“Fed Has Fingers & Thumbs On The Scales Of Finance,” Grant Tells Santelli And It “Will End Badly” | Zero Hedge
In a mere 140 seconds, Jim Grant explains to an almost stunned into silence Rich Santelli how we all “live in a valuation hall of mirrors” as the Fed manipulates everything. Thanks to it’s “fingers and thumbs on the scales of finance,” Grant continues, the Fed “insists on saving us from ‘everyday low prices'” – what they call deflation – and by doing so it manufactures “redundant credit” which “does mischief” in and out of markets. Grant, ominously concludes, “there is no suspense as to how [this will] end… [it will] end badly.”
Must watch… (especially for EM asset managers)…
January 30th, 2014
The avian flu virus, which up until last year infected poultry exclusively, has now mutated and crossed over to humans.
What’s even scarier is the fact that the Chinese have been unable to contain the novel H7N9 strain of the virus and health officials the world over are getting ready for the worst. It’s spreading and we now have confirmation that the virus has begun appearing in other countries.
On Thursday, billions of Chinese will be on the move to celebrate the Lunar New Year, creating ripe conditions for the spread of the influenza virus from those already infected. And many of those celebrations will include chickens, the primary carriers of H7N9. In addition, with the Winter Olympics, one of the world’s largest sporting events, just two weeks away, the virus could find the ideal conditions for breaking out.
And that means the next plane could bring a pandemic to the U.S. or anywhere else around the world. “The bottom line is the health security of the U.S. is only as strong as the health security of every country around the world,” says Dr. Thomas Frieden, director of the U.S. Centers for Disease Control.
“We are all connected by the food we eat, the water the drink and the air we breathe.”
But that’s not the worst of it. Last year the World Health Organization warned that H7N9 is one of the most lethal influenza strains ever identified.
Of the nearly 250 officially confirmed reports of human infection since last year, a quarter of those infected have died.
Those are the official numbers, but it is likely that the number of active infections could be a hundred-fold (or more) higher.
Moreover, like any flu virus, H7N9 continues to mutate and scientists recently suggested that all it would take for this particular strain to become a deadly global pandemic is an increase in its transmission rate.
It was initially thought that the virus only spread through human contact with poultry, but that theory was quickly turned on its head when a team of researchers at the University of Hong Kong confirmed that the virus had gone airborne.
If H7N9 mutates to transmission rates of other flu viruses, which is certainly a possibility, then we could well be looking at a mass global pandemic – and according to WHO the H7N9 is mutating eight (8) times faster than a typical flu virus.
To put this in perspective, the 1918 Spanish Flu infected as many as half a billion people (about a quarter of the world’s population). The mortality rate was somewhere in the area of 5% to 10%, with a final death toll of around 50 million people.
At a 25% mortality rate the H7N9 avlian flu, combined with modern transportation systems and metropolitan areas housing tens of millions of people, there is serious potential for a globally significant catastrophe.
Should this virus increase its transmission rate we could be looking at a scenario where a billion or more people contract the virus around the world.
The math is straight forward. One in four will perish.
While we’ve had pandemic scares in the recent past, this one really has researchers and global health officials spooked:
The fast mutation makes the virus’ evolutionary development very hard to predict. “We don’t know whether it will evolve into something harmless or dangerous,” He said. “Our samples are too limited. But the authorities should definitely be alarmed and get prepared for the worst-case scenario.”
As of yet, there is no available vaccine, and one novel mechanism of action for H7N9 is that as soon as it infects its host it develops rapid antiviral resistance, so traditional medicines like Tamiflu don’t work.
One infected student at a local school, or a restaurant worker, or a passenger on an airplane could take this to the next level.
And once it takes hold, there will be no stopping it.
Most don’t believe it is possible with our advanced sciences and research facilities.
History proves otherwise.
- Plague of Justinian (541 – 542) – At it’s peak over 5,000 people per day died in the city of Constantinople
- Black Death (1348 – 1350) – Over 75 Million Dead. Nearly 60% of Europe.
- Smallpox (16th Century) – Wiped out entire civilizations like the Aztecs.
- The Third Pandemic (1855 – circa 1990) – A Bubonic Plague that killed over 10 million in China and India
- The Spanish Flu (1918 – 1919) – Over 50 million dead
The only steps one can take is to be ready in advance with a Pandemic Preparedness Plan, as recommended by Tess Pennington:
When an outbreak occurs, many will remain in a state of denial about any approaching epidemics. Simply put, most people believe themselves to be invincible to negative situations and do not like the idea change of any kind.
They will remain in this state until they realize they are unable to deny it to themselves any longer. Being prepared before the masses come out of their daze will ensure that you are better prepared before the hoards run to the store to stock up.
In addition to remaining isolated from the general population, you must have (in advance) access to food, water, medicine, and self defense armaments.
If such a virus were to spread, infecting millions and killing off 25% of those who contract it, you can be assured of widespread panic as the unprepared search and fight for resources.
|Just a few decades ago, Ethiopia was a country defined by its famines, particularly between 1983-1985 when in excess of half a million people starved to death as a consequence of drought, crop failure and a brutal civil war.Against this backdrop, it is impressive that in recent years, Ethiopia has been experiencing stellar economic growth. The headline statistics are certainly remarkable: the country is creating millionaires faster than any other in Africa; output from farming, Ethiopia’s dominant industry, has tripled in a decade; the capital Addis Ababa is experiencing a massive construction boom; and the last six years have seen the nation’s GDP grow by a staggering 108 percent.
But it is not all positive news, because for all the good figures there are still plenty of bad ones.
Around 90 percent of the population of 87 million still suffers from numerous deprivations, ranging from insufficient access to education to inadequate health care; average incomes are still well below $1500 a year; and more than 30 million people still face chronic food shortages.
And while there are a number of positive and genuine reasons for the growth spurt – business and legislative reforms, more professional governance, the achievements of a thriving service sector – many critics say that the growth seen in agriculture, which accounts for almost half of Ethiopia’s economic activity and a great deal of its recent success, is actually being driven by an out of control ‘land grab’, as multinational companies and private speculators vie to lease millions of acres of the country’s most fertile territory from the government at bargain basement prices.
At the ministry of agriculture in Addis Ababa, this land-lease programme is often described as a “win-win” because it brings in new technologies and employment and, supposedly, makes it easier to improve health care, education and other services in rural areas.
“Ethiopia needs to develop to fight poverty, increase food supplies and improve livelihoods and is doing so in a sustainable way,” said one official.
But according to a host of NGO’s and policy advocates, including Oxfam, Human Rights Watch and the Oakland Institute, the true consequences of the land grabs are almost all negative. They say that in order to make such huge areas available for foreign investors to grow foodstuffs and bio-fuels for export – and in direct contravention of Ethiopia’s obligations under international law – the authorities are displacing hundreds of thousands of indigenous peoples, abusing their human rights, destroying their traditions, trashing the environment, and making them more dependent on food aid than ever before.
“The benefits for the local populations are very little,” said renowned Ethiopian sociologist Dessalegn Rahmato. “They’ve taken away their land. They’ve taken away their natural resource, because these investors are clearing the land, destroying the forest, cutting down the trees. The government claims that one of the aims of this investment was to enable local areas to benefit by investing in infrastructure, social services … but these benefits are not included in the contract. It’s only left up to the magnanimity of the investor.”
And those investors, he continued, are simply not interested in anything other than serving their own needs: “They can grow any crop they want, when they want it, they can sell in any market they want, whether it’s a global market or a local market. In fact most of them are not interested in the local markets.”
He cited as an example a massive Saudi-owned plantation in the fertile Gambella region of south west Ethiopia, a prime target area for investors: “They have 10,000 hectares and they are producing rice. This rice is going to be exported to the Middle East, to Saudi Arabia and other places. The local people in that area don’t eat rice.”
But the most controversial element of the government’s programme is known as ‘villagisation’ – the displacement of people from land they have occupied for generations and their subsequent resettlement in artificial communities.
In Gambella, where two ethnic groups, the Anuaks and the Nuers, predominate, it has meant tens of thousands of people have been forced to abandon a traditional way of life. One such is Moot, an Anuak farmer who now lives in a government village far from his home.
“When investors showed up, we were told to pack up our things and to go to the village. If we had decided not to go, they would have destroyed our crops, our houses and our belongings. We couldn’t even claim compensation because the government decided that those lands belonged to the investors. We were scared … if you get upset and say that someone stole your land, you are put in prison. If you complain about being arrested, they will kill you. It’s not our land anymore; we have been deprived of our rights.”
Despite growing internal opposition and international criticism, the Ethiopian government shows no sign of scaling the programme back. According to the Oakland Institute, since 2008, an area the size of France has already been handed over to foreign corporations. Over the next few years an area twice that size is thought to be earmarked for leasing to investors.
So what does all this mean for the people on the ground? In Ethiopia – Land for Sale, filmmakers Veronique Mauduy and Romain Pelleray try and find out.
WASHINGTON — The National Security Agency monitored the communications of other governments ahead of and during the 2009 United Nations climate negotiations in Copenhagen, Denmark, according to the latest document from whistleblower Edward Snowden.
The document, with portions marked “top secret,” indicates that the NSA was monitoring the communications of other countries ahead of the conference, and intended to continue doing so throughout the meeting. Posted on an internal NSA website on Dec. 7, 2009, the first day of the Copenhagen summit, it states that “analysts here at NSA, as well as our Second Party partners, will continue to provide policymakers with unique, timely, and valuable insights into key countries’ preparations and goals for the conference, as well as the deliberations within countries on climate change policies and negotiation strategies.”
“Second Party partners” refers to the intelligence agencies of the United Kingdom, Canada, Australia, and New Zealand, with which the U.S. has an intelligence-sharing relationship. “While the outcome of the Copenhagen Climate Change Conference remains uncertain, signals intelligence will undoubtedly play a significant role in keeping our negotiators as well informed as possible throughout the 2-week event,” the document says.
The Huffington Post published the documents Wednesday night in coordination with the Danish daily newspaper Information, which worked with American journalist Laura Poitras.
The December 2009 meeting in Copenhagen was the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change, which brings together 195 countries to negotiate measures to address rising greenhouse gas emissions and their impact. The Copenhagen summit was the first big climate meeting after the election of President Barack Obama, and was widely expected to yield a significant breakthrough. Other major developed nations were already part of the 1997 Kyoto Protocol, which set emissions limits, while the United States — the world’s biggest emitter of greenhouse gases when the protocol went into effect in 2004 — had famously declined to join. The two-week meeting was supposed to produce a successor agreement that would include the U.S., as well as China, India and other countries with rapidly increasing emissions.
The document indicates that the NSA planned to gather information as the leaders and negotiating teams of other countries held private discussions throughout the Copenhagen meeting. “[L]eaders and negotiating teams from around the world will undoubtedly be engaging in intense last-minute policy formulating; at the same time, they will be holding sidebar discussions with their counterparts — details of which are of great interest to our policymakers,” the document states. The information likely would be used to brief U.S. officials, such as Secretary of State Hillary Clinton and Obama, among others, according to the document.
The document does not detail how the agency planned to continue gathering information during the summit, other than noting that it would be capturing signals intelligence such as calls and emails. Previous disclosures have indicated that the NSA has the ability to monitor the mobile phones of heads of state. Other documents that Snowden has released indicate that the U.K.’s intelligence service tapped into delegates’ email and telephone communications at the 2009 G-20 meetings in London. Other previous Snowden disclosures documented the surveillance of the G-8 and G-20 summits in Canada in 2010, and the U.N. climate change conference in Bali in 2007.
The document also refers to some intelligence gathered ahead of the meeting, including a report that “detailed China’s efforts to coordinate its position with India and ensure that the two leaders of the developing world are working towards the same outcome.” It refers to another report that “provided advance details of the Danish proposal and their efforts to launch a ‘rescue plan’ to save COP-15.”
The Danish proposal was a draft agreement that the country’s negotiators had drawn up in the months ahead of the summit in consultation with a small number key of countries. The text was leaked to The Guardian early in the conference, causing some disarray as countries that were not consulted balked that it promoted the interests of developed nations and undermined principles laid out in previous climate negotiations. As Information reports, Danish officials wanted to keep U.S. negotiators from seeing the text in the weeks ahead of the conference, worried that it may dim their ambitions in the negotiations for proposed cuts to greenhouse gas emissions.
The Danes did share the text with the U.S. and other key nations ahead of the meeting. But the NSA document noting this as “advance details” indicates that the U.S. may have already intercepted it. The paragraph referring to the Danish text is marked “SI” in the Snowden document — which most likely means “signals intelligence,” indicating that it came from electronic information intercepted by the NSA, rather than being provided to the U.S. negotiators.
That could be why U.S. negotiators took the positions they did going into the conference, a Danish official told Information. “They simply sat back, just as we had feared they would if they knew about our document,” the official said. “They made no constructive statements. Obviously, if they had known about our plans since the fall of 2009, it was in their interest to simply wait for our draft proposal to be brought to the table at the summit.”
Members of the Danish delegation indicated in interviews with Information that they thought the American and Chinese negotiators seemed “peculiarly well-informed” about discussions that had taken place behind closed doors. “Particularly the Americans,” said one official. “I was often completely taken aback by what they knew.”
Despite high hopes for an agreement at Copenhagen, the negotiations started slowly and there were few signs of progress. Obama and heads of state from more than 100 nations arrived late in the second week in hopes of achieving a breakthrough, but the final day wore on without an outcome. There were few promising signals until late Friday night, when Obama made a surprise announcement that he — along with leaders from China, India, Brazil and South Africa — had come up with the “Copenhagen Accord.”
The three-page document set a goal of keeping the average rise in global temperature to less than 2 degrees Celsius, but allowed countries to write their own plans for cutting emissions — leaving out any legally binding targets or even a path to a formal treaty. Obama called the accord “an unprecedented breakthrough” in a press conference, then took off for home on Air Force One. But other countries balked, pointing out that the accord was merely a political agreement, drafted outside the U.N. process and of uncertain influence for future negotiations.
The climate summits since then have advanced at a glacial pace; a legally binding treaty isn’t currently expected until 2015. And the U.S. Congress, despite assurances made in Copenhagen, never passed new laws cutting planet-warming emissions. (The Environmental Protection Agency is, however, moving forward with regulations on emissions from power plants, but a new law to addressing the issue had been widely considered as preferable.)
The revelation that the NSA was surveilling the communications of leaders during the Copenhagen talks is unlikely to help build the trust of negotiators from other nations in the future.
“It can’t help in the sense that if people think you’re trying to get an unfair advantage or manipulate the process, they’re not going to have much trust in you,” said Alden Meyer, director of strategy and policy for the Union of Concerned Scientists and a seasoned veteran of the U.N. climate negotiations. Meyer said he worried that the disclosure might cause the parties to “start becoming more cautious, more secretive, and less forthcoming” in the negotiations. “That’s not a good dynamic in a process where you’re trying to encourage collaboration, compromise, and working together, as opposed to trying to get a comparative advantage,” he said.
Obama has defended the NSA’s work as important in fighting terrorism at home and abroad. But the latest Snowden document indicates that the agency plays a broader role in protecting U.S. interests internationally.
National Security Council spokeswoman Caitlin Hayden declined to comment directly on the Snowden document in an email to The Huffington Post, but did say that “the U.S. Government has made clear that the United States gathers foreign intelligence of the type gathered by all nations.” She noted that Obama’s Jan. 17 speech on the NSA “laid out a series of concrete and substantial reforms the Administration will adopt or seek to codify with Congress” regarding surveillance.
“In particular, he issued a new Presidential Directive that lays out new principles that govern how we conduct signals intelligence collection, and strengthen how we provide executive branch oversight of our signals intelligence activities,” Hayden said. “It will ensure that we take into account our security requirements, but also our alliances; our trade and investment relationships, including the concerns of our companies; and our commitment to privacy and basic liberties. And we will review decisions about intelligence priorities and sensitive targets on an annual basis, so that our actions are regularly scrutinized by the President’s senior national security team.”
Some very relevant observations from Louis Gave of Evergreen GaveKal
Who Will The Emerging Markets Crisis Adjust Against?
In last summer’s emerging market sell-off, India was very much at the center of the storm: the rupee collapsed, bond yields soared and equity markets tanked. The Reserve Bank of India responded by raising rates while the government introduced harsh restrictions on gold imports. Promptly, the Indian current account deficit shrank. So much so that, in the current emerging market (EM) meltdown, India has been spared relative to most other current account deficit emerging markets, whether Turkey, Brazil, South Africa or Argentina. And on this note, the inability of the Turkish lira, South African rand, Brazilian real, etc. to hold on to gains after recent hawkish moves by their central banks is problematic. Markets won’t be calmed until there is clear evidence these countries’ current account deficits can improve. But how can these adjustments happen?
The problem is twofold. First, current accounts are a zero sum game, so future improvements in emerging market trade balances have to come at someone else’s expense. Second, we have had, over the past year, only modest growth in global trade; so if EM balances are to improve markedly, somebody’s will have to deteriorate.
When the 1994-95 “tequila crisis” struck, the US current account deficit widened to allow for Mexico to adjust. The same thing happened in 1997 with the Asian crisis, in 2001 when Argentina blew, and in 2003 when SARS crippled Asia. In 1998, oil prices took the brunt of the adjustment as Russia hit the skids. In 2009-10, it was China’s turn to step up to the plate, with a stimulus-spurred import binge that meaningfully reduced its current account surplus.
Which brings us to today and the question of who will adjust their growth lower (through a deterioration in their trade balances) to make some room for Argentina, Brazil, Turkey, South Africa, Indonesia…? There are really five candidates:
- China, again? That seems unlikely. Instead, China’s policymakers continue to do all they can to deleverage, despite the cost of a slowing economic expansion. Moreover, mercantilism still rides high in the corridors of power in Beijing and so the willingness to move to a current account deficit is simply not there.
- The US, again? As discussed in our recent book (see Too Different For Comfort), the Federal Reserve’s attitude since the global financial crisis has consistently been one of: “the US dollar is our currency and your problem.” The Fed has been happy to print and devalue the US dollar, leaving other countries to deal with the consequences. The days of the US acting as the backstop in the system are now behind us.
- Oil: In the past, collapsing oil prices have come to the rescue during emerging market crises. Of course, this accentuates problems for the EMs dependent on high energy prices for their growth, but is a boon for others (including India, China, Korea, Turkey). Unfortunately, for now, energy prices are not falling, with some more localized markets, like US natural gas, seeing a surge amid record cold snaps.
- Japan: Japan, which has been such a non-player for twenty years, is once again finding its feet. However, it is doing so by exporting its deflation through a central bank orchestrated currency devaluation. How this “beggar-thy-neighbor policy” will help the struggling emerging markets is hard to see, except perhaps through a) capital flows from rich Japanese savers into by now higher yielding EM debt, or b) import substitution on the part of threatened emerging markets where the end consumers will perhaps replace high priced US dollar/euro denominated imports of manufactured goods for cheaper yen denominated ones?
- Euroland: The currency zone’s slight trade surplus is largely due to Germany. However, Germany’s exports to Turkey, Russia, Brazil, etc., will likely suffer as domestic demand implodes in these countries. In this sense—the euroland will be the likeliest candidate on the other side of the EM current account adjustment. Unfortunately, odds are this will take place through falling European exports rather than rising European imports and/or rising EM exports to the eurozone. This is not a good harbinger for global growth.
In short, either oil collapses very soon, or the US dollar shoots up (with Janet Yellen about to take the helm, is that likely?) or we could soon be facing a contraction in global trade. And unfortunately, contractions in global trade are usually accompanied by global recessions. With this in mind, and as we argued in Eight Questions For 2014, maintaining positions in long-dated OECD government bonds as hedges against the unfolding of a global deflationary spiral (triggered by the weak yen, a slowing China, busting emerging markets and an uninspiring Europe…) makes ample sense.
Too late. I already opted for the first option years ago. It was a choice between a low return on capital or no return of capital, so I chose the former. Everyone thinks that they will be that one guy who gets out at the very top – you know, like Alan Greenspan. Fortunately, you don’t have to be a retiring Central Bankster to realize that a set of widely ignored factors have coalesced to make meltdown inevitable.
Capitalism taken to the logical extent possible will inevitably self-implode with extreme dislocation.
Carry Trades Unwinding
First off, carry trade unwind risk was always the greatest risk created by Quantitative Easing and despite the rolling dislocations in Emerging Markets, it’s still being ignored. These various high risk Emerging Market countries were primary beneficiaries of Fed largesse as it temporarily propped up their currencies and their debt markets. Now during the unwind phase, the currencies are collapsing and interest rates are rising. Meanwhile, investors are just starting to realize that these trade deficits (current account balances) are totally unsustainable. In a desperate attempt to stabilize its currency, Turkey raised interest rates by 4% overnight which of course will kill the economy. This is all just deja vu of the 1997 currency crisis which started in Thailand and spread throughout Asia.
Don’t Worry. Be Happy
“China is being engulfed in a financial crisis that might end up in its own version of the credit crunch. There are running battles on the streets on Bangkok and Kiev as authoritarian regimes totter. Turkey is sinking, and may soon not be able to fund its current account deficit. Argentina is going through another currency crisis. There is no shortage of drama coming out of the emerging markets. And there is no shortage of reasons for the markets to work them themselves up into a panic.” (“Why An Emerging Markets Crash Wouldn’t Matter”)
Key Stock Market Risks
In order to understand what solutions to our energy predicament will or won’t work, it is necessary to understand the true nature of our energy predicament. Most solutions fail because analysts assume that the nature of our energy problem is quite different from what it really is. Analysts assume that our problem is a slowly developing long-term problem, when in fact, it is a problem that is at our door step right now.
The point that most analysts miss is that our energy problem behaves very much like a near-term financial problem. We will discuss why this happens. This near-term financial problem is bound to work itself out in a way that leads to huge job losses and governmental changes in the near term. Our mitigation strategies need to be considered in this context. Strategies aimed simply at relieving energy shortages with high priced fuels and high-tech equipment are bound to be short lived solutions, if they are solutions at all.
OUR ENERGY PREDICAMENT
1. Our number one energy problem is a rapidly rising need for investment capital, just to maintain a fixed level of resource extraction. This investment capital is physical “stuff” like oil, coal, and metals.
We pulled out the “easy to extract” oil, gas, and coal first. As we move on to the difficult to extract resources, we find that the need for investment capital escalates rapidly. According to Mark Lewis writing in the Financial Times, “upstream capital expenditures” for oil and gas amounted to nearly $700 billion in 2012, compared to $350 billion in 2005, both in 2012 dollars. This corresponds to an inflation-adjusted annual increase of 10% per year for the seven year period.
Figure 1. The way would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete.
In theory, we would expect extraction costs to rise as we approach limits of the amount to be extracted. In fact, the steep rise in oil prices in recent years is of the type we would expect, if this is happening. We were able to get around the problem in the 1970s, by adding more oil extraction, substituting other energy products for oil, and increasing efficiency. This time, our options for fixing the situation are much fewer, since the low hanging fruit have already been picked, and we are reaching financial limits now.
Figure 2. Historical oil prices in 2012 dollars, based on BP Statistical Review of World Energy 2013 data. (2013 included as well, from EIA data.)
To make matters worse, the rapidly rising need for investment capital arises is other industries as well as fossil fuels. Metals extraction follows somewhat the same pattern. We extracted the highest grade ores, in the most accessible locations first. We can still extract more metals, but we need to move to lower grade ores. This means we need to remove more of the unwanted waste products, using more resources, including energy resources.
Figure 3. Waste product to produce 100 units of metal
There is a huge increase in the amount of waste products that must be extracted and disposed of, as we move to lower grade ores (Figure 3). The increase in waste products is only 3% when we move from ore with a concentration of .200, to ore with a concentration .195. When we move from a concentration of .010 to a concentration of .005, the amount of waste product more than doubles.
When we look at the inflation adjusted cost of base metals (Figure 4 below), we see that the index was generally falling for a long period between the 1960s and the 1990s, as productivity improvements were greater than falling ore quality.
Figure 4. World Bank inflation adjusted base metal index (excluding iron).
Since 2002, the index is higher, as we might expect if we are starting to reach limits with respect to some of the metals in the index.
There are many other situations where we are fighting a losing battle with nature, and as a result need to make larger resource investments. We have badly over-fished the ocean, so fishermen now need to use more resources too catch the remaining much smaller fish. Pollution (including CO2 pollution) is becoming more of a problem, so we invest resources in devices to capture mercury emissions and in wind turbines in the hope they will help our pollution problems. We also need to invest increasing amounts in roads, bridges, electricity transmission lines, and pipelines, to compensate for deferred maintenance and aging infrastructure.
Some people say that the issue is one of falling Energy Return on Energy Invested (EROI), and indeed, falling EROI is part of the problem. The steepness of the curve comes from the rapid increase in energy products used for extraction and many other purposes, as we approach limits. The investment capital limit was discovered by the original modelers ofLimits to Growth in 1972. I discuss this in my post Why EIA, IEA, and Randers’ 2052 Energy Forecasts are Wrong.
2. When the amount of oil extracted each year flattens out (as it has since 2004), a conflict arises: How can there be enough oil both (a) for the growing investment needed to maintain the status quo, plus (b) for new investment to promote growth?
In the previous section, we talked about the rising need for investment capital, just to maintain the status quo. At least some of this investment capital needs to be in the form of oil. Another use for oil would be to grow the economy–adding new factories, or planting more crops, or transporting more goods. While in theory there is a possibility of substituting away from oil, at any given point in time, the ability to substitute away is quite limited. Most transport options require oil, and most farming requires oil. Construction and road equipment require oil, as do diesel powered irrigation pumps.
Because of the lack of short term substitutability, the need for oil for reinvestment tends to crowd out the possibility of growth. This is at least part of the reason for slower world-wide economic growth in recent years.
3. In the crowding out of growth, the countries that are most handicapped are the ones with the highest average cost of their energy supplies.
For oil importers, oil is a very high cost product, raising the average cost of energy products. This average cost of energy is highest in countries that use the highest percentage of oil in their energy mix.
If we look at a number of oil importing countries, we see that economic growth tends to be much slower in countries that use very much oil in their energy mix. This tends to happen because high energy costs make products less affordable. For example, high oil costs make vacations to Greece unaffordable, and thus lead to cut backs in their tourist industry.
It is striking when looking at countries arrayed by the proportion of oil in their energy mix, the extent to which high oil use, and thus high cost energy use, is associated with slow economic growth (Figure 5, 6, and 7). There seems to almost be a dose response–the more oil use, the lower the economic growth. While the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) are shown as a group, each of the countries in the group shows the same pattern on high oil consumption as a percentage of its total energy production in 2004.
Globalization no doubt acted to accelerate this shift toward countries that used little oil. These countries tended to use much more coal in their energy mix–a much cheaper fuel.
Figure 5. Percent energy consumption from oil in 2004, for selected countries and country groups, based on BP 2013 Statistical Review of World Energy. (EU – PIIGS means “EU-27 minus PIIGS’)
Figure 6. Average percent growth in real GDP between 2005 and 2011, based on USDA GDP data in 2005 US$.
Figure 7. Average percentage consumption growth between 2004 and 2011, based on BP’s 2013 Statistical Review of World Energy.
4. The financial systems of countries with slowing growth are especially affected, as are the governments. Debt becomes harder to repay with interest, as economic growth slows.
With slow growth, debt becomes harder to repay with interest. Governments are tempted to add programs to aid their citizens, because employment tends to be low. Governments find that tax revenue lags because of the lagging wages of most citizens, leading to government deficits. (This is precisely the problem that Turchin and Nefedov noted, prior to collapse, when they analyzed eight historical collapses in their book Secular Cycles.)
Governments have recently attempt to fix both their own financial problems and the problems of their citizens by lowering interest rates to very low levels and by using Quantitative Easing. The latter allows governments to keep even long term interest rates low. With Quantitative Easing, governments are able to keep borrowing without having a market of ready buyers. Use of Quantitative Easing also tends to blow bubbles in prices of stocks and real estate, helping citizens to feel richer.
5. Wages of citizens of countries oil importing countries tend to remain flat, as oil prices remain high.
At least part of the wage problem relates to the slow economic growth noted above. Furthermore, citizens of the country will cut back on discretionary goods, as the price of oil rises, because their cost of commuting and of food rises (because oil is used in growing food). The cutback in discretionary spending leads to layoffs in discretionary sectors. If exported goods are high priced as well, buyers from other countries will tend to cut back as well, further leading to layoffs and low wage growth.
6. Oil producers find that oil prices don’t rise high enough, cutting back on their funds for reinvestment.
As oil extraction costs increase, it becomes difficult for the demand for oil to remain high, because wages are not increasing. This is the issue I describe in my post What’s Ahead? Lower Oil Prices, Despite Higher Extraction Costs.
We are seeing this issue today. Bloomberg reports, Oil Profits Slump as Higher Spending Fails to Raise Output. Business Week reports Shell Surprise Shows Profit Squeeze Even at $100 Oil. Statoil, the Norwegian company, is considering walking away from Greenland, to try to keep a lid on production costs.
7. We find ourselves with a long-term growth imperative relating to fossil fuel use, arising from the effects of globalization and from growing world population.
Globalization added approximately 4 billion consumers to the world market place in the 1997 to 2001 time period. These people previously had lived traditional life styles. Once they became aware of all of the goods that people in the rich countries have, they wanted to join in, buying motor bikes, cars, televisions, phones, and other goods. They would also like to eat meat more often. Population in these countries continues to grow adding to demand for goods of all kinds. These goods can only be made using fossil fuels, or by technologies that are enabled by fossil fuels (such as today’s hydroelectric, nuclear, wind, and solar PV).
8. The combination of these forces leads to a situation in which economies, one by one, will turn downward in the very near future–in a few months to a year or two. Some are already on this path (Egypt, Syria, Greece, etc.)
We have two problems that tend to converge: financial problems that countries are now hiding, and ever rising need for resources in a wide range of areas that are reaching limits (oil, metals, over-fishing, deferred maintenance on pipelines).
On the financial side, we have countries trying to hang together despite a serious mismatch between revenue and expenses, using Quantitative Easing and ultra-low interest rates. If countries unwind the Quantitative Easing, interest rates are likely to rise. Because debt is widely used, the cost of everything from oil extraction to buying a new home to buying a new car is likely to rise. The cost of repaying the government’s own debt will rise as well, putting governments in worse financial condition than they are today.
A big concern is that these problems will carry over into debt markets. Rising interest rates will lead to widespread defaults. The availability of debt, including for oil drilling, will dry up.
Even if debt does not dry up, oil companies are already being squeezed for investment funds, and are considering cutting back on drilling. A freeze on credit would make certain this happens.
Meanwhile, we know that investment costs keep rising, in many different industries simultaneously, because we are reaching the limits of a finite world. There are more resources available; they are just more expensive. A mismatch occurs, because our wages aren’t going up.
The physical amount of oil needed for all of this investment keeps rising, but oil production continues on its relatively flat plateau, or may even begins to drop. This leads to less oil available to invest in the rest of the economy. Given the squeeze, even more countries are likely to encounter slowing growth or contraction.
9. My expectation is that the situation will end with a fairly rapid drop in the production of all kinds of energy products and the governments of quite a few countries failing. The governments that remain will dramatically cut services.
With falling oil production, promised government programs will be far in excess of what governments can afford, because governments are basically funded out of the surpluses of a fossil fuel economy–the difference between the cost of extraction and the value of these fossil fuels to society. As the cost of extraction rises, the surpluses tend to dry up.
Figure 8. Cost of extraction of barrel oil, compared to value to society. Economic growth is enabled by the difference.
As these surpluses shrink, governments will need to shrink back dramatically. Government failure will be easier than contracting back to a much smaller size.
International finance and trade will be particularly challenging in this context. Trying to start over will be difficult, because many of the new countries will be much smaller than their predecessors, and will have no “track record.” Those that do have track records will have track records of debt defaults and failed promises, things that will not give lenders confidence in their ability to repay new loans.
While it is clear that oil production will drop, with all of the disruption and a lack of operating financial markets, I expect natural gas and coal production will drop as well. Spare parts for almost anything will be difficult to get, because of the need for the system of international trade to support making these parts. High tech goods such as computers and phones will be especially difficult to purchase. All of these changes will result in a loss of most of the fossil fuel economy and the high tech renewables that these fossil fuels support.
A Forecast of Future Energy Supplies and their Impact
A rough estimate of the amounts by which energy supply will drop is given in Figure 9, below.
Figure 9. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.
The issue we will be encountering could be much better described as “Limits to Growth” than “Peak Oil.” Massive job layoffs will occur, as fuel use declines. Governments will find that their finances are even more pressured than today, with calls for new programs at the time revenue is dropping dramatically. Debt defaults will be a huge problem. International trade will drop, especially to countries with the worst financial problems.
One big issue will be the need to reorganize governments in a new, much less expensive way. In some cases, countries will break up into smaller units, as the Former Soviet Union did in 1991. In some cases, the situation will go back to local tribes with tribal leaders. The next challenge will be to try to get the governments to act in a somewhat co-ordinated way. There may need to be more than one set of governmental changes, as the global energy supplies decline.
We will also need to begin manufacturing goods locally, at a time when debt financing no longer works very well, and governments are no longer maintaining roads. We will have to figure out new approaches, without the benefit of high tech goods like computers. With all of the disruption, the electric grid will not last very long either. The question will become: what can we do with local materials, to get some sort of economy going again?
NON-SOLUTIONS and PARTIAL SOLUTIONS TO OUR PROBLEM
There are a lot of proposed solutions to our problem. Most will not work well because the nature of the problem is different from what most people have expected.
1. Substitution. We don’t have time. Furthermore, whatever substitutions we make need to be with cheap local materials, if we expect them to be long-lasting. They also must not over-use resources such as wood, which is in limited supply.
Electricity is likely to decline in availability almost as quickly as oil because of inability to keep up the electrical grid and other disruptions (such as failing governments, lack of oil to lubricate machinery, lack of replacement parts, bankruptcy of companies involved with the production of electricity) so is not really a long-term solution to oil limits.
2. Efficiency. Again, we don’t have time to do much. Higher mileage cars tend to be more expensive, replacing one problem with another. A big problem in the future will be lack of road maintenance. Theoretical gains in efficiency may not hold in the real world. Also, as governments reduce services and often fail, lenders will be unwilling to lend funds for new projects which would in theory improve efficiency.
In some cases, simple devices may provide efficiency. For example, solar thermal can often be a good choice for heating hot water. These devices should be long-lasting.
3. Wind turbines. Current industrial type wind turbines will be hard to maintain, so are unlikely to be long-lasting. The need for investment capital for wind turbines will compete with other needs for investment capital. CO2 emissions from fossil fuels will drop dramatically, with or without wind turbines.
On the other hand, simple wind mills made with local materials may work for the long term. They are likely to be most useful for mechanical energy, such as pumping water or powering looms for cloth.
4. Solar Panels. Promised incentive plans to help homeowners pay for solar panels can be expected to mostly fall through. Inverters and batteries will need replacement, but probably will not be available. Handy homeowners who can rewire the solar panels for use apart from the grid may find them useful for devices that can run on direct current. As part of the electric grid, solar panels will not add to its lifetime. It probably will not be possible to make solar panels for very many years, as the fossil fuel economy reaches limits.
5. Shale Oil. Shale oil is an example of a product with very high investment costs, and returns which are doubtful at best. Big companies who have tried to extract shale oil have decided the rewards really aren’t there. Smaller companies have somehow been able to put together financial statements claiming profits, based on hoped for future production and very low interest rates.
Costs for extracting shale oil outside the US for shale oil are likely to be even higher than in the US. This happens because the US has laws that enable production (landowner gets a share of profits) and other beneficial situations such as pipelines in place, plentiful water supplies, and low population in areas where fracking is done. If countries decide to ramp up shale oil production, they are likely to run into similarly hugely negative cash flow situations. It is hard to see that these operations will save the world from its financial (and energy) problems.
6. Taxes. Taxes need to be very carefully structured, to have any carbon deterrent benefit. If part of taxes consumers would normally pay to the government are levied on fuel for vehicles, the practice can encourage more the use of more efficient vehicles.
On the other hand, if carbon taxes are levied on businesses, the taxes tend to encourage businesses to move their production to other, lower-cost countries. The shift in production leads to the use of more coal for electricity, rather than less. In theory, carbon taxes could be paired with a very high tax on imported goods made with coal, but this has not been done. Without such a pairing, carbon taxes seem likely to raise world CO2 emissions.
7. Steady State Economy. Herman Daly was the editor of a book in 1973 calledToward a Steady State Economy, proposing that the world work toward a Steady State economy, instead of growth. Back in 1973, when resources were still fairly plentiful, such an approach would have acted to hold off Limits to Growth for quite a few years, especially if zero population growth were included in the approach.
Today, it is far too late for such an approach to work. We are already in a situation with very depleted resources. We can’t keep up current production levels if we want to–to do so would require greatly ramping up energy production because of the rising need for energy investment to maintain current production, discussed in Item (1) of Our Energy Predicament. Collapse will probably be impossible to avoid. We can’t even hope for an outcome as good as a Steady State Economy.
7. Basing Choice of Additional Energy Generation on EROI Calculations. In my view, basing new energy investment on EROI calculations is an iffy prospect at best. EROI calculations measure a theoretical piece of the whole system–”energy at the well-head.” Thus, they miss important parts of the system, which affect both EROI and cost. They also overlook timing, so can indicate that an investment is good, even if it digs a huge financial hole for organizations making the investment. EROI calculations also don’t consider repairability issues which may shorten real-world lifetimes.
Regardless of EROI indications, it is important to consider the likely financial outcome as well. If products are to be competitive in the world marketplace, electricity needs to be inexpensive, regardless of what the EROI calculations seem to say. Our real problem is lack of investment capital–something that is gobbled up at prodigious rates by energy generation devices whose costs occur primarily at the beginning of their lives. We need to be careful to use our investment capital wisely, not for fads that are expensive and won’t hold up for the long run.
8. Demand Reduction. This really needs to be the major way we move away from fossil fuels. Even if we don’t have other options, fossil fuels will move away from us. Encouraging couples to have smaller families would seem to be a good choice.
Royal Dutch Shell revealed Thursday that 2014 will see the company stop its Alaska program and focus on achieving better capital efficiency by making ‘hard choices’ about new projects and reducing capital spending.
Announcing its results for 2013, Shell said that the landscape the company had expected has changed and it cited factors such as the worsening security situation in Nigeria and delays to non-operated projects in several countries. With North American natural gas prices remaining low, the company said it particularly plans to focus on restructuring and improving profitability in its North American upstream operations.
“Our ambitious growth drive in recent years has yielded a step change in Shell’s portfolio and options, with more growth to come, but at the same time we have lost some momentum in operational delivery, and we can sharpen up in a number of areas,” New Shell CEO Ben van Beurden said in a company statement.
“Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance.”
Meanwhile, Shell said the recent Ninth Circuit Court decision against the Department of the Interior “raises substantial obstacles to Shell’s plans for drilling in offshore Alaska”. As a result, Shell has decided to stop its exploration program for Alaska in 2014.
“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said. “We will look to relevant agencies and the Court to resolve their open legal issues as quickly as possible.”
Shell’s capital spending in 2014 is targeted at around $37 billion, compared with the $46 million it spent in 2013. Meanwhile, the firm plans to increase the pace of its asset sales, which are expected to be $15 billion for 2014-2015 in both its upstream and downstream segments.
“We are making hard choices in our world-wide portfolio to improve Shell’s capital efficiency,” van Beurden added.
The situation in Ukraine is a fluid one and changing by the hour. Although it had appeared that there was a resolution to the protests that had broken out after the government of Ukraine had made the sovereign decision of sticking with Russia and saying no to closer European Union integration, excessive violence from the western backed opposition has spread like a wave throughout the country.
The so called Ukrainian “opposition” now resembles something more akin to armed insurgents in Syria involved in a coup d’état than opposition protestors.
The situation in Ukraine once again underlines US hypocrisy. The US, which prides itself on protecting its police, supports an “opposition” which is threatening, attacking, kidnapping and setting young police officers on fire. The scene currently playing out in Ukraine has all of the signs of a foreign engineered regime change operation and with the taking of government buildings, has unarguably moved into a scenario where the continuity of the state is in question.
Voice of Russia regular and NATO expert Rick Rozoff discussed all of these issues and more as the situation threatens to spin out of control.
Robles: Thanks a lot. I was wondering if we can get your views on what is going on in Maidan or Independence Square in Ukraine. It seems like the level of violence is escalating with … looks like no end in sight, I don’t know. What do you think?
Rozoff: No, you are absolutely correct. Ukraine has become, you know, the center of attention I think , globally, right now, the cynosure. People are focused on it with good reason. In a way it’s replaced Syria as the, how would I put it, proxy conflict between the East and West with the West once again on the offensive. That is, in an attempt to do something, nothing short of toppling an elected government of a nation that has close state-to-state relationships with Russia.
And what is happening is fluid, of course, but it is also tense and it is also fraught with not only dangerous but potentially catastrophic consequences if the violence that exists in Kiev in and around Independence Square and now by recent reports spreading into parts of Western Ukraine where the hotbeds of nationalist and even fascistic extremism are…
So I think what you are seeing is well-coordinated series of activities that began in Kiev and may very well spread to the Western part of Ukraine.
Robles: I see. What are your views on who is behind all this, and the reasons for it? Now at first they came up with that there was the EU integration, then they were protesting the government, and then they were calling for early elections, then they were protesting against Russia.
Now one of the objects of the protesters&# 39; actions is something about some students that were beat several weeks ago. It just seems like they are finding any reason whatsoever to keep escalating and continuing their violence.
During the night there were negotiations and the opposition said they had agreed to the conditions set by the government to stop their violent activities, and then they went out and announced this to their supporters. Their supporters weren’t happy about it and they went back on their word, they said: ‘No, we are not going to agree to any cease in our violence’ .
And they are continuing with their violence which, they’re throwing Molotov cocktails at Police. All of the Police and the security forces they are suffering severe burns and the violence against the police is escalating.
And of we look at who the leaders are, it brings a lot of questions to my mind – as who is actually running all of this? I mean they’ve got this ex-boxer, he is promoting all this violence.
Can you give us some comments on him and on the resolution by the Russian State Duma yesterday, if you could, regarding the violence?
Rozoff: Yes, the opposition, and again we have to keep in mind in a fluid situation like this, and what we are looking at is really not only a destabilization but ultimately a regime change technique or scenario. But what we see is the boxer, the heavyweight boxer Vitali Klichko, and two other nationalists emerging as what is a typical color revolution scenario where there is a triumvirate or triad of political leaders.
This was true by the way during the Orange Revolution, so-called, in 2004 and 2005. We had Viktor Yanukovich (Yushchenko) , Yulia Tymoshenko and Alexander Moroz as being the triumvirate, modeled after that in Georgia, incidentally, the preceding year, in 2003.
So, the question is begged of course, about whether the public or nominal leadership is really anything more than figureheads, or are anything more than figureheads, and whether in fact there is not something more substantive behind it both internally and of course externally.
So what we are looking at is a degree of violence against police officers that would not be tolerated in any other European country, I can assure you, certainly not in the West. But being cheered on and supported unequivocally by Western political leaders in the European Union, in the United States, in NATO I might add.
Yesterday Secretary General of the North Atlantic Treaty Organization, Anders Fogh Rasmussen, said, “Violence can never be used for political means.” You know, a lightening bolt should come from the heavens and strike anyone making a statement like that when they’re the head of NATO which has used violence for political means uninterruptedly since 1995 in several countries on three continents.
Robles: Well that’s their only tactic. How could you say that?
Rozoff: But of course. But I mean there is a difference between official use of force by a government to maintain peace in a country – there could be abuses, there could be excessive use of that force, but at least it is legally sanctioned – as opposed to people who are a little bit better than gangsters at times, hitting police officers with hammers or throwing petrol bombs at them.
You don’t see much of it here in the West, but luckily with the Internet we can see a television broadcasts around the world. And we’ve seen the horrifying pictures of the results of the use of so-called Molotov cocktails in Kiev. Seeing your young police officers’ heads and arms are on fire and so forth and you can only imagine the degree of, third-degree I’m sure, of burns that they suffer as a result of gasoline bombs.
But I think rather than focusing on the mechanics of what is going on, which will be debated ad nauseam in the Western press of course, what is important to again come back to you, and you and I have had occasion to talk about this before, John, is the regional and ultimately the global context within which the battle for Ukraine, and I would term it exactly that the battle for Ukraine, is occurring.
One factor which is very significant but didnot receive the attention it certainly warranted was in the middle of last month, the middle of December, now former US Congressman Dennis Kucinich, he had served in the US House of Representatives for eight terms, for 16 years- he is a native of my home state of Ohio, incidentally – wrote a very revealing article stating that the so-called European Union Association Agreement with – initiative rather – with Ukraine was simply NATO’s Trojan Horse in Ukraine. This is precisely how former Congressman Kucinich put it. And what he did indicate and he shows a fairly good degree of familiarity with how all these things are done that Ukraine would first to join NATO and then join the European Union because traditionally that is how it has occurred, with the newer members, with the exception of tiny island nations of Cyprus and Malta.
So that what we are looking at is Ukraine is a geo-strategically pivotal nation; it clearly is that nation that separates what geopoliticians or -strategists would talk about from East to the West. It borders, of course, Poland and other nations that are now considered to be in Central Europe for that matter and Russia to its East which of course is in Eastern Europe and even in Eurasia. I mean, in fact, the greater part of Russia being in Asia itself.
What we are seeing is something almost evocative of formal struggles, and there is a history of Ukraine being pivotal in that sense. Many of your listeners may be acquainted either with the 19th century novel Taras Bulba, by the Russian novelist Nikolai Gogol, who is from Ukraine, or the movie adaptation at the end of the last century, more people might know.
It is a fact that Ukraine is a bone of contention between the Westernized Slavic part of Europe, if you will, those with the Latin alphabet and the Roman Catholic religion and those with the Cyrillic alphabet and the Orthodox religion which Ukraine for the most part is. And that we’ve seen similar situations after World War 1, during World War 2.
In World War 1 Germany, in the first instance, tried to wean Ukraine away from Russia; in World War 2 Stepan Bandera and other Nazi collaborators, who are heroes incidentally to the modern nationalists in Ukraine, who under the Yushchenko government rehabilitated members of the Ukrainian Insurgent Army and others who had collaborated with the Nazi Germany, so we are looking at very extremist elements..
Probably the most visible and prominent of the so-called youth activista are members of the so-called Svoboda or Freedom party, which up until a few years ago had as its logo a variant of the Nazi swastika. So let’s be very clear about what we are dealing with. There are may be any number of innocent youth who want, going out for a dare, much as Orange Revolution in 2004-2005, but behind it there are some very hardcore nationalists, and Russo-phobic extremists, who whether be known to themselves or not are serving the purpose of turning yet another country into a battle zone in a renewed post-Cold War East-West conflict.
Robles: Can you give us your views on the statement by the Crimean parliament and by the Russian Duma yesterday? The Russian Duma is calling for foreign actors, foreign players -we know who we are talking about: the West, the US – to refrain from interfering in Ukraine.
The Crimean parliament, they adopted a statement with a vote of 78-81 deputies in favor of it. The statement reads: ‘The political crisis, the formal pretext for which was a pause in Ukraine’ s European integration has developed into armed resistance and street fights. Hundreds of people have been hurt and, unfortunately, some people have been killed. The price for the power ambitions of a bunch of political saboteurs – Klichko, Yatsenyuk and Tyagnibok- is too high. They have crossed the line by provoking bloodshed using the interests of the people of Ukraine as cover and pretending to act on their own behalf.’
And they finish up by saying:’ The people of Crimea will never engage in illegitimate elections, will never recognize their results. And will not live in Bandera Ukraine.’ – they say. So, can you comment on that and on the Russian resolution, if you would?
Rozoff: First of all I want to commend you, as of I think yesterday or perhaps today, of compiling a list of I think significant statements by the Russian State Duma, the duma or the parliament in Crimea and others and putting them into a very condensed form that has been very useful to me.
A couple of things: the trio of opposition figures is exactly the triumvirate I alluded to earlier with Vitali Klichko playing what could only be described as a sort of Rocky Balboa-meets- Rambo Sylvester Stallone compilation of pseudo-populist, right-wing, dangerous and ultimately violent sort of activity.
The Bandera allusion we’ve talked about earlier; he was a leader during World War 2 of the Ukrainian Insurgent Army and fought against the legitimate political authorities in what was then Nazi-occupied Soviet Union, but often times in conjunction with the Third Reich, with the Nazis. So they are using the same language you and I had used.
Now, what we are talking about here in Crimea is of the upmost importance. The US has for several years now been waging, in conjunction with its NATO allies, annual fairly large-scale naval war games called Sea Breeze, and they are conducted in the Crimea dangerously close to where the Russian Black Sea fleet is stationed at Sevastopol. And even though a public outcry led to, or resulted in, a Sea Breeze exercise I think three years ago, perhaps four, being called off, they have been resumed and what has happened over the last two or three years, this is very significant, and I hope your listeners pick up on this, the US as a matter of course has been sending missile cruisers into the Black Sea to go to Crimea, to dock there.
These are what are called the Ticonderoga- class guided missile cruisers, of the sort that are part of the US international missile, so-called missile shield, that is they are to be equipped with Standard Missile-3 interceptor missiles, and these ships are visiting Ukraine on a regular basis.
As the US continues its military takeover of the Black Sea, they’ve already done this with Bulgaria and Rumania, where they’ve acquired eight major military basses in those two countries. Turkey of course is a NATO ally and Ukraine then becomes a very significant factor in the US military takeover of the Black Sea largely through NATO expansion. But what is even I think of more concern, a WikiLeaks document of in the last couple of years revealed that in 2006 the then-head of the US Missile Defense Agency, he’s now retired, General Henry, or Trey, Obering, met with Ukrainian officials, this was during the Yushchenko [administration] , to recruit Ukraine into the European missile shield.
And in the subsequent year, 2007, General Obering, head the Missile Defense Agency, visited to Ukraine during the Yushchenko years, administration years, and met with the defense minister and other key officials in Ukraine in an effort to bring Ukraine into that. If Ukraine were to join, along with Poland, Romania, Turkey and other countries, the beginning stages of the so-called European Phased Adaptive Approach for the interceptor missile system, this would be extremely dangerous. This would be such an open provocation to Russia that I don’t see how Russia could not take some fairly dramatic action in response to it.
So when we talk about the factors that are involved we have to keep several significant ones in mind.
First of all, Ukraine is strategically vital, it is indispensable. In the energy wars that the US and its European Union allies, which is to say NATO allies, have been waging over the past decade to try to curtail Russian exports of natural gas and oil to Europe, ultimately perhaps to cut them off altogether in favor of natural gas and oil projects bringing Caspian Sea energy into Europe via the Caucasus, Azerbaijan and Georgia, but of course from there to Ukraine, from Ukraine into the Western Europe. So Ukraine is significant in that sense.
Ukraine is also one of four countries that NATO has announced, four non-NATO countries, that are to join the NATO Response Force, that is the international strike force that NATO has developed. The other three are Georgia, Finland and Sweden. Of course three of those four countries, all except Sweden, have lengthy borders with Russia.
And that Ukraine has been gradually, I think unbeknownst to most people in Ukraine, and certainly outside, has been dragged into the NATO net deeper and deeper and deeper.
Ukraine is, and these are significant facts, so I hope you don’t mind my emphasizing them. Ukrainet became the first, and to date only, non-NATO country to supply a naval vessel to what is now NATO’s permanent surveillance and interdiction naval operation in the Mediterranean Sea – Operation Active Endeavor. Ukraine’s second to that became the first, and to date only, non-NATO country to supply a ship to NATO’s Arabian Sea – Operation Ocean Shield. Ukraine, during the Kuchma government, supplied 2,000 troops to the United States, NATO in Iraq. They have a small contingent of troops serving under NATO’s International Security Assistance Force in Afghanistan.
Part 1 of an interview with Rick Rozoff, the owner and manager of the Stop NATO website and international mailing list. You can find the rest of this interview on our website at http://voiceofrussia. com.
Activist Post: West Virginia Health Officials Refuse to Accept Experts Findings on Elk River Contamination
Even though the water in West Virginia has been declared safe, hospital admissions related to the spill have increased.
What has transpired is that the Center for Disease Control has set safety standards for pure MCHM (4-methylcyclohexaneemethol), but the stuff polluting the Elk River was far from pure. Containing a mix of up to seven chemicals, the crude MCHM that was discharged into the Elk River was something else entirely, and the CDC safety standards set for MCHM don’t cover it when mixed with other chemicals, what is referred to as crude MCHM.
Investigators still don’t know the full composition of the 10,000 gallon discharge into the Elk River. Freedom Industries, the company responsible with maintaining the storage tanks, has filed for Chapter 11 bankruptcy and, although hit with numerous law suits regarding the spill, they have been slow to provide information on the toxic cocktail that entered the river.
“I can guarantee that citizens in this valley are, at least in some instances, breathing formaldehyde. They’re taking a hot shower. This stuff is breaking down into formaldehyde in the shower or in the water system, and they’re inhaling it.”
“It’s frightening, it really is frightening,” the Charleston Gazette quoted Simonton telling state lawmakers. ”What we know scares us, and we know there’s a lot more we don’t know.”
“We know that (crude MCHM) turns into other things, and these other things are bad,”.”And we haven’t been looking for those other things. So we can’t say the water is safe yet. We just absolutely cannot.”
Now that officials know other chemicals were present, they can start the process of hunting them down. The fear is that even though the all clear was given regarding the levels of pure MCHM, other chemicals, either singularly or in combination, could well be lurking in domestic pipes and tanks, and that those chemicals could break down into yet more harmful components.
For this reason residents have been told to flush their domestic systems to remove any lurking toxins, but even the best way to do that is open to dispute with experts disagreeing on the best method to use.
Andrew Welton, an environmental engineer from the University of South Alabama, went to West Virginia after the leak. He has been assisting residents to purge their systems, but using different guidelines to those used in West Virginia. For example, he recommends that residents should open windows and doors before starting the process and should use fans to remove fumes from homes. West Virginia officials say this is un-necessary.
Speaking to The West Virginia Gazette he said:
“I can’t believe they aren’t doing this. These issues aren’t being addressed. The long-term consequences of this spill are not being addressed.”
In another twist The commissioner of the Bureau of Public Health, Dr Letitia Tierney DISMISSED Simontons statement and said that the formaldehyde detected was unrelated to the chemical spill.
“Formaldehyde is naturally produced in very small amounts in our bodies as part of our normal, everyday metabolism and causes no harm,” Tierney’s statement said. “It can also be found in the air that we breathe at home and at work, in the food we eat, and in some products that we put on our skin.”
“Your level of what risk you will accept is up to you,” Simonton said. “I can only tell you what mine is, and I’m not drinking the water. (source)
While the arguing over who’s right and who’s wrong, it’s interesting to note that West Virginia officials are blaming the winter for some of the hospital admissions. Governor Earl Ray Tomblin’s office pointed to many reasons why hospital admissions are rising, namely the inability of a large number of people to wash their hands, which is an odd thing to say if they believe the water is safe to use. Or maybe they have washed their hands, and that’s why they are sick.
“We’re in the middle of flu and virus season,” Dr. Letitia Tierney of the state Bureau of Public Health said in the statement. “While the [hand] sanitizer is good for cleaning, it isn’t great for eliminating a virus. Some people are getting these viruses, as many people do every winter. In addition, a lot of people are getting very anxious. Anxiety is a real diagnosis, and it can be really hard on people and it’s OK to be seen by a health professional to ensure you’re OK.”
West Virginia health officials are playing around with the well-being of 300,000 people. It would be good if they could cut the crap and sort this situation out before someone dies.
Chris Carrington is a writer, researcher and lecturer with a background in science, technology and environmental studies. Chris is an editor for The Daily Sheeple. Wake the flock up!