Archive for April, 2010

Shopping at the Flea Market

Monday, April 26th, 2010

Now that we’re about to enter into the long descent (oil is now officially declared to be in decline by 2012, with global demand shortfalls of 10 million barrels per day predicted by 2015), it’s probably a good idea to start developing some slightly more useful skills.

All you so-called ‘free market’ fans pay special attention, this is about dealing with real free markets, not those abominations of corporate oligarchies known as big box retailers, that receive the benefit of this term with virtually no critical thought at all.

Let it first and foremost be noted – I love free markets. I love local markets, I love the interaction, the process of getting to know the various proprietors, the products they have, the way they treat you, if you get ripped off, if you find a great deal, whatever. I love the whole thing. I also love farmer’s markets, for the same reasons, plus the added one that the food is simply better, and cheaper often, than supermarkets, but that’s a topic for another posting.

Obviously, not everywhere has a vibrant flea market locally, some only have the more antique type ones, which are useless if you’re actually looking for something useful or cheap, if that’s your case in your area, sorry, this posting won’t do you much good.

Shopping, Price, and Bartering

If you’re used to unfree markets, like for example Walmart, Target, Safeway, Lucky’s, Vons, and so on, entering into real free markets might come as something of a shock. First of all, the prices aren’t set in any predictable manner. They don’t have sales, although you can try to barter for items if you think the price is too high.
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When Hutchinson Actually Start to Understand Reality I Get Worried

Monday, April 26th, 2010

I’ve followed PrudentBear.com for years, over a decade now I think, and I’ve always enjoyed their writing and analysis, especially now that Doug Noland has been proven to be so right about his decade long warnings about the problems inherent in credit bubble economics. As if you need to prove the notion that economic bubbles must pop.

But what caught my eye this week was not another perceptive Noland Credit Bubble Bulletin, but rather an article by his conservative side-kick, Martin Hutchinson, a guy I generally tend to ignore, since all too often he’s just repeating the same anti-regulation stuff that brought us to where we are today. His web site is called greatconservatives.com, which is an oxymoron if I’ve ever heard one.

But here we have a guy speaking from that desolate intellectual moonscape, and he’s making sense!! This is disturbing.

Two more years of 62.4% price rises would take oil prices to $215 per barrel. Given that $147 per barrel oil was a major contributor to the 2008 crisis, do we really think the U.S. economy capable of bearing $215 oil in 2012 without caving in on itself? I don’t think so. At least, not unless the dollar has collapsed and inflation has taken off to a level of perhaps 20-25% per annum, which is certainly a possibility.

Then there’s iron ore. The annual contract system appears to have broken down, with contracts settled at 100% above last year’s prices and the spot price running 50% higher still. Given the assumption of robust global growth and thus maintenance of this rate of increase, iron ore prices by April 2012 could thus be quadruple their current level, or $600 per metric tonne. Automobile production would have to shift entirely to plastic – except that being derived from petroleum, plastics prices would also have grown exponentially.

Then there’s copper. That’s also up more than 60% over the past year, and on the London Metal Exchange is closing in on its all-time record price, set in April 2008, around $9,000 per tonne. Existing copper mines deplete rapidly unless capital is invested in them, and with new investment having ceased for a year in 2008-09 there is now a serious supply shortage, not expected to be alleviated until major new capacity comes on stream in 2014-15. Again, if economic recovery is robust for the next two years, copper prices will continue rising at the same rate as in the last year, reaching $21,000 per tonne by 2012. Any bets on what that will do to the economy, or to inflation?
V-shaped explosion

No gibbering about Government policies, removing regulations, etc, none of which can actually resolve global geological production peaks of finite commodities. In other words, he’s making sense.

I have to admit, this, more than anything else, worries me, and I’ll tell you why. When reality has become so obvious that so-called ‘conservative’ anti-government types actually recognize it for what it is, it means reality is just about to slap us all in the face, and hard.
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Bakhtiari on the eminent decline of oil production

Monday, April 26th, 2010

There was a nice article on Bakhtiari in whiskeyandgunpowder.com, as you’ll note if you read the article, times are very close, close enough where we can see the iceberg approaching the prow of the Titanic, yet we are still tuning in to various radio broadcasts about things unrelated. Too bad.

ALI SAMSAM BAKHTIARI is a retired “senior energy expert,” formerly employed by the National Iranian Oil Co. (NIOC) of Tehran, Iran. He has held a number of important positions with NIOC since 1971. He is currently attached to the director’s office in the Corporate Planning Directorate of NIOC, and specializes in questions related to the global oil, gas and petrochemical industries.
Nothing Like Business as Usual

But the really good part was in his concrete advice on how to proceed with this problem:
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Interview With William Black

Monday, April 26th, 2010

William Black, for those of you who don’t follow such things, is the guy who salvaged the Savings and Loan debacle way back there in the 90s.

He’s also the guy who was NOT hired by Obama, which was the exact moment we were told that in fact, yes, accepting campaign contributions from Wall Street does hopelessly compromise your integrity, left or right, makes no difference.

But it’s still good to know there are some reasonably competent and honest individuals out there.

Mr. Black, you are a white-collar criminologist. Can you describe for us these “certain patterns of behaviour, which are relatively standard in criminal financial activity” and explain why they occurred?

The fuller question is why we have recurrent, intensifying crises in so many nations. The principal cause is epidemics of “control fraud.” “Control frauds” are seemingly legitimate entities controlled by persons that use them as a fraud “weapon.” (The person that controls the firm is typically the CEO, so that term is used in this article.) A single control fraud can cause greater losses than all other forms of property crime combined. Neo-classical economic theory, methodology, and praxis is optimizing criminogenic environments that hyper-inflate financial bubbles and produce recurrent, intensifying financial crises. Financial control frauds’ “weapon of choice” is accounting. Neo-classical theory, which dominates law & economics, is criminogenic because it assumes that control fraud cannot exist while recommending legal policies that optimize an industry for control fraud. Its hostility to regulation, endorsement of opaque assets that lack readily verifiable market values, and support for executive compensation that creates perverse incentives to engage in accounting control fraud and optimizes fraudulent CEOs’ ability to convert firm assets to the CEO’s personal benefit have created a nearly perfect crime.
Interview with Bill Black: The Great Global Bank Robbery, Part 1

And make sure not to miss the recent article Spitzer and Black cowrote:

For those who have spent years investigating fraud, it was no surprise to hear that Goldman Sachs, the (self-described) jewel of Wall Street, is the latest firm to emerge from the financial crisis with tarnished reputation. According to a lawsuit brought by the Securities and Exchange Commission, Goldman misrepresented to its customers the quality of the toxic assets underlying a complex financial derivative known as a “synthetic collateralized debt obligation (CDO).”
Spitzer & Black: Questions from the Goldman Scandal

But read this stuff yourselves, these guys are good.
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An Alternate View of US Military Expenditures

Monday, April 26th, 2010

Here’s a useful tool for re-evaluating the actual costs of the US military.

pie chart of US budget

So what does this mean? Well, it’s pretty simple – next time you hear a politician say we can’t afford X or Y, or we need to cut A or B, keep always in your head, that we can afford these things, if, but only if, we slash back our military industrial complex, and our foreign bases. In other words, if we return to having a purely defensive military, one without the current revolving chairs taking Pentagon officials straight from military service to high paying jobs with defense contractors.

Such a slimmed down military would look a lot like the militaries of other countries that engage in largely defensive military development and funding. In other words, it would cost probably only 10% of what we currently spend. So that’s a good place to start when looking where to cut the budgets.

It’s really not complicated, all it takes is the willingness to demand change, and to vote for candidates who will actually promote change. This, of course, won’t happen until we simply cannot afford our current corrupt system.