The six o’clock alarm would never ring
But it rings and I rise, wipe the sleep out of my eyes
The shavin’ razor’s cold and it stings
You once thought of me as a white knight on a steed
Now you know how happy we can be
Our good times start and end, without dollar one to spend
But how much baby, do we really need?
Cheer up sleepy Jean, oh what can it mean
To a daydream believer and a homecoming queen
- Daydream Believer
One of the things about living in an era of great change is grand illusions of established power shatter at an ever faster pace. One of le grandest illusions offered by our industrial political economy has been the idea of something called “oil markets.” In the scripture of modern free-marketeerism, the allegory of oil markets are the equivalent of the transfiguration or maybe the virgin birth. The simple fact is oil’s not been a market since Mr. Rockefeller established his monopoly, yet in over a century how many times has the term oil markets been repeated, particularly in such august financial journals as the Wall Street Journal or Financial Times?
So as the financial press with each passing day gets ever more difficult to discern from the funny papers, the FT has a most amusing story about EU regulators busting into some of the oil majors for price fixing - ho ho ho - that would be price setting. That’s what the oil companies do, just like the Libor “scandal” where it was discovered banks set interest rates. Nonetheless, the FT through the comedy, and all good high comedy reveals a little truth states,
— John Lee Hooker
Since the election of Shinzo Abe five months ago and his pledge to do whatever necessary, or was that Draghi, maybe it was Chairman Ben, the Nikkei has gone up 75% - chart here - who says there’s no money to be made?
TOKYO (AP) — Japan’s parliament elected Shinzo Abe as the nation’s prime minister on Wednesday, ending three years of rule by liberal administrations and bringing back to power the conservative, pro-big business party that has run Japan for most of the post-World War II era.
Abe, whose nationalist positions have in the past angered Japan’s neighbors, is the country’s seventh prime minister in just over six years. He has promised to restore growth to an economy that has been struggling for 20 years.
Jeremy Grantham, the Heretic as Reformer
Mother of Rome, delight of Gods and men,
dear Venus that beneath the gliding stars
makest to teem the many-voyaged main
and fruitful lands—for all living things
through thee alone are evermore conceived,
through thee are risen to visit the great sun — before thee,
Goddess, and thy coming on,
flee stormy wind and massy clouds away,
for thee the daedal earth bears scented flowers,
for thee waters of the unvexed deep smile,
and the hollows of the serene sky
glow with diffused radiance for thee!
Divine one, give my words Immortal charm.
Lull to a timely rest O’er sea and land the savage works of war,
for thou alone hast power with public peace to aid mortality;
since he who rules the savage works of battle, puissant Mars,
how often to thy bosom flings his strength O’ermastered by the eternal wound of love
— and there, with eyes and full throat backward thrown,
gazing, my Goddess, open-mouthed at thee,
pastures on love his greedy sight, his breath hanging upon thy lips
him thus reclined fill with thy holy body, round, above!
Pour from those lips soft syllables to win Peace for the Romans, glorious Lady, peace!
- Titus Lucretius Carus, De rerum natura
So it is obvious, or certainly should be, to have any understanding of the global economy, one cannot ask an economist of any stripe. The same goes for those in the financial community, but in the depths of this darkness a light has shone. I cannot more highly recommend this Jeremy Grantham interview. Mr. Grantham is a stockbroker and made a lot of money in the past four decades. He has turned heretic to financial and economic orthodoxy by simply looking at the nature of things.
As a true radical, from the Latin, “to the root,” Mr. Grantham starts not with a bunch of theories or faiths, but looks at natural resource numbers for a finite planet. Mr. Grantham undermines the impossible faith at the root of all establishment economics — infinite growth on a finite planet. Mr. Grantham makes a number of important points, here’s three of the most important:
1)We are at the end of the fossil fuel era both for environmental reasons, in the case of coal and natural gas, and depletion in the case of oil.In less than an hour, Mr. Grantham destroys the foundation of modern economics, showing that it is and always has been little more than a secular scripture for certain power structures. But do not despair if you’re so inclined when illusions are broken, Grantham also offers a path for the future. In looking at our political economy, the foundation is not economic principles but natural resources. Accounting for the value and costs of natural resources, in their extraction, molding, and resulting impacts is the foundation of all economy. Secondly, what technologies are used in the processes of extraction and molding of resources defines the political economic culture. Finally, the culture, institutions, and values of political economy are dependent on natural resources and technologies.
2)The era of cheap oil is over, what we deem modernity is built on oil, and economists of all stripes haven’t a clue on how to account for the value of oil in the present economy.
3)The idea that more debt creates growth is simply not true. That since 1982 when the banks took complete control of the economy, total debt was 1.4 times total US GDP to today, debt is 3.5 times, economic growth has slowed. Meaning whatever side of the debt debate you’re on, it’s not providing any light.
Change has come, we are at the end of the fossil fuel industrial era. The questions of money and finance dominating our current economic “debate”, matter little. The continued pumping of money by central banks into a system that is failing, and it fails because it increasingly has no relation to natural resources, does little more than slow inevitable and necessary change. The longer we continue a futile attempt at upholding the present status quo, the more we insure change will be catastrophic — for that brothers and sisters is the nature of things.
May we all soon be heretics.
Oil Industry Propaganda
im useless but not for long, the future is coming on
i see destruction and demise, corruption in disguise
so mother fuckers remember what the thought is
i brought all this so you can survive when law is lawless
i aint happy, im feeling glad, i got sunshine in a bag,
im useless but not for long my future is coming on
is coming on
it’s coming on
- Gorillaz and Del the Funky HomoSapien
After following matters of oil for much much longer than I care to think, in the last year propaganda from the industry has been thickerer than black gold, Texas Tea, Canadian Tar. One great pitch, forget about “peak oil” we’re going to soon reach “peak demand” - hallelujah brothers and sisters!
This piece today in the FT should go under advertising, call it Judith Miller oil reporting, do you readers of the New York Times remember Judith Miller, she was an oil reporter. It states,
and in subhead the nut
Yes brothers and sisters, investment, or in other words costs, as opposed to production. Because remember North Sea production peaked in 1999 at 4.5 million barrels a day, it’s down to around 1.5 million barrels a day today, so with my numbers thats a decline of 66% in 14 years. Supposedly, this record investment will in five years add half million barrels, I dont think they’re counting decline rates in that, whatever, it aint Mrs. Thacther mid-80s North Sea, she was the original Tony Blair ya know? nor sure as hell not Nasdaq 5000, hummers in the oval office, 1999 ten bucks a barrel - oooh Bubba!
Breaking the Chains of Authority and the Confines of Present Imagination
“We are at the very beginning of time for the human race. It is not unreasonable that we grapple with problems. There are tens of thousands of years in the future. Our responsibility is to do what we can, learn what we can, improve the solutions and pass them on. It is our responsibility to leave the men of the future a free hand. In the impetuous youth of humanity, we can make grave errors that can stunt our growth for a long time. This we will do if we say we have the answers now, so young and ignorant; if we suppress all discussion, all criticism, saying, ‘This is it, boys, man is saved!’ and thus doom man for a long time to the chains of authority, confined to the limits of our present imagination. It has been done so many times before.” — Richard Feynman — QED: The Strange Theory of Light and Matter
When we think of “chains of authority,” invariably we think of political, cultural and economic institutions. The act of separating power into these structures is an authority of its own. What we rarely consider with “chains of authority” is technology, and it is technology, and specifically industrial technology, that is faltering, offering no solutions to the fast metastasizing challenges of global political economy. Without breaking the chains to this technology and continuing to confine our imaginations to industrial thinking, we shall commit humanity’s greatest sin – shackling the future.
“The valley could yield 10 billion barrels, Tullow estimates, enough to supply Kenya for three centuries or the U.S. for about 18 months.”
good thing we’re doing 2 billion in “car resarch”, I did a book party here in the high desert last weekend, and this old new left guy, when I said getting people to leave their car at home one day a week, scoffed, “that’s politics?”
“The highest and noblest,” I replied.
our duty to all coming generations
We are at the very beginning of time for the human race. It is not unreasonable that we grapple with problems. There are tens of thousands of years in the future. Our responsibility is to do what we can, learn what we can, improve the solutions and pass them on. It is our responsibility to leave the men of the future a free hand. In the impetuous youth of humanity, we can make grave errors that can stunt our growth for a long time. This we will do if we say we have the answers now, so young and ignorant; if we suppress all discussion, all criticism, saying, ‘This is it, boys, man is saved!’ and thus doom man for a long time to the chains of authority, confined to the limits of our present imagination. It has been done so many times before.
It is our responsibility as scientists, knowing the great progress and great value of a satisfactory philosophy of ignorance, the great progress that is the fruit of freedom of thought, to proclaim the value of this freedom, to teach how doubt is not to be feared but welcomed and discussed, and to demand this freedom as our duty to all coming generations. — Richard Feynman
State Capitalism: A Lesson from Chairman Mao
“‘Have a head for figures.’ That is to say, we must attend to the quantitative aspect of a situation or problem and make a basic quantitative analysis. Every quality manifests itself in a certain quantity, and without quantity there can be no quality. To this day many of our comrades still do not understand that they must attend to the quantitative aspect of things - the basic statistics, the main percentages and the quantitative limits that determine the qualities of things. They have no ‘figures’ in their heads and as a result cannot help making mistakes.” — Mao Tse Tung, Quotations of Chairman Mao
The state and capitalism, few bits of history are as distorted and misunderstood. The simple fact is that the state, as Karl Polanyi chronicled in his essential 1944 book The Great Transformation, was integral to the development of capitalism from the beginning. Yet today in any discussion of political economy, we are meant to think somehow the state’s and capital’s always close relationship instead of being the rule, is not simply an exception, but some sort of great violation.
If we look at capitalism across its two and half century history, it essentially has three components; modern debt-money/banking, industrial technology, and the corporation. With each of these factors, the state was and is tightly entwined. Looking across this relatively short span of history, it’s difficult to discern whether the state or capitalism was the senior partner. Over the last couple decades, the two have morphed together to become almost indiscernible. Nowhere outside the United States is this system, call it “state capitalism,” more apparent than China.
A recent book called Red Capitalism by Carl Walter and Fraser Howie, both have extensive experience in global and Chinese finance, sets out the structure of Chinese state capitalism. The book is an excellent expose on the tremendous change China has undergone over the past quarter-century with industrialization, creating to paraphrase Premier Deng, capitalism with Chinese characteristics. However what’s most interesting, as Chinese capitalism has evolved in the past two decades, its main model the United States evolved increasingly to resemble China.
The Quantum Tech Revolution
He who learns must suffer
And even in our sleep pain that cannot forget
falls drop by drop upon the heart
and in our own despair, against our will,
comes wisdom to us by the awful grace of God
Well, here’s an actual insightful bit by someone who works on Wall Street about the economy, amazing really. Mr. Rosenberg states,
“The reason why the past four years has been so dismal, over and beyond the failure of the labour market to fully recover among other things, is that we have gone through the weakest period in the post-WWII era in terms of growth in the private sector capital stock. We invented the Internet and spent years after spreading its applications and co-mingling the technology with labour so as to bolster multi-factor productivity. But that golden age was 10-15 years ago. Despite some really impressive stuff going on in the biomedical field to be sure, and what Apple has done in terms of introducing its array of impressive consumer gadgets, growth in the private sector capital stock since 2009 has been the softest on record.
“The implications this stagnation will have on that key supply-side component of the economy, otherwise known as productivity, are not good at all — it is amazing that there is such little attention being played to the Q4 contraction in real nonfarm business output per hour worked. And coming at a time of deteriorating demographic trends, it would not be a surprise to end up seeing the U.S. non¬inflationary growth potential, once seen at over 4%, to come in at 2% or lower. How this ends up fitting into expanded fair-value price/earnings multiples would be interesting to see.”
Again amazing, I might say a first of its kind. Its the beginning of an understanding this quantum technology is not industrial technology and value will not be measured in the same way. Now this is a difficult, because heretofor it has, start with IBM, then Microsoft, Google, and ho-ho Facebook, the measure to this point has been industrial, though the value is different, and that is now it is becoming clear enough for even some of Wall Street to see. Part of it not being so clear has been the tech-industry’s relationship with Wall Street, the true story of which has yet to be told properly, and to that might as well be added the story of the great Military-Welfare Queens so many of those Libertarians in the Valley are — wisdom is hard, so said the Greeks.
In the US, this tech-revolution is not primarily about more, it’s about reconfiguring what’s there. For example another great quantum technology, solar, is not about adding to energy use in the US, it’s about replacing and reconfiguring existing fossil fuel infrastructure. This is difficult to do when there’s so much debt or is that “wealth” tied to the existing infrastructure — comes the revolution.
Debt/money and Panics
Joe Costello is author of Of By For: The New Politics of Money, Debt, and Democracy
“The farmer and the labourer are the last in society who can bring up their services to the standard of a depreciated currency.” — Governor William Carroll, Tennessee, 1821*
Lord, lord, to write about money is a religious undertaking. The denominations — left, right, center — all have their beliefs, faiths, and idols, and there is great idolatry in established money power. What did the late 19th century mad-German teach about taking-on idols — only with a hammer. It is not the hammer wielder who offends, but the cracking and revelations of putrid power. One of the problems with talking about money in America is we are an ahistorical people and proud of it. From left, right, center, when I tell people, “One of the main issues of 19th century American politics was money, and not who has how much, but what exactly money is,” I get in return the same blank, half-quizzical expression. Which is understandable, because we all know what money is, we have institutions, priesthoods, governments who all agree what money is, and woe to all infidels. Any real power’s, and that definitely is our banking-money system, main strength is no one talks about what exactly it is, it just is.