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The Bottom’s Falling Out

The Bottom’s Falling Out

Imagine you’re standing across the street from a house that’s on the verge of falling apart, a condemned building, an edifice devoured by rot from bottom to top. Now imagine you see a construction crew arriving to repair it, and they start to fix the roof. You would think that’s not much use if the walls, floor and foundation are just one wolf’s huff and puff away from collapse.

Still, that is what the world’s central banks are doing today: they “fix” the top by bailing out banks and allege that somehow that will fix the rest of the edifice too. In that same analogy, while central banks prop up banks, governments try to support the walls, by bailing out businesses. Again, while the floors and foundations keep on rotting away. And when the floors cave in, so of course will the walls, just like the roof.

There may appear to be some logic to all this, but it’s only the “inner logic” of an economic and political ideology that deals exclusively with how things should be, not how they are. Of course it’s nice to have a shiny new roof, and strong walls. But neither have any value if there are no more floors to support them.

This is what is happening today to our economies and societies. The 2008 crisis wasn’t bad enough to expose the failures of the “inner logic” of the system, but the fallout of COVID19 will be. And it’s not the virus that does it all, or the lockdowns, they merely expose a system that’s been rotting for many years without its floors and foundations ever being repaired.

…click on the above link to read the rest of the article…

2018 Chaos, 2019 Mayhem

Titian The rape of Europe 1560-62

It took me a while to decide which word(s) best define the past year and the next one, but I think this is pretty much it. 2018 was chaotic more than anything else, and that chaos will give rise to mayhem in 2019.

What I think is striking is that this is true across the board, in all walks of life so to speak. In finance, in politics, in energy markets, in ecological matters, and perhaps most of all in the ways all these topics are being covered by what once were trusted media.

I’m going to have to come back to all these topics separately, so it’s promising to be a very busy holiday season, but it’s also good to try and put them together in one place, if only to show how interconnected everything is. And how futile it is to look at the economy without seeing its connection to energy flows and ecosystems. And vice versa.

In finance and economics, we’ve seen an avalanche of falling numbers recently, in stock prices, bond prices, housing, across the globe, and obviously that evokes a lot of comments in the financial press. But that press, and bankers investors on their own, still talk about markets.

However, as I wrote in April 2018, if there is no price discovery, and there isn’t, there ARE NO markets, and it would be good and beneficial if many more people absorb that simple reality. Many more so-called traders and investors would be a start, but by no means enough. Lots more people who have nothing to do with the ‘markets’ should understand why there is no such thing anymore.

 …click on the above link to read the rest of the article…

Interview Raúl Ilargi Meijer about Julian Assange

Charles Burchfield Bluebird and Cottonwoods (The Birches) 1917


My Australian friend Wayne Hall, who‘s lived in Athens for many many years, is doing a video project on fellow Aussie Julian Assange. This is an interview with me, recorded 3 weeks or so ago, that’s part of the project. I would have done 1000 things differently, but it’s not my baby, it’s Wayne’s world. At least some snippets of information come through.

Note: it was 100º, and it shows. Very sweaty, very uncomfortable. Still, while I’m not wild about doing videos -we had Nicole for that, right?!- maybe I should be doing more of this. Not that I watched this one, mind you. But you can.

Wayne Hall: Good afternoon Raúl Ilargi Meijer. You have a blog called “Automatic Earth” and you are very active with it. Can you say something about “Automatic Earth”? When was it founded? What is its aim?

Ilargi: It was founded almost eleven years ago. Nicole Foss and I founded it because we wanted to write about finance whereas the people we were writing for before that, “The Oil Drum”, didn’t want us to do that and we thought it was too important not to.

WH: And what are you doing here in Athens?

Ilargi: I’m supporting a group of people who feed the homeless and refugees. I’ve written a bunch of articles at “Automatic Earth” about that.

WH: Now even though you have written articles that show clearly how important you think it is to try to defend Julian Assange (I read one that you published today [17/8/2018] that was very much on that subject and it was a powerful article), you really don’t agree with Julian Assange on the importance of defending the European integration project or citizens’ Europe.

Ilargi: I have no idea what either of these things are.

Patriotism, Flags and Referendums

Robert Frank London 1952-53
‘Tis the jolly time of elections, referendums, flags and other democracy-related issues. They are all linked in some way or another, even if that’s not always obvious. Elections, in New Zealand and Germany this weekend, referendums in Catalonia and Kurdistan the coming week, a looming Party Congress in China, quarrels about a flag in the US and then there’s always Brexit.

About China: the Congress is only in October, Xi Jinping looks sure to broaden his powers even more, and it ain’t all that democratic, but we should still follow it, if only because party officials will be either demoted or promoted, and some of them govern more people than most kings, queens, presidents and prime ministers. They say everything’s bigger in Texas, but in China everything really is. Including debt.

New Zealand: the election very early this morning didn’t bring a much hoped for win for Labour, or any clear winner at all, so don’t expect any grand changes in policy. New Zealand won’t wake up till its economy dives and the housing bubble pops.

Germany: Angela Merkel has set up today’s election so that she has no competition. Though she will see the ultra-right AfD enter parliament. Still, her main ‘rival’, alleged left wing Martin Schulz, is a carbon copy of Merkel when it comes to the main issues, i.e. immigration and the EU. An election that is as dull as Angela herself, even though she’ll lose 10% or so. The next one won’t be, guaranteed.

As for the US, no elections there, but another round of big words about nationalism, patriotism and the flag. Donald Trump is well aware that 75% or so of Americans say the flag must be respected, so criticizing people for kneeling instead of standing when the anthem gets played is an easy win for him. No amount of famous athletes is going to change that.

…click on the above link to read the rest of the article…

Productivity and Debt


William Blake Europe Supported by Africa and America 1796
 

Earlier this week I was struck by the similarities and differences between two graphs I saw float by. And the thought occurred that they are as scary as they are interesting. The graphs show eerily similar trends. And complement each other. The first graph, which Tyler Durden posted, shows productivity, defined as more or less the same as GDP per capita. It goes all the way back to 1790 and contends that 2017 productivity is about back to the level it was at in 1790. In the article, Tyler suggests a link with the amount of time people spend on Instagram et al, but perhaps there is something more going on.

That is, America and Western Europe exported almost their entire manufacturing capacity to China etc. And how can you be productive if you don’t manufacture anything? Yeah, I know, ‘knowledge economy’ and ‘service economy’ and all that, but does anyone still really believe those terms? Sure, that may have worked for a while as others were still actually making stuff (and nobody really understood the idea anyway), but it’s a sliding scale. As productivity plunged, so did GDP per capita. We can all wrap our heads around that.

America’s Productivity Plunge Explained

For the first time since the financial crisis, US multifactor productivity growth turned negative last year, mystifying economists who have struggled to find something to blame for the fact that worker productivity is declining despite a technology boom that should make them more efficient – at least in theory. To be sure, economists have struggled to find explanations for the exasperating trend, with some arguing that the US hasn’t figured out how to properly measure productivity growth correctly now that service-sector jobs proliferate while manufacturing shrinks. But what if there’s a more straightforward explanation? What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?

…click on the above link to read the rest of the article…

Trump, the CIA and the Yokeldom


Jackson Pollock The Deep 1943
 

 

The western world is mired in a mile-deep political crisis and nary a soul seems to notice, or rather: everyone just sees their own little preferred echochamber tidbits of it. Which is not a good thing, because that crisis is bound to trigger other bigger crises that are much more damaging. And I’m sorry to say it, but Donald Trump is not your main problem. Not even close.

The main problem is the collapse of western political systems. While that is what brought Trump to power in the first place, he didn’t cause the collapse. The collapse is also what ‘gave you’ Brexit, and Trump didn’t cause that either. Moreover, in the next step, on the far end of all this, Trump may well be the only thing standing between you and CIA warfare. I know, who wants to hear that, right?! Who’s ready for that next step?

But it’s not that crazy. Trump was the one who stopped the CIA from arming Syrian ‘rebels’, which are just a bunch of extremists gathered by that same CIA in its attempts to unseat Assad, and who Trump saw laughingly beheading a child. And who was it that had previously, and enthusiastically, decided to support these crazies? The US Republican and Democratic parties, in unison, while Obama was president and Hillary slash Joe Biden was Secretary of State. Remember the Chelsea Manning footage of videogame-like drone killings? What did Obama do about that?

Still, that’s not where the core of the demise of our political systems lies. Though it does gave us a flavor of their priorities. The core can be found in economic issues. In both president Bush II and president Obama bailing out banks while letting people’s incomes and wealth tank, and not sueing any banker for anything at all. Obviously, the same scenario played out in Britain as well. And in many other nations.

…click on the above link to read the rest of the article…

Central Banks ARE The Crisis


Walter Langley Never morning wore to evening but some heart did break 1894
If there’s one myth -and there are many- that we should invalidate in the cross-over world of politics and economics, it‘s that central banks have saved us from a financial crisis. It’s a carefully construed myth, but it’s as false as can be. Our central banks have caused our financial crises, not saved us from them.

It really should -but doesn’t- make us cringe uncontrollably to see Bank of England governor-for-hire Mark Carney announce -straightfaced- that:

“A decade after the start of the global financial crisis, G20 reforms are building a safer, simpler and fairer financial system. “We have fixed the issues that caused the last crisis. They were fundamental and deep-seated, which is why it was such a major job.”

Or, for that matter, to see Fed chief Janet Yellen declare that there won’t be another financial crisis in her lifetime, while she’s busy-bee busy building that next crisis as we speak. These people are now saying increasingly crazy things, and that should make us pause.

Central banks don’t serve people, or even societies, as that same myth claims. They serve banks. Even if central bankers themselves believe that this is one and the same thing, that doesn’t make it true. And if they don’t understand this, they should never be let anywhere near the positions they hold.

You can pin the moment central banks went awry at any point in time you like. The Bank of England’s foundation in 1694, the Federal Reserve’s in 1913, the ECB much more recently. What’s crucial in the timing is where and when the best interests of the banks split off from those of their societies. Because that is when central banks will stop serving those societies. We are at such a -turning?!- point right now. And it’s been coming for some time, ‘slowly’ working its way towards an inevitable abyss.

…click on the above link to read the rest of the article…

Feeding Frenzy in the Echo Chamber


Willem de Kooning Police Gazette 1955
The best comment on the June 13 Jeff Sessions Senate testimony, and I’m sorry I forgot who made it, was that it looked like an episode of Seinfeld. A show about nothing. Still, an awful lot of voices tried to make it look like it was something life- and game-changing. It was not. Not anymore than Comey’s testimony was, at least not in the sense that those eager to have these testimonies take place would have liked it to be.

Comey shone more of an awkward light on himself rather than on Donald Trump, by admitting that he had leaked info on a private conversation with the president he served at the time. Not quite nothing, but very little to satisfy the anti-Trump crowd. It’s just that there’s so many in that crowd, and most in denial, that you wouldn’t know it unless you paid attention.

To cut to the chase of the issue, it’s no longer possible -or at least increasingly difficult- to find coverage in the US -and European- press of anything related to either Trump or Russia that doesn’t come solidly baked in a partisan opinionated sauce.

For instance, I have a Google News page, somewhat personalized, and I haven’t been able to open it for quite some time without the top news articles focusing on Trump and/or Russia, and all the ones at the very top are invariably from the New York Times, Washington Post, CNN, The Hill, Politico et al.

But I am not interested in those articles. These ‘news’ outlets -and you really must ask whether using the word ‘news’ is appropriate here- dislike anything Trump and Putin so much, for some reason, that all they do is write ‘stuff’ in a 24/7 staccato beat based on innuendo and allegations, quoted from anonymous sources that may or may not actually exist.

…click on the above link to read the rest of the article…

The Dynamics of Depletion

Paul Klee Ghost of a Genius 1922
The Automatic Earth has written many articles on the topic of EROEI (Energy Return on Energy Invested) through the years, there’s a whole chapter on it in the Automatic Earth Primer Guide 2017 that Nicole assembled recently, which contains 17 different articles.

Still, since EROEI is the most important energy issue there is at present, and not the price of oil or some new gas find or a set of windmills or solar panels or thorium, it can’t hurt to repeat it once again, in someone else’s words and from someone else’s angle. This one comes from Brian Davey on his site CredoEconomics, part of his book “Credo”.

It can’t hurt to repeat it because not nearly enough people understand that in the end everything, the survival of our world, our way of life, is all about the ‘quality’ of energy, about what we get in return when we drill and pump and build infrastructure, what remains when we subtract all the energy used to ‘generate’ energy, from (or at) the bottom line.

Anno 2017, our overall ‘net energy’ is nowhere near where it was for the first 100 years or so after we started using oil. And there’s no energy source that comes close to -conventional- oil (and gas) when it comes to what we are left with once our efforts are discounted, in calories or Joules.

The upshot of this is that even if we can ‘gain’ 10 times more than we put in, in energy terms, that won’t save our complex societies. To achieve that, we would need at least a 15:1 ratio, a number straight from our friend Charlie Hall, which is probably still quite optimistic. And we simply don’t have it. Not anymore.

…click on the above link to read the rest of the article…

 

Coming Apart: The Imperial City At The Brink


Thomas Cole Destruction of Empire 1836
The Conflicts Forum, directed by former British diplomat and MI6 ‘ranking figure’ Alastair Crooke, sent me another unpublished article by Alastair and asked if the Automatic Earth would publish it. But of course. Previous articles by Alastair published here are: ‘End of Growth’ Sparks Wide Discontent in October 2016, Obstacles to Trump’s ‘Growth’ Plans in November 2016 and What is this ‘Crisis’ of Modernity? in January 2017.

Here’s Alastair again:

Alastair Crooke: David Stockman routinely refers to President Trump as the ‘Great Disrupter’. But this is not a bad quality, he insists. Rather, it is a necessary one: Stockman argues (my paraphrasing) that Trump represents the outside force, the externality, that tips a ‘world system’ over the brink: It has to tip over the brink, because systems become too ossified, too far out on their ‘branch’ to be able to reform themselves. It does not really matter so much, whether the agency of this tipping process (President Trump in this instance), fully comprehends his pivotal role, or plays it out in an intelligent and subtle way, or in a heavy-handed, and unsubtle manner. Either serve the purpose. And that purpose is to disrupt.

Why should disruption be somehow a ‘quality’? It is because, during a period when ‘a system’ is coming apart, (history tells us), one can reach a point at which there is no possibility of revival within the old, but still prevailing, system. An externality of some sort – maybe war, or some other calamity or a Trump – is necessary to tip the congealed system ‘over’: thus, the external intrusion can be the catalyst for (often traumatic) transformational change.

…click on the above link to read the rest of the article…

Coming Apart: The Imperial City At The Brink


Thomas Cole Destruction of Empire 1836
The Conflicts Forum, directed by former British diplomat and MI6 ‘ranking figure’ Alastair Crooke, sent me another unpublished article by Alastair and asked if the Automatic Earth would publish it. But of course. Previous articles by Alastair published here are: ‘End of Growth’ Sparks Wide Discontent in October 2016, Obstacles to Trump’s ‘Growth’ Plans in November 2016 and What is this ‘Crisis’ of Modernity? in January 2017.

Here’s Alastair again:

Alastair Crooke: David Stockman routinely refers to President Trump as the ‘Great Disrupter’. But this is not a bad quality, he insists. Rather, it is a necessary one: Stockman argues (my paraphrasing) that Trump represents the outside force, the externality, that tips a ‘world system’ over the brink: It has to tip over the brink, because systems become too ossified, too far out on their ‘branch’ to be able to reform themselves. It does not really matter so much, whether the agency of this tipping process (President Trump in this instance), fully comprehends his pivotal role, or plays it out in an intelligent and subtle way, or in a heavy-handed, and unsubtle manner. Either serve the purpose. And that purpose is to disrupt.

Why should disruption be somehow a ‘quality’? It is because, during a period when ‘a system’ is coming apart, (history tells us), one can reach a point at which there is no possibility of revival within the old, but still prevailing, system. An externality of some sort – maybe war, or some other calamity or a Trump – is necessary to tip the congealed system ‘over’: thus, the external intrusion can be the catalyst for (often traumatic) transformational change.

Stockman puts it starkly: “the single most important thing to know about the present risk environment [he is pointing here to both the political risk as well as financial risk environment], is that it is extreme, and unprecedented.

…click on the above link to read the rest of the article…

The Automatic Earth Primer Guide 2017

 


Pablo Picasso Bull plates I-XI 1945
Nicole Foss has completed a huge tour de force with her update of the Automatic Earth Primer Guide. The first update since 2013 is now more like a Primer Library, with close to 160 articles and videos published over the past -almost- 10 years, and Nicole’s words to guide you through it. Here’s Nicole:

The Automatic Earth (TAE) has existed for almost ten years now. That is nearly ten years of exploring and describing the biggest possible big picture of our present predicament. The intention of this post is to gather all of our most fundamental articles in one place, so that readers can access our worldview in its most comprehensive form. For new readers, this is the place to start. The articles are roughly organised into topics, although there is often considerable overlap.

We are reaching limits to growth in so many ways at the same time, but it is not enough to understand which are the limiting factors, but also what time frame each particular subset of reality operates over, and therefore which is the key driver at what time. We can think of the next century as a race of hurdles we need to clear. We need to know how to prepare for each as it approaches, as we need to clear each one in order to be able to stay in the race.

TAE is known primarily as a finance site because finance has the shortest time frame of all. So much of finance exists in a virtual world in which changes can unfold very quickly. There are those who assume that changes in a virtual system can happen without major impact, but this assumption is dangerously misguided.

…click on the above link to read the rest of the article…

Comey and the End of Conversation


Ray K. Metzker Philadelphia 1962
You might have thought, and hoped, that recent events, such as the election of Trump as president of the US, or Brexit, or the rise of Marine Le Pen and other non-establishment forces in Europe, would, as a matter of -natural- course, have led to increased conversation and discussion between parties, entities, whose divisions were material in sparking these events.

But the opposite has happened, and continues to happen at an ever faster and fiercer pace. Various sides of various divides become ever more deaf to what other sides have to say. What still poses as conversation turns into blame games and shouting matches replete with innuendo, fake news and insinuations.

The mainstream media even find they are to an extent redeemed by this -at least financially-. Formerly last-gasp ‘news sources’, suffering from the advent of the interwebs, like the New York Times, CNN, HuffPo and WaPo, as well as Fox, Breitbart on the other side, and many others, have seen their reader- and viewerships expand over the past year as they turned into increasingly impenetrable echo chambers.

They may be losing a lot of potential attention -and revenues- from one side of the -former- debate, but that is more than made up for by rising attention from their faithful flocks. The public feel they need to have an opinion on political matters, and the media are more than willing to define, construct and phrase that opinion for them, to first confirm what people already think, and then raise it a notch or two, or three, or ten.

…click on the above link to read the rest of the article…

Our Economies Run On Housing Bubbles

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Rene Magritte Memory 1948
We are witnessing the demise of the world’s two largest economic power blocks, the US and EU. Given deteriorating economic conditions on both sides of the Atlantic, which have been playing out for many years but were so far largely kept hidden from view by unprecedented issuance of debt, the demise should come as no surprise.

The debt levels are not just unprecedented, they would until recently have been unimaginable. When the conditions for today’s debt orgasm were first created in the second half of the 20th century, people had yet to wrap their minds around the opportunities and possibilities that were coming on offer. Once they did, they ran with it like so many lemmings.

The reason why economies are now faltering invites an interesting discussion. Energy availability certainly plays a role, or rather the energy cost of energy, but we might want to reserve a relatively larger role for the idea, and the subsequent practice, of trying to run entire societies on debt (instead of labor and resources).

It almost looks as if the cost of energy, or of anything at all really, doesn’t play a role anymore, if and when you can borrow basically any sum of money at ultra low rates. Sometimes you wonder why people didn’t think of that before; how rich could former generations have been, or at least felt?

The reason why is that there was no need for it; things were already getting better all the time, albeit for a briefer period of time than most assume, and there was less ‘want’. Not that people wouldn’t have wanted as much as we do today, they just didn’t know yet what it was they should want. The things to want were as unimaginable as the debt that could have bought them.

…click on the above link to read the rest of the article…

Not Nearly Enough Growth To Keep Growing

 


Jackson Pollock Shooting Star 1947

It’s amusing to see how views start to converge, at the same time that it’s tiresome to see how long that takes. It’s a good thing that more and more people ‘discover’ how and why austerity, especially in Europe, is such a losing and damaging strategy. It’s just a shame that this happens only after the horses have left the barn and the cows have come home, been fed, bathed, put on lipstick and gone back out to pasture again. Along the same lines, it’s beneficial that the recognition that for a long time economic growth has not been what ‘we’ think it should be, is spreading.

But we lost so much time that we could have used to adapt to the consequences. The stronger parties in all this, the governments, companies, richer individuals, may be wrong, but they have no reason to correct their wrongs: the system appears to work fine for them. They actually make good money because all corrections, all policies and all efforts to hide the negative effects of the gross ‘mistakes’, honest or not, made in economic and political circles are geared towards making them ‘whole’.

The faith in the absurd notion of trickle down ‘economics’ allows them to siphon off future resources from the lower rungs of society, towards themselves in the present. It will take a while for the lower rungs to figure this out. The St. Louis Fed laid it out so clearly this week that I wrote to Nicole saying ‘We’ve been vindicated by the Fed itself.’ That is, the Automatic Earth has said for many years that the peak of our wealth was sometime in the 1970’s or even late 1960’s.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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