A Drop of Rain

Another good one, an interview with Kevin Phillips, author of Bad Money: RECKLESS FINANCE, FAILED POLITICS, AND THE GLOBAL CRISIS OF AMERICAN CAPITALISM.

Like the previous links, this one is somewhat refreshing, because the author is an ex-Nixon White House person, who I think fairly accurately notes the serious problems with both the Democratic and Republican parties in the USA.

BILL MOYERS: So you have it — for this disaster has bipartisan parentage.

KEVIN PHILLIPS: Absolutely.

BILL MOYERS: But yet you say it’s come to an end. You say there’ll be no pretense any longer that the financial system is supreme.

KEVIN PHILLIPS: Oh, there may be a pretense in some quarters. I mean, obviously people who were doing the bailouts are saying how important it is that we don’t rock or endanger the financial system. Some would say to the contrary that the best thing we could do would be to put its failings out there and let the making cure it.

Like so many he sees things fairly clearly, but also, sadly understands that it is now too late. The bubble has to burst, and pumping in hundreds of billions of dollars to keep it inflated, and to keep debt holders buying more, is just not going do anything but make it worse.

Good transcript of Bill Moyer’s interview with Bacevich, author of The Limits to Power.

ANDREW BACEVICH: Our foreign policy is not something simply concocted by people in Washington D.C. and imposed on us. Our foreign policy is something that is concocted in Washington D.C., but it reflects the perceptions of our political elite about what we want, we the people want. And what we want, by and large - I mean, one could point to many individual exceptions - but, what we want, by and large is, we want this continuing flow of very cheap consumer goods.

And make sure to check out this ‘picture is worth a thousand words’ image of the Total Credit Market Debt as a % of GDP over the last 90 years or so. If you have a hard time understanding where we are about to go, take one more look, it’s all you should need.

Read this recent article about the roots of our new economic collapse.

I’m not going to paraphrase this, it’s an excellent analysis and historical overview.

These events are not a short term bump on the road, but the culmination of the decision a generation ago to use paper to buy oil, to inflate that paper by allowing those at the very highest reaches of a social elite to engage in a “race to the top” with the suppliers of oil. This system was accepted by both parties, and it created a neo-liberal era where any restriction to creating paper wealth had to be removed. This was not a matter of left or right, everyone was a neo-conservative, and every one was a neo-liberal.

Richard Heinberg recently wrote a short piece for The Ecologist (and believe me, all you head-in-the-sand denialists are about to wake up to a harsh dose of reality, so you might want to start paying attention to the people who are right, and who have been right all along) discussing the speed of systems collapse as of now.

Keep in mind, we’re sailing here on a very big ship, with a lot of inertia, so changes happen in a sort of surreal slow-motion time frame that requires something of a coherent overview to understand, although everyone of course immediately understands things like $100 fill-ups on their excessively large SUVs and trucks.

Heinberg’s point below, however, is worth some serious thought. I guarantee you I’m going to look at his suggestion very seriously, and I recommend you all do too.

As the Great Unraveling proceeds, there may in fact be only one occupation worthy of our attention: that of identifying the qualities that make our species worth saving, and then celebrating and exemplifying those qualities. If we concentrate on doing that, perhaps we win no matter what. Outwardly, it will probably look a lot like what many of us are already doing: working to save a species, an ecosystem, a human community; to make a village sustainable, or to halt a new coal power plant.

Taking in traumatic information and transmuting it into life-affirming action may turn out to be the most advanced and meaningful spiritual practice of our time.
How Do You Like the Collapse So Far?, 05 Jun 2008

Ilargi posted a very thoughtful comment in the automatic earth, a response to a Der Spiegel article on the environment.

Sometimes it’s refreshing to read a straight ahead piece like this amidst all the talk about the economy, especially when you have to hear pretty much every mainstream media voice on the planet talk about the costs of not killing ourselves, ie, the economic costs of stopping growth, which is what this all really boils down to in the end.

As long as we keep stating the earth’s value in monetary terms, we are irrevocably doomed. If you accept that you come from, and belong to, the world around you, and understand that Darwin has delivered proof that (wo)man has come from all that has been before, that 90% of our genes are identical to those of our pets and so on, than putting a dollar price on plants and animals and rivers and skies is identical to putting a dollar price on your own life, and on your children and loved ones. Everything alive is a part of you. Dollars are not.

In our economic system, based on debt, credit and interest, the future value of everything under the sun necessarily gets discounted over time. That is because currencies lose their value over time. It’s also in our genes: we prefer what we have now over what we might have later. Our ancestors were the ones who focused on immediate threats. Those who focused on future ones, in general didn’t live long enough to procreate.

There is an economist in this article who says:
“Protecting diversity is much cheaper than allowing its destruction.”
He’s wrong, because of what I just said: all future values are discounted, so destruction is more profitable than preservation. This economist has never grasped the essence of his own chosen field.
What is the earth worth?, the Automatic Earth, May 27, 2008

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Who said it’s all bad news? Globalization was always a totally false construct, built on a foundation of dirt cheap oil prices (around $10 a barrel until only 10 years or so ago), caused by a very temporary global oil glut.

So to see a story about globalization already collapsing at oil prices around 120 a barrel current really makes my day a bit more cheerful. Read on to see how rising oil prices are already impacting the US locally as well.

To summarize some other postings here, ship bunker oil, fuel oil, is from what I can gather basically Number 6 distillate, the heaviest, crappiest stuff, left over after they refine out gasoline, diesel, heating oil, and jet fuel. Read this nice overview in wikipedia if you want to learn the specifics. Check out this sample of current Los Angeles bunker fuel prices.

Noting there that all categories of bunker fuel prices are rising right along with crude oil futures, the following article now should be fairly easy to understand:

The rising price of oil is making international trade of heavy cargo prohibitively expensive, and acting as an incentive for importers to find products such as steel closer to home, new research by CIBC World Markets shows.
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If oil prices continue to rise, the soaring cost of global transport will act like a major tariff barrier and lead to a substantial slow down in international trade, they argue.

“Globalization is reversible,” they state.
High oil prices will hurt trade, report says, Globe and Mail, May 27, 2008

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The recent developments in global fertilizer price hikes, diesel fuel rising, global grain prices skyrocketing, point towards one fact:

At Some Point Sustainability Must be Addressed

That, of course, will also expose the true carrying capacities of each region, since industrial agriculture is essentially an extractive industry, not a sustainable one. Sustainable means sustainable, in case you’re trying to confuse yourself, it means you can sustain the practice over time. If unsustainable food production, aka: industrial farming, is used to maintain a population at a certain level, that population is not sustainable.

It’s not, however, nearly as simple as it seems. As a recent The Nation piece reminds us, most global food production has been industrialized, and is in one way or the other, in the hands of global food corporations.

The Mexican food crisis cannot be fully understood without taking into account the fact that in the years preceding the tortilla crisis, the homeland of corn had been converted to a corn-importing economy by “free market” policies promoted by the International Monetary Fund (IMF), the World Bank and Washington. The process began with the early 1980s debt crisis. One of the two largest developing-country debtors, Mexico was forced to beg for money from the Bank and IMF to service its debt to international commercial banks. The quid pro quo for a multibillion-dollar bailout was what a member of the World Bank executive board described as “unprecedented thoroughgoing interventionism” designed to eliminate high tariffs, state regulations and government support institutions, which neoliberal doctrine identified as barriers to economic efficiency.

Interest payments rose from 19 percent of total government expenditures in 1982 to 57 percent in 1988, while capital expenditures dropped from an already low 19.3 percent to 4.4 percent. The contraction of government spending translated into the dismantling of state credit, government-subsidized agricultural inputs, price supports, state marketing boards and extension services. Unilateral liberalization of agricultural trade pushed by the IMF and World Bank also contributed to the destabilization of peasant producers.
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With the shutting down of the state marketing agency for corn, distribution of US corn imports and Mexican grain has come to be monopolized by a few transnational traders, like US-owned Cargill and partly US-owned Maseca, operating on both sides of the border. This has given them tremendous power to speculate on trade trends, so that movements in biofuel demand can be manipulated and magnified many times over. At the same time, monopoly control of domestic trade has ensured that a rise in international corn prices does not translate into significantly higher prices paid to small producers.
Manufacturing a Food Crisis, May 15, 2008

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I came across an interesting article re rice production. As you may have heard, the main components of fertilizer are skyrocketing in price. Economists, and people who believe that this way of thinking will help our future, of course make the predictable statement: high rice prices benefit the (largely corporate, but let’s leave that aside) rice growers.

The formula is simple: skyrocketing fertilizer prices are forcing down fertilizer use, which will next year create a major rice shortage.

Few people are aware that beneath the worries over rice which pervade media these days is a looming disaster which could make the rice crisis seem puny in comparison.

To understand the magnitude of this global menace, one would first have to appreciate how world food production quintupled many times over from the early 19th century to the present, making possible the global population explosion.

Of course, advances in global agricultural production technology played their part in boosting food production worldwide, but even their combined impact cannot compensate for something basic to agriculture which has been mainly responsible for increases in farm production since the earliest times: fertilizer.
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One thing which has not been given due attention in the present rice crisis is the effect of fertilizer in rice production. It´s fertilizer which enables countries like Thailand and Vietnam to have astounding rice yields compared to the Philippines. Thus, while we have a wider area planted to rice compared to these two countries, they produce more rice and we often end up importing from them. Without having to go into the details of the variance in yields between irrigated and raid-fed rice paddies, it´s easy to see evaluate the impact rising fertilizer prices have had on the farm gate and retail prices of rice.
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So why does this all matter to the ordinary consumer already burdened by rising prices of food, rice and petroleum products? With the dropping utilization of fertilizer as a result of its rising prices, domestic rice production is expected to fall by over 50% of the rice produced last year and the crisis that is being perceived today will further escalate to real crisis level as early as 2009.
Fertilizer and the looming global food crisis, May 23, 2008

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Well, I’d say the mainstream media’s main sources are all stumbling towards a part of the first step of realization. Seeing Kunstler featured in the Washington Post editorial pages is a pretty good sign in my opinion, although it’s a bit late, since from what I can see, we are now starting to bump our way down the back end of the global oil production peak.

The public, and especially the mainstream media, misunderstands the “peak oil” story. It’s not about running out of oil. It’s about the instabilities that will shake the complex systems of daily life as soon as the global demand for oil exceeds the global supply.
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As the world passes the all-time oil production high and watches as the price of a barrel of oil busts another record, as it did last week, these systems will run into trouble. Instability in one sector will bleed into another. Shocks to the oil markets will hurt trucking, which will slow commerce and food distribution, manufacturing and the tourist industry in a chain of cascading effects. Problems in finance will squeeze any enterprise that requires capital, including oil exploration and production, as well as government spending. These systems are all interrelated. They all face a crisis. What’s more, the stress induced by the failure of these systems will only increase the wishful thinking across our nation.

And that’s the worst part of our quandary: the American public’s narrow focus on keeping all our cars running at any cost. Even the environmental community is hung up on this. The Rocky Mountain Institute has been pushing for the development of a “Hypercar” for years — inadvertently promoting the idea that we really don’t need to change.
GRAND DELUSION
Wake Up, America. We’re Driving Toward Disaster, May 25, 2008

Kunstler took good advantage of this opportunity, and I’m glad that the Washington Post is printing this story.
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Admit it, you read the news, Wall Street sits poised on the edge, but somehow it hasn’t collapsed yet. Why? It took me a while to realize the answer, and I found an article today while checking out some new news sources, Business Intelligence - Middle East in this case. I’d suspected this was the case, and the following article shows it fairly clearly.

Sovereign funds from the Middle East and Asia were also highly active in providing more than US$43 billion in capital to Wall Street banks starved of funds during the credit crisis that erupted last Summer.

Sovereign wealth funds - JPMorgan Chase catalogued 50 of them - are pools of money derived from official surpluses, such as foreign reserves, commodity revenues or fiscal sources. Profits from the funds are meant for the benefit of a particular nation’s future generations.

A steady and deep source of capital for many private equity firms and hedge funds will likely be welcome news, especially since many private investors have become more risk averse lately.

The report also cites talk that sovereign funds may provide private equity with debt financing for leveraged buyout deals, replacing bank financing, which dried up in the face of the crisis.
BI-ME and Reuters, 22-05-2008

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