Monday, April 27, 2009

Max Keiser on Revolution and the coming collapse of the US$

Check out this video featuring economics commentator Max Keiser. Here is the kind of opinion and voice which is de-legitimising the powers-that-be and giving the justifications for the civil unrest which is undoubtedly coming. It will be interesting to see how these ideas spread, to whom and when. Note the latter part where he is talking about the moves the Chinese are making to make the Yuan the international reserve currency to replace the US Dollar – this will give the Chinese the advantages of seigneurage (the net revenue derived from the issuing of currency, one of the reasons why governments guard this privilege so jealously and hate barter currencies so much) and one of the reasons why the USA has been so rich since the Second World War. He thinks the Chinese will make their move in eighteen months, which is interesting in light of my prediction of the collapse of international trade due to the collapse of the US dollar sometime soon…

Friday, April 24, 2009

My meeting with our Federal member of parliament

I've just come out of a meeting with Russell Broadbent, our local representative in the Australian Parliament. We met at the Source Café in Foster, with mum's and babies at nearby tables and the street scene of Foster strolling past the big window right next to us. Fiona Mottram, one of the two reporters for our local paper the "Mirror", spotted us there and darted in with her camera to take yet another shot of me for the paper. I'm already suffering from serious over-exposure in the "Mirror" due to all the publicity associated with acting the part of Hugo in "Dinner at Hugo's" written by our local playright, Edwin Coad (final performance tonight: sorry folks, totally sold out!). The "Mirror" has also given me a very good run with my Peak Oil forum. Thanks Fiona and Wendy Williamson (who also got a talking part in the ABC Radio National documentary and who said nice things)!

Russell is a very affable, high energy sort of guy who it is impossible to dislike, even more so due to his courageous and principled stand against the majority of his own party over the appalling treatment of refugees by the Howard government (policies some of which appear to be still running under the Rudd Labor government).

He's a very wily and experienced old politician all the same, and managed not to answer my questions as to whether there is a Plan "B" by either party to deal with the consequences of the Depression now bearing down upon us when their Plan "A", return to Business As Usual, fails. However he listened attentively to my concerns and to my vision of how we could build a more resilient community here. Maybe it is some sort of beginning.

Friday funnies

Treasury Department Issues Emergency Recall Of All US Dollars

Thursday, April 23, 2009

Parameters for planning #2: debt, money

Do you own your own home free and clear? Is it the kind of place you need to be living in and is it in a good location? If the answer to any of these questions is no, consider putting it on the market now. Prices are not going to rise. Debt will become very difficult to service and you can expect these difficult conditions to arrive abruptly, leaving masses of people trying to exit the debt trap through a narrow opening. At that point prices will crash through the floor and even excellent properties will be left unsold because no-one will have the cash to bid.

We have confused credit with money. There has been a lot of credit around and that is what the industrial west has been living on. Credit cards, home equity loans, no cash down consumer purchases. This credit is what is going now and will vanish almost completely. We'll be left with money only and the shocking discovery that there's actually not very much of it.

Rent yourself a house and let someone else take the massive deflation hit which is coming. Even better, share it with friends and cut your outgoings right back.

Move your capital into things of value. Get rid of those collectables on eBay while you can still get something for them. How long is it since you even looked at those Star War figures or your Asian beer can collection anyway? Take the money and cruise round the outer suburbs where the mortgage stress is highest and the McMansions biggest, check out garage sales where unemployed builders are selling off high quality tools for a pittance and get yourself kitted out.

Learn skills while it's cheap. Learn to weld, do woodwork, sew and fix your own clothes. Do a first aid course and find out how to manage your own health care. Learn to service/fix your vehicles yourself. Go to Jaycar or Dick Smith, buy some electronic tools (soldering iron. multimeter, good screwdrivers and pliers) and build some kits. Save yourself a fortune in appliance purchase and repair! Make sure the house you rent has room for a vegie garden and get stuff growing! Get back control of your immediate environment.

It'll be different when we come out the other side of this in ten or fifteen years time. We'll all know the score by then and be back in some sort of routine. But the transition, which has already started, will be very difficult for us all. Armour yourself. Don't cling to false hope. Business As Usual will not return. Learn to surf the avalanche. Good luck.

Edit: today there's a great post by Amanda Kovattana on innovation and self-reliance—check it out

Wednesday, April 22, 2009

Parameters for planning #1: the 50% rule

Following my forecast for the financial year '09-'10 yesterday, here is an initial data point for you to keep in mind when making plans for the future. Plan for a 50% reduction in available funds for whatever you intend to do within the next eighteen months…
  • 50% reduction in personal income
  • 50% reduction in gross takings for your business
  • 50% reduction in funding available for government department operations at Federal, Local and State levels
These reductions will take place through business contraction, budget cuts, reduced returns on investments and later, inflation. For those of us on what are for now fixed incomes such as Social Security benefits, expect your income to be reduced over a slightly longer term by the same amount through inflation. Ditto those on award rates paid by the government: police, teachers and other public servants. Why? Some straws in the wind from todays ABC News…
Share market gamble may cost Gosford Council millions
Recession will be a wrecking ball on revenue: Swan

How can we deal with this? Watch this space!

Sunday, April 19, 2009

Lloyd's outlook for the '09-'10 financial year

OK. I'm going out on a limb and playing forecaster, soothsayer or seer. Always a dangerous business and I've often been wrong before, not usually in matters of substance but commonly in the timing. However I think now is the time to stop pussyfooting around and call it as I see it, because it's easy enough to criticise the events of the day but you can't make any plans on that basis.

It is becoming apparent that the collapse of the US economy is immanent. It may be a matter of months, or it may take until early next year, but it will most likely be triggered (surprise!) by volatility in the price of oil. It could also be triggered by widespread social unrest which will erupt in any case when large numbers of people finally realise that their descent into destitution is being engineered by the cabal of Wall Street insiders and big banks who have seized control of the White House and corrupted the legislature in order to pillage any remaining financial assets. It seems very likely political collapse will follow financial collapse.

Our situation in Australia will be the same in principle, although differing in rapidity of onset and in the constituency of the pillagers. Volatility of oil prices will bring on the collapse of Qantas, causing the Federal government to rush in with billions in bailout funds which will be wasted trying to sustain the unsustainable. The coal industry will make arrangements to have what amounts to an automatic debit from the bank account of every citizen. You will pay thousands of dollars of the cost of each locally made hoon's V-8 in your taxes (even if they're not economically or literally literate enough to appreciate it). Billions will be spent on roads which will never be maintained, on buildings which will never be occupied, on studies of absurd technologies which will never be implemented.

By the end of the financial year '09-'10 I expect the financial tsunami will have reached our shores and the current mood of Australian exceptionalism (a kind of American Exceptionalism Lite) will have been badly shaken and will be beginning to fade. People will be frightened and unemployment will increase rapidly amidst a tidal wave of business collapses both large and small. International trade will most likely collapse almost completely as well for a time next year, because the international reserve and trading currency, the US dollar, will suddenly become Monopoly money and it will take some time for other sufficiently trustworthy exchange arrangements to be made. Of course now is the time our government should be striking bilateral barter deals with oil-producing nations to safeguard our energy supplies but that is too much to expect I suppose.

There will be no political consensus as to what actions to take by the end of the next financial year because there will be no social consensus as to the realities confronting us as citizens and as a nation. Into this intellectual and political vacuum will rush many crazy ideas and personalities. The worst hate filled xenophobes, anti-environmental fascists and other familiar scaly monsters of the Howard years, plus some novel variations, will rise up frothing at the mouth. Various powerful interests, sensing that the economic ship is finally sinking, will try to grab whatever they can, much as is now happening in the USA. This is when the subsidy and rent seekers will be in fullest cry.

Deflation, which will manifest as a steady and remorseless fall in property prices, stockmarket values and wages will be the dominant economic fact of life and all but the crustiest of die-hards (and fools like Peter Costello) will have stopped talking about the risk of inflation. Of course inflation will most likely come back ferociously (and Weimar-like) as a debt-strapped government decides to print money as a way of dealing with it's obligations, but that's a bit further off in the future, perhaps a further two years away.

What actions can we take to protect ourselves? Watch this space. And in the meantime, read The Automatic Earth's advice in How to Build a Lifeboat.

Saturday, April 18, 2009

Oh dear!…

Australia's car industry has a bright future according to Dave Oliver, Australian Manufacturing Workers Union national secretary. Oh goody! And the Federal government is its Friend. Well it had better be if it doesn't want the union movement to come down on it like a ton of bricks. This is a classic example of the Trapped Leaders Syndrome. No matter that brute reality is going to grind their dreams to rubble, based as they are on a living arrangement that has no future. The leadership has no choice but to preserve the illusions of those who put them where they are. In the case of Dave Oliver that is his union's membership. In the case of the Federal government it is the unions. Anyone who doesn't play the game will simply be replaced by someone else who will. And so the quality of leadership will gradually and inevitably go down until they become completely irrelevant.

Friday, April 17, 2009

Business management

From Inside Retailing (Australia)…
In a recent edition of the Australian Financial Review, Merrill Lynch – the once all conquering investment house – was quoted as saying, “We are concerned that Woolworths is currently too focused on improving its underlying business from a customer standpoint and strategically disadvantaging its competitor – and not enough from its own shareholder standpoint.”

What the?

If this quote is true it symbolizes why we are going through one of the worst world financial markets corrections in 100 years.

Read on

Tuesday, April 14, 2009

How we were robbed by ourselves

Here's a story from today's ABC News…
Older-style defined benefits superannuation funds are creaking under the weight of falling asset values and a sinking global economy.

A survey out today says there has been an unprecedented blowout in defined benefits liabilities since September last year, with the shortfall for more than 50 listed companies growing from $2 billion to $25 billion.

People looking back at the late twentieth and early twenty-first centuries will marvel at how two thirds of western industrial societies managed to swindle themselves by mistaking (yet again!) gambling on the stock market for a productive activity. And the penny still doesn't seem to have dropped yet for the majority.

Monday, April 13, 2009

An Easter snapshot of our moral position

I invite you all to read the following passage and consider where you stand in relation to it…
“A crucial point in that earlier history occurred when men and women of good will turned aside from the task of shoring up the Roman imperium and ceased to identify the continuation of civility and moral community with the maintenance of that imperium. What they set themselves to achieve instead was the construction of new forms of community within which the moral life could be sustained so that both morality and civility might survive the coming ages of barbarism and darkness. If my account of our moral condition is correct, we ought also to conclude that for some time now we have reached that turning-point. What matters at this stage is the construction of local forms of community within which civility and the intellectual moral life can be sustained through the new dark ages which are already upon us.
This time, however, the Barbarians are not waiting beyond the frontiers; they have already been governing us for quite some time. And it is our lack of consciousness of this that constitutes part of our predicament.”

~Alasdair MacIntyre, After Virtue : A Study in Moral Theory

Thursday, April 9, 2009

The blame game

It's very easy to slip into a whiny tone when looking at all the nuttiness going on in the halls of power. There's natural human tendency to look for causes when things go wrong and the easiest targets for blame are other people. I've done my share of flailing the economists and politicians who sleepwalked us into our present mess. The solutions they seem to be proposing are simply more of the same, or more metaphorically (from Dmitri Orlov) "this new compulsion sweeping the land to shoot oneself in the foot while simultaneously setting one's hair on fire."

But it is important to remember that underlying everything are titanic forces beyond human control. From an ABC story which caught my eye this morning
Towns in rural Australia are at risk of dying off as drought and Federal Government policy takes a toll on agriculture and forces a "mass exodus" in some regions.
But the government does not control the climate. The role of politics is and always will be the distribution of scarce resources among competing claims. But the game is set by nature. The climate is changing. The amazing bonanza of cheap oil and the power it has given us is a geological fact, not a political one. We must look beyond the blame game and see what nature has in store for us if we want to survive.

Wednesday, April 8, 2009

Home owners read this…

From Steve Keen, a dash of cold water in the face over the housing crisis…

After the leaders, here's the view from below

I've been discussing leaders in the last couple of posts and have mentioned the role of TV in tranquilising the masses. From Joe Bageant…
"We are a nation of latchkey kids babysat by an electronic hallucination, the national hologram."

Joe writes like an angel, so zip over here and read the article, from which this is the last line. He lays out just how far down the road of delusion we've been led.

Tuesday, April 7, 2009

More on leaders

A very sombre post by Dmitri Orlov on adaption to our inevitable future. The bright thoughts in it for me were pointers to possible businesses post-Crash. Have a look at it and see what you think.

It follows on from another very dark post on the failure of the War on Drugs. What I like about Dmitri is his humanity, coupled with his lack of squeamishness when describing what's coming towards us. It may be very uncomfortable reading at times but it's the kind of objective, detached and disinterested (as far as anyone can be!) commentary we need if we're to navigate the twists and turns ahead of us.

I had some good comments from reader Tim on my last post…
"The optimist in me likes to hope that all this talk of "returning to growth" and "kick-starting the credit markets" is just rhetoric from leaders who understand the reality but also realise the political implications of telling it straight."
I also hope our leaders aren't nearly as blind as I fear they may be and that the various stimulus packages are simply stop-gap messures to help a transition to a different kind of economy. But I have heard absolutely nothing so far to indicate there is any aim other than to return things to Business-As-Usual .

I've asked my local Federal MP, Russell Broadbent, for a meeting in a couple of weeks where I'm hoping to get some sense from him of just how our leaders are seeing things in Canberra, and I too am hoping to hear something a bit more encouraging. I had a brief chat with Russell some time ago about the Peak Oil issue and at the time he seemed to have some grasp of the issues. However he has been on the outer with some of the dominant factions in his own party due to his humane attitude to the refugee issue, plus his party is now in opposition and making heavy weather of it. Still at least he will know what's really going on and hopefully I'll be able to get it out of him!

Sunday, April 5, 2009

What makes a good leader?

"I carry twenty-three great wounds, all got in battle. Seventy-five men have I killed with my own hands in battle. I scatter, I burn my enemies tents. I take away their flocks and herds. The Turks pay me a golden treasure. Yet, I am poor, because I am a river to my people!"

Audar Abu Tayi as played by Anthony Quinn from David Lean's film, Lawrence of Arabia.

As they wing their way home from the G20 meeting, the world's leaders are no doubt thinking "How can I keep this going? How can I continue to be a river to my people?" In our modern, progressive world their people can be a tiny group of insiders like those presently pillaging the USA's financial system, while those millions who think they are their Dear Leader's people are a great mass of suckers sitting with their jaws hanging slackly in front of the TV, which is telling them what the insiders want them to believe.

When the pie is expanding any half-competent leader can be a river to their people, but the cruel truth is that when the pie starts to shrink the leader must make a choice. Like a loving parent, do I share among the family equally? Or do I make sure those who put me where I am are kept mind-bogglingly rich and the rest go hang (one in ten Americans are receiving food stamps)? It's an easy choice if the masses can be kept lobotomised by the idiot box and when that stops being effective you can always bring the troops home. A tip from the Chinese: never use troops to maintain order in their home province. Avoid conflicts of loyalty! You want them to shoot into the crowd, not over their heads.

Our own Dear Leader, one K Rudd, doesn't have such a brazen group of blood-sucking insiders to protect, but he has to look after his constituency, which is the scared lower-middle-class and working class mortgage belt. The fact that the living arrangement which all these people depend upon has now passed its use-by date must never be mentioned. At all costs growth must be restarted so that builders laborers keep buying V-8 utes with lots of hot accessories: along with fleet buyers they are the only hope for the local car industry. Even Paul Keating was on TV the other night repeating the mantra of growth. Paul is definitely starting to lose it. I can forgive the unmistakable signs of aging, the loss of mental speed and acuity which happens to us all. But how can he be so moronic as to believe that growth can go on forever in a finite world? This is a moral and intellectual failure which discredits all he stands for and all who stand with him. It is understandable that an incumbent politician might skirt around the issues we face, but someone who has little current stake in the power structure and considerable public standing should tell it like it is.

Our present crop of leaders see the equation of growth=more pie=happy followers as the only possible paradigm worth planning for and worth talking about. While some of them acknowledge, at least privately, the possibility that growth may not continue, they simply can't bring themselves to consider what that may mean. Part of it is an understandable squeamishness. Leadership in a time of decline is not nearly as much fun. It involves acknowledgment of limits to one's own power and of the patronage one can dispense. It means saying uncomfortable truths to a public many of whom will be in deep denial and who will be very angry and looking for scapegoats. It's the sort of environment that will attract a toxic type of leadership, ready to play on irrational fear and anger. It's much easier to keep repeating the growth mantra and let others cop the flack if they want to be the bearers of bad news.

Why do we need growth? Well actually we the people don't, but our financial system does, built as it is around fractional reserve banking and credit. It literally cannot exist without growth. That is why it's going to collapse now that we are up against our resource limits (oil principally, but others are not far behind). And our dependence on the financial system as it's now structured means our heads are all in the noose. Can a system exist without growth? Absolutely. Most natural systems are like that. It's what sustainability is supposed to mean. We are creatures like any other: we can live in a sustainable system. What about sustainable growth, the new hybrid which I've heard various bubble-heads spouting on about? It is impossible nonsense, in the same league logically as perpetual motion machines. It is usually a cover phrase for some sinister and far from sustainable development of some kind.

So why cant we have good leaders who say it like it is and point things in the right direction? Why cant we change to a financial system which doesn't depend on perpetual growth? Well theoretically we can have both. In practice we will have the second anyway because if we don't impose it on ourselves reality will do it for us, most likely in a very uncomfortable fashion. But discomfort will be there even if it's voluntary. And realistically do many people impose hardship and discomfort on themselves voluntarily? And if it is imposed by a kind but stern leadership, how many would buck against it?

So the reality is that our leadership is only going to be as good as we are willing to accept. If we cant accept reality, no leader getting real with us will be effective. In fact such a leader runs considerable personal risk. Thus in the end we will get the leadership we deserve.

Thursday, April 2, 2009

Where do you look for an oracle?

I was going to post on the G20, but it bores me. The outcome is so predictable. The politicians will say whatever their frightened or angry constituents want to hear. Kruddy will sound reassuringly verbose and controlled, a kind of splendid clockwork toy, predictable and well groomed. Sarkosy will say "L'Anglais? Villeurs, pillards! Vive La France!" Mr Smooth Obama will make smooth conciliatory speeches, especially to the Chinese who now bankroll the USA. I say ignore these ephemera. They signify nothing but a distracting noise that appears to promise a return to Business-As-Usual but which is already yesterday's news. See past the immediate and focus on what lies beneath. The Archdruid nails it today with this…
…the high notes of economic crisis mingle with the basso-profundo of declining energy reserves, pushing us further and further away from the world of business-as-usual fantasy we have tried to inhabit for the last quarter century. We need to start talking about how we can hold onto our humanity in bitter times; about how we can find reasons for hope and sources of necessary joy as so many of our former certainties crumble to dust; about what stories we can use to bring meaning to the world when so many of our familiar meanings no longer make sense of anything.

I love Ran Prieur! Just dip in wherever you want and you'll catch a nugget of gold. On taxation…
One frequently hears the argument, "This is my money. I earned this money. The government has no right to take it away." But the government's right to take it away rests on exactly the same foundation as your right to have it in the first place: that's what the rules say. Our very concepts of "money" and "property" are social constructions -- and not very good ones. Money is power, and a well-functioning society will award power to those who prove their ability to use power wisely. Our rules award money for all kinds of things: greed, foresight, lack of empathy, frugality, corruption, self-discipline, luck, manic work habits... but not for the ability to spend that money effectively for the greater good. That's why taxation is necessary, but even taxation is only a patch for a system that's fundamentally unsound.
Just read the guy! He is sometimes way off: he has a tendency to see high level conspiracy where I see opportunism and incompetence. But I'll quote his post from today in full…
April 1. Continuing on yesterday's subject, we need to distinguish two completely different kinds of "negativity". One of them is about facing unpleasant facts and preparing for the worst case: the economy as we know it will never recover; more and more people will be unable to pay for housing; the dollar seems likely to hyperinflate; local disasters will be more frequent and severe; the electricity will go out more often; present agricultural methods cannot continue to feed everyone; there might be a giant disease epidemic, or a solar storm.

I would almost call this positive thinking, because you're talking about what we will have to face, instead of denying we'll have to face it. It's psychologically opposite to the kind of negative thinking I was talking about yesterday, which is about what we do: if we can't pay for housing, we'll die in the streets; if the police stop keeping order, we will wildly massacre each other; if we can't make chemical fertilizers, we'll all starve; if existing bicycle and shoe factories shut down, we'll walk around barefoot.

Put it together: the weakest position is, "All I can do is hope that nothing bad will happen, or that our leaders will take care of us, because otherwise we're all doomed." And the strongest position is, "We face tremendous challenges, no higher power will help us, and we will overcome them, even if we cannot yet see the way."

So we wont have new, pointy looking cars every couple of years and we wont spend most of our waking hours staring at screens. Big deal. Tomorrow and all the tomorrows after it for as long as we all shall live will have beautiful sunsets, cute children, good-looking young people, jokes, friends, memorable meals and music which gives you spiritual joy. We are all free to chose to be victims or actors in our own story, as we always have been. Let's get real and get on with it.