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…

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

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…

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!

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.

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.

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…

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.

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