Food for Thought

For fiscal year 2004 , $1 trillion of the $2.2 trillion US budget went to three entitlement programs: Medicare, Medicaid and Social Security.

By 2030, there will be twice as many retirees as there are workers in the United States, and the burden these entitlement programs place on the US budget will only worsen.

Right now, the Government Accounting Office (GAO) is stating that the USA is insolvent.

Most Americans, and surely everyone under the age of 50 has grown up in an age of plenty.  It was logical to always expect more, bigger and better for everything in our lives.   Between oil depletion, fiscal mismanagement, and climate change, current and future generations will experience a much different outlook.    Instead of an Age of More, we will be entering an Age of Less.

“A government big enough to give us everthing we want is a government big enough to take from us everything we have.” President Gerald Ford 1913 – 2006. RIP

Enjoyable Sustainability

I’m getting ready to make some new years’ resolutions for 2007, and one of them is to try and live more self-sustainably. I’m under no illusions that I can totally provide for myself and my family living on my suburban plot, but there are things I can do to reduce my carbon usage, and to concentrate on a few luxuries that I’d like to keep enjoying regardless of my personal economic situation. One of those luxuries for me is beer.

I’ve been homebrewing beer, mead and wine for the last three years or so. I enjoy drinking darker, stronger beers than the normal swill that passes for beer in the USA. and I don’t like paying through the nose for it. Brewing my own beer both allows me to make beers suited to my personal tastes, and it also saves me money. After the initial purchase of equipment, the actual cost of ingredients is much lower than the equivalent cost of commercially-produced beer. Finding a decent commercial mead is almost impossible as well, so if I want to drink the stuff, I almost have to make it myself. So, I’ve been acquiring the necessary equipment I need to stock a decent home brewery.

A lot of people outside the sustainability movement look at voluntary simplicity or sustainability as an exercise in self-denial. Their mindset seems to be that in order to support ourselves, we must cut back on many or all of the things that make life worth living. This is nonsense. A lot of the ‘stuff’ that we cling to as necessities of modern life are no such thing, and if we concentrate on a few things we derive a lot of enjoyment or satisfaction from, we can live a much more enjoyable life once we free ourselves from the mental shackles that are placed on us by our addiction to stuff.

Whether it’s making your own beer, or woodworking, knitting, gardening, or something else, find something that gives you pleasure, and figure out how to do it even if you find your access to money and/or energy restricted. That’s one of my resolutions for 2007.

New Movie: How to Save the World

I was contacted a while ago by Barbara Burstyn, the producer of the new movie “How to Save the World: One Man, One Cow, One Planet,” asking me to help advertise the film once it was released. The film deals with biodynamic farming in India, and how the efforts of Australian activist Peter Proctor are making a difference in the poor, rural areas of that country.

Readers interested in the practical application of biodynamic principles are encouraged to check the film out.

I have no financial interest in this project whatsoever… I’m just trying to do my part to help get the word out.

News and Notes

I’ve run across a couple of interesting stories in the last few days that readers should be aware of.

– In early 2006 the Federal Reserve got rid of reporting on M3, the total amount of US dollars in circulation worldwide, whether electronic, printed, or otherwise accounted for. The offical reason was that the Fed claimed it wasn’t a very accurate or relevant figure to track, while some economists and conspiracy theorists believed that this was a precursor to the Fed starting to inject massive ammounts of liquidity into the markets to keep the dollar afloat and the US government open for business. Several sites have reconstructed M3 based on other stats, and what do the numbers show? Why, they show that overall M3 is up 11.5 percent this year. In other words, the good folks over at the Fed have created $11.50 out of thin air for each $100 in circulation worldwide.

What happens when they dilute the puchasing power of money this way? Inflation happens. Have you noticed your bills for food, power and taxes rising faster than your wages? When costs are rising by 8-10% a year, and your savings account is earning a whopping 1.5% interest, it doesn’t take a rocket scientist to figure out you’re shooting yourself in the foot. Likewise, at an 11.5% inflationary rate, is it any wonder why Wall Street punishes corporations that fail to keep profits rising faster than that? Expect more of the same next year, and every year after that until the dollar finally crumbles under the pressure. The best investment I can see is in acquiring necessary tools and equipment now while prices are still low.

– CNN is reporting that a new ice island has been formed in the Arctic Ocean where a large piece of the ice shelf attached to Ellesmere Island has snapped off. An ice sheet the size of 100,000 football fields (or around 41 square miles) became a new ice island in about an hour one day in late 2005, according to scientists in both Canada and the USA. The experts are warning about this being another sign of climate change and thresholds being crossed, etc. I still don’t expect the US to do anything serious about it until we personally are devastated. That seems to be the way of things.

– Speaking of climate change, 2006 was the third-warmest year on record for Minnesota. It’s late December and the ground still isn’t frozen here in the great brown north.

– “One day in the not too distant future I believe that gold and silver will be great investments; almost as good as a stockpile of baked beans.”

Post-Holiday Wrap-Up

I hope everyone who celebrates any of the holidays that occur around the winter solstice had an enjoyable time.  In my case, it was hectic, but that goes with the territory when you’re a parent to a present-crazy preschooler who gets spoiled rotten by his entire extended family.  I lost track of the number of times I heard the phrase “Daddy?  I’m ready for another present!”

The holidays weren’t too bad on the present front for myself, either.   It’s tradition for both sides of the family to give lots of gifts to everyone, not just the kids, so I am expected to provide a list of things I’d like to receive.  This year, instead of turning in the usual list of CD’s, books and computer paraphernalia, I put together a more sustainable-living sort of list.   Santa smiled on me, apparently, for I received a couple of nice items, including a 7-quart cast iron Dutch Oven, a nice steam pressure canner/cooker, and a turkey fryer, which will become the centerpiece of my new homebrewery.   I also recieved several gardening or cooking-related books that my mother snatched from a local library book sale… some recycled gifts if you will.

The weather here has been unseasonably warm here in Minnesota, and the trend appears to be continuing until sometime in early/mid January.  Thank you el Nino!  While the reduced stress on the heating bill has been nice, it’s very dry outside, and I’m starting to worry that the drought conditions that plagued much of the western US this year will move into my neck of the woods.  My grass will survive, but I’m guessing that the local farmers won’t be either so lucky or so happy.  We need snow, and I’m hoping we get a fair bit of it sometime in early 2007.

My seed catalogs should start arriving in the next few weeks, and I’m starting to put some serious thought into the vegetable garden I want to establish this year, along with a few small permaculture guilds that I’d like to accompany the shade trees that are already in the yard.  More about this in a future post.

Looking At 2007…

2006 is almost over, and it’s been a blessedly quiet year from a peak-oil perspective. The price of gasoline and natural gas has stayed stable for most of the year, and nothing else has really sprung up that would wrack the world economy. Compared to 2005, this has been a good year, and we should feel thankful for that, for I don’t believe that 2007 will treat us so kindly.

 

I’m not qualified to offer full-blown predictions for the coming year, but there are several noticeable trends that I feel we need to keep track of. Here’s my list of things to watch in 2007.

 

Oil

 

OPEC decided to close out the year by both acknowledging that peak oil is a real threat to the world economy, and by agreeing to production cuts in the interest of keeping oil prices above $60 per barrel. There is speculation, of course, that some of the production cuts are a move to hide member countries’ (read: Saudi Arabia) ability to keep producing at recent levels. Declining production from the Cantarell field will also keep oil prices from dropping, as Mexico struggles to keep its daily production rates up.

 

The timely arrival of El Nino short-circuited the 2006 hurricane season and prevented another summer spike in gasoline prices. Forecasters are already predicting a 2007 hurricane season that is more active than normal, but whether a major storm makes it into the Gulf of Mexico’s oil patch or not remains to be seen. If it does, a return to $4/gallon gasoline will be imminent.

 

Finally, there are the wildcards of the geopolitical scene. The threat of civil war or worse looms in the Middle East and West Africa, and the stability of those regions will play a major role in determining the price of oil. If everything stays fairly quiet, all is well, but more and more insurgent groups around the world are figuring out that it is both easier and more profitable to strike at the infrastructure of a country versus symbolic targets. A major strike at oil facilities in Saudi Arabia, Iraq or Nigeria (among other places) will have an immediate affect on the price of oil.

 

Climate

 

As I alluded to above, the arrival of El Nino stayed the hand of the 2006 hurricane season, much to the relief of the rebuilding Gulf Coast as well as the oil industry in the region. This winter is also promising to be mild in some regions of the USA, which will keep natural gas prices from rising too fast as well.

 

Several major grain-producing regions of the world are suffering from drought, including parts of Australia and the USA. This is already having an effect on the price of staple grains around the world, and a continuing or worsening drought will only make things worse. The combined effects of drought, increased ethanol production (from corn in the USA), and a growing population are already being predicted to cause meat prices to rise, and depending on how bad the situation gets, countries like China could cause a more general bidding war for the world’s dwindling grain reserves.

 

Finally, I expect the climate change debate to intensify next year. As I write this Minnesota is experiencing of one on the warmest Decembers I can remember, while other parts of the country like the Pacific Northwest are getting socked with bad weather. As time goes on, it is becoming harder and harder to deny that we are having an effect on the world’s weather. Hopefully we will see some more positive signs on this front in 2007. The USA, of course, will dither as always, which seems odd to me since we seem to be doing everything we can to get rid of all of our manufacturing base as fast as we can. I wasn’t aware that bundling financial derivatives needed to pay a carbon tax…

 

Economy

 

It’s an open secret that the US economy is in trouble. At the end of this year, a delegation of senior US officials, including the Secretary of the Treasury and the Chairman of the Federal Reserve, went to China, hat in hand, to alternatively badger and bluster the Chinese into doing something to help the trade imbalance between our two countries. Demands to lower trade barriers, float the yuan, and pleas to not dump the $1 trillion in US treasury bonds and cash reserves fell on more or less deaf ears. The Chinese are naturally in no hurry to alter what they see as a successful policy of growth that keeps the cash coming in, and keeps growing segments of the Chinese population employed. They would like to reduce their exposure to the dollar, but seem to be having trouble doing so. Apparently the EU has told Beijing that they either cannot or will not sell the Chinese enough Euros to significantly reduce the amount of US dollars the Chinese Central Bank is holding onto, and various Middle Eastern nations (also major holders of dollars) have told the Chinese that if they dump dollars on the open market in large amounts, they can expect to receive less oil imports from the region. It’s a tricky dance for all involved, since the US needs to continue printing more and more money to pay its obligations, while the rest of the world is trying to both keep the value of the dollar up while trying to find ways to subtly reduce their holdings without inducing a general panic. Good luck to all of us with that.

 

Another issue to watch is the slowing US economy. Mortgage refi’s have enabled US consumers to continue spending with abandon, but that trend is ending as mortgage rates rise, the housing market continues to slow, and more and more ARM’s reset after their initial, very low rates expire. The number of foreclosures is continuing to increase, and housing prices on both coasts appear to be in danger of correcting to one degree or another. If the housing market implodes, the odds of if being contained to only one segment of the economy is low.

 

Inflation fears, growing recognition of the horrible fundamentals of the US economy (can anyone say ‘insolvent?’) and the growing shadow the derivatives market is casting on Wall Street are other issues that bear watching as well in the coming year.

 

Middle East

If you believe the leaks coming out of Washington D.C., it appears the US will be increasing the number of combat troops in Iraq in an attempt to make one final push to secure Baghdad and achieve ‘victory.’ Will these troops be used to combat the Sunni insurgents, or is there a plan to strike the forces of Moktada Al-Sadr, whose militia is believed to be behind a lot of the anti-Sunni violence taking place in the area. If we do go after both the Shiites and the Sunnis, then what? Likewise, if we decide to pull out of the area, all hell will break loose. Vice President Cheney has already been summoned to Riyadh to be told that Saudi Arabia will not stand by and let the Shiites butcher Iraqi Sunnis, and they also fear growing Iranian power in the region. Incursions by both Saudi and Iranian forces into an Iraqi civil war (not to mention a possible Turkish intervention if the Kurds declare independence) and you have the makings for both regional bloodshed and skyrocketing oil prices, which will rock the world economy. We have truly opened a Pandora’s Box in Iraq, and finding a way to shut it will prove to be interesting to watch.

 

There is also the unfinished business Israel has with both Palestine and Hezbollah. These issues will continue to fester until a permanent solution can be achieved. Unfortunately, it appears that the current administration in Israel has no intention of negotiating with either group, and that probably means status quo at best unless tensions flare up again.

 

Conclusion

 

These are just some of the issues that will bear watching in the coming year. It is not a complete list, and I sincerely hope that we have another bland, boring year. I don’t think that’s in the cards, though.

 

My main worry is for the US economy, since there are so many variables in play, and we are far too reliant on the goodwill of other nations to keep the current game going. We may very well get through to the 2008 elections before we see a major correction in the markets, but I’m not too hopeful of that. It’s not just that other nations keep from dumping their dollars on the open market; we also need them to keep buying more dollars. If they don’t, it will become harder and harder to keep the illusion of a healthy economy viable. And if the US economy corrects, the contagion will spread to other markets as well, thanks to globalization and the US Dollar’s status as the world’s reserve currency.

 

I don’t think of myself as being too much of a doomsayer. However, I also cannot ignore the situation at hand, and while it’s possible that 2007 will turn out to be another relatively placid year from a peak oil/financial crisis standpoint, there are enough potential flashpoints out there that we all need to pay attention to them, and be prepared for as many of the possible outcomes as we can.

 

 

OPEC: Peak Oil is Real

I just posted a news item at Groovy Green about the latest OPEC bulletin, in which the chairman of the Libyan NOC writes that peak oil is a real problem.

Check it out…

China: Biofuels Eating into Food Grain Stocks

Here’s another example of the growing issue that is the grains-as-food-or-fuel debate:

But worried over surging crop prices China is now clamping down on the use of corn and other edible grains for producing biofuel. While it wants to support the growth of alternative energy sources, Beijing says the issue of national food security should take precedence over the country’s green agenda.

For all of the good press China receives for being an economic powerhouse, they do have their fair share of problems, including growing difficulty in feeding the 1 billion-plus souls that inhabit it. There is already a good deal of internal turmoil in the country caused by several factors, including the growing divide between the rich cities and poor countryside, ethnic tensions in the Muslim regions of China, and growing dissatisfaction with the government’s hammerlock on human rights and political power. Food riots don’t need to be added to that mix.

It will be curious to see if China seeks to still be an important player in the biofuel market, or if they will simply use their US Dollars to purchase whatever gas and oil they need to keep their export machine humming along smoothly.

Stay tuned…

GAO: USA is Insolvent

This isn’t getting a whole lot of press, but Comptroller David Walker has more or less announced that the USA cannot pay it’s obligations at the current rate of taxation. In other words, while we many not be totally broke, we’re headed there. For example, when you include the ‘off-balance sheet’ appropriations the government has used to fund numerous projects in the last 6 years, the national debt currently stands at around $53 trillion (versus the official tally of $8 trillion), which is over 400% of the US GDP, and that’s not counting state, local or personal debt. Chris Martenson’s article does an excellent job of discussing what this means for all of us in the coming years. Hint: It’s not pretty.

People who are holding large amounts of dollars in a savings or money-market account are going to get punished through the mechanism of inflation if nothing else. If you have any tools or other items you are considering purchasing, I would encourage you to think about doing it soon, for this game can’t continue indefinitely. This is especially true for imported goods, which in the USA means more or less everything.

Sooner or later, the dollar will collapse. I think it’s inevitable at this point due to the horrible underlying economic situation the US is wallowing in. What do we do at that point? Re-monetize, of course. Get ready for the Amero, a Euro-clone which promises to be the bastard child of the US Dollar, Mexican Peso and Canadian Dollar if the CFR wonks get their way.

Is Peak Oil a Kill Shot?

Kevin at Cryptogon has an interesting post this week on whether peak oil is a ‘faith-based collapse theory.’ :

Stories like the one below, from the BBC, reinforce the nagging fear I have that Peak Oil just isn’t going to be the kill shot that many of us think it’s going to be.

His use of the term ‘kill shot’ gives us some insight into his personal viewpoint of how destructive crossing the peak will be. It appears Kevin expected (and maybe is still expecting) the post-peak slide to be nasty, quick, and very effective in bringing down the global infrastructure. A ‘kill shot’ ending would have war, die-off and an immediate drop in standards of living worldwide. This would explain perfectly his desire to get out of the USA and move to a remote part of New Zealand, where he is adapting his life to one of agriculture/permaculture and radical voluntary simplicity. If the system’s gonna go down that fast, then getting out early makes plenty of sense.

What if that doesn’t happen?

My personal feeling is that peak oil is more of a process versus an event, and as such will take a fairly long time to work out. In my view, it’s more of a ‘gut shot’ versus a ‘kill shot’ if you’ll excuse the firearms-related metaphors. The end result may very well be the same, but the time horizon is different. Instead of a quick unravelling of the system, I think we’ll see more of a slow and steady degredation of our current infrastructure, punctuated by major destructive events, many minor incidents, and lots of volatility as the various forces interact and cause temporary peaks and valleys in the availability and quality of the services we depend on.

I wonder if folks like Kevin would have altered their escape plans had they thought that the system would linger on for a decade or two. In a world of ‘clean, green fascism’, I’m not sure there’s any place that one could relocate to in order to totally get out from under the boot.