Podcast

alphaspirit/Shuttestock

David Stockman: The Global Economy Has Entered The Crack-Up Phase

And will be characterized by these 4 developments
Sunday, February 15, 2015, 3:42 PM

Few people understand the global economy and its (mis)management better than David Stockman -- former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier.

David is now loudly warning that events have entered the crack-up phase, which he predicts will be defined by the following 4 developments:

  • Increasingly desperate moves by the world's central banks
  • Increased market volatility and losses
  • Deflation in industrial and commodity prices
  • Decreasing demand due to Peak Debt

As the crack-up phase gains momentum, he predicts an increasing number of "financial breaks" that will add to the unpredictability and instability of the environment for investors. Even 'dancing close to the door' sounds excessively risky at this point.

We’re in the crack-up phase. I think there are four big characteristics of that which are going to shape the way the economy and the markets unfold as we go forward.

You’re going to see increasing desperation and extreme central bank financial repression because they have gotten themselves painted so deep into the corner that they're lost and desperate. Almost week by week, we have another central bank – this week, it was Sweden – lowering their money market rates into negative territory. The Swiss Bank is already there, the Denmark Bank is there, the ECB is there on the deposit rate, the Bank of Japan’s there. All of the central banks of the world now are desperately driving interest rates into negative territory. I believe that they’re lost; they're in a race to the bottom whether they acknowledge it or not. The central bank of China can’t sit still much longer when the reminbi has appreciated something like 30% against the Japanese yet because of the massive bubble of monetary expansion that’s being created there. So that’s the first thing going on. Central banks out of control in a race to the bottom, sliding by the seat of their pants, making up really incoherent theories as they go. 

The second thing is increasing market disorder and volatility. In the last three months, the stock market has behaved like a drunken sailor. But it’s really just a bunch of robots and day traders that have traded chart points until somebody can figure out what is happening directionally in the world. It has nothing to do with information or incoming data about the real world. We have today the 10-year German bond trading at 29.5 basis points. Well, the German economy’s been reasonably strong, fueling the Chinese boom. That export boom is over. The Chinese economy is faltering. Germany is going to have its own problems. But clearly, 29 basis points on a 10-year is irrational, even in the case of Germany, to say nothing of the 160 available today on the 10-year for Spain and Italy. Both of those countries are in deep, deep fiscal decline. There is no obvious way for them to dig out of the debt trap that they’re in. It’s going to get worse over time. There’s huge risk in those bonds, especially because there’s no guarantee that the EU will remain intact or the euro will survive. Why in the world would anybody in their right mind be owning Italian debt at 160 other than the fact that they’re front-running the massive purchases that Draghi has promised and the Germans have acquiesced to over the next year or two. But that only kicks the can down the road. One of these days, the central banks are going to falter and the market is going to reset violently to prices that reflect the true risk on all this sovereign debt and the pretty cloudy outlook that’s ahead for the world market.

We now have something like four trillion worth of sovereign debt spread over Japanese issues, the major European countries that are trading at negative yields. Obviously, that is one, irrational and second, completely unsustainable. And yet, it’s another characteristic of what I call these disorderly markets. Investment is now coming home to roost. It will be driving a huge deflation of commodity and industrial prices worldwide. You can see that in iron ore, now barely holding $60 from a peak of $200. Obviously, it’s seen in the whole oil patch. Look at the Baltic Dry Index. That is a measure, one, of faltering demand for shipments and, two, massive overbuilding of bulk carrier capacity as a result of this central bank driven boom that we’ve had in the last 10 to 20 years. So that is going to be ripping through the financial system, the global economy, in ways that we’ve never before experienced. And so therefore, in ways that are hard to predict what all, you know, the ramifications and cascading effects will be. But clearly, it’s something that we haven’t seen in modern times or ever before – the degree of over investment, excess capacity, and everything from iron ore mines to dry vault carriers, aluminum plants, steel mills, and on down the line.

And then, finally, clearly, demand has run smack up against peak debt -- I think that’s the right word for it. We had a tremendous study come out in the last week or so from McKinsey, who do a pretty good job of trying to calculate, track and total up the amount of credit outstanding, public and private, in the world. We’re now at the $200 Trillion threshold. That’s up from only about $140 Trillion at the time of the crisis. So we’ve had a $60 Trillion expansion worldwide of debt just since 2008. During that same period, though, the GDP of the world saw a little more than $15 trillion from $55 or mid-$50s, roughly, to $70 Trillion. So we’ve generated, because of central bank money printing and all of this unprecedented monetary stimulus, we’ve generated something like $60 Trillion of new debt in the world and have barely gotten $15-17 Trillion of new GDP for all of that effort. And I think that is a measure of why the fundamental era is changing. That the boom is over and the crackup is under way when you see that kind of minimal yield from the vast amount of new debt that has been generated.

Now I’d only wrap this up by calling attention to the fact that within that global total of $200 Trillion, the numbers from China are even more startling. At the time of the crisis, let’s go back to 2000, China had $2 Trillion of credit outstanding. It’s now $28 Trillion. So we’ve had just massive 14X growth in 14 years. There’s nothing like that in recorded history, nor is there any plausible reason to believe that an economy, which is basically under a command-and-control system that is run from the top down to the party cadres, could possibly create $26 Trillion in new debt in that period of time without massive inefficiencies in waste and mistakes everywhere within the systems, especially since they have no markets. They have no feedback mechanisms. It all comes cascading down from the top and everybody lies to the next party above them. And I think the system is irrationally out of control.

In any event, my point was that at the time of the 2008 crisis, China had allegedly – if you believe their numbers, which no one really should – but as reported, they had $5 Trillion worth of GDP. It’s now $10. So they’ve gained $5 Trillion of GDP. Their debt at the time of the crisis was $7 Trillion, now it’s $28. So the debt is up more than $20 Trillion while the GDP is up just $5 Trillion. These are extreme unsustainable deformations, if I can use that word, that just scream out, “Danger ahead. Mayhem has happened.” And the unwinding of this and the resolution of this is not going to be pretty.

Click the play button below to listen to Chris' interview with David Stockman (54m:29s)

Transcript: 

Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. It’s a central banker world and that world is increasingly volatile, deformed, and full of risks. Today, we’re speaking with a guest I am especially keen to interview, Mr. David Stockman, economic policymaker, politician, and financier. Mr. Stockman represented Southern Michigan in the US House of Representatives from 1976 to 1981 and later served as the Director of the Office of Management and Budget in the Reagan administration and was the youngest cabinet member of the twentieth century.

Since then, he has held executive positions in many of the most influential banking, buy-out, and private equity firms including the Blackstone Group and Salomon Brothers. He is author of The Great Deformation: The Corruption of Capitalism in America, which is a blunt and sometimes delightfully and deservedly scathing examination of the various fiscal and policy blunders that have degraded our current and future hopes for prosperity. Be sure to have your blood pressure medication handy as you read it because not only does it detail a litany of regulatory and policy blunders of the recent past, it reads like it was lifted from today’s headlines.

He also runs the popular and excellent website, David Stockman’s Contra Corner, where he both blogs and assembles other excellent economic content for you to read, so be sure to visit it regularly.

Welcome, David. It’s an honor to have you as our guest.

David Stockman: Very happy to be with you again, Chris.

Chris Martenson: So there’s such a target-rich environment to talk about with you. Where do we start? You know what I’d love to start with is I was actually a little bit shocked to see Elizabeth Warren come out and say that she didn’t support auditing the Federal Reserve. And I was a little shocked because she’s been a populist and presented herself that way. I can’t think of anything more populist oriented than to have exquisite transparency into the organization that is entrusted with printing money out of thin air and handing it out.

David Stockman: Well, you know, I think that’s a really good starting point. I actually had – I posted a blog on that two days ago. The title happened to be "Audit the Fed, Shackle the Fed." And that’s the difference between where I would be, for instance, and where Elizabeth Warren came out. The Liberals don’t have any objection at the end of the day to money printing. They are still under the Keynesian delusion that somehow zero interest rates will rejuvenate the economy. That we don’t have enough borrowing in this system and that business and consumers, therefore, need to be encouraged to borrow more. You know, that whole syndrome, that whole framework obviously is wrong. It’s failed dramatically. We can see that almost day-by-day as we enter another calendar year and find that the economy, again, has not taken off at escape velocity as we’ve been promised over and over as a result of all this monetary expansion.

So I think, you know, we’re getting to the Rubicon here in terms of where people stand on this issue. And I do appreciate the fact that she has been pretty tough on Wall Street and the bailouts and that was all to the good. But you have to ask, “Why did all this happen? Why have we created so much leverage and risk taking and kind of unproductive trading and churning in our financial markets?” Does this come out of the inherent nature of capitalism? I don’t think so. Has there been an upgrade in the level of greed on Wall Street? I don’t think so. It’s always been there. The change is at the central bank. The change, the difference, is in monetary policy, which is out of control. We’re now in the 73rd month of zero interest rates. That’s the most important price in all of capitalism. And it’s been pinned at zero for 73 months and they still can’t quite get up the nerve to let it rise even by 25 basis points.

So I think those points begin to frame the issue and it’s pretty clear that the kind of anti-bailout Liberals like Elizabeth Warren don’t have a clue as to what the fundamental problem is. And that is, obviously, an overwhelmingly out-of-control central banks, not just in the Eccles Building here but virtually, every central bank in the world.

Chris Martenson: Excellent points, David. You know, what it comes down to for me is this idea that Elizabeth Warren was against the bailouts. I can’t think of anything that’s a more profound and pronounced and ongoing bailout than to drive interest rates to zero, prevent people who are savers from accumulating any interest returns on that money. And since they’re not getting it, somebody is, and that turns out to be the banks and their balance sheets. So the Fed, all on its own, decided that it was going to, at the expense of one set of participants in the economy, punish them and reward another set, which I don’t believe deserved to be rewarded. I can’t think of anything that’s more bailout-ish than that.

David Stockman: No, that is the continuing fundamental bailout that has been in place continuously since September 2008. I actually addressed that yesterday in a blog when I went after Bank of America for its latest malefaction, shifting insured deposit money from the North American bank to London so it could be spread around among some fast money hedge fund traders to pull off various kinds of tax arbitrages.

Well, the point I was making is that the banking system is not, by any means, fixed. That when you have a rogue operation like Bank of America now facing something like 100 billion dollars’ worth of settlements, fines, penalties, recoveries, etc., that, I think, is a sign that nothing has been fixed and all the dangers are still there. But my underlying point – and taking after Bank of America – was that they have 1.1 trillion worth of deposits on a two trillion balance sheet. My view is that the financial repression of the front end of the yield curve by the Fed is at least worth 300 basis points. I mean, we shouldn’t have zero cost of money. We still do have inflation and taxes. That’s worth about 30 billion, arguably, in 2014 to Bank of America in terms of reduced cost of funding their balance sheet. They had profits 11.5 billion, so make your comparison.

The point I was getting at is that in a free market, they would be paying a lot more than zero for their deposits. Maybe the yield on some assets and loans would be a little higher but I don’t think it’s symmetrical or parallel. Because if we actually allowed the free market to price debt and other financial securities, if we allowed the yield curve to find its own proper shape based on honest price discovery in the market, I think the demand for borrowing would fall and therefore, interest rates would be thereby impacted. Whereas the availability of savings would rise as interest rates normalized to something that was reasonable.

You put the two together and you come to the conclusion, at least in my view, that bank earnings are massively overstated or distorted or malformed, if we can use that word, as a result of this massive financial repression by the Fed. That a bank like Bank of America, which allegedly has rebuilt its balance sheet and regenerated some equity, is basically the recipient of this huge gift from the Fed. And so the banking system hasn’t been fixed. It’s simply the financial system that has been totally distorted and malformed by this destructive monetary policy.

So all of that lies in front of us. And obviously, as we move on here from month to month and quarter to quarter, you know, the coiled spring, which is being created in the financial markets as a result of this enormous intervention of money printing is likely to unravel and break out in ways that are very hard to predict but certainly, will be surprising and disruptive.

Chris Martenson: Now, what you’re referring to here is the idea that I guess we just have all this speculative hot money, it’s out there. When the Fed goes out and buys a trillion dollars of mortgage-backed securities and stuffs that cash back into the system, it has to go somewhere. And some of it leaks back into the so-called excess reserves just kicking around at the Fed. But some of that hot money, it’s out in the wild, it’s got to do something so it chases yield, drives yields down even on junk debt to where it has a 5% handle. And in equities, we see some strange things. You probably caught this on ZeroHedge that there are four cheese trucks running around this country that have a collective equity valuation of 100 million dollars.

David Stockman: A hundred million, yeah.

Chris Martenson: Which is a lot of cheese sandwiches, isn’t it?

David Stockman: Right. Yeah, exactly. You know, and I think that’s the point. The mechanical Keynesians say not to worry, the money is circulating through the primary dealers as the Fed, until recently, you know, quit the QE, but until the end of QE bought 3.5 trillion dollars’ worth of treasuries and GSEs from the point of the crisis in September 2008 to October. But not to worry about that because a lot of it just has come back as excess reserves at the New York Fed.

I think what is totally missing from that analysis is that as that massive liquidity injection circulates through the canyons of Wall Street, it dramatically impacts the pricing of everything in the financial market. That is what causes the money market to stay at zero. That’s what causes the sharp repression of 30-year mortgage yields or 10-year treasury yields or the entire treasury curve along with it.

Now, when you get false pricing, when you get artificially low prices, especially on the front end of the curve in the money markets, that is simply a backdoor way of creating more credit. In other words, the money market or the repo market becomes the funding source for speculators buying up the curve, mismatching their maturities, collecting the spread, and laughing all the way to the bank because the Fed has promised them that it will keep their carry costs at zero until further notice with a lot of prior indications. And that the assets that they’re buying will not be allowed to drop dramatically in price and so therefore, the arbitrage is a no-brainer.

Now, that’s what happens when 3.5 trillion dollars circulate from the printing press, the Send button at the Fed, through Wall Street and the primary dealer system, and some of it comes back into the excess reserve accounts. In the process, all pricing is distorted, all assets – financial assets – get re-hypothecated and carried in the overnight credit markets, the repo markets, the short-term, unsecured debt markets. And that is the mechanism by which this huge financial bubble is continuously inflated, whether it’s on the fixed income side, the equity side, or all the derivatives and trades that could be fashioned in those markets.

Chris Martenson: So let’s look at just one aspect of all that money sloshing around, and it’s one that really has got my attention full on. It’s what’s happened – and is happening – in the shale patch. So you have a bunch of drillers out there and they’re punching holes all over North Dakota, Colorado, Arkansas, you name it. And the way it was working was that they would drill these wells at a pretty horrendous cost – seven to 10 million bucks a pop – and then they would take the revenue streams that would come off of that, collateralize it in some way, and go put that in the market, sell junk debt however they wanted to do that. And then, get more capital and keep going. And David, as I analyzed this, I saw that these companies were not generating any positive free cash flow when oil was at 100 a barrel. What are you seeing in that space? And what do you think happens from here with oil at 50 a barrel?

David Stockman: Well, I think you’ve put your finger right on the issue. We keep talking about the fact that all of this central bank intervention and pegging of market prices in virtually every class of financial assets is generating huge underlying malinvestments in the real economy and there is probably no more dramatic case than the oil patch. It is evident right now that oil is not capable of sustaining at $100 or $110 a barrel as the world economy cools down from this enormous central bank boom that we’ve had for the last almost two decades. And therefore, there isn’t enough demand to support the price at $100-plus a barrel.

On the other hand, the desperate scramble for yield that was generated by financial repression by the Fed and other central banks drove tens of billions, hundreds of billions, worth of capital into very high-risk investments such as junk bond funding of the investments in the shale patch. Now, if you look at it objectively, there is probably no price in the last eight or nine years that’s been more volatile than the oil price. You know, it went from 80 to 150 back to 30 up to 115 and now back to in the 40s. At some point, a relatively short period of time here. In that kind of commodity market, pouring fixed yield debt down the well bore for high-cost shale just was the height of irrationality. And yet, that is what occurred.

And now we’re on the back side of that, and that is that all of the malinvestment is going to come undone and there is going to be – there has already been – a massive adjustment even within a few months after the price adjustment took hold. Oil rates, you know, the number already is down from the peak of 1,600 in October to under 1,200 now and is heading down to 80 or 90 a week. And that ricochets through the whole system in terms of local economic activity and jobs and multiplier effects and so forth.

There was a story two days ago about the building boom in Houston—18% of all the commercial square footage under construction in the United States today is in Houston – 80 different high-rise office buildings. And there is going to be a huge collapse of demand as a result of this dramatic adjustment that’s occurring.

Well, the point is all that adds up to economic waste. You bring people to North Dakota and pretty soon, after a few years of earning $200,000 a year, they’re back in their pickups heading back to where they came from. You create a massive local boom in the Eagleford and then all of a sudden, everything is drying up from restaurants to bars to carwashes and all the rest. You create a massive bubble in Houston as a result of the oil price and the shale boom and all of a sudden, there’s going to be half-completed office buildings everywhere.

The Keynesians don’t even recognize that or accept that because they have no history or balance sheets. That’s all yesterday. Their view is, “What do we do tomorrow?” without recognizing that there has been an enormous dissipation of resources, of misallocation of resources, and very brutal financial losses, particularly in the junk bond market, that resulted from the efforts of central banks to control the modern economy. It’s just plain flat wrong. The policy is destructive, and we somehow need to get back to the point where we let the market price, the financial system, and where we let the economy drive the financial markets in terms of capital that’s needed and profits that are produced and valuations that are honestly discovered in markets that are not manipulated and pegged by the central banks.

Chris Martenson: You brought up so many great points in there. And one thing that stuck out for me was this idea that we’re under a couple of decades of Fed intervention. You know, once upon a time, the Fed was not that interventionist. And under Greenspan, that really started to shift.

So the way I look at this, David, is we had a little corporate bond hiccup in ’94. It led to this really bizarre thing known as the Sweeps Program where banks were allowed to effectively sweep demand moneys out of various accounts simply for the optics of being able to say, “Hey, we don’t have to hold anything in reserve. Now we can really jack the lending up.” That gave us a stock boom, which then you know, crashed and required the Fed to come in and ride interest rates down to 1%, which gave us a housing boon, which was even more destructive than the stock boom before. And in response to that, they’ve taken us to 0%.

And so my perception is that the Fed is compounding little errors and making them larger over time. And I feel like we’re at a place now where they’ve got themselves really boxed in a corner where there’s only two ways out of this. One is glorious growth forever, _____ [00:22:20] on, and nothing goes wrong. And the other’s a pretty bad accident. How do you see it?

David Stockman: Well, I take the second view and I think it’s not only the Fed and the US economy but it’s global. I think the central bank-driven global boom of the last two decades is over. Perhaps it started in 1994 when the Greenspan Fed lost its nerve in the face of that little bond market hiccup and over on the other side of the Pacific, Mr. Deng said, you know, “To be rich is glorious,” and the great China construction and debt boom got underway.

We are now through that, we’re done with that. We’re in the crackup phase. And I think there are four big characteristics of that, which are going to basically shape the way the economy and the markets unfold as we go forward. I think you’re going to see increasing desperation and extreme central bank financial repression because they have gotten themselves painted so deep into the corner that they are lost, they are desperate. And so one, you know, almost week by week, we have another central bank – this week, it was Sweden – lowering their money market rates into negative territory. You know, obviously, the Swiss Bank is already there, Denmark Bank is there, the EC is there on the deposit rate, the Bank of Japan’s there. All of the central banks of the world now are desperately driving interest rates into negative territory. And I believe that they’re lost. They are in a race to the bottom whether they acknowledge it or not. You know, the central bank of China can’t sit still much longer when the RMB has appreciated something like 30% against the Japanese yet because of the massive bubble – or monetary expansion – that’s being created there.

So that’s the first thing going on. Central banks out of control in a race to the bottom, sliding by the seat of their pants, making up really incoherent theories as they go. Everybody’s talking about deflation and 2% inflation targets as being some magic elixir. There isn’t a shred of proof anywhere that economies grow better over time at 2% than .8%. It is just made up. So I think that’s the first thing.

The second thing is increasing market disorder and volatility. In the last three months, the stock market has behaved like a drunken sailor but it’s really just a bunch of robots and day traders that are trading chart points until somebody can figure out what is happening directionally in the world. They just keep trading it back to 290, it bounces off, it takes a dive, they trade it back. It has nothing to do with information or incoming data about the real world. We have today the 10-year German bond trading at 29.5 basis points. Well, the German economy’s been reasonably strong, fueling the Chinese boom. That export boom is over. The Chinese economy is faltering. Germany is going to have its own problems. But clearly, 29 basis points on a 10-year is irrational, even in the case of Germany, to say nothing of the 160 available today on the 10-year for Spain and Italy. Both of those countries are in deep, deep fiscal decline. There is no obvious way for them to dig out of the debt trap that they’re in. It’s going to get worse over time. There’s huge risk in those bonds, especially because there’s no guarantee that the EU will remain intact or the euro will survive. Why in the world would anybody in their right mind be owning Italian debt at 160 other than the fact that they’re front running the massive purchases that Draghi has promised and now the Germans have acquiesced to over the next year or two.

But that only kicks the can down the road. One of these days, the central banks are going to falter and the market is going to reset violently to prices that reflect the true risk on all this sovereign debt and the pretty cloudy outlook that’s ahead for the world market.

We now have something like four trillion worth of sovereign debt spread over Japanese issues, the major European countries that are trading at negative yields. Obviously, that is one, irrational, and second, completely unsustainable. And yet, it’s another characteristic of what I call these disorderly markets.

Mal-investment is now coming home to roost. It will be driving a huge deflation of commodity and industrial prices worldwide. You can see that in iron ore, now barely holding $60 from a peak of $200. Obviously, it’s the whole oil patch that we talked about. Look at the Baltic Dry Index. That is a measure, one, of faltering demand for shipments and two, massive overbuilding of bulk carrier capacity as a result of this central bank driven boom that we’ve had in the last 10 to 20 years.

So that is going to be ripping through the financial system, the global economy, in ways that we’ve never before experienced. And so therefore, in ways that are hard to predict what all the ramifications and cascading effects will be. But clearly, it’s something that we haven’t seen in modern times or ever before—the degree of over investment, excess capacity, and everything from iron ore mines to dry bulk carriers, aluminum plants, steel mills, and on down the line.

And then, finally, clearly, demand has run smack up against peak debt, and I think that’s the right word for it. We had a tremendous study come out in the last week or so from McKinsey, who do a pretty good job of trying to calculate and track and tote up the amount of credit outstanding, public and private, in the world. We’re now at the 200 trillion threshold. That’s up from only about 140 trillion at the time of the crisis. So we’ve had a 60 trillion expansion worldwide of debt just since 2008. During that same period, though, the GDP of the world saw a little more than 15 trillion from 55 or mid-50s, roughly, to 70 trillion.

So we’ve generated, because of central bank money printing and all of this unprecedented monetary stimulus, we’ve generated something like 60 trillion of new debt in the world and have barely gotten 15, 17 billion of new GDP for all of that effort. And I think that is a measure of why the fundamental era is changing. That the boom is over and the crackup is under way when you see that kind of minimal yield from the vast amount of new debt that has been generated.

Now I’d only wrap this up by calling attention to the fact that within that global total of 200 billion, the numbers from China are even more startling. At the time of the crisis, let’s go back to 2000, China had two trillion of credit outstanding. It’s now 28 trillion. So we’ve had just massive 14X growth in 14 years. There’s nothing like that in recorded history nor is there any plausible reason to believe that an economy, which is basically under a command and control system that is run from the top down through the party cadres, could possibly create 26 trillion in new debt in that period of time without massive inefficiencies in waste and mistakes everywhere within the system, especially since they have no markets. They have no feedback mechanisms. It all comes cascading down from the top and everybody lies to the next party above them. And I think the system is irrationally out of control.

In any event, my point was that at the time of the 2008 crisis, China had allegedly – if you believe their numbers, which no one really should – but as reported, they had five trillion worth of GDP, it’s now ten. So they’ve gained five of GDP. Their debt at the time of the crisis was seven trillion, now it’s 28. So the debt is up more than 20 trillion and the GDP is up five. These are extreme, unsustainable deformations, if I can use that word, that just scream out, “Danger ahead. Mayhem has happened.” And the unwinding of this and the resolution of this is not going to be pretty.

Chris Martenson: Now, that’s a fantastic list. You’ve given us a number of characteristics of this crackup phase. We’ve got this increasing desperation by the central bank because obviously, they’ve painted themselves in a pretty big corner. Can’t possibly normalize interest rates now without creating just absolute world class mayhem. Increasing market disorder and volatility because we’ve got all this malinvestment and we’ve got a lot of speculators and hot money and everything’s mispriced so who knows what anything is.

And then, this idea of peak debt – a couple hundred trillion of debt outstanding – those are our hallmarks. When this deformation comes up against reality and goes through its unwinding phase, paint that for me. What does that look like? Do markets just go haywire? Do we have flash crashes?

David Stockman: Yeah. You know, it’s a great question. And first of all, everybody ought to be reasonably humble about their predictions and forecasts because we have never been remotely in a world characterized by the things we’ve discussed so far – 200 trillion worth of debt, nearly a 3X debt to income ratio worldwide. The creation of new debt at a rate four, or even more – four times or even more the amount of new GDP that’s being generated. Central bank financial repression at the zero bound that wasn’t even imaginable. And I just don’t think you can stress that enough. Wind back ten years: Who would’ve predicted that any known events in the world would’ve been sufficient to drive the central banks to peg the money market, the short-term rate, at zero for 73 months running and actually, 80 months once they get to July if they manage to raise it then?

So these fundamental characteristics and distortions are so novel and unique that it’s really difficult for anyone to predict how it will unwind. But I think it’s more like a coiled spring. And when finally the pressure is released, you know, there’s going to be a lot of flying parts and pieces everywhere. And it’ll amount to the great reset in financial markets. Everything is dramatically overvalued – bonds, stocks, until recently, commodities. They’re already going into their reset. And I think it’s just the first of many waves of repricing. And that means that you have multi-trillion bond bubbles in the world, you have multi-trillion stock market bubbles in the world. And they’re going to resolve themselves pretty violently once confidence is lost.

Ultimately, this is a con game going on in the world that the central banks have gotten away with for a long period of time. But it doesn’t mean you can do it permanently. Sooner or later, the weight of disbelief becomes too substantial, too great for even the central banks to manage their way through. And we get a break, as they used to call it in old-fashioned times, a financial break. And once the financial break starts, we’ve seen a living demonstration of it in oil – 110 in June, you know, hitting around mid-40s and maybe another big leg to drop very easily in the months ahead. There wasn’t one, you know, out of 100 so-called oil analysts that saw anything remotely like this coming. And yet, the facts on the ground were all materializing, all emerging, all discoverable in June and yet, no one saw it coming.

So maybe we take kind of the oil model and suggest it’s going to be replicated many times over in other financial markets of the world as the central bank prop in this whole bubble finally loses its traction.

Chris Martenson: David, so many excellent points in there. I really want to focus on this idea of confidence. The central banks have really been given a big vote of confidence, they’ve been given a lot of leeway. They’re acting in cahoots with each other. They’ve been doing a lot. I’m reminded now of a George Orwell quote, which is, “In a time of universal deceit, telling the truth is a revolutionary act.” How revolutionary was the Finance Minister of Greece’s pronunciations to the world? I watched the EU bureaucrats just absolutely go into a panic tizzy over the things he was saying. How revolutionary is that?

David Stockman: Well, you know, I think it was a pretty dramatic inflection point. I think of all the points he’s made – and some of them, obviously, are for home consumption politically. But the fundamental point is that we have – the Greek nation – 350 billion dollars’ worth of debt. We didn’t ask to sustain that. It was forced on us by the EU bureaucracy and mechanism that essentially bailed out the banks of Germany and France and Italy and elsewhere, and converted what was de facto, defaulted debt issued by the Greek governments prior to 2010 into permanent obligations guaranteed by the taxpayers of Europe. And that was a fundamental mistake. It was symptomatic of this whole “kick the can” model that has ruled the world for many years now. And I think what’s happening at the moment, which is getting more tense by the hour, is the Greeks have finally said, “No, we’re not going to run our economy and our policy as based on the mandate that we have gotten from the people in order to shield the taxpayers of Germany and Italy and France from the imprudent obligations that they took on, unbeknownst really, to the public on the street in Europe.” But the obligations they took on because Brussels and Frankfurt were unwilling to allow defaults to occur, losses in the banking system to happen, and the market process in finance to work its will.

And now, we’re at the point where the political contagion is breaking out because if they dare let Greece off the hook, how soon will there be an upheaval in Spain in the new government? How soon will there be an upheaval in Italy in the new government? I think you’re really at the explosive inflection point here. They may come up with some words to tide this over for another few months while they negotiate. But you’re at a point where Greece owes 350 billion, has got a GDP of 280 billion at best. Most of what they owe is to the machinery of the IMF, the EU, the ECB. It’s all been moved into the sphere of politics and I think politics is a much more explosive and unpredictable process than the markets recognize at the moment.

In fact, I think the markets have their head in the sand. They are sheep being led to the slaughter. Of course, the fast money thinks they’ll get the word before anybody else. But the kind of rally that occurred in the last couple days in the euro and the yields on the EU members that are next in line are really supremely irrational. You know, rational investors would be selling their way out of the Italian bond as quick as they could get out, or the French bonds, for that matter. Sixty basis points for the 10-year debt of France, that is a stunningly stupid condition. Yet, I think it’s symptomatic of the way the markets are sleepwalking in the face of what looks to be like the beginning of a total breakdown of politics within the EU.

Chris Martenson: Now, what I loved about what the Greek Finance Minister said, which I thought was a little too truthy for the markets, was he just said flat out, “My country’s broke.” And that’s true. And I think that it’s a short hop, skip, and a jump from there to say, well, if Greece is broke and they’re going to admit it and that’s going to have repercussions, then what do we say about Italy or Spain or Portugal or Ireland or Japan or the United States, if you run the clock out long enough?

What’s interesting to me here is, you know, you talk about Greece and I had always thought of it in my head, it’s an economy, it’s a country, it’s a nation state. But I’m looking at a chart here that shows various things that have larger economies, GDPs, than Greece. And right next on the list with a larger economy than Greece is Boston.

David Stockman: Yeah, right [laughter].

Chris Martenson: So when we say they have 380 billion of debt, imagine Boston trying to figure out how to pay 380 billion of debt. But honestly, Boston has a more vibrant economy than Greece currently.

David Stockman: Yeah. You know, I think that the problem is Greece is the inflection point. It’s not just the 350 billion that they can’t service. The fact is they were bankrupt in 2010, he was right. They should’ve proceeded to write-offs and ejection, if it needed to be, from the euro and the EU at the time. But they haven’t and that policy has become the universal policy of central banks in cahoots with governments all around the world. I mean, look at Japan. Their population is getting older by the day. Their economy, notwithstanding all of this massive stimulus from Abenomics, is not expanding. Their total debt is something like 500% of GDP, public and private. Their public debt is 2.5 times GDP, off the charts. This is an equation that can’t be sustained. It is an explosive equation.

So Greece may be the size of Boston but it symbolizes a planet-wide policy and condition and deception about the true state of economic and financial reality.

Chris Martenson: I thought that the chief lesson coming out of this, and seeing the panic that’s ensued, is that you’re not supposed to say the obvious. And that’s really the biggest deformation is that speaking the truth seems to have really slipped in the past number of years and decades. And we’re at the point now where we do have to deal with some real solid structural issues. If something can’t be paid back, it won’t.

And so right now, I look at what’s happening in the EU vis a vis Greece, but soon to be coming to a theater closer to you, is really, they’re just trying to solve this one question. And the question is: Who is going to eat the losses? There’s just losses to be had. I guess we’re now to the point of arguing over who’s going to take them. The standard IMF position, which they are – poor Ukraine. I mean, they had a great deal with Russia in December of 2013. They reneged on that, 20 billion with no strings attached relative to the IMF, which gave them 17.5, very string-laden attachments, and they’ll never dig out from under them is the lesson from that.

And so as I look at it, it’s really the banker, political class on side saying “We don’t want to eat the losses. We think the people should.” Greece is the first nation state I know of, after Iceland, to stand up and say, “That’s not how this is going to work out.”

David Stockman: Yeah, yeah, it’ll be very interesting to watch over the next couple weeks how this plays out. I still think there is some possibility that they’ll find a way to kick a rusty can down the road for a few months. You know, the Germans are saying they must complete the program. Well, what does “complete” mean and what does “program” mean? The new Greek government says it has a mandate not to extend the program. Well, what does “extend” really mean? And can people find ways to split hairs and twist words so that the differences – the vast black and white difference between the north and south of Europe can be accommodated.

I think maybe words can extend the situation for a few months. But it’s pretty clear now that Europe is running into a very difficult place and that this isn’t going to last much longer. The EU and the German differences over monetary policy, the unrest that’s in the electorates of all the major European countries that are heading for elections. All of this creates pressures and tensions and fractures that I do not think are containable and manageable much longer, even if suddenly next week, you get an announcement that they’re going to get by for another 30 days. I don’t think you can run the world 30 days at a time with this much built up pressure and tension.

And so therefore, you know, at the end of the day, we are more exposed to unexpected dislocations to the so-called black swan events than ever before. And when you have a system that has never been this unstable and fragile, in which the environment is rich with opportunities for surprise and dislocation, I think it is a very dangerous time.

Chris Martenson: I couldn’t agree more. And since we can’t predict what’s going to happen, I’m constantly advising people that they should be prepared for almost anything. So true diversification is really important these days.

As a final comment from you, I am wondering—I am watching this Greece thing as a petri dish to figure out how this all might play out. This leftist party gets put in place and they’ve been given a mandate, they feel, and so they’re going to go forward. The EU’s in a tough position here because I don’t think they can “let” Greece get away with this so they’re going to have to be tough. But if they’re too tough and they kind of crush these guys, you know who’s waiting in the wings is the party Golden Dawn, which is the ultra right wing fascist group that’s in Greece. And there’s a sort of rise of those sentiments I’m detecting all across Europe. And I think that’s just what happens when you – you know, we saw this in World War I and then especially before World War II. That strict austerity and things like the Versailles Treaty and all of that just have a way of creating pressures that create either space for, or new recruitment for, fairly extreme groups to arise. Do you see that as a danger?

David Stockman: Yes, I think that—I agree with that completely and I think it’s really the biggest danger at the end of the day. It’s not exactly about numbers and leverage ratios and bailout programs and whether the GDP or the primary surplus in Greece is 4% or 2%. I think what they’ve set in motion by inappropriately bailing out the banks and creating all of this sovereign obligation is radical political upheaval and discontinuities in Europe. It’s very possible that in France, at the next election, you’re going to get the Nationalist party in power, which is anti-EU. In Spain, the Podemos party came out of nowhere and now is running like 30% in the polls, way ahead of the incumbent government party. None of this was visible back in 2010, ’11, ’12, when they were fashioning all of these mechanisms, or even when Draghi was promising he would do whatever it takes.

So we’re in a new phase of this, and that may be the political blowback of what was an unsustainable and profoundly stupid policy at the beginning. You know, it’s a warning that you have to face down the problem of massive excess debt in the world and allow some liquidation to occur, allow some losses and write downs to happen, clear the decks. Because if you don’t, you’re simply buying a little time and sowing the seeds of much greater and more unpredictable and uncontrollable reactions and blowback down the road.

That’s the real lesson in Greece. I mean, this is a ragtag party of Trotskyites and populists and leftists and hippies, for that matter. And who would’ve predicted that they would come to power in this dramatic way? Well, you wouldn’t have predicted that but it is the consequence of the dictation that came out of Brussels when it should’ve faced the problem from the very beginning in a forthright way.

Chris Martenson: And boy, isn’t that just a metaphor for what’s happening all over the world – Japan, US, you name it. We’ve been talking with David Stockman. His website is DavidStockmansContraCorner.com. It’s an excellent website. I visit it daily. David, you’ve been very generous with your time today. Thank you so much.

David Stockman: Very happy to have the discussion.

About the guest

David Stockman

Mr. Stockman is the founding partner of Heartland Industrial Partners. He was formerly a senior managing director of The Blackstone Group. Prior to joining Blackstone, Mr. Stockman was a managing director at Salomon Brothers, Inc.

He served as the director of the Office of Management and Budget in the Reagan administration and was the youngest Cabinet member of the twentieth century. From 1976 to 1981, Mr. Stockman represented Michigan in the House of Representatives.

He is also the author of the book "Triumph of Politics: The Inside Story of the Reagan Revolution" and the upcoming book "The Great Deformation: The Corruption of Capitalism in America".

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64 Comments

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 26 2010
Posts: 232
Reality vs Current State of Affairs

This was a very sobering podcast.  The first third or so was the standard review of the current state of the economy, etc.  The middle third, where Stockman goes into detail about the four steps and you see how closely current events are linked to them, was disturbing.  I thoroughly enjoyed the last section where Chris and Stockman talked about the situation in Europe, specifically in Greece.  I have been following, from a distance, the emergence of Greek's "Golden Dawn" party for a couple of years.  Not exactly a nice group of people, and it is alarming some of their ideas even see the light of day.  Very good, detailed podcast.

abhills's picture
abhills
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Posts: 6
Debt Bomb

It is amazing how long these Ponzi scheme things can go on when you have a printing press for money unlike Bernie Madoff who eventually came to an end. At these low rates it is like free money so until rates start to climb it is cheap to run up debts like Japan has. If rates returned to the norms all of it would fall apart and the US would have interest payments resembling the military budget. Printing money does not reduce rates anymore but actually raises them as people buy bonds in a stronger currency to avoid destruction of their money. Janet Yellen seems to recognize this and QE may be over for a while in the USA which will restore some kind of normal behavior by investors who fled the dollar into many unproductive investments like oil, gold and commodities etc which are now unnecessary with a stable dollar. So many distortions by investors trying to preserve capital instead of investing in productive assets?

BuzzTatom's picture
BuzzTatom
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Posts: 72
Central Bank PM

I have been reading about Central Banks buying gold. Does anyone think they could be doing that to at some point reset PM prices to back to some degree the public debt we have? Sounds to simple to me but it sure sounds like they are using paper money to accumulate hard assets. You know they aren't going to take the right way out.

I'm getting to the point of thinking us small people don't have a chance.

BuzzTatom's picture
BuzzTatom
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Stockman

Chris, I did want to say thank you. With this guys credentials it is hard for people to dismiss what he says. The more credible people you have talking, the easier it is to convince others of what is coming.

Phaedrus the younger's picture
Phaedrus the younger
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Another powerful podcast

I remember about a year ago when you guys were contemplating a new direction for PP and sweating the move.  As far as I  can tell, you've exceeded expectations in content and credibility.  It appears you've also made inroads on expanding your base too although likely not as far along as needed.  I recommend PP to all of my colleagues, friends and family.

Keep it coming!

davefairtex's picture
davefairtex
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Posts: 3473
My favorite comment:

My favorite comment: Keynesians don't have balance sheets.  (A balance sheet is where you keep track of what you own, and who you owe - assets & liabilities).

An econo-geeky joke, but sure to make me laugh.

I also really enjoyed the stats that Stockman pulled from the recent McKinsey report: 57 trillion in new debt resulting in 15 trillion in new GDP.

http://www.mckinsey.com/~/media/McKinsey/dotcom/Insights/Economic%20Studies/Debt%20and%20not%20much%20deleveraging/MGI%20Debt%20and%20not%20much%20deleveragingFullreportFebruary2015.ashx

Debt writedowns are incredibly deflationary.  Someone - a holder of some asset, obligation (pension, insurance policy, etc), or deposit - must take a loss if a writedown occurs.

If debts are (roughly) 2x sustainable levels, then that means a 50% loss on all financial assets (bonds, deposits, pensions, etc) in real terms.  It also may mean a 50% loss on all assets that have been supported by debt money.

Makes you want to pull cash out of the bank, doesn't it?

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
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Posts: 539
A new stimulus plan

Here's an idea.  Let interest rates rise to 1 or 2 % above inflation, real inflation that is.  Then retired people like myself would definitely spend some of that money back into the economy, instead of buying junk bonds.

If I were receiving the $60,000 or $70,000 in annual interest that my retirement plan was based on and that I was lead to believe I could safely expect, my spending pattern would be entirely different.  No doubt about it.

I am sorry if that would result in massive interest payments on accumulated debt.  But, hey, I didn't carelessly accumulate debt.  I saved money, so that I could lend it to have an income in retirement.

I feel like I'm in a poker game where the dealer can set the rules to win after the last cards are drawn.  Guess who wins every hand.

KennethPollinger's picture
KennethPollinger
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JoePlummer.com MORE news

StopTheLie.com News update 02-16-2015 Wall Street Pays Bankers to Work in Government Source: NewRepublic.com --These payments are routine at major banks, several of which have explicit policies, found in filings with the SEC, outlining automatic awards for executives who rotate into government. Goldman Sachs offers “a lump sum cash payment” for government service, for example. --“It fuels the revolving door between banks and the government,” said Michael Smallberg, an investigator for the Project On Government Oversight (POGO), whose 2013 report detailed these types of compensation agreements. The average executive branch salary is substantially less than these millions in awards, so the bonuses effectively supplement the lower pay, raising questions about who the government officials actually work for. Read full article at: http://www.newrepublic.com/article/120967/wall-street-pays-bankers-work-...

bitterbaldguy's picture
bitterbaldguy
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opposing Fed audit - Warren

“I strongly support and continue to press for greater congressional oversight of the Fed’s regulatory and supervisory responsibilities, and I believe the Fed’s balance sheet should be regularly audited – which the law already requires,” Ms. Warren said in an emailed statement. “But I oppose the current version of this bill because it promotes congressional meddling in the Fed’s monetary policy decisions, which risks politicizing those decisions and may have dangerous implications for financial stability and the health of the global economy.”

--  Sen. Warren
 
So what's wrong with this?  Sounds like more sanity from someone towing a very different line.
InfiniteSelf33's picture
InfiniteSelf33
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Posts: 7
Funny you mention Boston

Debt snow what's the difference....https://www.bostonherald.com/news_opinion/local_coverage/2015/02/boston_getting_soaked_on_snow_melter_rentals

aggrivated's picture
aggrivated
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Posts: 301
Congress has the authority & it is political

US Constitution--Article I, Section 8 gives the US Congress the authority to coin money and regulate the value of money, etc.  One of the original 'arguments' for the Fed's creation   in 1914 was to give Congress a non-political way to fulfill its Section 8 responsibility.  What resulted was the equivalent of giving the fox responsibility to feed the chickens. It would behoove us to force Congress to take back that responsibility and exercise more direct control.  After the Founders experience with the Continental fiat money issue going to zero value I bet they were deliberate when they used the word 'coin' and not 'print'. 

What the present arrangement allows is for the Congress to spend way more than is available and then leave the Fed to backfill with money creation. This is an abdication of responsibility by Congress but a money maker for Wall Street's banks.  We are supposed to feed the chickens directly by taxation of ourselves and tariff, not by debasement of our money. If you elect chickens they act like chickens.

treebeard's picture
treebeard
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Posts: 501
Debt

Economic debt has no absolute value, it only can have relative value between participants in an economy.  Assets created with debt are no different in utility than those paid for with cash.  Energetically everything is paid for the moment it is created, the labor, resources and energy are expended in the act of creation, no debt is possible.  If all the necessary ingredients are not present then creation cannot occur.

What is entirely possible is to create malinvestment because our economic thinking is not in alignment with ecological structures. What is entirely possible is to create real and destructive debt by degrading the environment and reducing the current productive capacity of the planet. What is entirely possible is reducing future real productive capacity by squandering non-renewable resources now.  What is also entirely possible, the crowning achievement of our current hubris, is techno-fantasy thinking, that claims that real debt, ecological and resource degradation is pure fantasy, and our only real problem is economic debt.

Even if we claim to hate the banking system, we are still playing within the deluded mental construct that ignores the real threats to our current and future viability.  Can we bring economic incentives in alignment with reality, rather than this fantasy system that is bent on self destruction?  We have to climb outside the economic box into the ecological box otherwise our brilliance will be wasted on this abstract game we call the economy.

Arthur Robey's picture
Arthur Robey
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Posts: 3936
The Wages of Kings.

Makes you want to pull cash out of the bank, doesn't it?

I am too aristocratic (thick) to take an interest in money Dave, but  in some mysterious way my unconscious mind is is ahead of the curve.

Ag.

Gold is the money of Kings, silver is the money of aristocrats, barter is the money of peasants and debt is the money of slaves.

Gold rhymes with guillotine in my ears.

aggrivated's picture
aggrivated
Status: Gold Member (Offline)
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Posts: 301
Peasantry is underated

Though you can bite it to check its purity, neither gold nor silver are edible.  If a peasant has food or firewood, a barter trade is much more likely to go down well than a precious metals purchase.  Besides--better deals are made (without force being applied) when both parties are standing on the same ground.  Precious metals are great for insurance and boogying away without having to take the kitchen sink, but on a day to day basis I vote to keep your king (and aristocrat) cards close to your chest and join the peasants.

An anecdotal comment to close my reaction to your great quote on gold, silver, barter, and debt.  When my family and I were visiting Abe Lincoln's birthplace, the comment was made that the Lincoln's immediate neighbors were looked down on in the community because they had once borrowed money.  Now the whole system runs on slavery, uh, I mean debt.

climber99's picture
climber99
Status: Silver Member (Offline)
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Posts: 126
David is saying that increase



David is saying that

increase in world GDP per year = 0.25 x increase in world debt per year

Lets assume his figures are correct,  and I have no reason to disbelieve the figures.This implies an underlaying depreciation of currencies of 25% per year. Inflation of this magnitude is clearly not happening.  I suspect the majority of this new money is not circulating round the economy but is instead being parked in bank accounts, bonds and equity markets. ie. the velocity of this new money is very low.

The next logical step is negative interest rates so as to make people stop hoarding money.   Unpopular and incomprehensible to the general public, I know. It's how our money creation and destruction has evolved to work. Money needs to circulate so debts can be repaid.

Before anyone says that debts cannot be repaid. That is nonsense. Money is created as debt so its out there in circulation waiting to repay the debt.

Ed

agitating prop's picture
agitating prop
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Posts: 793
Ghost cities

On the one hand, there are people living in honest-to-God cages in Hong Kong but ghost cities with room for millions, sitting empty in mainland China. Something has to give.  What a crazy-ass place. Nuttier than North America, by a long shot. 

agitating prop's picture
agitating prop
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Posts: 793
Question for Mr.Stockman

Not that I am a Communist, but Karl Marx, predicted concentration of capital in fewer and fewer hands, in the over ripe banana stage of capitalism. He called Crony Capitalism, "class war."  

I wonder if Mr. Stockman could comment on the role that automation is playing, too, in concentrating capital and if there are any top down solutions, he would endorse. Do we have to figure it all out ourselves?  And why aren't any banksters in jail, preferably on lavatory duty?

agitating prop's picture
agitating prop
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Posts: 793
Complete breakdown scenario??

A barter system is untenable, inefficient.  Barter is great way to augment easier to manage stores of value, like precious metals or fiat currency that is intelligently managed.  But alone, it won't work.  If you advocate for this kind of system, in a world of 7 billion people, you are consigning most people to a slow death by starvation, thirst, disease.

LesPhelps's picture
LesPhelps
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Posts: 539
agitating prop wrote: If you

agitating prop wrote:

If you advocate for this kind of system, in a world of 7 billion people, you are consigning most people to a slow death by starvation, thirst, disease.

Commerce system notwithstanding, 7 billion people on an Earth size planet consigns most people on the planet to starvation and thirst, once the non renewable resources become scarce, hence the concept of overshoot.

climber99's picture
climber99
Status: Silver Member (Offline)
Joined: Mar 12 2013
Posts: 126
All things triangle

I have a picture in my head that may help you visualize how capital and debt work.  Think of an isosceles triangle with the richest people at the apex and the poorest people forming the base.  Money moves up the triangle while debt moves down.  Everyone can pay off their own debts as long as a new layer of indebtedness is formed at the bottom of the triangle.  Many view this as a Ponzi scheme because it requires the triangle to forever grow.  In fact some people picture the triangle the other way round, standing on its point to emphasize this aspect.

The idea that there isn't enough money to pay back debt is wrong. The total amount of money in the triangle is equal to the total amount of debt in the triangle.  (Remember money is created as debt).   The problem is the distribution of money and debt within the triangle.

When the limits to growth are met the triangle can no longer grow. The people at the bottom of triangle cannot pay back their debts because the people above them have all the money and there isn't a new layer forming beneath them to keep the Ponzi scheme going.

Hope this helps visualize the situation.

Ed

ps One way to salvage the situation is to redistribute the money within the triangle.  That is why the German taxpayers will ultimately end up paying off Greek debt.

jgritter's picture
jgritter
Status: Gold Member (Offline)
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Posts: 266
Join the Peasants

Thoughts on "joining the peasants".  

Do not assume that you will be welcomed by rural communities.  As a member of the government of a community of less then a thousand people within a half a tank of gas range of Chicago, I can say that we are painfully aware that there is very little we can do for a large influx of internally displaced people. 

Bring provisions.  If you arrive with food, fuel, bedding, clothing and some cash you have a much better chance of integrating yourself into a community then those that might arrive destitute.

Be prepared to work.  Pitch in whole heartedly with what ever needs doing.  You want to be seen as, and be, a legitimate part of the solution, not as part of the problem.

Bring a sense of humility.  Country people have a long history of feeling that their intelligence is being questioned by city people and we tend to be alittle defensive.  Thinking that you are going to bring culture to the hinderlands by telling us how affluent people do it in the big city is not going to win you many brownie points.

We don't wear suits out here.  The guy with the tousled hair, grubby barn coat and camo bedroom slippers is the Fire Chief.  The petite, mild manored, grey haired lady in the house coat is the Mayor.  The disorganized young woman with the crying baby and the unfortunate tattoos, is related, one way or another, to a quarter of the Village.  Be polite to everybody.

Timing would seem to be the critical issue.  If/when egress routes begin to get choked/blocked, you want to be the useful person inside the barricade rather then the scary one outside the barricade.

Good Luck, 

John G.

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westcoastjan
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Posts: 538
All of this creates pressures

All of this creates pressures and tensions and fractures that I do not think are containable and manageable much longer, even if suddenly next week, you get an announcement that they’re going to get by for another 30 days. I don’t think you can run the world 30 days at a time with this much built up pressure and tension.

Without the ability to plan strategically on a global scale we are truly screwed. Running countries and economies on the fly, not knowing what will happen tomorrow or next week, never mind 30 days from now is absolutely why there are all of these pressures and tensions. People need to have hope for the future and the lack of any kind of long-term strategic planning takes away anything tangible on which to pin those hopes.

Diversification on a personal level really is the key, all the more so now than ever before. Creating a balance in all aspects of life along with a personal strategic risk management plan that assesses realistically what each of us, in our own particular circumstances, are likely to experience going forward is the only way we can counteract the lack of strategic planning elsewhere. In the big picture "they" might not be able to plan where they are going or how they are going to get there, but we can do that on our own small scale.  A great personal plan may not eliminate all of the risks but it sure a heck will help mitigate and reduce exposure to the down drafts that are surely coming.

Jan

Christopher H's picture
Christopher H
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Posts: 123
The barter myth, again....

A barter system is untenable, inefficient.  Barter is great way to augment easier to manage stores of value, like precious metals or fiat currency that is intelligently managed.  But alone, it won't work.  If you advocate for this kind of system, in a world of 7 billion people, you are consigning most people to a slow death by starvation, thirst, disease.

We have been taught for several generations to think that in the absence of money, most transactions were conducted by barter, and that people lived primarily within a barter economy.  As neoclassical economists are fond of saying, "Money is a veil over barter."

The problem is that this bears no resemblance to actual history.  The fact is that most people up until about 200 years ago did not live in a barter economy, they lived in gift economies.  What this meant was that when someone had a surplus of one thing and someone else had a deficiency, the resource was shared.  And the expectation was that if the giver found themselves in need of something, someone else would step up and help them out.  This lack of immediate exchange so common to market economies results in obligation and gratitude developing among the participants -- something that makes the economy a source of social cohesion as opposed to something that puts people in competition with one another.

Backing up the gift economy were a few other social phenomena.  One was the network of mutual obligations among kin and community.  The best example of this in the modern world is an Amish barn raising.  Able-bodied men in the Amish community do not receive direct compensation for coming out and helping -- rather, they do so because it is expected of them, it is their obligation as members of the wider community.  In this way, every family gets a barn without having to go into debt or spend an outlandish part of their savings.

Another was the role of gossip.  When someone in the community would shirk their responsibilities, word would quickly get around -- and that person might not find others stepping up to help them in the event that they find themselves in trouble.  Despite the negative connotation surrounding gossip today, the reality was that it served a crucial role in community gift economies by ensuring that everyone put in their fair share, and correcting those who did not.

ON EDIT: I am frequently reminded of the way that gift economies worked when I think about stories my 96 year old grandfather still tells me about growing up in the depression, in rural Western PA.  His family was fortunate to have a small homestead with a milk cow, gardens, and even a coal shaft on the land.  He and my great-grandfather would mine coal out of that shaft, and it was not uncommon for my great-grandfather to advance coal to other people in the community who needed some.  My grandfather could never get over the fact that those neighbors were not going to be able to pay them back, and says he would point this out to his father.  He says my great-grandfather would just shrug his shoulders and say, "Well, what are you going to do?"

I think that this reveals a big disconnect between a generation that was brought up in a functioning gift economy (my great-grandfather, born (I think) in 1879 in a rural area) and one that came of age as it was overtaken by the market economy (my grandfather, born in 1918 in that same area).  I think my great-grandfather realized that they had more coal than what they needed, and that being the case, you didn't just hold on to it and let other people freeze during the winter.  At least not without word getting out that you were a cold, greedy, heartless bastard -- and hurting your prospects with other people in the community.

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jgritter, all excellent advice!

As someone raised in a rural environment who fled for the city, then settled in a different rural area, I'd add another item to your list -- SHARE YOUR SURPLUS.  This can be something as simple as offering to walk the dogs of a neighbor who works long hours (sharing surplus time), or give away surplus garden produce (sharing surplus food).  This will help you to establish a reputation as someone who is dependable, who is willing to help -- in short, will help you to bank a feeling of trust with your neighbors.  Because if things go to hell in a handbasket and you're in an area like this, those neighbors will be who you depend upon to get by -- and it's too late to build up trust at that point.

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Share your surplus

CAH, good point.

Parable of the Loaves and Fishes, a couple of interpretations.

1) Follow Jesus and all your needs will be magically taken care of, or...

2) Follow Jesus's example and give freely of what you have.  Jesus puts his lunch on the table, everyone else looks around for a second then puts their lunches on the table, and not only was there enough for everyone with left overs  but the multitude is now a community of people who have shared a meal and owe each other a favor.  What was a mob is now a tribe with functioning gift economy, miraculous!

John G.

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Jesus and the Parable of the Loaves and the Fishes

jgritter,

As someone re-integrating myself with the Christian traditions in which I was raised, this comment really hit home.  I still really have issue with the way that the concept of a "personal Jesus" is spread throughout mainstream Christianity.  When my wife and I took our kids to Sunday school the first time and they were doing prayers, some of those we heard were things like, "Help me improve my grade in English."

I honestly had to bite my tongue from blurting out, "You're not getting it!  It's not about what magical gifts can be provided FOR you, it's about what gifts YOU can bring in the spirit of service and gratitude to others!"  And as you pointed out with your second interpretation of the parable, when you get enough people taking that kind of an approach to things, the end result is a situation where you always get what you need, even if it isn't necessarily what you wanted.

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Gift economy vs. Market economy

CAH - I really enjoyed your post.. have been reading Eisenstein on and off myself.  Question;  you said, 

I think that this reveals a big disconnect between a generation that was brought up in a functioning gift economy (my great-grandfather, born (I think) in 1879 in a rural area) and one that came of age as it was overtaken by the market economy

Your statement could be interpreted as saying that the gift economy and the functioning of a market economy are mutually exclusive.  Are they?  I am not sure they are.... it still seems to me that honest, transparent, reasonably regulated markets should be able to give price signals that are, in the end, beneficial to our stewardship of the earth... i.e. if something is scarce, it should become more expensive.  

At the highest level, I don't think the answer to our problems of today is going to be all or nothing.  I don't think the answer is a pure gift economy.  I don't think the answer is pure capitalism either, or simply a matter of honest money (though that would go a long, long way).  I think the answer lies in a hybrid. 

It's a good thought experiment to imagine what a working system that embodies the, "best practices" might look like, regardless of how realistic it might be to get from where we are today to this new system.

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Hybrid Economy

For my part I would have to say that rather then being mutually exclusive the gift economy and market economies exist side by side at all times as reciprocals.  In a large complex economy flush with cash, cash transactions will predominate.  In a small local economy with little cash, gifts will predominate.  Given human beings baseline predilection for banding together for mutual support I don't find it difficult to imagine a gift economy rising up so smoothly and seamlessly (at least on a local level) in the wake of a cash crunch that people hardly notice.  I don't find it hard to imagine a world in which gifts, barter and money (be it precious metals or notes backed by something tangible) freely co-mingle.  Our currant ethereal system of global finance might be dead but, given that the majority of people are essentially destitute and have nothing to loose but their debts, I don't think many people on Main Street would miss it for long.

John G

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What goes around comes around

Great conversation John G and CAH. I've been experimenting with barter and gifting for the last few years myself. We moved to a rural area 4 years ago and are generating more surplus each year. Sometimes we barter, sometimes we sell produce and often we simply give it away. This is definitely a powerful way to build positive relationships (and to eat well at the same time! -  it almost always comes back around.)

I'm not sure that gifting and money economies are mutually exclusive. Right now I can see a place for both. I'm reminded of a tai chi principle of not getting caught on the wrong foot. If that foot is taken out from under you, you're gone. We have a mortgage and live in the real world - money is a requirement for now. Equally we live in a community that is likely to see radical change in the next few years. Forging relationships that go deeper than money is vital.

In our society a lot of people have all their weight on their 'money leg' and I fear this will become problematical for them. It may or may not be necessary to transition entirely to a gift economy as events unfold. But either way it is useful and rewarding to have made a start.

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Gift Economy vs. Market Economy

The gift economy and money/market economy (especially under industrialization) are two very different animals.  The gift economy is horribly inefficient at meeting wants, but due to the fact that its exchanges are left "open," it has the effect of increasing social cohesion through a sense of mutual gratitude among the participants.  A market/money economy, on the other hand, is incredibly efficient at satisfying wants (and, in our current system, manufacturing those wants) -- but it is horrible for social cohesion, because every exchange is completed immediately, with both parties walking away not "owing" anything to the other party.

While there are certainly instances where a gift economy and market/money economy exist together, by and large I do not view them as reciprocal nor complimentary.  Anywhere a market/money economy has emerged, it has squeezed out the gift economy.  This fact has been recognized by certain populations even here in the United States.  In the pre-Civil War South, for instance, "improvements" such as river mills were fought against by yeoman farmers because they knew the way in which those improvements in the North had been the first salvo in turning independent, self-reliant heads-of-household into wage slaves -- and they wanted no part of it.  Similarly, the gift economy maintained the greatest hold in Appalachia, primarily because the terrain prohibited the intrusion of a market/money economy on any scale beyond a peddler's wagon coming through a couple times each year.

Anywhere that people gain access to money, the gift economy is squeezed out.  Every time.  This is supported by the fact that gift economies still in place in "mainstream" American society are uniformly in poorer communities, where they rely upon exchanging basic goods and services with each other outside of money.  Now, what this also means (and Dmitry Orlov has written a fair amount about this) is that if things really do tip over and we all see a drastic decline in our standard of living across the board, the people best positioned to deal with it will be the poor, because they have been practicing how to be poor for a long time.  Being poor, and participating in a gift economy, and making do with what comes across your path instead of what you want is hard work.  While I see an adoption of the gift economy among downwardly-mobile middle and upper-middle class people happening eventually, I do not think that the transition will be anywhere close to rapid or seamless -- because people in the middle and upper-middle classes will do whatever they can to hold on to their "status" as long as they can by keeping up appearances, and part of that will be a refusal to participate in the kinds of non-monetary exchanges that poor people do.

All that being said, there are groups that do manage to participate in both the market and gift economies.  However, these are typically groups that consciously separate themselves from the rest of society (Amish, Hutterites, Hasidim, etc.).  There are very conscious and strict limits on their interaction with the wider society and market economy, and these limits are usually founded on the separate identity (often religion-based) that these groups maintain.

Finally, with regards to market economies, I don't understand where this faith in fair, transparent markets comes from.  Markets, by their very nature, will never be fair and transparent entities.  First, because they are not ruled by rationality, but rather by greed and fear.  Second, because those who have the ability to game the system will inevitably do so to their own favor.  As Adam Smith said, "Men of the same profession rarely come together, even for merriment, without the end resulting in a conspiracy against the public."  This fact was not lost on the yeomanry of the early Republic -- it is why they often consciously avoided interaction with anything resembling a financial economy.  They knew that it was more often than not a sure road to ruin.  It is only since financial markets have managed to swallow up almost all other exchanges that we have convinced ourselves of the fallacy that they can be "fair" and "transparent".

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Living in two worlds vs. competition between those worlds

davidallan -- I want to clarify my above post in light of reading your reply.  I too recognize the fact that we currently live in an over-financialized system, and it is nigh impossible to drop out of it completely.  I, also, am trying more and more each year to reduce my reliance on money in order to meet our needs -- often by leveraging savings into improvements that will meet some of those needs (solar heat/energy, firewood, micro-farming, etc.).  However, I think that this acknowledgement and personal choice is a different thing than looking at the macro picture of how these different worlds interact with each other.

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Things are returning to their source

It has been the mark of recent history that "free market" economies have been destroying local indigenous gift economies around the globe.  Always to much applause, since it created the much worshiped "per capita income" which has now become the measure of all things. But that will not always be the case, things must and always will return to their source.  As the predatory system we live under based on fear continues to fail, as it must, we will all be forced to confront our individual and collective fears, the fears that are so well articulated here at PP on a daily basis.  When we finally build the courage to peer into the darkness we will see only ourselves.  When we finally own it, then we will finally be free.  The problem is not my brother or sister, it is me. Blessed be the darkness, because it is from within it that I may finally see the light.

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Points well taken

CAH,

I wonder if you and I are as blind men describing an elephant.  I write from the perspective of one who lives in a deindustrializing area with a shrinking money supply.  The gift economy here is tiny, but I can image it gaining traction as the money supply continues to dwindle.  I see the potential, some years hence, of a vibrant community of people who are wealthy in food, fuel, social connections, feelings of self worth and general quality of life but who have little or no money.

John G

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Blind men describing an elephant

Yeah, John -- your statement is probably pretty accurate.  I live about 60 miles outside of NYC, so we have the benefit of all that money sloshing around the global financial capital -- at least for a little while longer.  But I also notice even in my own life that I will often take the convenience of a cash purchase over the work required to build trust and operate in a gift economy a little more each year.  But I reckon even in that respect I'm ahead of the game, because most people I come across are oblivious to the vulnerability of relying on cash for everything.

I see the potential, some years hence, of a vibrant community of people who are wealthy in food, fuel, social connections, feelings of self worth and general quality of life but who have little or no money.

That's actually my aim, more or less, over time.  But in order to do it I have to be willing to take the "leap" that Geoff Lawton describes, and jump out of the life I don't want (but gives me a false sense of security) and into the life I do want (but scares the hell out of me with a wife, 2 kids, and a mortgage).

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Sorry, OT

OT

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Great discussion

I'm gone for a couple of days and come back to such a great exchange of ideas!  The current money economy is based on debt.  If debt is destroyed either through default or non-engagement then money is destroyed. Climber 99's triangle (post 21)shrinks a little each time this happens.  If you don't want a monster, don't feed it.  The gift, and to some extent barter, type of economy can work now and help starve the monster. 

All of the above discussion opens up the awareness of possibilities to function in a much different way in our lives.  Most of this can be explored and entered into as a voluntary replacement for our current money based economic exchanges.  As CAH brilliantly pointed out above, "You're not getting it!  It's not about what magical gifts can be provided FOR you, it's about what gifts YOU can bring in the spirit of service and gratitude to others!".

On a personal level, I have always thought Descartes was wrong when he said "Cogito ergo sum" (I am thinking therefore I am).  This idea makes it seem that we can  'be' as separate islands. This concept has been one of the foundational stones of Western philosophy and thought.

In contrast to this, the reality of my life has been based around knowing I exist and have some value as an individual because I have interactions with those that are in my daily path of life.  The others around me on a basic level enable me to know who I am as I interact with them.  Using barter and gifting for relating to others around us not only will help starve the monster of debt based money (and it's Ponzi like Isosceles triangle) but will enable a growing sense of knowing where we fit into our communities.  This beats the heck out of going to school for years, having piles of debt, and not being able to find a job.

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Treebeard...

When we finally build the courage to peer into the darkness we will see only ourselves.  When we finally own it, then we will finally be free.  The problem is not my brother or sister, it is me.

Brilliantly stated, Treebeard.  When I stop and reflect on my own impatience in dealing with others, more often than not I come to the conclusion that in them I am seeing things about myself that I do not like, which in turn causes me to react in a less-than-productive manner.  But I am slowly trying to file away those edges and get busy more with living the kind of life that I want, in my heart, to live.

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Watch out, Volks!

LesPhelps wrote:

agitating prop wrote:

If you advocate for this kind of system, in a world of 7 billion people, you are consigning most people to a slow death by starvation, thirst, disease.

Commerce system notwithstanding, 7 billion people on an Earth size planet consigns most people on the planet to starvation and thirst, once the non renewable resources become scarce, hence the concept of overshoot.

If the only solution to overshoot is an inefficient system that imposes a summary execution style economic system, on billions of people, most people would decline its implementation. If the solution is to maintain and enhance the positives in our current system while mixing it up with some older cooperative type arrangements and some newer ways of doing things...cool.

The concept of overshoot has to be treated delicately and humanely. If we are trying to, in part, reintroduce soul, community back into our lives while we attend to the planet and end up writing off vast numbers of humans as 'outside the club' or somehow inconsequential, it makes a complete mockery of the very values we are trying to preserve. 

There is  a term for these cozy concepts...and I am not addressing you here but the countless posts I have read on many forums regarding overshoot. The word is German. It is "Volks". 

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Utopian societies

Utopian or gift type societies worked well during times of economic emergency, in the past.  Of course many of them, like present day Amish communities utilized money as well. 

Once the emergency is over though, most people are just itching to get out.  There are very real constraints on personal freedom in these communities, even when they aren't  structured around oddball gurus, scam artists or hopelessly dogmatic and doctrinaire belief systems. 

It's not Hobbitville. It's Peyton place with fresh blueberries. 

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Peyton Place

With fresh blueberries........talk about painting a picture with a few select words, that is real poetry, brilliant.  I haven't laughed that hard in a while. The problem with utopianism of course is that it is externalizing what must occur within each one of us.  Who wants to live with a group of volks running away from themselves.  What you will get of course is as was so well said, "Peyton place with fresh blueberries".

We must transform ourselves and the places where we are present.

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The Newest Country to Defy the Banksters

Here's a little inspiration...http://www.silverdoctors.com/the-newest-country-to-defy-the-banksters/

Under Orban’s leadership, Hungary has not only managed to pay down their near $26 billion IMF loan, but did so early.  In 2013, with just $2 billion in payments left to go, he actually requested, via the central bank, that IMF officials should pack their bags and leave, noting that their “services” were no longer needed!

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The demonization

of Orban you know can't be far behind either.  Perhaps he will be blamed for assisting Russia in the shoot down of another jet liner. The banksters will not go quietly into the night.  The connection between wall street and the secret services is the foundation of the Anglo-American empire.

http://abcnews.go.com/International/wireStory/polish-leader-holds-diffic...

We are always at war over money and power, whether it be overt, covert, cold or hot.  Any macro economic analysis that does not take this into account will always be lacking.  We have to come to accept the destructive addiction to money and power that human beings have and how much that drives our world.  Till we realize this and we do all that we can to stop funding the power of the national state and the multinational corporate/banking structure that supports it, all will be for naught.

I would like to believe that the formation of strong local economies that are cash poor and rich in all other things, will be the answer.  That transformation and not confrontation will work out.  Heres to hoping for the best.

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Hungary vs. Bankers

Pinecarr and Treebeard,  In my mind there is no higher service to which we can aspire right now, at this point in time, than the business of exposing the false narrative that is force fed to the masses.  The true narrative is not an easy sell though, as most of us know.   

The banksters will not go quietly into the night.  The connection between wall street and the secret services is the foundation of the Anglo-American empire.

No, they won't.  And Yes, Yes it is. 

I ran across this recently, and it well states the frustration I feel as I try to wake up those I care about most;

http://coyoteprime-runningcauseicantfly.blogspot.com/2012/01/chris-floyd...

"No Ways Tired in A Sea of Lies" (Adapted)

by Chris Floyd

"I think we are living in a world of lies: lies that don't even know they are lies, because they are the children and grandchildren of lies. One of the hardest things to accept is that the reality of our world is buried under so many layers of official deception and well-cultivated public ignorance about our history and our political system. Even if you break through somehow, momentarily, and hold up a fragment of the truth, most people have no context for dealing with it. It's like a bolt from the blue, they can't process the information. And so the sea of lies closes over us again, and again, and again. And yet the reality of our economic future appears on the horizon, denial be damned, an irresistible tsunami of destruction, changing all our lives forever.

These are the facts, and they can't be altered. But how to respond to this catastrophe? Shall we weep, moan, rend our garments, cover ourselves with sackcloth and ashes? Shall we sit upon the ground and tell sad stories of the death of republics? Shall we cower in the shadows and sing glamorous dirges for the Lost Cause, for vanished glories and broken dreams?

Or shall we come out fighting, unbowed, heads high, laughing fools to scorn, rejecting at every turn the moral authority of murderers and thieves to rule our lives, determine our reality, act in our name? Let's dispense with lamentation - give not a single moment to that emotional indulgence - and get right back to work, more determined than ever to bear down harder, dig deeper and excavate the radioactive nuggets of truth still glowing beneath the slag-heap of ruin...........

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I really like this, Jim

I really like this, Jim H.:

http://coyoteprime-runningcauseicantfly.blogspot.com/2012/01/chris-floyd...

"No Ways Tired in A Sea of Lies" (Adapted)

by Chris Floyd

"I think we are living in a world of lies: lies that don't even know they are lies, because they are the children and grandchildren of lies. One of the hardest things to accept is that the reality of our world is buried under so many layers of official deception and well-cultivated public ignorance about our history and our political system. Even if you break through somehow, momentarily, and hold up a fragment of the truth, most people have no context for dealing with it. It's like a bolt from the blue, they can't process the information. And so the sea of lies closes over us again, and again, and again. And yet the reality of our economic future appears on the horizon, denial be damned, an irresistible tsunami of destruction, changing all our lives forever.

I have found what Chris Floyd says about holding up a fragment of truth, and not having a context for dealing with it, rings true, even for those of us seeking the truth (well, speaking for myself, at least).  We find fragments of truth here and there, and hold them up as truth, without even realizing that they are just  bits and pieces of the truth; just the rents and tears we can see through the larger narrative that we have been taught is "the truth".  But we then find that if we keep on poking and prodding, even more rents and tears are made in that narrative, until the whole "picture" we grew up with is revealed to be only a backdrop to a man-made story, just like a backdrop for a play in the theater. 

There are things I would never have even questioned 10 years ago, because I believed the "backdrop" I grew up with was real.  It has taken years of willfully choosing to examine the rents and tears in that backdrop, and making new rents and tears to see the truth behind it, to discover that the worldview I believed in was just a manmade construction; the backdrop for a story.  No wonder it is so hard for others less inclined to look to "see"!

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Gift economies are "utopian"?

Utopian or gift type societies worked well during times of economic emergency, in the past.  Of course many of them, like present day Amish communities utilized money as well.

Sorry, but this is a strawman argument.  Please point out to me in any of my previous comments regarding gift economies where I categorized or portrayed them as "utopian."  In case I wasn't clear in the previous post, I suggest nothing of the sort.  Rather, I suggest that a functioning gift economy exists as a source of social cohesion (with its own attendant baggage, to be certain), where a market economy often works in the exact opposite manner.  Religion is another force of social cohesion in human societies, historically speaking -- and pointing out that it is does not immediately mean that it has taken on the status of a utopian society.

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Ditto

I second CAH.

When I said that I could imagine an economy where people were warm, fed, living in fellowship and enjoying themselves without any money in circulation I didn't mean to suggest that they were also living in McMansions and driving SUVs.  Quite the contrary, such people are typically living in wigwams ( igloos, yurts, mud huts) and wearing furs ( felt, homespun, or what ever the local variant may be ).  I would hope that such people would be able to live in relative peace, though history and anthropology would seem to suggest that as the competition for resources increases so does the violence.  Our current state of overshoot would seem to suggest that there may be a protracted period of starvation and violence before the population drops to a point were people can have a reasonable expectation of living in peace.  The price of peace may be profound ignorance and material poverty.

"Freedom's just another word for nothing left to lose."

John G.

p.s. "Peyton Place with fresh blueberries" describes where I live so aptly that I really can't say it's funny. wink

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More Blueberries

I have been following this thread for days now without time to jump in.  Very interesting.  Here are some of my thoughts.

Having lived for almost ten years in a consensual community I can attest that it is not “utopian” in any sense of the word.  All the same pressures, problems and issues of the larger society manifest themselves in one way or another.  There is also a goldfish bowl aspect to a shared life, as everyone comes to know much more about everyone one else, than normally happens in present day American middle class life. Peyton Place with fresh blueberries is a very apt description.

The “gifting” economy was a large part of our community’s economic life. Clothes and furniture were constantly recycled.  Cars, trucks and equipment were readily loaned and borrowed. Repair work, moving, yard care and other services were often handled “Amish” style. You gave your time to other members knowing that you could call on them when you had a need.  Members participated in the money economy, each having their own employment and owning their own homes, businesses and goods.  The benefit of the gifting economy was that it allowed the funds from the money economy to go much further than would be possible for an individual person, couple or family trying to make their economic way under their own power. 

Our community encompassed people from very divergent economic circumstances.  While few were on welfare, a number of people were disabled, or existing on small pensions.  Other members were millionaires plus.  For the folks at the lower end of the spectrum the gifting economy gave a sense of stability and security in that a member would not be allowed to go hungry or without medical care or housing.

My wife and I, for the past three years, have owned a summer cottage in a northern New England town of Twelve Hundred people, less than five hundred households. Over that time we have come to see, and participate in a limited way, in a lively “gifting” exchange. Things no longer needed or wanted, or surpluses of perishables, are freely passed on (If you do not know anyone who could use an item you place it at the edge of your property with a “free” sign. Unless the item is totally worthless it will disappear in a day or two.). There is of course a money economy here also but I get the sense that the gifting is extensive and that very little is thrown out or goes to waste.

JT

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Lies and the Grandchildren of Lies

Lies and the Grandchildren of Lies

I can really relate to this statement!  I have posted on facebook my abhorrence of torture and secret assassination programs (that incidentally take out all the family and friends of the "target" within a hundred yards) and am met with:   "Yes but we must stop the Islamo-fascists before they take over the world" and "Well ordinarily I'd agree with you but national security trumps humane treatment due to the severity of the situation."

This is the reason that 9/11 is SUCH A GIFT.  In big bold pictures that can be reviewed by anyone AND we can see the inconsistencies.

No building in history has ever "collapsed" in anything like this manner.  Yet on this one morning TWO buildings did nearly identical complete destruction of all portions of the building with the fragments thrown outwardly hundreds of yards.  Try to find ANY building in history that has done anything like this in the past!

No building has EVER collapsed due to office furniture fires.  Yet for the first time in history this building did, and in a pattern that is classic for an implosion demolition.  

The detonation diagram of a classic "implosion" pattern explosive demolition.

And we are told that a jet liner crashed here.  But are not shown any pictures of the crash despite the most heavy security of any building on earth, ringed with surveillance cameras and housing the command and control structure of the largest military in the history of the Earth.  Not a single picture of the incoming airplane.  Nothing at the crash site clearly identifieable as airplane debris.

We are told that the jet fuel burned so fiercely that all of the plane's structure, including the multi-ton engines made of steel and titanium, were "vaporized."  Same with the seats, luggage, bodies.  Really!?  

And despite no visible plane fragments or body parts, and fires that melted the plane, we are told that DNA testing identified the remains of 184 of 188 passengers.   This is quite remarkable!

And here, another jet liner crash without identifiable jetliner.

You can't see the airplane because it fell like a "marble into water" sinking beneath the soft Pennsylvania soil which spontaneously "back-filled" to cover the entirety of the wreckage.   Fortunately, the grass around the crash site was undisturbed by this.  Really?

And all if this happened on ONE action filled day.

And THIS is the reason that the FOUNDATIONAL PRINCIPLES OF CIVILIZATION ITSELF must be dismantled.

Here we have the Grandfather's grandfather of the pyramid of lies being used to reshape the world into a private/corporate military dictatorship designed much like the Roman Empire.

jtwalsh's picture
jtwalsh
Status: Silver Member (Online)
Joined: Oct 1 2008
Posts: 235
sand_puppy

As we have discussed before, you are coming very close to making a believer (or maybe a non-believer in the lies and coverup) out of me. It's a position I find most uncomfortable, but one which is making more and more sense to me.

Change of thought patterns does not come easily.

JT 

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