My only 2016 post

I decided to document something that I connected in my brain.

We squandered the energy wealth slowly built up over 100 million years (fossil fuels) on short term wants that are consumed or obsolete or otherwise unusable after a decade or so and left with what? A planet that is saturated with plastic micro-pieces (oceans), carbon dioxide and methane (atmosphere) and another million or so chemical compounds that didn’t exist 200 years ago permeating all of it.  Afterwhich, we, as a species, will need to deal with that, PLUS how to feed 8+(?) Billion people from the energy of the sun or other natural energy flows (e.g., gravity driven water, geothermal).

The Olduvai theory is slowly playing out ... (until it will be far faster than you are prepared for)

Not bad as far as thoughts go...

The Whisper of the Shutoff Valve

http://thearchdruidreport.blogspot.com/2015/05/the-whisper-of-shutoff-valve.html
WEDNESDAY, MAY 06, 2015
The Whisper of the Shutoff Valve

Last week’s post on the impending decline and fall of the internet fielded a great many responses.

That was no surprise, to be sure; nor was I startled in the least to find that many of them rejected the thesis of the post with some heat. Contemporary pop culture’s strident insistence that technological progress is a clock that never runs backwards made such counterclaims inevitable.

Still, it’s always educational to watch the arguments fielded to prop up the increasingly shaky edifice of the modern mythology of progress, and the last week was no exception. A response I found particularly interesting from that standpoint appeared on one of the many online venues where Archdruid Report posts appear. One of the commenters insisted that my post should be rejected out of hand as mere doom and gloom; after all, he pointed out, it was ridiculous for me to suggest that fifty years from now, a majority of the population of the United States might be without reliable electricity or running water.

I’ve made the same prediction here and elsewhere a good many times. Each time, most of my readers or listeners seem to have taken it as a piece of sheer rhetorical hyperbole. The electrical grid and the assorted systems that send potable water flowing out of faucets are so basic to the rituals of everyday life in today’s America that their continued presence is taken for granted.  At most, it’s conceivable that individuals might choose not to connect to them; there’s a certain amount of talk about off-grid living here and there in the alternative media, for example.  That people who want these things might not have access to them, though, is pretty much unthinkable.

Meanwhile, in Detroit and Baltimore, tens of thousands of residents are in the process of losing their access to water and electricity.

The situation in both cities is much the same, and there’s every reason to think that identical headlines will shortly appear in reference to other cities around the nation. Not that many decades ago, Detroit and Baltimore were important industrial centers with thriving economies. Along with more than a hundred other cities in America’s Rust Belt, they were thrown under the bus with the first wave of industrial offshoring in the 1970s.  The situation for both cities has only gotten worse since that time, as the United States completed its long transition from a manufacturing economy producing goods and services to a bubble economy that mostly produces unpayable IOUs.

These days, the middle-class families whose tax payments propped up the expansive urban systems of an earlier day have long since moved out of town. Most of the remaining residents are poor, and the ongoing redistribution of wealth in America toward the very rich and away from everyone else has driven down the income of the urban poor to the point that many of them can no longer afford to pay their water and power bills. City utilities in Detroit and Baltimore have been sufficiently sensitive to political pressures that large-scale utility shutoffs have been delayed, but shifts in the political climate in both cities are bringing the delays to an end; water bills have increased steadily, more and more people have been unable to pay them, and the result is as predictable as it is brutal.
The debate over the Detroit and Baltimore shutoffs has followed the usual pattern, as one side wallows in bash-the-poor rhetoric while the other side insists plaintively that access to utilities is a human right. Neither side seems to be interested in talking about the broader context in which these disputes take shape. There are two aspects to that broader context, and it’s a tossup which is the more threatening.
The first aspect is the failure of the US economy to recover in any meaningful sense from the financial crisis of 2008. Now of course politicians from Obama on down have gone overtime grandstanding about the alleged recovery we’re in. I invite any of my readers who bought into that rhetoric to try the following simple experiment.  Go to your favorite internet search engine and look up how much the fracking industry has added to the US gross domestic product each year from 2009 to 2014. Now subtract that figure from the US gross domestic product for each of those years, and see how much growth there’s actually been in the rest of the economy since the real estate bubble imploded.

What you’ll find, if you take the time to do that, is that the rest of the US economy has been flat on its back gasping for air for the last five years. What makes this even more problematic, as I’ve noted in several previous posts here, is that the great fracking boom about which we’ve heard so much for the last five years was never actually the game-changing energy revolution its promoters claimed; it was simply another installment in the series of speculative bubbles that has largely replaced constructive economic activity in this country over the last two decades or so.

What’s more, it’s not the only bubble currently being blown, and it may not even be the largest.

We’ve also got a second tech-stock bubble, with money-losing internet corporations racking up absurd valuations in the stock market while they burn through millions of dollars of venture capital; we’ve got a student loan bubble, in which billions of dollars of loans that will never be paid back have been bundled, packaged, and sold to investors just like all those no-doc mortgages were a decade ago; car loans are getting the same treatment; the real estate market is fizzing again in many urban areas as investors pile into another round of lavishly marketed property investments—well, I could go on for some time. It’s entirely possible that if all the bubble activity were to be subtracted from the last five years or so of GDP, the result would show an economy in freefall.

Certainly that’s the impression that emerges if you take the time to check out those economic statistics that aren’t being systematically jiggered by the US government for PR purposes. The number of long-term unemployed in America is at an all-time high; roads, bridges, and other basic infrastructure is falling to pieces; measurements of US public health—generally considered a good proxy for the real economic condition of the population—are well below those of other industrial countries, heading toward Third World levels; abandoned shopping malls litter the landscape while major retailers announce more than 6000 store closures. These are not things you see in an era of economic expansion, or even one of relative stability; they’re markers of decline.

The utility shutoffs in Detroit and Baltimore are further symptoms of the same broad process of economic unraveling. It’s true, as pundits in the media have been insisting since the story broke, that utilities get shut off for nonpayment of bills all the time. It’s equally true that shutting off the water supply of 20,000 or 30,000 people all at once is pretty much unprecedented. Both cities, please note, have had very large populations of poor people for many decades now.  Those who like to blame a “culture of poverty” for the tangled relationship between US governments and the American poor, and of course that trope has been rehashed by some of the pundits just mentioned, haven’t yet gotten around to explaining how the culture of poverty all at once inspired tens of thousands of people who had been paying their utility bills to stop doing so.

There are plenty of good reasons, after all, why poor people who used to pay their bills can’t do so any more. Standard business models in the United States used to take it for granted that the best way to run the staffing dimensions of any company, large or small, was to have as many full-time positions as possible and to use raises and other practical incentives to encourage employees who were good at their jobs to stay with the company. That approach has been increasingly unfashionable in today’s America, partly due to perverse regulatory incentives that penalize employers for offering full-time positions, partly to the emergence of attitudes in corner offices that treat employees as just another commodity. (I doubt it’s any kind of accident that most corporations nowadays refer to their employment offices as “human resource departments.” What do you do with a resource? You exploit it.)

These days, most of the jobs available to the poor are part-time, pay very little, and include nasty little clawbacks in the form of requirements that employees pay out of pocket for uniforms, equipment, and other things that employers used to provide as a matter of course. Meanwhile housing prices and rents are rising well above their post-2008 dip, and a great many other necessities are becoming more costly—inflation may be under control, or so the official statistics say, but anyone who’s been shopping at the same grocery store for the last eight years knows perfectly well that prices kept on rising anyway.

So you’ve got falling incomes running up against rising costs for food, rent, and utilities, among other things. In the resulting collision, something’s got to give, and for tens of thousands of poor Detroiters and Baltimoreans, what gave first was the ability to keep current on their water bills. Expect to see the same story playing out across the country as more people on the bottom of the income pyramid find themselves in the same situation. What you won’t hear in the media, though it’s visible enough if you know where to look and are willing to do so, is that people above the bottom of the income pyramid are also losing ground, being forced down toward economic nonpersonhood. From the middle classes down, everyone’s losing ground.

That process doesn’t continue any further than the middle class, to be sure. It’s been pointed out repeatedly that over the last four decades or so, the distribution of wealth in America has skewed further and further out of balance, with the top 20% of incomes taking a larger and larger share at the expense of everybody else. That’s an important factor in bringing about the collision just described. Some thinkers on the radical fringes of American society, which is the only place in the US you can talk about such things these days, have argued that the raw greed of the well-to-do is the sole reason why so many people lower down the ladder are being pushed further down still.

Scapegoating rhetoric of that sort is always comforting, because it holds out the promise - theoretically, if not practically - that something can be done about the situation. If only the thieving rich could be lined up against a convenient brick wall and removed from the equation in the time-honored fashion, the logic goes, people in Detroit and Baltimore could afford to pay their water bills!  I suspect we’ll hear such claims increasingly often as the years pass and more and more Americans find their access to familiar comforts and necessities slipping away.  Simple answers are always popular in such times, not least when the people being scapegoated go as far out of their way to make themselves good targets for such exercises as the American rich have done in recent decades.
John Kenneth Galbraith’s equation of the current US political and economic elite with the French aristocracy on the eve of revolution rings even more true than it did when he wrote it back in 1992, in the pages of The Culture of Contentment. The unthinking extravagances, the casual dismissal of the last shreds of noblesse oblige, the obsessive pursuit of personal advantages and private feuds without the least thought of the potential consequences, the bland inability to recognize that the power, privilege, wealth, and sheer survival of the aristocracy depended on the system the aristocrats themselves were destabilizing by their actions - it’s all there, complete with sprawling overpriced mansions that could just about double for Versailles. The urban mobs that played so large a role back in 1789 are warming up for their performances as I write these words; the only thing left to complete the picture is a few tumbrils and a guillotine, and those will doubtless arrive on cue.

The senility of the current US elite, as noted in a previous post here, is a massive political fact in today’s America. Still, it’s not the only factor in play here. Previous generations of wealthy Americans recognized without too much difficulty that their power, prosperity, and survival depended on the willingness of the rest of the population to put up with their antics. Several times already in America’s history, elite groups have allied with populist forces to push through reforms that sharply weakened the power of the wealthy elite, because they recognized that the alternative was a social explosion even more destructive to the system on which elite power depends.***

I suppose it’s possible that the people currently occupying the upper ranks of the political and economic pyramid in today’s America are just that much more stupid than their equivalents in the Jacksonian, Progressive, and New Deal eras. Still, there’s at least one other explanation to hand, and it’s the second of the two threatening contextual issues mentioned earlier.

Until the nineteenth century, fresh running water piped into homes for everyday use was purely an affectation of the very rich in a few very wealthy and technologically adept societies. Sewer pipes to take dirty water and human wastes out of the house belonged in the same category. This wasn’t because nobody knew how plumbing works—the Romans had competent plumbers, for example, and water faucets and flush toilets were to be found in Roman mansions of the imperial age. The reason those same things weren’t found in every Roman house was economic, not technical.

Behind that economic issue lay an ecological reality.  White’s Law, one of the foundational principles of human ecology, states that economic development is a function of energy per capita. For a society before the industrial age, the Roman Empire had an impressive amount of energy per capita to expend; control over the agricultural economy of the Mediterranean basin, modest inputs from sunlight, water and wind, and a thriving slave industry fed by the expansion of Roman military power all fed into the capacity of Roman society to develop itself economically and technically. That’s why rich Romans had running water and iced drinks in summer, while their equivalents in ancient Greece a few centuries earlier had to make do without either one.

Fossil fuels gave industrial civilization a supply of energy many orders of magnitude greater than any previous human civilization has had—a supply vast enough that the difference remains huge even after the vast expansion of population that followed the industrial revolution. There was, however, a catch—or, more precisely, two catches.  To begin with, fossil fuels are finite, nonrenewable resources; no matter how much handwaving is employed in the attempt to obscure this point - and whatever else might be in short supply these days, that sort of handwaving is not - every barrel of oil, ton of coal, or cubic foot of natural gas that’s burnt takes the world one step closer to the point at which there will be no economically extractable reserves of oil, coal, or natural gas at all.

That’s catch #1. Catch #2 is subtler, and considerably more dangerous. Oil, coal, and natural gas don’t leap out of the ground on command. They have to be extracted and processed, and this takes energy. Companies in the fossil fuel industries have always targeted the deposits that cost less to extract and process, for obvious economic reasons. What this means, though, is that over time, a larger and larger fraction of the energy yield of oil, coal, and natural gas has to be put right back into extracting and processing oil, coal, and natural gas—and this leaves less and less for all other uses.

That’s the vise that’s tightening around the American economy these days.  The great fracking boom, to the extent that it wasn’t simply one more speculative gimmick aimed at the pocketbooks of chumps, was an attempt to make up for the ongoing decline of America’s conventional oilfields by going after oil that was far more expensive to extract. The fact that none of the companies at the heart of the fracking boom ever turned a profit, even when oil brought more than $100 a barrel, gives some sense of just how costly shale oil is to get out of the ground. The financial cost of extraction, though, is a proxy for the energy cost of extraction—the amount of energy, and of the products of energy, that had to be thrown into the task of getting a little extra oil out of marginal source rock.

Energy needed to extract energy, again, can’t be used for any other purpose. It doesn’t contribute to the energy surplus that makes economic development possible. As the energy industry itself takes a bigger bite out of each year’s energy production, every other economic activity loses part of the fuel that makes it run. That, in turn, is the core reason why the American economy is on the ropes, America’s infrastructure is falling to bits—and Americans in Detroit and Baltimore are facing a transition to Third World conditions, without electricity or running water.

I suspect, for what it’s worth, that the shutoff notices being mailed to tens of thousands of poor families in those two cities are a good working model for the way that industrial civilization itself will wind down. It won’t be sudden; for decades to come, there will still be people who have access to what Americans today consider the ordinary necessities and comforts of everyday life; there will just be fewer of them each year. Outside that narrowing circle, the number of economic nonpersons will grow steadily, one shutoff notice at a time. [Ed. - This assumes that nothing triggers a financial collapse, which is a long-shot, IMHO]

As I’ve pointed out in previous posts, the line of fracture between the senile elite and what Arnold Toynbee called the internal proletariat—the people who live within a failing civilization’s borders but receive essentially none of its benefits—eventually opens into a chasm that swallows what’s left of the civilization. Sometimes the tectonic processes that pull the chasm open are hard to miss, but there are times when they’re a good deal more difficult to sense in action, and this is one of these latter times. Listen to the whisper of the shutoff valve, and you’ll hear tens of thousands of Americans being cut off from basic services the rest of us, for the time being, still take for granted.
Posted by John Michael Greer at  6:35 PM  

Planning for the future via IRAs

The Year of the Roth
By Terry Coxon
Created 29 Jul 2010
Until 2010 arrived, you couldn't have a Roth IRA if your income exceeded certain limits. That restriction is gone. Now anyone with a traditional IRA can convert it to a Roth. But should you?
Background
Roth or traditional, the central advantage of an IRA is tax deferral. Earnings accumulate and compound free of current tax, so the total value grows faster.
An IRA is fed by annual contributions made out of employment income (salary, wages, and fees). With a traditional IRA, the employment income you contribute escapes current tax. Tax time for the contributions and their earnings comes when you withdraw the money. With a Roth IRA, you pay tax on the income you contribute, but the contributions and earnings eventually can be withdrawn tax-free (provided the Roth is at least five years old when you take the money out).
The ceiling on contributions to either type of IRA is $5,000 per year ($6,000 if you've had a 50th birthday party).
Two other age milestones apply. Withdrawals you make before the year you reach age 59½ are subject to a 10% excise tax. And with a traditional IRA (but not a Roth), you must begin making "Required Minimum Distributions" when you reach age 70½. The question of whether to convert a traditional IRA to a Roth isn't simple. Even so, for most readers the answer turns out to be an emphatic YES.
A good way, perhaps the best way, to cut through the complexity and discover why the YES is so loud and clear is to imagine you’re starting from scratch. If you were just beginning to build an IRA, and if the rules would allow you to choose between making a deductible contribution to a traditional IRA or a non-deductible contribution to a Roth IRA, which would be better?
Tax Rates
A traditional IRA is a holding tank for taxable income. A Roth is a reservoir of tax-free income. Both give you the benefit of tax-free compounding.
Assume, for the sake of simplicity, that you are going to cash out your entire IRA when you reach age 70½. In that case, the choice between contributing to a traditional IRA or to a Roth is nothing more than a bet on tax rates. If your tax rate goes up, the Roth will give you more after-tax spendable cash when you reach age 70½. If your tax rate goes down, contributing to a Roth will turn out to have been a mistake. If your tax rate holds steady, your decision won't matter.
A simple example illustrates the last point. Suppose that:
You are 40 years old.
You have $5,000 of pre-tax employment income to contribute to an IRA
The IRA will earn 8% per year.
You are and always will be in a 40% tax bracket.
If you contribute to a traditional IRA, it will be worth $50,313 when you reach age 70½, but after paying tax on the withdrawal, you’ll be left with $30,188 to spend. On the other hand, if you pay tax on the $5,000 now and contribute the remaining $3,000 to a Roth, you'll eventually discover that you really only needed one hand – since the spendable cash waiting for you 30 years later will be the same $30,188.

Traditional IRA Roth IRA
IRA budget 5,000 5,000
Current tax on IRA budget None 2,000
Net contribution 5,000 3,000
Gross value after 30 years 50,313 30,188
Tax in 30 years 20,125 None
After-tax value in 30 years 30,188 30,188

In the example, the result is a tie. Assume any starting age, any earnings rate, and any constant tax rate, and you’ll still get a tie.
A number of factors break the tie.
Effective Size
Even if you assume a constant tax rate, contributing to the Roth will be a better choice because the contribution limit on a Roth is effectively much higher. Consider the example just above. The rules wouldn’t limit you to contributing $3,000 to a Roth; you could contribute $5,000 of after-tax income to it.
At a 40% tax rate, the government effectively owns 40% of your traditional IRA, so 40% of each contribution goes to building the government’s share. With a Roth, you own the whole thing.
Life After 70½
You probably have important assets outside of your IRA or other retirement plan, assets that are fully exposed to taxation. Regardless of your age, it makes sense to draw on those other assets for living expenses before touching tax-protected IRA money. Ideally you should spend the last outside dollar before you spend the first IRA dollar. With a Roth, you are free to do just that. With a traditional IRA, the rule on Required Minimum Distributions deprives you of that freedom when you reach age 70½.
The RMD rule eventually forces you to pull money out from under the tax-deferral canopy of a traditional IRA. But Roth money can stay sheltered until you need it, regardless of your age.
High Odds on Higher Rates
The farther out you look, the less confident you can be about tax rates. You may not like it, but you have no choice but to bet on where rates are headed. So let's be sensible handicappers. As you try to peer into 2011, 2012, 2020, or – strain at the binoculars – 2040, do the odds favor the low-tax horse or the high-tax horse?
For 2011, High Tax has already galloped into the stretch. Low Tax, meanwhile, is trembling behind a curtain, and the vet is reaching for his pistol of mercy.
The "Bush" tax cuts are set to expire at the end of this year. Unless new legislation extends them (unlikely, given the attitudes of the current White House occupant), the top rate will bob up from today's 35% to 39.6%.
Try to see a few years beyond 2011, and what you find is a landscape of huge federal deficits – not a plausible background for lower tax rates.
If that picture of where tax rates are headed makes sense to you, then the case for contributing to a Roth rather than contributing to a traditional IRA gets even stronger.
Move the Previous Question
We started with the puzzle of whether you should convert an existing traditional IRA to a Roth. But all the answers so far have been about whether to send your 2010 contribution to a traditional IRA or to a Roth.
The contribution question and the conversion question are the same. Converting a traditional IRA to a Roth (pay tax on the income now) instead of staying with the traditional IRA (pay no current tax) has the same effect as contributing taxable income to a Roth (pay tax on the income now) instead of contributing it to a traditional IRA (pay no current tax). So any argument for sending your 2010 contribution to a Roth is also an argument for converting your traditional IRA to a Roth this year.
Easing the Pain
Converting a traditional IRA to a Roth usually means writing a large check for the tax bill. But by positioning your IRA properly, it’s possible to cut that tax bill by a big margin.
Most IRAs are sponsored by a financial institution – bank, broker, mutual fund family, or insurance company. Not surprisingly, they are limited to the investments or investment services the sponsor wants to promote.
An "Open Opportunity" IRA takes you past the limitations of a sponsored IRA. An Open Opportunity IRA owns a single asset – a limited liability company that you manage yourself. It, not the custodian, holds the investments you want.
The Open Opportunity format opens many doors that are closed to an ordinary IRA. You're free to invest in almost anything – real estate, tax liens, American Eagle gold coins (store them personally anywhere in the world), private placements, equipment leasing, foreign real estate, intellectual property that you buy or create. You name it. Your Open Opportunity IRA can even have its own foreign holding company.
Using a limited liability company to hold IRA investments also enables you to reduce the tax cost of a Roth conversion by adapting a valuation strategy commonly used in estate planning.
A now well-established and conventional estate-planning strategy is to put assets into an LLC having features that suppress the fair market value of ownership shares in the LLC. Such features often include restrictions on transferring shares, restrictions on distributions and a requirement for a supermajority, or even unanimity, to dissolve the LLC. Achieving a discount of 35% (the value of the shares vs. the value of the assets inside the LLC) is common, which reduces the related gift or estate tax by 35%.
With an Open Opportunity IRA, you can apply the same strategy to a Roth conversion, since it is the fair market value of the assets being transferred to the Roth – the shares in the LLC – that gets taxed. The result can be a big cut in the tax cost of making the conversion.
Timing
If converting to a Roth looks like the right move, the best time to do it is soon. An investor who makes a Roth conversion in a given year is allowed to undo it at any time before his tax return for the same year is due. This amounts to a wait-and-see period on investment performance, and the longer the period is, the more valuable it can be.
Suppose you make a Roth conversion and the investments do poorly between now and the time your 2010 tax return is due. In that case, you could, and probably should, revert to a traditional IRA. There would be no tax on the roundtrip. On the other hand, if the investments perform well between now and the due date, you would simply stay with the Roth and congratulate yourself for having converted early, when the IRA was worth less and the tax bill was smaller.
Don’t rush to convert your traditional IRA to a Roth, but don’t put off the decision. As it is with so many other matters, if it makes sense to act, sooner is better.

http://www.financialsense.com/contributors/terry-coxen/the-year-of-the-roth

Why a Fast Crash is More Likely

This is a great article explaining why it will be nearly impossible to adjust civilization to a declining energy paradigm in a non-disruptive manner.

Peaknic

http://ourfiniteworld.com/2011/04/11/steep-oil-decline-or-slow-oil-decline-expanded-thoughts/


Will the decline in world oil supply be fast or slow?
Posted by Gail the Actuary on April 18, 2011 – 11:15amTopic: Demand/ConsumptionTags: hubbert’s curve, peak oil [list all tags]

An Oil Drum reader wrote, asking the following question:

Dear Oil Drum Editors,
I have been reading quite a bit about peak oil recently. I get the impression (not based on data) that at some point there will be a quite steep decline in oil production/supply, and therefore we will see dramatic changes in how the world runs. However, when I look at oil depletion rates and oil production declines based on the Hubbert Curve, it seems to suggest a rather smooth decline. How is that some people expect a serious energy crunch in about two or three years, then?
Many thanks! –Curious Reader

Below is my answer to him.

Dear Curious,

It seems to me that

(1) A slow decline assumes that the only issue is geological decline in oil supply, and the economy and everything else can go on as usual. Technological advances and switches to alternatives might also be expected to help keep supply up.

(2) A fast decline can be expected if one or more adverse factors make oil supply decline faster than geological factors would suggest. These might include:

(a) Liebig’s Law of the Minimum – some necessary element for production, such as political stability, or adequate food for the population, or adequate financial stability, is missing or

(b) Declining Energy Return on Energy Invested (EROEI) interferes with the functioning of society, so the society generates too little net energy, and economic problems ensue, or

(c) Oil becomes so high priced that there is little demand for it. This would quite likely be related to declining EROEI.

My view is that some version of the faster decline scenario is likely, because we will hit limits that interfere with oil production or oil demand.

Let me explain my reasoning.

Declining EROEI

EROEI means Energy Returned on Energy Invested. It can be defined as the ratio of the amount of usable energy acquired from a particular energy resource to the amount of energy expended to obtain that energy resource. Wikipedia says,

When the EROEI of a resource is equal to or lower than 1, that energy source becomes an “energy sink”, and can no longer be used as a primary source of energy.

The situation is really worse than Wikipedia suggests. An economy needs a certain level of energy just to keep its infrastructure (roads, bridges, schools, medical system, etc.) repaired and working, and citizens educated. So energy resources, to really be useful, need an EROEI significantly higher than 1 to maintain the system at its current level of functioning.

How much higher than 1.0 the EROEI needs to be on average will depend on the economy. An economy such as that of China, with relatively fewer paved roads and less expensive schools and healthcare system can probably get along with a much average lower EROEI (perhaps 4.0?) than an economy like the United States (perhaps 8.0), because of lesser infrastructure demands.
If the average EROEI available to society is falling because oil is becoming more and more difficult to extract, an economy with a high standard of living such as the US would seem likely to be affected before an economy with a lower standard of living, such as China or India or Bangladesh, because of the higher EROEI needs of the more extensive infrastructure.

Ultimately, though, the world is one economy, so problems in one country are likely to affect the economies of other countries as well.

There a couple of issues related to declining EROEI:

1. High cost to extract. Sources of oil or natural gas or coal that are difficult (high cost) to extract tend to be lower in EROEI than sources that are low cost to extract. So high cost of extraction tends to be a marker for low EROEI. We are increasingly running into this issue, for both oil and natural gas.

2. Declining Net Energy. EROEI is closely related to “Net Energy,” which is the amount of usable energy that is left after deducting the energy that it takes to make energy. When net energy decreases, we have less energy to run society, making it difficult to do things like maintain bridges and roads, and fund schools.

So high cost of oil extraction, low net energy, and low EROEI are all very closely related.

What did M. King Hubbert Say?

M. King Hubbert in various papers such as these (1956, 1962, 1976) talked about a world in which other fuels took over, long before fossil fuels encountered problems with short supply.

In such a world, there would be plenty of net energy from alternative fuels to run society. Because of this, even if fossil fuels ran low, it would be easy to maintain the economy’s infrastructure, without disruption. In Hubbert’s 1962 paper, Energy Resources – A Report to the Committee on Natural Resources, Hubbert writes about the possibility of having so much cheap energy that it would be possible to essentially reverse combustion–combine lots of energy, plus carbon dioxide and water, to produce new types of fuel plus water. If we could do this, we could solve many of the world’s problems–fix our high CO2 levels, produce lots of fuel for our current vehicles, and even desalinate water, without fossil fuels.

He also showed this figure in his 1956 paper:

In this figure, most of the additional energy comes from nuclear energy, while a smaller amount comes from “solar” energy. By solar energy, Hubbert would seem to mean solar, wind, tidal, wood, biofuels, and other energy we get on a day-to-day basis, indirectly from the sun. His figure seems to suggest that solar energy would basically act as a fossil fuel extender, and would not last beyond the time fossil fuels last. The primary long-term source of energy would be nuclear.

Figure 3. Hubbert’s application of his curve to world oil supply, from his 1956 paper.

In such a world, applying Hubbert’s Curve to world oil supply would make perfect sense, because there would be plenty of other energy, to provide the energy needed to keep up the infrastructure needed to main extraction of oil, gas, and other fuels as long as they were available. Even liquid fuels and pollution wouldn’t be a problem, if they could be manufactured synthetically. The carrying capacity of the world for food would eventually be a factor, but in one scenario in his 1976 paper, he shows the possibility of world population eventually reaching 15 billion people, thanks to the availability of other fuels.

Another Approach to Forecasting Future Oil Supply: Limits to Growth Type Modeling

Another approach estimating the shape of the decline curve is by applying modeling techniques, such as used in the 1972 book Limits to Growth by Donella Meadows et al. The factors considered in this model were population, food per capita, industrial output, pollution, and resources. Resources were modeled in total, not oil separately from other types of resources.

There were 24 scenarios run. The base scenario suggested that the world would start hitting resource limits about now (plus or minus 10 or 20 years). There have been several analyses regarding how this model is faring, and the conclusion seems to be that it is more or less on track. This is a link to such an analysis by Charles Hall and John Day.

With this type of model, according to Limits to Growth (p. 142), “The basic mode of the world system is exponential growth of population and capital, followed by collapse.” This type of decline would seem to be substantially faster than the decline predicted by the Hubbert Curve.

One thing I notice about the Limits to Growth model is that it leaves out our debt-based financial system. Since so much capital is borrowed in today’s world, it seems like including such a variable would tend to make the system even more “brittle”, and perhaps move up the date when collapse occurs.

Also, the Limits to Growth model is for the world as a whole, rather than for different parts of the world. Different areas of the world can be expected to be affected differently, as oil gets in shorter supply. The effect of this would seem to be to push economies which have a higher need for oil (illustrated above with my estimate that the US requires a EROEI of 8.0 on energy resources) down toward economies that use smaller amounts of oil (illustrated by my rough guess that perhaps China could get by with an EROEI of 4.0), especially if they trade with each other. I explain how I see this happening in a later section of this post.

Demand for Oil (or other Fossil Fuels)

Even if there is plenty of high-priced oil extracted from the ground, if potential buyers cannot afford it, there can be a problem, leading to a decline in oil production. Demand can be thought of as the willingness and ability to purchase oil products. Many people would like to have gasoline for their cars, but if they are unemployed, or have a part-time minimum wage job, they are likely not to have enough money to buy very much.

Over the long term, declining demand can be expected because of declining EROEI, as illustrated by Prof. Charles Hall’s “Cheese Slicer” model:

Figure 4. Professor Charles Hall’s cheese slicer model of the economy, reflecting the energy needed to make energy, and other aspects of the economy at 1970

Figure 5. Professor Charles Hall’s cheese slicer model of the economy, reflecting the energy needed to make energy, and other aspects of the economy at 2030

Declining demand, and ultimately lack of sufficient demand to support supply, is related to the much larger size of the big black “energy needed to create energy” arrow as resources become more and more difficult to extract, and the much smaller size of the red discretionary spending arrows. When the discretionary spending arrows are small, people can’t afford the oil that is produced.

Lack of Demand Can Be Expected to Affect the More-Developed World before the Less-Developed World

Let me explain one way I see lack of demand for oil arising in the developed world today. This is related to the tendency of economies with high required EROEI to maintain infrastructure to be the first economies to be affected by declining EROEI, and by the tendency of free trade to lead to equalization among economies.

US energy consumption in general, and oil consumption in particular, has been relatively flat in the 2000-2009 period, and declining at the end of that period, indicating low demand. Prior to this period, it was rising.


More or less the reverse has happened in China and India. Growth in oil use and energy products in general was moderate prior to 2000, but increased rapidly after 2000.

Figure 7. China’s energy consumption, from Energy Export Data Browser

Figure 8. India’s energy consumption, from Energy Export Data Browser

When we look at the percentage of the US population that is employed (Figure 9), it has been decreasing since 2000, so there are fewer people earning wages, and thus able to buy oil and other products. Prior to 2000, the percentage of the US population working was increasing.

Figure 9. Percentage of US population with jobs has been falling since 2000, based on Bureau of Labor Statistics Data.

In fact, over time, in the US, there is a high correlation between number of people employed and amount of oil consumed.

Figure 10. Comparison of number of jobs (BLS) with oil product supplied (EIA)

This high correlation is not surprising for two reasons: (1) jobs very often involve often use oil in producing or shipping goods, and because (2) people who are earning a salary can afford to buy goods and services that use oil.


If we think about it, businesses employing people in China and India have three cost advantages over businesses employing people in the US:

1. People in China and India earn less, in large part because their life styles use less oil. As the price of oil has rises, a person would expect this difference to become greater, if salaries of US earners are raised over time, to reflect the higher cost of oil, as it rises. If the living standards in China increase, the salary differential could decline, but still might be very high in dollar terms.




2. The cost of electricity used in manufacturing in China and India is cheaper, because it is generally coal-based. The cost of electricity from coal is quite likely even cheaper than electricity from coal from the United States, because these countries are more likely to have poor pollution controls, and because the coal is extracted using cheap labor. The difference in the cost of electricity can be expected to become greater, to the extent the US imposes stricter pollution regulations, or switches to higher priced alternative power (say, offshore wind), or imposes a carbon tax.




3. Taxes and employee benefits are likely to be lower (in absolute dollars, but perhaps as a percentage as well) in China or India, because infrastructure is less complex, and because there is less in the way benefits comparable to Social Security, Medicare, etc. (This is related to the lower EROEI required to maintain the infrastructure in these countries.)
   With these advantages, as trade restrictions are eased and more “free” trade of services is enabled through the Internet, I would expect an increasing number of jobs to move overseas, and more goods and services to be imported. Salaries will also tend to stay lower in the US, especially for jobs associated to goods and services that can be produced more cheaply in China or India.

With these lower salaries in the US, demand for oil in the US will tend to be lower, because people who are paid less (or out of work) will not be able to afford high-priced oil for vacations and other optional purchases. As more US jobs move overseas, unemployment and recession can be expected to increasingly become problems. Furthermore, it will become difficult to collect enough taxes from the lower number of employed people to pay enough taxes to keep the system operating. I write about this in What’s Behind the US’ Budget Problems?

One thing that happens, too, with this arrangement is that world’s coal use has risen.

Figure 11. World energy consumption, from Energy Export Data Browser

I wonder if all of the emphasis on CO2 reduction has not exacerbated the problem. Countries that reduce their own coal use and instead rely more on imports can feel virtuous, but they also set the stage for negative impacts. By using less coal, these countries leave more coal for lesser developed countries to import. These lesser developed countries probably burn it less safely (for example, with less mercury controls) and compete with them for jobs. The developed countries can be expected to have more and more budget problems, as their tax bases erode, and the number of unemployed rises.

When new electricity generation is planned in the United States, the usual practice is to compare expected costs with other types of new electricity generation that might be possible in the United States. It seems to me that this practice does not show the full picture. Goods and services produced in the United States will have to compete with goods and services produced around the world. Some of the electricity used will be from nuclear plants that have long been paid off; some will be from coal production; and a little will be from high priced new types of electricity production. As long as there are no tariffs or other trade restrictions, higher-priced US electricity will tend to hinder exports and help imports. I would vote for trade restrictions.

Conclusion

The downslope of oil production can be expected to reflect a combination of different impacts.

Unless technology improvements truly have a huge impact, it would seem to me that the overall direction of the downslope is likely to be faster than Hubbert’s Curve would predict.
Thanks for writing!

Best Regards,
Gail Tverberg (also known as Gail the Actuary)

Why our Financial System is Fundamentally Broken

Unhinged: When Concrete Reality No Longer Matters to the Market (and What to Do About It)
by Zeus Yiamouyiannis, Ph.D.

Introduction

Something profound has happened, obscured by all the concerns about economic details and speculation about whether we are in a “deep recession” or a “depression,” a “nascent recovery” or a “W shaped” downturn. We no longer have a global economic system that is tethered to concrete reality. Parasitic, amoral, slight-of-hand value-shuffling (what I would call the “unreal economy”) has effectively trumped the “real economy,” the production and exchange of meaningful goods and services.

Worse, we’ve let it happen with our acquiescence, our hope that we can just ride this one out, and our denial of what we sense intuitively to be true—pervasive fraud in the conduct of global financial business and massive counterfeiting in the establishment of value.

We’ve allowed big banks and affiliated institutions to simply concoct fake wealth out of thin air, and we have legitimized and rewarded these concoctions with a massive transfer of real wealth to a very small but powerful oligarchy through unregulated private bets backed by public taxpayer money, stratospheric fees siphoned from transactions, predatory lending, and private equity cannibalization of once-productive firms.

A global economy mediated by an acceptance of a standardized, reality-based rule of law and value between nations has given way to the shrouded anarchy of transnational banks as overriding powers driven by their own brand of anti-public “interest.”

What constitutes value has migrated from actual value, based in something you earn and related to something you can actually concretely use, to “references to value,” some number merely assigned to some financial instrument attached to some good or service somewhere several degrees removed from its source. (Think “mortgage backed securities” where the actual deeds to properties are no longer even in the picture after extensive “packaging” and repackaging.)

This is all a fancy way of playing the age old game, externalize liabilities, internalize gains, but on an unprecedented and potentially cataclysmic scale. Just as with political coverage that largely deals with the “horse race,” personalities, gaffes, and likeability of candidates over actual policy, financial coverage has concerned itself with a relentless boosterism, tea leaf reading, and a host of other trivialities while the structural rot goes unreported.

Abstractions like the “velocity of money,” along with whitewashing indicators like trading volume are used to gauge the health of an economy without sorting out whether such indicators are attached to some productive, underlying activity or asset. This all serves to create a convenient smoke screen for moneyed interests, and progressively makes the “new normal” one that thrusts citizens deeper into debt servitude.

Post Mortem and Review

A post mortem is in order. The elements of this worldwide con game are remarkably simple, not complex at all. Apparently you only need a few things to make a mockery of the entire global economic system, and big banks garnered these few important things through “regulatory capture”:
1) Unregulated, unenforced rules (particularly for derivatives)
2) license to “mark to model” (assign your own values to your assets)
3) ability to peg present value to irrational expected future returns (based on unlimited, exponential growth)
4) infinite leverage (no effective requirements for reserve capital in unregulated “shadow” markets)
5) massive size, so that the bank is "too big to fail" 6) non-transparency and non-accountability.

This combined with the moral, social, personal, and cultural approval of maximizing profit at any cost, incentivizes massive fraud and counterfeiting. How could this be otherwise, given the premises?

So here we have a system where you can 1) make up your own rules, 2) establish any value for any asset you choose, 3) inflate that value a hundred fold based on ostensible future value and returns, 4) leverage that inflated value another thousand or a million fold simply on your say-so, enough to buy up multi-billion dollar firms if you choose, 5) lean on taxpayer bailouts when you get into trouble, and 6) do this without any disclosure or accountability, all based upon a self-interested formula you concoct to enrich yourself. This is less sin or malfeasance than just plain lunacy. Yet, this is what we have and what we have allowed to gain the upper hand.

Literally, following the same formula with a little “solid reputation” sprinkled on, I can value my cat’s litter box at a million dollars, trade on its ostensible increased future value to skim myself a tidy sum in profit and transaction fees, leverage my “marked to model” value of that litter box, a million fold to buy up Chrysler. I can then loot Chrysler, stripping it of its real wealth and infrastructure, gut jobs, etc. for short term boosts to profits, and then walk away a billionaire.

I can give any reason or no reason at all for what I’m doing. I don’t have to tell anyone a thing, and no one is going to come after me. If they do “come after me” it will be to lard me with hundreds of billions of dollars of taxpayer money to keep the national or global economy from collapsing.

Talk about throwing good money after bad. The most I can lose is my litter box and now that everyone has a stake in the con, they have every incentive to cover it up and make me whole, both to protect against their anxiety and their feelings they’ve been conned, and to maintain a functioning dysfunctional system.

The Historical Proof

Let me stress again: This is not mere “moral hazard;” this is sheer lunacy of the highest order. Moral hazard assumes a rational framework where the “good” (productivity, efficiency, etc.) is rewarded. We have currently already established and incentivized as “rational” an irrational framework where outright, willful lying, theft, fraud, and counterfeiting are rewarded. The more parasitic and more inefficient I am in this framework, the more I make. The more I trade an asset back and forth, the more fees I get.

Even if those fees eclipse the entire value of the asset in question, I am “rationally” compelled to continue trading as long as someone else is paying. If I can inflate the value of my asset at will and pay Moody’s or Standard and Poor’s to give me a AAA rating who’s going to know?

It is sobering to contemplate that the market for unregulated derivatives alone, has exceeded the global GDP at a total volume exceeding 600 trillion dollars and possibly more than a quadrillion dollars (1,000,000,000,000,000 or a million billion dollars).

Exhibit 1: The Private Equity Tax Loophole Scam:

Joshua Kosman, author of The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis does a pretty good run-down on this scam on NPR’s November 16, 2009 “Fresh Air” .

According to the transcript, private equity firms (the new name for “leveraged buyout firms”) like the notorious Carlyle Group have purchased companies in a variety of industries and are now set to default on about a trillion dollars of their debts, close to the amount of default for the entire sub-prime mortgage market. Taking advantage of cheap money and lax lending, private equity firms will likely bankrupt about half of the 3,100 companies they bought, which currently employ one in ten American workers. Kosman estimates about 1.9 million jobs would be lost as a result.

By squeezing out workers, cutting research and development, private equity firms sell to each other at a massive short-term profit that devastates long-term viability. With the mattress industry, private equity firms bought Sealy, Simmons, and Serta. They then proceeded to essentially fix prices between themselves raising prices while lowering quality and durability. This worked short term, until competitors like Tempur-pedic gained market share and left the overpriced junk offered by their hollowed-out leveraged companies on the shelves. Market share and profitability for Serta dropped below pre-takeover levels.

The same formula is used with hospitals and other industries. Take a productive company with some reputation and loyalty, trash it, counting on lag time for people to depart, and make off with loot when it crashes.

Incredibly, going back to our theme of the market being “unhinged” from concrete reality, these private equity firms purchase companies with debt. Literally they put their fractional “money” down, and get the firm they are buying to take on the remainder of the debt! Ostensibly, since interest is tax-deductible, the reasoning goes, tax savings for the company accepting the debt will outweigh the disadvantages of paying down the interest and taking on the risks.

Of course, unsurprisingly, reality intercedes in a different direction. The scam is exposed. The equity firm walks away, and the company goes bankrupt. Many jobs are lost, and the whole country pays.

Exhibit 2: Fabricated Supply and Demand Scam: The Speculative Run-Up in Oil

Remember in the mid-2000’s when the media kept falling over itself to explain why gas prices were unhinged from oil supply and unrelated to any impinging world and seasonal events. Back then it was all explained away by mumbo-jumbo about the price of refining, and how certain refineries were off line. By 2007, the U.S. had begun a serious inquiry, with some settlements won for price fixing by retailers (the “bad apple strategy” that always leaves the big boys untouched), and, soon after, the prices settled down.

Now we have news of a new unexplained buoyancy in gas prices. This time commentators aren’t even bothering to pretend it has any rational connection with present supply and demand. Oil supplies are abundant, demand is down due to unemployed people staying home, and the summer driving season has yet to arrive. Instead prices are being “expectation driven” by speculators betting future upticks in the world economy, particularly China’s, will increase demand for oil.

The bitter irony of all this future possible value being more important than the present actual value is that this speculation could actually drive prices beyond the reach of people with less money now due to the poor economy and squash the very recovery that would give rise to legitimately higher prices in the future.

Again, a certain kind of twisted, counterproductive logic is allowed to run the market without correction from present, concrete conditions.

Exhibit 3: The Double Whammy Scam: Profiting from Designed Failure and Placing Bets Backed by Counterfeit Value

A recent government suit alleges that Goldman Sachs colluded with a billionaire short seller, John Paulson, to defraud investors and “construct a package of mortgage linked derivatives designed to blow up” so Paulson could make a fortune.

Continuing from AP reporter, Bernard Condon’s, article in the Washington Post, (Does Goldman Case Tarnish Cassandras of the Crash? April 21, 2010):

So-called short sellers, like Paulson, profit when stocks, mortgages or other assets they bet against lose value. In other words, the game of guessing which way prices would go was allegedly rigged in this case. That sounds bad enough. But some Wall Street veterans say the real tarnish on our erstwhile housing heroes is the package itself - regardless of whether it was designed to fail. By just linking to mortgages but not actually containing any, the Paulson package and others marketed by banks upped bets on housing to more than even the mortgages in existence, making the overall losses much bigger now that boom has turned to bust.

"Normally short sellers add rationality to a runaway marketplace," says Charles Smith, who oversees $1 billion at Fort Pitt Capital Group. "But in this case they were adding rocket fuel to the fire." The fuel here is devilishly difficult to understand. Called synthetic collateralized debt obligations (CDOs), these packages contained a series of wagers on whether thousands of homeowners would continue to pay their loans.

The key thing to grasp about them, and the part that explains how they magnified housing losses, is that they don't actually own any mortgages and so aren't limited by the number of such loans. Instead, these investments merely make "reference" to real mortgages to determine which side of the wager wins. (my emphases)

Did you catch that? This language confirms the divorce of concrete reality and the market: 1) “Linking to” mortgages but not containing any, 2) not actually owning any mortgages but being able to bet on them, 3) making “reference” to real mortgages to determine which side of the wager wins, 4) wagering bets not “limited” by material assets. The last point could theoretically involve an infinite number of bets and infinite returns on those bets.

This is well analyzed except for one point: The core of this dealing is deceptively simple, even if the instruments themselves are deliberately complex. Industry bettors simply concoct counterfeit value by leveraging their own abstract, self-assigned-value assets between themselves in a ping-pong ascending scale beyond the value of the underlying concrete assets.
The bet has both replaced and exceeded the thing it refers to. There is no “there” there. Real money is siphoned in fees from the “marks,” the pension funds who are told they are investing in highly rated, stable instruments, and then the U.S. taxpayer is asked to take up trillions of dollars of real debt in order to cover a counterfeit, undisclosed bidding/betting war.

Should I be able to make a “reference” to the Bank of England, or food, or oil, simply collect billions of real money if I bet right, and lose my never-there-to-begin-with counterfeit wealth if I don’t?

Who is the “house” in this casino in which someone can wage a series of bets on assets that actually exceed the value of the assets themselves? It’s always going to be the American taxpayer, the public, bailing out an unregulated, morally and financially reprehensible private market. Usually when someone says, “You really hate America,” it’s a disgruntled conservative with a chip on his shoulder.

Well, these profiteers actually make huge sums of money by destroying America, robbing it blind, and then sticking the American citizen with the check for any downside bets. Now let’s see why very little is currently being done to correct this.

One Nasty Hangover: Cultural Capture, Complicity, Rage, and Wondering When the Perps Will Walk

As with any successful “mark” in a con, the initial reaction by the abused is shame and efforts to pretend a scam did not happen. With the American people there is also more than a trace of complicity. People got high on visions of unlimited wealth and got a taste of their skyrocketing wealth, fictional and bubble-driven as it might have been. Some even used their houses as ATM’s.

This stems from a creeping and cleverly warped version of the American Dream, that we all could get wealthy without working if we were lucky or clever enough. In the orgy to get in on a “good thing,” people didn’t ask the serious question about whether this collusion was a morally, socially, and spiritually bad way to live your life, not to mention an abominable way to treat others and future generations.

Turns out the “good thing” is bad for everyone involved, even the crooks. People will begin to wake up to this as more jobs get lost and the fig leaves of fanfare-driven recovery fade into an uncomfortable reality—the United States and the world has been ripped off trillions of dollars, more than can be paid back even on the backs of overworking two-income families.

Rage is beginning to replace shame as the promises of recovery keeping meeting the stubborn reality of high unemployment, frozen lending, plunging commercial and residential real estate, skyrocketing college tuition, and expensive oil. People are beginning to wonder, “Where are the prosecutions; where is the accountability?” Why are citizens being counseled to liquidate their retirements to pay for their upside-down mortgages while corporations walk away from billion dollar real estate busts? Why is public money being used to bail out banks that engaged in purely private, unregulated betting?

Part of the answer is revealed in the case of Bradley Birkenfeld. Birkenfeld was an inside-the-inner-circle employee of the UBS, a Swiss Bank and one of the largest banks in the world. Swiss banks pride themselves on their “discretion” and privacy, a policy that allowed them to hide stolen Nazi wealth for decades.

So it’s clear that we are only talking financial and not moral “discretion.” In fact, Swiss banks continue to be a haven for tax cheats, international arms dealers, and anyone looking to park their ill-gotten gains outside the prying eyes of international law. After counseling clients including American politicians how to divert their money into UBS to avoid taxes, and even acting as a “concierge” to buy expensive objects for clients, Birkenfeld finally blew the whistle on the operation.

In interviews on CBS’s 60 minutes and Amy Goodman’s Democracy Now, Birkenfeld and his lawyer outlined the depth the corruption. From the April 15th, 2010 Democracy Now interview with Stephen Kohn, Birkenfeld’s lawyer:

Nineteen thousand American millionaires and billionaires had these offshore accounts. You had to be very wealthy to set one of these up. The government created an amnesty program, so if you voluntarily turned yourself in, you escaped any prosecution and even public exposure. No one would even know who you were. On the other hand, to Mr. Birkenfeld, who didn’t even have an account, Mr. Birkenfeld, who turned it in, he was sentenced to prison and was not offered immunity. So that’s the dichotomy.

Dichotomy indeed. There existed in UBS tens of billions of dollars of hidden, tax-dodges for the American clients alone, and all those clients got was a slap on the wrist and more “discretion” around their identities from U.S. law enforcement? UBS itself was merely fined 780 million dollars and forced to give over its names, a drop in the bucket for their almost 2 trillion dollar holdings. For all those wanting a progressive resurgence of the level playing field and the rule of law, there is little evidence of accountability to nourish one’s desire for justice. Hopes for real top-down prosecution are fading, but is there another tack the public can take?

Conclusion: A Possible Silver Lining

How can a world-wide economy unhinged from concrete reality perhaps result in positive changes (after, no doubt, a lot of pain)? The answer is fairly brief. Part of the problem involves mooring our own notions of the good life to our material subsistence and/or success. The notion that living luxuriously equals the epitome of the good life, has stunted our development and kept us infantilized, even with the many technological, artistic, social, and cultural advances we have made.

We still spend a vast majority of our time grinding out a living in so-so jobs that do not challenge us intellectually or creatively and that displace quality energy and time we could be spending with family, friends, community, and world.

We can make things, even necessities, cheaper than we ever have, yet we are spending more time working. In the 1990’s and 2000’s, productivity skyrocketed in the U.S., but real wages remained flat or declined. Now we see why. We have become debts serfs to financializers and market manipulators, who don’t even bother having a material stake in the game.

We can see two things from this if we are prepared to mature:
1) The good life, and even the economy itself, do not have to be primarily tied to material existence, and 2) We can do most if not all the things for ourselves that “experts” are being paid to do. We can decide to rent or share housing and watch each other’s kids. We can decide to drastically reduce our consumption, thus saving the environment and de-polluting our daily life. We can move our money to community banks, directly invest into microfinance, or lend to each other through “circle lending,” cutting out the big banks and brokerages.

We can help each other fortify and maintain our health through community programs and “medical tourism”, cutting out health insurance and medical industry parasites. We can set up or join intellectually and socially edifying cultural groups. In short we can exercise civil disobedience, refuse to be stooges, create our own spaces, and and recommit to spend time and energy where our true heart lies, free from the delusional temptations of a corporate-driven reason for life that has shown itself to be both conclusively abusive and unfulfilling.

In the end, they need us, and we don’t need them. This is the only “this life” we are going to have. It’s a lot more adventurous and enhancing to be a cultural creative then a debt slave. So, what are we waiting for?

copyright 2010 Zeus Yiamouyiannis. Permission to link to this essay is hereby granted to anyone who includes the author's name, copyright and the URL to this site. http://www.oftwominds.com/blogmay10/market-unhinged-from-reality05-10.html