Monthly Archives: January 2012

Game Over, How You Can Prosper in a Shattered Economy

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This book by Stephen Leeb is the second recent review about the inevitability of an economic collapse. The review of the book posted last week predicts what will happen in the United States compared to what happened in Russia after the Soviet Union collapsed. That book provided little guidance other than encouraging stockpiling of food, medicine, and barter goods. There is advice in “Game Over” on how to be best prepared for predicted collapse caused by runaway inflation and shortages of commodities.“Growing numbers of the world’s 6.6 billion people are now actively seeking to equal Americans’ high consumption lifestyle…” There are limits to all commodities, and governments and central banks are not acting as if they have the restraint necessary to keep inflation under control.

Peak and decline of oil supplies and inadequacies of alternative energy production are likely to cause energy production to fail to keep up with the world’s appetite. Replacing carbon fuels with wind is impossible, because there isn’t enough iron oxide to build enough towers and turbines. It is not yet clear whether solar cells produce a net gain in energy. Thin film photovoltaics require cadmium telluride, and there isn’t a wealth of that available in the world. Producing energy by converting corn into ethanol uses more energy than is gained and making fuel out of food when there is a shortage of food is, to be kind, idiotic.   Continue reading →

At Stake

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This idiom is usually used as a financial term to describe an amount of money that was put at risk in a bet or business venture. It is speculated that it originated with the brutal practice of tethering a bear to a stake and turning dogs loose to attack it. Apparently the bets would be placed on whether the dogs or the bear would be killed. The money that was bet was called “at the stake,” or “at stake.”

Game Over, The Impending Economic Collapse

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I posted a review of a book “Game Over” by Stephen Leeb in which it is predicted that the U.S. economy is doomed to collapse because the world has reached what is called “Peak Oil.” All commodities are limited, and the developing world is demanding more of its share. Another review on the same subject titled “Reinventing Collapse” by Dimtry Orlov which gives virtually the same prediction, although that book is about comparing what the U.S. collapse will look like compared to what happened with the Soviet Union.

President Obama might have hastened the eventual collapse of the U.S. economy by his recent rejection of the Keystone XL pipeline. The pipeline is proposed to bring Canadian tar sand oil to the U.S. to be refined. Federal law requires that government projects be subjected to detailed environmental impact studies under the National Environmental Policy Act (NEPA). NEPA approval was given to Keystone XL after three years of study found the project would not have an adverse environmental impact. However, the powerful Environmental lobby hates the idea of the project and threatened to not support the Obama reelection campaign if he approved the project.

The President said he rejected the project because the “arbitrary date” set by Congress did not give enough time for full review (despite the lengthy NEPA review). I speculate that most Presidents would have at least complained about Congress passing a law with a deadline for action by the President. However, I also speculate that the President made a calculated political decision. He needs the environmental movement to support his campaign with volunteers to man the phone banks and do the door to door work to get his vote out next November. The Unions wanted the jobs that would be created by pipeline, but I’m guessing Mr. Obama knows they will vote for him over any Republican candidate. Nate Beeler’s political cartoon in The Washington Examiner on January 18 expresses a different perspective. It shows a caricature of President Obama dusting off his hands after tying a pipe labeled “Keystone XL Jobs” into a hangman’s noose. Another figure holding a sign “Need Job” is asking, “IS THAT SUPPOSED TO BE FOR ME or YOU?”

“Game Over” documents that alternative energies such as solar, wind, and biofuels can’t replace the energy provided by carbon-based fuels in the near future or ever. An article in the Wall Street Journal by Robert Bryce has interesting information about popular alternative energy sources and nuclear power. It would take 770 square miles of land covered with wind turbines to replace the two Indian Point nuclear reactors that sit on 250 acres of land and provide 30 percent of the energy used by New York City. There isn’t enough iron oxide to build enough towers and wind mills to come close to replacing electricity produced from carbon-based production. It isn’t yet certain that solar panels produce more energy than is required to construct, operate, and maintain the panels.  An area the size of Illinois would have to be planted in switch grass for biofuel to replace one-tenth of the energy produced by oil. Biofuel production as advocated by Secretary of Energy Steven Chu, “…is a fool’s errand.”

The Canadians are saying they know they will sell the oil, probably to the Chinese, if the U.S. continues to block the Keystone XL pipeline. The argument that the oil is “too dirty for use” won’t impress a world that is demanding more oil. It will be burned somewhere, and Mr. Obama may have assured it won’t produce jobs and energy here.

“Game Over” predicts that runaway inflation and devaluation of the U.S. dollar along with declining commodity resources will be a centerpiece of an economic collapse. The worst case scenario is that the developed nations, which have created complexity along with wealth, will collapse in the midst of violence and starvation. Perhaps that possible outcome will somehow overcome the resistance to nuclear energy. Three Mile Island, Chernobyl, and the Japanese tsunami disasters certainly have given nuclear energy a bad reputation. The waste generated is another subject popular with critics. However, the “…American commercial nuclear power industry, over its entire history, has produced about 62,000 tons of high-level waste. Stacked to a depth of about 20 feet, that would cover a single football field. Coal-fired power plants in the United States, by contrast, generate 130 million tons of coal ash a single year.” (That is an interesting observation, but remembering what causes a nuclear criticality would tell you that stacking high level waste isn’t a good idea.)

There has been a stream of comments and counter comments about the Bakken field in the Dakotas and how much that huge deposit could help with U.S. demands for oil. The field is producting just under half a million barrels of oil a day, which is stretching the infrastructure ability for collection and shipment. There are also arguments about the “fracking” to improve extraction. The Bakken field is generating oil and arguments. There is an interesting discussion about how much the field might be able to produce on Snopes. That source says production from the field has already peaked at about half a million barrels a day.

I speculate that many people will eventually think developing the Bakken fields, want Canada to sell us oil transported though some pipeline, and/or building more nuclear plants are all acceptable alternatives to starving in the cold and dark.  I also speculate that President Obama’s choice to block the Keystone XL pipeline will prove to be unpopular with a majority of Americans when they eventually can’t afford to fill the gas tanks of their cars or when the charging stations for their battery powered cars aren’t receiving electricity from the power plants. Maybe people won’t really care until they aren’t able to use their electricity-powered computers, cell phones, and other electronics or when they have to walk or bike to get anywhere.

Reinventing Collapse, The Soviet Example and American Prospects

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This book by Dmitry Orlov predicts a U.S. economic collapse, and it is both interesting and often oddly entertaining. The author was born and grew up in Leningrad, but lived in the U.S. until the mid-seventies. He had several visits to the Soviet Union during the years that political system was preparing to collapse or after it had collapsed. He believes that the U.S. will only have the option of inflating to escape excessive debt or defaulting on obligations. “But the results are the same: a worthless national currency and unhappy international creditors unwilling to extend further credit.” That scenario leads to the need, if the author is correct or partially correct, for individuals to consider what they should do, or prepare to do, if there is a collapse of the U.S. economy.  I don’t agree with some of what is written (the risk from global warming, as one example) but I believe the book is worthwhile.

The descriptions of the visits to the Soviet Union are an example of how the author can take the edge off serious matters with clever writing. “The stores were largely empty (in the sense of being quite uncontaminated by consumer goods) and often closed.” He quickly learned a half-liter of vodka could be easily exchanged for ten liters of gasoline, “…giving vodka far greater effective energy density than rocket fuel.” People were willing to exchange items of great value for American jeans. This is an important point. When an economy collapses, it is important to have desirable items to barter for what is needed for survival. The author also warns that, “Access to actual physical resources and assets…and relationships, quickly becomes much more valuable than mere cash.” Continue reading →

Made from Scratch

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The use of the word “scratch” in this expression began with the description of a line or mark drawn or scratched into the ground to indicate a boundary or starting-point in sports. Scratch then became the definition of giving a competitor no odds, and a “scratch golfer” is given no handicap strokes. The term was later applied to mean “from nothing, such as when a recipe is made from individual ingredients instead of using a boxed mix.

Weasels and Social Security

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I’ve tried to maintain interest in politics, but it is challenging. Republican candidates demean each other while the Democrats demean the Republicans ranking highest in the polls at the moment.   The spectacle brings to mind an article titled “On Weasels and Removal Thereof Though Unified Action” by Susan Westfall. The author wrote that she “…decided to settle on a word to use when referring to politicians…and special interest groups who work so hard to sell the sovereign countries of the world down the road for personal gain, all the while espousing their good intentions for the ‘general welfare’ of the people.”  “Ultimately, I settled upon the term ‘weasel’.” That term is used to describe people who are acting in “…a cunning/and or deceitful fashion to achieve desired ends.”

We need fewer politicians willing act like weasels to buy enough votes to be reelected. Government entitlements such as Social Security and Medicare are popular with voters and any politician mentioning changes to improve the long term economics of the programs will face the wrath of voters. Too many politicians buy votes by defending both of the programs even though they know the programs need to be fixed.

President Clinton spent a year at town hall meetings talking about Social Security and that we should “…fix the roof while the sun is shining.” He was and is a clever politician, and he didn’t lay out details of how to fix the program. That resulted in people nodding knowingly that something should be done.

George W. Bush wasn’t as clever. He actually suggested that we begin to fix the Social Security by letting younger people voluntarily put a third of their Social Security “contributions” into private retirement accounts similar to IRAs. The account owner could then select how the money was invested, and they could select treasury bills or insured certificates of deposit if they wanted to be conservative to assure the money was there for them when they retired. They could also select the beneficiary, while Social Security is limited to dependent children and legal spouses (and is therefore homophobic).  Democrats were mortified. Robert Reich, who had been Clinton’s Labor Secretary, responded, “If it ain’t broke, don’t fix it!” Alliances were formed with older people who were told Bush wanted to destroy Social Security by “privatizing it.” I was discouraged that members of Congress and evidently their voting constituents believed the government could more intelligently manage money than the people who originally earned the money.  Bush lost, and future politicians received a clear message. Act like a weasel if you want to be reelected.

I have one hope, and that is some future politician will have the courage to offer what Franklin Delano Roosevelt proposed in an address given November 14, 1934. “It takes so very much money to provide even a moderate pension for everybody, that when the funds are raised from taxation only a “means test” must necessarily be made a condition of the grant of pensions.” He not only recommended a means test to determine whether people should receive a benefit, he also said he believed the taxpayers should only support the program for thirty years (until about 1965) at which time it would be replaced by private accounts.  When Bush’s opponents commented that Bush wanted to “destroy FDR’s legacy program,” they apparently believed what he had proposed didn’t go nearly far enough to implement FDR’s vision.

(Some readers might hesitate to believe the previous paragraph. A link is provided for those who want to read FDR’s comments in context. I predict you will find what I’ve written is accurate. Links are also provided to speeches by President Clinton and George W. Bush on the Social Security web site.)

Realistically, FDR probably would have been pleased with the backlash at Bush for suggesting changes. He even predicted that once the program was put in place “…no damn politician…” would ever be able to change it.  An advisor told FDR that Social Security wasn’t good economics. FDR famously responded, “I guess you’re right on the economics, but those taxes were never a problem of economics. They were politics all the way through.”

A few years back there was a bumper sticker popular in areas of the country where you would find large concentrations of retirees on vacation that read, “We’re spending our children’s inheritance.”   I hadn’t seen the sticker lately, and it occurred to me that message is no longer valid.  We retirees are no longer satisfied with spending only the children’s inheritance.  The Social Security program is diligently collecting substantial portions of incomes from the salaries of young workers and transferring it to those of us who are retired after skimming the cost of operating the bureaucracy.  Not fixing the program means we are willing to take that money with the promise workers under the age of about forty won’t receive equivalent benefits unless more money is taken from paychecks of the shrinking numbers of employed younger people.

I have advocated ending the cost of living adjustments to Social Security beneficiaries, and I’m guessing that one suggestion means there’s no risk of me being elected to any political position. However, I promise I’ll vote for people who show the courage to do something to improve future prospects for the country. My appeal is for others to join me in a quest to show the weasels the door. The other alternative is to wait for the eventual bankruptcy of the U.S. economy and the end of those monthly Social Security checks. I don’t think I’m the only grandparent who is willing to see changes to the Social Security program that would  give our families a better future.