Disintegration …



The economic crisis in Europe and elsewhere deepens, political systems are unable to respond, conditions are rapidly spiraling out of control.

 

 

In English, this remark from the Chinese social networking site, Weibo:

 

beijingwanbao: We can adapt as times change. If the foreign devils haven’t said the U.S. army won’t get involved, what are we doing tying up our own hands and feet? If we don’t even have this measure of resolve, we’ll just be blackmailed. //@tracelesstraveler: China affirms it would not use nuclear weapons first. //@beijingwanbao: “Starting a Sino-Japanese War: Comparing Weaponry in Pictures” http://t.cn/zWsiGrC (via @milnews) Why waste energy? Skip to the main course and drop an atomic bomb. Simple.

Reposts: 2082 Comments: 974

 

Beijing Wanbao is a Chinese capital city news broadcaster. The frenzy is about the purchase of the Senkaku Islands, by the Japanese government from their private owners last week. These uninhabited islands are located near Formosa.

 

Around 1900, Japanese entrepreneur Koga Tatsushirō constructed a bonito processing plant on the islands with 200 workers. The business failed in 1940 and the islands have remained deserted ever since.

 

Back then, nobody cared …

 

The islands came under US government occupation in 1945 after the surrender of Japan ended World War II. In 1969, the United Nations Economic Commission for Asia and the Far East (ECAFE) identified potential oil and gas reserves in the vicinity of the Senkaku Islands.

 

The xenophobic, paranoid hyper-nationalism of the Chinese is never far from the surface, the smallest scratch brings it to the surface:

 

 

More Weibo: the sign says, “Even if China becomes nothing but tombstones, we must exterminate the Japanese; even if we have to destroy our own country, we must take back the Diaoyu Islands.”

Kill humans so that there might be cars!

It’s not just about the oil, it’s about the denial about the oil: the banner is posted in front of an Audi automobile dealership by employees. Without the presumed gusher of fuel from Diaoyu-Senkaku Islands, cars are a hard-sell. The Chinese fanatics defend both their pocketbook interests and their new-found adoration of the sports sedan. The Chinese are late to the party and they know it: the furious desperation with which they grasp their last, best chance is indicative. They will have their wasteful moment in the sun and they will blow up anything and everything that stands in their way.

Like Americans, the Chinese have bet the rent money on endless supremacy of the automobile over all other things into the far distant future. Cognitive dissonance: what the banner holders don’t grasp is their cars devour the fuel supply that they themselves are willing to kill and die for. Each Chinese dies twice, once to gain oil concessions then again when their pet cars burn up the fuel supply. At the end of the day, the Chinese have nothing to show for their human sacrifices other than some used cars … and massive debts that cannot be repaid.

All of this and violent anti-Japanese riots on top of threats by the Chinese establishment to bankrupt Japan by dumping its collection of Japanese IOU’s on the market at once.

Clearly the American Way loses something in the translation to Chinese. Cars cease being ‘fun’ when they become instrumental to mass destruction.

China’s fury is misdirected: the Japanese are flat broke, depending upon the Bank of Japan to keep the debt collectors at bay for one more day (Ambrose Evans-Pritchard):

 

The Bank of Japan is to buy a further 10 trillion yen (US$130bn) of bonds, bringing the total accumulated so far in its battle against deflation to 80 trillion yen, or 20pc of Japanese GDP.

Jun Azumi, Japan’s finance minister, praised the bank’s “bold” efforts to hold down the yen, lending credence to suspicions that the real motive is to counter “beggar-thy-neighbour” currency devaluations by other powers and prevent the strong yen choking Japan’s export industry.

Yunosuke Ikeda, from Nomura, said the Bank of Japan had yielded to “immense political pressure” after months of criticism.

 

Japan seeks to protect its own precious automobile industry, the central bank jumps on the quantitative easing bandwagon in an attempt to keep the status quo intact. The fact of mass, coordinated QE speaks for itself. Meanwhile, the crisis in Europe takes a political turn (Ambrose Evans-Pritchard):

 

Spain risks break-up as Mariano Rajoy stirs Catalan fury.

The ruling parties of Catalonia have sought guidance from Brussels on the legality of secession from Spain, requesting a “route map” for membership of the European Union and the euro as an independent state.

Jose-Manuel Garcia-Margallo, the (Spanish) foreign minister, threw down the gauntlet, calling Catalan secession “illegal and lethal”. He warned that Spain would use its veto to stop the region of Catalonia becoming an EU member “indefinitely”.

Catalan leader Artur Mas held high-stakes talks with Mr Rajoy in Madrid on Thursday, armed with a mandate from the Catalan parliament and with charged emotions left from an unprecedented protest by 1.5m people in Barcelona 10 days ago.

He demanded an independent treasury for the rich Catalan region, with control over its own tax base akin to the model already enjoyed by Basques. The 9m Catalans have an economy the size of Austria’s.

[ … ]

A serving army officer, Colonel Francisco Alaman, has fueled the flames by comparing the crisis with 1936 – when Gen Francisco Franco seized power – and by vowing to crush Catalan nationalists, described as “vultures”.

“Independence for Catalunya? Over my dead body. Spain is not Yugoslavia or Belgium. Even if the lion is sleeping, don’t provoke the lion, because he will show the ferocity proven over centuries,” he said.

Retired Lt-Gen Pedro Pitarch, a former army chief, said the words reflect “deeply-rooted thinking in large parts of the armed forces”. He also accused Madrid of bungling the Catalan drama disastrously.

“Are we looking at a failed state?” he asked. Investors holding Spanish debt are listening carefully.

 

There are disputes, violence and disturbances relating to oil and other resources in the Arctic, in northern, eastern, southern and western Africa, out and out war in the Middle East, in the Eastern Mediterranean littoral, the Persian Gulf in both Iran and Bahrain, in South Asia, as well as political gridlock in Europe, Japan and the United States. Every day the world steps closer to the precipice. As the economic tools prove to be useless to stem decline what remains are military tools, the means to simply steal from others. The imperial West has resorted to these tools already, to kill all of us so that (presumably) all of us might drive.

All of the above is more Peak Oil denial, like the ‘Central Bank Printing Money’ meme. The gist of the militarist argument is that stealing resources is a permanent solution to resource constraints, that the resources are available to steal, that they will be better employed by the thief.

China, Japan, Spain and the rest are bankrupted by their unaffordable automobiles. None of these countries can pay for their past consumption of non-renewable resources. They have borrowed in the past and seek to borrow now, to pay for the resources and to retire older debts.

Meanwhile, the same countries have nothing worthwhile to offer as payment for the resources they need tomorrow … or for the generations to come. They consume the means with which to pay. They offer up comic-book drek … of a careless future the outlines of which are becoming more clear. In the place of a fanciful futurama of robot kitchens and flying cars, there is a continual unraveling accompanied by denial of the same unraveling, a collective inability to respond appropriately leading to system breakdown: more cognitive dissonance.

 

Reality about energy supplies begins to emerge and it’s as ugly for ‘Autoworld’ as Thanksgiving is for turkeys. Peak Oil has blitzed the Greek economy into the dumpster with stunning dispatch, so much so it seems beyond the ability of sensible Greeks to understand what happened to them. Greece isn’t a hedge fund or an over-leveraged investment bank peddling fubar MBS out of a back room but a modern, middle-class nation with a (semi)functioning government and a four-thousand year history: all that except for the history is gone … in a heartbeat. Fall asleep in Greece, wake up in Angola.

 
— from ‘God, Peak Oil and Turkeys’ (March, 2012)

Nobody will admit that Greece was undone by peak oil, nobody will even discuss it or entertain the possibility! This isn’t economists in 2004 missing a prediction about what might happen in 2008. This is an entire army of exceptionally well-paid, over-educated analysts, policy makers, business leaders, economists, university professors, pundits, finance- and energy bloggers, fiction writers, poets and bass fishermen not seeing what is taking place right under their noses!

Now it is Spain’s turn to be swept off the table by its automobile waste. The only issue is how long will the process take. Using Greece as a model, once the establishment is admittedly insolvent, the spasm of national ruin and follow-on decline is almost instantaneous.

Like Greeks, the Spanish bet the rent on the American Way waste-based consumer economy, not realizing it was a scam. Now that they ‘know’ (or are dimly aware) there is nothing they can do about it, there is nothing the Spanish want to do about it. Like the Greeks the Spanish want the euro, they want the cars they want the modernity and will continue to do so even when the Spanish economy completely collapses. The Spanish have spent centuries living off the soil in small villages and they have no desire to return.

Same with the Chinese and Japanese.

 
“There’s a lot of momentum embedded in the passion of Chinese here to adopt higher-standard of living … they want their apartment, they want their cars, they want their air conditioning.

— Bloomberg
 

These countries’ chances to turn aside from faddish consumerism came and went decades ago. They caught themselves in the self-reinforcing web of fashion … that requires chic Spaniards/Greeks/Japanese/Chinese to have a shiny new cars, luxury jobs, designer ‘accessories’, new houses in the suburbs and ‘resorts’. Add the predatory lenders and ruthless manufacturers, shills and gamblers and the moderns were doomed. They had no idea what it was they were signing their futures away for, they believed the salesmen rather than following common sense.

All of this overhead structure is precariously balanced upon slender resources. The amounts of oil near the Senkaku Islands look to be very small. Information from the International Energy Agency (IEA, 2008)

Field Estimated Oil Reserves (Mbbl)
Canxue 5
Baoyunting 4.5
Chunxiao 3.8<
Cuanqaio 2.2
Wuyunting 1.9
Tianwaitin .5
Total: 17.9

Twenty million barrels is an insignificant amount of oil to go to war over. Presumably there is more than the 20 million … that can be retrieved by improved drilling. Yet, even 2 billion- or 20 billion barrels of proven reserves would do little to address the 10 million barrel per day consumption habits of the Japanese and Chinese. A decade and more of extraction enterprise is required to bring any oil to the markets. In the meantime, the world’s other oil wells relentlessly decline. Bloated demand outruns all possible sources of new supply. The only question is how long will it be until this demand is bankrupted?

 

Next goes Europe, itself. The Greek default closes the book on Europe in its current form, which is a lost cause. It is the end of the beginning: there is not going to be any ‘recovery’ or way back from the abyss that is now engulfing the continent. Some fragments here and there might save themselves for a little while, then like sparks from a bonfire be swept away by the wind. The crisis must now burn itself out: Europeans, look to yourselves and may your turkey-God have mercy on your souls.

 

Not much longer, children ….

51 thoughts on “Disintegration …

    1. steve from virginia Post author

      We are thinking alike on this one, RE!

      A number of worried opinionators @ Bloomberg over the China/Japan situation. It might blow up into something serious.

    2. tip

      “Though why anyone would care or want to be recognized by that bunch of scumbags I have no clue whatsoever.”

      that was my thought as well when reading steve’s original article. they should just start their own currency called the Gaudi and be done with it. but then, how would they secure the oil? which brings us back to the original problem.

      we’re all slaves to the black gold.

      1. steve from virginia Post author

        The Catalans want the euro and to be part of the European Union!

        Everyone believes they can ‘fix the problem’ or start the car by making adjustments in management techniques. The only technique that will work — stringent conservation — is not acceptable or up for discussion.

      2. Reverse Engineer

        The Catalans want the euro and to be part of the European Union!-Steve

        The Catalans should get the euro just in time to see it go worthless.

        Not too sure stringent conservation would make much difference now. They’re too broke to even keep the lights on, much less keep the Carz rolling. You just can’t keep cities like Madrid or Barcelona from imploding without electricity. The old systems aren’t there to replace it, and the populations have grown too large.

        It will crash regardless of conservation, IMHO.

        RE

      3. steve from virginia Post author

        Conservation as a political act would carry great weight. It would demonstrate the establishment is willing to do difficult things (even if the difficult things are being done automatically in the background). Everyone likes to sense they have some control over their own destinies.

        Part of the problem is the establishment is swept away with the rest, there is a vacuum that is filled by mad men: see ‘Greece’ and Golden Dawn.

        http://www.abc.net.au/news/2012-09-12/thousands-turn-out-for-autonomy-rally-in-barcelona/4256036

  1. tom jones

    steve, this recent posting from Brazil conflicts with your theory. as i tend to agree with you, i hope you and your posters will assess the facts and assumptions within.

    http://brazilianbubble.com/us-energy-revolution-may-get-in-the-way-of-petrobras-pre-salt-success/

    By Luiz Bulcao (via Veja)

    Discovered in 2007, Petrobras’ pre-salt oil reserves were taken as the miracle required to launch Brazil towards a developed country status. But the rewards of this “Godsend,” as then-president Lula called it at the time, were not yet reaped. With the auctions for the fields exploration completely frozen until the Brazilian Congress agrees on how the royalties will be shared, the pre-salt is a reality only in the few Petrobras fields already in operation. The delay of these definitions is another complicating factor in this complex operation in the distant and deep ocean.

    The project slowness also makes it difficult to predict exactly what are the true benefits that the country may reap with the pre-salt reserves. The technological complexity and high costs of production would make the barrel price competitive only in a scenario of high oil prices. However, the other larger issue is the prospect that when Brazil has figured out its challenges on becoming a major oil exporter, the global demand for the world’s most coveted fuel in the last century may not be the same anymore. And the change becomes easier to envision as one looks at the United States – the largest consumer and importer of oil on the planet – which is experiencing an energy revolution by improving the techniques for the production of oil and gas from unconventional sources by hydrocarbon fraction.

    Adam Sieminski, chief of the Energy Information Administration (EIA), an American agency, says that several factors contribute to a radical change in the geopolitical scenario. One is the stabilization of energy demand by the developed countries. He said that the real growth in demand will take place in non-OECD countries, such as India and China. The traditional consumers, like the U.S., Europe and Japan have a stabilized demand. The United States, for example, had a significant increase in energy efficiency, since over the last few years the industry has innovated and developed technologies that use less fuel. The other factor that relieves the pressure on American energy is precisely the alternative sources of energy, the unconventional fuel…..”

    the article continues, and discusses the possibility that the USA might become net exporters of oil, thanks to Bakken in North Dakota and Eagle Ford in Texas.

    1. steve from virginia Post author

      “And the change becomes easier to envision as one looks at the United States – the largest consumer and importer of oil on the planet – which is experiencing an energy revolution by improving the techniques for the production of oil and gas from unconventional sources by hydrocarbon fraction.”

      The increase in production amounts to a few hundred-thousand barrels per day … out of consumption of + 18 million barrels per day, 2/3ds of which are imported.

      Data: BP Graphic: Jonathan Callahan Energy Export Databrowser.

      The decline in US energy consumption is due to deleveraging/decline in credit in the US, increased unemployment and poverty. 50 million in the US are on food stamps: those who can afford fuel cannot afford a car. Cars are sold because manufacturers’ lenders offer interest-free ‘sub-prime’ loans.

      For anyone who believes the US will become a net exporter of ‘oil’ in the near future, I have a bridge you might like to take a look at.

      If the US becomes a net exporter it will be under circumstances vastly different from today’s … that most will be hard-pressed to endure. It means the US will have gone ‘off oil’ and exports to gain hard currency or resources in return.

    2. The Dork of Cork

      Adam Sieminski needs to get out more….

      “One is the stabilization of energy demand by the developed countries.”
      Stabilzation = static in my book.

      But perhaps countries can deal with 2% yearly energy consumption decline rates
      However…..

      Y2011
      UK: – 6.1%
      Switzerland: -4.9 %
      Spain: -2.5%
      Portugal: -5.2%
      Holland: -5%
      Italy: -3.8 % … it will be a much larger decline in 2012.
      Ireland: -9 % … top of the class 2011
      Hungary: -3.4%
      Greece: -4.6%
      Germany: – 6.6%
      France: -3.9 %
      Finland: -4.7%
      Denmark: – 8.7%
      Benelux: -5.3%
      Austria: -6%
      Japan: -5.1 %

      (Edited)

  2. Brian Richards

    Hi Steve,
    I read all articles on both The Oil Drum and Al Fin energy sites, which I recommend to everyone interested in energy. There seems to be substantial evidence against the United States ever becoming an oil exporter, despite what one reads in the press. On the other hand, there are some really interesting energy technologies presented on the Al Fin Energy site, some of which might eventually enable our grandchildren to start buying Hummers again.

    1. steve from virginia Post author

      I don’t predict the future, I expect I will be alive tomorrow but I can’t guarantee it.

      Big business, marketeers and industrialists have been promising a bright (deranged) future ‘tomorrow’ for 400 years. They’ve never once delivered. ‘Grandchildren buying Hummers,’ is another one of these empty promises. In the meantime these fools have pushed the entire human enterprise — and much of nature herself — to the brink of collapse in all areas.

      Quite an accomplishment/track record.

    1. Mr. Roboto

      That you would post a link to something such as this has a lot to do with why so many here find it difficult to take you seriously.

      1. enicar666

        The name of the post is “Disintegration”.

        The theme is WAR.

        “Why waste energy? Skip to the main course and drop an atomic bomb. Simple.”

        My statement, “a view of the USA from a different perspective” is just that. The video has been on You-Tube for a long time and the original theme music was changed from “Ameno” and “Gay Bar” to “Born to be Wasted”. The poster who created the video is NOT American, and English is not their native tongue – hence misspellings and colloquialisms that seem odd to you.

        SO – are you “The Ugly American?”

        What is factually incorrect in the video? Very little in my eyes. Do you find it inconceivable that in the eyes of others – America might be considered an EVIL EMPIRE? Geez- I CONSIDER AMERICA AN EVIL EMPIRE and I live here.

        Chinese fought Americans in Korea – and almost won.

        SCO = Shanghai Cooperation Organization is an intergovernmental mutual-security organization which was founded in 2001 in Shanghai by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan.

        Iran and Pakistan, amongst others, are observer States.

        Hence – an outbreak of war with Japan or Iran would engage the SCO and could lead to an escalation whereby China and Russia nuke America, because treaties with Japan would involve the US, and Israel won’t attack Iran without US support.

        Look at a map of the World – Afghanistan borders China and Iran – do you now understand why we are there? We are blocking the Chinese from direct access to the Middle East – and our troops are there to remind the Chinese that IF they try to march to the Middle East – they have to first attack US Troops and the US can then use the nuclear option. IF China and Japan engaged in war – the Chinese should, and most likely would attack US troops in Afghanistan and race to Iran. We would lose almost all forces and equipment – does the US go nuclear?

        IF Israel attacks Iran – does Russia and China come in to help? What if the Israelis use Nukes? Do they then use the Sampson Option and nuke Europe also?

        Hopefully this explanation gives you a better understanding of the video.

      2. steve from virginia Post author

        Obviously, the point of the video is the US has much better-looking gay soldiers than do Russia or China … and much worse looking politicians.

        Obvious jealousy ….

      3. enicar666

        Imagine American culture from the outside in.

        What did the Clinton Administration talk about ENDLESSLY?

        WHAT IS THE CONSTANT DEBATE AND THEME?

        DON’T ASK, DON’T TELL

        Gays in the military – Have you become so mind-numbed to the American media’s fascination with the subject that you are deaf and blind to it?

        A foreigner points it out to you – and yet you STILL can’t see it…..

        Hydrogen bombs won’t destroy America – they will sterilize it and cleanse the Universe!!

      4. steve from virginia Post author

        Good grief!

        Step away from that beer, Any Car.

        There are gays in all the world’s militaries, even the Taliban. There are gays everywhere in society and have been since the beginning of time, in all countries and different cultures. Homosexuals have never done anyone any harm (specific to their desires), and have only asked to be left alone and not be treated like dirt.

        BTW, my job over here is to look at American culture inside-out as well as outside-in. It is a thankless, non-remunerative job. The problems in America have nothing to do with individual’s sexual preference, rather Americans’ insecurities about others’ sexual preferences (among other things).

        If you want to make a change for the better for both yourself and for others, stop looking for the simple, ready-made scapegoats and get rid of your car, instead.

        I’m almost to the point now where I am going ban everyone who has a car or a TV. That will be the cost of entry to exalted Undertowlandia.

  3. Ed

    This is a great essay, but one minor caveat. In all fairness, some mainstream economists have called the great financial crisis correctly. James Hamilton at Econobrowser has been pretty clear that it was triggered by peak oil. And Steve Johnston is getting increasingly explicit that the response by governments and banks has really been a cover for massive looting.

    One thing though, is when mainstream figures now start calling it something like it is, they eventually become ex-mainstream figures.

    1. steve from virginia Post author

      You mean Simon Johnson, right?

      http://www.zerohedge.com/news/2012-09-22/whats-next-simon-johnson-explains-doomsday-cycle

      I haven’t been keeping up with Hamilton (who tends to write about general economics) or Jeff Rubin. Both insisted the 2008 recession was caused by high oil prices, not necessarily Peak Oil. Stuart Staniford has edged away from Peak Oil prognostication.

      Not a problem over here @ the Undertow: Peak Oil occurred in 1998 when a barrel cost $11. Price is what matters.

      Matt Simmons had a handle on the problem but also had the crisis phase occurring in the future. Chris Nelder is pretty acute: peak oil = future. Most of the ‘doomosphere’ tends to fault finance and money management with problems aggregating in … the future. Future is safe for futurists’ reputation.

      Reality is tapping on my shoulder saying, “the future is right now, baby!”

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  5. The Dork of Cork

    The last time I was in Barcelona (2 years ago now) I got pissed with a Galician (Celtic Atlantic sort of people) complaining about the Catalans and how they put a value on money above all other things , it was quite funny really.
    2 Rednecks in a bar.

    The Basques are however deeply strange…..however walked into a hybrid cultural town of theirs once on the border zone between spheres and was pleasantly surprised…. all the doors remained open and everyone was well – so nice.
    Because trade before the invention of Iron horses was almost all sea based you get sudden bursts of cultural affinity far from home in these now strange backwoods places.

    Anyhow the Canigou massif remains sacred for many Catalans -its a beautiful place.
    I would hate to see the place stripped for wood etc by very desperate fuel poor people
    Many nights I spent sleeping in & above its shoulders………..never met a girl walking it barefoot though (I wish)
    http://www.youtube.com/watch?v=4kaN17YZ_9s

  6. Sandor

    http://www.newyorker.com/reporting/2012/09/24/120924fa_fact_lepore

    New Yorker on ‘The Lie Factory’: the origins of the political consulting business in America. Well worth the read, it filled in many gaps in my knowledge of political history and helps one understand how the game is played right now and why reason is absent from public political discourse. It explains why Steve’s analysis will inherently fall on deaf ears and/or be tuned out by most of the intelligentsia who could process it to begin with. One of the most important articles I have come across in years. The main attack is emotional hypnosis through sheer repetition. Most of the flavour of modern politics comes straight from the Baxter and Whitaker playbook. It leads me to think that the culture will lurch from one disaster to the next and the policy mechanism will be ad hoc ad hominem reactionary until the majority is burned out and exhausted. Only a decade of destitution will get the peak oil message across, and even that may not be enough to wipe the smug smirk of denial off the republocrats faces.

  7. Pingback: E pensar que ainda há quem dê ouvidos « Achaques e Remoques

  8. dolph

    The message is getting through to some, even if only in a vague sense of foreboding. On zerohedge there are regular discussions on oil, as you know, and the comment section indicates that some do get it.

    Peak oil is too big to grasp even in this information age. You almost have to be a historian to do it.

    It’s up to us to determine on an individual basis what our response to it will be. For whatever it is worth, you and many others who blog about this ARE having an effect, however small. I’m a young physician who has largely given up on modern medicine, and am now basically a gold/silver speculator. On the side I will continue to do odd jobs and continue to prepare. But I will try to do so on my own terms as much as circumstances allow.

    Now that may not be what you hope for per say, but it is what it is. I do not apologize to anyone, but you can be rest assured that I am aware of what is going on and take action on it.

  9. The Dork of Cork

    Interesting video on the “growth” of Burlington international airport and perhaps explains the dramatic decline of the Vermonter train.

    http://www.youtube.com/watch?v=FkF1La-e3YI

    Jet Blue airlines is mentioned … the capital malinvestment caused by these outfits is on a huge scale.
    They appear to make very wasteful activities profitable by simply cutting wages and redirecting resourses towards fuel waste … reducing the ability to do work.

    What I find amazing is that people don’t get it or simply don’t want to get it – they seem to like the cheap fares of these companies until they or their children work for such outfits. Eventually everybody works for organisations such as Ryanair and Jet Blue and they collapse … and everybody is surprised?

    Have they ever even heard of Marxs Labour theory of value?

    http://www.youtube.com/watch?v=-e8rt8RGjCM

    (Edited)

  10. James

    I sometimes leave comments on The Oil Drum as Dopamine. Last night I left a comment regarding human behavior and it was removed, along with related others. I guess I’m going too far down the rabbit hole. The intellectually deficient bunnies at TOD seem most interested in protecting the virginity of the average delusional mind. I’ve included the comment below. Maybe they don’t want to accede to what I believe is an almost hopeless situation.

    Imagine a human as a tightly knit association of amoebas, originally chemotactic in nature, but having given up their mobility to specialized systemic structures, sensory organs, a brain and muscles. The organism still moves in the direction of “pleasurable” stimulation and away from negative stimulation and receives chemical rewards. However, humans have a massive memory and planning organ that can negotiate the most circuitous routes to pleasure. That we could turn coal into dopamine requires ingenuity. In some cases all you must do is start fire and enjoy the heat it produces.

    Humans can be ingenious and yet still be dominated in the motivations and actions by simple biochemical rewards. I don’t know if it is possible to modify these behaviors, even with a full knowledge of the damage we inflict upon self and environment. Smokers can certainly “kick the habit”, but some other consumption is often substituted for the original bad habit. I see an appeal to personal sacrifice as ineffective, as others would only increase their dosage of precious soma.

    Why does the junkie keep going back for a their pleasure fix? Why does the middle class hang out at the mall? Why do the wealthy pursue even greater wealth? Why do the religious long for heaven? Insane? Not really, they’re all just organisms trying to get more brain candy, the only motivation they’ve ever known. Unfortunately, the brain can banish or subvert any rational thoughts that interfere with acquisition of pleasure and profit in deference to biochemical rewards that have guided us for hundreds of millions of years.

    “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.” As stated in the passage from the Declaration of Independence above, “happiness” is paramount. What happens when the freedom to pursue happiness puts the safety of everyone, including future generations, in jeopardy? How do we alienate mankind from their suicidal pursuit of happiness? I’m not sure we can.

    In any case, I enjoy reading Steve’s contributions because he rarely pulls any punches and doesn’t round the edges of his arguments to satisfy the existing biases of his readership.

    1. steve from virginia Post author

      Quite a challenge we find ourselves in the middle of.

      I find it comforting the human race hasn’t nuked itself into oblivion these past fifty years or so even when the means to do so have existed and indeed, multiplied. Humans understand limits even when they don’t want to. Maybe nuclear weapons are good for something after all …

      How to get from where we are now to where we need to be? I suspect the organism will be reforged again as it has been over and over the past 100,000 years into the current homo televisionwatchus. What’s next? Who knows! Chances are, ‘it’ will walk upright, scratch its itchy genitalia when it thinks nobody else is watching, it will drool occasionally and be irrational most of the time … but it will adjust its pleasure principle. It’s that or (makes throat cutting gesture).

      The forging process is bound to be unpleasant. But … as with all else there is a limit to the unpleasantness. We all die individually and personally, there is no escape from it, we all come to terms with death whether we want to or not. What is underway right now is the personalization of the idea of collective death, the instinctive understanding that this last thing is more vital than the individual variety.

      Collective death is an abstraction. Part of the challenge we face is making that abstraction into something understandably real. This is the evolutionary process at work. We currently don’t have the wiring to allow us to grasp collective death easily, technology has allowed us to leapfrog over some of the basic instinct, such as the molecular-level drive to survive. We rationalize: survival = following our ‘instincts’ (as seen on TV). Step one is ‘jump in the car’.

      In reality, the cars are all going the first to get rid of his is the ‘winner’ even though he/she won’t feel like one.

      This is what you’re trying to do, which cuts against the grain, it offends the sponsors, it is too avant-garde while being not avant-garde enough, the humans want to avoid individual pain which is as strong an impulse as the drive for dopamine.

      What next? It’s interesting that our self-created dangers accompany the means by which we can recognize the dangers and make adjustments. We could have had all the fuel-burning tech 2000 years ago without satellites and weather instruments, we could have unraveled the world without having any idea we were doing so. The substitution of bromine in place of fluorine in refrigerants would have likely done the job, as would have Gen. Curtis LeMay launching an all-out strike on the Soviet Union in 1962. Somehow or other the needed tools always come to hand … to allow us to dig ourselves out of the holes we bury ourselves in. There is Internet, there is free exchange (to a point), there is (imperfect) politics, there is an organized intellectual framework (even if it’s self-reinforcing at all times) … Reality will do the heavy lifting. No matter what the establishment wants or what it attempts, the future will arrive … whether we are ready for it or not.

    2. Ed

      I’m not sure why you were censored, but its a dumb comment. The brain can be trained to regard some things as good sources of pleasure/ dopamine and others as not good sources. Its called “education” (or at larger scale, civilization). Religious orders do this with their initiates all the time. Parents do it with their children to some extent.

      Also, and comments in this vein drive me up the wall, the world is not burning through its stock of fossil fuels because “we” take pleasure from it. You can leave me out of the “we”. I don’t have a car, live in a studio apartment, and basically fly when someone tells me to do so (which I try to avoid). Yeah, I buy food from stores and farmers market that get their deliveries by truck, but I didn’t make this arrangement.

      Fossil fuels are burned in industrial processes in industries controlled by a handful of people, and -this is as far as there is popular participation- in people using transportation because that is what central planners have provided for transportation for the masses. Most fossil fuels are burned in just two countries, the US and China. Neither of these places are exactly democracies. Really the problem lie in the American and Chinese elites.

      I wouldn’t ban the comment, but I think its fuzzy thinking, and in trying to blame everyone (well, “humans”, I think you mean human nature) for the predicament the result is to blame no-one.

  11. James

    You’re welcome to your opinion Ed. I won’t try to refute any part of it nor offer further explanation of my own thoughts. But while you’re “learning” to enjoy moldy cheese in the Abbey of Self-flagellation, my children and I will be taking full advantage of your own self-denial. If we are headed over a cliff, and I think we are, I’ll be traveling first class while you struggle to fit your scarce dopamine molecules into their wilting receptors. Enjoy the pain Ed.

  12. Reverse Engineer

    From the commentary inside the For Whom the Bell Tolls thread on the Diner:
    http://www.doomsteaddiner.org/forum/index.php?topic=912.msg9227;topicseen#msg9227
    ———
    Plenty more today on ZH and from Ambrose on the brewing Spanish Civil War. Also Surly got up the stuff from RT on DD Facepalm. I’ll get Ambrose’s latest up over in the Ambrose thread.

    The newz reports are saying “10s of thousands” surrounding Parliament in Madrid, but those pics to me look like 100s of thousands. The fact also the market took such a dive today indicates that things are more serious than the MSM suggests.

    Perhaps the most interesting thing I read so far today is with respect to the “Legality” of Secession in Spain (probably here too). Apparently it is “Illegal” to hold a Referendum where the People can Vote on whether they want to be a part of the Nation-State or form a New one. IOW, even if 100% of the people living in a given territory want to Seceed and form their own New Country, there is no “Legal” means for them to do so in a Peaceful manner.

    Quote from: John F. Kennedy

    “Those who make peaceful revolution impossible will make violent revolution inevitable. ”

    Welcome to the Hotel California, where you can Check Out but you can never Leave.

    The other thing that perpetually surprises me is that even when 10s of thousands or even MILLIONS of their Countrymen are out in the Street in Protest that the Gestapo will continue to Follow Orders and beat the shit out of women, old men and dogs too. Amazing what people will do for a Paycheck, eh?

    Anyhow, besides the Gestapo continuing to beat heads, fire rubber bullets and tear gas etc, according to Ambrose the Army is threatening to try for Treason anybody who pushes for Secession. Trying Civilians in Military Courts is ALSO considered “Illegal”, but apparently that Legality isn’t as important as the No Referendum/No Democracy Legalities.

    Sadly of course for the Spaniards, Seceeding won’t solve their problems at all. The Catalonians boast that if they were Independent they would be among the Top 50 Exporting Countries of the World, but they NEGLECT to mention that they also are and Oil IMPORTER. They can’t Export enough to pay for the Oil they Import, that really is the problem in all the Industrialized countries and why every one of them runs up endless deficits.

    Tyler Durden in his typical Piglet fashion blames their financial problems on Goobermint Corruption and Socialism, even though in theory at least he is aware of Peak Oil and the Energy requirements of running an Industrialized nation. Although just about every Goobermint is Corrupt, that is not the real source of the problem. The source of the problem is that once the Oil gets too expensive, one by one entire Nation States lose access to Credit to buy said Oil. Becoming an Independent Nation State won’t solve that problem for the Catalans, in fact it will make it worse.

    Catalans aren’t any more prepared to go back to Lights Off Horse and Buggy time anymore than anyone else is. Changing Goobermints won’t help their situation, by Peaceful OR Violent means. It just accelerates their slide into the Abyss.

    Will anyone in Power ever stand up and Speak the Truth here? I guess not. Sad situation indeed for the Catalans now, and for everyone else in the industrialized world also soon enough.

    Coming Soon to a Theatre Near You.

    RE

    1. steve from virginia Post author

      This didn’t help:

      Oil fell to a seven-week low as Federal Reserve Bank of Philadelphia President Charles Plosser said a new stimulus program probably won’t boost growth.

      “Conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed’s credibility,” Plosser said in the text of a speech prepared for delivery today in Philadelphia.

      http://www.bloomberg.com/news/2012-09-25/oil-climbs-as-home-prices-in-u-s-increase.html

      Similar misgivings in the EU regarding the ECB. Without effective central banking … what is there?

      Easing has become a form of background noise … the central banks have become ineffective.

      1. Reverse Engineer

        Agreed, the CBs are virtually Impotent now. They can only push out Funny Money at the Wholesale level to the TBTF Banks. They CANNOT force said banks to further loan out the money into the Real Economy, where every Investment now is a LOSING investment. Only in complete Command Economies like China can the Politburo MANDATE that money gets pushed out this way, but all it does is lose the money faster when they do that.

        As the general industrial economy winds down, the unfunded liabilities fo Goobermints in Pensions and Health care become ever more onerous. Perhaps they can keep this going a while longer with Naked Printing, but so far the main CBs have not gone down that route yet. If/When they do, it almost certainly causes loss of faith and the Hyperinflationary scenario to take place.

        It’s definitely coming to the End Game now. HOW LONG though till the Big Run for the Fire Exit? Month? Year? Decade? This remains the toughest question to answer.

        RE
        http://doomsteaddiner.org

      2. steve from virginia Post author

        RE, there is no ‘money’ to loan, it simply does not exist.

        What the Fed offers is a ledger entry onto a bank’s account at the Fed. The only way this ‘money’ can be ‘spent’ (loaned out) is if there is a bank run. It will then be used to satisfy (some of the) depositor redemption demands.

        It is as if the Fed credits $100,000 to your checking account … but you aren’t allowed to touch it. If the bank fails you can remove … what you had in your account in the first place … before the $100,000 mysteriously appeared. If you had $50 before, you get $50. If you had $100k, you get yr $100k. The Fed credit is in the form of a guarantee … for your deposit as well as others.

        Not only are these ‘monies’ phantoms, the Fed cannot ‘leverage’ or put more into banks’ accounts than the banks offer to the Fed as collateral. If a reserve bank leverages itself it is no different from ordinary commercial banks that do the same thing. If all the banks are leveraged and all have bad loans (which they do which is a reason for the crisis) it means there is no lender of last resort.

        This is why there are bank runs around the world right now: there are no effective lenders of last resort. This is also why Plosser’s remarks are so devastating. Loss of credibility = fatal error.

        If the central banks leverage, the system dies due to depositor flight. If the central banks do not leverage the system also dies due to credit strangulation. We’ve reached the end of the gangplank.

        As for the collapse, it began in Greece last year and was well underway in March of this year. Spain is going, next up Japan and China. It’s all energy prices. Our waste-based economies cannot swallow the high prices and (pretend to) make profits. In that light the real ‘collapse’ began in 1999, (before I owned a computer or was making finance predictions).

      3. Reverse Engineer

        No computer in 1999?!?!?!? Geez, had a TRS-80 from Radio Shack back in the Jurrassic Period. By 1995 I was moderating boards on AOL. Talk about psychos! I have a Yahoo Group which has messages on it going back to 1997 or so. However, collapse didn’t really start coming off my keyboard until Katrina, but the real Kicker was Bear Stearns. Been all collapse all the time since then.

        Anyhow, I realize the money is Fictitious, but as long as Goobermints keep issuing Bonds, the CB has “Collateral” to loan against. And what Country will STOP issuing Bonds? They can’t, becuase they can’t pay for anything without a constant stream of new money coming in.

        The Jig would seem to be UP when the ECB won’t take Spanish Bonds as collateral or Da Fed won’t take USTs as such, but why would Da Fed stop taking USTs as collateral? Then it is Game Over.

        Anyhow, it still makes it hard to finger exactly when you’ll see a currency collapse of the Yen, Euro or Dollar.

        RE

      4. steve from virginia Post author

        Regarding US Treasury bonds as collateral:

        – There isn’t an unlimited supply of USTs/collateral (‘good’ collateral), government borrowing is also subject to diminishing returns and effects of First Law.

        – It is the change in the quantity of USTs available that matters: that is, the change in the marginal amount of ‘money’ that is borrowed. A change that is large enough to make a difference in overall US economy would be beyond the effective capacity of the central bank. The reason the government can borrow as much as it does is the diversity of lenders, not the capacity of any single lender. When one lender becomes the market … there is no market, the participants all lose credibility.

        – Collateral being accepted currently is ‘mortgage backed securities’ which are likely private label, the ‘real’ or underlying collateral is millions of overpriced tract houses in dying suburbs across the country. The Fed is the fool in the market, not its master. Everywhere the Fed and other central banks turn there is a morass. With each passing day the idea of the central bank/monetary policy as some sort of ‘savior’ erodes. Behind the CBs there is nothing. The governments can issue currency … the window for that sort of action to be effective is rapidly closing. Governments as well as central banks ‘sell’ confidence and credibility. In Washington, DC and elsewhere what is in the shortest supply is credibility.

        Things are crashing fast enough, thanks. As for a ‘big reset’, I doubt it is going to happen the way a lot of people imagine. What you see in Spain and Greece are what is on tap for the rest of the world. Biggest problems will be in poor countries that lose functioning government services combined with environmental breakdowns: floods, droughts … effective secession, power blackouts, lack of potable water, food shortages, economies reverting to barter, increase in dependence upon overseas charity … this leading to civil uprisings and then regional low-level conflicts over basic resources. Then … more AIDS/HIV, more tuberculosis, more malaria (all drug resistant), then, bankruptcy of Europe and China, Japan, fuel shortages (which will be permanent and be the introduction to stringent fuel rationing in the US and elsewhere).

        Fuel vicious cycle (which is underway now) will put airlines/shipping companies into bankruptcy, the outcome will be the same as Smoot-Hawley without the need for any pesky legislation. If you want shoes there will be no more shoes shipped from China, you will have to find someone nearby who makes shoes. A signifier for the recession to come will be worn out shoes, everyone will be wearing ruined shoes because it will take a long time for a domestic apparel industry to emerge. Plus, everyone will be walking a lot more.

        It is hard to say how long the current Internet will remain. It is likely to become more like the the old text-only network, not much effective bandwidth, a lot more monitoring. It will also cost a lot more as the current ad-based model unravels.

    2. dolph

      It’s protection of turf…tribalism at every and all levels.

      I grew up in a family of 4, one sibling. My parents were boomers, they each had 4 siblings. And we are all mostly prosperous, I remember vacationing to their homes across America, having good times in childhood with all of my cousins. To this day I’m still expected to drive or fly hundreds of miles to show up like the good, well behaved family member whenever there’s yet another wedding.

      Despite all of this, I have absolutely no doubt in my mind that if I was starving and bleeding to death in a gutter, no cousin or aunt or uncle of my mine would bat an eyelish. Only my immediate family and a few friends would care.

      Sad, but true. Look, I’m one to look reality in the face, which is why I understand what’s going on.

  13. The Dork of Cork

    The IEA mention Italy again in their September report.
    Total oil demand “with 17 months of continuous contraction (-7.9 % average) ( -5.5% July)”
    Something very dramatic is happening in Italy.
    Diesel consumption (work) points the way again…..into the abyss.

    omrpublic.iea.org/demand/it_dl_ov.pdf

    It was a victim of “structural adjustment” during the 90s under the first Marios rule with little capital investments so as to sustain interest payments to sov holders and prepare itself for the Euro malinvestment nightmare.

    So it is a very different set up to the oil / credit hyperinflation of Ireland 1987 -2007.
    From its 2005 oil peak Ireland has dropped its oil consumption by 30%~
    If Italy drops it oil consumption again by lets say 30% what exactly happens ?

    Do ferries to Sardinia stop dead or what ?
    I do know that Corsica has done well this summer as the rich encamp on that island , perhaps it was somewhat similar on Sardinia but for how long ?
    As long as those people on Motor yachts get paid in full I Imagine.

    Germany is also showing sign of oil consumption weakness

  14. Sandor

    Did anyone else notice that Spain proposed to ‘borrow’ €3 billion from the government employees pension fund as part of its 2103 budget? Welcome to the future. California will resort to this move in the next few years. Then Illinois, etc. Ultimately the US gov will do the same. The unintended consequence of this is a breakdown of trust in institutions. Less trust = less credit = deflation/depression.

    http://online.wsj.com/article/SB10000872396390443916104578021692765950384.html

    {In addition, Spain’s new austerity budget, plus the announcement it will take around €3 billion from the state’s pension reserve fund, could spark a new political backlash toward the government.

    “This will be the budget of [economic] depression,” said Inmaculada Rodríguez Piñeiro, spokeswoman for Spain’s largest opposition party.

    “This is the first time the government uses the pensions fund,” she said, adding that her Socialist party will oppose the effort.}

    1. steve from virginia Post author

      Scraping the bottom of the barrel …

      You have to wonder where the technology is … that is supposed to save everyone? Deploy the senior citizens!

      Life imitates Monty Python …

      1. Phlogiston Água de Beber

        Ah, Monty Python, my candidate for the 20th Century’s finest achievement.

        The technology to save everyone was cancelled in favor of the technology to destroy everyone. Even the creditistic system couldn’t afford both. The reality oriented former Pentagonal Province analyst, Franklin Spinney makes some very good points in this article posted on the late Alex Cockburn’s Counterpunch website.

        When the barrel is empty, there is nought left to do, but scrape the bottom. If senior consumers have to add starvation to their naturally ordained discomforts, well that’s life, in this best of all possible worlds. In compensation, they should expect a merciful end well before their offspring.

        In large part the barrel is empty for the reasons Spinney cites.

        Military Keynesianism — i.e, shoveling money into weapons manufacturing — certainly worked in WWII, and it may have worked more modestly in the late 1940s and the early 1950s, although given the anguish of Eisenhower’s farewell address, my guess is that he may have thought Military Keynesianism created more problems than it solved. Whether or not that was the case by 1961, one thing is clear from Figure 2 in this regard: Throwing money at the Pentagon over the last 30 years has been a total bust in terms of stimulating any growth in manufacturing employment, not to mention Military Keynesianism’s complete failure to re-igniting anything remotely similar to a virtuous cycle of prosperity begetting prosperity.

        There is a reality-free normalcy now driving American politics. Both parties would rather fiddle with Karl Rove’s soothing “create-your-own-reality” political meme than douse the ideological fires of neoliberalism that are torching the American economy and impoverishing the middle class. With politics this boorish, is it any wonder that people are tuning out? A better way for understanding what ails our political class would be to begin with one of the most elegant quotes in Gibbon’s Decline and Fall of the Roman Empire, because as he explained … “Their credulity debased and vitiated the faculties of the mind: they corrupted the evidence of history; and superstition gradually extinguished the hostile light of philosophy and science.”

  15. The Dork of Cork

    Some records set during the UK Q2 period in its balance of trade and current account figures.

    Current account Net

    Trade in Goods : £ -28.1 Billion ( largest deficit ever recorded)
    Trade in Services : £+ 17.9
    Income : £ -5.2 Billion (largest deficit ever recorded)
    Transfers : £ -5.5 Billion

    Current balance £ -20.8 Billion (largest deficit ever recorded)

    meanwhile Ireland posted a record current account surplus of over 3 Billion in Q2 and even Greece had a current account surplus in July.

    Do we have a lack of settlement problem ?
    Is the PIigs bailing out The City of London ? – it sure looks like it.
    Everything post 1986 and their Big Bang soon to be followed by the infamous 1990 “Dash for Gas” has been a Disaster.

  16. The Dork of Cork

    •The United Kingdom’s (UK) current account deficit was £20.8 billion in the second quarter of 2012, up from a revised deficit of £15.4 billion in the previous quarter.
    •The trade deficit widened to £10.1 billion in the second quarter of 2012, up from £8.1 billion in the previous quarter.
    •The income deficit widened to £5.2 billion, up from £1.9 billion in the first quarter of 2012.
    •The financial account recorded net inward investment of £11.1 billion during the second quarter of 2012.
    •The international investment position recorded UK net liabilities of £325.8 billion at the end of the second quarter of 2012
    Now that the city cannot run oil through the PIigs and get a yield off the waste production it must try to push these sad little countries into current account surplus.
    Ireland has posted its biggest current account surplus ever and even Greece acheived a current surplus in July.
    I am all in favour of Fiat currencies withen the confines of defined political borders but its the banks which provide the mechanism of final settlement….they have engineered a system where there cannot be final settlement.

    All Countries must always be a state of permanent Bankruptcy so that the city can live the life it has grown accustomed to.
    Now all cities must always be in trade defecit to their hinterland but if they cannot come up with any worthwhile ideas there is no need for cities.
    I imagine This was the reason for the Breakdown of Roman Rule.
    Eventually People embraced the Dark ages as at least they could get on with their short brutish lives.

    Thinking of investing in a Iron Age hill fort (the Iron ages only really fully came to Ireland during the Dark Ages , funny that)…….despite the destruction of the landscape many remain in Ireland.

    Bring on the 6 th century for a rest.

  17. The Dork of Cork

    UK Balance of trade in oil

    Y2009 : £ -3,426
    Y2010 : £ -4,719
    Y2011 : £ -11,509

    Y2010 Q1 : £ -358
    ….. Q2 : £ -701
    Y2011 Q1 : £ -1,547
    Y2011 Q2 : £ -2,243
    Y2012 Q1 : £ -3,092
    ….. Q2 : £ -3,544

    Is the Euro crisis merely a City of London malinvestment crisis projected outward towards its Vassal Euro States.

    Part of its physical trade deficit can merely be Artwork , precious stones , silver etc (gold is top secret and is not shown on the trade books) But we are clearly locked within a settlement crisis within Europe.

    The IMF closed down the UKs Boffin culture in the 60s and 70s. What remained was Grot. Its not quite as clear as you make out Steve.

    The UK had a wealth of resources in the 80s…..the elite running the gaff may have had a Reggie Perin like moment..bored with life they decided to run stuff into the ground…..to their amazement things kept working until now.

    http://www.youtube.com/watch?v=fWpVJU1K2-c
    http://www.youtube.com/watch?v=bA7Acz-UPI4

    (Edited)

  18. The Dork of Cork

    The real goods trade deficit (inc oil) of the UK was a record £100 billion in 2011.
    Trade of goods balance : – 88,505m
    Trade of oil Balance : – 11,509m

    Is Europe a victim of unsustainable international trade /energy connections which reduces rational internal / national demand and rational investment ?

    If you compare this to the year 2000
    Trade of goods balance : -39,512 m

    Trade of oil balance :+6,536m (peak)

    And Y1991

    Trade of goods balance : -11,497m
    Trade of oil balance : + 1,274m

  19. brazilian horse

    it seems to me Goldfajn and Felipe are, as the Brazilians say, ‘viajando no maionese’ (traveling in mayonnaise). could be Itau, a big bank, is ‘vendendo seu peixe’ (selling their fish)? anyway, if their forecast is based on stuff like this, ……(shoulders shrugging, hands up:-)

    http://brazilianbubble.com/forecasts-for-brazil-in-the-new-global-context/

    Forecasts for Brazil in the new global context
    By Ilan Goldfajn and Felipe Salles (via Itau BBA)

    “…..In the U.S., we do not expect the economy to fall back into a recession or to have a strong recovery. Aggressive monetary expansion adopted by the Federal Reserve was able to avoid deflation, which could have complicated the aftermath of the crisis. Just as high inflation reduces the real value of debt, deflation hinders the deleveraging process. Unemployment remains high, but nothing compared to what followed the crisis in 1929. The budget deficit needs to be reduced, but there are no doubts about the government’s ability to honor its debt.

    The private sector advanced toward the necessary adjustments to resume sustainable long-term growth. The balance sheets of banks and companies are relatively healthy, while households increase their savings and pay off debt. Real estate prices stabilized, the inventory of properties for sale declined and demand started to show signs of life.

    The problem is that a large part of the adjustment in the private sector was shouldered by the public sector. The stock of public debt increased, the public deficit rose and the Fed’s balance sheet widened significantly. The public sector’s adjustment still needs to be done, and uncertainties linger. For instance, will the Fed be able to reduce its balance sheet when financial conditions normalize completely? The risk is higher inflation in the future.

    The outlook is for low but steady growth: on one hand, the necessary fiscal adjustment gets in the way of the rebound; on the other hand, at some point, the currently-stagnant construction sector may go back to normalcy, stimulating the economy. ……”

  20. The Dork of Cork

    The Irish economy blog has a piece about a IMF paper “External Imbalances in the Euro Area”.
    Okay (Ireland is) “in the Euro area” but the UK’s truly massive real Goods deficit is not even given a few lines

    Weird stuff.

    Does the IMF only pick Austistic economists with no understanding for political or physical geography.
    I mean the last time I checked the UK was part of Europe and stuff.

    (Edited)

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