of doom and hope
By Dave McArthur 28 October 2008
times are an opportunity to enjoy hope and a greater sense of harmony.
Here’s how we can prove the doomsdayers wrong.
Second: ask these
"doomsayers" if and how they think doom is avoidable. Allow
the possibility that their vision that enabled them to anticipate the
current credit collapse also provides them with insights as to how we
can avert a complete collapse of our societies. Initially we might not
like what they say, but hey, when we are stuck in a hole in the ground
with fiscal bombshells exploding all round and your wealth is
evaporating suddenly any seeming crazy idea that might bring peace and
sanity is worth exploring.
In these times,
in this situation, we are very busy just surviving and it is hard to
find time to research alternative futures. So I will offer you this
opportunity to access one of the so-called doomsdayers this instant and
in a brief two minutes I will enable you to see what drives the beliefs
of some of them.
I confess. I am
one of the so-called doomsdayers.
In 1991 while
others were cheering “the collapse of the Berlin wall” and the
advent of a new global economic era founded in “free markets” I was
watching our troops storming into Iraq on the then revolutionary CNN
coverage being broadcast 24 hours a day on TV3 here in New Zealand. I
was riveted like a stunned mullet to the television each day. Out of my
fog of disbelief and dismay three insights gradually emerged.
One is that any
society that bases its notions of wealth on addictive uses of mineral
oil/gas is doomed – it is a very finite and extremely potent resource.
In this context cars and jets are weapons of mass destruction. These are
The second was
that the mindless nature of this new media is fatal.
The third was
that New Zealand’s brief period of relative independence after
centuries of British rule ended in the 1970s was over and we were now a
colony of a few American corporations. I saw that there would be a huge
surge by these corporations to control and extract wealth on scale from
nations all over the world.
insights coalesced into a vision that we were exiting the Cheap Oil/Gas
Age and that we needed to transition to another age.
working in the “electricity industry” provided me with key insights
into that future. I knew the huge potential of the new “solid state”
technology, which is how we described the meters etc that no longer
required masses of moving parts such as systems of
wheels and cogs and instead used computer boards. I did not
imagine the form of the Internet but I knew that if communities the
world over could make intelligent uses of their electrical, carbon and
solar potential then we could avoid doom. I also knew the Economic
Reforms of that time were designed to actively destroy this vast
community potential and so it has been proven.
The wider insight that the short era of Cheap Mineral Oil/Gas is over is now proven. Looking back we can now see it only lasted three generations, during which time we expanded the human population three fold to the current 6.7 billion people.
those societies that make addictive uses of mineral oil/gas and have
based housing, transport, manufacturing, security and credit structures
on the assumptions of this era are now on the point of collapse. Put
simply here are the fatally flawed assumptions that our media and
merchant bankers have propagated.
Energy = fossil fuels
Energy = Bulk-generated electricity
The sun = little or no value, often a liability.
Large-scale private corporations = good
Small-scale community structures = bad
There is little
science underpinning such beliefs and the first two beliefs are a
profound denial of the Conservation Principle of Energy. Such denial is
the source of most of our misery. The denial leads directly to our
current economic structures, as described by
NYU economist Nouriel Roubini:
“Today any wealthy individual can take $1 million and go to a prime
broker and leverage this amount three times; then the resulting $4
million ($1 equity and $3 debt) can be invested in a fund or funds that
will in turn leverage these $4 million three or four times and invest
them in a hedge fund; then the hedge fund will take these funds and
leverage them three or four times and buy some very junior tranche of a
CDO that is itself leveraged nine or ten times. At the end of this
credit chain, the initial $1 million of equity becomes a $100 million
investment out of which $99 million is debt (leverage) and only $1
million is equity. So we got an overall leverage ratio of 100 to 1.
Then, even a small 1% fall in the price of the final investment (CDO)
wipes out the initial capital and creates a chain of margin calls that
unravel this debt house of cards.”
since 1991 I have watched this leveraging process happening until the
credit now is now an estimated $US162,000,000,000. I have also learned
something else – something our education and media institutions never
ever communicated to me: I have learned via the Internet what truly
potent resources mineral oil and gas are.
learned that each 42 gallon barrel of mineral oil contains the energy
equivalent of 25000 man-hours of labour. Or if you like, when you are
holding that petrol pump hose to fill your car tank it is as though you
are holding a multi-megaWatt electrical cable. Such is the power of
the figure is a bit under 25000 man-hours of labour but that is a round
figure that anyone can calculate and visualise with – even me, a
well-documented maths failure! Last week I calculated, for instance,
that it requires the equivalent of about 470,000 men working hard for
one hour to keep a 747 aloft for one hour. At the end of that hour they
are gone, expended, burned, never to be replaced for eons. The main
memory of them is pollution in our atmosphere and oceans.
1999 the price of mineral oil was about $US10 a barrel and the US
Congress calculated they no longer needed any restraint on debt creation
and revoked the Glass Steagall acts. In other words they assumed it was
right and natural to value mineral oil at the equivalent of, wait for
it, 0.04 cents per man-hour of labour equivalent.
NYU economist Nouriel Roubini tells only a small part
of the story. The delusion he talks of is built on an even larger
delusion that is propagated by our politicians, media and merchant
bankers. That million dollars of wealth that the wealthy individual
initially invested is mainly derived from systems that vastly undervalue
mineral oil/gas. Most of that initial $1 million is based on a valuation
of mineral oil at 0.04 cents per man-hour of labour equivalent in a
society where the labour of the average person is valued at over $US20
One does not have to be a genius to understand the implications of this. One has only to be honest and courageous to see that as mineral oil is very finite resource then economies based on the above equations cannot survive.
Do as I did several years ago and ask the question,
“What happens to such societies (NZ, USA, UK, et al) if for some
reason the price of mineral oil rises to $US100 a barrel?” Sure that
is still a very low valuation indeed. It is still a value of less than
0.5 cents per man-hour of labour.
Remember, as Nouriel points out, when that million
dollars was leverage 100:1 it only takes a 1% drop in price
($1 million) for the whole stack of credit to implode. Now think
of how what happens to those many millions of dollars of credit based on
the 0.04 cents a man-hour of labour assumption. A rise to 0.4 cents a
man-hour is the equivalent of the massive labour force provided by
mineral oil suddenly demanding a 10 fold increase in wages.
We can respond to this increase in two ways.
Here is another
way of looking at it. We, you and I in countries like NZ and the USA,
have based our economies on burning fossil fuels. As I explained in my
last blog, if you are wondering where all our wealth has gone then the
answer is as close as your next breath. It is now pollution in the air
we breathe. And, as I have repeatedly pointed out to our Prime Minister,
we now face an avalanche of inflation that will destroy the Labour
Movement, and the Green Movement for that matter.
Again these predictions are now proven accurate. The NZ
Labour Government has in the past few weeks made gigantic commitments of
hundreds of billions of dollars to the money traders with Kiwi Saver,
the Emissions Trading Strategy and the “bank guarantees”. John Key,
a leading politician and trader from Merrill Lynch now rules perhaps
even more totally than if he were actually Prime Minister.
Labour and Green politicians are now hollow people, just walking
rubberstamps for his policies.
Labour and Green politicians are now hollow people, just walking rubberstamps for his policies.
It was patent when George Bush took over the
presidency of the USA in 2000 that the agenda of his Administration was
one of inflation and war. So it has proved.
Here in New Zealand the new Labour Administration came
to power in 1999 on the basis of promises of saner uses of our
electrical and carbon potential but within weeks it had reneged on them.
Many of us have continually attempted to to remind Labour politicians of
those promises and alert them to the dangers of the grossly
unsustainable credit expansion they have promoted based on severe
undervaluations of the costs of our use of mineral oil/gas.
I have spoken to several people who have written to our
Prime Minister, Helen Clark, warning her of the folly. None of us
received responses from her and, if we did get a response, it was some
one like the Finance Minister or the Minister of Energy.
We all have a similar story to tell. The media refused
to print our letters or made laughing stocks of them. They, and
politicians and academics, derided
and dismissed us, quoting, for instance mineral oil company and
international “energy agencies” projections that mineral oil would
be $US25 until 2025 etc.
I had never understood these projections until I learned these self styled “energy agencies” worked on the premise that “the Market would provide”. In other words “Energy = mineral oil/gas” i.e. the supply will always match the demand somehow. And this in a world with the population predicted to double by 2025 to 9 billion people. The principles of physics did not exist in their “energy” world. a world in which "energy = mineral oil/gas".
The derision of our media, politicians and merchants
was understandable, even if was very unhelpful. In 2004 my letters
predicting mineral oil would be $US80 in 2008 and our economies would be
imploding did look nonsensical when the price was less that half that. I
have no special mathematical skills. I just assumed that the
Conservation Principle holds and demand would rise because people were
being so thoroughly conditioned against adaptive change by our media.
My local suburban newspaper finally printed a letter with this prediction early in 2005 and apart from SCOOP News our journalists have basically ignored the dozens of letters and articles I have sent them.
Similarly politicians of all parties ignored the
letters and have now committed the NZ people to the Emissions Trading
Strategy (Money trader’s delight, atmospheric blight), the KiwiSaver
Superannuation scheme (the Kiwi Killer Sheme), more motorways (to
debt-hell and war) and now the massive billion dollar taxpayer subsidy
to the money traders (sorry, “The Market confidence measure”)
We see the same process in the USA with both
presidential candidates backing $billions of subsidies to the car and
armament manufacturers and $trillions to the money traders – exactly
as I predicted in my
last blog too. Sarah Palin rules!
What she reflects in the American people now prescribes the agenda of
whoever actually wears the presidential crown and robes.
What she reflects in the American people now prescribes the agenda of whoever actually wears the presidential crown and robes.
Do your own rough sums based on the above figures –
it was easy to predict our societies would implode amidst inflation and
conflict. Just assume $50 million ( ie half of the $100 million of
credit used in the Nouriel Roubini example ) is based on a
valuation/cost of 0.04 cents per man-hour of labour doing most of our
pushing, pulling and lifting. When the price of that labour rises 10
fold then those $50 million only buy the equivalent of $5 million of
So where are the money traders going to get the money
from to maintain their current lifestyles in the future? From your
superannuation, education, health and other community funds! So don’t
be surprised if the $US dollar disappears, for instance, and is replaced
with a currency that devalues your wealth and income by 90%.
That could be as early as this US winter.
That could be as early as this US winter.
Yes, this is doomsdayer stuff. But at least you now know what is really going on. In our heart of hearts we all know it is better to walk on the bedrock of truth, even if it is uncomfortable at times than to live a lie and know we are walking on quicksand which at any moment may swallow us up.
You now know how to begin to calculate what will happen
if you and I and about 998 other compatriots continue destroying over 20
barrels, 10 barrels or 5 barrels of mineral oil a day. New Zealand’s
rate = 38 barrels/day/1000 people, USA =68.
And the good news?
Well, the good news is you have far more options that
you probably realise and many of them can enable you to enjoy a far more
meaningful life than you currently do. Remember, some of us have been
facing for some time now the unpleasant and disconcerting reality you
are suddenly having to confront as you watch your wealth and security
evaporate. We have had time to create alternative strategies. It is just
that our media refuses to communicate them to you. And our politicians
will only support the policies if you and I give them a lead.
Here in a brief paragraph are some simple helpful
Understand that The Market (the money traders’
construct) does not care if you live or die. It is a reflection of the
psychopathic element in each of us and knows no value.
Refrain from using and do not trust people, especially
policy makers and journalists, who use the equations:
Energy = fossil fuels
Energy = Bulk-generated electricity
The sun = little or no value
corporations = good
structures = bad
Put a very high value on mineral oil. Treasure every
drop in the knowledge that it will probably not be replaced in the
lifetime of the Earth. Remain mindful that at present, on average,
5 out of every 6 calories required to put a calorie of food on the plate
of any human being comes from fossil fuel.
Know that we have an enormous untapped potential in the
ways communities can make use of our carbon, electrical and solar
Give a high value to universal education and health systems
and take care of our elderly and infirm.
Embrace your local community and you will find wealth
Enjoy compassion for yourself, your fellow humans and
all sentient beings. If you and I do that then we each will live
meaningful lives. Debt will tend to vanish and we will thrive.
And if in this moment you find yourself dismissing
these as mere trite words, the mutterings of a flake, simply ask
yourself,” What have I got to lose? What if it were to be that debt
can indeed vanish and we all thrive?”
Never underestimate the power of compassion and community. Without them the doomsdayers will be right and we will experience an Economic Depression that dwarfs the Great Depression of last Century. Why? Because at the end of that economic depression most of the cheaply extracted mineral oil/gas reserves remained and there are now an extra four billion people to feed, clothe and shelter.
And if these words make sense, forward them on to your
treasured friends and acquaintances. In your shared treasure is
community and great hope and the doomsdayers in our midst are proven
wrong yet again.