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Obama's Former Foreign Policy Adviser Said – In 1997 – that the U.S. Had to Gain Control of Ukraine Washington's Blog

Obama’s Former Foreign Policy Adviser Said – In 1997 – that the U.S. Had to Gain Control of Ukraine Washington’s Blog.

The Battle for Ukraine Was Planned in 1997 … Or Earlier

Neoconservatives planned regime change throughout the Middle East and North Africa 20 years ago. Robert Parry correctly points out that the Neocons have successfully “weathered the storm” of disdain after their Iraq war fiasco.

But the truth is that Obama has long done his best to try to implement those Neocon plans.

Similarly, ever since the Soviet Union collapsed in 1991, the U.S. has pursued a strategy of encircling Russia, just as it has with other perceived enemies like China and Iran.

In 1997, Obama’s former foreign affairs adviser, and president Jimmy Carter’s national security adviser – Zbigniew Brzezinski – wrote a book called The Grand Chessboard arguing arguing that the U.S. had to take control of Ukraine (as well as Azerbaijan, South Korea, Turkey and Iran) because they were “critically important geopolitical pivots”.

Regarding Ukraine, Brzezinski said (hat tip Chris Ernesto):

Ukraine, a new and important space on the Eurasian chessboard, is a geopolitical pivot because its very existence as an independent country helps to transform Russia. Without Ukraine, Russia ceases to be a Eurasian empire.

***

However, if Moscow regains control over Ukraine, with its 52 million people and major resources as well as access to the Black Sea, Russia automatically again regains the wherewithal to become a powerful imperial state, spanning Europe and Asia.

And now Obama is pushing us into a confrontation with Russia over Ukraine and the Crimea.

As Ernesto notes:

Late last year when Ukraine’s now-ousted president Viktor Yanukovych surprisingly canceled plans for Ukrainian integration into the European Union in favor of stronger ties with Russia, the US may have viewed Ukraine as slipping even further out of its reach.

At that point, with the pieces already in place, the US moved to support the ousting of Yanukovych, as evidenced by the leaked phone conversation between US Assistant Secretary of State Victoria Nuland [arch-Neocon Robert Kagan‘s wife]  and US Ambassador to Ukraine Geoffrey Pyatt.  When peaceful protests were not effective in unseating Yanukovych, the violence of the ultra-nationalist Svoboda party and Right Sector was embraced, if not supported by the west.

In today’s Ukraine, the US runs the risk of being affiliated with anti-Semitic neo-Nazis, a prospect it probably feels can be controlled via a friendly western media. But even if the risk is high, the US likely views it as necessary given the geopolitical importance of Ukraine, as Brzezinski mapped out in 1997.

In other words, Obama is following the same old playbook that the Neocons have been pushing for more than a decade.

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Obama’s Former Foreign Policy Adviser Said – In 1997 – that the U.S. Had to Gain Control of Ukraine Washington’s Blog

Obama’s Former Foreign Policy Adviser Said – In 1997 – that the U.S. Had to Gain Control of Ukraine Washington’s Blog.

The Battle for Ukraine Was Planned in 1997 … Or Earlier

Neoconservatives planned regime change throughout the Middle East and North Africa 20 years ago. Robert Parry correctly points out that the Neocons have successfully “weathered the storm” of disdain after their Iraq war fiasco.

But the truth is that Obama has long done his best to try to implement those Neocon plans.

Similarly, ever since the Soviet Union collapsed in 1991, the U.S. has pursued a strategy of encircling Russia, just as it has with other perceived enemies like China and Iran.

In 1997, Obama’s former foreign affairs adviser, and president Jimmy Carter’s national security adviser – Zbigniew Brzezinski – wrote a book called The Grand Chessboard arguing arguing that the U.S. had to take control of Ukraine (as well as Azerbaijan, South Korea, Turkey and Iran) because they were “critically important geopolitical pivots”.

Regarding Ukraine, Brzezinski said (hat tip Chris Ernesto):

Ukraine, a new and important space on the Eurasian chessboard, is a geopolitical pivot because its very existence as an independent country helps to transform Russia. Without Ukraine, Russia ceases to be a Eurasian empire.

***

However, if Moscow regains control over Ukraine, with its 52 million people and major resources as well as access to the Black Sea, Russia automatically again regains the wherewithal to become a powerful imperial state, spanning Europe and Asia.

And now Obama is pushing us into a confrontation with Russia over Ukraine and the Crimea.

As Ernesto notes:

Late last year when Ukraine’s now-ousted president Viktor Yanukovych surprisingly canceled plans for Ukrainian integration into the European Union in favor of stronger ties with Russia, the US may have viewed Ukraine as slipping even further out of its reach.

At that point, with the pieces already in place, the US moved to support the ousting of Yanukovych, as evidenced by the leaked phone conversation between US Assistant Secretary of State Victoria Nuland [arch-Neocon Robert Kagan‘s wife]  and US Ambassador to Ukraine Geoffrey Pyatt.  When peaceful protests were not effective in unseating Yanukovych, the violence of the ultra-nationalist Svoboda party and Right Sector was embraced, if not supported by the west.

In today’s Ukraine, the US runs the risk of being affiliated with anti-Semitic neo-Nazis, a prospect it probably feels can be controlled via a friendly western media. But even if the risk is high, the US likely views it as necessary given the geopolitical importance of Ukraine, as Brzezinski mapped out in 1997.

In other words, Obama is following the same old playbook that the Neocons have been pushing for more than a decade.

'Cash-On-The-Sidelines' Fallacies And Restoring The "Virtuous Cycle" Of Economic Growth | Zero Hedge

‘Cash-On-The-Sidelines’ Fallacies And Restoring The “Virtuous Cycle” Of Economic Growth | Zero Hedge.

As we explained in great detail recently, the abundance of so-called cash-on-the-sidelines is a fallacy, but even more critically the we showed the belief that these ‘IOUs of past economic activity’ would immediately translate into efforts to deploy them into future economic activity is also entirely false. Simply put,  there is no relationship between corporate cash and subsequent capital expenditure, nor is the level of capital expenditure even well-correlated with the level of real interest rates. At this point, as John Hussman explains, it should be clear that the mere existence of a mountain of IOUs related to past economic activity is not enough to provoke future economic activity. What matters instead is the same thing that always matters: Are the resources of the economy being directed toward productive uses that satisfy the needs of others?

The fallacy of cash piles on the balance sheet meaning strong balance sheets…

US companies are carrying far more net debt than in 2007

Another curiosity is this notion that US companies have substantially reduced their debt pile and are therefore cash rich. The latter is indeed true. Cash and equivalents are at historically high levels, but rarely do those who mention the mountains of corporate cash also discuss the massive increase in debt seen over the last couple of years.

 

In fact, debt levels have been growing to such an extent that net debt (i.e. excluding the massive cash pile) is 15% higher than it was prior to the financial crisis.

and Proposition 1: Corporate cash is high, and therefore, businesses should put that cash to work through capex.

Comments: This is the most obviously deceptive of the four propositions, hence Mark Spitznagel’s incredulous response when asked to address cash balances by Maria Bartiromo last week. As Spitznagel explained, it makes little sense to isolate the cash that sits on corporate balance sheets without netting the credit portions of both assets and liabilities. We last updated corporations’ net credit position here, showing that gradual increases in cash balances are dwarfed by rising debt.

A longer history further disproves the proposition; it shows that there’s no correlation between capex and corporate cash:

capex and cnbc 1

 

So how do we restore growth?

Via Hussman’s Funds’ Weekly Insight,

To the extent that such desirable activities exist – whether as consumption goods or as investment goods like machines, the act of bringing them forward not only engages existing resources (such as factory capacity and labor), but also creates new income that can be used to purchase yet other desirable products. This is what creates a virtuous circle of economic activity and growth. Not quantitative easing, not suppressed interest rates, not speculation. The resources of the economy must be channeled toward activities that are actually productive, desirable, and useful to others.

When this doesn’t occur – when companies produce output that isn’t wanted, when capital investments are made that aren’t productive, when housing is constructed at a pace that exceeds the sustainable demand and ability to finance it – the act of production and the resources of the economy are wasted. That is really the narrative of the past 14 years, and is largely the result of repeated bouts of Fed-induced speculation and misallocation. Robert Blumenthal recently wrote an excellent essay describing the economic costs of such “malinvestment.”

At the moment that a person uses their labor to produce something of value to others, that person’s own income is enhanced, and the ability to purchase the output of others is also created. As economist Jean-Baptiste Say wrote, “A product is no sooner created than it, from that instant, affords a market for other products to the full extent of its own value… Thus the mere circumstance of creation of one product immediately opens a vent for other products.”

In a healthy economy, the productive activity of one sector opens a vent for the productive activity of other sectors of the economy. The useful allocation of resources in one area of the economy reinforces the useful allocation of resources in another. Economic growth continues as the efforts of each sector focus on the production of those things that will be of demand and use to others. Each productive act is not simply an event, but contributes momentum to a virtuous cycle.

The difficulty emerges when something is brought into production that is not desired – that fails to align with the actual demand for it. In that event, the value of the product itself may be less than the value of the resources committed to its production. Since it is not consumed, it simultaneously becomes “savings” and “unwanted inventory investment.” Long-term growth is harmed, because economic effort and resources are wasted and fail to open a vent for other production. If this occurs at a large scale, jobs are lost, inventories build, and the economy suffers the long-term effects of misallocated activity.

When we review the economic narrative of the past 14 years, this is exactly what we observe.

The first insult occurred during the excesses of the tech bubble and the severe misallocation of capital that resulted. Next, in response to the economic downturn in 2000-2002, the Federal Reserve held interest rates down in the hope of reviving interest-sensitive spending and investment. Instead, the suppressed interest rate environment triggered a “reach for yield” that found itself concentrated in enormous demand for mortgage securities. Wall Street was more than happy to provide the desired “product,” but could do so only by creating new mortgages by lending to anyone with a pulse.

The resulting housing bubble became a second episode of severe capital misallocation, and led to the economic collapse of 2008-2009. In response to that episode, the Federal Reserve has now produced and largely completed a third phase of speculative malinvestment, this time focused on the equity market. On historically reliable valuation measures, equity prices are now double the level at which they would be likely to provide historically normal returns.  As in 2000, three-quarters of the record new issuance of equities is now dominated by companies that have no earnings. The valuation of the median stock is now higher than it was at the 2000 peak. NYSE margin debt as a percent of GDP exceeds every point in history except the March 2000 peak. All of this will end badly for the equity market, but the real insult is what this constant malinvestment has done to the long-term prospects for U.S. economic growth and employment.

The so-called “dual mandate” of the Federal Reserve does not ask the Fed to manage short-run or even cyclical fluctuations in the economy. Instead – whether one believes that the goals of that mandate are achievable or not – it asks the Fed to “maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.”

What the Fed has done instead is to completely lose control of the growth of monetary aggregates, in an effort to offset short-run, cyclical fluctuations in the economy, so as to promote maximum speculative activity and repeated bouts of resource misallocation, and ultimately damage the economy’s long-run potential to increase production and promote employment.

In the face of our concerns about long-run consequences, some might immediately appeal to Keynes, who trivialized prudence and restraint, saying “In the long run, we are all dead.” But we are not talking about decades. The insults to the U.S. economy, to U.S. labor force participation, and to the long-term unemployed are the largely predictable result of policies that have been pursued in the past decade alone.

On the fiscal policy side, there are numerous initiatives that – when properly focused on productivity and labor force participation – could easily be self-financing for the economy in aggregate. Too much of our fiscal deficit has nothing to do with productivity or inducements that reward economic activity. Productive infrastructure (ideally projects that have large distributed effects, as opposed to notions like rural broadband), alternative energy, earned income tax credits, tying extended unemployment compensation to some sort of activity requirement (community, internship or otherwise), small business loans and tax credits tied to job creation and retention, investment and R&D credits, and other initiatives fall into this category. The objective is for the private markets to retain a vested interest and exposure to some amount of risk, so that losses and unproductive decisions remain costly, but also for fiscal initiatives to ease constraints that are binding on private decision-making.

On the monetary policy side, it’s simply time to change course to a far less “elastic,” rules-based policy. With $2.5 trillion in excess reserves within the banking system, even one more dollar of quantitative easing is harmful because it perpetuates financial distortion and speculative activity while doing nothing to ease any constraint in the economy that is actually binding. Fortunately, it actually appears that the FOMC increasingly recognizes this, as attention has gradually focused on questions about policy effectiveness and financial risk, and away from the weak hope for positive effects. We will have to see how long this insight persists, but statements from FOMC officials increasingly reflect the intention to “wind down” QE, and emphasize the “high bar” that would be required to move away from that stance.

The cyclical risk for the U.S. equity market is already baked in the cake, and we view downside potential as substantial. The economy would allocate capital better, and to greater long-term benefit, if interest rates were at levels that rewarded savings and discouraged untethered growth in fiscal deficits. The economy would also allocate capital better if equity valuations were closer to historical norms (unfortunately about half of present levels given the extent of present distortions). While the capital markets are likely to undergo a great deal of adjustment in the coming years, we don’t anticipate systemic economic risks similar to the 2007-2009 period. We do observe a buildup of inventories in recent quarters that, combined with disruptions abroad, seem likely to contribute to economic weakness, but there are numerous episodes in history when stock market losses were not associated with steep economic losses.

The largest economic risks are particularly likely to emerge in Asia, where “big bazooka” central bank policies and speculative overinvestment have also produced large and persistent misallocation. China and Japan are of principal concern, though many smaller developing countries outside of Asia also appear at risk. Policy makers should certainly focus on areas where exposure to foreign obligations, equity leverage, and credit default swaps would produce sizeable disruptions. In any event, I believe it is urgent for investors to recognize the current position of the U.S. equity market in the context of a complete market cycle. As I noted in the face of similar conditions in 2007, my expectation is that any “put option” still provided by the Federal Reserve has a strike price that is way out-of-the-money.

‘Cash-On-The-Sidelines’ Fallacies And Restoring The “Virtuous Cycle” Of Economic Growth | Zero Hedge

‘Cash-On-The-Sidelines’ Fallacies And Restoring The “Virtuous Cycle” Of Economic Growth | Zero Hedge.

As we explained in great detail recently, the abundance of so-called cash-on-the-sidelines is a fallacy, but even more critically the we showed the belief that these ‘IOUs of past economic activity’ would immediately translate into efforts to deploy them into future economic activity is also entirely false. Simply put,  there is no relationship between corporate cash and subsequent capital expenditure, nor is the level of capital expenditure even well-correlated with the level of real interest rates. At this point, as John Hussman explains, it should be clear that the mere existence of a mountain of IOUs related to past economic activity is not enough to provoke future economic activity. What matters instead is the same thing that always matters: Are the resources of the economy being directed toward productive uses that satisfy the needs of others?

The fallacy of cash piles on the balance sheet meaning strong balance sheets…

US companies are carrying far more net debt than in 2007

Another curiosity is this notion that US companies have substantially reduced their debt pile and are therefore cash rich. The latter is indeed true. Cash and equivalents are at historically high levels, but rarely do those who mention the mountains of corporate cash also discuss the massive increase in debt seen over the last couple of years.

 

In fact, debt levels have been growing to such an extent that net debt (i.e. excluding the massive cash pile) is 15% higher than it was prior to the financial crisis.

and Proposition 1: Corporate cash is high, and therefore, businesses should put that cash to work through capex.

Comments: This is the most obviously deceptive of the four propositions, hence Mark Spitznagel’s incredulous response when asked to address cash balances by Maria Bartiromo last week. As Spitznagel explained, it makes little sense to isolate the cash that sits on corporate balance sheets without netting the credit portions of both assets and liabilities. We last updated corporations’ net credit position here, showing that gradual increases in cash balances are dwarfed by rising debt.

A longer history further disproves the proposition; it shows that there’s no correlation between capex and corporate cash:

capex and cnbc 1

 

So how do we restore growth?

Via Hussman’s Funds’ Weekly Insight,

To the extent that such desirable activities exist – whether as consumption goods or as investment goods like machines, the act of bringing them forward not only engages existing resources (such as factory capacity and labor), but also creates new income that can be used to purchase yet other desirable products. This is what creates a virtuous circle of economic activity and growth. Not quantitative easing, not suppressed interest rates, not speculation. The resources of the economy must be channeled toward activities that are actually productive, desirable, and useful to others.

When this doesn’t occur – when companies produce output that isn’t wanted, when capital investments are made that aren’t productive, when housing is constructed at a pace that exceeds the sustainable demand and ability to finance it – the act of production and the resources of the economy are wasted. That is really the narrative of the past 14 years, and is largely the result of repeated bouts of Fed-induced speculation and misallocation. Robert Blumenthal recently wrote an excellent essay describing the economic costs of such “malinvestment.”

At the moment that a person uses their labor to produce something of value to others, that person’s own income is enhanced, and the ability to purchase the output of others is also created. As economist Jean-Baptiste Say wrote, “A product is no sooner created than it, from that instant, affords a market for other products to the full extent of its own value… Thus the mere circumstance of creation of one product immediately opens a vent for other products.”

In a healthy economy, the productive activity of one sector opens a vent for the productive activity of other sectors of the economy. The useful allocation of resources in one area of the economy reinforces the useful allocation of resources in another. Economic growth continues as the efforts of each sector focus on the production of those things that will be of demand and use to others. Each productive act is not simply an event, but contributes momentum to a virtuous cycle.

The difficulty emerges when something is brought into production that is not desired – that fails to align with the actual demand for it. In that event, the value of the product itself may be less than the value of the resources committed to its production. Since it is not consumed, it simultaneously becomes “savings” and “unwanted inventory investment.” Long-term growth is harmed, because economic effort and resources are wasted and fail to open a vent for other production. If this occurs at a large scale, jobs are lost, inventories build, and the economy suffers the long-term effects of misallocated activity.

When we review the economic narrative of the past 14 years, this is exactly what we observe.

The first insult occurred during the excesses of the tech bubble and the severe misallocation of capital that resulted. Next, in response to the economic downturn in 2000-2002, the Federal Reserve held interest rates down in the hope of reviving interest-sensitive spending and investment. Instead, the suppressed interest rate environment triggered a “reach for yield” that found itself concentrated in enormous demand for mortgage securities. Wall Street was more than happy to provide the desired “product,” but could do so only by creating new mortgages by lending to anyone with a pulse.

The resulting housing bubble became a second episode of severe capital misallocation, and led to the economic collapse of 2008-2009. In response to that episode, the Federal Reserve has now produced and largely completed a third phase of speculative malinvestment, this time focused on the equity market. On historically reliable valuation measures, equity prices are now double the level at which they would be likely to provide historically normal returns.  As in 2000, three-quarters of the record new issuance of equities is now dominated by companies that have no earnings. The valuation of the median stock is now higher than it was at the 2000 peak. NYSE margin debt as a percent of GDP exceeds every point in history except the March 2000 peak. All of this will end badly for the equity market, but the real insult is what this constant malinvestment has done to the long-term prospects for U.S. economic growth and employment.

The so-called “dual mandate” of the Federal Reserve does not ask the Fed to manage short-run or even cyclical fluctuations in the economy. Instead – whether one believes that the goals of that mandate are achievable or not – it asks the Fed to “maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.”

What the Fed has done instead is to completely lose control of the growth of monetary aggregates, in an effort to offset short-run, cyclical fluctuations in the economy, so as to promote maximum speculative activity and repeated bouts of resource misallocation, and ultimately damage the economy’s long-run potential to increase production and promote employment.

In the face of our concerns about long-run consequences, some might immediately appeal to Keynes, who trivialized prudence and restraint, saying “In the long run, we are all dead.” But we are not talking about decades. The insults to the U.S. economy, to U.S. labor force participation, and to the long-term unemployed are the largely predictable result of policies that have been pursued in the past decade alone.

On the fiscal policy side, there are numerous initiatives that – when properly focused on productivity and labor force participation – could easily be self-financing for the economy in aggregate. Too much of our fiscal deficit has nothing to do with productivity or inducements that reward economic activity. Productive infrastructure (ideally projects that have large distributed effects, as opposed to notions like rural broadband), alternative energy, earned income tax credits, tying extended unemployment compensation to some sort of activity requirement (community, internship or otherwise), small business loans and tax credits tied to job creation and retention, investment and R&D credits, and other initiatives fall into this category. The objective is for the private markets to retain a vested interest and exposure to some amount of risk, so that losses and unproductive decisions remain costly, but also for fiscal initiatives to ease constraints that are binding on private decision-making.

On the monetary policy side, it’s simply time to change course to a far less “elastic,” rules-based policy. With $2.5 trillion in excess reserves within the banking system, even one more dollar of quantitative easing is harmful because it perpetuates financial distortion and speculative activity while doing nothing to ease any constraint in the economy that is actually binding. Fortunately, it actually appears that the FOMC increasingly recognizes this, as attention has gradually focused on questions about policy effectiveness and financial risk, and away from the weak hope for positive effects. We will have to see how long this insight persists, but statements from FOMC officials increasingly reflect the intention to “wind down” QE, and emphasize the “high bar” that would be required to move away from that stance.

The cyclical risk for the U.S. equity market is already baked in the cake, and we view downside potential as substantial. The economy would allocate capital better, and to greater long-term benefit, if interest rates were at levels that rewarded savings and discouraged untethered growth in fiscal deficits. The economy would also allocate capital better if equity valuations were closer to historical norms (unfortunately about half of present levels given the extent of present distortions). While the capital markets are likely to undergo a great deal of adjustment in the coming years, we don’t anticipate systemic economic risks similar to the 2007-2009 period. We do observe a buildup of inventories in recent quarters that, combined with disruptions abroad, seem likely to contribute to economic weakness, but there are numerous episodes in history when stock market losses were not associated with steep economic losses.

The largest economic risks are particularly likely to emerge in Asia, where “big bazooka” central bank policies and speculative overinvestment have also produced large and persistent misallocation. China and Japan are of principal concern, though many smaller developing countries outside of Asia also appear at risk. Policy makers should certainly focus on areas where exposure to foreign obligations, equity leverage, and credit default swaps would produce sizeable disruptions. In any event, I believe it is urgent for investors to recognize the current position of the U.S. equity market in the context of a complete market cycle. As I noted in the face of similar conditions in 2007, my expectation is that any “put option” still provided by the Federal Reserve has a strike price that is way out-of-the-money.

Activist Post: The College Debt Bubble Is Set to Explode (Micro Documentary)

Activist Post: The College Debt Bubble Is Set to Explode (Micro Documentary).

Mac Slavo
Activist Post

This month President Obama issued a directive that will penalize “for-profit” trade schools because students are amassing huge levels of debt they can’t pay off. According to the President and the Department of Education these specialty training schools promise to train students and prepare them for a career in everything from computer design to personal training. But when graduates get out of school they often lack the skills necessary to land the high paying jobs they were promised, leaving many without the income to service their loans.

The proposed regulations would penalize career oriented programs that produce graduates without the training needed to find a job with a salary that will allow them to pay off their debt. Schools, for-profit or not, that don’t comply would lose access to the federal student aid programs.

“Today, too many of these programs fail to provide students with the training that they need at taxpayers’ expense and the cost to these students’ futures.”

What President Obama won’t tell you is that it’s not just trade schools that promise young and optimistic high school graduates a future full of big money and easy living.

And though most universities claim they are non-profit pedagogic institutions whose goal is to serve and mold young minds for the future, the fact is that there is a ton of money to be made by everyone involved including teachers, administrators, banks and periphery industries that service colleges.

According to a new documentary from Crush the Street obscene debt levels are being amassed on all levels of secondary education – even if the college in question is not “for profit.”

If you have kids entering college, in college, or graduates living with you at home, the following documentary is one you’ll want to share – just so they know exactly how they’ve been brainwashed into believing that the road to success requires a degree. Moreover, it reveals the reasons for why college education costs are skyrocketing, as well as the end result of the trillion dollar bubble that is sure to pop in coming years.

A Must Watch For Anyone Entering Higher Education: The College Bubble

The official fiscal year 2010 default rate was 14.7% and we can only expect that to be higher for the following years. No one but the government would guarantee a loan for anyone to go to college, for any curriculum with little regards for the likelihood of the individual to repay the loan.

The government gladly invests taxpayer dollars into student grants and loans. This is what has been driving the increase in college tuition bringing it above and beyond the average student and family.

For teenagers the propaganda is so potent that high school students in many cases have blind optimism that they will land their dream career after college and have the income to easily pay off any loan balances occurred along the way.

Some graduates are left with over $100,000 in debt and can barely find any job, let alone the one they pictured themselves getting into four years ago.

For starters, we are now living in a new economy, much different from the one our parents and grandparents experienced after World War II. Many of America’s high paying jobs have been outsourced to foreign countries. Manufacturing has been shifted to slave-labor economies like China. The majority of jobs left in America are low-paying, minimum wage labor. So the competition for the few high paying jobs remaining is extremely fierce.

This is why a huge percentage of American adults – nearly 30% – are living with their parents, and that includes graduates who just got out of school with tens of thousands in debt.

The government interference that caused home prices to rise ahead of the 2008 financial crisis and saw more people buy homes than ever before, is the very same effect we’re seeing in college education.

We all remember how that ended up.

College tuition cannot rise indefinitely. Eventually something will cause the great college bubble to pop.

Outstanding student loan debt is over $1.2 trillion. This is nearly 50% higher than outstanding credit card debt.

The longer the status quo is kept, the bigger the bubble is going to get… and thus the larger the crash will be.

In the coming years student loan payments will get so high that it’ll be unmanageable… even for the students that get the dream job that they were told their degree would award them.

Massive defaults will occur and colleges will soon be worse off. Prices will need to be readjusted to maintain the maximum income when attendance levels crash. Professors will face pay cuts or layoffs, along with administration, maintenance, construction and anyone else working for or at a college or university.

As an example, take a high school graduate who wants to become a teacher. She’ll spend four years in school and take on around $80,000 of debt. When she gets out of school, she’ll make around $35,000 a year. At that rate it would literally take her two decades to pay off her loan. Others might not be so lucky and will end up shackled with debt for their entire life, or they’ll simply default

Consider a liberal arts major who, in essence, is being trained for a “career” that produces a service that the majority of Americans won’t have the money to pay for. How will this individual pay back tens of thousands of dollar in debt?

The simple answer? They won’t.

There are certainly jobs out there that require higher education. But even those industries, such as the medical field, are being gutted from within.

This is just another example of what happens when government gets involved in the free market. Overblown prices, life-long debt commitments, and a future of destitution is what college graduates can expect over coming decades.

What high schoolers don’t realize – and many will never be taught under Common Core’s curriculum – is that the key elements for success are, among other things, self-education, focus, adaptability, resilience, persistence and an optimistic attitude. You know, all of those things that made America great to begin with. A college degree is secondary.

You can read more from Mac Slavo at his site SHTFplan.com where this first appeared.  

The Fed is Fighting the Wrong Battle Again… And Creating Yet Another Crisis | Zero Hedge

The Fed is Fighting the Wrong Battle Again… And Creating Yet Another Crisis | Zero Hedge.

A critical element for investors to consider is that the Fed is not forward thinking when it comes to monetary policy. Indeed, if we reflect on the last 15 years, we see that the Fed has been well behind the curve on everything.

First and foremost, recall that Alan Greenspan was concerned about deflation after the Tech Crash (this, in part is why he hired Ben Bernanke, who was considered an expert on the Great Depression).

Bernanke and Greenspan, both fearing deflation (Bernanke’s first speech at the Fed was titled “Deflation: Making Sure It Doesn’t Happen Here”), created one of the most extraordinary bouts of IN-flation the US has ever seen.

From 1999 to 2008, oil rose from $10 per barrel to over $140 per barrel. Does deflation look like it was the issue here?

Over the same time period, housing prices staged their biggest bubble in US history, rising over three standard deviations away from their historic relationship to incomes.

Here are food prices during the period in which Greenspan and then Bernanke saw deflation as the biggest threat to the US economy:

The message here is clear, the Greenspan/ Bernanke Fed was so far behind the economic curve, that it created one of the biggest inflationary bubbles in history in its quest to avoid deflation.

Indeed, by the time deflation did hit (in the epic crash of 2007-2008), the Fed was caught totally off guard. During this period, Bernanke repeatedly stating that the subprime bust was contained and that the overall spillage into the economy would be minimal.

Deflation reigned from late 2007 to early 2009 with the Fed effectively powerless to stop it. Then asset prices bottomed in the first half of 2009. From this point onward, generally speaking, prices have risen.

The Fed, however, continued to battle deflation in the post-2009 era, unveiling one extraordinary monetary policy after another. They’ve done this at a period in which stocks and oil have skyrocketed:

 

Home prices bottomed in 2011 and have since turned up as well (in some areas, prices now exceed their bubble peaks):

 

 

Which brings us to today. Inflation is once again rearing its head in the financial system with the cost of living rising swiftly in early 2014.

 

Rents, home prices, food prices, energy prices, you name it, they’re all rising.

 

And the Fed is once again behind the curve. Indeed, Janet Yellen and Bill Evans, two prominent members what is now the Yellen Fed (Bernanke stepped down in January), have both recently stated that inflation is too low. They’ve also emphasized that rates need to remain at or near ZERO for at least a year or two more.

 

Investors should take note of this. The Fed claims to be proactive, but its track record shows it to be way behind the curve with monetary policy for at least two decades. Barring some major development, there is little reason to believe the Yellen Fed will somehow be different (Yellen herself is a huge proponent of QE and the Fed’s other extraordinary monetary measures).

 

Which means… by the time the Fed moves to quash inflation, the latter will be a much, much bigger problem than it is today.

 

For a FREE Special Report on how to protect your portfolio from inflation, swing by

www.gainspainscapital.com

 

Best Regards

Phoenix Capital Research

The Fed is Fighting the Wrong Battle Again… And Creating Yet Another Crisis | Zero Hedge

The Fed is Fighting the Wrong Battle Again… And Creating Yet Another Crisis | Zero Hedge.

A critical element for investors to consider is that the Fed is not forward thinking when it comes to monetary policy. Indeed, if we reflect on the last 15 years, we see that the Fed has been well behind the curve on everything.

First and foremost, recall that Alan Greenspan was concerned about deflation after the Tech Crash (this, in part is why he hired Ben Bernanke, who was considered an expert on the Great Depression).

Bernanke and Greenspan, both fearing deflation (Bernanke’s first speech at the Fed was titled “Deflation: Making Sure It Doesn’t Happen Here”), created one of the most extraordinary bouts of IN-flation the US has ever seen.

From 1999 to 2008, oil rose from $10 per barrel to over $140 per barrel. Does deflation look like it was the issue here?

Over the same time period, housing prices staged their biggest bubble in US history, rising over three standard deviations away from their historic relationship to incomes.

Here are food prices during the period in which Greenspan and then Bernanke saw deflation as the biggest threat to the US economy:

The message here is clear, the Greenspan/ Bernanke Fed was so far behind the economic curve, that it created one of the biggest inflationary bubbles in history in its quest to avoid deflation.

Indeed, by the time deflation did hit (in the epic crash of 2007-2008), the Fed was caught totally off guard. During this period, Bernanke repeatedly stating that the subprime bust was contained and that the overall spillage into the economy would be minimal.

Deflation reigned from late 2007 to early 2009 with the Fed effectively powerless to stop it. Then asset prices bottomed in the first half of 2009. From this point onward, generally speaking, prices have risen.

The Fed, however, continued to battle deflation in the post-2009 era, unveiling one extraordinary monetary policy after another. They’ve done this at a period in which stocks and oil have skyrocketed:

 

Home prices bottomed in 2011 and have since turned up as well (in some areas, prices now exceed their bubble peaks):

 

 

Which brings us to today. Inflation is once again rearing its head in the financial system with the cost of living rising swiftly in early 2014.

 

Rents, home prices, food prices, energy prices, you name it, they’re all rising.

 

And the Fed is once again behind the curve. Indeed, Janet Yellen and Bill Evans, two prominent members what is now the Yellen Fed (Bernanke stepped down in January), have both recently stated that inflation is too low. They’ve also emphasized that rates need to remain at or near ZERO for at least a year or two more.

 

Investors should take note of this. The Fed claims to be proactive, but its track record shows it to be way behind the curve with monetary policy for at least two decades. Barring some major development, there is little reason to believe the Yellen Fed will somehow be different (Yellen herself is a huge proponent of QE and the Fed’s other extraordinary monetary measures).

 

Which means… by the time the Fed moves to quash inflation, the latter will be a much, much bigger problem than it is today.

 

For a FREE Special Report on how to protect your portfolio from inflation, swing by

www.gainspainscapital.com

 

Best Regards

Phoenix Capital Research

Resource Insights: Net vs. gross energy: Is it wise to be complacent?

Resource Insights: Net vs. gross energy: Is it wise to be complacent?.

Everyone knows that when a potential employer makes a job offer, the salary or wage he or she proposes isn’t what you’ll be taking home. What you’ll take home is your net pay. The number the employer offers you is your gross pay, and that’s just what it says on your pay stub.

It’s not quite a perfect analogy with net energy versus gross energy. But it’s an everyday analogy that most people can understand. Net pay is what you have to pay your bills today. And, net energy is what society has in order to conduct its business (and its fun) on any given day. Net energy is what’s left after the energy sectors of the economy–oil and gas, coal, nuclear, hydroelectric, renewable energy industries, and farming which provides food for human and animal energy and crops for biofuels–expend the energy they must to extract energy from the environment and then sell the surplus to the rest of us.

We don’t often think of these sectors of the economy because for most people they are out of sight and therefore out of mind. And, until the last decade food and energy have been so consistently cheap in the last 60 years or so, that few people ever paused to ponder the fact that it takes energy to get energy. And, after all, cheap energy is an indication that it takes very little energy to extract huge amounts of energy from the environment. So, why worry about that?

However, as food and energy costs have risen dramatically in the last decade, the public and policymakers have begun to notice. What they don’t seem to understand is that this rise results from the fact that it is now taking significantly more energy (and therefore money) to extract the energy we desire, both from fossil fuels in the ground and farm crops on the land (yields of which are currently heavily dependent on fossil fuel inputs). An obvious symptom is that wealth is flowing into the energy-gathering sectors of the economy mentioned above. But, that means there is less wealth left for the other sectors of the economy where the vast majority of people work, at least in so-called developed countries.

Still, as costs to extract energy continue to rise for those in the energy-gathering sectors of the economy, even their profits and wages will ultimately get squeezed. Yes, everyone eventually suffers when society must use more and more energy just to get the energy it needs to allow the non-energy parts of the economy to function properly.

Since 86 percent of the energy consumed worldwide is derived from burning finite fossil fuels, we are faced with a serious dilemma. Eventually, the energy we get from these fuels will turn down–and not for the reason that most people think. The world continues to extract more gross energy in the form of oil, natural gas, and coal each year. And yet, it takes energy to find, extract, refine and deliver that energy to society. So, are we still getting more net energy from those fuels each year? No one knows the answer.

One thing is clear. Because fossil fuels are finite, one day their rate of extraction will peak and then begin an irreversible decline. When that will occur, no one can know. But, before that happens–perhaps many, many years before it happens–the net energy from fossil fuels will peak and then begin an irreversible decline.

There are clues, obvious clues, that we may be nearing a net energy peak, even as the energy companies tout new records of gross fossil fuel extraction. High prices and now shrinking profits are evident in the oil and gas industry. Executives in the linked article give many explanations for falling profits, but none of them have to do with the declining net energy from their extractive activities. And, if the executives understand the latter cause–and I’m not sure they do–announcing it would hardly boost oil company stock prices.

But the word is out now that high costs for developing new fossil fuel energy sources are finally biting into energy company profits despite continuing high prices for oil and rebounding prices for natural gas.

One way the companies are fighting the high cost of developing new resources is simply to cut back on investment. But, this could create a self-reinforcing cycle in which exploration and development cutbacks lead to supply reductions worldwide which lead to higher prices which lead to recession and thus lower demand–and finally to much lower prices which discourage exploration and development.

But, back to my answer to the question, “Are we still getting more net energy from those [fossil] fuels each year?” My answer was that nobody knows. It’s curious that in the information age no one has thought to examine this question very deeply except a few energy researchers who have been too ill-funded to gather and analyze extensive data on the subject. Charlie Hall and his students come to mind. They have gone to heroic lengths to obtain at least some data and analyze it in order to explore this question.

It is instructive that the premier energy statistics agency on the planet, the U.S. Energy Information Administration (upon which I rely heavily for accurate historical energy statistics), does not even have a category in its tables for net energy, nor any mention of it (in the sense I mean it) anywhere on its site that I can find.

The real peak then in fossil fuel energy will come not when the rate of extraction of oil or coal or natural gas peaks. As far as society is concerned, it will come when the net energy from these sources peaks and begins to decline. The fact that we won’t even be able to see this when it arrives means we’re headed for trouble already.

Kurt Cobb is an authorspeaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novelPrelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Blinkered to threat of rising oil prices

Blinkered to threat of rising oil prices.

Oil production in Australia peaked in 2000. It would have peaked worldwide too by now, had it not been for the shale oil boom in the US.

Some interesting work by this country’s most unrelenting peak oil proponent, retired engineer Matt Mushalik, shows that without shale oil – which accounts for 1.5 million barrels a day – world oil production last year was back at 2005 levels. It seems a monumental economic crisis may have been averted.

Still, the price of crude oil has stubbornly hovered around its present mark of $US108 a barrel for the past three years even as shale oil production has ramped up.

For motorists in Australia, should consensus predictions of a falling Australian dollar come to pass, prices will head higher at the petrol pump in coming years.

This currency effect, however, is a sideshow compared with the big question of world oil prices and production.

Thanks to the shale oil boom, the more alarmist cries of the peak oil brigade have been subdued. Even with advancing technology and ever more sophisticated extraction methods though, it is London to a brick that the price of crude oil will rise sharply in the longer term.

You would think then that peak oil might be factored in to major policy decisions about the future of the nation and its infrastructure.

Energy security is paramount.

But it is not so. In early 2012, then industry minister Kim Carr declined to table the federal government’s peak oil report BITRE 117 before a Senate hearing on grounds that it was ”not up to scratch”.

Later that year, the energy white paper also failed to deliver an updated version. Research on oil, perhaps the most critical commodity for Australia’s long-term security, has been abandoned.

As the Abbott government grapples with the tricky question of how to fund big projects ahead of public hearings on infrastructure next month, the question of oil prices is not even on the agenda.

Already, the bias of state and federal governments for roads over rail has been well documented. As oil is the most critical commodity in fuelling any transport option, you could be forgiven for thinking that it should be on the agenda.

Nothing in the issues papers, nothing in the draft report from the Productivity Commission. It seems to be an article of faith that people will keep finding oil somewhere, so let’s not give it a second thought.

In an interview with the US Association for the Study of Peak Oil and Gas in January, an ex-Saudi Aramco geologist, Dr Sadad Al-Husseini, predicted oil price spikes of $140 by 2016-17.

”My base oil price forecast in 2012 dollars still ranges between $US105 and $US120/barrel … with a volatility floor of $US95/barrel and more probable upward spiking to $US140/barrel within 2016-17.”

Dr Al-Husseini’s forecast in 2009 of a limited plateau of oil supplies appears to have been vindicated. He said the plateau might have been inflated thanks to high-cost unconventional oils but major forecasters see this as pretty much transitional. ”The plateau itself remains a reality and unfortunately its duration is still unlikely to extend beyond the end of this decade.”

He highlighted several factors that would inhibit the expansion of production, including decline rates (more extreme than ever with shale oil and deep offshore), limited investments (quadrupled capex/barrel in the past few years) and economic growth (still recovering). ”In the long term, reserves depletion remains very high with totally inadequate reserves replacements regularly obscured by resorting to claiming ‘resources’ as reserves.”

The industry has moved into a higher-cost paradigm with very limited growth in conventional oil and condensate supplies, accelerated ”proven” reserves depletion and high levels of violence and conflicts around the world’s major basins of low-cost oil production.

Australia is fortunate in having enormous gas resources. Still, with the world population forecast to grow to 11 billion by the end of this century and the developing economies ever-thirsty for oil, it would seem foolish to ignore the oil price in long-term infrastructure planning.

Mind you, short-termism is an affliction not merely contained to oil. In the annual Mitsubishi lecture back in 2010, Don Elder, chief executive of coal company Solid Energy, said there was enough in coal reserves for 100 years. Yet in one more generation, global demand for food and energy would double.

The Sovereignty Series – Reassessing Our Lives – The Value of Being Centered | Two Ice Floes

The Sovereignty Series – Reassessing Our Lives – The Value of Being Centered | Two Ice Floes.

Most of us will argue that on those occasions when we reach critical decision points in our life we believe they are successfully navigated. Just as important we believe the vast majority of our decisions are based upon current data, the present state of our personal affairs and how it all fits in with our perceived life goals.

Quite frankly, for many of us this is an illusion we embrace in order not to upset our sense of self and our positioning within the ‘real’ world we call ours. In reality we rarely deviate much from our present path, a path more often chosen for us by opportunity and circumstance then by directed thought and conscious decision.

When do we ever pull back and thoroughly assess where we are and what we want, not based upon debt or family pressures or even what our employment situation demands of us, but upon what we really truly desire of ourselves? Until recently, for this author at least, the honest answer was not very often.

In fact the last time I conducted this type of thorough self assessment was back in 1990 when I completely changed my career and life direction. While the decision was right for me at the time, it was now well past stale and moldy, the ‘sell by’ date long past expiration.

Since that critical juncture in my life I had not considered conducting another self assessment of this sort with any real seriousness. If anything I would engage in fantastical daydreaming about how neat this might be or how liberating living that way could be. To be frank I did not want to back myself into an emotional corner, to come to a conclusion contrary to where I was presently positioned in life and then not follow through.

No one wishes to face their own impotence, to fail their ‘self’ and then have nowhere to hide. It is best not to have tried rather than fail and be unmasked and miserable. Sometimes we are most embarrassed and ashamed when bare naked and fully exposed to our self.

This is the deeply conditioned slave mentality which I and so many others struggle with, a perspective that helps to explain quite well the present state of the zombie nation. We dull the ever present pain of our own failures with food, drink, drugs, TV, work, whatever it takes to forget if only for another moment more.

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did know that I was growing increasingly unhappy with my chosen profession and I wanted out. But like a deer in the headlights I was frozen in place and unable to make any significant decisions because of all the entanglements, real or otherwise, that I thought were tying me down.

Some I believed were financial, some physical, some emotional, but all were blown way out of proportion to the reality I was trying to avoid. One must build the walls of our own cage higher than we are willing to climb if we are to remain safely confined within our own mind.

In short I was unhappy enough to think about radical change, but just content enough (‘sated’ is probably a much better term to use here) with the status quo that I didn’t wish to upset my carefully stacked house of cards. Who really wants to gather up all their Jacks and fling them high into the air in order to see what comes up when they all fall down?

Mostly this was because I had never honestly asked myself “What it is that I desire most” or “How would I like to live”? Instead I would ask myself the normal questions society directs us towards; what is it that I want to ‘do’, or what do I want to ‘be’ when I grow up, get out of school, change careers or retire?

Think about one of the first questions you ask a stranger you are meeting for the first time in a casual social setting. Or what is asked of you during that same social function. “So….what do you do”? The honest answer is that we live in our own mental straitjacket with our body and life dragged along, securely attached via our own carefully constructed ball and chain.

For most of us the ‘life’ decision process, at least initially, works in reverse. We start off listing what it is we don’t want and move forward from there. And the number one item at the top of most lists of undesirables is the following……“I don’t wish to be poor”.

Since we are forever focused on the ‘money meme’ every decision radiates out from that central focal point. It may help to remember that the all controlling money meme permeates so deeply into our childhood that the tooth fairy brings money in exchange for recently removed used body parts.

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OK………well, if I don’t wish to be poor I will ‘need’ (as opposed to ‘want’) a good education followed by a decent job to start my career, then marriage, kids, cars, house etc. Before we know it our exercise wheel is up to speed and we are off to the races on our never ending run to nowhere.

Back in 1990 I changed everything in my life after nearly two decades wasted. Because I headed off the deep end just after graduating from high school, rather than money being my central focus it was another equally damaging obsession that I revolved around.

Seventeen years later, my life in tatters by my own hand but still well along in the process of living, I struggled to move forward while balancing single parenthood demands with the need to earn a living.

The decisions I made at that point suited my life situation, not my happiness. I did what needed to be done to finish raising my son, who was then only five years of age, and to begin the process of cleaning up the mess I had created which trailed far behind me.

When the time came for my son to leave home and move on, essentially thirteen years later with me still single and uninvolved, I settled in to begin the serious work of examining the world around me, something I never fully pursued earlier since life was demanding my attention after I finally got my act together.

Back in 1990 after I awoke from my stupor, I saw contradictions and cognitive dissonances as far as the eye could see, but I deliberately chose not to look too deep in order to maintain some semblance of stability in my son’s life, not to mention my own. It was years, actually more than a decade, before I felt stable enough to really begin to deeply examine what I perceived as wrong with the world.

Once we begin the process of questioning everything, eventually we begin to seriously question ourselves, a course of action that often derives its value from the procedure itself rather than any actual results obtained. If we find the courage to travel far enough down the rabbit hole we find ourselves face to face with……….well, with our ‘self’. It is then that we reach a decision point unlike any we have encountered up to this point in our lives.

Do we travel a path, the path, any path that ultimately frees us from ourselves (or at least gets us a little bit closer), one which opens up an entirely new panorama of choices, the road less traveled if you will? Or do we look into the abyss, experience only disorientation and fear, then rapidly retreat to the perceived safety of our existing familiar surroundings.

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If we have remained in a continuous state of low level pain for a long enough period of time, the idea of making radical changes in order to relieve that pain is not as inviting as it might seem at first blush. The elevated level of pain we mentally and emotionally project will result from the change is nearly always believed to be much worse than it actually turns out to be.

A perfect example of this is the person with a nagging toothache who is frightened of the dentist. On an accumulated basis that person might experience ten times more pain over a month’s time before finally capitulating to the inevitable trip to the dentist, rather than if he had just ripped the tooth out at home with some pliers. Procrastination is just as much a process of bargaining with ourselves as it is fear and consequence avoidance.

This isn’t to say that one must change everything in order to begin the process of being true to oneself. Becoming personally sovereign in the middle of an insane asylum is a journey at best and not a destination. One can never be truly clean when we wash in filthy water, but we can begin to filter the water and improve the conditions under which we bathe.

The thing is that the end result for many who go down this road is not a product of any one decision, but of a series of half steps and reluctant conclusions that lead to a fundamental recognition. Eventually we come to understand that if we are to be true to ourselves we can no longer live in the manner we currently are. It is then that we discover if we have the courage to take a chance and move deeper down into the rabbit hole, or do we scurry away back to the perceived safety of the herd’s insanity.

I say this not to be judgmental of anything the reader is or is not doing. I live in a very fragile glass house with no intention of throwing stones or examining the quality of your life’s construction. Nor do I claim to have arrived at my destination and thus am qualified to give advice and direction. What I am doing works for me, and most likely will not work for you precisely because we are all unique individuals with distinctively different needs and life situations.

While I have clearly stated that personal sovereignty is a ‘State of Mind’, meaning we adopt a particular mindset that fully encompasses total personal responsibility for our ‘self’, it also requires that we be more centered than most of us presently are. If we are unhappy with our lives, or if we are in denial about our unhappiness which simply pushes us further and further away from our center, trying to adopt the personal sovereignty mindset is nearly impossible.

Take that first step; reassess where you are and why you aren’t somewhere else. Look deeply, ask those difficult questions of your ‘self’, push your outer boundaries and scale those cognitive walls. You have little to lose and everything to gain…..including your centering. Deliberately and consciously push that start button and begin the process within your ‘self‘.

03-15-2014

Cognitive Dissonance

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