Miserable Pursuits

As I write this, I am on the train to Washington, to attend a conference sponsored by the Community Action Partnership on "The New Reality: Preparing Poor America for Harder Times Ahead." The agenda will include in-depth discussions of employment, food, housing, health care, security, education, transportation, and even the somewhat touchy-feely subjects of community cohesion, communication, and, last but not least, right before the cocktail hour, culture. The recommendations will be rolled into a report and the conclusions will be presented at CAP's annual conference later this month.

Poor America would conceivably be a place of few good jobs, nasty food, dilapidated housing, unaffordable health care, oppressive yet ineffectual security, education programs replete with dinosaur-riding Jesuses, transportation networks composed of run-down pickup trucks and potholed roads, not much more community cohesion than there is now, and communication still dominated by the corporate media.

But then what about that strange little topic showing up at the very bottom of the list—culture? We'd expect the poor to be uncultivated, unlettered and uncouth, but beyond that, shouldn't we expect a culture of poverty to evolve, as an adaptation to being poor? To an anthropologist, culture is an adaptive mechanism that evolves in order to enable humans to survive and thrive in a wide variety of environments. To others, it may be a matter of dancing a jig or of strumming an instrument while crooning. To me, culture is, first and foremost, a matter of literature.

The Russian author Eduard Limonov wrote of his experiences with poverty in America. To his joy, he discovered that he could supplement his cash earnings with public assistance. But he also quickly discovered that he had to keep this joy well hidden when showing up to collect his free money. It is a curious fact that in America public assistance is only made available to the miserable and the downtrodden, not to those who are in need of some free money but are otherwise perfectly content. Although it is just as possible to be poor and happy in America as anywhere else, here one must make a choice: to avoid any number of unpleasant situations, one must be careful to hide either the fact that one is poor, or the fact that one is happy. If free public money is to be obtained, then only the latter choice remains.

It is another curious fact that vast numbers of Americans, both rich and poor, would regard Limonov's behavior as nothing short of despicable: a foreign author living in America on public assistance while also earning cash! It seems reasonable that the rich should feel that way; if the poor can't be made miserable, then what exactly is the point of being rich? But why should the poor particularly care? Another cultural peculiarity: what dismays them is not the misappropriation of public funds. Tell them about the billions wasted on useless military projects, and they will reply with a yawn that this is just business as usual. But tell them that somewhere some poor person is eating a free lunch, and they will instantly wax indignant. Amazingly, Americans are great believers in Lenin's revolutionary dictum: "He who does not work, does not eat!" One of the rudest questions you might hear from an American is "What do you do for a living?" The only proper response is "Excuse me?" followed by a self-satisfied smirk and a stony silence. Then they assume that you are independently wealthy and grovel shamefully.

Most shockingly, there are many poor Americans who are too proud to accept public assistance in spite of their obvious need for it. Most Russians would regard such a stance as absurd: which part of "free money" don't these poor idiots like—the fact that it's money, or the fact that it's free? Some Russians who are living in the US and, in trying to fit in to American society, have internalized a large dose of the local hypocrisy, might claim otherwise, but even they, in their less hypocritical moments, will concede that it is downright foolish to turn down free money. And rest assured, they will mop up every last penny of it. Mother Russia didn't raise any dummies.

But let us not blame the victim. What causes these poor souls to leave money on the table is just this: they have been brainwashed. The mass media, most notably television and advertising, are managed by the well-to-do, and incessantly hammer home the message that hard work and self-sufficiency are virtuous while demonizing the idle and the poor. The same people who have been shipping American jobs to China and to India in order to enhance their profits want it to be generally understood that the resulting misery is entirely the fault of the miserable. And while the role of the pecuniary motive may be significant, let us not neglect to mention the important fact that producing mass misery is a high-priority objective in and of itself.

You see, these are very difficult times to be rich. It used to be that having a million dollars made you a millionaire—but not any more! Now, to be perfectly safe and completely insulated from economic reality you need at least ten million, if not more, and the more you have, the more unnerving become the wild undulations of the financial markets and the dire prognostications of the experts. It is getting to the point that you can make a plausible guess at a person's net worth based on how nervous and miserable they look.

Recently, I had a chance to see this misery on display. We spent a week vacationing on outer Cape Cod. We sailed there and back (the wind is free) and anchored while there (the municipal moorings are quite affordable). We rowed ourselves ashore and back in our home-made plywood dink and bicycled around picking edible mushrooms along the bike path. This time of year, this part of Massachusetts is overrun by stampedes of shiny late-model SUVs with New York and New Jersey license plates. They are driven by various subspecies of the middle-aged well-to-do American Office Ogre—the lawyer, the doctor, the dentist, the banker, the lobbyist and the corporate businessman—the people who are attempting to run off with all the loot. The majestic scenery is somewhat spoiled by these surly, scowling, raspy-voiced ogres and their flabby, overmedicated wives with voices like an unoiled hinge. When not aimlessly driving around, they sit in upscale restaurants, toying with their food and gossiping menacingly. They have long forgotten what it means to be happy and carefree, and their labored attempts at feigning enjoyment are painful to watch. You can be sure that the sight of poor but happy people makes them quite livid.

I am not gloating. I do feel sorry for these poor rich people, and I even have good news for them: their condition is far from incurable. I know people who went prematurely gray, lost weight and often woke up screaming while watching their last $500,000 in savings dwindle to nothing, buried under a pile of debt, but once the cash is burned off and the dour creditors abscond with what remains of the property, there is much less for them to worry about, and this gives them a chance to reevaluate what is important, what is essential, and what gives them pleasure. And so, where there is sorrow there is also joy, and we need not grieve for the poor rich people excessively, because the way things are going their problems are likely to resolve themselves spontaneously. Keep in mind that, compared to the formidable, often insurmountable challenges faced by those who attempt to escape poverty, becoming downwardly mobile is as easy as falling off a log, and, with a bit of foresight, can be done in comfort and style.

I have good news for America's poor as well. Although they are exceedingly unlikely to ever become any richer, they are, in fact, quite rich enough already. Recently I heard a story on NPR about a poor family that went around looking for discounted food items at various groceries and stopping at the food pantry—in their own private minivan! And so here is a poor family that owns what in many parts of the world would amount to a bus company! When they couldn't find enough discounted foods to buy, they still had enough to feed their children, while the adults skipped meals. This is healthy: hunger is symptomatic of a good appetite, and, given the excessive girth of most Americans, periodic fasting is a prudent choice. What's more, they sounded reasonably happy about their lot in life.

And so, a poor but happy and carefree future may yet await a great many of us, both idle rich and idle poor—one happy though rather impoverished family. But in order to achieve that we would have to change the culture. Let it be known that free lunch is a very good thing indeed, no mater who's eating it or why, and never mind that Lenin said that "He who does not work, does not eat." And while we are at it, let's also dispense with the hackneyed adage that "Work will set you free" (Arbeit Macht Frei) which the Nazis liked to set in wrought iron atop the gates of their concentration camps. Let us consign the communists and the fascists and the capitalists to the proverbial scrapheap of history! Let us instead gratuitously quote Jesus: "Behold the lilies of the field, how they grow. They labor not, neither spin. And yet for all that I say unto you, that even Solomon in all his royalty, was not arrayed like unto one of these... Therefore take no thought saying: What shall we eat? or What shall we drink? or Wherewith shall we be clothed? ... Care not therefore for the day following. For the day following shall care for itself. Each day's trouble is sufficient for the same self day." Amen.

-- D. Orlov

The Purpose Behind Engineered Economic Collapse

By Giordano Bruno

Neithercorp Press – 08/17/2010

“From now on, depressions will be scientifically created.” — Congressman Charles A. Lindbergh Sr. , 1913

Everyone loves money. Even people like myself who abhor the abuse of money and commerce, who understand the fraudulent nature of the system we live in, still work hard and save so that we might attain a sense of stability within that system. Many people see money as a focal point to their existence. But is it really money that they are after, or is it something else entirely? In truth, money represents ‘security’ in the minds of the masses. Money affords us the ability to survive, and the more of it we have, the safer we all feel. Because we subconsciously associate the extension of our very life with the variable health of the economic structure in which we live, we tend to become unwitting devotees to its continued existence, even if it is corrupt and condemned to failure. We gullibly deny the system or the currency that supports it is doomed to the contrary of all evidence because, even though it has beaten us bloody, we have never known anything else.

In light of this entrenched way of perceiving things, especially in the U.S., it is difficult enough to convince some people that the economy is in fact not providing the security they desire, but is actually destroying their future completely. To explain to them that this is deliberate, that the economy is designed to self-destruct, that is another prospect altogether.

Many people hit a proverbial wall on this issue because they simply cannot fathom that certain groups of men (globalists and central bankers) view money and economy in completely different terms than they do. The average American lives within a tiny box when it comes to the mechanics and motivations of finance. They think that their monetary desires and drives are exactly the same as a globalist’s. But, what they don’t realize is that the box they think in was BUILT by globalists. This is why the actions of big banks and the decisions of our mostly corporate establishment run government seem so insane in the face of common sense. We try to rationalize their behavior as “idiocy”, but the reality is that their goals are highly deliberate and so far outside what we have been taught to expect that some of us lack a point of reference. If you cannot see the endgame, you will not understand the steps taken to reach it until it is too late.

In the past we have covered numerous instances in which global bankers have admitted to fraud on a massive scale, fraud which is now crushing our already fragile economy. We have covered the private Federal Reserve and how it knowingly facilitated the creation of the housing bubble, as well as how it is now inflating a Treasury bubble which is soon to implode. We have covered Goldman Sachs and its efforts to promote and sell toxic derivatives all over the world while at the same time betting against those derivatives on the open market. We have covered the manipulation of gold and silver markets by companies like JP Morgan, which have recently been exposed by whistleblowers and GATA investigations. And, most importantly, we have executed in-depth analysis on the growing weakness of the U.S. dollar in preparation for severe currency devaluation. These revelations raise questions, which is natural, but they also illicit misconceptions and reckless knee-jerk reactions, especially when broaching the fact that the illegal strategies of international banks are part of a greater agenda.

Below, we will examine some of the most common narrow minded responses to the issue of engineered economic collapse, as well as why people think the way they do when the “semi-sacred” subject of money is involved…

1. The economy is too complex to be controlled by just a handful of people…

This response often comes from people who make presumptions on economics, rather than actually educating themselves on how the system works. From the outside looking in, the world of finance appears chaotic; a mixture of mathematical and legal standards swirling in a void of mass psychology. Many Americans are either frightened off by the seemingly complicated field of study, or they find it rather boring and not worth their time. This, however, does not stop them from assuming that they know how money works.

The problem is that just because a person participates in his economy daily, it does not mean he has any understanding of how it operates. Many watch television on a daily basis, but few have any idea how the picture actually gets onto the screen, or how to fix a television once it is broken. Sadly, our egocentric culture has led a substantial portion of the public to imagine that they are experts on EVERYTHING, and thus, true researchers in the fields of economics and globalism get reactions like the one above constantly.

At bottom, once all the quasi-technical biz-babble used by mainstream talking heads is removed from the equation, economics is rather simple. Supply and Demand will always be at the center of any and every economy, regardless of the political atmosphere it exists in. These two fundamental factors can be manipulated to a point, by the creation of artificial supply, or the conjuring of false demand. This is achieved in many ways by global bankers, but primarily through domination of the issuance of currency, the ability to change interest rates at will, as well as the ability to inject or remove incredible sums of money from any market.

A perfect example is the suppression of silver prices by JP Morgan:

http://www.zerohedge.com/article/whistleblower-exposes-jp-morgans-silver-manipulation-scheme

Gold and silver represent competing currencies to the fiat dollars created by the Federal Reserve, and suppressing the value of these commodities helps to ensure that the public will never see them as a viable alternative to paper assets. JP Morgan, who along with other international banks has the ability to throw around massive quantities of capital wherever they please, suppresses the value of physical silver by issuing paper securities for silver that doesn’t actually exist (creating an artificially high supply), and naked short selling silver markets to drive them lower (creating the false impression of low demand).

Another good example of economic manipulation is the private Federal Reserve’s strategy during the 90’s under Alan Greenspan to artificially lower interest rates, allowing banks to issue credit at historical levels for over a decade. Linked below is an article from Ron Paul’s ‘Texas Straight Talk’ dated March, 2007, before the housing market even began its full swan-dive. In it, he discusses the Federal Reserve’s direct role in the creation of the housing bubble:

http://www.house.gov/paul/tst/tst2007/tst031907.htm

Men like Ron Paul, Peter Schiff, Gerald Celente, Jim Rogers, and many others were able to predict long before hand that the Federal Reserve’s actions were creating an explosive mortgage and credit bubble, yet, we are supposed to believe that the Federal Reserve had “no idea” that their actions would result in a debt implosion?

Catherine Austin Fitts, former Assistant Secretary of Housing and Commissioner of the U.S. Department of Housing and Urban Development under the first Bush Administration stated conversely that the mortgage bubble was absolutely not an accident, and that she had witnessed outright and deliberate fraud on the part of the U.S. government and the Federal Reserve Bank in creating the bubble. The fact that disturbed her most, however, was her discovery that only a small handful of international banks were responsible for the perpetuation of toxic mortgage debt, not just in America, but around the world:

http://solari.com/blog/?p=2058

Goldman Sachs (one of the primary globalist banks involved in the igniting of the debt crisis) was caught red-handed selling toxic derivatives to investors and governments all over the planet while at the same time betting against those derivatives on the market. Goldman even bet against mortgage securities the bank itself created!

http://www.businessweek.com/news/2010-04-26/goldman-sachs-bet-against-its-own-deals-senate-s-levin-says.html

This is sort of similar to a car maker selling vehicles without brake lines, then placing bets that their clients will crash and burn. Essentially, it is blatant and sociopathic fraud! Goldman’s actions directly contributed to credit collapses in numerous countries, including Greece, and here in the U.S.

The idea that global banks can turn the economy on and off like a light switch may be a stretch, but the vast majority of evidence shows that they do have the ability to shift the direction of markets to a point, as well as the ability to spur the growth of bubbles that eventually lead to recessions, depressions, and beyond. In fact, if one examines the U.S. economy from the inception of the Federal Reserve in 1913, they would find that the past century has been nothing but a series of engineered equity bubbles designed to slowly hobble, but not completely cripple, our financial system and our currency, at least, until recently. Like a steam locomotive on a collision course with a bottomless canyon, globalist banks can slow or speed up the pace of our descent, but the final destination never changes.

Now that we have established that market collapses can be created by a small handful of bankers and done knowingly, lets move on to the next most common sheeple-like talking point.

2. Yes, international banks triggered the meltdown, but the “greed of Capitalism” is truly to blame (i.e. Its all the Republican Party’s fault)…

First off, if you’re parroting the fiscal debate points of two dimensional socialist gatekeepers like Michael Moore, then you’re already hopelessly lost in the mind warping hedge maze of the false left/right paradigm. You should stay as far away as possible from adult conversions on economics, especially if you plan on associating the “greed” of capitalism and corporatism with the Republican Party alone.

News Flash! Barack Obama received far more in corporate campaign donations (including donations from BP and Exxon) than McCain did. Both Bush Jr. and Obama increased government spending to record levels meaning Neo-Conservatives are in no way “conservative” (as a true Republican is supposed to be). Obama has consistently surrounded himself with banksters and corporate lobbyists, including various hobgoblins from the bowels of Goldman Sachs. BOTH major parties are owned and operated by global banks. This is a cold hard undeniable truth of our political system. There is no way around it. Learn it, accept it as reality, and stop trying to blame one side or the other for problems that both sides created! If you cannot do this, your view of our cultural state of affairs will always be horribly skewed and your insights on our social problems will be utterly worthless.

While wannabe socialists desperately clamor to point fingers at the free market ideology as the cause of all our ills, the fact is that none of us have ever lived in a truly free market system. Since the inception of the Federal Reserve in 1913, all markets and even our own currency have become more and more vulnerable to manipulation by the banking elite. We have lived our entire lives in a rigged market, not a free market. To blame the very concept of Capitalism for our current dire circumstances is not only naïve, it is dangerous. Globalists would like nothing better than to promote the illusion that “too much freedom” led us to this disaster, and that severe controls must be put into place to ensure that it “never happens again”.

3. Global banks would never engineer the collapse of the U.S. economy or the Dollar. It makes them too much money…

This often heard song and dance ties in with the number two comment above. Again, the assumption is that the globalists only do what they do out of an “uncontrollable greed for money”. This perpetuates a couple fallacies. First, it encourages the false belief that the end concern for the Elite is the accumulation of riches. Central bankers have the ability to PRINT all the money they want from thin air! Remember, the Federal Reserve has never been subjected to a full audit, meaning they could easily create billions if not trillions without any oversight whatsoever. Greed for money, to them, is surely an absurd notion. What they do want, more than anything else, is social power. They want control over every living human being without question. All other concerns are secondary.

The next fallacy underlying the above argument is the conjecture that the U.S. economy is somehow indispensable to global banks. This is simply not so. Where we see the economy as an extension of our culture and ourselves, the Elites see financial systems as mere tools in the pursuit of a greater goal: World Government. Imagine you are building a house. Once your saw has fulfilled its intended role of cutting the wood, do you cling to it, or do you throw it aside and pick up a hammer? This is how globalists look at financial systems. They are perfectly willing to cast off the U.S. economy like a snake shedding skin if it brings them closer to attaining their ultimate aim.

The same goes for the Dollar. The Greenback may be the premier world reserve currency now, but that can and likely will change very quickly over the next couple years. The Dollar is a device that has outlived its usefulness as far as global bankers are concerned. The IMF has on several occasions made it clear that they eventually intend for the SDR (Special Drawing Rights) to replace the Dollar as the world reserve currency, and they have openly admitted that it will one day be established as a global currency. IMF press releases make this development sound far off and away, but SDR accumulations by countries around the world have risen dramatically in the past year. This along with other factors we will cover (namely China’s preparations to dump their U.S. T-bond holdings) show that IMF actions indicate they are preparing for a collapse of the Dollar now!

4. China would never dump U.S. Treasuries because it would hurt them as much as it hurts us…

The theory that China is somehow fused to the U.S. in a kind of symbiotic seesaw relationship that can never be broken is so ingrained among mainstream American financial analysts it simply will not die, regardless of how much contradictory evidence you show them. It really is like a mental disease which causes MSM pundits to go into involuntary Tourettic convulsions every time you mention the words “Treasury bond dump”. America and China are not conjoined twins, and one can survive without the other. We have covered the China issue over and over again, and I will not rehash all that evidence here. To lay it out simply: China has re-engineered its economy towards consumption and importation rather than relying on exports. The IMF has talked about this on many occasions with apparent excitement:

http://www.imf.org/external/np/tr/2010/tr072910c.htm

China has also finalized the ASEAN trading bloc which has combined export markets at least equal to that of the U.S. Meaning, China already has another place to send its exports besides America.

Most importantly, China must increase their currency’s value if their new consumer based system is to survive. Allowing the Yuan to rise sharply in value will revitalize the buying power of the Chinese populace making greater consumption possible. Indeed, China MUST dump their Treasury holdings and pump up the Yuan if they are to hold their economy together. And, the Federal Reserve has given China every reason to turn its back on Treasuries through never ending liquidity injections. This is not to say that a U.S. collapse will not affect them, it would negatively affect the entire world. However, China has positioned itself to survive, and perhaps even thrive with their economic expansions into Africa, and their new financial agreements with Germany.

Finally, the Chinese have been very forthcoming over the past week about plans to drop Treasuries. China has dumped over 7.7% of their U.S. T-Bond holdings since January, including the biggest T-bond dump on record this month. They have openly admitted to a plan to diversify away from the Dollar:

http://www.bloomberg.com/news/2010-08-17/china-cuts-long-term-treasury-holdings-by-most-ever-as-u-s-yields-decline.html

I’m always fascinated by those economists who vehemently deny China will ever turn away from the U.S. Dollar while they are doing so right in plain view. Are MSM analysts simply crazy? I don’t know, but it would explain a lot…

5. Sure, bankers took advantage, but it’s really the American people’s fault for getting suckered…

Yes, a sizable portion of the American public can be gut wrenchingly stupid. It hurts my head and my feelings to see people act so idiotic, it really does. The problem with this argument though is that when it is taken too far it becomes an attempt to divert blame away from the criminals and place it on the victims. If you knowingly leave your front door unlocked in a bad neighborhood and you find your home ransacked the next day, then you are partly responsible. But, we cannot forget that the neighborhood is “bad” in the first place because of the criminals, not the people who don’t lock their doors.

Just because global banks can sucker the public doesn’t mean they should, or that they cannot be judged for it. The crime ultimately rests on those men who made the conscious effort to destroy this country, and the blame rests with them as well. I see the attempt to parlay the economic collapse into the lap of the American people very often lately, especially from bankers who now claim that it’s the American public’s fault entirely. Why? Because they will not spend more, they will not take on more debt, they will not take on more risk, and they will not believe hard enough in the recovery that never was. Imagine a serial rapist behind a podium admonishing women for carrying pepper spray. It’s eerily similar…

6. Ok, maybe the banks are causing a collapse, but to say the government is helping them is just crazy conspiracy theory…

Why is it that the Federal Reserve has never been fully audited? Why is it that when Ron Paul tried to pass HR 1207 Federal Reserve Transparency Bill, it was muddled in committees and then eventually derailed? Why is it that banks like Goldman Sachs have been caught, yes caught, setting the stage for an economic implosion in this country, yet no government indictments have been formed to criminally prosecute them? Why are these men still roaming free like locusts to continue pillaging at will? Are we supposed to feel lucky that we get table scraps like Bernie Madoff behind bars while the Federal Reserve commits Ponzi fraud on a scale that dwarfs his?

Our government, both major parties, is owned lock stock and barrel. This is why there are no satisfactory answers for the questions posed above. Elements of the U.S. Government including almost every president since 1912 have not only turned a blind eye to Globalist activities, they have offered their full support to the bankers.

Nixon removed the Dollar from the gold standard in 1971 giving the Fed free reign to print as much fiat as they wished without limitations. In 1980 the Depository Institutions Deregulation and Monetary Control Act was passed placing all banks essentially under the rules of the Federal Reserve. The Glass-Steagall Act which kept investment banks and depository banks separate was repealed under a Republican majority in the Senate, and then finalized by Democratic President Bill Clinton in 1999. 30 years ago, banks that held your home mortgage were for the most part required to keep that mortgage until it was finally paid. But, a series of government decisions spanning that period and influenced by global banks allowed for the “securitization” of mortgages, leading to the creation of “derivatives”, which were then used by corporate mobsters like Goldman Sachs to destroy our financial system. Last, but certainly not least, both the Bush and Obama Administrations pressured Congress into passing highly unpopular bailout legislation which basically rewarded the same banks that created the credit crisis with trillions in taxpayer dollars (yes, the bailouts are now actually in the trillions, not billions). This led to the coining of the term “too big to fail” (or “too big to jail”). Our Government has been nothing but complicit in the banker takeover of this country. To debate otherwise is to invite embarrassment.

I haven’t even scratched the surface of government involvement in the collapse of our economy. Cases like the Savings and Loan crisis of the 1980’s led to serious prosecutions and jail time for more than 1100 criminal bankers, but this only caused the government to respond by changing investigation rules to make it even more difficult to catch the high level fraudsters in the act! Linked below is an interview between Max Keiser and bank regulator Prof. William K Black who outlines our government’s complicity in the breakdown of the country it is mandated to protect:

http://www.youtube.com/watch?v=5Bf5Frx1lZk

Elites destroy cultures to make way for new philosophies; their philosophies. Its not so much “conspiracy theory” as it is a widely admitted methodology. Corporate globalists believe in global government on their terms and they barely try to hide it. If someone thinks this sounds “fantastical” then they haven’t been paying the slightest attention. When one understands how Elites view economy, and realizes their primary motivations, the fact that they purposely triggered a collapse is perfectly logical. Nothing besides all out war inspires more fear and desperation in a society than a financial upheaval. Such elements on a mass scale allow changes in our collective psychology that were never possible before. Most people tend to falter under such an overwhelming threat and turn towards any authority (or fake authority) to save them from harm. Some people scoff at this idea, but it is likely they have never actually been in the wake of a real national catastrophe before. Men, especially those who know little of themselves, can change quickly in the face of calamity. The Elites recognize this, engineer tragedy, then waltz into the aftermath to merrily lord over the rubble.

Will their plan work? I think not, but I’m an optimist (no, really). The pursuit of total control and total power seems rather infantile to me, be it on an impressively psychotic level. Although, if we are made to forget who the real enemy is, then I think they do have a chance at success. That is how they have remained successful to this point. Only now does the average man have such immense knowledge at his fingertips, the knowledge to bring down a line despots and tyrants that have reigned for centuries. If only the average man was not so easily deterred by WMD’s (Weapons of Mass Distraction). The Elites will likely ignite some wars, tempt us into in-fighting, and fabricate enemies like Al Qaeda out of the ether. As the slogan goes, “Order Out Of Chaos”. Whatever happens, our eyes must remain fixed on the root of the problem; the bankers, and nothing else.

Globalists are not invincible, they are not untouchable, they are not even all that brilliant. They are human, and they have made many mistakes. The engineering of an economic meltdown really changes nothing. Hired thugs, useful idiots, corrupt officials, even hyperinflation, all tiny obstacles when considering the world we could have if the Elites were finally made to face the reckoning they deserve. Americans once took on the greatest empire on Earth. We once took a feared king to task. Are a bunch of frothing corporate bankers really so daunting? All that is needed is a principled movement with the will to see justice done, and I believe we have that already.

Peak Capital - Our Ultimate Limit?

This post was published in June 2009 under the name The Fifth Problem: Peak Capital.

The five main elements of the world model developed in "The Limits to Growth" study according to Magne Myrtveit .

* * *

The world's global positioning system (GPS) is in trouble. The US government accountability office (GAO) has published a worrysome report on the situation. The GPS satellites are wearing down and, if no new investments are made, the accuracy of the positioning system will be reduced. Eventually, the whole system may cease functioning.

What's happening here? The GPS system is a pinnacle of modern technology, a demonstration that the thing we call "progress" exists. If you have a car navigator, the idea of going back to clumsy printed maps just seems impossible. And that is just one of the many uses of the GPS system. How come that we left such an important system degrade? How can it be that someone forgot that satellites need to be replaced after a while?

The degradation of the GPS system may be attributed to mistakes, incompetence, bureaucracy or even conspiracies. But the problem may lie at a much deeper level. It may be a symptom of the degradation of the whole economy. But why is this happening? People mention evil banking practices, speculation, subprimes, terrorism, and what you have. But, with so many things going on at the same time, what is really the origin of the problems and what is just a consequence of other factors? To find an answer, you need to understand how the world's economic system works. One of the first attempts to do that in a comprehensive way was the 1972 report to the Club of Rome known as "The Limits to Growth" (LTG).

The LTG study was based on a rather complex model which, however, can be summarized in terms of five main elements, as you see in the figure at the beginning of this post. The five elements are 1) population, 2) mineral resources, 3) agricultural resources, 4) pollution and 5) capital investments. This is just one of the many ways to build such a model. Other choices are possible, but the LTG model, improved over the years, is a good way to capture the essential elements of the world's economy. Despite the persistent legend that the LTG study was "wrong"; the results of the study have been found to be remarkably accurate.

None of the five elements of the model is a problem in itself. But each one can become a problem. In that case, we speak of 1) overpopulation, 2) mineral depletion, 3) famine, 4) ecosystem collapse and 5) economic decline. Often, these five problems are considered as if they were independent from each other. People tend to attribute all what is going on to a single problem: peak oil, climate change, overpopulation, and so on. In particular, economists tend to see the economy as independent from the availability of natural resources. Of course, this cannot be true and in a "dynamic" model, such as the LTG one, all the elements of the economic system interact with each other; either reinforcing each other (positive feedback) or weakening each other (negative feedback). To understand how the economy behaves as the natural resources are exploited (and overexploited) it is important to consider the role of the "capital" parameter. The behavior of the capital stock directly affects industrial production and other parameters which are counted as part of economic indicators such as the gross domestic product (GDP).

In the LTG world model, "capital" is created by investments generated by industrial activity. Capital is assumed to decay at a rate proportional to the amount of existing capital. This is called obsolescence or, sometimes, depreciation. To keep capital growing, or at least not disappearing, investments need to be larger than, or as large as, depreciation. Since investments depend on the availability of natural resources, the buildup (or the dissipation) of the capital stock depend on the progressive depletion of these resources. In the original LTG model of 1972, there were three kinds of capital stocks considered: industrial capital (factories, machines, etc.), service capital (schools, bridges, hospitals, etc.) and agricultural capital (farms, land, machinery, etc.). In the latest version (2004), industrial capital and mining capital are considered separately, as you see in the following figure ( from the synopsis of the 30 year update of LTG). Note how the "capital" parameter (in its various forms) affects the parameters which determine the GDP.

Here is a very clear description of how capital interacts with the other elements of the world model in a synopsis written in 1972 by the authors of the LTG report:

The industrial capital stock grows to a level that requires an enormous input of resources. In the very process of that growth it depletes a large fraction of the resource reserves available. As resource prices rise and mines are depleted, more and more capital must be used for obtaining resources, leaving less to be invested for future growth. Finally investment cannot keep up with depreciation, and the industrial base collapses, taking with it the service and agricultural systems, which have become dependent on industrial inputs.

Here are the results of these interactions, expressed in graphical form as what is called the "standard run" or "base case model" of the LTG study (from the 2004 edition)

In the graph, you don't see the "capital" parameter plotted. However, industrial capital follows the same curve of industrial production. The other forms of capital have a similar behavior. All reach a maximum level and then decline, carrying the whole economy down with them. Overall, it is "peak capital."

When do we expect peak capital to occur? According to the "standard run" of the LTG report, it may arrive during the first two decades of the century. It may very well be that much of what we are seeing now is a symptom of peak capital approaching: airports, roads, bridges, dikes, dams, and about everything that goes under the name of "infrastructure" are decaying everywhere in the world. The whole economic system is becoming unable to maintain the level of complexity that it had reached just a few decades ago.

So, the degradation of the world' GPS system is not something unexpected, nor it is unrelated to such problems as peak oil or the depletion of mineral resources. It is just another kind of peak: "peak capital." Maybe GAO has been too pessimistic; maybe we'll decide that the GPS system is so important that we can't let it decay. But, in any case, it is a sign of the times: the fifth problem.

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Two posts by Ugo Bardi on "The Limits to Growth"

Cassandra's curse: how the limits to growth was demonized

Peak oil and The Limits to Growth: two parallel stories

Other "Limits to Growth" posts:

Dennis Meadows - Economics and Limits to Growth: What's Sustainable? - By Gail the Actuary

New World Model - EROEI Issues - Guest post by Delores García

Limits to Growth Article Worth Another Look by Dave Murphy

Europe and Natural Gas - Are Tough Choices Ahead?

EUROPE’s DEVELOPMENT IN NATURAL GAS SUPPLIES AND RESERVES

Below I will present developments in Europe’s natural gas production and reserves. I also describe how additional supplies by pipeline and LNG have developed in the recent years for both source and end user. It has been an objective for many European countries to diversify their sources for natural gas supplies.

Figure 01: The diagram shows developments in EU’s natural gas consumption, net imports (inclusive of imports from Norway) and production from EU and EU + Norway.

The recent economic slowdown reduced natural gas consumption and thus the need for imports. Now it seems like demand for natural gas in EU is growing.

Figure 02: The stacked diagram shows developments in proven natural gas reserves for EU and Norway for the years 1980 - 2009. It also shows developments in production for the same.

EU + Norway’s proven natural gas reserves had a top in 2001 and have since been in steep decline. EU + Norway's production peaked in 2004 and is now in terminal decline. As of end of 2009, Netherlands held around 75 % of EU’s proven natural gas reserves.

PIPELINED NATURAL GAS

Figure 03: Above is shown developments in sources for Europe’s imports of natural gas by pipeline for the years 2001 - 2009.

Russia has been and is believed will continue to be the biggest supplier of natural gas for Europe. North Africa by Algeria and more recently Libya, has been and will continue to supply the Europe’s Mediterranean region with natural gas.

Figure 04: The stacked columns above shows how imports of natural gas from Russia for some European countries have developed for the years 2001 - 2009.

Germany and Italy have been big importers of natural gas from Russia. Countries close to Russia have supplemented their indigenous production with imports from Russia or been dependent on most of their natural gas supplies from Russia. Imports from Russia had a high in 2004 and has declined a little in recent years mainly due to the economic slowdown.

For my estimates on when Europe could experience future imbalances between supplies and demand I have assumed that Russia has the ability to increase natural gas supplies to Europe and thus allowed for future growth in Russian natural gas deliveries to Europe.

LNG (LIQUEFIED NATURAL GAS)

Figure 05: The stacked columns shows how supplies of LNG for some European countries have developed for the years 2001 - 2009.

LNG (Liquefied Natural Gas) has been one way for Europe to pursue a diversification in natural gas supplies. Spain which in recent years has had a strong economic growth has facilitated this also by growing energy consumption and for natural gas, primarily by LNG imports.

As of 2009 Europe’s demand for LNG was around 26 % of the global LNG market.

Recently UK has been a big importer of LNG and these imports will grow in the next few years. Interestingly this year’s growth in U.K.’s LNG imports have facilitated increased exports of natural gas to Continental Europe, which could suggest that companies on Continental Europe have taken benefits of U.K.’s growing LNG import capabilities.

Figure 06: The diagram shows where Europe’s imports of LNG has come from for the years 2001 - 2009.

LNG has a more global market than pipelined natural gas provided there are receiving facilities and provided specifications are met.

Earlier this decade, many LNG developments (like Snøhvit in Norway) were sanctioned in the anticipation of growing import needs for natural gas from the USA. The recent year’s growth in unconventional natural gas production in the USA, primarily what is now referred to as shale gas, became what in many circles was referred to, a “game changer” which also affected the market for LNG. The supplies of unconventional gas led to a softening of the natural gas prices in the US market.

This is now reflected in how Europe imports its LNG which includes more distant sources as Trinidad & Tobago (ref the diagram above).

Some years ago Algeria experienced a fatal accident at one of their LNG plants that reduced their export capabilities. This explains the recent years' decline in European LNG imports from Algeria.

Qatar is now emerging as the biggest supplier of LNG for Europe; this is very much facilitated by the growing LNG receiving capabilities at the South Hook and Dragon in Wales.

THE FORECAST

Figure 07: The diagram shows developments in actual natural gas consumption between 2001 and 2009 for EU, split on Europe’s (inclusive of Norway’s) own production and imports by pipeline and LNG. It also shows forecasts growth in demand (black line) towards 2020 from EIA and IEA.The light blue area is my projection of how Europe’s natural gas production will develop towards 2020 and by showing pipeline and LNG imports at 2009 levels towards 2020, the diagram illustrates the growth in additional supplies from pipeline and LNG, if forecast demand is to be met.

NOTE. Production from Norway has been included in EU’s production though formally Norway is not a full member of EU.

The forecast on EU + Norway’s natural gas production is done with regard to developments in proven reserves, production and R/P (Reserves over Production) ratio for each European country.

For Norway (which production forecast is included in the light blue area), my forecast is based upon a field by field approach for all sanctioned fields as of end 2009 and where due considerations to NPD’s (Norwegian Petroleum Directorate) data for proven reserves, production developments and R/P ratios has been given. My forecast for Norway results in growth in natural gas supplies until 2012 which then starts to decline.

At the beginning of this post, I described the possibility for an imbalance between European natural gas supplies and demand around 2011/2012. In my analysis I have allowed natural gas deliveries from Russia to Europe to grow above 130 Gcm/a by 2012 and assumed full utilization of U.K. LNG receiving facilities which is still being expanded.

IEA in their WEO 2009 have assumed a growth in European natural gas demand of 0,8 %/y and EIA in their IEO 2009 has assumed a growth of 1,0 %/y.

Presently I look upon the European natural gas market as being driven by three components; a) economic development, b) substitution from coal and nuclear to natural gas for electricity generation, and c) weather.

Substitution from coal and nuclear could be what now primarily drives European demand for natural gas, as recent data from U.K. suggests.

Allowing for growth in Russian and LNG supplies, it looks like European demand and supplies may become imbalanced by 2011/2012 and this gap may grow to 120 - 150 Gcm/a by 2020.

As of now, it is hard to see where such additional supplies will come from, if EIA/IEA projected demand by 2020 is to be met.

NORWAY AND RUSSIA

Presently Norway and Russia are the biggest suppliers of natural gas for EU.

Figure 08: The above diagram shows development in Norway’s natural gas production by some individual fields and group of fields as reported by NPD (Norwegian Petroleum Directorate) for the period January 2001 and as of May 2010.

As of now it may look as Norwegian supplies are about to plateau as illustrated by the 12 MMA (Month Moving Average). The diagram shows how supplies from fields like Sleipner and Gullfaks South are now in decline due to depletion. The Troll field has been and will be a major supplier of natural gas. The diagram illustrates that recent growth in Norwegian supplies has primarily come from the Ormen Lange field.

The yellow columns shows all other fields and the diagram illustrates that new fields brought online primarily have helped offset declines from fields in decline like Sleipner and Gullfaks South.

Figure 09: The diagram shows Gazprom’s production of natural gas for the years 2000 - 2008. It further shows present projections by Gazprom on how their supplies will grow towards 2020.

The Russian gas giant Gazprom presently controls more than 85 % of Russian natural gas production and has a monopoly on exports on natural gas. Gazprom now projects their supplies to grow by around 100 Gcm/a relative to 2008 levels by 2020. This growth is for increased domestic consumption, growing exports to Asia (from Eastern Siberia to China and Japan), and some for other markets included the European.

As of now it appears as Gazprom is not planning to increase European deliveries to such an extent that they will cover a major part of the European natural gas supplies gap I have described here.

SOURCES:
[1] BP STATISTICAL REVIEWS OF WORLD ENERGY 2002 - 2010
[2] EIA, INTERNATIONAL ENERGY OUTLOOK 2009
[3] IEA, WORLD ENERGY OUTLOOK 2009
[4] IEA, MEDIUM-TERM OIL&GAS MARKETS 2010
[5] NATIONAL GRID, TEN YEAR STATEMENT 2009
[6] NPD, RESOURCES ACCOUNTING FOR NCS AS OF END 2009
[7] NPD, ACTUAL PRODUCTION FIGURES FOR NCS AS OF MAY 2010
[8] GAZPROM’s WEBSITE