Feb 042013
 February 4, 2013  Posted by at 3:17 pm Finance

It's sort of funny that it had almost even escaped both Nicole and I altogether, but it's true, and we can therefore albeit belatedly remind both you and ourselves that The Automatic Earth turned 5 years young on January 22, 2013. I think perhaps the reason we tend to forget that date is that the start of the Automatic Earth in our view was largely a continuation of the work we had already been doing together for a few years, at the Oil Drum. We've been working together for over 7 years now, and though I know not everybody would agree, for us it has been, and continues to be, a great collaboration, very rewarding. What a journey! Never in our craziest dreams did we know way back when what this site would become.

A lot has happened in those 5 years of TAE. The crisis we started saying 7 years ago would happen, did. And while we since have at times, if not incessantly, stared in bewilderment at the levels of newspeak people accept from their leaders and elites, as their remaining wealth is being dragged out through the backdoor, we know the same people will wake up one day. Just a lot poorer than they would have needed to be.

Obviously there are tons of voices out there who think the crisis is over, or the worst of it (look at the S&P!), and that therefore The Automatic Earth has lost part of its relevance. While others feel we should focus less on finance and more on for instance sustainability. We choose to deal with what we think is most important at any given point in time. A substantial focal point in that is that in our view the financial crisis is by no means over, far from it, it's simply been swept under the rug, running on fraud and fumes, and at a huge cost to all of us. Just look at what's going to happen in Europe this spring, and you'll see our point.

No, The Automatic Earth is as relevant now as it was 5 years ago, if not more. Of course Nicole and I too grow and develop and learn, but we do so against the backdrop of a basic tenet that remains unchanged: that this crisis makes the idea of a return to business as usual, to growth, to a rising tide for all boats, impossible. If not ridiculous. Still, we're all of us faced with the fact that the intertwined spheres of politics, finance and media are in the hands of those who owe their power to what once was, and will use all of that power to return there, or die trying. Power doesn't just corrupt, it blinds too. And it's highly destructive.

And as they face backward, we must look forward and ahead. That is not so easy; we too must shake off models and notions that we've known all our lives. It's not just about finance either, of course. The outcome of the financial crisis, along with the backward facing attitude of what poses as leadership, will ensure we, as nations and societies, will be thrown head first into a grueling energy crisis, which also will take us away from all we've known all of our lives.

We're going to need to cut down our energy consumption by 95% or so, just for starters, because we A) won't be able to afford what B) isn't going to be available. Tragically, while that's not even impossible, we won't do it until we're forced to. Every single organism deals the same way with energy surpluses: burn it as fast as they can. We are no different; it's in our DNA.

And yet: knowing that we will always tend to do this offers a glimmer of hope and light. Just not on a large scale. We'll have to build a saner place for ourselves in small increments. Things like globalization, transport based economies and mass production are anathema to the world we're going.

The very first thing we need to do is bring our basic human needs back under our own control. We ourselves should own our water supply, not some foreign investment fund. We must take back control of our food supply from the chemical mastodonts that have taken it out of our hands. It's really simple. But it will be a long and hard and winding road to get there; we're too much part of what we must leave to make it easy.

That and much more is what The Automatic Earth will occupy itself with. Like it's done for the past 5 years, which have led to quite a rich library of articles, something we can feel at least a little bit proud of.

On a practical note, Nicole is going to delve into permaculture in Belize in a few weeks, hoping to get a more thorough understanding of that field. And then in mid March she's off to another long speaking tour of Australia and New Zealand. I won't join her this time mainly because about 15 hours from now I will undergo hip surgery and hence take my next step towards the $6 billion bionic man ideal. Hey, at least, that should leave ample time for reading and writing….

Since we haven't done a fundraiser in what is it, almost two years (?!), I think our 5 year anniversary is a good moment to launch one. Hereby. I'd say buying our DVD set with Nicole's lectures is a great way to support The Automatic Earth, but we would also love to see you continue to provide your donations in the same extremely generous spirit in which you have given them before. Our gratitude is such that it can never be adequately put into words. Suffice it to say that we can't do what we do without your donations. I'll add one of those thermometer things for the fundraiser when I get out of the hospital.

We pledge and promise to do the best we can and then some to provide you with a realistic picture of the world we live in and its and our future.

Finally, here's a treat for you, an hour long interview James Howard Kunstler did with Nicole recently when she visited his neck of the woods. Two such fine minds talking, what can go wrong?


JHK steps up to resume the KunstlerCast solo without Duncan Crary. I’ll do interviews with guests sometimes, and sometimes I will just yak on my own. This week I was fortunate to have Nicole Foss of TheAutomaticEarth.com swing by as an overnight houseguest and we got to sit down at the microphones for a chat. Nicole is a veteran of Canadian government’s electrical ministry and has worked in the nuclear energy ministries of the UK and the European Union. She has lectured all over Europe, the USA, Australia and New Zealand in recent years.

The new KunstlerCast theme music is called “Adam and Ali’s Waltz” from the new recording Waiting to Fly by Mike and Ali Vass.

Direct Download:


( 40 MB | 61 mins.)



Home Forums The Automatic Earth Is 5 Years Young

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  • #8402

    It's sort of funny that it had almost even escaped both Nicole and I altogether, but it's true, and we can therefore albeit belatedly remind b
    [See the full post at: The Automatic Earth Is 5 Years Young]

    Golden Oxen

    Happy Birthday, and thank you ever so much for your wise council and good intentions.


    Well done on all the effort you both have done.
    I think it’s important to maintain a clear idea of what is happening (don’t believe the hype!) and look to the future.

    The historic cheap and easily available energy and capital period of many decades if over. So the question is : that’s next?

    Illargi and Stoneleigh keep well, it seems to me things have only just begun.


    Good luck with your surgery.

    I hope to get something done about my knee before it all unwinds – a very long waiting list.:)

    Viscount St. Albans

    Wishing you all the best, Ilargi,

    I hope you have better luck with your new hip than Jim had with his. Systemic cobalt fragments sounds like some kind of intro to Spanish Inquisitorial hospitality. I imagine one can place greater faith in the Dutch health care system vs. the U.S. (Perhaps the topic of a future discussion with Jim).

    In any case, many thanks for 5 years of TAE. I&S&A and friends have opened my eyes and broadened my thinking. I discovered TAE through a comment on Jim’s CF blog some 4.5 years ago, so I’m very happy to see Jim’s KunstlerCast interview with Stoneleigh featured on the 5-year TAE anniversary.

    Huzzah and all that and wishing for another 5-years of enlightening writing and discussion.


    Happy birthday TAE. I’ve only known the blog for 3 blinding fast years. I can only say how much I appreciate the wisdom and insights the site offers. Hope to catch Stoneleigh in New Zealand on her next Down Under tour. Sorry to hear Ilargi won’t be making it…but good to hear he’ll be bionic at least.


    Yes happy birthday…that 5 yrs went by fast…
    The word in the news today is that the stock market can keep going up because of the FED…they say they are not printing money but their actions produce the same effect…how long can they do this and when will they be forced to stop and what will make them stop? And what will be the ramifications of the policy? I have some idea but I don’t understand how the FED has been able to do this for so long, is this unprecedented? I have a friend that always tells me this is just like the 70’s and we will shoot out of this soon— I wish I think this time is much different than the 70’s

    John Day

    Hey, I’ve been enjoying your wisdom since you were 4 months old.
    Here is more of the meme of “Global Financial Collapse Might Avert Global Extinction” (definitive answers in next 2 decades, stay tuned).
    Professor Guy McPherson, at Nature Bats Last makes it really clear in the second little video, the one with the 3 undersea pictures:

    Media update: audio, video, print, and “print”


    A big thank you for The Automatic Earth, being an amateur student of current affairs (for survival/entertainment), I appreciate the access to hight quality/timely commentary on what the hell is going on financially in the world. I add that conventional media, in many cases is simply repeating a “prepared” news release from the government/business world. If you want to know what is really going on, I use a reverse analysis, if the Federal government feels it is nescessary to spend money telling us how good the economy has been and still is, then the reverse would read the economy is hanging on but not for long! In no way should a so called “modern world” have to constantly interpret the untruths and lies of entities in power – why the hell can’t everyone just tell the truth! A big thankyou for your mention of a 95% reduction in energy consumption, this is key for humanities survival, George Monbiot was the first author to write that a 90% reduction in CO2/energy emissions was required to stabalize climate change. It seems impossible but with some small effort it can be acheived with only a little sacrifice and inconvenience – a small price to pay for a future!


    I have discovered that Jon Corzine was not the first to use segregated accounts as collateral for overseas trading adventures. Below is a case that was covered by the 7th US District Appellate Court on 0625/12.

    Court Docket # 10-3607 — Griffin Trade Company (a holding corp dealing in futures contracts).

    Even though this case began 14 years ago it is still being fought over in the court system!!

    Below is a brief description of the events. Section III of the brief covers the CFTC rule that was violated
    and should be used against Jon Corzine!!!


    On December 21, 1998, Park began trading German bonds out of Griffin Trading’s office in London.   Griffin Trading was not a clearing member of EUREX, the relevant exchange for Park’s trades, and so its trades were placed through MeesPierson (a company organized in the Netherlands), which was Griffin Trading’s clearing broker.  (At one point it was known as Fortis MeesPierson, reflecting the fact that it was acquired by Fortis Bank in 1997, but in 2009 the name changed back to MeesPierson.   For the sake of consistency with the historical record, we refer to it here simply as MeesPierson.)   This arrangement created a chain of responsibility:  If and when trading losses arose, EUREX would seek to recover from MeesPierson, MeesPierson from Griffin Trading, and Griffin Trading from Park. In order for each party in the chain to reduce its financial exposure, each one required its customers to maintain margin funds in its customer accounts.   Thus, Griffin Trading had to keep some money on deposit with MeesPierson, and Park was required to keep a minimum amount of money in his account with Griffin Trading.   Park’s trades, however, far exceeded his trading limit;  in less than two days, Park lost over $10 million.

    As a result of these losses, MeesPierson issued a margin call for 5 million Deutsche Marks (DM) on the morning of December 22, payable the next day.  (The euro was not launched until January 1, 1999, but initially it operated only as a virtual currency;  it became fully effective on January 1, 2002, when all participating national currencies, including the DM, had to be converted.   See https://​ec.​europa.​eu/​economy_​finance/​euro/​index_​en.​htm.) This triggered a series of transactions among Griffin Trading’s bank accounts.   First, at 11:19 a.m. in London on December 22, £1.6 million were transferred from Griffin Trading’s account of segregated customer funds at the London Clearing House to its account of customer funds at the Bank of Montreal.   That money was then transferred to its customer-fund account at Crédit Lyonnais, apparently to take advantage of favorable rates.

    On the morning of the next day, December 23, Griffin Trading moved that money—converted from British pounds to DM—back to the Bank of Montreal.   Finally, at 11:52 a.m. on the 23rd, Griffin Trading answered the margin call by wiring 5 million DM from its account of customer funds at the Bank of Montreal to MeesPierson’s account at Commerzbank (a German entity).   In all, as a result of Park’s trades made in London on a European bond exchange, £1.6 million (or the equivalent in DM) bounced around among Griffin Trading’s accounts holding customer segregated funds in England, Canada, and France, until the funds were finally transferred to MeesPierson’s account in Germany.

    Meanwhile, back in the United States, Farrel learned of Park’s losses between 6:00 and 7:00 a.m. Chicago time (noon to 1:00 p.m. UTC) on December 22.   He called his partner, Roger, and both of them quickly realized that this “debacle” (their word) was going to send Griffin Trading into bankruptcy unless they quickly found a solution.   Their first step was, as they put it, to take charge of Griffin Trading’s activities.   Farrel, with Roger available by phone, contacted Park, had several conversations with the London office, and, notably, called MeesPierson directly.   The bankruptcy court determined that both Roger and Farrel at that time discovered that MeesPierson had issued the 5 million DM margin call to cover Park’s initial losses (another margin call for over 13 million DM would come later that day for the rest of the loss, but it was not satisfied), and that they failed in their primary obligation to protect customer funds by not blocking the 11:52 a.m. wire transfer.

    After unsuccessfully attempting to cover the remaining shortfall, Griffin Trading filed for bankruptcy in the Northern District of Illinois on December 30, 1998.   The trustee in bankruptcy initiated this adversary action against Roger and Farrel in 2001, and the suit went to trial in 2004.   At trial, the bankruptcy court found that Roger’s and Farrel’s failure to “stop the wire transfer paying the margin call constituted gross negligence and constituted a violation of their fiduciary duties to their creditors.”  Inskeep v. Griffin (In re Griffin Trading Co.), No. 01A00007 (Bankr.N.D.Ill. Jan. 26, 2005).   Farrel and Roger appealed the bankruptcy court’s decision to the District Court for the Northern District of Illinois, arguing that the application of Illinois’s U.C.C., rather than foreign law, was error.   The district court found this argument forfeited, but it nevertheless thought the bankruptcy court applied the wrong law—in particular, the wrong section of the U.C.C. See No. 05C1834, 2008 WL 192322, at *7 (N.D.Ill. Jan. 23, 2008).   On remand, the bankruptcy court reversed its earlier course, holding that the trustee failed to establish, as a matter of Illinois law, that Farrel and Roger actually caused the loss of customer funds.  418 B.R. 714, 718–21 (Bankr.N.D.Ill.2009).   The court further held that the trustee failed to establish damages.  Id. at 721.   The district court affirmed, 440 B.R. 148, 164 (N.D.Ill.2010), and the trustee now appeals.

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