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Another Nail in the US Empire Coffin

Collapse of Shale Gas Production Has Begun

by Tyler Durden

via SRSroccoReport.com {1}

Zero Hedge (January 30 2016)

The US Empire is in serious trouble as the collapse of its domestic shale gas production has begun.  This is just another nail in a series of nails that have been driven into the US Empire coffin.

Unfortunately, most investors don’t pay attention to what is taking place in the US Energy Industry.  Without energy, the US economy would grind to a halt.  All the trillions of dollars in financial assets mean nothing without oil, natural gas or coal.  Energy drives the economy and finance steers it.  As I stated several times before, the financial industry is driving us over the cliff.

The Great US Shale Gas Boom is Likely Over for Good

Very few Americans noticed that the top four shale gas fields combined production peaked back in July 2015.  Total shale gas production from the Barnett, Eagle Ford, Haynesville and Marcellus peaked at 27.9 billion cubic feet per day (Bcf/d) in July and fell to 26.7 Bcf/d by December 2015:

As we can see from the chart, the Barnett and Haynesville peaked four years ago at the end of 2011.  Here are the production profiles for each shale gas field:

According to the US Energy Information Agency (EIA), the Barnett shale gas production peaked on November 2011 and is down 32% from its high.  The Barnett produced a record 5 Bcf/d of shale gas in 2011 and is currently producing only 3.4 Bcf/d.  Furthermore, the drilling rig count in the Barnett is down a stunning 84% in over the past year.

The Haynesville was the second to peak in January 2012 at 7.2 Bcf/d per day and is currently producing 3.6 Bcf/d.  This was a huge fifty percent decline from its peak.  Not only is the drilling rig count in the Haynesville down 57% in a year, it fell another five rigs this past week.  There are only eighteen drilling rigs currently working in the Haynesville.

The EIA reports that shale gas production from the Eagle Ford peaked in July 2015 at 5 Bcf/d and is now down six percent at 4.7 Bcf/d.   As we can see, total drilling rigs at the Eagle Ford declined the most at 117 since last year.  The reason the falling drilling rig count is so high is due to the fact that the Eagle Ford is the largest shale oil-producing field in the United States.

Lastly, the Mighty Marcellus also peaked in July 2015 at a staggering 15.5 Bcf/d and is now down three percent producing 15.0 Bcf/d currently.  The Marcellus is producing more gas (15 Bcf/d) than the other top three shale gas fields combined (12.1 Bcf/d).

I have posted the Haynesville shale gas production chart below to discuss why US Shale Gas production will likely collapse going forward:

What is interesting about the Haynesville shale gas field, located in Louisiana and Texas, is the steep decline of production from its peak.  On the other hand, the Barnett (chart above in red) had a much different profile as its production peak was more rounded and slow.  Not so with the Haynesville.  The decline of shale gas production at the Haynesville was more rapid and sudden.  I believe the Eagle Ford and Marcellus shale gas production declines will resemble what took place in the Haynesville.

All you have to do is look at how the Eagle Ford and Marcellus ramped up production.  Their production profiles are more similar to the Haynesville than the Barnett.  Thus, the declines will likely behave in the same fashion.  Furthermore drilling and extracting shale gas from the Haynesville was a “Commercial Failure” as stated by energy analyst Art Berman in his Forbes article on November 22 2015 {2}:

 

The Haynesville Shale play needs $6.50 gas prices to break even. With natural gas prices just above $2 per Mcf (thousand cubic feet), we question the shale gas business model that has 31 rigs drilling wells in that play that cost eight to ten million dollars apiece to sell gas at a loss into a over-supplied market.

At $6 gas prices, only seventeen of Haynesville wells break even (Table 3) and approximately 115,000 acres are commercial (Figure 2) out the approximately 3.8 million acres that comprise the drilled area of the play.

The Haynesville Shale play is a commercial failure. Encana exited the play in late August. Chesapeake and Exco, the two leading producers in the play, both announced significant write-downs in the third quarter of 2015.

 

Basically, the overwhelming majority of the shale gas extracted at the Haynesville was done so at a complete loss.  So, why do they continue drilling and producing gas in the Haynesville?

The reason Art Berman states is this:

 

What we see in the Haynesville Shale play are companies that blindly seek production volumes rather than value, and that care nothing for the interests of their shareholders. The business model is broken. It is time for investors to finally start asking serious questions.

 

Chesapeake is one of the larger shale gas producers in the Haynesville as well as in the United States.  According to its recent financial reports, Chesapeake received $1.05 billion in operating cash in the first three-quarters of 2015, but spent $3.2 on capital expenditures to continue drilling.  Thus, its free cash flow was a negative $2.1 billion in the first nine months of 2015.  And this doesn’t include what it paid out in dividends.

The same phenomenon is taking place in other companies drilling for shale gas in the other fields in the US.  This insanity has Berman perplexed as he states this in another article from his site {3}:

 

This has puzzled me because the shale gas plays are not commercial at less than about six dollars per mmBtu except in small parts of the Marcellus core areas where $4 prices break even. Natural gas prices have averaged less than three dollars per mmBtu for the first quarter of 2015 and are currently at their lowest levels in more than two years.

 

The reason these companies continue to produce shale gas at a loss is to keep generating revenue and cash flow to service their debt.  If they cut back significantly on drilling activity, their production would plummet.  This would cause cash flow to drop like a rock, including their stock price, and they would go bankrupt as they couldn’t continue servicing their debt.

Basically, the US Shale Gas Industry is nothing more than a Ponzi Scheme.

The Collapse of US Shale Gas Production Even at Higher Prices

I believe the collapse of US shale gas production will occur even at higher prices. Why?  Because the price of natural gas increased from $2.75 per mmBtu in 2012 to $4.37 per mmBtu in 2014, but the drilling rig count continued to fall:

As the price of natural gas increased from 2012 to 2014, gas drilling rigs fell forty percent from 556 to 333.  Furthermore, drilling rigs continued to decline and now are at a record low of 127.  Just as Art Berman stated, the average break-even for most shale gas plays are six dollars per mmBtu, while only a small percentage of the Marcellus is profitable at four dollars per mmBtu.

Looking at the chart again, we can see that the price of natural gas never got close to six dollars per mmBtu, the highest was $4.37 per mmBtu.  Thus, the US Shale Gas Industry has been a commercial failure.

Now that the major shale gas producers are saddled with debt and many of the sweet spots in these shale gas fields have already been drilled, I believe US shale gas production will collapse going forward.  If we look at the Haynesville Shale Gas Field production profile, a fifty percent decline in four years represents a collapse in my book.

The Two Nails in the US Empire Coffin

As I stated in several articles and interviews, ENERGY DRIVES THE ECONOMY, not finance.  So, energy is the key to economic activity.  Which means, energy output and the control of energy are the keys to economic prosperity.

While the collapse of US shale gas production is one nail in the US Empire Coffin, the other is Shale Oil.  US shale oil production peaked before shale gas production:

This chart is a few months out of date, but according to the EIA’s Productivity Reports, domestic oil production from the top four shale oil fields peaked in April of 2015, three months before the major shale gas fields (July 2015).

Unfortunately for the United States, it was never going to become energy independent.  The notion of US energy independence was built on hype, hope and cow excrement.  Instead, we are now going to witness the collapse of US shale oil and gas production.

The collapse of US shale oil and gas production are two nails in the US Empire coffin.  Why?  Because US will have to rely on growing oil and gas imports in the future as the strength and faith of the Dollar weakens.  I see a time when oil exporting countries will no longer take Dollars or US Treasuries for oil.  Which means we are going to have to actually trade something of real value other than paper promises.

I believe US oil production will decline thirty to forty percent from its peak (9.6 million barrels per day July 2015) by 2020 and sixty to 75 percent by 2025.  The US Empire is a suburban sprawl economy that needs a lot of oil to keep trains, trucks and cars moving.  A collapse in oil production will also mean a collapse of economic activity.

Thus, a collapse of economic activity means skyrocketing debt defaults, massive bankruptcies and plunging tax revenue.  This will be a disaster for the US Empire.

Links:

{1} https://srsroccoreport.com/another-nail-in-u-s-empire-coffin-collapse-of-shale-gas-production-has-begun/

{2} http://www.forbes.com/sites/arthurberman/2015/11/22/haynesville-shale-needs-6-50-gas-to-break-even-the-business-model-is-broken/#60cc9a803ba8

{3} http://www.artberman.com/shale-gas-rig-counts-are-too-high/

http://www.zerohedge.com/news/2016-01-30/another-nail-us-empire-coffin-collapse-shale-gas-production-has-begun

Categories: Uncategorized

Why the ‘Sultan of Chaos’ is Freaking Out

by Pepe Escobar

RT.com / Op-Edge (February 04 2015)

Picture sleepless nights at ‘Sultan’ Erdogan’s palace in Ankara. Imagine him livid when he learns the Syrian Arab Army (SAA), backed by Russian air power, started a preemptive Battle of Aleppo – through the Bayirbucak region – cutting off Ankara’s top weaponizing corridor and Jihadi highway.

Who controls this corridor will control the final outcome of the war in Syria.

Meanwhile, in Geneva, the remote-controlled Syrian opposition, aka High Negotiations Committee, graphically demonstrated they never wanted to meet with the Damascus delegation in the first place – “proximity” talks or otherwise, even after Washington and Moscow roughly agreed on a two-year transition plan leading to a theoretically secular, nonsectarian Syria.

The Saudi front wanted no less than Ahrar al-Sham, Jaysh al-Islam and all Jabhat al-Nusra, aka al-Qaeda in Syria, collaborators at the table in Geneva. So the Geneva charade, quicker than one can say “Road to Aleppo!” was exposed for what it is.

And Forget about Nato

Notorious Saudi intel mastermind Prince Turki, a former mentor of one Osama bin Laden, has been to Paris on a PR offensive; all he could muster was an avalanche of non-denial denials – and blaming the whole Syria tragedy on Bashar al-Assad.

The bulk of the Syrian “opposition” used to be armchair warriors co-opted by the CIA for years, as well as CIA Muslim Brotherhood patsies/vassals. Many of these characters preferred the joys of Paris to a hard slog on Syrian ground. Now the “opposition” is basically warlords answering to the House of Saud even for bottles of water – regardless of the suit-and-tie former Ba’ath Party ministers handpicked to be the face of the opposition for the gullible Western corporate media.

Meanwhile, the “4+1” – Russia, Syria, Iran, Iraq, plus Hezbollah – is now winning decisive facts on the ground. The break down; there won’t be regime change in Damascus. Yet no one broke the news to the Turks and Saudis.

‘Sultan’ Erdogan is wallowing in a sea of desperation. He continues to divert the gravely serious issues at stake to his own war against the PYD – the umbrella organization of the Syrian Kurds – and the YPG (People’s Protection Units, their military wing). Erdogan and Prime Minister Davutoglu wanted the PYD not only banned from Geneva but they want it smashed on the ground, as they see the PYD/YPG as “terrorists” allied to the PKK.

Yet what is ‘Sultan’ Erdogan going to do? Defy the recently arrived 4G++ Sukhoi Su-35S fighters – which are scaring the hell out of every Nato Dr Strangelove? The Turkish Air Force putting its bases on “orange alert” may scare the odd vagrant dog at best. The same applies to Nato Secretary-General, figurehead Jens Stoltenberg, pleading to Russia “to act responsibly and fully respect Nato airspace”.

Moscow is going after the Turkmen with a vengeance and at the same time providing air support to the PYD west of the Euphrates. That hits the ‘Sultan’ in his heart of hearts; after all Erdogan has threatened multiple times that a PYD/YPG advance west of the Euphrates is the ultimate red line.

An already scared Nato won’t support the folly of an Erdogan war against Russia – as much as US and UK neocons may crave it; as Nato decisions must be unanimous, the last thing EU powers Germany and France want is yet another Southwest Asia war. Nato may deploy the odd Patriot missiles in southern Anatolia and the odd AWACs to support the Turkish Air Force. But that’s it.

Pick Your Favorite Regime Change

ISIS/ISIL/Daesh, meanwhile, continues to profit from its own Jihadi highway across a 98 kilometer stretch of Turkish/Syrian border, especially in Jarablus and Al Rai across from Gaziantep and Kilis in Turkey.

Taking a cue from Israel, Ankara is building a wall – 3.6 meters high, 2.5 meters wide – covering the stretch between Elbeyli and Kilis, essentially for propaganda purposes. Because the Jihadi Highway, for all practical purposes, remains open – even as Turkish Armed Forces may apprehend the odd trespasser (always released). We’re talking about a monster smuggler/soldier scam; as much as $300 change hands for each night crossing and a non-commissioned Turkish officer may earn as much as $2,500 to look the other way for a few minutes.

The real question is why Gaziantep is not under a curfew imposed from Ankara, with thousands of Turkish Special Forces actually fighting a “war on terra” on the spot. That’s because Ankara and provincial authorities couldn’t give a damn; the real priority is Erdogan’s war on the Kurds.

This brings us to the only leverage the ‘Sultan’ may enjoy at the moment. From Brussels to Berlin, sound minds are terrified that the EU is now actually hostage to Erdogan’s Kurd “priority”, while Ankara is doing next to nothing to fight massive migrant smuggling.

When Davutoglu went to Berlin recently not only did he make no promises; he re-stressed Erdogan’s vow to “annihilate” the Syrian Kurds.

And that explains German Chancellor Angela Merkel’s own desperation. How could the alleged most powerful politician in Europe fall for such a crude extortion racket? The ‘Sultan’ wants a lot of cash, a lot of concessions, and even a further shot at entering the EU. Otherwise, he won’t turn off the tap on the grim refugee flood.

No wonder the regime change rumor mill is frantic. In Ankara? No; in Berlin.

_____

Pepe Escobar is an independent geopolitical analyst. He writes for RT, Sputnik and TomDispatch, and is a frequent contributor to websites and radio and TV shows ranging from the US to East Asia. He is the former roving correspondent for Asia Times Online. Born in Brazil, he’s been a foreign correspondent since 1985, and has lived in London, Paris, Milan, Los Angeles, Washington, Bangkok and Hong Kong. Even before 9/11 he specialized in covering the arc from the Middle East to Central and East Asia, with an emphasis on Big Power geopolitics and energy wars. He is the author of Globalistan (2007), Red Zone Blues (2007), Obama does Globalistan (2009), Empire of Chaos (2014), and 2030 (2015), all published by Nimble Books.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

https://www.rt.com/op-edge/331279-erdogan-syria-aleppo-turkey/

Categories: Uncategorized

Peace Talks “Paused” …

… After Putin’s Triumph in Aleppo

by Mike Whitney

CounterPunch (February 05 2016)

 

This is the beginning of the end of jihadi presence in Aleppo. After four years of war and terror, people can finally see the end in sight.

–  Edward Dark, Twitter, Moon of Alabama

 

A last ditch effort to stop a Russian-led military offensive in northern Syria ended in failure on Wednesday when the Syrian Arab Army (SAA) backed by the National Defense Forces (NDF) and heavy Russian air cover broke a forty-month siege on the villages of Nubl and al-Zahra in northwestern Aleppo province. The Obama administration had hoped that it could forestall the onslaught by cobbling together an eleventh-hour ceasefire agreement at the Geneva peace talks.  But when the news that Syrian armored units had crashed through al Nusra’s defenses and forced the jihadists to retreat, UN envoy Staffan de Mistura suspended the negotiations tacitly acknowledging that the mission had failed.

“I have indicated from the first day that I won’t talk for the sake of talking, the envoy told reporters, saying he needed immediate help from international backers led by the United States and Russia, which are supporting opposite sides of a war that has also drawn in regional powers”. (Reuters)  De Mistura then announced a “temporary pause” in the stillborn negotiations which had only formally begun just hours earlier. Developments on the battlefield had convinced the Italian-Swedish diplomat that it was pointless to continue while government forces were effecting a solution through military means.

After months of grinding away at enemy positions across the country,  the Russian strategy has begun to bear fruit. Loyalist ground forces have made great strides on the battlefield rolling back the war-weary insurgents on virtually all fronts. A broad swathe of the Turkish border is now under SAA control while the ubiquitous Russian bombers continue to inflict heavy losses on demoralized anti-regime militants. Wednesday’s lightening attack on the strategic towns of  Nubl and Zahraa was just the icing on the cake.  The bold maneuver severed critical supply-lines to Turkey while  tightening the military noose around the country’s largest city leaving hundreds of terrorists stranded in a battered cauldron with no way out.

For the last two weeks, the Obama team has been following developments on the ground with growing concern. This is why Secretary of State John Kerry hurriedly assembled a diplomatic mission to convene emergency peace talks in Geneva despite the fact that the various participants had not even agreed to attend. A sense of urgency bordering on panic was palpable from the onset. The goal was never to achieve a negotiated settlement or an honorable peace, but (as Foreign Policy magazine noted) to implement “a broad ‘freeze’ over the whole province of Aleppo, which would then be replicated in other regions later”. This was the real objective, to stop the bleeding any way possible and prevent the inevitable encirclement of Aleppo.

The recapturing of Nubl and Zahraa leaves the jihadists with just one route for transporting weapons, food and fuel to their urban stronghold. When loyalist forces break the blockade at Bab al Hawa to the northeast, the loop will be closed, the perimeter will tighten, the cauldron will be split into smaller enclaves within the city, and the terrorists will either surrender or face certain annihilation. Wednesday’s triumph by the Russian-led coalition is a sign that that day may be approaching sooner than anyone had anticipated.

It’s worth noting, that a senior fellow at the Brookings Institution, Michael O’Hanlon – whose plan to “deconstruct Syria” by using “moderate elements”  to “produce autonomous zones” – advised Obama and Kerry “not to pursue the failed logic of the current Syria peace talks but to explore a confederal model and seek buy-in from as many key players and allies as possible”.   In other words, the main architect of the US plan to break up Syria into smaller areas, (controlled by local militias, warlords and jihadists) thought the peace talks were “doomed” from the very beginning.

According to O’Hanlon the US needs to commit “20,000 combat troops” with  “the right political model for maintaining occupation”.   The Brookings analyst says  that “Any ceasefire that Kerry could negotiate … would be built on a foundation of sand” for the mere fact that the “moderate” forces it would support would be much weaker than either the SAA or ISIS. That means there would be no way to enforce the final settlement and no army strong enough to establish the authority of the new “unity” government.

O’Hanlon’s comments suggest western elites are deeply divided over Syria. The hawks are still pushing for more intervention, greater US, EU, and NATO involvement, and American and allied “boots on the ground” to occupy the country for an undetermined amount of time. In contrast, the Obama administration wants to minimize its commitment while trying desperately to placate its critics.

That means Syria’s troubles could resurface again in the future when Obama steps down and a new president pursues a more muscular strategy.  A number of  powerful people in the ruling establishment are as determined-as-ever to partition Syria and install a US puppet in Damascus. That’s not going to change. The Russian-led coalition has a small window for concluding its operations, eliminating the terrorists, and re-establishing security across the country.  Ending the war as soon as possible, while creating a safe environment for Syrian refugees to return home, is the best way to reduce the threat of escalation and discourage future US adventurism. But Putin will have to move fast for the plan to work.

Excerpts from “Deconstructing Syria: A New Strategy for America’s Most Hopeless War”, Michael O’ Hanlon, Brookings Institute.
http://www.brookings.edu/blogs/order-from-chaos/posts/2015/06/30-deconstructing-syria-ohanlon

_____

Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (2012). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.co

http://www.counterpunch.org/2016/02/05/peace-talks-paused-after-putins-triumph-in-aleppo/

Categories: Uncategorized

If Only …

… the Nuclear Arsenal Were Fool Proof

by John Laforge

CounterPunch (January 29 2016)

In his book Atomic Accidents (2014), James Mahaffey reports that the US has lost, destroyed or damaged nuclear weapons 65 times between 1945 and 1989. January 24 was the anniversary of a B-52 crash in North Carolina where two 6,500-pound hydrogen bombs fell from the plane and nearly detonated when the bomber broke up in the air. Two recent accidents highlight the dangers today’s weapons still pose to the people who pay for them.

Trident Submarine Runs Aground, Captain Sacked

On November 25 2015 the nuclear-powered Trident submarine USS Georgia ran aground in Kings Bay, Georgia. The Navy is still investigating the crash, the sub’s Captain David Adams was fired January 4th, and the service estimated the cost of repairs would be at least $1 million.

Imagine being among the terrified 160-member crew, thrown about your cramped quarters – along with anything else not tied down – not knowing the cause of blaring alarms. If fire suppressors spring on when the 560-foot, 18,000-ton sub bashed the shoreline, it was a rainy night in Georgia.

Captain Adams told the press he would “miss sailing … again to stand against our nation’s enemies”. But who needs enemies with friends like Adams literally running $2 billion weapon systems into the ground?

Minuteman III Missile Damaged, Launch Crew Fired

Meanwhile, in the nuclear heartland, three Minuteman III missile launch officers were fired after a recently disclosed accident that left one missile with at least $1.8 million in damages. [The missile is named “Damned if you do” in Nukewatch’s new Revised Edition of “Nuclear Heartland: A Guide to the 450 Land-Based Missiles of the United States”, which features maps of all three of the US’s active missile fields.]

The damaged, single-warhead rocket was in its underground silo near Peetz, Colorado, where Warren Air Force Base operates 150 of the missiles. The rocket, which has a 300-to-335-kiloton thermonuclear warhead, was shipped to Hill Air Force Base in Utah for repairs.

The Air Force’s Accident Investigation Board of the mishap report is being kept secret in spite of standing USAF policy. The Associated Press noted that under the Air Force’s own regulations such reports “are supposed to be made public”. Robert Burns reports that the AP‘s request for a copy, under the Freedom of Information Act, was denied. A brief summary of the AIB report issued January 22 says the accident “posed no risk to public safety”, a claim made unverifiable because no details of the damage were disclosed.

Hans Kristensen, director of the Nuclear Information Project at the Federation of American Scientists, interviewed by Burns January 23, said, “By keeping the details of the accident secret and providing only vague responses, the Air Force behaves as if it has something to hide and undermines public confidence in the safety of the ICBM mission”.

The pubic summary says the weapon “became non-operational” during a test on May 16 2014 and that the next day, the chief of a “mishap crew” violated “technical guidance” during the team’s checkup “subsequently damaging the missile”.

Blunder Kept Secret from Higher-ups

Although the accident happened twenty months ago, it was first revealed this month. In fact, commanders at Warren AFB kept it secret from their military and civilian superiors in the Pentagon. At the time, the Minuteman missile system, its launch control staff in particular, was under investigation for narcotics trafficking, mass cheating on exams, performance failures, and misconduct by command authorities. On orders from Secretary of Defense Chuck Hagel, nuclear-weapons experts conducted a three-month investigation of the missile “wings” at Air Bases in Great Falls, Montana, Cheyenne, Wyoming, and Minot, North Dakota.

Asked if the May 17 accident was reported to the high-level investigators, Lieutenant Colonel John Sheets, spokesman for the Air Force Global Strike Command in Omaha, which controls the ballistic missile force, said, “No” and referred further questions to the Pentagon.

It bears repeating that nuclear weapons accidents have the potential for catastrophic radiation releases with long-term health and environmental consequences. These two accidents amplify the seriousness of recent high-level calls for the elimination of the missiles.

Former Pentagon Chief William Perry said last December 3, “Nuclear weapons no longer provide for our security, they endanger it”. He pointed specifically to the land-based missiles, saying ICBMs “aren’t necessary”, are “destabilizing”, and “are simply too easy to launch on bad information and would be the most likely source of an accidental nuclear war”.

In an essay titled “A Threat Mostly to Ourselves”, Paul Nitz, a personal advisor to Ronald Reagan, wrote, “I see no compelling reason why we should not unilaterally get rid of our nuclear weapons. To maintain them is costly and adds nothing to our security.” General James Cartwright, a retired four-star general of the Marine Corps, issued a report in 2012 signed by Senator Chuck Hagel (later Secretary of Defense) that recommended getting rid of the land-based missiles.

Perhaps General James Kowalski, a retired three-star general and Deputy Commander of StratCom which oversees the ICBMs, said it best. Recalling a string of scandals, accidents and staff firings in December 2014, General Kowalski said, “The greatest threat to my force is an accident. The greatest risk to my force is doing something stupid.”

Scores of accidents documented by Mahaffey and by Eric Schlosser’s Command and Control (2014), beg the question: What is the government waiting for? Is a self-inflicted nuclear weapon disaster the only way to force the military to turn the nuclear pistols away from our heads and put the safety on?

_____

John LaForge is a Co-director of Nukewatch, a peace and environmental justice group in Wisconsin, and edits its newsletter.

http://www.counterpunch.org/2016/01/29/if-only-the-nuclear-arsenal-were-fool-proof/

Categories: Uncategorized

Retrotopia: Lines of Separation

by John Michael Greer

The Archdruid Report (January 27 2015)

This is the fourteenth installment of an exploration of some of the possible futures discussed on this blog, using the toolkit of narrative fiction. Our narrator returns from his trip to a tier one county full of doubts about the Lakeland Republic’s prospects, and has those at once challenged and sharpened by a conversation at the local Atheist Assembly …

*****

I’d had lunch with Ruth Mellencamp at a pleasant little diner a block from the station before I caught the train, so I had nothing to do until I got to Defiance but watch farmland roll by and think about what I’d seen since I’d crossed the border less than a week before. My reactions were an odd mix of reluctant admiration and unwilling regret. The people of the Lakeland Republic had taken a situation that would have crushed most countries – an international embargo backed up with repeated attempts at regime change – and turned it into their advantage, using isolation from the capital flows and market pressures of the global economy to give them space to return to older ways of doing things that actually produced better results than the modern equivalents.

The problem with that, I told myself, was that it couldn’t last. That was the thing that had bothered me, the night after I’d toured the New Shaker settlement, though it had taken another day to come into focus. The whole Lakeland Republic was like the New Shakers, the sort of fragile artificial construct that only worked because it isolated itself from the rest of the world. Now that the embargo was over and the borders with the other North American republics were open, the isolation was gone, and I didn’t see any reason to think the Republic’s back-to-the-past ideology would be strong enough by itself in the face of the overwhelming pressures the global economy could bring to bear.

That wasn’t even the biggest challenge they faced, though. The real challenge was progress – the sheer onward momentum of science and technology in the rest of the world. Sure, I admitted, the Lakeland Republic had done some very clever things with old technology – the Frankens blowing drones out of the sky with a basement-workshop maser kept coming to mind – but sooner or later the habit of trying to push technology into reverse gear was going to collide catastrophically with the latest round of scientific or technical breakthroughs, with or without military involvement, and leave the Lakelanders with the hard choice between collapse and a return to the modern world.

A week earlier, I probably would have considered that a good thing. As the train rolled into Defiance, I wasn’t so sure. The thing was, the Lakeland Republic really had managed some impressive things with their great leap backward, and in a certain sense, it was a shame that progress was going to steamroller them in due time. Most of the time, people say “progress” and they mean that things get better, but it was sinking in that this wasn’t always true.

I picked up a copy of that day’s Toledo Blade from a newsboy in the Defiance station, and used that as an excuse to think about something else once I boarded the train back to Toledo. The previous day’s drone shoot was right there on page one, with a nice black and white picture of Maude Duesenberg getting her sixth best-of-shoot trophy, and a big feature back in the sports section with tables listing how all the competitors had done. I didn’t pay attention to anything else on the front page at first, though, because another satellite had been hit.

The Progresso IV and the the Russian telecom satellite were bad enough, but this one was a good deal worse, because it was parked in a graveyard orbit – one of the orbital zones where everybody’s been sticking their defunct satellites since it sank in that leaving them in working orbits wasn’t a good plan. There’s a lot of hardware in most of the graveyard-orbit zones, and though they’re well away from the working orbits that doesn’t really matter once you get a Kessler syndrome started and scrap metal starts spalling in all directions at twenty thousand miles an hour. That was basically what was happening; a defunct weather satellite had taken a stray chunk of the Progresso IV right in the belly, and it had just enough fuel for its maneuvering thrusters left in the tanks to blow up. A couple of amateur astronomers spotted the flash, and the astronomy people at the University of Toledo announced that they’d given up trying to calculate where all the shrapnel was going; at this point, a professor said, it was just a matter of time before the whole midrange was shut down as completely as low earth orbit.

That was big news, not least because the assault drones I’d watched people potshotting out of the air depend on satellite links. Oh, there are other ways to go about controlling them, but they’re clumsy compared to satellite, and you’ve also got the risk that somebody will take out your drones by blocking your signals – that’s happened more than once in the last couple of decades, and I’ll let you imagine what the results were for the side that suddenly lost its drones. Of course that wasn’t the only thing that was in trouble: telecommunications, weather forecasting, military reconnaissance, you name it, with the low orbits gone and the geosynchronous going, the midrange orbits were the only thing left, and now that door was slamming shut one collision at a time.

It occurred to me that the Lakeland Republic was one of the few countries in the world that wasn’t going to be inconvenienced by the worsening of the satellite crisis. Still, I told myself, that’s a special case, and paged further back. The rest of the first section was ordinary news: the Chinese were trying to broker a ceasefire between the warring factions in California; the prime minister of Quebec had left on a state visit to Europe; the melting season in Antarctica had gotten off to a very bad start, with a big new iceflow from Marie Byrd Land dumping bergs way too fast. I shook my head, read on.

Further in was the arts and entertainment section. I flipped through that, and in there among the plays and music gigs and schedules for the local radio programs was something that caught my eye and then made me mutter something impolite under my breath. The Lakeland National Opera was about to premier its new production of Parsifal the following week, and every performance was sold out. Sure, I mostly listen to classic jazz, but I have a soft spot for opera from way back – my grandmother was a fan and used to play CDs of her favorite operas all the time, and it would have been worth an evening to check it out. No such luck, though: from the article, I gathered that even the scalpers had run out of tickets. I turned the page.

I finished the paper maybe fifteen minutes before the train pulled into the Toledo station. A horsedrawn taxi took me back to my hotel; I spent a while reviewing my notes, got dinner, and made an early night of it, since I had plans the next morning.

At nine-thirty sharp – I’d checked the streetcar schedule with the concierge – I left the hotel and caught the same streetcar line I’d taken to the Mikkelson plant. This time I wasn’t going anything like so far: a dozen blocks, just far enough to get out of the retail district. I hit the bell just before the streetcar got to the Capitol Atheist Assembly.

Half a dozen other people got off the streetcar with me, and as soon as we figured out that we were all going the same place, the usual friendly noises followed. We filed in through a pleasant lobby that had the usual pictures of famous Atheists on the walls, and then into the main hall, where someone up front was doing a better than usual job with a Bach fugue on the piano, while members and guests of the Assembly milled around, greeted friends, and settled into their seats. Michael Finch, who’d told me about the Assembly, was there already – he excused himself from a conversation, came over and greeted me effusively – and when I finally got someplace where I could see the pianist, it turned out to be Sam Capoferro, the kid I’d seen playing at the hotel restaurant my first day in town. He gave me a grin, kept on playing Bach.

We all got seated eventually. What followed was the same sort of Sunday service you’d get in any other Atheist Assembly in North America: the Litany, the lighting of the symbolic Lamp of Reason, and a couple of songs from the choir, backed by Capoferro’s lively piano playing. There was a reading from one of Mark Twain’s pieces on religion, followed by an entertaining talk on Twain himself – his birthday was coming up soon, I thought I remembered. Then we all stood and sang “Imagine”, and headed for coffee and cookies in the social hall downstairs.

“Anything like what you get at the Philadelphia Assembly?” Finch asked me as we sat at one of the big tables in the social hall.

“The music’s a bit livelier”, I said, “and the talk was frankly more interesting than we usually get in Philly. Other than that, pretty familiar.”

“That’s good to hear”, said a brown-skinned guy about my age, who was just then settling into a chair on the other side of the table. “Even with the borders open, we don’t have anything like the sort of contacts with Assemblies elsewhere that I’d like”.

“Mr Carr”, Finch said, “this is Rajiv Mohandas – he’s on the administrative council here. Rajiv, this is Peter Carr, who I told you about.”

We shook hands, and Mohandas gave me a broad smile. “Michael tells me that you were out at the annual drone shoot Friday. That must have been quite an experience.”

“In several senses of the word”, I said, and he laughed.

We got to talking, about Assembly doings there in Toledo and back home in Philadelphia, and a couple of other people joined in. None of it was anything out of the ordinary until somebody, I forget who, mentioned in passing the Assembly’s annual property tax bill.

“Hold it”, I said. “You have to pay property taxes?” They nodded, and I went on: “Do you have trouble getting Assemblies recognized as churches, or something?”

“No, not at all”, Mohandas said. “Are churches still tax-exempt in the Atlantic Republic? Here, they’re not.”

That startled me. “Seriously?”

Mohandas nodded, and an old woman with white hair and gold-rimmed glasses, a little further down the table, said, “Mr Carr, are you familiar with the controversy over the separation of church and state back in the old Union?”

“More or less”, I said. “It’s still a live issue back home”.

She nodded. “The way we see it, it simply didn’t work out, because the churches weren’t willing to stay on their side of the line. They were perfectly willing to take the tax exemption and all, and then turned around and tried to tell the government what to do.”

“True enough”, Mohandas said. “Didn’t matter whether they were on the left or the right, politically speaking. Every religious organization in the old United States seemed to think that the separation of church and state meant it had the right to use the political system to push its own agendas – ”

” – but skies above help you if you asked any of them to help cover the costs of the system they were so eager to use”, said the old woman.

“So the Lakeland Republic doesn’t have the separation of church and state?” I asked.

“Depends on what you mean by that”, the old woman said. “The constitution grants absolute freedom of belief to every citizen, forbids the enactment of any law that privileges any form of religious belief or unbelief over any other, and bars the national government from spending tax money for religious purposes. There’s plenty of legislation and case law backing that up, too. But we treat creedal associations – ”

I must have given her quite the blank look over that phrase, because she laughed. “I know, it sounds silly. We must have spent six months in committee arguing back and forth over what phrase we could use that would include churches, synagogues, temples, mosques, assemblies, and every other kind of religious and quasireligious body you care to think of. That was the best we could do.”

“Mr Carr”, Finch said, “I should probably introduce you. This is Senator Mary Chenkin.”

The old woman snorted. “‘Mary’ is quite good enough”, she said.

I’d gotten most of the way around to recognizing her before Finch spoke. I’d read about Mary Chenkin in briefing papers I’d been given before this trip. She’d been a major player in Lakeland Republic politics since Partition, a delegate to their constitutional convention, a presence in both houses of the legislature, and then the third President of the Republic. As for “Senator”, I recalled that all their ex-presidents became at-large members of the upper house and kept the position until they died. “Very pleased to meet you”, I said. “You were saying about creedal associations”.

“Just that for legal purposes, they’re like any other association. They pay taxes, they’re subject to all the usual health and safety regulations, their spokespeople are legally accountable if they incite others to commit crimes – ”

“Is that an issue?” I asked.

“Not for a good many years”, Chenkin said. “There were a few cases early on – you probably know that some religious groups before the Second Civil War used to preach violence against people they didn’t like, and then hide behind freedom-of-religion arguments to duck responsibility when their followers took them at their word and did something appalling. They couldn’t have gotten away with it if they hadn’t been behind a pulpit – advocating the commission of a crime isn’t protected free speech by anyone’s definition – and they can’t get away with it here at all. Once that sank in, things got a good deal more civil.”

That made sense. “How’s the Assembly doing financially, though, with taxes to pay?”

“Oh, not badly at all”, said Mohandas. “We rent out the hall and the smaller meeting rooms quite a bit, of course, and this room – ” He gestured around us. ” – is a school lunchroom six days a week”. In response to my questioning look: “Yes, we have a school – a lot of”, he grinned, “creedal associations do. Our curriculum’s very strong on science and math, as you can imagine, strong enough that we get students from five and six counties away.”

“That’s impressive”, I said. “I visited a school out in Defiance County yesterday; it was – well, interesting is probably the right word”.

“Well, then, you’ve got to come tour ours”, Chenkin said. “I promise you, there’s no spectator sport in the world that matches watching a class full of fourth-graders tearing into an essay that’s been deliberately packed full of logical fallacies”.

That got a general laugh, which I joined. “I bet”, I said. “Okay, you’ve sold me. I’ll have to see what my schedule has lined up over the next few days, but I’ll certainly put a tour here on the list”.

“Delighted to hear it”, Mohandas said.

I wrote a note to myself in my pocket notebook. All the while, though, I was thinking about the future of the Lakeland Republic. Unless the science and math they taught was as antique as everything else in the Republic, how would the kids who graduated from the Assembly school – and equivalent schools in other cities, I guessed – handle being deprived of the kinds of technology bright, science-minded kids everywhere else took for granted?

*****

While we’re on the subject of narrative fiction, Conan the Cimmerian, Robert E Howard’s archetypal barbarian hero, has made more than one previous appearance on this blog. With that in mind I’d like to point interested readers in the direction of one of Conan’s more wryly amusing modern manifestations. By Crom! by cartoonist Rachel Kahn features the guy from Cimmeria offering helpful advice for modern urban life. Those who find that thought appealing might consider visiting the publisher’s website {1} to read the online version or buy PDF copies of the two By Crom! books; those who want printed copies can find the Kickstarter for that project at {2}.

 

_____

 

John Michael Greer is the Grand Archdruid of the Ancient Order of Druids in America {3} and the author of more than thirty books on a wide range of subjects, including peak oil and the future of industrial society. He lives in Cumberland, Maryland, an old red brick mill town in the north central Appalachians, with his wife Sara.

Links:

{1} http://www.wealdcomics.com/?page_id=690

{2} https://www.kickstarter.com/projects/899751906/printing-by-crom-the-autobio-comic-with-a-barbaria

{3} http://www.aoda.org

http://thearchdruidreport.blogspot.jp/2016/01/retrotopia-lines-of-separation.html

Categories: Uncategorized

Helicopter Money Arrives

Switzerland to Hand Out $2500 Monthly to All Citizens

by Tyler Durden

Zero Hedge (January 29 2016)

With Citibank’s chief economist proclaiming “only helicopter money can save the world now”, {1} and the Bank of England pre-empting paradropping money concerns {2}, it appears that Australia’s largest investment bank’s forecast that money-drops were twelve to eighteen months away {3} was too conservative. While The Finns consider a “basic monthly income” {4} for the entire population, Swiss residents are to vote on a countrywide referendum about a radical plan to pay every single adult a guaranteed income of around $2500 per month, with authorities insisting that people will still want to find a job.

The plan, as The Daily Mail reports {5}, proposed by a group of intellectuals, could make the country the first in the world to pay all of its citizens a monthly basic income regardless if they work or not.  But the initiative has not gained much traction among politicians from left and right despite the fact that a referendum on it was approved by the federal government for the ballot box on June 5.

 

Under the proposed initiative, each adult would receive $2,500 per months, and each child would also receive 625 francs ($750) a month.

The federal government estimates the cost of the proposal at 208 billion francs ($215 billion) a year.

Around 153 billion francs ($155 billion) would have to be levied from taxes, while 55 billion francs ($60 billion) would be transferred from social insurance and social assistance spending.

 

That is thirty percent of GDP!

The action committee pushing the initiative consists of artists, writers and intellectuals, including publicist Daniel Straub, former federal government spokesman Oswald Sigg and Zurich rapper Franziska Schlapfer (known as “Big Zis”), the SDA news agency reported. Personalities supporting the bid include writers Adolf Muschg and Ruth Schweikert, philosopher Hans Saner and communications expert Beatrice Tschanz. The group said a new survey showed that the majority of Swiss residents would continue working if the guaranteed income proposal was approved.

 

“The argument of opponents that a guaranteed income would reduce the incentive of people to work is therefore largely contradicted”, it said in a statement quoted by The Local.

However, a third of the 1,076 people interviewed for the survey by the Demoscope Institute believed that “others would stop working”.

And more than half of those surveyed (56 percent) believe the guaranteed income proposal will never see the light of day.

 

The initiative’s backers say it aims to break the link between employment and income, with people entitled to guaranteed income regardless of whether they work.

Or put another way – break the link between actually having to work for anything ever again … but maybe this “group of itellentuals” should hark Margaret Thatcher’s words that “eventually you run out of other people’s money”!

 

*****

 
As we previously detailed, {6} support is growing around the world for such spending to be funded by “People’s QE”. The idea behind “People’s QE” is that central banks would directly fund government spending … and even inject money directly into household bank accounts, if need be. And the idea is catching on.

 

Already the European Central Bank is buying bonds of the European Investment Bank, an EU institution that finances infrastructure projects. And the new leader of Britain’s Labor Party, Jeremy Corbyn, is backing a British version of this scheme.

That’s the monster coming to towns and villages near you! Call it “overt monetary financing”. Call it “money from helicopters”. Call it “insane”.

But it won’t be unpopular. Who will protest when the feds begin handing our money to “mid- and low-income households”?

 

Simply put, The Keynesian Endgame is here {7} … as  the only way to avoid secular stagnation (which, for the uninitiated, is just another complicated-sounding, economist buzzword for the more colloquial “everything grinds to a halt”) is for central bankers to call in the Krugman Kraken and go full-Keynes.

 

Rather than buying assets, central banks drop money on the street. Or even better, in a more modern and civilised fashion, credit our bank accounts! That, after all, may be more effective than buying assets, and would not imply the same transfer of wealth as previous or current forms of QE. Indeed, “helicopter money” can be seen as permanent QE, where the central bank commits to making the increase in the monetary base permanent.

Again, crediting accounts does not guarantee that money will be spent – in contrast to monetary financing where the newly created cash can be used for fiscal spending. And in many cases, such policy would actually imply fiscal policy, as most central banks cannot conduct helicopter money operations on their own.

So again, the thing to realize here is that this has moved well beyond the theoretical and it’s not entirely clear that most people understand how completely absurd this has become (and this isn’t necessarily a specific critique of Societe Generale by the way, it’s just an honest look at what’s going on). At the risk of violating every semblance of capital market analysis decorum, allow us to just say that this is pure, unadulterated insanity. There’s not even any humor in it anymore.

You cannot simply print a piece of paper, sell it to yourself, and then use the virtual pieces of paper you just printed to buy your piece of paper to stimulate the economy. There’s no credibility in that whatsoever, and we don’t mean that in the somewhat academic language that everyone is now employing on the way to criticizing the Fed, the ECB, and the BoJ.

 

And it will end only one way … {8}

 

The monetizing of state debt by the central bank is the engine of helicopter money. When the central state issues $1 trillion in bonds and drops the money into household bank accounts, the central bank buys the new bonds and promptly buries them in the bank’s balance sheet as an asset.

The Japanese model is to lower interest rates to the point that the cost of issuing new sovereign debt is reduced to near-zero. Until, of course, the sovereign debt piles up into a mountain so vast that servicing the interest absorbs more than forty percent of all tax revenues.

But the downsides of helicopter money are never mentioned, of course. Like QE (that is, monetary stimulus), fiscal stimulus (helicopter money) will be sold as a temporary measure that quickly become permanent, as the economy will crater the moment it is withdrawn.

The temporary relief turns out to be, well, heroin, and the Cold Turkey withdrawal, full-blown depression.

 

Links:

{1} http://www.zerohedge.com/news/2015-08-29/citigroup-chief-economist-thinks-only-helicopter-money-can-save-world-now

{2} http://www.zerohedge.com/news/2015-11-06/stunning-admission-boe-central-banker-what-coming-helicopter-money-will-look

{3} http://www.zerohedge.com/news/2015-09-18/it-begins-australias-largest-investment-bank-just-said-helicopter-money-12-18-months

{4} http://www.zerohedge.com/news/2015-12-06/it-begins-desperate-finland-set-unleash-helicopter-money-drop-all-citizens

{5} http://www.dailymail.co.uk/news/article-3422775/Swiss-government-proposes-paying-1-700-month-work-not-bid-end-poverty-insists-people-want-job.html#ixzz3yeIQHSc1

{6} http://www.zerohedge.com/news/2015-10-04/here-come-money-helicopters

{7} http://www.zerohedge.com/news/2015-10-07/you-never-go-full-krugman-insane-helicopter-money-calls-continue-trapped-central-ban

{8} http://www.zerohedge.com/news/2015-10-13/where-first-helicopter-drop-money-likely-land

http://www.zerohedge.com/news/2016-01-29/helicopter-money-arrives-switzerland-hand-out-2500-monthly-all-citizens

Categories: Uncategorized

Why Robots Mean Interest Rates Could Go Even Lower In The Future

by Simon Kennedy

Bloomberg (January 25 2016)  –  9:01 AM JST

* Technology gains will hurt workers and boost productivity

* Automation to put `a lid on’ inflation, says UBS’s Weber

If robots rise, interest rates will fall.

That was the assumption of delegates at the World Economic Forum’s annual meeting in Davos, Switzerland, as revolutions in automation and artificial intelligence reshape how economies work.

The argument goes like this: As machines become more and more advanced, many workers will lose their jobs and others will see their wages fall. New technology will also increase the chances of a 1990s-style jump in productivity. Those forces will combine to restrain prices across the world economy, meaning that the era of slow inflation now challenging central bankers may only prove a sign of things to come.

“Technological progress will put a lid on how inflation can re-emerge”, Axel Weber, chairman of UBS Group AG and a former president of Germany’s Bundesbank, said in Davos.

The worry is that the so-called fourth industrial revolution will hurt an increasing share of the labor force, generating unemployment and putting pressure on wages and therefore consumption, especially of low-skilled employees.

Disrupted Politics

The Forum calculated more automation means over five million jobs will be lost by 2020 in fifteen major developed and emerging economies {1}. That prospect is already unsettling voters around the world, disrupting politics and fanning support for populists from Marine Le Pen to Donald Trump.

“The first effect is lower wages for those people who are replaced”, said Adam Posen, a former Bank of England policy maker who now runs the Peterson Institute for International Economics in Washington. “That should adjust over time, but the initial impact is deflationary”.

By making the remaining workforce more efficient, optimists are banking on a productivity boom akin to when the Internet age helped propel a 3.5 percent rate of productivity growth in the US from 1996 to 2003, allowing central bankers to keep rates lower than otherwise. Bank of America calculates the adoption of robots and artificial intelligence could boost productivity by thirty percent in many industries.

Smashing Looms

“The result is a low inflation environment”, said Laura Tyson, a former economic adviser to President Bill Clinton who now teaches at the Haas School of Business at the University of California, Berkeley.

Another problem for the optimists is the impact on politics. As when Luddites smashed looms in the first industrial revolution, another reshaping of the world could provoke discord among voters and reactionary politics.

“It’s going to be radical change”, said Johan Dennelind, chief executive officer of TeliaSonera AB, a Swedish telecom operator. “It could be really painful. I think we have to admit that it will be, and use common sense to prepare for it.”

Nobel laureate Edmund Phelps said governments may have to respond by redistributing tax income toward those who suffer from the profits enjoyed by those who utilize the new advances.

Central bankers are already preparing for the challenge. In November, Andrew Haldane, the Bank of England’s chief economist, estimated automation could cost fifteen million British jobs.

Policy Rethink

“If substitutability between labor and capital is higher than in the past, labor’s bargaining power and share of income might be commensurably lower”, he said. “The upshot is a materially lower path for inflation”.

Such an environment is another reason why central banks will have to rethink how they go about delivering price stability, having repeatedly missed their inflation goals since the financial crisis, said Paul Sheard, chief global economist at Standard & Poor’s.

“It’s a reason for stepping back and having a brainstorm”, he said in Davos.

Links:

{1} http://www.bloomberg.com/news/articles/2016-01-18/rise-of-the-robots-will-eliminate-more-than-5-million-jobs

{2} http://www.bankofengland.co.uk/publications/Documents/speeches/2015/speech864.pdf

http://www.bloomberg.com/news/articles/2016-01-25/why-robots-mean-interest-rates-could-go-even-lower-in-the-future

Categories: Uncategorized
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