Podcast

Former US Senator Bill Bradley believes a better tomorrow is within our grasp, despite the economic pain the middle class is experiencing today.

He wrote his new book We Can All Do Better to address the growing despondency and resentment he sees among Americans. With the right vision, leadership, and civic participation, he believes we can work our way back to prosperity and growth.

Chris was honored and excited to speak with the former Senator, particularly to uncover what awareness there is of the Three Es among our top political leaders. Not surprisingly for a longtime insider, Senator Bradley looks through the lens of working within the current system – i.e., if we can fix its shortcomings, it will solve our problems. Potential structural limits to growth, such as Peak Oil, are less bright on the radar.

There is much to learn here about what our Congressional leaders are focused on and what they are not. Listeners will undoubtly find points to agree with, and possibly others out-of-alignment with the concerns presented in the Crash Course. We expect an animated discussion to ensue in the Comments section below.

We take it as a good sign that widely-known veteran politicians such as Senator Bradley are increasingly standing up to admit "there is a problem" — that's the first step towards taking corrective action. And we're very thankful of the time the Senator has given to speak to our community.

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Joe Saluzzi, expert on algorithmic trading — also known as high-frequency trading, or HFT — returns as a guest this week to explain how the players behind this machine-driven process act as parasites that are destroying our financial markets (and, increasingly, even themselves).

Since Joe first spoke with us last year, HFT firms have only increased in size and share of market activity. Here are some staggering statistics on how influential they have become:

• HTFs make up between 50-70% of the volume seen across market exchanges today.
• 2% of the traders on many exchanges (HFTs, specifically) represent 80% of the volume.
• A single large HFT firm (referred to as a Direct Market Maker) can account for 10%+ of a market's volume on a given day
• Large HFT firms make between $8 to $21 billion a year.
• HFT trades occur in milliseconds (i.e., a small fraction of the time it takes your eye to blink).

With such scale, speed, and profitability, HFTs have turned the market away from being an efficient price-setting mechanism and perverted it into a casino where the clientele of human investors gets fleeced.

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"It's impossible to have a political solution to a balance sheet problem" says Paul Brodsky, bond market expert and co-founder of QB Asset Management.

The world has simply gotten itself into too much debt. There are creditors that expect to be paid, and debtors that are having an increasingly difficult time making their coupon payments. No amount of political or policy intervention is going to change that reality. (Unless a global "debt jubilee" transpires, which Paul thinks is unlikely).

Looking at the global monetary base, Paul sees it dwarfed by the staggering amount of debts that need to be repaid or serviced. The reckless use of leverage has resulted in a chasm between total credit and the money that can service it.

So how will this debt overhang be resolved?

Central bank money printing — and lots of it — thinks Paul.

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Author and social critic James Howard Kunstler has been one of the earliest, most direct, and most articulate voices to warn of the consequences — economic and otherwise — of modern society's profligate wasting of the resources that underlie its growth.

In his new book, Too Much Magic, Jim attacks the wishful thinking dominant today that with a little more growth, a little more energy, a little more technology — a little more magic — we'll somehow sail past our current tribulations without having to change our behavior.

Such self-delusion is particularly dangerous because it is preventing us from taking intelligent, constructive action at the national level when the clock is fast ticking out of our favor. In fact, Jim claims that we are past the state where solutions are possible. Instead, we need a response plan to help us best brace for the impact of the coming consequences. And we need it fast.

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There is nothing inherently environmentally damaging about human participation. Yes, I admit it and repent in sackcloth and ashes for all of the human devastation that has been caused throughout history. It has been caused long before the USDA, long before America, long before a lot of things.

It does not have to be so. In fact, we are not only the most efficient at destroying it; we are also the most efficient at healing it.

So states Joel Salatin, one of the most visible and influential leaders in the organic food and sustainable farming movement. Joel returns as a guest to discuss "ecological participation" – methods by which humans can create a much more resilient landscape than current mass agricultural practices allow for.

Among other topics covered in this podcast, Joel and Chris focus the current drought gripping much of the US (and other countries). How unusual is it in its severity? What's causing it? What can be done to reduce our vulnerability in the future?

Joel's basic point is that there is a wide set of solutions that are possible to implement today, at scale, that can have an enormously restorative impact on our ecology without sacrificing crop production yields. Some of these involve returning to practices common in past generations before modern factory farming, others arise from new innovative thinking and technologies.

The only obstacle to implementing these solutions is our own intransigence. Our politics and economy are deeply wed to the heavily depleting and input-dependent practices of modern mega-farms. So there are big interests concerned with protecting the status quo, even though it is simply not sustainable in the long term. 

Which is why Joel is a big believer in action at the individual level. The more households and local communities begin implementing these sustainable solutions, more momentum will build to change perception and thinking at the state and national level. Plus, our local foodsheds and watersheds will be better off from these efforts – so why not get started now?

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Kirk Sorensen, NASA-trained engineer, is a man on a mission to open minds to the tremendous promise that thorium, a near-valueless element in today's marketplace, may offer in meeting future world energy demand.

Compared to Uranium-238-based nuclear reactors currently in use today, a liquid fluoride thorium reactor (LTFR) would be:

• Much safer – No risk of environmental radiation contamination or plant explosion (e.g., Chernobyl, Fukushima, Three Mile Island)
• Much more efficient at producing energy – Over 90% of the input fuel would be tapped for energy, vs. <1% in today's reactors
• Less waste-generating – Most of the radioactive by-products would take days/weeks to degrade to safe levels, vs. decades/centuries
• Much cheaper – Reactor footprints and infrastructure would be much smaller and could be constructed in modular fashion
• More plentiful – LFTR reactors do not need to be located next to large water supplies, as current plants do
• Less controversial – The byproducts of the thorium reaction are pretty useless for weaponization
• Longer-lived – Thorium is much more plentiful than uranium and is treated as valueless today. There is virtually no danger of running out of it given LFTR plant efficiency 

Most of the know-how and technology to build and maintain LFTR reactors exists today. If made a priority, the U.S. could have its first fully-operational LFTR plant running at commercial scale in under a decade.

But no such LFTR plants are in development. In fact, the U.S. shut down its work on thorium-based energy production decades ago and has not invested materially in related research since then.

Staring at the looming energy cliff ahead, created by Peak Oil, LFTR begs the question – why not?

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This week, we're trying something new in our regular podcast series. Chris talks with Bob Fitzwilson, founder of one of the financial advisory firms that we endorse.

Last week we invited Peak Prosperity readers to submit their top questions about money and investing. You didn't disappoint.

In the podcast below, Chris puts your questions to Bob. We think you'll be pleased with the results.

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"If you’re rich you get a bailout. If you’re poor you get a handout. And if you’re middle class you get left out. " That's not a sustainable way to run the system, exclaims investment strategist Keith Fitz-Gerald.

A cancer at the core of our current economy is the magical thinking, "no pain, all gain" philosophy, pursued by those running it. They are doing all they can to remove the consequences of failure from the system — not realizing that failure plays an essential 'waste-clearing' function of a healthy free market.

Without the discipline of Darwinism, the individual actors in the system make all sorts of malinvestments that would never make sense in an efficient marketplace. But since the losses from these inane pursuits are socialized, there's no incentive to stop making them. At least, up until the point where the class who's back is burdened with paying for the socialized messes finally breaks.

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During the height of the 'Goldilocks economy' of the mid-1990s, Mat Stein wrote When Technology Fails: A Manual for Self-Reliance, Sustainability, and Surviving the Long Emergency, a master compendium of do-it-yourself preparation skills.

Fast-forward to today's Great Recession, drought-stricken, $100+ oil, post-Katrina, post-Fukushima world — many are realizing the prudence of taking basic precautionary steps to reduce their vulnerability to whatever the future may bring. Whether you're concerned about the fallout from a breakdown of today's weakened global economy, or simply want to be better able to deal with the aftermath of a natural disaster if you live in an earthquake/hurricane/flood/wildfire/tornado-prone part of the world — the personal resiliency measures Mat recommends make sense for almost everyone to consider.

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Global financial markets are awash in hundreds of trillions of dollars worth of derivatives. By some estimates, the total amount exceeds one quadrillion.

Derivatives played a central role in the 2008 credit crisis, as they had a brutal multiplying effect on the magnitude of the carnage. As a bad asset was written down, oftentimes there were derivative contracts written against it that resulted in total losses 10x greater than the initial write-down.

But what exactly are derivatives? How do they work?

And have we learned to treat these "weapons of mass financial destruction" (as Warren Buffet colorfully coined them) any more carefully in the aftermath of the global financial crisis?

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