, or AIG...). I maintain that this may be the year that the crisis gets our attention, because capital is suddenly harder to get than fossil-fuel-based fertilizer.
All these epochal discontinuities present themselves, for the moment, as a season of muted "hope" and general apathy. The days are suddenly mild. We've resumed old and happy habits of grilling meat outdoors and motoring to those remaining places that were not blanketed with franchised food huts and discount malls. We have a new, charming president with an appealing family. Newly-minted dollars are flowing to the "shovel-ready." The new bad news is less bad than the old bad news (or seems to be). And the year just past has been such a bummer that our hard-wired human nature tells us that good things must be just around the corner.
Personally, I think a lot of good things await us, but not the ones we're expecting - not a return to buying Slurpees on credit cards. It will be very salutary to leave behind the junk empire we've accumulated and move into an epoch of quality and purpose. For the moment, though, our hopes reside elsewhere.
Regards,
James Howard Kunstler
for The Daily Reckoning
The Daily Reckoning PRESENTS: Trend forecaster Gerald Celente describes the history of the future, envisioning how "The Greatest Depression" will look from the perspective of someone in 2012. Read on, and see how he recommends you prepare for the worst...Looking Back on The Greatest Depressionby Gerald CelenteKingston, New YorkOn average, world trade fell 31 percent in January 2009. To varying degrees, recession and depression gripped globally."The outlook for global consumption remains bleak. Exports are likely to remain lackluster until global consumers regain their appetite for consumption," wrote Jing Ulrich, managing director at JPMorgan in Hong Kong, in response to the dire data.To track and make practical use of trends requires critical analysis of not only the data but also of the interpretations arising from the data. This becomes particularly essential when interpretations express a virtual media consensus. "Whenever you find that you are on the side of the majority, it is time to pause and reflect," advised Mark Twain.A case in point: On the surface, Ms. Ulrich's assessment above does not seem unreasonable. It is a theme expressed, with minor variations, by a majority of economic analysts reported by the media. But that assessment rests upon a set of false or questionable assumptions. The first assumption was that all consumers need to do is "regain their appetites" for exports. But it has nothing to do with "appetites." Consumers were broke. They were no less hungry for products - they just didn't have the money to buy them.The second assumption was that once consumers started consuming again exports would regain luster. Implicit in this statement was that as exports grew, economies would rebound and everything would go back to normal. This "normal" refrain was endlessly repeated, not only by economic analysts, but by politicians and business leaders.Unquestioned was not only the inevitability, but also the virtue and desirability of a return to "normal." What was normal?Normal, prior to "The Greatest Depression," meant unchecked over consumption and over development made possible by the availability of cheap money and easy credit.On the consumer end, "normal" was a death wish, "shop 'til you drop" - an obsessive compulsion by the profligate many to spend money they didn't have but had to borrow. The spending spree extended to buying expensive new cars rather than affordable used ones. It had people building extensions and making home improvements when neither were necessary. It meant buying a McMansion when a Cape Cod would do. Splurging on expensive vacations, elaborate weddings and extravagant bar-mitzvahs to impress family and friends. Borrowed money financed a major lifestyle upgrade that otherwise could not have ever been imagined, but that corresponded to what most people considered the "American Dream." Borrow to the limit now, and pay sooner or later was "normal."On the commercial/financial end, "normal" was also the obsessive compulsion to endlessly acquire, not merely upgrade. Borrowed billions, lots of leverage and little collateral provided financiers and developers with the power to acquire ever more money, assets and prestige - through mergers and acquisitions, building developments, equity market speculation and predatory business practices that gobbled up or drove out the competition. Give or take a bit of regulation and self-restraint, this was the "normal" the popular new President promised to return to.Which brings us to the third assumption, and arguably the most important which was that the crisis - inability of banks to lend and businesses to borrow - was mainly responsible for the economic disaster. As President Obama put it, "Our goal is to quicken the day when we restart lending to the American people and American business, and end this crisis once and for all."
"To promote policies encouraging people to take out more loans and sink still deeper into debt was abnormal, not 'normal.' The abnormal had been renamed the normal."He said, "You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll." Sounds positive, doesn't it? Ease the "flow of credit." Make it easier "to get a loan."But what the President meant and did not say was ... take on more debt, borrow more money. Sound familiar? Turn back the clock. Remember the advertisements at the start of the decade encouraging Americans to take out home equity loans, to buy new cars, to move up from a starter home into the dream house? With interest rates at 46 year lows and credit flowing, the public were suckered into betting on their futures with borrowed money they could only pay back as long as they had jobs, could make payments and the economy didn't collapse.But when they lost their jobs, they couldn't make payments and the economy began to collapse. Total unemployment (including discouraged workers and those with part time jobs looking for full time) was nearing 15 percent. In the fourth quarter of 2008, the net worth of American households fell by the largest amount in more than a half- century of record keeping. By February 2009, the foreclosure rate was up 30 percent from February 2008.What Mr. Obama promised as the solution was, and had been, the problem. The country was already overwhelmed with debt ... debt that it couldn't pay back. In what way could incurring more debt "end this crisis once and for all"?It was a plain fact; the flow of easy credit produced a torrent of debt. In 2009, private sector credit market debt was 174 percent of GDP. Household debt-service ratio was at an all-time high. US households had 39 percent more debt than income. (In 1962, consumers had 37 percent less debt than income. To promote policies encouraging people to take out more loans and sink still deeper into debt was abnormal, not "normal." The abnormal had been renamed the normal. Instead of encouraging people to live within their means, cut back, save money, and distinguish between "wants" and real needs, the official policy was to turn on the credit tap and flood the world with more debt.The sanity of the policy was never in question. Arguments raged only over the quickest and most effective way to turn on the money spigot.Everyone was looking for someone, somewhere, for rescue, and most eyes were turned to the United States. Even though the US was blamed for the flagrant economic abuses that brought on the crisis, given its economic clout and Superpower status, America was still looked to for the leadership needed to pave the way to recovery.With its globally popular new president, hopes ran high that American know-how would know how to fix the problem ... as though it were an intellectual exercise that could be solved by applying the correct economic formula. No such formula existed. Yet so desperate was the world that it placed its hopes on the very people responsible for the deregulation of the financial industry largely blamed for the crisis. The deregulators now occupied key positions within the cabinet of that globally popular new President.Billionaire investor Warren Buffett added a military dimension, dubbing the meltdown an "economic Pearl Harbor." Buffett called on Congress to unite behind President Barack Obama, comparing the economic crisis to a military conflict that needed a commander-in-chief. "Patriotic Americans will realize this is a war," he said. If it was an economic Pearl Harbor, the enemies were Fannie Mae, Freddie Mac, A.I.G., Countrywide, Bank of America, Merrill Lynch, Citigroup, Bear Stearns, and all the other banks, brokerages, speculators, insurance companies, hedge funds and leverage buyout specialists that had launched the sneak attack on the American economy.It had nothing to do with patriotism, unless being a "Patriotic American" meant appeasing and rewarding the enemy with trillions of dollars of taxpayer money and not being allowed to know where the money went.
Fed Refuses to Release Bank Data,Insists on SecrecyMarch 5, 2009 (Bloomberg) - The Federal Reserve Board of Governors receives daily reports on bailout loans to financial institutions and won't make the information public, the central bank said in a reply in a Bloomberg News lawsuit.The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast "a stigma on recipients of more than $1.9 trillion of emergency credit from US taxpayers and the assets the central bank is accepting as collateral.The public had been cozened into believing:
That disclosing the identities of the recipients would poorly reflect upon their public image and therefore their ability to function. Secrecy, on the other hand, allowed them to continue making disastrous decisions, while bamboozling clients who would not know they were dealing with incompetents - who stayed in business only because of huge taxpayer-financed infusions of corporate welfare.The "too big to fail" had to be bailed out by taxpayers in order to keep "the credit markets from seizing up." But the consequences of seized up credit were rarely if ever spelled out.Many financial analysts no less "expert" than those pushing through the bailouts were convinced that allowing the credit markets to seize up would, in the long run, prove far less costly than endlessly printing money and pouring it down a plush-lined sink hole. Buffett was wrong. It wasn't a "war" at all. It was a criminal case, or should have been, but the accused took a financial Fifth Amendment - the right to remain silent, since any statement made could be used as evidence against them - and got away with it.When, at a hearing before the Senate Budget Committee, Fed Chairman Ben Bernanke was asked, "Will you tell the American people to whom you lent $2.2 trillion of their dollars?" He answered, "No."Regards,Gerald Celentefor The Daily ReckoningEditor's Note: The above is excerpted from The Trends Journal, which is published by Gerald Celente. The Trends Journal distills the ongoing research of The Trends Research Institute into a concise, readily accessible form.To learn more about The Trends Journal, click here.Gerald Celente is also founder and director of The Trends Research Institute, as well as the author of Trends 2000 and Trend Tracking. Celente has made many media appearances including Oprah, CNN, The Today Show, CNBC, Good Morning America, NBC Nightly News, and has been cited in publications such as the Economist, Chicago Tribune, LA Times, Entrepreneur, and USA Today.
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