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“Epic in scale, unprecedented in world history.” That is how William K. Black, professor of law and economics and former bank fraud investigator, describes the frauds in which JPMorgan Chase (JPM) has now been implicated. They involve more than a dozen felonies, including bid-rigging on municipal bond debt; colluding to rig interest rates on hundreds of trillions of dollars in mortgages, derivatives and other contracts; exposing investors to excessive risk; failing to disclose known risks, including those in the Bernie Madoff scandal; and engaging in multiple forms of mortgage fraud.

So why, asks Chicago Alderwoman Leslie Hairston, are we still doing business with them? She plans to introduce a city council ordinance deleting JPM from the city’s list of designated municipal depositories. As quoted in the January 14^th Chicago Sun-Times:

The bank has violated the city code by making admissions of dishonesty and deceit in the way they dealt with their investors in the mortgage securities and Bernie Madoff Ponzi scandals. . . . We use this code against city contractors and all the small companies, why wouldn’t we use this against one of the largest banks in the world?

A similar move has been recommended for the City of Los Angeles by L.A. City Councilman Gil Cedillo. But in a January 19th editorial titled “There’s No Profit in L A. Bashing JPMorgan Chase,” the L.A. Times editorial board warned against pulling the city’s money out of JPM and other mega-banks – even though the city attorney is suing them for allegedly causing an epidemic of foreclosures in minority neighborhoods.

“L.A. relies on these banks,” says The Times, “for long-term financing to build bridges and restore lakes, and for short-term financing to pay the bills.” The editorial noted that a similar proposal brought in the fall of 2011 by then-Councilman Richard Alarcon, backed by Occupy L.A., was abandoned because it would have resulted in termination fees and higher interest payments by the city.

It seems we must bow to our oppressors because we have no viable alternative – or do we? What if there is an alternative that would not only save the city money but would be a safer place to deposit its funds than in Wall Street banks?

The Tiny State That Broke Free

There is a place where they don’t bow. Where they don’t park their assets on Wall Street and play the mega-bank game, and haven’t for almost 100 years. Where they escaped the 2008 banking crisis and have no government debt, the lowest foreclosure rate in the country, the lowest default rate on credit card debt, and the lowest unemployment rate. They also have the only publicly-owned bank.

The place is North Dakota, and their state-owned Bank of North Dakota (BND) is a model for Los Angeles and other cities, counties, and states.

Like the BND, a public bank of the City of Los Angeles would not be a commercial bank and would not compete with commercial banks. In fact, it would partner with them – using its tax revenue deposits to create credit for lending programs through the magical everyday banking practice of leveraging capital.

The BND is a major money-maker for North Dakota, returning about $30 million annually in dividends to the treasury – not bad for a state with a population that is less than one-fifth that of the City of Los Angeles. Every year since the 2008 banking crisis, the BND has reported a return on investment of 17-26%.

Like the BND, a Bank of the City of Los Angeles would provide credit for city projects – to build bridges, restore lakes, and pay bills – and this credit would essentially be interest-free, since the city would own the bank and get the interest back. Eliminating interest has been shown to reduce the cost of public projects by 35% or more.

Awesome Possibilities

Consider what that could mean for Los Angeles. According to the current fiscal budget, the LAX Modernization project is budgeted at $4.11 billion. That’s the sticker price. But what will it cost when you add interest on revenue bonds and other funding sources? The San Francisco-Oakland Bay Bridge earthquake retrofit boondoggle was slated to cost about $6 billion. Interest and bank fees added another $6 billion. Funding through a public bank could have saved taxpayers $6 billion, or 50%.

If Los Angeles owned its own bank, it could also avoid costly “rainy day funds,” which are held by various agencies as surplus taxes. If the city had a low-cost credit line with its own bank, these funds could be released into the general fund, generating massive amounts of new revenue for the city.

The potential for the City and County of Los Angeles can be seen by examining their respective Comprehensive Annual Financial Reports (CAFRs). According to the latest CAFRs (2012), the City of Los Angeles has “cash, pooled and other investments” of $11 billion beyond what is in its pension fund (page 85), and the County of Los Angeles has $22 billion (page 66). To put these sums in perspective, the austerity crisis declared by the State of California in 2012 was the result of a declared state budget deficit of only $16 billion.

The L.A. CAFR funds are currently drawing only minimal interest. With some modest changes in regulations, they could be returned to the general fund for use in the city’s budget, or deposited or invested in the city’s own bank, to be leveraged into credit for local purposes.

Minimizing Risk

Beyond being a money-maker, a city-owned bank can minimize the risks of interest rate manipulation, excessive fees, and dishonest dealings.

Another risk that must now be added to the list is that of confiscation in the event of a “bail in.” Public funds are secured with collateral, but they take a back seat in bankruptcy to the “super priority” of Wall Street’s own derivative claims. A major derivatives fiasco of the sort seen in 2008 could wipe out even a mega-bank’s available collateral, leaving the city with empty coffers.

The city itself could be propelled into bankruptcy by speculative derivatives dealings with Wall Street banks. The dire results can be seen in Detroit, where the emergency manager, operating on behalf of the city’s creditors, put it into bankruptcy to force payment on its debts. First in line were UBS and Bank of America, claiming speculative winnings on their interest-rate swaps, which the emergency manager paid immediately before filing for bankruptcy. Critics say the swaps were improperly entered into and were what propelled the city into bankruptcy. Their propriety is now being investigated by the bankruptcy judge.

Not Too Big to Abandon

Mega-banks might be too big to fail. According to U.S. Attorney General Eric Holder, they might even be too big to prosecute. But they are not too big to abandon as depositories for government funds.

There may indeed be no profit in bashing JPMorgan Chase, but there would be profit in pulling deposits out and putting them in Los Angeles’ own public bank. Other major cities currently exploring that possibility include San Francisco and Philadelphia.

If North Dakota can bypass Wall Street with its own bank and declare its financial independence, so can the City of Los Angeles. And so can the County. And so can the State of California.

____________

Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of 12 books includingThe Public Bank Solution. She is currently running for California state treasurer on the Green Party ticket.

Is America About To Reach A Breaking Point? Anger Grows As Unemployment Benefits Get Cut

December 31, 2013 8:05 am / Leave a comment

Is America About To Reach A Breaking Point? Anger Grows As Unemployment Benefits Get Cut.

In America today, there are close to 50 million people living in poverty and there are more than 100 million people that get money from the federal government every month. As the middle class disintegrates, poverty is climbing tounprecedented levels. Even though the stock market has been setting record high after record high, the amount of anger and frustration boiling just under the surface in our nation grows with each passing day. And now extended unemployment benefits have been cut off for 1.3 millionunemployed Americans, and it is being projected that a total of 5 million unemployed Americans will lose their benefits by the end of 2014. In addition, as I have written about previously, 47 million Americans recently had their food stamp benefits reduced. The conditions for a “perfect storm” are certainly being created. So how much longer will it be until we see all of this anger and frustration boil over in the streets of our major cities? Is America about to reach a breaking point?

If you think that the title of this article is “alarmist”, you probably have not been paying attention to what has been happening over the past few weeks. For example, a 600 person brawl broke out at at movie theater in Jacksonville, Florida just the other day…

Five teenagers were arrested when a 600-person brawl broke out in a Florida movie theater’s parking lot on Christmas night.

Described by police as a “melee,” the fight occurred around 8:30 p.m. on Wednesday outside the Hollywood River City 14 movie theater in Jacksonville when a group tried to storm the theater’s doors without purchasing tickets, police said. Several had rushed an off-duty police officer working as a security guard.

The officer “administered pepper spray to disperse the group, locked the doors and called for backup, following protocol,” said Lauri-Ellen Smith, a spokeswoman for the Jacksonville Sheriff’s Office.

Soon after the pepper spray was used, “upward of 600 people moving throughout a parking lot about the size of a football field began fighting, disrupting and jumping on cars,” she said.

And a “flash mob” of “400 crazed teens” was so violent that it forced a mall in Brooklyn to shut down just a few days ago…

A wild flash mob stormed and trashed a Brooklyn mall, causing so much chaos that the shopping center was forced to close during post-Christmas sales, sources said Friday.

More than 400 crazed teens — who mistakenly thought the rapper Fabolous would perform — erupted into brawls all over Kings Plaza Shopping Center in Mill Basin on Thursday at 5 p.m., sources said.

The troublemakers looted and ransacked several stores as panicked shoppers ran for the exits and clerks scrambled to pull down metal gates.

In addition, the release of new Air Jordan sneakers caused mini-riots and brawls to break out all over the country just before Christmas.

So why is all of this happening?

Of course people will come up with all sorts of theories to explain these outbreaks of violence, but what pretty much everyone should be able to agree on is that we are seeing levels of anger and frustration rise to very dangerous levels in this country.

Right now, there are approximately 6 million Americans in the 16 to 24-year-old age group that are not in school and that are not working either. What that means is that we have an alarmingly high number of very frustrated young people that do not have anything better to do than to cause trouble.

In some of our largest cities this has become a massive problem. In fact, quite a few major U.S. cities actually have more than 100,000 “idle youth” living in them…

Just look at some of the nation’s largest cities. Chicago, Houston, Dallas, Miami, Philadelphia, New York, Los Angeles, Atlanta and Riverside, Calif., all have more than 100,000 idle youth, the Opportunity Nation report found.

But the Obama administration says that this should not be a problem. In fact, the Obama administration tells us that the unemployment rate has been steadily “declining” and that there are plenty of opportunities for everyone.

Of course that is a giant lie. Just before the last recession, about 63 percent of all working age Americans had a job. During the recession that number fell below 59 percent and it has stayed there ever since…

So the notion that we are experiencing an “employment recovery” is absolutely laughable.

But most of our politicians appear to believe this lie, and it is being used as justification to cut off extended unemployment benefits.

And the funny thing is that by cutting off these benefits, it is going to make it appear as though unemployment has gone down even more. Millions of unemployed workers that are being forced into the streets will now be counted as having “left the labor force”, and it is being projected that the unemployment rate could decline by as much as half a percentage point as a result.

What a joke.

A lot of the people that are having their benefits cut off are really hurting. For instance, consider the case of 63-year-old paralegal Laura Walker…

“Not all of us have savings and a lot of us have to take care of family because of what happened in the economy,” said Walker, of Santa Clarita, who said she has applied for at least three jobs a week and shares an apartment with her unemployed son, his wife and two children. “It’s going to put my family and me out on the streets.”

So what is she going to do?

Well, at this point she appears to be down to just one option…

“I just don’t know what to do, except pray.”

And of course the unemployed are not the only ones that have had their benefits cut. As I mentioned above, all 47 million Americans that are currently on food stamps recently had their benefits reduced. The following is an excerpt from a recent article by Mac Slavo…

Earlier this year government benefits for nutritional assistance were reduced after the expiration of emergency legislation that was enacted following the 2008 financial collapse. Nearly all of the 48 million people receiving food stamp distributions were affected. The move led to warnings from food pantries and recipients around the country who said that the $40 billion in cuts would leave many American families without the ability to put food on dinner tables across America. According to Feed America, the roughly $29 per family that would no longer appear on their EBT cards will amount to about1.5 billion meals in 2014.

The fact that government dependence has soared to all-time highs even in the midst of this so-called “economic recovery” is just another sign that the middle class is dying. For years, middle class families have tried strategy after strategy in an attempt to survive, but now it has become apparent that the middle class is rapidly approaching a breaking point…

Rising income inequality is starting to hit home for many American households as they run short of places to reach for a few extra bucks.

As the gap between the rich and poor widened over the last three decades, families at the bottom found ways to deal with the squeeze on earnings. Housewives joined the workforce. Husbands took second jobs and labored longer hours. Homeowners tapped into the rising value of their properties to borrow money to spend.

Those strategies finally may have run their course as women’s participation in the labor force has peaked and the bursting of the house-price bubble has left many Americans underwater on their mortgages.

And even though the Obama administration and the mainstream media have tried to convince us over and over that the economy is “getting better”, most Americans are not buying it. In fact, according to a newCNN poll, 70 percent of all Americans believe that “the economy is generally in poor shape”.

As the economy continues to decline, not all Americans will respond to their desperate situations by getting violent. Many suffer quietly, hoping that things will eventually turn around for them. Unfortunately, the ranks of the suffering grow with each passing year. For example, a recentCNN article discussed the continued growth of “tent cities” all over America…

The total number of homeless people residing in tents and makeshift homes is unknown. Many of these communities are small and hidden from public view, while others claim hundreds of residents and are sprinkled through major urban areas.

Some, like those tucked under roadways, are temporary and relocate frequently. Their conditions are vile, unsanitary and fail to provide refuge from storms and winds. Then there are communities, such as Dignity Village in Portland, Oregon, that have a more sustained presence. The 13-year-old “ecovillage” set up by homeless people is hygienic and self-sufficient.

Preliminary findings by The National Law Center on Homelessness and Poverty show that tent cities have been documented in almost every state, and they’re growing.

So how do we solve these problems?

Are there any solutions that could get us out of this mess?

Of course there are. But don’t hold your breath waiting for any of them to be adopted. In fact, the American people continue to express great support for the very people that got us into this mess in the first place. For example, according to a Gallup survey that was just released, Barack Obama is the most admired man in America by a very wide margin and Hillary Clinton is the most admired woman in America by a very wide margin.

And the mainstream media will continue to tell all of us that “leaders” like Obama, Clinton, Reid, Boehner, McConnell and Pelosi can be trusted to get us out of this mess.

If you believe that, there is a bridge that I would like to sell you.

The American people need to stop having blind faith in the relentless propaganda that is being spewed at them through their televisions screens. The pretty faces that you see “reporting the news” do not care about you and they are not watching out for your best interests. Thecorporate-controlled news is highly scripted and it is pretty much the same whatever channel you turn to. If you have any doubt that “the news” is scripted, just check out this video…

U.S. Cover-up of Saudi 9/11 Ties Probed, JW Has Secret Flight Docs | Judicial Watch

December 21, 2013 9:28 am / Leave a comment

U.S. Cover-up of Saudi 9/11 Ties Probed, JW Has Secret Flight Docs | Judicial Watch.

The U.S. government’s cover-up of a Saudi connection in the 9/11 terrorist attacks is receiving new attention because a pair of legislators—one Republican, one Democrat—recently viewed a redacted chunk of a congressional report that confirms foreign state involvement in the plot.

Americans have been told that Al Qaeda acted alone on September 11, 2001 and that there were no state sponsors. In fact, the George W. Bush administration blacked out dozens of pages of a congressional investigative report on 9/11 that dealt with specific sources of foreign support for the 19 hijackers, most of whom were Saudi nationals.

Judicial Watch quickly launched an investigation and in 2005 obtained shocking documents from the FBI detailing how well-connected Saudis, including relatives of Osama bin Laden, left the U.S. on specially chartered flights while most air traffic was still grounded. In all, 160 subjects of the Kingdom of Saudi Arabia, including but not limited to members of the House of Saud and/or members of the bin Laden family fled the U.S. between September 11, 2001 and September 15, 2001.

The records uncovered by JW show that two prominent Saudi families that fled the U.S. following 9/11 got personal airport escorts from the FBI and that authorities let other Saudis leave the country without first interviewing them. The secret Saudi flights left from Las Vegas, Los Angeles and other major U.S. cities. An unidentified prince in Las Vegas even thanked the FBI for its assistance, according to one internal report obtained by JW. Incredibly, the FBI returned to the Las Vegas hotels with subpoenas days after the Saudi flights departed to gather information on the royal guests, the records show. Read more about this in JW’s New York Times Best Seller “Corruption Chronicles.”

This week investigative journalist Paul Sperry reveals that two federal lawmakers— North Carolina Republican Congressman Walter Jones and Massachusetts Democrat Stephen Lynch—finally got a hold of the suspiciously redacted pages of Congress’s 9/11 report. Federal law prohibits them from disclosing the details, but both legislators said they were “absolutely shocked” at the level of foreign involvement in the 9/11 attacks. There’s little doubt they’re referring to the Saudi connection.

To make the information public, the lawmakers have proposed that Congress pass a resolution asking President Obama, who has promised to run the most transparent administration in history, to declassify the entire 2002 report. It certainly appears that the U.S. government is protecting the Saudis. In fact, federal agents told Sperry, a veteran reporter and columnist, that they were repeatedly called off pursuing 9/11 leads back to the Saudi Embassy, which had curious sway over White House and FBI responses to the attacks.

Besides the secret Saudi flights, Judicial Watch has ongoing investigations related to the sophisticated 9/11 plot. Earlier this year JW obtained documents from the FBI that show strong ties between Anwar al Aulaqi, the U.S.-born terrorist assassinated in 2011 by a U.S. drone in Yemen, and two of the 9/11 hijackers who attacked the Pentagon. In the documents the FBI describes al Aulaqi as “The Spiritual Leader of the Hijackers.”

Why Does The Mainstream Media Like To Make Fun Of Preppers So Much?

November 18, 2013 11:40 am / Leave a comment

Why Does The Mainstream Media Like To Make Fun Of Preppers So Much?.

This article was written by Michael Snyder and originally published at The American Dream

Have you noticed that the mainstream media has a tremendous amount of disdain for preppers? Even though there are now approximately 3 million preppers in the United States, most of the time the media ignores us. But once in a while an editor in New York City or Los Angeles decides that it would be fun to do a story about the “crazies” that are preparing for doomsday.

And of course it is very rare for any piece in the mainstream media about preppers to be even close to balanced reporting. Most of the time, news stories that report on preppers portray them as mentally unstable kooks and loons that everyone else in society should be laughing at. But perhaps there is a deeper explanation for the contempt that the mainstream media has for preppers.

After all, those in the media are representatives of the establishment, and they are probably deeply offended on some level that we don’t have the same kind of blind faith in the system that they do. The fact that so many Americans believe that the system is on the verge of collapse doesn’t make any sense to them, and instead of really looking into the truth of what we are saying, they would much rather dismiss us by labeling all of us a bunch of uneducated nutjobs on the fringe of society.

A few days ago, I came across another example of this demonization of preppers by the mainstream media. The following are a few lines from a recent CNN article entitled “What I saw at the doomsday prepper convention“. For the first few paragraphs the piece actually seems fairly balanced, but by the end of the article the author can’t resist openly mocking preppers and what many of them believe. Just check out these zingers…

-“It’s so much more fun to worry about martial law than a hurricane. People like zombies as a marketing tool.”

-“I spot more than a few zombie-themed rifle targets at the show.”

-“Still, it was impossible to completely ignore the presence of an element many would consider reactionary.”

-“After a relatively measured primer on the threats of inflation, featured economist Dr. Kirk Elliot encouraged me to look into how the Rothschild and Rockefeller families continue to own the Federal Reserve.”

-“Finally, at the end of my conversation with John Egger about the rise of ‘suburban homesteading,’ a man with a white shock of hair interjected himself into the conversation. ‘You know what chemtrails are?’ he asked, referring to another conspiracist trope that sees chemical tampering in jetstream vapor trails. ‘They’re changing the weather, then selling drought tolerant seeds. George Soros and Bill Gates are behind it.’ Egger nodded politely and smiled, tolerant of a potential customer’s eccentricities.”

-“While normalcy and centrism may be the goal for businesspeople like Cindy and Jim Thompson, it seems the preparedness lifestyle hasn’t completely shaken loose its extremists and kooks.”

And of course this is hardly an isolated example of prepper bashing. The following is an excerpt from a Los Angeles Times review of the Doomsday Preppers television show on the National Geographic channel…

Still, it’s hard not to feel for young Jason from tiny Plato, Mo. (pop. 109), who is awaiting worldwide financial collapse with his homemade, nail-studded “mace-ball bat,” and that his is a life on the verge of going completely wrong. “I’m not afraid to have to kill,” Jason says, in his camouflage pants and dog tag, and there seems to be no question in his mind that it will come to that. (“Jason has always been a worrywart,” says his mother.)

Or for Big Al, from Nashville, who is getting ready for old-school nuclear war by digging down into the earth and surrounding himself with steel. (“I prefer not to use the term ‘bunker’ — to me, it’s an underground house.”) He spends months at a time by himself down there, training for the inevitable — which he expects to weather alone — cooking different combinations of canned goods and, you know, spending too much time alone. One leg pumps constantly as he talks.

The preppers don’t want my pity, of course — quite the opposite, I’m sure. The joke will be on me, they would say, when I am expiring from fallout or smallpox, being carried away in a tornado or torn apart by the hungry ravaging hordes. (I am not even prepared for the Big Earthquake that might more probably get me.)

Lovely, eh?

Would the Los Angeles Times mock other groups of Americans in a similar manner?

I think not.

Meanwhile, as the mainstream media continues to mock us, there is a perfect example of why we should all be prepping that is unfolding right in front of our eyes. The most destructive typhoon in the history of the Philippines is showing just how rapidly society can completely fall apart in the event of a major disaster…

The cries of the suffering carried through a small, cramped one-story clinic in typhoon-ravaged Tacloban where the medicine was all but gone Thursday, but the number of wounded in the hard-hit Philippine city continued to grow.

The clinic at the airport in the decimated capital city of Leyte province is one of the few places where those injured in Super Typhoon Haiyan and its aftermath can turn for help, what little help there is six days after the storm.

“We don’t have any medicines. We don’t have any supplies. We have IVs, but it’s running out,” Dr. Katrina Catabay told CNN.

“Most of the people don’t have water and food. That’s why they come here. Most of the kids are dehydrated. They are suffering from diarrhea and vomiting.”

Most Americans assume that if anything like this ever happened here that the federal government would rush in and rescue them.

But what if the government didn’t come to rescue you?

Past disasters such as Hurricane Katrina have long since faded from the memories of many Americans. How quickly we forget the lessons that we should have learned from past tragedies.

And what if there is an event such as a massive EMP blast that causes public services to go down permanently?

What would you do?

In the Philippines, there is widespread looting and rioting even though this natural disaster is only temporary and governments from all around the world are rushing in to offer assistance…

TV reports said security forces exchanged fire with armed men amid widespread looting of shops and warehouses for food, water and other supplies in the village of Abucay, part of worst-hit Tacloban in Leyte province.

While eight people were crushed to death when looters raided rice stockpiles in a government warehouse in the town of Alangalang, causing a wall to collapse, local authorities said.

Other looters still managed to cart away 33,000 bags of rice weighing 110 lb each, said Orlan Calayag, administrator of the state-run grain agency National Food Authority.
Warehouses owned by a food and drinks company were ransacked in the storm-hit town of Palo in Leyte, along with a rice mill in Jaro, said Alfred Li, head of the Leyte Chamber of Commerce and Industry.

Tacloban city administrator Tecson John Lim said 90 percent of the coastal city of 220,000 people had been destroyed, with only 20 percent of residents receiving aid. Houses were now being looted because warehouses were empty, he said.

If you don’t think that anything like this could ever happen here, you are just being delusional. Americans are not any better than those living in the Philippines. When something really, really bad happens in the heart of the United States, we will see mass panic and fear here too.

And most Americans are completely and totally unprepared for even a minor emergency…

–44 percent of all Americans do not have first-aid kits in their homes.
–48 percent of all Americans do not have any emergency supplies stored up at all.
–53 percent of all Americans do not have a 3 day supply of nonperishable food and water in their homes.

So instead of making fun of preppers, perhaps the mainstream media should be encouraging more people to prepare for future emergencies.

Someday major disaster will strike this nation, and when that happens it will be the preppers who will have the last laugh.

Growth is Obsolete: James Howard Kunstler | Peak Prosperity

October 20, 2013 4:36 pm / Leave a comment

Growth is Obsolete: James Howard Kunstler | Peak Prosperity. (source)

The word that sticks in the craw of many who cogitate over economics is growth. The condition that the word refers to has proven disturbingly problematic in recent years, especially as world’s population continues to expand exponentially and the global ecology suffers in response. In fact, Thomas Carlyle (1795 – 1881) called economics “the dismal science” in direct reference to the work of the Rev. Thomas Malthus, because the Malthusian conclusions were so unappetizing — that sooner or later rising human populations would outstrip the world’s capacity to provide for them.

Now it happened that the Reverend Malthus’s notorious Essay on the Principle of Population was first published in 1798, which was about exactly the take-off moment for the industrial revolution. That extravagant melodrama was about marshaling mechanical invention with fossil fuel. The first act ran on coal and allowed populations to expand because it extended the extractive reach for resources by colonialist nations. The second act featured exploitation of oil, which was more powerful and versatile than coal. It also lent itself much more directly than coal to being converted into food for people. The use of oil powered farming machines, oil and gas (an oil byproduct) based herbicides, insecticides, and fertilizers, and oil based long distance food transport, has allowed us to convert oil into food pretty directly. This has led to the “hockey-stick” swerve of population growth that took human numbers worldwide from under 2 billion in the year 1900 to more than 7 billion today.

We are in the third act of the industrial melodrama now where the dire sub-plot of peak oil has taken stage. Despite the wishful thinking and happy-talk propaganda lighting up the media-space, we have arrived at the problematic point of the story: the end of cheap oil. This is poorly understood by the public and, apparently, by leaders in business, politics, and the media, too. They misunderstand because they insist on thinking that peak oil was simply about running out of oil. It’s not. It’s about running out of the ability to extract it from the earth in a way that makes economic sense — that is, at a price we can afford in terms of available capital and energy invested (and also ecological destruction). That dynamic is now exerting a powerful influence on modern civilizations. We ignore it — even at the highest levels of intellectual endeavor — because we have made no alternate plans for running the complex operations of everyday life, and because the early manifestations of the dynamic present themselves in the realm of finance, which is dominated by academic viziers and money-grubbing opportunists who benefit from obfuscating reality.

The sad, stark fact is that oil is now too expensive to permit further expansion of economies and populations. Expensive oil upsets the cost structure of virtually every system we need to run modern life: transportation, commerce, food production, governance, to name a few. In particular expensive oil destroys the cost structures of banking and finance because not enough new wealth can be generated to repay previously accumulated debt, and new credit cannot be extended without a reasonable expectation that more new wealth will be generated to repay it. Through the industrial age, our money has become an increasingly abstract and complex product of debt creation. As Chris Martenson has put it so succinctly in The Crash Course, money is loaned into existence. Thus, the growth of debt (allowing the growth of money) has played a crucial role at the heart of our banking operations, and the very word “growth” has become shorthand for this process in the lingo of current economic discourse.

It is quite clear that the banking system has been thrown into great disarray as the price of oil levitated from $11-a-barrel in 1999 to the great spike of $140 in 2008, and then settled into a range between $75 and $110 since 2010. Most of this disarray is a result of attempts to offset the failure to create new real wealth with fake wealth generated by accounting fraud, “innovative” swindling, insider chicanery, high frequency front-running, naked shorting of securities, and the construction of a vast untested network of derivative counterparty wagers that give every sign of being booby-trapped. All this private monkey business has been abetted by public mischief in central bank interventions and market manipulations, fiscal irresponsibility, political payoffs for favorable legislation, statistical misreporting, and the failure to apply the rule of law in cases of blatant misconduct (e.g., the MF Global confiscation of segregated client accounts; the Goldman Sachs “Timberwolf” CDO scam… the list is very long).

In short, a society with deeply impaired capital formation has turned to crime, corruption, fakery, and subterfuge in order to pretend that “growth” — i.e. expansion of capital — is still happening. The consequences are many and profound. The chief one is that the manufacture of fake wealth is such an alluring activity that some of the smartest people in society have devoted their waking hours to making a profit off it. It absorbs all their energies and they are simply not available for other work, such as figuring out a sane and practical way to run civilization in the absence of cheap energy. Added to this is the administrative effort and the work-arounds needed to support all this corruption and dishonesty, which occupy the hours of another class of smart people who work in government, academia, public relations, and the media. The sustenance of these parasitical cohorts more and more continues at the expense of everybody else in society, who cannot find work, or cannot make enough money to pay their living expenses, and who have become deeply discouraged, disappointed, demoralized, and disengaged in their losing struggle to thrive. Hence there is little public vigor to even mount a discussion of these vexing problems and the final result is the greater wholesale failure to construct a coherent consensus about what is happening to us and what we might do about it.

Another consequence to these disorders of capital is the massive malinvestment directed into things with no future in themselves or, much worse, things that actively undermine the future of everything needed to support any civilized future. For instance, the “innovation” in securitizing and repackaging mortgages — which continues to be a boon for the giant banks in concert with the thoroughly dishonest and technically bankrupt “government sponsored enterprises” Fannie Mae and Freddie Mac — expresses itself in the activity we call “housing starts.” Economists overwhelmingly agree that a higher number of housing starts is a good thing for the economy and hence for society. But what do housing starts actually represent? These days they mostly take the form of new suburban housing subdivisions, which are inevitably joined by the kit of the strip mall, the big box store, and all the other furnishings of the highway strip. In short, all that glorious “innovation” by the banks produces more suburban sprawl and destruction of rural land, which is about the last thing this society needs when faced with the realities of peak cheap oil, since it is absolutely certain to make these things obsolete, and very soon. It is not any better, either, if the nominal capital — nominal because it is sure to someday represent a loss for some bond-holder or stockholder — gets invested in a 30-story high rise apartment because, contrary to a lot of current delusional thinking, skyscrapers also have no practical future for reasons I have explained in other essays here.

Similarly, the public investments going into “shovel-ready” highway projects, although the fiscal outlays are more transparently based on money that doesn’t really exist. The public, as well as leaders all across society, serenely believe that the Happy Motoring matrix will find a way to go on forever, and that therefore we must make provision for it, not to mention the beneficial side of effect of “job creation” for all the additional workers. Yet the dynamic at work must be obvious: oil will never be cheap again; it will impair future capital formation; there will be far fewer car loans; there will dwindling public funds to maintain the roads; and there is no practical substitute for gasoline that scales to the existing system, nor any prospect of one within a time frame that makes sense — not to mention the gigantic background problem of pouring evermore carbon into the sky.

If these things I mention — highways, tract houses, condo towers, strip malls — represent our current idea of “growth,” and if they are self-evidently bad investments, then we can infer that our current concept of “growth” no longer applies to a reality-based model of our economic prospects. We ought to junk the term and what it implies about the daily business of mankind, and come up with a new way of understanding the place we’re at.

The Automobile Ruined Everything (boiseplanning.wordpress.com)
Review, The End of the Suburbs (jennifernicholsongraham.wordpress.com)
James Howard Kunstler – Fed up (redgreenandblue.org)

Tower of Babel Moment « The Burning Platform

October 15, 2013 11:21 am / Leave a comment

Tower of Babel Moment « The Burning Platform. (FULL ARTICLE)

This week over in China, the Chinese had to SHUT DOWN Beijing due to SMOG problems. This is pretty radical, since far as I know not even Los Angeles ever got shut down due to Smog, and it was pretty nasty there particularly before CA Greenies went big time into emissions restrictions on the plethora of Carz that started hitting the LA Freeways in the 60s and 70s.

From Bloomberg:

China started reopening roads and airports in Beijing and surrounding areas that were shut byheavy smog, allowing millions of travelers to return from a week-long holiday.

Air quality index readings for half of Beijing’s 12 urban areas fell below 200, the level dividing medium and heavy pollution, as of 12 p.m. today, according to data on the website of the Beijing Municipal Environmental Monitoring Center.

Tennis fans wear masks to watch the women’s semi-final match of the 2013 China Open during severe pollution at the National Tennis Center in Beijing on Oct. 5, 2013. Photographer: Feng Li/Getty Images

“Beijing will see light rain tonight, which will make it easier for air pollutants to dissipate,” Beijing Meteorological Bureau said today in its official microblog. The bureau lifted a yellow alert on smog at 8:50 a.m., predicting that visibility will improve….

ZeroHedge: No Planes, No Trains, And No Automobiles As Record Smog Shuts Beijing (silveristhenew.com)
Beijing Smog Closes Highways as Travelers Return After Holiday (bloomberg.com)
Beijing shuts down highways, airport in fight against smog (elementulhuliganic.wordpress.com)

Paradigm Blindness | KUNSTLER

October 7, 2013 9:51 pm / 1 Comment on Paradigm Blindness | KUNSTLER

Paradigm Blindness | KUNSTLER. (FULL ARTICLE)

Something is sucking the air out of the humid terrarium that is US politics, making the lizards, tarantulas, and scorpions within hyperventilate. That something is the vacuum of disappearing wealth. All the accounting fraud, statistical mis-reporting, price manipulations, naked-short beat-downs, high-speed arbitrage hijinks, and carry trade rackets can’t conceal the reality that the nation is going broke – at least 99 percent of the nation. The remaining 1 percenters, outside the terrarium, are swimming in a pool of notional wealth that is primed to go down the drain and leave them at the bottom, desiccated little husks of animal matter that the crows will feed on.

The reason nobody seems to know what to do is because they know anything they do will make them look bad, so the only thing to do is nothing, with a sound track of lizard squawks and much darting of forked tongues. Nature is now in charge, not personalities, and nature is now leading a purblind humanity to the place it has to go, which is smaller, simpler, and local. The flailings and squawking of politicians can only avail to make the journey more painful and disorderly, but the march is on….