resilience Archives - The Automatic Earth

View From The Brextanic

Mar 012019

March 1, 2019 Posted by Raúl Ilargi Meijer at 2:27 pm Primers Tagged with: Beatles, Brexit, Britain, Britannia, Celtic, Corbyn, delirium, dissonance, diversity, empire, history, Ireland, May, neoliberal, resilience, UK 5 Responses »

Marcel Duchamp Sad young man on a train – Nude study 1911-12

Longtime Automatic Earth friend Alexander Aston talks about finding himself at Oxford at a point in time when the British themselves appear overcome by a combo of utter confusion and deadly lethargy, and one can only imagine what it must be like for ‘foreigners’ residing in Albion, who face large potential changes to their lives and know there’s not a thing they can do about it, not even vote.

I like the observation that the entire British political system, the place where decisions are made, is the size of a small village. That’s a visual we can all relate to. It’s a physical limit as well as a mental one. I’m all for sovereignty and self-determination, but how’s that going to work if you can’t even see the boundaries of your own territory?

Guys, it’s 4 weeks to D-Day today. How about we call off the landing, get a few pints instead, and talk? First round’s on me.

Here’s Alexander:

Alexander Aston: I arrived in the UK in 2015 to undertake interdisciplinary research at the University of Oxford. I am a child of the Empire, a cultural product of Britannia’s oldest colonies in the British Isles, her most important colony now turned empire as well as one of her youngest, Zimbabwe. The UK is both an intimately familiar society and yet one that is also strangely alien for me, like a wealthy, often charming and deeply abusive parent that sparks both self-recognition and rejection.

The ‘leave’ referendum occurred close to a year after I arrived in the UK and is one of the few political events over the past few years that surprised me. I suppose that I assumed, given the power and wealth afforded to UK elites by the EU, that those who benefited so greatly from the status quo would do anything to manipulate or fudge the results. Nonetheless, history decided to swerve, and over the past four years, I have watched the inhabitants of this island stumble into an profound identity crisis. Having spent a good portion of my life in Greece, I do not have particularly warm and cuddly feelings toward the European Union and was never a natural ‘remainer’.

The single markets and the long peace are significant achievements, and the ability for Europeans to move freely and form new discourses, relationships and endeavours has value that is impossible to quantify. The EU is technocratic, unaccountable and enthralled to a neoliberal ideology that knows only how to extract wealth from the most vulnerable and concentrate it in the hands of the most powerful. I have lived in Athens, I have family in Greece, I have seen well enough the true costs of EU membership.

What strikes me most in my experiences of the United Kingdom are the incredible levels of cognitive dissonance demanded by its media, politics and economics in order for the society to function. I live in one of the most expensive and unequal cities in the entire country. I am surrounded by the grandeur of powerful and wealthy institutions that are older than the Aztec empire and filled with some of the most powerful and elite humans on the planet and their heirs in waiting. Every time that I enter a building, go to a lecture, meet with a colleague, or sit for some grand meal in one of the colleges I must walk past dozens of human beings that are cold, hungry and occasionally dying on the streets.

This is in a country that provides social housing and millions in basic income to a single family, where it is accepted that the most vulnerable people are relentlessly bullied into poverty through cuts, inspections and ever increasing demands of performance. In a country where the Beatles and J.K. Rowling all started their careers on the dole. I don’t know the answers to our predicaments, but the conversation is extremely lopsided and blind to the real misery it is creating. Every time I walk through Oxford, I am filled with a profound sense of guilt and remorse, I marvel and benefit from the treasures surrounding me and I wonder… is this the best we can do? Are these the limits of our social imagination and creativity?

Shortly after I arrived, Jeremy Corbyn was elected to the leadership of the labour party. It was an early prefiguration of the political disruptions that were about to sweep the world. The neoliberal managerialism of New Labour had lost control, and its partisans wage an increasingly desperate guerrilla war with no small amount of aid from the establishment media.

Long before Brexit was a reality I became aware of the repetitious delirium of innuendo, slander and fear-mongering through which the media managed the perspective and narrative in the country, much like the American system but with its own uniquely British aesthetics and sense of authority. This somnambulant fever has only grown as the country has tripped and stumbled through the unexpected circumstances and self-engineered traps of austerity, political deadlock, and delusions of grandeur.

Day in and day out we are subjected to a litany of failure by one of the most incompetent governments in history while the media clucks, puffs and turns a path of ruin into mere spectacle. Yet, day after day we find ourselves in a state of inertia, nothing seems to change as the country hurtles towards historical rupture. The dissonance created between a seizing political system, PR firms masquerading as journalists and a dysfunctional economy requires that the people of the United Kingdom smooth over, ignore or forget the increasing contradictions of their lived experience.

Anthropologically speaking, the nuance of British culture that has perhaps had the most profound impact upon me is the detail to which the English are able to infer region, class and schooling through the voices of their fellow citizens. The subtle encoding of social hierarchies into the dialects and accents of the United Kingdom to degrees that I have never experienced in the rest of the Anglophone world. Despite my ignorance about many intricacies of British linguistics, one thing I do feel relatively confident about is that even though the English have the vast majority of the wealth and power in the United Kingdom, the Celts have received the warmer sense of humour.

For me, one of the few truly positive possible outcomes of Brexit is the potential for Irish reunification and even the chance of an emerging “Celtic sphere” to provide a new counterbalance in the British Isles. The partition of Ireland stems from one of the deepest and oldest wounds inflicted by the British Empire. It is an ironic twist of fate that the Tories now find themselves dependent upon the Unionist partisans and descendants that they so eagerly fostered to maintain dominance over Ireland. The United Kingdom’s mythology of itself has run headlong into the contradictions at the heart of its empire. The country that is partitioning itself from Europe finds its politics paralysed by an older act of partition.

The contradictions of Brexit have riven the political parties and the governing process has ground to a halt. It is an intractable predicament, the interests of the Unionists, Capitalist Utopianists, Neoliberal reactionaries, Political Elites, Nationalists, Independents and Socialists are all pulling in different directions. Consensus is only achieved in moments of near universal rejection, yet with no ability to pass any meaningful legislation the Tories only coalesce in obstinate refusal to change the situation.

Meanwhile the ship of state drifts towards a political, economic and moral abyss. What I can say from my time at Oxford is that the political masters of this country are indoctrinated with an imperial hubris in a political system that operates like a small village. The institutions of power here produce all too many children with no experience of the daily struggles of common people, that are all together convinced as to their entitlement to rule over millions with a PPE degree in hand.

The country is in an intractable prisoners dilemma, the logic of which makes a no-deal outcome highly possible. My fear with a no deal is that this would result in a bond shock, and with economic disruptions in Ireland, the Benelux, a France mired in a political crisis and the financial precarity of Italy all create excellent conditions for an absolutely roaring debt calamity. Yet, the UK blithely dithers on as Theresa May puts on her best performance of Neville Chamberlain and tries, tries again. The fact is that the government has lost all political legitimacy and Parliament is an omnishambles.

Those that lead us are so committed to their own narratives, so convinced of their acumen and power, so insulated by their privilege that they will sacrifice the health and prosperity of this nation in the absolute conviction that they are right and that all their problems are the fault of stupid people that don’t listen and do what they are told. The folks in the ERG think they only need sit on their hands and they can, they will, find themselves in a libertarian Aristocracy sea steading off the shores of Europe.

The London centric remainers think that they can paper over the past four years with a second referendum and that all can go back to normal and Brexit can be safely tucked away as a terrifying aberration. I am reminded of the H.L. Mencken quote that “for every complex problem there is an answer that is clear, simple and wrong.”

The only pathway I can see to restoring political legitimacy at this point is a general election. Only after an extension of article 50 and a new government has negotiated an alternative deal is it really feasible to begin speaking about holding further referendums that won’t cause great harm to democratic society. Citizen assemblies would need to be formed and plans for three referenda drawn up, a choice between Mays and the Alternative deal followed by a decision between the winning deal and a no-deal option which would culminate in a final choice between a popularly demanded type of Brexit and remaining within the European Union.

I, as the rest of us, have no idea where our current moment in history will lead. However, there are a few things that I feel confident are occurring. The long twentieth century that began in 1914 is at the end of its cycle. Whatever comes next will be something new, a difficult and demanding opportunity for profound creativity and the chance to step out of the long shadow of our past. In all ecosystems, diversity generates resilience. It is the reason and the strength of building consensus. Yet we cannot build consensus if we refuse, alienate and straw man the voices of others and refuse to examine and discuss the contradictory predicaments in which we find ourselves.

Those that lead us are blind, they are blind because they are true believers and they lack either the wit or compassion to imagine something different beyond more wealth extraction and violence. We have seen Neoliberalism’s Capitalist Utopia and it has failed. Only open and honest discourse coupled with pragmatic action will allow us to navigate to a new shore. I feel strongly about these things, that and that no matter what ones political persuasion, voting for the Tories should be beneath anyone’s dignity at this point.

To be awake from this collective dissonance we must approach our predicament with humility and honesty. Without a democratic commitment to an open and honest discussion, pragmatic decision making processes and a functioning political system capable of mitigating the worst damage, this country will become a mere serfdom ruled by Lilliputian lords.

“For we each of us deserve everything, every luxury that was ever piled in the tombs of the dead kings, and we each of us deserve nothing, not a mouthful of bread in hunger. Have we not eaten while another starved? Will you punish us for that? Will you reward us for the virtue of starving while others ate? No man earns punishment, no man earns reward. Free your mind of the idea of deserving, the idea of earning, and you will begin to be able to think.”
– Ursula K. Le Guin, The Dispossessed

Alexander Aston is a doctoral candidate in archaeology at the University of Oxford and is on the board of directors with the Centre for Cognitive Archaeology at the University of Colorado in Colorado Springs. He has prior degrees in philosophy and history. His work lays at the intersection of Cognitive Archaeology, Deep History and Natural Philosophy, examining the relationship between ecology, material culture and social cognition. Alexander grew up between Zimbabwe, Greece and the United States. He has worked as a stone mason, community organiser and collaborative artist focused on issues of sustainability, alternative education and economic justice for nearly two decades. He has helped to establish community collectives, free schools, participatory art projects, sustainability and education programs in several international projects.

The Rise and Fall of Trade – Redux

Jul 122018

July 12, 2018 Posted by Nicole Foss at 12:05 pm Finance, Primers Tagged with: credit, globalization, just-in-time, liquidity, Nicole Foss, outsourcing, redundancy, resilience, self-sufficiency, Smooth-Hawley, supply lines, tariffs, trade 6 Responses »

Russell Lee Gas station, Edcouch, Texas 1939

Ilargi: Someone linked to this almost 8 year old article from Nicole (July 19 2010), on Twitter. And yes, it’s even more relevant now than it was when she wrote it. So here’s a re-run:

… the Smoot-Hawley Tariff Act of 1930 in the US, which drastically raised tariffs on imports, lead to retaliation by trading partners, and the resulting trade war dropped global trade by 66% between 1929 and 1934.

One more comment from me: Trump may be on to something with some of his tariff actions, but he risks having the US run headfirst into the brittleness of just-in-time supply lines.

Nicole Foss: As the world has become a smaller and smaller place over the last few decades, we think less about the differences between locations. Global trade has allowed us to circumvent many local constraints, evening out surpluses and shortages in a more homogenized world.

We have a just-in-time world built on comparative advantage, in the name of economic efficiency. Under this economic principle, every location should specialize in whatever activity it executes most efficiently and the resulting products from all areas would then be traded. The idea is that all will then be better off than they would have been had they attempted to cover all bases themselves for reasons of self-sufficiency.

Where countries had been inclined towards more expensive self-sufficiency, market forces have often made this approach untenable, as large cost differences can make countries or industries uncompetitive. Local production has been progressively out-sourced as a result.

By ‘better off’, economists mean that goods will be cheaper for all, thanks to global wage arbitrage and economies of scale. Globalization has indeed delivered falling prices for many consumer goods, particularly electronics. In an era of massive credit expansion (effectively inflation), such as we have lived through for decades, one would normally have expected prices to rise, as a lagging indicator of money supply expansion, but prices do not always follow money supply changes where other major complicating factors exist.

In recent years, the major complicating factors have been the ability to produce goods in places where wages are exceptionally low, the ability to transport those goods to consumer markets extremely cheaply and ready access to letters of credit.

For nominal prices (unadjusted for changes in the money supply) to fall during an inflationary period, real (inflation adjusted) prices must be going through the floor. This has been the effect of trade as we have known it, and it is all many of us have known. What we are not generally aware of is the vulnerability of the global trade system, due to the fragility of the critical factors underpinning it.

By producing goods, particularly essential goods, in distant locations, we create long and potentially precarious supply lines. While relative stability reigns, this vulnerability does not cause trouble and we enjoy cheap and plentiful goods. However, if these supply lines are disrupted, critical shortages could result. In a very complex just-in-time system, this may not take very long at all. Such as system is very brittle, as it has almost no redundancy, and therefore almost no resilience. When Jim Kunstler refers to efficiency as “the straightest path to hell”, it is this brittleness he is referring to.

The most ephemeral critical factor for trade is the availability of letters of credit. These became scarce during the first phase of the credit crunch in 2008, and the result was goods stuck in port even though there was robust demand for them elsewhere. Goods simply do not move without letters of credit, and these can dry up extremely quickly as a systemic loss of confidence results in a systemic loss of liquidity. In a very real way, confidence IS liquidity.

The Baltic Dry shipping index fell 96% in 2008 as a result, meaning that shipping companies were suffering. Although the index has recovered slightly during the recent long rally, it is still very depressed in comparison with its previous heights. Now that the rally appears to be over, on the balance of probabilities, letters of credit for shipping will come under renewed pressure, and goods will once again have difficulty moving. As demand also starts to fall, due to the loss of purchasing power in the depressionary era we are moving into, this will get far worse.

In a depression, trade is very adversely affected. One reason for this a highly protectionist beggar-thy-neighbour economic policies. For instance, the Smoot-Hawley Tariff Act of 1930 in the US, which drastically raised tariffs on imports, lead to retaliation by trading partners, and the resulting trade war dropped global trade by 66% between 1929 and 1934.

Thanks to globalization, we are much more dependent on trade than people were in the 1930s. The combination of credit drying up on the one hand and global trade wars on the other is an extreme threat to our vulnerable supply lines. Add to that the general upheaval created by severe economic disruption, which can easily lead to increased physical risks to transporting goods, and the longer term potential for much higher energy prices, and we could see an outright collapse of global trade in the approaching years.

The benefits of self-sufficiency will be seen in places where it still exists. So long as the whole supply chain is local, localized production means being able to maintain access to essential goods at a time when obtaining them from overseas may be difficult or impossible. It is currently more expensive, but the relative security it can provide can be priceless in a dangerous world. The ability to produce locally does not arise overnight however, especially where there are no stockpiles of components. In places where it has been lost, it will take time to regain. There is no time to lose.

We will be returning to a world of much greater diversity as we lose the homogenizing effect of trade. That means the existing disparities between areas will matter far more in the future than they have in the recent past. We will need to think again about the pros and cons of our local regions – what they can provide and what they cannot, and for how many people. Some areas will be in a great deal of trouble when they lose the ability to compensate for deficiencies through trade. As the global village ceases to exist, the world will once again be a very large and variable place.

Volatility on Steroids

Oct 272017

October 27, 2017 Posted by Raúl Ilargi Meijer at 1:09 pm Finance Tagged with: Costa Rica, happiness, Koyaanisqatsi, Nelson Lebo, permaculture, Pura Vida, resilience, volatility 6 Responses »

Salvador Dalí White calm 1936

It’s been a while since we last heard from longtime friend of the Automatic Earth Dr. Nelson Lebo III, New Englander living in Wanganui, New Zealand. Nelson has written a fine collection of articles on this site through the years.

Of course I thought, when I first saw this piece in my mailbox, that he would have written about New Zealand’s new prime minister, Labour’s 37-year-young Jacinda Ardern, whose first action in her new job will be to prevent foreigners from buying existing homes in her country. It’ll be interesting to see how she intends to do so while remaining inside the Trans Pacific Partnership -TPP- agreement.

Radio New Zealand has a portrait in which she says ‘I Want The Government … To Bring Kindness Back’. And obviously my first thought was: wait till you meet Donald Trump. But it would be misleading to put the lack of kindness in politics on his shoulders. There’s too much blood on too many hands.

But Nelson didn’t address her this time. I hope he will soon. Instead, and I should have known, he writes about Koyaanisqatsi, life out of balance. When I wrote The Koyaanisqatsi Economy a month ago, he said he had been thinking of the same theme.

Nelson named his article “Pura Vida trumps Koyaanisqatsi”, but I thought his emphasis on volatility is too important to not be the headline. Especially given that volatility in financial markets is at a -near- record low, while it appears blatantly obvious that this not reflect the ‘real world’ at all.

Nelson’s summary of the real world: “..hurricanes, mass shootings, hurricanes, opioid epidemics, hurricanes, people sleeping in cars, hurricanes, rising suicide rates, hurricanes, and children dying from cold damp homes..”

If that doesn’t spell volatility, what does? Forget about financial markets reflecting anything real anymore. Thanks to central banks, markets are fiddling while Rome burns.

Heeeeeere’s … Nelson:

Dr. Nelson Lebo III: Volatility is the new normal – that’s the message I gave a local Rotary Club when I spoke to members four or five years ago. I had been told beforehand the group was “worldly” and specifically instructed in the invitation to challenge them with my presentation. As a weekly columnist in the city’s paper – the Wanganui Chronicle – I was widely known for my positions on wealth inequality, climate change, and debt, as well as a wide range of practical approaches to address these issues.

Around that time it was clear that a post-GFC new normal was functioning worldwide and many writers were using the term. By then The Spirit Level (Pickett & Wilkinson, 2009) had been widely read and widely praised for its documentation of the relationship between wealth and income inequality and social problems. Additionally, peer reviewed research based on decades worth of data had shown there was a quantitatively measurable increase in extreme weather events: more big storms and more big droughts.

I thought my audience would be well on board.

Judging from the response that day, however, the brief I had been given was misguided and most club members were neither expecting nor wanting a presentation that challenged the dominant paradigm of infinite growth without consequences no matter how factual. As a mid-week midday meeting with New Zealand ‘fush ‘n chups’ on the menu the message that the-world-as-you-know-it-has-changed-forever was a bit heavy for people on their lunch break.

The response that day was, of course, perfectly ‘normal’. Almost no adult human seeks out new and different worldviews. On the contrary, we are far more inclined to cling to outdated ones, à la “Make America Great Again” than to acknowledge changing realities.

Social media allows us to reverberate in echo chambers of our own beliefs where we know we’re right because the echo told us so. Social science researchers have told us this for decades. The Internet just makes it worse and more obvious.

I’ve been writing about Trump, doubling-down and the post-truth world for two years now, and if anything I am more certain of the point I’ve been trying to make: most people are irrational. Seems there’s now a Nobel Laureate who has been arguing the same for decades. Behavioral economist Richard Thaler was recently awarded a Nobel for his study of the psychology of economics, which seeks to understand how we are irrational and the impact on traditional economic theories that have failed time and again (think 2008 Global Financial Crisis) because they don’t sufficiently incorporate human factors. (Remember Greenspan’s admission?)

In no way do I intend to single out the Wanganui Rotarians, but rather use this example as illustrative for what my community, nation, and the entire world face: volatility made worse by inertia. In other words, the longer we choose to ignore inconvenient truths the greater will be their negative impacts.

This situation usually manifests in the form of tipping points . Malcolm Gladwell defined a tipping point in his debut book of the same name as “the moment of critical mass, the threshold, the boiling point.” Everything looks fine with the economy and the climate…until it’s not. And by ‘not fine’ we are talking really NOT FINE à la Greece, Puerto Rico, Houston, etc.

Tipping points is volatility on steroids. Brace yourselves.

Well-informed leaders from President Obama to Pope Francis agree the greatest threats facing humanity are climate change and wealth inequality. I’ve written extensively about both for many years yet neither appears to get much traction locally or globally. Our ‘leaders’ ignore these issues at all of our peril because the result of each is increasing volatility in many forms: social, economic, financial, political, and an increasing incidence of extreme weather events.

Volatility is not good for social order, and where I live is a perfect example of the canary in the coalmine: a coastal, river city with high levels of inequality. It’s a tipping point waiting to happen.

Some readers may remember the 1982 film by Godfrey Reggio called Koyaanisqatsi, named using a Hopi term meaning “chaotic life” or “life out of balance.” The film is unnerving, as is much of what comes via news media these days: hurricanes, mass shootings, hurricanes, opioid epidemics, hurricanes, people sleeping in cars, hurricanes, rising suicide rates, hurricanes, and children dying from cold damp homes. And then there’s Myanmar: When Buddhists become the aggressors, you know the world is well and truly out of balance.

Okay, so the world is out of balance. What can be done about it?

Our solution to imbalance, as any regular reader of our blog knows, is called “Eco-Thrifty.” This approach to design and to life is about living better on less. Seems we have good company along these lines in the form of Costa Rica, the small Central American nation that regularly tops the Happy Planet Index published by the New Economics Foundation.

Despite per capita income one quarter that of New Zealand (ranked 38th of 140) and one fifth that of the US (108th of 140) Costa Rica matches many Scandinavian countries in terms of equality, wellbeing, life expectancy and ecological impact.

As Jason Hickel of the Guardian recently put it, “Costa Rica proves that rich countries could theoretically ease their consumption by half or more while maintaining or even increasing their human development indicators.”

“The opposite of growth isn’t austerity, or depression, or voluntary poverty. It is sharing what we already have, so we won’t need to plunder the earth for more.”

Sharing is at the heart of the permaculture ethics, where it is joined by caring for the environment and caring for people. Although we practice permaculture on our farm and in our community, we’re not dogmatic about it. What drives the eco-thrifty bus is resilience accompanied by regeneration.

Resilience, in this context, is the ability to withstand a pulse. It does not happen by accident. It can be designed, built and managed. Resilience only matters 0.0001% of the time, but when it matters it really matters. Resilient homes stand up to earthquakes and hurricanes. Resilient farms stand up to major rain events and extended droughts. Resilient communities withstand economic downturns and ‘natural disasters’.

Regeneration, in this context, is about getting better, stronger, more resilient over time. Regenerative farms grow food while building soil fertility, reducing erosion, storing carbon, managing storm water, and increasing biological diversity. Regenerative communities reduce crime, domestic violence, drug abuse, and suicide rates while keeping wealth and resources circulating locally. They improve quality of life while shrinking energy use, pollution and wealth inequality.

From these perspectives Costa Rica is a good, albeit imperfect, case study. It is, however, about the best example we can find and has the data to show long-term consistently high quality of life.

Pura Vida trumps Koyaanisqatsi.

Debt Rattle July 30 2017

Jul 302017

July 30, 2017 Posted by Raúl Ilargi Meijer at 8:33 am Finance Tagged with: collusion, Dow, leasehold, refugees, resilience, tarsands, time bomb, tweets, VIX, WaPo, zombie Comments Off

Gertrude Käsebier Young negro woman, Newport, Rhode Island 1902

• Wall Street Isn’t Ready For A 1,100-Point Tumble In The Dow Industrials (MW)

• Dangerous Game: Shorting the VIX (Barron’s)

• Zombie Companies Littering Europe May Tie the ECB’s Hands for Years (BBG)

• Markets Relax Merrily on a Powerful Time Bomb (WS)

• US Economic Resilience Is An Exaggeration (DDMB)

• The Quest To Prove Collusion Is Crumbling (WaPo)

• What’s The Matter With Democrats – Thomas Frank (IBT)

• Decades From Now, They’ll Say He Had “The Tweets” (Jim Kunstler)

• Leasehold Tycoon Whose Firms Control 40,000 UK Homes (G.)

• Companies Abandon Nearly One Million Hectares of Alberta Oilsands (CP)

• EU Accused Of ‘Wilfully Letting Refugees Drown’ In The Mediterranean (Ind.)

And it never will be.

• Wall Street Isn’t Ready For A 1,100-Point Tumble In The Dow Industrials (MW)

The U.S. stock market has been on such a parabolic march higher that Wall Street investors may have forgotten what a typical, sharp downturn feels like. Indeed, much has been made about the lack of volatility. The CBOE Volatility Index otherwise known as the “fear gauge,” had been flirting with its lowest close on record, implying that market expectations for a sharp, sudden fall are near rock bottom, as the Dow Jones Industrial Average, S&P 500 and the Nasdaq Composite Index scale new heights. (The Dow notched a fresh record on Friday to end the week 1.2% higher.) The recent level of complacency permeating the market has pundits talking about the lack of 5% falls in the market—an occurrence that isn’t unusual in a normal market environment. However, a 5% tumble, while normal, isn’t that common either. It has occurred at least 75 times over the course of the blue-chip index’s, according to WSJ Market Data Group, using data going back to 1901.

The Dow, however, hasn’t experienced a 5% decline since 2011, and before that a 5% drop hadn’t happened since 2008, when there were 9 such drops: At this point, with the Dow just 200 points shy of 22,000, a 5% selloff would equate to a 1,100-point, one-day slide in the gauge. Is the market ready for that sort of sudden jolt lower, given the optics of a quadruple-digit downturn and how it might rattle investment psyche? Art Hogan, chief market strategist at Wunderlich Securities, doesn’t think so. “I would say no because we’re out of practice. Your usual standard garden-variety volatility just hasn’t been around, and we haven’t seen it for 12 months,” Hogan told MarketWatch. “Quiet markets have been the norm and not the exception and I think a major pullback is going to feel a whole lot larger for lack of experience and the numbers are larger,” he said.

Even a 2.5% drop in the Dow, adding up a 550-point decline, could be unsettling, market participants said. Those sorts of tumbles are far more frequent, with 564 such moves of that magnitude occurring in the Dow since 1901. The most recent slump of at least 2.5% was on June 24, 2016, when the Dow tumbled about 610 points, or 3.4%, a day after U.K. citizens voted to end the country’s membership in the EU. There were 3 falls for the Dow of at least 2.5% in 2015. Hogan said it is even hard to imagine what the landscape of the market would like in the face of a plunge of the same magnitude of the 1987 crash, when the Dow lost 22.6% of its value, or 508 points, in a single session. “That’s why it is hard for investors to think about it intuitively. We have no muscle memory for it. It’s hard to harken back to 30 years ago. We have been lulled to sleep,” he said.

What always happpens when everyone is on the same side of the boat.

• Dangerous Game: Shorting the VIX (Barron’s)

As stocks keep dancing around record highs, and the CBOE Volatility Index remains historically low, some investors are preparing for a violent end to one of the world’s most popular trades: shorting volatility. A one-day Standard & Poor’s 500 correction of 3% to 4% could force some funds that short futures on the index, such as the ProShares Short VIX Short-term Future s exchange-traded fund (ticker: SVXY) and the VelocityShares Daily Inverse VIX ST ETN (XIV), to cover their positions. That could make the VIX skyrocket. If the weighted-average of 30-day VIX futures sharply jumped—say by 80% in one day—it would, in turn, trigger an “acceleration event” that would force more funds to buy back short VIX futures contracts. Some VIX funds could face margin calls.

And a chain reaction would likely explode across the volatility spectrum and ultimately the stock market, pushing down share prices and boosting volatility further. So many institutional investors use strategies that increase portfolio leverage as equity volatility declines that Marko Kolanovic, JPMorgan’s top quantitative strategist, fears the markets are nearing a turning point. “While these strategies include concepts like ‘risk control’, ‘crisis alpha’, etc. in various degrees they rely on selling into market weakness to cut losses. This creates a ‘stop-loss order’ that gets larger in size and closer to the current market price as volatility gets lower,” Kolanovic wrote last week. The S&P 500’s realized volatility–the level that’s materialized already—is the lowest since 1966. That influences expectations for future, or implied, volatility.

In fact, CBOE Volatility Index levels are so meager that relatively small point moves can create big percentage changes, creating a major problem for VIX funds. “The one-day percentage change is a big deal in the VIX complex because the levered and inverse VIX ETFs and ETNs rebalance daily, based on the percentage change, and some of the thresholds for forced [unwinding of positions] are based on the percentage change. This is why lower volatility creates higher risk,” Christopher Metli, a Morgan Stanley quantitative derivatives strategist, recently warned clients.

But Draghi gets praised for saving the EU economy. Well, you can’t have it both ways. Decide.

• Zombie Companies Littering Europe May Tie the ECB’s Hands for Years (BBG)

Watch out for the zombies. The plethora of companies propped up by the ECB will limit policy makers’ ability to withdraw monetary stimulus that’s been supporting the continent’s bond market since the financial crisis, according to strategists at Bank of America. About 9% of Europe’s biggest companies could be classified as the walking dead, companies that risk collapse if the support dries up, according to the analysts. After the crash of Lehman Brothers sent global markets into a tailspin, a decade of easy-money policies gave breathing room for nations to get their balance sheets in check and allowed for a spirited revival in corporate profits. But as central bankers look to pull back stimulus for fear of overheating, the potentially grim outlook for vulnerable companies may give them pause, according to Bank of America.

“Monetary support in Europe over the last five years has allowed companies with weak profitability to continue to refinance their debt and stave off defaults,” analysts led by Barnaby Martin wrote in a note Monday. “This supports the point that our economists have been making: that the ECB will likely be very slow and patient in removing their extraordinary stimulus over the next year and a half.” The strategists classify zombies as non-financial companies in the Euro Stoxx 600 with interest-coverage ratios – earnings relative to interest expenses – at 1 or less. The thinking goes that companies in this category are particularly vulnerable to rising interest rates. About 6% of European companies had a coverage ratio of less than 1 on the eve of Lehman’s downfall, a %age that fell to as low as 5% in 2013 when the euro-area sovereign debt crisis cooled.

Zombies shot up to as high as 11% in June 2016 before easing in recent months. Energy companies, thanks to weak oil prices, and those based in southern Europe –particularly smaller firms faced with weak profit generation amid feeble growth – make up a disproportionate share of the zombie world, according to Bank of America. To be sure, different metrics tell different stories about the health of corporate leverage, with some investors citing growth projections and yardsticks like net debt to earnings as reasons bond buyers can be more sanguine. But the coverage ratio is particularly useful in projecting how companies can cover debt costs from their earnings as interest costs rise.

Leverage kills.

• Markets Relax Merrily on a Powerful Time Bomb (WS)

Stock and bond market leverage is everywhere. Some of it is transparent, such as NYSE margin debt which was $539 billion as of the June report. But the hottest form of stock and bond market leverage is opaque, offered by financial firms that usually don’t disclose the totals: securities-based loans (SBLs) — or “shadow margin” because no one knows how much of it there is. But it’s a lot. And it’s booming. These loans can be used for anything – pay for tuition, fix up that kitchen, or fund a vacation. The money is spent, the loan remains. When security prices fall, the problems begin. Finra, the regulator for brokerages, doesn’t track this shadow margin, nor does the SEC. Both, however, have been warning about the risks. No one knows the overall amount of this shadow margin, but some details have been reported:

Morgan Stanley had $36 billion of these loans on its balance sheet as of the end of 2016, up 26% from 2016, and more than twice the amount in 2013. • Bank of America Merrill Lynch had $40 billion in SBLs on the balance sheet at the end of 2016, up 140% from 2010; • UBS and Wells Fargo “also have made billions in such loans, people familiar with those banks” told the Wall Street Journal. Raymond James, Stifel Nicolaus… they’re all doing it. • Fidelity used to fund its own SBLs for its clients, but three years ago partnered with US Bancorp. • Even the little ones are trying to get their slice of the pie: In April, robo-advisory startup Wealthfront, with less than $6 billion, announced that it would offer SBLs to its clients.

And now Goldman Sachs, which has been offering SBLs to its 12,000 super-wealthy clients through its Private Banking unit — accounting “for more than half of the unit’s $29 billion in loans outstanding,” according to the Wall Street Journal — announced on Thursday that this wasn’t enough and that it is partnering with Fidelity Investments to spread these loans far and wide.

No. It’s an outright lie. Pure make believe.

• US Economic Resilience Is An Exaggeration (DDMB)

Are US Federal Reserve stress tests leading economic indicators? That certainly seems to be the case. Just ask Capital One. As of the first quarter, credit card loss provisions at Capital One were above 5%, a six-year high. The company recorded some improvement for the second quarter, yet Fed stress tests of the bank’s overall loan portfolio in a deep downturn show losses topping 12%. That explains Capital One’s “conditional” passing score, a black eye that prompted a reduced share buy-back plan and no increase in its dividend. Most economists today applaud the resilience of the current recovery, which has stretched into its eighth year, the third-longest in postwar history. Resilience and rising household defaults, though, don’t tend to go hand in hand.

Pressures have been building in the background for some time. When adjusted for inflation, credit card usage has grown faster than incomes for 18 months. According to Fed data, that time frame coincides with the upturn in revolving credit, a proxy for credit card debt. In November 2015, outstanding revolving credit crossed above the $900-billion threshold for the first time since December 2009. By May of this year, annual growth was clocking 8.7%. Meanwhile, credit card balances hit $1.02 trillion, the highest level in almost eight years. Whether by choice or force, the aftermath of the financial crisis prompted households to ratchet back their usage of credit cards. As the recovery got underway, frugality prevailed, punctuated by an increase in debit card purchases.

It is thus notable that Bank of America data find debit card usage has weakened in recent years as households grew more comfortable rebuilding their credit card balances. “Confidence” is the term most associated with the rising credit card debt. But it’s fair to ask why confident households would choose to pay so dearly for the privilege. At 15.83%, the average rate on credit card balances is at a record high. It is more likely that households are increasingly tapping their credit cards to cover the cost of necessities, that they are less confident and more anxious about their future finances.

This should be presented as a major mea culpa by WaPo, but no, it’s not them, it’s “the media” who screwed up. NYT runs similar piece. WIll they all fit through the exit door at the same time?

• The Quest To Prove Collusion Is Crumbling (WaPo)

While everyone is fixated on President Trump’s unbecoming and inexplicable assault on Attorney General Jeff Sessions, the media has been trying to sneak away from the “Russian collusion” story. That’s right. For all the breathless hype, the on-air furrowed brows and the not-so-veiled hopes that this could be Watergate, Jared Kushner’s statement and testimony before Congress have made Democrats and many in the media come to the realization that the collusion they were counting on just isn’t there. As the date of the Kushner testimony approached, the media thought it was going to advance and refresh the story. But Kushner’s clear, precise and convincing account of what really occurred during the campaign and after the election has left many of President Trump’s loudest enemies trying to quietly back out of the room unnoticed.

Cable news airtime and in-print word count dedicated to the nonexistent collusion story appear to be dwindling. Democrats and their allies in the media seem less eager to talk about it, and when they do, they say something to the effect of “but, but, but … Kushner didn’t answer every question … He wasn’t under oath … There are still more witnesses … What about this or that new gadfly?” They are stammering. And it hasn’t taken long for news producers and editors to realize that the story is fading. At last, the story that never was is not happening. There are a few showstoppers from Kushner’s testimony that make it obvious to any fair-minded, thinking person that there was no collusion with Russia. In his own words, Kushner makes it clear that his actions were innocent but, at times, misguided and ill-conceived.

He plainly states he had “hardly any” contacts with Russians during the campaign and found his June 2016 meeting with Donald Trump Jr. and the infamous Russian lawyer to be an absolute “waste of time.” Democrats and their allies in the media have exhausted themselves building a scandalous narrative surrounding the Russian lawyer meeting, but according to Kushner, the meeting was so useless that he “actually emailed an assistant from the meeting after [he] had been there for ten or so minutes and wrote ‘Can u pls call me on my cell? Need excuse to get out of meeting.”’ Maybe the collusion didn’t take very long, or maybe he realized what the lawyer had to say was a useless farce and he wanted to get on with his day.

Much to the dismay of Trump’s haters, Kushner’s account of events even further proves just how far the media has stretched the collusion story. When the campaign received an official note of congratulations from Russian President Vladimir Putin the day after the election, Kushner had to send Dimitri Simes of the Center for the National Interest an email asking for the name of the Russian ambassador so that he could reach out and confirm the message’s authenticity. So, that’s that. If you can’t remember your handler’s name, you can’t be guilty of nefariously colluding with that person. How much collusion could Kushner have possibly done with someone whom he had so little communication with that he could not remember his name and did not know how to contact him?

From interview with David Sirota. Party has no future. Get out or go down with it.

• What’s The Matter With Democrats – Thomas Frank (IBT)

Basically, I think the Democratic party is in deep trouble. The evidence of that is now plain, I think, to everyone — that they’re in a state of historic wipe-out across the country and in both of Houses of Congress, and of course, they lost the presidency, too… The leadership of the party have persuaded themselves that they don’t really have a problem, that all they have to do is wait for [Donald] Trump to screw up and they’ll waltz right back in, and so they don’t have to do anything different. I think Trump represents the culmination of a long-term shift of working people, working-class people away from the Democratic Party.

[..] The way I look at it is that this is a long-term problem. This is a culmination of a very long-term problem with the Democrats very gradually, but definitely, abandoning the interests of working-class voters, identifying themselves instead with a more affluent group, with the affluent white-collar professionals. It starts in the 1970s with the Democrats removing organized labor from its structural position in the Democratic party, and then it goes up through Bill Clinton getting NAFTA done, the free trade deals that the Democrats have … By the way, in my opinion, free trade or the trade agreements, I should say, was probably the issue that if there was one issue that really did Hillary in, I think that’s what it was: the trade deals under the Clinton administration, Obama sort of dropping the ball on labor’s various issues, doing these incredible favors for Wall Street while he blew off the concerns of union.

[..] Bailouts. The Wall Street bailout was the worst. This was, of course, George W. Bush … No, take a step back further. The deregulation under Clinton. Do you remember, bank deregulation was something that we now think of it as one of the central elements of neoliberalism, but Reagan couldn’t get it done. Reagan tried. They put some dents in Glass Steagall when Reagan was president, but it took a Democrat to really get it done, Bill Clinton, and it wasn’t just blowing up Glass-Steagall. There was this whole series of bank deregulatory measures when he was president. By the end of his term in office, basically, Wall Street was more or less openly identified with the Democratic Party. This is an enormous historical shift…

The Democratic party [used to be] this sworn enemy of Wall Street. Franklin Roosevelt broke up all of these banks, the Glass Steagall Act, put all these banks out of business, and set up the Securities and Exchange Commission to regulate these guys, all of these regulatory measures. That’s the Democratic heritage. That’s the legacy of the New Deal. Up until the days of Clinton, that’s really who the Democratic Party was. They had a very populist tone, and they would never identify themselves with Wall Street. Barack Obama comes in, and I was one of these people who thought that he represented a turn back in the other direction and that he would be, very shortly would be, getting tough with Wall Street. He had all the bailouts were underway. He had total authority over these guys, and he didn’t do it. Instead, he appointed all these various Clinton people to come in and manage the bailout situation.

Like that line.

• Decades From Now, They’ll Say He Had “The Tweets” (Jim Kunstler)

I know I’m not the first to point out how Anthony Scaramucci, President Trump’s brand new Communications Director, is suddenly and eerily carrying on like his namesake, the arch-rascal / buffoon of the Old World Commedia dell’Arte in lashing out at his fellow scamps and bozos in the clown school that the White House has become. Of course, these antics only reflect the astounding violent vulgarity of current US culture in general, especially as it recursively re-amplifies itself in the distorting echo chamber of TV. It’s how we roll nowadays – right up the collective butt-hole of history until some fateful event provokes a last frightful purging of our own bullshit. Still, it was rather shocking to hear Scaramucci refer to White House Chief of Staff Rance Priebus as “a fucking paranoid schizophrenic” and Trump ultra-insider Steve Bannon as someone who “enjoys sucking his own cock.”

It’s kind of like Paulie Walnuts of “The Sopranos” wandered into the West Wing of “Veep.” Somebody’s gonna get whacked, and it’ll be a laugh-riot when it happens. We need a little comic relief in these midsummer horse latitudes of the mind as the ill-starred Trump Show appears to enter its ceremonial death dance. There’s also something satisfyingly Napoleonesque about Scaramucci. Here’s a guy who cuts through the odious blubber of US politics right to the bone of things with a flensing blade of profane righteousness. Personally, I’d like to see him take some whacks at a few more deserving targets, and I can even imagine a somewhat farfetched scenario where the little guy shoves Trump out during a concocted national emergency and manages to declare himself First Citizen, or some such innovative title allowing him to run things for a while – say, until the generals toss him out a window.

Or maybe he’ll last less than a week in his current position. I would not be surprised, either, if Mr. Bannon beats little Mooch to death with an Oval Office fireplace poker right in front of the Golden Golem of Greatness himself. The mills of the gods grind slowly, but they grind exceedingly fine – in this case, inexorably toward the restorative medicine of the 25th amendment. There is, after all, that hoary old artifact called the national interest lurking somewhere offstage aside of all this colorful mummery, especially as the Russian Meddling gambit appears to be dribbling away to nothing. It’s more than self-evident that poor Trump is in so far over his head that he’s come down with something like the bends, a debilitating systemic disorder rendering him unfit to execute the powers of office. Decades from now, they’ll say he had “the tweets.”

You do know you live in a feudal society, right?

• Leasehold Tycoon Whose Firms Control 40,000 UK Homes (G.)

He does not appear on any rich list but he has built a property empire that rivals that of the Duke of Westminster. Companies controlled by James Tuttiett, aged 53, have quietly snapped up the freeholds of tens of thousands of houses and flats in almost every city in Britain, which are now at the centre of controversy over spiralling ground rents. The scale of Tuttiett’s property empire has never been previously disclosed. Documents at Companies House reveal that he is frequently the sole director of companies that own the freehold of large-scale developments in Newcastle, Birmingham, Leeds, Coventry and London. Leaseholders are obliged to pay ground rents to his company, E&J Estates, that in some cases will soar to £10,000 a year per home.

The government this week proposed a ban on new-build leaseholds, and said ground rents on new apartments should fall towards zero. At the launch of an eight-week consultation, the communities secretary, Sajid Javid, said: “It’s clear that far too many new houses are being built and sold as leaseholds, exploiting homebuyers with unfair agreements and spiralling ground rents.” “Enough is enough. These practices are unjust, unnecessary and need to stop,” said Javid, adding on BBC Radio 4’s Today programme that ground rent had been used “as an unjustifiable way to print money”. [..] Research by Guardian Money found an extraordinary web of 85 ground rent companies controlled by Tuttiett, where the freeholds include not just homes but also schools, health clubs and petrol stations.

In 2016 one of these 85 companies, SF Funding Ltd, recorded an £80m increase in the value of its ground rents from the year before, taking them to £267.4m. Tuttiett is the sole director of the company, which has no other employees. The financing of Tuttiett’s property empire is helped by low-interest loans totalling £336m made by an insurance company, Rothesay Life, spun out of Goldman Sachs, in which the US investment bank remains the largest shareholder. Among the Rothesay Life loans made to E&J is one at £128m with a stated interest rate of just 0.95% a year, although it is understood the real rate paid is likely to be higher. The existence of the Rothesay loans opens a back door into Tuttiett’s interests, as Companies House lists all the properties over which Rothesay has a charge.

Lenders are getting out. But not because they care about the earth.

• Companies Abandon Nearly One Million Hectares of Alberta Oilsands (CP)

In another sign the bloom is off the boom for the oilsands, the industry has returned almost one million hectares of northern Alberta exploration leases to the province over the past two years. The total area covered by oilsands leases remained constant at about nine million hectares between 2011 and 2014. But it fell to 8.5 million hectares in 2015 and 8.1 million in 2016, following the crash in world oil prices from over US$100 to under $60 per barrel in 2014. Most of the returned acreage either represents expired or surrendered leases, according to Alberta Energy. Observers were surprised by the size of the lease returns which they attributed to industry cost-cutting and disinterest in spending to develop new prospects when there’s no money to build projects already on the books.

“It costs money to maintain these lands,” said Brad Hayes, president of Petrel Robertson Consulting in Calgary. “You can’t convince shareholders to continue to put that money out if there’s no prospect for success.” Alberta’s oilsands have been getting little respect lately, thanks to the exit of large foreign companies, the province’s hard cap on oilsands emissions, increasing carbon taxes and the stumbling price of crude oil. Its troubles have been welcomed by environmentalists who point out the industry’s outsized impact on air, land and water pollution. “This is good news. It’s a sign that investment dollars are shifting out of carbon-intensive energy,” said Keith Stewart, senior energy strategist with Greenpeace Canada.

Feels like all they do is try to create an ever bigger mess. Throw in another €100 million and say: We tried!

• EU Accused Of ‘Wilfully Letting Refugees Drown’ In The Mediterranean (Ind.)

Aid workers have accused the EU of “wilfully letting people drown in the Mediterranean” as they face being forced to suspend rescue missions for refugees attempting the world’s deadliest sea crossing. Italy is attempting to impose a code of conduct on NGOs operating ships in the search and rescue zone off the coast of Libya, which is now the main launching point for migrants trying to reach Europe on smugglers’ boats. Humanitarian groups have argued the code will impede their work by banning the transfer of refugees to larger ships, which allows vessels to continue rescues, and forcing them to allow police officers on board. A revised code of conduct is expected to be presented by the Italian interior ministry on Monday, following meetings between officials and NGOs.

The 11-point plan, which has been approved by the European Commission and border agency Frontex, could see any groups refusing to sign up denied access to Italian ports or forbidden from carrying out rescues. They are currently deployed by officials at Rome’s Maritime Rescue and Coordination Centre (MRCC) and charities fear any move to restrict their operations, leaving just Italian coastguard and naval ships, will dramatically reduce rescue capacity during peak season. German charity Sea-Watch announced the deployment of a second rescue vessel in response to the plans, which it called a “desperate reaction” by a country abandoned on the frontline of the refuge crisis by its European allies. “The EU is wilfully letting people drown in the Mediterranean by refusing to create a legal means of safe passage and failing to even provide adequate resources for maritime rescue,” said CEO Axel Grafmanns.

“The NGOs are currently bearing the brunt of the humanitarian crisis and they are being left alone.” Médecins Sans Frontières (MSF), which has staff on two rescue ships, said it was engaging with Italian authorities in an “open and constructive way” over the proposed code but had serious concerns over several clauses. “MSF employees are humanitarian workers, not police officers, and that for reasons of independence they will do what is strictly requested by the law but nothing more so as to protect our independence and neutrality,” a spokesperson said.

Debt Rattle July 23 2017

Jul 232017

July 23, 2017 Posted by Raúl Ilargi Meijer at 8:10 am Finance Tagged with: carbon farming, EU, Fukushima, LNG, Poland, recovery, refugees, resilience, sanctions, Syria, tenants, Trump 1 Response »

Vincent van Gogh Women Picking Olives 1889

• Lock Them Up! (David Stockman)

• This Recovery Isn’t All That Resilient (DDMB)

• Is Productivity Growth Becoming Irrelevant? (Adair Turner)

• EU Sounds Alarm, Urges US To Coordinate On Russia Sanctions (R.)

• EU Will Hit Poland With Deadline To Reverse Curbs On Judicial Freedom (G.)

• EU’s Car Regulator Warns Against Car Diesel Ban In Cities (R.)

• 100 British Tenants A Day Lose Homes On Rising Rents And Benefit Freeze (G.)

• Australia and Its Volatile Future as an LNG Superpower (Nikkei)

• Fukushima Robot Images: Massive Deposits Thought To Be Melted Nuclear Fuel (G.)

• US Continues Supporting Terrorists in Syria (Lendman)

• Meow (Jim Kunstler)

• Europe Seeks Long-Term Answer To Refugee Crisis That Needs Solution Now (G.)

• Indigenous Australians Take Carbon Farming To Canada (G.)

Watch out. Stockman’s had enough.

• Lock Them Up! (David Stockman)

We frequently hear people say they have nothing to hide—-so surrendering privacy and constitutional rights to the Surveillance State may not be such a big deal if it helps catch a terrorist or two. But with each passing day in the RussiaGate drama we are learning that this superficial exoneration is dangerously beside the point. We are referring here to the unrelenting witch hunt that has been unleashed by Imperial Washington against the legitimately elected President of the United States, Donald J. Trump. This campaign of lies, leaks and Russophobia is the handiwork of Obama’s top national security advisors, who blatantly misused Washington’s surveillance apparatus to discredit Trump and to effectively nullify America’s democratic process.

That is, constitutional protections and liberties were systematically breached, but not simply to intimidate, hush or lock up citizens one by one as per the standard totalitarian modus operandi. Instead, what has happened is that the entire public debate has been hijacked by the shadowy forces of the Deep State and their partisan and media collaborators. The enabling culprits are Obama’s last CIA director, John Brennan, his national security advisor Susan Rice and UN Ambassador Samantha Power. There is now mounting evidence that it was they who illegally “unmasked” NSA intercepts from Trump Tower; they who confected the Russian meddling narrative from behind the protective moat of classified intelligence; and they who orchestrated a systematic campaign of leaks and phony intelligence reports during the presidential transition—-all designed to delegitimize Trump before he even took the oath of office.

So all three of them should be locked up -that’s for sure. But the more urgent solution would be to unlock and make public all the innuendo, surmises, assessments, half-truths and boilerplate intelligence chatter on which the entire false narrative about Russian meddling and collusion is based. Stated differently, without the nation’s massive intelligence apparatus and absurd system of secrecy and classified information to hide behind, the RussiaGate witch hunt would have never gotten off the ground. In truth, as we will essay below, there is no there, there. So what this new chapter in McCarthyite hysteria actually demonstrates is that the Imperial City’s far-flung, 17-agency, $75 billion Intelligence Behemoth is a plenary threat not just to individual liberty, but to the very constitutional democracy on which the latter depends.

To appreciate the severity of the threat, it is necessary to recognize that the post-9/11 Deep State has lowered a double whammy on our system. That is, it unconstitutionally collects the entirety of all internet based communications of America’s 325 million citizen, while at the same time it has effectively disenfranchised 98% of the 535 members of the House and Senate who have been elected to represent them. Accordingly, behind the Surveillance State’s vast wall of secrecy and so-called “classified” information, there operates a Dark Government that is unaccountable to the public and largely unconstrained by normal constitutional limits, which the Patriot Act and secret FISA courts have more or less suspended. [..] Unfortunately, the Donald doesn’t seem to recognize that he is actually President. If he did, he would have the Justice Department launch a prosecution against the faithless officials—-Brennan, Rice and Power—-who concocted the whole RussiaGate defamation in the first place.

No, Danielle. It’s not about resilience. It’s simply not a recovery. No series of numbers, no matter how impressive looking can change that.

• This Recovery Isn’t All That Resilient (DDMB)

Are Federal Reserve stress tests leading economic indicators? That certainly seems to be the case. Just ask Capital One. As of the first quarter, credit card loss provisions at Capital One were above 5%, a six-year high. The company recorded some improvement for the second quarter, yet Fed stress tests of the bank’s overall loan portfolio in a deep downturn show losses topping 12%. That explains Capital One’s “conditional” passing score, a black eye that prompted a reduced share buyback plan and no increase in its dividend. Most economists today applaud the resilience of the current recovery, which has stretched into its eighth year, the third-longest in postwar history. Resilience and rising household defaults, though, don’t tend to go hand in hand. Pressures have been building in the background for some time.

When adjusted for inflation, credit card usage has grown faster than incomes for 18 months. According to Fed data, that time frame coincides with the upturn in revolving credit, a proxy for credit card debt. In November 2015, outstanding revolving credit crossed above the $900-billion threshold for the first time since December 2009. By May of this year, annual growth was clocking 8.7%. Meanwhile, credit card balances hit $1.02 trillion, the highest level in almost eight years. Whether by choice or force, the aftermath of the financial crisis prompted households to ratchet back their usage of credit cards. As the recovery got underway, frugality prevailed, punctuated by an increase in debit card purchases. It is thus notable that Bank of America data find debit card usage has weakened in recent years as households grew more comfortable rebuilding their credit card balances.

“Confidence” is the term most associated with the rising credit card debt. But it’s fair to ask why confident households would choose to pay so dearly for the privilege. At 15.83%, the average rate on credit card balances is at a record high. It is more likely that households are increasingly tapping their credit cards to cover the cost of necessities, that they are less confident and more anxious about their future finances. The latest University of Michigan consumer confidence data suggest anxiety is indeed setting in. At 80.2, the expectations component is at the lowest since October and running below the 2016 average of 81.8.

Productivity in a so-called service economy. A mirage.

• Is Productivity Growth Becoming Irrelevant? (Adair Turner)

Our standard mental model of productivity growth reflects the transition from agriculture to industry. We start with 100 farmers producing 100 units of food: technological progress enables 50 to produce the same amount, and the other 50 to move to factories that produce washing machines or cars or whatever. Overall productivity doubles, and can double again, as both agriculture and manufacturing become still more productive, with some workers then shifting to restaurants or health-care services. We assume an endlessly repeatable process. But two other developments are possible. Suppose the more productive farmers have no desire for washing machines or cars, but instead employ the 50 surplus workers either as low-paid domestic servants or higher-paid artists, providing face-to-face and difficult-to-automate services.

Then, as the late William Baumol, a professor at Princeton University, argued in 1966, overall productivity growth will slowly decline to zero, even if productivity growth within agriculture never slows. Or suppose that 25 of the surplus farmers become criminals, and the other 25 police. Then the benefit to human welfare is nil, even though measured productivity rises if public services are valued, as per standard convention, at input cost. The growth of difficult-to-automate service activities may explain some of the productivity slowdown. Britain’s flat productivity reflects a combination of rapid automation in some sectors and rapid growth of low-productivity, low-wage jobs – such as Deliveroo drivers riding around on plain old-fashioned bicycles. In the United States, the Bureau of Labor Statistics reports that eight of the ten fastest-growing job categories are low-wage services such as personal care and home health aides.

The growth of “zero-sum” activities may, however, be even more important. Look around the economy, and it’s striking how much high-talent manpower is devoted to activities that cannot possibly increase human welfare, but entail competition for the available economic pie. Such activities have become ubiquitous: legal services, policing, and prisons; cybercrime and the army of experts defending organizations against it; financial regulators trying to stop mis-selling and the growing ranks of compliance officers employed in response; the huge resources devoted to US election campaigns; real-estate services that facilitate the exchange of already-existing assets; and much financial trading. Much design, branding, and advertising activity is also essentially zero-sum. It is certainly good that new fashions can continually compete for our attention; choice and human creativity are valuable per se. But we have no reason to believe that 2050’s designs and brands will make us any happier than those of 2017.

The new House sanctions under fire from Merkel AND Trump.

• EU Sounds Alarm, Urges US To Coordinate On Russia Sanctions (R.)

The European Union sounded an alarm on Saturday about moves in the U.S. Congress to step up U.S. sanctions on Russia, urging Washington to keep coordinating with its G7 partners and warning of unintended consequences. In a statement by a spokeswoman after Republicans and Democrats in the U.S. Congress reached a deal that could see new legislation pass, the European Commission warned of possibly “wide and indiscriminate” “unintended consequences”, notably on the EU’s efforts to diversify energy sources away from Russia. Germany has already warned of possible retaliation if the United States moves to sanction German firms involved with building a new Baltic pipeline for Russian gas.

EU diplomats are concerned that a German-U.S. row over the Nord Stream 2 pipeline being built by Russia’s state-owned Gazprom could complicate efforts in Brussels to forge an EU consensus on negotiating with Russia over the project. “We highly value the unity that is prevailing among international partners in our approach towards Russia’s action in Ukraine and the subsequent sanctions. This unity is the guarantee of the efficiency and credibility of our measures,” the Commission said in its statement. “We understand that the Russia/Iran sanctions bill is driven primarily by domestic considerations,” it went on, referring to a bill passed in the U.S. Senate last month and to which lawmakers said on Saturday they had unblocked further obstacles.

“As we have said repeatedly, it is important that any possible new measures are coordinated between international partners to maintain unity among partners on the sanctions that has been underpinning the efforts for full implementation of the Minsk Agreements,” the Commission said, referring to an accord struck with Moscow to try to end the conflicts in Ukraine. “We are concerned the measures discussed in the U.S. Congress could have unintended consequences, not only when it comes to Transatlantic/G7 unity, but also on EU economic and energy security interests. This impact could be potentially wide and indiscriminate, including when it comes to energy sources diversification efforts.

The heavy hand tactics will backfire at some point, it’s just a matter of time.

• EU Will Hit Poland With Deadline To Reverse Curbs On Judicial Freedom (G.)

The EU is expected to give Poland’s rightwing government until September to reverse a controversial set of laws that give the country’s politicians control over its supreme court. The Polish senate defied international condemnation early on Saturday and mass demonstrations in Warsaw to approve a law that allows the firing of its current supreme court judges, except those chosen by the justice minister and approved by the president. Protests continued in Poland on Saturday. But despite increasing dismay at developments, the European commission knows it needs time to build support before moving towards what is regarded as the nuclear option – of suspending a country’s voting rights in the EU for the first time. Last week the first vice-president of the EU’s executive, Frans Timmermans, warned that Brussels was “very close” to triggering the sanction, which would spark a major confrontation with one of the EU’s most populous member states.

The legislation passed on Saturday is only one of a series of contentious legal reforms being pursued by the ruling Law and Justice party (PiS) which have prompted thousands to take to the streets in protest against what many claim is the death of Polish democracy. The new law gives the president the power to issue regulations for the supreme court’s work. It also introduces a disciplinary chamber that, on a motion from the justice minister, would handle suspected breaches of regulations or ethics. The law now requires only the signature of the president, Andrzej Duda, who was previously a member of PiS, to become binding. With Brexit negotiations in full flow, there is unease in Brussels at taking any action that could be seen as heavy-handed in relation to a member state.

With the EU engaged in a difficult balancing act, it is understood Timmermans will suggest at a meeting of commissioners on Wednesday that Poland be given until the next general affairs council of EU ministers, on 25 September, to respond to claims that its measures are a systemic threat to the rule of law. While Poland has ignored the commission when it has previously set deadlines on this issue, the move would at least give the commission the summer months to garner the support required to impose tough sanctions. The EU believes, however, that it will be in a position to launch two infringement proceedings against Poland as soon as this week, in an attempt to slow the country’s drift towards what Brussels regards as authoritarianism.

[..] The Hungarian prime minister, Viktor Orbán, said on Saturday that Budapest would fight to defend Poland. “The inquisition offensive against Poland can never succeed, because Hungary will use all legal options in the European Union to show solidarity with the Poles,” he said.

So both Berlin and brussels are in bed with the automakers. Lovely.

I have a question: why are cities full of cars in the first place?

• EU’s Car Regulator Warns Against Car Diesel Ban In Cities (R.)

Banning diesel cars in European cities could hamper automakers’ ability to invest in zero-emission vehicles, the European Union’s commissioner for industry has warned the bloc’s transport ministers. In a letter seen by Reuters, Commissioner Elzbieta Bienkowska said there would be no benefit in a collapse of the market for diesel cars and that the short-term focus should be on forcing carmakers to bring dangerous nitrogen oxide emissions into line with EU regulations. “While I am convinced that we should rapidly head for zero-emission vehicles in Europe, policymakers and industry cannot have an interest in a rapid collapse of the diesel market in Europe as a result of local driving bans,” Bienkowska said. “It would only deprive the industry of necessary funds to invest in zero-emissions vehicles,” she said in the letter, dated July 17.

Germany’s three major carmakers have invested heavily in diesel technology, which offers more efficient fuel burn and lower carbon dioxide emissions than gasoline-powered cars. But since Volkswagen admitted in 2015 to cheating on U.S. emissions tests, worries about vehicle pollution have left the entire auto industry under scrutiny. A particular concern is emissions by diesel cars of nitrogen oxide, which is blamed for causing respiratory diseases. In the letter, Bienkowska told ministers she was concerned that the latest emissions violations at Audi and Porsche (PSHG_p.DE) were discovered by prosecutors and not Germany’s vehicle and transport authorities. Bienkowska’s letter also called for all cars with excessively high levels of nitrogen oxide emissions to be taken of European roads, but said carmakers should act on a voluntary basis. The commissioner did raise the prospect of an EU testing agency if national regulators failed to spot more emissions-test cheats.

Once again: what a society. Makeover!

• 100 British Tenants A Day Lose Homes On Rising Rents And Benefit Freeze (G.)

A record number of renters are being evicted from their homes, with more than 100 tenants a day losing the roof over their head, according to a shocking analysis of the nation’s housing crisis. The spiralling costs of renting a property and a long-running freeze to housing benefit are being blamed for the rising number of evictions among Britain’s growing army of tenants. More than 40,000 tenants in England were evicted in 2015, according to a study by the Cambridge Centre for Housing and Planning Research for the Joseph Rowntree Foundation (JRF). It is an increase of a third since 2003 and the highest level recorded. The research appears to confirm fears that a mixture of rising costs and falling state support would lead to a rise in people being forced out of their homes. It will raise concerns that even those in work are struggling to pay their rent.

High numbers of “no-fault” evictions by private landlords is driving the increase. More than 80% of the extra evictions had occurred under a Section 21 notice, which gives a tenant two months to leave. The landlord does not have to give a reason and there does not need to be any wrongdoing on the part of the tenant. The study found that changes in welfare benefits have combined to make rents unaffordable to claimants in many areas. Housing benefit was no longer covering the cost of renting in some cases, with average shortfalls ranging from £22 to £70 a month outside of London, and between £124 and £1,036 in inner London. Housing benefit has not risen in line with private rents since 2010, and a current freeze means the rates paid will not increase until 2020. A series of interviews with private renters who are struggling to meet their bills exposed the pressure some low-paid tenants are now under.

One man said that the £50 shortfall he had suffered was “almost a week’s money in itself”. “And then you’ve got the other bills…I just couldn’t make it work. I had to choose, what do I pay this month – do I pay the rent? Do I pay the electricity? Do I buy some food? And it just snowballed.” A single mother in her 20s said: “I paid it as much as I could, but my youngest child has been quite sickly … If my kids are sick, I don’t get paid.” The problem is particularly acute in London and the south-east. Four out of every five repossessions using Section 21 orders are in London, the east of England and the south-east. Nearly two-thirds are in London. Within the city, Section 21 repossessions are concentrated in the boroughs of Newham, Enfield, Haringey, Brent and Croydon. Of the 40,000 evictions, there were 19,019 repossessions in the social housing sector, and 22,150 in the private rented sector.

Burn baby burn! But not all of it. Maybe. Or not right now.

• Australia and Its Volatile Future as an LNG Superpower (Nikkei)

Australia is expected to overtake Qatar to become the world’s largest exporter of liquefied natural gas in 2019, but a political risk has emerged that is casting a dark cloud over the resource-rich nation’s future as an LNG export superpower. The government of Prime Minister Malcolm Turnbull introduced a new energy policy this month to prioritize the domestic gas supply and regulate LNG exports. Australian oil and gas major Santos has seen its stock price decline as the company is expected to be subjected to the regulations as early as next year. Australia’s conservative ruling coalition, whose approval rating is languished since a narrow election win a year ago, is aiming to allay public discontent with rising electricity and gas bills. But the new energy policy has sparked confusion across corporate Australia.

On April 27, the Turnbull government announced the introduction of the Australian Domestic Gas Security Mechanism, or ADGSM. According to details released on June 20, the Australian resources minister every summer will discuss plans for the following year’s domestic g

as supplies by consulting gas companies, industry regulators and other parties. The resources minister is to then determine by Sept. 1 – or Nov. 1 at the latest – whether the country will face a gas shortage the following year. LNG export controls will be imposed in the event of a supply shortage at home. Three LNG projects in the eastern state of Queensland will be subject to the new regulations for the time being. They are the world’s first projects to extract coal bed methane, also known as coal seam gas in Australia, and export the gas in the form of LNG.

The three LNG projects, which include the Santos-operated Gladstone LNG, or GLNG, project, went on stream over 2014 and 2015 in anticipation of swelling Asian demand. They have a combined annual production capacity of 25.3 million tons. The resources minister is to take into account the volume of exports and that of domestic shipments from each project and determine whether each project is denting the domestic supply, including through emergency procurements for export purposes. If any of the projects is deemed to be harming domestic supplies, the project operator will be required to take measures, such as cutting exports and increasing domestic shipments.

Fukushima. Where robots go to die.

• Fukushima Robot Images: Massive Deposits Thought To Be Melted Nuclear Fuel (G.)

Images captured by an underwater robot on Saturday showed massive deposits believed to be melted nuclear fuel covering the floor of a damaged reactor at Japan’s destroyed Fukushima nuclear plant. The robot found large amounts of solidified lava-like rocks and lumps in layers as thick as 1m on the bottom inside a main structure called the pedestal that sits underneath the core inside the primary containment vessel of Fukushima’s Unit 3 reactor, said the plant’s operator, Tokyo Electric Power Co. On Friday, the robot spotted suspected debris of melted fuel for the first time since the 2011 earthquake and tsunami caused multiple meltdowns and destroyed the plant. The three-day investigation of Unit 3 ended on Saturday.

Locating and analysing the fuel debris and damage in each of the plant’s three wrecked reactors is crucial for decommissioning the plant. The search for melted fuel in the two other reactors has so far been unsuccessful because of damage and extremely high radiation levels. During this week’s probe, cameras mounted on the robot showed extensive damage caused by the core meltdown, with fuel debris mixed with broken reactor parts, suggesting the difficult challenges ahead in the decades-long decommissioning of the plant. TEPCO spokesman Takahiro Kimoto said it would take time to analyse the debris in the images to figure out removal methods.

Will the CIA destroy Trump and Putin’s ceasefire?

• US Continues Supporting Terrorists in Syria (Lendman)

It’s naive to believe otherwise. It’s central to US strategy since launching war for regime change. Tactics alone changed from then to now, not Washington’s objective – allied with Israel and other rogue states to topple Syria’s legitimate government. In response to Trump’s announced end to covert CIA-arming and training of so-called “moderate rebels” (aka terrorists like all other anti-government groups), Russia’s Information and Press Department deputy director Artyom Kozhin said the following: “We have not heard anything regarding this decision from the official sources. Neither do we know about the status of other similar programs that could be implemented by other US agencies.” “(W)e have expressed how we feel when it comes to the US flirting with militants in Syria more than once. We have forewarned that this flirtation could have unpredictable military and political consequences.”

“We repeatedly pointed to the Americans’ unscrupulous actions taken in Syria in the pursuit of their self-seeking geopolitical interests.” “It is an open secret that a substantial number of militants who have been trained under the US Train and Equip program ultimately joined ISIS and al-Nusra.” “We regard this as a repetition of the tragic story of Afghanistan and Libya. The potential consequences of this should be obvious to everyone.” On Friday, Sergey Lavrov minced no words, saying Washington continues arming anti-government terrorist groups in Syria, euphemistically called the moderate opposition. It has illegal bases in the country, established without Security Council or Damascus authorization. According to CENTCOM commander General Joseph Votel, US forces will remain in Syria after the battle for Raqqa is over – on the phony pretext of stabilizing the region.

Washington wants northern Syrian territory occupied, along with other areas it’s able to gain control over – a scheme risking direct confrontation with Russia and Damascus. Trump wants increased funding for US military bases in Iraq and Syria, reflecting plans for permanent (illegal) US occupation. Saying it’s to continue combating ISIS is willful deception, concealing America’s support for the terrorist group and likeminded ones. On July 19, Russia’s upper house Federation Council ratified a January protocol agreed on in Damascus to establish the legal presence of Russian aerial forces and support personnel in Syria for 49 years – to be automatically extended for subsequent 25-year periods. The move aims to secure and protect Syrian sovereignty. It continues longstanding mutually cooperative bilateral relations. It signifies Russia’s intention to challenge US, NATO and Israeli imperial designs on the country.

” And then the US Treasury will destroy the dollar trying (again) to save the banks. And the bank accounts will be frozen. And the loans will stop being paid.”

• Meow (Jim Kunstler)

I’d actually go further now than the “soft coup d’état” scenario that has Trump run over by the 25th amendment. It will happen, of course, but it will not satisfy anybody. Mike Pence will prove to be as ineffectual and unpopular as Trump, and he will be drowning in financial and fiscal problems, and he will get no help from the legislature in resolving any of it, and before too long there may be a general in the White House – or attempting to run things from someplace else, if he can. The whole nauseating spectacle will be attended by violent popular revolt of region against region and tribe against tribe in a great civil explosion of long-suppressed angst. Too many nasty forces are vectoring in on the scene to overthrow the dream state America has been languishing in.

Most of them involve money (or “money”) and the questions of how can we possibly keep paying for the way we live in this country, and who exactly has been fobbing off with the former wealth of every rusted and busted community in the land? It’s going to start in the stock and bond markets and it will be soon. And then the US Treasury will destroy the dollar trying (again) to save the banks. And the bank accounts will be frozen. And the loans will stop being paid. And the SNAP cards are going to stop working, and pretty soon the just-in-time deliveries to the supermarkets, and the resupply to the gas stations, and there won’t be much that Mike Pence can do about it. He’ll be shoved aside and the military will have to try to restore order in the land. When they do, it will not be the same land we sang about back in the fifth grade. Up in a cloud somewhere over Ohio, maybe, Schrödinger’s Cat will be gazing down on us, grinning.

Europe only seeks a way to not have to deal with it.

• Europe Seeks Long-Term Answer To Refugee Crisis That Needs Solution Now (G.)

European efforts to deal with the influx, hastily enacted two years ago at the height of Syria’s civil war, are faltering. A burden-sharing deal agreed by all 28 EU states in 2015, when Germany took nearly 1 million people, has arguably never worked. Of 160,000 refugees due to be accepted under the scheme, fewer than 21,000 have been relocated. Europe is split down the middle. Poland and Hungary have refused to take anyone. The Czech Republic initially accepted 12 people but has since slammed the door. The European commission has begun legal action against all three. Italy and Greece, so-called “frontline states”, are at odds with their northern neighbours, notably France and Austria. Dashing hopes of a new approach, the new French president, Emmanuel Macron, is proving inflexible on the issue.

As we report today, hundreds of migrants are effectively kettled in Ventimiglia on the Italian side of the border with France. Paris is preventing vessels carrying rescued migrants docking in French ports. Nor has France met its share of the European Union relocation quota. Austria is paying refugees to leave, amid a rise in far right and neo-Nazi attacks. The Vienna government says it will close the Brenner Pass if Italy issues temporary travel visas for the migrants. The Italian government, facing elections in 2018 and under pressure from the populist Five Star movement opposition, is furious about perceived French hypocrisy. “After saying they understand our problem, it doesn’t seem like France wants to help us concretely … we need more solidarity,” says Mario Giro, Italy’s deputy foreign minister.

The new refugee crisis is playing into a bigger, EU-wide battle about respect for national sovereignty. Hungary’s rightwing prime minister, Viktor Orbán, says he will “not give in to blackmail from Brussels”. Poland says the EU relocation scheme encourages more migrants, arguing most refugees do not genuinely fear persecution but are economic migrants seeking a better life. [..] Confusion and division also characterise Europe’s policy towards Libya, the main stepping-off point for migrants. Much of Libya is ungoverned following the US, British and French-backed overthrow of Muammar Gaddafi’s regime in 2011, and UN-led efforts to restore order are floundering. Overwhelmed by sheer numbers, Italy has been trying to limit its at-sea rescue efforts. But as elsewhere, political and humanitarian responses are in conflict.

About 3,000 people from Libya were picked up in one day in May in more than 20 rescue operations mounted by the Italian coastguard and navy, ships from the EU’s Mediterranean mission, its Frontex border agency, and merchant vessels. Merkel was widely praised for her open-door response in 2015 but public attitudes have hardened, and she faces a general election in September. Her focus now is her new “compact with Africa”, showcased at the Hamburg G20 summit, which seeks more state and private investment in Africa to combat poverty and the effects of climate change, and thereby deter mass migration to Europe. But Merkel’s solution is long-term. Europe’s new refugee crisis is happening now, as British beach-goers may soon testify.

Love it. The wiser peoples of the world working together.

• Indigenous Australians Take Carbon Farming To Canada (G.)

Australia’s world-leading Indigenous land management and carbon farming programs are spreading internationally, with a formal agreement signed to help build a similar program in Canada. A chance meeting between Rowen Foley from the Aboriginal Carbon Fund and a Candian carbon credit businessman at the 2015 Paris climate conference spawned a relationship that led to an agreement this week that will help Canadian First Nations peoples learn from the Australian Aboriginal carbon farming success. “Sometimes chance meetings are a form of karma or synchronicity at play,” Foley says. Foley set up the Aboriginal Carbon Fund in 2010 to help other Indigenous organisations make money by managing land in such a way that it sequesters carbon in the soil.

One of the most successful types of Indigenous carbon farming in Australia has been savannah burning, in which regular small fires are lit, replicating ancient Aboriginal practices and helping to prevent larger fires that release more carbon dioxide into the atmosphere. The projects are often managed by workers in the Indigenous ranger program, which a recent government review concluded were enormously effective, increasing employment, building stronger communities and reducing violence, while also increasing income tax and reducing welfare payments. “Sustainable Indigenous land management, such as savannah burning, not only reduces carbon emissions but also builds communities by offering meaningful jobs for local traditional owners as rangers and an independent income,” Foley says.

One project – run by the Karlantijpa North Kurrawarra Nyura Mala Aboriginal Corporation – was awarded a contract for carbon credits under the Australian government’s Emissions Reduction Fund. By burning the savannah early in the season, it secured payments for sequestering 24,100 tonnes of carbon, in an auction where the average value for such abatement would have been $257,629. The Aboriginal Carbon Fund works with similar groups to produce carbon credits that can be bought by corporations as carbon offsets. Now the lessons learned in Australia are set to be taken to Canada, with an agreement between the Aboriginal Carbon Fund and the Canadian First Nations Energy and Mining Council. “It feels like the idea is coming of age,” Foley says.

Foley travelled to Vancouver to meet David Porter, the chief executive of the First Nations Energy and Mining Council, to sign the agreement. It notes the “strong similarities” between the First Peoples of Canada and the Indigenous people of Australia in relation to land management and climate mitigation.

Climate, Energy, Economy: Pick Two

Jul 052016

July 5, 2016 Posted by Raúl Ilargi Meijer at 12:20 pm Finance Tagged with: Catch22, climate, economy, energy, equity, Nelson Lebo, resilience 2 Responses »

Dorothea Lange Miserable poverty. Elm Grove, Oklahoma County, OK 1936

We used to have this saying that if someone asks you to do a job good, fast and cheap, you’d say: pick two. You can have it good and cheap, but then it won’t be fast, etc. As our New Zealand correspondent Dr. Nelson Lebo III explains below, when it comes to our societies we face a similar issue with our climate, energy and the economy.

Not the exact same, but similar, just a bit more complicated. You can’t have your climate nice and ‘moderate’, your energy cheap and clean, and your economy humming along just fine all at the same time. You need to make choices. That’s easy to understand.

Where it gets harder is here: if you pick energy and economy as your focus, the climate suffers (for climate you can equally read ‘the planet’, or ‘the ecosystem’). Focus on climate and energy, and the economy plunges. So far so ‘good’.

But when you emphasize climate and economy, you get stuck. There is no way the two can be ‘saved’ with our present use of fossil fuels, and our highly complex economic systems cannot run on renewables (for one thing, the EROEI is not nearly good enough).

It therefore looks like focusing on climate and economy is a dead end. It’s either/or. Something will have to give, and moreover, many things already have. Better be ahead of the game if you don’t want to be surprised by these things. Be resilient.

But this is Nelson’s piece, not mine. The core of his argument is worth remembering:

“Everything that is not resilient to high energy prices and extreme weather events will become economically unviable…

…and approach worthlessness. On the other hand,…

Investments of time, energy, and money in resilience will become more economically valuable…“

Here’s Nelson:

Nelson Lebo: There appear to be increasing levels of anxiety among environmental activists around the world and in my own community in New Zealand. After all, temperature records are being set at a pace equal only to that of Stephen Curry and LeBron James in the NBA Finals. A recent Google news headline said it all: “May is the 8th consecutive month to break global temperature records.”

In other words, October of last year set a record for the highest recorded global monthly temperature, and then it was bettered by November, which was bettered by December, January, and on through May. The hot streak is like that of Lance Armstrong’s Tour De France dominance, but we all know how that turned out in the end.

Making history – like the Irish rugby side in South Africa recently – is usually a time to celebrate. Setting a world record would normally mean jubilation – not so when it comes to climate.

Responses to temperature records range from sorrow, despair, anger, and even fury. Anyone with children or grandchildren (and even the childless) who believes in peer review and an overwhelming scientific consensus has every right to feel these emotions. So why do I feel only resignation?

We are so far down the track at this point that we are damned if we do and damned if we don’t. Remember the warnings 30 years ago that we needed 30 years to make the transition to a low carbon economy or else there would be dire consequences? Well, in case you weren’t paying attention, it didn’t happen.

While these warnings were being issued by scientists much of the world doubled down – Trump-like – on Ford Rangers, Toyota Tacomas, and other sport utility vehicles. The same appears to be happening now, with the added element that we are experiencing the dire consequences as scientists issue even more warnings and drivers buy even more ‘light trucks’. Forget Paris, the writing was on the wall at Copenhagen.

The bottom line is that most people will (and currently do) experience climate change as a quality of life issue, and quality of life is related to a certain extent to disposable income. Acting or not acting proactively or reactively on climate change is expensive and gets more expensive every day.

If the international community ever takes collective action on climate change it will make individuals poorer because the cost of energy will rise significantly. If the international community fails to act, individuals will be made poorer because of the devastating effects of extreme weather events – like last year’s historic floods where I live as well as in northern England, etc – shown to be on the increase over the last 40 years in hundreds of peer-reviewed papers with verifiable data.

And here is the worst part: most economies around the world rely on some combination of moderate climate and cheap fossil fuels. For example, our local economy is heavily dependent on agriculture and tourism, making it exceptionally vulnerable to both acting AND not acting on climate change.

Drought hurts rural economies and extreme winds and rainfall can cost millions in crop damage as well as repairs to fencing, tracks and roads. As a result, both farmers and ratepayers have fewer dollars in their pockets to spend on new shoes, a night out, or a family trip. This is alongside living in a degraded environment post-disaster. The net result is a negative impact on quality of life: damned if we don’t.

On the other hand, tourism relies on inexpensive jet fuel and petrol to get the sightseers and thrill seekers to and around the world with enough dollars left over to slosh around local economies. Think about all of the service sector jobs that rely on tourism that in turn depend entirely on a continuous supply of cheap fuel. (This is not to mention peak oil and the lack of finance available to fund any long and expensive transition to an alternative energy world.) I’m told 70% of US jobs are in the service sector, most of which rely on inexpensive commuting and/or a highly mobile customer base.

Any significant approach to curbing carbon emissions in the short term will result in drastic increases to energy prices. The higher the cost of a trip from A to Z the less likely it is to be made. As a result, business owners and ratepayers at Z will have fewer dollars in their pockets to spend on new shoes, a night out, or a family vacation of their own. The net result is a negative impact on their quality of life: damned if we do.

I suppose it deserves repeating: most OECD economies and the quality of life they bring rely on both moderate climate and cheap fossil fuels, but these are mutually exclusive. Furthermore, regardless of emissions decisions made by the international community, we are already on track for decades of temperature records and extreme weather events that will cost billions if not trillions of dollars.

The response in many parts of the world has been to protest. That’s cool, but you can’t protest a drought – the drought does not care. You can’t protest a flood – the flood does not care. And even if the protests are successful at influencing government policies – which I hope long-term they are – we are still on track for decades of climatic volatility and the massive price tags for clean up and repair.

Go ahead and protest, people, but you better get your house in order at the same time, and that means build resilience in every way, shape and form.

Resilience is the name of the game, and I was impressed with Kyrie Irving’s post NBA game seven remarks that the Cleveland Cavaliers demonstrated great resilience as a team.

As I wrote here at TAE over a year ago, Resilience Is The New Black. If you don’t get it you’re not paying attention.

This article received a wide range of responses from those with incomplete understandings of the situation as well as those in denial – both positions dangerous for their owners as well as friends and neighbours.

The double bind we find ourselves in by failing to address the issue three decades ago is a challenge to put it mildly. Smart communities recognize challenges and respond accordingly. The best response is to develop resilience in the following areas: ecological, equity, energy and economic.

The first two of these I call the “Pope Index” because Francis has identified climate change and wealth inequality as the greatest challenges facing humanity. Applying the Pope Index to decision making is easy – simply ask yourself if decisions made in your community aggravate climate change and wealth inequality or alleviate them.

For the next two – energy and economics – I take more of a Last Hours of Ancient Sunlight (credit, Thom Hartmann) perspective that I think is embraced by many practicing permaculturists. Ancient sunlight (fossil fuels) is on its way out and if we do not use some to build resilient infrastructure on our properties and in our communities it will all be burned by NASCAR, which in my opinion would be a shame.

As time passes, everything that is not resilient to high energy prices and extreme weather events will become economically unviable and approach worthlessness.

On the other hand, investments of time, energy, and money in resilience will become more economically valuable as the years pass.

Additionally, the knowledge, skills and experience gained while developing resilience are the ultimate in ‘job security’ for an increasingly volatile future.

If you know it and can do it and can teach it you’ll be sweet. If not, get onto it before it’s too late.

Dr. Nelson Lebo is a serial permaculture property developer and consultant. He likes underdogs but not drug cheats. Congratulations Cleveland and Ireland.

Nicole Foss presents: Challenge and Choices

Nov 222015

November 22, 2015 Posted by Raúl Ilargi Meijer at 2:56 pm Finance Tagged with: carrying capacity, community, limits, resilience, resources, risk, skills, solutions, uncertainty Comments Off

Theodor Horydczak Washington Monument 1933

The Automatic Earth today releases its newest video presentation by Nicole Foss. Entitled ‘Challenge and Choices’, it deals with the problems presented to us by the earth’s limits to growth, in finance, energy and the natural world, and with the options and answers that exist in face of these problems.

To purchase the 3-hour video download of Challenge and Choices, go to our store. Click this image to get there:

Nicole Foss: After more than 30 years of exponential growth, gargantuan resource demand and increasingly frenetic consumption, we have now reached, or are reaching, an array of limits to growth. During our long, debt-fuelled boom, we reached out spatially through globalisation to monetise as much global production as possible, in order to facilitate the efficient transfer of wealth from the global periphery to its economic heartland.

We also, through the profligate use of credit and debt, reached forward in time to borrow from the future in order to stage an orgy of consumption in the present. This spectacularly successful modern form of economic imperialism delivered unprecedented wealth concentration, the like of which previous imperial structures could not have dreamed of attaining.

We are facing limits in terms of finance, energy, water, soil fertility, food web integrity on both land and sea, biodiversity, carrying capacity and the environment’s ability to absorb waste streams, among others. All of these factors, and the interactions between them, constitute parts of the reality jigsaw which we have been developing here at the Automatic Earth for the past eight years. Although we focus primarily on finance, as this is the first limit many will face, all limiting factors, and their relative timeframes, are vital to an understanding of the way the next several decades can be expected to play out.

This understanding of the big picture is crucial, but even more important is the ability to apply the knowledge in practice. This involves working through a complex decision tree process, spanning the assessment of strengths, weaknesses, opportunities, vulnerabilities and potential courses of action at different scales, from the individual to the regional. Our latest Automatic Earth video offering – Challenge and Choices – is designed to offer guidance in working through this process.

The video is divided into chapters, beginning in Chapter 1 with a broad overview of the limits to growth scenario, expanded to include a wider range of factors than we generally focus on at the Automatic Earth. The elements to be considered in an assessment of dependencies, or vulnerabilities, naturally lend themselves to actions at different scales. A vulnerability assessment typically begins with personal or family circumstances, hence the initial segments of the presentation focus on these aspects, beginning in Chapter 2 with financial circumstances.

As we have discussed many times at the Automatic Earth, we are facing the bursting of a major financial bubble and this is leading us directly into a state of economic depression, where people can expect many of the assumptions upon which their lives have been built to be invalidated in a short space of time. Such a period is characterised by high unemployment, sharply rising interest rates, taxes and rates (property taxes), falling incomes, cuts to benefits and entitlements, falling asset prices, major government spending cuts and increasingly aggressive debt collection, among other factors.

Being aware of these risks in advance allows for people to minimise the impact. The factors under consideration in our new presentation include leverage (what you owe compared to what your own), consequent interest rate risk, the potential for bankruptcy protection, margin call potential, access to and control over liquidity reserves, personal stores of value, risk management strategies and extended family issues.

The security of both liquidity and of stores of value will be extremely important, and extremely challenging. During a liquidity crunch, there will be very little money in circulation, leading to very little economic activity, and under such circumstances, cash will be exceptionally important. Managing risks to liquidity (cash) makes the difference between being at the mercy of changing circumstances and having the freedom of action to respond to both opportunities and threats as they develop. It is therefore important to avoid the large risks beyond one’s own control that are associated with assets inside the financial system, while learning to manage the risks associated with being outside of it.

Income streams will vary greatly in terms of reliability in economically contractionary times, given that the quantity of money available will decline sharply, and money in circulation will diminish even more quickly as increasingly risk-averse people cease spending and hold on to cash reserves, if they are lucky enough to have some. Many current employment opportunities will dry up or cease to exist entirely, and holding on to such a position now may mean being economically stranded at a time when available employment niches are much reduced in scope and already filled to capacity.

In an ideal world, one would therefore seek to be positioned in advance in a trade or profession likely to continue to deliver an income stream even in times when disposable income will be very scarce. This involves looking at one’s own skill set and personal inclinations, and moving towards using these to provide essential goods or services locally. Either employment or self-employment can be viable options, with running one’s own business raising many additional considerations. Although the complications may be greater, so is the potential for adding usefully to the economic and social fabric of one’s local environment.

Major decisions for everyone surround the issue of shelter – the appropriate form, the means of obtaining it and where it is located. The question of ownership versus renting deserves much greater consideration than most people allow for, given the degree of leverage involved in most cases. Property is drastically over-valued in many locations.

Purchasing property will not necessarily be the right decision, especially under circumstances where the financial value of the asset is set to fall substantially, but the debt will remain the same, leading to a rash of negative equity. Since the burden the debt represents will grow as both interest rates and unemployment rise, and social safety nets are withdrawn, there is a considerable incentive to remain debt-free through renting rather than ownership. Renting also allows for valuable flexibility as to location.

Chapter 3 goes into considerable detail as to the advantages and disadvantages of different types of locations – urban, rural, suburban, small town and intentional community. It is important to realise that the status quo is an active choice, not just a default option, and it may well not be a good one for one’s circumstances. All alternative options, including the status quo, should be thought through in order to avoid becoming stuck in the wrong place, facing risks that might have been avoidable. Becoming stuck is a very real risk under depression conditions, when freedom of action is likely to be very sharply limited, hence positioning in advance in highly advantageous.

The best choice will vary for different people with different circumstances, so there is no one right answer as to the best place, or set of circumstances, to be located. Each option is presented with suggestions as to which might suit what kind of individuals and families, and case-studies are provided as to workable approaches in each different environment. There are many quite inspiring examples from around the world to choose from.

In choosing a good location, carrying capacity and natural factors such as local resource availability need to be taken into account. These factors are considered in Chapter 4. For instance, a reliable water supply of predictable quality will be of particular importance, and one might not be able to rely on current sources that may be vulnerable under depression conditions. Similarly the potential impact of natural threats – wildfires, flooding, drought, earthquakes, cyclones, blizzards, extreme cold – needs to be understood as these are highly variable and represent a wide range of risk scenarios. The risks one feels comfortable with, or can tolerate, manage or mitigate, will be individual choices.

The most obviously good places are probably already over-crowded and expensive, whereas more marginal places may well have been overlooked and may represent both much better financial value and a greater range of opportunities. A given area can only support a certain number of people, and those limits can only be circumvented if large-scale trade is feasible and affordable energy readily available.

As we have pointed out at the Automatic Earth many times before, trade is very vulnerable when the credit it relies on dries up, meaning that economically contractionary times typically lead to trade collapses. At that point, local circumstances such as carrying capacity for a given local resource base become paramount. However, living close to a rich resource base is not necessarily the answer. One only has to look at the resource-rich geopolitical hotspots in the world to know that living on top of coveted resources is not necessarily an advantage.

Energy supply will be a major issue in many, if not most, regions. As we have noted many times here at the Automatic Earth, gross energy production is flat to falling globally, and the average energy profit ratio (energy returned on energy invested) is falling sharply. A greater and greater percentage of energy produced is being reinvested in energy production, leaving less and less to serve all society’s other purposes.

Both unconventional oil and gas and most forms of ‘renewable’ energy have low energy profit ratios and are also critically dependent on conventional oil gas gas production to enable them to be developed at all. As such they represent nothing more than an extension of the high energy profit ratio conventional fossil fuel era that we are now moving beyond. Being capital intensive as well as trade-dependent, they also depend on the continued expansion of the financial bubble, but this is on the verge of implosion. The future will be one of far less energy available, and consequently much reduced socio-economic complexity.

Families would do well to take a hard look at their energy-dependent essential functions (such as cooking, climate control, transport, and equipment operation), and think about what energy sources are required to fulfil these functions, what vulnerabilities different sources of supply may be subject to, whether each function is truly essential, and whether there may be more than one way to perform truly essential functions. One may require specifically electricity, liquid fuel or solid fuel, but there may be some capacity for substitution, perhaps with some additional or modified equipment.

The energy required may come from overseas or may require a large-scale centralised distribution system. Both of these represent significant threats to continued supply under conditions of credit contraction, trade collapse and reduced socio-economic complexity. Conversely, local energy sources which can be relatively simply obtained are a far more secure source of supply. Local dependency creates considerably less vulnerability, hence moving over to local supply in advance of supply problems would be advisable. Redefining essentials and moving away from requiring external energy sources would reduce vulnerability even further.

The local climate will determine how many aspects of life play out in practice, notably energy demand for climate control. Climate not requiring external energy inputs would eliminate a substantial dependency, but only a minority would have the choice to live in such a place. For the rest, thinking through how truly essential climate control is, and how this might be achieved in a low energy environment, will be important.

The development of tolerance for a wider range of indoor temperatures is likely to be necessary. Climate and water availability will, of course, determine what food can be grown locally, and in the sharp reduction of trade will reduce the potential for bringing food in from elsewhere. Relative proximity to the poles determines growing season, and is therefore a strong influence on the balance between plant and animal foodstuffs under a locavore scenario.

Health, healthcare care, social circumstances and political culture are also important factors in determining a good location for a given individual or family group. They are highly variable now, and can be expected to become more so as regions become more isolated with reduced trade. Human connections will grow greatly in importance in difficult times, hence being in a location where one is socially and culturally embedded can be expected to make a substantial difference to family fortunes. Any contemplation of relocation must take these aspects into account as they may ultimately matter more than physical circumstances. These factors are covered in depth in the Challenge and Choices presentation.

The scale of the community in which a family is socially involved will determine the range of choices available beyond the scale of individuals and families themselves. Isolation limits the range of options considerably, meaning that attempting to ‘go it alone’ is not advisable. Communities, whether urban, suburban, small town, village or rural, all offer the advantages of being able to work with others for mutual benefit. Chapter 5 is devoted to exploring the options available at larger scale, beginning with emphasis on community scale potential for pooling resources and building valuable social capital.

Relationships of trust are the foundation of society, enabling collective human endeavours to function. Building them in advance of difficult times creates a critical advantage, allowing existing constructive initiatives to flourish and new ones to gain traction rapidly once the need for them becomes clear. A range of examples of communal possibilities is given in the presentation, including community hubs, maker spaces, community projects, local network building and peer to peer coordination and funding activities.

Several are then discussed in greater depth, notably those in the economic sphere which will be necessary to navigate a period of liquidity crunch. These include time banking, savings pools, alternative currencies, alternative trading arrangements and the slow money movement. These are initiatives reducing the dependence on the existing monetary system, thereby reducing exposure to the risk of that system being disrupted.

Periods of economic depression create a situation of artificial scarcity, where a society has all the resources it had before, but due to the lack of money in circulation, can no longer make use of them. As those who lived through the great depression of the 1930s said – “We had everything but money”. Finance represents the operating system for our societies, and when that system crashes, it it necessary to ride out the acute phase of the crunch, and then to reboot the system into a more workable form. The initial phase creates an urgent need to substitute for the missing liquidity in the larger system with alternative forms of liquidity at the local level, in other words to relocalise finance in order to ride out the period of hardship.

Such systems emerge spontaneously at times and in places where economic depressions have been or are now in force, for instance Austria during the 1930s, Argentina following 2001 or Greece today. However, they can be initiated in advance, functioning in parallel with the larger system, and then are well positioned to stand more or less alone when the need arises. Examples of alternative currencies functioning under normal circumstances and under depression conditions are discussed in Challenge and Choices.

The need for financial relocalisation is but one aspect of the general need for much greater decentralisation. The contraction of the trust horizon during times of economic and financial contraction results in the need for all manner of activities, very much including finance, to operate at much smaller scale in order to function. Trust determines effective organizational scale, hence in contractionary times, working within the trust horizon implies working at substantially smaller scale. Governance mechanisms will be no exception.

Dependence on larger scale organizations to deliver essential goods and services, or to maintain a functioning socio-economic system, will represent a considerable vulnerability at a time when those entities are ceasing to be able to perform the functions for which they currently hold responsibility. Over time those responsibilities will come to vest in whichever organizations are positioned in practice to assume them, whether or not such organizations have the legal responsibility to do so.

Smaller scale governing institutions and regulatory mechanisms, which have been substantially disempowered in recent years, can therefore expect to inherit greater responsibility in the future. Being informed and well-positioned in advance to step into any power vacuum once it appears will be advantageous.

Centralised systems often struggle already to deliver what they are supposed to, hence decentralisation initiatives are already underway in many fields. These are commonly opposed by a top-down system critically dependent on continued growth, and the increasingly complete buy-in required to maintain it. It is therefore becoming increasingly difficult to opt out, even as doing so is coming to make more and more sense because the cost burden associated with the larger system is increasingly disproportionate to the benefits it is able to deliver.

In many ways the essentials can be provided independently at far lower cost, thanks to the absence of large and complex bureaucracies to support. This makes them a threat to a larger system reliant on holding hostage the provision of essentials by closing off independent options. Trying to achieve independence in any sphere therefore faces obstacles which make it more difficult than it should be, but it will be necessary to move in that direction in any case.

The existing level of socio-economic complexity allowing larger scale systems to function is itself dependent on trust, political legitimacy, cheap money and cheap energy, all of which are threatened in a limits to growth scenario. The future will be simpler and more local whether we like it or not, so we must position ourselves for that future. In doing so we generate resilience – the ability to cope under a wide range of circumstances, to bounce back from system shocks and to thrive in the meantime. This capacity is what working through the limits to growth decision tree process is capable of establishing.

Challenge and Choices provides the basis for being proactive at both the individual and collective levels, allowing us to face the approaching limits and navigate a near future fraught with risk and uncertainty. Challenging circumstances are much less daunting when equipped with information, analysis and the tools required to adapt to a changing big picture. We can replace a destructive mindset with a constructive one grounded in a solid sense of purpose, replacing fear of the unknown with empowerment.

Nicole Foss

To purchase the 3-hour video download of Challenge and Choices, go to our store. Click this image to get there:

What Resilience Is Not

May 162015

May 16, 2015 Posted by Raúl Ilargi Meijer at 3:01 pm Finance Tagged with: community, extremes, grey areas, prepping, resilience, sustainability 6 Responses »

Unknown Dutch Gap, Virginia. Bomb-proof quarters of Major Strong 1864

A little over a week ago I published an article at The Automatic Earth by our friend Dr. Nelson Lebo III from Wanganui, New Zealand, named Resilience is the New Black. After being reposted at Zero Hedge, Naked Capitalism and at least a dozen other sites, it may well have had more hits than everything he ever wrote put together. While that is obviously great, Nelson also did come away feeling a bit misunderstood – in particular, about what resilience actually is, and how he made it part of his life -, and he said he wanted to try and set the record straight. By all means. Here’s the doctor:

Nelson Lebo III: The article I wrote for The Automatic Earth last week – Resilience is the New Black – appears to have caused a stir in certain sectors of the internet. It’s great that the piece struck a chord with so many but this came as a surprise to me. We have been publishing our blog for over four years but only get 50 to 100 views per day.

The other two things that surprised me were the misreading of the piece and a huge amount of confusion and uncertainty about what ‘resilience’ even means. I’ll address both in this article.

Ilargi first alerted me that Yves Smith had posted the article on Naked Capitalism with some comments of her own. I had a look and was a bit shocked at what she had written. Her comments appear to misrepresent the article and perhaps served to bias readers before they got into the piece itself.

It appears that the two main points of her critique miss the mark: 1) that I have abandoned the notion of sustainability; and, 2) that I have turned my back on the world and focus only on “me, mine, my family”.

Here is what I submitted to the comments section, admittedly after reading a number of bizarre musings from courageously anonymous posters:

Thanks for posting this article. Raul tipped me off. It’s great to see it has sparked healthy debate. Two important points that I think you missed in your preamble.

First, it was not my intention to indicate an “abandonment of the notion of sustainability.” What I wrote is that I do not bang the drum for sustainability anymore. I practice it on a daily basis. I have meant to make a couple of points in the article: 1) My observations of the global debate on many issues has shifted to resilience over the last 7 years; and 2) Most people in my direct experience relate much stronger to the notion of resilience than sustainability.

I work with patterns and both of these are strong patterns I have observed since 2008. As a community educator, it is my duty to take the most effective approach to support my fellow citizens. The resilience approach has been hugely successful across the socio-economic spectrum.

Second, the word community is used three times in my article along with a reference to sharing our project locally. I’d say that scores 4 mentions of us supporting our neighbours and our city. Characterizing the piece as focusing on “me, mine, my family” is simply inaccurate. I know of few people in the sustainability movement worldwide who are more community-focused than us or who are more generous with their time. Ask anyone who has ever met us or worked with us, including Ilargi and Nicole at the Automatic Earth.

I see no problem challenging someone on their own “home turf.” I think it is important to do. But it is necessary to make sure you are accurate in your critique.

My thesis was that resilience has surpassed sustainability at the forefront of many people’s minds in recent years. But to embrace resilience does not mean to deny sustainability completely. If resilience is ‘the new black’ it doesn’t mean you don’t wear sustainability once in a while. Personally, I wear it everyday, but I bang the drum for resilience because more people listen.

On the second point above, Yves is totally off the mark. I am heavily involved with the permaculture movement and sustainability networks, and know of few people globally who can match our community projects here. How did she overlook the major emphasis on community in the piece? Reading further down the comments section gave me some possible clues.

One person suggested resilience was simply “prepping” and another thought it might be some new hipster term for…I don’t remember. My point is that there appears to be a huge amount of misunderstanding of resilience. I suspect that Miss Smith labeled me a “prepper” and then stereotyped all of the common attributes of preppers.

I am used to the term sustainability being interpreted in hundreds of different ways, including being co-opted by corporations. It seems the concept of sustainability is surrounded by grey area, but I was not expecting the same for the concept of resilience. It appears the Internet can make anything grey, so I’ll try to put things in black and white.

Resilience is not “prepping.” I repeat, resilience is not “prepping”.

A three second search of the Internet found these definitions:

1) the ability of a substance or object to spring back into shape; elasticity

2) the capacity to recover quickly from difficulties; toughness.

While both definitions focus on after-the-fact aspects of resilience, the most important aspects in the context of climate change, income inequality and volatile energy prices involve building resilient capacity. In other words, the ability of bounce back requires lots of up front groundwork. In these contexts, the groundwork that needs to be done is moderating extremes.

The human body is a great example of moderating extremes. When we are too hot we sweat and when we are too cold we shiver. Like the Buddha, our bodies seek a middle way. But unhealthy living conditions weaken the immune system and decrease the body’s resilience. I have been a crusader for warm, dry, healthy homes in my community (and world wide through the web) for over four years. I even developed a maths/science curriculum on passive solar design using our Eco-Thrifty Renovation as an example. The Little House That Could can be found on Facebook.

In the context of climate change, resilience means moderating climate extremes, especially those involving water and the lack thereof. In both cases eco-design is the best approach to take: imitating the way nature moderates for climatic variability. We are currently using eco-design to drought-proof our farm while also managing for periods of excessive rainfall. I have written an article for fix.com on how to drought-proof a suburban property but it is yet to be published. If you’re interested keep an eye out for it.

In the context of income inequality, we also need to buffer society from extremes. Researchers have told us that there is a correlation between wealth inequality and social problems. If we want a resilient society – and I sure do – we need to work to moderate those extremes. That’s why I have put so much volunteer work into raising awareness of the TPP in my community.

In the context of volatile energy prices, I believe it is important to design for resilience for ourselves and our communities. Our Eco-Thrifty Renovation project represents this approach, and would be considered one of the best such initiatives anywhere in the ‘developed world’. For a summary of the project, see this page I posted as part of my diploma work in permaculture:

We have lots of mottos and catch phrases, but one of the best is Act Locally – Share Globally. Our work represents thousands of volunteer hours that are both locally and globally focused. As an individual, I answer every email I get requesting information about our projects. Who else can say that?

The bottom line is that extremes and their consequences are almost always expensive. Avoiding and moderating them is both conservative and practical. I believe our world and my family will both be better off if I promote resilience to extremes on all levels. Nothing grey about that, is there?

Dr. Nelson Lebo believes in the permaculture principles of Earth Care, People Care, and Fair Share.

Resilience is The New Black

May 082015

May 8, 2015 Posted by Raúl Ilargi Meijer at 7:50 am Finance Tagged with: Baltimore, change, crisis, earthquake, proactive, resilience, sustainability, TPP 8 Responses »

Harris&Ewing Happy News Cafe, “restaurant for the unemployed”, Washington, DC 1937

This is another essay from our friend Dr. Nelson Lebo III in New Zealand. Nelson is a certified expert in everything to do with resilience, especially how to build a home and a community designed to withstand disasters, be they natural or man-made, an earthquake or Baltimore. Aware that he may rub quite a few people the wrong way, he explains here why he has shifted from seeing what he does in the context of sustainability, to that of resilience. There’s something profoundly dark in that shift, but it’s not all bad.

Nelson Lebo III: Sustainability is so 2007. Those were the heady days before the Global Financial Crisis, before $2-plus/litre petrol here in New Zealand, before the failed Copenhagen Climate Summit, before the Christchurch earthquakes, before the Trans Pacific Partnership Agreement (TPP)…the list continues.

Since 2008, informed conversations on the economy, the environment, and energy have shifted from ‘sustainability’ to ‘resilience’. There are undoubtedly many reasons for this shift, but I’ll focus on just two: undeniable trends and a loss of faith. Let me explain.

Since 2008, most of the pre-existing trends in income inequality, extreme weather events and energy price volatility have ramped up. Sustainability is about halting and reversing these trends, but there is essentially no evidence of that type of progress, and in fact the data shows the opposite.

Plenty of quantitative data exists for the last seven years to document these accelerated trends, the most obvious is the continually widening gap between rich and poor everyone else. The second wave of commentary on the Baltimore riots (after the superficiality of the mainstream media) has been about the lack of economic activity and opportunity in many of the largely African-American neighbourhoods.

Tensions have been simmering for years (decades) and overzealous police activity appears to have been just been the spark. This should come as no surprise to anyone who has read The Spirit Level, or any similar research on the correlation between wealth inequality and social problems.

You can only push people so far before they crack. For residents of Baltimore’s disadvantaged neighbourhoods the inequities are obvious. People are not dumb. We can see the writing on the wall, and know for the most part that government on every level has not taken significant steps to embrace sustainability be it economic, environmental or social . To me it seems we are running on the fumes of debt on all three: over-extended financially on nearly all levels; over-extended on carbon emissions (and post oil peak); and a powder keg of social unrest waiting for a tipping point.

Which brings me to my second point: a loss of faith.

For most of my adult life I have banged the drum for sustainability. I don’t anymore. Sustainability is about voluntarily balancing three factors: human needs, environmental health, and economic viability. My observation is that it has been a failed movement and that the conversation has naturally shifted to resilience.

These observations do not come casually. I have worked full-time in the environmental/sustainability/resilience field for twenty-five years and I have a PhD in science and sustainability education.

Dennis Meadows, a well-known scientist who has been documenting unsustainable trends for over 40 years, puts it this way:

The problem that faces our societies is that we have developed industries and policies that were appropriate at a certain moment, but now start to reduce human welfare, like for example the oil and car industry. Their political and financial power is so great and they can prevent change. It is my expectation that they will succeed. This means that we are going to evolve through crisis, not through proactive change.

This is the same quote that Ilargi recently highlighted here at The Automatic Earth. Clearly it resonated with me.

This is not to say we cannot and should not be proactive. It is more about where we direct our ‘proactions.’ Being proactive about resilience means protecting one’s self, one’s family, and one’s community from the trends that make us vulnerable economically, socially and environmentally, as well as to sudden shocks to the system.

The recent earthquake in Nepal is another reminder of the critical importance of resilience. Before that it was Christchurch and Fukushima. In the wake of earthquakes we often hear about a lack of food and water in the effected area, along with disruptions to energy supplies in the wider region. In Nepal these have lead to significant social unrest.

Whether it is Kathmandu over the last month or New Orleans after Katrina, we know that we cannot count on “the government” for significant assistance in the immediate aftermath of natural disasters. Along the same lines, we cannot count on governments to protect us from unnatural disasters such as the TPP and TTIP.

Whether it is a potential earthquake or the next mega-storm and flood, the more prepared (ie, resilient) we are the better we will get through. Even rising energy prices and the probable effects of the TPP will siphon off money from our city and exacerbate social problems in our communities.

In most cases, the same strategies that contribute to resilience also contribute to a more ‘sustainable’ lifestyle. But where for most people sustainability is largely abstract and cerebral, resilience is more tangible. Perhaps that’s why more and more people are gravitating toward it.

Resilience is the new black.

A resilient home is one that protects its occupants’ health and wealth. From this perspective, the home would have adequate insulation, proper curtaining, Energy Star appliances, energy-efficient light bulbs, and an efficient heater. By investing in these things we are protecting our family’s health as well as future-proofing our power bills. Come what may, we are likely to weather the storm.

Beyond the above steps, a resilient household also collects rainwater, grows some of its own food, and has back-up systems for cooking and heating. When we did up an abandoned villa in Castlecliff, Whanganui, we included a 1,000 litre rain water tank, three independent heat sources, seven different ways to cook (ok, I got a little carried away), and a property brimming with fresh fruit and vege. These came on top of a warm, dry, home and a power bill of $27 per month. (We did it all for about half the cost of an average home in the city.)

A loss of power and water for two or three days would hardly be noticeable. A doubling of electricity or fresh vege prices would be a blip on the radar. During the record cold week in 2011 our home was heated for free by sunshine.

Sustainability may be warm and fuzzy, but resilience gets down to the brass tacks.

Above all else, I am deeply practical and conservative. The questions I ask are: does it work?; is it affordable?; can I fix it myself?; and, importantly, is it replicable? Over the last decade I have developed highly resilient properties in North America and New Zealand. All of these properties have been shared as examples of holistic, regenerative permaculture design and management. We have shared our experience locally using open-homes, workshops and property tours, as well as globally through the internet.

When the proverbial sh*t hits the fan, which all the trends tell us will happen, I know that I have done my best to help my family and community weather any storm be it a typhoon, an earthquake, rising energy prices, or the TPP.

This is an expanded version of my regular weekly column for the Wanganui Chronicle (NZ).

– Dr. Nelson Lebo designs low-input/high performance systems that are both resilient and cost-effective.

Nicole Foss On Australian National Radio

Aug 052014

August 5, 2014 Posted by Raúl Ilargi Meijer at 2:22 pm Finance Tagged with: Australia, limits to growth, resilience 1 Response »

Russell Lee Magazines for sale in Taylor, Texas Oct 1939

The Automatic Earth’s Nicole Foss did an interview with national Australian radio channel ABC, which aired earlier today. I don’t know why ABC doesn’t simply have an embedded MP3 available (the Listen Now button had my Mac look for RealPlayer, which I’m pretty sure it must have left behind in the last century), but I would go for the download option if I were you, which gives you an MP3 file …)

Building Resilience In An Era Of Limits To Growth

We are approaching many limits to growth over the next decades: Economic contraction, peak energy and geopolitical stress. Nicole Foss explains how the deflationary dynamics that always follow finance and property bubbles will rapidly impact individuals and communities, while the longer acting forces of peak oil and climate change will limit the nature of any economic recovery. So how can we adapt?

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