Podcast

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FerFAL: Understanding Societal Collapse

Warnings we should heed from Venezuela's crisis
Sunday, May 22, 2016, 1:18 PM

As we write about the risks of our over-indebted economy, of our unsustainable fossil fuel-dependent energy policies, and our accelerating depletion of key resources, it's not a far leap to start worrying about the potential for a coming degradation of our modern lifestyle -- or even the possibility of full-blown societal collapse.

Sadly, collapse is not just a theoretical worry for a growing number of people around the world. They're living within it right now.

This week, we catch up with Fernando "FerFAL" Aguirre, who began blogging during the hyperinflationary destruction of Argentina’s economy in 2001 and has since dedicated his professional career to educating the public about his experiences and observations of its lingering aftermath. He is the author of Surviving the Economic Collapse and sees many parallels between the path that led to Argentina's decline and the similar one most countries in the West, including the U.S., are currently on. Since our 2011 interview with him "A Case Study in How An Economy Collapses", FerFAL has successfully relocated his family to Europe.

Given his first-hand experience with living through, and eventually escaping, economic collapse in South America, we asked him to offer his insider's perspective on the current crisis in Venezuela, as well as the devolving situation in Brazil:

The greatest points to keep in mind is overwhelming corruption. People get lost on what exactly went wrong in Argentina, in Venezuela, or what’s happening right now in Brazil. What they all have in common is that the people in charge had no real interest in doing things right; they really didn't care about destroying the country. They just cared about filling their pockets as much as possible.

Think of Venezuela this way: you have a country where water is more expensive than gasoline. What sense does that make? I mean, you had Hugo Chavez walking down the street pointing with his finger saying “Nationalize this. Nationalize that”. And when he was saying "nationalize", he was saying "Steal this". He didn’t have any great plans or political grandeur going on in his mind. He just wanted to steal as much as he could.

I know for a fact that they’re slaughtering one another in the streets right now in Venezuela. For at least three years it’s been a case of out-of-control crime and corruption over there. It’s not getting better any time soon unless something changes on a deeper level.

For the average "middle class" person in Venezuela -- educated and still holding on to a good job -- he needs two years of wages to buy a single plane ticket in his own currency. He needs to work for two full years to buy one single plane ticket -- he's stuck there. The problem is that he waited too long to leave. That's something important that I write about often: You have to know when to leave. You needed to leave Venezuela at least three or four years ago; now you’re getting to the point where you’re stuck there. The official exchange rate between the USD and Bolivar is 1 to 10, but unofficially which is the real one you experience,  is more like 1 to 1,000. So they basically are starving you to death through a completely devaluated currency which is what you’re getting paid in.

Basically need to find ways of leaving the country by any means possible. What I would do if I was in Venezuela right now is I would leave on foot. I would leave any way I could, because it’s not safe. I know people that have killed people surviving Venezuela, I actually know guys that had to do that to live. You can't even find some land and grow your own food. You cannot do that when you have the government stealing it from you. It’s a no win situation.

Click the play button below to listen to Chris' interview with Fernando “FerFAL” Aguirre (55m:03s).

A heads up: the audio quality of this podcast is not at our usual standards, due to the phone conditions in Spain where we managed to contact Fernando.

Transcript: 

Chris Martenson: Welcome to this Peak Prosperity podcast, I am your host Chris Martenson. We need to talk. We need to talk about Venezuela; it’s in meltdown right now, social, financial, economic, political – meltdown, is that too strong a term? I don’t think so because people are rioting. They are storming grocery stores because they’re starving; street justice is taking root, death squads are roaming all over which explains why the morgues of Caracas are overflowing. Inflation is running in the hundreds of percent officially, maybe more unofficially and accelerating. And of course Argentineans experienced a sort of thing like this back in 2001, it's close, and so we’re wondering what sorts of lessons learned can be gleamed from that experience.

Today are fortunate to be speaking with Fernando Aguirre, also known as Ferfal, Author of Surviving the Economic Collapse and also Bugging Out and Relocating, two books, you should check them out.

Ferfal experienced the hyperinflationary destruction of Argentina’s economy in 2001 up close and personal. And has since dedicated his professional career to educating the public about his experiences and observations of the lingering aftermath. His blog, Surviving in Argentina, found at Ferfal.blogspot.com, is covering the events as they unfold there as well as elsewhere and more general topics around the idea of navigating an economic dislocation wherever you happen to live.

Now, given rising concerns—we are seeing this in major hedge fund operators. Really large financial titans are beginning to express their concerns about the possibility of a much larger and unfortunate conclusion to central bank meddling, one that could sweep the world. Our listeners are increasingly asking to hear from voices that have firsthand experience of what it’s like to live through a large upheaval such as the one Venezuela is undergoing. So Fernando, thank you so much for being with us today.

Fernando Aguirre: Chris it’s great to be talking with you again.

Chris Martenson: Okay right from the top, what are the similarities between Venezuela and what you experienced in Argentina?

Fernando Aguirre: I think that the greatest points to keep in mind is overwhelming corruption. People sometimes get lost on what exactly went wrong in Argentina or Venezuela or what’s happening right now or even Brazil. What they all have in common is that the people in charge had no real interest in doing things right, they really did not care about destroying the country. They just cared about filling their own pockets as much as possible and that’s exactly what you’re seeing in Venezuela.

You have this communist speech going on in Venezuela and it was very similar to what the government had in Argentina as well. Now these are people that were wealthy beyond our wildest dreams, people that have no problem with amassing huge fortunes. So they have no problem doing this by any means possible.

Chris Martenson: So this corruption obviously it leads to all sorts of problems. We’re seeing very low investment back in the country. We’re seeing a lot of the capital that does come from the country flee. In Venezuela this is bizarre. We’re talking about the country with the second largest stated oil reserves on the planet; I know it’s the junk out of the Orinoco Belt but still bestowed with plenty of oil. Nigeria, another country with plenty of oil, but again just crushing sorts of poverty, corruption... how does that happen?

Fernando Aguirre: I understand how confusing it can be. But Chris think of it this way, you have a country where water is more expensive than gasoline. What sense does that make? I mean you had a guy, you had Uwu Chavez walking down the street and pointing with his finger saying “Nationalize this, nationalize that”. And when he was saying "nationalize", he was saying "steal this". Well he doesn’t have any great plans or any political grandeur things going on in his mind. He just wanted to steal as much as he could and that’s basically what populism is all about. You see it in Venezuela, you saw it in Argentina. The [Inaudible 00:04:45] government now has – they, right now they’re talking about... the new president of Argentina, which is a much more serious type of person—they’re talking about an entire year's GDP being stolen during the [Inaudible 00:05:00] government. So imagine what kind of corruption we’re talking about.

Chris Martenson: An entire year's GDP, is that what you just said?

Fernando Aguirre: Yes that’s exactly what I said.

Chris Martenson: Huh, well that seems like quite a lot; so that would be stealing $18 trillion from the US.

Fernando Aguirre: I mean our entire structure of over-pricing anything that’s being done by the States, going to friends that are actually owners of companies and that are owned by the same people in power [Inaudible 00:05:36] they basically stole in such a shameless way and one of the things that is being said a lot in Argentina and people are now just realizing it, all the money being stolen – it’s not being stolen out of thin air, it’s being stolen from the people. All that money that hasn’t been invested in roads and hospitals and schools, that’s all money that’s missing and it’s in their pockets and in their bank accounts in Seychelles or wherever.

Chris Martenson: This corruption idea is very interesting. When I had John Perkins on, Confessions of an Economic Hit Man writer, author, he talks about this sort of corruption and it happens a lot. It’s a very systemic thing. It’s not just the United States doing it but there’s a system in place which really encourages this behavior and a lot of these leaders are encouraged to participate in this bribery. The IMF is involved, the world bank, these big loans are created and never actually enter the country they’re supposed to be dedicated towards, although the assignment of the repaying those gets attached to the country. But the money goes from a server in a bank in New York to a server in a bank in New York and that’s it, right?

Fernando Aguirre: Right.

Chris Martenson: And many of these leaders think they’re rich because they siphon that money off, they squirrel it away, but then as Mr. Perkins said they really don’t actually have access to it because as soon as they run afoul of what certain worldwide interests want, they’re outed as corrupt dictators and the money is seized. So they never really actually had it, but it felt like it. Meanwhile the country just gets looted. So are you saying that Venezuela is just at the tail end of a long run of corruption and that’s where it’s problems mainly stem from?

Fernando Aguirre: Yes it’s basically the end of a very sad story of out of control corruption fueled by a very populist present with that common speech of taking away from the rich and giving to the poor. Basically I mean that sounds all very Robin Hood but who is really the rich? I mean if you’re the wealthiest guy in the country, who is it that you’re stealing from to get to give to the poor? You’re stealing from yourself? We know that’s not true. You know you’re not stealing from yourself to give to the poor.

It’s all very systematic. I mean for instance there’s an entire agenda—and this isn't theory; this is fact. They had an entire plan of forming the mentality of people. In Argentina they had a Ministry of National Thoughts, which was pretty much as bad as it sounds. The idea was to indoctrinate kids from a very early age, basically destroy their ability to read and understand text. Right now in Argentina about half of the kids that even finish primary school, they don’t understand what they’re reading, right? They lack reading comprehension to such an extent. So that kind of population is very easy to control and abuse them in all these ways.

Chris Martenson: Well that sounds familiar to other countries, let me leave that topic for a moment. So Venezuela, how bad are things there right now?

Fernando Aguirre: Well it’s pretty disastrous. There’s an interesting website where they’re showing what people actually have in their fridges; I mean it’s less than a grocery bag full for any of us. I mean a couple bananas, half a bag of flour and I mean it’s really desperate. That’s why you see people truly starving. It makes no sense. As you said, they have oil. They have a country that it’s – come on it’s in the middle of a tropical region where they should be able to produce as much food as they could possibly want, and they’re starving to death? Last year they didn’t have even toilet paper. What country ends up not having toilet paper?

Chris Martenson: Yeah it’s really tragedy at this point but you know the videos I’ve seen of people rioting – rioting is maybe the wrong word. Very, very hungry people who have been queuing in line for eight or nine hours in the hot sun, being told the store is closed, get a little angry and say “I’m still hungry and I’ve got hungry kids at home” and they break into the store. I’m not sure that’s the same as rioting, per say, but it sounds like people are actually getting to starvation at this point, like losing weight.

Fernando Aguirre: Yeah and as you were explaining pretty accurately now it’s not always as easy seeing everyone that’s looting and breaking into – it’s not as simple as it’s sometimes seen. These are honestly people that are starving, right? And folks don’t understand how complex that is. I was reading in a forum some of them were saying “Well that lady looks pretty fat and she’s hungry”? They don’t even understand – most folks don’t understand that many times people that have a weight problem are some of the poorest people around the world. They don’t have the quality of food or the gym subscription that some other folks have. It's people that are really desperate. I mean six months ago I was writing about an incident where one sister killed another over a pack of rice or flour. These are honestly people that are very desperate.

Chris Martenson: And it’s the – the pictures that I’ve seen of the hospital conditions are just beyond third world at this point. Like Greece did a while ago, Venezuela has run out of basic medicines and people who are on certain medicines are finding that they’re not available at any price because the country doesn’t have the hard currency to import them. So it’s rapidly becoming a food crisis, a medical crisis, a security crisis. It’s really hitting the bottom of Maslow’s hierarchy of needs. I mean these people are really getting down to a very serious humanitarian situation at this point.

Fernando Aguirre: Again we go back – the key word is corruption. You know what they did in Argentina during the middle of the [Inaudible 00:12:01] government? They replaced medicine for cancer patients with water. They stole the actual medicine. They charged it to the government as real medicine. The government would be paying for them. Of course all this money was always channeled to the [Inaudible 00:12:11] family but they were giving water to cancer patients and killing these people. Again, not anything that I’m making up; it’s all available on the internet and people are actually being charged for this right now. But those that are dead, they’re not going to come back.

Chris Martenson: Now do you think – let me guess, you think things are going to get worse in Venezuela before they get better?

Fernando Aguirre: I think in the case of Venezuela, yes. Yes because – in the case of Argentina fortunately they changed... We still need another year or so to see if really things are – if there’s hope. Right now they have Mauricio Macri for President which is a guy that I never thought would – because he’s actually a well-educated person, seems quite decent, which is a very nice change. But you still need some more time, another six months or a year to see if things – now in the case of Venezuela they are really heading to – they’re really crushing bad before they see something better. We haven’t still gotten to that point. Until you actually have people, decent people in the government, there’s little hope.

Chris Martenson: Now what’s the chance there of something more serious like a coup, civil war, rebellion of some kind do you think?

Fernando Aguirre: Chris it’s already very bad. I mean how much worse – people are – I know for a fact that they’re slaughtering one another in the streets right now in Venezuela. And it’s not just now, it’s been for – I mean for at least three years it’s been a case of out of control crime and corruption over there. And people have been having – a significant percentage of the population has been struggling with food for at least a year as well now. So it really – it’s not getting better any time soon unless something changes on a deeper level.

Chris Martenson: All right so let me ask you this: Assume for the moment you’re not one of the lucky ones who can leave—and I know a lot of Venezuelans have left to go to Miami—it's really a study in Venezuela in some sections. So those are the people who could afford to leave, let’s assume you’re not one of those people and you’re in Venezuela, what would you be doing right now?

Fernando Aguirre: Well as you mentioned, the people that actually left, those are the ones that have the right strategy. I mean there’s – for the average middle class person in Venezuela and talking about the middle class, even a little bit of an upper middle class, right, educated a good job? He needs two years of wages to buy a single plane ticket in their own economy, in their own currency. He needs to work for two full years to buy one single – I mean that average middle class person is stuck there. The problem is that he waited too long and he didn’t manage to leave. That is something that I write about often is know when you have to leave. In order to leave Venezuela was at least three or four years ago. Right now you’re getting to the point where you’re stuck there. Now you’re stuck in a country where no matter what it is that you do, you’re always going to be earning in bolivars, which is a currency that is completely fake. They have an exchange rate – official exchange rate of 1:10 dollars, but unofficially, which is the real one, it’s almost like 1:1,000 dollars. So they basically are starving you to death through the economy, completely devaluated currency which is what you’re getting paid for, you basically need to find ways of leaving the country.

What I would do if I was in Venezuela right now, I would leave on foot. I would leave any way I could because it’s not safe, it’s definitely – I know people that have killed people to survive in Venezuela. I actually know guys that had to do that to live. And the only solution you have is you cannot stay there. If you had – and again folks that have a fridge with a couple bananas and an orange, how can you sustain life like that? At the same time, if you’re thinking about farming, you have a government that stole people’s land. I mean Chavez, he [Inaudible 00:16:42] those forms. Those folks that are thinking of buying a chunk of land and growing our own food—you cannot do that when you have the government stealing it from you. And you’re not going to be winning against the government's military or police. It’s a no-win situation.

Chris Martenson: So let’s rewind then, what were the warning signs that Venezuelans should have been listening to, if they could have, before things got bad? How long ago were those and what were those warning signs?

Fernando Aguirre: Well again the similarities with Argentina... Many years people in Argentina were saying “We’re turning into Venezuela” and there was actually a phrase, a word coined was "Argenzuela", because Argentina was looking so much like Venezuela that the local joke was “We’re turning into Argenzuela”. And you see the same thing. You see it so clearly. First you see a populist leader rise and has this hate speech, which is something that unfortunately we’re seeing in many places around the world these days. That hate of "we’re the poor ones, they’re the rich ones" and I mean at the end of the day you know as well as I do that behind all this there’s always a big bank person running things, right? But when you have this kind of populist leader with that Socialist, Communist thing going on and he says he’s going to be stealing or nationalizing stuff and giving it back to you, and one of the things he does is right away he tries to control the media. Of course when he cannot control the media because they’re own desires clash with reality, they want people to believe something that’s not true; so they get desperate with the media. They try to control it, to censor it any way they can. They start closing media outlets that are not friendly to them. Those are real serious warning signs.

Chris Martenson: All right and so those signs have been cropping up for a while. And things are clearly very bad in Venezuela; we’ve been writing about it for a while and commenting on it. But the articles just come on a daily basis, failed state collapse and things like that; so it’s clearly on a bad road so I agree with you. I think that if you have the chance, even if it’s by foot it’s probably best to leave.

But let’s talk about some other places where maybe we’re seeing the same warning signs. So where do we start even? Well let’s start with Argentina. How are things shaping up there? Were you invited to the international bond market, some recent political turnover; how are things looking there?

Fernando Aguirre: Right, in December of last year were elections and [Inaudible 00:19:31] lost to  Mauricio Macri. Mauricio Macri is a rich guy, from a rich family, a wealthy family from Argentina, has been around for some time now. His father was actually one that had a big company and Macri is actually – Mauricio Macri is actually an engineer, he speaks English fluently, he’s well educated. And he is someone that was pretty much interested in keeping the family business. He got an interest in football, what you guys call soccer, and he became the president of Boca Juniors Club, which is a pretty big club which is a big deal in Argentina football. So that was his pretty much first step in politics. Then he got into politics when the [Inaudible 00:19:51] government started doing its populist thing and whenever someone complained about something they said “Okay if you have a problem with us start your own party and win the election” and that’s exactly what Mauricio Macri did. He started his own political party, brand new, picking up the people that he thought would be good for the job. So you see Macri with a – everyone in his political party is well educated and has a good background of transparency and – there’s always something a little bit gray here and there but in general honestly it’s maybe one of the best things we have going on in terms of politics since as long as I can remember, definitely in the last 30 years.

So you have a guy that honestly seems to be – if you want to put in some box, he's a center right type of conservative type of person. I think he's more of a center. But again the important thing is he doesn’t have that corruption thing going for him which [Inaudible 00:21:33] exact opposite. But you still need at least a year or so because they’re still very much – the [Inaudible 00:21:43] government made sure an entire generation—as we were talking about before—the entire generation of people that they taught that it was right to be corrupt and to steal through the government. So what do you do with thousands of people like that, hundreds of thousands of people like that? It’s not going to be an easy job, but yeah I think it’s a good start.

Chris Martenson: Well to sort of paraphrase a famous scientist who said that science advances one funeral at a time. People with belief systems that are entrenched, sometimes you have to really literally wait for them to die before those belief systems will go away because that’s how it works for them and that’s how they see the world, so I understand. It’s a real tragedy to have a whole generation of corrupt, let’s say inoculated people who grew up that way. Or in the case of Greece and even Spain, which I understand I’m calling you in, which we’ll get to in a minute. But having a huge chunk, 50% or more of young people out of work has a corrosive long term effect; so that corrosion of society, I get it. It’s a really big deal and I think it’s overlooked; so thank you for bringing that up.

Now let’s shift just a little north from Argentina. How about Brazil? That’s really in the news; it seems to really be having trouble finding its footings. If you lived in Brazil are you seeing warning signs there that would say time to go to Miami?

Fernando Aguirre: Brazil is definitely not as bad as Venezuela by any means. But I mean it always was a third world country. It’s not a politically correct term but it is what it is. A third world country simply that lacks that kind of structure that allows – in a developed nation you can put a turtle for a president for a term or two and the country will still roll, right? In places like Argentina or Brazil or Venezuela which don’t have the stability, you really need someone to change course, maybe a guy like Macri. Right now in Brazil they have Dilma Rousseff, which she has been removed from her presidency and it’s a pretty serious political crisis. It’s hard to say how that will end up. I think that it will – especially with the examples you have around when you have your neighbors like you have in Venezuela, then people are more likely to say "okay, let’s calm down a little bit and see how we can fix things unless we end up like those guys," you know? So that’s always an encouragement. I know it was for Argentina. Argentina, the greatest fear we had was ending up like them, ending up like Venezuela; we never wanted that. People in Brazil I assume will try to fix things but it’s definitely going through some serious political crisis.

Chris Martenson: So Fernando in Brazil it’s a political crisis at this point but it’s not yet economic or monetary?

Fernando Aguirre: Well it’s not doing great economically because it is affecting of course – as you well know the economy is all about trust. The fiat currency we use is pure trust in a piece of paper. So as soon as people lose faith in a country and its economy and ability to answer, then the economy starts struggling pretty bad. But it still has—Brazil is the largest economy in South America so it still has a little bit of backbone left to get back on track. We need a little bit more time to see if it gets back on its feet or not.

Chris Martenson: Okay well how about Puerto Rico though? We’re looking at... well it’s bankrupt at this particular stage so they’re going through debt restructuring. That situation I’m not as familiar with in terms of how much corruption has played a role in what’s happened there. Whether that was just good old fashioned mismanagement in Puerto Rico or how much corruption might have been welded in. What’s your view there?

Fernando Aguirre: Yeah I think Puerto Rico had its fair share of corruption. It’s smaller, which makes it easier to fix. It doesn’t have the leverage like a bigger country has but it’s also somewhat easier. Puerto Rico always had that paradise thing going for it. Many expats chose it as their location, so with that kind of... it still has a little bit of hope of getting back on track but it’s not as serious as Venezuela. When there's people with money that have an interest in a place, usually a way is found to get things fixed.

Chris Martenson: Well all right, so Europe then. I have increasing debts in my brain about the idea that Europe is not going to survive a lot longer as a single union, and I know that’s maybe a slightly controversial view. The refugee crisis, the way that second state status has been granted and shoved down Greece’s throat and it’s probably going to visit some of the other southern European nations over time. Italy is fully bankrupt as a nation, but yet things sort of carry on. You’re living over there now, what’s your views from the street view; what do you see?

Fernando Aguirre: I’m actually very close to [Inaudible 00:27:34] which is near the southern part of Spain and actually right in front of the ocean now, the Mediterranean Sea –

Chris Martenson: You get sunshine there.

Fernando Aguirre: Yeah, a lot of it, yes, yes. It’s a beautiful place really. It’s full of tourists. That’s the thing – the thing about Europe that maybe none of our people will have that much of an understanding especially if they haven’t traveled through it. It’s a collection of countries really and each country has its own very rich culture in terms of thousands of years of history. And each country, even though right now it’s the European Union, each country has its way of dealing with things. I think for example Spain would say you look at the – kind of put together a government you would think people are at one another's throats on the street, and really that’s not the case. It’s quite peaceful. You have more of a relaxed way of doing things. We went through a pretty big crisis which they’re somewhat recovering from. Unemployment is still an issue but at the same time you walk on the streets and you see some signs of, you know, jobs wanted and such. So it’s definitely not good but it’s not as disastrous as it may seem.

One of the things I try to explain is the difference between crisis and collapse. Venezuela is collapsing right now. It has been collapsing for some time. Argentina collapsed. Collapse, in my mind, means the president resigns and escapes in a chopper like we saw in 2001, right? The people start burning everything you know? And no one wants to even be president of the country; that’s what collapse is in my mind.

Crisis is still very bad and when you have that kind of economic crisis and you see such a shift from middle class to poor, it’s a real tragedy. It’s not joke; definitely not. But the example here in Spain is there’s not the level of crime that we saw in Argentina, not nearly anything like that. People here walk on the streets in the city and it’s definitely much safer than many other places I’ve been to. The murder rate is like a fifth of what it is in the United States. So it’s still a safe place to be.

Now what you were mentioning about the integrity of the European Union and especially now with Brexit—with Britain thinking about leaving and such, it can be compromised and there's always a possibility of things going south pretty fast.

Chris Martenson: Yeah well that’s the piece I’m sort of tracking here. So here in the United States— and I'd love to get your views on how Europe is sort of watching this circus of a presidential cycle over here. But before we go there, there’s a growing discontent in the United States between the protected class and the unprotected class. The unprotected has a much harder run of it here in the United States in many places than Europe because we don’t do a social safety net thing here. You get a few weeks of unemployment if you happen to have been working in a job that qualified, and then you’re out. Meanwhile we’re just absolutely screwing ourselves every possible way we can with healthcare, food costs, you name it. It doesn’t matter, whatever it is. If you can get away with charging people for it, that’s fine; so people are getting squeezed and we’re seeing it really show up.

I was starting to detect strains of that particularly around the refugee crisis where there was a little bit of a cultural crisis going on, which I totally understand. When you have a culture and you try and drop ship a whole bunch of a young males in particular who are insistent in bringing their own culture in, there’s some shock involved with that. You can’t just sort of have Brussels wave their bureaucratic wands and "say you have to suck it up because we say so." That’s what I thought the Brexit was about was more and more ordinary people saying “Hey that ruling body in Brussels seems really out of touch and bureaucratic and kind of heavy handed and increasingly so; we don’t want any part of that”; is that a reasonable characterization or is that going too far?

Fernando Aguirre: Well there’s probably some of that – the thing is I’m always giving my experience of why I distrust governments in general. I distrust mainstream media a great deal. I know there’s always interests involved. I mean look at what’s happening for example with Brexit, who is going to be benefiting from it. I see a media fueling it on a certain direction, which they have a point in some things. Then again right now I mean they have a Muslim mayor in London, that’s happened in the last six or 12 months. The entire community over there already in place. So is it really that way you want to be leaving or is it maybe some financial interest that benefits greatly from separating itself from the European Union and some of the things that they don’t like as much about it? I tend to be quite distrusting.

It is very true what you’re saying about having such a mass of people... and I have refugees here, I see them. Honestly there’s a lot of people who have been here far longer than many of us maybe for several generations with their own cultural thing. And there's clash; they have their ideas of how you should treat women. Maybe I don’t agree with them that much, you know what I mean? I think it’s always possible at the end if you really try you can live together. I think it’s possible to have peace even if you have different ideas of what a family is and how you manage yourself and your loved ones. It’s not always easy –

Chris Martenson: I agree but it’s definitely easier if you have ample resources and there’s plenty of jobs and people aren’t fighting for basic survival. When you’re in crisis for sure but especially when you go to collapse I think that those cultural frictions that’s when they really amplify and become very problematic.

Fernando Aguirre: Think of it as tinder just waiting there and you just feel a spark and it's a perfect excuse for a lot of ugly stuff, to put it some way. So yes it is a problem, it is an issue. Then again it’s also true, at the end of the day, people make money for governments. When you import hundreds of thousands of people, yes there are a lot of problems involved with that but it also means an increasing in capital as well as a country. I look at it different because I am from Argentina. My grandparents came from Spain to Argentina and I married a descendant of Italians in Argentina. I have maybe a little bit of a different perspective of what it means to be an immigrant that needs to make a new country your own. I feel 100% Argentine, myself, but I also understand my cultural – the Spanish culture that I inherited and the Italian culture that my wife inherited. And it somehow ends up working but yes it is true that there is an economics problem and economic crisis and it’s going to be a bit more complicated.

Chris Martenson: I understand. So let me ask you this then: As honestly as you can, you did move from Argentina with your family and you did that because you wanted to leave a worsening situation for hopefully a better one. Any regrets? I’m interested in what’s worked well and what do you miss?

Fernando Aguirre: Yes I’m definitely happy I left, there’s no doubt about that. Even now... I was just talking with my grandmother; 92 years old and she visits me a great deal and she is talking about how things are within the government. I mean this is what I do. I know that its going got be taking at least 10 years for the country. If everything works great, it will be another 10 years for the country to be fixed. You cannot just rush back because of a new president. [Inaudible 00:36:53] lacks that kind of stability that is enjoyed in other places. So definitely it was a very good thing to leave Argentina even though it’s not always easy and it’s painful to leave your country behind. But they’re worse today than they were four years ago or five years ago when I left. But when I first left I went to Ireland, it was – I wanted my kids to have the experience that I had when I moved to Boston when I was little and lived there for three years. It really helped me. I’m actually speaking to you in somewhat fluent English thanks to that experience. It’s not just the language, it’s the experience of having lived in another place. I learned to appreciate many American things that I integrated into my own family. I wanted my kids to have that and we got that in Ireland. But Ireland is a fantastic place and I have recommended it to people that have moved there and cannot thank me enough for it, they are very happy. The climate thing is a little bit tricky; the rain gets a little rough sometimes.

I guess what I’m trying to say is we got what we wanted from that experience and at the same time I am both the Argentine and Spanish and Spanish is my language and culture and I wanted my kids to have that as well. So that’s why we’re in Spain right now and we’re really enjoying it.

Chris Martenson: Yeah and so when you decided that it was time to move from Ireland, was there any consideration of going back to Argentina?

Fernando Aguirre: No, not at all. Not because – we understand very well the difference between a developed country and a country that hasn’t gotten to that state yet. South America is still – it has lots of potential. Argentina is huge and has such a small population. You would think it has everything for it, massive lands of all kinds and somewhat educated population. Yet with all the political problems they have... and one more thing it really hasn’t got that wave of immigrants and different cultures clashing. Argentines are 99% Argentine people, you know what I mean? They have similar religion and basically are coming from Spain or Italy, so pretty uniform in that regard. But the political aspect is what ends up ruining everything. It wasn’t easy to leave Ireland as well because it was a great place to be in. But we decided we wanted something a little bit more to what we were used to, the Spanish culture and the climate – being completely honest, the climate thing was probably the biggest thing for us. Do we really want to be living 10 years more under a cloud, damp all the time? Beautiful place though.

Chris Martenson: Of course you ended up on the Mediterranean, that makes sense. Let me switch gears with the time we have left real quick. I mentioned you have two books and one is: Surviving the Economic Collapse, and the second one: Bugging out and Relocating. So we’ve discussed the relocating part because you’ve done that. The bugging out part, when we talk about bugging out a lot of people think "oh gosh, okay now we’re talking something that’s apocalyptic. It’s really unlikely. I won’t have to do that." But the good people of Fort McMurray in Alberta Canada had to do exactly that recently, on really short notice. And you wrote about that experience; so what kind of learnings came from that experience do you think?

Fernando Aguirre: Well in the book I actually describe pretty accurately what those people ended up going through. In the book I explain that bugging out may be a number of things. Bugging out basically means that wherever you are right now is no longer possible, it’s no longer viable. You may have five seconds, five minutes, five hours or five weeks to leave but the point is you still have to go. If you have a fire like that you have just seconds to leave; so you have to have a plan ahead of time. Go through the mental exercise of: "if I have to leave right this moment, get into a car and leave, what is it that I have to work with?" If you have warning of a storm or flood heading your way, you have a little bit more time, can you grab a bag or some other gear? Where is it that you’re going to be going? What route are you going to be taking? And once you start doing that you start thinking of “Okay I’m going to be taking this route and I’m going to be needing this much gas to get there. This is what I’m going to be finding when I get there”. You start thinking about locations or where is it you’re going to be going. I get mad sometimes when people say "I already live in my bugout location." I immediately tell them it’s impossible. You’re already living there no matter how rural it is, how great it is or how fantastic your place is, it’s no longer your bugout location because it has to be somewhere else. Basically that’s the idea behind bugging out; it’s when your current place of residence is no longer viable. Once you live there it's no longer that location.

Now it may be the case of something like people saw in Venezuela or they saw in Argentina when the slow change where you have months, maybe even years to leave, but you always [Inaudible 42:51] people say “No this cannot be happening; it will get better” and sometimes it does not. It simply does not get better; it just gets worse. Think of Venezuela, think of Ukraine. People that were living there a few years ago completely at peace, suddenly some of those actually end up dying there because they didn’t leave in time. Some folks left from their homes were [Inaudible 00:43:14] and they just left with the clothes on their backs. So what I say is don’t think "it’s never going to be happening to me" because millions, literally millions have thought that and wish they had planned different.

Chris Martenson: So let’s talk about Fort McMurray; I was reading accounts where some people had zero minutes. Like they’re at work and they’re like “Oh you’re being evacuated” they didn’t even have a chance to go home and get their bugout bag. Other people were just — suddenly it was a blue day and now it’s suddenly a dark day and they’re being told they have to leave; so they had minutes. A few other people had slightly longer amounts of time but the overriding thing that I learned was that very few people heeded the messages early, right? So there was a couple stories I found where people just got a gut sense, they knew it was going to be bad and they left before everybody else. There was still time to be in the gas station and just minutes later there would be 200 cars lined up and nobody had enough gas for the trip they were going to have to take. Things like that. So if you were going to advise people there or any other place that could be affected by a calamity like that, what should everybody have prepared way in advance?

Fernando Aguirre: You should have a plan. You should have an idea of where it is you’re going to be going if where you are right now is no longer possible. What I explain also in the book is ideally you have someone within your neighborhood; say a neighbor, a family member, someone – if it’s an isolated incident, your house burns down, it happens to people every single day. Where is it you’re going to be going? Can you go to someone’s house nearby for some time until you get back on your feet? Also have someone further away in the next county. That means that if something more widespread like what happened in Canada takes place and the immediate mid-range is no longer good, you have somewhere else to go. You need to have all these options; the more options you have the better. In the case of something maybe like what happened in Venezuela where the entire country is going down and you have people in other places if you keep in touch with some family and friends – I know folks that left and stayed in someone’s living room until they got a job and got back on their feet. It happens, its life; so having these plans ahead of time really helps a great deal.

Chris Martenson: And yeah so most of these people, they didn’t have a plan. They didn’t really know what to do so there’s a lot of confusion. Things sorted themselves out and I think it was handled really well with no loss of life. A lot of loss of property. Pretty interesting to see how that all shook out. At the same time –

Fernando Aguirre: The thing to keep in mind, sorry Chris, is that it is Canada. The same thing happens in other places, you know as well as I do there would have been significant loss of life, no doubt.

Chris Martenson: Yeah no, I was astonished. I even commented on this and I think one Canadian on my site took exception but I’m watching this video. It's front and rear dash cam footage and behind this guy’s truck is a guy on a motorcycle and there’s just a wall of flames there and this guy is wincing away from it and there’s a whole empty lane for oncoming traffic that’s not oncoming because everybody is leaving, right? And it’s not being used. And there’s all these four wheel trucks and they’re all in this orderly line with all these flames right there and it’s just in a suburban neighborhood. I tell you way before that happened in America the trucks would have like gone four wheeling across people’s lawns. That guy on the motorcycle would have absolutely been just tearing up the sidewalk or whatever. But they’re they all were in a line, you know, very polite and very mannerly. So I think that really speaks to the cultural capital and how much that plays out in a crisis or collapse. And when your culture has been ruined by corruption and lack of trust and every man for himself, I think things go bad, worse more quickly. I think you’re right. When I asked you about Venezuela and you started right on that, like, this is a corrupt country and that’s why it’s so bad right now.

Fernando Aguirre: In Venezuela I know for a fact it would have been everyone for themselves. Those lanes would be completely covered with people. Many of the cars would have stalled or broken down in the middle of the thing. It's those little details. Every guy in Canada had an idea of "be responsible; my car has to work, for myself and for others as well." In Latin America it’s like "yeah my car is okay but if it breaks down in the middle of the road and I end up causing problems for thousands of people, that’s not my problem." That kind of mentality at the end of the day causes everyone problems. You have such an organized society, it's much better. Life is better in general.

Chris Martenson: Absolutely. That’s at least part of – I love the distinction you made, there’s a big difference between developing and developed and all of that. Final question then is about how long do you think the developed countries are going to stay that way? You and I have been tracking this potential financial and economic collapse for a long time. I’m surprised Fernando, I’m surprised by how long it’s taken. How about you? Are you surprised by how this is unfolding? Do you see anything on the horizon that concerns you at this point or do you think “Wow they’ve proven the power of money printing” and it actually works?

Fernando Aguirre: No. I don’t think that just – I think the planning going along just as – everything is going as planned. What you’re seeing is a lot of people from the middle class are starting to become poor.

Chris Martenson: That’s true.

Fernando Aguirre: And this is the kind of thing as we were saying before it’s not covered as well in the media because there is always their own interest but it’s – you know it to be true in the US. There’s a lot of people who used to be middle class who are no longer middle class anymore.

Chris Martenson: 47% of people, 47% of respondents to the last Fed survey couldn’t come up with $400 in an emergency without borrowing it or selling something, 47%. If middle class is the middle of your country, the middle of my country can’t come up with $400.

Fernando Aguirre: Okay Chris what does that tell you?

Chris Martenson: There is no middle class anymore; that so called middle class band is shrinking and climbing up the ladder.

Fernando Aguirre: Let’s be generous and say there is still some but it’s shrinking. It’s shrinking every single year. Every year it gets smaller and smaller and those guys that used to be able to do certain things and have a certain quality of life are losing it little by little. That trickle of financial ability and quality of life that’s been taken away from them. And of course going in one direction. I know that I never accidentally made a billion dollars; I don’t know if you know someone that actually did this. Whenever someone goes “Whoops, I made a billion dollars” like it wasn’t an accident my friend, you actually planned for that and you executed very beautifully and it went great for you. But all that shrinking middle class is going to that little bunch of guys that are taking great benefit from it. That means – as years go by that’s going to be happening. It’s going to be that struggle of clawing your way up that iceberg to stay on top of it.

Chris Martenson: Yeah the way I see it is that because of the amount of debt we have, because of the shrinking resource base that’s out there, that the pie doesn’t expand like it used to. Unfortunately we have a debt based money system which means that there’s always, always, always a siphon that’s vacuuming wealth from the bottom to the top; that’s just how the system works. I’m not going to say if it’s good or bad; it’s a feature. But the problem comes in when the pie is no longer expanding, that vacuum is still sucking at its normal rate and so you just get—less and less is left at the bottom and more and more accumulates at the top and that creates an unstable situation. That’s what we’re seeing politically in this country in the United States. We’ve got Donald Trump fans expressing one form of dissatisfaction, Bernie Sanders another, with Hilary representing the corrupt class who want everything to stay corrupt or whatever she represents, I’m not clear on what the attraction there is. So there’s sort of a status quo, "keep everything moving" by Hilary, and "let’s change things" from Trump and Sanders. But that "let’s change things" I think is just representing people who are increasingly feeling squeezed and pinched. Many of them don’t actually understand why—because you’re right, it isn’t well reported on. We don’t really talk about it. Sometimes they throw big statistics around but the truth is there’s a systematic looting of the middle class and it’s being done with regulations and lobbying and rule changes and stifling barriers to growth that favor big companies over small companies. My judgment for my country: The engine of growth has always been small and medium sized companies and those are just getting killed. So we’re busy in the process of killing the goose that laid the golden egg over here and not actually talking about what’s happening realistically. That’s how I see it.

Fernando Aguirre: Yeah it’s more like – it’s the chain around the goose’s neck and squeezing for all its worth and it’s no longer getting you that beautiful golden egg, it’s a little bit – pebbles or grains of gold and they’re just killing it trying to get more out of it. That’s the image that I have.

Chris Martenson: Yeah. That's—

Fernando Aguirre: I think unfortunately nothing is going to be changing politically. I mean it’s already – I mean with the candidates that you have you know that nothing is going to be changing no matter who wins at this point.

Chris Martenson: I know. That’s the greatest illusion of them all is that it actually matters which of the three candidates get in.

Fernando Aguirre: I think it's funny how they fight over... It’s not going to be changing no matter who wins at this point. The candidates that you have right now, you’re not going to be changing anything. They’re just going to be making sure that everything continues the way it is. And the way it is, is that middle class is going to be shrinking. Unfortunately people still have to learn the hard way, and it’s going to be taking maybe another term until people say "it no longer works, we really need something else. We cannot have the same thing about us being squeezed little by little every drop of blood out of us; we are a different idea of what politics means, what a politician is, what the president should be representing." Until that changes people will still be suffering.

Chris Martenson: I totally agree, and so we’re just going to have to track this. I love the message that it’s just going to take time. It’s going to be unfolding for a good long time. As it does, first I want to thank you for your time today. And then I want to know what’s the best way for people to follow your writings and your thinking?

Fernando Aguirre: Sure, I have my website which is TheModernSurvivalist.com and, as you mentioned, my books basically are explaining the kind of strategies I applied myself to get through this kind of thing. Granted, in Argentina it was an economic collapse, but it’s still valid for what people will be looking at in the future.

Chris Martenson: All right so TheModernSurvivalist.com we’ll provide a link at the bottom of this with the transcript. Thank you everyone for listening today and Fernando thank you so much for your time.

Fernando Aguirre: Thanks Chris.

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79 Comments

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1209
Firsthand perspective in Venezuela

Recently I was interacting with a colleague of mine in Venezuela and this is what she told me about the current situation in the country.

Thank you for your message. Mark your appreciation despite being abroad is true, but unfortunately the reality is even more tragic than it seems. Now in Venezuela everything is a nightmare. It is very sad and frustrating. There is a social, economical and political chaos and the country is divided into two irreconcilable political factions.

Chávez was a real leader and had a lot of followers, especially during the first years as president. Many, many people invested a lot of energy and time, put the best efforts, illusions, and confront adverse situations to construct an inclusive and a just society. Significant and revolutionary achievements were made during the Chavez government, however, his last years of government and the actual people in the power took the country to the ruin. They destroyed the structure of the majority of institutions, closed or nationalized fabrics and broke the remaining industry, established the corruption, gave the power to the army, who is involved in corruption and drug traffic, there is no food, no medicaments, no energy (Guri the main hydroelectric power was collapsed without appropriated maintaining) and allowed the violence and debase the judicial system. Today, impunity reigns in Venezuela.

In my personal point of view, the violence is one of the more difficult things to overcome and manage.

I think of this as a cautionary tale of what we may face ourselves some day.

Mark

ccwesq's picture
ccwesq
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Posts: 48
Chavez

Didn't I just hear Chavez' family looted the country and that his daughter is now worth $4bn?   Does your friend not know or believe this to be true?  Does she think socialism simply wasn't given a fair enough shake?

All this is straight out of atlas shrugged, isn't it?  Squandering of natural resources. Starving people despite all the oil and rich farmland.  

HughK's picture
HughK
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Posts: 759
Dolartoday

If anyone's interested in following the black/grey market exchange rate for bolívares to USD, check out dolartoday, which Rafa, one of my Venezuelan students, showed me.

Currently the rate is 1050 Bolívares "fuertes" to 1 USD.

P.S. Atlas Shrugged is for sophomores.  Gómez pillaged the country and squandered natural resources too, as have many other right-wing pro-business Latin American caudillos.  It's past time we graduated past Rand's didactic tales to a higher level of understanding.  

Industrial civilization is broken, and whether the government is very pro-capitalist or pure communist makes less of a difference the fact that we all share an extractive economic structure that carries the seeds of its own - and our own - destruction.

KugsCheese's picture
KugsCheese
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Posts: 1287
Re: Chavez' family looted the country

ccwesq wrote:

Didn't I just hear Chavez' family looted the country and that his daughter is now worth $4bn?   Does your friend not know or believe this to be true?  Does she think socialism simply wasn't given a fair enough shake?

All this is straight out of atlas shrugged, isn't it?  Squandering of natural resources. Starving people despite all the oil and rich farmland.  

And now the raw animal instincts kick in.  Grab what you can even if you have to harm others physically.  Certainly Chavez's "socialism" did Venezuela in.   Very few question truly the state of humans therefore the same disasters happen over and over.  I do think the human species will be the first species to intentionally extinct itself.

KugsCheese's picture
KugsCheese
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Ayn Rand

HughK wrote:

If anyone's interested in following the black/grey market exchange rate for bolívares to USD, check out dolartoday, which Rafa, one of my Venezuelan students, showed me.

Currently the rate is 1050 Bolívares "fuertes" to 1 USD.

P.S. Atlas Shrugged is for sophomores.  Gómez pillaged the country and squandered natural resources too, as have many other right-wing pro-business Latin American caudillos.  It's past time we graduated past Rand's didactic tales to a higher level of understanding.  

Industrial civilization is broken, and whether the government is very pro-capitalist or pure communist makes less of a difference the fact that we all share an extractive economic structure that carries the seeds of its own - and our own - destruction.

Have you read Rand's stuff?  She didn't like the Right either.  

peakoilwelder's picture
peakoilwelder
Status: Member (Offline)
Joined: Mar 5 2011
Posts: 17
evacuation

A few weeks ago I was evacuated from the Fort Mac area. I was working at Syncrude, on a maintenance turnaround. Short term work, and as someone else's employee, but that's all I've been able to get for the last 6 months. I live in Edmonton, so I was simply sent home - after a couple of days of confusion! It was mildly exiting to fly home on a C-130 configured as a troop transport. My personal vehicle is parked at Albian Sands, and may be there for some time yet.

Now, with so many displaced workers, competition for jobs is severe. I've already been at an income level 1/3 of what I made a year ago. There is the very real possibility of my business going bankrupt in the next 2 months, perhaps personal bankruptcy as well. It is, quite simply, expensive to live here. I've reduced my debt considerably in the last few years, but it hasn't been enough. It is depressing to be stuck in the middle of a lifestyle which I understand to be essentially untenable. I am being pushed up against "emotional resilience" as I write these words. Perhaps my own personal paradigm shift has arrived, not as an intellectual notion, but a simple empty chequeing account, and too much debt.

LesPhelps's picture
LesPhelps
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Posts: 651
KugsCheese wrote:HughK

KugsCheese wrote:

HughK wrote:

If anyone's interested in following the black/grey market exchange rate for bolívares to USD, check out dolartoday, which Rafa, one of my Venezuelan students, showed me.

Currently the rate is 1050 Bolívares "fuertes" to 1 USD.

P.S. Atlas Shrugged is for sophomores.  Gómez pillaged the country and squandered natural resources too, as have many other right-wing pro-business Latin American caudillos.  It's past time we graduated past Rand's didactic tales to a higher level of understanding.  

Industrial civilization is broken, and whether the government is very pro-capitalist or pure communist makes less of a difference the fact that we all share an extractive economic structure that carries the seeds of its own - and our own - destruction.

Have you read Rand's stuff?  She didn't like the Right either.  

Admittedly, Ayn Rand's books can be a fun read, mostly for conservatives.  However, HughK has a point.  Not all industrialists are saints.  Unregulated industries do not behave all that well.

Don't forget, Greenspan was a friend and disciple of Rand's and Rand herself did not live up to her own philosophy, not even close.

davefairtex's picture
davefairtex
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shrugging atlas

So the theories of Rand, put into practice by Greenspan, were finally challenged by the experience of the real-life housing bubble.  Greenspan acknowledged the (deadly) flaw after-the-fact:

Greenspan, 82, acknowledged under questioning that he had made a “mistake” in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that “a flaw in the model ... that defines how the world works.”

Oops.  Someone took a book too seriously.  Capitalism always tends towards crony capitalism, since the best use of capital involves eliminating competition via acquisition and collusion, engaging in cartel pricing, and controlling regulation through bribing the politicians.  Likewise, corporate managers compensated using annual bonuses and stock options focus on short term frauds to get their shares to pop so they get rich.  Nobody is looking at the long term.

I guess Greenspan didn't read that particular chapter of the book.  Maybe we should send him a copy of Bill Black's book, "The best way to rob a bank is to own one."

Ideally, I think capitalism is great.  So is communism, socialism, and all the other isms.  Rand seems to be no better than Marx - and no worse.  Each writer reveals truth, but I don't think any of them should be mistaken as some sort of operating manual for how to run a civilization.

Mark Cochrane's picture
Mark Cochrane
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Posts: 1209
Politics and people

Not sure what you are on about here. She reports the facts as she knows them. There is no doubt that Chavez was very popular and energized a lot of people in the beginning of his reign. He was a leader, kind of like the Pied Piper, few understood where they were being led though. I don't know if there was ever an ounce of credibility in his intent but she reports clearly that over time the whole system went to shit under Chavez (she doesn't even mention Maduro). He created a completely corrupt system that is now collapsing. They messed up everything and the whole place is dysfunctional beyond belief. Doesn't sound starry-eyed to me. I didn't see her apologize for Socialism or espouse and other -ism at all. She did mention that the whole place is polarized between two political groups but didn't spell out who they are or favor either one.

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 651
Obesity

Granted, low income people have fewer nutritional options.  But, I simply don't buy that poverty makes obesity absolutely necessary.

Poverty and limited nutritional knowledge are a further challenge.  However, where is the line between society vs individual responsibility for obesity?

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
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Posts: 651
davefairtex wrote: Likewise,

davefairtex wrote:

 Likewise, corporate managers compensated using annual bonuses and stock options focus on short term frauds to get their shares to pop so they get rich.  Nobody is looking at the long term.

Then again, Rand did not write about today's CEOs.  She wrote about Henry Ford and Oscar Mayer.  Both of these men knew how to build a business from scratch, create jobs and manufacture quality products that were in demand.  

They had an incentive to consider long term issues, as they wanted to pass the business they created to their children, intact and healthy.

Todays CEOs come largely from marketing careers.  As a group, their expertise is not in creating a company, or jobs or quality products.  They cannot pass the company they run on to their children.  It is not surprising that they make short term decisions with the purpose of improving their compensation package.

newsbuoy's picture
newsbuoy
Status: Silver Member (Offline)
Joined: Dec 10 2013
Posts: 191
Ape and Essence

Considering the implications of Aldous Huxley's "Ape and Essence"; Once replication becomes unreliable society will disintegrate.

But then, as George Dyson points out in the Q&A portion of this brilliant lecture for the Long Now Foundation,

What if replication becomes perfect and we can have anything we want? perfect child, perfect weather, perfect energy, etc?

Which is the greater nightmare/dream?

And what about Brown Brothers Harriman?

 
KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1287
davefairtex wrote: So the

davefairtex wrote:

So the theories of Rand, put into practice by Greenspan, were finally challenged by the experience of the real-life housing bubble.  Greenspan acknowledged the (deadly) flaw after-the-fact:

Greenspan, 82, acknowledged under questioning that he had made a “mistake” in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that “a flaw in the model ... that defines how the world works.”

Oops.  Someone took a book too seriously.  Capitalism always tends towards crony capitalism, since the best use of capital involves eliminating competition via acquisition and collusion, engaging in cartel pricing, and controlling regulation through bribing the politicians.  Likewise, corporate managers compensated using annual bonuses and stock options focus on short term frauds to get their shares to pop so they get rich.  Nobody is looking at the long term.

I guess Greenspan didn't read that particular chapter of the book.  Maybe we should send him a copy of Bill Black's book, "The best way to rob a bank is to own one."

Ideally, I think capitalism is great.  So is communism, socialism, and all the other isms.  Rand seems to be no better than Marx - and no worse.  Each writer reveals truth, but I don't think any of them should be mistaken as some sort of operating manual for how to run a civilization.

IIRC Rand did not like central banking nor fiat money.  Greenspan was and is a fake person.  He has no moral compass.  Rand died in 1982.

reflector's picture
reflector
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Posts: 250
exactly

sometimes dave posts things that are so outrageously ass-backwards, that i assume he is trolling, or perhaps he exists in an alternate reality where up is down and black is white.

dave, in case you were not aware: central banking is the antithesis of capitalism, it is an anathema to the free market and to honest price discovery.

i'm not aware of any "theories of rand" that were put into practice by greenspan going into central banking and creating huge asset bubbles and mis-allocation of capital.

ccwesq's picture
ccwesq
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Posts: 48
Jeez

Kind of a touchy bunch for a Monday morning.  It was an innocent enough question and equally innocent (and accurate) observation, perfectly capable of being ignored.  But since it wasn't:

I'm no disciple of hers but anyone who actually read Rand, even a sophomore, would know that in a nutshell she was opposed to collectivism on the left and the right, and pretty much any other subordination of the individual to the state. 

Nothing she ever said or wrote has jack to do with the housing bubble.  If you believe otherwise I submit you either do not understand her or else do not understand the housing bubble. 

I did not say Rand wrote the operating manual for civilization.  I did fairly imply that the novel had some insights and predictive force relevant to the subject matter of the podcast and that is true.  Putting cronies in charge of industries and hyperinterference in markets by government were major themes of the book just as they were in the podcast.

So feel free to lighten up.  If I had wanted to stir up trouble I'd just call Michael Mann a fraud again. :)

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Greenspan

KugsCheese wrote:

davefairtex wrote:

I guess Greenspan didn't read that particular chapter of the book.

IIRC Rand did not like central banking nor fiat money.  Greenspan was and is a fake person.  He has no moral compass.  Rand died in 1982.

Wikipedia wrote:

In the early 1950s, Greenspan began an association with novelist and philosopher Ayn Rand.[48] Greenspan was introduced to Rand by his first wife, Joan Mitchell. Rand nicknamed Greenspan "the undertaker" because of his penchant for dark clothing and reserved demeanor. Although Greenspan was initially a logical positivist,[56] he was converted to Rand's philosophy of Objectivism by her associate Nathaniel Branden. He became one of the members of Rand's inner circle, the Ayn Rand Collective, who read Atlas Shrugged while it was being written.

I believe it was Nathaniel Branden who eventually distanced himself from objectivism and apologized for his part in encouraging the "Rand Mystique."

I still think her books deserve the label of good light fiction.

For those of you who enjoy the SciFi genre, James P. Hogan wrote "Voyage From Yesteryear," when he was enamored with Rand.  It's a bit hard to find in paperback, but pdf versions can be found.

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Best of Luck PeakOilWelder

peakoilwelder wrote:

A few weeks ago I was evacuated from the Fort Mac area. I was working at Syncrude, on a maintenance turnaround. Short term work, and as someone else's employee, but that's all I've been able to get for the last 6 months. I live in Edmonton, so I was simply sent home - after a couple of days of confusion! It was mildly exiting to fly home on a C-130 configured as a troop transport. My personal vehicle is parked at Albian Sands, and may be there for some time yet.

Now, with so many displaced workers, competition for jobs is severe. I've already been at an income level 1/3 of what I made a year ago. There is the very real possibility of my business going bankrupt in the next 2 months, perhaps personal bankruptcy as well. It is, quite simply, expensive to live here. I've reduced my debt considerably in the last few years, but it hasn't been enough. It is depressing to be stuck in the middle of a lifestyle which I understand to be essentially untenable. I am being pushed up against "emotional resilience" as I write these words. Perhaps my own personal paradigm shift has arrived, not as an intellectual notion, but a simple empty chequeing account, and too much debt.

P.O.W. - thanks for the update and good to hear from you.  Please use this community however you can to help maintain your bearings through the perfect storm that is visiting your chosen area.

there may be another year, possibly two, before oil seriously rebounds based on the fundamentals.  Of course anything could happen event-wise to hasten the timing of that rebound, if not spike, forwards.

Certainly the way oil is shaping up right now it looks like 2016 might be the first year where new supplies are exceeded by existing declines...a situation that will only get more severe between 2017 - 2020.

But how to hang on until then?  Or do you even want to?  Maybe this is the even-driven nudge to go in an entirely different direction?  

At any rate, best of luck!

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self regulation

Prior to his Come to Jesus Moment during the 2008 crash, Greenspan sounded certain that the banks would never engage in crazy ponzi lending or in widespread fraud because in his model of how the world worked, companies (and especially banks) engage in rationally beneficial activity to protect their shareholders, their reputation, and their long term viability as going concerns.  The self-correcting free market fixes all.

In congressional testimony on October 23, 2008, Greenspan finally conceded error on regulation. The New York Times wrote, "a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending...Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken"

Ayn Rand calls this philosophy "self-regulation."  It appears that Greenspan used to share this philosophy.

I agree that Rand would not have supported Greenspan's constant interventions.  My point was on the concept of self-regulation in an idealized view of capitalism, and what happened when that met the widespread banking frauds that took place during the housing bubble - well documented by our friend Bill Black.

These guys print our money.  I think they need actual regulation, not "self-regulation."

To me, its not an issue if we are just talking about light fiction.  Its more of a deal if your banking regulator follows its precepts to the point that the banks are allowed to do just about anything because of the belief that the free market will fix all.

And who knows, maybe the free market would have fixed all.  Depositors would have been wiped out, banks all would have gone down, and we'd be deep in a massively deflationary depression.  I suppose that would be a fix of sorts.

And that was my only point - apologies if it was made unclearly.

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civilization corruption

I find Dmitry Orlov's view of corruption and collapse quite interesting.  Being a Russian, he witnessed the Soviet Union's collapse first hand and thinks that things will be worst here when it happens.  He says that communism is the most efficient system at the tribal level (150 or less people).  Above that level all of the "isms" degenerate into corruption and worst.  He also had nothing positive to say about Rand.

From my point of view a similar degeneration would occur if we all formed these tribes since there would be 2 million of them roaming around Genghis Kahn style in the US thanks to exponential population growth.

I wonder what is really behind Venezuela's etc collapse.  I still remember Reagan's death squads (aka freedom fighters) that roamed El Salvador, Nicaragua, etc and the massive influx of Salvadorians into Tucson where I lived at the time.  I also knew a woman from Chile who witnessed the Kissinger coup first hand.  She thought I was an idiot for not knowing much about it at the time, thanks to mainstream media.  Does anyone remember the religious fanatic Pat Robertson pushing for Chavez's overthrow on TV?  I'm sure he was only concerned with the peoples' well being since trickle down (aka: I better not say it) economics is best for them.

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could we discuss definitions?

My definition of any -ism is rule by that entity. Thus, I tend to define capitalism as rule by capital. Capital, in turn, I would tend to define as invested assets/money.

As such, I would think that central banks are absolutely necessary for the binding of all governance to capital.

But I would contend that both central banks and capitalism are contrary to free markets.

Maybe you disagree. if so, do you disagree with the definitions? Or the reasoned statement?

I think that if we are to disagree in a useful way, it would be ideal to first clarify definitions.

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Hang in there PeakOilWelder

I, like most Canadians, feel for you and we are all doing what we can from a distance to help those impacted by the Fort Mac disaster. Without a doubt reality is setting in in a big way for people such as yourself.  You and all the other affected people will need all the emotional resilience you can muster going forward. But you can take heart that you are in Alberta, a place where the "can do" mindset is legend. It is that mindset that will help people and businesses to re-build. You also have functioning governments at various levels who thus far have done pretty good in supporting people. I have no doubt that there will be adequate support for businesses as well, even if it means more deficit spending. To not help people like you get back in the game would be to exacerbate an already bad situation.  Hang tight!

That is not to say that it will necessarily be the same as what it was pre-disaster, but perhaps this will afford the big players the opportunity to put more thought and time into the rebuilding of something even better, with proper strategic thinking to manage the growth, sustainability, environmental and ecological issues. I would hate to see the out of control economic train that has been Fort Mac and the rest of the oil patch get started up again...

Also take heart that there is still a level of trust and respect in our society that prevented things from getting far worse as things unfolded. To Chris's comment:

So I think that really speaks to the cultural capital and how much that plays out in a crisis or collapse. And when your culture has been ruined by corruption and lack of trust and every man for himself, I think things go bad, worse more quickly.

I totally concur with this sentiment, which indicates to me that we are, at least in this first world country, a long way off from a systemic collapse. We still have that level of cultural capital that prevents chaos such as what might have happened in other countries, and would have made the situation far worse than what it was.  That gives some level of confidence about the future - for the near term anyway.

But that is not to say that we will not be exposed to localized disasters like this Fort Mac. Each of us has unique risks according to where we live. This podcast as well as the Fort Mac disaster has me revisiting my disaster preparedness planning. It is easy to let things slip a bit as the days go by. Seconds do count at times, and that go bag and any other preps have the potential to make a big difference in both outcomes and mindset.

Good luck to you PeakOilWorker. Know that there are lots of folks pulling for you and everyone else over there.

Jan

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Debt, the first 5000 years - highly recommended

The book posits that initially among stone (iron, copper-age? not sure) age humans, there was only 'mutualism' (termed 'communism' in the book) among tribal members. People contributed as they could, people shared, people worked together - the group survived as a whole. Slackers, liars, thieves, sociopaths were not tolerated - they were cast out or killed.

The problem with our 'capitalist' system today is that there are no real consequences for the toxic behavior of the biggest and most powerful slackers, liars, sociopaths and thieves.

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davefairtex wrote: Ideally, I

davefairtex wrote:

Ideally, I think capitalism is great.  So is communism, socialism, and all the other isms.  Rand seems to be no better than Marx - and no worse.  Each writer reveals truth, but I don't think any of them should be mistaken as some sort of operating manual for how to run a civilization.

I agree. I think people get too hung up on the left vs. right argument -- government control of markets (communism/ socialism) vs. private (capitalism). I think the real issue is whether the people actually control the policies and future of a country (democracy) or is it a few corrupt leaders manipulating things for their own enrichment, self gratitude and greed? That's the real issue: democracy vs. dictatorship. Today I think our countries are closer to dictatorship (oligarchy) than democracy, voting is just an entertaining circus to pacify the masses into believing that they don't live in dictatorships. As the saying goes, "if voting made any difference they wouldn't let you do it" which is why we are stuck with the absurd choice between Tweedle Dee and Tweedle Dumb, both incestuous second cousins of third aunts of the same inbred family.

Ultimately I don't think either socialism or capitalism works. For various reasons both devolve into single individuals or families controlling the masses which never ends well. In the case of capitalism, it requires perpetual growth which isn't possible and leads to cronyism and extreme wealth inequality. In socialism / communism, you get terribly inefficient allocation of resources, worker apathy and hopelessness in not being able to control their future and being forced to work for the state, and centralized control always ends in corruption.

All the isms out there have their followers because each attempts to solve some observed problem in society or economics. But often times the other problems they create as a result are just as bad as the ones they try to solve. And the world is way more complex than any single ism can encapsulate to the point of effectively organizing global societies. But believers in various isms conveniently look away from the problems with their particular isms; the human mind has a funny way of doing that, kind of like Chris' post the other day in the Silicon Valley story about how we selectively create our own memories to form our identity. In a similar way I believe (hey I'm doing it too) that we fill in the blanks about how the world works in order to conform to our own particular isms so as to create an understandable narrative about how the world works and how we as individuals fit into it.

Just like so many people falsely feel that the universe owes us an energy supply forever and ever, I think almost everyone falsely believes that there is an ism out there that will effectively organize society and economics fairly and sustainably into the future. I highly doubt that, especially when we are so overpopulated.

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Common flaw

All of the -isms work great, in theory. If everything worked as designed they'd function admirably for much longer than they typically do before running into some other limit but they all fail long before then for the simple reason that they are all built with complete disregard for human nature. Every system tends to its own flavor of corruption until it collapses in upon itself and is reborn in another form that again eschews corruption and values honesty and integrity, for a time.

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Common Flaw?

I think its time to get out Hayek's title, The Road to Serfdom, and have a read. My understanding, from this work is that when economic disparities become sufficiently large in developed societies, the tendency is to drift towards a totalitarian mode of governance in order to bring things into an orderly, functioning, PLANNED economy. Rights and freedoms become secondary issues. Any wonder that massive war games are in motion in Venezuela. If you plan on implementing martial law, you need soldiers on the ground.

http://www.bloomberg.com/news/articles/2016-05-21/venezuela-holds-war-ga...

Stay tuned!

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No Coincidences Anymore

Ukraine is in a loosing position. My eyes popped out in my local bookshop in Dublin - " 2017  War in Europe" by none other than Sir Richard Sherreff, former deputy Commander of Supreme Allied Headquarters Europe. A fictional work based on Putin grabbing the Baltic States!  Sir Richard says he wants to alert the world to the danger. And by some miracle of instant interest in european defence matters - our tame national radio station RTE decides to interview the good general on prime time. Ahem, the new director general is former BBC!  And we're supposed to be neutral.  It just confirms all the voices saying the US is up to something seriously no good in Central Europe. 

Putin is a bad, bad, man and good old Uncle Sam is coming to help us lazy people...again, and at great expense for which do the decent thing and put our hands in our pockets for some expensive US hardware.

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Greenspan, and the rest of

Greenspan, and the rest of the Central Banking Elite......LIE.

davefairtex wrote:

Prior to his Come to Jesus Moment during the 2008 crash, Greenspan sounded certain that the banks would never engage in crazy ponzi lending or in widespread fraud because in his model of how the world worked, companies (and especially banks) engage in rationally beneficial activity to protect their shareholders, their reputation, and their long term viability as going concerns.  The self-correcting free market fixes all.

In congressional testimony on October 23, 2008, Greenspan finally conceded error on regulation. The New York Times wrote, "a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending...Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken"

Ayn Rand calls this philosophy "self-regulation."  It appears that Greenspan used to share this philosophy.

I agree that Rand would not have supported Greenspan's constant interventions.  My point was on the concept of self-regulation in an idealized view of capitalism, and what happened when that met the widespread banking frauds that took place during the housing bubble - well documented by our friend Bill Black.

These guys print our money.  I think they need actual regulation, not "self-regulation."

To me, its not an issue if we are just talking about light fiction.  Its more of a deal if your banking regulator follows its precepts to the point that the banks are allowed to do just about anything because of the belief that the free market will fix all.

And who knows, maybe the free market would have fixed all.  Depositors would have been wiped out, banks all would have gone down, and we'd be deep in a massively deflationary depression.  I suppose that would be a fix of sorts.

And that was my only point - apologies if it was made unclearly.

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Human Nature

Is the Common Flaw of all "ism's".  

Mark Cochrane wrote:

All of the -isms work great, in theory. If everything worked as designed they'd function admirably for much longer than they typically do before running into some other limit but they all fail long before then for the simple reason that they are all built with complete disregard for human nature. Every system tends to its own flavor of corruption until it collapses in upon itself and is reborn in another form that again eschews corruption and values honesty and integrity, for a time.

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Government Corruption Flavours

We are concerned primarily with what the guess speaker has to say about "bugging-out" and his experiences in the former colonies in South America. Opps! (Did someone bring up colonialism?  Put him on "the list").

As such the guest is an entrepreneur with a business model and not particularly credible as an interpreter of Latin American political history. As we here understand one must be careful in seeing the world through our own interests ie. confirmation bias. So when he presents leftist governments as corrupt by nature (or is that my ears) we must then wonder about reports coming out of Brazilia (with the fascist concept in mind): 

"BRAZIL TODAY AWOKE to stunning news of secret, genuinely shocking conversations involving a key minister in Brazil’s newly installed government, which shine a bright light on the actual motives and participants driving the impeachment of the country’s democratically elected president, Dilma Rousseff. The transcripts were published by the country’s largest newspaper, Folha de São Paulo, and reveal secret conversations that took place in March, just weeks before the impeachment vote in the lower house was held. They show explicit plotting between the new planning minister (then-senator), Romero Jucá, and former oil executive Sergio Machado — both of whom are formal targets of the “Car Wash” corruption investigation — as they agree that removing Dilma is the only means for ending the corruption investigation. The conversations also include discussions of the important role played in Dilma’s removal by the most powerful national institutions, including — most importantly — Brazil’s military leaders."

"...and the beat goes on..." until 2030 or so.

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While we're at it

Here is an interesting analysis of what happens to American presidents who push back on "whatever":

The Fates of American Presidents Who Challenged the Deep State (1963-1980) アメリカの深層国家に抗した大統領の運命(1963-1980)
Peter Dale Scott

October 20, 2014
Volume 12 | Issue 43 | Number 4
In the last decade it has become more and more obvious that we have in America today what the journalists Dana Priest and William Arkin have called

two governments: the one its citizens were familiar with, operated more or less in the open: the other a parallel top secret government whose parts had mushroomed in less than a decade into a gigantic, sprawling universe of its own, visible to only a carefully vetted cadre—and its entirety . . . visible only to God.1

http://apjjf.org/2014/12/43/Peter-Dale-Scott/4206.html

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Here's an interesting alternative to the right/left divide

Mark Cochrane hit the nail on the head about all of the "isms" out there in my opinion.  However, one thing that often gets left out of any discussion about Rand is how you can live in a society that elevates the individual over all that must subsist without the massive energy subsidy of fossil fuels that allows each and every one of us to have the equivalent of hundreds of slaves working for us 24/7/365.  So far as I see it, her "philosophy" is one that could only come about in and industrialized society, and when the subsidy undergirding that society melts away, it will resemble nothing more than mere flotsam and jetsam along the beach.  But, I digress....

Dmitry Orlov's press is publishing a book that presents an alternative to all of this left vs. right rigamarole.  It looks at Dunbar's number, and how to develop structures to better leverage that dynamic in modern life.  I haven't read it yet (outside of the excerpts on Dmitry's site), but it looks like something to consider.

http://www.amazon.com/150-Strong-A-Pathway-Different-Future/dp/1523676523

https://en.wikipedia.org/wiki/Dunbar's_number

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Goals

My goal was to get away from the oil patch completely by the time I was 45.  Its looking more like 47 now.  Heavy industry is the most ecologically harmful thing we've done to our little world, and I'm sad to be a part of it.  But, changing my life isn't an overnight thing - responsibilities, and obligations take time to fulfill. And my lifestyle hasn't been a model of environmental sensitivity.  Old habits die hard, and sometimes it's tough to pop ones head out of the sphincter of consumerism.  

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peakoilwelder???

I enjoyed your metaphor....."sometimes its tough to pop ones head out of the sphincter of consumerism".

i will be certain to use it. OK?

robie, keeping in the quiver of human experience, the draft animal.

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Hey folks, hope you liked the

Hey folks, hope you liked the podcast. If anyone has any questions please let me know. Thanks!

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metaphor

Feel free to use the metaphor. I'm glad it resonated!

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My brother had a theory abt govt

Dave,

My brother had a theory about why the US government functioned so well for so long. It was this:

Traditionally, we have seen certain structures come to power and rule a nation ON THEIR OWN. That is, the structure seized power from all others, and held a country in dictatorship.

His theory was that those structures are capable of warring for power, and therefore must be accomodated in a legitimate way, or they will overthrow the government and seize control in an illegitimate way.

Those powers, historically, were (excluding one): the power of the charismatic leader; the power of the gentry (the princes of a nation). The power of respected, wise counsel; the power of the masses.

There is one power that I didn't mention, that overthrew many governments. Think of the Hansa league.

It is the power of money.

For this reason, my brother contends that our government, in recognizing almost all the traditional powers, did pretty well, and made itself fairly stable. But in missing one, money, it allowed ALL the others to be overthrown by that one.

For that reason, he has long suggested a third house of Congress, and one that should REPLACE the IRS.
In that house of Congress, the members are all citizens, who are named for a three year term to a seat that is auctioned off to the highest bidder. That house has the power to block any new law. It has complete power of veto. Now, once a citizen is named by the winner of the auction (foreign or natural or corporate... anyone can win aselong as they pay), then as long as the owner of that seat affirms the citizen, the citizen may vote in the third house. The winner cannot tell that citizen how to vote, and cannot change thir holder. They CAN vacate the seat, and it will then remain vacant until it is auctioned off three years later, one auction per week, 156 seats in the third house.

Since money likes investment and investment requires stability, It is to be expected that with the advent of the third house would make the government a LOT of money from the wealthiest investors. At the same time, it would curtail the power of Congress, and curtail the money spent on lobbyists.

Just something to chew on...e

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Thank you for the informative podcast FerFAL, Chris...

I and others have been exploring options in Central and South America with an eye toward small scale agriculture opportunities and reprieve from Canadian winter. I don't mind the cold so much as the scarcity of fresh local produce.

Any input re Panama/Colombia (potential spillover from Venezuela?) or Peru/Chile would be appreciated.

Thanks very much,

Brad

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definitions

Michael_Rudmin wrote:
My definition of any -ism is rule by that entity. Thus, I tend to define capitalism as rule by capital. Capital, in turn, I would tend to define as invested assets/money. As such, I would think that central banks are absolutely necessary for the binding of all governance to capital. But I would contend that both central banks and capitalism are contrary to free markets. Maybe you disagree. if so, do you disagree with the definitions? Or the reasoned statement? I think that if we are to disagree in a useful way, it would be ideal to first clarify definitions.

yes, i would disagree with 3 of the above statements:

1) that capitalism is "rule" by capital. capitalism doesn't rule anyone, it has no dogma, it makes no demands upon you. let's not confuse capitalism with cronyism. unless you consider offering someone a financial incentive which they can voluntarily accept or reject, as "rule".

2) and, disagree with the claim that capitalism is contrary to the free market.

in fact, capitalism is synonymous with the free market.

capitalism gives space to engage in free and voluntary trade, with minimal or ideally no interference from those that employ force or coercion (i.e., government).

3) and disagree "that central banks are absolutely necessary for the binding of all governance to capital."  not sure what your basis for saying this is, it makes no sense to me. central banks are absolutely unnecessary in any way, and are in fact downright destructive with their misguided policies. they are a plague upon humanity, and their main function is to oppress and enslave, to siphon wealth away from their victims (citizens).

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thanks

FerFAL wrote:

Hey folks, hope you liked the podcast. If anyone has any questions please let me know. Thanks!

thanks ferfal!

the content was good, though the audio was a bid hard to hear at times.

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Transcript

I didn't have time to listen to this, but I read the whole thing.

Thanks a ton for the transcript, I know it's a lot of work.

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The "free market" never has, and never will exist

"in fact, capitalism is synonymous with the free market."

Sorry, but this statement bears absolutely no resemblance whatsoever to historical reality.  It is not an accident that in the areas where capitalism took hold, it was always a project of the STATE.  That is because the transformation that it wreaked could not be achieved without the interventionist power of the state behind it.  The market is never "free," it is rather a reorganization of rules and sources of coercion from prior forms.  For instance, in England, the rise of capitalist enterprise and joint stock companies was accompanied by the enclosure acts, poor laws, and indentured servitude -- not to mention a broader mercantilist policy that was designed to place colonial subjects in an economic straitjacket.

Of course, if you can provide an example of capitalism taking hold in a society without massive state intervention, I'm willing to listen and consider.  But until I see a viable example of that (and to this day I never have), I'll hold to the view that the free market is a central myth of capitalism, meant to legitimize an ideology rather than provide a realistic working explanation of the world in which we live.

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Re: The "free market" never has existed

Ever been to Morroco?

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RE: in fact, capitalism is synonymous with the free market.

Christopher H wrote:

"in fact, capitalism is synonymous with the free market."

Sorry, but this statement bears absolutely no resemblance whatsoever to historical reality. 

if you type the word "capitalism" into google, "free market" comes up as a synonym.

to say that capitalism is synonymous with free market is a simple statement of fact.

Christopher H wrote:

It is not an accident that in the areas where capitalism took hold, it was always a project of the STATE. 

no, the state is a hindrance to true capitalism and the free market.

the only thing required for capitalism is for someone to choose to employ their capital in a productive enterprise.

i employ capital in a productive enterprise. i reject the state and avoid it like the plague.

you seem to be talking about "historical reality" or grand notions of society-wide philosophies. that's all well and good, but that has nothing to do with the free market. the free market is much more simple and direct.

Christopher H wrote:

That is because the transformation that it wreaked could not be achieved without the interventionist power of the state behind it.  The market is never "free," it is rather a reorganization of rules and sources of coercion from prior forms.  For instance, in England, the rise of capitalist enterprise and joint stock companies was accompanied by the enclosure acts, poor laws, and indentured servitude -- not to mention a broader mercantilist policy that was designed to place colonial subjects in an economic straitjacket.

Of course, if you can provide an example of capitalism taking hold in a society without massive state intervention, I'm willing to listen and consider.  But until I see a viable example of that (and to this day I never have), I'll hold to the view that the free market is a central myth of capitalism, meant to legitimize an ideology rather than provide a realistic working explanation of the world in which we live.

examples of capitalism taking hold in society without state intervention are everywhere, you would have to avoid looking to not see it.

when the carpenter invests his capital in a new saw, when the baker invests his capital in a new oven, when the farmer invests his capital in a new tractor, that is capitalism. none of these require state intervention.

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Christopher H wrote:It is

Christopher H wrote:

It is not an accident that in the areas where capitalism took hold, it was always a project of the STATE.  That is because the transformation that it wreaked could not be achieved without the interventionist power of the state behind it.  The market is never "free," it is rather a reorganization of rules and sources of coercion from prior forms.  For instance, in England, the rise of capitalist enterprise and joint stock companies was accompanied by the enclosure acts, poor laws, and indentured servitude -- not to mention a broader mercantilist policy that was designed to place colonial subjects in an economic straitjacket.

 

This statement is oxymoronic. Capitalism and free markets by definition are devoid of State interference. That's why it's called a free market. If it is "a project of the State", it is by definition something other than a capitalist or free market condition. The capitalistic nature of an economy diminishes by the degree of State intervention. For instance, in England, "capitalist" enterprise cannot be accurately called capitalist when accompanied by enclosure acts, poor laws, indentured servitude, and mercantilist policies if imposed by government mandate (read coercion). 

It's reasonably argued that a pure capitalist economic system has never existed. But if that's the case, it is then unreasonable to then argue that it is somehow discredited.

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KugsCheese
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Capitalism/Free Market

Capitalism is private ownership of means of production with rights of trade being market based.   Free Market is market in which there are no regulations except the market itself.   Capitalism can exist in a free market or not.   Over the history of humans there has never been a true free market with capitalism because psychos always rise to the top to distort.

P.S. Capitalism developed in England as response the Mercantilism (defined as companies using government to protect their markets which result in heavy regulation).

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KugsCheese wrote:Capitalism

KugsCheese wrote:

Capitalism is private ownership of means of production with rights of trade being market based.   Free Market is market in which there are no regulations except the market itself.   Capitalism can exist in a free market or not.   Over the history of humans there has never been a true free market with capitalism because psychos always rise to the top to distort.

P.S. Capitalism developed in England as response the Mercantilism (defined as companies using government to protect their markets which result in heavy regulation).

I think it's important to define terms before discussion so everyone is on the same page. Thanks for defining them. I think your definition of capitalism is simple but accurate. The free market is a bit tougher to define. One could say that a free market operates without any regulatory interference. But there is more to it. There has to be perfect competition so that no single participant is big enough to impact the market towards monopoly. That requires regulation which is where the paradox comes in because that violates the definition of a free market being devoid of regulation. That's why I've  always said that free markets don't and can't exist in the real world. 

Furthermore, I sound like a broken record because I am constantly asking for "production" and "productive" activities to be defined but they never are. Since the concept of "production" is at the heart of all of these economic concepts, I don't think any meaningful discussion can be undertaken any further. Which is why the debates spiral on ad infinitum because people aren't relating the concepts down to real world processes, they are all built around assumptions about what everyone thinks production is. 

Generally government activity is considered unproductive. But I have seen them pave roads and build curbs, sidewalks, enact laws to protect the environment and people. Surely these are "productive" activities, no? Similarly I can act as a private individual and go dump all of my garbage at the side of the road at the downtown square. I have "produce" a bunch if garbage. Is it now a productive activity?

i can walk through the forest and pick blueberries and eat them. I am consuming them. But the instant I sell some of those berries in a market, suddenly I switch from a consumer to become a producer. And this us the basis if our entire economic system, the supply and demand chart? Makes no sense.

The whole concept seems really silly to me. And what the distinction is between other activities that are not productive, who knows, it's never explained. All based around gut feeling touchy feely personal interpretations. 

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people, not government

Mark_BC wrote:

I think it's important to define terms before discussion so everyone is on the same page. Thanks for defining them. I think your definition of capitalism is simple but accurate. The free market is a bit tougher to define. One could say that a free market operates without any regulatory interference. But there is more to it. There has to be perfect competition so that no single participant is big enough to impact the market towards monopoly.

the free market is a market in which all participants engage in voluntarily.

anything other than that, and it's not a free market.

for a slightly longer discussion on what the free market is, here is an article by murray rothbard:

https://mises.org/library/what-free-market

Mark_BC wrote:

Generally government activity is considered unproductive. But I have seen them pave roads and build curbs, sidewalks, enact laws to protect the environment and people. Surely these are "productive" activities, no?

you say that you have seen "them" pave roads, but who is them? think back to that moment when you saw the road being paved, whom did you see paving it? do you believe you saw a government doing it? did it have 2 arms, 2 legs, a hardhat, a pair of boots, and an orange reflective vest? well, i would hazard a guess that what you saw was actually a human being, or group of human beings, not a government.

people produce things.

governments do not.

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Ideology or historical record?

if you type the word "capitalism" into google, "free market" comes up as a synonym.

to say that capitalism is synonymous with free market is a simple statement of fact.

Referring to Google supporting "capitalism" and "free market" as synonyms to prove your point is not relying on a "fact," at least not an objective one.  You're referring to a subjective interpretation here, albeit one that is accepted by a great many people throughout the industrialized world.  By the logic presented here, phrenology was a fact in the 19th century because it was widely accepted by many people -- but has since been shown to be pure fiction.  Since "facts" are generally immutable, then we see that our definitions of terms and beliefs often cloud our perceptions.

no, the state is a hindrance to true capitalism and the free market.

the only thing required for capitalism is for someone to choose to employ their capital in a productive enterprise.

There are many other "invisible" structures that are required for capitalism -- such as a legal code, financial currency, police forces, etc.  Ever since the advent of civilization over 5000 years ago, all of the above have been the domain of the state.  When capitalism was taking off in England during the period of 1450-1750, one of the principle complaints by burgeoning capitalists was that the people could not be compelled to work for wages because all they cared about was meeting their basic needs off the land (when it was still held in commonwealth) and then relaxing.  The cure for this problem wasn't anything like offering higher wages to better entice laborers (partly because they just weren't all that interested in money), but rather to make their lives more miserable and impoverished in order to compel them to labor for wages.  This is where the Enclosure Acts, Poor Laws and Indentured Servitude come into the picture.

Things were not much different in the states prior to the Civil War.  The yeoman ideal of early America was someone having access to land to meet their basic needs.  This ideal held on much more in the antebellum South than the North -- southern independent farmers were often described as "shiftless," and they often banded together to resist "improvements" such as mills built on creeks or rivers because they recognized them as the beachhead of an industrial model (which was wrapped up in the capitalism of its day) which was a direct threat to their way of life.  In fact, this is what was meant by many of the poor whites who fought for the Confederacy during the Civil War when they said they were "fighting for their rights."  They saw their rights as being wrapped up in the old common rights that were still acknowledged throughout most of that region.  This, of course, was summarily crushed by the North's victory in the Civil War and subsequent reconstruction that turned cash-poor but independent white yeoman farmers into "poor white trash".

i employ capital in a productive enterprise. i reject the state and avoid it like the plague.

you seem to be talking about "historical reality" or grand notions of society-wide philosophies. that's all well and good, but that has nothing to do with the free market. the free market is much more simple and direct.

When I mention "historical reality," I'm referring to how things actually went down in the past.  It's not about philosophy or grand notion of society.  The historical facts that have been well-established (I cited a few examples above) are that, on the whole, people have not enthusiastically embraced capitalism -- rather it has required the threat or use of violence on behalf of the state to coerce people to engage in it, at least to a certain inflection point after which it becomes inevitable.  The tradeoff for the vast majority of people has been a certain degree of comfort in exchange for a good bit of freedom of their time.  For all the disparagement that is hurled at the Middle Ages, for instance, it took a woodcutter only a fraction of the year to earn enough to support his family for the remainder of the year.  Contrast this with workers in the "Satanic mills" of 18th century England toiling for 16-18 hours a day for near-starvation wages.  Of course, there were mill owners who became fantastically wealthy by extracting the profit from their workers' labor in this arrangement, but that could not have occurred without massive state intervention and coercion on behalf of the owners.

examples of capitalism taking hold in society without state intervention are everywhere, you would have to avoid looking to not see it.

when the carpenter invests his capital in a new saw, when the baker invests his capital in a new oven, when the farmer invests his capital in a new tractor, that is capitalism. none of these require state intervention.

The examples you provided here are of extremely early-stage petit-bourgeois capitalism.  I acknowledge that they are certainly viable examples, but the current reality is that they are dwarfed by (and often snuffed out by) the later-stage oligopoly/crony capitalism that has come to dominate much of our system.  Additionally, the early-stage petit-bourgeois capitalism is what eventually, inevitably leads to oligopoly/crony capitalism that we have today.  Lastly, while the individual acts that you cited do not require state intervention, the establishment of the conditions that make such actions possible (or inevitable) most certainly do.  In the simplest sense, if you're talking about capital=money, then the actor is reliant upon money backed by the state and the legal code that enables the procurement (and accumulation) of resources and capital required to bring those things into being.

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Christopher H
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Origins of Capitalism in England

KugsCheese wrote:

P.S. Capitalism developed in England as response the Mercantilism (defined as companies using government to protect their markets which result in heavy regulation).

Are you speaking here of the early capitalism that developed in concert with mercantilist colonial policy?  Or are you speaking of the advocates of economic liberalism of the 18th and 19th centuries?  Because if it's the former, then capitalism developed very much in concert with mercantilism (which secured below-cost raw materials and captive markets for finished products).  If it's the latter, then it's important to note (as Michael Hudson has pointed out repeatedly) that much of the economic thought of that period was concerned with getting rid of rentiers who extracted wealth simply for having legally-sanctioned control over the means of production.

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