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There are no more “saves” available for the next market meltdown.

The past 24 years can be viewed as an era in which risk declined due to the dynamics of globalization and financialization.

The ascent of China as “workshop of the world” generated a deflationary wave of lower prices for products (due to lower labor costs and lower quality components) that blunted the inflationary impact of the global economies adding $150 trillion in debt since 2000. Global debt, public and private, now tops $315 trillion, 333% of global GDP.

Absent the deflationary impact of globalization, this vast increase in money sloshing around would have sparked inflation. Absent the vast expansion of money via financialization, the expansion of production and consumption enabled by globalization could not have occurred.

At the same time, central banks coordinated policies to steadily reduce interest rates, reaching effectively zero or negative rates (when adjusted for inflation) in 2009 and beyond. This reduction of rates far below historic norms enabled creditors to borrow more even as their debt service costs fell.

Financialization vastly increased leverage and the commodification of credit/debt, enabling emerging-market nations and enterprises and consumers globally to increase their borrowing/spending.

Globalization generated incentives for nations and their central banks to “play nice” and cooperate with other governments and banks to spur profitable (and happily deflationary) trade. These coordinated efforts enabled the global economy to avoid the potentially fatal disruptions of the Global Financial Crisis (GFC) in 2008-09.

Despite localized droughts and extreme weather, global food production increased by expanding land in production and intensifying agricultural methods.

All of these risk-reducing trends are reversing or reaching diminishing returns.

Extreme weather events are increasing, leading to massive losses by insurers, a trend described in As Insurers Around the U.S. Bleed Cash From Climate Shocks, Homeowners Lose (New York Times)(seechart below):

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

Today’s Contemplation: Collapse Cometh XIV–Reducing Population: Degrowth or Enrich Everyone?

October 15, 2023

Today’s Contemplation: Collapse Cometh XIV

Reducing Population: Degrowth or Enrich Everyone?

Part of an ongoing conversation with another regarding globalisation and whether it is a beneficial or detrimental endeavour of humanity. You can find the entire back and forth here.

The notion that to address our overshoot dilemma by bringing the impoverished up to the level of the so-called ‘advanced’ economies so that population levels out or decreases (eventually) requires some significant magical thinking.

As I stated, the primary reason for ‘advanced’ economy riches is the exploitation of a finite resource; a finite resource that is already in its death throes due to the law of declining marginal utility (to say little about all the other resources that are similarly experiencing diminishing returns and requiring greater and greater amounts of energy to even maintain or slightly increase extraction levels).

There are not the resources remaining to bring the entire world up to the level supposedly necessary to lead to smaller families. What resources remain would be best used in helping everyone relocalise which is going to be most difficult for those caught in the trap of globalisation: dependence upon long-distance supply chains, especially for food.

Then there are the environmental/ecological consequences of attempting to enrich the majority of the world that continues to increase global population, resulting in even more stress on the various complex systems that ‘sustain’ humanity (and many other species). In fact, there are many who would argue our resource exploitations have already resulted in irreparable harm and must be halted immediately, not doubled- or tripled-down as you suggest to provide ‘riches’ for everyone.

I think you’ve got it completely backward; in fact, your suggestion would likely expedite the impending ‘collapse’ of our complex and energy-intensive, industrialised world. The ‘advanced’ economies are going to have to become far, far less ‘rich’ and as I said, either we choose how this might be done before we fall over the impending energy cliff or nature WILL do it for us; and nature doesn’t give one single iota of care or concern about how populations are brought back into balance with an area’s environmental carrying capacity. There are many who suggest a massive die-off of humans is the most likely scenario for the planet.

And I won’t even get into the fact that our current complex systems have been continuing only because of the economic Ponzi that the ruling class has created through flooding of the world with (increasingly debased) fiat currency and debt (hundreds of trillions of dollars). This is a monetary/financial/economic system that could ‘collapse’ at any moment, especially if people lose faith in the system.

I would suggest investigating the dilemma of Peak Oil, maybe start with Gail Tverberg (https://ourfiniteworld.com), Alice Friedemann (http://energyskeptic.com), Peak Prosperity’s The Crash Course (https://www.peakprosperity.com/crashcourse/), and the late Michael Ruppert’s Collapse (https://youtu.be/0Lx2dfK7H9E). Then also watch the following clips with William Catton (author of Overshoot): https://youtu.be/jNuRZuaw0_U, the late Dr. Albert Bartlett on our conundrum: https://youtu.be/O133ppiVnWY, and archaeologist Dr. Joseph Tainter (author of The Collapse of Complex Societies): https://youtu.be/G0R09YzyuCI.

It’s a New Era

January 1, 2023

It’s a New Era

This dynamic–making problems much worse by forcing more of whatever worked in the previous era into a saturated, increasing unstable new era–receives little attention or understanding.

Eras may last decades, and only those who’ve lived long enough to recall previous eras have experienced the transition from one era to the next. The era of financialization, globalization and low-cost, abundant oil/natural gas began over 40 years ago in 1981.

The era of digital / Internet technologies took off about 30 years ago. All of these dynamics accelerated in the early 2000s, roughly 20 years ago.

Only those 60 and older experienced working in a previous era (pre-1981).

All of these dynamics are entering a phase of nonlinear turbulence as the changes are outpacing these highly streamlined / optimized systems’ ability to self-correct.

This nonlinear instability is being accelerated by doing more of what worked in the previous era, in the mistaken belief that the 2020s are simply an extension of the eras that began 40 and 30 years ago.

The fixes that worked in the past won’t resolve the nonlinear instability because all these dynamics have reached saturation: adding more debt no longer generates organic expansion of productivity, all it does is inflate an even larger and more unstable credit-asset bubble.

Globalization has been optimized to the point of saturation: the potential downsides to national security outweigh any remaining marginal gains in corporate profitability.

Financialization has so distorted the economy that gambling on useless speculations is now viewed as the best (or only) way to get ahead.

When a system has absorbed all it can absorb, adding more is just a waste of resources.

We’ve entered a new era, and so the fixes and incentives that worked in the past 40 years no longer work.

…click on the above link to read the rest…

The Netherlands may be the first country to hit the limits of growth

October 31, 2022

The Netherlands may be the first country to hit the limits of growth

The country has 507 people per sq km, nearly five times the EU average, while liveable land is shrinking due to climate change

The other morning I cycled around the Dutch town where I grew up. Behind our old house, the field where I spent half my childhood is now covered with homes. So is my old football club. My high school is now in a built-up area. At the local train station, the bike shed was full on a Saturday afternoon. When I got to Amsterdam, the business-traveller economy appeared to have broken down: endless waits for Ubers, nobody at hotel reception, restaurants closed at lunchtime for want of waiters.

I know over-construction and understaffing are now global problems, but they are particularly acute in the Netherlands. The country has run out of space and staff. Sure, a recession may temporarily loosen the jobs market, but the problem was acute pre-pandemic and will simply resurface whenever growth resumes. The Netherlands is probably the first country to hit the limits of economic growth.

Other overdeveloped places such as the Bay Area, New York and Singapore may follow, running out of room for new workers and businesses. This raises the question: can a rich place be happy if its economy stops growing?

With hindsight, the Netherlands was too well-suited to the era of globalisation. The trading nation with Europe’s biggest port experienced 26 years of unbroken economic growth until 2008, then a world record. Now it tops ETH Zurich’s KOF Globalisation Index as the world’s most globalised country.

And so its population mushroomed. When the counter hit 14 million in 1979, Queen Juliana said, “Our country is full.” In 2010, Statistics Netherlands said the population would probably never reach 18 million. Today it’s 17.7 million and rising…

The EU’s Crisis Is Global: Neocolonialism, Hyper-Financialization and Hyper-Globalization Come Home to Roost

September 10, 2022

The EU’s Crisis Is Global: Neocolonialism, Hyper-Financialization and Hyper-Globalization Come Home to Roost

The EU’s crisis isn’t limited to energy. It is a manifestation of the global breakdown of Neocolonialism, Financialization and Globalization.

The European Union (EU) was seen as the culmination of a centuries-long process of integration that would finally put an end to the ceaseless conflicts that had led to disastrous wars in the 20th century that had knocked Europe from global preeminence.

Wary of the predations of the U.S. and rising Asian powers, European nations sought the economic and diplomatic strength of a confederation that would be greater than the sum of its parts, a union that would restore Europe’s rightful place as a global power.

This worthy goal was undermined by the destructive dynamics of the past forty years: Neocolonialism, Financialization and Globalization.

These dynamics are unstable due to their internal contradictions. In classical colonialism, the Core dominates the Periphery with force, extracting economic value by exploiting the subject states’ commodities and forcing the colonies to buy the valued-added finished goods produced by the colonial power’s domestic economy.

This extractive model was at odds with the liberal worldview of the colonial powers which held self-rule and open markets as necessary to stable prosperity. The contradictions of classical colonialism led to its collapse as colonies broke free and the colonial powers were forced to navigate a more open global economy.

Beneath the glossy vibe of strength through unity, the EU institutionalized a Neocolonial Model in which some EU members are more equal than others, a divide that was starkly revealed in the debt crisis of 2011-2012.

I described the EU’s version of the Neocolonial Model in 2012: The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)

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

This is how civilisations collapse

June 15, 2022

This is how civilisations collapse

Last week, in an attempt to explain away the supply chain woes that are increasingly leading to goods shortages in America, President Biden cited a popular neoliberal fable. He observed that to make a pencil, wood and graphite must be sourced from the other ends of the world before the finished product can end up in American hands. “It sounds silly, but that’s exactly how it happens,” Biden mused, “that’s just the nature of the modern economy.” But the result, he added, is that “when global disruptions hit… it can hit supply chains particularly hard”.

For neoliberal ideologues such as Milton Friedman, who used the pencil fable to argue for opaque world-spanning supply chains, the beauty of such complex systems is not only that the consumer obtains his product at the lowest price possible, and that the producer can maximise his profits, “but even more to foster harmony and peace among the peoples of the world”. As the historian Quinn Slobodian noted in Globalists, his recent study of the first neoliberal theorists, such idealistic motivations were evident from the very start. Ignoring the fact that the globalised world of the late 19th century failed to prevent World War One, they believed that creating a giant interconnected market would make a repeat of such a cataclysm impossible.

They were wrong. Instead, the restructuring of the global economy into a large web vastly increases the risk of a total system collapse. Instead of one economy failing, a shock in one corner of the world can place great and sudden stress on economic and political systems thousands of miles away. A war in distant Taiwan can mean you’re no longer able to buy a new car; a drought on the other end of the world means empty shelves at home.

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

Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense

October 7, 2021

Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense

The era of abundance was only a short-lived artifact of the initial boost phase of globalization and financialization.

Global corporations didn’t go to all the effort to establish quasi-monopolies and cartels for our convenience–they did it to ensure reliably large profits from control and scarcity. Not all scarcities are artificial, i.e. the result of cartels limiting supply to keep prices high; many scarcities are real, and many of these scarcities can be traced back to the stripping out of redundancy / multiple suppliers of industrial essentials to streamline efficiency and eliminate competition.

Recall that competition and abundance are anathema to profits. Wide open competition and structural abundance are the least conducive setting for generating reliably ample profits, while quasi-monopolies and cartels that control scarce supplies are the ideal profit-generating machines.

The incentives to expand the number of suppliers, i.e. increase competition, are effectively zero. America’s corporations spent $11 trillion buying back their own stocks over the past decade; that’s equal to the combined GDP of Japan, Germany and Italy. If adding new suppliers to the global supply chain were profitable, some of that $11 trillion would have exploited those vast profits.

The financial reality is attempting to compete with an established cartel that has captured regulatory and political mechanisms is a foolhardy waste of capital. If firing up a new supplier of essential solvents, etc. was so captivatingly profitable, the why wouldn’t Google and Apple take a slice of their billions in cash and go make some easy money?

The barriers to entry are high and the markets are limited. A great many specialty lubricants, solvents, alloys, wires, etc. are essential to the manufacture of all the consumer and industrial products that are sourced globally, but the markets are narrow: manufacturers need X amount of a specialty solvent, not 10X.

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

The End of Western Globalia?

May 16, 2021

The End of Western Globalia?

Since the 1970’s, international trade has continuously been promoted by leaders of developed countries and economic agents.

Several theoretical frameworks have been put forward to explain the benefits of a free trade environment, from Adam Smith’s concept of absolute advantages to more recent firm-based theories. However, the reality is much more nuanced, especially after China’s entry into the WTO in 2001, and questions arise as to the sustainability of the current model.

While the development of free trade activity could be regarded as a sound intellectual victory for Western capitalism, such trend has paradoxically weakened several countries in Europe and America.

The first side effect of economic globalism in the West has been the retreat of manufacturing in several economies like the United States, with durable unemployment issues as a result. Beyond social impacts, Canadian author Vaclav Smil argued that a manufacturing decline is structurally problematic as it affects the ability of a country to innovate on the long run [1].

The second reason to be skeptical about international trade is the multiplication of structural imbalances in the global economy, with unstainable surpluses and deficits everywhere. An economy displaying a growing trade deficit is getting poorer with respect to foreign economies, leading to a financial and/or social crisis in the end. To understand that, it is necessary to imagine a country whose currency is backed by something tangible (e.g. gold). In that case, a deficit means that the country owes metals to the rest of the world. Of course, current account deficits can be offset by financial inflows, but as there’s no free lunch in economics, that should not be seen as a long-term solution.

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

Where’s Dirk Gently When You Need Him?

April 5, 2021

Where’s Dirk Gently When You Need Him?

Did you hear? A supersized cargo ship got wedged in the Suez Canal on March 23rd? If you didn’t, you must do pretty well at avoiding the news, social media, and late night TV. But the short of it is: the Ever Given somehow lost control (sandstorm strength winds have been blamed, as have human errors) and crashed into the bank of the canal and lodged itself in.

So what? Is this really news? Or just a sensational story to distract us from the pandemic, which, one might argue, is itself a distraction from the rapid unraveling of Earth’s systems and thus human civilization? Perhaps. But then again perhaps not.

Here’s why this incident is worth understanding:

First, a ship single-bowedly disrupted global trade for six days. It was finally freed on March 29th. However, there is now a backlog of over 300 ships while many ships rerouted around the Cape of Good Hope. The Suez Canal is part of a trade route that carries more than 10 percent of global trade, including 7 percent of the world’s oil. Each day 30 percent of the world’s shipping container freight moves through the canal. Thus it created backlogs in shipping (including some 200,000 live animals who could have overheated or run out of food). It raised the price of oil briefly. It created shortages in factories—not just of parts but of shipping containers. And of course, it felt like a freak occurrence. Last year, of the 18,840 ships that moved through the canal, there were no incidents.

But the main reason is because this is an excellent metaphor on how fragile our entire globalized system has become.

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

Erik Assadourian, suez canal, supply chains, trade, shortages, globalisation, gaianism, shipping

Suez Highlights the Fragility of Globalization

April 4, 2021

Suez Highlights the Fragility of Globalization

Photo: Suez Canal Authority.

The global supply chain is an elaborately choreographed ballet, nowhere more than in the flow of containers through which 60% of the world’s seaborne trade travels. Calibrating a stream of over 800 million boxes each year entails sophisticated tracking that makes sure containers reach their destination. The system reaches down to the crane operator who stacks each box in a specified position on the ship, and ensures enough empty boxes are on site to load the next shipment.

Last week the ballet turned into a mosh pit, when a character named MV Ever Given stepped out of its choreographed role to disrupt the entire dance. It blocked the world’s most critical trade chokepoint, the Suez Canal, an artery carrying 30% of the world’s container traffic. Effects radiated across the planet. Oil prices ticked upwards. Ships were held up at major ports from Rotterdam to Newark. Store and e-commerce deliveries were delayed. Both Amazon and Ikea had shipments on the Ever Given itself.

In our just-in-time world, where ships act as precisely scheduled floating warehouses, a week’s interruption creates a backlog that lasts a lot longer. It may only take days to relieve the maritime traffic jam and restore normal canal operations. But leading container shippers predict it could take weeks or even months to sort it all out, as off-schedule ships pile into congested ports. The shipping industry was already struggling with impacts of the pandemic on operations and the way it has shifted consumer purchases from restaurants and entertainment to consumer goods. Containers were short in Asia where much shipping emerges, and costs were way up. Then the canal blockage piled on. It is “going to result in one of the biggest disruptions to global trade in recent years,” reported MSC, the world’s second leading container shipper.

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

PATRICK MAZZA, counterpunch, supply chains, globalisation, suez canal,

Toward an age of low tech for a more resilient and sustainable society

November 4, 2020

Toward an age of low tech for a more resilient and sustainable society

The various restrictions that have been imposed to tackle the COVID-19 crisis have led many of us to reflect on what might be our response to other pressing issues that we face, especially inequalities in our societies and the major ecological issues of climate change, biodiversity collapse and resource depletion. What has the crisis told us about the state of our planet and societies, and are there wider lessons that can be learned from our response?

Even before the pandemic, we had begun to talk in public debate in ways that would have been unimaginable ten years ago: about the climate crisis and resilience to ecological disruption, questioning the dogma of growth at all costs. The pandemic has reinforced concerns about globalisation and challenged beliefs about the role of the state and the possibility of printing money in a real emergency, while showing that we could do very well without certain things, such as shopping trips to Dubai or cruise ships. Many of us have learned to value nature more, to seek conviviality and escape from the incessant pressures of modern life, while seeking to build societies that are more resilient to disturbances.

The crisis has further also exposed our societal inequalities in the contrasts between those who were confined in pleasant conditions and others in less fortunate circumstances, between those who could work from home and those who had to stay in their workplaces in order to keep healthcare, food supplies and other essential services operating, and between those who kept getting paid no matter what and those whose earnings dried up.

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

Globalization and Our Precarious Medical Supply Chains

March 4, 2020

Globalization and Our Precarious Medical Supply Chains

The grave risks and dangers in the process of worldwide out-sourcing and so-called globalization of the past 30 years or so are becoming starkly clear as the ongoing health emergency across China threatens vital world supply chains from China to the rest of the world. While much attention is focused on the risks to smartphone components or auto manufacture via supplies of key parts from China or to the breakdown of oil deliveries in the last weeks, there is a danger that will soon become alarmingly clear in terms of global health care system.

If the forced shutdown of China manufacture continues for many weeks longer, the world, could begin to experience shortages or lack of vital medicines and medical supplies. The reason is that over the past two decades much of the production of medicines and medical supplies such as surgical masks have been outsourced to China or simply made in China by Chinese companies at far cheaper prices, forcing Western companies out of business.

Sole source China

According to research and US Congressional hearings, something like 80% of present medicines consumed in the United States are produced in China. This includes Chinese companies and foreign drug companies that have outsourced their drug manufacture in joint ventures with Chinese partners. According to Rosemary Gibson of the Hastings Center bioethics research institute, who authored a book in 2018 on the theme, the dependency is more than alarming.

Gibson cites medical newsletters giving the estimate that today some 80% of all pharmaceutical active ingredients in the USA are made in China. “It’s not just the ingredients. It’s also the chemical precursors, the chemical building blocks used to make the active ingredients. We are dependent on China for the chemical building blocks to make a whole category of antibiotics… known as cephalosporins. They are used in the United States thousands of times every day for people with very serious infections.”

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

Blain’s Morning Porridge – May 21st 2019

May 21, 2019

Blain’s Morning Porridge – May 21st 2019

“He knew everything about literature, except how to enjoy it…”

Waves of negative news headlines battering markets. Might have to wear a hat..

Huawei – Trade War Threat Level Rises

The Huawei embargo raises the trade war threat from undeclared to imminent shooting match. While it’s not quite “bullets fired at Archduke’s car”, it’s getting close. It feels like there is something of a tedious inevitability developing – a bellicose Trump realises his political future depends on winning, and the Chinese refuse to lose face. Is it already too late to rein back?

Huawei being effectively barred from Occidental markets has triggered all kinds of market fears: a “digital iron-curtain”, the threat of an economic cold tech war, broken global supply chains, and knock-on effects we can only begin to imagine. It’s the End of Globalisation – scream the media. The Chinese hint at reprisals. The “temporary exemptions” granted last night by the US are just that – temporary: they won’t undo the sudden need of millennials to dump their Huawei phones. The damage has been done. Who will the Chinese punish in return?

Markets are now rife with speculation about “ripple” effects damaging tech dependent initiatives from autonomous cars, streaming, digitisation, and booking apps, triggering all kinds of real-world economic pain in sectors like tourism and luxury goods. While the market is fretting about how America will shod itself as tariffs are slammed on shoes made in China, it might be time to reassess market sectors where we expected long-term and ongoing China expansion, rising domestic consumption and demand to drive growth – I’m think areas from aviation, autos, machinery and plant, and energy. And, what are the implications for the UK – where the Chinese are building our nuclear power stations?

This doesn’t end well…

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

Localisation: A strategic solution to globalised authoritarianism

April 9, 2019

Ladakhi girls. Photo credit: Helena Norberg-Hodge

Localisation: A strategic solution to globalised authoritarianism

For those who care about peace, equality and the future of the planet, the global political swing to the right over the past few years is deeply worrying. It has us asking ourselves, how did this happen? How did populism turn into such a divisive and destructive force? How did authoritarianism take over the political scene once again?

From my 40 years of experience working in both industrialised and land-based cultures, I believe the primary reason is globalisation. When I say globalisation, I mean the global economic system in which most of us now live – a system driven by continual corporate deregulation and shaped by neoliberal, capitalist ideologies. But globalisation goes deeper than politics and the economy. It has profoundly personal impacts.

Under globalisation, competition has increased dramatically, job security has become a thing of the past, and most people find it increasingly difficult to earn a liveable wage. At the same time, identity is under threat as cultural diversity is replaced by a consumer monoculture worldwide. Under these conditions it’s not surprising that people become increasingly insecure.

As advertisers know from nearly a century of experience, insecurity leaves people easier to exploit. But people today are targeted by more than just marketing campaigns for deodorants and tooth polish: insecurity leaves them highly vulnerable to propaganda that encourages them to blame the cultural “other” for their plight.

Let me illustrate how this happened in Ladakh, or Little Tibet, where I first visited as a young woman and where I have worked for over four decades. Situated in the Indian Himalayas, Ladakh was relatively isolated—culturally and economically—until the late 1960s. When I arrived in the early 70s, a campaign of Western-style development had just been launched by the Indian government — giving me the opportunity to experience what still remained of the ancient culture, and to observe the changes that came with modernisation.

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

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