Aug 042017
 
 August 4, 2017  Posted by at 1:26 pm Finance Tagged with: , , , , , ,  7 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


William Blake Europe Supported by Africa and America 1796

 

Earlier this week I was struck by the similarities and differences between two graphs I saw float by. And the thought occurred that they are as scary as they are interesting. The graphs show eerily similar trends. And complement each other. The first graph, which Tyler Durden posted, shows productivity, defined as more or less the same as GDP per capita. It goes all the way back to 1790 and contends that 2017 productivity is about back to the level it was at in 1790. In the article, Tyler suggests a link with the amount of time people spend on Instagram et al, but perhaps there is something more going on.

That is, America and Western Europe exported almost their entire manufacturing capacity to China etc. And how can you be productive if you don’t manufacture anything? Yeah, I know, ‘knowledge economy’ and ‘service economy’ and all that, but does anyone still really believe those terms? Sure, that may have worked for a while as others were still actually making stuff (and nobody really understood the idea anyway), but it’s a sliding scale. As productivity plunged, so did GDP per capita. We can all wrap our heads around that.

America’s Productivity Plunge Explained

For the first time since the financial crisis, US multifactor productivity growth turned negative last year, mystifying economists who have struggled to find something to blame for the fact that worker productivity is declining despite a technology boom that should make them more efficient – at least in theory. To be sure, economists have struggled to find explanations for the exasperating trend, with some arguing that the US hasn’t figured out how to properly measure productivity growth correctly now that service-sector jobs proliferate while manufacturing shrinks. But what if there’s a more straightforward explanation? What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?

To wit, Facebook has just released user-engagement data for its popular Instagram photo-sharing app. Unsurprisingly, the data show that the average user below the age of 25 now spends more than 32 minutes a day on the app, while the average user aged 25 and older. The last time Facebook released this data, in October 2014, its users averaged 21 minutes a day on the app. According to Bloomberg, “time spent is an important metric for advertisers, which like to hear that users are browsing an app beyond quick checks for updates, making them more likely to run into some marketing.” Maybe they should matter more to economists, too.

 

When asking the question “What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?”, a next question should be: what is the technology used for? And if the answer to that is not “for making things”, then what do you think could its effect on productivity could possibly be?

Tyler took that graph from an article posted August 22, 2015, also on Zero Hedge, by Eugen Bohm-Bawerk, who at the time had some interesting things to say about it:

Productivity In America Now On Par With Agrarian Slave Economy

[..] it is time to take a closer look at productivity measured in terms of GDP per capita. While this is not an entirely correct way to measure productivity, it does adhere to new classical growth model theories which posit that in a developed economy, reached steady state, the only way to increase GDP per capita is through increased total factor productivity. In plain English, growth in GDP per capita equals productivity growth. The reason we use this concept instead of more advanced productivity measures is to get a long enough time series to properly understand the underlying fundamental forces driving society forward.

In our main chart we have tried to see through all the underlying noise in the annual data by looking at a 10-year rolling average and a polynomial trend line. In the period prior to the War of 1812 US productivity growth was lacklustre as the economy was mainly driven by agriculture and slaves (slaves have no incentive to work hard or innovate, only to work just hard enough to avoid being beaten). From 1790 to 1840 annual growth averaged only 0.7%. As the first industrial revolution started to take hold in the north-east, productivity growth rose rapidly, and even more during the second industrial revolution which propelled the US economy to become the world largest and eventually the global hegemon [..]

Adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold. The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2% from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

[..] With hindsight we know that finance did more harm than good so we can conservatively deduct finance from the GDP calculations and by doing so we essentially end up with no growth per capita at all over a timespan of more than 15 years! US real GDP per capita less contribution from finance increased by an annual average of 0.3% from 2000 to 2015. From 2008 the annual average has been negative 0.5%!

In other words, we have seen a progressive (pun intended) weakening of the US economy from the 1970s and the reason is simple enough when we know that monetary policy broken down to its most basic is a transaction of nothing (fiat money) for something (real production of goods and services). Modern monetary policy thereby violates the most sacred principle in a market based economy; namely that production creates its own demand. Only through previous production, either your own or borrowed, can one express true purchasing power on the market place.

The central bank does not need to worry about such trivial things. They can manufacture the medium of exchange at zero cost and express purchasing power on the same level as the producer. However, consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption. Do this on a grand scale, over a long period of time, even a capital rich economy as the US will eventually be depleted. Capital per worker falls relative to competitors abroad, cost goes up and competitiveness falls (think rust-belt). Productive structures cannot be properly funded and the economy must regress to align funding with its level of specialization.

Eugen gets close to what I said earlier about productivity. That is, you have to make stuff, to manufacture things, in order to have, let alone grow, productivity (aka GDP per capita). An economy based -too heavily- on services and finance is not going to do it for you. Because “the most sacred principle in a market based economy” is that “production creates its own demand.”

Now, combine that graph with the next one, from Lance Roberts, which unmistakably depicts the same trendline, though on a different -shorter- time scale. Lance’s graph shows more or less the same as Tyler’s, if you allow me that freedom, namely: GDP per capita growth equals productivity equals GDP growth, but it adds a crucial component (unless you ask someone like Paul Krugman): debt.

Together, the graphs show how we have ‘solved’ the issue of falling growth and productivity: with debt. It doesn’t get simpler than that. We exported our productive capacity to China, and now we can only afford to buy their products -which are mostly inferior in quality to what our ancestors once made- by getting into -more- debt. Big simplification, granted, but we’re doing broad strokes here.

 

 

All this is simple enough for a 6-year old to grasp. It’s actually likely easier for them than for most trained economists. Problem is, the 6-year olds are probably busy on Instagram. Tyler’s right on that one. But then, at least they’re not stuck in outdated modelling.

Ergo: we have a precipitous decline in productivity, which also translates into a decline in GDP. Even if we come up with all sorts of accounting tricks to hide this fact. And what do we do, or rather, what have we done? Enter central banks, stage right. That second graph inevitably raises the question: Without all the debt, where would the growth rate stand today? And I know what you want to say, because just like you, I am afraid to ask.

We’ve used all those trillions in new debt to, as far as productivity is concerned, run to not even stand still: productivity (GDP per capita) continues to decline despite all the debt. Why is that? Well, Bohm-Bawerk answers that question earlier: “.. consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption.” In other words, as I said before, if you don’t use it to actually make things, you’re basically just burning it. Plus, in the process, as we see ever clearer in the effects of QE, you can grossly distort an economy, by blowing bubbles, propping up zombies etc.

Things would look different if we used the “zero cost money” for production instead of consumption. But that’s not what the central bank money is used for at all. The net effect of all that debt, be it QE or new mortgage debt, is less than zero. Quite a bit less, actually. How do we solve that problem? The answer is deadly simple, though not easy to put into practice: start making stuff again! Or put it this way: debt must be used to raise production, not consumption.

 

 

Jan 292017
 
 January 29, 2017  Posted by at 11:10 am Finance Tagged with: , , , , , , , , , ,  2 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


Michael Andrews A Shadow 1974

Donald Trump’s Cruel Ban On Refugees Sets A Chilling Precedent (Robert Fisk)
Judges Block Parts of Trump’s Order on Muslim Nation Immigration (BBG)
Malevolence Tempered by Incompetence (Wittes)
Trump’s Muslim Ban Triggers Chaos, Heartbreak, And Resistance (IC)
Science Can Decode the Laws of History and Predict US Political Violence (PT)
UK Agrees £100m Fighter Jet Deal With Turkey Despite Human Rights Abuse (Ind.)
Canada’s Justin Trudeau Takes A Stand On US Refugee Ban (BBC)
Centralization and the Decline of Europe (IL)
Muslims Make A Pitch For Populist Vote As Dutch Politics Turns Sharp Right (G.)
How Great the Fall Can Be (Greer)
This Could Be Greece’s Last Chance To Save Itself (CNBC)
Greece’s Best-Selling Daily To Cease Publication Due To Debts (AFP)
Second Man Dies At Lesbos Refugee Camp Within Days (Kath.)

 

 

Strong from Fisk: “It’s OK to use pilotless planes to assault men and women in other countries. It’s OK if your allies steal land from others for their own people, if you support Arab dictatorships that emasculate and execute and rape their prisoners, as long as they are “allies” of the USA.”

But do note: none of these things have occurred under Trump. So where were you when Obama became the Drone King? When Hillary said We Came We Saw He Died? Do you feel those things are less important or less cruel than what happened yesterday in US airports? Now is the time to speak.

Donald Trump’s Cruel Ban On Refugees Sets A Chilling Precedent (Robert Fisk)

So Donald Trump is going to f**k them all. No excuses for such filthy words today. I’m only quoting the man whose Pentagon offices he just used to disgrace himself – and America. For it was Secretary of Defence James ‘Mad Dog’ Mattis who told Iraqis in 2003 that he came “in peace’ – he even urged his Marines to be compassionate – but said of those who might dare to resist America’s illegal invasion of their country: “If you f**k with me, I’ll kill you all.” There’s no getting round it. Call it Nazi, Fascist, racist, vicious, illiberal, immoral, cruel. More dangerously, what Trump has done is a wicked precedent. If you can stop them coming, you can chuck them out. If you can demand “extreme vetting” of Muslims from seven countries, you can also demand a “values test” for those Muslims who have already made it to the USA.

Those on visas. Those with residency only. Those – if they are American citizens – with dual citizenship. Or full US citizens of Muslim origin. Or just Americans who are Muslims. Or Hispanics. Or Jews? Refugees one day. Citizens the next. Then refugees again. No, of course, Trump would never visit such obscene tests on Jewish immigrants – for they would be obscene, would they not? – and nor will he stop Christians from Muslim countries. America has always condemned sectarian states, but now Trump declares that he approves of sectarianism. Minorities will be welcome – the Alawites of Syria, to whom Bashar al-Assad belongs, will presumably not count, and I guess we can expect all US embassies to have three queues for visa applicants. One for Muslims, one for Christians, and a third marked ‘Other’. That’s where most of us will be standing in line. And by doing so, we will automatically give approval to this iniquitous system – and to Trump.

There’s no point in wasting time over the obvious: that America has bombed, directly or indirectly, five of the seven nations on Trump’s banned list. Sudan just escapes, but the US blew a packed Iranian passenger airliner out of the sky in 1988 and has raised no objections to Israel’s bombing of Iranian personnel in Syria. So that makes six. There’s nothing to be gained by reiterating that the four countries whose citizens participated in the international crimes against humanity of 9/11 – Saudi Arabia, Egypt, the Emirates and Lebanon – do not feature on the list. For the Saudis must be loved, cosseted, fawned over, approved, even when they chop off heads and when their citizens funnel cash to the murderers of Isis. Egypt is ruled by Trump’s “fantastic guy” anti-‘terrorist’ president al-Sisi. The glisteningly wealthy Emirates won’t be touched. Nor will Lebanon, although its tens of thousands of dual-national Syrians may have a tough time in the future.

But no, this vile piece of legislation is not aimed at nations. It’s targeting refugees, the poor, the huddled masses yearning to breathe free. The Muslim ones, that is, not the Christians. How can they ever withstand a “values test”? And what are America’s “values” anyway? It’s OK to attack sovereign states. It’s OK to use pilotless planes to assault men and women in other countries. It’s OK if your allies steal land from others for their own people, if you support Arab dictatorships that emasculate and execute and rape their prisoners, as long as they are “allies” of the USA. It’s OK to fast-track Saudi visas – as the Brits have been doing for years – even if they are members of the most inspirational Wahhabi cult in the world: membership includes the Taliban, al-Qaeda, Isis, you name it.

There’s even no value in touting our own participation in this charade. Having just patted the killer governments of the Gulf on the head – and heading off to do the same to Turkey’s autocrat-in-chief – our poodlet prime minister, fresh out of Washington, hasn’t uttered a word about Trump’s wickedness. Wasn’t it Britain – and America, for heaven’s sake – that was weeping copious tears, buckets of the stuff, for the 250,000 (or 90,000) Muslim refugees of eastern Aleppo a couple of months ago? And now, so much do we care for them, that they are being well and truly f****d.

Read more …

More of this please.

Judges Block Parts of Trump’s Order on Muslim Nation Immigration (BBG)

Two judges temporarily blocked President Donald Trump’s administration from enforcing parts of his order to halt immigration from seven Middle Eastern countries, after a day in which students, refugees and dual citizens were stuck overseas or detained and some businesses warned employees from those countries not to risk leaving the U.S. A nationwide ruling in Brooklyn, New York, barring refugees and visa holders already legally in the U.S. from being turned back came hours after the American Civil Liberties Union and other groups sued to halt the Jan 27 order. A separate order in Alexandria, Virginia, forbid the government from removing about 60 legal permanent residents of the U.S. who were being detained at Dulles International Airport.

Neither ruling strikes down the executive order, which will now be subject to court hearings. White House officials didn’t immediately respond to a request for comment late Saturday night. There were wrenching scenes – and angry protests – at major airports across the country before the court orders were issued. At Los Angeles International Airport, a lawyer reported that an 80-year-old insulin-dependent visitor was being held by officials and had no contact with her worried family. Shane Moss, a 38-year-old from Missouri, was returning from Thailand with his girlfriend, a dietician and joint Canadian-Iranian citizen with a valid work visa, when they were forced to separate. Hours later, he had not heard from her. “They won’t tell me anything,” Moss said. “I’m worn out. I’ve been up for 20-something hours and we’ve still got to get home to Kansas City.”

[..] The executive order, issued on Friday, bars citizens of Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen, from entering the U.S. for the next three months in an effort to stop terrorists and gain hold of the immigration system. White House officials told reporters, before the court orders were issued, that green card holders from those countries who found themselves abroad and trying to come back would be evaluated case by case. Last year there were nearly 32,000 immigrant visas issued in the U.S. to the seven affected countries. The order also halts refugee resettlement to the U.S. for 120 days, and orders that refugee admissions for 2017 be cut to 50,000 from the planned limit of 110,000.

Read more …

This is from what I would call a decidedly right wing lawyer (though he also says he’s ‘pro-refugees’). “I believe in strong counterterrorism powers. I defend non-criminal detention. I’ve got no problem with drone strikes. I’m positively enthusiastic about American surveillance policies. I was much less offended than others were by the CIA’s interrogations in the years after September 11.” But who says: “It will cause hardship and misery for tens or hundreds of thousands of people because that is precisely what it is intended to do.”

Malevolence Tempered by Incompetence (Wittes)

Put simply, I don’t believe that the stated purpose is the real purpose. This is the first policy the United States has adopted in the post-9/11 era about which I have ever said this. It’s a grave charge, I know, and I’m not making it lightly. But in the rational pursuit of security objectives, you don’t marginalize your expert security agencies and fail to vet your ideas through a normal interagency process. You don’t target the wrong people in nutty ways when you’re rationally pursuing real security objectives. When do you do these things? You do these things when you’re elevating the symbolic politics of bashing Islam over any actual security interest. You do them when you’ve made a deliberate decision to burden human lives to make a public point. In other words, this is not a document that will cause hardship and misery because of regrettable incidental impacts on people injured in the pursuit of a public good. It will cause hardship and misery for tens or hundreds of thousands of people because that is precisely what it is intended to do.

[..] I think we can, without drawing any kind of equivalence between this order and Jim Crow, make a similar point here: Is this document a reasonable security measure? There are many areas in which security policy affects innocent lives but within which we do not presumptively say that the fact that some group of people faces disproportionate burdens renders that policy illegitimate. But if an entire religious grouping finds itself irrationally excluded from the country for no discernible security benefit following a lengthy campaign that overtly promised precisely such discrimination and exactly this sort of exclusion, if the relevant security agencies are excluded from the policy process, and if the question is then solemnly propounded whether the reasonable pursuit of security is the purpose, I think we ought to exercise one of the sovereign prerogatives of philosophers—that of laughter.

So yes, the order is malevolent. But here’s the thing: Many of these malevolent objectives were certainly achievable within the president’s lawful authority. The president’s power over refugee admissions is vast. His power to restrict visa issuances and entry of aliens to the United States is almost as wide. If the National Security Council had run a process of minimal competence, it could certainly have done a lot of stuff that folks like me, who care about refugees, would have gnashed our teeth over but which would have been solidly within the President’s authority. It could have all been implemented in a fashion that didn’t create endless litigation opportunities and didn’t cause enormous diplomatic friction. How incompetent is this order? An immigration lawyer who works for the federal government wrote me today describing the quality of the work as “look[ing] like what an intern came up with over a lunch hour. . . . My take is that it is so poorly written that it’s hard to tell the impact.”

I would wax triumphant about the mitigating effect of incompetence on this document, but alas, I can’t do it. The president’s powers in this area are vast, as I say, and while the incompetence is likely to buy the administration a world of hurt in court and in diplomacy in the short term, this order is still going take more than a few pounds of flesh out of a lot of innocent people. Moreover, it’s a very dangerous thing to have a White House that can’t with the remotest pretense of competence and governance put together a major policy document on a crucial set of national security issues without inducing an avalanche of litigation and wide diplomatic fallout. If the incompetence mitigates the malevolence in this case, that’ll be a blessing. But given the nature of the federal immigration powers, the mitigation may be small and the blessing short-lived; the implications of having an executive this inept are not small and won’t be short-lived.

Read more …

It started at least a week ago.

Trump’s Muslim Ban Triggers Chaos, Heartbreak, And Resistance (IC)

Following an executive order signed late Friday, President Donald Trump on Saturday launched a sweeping attack on the travel rights of individuals from more than a half dozen Muslim majority countries, turning away travelers at multiple U.S. airports and leaving others stranded without answers — and without hope — across the world. Trump’s order triggered waves of outrage and condemnation at home and abroad, prompting thousands of protesters to flood several American airports and ultimately culminating in a stay issued by a federal district judge in New York City on the deportation of people who were being detained by immigration officials. Similar stays were issued by judges in Washington, Massachusetts, and Virginia.

The administration’s assault on civil liberties explicitly targeted the world’s most vulnerable populations – refugees and asylum seekers fleeing devastating wars – as well as young people with student visas pursuing an education in the United States, green card holders with deep roots in the country, and a number of citizens of countries not included in the ban. It also impacted American children traveling with, or waiting to meet, their non-citizen parents. With an estimated 500,000 people in the crosshairs, Trump’s order was carried out swiftly and sowed confusion among the nation’s immigration and homeland security agencies – which were excluded from the drafting process and were scrambling to understand how to implement it, according to media reports and two government officials who spoke to The Intercept.

Days before the executive order was signed, reports began to emerge that valid visa holders were suddenly being prevented from reentering the country after taking trips abroad. A senior U.S. immigration official, who asked not to be identified for fear of retaliation, confirmed to The Intercept that the rash of unusual student visa revocations began roughly a week before the official order was signed. Many of the stories the official heard about were anecdotal. Others, however, the official was able to review via internal Department of Homeland Security monitoring systems. While visas are revoked every day with little explanation afforded to those affected, the backgrounds of the individuals in these cases raised no red flags, the official said.

On the contrary, the impacted individuals whose files the official reviewed included a young mother of a U.S. citizen child, and students at some of the nation’s top universities publicly recognized for their outstanding achievement. These students had already undergone rigorous U.S. government vetting before being admitted to the country, and had only traveled abroad briefly over their winter break. The Intercept has independently verified two of these stories by speaking to those denied entry, who asked that their names not be used because they are attempting to appeal the decisions.

Read more …

Interesting notion: “elite overproduction”.

Science Can Decode the Laws of History and Predict US Political Violence (PT)

Consider the “structural-demographic theory” that was first proposed by the sociologist Jack Goldstone and subsequently developed and tested with data by others, including myself. The theory explains major outbreaks of political violence, such as the French Revolution or American Civil War, by focusing on several interrelated processes. One is the falling or stagnating living standards of the general population. But contrary to the widely held view, popular discontent by itself is not a sufficient cause of a civil war or a revolution. A more important factor is what has been called “elite overproduction” – that is, the appearance of too many elite candidates vying for a limited supply of power positions within the government and the economy. As written about in my book War and Peace and War, elite overproduction results in intense intra-elite competition, polarisation, and conflict that ultimately takes violent forms.

[..] The structural-demographic theory has been tested by several investigators on many historical societies. The theory predicts very long-term cycles in which periods when societies are internally at peace are succeeded by waves of unrest. Both of these “integrative” and “disintegrative” phases are about a century long. The theory focuses entirely on the dynamics of political instability within states as external wars have a logic of their own (in fact, it is typically societies which are in their integrative phases that prosecute successful wars of external conquest). Our empirical investigations of a variety of historical societies confirm that they go through structural-demographic cycles. But on top of the long cycles are often superimposed shorter oscillations with periods of roughly 50 years.

It appears that people eventually tire of incessant fighting, so during the disintegrative phases human generations experiencing a lot of fighting tend to alternate with relatively peaceful ones. Recently the Journal of Peace Research published my article in which I tested the predictions of the theory on American data. Constructing and analysing a database on US political violence (between 1780 and 2010), I found that the dynamics of violent incidences were just as predicted by the theory: a long structural-demographic cycle with a 50-year cycle superimposed on it:

Read more …

This is really the worst news of all. Money, and the military-industrial complex, still rule supreme. Nothing at all will improve until we root it out.

UK Agrees £100m Fighter Jet Deal With Turkey Despite Human Rights Abuse (Ind.)

The UK has signed a £100m deal to design new fighter jets for Turkey, despite the country’s President undertaking a severe crackdown on his regime’s opponents. Theresa May said it could open the way to billions of pounds worth of business, as she became the first foreign leader to visit Turkey since Recep Tayyip Erdogan ordered a wave of arrests and sackings in the wake of last summer’s coup. Questioned over human rights concerns, Downing Street officials said the deal to design the TF-X jets was sealed in light of Turkey’s status as a Nato ally and claimed Ms May could approach human rights as a “separate” issue. The PM did warn the President it was “important” for him to uphold human rights, as the stony faced Turkish leader looked on.

The UK is already mired in controversy regarding some £3bn worth of licences granted to export arms to Saudi Arabia as the Kingdom embarked on a deadly bombing campaign in Yemen. The announcement in Ankara yesterday means BAE Systems and Turkish Aerospace Industries have signed a “heads of agreement”, establishing a partnership for the development of the Turkish Fighter Programme or TF-X. Downing Street sources said the £100m contract has the potential to facilitate multibillion pound contracts between the UK and Turkish firms over the project’s 20-year lifetime. Ms May added: “It marks the start of a new and deeper trading relationship with Turkey and will potentially secure British and Turkish jobs and prosperity for decades to come.”

Read more …

How will Justin avoid a major battle with Washington? Build a wall?

Canada’s Justin Trudeau Takes A Stand On US Refugee Ban (BBC)

Canadian Prime Minister Justin Trudeau has taken a stand on social media against the temporary US ban on refugees and immigration from seven Muslim-majority countries Mr Trudeau underscored his government’s commitment to bringing in “those fleeing persecution, terror & war”. The US Department of Homeland Security said the entry ban would also apply to dual nationals of the seven countries. However, Mr Trudeau’s office says Canadian dual nationals are exempt. “We have been assured that Canadian citizens travelling on Canadian passports will be dealt with in the usual process,” a spokeswoman for Mr Trudeau said in an emailed statement.

US President Donald Trump’s National Security Adviser Mike Flynn “confirmed that holders of Canadian passports, including dual citizens, will not be affected by the ban,” the statement said. Canada’s Immigration Minister Ahmed Hussen is a dual national who arrived as a Somali refugee. Within hours, Mr Trudeau’s tweets had been shared more than 150,000 times. “Welcome to Canada” also became a trending term in the country. Mr Trudeau, who gained global attention for granting entry to nearly 40,000 Syrian refugees to Canada over the past 13 months, also sent a pointed tweet that showed him greeting a young refugee at a Canadian airport in 2015.

Read more …

Growth, centralization and decline. I’ve made the connection many times.

Centralization and the Decline of Europe (IL)

The famous French diplomat Charles Maurice de Talleyrand supposedly said that a weakness of the Bourbon monarchs was that they learned nothing and forgot nothing. If so, the genetic descendants of the Bourbons are now in charge of Europe. But before explaining why, let’s first establish that Europe is in trouble [..] because of statism and demographic change. What’s far more noteworthy, though, is that even the Europeans are waking up to the fact that the continent faces a very grim future. For instance, the bureaucrats in Brussels are pessimistic, as reported by the EU Observer. “…the report warns of a longer term risk for the EU economy. “As expectations of low growth ahead affect investment today, there is potential for a vicious circle,” the commission’s director general for economic and financial affairs writes in the report’s foreword. “In short, the projected pace of GDP growth may not be sufficient to prevent the cyclical impact of the crisis from becoming permanent (hysteresis), ” Marco Buti writes.”

The people of Europe share that grim assessment. Pew has some very sobering data on angst across the continent. Support for European economic integration – the 1957 raison d’etre for creating the European Economic Community, the EU’s predecessor – is down over last year in five of the eight EU countries surveyed by the Pew Research Center in 2013. Positive views of the European Union are at or near their low point in most EU nations, even among the young, the hope for the EU’s future. The favorability of the EU has fallen from a median of 60% in 2012 to 45% in 2013.

Establishment-oriented voices in the United States also agree that the outlook is rather dismal. Writing in the Washington Post, Sebastian Mallaby offers a grim assessment of Europe’s future. “…since 2008…, the 28 countries in the European Union managed combined growth of just 4%. And in the subset consisting of the eurozone minus Germany, output actually fell. …most of the Mediterranean periphery has suffered a lost decade. …The unemployment rate in the euro area stands at 9.8%, more than double the U.S. rate. Unemployment among Europe’s youth is even more appalling: In Greece, Spain, France, Croatia, Italy, Cyprus and Portugal, more than 1 in 4 workers under 25 are jobless.” The bottom line is that there’s widespread consensus that Europe is a mess and that things will probably get worse unless there are big changes.

But the key question, as always, is whether the changes are positive or negative. And this is why I started with a reference to the Bourbon kings. European leaders today also are infamous for learning nothing and forgetting nothing. [..] As Nassim Nicholas Taleb has sagely observed, it is centralization and harmonization that creates systemic risk. And all this talk about “common resources” and “public risk sharing” is simply the governmental version of co-signing a loan for the deadbeat family alcoholic. Yet Europe’s ideologues can’t resist their lemming-like march in the wrong direction. What makes this especially odd is that there is so much evidence that Europe originally became rich for the opposite reason.

Read more …

Elections in (7?) weeks and everyone turns right. Pragmatism, politicians call it.

Muslims Make A Pitch For Populist Vote As Dutch Politics Turns Sharp Right (G.)

Nourdin el Ouali has grown used to far-right attacks on Dutch Muslims, and to dog-whistle politics. But when the country’s prime minister wrote an open letter last week, in effect demanding that minorities integrate or “go away”, he was still shocked. Mark Rutte’s letter comes less than two months before a national election, and after months of watching populist Geert Wilders rising into the top position in national polls. If the election were held tomorrow his far-right party would probably be the largest in parliament. The letter did not directly mention Muslims, and began instead by attacking people who drop litter or spit on buses. However, in his warning of “something wrong” in Dutch society, the message was clear.

Rutte’s naked bid to woo far-right voters for the 15 March election prompted scathing criticism across mainstream society, and worry among Dutch Muslims, who have already endured a sharp rise in hate crime and say they face regular discrimination in daily life. “It concerns me a lot, because it’s the prime minister who wrote the letter,” says Ouali, a Rotterdam native, founder and city councillor for the progressive Nida party. “You would expect a different role from someone in this position, to rise above it all, bring people together – not writing this kind of letter where he really in a sneaky way talks about Dutch identity, implying there are groups [of Dutch citizens] that are a threat to the Dutch way of life.”

Read more …

“..those of my readers who have worked themselves up to the screaming point about the comparatively mild events we’ve seen so far may want to save some of their breath for the times ahead when it’s going to get much, much worse.

How Great the Fall Can Be (Greer)

What kinds of meltdowns are we going to get when internet service or modern health care get priced out of reach, or become unavailable at any price? How are they going to cope if the accelerating crisis of legitimacy in this country causes the federal government to implode, the way the government of the Soviet Union did, and suddenly they’re living under cobbled-together regional governments that don’t have the money to pay for basic services? What sort of reaction are we going to see if the US blunders into a sustained domestic insurgency—suicide bombs going off in public places, firefights between insurgent forces and government troops, death squads from both sides rounding up potential opponents and leaving them in unmarked mass graves—or, heaven help us, all-out civil war?

This is what the decline and fall of a civilization looks like. It’s not about sitting in a cozy earth-sheltered home under a roof loaded with solar panels, living some close approximation of a modern industrial lifestyle, while the rest of the world slides meekly down the chute toward history’s compost bin, leaving you and yours untouched. It’s about political chaos—meaning that you won’t get the leaders you want, and you may not be able to count on the rule of law or even the most basic civil liberties. It’s about economic implosion—meaning that your salary will probably go away, your savings almost certainly won’t keep its value, and if you have gold bars hidden in your home, you’d better hope to Hannah that nobody ever finds out, or it’ll be a race between the local government and the local bandits to see which one gets to tie your family up and torture them to death, starting with the children, until somebody breaks and tells them where your stash is located.

It’s about environmental chaos—meaning that you and the people you care about may have many hungry days ahead as crazy weather messes with the harvests, and it’s by no means certain you won’t die early from some tropical microbe that’s been jarred loose from its native habitat to find a new and tasty home in you. It’s about rapid demographic contraction—meaning that you get to have the experience a lot of people in the Rust Belt have already, of walking past one abandoned house after another and remembering the people who used to live there, until they didn’t any more. More than anything else, it’s about loss. Things that you value—things you think of as important, meaningful, even necessary—are going to go away forever in the years immediately ahead of us, and there will be nothing you can do about it.

It really is as simple as that. People who live in an age of decline and fall can’t afford to cultivate a sense of entitlement. Unfortunately, [..] the notion that the universe is somehow obliged to give people what they think they deserve is very deeply engrained in American popular culture these days. That’s a very unwise notion to believe right now, and as we slide further down the slope, it could very readily become fatal—and no, by the way, I don’t mean that last adjective in a metaphorical sense. History recalls how great the fall can be, Roger Hodgson sang. In our case, it’s shaping up to be one for the record books—and those of my readers who have worked themselves up to the screaming point about the comparatively mild events we’ve seen so far may want to save some of their breath for the times ahead when it’s going to get much, much worse.

Read more …

Greece can not save itself by agreeing to more cuts; it can only doom itself.

This Could Be Greece’s Last Chance To Save Itself (CNBC)

Despite decisive action proposed by the IMF to ease Greece’s financial burden, more turbulence lies ahead for the debt-ridden European nation, reveals the latest IMF report, which was delivered to the Fund’s board members for consultation. CNBC has received the report through a close source to the IMF. According to IMF deputy spokesman William Murray, the report will be discussed at the IMF’s board meeting on Feb.6. Among the reforms they are pressing are further cuts to pension programs and an increase in income taxes. Without a substantial pace of reforms, Greece will be unable to narrow the gap in its real per-capita income relative to the euro zone and remain prosperous and competitive. This has prompted the euro zone’s finance ministers to demand that Greece proceed with these necessary reforms until Feb. 20 or risk the IMF dissolving support of the Greek financial program.

In the latest report, the IMF claims the Greek banks have a weak capital structure and are exposed to the risk of nonperforming loans. The Greek banks’ current strategies require a reduction in the aggregate nonperforming loans ratio to 48, 42 and 34% by 2017, 2018 and 2019, respectively, but these backloaded NPL reductions “do not appear consistent with the Greek authorities’ ambitious investment and growth assumptions.” Among the measures included in the IMF report is the push to rebalance the policy mix toward growth-friendly and equitable policies and to lower the threshold of tax-free income. “Greece’s revenue yields lag behind peers as high marginal tax rates applied on narrow bases encourage tax evasion, discourage labour participation in the formal economy and provide incentives for firms to relocate to low tax neighbouring countries,” the IMF report said.

In addition, the IMF supports a further reduction to Greece’s pensions, which in recent years have fallen by 40%. The report stresses that “while recent pension reforms have helped address expected long-run pressures from population aging, pensions for current retirees remain unaffordably high.” At this point, the IMF is very critical, claiming that “the Greek authorities did not see a need to reduce pension spending or the income tax credit.” The IMF is hardening its stance not only against Greece but also across the euro zone countries seeking greater debt relief for Greece. Yet even with with full implementation of policies agreed to under the ESM program, a debt sustainability analysis included in the report reveals that Greece’s public debt is “highly unsustainable.” It further emphasizes that Greece’s public debt and financing needs will become “explosive” in the long run if Greece is unable to replace highly subsided official sector financing with market financing at rates consistent with sustainability.

The IMF projects Greek debt will reach 170% of GDP by 2020 and 164% of GDP by 2022 but will rise thereafter, reaching around 275% of GDP by 2060. (This is based on the cost of debt rising over time as market financing replaces highly subsidized official sector financing. It should more than offset the debt-reducing effects of growth and the primary balance surplus. ) The country’s gross financing needs (defined as the sum of budget deficits and funds required to roll over debt that matures in the course of the year) will be higher: a 15% of GDP threshold by 2024 and a 20% of GDP threshold by 2031, reaching around 33% by 2040 and about 62% of GDP by 2060.

Read more …

It all falls apart.

Greece’s Best-Selling Daily To Cease Publication Due To Debts (AFP)

Two historic Greek newspapers, including the country’s best-selling daily, will cease publication, the debt-ridden Lambrakis Press Group announced on Saturday. “‘To Vima’ weekly and ‘Ta Nea’ daily are forced to cease their publication within days due to financial reasons,” the company said in a statement. Lambrakis Press Group (DOL) “is lacking any available resources and as a result it can’t support the printing of its newspapers and, of course, can’t ensure the unhampered operation of the other media outlets it owns,” it added. Besides the two newspapers DOL owns numerous magazines, news sites and the Vima FM radio. DOL failed to pay its €99 million ($106-million) debt obligations in December, Antonis Karakoussis, director of the Vima newspaper and Vima FM radio said on January 11.

He added that this situation was the result of the economic crisis Greece has faced since 2010 which has already led to the closure of many media outlets. In Saturday’s statement DOL accused the creditor banks of putting the press group in a special management regime without providing for the continuation of its publications. DOL says the creditor banks are withholding all its earnings “whether these come from newspaper sales or from advertisements”. Lambrakis Press Group, one of the shareholders of the Mega Channel TV station that is also heavily indebted, has also faced legal turmoil over the past months, with its president, Stavros Psycharis, being prosecuted for tax evasion and money laundering. With its particularly critical stance against Greece’s leftist Prime Minister, Alexis Tsipras since his election in 2015, DOL has been, along with other Greek media moguls, the target of the government’s effort to “reestablish transparency” in what it calls a sector “of oligarchs”.

Read more …

Yes, it’s come to this. Lesbos resident Eric Kempson has more in the video.

Second Man Dies At Lesbos Refugee Camp Within Days (Kath.)

A 46-year-old Syrian man was found dead in his tent in the Moria refugee camp on Lesvos on Saturday morning. He was the second person to die at the facility last week, after the death of a 22-year-old Egyptian man a few days earlier. The deaths have highlighted the poor conditions that refugees face at camps on the Greek islands, especially during the current cold weather. The government is making efforts to create new facilities and move some migrants to the mainland but the United Nations High Commissioner for Refugees accused Athens last week of failing to respond to its proposals about improving conditions at the existing camps.

Read more …

Jan 232017
 
 January 23, 2017  Posted by at 10:08 am Finance Tagged with: , , , , , , , , ,  7 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


DPC Looking south on Fifth Avenue at East 56th Street, NYC 1905

We’ve Been in Decline for 40 Years – Trump is a Chance to Rethink – Eno (G.)
The Coming Unhappiness With Trump – Egon von Greyerz (KWN)
Trump’s Infrastructure, Defense Plans Will Lead To Ruin – Ron Paul (CNBC)
China’s Central Bank ‘Playing Dangerous Game’ To Prop Up Yuan (SCMP)
EU Is Dead But Doesn’t Know This Yet – Marine Le Pen (DS)
We Need An Alternative To Trump’s Nationalism. It’s Not The Status Quo (YV)
George Soros and the Women’s March on Washington (Nomani)
These are the Countries with the Biggest Debt Slaves (WS)
“Billion-Year” Gambian President Was Installed By The CIA (SCF)
Greek Supreme Court To Decide On Fate Of Eight Turkish Servicemen (Kath.)
UK Government ‘Sneaks Out’ Its Own Alarming Report On Climate Change (Ind.)
The Last Time Oceans Got This Warm Sea Levels Were 20 to 30 Feet Higher (LAT)

 

 

Only fitting that the best description of how I feel about this can be found in an interview about music.

We’ve Been in Decline for 40 Years – Trump is a Chance to Rethink – Eno (G.)

He has called himself an optimist. In the past. I ask him if he still is, post-2016. Yes, he says, there is a positive way to look at it. “Most people I know felt that 2016 was the beginning of a long decline with Brexit, then Trump and all these nationalist movements in Europe. It looked like things were going to get worse and worse. I said: ‘Well, what about thinking about it in a different way?’ Actually, it’s the end of a long decline. We’ve been in decline for about 40 years since Thatcher and Reagan and the Ayn Rand infection spread through the political class, and perhaps we’ve bottomed out. My feeling about Brexit was not anger at anybody else, it was anger at myself for not realising what was going on. I thought that all those Ukip people and those National Fronty people were in a little bubble.

Then I thought: ‘Fuck, it was us, we were in the bubble, we didn’t notice it.’ There was a revolution brewing and we didn’t spot it because we didn’t make it. We expected we were going to be the revolution.” He draws me a little diagram to explain how society has changed – productivity and real wages rising in tandem till 1975, then productivity continuing to rise while real wages fell. “It is easily summarised in that Joseph Stiglitz graph.” The trouble now, he says, is the extremes of wealth and poverty. “You have 62 people worth the amount the bottom three and a half billion people are worth. Sixty-two people! You could put them all in one bloody bus … then crash it!” He grins. “Don’t say that bit.” (Since we meet, Oxfam publish a report suggesting that only eight men own as much wealth as the poorest 3.6 billion people in the world – half the world’s population.)

[..] He is still thinking about the political fallout of the past year. “Actually, in retrospect, I’ve started to think I’m pleased about Trump and I’m pleased about Brexit because it gives us a kick up the arse and we needed it because we weren’t going to change anything. Just imagine if Hillary Clinton had won and we’d been business as usual, the whole structure she’d inherited, the whole Clinton family myth. I don’t know that’s a future I would particularly want. It just seems that was grinding slowly to a halt, whereas now, with Trump, there’s a chance of a proper crash, and a chance to really rethink.”

Read more …

Not his fault. As I wrote in November 8’s America is the Poisoned Chalice.

The Coming Unhappiness With Trump – Egon von Greyerz (KWN)

“The new US Administration has taken over with the conviction that they will “make America great again.” I really hope they will succeed because a strong US would be good for the world. Sadly, the odds of achieving that admirable objective are totally stacked against them. At the end of the next 4 years there is a risk that this Administration will be more hated than any government since Carter and probably even more hated than Carter. The coming unhappiness with Trump and his team will not arise because of the actions they take. They will clearly do everything in their might to make America great again. But the probabilities are totally against them to achieve this goal. They are taking over power at a time when debt has grown exponentially since the 1970s. They are also assuming power of a country that has not achieved a proper budget surplus for well over half a century. Even worse, the US has not had a positive trade balance since the early 1970s.

So here we have a country that has been living above its means for decades and has no real chance of changing this vicious cycle. The Federal debt is at $20 trillion and has been growing at the rate of 9% per year for the last 40 odd years. The forecast for the next four years is that the growth of the debt will accelerate. Total US debt is over $70 trillion or over 3.5x GDP. But that is just a fraction of the US liabilities. Unfunded liabilities are over $200 trillion. And you can add to that to the real gross derivative positions of US banks, which most likely more than $500 trillion. The success of a president in the US is closely linked to the performance of the stock market. Therefore, the best chance for a president to be loved by the American people and re-elected is for stocks to go up. P/Es on the S&P index are now at 70% above their historical mean – hardly a position from which it is likely to surge. Corporate borrowings have also surged since the Great Financial Crisis started.

In 2006 US corporate debt was just over $2 trillion. Today it is more than 3x higher at $7 trillion! At the same time, cash as a%age of corporate debt is declining and is now down to 27%. Within this massive increase in debt, there are major defaults looming in many areas like car loans, student loans and the fracking sector where potential write offs could be in the trillions of dollars. Another disaster which is guaranteed to happen in the US and the rest of the world is the coming pension crisis. Most people in the West have zero or a minimal pension. And even for the ones who have proper pension plans, they are greatly underfunded. It is estimated that US state and local government pensions are underfunded to the extent of a mind-blowing $6 trillion. And this is after a long period of surging stocks and bonds. Imagine what will happen to these pensions when stocks and bonds collapse, which is very likely to happen in the next few years.

Read more …

Look here, CNBC, introducing Ron Paul as a “well-known Trump critic” is insane. Fake labeling.

Trump’s Infrastructure, Defense Plans Will Lead To Ruin – Ron Paul (CNBC)

For all the fanfare that greeted President Donald Trump at his inauguration on Friday, the next four years of his presidency could very well be marred by a weakening economy as a result of “injurious” policies. That’s according to past Texas Congressman and former presidential candidate Ron Paul, who joined CNBC’s “Futures Now” last week to echo his past sentiments about the new president. Most notably, the well-known Trump critic believes that the President’s proposed plans could overspend the economy into trouble and drive the Federal Reserve to interfere. “With his massive increase in infrastructure and the military, I think there’s going to be a lot more spending,” said Paul. “The debt is going to be much bigger [and] I think that will put more pressure” on the Federal Reserve, he said, with the central bank already planning to tighten interest rates.

“You have good times, and then you have bad times to compensate for the artificially good times,” he added. “So we’ll have a downturn and that will be a real challenge for the new administration.” Although most of Wall Street appears bullish about the short-term economic outlook under Trump’s fiscal policy plans, some economists have been less than sanguine. Paul’s critique echoed that of David Stockman, a former Reagan-era budget director who also warned CNBC last week that Trump’s plans would ultimately lead to financial calamity. Paul had refused to endorse Trump from early on in the election cycle, claiming that the now President would divide the Republican Party. Much of Paul’s criticism of Trump lies with the latter’s proposed border taxes, which Paul believes is actually more of a “tariff” that would block free trade. “I think that right now, I’d fear most the retaliation [from other countries] and the burden it’s going to place on the consumer,” said Paul.

Read more …

“Floatation does not mean a large devaluation,” he said. “Actually, a one-off devaluation [of the yuan] doesn’t need to be big

No, I don’t think so. A devaluation must be big, because you can’t risk having to repeat it. And floatation will mean a large loss of value no matter what. When you float, you can’t manipulate anymore.

China’s Central Bank ‘Playing Dangerous Game’ To Prop Up Yuan (SCMP)

China’s central bank is playing a dangerous game using the country’s foreign reserves to defend the yuan because it could leave the nation defenceless in an increasingly volatile world, a state researcher has warned. Zhang Ming, senior fellow at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, said the People’s Bank of China (PBOC) should take a hands-off approach to the currency and focus on safeguarding foreign exchange reserves. “Forex reserves are valuable assets that [China] can use at critical times. It’s a pity that they are being sold heavily in the market,” Zhang said. “It should be the last resort.” Zhang said the PBOC was betting on “the weakening of the US dollar and a domestic economic rebound”.

The country’s forex reserves have shrunk by almost a $1 trillion since June 2014 as the central bank has sought to prevent a large fall in the yuan against the U.S. dollar. Zhang call’s for Beijing to reverse tack and abandon its heavy intervention in the foreign exchange market is gaining traction among researchers. Zhang Bin, another researcher at the Chinese Academy of Social Sciences, agreed that Beijing should free up controls on the yuan’s exchange rate by reducing government intervention in the market. “Floatation does not mean a large devaluation,” he said. “Actually, a one-off devaluation [of the yuan] doesn’t need to be big, and [the currency] may rebound as well. By doing this it will help the domestic economy,” he said.

Read more …

She’s dead on, I’ve been saying this for years, and she’s getting it handed to her on a silver platter the same way Trump was.

EU Is Dead But Doesn’t Know This Yet – Marine Le Pen (DS)

Far-right National Front leader Marine Le Pen said on Sunday that France has to leave the European Union as she claimed that staying in the bloc is no longer a viable option for the country. Speaking in an interview with France’s BGNES, Le Pen said the EU is dead but it does not know this yet, stating that the bloc has failed economically, socially as well as security-wise. She said the recent economic growth, unemployment and poverty indicators prove the EU’s failure, adding that the bloc is also incapable of protecting its own borders against what she called as “Islamic terrorism”. With voters across Europe moving to the right, most polls currently show a Fillon-Le Pen runoff is the most likely scenario in May. National Front leader Le Pen told a meeting of rightwing populist parties in Germany on Saturday that Europe was about to “wake up” following the victory of Donald Trump in the US election and the British vote to leave the EU.

Read more …

I get what Varoufakis thinks and says, but I also think renewed nationalism is backed into the cake by now. Where I differ from most is I don’t see that as a disaster, not necessarily. It’s the EU that is a disaster.

We Need An Alternative To Trump’s Nationalism. It’s Not The Status Quo (YV)

Thatcher’s and Reagan’s neoliberalism had sought to persuade that privatisation of everything would produce a fair and efficient society unimpeded by vested interests or bureaucratic fiat. That narrative, of course, hid from public view what was really happening: a tremendous buildup of super-state bureaucracies, unaccountable supra-state institutions (World Trade Organisation, Nafta, the European Central Bank), behemoth corporations, and a global financial sector heading for the rocks. After the events of 2008 something remarkable happened. For the first time in modern times the establishment no longer cared to persuade the masses that its way was socially optimal.

Overwhelmed by the collapsing financial pyramids, the inexorable buildup of unsustainable debt, a eurozone in an advanced state of disintegration and a China increasingly relying on an impossible credit boom, the establishment’s functionaries set aside the aspiration to persuade or to represent. Instead, they concentrated on clamping down. In the UK, more than a million benefit applicants faced punitive sanctions. In the Eurozone, the troika ruthlessly sought to reduce the pensions of the poorest of the poor. In the United States, both parties promised drastic cuts to social security spending. During our deflationary times none of these policies helped stabilise capitalism at a national or at a global level. So, why were they pursued?

Their purpose was to impose acquiescence to a clueless establishment that had lost its ambition to maintain its legitimacy. When the UK government forced benefit claimants to declare in writing that “my only limits are the ones I set myself”, or when the troika forced the Greek or Irish governments to write letters “requesting” predatory loans from the European Central Bank that benefited Frankfurt-based bankers at the expense of their people, the idea was to maintain power via calculated humiliation. Similarly, in America the establishment habitually blamed the victims of predatory lending and the failed health system.

It was against this insurgency of a cornered establishment that had given up on persuasion that Donald Trump and his European allies rose up with their own populist insurgency. They proved that it is possible to go against the establishment and win. Alas, theirs will be a pyrrhic victory which will, eventually, harm those whom they inspired. The answer to neoliberalism’s Waterloo cannot be the retreat to a barricaded nation-state and the pitting of “our” people against “others” fenced off by tall walls and electrified fences.

Read more …

Russia threw out Soros, Hungary wants to, so does FYROM. Who’s next?

George Soros and the Women’s March on Washington (Nomani)

In the pre-dawn darkness of today’s presidential inauguration day, I faced a choice, as a lifelong liberal feminist who voted for Donald Trump for president: lace up my pink Nike sneakers to step forward and take the DC Metro into the nation’s capital for the inauguration of America’s new president, or wait and go tomorrow to the after-party, dubbed the “Women’s March on Washington”? The Guardian has touted the “Women’s March on Washington” as a “spontaneous” action for women’s rights. Another liberal media outlet, Vox, talks about the “huge, spontaneous groundswell” behind the march. On its website, organizers of the march are promoting their work as “a grassroots effort” with “independent” organizers. Even my local yoga studio, Beloved Yoga, is renting a bus and offering seats for $35.

The march’s manifesto says magnificently, “The Rise of the Woman = The Rise of the Nation.” It’s an idea that I, a liberal feminist, would embrace. But I know — and most of America knows — that the organizers of the march haven’t put into their manifesto: the march really isn’t a “women’s march.” It’s a march for women who are anti-Trump. As someone who voted for Trump, I don’t feel welcome, nor do many other women who reject the liberal identity-politics that is the core underpinnings of the march, so far, making white women feel unwelcome, nixing women who oppose abortion and hijacking the agenda. To understand the march better, I stayed up through the nights this week, studying the funding, politics and talking points of the some 403 groups that are “partners” of the march. Is this a non-partisan “Women’s March”?

Roy Speckhardt, executive director of the American Humanist Association, a march “partner,” told me his organization was “nonpartisan” but has “many concerns about the incoming Trump administration that include what we see as a misogynist approach to women.” Nick Fish, national program director of the American Atheists, another march partner, told me, “This is not a ‘partisan’ event.” Dennis Wiley, pastor of Covenant Baptist United Church of Christ, another march “partner,” returned my call and said, “This is not a partisan march.” Really? UniteWomen.org, another partner, features videos with the hashtags #ImWithHer, #DemsInPhily and #ThanksObama. Following the money, I pored through documents of billionaire George Soros and his Open Society philanthropy, because I wondered:

What is the link between one of Hillary Clinton’s largest donors and the “Women’s March”? I found out: plenty. By my draft research, which I’m opening up for crowd-sourcing on GoogleDocs, Soros has funded, or has close relationships with, at least 56 of the march’s “partners,” including “key partners” Planned Parenthood, which opposes Trump’s anti-abortion policy, and the National Resource Defense Council, which opposes Trump’s environmental policies. The other Soros ties with “Women’s March” organizations include the partisan MoveOn.org (which was fiercely pro-Clinton), the National Action Network [..]. Other Soros grantees who are “partners” in the march are the American Civil Liberties Union, Center for Constitutional Rights, Amnesty International and Human Rights Watch.

Read more …

Well, they call their debts assets…

These are the Countries with the Biggest Debt Slaves (WS)

Americans have been on a borrowing binge. To buy their favorite cars and trucks, they’ve loaded up on $1.14 trillion in auto loans. Young and not so young Americans are mortgaging their future with student loans that now amount to $1.28 trillion. Credit card and other debts are at $1.12 trillion. And mortgage debt stands at $8.82 trillion. So, total household debt was $12.35 trillion, according to the New York Fed’s Household Debt and Credit Report for the third quarter 2016. That’s a massive amount of debt. Many consumers are struggling with it. Student loans are seeing enormous default rates, and repayment rates are far worse than previously disclosed. And “debt slaves” has become a term in the financial vernacular. But it isn’t nearly enough debt…

Neither for the New York Fed whose President William Dudley, in a speech a few days ago, practically exhorted households to borrow more against the equity in their homes so that they blow this cash and drive up retail sales: “Whatever the timing, a return to a reasonable pattern of home equity extraction would be a positive development for retailers, and would provide a boost to aggregate growth,” he mused, with nostalgic thoughts of 2008. Nor for the global rankings of debt slaves, where US households squeaked into the ignominious 10th place, barely ahead of Portugal! I mean, come on! Portugal!! There are many ways to measure household indebtedness and debt burdens. Comparing total household debt to the overall size of the economy as measured by GDP is one of the measures. And per this household-debt-to-GDP measure, the Americans are 10th place with 78.8% and look practically prudent compared to the peak just before the Financial Crisis.

[..] And here’s some inevitable food for a terrifying thought: The countries with highly indebted households, so the top of the list, are mostly countries were central-bank policy rates are very low or even negative, and where mortgage rates are super low. What happens to those housing markets, the households, the banks, and the overall economies when interest rates rise even a little and that whole equation of perennially ballooning debt falls apart? We already know what happens.

Read more …

You might be tempted to name this an unbelievable story, but then you realize this is what the US is good at. Reads like a spy novel, a film script.

“Billion-Year” Gambian President Was Installed By The CIA (SCF)

Gambian President and dictator Yahya Jammeh, facing a combined military force composed of Senegalese army troops, the Nigerian air force, and troops from Mali, Ghana, and Togo, has agreed to relinquish the presidency of Gambia. On December 1, 2016, Jammeh was defeated for re-election in a surprise upset by his little-known rival Adama Barrow. Jammeh received only 45% of the vote. During the election campaign Jammeh vowed in an interview with the BBC to «rule for one billion years». After initially conceding defeat to Barrow, Jammeh reneged on his promise to step down and announced he would remain as president. The Economic Community of West African Countries (ECOWAS) decided that Jammeh had to go, a stance ironically supported by the United States, which had assisted Jammeh in overthrowing Gambia’s democratically-elected president, Sir Dauda K. Jawara, in 1994.

After Jammeh refused ECOWAS’s, the African Union’s, and the United Nations Security Council’s demands to leave office and permit Barrow to assume the presidency, ECOWAS mobilized its military forces. On January 19, 2017, Barrow was sworn in as president in the Gambian embassy in Dakar, the Senegalese capital. Hours later, Senegalese troops began to enter Gambia and Nigerian air force jets buzzed the Gambian capital of Banjul. The presidents of Mauritania and Guinea flew to Banjul to urge Jammeh to leave office peacefully. Jammeh’s fate was sealed when Major General Ousman Badjie, the commander of the Gambian armed forces, recognized Barrow as Gambia’s commander-in-chief.

The demand from the United States for Jammeh to relinquish power was a display of absolute hypocrisy since Washington had not only installed Jammeh into power but two successive U.S. presidents warmly welcomed the military ruler to the White House. Jammeh, who owns a $3.5 million mansion in Potomac, Maryland, was warmly greeted by President Barack Obama at the 2014 and 2015 U.S.-Africa Leaders’ Summits in Washington. President George W. Bush greeted Jammeh at the U.S.-Africa Business Summit in Washington in 2003. With the protection of the State Department’s Diplomatic Security Service, Jammeh’s Moroccan-born wife, Zineb Jammeh, ran up huge totals at the Washington area’s fashionable shopping malls. She also settled on Sam’s Club, a wholesale discount store, to buy massive amounts of household goods. Jammeh is a textbook case of CIA-sponsored kleptocracy on a grand scale.

Under Jammeh, Gambia continued to be a strategic ally of the United States. The kleptocratic Gambian leader permitted the U.S. National Aeronautics and Space Administration (NASA) to maintain an emergency landing site for NASA’s space shuttle in the country and Gambia participated with the U.S. Central Intelligence Agency in the post-9/11 rendition program. Before being installed as Gambia’s dictator, Jammeh had received training from the Pentagon. Merely a lieutenant in the Gambian National Army. In 1993, Jammeh attended the notorious «School of the Americas» in Fort Benning, Georgia. The school has trained some of Latin America’s most notorious military dictators and death squad commanders. While in Fort Benning, Jammeh was made an honorary citizen of the state of Georgia. The following year, and before he launched his coup, Jammeh attended the Military Police Officers Basic Course (MPOBC) at Fort McClellan, Alabama.

[..] It was during the administration of President Bill Clinton that the green light was given for Jammeh to be installed in a CIA-led coup in Gambia. On July 24, 1994, President Jawara was at his palace in Banjul entertaining the commanding officer of the visiting U.S. Navy tank landing ship, the USS La Moure County. Also present was U.S. ambassador to Gambia, Andrew Winter, a career foreign service officer who represented a new breed of U.S. ambassador – one that routinely and publicly involved himself in the domestic political affairs of the nation to which they were posted. While Jawara and the ship’s commander exchanged diplomatic niceties, junior army officers, led by Jammeh, staged a coup against the democratically elected government.

Read more …

Only one decision makes any sense.

Greek Supreme Court To Decide On Fate Of Eight Turkish Servicemen (Kath.)

The Greek Supreme Court on Monday is to rule whether eight Turkish servicemen who fled to Greece after July’s failed coup should be extradited. Three separate panels of Greek judges have already ruled that the Turkish officers’ lives may be put at risk if they were to be returned to Turkey, where Prime Minister Recep Tayyip Erdogan has launched a tough crackdown on dissent since the summer’s coup attempt. Diplomatic circles that fear a rejection of Turkey’s request could put a further strain on ties between Athens and Ankara, particularly at a time when Cyprus reunification talks also hang in the balance, have been keeping a close eye on proceedings. The issue has also drawn attention from intellectuals and the media in Greece and other parts of Europe, who see it as a test of the bloc’s fundamental principles and values. All eight servicemen have denied involvement in the coup attempt and say they fear for their lives if they are returned to Turkey.

Read more …

What a surprise.

UK Government ‘Sneaks Out’ Its Own Alarming Report On Climate Change (Ind.)

The Government has been accused of trying to bury a major report about the potential dangers of global warming to Britain – including the doubling of the deaths during heatwaves, a “significant risk” to supplies of food and the prospect of infrastructure damage from flooding. The UK Climate Change Risk Assessment Report, which by law has to be produced every five years, was published with little fanfare on the Department for Environment, Food and Rural Affairs’ (Defra) website on 18 January. But, despite its undoubted importance, Environment Secretary Andrea Leadsom made no speech and did not issue her own statement, and even the Defra Twitter account was silent. No mainstream media organisation covered the report.

One leading climate expert accused the Government of “trying to sneak it out” without people noticing, saying he was “astonished” at the way its publication was handled. In the report, the Government admitted there were a number of “urgent priorities” that needed to be addressed. It said it largely agreed with experts’ warnings about the effects of climate change on the UK. These included two “high-risk” issues: the damage expected to be caused by flooding and coastal erosion; and the effect of rising temperatures on people’s health. The report concluded that the number of heat-related deaths in the UK “could more than double by the 2050s from a current baseline of around 2,000 per year”. It said “urgent action” should be taken to address overheating in homes, public buildings and cities generally, and called for further research into the effect on workers’ productivity.

The Government also recognised that climate change “will present significant risks to the availability and supply of food in the UK”, the report said, partly because of extreme weather in some of the world’s main food-growing regions. The report also said the public water supply could be affected by shortages and that the natural environment could be degraded. Bob Ward, policy and communications director at the Grantham Research Institute on Climate Change and the Environment in London, said he was “astonished” at the way such a report had been slipped out. “Defra did very little to publicise it – they didn’t even tweet about it,” he said. “It’s almost as if they were trying to sneak it out without people realising. I have no idea what they were thinking.”
.

Read more …

You better start swimming or you’ll sink like a stone.
For the times they are a-changing.

The Last Time Oceans Got This Warm Sea Levels Were 20 to 30 Feet Higher (LAT)

Ocean temperatures today are about the same as they were more than 100,000 years ago – at a time when sea levels were 20 to 30 feet higher. The findings, published in the journal Science, highlight the key role that human activity has played in global warming and underscore concerns about the future impact of rising sea levels. Over millions and billions of years, the Earth has gone through periods of cooling (when water freezes out of the oceans, causing glaciers to grow and sea levels to fall) and warming (when the ice melts and sea levels rise). Scientists often look for clues hidden in layers of ancient rock and ice to determine what conditions were like in that long-gone climate.

The last interglacial period, which took place some 129,000 to 116,000 years ago, is a particularly intriguing chapter in Earth’s relatively recent history because of what it could tell us about today’s climate, said lead author Jeremy Hoffman, a paleoclimatologist at the Science Museum of Virginia. “The last interglacial is extremely interesting because it’s the last time period in recent Earth history when global temperatures were a little bit higher and global sea level was about 6 to 9 meters higher – but carbon dioxide in the atmosphere was roughly at what it was during the pre-industrial era,” said Hoffman, who conducted the work as a doctoral student at Oregon State University. “So it’s a really interesting scientific question: What is it about the last interglacial that’s so unique, that gave rise to higher sea levels?”

The problem is, researchers often assume climate change happened synchronously across the globe — that is, if it grew warm in one part, it also heated up in the others, and if it cooled in one area, it was cooling everywhere else at the same time. It’s already clear from climate patterns today that this simply isn’t the case, Hoffman said. Even if Earth overall is warming at a given point in time, for example, some spots might be getting cooler while others heat up. “What we know about how climate and temperature change on this planet is, it’s not all at the same time or at the same rate,” he said. “You can see these even today in human-caused climate change, how that’s playing out on a global scale.”

Read more …

Aug 042016
 
 August 4, 2016  Posted by at 9:22 am Finance Tagged with: , , , , , , ,  5 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone

Howard Hollem George Lane April 1942
“George Lane, served in the last war with the British Army from Vimy Ridge to the Occupation. Two of his sons are in the American Army, one with the Air Corps in Australia. His daughter volunteered for the Women’s Army Auxiliary Corps. Seven of his nephews are in the British Army”

 

 

With the Bank of England about to announce its latest set of desperate measures today, the first since the Brexit, I accidentally stumbled upon an article I wrote on January 16 2012, well over 4 1/2 years ago, in the Automatic Earth’s last days at Blogger. Posting it again here seems appropriate 5 weeks after the Brexit, because the article shows you that the referendum result did not come out of nowhere, no matter what many people claim. The British economy was already doing very poorly, and already failing millions of people, going into 2012.

Note: of course not all predictions made back then played out the way they were made, but I’m more interested in the overall picture. For instance, unemployment numbers are not as dire as forecast, but that hides the deterioration in the quality of jobs, and what they actually pay, much as that happens in the US. Bubbles in stocks and housing hide a lot too. David Cameron’s rule has been hard on the poorer British people, and it will take a long time for that to be corrected. I changed the coding just a little bit (Blogger vs WordPress), nothing big, so it looks a bit different. Here’s from early 2012, happy time travel:

 

 

Ilargi: There is a relative silence in the international financial press when it comes to Britain. The economic situation of continental Europe gets almost all the attention. Every now and then someone in France or Germany states that Britain, too, should be downgraded, like when S&P cut the ratings of 9 European countries, but such statements attract hardly any interest at all. This might not be overly wise, though.

At the end of last year, Tyler Durden at ZeroHedge published a graph from Haver Analytics/Morgan Stanley that should probably have sounded alarm bells quite a bit louder than it did.

Still, this graph would seem to indicate that the only core issue in the UK is its outsize financial sector with its outsize debt. From time to time, however, news articles pop up that seem to indicate there’s more going on than trouble in the City of London.

I found this one alarmingly interesting, for instance, from James Hall in the Telegraph on January 4:

One million people take out emergency loans to pay mortgage

Almost one million Britons have taken out an emergency ‘payday’ loan to help pay their rent or mortgage in the last year, according to Shelter, the housing charity.

The high degree of borrowing highlights the ‘spiral of debt’ that people are falling into to keep a roof over their head, Shelter said. The charity also found that seven million Britons are relying on some form of credit to help pay their housing costs.

Campbell Robb, Shelter’s chief executive, said: ‘These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home.’

Ilargi: Payday loans to pay off your mortgage? Sounds like perhaps Britain has a substantial hidden real estate problem, a pre-shadow inventory one that could spiral out of control at a rapid clip.

On January 9, the same James Hall had this follow-up:

Six million households have only five days’ savings

Around six million households would be unable to survive for more than five days if they stopped being paid, such are the low levels of savings among Britons, new research shows.

A new report from First Direct, the bank, warns that one in three UK households have less than £250 in accessible savings. A fifth of all households have no savings at all.

The bank said that £250 is the equivalent of three days’ average monthly household take-home pay. With average monthly outgoing currently at £1,536, these savings would last just five days.

Ilargi: Obviously, the two groups, those that take out loanshark payday loans to keep a roof over their head, and those that live paycheck to paycheck, overlap each other to a large extent.

Still, what makes it striking is the sheer number of people affected. One million people need emergency loans to keep their families in their homes, while six million households have nothing whatsoever saved for a rainy day.

If we put the average household size at 2.5 people, that means that, out of 60 million living in Britain, 2.5 million are on the verge of losing their homes, and 15 million, or 25% of the population, risk having to cut on their basic needs, food and heating, if they hit even the slightest speedbump.

And what are the chances this situation will improve any time soon? It doesn’t look good; in fact it looks set to worsen. While there’s no lack of denial, an increasing number of voices admit that the British economy has already slipped back into recession. This is from the BBC this morning:

UK in recession say Item Club economic forecasters

The UK may have already slipped back into recession, economic forecaster the [Ernst&Young] Item Club has warned. The think tank said gross domestic product shrank in the final quarter of last year and would contract again in the current three-month period.

It said that even if the eurozone could resolve its problems the UK economy would grow by just 0.2% this year. It also predicted unemployment would rise by a further 300,000 to just below three million people. [..]

Meanwhile, the Chartered Institute of Personnel and Development said unemployment would stay above 2.5 million until at least 2016, peaking at 2.9 million next year. Chief economic adviser John Philpott said the jobless rate would rise to 8.8% at the end of next year. [..]

Another forecast from the Centre for Economics and Business Research said the UK would actually shrink this year by 0.4% and by a full 1% if the eurozone broke up.

Ilargi: Nor is it hard to find an ironic twist in all this. In what depicts a fast growing chain of events, Zoe Wood reports for the Guardian:

Royal Bank of Scotland pulls out of deal to rescue Peacocks

More than 13,000 retail jobs are on the line at value fashion group Peacocks after Royal Bank of Scotland walked away from restructuring talks at the heavily indebted retail chain.

Peacocks may have to appoint administrators after the state-backed lender had an abrupt change of heart about a deal to refinance the retailer’s £600m debt pile, which would have involved risking more money in the business. RBS and Barclays were in the driving seat of the complex debt-for-equity negotiations – which were said to involve 18 funds and lenders – as they are owed the most. Both banks are owed more than £100m.

Peacocks’ advisers have been trying to put together a rescue deal for months, but talks broke down at the weekend, leaving the future of the store, which has 550 branches and employs around 10,000 staff, hanging in the balance. [..] “It’s quite a complex deal,” said one insider. “It was all going well until RBS walked away last week. There are still conversations going on.” [..]

RBS is facing a series of tough decisions this year as a number of struggling high-street chains, including HMV and Clinton Cards, are reliant on its largesse. “Each company restructure is judged on its own merits, but clearly the difficult conditions that retailers face is an important factor,” said an RBS spokesman. [..]

A string of high-street chains including La Senza, Blacks Leisure and Barratts Priceless have called in administrators in recent weeks as trading failed to produce enough cash to cover costs such as rent and interest payments on loans.

Ilargi: With the country in a recession, but hardly anyone willing to concede that to date, least of all its government, it’s no wonder that things like this happen, mostly hidden from sight.

The ironic twist to it is provided by that fact that RBS is 70% owned by the British government, which has poured billions of pounds into the bank, and then lets it make decisions that cost 10’s of 1000’s of jobs.

I don’t want to get into a political debate about this; however, protecting banks with taxpayer funds, but not jobs, is a decision that is of course as political as it is ironic. Letting bailed out bank executives make decisions that cut all these jobs and at the same time pay themselves multi-million dollar bonuses is way beyond ironic.

But all of the above is just today’s prologue. I received an article yesterday that outdoes it all, and then some.

John Ross, Visiting Professor at Antai College of Economics and Management at Jiao Tong University in Shanghai writes a real stunner on his blog Key Trends in Globalisation:

The incredible shrinking UK economy

The magnitude of the blow suffered by the UK economy since the beginning of the financial crisis is very considerably minimized by not presenting it in terms of a common international yardstick. Gauged by decline in GDP, using a common international purchasing measure, dollars, no other economy in the world has shrunk even remotely as much as the UK.

As most countries produce only annualized GDP data it will be necessary to wait before a comprehensive global comparison can be made for 2011. However it is clear no substantial growth in dollar terms took place in the UK economy during that year – GDP at national current prices rose only 1.4 per cent between the 1st and 3rd quarters and the change in the pound’s exchange rate against the dollar during the year was a marginal 0.3 per cent.

Therefore there will have been no significant recovery from the UK data set out in Table 1 below, and the gap between the UK and other European economies, which form the next worst performing major group, is too great to have been qualitatively affected by changes in the Euro’s exchange rate – the Euro declined against the pound by only 3.3 per cent in 2011.

Table 1 shows that the fall in UK GDP in 2007-2010 was $562 billion compared to the next worst performing national economy, Italy, with a decline of $65 billion – i.e. the decline in UK GDP in the common measuring yardstick of dollars was more than 8 times that of the next worst performing national economy. Table 1 shows the 10 national economies suffering the greatest declines in dollar GDP.

It is also extremely striking that the UK’s decline was more than two and a half times that of the entire Eurozone.

The UK accounted for a somewhat astonishing 77% of the EU’s decline.

Expressed in percentage terms the situation is no better. Of all economies for which World Bank data is available only Iceland, with a decline in dollar GDP of 38.4%, suffered a worst percentage fall than the UK – even bail out economy Ireland, with a fall of 18.4%, outperformed the UK economy.

Two trends intersected for the UK’s performance to be so much worse than that of any other economy. First, contrary to the government’s anti-European rhetoric, UK economic performance in constant price national currency terms has been significantly worse than the Eurozone during the financial crisis (Figure 2). [..]

… between the beginning of 2008 and the beginning of 2012, the pound’s exchange rate has fallen by 21.0% against the dollar compared to the Euro’s 11.4% drop in the same period. The multiplicative effect of the severity of the relative drop in constant price GDP and the fall in the pound’s exchange rate accounts for the unequalled decline in UK GDP in dollars.

As at present the UK economy shows no substantial sign of recovery, the present UK government, which maintains a steadfastly ostrich like attitude towards Europe in particular, and most other countries in general, may argue that a measure in terms of dollars at current exchange rates is irrelevant – the UK currency is the pound and what counts is constant price shifts. Such an argument is false and an attempt to disguise the true scale of the decline of the UK economy.

The internationally unmatched decline in UK dollar GDP is a huge fall in real international purchasing ability. The far higher than targeted inflation in the UK during the last two years, which has substantially eroded the population’s living standards, is itself in part a reflection of the decline in the UK’s exchange rate and consequent raising of import prices. In short, the decline in the international purchasing power of the UK’s economy translates into a direct fall in real incomes.

It may also be seen that the government’s claim that the UK is outperforming Europe and the Eurozone is entirely without foundation even in constant price national currency terms. But when measured in terms of real international comparisons, i.e. in dollars, the UK’s performance is incomparably worse than Europe’s.

It appears extremely unlikely that the UK’s economy will escape from this circle of decline in the next period. The austerity policies pursued by the present UK government have substantially slowed the economic recovery that was taking place in 2009 and the first part of 2010 – between the 3rd quarter of 2010 and the 3rd quarter of 2011 the UK economy grew by only 0.5%. [..]

Even if any partial recovery takes place, for example by some increase in the exchange rate of the pound against the Euro, the sheer magnitude of the decline in the UK economy makes it implausible that this could be on a scale sufficient to reverse the fall in its relative international position.

Ilargi: Britain lost 20% of GDP from 2007 – 2011. Against this backdrop, and don’t let’s forget the over-600% debt to GDP ratio just for Britain’s financial sector, which will inevitably lead to more – calls for – bailouts, what is the Cameron government’s response?

First of all, austerity measures. Which will hit those people very hard who are in the bottom 25% or so who already have no savings, no nothing, to fall back on. And which will also lead to a rise in unemployment, which in turn will exacerbate the vicious problem circle.

Cameron also distances himself, and his country, from continental Europe, even though that is Britain’s main export destination. How smart is that?

Britain is a country of relatively large regional disparities as well as wealth disparities. The already rich center increasingly sucks up the remaining wealth of the periphery of society. There is then only one possible outcome of those one million people paying their rents and mortgages with payday loans: the British housing bubble will burst sooner rather than later.

Tax revenue has only one way to go as well. Down. So what will Cameron use to support the banks? How will he attempt to prevent a large scale repeat of last year’s Tottenham riots?

Looking at all this, we also need to wonder how much longer, and why in the first place, Britain is perceived as a safe haven, with its sovereign bonds – gilts – much sought after. Sure, Britain has its own currency and central bank, it can “print”, it can do QE 1001, but it’s not as if it hasn’t already tried that route. And still lost 20% of GDP.

Whatever it decides to do, it seems safe to presume that Britain might well steal some of the limelight away from Greece and Italy in the not too distant future.

 

 

Me in 2016 again for a moment: after reading this -I wrote it 55(!) months ago-, does the Brexit still surprise you?

 

 

Jul 192016
 
 July 19, 2016  Posted by at 3:13 pm Finance Tagged with: , , , , , , ,  14 Responses »
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone


M. King Hubbert

It’s been a while since we posted an article by our friend Euan Mearns, who was active at The Oil Drum at the same time Nicole and I were. Is it really 11 years ago that started, and almost 9 since we left? You know the drill: we ‘departed’ because they didn’t want us to cover finance, which we said was the more immediate crisis, yada yada. Euan stayed on for longer, and the once unequalled Oil Drum is no more.

On one of our long tours, which were based around Nicole’s brilliant public speaking engagements, we went to see Euan in Scotland, he teaches at Aberdeen University. I think it was 2011?! An honor. Anyway, always a friend.

And there’s ono-one I can think of who’d be better at explaining the Peak Oil Paradox in today’s context. So here’s a good friend of the Automatic Earth, Euan Mearns:

 

 

Euan Mearns: Back in the mid-noughties the peak oil meme gained significant traction in part due to The Oil Drum blog where I played a prominent role. Sharply rising oil price, OPEC spare capacity falling below 2 Mbpd and the decline of the North Sea were definite signs of scarcity and many believed that peak oil was at hand and the world as we knew it was about to end. Forecasts of oil production crashing in the coming months were ten a penny. And yet between 2008, when the oil price peaked, and 2015, global crude+condensate+NGL (C+C+NGL) production has risen by 8.85 Mbpd to 91.67 Mbpd. That is by over 10%. Peak oilers need to admit they were wrong then. Or were they?

 

 

Introduction

 

It is useful to begin with a look at what peak oil was all about. This definition from Wikipedia is as good as any:

Peak oil, an event based on M. King Hubbert’s theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline. Peak oil theory is based on the observed rise, peak, fall, and depletion of aggregate production rate in oil fields over time.

Those who engaged in the debate can be divided into two broad classes of individual: 1) those who wanted to try and understand oil resources, reserves, production and depletion rates based on a myriad of data sets and analysis techniques with a view to predicting when peak oil may occur and 2) those who speculated about the consequences of peak oil upon society. Such speculation normally warned of dire consequences of a world running short of transport fuel and affordable energy leading to resource wars and general mayhem. And none of this ever came to pass unless we want to link mayhem in Iraq*, Syria, Yemen, Sudan and Nigeria to high food prices and hence peak oil. In which case we may also want to link the European migrant crisis and Brexit to the same.

[* One needs to recall that GWI was precipitated over Kuwait stealing oil from Iraq, from a shared field on the Kuwait-Iraq border, leading to the Iraqi invasion of 1991.]

The peak oil debate on The Oil Drum was a lightning conductor for doomers of every flavour – peak oil doom (broadened to resource depletion doom), economic doom and environmental doom being the three main courses on the menu. The discussion was eventually hijacked by Greens and Green thinkers, who, not content with waiting for doomsday to happen, set about manufacturing arguments and data to hasten the day. For example, fossil fuel scarcity has morphed into stranded fossil fuel reserves that cannot be burned because of the CO2 produced, accompanied by recommendations to divest fossil fuel companies from public portfolios. Somewhat surprisingly, these ideas have gained traction in The United Nations, The European Union and Academia.

It is not my intention to dig too deeply into the past. Firmly belonging to the group of data analysts, in this post I want to take a look at two different data sets to explore where peak oil stands today. Is it dead and buried forever, or is it lurking in the shadows, waiting to derail the global economy again?

 

 

The USA and Hubbert’s Peak

 

The USA once was the poster child of peak oil. The Peak Oil theory was first formulated there by M. King Hubbert who in 1956 famously forecast that US production would peak around 1970 and thereafter enter an era of never-ending decline (Figure 1). Hubbert’s original paper is well worth a read.

Figure 1 From Hubbert’s 1956 paper shows the peak and fall in US production for ultimate recovery of 150 and 200 billion barrels. The 200 billion barrel model shows a peak of 8.2 Mbpd around 1970 that proved to be uncannily accurate.

Looking to Figure 2 we see that Hubbert’s prediction almost came true. US production did indeed peak in 1970 at 9.64 Mbpd while Hubbert’s forecast was a little lower at 8.2 Mbpd. The post-peak decline was interrupted by the discovery of oil on the N slope of Alaska and opening of the Aleyska pipeline in 1977 that was not considered in Hubbert’s work. Herein lies one of the key weaknesses of using Hubbert’s methodology. One needs to take into account known unknowns. We know for sure that unexpected discoveries and unexpected technology developments will occur, it’s just we don’t know, what, when and how big.

Figure 2 In red, US crude oil production from the EIA shows progressive growth from 1900 to 1970. The oil industry believed this growth would continue forever and was somewhat aghast when M. King Hubbert warned the party may end in 1970 which it duly did. The discovery of oil in Alaska created a shoulder on the decline curve. But apart from that, Hubbert’s forecast remained good until 2008 when the shale drillers and frackers went to work. Hubbert’s 1970 peak was matched by crude oil in 2015 and exceeded by C+C+NGL that same year.

Following the secondary Alaska peak of 8.97 Mbpd (crude oil) in 1985, production continued to decline and reached a low of 5 Mbpd (crude oil) in 2008. But since then, the rest is history. The shale drillers and frackers went to work producing an astonishing turnaround that most peak oil commentators, including me, would never have dreamt was possible.

Before going on to contemplate the consequences of the shale revolution, I want to dwell for a moment on the production and drilling activity in the period 1955 to 1990. 1955 to 1970 we see that total rigs* declined from 2683 to 1027. At the same time crude oil production grew from 6.8 to 9.6 Mbpd. It was in 1956 that Hubbert made his forecast and in the years that followed, US production grew by 41% while drilling rigs declined by 62%. No wonder the industry scoffed at Hubbert.

[* Note that Baker Hughes’ archive pre-1987 does not break out oil and gas rigs from the total.]

But then post 1970, as production went into reverse, the drilling industry went into top gear, with operational rigs rising sharply to a peak of 3974 in 1981. But to no avail, production in the contiguous 48 states (excluding Alaska) continued to plunge no matter how hard the oil and its drilling industry tried to avert it. Hubbert must surely have been proven right, and his methodology must surely be applicable not only to the US but to the World stage?

The oil price crash of 1981 put paid to the drilling frenzy with rig count returning to the sub-1000 unit baseline where it would remain until the turn of the century. The bear market in oil ended in 1998 and by the year 2000, the US drilling industry went back to work, drilling conventional vertical wells at first but with horizontal drilling of shale kicking in around 2004/05. Production would turn around in 2009.

Those who would speak out against peak oil in the mid-noughties, like Daniel Yergin and Mike Lynch, would argue that high price would result in greater drilling activity and technical innovation that would drive production to whatever level society demanded. They would also point out that new oil provinces would be found, allowing the resource base to grow. And they too must surely have been proved to be correct.

But there is a sting in the tail of this success story since drilling and producing from shale is expensive, it is dependent upon high price to succeed. But over-production of LTO has led to the price collapse, starving the shale drilling industry of cash flow and ability to borrow, leading to widespread bankruptcy. In fact informed commentators like Art Berman and Rune Likvern have long maintained that the shale industry has never turned a profit and has survived via a rising mountain of never ending debt. Economists will argue, however, that improved technology and efficiency will reduce costs and make shale competitive with other sources of oil and energy. We shall see.

Herein lies a serious conundrum for the oil industry and OECD economies. They may be able to run on shale oil (and gas) for a while at least, but the industry cannot function properly within current market conditions. Either prices need to be set at a level where a profit can be made, or production capped to protect price and market share. This of course would stifle innovation and is not likely to happen until there are queues at gas stations.

 

 

2008-2015 Winners and Losers

 

BP report oil production data for 54 countries / areas including 5 “other” categories that make up the balance of small producers in any region. I have deducted 2008 production (barrels per day) from 2015 production and sorted the data on the size of this difference. The data are plotted in Figure 3.

Figure 3 The oil production winners to the left and losers to the right, 2008 to 2015. The USA is the clear winner while Libya is the clear loser. About half of the countries show very little change. Click chart for a large readable version.

What we see is that production increased in 27 countries and decreased in the other 27 countries. One thing we can say is that despite prolonged record-high oil price, production still fell in half of the world’s producing countries. We can also see that in about half of these countries any rise or fall was barely significant and it is only in a handful of countries at either end of the spectrum where significant gains and losses were registered. Let’s take a closer look at these.

Figure 4 The top ten winners, 2008 to 2015.

The first thing to observe from Figure 4 is that the USA and Canada combined contributed 7.096 Mbpd of the 8.852 Mbpd gain 2008-2015. That is to say that unconventional light tight oil (LTO) production from the USA and LTO plus tar sands production from Canada make up 80% of the global gain in oil production (C+C+NGL). Iraq returning to market in the aftermath of the 2003 war makes up 18%. In other words expensive unconventional oil + Iraq makes up virtually all of the gains although concise allocation of gains and losses is rather more complex than that. Saudi Arabia, Russia, The UAE, Brazil, China, Qatar and Colombia have all registered real gains (5.258 Mbpd) that have been partly cancelled by production losses elsewhere.

Figure 5 The top ten losers, 2008 to 2015.

Looking to the losers (Figure 5) we see that Libya, Iran, Syria, Sudan and Yemen contribute 2.828 Mbpd of lost production that may be attributed to war, civil unrest or sanctions. I am not going to include Venezuela and Algeria with this group and will instead attribute declines in these countries (0.979 Mbpd) to natural reservoir depletion, although a slow down in OECD technical assistance in these countries may have exacerbated this situation. That leaves the UK, Mexico and Norway as the three large OECD producers that register a significant decline (1.687 Mbpd) attributed to natural declines in mature offshore provinces. Let me try to summarise these trends in a balance sheet:

Figure 6 The winner and loser balance sheet.

We see that these 20 countries account for 8.463 Mbpd net gain compared with the global figure of 8.85 Mbpd. We are capturing the bulk of the data and the main trends. In summary:

  • Unconventional LTO and tar sands + 7.096 Mbpd
  • Net conventional gains + 2.592 Mbpd
  • Net conflict losses -1.225 Mbpd

The sobering point here for the oil industry and society to grasp is that during 8 years when the oil price was mainly over $100/bbl, only 2.592 Mbpd of conventional production was added. That is about 3.1%. Global conventional oil production was all but static. And the question to ask now is what will happen in the aftermath of the oil price crash?

One lesson from recent history is that the oil industry and oil production had substantial momentum. It is nearly two years since the price crash, and while global production is now falling slowly it remains in surplus compared with demand. This has given the industry plenty time to cut staff, drilling activity and to delay or cancel projects that depend upon high price. In a post-mature province like the North Sea, the current crisis will also hasten decommissioning. It seems highly likely that momentum on the down leg will be replaced by inertia on the up leg with a diminished industry unwilling to jump back on the band wagon when price finally climbs back towards $100 / bbl, which it surely will do one day in the not too distant future.

For many years I pinned my colours to peak oil occurring in the window 2012±3 years. Noting that the near-term peak was 97.08 Mbpd on July 15 2015 it is time to dust off that opinion (Figure 7). The decline since the July 2015 peak is of the order 2% per annum (excluding the Fort McMurray impact). It seems reasonable to presume that this decline may continue for another two years, or even longer. That would leave global production at around 92 Mbpd mid 2018. It is nigh impossible to predict what will happen, especially in a world over run by political and economic uncertainty. Another major spike in oil price seems plausible and this could perhaps destabilise certain economies, banks and currencies. Should this occur, another price collapse will follow, and it’s not clear that production will ever recover to the July 2015 peak. Much will depend upon the future of the US shale industry and whether or not drilling for shale oil and gas gains traction in other countries.

Figure 7 The chart shows in blue global total liquids production (C+C+NGL+refinery gains+biofuels) according to the Energy Information Agency (EIA). The near term peak was 97.08 Mbpd in July 2015. The decline since then, excluding the Fort McMurray wild fire impact, is of the order 2% per annum. In the current low price environment, it is difficult to see anything arresting this decline before the end of next year. In fact, decline may accelerate and go on beyond the end of 2017. The dashed line shows the demand trajectory and scheduled balancing of supply and demand by the end of this year. By the end of next year the supply deficit could be of the order 3 Mbpd which on an annualised basis would result in a stock draw of 1.1 billion barrels. But remember, forecasts are ten a penny 🙂

 

 

Concluding Thoughts

 

  1. M. King Hubbert’s forecast for US oil production and the methodology it was based on has been proven to be sound when applied to conventional oil pools in the USA. When decline takes hold in any basin or province, it is extremely difficult to reverse even with a period of sustained high price and the best seismic imaging and drilling technology in the world.
  2. On this basis we can surmise that global conventional oil production will peak one day with unpredictable consequences for the global economy and humanity. It is just possible that the near term peak in production of 97.08 Mbpd in July 2015 may turn out to be the all-time high.
  3. Economists who argued that scarcity would lead to higher price that in turn would lead to higher drilling activity and innovation have also been proven to be correct. Much will depend upon Man’s ability to continue to innovate and to reduce the cost of drilling for LTO in order to turn a profit at today’s price levels. If the shale industry is unable to turn a profit then it will surely perish without State intervention in the market.
  4. But from 2008 to 2015, oil production actually fell in 27 of 54 countries despite record high price. Thus, while peak oil critics have been proven right in North America they have been proven wrong in half of the World’s producing countries.
  5. Should the shale industry perish, then it becomes highly likely that Mankind will face severe liquid fuel shortages in the years ahead. The future will then depend upon substitution and our ability to innovate within other areas of the energy sector.

 

 

Related reading:

 

From Rune Likvern:

The Bakken LTO extraction in Retrospect and a Forecast of Near Future Developments

Bakken(ND) Light Tight Oil Update with Sep 15 NDIC Data

Are the Light Tight Oil (LTO) Companies trying to outsmart Mother Nature with their Financial Balance Sheets?

From Enno Peters:

Visualizing US shale oil production