Peak Everything, Overshoot, & Collapse

How to preserve your wealth in the worst depression ever

Posted on February 7, 2014 by energyskeptic

A book review by Alice Friedemann, June 17, 2009, of:

Weiss, Martin D. 2009. “The Ultimate Depression Survival Guide. How to Protect Your Savings, Boost Your Income, and Grow Wealthy Even in the Worst of Times”. Wiley.

The economic crisis we’re in now was predictable and inevitable – too much debt has accumulated since 1977. In 2008, 41% of the nation’s wealth was flowing into the most corrupt financial industry in history (historically banking and other financial institutions comprised at most 15% of economic activity. The don’t produce anything, they’re like a toll-taker sucking off wealth from the system).

For 10 years, I’ve been following the debates at investment forums about whether there’d be deflation, inflation, or stagflation after the crash. Most predicted inflation, and although most agree that may be the ultimate outcome, Weiss was one of the few to predict deflation would come first, along with a strong dollar.

You’d think that the trillions being pumped into the economy by the government would cause inflation, but the cash isn’t creating new loans, investing, or jobs – it’s building capital at the institutions that caused the crisis – so you probably won’t see inflation for a while, but in these volatile times, anything could happen — you have to keep paying attention.

Weiss thinks there will be inflation eventually, but first there’s so much credit to unwind, that the trillions the government throws at the mess go into a black hole (there’s $600 trillion in derivatives alone). If the government chooses to try to get out of the mess by monetizing the debt and creating inflation, there will only be a worse, harder crash later on.

In a deflation, cash is king. But just having cash isn’t enough – you need to stash it in a safe place so that in the event of a financial meltdown, the institution you have your savings at will still have your cash.

The FDIC guarantee is a promise that will be broken for sure — they’re already in the red. Very likely, your account will be frozen at bad banks while the FDIC tries to sort out the mess. More about this later.

Since the timing of when inflation will hit is uncertain, it’s best to put your cash into short-term vehicles such as 4-week, 13-week, 3-month, or 6-month treasury bills.

I lost much of my savings in the 1980s because of investments at Prudential Bache, as did half a million others in the biggest securities fraud of the 1980s (see Eichenwald’s “Serpent on the Rock” or Kathleen Sharp’s “In Good Faith” for details).

At some point I became aware of Weiss Reports, because the U. S. Congress had the GAO investigate why Weiss was the only rating agency to give First Capital Life a poor rating (D-) while large rating firms such as the Standard & Poors, Moody’s, and A.M. Best gave this company “superior” to “excellent” ratings (foreshadowing the role these rating agencies played again in 2008). First Capital Life and similar companies who owned mostly junk bonds failed. Investors lost over $21 billion dollars.

Weiss Ratings was the only honest rating agency because they don’t accept money from the companies they rate. So I trust Weiss more than most financial experts, but I trust him most of all because he was one of the few who was predicting the 2008 crash many years ahead of time, and even more importantly, one of the few who predicted it would be a DEFLATIONARY crash (and there are only two others who expected deflation that I know of: Nicole Foss at theautomaticearth.com and Gail Tverberg at ourfiniteworld.com).

Bonner and Wiggins over at dailyreckoning, who I also like, were predicting INFLATION so buying gold and silver, but the prices of commodities crashed, just as they will in the next financial crash. Yes, inflation may come back, though how that could happen short of dropping money out of helicopters isn’t clear to me, given that half of Americans would have a hard time borrowing $2,000, 10% or more are unemployed, 1 million new immigrants arrive every year to compete with the millions of high school and college graduates plus the unemployed still trying to find work, and the unions are mostly gone, so they can’t drive wages up either.

But the world is complicated and full of Black Swans, which Weiss is well aware of, so although he’s betting on deflation, he knows inflation is still possible in the future, and shows you how to hedge your portfolio for sudden inflation as well.

Weiss’s father was a very successful investment adviser, who told his son he didn’t think that Greenspan and others were right that the government could nip a depression in the bud by acting quickly and aggressively. It may appear his father was wrong, but all that happened was the can was kicked down the road, which will make the next crash even worse. Weiss’s father was on Wall Street during the Great Depression and watched the Fed try to stop the panic in the 1930s by pumping billions into banks, until the government finally realized they couldn’t save everyone.

Now history repeats itself, all over the world, as governments try to bail out banks and markets. But clearly this can’t go on forever in the USA because

1) There’s too much debt, far more than had built up before the Great Depression (170% of our economy in 1929, now it’s over 350%):

$294 trillion in derivatives (I find estimates of 600 to 1,200 trillion now in 2014, but it’s unregulated, who knows)

$ 52 trillion in corporate, municipal, and federal debt; mortgages, credit cards

$ 60 trillion for SSN, Medicare, etc

What good does a mere $16 trillion do in the face of that amount of debt?

2) Who’s going to pay for the bailout? The government has to sell treasuries to raise the money, which hogs most of the available credit, which drives up interest rates, which increases mortgage rates, which leads to more foreclosures, less credit. The Chinese and other nations are discussing setting up an alternative global currency, and have cut back on their purchase of U.S. securities.

3) Lack of public confidence. Which led to less consumer spending, which led to corporate cutbacks, tightening of credit

4) Vicious cycle of debt and deflation. Debt alone is tolerable if the borrower has an income to make payments.

Deflation alone makes everything more affordable. But debt plus deflation equals depression. Foreclosures cause home price declines. Corporations and banks run out of capital, can’t pay debts, go bankrupt, so investors sell shares, forcing stocks lower, so then companies can’t raise capital and go bankrupt. This downward spiral also has consumers, small businesses, city and state governments, hospitals, and schools caught in this vortex of slashed spending and layoffs.

The biggest mistake you can make is to assume that the prices of your stocks, home, and commodities are as low as they can get. All assets kept going down in price during the Great Depression – and only stopped going down when the bad debts were cleaned out.

The goal now is to hang onto what you’ve saved – not to make money.

There’s a saying that the market can remain irrational longer than you can remain solvent – this sort of business downturn can last for 20 years – a long time to wait for your stocks to get back to the value they have now. [An aside: here’s where I part ways with Weiss, he seems unaware of peak oil and everything else. Stocks are never going to go back up again. Richard Heinberg explains this better than I can in his outstanding book “The End of Growth”].

Weiss thinks we’re headed for much worse times than we’ve already experienced. Consider that by 2008 one in ten Americans had already defaulted on their mortgages and four in ten owed more than their home was worth – that’s worse than what happened in the Great Depression, and this happened before the usual triggers of high unemployment, high interest rates, and companies going bankrupt occurred.

Housing Bubble

Weiss points out that in all the bubbles in history, investors had to put up some of their own money. But in the housing bubble, millions of people bought homes with zero money down, with no collateral or evidence of income. Many of these loans were predatory with outrageous hidden fees and teaser rates that lasted just a few months. Lenders made bad loans and handed off the responsibility to faraway investors resulting in the biggest debt build-up in history.

On top of that, you had the corruption, fraud, and cover-ups of Fannie Mae and Freddie Mac, inflated appraisals, balloon payments, and prepayment penalties.

The bottom line is that no matter how far home prices have fallen, prices could still fall a lot more, because more and more homes remain unsold, abandoned properties are falling apart which lowers the value of homes nearby, there are millions of ARMS about to be reset at higher rates, increasing unemployment, and increasing numbers of people with home values below the balance owed. Weiss concludes that if you need or want to sell your home, don’t wait and gives 10 steps on how to sell in a sinking market, or to hang on to your house if you don’t want to sell it.

In Chapter 3, Weiss makes the case that in a deflationary depression, buying and holding is a disaster. If you owned stocks in companies in the 30’s and all of them survived (not likely), it wasn’t until 1954 that you’d have recouped your losses. The same goes for 1965 to 1980, and the Japanese Neikkei average is down 82% from its 1990 highs.

Don’t be fooled by temporary rallies. In the great depression, there were seven major rallies before the bottom was reached in 1932. These rallies can happen suddenly and last for months, but keep in mind that until the fundamental causes are resolved, the market usually crashes after a rally to new lows. Use rallies as selling opportunities.

On page 49 he warns how and wyy your broker will try to talk you out of selling your stocks. Don’t listen to the broker or your financial analyst if they do this.

Although owning stocks, commodities, and real estate will eventually be a good idea, right now the name of the game is the preservation of capital. Then you’ll have the cash to buy whatever you want, cheap. So where do you park your cash that’s safe?

Weiss says the government can’t bail the banks out forever:

1) Bank runs are very likely and could be the final trigger of a systemic meltdown. It’s not individuals who would cause this, but large, uninsured institutions running for cover, which is why Washington Mutual lost $16 billion in deposits (and also Wachovia Bank).

2) The underlying causes of risk taking and bad assets haven’t been resolved. In fact, the opposite is happening: bad assets are being shuffled from one bank to another, which encourages banks to resume taking risks.

3) There are too many banks at risk – the FDIC listed 117 in March of 2008, but Weiss looked at 9,000 banks and found 1,673 with $3.2 trillion in trouble (as of June 2009 it’s gone up to 2,025 bad banks)

4) The government can’t stop shareholders from panicking and selling their shares, which would make uninsured depositors afraid and likely to take their money out.

If your bank fails and you’re a shareholder, you’ll lose all or most of your investment. If you have an insured FDIC account, and there’s a meltdown, the FDIC will be too busy sorting the mess out to let you have your money any time soon. By the time you do get your money back, you may have suffered losses. Nor does the FDIC have enough money to bail everyone out – they have about $1.25 for every $100 in deposits.

Most likely scenario in a major banking crisis with FDIC insured accounts

You will have to make one of these choices:

A) Leave some or all of your funds on deposit for a long time earning below market interest rates so your bank can recoup its losses and build capital with income that should have been yours.

B) Withdraw your funds with a loss that corresponds to the banks loss. Those in stronger banks come out whole or almost whole, those in weaker banks suffer the largest losses. That’s why it’s so important to keep your money in a safe bank rated B+ or higher (see thestreet.com to find one).

The government may try to discourage people from withdrawing their funds by charging an additional penalty for immediate reimbursement. There is precedence for this – this is how the large insurance failures of the early 1990s were dealt with.

C) The government uses inflation and fires up the printing press, devaluing the U.S. dollar. You’ll get your money back, but the money won’t buy much.

D) If the losses are too large the FDIC will have no choice but to break its promise. Everyone will have to take a loss, be paid with devalued dollars, or both.

My take on the 64 million dollar question: how should you preserve your wealth?

Weiss recommends finding a safe bank. I don’t think there are any 100% certain-to-be-safe banks. But you’ll still need to find the safest bank possible.

Because the safest place to park your savings is in a treasurydirect.gov account in SHORT-TERM TREASURY BILLS (4-week to 1 year). Weiss also recommends you do this. The richesst 1% also park some of their money in t-bills every time the stock market looks shaky.

You need an A rated bank to push money up to treasurydirect to buy treasury bills with, and for the money to flow back to when you need it. If there aren’t any banks open after the next crash, perhaps treasurydirect.gov will cut you a check and send it in the mail. Perhaps. I don’t know if that is already possible or will be after the next crash.

If you have an IRA you can do this via Fidelity (sad to say, but Vanguard doesn’t offer this), nor does any other trustworthy brokerage that I know of. It is not worth buying a treasury bill money market fund or equivalent — the fees are higher than the interest you can earn.

Remember: you are trying to hang onto your money, not make money.

If there’s a crash and most people lose half their wealth in the stock market, you are now twice as wealthy. You can make an enormous amount of money by not losing it.

Also consider cash. I just read that more and more people are using cash after the Target credit card scandal, and that’s certainly a good option. If there’s a crash and all bank accounts are frozen, you’ll be glad to have some cash on hand.

Treasury bills are the safest place now, but long-term probably won’t be

Nicole Foss and Gail Tverberg believe that the government is likely to convert your short-term bills to long-term bonds that you can’t cash in as the financial mess spirals downwards. The government must remain solvent to function. As unemployment grows, there will be less and less taxes collected, the money has to come from somewhere, and probably the wealthiest people will have off-shored their money or put it into solid goods like real estate, land, sailboats, etc., leaving ordinary people like you and I to foot the bill.

Why are treasuries safer than bank CDs?

You’re probably thinking the FDIC is also backed by the U. S. government, and CD’s pay a higher yield. Well, the yield wouldn’t be higher if the risk weren’t higher. The governments first priority are U.S. Treasury securities, second are securities of U.S. government agencies such as Ginnie Mae, and third is the FDIC. In a meltdown, the FDIC deposits will not be first in line, which they may deny, but the differential in yields between CDs and T-bills tells the real story.

Weiss says that the government can be trusted because the USA has the world’s largest economy, strongest military, and has to support defense, homeland security, and emergency responses – the Treasury will do whatever it takes keep the nation running, which means they can’t default on treasury securities.

When inflation does appear, you should still keep some of your money in the safety and liquidity of treasury bills, but also buy hedges like gold, oil, and foreign currencies.

Hedging

Rather than selling short with options, futures, and so on, Weiss recommends buying Exchange-Traded Funds (ETFs). He likes them because there’s a wide variety, no loads or hidden fees, leverage, and flexibility.

So if have a lot of energy stocks, you should own some ultrashort oil and gas ETFs. There’s a reverse, or ultrashort, ETF out there for every possible investment you have – against the Nasdaq index, gold, Russell 2000, etc. You can find them by going to http://moneycentral.msn.com/investor/partsub/funds/etfperformancetracker.aspx and selecting a category. Within each one you’ll see words like Short or Bear, which indicates this is a reverse index.

DO NOT BUY AND HOLD THESE. You’ve got to become a day trader to use these, if you buy one and keep your money in, it will be eaten away as the market swings back and forth (you only win one direction). Sell inverse ETFs when there’s a burst of optimism and a rally in the market. No one can time this right. You can’t expect to make money all the time, so inverse ETFs are strictly to be used with money you can afford to lose. Wait for good news during a bear market to drive stock prices up, then buy the inverse ETF in anticipation of another decline while the economy is still contracting. Diversify across several stock sectors.

Currencies

Weiss likes currencies because they’re separate from the stock market, and they’re easy to invest in with currency ETF’s. The trends in currencies are more consistent and longer term than stock market rallies and dips.

One reason the dollar is so strong in a deflation is that it’s the reserve currency, and looks prettier than all the other currencies, because many nations are lending even more than we are to their banks and financial institutions.

So one way to make a currency bet, as long as deflation continues, is to bet against other currencies, or bet with the U.S. dollar. If inflation returns, do the reverse.

What to invest in when the bottom is reached

First, you’ve got to know we’re at the bottom by signs like debt liquidation, the government stops bailing everyone out, rating agencies downgrade companies, wall street analysts call most stocks worthless, everyone you know is extremely pessimistic, and finally some sort of watershed event (or follow Weiss at moneyandmarkets.com)

At the bottom, if you don’t have cash to buy whatever it is you want, you’ll have trouble getting any cash by selling your house, gold, or stocks – there are few buyers out there. Nor will you be able to borrow the money, there will be almost no credit.

At the bottom, Weiss recommends switching a large amount of your short-term treasuries into long-term treasury bonds to lock in high interest rates, and another chunk into high-grade corporate bonds and stocks that pay dividends.

Chapter 12 is devoted to why dividend paying stocks are so great.

Inflation vs deflation

Consequences of hyper-inflation: pain of debtors eased temporarily, the illusion that the “crisis is over”, only a privileged few benefit, any benefits don’t last long, and if they do, it’s in the form of another bubble and another bust and an even worse depression. You end up with even more bad debt, speculators being rewarded, savers punished, the dollar destroyed, retirement nest eggs and pensions worthless.

Consequences of deflation: bankruptcy, high unemployment, financial losses – which are unavoidable anyway. Debts are paid off or liquidated and you’re back to a clean slate. Speculators suffer the biggest losses – the same people who caused the problem, and savers are rewarded. The U. S. dollar gains in purchasing power, so people will work harder to own them and sacrifice for their community and nation.

Although deflation is winning now, the government thinks that gives them the leeway to bail out companies with no restraint, lower interest rates to zero, and print all the money they want. Yet this same strategy after the dot.com bust produced the housing bubble. Inflation does not cure deflation and deflation does not cure inflation.

Weiss thinks the inflation scenario is less likely and would look like this: The government continues to shuffle toxic assets between companies, nationalizes banks, and tries to postpone the day of reckoning with more and more bailouts. There are more bubbles and busts. Unemployment surges to the highest level in history. In some of the worst areas, overcrowded tent cities spring up, and there’s not enough food to feed the hungry. The middle class migrates to places of opportunity, starvation strikes the poor, every city suffers a “financial Katrina, and pandemics sweep the nation.

The danger of inflation remains, and once unleashed, can not easily be stopped. So in case inflation wins, consider buying gold as insurance – up to 5% of your assets. Later, after a long period of deflation buy more. But gold is generally a bad investment in deflationary times, regardless of some theories to the contrary.

Hyper-inflation: not

Weiss thinks we’ll avoid this because ultimately bond holders can dump government securities, so it’s the bond holders with the power, not the government. The U.S. can only borrow money by selling bonds to investors. Most of these investors are overseas. Some are banks, pension funds, insurance companies, cities, and states.

The governments’ huge deficits mean either higher taxes or interest rates, which leads to lower stock prices and more economic destruction.

Weiss says we papered over the savings and loan crisis in the 1980s, and life insurers in the 1990s, resulting in more easy money and debt, but now we’re at the end of the line. The quantity and toxicity of debt so great it’s driving us into a depression.

Conclusion

Because of depleting energy, water, topsoil, forests, phosphorous, minerals and increasing populations, I don’t think that long term there can ever be anything but a Great Depression until resources are in line with population, but there are still a few good years left, so make the most of investing and gaining skills while you can.

Once there’s a recovery, it won’t be long before the continuing declines in oil production will knock the price of oil sky high again, and the economy back down again, because high energy prices will stop any recovery from lasting very long. And there won’t be any credit for companies to borrow to start new oil-drilling projects, so even if there is geologically available oil, it’s not financially available.

I know it must seem like I’ve told you everything there is in the book, but there’s more in the 206 pages than I can possibly mention, especially the lists of what to buy and the nuts and bolts of investing in treasuries, ETFs, and so on. See these topics in the book for details: pages 59-60 corporate and municipal bonds, 65-66 how to find safe insurance, 74-75 how to save, 76-83 why and how derivatives could lead to a global financial meltdown, 96-100 treasury only money market funds, 116-122 ETF investing, 130 currency ETFs, 138-139 what to buy at the bottom of the market).

Safest place to put your money from best to worst for now (p50-51)

1) Short term treasuries via treasurydirect.gov

2) For your IRA, get short-term ETF’s like BIL or SHV which have much lower management fees than the brokerage treasury only money market funds http://seekingalpha.com/article/137330-the-dollar-may-be-dirt-but-cash-isn-t-trash

http://www.marketoracle.co.uk/Article10822.html

3) Treasury only money market fund (Fidelity and Vanguard have closed their treasury only money market funds)

4) Government-only money market fund

5) Standard money market fund (but risky since nearly all have some corporate and municipal bonds)

6) Income or bond fund that invests only in U.S. government notes and bonds and nothing in corporate bonds

7) Income or bond fund like above with as little as possible in corporate bonds

Keep adding to your 401K, IRA, 529 college savings and other tax-protected plans.

Get out of debt, get out of debt, get out of debt!

Cut up all your credit cards.

Pay off all of your credit cards and don’t get new ones.

Pay down all of your loans and mortgage.

Build up your cash savings.

Protect your job. If the company you work for is in a good financial position, work hard to make yourself essential, constantly learn new job skills. Otherwise stay on top of the job market, other ways to make money in a home business, and how to market your skills.

Page 201: 5 golden rules

1) keep your priorities straight. #1 is savings and capital preservation, #2 growth, #3 speculative profits

2) Control risk. Use stop-loss orders so you don’t lose everything in a meltdown

Diversify beyond the stock market, mainly in treasury bonds (short now, long

later), and when the bottom is reached, other assets

3) If you speculate, use only money you can afford to lose

4) Keep your emotions in check, investing is a business, not a game. Categorize and keep track of your expenses and review your financial position monthly. Don’t hesitate to change your strategy as needed.

5) If you trade actively, reduce your commission costs to the bone (switch brokers).

Posted in Financial | Comments Off

Nicole Foss – Links to best posts

Posted on February 7, 2014 by energyskeptic

Although I have links to just a few of my favorite posts below by Nicole Foss (aka Stoneleigh) to get you started, the most valuable way to get up to speed is to buy one or both of her DVD sets. These clearly explain the crisis and what you can do to cope.

Start with “A World of Change” and then get “Facing the Future” which you can purchase at her blog.

You can figure out much of this information from her posts, but it will take you months, and the puzzle pieces won’t be in a logical order. She’s writing for a very sophisticated audience who’ve followed her for years. The DVD’s (or videos) are clear and focused with great graphs, charts and other visuals that make her message easy to understand.

If you do want to get up to speed, this is a fantastic primer:

August 13 2011: The Bigger Picture: Primer Guide Update

Keep up with the latest information at: http://www.theautomaticearth.com/

Feb 7 2014: Debt Rattle Why Is Up Always Good And Down Always Bad?

July 18, 2012. Jeff Rubin and Oil Prices Revisited

Jan 30, 2012. Petroplus – the Tip of an Iceberg (scroll down to see it)

Dec 5, 2011: Look Back, Look Forward and Look Down. Way Down.

October 3 2011: Commodities and Deflation: A Response to Chris Martenson

Posted in Other Experts | Tagged economics, Nicole Foss | Comments Off

We’ve taken over too much of the planet for pasture and crops

Posted on February 6, 2014 by energyskeptic

In the article “Primeval planet: What if humans had never existed?” by Christopher Kemp in NewScientist, these charts of increasing intensity of pasture and crop land from 5000 BC (18,000,000 population) until 2000 (6,150,000,000 people) show that humans are laying waste to the very ecosystems that keep us alive, world-wide, and driving other species extinct.

Posted in Extinction, Overpopulation | Tagged agriculture, aquifer depletion, biodiversity loss, crops, green house gas emissions, pasture, rangeland, topsoil erosion | Comments Off

Gail Tverberg: Collapse may have already started

Posted on February 6, 2014 by energyskeptic

Limits to Growth–At our doorstep, but not recognized

ourfiniteworld.com February 6, 2014 by Gail Tverberg

How long can economic growth continue in a finite world? This is the question the 1972 book The Limits to Growth sought to answer. The computer models the team of researchers produced strongly suggested that the world economy would collapse sometime in the first half of the 21st century.

I have been researching what the real situation is with respect to resource limits since 2005. The conclusion I am reaching is that the team of 1972 researchers were indeed correct. In fact, the promised collapse is practically right around the corner, beginning in the next year or two. In fact, many aspects of the collapse appear already to be taking place, such as the 2008-2009 Great Recession and the collapse of the economies of smaller countries such as Greece and Spain. How could collapse be so close, with virtually no warning to the population?

Continue reading –> Limits to Growth at our doorstep

Posted in Gail Tverberg | Comments Off

Preparing for a Nuclear Terrorist Attack on an American City: Report from the National Academy of Sciences.

Posted on January 28, 2014 by energyskeptic

[ I think cities may be the “best” place for a while. Cities have always been richer than rural areas since wages for farmers, loggers, and mining are much lower than the wages of workers who make “value-added” products from them. But at some point cities will have to be abandoned as supply chains break from lack of diesel and other issues discussed in 3) Fast Crash.

I’m just back from Belize, where the Mayans declined because most of the trees were cut to make limestone for the temples and to cook and build with. This led to topsoil washing away, and the ensuing drought is likely the result of all this. Those who survived fled to the highlands of Guatamala. Even today the population is 10% of what it once was. About 60% of the food is produced by a small number of Mennonite and Amish farmers who’ve moved down there.

Alice Friedemann www.energyskeptic.com author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Davis, M. et al. 2013. Nationwide Response Issues After an Improvised Nuclear Device Attack: Medical and Public Health Considerations for Neighboring Jurisdictions. National Academy of Sciences.

Our nation faces the distinct possibility of a catastrophic terrorist attack using an improvised nuclear device (IND), according to international and U.S. intelligence (Jenkins, 2008). Detonation of an IND in a major U.S. city would result in tens of thousands to hundreds of thousands of victims and would overwhelm public health, emergency response, and health care systems, not to mention creating unprecedented social and economic challenges.

An IND is a nuclear weapon bought illicitly, stolen from a nuclear state, or fabricated by a terrorist group from illegally obtained nuclear weapons material (e.g., plutonium or highly enriched uranium). An IND explosion on the ground yields the same physical and health effects as detonating a nuclear weapon in the air, similar to the hydrogen bombs dropped during World War II.

Although it is generally accepted that larger U.S. cities likely represent the highest-risk targets for an IND terrorist attack, the ripples from an IND detonation would overwhelm the surrounding communities and spread nationwide.

An IND is not to be confused with a radiological dispersal device (RDD), informally known as a “dirty bomb.” An RDD is a weapon that combines explosives with radioactive material. The explosion vaporizes or aerosolizes radioactive material, propelling it into the air, but the explosion does not trigger a fission reaction that releases the mammoth amounts of energy or fission products that are associated with a nuclear detonation. The effects of an RDD extend over an area the size of multiple city blocks, whereas the consequences of an IND detonation extend for miles. Buddemeier explained that most of the nuclear hazard of an RDD attack is due to people breathing radioactive dust in the immediate area of the explosion (although there is some external radiation), whereas with an IND attack, most of the nuclear hazard is from fallout, which emits radiation of sufficient strength to burn or penetrate the skin and travel into the body cavity to trigger acute radiation syndrome. Fallout particles, though, are too large to become a breathing hazard.

Fallout is generated by thousands of tons of debris—from collapsed buildings and other structures destroyed by the blast—combined with radioactive fission products and catapulted upward by the extreme heat of detonation. The radioactive debris-filled cloud rapidly ascends through the atmosphere up to 5 miles high for a 10-kiloton (kt) device. Highly radioactive particles coalesce and drop back down to earth as they cool to form fallout. Within 10 to 25 miles of the detonation, fallout particles are the size of table salt or sand as they fall back to earth, contaminating all surfaces, including clothing, skin, and hair. The particles give off penetrating radiation—primarily gamma and beta radiation—that can injure people inside cars or in inadequate shelters. The path of fallout depends on wind direction and speed and other environmental conditions (e.g., terrain and weather). Fallout’s radioactivity decreases with distance and decays rapidly with time, with the greatest danger occurring within the first few hours after the detonation. A ground-level detonation produces more fallout than one exploded above ground, as was the case for the atom bombs dropped on Hiroshima and Nagasaki. Fallout is the primary source of radiation exposure in outlying communities. The best method of reducing radiation exposure from fallout is to remove outer clothing and remove particles from hair when entering a safe shelter.

In the case of a 10-kt detonation in Washington, DC, it is likely that 45,000 people would perish immediately and 100,000 would be at risk of death. An additional 320,000 people would be likely to be seriously injured, and another 175,000 would likely have minor injuries.

Being unaffected physically, outlying communities are likely to be in the best position to save lives following an IND attack. However, these communities will experience an unparalleled number of evacuees who will need emergency medical care for blast, burn, and radiation injuries; screening for contamination and acute radiation syndrome; and provision of radiation countermeasures, shelter resources, and mental health and material support. Yet, most outlying communities have not considered the potential burden they may experience and so have not undertaken planning for an IND detonation in a nearby city, making them drastically underprepared. The influx of tens of thousands of displaced victims will require dedicated command, control, and resource capabilities from across the region and nation to ensure a successful response.

Areas that could positively influence state and local planning progress:

High-level political support and direction to supplement available guidance
Translation of federal guidance into actionable local tools
“Socializing” preparedness—getting the public to take personal responsibility for being prepared—to increase resiliency and decrease public dependency on already taxed services
Need for education of first responders, local leadership, and health care providers on types of radiation attacks and different vulnerabilities
Coordinating transport systems: Radiation Injury Treatment Network, National Disaster Medical System, Civil Reserve Air Fleet, and regional/local transports
Robust risk communication, including pre-event messaging if possible
Expanding health care coalitions to include a wider, more diverse range of partners
Integration of public health and medical services into command and control infrastructure, emergency operations centers, and unified command
Core capabilities that receiving communities should focus on related to an IND—and corresponding commonalities with the Public Health Emergency Preparedness/Hospital Preparedness

There is a lot more to this 257-page report which is free at:

http://www.nap.edu/catalog.php?record_id=18347

Posted in Where to Be or Not to Be | Comments Off

Review of “The Bet: Paul Erlich, Julian Simon, and our Gamble over Earth’s Future”

Posted on January 6, 2014 by energyskeptic

Alice Friedemann book review of “The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth’s Future” by Paul Sabin

Kind of scary that Bill Gates recommends this book. But then again, to get really good at something, you don’t have the time to read about vast other areas of knowledge – even scientists don’t have enough time to escape the narrow confines of their specialty and can be dismayingly techno-optimistic.

There are limits to growth. Sabin thinks we can choose a compromise view that falls between Erlich’s too gloomy and Simon’s too optimistic world views.

But that’s not true: we can’t choose some happy medium between them. Scarcity will not lead to innovation and technical solutions if we make the “right political and social choices”. Seeing the world through political, social, and economic filters blinds Sabin to physical reality — our dependence on the resources of nature for our lives. This Neoclassical economic point-of-view ignores what the environment provides to the economy, and assumes endless growth, which systems ecologists find so obviously insane that they send each other economist jokes in frustration.

Billions will die. We have overshot the carrying capacity of the planet in so many ways that there are no “political and social” solutions.

To give Julian Simon any credibility at all is absurd. Limits to Growth, systems ecology, the Millennium Assessment Reports, and many vast areas of science are totally ignored in order to arrive at what would seem to an uninformed reader a wise and reasonable balance between the two points of view. But it is intellectually dishonest from start to finish.

And the Bet was stupid. Money is an abstract idea used to expedite commerce. The ‘value’ of money goes up and down. Oil prices are “down” now from $150/barrel to “merely” $100, which is spun by Wall Street as showing there is no oil shortage to worry about. But the truth is, many people are driving less, or not at all, because they’re unemployed or making minimum wage and can’t afford gasoline. In a deflation, prices go down. At the bottom of the Great Depression, assets were bought for pennies on the dollar. At some point oil will go back up in price, and that will bring on another depression and “lower” prices, until finally the prices are so low that no new oil is being drilled for, which will bring on yet another oil crisis. Whether it goes to $150 or $1,500 is irrelevant — if people have no savings or work, then any price is too high.

M. King Hubbert thought energy should be our currency. Perhaps we wouldn’t have wasted as much energy if the true value had been realized, and conserved some oil for future generations. If energy were our currency, it would be much more clear to people that fossil fuels do the work, not money. Try shoving some dollar bills in your gas tank and see how far you get. Or how many dollar bills would it take to roast a leg of lamb?

Globalization is almost entirely due to the rise of containerized shipping (see The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, and ships run oil. So do trucks and trains. Oil, coal, and natural gas do the work. Not money. Saying the price of various commodities proves one person right or wrong is just crazy!

Once the energy to get a barrel of oil out of the ground exceeds the energy in the obtained barrel, that oil well is capped, finished. What matters is the Energy Returned on Energy Invested. Not Money.

The “industrial” age is misnamed — it was the fossil fuel age, and very little of it would have happened without oil or lasted as long as it has with wood. Steam engines running on wood were running out of forests to burn by 1830 East of the Mississippi, not just from trains and steamships, but because wood was used to heat homes, cook with, and build just about everything. The Foxfire series is amazing, each kind of wood was best for different uses — spoons, chairs, flooring, bee hives, fencing, and myriad other uses.

This book believes we can feed several billion more people because we are so inventive and that alternative energy will save us: it will not. To understand why alternative energy can’t replace and won’t outlast fossil fuels is not a sound-bite or Tweet. So below is a book and article list of mainly PEER-REVIEWED SCIENCE. Or read the posts in my Energy category.

First, you must understand what fossil fuel energy does for us, the SCALE — and then why alternative energy can not possibly replace fossil fuels. Ever. Laws of Physics and Thermodynamics can’t be overturned by magical thinking. We are going back to the Age of Wood, and in many ways, to grasp our situation best, and also read one of the best written and interesting books on my list, read A Forest Journey: The Story of Wood and Civilization.

This review wouldn’t be so angry in tone if I hadn’t gotten mad about the very subtle language chosen to denigrate the Erlichs about their positions on birth control and immigration.

By focusing on solutions that assume alternative energy, rather than birth control, abortion, limiting immigration, and getting millions back to the land FAST, we risk any chance we have of retaining democracy and avoiding a blood bath.

Fossil Fuel reading list

Alternative Energy reading list

Posted in Energy Books | Comments Off

Stuck in a Land Rover watching women do all the work

Posted on January 5, 2014 by energyskeptic

A book review by Alice Friedemann of Ann Jones “Looking for Lovedu. Days and Nights in Africa”. 2001.

The book deserves 5 stars in terms of hardship and difficulty. It ought to be required reading in schools to alert women to their fragile rights and what lies ahead if they don’t pay attention. Those rights could be taken away with just one negative Supreme Court decision, and are already disappearing at state and local levels every day.

I give this book three stars because I felt like I was also trapped in the Land Rover through the agonizing mud holes, sand trap desert, menacing roadblocks, and endless Missionaries. It reminded me of a month-long road trip in Europe where we drove so much (the other couple weren’t in very good shape), that I felt like the window was a TV screen and I might as well have stayed home. At times it’s like a Land Rover Reality Show sponsored by Land Rover. I wanted to get out of the Land Rover and walk> I felt sorry for Jones having this iron monster albatross around her neck that she couldn’t abandon.

Here’s a passage that captures what it is like to be in the Land Rover with Ann Jones with her macho traveling companion for hundreds of pages:

“…I drove steadily south, strapped in this..capsule like an astronaut in unrelenting orbit. Beside me, also strapped down, sat my constant companion, sucking a red licorice stick. He loved licorice. I loathed it. He ate licorice. I didn’t. Was this what remained of my individuality? This negative choice? Here was the dimension of our journey that I hadn’t foreseen: the togetherness, the tight confinement to this tiny space that seemed to close in around us like one of Poe’s horrific shrinking chambers. Africa rolled by in the background, like a distant view of the planet Earth seen from a space capsule, but always in the foreground, eclipsing the scene, was my fellow voyager. He took up more space than Africa, certainly more space than I. And even as his hand disappeared again into the bag of licorice, it seemed to rest on the controls. I cajoled, I argued, I fought chin to chin, and always our vehicle seemed to proceed on the course of his choosing, as though he held it in orbit by the sheer force of his personality”.

In the Congo, the roads were the worst of all. After 1960, the 31,000 miles of roads “dissolved, disappeared, or-worse-devolved into a kind of purgatorial proving ground for people foolish enough to want to go somewhere.” By 1980 only 3100 miles were still drivable. By 1996 it was unclear which roads could be driven on, no one was keeping track.

Jones believes this was deliberate. Mobutu let the roads fall apart because it kept the people divided and conquered. His rivals couldn’t grow wealthy trading goods because the roads kept them from doing so. Armies couldn’t revolt when stuck in the mud, and a rebellious spirit is squelched by the despondency and demoralization of the isolation the bad roads enforce. She says it’s the “potholes” that really get everyone down – endless troughs of water and mud, many over half a mile long. Trucks sink into the mud in the rainy season for up to 10 days despite a small army of local villagers digging trucks out. Jones came upon a truck that had only gone 37 miles over 5 months.

The best part about being dug out of mud for over a month is that it gives you a chance to meet the local people. They are way off the beaten path, the perfect opportunity to meet real Africans seldom encountered by tourists.

Except that the “real Africa” of colorful isolated tribes in the brochures disappeared a very long time ago. Then encounter endless Christian Missionaries who have given them second-hand clothing from American, not nearly as pretty or colorful as the former hides and bird feathers people once wore. She describes the donated clothing of Baptists in Indiana to one mission as:

“The men wore tee shirts too or polo shirts bearing the logo of the Chicago Bulls or the L.A. Raiders or the inscription CLINTON FOR PRESIDENT. The shirts frayed about the edges and blossomed with holes. The men tied the tattered ends together to make a kind of African lace.

If you’re hoping to encounter wildlife, forget it

“..as we drove south, we realized that what was important about Malawi was what we didn’t see. Wildlife, for example. In the uplands of Nyika National Park, where great herds used to roam, we spotted only a few animals-mountain reedbuck, eland, bushbuck, roan-all running scared. Three-quarters of the park’s animals had disappeared long since into the cooking pots of hungry people in Malawi and Mozambique, just across the border. Trees had disappeared too, felled to make room for people and fields of cassava and sugarcane, and thrown into the fires that heated those cooking pots. There were about ten million people in Malawi, most of them clustered in the south, and as we drove southward we could measure the rising population by the disappearance of the trees. The hardwoods-ebonies and Natal mahoganies-had gone to woodcarvers, and the rest were for sale along the road in great stacks of firewood and giant bags of charcoal five feet tall.”

Women do all the Work

“What I’d found-everywhere-was women in charge mostly of hard work. I’d been reading “The Africans” by David Lamb, who noticed the same thing. He writes that if work is what liberates women, African women are the most liberated in the world. Their labor is the one great constant force of the continent. They feed Africa, producing something like 70% of the food. They sell to Africa, running the market economy of village and town. But their work has grown harder over the years thanks to colonial administrators, missionaries, bureaucrats, and “experts” of international-aid and technical-development projects-all advancing theories of social progress that discount women’s work, preclude women’s education, set women back. Colonial governments and missions established too few schools for boys, and in 80 years of colonial administration almost noe for girls. Colonial development projects set up monocultural cash-crop plantations with men in charge on lands where generations of women had run subsistence farms. Postcolonial aid organizations still give agricultural grants to men to buy modern farm equipment. Never mind that it’s women with hoes who tend the sambas.

Even the Pygmies treat their women like slaves. After helping the men hunt, unsuccessfully, the women later gathered wood, cleaned and cooked rice and beans, wove new leaves into the walls of t hunts they lived in to keep them watertight, tended babies and other chores – while the men sat together smoking and drinking.

Jones comments on this to her guide Augustin, who replies “And if the men had killed an animal, the women would have carried it home and cleaned it and cooked it and served the best parts to the men.”

Jones summarizes the work of women in Africa: “All around us, all along the way, we saw women doing nothing but work….women hoeing, planting crops, weeding, harvesting, gathering wild edibles, shucking maize, pounding maize, grinding maize at the mill, carrying maize meal home, chopping wood, gathering firewood, carrying firewood home on their heads or on their backs, building fires, cooking, serving food, washing dishes, scouring pots, making clothes, buying clothes, washing clothes (after first carrying the laundry to the river, or carrying the river water home), selling clothes and food and baskets in the marketplace or beside the road, building houses, painting houses, gathering thatching, preparing mud plaster, polishing floors with cattle dung (to keep out insects), scrubbing floors, weaving palm fibers, making mats, making baskets, making hats, dying fabrics, sewing, knitting, embroidering, making pots, minding children, doctoring children, teaching children, feeding children, washing children, dressing children, plaiting hair, milking cows, feeding chickens, butchering chickens, shopping, making brooms, sweeping houses, sweeping yards, cleaning churches, cleaning wells, planting trees, and keeping accounts.”

Women have no rights

In Malawi, Jones went to buy the well-known fabrics of Margaret Mazembe. She went from barely surviving selling donuts to one of the most amazing craftswomen in that part of Africa by buying a sewing machine with her donut profits. Then the government gave here a class in making tie-dye, batik, and screen-printed fabrics, and any money she made, she reinvested in her business. Women in Kenya came to buy her cloth. She even hired five tailors to make men’s shirts and ladies’ dresses that were sold in far away markets. Then her husband came and took away four of her six sewing machines and most of her supplies. The husband told the police she brought over that the property was his because she had used it in his house. The police agreed. Her husband sold the sewing machines and moved in with another woman. She didn’t have the money to get started again, and despite a proven track record, no one would lend her any money.

Like women everywhere, men beat them up: “In Mali, when we were on the road to Bamako, we stopped at a village and I jumped out to ask directions. A young woman, smiling, with a baby in her arms, came forward to greet me. Suddenly a little wiry man leaped out of a hut and rushed between us. He turned on her and pummeled her about the head and neck with his fists and forearms. He hit her about the head and neck with his fists and forearms. He hit her resignedly and hard, the way I’d seen Africans club their donkeys on the head and neck to make them turn, as if this were the only signal the stupid beasts might understand. The woman did as the donkeys do; she hunched away without a sound.”

“80% of women in Cameroon are farmers but they can’t own land. They can’t own anything-not even their own children. Women have no say in who they’ll marry or how many kids they’ll have. It’s like slavery.”

The journey transforms Jones into a new person

I think the most interesting part of the book is the long-term effect this had on Jones when she came back to America:

I found “I couldn’t bear the wealth of goods that seemed to be everywhere in America, and the way people worked so long and hard go get things. It was stifling. As stifling as once again being shut up indoors with central heating and air-conditioning and windows impossible to open. …I left my job and my apartment, gave away most of my things, and….drove west with my cat and my old horses and came to rest in a one-room adobe house in the desert. I threw open the doors and windows and let the dry winds blow through, brining heat and dust and birdsong, and when the monsoon struck, toxic toads. But at night the coyotes yipped and set to barking all the German shepherds and Dobermans that lurked behind the walls of my neighbors’ houses, guarding their acquisitions.

———————————–

Although Jones came to Africa to find Lovedu, where women rule a prosperous land using peaceful diplomacy, the reality of Africa is that women do all the hard work, which is true nearly everywhere fate of all women everywhere. I don’t want to spoil the main theme of the book of what happens when she finally meets with the Queen, but I don’t think it’s not going to be a huge surprise to anyone given the universal oppression of women in Africa .

I’m also disappointed that Jones never mentions birth control and family planning as a way for women to claw their way out of this situation. Raising fewer children would give women a lot more options, slow down the ecological destruction, and prevent the extinction of some of the most wonderful and amazing creatures on the planet.

Even in America it hasn’t been long since women couldn’t own property, could be committed to mental asylums by their husbands, and couldn’t vote. Women who dismiss feminism really ought to read this book to understand how quickly the freedoms they take for granted could disappear. We could easily go back to those days again. You can see it happening already with the endless attacks on abortion rights and whittling down of the number of clinics that can provide this service (and birth control).

I predict that the rights of women in America and Europe will disappear as the “Limits to Growth” suddenly appear and there is less to go around. I can only hope that some women will keep the dream of women’s rights and equality alive as we go back to the days of “Might Makes Right” and men dominate women once again in the age of wood.

I would like to find a book about pre-fossil fuel cultural traditions where women protected each other from being beaten up by their husbands, made their own music, dances, and stories to transcend the everyday slavery and brutality of their lives, participated in ruling. I don’t know if any society pulled this off, certainly most of the anthropology I’ve read is pretty dismal as far as the lot of women in tribal societies, and it’s still true for most women in the third world. The most recent book I’ve read that gave me any hope was Jack Weatherford’s “The Secret History of the Mongol Queens: How the Daughters of Genghis Khan Rescued His Empire”

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Book Review of “Wheel of Fortune. The Battle for Oil and Power in Russia”

Posted on December 28, 2013 by energyskeptic

Alice Friedemann’s book review of “Wheel of Fortune. The Battle for Oil and Power in Russia”, by Thane Gustafson. 2012.

The main thesis of this book is that Russia will collapse again. Soon. Unless Russia drills offshore and in the Arctic with Western oil company help. Western Siberian oil is declining. Eastern Siberia doesn’t have much oil – just 800,000 barrels per day at most –and doesn’t have the required infrastructure of roads, pipelines, cities, towns, etc.

Gustafson is aware of how hard drilling in the arctic will be (though not the ecological consequences). An ExxonMobil engineer he interviews about the issues of the Sakhalin Island area said that the “biggest challenge was moving ice. The whole ice pack drifts along, and if you haven’t built for it, it will drag your whole platform away”. Also, it gets to minus 60 degrees Fahrenheit, storms create waves over 30 feet high, there are frequent earthquakes, and most difficult of all is managing the thousands of skilled specialists from hundreds of contractors and subcontractors from all over the world.

Gustafson ultimately sees a new round of conflict for control and distribution of the oil revenue spoils, resulting in renationalization, sinking oil returns, and Russia sliding deeper and deeper into debt. The only way he sees out of this is Arctic & offshore drilling, reducing welfare payments to citizens, more privatization, encouraging innovation and entrepreneurship, and other Capitalistic ideas. Surely he realizes this isn’t likely given that he says the current Russian culture and political system “is based largely on a rejection of the 1990s, nostalgia for the Soviet empire, and resentment of the West”.

July 2013: Former Soviet Union peak oil and gas has excellent graphs of Russian oil and gas production and where their remaining reserves are.

Alice Friedemann www.energyskeptic.com author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

Why Russian Oil Production Will Decline in the Future

Vladimir Bogdanov, CEO of Surgutneftegaz speaking about his company (p 449)

60% of reserves have been produced already
75% of oil is from low-grade reserves
90% of what we produce is water
Costs are rising twice as fast as world oil prices
West Siberia, where two-thirds of Russian oil is produced, is declining

Energy Minister Shmatko (late 2010): By 2020 oil production likely to be down to 7.7 million barrels per day (10.1 million in 2010).

Mature fields are 80% of total oil production now (8 million barrels per day). To offset 2% of decline in these large fields, the oil industry must add 160,000 barrels per day of new production to maintain current levels, or 1.6 million barrels per day by 2020 from poor quality, undeveloped fields at a cost of over $5 billion per year. Another $20 billion per year is needed to keep the decline of the existing large oil fields from declining even more precipitously. Over time, the absolute volume of decline will grow, and every new barrel will be more difficult and expensive. In other words, by 2020 it would take $50 billion a year to produce the same amount of oil as now.

Gustafson is not very peak oil aware, the decline rate is much more likely to be over 8% from the largest fields, and he never mentions EROI. He doesn’t have a clue about the peak oil situation. On page 458 he writes that peak oil won’t happen until as early as midcentury or as late as well into the next century.

But he knows a hell of a lot about Russian oil – more than I wanted to know, the paraphrasing and direct quotes below are from the beginning and end of the book.

Today, Russia is even more dependent on oil revenues than before the crash.

The renewed growth of oil production encouraged complacency and shortsighted greed. The inherited hydrocarbon wealth—already extensively explored and developed…came to be taken for granted by the political class and to some extent by the oil companies themselves, lessening the urgency of investing in new recourse of pursuing innovative approaches. The legacy fields still held an abundance of recoverable oil, which could be produced by techniques that were not particularly advanced and quickly mastered by local operators. The Russian oil industry in the 1990s had little need of the next-generation skills required for Arctic offshore projects or unconventional reservoirs, which would necessarily have involved foreign partners or service providers.

Therefore, over the long run, “Soviet legacy assets have acted as an anesthetic, delaying the adaptation of the Russian oil industry to modern management and technology. The next generation of oil and gas will force the oil industry toward new oil that will be deeper, hotter (or colder), higher in pressure, more sour (more sulfur), more complex geologically, and more remote and therefore, far more costly.

There aren’t smaller, independent operators in Russia who can help make the transition to more difficult oil due to the vertical gigantism of the existing system. Also, Russians are proud of their own practices and resist change or ideas from outside. Above all, Russians are determined not to lose control or ownership of petroleum to outsiders.

Russian Culture hasn’t changed much

After the fall of the iron curtain, the vast majority of Russians resented the foreign ideas and new capitalism. They continued to believe in a combination of Soviet Marxism and traditional Russian culture. In the oil fields, the prevailing culture was the opposite of capitalism. Workers were housed with electricity and water provided for a lifetime. The capitalistic Moscow newcomers were seen as likely to deplete the oil, and fire people like Western corporations. Old-timers like Siberian driller Vladimir Bogdanov were, and still are, revered in the oil towns.

“The Soviet system of totalitarian controls and systematic scarcity led Russians to form informal networks of collusion and exchange, to trade access, information, protection, and scarce goods.” With no private property and extreme accumulation of private wealth criminal, the best strategy of an entrepreneur was to share or rish being attacked. No one operated alone. “Networks of mutual trust were essential for survival…the norms of exchange and sharing—with neighbors, with partners, with political allies—have carried to the post-Soviet era. Yet in the absence of secure legal protections and property rights, these informal relations (which we call “corrupt” or “patrimonial”) continue to serve the same defensive functions as in Soviet times. As a common Russian business saying goes, “Good friends are worth more than good contracts.”

“Many Russians see the 1990s as a disaster and a humiliation, a time of invasion by foreign powers, interests, brand names, and values”

Russian Political structure hasn’t changed much either

Most of the machinery of government survived at all levels, and especially regionally and locally. Most of the energy sector remained under state control, though weaker in the 1990s. The gas and electric industries especially remained within state control. Although the oil industry broke free and became private, the state still owned the oil resources in the ground, the pipeline system, the borders, customs, and the power to control oil exports. Although weakened in the 1990s, the state came rip-roaring back into power and control again later.

Effect of 2008 Recession: Another Crisis is Brewing

The optimism of the 2000s disappeared. On the eve of the crash an oil price of $70 per barrel was enough to produce a surplus.

By 2012 it took nearly $120.

Capital flight resumed again after the crash at a higher rate than ever before. Domestic investment lagged. The political and business elite appeared to be gripped by a malaise over the future of the country, which Putin’s return to the presidency in 2012 did not dispel.

In 2008 oil production declined for the first time since the 1990s. Although growth resumed again later, it was unbalanced since the increase came from only a few large new fields. But the vast majority of the oilfields in West Siberia are entering a long-term decline.

The costs of finding and producing oil are rising rapidly yet the tax system takes 90% of the profits. So with no incentive to invest in new fields or technology, new drilling and exploration isn’t happening much.

The state economy and welfare system depend on oil revenues, need increasing amounts of oil revenues, at the same time that oil industry costs and income are declining.

This is a threat to the entire Russian political and social system. Right now the system benefits from the legacy oil investments and the “windfall” profits from the rise of world oil prices – an external factor that Russia does not control (which the author calls “rents”). Russia has depended on legacy and windfall profits for 20 years that may not be able to continue in the future.

“A flow of rents inevitably attracts rival claimants. The story of the post-Soviet oil industry is largely that of the battle for rents—in the 1990s for the legacy rents and in the 2000s for the global windfall rents. By the end of the first decade of the 2000s, the state had succeeded in recapturing the lion’s share of both.” Now a large part of the political and economic system depends on oil rents.

Unless the industry is able to recapture some of the state’s share for its own needs, it will underinvest, and oil production will eventually decline. At the end of the road lies renationalization, but even that would not be more than a stopgap, since the fundamental problem is the shrinking of margins.

“The coming decline in the flow of surplus from oil attacks the entire rent-based system and is already raising the level of conflict. Several categories of what in the West would be thought of as costs are actually key parts of the rent-distribution system. Russianoil and gas companies pay taxes to the state, but they also pay informal “taxes,” in the form of bribes and “social payments” to localities (known to Russians as sotsialka). Production costs are inflated, since much of their equipment and services is purchased through networks of connected companies. The process is subterranean, nontransparent, and largely invisible to outsiders, but it is a major channel of rents.”

“This flow is vital to the maintenance of the economy and the political system. Rent dependence is not simply at the heart of the system; it IS the heart of the system. The obvious implication is that if the flow of petroleum rents were ever to slacken, Russia would be deeply destabilized.”

“When he came to power, Putin saw his prime mission the restoration of stable central power. But Putin has been unable to build a stable institutional or ideological mechanism to ensure governability over the longer term. The system is based largely on a rejection of the 1990s, nostalgia for the Soviet empire, and resentment of the West. That is weak glue. What remains is elite self-interest. The result has been a spread of corruption and interclan wars, and, through the selective application of state power, a takeover of the “commanding heights” of the economy by politically favored interests. The oil industry has been one of the sectors most affected. The determination of state players to control the industry and to capture the bulk of its revenues has deprived it of the resources needed to renew itself and weakened its incentive to continue modernizing.”

Posted in Arctic, Books, Energy Books, How Much Left | Tagged oil, reserves, Russia | 1 Comment

Philip Cafaro on immigration and population

Posted on December 27, 2013 by energyskeptic

Here are some of the bullet points of what to do from “Arguments for Reducing Immigration” from Life on the Brink.

Cut legal immigration from 1 million to 200,000 per year
Reduce illegal immigration by strictly enforcing sactions against employers who hire illegal workers (it is fruitless to try to lower legal immigration levels while ignoring or condoning illegal immigration).Rework trade agreements, and increase and improve development aid, to help people live better lives and rein in population growth in their own countries
Increase funding for family planning clinics and take other steps to improve easy, inexpensive access to contraception domestically
Preserve the right to abortion (forcing women to bear children they do not want is unjust, and forcing them to have illegal abortions is dangerous)
End tax breaks and other government subsidies that encourage American citizens to have more children

Foreign policy:

Increase funding for international family planning efforts, to help secure safe, affordable contraception in other countries
Vigorously support women’s reproductive rights (including abortion rights) and girls’ equal rights to primary and secondary education, worldwide.
Deny all foreign aid and any immigration slots to nations that fail to commit to stabilizing their populations or sharing wealth fairly among their citizens

Cafaro points out that if you aren’t willing to reduce immigration into the United states, then you can’t avoid the environmental implications of your position. If you want to continue to let in 1.5 million immigrants, then you support a population of 700 million Americans by 2100, or 850 million if you supported the 2.5 million per year Edward Kennedy & John McCain bill of 2007 (which President Bush and then-senator Obama also supported). If you want 1.5 to 2.5 million people per year, then you also want more cars, more houses, more shopping mals, more power lines, more concrete and asphalt. You are against habitat and resources for wildlife, against water in the rivers and streams for fish, want fewer forests, prairies, and wetlands, fewer wild birds and wild animals in general. You’d like to see human beings replace all these other species. You reject sustainability.

Posted in Overpopulation, Population | 5 Comments

The Passengers are killing the crew of Spaceship Earth

Posted on December 15, 2013 by energyskeptic

What follows was written by Captain Paul Watson, who helped found Greenpeace in 1972 and the Sea Shepherd Conservation Society in1977. His books include: Sea Shepherd: My fight for Whales and Seals, Cry Wolf, Ocean Warrior, Earth Force, and Seal Wars.

The earth is a planet, but because it contains complex ecosystems and living entities on a celestial body hurtling through space, it may also be described as a spaceship.

The living entities that crew this spaceship are millions of species working within diverse ecological niches to maintain the complex life-support system of the ship. The foundation is made up of the species that most human beings regard as the lowest life forms: bacteria, insects, plankton, plants, invertebrates, and fish.

We could call them the custodians or the working crew of Spaceship Earth. The spaceship in reality belongs to them, not us. They run it. We so-called higher forms of life are merely the passengers. The custodians do not need us, but we need the custodians.

We humans suffer under the delusion that we own this planet. We do not. We never have and never will. We have not been here long, and we will not be here much longer if we continue to operate in contempt of the rules of ecology and in total disrespect of the ship’s crew.

A life-support system requires some essential engineering. We must breathe, and thanks to trees, plants, bacteria, and plankton we can. Another necessity, water, has its quality maintained by wetlands, estuaries, plankton, and bacteria. Eating is another component of our life-support system, and our gratitude must extend to the bacteria, earthworms, bees, beetles, ants, plants, and other animals for that privilege. We also must have a comfortable temperature gradient in which to live. Plankton, plants, and animals ensure the integrity of a global climate is maintained. Finally, there must be a mechanism for recycling waste. Bacteria, plants, insects, fungi, and animals can all take credit for this vital and often overlooked function.

The ecological reality is that no species can survive long outside of the laws of ecology. A violation of these laws leads to extinction. An extreme violation of these laws leads to a major extinction event. That is the situation in which we find ourselves at the moment. One species, our own, has radically violated the basic laws of ecology, placing us in the midst of a major extinction event. Between the year 2000 and the year 2065, we will lose more species of plants and animals than the planet has lost in the last 65 million years. The last major extinction event was caused when a comet collided with our spaceship.

It is like the passengers on an ocean liner partying in luxury, while slaughtering and feeding upon the engineers, navigators, and crew, only to find themselves adrift, with no place to go and nothing to eat or drink, and wondering where the crew went as they slowly starve. This is not something that most people want to hear.

The biggest problem is that people for the most part don’t care. What we have is collective apathy fueled by distractions and diversions. This is evident in what human societies consider important. Religion, sports, and entertainment are the three most notable forms of collective mass escapism from the realities of ecology. Consider that the video game World of Warcraft has over 11 million subscribers, and there is not a single environmental or conservation organization in the world that can equal that number of supporters.

Intelligent and ecologically concerned people cut right to the chase and declare they will have no children. Considering that such people would be hard pressed to outnumber the regular players of World of Warcraft, this does not bode well as a solution. Ecologically intelligent men and women refraining from reproduction leave the world in the hands of the ecologically ignorant and the anthropocentrically arrogant. If the biocentrically oriented refrain from having children, while the ecologically ignorant reproduce, the self-sacrificing people would act like cuckoo birds, paying taxes to raise the children of people who will do little to solve our problems. The population will grow even larger, with a higher proportion in the eco-idiocracy.

Then there is immigration, which enables less responsible countries like Catholic Mexico and Muslim Pakistan to export their surplus numbers to other countries. And since rich countries consume many times more resources per capita than poor countries, immigrants moving from poor nations to rich nations increase their consumption enormously, making global ecological problems even worse.

Social justice advocates will be angered by this, but the reality is that the laws of ecology are unconcerned with how humans treat each other. Alleviating poverty and empowering minorities are noble endeavors but irrelevant to the basic fact that resources are finite and there are limits to growth.

As populations increase and carrying capacity is reduced, the costs of food and commodities will continue to rise. Societies will not be able to keep up the charade of “sustainability”, a word that has been used to mask the destruction of resources.

Before we are faced with potential collapse, especially when fossil fuel resources are diminished and overall global carrying capacity is reduced, concerted attempts should be made to lower our populations.

Rather than endure genocide, war, famine, or pestilence, societies may choose to implement a more humane answer, although one that is in opposition to what is often falsely seen as a fundamental human right: the right to unlimited procreation.

Having children should be seen as a limited right with commensurate responsibilities.

Limit parenthood to those who are able to show they can provide financially and educationally for their offspring, and discourage all couples from having more than 2 children, who should not be raised in abject poverty or ignorance, nor should future children be forced to live in a crowded, ecologically barren world.

This would not only reduce our current excessive demands on the biosphere but also prepare us for a future balanced relationship between humanity and an ecologically restored Earth. It would also help ensure that couples a few centuries from now can exercise their right to have a child or two of their own.

The world 100 and 200 years from now will be vastly different from what we see today. The end of oil will be the end of civilization as we know it and the beginning of a new relationship between humans and nature. The alternatives to fossil fuel energy are not practical; at least not if we expect them to provide the sort of cheap, abundant energy we have gotten used to in recent years. Solar and wind power probably cannot satisfy the needs of 7 or 8 billion people. Nuclear energy requires vast amounts of fossil fuel to extract finite resources of uranium ore, process and transport the uranium, and there is no way to safely and securely store the nuclear waste.

It’s time to back off from the all-you-can-eat passenger buffet. The crew of this magnificent spaceship needs our respect and our support. They also need to be given some rights; most importantly, the right to survive, flourish, and continue to do what they do best: keep us all alive.

The needs of the crew are more important than the needs of the passengers, and we humans have been enjoying first-class service at the expense of the crew for too long. We will survive only by rejecting the anthropocentric perspective in favor of a biocentric point of view, and by living in harmony with all other species. We must realize that any species, including our own, survives as part of a collective whole, in accordance with the laws of diversity, interdependence, and finite resources.

Posted in Overpopulation, Population | Tagged overpopulation | 1 Comment