Obama’s new bank giveaway

SUBHEAD: It won't save the economy; It may make the crisis worse.

By Dr. Michael Hudson on 30 January 2009 in ISLET


Is this administration’s bank policy Bush-3 – or Clinton-5 or Reagan-8?

After (1) threatening for eight years that the prospect of a trillion-dollar deficit spread over a generation or so is sufficient reason to stiff Social Security recipients and abolish debts to the nation’s retirees, and (2) after the Bush administration provided $8 trillion over the past three months in cash-for-trash swaps of good Treasury bonds for Wall Street junk derivatives, the Obama Administration is now speaking of (3) some $2 to $4 trillion more to be given in just the next week or so.

Not a single Republican Congressman went along, just as Rep. Boehmer refused to support the Bush bailout on that fatal Friday when Mr. McCain and Mr. Obama debated each other over marginal issues not touching on the giveaway, which both candidates passionately supported. The Party of Wealth sees the political handwriting on the wall, for which the Party of Labor seems happy to take all responsibility. And indeed, only the Party of Labor could get away with such a giveaway. At least one hopes that they would have screamed like hell if they were a minority party and the Republicans tried to push through a plan like this.

I suppose that the moral is that being in a minority provides an opportunity to grandstand for god policy. If I thought the Republicans were serious rather than merely engaging in rhetorical posturing, I would like to see more “bipartisanship” here. But it all seems to be mere play-acting. The key will be to watch the campaign contributions flow for an index of how well this will pay off for the Democrats and how seriously Wall Street believes the Republican opposition to be!

The upshot is that traditional rhetorical language has been turned inside-out. After spending a lifetime denouncing socialism as inherently unfair, Wall Street is now doing a hideous parody – as if “socialism for the rich” were not an oxymoron in the first place. And the banks certainly are not being “nationalized.” Giving away the largest sum of spendable securities in history without direct managerial power that goes with real ownership is not “nationalization.” Ask Lenin.

As for “socializing the losses,” this is a euphemism for rewarding Wall Street for financially predatory and hence anti-social behavior. Another oxymoron.

The aim is to give away of between $2 and $4 trillion more for an “aggregator bank,” a “bad bank” to buy Wall Street’s junk mortgages and default swaps and thus to rescue banks from negative equity – leaving the government’s “bad bank” with the losses. Presumably, the bad loans will be made way above current market prices (zero, for loans that won’t be paid).

How on earth does one “compromise” between “mark to market” (what the market pays for loans and swaps without any value) and the trillions and trillions of dollars that banks have pumped into these bad loans? One would think that an either/or condition such as this wouldn’t lend itself to “compromise.” So it looks like Rep. Dennis Kucinich’s oversight committee is going to have a field day interrogating Treasury officials in years to come over how America created a brand new financial oligarchy. (How many readers of this can say “primitive accumulation”?)

Now that the details of the new, larger but definitely not improved bank have been leaked out in time for Wall Street’s Davos attendees to celebrate, we may ask whether, financially speaking, the Obama Administration should best be thought of as Bush-3 – or indeed, whether it is still on a pro-creditor trend that may better be traced as Clinton-5, or perhaps even Reagan-8. Since 1980 the financial sector has made a sustained money grab at the expense of labor and “taxpayers.” More accurately, it has been a debt grab, on the opposite side of the balance sheet from assets.

Backed by Mr. Summers, Boris Yeltsin’s Harvard Boys transferred trillions of dollars of Russian mineral wealth and public enterprises into the hands of kleptocrats. That was an asset transfer, pure and simple. In 1997, to be sure, the IMF gave Russia a loan that immediately disappeared into the kleptocrats’ bank accounts, to be paid out of subsequent oil-export proceeds. But assets were the name of the game.

Today’s U.S. giveaway has a new twist. It is analogous to the “watered stocks” and bonds that railroad magnates and Wall Street emperors of finance gave themselves and their political mouthpieces, simply adding the interest coupons and dividends onto the prices charged the public as if they were real “costs.” Today’s version – “watered Treasury bonds” – are being created on the public sector’s balance sheet.

“Taxpayers” must pay bear the interest charges on $2 to $4 trillion of new Treasury bonds printed and swapped for “trash,” that is, bad loans. Paying interest on these new bonds will leave less for the infrastructure investment that Mr. Obama rightly says we need.

The Bush-Obama bailout’s “small print” already has given Wall Street a decade’s tax-free status by letting it count its financial losses against its tax liability. So not only has there been a great fiscal debt giveaway, there has been a tax shift off finance. The fiscal squeeze has forced states and localities to announce plans to sell off roads and airports, land and other public assets to the financial sector in order to cover their looming budget deficits (which localities are not allowed to run under present legislation).

No federal funding has been granted to finance the cities as their tax receipts plunge. There has been a token amount to relieve some low-income families saddled with junk mortgages. But this does not involve actually giving them spendable money. Their role is to be trotted out like widows and orphans used to be, as justification to bail out banks for their bad gambles on currency, interest rates and bond derivative gambles. To Wall Street, insolvent debtors in the “real” economy are merely passive vehicles to get a book-credit of mortgage relief that the government will turn over in their name to their bankers to make these institutions whole.

Whole, and then some! In New York, Mr. Cuomo just reported (January 29) that $18.4 billion in Wall Street bonuses, paid for out of the government giveaway. And that’s just for New York State.

This is called “saving the economy.” That is as much an oxymoron as “socializing the losses.” Socializing the losses would mean wiping the mortgages and other bank loans of debtors off the books. These giveaways are to keep the debts on the books – with the government buying them to make the creditors whole.

The problem is that a quarter of U.S. real estate has fallen into Negative Equity. Its debts are not being bailed out, but are to be kept on the books. The economy’s “toxic waste” therefore remains. But a matching volume of new waste is being created and given to a few hundred families. No wonder the stock market soared by 200 points on Wednesday, led by bank stocks!

In the seemingly frenetic ten days since Mr. Obama took office, it is beginning to look as if his good political decisions – regarding Guantanamo, Iraq, employee rights to sue for employer wrongdoing – are sugar coating for the giveaway to Wall Street, a quid pro quo to avert opposition from his Democratic Party constituency. To accuse Mr. Obama of a crass giveaway would seem at first glance to contradict the basically decent thrust of his actions so far – or would, if one did not take into account his appointments of Larry Summers at the White House and the conspicuous leadership role in the bailout played by Barney Frank in the House and Chuck Schumer in the Senate. The administration’s solution has been placed in its hands by financial lobbyists – using in part the money that the Treasury has given to Wall Street.

The “solution” is to bail out the banks while leaving the “real” economy even more highly indebted. All this talk about more credit being needed, all this begging of banks to lend more and then extract yet more interest from the economy, leads it even deeper into the debt hole. The Obama administration hopes that the banks will lend it out to Americans. But this would mean that borrowers are to take on yet more debt – enough to start re-inflating house prices and making homes yet more unaffordable, requiring buyers to take on yet larger mortgages.

Larger mortgages at rising prices are supposed to help the banks rebuild their balance sheets – to earn enough to compensate for their gambling losses. The problem is that new loans do not help families pay their debts. It loads them down with yet more debt obligations. And homeowners whose mortgages already exceed the market price of their property are not going to be able to borrow more in any case.

Presumably the government will absorb their negative equity – after their own credit ratings are wrecked for life, but not those of the bankers who have made the bad loans. So we are seeing one of the most unfair double standards in history. It will make the economy worse off, because today’s looming depression is caused by debt deflation. Families, businesses and government having to spend more wage income, profits and tax revenues on debt service instead of buying goods and services. So why is the solution to this debt overhead held to be yet more debt? Is there not something crazy here?

How many families would like a “give-back” on every bad investment they’ve ever made? It’s like a parent coming to a child who has just broken a toy, saying “That’s all right. We’ll just go out and buy you a new one.” This from the apostles of “responsibility” for poverty, for mortgage debtors owing more than they can afford to pay, for people who get sick and can’t afford medical care, and for states and cities now left high and dry by the fiscal wipe-out that the Bush-Obama “cleanup” has foisted onto the economy.

No do-over for anyone but the hundreds of billionaires who have just been endowed with enough free money to become America’s ruling elite for the rest of the 21st century. (The Internal Revenue Service just announced that the wealthiest 400 families earned over $150 million each last year, on which they paid an average 17% tax rate.)

There is a simple way to think about what has happened – and why it won’t help the economy, but will hurt it. Suppose the new $4 trillion “bad bank” works. The government shell will give away Treasury bonds for bad bank loans and derivatives gambles, without the government “marking to market” on the prices it pays. So much for the pretense that giving Wall Street credit is “free market” policy.

The alternative to “free markets” (that is, markets free for predatory lending and a predatory tax shift off finance and property) does not turn out to be “socialism” at all, even “socialism for the rich.” It is naked kleptocracy, an oligarchic “primitive accumulation” akin to William the Conqueror’s seizure of the English Commons except that it is done by insider dealing rather than by overt military force as for instance had to be applied in Chile for Gen. Pinochet’s “labor capitalism” giveaway to the Chicago Boys.

The tragedy of all this is that it would take only $1 trillion or so to solve the bad-loan problem fro the homeowner’s side of the balance sheet. Or, the government could simply to let “the market” work its magic and wipe out the bad loans – and the bad debts that are their counterpart. This could best be done in the context of renewed debtor-oriented bankruptcy laws. But that obviously is not what the government aims to solve. It simply wants to make creditors whole – creditors who are, after all, the largest political campaign contributors and lobbyists these days.

When families owe debts they cannot pay, they are now liable for life. When banks make bad loans, bad bets on derivative insurance or owe money to winners to these trades beyond their ability to pay, they merely do what A.I.G., Citibank and Countrywide/Bank of America have done – turn their losses over to the government’s “bad bank.”

There can be no thought that banks are being “nationalized” (much less “socialized”) as long as the pro-creditor bankruptcy law for which the credit-card banks lobbied so hard is kept on the books. That should be the litmus test for all this.

The present economic crisis is that it was not necessary technologically, politically or fiscally. Governments at the state, local and federal levels are strapped for funds – but only because the natural source of taxation, land rent and monopoly rent and the user fees from public enterprise have been financialized. Back in 1930, property taxes financed three-quarters of state and local budgets. Today they supply only about a sixth. This shrinkage has not been passed on to homeowners and renters or commercial users.

Prices for homes and office buildings are set by the marketplace. The property price inflation has been fueled by junk-mortgage credit, with the rising rental value pledged to bankers as mortgage interest. The financial sector thus has replaced government as recipient of the economic surplus – leaving the public sector starved of cash. Populist “anti-tax” campaigns thus end up serving the mortgage bankers. The home owners serve only as passive vehicles by which the financial sector ends up with money previously destined for the public tax collector.

The financial sector also has replaced the government as economic planner. The legal monopoly of credit creation turns out to have given Wall Street the key to resource allocation.

It didn’t have to be this way. Bank credit is created freely. Governments could create it as simply on the computer keyboard as banks do it. The U.S. Treasury did thus during America’s Civil War when it issued greenback credit. That experience inspired half a century of bank efforts at public relations to accuse governments of being reckless. Only private banks, it was claimed, could issue prudent and responsible credit.

Now that that myth has been broken for good, isn’t it time to think about the alternative financial and fiscal policy that this myth was crafted to exclude from polite discussion? We don’t need a “bad bank.” We already have many on Wall Street – and they should be transformed with a new set of lending and investment rules, not restored in a way that will let them earn yet more tax-free gains by loading the economy down with yet more debt.

We don’t need the junk economics that led the banking system to create junk mortgages and the junk mathematics that Wall Street used to create junk “credit default swaps” and other derivatives that have now gone bad. These ARE bad – and shouldn’t be shifted onto the “good” government balance sheet.


The Big Stimulus

SUBHEAD: Reducing military budget would be a real economic stimulus.

By Justin Raimondo on 30 January 2009 in Antiwar.com

Image above: "Homeland" 2001 oil on panel (32x44) by Mark Bryan at http://www.artofmarkbryan.com/politics/

The talk is all of stimuli and other matters economic – how do we re-inflate the balloon of American prosperity? Reality has taken a hat-pin to it, and trillions have gone up in the smoke of foreclosed mortgages and credit-default swaps.

Panaceas are not lacking. Paul Krugman says it doesn't matter what we spend our money on, as long as we throw it away rapidly and without forethought. I have no doubt that soon we'll be hearing the ghost of Huey Long promising "Every man a king!" I fully expect the Townsend Plan to come back at some point, along, perhaps, with a revival of interest in pre-Leninist forms of Marxism

Along these lines, President Obama and his party have come up with a "stimulus package," and I must pause to remark how important language is to these people. It's a "package," you see, just like a Christmas gift, only better, because they, the politicians, get to play Santa Claus and shower their constituents with presents. This legislative larceny is predicated on the oddly counterintuitive notion that we can and should spend our way out of poverty – that the sins of our profligacy can be forgiven if only we indulge in yet more ravenous forms of gluttony.

To ordinary Americans, this kind of Washington-think is wholly alien: it is Bizarro economics. After all, when normal human beings are in financial trouble they cut back on their spending, as they are doing now. The American polity, in its younger days, would naturally apply the same logic to government, but, in our dotage, we impart magical powers to the organs of the state, which can produce wealth out of thin air, with only the aid of a printing press.

Oh, yes, we understand – albeit vaguely – that this is debt for future generations to pay. Yet we recall – even more vaguely – old bromides like "We owe it to ourselves," which are embedded in our collective memory like flies in amber, and we are reassured.

Putting aside Bizarro economics, for now, and my wholesale rejection of same, there is one way we can stimulate the economy with a mighty injection of cash into the hands of one and all. No, not another government subsidy, but the cutting of the single largest federal expenditure down to a manageable size: the U.S. military budget.

Larger than all the other "defense" budgets in the world combined, this unimaginable sum is not even known, for sure, but of one thing we can be certain: the hidden costs are much more than anyone suspects. Covert "black operations" are run on an off-the-books budget that we peons are not entitled to see.

Consuming nearly half of all government spending, the military budget maintains an overseas empire unrivaled in the history of the world. The U.S. operates a network of bases in dozens of countries, on every continent. The Pentagon is the biggest landowner on earth. This is not only tremendously expensive, but also completely unnecessary and even harmful to our national interests.

Why, for example, do we need bases in Germany, of all places? They are there on account of a war fought a generation ago, and they stayed because of a perceived threat from the Soviets that vanished into history along with Stalin's ghost.

The hidden costs of empire are not limited to the CIA's secret slush funds – a much greater proportion of this sum amounts to invisible yet all too real opportunity costs, lost avenues of investment that were, instead, diverted to the military-industrial complex. Militarism distorts not only the economy, but also the progress of science, which is channeled in directions that are wholly destructive, rather than productive.

Yes, it's true that military applications have often spun off useful byproducts, but if the original aim and intent of scientific research were directly applied to productive and pacific civilian projects, it 's reasonable to expect the results would have been far more fruitful.

The reason for the huge outlay in military expenditures has nothing to do with America's national security: after all, we don't even inspect all the cargo coming into our ports. How concerned with real security are we, anyway? Not very. What matters, in this game, is the financial security of certain economic interests, as well as the ideological agendas of pressure groups within U.S. society.

The Pentagon establishment wants to start building a new generation of nuclear weapons, over some opposition in the Obama administration. That these weapons only add to the danger of global annihilation, and therefore reduce our security, is irrelevant: what matters is that a powerful political constituency exists for the pattern of our military spending, with a very organized and well-funded lobby to continually push for bigger, better, and progressively more expensive weaponry.

In making a point about how a complete fraud like Mikheil Saakashvili, the despotic president of Georgia, managed to make such headway in Washington circles, Professor Stephen Walt trenchantly observes:

"The United States has a uniquely permeable political system. If a foreign diplomat can't persuade the State Department, Treasury, or Defense, there are 435 congressmen and 100 different senators for them to go to work on. As Ken Silverstein shows in his fascinating and funny book Turkmeniscam, there are also a host of lobbying and PR firms who are happy to help foreign governments sell their story here too."

This permeability is even more conducive to domestic lobbies, such as those deployed by the arms manufacturers and the ancillary industries that piggyback on America's overseas presence. A good example is Halliburton and its offshoots, which provide all the comforts of home to our centurions at the far frontiers of the empire.

Add to this corporate factor the foreign lobbyists and their domestic fellow travelers, and you have the broad outlines of the War Party's political coalition, the means by which they retain their iron grip on policymaking.

Up against this colossus stands – what? Or, rather, whom?

Well, it's just you and me, folks, and a few other scattered, badly disorganized and under-funded peace groups. And that's it. There's no pro-peace lobbying organization with any heft, and certainly not with any funding. The anti-interventionist blogger Professor Juan Cole recently noted this vital lack, and he's absolutely right when he says:

"The reason AIPAC and its constituencies among the Evangelicals and American Likudniks has been so successful is that there is virtually no countervailing political force. Madison and other Founding Fathers set up the U.S., as Ian Lustick has argued, on the assumption that on most important issues there would be opposing factions who would check each other in the legislature.

The drawback of their system is that when there is only one effective faction on an issue, it completely dominates politically. Madison's system worked to prolong the heyday of Big Tobacco far beyond what was reasonable. Anti-smoking campaigners who knew that smoking kills you dead could not make headway with Congress because the tobacco-growing and cigarette industries would counter-lobby.

"But on some issues there is no one on the other side of it to lobby and threaten congressmen. Thus, there was not much percentage until recently in pushing for an end to the boycott on Communist Cuba, since the Florida Cuba lobby would punish you politically and virtually no one would reward you."

Putting aside the choice of "Big Tobacco" – as a libertarian, and a smoker, I say leave them the heck alone – Professor Cole is quite correct: there is virtually no opposition to the War Party in the halls of government. The enemies of peace are organized, they coordinate their efforts, and they have plenty of money to throw around.

The peacemakers, on the other hand, are disorganized, divided, and poor. This imbalance is what – more than any other single factor – has given the War Party so many victories in recent years. We will not defeat them until we out-organize them on the ground. The potential is there, but it is – so far – tragically unrecognized.

Such a Peace Lobby, if you will, would seize this moment in our history, when there really is a good chance that a mass movement to cut the "defense" budget could get off the ground. By arguing for a "peace stimulus," one that would allow bigger tax cuts for all and put more money in the hands of oppressed taxpayers, the organizers of such a campaign could make a larger point: that an empire is bad economics, as well as bad foreign policy.

You want a "stimulus"? Forget all those condoms and start cutting back the Pentagon. We could cut our military budget by 30 percent without even feeling it, although I would suggest a 50 percent reduction – to start.

Sound radical? Well, as Ron Paul remarked more than once, you'd be surprised how much of our military expenditures amount to maintaining our overseas empire and really have nothing to do with the defense of the continental United States. Get rid of the empire, and we can finance the rebuilding of the American economy – or, at the very least, our decayed infrastructure – several times over.


Eastside resorts approved

SUBHEAD: Kauai Planning Commission leaves Environmental Assessment ball in DOT court.

By Michael Levine on 28 January 2009 in The Garden Island News

Image above: A view along the coast on Kauai's eastside with a small stand of coconut trees. An ever rarer sight.

The Kauai Planning Commission on Tuesday unanimously approved amendments to three conditions for a pair of proposed Waipouli resorts — Coconut Beach Development and Coconut Plantation Holdings — complying with a December court order and likely bowing out of the process. The projects, when completed, will sit on 32 acres and house a total of 535 multi-family units, 12 hotel rooms, 964 parking stalls, thereby adding a host of travelers to what is already the busiest stretch of road on the island.

The amendments — which alter the first, second and 13th conditions of the already approved special management area use, project development use and class IV zoning permits — were met with agreement from attorneys of both developments, who said in joint testimony to the commission that they believed the language was in compliance with a court order from 5th Circuit Judge Kathleen Watanabe.

Attorney David Minkin, who advised the commission throughout the hearing, said during testimony that the changes “will not force the county to do something it’s never done before” and would prevent the developers from being treated differently than “all other projects in history.”

The permits were originally approved in January 2007 with more than a dozen conditions to be met before the Planning Department would issue building permits. Upon appeal, three of the conditions were found by Watanabe to be unconstitutional, and were sent back to the commission for adjustments. After taking one failed crack at meeting Watanabe’s order late last year, earning a second instruction by the judge to consider essential nexus and rough proportionality, the commission adopted new amendments, proposed in a Planning Department staff report.

The most critical of the amendments will require the developers to make monetary contributions to traffic mitigation projects recommended by the Department of Transportation rather than design, construct and install the measures on their own.

Attorney Greg Meyers, representing environmental group 1000 Friends of Kauai, said the subtle distinction could allow the developers to skirt an environmental assessment, normally triggered under Hawaii Revised Statutes Chapter 343. Rep. Hermina Morita, D-Hanalei-Kapaa, chair of the House Energy and Environmental Protection Committee, said in a Tuesday afternoon phone interview that simply contributing funds towards traffic mitigation rather than managing construction would not, by itself, preclude an EA, because such projects would still presumably involve public lands.

However, DOT has a long list of exemptions that protect developers from smaller potential EA triggers like installing traffic signals, one of the mitigation measures advocated in a traffic study conducted a year before the permits were first approved. Whether acceleration/deceleration lanes and road widening, other measures specified, trigger an EA remains to be seen, as does the scope of an EA triggered by DOT.

Asked if a hypothetical DOT-mandated EA would take a broad look at the full development projects, DOT Director Brennon Morioka said in a Tuesday phone interview, “We typically take a look at things from just the transportation aspect, and we would rely on other agencies to make the determination” about other potential environmental impacts. Morioka, who pointed to agencies like the Department of Land and Natural Resources and the Office of Environmental Quality Control, said the benefit of a multi-agency review is that it “acknowledges the fact that different agencies have different expertise.”

As for a broad, big-picture look at the overall impact of the project as a whole, Morioka said that burden often falls on the county planning departments. “If their process knowingly furthers the action of an applicant to do something that will require an EA in the future, then that is the point at which an EA should be required,” he said.

That ship appears to have sailed. A written statement from 1000 Friends of Kaua‘i, provided by attorney Dan Hempey following the hearing, said the group “has always contended that the environmental impacts of these projects should be studied and mitigated before the resorts are built.

The end result of today’s vote is that it will be the DOT and other agencies, but not the Planning Department, that decides whether to require an environmental assessment.” While Tuesday’s vote appears to be the commission’s final act on the two developments, it could also be one of the last major development applications for tourist accommodations to be heard by the body for some time.

On Nov. 4, voters approved a charter amendment essentially transferring the power to approve permits for tourist accommodations to the County Council upon a two-thirds affirmative vote of the council and allowing the council, if it enacts a rate-of-growth limit that is consistent with the General Plan, to delegate the approval authority to the Planning Commission. How, and when, the council assumes control remains up in the air. “There’s an urgency for us to get clarity in the legal interpretations,” said Councilman Jay Furfaro, chair of the council’s Planning Committee, adding there is a “series of interpretations” the council must make, such as whether the growth rate is tied to a unit count or, as in the General Plan, to a daily census number of visitors.

“We’re in uncharted territory,” said Councilman Tim Bynum, who said he understands the intent of the new legislation, but is unclear on “the interpretations of what the law means and how we implement that appropriately. I don’t have a good answer. I don’t know at this point. I’m not an attorney and I’m not a planner.”


Peak Oil Planning

SUBHEAD: What Should We Do Now?

By Gail the Actuary on 29 January 2009 in The Oil Drum -

Image above: Ancient Miao Village in Gouizhou Province, China. From http://www.pbase.com/frankhuang/xijiang_miao_stockade_village

I wrote this post back in August 2007. Back when I wrote the post, we were pre-peak oil. Now, it seems to me that we are most likely post-peak oil. Much of the advice from back then would still hold, however. One thing I didn't get right was which direction gasoline prices would go. Also, while I touched on financial issues, I didn't try to emphasize them. I can see now that financial issues are likely to be as big a problem as I feared.

We know that peak oil will be here soon, and we feel like we should be doing something. But what? It is frustrating to know where to start. In this post, I will discuss a few ideas about what we as individuals can do.

1. What will the first few years after peak oil be like?

It is hard to know for certain, but a reasonable guess is that the impact will be like a major recession or depression. Many people will be laid off from work. Gasoline is likely to be very expensive ($10 a gallon or more) and may not be available, except in limited quantities after waiting in line for a long time. Fewer goods of all types will be available in stores. Imports from third-world countries are likely to be especially unavailable, because of the impact of the oil shortage on their economies.

Money may not have the same value as previously--opinion is divided as to whether deflation or rampant inflation will be a problem. Investments, even those previously considered safe, are likely to lose value. Things we take for granted--like bottled water, fast food restaurants, and dry cleaners--may disappear fairly quickly. Electricity may become less reliable, with more frequent outages. Airplane tickets are likely to be extremely expensive, or only available with a special permit based on need.

2. If a scenario like this is coming, what can a person do now?

Here are a few ideas:
  • Visit family and friends now, especially those at a distance. This may be more difficult to do in the future.
  • Learn to know your neighbors. It is likely that you will need each other's help more in the future.
  • If you live by yourself, consider moving in with friends or relatives. In tough times, it is better to have others to rely on. It is also likely to be a lot cheaper.
  • Buy a bicycle that you can use as alternate transportation, if the need arises.
  • Start walking or jogging for exercise. Get yourself in good enough physical condition that you could walk a few miles if you needed to.
  • Take care of your physical health. If you need dental work or new glasses, get them. Don't put off immunizations and other preventive medicine. These may be more difficult to get, or more expensive, later.
  • Move to a walkable neighborhood. If it seems likely that you will be able to keep your job, move closer to your job.
  • Trade in your car for one with better mileage. If you have a SUV, you can probably sell it at a better price now than in the future.
  • If you have two cars powered by gasoline, consider trading one for a diesel-powered vehicle. That way, if gasoline (or diesel) is not available, you will still have one car you can drive.
  • Make sure that you have at least a two-week supply of food and water, if there is some sort of supply disruption. It is always good to have some extra for an emergency--the likelihood of one arising is greater now.
  • Keep reasonable supplies of things you may need in an emergency--good walking shoes, boots, coats, rain wear, blankets, flashlights and batteries (or wind-up flashlights).
  • Take up hobbies that you will be able to continue in a low energy world, such as gardening, knitting, playing a musical instrument, bird watching, or playing cards with neighbors.
  • Join a local sustainability group or "permaculture" group and start learning about sustainable gardening methods.
3. Do I need to do more than these things?
It really depends on how much worse things get, and how quickly. If major services like electricity and water remain in place for many years, and if gasoline and diesel remain reasonably available, then relatively simple steps will go a a long way.

Some steps that might be helpful to add once the crunch comes include:
  • Join a carpool for work, or make arrangements to work at home. If public transportation is available, use it.
  • Cut out unnecessary trips. Eat meals at home. Take your lunch to work. Walk or jog in your neighborhood rather than driving to the gym. Order from the internet or buy from stores you can walk to, rather than driving alone to stores.

  • If you live a distance from shopping, consider forming a neighborhood carpool for grocery and other shopping. Do this for other trips as well, such as attending church. If closer alternatives are available, consider them instead.
  • Plant a garden in your yard. Put in fruit or nut trees. Make a compost pile, and use it in your garden. Put to use what you learned in sustainability or permaculture groups.
  • Meat, particularly beef, is likely to be very expensive. Learn to prepare meals using less meat. Make casseroles like your grandmother's, making a small amount of meat go a long way. Or make soup using a little meat plus vegetables or beans.
  • Use hand-me-down clothing for younger children. Or have a neighborhood garage sale, and trade clothing with others near you.
4. Should families continue to have two, three, or four children, as they often do today?
With the uncertainties ahead, it would be much better if families were very small--one child, or none at all. The world's population has grown rapidly in the last 100 years. Part of the reason for growth is the fact that with oil and natural gas, it was possible to grow much more food than in the past. 

As we lose the use of these fossil fuels, it is likely that we will not be able to produce as much food as in the past, because of reduced ability to irrigate crops, and reduced availability of fertilizers, insecticides, and herbicides. In addition, manufactured goods of all types, including clothing and toys, are likely to be less available, with declining fossil fuel supply. Having smaller families will help fit the population to the available resources.

If couples have completed their families, it would probably be worthwhile for them to consider a permanent method of contraception, since birth control may be less available or more expensive.

5. Are there any reasons why steps such as those outlined in Question 3 might be too little to handle the problem?
Besides the decline in oil production, there are a number of other areas of concern. Hopefully, most of these will never happen, or if they do happen, will not occur for several years. If they do happen, greater measures than those outlined in Question 3 are likely to be needed.
  • Collapse of the financial system. Our financial system needs growth to sustain it, so that loans can be paid back with interest. Once peak oil hits, growth will be gone. Economic growth may even be replaced with economic decline. It is not clear our financial system can handle this.
  • Collapse of foreign trade. Many factors may come into play: The cost of transportation will be higher. Airline transport may not be available at all. Fewer goods are likely to be produced by the poorer countries of the world, because of power outages related to high oil prices. Rapid inflation/deflation may make monetary transactions more difficult.
  • Rapid climate change. Recently, scientists have discovered that climate change can take place over a very short period of time--as little as a decade or two. Temperature and precipitation changes may cause crop failures, and may make some areas no longer arable. Sea levels may also rise.
  • Failure of the electrical grid. The grid tends to be vulnerable to many kinds of problems--including deterioration due to poor maintenance, damage during storms, and attacks in times of civil unrest. Maintenance is currently very poor (grade of D) according to the "Report Card on America's Infrastructure" by the American Society of Civil Engineers. If we cannot maintain the grid, and upgrade it for the new wind and solar capacity being added, we will all be in the dark.
  • Water shortages. There are several issues--We are drawing down some aquifers at unsustainable rates, and these may be depleted. Climate change may reduce the amount of water available, by melting ice caps and changing storm patterns. City water and sewer systems require considerable energy inputs to continue functioning. If these are not provided, the systems will stop. Finally, systems must also be adequately maintained--something that is neglected currently.
  • Road deterioration. If we don't have roads, it doesn't matter whether we have cars. In the future, asphalt (a petroleum product) is expected to become more and more expensive and less available. It is not clear whether recycling asphalt from lesser-used roads will overcome this difficulty.
  • Decline in North American natural gas production. Natural gas is especially used for home heating, making plastics and making fertilizer. It is also used in electrical generation, particularly for extra load capacity when demand is high. Conventional natural gas is declining, and it is not clear that supply from other sources can make up the gap.
  • Inadequate mineral supplies. A number of minerals are becoming less avaialble, including copper (used in electric wiring), platinum (used in catalytic converters), phosphorous (used in fertilizer).
  • Fighting over available supplies. This could happen at any level. Individuals with inadequate food or gasoline may begin using violence. Or there may be fighting among groups within a nation, or between nations.
6. Are there any reasons for optimism?
Yes. We know that people throughout the ages have gotten along successfully with far fewer resources than we have now, and with much less foreign trade. Financial systems have gotten into trouble in the past, and eventually new systems have replaced them. If nothing else, barter works.

We know that among the countries of the world, the United States, Canada, and Russia have reasonably good resource endowments in relation to their populations. They have fairly large amounts of land for crops, moderate rainfall, reasonable amounts of fossil fuels remaining, and populations that are not excessively large.

We also know that Cuba successfully made a transition from high oil usage to much lower oil usage, through the development of local gardens, increased public transit, and bicycles. A movie has been made about the Cuban experience.

7. What should we do, if we want to do more than described in Question 3?
Some web sites (such as Life After the Oil Crash and wtdwtshtf.com) advocate moving to a farming area, buying land and hand tools, and learning to farm without fossil fuels. Typically, an individual purchases an existing farmhouse and adds solar panels or a windmill. The web sites generally recommend storing up large supplies of food, clothing, medicine, tools, guns, and ammunition, and learning a wide range of skills. These sites also suggest storing some things (liquor, razor blades, aspirin, etc.) for purposes of barter.

This approach may work for a few people, but it has its drawbacks. Making such a big move is likely to be expensive, and will most likely involve leaving one's job. The individual will be alone, so security may be a problem. The individual may be dependent on his or her own resources for most things, especially if the farm is in a remote location. If the weather is bad, crops may fail. Living on the edge of a small town may prevent some problems, but such a move would still be a major undertaking.

8. How about Ecovillages? What are they?
These are communities dedicated to the idea of sustainable living. These communities were set up in response to many issues facing the world, including global warming, resource depletion, and lifestyles that are not fulfilling. They were generally not formed with peak oil in mind.

Each ecovillage is different. Organizers often buy a large plot of land and lay out a plan for it. Individuals buy into the organization. Homes may be made from sustainable materials, such as bales of straw. Gardening is generally done using "permaculture"- a sustainable organic approach. Individuals may have assigned roles in the community.

The few ecovillages I investigated did not seem to truly be sustainable--they bought much of their food and clothing from outside, and made money by selling tours of their facilities. The ecovilliage approach could theoretically be expanded to provide self-sustaining post-peak oil communities, but would require some work. Some adventuresome readers may want to try this approach.

9. Is there a middle ground? What should be people be doing now, if they want to do more than outlined in Questions 2 and 3, but aren't ready to immerse themselves in a new lifestyle?
As a middle ground, people need to start thinking seriously about how to maintain their own food and water security, and start taking steps in that direction.

Food security. We certainly hope our current system of agriculture will continue without interruption, but there is no guarantee of this. Our current method is very productive, but uses huge amounts of energy. If we can keep our current system going, its productivity would likely be higher than that of a large number of individual gardens. The concern is that eventually the current system may break down due to reduced oil supply and need to be supplemented.

Vulnerabilities include:
  • Making hybrid seed, and transporting it to farmers
  • Getting diesel fuel to the farmers who need it
  • Transporting food to processing centers by truck
  • Creating processed food in energy-intensive factories
  • Making boxes and other containers for food
  • Transporting processed food to market
If diesel fuel is allocated by high price alone, farmers may not be able to afford fuel, and may drop out. Or truck drivers may not be able to get what they need.

It is in our best interest to have a back-up plan. The one most often suggested is growing gardens in our yards--even front yards. Another choice is encouraging local farms, so that transportation is less of an issue. It takes several years to get everything working well (new skills learned, fruit trees to reach maturity), so we need to start early.

One type of crop that is particularly important is grain, since grain provides a lot of calories and stores well. In some parts of the country, potatoes might be a good substitute. It would be good if people started planting grain in gardens in their yards. There is a lot to learn in order to do this, including learning which grains grow well, how much moisture and nutrients the grains need, and how to process them. If the grain that grows well is unfamiliar, like amaranth, there is also a need to learn how to use it in cooking.

Individuals (or local farms) should also begin growing other foods that grow well in their areas, including fruits and nuts, greens of various types, and other more traditional garden crops, including beans. For all types of gardening, open pollinated seeds (sometimes called heirloom seeds) are probably best for several reasons:
  • It makes storing seeds after harvest possible, and reduces dependence on hybrid seeds.
  • There is less uniformity, so the harvest is spread over a longer period.
  • The reduced uniformity also helps prevent crop failure in years with drought or excessive rain. Some seeds will not grow, but others will. (Hybrids are all or nothing.)
Imported foods are likely to shrink in supply more quickly than other foods. If you live in a country that is dependent on imported foods, you may want to consider moving elsewhere.

Water Security. Here, the largest issue is whether there is likely to be sufficient supply in your area. Another issue is whether there will be sufficient water for your garden, at appropriate times. A third issue is whether there will be disruptions in general, because of poor maintenance or because the process of treating fresh water (and sewage) is energy-intensive.

With respect to sufficient water in your area, if it looks like there is a problem (desert Southwest, for example), relocating now rather than later is probably a good idea. Transporting water is energy intensive, and new efforts at developing energy (like shale oil or more ethanol) are likely to make the water supply situation even worse.

With respect to water for gardening, consider a rainwater catchment system for your roof. Runoff water is saved in barrels, and can be used for irrigation in dry periods.

General disruptions of water supply are more difficult. Keep some bottled water on hand. You may also want to consider a tank for greater storage supply. Rainwater catchment can be used for drinking water, with the correct type of roofing (not asphalt shingles!) and proper treatment, but this is not generally legal in the United States.

10. What kind of investments should I be making?
A person's first priority should be buying at least a little protection for a rainy day - some extra food and water, comfortable clothing, blankets and flashlights. I suggested two weeks worth in Question 2. If you have money and space, you may want to buy more.

Paying down debt is probably a good idea, if only for the peace of mind it brings. There are some possible scenarios where debt is not a problem (hyper-inflation but you keep your existing job and get a raise). In many other scenarios (deflation; job lay-offs; rising food and energy prices) debt is likely to be even harder to pay off than it is now.

Land for a garden is probably a good investment, as well as garden tools. You will want to invest in gardening equipment, some books on permaculture, and perhaps some heirloom seeds. You may also want to consider a rainwater catchment system, to collect water from your roof.

You may also want to invest in solar panels for your home. If you want round-the-clock solar energy, you will also need back-up batteries. Buying these is questionable--they tend to be very expensive, require lots of maintenance, and need to be replaced often.

There is a possibility that the financial system will run into difficulty in the not-too-distant future. Some ideas for investments that may protect against this are:
If you want to invest in the stock market, we know that there will be more and more drilling done for oil and gas done in the next few years, so companies making drilling equipment are likely to do well. Small independent oil and gas companies may also do well, doing "work-over" business. We know that there are likely to be shortages in some metals in the years ahead (copper, platinum, uranium), so shares in companies mining these types of metals may do well.

Investments in biofuels should be considered with caution. Most ethanol from corn appears to be heavily dependent on subsidies. If it should ever have to compete with other fuels on a level playing ground, it is likely to do poorly.

I would be cautious about buying insurance policies, except for short-term needs such as automobile coverage, homeowners coverage, and term life insurance. If we encounter a period of significant deflation, insurance companies are likely to fail, because bondholders cannot pay their debt. If we run into a period of rapid inflation, the life insurance or long term care coverage you buy may have very little real value when you come to use it.

11. Should I move to a different location?

There are many reasons you might want to consider moving to a different location:
  • To find something less expensive. If times are going to be difficult, you do not want to be paying most of your income on a mortgage or rent.
  • To be closer to friends or family, in the difficult times ahead.
  • To share a house or apartment with friends or family.
  • To be closer to work or public transportation.
  • To be closer to a type of employment that you believe will have a better chance of continuing in the future.
  • To have better fresh water supplies.
  • To join a community with similar interests in sustainability.
  • To leave a community that you feel may be prone to violence, in time of shortage.
There are disadvantages as well as advantages to moving to a new location. If many others are trying to move at the same time, you may not be welcome in the new community. You will likely not have friends and the support group you would have had in your prior location. Because of these issues, it is probably better to move sooner, rather than later, if you are going to move. If you balance the pluses and the minuses, it may be better to stay where you are.

12. We hear a lot about various things we can do to be "green", like buying fluorescent light bulbs. Do these save oil?
Most of the "green" ideas you read about save energy of some kind, but not necessarily oil. Even so, they are still a good idea. If there is a shortage of one type of energy, it tends to affect other types of energy as well. Doing “green” things is also helpful from a global warming perspective.
Here are some green ideas besides using fluorescent light bulbs:
  • Move to a smaller house or apartment.
  • Insulate your house, and have it professionally sealed to keep out drafts.
  • If any rooms are unused, do not heat and cool them.
  • Keep your house warmer in summer, and cooler in winter.
  • If you no longer need a big refrigerator, buy a smaller one. Be sure it is an "Energy Star" refrigerator.
  • If you have more than one refrigerator, get rid of the extra(s). Refrigerators are a big source of energy use. For parties, use ice in a tub.
  • Separate freezers are also big energy users. Consider doing without.
  • Eat less meat. Also avoid highly processed foods and bottled water. All of these require large amounts of energy for production.
  • Get power strips and turn off appliances that drain energy when not in use.
  • Turn off lights that are not needed.
  • Rewire lights into smaller "banks", so you do not need to light up the whole basement when all you want is light in a small corner.
  • Get a clothes line, so you do not need to use your clothes dryer.
  • When cooking, use the microwave whenever possible.
  • Reduce air travel to a minimum. Air travel results in a huge number of miles of travel with corresponding fuel use.
  • Recycle whenever you can.
  • Eliminate disposables as much as possible (coffee cups, napkins, plastic bags, etc.)
13. Should we be talking to our local government officials about these problems?
Yes! At the local level, there are many changes that would be helpful:
  • Laws permitting people to put up clothes lines in their yards.
  • Laws encouraging gardens to be grown, even in the front yards of homes.
  • Laws permitting multiple occupancy of houses by unrelated individuals.
  • New local public transportation plans, particularly ones that do not require large outlay of funds. For example, a plan that is more like a glorified car pool might work.
  • Allocation of funds to study the best crops to be grown in the area, and the best cultivation methods, if energy supplies are much lower in the future.
It would also be helpful to make changes at higher levels of government, but these are beyond the scope of the discussion in this post.

14. What other resources might we look at to get ideas about what is ahead what we might do now?

The Community Solution is an organization that puts on an annual sustainability conference and issues reports on energy-related solutions.

Global Public Media has a number of talks on relocalization.

Closing the Collapse Gap is a humorous talk by Dmitry Orlov. The Soviet Union collapsed in 1990, and its oil production dropped about that time. Dmitry compares the US situation to that of the USSR.

Rolling Stone has a short summary of The Long Emergency, a book by James Howard Kunstler. Links by Question:

Q2: Calculate a "walk score" for any neighborhood - Learn about walkable neighborhoodshttp://www.walkscore.com/get-score.shtml?street=500+7th+street%2C+arcata...

Q4: Eating Fossil Fuels: Oil, Food, and the Coming Crisis in Agriculture by David Allen Pfeiffer, New Society Publishers, 2006http://www.amazon.com/Eating-Fossil-Fuels-Coming-Agriculture/dp/08657156...

Q5-1: Rapid Climate Change, American Institute of Physicshttp://www.aip.org/history/climate/rapid.htm

Q5-2: Report Card for America's Infrastructure by American Society of Civil Engineershttp://www.asce.org/reportcard/2005/page.cfm?id=92

Q5-3: Earth Policy Institute, Lester Brown Presidenthttp://www.earth-policy.org/

Q5-4: Report Card for America's Infrastructure by American Society of Civil Engineershttp://www.asce.org/reportcard/2005/page.cfm?id=92

Q5-5: National Petroleum Council - Hard Truths about America's Energy Supply, 2007http://downloads.connectlive.com/events/npc071807/pdf-downloads/Facing_H...

Q5-6: Measure of Metal Supply Finds Future Shortage, David Biello, Scientific American, January 17, 2006.http://www.sciam.com/article.cfm?articleID=000CEA15-3272-13C8-9BFE83414B...

Q5-7: Carmakers Gear Up for the Next Shortage-Platinum, The Mining News, July 6, 2005http://www.theminingnews.org/news.cfm?newsID=800

Q5-8: Peak Phosphorus by Patrick Dery and Bart Anderson, August 13, 2007http://www.energybulletin.net/33164.html

Q6: The Power Community: How Cuba Survived Peak Oil, Movie Directed by Faith Morgan, The Community Solution

Q7-1: Life After the Oil Crashhttp://www.lifeaftertheoilcrash.net/

Q7-2: What to Do When the Shit Hits the Fanhttp://wtdwtshtf.com/

Q8: Global Ecovillage Networkhttp://gen.ecovillage.org/

Q9-1: Local Harvest directory of local food sourceshttp://www.localharvest.org/about.jsp

Q9-2: Amaranth, Wikipediahttp://en.wikipedia.org/wiki/Amaranth

Q9-3: Heirloom Seedshttp://www.heirloomseeds.com/

Q9-4: American Rainwater Catchment Systems Associationhttp://www.arcsa-usa.org/

Q10-1: American Rainwater Catchment Systems Associationhttp://www.arcsa-usa.org/

Q10-2: Treasury Securities, Wikipediahttp://en.wikipedia.org/wiki/Treasury_security

Q12-1: Southface: Responsible Solutions for Environmental Livinghttp://www.southface.org/

Q12-2: Energy Star by US Environmental Protection Agency and US Department of Energyhttp://www.energystar.gov/

Q14-1: The Community Solution Home Pagehttp://www.communitysolution.org/index.html

Q14-2: The Community Solution Conference, October 26-28, 2007 Yellow Springs, Ohiohttp://www.communitysolution.org/conference.html

Q14-3: The Community Solution Reportshttp://www.communitysolution.org/nsreports.html

Q14-4: Closing the Collapse Gap: The Soviet Union Was Better Prepared for Collapse than the US, by Dmitry Orlov, December 4, 2006http://energybulletin.net/23259.html

Q14-5: Summary of The Long Emergency by James Howard Kunstler, March 24, 2005http://www.rollingstone.com/news/story/7203633/the_long_emergency

Supermarket bans pesticide

SOURCE: Jeri DiPietro ofstone@aol.com
SUBHEAD: Co-op bans eight pesticides after worldwide beehive collapse

By Alison Benjamin on 28 January 2009 in The Guardian

Image above: Entry to a Co-Op Supermarket in Britain. Photo by The Guardian

First UK supermarket chain – and Britain's biggest farmer – will prohibit chemicals implicated in the death of over one-third of British bees. The Co-op today became the first UK supermarket to ban the use of a group of pesticides implicated in billions of honeybee deaths worldwide.

It is prohibiting suppliers of its own-brand fresh produce from using eight pesticides that have been connected to honeybee colony collapse disorder and are already restricted in some parts of Europe.

The Co-op said it will eliminate the usage of the neonicotinoid family of chemicals where possible and until they are shown to be safe. The Co-op has over 70,000 acres of land under cultivation in England and Scotland, making it the largest farmer in the UK.

Since 2001, it has already prohibited the use of 98 pesticides under its pesticide policy. Simon Press, senior technical manager at the Co-op group said: "We believe that the recent losses in bee populations need definitive action, and as a result are temporarily prohibiting the eight neonicotinoid pesticides until we have evidence that refutes their involvement in the decline."

Laboratory tests suggest that one of the banned chemicals, imidacloprid, can impede honeybees' sophisticated communication and navigation systems. It has been banned in France for a decade as a seed dressing on sunflowers. Italy, Slovenia and Germany banned neonicotinoids last year after the loss of millions of honeybees. And the European Parliament voted earlier this month for tougher controls on bee-toxic chemicals.

Paul Monaghan, the Co-op's head of social goals accused the UK government of failing to recognise that "pesticides could be a contributing factor" in the breakdown of nature's number one pollinating machine. NOTE: Sierra Club urges EPA to suspend nicotinyl insecticides http://www.sierraclub.org/biotech/whatsnew/whatsnew_2008-07-30.asp The EPA wrote me back and in their letter admitted that they're not testing for low level exposures!

See also:
Island Breath: GMO's Killing Bees? 1/11/09
Island Breath: Bee Colony Collapse 6/8/07


Clean Energy Initiative

SOURCE: Rayne Raygush rayne@kauainetwork.org
SUBHEAD: A forum on Kauai and its clean energy future scheduled in Lihue. Plan to attend the Hawaii Clean Energy Initiative and What It Means for Kauai Forum

Tuesday, February 10 from 6:30-8:30 PM (Doors open at 6:00 pm.)

Lihue Missionary Church. 4383 Rice Street, Līhu‘ e
(Across from the Historic County Building. )

Local, state and national experts will discuss an innovative new initiative designed to reduce Hawai‘i’s dependence on fossil fuels by utilizing renewable technologies and retooling our energy delivery systems. Find out how Kaua‘i fits into this program to better conserve and manage resources.

This forum is brought to you by
Kauai Planning and Action Alliance (KPAA)
Apollo Kauai
Kauai Island Utility Cooperative (KIUC )
Kauai Economic Development Board

BILL PARKS, Deputy Assistant Secretary, U.S. Department of Energy
TED PECK, Energy Administrator, Hawai‘i State Energy Office
ROBBIE ALM, Executive Vice President, Hawaiian Electric Company (HECO)
RANDALL HEE, President, Kaua‘i Island Utility Cooperative (KIUC)

Contact KPAA at (808) 632‐2005 or kpaa@kauainetwork.org


The Baltic Dry Index

SOURCE: Elaine Dunbar (inunyabus@gmail.com)
SUBHEAD: An old index indicates a lengthening economic downturn with little shipping.

by Jeff on 4 January 2009 in The Green Dragon Inn - 

Video above: BDI Index analysis from Green Dragon. From (http://www.youtube.com/watch?v=SXATSV8S3-M). http://thegreendragon.ning.com/video/vital-critical-you-must

[IB Editor's note: The following article includes a video and text that appears to have as a source several common internet sites, icluding http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm]

I've been discussing the Baltic Dry Index (BDI) with everyone I can for months now. I started following it in June of 2008. It's not a traded index so no one profits from the index itself, which makes it virtually manipulation proof. It is what it is and that doesn't bode well for any of us. OK, we have 26 shipping routes around the world that the BDI looks at.

Shipping stocks are slaves to the BDI. Capesize Ships (over 100,000 tons) make up only 10% of the World Fleet but move 62% of Dry Bulk Traffic (at a given time Australia has 35/40, China 20, Brazil 40-50, S. Africa 1-7). Panamax Ships (60,000-80,000 tons) make up 19% of the world fleet and move 20% of the Dry Bulk Traffic (at a given time Australia has 40-60, China 20-35, Brazil 3-12, S Africa 0-1).

There is a third and fourth ship size but they are quite small and they aren't moving either. If we can use the Baltic Dry Index (BDI) as a guide for the next 12 months of product delivery and food availability in the stores we shop in then the BDI says shelves will be virtually empty of almost every product we use each and every day. Is the BDI is wrong it will be an historic first.

The BDI is used by bankers, financial experts, brokers, traders and everyone in high end finance to assess the global financial condition and the availability of products worldwide.

The BDI has dropped 94% in a short few weeks which means raw materials, grains, ores, steel, iron, cement and all imported products for food manufacturing and product manufacturing even though we actually do very little of that here in the US. We do make bread and other products that require grains, like cereals. We import clothing, gasoline, various fuels and, well, just about everything these days and the BDI says global shipping has shut down.

NOTHING is moving. Because this spells disaster for a country that produces little and imports everything I have been intently blogging about the subject and asking people to view a short video I have posted (8 minutes) on.

The Baltic Dry Index (BDI) is an indicator of how much product is actually out for delivery throughout the world. It cannot be cheated or manipulated because it deals with actual products that are either actively being shipped, or are on docks awaiting to be shipped as Freight On Board (FOB).

As the chart below proves, back in June, 2008 the BDI stood at a reasonably healthy 11,600. As of today, the BDI has plummeted to 791. That's about a 94% drop in goods actually being shipped worldwide. This portends unprecedented disaster around the world, especially as it relates to food. Products are simply not being shipped. They aren't being shipped because there aren't any orders for them. This will translate into massive, unprecedented unemployment worldwide and, as things get worse, massive food shortages.

I have urgently asked each of you to stock up on dry foods like 50 lb bags of rice, 50 lb bags of oatmeal, beans, powdered milk, canned foods, canned vegetables and such to assure your family will have enough to eat when the world economy totally collapses. Many of you laughed me off as some sort of kook for making those suggestions, with some of you going so far as to call me "chicken little, the sky is falling." Well, it appears I'm having the last laugh. I correctly forecast the economic meltdown which took place in September.

For over a year prior to that meltdown, I warned it was coming and, in March of 2008, I actually pinpointed the month the meltdown would take place, warning you it would happen in September. It did. Now I am once again warning you about food shortages because the facts are irrefutable. The BDI proves that goods are not being shipped. There has been a 94% reduction in shipped goods since June of this year and it is only going to get worse.

If you do not have food stored up for your family, you will starve to death. If you do not own guns and ammunition, any food you DO have will be stolen by roving bands of savages who are trying not to starve to death. The social breakdown that is coming is unparalleled in modern history.

We are going to suffer on an order of magnitude greater than folks suffered during the Great Depression. Please, I urge you, prepare. There are only a few precious months left before it all goes to hell.

So as I said, I have been emailing everyone I can think of and here's a very interesting email I received back from a friend tonight. He's a senior level electrical engineer for a large engineering and construction firm in Denver and desigsn and builds large power plants for a living. Hi Jeff, Quite the contrary, I'm well acquainted with the Baltic Dry Index.

My brother is a mid- to high-level executive with a logistics/cargo firm. His company (as well as all other shipping companies) have seen huge dives in the amount of business they do. The main point that many people do not understand is that without trade between states and nations no one prospers! It's always tempting to say "screw the third world countries and screw the Chinese with all the crap they send over here!

Let's shut our borders down and not import anything!" But the reality is that no country that practices such Draconian protectionist policies ever lasts very long. So with that, it is of huge concern to you, me, and everyone else "in the know" when the BDI drops so drastically!

The whole world is truly tied at the hip, as the saying goes! Brother, I'm on board with you 100%! I sincerely appreciate you taking the time to send me the link (which I will watch by this weekend). You hit the nail on the head in that 98% of the people in this country have not one clue what the BDI is, what it indicates; nothing!

The truly sad thing, to me at least, is that the masses of "useful idiots" (as Lenin called them) have no clue what is going on around them, yet they so eagerly and boisterously vote! I'm afraid that this country is going to have to go through a considerable amount of pain before the uneducated, ignorant (and I won't say stupid because they simply have not been taught) masses "get it". I am a senior level electrical engineer for a large engineering and construction firm in Denver.

I design and build large power plants for a living. Without giving the whole story of my career believe me when I say that in the next few years this country will see rolling blackouts (and that's not taking into account another terrorist attack on our country!). If the people in this country knew what I know first hand about our power grid and the condition of our (very old!) power plants in this country, they would probably crap themselves in fear!

The only surprise to me is that the blackouts didn't happen this past summer, but that was due to 2008 being a cooler year than expected. The bottom line is, our power grid (and for that matter, much of the infrastructure in this country) is tapped out and actually older than its expected life.

And yet, our wonderful federal government, elected by us "useful idiots", continues to spend, spend, spend like drunken sailors. Why? Well, because that's what we've "always" done! It sickens me! Take a look at www.chrismartenson.com This fellow has his head screwed on straight!

Take it from me brother, I build power plants for a living. But I still have a basement full of not just guns, ammo, and food, but of fuel! White gas, propane bottle's, even sterno & alcohol type cans. Do yourself a favor if you haven't already, STOCK UP on a fuel supply, at least so that you can cook and have some modest heat if you don't have a fireplace!

Consider what you have and ask yourself if you have enough to get you through a month, 2 months? Three? God Bless Sam's Club for carrying Coleman fuel and propane and such... I'll share more of my knowledge (limited though it is) with you later on. Peace be with you brother.

Hope for the best but prepare for the worst! Believe or don't, the choice is yours but at the very least I suggest you start doing the research on this subject or you may be starving in a few short months.

Alpha Plus

SUBHEAD: A Brave New World of Bankster Godfathers.

By John Schettler on 26 January 2009 in The Writing Shop -


Image above: detail of album cover for Iron Maiden's 2000 "Brave New World"
“Consumer” confidence plummeted to the lowest figure ever recorded in January. That is no surprise. The dismal Christmas selling season provided ample warning, but this year the normal psychology of change that the champagne of New Year’s brings did not offer solace, in spite of the uplifting change at the top of our government. The bad news continued unabated. January 26 week brought no less than 71,400 new job cuts on a single day! Profits are down, businesses are closing, foreclosures continue to rise, credit remains frozen. So it is no wonder that people are holding onto what little money they have.

They spend when they have hope that their future will be brighter than the present, and no one can see through the gloom to discern just how bad things will truly become, or when a recovery might be expected. Even with hope in abundance, “normal” spending still requires money. (I use quotations on the word “normal,” for in my mind most typical spending by Americans has long been excessive and unnecessary.) The hard times seem to have finally made the point that you cannot use other people’s money, (credit) to spend 25% more than you earn each year. The crisis in the economy is what happens when all that credit suddenly vanishes due to banking malfeasance, and “consumers” can no longer pay their bills, let alone consume.

When people don’t have money to pay their IED rigged mortgage, is it any surprise that they stop paying and default? And when they do, the housing market crashes. When they stop buying cars, the auto industry crashes. When they stop buying clothes, the retail sector crashes. And on it goes. The unemployment numbers are just starting to get warm. The real heat and fire is yet to come. A husband and wife both lost their jobs this week and both took their lives in a nice little suburb of LA--along with the lives of their five children.

This is pain and despair so deep that it boggles the mind. And the hardest thing about that story was this--where were their friends? Was there no one on this earth who knew them and loved them enough to offer help? That they felt so isolated, and so hopeless in their situation is a sad testimony to the state of our Society, with a capital S. As President Obama wrangled on the Hill for support for his $850 billion stimulus plan, I realize that we cannot wait for the Directors and Controllers of our Brave New World to save us. We have to save ourselves. If we cannot take care of each other on a personal level, and help one another through this, no amount of government bailout money will matter.

How did we get here, staring into the abyss of yet another economic collapse, and one to possibly rival or even eclipse the Great Depression of the 1930s? Is it all the fault of extravagant “consumers,” the millions of Betas and Deltas in the soma ridden shopping malls of our Brave New World? Or perhaps we should blame those further down on Society’s ladder of privilege, the “sub-prime” Gammas and Epsilons who were unable to escape the Alt-ARM reset traps the bankers set for them in their “home loan.”

No. We must look higher up if we are to find the real culprits. The real damage to Society did not occur in the copper gutted neighborhoods of Cleveland and Detroit, but in the glitz and opulence of Wall Street, with John Thain’s $80,000 area rugs and $1400 trash cans the accepted norm. The shiny new corporate jets that the CEOs of GM, Ford, and Chrysler used when they first flew to Washington to beg for money are another clue, along with the $50 million addition to Citigroup’s corporate jet fleet after that bank received over $50 billion in free taxpayer money.

The half million dollar party AIG threw after it received its $90 billion was yet another clue. Or perhaps we should look to the $13 million dollar estate of ex-Lehman Brothers CEO Richard Fuld, quietly sold to his wife for a sum of a hundred dollars to make sure it stays in the family… or to the millions in diamond studded jewelry Bernie Madoff tried to slip into the mailbox to his relatives and friends. No, my friends. If we want to point the finger of justice at anyone, we must look first to the very top, where our Alpha-Plus executives sit in their mansions and multi-million dollar office suites—the men who have brought some of the largest and most powerful institutions in the nation to the brink of bankruptcy through their excessive greed, incompetence, lack of prudence and foresight, and downright corruption. Now they are looting the public purse as well.

Paul Craig Roberts of Counterpunch said it well when he wrote: “The gangsters are using the crisis as an opportunity to steal from taxpayers and to finance their misdeeds and exorbitant salaries with Federal Reserve loans. Their shills among economists and the financial press tell the people that the solution is to fatten up the banks with funds so they will resume lending to an over-indebted public that will then return to the shopping malls.” In effect, they want to start the wheels turning again, greased by taxpayer money this time, so they can return to the same old game.

How did we get here? It’s no great secret. Quite simply, banks were playing a huge shell game with the world’s money supply, and with the trust and confidence of all their investors and customers. It started with a loan, a little nut placed under the first shell of a “home.” Then the hands of bankers and investors became that well practiced blur of distraction and deception as the loan was tranched away into securities and moved from one shell to another, and then off the table of reality altogether, deftly slipped up the banker’s sleeve to the nebulous world of “off balance sheet assets.”

And when the game was finally exposed for what it was—a massive con—all the other traders and investors around the game tables at places like Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley and Goldman Sachs had a panic attack. All the betting stopped, and the trading of these rotten nut “assets” came to a screeching halt. Confidence in the gamesters plummeted, along with the stock value of financial institutions all across the globe. As one storied investment house after another began to collapse like the floors of the World Trade Center, bankers began to panic as well. They hoarded cash and stopped lending. Credit, the fuel the economy was running on, like cheap oil, underwent a massive contraction. And that was the end for the main street consumer, who had financed big spending almost entirely on credit cards and home equity loans.

Consumer spending fell off a cliff. Auto showrooms across the nation sat empty. Retail sales fell to new lows. Businesses, once flush with the frenzy of one day sales and blowout holiday specials, suddenly saw their margins evaporate and red ink swelled like a blood stain on their books. Inventory backed up on store shelves and could not be moved even at 70% discounts. Cars sat idle in the dockyards of American ports, in tens of thousands. The wheels of the economy finally stopped turning, the very same wheels that Huxley’s World Controller Mustopha Mond said must never stop.

Bush and Cheney sent our young men and women off to war for eight years to guard and secure the fuel we needed to keep those wheels constantly turning. They hunted out “enemies” in the caves of the Hindu-Kush, while all the while the real danger to Society was lurking in the plush high rise office suites of Wall Street. So if anyone is to be blamed, let us begin at the very top of the pyramid, where that all seeing eye surveils the world on the back of the almighty dollar. Let us begin with the very best and brightest men who were entrusted with the leadership of all these failed institutions, the masters of the shell game, the great con artists of our generation.

One writer at the “Debt Slavery Emancipation” blog expressed what many must surely feel about the Wall Street wizards competence: “One could understand how maybe a few mere mortals might have missed the warning signs, but how could the Masters of the Universe not have seen the tsunami of financial sewage that was headed toward this economy? After all, these are the people at the helm of the ship with a bird's eye view of the inner workings of the Ponzi scheme we know as banking. People that rise to these levels in business are more often than not grossly unqualified for their responsibilities - which include protecting the meager wealth of those who actually earn it through legitimate work. Cronyism and access to influence rule the day while good business sense and prudence have found their way onto the endangered species list.”

But for my money, let’s just stick with Aldous Huxley, who showed us how the Brave New World handled its fallen heroes.

“Ladies and gentlemen,” the Director repeated once more, “excuse me for thus interrupting your labors. A painful duty constrains me. The security and stability of Society are in danger! Yes, in danger, ladies and gentlemen. This man who stands before you here, this Alpha-Plus to whom much has been given, and from whom, in consequence, so much must be expected, this colleague of yours—or should I anticipate and say ex-colleague?—has grossly betrayed the trust imposed in him…For this reason I propose to dismiss him, to dismiss him with ignominy from the post he has held in this Center…In Iceland he will have a small opportunity to lead others astray by his unfordly example.” --Aldous Huxley, Brave New World

Here they are, ladies and gentlemen. I give you the Alpha-Plus of our own Brave New World of finance and banking: Ken Lewis of BofA, John Mack of Morgan Stanley, Angelo Mozilo or Countrywide Financial, Alan Schwartz of Bear Stearns, Vikram Pandit of Citigroup, Richard Fuld of Lehman Brothers, former NASDAQ head Bernie Madoff, and let us not forget the esteemed John Thain of Merrill Lynch…and the list goes on and on, from former WaMu CEO Killinger and on through one bank and mortgage lending boiler room after another, through hedge funds and junk bonds and credit defaults swapped from one to another in the greatest heist and squandering of wealth the world has ever seen. (And of course we must also include those at the very top of the Directorate itself, the Grand Maestro, Alan Greenspan, and his apprentice Ben Bernanke.) Oh how they culled and wooed and dissembled about the game tables, until they had not only destroyed the wealth and confidence of all their investors and shareholders, but also stole away the public trust and treasure in the bargain.

The wheels have stopped, ladies and gentlemen, and they must never stop. Society is in danger. Who should we blame, the gammas and sub-prime epsilons these men burdened with loans that could never be repaid, or the Alpha-Plus at the very tip top of the pyramid, where all the rules were made, and then so egregiously bent and broken? And what should we do—send them all to Iceland? The banks, and the government, have failed there as well, stopping the wheels in that far flung outpost of Society and bringing down the local Directorate. Perhaps they can ply their deceptive and foolhardy craft in that isolated place, where the opportunity to lead other astray will be much diminished.

But even as these former titans of finance shuffle off, one after another, wholly discredited, who will replace them? How will the damage they have wrought be repaired? There has been much talk of late about the nationalization of the banks, following a model Sweden used to save itself in a similar crisis. The banks were nationalized, bad assets isolated and disposed of. Then they were recapitalized and sold back into private hands to start over. The UK is facing this very same problem, except the government is cowed by the fact that some of the nation’s largest banks have bad asset problems that dwarf the government current ability to redress them, many times over. The only solution seems to be the printing press, creating the money necessary to clean up the bad debt. Yet the danger in this is an eventual debasing of the currency when all that new money enters the real main street economy.

Have a look at the “liquidity” that has been slowly building up in the bank vaults of America. Want to know where all your taxpayer funded billions are being hoarded? Look no further. The banks are not lending this money because the reality of what they have done has finally dawned on them, and they realize the losses already on their books now, while cleverly hidden, render them technically insolvent. So, like water behind a dam, the bailout cash is rising ever higher. Current financial World Controller Ben Bernanke probably believes the banks will eventually release this tide in an “orderly fashion,” though I would not bet that it will quickly begin to circulate in the form of new loans.

So don’t worry about the value of the dollar just yet, or the specter of hyperinflation.” The most likely scenario is that all this bailout money will be devoured in the black debt hole of the banking system, which is already eating capital faster than it can be printed. Until this condition changes, we will continue in the ever darkening downward spiral of deflation that is now destroying the economy and taking us, most surely, into the maw of the next “Great Depression.”

Hang on to your soma, folks! Have a half-gram holiday and try to forget. Play another round or two of Obstacle Golf or take the family out to the Feelies tonight. Remember the teachings of Our Ford—that “every man, woman, and child is compelled to consume so much a year in the interests of Industry.” Console yourself by simply repeating the simple slogans born of happier times: “Ending is better than mending… the more stiches, the less riches…the more stiches, the less riches…” But through it all remember the words of the Director himself: “Happiness has to be paid for.” 

Boondoggles to the Rescue!

SUBHEAD: Economic collapse has a way of turning economic negatives into positives.

By Dmitry Orlov on 26 January 2009 in Club Orlov -

 Image above: "Last of the Merlot" by Mark Bryan in 2008. From (http://www.artofmarkbryan.com/?s=last+of+the+merlot)

Just look around and you will see boondoggles sprouting up everywhere, in every field of endeavor: we have military boondoggles like Iraq, financial boondoggles like the doomed retirement system, medical boondoggles like private health insurance and legal boondoggles like the intellectual property system. 

At some point, creating another boondoggle becomes the preferred course of action: since the outcome can be predicted with complete accuracy,there is little risk. Proposing a solution that might work runs the risk of it not working. Economic collapse has a way of turning economic negatives into positives. It is not necessary for the United States to embrace the tenets of command economy and central planning to match the Soviet lackluster performance in this area. 

We have our own methods that are working almost as well. I call them “boondoggles.” They are solutions to problems that result in more severe problems than those they attempt to solve. So why not, as a matter of policy, only propose solutions that are guaranteed to simply create more problems, for which further solutions can then be proposed? 

At some point, a boondoggle event horizon is reached, like the light event horizon that exists at the surface of a black hole. Beyond that horizon, the only possible course of action is to create more boondoggles. The combined weight of all these boondoggles is slowly but surely pushing us all down. If it pushes us down far enough, then economic collapse, when it arrives, will be like falling out of a ground-floor window. We just have to help this process along, or at least not interfere with it. 

So if somebody comes to you and says, “I want to make a boondoggle that runs on hydrogen” — by all means encourage him! It’s not as good as a boondoggle that burns money directly, but it’s a step in the right direction. Once you understand the principles involved, boondoggling will come naturally. Let us work through a sample problem: there is no longer enough gasoline to go around. A simple but effective solution is to ban the sale of new cars, with the exception of certain fleet vehicles used by public services. 

First, older cars are overall more energy-efficient than new cars, because the massive amount of energy that went into manufacturing them is more highly amortized. 

Second, large energy savings accrue from the shutdown of an entire industry devoted to designing, building, marketing and financing new cars. 

Third, older cars require more maintenance, reinvigorating the local economy at the expense of mainly foreign car manufacturers, and helping reduce the trade deficit. Fourth, this will create a shortage of cars, translating automatically into fewer, shorter car trips, a higher passenger occupancy per trip and more bicycling and use of public transportation, saving even more energy. Lastly, this would allow the car to be made obsolete on about the same time line as the oil industry that made it possible. 

 Of course, this solution does not qualify as a boondoggle, so it will not be seriously considered. The problems it creates are too small, and they offer too little scope for creating further boondoggles. 

Moreover, if this solution worked, then everyone would be happily driving their slightly older cars, completely unprepared for some inevitable, cataclysmic, economy-collapsing event. It is better to introduce some boondoggles, such as corn-based ethanol and coal-to-liquids conversion. Ethanol production creates very little additional energy but it does create some fantastic problems for further boondoggling: a shortage of food and higher food prices, malnutrition among the poor and inflation. It also reinforces a large existing boondoggle: by funneling resources to petrochemical-based agribusiness, which depletes and poisons the soil and has no future in an age when petrochemicals are scarce, it helps undermine futurefood security. 

Coal-to-liquids conversion offers similarly excellent opportunities. By attempting to alleviate a shortage of gasoline, it will cause a shortage of coal, resulting in power outages and dramatically higher electricity rates. It will add more carbon dioxide to the atmosphere, accelerating global warming. It will probably call for some coal imports, inefficiently moving a very bulky fuel from far away, and fostering energy dependence on suppliers such as China and Russia, further enhancing the trade deficit. 

Along with corn-based ethanol, this excellent boondoggle reinforces the erroneous notion that Americans will be able to continue to drive cars into the indefinite future, conditioning them to clamor for more boondoggles in place of any real solutions. 

With a bit of practice, you should be able to come up with some excellent boondoggles of your own in your own field of endeavor. If your boondoggle works, it will create more problems for you to solve in the next round, as long as there is time for one more round. And if there is not, then you will be where you want to be: at a ground-floor window, staring into an abyss of only a couple of feet. 

Although by then it may feel unnatural, at that point you must resist the temptation to create yet another boondoggle by jumping down head-first. [Reinventing Collapse, pp 118-120]