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Forecast 2014 — Burning Down the House | KUNSTLER

Forecast 2014 — Burning Down the House | KUNSTLER.

      Many of us in the Long Emergency crowd and like-minded brother-and-sisterhoods remain perplexed by the amazing stasis in our national life, despite the gathering tsunami of forces arrayed to rock our economy, our culture, and our politics. Nothing has yielded to these forces already in motion, so far. Nothing changes, nothing gives, yet. It’s like being buried alive in Jell-O. It’s embarrassing to appear so out-of-tune with the consensus, but we persevere like good soldiers in a just war.

Paper and digital markets levitate, central banks pull out all the stops of their magical reality-tweaking machine to manipulate everything, accounting fraud pervades public and private enterprise, everything is mis-priced, all official statistics are lies of one kind or another, the regulating authorities sit on their hands, lost in raptures of online pornography (or dreams of future employment at Goldman Sachs), the news media sprinkles wishful-thinking propaganda about a mythical “recovery” and the “shale gas miracle” on a credulous public desperate to believe, the routine swindles of medicine get more cruel and blatant each month, a tiny cohort of financial vampire squids suck in all the nominal wealth of society, and everybody else is left whirling down the drain of posterity in a vortex of diminishing returns and scuttled expectations.

Life in the USA is like living in a broken-down, cob-jobbed, vermin-infested house that needs to be gutted, disinfected, and rebuilt — with the hope that it might come out of the restoration process retaining the better qualities of our heritage. Some of us are anxious to get on with the job, to expel all the rats, bats, bedbugs, roaches, and lice, tear out the stinking shag carpet and the moldy sheet-rock, rip off the crappy plastic siding, and start rebuilding along lines that are consistent with the demands of the future — namely, the reality of capital and material resource scarcity. But it has been apparent for a while that the current owners of the house would prefer to let it fall down, or burn down rather than renovate.

Some of us now take that outcome for granted and are left to speculate on how it will play out. These issues were the subjects of my recent non-fiction books, The Long Emergency and Too Much Magic (as well as excellent similar books by Richard Heinberg, John Michael Greer, Dmitry Orlov, and others). They describe the conditions at the end of the cheap energy techno-industrial phase of history and they laid out a conjectural sequence of outcomes that might be stated in shorthand as collapse and re-set. I think the delay in the onset of epochal change can be explained pretty simply. As the peak oil story gained traction around 2005, and was followed (as predicted) by a financial crisis, the established order fought back for its survival, utilizing its remaining dwindling capital and the tremendous inertia of its own gigantic scale, to give the appearance of vitality at all costs.

At the heart of the matter was (and continues to be) the relationship between energy and economic growth. Without increasing supplies of cheap energy, economic growth — as we have known it for a couple of centuries — does not happen anymore. At the center of the economic growth question is credit. Without continued growth, credit can’t be repaid, and new credit cannot be issued honestly — that is, with reasonable assurance of repayment — making it worthless. So, old debt goes bad and the new debt is generated knowing that it is worthless. To complicate matters, the new worthless debt is issued to pay the interest on the old debt, to maintain the pretense that it is not going bad. And then all kinds of dishonest side rackets are run around this central credit racket — shadow banking, “innovative” securities (i.e. new kinds of frauds and swindles, CDOs CDSs, etc.), flash trading, insider flimflams, pump-and-dumps, naked shorts, etc. These games give the impression of an economy that seems to work. But the reported “growth” is phony, a concoction of overcooked statistics and wishful thinking. And the net effect moves the society as a whole in the direction of more destructive ultimate failure.

Now, a number of stories have been employed lately to keep all these rackets going — or, at least, keep up the morale of the swindled masses. They issue from the corporations, government agencies, and a lazy, wishful media. Their purpose is to prop up the lie that the dying economy of yesteryear is alive and well, and can continue “normal” operation indefinitely. Here are the favorites of the past year:

  • Shale oil and gas amount to an “energy renaissance” that will keep supplies of affordable fossil fuels flowing indefinitely, will make us “energy independent,” and will make us “a bigger producer than Saudi Arabia.” This is all mendacious bullshit with a wishful thinking cherry on top. Here’s how shale oil is different from conventional oil:

PP Oil 2

  • A “manufacturing renaissance” is underway in the US, especially in the “central corridor” running from Texas north to Minnesota. That hoopla is all about a few chemical plants and fertilizer factories that have reopened to take advantage of cheaper natural gas. Note, the shale gas story is much like the shale oil story in terms of drilling and production. The depletion rates are quick and epic. In a very few years, shale gas won’t be cheap anymore. Otherwise, current talk of new manufacturing for hard goods is all about robots. How many Americans will be employed in these factories? And what about the existing manufacturing over-capacity everywhere else in the world? Are we making enough sneakers and Justin Beiber dolls? File under complete fucking nonsense.
  • The USA is “the cleanest shirt in the laundry basket,” “the best house in a bad neighborhood,” the safest harbor for international “liquidity,” making it a sure bet that both the equity and bond markets will continue to ratchet up as money seeking lower risk floods in to the Dow and S & P from other countries with dodgier economies and sicker banks. In a currency war, with all nations competitively depreciating their currencies, gaming interest rates, manipulating markets, falsely reporting numbers, hiding liabilities, backstopping bad banks, and failing to regulate banking crime, there are no safe harbors. The USA can pretend to be for a while and then that illusion will pop, along with the “asset” bubbles that inspire it.
  • The USA is enjoying huge gains from fantastic new “efficiencies of technological innovation.” The truth is not so dazzling. Computer technology, produces diminishing returns and unanticipated consequences. The server farms are huge energy sinks. Online shopping corrodes the resilience of commercial networks when only a few giant companies remain standing; and so on. Problems like these recall the central collapse theory of Joseph Tainterwhich states that heaping additional complexity on dysfunctional hyper-complex societies tends to induce their collapse. Hence, my insistence that downscaling, simplifying, re-localizing and re-setting the systems we depend on are imperative to keep the project of civilization going. That is, if you prefer civilization to its known alternatives.

Notice that all of these stories want to put over the general impression that the status quo is alive and well. They’re based on the dumb idea that the stock markets are a proxy for the economy, so if the Standard & Poor’s 500 keeps on going up, it’s all good. The master wish running through the American zeitgeist these days is that we might be able to keep driving to Wal-Mart forever.

The truth is that we still have a huge, deadly energy problem. Shale oil is not cheap oil, and it will stop seeming abundant soon. If the price of oil goes much above $100 a barrel, which you’d think would be great for the oil companies, it will crash demand for oil. If it crashes demand, the price will go down, hurting the profitability of the shale oil companies. It’s quite a predicament. Right now, in the $90-100-a-barrel range, it’s just slowly bleeding the economy while barely allowing the shale oil producers to keep up all the drilling. Two-thirds of all the dollars invested (more than $120 billion a year) goes just to keep production levels flat. Blogger Mark Anthonysummarized it nicely:

…the shale oil and gas developers tend to use unreliable production models to project unrealistically high EURs (Estimated Ultimate Recovery) of their shale wells. They then use the over-estimated EURs to under-calculate the amortization costs of the capital spending, in order to report “profits”, despite of the fact that they have to keep borrowing more money to keep drilling new wells, and that capital spending routinely out paces revenue stream by several times… shale oil and gas producers tend to over-exaggerate productivity of their wells, under-estimate the well declines…in order to pitch their investment case to banks and investors, so they can keep borrowing more money to keep drilling shale wells.

As stated in the intro, these perversities reverberate in the investment sector. Non-cheap oil upsets the mechanisms of capital formation — financial growth is stymied — in a way that ultimately affects the financing of oil production itself. Old credit cannot be repaid, scaring off new credit (because it is even more unlikely to be repaid). At ZIRP interest, nobody saves. The capital pools dry up. So the Federal Reserve has to issue ersatz credit dollars on its computers. That credit will remain stillborn and mummified in depository institutions afraid of lending it to the likes of sharpies and hypesters in the shale gas industry.

But real, functioning capital (credit that can be paid back) is vanishing, and the coming scarcity of real capital makes it much more difficult to keep the stupendous number of rigs busy drilling and fracking new shale oil wells, which you have to do incessantly to keep production up, and as the investment in new drilling declines, and the “sweet spots” yield to the less-sweet spots or the not-sweet-at-all spots… then the Ponzis of shale oil and shale gas, too will be unmasked as the jive endeavors they are. And when people stop believing these cockamamie stories, the truth will dawn on them that we are in a predicament where further growth and wealth cannot be generated and the economy is actually in the early stages of a permanent contraction, and that will trigger an unholy host of nasty consequences proceeding from the loss of faith in these fairy tales, going so far as the meltdown of the banking system, social turmoil, and political upheaval.

The bottom line is that the “shale revolution” will be short-lived. 2014 may be the peak production year in the Bakken play of North Dakota. Eagle Ford in Texas is a little younger and may lag Bakken by a couple of years. If Federal Reserve policies create more disorder in the banking system this year, investment for shale will dry up, new drilling will nosedive, and shale oil production will go down substantially. Meanwhile. conventional oil production in the USA continues to decline remorselessly.

The End of Fed Cred

It must be scary to be a Federal Reserve governor. You have to pretend that you know what you’re doing when, in fact, Fed policy appears completely divorced from any sense of consequence, or cause-and-effect, or reality — and if it turns out you’re not so smart, and your policies and interventions undermine true economic resilience, then the scuttling of the most powerful civilization in the history of the world might be your fault — even if you went to Andover and wear tortoise-shell glasses that make you appear to be smart.

The Fed painted itself into a corner the last few years by making Quantitative Easing a permanent feature of the financial landscape. QE backstops everything now. Tragically, additional backdoor backstopping extends beyond the QE official figures (as of December 2013) of $85 billion a month. American money (or credit) is being shoveled into anything and everything, including foreign banks and probably foreign treasuries. It’s just another facet of the prevailing pervasive dishonesty infecting the system that we have no idea, really, how much money is being shoveled and sprinkled around. Anything goes and nothing matters. However, since there is an official consensus that you can’t keep QE money-pumping up forever, the Fed officially made a big show of seeking to begin ending it. So in the Spring of 2013 they announced their intention to “taper” their purchases of US Treasury paper and mortgage paper, possibly in the fall.

Well, it turned out they didn’t or couldn’t taper. As the fall equinox approached, with everyone keenly anticipating the first dose of taper, the equity markets wobbled and the interest rate on the 10-year treasury — the index for mortgage loans and car loans — climbed to 3.00 percent from its May low of 1.63 — well over 100 basis points — and the Fed chickened out. No September taper. Fake out. So, the markets relaxed, the interest rate on the 10-year went back down, and the equity markets resumed their grand ramp into the Christmas climax. However, the Fed’s credibility took a hit, especially after all their confabulating bullshit “forward guidance” in the spring and summer when they couldn’t get their taper story straight. And in the meantime, the Larry-Summers-for-Fed-Chair float unfloated, and Janet Yellen was officially picked to succeed Ben Bernanke, with her reputation as an extreme easy money softie (more QE, more ZIRP), and a bunch of hearings were staged to make the Bernanke-Yellen transition look more reassuring.

And then on December 18, outgoing chair Bernanke announced, with much fanfare, that the taper would happen after all, early in the first quarter of 2014 ­— after he is safely out of his office in the Eccles building and back in his bomb shelter on the Princeton campus. The Fed meant it this time, the public was given to understand.

The only catch here, as I write, after the latest taper announcement, is that interest on the 10-year treasury note has crept stealthily back up over 3 percent. Wuh-oh. Not a good sign, since it means more expensive mortgages and car loans, which happen to represent the two things that the current economy relies on to appear “normal.” (House sales and car sales = normal in a suburban sprawl economy.)

I think the truth is the Fed just did too darn much QE and ZIRP and they waited way too long to cut it out, and now they can’t end it without scuttling both the stock and bond markets. But they can’t really go forward with the taper, either. A rock and a hard place. So, my guess is that they’ll pretend to taper in March, and then they’ll just as quickly un-taper. Note the curious report out of the American Enterprise Institute ten days ago by John H. Makin saying that the Fed’s actual purchase of debt paper amounted to an average $94 billion a month through the year 2013, not $85 billion. Which would pretty much negate the proposed taper of $5 billion + $5 billion (Treasury paper + Mortgage paper).

And in so faking and so doing they may succeed in completely destroying the credibility of the Federal Reserve. When that happens, capital will be disappearing so efficiently that the USA will find itself in a compressive deflationary spiral — because that’s what happens when faith in the authority behind credit is destroyed, and new loans to cover the interest on old loans are no longer offered in the non-government banking system, and old loans can’t be serviced. At which point the Federal Reserve freaks out and announces new extra-special QE way above the former 2013 level of $85 billion a month, and the government chips in with currency controls. And that sets in motion the awful prospect of the dreaded “crack-up boom” into extraordinary inflation, when dollars turn into hot potatoes and people can’t get rid of them fast enough. Well, is that going to happen this year? It depends on how spooked the Fed gets. In any case, there is a difference between high inflation and hyper-inflation. High inflation is bad enough to provoke socio-political convulsion. I don’t really see how the Fed gets around this March taper bid without falling into the trap I’ve just outlined. It wouldn’t be a pretty situation for poor Ms. Janet Yellen, but nobody forced her to take the job, and she’s had the look all along of a chump, the perfect sucker to be left holding a big honking bag of flop.

We’re long overdue for a return to realistic pricing in all markets. The Government and its handmaiden, the Fed, have tweaked the machinery so strenuously for so long that these efforts have entered the wilderness of diminishing returns. Instead of propping up the markets, all they can accomplish now is further erosion of the credibility of the equity markets and the Fed itself — and that bodes darkly for a money system that is essentially run on faith. I think the indexes have topped. The “margin” (money borrowed to buy stock) in the system is at dangerous, historically unprecedented highs. There may be one final reach upward in the first quarter. Then the equities crater, if not sooner. I still think the Dow and S &P could oversell by 90 percent of their value if the falsehoods of the post-2008  interventions stopped working their hoodoo on the collective wishful consciousness.

The worldwide rise in interest rates holds every possibility for igniting a shitstorm in interest rate swaps and upsetting the whole apple-cart of shadow banking and derivatives. That would be a bullet in the head to the TBTF banks, and would therefore lead to a worldwide crisis. In that event, the eventual winners would be the largest holders of gold, who could claim to offer the world a trustworthy gold-backed currency, especially for transactions in vital resources like oil. That would, of course, be China. The process would be awfully disorderly and fraught with political animus. Given the fact that China’s own balance sheet is hopelessly non-transparent and part-and-parcel of a dishonest crony banking system, China would have to use some powerful smoke-and-mirrors to assume that kind of dominant authority. But in the end, it comes down to who has the real goods, and who screwed up (the USA, Europe, Japan) and China, for all its faults and perversities, has the gold.

The wholesale transfer of gold tonnage from the West to the East was one of the salient events of 2013. There were lots of conspiracy theories as to what drove the price of gold down by 28 percent. I do think the painful move was partly a cyclical correction following the decade-long run up to $1900 an ounce. Within that cyclical correction, there was a lot of room for the so-called “bullion banks” to pound the gold and silver prices down with their shorting orgy. Numerous times the past year, somebody had laid a fat finger on the “sell” key, like, at four o’clock in the morning New York time when no traders were in their offices, and the record of those weird transactions is plain to see in the daily charts. My own theory is that an effort was made — in effect, a policy — to suppress the gold price via collusion between the Fed, the US Treasury, the bullion banks, and China, as a way to allow China to accumulate gold to offset the anticipated loss of value in the US Treasury paper held by them, throwing China a big golden bone, so to speak — in other words, to keep China from getting hugely pissed off. The gold crash had the happy effect for the US Treasury of making the dollar appear strong at a time when many other nations were getting sick of US dollar domination, especially in the oil markets, and were threatening to instigate a new currency regime by hook or by crook. Throwing China the golden bone is also consistent with the USA’s official position that gold is a meaningless barbaric relic where national currencies are concerned, and therefore nobody but the barbaric yellow hordes of Asia would care about it.

Other nations don’t feel that way. Russia and Switzerland have been accumulating gold like crazy at bargain prices this year. Lat year, Germany requested its sovereign gold cache (300 tons) to be returned from the vaults in America, where it was stored through all the decades of the cold war, safe from the reach of the Soviets. But American officials told the Germans it would take seven years to accomplish the return. Seven years ! ! ! WTF? Is there a shortage of banana boats? The sentiment in goldville is that the USA long ago “leased” or sold off or rehypothecated or lost that gold. Anyway, Germany’s 300 tons was a small fraction of the 6,700 tons supposedly held in the Fed’s vaults. Who knows? No auditors have been allowed into the Fed vaults to actually see what’s up with the collateral. This in and of itself ought to make the prudent nervous.

I think we’re near the end of these reindeer games with gold, largely because so many vaults in the West have been emptied. That places constraints on further shenanigans in the paper gold (and silver) markets. In an environment where both the destructive forces of deflation and inflation can be unleashed in sequence, uncertainty is the greatest motivator, trumping the usual greed and fear seen in markets that can be fairly measured against stable currencies. In 2014, the public has become aware of the bank “bail-in” phenomenon which, along with rehypothication schemes, just amounts to the seizure of customer and client accounts — a really new wrinkle in contemporary banking relations. Nobody knows if it’s safe to park cash money anywhere except inside the mattress. The precedent set in Cyprus, and the MF Global affair, and other confiscation events, would tend to support an interest in precious metals held outside the institutional framework. Uncertainty rules.

Miscellany

I get a lot of email on the subject of Bitcoin. Here’s how I feel about it.
It’s an even more abstract form of “money” than fiat currencies or securities based on fiat currencies. Do we need more abstraction in our economic lives? I don’t think so. I believe the trend will be toward what is real. For the moment, Bitcoin seems to be enjoying some success as it beats back successive crashes. I’m not very comfortable with the idea of investing in an algorithm. I don’t see how it is impervious to government hacking. In fact, I’d bet that somewhere in the DOD or the NSA or the CIA right now some nerd is working on that. Bitcoin is provoking imitators, other new computer “currencies.” Why would Bitcoin necessarily enjoy dominance? And how many competing algorithmic currencies can the world stand? Wouldn’t that defeat the whole purpose of an alternative “go to” currency? All I can say is that I’m not buying Bitcoins.

Will ObamaCare crash and burn. It’s not doing very well so far. In fact, it’s a poster-child for Murphy’s Law (Anything that can go wrong, will go wrong). I suppose the primary question is whether they can enroll enough healthy young people to correct the actuarial nightmare that health insurance has become. That’s not looking so good either now. But really, how can anyone trust a law that was written by the insurance companies and the pharmaceutical industry? And how can it be repealed when so many individuals, groups, companies, have already lost their pre-ObamaCare policies? What is there to go back to? Therefore, I’d have to predict turmoil in the health care system for 2014. The failure to resolve the inadequacies of ObamaCare also may be a prime symptom of the increasing impotence of the federal government to accomplish anything. That failure would prompt an even faster downscaling of governance as states, counties, communities, and individuals realize that they are on their own.

Sorry to skip around, but a few stray words about the state of American culture. Outside the capitals of the “one percent” — Manhattan, San Francisco, Boston, Washington, etc. — American material culture is in spectacular disrepair. Car culture and chain store tyranny have destroyed the physical fabric of our communities and wrecked social relations. These days, a successful Main Street is one that has a wig shop and a check-cashing office. It is sickening to see what we have become. Our popular entertainments are just what you would design to produce a programmed population of criminals and sex offenders. The spectacle of the way our people look —overfed, tattooed, pierced, clothed in the raiment of clowns — suggests an end-of-empire zeitgeist more disturbing than a Fellini movie. The fact is, it simply mirrors the way we act, our gross, barbaric collective demeanor. A walk down any airport concourse makes the Barnum & Bailey freak shows of yore look quaint. In short, the rot throughout our national life is so conspicuous that a fair assessment would be that we are a wicked people who deserve to be punished.

Elsewhere in the World

Globalism, in the Tom Friedman euphoric sense, is unwinding. Currency wars are wearing down the players, conflicts and tensions are breaking out where before there were only Wal-Mart share price triumphs and Foxconn profits. Both American and European middle-classes are too exhausted financially to continue the consumer orgy of the early millennium. The trade imbalances are horrific. Unpayable debt saturates everything. Sick economies will weigh down commodity prices except for food-related things. The planet Earth has probably reached peak food production, including peak fertilizer. Supplies of grain will be inadequate in 2014 to feed the still-expanding masses of the poor places in the world.

The nervous calm in finance and economies since 2008 has its mirror in the relative calm of the political scene. Uprisings and skirmishes have broken out, but nothing that so far threatens the peace between great powers. There have been the now-historic revolts in Egypt, Libya, Syria, and other Middle East and North African (MENA) states. Iraq is once again disintegrating after a decade of American “nation-building.” Greece is falling apart. Spain and Italy should be falling apart but haven’t yet. France is sinking into bankruptcy. The UK is in on the grift with the USA and insulated from the Euro, but the British Isles are way over-populated with a volatile multi-ethnic mix and not much of an economy outside the financial district of London. There were riots in — of all places — Sweden this year. Turkey entered crisis just a few weeks ago along with Ukraine.

I predict more colorful political strife in Europe this year, boots in the street, barricades, gunfire, and bombs. The populations of these countries will want relief measures from their national governments, but the sad news is that these governments are broke, so austerity seems to be the order of the day no matter what. I think this will prod incipient revolts in a rightward nationalist direction. If it was up to Marine LePen’s rising National Front party, they would solve the employment problem by expelling all the recent immigrants — though the mere attempt would probably provoke widespread race war in France.

The quarrel between China and Japan over the Senkaku Islands is a diversion from the real action in the South China Sea, said to hold large underwater petroleum reserves. China is the world’s second greatest oil importer. Their economy and the credibility of its non-elected government depends on keeping the oil supply up. They are a long way from other places in the world where oil comes from, hence their eagerness to secure and dominate the South China Sea. The idea is that China would make a fuss over the Senkaku group, get Japan and the US to the negotiating table, and cede the dispute over them to Japan in exchange for Japan and the US supporting China’s claims in the South China Sea against the other neighbors there: Vietnam, Indonesia, Malaysia, and the Philippines.

The catch is that Japan may be going politically insane just now between the rigors of (Shinzo) Abenomics and the mystical horrors of Fukushima. Japan’s distress appears to be provoking a new mood of nationalist militarism of a kind not seen there since the 1940s. They’re talking about arming up, rewriting the pacifist articles in their constitution. Scary, if you have a memory of the mid-20th century. China should know something about national psychotic breaks, having not so long ago endured the insanity of Mao Zedong’s Cultural Revolution (1966-71). So they might want to handle Japan with care. On the other hand, China surely nurtures a deep, deadly grudge over the crimes perpetrated by Japan in the Second World War, and now has a disciplined, world-class military, and so maybe they would like to kick Japan’s ass. It’s a hard one to call. I suspect that in 2014, the ball is in Japan’s court. What will they do? If the US doesn’t stay out of the way of that action, then we are insane, too.

That said, I stick by my story from last year’s forecast: Japan’s ultimate destination is to “go medieval.” They’re never going to recover from Fukushima, their economy is unraveling, they have no fossil fuels of their own and have to import everything, and their balance of payments is completely out of whack. The best course for them will be to just throw in the towel on modernity. Everybody else is headed that way, too, eventually, so Japan might as well get there first and set a good example.

By “go medieval” I mean re-set to a pre-industrial World Made By Hand level of operation. I’m sure that outcome seems laughably implausible to most readers, but I maintain that both the human race and the planet Earth need a “time out” from the ravages of “progress,” and circumstances are going to force the issue anyway, so we might as well kick back and get with the program: go local, downscale, learn useful skills, cultivate our gardens, get to know our neighbors, learn how to play a musical instrument, work, dine, and dance with our friends.

As it happens, the third in the series of my World Made By Hand novels, set in upstate New York in the post-collapse economy, will be published in September by the Atlantic Monthly Press. It’s a ripping yarn. Whether anyone will have enough money to buy a copy, I can’t predict. Happy 2014, Everybody!
New Features this week at kunstler.com:
Jim’s Garden Report, 2013
Jim’s New Paintings, 2011-2013

Published as an E-book for the first time!

The 20th Anniversary edition

With an entertaining new introduction by the author

 

GON_thumb

 

Chart Of The Day: Greek Poverty | Zero Hedge

Chart Of The Day: Greek Poverty | Zero Hedge.

And now, the saddest chart of the day: Greek poverty since the crisis, and in 2013, when the so-called “Grecovery” arrived.

Here is how Greek Kathimerini describes the fact that nearly half of all Greek incomes, some 44%, had an income below the poverty line in 2013 according to estimates by the Public Policy Analysis Group of the Athens University of Economics and Business (AUEB).

The poverty threshold is measured as 60 percent of the price-adjusted average income in 2009, or up to 665 euros per person per month and up to 1,397 for a couple supporting two underage children. The AUEB researchers also found that last year 14 percent of Greeks earned below the adequate living standards, compared with 2 percent of the population four years ago.

The blame, of course, was placed squarely on austerity, or the fact that Greece, whose epic socio-economic problems stem primarily from its massive overleveraging leading up to 2008, did notleverage some more to “fix” itself.

The group’s report, published last week, suggested that during the crisis instead of strengthening support to the unemployed – which is one of the most efficient methods to rekindle demand – the state was forced to reduce it.

Well, not all the blame: some was reserved for where it rightfully resides: an incompetent, corrupt, crony and quite criminal political system:

… besides the austerity policies of the last few year, the inability of the state to contain the collapse of social structures is due to the lack of targeted strategies and to the inefficient use of resources, problems that dogged Greece even before the onset of the crisis.

No mention that Greece was merely a pawn in the “political capital” invested in the failed Eurozone experiment, in which the main thing at stake is the vested interest of the legacy oligarchs and, of course, the bankers.

As for the Greece: don’t cry for it – it still has the euro – that symbol of successful European integration – so all is well.

Is Inflation Understated? | Zero Hedge

Is Inflation Understated? | Zero Hedge.

Submitted by Shane Obata-Marusic,

It’s ironic that in a day and age where Keynesian economics is the “accepted view” we still don’t pay enough attention to what Keynes said about inflation.

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some… Those to whom the system brings windfalls,…become “profiteers,” who are the object of the hatred… the process of wealth-getting degenerates into a gamble and a lottery… Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Keynes On Inflation

The problem today is that some people believe inflation is lower than it actually is.

The Consumer Price Index CPI is used to measure the cost of maintaining a certain standard of living. Now it measures the cost of maintaining a certain level of satisfaction.

1. VESTED INTERESTS

In reality, the purchasing power of the consumer dollar is tanking and the prices of many goods, services, and assets are increasing in price. The end result is that the consumer is suffering. By creating incredible amounts of money, the central banks of the world are debasing the currencies that they issue. In other words, the value of all of existing dollars is reduced when new dollars are supplied.

This is translating to a lower quality of life for more Americans. When one examines real median household income – which was down to $51 ,000 in 201 2 from $56,000 in the year 2000 – this becomes evident.

Before we continue, let’s make something clear. The year over year rate of increase in inflation has been in a downtrend for some time. Therefore, it’s reasonable to conclude that disinflation is a real risk.

That said, because of the presence of the central banks, it’s unlikely that deflation will become a real problem.

The CPI affects the economy because cost of living adjustments to social security, federal civilian and military retirement, and supplemental security income are tied to it. It’s also used to index income tax parameters, TIPS, and some federal contracts.

If the CPI is so important then why does it understate inflation?

That question brings us to the government’s “inflation dilemma”. The US government has 1 of 2 choices: either it can 1 ) mislead its citizens by understating inflation or 2) release accurate inflation data thereby increasing social benefit obligations. This is a lose-lose situation because, unfortunately, both choices only serve to perpetuate an already insurmountable debt problem.

So why is it important to know that inflation is understated? Because, as Keynes said in the opening quote, inflation is essentially a means by which wealth – in the form of real assets such as real estate, businesses, stocks, and bonds – is transferred from the poor and the middle class to the rich. As asset prices inflate, the rich get richer. This allows them to purchase even more assets. At the same time, the poor and middle class become worse off because they have fewer assets and more debt.

Due to the fact that the CPI understates actual inflation, low and middle income individuals are struggling to keep up with the rising costs of living. As a result, more and more people are relying on the government for support.

Inflation is only “low” because of how it’s calculated. Since the 1980s, the US government has made many changes to how the CPI is calculated. These changes have resulted in an index that no longer accurately represents how expensive it is for people to live.

The Way The Politicians Wanted It

 

In the early-1990’s, political Washington moved to change the nature of the CPI. The contention was that the CPI overstated inflation (it did not allow substitution of less-expensive hamburger for more-expensive steak). Both sides of the aisle and the financial media touted the benefits of a “more-accurate” CPI, one that would allow the substitution of goods and services.

 

The plan was to reduce the cost of living adjustments for government payments to Social Security recipients, etc. The cuts in reported inflation were an effort to reduce the federal deficit without anyone in Congress having to do the politically impossible: to vote against Social Security. The inflation-calculation changes had the further benefit to government fiscal conditions of pushing taxpayers artificially in to the higher tax brackets, thus increasing tax revenues. The changes afoot were publicized, albeit under the cover of academic theories. Few in the public paid any attention.

 

Federal Reserve Chairman Alan Greenspan and Michael Boskin, then chairman of the Council of Economic Advisors, were very clear as to how changing or “correcting” the CPI calculations would help to reduce the deficit. As described at the time by Robert Hershey of the New York Times, “Speaker Newt Gringrich, Republican of Georgia, suggested this week that fixing the [CPI] index, with its implications for lower spending [Social Security, etc.] and higher revenue [tax bracket adjustments], would provide maneuvering room for budget negotiators…”

 

John Williams’
Shadow Governement Statistics

The Boskin Commission estimates that the cumulative effects of a 1% bias (to the upside) would have added 1 trillion dollars to national debt in between 1997-2008; clearly, this was an incentive to lower the reported state of inflation.

2) PROBLEMS WITH THE CPI

If the CPI understates inflation then why is it so widely used and referred to? Probably because it’s accepted as “the best measure of inflation that exists”.

In terms of measurement, the CPI has 3 main problems: 1 ) hedonics, 2) substitution, and 3) understated costs.

1 ) Hedonic Adjustments are meant to account for changes in the quality of goods and services. The concept of adjusting prices for changes in quality makes sense. That said, the process is too subjective and is far from perfect.

Some examples:

New computer features were deemed quality improvements, with downside price adjustments made in the CPI for the changes, even though a consumer may not have wanted or used the features

 

The consumer still had to buy those features and pay full cost out-of-pocket, irrespective of what the government determined those products were generating in purported hedonic quality benefits that the consumer was not considering or using.

 

John Williams’
Shadow Governement Statistics

More issues related to subjectivity:

  • where does a good stop being a variety of a given product class and become a product on its own? – ex: Toyota corollas and Toyota camrys.
  • when it comes to a good or service’s characteristics, who’s judging their utility? The consumer or the producer or both?
  • how can someone accurately determine the “quality” of novel or intangible items?
  • what if the ratio of prices does not = the ratio of qualities?

Examples:

  1. if an old product is discounted and a new product is introduced at an unusually high price
  2. if an item is introduced into the market at an unreasonably low price in order to induce demand and then subsequently increases in price during a return to normal market conditions
  3. when a new item is not comparable to an old item

and one final comment on inflation:

The take away point here is not that hedonics is a bad concept but that a lot of subjectivity is involved in calculating hedonic adjustments. I t’s a conflict of interest for the Bureau of Labor Statistics (BLS) to calculate the CPI because it’s in the government’s interest to lower social benefit payments. As a result, the BLS’s inflation data are questionable.

2) Substitution may reflect changes in consumption patterns. That said, the concept of substitution invalidates the CPI as a measure of the cost to maintain a certain standard of living. Ex: if Bob eats steak every day for a year but is then forced to switch to chicken because of rising beef costs then it’s plausible to think he’s maintained the same level of utility. That said, one cannot argue that he’s maintained the same standard of living if he’s forced to substitute steak for a lesser alternative.

BLS introduced: More frequent re-weightings of the CPI index from every ten years to every two years, which moved the CPI closer to a substitution-based index, but the change was not considered a change in methodology.

 

BLS introduced: On-going re-weightings of sales outlets (discount/mass-merchandisers versus Main Street shops), also moving closer to a substitution-based index and creating other constant-standard-of-living issues.

3) If the BLS was actually trying to measure the cost of home ownership then their measure of housing inflation – the Owner’s Equivalent Rent (OER) – would include property taxes, maintenance costs, and insurance. The next best option would be to use the actual price of home. The OER is even less realistic as it measures “how much someone’s house would rent for monthly, unfurnished and without utilities.

“the problem with this hypothetical approach to measuring a significant portion ofCPI is obvious at best. At worst, it’s somewhat disturbing in today’s information age where actual home price data are readily-available at the mere stroke of a key. The “corrected” CPI measure clearly failed to predict an incredible amount of home price inflation which ultimately led to the biggest housing bubble in the history of the world.”

A lower OER leads to a lower CPI . This in turn leads to lower rates which lead to an even lower rate of growth in OER; it’s a negative feedback loop. What’s more is that the OER is the single largest component of the CPI”

The CPI also fails to reflect higher costs in other areas such as energy, tuition, medical care, and food and beverages. Here is a chart that demonstrates how the CPI underestimates inflation:

Lastly, it’s important to the note that the CPI doesn’t include taxes – which have grown from 5% in 1 91 3 to over 30% in 201 3. I t doesn’t make sense that the CPI doesn’t include such a significant expense. Thus, the CPI is flawed as a measure of maintaining a certain standard of living.


3) ALTERNATIVES TO THE CPI

The following section will examine multiple alternative measures of inflation. I t is not that any or all of these measures are perfect, it’s that the actual rate of inflation is higher than the CPI says it is. As a reminder, at its current levels, the CPI indicates that inflation is running at around 1% year over year.

1 ) Shadow Stats:

According to Shadow Stats, the CPI understates inflation by around 3% and 7% for the 1990s and 1980s based shadow stats alternatives respectively.

CPI Year-to-Year Growth The CPI -U (consumer price index) is the broadest measure of consumer price inflation for goods and services published by the Bureau of Labor Statistics (BLS).

While the headline number usually is the seasonally-adjusted month-to-month change, the formal CPI is reported on a not seasonally-adjusted basis, with annual inflation measured in terms of year-to-year percent change in the price index.

In the charts above we show two SGS-Alternate CPI estimates: One based on the pre-1990 official methodology for computing the CPI -U, and the other based on the methodology which was employed prior to 1980.

2) Chapwood index:

In 2012, the average inflation rate for the top 30 cities – ranked by population – was approximately 11% – or more than 3x higher than what the CPI was.

3) The EPI (Every day Price Index):

As you can see in the following chart, the CPI and EPI tracked relatively closely until the early 2000s. At that point in time, the 2 measures began to diverge. Since 1 987, the EPI and CPI have increased by approximately 1 40 and 1 1 0 percent respectively. In other words, the EPI suggests that cumulative inflation from 1 987 to the present is 30% higher than the CPI would suggest.

4) CONCLUSION

Inflation is higher than the CPI says that it is and most people are aware of that. I f you ask your friends and family whether or not they’ve noticed a general increase in prices then they’ll say yes. As noted above, both food and beverages and energy costs have risen in price dramatically. Why is that important? Because the majority of people are exposed to one or both of those costs on a regular basis.

You can argue the magnitude of the inflation understatement but you can’t argue that the official numbers are accurate.

Under reporting inflation has led to many predictable outcomes.

Americans are accumulating debt, reducing their spending, relying on government transfers, and searching for yield because the cost of living is going up.

A repressed CPI also has many effects on the financial markets.
1) It provides justification for artificially low interest rates and QE
2) It leads to the perception that the USD is holding its value and
3) It leads to overstated real returns in stocks and especially bonds

In conclusion, inflation is the means and a wealth transfer from poor and the middle class
to the rich is the end.

Don’t be fooled by people who claim that there’s no inflation.

Although disinflation is – at present – a real risk, cumulative inflation is still drastically reducing the consumer’s purchasing power.

Detroit Emergency Manager “Freezes” Pension Fund | Zero Hedge

Detroit Emergency Manager “Freezes” Pension Fund | Zero Hedge.

So far, city employees of bankrupt Detroit have stoically withstood all direct and indirect eliminations of their entitlements and retirement benefits, which was to be expected: after all as per a recent finding, they are merely an unsecured claim in an insolvent entity. However, following the latest shot across the bow from Detroit’s emergency manager Kevyn Orr, which freezes pension plans for all non-uniform employees, said stoicism will likely be acutely tested.

As Detroit News reports,

Emergency Manager Kevyn Orr has frozen the city’s pension plans for all non-uniform employees, closing the General Retirement System effective Jan. 1.

 

Orr’s Dec. 30 action freezes earned pension benefits for employees in the General Retirement System and creates a new 401(k)-style defined contribution retirement plan for existing and future city workers, according to a copy of the emergency manager’s order obtained by The Detroit News.

 

As part of the order, Orr also eliminated the pension “escalator,” effectively eliminating any future cost-of-living increases for all retired city employees in the General Retirement System.

 

The emergency manager’s order also closes the pension system’s Annuity Savings Fund, an added benefit for some municipal workers.

 

 

City employees who were not already vested in the retirement system “shall not be entitled” to pension benefits, according to the order.

 

 

Tina Bassett, a spokeswoman for the General Retirement System, called Orr’s pension freeze “an outrageous and over-zealous action.”

 

“Again the EM’s office demonstrates a lack of integrity and willingness to make a good faith effort when negotiating with our pension system,” Bassett said in a statement. “Currently we are in the midst of mediations that we thought were going rather well. We can only wonder, why take this action now and for what purpose?

The Ron Paul Institute for Peace and Prosperity : World Danger Spots for 2014

The Ron Paul Institute for Peace and Prosperity : World Danger Spots for 2014.

written by eric margolis
Kiev Nov

Where are the world’s most dangerous places in 2014?

*Mostly forgotten, but the highly dangerous, Indian-controlled portion of disputed Kashmir. Rebellion against Indian rule by Kashmir’s majority Muslims is again boiling. Over 1.6 million Indian and Pakistani troops, backed by nuclear weapons, are in confrontation. Skirmishing along Kashmir’s Line of Control is frequent. The nuclear strike forces of both India and Pakistan are on a perilous hair-trigger alert, with about three minutes warning of an enemy attack.

A false warning of incoming missiles or aircraft, a border clash, or a massive offensive by India exasperated by guerilla attacks from Pakistan could set off a war that could kill millions and pollute the entire planet with radioactive dust. India and Pakistan aside, hardly anyone even thinks about beautiful, remote, perilous Kashmir.

*Korea’s Demilitarized Zone, the world’s second most dangerous place where 1.5 million North and South Korean troops, and 28,000 Americans, face off. Tension crackles along the DMZ. Some 11,000 N Korean guns and rockets are targeted on South Korea’s capitol, Seoul. The North is believed to have 4-6 crude nuclear devices that could hit S Korea or Japan.

In December, North Korea’s new ruler, Kim Jong-un, had his powerful uncle arrested and shot. This was another sign of the Pyongyang regime’s instability, and dangerously erratic behavior by youthful hothead leader, Kim Jong-un. War could erupt anytime along the DMZ. Just as likely, North Korea could collapse, sending 25 million starving northerners to seek refuge in South Korea, something that Seoul dreads.

*The dear old Mideast. Syria may continue disintegrating into warring mini-states. The US, Saudi, Israel, and Turkey sparked the uprising against Syrian ruler Bashar Assad to punish Iran, causing millions of refugees to flood the region. This after the US invasion of Iraq caused 3 million refugees. Iran and Saudi Arabia (backed by secret ally Israel) will fight over Syria’s bleeding body as this once lovely country is relentlessly destroyed. Yemen will continue to burn.

Intense efforts are underway by American neocons and their hired hands in Congress to get the US to attack Iran, or at least force the US to go to war against Iran if Israel initiates a conflict. Meanwhile, Israel is gearing up for another invasion of Lebanon aimed at destroying Hezbollah, and it may intervene directly in Syria. Egypt, now ruled by a fascist military junta, is working hand in glove with Israel and Saudi Arabia. The so-called Israel-Palestinian peace agreement is a very bad joke, a Mideast Kabuki dance in which no one believes.

*East Africa – A new cauldron of trouble. Efforts by Washington to forge a US-led African protectorate of South Sudan, Uganda, Rwanda, Kenya, Somalia – dominated by close US ally Ethiopia – have run into trouble. All are dictatorships that are rent by tribal, ethnic and regional problems.

Watch the new US Africa Command get drawn ever deeper into East, Central and North Africa, all regions, by no coincidence, with oil.

*China Sea – China has blundered into open confrontation with Japan, Taiwan, Vietnam and the Philippines over its claims to islets in the East China Sea. This has caused the US to beef up its Pacific forces and alliances. Japanese and Chinese warplanes and ships play a daily game of chicken around the disputed Senkaku/Diaoyu Islands. China’s aggressive stance is causing Japan to increase military spending and may, along with North Korean threats, cause Japan to deploy nuclear weapons – which it can produce in only 90 days.

Chinese, usually deft, cautious diplomats, have alarmed much of East Asia for no good purpose. China’s government has been foolishly fanning the flames of nationalism among young people. All this resonates with the same type of idiotic, primitive behavior that unleashed World War I. The clock is ticking down rapidly.

*Strife-torn Ukraine is another powder keg. Its western half wants to join Europe; the Russian-speaking eastern half wants to reunite with Russia. The West is busy stirring the pot in Kiev. Moscow is furious and sees nefarious western plots to begin tearing apart the Russian Federation, which is beset by rebellion in the Caucasus. All this threatens a clash between Russia and NATO. Diplomacy, not subversion, is urgently needed.

Flickr/Oxlaey.com

Worthwhile Canadian Initiative: When Will Low Interest Rates End?

Worthwhile Canadian Initiative: When Will Low Interest Rates End?.

A recent piece in the Financial Post titled “How many times can economists cry wolf about interest rates” caught my interest because I – like many economists in Canada – have been expecting interest rates to eventually start to rise and yet they do not.  So when will Canadian interest rates start to go up?  My knowledge of money and banking and monetary economics is pretty rudimentary but I’m feeling adventurous in the New Year.

At its most basic level the demand for and supply of money sets the interest rate.  If money supply shifts right faster than money demand, then interest rates will fall.  So assuming money demand is strongly driven by growing transactions fueled by rising output, I suppose one answer is that rates will rise when the growth rate of the money supply is curtailed so that it grows less quickly relative to GDP.Take a look at Figure 1.  I used the monthly estimates of M2 for Canada constructed by Cherie Metcalf, Angela Redish and Ron Shearer for the period 1871 to 1967 and combined them with the monthly estimates of M2 for 1968 to the present from Statistics Canada (v41552796). I took the monthly average each year for the period 1871 to 2013 and used this annual average to estimate the annual growth rate for M2. Over the entire period 1871 to 2013, the average annual growth rate of M2 was 7.2 percent.  While growth in 2009 during the financial crisis was 13.52 percent, it has since ranged from 4.95 to 6.60 percent. This suggests that the recent growth rate of M2 has not been that high by historical standards.

However, money supply growth needs to be considered in the context of the growth of the economy and money demand.  Figure 2 presents a more interesting picture by taking the ratio of M2 to GDP for the period 1871 to 2013.  From a ratio of just under 0.2 in 1871, the M2 to GDP ratio has grown over time.  Recent years have seen it grow to the highest it has ever been.  Of course, the period from 1870 to 1930 reflects the growth and development of the modern Canadian financial intermediary sector and monetary sector and the rise in the ratio reflects this.  However, the period since 1935 represents the “modern Canadian banking era” in that the Bank of Canada has been in existence during that period.

Figure 3 presents a graph of the trend setting Bank of Canada interest rate and it shows a hump shaped pattern with the lowest interest rates in the period from 1935 to the mid 1950s and since 2009 and the highest rates in the period from the mid 1970s to the early 1990s. On the other hand, since the Second World War, the M2/GDP ratio has shown an approximately u-shaped pattern with lowest M2/GDP ratios in the mid to late 1960s.  If the two are juxtaposed as in Figure 3a and taking into account that there is probably a lag between a drop in M2/GDP and the subsequent rise in interest rates, it appears that the peak in interest rates occurs after the low point in the m2/GDP ratio in the late 1960s. If you take the first differences of the M2/GDP ratio and the Bank of Canada rate over the period 1935 to 2013 and plot them against each other (as in Figure 4) and fit a linear trend, you do get a slight inverse relationship.  That is, a higher money supply to GDP ratio is correlated with lower interest rates.  However, I admit this is a pretty noisy picture.  Moreover, this discussion focuses just on Canada and international economic and monetary conditions play a role in the Canadian economy. It would be interesting to see how the performance of Canada’s M2 to GDP ratio over time compares to other countries.

We have been expecting interest rates to rise for several years now because GDP has recovered somewhat from the 2009 financial crisis and the Canadian economy is growing.  As a result, one might expect a growing demand for money and credit to fuel rising interest rates.  However, money supply – as measured in this case by M2 – is still growing faster than GDP.  I think we will see interest rates start to increase provided first that GDP continues to expand and then the M2/GDP ratio starts to drop.  However, its not enough that this happens just in Canada – it would also need to happen on a global scale. I don’t think that is going to happen anytime soon. For example, look at Japan.

 

Climate change activists disrupt Stephen Harper event – Politics – CBC News

Climate change activists disrupt Stephen Harper event – Politics – CBC News.

Activists disrupt Harper event

Activists disrupt Harper event 4:37

Activists disrupt Harper event RAW

Activists disrupt Harper event RAW 0:42

Two climate change activists managed to sneak up behind Prime Minister Stephen Harper on Monday just as he was getting ready to start a question and answer session at the Vancouver Board of Trade.

Sean Devlin and Shireen Soofi succeeded in getting past the prime minister’s security detail and onto the stage where Harper was sitting to protest his government’s climate change policies.

Devlin stood behind Harper holding a sign that read “Climate Justice Now.”

Soofi held up a sign saying “The Conservatives Take Climate Change Seriously,” with the sentence crossed out.

She was standing between the prime minister and Iain Black, the president of the board of trade, who was introducing Harper when the activists took the stage.

Both men kept their cool as the pair were escorted off the stage by security.

“I’d like to take a minute and have some folks removed from the stage,” Black said while the prime minister reached for a sip of water.

“It wouldn’t be B.C. without it,” Harper joked.

The crowd of business leaders applauded Harper as security removed the activists from the room.

Former prime minister Kim Campbell was also in attendance, along with Industry Minister James Moore and a handful of Conservative MPs from the region.

Anti-Harper protester behind disruption

The two activists had the help of Brigette DePape, who immediately issued a press release following the security breach bragging about the pair’s exploits.

DePape was fired as a Senate page in 2011 after walking onto the Senate floor carrying a “Stop Harper!” sign during the speech from the throne to protest against Harper’s policies.

“This morning two people directly intervened in a high-security question and answer session with Prime Minister Stephen Harper,” the release said.

“The group managed to make their way past police undetected and into the secured Vancouver Fairmont Pacific Rim Hotel.”

Reached by telephone following the disruption, DePape said she was proud of the protest.

DePape told CBC News “it was very empowering” for the activists to get that close to the prime minister.

No comment from PMO

Despite the security breach, the Prime Minister’s Office refused to comment publicly.

Jason MacDonald, a spokesman for the prime minister, told CBC News in an email, “we don’t comment on security-related matters.”​

Following the event, the president of the board of trade Vancouver Board of Trade was asked by reporters how the protesters got on stage.

“I would defer that to the Prime Minister’s Office,” Black said.

The head of the board said that when high-profile guests are invited to speak, security is handled by a number of agencies, from the Vancouver police to the RCMP.

Both protesters were initially detained by Vancouver police, but were later released.​

Vancouver police told CBC News that no charges have been laid against the protesters, but that could change.

“We will be working with the protection detail of the RCMP at the event to determine if charges are going to be laid,” the police said.

The RCMP said it was reviewing the incident and would take “appropriate action,” but referred questions on charges to Vancouver police.

Harper ‘shrugged it off’

Black said he wasn’t shaken by the event and that he took his cue from the prime minister.

“I didn’t really get rattled by it. First of all, it happened very quickly. We all saw how quickly it was handled. I took the lead from the prime minister’s response, to be honest.”

“He didn’t seem rattled. He’s got full confidence in the team around him and that showed. He kind of shrugged it off, and there was no reason for me to do anything else,” Black said.

Richard Zussman, who was at the event reporting for CBC News, said in a post on Twitter that the activists “looked to be dressed as wait staff.”

DePape, in her press release, hinted that other events may be disrupted.

“These actions are taking place as part of a global movement of groups of who are directly confronting the fossil fuel industry, from First Nations legal challenges and blockading projects on their territories, to other forms of non-violent direct action.”

Harper did not take any questions from the media.

Environment Canada Researchers Find High Mercury Levels Around Alberta Oilsands | DeSmog Canada

Environment Canada Researchers Find High Mercury Levels Around Alberta Oilsands | DeSmog Canada.

Tar Sands, Alberta, oilsands

Mercury levels have risen to 16 times the regional “background” levels in an area around oilsands developments in northeastern Alberta, according to Environment Canada researchers.

Environment Canada researcher Jane Kirk, who presented the as-yet unpublished report at a Society of Environmental Toxicology and Chemistry (SETAC) conference in Nashville last November, told Postmedia News the affected area encompasses 19,000 square kilometres around oilsands operations.

Margaret Munro of Postmedia News reports that Kirk told the conference the area is “currently impacted by airborne Hg (mercury) emissions originating from oilsands developments.”

The mercury levels fall off gradually with increasing distance from the oilsands “like a bull’s eye,” said co-researcher Derek Muir, head of Environment Canada’s ecosystem contaminants dynamics section. The highest mercury loadings, which reached up to 1,000 nanograms per square metre, were found in the “middle of the bull’s eye,” covering around 10 percent of the impacted area.

In October, Environment Minister Leona Aglukkaq signed a global treaty pledging to decrease mercury emissions.

The federal researchers stressed that the findings were still lower than mercury levels found in southern Ontario and southern Quebec, where toxins from incinerators and coal-burning power plants are affecting the environment.

But the scientists said that mercury is “the number one concern” when looking at toxins released by oilsands production, with “indications that the toxin is building up in some of the region’s wildlife.” The contamination is further worrying to environmental groups and First Nations concerned about the oilsands’ impact on fishing, hunting and wildlife.

Environment Canada wildlife scientist Craig Herbert told the toxicology conference that the eggs of several species of waterbirds downstream of the oilsands have been showing increasing levels of mercury, with levels found in the majority of Caspian Tern eggs in 2012 exceeding “the lower toxicity threshold.”

Kirk’s team measured contaminants in cores of the snowpack collected from over 100 sites near the oilsands every March, to calculate how much pollution enters the ecosystem at spring melt after gathering in snow over winter.

The team’s 2011 results confirmed that “aerial loadings” of 13 priority pollutant elements including mercury were 13 to 15 times higher at sites within 50 km of the upgraders that convert bitumen into synthetic crude oil, and “highest within 10 km of the upgraders,” according to the presentation abstract.

The results “support earlier findings that the bitumen upgraders and local Oil Sands development are sources of airborne emissions to the Alberta Oil Sands Region.”

The researchers also found up to 19 nanograms of methyl mercury per square metre near oilsands sites, which is 16 times the region’s background level. Postmedia News reports that this is the first finding of this more toxic form of mercury in snow. The finding is significant because, as the abstract explains, “methyl mercury is a neurotoxin that bioaccumulates through foodwebs.”

“Here we have a direct source of methyl mercury being emitted in this region and deposited to the landscapes and water bodies,” Kirk told Postmedia News. “So come snowmelt that methyl mercury is now going to enter lakes and rivers where potentially it could be taken up directly by organisms and then bioaccumulated and biomagnified though food webs.”

Muir said that microbes in the snow could be converting mercury into methyl mercury, or that it could be coming from “dust and land disturbances,” though there is currently no data to support this.

“To our knowledge, emissions data from blowing dusts due to various landscape disturbances (open pit mines, exposed coke piles, new roads, etc.) and volatilization from tailing ponds are not publicly available,” the researchers said.

The research shows that zinc, nickel and vanadium levels in lake sediments peaked in the 1990s following oilsands development, but have fallen off since, which Kirk attributes to “improvements in the air pollution catcher technology at the upgraders.”

But levels of mercury and other “crustal elements” in lake sediments have been “going up more or less continually” with the expansion of the oilsands, said Muir, with open pit mines and coke piles possibly contributing to the pollution.

The fact remains that more research is required on why mercury levels are going up and the impact it’s having on ecosystems.

“Is it affecting fish levels and is it going to result in increasing fish consumption advisories? We don’t know,” said Kirk.

But Environment Canada’s latest results only confirm the need to further study and address the serious impacts of oilsands development.

The Mis-Taking of America

The Mis-Taking of America.

by Erik Lindberg, originally published by Transition Milwaukee  | TODAY

America was not infinite; it only seemed that way to early European explorers, conquerors, and settlers for whom the size of the known world had suddenly doubled and the quantity of effectively unclaimed resources increased by far more than that.  This sudden immeasurable and unearned abundance, it is clear, authorized a new set of cultural practices that would not have been deemed appropriate by a people confronted by visible boundaries and limits.  But I am less concerned with past crimes than I am with the beliefs and expectations that lead us into the future.  The stories we continue to tell ourselves about the discovery of America, its conquest and settling, the Enlightened awakening from an age of unreason are similar to those that helped develop and profoundly shaped a new way of thinking about the world whose main contours are still in place today.  The remaining question is how deep beyond these specific practices and habits of consumption does the false image of the infinite run?  Our way of life is clearly not sustainable; but what if our way of perceiving reality–our fundamental political, economic, even scientific categories—were also inalterably deformed by the false image of an infinite land?  Is philosophical Liberalism compatible with a finite planet and a way of life designed to live on it?  How fundamental are the changes we must make in order to recast the American way of life to fit on a finite, increasingly crowded, planet?

In his one and only full book, Notes on Virginia, Thomas Jefferson provide clear evidence to the first point, that American cultural practices were shaped by this terrible misconception of limitlessness, even if its most destructive and inescapable consequences might come home to roost  only decades, even centuries later.  In a brief aside in Notes on Virginia, Jefferson contrasts European and American farming practices.   Unlike European agriculture, which he admits is more intensive and careful in its approach, the character of American agriculture is formed by the fact that a parcel stripped of its fertility can be abandoned for another: “The indifferent state of that [careful agricultural practices] among us does not proceed from want of knowledge merely; it is from our having such quantities of land to waste as we please.  In Europe the object is to make the most of their land, labour being abundant; here it is to make the most of our labour, land being abundant.”  This is an astonishing admission by Jefferson; and it is indicative of a remarkable culturally-, or perhaps geographically-conditioned lack of foresight, the apparent unimportance of the question: how much land we might really “waste as we please?”  The same lack of foresight appears in most discussions over energy and the environment today, even as we can calculate their finite nature with considerable accuracy.  Ours is a history of a certain kind of success enabled by a particular kind of miscalculation.

Am I making too much of an off-handed remark, a moment of hyperbole buried in an otherwise dry and rather boring recitation of fact and figures about the commonwealth of Virginia?  I don’t think so and for a number of reasons significant to our topic.  Jefferson’s statement about the wasting of land and the constant push westward to find new land was not an obscure sentiment, but was the basic policy and practice of Southern planters.  George Washington’s description of plantation management was similar:

“a piece of land is cut down,” its forests stripped away, so that it can then be “kept under constant cultivation, first in tobacco and then in Indian corn (two very exhausting plants), until it will yield scarcely anything (quoted in Kennedy 17).   At that point, it would be abandoned in favor of new land obtained at the ever-receding frontier.   As historian Robert Kennedy shows in his book, Mr. Jefferson’s Lost Cause: Land, Farmers, Slavery, and the Louisiana Purchase, the life of colonial planters was far more mobile and unsettled than the image of old southern families would suggest: “the evidence of local records in Georgia, Alabama, and Mississippi indicates that the average planter family moved at least twice in a generation,” while the wealthiest planters engaged in ramped land speculation across the western frontier.  The result, as Kennedy argues, was “a migrant agricultural capitalism with results deadly to humans and to the land itself.”  “As the practice of working soil to death and slaves to exhaustion was repeated over and over again, the desolating army of King Cotton moved on a broad front across the South, drawing people away from home and leaving blighted hopes behind.  By 1847, the first cotton lands planted in Georgia were already exhausted; the number of white farmers in Wilkes County fell by half in twenty years” (21, 14, 21-2).  This practice was made possible by the low price of abundant land.  As Jefferson remarked, “we can buy an acre of new land cheaper than we can manure an old one” (12).

This cycle of careless over-use, destruction, and self-displacement was repeated most rapidly by the wealthiest Southern Planters with huge land holdings and thousands of slaves, all of whom were focused on commodity crops such as tobacco and cotton.  But these wasteful practices, and an accompanying ideology of short-term profit, can be seen throughout the American experience, from the first fur traders to the fracking industry today.  In a chapter entitled “The Economics of Extinction,” in her beautiful Reflections from Bullough’s Pond, Diana Muir tells of the pre-colonial trade in beaver pelts, a trade driven by European fashion, the debt held by many early European settlers, and by the precarious and constant need to hold a surplus against the vicissitudes of life in a foreign land where, as Muir puts it, the Europeans, like us, believed that “one could never pile up too many goods” (11).  Between around 1630 and 1675 all the beavers in New England were turned into coats and hats, hunted into extinction.

The loss of beaver however did not spell only the end of a lucrative trade, but the dying of an entire ecosystem that was responsible for the initial abundance experienced by the first settlers, as well as the entire way of life for the Native Americans.  The beaver pond, after all, provides habitat for hundreds of species as well as an entire microscopic universe.  As Muir describes it, the dead leaves that fall into the stagnant waters of a dammed stream creates algae, which in turn produces “food for the tiny creatures that feed the small fish that feed big fish that feed the majestic osprey. . . . Sedge, moss, arrowhead, pickerelweed, water milfoil—every plant between the ferns far up the bank and the duckweed floating on open water is home to some animal or its young, a necessary food for some growing thing” (6).  But the loss of the beaver, nature’s greatest architect and landscaper, has an even greater geographical and hydrological impact upon the land, and in a way that directly affects an agricultural people.  A beaver dam is a wonder of water management, moderating “the seasonal extremes of rainfall, trapping the rains of April to release them in slow, even seepage through the hot, dry days of summer and early fall” (6).

When settlers first arrived, Muir notes, New England was home to tens of thousands of beaver ponds.  As important as the slow release of water, moreover, was the way millions of gallons were held behind the dams, creating a constant seepage into the ground. The result: a “reservoir of ground water so abundant that it burst in ever-flowing springs [even] on the beach,” a ground water source necessary to all “the abundance of every kind [that] impressed the first Europeans to reach these shores, abundance of strawberries in the fields and of deer in the woods, abundance of trees, and an astonishing abundance of fresh, clear water” (7). The beaver gone, the forests felled, the ground turned into fast-eroding fields, this became the hardscrabble New England that we know today.  But it scarcely mattered to the European settlers; rivers could be turned into industrial mills and new land could be acquired further west, with little cost to this new economics of extinction that had great and varied abundance to churn through.  Recalling Huber and Mills, the logic of the wealth retrieving machines of these new white Americans advanced much faster than the abundance retreated—over the decades, they closed in on the receding horizon.

If this economics of extinction was made possible by the cheap supply of land and the cheapness with which the lives of its inhabitants were treated, how was it justified?  Most individual participants in any  destructive form of commerce keep their noses down and, for the most part, are just trying to make a living or compete with their neighbors, or live up to some status-filled ideal; for them, no justification beyond immediate gain is required.  But a “big picture thinker” with epic ambitions like Jefferson, one who was designing a new way of life, would require something more.  This is where the notion of the infinite or the limitless scale of the Americas comes in, a notion that appears repeatedly throughout Jefferson’s work and, more significantly, informs the sort of expansionary policy that Jefferson inaugurated and that has become one of the few political solutions that has proved successful decade after decade ever since Jefferson’s purchase of the Louisiana Territory: when in doubt, expand and grow, a policy that has evolved from Westward expansion and Indian removal, to foreign conquest and economic imperialism.  All of these expansionary solutions have been similarly cloaked with self-congratulatory stories of manifest destiny, American exceptionalism, an American Empire of Liberty or Beacon of Hope, a seven-billion member global middle class powered by Windows, and, most improbably, the myth that there are no limits to growth.  This has also provides the model for categorical disregard of ecological limits that much of the world has adopted.

It is true that Jefferson is often presented as the patron saint of American homestead agriculture, the spokesman for the virtuous and modest aspiration that American citizens might bind themselves to a piece of land which they would nurture and husband, while engaging in informed participation in the difficult task of self-government.  Jefferson clearly favored this agricultural model over the more commercially and financially-minded manufacture or trade promoted by Alexander Hamilton and John Adams, with whom Jefferson battled over the identity America might assume.   In a famous letter to John Jay, Jefferson writes: “Cultivators of the earth are the most valuable citizens.  They are the most vigorous, the most independent, the most virtuous, and they are tied to their country, and wedded to its liberty and interest by the most lasting bonds.”  In order for the audacious American experiment in self-rule to work, the nation would need to be bound together by people also bound to the earth, or so Jefferson professed.  While the image was modest, the ambition was immense and the arc of simple virtue reached towards the infinite: an Empire of Liberty.

This tension between a modest virtue and a grand ambition is illustrated in the same letter to Jay: the stay at home virtues of the yeoman farmer, tied to the land and a local community is also  a sort of tool or device to be used in a far more ambitious dream in which “most valuable citizens,” whose way of living Jefferson would never have accepted for himself, appear as pawns in a policy of expansion and growth that did not develop any strategies, in the end, to limit itself. “We have now lands enough to employ an infinite number of people in their cultivation.  As long therefore as they can find employment in this line, I would not convert them into mariners, artisans or anything else. But our citizens will find employment in this line till their numbers, & of course their productions, become too great for the demand both internal & foreign. This is not the case as yet, & probably will not be for a considerable time.”

Our first clue to this broader motive comes in the very question that Jefferson is addressing: the paternalistic one that asks, how should we put our new citizens to work?  What occupation might best serve the political needs of the nation?   But beyond the social engineering, as people on the right would refer to this today, the answer exemplifies a common Jeffersonian assumption buried in his similar response to other political questions, many of which employed for political advantage the seemingly unlimited space of the American continent.  That we could waste as much land as we please makes the virtues of being tied to the land and the liberty of the nation optional and, like everything else, disposable.   “We have now lands enough to employ an infinite number of people in their cultivation.”  Was there really room for an infinite number of farmers?   Is Jefferson serious?  While he may have admitted that it wasn’t really infinite, only infinite for all practical purposes, here and elsewhere he nevertheless proceeds as if it were truly infinite or that any distant limits need not be a concern of his.  The only foreseeable limits that Jefferson can even imagine are established not by land constraints, but by limits to the demand of agricultural products.

It is also interesting to consider these words in light of the post-Keynesian economic theory of Krugman and Reich, in which economic problems are generally presumed to be ones of demand rather than supply, and in the light of our multi-billion dollar advertising and marketing industry, whose main function is to address problems of demand by goading us into wanting and needing more.  If there is a limit to how many farmers Jefferson thought the United States might support, it is not land.  It is instead demand for their products, food, but also fiber and tobacco.  This belief in infinite land pops up repeatedly in Jefferson’s writings and speeches.  We have seen the way Jefferson has made some sort of truce with the wasteful techniques of agriculture in Notes on Virginia, assenting to the sacrifice of soil and “lasting bonds,” alike, to some principle of productivity or profit, and a corresponding inability to anticipate how long it might take to waste all our land.  The same sort of indifference to the quickening power of exponential growth appears in his first Inaugural Address, where Jefferson predicts that this “chosen country” would have “room enough for our descendants to the thousandth and thousandth generation.”  This, we might note, is more than ten times the generations there had been since the birth of Christ.   We should also note that in the same address Jefferson spoke favorably on the exponential population expansion that the young nation was experiencing: “you will perceive that the increase in numbers during the last 10 years, proceeding in geometric ratio, promises a duplication in little more than 22 years.”  This growth is viewed with nothing but optimistic pride: “we contemplate this rapid growth and the prospect it holds up to us, not with a view to the injuries it may enable us to do others in some future day, but to the settlement of the extensive country still remaining vacant within our limits to the multiplication of men susceptible of happiness, educated in the love of order, habituated to self-government, and valuing its blessings above all price.”

Jefferson’s comments on agriculture can be slightly, and perhaps purposefully, confusing.  The wealthy planters who received the benefit of most of Jefferson’s policies do not share the ethic of the family farm.  Likewise, it is disingenuous to suggest that labor was not plentiful in the new world, where millions of slaves toiled and were necessary to this economics of extinction.  In the above mentionedMr. Jefferson’s Lost Cause, Robert Kennedy argues that in addition to the better-known divide between Jefferson’s agrarianism and Hamilton’s commerce and industry, agriculture had two distinct strains of its own.  One of these, represented by the Yeoman farmer of the sort written about to John Jay, was the kind of farming Jefferson favored, at least in principle and within his soaring approbations.  In contrast, was the slave-based, commodity-centered, Southern plantation, a clear precursor to today’s industrial agriculture.  While Jefferson despised the slavery upon which the plantation system was built, and was eventually to mourn the devastation to the land that it wrought, he nevertheless suited his policies around the needs of the wealthy planter and at the expense of the yeoman farmer.  The Louisiana Purchase and the spread of slavery westward was the most significant example of this, but the same sacrifice of his ideal pervaded a much broader series of decisions, all of which are well-documented by Kennedy.  An Empire of Liberty founded on the virtues of the cultivators of the earth was the “lost cause” referred to in Kennedy’s title.

The yeoman farmer was less dependent on the money economy and foreign markets.  Small family farms were far more self-sufficient and, because they were less capital-intensive, were not as ready or as able to uproot themselves even for the cheap land at the frontier.  In Jefferson’s day it was already apparent that the small and diversified farmer, often laboring without slaves, provided what we would today call as more “sustainable” model.  They would manure an acre of land rather than abandon it for another.  This model of agriculture and its attendant virtues is significant to our broader understanding of Liberalism and America, and our attempt to find a path towards a sustainable future.  As Kennedy would tell it, American history is a struggle between these two competing strains of freedom and democracy, a struggle that tore at Jefferson himself.  Kennedy argues that the struggle between the free, independent, and ecologically minded family farm, on the one hand, and the more exploitative and destructive plantation, on the other, often hung in a close balance. It could have gone either way.  He is particularly critical of Jefferson, who for a variety of personal and political reasons, never had quite the courage necessary to defend his ideals.  In this way, Kennedy believes Jefferson could have possibly prevented the growth of slavery, the underdevelopment of the South, and even the civil war.

Kennedy’s thesis also suggests that Liberalism contains within it a sustainable strain based on lower levels of consumption and waste, and an economy tied more closely to an ecology.   This view would in some sense cast doubt on my thesis that Liberalism is inherently expansionary and inherently anti-ecological.  My primary response is: good!  All the better if Liberalism and Enlightenment reason have the seeds of a sustainable rebirth buried within them.  My goal is not to overthrow the principles of the Liberal Enlightenment just for the fun of it, but to articulate ways in which our Liberal Expectations, as they have evolved, might be reformed to fit into a finite planet.  The future prospects of my two year old twin sons become all the more better if, indeed, we can retrace our steps and take some other fork in the road.  They will care not a bit whether they inherit an inhabitable planet with an intact society that is Liberal, Post-Liberal, or something with an altogether different label.  I am more than happy to welcome those parts of our tradition and our reigning political ideology that accept limits to consumption, that don’t value growth for growth’s sake, or believe that every problem will be solved with more technology and a step further from the soil and the land.

In any event, a number of questions still remain even if we except Kennedy’s thesis:  why, most significantly, has our tradition of the yeoman farmer given way time and time again to the powers of expansion and growth?  What forces or internal logic has transformed our family farmers into an industrial agricultural complex, our tradesmen and artisans into assembly line workers, our store-owners into cogs in a big-box machine, our local bankers and accountants into Wall Street masters of the universe, the good earthy folk of the North East and the Mid-West into iPad-punching account executives, marketers, and global salespeople?  We have, I will argue, designed all our life supporting systems—our food, our trade, our manufacturing, our waste disposal, even our political elections—as if the world were limitless, our resources and dumps infinite.  Was there ever really anything else?  Did ecology ever stand a chance in the face of so profitable an economy of extinction?

It is of course satisfying to think it did, especially if we can find a villain to blame.  Kennedy’s description follows the pattern we saw in our discussion of partisan warfare: the forces of destruction are thus isolated into a particular group.  In this case, the Southern, slave-owning plantation owners provide a welcome target for educated, progressive, northern middle-class people.  They, we can happily say, were the problem.  Those values, not ours, are unsustainable.  But one need not look very far to see that Jefferson’s yeoman farmer may have just been a somewhat slower version of the Southern Planter. While Kennedy emphasizes several times that the Yeoman model was successfully instituted in the North East, and areas north of the Ohio River, the marks they may have left on the terrain have long since been plowed under.  A state like Wisconsin or Illinois was, at one time, the seat of diverse agriculture and then for a time the center of grain production.  But wheat will deplete the soil quickly and thus the wheat belt was forced west, leaving Wisconsin to Dairy pastures.  The only thing that has allowed states like Iowa or Kansas to remain in grain production was the introduction of chemical fertilizers, which have temporarily obscured the complete destruction of its soils.

Perhaps, to answer the questions posed above, like absolute power, unlimited space corrupts.  Or perhaps the scales of judgment and reason cannot be balanced except against a background of limits and finitude.  The illusion infinite space, like infinite energy or resources, at the very least lets one off a number of ethical hooks and solves all sorts of practical problems: without limits “and” replaces “either/or” and governing becomes the far easier project of adding benefit to benefit.  Expansion helps fill the coffers; free land, like today’s tax cuts or stimulus checks, stills unrest.  A bigger pie means less struggle over the relative size of one’s piece.  One must believe that there is infinite land or develop some economic fantasy about a permanently growing dematerialized knowledge economy in order for this sort of “solution” not to look like you are just kicking the can down the road.  Which is more or less what Jefferson did with regards to slavery, where we can see a similar sort of tension between short-term gain and the deeper principles necessary to a democratic nation.  The immediate economic gain of a slave economy provided exports of sugar, cotton, and tobacco that a young cash-starved and highly indebted nation needed.  For even as Jefferson believed that slavery would destroy the national soul, the lure of fantastic gain from wasted land and lives was too much for his virtue or his reason or some other part of him that was not as strong as we retrospectively might have liked.   But as long as there were no visible limits, the day of reckoning could be postponed.  This “problem” would have to be solved, but only later.   We may scorn Jefferson’s views on slavery and remain unforgiving towards his obvious historical cultural and racial bias.  But do we not tell a similar sort of story about our tremendous waste and destruction of the planet?  Yes, someone needs to do something.  But not yet, not until we fix the economy or make sure everyone has good internet access, or a job free from manual labor.  Part of the work of reworking our political and economic beliefs and expectations involves the tricky task of separating various threads from our history.

In his magnificent portrait of the United States, The Unsettling of America, Wendell Berry observes that “one of the peculiarities of the white race’s presence in America is how little intention has been applied to it.”  America was of course discovered, and its inhabitants misnamed,  in the course of a ill-navigated search for a short route to India; despite this fundamental and originary disorientation–or perhaps because of it–the continent was, Berry points out, thereafter “laid open in an orgy of goldseeking” whose object of desire was “always somewhere further on.”  This combination of  misplaced intentions and spatial bewilderment marked the beginning of a restless settling and unsettling characteristic of our culture, to treaties brokered only long enough to be betrayed, to trails of broken bodies and broken spirits and the demeaning of life and work upon which the unstoppable push westward was beaten and eventually paved.  From the first days plunder to the present, Berry argues, we the inhabitants of the Americas have continued to “displace ourselves. . . with the same mixture of fantasy and avarice” (3) that Columbus and Cortez first combined with such explosive results.   Jefferson is of special interest to this story precisely because he is not entirely given over to this fantasy and avarice, but is concerned about the virtues necessary for peaceful democratic self-rule.  Jefferson was no conquistador.  Peace and independence ranked far higher in his scheme than sudden riches.  And yet he cannot resist what Berry refers to as this tendency to displace ourselves and what I would refer to as the mist-taking of America, both of which cannot be fully dissociated from the disorientating experience of an incomprehensibly large space at the edge of which Christopher Columbus ran aground.

Contrary to popular legend, Columbus did not believe the Earth was flat.  That myth was brokered by Washington Irving in an attempt to make pre-modern Europeans appear irremediably stupid and ourselves, in contrast, impeachably advanced.  But Columbus did believe the Earth to be significantly smaller than it is and, because of a simple, almost comic, transcription error, insisted that the 19,000 mile westward trip from Europe to Asia was more like 2,000.  Had he not run aground when he did, on an unmapped land, Columbus and his men would have soon starved to death as they drifted off into obscurity.  Until his death, nevertheless, Columbus maintained that with his landing in the “East Indies” he had indeed found passage to the edge of Asia.  But given the overriding purposes of the day, it scarcely mattered which hemisphere Columbus had stumbled upon, and his staggering geographical disorientation did nothing to diminish his jubilation, nor inhibit the ensuing orgy of plunder or the grandeur of the fantasy and avarice with which he carried it out.  His initial impression of the first Native Americans he encountered was how their open friendliness and thus how easy they would be to slay or enslave, both of which he promptly set out to prove.  In his first report to his sponsors in the Spanish Court, Columbus likewise promised them “as much gold as they need. . . and as many slaves as they ask.”  The mortality rate in the Islands Columbus visited approached 90% in many cases.  Although we don’t like to think about it too much, we, middle-class Americans, are the beneficiaries of this mistaking of America, and it is only by turning away from the details of his three eventual rampages through the Caribbean and the coast of Central America that Columbus remains a celebrated hero in the United States.

In this way did Columbus begin a process which I would call the mis-taking of America: where cognitive, accounting, or navigational errors actually leads to a great and successful plundering, where “Indians” are either removed or made invisible according to a philosophy based on a distinction between civilization and savagery; where civilization attempts to wash itself clean  in a state of nature, which it then proceeds to clear, mine, and develop into oblivion; where the political and spiritual renewal that an empty frontier promises is used to justify the emptying of that frontier of its native inhabitants so that it might be reworked according to European ideals of property, cultivation, and advancement, often by slaves kidnapped from Africa—with the whole charade of avarice held together with high-sounding philosophical and scientific fantasy.  Thus do cognitive and error and moral blindness feed off of each other and thus do they create a disorientation and moral unmooring–one which can be seen most vividly today in our relationship to energy and the environment.

I am not of course the first to depict the particular moral and political development of the United States in terms of the vast space of the Americas.  This honor likely goes to historian Frederick Jackson Turner and his late nineteenth century “Frontier Thesis,” according to which our national development was best explained by our history of westward expansion.  Turner’s overriding purpose was to explain the uniqueness of the “American character,” especially in comparison to the European one, which was at the time mired in conflict.  My question, of course, is quite different in that it asks “how is it that we, the most enlightened and technologically advanced people, are unable to see where our current trajectory will take us?”  But the role of a vast and bountiful space takes center-stage in both approaches.  While for most nations, according to Turner, “development has occurred in a limited area,” America has developed through its continued expansion into an open frontier: “Up to our own day American history has been in a large degree the history of the colonization of the Great West.  The existence of an area of free land, its continuous recession, and the advance of American settlement westward, explains American development” (The Frontier in American History 1).  More specifically, as the frontier line advanced, Jackson proposes, settlers were continually confronted with primitive, even savage conditions, and the newly cast civilization was repeatedly forced its forge itself anew out of the wilderness: “this perennial rebirth, this fluidity of American life, this expansion westward with its new opportunities, its continuous touch with the simplicity of primitive society, furnish the forces dominating American character” (2).

Turner, of course, remains oblivious to the peoples and the cultures who did in fact inhabit a frontier that was neither free nor open.  His is a history most clearly written from the standpoint of the conqueror.  Armed with Enlightenment principles such as the “state of nature” in which human civilization would be laid bare and cleansed of its sediment so that it might enjoy perennial rebirth, Turner provides one more example of the mis-taking of America.  The American character, according to Turner, is marked by:

a coarseness and strength combined with acuteness and inquisitiveness; that practical, inventive turn of mind, quick to find expedients; that masterful grasp of material things, lacking in the artistic but powerful to effect great ends; that restless, nervous energy; that dominant individualism, working for good and for evil, and withal that buoyancy and exuberance which comes with freedom–these are traits of the frontier, or traits called out elsewhere because of the existence of the frontier. Since the days when the fleet of Columbus sailed into the waters of the New World, America has been another name for opportunity, and the people of the United States have taken their tone from the incessant expansion which has not only been open but has even been forced upon them.

Not adequately characterized, here, is a blinding arrogance that is shared by Turner, an inability to understand who, at this meeting point between “savagery and civilization,” the real savages were.  The terrible “expedients” that these restless heroes were so quick to find need to be named, the “great ends” need to be defined.  For these were a people who had tools and weapons of great power, and beguiling trinkets; they carried devastating disease, were unmoored by exuberance and opportunism, and were animated by new beliefs that released them from any sense of bounded limits.  They were smart, no doubt, and quick.  But they were not wise.  They knew how to conquer and exploit, but it is unclear they ever learned how to settle.

In discussing the “unsettling of America,” Wendell Berry suggests that “the first principle of the exploitative mind is to divide and conquer.  And surely there has never been a people more ominously and painfully divided that we are—both against each other and within ourselves (11).  The roots of this  divide—which, in contrast to Turner, Berry believes to be the most significant product of our restless advance against a settled frontier–of course lie in our history: in a history where we have been competing with each other and the earth at the expense of both.  In contrast to the illusion of infinity provided by the immense stretch of land embedded in our modern picture of the world, Berry looks to the divine as a source of wholeness that might heal these divisions.  But “we can make ourselves whole only by accepting our partiality, by living within our limits, by being human—not by trying to be gods” (95).

To this I would only add that the lure of infinite reason becomes insensible to that reason’s limits.  As Alasdair MacIntyre reminds us, “reason is calculative; it can assess truths of fact and mathematical relations but nothing more.  In the realm of practice therefore it can speak only of means.  About ends it must be silent” (After Virtue 54).  But our reason and logic has been ruthlessly self-assertive.  In the age of infinite reason, and upon the land where it was unleashed, our ends, unguided by anything else, are given to the aggressive impulses of expansion—bigger, faster, more, and yet more still.  Liberalism, at least as it has evolved so far, might be described of as a system where the ends—the values and goals that guide our practices—are a reflection only of the calculating and opportunistic means we have mistaken with truth itself: expansion, because we have cleared the space for it; wealth, because it makes everyone wealthy; growth, because it permits future growth; competition, because it keeps us competitive; freedom, because it prevents any hindrance to our aims, whatever they might be.

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The Ron Paul Institute for Peace and Prosperity : Iraq: The ‘Liberation’ Neocons Would Rather Forget

The Ron Paul Institute for Peace and Prosperity : Iraq: The ‘Liberation’ Neocons Would Rather Forget.

Ronpaul Tst
Remember Fallujah? Shortly after the 2003 invasion of Iraq, the US military fired on unarmed protestors, killing as many as 20 and wounding dozens. In retaliation, local Iraqis attacked a convoy of US military contractors, killing four. The US then launched a full attack on Fallujah to regain control, which left perhaps 700 Iraqis dead and the city virtually destroyed.According to press reports last weekend, Fallujah is now under the control of al-Qaeda affiliates. The Anbar province, where Fallujah is located, is under siege by al-Qaeda. During the 2007 “surge,” more than 1,000 US troops were killed “pacifying” the Anbar province.  Although al-Qaeda was not in Iraq before the US invasion, it is now conducting its own surge in Anbar.

For Iraq, the US “liberation” is proving far worse than the authoritarianism of Saddam Hussein, and it keeps getting worse. Last year was Iraq’s deadliest in five years. In 2013, fighting and bomb blasts claimed the lives of 7,818 civilians and 1,050 members of the security forces. In December alone nearly a thousand people were killed.

I remember sitting through many hearings in the House International Relations Committee praising the “surge,” which we were told secured a US victory in Iraq. They also praised the so-called “Awakening,” which was really an agreement by insurgents to stop fighting in exchange for US dollars. I always wondered what would happen when those dollars stopped coming.

Where are the surge and awakening cheerleaders now?

One of them, Richard Perle, was interviewed last year on NPR and asked whether the Iraq invasion that he pushed was worth it. He replied:

I’ve got to say I think that is not a reasonable question. What we did at the time was done in the belief that it was necessary to protect this nation. You can’t a decade later go back and say, well, we shouldn’t have done that.

Many of us were saying all along that we shouldn’t have done that – before we did it. Unfortunately the Bush Administration took the advice of the neocons pushing for war and promising it would be a “cakewalk.” We continue to see the results of that terrible mistake, and it is only getting worse.

Last month the US shipped nearly a hundred air-to-ground missiles to the Iraqi air force to help combat the surging al-Qaeda. Ironically, the same al-Qaeda groups the US is helping the Iraqis combat are benefiting from the US covert and overt war to overthrow Assad next door in Syria. Why can’t the US government learn from its mistakes?

The neocons may be on the run from their earlier positions on Iraq, but that does not mean they have given up. They were the ones pushing for an attack on Syria this summer. Thankfully they were not successful. They are now making every effort to derail President Obama’s efforts to negotiate with the Iranians. Just last week William Kristol urged Israel to attack Iran with the hope we would then get involved. Neoconservative Senators from both parties recently introduced the Nuclear Weapon Free Iran Act of 2013, which would also bring us back on war-footing with Iran.

Next time the neocons tell us we must attack, just think “Iraq.”

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