Wednesday, February 25, 2009

Roulette Anyone?

I have many vices, but gambling isn't one of them. When I take a risk, I like to know that the odds are in my favor. I can spend a whole week in Vegas and not bet a single nickel. This time, I have no choice. The bet has already been made -- the future of Mother Nature and all her children, including me and mine -- on a spin of the roulette wheel. The wheel is in motion, but where do I place my chips?

The table offers a range of squares. There are the Joe Romm and Thomas Friedman versions of the future -- you know, we save the world through conservation, efficiency and techno-glitz. There are Rob Hopkins versions where the world powers down to a simpler life of local sufficiency, much like my favorite poster child, Earthaven. Middle of the spectrum is Howard Kunstler's World Made by Hand (rather terrifying to think that Kunstler is middle of the spectrum!), followed by a survival-of-the-most-ruthless version of Mad Max. Worst of all is the James Lovelock death toll: we're done for, so relax and enjoy the game. Somewhere on the table is my mother's version, the biblical apocalypse of Revelation. She is trying desperately to bring me back into the fold before the Rapture, but Jesus can't save a soul that denies the need for salvation.

I stand here, watching the wheel spin, trying to calculate the odds. I dismiss Lovelock and Revelation -- no bets could cover those odds! That leaves me with the Friedman/Romm to Mad Max range. There are days when I think Friedman and Romm could be right. Maybe we will get clean electrons up and running in time to power a miracle fleet of plug-in vehicles. Or maybe we'll be running our cars on compressed air. Happy motoring and the suburban lifestyle don't have to be a dead end, do they? And if we revitalize our train system, much of our current trucking could be done by rail. But what about farm equipment, construction machinery, airplanes and ocean freighters? If we are truly at peak oil, and I see every indication that we are, then personal auto transportation is but a small piece of the pie. Okay, but maybe we'll find huge new oil reserves in the melting Arctic. Oh, wait, then we would save ourselves from peak oil only to kill the planet with global warming. . . And I haven't even touched on water, food and resource shortages, climate extremes, epidemics, refugee conflicts, or the potential for war.

Joe, Thomas, I just don't see it happening your way. If we're smart, we'll get a Hopkins/Earthaven future. If we're stupid but lucky, we'll get a Kunstler world made by hand. And if we keep playing with our eyes closed, we'll be sharing the future with Mad Max. To quote a Judy Fjell song, "There's no way out of this one, no way that I can see, no place that I can run to . . . "

Ladies and gentlemen, place your bets and take your chances!

Tuesday, February 24, 2009

Wisdom of the Ages

Some great quotations on the internet today, thanks to a challenge by Nate Hagens at The Oil Drum.

"Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion---when you see that in order to produce, you need to obtain permission from men who produce nothing---when you see that money is flowing to those who deal, not in goods, but in favors---when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you---when you see corruption being rewarded and honesty becoming a self-sacrifice---you may know that your society is doomed."
Ayn Rand

"The survival of the fittest is the ageless law of nature, but the fittest are rarely the strong. The fittest are those endowed with the qualifications for adaptation, the ability to accept the inevitable and conform to the unavoidable, to harmonize with existing or changing conditions."
-- Dave E. Smalley

“It is difficult to be sat on all day, every day, by some other creature, without forming an opinion about them. On the other hand, it is perfectly possible to sit all day, every day, on top of another creature and not have the slightest thought about them whatsoever.”
Douglas Adams

"Only when the last tree has died and the last river been poisoned and the last fish been caught will we realise we cannot eat money."
Apparently a native Indian saying.

"The people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the peacemakers for lack of patriotism and exposing the country to danger. It works the same in any country."
- Nazi Reich Marshall Hermann Goering, at the Nuremberg War Trials

“This planet has - or rather had - a problem, which was this: most of the people on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper, which is odd because on the whole it wasn't the small green pieces of paper that were unhappy.”
- "The Hitchhikers Guide to the Galaxy" by Douglas Adams

"Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."
Kenneth Boulding, economist

“Being right too soon is socially unacceptable.”
Robert A. Heinlein

And my own submissions:
“I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crises. The great point is to bring them the real facts.”
“You cannot escape the responsibility of tomorrow by evading it today.”
Abraham Lincoln

Friday, February 20, 2009

The Pyramids of Egypt Got Nothing On Us

On a scale of one to ten, what I know about financial markets is a minus two. Talk about derivatives and hedge funds and futures, and I can't even begin to follow. But even I understand pyramid schemes -- to keep them from collapsing, you must constantly bring in new capital, you must keep growing. Pyramid schemes work great in the beginning -- the guys at the top get rich, the guys in the middle get promises of getting to the top, and the guys at the bottom believe they too will get their day. But eventually all pyramids reach the limit of their growth potential and the poor schmoes on the bottom get crushed in the implosion. That's why pyramid schemes are illegal. That's why Madoff is in soooo much trouble.

But, hey, wait -- isn't that how our whole financial system is structured? Isn't it all one giant Ponzi scheme? Isn't that why we're desperately pumping more money into the pyramid to keep it from imploding? Like I said, what I know is a minus two, so I could have this all wrong.

What led me to this conclusion was an article by Chuck Burr, also known as culturequake. To quote from his article:

Total world derivatives are $1000 trillion or 19 times the total world GDP of $54 billion. Over-the-counter derivatives total $684 trillion of which 67 percent are interest rate swaps. Exchange-traded derivatives total $344 trillion. Interest rate swaps are the largest derivative powder keg waiting to blow the world financial markets to supernova.
Our capitalist global casino is a house of cards. If the economy continues to sink, credit default swaps will be the first to blow as we move from hundreds of billions to trillions in corporate quarterly losses. This triggers more deficit spending, which ignites more inflation which lights the fuse to the interest rate swaps supernova.

Greater financial risk plus plummeting earnings per share pushes stock markets lower, which increases pension deficits and defaults (S&P 500 Corporate Earnings chart). As mentioned in my previous essay, America’s 500 largest companies have a deficit of $200 billion in their pension plans. If the Dow hits 4,000, pension deficits would rise to $400 to $500 billion. Retirees lose their pensions and stock market investments. Many will be left with just their FDIC insured deposits if the government does not default.

What applies to the financial markets applies to our entire economical model -- our current economy is built upon a foundation of ever increasing debt. To keep our system from collapsing, it must grow. Housing prices must go up, salaries must go up, sales must go up, tax revenues must go up. If we reach the limit of our growth potential, the whole thing will implode and the poor schmoes at the bottom will get crushed.

Sounds just like a pyramid scheme to me. But, hey, I could be wrong!

[G:As it turns out, I'm not the only one who sees it this way! Check out Joe Romm's piece: Is the global economy a Ponzi scheme, are we all Bernie Madoffs, and what comes next? Part 1]

Tuesday, February 10, 2009

Gold Party

Years ago, I went to a lingerie party. Not proud of it, but there it is. Years before that, I went to a Mary Kay cosmetic party, and years before that, a Tupperware party. So, hey, I've been around the block. I'm no virgin!

But a gold party? "Bring your old gold jewelry," she said, "the stuff you don't want anymore. You know, broken chains, singleton earrings, or pieces you no longer wear." (She must not have access to my jewelry box or she would know that I have very little of the 'real stuff'!) "I went to one last week," she continued. "Took in a handful of gold and would have been happy with 50 bucks. I went home with 450!!"

"I think I'll pass," I answered. "I mean, if it's worth that much now, I'll just hang on to it. Might be worth even more someday."

"Well," she replied, "I figure it this way. People don't want to invest in stocks right now so they're looking for a place to put their money. Gold is it. But when the economy recovers, stocks will go up and gold will go down. Might as well get while the getting is good."

I didn't tell her where I think the economy is going, but it's not back up. And gold probably is a good investment, but I don't like the way it's mined. Odd, isn't it, how much value we put in a relatively useless yellow metal? It's good for jewelry and coins but not much more -- too soft for tools. And you can't eat it, drink it, or use it for shelter.

I hung up the phone, feeling as if I had been kicked in the stomach. How could we have dug our way so far down into the hole and still not notice the bad air? Well, I'm hanging onto my gold, the little that I do have, and I'm putting my coins in a jar every night. Just another insurance policy.

Friday, February 6, 2009


I have an elephant that follows me everywhere. He's invisible to just about everyone I know, so I try not to refer to him too often -- no point in giving people even more reason to believe I'm a bit screwy. But he is hard to ignore! Some days we tolerate one another rather well, but lately he seems to be getting more insistent -- he likes pushing me around, making me jump through hoops. There are days when he looks so terrifying that he scares the bejeebers out of me; there are nights when he sits on my chest and makes it hard to sleep, and there are mornings when he boots me out of bed at o-dark-thirty. But the hardest thing is that he's always there, the elephant in the room, and to preserve any claim on normalcy, I have to pretend otherwise.

At least he's not pink!