Worse Than 2008

Wednesday, December 21, 2011, 10:00 AM

There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, Is this 2008 all over again?

No, it’s worse. Much worse.

In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms.

Anyone who has paid attention knows that those "magic potions" proved to be anything but. Not only are the root causes still with us (too much debt, vast regional financial imbalances, and high energy prices), but they have actually grown worse the entire time.

As always, we have no idea exactly what is going to happen and when, but we can track the various stresses and strains, noting that more and wider fingers of instability increase the risk of a major event. Heading into 2012, there's enough data to warrant maintaining an extremely cautious stance regarding holding onto one's wealth and increasing one's preparations towards resilience.

Here’s the evidence:

  • Oil prices higher now than in 2009
  • Derivatives up more than $100 trillion since 2009
  • Government debts exploding
  • Weak GDP growth
  • Europe in trouble
  • Small investors leaving the market
  • China hitting a wall

One of the most important things we need to track is simply untrackable, and that is market perception. When faith in a faith-based money system vanishes, the game is pretty much over.

If you have been reading my work (or anyone else's) with a decent macro view, you likely lost your faith in the system a while ago and marvel that it can continue along for another moment, let alone all the years it has been creaking towards its eventual date with reality. But along it creaks, day after day, week after week, and month after month, threatening to wear down the observant and vigilant before finally letting go.

2012 promises to be an interesting year, with more than $10 trillion in funding and rollover financing required to keep the developed world floating along. But where will that funding come from? The lesson from defunct economies is “not internally!” And if China’s recent slowdowns and projections of an even more lackluster 2012 come true, then we might also scratch a few external sources off the list as well. 

Oil Prices

As Gregor recently penned so eloquently for us, high oil prices are like sand in the gearbox of the economy -- they represent the most serious form of friction there is. Rather astutely, Jim Puplava has called oil prices 'the new Fed Funds rate,' meaning that the traditional role of the Federal Reserve in regulating the economy via the price of money has been usurped by oil. 

As oil prices go up, the economy slows down, and vice versa. 

The simple fact is that oil prices remain quite elevated by historical standards, and since the correction in 2008, they have been ratcheting steadily higher each year. They are now at their highest average rate in three years. In round dollar terms, oil is $30/bbl higher than in 2009 and $10/bbl than in 2010.

I won't rehash the data here, but the best explanation for this steady increase is that supplies of cheap oil are dwindling and flow rates of the desired blends are having a hard time keeping up with demand.

The twin deficits to the export market are falling production from existing fields and rising internal demand in the producing countries. The way all that gets balanced is in the usual fashion -- through prices.

All of this would be fine, except for the idea that the world is in a far more fragile condition today than back in 2008 when it suffered the first insults levied by high oil prices.

As the Bank of England's Paul Fisher recently put it:

Financial markets in greater danger than 2008-BoE's Fisher

Dec 19, 2011

Dec 19 (Reuters) - Financial markets are facing a more dangerous situation now than during the financial crisis of 2008, Bank of England policymaker Paul Fisher was quoted as saying on Monday.

Fisher, who is the central bank's executive director of markets and sits on the Monetary Policy Committee, also said governments had fewer options to deal with the current crisis because of their stretched public finances.

Fisher was quoted as saying that in 2008, governments had more leeway and cash available to stimulate their economies and bail out banks. Today that "sovereign backstop is less clear", Fisher said.

"The policy out is going to be more difficult than it was in 2009, given the current position of the sovereigns."


We'll explore these ideas in greater depth below, but I think the bolded parts illuminate why high oil prices are potentially more corrosive now than in 2008. The bottom line is that economic growth is central to nearly every story of recovery, and there are appallingly few analyses coming out of the OECD countries that address how the various debt rescue plans will fare if said economic growth does not materialize. Most just note that 'it will not be good' and leave it at that.


Let's begin with debt. This crisis was rooted in too much debt. Even without the headwinds caused by structurally rising energy prices (we'll get to those in a minute), the credit bubble was destined to someday pop all on its own. After all, there's no way for debt to continually expand faster than income, which is what was happening across the entire OECD, thanks to the ultra-accommodative policies of the world's central banks.


Note that GDP is virtually unchanged since 2008, meaning that $5 trillion did not buy us any incremental GDP; it only managed to bring us back to about even:


That means we have about the same-sized economy to support an additional $5 trillion in federal debt, or roughly a third more than when the crisis started.

It is also true that GDP growth in the US is weaker this year than last year, a trend that does not bode well for the US deficit situation:


It should be noted here that this weak growth is happening even though the US federal deficit for FY 2011 was $1.3 trillion, or more than 10% of GDP. If that's how anemic the economy is with that level of deficit spending, where would it be with less?

Europe in Trouble

The bad news out of Europe continues unabated, including debt and ratings downgrades, sliding economic growth, and exploding red ink.

Much of the hope in Europe rests upon carefully crafted bailouts that rest upon assumed rates of economic recovery and growth in order to pencil out. Without the assumed rates of growth, the plans fall apart, and more rescue funds -- or outright defaults -- lie in the future.

Ireland is an instructive case because it entered its difficulties earlier, and it has already received a bailout and implemented the austerity measures that were meant to balance the equation.


Unfortunately, the plan is now in tatters with the recent revelation that the Irish economy is slumping more than expected under the twin weights of reduced lending and imposed austerity

Ireland's debt rating under threat as economy contracts

Dec 16, 2011

Rating agency Fitch tonight warned it may downgrade Ireland and five other euro zone countries in the absence of a comprehensive solution to the region's debt crisis which it concluded may now be "technically and politically beyond reach".

The agency placed the ratings of Belgium, Spain, Slovenia, Italy, Ireland and Cyprus in credit watch “negative”, which means a downgrade is possible within three months.

The move comes on back of unexpectedly poor economic data for Ireland which showed economy weakened considerably in the third quarter, shrinking at the fastest rate in more than two years.


Here's the data:


GNP is a better measure than GDP in this case because GNP removes repatriated corporate profits that have left the shores. Many companies use Ireland as a tax haven, so the monies that cycle briefly into and then right back out of the Irish system really should not be counted towards their economic progress. 

With economic contraction, the Irish fiscal deficits will once again breach agreed-upon levels, and repaying debts also becomes that much harder. It is a negative spiral that can be quite destructive and difficult to stop.

The bottom line here, which should surprise exactly nobody, is that austerity shrinks an economy and that economic shrinkage and crushing debt loads are incompatible. Ireland has not been fixed, and it seems that the can is once again right in front of the ECB, ready for another good kick down the road.

Ireland's debt yields are instructive here. While it is true that Ireland's debt yields are down quite a lot from their maximum levels (which were over 23% for 2-year paper and 15.5% for their 9-year debt), the current yields of 7.9% and 8.6%, respectively, are utterly unsustainable for an economy that is shrinking. It is only a matter of time before those rates crush the finances of the Irish government.

Do you know why the generally agreed-upon limit for persistent government deficits is 3%? That's because it's the basic rate of GDP growth that history has shown to be sustainable. As long as deficits are growing at the same rate as the economy, then the debt-to-GDP ratio stays constant and everybody is happy. If (or when, I should say) the economy grows more slowly than the rate of interest that is demanded from a government, it is a mathematical certainty that either the deficits will swell or austerity and/or tax hikes must be imposed. There is no other way to balance the books.

On this basis, Ireland is still mired in a math problem.


One theme of the financial crisis is governments loading up on debt in order to get by for a little longer, with the plan seeming to be to face the music later and/or keep one's fingers crossed that the economy will have somehow sorted itself out by then.

Spain, suffering from a truly crushing housing bust that is still playing out (and will for a long time), very high unemployment, and a stalled economy, has also compounded the issues by piling up an astounding amount of new debt over the past year:

Spain regional debt up 22 percent to $176 billion

Dec 16, 2011

MADRID (AP) -- Debt levels for Spain's cash-strapped 17 semiautonomous regions have soared 22 percent over the past year, the country's central bank said Friday.

A near two-year recession after a real estate bubble collapse has left Spain with swollen regional and national deficits, a stalled economy and 21.5 percent unemployment.

Many regions are facing severe cash-flow problems and are having to delay payments to suppliers.

An example of the cutbacks came Thursday, when Spain's Woman's Institute said nearly 100 centers for the victims of domestic violence face closure next year in the central Castilla-la-Mancha region. Centers for drug addicts in Madrid are facing a similar fate.


The good news out of Spain is that its bond yields have fallen considerably since the end of October, when they breached the 6% barrier and seemed ready to launch into truly dangerous, irrecoverable territory. 

Most recently, Spain's 10-year bond yields were 5.13%, down from 6.7% on October 31 but still about 1.5% higher than pre-crisis levels. It's important to note that the current yield may not be indicative of the true market perception of Spanish risk because the ECB has been heavily involved in buying Spanish debt. The true yield should undoubtedly be a lot higher given the grim state of finances there. 

Still, Spain's yield levels are in the best shape out of all the PIIGS. Speaking of which... 


Portugal is still in trouble, and the government has, quite worryingly for the precedent it sets, raided private pension funds to help balance the books. 

Portugal deficit falls, helped by one-off measure

Dec 16, 2011

LISBON, Portugal (AP) -- Portugal's finance minister says his debt-stressed country's budget deficit will likely fall to below 5 percent this year from 9.8 percent in 2010.

But Vitor Gaspar says the sharp drop is largely due to the transfer to the Treasury of euro6 billion ($7.8 billion) in private banks' pension funds.


I am not sure of all the back story and intrigue that must accompany this move, but it seems loaded with implications ranging from the door it opens to other governments seeking relief, to the fact that we know that Portugal is being leaned on heavily by the international banking community and has decided to raid the pensions of...wait for it...four of the largest private banks in Portugal. Maybe there's a bit of spite built into that move?

Portuguese bond yields are down from their crisis highs of 20.4% (2-year) and 14.1% (10-year), but again not enough to count, as they are sitting at 15.6% (2-year) and 13.1% (10-year), levels well above the current rate of GDP growth.


Our poster child for the entire Eurozone mess is, of course, Greece. And quite understandably, a trickle of bank withdrawals has turned into a flood:

Greeks fearing collapse of eurozone bailout pulled record sums from bank

Dec 16, 2011

An unprecedented exodus of capital from Greece – peaking in a record number of withdrawals from banks in recent months – has exacerbated the liquidity crisis now wracking the recession-hit country.

The latest figures released by the Bank of Greece reveal that in September and October alone investors pulled €12.3bn (£10.3bn) from domestic banks, spurred by fears of political uncertainty and economic collapse.

Overall, outflows have reached a record 25% since September 2009 – when household and corporate deposits stood at a peak of €237.5bn, the data showed.

Theodore Pelagidis, an economics professor at the University of Piraeus, said: "This is part of the death spiral of the recession as a result of austerity measures. People realize that contagion has come to banks and they are very afraid of losing their deposits. On average around €4bn-€5bn in capital flees the banking system every month."

The extraordinary figures back up anecdotal evidence that it is not just the super-rich behind the flight of funds.


This data, released by the Bank of Greece, is over a month old, and we'd be especially interested to see what November and December add to the story. At any rate, it is now "game over" for Greece. The market is still pricing in a nearly 100% chance of default even as the bankers and Eurocrats squabble over the prospect of raising the haircut on Greek debt from 20% to 50%. 

Where the Greek crisis highs for debt yields were 151.9% (2-year) and 35.1% (10-year), they are now sitting at 146.6% (2-year) and 34.6% (10-year), which are essentially unchanged.

The Pattern

I keep mentioning that the ECB is interfering heavily in the bond markets of various countries in their attempts to keep things going. Apparently they've tossed in the towel on Greece, as evidenced by the Greek yields above.

However, when we note the ways in which the Spanish, Irish, and Italian debts have come down off their highs, can we make sense of why the ECB focused their efforts there? Sure, that's easy, and the BBC has put together an extraordinarily helpful interactive chart to make it all crystal clear.

The interactive chart can be found here, but I've taken a number of screen shots so that you can more easily follow the story.

To begin with, what the chart is showing by the width of the arrows is how much money is owed to banks of other countries -- the wider the arrow, the greater the amount.

Here's the country that was let go:

Now let's compare that to Ireland, which was rescued (for now):

And here's Portugal, which is apparently in the process of being tossed under the bus, at least judging by how its interest rates are still punishingly (and ruinously) high:

See the pattern? Now let's look at Spain and Italy, both of which have recently enjoyed a nice decline in their yields

Now are the actions and focus of the ECB coming clear? It's not a surprising insight, but these charts help bring things into focus for me, and inform us that falling bond yields are probably more indicative of ECB actions than an improving debt crisis. 

Just for kicks, and to complete the story, here are the charts for the UK and the US, which hopefully make clear why these two countries could never be allowed to fail, for surely the whole world would fail to spin on its axis

The other takeaway from these charts is that everybody owes everybody, a point I've made before, but not as nicely as these charts manage to do. Kudos to whomever thought these up. 

Where Things Are Headed

In Part II: Get Ready for Worldwide Currency Devaluation, we detail the remaining risks posed by the massive amount of outstanding derivatives, small investors fleeing the markets, and China's increasingly visible slowdown. At this point, it's quite clear that there simply won't be enough economic growth to rescue the global economy from the hole it's in. So, how does this end?

It will most likely end in a concerted devaluation of the world's currencies, in an attempt to inflate away the worst of our debt burden. And if that happens, there's one asset in particular that you will want to be holding.

Click here to access Part II of this report (free executive summary, enrollment required for full access).

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AWR's picture
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 Thanks for the article

 Thanks for the article Chris.  The bank debt charts are frightening!

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Where is China on US debt chart?

I thought that China held a lot of U.S. treasury debt.

How come there is no slice for China on the chart of US debt?  Are they so small as to not show up? 

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Thought provoking as always

Thought provoking as always and you have a gift of taking a complicated/complex situation and make it understandable without understating the nature of the situation.  I would like to correct one statement, the point remains the same but you state

That means we have about the same-sized economy to support an additional $5 trillion in federal debt, or roughly a third more than when the crisis started

I think the increase of 5 trillion would be an increase of one half of when we started as the total outstanding debt in 2008 was 10 trillion.

I have not yet read part two, but I am looking forward to reading more of your thoughts.

And by the way, listened to your presentation at the "End of Money" conference and you did a terrific job.  Listening to the whole conference, you must have really enjoyed the conference as the speakers were really thought provoking.



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Thank you.

 I appreciate the feedback and the chance to clarify...

There are two ways to express an increase, one is from the perspective of the starting point and the other is the ending point.  The way I chose is from the ending point and we do indeed have one-third more debt now than in 2008.  But I could have written it a bit more clearly I see....

Thanks again.

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 For those interested,

 For those interested, TexMetals has a great promotion going on sealed boxes of 200 Grizzlies in Thermatron packaging. Spot is $7.95, which is actually really good for the grizzlies (APMEX is $10 over). Only 2400 left. If I had any cash I would buy.
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I figured you had thought

I figured you had thought that through as you are such a detail guy!

Part two is awesome, if you are not a subscriber, you may want to consider subscribing as the details Chris allows in the "enrolled" section is worth the price.  His ability to analyze and then summarize the data is amazing.  This is really unprecedented times and things are moving very rapidly.  I certainly appreciate reading or listening to what Chris has to say.


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China ??

A heated debate with my co-worker led me to did back to the source Chris listed for the diagrams.

From what I an tell, China should be listed a little ahead of Japan as to what the U.S. owes to it.  However, the source of the diagrams did not include China because they could not come up with the amount of eurozone debt held by China so they left it off the list. 

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Everybody owes everybody?

This statement reminded me of a story that's been making the rounds:

It is a slow day in the small Minnesota town of Marshall , and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A rich tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Farmer's Co-op.

The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.

At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves town.

No one produced anything. No one earned anything... However, the whole town is now out of debt and now looks to the future with a lot more optimism.

A simplistic situation to be sure, but it occurs to me to wonder: if the "circular" debt is large enough, could it be simply written off by common agreement of the parties?  If so, how much of a reduction would that make?

I expect that there's probably a good reason why it doesn't apply here, but I'm not sophisticated enough in these matters to see it.

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ECB loan stampede spooks global markets

ECB loan stampede spooks global markets

Posted December 22, 2011 09:27:30

An overwhelming demand by European banks for low-cost unlimited loans from the European Central Bank has global investors worried that more banks are in more trouble than they thought.

The European Central Bank has made its first-ever offer of unlimited three-year loans at next to no interest to commercial banks. Hundreds of European banks applied to take-up the 490 billion euro ($635 billion) offer, which is many more than anticipated. That has rattled investors.

The move will ease tightening in the credit market and free up liquidity in the financial system, helping vulnerable commercial banks rebuild their finances.

But there are concerns that banks will not use the cash to buy sovereign debt and ease the crisis.

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China Not A Major Owner Of European Bonds


I think because China isn't a major owner of European bonds, which is what the chart was initially focused on. So it isn't in the "Euro" circle chart and likely won't be suffering a euro bond explosion (just the other collateral damage of a euro catastrophe). Same with own-country owners of bonds, like pension funds, private investors, and mom-and-pop retirees - also not in the chart.


joesxm2011 wrote:

I thought that China held a lot of U.S. treasury debt.

How come there is no slice for China on the chart of US debt?  Are they so small as to not show up? 

Damnthematrix's picture
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Everybody owes everybody?
Dwig wrote:

This statement reminded me of a story that's been making the rounds:


A simplistic situation to be sure, but it occurs to me to wonder: if the "circular" debt is large enough, could it be simply written off by common agreement of the parties?  If so, how much of a reduction would that make?

I expect that there's probably a good reason why it doesn't apply here, but I'm not sophisticated enough in these matters to see it.

Seen this story before, and very apt it is too......

The other thing that occured to me was, if ALL currencies depreciate, what next?  Or is it just another race to the bottom?


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Add Ireland To The Private Pension Fund Raiders

By the way, Ireland had recently announced it's budget shortfall will not be as bad, because it is taxing an estimated $470 million from private pensions per year for the next four years, starting with this year.

Consider that they only have 4.48 million people, and not everyone has a private pension...


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If the world does come

If the world does come apart, a big if, the Dollar will soar, as will treasury bonds/notes, and gold will crash. If they "fix" Europe (by printing money, the only thing they can and will do) then the opposite will happen. Gold/stocks will soar and the dollar and bonds fall.

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More black comedy

This is so old (May 26,2010) you've probably all seen it but I still find it hilarious, and you may too.  Of course I laugh to keep from crying. And it amazes me this could've been produced yesterday and except for updating a few numbers the situation is still the same.  We still have broke countries contributing to rescue funds which they themselves will have to use!  It's "World Collapse Explained in 3 Minutes." 

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10 trillion refinanced in 2012

 The 10 trillion the be refinanced is resonating with my family as I attempt to bring them into the "fold" of believing the need to prepare.  Can you clarify the countries involved in the refinancing  of this ridiculous & massive sum. 

Thanks Joel  

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Re: Dwig
Dwig wrote:

No one produced anything. No one earned anything... However, the whole town is now out of debt and now looks to the future with a lot more optimism.

Hi Dwig,

The amount of optimism in this particular town should have been pretty high even before the wealthy tourist came, because nobody in this town was really "in debt" to the extent that they had a negative net worth.  If you owe somebody $100, but you have a $100 in your back pocket, would you think of yourself as "in debt"?  No, because you have the money.  You're even.

Everybody in this town owed $100, but they also had $100 coming to them from somebody else, which was almost like having $100 in their back pockets.  A debt owed to you is an asset.  They were "even" all along.

But the real world presents more complexity.  First of all, there are a lot of people and businesses (and governments) who are truly "in debt" because they owe far more money than they can immediately collect.  No mutual agreement is possible in those situations because the debt doesn't cancel itself out.  Even more troublesome is the fact that you don't always know which person owes more than they can pay.

Second, an OUI for $100 has a different cash value depending on who it is coming from.  Suppose you are the grocer in that town.  Now suppose that Sober Sam the Clergyman owes you $100, but he doesn't have the cash right now.  Instead, Sam offers to pay you with a $100 OUI from a stranger named "Bob."  (In fact Bob's full name is Crazy Bob the Gambler.)  You would refuse to take that IOU at full face value, because an IOU from Crazy Bob is worth a lot less than an IOU from Sober Sam.  You're not going to let Sam off the hook that easily, and leave you with a potentially worthless IOU from some drunken wastrel.

The lesson is that in real life people don't always pay off their debts, even when they have they money, so a debt isn't paid until it's paid.  

Actually, debts are exchanged all of the time on the open market.  But an OUI (assuming it pays 0% interest) is never worth its full face value.  You might take the $100 OUI from Crazy Bob, but you might value it at only $50, since you think there is only a 50% chance that it will ever paid.  If Crazy Bob is one of the links in a long daisy chain of debts, then the value of every IOU after Crazy Bob is reduced, because they all depend on Crazy Bob making his payment on time.  Even Sober Sam might get run over by a bus on his way from the bank, so his $100 OUI might be worth $99.85, taking this risk into account.  These risks accumulate and build on one another as we go down the chain. 

The bottom line is that, because of the risk of nonpayment an IOU is always worth less than cash.  For this reason the people in town would wind up short if they tried to settle their debts by agreement.

If this small town contains a bank, then things get even more complicated because of the way that new money is created.  I recommend watching the Crash Course chapters on money creation.  Another excellent video that will help you wrap your mind around the issue is "Money As Debt" by Paul Grignon.

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jbtbga wrote:  The 10
jbtbga wrote:

 The 10 trillion the be refinanced is resonating with my family as I attempt to bring them into the "fold" of believing the need to prepare.  Can you clarify the countries involved in the refinancing  of this ridiculous & massive sum. 

Thanks Joel  

Print the McAlvany Weekly Podcast transcript The Thirteen Days of Christmas for them. It has those countries listed.

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frightening indeed

The world economy cannot at the current rate ( stifled by debt) grow itself out of a  proverbial wet paper bag. There is no way this will ever be paid, by any of the countries. The most rational solution is a reset, and I believe that may be the objective, aka one-world currency and government. However it will be up to the people to say not just no, but HELL NO!. We did not incur the debt, and we will not pay for it. My fear is that the real next great war will be between the peoples of the earth and the conglomerate banking system. -WHO CAN MAKE WAR WITH THE BEAST?-please check out the video by Larken Rose , one of my favorites, :The tiny Dot". "They", the ominous governments and banking systems combined are the tiny dot... The media has the job of convincing us otherwise. As Chris says, it will be an interesting year. I tend also to agree with Gerald Celente that we may have until after Christmas before the arms of the comtrollers will grow weary of holding the thing in the air and will let it drop. Either that or their collective ability to do so will fail as the guy referenced in the article said,pp "we lose faith in a faith based sytem". I would suggest that those of you in wait-and-see mode will be found lacking time and resources when you finally "see" it coming. Wait if you will, but the end marches on.

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Everybody owes is a problem

It took me a minute to see the problem with this explanation...but only a minute.  This is the classic unwinding debt explanation, that will only work if no one charges anyone interest.   The problem is interest.  In the real world all money is created as debt owing interest.  So the rich tourist does not just plop down a hundred bucks as a free loan, he lends it to the motel owing interest.  At this point the $100 makes its way through the economy unwinding debts, but when its payed back to the rich tourist, the town as a whole will have to produce more than $100 due to the interest.  The town as a whole is now indebted to the outsider by the interest charge, and when this process repeats a thousands of times a second, for 3 decades, the debt builds to unimaginable levels, which is where we are today.  Its the interest that makes unwinding the debt impossible.  (Note that it only took the Euro less than 14 years to reach unsustainable debt.  The USA essentially defaulted in 1971, hence the 3 decades).

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Welcome, meltexas

Very nice to see you on the site.

And since you are new here I just want to recommend you visit the "What should I do?" sections of the site.

- Safewrite

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Yes but.......
meltexas wrote:

The world economy cannot at the current rate ( stifled by debt) grow itself out of a  proverbial wet paper bag. There is no way this will ever be paid, by any of the countries. The most rational solution is a reset, and I believe that may be the objective, aka one-world currency and government.

I totally agree about the reset.

But forget about one world currency.....  one European currency didn't work, how would a one world currency succeed?

And a global government?  Are you kidding?  Just try and get the Muslim world to agree to THAT....  Or Venezuela, Cuba, Zimbabwe, Greece, France, Iceland, and I could go on and on and on....

Never gonna happen.


Dwig's picture
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Everybody owes everbody -- does interest matter?

True in the usual situations in the real world, but outside the frame of the story.  (And yes, I'm familiar with the Crash Course, Money as Debt, and related works by Greco, Eisenstein, et al.)

What I had in mind by "common agreement of the parties" would include forgoing any interest due.  If the interest rate on all the steps in the circular debt is the same, this wouldn't disadvantage of the parties.  Even if the rates vary, it might be that reducing the overall debt to manageable levels might make the parties consider it worth the loss of interest due.

So, what percentage of the overall debt is involved in these circular relationships?

dangr's picture
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Human beings are intelligent animals not more not less.

Nature's rules are applicable to human beings as to any other existing or extinct animal.

Human being flourish when they have abundant  food , water , and  physical safety

Otherwise they perish.

Some like to call it "Nature" some call it "GOD" or "Karma". But basically its all the same.

With deminishing:  fuel , food, drinking water, fish,phophates , fertile land , extreme weather conditions due to

human pollution and 7 billion human beings-  the consequences are unavoidable.( i.e -dinossaurs)

We may play with statistics , charts, trends and hitech gadgets  but the basic fact  remains-  a human being dies

without food.

Nature (or GOD if you like) will create a new equilibrium with much less human beings on earth  or leave it barren .

We can see already the beginning of this process .

We will see Peak Population within 15-20 years with a steep downward slope beyond it

Keep well and 

Happy New Year

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Arthur Robey
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World Government.

Cuba, Zimbabwe, Greece, France, Iceland, and I could go on and on and on....

Dunno about the rest but I can discuss Zimbabwe. It is stiched up already. 

When the Chancellor of the Exchequer Bernard Chidzero was fired by Washington the leading families of Zimbabwe lobbied Washington for the position. So much for it being a sovereign state.

Politicians are a dime a dozen.

Hladini's picture
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water depletion remedy

First I would like to thank Mr. Martenson for creating the Crash Course and for making it available free to the public.

The Crash Course answers the question:  "Why Transition?"  The first step to a successful transition is to raise awareness of looming outcomes.  Raising awareness is the first step, understanding the problem is the second step and then taking appropriate action is the third step.

Transitioning means taking personal action after taking personal responsibility for the problem(s).  One very critical way we could save our water is to become vegetarians.  According to the film "Eating," vegetqarians consume 109 gallons of water per day.  Adding just one hamburger a day raises water consumption to over 3000 gallons per day.

This is an exponential growth chart for water usage that can easily be turned around.  Most of the U.S. water usage is watering crops to feed animals raised for slaughter.  We have billions of farm animals in this country, and they eat a lot.  In fact, a very large percentage of our food crops are food for animal crops - much more than what is grown for human consumption.

I have not eaten meat, fish or eggs for the last 28 years.  I raised four children as vegetarians and they are raising their children as vegetarians.  Let's look at the numbers: 3000 gall. per day x 365 x 28 yrs (me), 3000 gallons per day x 365 x 32 yrs, x 30 yrs, x 28 yrs, x 23 yrs, x 13 yrs, x 9 yrs, x9 yrs, x 7 yrs, x 6 yrs, x 4 yrs, x 3 yrs, x 1 yr. (kids and grandkids).

Now that's an exponential chart!  It is amazing how much influence just one person can have.

The other side of the water story is the amount of waste that is running off into our waterways.  Billions of animals excrete billions, maybe trillions? of waste every day.  There are no laws or regs requiring sewage treatement for this animal waste.  The waste runs off into rivers, streams, lakes, farms, aquaducts, and oceans.  There are literal dead zones in all of our waterways because of animal waste run off.

In addition to dead zones, we have massive recalls of meat, fish, poultry, eggs, lettuce, spinach, strawberries, and apples.  In addition to massive recalls, we have highly resistant bacteria due to massive meds pumped into our very unhealthy animals.

Adding insult to injury, just consider the methane released from burps, farts and waste.  The bad thing about methane gas is that it's hotter than CO2; the good thing about methane gas is that it circulates out of the atmosphere much faster than CO2.

Taking the Transition Initiative is liberating.  It means no more arm chair philosophying, no more feelings of fear, no more feelings of helplessness, no more waiting around for someone else to fix the problem, it means taking action.

Becoming vegetarian is a really easy way to mold this particular predicament to our advantage.

MarkM's picture
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Posts: 856
Billions of farm animals?

Could you cite a source for those numbers?

Ever wonder how the plains supported 60+ million bison and yet the Indians had plenty of clean water...that didn't come from a water treatment plant?

Do you use a flush toilet?

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Wendy S. Delmater
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dear Hladini

Welcome ot the forums.

For those of us not ready to take the step to becoming a strict vegan, including myself, it will be wise to get used to a diet with a lot less meat. Cheaper and healthier, too. Try haveing a meatless dinner a week, followed by two meantless dinners a week and work your way up to at least three meatless dinners a week. We like veggie pizza, spinach pies, a stir fry with tofu and a dish I learned in the Bahamas--homemade maccaroni and cheese with pigeon peas. We had tostdas for dinner last night: corn tortillas covered with refried beans with cheese and veggies: lettuce, tomato, onion, and home-pickled jalapeno or fresh green peppers. Didn't miss the meat at all.

Keep in mind that poultry and eggs and fish are healthier for the environment that red meat. This is especially true if your do it sustainably: fish home raised in a stock pond or chickens and eggs from your own coop.

It's easier on the planet, your wallet, and your health. Vegetables should be the main course, followed by whole grains--and only then--protiens and fats. Protiens and fats can come from a variety of sources, like the lima beans and peanuts in my garden.

nickbert's picture
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meat diet and water use

Hladini's information, if correct, makes the assumption that all meat eaten uses the factory farm/ranch methods of raising livestock.  For at least some types of livestock there are other methods that are far more sustainable.  Grass-fed livestock should have a much less intensive rate of water consumption.  In most areas though I imagine that would support fewer meat animals overall than are currently supported, so adapting to a diet with less meat still makes sense for most areas. 

I have never been a heavy meat eater, but I have no intention of cutting meat out of my diet entirely.  And for both of our family's "home areas" (both northern climates with limited farming potential), diets including meat and/or fish are far more appropriate than vegetarian or vegan diets.

- Nickbert

tictac1's picture
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Posts: 175
The problem with many (not

The problem with many (not all) vegetarians is that their decision to forgo meat is usually based on slogans and oft-repeated misconceptions, and I still have not heard a viable answer to the B-12 question.

Yes, factory farming produces run-off which can contaminate water ways.  This is due to the confinement style, and the mounds of manure the animals generate in tight quarters, being fed subsidized grains.   What you call waste is actually fertilizer, a neccesary component of the circle of life.  It can be and is used correctly on many farms, i.e. Joel Salatin's.  Pasture land actually benefits from intensive grazing, soil fertility and tilth increases due to the "waste".  This was the situation with the buffalo until the Europeans killed them off wholesale.

Most of the issues that drive vegetarians have nothing to do with meat, but the politics of big agriculture.  As for the ethics of eating an animal, which is worse, a bison that leads a healthy, happy life, protected from predators, diease and starvation, which ends when that animal becomes meat for my table, OR a bison that lives roaming, in constant search of food, stalked by wolves, susceptable to disease, on the ragged edge of starvation?  Look at Yellowstone's bison for an example of what I'm talking about.  The animal is going to die eventually, one way or another.  Why should it's death be wasted?

Until the advocates of the Paleo Diet enter old age, the jury is still out on what constitutes a "healthy" diet, in terms of protein and fat intake.  There's WAY more to nutrition than simply choosing which foods to eat based on some pyramid or square.

Damnthematrix's picture
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Posts: 3998
water depletion remedy

Firstly, Hladini, I have to say is correct.  BUT what his post points out is the inefficacy of the food system that has grown over the past 100 years as we left sustainable farming to achieve industrial farming......

I agree that most of us eat too much meat, but damned if I will give up meat or eggs because every other "farmer" on the planet is doing it wrong!

We have raised pigs, goats, chicken, and ducks using no other water than that which falls on our roof.  Had we not used it for these purposes, it would've simply run out the tanks' overflow to waste.

Any "farmer" who allows his "animal waste" (there's no such thing as waste, only resources in the wrong places!) has rocks in his head.  By applying PERMACULTURE PRINCIPLES, things like swales to slow down the flow of stormwater to the catchment, catching the rain that falls on your roof in water tanks for later when it is not raining, ALL retard the flows of manure effluent to creeks and rivers.  In any case, all that manure should be harvested and turned into compost to feed the land that feeds both the people and the animals.  Why anyone puts up with the one way flow of resources from wells/mines to farms to oceans is totally beyond me.  One day soon, it will stop.....

I'm not personally concerned about the methane my animals put out, because we have a zero Carbon footprint.  Thanks to PERMACULTURE.  Permanent agriCULTURE.

The end of the fossil fuel era is nigh, and I look forward to it.


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