March of the Pigmen …

Apropos to being outed as a Pigman in the hillbilly infested hoots and hollers of Tennessee darker corners of the Internet, here is an article in FT Alphaville regarding the subject nearest and dearest to pigmen’s hearts everywhere: GOLD.




As gold is the ultimate fetish object it holds to reason that those who own gold or pitch it online are pigmen and that those who don’t, aren’t … they are the chaste and proper ‘Anti-Pigmen’ such as those who grace the pages of the Financial Times.

… if irony cannot be found here it does not exist anywhere in the universe.


Man walks into a gold bar. Au!

By the lovely and brilliant Izabella Kaminska,

Part of the Cash-for-Gold series:

FT Alphaville participated in a “Gold Bulls vs Bears” event hosted by the Association of Mining Analysts (AMA) on Wednesday.

The motion being discussed was:

Is gold’s role as a safe haven asset in the global financial system outdated and redundant and if the ubiquitous QE programs have been successful and the global economic upturn is confirmed, the price of gold will continue to struggle?

FT Alphaville was on the bear team with Tyler Broda, from Nomura, and Robin Bhar from Societe Generale.

On the bull team there was Sharps Pixley’s Ross Norman, MoneyWeek’s Dominic Frisby and Edison Research’s Charlie Gibson.

The bears lost the motion.


Mwaa-hahahaha! Frisby is a stand-up comic … the bears lost a highly technical finance argument to a television personality! How embarrassing … like losing a courtroom argument to Fred Davis … or the Italian establishment doing very much the same thing.


Goldschlager 1


This was the consolation price, Izzy drank it all. What the winners received is not mentioned. Probably cases of beef jerky.

Sez Izzy:


Since we (the Alphaville side) now have the platform, we’ll unashamedly reiterate the bears’ case. Any gold bull rebuttal that actually makes logical sense (you’ll be working to convince independent adjudicator Jamie Chisholm) has a chance to win the Goldschlager.

SocGen’s Robin Bhar made three stellar points:

– Where is the inflation?

Simply put, the current gold price appears to be discounting a huge, sustained increase in inflation over the coming years. For example, we can calculate the required annual US inflation rate over the next five years that would justify the current gold price (using 1968 as the starting point): US inflation would have to run at an overwhelming 45% per annum for the next five years.

But inflation is subdued. Gold prices have soared in recent years despite the fact that US CPI has stayed below 4% for the bulk of the time.

– The dollar’s strength and US growth:

The US economy currently offers the best potential for stronger-than-expected growth. This suggests a stronger US dollar in such a scenario with its obvious impact on gold.

– The end of QE:

And now we are beginning to see: 1) the economic conditions that would justify an end to the Fed’s QE; 2) fiscal stabilisation that has passed its inflection point; and 3) a US dollar that has begun trending higher. Ot seems unlikely that investors would want to add much to their long gold positions in this context. If so, the gold price would trend lower at pace as the physical gold market is seriously oversupplied without continued large-scale investor buying. Selling by investors would add fuel to the fire.


The inflation argument has just torpedoed itself! The pigmen score! “Gold prices have soared despite!” There is no direct relationship between gold prices and inflation only a correlation. The gold price discounts all sorts of risks including inflation … which in its virulent form is a default or a policy choice of managers … as was unloaded upon sleeping Cypriot bank depositors a few weeks ago.

Ask Bank of Cyprus depositors whether they would have rather had their now-severely-diminished or unavailable bank accounts or gold instead. “Gold is too expensive!” howl the bearish anti-pigmen, but how expensive was not having any? Sometimes people cannot see the current lessons being given right under their noses.

The ‘inflation-is-kaput’ argument presupposes the United States or the EU make up the entire economic world. There is deflation in Europe and Japan, at the same time there is inflation in China, India, Argentina and Iran and elsewhere. This is due to hot-money flows and restrictions leading to foreign exchange arbitrage, that is, there are different exchange rates between the public- and private sectors within these countries in addition to wage pressures. The consequence of the harder dollar is more arbitrage in these countries rather than less, more and stronger inflation … along with increased demand for gold.

Bhar’s second argument assumes US ‘growth’ is meaningful and is re-pricing the dollar rather than deflation, fuel shortages and the flight-to-safety. Growth in the US is disconnected from physical reality. The US is the healthiest patient in the cancer ward. Graded on its own curve: labor force participation, gasoline- and electricity consumption, goods imports have all declined; the demand for government supports such as food stamps and disability relief has increased. The remaining ‘growth’ component to the US economy is the debt-supercharged stock market … a rise that suggests currency weakness rather than strength, by the way …

The physical economy offers investors little- or nothing in the way of returns, only non-stop capital destruction and fleets of creditors demanding repayment-or-else. What remains is speculation in finance markets where gains are dearly bought with moral hazard.

Meanwhile, the economic conditions on the ground in the US and elsewhere are unrelated to QE which is an exchange of assets between banks. What is pounding the world’s economies to rubble is not the cost of credit but rather the relentlessly increasing real cost of petroleum fuel. It’s hard to find fiscal stabilization anywhere, governments are playing catch-up trying to bail out bank investors and themselves at the same time they encourage more petroleum consumption which makes everything worse.

Bhar suggests there is excess gold inventory.

Gold-Comex Holding 051713

Figure 1: Gold disappears from the Comex metal vaults/JP Morgan, (Tekoa Da Silva-Nick Laird-Sharelynx): maybe it’s not seriously over-supplied after all (click on for big).

Keep in mind, the amount of gold does not change except for small increases year over year due to mine output, less what is lost in boating accidents. What changes is ownership, from merchant pigmen to whom gold is another transferable good to hoarders who are resistant to selling pressures. In order for an investor to gain gold he must either trade with another … or he must borrow. Bhar suggests that increased private sector lending renders QE unnecessary. More credit is just as likely to support the price of gold … as it would any other asset. Bhar argues gold prices will collapse, why should they? A rising tide lifts all boats including those made from solid gold.

Enter Nomura’s Tyler Broda. According to Izzy, he is … “focused on flows and changing tastes:”


… he said it’s unlikely that the gold market can continue to sustain the investment demand needed to take the price higher:

Investment Demand 051713

Figure 2: Investment demand (FT Alphaville-Izzy Kaminska-Nomura): Whom to believe, Broda or his own chart? His only possible argument favors one asset class over another. If overall investment demand collapses as suggested by the chart there will certainly be solicitous central banks offering more cheap credit. Remember, pigmen always come first!


There was also a question of evolving tastes. Who really would want to be seen in the same shirt as their father?

Bond Nehru 1

James Bond’s Nehru jacket … Why not?

Sez Broda:


– In the scenario of a US recovery, and an associated appreciation of US dollar, most gold demand categories could weaken after 12 years of bull market growth.


Just as there are other investment reasons to own gold besides dollar depreciation.


– Investment comes under pressure (and even puts supply back on the market as is happening now) with normalising interest rates.


Broda can’t have it both ways, either gold is an investment or it isn’t. If it is, there is no reason for gold investors to behave differently than other investors. Under the hide, all investors are pigmen, even if the investments are cases of 9mm ammo, canned beans or composting toilets. Meanwhile, normalized interest rates are unaffordable, credit has painted itself into a corner.


– Commodity currencies weaken thereby lowering the cost curve support.


Commodity currencies are repriced relative to each other for many different reasons that often have little to do with interest rates. For instance, supply and demand — currency float/liquidity during a particular period — as well as marketplace momentum chasing and front-running affect currency prices.


– Lower gold prices mean less equity market interest in gold production, so debt and private equity financing increases which could lead to a return of hedging (adding to current supply).


Hedging adds to the supply of claims against gold, it cannot add the gold itself. Problems begin when the hedges are unwound and the claims are exercised. When there is less gold then claims are either worthless and extinguished in bankruptcy or they become bidding licenses.


– US dollar strength, reshoring and lower energy imports, reduces the size of EM trade surpluses, which could see EM central banks not accumulate gold at as fast as recent levels.


Exporters have currency reserve positions that are illiquid due to their size. There is little to buy with these reserves other than different currencies, debt or resources (capital). Gold is appealing because it’s different: it’s the resource that isn’t burned up for nothing.

There are lower energy imports in the US and elsewhere is because customers in these places are going broke and becoming ex-pigmen. This in turn adversely effects money supply, the EM’s forex reserves become stranded. This is not a problem with gold, instead the issue is EMs finding enough of it to buy … to do so without blowing the price sky high.


– Longer-term, jewellery demand could be negatively influenced by increasing sophistication within the emerging market economies.


Then again, it might not …


– The further adoption of globalised tastes means the affinity towards gold could ebb.


Tastes change in unpredictable ways, however, the Pharaohs 3,000 years ago wore gold jewelry like brides in India do today. A difference: there are far more brides now than there were Pharaohs, then.


– Gold’s dynamics are cyclical in nature. In this scenario, after these trends take hold, there will come a time where lower mined grades, continued nominal income growth (especially in Asia) and a return to investment demand push gold prices higher. However, with the market having built up $250 billion in investment demand alone over the past 4 years, supply and demand suggest the risks are still to the downside.

With respect to any increase in hedging, he added this would naturally bring forward tomorrow’s selling pressure to today, adding to current liquidation pressure.


Today’s selling pressure looks to be the result of margin calls by massively over-leveraged European banks as best-collateral is liquidated first.


– FT Alphaville pointed out that gold’s time as a safe asset had come and gone mostly because of technological evolution.


Add buzzwords here … ‘fill-in-the-blank technology’ … is going to save us all, blah, blah, blah …


– Gold certainly used to fulfill a store of value role in deepest darkest history because at that time there weren’t many other means to independently verify and record social liabilities. Gold was often the only common denominator between communities that did not know each other due to its fungible state and relative global scarcity.


2013: a ‘mark to fallacy’ world filled with shaggy-haired, moth eaten debts, most of which will never be repaid … what are the social liabilities worth, exactly? Nobody can verify what institutions hold on their balance sheets now; only a form of self-interested desperation is what is keeping the various components of the establishment knit together under enormous strains.


– But its value always lay in what it represented: a social liability. Debts and favours have always come before commodity money.


Broda says gold is poor quality money … compared to what? Keeping accounts straight is never the issue, for that purpose all forms of money work the same.


– Gold was an obvious token to be used to represent social wealth because only a wealthy society could justifiably waste its time doing something so pointless as digging up gold.


Somehow, digging up a trillion barrels of oil, then burning them all for nothing by driving aimlessly in circles while poisoning the atmosphere at the same time is not pointless!


– In that sense gold was naturally associated with free time and social standing.


So are a lot of other things … Goldschlager, vacation homes, mega-yachts, Rolls-Royces … so is finance in general. This is Financial Times for crying out loud, the discussion is about rentier assets not alms for the poverty stricken! At issue is relative pig-mannishness … or is it relative pig-mannery?


– But even in Roman times gold was mostly used as a last resort settlement option between strangers and foreigners only. The Romans actually had a very evolved debt-based system, with coins representing a memory device for social debts in an age when liabilities could not be verified with electronic ledgers.


Broda just torpedoes his own argument over and over. Gold did indeed exist as a tradable asset alongside credit … as it does so today. Markets have not changed, there are same funding sources, same pigmen; some of wallow more comfortably than do others.


– Those who believe gold has value beyond what a gold coin represents in the context of a wider “paper” liability based system suffer from the “Emperor’s New Clothes” delusion.


That’s another hole under the waterline. As a natural resource, gold has value, it is capital.

Unlike money, gold is non-reproducible. Our industrial money is value-negative, that is, it destroys value. Money is capital’s residue: it annihilates capital so as to substitute worth in the place of resource value. Or money creates perverse incentives: it enables those humans who destroy capital to live better than those who do not. Here is our ongoing crisis – slash – omnicide that is taking place right now! The human race requires intact capital not its residue; credit brings capital destruction forward. We congratulate ourselves for our cleverness: we have destroyed our grandparents’ capital and our parents’ … we are devouring our grandchildrens’ and theirs in turn. What will be left for them besides empty promises?

It is not gold … nor is it the perception of gold’s abstract characteristics … that argues against liability money, rather it is the ordinary operation of our day-to-day business which does all the heavy lifting. We sit back and watch the destruction taking place all around us helpless to do anything about it because of the hold our swinishness has on us!


– Unless gold turns out to hold the key to eternal life, its utility is non-existent (outside of some small use dentistry or the chemical industry).


How hyperbolic! Gold is expected to transcend physics in order for it to outperform credit even as credit is unable to outperform itself. If it were otherwise — if credit could simply meet its own costs for longer than a few measly years — there would be no finance crisis. Instead, we are enduring the abysmal success of credit money, which has pitched our economies at the edge of the pit.


– As Warren Buffett famously reflected about the absurdity of the gold market: we take something out of the ground only to immediately rebury it.


Buffett, the Ultimate Pigman …


Gold Royce 1


I am Pigman, hear me roar (Yahoo)


– Which is why in a crisis people defer to objects of real utility for social exchange: cigarettes, favors, food, shelter, medical services and medicine.


… when they don’t have any gold. This last remark could be rephrased, “in a crisis people prefer real objects over airy abstract promises from con- pigmen”.


– If gold has value it’s because its abundant supply is being constantly manipulated by hoarders who suffer collectively from the same gold delusion.


Don’t start with central banks’ currency tricks and moral hazard, the pot calls kettle black!


– Roman gold hoards are a good example of this absurdity. They exist mainly because the Romans who buried those hoards never rediscovered them. The hoards were hardly a good insurance policy for them.


Nobody knows about the Roman gold hoards that were dug up by the Romans themselves …


– A social obligation authenticated by peers, however, cannot be lost as easily.


Another self-torpedoing: Peers authenticating credit is okay, but the same peers authenticating gold is not okay … enter the pigman attempting to appear to be something other than what he is! Gold = Pig. AAPL also = Pig.


– Thus if gold’s value went up during the crisis, it was only because temporarily people were reburying gold more quickly than they were unburying it.


Hmmm … that one sounds vaguely … Keynesian …


– But even at this time, the key trade was cash for gold, not gold for cash. The real commodity being demanded was in fact the cash. This created a delayed liquidation effect, as more gold became financialised and hedged by the industry lifting the price of the free-float.


“A man has two reasons to do anything, a good reason and the real reason.” __ J. P. Morgan


– In conclusion, we commented that gold’s value rests entirely on a belief system as zealous and subjective as any fundamentalist religion …


… like all other assets including credit money. All money is a mutually agreeable understanding with the past predicating the future. Gold has as good a record in this regard as any other form of money … or any other asset, for that matter.

The anti-pigman argument is that gold isn’t as ‘efficient’ an investment asset as others that pay dividends … that is, unearned income. The pigman counter-argument is gold carries less risk than other dividend-paying assets such as shares. Anti-pigs cannot argue that dividend-paying assets or other asset regimes carry little risk, even as least-risky of these assets are being crushed by policy on one hand, energy depletion-driven deflation on the other. Religion has nothing to do with behavior of money and money-users, rather it’s the very reasonable disillusion with religion.


– What’s more it’s a belief system that is driven by selfish and anti-social instincts, obsessed with concentrating wealth among the few on the arcane notion that gold’s value is somehow a constant in a world of variables.


The stock, bond, real estate markets are belief systems driven by selfish and anti-social instincts, obsessed with concentrating wealth among the pigmen!


… But there is no constant value system in a social system. Everything is relative.


When everything is relative, the anti-pigman argument vanishes, it can only take form where there is at least one constant as a reference point. One is either pregnant or not. The anti- constant is GDP growth in industrialized economies … a slender string indeed.

A few other things to keep in mind:

– On Ebay gold is ±$1,800/oz. More or less the same as it has been since end of 2011.

– Gold will depreciate when Picassos depreciate and not before: both are collected by Pigmen who can afford them regardless of price. Whatever is said about the investment worth of Picassos can be said about gold, after all, they are nothing more than bits of paint smeared onto pieces of cloth.

– Unlike petroleum where the high price is economically destructive, a high price for gold is economically irrelevant. $5 gasoline in the US = a severe recession or depression, $50,000/oz gold would not trigger anything but celebration among pigmen.

– Gold offers zero-returns, negative when cost of carry is added … the world’s risk-free securities offer nothing better.

– Gold can be exchanged directly for goods such as real estate. These sorts of barter trades occur outside of ordinary finance markets, traders therein cannot gain their accustomed percentage, the traders do not like these trades and they don’t like gold.

– At the same time, gold is held largely by the wealthy pigmen and central banks. Do they know something the rest of us don’t?

– Choice: do you keep wealth in gold … or as cash in a bank where it can be ‘bailed in’? There are more kinds of risk outside that of inflation. Unlike a national currency that is specific to a country, gold is portable, fungible and readily exchangeable everywhere in the world.

– The folks promoting OECD economic recovery are pro liars and media propagandists. Europe is in another recession and the US economy is misrepresented by ‘official’ figures. Even China is hiccuping.

– Japan’s trade deficit is deadly poison for Japan and for those who hold its paper. The yen is on a knife edge, JGB yields look to increase, the next step is a funding crisis both inside and outside of Japan. Inside; funding of the government’s interest burden and ordinary citizens’ purchases of imports, outside; to fund the yen carry trade (hedge). There will either be a flood of yen in circulation due to Abenomics’ success or too few due to its failure. Either one- or the other will occur, Japan’s trade deficit requires it.

Japan’s customers are now too broke to subsidize Japan’s mercantile economy any longer, they cannot subsidize themselves and their own wasteful consumption.

– What are (sovereign) securities really worth? (A: what Jim Cramer says they are!)

– The alternative collateral to gold is … what exactly? Non-gold collateral includes shiploads of bad loans spirited from the private sector onto the central banks’ balance sheets. Nothing is improved, nothing ever has been improved only papered over with new loans: finance is insolvent.

– The German government asked the US and France to return … something. Was it lederhosen? Cuckoo clocks? Porsche hub caps? Pigmen within the German government set their gold-retrieval process in motion: ‘Law of averages’ suggests not all the German government pigmen are daft.

– Market call: gold is a natural resource, like the others, it’s real price — that relative to other goods and services — will relentlessly increase.

There is more … more always more. More is the nature of Pigmen to always require more. Izzy can send the bottle of Goldschlager over here, at her convenience.

NOTE: All the non-book comments on the previous post will be brought forward over here.


105 thoughts on “March of the Pigmen …

  1. The Dork of Cork.

    A poor article about Ireland on Automatic earth.

    He does not quite get the history of Ireland in the late 17th and early 18th century leading up to the great famine some few decades later.

    Wealth existed in Ireland (although was very unbalanced with small intermediate sized famines) in the 1700s …..the remaining buildings of Georgian Dublin attest to that.
    There was a population bulge from that time of prosperity that was kept going during the false war boom of the early 1800s.
    The spuds was just one of the mechanisms for growth.
    After that time period people remained but no longer became viable economic units.
    The Irish population was threading water for the last 20 or so years before implosion.
    The crisis actually reached its political peak during the agrarian Rockite rebellion of the early 1820s although it was a military farce as France no longer existed as a military foe of England.

    The Irish population has increased by 1 million~ since 1990 which is very considerable for a small country and is indeed the largest % population increase in Europe during that time period.
    25%~ of Irish mothers are now of a non national background.

    These rises in population are a nothing for a country under industrial growth but Ireland is being driven into extreme surplus as during the middle years of the 19th century.
    The final years of the 19th century and early 20th century was good for Ireland on a relative basis (but only in rural areas as working class slums in Ireland were terrible)
    Its just that the world was very globalized back then – many Irish (second and third sons ) left for America and England to find greater riches.
    The Irish war of independence was really a farmers revolt down south – much like during the 1820s they lost income when the boom went bust.
    Given that the UK was more or less destroyed after the Great War they won a marginal form of independence.

  2. Dopamine

    The path towards systemic collapse should increase as humans are expelled from the cancer that once fed them. The cost of repairing this damage can be added to the natural rate of decay, and may elicit an immune response much like the establishment of Homeland Security in the wake of the 911 terrorist attack and the massive immune response in Boston. Single humans can cause massive on-going immune reactions (yes, this cancer has an immune system) that are out of proportion to the perceived and actual threat. The immune system will watch everyone and be especially vigilant against anything that shows signs of growth and organization. A major corporation watches fired executives for two weeks to make sure they don’t return to their place of employment and shoot someone. Some day a civilizational bee sting may bring about anaphylactic shock. The energy cost is tremendous and will eventually exhaust the civilization, especially ones run on diminishing amounts of net energy.

    It’s unfortunate that we must spend our time in some dark recess of the cancer infrastructure doing a “job”, repeatedly carrying out a limited number of operations that constitute the cancer metabolism. Our systemic organization has demoted us from being human to being operators within the cancer metabolism with virtual friends and family brought to us on T.V. for faux nationalistic kinship. We are no longer a species that interacts with other species on an equal footing, we are a complex cancer organized to maximize the flow-through of resources and energy to the detriment of the body that gave birth to us. This all ends about the same way as metastatic cancer in a human body ends – massive system failure for both the cancer and the ecosystem.

    1. Sandor

      The difference between cancer and the human species is that humans have consciousness and the capability of genetically rescripting themselves, thus changing the rules of the game and behaviour. Cancer, based on third-party reports, simply runs off its DNA program, without any ‘self-reflective awareness’. The humans on earth story is not a fait accompli, regardless of how convinced you of the soundness of your analogical reasoning. I agree with the main thrust of your argument, but will not assign certainty to its conclusions.

      1. Dopamine

        Why havn’t the bearded gutless wonders of academia not pursued this line of thought. Perhaps it would be too damaging to their well-paid careers in the preparation of new crops of cancer promoters (students). Maybe the academics are too busy building slaughter machines for the military or tending to the lucrative business of curing the cellular cancers of humans. The only scientist of note to refer to civilization as a cancer is Dennis Meadows, his openness perhaps owing to his retired status. Cancer cells are not conscious, but neither are humans to a large extent, being unable to place themselves within the context of the natural world from which they arose.

        In any case, after writing about the characteristics civilization shares with cellular cancer, I’ve been unable to sign-in to the The Oil Drum. The word “cancer” makes the amygdala pulse uncontrollably even more so than the foggy prospect of the cancer devouring all resources and disturbing the homeostatic calm. “Cancer” is so much more inflammatory than “Peak Oil” that even its mention must be suppressed. Humans have great familiarity with cancer, its emergence, growth and often-intractable cause of systemic death. If the ecosystem has cancer and humans have cancer, I guess that means we’re both balanced and complex systems, oh my, soulless that be. And it was going so well, all of that growth turned into dopamine-releasing complexity just for one monkey species that wants to live and grow forever. We don’t want to be the killers of the ecosystem like cancer cells are our killers and that’s a problem for our greedy capitalistic growth/death oriented system that seems hell bent upon behaving just like – a cancer.

      2. p01

        Not making an apology for the capitalist system, but the problem is, and has been always population growth. Capitalism had given an increased population something to do on their children`s resources which would have not been burned if not for the debt.
        When having population growth, there must be increase in economic activity; people have to do something.
        While food production increases or food quality per capita decreases (Mr. Meadows advocated this and is now surprised and outraged – we’re a cancer, said the scientist!), there will be population growth, guaranteed by the Laws of Nature. Perhaps it is very hard to accept this simple fact of life on planet Earth. Took me some time, excess alcohol and neuron loss to digest and understand the implications, also, but I did.

      3. Makati1

        Capitalism is the cancer. It demands profits which demand growth which demands resource destruction. We are probably the first and last species to cause our own extinction and in less than .01% of the time the dinosaurs ruled the earth.

  3. The Dork of Cork.

    One of the reasons why Irish youth unemployment is lower then in Spain is that the birth rate in Ireland reached new lows in the early ,mid 1990s
    The domestic Irish women were having less kids.

    Just type in under one year , all sexes and all years.
    The estimated number of kids under one year reached a low of 48.2 thousand in 1995 rather then the current 70+ thousand.
    The 1995 group are now leaving school.

    This current high birth rate is a result of external workers coming into the country – these are generally workers in the 20s to 30s age group …….prime child bearing years.

    1. Ric

      Nice post, Josh. Great selection and wide variety of indices, indicators, and other quantities compared to the 3-month T-bill yield.

      I guess when it comes to the industrial economy, all of us first world moderns are necrophiliacs to some degree.

  4. The Dork of Cork.

    Paris Tramway T6 looks well on the way to completion. (14km)

    Although this inferior Tram on tires was adopted for corporate socialist reasons.

    “Vélizy-Villacoublay is served by no station of the Paris Métro, RER, or suburban rail network. The closest station to Vélizy-Villacoublay is Chaville–Vélizy station on Paris RER line C. This station is located in the neighboring commune of Viroflay, 1.7 km (1.1 mi) from the town center of Vélizy-Villacoublay.”

  5. The Dork of Cork.

    France is such a old anti young peoples place.

    It now costs just 25 euros to get a fast train from the Paris Suburbs to the center of Montpellier………..
    The 4 tram lines converge on the train station and will take you to most of the places in that small city.
    Therefore its more then likely that the few local young people remaining will have more spending power without the need for cars & now with cash flow coming from Paris.

    I guess people have no idea how noisy these Roman places were in Roman times.
    They are now complaining about city life !!!,698354.php

    The shock of young people with a little spending power is just too much for this old society.

  6. Reverse Engineer

    OK Steve, I figured out an EZ way to add a DB Table to a WP Blog for a Book Library. All on my own too, no Peter yet on this one. 🙂

    Go to to see how it looks. There is also a Button on the top of the Homepage of the Diner which links to that page.

    PM me over on the Diner and I will explain to you how to do it. Very EZ, took me about 10 minutes.

    You are Welcome to Share this Library with me, and we can link to it from both Blogs.

    The Table will sort by Field, but it doesn’t have query ability for filtering. You can however export the table as a CSV, make an Access DB then Query to your Heart’s Content.

    Peter is currently looking for a more comprehensive solution, but until he finds one this works well, and later if a better Widget is located we can move all the data via a CSV file.


    1. Reverse Engineer

      OK, I added Helicopter Ben’s Essays on the Great Depression and sorted the Table by Author now.

      Undertowers are welcome to add any entries to this Database.


  7. The Dork of Cork.

    For me Golds bull case orbits all those banking double entry “assets”

    The banks which control the euro states have decided to crush cashflow so as to get it back.

    Gross national income in Ireland went from 37,000+ euros per head to 28,000 euros.

    That is a lot of debt that cannot be serviced and at 9 -10 thousand loss per person each & every year……………..those losses get worse and worse as the debt mostly remains on the books but is kicked to touch.
    I imagine it much the same in Spain although perhaps not quite as extreme as in Ireland.

    Also golds role in final settlement seems to threaten the Anglos in a extreme manner unlike WW1 when the big bank sat over Canadian & South African production.
    The dynamics of the lack of settlement is best illustrated in this paper where national income is in fact worse in Ireland then the figures suggest.

    Therefore according to the logic of the writer we must drive Ireland into a even more extreme surplus.
    This means the losses will be even worse.
    I imagine these global rent flows are directed towards London to be spent in England or on diesel for a yacht in the med.
    But the important bit is that they are spent.
    But this lack of settlement is subtracting from even primary production in Ireland as farmers are refused credit for feed.
    Therefore the losses in Ireland keep mounting.

    I guess as long as the double entry books declare these losses are not real everything will be OK.
    But we live is a sick world where inputs are starved from primary production so as to sail a super yacht in the Med.
    Ireland is now a badly run estate………unlike a well run estate in the 60s & 70s

    On the other hand the bear case for Gold is if they actually begin to kill people on mass.
    Then the losses can be wiped from the accounts & life can go on for our betters as before.

    The whole thing stinks of 1914 all over again.

  8. The Dork of Cork.

    Life in euro health fascist land.

    Wages = beer consumption in Ireland
    Less wages = less beer consumption.

    “People are really starting to take into account what consuming alcohol responsibly does mean”
    Yes , less food to eat or no roof over your head.
    All surplus income must flow to the rentiers.

    Exactly the same thing happened in France , where outside the big cities the French waiter system collapsed.
    As there was no cashflow to pay labour in a extreme debt based system of social & economic control.
    Pubs and Restaurants which are highly labour intensive but a very energy efficient means of consumption in urban areas begin to die.
    This is exactly how Rome collapsed.
    City life became unbearable.

  9. Richard

    Your post Steve progressively moves about from the subjects of money, gold, debts, violence and human emotions. I think you are wondering if any fiat can survive, or if gold hoards would be more useful, through human turbulence.

    Gold has always been a store of value, and its persistent use is an example of the corollary of Gresham’s Law that good money must be hoarded as a store of value.

    My comment is about distinguishing between hoards versus large stores.

    Also note that hoarded gold is not always the same as good money. The exchange of gold into money is something to take great care about, that is why it stays only in strong hands.

    I’m assuming that genuine hoarders keep gold very privately as items like rings and small bars or jewellery. A moments calculation proves that the stored bullion bars shown in the news photos must exist just for bankers’ purposes, to conjure up various fiats really based upon debts rather than gold. Gold in real hoards must be in untrackable usable pieces which permit easy transfer at certain times and circumstances at the discretion of the hoarder into use as debt-based, violence-backed, fiat money. The central banks gold stores are not real hoards, by my use of the term ‘hoard’. I draw a distinction between stores managed by committees and personal hoards.

    In turn it is our insecurities which make us hoard, or choose values and beliefs to spend our hoards on. Gold can be spent on any available service or agent available to ease our uncertainties, so long as when we spend it it behaves like money. Hoarded gold only becomes money at the moment of use.

    As other commenters have alluded, anxiety and depression are connected to all this. Growth and creation requires animal spirits or mania. The complex laws of ownership and property, best exemplified today by the various Constitutions of the States of The USA, have everything to do with depressive Malthusian views of scarcity and abundance. The growing numbers demanding shares in that abundance are caused by fossil-fuelled human progress for 200+ years. Human progress over thousands of years also required optimism.

    Manipulation of these mass emotions allowed profitable wars to be called, even modern wars like 1914-1918 which were found to unfortunately destroy massive amounts of bankers’ property. However the very basic underlying law of property remains after conflict, the rather depressive rule, “What we have, we hold”. That basic law has nothing to say about making hedges, or re-circulating existing hoards, or helping the economy. As the saying goes “they make a desert and call it peace”. Owing to shortage of cheap fossil fuel well-meaning agents like various Governments can’t manage the situation that has arisen without making it worse. Wars etc. won’t help. Making electronic management systems that control through beggary most of the ‘citizens’ of USA and Europe and client states or groups may help out some ruling minorities for a while.

    By storing massive amounts of gold some ruling parties in the waste-based economy like perhaps Italy, China, Russia, or some large banks, may hold their own positions and even reduce credit available somewhere and inadvertently hasten the collapse of other parts of that economy, but when those stores are eventually flushed out of weaker hands again, as for example currently in Europe, another participant must obtain the gold and I reckon for several years it has therefore moved generally towards the small hoarders, up to now. Gold’s value in any paper currency like the dollar would therefore fluctuate wildly during economic upsets, especially if as seems likely paper-based ‘gold’ is progressively discarded during every such rout. In fact, if paper gold was deprecated gold metal would become and remain a leading economic indicator in these times, something which would never do for those maintaining the fiats. Some of these situations are as Steve says balanced on a knife-edge. No-one can easily predict them and profit by buying or selling anything before they occur.

    Gold’s value in fiat terms can however be kept fairly steady as long as more paper-based gold can be added or removed easily, and having paper 100 to 1 against real gold does give the central bankers real hedges in both directions. They have several other connected schemes, such as swaps and debt hostages. Silver metal is similar but a much smaller market to manage than gold. Gold price manipulation has thus been an important part of the fiat regime’s modus operandi since Bretton Woods but is not easy now, with more and larger economies in sudden shrinkage and deflation than for decades.

    The generals in charge of the debt-as-money control system are beginning to fail as they retreat, and little barbarians are claiming some relic hoards.

    Looking at the bank gold stores, and also their grip on paper gold markets, by any calculation, there must be quite a time to travel before the ruinations of our fiat nations and debt-based social networks are complete and gold is found only in tradable fragments in real hoards.

    To what ends the hoarders will then be able to use them it is hard to say.

    1. Ellen Anderson

      Perhaps as a dowry for a girl hoping to marry into a family whose farm has good topsoil?

      1. Richard

        Exactly. Slavegirls and cattle. When money, bonds and cash, failed in the Weimar hyperinflation, those families who relied on it had no dowries for their girls, except a minority who still held tangibles like gold or means of production. When there was deflation and the central European banks collapsed in the 1930s, those same minorities profited again. These cycles set up terrible social instabilities. No-one knew what stored worth or money was for a while. At least most money then was paper cash and bonds now the credit winners and losers are mesmerized by the effects of decades of cheap fossil fuels and the wins and losses are being amplified by electronic credits and the event horizon thus lies where money is traded across electronic borders, in derivative-land. So what is money today?… I agree with you.

  10. The Dork of Cork.

    IEA Feb Monthly Electricity Statistics are showing brutal declines in OECD Europe.

    It looks like a repeat of 2008/9 but more centered on Europe this time around the sun.

    OECD Europe
    Feb Elec. supplied : -7.1%
    Jan Feb : – 2.7%

    Both France & Germany down 9 % in Feb.
    With Finland & Czech Rep down 11+ %

    Portugal looks like a war zone with elec supplied down 21.3% in Feb & 15.5% Jan to Feb.
    As I said before – this is the reason why gold is going down.
    Europe is imploding.
    People & banks will run out of cash , sell their gold , the gold will flow back to London.

    If the Big Bank gets enough of the stuff they might then inflate.
    Its a sick old world.

  11. enicar666

    Broda can’t have it both ways, either gold is an investment or it isn’t.

    Really? Define INVESTMENT… can you breathe GOLD?

    Sometime in March – the sickness hit me and while I could breathe – I felt short of breath. It hasn’t gone away – and other complications have manifested themselves. Gold? How about breathable air? You got breathable air?

    May 19 – I walk a few mile across Racine to retrieve my bicycle and drink too many beers. Everything is flowering – but there is not a Bee in sight. NOT ONE SINGLE BEE. In fact, insect life appears to be amazingly missing. This is NOT good.

    400 ppm CO2 and rising methane rates? It felt like the tropics today – hot and humid – and tough to breathe in – in SE Wisconsin. Where are the insects? Why am I short of breath?

    The twin sides of the fossil-fuel coin.

  12. I1

    Just think, silver is so cheap now they can mint dimes with it. Too bad gasoline is $3.50 a gallon, I wish they’d pile on that stuff. So a country that burns corn and gasoline for a living can render monetary metals obsolete, yet can’t get unleaded back to a buck? What worthless stooges, I want my money back.

    1. steve from virginia Post author

      Too funny!

      US PIRG sez we need to buy more new stuff in order to, “help create the conditions under which Americans can fulfill their desire to drive less.”

      More stuff is what we don’t need! We have too much already. What is needed is to simply get rid of the cars, the rest will take care of itself.

      In the background, the cars are being gotten rid of, the mechanism is national bankruptcy caused by in the first place the cars and the stupendous waste they represent. The endgame is few if any cars with bankrupted ex-drivers scrambling to earn whatever sort of living they can.

      That’s a good score, deserves more comment.

      1. Ellen Anderson

        So are some of you guys going to PA this weekend (to camp out in the rain) and witness the discussions between The Archdruid and the ex-professor? I would also like to know whether Albert Bates still thinks we can create soil.
        Please go and take videos! I am stuck here working this weekend.

      1. steve from virginia Post author

        Private sector lenders have nothing to lend against, collateral is defunct or recycled.

        Private sector lenders have no one to lend to except stock peddlers. ‘Real Economy’ = real ‘dud’ economy. Lending to people so they might buy new cars is a loser … b/c driving the cars does not earn anything. Just ask the French.

        Private sector lenders have pooped in their own lunch. Forex is turning-has turned against the central banks and bond markets are at multi-year highs. Bond- dumping engaged.

  13. The Dork of Cork.

    Feb gas consumption in OECD Europe down 14 %

    -6.8 % Year to date.

    Czech republic – 20.4 % !

    Finland – 24.4 %

    France – 14.5 %

    Germany – 14.1 %

    Italy -17.8 %

    Germany , Italy and the UK are the biggest consumers & have equal ~ levels of nat gas consumption.

    Only sov UK is keeping up consumption at +.02 %

    Spain – another medium scale user is down – 18.3 %

    Netherlands (a big consumer) -10 %

    1. Ellen Anderson

      Like Dr. McPherson, Chris Hedges has earned the right to his opinion. But I would change the title to “Rise Up and Die.” Hard to know which hill to chose though, isn’t it? – to die on, I mean.
      We should really put Moby Dick on our list. My favorite line from that tome (of which I own three different audio versions) is: “Better to sleep with a sober cannibal than a drunken Christian.” I have always found it to be so.

      1. steve from virginia Post author

        There are some classics that need to go up there: Gatsby, of course. He criticized the vapidity of capitalist excess simply by describing it.

        Somehow the light would not make any sense if it was any color but green.


        Ayn Rand is enough to keep me clear of the Austrians (although some have been entered and there are more).

      2. Ellen Anderson

        Booth Tarkington won the Pulitzer Prize (in 1919 maybe?) for The ‘Magnificent Ambersons.’ Hands down the best description of what carz did to communities in America. Lot of good it did.
        In those times many good folk never expected society to put up with the carnage (never mind loss of public space) that the private auto was causing. My grandfather built a car – I think it is in the Smithsonian now. He was constantly being arrested for exceeding 10 mph because he was scaring the horses.
        We should put some Ivan Ilych and Paul Goodman on the list. I will go back and try to figure out how to do it.

      3. steve from virginia Post author

        Here’s the format for booklist entries. It’s easier for me, I can simply cut and paste your suggestion:

        NAME OF THE AUTHOR: don’t forget the colon <a href=”link”>Complete Title of the Book in Title Case</a> (the date of first publication in parentheses) short description (note if item is downloadable or available on-line in parentheses)

        The book author’s name is ALL CAPS, the name protocol is conventional: given name first then family name.

        The Complete title includes more than the well-known hash. For instance ‘Nicholas Nickleby’ is the hash, the complete title is ‘The Life and Adventures of Nicholas Nickleby’. A lot of titles don’t make sense without the entire word salad. At the same time, the author wrote the title a certain way, which is the way the title should be.

        The link is to a site that gives a short description or review of the book. Most general interest books can be found on Google Books, as can e-books. Economic papers and other technical material can be linked to the publisher generally, most of which are non-commercial such as universities, central banks websites and think tanks.

        No Amazon links or other bookstore links other than links to e-books and other free distributions.

        Description in 25 words or less.

        There is a lot more to come on the booklist as it does take some time to hunt down information and edit it. Please check back frequently.

        There is really not much in the way of limits to the booklist: the connecting thread is economics which itself incorporates almost everything that humans do while they are awake. ‘The Communist Manifesto’ belongs and perhaps, ‘War and Peace’ but not Anna Karenina’ (although it does have some great lines in it.)

        Obvious advertising not going to be included such as ‘Audacity of Hope’ or advertising dressed up as memoirs: Michael Lewis and Matt Taibbi are in, Jack Welsh is not in, although his, ‘Jack: Straight from the Gut’ falls into … some useful category or other.

        Eventually the categories will themselves become individual pages and some form or sorting besides alphabetical last names might be applied in the future.

        RE should keep working on his project, maybe reformatting it to make it easier to read.

        Sending suggestions by way of the comments is the best for this one-person operation, there are fewer site-management issues if access is limited.

        Thanks for your patience and suggestions!


  14. The Dork of Cork.

    Digging up old Atlanta Tram lines to put in new ones.

    The shortness &loop nature of these lines is striking.
    Its a very different ( but traditional) view of how Tram lines work

    The French seem to favour a heavier tramline forming a linear backbone for auto & bus connection..
    The Tuscon tramline almost built now is also very short , perhaps too short.

    Different strokes for different folks I guess.

    1. The Dork of Cork.

      Yes it could work…….
      MARTAs 1970s era heavy transit system has a station (Peachtree , built deep in the Atlanta granite) that links with the streetcar far above.

      This cheesy promo vid is quite funny.
      “Come visit the world of Coke !!!”

      However looking at MARTA rail passenger numbers gives one a moment of pause.
      Down -5.02% to 70.506 million trips

      Bus passenger numbers down also
      -3.14 % to 60.042 million trips.

      Its the world of coke thing me thinks.
      One can only visit such sites once in a lifetime.

  15. iguanaisland

    HUGE PLUNGE in the Nikkei today! Down 1143! Hey, here comes a credit crisis in the making. JGBs yields spiking & no surprise. I live in Japan and I guess the “Greek tragedy”, a sovereign debt crisis, will also be making its way here sooner rather than later. I suspect that other countries in the world are more resiliant than Japan against this energy bust, and so the oil that Japan was going to use is (guess what!!!) going abroad to China, etc. Here comes failure with a capital F.
    But it’s funny, noone even thinks about that part— mean what a bust effectively points to—-that other countries survived the cut while your weak little island gets pushed away from the feeding trough.
    Never mind, I chose this place and I’ll see what happens next.

  16. The Dork of Cork.

    Coppola getting silly me thinks.

    I take a final settlement view of such things.

    My view is simple as I believe the answer is simple

    Large House price rises are the result of real goods trade deficits.

    In a neo liberal economy this inflow of wealth is expressed via a rise in house prices & car purchase via the mechanism of consumer credit production and a subsequent rise in consumption in a sort of circular process which consumes more external wealth.

    Germany had / has no house price boom because it exports its wealth.
    Spain & Ireland broke or were forced to break that circle
    (Irelands domestic economy is more or less a distinct entity from multinational operations in its jurisdiction which distorted its trade balance)

    Well Spain & Ireland were in trade deficit until they were forced into surplus.
    The UK remains in deficit to Germany , China , Norway etc so its house prices remain high.

    I really don’t see whats so complicated with this picture.

    The ability & willingness to consume physical goods is (perhaps short term) wealth.
    “as I was in the early 1990s, the last time there was a significant house price correction in the UK”

    There was a short correction in the UK trade balance during the first EMU crisis.
    German corporates could not sell its wealth to deficit countries in the manner they were accustomed.
    That was the crisis believe it or not.
    The system could not expand outwards for whatever reason.

    “But the Government is not even discussing it. On the contrary, it is doing everything in its power to prop up house prices”

    Houses as banking assets are a conduit asset for external consumption of goods.
    A sort of monetary battery system and are not valued on their basic utility value.
    Of course the politicos don’t want it to go down.
    The house prices “up north” are not high because those people are generally not adding to the UKs trade deficit.
    Its the people down south which consume the BMWs and the large drive that goes with it.

    The workers up north could be bypassed by the people down south as there is no settlement between countries during these strange market state days.

    Are you suggesting there should be correction in the UK trade balance or should the UK spend external wealth on other items such as ….new power plants ?

    1. Frances Coppola

      The 1989 housing crash preceded the UK JOINING the ERM, let alone leaving it. At the time of the housing crash, the UK’s trade balance was in the red by nearly £6bn. It gradually corrected itself between 1990-1994, during which time the UK both joined and left the ERM. The UK was in recession at that time and there were a large number of people in negative equity, of whom I was one. The correction of the trade balance at that time is almost certainly due to a fall in imports.

      I think you have the direction of causation the wrong way round, because you seem to think that mortgage lending is dependent on banks having capital to lend. That is not the case. The primary driver of mortgage lending bubbles is an expectation of continually rising property prices by both borrowers and banks. If the expectation is that prices will always rise, then banks will offer high LTVs and income multiples – yes, we had subprime in the 1980s – and borrowers will leverage up their incomes. There is also more activity in the housing market as even quite ordinary people buy to speculate on rising prices rather than investing for the long term – and that increased activity itself inflates the bubble further. Even in the 1980s banks borrowed on the international wholesale markets to fund lending, so availability of funding wasn’t really the issue. I would have to admit that, then as now, foreign capital inflows did push up the prices of PRIME real estate in London. But they had (and have) little or no effect on house prices in the rest of the country.

      I should add that Government behaviour can drive housing bubbles, too. In the 1980s there were tax breaks to encourage home ownership, notably MIRAS which benefited dual-income cohabiting couples (hence massive increase in cohabitation at that time too!). When the Chancellor announced the phasing out of double MIRAS, IIRC in 1988, there was a spike in house purchases by couples seeking to benefit from double MIRAS before it disappeared.

      As you rightly point out, wealth effects due to increasing property prices suck in imports, increasing the trade deficit. When those wealth effects disappear after the crash, the trade balance slowly corrects itself provided that exports hold up. But if they don’t, the trade balance cannot correct even if housing has crashed. Currently, although housing hasn’t crashed, the squeeze on real incomes is hitting imports, but the UK’s trade imbalance remains severely in deficit because of the weakness of exports. Our export performance is frankly awful.

      I would be the first to agree that the UK’s housing market is overdue for a substantial correction. Indeed I said so in the post. The problem, which you ignore completely, is the damage that a major house price correction would do to an already fragile banking sector and therefore to the rest of the economy. Maybe you don’t care about the human cost of a major economic collapse. But I do – and that is why I say that there is no simple or quick solution to the UK’s housing problem.

      Describing me as “silly” because I identify a problem that you completely ignore is, frankly, silly.

      1. The Dork of Cork.

        To my knowledge monetary instability was building in the late 80s….. indeed .this broke the housing market in 89 .
        The lack of credit caused imports to slump for sure but this came later as savings from deposits hyperinflated on the other side of the sheet takes time to run down. was the memory in the battery.
        But you prove my point as the peak of the trade deficit came at the peak of the credit.

        see above ….its a demonic loop…….chicken and the egg.
        Banks will continue to eat up a surplus via credit until they cannot.

        Although I am sure the Germans were looking to force feed their cars down other euro countries in 1990 before the Gulf mark 1.
        In Ireland I clearly remember a BMW /Merc boom during that summer.
        Perhaps a manic Germanic effort to offload stuff on anybody caused the proto euro trade pressures to build up even further.
        Oh and Francis we live in a sometimes silly world.

        I believe my argument to be the correct one this time.

      2. The Dork of Cork.

        Just to add – just because Sterling was not in ERM during the late 80s did not mean no trade pressures were building.
        Just like today
        Sterling is not in the euro but its economy is deeply integrated with the Euro monster nevertheless.

        The UK started to go into current account deficit in If I remember this correctly 1984 (?) just after the early 80s mini depression where the economy was structurally adjusted to accept core European goods (at the expense of northern Industrial workers) which was going into extreme surplus because of Franco – Germanic policies of local scarcity at that tme.

        Both the big bang and the birth of the euro was the same event.
        You must accept this ?
        No ?
        Yes ?
        Perhaps ?

      3. The Dork of Cork.

        Oh Francis
        I think you are great at monetary understandings of the system on one level (way above my pay grade)
        But you do not seem to grasp the nature of the physical economy which lies underneath.

        You state.
        “but the UK’s trade imbalance remains severely in deficit because of the weakness of exports. Our export performance is frankly awful.”
        Dork – From a UK (south of England) national interest a frankly awful export performance is a good thing.

        Its the UK imports which is far more important to understand the dynamics of this
        As a sov currency within a currency union soup yee guys can outbid others for energy and finished goods.
        This is clearly showing up in your trade balance with imports from Germany & other countries such as Poland and even Spain increasing during these past few years.

        Spanish austerity is working…….. for the UK.

        Fair enough – if yee lads can get away with it without national push back then why not ?

  17. The Dork of Cork.

    The poison that is IEA energy advice continues………….,38344,en.html

    “Ms. Van der Hoeven cautioned that energy policy could no longer be developed at a national level only, and that Finland should continue to further the integration of its natural gas and electricity markets to regional markets by means of EU-supported infrastructure projects and closer co-operation with its neighbours”

    The European economic implosion is chiefly a result of banking systems reaching beyond national level in a ever more extreme fashion yet they wish to scale up even further !!!!
    Van der Hoeven wishes that Finland will open itself to a future natural gas shock.

    Quite Incredible.
    The old oil & gas giants of London & Amsterdam continue to grasp for MORE POWER.

    Slowly walk away Finland …..slowly walk away.

    Finland was doing fine with Soviet Nuclear designs with western electronics until the neo liberal age of cutting labour costs.
    The new French / Finnish plant is a disaster zone of delays.

    And yet she states

    “The report attributes the success of Finland’s nuclear programme to the government’s effective and inclusive planning and consenting regime, and to the high level of trust that the population has in its government due to its top-of-the-league ranking in terms of transparency and absence of corruption.”

    Forked tongue does not come close.

    1. The Dork of Cork.


      “Final Settlement ” see above.
      Which is impossible now.

      In my opinion Gold cannot be valued because the big plantation owners houses refuse to settle with the cotton fields.
      And if they did ?
      Imagine what would happen if the UK lost its £100 billion goods deficit ?
      Somalia would not even come close.
      Even now with that £100 billion in the bag its fucking close.

      The UK is clearly destroying the euro economies so that euro gold will flow back …..when it gets the stuff back it will revalue “in the interests of monetary stability”
      Then surprise surprise it will find itself rich again.

    1. Ellen Anderson

      Great link! We take the grid for granted when it is so fragile and beyond anyone’s control. I have always thought that the ultimate black swan could be a huge grid failure. Nicole Foss and The Oil Drum published some great analyses years ago.
      Meek says:
      “Electricity isn’t a commodity like copper or coffee or water. It’s the only commodity that is both essential to modern life and impossible to store. An electricity system must be able to manufacture and transport as much power as the society it serves demands at every given moment, and not one watt less. The only efficient way to achieve this is for society to invest vast amounts of manpower and resources over generations to plan, build and maintain a network of power stations and supply cables, with excess capacity to deal with breakdowns and peaks in demand.”
      And this:
      “With unusual passion, Helm put him straight. If you define the problem as the lights not going out, he said, you misunderstand everything about the way the new world of electricity markets works. The ideal situation for private electricity firms is one where there is only just enough electricity to go round. Then they can charge as much as they like, and people will have to pay. ‘People think insecurity of supply means will the lights go off or not – but that is not the issue,’ he said. ‘It is what happens just before the lights go off.”

      1. The Dork of Cork.

        Which is why the nuclear industry was shut down , post 1980 /86 in Europe.
        London could simply not earn enough or indeed any rent from a glut.

        Greenspan ,Bernanke , Lawson etc etc and co wish to destroy capital (house bubbles) through private credit provision so that scarcity is the order of the day.

        Most people can’t really get their heads around the badness of the Anglo / Dutch model of extraction.
        You must look back into Irish & Scottish history to see how the Tudors & the Dutch based banks behind them destroyed all kinds of income bearing shit to make a killing via a redirection of the remaining (smaller) surplus.

      2. steve from virginia Post author

        Dork, you are diving head first down an artificial scarcity rabbit hole that Marx himself was very careful to step around. Macro is macro …

        Greenspan, Bernanke, Lawson, etc. etc. and co. wish to destroy capital (house bubbles) through private credit provision so that scarcity is the order of the day.

        First of all, you are giving too much credit to the managers, who struggle at all times to a) understand what is going on around them, and b) remain relevant.

        Second, your premise completely backwards: private (and public) credit is offered in order to destroy capital, house bubbles are simply one form of destruction, there are others. The bubble ‘subjects’ are collateral, the method is market momentum and front-running, carry trades, etc. for credit’s sake.

        Third, asset bubbles are a form of energy price hedge. The price of the favored asset is presumed to increase faster than the price of the energy component: a factor horse race, if you will.

        Fourth, I disagree with your history as it does not take into account the (stupendous) post- 16th century flow of hard funds — gold and silver — from the Western Hemisphere to Europe.

        UK and Northern Europe gained percentages of the otherwise Spanish flow by way of piracy as well as aggressive mercantile trade, that is, from income bearing businesses. If there was a complaint regarding these sorts of businesses it was that there were too few of them.

        The biggest problem in Europe after the Spanish conquest of the New World was the galloping management costs associated with the ballooning cash surpluses! These costs emerged in the forms of severe structural inflation and political restructurings including Spain becoming serial defaulter in 1557, 1560, 1575 and 1596.

        Don’t forget Steve’s First Law of Economics: as a surplus increases, the cost of managing it increases to exceed the surplus’ worth. You should read the articles over here DOC, I write them just for you!


      3. The Dork of Cork.

        I have this old Huguenot idea in my little head of capital creating yet more capital (with of course its increased exponential service costs)

        Of something jumping from one energy density to a higher form.

        At the same time there is a folklore in my town of Anglo dutch forces behind every nasty little bit of entropy – which is borne out of events mind you,.

        Sure Spain was the superpower of the 1500s (with catholic multinational power behind it) until it was not.

        Then with other forces moving into a temp vaccum of power until it was filled with the modern corporate Anglo world of a narrow return on investment.

        It was so narrow because they had such little surplus to play with until later in the game.

        Other forces were present until Anglo power became a more organized force with the high science of extraction behind it.

        It took some time…….at least a few decades.

      4. steve from virginia Post author

        I have this old Huguenot idea in my little head of capital creating yet more capital

        If this were so we would be stuck with an economy no greater in scope than our great-grandfathers’, restrained by the limits imposed by pre-existing money-capital.

        Fractional reserve lending as it is generally understood is only partially true: there is no real need for reserves which tend to be bookkeeping entries and nothing more … they are certainly not capital.

        Credit is many multiples of physical production: output = waste making. The term ‘output’ is meaningless as capital is destroyed by way of the machine processes not accumulated, we use tricky words/rationalizations to fool ourselves about what it is we really do.

        Money capital is simply debt: the retained earnings which we sanctify as capital in our benighted world are the well-laundered debts of third parties. Adding to debt requires only two things: willing borrowers and an institutional lender of last resort.

      5. Richard

        Extraction by pirates. The Atlantic winds meant control of Ireland’s shore could not fall to the continental catholic powers, or England would be strangled in a moment. Hence olde England’s intense interest in Ireland’s welfare from Tudor times. The Anglo-Dutch model of capitalism was first developed in colonial Ireland and Caribbean and mainland America, both by the Spanish and English. The gold and silver from conquests in America caused serial inflationary disasters for European catholics aka Spain from which that country recovered at first, but other powers and social groups inflated a bit less and also still had real trade going on or usable hoards, so they co-operated as a matter of survival especially in and around London, Antwerp and Holland and finally overwhelmed Spain. Disaster capitalism followed as explained ( sort of ‘justified’ in a higgledy way) by Scottish and English economic philosophers, until Malthus disgusted them so much even they gave up pretending to explain it to others. The unspeakable corollaries of Malthus silently inform all the thoughts of the famine survivors of extractive capitalism and their descendants.

      6. The Dork of Cork.

        Protestant forces of accumulation have been working in a somewhat artificial environment of overwhelming external oil based capital flows and perhaps American loot of past times.

        In such a case catholic like consumption would have been best as the trade system is so absurd at the moment.
        Instead good and not so good Catholics were force feed credit rather then beer with now obvious catastrophic results as the real physical environment built around this credit cannot be serviced.

        But this does not mean new capital assets should not be built or maintained to capture the remaining more limited national or local flow.
        If not you get a wider system collapse as we do depend on technology for our survival.

        See 37.20 for a girls transit experience in Portland.
        Much More Fiat subsidy of some capital structures such as public transport and indeed Nuclear is badly needed so that the local hinterland can regain some critical mass over and above external capital flows.

      7. Richard

        Yes individuals benefit from public transport and it is one well-understood common good which citizens should be able to defend from pirates. I notice the very old benefit the most actually, because their few trips are critical to their survival outside expensive high-dependency residences.
        Public transport might conserve energy. But owing to persistent demands to consume in other areas, in a deflationary collapse there probably won’t be enough ‘capital flow’ conserved from maintaining public transport to make beer for all the Good or Bad Roming Cathoholics out of.
        Every calorie saved will be taxed out of the turnips by the rapacious governments that we can expect consumer interest groups like our elderly, unemployable and uninformable to elect, unless mass hysteria can be calmed decades hence. I think they may also cease making babies and that the reason the population in ‘developed’ places is aging is already mainly because of deflation.
        The indirect costs of nuclear are impossibly high. We’ll have to think of some other scheme.
        Steve has yet to address CO2 production so no final plans can be laid.

      8. The Dork of Cork.

        When the capital (oil) is sunk into nuclear or mass transit systems then all that is mostly needed is fiat for workers to maintain the system.
        Governments can create fiat just like banks.
        Fiat used to subsidize internal industrial activities such as the above will find itself flowing into discretionary consumption.

        “Total MAX ridership fell 9.6%
        during the peaks and 1.0% in off-peak periods, resulting in a 3.6% drop in weekday ridership.
        Total weekend ridership was also down (-2.3% Saturday, -9.9% Sunday), leading to a 4.0%
        decline in weekly MAX rides in March. Most of the MAX ridership decline was in the former
        Rail Free Zone area.”

        Portland is a non sov entity much like euro governments – it must tax the wasteful “growth” of free banking or it will have no tokens of exchange available to engage in its functions.
        In such a monetary system If free banking fails then all other systems must fall.
        This of course need not be the case.

      9. The Dork of Cork.

        Authority no longer able to tax (fares outside the free zone) so as to maintain the free zone.

        Critical mass inside downtown areas decline … car dependent sprawl continues, discretionary consumption declines.

        Policy objective crushed simply because of the lack of token problem.

      10. Richard

        Arranging public transport to replace carz would not necessarily permit a new public fiat, like travel tokens, to circulate. Making it free or free for some wont build enough credit either. The built environment we inhabit has cheap fossil fuels built into it, and these will be re-extracted by wreckers and highwaymen. At a higher level this is already happening with the banksters. Electrical grid is another substitute for public fiat, like you hinted. Various parties seeking subsidies or rents will continue to extract whatever they value from all accessible or moving parts.

        The grid and public transport are a form of subsidy which the tax machines may try to adjust to their electorate.

        It’s just that in a credit-deprived world, the taxes and subsidies we all vote for at every election cannot add up, so there is no prospect of making a new local money out of them. Almost every country and currency zone, like the Euro periphery and even the ‘core’ are in permanent deficits. Politics also encourages that. Every vote is worth so many tax dollars.

        Nuclear is too expensive to build out as the Germans and French have realized.

        When there is a deflationary step downwards that everyone agrees they notice, some of the issues at first will be how our public transport and grids can be kept up, or not, given the wreckers. Power rationing is going to occur. There won’t be any buildout.

      11. The Dork of Cork.

        Reread the above Meeks piece in the UK energy story please.

        Nuclear was not too expensive to build.(although it is now as the people are simply no longer available in quantity)
        The system wishes to create scarcity to increase profits.
        I think Ireland spent 400 billion euros on houses and shit between 2000 & 2008 & the house boom started in 1990 ~ !
        Thats maybe 40 ~ reactors.
        The entire island of Ireland needs about 3 PWR at present consumption levels …including shutting down 1 during the summer months

        The EU is not what it seems.
        Its a city operation.
        Now that the capital is gone the city and its host will leave the building.
        It will simply try to ascend to the top of another building while the rest of us starve to death.

        The sole object of the game is to remain on top.
        Net wealth is dangerous to those in power,
        When the EMU really got going all Nuclear was stopped dead in its tracks and for good reason,

        It takes about this long for power plants to age and die.
        Its called depreciation.
        Even now the UK is trying to change the dynamics of its capital account to take account of these “mistakes”

        Sorry about that chaps.

        Military fiat is military fiat.
        It is used to size resources via the production of new money.
        It can still build maybe one or two reactors in the UK but they simply refuse to do it.

        It would cause a breakup of the market state model which they served to the world post Suez when they lost their physical colonies.

        A break in the UK trade deficit (which depends on other market states supplying the surplus goods would mean the end of their way of life now.
        They are caught in a catch 22 of their own making,.

  18. The Dork of Cork.

    You can clearly see Europe is the UKs modern India from the PInk book publication of 2001.

    Its has basic balance of payments data going right back to the post war era.
    More detailed data from 1979
    And the final run up to the creation of the euro in the 1990s can be clearly seen.

    In chapter 9 – A geographical breakdown of the UKs current account

    A wonderful map of the UKs current account with respect to mini me Europe and the world in the year 2000.
    For example you can clearly see Ireland getting stuffed foie gras like with credit from either London or Edinburgh free banking operations.

    Also see chapter 1
    The current account went into deficit in 1984 after Thatcher destroyed internal workers claims on wealth to free up wealth for the rentier class.

    It states quite clearly “the profile of the current account closely follows the trade of goods”

  19. Frances Coppola

    Dork, is there any possibility of you not patronising me? I really am not as ignorant as you suggest.

    I would remind you that correlation and causation are not the same thing. The relationship between trade imbalances and credit bubbles is much more complex than the obvious “inflows of capital lent out by banks to finance asset purchases”. Banks do not require “capital” in advance of lending and asset purchases are not necessarily financed by external capital inflows. I have explained the mechanics already.

    1. The Dork of Cork.


      Sure I agree….the egg came first – fair enough.
      But physical capital is destroyed nevertheless.
      You are engaged in sheer sophistry me thinks.
      Avoiding the kernel of my argument

      Look – The banks had the creditability back in the day (they were given this power of fiat by the various states) so they lent out the credit which destroyed global capital although as you seem to argue capital followed the banks actions because the banks had creditability ( this is the closed loop effect as seen in ecosystems )

      The profits was expressed as income from the rest of the world in the UK balance of payments & in other countries with financial hubs.
      Now the income is mostly gone yet the UK still maintains a real trade deficit with the rest of the world of nearly 7% of GDP.
      This is simply Incredible.
      There is no income and yet no settlement either.
      The lion (banks & corporates) keeps eating capital ( Zebras on their last legs) when there is no grass growth………….this will not end well

      As Yanis V. describes in his take on the euro (which I disagree with) – its a .Bankruptocracy
      The more bankrupt they become the more power they get in return for “their services” which bulks out the UKs trade balance when really there is nothing behind it.

      The services exports is a result of real goods coming in – the managers can simply drive around in circles (sucking in oil) and claim they are adding value.
      Quite absurd but very dark at the same time.

      That is not really sov power over your local domain.

      That is giving global resident banks letters of Marque to wage war in the national interest.
      I am reminded of Big Pauls words during the 1970s crisis when I think of symbiotic Anglo power mechanics.

      He spoke of a policy with “controlled disintegration” in its design.

      Look at it from a small islands perspective on a now massive monster of a global economy.
      In a closed loop world its not so much a question of the size of wealth claims …….its a question of relative wealth claims.

      I can understand why you get upset when I state the UK is now a carrion feeder.
      But such is life.
      Its a truly shitty world out there.

      1. Richard

        Cork picked the opposite side to merchant banking (credit) even AFTER the Wars of the Roses –

        The thought process in Ireland has been the opposite from the City of London, maybe we were all from different bands of pirates. Individuals have always to resort to the unspeakable parts of Malthusianism. Correct, respectable, hard, sparingly expressed by the now-fossilized institutions of the Irish Republic and other unflowered, protean or flinty stumps and sprigs all across Europe but largely unspoken.
        The technical denominators in all economic theories are groups of real people – voters, citizens, North Koreans, Antwerp peat diggers, little old ladies. But when people panic in the face of Cromwellian-invasion type events they turn to themselves alone. They dont organize into these social groups and trust to a sovereign issuer.
        That’s why gold as a usable hoard will trump credit or printing in a deflationary collapse. There will be proportionately less credibility for those who rely the most on it up to today. Many countries and their constitutions will cease to matter much at all. It doesn’t even matter if the sovereigns possess large stores of gold when fossil fuels become relatively scarce to groups of people, when they can’t drive their carz. If they won’t circulate it, or settle as the Dork puts it, it is pointless to expect them to help even themselves. Those visible stores will often just make currencies and ‘countries’ even more vulnerable. The apparent leaders verbalize ala Gordon Brown and can do nothing. A new set of actual sovereigns might arise decades later. The survivors might write various history books.
        It’s not because any of the participants are at all foolish. It is to do with trade eg North Sea oil and the UK booms, Euro trade and Euro lending. The leaders are passengers at the fringes of these trade events.

  20. Frances Coppola


    I’m certainly not “indulging in sheer sophistry”. I’m trying to explain to you HOW IT WORKS. Which you don’t seem to “get”. Perhaps you don’t want to.

    I don’t share your view that only real physical goods matter.

      1. Ellen Anderson

        Looks as though it would be a good investment though – better than my bank account:

        Order within 80 hrs 7 mins and choose One-Day Shipping at checkout.
        11 new from $552.04 5 used from $571.55

      1. The Dork of Cork.

        Thats F$£king terrible.

        As the only technologist remaining on this site I think this is a more suitable ditty.

        “Planet Earth is blue & there’s nothing left to do ”

        Mars Direct – one way ticket.
        Light the candle……..why not ?
        Lets blow our capital on something a bit more dramatic then roundabouts or low earth orbital flight.

      2. enicar666

        DOC – That was great. I believe.

        Have you yet read Richard Hoagland’s “Dark Mission”?

        How about the research of Dr. Joseph P. Farrell at Giza Death Star ?

        It’s there – but “they” are not sharing, and perhaps, Planet Earth is doomed. Dr. Paul LaViolette, Project Camelot Superwave.

        I’m blowing the last of my capital – (truthfully) in heading North for the Summer, to friends in Fairchild WI. Google Map it – where Bloom Rd. Meets Old Hwy 10. After a Summer of shredding what’s left of my liver in the beautiful woods of Northern WI. (while searching for Bigfoot) I hope to walk away in the Northern Forest to Valhalla and join the gods.

  21. The Dork of Cork.

    The strange story of Cincinnati’s abandoned subway.

    At present there is a 3.9 mile streetcar building programme downtown with a heavy emphasis on gentrification & property investment seems to be running into trouble also.
    Could history repeat itself ?

      1. The Dork of Cork.

        Contrast the stations.

        With passenger numbers a weird 16,209 which a Scottish highland village would be ashamed of.
        With just two services a week to Union & Penn station !!
        There should be a million long distance trips a year on this line.
        It is also very much isolated from the center of town.

        Newark is different – it is connected to multiple transit systems but by European standards the passenger numbers still remain shockingly low.

  22. Ellen Anderson

    How anyone can read and write as much as does the Dork of Cork and then suddenly propose building new public transportation and nuclear power plants is just beyond me. Could we try to limit ourselves to a couple of comments per post? Even three or four or five? I will if you will.

    1. The Dork of Cork.

      Sure I guess you are right.
      I sometimes get these manic public transport spasms in my little head.

      But consider this.
      Even if you get a Spanish like depression in the US well designed local public transport systems can begin to reach capacity very quickly.
      Zaragozas new tram system is now running at 80,000 people a day ! ! reaching beyond comfortable capacity between 1.30 & 3.00pm
      Meanwhile Portlands similar Max Green line is running at just 24,000 a day.

      Of course if you get a greater collapse all bets are off as we head into the hills but thats a lot of people to head into the hills don’t you think.
      But these (especially local) public transport systems may not be able to cope under certain monetary and physical world input conditions.
      Its best to invest in medium scale systems don’t you think ?
      Portland has invested about as much as it costs to build a nuclear plant into its transport systems over this past decade or so.
      Its main lines are running far below capacity.
      But its good to have these systems in place.
      It increases the redundancy of city systems especially if the monetary system is working OK. (unlike the euro)

      You have got to do something right ?
      Guys will make money from this Industrial process but they always have done.
      The costs for these projects keep rising but if the managers truly print then there will be something real & physical to flow into.

      Then again systems may break down in complex feedback loops leaving these lines as archaeological curiosities.
      Who really knows.

      1. The Dork of Cork.

        Are the people of Portland ready for this ?

        The disadvantage of having these systems in place is that burb people may come off the hills to live in metro areas destroying the relaxed friendly atmosphere you sometimes get in the center of small cities.
        But that is of course only if the system works.

      2. Ellen Anderson

        What you keep proposing is along the lines of the Chinese government that is building whole cities where no one lives. If the point is to get rid of money then you could do it but we in the west don’t have money we need to get rid of. We have debts but no capital. Furthermore, if there are no industries and no jobs why would any unemployed person get out of bed and get on the tram? Or, more to the point, why would they pay to do so? No one is going to build a train just so Sonny can go home to have tea with Mam!
        Public transit systems are famously expensive not only to build but to maintain and operate. They only get built if someone thinks he will make money off them. I am just hopeful that the existing tracks will be maintained between the midwest and New England (in particular the northern line through the Hoosic Tunnel.) Otherwise we won’t be able to get agricultural staples. If they could get rid of some of the regulations they could just attach a couple of passenger cars onto the back of the freight trains and let the people ride for cheap.
        I have always assumed that you put up all of this stuff about trains because you love them and you think we will be interested in them as well. Now I see you are advocating for the construction of new infrastructure and I ask myself – to what purpose?

      3. Ellen Anderson

        Oh but the printed money isn’t getting used to build trains and it can’t be used for that. It is being used to keep the financial system afloat. The real economy has already failed. I can see how you are looking at this though. It takes awhile to get used to the perverse weirdness of it all.

      4. The Dork of Cork.

        Well I propose using these systems to connect to existing housing infrastructure although the condo industry is very much part of these political /economic systems. (all systems are political economic )
        A little bit in France where the state still assumes some strategic function over economic affairs and much more so in the US such as in the Dallas DART developments.

        European cities have huge advantages over American cities as we refused to tear down much of the old centers even during the height of the car boom in the 60s &70s……..Edinburgh city for example was nearly cut in two by proposed road developments that was thankfully stopped.

        “Public transit systems are famously expensive not only to build but to maintain and operate.”

        Only because they are not used to capacity in the west and especially in the US of A
        After construction they require very little oil (capital) to maintain ………although they require much labour.

        Capital (oil) and Labour are valued incorrectly in our monetary system – remember ?
        Which is why transit systems appear not to work so well in our present monetary systems.

        The financial elite always wish to bypass labour using capital.
        Which is why in the past they invested in transit only in areas which would max out efficiency in such areas as Paris Metro or London underground.

        You see given this is where interest compounded finds it way …….it makes sense to invest in public transit where the money is rather then market towns and small provincial cities.
        But London makes its money from market town activity….running oil through town systems and getting a return.
        (London is the financial oil capital of the world)
        How will it make its income if very little oil is available ?
        Well now London is shutting down real systems outside its walls so that it can maintain relative wealth claims.
        Which is why people in typical western cities have no job or social life.
        But it need not be this way.

        A city such as London needs the present structure of trade to continue as before.
        People have nothing to do because banks make a yield from arbitrage.
        The arbitrage orbits the Asian – western trade & mini me Europe dynamic which is breaking down regardless.

        So what you are now seeing is a wealth transfer towards the financial hubs of this world…….but it is becoming less efficient over time.
        But the banks which control the money supply will lose if they scale down.
        So they are doubling down in a exponential fashion – investing much of what little capital remains in LNG hubs & wars? rather then transport systems that can work on a state or local city level.

      5. The Dork of Cork.

        A contrast from Zaragoza.
        Tri Wes using 1950s railcars.

        What other transport system in America uses 1950s vehicles ?

        only 1600 -1700 people a day use this line.
        The line is a massive loss maker simply because of the huge stock and flow problem is the US and all western economies.

        Even so the current DMU rail investment could not deal with a small fraction of the inter city traffic which runs parallel to the line.

  23. dolph

    American war triumphalism, of which memorials are a part, is the final blowoff phase of anglo imperialism which dates back 200 years now.

    There’s only one force powerful enough to counter this, and that’s if the rest of the world decides that they aren’t going to play by the rules anymore.

    Somebody, anybody, out there needs to grow a pair and say “yankee, go home, and we aren’t buying your debt anymore.”

    Until that happens, American war triumphalism continues.

    1. steve from virginia Post author


      For a FRED chart it doesn’t make a lot of sense. There are more than 100 million car regs and as a rate-of-change it wouldn’t be adjusted over the years.


      1. Chartist Friend

        apparently there are fewer car registrations now than there were a decade ago – and the vehicle miles traveled number is declining as well

        car culture carcass?

  24. Usman

    Hey Steve, I would like to recommend your site to co-workers and friends, but it’s difficult when your blogroll includes sites that post pornographic content (Chartist friend).

    1. steve from virginia Post author

      I dunno Usman, it’s pretty tame IMHO. Nothing buttoned down like over here, of course but still …

      What does CFFP have to say?

  25. The Dork of Cork.

    Large US oil production growth figures posted.
    Although you must discount oil independence memes this is a impressive level of primary production.

    From the IEA May oil market report.

    Americas demand
    Y2010 : 24.14 mbd
    Y2011 : 24.03 mbd
    Y2012 : 23.74 mbd
    Y2013 : 23.75mbd (projected)

    US 50 demand
    Y2010 :19.18 mbd
    Y2011 : 18.95 mbd
    Y2012 : 18.61 mbd
    Y2013 : 18.59 mbd (projected)

    Americas production
    Y2011 : 14.61 mbd
    Y2012 : 15.87 mbd
    Y2013 : 16.88 mbd (projected)

    US production
    Y2011 : 8.13mbd
    Y2012 : 9.18mbd
    Y2013 : 9.99mbd (projected)

    1. The Dork of Cork.

      Europe big 5 demand (now not so big)

      Y2010 : 8.92 Bpd
      Y2011 : 8.64 Bpd
      Y2012 : 8.24 Bpd

      Y2013 : 8.01 BPd projected/
      This looks especially optimistic given the third and forth quarter projections which show a recovery in demand when the third and fourth quarter of last year showed continual declines.
      Although the ACEA April car and van sales show some stabilization in sales although at a much lower level (the extra 2 days also helps)

      Q1 : 8.30 bpd
      Q2 : 8.26 bpd
      Q3 : 8.26 bpd
      Q4 : 8.17 bpd
      Q1 : 7.99bpd
      Q2 : 7.83bpd
      Q3 : 8.07bpd recovery ?
      Q4 : 8.15bpd ????

      Y2013 projection : 8.01 bpd.

      I am willing to take a bet the not so big European 5 will have oil demand below 8 million this year as Europes only purpose is as a vehicle for further globalization / transfer of remaining oil rations toward its income bearing plantations.

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