April 7th, 2012

I happened across this post from 2010 in the SynEARTH Archives. It seems even more timely today. The first section serves as introduction to the article by Andrew MacDonald that follows.


Timothy Wilken, MD writes: Imagine you own a comfortable 3000 square foot home with four bedrooms, three bathrooms, a big  family room, and a three car garage located on over an acre of land. Your home provides very comfortable shelter for you, your spouse and your three kids.

Then your spouse’s brother loses his job. Soon he and his wife can’t make their mortgage payments, and so they move in with their two kids. Now your home is less comfortable with nine people living there, but with some creative scheduling, it is livable.

But the economy continues to worsen, more family members lose their jobs, and suddenly you have twenty people living in the house. With this four-fold increase in population, living conditions in your home have changed from being livable to being nearly intolerable.

You are reaching the limits of your home’s ability to shelter you. After all the home is finite — it is limited to 3000 square feet.

Now humanity’s home is the Earth. While the Earth is quite large, it is still finite.  As in the example above, living on Earth was comfortable when the number in the human family was under one billion. Our species, Homo Sapiens, has existed for over 200,000  years on the planet. For 199,790 of those years, our population remained under one billion.

http://upload.wikimedia.org/wikipedia/commons/thumb/b/b7/Population_curve.svg/500px-Population_curve.svg.png

We reached 1 billion humans in 1800. By 1900, the world population was 1.5 billion. At that time, my grandfather was a young man raising his family that would eventual include 8 children. I was born in 1945, and would be one of three children. When I was a freshman in high school in 1960, the world’s population had doubled to 3 billion. Today, as I write this essay the World census is estimated to be 6.8 billion.

Humanity’s home, the Earth, is getting full. Our human population has increased over four-fold since 1900. We are reaching the limits of the planet. This is what really lies at the heart of our current world economic crisis. We are encountering Peak Oil, Peak Water, Peak Soil and Peak Food as a result of overpopulation, and the political-economic policy of over-consumption in order to maximize corporate profits.

Modern humans are no longer called people, they are consumers. Remember, when George W. Bush called on the American people to: “Go out and buy something.” Peak does not mean we are out of oil, water, soil or food. It means we are reaching the Peak of possible production for these necessities of life on a global basis.

Our current system of Market Capitalism, which is based on the premise of unlimited growth, has collided with the reality of a finite planet.

Things must change. We can expect no help from Big Government, the long term for Government is the length of time before the next election, and all political decisions are based on one dollar = one vote. We can expect no help from Big Business, they are only interested in the bottom line of their Profit and Loss Balance Sheets, and they clearly own our government directing it to base every political decision on what will increase the bottom line. Remember, “What is good for business is good for the nation.”

It will be up to us ordinary humans to solve our own problems by ourselves, and despite the actions of our government and corporations.

So, what can we do?

Imagine, if every human limited themselves to having only one child, the total population could be reduced dramatically within a few generations. This is something we can do voluntarily, if we choose to. Human reproduction remains in the control of ordinary humans.

In the meantime, there are lots of very practical things that can also be done. Today’s author shares two proposals that you can begin implementing tomorrow.


.

Don’t Just Stand There, Grow Something!

Andrew MacDonald

Do you hear the call?Be a food grower in some small or large way! You’ll connect to nature, our “daily bread”, and some fundamental political realities. You’ll educate yourself and redefine your relationship to fundamentals – and I didn’t even mention “cheap” yet!

I use the word “growing” in preference to gardening because gardening sounds like a hobby.

The good news about gardening can’t stay underground forever – it’s going to grow! Growing food – and eating local and simple food  – is at the heart of relocalization.

Growing has a way of plugging you into that beating heart. It’s a simple and deceptively multi-layered activity that you can find a way to be part of, whatever your background. Growers get that they’re connected to a deep natural process, as of course they are, and that connection is close to the heart of relocalization.

My partner Lynn’s and my growing efforts are new and so far we’ve been on the receiving end of local food abundance as neighbors and community members have shared with us. We hope to pay’em back over time.

The two interconnected ways to start are 1) to grow something right now, and 2) to learn to enjoy eating simply and low in the food chain.

1)  Grow something, whether it’s sprouting, growing a few pots of tomatoes, putting in a garden, joining a CSA (Community Supported Agriculture) group, or connecting to a local gardening group or food initiative.

Lynn and I have set ourselves the goal of  growing all our vegetables and some of the beans. We’ll have to buy others – we love lentils which don’t grow so well here (in southern Canada). Some of our grains come from local farmers but we buy our rice from away and we’ve harvested some “wild rice” (not really a true rice) too though we’ve not learned to thresh it.

2) The other part is to eat in a way that respects natural realities and limits – not just because it’s “a good thing,” though it is, but because eating a low-impact, mostly local diet will be the future in a world defined by peak oil, shifting climate, and high population and unrest from all of these. It’ll be your future and certainly your kids future. Eating simple is simply getting with the program, which in turn helps others do the same.

We’ve been eating a simple, tasty, nutritious and inexpensive diet for a while now. My partner Lynn has been experimenting and refining how to do this for years and I recommend what she’s developed as something to explore and adapt. It’s a total system that makes it easy to cook healthy food conveniently while keeping your grocery bill under $150 a month per person. That’s from the get-go, before you grow your own. It’s a way to fast track to a simpler, more local and more peaceful life. It’s totally possible to really enjoy food while eating more like the majority of people in the world. It’s a vegetarian diet, but you can add meat where you will. No shame but stopping eating meat is one of the simplest ways you can make a real difference in what you personally are putting into the atmosphere. Full disclosure, we do eat meat if we’re at someone’s home and it’s offered and we eat game when it’s given to us.

There are political-economic  ramifications to food and soil too . . . .think “peak soil” to go along with peak oil. As Wendell Berry says, “If we continue to be economically dependent on destroying parts of the earth, then eventually we will destroy it all.”


Visit the author’s website: Radical Relocalization

Read Poster artist, Judy Wilken’s StarChild Science Healthy Living Initiative

April 2nd, 2012

In this morning’s essay, re-posted from Common Dreams, the author introduces her subject as follows:

Canada, called the world’s most resource-rich country, is now being subjected to austerity measures like those imposed on third world countries in earlier decades.  It is all done in the name of reducing a federal debt that got out of control in the 1970s, when Canada quit borrowing from its own central bank.


Is Austerity the Best Choice for Canada?

Last week in Ottawa, the Canadian House of Commons passed the federal government’s latest round of budget cuts and austerity measures.  Highlights included chopping 19,200 public sector jobs, cutting federal programs by $5.2 billion per year, and raising the retirement age for millions of Canadians from 65 to 67.  The justification for the cuts was a massive federal debt that is now over C$ 581 billion, or 84% of GDP.   

An online budget game furnished by the local newspaper the Globe and Mail gave readers a chance to try to balance the budget themselves.  Possibilities included slashing transfer payments for elderly benefits, retirement programs, health benefits, and education; cutting funding for transportation, national defense, economic development and foreign aid; and raising taxes.  An article on the same page said, “The government, in reality, doesn’t have that many tools at its disposal to close a large budgetary deficit. It can either raise taxes or cut departmental program spending.”

It seems that no gamer, lawmaker or otherwise, was offered the opportunity to toy with the number one line item in the budget: interest to creditors.  A chart on the website of the Department of Finance Canada titled “Where Your Tax Dollar Goes” shows interest payments to be 15% of the budget—more than health care, social security, and other transfer payments combined.  The page was dated 2006 and was last updated in 2008, but the percentages are presumably little different today.

Penny wise, pound foolish

Among other cuts in the 2012 budget, the government announced that it would be discontinuing the minting of Canadian pennies, which now cost more than a penny to make.  The government is focusing on the pennies and ignoring the pounds—the massive share of the debt that might be saved by borrowing from the government’s own Bank of Canada.

Between 1939 and 1974, the government actually did borrow from its own central bank.  That made its debt effectively interest-free, since the government owned the bank and got the benefit of the interest.  According to figures supplied by Jack Biddell, a former government accountant, the federal debt remained very low, relatively flat, and quite sustainable during those years.  (See chart below.)  The government successfully funded major public projects simply on the credit of the nation, including the production of aircraft during and after World War II, education benefits for returning soldiers, family allowances, old age pensions, the Trans-Canada Highway, the St. Lawrence Seaway project, and universal health care for all Canadians.

The debt shot up only after 1974.  That was when the Basel Committee was established by the central-bank Governors of the Group of Ten countries of the Bank for International Settlements (BIS), which included Canada.   A key objective of the Committee was and is to maintain “monetary and financial stability.”  To achieve that goal, the Committee discouraged borrowing from a nation’s own central bank interest-free and encouraged borrowing instead from private creditors, all in the name of “maintaining the stability of the currency.”

The presumption was that borrowing from a central bank with the power to create money on its books would inflate the money supply and prices.  Borrowing from private creditors, on the other hand, was considered not to be inflationary, since it involved the recycling of pre-existing money.  What the bankers did not reveal, although they had long known it themselves, was that private banks create the money they lend just as public banks do.  The difference is simply that a publicly-owned bank returns the interest to the government and the community, while a privately-owned bank siphons the interest into its capital account, to be re-invested at further interest, progressively drawing money out of the productive economy.

The debt curve that began its exponential rise in 1974 tilted toward the vertical in 1981, when interest rates were raised by the U.S. Federal Reserve to 20%.  At 20% compounded annually, debt doubles in under four years.  Canadian rates went as high as 22% during that period.  Canada has now paid over a trillion Canadian dollars in interest on its federal debt—nearly twice the debt itself.  If it had been borrowing from its own bank all along, it could be not only debt-free but sporting a hefty budget surplus today.  And that is true for other countries as well.

Another way

Why are governments paying private financiers to generate credit they could be issuing themselves interest-free?   According to Professor Carroll Quigley, Bill Clinton’s mentor at Georgetown University, it was all part of a concerted plan by a clique of international financiers.  He wrote in Tragedy and Hope in 1964:

The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.

Each central bank . . . sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.

In December 2011, this charge was echoed in a lawsuit filed in Canadian federal court by two Canadians and a Canadian economic think tank.  Constitutional lawyer Rocco Galati filed an action on behalf of William Krehm, Ann Emmett, and COMER (the Committee for Monetary and Economic Reform) to restore the use of the Bank of Canada to its original purpose, including making interest free loans to municipal, provincial and federal governments for “human capital” expenditures (education, health, and other social services) and for infrastructure.  The plaintiffs state that since 1974, the Bank of Canada and Canada’s monetary and financial policy have been dictated by private foreign banks and financial interests led by the BIS, the Financial Stability Forum (FSF) and the International Monetary Fund (IMF), bypassing the sovereign rule of Canada through its Parliament.

Today this silent usurpation has been so well obscured that governments and voters alike are convinced that the only alternatives for addressing the debt crisis are to raise taxes, slash services, or sell off public assets.  We have forgotten that there is another option: cut the debt through the use of  publicly-owned banks that return the interest to public coffers.  Cutting out interest has been shown to reduce the average cost of public projects by about 40%.

Game over: we win.


Ellen BrownEllen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles.

In Web of Debt, her latest of eleven books, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.

She is president of the Public Banking Institute, http://PublicBankingInstitute.org, and has websites at http://WebofDebt.com and http://EllenBrown.com

March 25th, 2012

The following is an excerpt from a new book about Peak Oil and Global Climate Change. From the Front Flap of the Hard Cover Edition:

First the bad news: over the next twenty years, the United States must cut 20 quadrillion BTUs from its annual consumption of fossil fuels, more than 25 percent of the energy currently being used. This is a matter of both economic and environmental necessity. The good news is that we have the technology to pull it off. But where should we start? What exactly needs to be done? How much will it cost? And won’t such a drastic reduction in energy use destroy the American way of life?

In Before the Lights Go Out, science blogger and journalist Maggie Koerth-Baker presents a comprehensive analysis of the ways in which America produces, distributes, and consumes energy. She explains how our current systems developed, points out their strengths and weaknesses, and offers candid assessments of the time, the difficulty, and the expense involved in making radical changes to the energy systems that have shaped our lives for a hundred years. And the new world that results will be neither business-as-usual nor a hippie utopia.

Drawing on more than two years of research and interviews with experts on everything from our electrical grid and electric cars to fracking and passive buildings, Koerth-Baker explains what we can do, what we can’t do, and why “the solution” is really a lot of solutions working together.

This isn’t about planting a tree, buying a Prius, and proving that you’re a good person. Economic and social incentives got us a country full of gas-guzzling cars, long commutes, inefficient houses, and coal-fired power plants in the middle of nowhere, and economics and incentives will build our new world. Ultimately, change is inevitable. If we don’t control it, it will control us.

Koerth-Baker argues that we’re not going to solve the energy problem by convincing everyone to live like it’s 1900—nobody wants to do that. Rather than reverting to the past, we will be building a future where we get energy from new places and use it in new ways and do more with less. But for all the new technology, we’ll still need coal-fired, nuclear, and natural gas–burning power plants—and we’ll still be pumping gasoline into our (far more fuel-efficient) cars for many decades to come.

She also looks at new battery technology, smart grids, decentralized generation, clean coal, and carbon sequestration—buzzwords now, but they’ll be a part of our everyday life soon.

Yes, solving the energy problem is more urgent than ever before. Yes, we have the technology to do that—and the results may surprise you. Before the Lights Go Out reveals what that will look like.

The following excerpt is re-posted from the Scientific American.


Before the Lights Go Out:
Conquering the Energy Crisis Before It Conquers Us

Maggie Koerth-Baker

Most people reading this would probably find Merriam, Kansas, very familiar. Not because they’ve been there, but because it’s a lot like home.

Merriam is usually described as a suburb of Kansas City, Kans.—a small town that grew into a residential center for people who worked in the much larger city nearby. Yet the mental images that go with the word suburb don’t really fit Merriam all that well. When I think suburb, I imagine something like Levittown, treeless insta-villages where rows of identical houses dot gleaming new cul-de-sacs recently carved out of some farmer’s field. The greater Kansas City area certainly has its share of developments that would fit that description, but Merriam isn’t one of them.

In fact, when I was a kid, I didn’t even know Merriam existed at all. I thought it was Kansas City. Specifically, I thought it was where Kansas City began, the distinct point where you exit the Interstate and find yourself in the big city. This particular misconception has more to do with my family’s regular travel plans than anything else—Merriam’s main drag happens to be the same road that leads to the art museum my dad and I went to a lot and to the Christmas light displays I visited every winter with my mom. It also speaks volumes about what Merriam actually looks like, though, and it’s tied to some important trends in the way most Americans live today.

Merriam isn’t a small town. There’s nothing really recognizable as a small town central business district. Instead, Merriam’s stores and offices are mostly concentrated along two major thoroughfares—Shawnee Mission Parkway and Johnson Drive. These wide, multilane roads are dotted with clusters of shopping centers and big box stores, like necklaces strung with fat pearls. The municipal building and the police station are a couple of nondescript offices that sit off the frontage of Shawnee Mission Parkway, on a ridge overlooking the Interstate. Nothing about that says, “Classic Americana.”

Yet Merriam isn’t a suburb, either—or an urban city. It’s too dense to be the first and not dense enough to be the latter. Merriam has a mixture of house styles. Drive down one street, and you’ll see a 1930s bungalow standing shoulder to shoulder with a spare little 1950s Cape Cod. Next to that, there’s a 1980s split-level with windows on the front and the back but none on the sides. More than three generations of the American Dream are living here.

Each house sits on its own little lot, generous by the standards of city dwellers, but those lots would seem cramped to anyone who grew up on an expansive, truly suburban range of lawn. Some neighborhoods have sidewalks; others don’t. All in all, Merriam doesn’t quite fit in with any of the paradigms we use to describe “place” in the United States, and that sense of befuddlement extends all the way to the edge of town—if you can find it. The truth is that Merriam’s borders are hazy, known only to people whose jobs require them to be aware of that sort of thing. To most people, Merriam bleeds into Mission, into Shawnee, and into Overland Park. Those towns, in turn, nuzzle up against others just like themselves. You could almost call them neighborhoods, except that they have their own separate governments.

It’s ironic that Merriam doesn’t really fit any of the classic American paradigms, because, quite frankly, most of us have already left those paradigms behind. We talk about this country as if it’s full of neatly defined small towns, big cities, and tidy suburbs. In reality, the places where we live are lot mushier than that. Merriam isn’t the exception. Merriam is the rule.

The Brookings Institution calls places such as Merriam metropolitan areas. Each named community is just one part of a larger symbiotic organism. “Being in a metro means being tied to someplace else,” wrote Jennifer Bradley and Bruce Katz, of the Brookings Institution’s Metropolitan Policy Program, in 2008. The collection of cities in a metro work together, economically and socially, and by the Brookings Institution’s tally, this is how most Americans live—as much as 84 percent of the population.

That definition of “metro” is wide-reaching, encompassing places that might think of themselves as cities, small towns, and suburbs. That’s certainly true of Tonganoxie, where my paternal grandparents lived. Thirty miles from Kansas City, it was a far-flung Hicksville when my dad was a teenager. Today, Tonganoxie is part of the metro—not really just a suburb, but not truly its own entity, either. The Brookings definition also includes such places as where I live now—a 1920s streetcar suburb that’s been absorbed as a neighborhood of Minneapolis. We aren’t urban, as visiting friends from New York City often remind us, but we’re not suburban, either.

You can see that the Brookings definition is kind of broad, possibly overly broad. Residents of the places it describes might disagree with it, even vehemently. Yet if you’re trying to figure out an objective way to group places by shared economic and social characteristics, it makes sense. This is better than a survey, which would tell you more about perceptions than about what places are actually like. It also makes an important point: Independent, small-town life isn’t archetypal America anymore. The interconnected metro is.

Kansas is full of places that aren’t like Merriam. There are also tiny towns such as Quinter—a Western Kansas community with a population of fewer than a thousand—and mid-size cities such as Salina, which is home to more than forty-five thousand people. If you want to know what’s at risk in the future of energy, however, Merriam is the place to focus. It’s the place that can teach the majority of us something important about the places where we live and about the risks we’re taking when it comes to energy.

There are lots of reasons to care about energy, and lots of reasons to want to change the way we make and use energy in this country. For me, though, it boils down to a concern about climate change and about energy diversity. Those are the big reasons I think we need to seriously alter the way we make and use energy. Why do I think that? In a nutshell: that’s what the majority of scientific studies tell me. When many different, unconnected scientists come to the same conclusions, after decades’ worth of research, I listen. You should, too.

It all boils down to a preponderance of evidence—evidence collected by many different people, in many different ways, during the course of more than three decades. That’s what “scientific consensus” really means. It’s not only something a bunch of scientists choose to believe in. It’s something they’ve seen. It’s what the bulk of the evidence is telling them.

In Kansas, researchers have collected more than a hundred years’ worth of data about temperatures, rainfall, and weather patterns. From the perspective of a single year or even a decade or two, you might not notice much of a difference. There are seasons. Winters are still colder than summers. Kansas is one of those states with a reputation for fickle weather, anyway. Don’t like this cold winter day? Just you wait a week; you’ll be wearing shorts. Yet if you zoom out and look at the century, patterns emerge. The average winter temperatures have gone up by 2 degrees Fahrenheit. Summer has been more stable, with an increase of only .6 degrees. In general, during the last century, Kansas has had fewer relatively cold days, while the number of relatively warm days has increased. When those increases happen also matters. During both winter and summer, average nighttime temperatures have increased more than average daytime temperatures have.

That doesn’t sound like much, but it makes a difference in practical ways. In Merriam, Kansas, there are plants thriving today that probably couldn’t have survived thirty years ago. When I was born, home gardeners in Merriam chose the seeds they’d plant outdoors by finding species that were rated to USDA Hardiness Zone 5—meaning that those plants could survive winter temperatures as lowa’s –20 degrees. By the time I graduated from high school in 1999, the Kansas City metro, along with most of Kansas, had been upgraded to Hardiness Zone 6. Winter was no longer likely to be so frigid. If a plant could survive a few days of zero-degree temperatures, it could probably live in Merriam just fine.

That opens up more possibilities for creative green thumbs. There aren’t a lot of buildings in Kansas that are covered with the trailing green fingers of English ivy, but today, if you wanted a little ivy-covered cottage on the prairie—or an ivy-covered fence surrounding your metro backyard—you could grow it, without much worry of winter killing the plants. If English ivy doesn’t sound like a particularly horrible fate, that’s because climate change isn’t inherently good or bad, in and of itself. It’s all about how those changes affect people. We might like some of the results—English ivy can thrive, and even Kansas’s many food crops are likely to grow better, at least in the short term—but we won’t like everything that happens.

For instance, the same warmer temperatures that favor English ivy are also quite favorable to ivy of another sort. Research shows that rising temperatures—even the small increases seen in Kansas—and rising CO2 levels in the atmosphere are combining to expand the range of poison ivy, allowing it to be active for a longer part of the year and making it more poisonous.  A walk through local parks or state lands near Merriam is now more likely to involve a brush with the less-than-friendly side of nature.

The warmer climate works in tandem with a wetter one. Merriam and much of the northern and eastern parts of Kansas have become a lot wetter, especially in the winter. The Midwest is experiencing heavier storms more often than it did in the past. Those storms can cause serious damage and cost communities some serious money. That’s not all, though. Higher temperatures and more frequent downpours affect metro areas and their residents in a number of ways.

When you combine warm water and flash flooding, you get a risk of water-borne disease. That’s because many harmful microorganisms favor higher temperatures. If floods overwhelm water-treatment facilities, those organisms can find their way into the pipes, out of the tap, and into your glass. This isn’t something that happens only in underdeveloped countries or other places we can write off as “not like home.” The sanitation infrastructure of American metro areas is impressive, but it’s not infallible. Many parts of the Midwest have experienced increased precipitation from more numerous large storms. This isn’t only a Kansas problem. In 1993, Milwaukee, Wisconsin, suffered an outbreak of gastrointestinal disease caused by the bacteria Cryptosporidium. This bacteria doesn’t merely give you a tummy ache. Instead, it leads to a week or more of diarrhea, cramps, vomiting, and fever. Fifty-four people died. Just before the illness struck, the region had received its heaviest rainfall in fifty years.

Since 1993, researchers have found that heavy rainfalls are associated with higher levels of potentially dangerous bacteria. This has been measured in drinking water and in recreational waters. It’s also turned up in floodwater. In 2008, when major flooding inundated Iowa City and Cedar Rapids, Iowa, raw sewage came right out of the Cedar Rapids water-treatment plant and into the flood. Those contaminated waters sloshed into people’s houses, and when the water finally receded, it left behind buildings full of muck and mold. The people tasked with cleanup duties suffered from what they called “flood crud,” weeks of fatigue, cough, and other respiratory symptoms.

Speaking of breathing problems, warmer springs that bloom earlier in the year have also led to longer allergy seasons, and scientists say that the higher CO2 concentrations found in traffic-heavy cities and metros are causing plants to have higher pollen counts. This means that people who weren’t affected by allergies thirty or forty years ago might be sniffling and stuffy today, and Merriam residents who have always had allergies now have to deal with them for longer periods of the year.

Air pollution is another big problem. In the heat of a hot and sunny day, tailpipe emissions from cars turn into lung-damaging, heart-straining smog. In any metro area, including Merriam, the more relatively hot days you have, the greater the risks of smog-associated asthma and heart attacks. Kansas City, Kansas, and Overland Park—two cities near Merriam—spent more than $13 million on asthma treatment in 2001. The more risk there is of smog-related lung damage, the higher those costs will rise.

During the next thirty years or so, a warmer, wetter Merriam might be, in some ways, a more comfortable place to live—the last few decades have brought longer growing seasons for plants and winter temperatures that are more reliably pleasant. Yet Merriam is also becoming a more expensive place to live and a place where the individual risk of illness and property damage is going up—and up and up. The more greenhouse gases are added to the atmosphere, the higher the global average temperature will eventually climb. As that happens, Merriam and places like it all around the United States will be exposed to risks that are greater and more numerous.

Some people talk about thresholds for climate change—how many years we have left to act, how much CO2 we can afford to release, how high of a global average temperature we can accept before all hell breaks loose. I’m not sure that’s really a great way to think about it, though. Our climate is already changing. The risks are already being realized, and every emissions reduction goalpost ever set is somewhat arbitrary. There’s not a magic number that can save us. Instead, we should really just be trying to limit the continuation of climate change as much and as fast as possible.

If that isn’t enough to worry about, metros such as Merriam are also likely to be hard hit when oil production peaks and higher gasoline prices follow.

There’s an increasingly large collection of research telling us it probably isn’t a good idea to rely solely on fossil fuels. Why? Because those fuels are finite. There’s only so much of them to go around—although it is still open to debate exactly how finite the supplies of oil, coal, and natural gas are.

All three fossil fuels come from the same place—ancient plants and animals that died and were buried beneath layers of earth and rock, often millions of years before dinosaurs roamed this planet. Changed by heat, pressure, and the process of decomposition, these dead remains became the substances that make our modern lives possible. The coal that we burn to make electricity was once forests and swamps full of plants. The oil in your gas tank and the natural gas that heats your house are the remains of tiny sea creatures. Turning those plants and animals into fuel takes millions of years, and it can happen only under certain circumstances. Once we burn through these fuels—or, more important, once we burn through the ones that are relatively cheap to collect—there won’t be any more. Not on any time scale that would be useful to you or to me.

That’s worrisome. All of the conveniences, comforts, and wealth we’ve accumulated since the late 1800s have been largely based on the availability of relatively inexpensive fossil fuels. Those fuels pack a lot of energy into a compact space. Other fuels, such as cut wood, can’t compete with that kind of energy density—a fact that becomes especially important when you need to travel somewhere and must carry fuel along with you. The weight and the volume of fuel definitely matter. More than a hundred years ago, oil, refined into gasoline, solved the transportation-fuel problem, but what happens if oil becomes too expensive for most Americans? What happens, eventually, when it finally runs out?

To answer these questions, we first have to know “when.” If we have a hundred years before oil production peaks, then we’ll be in a very different position compared to that peak happening next year—or last year. The timing of this peak isn’t easy to figure out. The world’s supply of oil is harder to measure than carbon dioxide concentrations in the atmosphere, for the simple reasons that nobody owns the atmosphere, and the atmosphere is well-mixed. Oil, on the other hand, is a business. It comes with trade secrets. It also comes without an industry-wide standard for calculating untapped oil reserves. If one company tells you how much oil it has left, you can’t directly add that to another company’s number and get a reliable total, because both calculations were figured in very different ways. Unlike the atmosphere, you can’t just take a sample from anywhere on the planet and expect it to tell you something about conditions everywhere.

Finally, there’s no equivalent of the Intergovernmental Panel on Climate Change (IPCC) for peak oil. This matters. Part of what makes the IPCC so important is that it does the job of consolidating many little theories into one big Theory. The IPCC reviews all of the scientific papers published on climate science and the impact of climate change. It looks at methodology and figures out which papers are more trustworthy than others, and it compiles all of that information into realistic estimates of what might happen and when.

If there are two competing little theories that should be given equal attention—because nobody knows yet which is correct—the IPCC tells you that.

In contrast, peak oil research is a confusing jumble of individual, often contradictory, papers. To a layperson, it’s not easy to tell which little theories on this subject deserve more respect, and it’s hard to get a sense of what the overarching scientific consensus is, if one exists at all. That means you have nothing to draw on when it comes time to judge the statements about peak oil that are made outside the scientific community. When you read an op-ed that claims oil production has already peaked and that our entire way of life is imminently going to collapse, do you know how much evidence supports that and how much doesn’t? When another source tells you that peak oil isn’t something to worry about at all, is there a reason to believe this statement? Without an IPCC-like entity, answering those questions requires a lot of time and a not-insignificant amount of scientific expertise.

There’s been some progress made in solving this problem. In 2009, British researchers put together a sort of micro-mini IPCC aimed at answering the question “What evidence is there to support the proposition that the global supply of ‘conventional oil’ will be constrained by physical depletion before 2030?” In other words, is peak oil a short-term problem or a long-term problem?

The researchers’ report doesn’t cover all of the questions surrounding the idea of peak oil. For instance, they specifically avoid predicting what economic, political, or social side effects peak oil could produce, and their research covered only supplies of “conventional oil”—no tar sands or fuels made from coal or natural gas. This group was also much smaller than the one that evaluates the evidence for climate change—only eight experts, drawn from the United Kingdom and the United States. Yet the project is an important first for peak oil: a group with no obvious bias had collected all of the available research, evaluated it in a transparent way, and summarized the whole body of evidence for non-experts.

Here’s what they found. First, peak oil is a real occurrence. We know enough about how oil fields work and what happens during the life of a given oil deposit to say that production of oil will peak, and then it will decline.

Second, figuring out when that decline will happen isn’t easy, for reasons I’ve already mentioned and more. Yet although the data on oil supplies are flawed and patchy and the methods used to forecast future supplies have some serious limitations, the researchers agree that there’s still enough information available that we can start to form a clear picture of global oil supplies and make some adequate estimates about how long conventional oil will last. These estimates won’t be perfect, but they’re necessary, and they’ll be accurate enough to help us plan for the future, at least until better data come along.

Finally, even if you factor in a wide range of reasonable estimates about the quantity of oil supplies, you’re still left with a relatively narrow window of time during which oil production is likely to peak.

The peak is probably going to happen by 2030. To claim a later date, the researchers wrote, you have to start getting optimistic in your estimations of global oil supply. When we hit peak oil, it won’t mean that gasoline will vanish overnight, or even in a few years. But it would most likely mean the end of cheap gasoline. You may not feel that gas is cheap when you’re paying for a full tank. It’s never cheap right then. Even when I first started driving, in the late 1990s, and paid less than a dollar per gallon, I still drove away from the pump feeling disgruntled. Today, in early 2011, I pay closer to $4 a gallon, but that gas is cheap, too.

Gas has always been cheap in the United States, both compared to other developed countries and compared to the finite supply and the amount of work and convenience we get out of burning it. Gasoline is so cheap here that we built our entire lives around the expectation of being able to burn it whenever we want, no matter the reason. Gas is so cheap, I don’t even think twice about driving alone in my car less than a mile to the grocery store, just because I want an errand done faster. Gas is so cheap, my father-in-law can use a snow plow in the winter, instead of a shovel. Gas is so cheap, my mother can go for a ride through the woods on a four-wheeler, just for fun.

Peak oil means all of that will likely change. We’ll have to start considering whether we can afford certain aspects of our lifestyles that we currently take for granted.

For instance, right now, living in Merriam means owning a car. The whole town is designed around the idea that cheap gasoline will always be available. The main shopping center is a strip mall off the Interstate. Sidewalks—and easily walkable grid street plans—come and go throughout the neighborhoods, following the whims of past developers. Merriam has two bike routes, but one is mostly aimed at recreation. It doesn’t follow any path that people travel daily for business, school, or shopping. The other bike route begins and ends suddenly, covering only a small portion of busy Shawnee Mission Parkway. There are bus lines that pass through town, but the service isn’t particularly robust. Most of the buses are strictly for commuters, offering a handful of morning trips to downtown Kansas City and evening trips back. The system isn’t really meant for general mobility. A trip from Merriam’s main shopping center to my favorite Chinese restaurant in nearby Overland Park is a nine-minute drive. By bus, it’s forty-four minutes, and you can’t go for lunch or a late dinner. The buses don’t run between nine a.m. and four p.m., and they shut down for the night after six p.m. You see the problem here.

As the price of gas climbs, and middle-class Americans have to start seriously thinking about whether they can afford a given trip, the residents of Merriam will find themselves without an easy, all-weather way to navigate the crazy quilt of metro towns that surrounds them. For those who work outside Merriam, it’ll be harder to get to work. Inside Merriam, businesses will suffer the loss of the heavy traffic that now passes by twice a day.

Metro towns aren’t self-reliant. Their fates have been tied to the fates of the towns they touch for decades. That interconnection works now because gasoline is cheap. What happens to a metro town when travel from one part to another is no longer easy and frequent, no longer something that can happen daily or hourly? What happens when the parts of a metro can no longer rely on the direct support of all of the others but are still on the hook for funding shared systems? What happens to the city at the metro’s heart when it can no longer count on the social support, the financial investments, and the intellectual capital of people who actually live elsewhere?

Maybe the parts of a metro can break down into tighter-knit blocks. In a world of high fuel prices, Merriam could theoretically band together with the cities of Shawnee, Mission, and Overland Park to make a smaller, more walkable version of the metro experience. Yet it likely wouldn’t be as well-off as those places are today, when they can easily trade throughout the larger metro area and far beyond, when a local job doesn’t have to be closely tied to local demand, when the cost of food and goods isn’t also being driven up by the high cost of the fuel needed to make and transport them.

If you think about all of the parts of our lives that rely on cheap oil, it’s easy to see how authors such as James Howard Kunstler can believe that peak oil will lead, unstoppably, to the collapse of modern, industrial civilization—where metros will descend into poverty and anarchy, and only independent small towns will be able to survive in a future that shares a lot of similarities with the nineteenth century. You don’t even have to go that far, however, to be concerned about the impact of peak oil.

In a 2005 report (pdf) written for the Department of Energy, researcher Robert Hirsch wrote that total economic meltdown wasn’t an inevitable consequence of peak oil. Yet he also pointed out that most economic recessions in the United States after 1969 were preceded by a spike in oil prices, and that every jump in oil prices was followed by a recession. There’s a key quotation from the paper that really drives home the kind of risks we’re talking about: “Economically, the decade following peaking may resemble the 1970s, only worse, with dramatic increases in inflation, long-term recession, high unemployment, and declining living standards.” The 1970s, only worse. That’s the pleasant outlook. Even that won’t be possible, Hirsch says, if we don’t start changing the way we make and use energy now.

Remember, oil is most likely to peak sometime before 2030. We don’t know exactly when. It could be tomorrow, could be 2029. Yet if we want to really mitigate the impact of peak oil and keep the economy as stable as possible, Hirsch thinks we need at least twenty years of dedicated effort to sufficiently reduce oil consumption and create alternative fuels. As the prep time shortens, the consequences get larger. With only a decade of preparation before peak oil, we’re likely to be stuck with ten years of chronic fuel shortage. If we don’t start trying to mitigate the effects of peak oil until it actually happens, Hirsch thinks we’ll be looking at more than twenty years of hardship.

We have two problems: our metro lifestyles require energy, but we also want to avoid the negative impacts climate change and peak oil will have on metro communities. The timeline for action: the sooner, the better. So, the question becomes “Now what do we do?”


Go to Amazon to buy the book: Before the Lights Go Out: Conquering the Energy Crisis Before It Conquers Us © 2012 by Maggie Koerth-Baker.

March 12th, 2012

There is a solution that could help restore a working bank system. It has been used all over the world for decades. Do we have the will to fix our broken economy? … Re-posted from truth-out.org.

Once the black sheep of high finance, government owned banks can reassure depositors about the safety of their savings and can help maintain a focus on productive investment in a world in which effective financial regulation remains more of an aspiration than a reality.

Centre for Economic Policy Research, VoxEU.org (January 2010)


Public-Sector Banks:
From Black Sheep to Global Leaders

Ellen Brown

Public-sector banking is a concept that is relatively unknown in the United States. Only one state—North Dakota—owns its own bank. North Dakota is also the only state to escape the credit crisis of 2008, and has sported a budget surplus every year since, but skeptics write this off to coincidence or other factors. The common perception is that government bureaucrats are bad businesspeople. To determine whether government-owned banks are assets or liabilities, then, we need to look farther afield.

When we remove our myopic US blinders, it turns out that, globally, not only are publicly owned banks quite common, but countries with strong public banking sectors generally have strong, stable economies. According to an Inter-American Development Bank paper presented in 2005, the percentage of state ownership in the banking industry globally by the mid-nineties was over 40 percent. The BRIC countries—Brazil, Russia, India and China—contain nearly 3 billion of the world’s 7 billion people, or 40 percent of the global population. The BRICs all make heavy use of public-sector banks, which compose about 75 percent of the banks in India, 69 percent or more in China, 45 percent in Brazil and 60 percent in Russia.

The BRICs have been the main locus of world economic growth in the last decade.  China Daily reports, “Between 2000 and 2010, BRIC’s GDP grew by an incredible 92.7 percent, compared to a global GDP growth of just 32 percent, with industrialized economies having a very modest 15.5 percent.”

All the leading banks in the BRIC half of the globe are state-owned. In fact, the largest banks globally are state-owned, including:

—The two largest banks by market capitalization (Industrial & Commercial Bank of China [ICBC] and China Construction Bank)
—The largest bank by deposits (Japan Post Bank)
—The largest bank by assets (Royal Bank of Scotland, now nationalized)
—The world’s largest development bank (Brazilian Development Bank [BNDES by its Portuguese acronym] in Brazil).

A May 2010 article in The Economist noted that the strong and stable publicly owned banks of India, China and Brazil helped those countries weather the banking crisis afflicting most of the rest of the world in the last few years. According to Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil:

Government banks provided counter cyclical credit and policy options to counter the effects of the recent financial crisis, while realizing competitive advantage over private and foreign banks. Greater client confidence and official deposits reinforced liability base and lending capacity. The credit policies of BRIC government banks help explain why these countries experienced shorter and milder economic downturns during 2007-2008.

Surprising Findings

In a 2010 research paper summarized on VoxEU.org, economist Svetlana Andrianova and her colleagues wrote that the post-2008 nationalization of a number of very large banks, including The Royal Bank of Scotland, “offers an opportune moment to reduce the political power of bankers and to carry out much needed financial reforms.” But, wrote Andrianova, “there are concerns that governments may be unable to run nationalised banks efficiently.”

Not to worry, say the authors:

Follow-on research we have carried out (Andrianova et al, 2009) … shows that government ownership of banks has, if anything, been robustly associated with higher long run growth rates.

Using data from a large number of countries for 1995-2007, we find that, other things equal, countries with high degrees of government ownership of banking have grown faster than countries with little government ownership of banks. We show that this finding is robust to a battery of econometric tests.

Expanding on this theme in their research paper, the authors write:

While many countries in continental Europe, including Germany and France, have had a fair amount of experience with government-owned banks, the UK and the USA have found themselves in unfamiliar territory. It is therefore perhaps not surprising that there is deeply ingrained hostility in these countries towards the notion that governments can run banks effectively…. Hostility towards government-owned banks reflects the hypothesis … that these banks are established by politicians who use them to shore up their power by instructing them to lend to political supporters and government-owned enterprises. In return, politicians receive votes and other favours. This hypothesis also postulates that politically motivated banks make bad lending decisions, resulting in non-performing loans, financial fragility and slower growth.

But that is not what the data of these researchers showed:

[W]e have found that … countries with government-owned banks have, on average, grown faster than countries with no or little government ownership of banks…. This is, of course, a surprising result, especially in light of the widespread belief—typically supported by anecdotal evidence—that ” … bureaucrats are generally bad bankers.”

What accounts for their surprising findings? The authors provide a novel explanation:

We suggest that politicians may actually prefer banks not to be in the public sector…. Conditions of weak corporate governance in banks provide fertile ground for quick enrichment for both bankers and politicians—at the expense ultimately of the taxpayer. In such circumstances politicians can offer bankers a system of weak regulation in exchange for party political contributions, positions on the boards of banks or lucrative consultancies.  Activities that are more likely to provide both sides with quick returns are the more speculative ones, especially if they are sufficiently opaque as not to be well understood by the shareholders such as complex derivatives trading.

Government owned banks, on the other hand, have less freedom to engage in speculative strategies that result in quick enrichment for bank insiders and politicians. Moreover, politicians tend to be held accountable for wrongdoings or bad management in the public sector but are typically only indirectly blamed, if at all, for the misdemeanours of private banks. It is the shareholders who are expected to prevent these but lack of transparency and weak governance stops them from doing so in practice. On the other hand, when it comes to banks that are in the public sector, democratic accountability of politicians is more likely to discourage them from engaging in speculation. In such banks, top managers are more likely to be compelled to focus on the more mundane job of financing real businesses and economic growth.

The BRICs as a Global Power

Focusing on the financing of real businesses and economic growth seems to be the secret of the BRICs, which are leading the world in economic development today.  But the BRIC phenomenon is more than just a growth trend identified by an economist. It is now an international organization, an alliance of countries representing the common interests and goals of its members. The first BRIC meeting, held in 2008, was called a triumph for then-Russian President Vladimir Putin’s policy of promoting multilateral arrangements that would challenge the United States’ concept of a unipolar world.

The BRIC countries had their first official summit and became a formal organization in Yekaterinburg, Russia, in 2009. They met in Brazil in 2010 and in China in 2011, and they will meet in India in 2012. In 2010, at China’s invitation, South Africa joined the group, making it “BRICS” and adding a strategic presence on the African continent.

The BRICS seek more voice in the International Monetary Fund (IMF), the World Bank and the United Nations. They are even discussing their own multicultural bank to fund projects within their own nations, in direct competition with the IMF.  They oppose the dollar as global reserve currency. After the Yekaterinburg summit, they called for a new global reserve currency, one that was diversified, stable and predictable—and they have the clout to get it. According to Liam Halligan, writing in The UK Telegraph: “The BRICs account for … around three-quarters of total currency reserves. They have few serious fiscal issues and all are net external creditors.”

Western financial interests have long fought to maintain the dollar as global reserve currency, but they are losing that battle despite economic and military coercion. Russia, China and India are now nuclear powers. The BRICS will have to be negotiated with, and the first step to forming a working relationship is to understand how their economies work. We need to lift the curtain on how the other half of the world does it. Rather than declaring war on their more successful practices, we may decide to assimilate some of them into our own.

As Gandhi said, “First they ignore you, then they laugh at you, then they fight you, then you win.”

Written for the Public Banking in America Conference to be held April 27-28 in Philadelphia.


Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.  Her websites are http://WebofDebt.com  and http://EllenBrown.com.

February 23rd, 2012

Wise woman, Nadia McClaren who lives in Australia provides a perfect introduction for  today’s article:

After a decade of warning signs, it seems fairly obvious that we are now in the active process of devaluing a hyperinflated, mostly virtual, global economy. The necessary collapse is so large that managing a soft landing is almost impossible.

It’s so complicated that the unravelling will come by way of many slips and falls, few of which are predictable. It also seems the trick of the super-rich is to extract whatever financial benefits they can along the way.

What bothers me most is that entire countries are now held hostage to this collapse.  The banks own the government debt.

Even in “doing it easy” Australia we are told that interest rates must remain high because the “cost of money” for the banks is so high.  Money costs money (costs money, costs money….).  Duh!  Apparently these days around a half of the cost of everything and anything – from electrical appliances to water to education – is debt; debt carried by the businesses that produce the resources, the consumer that buys them and every step along the value chain and within the social matrix that supports it.

I’m looking forward to a time when money more closely represents real value.  Then, for example, we might treasure the planet and its wondrous species.

Here is this morning’s take on things as re-posted from: Global Research.


How Greece Could Take Down Wall Street

Ellen Brown

In an article titled “Still No End to ‘Too Big to Fail,’” William Greider wrote in The Nation on February 15th:

Financial market cynics have assumed all along that Dodd-Frank did not end “too big to fail” but instead created a charmed circle of protected banks labeled “systemically important” that will not be allowed to fail, no matter how badly they behave.

That may be, but there is one bit of bad behavior that Uncle Sam himself does not have the funds to underwrite: the $32 trillion market in credit default swaps (CDS).  Thirty-two trillion dollars is more than twice the U.S. GDP and more than twice the national debt.

CDS are a form of derivative taken out by investors as insurance against default.  According to the Comptroller of the Currency, nearly 95% of the banking industry’s total exposure to derivatives contracts is held by the nation’s five largest banks: JPMorgan Chase, Citigroup, Bank of America, HSBC, and Goldman Sachs.  The CDS market is unregulated, and there is no requirement that the “insurer” actually have the funds to pay up.  CDS are more like bets, and a massive loss at the casino could bring the house down.

It could, at least, unless the casino is rigged.  Whether a “credit event” is a “default” triggering a payout is determined by the International Swaps and Derivatives Association (ISDA), and it seems that the ISDA is owned by the world’s largest banks and hedge funds.  That means the house determines whether the house has to pay.

The Houses of Morgan, Goldman and the other Big Five are justifiably worried right now, because an “event of default” declared on European sovereign debt could jeopardize their $32 trillion derivatives scheme.  According to Rudy Avizius in an article on The Market Oracle (UK) on February 15th, that explains what happened at MF Global, and why the 50% Greek bond write-down was not declared an event of default.

If you paid only 50% of your mortgage every month, these same banks would quickly declare you in default.  But the rules are quite different when the banks are the insurers underwriting the deal.

MF Global: Canary in the Coal Mine?

MF Global was a major global financial derivatives broker until it met its unseemly demise on October 30, 2011, when it filed the eighth-largest U.S. bankruptcy after reporting a “material shortfall” of hundreds of millions of dollars in segregated customer funds.  The brokerage used a large number of complex and controversial repurchase agreements, or “repos,” for funding and for leveraging profit.  Among its losing bets was something described as a wrong-way $6.3 billion trade the brokerage made on its own behalf on bonds of some of Europe’s most indebted nations.

Avizius writes:

[A]n agreement was reached in Europe that investors would have to take a write-down of 50% on Greek Bond debt. Now MF Global was leveraged anywhere from 40 to 1, to 80 to 1 depending on whose figures you believe. Let’s assume that MF Global was leveraged 40 to 1, this means that they could not even absorb a small 3% loss, so when the “haircut” of 50% was agreed to, MF Global was finished. It tried to stem its losses by criminally dipping into segregated client accounts, and we all know how that ended with clients losing their money. . . .

However, MF Global thought that they had risk-free speculation because they had bought these CDS from these big banks to protect themselves in case their bets on European Debt went bad. MF Global should have been protected by its CDS, but since the ISDA would not declare the Greek “credit event” to be a default, MF Global could not cover its losses, causing its collapse.

The house won because it was able to define what “ winning” was.  But what happens when Greece or another country simply walks away and refuses to pay?  That is hardly a “haircut.”  It is a decapitation.  The asset is in rigor mortis.  By no dictionary definition could it not qualify as a “default.”

That sort of definitive Greek default is thought by some analysts to be quite likely, and to be coming soon.  Dr. Irwin Stelzer, a senior fellow and director of Hudson Institute’s economic policy studies group, was quoted in Saturday’s Yorkshire Post (UK) as saying:

It’s only a matter of time before they go bankrupt. They are bankrupt now, it’s only a question of how you recognise it and what you call it.

Certainly they will default . . . maybe as early as March. If I were them I’d get out [of the euro].

The Midas Touch Gone Bad

In an article in The Observer (UK) on February 11th  titled “The Mathematical Equation That Caused the Banks to Crash,” Ian Stewart wrote of the Black-Scholes equation that opened up the world of derivatives:

The financial sector called it the Midas Formula and saw it as a recipe for making everything turn to gold.  But the markets forgot how the story of King Midas ended.

As Aristotle told this ancient Greek tale, Midas died of hunger as a result of his vain prayer for the golden touch.  Today, the Greek people are going hungry to protect a rigged $32 trillion Wall Street casino.  Avizius writes:

The money made by selling these derivatives is directly responsible for the huge profits and bonuses we now see on Wall Street. The money masters have reaped obscene profits from this scheme, but now they live in fear that it will all unravel and the gravy train will end. What these banks have done is to leverage the system to such an extreme, that the entire house of cards is threatened by a small country of only 11 million people. Greece could bring the entire world economy down. If a default was declared, the resulting payouts would start a chain reaction that would cause widespread worldwide bank failures, making the Lehman collapse look small by comparison.

Some observers question whether a Greek default would be that bad.  According to a comment on Forbes on October 10, 2011:

[T]he gross notional value of Greek CDS contracts as of last week was €54.34 billion, according to the latest report from data repository Depository Trust & Clearing Corporation (DTCC). DTCC is able to undertake internal netting analysis due to having data on essentially all of the CDS market. And it reported that the net losses would be an order of magnitude lower, with the maximum amount of funds that would move from one bank to another in connection with the settlement of CDS claims in a default being just €2.68 billion, total.  If DTCC’s analysis is correct, the CDS market for Greek debt would not much magnify the consequences of a Greek default—unless it stimulated contagion that affected other European countries.

It is the “contagion,” however, that seems to be the concern.  Players who have hedged their bets by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets.  The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme.  The potential for this sort of nuclear reaction was what prompted billionaire investor Warren Buffett to call derivatives “weapons of financial mass destruction.”  It is also why the banking system cannot let a major derivatives player—such as Bear Stearns or Lehman Brothers—go down.  What is in jeopardy is the derivatives scheme itself.  According to an article in The Wall Street Journal on January 20th:

Hanging in the balance is the reputation of CDS as an instrument for hedgers and speculators—a $32.4 trillion market as of June last year; the value that may be assigned to sovereign debt, and $2.9 trillion of sovereign CDS, if the protection isn’t seen as reliable in eliciting payouts; as well as the impact a messy Greek default could have on the global banking system.

Players in the future may simply refuse to play.  When the house is so obviously rigged, the legitimacy of the whole CDS scheme is called into question.  As MF Global found out the hard way, there is no such thing as “risk-free speculation” protected with derivatives.


Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.  Her websites are http://WebofDebt.com  and http://EllenBrown.com.