Blog Archives

Forget “Money”: What Will Matter Are Water, Energy, Soil and Food–and a Shared National Purpose

The status quo measures wealth with “money,” but “money” is not what’s valuable. “Money” (in quotes because the global economy operates on intrinsically valueless fiat currencies being “money”) is wealth only if it can purchase what’s actually valuable.

As the world slides into an era of scarcities, what will matter more than “money” are the essentials of survival: fresh water, energy, soil and the output of those three, food. The ability to secure these resources will separate nations that fail and those that survive.

In a world of abundance, it’s assumed every essential resource can be bought on the open market. Surpluses are placed on the market and anyone with “money” can buy the surplus.

Things work differently in scarcity: “money” buys zip, zero, nada because nobody with what’s scarce can afford to give it away for “money” which can no longer secure what’s scarce.

Parachute into a desert with gold, dollars, euros, yen and yuan, and since there’s nothing to buy, all your money is worthless. Once you’re thirsting to death, you’d give all your money away for a liter of fresh water. But why would anyone who needs that liter for their on survival trade it for useless “money”?

Imagine the longevity of a regime which sold the nation’s food while its populace went hungry. Not very long once the truth comes out.

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Keynesian Economics Is an Artifact of Cheap Energy

Of the many delusions of modern economics, perhaps the greatest is that the dominant Keynesian model reflects permanent dynamics of advanced economies. Economics, along with other social sciences, makes an implicit claim that its econometric claims are the equal of the “hard sciences” of physics and chemistry.

In other words, the econometrics of Keynesian economics is presented as possessing the same timeless validity of the natural sciences.

The reality is that Keynesianism arose in an era of abundant cheap energy, and it is an artifact of that brief one-off period in which industrialization, consumption and the human population were able to expand by leaps and bounds due to cheap energy and new technologies that leveraged greater value (“work,” output) from the cheap energy.

Once energy is no longer cheap or abundant, the Keynesian model of paying people to dig holes and fill them as a means of boosting “aggregate demand” falls apart. In the Keynesian model, “growth” as measured by consumption (gross domestic product) is assumed to be permanent and the highest goal of any economy.

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Will Our Grandchildren Wonder Why We Didn’t Build a Renewable Power Grid When It Was Still Affordable?

Anyone seeking clarity on the energy picture a decade or two out is to be forgiven for finding a thoroughly confusing divide. On the one hand, we have reassuring projections from the U.S. Energy Information Administration (EIA) that assume current production of fossil fuels will remain steady for decades to come. Coal will continue to decline as a share of total energy consumption, and renewables will rise modestly. In other words, everything’s hunky-dory, there’s nothing to worry about.

The EIA’s Annual Energy Outlook 2017 (64-page PDF) lays out the all-is-well, no-worries projections.

If you want to really dig deep into energy consumption, then the EIA has a treat for you: a detailed 390-page PDF report: Energy Perspectives 1949–2011 (link to 390-page PDF).

But just when you conclude fossil fuels will remain cheap and abundant until 2040 and beyond, you read this: Civilization goes over the net energy cliff in 2022,

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Here’s Why Wages Have Stagnated–and Will Continue to Stagnate

Mainstream economists are mystified why wages/salaries are still stagnant after 7+ years of growth / “recovery.” The conventional view is that wages should be rising as the labor market tightens (i.e. the unemployment rate is low) and demand for workers increases in an expanding economy.

But wages are only rising significantly for the top 5%, while workers between the bottom 81% who have seen their household incomes decline and the top 5% are experiencing stagnant earnings.

We can see how the top 5% have pulled away from the bottom 95% by examining household budgets: spending by the top 5% has soared compared to the stagnant spending of the bottom 95%.

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Don’t Think It Won’t Happen Just Because It Hasn’t Happened Yet: Loss of Faith in the Fed

Much of the supposedly godlike power of central banks is participants’ faith in their powers to control not just finance but the real world that can be leveraged by finance.

The Grand Narrative of the global economy since the 2008 financial meltdown has been: whatever the problem, zero interest rates and more credit will fix it. Too much debt? Zero-interest rates and more credit will fix that. Government spending far exceeds tax revenues? Zero-interest rates and more credit will fix that. Economy sluggish? Zero-interest rates and more credit will fix that. Few jobs being created? Zero-interest rates and more credit will fix that.

Had a bad hair day? Zero-interest rates and more credit will fix it.

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Finding Shelter from the Storm Part 2

Investing your time wisely and productively is a skill that doesn’t require any expenditure of cash to learn.

A Reader Asks: How to Find Shelter from the Coming Storms? prompted some excellent follow-on suggestions for what we can do to survive the coming financial storms.

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Headlines: Unpaid Taxes and Stockholm Syndrome

Gimme!

Gimme!

Concern at plan to let HMRC recover unpaid tax directly from bank accounts

George Osborne, the chancellor, believes the measure can be justified because the Department for Work and Pensions already has the right to take money directly from people’s bank accounts to pay child maintenance.

However, the committee pointed out that the parallel is not exact as the DWP is acting as an intermediary between two individuals, while HMRC would be acting in pursuit of its own objective of bringing in revenue for the exchequer. Tyrie said: “The proposal to grant the power to HMRC to take money directly from people’s bank accounts is very concerning.

Stockholm Syndrome in the Baltics

Neoliberals claim that Latvia’s bounce back shows that austerity can restore growth as well as avoid public debt defaults. Its success in reversing the sharp wage increases that occurred during the real estate bubble of 2005–7 is applauded as an object lesson for indebted economies throughout the European Union, and even the United States, to follow suit.

But Latvia’s economy has never really departed from its structural underdevelopment created at independence. Its economic contraction in 2008–10 was brutal, and it remains the most impoverished country in the EU after Romania and Bulgaria, as Richard Milne stated in the Financial Times: “Latvia remains an impoverished country, the poorest in the EU after Romania and Bulgaria, and its GDP is still below pre-crisis levels. Unemployment has fallen from peaks of more than 20 per cent but remains high at 10.9 per cent” (Milne 2013).

Ukraine crisis EXCLUSIVE: West draws up plan to ‘disarm’ Russia’s energy supply threat

“The diversification of sources and routes for fossil fuels is essential,” the G7 communique stated.

“No country should depend totally on one supplier. Nor should energy be used as a means of political coercion or a threat to security.” [SH: But payment systems should?]

Stacy again: I think it’s adorable that Americans are so patriotic as to be willing to double or triple their own energy bills so that Europe may be ‘free’ from Russian energy hold! Watch the Get REAL interview with Jan Skoyles with Reuters’ natural gas expert for a bit of sense on this energy war in Ukraine:

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Subscription Keiser: China Number One?

Stacy Summary: Today’s podcast discussing the surprising front page FT article, “China to overtake US economy this year.” We ponder the meaning of this in light of geopolitical events of the past few years and, especially, today. As tensions, escalate with Russia, the bond market tells Obama to back off and US GDP crashes to 0.1%.

[powerpress]

Subscription Keiser!

Subscription Keiser!

An amazing event, not seen since the days of Clinton: the bond market is calling the shots! Max elaborates in the podcast so make sure to listen.

On a related note to all the deglobalizing, geopolitical tensions, GoldenTree Goes Bold in Buying Up Russian Corporate Bonds.

The $18 billion investment firm has been buying up the nation’s corporate bonds, saying the securities offer value after suffering a 5.4 percent selloff this year. Among its targets: securities of gas company OAO Gazprom, which now looks like “one of the best credits in the world,” Managing Partner Steve Tananbaum said in an interview with Bloomberg Television’s Stephanie Ruhle and Erik Schatzker yesterday.

“If you look at Russia, it’s a strong credit in a difficult environment,” Tananbaum, also chief investment officer at GoldenTree, said.

Lots of fun stuff; wanted to get to the Royal Mail ‘botched’ sell off, but we’ll cover that next time. Remember, you can follow us on Twitter @PremiumKeiser or Google+ here.

By the way, here’s the trampoline tweet:

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Ukraine, A Geopolitical Choke Point

Rather than attempt to reduce a very complex system to a cartoonish “explanation” of events, we would be better served by seeking out the geopolitical linchpins.

In trying to put the fast-moving events in Ukraine in perspective, we are equally prone to lose our way in simplistic reductions or obfuscating complexities. Many commentators reduce the many dynamics in play to a conventional binary conflict: Russia vs. the U.S. (Cold War redux), Russia vs. Europe, neo-fascist nationalists vs. leftists, western Ukraine vs. eastern Ukraine, etc.

While each of these binaries reflect one facet of the totality, claiming any binary is the key context guarantees a fatal blindness to all that is excluded by such reductionism.

On the other hand, the inability to discern key dynamics from background noise and sensationalism (World War III, coming to a screen near you!) triggers a free-fall into incoherence.

Rather than attempt to reduce a very complex system to a cartoonish “explanation” of events, we would be better served by seeking out the geopolitical linchpins that have proven key in every era and theater of operations. These include:

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Ukraine: Follow the Energy

Scrape away the media sensationalism and geopolitical posturing and it boils down to a simple dynamic: follow the energy.

Though many seem to believe that internal politics and geopolitical posturing in Ukraine are definitive dynamics, I tend to think the one that really counts is energy: not only who has it and who needs it, but where the consumers can get it from.

Let’s cut to the chase and declare a partition along long-standing linguistic and loyalty lines a done deal. Let’s also dispense with any notions that either side can impose a military solution in the other’s territory.

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The “Impossible” But Inevitable Solution: Decentralization

What lies beyond the current failing, unsustainable versions of Capitalism and Socialism? Decentralization.

Correspondent John D. recently sent in a link to an interview with energy expert and author Jeremy Leggett. The title, “Make no mistake, this is an energy civil war” is a bit sensationalist, but the gist of his point is that centralized control of energy (and the capital that controls the energy and distribution networks) are colliding with new models of decentralized, locally autonomous control and ownership of energy generation and distribution.

Given the immense power of the banking/energy/political Elites that directly benefit from centralization of energy, capital and political power, I term this decentralization solution “impossible.” Yet because it is driven by the diminishing returns of the centralized model and the emergence of the Web as an unstoppable force distributing decentralization and new models, the transition from ossified, failing centralized models to adaptive, faster-better-cheaper decentralized models is also inevitable.

This is the context of Leggett’s view that there is an ‘energy civil war’ between the powers defending centralization and those promoting community ownership and control of energy:

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