Teetering on the brink

Written By: Anthony R0bins - Date published: 8:23 am, July 23rd, 2011 - 84 comments
Categories: capitalism, economy, International, us politics - Tags: america, greece, obama

The global economy has never really recovered from the recession. Over the last couple of months two potential crises have been unfolding in two very different countries. Both of them looked to be in danger of defaulting on their huge debts and triggering a cascade of disastrous consequences (like those that followed the collapse of Lehman Brothers in 2008).

The first of these, of course, was Greece. There have been months of negotiations, austerity measures, demonstrations, predictions of the death of the Euro, and confusion. In the end, Europe decided that the Greek debt was “too big to fail” (yet), and the bailout that most expected was agreed. In fact, Europe is trying to think beyond the immediate crisis:

Bailed out – again. Eurozone throws Greece €109bn lifeline

Bailout fund turned into much more ambitious instrument in deal hatched following months of dithering

European leaders have sealed a new €109bn bailout for Greece and erected defences against the debt crisis spreading to Italy and Spain by turning the eurozone’s 15-month-old bailout fund into a much more ambitious instrument resembling an infant European monetary fund.

Whether this contains the European situation remains to be seen of course. But Greece is by no means out of the woods yet:

The deal, hatched at an emergency summit in Brussels of eurozone leaders, following months of dithering and division, also entailed large losses for Athens’ private creditors, making it almost certain that Greece would become the first eurozone country to be deemed to be in some form of default on its sovereign debt.

The second country facing a debt default crisis is America. America established a theoretical “debt ceiling” in 1941, and has been steadily raising it ever since (it currently stands at $14.294 trillion). Republicans seem determined to block the current ritual ceiling rise, which would cause America to default on its debts, almost certainly destroying whatever confidence is left in the dollar and its role as the world’s reserve currency. After several weeks of brinksmanship and frustration, Obama appears to have been forced into a bold but risky gamble:

President’s debt offer: risky but could be win-win

It’s hard to know which is more surprising: a Democratic president pushing historic cuts in spending, including Social Security and Medicare. Or a Republican-controlled House refusing to accept the deal and declare a huge victory for long-sought GOP goals.

Political orthodoxy has been turned on its head ever since President Barack Obama stepped up his call for a bipartisan “grand bargain” to raise the national debt ceiling and avert a default on U.S. obligations. The deal would include $4 trillion in deficit reduction over 10 years, mainly through steep spending cuts but also including up to $1 trillion in new federal revenue. …

Some pundits and political insiders say Republicans should leap at the offer. But there’s a hitch: The new revenue — mainly from overhauling the tax code and lowering rates by eliminating or limiting a broad swath of loopholes, deductions and tax breaks — presumably would violate a no-net-tax-hike pledge that scores of Republican lawmakers have signed.

Mostly for that reason, House Republicans so far have rejected Obama’s overture, despite the interest shown by Speaker John Boehner. Some pro-Republican analysts seem bewildered.

… If Congress approves a version of the “grand bargain,” Obama can run next year as a president who began taming the runaway deficit, extracted concessions on higher taxes from Republicans and put Medicare and Social Security on a possible path toward greater stability. If congressional Republicans block the plan — and especially if the Aug. 2 debt ceiling deadline is missed — Obama might persuasively argue that he tried his best to strike a compromise, at some political risk to himself.

A high stakes game of chicken indeed!

Europe has acted to contain the Greek situation, but for how long? Will Republicans accept Obama’s (possibly poisoned) chalice, or will they really drive America over the edge and in to turmoil just to spite him? Even if we dodge both bullets this time the underlying problems are still there, and they’ll be back. And then what about the next crisis, and the next one, and the next? It’s hard to escape the conclusion that the world’s economy is teetering on the brink of a precipice.

84 comments on “Teetering on the brink ”

Comments are now closed

tc 1

23 July 2011 at 9:17 am

Get a piece of fertile godzone to help sustain your intake people, you’re going to need it.
Colonial Viper 2

23 July 2011 at 9:30 am

It’s hard to know which is more surprising: a Democratic president pushing historic cuts in spending, including Social Security and Medicare. Or a Republican-controlled House refusing to accept the deal and declare a huge victory

Are we all clear yet that the Land of the Free and the Brave has now had for a long time a choice of The Bankers Party, and The Other Bankers Party?

This is what the leading kleptocracy of the world has become.
- mel 2.1
  
  23 July 2011 at 3:19 pm
  
  You are exactly right!!!! The lack of regulation, as well as lack of any moral ethics, in the banking industry in the US has brought the world into this extended financial crisis. The bankers are responsible for the crisis NOT the public, yet around the world we see the public being asked to pay the price in terms of ‘austerity measures’.
  
  It is similar in NZ, where most debt is private debt, yet the National party are proposing to reduce this debt with a fire sale of NZ assets, at the expense of nearly $1 billion dollars in revenue each year. Does the National party really expect that NZers will be buying assets they already own. Within 5-6 years we would be back where we started without the benefit of the revenue, and probable loss of further NZ jobs.
  
  Asset sales are a scam perpetrated on the public of NZ, just as they are being forced on people in countries around the world.
mikesh 3

23 July 2011 at 10:22 am

Bring back the greenbacks.
- Colonial Viper 3.1
  
  24 July 2011 at 1:11 pm
  
  🙂
Nick K 4

23 July 2011 at 10:29 am

It wasn’t too long ago that the economic writer on this blog (who has now disappeared) was praising the USA for its textbook quantative easing Keynesian response to the economic crisis; and how Key didn’t spend as much so we were facing oblivion.

On that analysis all Obama has to do now is to spend more. That’s bound to work, aye.
- mik e 4.1
  
  23 July 2011 at 10:54 am
  
  IF inflation is low and the Ponzi scheming banks shut up shop it is an option but if inflation is growing the best options are to reduce spending increase taxes increase savings increase spending on r&d innovation spread wealth.If the US hadn,t done some quantitve easing the NZ economy would be stuffed because the ponzi banks had shut up shop so borrowing Bill English would have no where to borrow his $16Bilion a year for the next four years . I,m surprised at the economic illiteracy of the right bloggers ,maybe not because their leaders seam to have the same problem.
- Eddie 4.2
  
  23 July 2011 at 12:18 pm
  
  Actually, Obama’s response was textbook and it worked. I don’t think there’s any suggestion that Obama’s economic polices haven’t worked as well as could be hoped. The US economy has actually been growing.
  
  What we have a is political crisis around a politically-created artifice, the debt ceiling. The republicans are hoping to force such savage spending cuts that US economic growth will be undermined ahead of the 2012 elections.
  - Rusty Shackleford 4.2.1
    
    23 July 2011 at 3:27 pm
    
    By what measure did it work?
Todd 5

23 July 2011 at 10:56 am

Greece,Spain,Italy Ireland,Portugal, the IMF thinks it can throw money at these counties to fix the problem.It will never work to simply ignore these problems without fixing the causes will lead to long term stagnation and woe.Then we have the USA,what a joke Obama is,his policy of high inflation will ring throughout the world for years to come.My pick buy gold,look for it reaching $5000 an ounce over the next 1-2 years.
- ghostwhowalksnz 5.1
  
  23 July 2011 at 11:48 am
  
  No one is ‘throwing money’ at these countries.
  
  They are merely being given loans which they pay back with interest. Do you perhaps not understand the word LOAN
  - Colonial Viper 5.1.1
    
    23 July 2011 at 3:43 pm
    
    Further the loans are not designed to fix shit, they are designed to buy enough time for international financiers and bankers to position themselves to either
    
    a) make enough money raping and pillaging sovereign assets which will be sold off at cents on the dollar
    
    b) clear the resulting financial blast zone, leaving tax payers in other states carrying the tab
    
    c) all of the above
    
    Todd is a complete ignorant idiot but even he got this right
    
    My pick buy gold,look for it reaching $5000 an ounce over the next 1-2 years.
    
    (although it might take 3-4 years to get to that price)
    - travellerev 5.1.1.1
      
      23 July 2011 at 5:08 pm
      
      Silver is better, still much to cheap in relation to gold.
      
      Oh, and start a veggie garden!
- Zaphod Beeblebrox 5.2
  
  23 July 2011 at 3:34 pm
  
  Has the U.S. had high inflation? Even with record low Interest Rates and rising oil prices it has stayed pretty modest.
  - Rusty Shackleford 5.2.1
    
    23 July 2011 at 3:49 pm
    
    A 99% decline in the value of the dollar over the last 90 years seems like pretty high inflation to me.
    - mik e 5.2.1.1
      
      24 July 2011 at 9:55 pm
      
      rusty thats depreciation which doesn,t necessarily lead to inflation
Afewknowthetruth 6

23 July 2011 at 10:58 am

If it is widely reported by the mainstream media you know it is a sideshow and the real action is elsewhere.

We are not witnessing a recession: we are witnessing the end of a corrupt and lethal system which has been running for four centuries and has almost run out of the capacity to create money out of thin air and has almost run out of things to loot. The times we are in are otherwise known as the never-ending depression, the great turning, the long emergency, post peak everything etc.

The predicament we are in is due to

1. over-population
2. over-consumption
3. fractional reserve banking, leveraging and debt

If we ask the criminals who are in control (politicians, money-lenders and corporations) what the solution to the predicament is, they say it is population growth, increased consumption and more debt.

They also say that 1+1 = 3
- RedLogix 6.1
  
  23 July 2011 at 11:10 am
  
  Yes I have to agree.. it never an accident that the money-changers had set up shop in the courtyard of the temple of the priests. They always were acting in collusion to control us.
  
  In simple terms the world has never been richer. We are at the peak of an oil driven explosion in technology that has created immense wealth… yet virtually all of this new wealth has been captured by a tiny elite of game players in the finance world. (I’m reluctant to call them ‘bankers’… in the ordinary run of affairs bankers do have useful, albeit modest, role to play in running the exchange of credit needed for the everyday economy.) The rest of us have gained little, or gone backwards, over the last 30 years.
  
  They make the plays in the grand game, they look to screw every possible gain for themselves … yet when they fail they always find a way to push the losses onto us ordinary people. Truly they have become a parasite bloated beyond all reason and tolerance.
  - dave brown 6.1.1
    
    23 July 2011 at 12:07 pm
    
    Well Capitalism will not fall down by itself. As we see countries will be bailed out so long as they have governments that will mortgage future generations of workers to pay back the debt plus compounding interest. And so long as workers let them get away with murder.
    
    The real problem is that capitalism is no longer a progressive force for change but a destructive force. It was progressive so long as it destroyed feudalism and other tributary modes of production and gave us the industrial revolution. But since start of the 20th century, capitalism has become a top heavy, destructive juggernaut that grinds the masses under it wheels. It survives only by wars and counter-revolutions that smash the masses rebelling against its rule. Its productive capacity is on a long decline punctuated by depressions and wars that only kick start upturns by the sheer destruction of physical and social capital.
    
    The current so-called ‘great recession’ is a deep cyclic recession among a series of such cycles since the end of the post-war boom, itself no more than a long-upturn brought about by the destruction of physical and social capital by the Great Depression and WW2. If there is another cyclic upturn following this recession it will be weak and rapidly swing downwards again. The reason for this is not overpopulation, underconsumption, or the bubble banking system, which are no more than surface symptoms of capitalism in terminal decline.
    
    The underlying cause of capitalist crisis is that it can no longer as a global system extract sufficient surplus from human labour power to produce profits on the total capital accumulated. Since profit is the driving force of capitalist production the motivation to invest stops. Keynes’ ‘solution’ to prime the pump by paying workers to consume to leads to stagflation that only delays the decision as to when bosses stop investing. That is why the only real productive growth is now in East Asia and the other BRICS where the conditions of early capitalism, low wages, and technical innovation allows labour to be exploited profitably for the moment. And yet even this productive burst will lead to stagflation which will produce a real test of state capitalist systems to survive.
    
    In the rest of the world where capitalism has been long established, despite falling wages and new technology, productivity is lagging. Hence, surplus capital that is not shipped off to China etc, must be diverted into speculation in existing commodities. This is a ponzi scheme to try to delay the inevitable devaluation of money that is not invested productively. No new value is added to these commodities, and their rising prices represent ‘fictitious’ value or capital. Hence when these fictional bubbles burst, the accumulated surplus money is devalued massively. It is a consequence not cause of the current crisis.
    
    The only thing keeping capitalism alive at the moment is the capacity of the ruling capitalist classes to use THEIR state to syphon the wages and taxes of workers to pay for the bad debts run up by speculation. Bailing out private capital debt, turning it into sovereign debt, shifts the burden of repaying the debt onto the working class its total effects now referred to as ‘austerity’. But this trick of making the working class pay for the huge costs of capital;s survival is reaching its limit. The contradiction of workers both producing the wealth, and then propping up a system that destroys it, has dawned when ‘austerity’ drives the masses of workers into poverty and misery. The ability of capitalism to mask this ‘destruction’ of society and nature as as ‘natural’ and ‘necessary’ no longer works. Capitalism is losing its clothes. The unions and social democratic parties that have long kept the lid on workers struggles are as bankrupt as capitalism. Spanish and Greek workers have lost their faith in this political class. The corrupt power of the system of bosses, bankers, media barons and the armies of bureaucrats who keep the lid on popular discontent is being blown apart.
    
    But as the melodrama of Murdoch in the dock shows, the bosses still have a lot of power to spray bullshit over the most damaging revelations. Capitalism will stagger from one crisis to the next so long as we let it. Capitalism won’t die until we bury it alive and drive a stake through its heart. We will see bigger rebellions, general strikes, and working class struggles against fascist movements to keep capitalism alive in the next years. For workers to win they have to pull off the scales that capitalism places over their eyes and open their eyes to the nature of the enemy so as to be able to defeat it. That is why the Marxist critique of Capital is as essential today is it was when it was first written some 150 years ago.
    - uke 6.1.1.1
      
      23 July 2011 at 12:41 pm
      
      “The real problem is that capitalism is no longer a progressive force for change but a destructive force. It was progressive so long as it destroyed feudalism and other tributary modes of production and gave us the industrial revolution.”
      
      I can’t agree that the industrial revolution as the outcome a wholly “progressive” force. Surely it has also been destructive of the biosphere, of the self-sufficiency for ordinary people, of older technologies (which we are only now rediscovering to be more efficient and sustainable than the new)?
      - dave brown 6.1.1.1.1
        
        24 July 2011 at 10:36 am
        
        The industrial revolution was progressive in leaping out of small scale rural based craft production into mass factory based production. Its destructive impact in the 20th century is down to capitalist control of production where everything is subbed to profit. Is only in that period that industry has run amok in destroying the biosphere (also that of the Stalinist regime that has nothing to do with Marxism or communism, just as the current Chinese state is nothing to do with socialism). So its not industry that has to be sacrificed by returning to earlier technology that uses up more labour time, but who controls industry. Workers control can harness the latest technology with sustainable economics. Society and nature back into harmony.
    - Afewknowthetruth 6.1.1.2
      
      23 July 2011 at 12:47 pm
      
      You are not taking into account energy. Without energy nothing happenes. That is why there will never be a recovery. The peak in per capita energy was around 1979, and we are into declining net gobal eenrgy.
      
      The only recovery we might witness night be a recovery FROM the system, not a recovery OF the system. That very much depends on whether the system has already pushed the global environment beyong the point of no return; much evidence indicates it has.
      
      An economic system predicated on the use of oil must implode if the oil supply is declining: simple mathematics, simple logic. We are progressing towards a ‘game over’ scenario, but it will not be reached overnight. Most informed analysts suggest the collapse will take place over the next decade.
  - Reality Bytes 6.1.2
    
    23 July 2011 at 10:03 pm
    
    “..In simple terms the world has never been richer…”
    
    ^this.
    
    All this talk of recession etc is utter bullshit generated from our flawed monetary systems.
    
    The reality is as a species we now have immense technological capabilities and learnings that we should now be leveraging for immense benefit of all mankind. But the primary focus seems to be on statistics and benchmarks relating to this economic experiment.
    
    We have the capability to be living in utopia, yet we lack the leadership/vision/inertia to implement it, because it’s all about silly economic benchmarks and ‘consumerism growth above all else’, not practical real outcomes. That’s what sucks with mankind’s general direction these days.
Lanthanide 7

23 July 2011 at 11:25 am

America won’t default on 2nd of August.

If worst comes to worst, Obama can invoke the 14th amendment to the constitution that can be interpreted to say that the debt limit is unconstitutional. This would almost certainly end up at the supreme court in a Bush election style case. On one hand the country defaults, and on the other they don’t – guess which way the judges will vote (imagine being remembered as the incompetent judge that bankrupted the country?).
- ghostwhowalksnz 7.1
  
  23 July 2011 at 11:52 am
  
  He has ruled this option out.
  Your use of the word default is misleading, as there is no suggestion of not being able to ‘pay’ the creditors.
  Its like if you were told you had reached your credit card limit , doesnt mean you have defaulted on your house loan.
  
  The debt limit ceiling affects spending so is most likely for a short period to hit those working for the US government
  - Colonial Viper 7.1.1
    
    23 July 2011 at 12:05 pm
    
    as there is no suggestion of not being able to ‘pay’ the creditors.
    
    not meeting your obligations is a default. True the US can choose who NOT to pay (it might be a pensioner, a soldier or a Chinese bank) or it might choose to continue stealing funds to allow it to pay (e.g. raiding [‘temporarily utilising the funds of’ lol] public service retirement accounts, which it has been doing) but it all still looks like a default to me.
    
    Even the EU ‘selective default option’ for a ‘few days’ designed not to trigger CDS payouts…I mean, who is that fooling, really.
    
    One of the most interesting parts of this is…will the US lose its AAA credit rating.
  - Lanthanide 7.1.2
    
    23 July 2011 at 1:26 pm
    
    “He has ruled this option out.”
    
    Doesn’t mean he won’t do it if forced.
    
    It’s all pretty stupid anyway though, because if it actually gets to that point without a sensible agreement being made, damage will already have been done.
Peter Bains 8

23 July 2011 at 12:25 pm

No pint having your own land, subscribers to this site will nationalise it all and make you share your own grown veges and fruit, GST free of course.
- Colonial Viper 8.1
  
  23 July 2011 at 12:50 pm
  
  its been done before in NZ and it could be done again. So?
  - Rusty Shackleford 8.1.1
    
    23 July 2011 at 3:46 pm
    
    What is the point of improving your land if it can be taken away.
    - Colonial Viper 8.1.1.1
      
      23 July 2011 at 3:46 pm
      
      What’s the point of improving your life if it too can end?
    - Draco T Bastard 8.1.1.2
      
      23 July 2011 at 3:57 pm
      
      It’s not your land. It cannot be removed from the commons as what you do on it will affect everybody else.
      - Rusty Shackleford 8.1.1.2.1
        
        23 July 2011 at 4:07 pm
        
        That’s a nice platitude. But in reality, where you have lack of property rights you have poverty.
        
        Colonial Viper 8.1.1.2.1.1
        
        23 July 2011 at 4:07 pm
        
        Sorry mate that’s a platitude right there
        
        The success of NZ’s modern agriculture industry, and in fact every farmer today, owes their livelihood to the land confiscations and title breakups of the 1890’s.
        
        Draco T Bastard 8.1.1.2.1.2
        
        23 July 2011 at 4:15 pm
        
        Dictators can be identified by their cry of Property Rights.
        
        If you were so protective of peoples rights you’d be supportive of people not being affected by others actions without their say so. In fact, didn’t you link to a libertarian article that classed a persons body as his property?
        
        Rusty Shackleford …
        
        23 July 2011 at 4:28 pm
        
        Probably. I don’t recall, but absolutely a person has full and singular ownership of hos body. Libertarians are extremely concerned with the effect actions have on others. Positing that pollution is mostly a function of poorly defined property right (as an example).
        
        Draco T Bastard …
        
        23 July 2011 at 5:18 pm
        
        And yet you still can’t see that the effects of pollution, which disperse through the land no matter what affecting everybody else, makes it so that land cannot be owned by an individual?
        
        Rusty Shackleford …
        
        23 July 2011 at 5:38 pm
        
        “And yet you still can’t see that the effects of pollution, which disperse through the land no matter what affecting everybody else,…”
        What does this even mean?
        
        “…makes it so that land cannot be owned by an individual?”
        Therefore this.
        
        Colonial Viper …
        
        23 July 2011 at 6:09 pm
        
        Rusty, either DTB’s point is dumb or you are. Don’t be so quick to put your life on the line on that distinction is my suggestion.
        
        Rusty Shackleford …
        
        23 July 2011 at 6:17 pm
        
        Feel free to clarify his point, if you want. I feel safe in admitting I had trouble gleaning what the central thesis of his statement was. Something about pollution therefore private property ownership is bad. I wouldn’t like to read anymore into it than that.
        
        Colonial Viper …
        
        23 July 2011 at 6:26 pm
        
        The point did not seem to focus on pollution, it seemed to focus on pollution adversely affecting the commons and impacting on others.
        
        Externalities, in other words.
        
        Draco T Bastard …
        
        23 July 2011 at 9:35 pm
        
        If something you do has an effect upon everyone else then you have no right to do it unless you get permission. Land is one of those things where what you do to it will filter out to everyone else and so you would need to get permission before you did anything with it. This effectively precludes ownership as ownership gives exclusive rights over that owned object and, as we see, rights over land cannot be exclusive.
        
        All land should be shifted to a leasehold with the ownership held by the local community.
        
        mik e 8.1.1.2.1.3
        
        24 July 2011 at 10:05 pm
        
        Tell Maori that,Someone on the right has finally figured it out,it only took 150 years. Maori were supposed to have the rights of British citizens but they had their land removed from their ownership by shonkey land traders and brute force while they didn,t understand the meaning of of the European model of ownership and look whats happened as you have described. Better not tell Don Brash that he might have to vote with the Maori party!
- Draco T Bastard 8.2
  
  23 July 2011 at 1:21 pm
  
  Peter Bains proves, once again, that the RWNJs are terrified of people having a good life through cooperation.
  - mik e 8.2.1
    
    24 July 2011 at 10:07 pm
    
    Yeah DTB the very few of them would rather be lauding it over the rest in a feudal state
- Reality Bytes 8.3
  
  24 July 2011 at 6:57 pm
  
  Peter, think about this:
  
  At the beginning of World War II the U.S. had a mere 600 or so modern fighting aircraft and a woefuly equipped armed forces in general. They rapidly overcame this shortage and produced more than 90,000 planes a year.
  
  Did they have enough money or gold to pay for these implements of war? No they did not.
  But what they did have was more than enough resources. It was the organisation and utilisation of these resources that enabled the US and it’s allies to achieve the production levels required to win the war, not money. And this would have been a similar to the same approach of all major nations, UK, Russia and even the axis.
  
  So does that mean that USA and the allies won because they were communists? No they won the war because they realized money has it’s limitations and is far from the most ideal productive system and would hinder REAL progress and even their very national survival if they relied on it.
  
  Unfortunately, this practical way of dealing with emergencies is only considered in times of war.
Bright Red 9

23 July 2011 at 12:26 pm

it’s interesting that the textbooks say the US can’t default. As the world’s reserve currency, with everyone else keeping the bulk of their foreign reserves in T-Bills, the US can simply print more money – as it has done – if money gets tight and that passes the cost on to foreign holders of US debt whose currency appreciates vs the USD.

If we did that, the world would react by demanding a higher price for buying our debt – ie higher interest rates, a lower credit rating – but the fact that everyone else holds so many T-bonds means they can’t react like that against the US, not without further devaluing their own foreign reserves.

Of course, the textbooks assume rational actors. This is the ruling class of a crumbling empire doing what such ruling classes always do – factionalising and tearing themselves apart and failing to guard against the enemy at the gates.
Colonial Viper 10

23 July 2011 at 12:53 pm

As the world’s reserve currency

One reason the USD is in play is because some big groups want to change that. A new global currency in the form of IMF SDRs is being designed.

You’ll know that the USD is history when the trade in oil starts moving to other currencies.

Of course, the textbooks assume rational actors.

Mainly neoliberal economics text books. Psychology textbooks definitely do not.
- mik e 10.1
  
  24 July 2011 at 10:19 pm
  
  CV they,ve already by passed currency and are now speculating on oil [a finite resource as opposed to money which can be printed] thats why it jumps every time a currency weakens. In the US all printed money these days has to be repaid as would a loan most of the money printed has already bean repaid .Its had a beneficial effect in keeping imports down and local production up as well giving the Chinese yuan a shot across its bow because they refuse to float. therefore creating a huge balance of payments deficit.
Afewknowthetruth 11

23 July 2011 at 1:02 pm

Current economic and financial arrangements were established towards the end of the Second World War, when Britain was dethroned and the US was ‘crowned king’ at Bretton Woods.

At that time the US was THE major exporter of oil -money coming out the ground for almost no cost- and extraction was increasing. The tuirning point for the US was 1970-71, when extraction peaked and began to fall. Rising consumption and falling extraction has put the US (and most of the world) into an increasingly dire predicament.

The US will continue to create money out of thin air until it can’t (just as Britain or the Eurozone will). But that which underpins the entire system is in decline. Only one conclusion is possible, though the route to that conclusion is anyone’s guess at the moment.
Bored 12

23 July 2011 at 1:11 pm

I have been watching the whole thing roll out for the last few years since the initial financial dam burst and bail out. I would like to comment on the role of the media.

To date the NZ news media has been totally light weight with both coverage and analysis. This is the biggest story of the decade along with its much related cousins, climate change and resource depletion. What do we get? Duncan Pea Brain Garner from Washington standing on a lawn saying, “The US economy is in crisis, it appears serious”, or words to that effect, stern faced, attempting to ellicit emotion. Well done Duncan, anybody who reads widely has known for a while, its not news.

One minute per day if we are lucky, but hours of “market” reports, this is up, that down, big fucking deal. Lazy bastard media? Or perhaps deliverately evading the real iissues?
- Draco T Bastard 12.1
  
  23 July 2011 at 1:26 pm
  
  Lazy bastard media? Or perhaps deliverately evading the real issues?
  
  A little bit of both, a large helping of ignorance and a complete incapability of applying logic to anything. That applies to the economists as well who wouldn’t know an economy if it bit them.
  - Ianupnorth 12.1.1
    
    23 July 2011 at 2:04 pm
    
    http://www.telegraph.co.uk/news/politics/8655106/Im-starting-to-think-that-the-Left-might-actually-be-right.html
    Even the right are acknowledging they fucked up the world!
    - Afewknowthetruth 12.1.1.1
      
      23 July 2011 at 2:21 pm
      
      Ianupnorth.
      
      An interesting item.
      
      What no mainstream journalist acknowledges is that the [apparent] wealth generated in the late 1980s and 1990s was due to increadibly cheap oil that was a result of the opening up of Alaska and the North Sea. The cheap oil bubble has burst, and Britian (along with most other nations) is chasing a diminishing supply of oil (and natural gas) with increasingly worthless paper money.
- Afewknowthetruth 12.2
  
  23 July 2011 at 2:05 pm
  
  The media are primairly corporate businesses. Thier motto therefore is: ‘corportae business is good and will get better’. Anything that challenges that delusion is:
  
  a) ignored
  b) ridiculed
  c) ackowledged as a minor problem that can be readily overcome via a corporate ‘solution’.
  
  The real problem is that corporations run the government, so anything that challenges corporate business as ususal is:
  
  a) ignored
  b) ridiculed
  c) ackowledged as a minor problem that can be readily overcome via a corporate ‘solution’.
  
  by the government (and by local government).
  
  Since most people only beleive something if they’ve seen it on a mainstream source or it is official policy, they keep supporting the present dysfunctional political and economic arrangements.
  
  Therefore we are well and truly screwed. And the next generation is utterly screwed. You only have to read some of the comments (based on gross ignorance) on this forum to see that.
  
  (My guess is there are a couple of thousand people in NZ who understand what is going on and where it is leading.)
  - Colonial Viper 12.2.1
    
    23 July 2011 at 4:32 pm
    
    Oh relax, NZ will do just fine. At a 1910’s / 1920’s energy per capita kind of civilisation, but that’s no real problem.
    - uke 12.2.1.1
      
      23 July 2011 at 5:12 pm
      
      To some extent I agree.
      
      But there will definitely be much increased pressure on fish stocks in surrounding oceans, from foreign fishing fleets. I would also expect that as populous nations like the US start to break down, a mass exodus to farflung safe havens like NZ, which will put pressure on land and resources.
      
      But most NZers (Pakeha, Maori, Pacific Islanders, Chinese) are not far removed from former generations that got by on subsistence living. We’re a nation of scroungers and scavangers. Most people will soon discover – shock, horror – that they don’t actually need a car, flat-screen TV or even a computer!
      - Colonial Viper 12.2.1.1.1
        
        23 July 2011 at 6:33 pm
        
        I have to say that one bonus of being a country with such a large under class/squeezed middle class, is that we’ve already got the informal skills and systems to scrounge and survive in tough times. (The kind of comment that Dmitri Orlov might make).
        
        uke 12.2.1.1.1.1
        
        24 July 2011 at 8:55 am
        
        Thanks for the Dmitry Orlov reference.
        
        I have now learned I may be what is called a “collapsitarian”!
        
        felix …
        
        24 July 2011 at 9:29 am
        
        Good skills to have. Maybe essential skills.
        
        Colonial Viper …
        
        24 July 2011 at 1:16 pm
        
        Welcome. Just spreading the wealth – the real wealth.
      - Draco T Bastard 12.2.1.1.2
        
        23 July 2011 at 9:45 pm
        
        a mass exodus to farflung safe havens like NZ, which will put pressure on land and resources.
        
        Yep, which is why we will be putting in place a population cap and stopping immigration at some point in the near future. We cannot house/feed the entire world here.
    - Afewknowthetruth 12.2.1.2
      
      23 July 2011 at 6:26 pm
      
      You are forgetting that the 1910/1920s lifestyle and energy per capta civilisation was dependent on the consumption of huge amounts of coal, e.g. gas was manufactured from coal, railways used coal, coal was used domestically etc. All the easy coal has been extracted and burned, just as with oil.
      
      I suspect a 14th century level of civilisation will be closer to the mark, assuming abrupt climate change doesn’t render NZ largely uninhabitable. (we won’t be able to go back to the 1800s lifestyle because that was based on whale oil: not many whales around these days).
      - Colonial Viper 12.2.1.2.1
        
        23 July 2011 at 6:41 pm
        
        Come now, NZ still has several tens of millions of tonnes of coal buried under our ground.
        
        Yes, it is not high quality anthracite (nice as that would be). But we will be quite OK. As long as we save it for ourselves and don’t export it.
        
        Admittedly getting to some of these deposits will be hard without easy access to heavy machinery and millions of litres of diesel, but we’ll figure something out.
        
        I suspect a 14th century level of civilisation will be closer to the mark, assuming abrupt climate change doesn’t render NZ largely uninhabitable.
        
        Nah, your 14th C estimate is way too pessimistic: we have coal, we have electricity and we have the knowledge of modern science and technology.
        
        We will still be able to make mild steel, aluminium, pasturise milk, have hot showers, make soap and run trains. That’s somewhat beyond 14th Century living wouldn’t you agree?
        
        As for NZ becoming uninhabitable – that’s very doubtful in the next 100 years anyways. 500 years and beyond – who knows.
        
        Robert Atack 12.2.1.2.1.1
        
        24 July 2011 at 8:55 am
        
        “Come now, NZ still has several tens of millions of tonnes of coal buried under our ground.”
        
        How many man hours would it take to get Pick River coal without the use of machinery? Because in a post crash world we are back to less than shovels and buckets, at best we could make the odd greenstone axe, it is bloody hard to dig through rock with sticks and finger nails, all the easy to get energy is gone baby gone, we burnt it baby burnt it.
        We are heading back to the Jurassic period http://www.youtube.com/watch?v=mQloUVD88h4
        
        NZ may not become uninhabitable but without the inputs from coal, gas, and oil it will fast become uninhabited, as our food production will fail to feed 4 million people, and you can bet dollars to doughnuts we will not have the ability to stop the refugees arriving in their nuke powered boats. NZ is a ripe plum waiting to be picked
        
        But if we all stay behind the rose coloured maternity ward windows, things look fine.
        
        Maori will be one of the last groups alive in NZ as
        1 – they have the strongest connections with each other via their Marae
        2 – they don’t mind eating people )
        
        “We have 300-400 years worth of coal if we don’t export it. To maintain some degree of civilisation through that time it gets used, full stop.”
        The only way that coal will be extracted is via slaves digging with their hands
        It may only take another 20 years of coal extraction (at current rates) to turn this planet into …a rock.
        
        Colonial Viper …
        
        24 July 2011 at 12:54 pm
        
        without the inputs from coal, gas, and oil it will fast become uninhabited, as our food production will fail to feed 4 million people, and you can bet dollars to doughnuts we will not have the ability to stop the refugees arriving in their nuke powered boats. NZ is a ripe plum waiting to be picked
        
        Please stay consistent.
        
        If we can’t even feed our own population as you suggest (BTW I think you are dead wrong, its just that 20% of our labour force will have to move into ag/hort) why on earth would refugees come here, and why on earth would we be considered a ‘ripe plum’ if we had no food to offer.
        
        Colonial Viper …
        
        24 July 2011 at 1:21 pm
        
        How many man hours would it take to get Pick River coal without the use of machinery? Because in a post crash world we are back to less than shovels and buckets…the only way that coal will be extracted is via slaves digging with their hands
        
        btw do you also believe that humans are going to forget about the wheel, levers, how to sharpen a blade, crop rotation and how to make fire?
        
        Get a grip dude, don’t become part of the problem.
      - Draco T Bastard 12.2.1.2.2
        
        23 July 2011 at 9:43 pm
        
        And you forget that we’ve built up a hell of a lot of renewable energy supplies since 1910. They aren’t going away and neither is the knowledge to of how to make and maintain them.
        
        Yes, there will be some pain involved with the reduction and eventual removal of oil as a transport fuel but we’ll be able to maintain nearly everything else. Reduction in per capita energy use and the end of the oil age does not automatically result in the end of industrialism.
        
        Climate Change is the real problem but I think NZ will be able to weather that storm as well. It won’t be nice and easy but it will be a damn site better than central Europe/N&S America.
        
        Afewknowthetruth 12.2.1.2.2.1
        
        23 July 2011 at 11:17 pm
        
        DTB and CV.
        
        I assume neither of you are aware of the forecast for a 3.5oC rise in average temperature by 2035. That wil be utterly devastating. Burning the last of the coal will make such a temperature rise a certainty. (of course NZ is just a bit player as far as global emissions go, but the per capita emissions are little short of appalling).
        
        And I think you are forgetting that the so-called renewable infrastructure is dependent on oil for maintenance. What happens when the blades fall off, the gearbox breaks, lightning strikes etc. ?
        
        I am not suggesting we will immediately transition to a 14th century lifestyle, but ultimately that is the only sustainable lifestyle above the stone age level. (some commentators suggest a most regions of the Earth will descend to the stone age level before 2030).
        
        The southern states of the US may be a foretaste of what is to come climatewise (no rain to speak of for 4 months, cattle dying, crops dying: I believe they are praying for hurricanes instead of praying for no hurricanes.)
        
        These certainly are interesting times.
        
        Colonial Viper …
        
        23 July 2011 at 11:31 pm
        
        Question is not what the avg global temp rise is going to be, but what is it going to be in NZ? Let’s say that on avg we get 3.5 deg C warmer throughout NZ by 2035. That would lead to massive changes in agriculture and horticulture, no doubt. Southland would become the premier grape growing region of the country and Northland will have no problems with their citrus harvests.
        
        BTW I appreciate that if you are in New Mexico or Darwin, a 3.5 deg C temp rise is a very very bad thing.
        
        And I think you are forgetting that the so-called renewable infrastructure is dependent on oil for maintenance. What happens when the blades fall off, the gearbox breaks, lightning strikes etc. ?
        
        We should do OK on a mix of a ‘salvage society’ and basic new fabrication. We’ll should more than Cuba has to work with eh?
        
        Sheep skin drums and gut strings for the guitar, cane and fruit sugars to feed the still, I’m already looking forwards to some wicked partying.
        
        And best of all, no need to turn up at the office at 8am come Mon morning to work in front of a screen 🙂
        
        That wil be utterly devastating. Burning the last of the coal will make such a temperature rise a certainty.
        
        We have 300-400 years worth of coal if we don’t export it. To maintain some degree of civilisation through that time it gets used, full stop.
        
        Solid Energy must not be sold to foreign interests
        
        Locus …
        
        23 July 2011 at 11:46 pm
        
        There were some early civilisations that did well without guzzling energy, emitting GHGs and the benefits of modern technology. But then they had slavery…. Let’s hope we don’t see the power hungry nations enslaving the world – though it looks like we’re well down that road already
        
        Colonial Viper …
        
        23 July 2011 at 11:53 pm
        
        Actually it won’t be a case of one nation enslaving another or some kind of formalised slavery or neo-feudalism with distinct lords and serfs.
        
        It will be more likely a case of the ruling classes in our very own towns and cities making the rest of us work for them for next to nothing, with no breaks, no access to unions, no chance of career progression, no job security, no promise of respect or fair treatment, a way of living where we are barely able to house, feed, clothe ourselves and our families, where we can lose our livelihoods for no reason, with no warning.
        
        Oh shit…
        
        Draco T Bastard …
        
        24 July 2011 at 10:01 am
        
        And I think you are forgetting that the so-called renewable infrastructure is dependent on oil for maintenance.
        
        No they’re not or, to put it another way, they don’t have to be.
        
        What happens when the blades fall off, the gearbox breaks, lightning strikes etc. ?
        
        We make new ones. NZ’s steel mills are powered by electricity not coal or oil. They have to be because it’s the only way to refine our iron sands due to their high titanium content. The blades are made from fibre reinforced epoxy resins which are not dependent upon oil for their manufacture either and, as mines don’t go anywhere, we’ll be able to power those with electricity as well.
        
        I am not suggesting we will immediately transition to a 14th century lifestyle, but ultimately that is the only sustainable lifestyle above the stone age level.
        
        No it’s not as we will be able to maintain industrial processes. Not to the same scope as we do now but we will be able to. And, yes, some areas will be worse off than others. It’s most likely that those areas won’t be inhabited as a major change coming is the drop in human population.
        
        Robert Atack 12.2.1.2.2.2
        
        24 July 2011 at 9:34 am
        
        DTB- “we’ve built up a hell of a lot of renewable energy supplies since 1910”
        
        Are you talking about all the dams that are all fast silting up? That are heavily dependent on China et al for all the oil/coal/natural gas by products ie steel to make/maintain the turbines, power lines etc? And the diesel fuelled trucks etc needed to maintain the system, we couldn’t even stop the power lines earthing out without gangs of people keeping the trees from touching the cables, have you seen what sort of gear a line gang have to maintain our grid? = truck loads of shit………. including helicopters.
        And what are we going to use all this electricity with? 50 inch TVs from China? fridges, washing machines? ….. traffic lights 😉 I know milk processing plants, just need the diesel powered trucks to keep that supply chain functioning.
        And take plastic out of the equation and we have next to nothing …. right down to syringes and all the shit hospitals need to maintain there function
        How will we cope with all the smelly crutches without panty liners? And I can just see us all using chewed sticks to brush our teeth.
        
        Draco T Bastard …
        
        24 July 2011 at 10:30 am
        
        Are you talking about all the dams that are all fast silting up?
        
        Yes and no. Yes in the fact that we do have them and can use the electricity that we generate from them and no because, after we tear them down, we can still get power from the water flow.
        
        In-stream power also gets called “low-impact hydro” and “hydro without the dam.” By any name, it may be an idea whose time has finally come.
        
        That are heavily dependent on China et al for all the oil/coal/natural gas by products ie steel to make/maintain the turbines, power lines etc?
        
        WTF are you smoking? We’ve produced high quality steel in NZ for half a century.
        
        And the diesel fuelled trucks etc needed to maintain the system, we couldn’t even stop the power lines earthing out without gangs of people keeping the trees from touching the cables, have you seen what sort of gear a line gang have to maintain our grid?
        
        Horse and cart’s fine and, being an ex-lineman, I have seen the gear that needs to be carted around. I didn’t say that it was going to be easy – merely that we would be able to maintain a reasonable level of industrial society.
        
        And what are we going to use all this electricity with? 50 inch TVs from China? fridges, washing machines?
        
        Most likely we’ll make them here rather than importing with a very strict use and recycling regime.
        
        I know milk processing plants, just need the diesel powered trucks to keep that supply chain functioning.
        
        As I said, horse and cart’s fine. And the electric rail.
        
        And take plastic out of the equation and we have next to nothing …. right down to syringes and all the shit hospitals need to maintain there function
        
        Don’t need plastic. Ceramics can be used as a replacement in many products (power sockets, monitors, etc), syringes used to be made of glass and can be again.
        
        And I can just see us all using chewed sticks to brush our teeth.
        
        More likely to be animal hair brushes actually or it could be bioplastic.
        
        Not everything we do is dependent upon oil and there are replacements which is where you go wrong as you seem to think there isn’t.
        
        AAMC …
        
        24 July 2011 at 1:05 pm
        
        Micro energy production. Generate it where you use it.
        
        AAMC …
        
        24 July 2011 at 1:30 pm
        
        Micro energy production. Generate it where you use it.
        
        AAMC …
        
        24 July 2011 at 1:35 pm
        
        Micro energy production. Make it where you use it.
      - mik e 12.2.1.2.3
        
        24 July 2011 at 10:24 pm
        
        Theres plenty in Auckland Afew Thats WHALEOiL
John D 13

23 July 2011 at 8:32 pm

The Euro crisis is the “beneficial crisis”. They will seek greater economic and political union out of this.

This was the game, all along.

The EUSSR is with us.
M 14

24 July 2011 at 2:27 am

I think recession is too mild – we are entering GD2. The US may be able to lift the debt ceiling on 2 August but that just delays the day of reckoning and by then Americans will become the images they’re used to viewing on the TV – western Somalians – and when fuel reaches $6 per gallon then there may be petroleum springtime riots.

Not many people know or want to imagine how grim things will become because that means they’d have to acknowledge their lives will change markedly. Even if we are self sufficent in coal and have good coverage with renewables people will have to get used to spotty electricity supply or maybe none at all, and will anyone be able to afford even half the energy they are used to using at the moment? There is potential for a lot of darkness in all senses of the word, particularly social interaction and this is where the government needs to step up and put things in place now, but won’t because it’s easier to keep to the script as it means the chance to govern.

The left needs to be brave and honest about our energy predicament and get cracking on projects to conserve energy and increase renewable energy coverage – employment opportunities to mop up unemployed, particularly youth are there for the taking.
- Afewknowthetruth 14.1
  
  24 July 2011 at 9:50 am
  
  The last time the left were in power they were cowardly and dishonest, and were more concerned with promoting short-term business as usual than with dealing with reality. Hodgson, Mallard, Parker and the other clowns assiciated with them maintianed the culture of denial throughout the years when there were windows of opportunity to put in place mitigation. Now most windows of opportunity have closed.
  
  And I see no change. The present crop of left politicians and hopefuls are no better than the clowns who were in office before (in fact several of them are the same clowns). They constantly promote the culture of denial, ignorance and complacency, all backed up by corporatism, even as the ‘Titanic’ sinks.
  
  The general populace should be terrified. But they’re not. They seem more concerned about rugby than their own futures. It’s quite surreal.
  - M 14.1.1
    
    24 July 2011 at 2:12 pm
    
    AFKTT, yes lying by omission or blind faith that things will turn out OK. I’m a peakist but also have concerns for the day to day social conditions for NZers and I’m not letting the last Labour government off the hook because IMHO they moved at a glacial pace when last in power in providing relief to lower income families and of course I haven’t forgotten 1984-1990; however, when you look at the record of the right in taking a scythe to working people from 1990-1999 and presently while they live like the French aristocracy of old holding all the trump cards in their hands I’d rather take my chances with a left leaning government that spreads the sacrifice more than the right ever will.
    
    I agree that hospitals are energy pigs and there is a great deal of waste but when petro-based supplies like plastic tweezers and syringes are difficult to obtain autoclaving and alcohol baths for injection needles will make a huge comeback. Choices will also be made as to whether extending a person’s life in their twilight is affordable and there may not be enough power to run all the equipment prem babies require. I think that a new mindset will come by necessity when it comes to having children and how many. IIRC correctly I read that part of the reason for the baby boom after the war was that people had delayed starting families because of the Depression and war, but yeah they went overboard. Uptake of sterilisation, I expect, will ramp up significantly because the pill and condoms will be victims of the breakdown of the industrial complex. Perhaps a new conservatism will emerge when the absence of condoms means there’s no protection against AIDS let alone drugs to limit the progression of the symptoms.
    
    The problems we face are huge and if I dwell on them for too long it becomes quite depressing, but I look to the Brits and the way they carried on in WWII despite seemingly insurmountable odds because the only alternative was to surrender and probably die. I’m not advocating a devil-may-care, live-for-today attitude with the attendant profligacy but for everyone to do all they can at a personal level to conserve, conserve, conserve and grow their own food if they have some land and enjoy modest treats using as few petro-based chemicals as possible. An honest government (yeah I know, we’re talking hen’s teeth) could accelerate the staving off of grimness a lot.
dave brown 15

24 July 2011 at 2:15 pm

“The general populace should be terrified. But they’re not. They seem more concerned about rugby than their own futures. It’s quite surreal.”

Only a minority is concerned about rugby to the point of seeing it as symbolic of what is ‘good’ about corporate capitalist society. I would say another minority see it as a fun and fulfilling activity in its own right. And another minority is turned off it because it has become a symbol of the ruthless capitalist patriarchy.

Nothing about this is surreal, its about people seeing rugby through their values and interests.

Should we be terrified by capitalism ‘teetering’. No, its demise is our opportunity. I don’t see capitalism’s decline and fall as quite so dramatic. I think that growing numbers will resist and create a socialist alternative within the wreckage. Evidence shows that disasters and dictatorships force rethinks where needs are reassessed by popular demand and not by the MSM and corporates. Japan after the Great East Earthquake and Fukushima. Christchurch on a small scale. The uprisings the dictatorships in North Africa and the Middle East prove that once people oppose tyranny, freedom is more than life.

This means that capitalism will suffer its terminal decline in fits and starts. Those who worship corporate rugby in all its alienated gloss will see its just a game. Those who see it as just a game will then see it as a chauvinist opiate. There will be a rush to rehab. There will be victories little and big. The stock of science and technology will not be lost but put to better uses.

Even if a cataclysmic collapse happens in some places, it’ll be a couple of steps back not a slide down the drain. Capitalism will have served its historic purpose creating the embryo of a socialist society within it, including its own gravediggers. We should aim to be around to celebrate.