Something Stirs

Do you remember this poster that idealistic people used to have on their walls in the 1970s? The native American wisdom it quotes stresses that we can't actually eat money, which to my young self seemed pretty self-evident.

These days of course, people don't put posters like that up on their physical walls, they put them all over their virtual social media walls so that like minded people can 'like' them and un-like minded people can unlike you and whisper about you having 'gone weird'.

Anyway, money, or what passes for it these days, has been getting a whole lot more exciting over the last week. I blame Ben Bernanke, the soon-to-be ex-chairman of the US Federal Reserve. During his tenure he has overseen a massive bond-buying programme, the likes which the world has never seen. Now, as he steps down to hand over the reins of power, he is tapering off the amount of - let's be honest - money printing. And this is having a pretty dramatic effect on things, to say the least.

Although he is being hailed as a fiscal hero in most quarters, the legacy he leaves behind is massive debt and broken economies. And it is only now becoming clear that the effect of flooding the too-big-to-fail banks with money has been to make them even bigger, and to launch a series of crises around the world as 'emerging economies' (I hate that condescending nomenclature, so have to put it in quotes) suddenly find themselves with currency crises. Any number of them are having to hoik interest rates to protect their currencies, and in doing so are chucking many of their citizens under the proverbial bus.

India, Turkey, South Africa, Russia, Ukraine, plus a baker's dozen other 'emerging nations' are in full panic mode as they exhaust their supplies of hard currency trying to keep their own rands, rupees and florins from devaluing. Each one is a different case, with some in better positions than others, but the upshot of it is that all of them will be going through some challenging contractions. Some excitable people are talking about currency wars being a prelude to real bullets and bombs wars. Better get a flak jacket and dig a shelter, if that's the case.

And it's not just the 'emerging economies'. Combined, they make up almost half of the world's trade. A couple of decades ago this would not have been the case, but now, by crashing their economies, the US is effectively shooting itself in the foot - albeit a foot that is wearing the steel toe-capped boots of a reserve currency status. For now.

Turmoil ensues. Stocks are dropping like stones. Money is flooding into safe havens, such as gold, the Swiss franc and, of course, the US dollar. The volatility index has gone through the roof and the mainstream media, for all of its talk about recovery, is still trying its best to ignore it.

And so it becomes clear that all of this QE business boiled down to one thing: most of the world's weaker economies were sacrificed on the alter of keeping the bigger western economies from melting down. Simple as that, really. Let them have an emerging middle class of consumers, and just when their expectations have been raised, pull the rug out from under their feet and send them all back to the shanty towns. That's life in the hardball world of dog-eat-dog capitalism.

And still, it may all be for nothing. Does anyone feel safe with their money in a bank account? If so, why? Putting your money in a bank is akin to lending it to a crystal meth addict with a black credit record. Incidentally, once you put your money in the bank it ceases to be yours. Almost every western nation is now talking in terms of bail-ins. A bail-in is where YOU get to bail out the failing bank with YOUR money because the world's central banks are running out of fire blankets and ammunition to contain the problem of over-leverage. It happened in Cyprus. It may well happen in the UK next, where some banks are insisting that if you want to withdraw money from your own account you must submit to intimate questioning, have documented proof of what you are spending it on, and present a signed note from your mum for good measure.

What's more, we are heading into a period of deflation. People hear the word deflation and think that it'll be great because things will be cheaper. They may well be cheaper, but they'll have correspondingly less money to spend on them, so they'll still be poorer. Europe has already entered into deflation. I found myself in a Poundland store (where everything costs a pound) this morning on a trip to Truro, the regional capital (a throbbing metropolis of 19,000 people). I must admit to being a bit sniffy about this kind of place in the past. Not any more. I picked up four fruit bushes, some toilet paper, a roll of silver kitchen paper, two home-grow mushroom kits, a CD, two litres of milk and some potting compost - all for ten quid. The same stuff in other stores would cost four times the price.

Perhaps that's why everyone all of a sudden seems to be shopping at these places and why supermarkets such as Lidl are popping up everywhere. Of course, not everyone can even afford to shop at Poundland or Lidl - these are the people that find themselves lining up at food banks. There are plenty of these too. Some recovery! Still, better get used to going hungry some reports suggest that global food prices will triple in the next two decades.

Poundland: cheap and cheerful

On the way back home I listened to a BBC programme on the radio in which people in Liverpool were questioned about whether they could 'feel the recovery yet'. Only one person said he had become better off in the last five years and he was selling donuts on the street ('Because people can't afford a proper meal any more so they buy donuts.'). Everyone else seemed to have tales of deprivation and downright misery. The only person who could see any green shoots at all was the leader of the city council, who was defending his decision to spend £50 million on a shiny new prestige library that has won some kind of architectural award. The city borrowed the money to build it. But even he said it was 'challenging' when the receipts from local taxes only covered about half of what the city spends annually. But he figured everything would be okay in the end because the city has a great vibe and 'people are resilient'.

Yet, despite all this gloom, there remains a patina of richness and wealth about the country. People cruise around in their shiny new BMWs and Audis and luxury supermarkets are also on the rise. Property prices are rising dramatically, and the government would have us believe that Britain is the rising star of the European economies. Sometimes I have to pinch my arm and remind myself that most wealth is virtual, that 99% of 'money' in the global economy is just static electricity on computer chips being buzzed around via satellites and cables from one continent to another seeking 'yield'.

A newspaper front page last week

So it seems that the propaganda machine is in overdrive to convince us that we are enjoying boom times again. Could it be that this is timed to coincide with the inevitable capital flight from the 'emerging nations' as QE programmes are wound down? Is the British government's policy to try and look like the proverbial prettiest horse in the glue factory to skittish investors? Does anyone realise we are just one sharp pin away from a big bubble going pop?

Prediction time. Over the next few weeks and months there will be a massive deleveraging of unsalvageable debt. The stock market will go down a lot. The weaker currencies will devalue mightily as traders act like pack wolves to bring them down one by one. China will wrestle with its out of control shadow banking system, with unpredictable results. People will willingly sign up to have their pensions evaporated. Financial Crisis 2:0 will be hailed and politicians everywhere will blame the 'emerging markets' for the chaos. Within a year the fracking bubble will have burst (big oil companies are already pulling out as fast as they can), deflation will take hold and a lot of people will suddenly find they are a lot poorer. Life will go on, for most. The investor classes will look around for a new bubble to inflate.

And no, when the last tree has been cut down, the last river poisoned  and the last fish caught, we will find that we can't eat static electricity either. What strange times we live in.

***

I'm taking a break from updating this blog for at least a month as I attempt to finish the book I am working on entitled When the Lights Go Out. I hope to have this for sale in the summer, assuming anyone has enough money to buy things then. If not, I'll accept family silver, shares in DONG, non-perishable food and pigs' teeth as currency (but, sorry, not Bitcoins).

The Energy Thieves

An interesting side effect of spiralling energy bills in the UK is that a lot more people are stealing energy through a variety of ingenious means. From bypassing meters, tampering with supplies and sawing the edges off the meter cogs, an entire new industry has sprung up offering people the chance to get away without paying for their utilities.

What is the upshot of all this? Well, those who do pay their bills will have to shoulder the costs of paying for those who don't. Furthermore, they will also be saddled with the not inconsiderable cost of making the system more secure - after all, someone has to pay for it. This means electricity and gas bills will have to rise further, pushing more people into either stealing their supplies or else just cutting it off and going medieval. This in turn pushes the fixed costs of maintaining the system (including the energy companies' hunger for inflated profits) onto the ever decreasing pool of those still able to pay.

In other words, we have a positive feedback loop going on. And they never tend to end well.

'It's a difficult economic climate so more people are feeling this is the only way they can get their energy.  So the trend is upwards.'

  - Mark Andrews, head of revenue protection for British Gas

There's more on this story here.

The Joy of Coppicing

There's a post over on today's Archdruid Report in which he lists seven sustainable technologies he thinks are worth reviving for a post-industrial future. I was happy to see that he included coppicing as this, in fact, is what I've been up to for the past week.

To that end, I have written a new post over on my Tales From Fox Wood blog talking about how the coppice work went and why, in my opinion, you could do worse that get hold of a piece of woodland yourself.

You can read it here. 

Nuisance Abatement Disorder

This is quite outrageous but entirely predictable. As people turn their backs on the consumption and waste based paradigm and opt out of the system, authorities are increasingly stamping down on them, saying they represent a 'nuisance'. Whether it's for raising funds for their cash-strapped authorities or simply out of a naked hatred for anyone who likes they may be getting something for free, people are having their lives turned upside down by over-zealous officials with 'nuisance abatement' enforcement orders.

It's not just in the US that this is happening, but it does seem to be there that the worst abuses of it are occurring. Who'd have thought that rainwater could be private property (as in Colorado) or raw milk would be illegal, or organic kitchen gardens would attract the attentions of the police? Where else in the world is it illegal to dig up your lawn and plant vegetables?

Where do you go if you have no income or marketable skills and you are turfed off your own land by gun wielding cops? Where do you go if opting out is illegal but opting in is impossible?

As the video above shows, the only way to combat this insanity is to stick together as a group, know your rights, and make a loud fuss about it.

Pigs on the Wing

Will the FTSE reach new heights in 2014?

Another year dawns and it’s with some wry amusement that I note almost everyone in the peak energy/collapse blogosphere has been throwing out predictions as to what the coming year has in store for us. It seems to me a bit of a fool’s errand to try and predict what will happen over the coming twelve months because, as the Danish physicist Niels Bohr noted, it’s hard to make predictions, especially when they are in the future. But then Mr Bohr was pretty bad at making predictions himself, failing to foresee that inventing the atomic bomb might lead to a few problems in the future.

Mind you, if one considers oneself as having something even vaguely worthwhile to say about the future of our energy supplies and thereby our industrial civilisation it’s perhaps not too hard to see why people might expect some kind of periodic prediction with a timeframe attached to it. I mean, is it too much to ask? So here’s my prediction about what will happen in the year to come:

I don’t know.

There it is - you have it. I have no clue about gold or silver prices, and still fail to understand why these should be considered important to so many people in this corner of the internet. Neither do I have a clue about the price of oil, subject as it is to a baker’s dozen vagaries ranging from supply and demand, to geopolitics and corruption. I do know that the supply of oil is slowly but steadily dwindling, especially so when you take into account the quality of said oil, but what turn that will take in 2014 is anyone’s guess. Those who have spent far more time analysing these factors seem to be saying that it could be as low as $20 a barrel, or perhaps as high as $200 - or somewhere in the middle, and bouncing around quite a bit. Let’s face it: nobody knows. What we do know is that high prices and volatility cause economic damage, and that low prices mean it isn't profitable to produce it in the first place. These are both good and bad depending on your perspective.

Speaking of geopolitics, what is to happen on the international stage? Will China and Japan have a war? Will Saudi Arabia have an Arab Spring? Will the European Union bust apart at the seams with Greeks fighting Germans? Will Syria’s bloody conflict spread beyond its borders and engulf surrounding lands?

In each case I could say ‘possibly’, but I’d also have to admit that anything else could happen, and probably will. Going from past experience it’s equally as likely that some new previously overlooked regional flashpoint escalates in a way nobody expected it to. China might attack its own Uighurs. North Korea might throw a fit. Israel or Russia might have a nuclear 'whoops' moment. Anything could happen.

Here at home, what is to happen in ‘Great’ Britain? Scotland might or might not decide to turn its back on Sassenach rule. The best of luck to them but either way it won’t make much difference to the fortunes of these increasingly damp and dispirited isles. Will we be invaded by legions of Romanians and Bulgarians - all of whom are thieving, benefit cheating, swarthy ‘others’ as the press keeps telling us? Again, I don’t know, but I doubt it (Romania’s economy is doing better than the British one). If they do arrive en masse, perhaps they could teach us a few of the skills we have so willingly forgotten.

Will Fukushima kill us all? Will the US government launch a war against its own people? Will the world economy crash and we will all have to revert to making transaction with pigs’ teeth? I don’t know, I don’t know, I don’t know.

I’m not much use am I?

Well, okay, if we have to play this game then I’ll make a few predictions that are close enough to home that I feel confident enough to call. Here they are, in no particular order of importance:

• The government and press will continue to confuse asset price inflation with economic recovery. The fact that the FTSE has inflated like a giant floating pig at a Pink Floyd gig will continue to be heralded as proof that an economic recovery is underway. If further proof were needed, house price rises will continue to such an extent that home ownership will slip even further from the outstretched grasp of Mr and Mrs Average, while multi million pound mansions in London will continue to be snatched up like hotcakes by Chinese, Russian and Arab buyers.
• At the same time, the number of families who rely on food banks will continue to climb. As will the number of children turning up hungry to school and unable to afford school uniforms. Austerity will continue to bite deeper and harder and more people will end up living on the streets. More families will break down and the number of people with a decent job that allows them a good standard of living and a chance to put some aside for the future will continue to fall.
• The public will become increasingly fed up. British people don’t get angry, they just get miffed. There will be more peeved letters written to The Times, and mostly they will be about the price of petrol and food, and the fact that energy bills and train fares are going up almost as fast as savings rates and pensions are going down. 
• There will be a growing realisation among people that the retirement age is accelerating away from them as they age, like a mechanical rabbit at a greyhound track. 
• The government will continue to enact policies that may have made sense ten or twenty years ago before energy supplies had plateaued but which now make no sense whatsoever unless interpreted through the lens of cargo cult behaviour. They will promise more housing development on protected land, more nuclear power stations, more ‘golden age of energy’ fracking, more high speed train lines that nobody needs or can afford, more airports and more road building to promote GROWTH!
• More people will see through this increasingly desperate tissue of lies and start wondering why they hadn’t seen through it all a few years earlier when they had more cash. They will start reading books on peak oil and searching the internet for somewhere ‘safe’ to go and live. Their friends will think they are weird and have ‘lost the plot’.
• Usury will continue to be the most profitable business in the country. More and more people will consider it to be normal behaviour to turn to companies like Wonga.com that feature cute animated 'normal people' characters on prime time adverts and take out loans at 5,853% interest.
• The weather will be awful, again. Floods, torrential rain and storms will continue to turn this once green and pleasant isle into something from a dystopian sci-fi B movie where it never stops raining. As a result, more homes built on flood plains, beside rivers or a bit too close to the sea, will become uninsurable. And when it does occasionally stop raining it will turn into a scorching drought that gives old people heat stroke and dries up all the rivers.
• More and more councils and local authorities will slip into the red and have to cut the services they offer. At the same time, the ongoing wholesale privatisation of council services will massively drive up costs as inefficient and bloated corporate behemoths stuffed with thousands of salaried middle managers attempt to make money out of vital public services - and succeed - at the expense of the public. 
• Ditto with public health services.
• More public assets will be sold off at fire sale prices to overseas ‘investors’ and this will be spun as a ‘good thing’ and positive for the economy.
• The number of road miles driven will continue to fall (it has already fallen by 18% since its peak in 2008) and this will again be put down to increased haulier efficiency and better SatNavs.
• The number of street lights switched off will continue to climb and safety campaigners will continue to insist that we we are going ‘back to the dark ages’.
• I will finish writing my book entitled “When the Lights Go Out: A Survival Guide for Energy Descent” and a handful of people will place orders for it through this blog.

These are the things we can look forward to in 2014. There are a whole load of other predictions that one could wager upon in the realm of economics, but I’m not going to make any because for the time being at least that realm is controlled by fantasists and mental herds.

One thing that I have observed that should worry anyone with the sense to be worried by it is that the abstract notion of the ‘economy’ as we know it is showing alarming signs of becoming something similar to the state-controlled Soviet communism of yore. It’s ironic, to put it mildly, that as China becomes ever more capitalist in nature (and increasingly hardline attempts to control its shadow banking system are something to look out for this year) the West becomes increasingly monolithic. Because that’s what quantitative easing seems to be all about, namely taking wealth from the population and delivering it to a tiny elite who increasingly control the means of production and are able to successfully lobby governments and enact regulatory capture. But all this is more or less hidden from view, or at least rarely mentioned, and won’t really come apparent until we are looking in the rear view mirror and asking what went wrong.

And I’m not even going to mention the so-called taper.

Or the US fracking bubble.

So there it is. A bunch of predictions and non-predictions. The only one I feel I can make with cast iron certainty is that our over-loaded techno-economic-infrastructure will continue to be worn thinner by the physical constraints that underpin it and that a great many people will proclaim that this isn’t so while simultaneously becoming poorer in any metric that you care to measure except, perhaps, the availability of credit.

And then maybe credit will die too. But maybe that’ll be next year. Or the year after.