Saturday, January 14, 2012

January 14 2012: Housing and Oil: Dark Inventory Rules

National Photo Co. Ingenious cheat February 13, 1922
"Washington, D.C., Unidentified woman demonstrating an ingenious Prohibition-era fashion accessory, the cane-flask"

Ilargi: I'd like to try a little intellectual exercise. There were two pieces in my mailbox this week that concerned posts at Naked Capitalism. Though their topics have at first glance little to do with one another, there is a term that is pivotal to both. Inventory.

When it comes to real estate, it's popularly called "shadow inventory". With regards to commodities, the term "dark inventory" has been coined. While there are plenty of differences in the way the terms are applied, I'm for now intrigued more by - potential - similarities between them.

Not that I have the illusion that I can treat this in a way that could even border on comprehensive, don't get me wrong. I want to lift only part of the veil that hides from view what underlies how and why the financial system that rules our economies is going to the dogs: market manipulation.

In particular, I'm interested in how both shadow and dark inventory phenomena pervert their respective markets, as well as the entire free market system as a whole, where everyone is supposed to have "full access to information". Something both dark and shadow inventories make impossible. Something the 99% general public are not aware of. At all.

And it's not like they're alone. Try your average pension fund manager, banker, politician. Not a clue.

Let' start with a trip back to June 2011, when Izabella Kaminska for FT Alphaville perhaps first used the term "dark inventory":

The power of the dark inventory
Dark inventory: Inventory that’s out there, but which no-one else can see.

It comes in many shapes and forms. Equity inventory, which has been internalised by banks and parked off-balance sheet (appropriately via private dark pools). Copper inventory, which has been stashed off-market and encumbered via finance deals. It’s also yet-to-be-produced commodities which have been pre-sold, but which nobody else knows have been encumbered.

But if you have the power to see or command the darkside inventory, you have the power to stay ahead of the game. Especially if you can move quickly. Indeed, almost every befuddling market move of late can, if you think about it, be explained by the concept of dark inventory. For example, consider the impact of dark inventory accumulation (the possible consequence of cheap liquidity).

In oversupplied markets this can mislead fellow investors. They see buying interest coming from somewhere, though they can’t quite understand from where. The fundamentals don’t explain it, but prices are rising regardless, led usually by the cheapest securities, and in tandem. With no ability to see the dark inventory, the market finally falls for the trend. They believe the demand is real.

If you are the accumulator of dark inventory, or privy to the flow, you are able to foresee the market rallies and position yourself accordingly. This is a profitable time.

Of course, in continually oversupplied markets you will begin to suffer the costs of hedging inventory, if you are bothering to hedge, (since forward curves may eventually flatten out) as well as the burden of balance sheet expansion. Eventually it will make sense to park that inventory off-balance sheet.

Thanks to matching, aggregation and netting you can use the inventory (in a sliced up, mixed up manner) to back equitised structured products, exchange traded notes, exchange traded products as well as synthetic funds. Lots of launches follow. This especially makes sense if by then everyone is a believer in the rally, a fact which  has translated into genuine buying interest which can now be captured to back your dark inventory.

The game is afoot.

Ilargi: I certainly recommend reading Izabella's entire piece (like all other pieces I quote from). But even from the quote above alone, you can, even if you're not familiar with the topic, still get a genuinely queasy feeling. We're talking market manipulation here, a way to influence investment decisions without anyone ever knowing they’re being manipulated. And fully legal.

Chris Cook, former compliance and market supervision director of the International Petroleum Exchange, writes this about "dark oil inventory" at Naked Capitalism:

Naked Oil
All is not as it appears in the global oil markets, which in my view have become entirely dysfunctional and no longer fit for its purpose. I believe that the market price is about to collapse as it did in 2008 and that this will mark the end of an era in which the market has been run by and on behalf of trading and financial intermediaries.

In this post I forecast the imminent death of the crude oil market [..]

Global Oil Pricing
The "Brent Complex" is aptly named, being an increasingly baroque collection of contracts relating to North Sea crude oil, originally based upon the Shell "Brent" quality crude oil contract which originated in the 1980s.

It now consists of physical and forward BFOE (the Brent, Forties, Oseberg and Ekofisk fields) contracts in North Sea crude oil; and the key ICE Europe BFOE futures contract which is not a deliverable contract and is purely a financial bet based upon the price in the BFOE forward market.

There is also a whole plethora of other 'over the counter’ (OTC) contracts involving not only BFOE, but also a huge transatlantic "arbitrage" market between the BFOE contract and the US West Texas Intermediate (WTI) [..]

North Sea crude oil production has been in secular decline for many years, and even though the North Sea crude oil benchmark contract was extended from the Brent quality to become BFOE, there are now only about 60 cargoes of BFOE quality crude oil (and as low as 50 when maintenance is under way), each of 600,000 barrels, delivered out of the North Sea each month, worth at current prices about $4 billion.

It is the 'Dated’ or spot price of these cargoes – as reported by the oil price reporting service Platts in the 'Platts Window’– which is the benchmark for global oil prices either directly (about 60%) or indirectly, through BFOE/WTI arbitrage for most of the rest.

[..] traders of the scale of the oil majors and sovereign oil companies do not really have to put much money at risk by their standards in order to acquire enough cargoes to move or support the global market price via the BFOE market.

[..] the evolution of the BFOE market has been a response to declining production and the fact that traders could not resist manipulating the market by buying up contracts and "squeezing" those who had sold forward oil they did not have [..] The fewer cargoes produced; the easier the underlying market is to manipulate.

[..] The Platts window is the most abused market mechanism in the world.

In the early 1990s Goldman Sachs created a new way of investing in commodities. The Goldman Sachs Commodity Index (GSCI) enabled investment in a basket of commodities – of which oil and oil products was the greatest component – and the new GSCI fund invested by buying futures contracts in the relevant commodity markets which were 'rolled over’ from month to month. The genius dash of marketing fairy dust which was sprinkled on this concept was to call investment in the fund a 'hedge against inflation’. Investors in the fund were able to offload the perceived risk of holding dollars and instead take on the risk of holding commodities.

The smartest kids on the block were not slow to realise that the GSCI – which was structurally 'long’ of commodity markets – was taking a long term position which was precisely the opposite of a commodity producer who is structurally 'short’ of commodities because they routinely sell futures contracts in order to insure themselves against a fall in the dollar price. ie commodity producers are offloading the risk of owning commodities, and taking on the risk of holding dollars.

So in 1995 a marriage was arranged.

BP and Goldman Sachs get Married

From 1995 to 2007 BP and Goldman Sachs were joined at the head, having the same chairman – the Irish former head of the World Trade Organisation, Peter Sutherland. From 1999, until he fell from grace in 2007 through revelations about his private life, BP’s CEO Lord Browne was also on the Goldman Sachs board.

The outcome of the relationship was that BP were in a position, if they were so minded, to obtain interest-free funding via Goldman Sachs, from GSCI investors through the simple expedient of a sale and repurchase agreement: ie BP could sell title to oil with an agreement to buy back the oil later at an agreed price.

The outcome would be a financial 'lease’ of oil by BP to GSCI investors and the monetisation of part of BP’s oil inventory. Such agreements in relation to bilateral physical oil transactions are typically concluded privately, and are invisible to the organised markets.

Due to the invisibility of the change of ownership of inventory, 'information asymmetry’ is created where some market participants are in possession of key market information which others do not have. This ownership by investors of inventory in the custody of a producer has been termed 'Dark Inventory’

I must make quite clear at this point that only BP and Goldman Sachs know whether they actually did create Dark Inventory by leasing oil in this way, and readers must make up their own minds on that.

Planet Hype

The 'inflation hedging’ meme gradually gained traction and a new breed of Exchange Traded Funds (ETFs) and structured investment products were created to invest in commodities. In 2005 Shell entered quite transparently into a relationship with ETF Securities which enabled them to cut out as middlemen both investment banks and the futures market casinos, and with them the substantial rent both collect.

Other investment banks also started to offer similar products and a bandwagon began to roll. From 2005 to 2008 we therefore saw an increasing flood of dollars into the oil market, and this was accompanied by the most shameless, and often completely misleading hype, and led to a bubble in the price.

There was (and still is) no piece of news which cannot be interpreted as a reason to buy crude oil. The classic case was US environmental restrictions on oil products, which led to restricted supply, and to price increases in oil products. Now, anyone would think that reduced refinery throughput will reduce the demand for crude oil and should logically lead to a fall in crude oil prices.

But on Planet Hype faulty economic logic – the view that higher product prices are necessarily associated with higher crude oil prices – was instead used as justification for the higher crude oil prices which resulted from the financial buying of crude oil attracted by the hype.

You couldn’t make it up: but unfortunately, they could, and they did.

More worrying than mere hype was that a very significant amount of oil inventory had actually changed hands from producers to investors. Only those directly involved were aware that below the visible part of the oil market iceberg lurked massive unseen 'Dark Inventory’.

Ilargi: In a nutshell: Cook argues that QE measures from the Fed and BOE have caused large investors to flee from dollars into commodities.

This in turn has led to a price bubble through contango (forward prices are higher than spot prices), for which they are all positioned, but this will down the line inevitably lead to the opposite - backwardation -, and the bubble must burst. Severely, says Cook: to as low as $45 a barrel. Given how conservative Cook is in the numbers he uses, even that may be a high estimate.

In yet another article at Naked Capitalism, Irish journalist Philip Pilkington summarizes Cook’s point so well it seems pointless to try and improve on it:

Fear and Loathing in the Financial Markets – What Happens to the Economy When the Oil Bubble Bursts?
Looking at recent market trends Cook raises concerns that we could be seeing the beginnings of the end of a bubble that began to inflate in the oil market after the crash of the previous bubble in 2008. This bubble, Cook argues, was inflated due to inflation fears after the QE programs undertaken by the Federal Reserve and the Bank of England. With the markets awash with dollar and sterling liquidity, banks and investors piled into commodities to escape what they saw to be a looming inflation.

In recent months Cook focuses on the move of the market from a position of 'contango’ to a position of 'backwardation’ – which he sees as evidence of a bubble deflating. While some investors read in this that the short-run demand for oil has risen, Cook points out that with the global recession grinding along there is no fundamental reason that this should be occurring. Instead Cook sees in this move a sign that the long-run demand for oil is falling as the current bubble begins to burst.

Cook thinks that the price collapse is going to be very painful – falling possibly as low as $45-$55 a barrel. In response to this OPEC will try to ramp up prices by cutting production and, most importantly for our purposes, a financial crisis of sorts will occur as inflation hedged investors see their net worth cut to pieces.

If this is as Cook says – if this is a bubble of fear and it bursts – the financial sector is going to see a huge wiping out of the profits they have been reaping from it. We have no way of knowing how much profitability is tied up in these dodgy markets – but my thinking is: a lot.

Ilargi: So far, so good. We must realize, however, that while lower oil prices seem very beneficial to many sectors of our economies, a wiping out of everyone who's betting the wrong side of this wager is not.

And if Cook is right, a large segment of the financial world, that is: those who are not privy to the magnitude of the dark inventory, have been, and are being, manipulated to be on that wrong side. And without a new bubble to flee into to boot. Indeed, there's a real risk the entire global oil market will cease to - properly - function.

Come to think of it, again, if Cook is right, it probably already has. Since to the extent that it still seems to function, it does so only to service the interests of those that control the dark inventory, and who squeeze those investors not "in the know". Oil prices are thus set, in essence, by derivative contracts, not by supply and demand, which is a mere illusion. Thing is, who would know?

Needless to say, there's another party that stands to lose big if oil prices collapse: producers. The Arab Spring may well return more powerful than ever.

Still, while I think it's important for everyone to see and understand that, and how, manipulation sets market prices for commodities (and stocks, but that's another story) on a daily basis, and not some free market principle, I started out trying to figure out what connects dark oil inventory and shadow housing inventory.

Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, has - extensively- looked at the latter:

9.8 Million Shadow Inventory Says Housing Market is a Long Way From the Bottom
"Shadow inventory," the number of homes that are either in foreclosure or are likely to end up in foreclosure, creates substantial but hidden pressure on housing prices and potential losses to banks and investors.

This is a critical figure for policymakers and financial services industry executives, since if the number is manageable, that means waiting for the market to digest the overhang might not be such a terrible option. But if shadow inventory is large, housing prices have a good bit further to go before they hit bottom, which has dire consequences for communities, homeowners, and the broader economy.

Yet estimates of shadow inventory, and even the definition of what constitutes shadow inventory property, vary widely. For example, the Wall Street Journal published a Nov. 11, 2011 article, "How Many Homes Are In Trouble?" where values varied from 1.6 million (CoreLogic), [..] to between 8.2 million and 10.3 million (Laurie Goodman, Amherst Securities). [..]

.... things are actually worse than any of the prevailing estimates indicate, although Goodman is very close to the mark. Current loss experience suggests that this figure is staggering, easily in the $1 trillion range.

Why aren’t those losses more visible yet? Well, evidence suggests that servicers are stalling the foreclosure process, not taking title to and selling these houses. For the lenders, such delay likely allows them avoid the write-offs of both the negative equity as well as the worthless second liens. More generally, it keeps the trillion dollar losses hidden.

Lenders aren’t acknowledging their stall tactics, however. When people notice how slowly foreclosures are progressing from initial steps to resale, lenders point at their foreclosure fraud related dysfunction. Lenders conveniently don’t mention that such dysfunction was self-induced, instead blaming borrowers and courts. [..]

.... there are 9,800,000 houses in shadow inventory.

If these loans were taken out for the median value of a state-by-state home price, using data from the FHFA, for Q2, 2006, there is $2.3 trillion of home values at near the market peak. The mortgage balances are going to be lower than that, but given how widespread equity extraction came to be (and it is probably that the most levered homes are hitting the wall), it is not unreasonable to assume LTV ratios relative to peak values of 80%.

Loss severities on prime mortgages are running at roughly 50% and are 70% on subprime (note that with more borrowers fighting foreclosures, and given that loss severities on a contested foreclosure can come in at 200% or even higher, so using these assumption is certain to understate actual results). $2.3 trillion x 80% x 50% = $900 billion.

These losses will be distributed across the GSEs (meaning taxpayers), banks that have second liens (with the biggest losers being Bank of America, Citibank, JP Morgan, and Wells Fargo), investors in private label (non GSE) mortgage securities, and other US and foreign banks.

Balanced against this liability is some amount figure for the underlying asset, the house. Given that servicer advances, foreclosure costs and servicer fees come close to and even exceed the value of the property, comparatively little of this $2.3 trillion will be recovered in property liquidations. [..]

In support of the conclusion that banks cannot afford to recognize this shadow liability is the sharp decrease of foreclosure filings in 2011 and the seeming unwillingness of banks to move foreclosures through the system.

They file foreclosures, then let them linger, not taking homes even when every possible borrower defense is exhausted. Some of this slowdown may be due to more scrutiny of foreclosure documentation, particularly in judicial foreclosure states, but there is clearly more at work. [..]

There is other anecdotal evidence suggesting banks do not want these houses or, more accurately, do not want the write-offs that actually taking the houses would force:

• Foreclosure defense lawyers have clients who have not paid their mortgage in years, but face neither a foreclosure nor even a negative mark on their credit report. I recently received a call from a man who said he had not paid his $1.6 million mortgage in two years but his servicer has not foreclosed, and he faces no derogatory information on his credit report; he was frustrated because he is retired and just wants to move to a cottage.

This phenomenon, which apparently isn’t rare, might explain why shadow inventory reports that rely on credit reports to extrapolate shadow inventory are often dramatically lower than these calculations. [..]

• It is common for foreclosure mill lawyers to argue for delays in selling a home when nobody is representing a borrower. Judges, who want to clear their dockets, will rail at bank lawyers about the age of the case even while bank lawyers argue for yet another delay, while the other table — where the borrower, the defendant, is supposed to sit — is empty. [..]

Yes, servicers continue to prey upon ordinary Americans. But evidence suggests that they’re also preying on investors. Individual American families do not deserve to suffer these behaviors, that increase the losses while delaying the uncertainty, and neither do pension funds, European villages, municipalities, or other unsuspecting entities who actually funded these loans.

Few people are going to complain when they’re not paying their mortgage that there is no mark on their credit-report nor a foreclosure; a few of the more perplexed ones — or those that want to bring a bad mortgage to resolution — may speak out, but most remain silent.

Similarly, many investors, and surely the banks themselves, know about these figures. But as both sides spin their wheels, the problem continues to spiral out of control.

Ilargi: I think perhaps the best way to make the connection between dark inventory in commodities and shadow inventory in real estate is to look at, no surprise, what pays for it. And that leads me to what I have long since coined "zombie money".

Zombie money is the money that seems, but only seems, to exist because of unrecognized losses. QE measures, for instance, basically serve to keep those losses unrecognized. That’s what they're for. To make markets, and ordinary people, believe that banks are still solvent when in reality they're not.

Funny thing is, even with all the accounting tricks that hide those losses, the entire system is still, and already, on the verge of collapse. And when it goes, the loser will be you, not the gamblers that lost fair and square. If dark inventory shows you anything, it’s that fair and square is a thing of some mythical fairy tale past. The reality for you and me is, and this is not the first time I put it like this: heads you lose, tails you die.

Zombie money pays for dark oil inventory; this is for instance why tar sands can look profitable, even as their EROEI is very low. If there's sufficient difference between spot prices and forward prices for natural gas and oil, it makes sense to turn the former into the latter (which is all that tar sands are about). Nothing to do with energy efficiency, everything to do with market manipulation. The same goes for shale gas, and for oil shale. It will all soon give a whole new meaning to the term "unsustainable". Promise.

Zombie money also allows, and causes, lenders, aided and abetted by governments all over, who want no part of a crashing real estate market, to keep millions of homes off the market, which in turn allows them to keep billions, if not trillions of dollars, in losses off their books. This results in hundreds of millions of people, throughout the western world, who think their homes are worth much more than they are. And then they wake up.

Dark inventory and shadow inventory keep us all from having a realistic picture of what is actually out there, what anything at all is worth. Prices are not set in any sort of "free" market; they are set in "shadow markets", "dark markets", in which - derivative - financial instruments rule, not the actual assets they are based on. Until they don't.

Today’s prices are set by bets on expectations of tomorrow’s prices, and these expectations in turn are manipulated by parties that have a vested interest in making investors - and the general public - think a certain expectation is realistic; all it takes is to make that expectation sufficiently opaque, to make sure investors have access to far less information than the parties that deal and/or hold the derivative instruments.

That's all it takes to create, out of thin air, a whole new generation of suckers and greater fools.

This creates a tremendous cognitive dissonance, a picture of the world that is entirely delusional. And that, of course, can and will not last. Even if a majority of people still wishes to think that it can. What do they know about what's going on behind the curtain? Hardly anything at all.

And then they wake up.


Nassim said...

The potentially landmark case is being orchestrated by retired British insurance broker Roger Brown, who will seek claimants through the website in early April.

''The people we are talking about are experiencing severe financial hardship through no fault of their own because they shouldn't have been given a home loan in the first place or they have been lent way too much money,'' Mr Brown told The Sunday Age. ''I think the banks have a case to answer for the irresponsible way they have been lending.''

The case is expected to be argued under provisions of the Competition & Consumer Act and the National Credit Code that prohibit unfair contract terms and reckless lending.

Maurice Blackburn principal, major projects, Ben Slade said there was a legal basis for challenging the lending practices of Australian banks that had ''unlawfully'' and ''wantonly'' put consumers in home loans they were unlikely to be able to repay.

Banks face home loan suit (Australia)

Eric said...

Here's a story: I just bought a house out of foreclosure, following the process all the way from the default through auction, repossession and all that. The house was appraised for 130K by the county, and the loan & costs at the auction were 91K, which no one bid against, so the lender won the auction and repossessed. A few months after the expiration of the redemption period, and considerable work done by the lender to clean up the place, the house was put up for sale at 90K. That was too much for me, so 2 weeks later I bought it when they dropped the price to 80K. It seems to me that the moral of this particular story to be that in this case the lender didn't care what price the house was finally sold to me, probably because they were insured against the difference. Clearly this model will not work when all that shadow inventory comes to light, and the insurers get bankrupted.

Ilargi said...


Michael Olenick in the article I quoted provides some insight into why lenders behave the way they do, something to take into account while assessing their behavior:

"Loss severities on prime mortgages are running at roughly 50% and are 70% on subprime [..]

... loss severities on a contested foreclosure can come in at 200% or even higher"

It's rock and a hard place territory for them.

Any property they actually unload, they don't care much about what they get for it. They're facing 50%-200% losses. It's limiting those losses that counts. But that's not necessarily a matter of how much they're paid for the property, it's likely more about avoiding some expensive next step in the -legal-process. Sell it at a loss now, or move into a potentially costly route with and uncertain outcome. And then go through that that for 1000s of properties.


Robert said...

Naked Oil by Chris Cook is reposted and discussed at TOD

John Day said...

For 60 years the financial game has been to pull more and more value out of the future, assuming the future would be a fatter plum, due to growth. Now the future is all mined out, with unserviceable debt as far as they eye can see, and declining oil ruling-out future growth. What I have been struggling with lately, is how to push current wealth forward into such an uncertain future, for the purpose of meeting basic human needs, in a collapse scenario.
This is a different type of investing, and it goes beyond bags of beans and crates of ammo. It seems that we must first envision and coordinate the needs of a community, since that is how we survive for decades. All "investment" advice goes along assuming society is stable. All survivalist advice seems to focus on the individual or family surviving a wave of privation, not creating another small town, for want of a better term.
The most fundamental aspects of how we really live need to be the foundation for a new model of "pay forward investing".
Got ideas?

bosuncookie said...

John Day, are you familiar with the Third Coast Workers for Cooperation in Austin? You may find some like-minded people there. One of their board members is Robert Jensen, a journalism professor and prolific writer about injustice, white privilege, the social and human costs of pornography, and—oddly enough—contraction and how we should live in the midst of that. Check it out.

Joel Caris said...

John Day,

You may be looking for a more complex answer--and you obviously weren't looking for any answer specifically from me--but it seems to me that much of future investment needs to be in skills, craftmanship, artisanship, hand tools, and knowledge about how to work with basic resources using low-tech techniques.

So many, many more people need to know how to grow food on a small scale, and particularly how to do it in their climate. Many, many more people need to know how to build with basic wooden carpentry, earthen building, straw bale, cob, etc. We are going to need many, many people who know how to build hand tools and other basic, useful goods out of salvaged materials. We'll therefore need people who know how to effectively salvage materials. We'll need metallurgists and blacksmiths. Cobblers and potters.

We're also going to have to relearn how to live in community. I think we've lost a lot of that. I imagine a lot of us will have to live with multiple people in cramped quarters, in ways we're simply not used to and may very well not particularly like--or, at least, not at first. I like John Michael Greer's point about trying to maintain and revive community organizations like the masonic lodges and granges. We'll need those local community institutions because we're going to have to more locally manage, organize and integrate ourselves. Even in rural places and small towns, much of that has been lost.

So, in other words, I think skills and abilities are a more useful investment at this point than most physical goods--except those physical goods that help you develop and practice said skills and abilities. (Land that you're going to live on seems like an applicable investment, too, of course.) My thinking is that however the future plays out, people are going to attempt to organize themselves and economic activity will continue in some form or another, likely outside of any sort of official channels. In such a world, ability is going to be key. If you have useful skills and you're able to function within a community setting, I imagine you would be far more likely to find a place. If you have a bunch of ammo and freeze dried food and little to no skill at making a living in a world without vast technological infrastructure and mounds of cheap energy and resources, I think you'll be in a much worse position.

Nassim said...

...Paradoxically, for reasons I'll touch on momentarily, the allegiance of this enforcement branch belongs to neither the Political Class whom they serve nor the Economic Class whom they "service." In time, their level of influence grows to the point in which they become a class of their own. They are the Praetorian Class.
Members of the Praetorian Class are typically recruited from the Economic Class and usually from the lower socio-economic spectrum, which offers them an opportunity for personal and professional gain that otherwise might be out of their reach. Early on in the training and indoctrination process, a strong emphasis is placed on teamwork and advancing the welfare of the team above the individual. While independent thought is never overtly discouraged, the fact is that questioning authority and failing to display complete loyalty to the team results in censure, shunning and even expulsion. Naturally, the recruit learns in short order which behavior is rewarded and responds accordingly. This forges a lifelong, unbreakable bond between the brothers-in-arms. This bond can be observed when people proudly display unit insignia and decorations decades after their departure from service.

As they serve in their martial role, members of the Praetorian Class learn to despise members of the Political Class and to view the plight of the Economic Class with detachment or even contempt.
While the Praetorian Class emerges as its own entity, with allegiance only to the members' peers, the most senior of the Praetorians are eventually invited to join the Political Class. Prior to that occurring, they are vetted for suitability, after which they become "made men."
History books are filled with examples of societies that have seen the rise of the Praetorian Class, followed by their own subsequent collapse, ranging from the Roman Empire to the Soviet Union. Of all the examples, however, none seems more instructive than the rise and fall of the Nazi Third Reich in Germany.
The Political Class leverages the full force of the Praetorian Class representing significant loss in wealth, personal freedom and, in many cases, human life. For this reason, it is critical that productive members of society take steps to protect themselves.

The Rise of the Praetorian Class

A very clear explanation of what is really going on in the USA.

John Day said...

Thanks for the suggestions. I looked at the site (Third Coast Workers for Cooperation) and read a couple of Robert Jensen essays.
There are no ideas presented, other than sketchy overviews of how we can't keep going like this, and shouldn't have done a lot of it, to begin with.
I'm seeking concrete suggestions for investing into self sustaining human communities, which will thrive by meeting human needs more effectively and more efficiently than our current milieu does.
I have seen some things working to various degrees.
People thrive with about 4 hrs/day of fairly vigorous work. That looks like how much work people naturally do in unstressed agrarian settings. They do other stuff, less physical, more social and intellectual, or crafty.
People thrive when community happens by virtue of location, working together, inhabiting a common space, sharing a common work/task/goal.
These commonalities have mostly been met in a group agriculture setting, which is what we evolved through to get here.
That being said as prologue, I still seek concrete suggestions. The 5 Mile Farm folks here in Austin are growing vegetables in a 1950s residential housing area, which is the population center of Austin. It is a focus for people seeking food, and will build community around shared food as a "CSA" (Community Supported Agriculture, in this case, not Confederate States of America).
This is a concrete step, investing forward by creating different experiences/expectations, improving health and physical well being, and by creating community, and working out how things can be done, by doing them. It is intentionally an educational project, but not formally so.
It is one of the kinds of steps, one of the kinds of investment enterprises, which I am seeking.

John Day said...

@ Joel Caris
I read carefully what you wrote, and I read your profile.
Clearly, you are on a path to develop the "pay it forward investing" as I awkwardly put it.
Thank You.
(I do hope for a world with bicycles, though.)

Joel Caris said...


No worries, I'm sure there will be many bicycles in our future. I suspect that will be one of our more important tools. We'll be much more using our own muscle power and good ways to translate that into transportation will no doubt prove popular.

bosuncookie said...

John Day,

Here's something going on in my area that may be more up your alley. It's a CSA, but a CSA with a twist. OUr nonprofit community center may become a dropoff point for this organisation that is both a virtual and actual CSA. It's called "Down East Connect."

Rear Entry said...


Punchline: Financial Markets are manipulated.

What's new under the sun?

Walk back in time 150 years to Railroad stock investors.
Same story, different year.

Railroads are the future.
Invest in Railroad stock. Now. NOW.
Railroads go bankrupt.
Railroads are (still) the future. Stocks now. Please.
Railroads go bankrupt.
Railroads are (still still) the future (we promise). Stocks now. Please please.
Railroads go bankrupt.
Automobiles are the future.
Stocks now. Pretty pretty please.
Rinse . Repeat . Where's my Bible?

Mitesh Damania said...

Do you think the FED will allow the futures market to dry up? Won't the flood the banks with even more cheap credit which will be used to prop up all the asset classes?

Rear Entry said...

Why don't we just blame the Gypsies if Oil stays above $100.

We can blame them too if Bank stocks don't rise.

skintnick said...

@John Day. Maybe not what you're looking for but my belief in the importance of complementary currencies (in bringing about a new prosperity while business-as-usual collapses) is championed by Bernard Lietaer who has co-authored a new book - Creating Wealth - which may give you some useful insights.

AdvanceHeating said...

This is the bottom line. Regardless of who you want to vote for, math will win.


Dr. Tom's link then leads to Haver Analytics. in which the UK's debt to GDP figure of over 800% seems to disagree with Stoneleigh's lectures. Her figure of the UK's ratio of 466% may have come from Global Finance...

Anyone know why the UK's debt to GDP ratio might be reported so differently, and whether the Global Finance site is definitely the place to go to find credible figures?

Ash said...

And when the manipulation that financial markets were built for no longer works, TPTB must rely on outright coercion, and while that won't work either, it's at least when you know the global financial market system is officially dead, as in deader than a Zombie dead.

Der Verkauf Ist Verboten - Germany Considers Ban On Sovereign Bond Sales

As the FT reports in its headline article today, whose gist is simple enough, that Europe is on the verge, it is the tactically-placed final paragraph that is of particular curiosity. It says the following: "Speaking on the fringes of a start-of-year retreat of her Christian Union lawmakers in the city of Kiel, Ms Merkel said she would consider calls from her party colleagues for legislation to bar institutional investors such as insurance companies from selling bonds when ratings were downgraded, or fell below investment grade." Allow us to recopy and repaste the key part: "legislation to bar institutional investors such as insurance companies from selling bonds."

--- said...

Good morning to all,

I have been looking at everything I can about the Navajo nation and possibilities there.

While no one seems to be allowed to own most of the land, at least on the western part of the nation (not even enrolled members of the tribe) they seem to have programs of leasing land to non-tribe members.

I have written to these people asking if small acreages might be available for lease:

The Navajo nation is roughly the size of the state of Iowa. Who knows, they might be amenable to someone tending sheep or goats, etc.

I suppose some are already laughing out loud, spitting their coffee all over their computers at this idea. Well, as someone born/raised in a state with seven "reservations" I would have people know that in most cases they consider themselves - and are considered to be - sovereign nations within US boundaries.

My particular experience was with a Montana tribe whose leadership were quite interested in hiring me - an artist with five plus years of upper education but no terminal degree - to teach in their college. I objected, saying I had no degree. They countered that they were a sovereign nation and did what they wanted, that they were not bound by US governance. For reasons beyond the scope of this comment, I chose not to pursue the opportunity. But many of you might like to know that you could approach the educators of a sovereign nation in an unconventional manner by US standards with your capabilities to teach, etc.

They also are eager to find people who will learn their language and assist with improving life for their people, particularly the young, according to all I have read.

This is in response to people wondering where to go, where to find "social capital," etc.

We are in Mexico and see some similarities to ejido land, where we keep livestock now. According to what I understand from many native American friends throughout my life, the reservations - which should be recognized as sovereign nations - are a lot like Mexico. In Spanish: "todo se puede en México." Meaning that once you meet people and stop dealing with the broader bureaucratic face of a sovereign native nation, things can just happen by local desire. They hate bureaucracy worse than any of you, for the most part, and "think outside the box."

Just in case anyone wants to give it some thought. There are a lot of commenters and I'm sure lurkers of great intelligence and know-how who, after patiently getting acquainted, might even be appreciated for their efforts if they stick with it.

--- said...

@ John Day

I posted the previous comment in response to your queries about what has been called social capital here.

If people work with an already long-established ancient tribe, it will probably work better than trying to assemble your new one from scratch.

While the sovereign native nations are under the governance of the cowards that be to a certain degree, I thought you might like to know that there are opportunities for limited refuge from Walmartdom, even in los estados hundidos.

Maybe a contingent among the commentariat here might work together as a group to approach some sovereign nations.

I always loved the Navajo. I could find the funny bone when I dealt with them, something important for blonde people. They just like to laugh, maybe from having a more contented sense of themselves for the abundant blessing of land they enjoy, or maybe just because. Also they have a little different attitude than other tribes I've known. While crossing their land, I asked a flagman (Navajo) on a highway construction crew if it was possible to go camping in the canyon lands. His answer (and attitude) floored me. He said "why not? It's a free country."

Go into Montana, and you will never get an answer like that.

--- said...

Re leasing land etc. on Navajo, this site looks promising:

Jeff Clark said...

The comments about the oil bubble and the need to keep prices high -- not just to keep investors happy but also to satisfy the financial requirements of everyone from Canadian oil sands companies to Saudi social programs -- offers insight into the current confrontation with Iran. Iran itself relies on higher oil prices to finance its national budget. I've read varying estimates of "minimum" oil prices needed to meet those needs, from $65 to $85, all of them well above Cook's estimates of a bubble-burst bottom. Uncertainty keeps oil prices high, and war is the ultimate uncertainty.

Joe in NC said...

I recommend the following article to anyone interested in a "cliff notes" type of guide for potential military hotspots (at energy "chokepoints") in the coming decade. That's the best description I could come up with. I know TAE has at least a couple of commenters that are military veterans and this material may be remedial reading for them, but I welcome any comments they (or anyone) has to offer on this article. After reading it, I think I have a better understanding of what to expect in the coming decade.

Dangerous Waters

"The Strait of Hormuz is, however, only one of several hot spots where energy, politics, and geography are likely to mix in dangerous ways in 2012 and beyond. Keep your eye as well on the East and South China Seas, the Caspian Sea basin, and an energy-rich Arctic that is losing its sea ice. In all of these places, countries are disputing control over the production and transportation of energy, and arguing about national boundaries and/or rights of passage."

I think the "Danger Waters" article is kinda related to the the following material that Tom posted in the last comment thread (per snips beneath link):

The Next War on Washington’s Agenda

"Depriving China of independent access to oil is Washington’s way of restraining and boxing in China."

"Washington is getting all of us in over our heads. Washington has declared the “Asia-Pacific” and the South China Sea to be areas of “America’s national interest.” What sense does this make? It makes the same sense as if China declared the Gulf of Mexico and the Mediterranean Sea to be areas of China’s national interest."

From Ilargi's excellent post:

"'s important for everyone to see and understand that, and how, manipulation sets market prices for commodities (and stocks, but that's another story) on a daily basis, and not some free market principle..."

I'm wondering if military intervention(s) could be used as another tool in the manipulation toolkit? Maybe it already has been used in this way? Who really knows what is going on benind the curtain.


--- said...

Sorry to scatter comments. Loading up on coffee... brain slow...

I suggest that if any are interested in Navajo possibilities that you just get together, a few of you perhaps, and go to either the college

or the educators of the tribe

and meet face to face.

Not a native American myself but I was raised with them, and they are much happier in the concrete and here and now than in the abstract, generally speaking.

Plus it is best to bypass the bluster of bureaucracy if you can.

People dedicated to education among a tribe will probably be your best allies.

Maybe you could set up a group-run site which pursued agriculture and supported educators on the side.

But face to face is your best shot.

And it is a stupendously beautiful part of the world too

If nothing else you will end up knowing some of your fellow commentariat face to face and probably glow with inspiration from the beauty of their land.

I suggest that those who can, google earth and check out some of the photos.


Joe in NC said...

U.S. troops quietly surge into Middle East

"The Pentagon has stationed nearly 15,000 troops in Kuwait, adding to a small contingent already there. The new units include two Army infantry brigades and a helicopter unit - a substantial increase in combat power after nearly a decade in which Kuwait chiefly served as a staging area for supplies and personnel heading to Iraq."

--- said...

Hi, again I don't mean to barrage people if there is not interest, but anyway what might be most problematic for some here is that the Navajo nation - like a lot of sovereign native American nations - is dry.

Here is a page that discusses life and philosophy dedicated for non-Navajo living there

But the way people talk here, I would imagine a lot of people not only could fit in, but might welcome the change.

My first thought as to a business would be to set up a collective trading post. If anyone could pull it off, it would be the commentariat of TAE.

There was a request for concrete suggestions, so I hope this has been of help at least to start new courses of thought. I think you will find that all the sovereign nations are starving for investment, but above all in education and human terms. You all have much of that. Maybe people could consider a group that made outreaches to various sovereign nations.

That said, be aware that the nations are very distinct from one another. Some friendly, some not, and plenty of them are arch-enemies among themselves. If anyone is wanting to really get an idea of how things are, I suggest going to a pow-wow, which are international gatherings of the sovereign peoples within the US. You will find every kind of person there, and see and learn about their families and concerns.

mike said...

I can say one thing, the overall belief of where oil is going is very confusing, on one hand we have 'experts' talking $200/b and here at TAE we have $45/b. The conclusion I've come to is that nobody knows a thing on what's going on, not on these blogs anyway.

ben said...

en dasher, great suggestion. life on the rez - now that would be something! thanks.

snuffy said...


Thanks for that link about "The Praetorian class".Interesting world view.I followed a few links of the author,and found some writing/essays that were....somewhat to the right of Genghis Khan.I am not arguing the validity of some of the points of the authors...But some of the generalizations,as to the cause/effect of what we are now facing disturb me.His points are well taken.
I understand [probably better than most]the validity of essay,as I have a younger brother who is of that class...a 25 year police vet...who is exactly as described.He nails it.
With precision.

His links to the Washington Rebel,and further extensions, to the very far right,were what I found disturbing.The content,and discussions,reminded me that there is a lot of people who don't seem to realize what you write on the net is there,somewhere,for a very long time.Or,that,[should things go a certain way],a fish dies by opening its mouth for a hook.

The increase in military force in the mid-east IS cause for concern,I believe.As our posters have pointed out,a lot of the development of oil sands,shale ect as major energy developments is predicated by "expensive" oil.Should the price would the justification for the projects,causing a whole lot of damage to the oil companies who invested in the projects and their investors.
If the calculus used by the powers that be involved a quick nasty strike at Iran,with a oil shock that mitigated by the Strategic Oil Reserve,dark inventory,and a oil shale/sand well as reliance on the .mil to remove,permanently,the threat of Iran to #1Dollar pricing of oil #2Israel #3US control of Chinese access to Iranian oil...

We might have a very interesting year.

Utilization of "patriotic fever" to quell OWS demonstrations might well be used.
A counterbalance,during a time of WAR/NATIONAL EMERGENCY...[Shut up and tighten your belt]..This type of things have done too many times in the past.And we have a whole bunch of folks now who are very specialized in manipulating public opinion

Time to get back to work..

Bee good,or
Bee careful


snuffy said...

One quick point..

The last two nations that tried pricing oil in anything besides dollars were Iraq...and Libya.Might we be seeing a pattern here?...upset that apple cart,face the


Anonymous said...

@ Rear Entry--"What's new under the sun?"

All driven by the incentives that derive from the use of money, to repeat as long as the use continues.

Ilargi said...

Haver Analytics. in which the UK's debt to GDP figure of over 800% seems to disagree with Stoneleigh's lectures. Her figure of the UK's ratio of 466% may have come from Global Finance... Anyone know why the UK's debt to GDP ratio might be reported so differently,

We use the Haver/MS graph these days, The difference may be due to several things, it all depends on what you count. GF sees 200% of GDP for the financial sector, while Haver/MS sees over 600%. Opaque territory. Do you count OTC paper? Periphery (Ireland!) bonds marked to market? My hunch is GF left out quite a bit of stuff, perhaps simply because they have no access to data.


Gravity said...

When reading the text of that iranian oil embargo in the NDAA s.1867, one gets the impression that the administration is trying to force a rise in oil prices, by creating a perceived tightness in supply and by intensifying the threats of an iranian blockade in the straight of hornuz.
Maybe they've foreseen a concurrent crash in prices and the saudis or big oil pressured the administration for price support by removing iranian oil exports.

According to Wiki;
"In 2010, Iran, which exports around 2.6 million barrels of crude oil a day, was the second-largest exporter among the Organization of Petroleum Exporting Countries. Several major emerging economies depend on Iranian oil: 10% of South Korea’s oil imports come from Iran, 9% of India’s and 6% of Chinese. Moreover, Iranian oil makes up 7% of Japan’s and 30% of all Greek oil imports. Iran is also a major oil supplier to Spain and Italy."

Sanctions would now be imposed on all countries who continue to import iranian oil, unless if waived under national security, or if;
"the President determines pursuant to subparagraph (B) that there is NOT a sufficient supply of petroleum and petroleum products from countries other than Iran to permit a significant reduction in the volume of petroleum and petroleum products purchased from Iran by or through foreign financial institutions."

trojanhorse said...

Jim Richards audio from King News.

On listening to this, the thing that came to mind was, 'Stalking Horse'.

Gravity said...

Lynford1933 said...

John Day: How does your search differ significantly from the “Transition Movement” for which there are many references on the internet? While ---
is looking at ’transition’ in a different nation albeit within the US. Good idea. We have Washoe indians here.

I guess I am part of the Praetorian Class due to long time military service and early learning experience of the depression though at some point I became a woodworker and more recently a back to the earth gardener and survivalist. I have often thought the best way to survive the coming chaos is to be a pirate or part of a pirate band. There will be plenty of easy pickings for pirates without ever coming to blows with a survivalist. I am quite sure that line of thought is more Praetorian than intellectual, peaceful transition. OTOH the intellectual, peaceful transition movement may also need a few Praetorian Class for which there are many more qualified than this old woodworker to keep the pirates at bay.

Mike: About oil estimates here and around. I get my latest information from the sign at the corner filling station. “Regular $3.43.9” and whether one can afford that or not is a judgment call we each have to make. “Predicting is very difficult especially about the future.” YB. Since my point of reference is real and on the corner, why should I care if someone predicts $45 or $200? It is not the price that is important but whether I can afford it. This simplifies life and IMHO gets away from a lot of useless anxiety.

BTW Tom: I got my Extra Class Amateur License in ‘64 when 20WPM CW was the defining feature. I let it expire some years ago with the invention of the internet and cell phones. I am going to get it back and put up an EMP survivable station. To me the long decent or even rapid financial collapse will be quite survivable but an EMP event will take maximum resources to rebuild. In that sense distant communication may be determinable, a make or break situation.

Of course there is a military buildup in the vicinity of Iran (duh?). If the President gives the word to strike, they will strike. That is the mission of the military. Now if the president does not give the order, it has been a modest exercise but if he does give the order, having troops nearby will be priceless (for all else there is MasterCard) I am actually surprised there isn’t more buildup on Iran’s eastern border and there may be but just not publicized. I am not saying the president should or should not do this. I do wish congress would declare the war if we are going to have one. That simplifies military decisions down the line.

A knight brings a smoking treasure box to the King. "How many times have I told you to rape and pilliage and then burn."

Here, north of Reno NV in the high desert, no one with any sense would try to live here. The big island sounds better OTOH I doubt if we will have much company here after TSHTF.

Many of you have said my view is condescending. I cannot see the world from a view other than my own. Your mileage will vary so do your own thing and don’t even be concerned about my view. I guess that last sentence is condescending; damn, Praetorianism is hard to get rid of. I have to go to the funeral of a good man who was 7 years my junior. One thing about growing old is peer pressure gets less and less. Cheers everyone.

Joe in NC said...

Cementing ties with Arab world

To buttress its fast-growing economy, China needs a stable and continuous supply of huge volumes of fuel. The Middle East is the world's largest fuel exporter, but then it needs a long-term and stable fuel consumer to maintain its position. Sino-Arab energy cooperation caters to the interests of and is strategically important for both sides.


Wen's visit to the Arabian Peninsula will help consolidate old friendship, cement political mutual trust and chart the future for a strategic partnership between China and the Arab nations. It will strengthen China's ties with the Arab League and the Gulf Cooperation Council, too, which are playing a bigger role in regional affairs now.

China’s Wen presses Saudi Arabia for oil, gas access

In talks with Saudi Crown Prince Nayef in Riyadh on Saturday, Wen also said his government wants “reputable” Chinese companies to invest in Saudi Arabia’s ports, railways and infrastructure, the Chinese Xinhua news agency reported.


Nassim said...

... somewhat to the right of Genghis Khan.I am not arguing the validity of some of the points of the authors ...


Frankly, I don't care much who is writing - provided what they write makes sense from my perspective on the matter. I think you agreed with that a little later on. People change and their point-of-view changes depending on their circumstances. Just look at Greenspan's attitude towards gold, for example.

BTW, I suspect that you - a person fully exposed to the market economy, a member of the "Economic Class" - are a minority among readers here. I used to be one too, but that is no longer the case - my wife does not quite agree on that point. I have seen loads of members of the other two classes and can recognise them a mile off because his analysis does not only apply to the USA.

I am actually surprised there isn’t more buildup on Iran’s eastern border


The oil is in the West, near Iraq and Kuwait. Also, the East is Afghanistan - a logistical black hole.

Joe in NC said...

"a person fully exposed to the market economy, a member of the "Economic Class" - are a minority among readers here."

Just curious, what class do you suspect the majority of readers to be in?


John Day said...

Thanks for thoughtful replies!
@ Joel Caris: I built one of my bike frames with tutelage. It's really nice.
@ Bosuncookie: Other friends of mine have "The Bountiful Sprout" which is an online order service for produce from about 20 local farmers, which folks can order, then go pick up, and the farmers get around 90%. They are expanding to Austin, so I am urging them and 5 Mile Farms to "join forces" and share a pick-up day site.
@ Skintnick : Local currencies did well for some towns in Austria, because the central government and banks could not extract wealth. They were soon outlawed, and the wealth extraction was started back up, and the depression returned, then there was Hitler...
A Said... I don't want to seem like a poseur, talking to Dr. Tom about working on Hawai'i (Big Island), and now telling you that I worked at the Chnle Az. Hospital and the Pinon Az. Clinic for 2 years in 1990-1992. I also got a lot of value out of that experience, and it was a good ticket to acceptance in the community. Those folks run deep, not shallow. However, the climate conditions there are really bad, and water for crops is very expensive. I grew a serious garden there, but it was very expensive in water. That land is very hard to survive on, which is why the Navajo people were allowed to have it, by a regime which was pretty blatantly genocidal, at the time. My first winter there we had a week that it never got above 20 degrees, and got to 20 below every night, and the winds were 20-50 mph. I decided that my 2 year contract was something I would fulfill, but that would be all. We left our van at the Basha's Grocery in a sandstorm, and when we got back to it, there was a sand dune to the top on one side. White people aren't made tough enough for that land (IMHO).
@ Lynford 1933 : Q: How am I different from "Transition" movement?
A: I ain't. However, Transition Austin is mainly an email group list. I go to the monthly meeting. Last Thursday there were 7 of us. We are all doing our little things and sharing thoughts and experiences, but the other million people in Austin are doin' their own thing. That's part of why I have enjoyed working on Hawai'i. The Navajo and Hawaiian people share a certain straightforward style of relating with others, a real connection. I'm not saying it's all the same, but if you can be real, you can appreciate it. It kinda' grows on you...

Lynford1933 said...

Nassim: That's just good planning. Protect the oil if necessary and be all ready to strike if called upon.

--- said...

John Day,

Thanks for the info on living on Navajo. Curious, I think you are describing the windswept upper plateau? Any difference if one is in the many canyons? Evidently they keep the herds down below in the winter?

In the last ditch ag dept, we are in Mexico. Finally have found land at a reasonable price if one knows Mexicans (and we do) who can sit on the title until just one more year until we are finally inmigrados and can own ejido land. 150,000 pesos (some $11,000) for rights to a huge swath of 170 hectares with a stream right over the Chihuahua border from Sonora. 30,000 pesos for a terreno with adobe houses in the area mixed in with Mennonites, who are said to be of consummate integrity - if they hit a sheep on the road will knock around to find its owner to pay him for it, etc.

Of course there are pockets of narcos there, depending on terrain/circumstance. From Nuevo Casas Grandes on south there are problem zones although there are areas where they are "not tolerated." Ahem. On the other hand land can be ridiculously expensive among gringo zones, US $100,000/hectare.

Curious thing about Mexico, I ran into all these policy wonks when I posted on DKos who insisted that most Mexican land was not arable. Only eleven percent is arable, they insisted. I told several they were nuts, that in reality one finds amazing springs and pools gurgling in all kinds of hills and mountains - has more to do with the fact that no one ever builds water works anymore, and they have abandoned the railroads.

Turned out that if one carefully reads the CIA website - which generates the eleven percent misprision their definition of arable land means something previously or recently used as such. It has nothing to do with condemning the rest as unusable - just that they do not classify it as arable. Not listing land as arable has nothing to do with considerations of soil quality, climate or water. But everyone leaps to make the "non-arable" inference all the same.

We are farming on "non-arable" land in the low Sonora desert, and the volcanic soil is fantastically fecund. Mound gravel around things four inches deep, and water is conserved, weeding becomes a non-issue and ants won't move in. Shangri-La for squash and pumpkins.

For the longest time we have been looking for people with whom to partner up on a project, but no one can seem to get free of the media-based picture of Mexico. Hence my possibly misguided fascination with Navajo land.

Just in case you are interested in more, here I am. Also answer to HDP, a question of being maladroit with Blogger and not able to recover my former ID.

muchos saludos.

Nassim said...

Just curious, what class do you suspect the majority of readers to be in?

Joe in NC,

Much the same as in the population at large - i.e. of the "Political Class".

I mean, only 2% of Americans are farmers - and many of them benefit from subsidies and handouts. The proportion of people actually creating real wealth in the USA, and not employing lobbyists, must be tiny. Of course, the people putting up messages here are not representative of the readership. Most people are fully invested in the status quo and don't want to rock the boat.

Anyway, that is my guess. :)

Nassim said...

Anne Richards, chief investment officer at Aberdeen Asset Management, says the possibility of European capital controls could be the greatest risk facing investors in the year ahead.

European capital controls are greatest concern

If the Germans are considering forcing their insurance companies and pension funds to hang on to their sovereign debts - even when these are downgraded - capital controls are only a little step further down that same pathway.

NZSanctuary said...

NASA's LENR technology – cheap energy production using low energy nuclear reactions.

It'll be interesting to see if anything viable comes out of this, and/or what scalability is like.

Patrick said...

@ NZsanctuary

It's my view that there simply is no viable form of energy that is going to replace oil. Oil is energy from the sun concentrated by orders of magnitude over mega millions of years. There will never be a source to compare.

But my real point is this: what good would it do you anyway? Go ahead and find a cheap abundant supply of energy. How far up the curve does anyone think population can be pushed? We are running out of time on the environment; peak water is just around the corner; the oceans could suffer catastrophic collapse from acidification at any time etc. etc.
Sorry folks, there is only one planet and you've pretty much used up all the good stuff it's got to offer.

Nassim said...

America's historic relationship and alliance with Saudi Arabia - the vital relationship between the world's largest producer of oil and its largest consumer - may no longer be the most important energy partnership in the world. And the energy relationship between China and Saudi Arabia could change history every bit as much as the U.S./Saudi relationship.

But if that's the case, the speech still hasn't set off any alarm bells in Washington. After all, the Saudis have been forced to re-align their strategic energy plans because of an unexpected energy boom in America. I'm talking about the energy revolution in North America that began on the plains of East Texas. This development, which could unleash an investment boom and an era of cheap and clean energy in Australia - has given America enough energy independence that its long relationship with the Saudis has changed.

The Growing Energy and Oil Alliance Between China and Saudi Arabia (Dan Denning)


The Daily Reckoning has been plugging fracking for some time - and fracking stocks. I am wondering if there is any genuine substance to the above statement?


BTW, I tried this stuff and it is pretty good - Stoneleigh Wines :)

Frank said...

John Day, I suggest you look at a larger selection of white folks. For possible tribes to look at, try Newfie, Sammi, Youper.

Lynford, without "kids", hill yankee culture would be in the same barely alive state as the culture of the indians we stole the land from three hundred years ago.

The last generation stuck here was the one too young for WWI and too old for WWII. The next two generations went to the flatlands. The hippies showed up just in time to learn how to live off this cold and rocky land, and also quite literally preserve the tribal chants and dances. [It's Imbolc/Candlemas/Groundhog day. If you've half your wood and half your hay, you'll make it through till the first of May.]

The next two generations went to the flatlands. And now another set of 20-somethings will be at the ten thousandth consecutive weekly dance at the Nelson (NH) town hall, some Monday next year.

Rear Entry said...

It gets really boring waiting for a stopped clock to be right.

jal said...

@ Rear Entry
I'm more concerned about the fact that the clock stopped working.


jal said...

Have the comments stopped working?

Nassim said...

Have the comments stopped working?

No, it's just that the people are preparing for the TEOTWAWKI.

Think Out Of The Box said...

I have a question about value/prices of home/land.

I figured, a few years ago, that the price of average homes, overall, would fall to the traditional 2 1/2 x's annual income. Given that most well paying jobs in the last few years, have been outsourced, I figured that between $10 & $20 would be the common man's pay.

If anyone were willing to loan (a local bank) it would fall back on traditional values. Annual income of$21K to $42K = 50K to 100K price range. In california that lends itself to a roughly, 90% fall in housing prices. In the last 5 years I've watched it fall to 50% of the peak. (This was before I had a clue about the economic collapse.. but it was obvious what had to happen if the jobs were gone & baby boomers were ALL trying to sell homes.) Then comes the sub-prime (prime, commercial) collapse.

Because there are still reasonable jobs for a significant number of people, I don't believe our housing will collapse as far down as I had expected. At least in the more commercial areas (SF, LA, San Diego). They have lost significant jobs, more companies will close, but I think there will still be some base left in the larger cities. Certainly the rural areas are headed down even further in California.

Does anyone have thoughts on this setup... with large metropolitan areas?