Structural Woes - an interview with Stoneleigh of TAE

Euan Mearns: Stoneleigh, the world economy seems to be suffering from two great structural woes at present, namely stubbornly high energy prices that are linked to demand that is persistently ahead of the supply curve, and a level of debt that has destabilized the global finance and banking systems.

Can you explain for us the scale and structure of this debt and to what extent write-downs and quantitative easing (QE) have solved this problem?

Stoneleigh: Firstly, I would say that the energy prices that currently seem stubbornly high should fall substantially as the speculative premium evaporates and demand falls on a resumption of the credit crunch. The sucker rally that has spawned all the talk of green shoots is essentially over in my opinion.

The result should be a reversal of a number of trends that depend on the ebb and flow of liquidity - we should see stock markets and commodity prices fall, a significant resurgence in the US dollar and a large contraction of credit. The scale of the reversal should be substantial, as should its effects on energy demand. Demand is not what one wants, but what one is ready, willing and able to pay for, and in a severe credit crunch the capacity to pay for supplies of most things will be severely reduced.




As demand falls, and with it prices, investment in the energy sector is likely to dry up. Many projects will be uneconomic at much lower prices, meaning that the projects which might have cushioned the downslope of Hubbert’s curve (and the much steeper net energy curve), are unlikely to be developed. In this way a demand collapse sets the stage for a supply collapse that could place a hard ceiling on any prospect of economic recovery. That is a recipe for extremely high energy prices in the future.

Secondly, our vulnerability to the consequences of debt is extremely high at the moment. The scale of that debt is staggeringly large. The global credit hyper-expansion has been decades in the making and is now significantly larger than notable events of the past such as the South Sea Bubble of the 1720s and the Tulip Bubble of the 1630s. It dwarfs the excesses that led to the Great Depression.




Credit bubbles are inherently self-limiting, proceeding until the debt they generate can no longer be supported. We have already passed that point and we are now two years into a contraction phase that is about to accelerate. As the aftermath of a credit bubble is typically proportional to the scale of the excesses that preceded it, we should be in for the largest economic contraction for at least several hundred years, and it will be global.

Real estate, which is a major focus of the mania, should do particularly badly in the coming years (in fact the coming decades or longer). There is still so much deleveraging ahead, and so many danger signals, such as the scale of the coming interest resets on US mortgages between now and 2012 (below). While the subprime resets are ending, Alt A and Option ARMs are just beginning.




There will be a very significant undershoot of historically average values, as there always is following a mania (much more than the Case-Shiller projection below suggests). In my opinion, housing prices are likely to fall at least 90% on average. For those who own property on margin, this will be a disaster.




For evidence that this crisis is indeed global, look, for instance, at European housing bubbles, which were worse than in the US.




Unlike inflation, which divides the underlying real wealth pie into smaller and smaller pieces, credit expansion creates multiple and mutually exclusive claims to the same pieces of pie. Once a credit expansion reaches its maximum extent, and contraction begins, these excess claims begin to be extinguished.

Unfortunately, the leverage is such that there are probably over a hundred claims to each piece of pie. While contraction begins slowly, as is the nature of positive feedback loops, it picks up momentum until a cascade point is reached, whereupon one can expect the excess claims to be extinguished in a rapid and chaotic process. This amounts to a rapid collapse in the supply of money and credit relative to available goods and services, which is the definition of deflation.




The scale of the problem has been temporarily concealed by a market rally and the shovelling of tens of trillions of dollars of taxpayer’s money into a giant black hole of credit destruction. This has done nothing to reignite lending, but the temporary (and entirely irrational) resurgence of confidence has restored a measure of liquidity. As that confidence evaporates with the end of the rally, that liquidity will also disappear

Banks hold extremely large amounts of illiquid ‘assets’ which are currently marked-to-make-believe. So long as large-scale price discovery events can be avoided, this fiction can continue. Unfortunately, a large-scale loss of confidence is exactly the kind of circumstance that is likely to result in a fire-sale of distressed assets. The structure of the credit default swap component of the derivatives market makes this very much more likely.




The CDS market allowed large bets to be placed on certain prices falling, and by entities which did not have to own those assets. This creates a perverse incentive for some parties to cause others to fail for profit (akin to me being able to take out fire insurance on your house and thereby give me an incentive to burn it down).

An added complication is the extreme degree of counterparty risk that resulted from a complete lack of capital adequacy regulation. Many parties with winning bets will not be able to collect, so they may cause financial mayhem for nothing. The CDS market is worth some $62 trillion, and a meltdown is very likely in my opinion.

A large-scale mark-to-market event of banks illiquid ‘assets’ would reprice entire asset classes across the board, probably at pennies on the dollar. This would amount to a very rapid destruction of staggering amounts of putative value. This is the essence of deflation.

Euan Mearns: I have for a long time argued and believed that there are so many interests vested in protecting our current system that national governments, the IMF and institutions working together would keep the market flooded with liquidity in order to ward off the threat of deflation.

In fact, it seems that a prolonged period of inflation is the only way to diminish our debts. I sensed at ASPO International in Denver that this was the majority view. Do you agree that inflation is the most likely near term outcome of current monetary policy?

Stoneleigh: Absolutely not. I agree that this is the consensus opinion, but I see it as fundamentally mistaken. The debt monetization that is going on has done nothing to increase the supply of money and credit relative to available goods and services, which is the definition of inflation.

Credit contraction dwarfs debt monetization, leaving us in a state of net contraction, even though we have just experienced a large rally lasting months, which should have been the most favourable condition for reigniting lending if such a thing were in fact possible. I would argue that it is simply not possible and that deflation is inevitable.




Credit bubbles always end this way, with the mass extinguishing of the excess claims debt represents. They are essentially Ponzi schemes, crucially dependent on the continued buy-in of new entrants. Globalized finance brought a flood of new entrants following the liberalization of the early 1980s, but there are now no more new sources of wealth to tap.

Deregulation allowed the reckless to gamble away virtually everything, including bank deposits and pension funds. Globalized finance has created a giant Enron, which while appearing robust is actually almost completely hollowed out. Such structures implode, often without much notice.




In my opinion, deflationary deleveraging will continue until the (small amount of) remaining debt is acceptably collateralized to the (few) remaining creditors. Until that point, there can be no lasting return of the confidence required to rebuild shattered credit markets.

Deflation is ultimately psychological. Without trust we will see hoarding of the cash which will be very scarce in the absence of the credit that currently comprises the vast majority of the effective money supply. The combination of scarce cash and a very low velocity of money will be toxic.

Money is the lubricant in the economic engine and without enough of it that engine will seize up as it did in the 1930s, when farmers dumped milk they couldn’t sell into ditches while others were starving for want of the money to buy food. There was plenty of everything except money, and without money, one cannot connect buyers and sellers.

Potential buyers will have no purchasing power as they will have lost access to credit and their ability to earn an income will be hit by spiking unemployment. Those who still have jobs will find that they have no bargaining power and there is therefore no wage support.

Sellers and producers will have no market and will themselves lose the means to purchase supplies or raw materials for the things they would like to produce.

If conditions remain frozen for any length of time, they will go out of business. The deeper the collapse, the more protracted the trough and the more difficult the eventual recovery.

I would argue that we have no need to fear inflation until we have reached a trough - until the deleveraging impulse is spent. We can expect to spend a long time in the liquidity trap, where real interest rates will be much higher than nominal rates, leaving central bankers “pushing on a string”.

Euan Mearns: Some would argue that faced with the unimaginable specter of deflation that governments will seize control of interest rates from the bond market. Why do you think this may not happen?

Stoneleigh: The bond market is far more powerful than governments at this point. While the international debt financing model remains, the bond market will retain its power to prevent money printing. Even though governments are not succeeding in increasing the effective money supply for reasons already discussed, they are nevertheless increasing systemic risk with their activities.

This is a recipe for very much higher interest rates as a risk premium. Governments do not set interest rates, they decide what rate to defend, but if that rate is substantially different from what the bond market requires, then defending it would be ruinous.

I think we are headed (not imminently but eventually) for a bond market dislocation, with nominal interest rates on government debt spiking into the double digits. This will amount to hitting the emergency stop button on the economy, especially since real interest rates will be substantially higher (the nominal rate minus negative inflation).

I am in fact expecting interest rates on private debt to rise before we see problems in the market for government debt, as the latter should benefit substantially in the shorter term from a flight to safety. The risk premium on private debt is already rising, which is a serious danger signal for such thoroughly indebted societies as we see in the developed world.

Euan Mearns: But stock markets are booming again, several OECD economies are emerging from recession, unemployment has stabilized, there are green shoots everywhere. Surely the current QE strategy is working?

Stoneleigh: The green shoots are gangrenous. Some of the largest market rallies on record happened during the course of the Great Depression, as depressions are associated with very high volatility. Look for instance at the great sucker rally of 1930. There are always rallies of all different sizes in any bear market, just as there are pullbacks of all sizes in bull markets. No market ever moves in only one direction.

People tend to extrapolate recent trends forward, but this amounts to stepping on the gas while looking only in the rearview mirror. This is one reason why major trend changes are so rarely anticipated. Another is that the prevailing view of markets is fundamentally wrong. There is no perfect information, perfect competition, stabilizing negative feedback, rational utility maximization or efficient markets.

Markets are irrational, driven by swings of optimism and pessimism, or greed and fear, in an endless tug of war, and largely in an information vacuum. Investors chase momentum by jumping on passing bandwagons, hence demand for financial assets increases when prices are rising and falls when prices are falling, in classic positive feedback loops.

We have just lived through a period of several months when greed and complacency were in the ascendancy, but that trend is about to reverse in my opinion. Looking at markets as constructs of human herding behaviour allows them to be probabilistically predictable, permitting the forecasting of trend changes. For anyone who is interested in pursuing this idea further, I suggest looking into Bob Prechter’s socionomics - a fascinating subject which delves into the many effects of changes in collective mood.

For instance, as pessimism deepens, driving economic contraction, one would expect to see many manifestations of collective anger and mistrust. As this progresses it is likely to lead to xenophobia and a blame-game, with skillful manipulators (such as the fascist BNP leader Nick Griffin in the UK) poised to direct the anger of the herd towards their own chosen targets.

The potential for serious social fragmentation is very high when expectations have been dashed and there is not enough to go around. Having lived through a very long period of manic optimism and increasing inclusion, we in the developed world are not used to expressions of the dark side of human nature, except for entertainment purposes in popular television programmes. It will come as a considerable shock.

Euan Mearns: Would you care to give your opinion on where the Dow Jones Industrial Average is headed in the near (1 year) and medium terms (2 to 5 years)?

Stoneleigh: I think the market will fall hard (intervening short rallies notwithstanding) for perhaps 18 months. This was the length of the first leg down (October 2007-March 2009) and so represents a reasonable first guess at how long the next leg at the same degree of trend might last.

I think we will see falls of thousands of points in a series of cascades. I don’t see the markets reaching a lasting bottom until probably the middle of the next decade, and even then I don’t expect it to be a final bottom. This has been the largest credit bubble in history, and the aftermath of a major bubble always undershoots where it began before any kind of recovery begins.




The aftermath of the last major mania - the South Sea Bubble in the 1720s - lasted decades and culminated in a series of revolutions. We are still relatively near the beginning of our own crisis, but already it compares with the Great Depression.

Euan Mearns: How do you see the US$, gold and oil trading in the same time frame?

Stoneleigh: I think almost all assets will fall as price support is knocked out from underneath them, but the dollar should rise initially on a flight to safety. Scarce cash will be king for a long time, and the value of one’s currency relative to available goods and services domestically will matter much more for most people than its value relative to other currencies internationally.

In a deflationary scenario, prices fall, but purchasing power typically falls even faster, meaning that everything becomes less affordable despite the lower nominal prices. Prices in real terms, adjusted for changes in the supply of money and credit, are what matter.

In a world where almost everything is becoming rapidly less affordable, the essentials will be the least affordable of all, as a much larger percentage of a much smaller money supply will be chasing them. This will confer relative price support.

Although we could initially see a large glut in energy supply as demand falls off a cliff, this is likely to lead to supply collapse as investment dries up, hence I expect energy prices to bottom early in this depression.

Both financial and physical risks to energy exploration are likely to increase substantially in a destabilized and capital constrained world, and even maintaining existing assets could become very difficult. This is a recipe for much greater state involvement in ownership and exploitation of (probably deteriorating) energy assets, with increasing conflict over those assets as supply gets dramatically tighter with lack of investment.

As for gold, I expect it to fall initially as people sell not what they would like to, but what they can, in order to raise the cash they need for living expenses and debt servicing. Owning gold is likely to become illegal again (as it did in the Great Depression) in my opinion.

This wouldn’t necessarily stop you owning it, but would stop you trading it (at least without taking major risks) for other things you might need. Owning gold now therefore only makes sense if one is confident of being able to sit on it for a very long time, as it will hold its value over the long term as it has for thousands of years.

Euan Mearns: What will be the consequences for unemployment levels and services provided by government?

Stoneleigh: Unemployment will go through the roof as the prospects for selling most goods and services decline dramatically. In the developed world we are nations of middle men - generally service economies where we make a living figuratively taking in each other’s laundry.

Most of us produce relatively little. Even those who do will find almost no market for their exports, and those who could find buyers may not be able to send shipments as credit contraction prevents shippers from getting the letters of credit they need to ship goods. A glance at what has happened to the Baltic Dry Index (below) indicates the difficulties already facing shipping companies.




Unfortunately middlemen are almost completely expendable, and the services of others are likely to become unaffordable for the majority very quickly. While there will be a huge surplus of labour, and the few who retain purchasing power will be able to hire anyone they want for very little, most people will have to do everything for themselves, as poor people have done throughout history and as most of the population of the world does now.

Not only will we lose access to the paid labour of others, but we will lose our virtual energy slaves as well. This will represent an enormous fall in the standard of living for the vast majority.




Whereas inflation can conceal a fall in purchasing power, so that people may not even realize it is happening, deflation brutally exposes it. Wages would have to fall just to keep purchasing power the same, but keeping it the same will not be an option for cash-strapped employers. In addition, with a large surplus of labour, workers will have no bargaining power.

This is a recipe for exploitation the like of which we have not seen for a very long time, but in the intervening adjustment period it is likely to lead first to war in the labour markets.

I would expect general strikes and a breakdown in the reliability of centralized services such as healthcare, education, power systems, water treatment, garbage (and snow) removal etc. This will be exacerbated by plunging tax revenues for all levels of government, which governments will try to compensate for by raising taxes, on anyone still capable of paying, to punitive levels. We would thus expect rapidly deteriorating services at much higher cost.

Many people are at risk of being eventually priced out of the market for goods and services, and particularly the essential ones, entirely.

In my opinion, we stand on the brink of truly tragic circumstances.

Gore Vidal's United States of fury

In Russian, the phrase "gore vidal" means "he has seen grief". As Gore Vidal is wheeled towards me across an empty London hotel lobby, it seems for the first time like an apt translation. In the eight years since I saw him last, he has lost his partner of 50 years, most of his friends, most of his enemies, and the use of his legs. The man I met then – bristling with his own brilliance, scattering witticisms around like confetti – has withered. His skin is like parchment, but the famous cheekbones are still sharp beneath the crags. "It is so cold in here," he says, by way of introduction. "So fucking cold."

Gore Vidal is not only grieving for his own dead circle and his fading life, but for his country. At 83, he has lived through one third of the lifespan of the United States. If anyone incarnates the American century that has ended, it is him. He was America's greatest essayist, one of its best-selling novelists and the wit at every party. He holidayed with the Kennedys, cruised for men with Tennessee Williams, was urged to run for Congress by Eleanor Roosevelt, co-wrote some of the most iconic Hollywood films, damned US foreign policy from within, sued Truman Capote, got fellated by Jack Kerouac, watched his cousin Al Gore get elected President and still lose the White House, and – finally, bizarrely – befriended and championed the Oklahoma bomber, Timothy McVeigh.

Yet now, he says, it is clear the American experiment has been "a failure". It was all for nothing. Soon the country will be ranked "somewhere between Brazil and Argentina, where it belongs." The Empire will collapse militarily in Afghanistan; the nation will collapse internally when Obama is broken "by the madhouse" and the Chinese call in the country's debts. A ruined United States will then be "the Yellow Man's Burden", and "they'll have us running the coolie cars, or whatever it is they have in the way of transport".

A Scotch is fetched for him as he is wheeled into the corner of the bar. "I was like everyone else when Obama was elected – optimistic. Everything we had been saying about racial integration was vindicated," he says, "but he's incompetent. He will be defeated for re-election. It's a pity because he's the first intellectual president we've had in many years, but he can't hack it. He's not up to it. He's overwhelmed. And who wouldn't be? The United States is a madhouse. The country should be put away – and we're being told to go away. Nothing makes any sense." The President "wants to be liked by everybody, and he thought all he had to do was talk reason. But remember – the Republican Party is not a political party. It's a mindset, like Hitler Youth. It's full of hatred. You're not going to get them aboard. Don't even try. The only way to handle them is to terrify them. He's too delicate for that."

When he compares Obama to his old friend Jack Kennedy, he shakes his head. "He's twice the intellectual that Jack was, but Jack knew the great world. Remember he spent a long time in the navy, losing ships. This kid [Obama] has never heard a gun fired in anger. He's absolutely bowled over by generals, who tell him lies and he believes them. He hasn't done anything. If you were faced with great problems in chemistry – to find the perfect gas, to gas a population – you won't know for a long time whether it works. You have to go by what people tell you. He's like that. He's not ready for prime time and he's getting a lot of prime time on his plate at once."

Is there any hope? "Every sign I see is doom. But then people say" – he adopts a whiny, nasal voice – "'Oh Mr Vidal, you're so negative, can't you say something nice about America? It's a wonderful country, everybody wants to live here.' Oh yes? When was the last time you saw a Norwegian with a green card who wanted to come here because of the health service? I'll pay you if you can find one."

But there is, he says with sudden perkiness, some "good news. Afghanistan will be terminal for the American empire, yes. Which is a happy way of looking at it. We'll be out of the empire game, rapidly. But it's too late for the country and the constitution." He raises his drink, and smiles ironically. "To a better republic," he says, and drinks in one long gulp.

I. The death of America

The current spasming death of America was foretold at its birth, Vidal says, and it can only be understood by whirling back there. It has been his mission to explain the past to the "United States of Amnesia," through his novels and essays. When he speaks, he sweeps over two millennia of history – from Caesar to Obama – as if he was there, forever spraying one-liners from the back row. Today, he was stopped time in Philadelphia, at the birth of the republic. "Benjamin Franklin saw all this coming," he says. "I quote him because most Americans don't even know who he was now. You'll have to explain to your readers." Franklin was a writer, scientist and soldier who became one of the founding fathers of the United States. "In Philadelphia in 1781, when the constitution was being put together, he was an observer. He didn't want to have any part of it, and as he was leaving the Constitution Hall in Philadelphia a couple of old ladies said, 'Ah, Mr Franklin, what is going to happen?' He told them: 'Well, you're going to get a Republic, if you can keep it. But every constitution of this sort has failed since the beginning of time due to the corruption of the people.'"

So the American people are corrupt? Americans weren't good enough for America? "Precisely. They were only good enough to be a restive colonial power – or the dregs of one."

Vidal's politics began here – almost. He was born at the United States Military Academy in West Point to a wealthy family at the apex of American power. His grandfather was Thomas Pryor Gore, the Senator for Oklahoma. He was blind, so from the age of five, little Gore was reading letters and books for big Gore and guiding him discreetly through Washington DC parties. The Senator was a populist, fighting to rally the people against the concentrated power of Wall Street and Big Finance. He represented the cotton farmers who emerged battered from the Civil War, only to be destroyed by Wall Street financiers playing roulette with the global cotton price. Yet there was always a strange contradiction to his life: "My grandfather couldn't stand his constituents," Vidal says. "And they loved him for it. Figure that one out."

He was a populist with no faith in the populace – precisely what his grandson has turned into. Gore Vidal shares the populist belief that the people are being shafted by the rich – but he thinks the population is too cretinous and drugged by television and fast food to figure it out. "It is always to be hoped that the people will mysteriously be educated, somehow. Well, that's the link. But the people don't know anything. As soon as we became an empire, we stopped teaching geography in the schools, so nobody would know where anything is. It's not the people's fault – they have been perverted them into imperial ways of thinking so that they would be docile workers and loyal consumers. That was the dream and it has come true."

As a child, Vidal loved spending time with his Senator-grandfather, not least because it meant he could escape for a time from his alcoholic mother Nina. When I raise the topic, he adopts the nasal whine of a mock-interviewer again and says: "'Oh Mr Vidal, your poor mother can't have been as awful as you say [in your memoirs].' She was a lot worse. I don't go after other people's mothers, but my own was quite enough to attack."

She was constantly drunk, and when she wasn't savaging him or threatening suicide, she would tell her son the full details of her life in an obsessive angry blather. When he was 10, "she told me that rage made her orgasmic. I didn't think to ask her if sex did the same." When he appeared on the cover of Time magazine years later, she wrote a long letter to the magazine denouncing him. The magazine headlined it: "A Mother's Love." Vidal seems to have inherited his bitter wit from her. Asked why she didn't marry for a fourth time, she said: "My first husband had three balls, my second two, my third one. Even I know enough not to press my luck." Does he think of her often? "No." He gives me an icy stare. After all these years, can he feel any compassion for her? "No." The ice becomes a glacier.

Does he think, at least, that she shaped his personality? His old friend Kenneth Tynan, the theatre critic, wrote in his diaries: "What superb and seamless armour he wears, as befits one for whom life is a permanent battle for (social and intellectual) supremacy ... Gore could never surrender (ie, expose) himself to anyone." Could his mother's cruelty explain his lifelong sweeping dismissal of everything around him – the constant goring by Gore? As soon as I ask this, I realise how Vidal has changed since I last saw him. Then, he would have responded with a witty put-down, or reasserted his supremacy with an obscure classical reference, quoted in the original Greek. Now he looks a little hurt – his eyes flicker sadly – and he says: "Well, it's the last thing I'd like to think about." Then he is silent. I suddenly feel rude and cruel.

His grandfather became increasingly furious that Franklin Roosevelt was – he believed – dragging the United States into an unnecessary war against Germany and Japan. He was opposed to all foreign wars, which he believed were drummed up by big business to serve their interests. "He thought that no foreign war was worth the life of any American," Vidal says, with a smile of pride. But this – combined with his opposition to the New Deal – meant he was voted out of office. As a little act of revenge, Vidal says he has never visited Oklahoma.

He joined the army at the age of 17, glad to escape his mother. He spent the war posted in Italy and, for three years, Alaska. He is not surprised that this "frozen hell" has produced Sarah Palin, "the latest idol in America's long cult of stupidity". Alaska was, he says, "the place where all the crooks in America went to hide. And they produced her."

He says he realises now that he was part of an army sent to build a global empire by "America's Augustus, Roosevelt". The old America was replaced by a military octopus with a metal arm on every continent, and the old constitution was replaced by a "National Security State. I wouldn't have enlisted if I knew where it was going to lead", he says. "But there it was, and we ended [the war as] an empire and slammed the door behind us. Then we fucked it up."

He left the army with no money. "My father and grandfather, as self-made men, were not going to make any other man. I knew that," he says. So he sat down and wrote a novel about the war called Williwaw. At the age of 20, he was suddenly a hard-boiled realist bestseller. He was lauded as a tough young soldier, and his grandfather talked of setting him up with a Congressional seat – but Vidal wanted to write another, bolder novel, based on the only person he had ever loved. It pulled any hope of a political career down behind him – but made him a defining figure in American life.

II. An Interrupted Love Story

When Vidal was 14, a boy called Jimmy Trimble moved into Vidal's dorm at his Washington boarding school. He was a blond, built jock; Vidal was a bookish intellectual. "His sweat smelled of honey, like that of Alexander the Great," he wrote years later in his memoir, Palimpsest. They fell in lust and perhaps in love, and had sex in the forest at the edge of the school grounds. "It was the first human happiness I had ever encountered," Vidal wrote. He saw Trimble as his other half, the person who finally made him complete. Then Trimble was, at the age of 19, blown up by a hand grenade on the beaches of Iwo Jima.

For years, thoughts of Trimble still made Vidal tremble. I think they still do: his eyes turn distant and a little watery when we talk about him. So he wrote a novel – The City and The Pillar – imagining what would have happened if they had met again after the war. It's a dark, bitter book: the sex is a failure and one kills the other. But in 1950s America, to show two all-American boys – manly, self-assured – having sex was wildly bold. He was subject to a blackout in the "respectable" press and any hope of elected office died, but the book became a best-seller.

Vidal resolved that he would never again find what he had lost with Jimmy: "It would be greedy to expect a repetition. I was aware of my once-perfect luck, and left it at that." He says he had sex with more than a thousand "anonymous youths" by the age of 25. He never saw them twice; he never pretended there was any affection there. He was what they labelled "trade" – he did nothing (deliberately, at least) to please them. He was pleasured; that was all. "When I got too old, I paid for it gladly." After the death of Trimble, he seems to have emotionally cauterised himself. Even his closest friends have said there is an isolation at the core of his character. He once said: "I have known so many people, but it seems I have known nobody at all."

Strangely, though, Vidal has always resisted the idea that he is a "gay" champion. "I never said I was gay, because I don't think anyone is." He says he finds "these restrictions tiresome. In the centuries of Rome's great military and political success, there was no differentiation between same-sexers and other-sexers; there was also a lot of crossing back and forth. Of the first 12 Roman emperors, only one was exclusively heterosexual." The US today is, for all the fussing, full of sodomy, he says. "Did you see [Colonel] Gaddafi [at the UN] complaining that American soldiers have been sodomising Arab boys? I thought, well that's been the case since the very beginning of the republic. They blamed the sodomy on those great forests out there which they said made them horny. There was nothing else to do but bugger boys, they said."

So homosexuality and heterosexuality are fictions? "Yes, of course." He adopts a camp voice and adds: "But it makes a lot of girls happy." Why do so many people believe it to be true about themselves if it's false? "They believe in Jesus, and that's a much bigger fiction, with more money spent on it. Prettier clothes too."

When he was 25, Vidal met a younger man called Howard Austen, and they settled down together, on one condition – they agreed to never have sex, nor be romantic in any way. He and Austen were together for 50 years. He died last year in a hospital in the Hollywood Hills. "He had lung cancer and he wouldn't stop smoking and then it went to his brain and he had brain cancer. That's ... that's what happened," he says. Once, in an essay, he quoted the critic Edmund Wilson, who said of his dead wife: "After she was dead, I loved her." Can he say that of Howard? He affects not to hear. "Now I'm a gimp. I can't walk. I need hospitals. You know I have a knee made out of titanium." He taps his knee. "So you see, I need hospitals." And he looks away, a little absently, as if thinking of something else.

III. Isolation

By his mid-20s, Vidal was a best-selling author, and rich. He rented a property in Guatemala – far from his mother – and settled down to write his next novel. But in that small tropical central American country, he found he was going to have to dramatically reassess the country he had just fought for – and pull his grandfather's abandoned philosophy from the gutter of history.

Just before Vidal arrived, the poverty-wreathed Guatemalan people had elected a left-wing president called Jacobo Árbenz Guzmán. They wanted him to introduce a minimum wage and start taxing the US mega-corporation, the United Fruit Company, that dominated the country's only industry, banana-growing. The outraged United Fruit Company acted to preserve its profits – by getting Washington to topple Árbenz and install a dictator. The phrase "banana republic" entered the language.

"I was astonished," Vidal says. "I had known vaguely about our numerous past interventions in Central America. But that was the past." He discovered that Senator Henry Cabot Lodge was leading the charge, and "I didn't believe it. Lodge was a family friend; as a boy I had discussed poetry with him". He says he realised then he had been fighting "for an Empire, not a republic". His grandfather, he resolved, had been right all along: wars only serve elites.

He rapidly became the leading left-wing critic of American foreign policy. He warned against every war from Vietnam to Iraq, often with extraordinary prescience. At the height of George W Bush's post-9/11 popularity, he said: "Mark my words – he will leave office the most unpopular President in history." His essays on this subject are often great flares of truth and anger. His horror at US foreign policy can be summarised in one little scene. In the 1980s, the Sistine Chapel was being restored, and some VIPs were invited to view it on an elevated platform. He spotted that old serial killer Henry Kissinger inspecting the section depicting Hell, and said: "Look, he's apartment hunting."

Vidal started preaching his grandfather's gospel of isolationism. "I am a patriot of the old republic that has slowly vanished during the expansionist years and disappeared completely in 1950 when the National Security State replaced it," he says. "I want us to go from a wartime economy to a peacetime economy, and restore the constitution. We should leave the world alone, before they make us."

The US is only menaced, he says, because it menaces others. "In geopolitics as in physics, there is no action without reaction." He stirs his Scotch and says: "There was no 9/11. I mean – our policies were such that we were going to have a lot of crazy people out there in the Arab world who were going to try to blow us up, because of crimes they feel we committed against them. Any fool could see it coming. And I'm sufficiently a fool to have seen it."

He sees his job as expressing "the unacceptable obvious", and says he is always ready to "turn the other fist". I tell him that while I agree with many of his criticisms of US foreign policy, it seems that to keep his isolationism pristine and pure, he has to go further than the truth. He has to imply every attack on the United States' power was provoked, and therefore justified – when some were not. He looks coldly at me. "Okay – name one." Pearl Harbour, I say. If the US can be an expansionist empire, so can other countries. The Japanese empire attacked the US, just as the US expansionists attacked Guatemala, Vietnam and others. It was unprovoked aggression.

His face tightens into a scowl. "Roosevelt saw to it that we got that war!" he snaps. "He taunted the Japanese so they would have to hit us, at Pearl Harbour, and they did ... We have conveniently forgotten because we don't teach American history to anybody, but he sent an ultimatum to the Japanese telling them to get out of China, which they'd been trying to conquer for years. He was laying down the law to them, [saying they had to] surrender their rather proud nation's empire. And they said fuck you. And the next thing we knew the fleet was moving towards Pearl Harbour."

That's not how most historians read it – but I move on to an even more contested example. He says the Soviet Empire was "purely reactive" to American power, and only committed atrocities and invasions because the US "goaded them". Can that be true? Couldn't they be independently cruel, just as the US sometimes was? "They had a whole continent to play with, they didn't need any more space," he says, and changes the subject, rather oddly, to talk about the Dutch.

I try to pull him back. Yes, it's clearly the case that 9/11 was in part a blow-back response to US crimes in the Middle East, but he goes much further, and says the Bush administration was "probably" in on it. Where is the evidence for this huge claim? "It would certainly fit them to a T, so you can't blame the rest of us for starting to think on slightly conspiratorial grounds. They did steal the great election of the year 2000 and they somehow fixed the Supreme Court of the United States, that sacred place, and got them to go along with it, with the selection, not the election, the selection of George W Bush as president. He wasn't voted for, people didn't want him. And were somewhat mystified that he ended up with it."

But there was an earlier attack on America that he wants to discuss now – one he says was carried out by a "sane" and "noble" man.

IV. A Noble Boy

On 19 April 1995, a former US soldier called Timothy McVeigh planted a massive truck bomb outside a government building in Oklahoma City, at the heart of Vidal's grandfather's old constituency. Some 168 people died, including a kindergarten full of children. McVeigh wrote to Vidal, saying he had been motivated, in part, by studying his work. He said he believed the US Constitution had been usurped by a National Security State that had to be defeated by force. Vidal wrote back – and they became friends. He started mounting passionate defences of the bomber in public. He says he was not crazy, but "too sane for his place and time".

"He was a dedicated student of the American way, of the Constitution itself," he says. "You should read his writings – they're very good. Particularly on the Posse Comitatus Act of 1876, which forbids the Federal government ever to use its troops against the American people – but which they proceeded to do at Waco [a compound used by a religious cult that was attacked by federal troops in 1993]. They killed more people than he managed to kill when he blew up that building in Oklahoma City. He was a noble boy."

Noble? The man who consorted with far right militia groups and blew up all those children? Vidal scowls again, and almost hisses: "He didn't kill them deliberately! But the American government killed all those people at Waco, men, women and children deliberately! It was his gesture against the government he loathed. You know, he swore to me he had no idea there were children there. He said, 'How would I know? I walked by the place once and I knew that there was some kind of dining room, families might be there, or they might not be there,' and he wasn't counting, he wasn't out for a big count. But he was trying to tell the government – look, you have done this arbitrarily, contrary to the Posse Comitatus Act, contrary to American law, you've killed American citizens. Remember he was an army boy, and he loved it, and he was longing to get back in the army and the army was longing to get him back, he was the best sharpshooter they'd seen in years. But it was not meant to be."

But he knew he would kill scores of innocent people: that was the point. Doesn't that show a callous disrespect for human life? "So did Patton, so did Eisenhower!" he says angrily. "Everybody's rather careless about it once you start getting involved in wars. He saw this as a war to preserve the Constitution! You know what he said? But you don't, so I'm going to tell you. The judge [at his trial] quite liked him, and he was intrigued by the fact that this rather talkative kid who wrote tons of pieces for the press had not defended himself. So he said – Mr McVeigh, could we hear more from you? [McVeigh] said, 'Well, your honour, I will base my case on Justice Brandeis, one of our most brilliant jurists, in his opinion in Olmstead. There, he writes that when government ceases to lead by example and actually provides a bad example, anything can happen. Government is the last teacher. Everything I did, I learned from my government."

When did this happen to Gore Vidal? When did he go from righteous – and right – opposition to atrocities carried out by his own government, to justifying any atrocity against it, no matter how extreme? When I ask him, his scowl turns to a sneer, and he says I am ignorant and clearly haven't read anything. I decide to try a different approach. I ask him – if there were more people like McVeigh, would that be a good thing? There is a crack in his hauteur, and he says: "It strikes me as a perfect nightmare. Of course I don't want more people like McVeigh. Since Americans refuse to think about anything, being incapable I suspect of thought, then they're not going to come to any conclusions except mistaken ones."

I don't understand. I try again and again to tug him back and get him to say whether this means he thinks McVeigh was wrong to plant the bomb. He won't. Finally, he jeers: "You are trying my patience," and defies me – with a long stare – to change the subject.

V. Pale Moonlight

Vidal is one of the last of his generation of American intellectuals standing (or, at least, sitting). I ask him about some of his rivals who have died recently – John Updike, William Buckley, Norman Mailer – and he interrupts. "Updike was nothing. Buckley was nothing with a flair for publicity. Mailer was a flawed publicist, too, but at least there were signs every now and then of a working brain." Then he smiles to himself: "You know, he used the word 'existential' all the time, to the end of his life, and never even learned what it meant. I heard Iris Murdoch once at dinner explain to Norman what existential meant, philosophically. He was stunned."

There is a vulnerability to Vidal now that didn't exist eight years ago. Before, I felt like I was shouting questions up Mount Olympus: he conducted the interview from above and beyond me, impervious to anything I said. Now, when I laugh at his jokes, he looks pleased, and laughs too. When we argue, he looks genuinely thrown, and hurt, and angry. He seems keen to return to the calmer waters of his memories, and we paddle together in his Kennedy anecdotes. Jackie was really secretly in love with Bobby, he says. He used to call Jack the President-erect. Jack once had sex with an actress friend of his in a bath, and suddenly rammed her head underwater, so she would have a vaginal spasm, and he would have an orgasm. "She hates him still," he says. But when I ask him what he made of the late Teddy Kennedy as a person, he snaps: "Who cares what they were like as people? That's just show business."

He has had to abandon his second home in the high hills of Italy, and says he misses it. "Italy is such a civilised country. Unlike America." But is the gap so great? Is Silvio Berlusconi better than Barack Obama? He snaps again: "Who cares? This is showbiz you're worried about. I don't care who's on television telling jokes on the Late Show."

Vidal seems exhausted and alone, living out his days in the Hollywood Hills. After an amazingly full life – "I have tried everything but incest and folk-dancing," he says – he has no more books gestating. He has travelled to London to receive applause on stage for providing the recorded narration for the new production of Mother Courage at the National Theatre, but all his old London friends – Tynan, Tom Driberg, Princess Margaret – are dead. I ask what it's like to be here, and he says: "This isn't a country, it's an American aircraft carrier." He starts to talk about his old friends again. He is swimming with ghosts now – from Jimmy Trimble to Jack Kennedy to his drunken, scolding mother. As he declines, he announces that everything around him is declining – America, literacy, humanity itself.

In one essay, Vidal said the author William Dean Howells at 84 "lived far too long". He quoted a line Howells wrote to Henry James: "I am comparatively a dead cult with my statues cut down and the grass growing over me in pale moonlight." Does he feel this about himself? I stare at him and don't have the heart to ask. He tells me he is unafraid of death. "I'm the least primitive American you're going to meet, and you have to be pretty primitive to believe in hell. To me hell is the United States of today."

After two hours, his carer – a beautiful long-haired French boy who has been reading Céline in the corner of the hotel bar – indicates that our time is up. I tell Vidal I hope I will interview him in another eight years' time. "Another eight years? Oh, the monotony!" he exclaims, and begins to be wheeled away. The last thing I hear him say as he vanishes across the marble lobby is a curse to his carer: "It's still so fucking cold in here!"

A Soldier's Warning

More than 160 years ago Søren Kierkegaard declared that "truth is a power." But it's a power that is rarely acknowledged beforehand because it entails suffering, and most people reject suffering. Eventually, however, the truth proves victorious, and the majority accepts it. "Why?" asked Kierkegaard. Not because it is truth. "They join it," he explained, "because everyone else is joining."

Twenty years ago the socialist bloc supposedly collapsed. But who is honestly celebrating this event? Some people imagined at the time, quite erroneously, that truth had proven victorious against history's most vicious lie. Russian dissident and former political prisoner Vladimir Bukovsky, speaking at the Oslo Freedom Forum last May 19th, said that the socialist empire of the East continues. It has somehow survived. According to Bukovsky, "Those who perpetrated all those horrible crimes in the communist countries are safely in power again. These people have never said sorry. Those and those of their accomplices in the West who were apologists and sympathizers of the Soviet oppression throughout all these decades ... never said [they were] sorry, and never gave us a chance to forgive them."

Bukovsky also warned that totalitarian socialism is on the march. Not only has it revived in the East. It is spreading throughout Europe and Latin America. Bukovsky said that "twenty years down the road all we can do is repeat the famous phrase of Mark Twain that the rumors of its death are greatly exaggerated." One only has to consider the situation in the United States, where socialists dominate the educational system and control the government. The idea that communism died in 1989 is farcical. "So far," Bukovsky explained, "no former communist country has managed to transcend its experience of the past.... Democratic institutions are systematically destroyed ... elections are turned into farce, political oppressions are everyday reality again, and even some new countries have joined that sad list of tyrannies and repressive societies such a Venezuela."

How has this happened? How could totalitarian socialism regain so much lost ground, so rapidly, without any serious resistance? How has it managed to make so much progress in the United States? "Contrary to one's expectations," Bukovsky lamented, "the collapse of communist regimes in the East did not bring any sobriety to the West, to a reassessment of its values. Just as we speak, a new version of the Soviet Union is forced on a silent majority of European nations: the European Union. Admittedly it is a very pale copy, a very mild copy of the Soviet Union; and yet, a copy nonetheless. We are already told there will be a Europe police, Europol, some kind of version of [the] KGB in the European Union, which will police us on 32 counts of crimes, two of which are particularly interesting because they do not exist as a crime in the penal code of any nation: that is the crime of racism, and the crime of xenophobia. And they already explained that those of us who object to the immigration policies of the European Union are going to be charged with the crime of racism, and those of us who object to the European Union are going to be charged with the crime of Xenophobia. Well, it always pays to know the article under which you are going to serve in jail."

Political correctness appears to be irresistible. The truth does not belong to most human beings. They are not soldiers for the truth. Instead, they are victims of the lie. Only a minority resists, by a process of suffering - as the truth itself suffers. Bukovsky told the Oslo Freedom Forum that socialism's utopian program is a criminal enterprise. It cannot be otherwise. As such, he explained, it should have been put on trial in 1992. But there was no trial.

According to Bukovsky, " [In 1992] I ... had access to archives of the Central Committee and Politburo; and what I discovered there explained to me why the West was so adamantly against a Nuremberg trial in Moscow. To begin with, so many of the prominent figures of the Western political, business and cultural world were in secret collaboration with Moscow that it would have been a huge shock in the West if that was revealed. And no one wanted that shock. But much more importantly, it would have been an ideological shock. Throughout the end of the Soviet Union, according to the documents I've seen, numerous leaders of the West, particularly of the left wing spectrum, would come to Russia, to the Soviet Union, alarmed at the prospect of the collapse of the Soviet Union. Now think of that. We worked all our life to see that collapse, and in the crucial moment when it was about to collapse the entire world was trying to save it. And What was their explanation? Why were they so adamant to support this disintegrating regime? Oh, because, as they say, and I quote: 'The collapse of socialism in the East can bring the crisis to that idea in the West.' So what they were trying to save was their own illusion, their own utopia of socialism, by dooming our countries...."

The KGB and the Communist Party Soviet Union were not without allies in 1992, and they are not without allies today. Soviet socialists are part of a brotherhood that includes American and West European socialists. The crime of forcing a socialist utopia on the world is still their goal. Those who "force utopia on the people are committing a crime," Bukovsky declared. This is the legacy of socialism. If we cannot learn from this, then the gigantic tragedy of Soviet oppression "will have no meaning."

At the Oslo Freedom Forum Bukovsky demanded "unconditional surrender from our enemy...." And then, he said, we must put them on trial. "We were told [in 1992] that we were trying to mount a witch hunt," said Bukovsky. "Well, today the witches have returned and they are hunting us." The Kremlin is engaged in a massive rearmament program. At the same time, the United States is disarming. Those who would resist have been neutralized. A small minority of organizers, KGB officers, agents of influence, and fellow travelers, have effectively turned the tables on the Free World.

The final crisis awaits, and Bukovsky tells us that we have a choice: to be soldiers against socialism, or to be its victims.

- Jeffrey R. Nyquist

Aquacalypse Now - The End of Fish

Our oceans have been the victims of a giant Ponzi scheme, waged with Bernie Madoff–like callousness by the world’s fisheries. Beginning in the 1950s, as their operations became increasingly industrialized--with onboard refrigeration, acoustic fish-finders, and, later, GPS--they first depleted stocks of cod, hake, flounder, sole, and halibut in the Northern Hemisphere. As those stocks disappeared, the fleets moved southward, to the coasts of developing nations and, ultimately, all the way to the shores of Antarctica, searching for icefishes and rockcods, and, more recently, for small, shrimplike krill. As the bounty of coastal waters dropped, fisheries moved further offshore, to deeper waters. And, finally, as the larger fish began to disappear, boats began to catch fish that were smaller and uglier--fish never before considered fit for human consumption. Many were renamed so that they could be marketed: The suspicious slimehead became the delicious orange roughy, while the worrisome Patagonian toothfish became the wholesome Chilean seabass. Others, like the homely hoki, were cut up so they could be sold sight-unseen as fish sticks and filets in fast-food restaurants and the frozen-food aisle.

The scheme was carried out by nothing less than a fishing-industrial complex--an alliance of corporate fishing fleets, lobbyists, parliamentary representatives, and fisheries economists. By hiding behind the romantic image of the small-scale, independent fisherman, they secured political influence and government subsidies far in excess of what would be expected, given their minuscule contribution to the GDP of advanced economies--in the United States, even less than that of the hair salon industry. In Japan, for example, huge, vertically integrated conglomerates, such as Taiyo or the better-known Mitsubishi, lobby their friends in the Japanese Fisheries Agency and the Ministry of Foreign Affairs to help them gain access to the few remaining plentiful stocks of tuna, like those in the waters surrounding South Pacific countries. Beginning in the early 1980s, the United States, which had not traditionally been much of a fishing country, began heavily subsidizing U.S. fleets, producing its own fishing-industrial complex, dominated by large processors and retail chains. Today, governments provide nearly $30 billion in subsidies each year--about one-third of the value of the global catch--that keep fisheries going, even when they have overexploited their resource base. As a result, there are between two and four times as many boats as the annual catch requires, and yet, the funds to "build capacity" keep coming.

The jig, however, is nearly up. In 1950, the newly constituted Food and Agriculture Organization (FAO) of the United Nations estimated that, globally, we were catching about 20 million metric tons of fish (cod, mackerel, tuna, etc.) and invertebrates (lobster, squid, clams, etc.). That catch peaked at 90 million tons per year in the late 1980s, and it has been declining ever since. Much like Madoff’s infamous operation, which required a constant influx of new investments to generate "revenue" for past investors, the global fishing-industrial complex has required a constant influx of new stocks to continue operation. Instead of restricting its catches so that fish can reproduce and maintain their populations, the industry has simply fished until a stock is depleted and then moved on to new or deeper waters, and to smaller and stranger fish. And, just as a Ponzi scheme will collapse once the pool of potential investors has been drained, so too will the fishing industry collapse as the oceans are drained of life.

Unfortunately, it is not just the future of the fishing industry that is at stake, but also the continued health of the world’s largest ecosystem. While the climate crisis gathers front-page attention on a regular basis, people--even those who profess great environmental consciousness--continue to eat fish as if it were a sustainable practice. But eating a tuna roll at a sushi restaurant should be considered no more environmentally benign than driving a Hummer or harpooning a manatee. In the past 50 years, we have reduced the populations of large commercial fish, such as bluefin tuna, cod, and other favorites, by a staggering 90 percent. One study, published in the prestigious journal Science, forecast that, by 2048, all commercial fish stocks will have "collapsed," meaning that they will be generating 10 percent or less of their peak catches. Whether or not that particular year, or even decade, is correct, one thing is clear: Fish are in dire peril, and, if they are, then so are we.

The extent of the fisheries’ Ponzi scheme eluded government scientists for many years. They had long studied the health of fish populations, of course, but typically, laboratories would focus only on the species in their nation’s waters. And those studying a particular species in one country would communicate only with those studying that same species in another. Thus, they failed to notice an important pattern: Popular species were sequentially replacing each other in the catches that fisheries were reporting, and, when a species faded, scientific attention shifted to the replacement species. At any given moment, scientists might acknowledge that one-half or two-thirds of fisheries were being overfished, but, when the stock of a particular fish was used up, it was simply removed from the denominator of the fraction. For example, the Hudson River sturgeon wasn’t counted as an overfished stock once it disappeared from New York waters; it simply became an anecdote in the historical record. The baselines just kept shifting, allowing us to continue blithely damaging marine ecosystems.

It was not until the 1990s that a series of high-profile scientific papers demonstrated that we needed to study, and mitigate, fish depletions at the global level. They showed that phenomena previously observed at local levels--for example, the disappearance of large species from fisheries’ catches and their replacement by smaller species--were also occurring globally. It was a realization akin to understanding that the financial meltdown was due not to the failure of a single bank, but, rather, to the failure of the entire banking system--and it drew a lot of controversy.

The notion that fish are globally imperiled has been challenged in many ways--perhaps most notably by fisheries biologists, who have questioned the facts, the tone, and even the integrity of those making such allegations. Fisheries biologists are different than marine ecologists like myself. Marine ecologists are concerned mainly with threats to the diversity of the ecosystems that they study, and so, they frequently work in concert with environmental NGOs and are often funded by philanthropic foundations. By contrast, fisheries biologists traditionally work for government agencies, like the National Marine Fisheries Service at the Commerce Department, or as consultants to the fishing industry, and their chief goal is to protect fisheries and the fishermen they employ. I myself was trained as a fisheries biologist in Germany, and, while they would dispute this, the agencies for which many of my former classmates work clearly have been captured by the industry they are supposed to regulate. Thus, there are fisheries scientists who, for example, write that cod have "recovered" or even "doubled" their numbers when, in fact, they have increased merely from 1 percent to 2 percent of their original abundance in the 1950s.

Yet, despite their different interests and priorities--and despite their disagreements on the "end of fish"--marine ecologists and fisheries scientists both want there to be more fish in the oceans. Partly, this is because both are scientists, who are expected to concede when confronted with strong evidence. And, in the case of fisheries, as with global warming, the evidence is overwhelming: Stocks are declining in most parts of the world. And, ultimately, the important rift is not between these two groups of scientists, but between the public, which owns the sea’s resources, and the fishing-industrial complex, which needs fresh capital for its Ponzi scheme. The difficulty lies in forcing the fishing-industrial complex to catch fewer fish so that populations can rebuild.

It is essential that we do so as quickly as possible because the consequences of an end to fish are frightful. To some Western nations, an end to fish might simply seem like a culinary catastrophe, but for 400 million people in developing nations, particularly in poor African and South Asian countries, fish are the main source of animal protein. What’s more, fisheries are a major source of livelihood for hundreds of million of people. A recent World Bank report found that the income of the world’s 30 million small-scale fisheries is shrinking. The decrease in catch has also dealt a blow to a prime source of foreign-exchange earnings, on which impoverished countries, ranging from Senegal in West Africa to the Solomon Islands in the South Pacific, rely to support their imports of staples such as rice.

And, of course, the end of fish would disrupt marine ecosystems to an extent that we are only now beginning to appreciate. Thus, the removal of small fish in the Mediterranean to fatten bluefin tuna in pens is causing the "common" dolphin to become exceedingly rare in some areas, with local extinction probable. Other marine mammals and seabirds are similarly affected in various parts of the world. Moreover, the removal of top predators from marine ecosystems has effects that cascade down, leading to the increase of jellyfish and other gelatinous zooplankton and to the gradual erosion of the food web within which fish populations are embedded. This is what happened off the coast of southwestern Africa, where an upwelling ecosystem similar to that off California, previously dominated by fish such as hake and sardines, has become overrun by millions of tons of jellyfish.

Jellyfish population outbursts are also becoming more frequent in the northern Gulf of Mexico, where the fertilizer-laden runoff from the Mississippi River fuels uncontrolled algae blooms. The dead algae then fall to a sea bottom from which shrimp trawling has raked all animals capable of feeding on them, and so they rot, causing Massachusetts-sized "dead zones." Similar phenomena--which only jellyfish seem to enjoy--are occurring throughout the world, from the Baltic Sea to the Chesapeake Bay, and from the Black Sea in southeastern Europe to the Bohai Sea in northeastern China. Our oceans, having nourished us since the beginning of the human species some 150,000 years ago, are now turning against us, becoming angry opponents.

That dynamic will only grow more antagonistic as the oceans become warmer and more acidic because of climate change. Fish are expected to suffer mightily from global warming, making it essential that we preserve as great a number of fish and of fish species as possible, so that those which are able to adapt are around to evolve and propagate the next incarnations of marine life. In fact, new evidence tentatively suggests that large quantities of fish biomass could actually help attenuate ocean acidification. In other words, fish could help save us from the worst consequences of our own folly--yet we are killing them off. The jellyfish-ridden waters we’re seeing now may be only the first scene in a watery horror show.

To halt this slide toward a marine dystopia, government intervention is required. Regulatory agencies must impose quotas on the amount of fish caught in any given year, and the way they structure such quotas is very important. For example, simply permitting all fisheries to catch a given aggregate number of fish annually results in a wasteful build-up of fleets and vessels as fisheries race to grab as large a share of the quota as possible before their competitors do. Such a system may protect the fish, but it is economically disastrous: The entire annual quota is usually landed in a short period, leading to temporary oversupply, which, in turn, leads to low prices. The alternative is to limit the number of fishermen, with those retaining "access privileges" being able to catch their assigned fraction of the overall quota whenever they want, without competing against other fishermen. Such individual quotas lead to less overall fishing effort and, hence, bigger profit in the fishery.

Unfortunately, most fisheries economists, fixated solely on corporate short-term profits, argue that, for such a system to work, access privileges must (a) be handed out for free, (b) be held in perpetuity, and (c) be transferrable (i.e., sellable and buyable like any other commodity). They call this construct "fishing rights" or "individual transferable quotas." However, there is no reason why a government should not auction off quotas with access privileges. The highest bidder would secure the right to a certain percentage of the quota, with society as a whole benefiting from providing private access to a public resource. This would be similar to ranchers paying--as they do--for the privilege to graze their cattle on federal lands. Grazing "rights" on the other hand, would simply give ownership of public land to ranchers, which is something few would consider.

Some Pollyannas believe that aquaculture, or fish farming, can ensure the health of stocks without government action--a notion supposedly buttressed by FAO statistics showing such rapid growth in aquaculture that more than 40 percent of all "seafood" consumed now comes from farms. The problem with this argument is that China reports about 68 percent of the world’s aquaculture production, and the FAO, which has been burned by inflated Chinese statistics before, expresses doubt about its stated production and growth rates. Outside of China--where most farmed fish are freshwater vegetarians, such as carp--aquaculture produces predominately carnivorous marine fish, like salmon, which are fed not only vegetal ingredients, but also fishmeal and fish oil, which are obtained by grinding up herring, mackerel, and sardines caught by "reduction fisheries." Carnivore farming, which requires three to four pounds of smaller fish to produce one pound of a larger one, thus robs Peter to pay Paul. Aquaculture in the West produces a luxury product in global terms. To expect aquaculture to ensure that fish remain available--or, at least, to expect carnivore farming to solve the problem posed by diminishing catches from fisheries--would be akin to expecting that Enzo Ferrari’s cars can solve gridlock in Los Angeles.

Others believe that fish populations can be rebuilt through consumer awareness campaigns that encourage buyers to make prudent choices. One such approach is to label seafood from fisheries deemed sustainable. In Europe, for example, consumers can look for the logo of the Marine Stewardship Council (MSC), a nonprofit started by the World Wildlife Fund and Unilever, which has a large fish-trading division. At first, the MSC certified only small-scale fisheries, but lately, it has given its seal of approval to large, controversial companies. Indeed, it has begun to measure its success by the percentage of the world catch that it certifies. Encouraged by a Walton Foundation grant and Wal-Mart’s goal of selling only certified fish, the MSC is actually considering certifying reduction fisheries, with the consequence that Wal-Mart, for example, will be able to sell farmed salmon shining with the ersatz glow of sustainability. (Given the devastating pollution, diseases, and parasite infestations that have plagued salmon farms in Chile, Canada, and other countries, this "Wal-Mart strategy" will, in the long term, make the MSC complicit to a giant scam.)

The other market-based initiative, prevalent in the United States, distributes wallet-size cards designed to steer consumers toward fish that the group issuing the cards deems to have been caught sustainably. Their success is considerable if measured by the millions of cards given away, for example, by the Monterey Bay Aquarium, but assessing the impact on the fisheries is difficult. For one thing, the multitude of such cards leads to contradictions and confusion, as the same fish are assessed differently by different organizations. For example, ahi tuna is rated as "safe," "questionable," and "avoid" on the wallet cards issued by three U.S. nonprofits. A bigger issue, however, is that these cards generate only "horizontal" pressure--that is, a group of restaurant-goers might chide each other for ordering the cod filet or might ask the overworked student who served them where the fish came from, but this pressure does not reach wholesalers, fleet operators, or supermarket chains. "Vertical" pressure exerted by environmental NGOs on such decision-makers is far more effective. But, if that’s true, why not directly pressure the government and legislators, since they are the ones who regulate the fisheries?

The truth is that governments are the only entities that can prevent the end of fish. For one thing, once freed from their allegiance to the fishing-industrial complex, they are the ones with the research infrastructure capable of prudently managing fisheries. For another, it is they who provide the billions of dollars in annual subsidies that allow the fisheries to persist despite the lousy economics of the industry. Reducing these subsidies would allow fish populations to rebuild, and nearly all fisheries scientists agree that the billions of dollars in harmful, capacityenhancing subsidies must be phased out. Finally, only governments can zone the marine environment, identifying certain areas where fishing will be tolerated and others where it will not. In fact, all maritime countries will have to regulate their exclusive economic zones (the 200-mile boundary areas established by the U.N. Law of the Sea Treaty within which a nation has the sole right to fish). The United States has the largest exclusive economic zone in the world, and it has taken important first steps in protecting its resources, notably in the northwest Hawaiian islands. Creating, or re-creating, un-fished areas within which fish populations can regenerate is the only opportunity we have to repair the damage done to them.

There is no need for an end to fish, or to fishing for that matter. But there is an urgent need for governments to free themselves from the fishing-industrial complex and its Ponzi scheme, to stop subsidizing the fishing-industrial complex and awarding it fishing rights, when it should in fact pay for the privilege to fish. If we can do this, then we will have fish forever.

They don't care about us

World War Three Anybody?

When Alan Greenspan predicted three percent economic growth showing up in the reported figures for the third quarter of 2009, did he mean executive compensation packages? Maybe the lesson here is: don't ask a crackhead to predict the future supply of crack. Greenspan's greatest success may be to drive economics into such disrepute that it will be cut loose from the universities and only be taught by mail order or internet subscription from the same outfits that offer PhD's in astrology. That is, before the universities themselves go broke.

The predicament that the USA finds itself will not be "solved" at the scale of operation that we're accustomed to, and we should just stop wasting precious time and dwindling resources in the idle hope that it will be. The failure to recognize this dynamic is the most impressive part of the meltdown. The only thing that the federal government is likely to prove in the process is the ineffectiveness of its actions as applied to any of the raging current problems from the killing burden of hyper-debt to the brushfires of geopolitics. Congress will only make the health care system more complex. Both congress and President Obama will do everything possible to keep housing prices unaffordable -- in a quixotic effort to protect the collateral of the big banks. Capital will continue to vanish in the black hole of default.

Something's got to give in the remaining three months of 2009. My guess is that attention will shift overseas for a while. This will not be due, as many probably think, to a cynical effort by the government to divert attention from the financial fiasco, but because the intrinsic tensions in the Middle East are reaching the snapping point. Iran is being called out on its nuclear program. If, from the start, it had just maintained the need for electric generating power in the face of dwindling fossil fuel reserves, they might have gone unchallenged. As it happened, though, the elected leader of Iran made too many intemperate remarks about wiping other nations off the face of the earth, and this has only prompted the leaders of other nations to take his remarks at face value and presume that Iran's nuclear program was devoted to armaments, not electric power generation.

So, now the USA has picked up the gauntlet. If Iran doesn't act to demonstrate the de-activation of its bomb-making capacity, then the USA will try to impose sanctions depriving Iran of necessary imported supplies. (Iran actually imports gasoline, due to inadequate refineries.) For sanctions to be effective, support will be required by other nations, including Iran's chief gasoline supplier, China. What a delicate calculus this will be! I rather imagine that China would not like to see the Middle East blow up. I'm not so sure about the nations of the Middle East though, or at least major parties in certain nations. The rulers of Saudi Arabia would probably enjoy seeing Iran get into big trouble, since Iran is Saudi Arabia's most active antagonist, working tirelessly to destabilize the Kingdom. Al Qaeda interests dispersed in many nations would certainly cheer any mayhem. The Taliban would love anything that takes the spotlight off them in Afghanistan. The Russians are conflicted between the wish to enhance their own leverage in world affairs and their need to discipline Islamic maniacs along their own borders. Europe is probably scared to death of anything that might threaten their energy lifeline. Pakistan is too tormented to have a position, but its radical Islamist factions are probably on the side of disorder -- as the best remedy for the status quo. If any of that spills over on India, as in the Mumbai bombing, then that flashpoint could turn to conflagration very quickly. We forget about Turkey, which was the hegemonic player in the region for centuries until its swift decline after 1914, but it has potent military capability and very mixed feelings about the the Jihad to ruin the West (since it is partly of the West). And finally there is Israel, the object of Iran's intemperate public statements.

This is a dangerous situation. I'm not so sure that Israel could launch an effective attack on Iran's nuclear infrastructure, but it might try anyway, especially if a US-backed sanctions effort fails to coalesce quickly. I'm not sure Israel would seek permission from the US to do this, though the US would certainly be tasked with defending the shipping lanes in the Persian Gulf. Iran might succeed in sinking more than a couple of US ships-of-the-line with sunburn missles and other toys, and this would lead to the bigger danger of oil supplies being choked off to the rest of the world. The US air response would be impressive, but possibly not effective against hardened targets. The leaders of Iran might exult even if the Iranian people were swept into a maelstrom. I imagine that what followed would be a very extravagant military frenzy amounting to World War Three, with European air forces and navies dragged in, with Hezbollah and Syria striking back at Israel, India and Pakistan possibly incinerating each other, and mayhem galore among the bystanders in Iraq, Egypt, Saudi Arabia, and Afghanistan. There could easily be internal mischief in the UK, France, and Germany from angry immigrant populations, and "sleepers" could work some overdue hoodoo in the USA. I don't know what Turkey would do, but it could be the biggest beneficiary of a bad regional meltdown, providing the only effective governance what remains in the region. China and Japan would probably just gape at the spectacle in wonder and nausea from the sidelines as they saw their energy supplies for years-to-come go up in flames.

The G-20 nations would be crippled as global oil supplies were choked off indefinitely. And if anyone -- Iran, or its friends inside the Kingdom -- managed to pull off a stunt such as blowing up the Ras Tanura oil terminal -- then a darkness will spread across places that were used to being lighted and they will stay dark a long time.

I don't know if any of this will come to pass, but as I said, tensions have reached a breaking point, including the greater tensions of history, which seem to require periodic release no matter how poignant the Pete Seegar songs are. It is perhaps, just another prime symptom of "overshoot," the world's way of shedding some of the toxic organisms that are making it so unhappy -- Gaia in a really bad mood.

If nothing develops along these lines on the geopolitical scene, the USA is still stuck in its predicament of trying desperately to maintain an overscaled living arrangement, with no coherent public discussion of downscaling, re-scaling, or re-arranging things. My guess is that this kind of restructuring only occurs when all other options have been exhausted. The last time the USA found itself in an intractable economic morass, World War Two came along and it made things all better here (after considerable sacrifice for us and catastrophe elsewhere). After World War Two, we ruled the world for a couple of generations. The outcome of World War Three would not be so favorable for us. At the very least, it would leave us attempting to run things on about one-quarter of the oil we're used to. That does not suggest a seamless transition between how we behave now and how the future will require us to behave differently.

- J. Kunstler
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Elephant anyone?

Marketing in a Small Town

Interview with D. Orlov:

DD: In the American (and not just American) media, one can periodically read about the barbaric Sharia law, according to which women can be stoned to death. Or about an eight-year-old Saudi girl who was sold into marriage to settle her family's debts. There are entire Web sites devoted to "stupid laws", especially in the southern states, according to which, for instance, it is illegal to have sex completely naked. However, few can see the absurdity and the barbarous nature of many U.S. laws on intellectual property, according to which one can be fined ten thousand dollars for downloading a song or a movie from a torrent (China, Russia and the Ukraine, where piracy flourishes, are considered uncivilized and legally underdeveloped). You once said (albeit in a different context), that those who pay for software are fools. It would be nice to know your opinion of the system of intellectual rights specifically and the U.S. legal system in general. Does it do more harm or good, and why are you convinced that the "legal-police-prison" complex will be one of the first victims of collapse?

DO: One of the main foundational insights of the Anglo-Saxon civilization (if can be honored by the use of such a bombastic term) is that unenlightened people are easier to control than enlightened ones. The effects of this can be seen in the fact that in all English-speaking countries there is a very stable layer of low-class people (the so called "underclass") and, except for a bit of lip service, it does not occur to anyone to remedy this situation. It can also be seen in the eagerness of the elites to impersonate British aristocracy by copying their strange habits and customs, as well as in the worship of the British throne by members of the general public, even in countries which shed considerable blood to win their independence from the empire. This can also be seen in the education system, which, except for the most privileged, strives to teach a trade, rules of conduct and obedience, rather than to expand the mental horizon. Not long ago, the acquisition of certain "dangerous" kinds of knowledge was even banned: for example, sailors on British vessels were forbidden to study navigation, and only officers were allowed to know how to chart a course or to pilot a vessel into a harbor. The same tendency can be observed in the Anglo-Saxon system of justice: the language of lawyers bears little resemblance to normal English, and everything is done to ensure that members of the public are not in a position to understand the meaning of not just the laws, but even of the contracts and agreements which they are forced to sign in order to gain access to employment, housing or medical care. Inconvenient laws are studiously ignored. For example, in the US court system, a jury has the right of nullification: they have the right to reject any law as invalid and to acquit the defendant regardless of his "guilt" under a law they see as unjust. So here's a proven method: If you are summoned as a juror, and you do not wish to serve, all you need to do is write the words "I believe in jury nullification" on the form, and the court will send you home at once! In the area of intellectual property rights, although the original copyright system protected the rights of inventors and authors, now it has become a way to ration access to information depending on one's ability to pay. All countries have to participate in this system to some extent in order to be able to defend and protect their own interests, but they should not be too zealous in the implementation of these laws, which are often inconsistent with the public interest. In the current situation, any attempt by the United States to enforce their system of intellectual property rights against citizens of other countries can be successfully ignored, if correctly assisted by the local governments. As for the legal-police-prison complex in the U.S., there is no longer any need to make predictions: the gaps in the budgets of many states are such that they are forced to prematurely release hundreds of thousands of prisoners. Already in several of the most depressed cities in the U.S. murders are not prosecuted due to lack of police resources. All of this is all starting to look more like ordinary lawlessness than like a system of legal terror.

DD: Recently on CNN there was a report about the U.S. mission to the moon. The Indians are planning to land there in 2020, the Russians and Americans in 2025, and the Chinese in 2030. I think that the popularity of conspiracy theories about the staging of those events is that we find it hard to imagine that we can not repeat the achievements of three decades ago without a huge effort. Meanwhile, examples similar to the lunar program are starting to occur more and more frequently. Experts say that Russia has lost the ability to produce modern weapons on a large scale for quite trivial reasons, such as lack of sufficiently skilled metalworkers, because the system of training them has collapsed. How justified are we in fearing that we (the world in general, not just Russia) are starting to slip back in time in terms of technology?

DO: In the end, the history of human trips to space will engender new myths: the primitive idols of the future will not be winged, but will sit astride rockets dressed in spacesuits. These trips were only possible thanks to large-scale industrial systems based on the use of fossil hydrocarbons, reserves which have already been exhausted, on average, about half. It will not be possible to exhaust them completely: the technological rollback has already started. It starts long before a particular resource is completely exhausted. To maintain homeostatic equilibrium, an industrial system requires a continuous flow of investment, and in order for this to happen capital must continually be created. If, say, the profitability of a coal mine is inversely proportional to shaft depth, it is enough to get to a depth at which the income is not sufficient to continue to update equipment, and the mine will close, regardless of how much coal there is left in it. But such a rational approach is rarely taken. Rather than make a difficult but timely decision, everyone begins to economize on safety, defer repairs, take on debt and so on. Periodically, the idea comes up that the situation can be improved if only everyone would show more zeal or ingenuity. We certainly all need some level of technology, and we all ought to stop to think hard which technologies can be sustained at a continually decreasing level of extraction of various natural resources. Instantly the thought occurs that aerospace technologies will not make it onto this list.

DD: How important are science and technology in modern society, as an ideology, or, if you like, a religion? Why do people prefer to believe that the problem will be solved by hanging solar panels on the roof and buying an electric car, although obviously a more simple solution would be to change the lifestyle so that one's dependence on the car is minimal?

DO: I have thought about this long and hard, and came to the conclusion that it all comes down to a very basic question: "How to please a girl?" After all, any modern, progressive, educated and attractive person begins to scoff if you take away her flush toilet and substitute a bucket, or if she has to go shopping leading a donkey, or if, instead of a shower, she is invited to go and stoke a sauna. From time immemorial status in society has been determined by access to luxury goods. As society becomes richer, luxuries turn into necessities. And when society starts to grow poorer again, it turns out that there is no going back. That is, there is a way back, but it is blocked by the innate tendencies of our clever species. My wife and I spent two years living aboard a very attractive and practical yacht slightly less than 10 meters in length at the waterline, and although the wife understands everything very well, even she cannot stop herself from casting a sideways glance when a yacht like Abramovich's walks past us, and from making some comment, like "Oh, now this I understand, this is the real thing!" And there is no point in explaining to her that what we have here on board is a very high level of civilization, while Abramovich is just an ordinary consumer. It is very hard, gentlemen, to change the lifestyle, but not change the woman! If someone succeeds in this, then he is a hero and a genius, and we should all learn from him. In the meantime, we are going to live in an apartment, and put the boat on the hard, and install all sorts of solar panels, water heaters, and other technological junk.

DD: There are quite a number of people who view the current crisis not as financial or economic, but as a moral crisis and a crisis of rationality. We have developed an entire system, or even multiple systems, that require you to constantly lie and deceive in order to make it into the upper middle class. I mean all of these brokers, bankers, brand managers and so on. This same "plague" has afflicted the academic community, where economic theories are completely independent of reality and common sense. Even in everyday life there is a huge rollback of rationality - otherwise a film like "The Secret", Tony Robbins, "positive thinking" and training for "personal growth" would never have become so popular. What's next - a new renaissance or a new Dark Age? How strong is the relationship between the crisis and questions of world-view, faith and culture?

DO: I do not see a fundamental difference between lying in financial and economic realms and lying as a moral and rational matter. Financial and economic lies are that you can endlessly stimulate economic growth, despite the fact that the natural resources and the soil are wearing out, that forests are being cut down, that the environment and the climate have been disrupted, and that investments in high technology do not pay. The moral and rational lies are that economic growth is a good thing, indeed, a necessary thing, otherwise all will be very bad. In the West these lies are taught well at prestigious universities like Harvard, and countries wishing to participate in the global economy have to recruit their graduates to help their central banks and finance ministries to lie on their behalf. Putting it politely, the ability to lie is the ability to pretend. And now our credentialed liars are all pretending that the crisis has ended. Has it really, or is this just the end of the first turn of the crisis spiral, with no end in sight? After all, whether or not you lie, you cannot run away from reality. I do not know whether the coming age will be Dark Age, but I am sure that it will be rather dim. After all, the art of lying has displaced a lot of useful knowledge.

DD: In Ireland, you talked about the fact that modern methods of warfare are economically inefficient. That is, you can equip twenty thousand rebels with Kalashnikov rifles (AK-47) and grenades, and they will successfully resist a army that uses tanks and aircraft, that cost tens of millions of dollars. However, guerrilla actions are effective only for defensive purposes, and not conquest. Theoretically, the crisis could lead to Americans being forced to curtail their activities in Iraq and Afghanistan. The US really are the main aggressors in the world now, but I have major doubts that, as soon as the aircraft carriers are mothballed, we will live in peace and harmony, all will lay down their arms and begin to "work the earth."

DO: People fight for all sorts of reasons, and I am sure that military actions in some parts of the world will continue after the disappearance of US from the global battlefield. There is no doubt that Kalashnikovs and grenades have given the poor throughout the world to the ability to bravely defend themselves against the most technologically equipped army. Wars either pay off or the aggressor goes bankrupt, and wars against today's poor but very successful guerrillas pay off much worse than wars against rich, peaceful and defenseless nations (of which there are none left). Americans are still fighting, because they are fighting on credit, but when at last their funding runs out, I suspect that this whole style of war will finally recede into the past. Certainly, there will be plenty of small and large-scale slaughter, particularly in heavily overpopulated and impoverished countries, but for this even Kalashnikovs are not needed. For example, in Rwanda the Hutu tribe did an excellent job with machetes, while the Khmer Rouge in Cambodia quite successfully strangled a lot of people with plastic bags. I do not know how many more countries will follow such a path, but in general I think that, thanks to the successes of modern guerrilla practice, the profitability of military action will continue to decrease.