Archive for September, 2011


Extract – full article here.



The Peak Oil Crisis: The German Army Report

~ Tom Whipple
Wed, Sept 21, 2011.

… Last year two military planning organizations went public with studies predicting that serious consequences from oil depletion will befall us shortly. In the U.S. the Joint Forces Command concluded, that by 2015 the global shortfall in oil production could be as much as 10 million b/d. Later in the year a draft of a German army study, which went into greater detail is unique for the frankness with which it explores the dire consequences which may be in store for us. They introduce the notion of a peak oil induced economic “tipping point” that would trigger so much economic damage that it is impossible to evaluate the possible outcomes.

For the near future the study foresees that a very large increase in oil prices would harm the energy-intensive agricultural systems that produce much of our food. The study goes on to postulate a “mobility crisis” that would arise from substantial increases in the costs of operating private cars and trucks.

As oil is used either directly or indirectly in almost 90 percent of industrial production, major increases in the price of oil would change most price relationships. Domestic and foreign trade will have to adapt to these new relationships but doing so will likely lead to economic upheavals. As businesses transform to less oil-dependent forms of services and production, there would likely be an extended period of “transformation unemployment” that will become a major economic problem. A case could be made that our current “jobs” crisis is simply the leading edge of the “transformation unemployment” that could go on for decades.

Of great significance is the willingness of nations to implement the economic policies necessary to effect the transformation to the post fossil fuel age. Forms of government will be sorely tested. The Germans who have much experience in these matters note that only continuous improvement in individual living conditions forms the basis for tolerant and open societies. Given the widespread unemployment and high mobility costs that are almost certain to accompany the transition to a post fossil fuel world, democratic forms of government are likely to face severe challenges.

For the immediate future, however, the German Army study foresees: 1. increasing oil prices that will reduce consumption and economic output (i.e. a recession or worse); 2. increasing transportation costs that will lead to lower trade volumes – less income for many and unaffordable food for some; and 3. pressure on government budgets as they must keep populations fed, deal with the social consequences of mass unemployment, and attempt to invest in sustainable sources of energy. Governmental revenues are bound to fall as unemployment increases along with resistance to further taxation.

In the medium term, most companies would come to realize that the global economy is going to be shrinking for a long time and act accordingly. In an indefinitely shrinking economy, savings would not be invested as profits could no longer be made or borrowing costs paid. In this environment, the banking system, stock exchanges and financial markets would have a hard time surviving.

The final step would be the loss of confidence in currencies and with them the ability to carry on normal economic transactions outside of barter. If all this sounds extreme, remember the Germans have been through far more than we have in the last century. What is interesting is the way they are telling it like they see it – no pulling of punches.





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I have heard of “Generation X”, and “Generation Y”, of course.

Generation Neutral is a new one on me, but I like it. (Neutral – as in disengaged)

I can understand entirely – but they are not going to be able to be disengaged forever. Sooner or later they are going to have to pick sides. Will be interesting to see how that plays out.


Guest post:  (from Zero Hedge)

The Folly of Misspent Optimism: Generation Neutral

~ Chris Moorman (24) 

America for the past century has been nearly synonymous with progress. A model based upon constant growth, the American style system of capitalism, built upon the dual building blocks property rights and nearly unlimited economic freedom, has allowed free movement of capital, talent and vision to produce the wealthiest country that the world has ever seen. This has not been without its hiccoughs and imbalances, but on the aggregate, the American system of ever rising prosperity has brought with it a rising standard of living for all parties in the post WWII era. The American birthright has been a promise of a hold on the ladder, and a better life for each subsequent generation.

This economic juggernaut used the free movement of capital to allow risk takers to borrow at the present to take advantage of the growth of the future. This system has withstood many shocks; the unilateral pullout of the Bretton Woods gold standard by Nixon, the subsequent stagflationary environment of the late 1970s and early 80s, to  the fall of the communism leaving American style capitalism as the unrivaled economic system in the world. American exceptionalism was not so much an opinion as an accepted fact.

This was the promise that Generation Neutral predicated its approach to maturity upon. Demographic headwinds stood in our way for sure. The baby boomers and the entitlement economics they had been promised began to seem underfunded at the present which meant declining standards of living in the future. An over-levered system of government subsidized housing found that the hangover left in the wake of the Internet boom and the new diplomatic order put forth after 9/11 would squeeze those on the margins past their breaking point. Government intervention which would have been unthinkable even a generation ago now seemed like the only thing holding our system from the edge of the abyss.

We avoided the abyss after the post-Lehman collapse of 2008. Purportedly rational players in the government arena used every tool at their disposal and designed new tools on the fly to keep the system from stalling out. Business cycle boom and bust is inherent in a free movement system such as ours, and we’d dealt with it before. Once the growth engine started running near its historical averages, the economy would rebound and the train would get back on the tracks. Life would return to normal and Generation Neutral would outgrow its debts fast enough to promise our children that life would still be better for them than it was for us. At least, this is what we’d planned on.

So we continued to pile on the debt, spending today so that our future earnings would allow us the lifestyle we’d always hoped for. College tuition rose at unthinkable rates when compared to CPI and other inflation measures, aided by a system of government backstops and a “no-way out clause” which took away the mechanism of bankruptcy in order to absolve the insolvent of an impossible to pay debt. Still we borrowed. Ivy league educations cost on the order of $120-150K, while even the “affordable” state school educations hovered above 60k for 4 years. We told ourselves that this was an investment in our future, that when the growth engine restarted, we’d be on the forefront of the new boom.

After 2008, it appeared that the growth engine was taking longer to prime than anyone had planned. Ivy League graduates, with crushing amounts of college loans, were forced to take jobs as baristas and retail workers; careers far below those promised by the glossy recruitment packets we’d gotten in high school. Some risk takers in my generation doubled down, and headed off to graduate school to “wait out” the recession as opposed to taking jobs which seemed beneath our level of expertise and education.

Increasingly, these “investments” are looking like consumption periods for which the bill will come monthly for 15-20 years. Those who doubled down on their bets with grad school, found that in addition to undergrad debt, the average 75-100k of law school debt looked nearly insurmountable when compared to starting salaries in the 50-70K range. A law school graduate with $150k (a number which errs on the conservative side if any) in combined undergrad and law school debt 6% at  is now looking at nearly $1300/month in loan repayments over a 15 year period. This is comparable to the payment on a 30 year mortgage on a $250,000 (slightly above the 2010 median home price) house at 5%. If the baby boomers are planning on my generation bailing out their underwater homes, they’d better find another plan.

Currently, a college grad making $75,000 (well above the median for the graduates of the downturn (2007-2010)) in Manhattan contributing nothing to pre-tax retirement brings home a little over $4,000 monthly. When this is stacked up against an average monthly rent of $1350, and a student loan repayment of $1300, this makes for a mere $1350 in disposable income. This makes it quite difficult to save the necessary funds for a downpayment on a house, and even makes it difficult to build a solid safety net of savings.

The real issues of my generation have unfortunately been glossed over. There have been the occasional articles chronicling how lifetime earnings are adversely affected for those who come out of school into a recession, but this downturn has already had a duration above and beyond the norm, and at present doesn’t appear to be ending any time in the near term. Meanwhile, the bills are stacking up, and even those of us from Generation Neutral who are working, are starting to be concerned that the debts we signed on for at 18 will live to haunt us well longer than our worst projections. There is beginning to be a certain resigned malaise hanging over us, and as capitalism is a system predicated on growth and a healthy amount of optimism in the future, this is yet another headwind to our economic and even psychological well being.

Other than the turnout brought upon by the “Hope and Change” campaign of President Obama, Generation Neutral has found itself strangely ambivalent about the political discourse, even as the bills are continuing to migrate from our parents’ generation to our own. A conversation about the national debt usually ends with the trite phrase “I don’t really care about politics” while the political decisions of today affect our economic future at an ever increasing rate compared to our parents and grandparents.

I’ve yet to figure out what will break our apathy, as our misspent optimism still keeps us believing, however fleetingly, that this too shall pass.  The day that we collectively realize that better days aren’t coming could well be too late, but the debts amassed during our optimistic youth will still continue to knock on our door. If our generation doesn’t have it better than our parents’, I wonder what the narrative we tell our children will sound like.







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Al Jazeera – Opinion Piece
~Dan Hind

This too is a time of revolutions.

In the Middle East tyrants are falling. In Europe and the US people long resigned to corruption and plutocracy are beginning to stir. There is a great game to be played and much rests on the outcome.

In one future, tyranny revives. A handful of magnates and their spokesmen in government take over ever more of the world’s wealth, offering violence and deception in return.

In another, the people succeed in their struggle for freedom and find new ways to safeguard their success.

Each of us can choose to ignore the moment in which we live and lose ourselves in the rhythm of days passing.  The game will play out with or without us.

But our choices – each and every one of them – will have some bearing on the outcome.


(word count 144)

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RockyRacoon's picture
 I’ve never understood the need to “grow” but I’ve learned that it is necessary if one wants to perpetuate the debt-driven system.

That system is now dying.




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” …in addition to fear itself, the one other thing everyone should fear, is governments believing that they know what they are doing, when transitioning to central planning and an authoritarian regime, based on nothing but faith. ”      ZeroHedge – Bill Buckler


If you are looking for a term that means whatever you want it to, then you can’t do much better than Democracy.

If on the one hand you mean – government of the people, by the people, for the people – that surely is a lovely concept of Democracy.

If on the other hand you mean – parliamentary government selected via two party general elections – then that is a system and definition that has passed it’s use-by-date. One so captured and corrupted that it is beyond redemption. (if you’re inclined to debate that, then you are reading the wrong blog)

As to what you would replace the current system with, once again there are two perspectives on the issue.

On one hand – it really doesn’t matter:

Make it up as you go along – stop, backtrack, change things if they are not working – treat the whole exercise as an evolving work in progress. There are a hundred and one alternative mechanisms for running a country that either already exist elsewhere, have been formulated in theory, or could be dreamed up in time of need. The specifics are unimportant, merely that you are brave enough to try.  For some people, the open opportunity is all that is necessary for them to explore the possibilities and dream.

And on the other hand – a prescription is required:

In order to commit to and support overturning the status-quo, a credible alternative plan needs to be promulgated and endorsed.  Airy-fairy statements of principle or grandiose plans, simply doesn’t cut it for a lot of people.


I guess I have a foot in both camps.

I am actually quite happy with the laissez faire approach, but equally, this blog is an attempt in fact  to prescribe the ingredients and methodology required to implement a comprehensive improved alternative to our current system.

In order to replace a system, you need to have some basic minimum structure(and theory) to substitute. The more complete and comprehensible that is, the easier it is for people to accept and work with.  It’s a confidence question(and a practicalities one too).

But I also believe in the necessity of leaving open some questions, so that the solutions and answers proposed, can evolve with changing circumstances.

So, I guess I am a Democrat.  I have a real attachment to the principles of the French and American Revolutions.  But I don’t accept or respect what currently passes for democracy in this country.

In so far as democracy is whatever you say it is, then my Revolution would be democratic.  It just wouldn’t be very recognisable vis the current system, the formal institutions would have to change.

I intend to continue writing essays and articles, to address those issues and to develop alternatives(your feedback would be welcomed too).


Word count 499


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I read recently that a Blog-Post shouldn’t be any longer than 250 to 500 words.

Which was interesting.

* On the one hand, that is kind of depressing, because it suggests that the attention span of your audience is severely limited.    ( …and the mentality / intelligence / literacy? )

* Or does it mean that most people just haven’t got the time to be wading through reams of text. (even if it is really good…)

* Or does it simply come back to the writer?  So, seriously, if you can’t get a cogent article written in less than 500 words, then you need to be taking a bit of a hard look at yourself.


Well… A bit of all of those probably.

So, for my part, I guess I should have a bit of a go at writing shorter, more tightly scripted Posts.

Might even be good for my writing.  😉


ps – word count 140


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Do the opposite


One of my favourite writers, Bernard Hickey, has written another good article.

He outlines what the problems are and says we dont have to look any further than Japan to see where we to are headed – and for the same reasons.

So… if you want to turn NZ around, look at the issues that Bernard has listed, and do the opposite to what Japan did.


Ageing populations

(actually, I am of the opinion that this is the least of our problem. Deal with the others first, then see where that leaves you.  ~R)

Zombie banks

A refusal to let rotten banks fail allowed many to suck up resources without lending or investing.

Hollowed middle classes

An explosion of outsourcing has allowed many multinationals to cut costs by sacking middle managers and manufacturing workers in developed economies… reducing the circulation of money and in turn reducing growth.

Financial repression

The heavily indebted nature of these developed economies has forced central banks to hold down short- and long-term interest rates to avoid economic collapses and to avoid governments going bankrupt… in vain attempts to fire up economic growth and to keep banks on life support.

Political disunity

Divided political systems in which leaders find it difficult to change policies make it hard for economies to dig themselves out of the morass. Vested interests in bureaucracies or from corporate backers can often block change.  We have yet to see financial repression, but it is a strategy politicians like because it maintains the status quo.

(our present political system is guaranteed, and structured, to create futile bi-partisan bickering. There is zero incentive to remove disfunctional systems.  ~ R)

Read his full article.





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