What Do the Commonwealth Club and the U.N. Have in Common? The Great Chris Martenson…

~~By InsightAnalytical-GRL

As you may or may not know, I’ve been a big fan of Chris Martenson, so much so that I’ve posted the link to his site under the economic links section to the right and have quoted him in in previous posts.  

Chris has put together “The Crash Course” which I blogged about last year (Saturday, July 11, 2009: One Year Anniversary of “Peak Oil Day” Makes it a MUST to Watch “The Crash Course”).  At that time, you could hear zip about some of the topics he has woven together.  Now, I’m beginning to see others mention things like “peak oil” and “sustainability” when I flip through the channels…rarely, but it’s a start.

Well, it seems like things have picked up a notch.  Last Thursday (January 28)  in Sonora, California, Chris spoke to 400 people and people had to be turned away. Tomorrow (February 2), Chris will be speaking at the U.N. on the topic “After Copenhagen: Understanding the Energy Trap for Policymakers.”  Along the way, Chris has lectured at colleges, meetings, been interviewed on smaller radio stations…but it seems the venues are getting to be more high profile.

For example, on January 26, Chris delivered a talk at the Commonwealth Club in San Francisco.  I thought I’d share some of it with you.

Big Ideas at the Commonwealth Club (Transcript)

Tonight I want to examine the obstacles that stand way of a full and lasting economic recovery and to illuminate the connection between economic growth and energy.

But before we delve into the details and explore the possibilities for alternative outcomes, let me share a little bit about myself and how this information has radically altered my life, and the life of my family.

Six years ago as a married, 42 year old professional with three young children, I lived in a suburban, five-bathroom house on the coast of Connecticut, had a secure position as a corporate Vice president with a very large company, and a twin-engine fishing boat in a slip.

I loved that boat.

Today I live in house that is less than half the size of my prior one, now located in a semi-rural location, I have a strong local community, and a kayak.

A small one.

Perhaps I could summarize my journey that way; I went from twin engines to a double paddle.

Yep, that about sums it up.

Now, why did I do that?

For the past 6 years I have been combining information and trends in the Economy, Energy and the Environment into a single comprehensive story.

Instead of delving deeply into any one of these subjects, I discovered that there’s immense value in looking across all three at once.

Instead of being like a blind man trying to describe one part of an elephant, I chose to be like a blind man examining the whole elephant.

Okay, this took me a few years, I’ll admit, it was a big elephant, but it was worth it.

This exploration altered my investments, my work, where I live, who I know, what I value and the things I choose to do.

The results of this exploration were put into video form which I made freely available to everyone on the internet about a year and a half ago.

It is called “The Crash Course” and has been viewed more than a million and half times and translated into numerous languages.

I have to say that I’ve made some changes as a result of watching “The Crash Course.”  The biggest is a mental change…a fierce desire to break away from “the system” as much as possible in terms of protecting my assets.  For example, I’m not listening to the financial crowd that, once again, is back to the old “buy and hold” mantra.  No, it’s time to take more control of my money and to that end, I’m in the midst of studying technical aspects of the market.  I want to make money, not get if siphoned off by handing over control to the “experts.”  I’ve also yanked money out of the “big banks” and it sits now in the local banks where I’ve known the folks who run them for years.

I’ve stored some food and started using a solar oven for some of my basic cooking.  The thing costs nothing to run and can purify water and dehydrate fruits as well as baking the most fantastic sweet potatoes you’ll ever taste!  I figure I save cooking gas that way and don’t heat up the kitchen and then have to run the A/C as much, either!

I keep up with my vegetable garden and have planted two more grape vines. I plan to plant a couple of more fruit trees.

In short, in my small way, I’m trying to be more self-sufficient!

Chris continues:

Here’s an example of how I connected the dots for the current economic crisis at a very high level.

While the entire narrative of this crisis is riddled with strange acronyms, unfathomable derivatives, and complicated regulatory lapses, my view is that these were just elements of the story.

The main plot line can be summed up in just three words; “Too Much Debt.”

The big picture view of our difficulties is nothing more complicated than the fact that from 2000 to 2008, eight short years, the total amount of debt in this country doubled.

You heard me right, it doubled.

Meanwhile no net jobs were created and median incomes actually went backwards.

When it comes to owing a debt your options are to either pay it back or default on it, and I don’t care if you are an individual, a family, a town, a state government or a corporation, the same basic rules apply.

As we all know, in order to pay your debts back you’ve got to have earnings and cash flow. If debts are growing but earnings are not, then sooner or later a debt crisis will result.

Which is exactly what happened, and was utterly predictable.

I’d love to take credit for having had a keen insight here but I really don’t consider this extraordinary.

It was common sense.

Common sense. Gee, how creative!

So, where are we?

A very large credit bubble developed right before our eyes and it was completely obvious to anyone who cared to see it for what it was.

My view is that we’ll be living with it for some time yet because I do not believe that it is possible to “solve” a crisis rooted in ‘too much debt’; by going deeper into debt.

And that is exactly what we are doing.

I think it’s like trying to cure an economic heart attack by feeding the patient a few more tubs of greasy debt.

So my assessment is that we’ll face an even bigger fiscal and maybe monetary crisis in the future.

We are compounding our mistakes.

But you know what? We’ve faced economic problems before as a nation and solved them, and if this were the only problem we faced, we’d solve this one as well.

However, even as we’re attempting to recover from our self-inflicted economic wounds several vital facts stand in the way of a full and lasting recovery.

Let’s discuss a few of those facts:

Fact #1: There are 70 million more people on the surface of the planet this year than last year.

Fact #2: Each of these new humans consumes some amount of resources such as food, oil, air, soil, water, copper, coal, or timber.

Fact #3: Someday, perhaps already, maybe a little later, the global flow rate of oil coming out of the ground will peak and then decline inexorably thereafter.

Fact #4: Every dollar in circulation was loaned into existence, with interest. We’re going to get back to this one in a minute.

Fact #5: During the industrial revolution, humans have consumed vastly more energy each decade. During the lifetime of a 22-year-old, humans will have burned more than half of all the oil ever consumed throughout history.

Fact #6: Oceanic fish stocks, ancient aquifers, and topsoil are all being depleted at unsustainable rates.

When I review these facts I come to this opinion – within our lifetime and that of our children, these disparate facts will coalesce into the greatest economic and physical challenge ever faced by our country, if not humanity.

Then, Chris takes you on an imaginary journey:

Let’s get back to those pesky facts.

Each one was tied to all the others by a single common feature.

In each case the thing being described was tied to exponential growth in some way.

Now I know that most of us aren’t accustomed to thinking about exponential growth, so before you start counting the ceiling tiles, let me see if I can bring the dynamic of exponential growth to life.

Suppose I had a magic eyedropper that could dispense a drop of water with a most unusual trait – this drop of water will double in size every minute – and I place a drop of water in your hand.

At first you’d just have a lonely drop of water sitting there, but after one minute it would double in size, and after six minutes you’d have a blob of water that could fill a thimble.

Do you have a sense of that growth?

Good. Let’s go to a Major League Baseball Park and start over.

To make this interesting, let’s assume that the park is water-tight, and that I’ve handcuffed you to the highest row of bleacher seats.

Now imagine that it’s tomorrow at twelve O’clock noon, you are manacled to a bleacher seat and, way down there, on the pitcher’s mound, you see me bend over to plop down a magic drop of water so small you could not possibly see it from where you are sitting, and it begins to double.

My question to you is, at what date and at what time would the park be completely filled? That is, how long do you have to escape from your handcuffs? Do you have days? Weeks? Months? Years?

The answer is this: in only 49 minutes the park is completely filled.

You have only 49 minutes to escape from your handcuffs.

Now let me ask you this, at what time do you suppose that the park is still 97% empty space (and how many of you will appreciate the seriousness of your predicament)?

The answer is that at 12:44 pm the park is still 97% unfilled. The first forty four minutes filled just three percent of the park, while the last five minutes filled the remaining ninety-seven percent.

It took from all of human history until 1960 to reach a population of three billion people; but only forty years to add the next three billion.

Forty four minutes for the first three percent, five minutes for the final ninety-seven percent.

And because we are surrounded by exponential growth we need to appreciate it.

For quite a while, everything seems just fine, but a few minutes later your park is overflowing.

MMM …do you feel wet yet?

The next section of the talk addresses our future path that exists if we don’t start making adjustments to our lives:

An energy crisis rooted in resource limits will quickly translate into an economic crisis unlike any other.

What follows next will be a disappointing string of associated crises starting with a food crisis, progressing through a profound fiscal crisis that could even result in a dollar collapse, before proceeding to a population crisis.

But you know what? If we choose, we can avoid that future.

Feeling overwhelmed?  Chris Martenson has decided our challenges should be met with a sense of optimism and adventure. But, there IS a sense of urgency, too.

In the past, with extremely abundant resources at hand, we had the luxury of making bad choices without really suffering any significant consequences.

But the stadium is now mostly filled, the water is rushing up the stairs, and our margin for error has shrunk considerably.

The longer we fiddle around the more our options shrink.

Today our wrong choices will be magnified many fold by virtue of where we are in our resource depletion curves.

And so will the good choices.

We must be intelligent and creative stewards of what remains.

The best news? I know we can do this.

We need our bright and shiny kids in the next generations to know that they’ve got an important role and that we’ve got their backs as they wrestle with the challenges now laid at their feet.

Change is not easy, but sometimes it is necessary and we find ourselves in a time of need.

How the future turns out is up to us. We have this responsibility at this time.

I don’t have all the answers and I can barely conceive of all the things that need to be done, let alone imagine their details.

But I do know that the first step begins with a proper understanding of the issues and that we are now in an era where it is the very largest picture that will serve us best.

There’s an elephant in the room, and we need to put our hands on it and describe it fully and accurately.

The alternative is to somehow miss seeing the next most predictable crisis in all of history coming towards us.

In closing, I am not all depressed by what I see coming, or exhausted by the thought of all the work laid out before us.

Truth be told, I am excited to be alive at this time – to be in the game when the entire trajectory of humanity may shift course.

You really can’t ask for more than that.

I have a proposal: Together, let’s create a world worth inheriting.

I again enthusiastically refer readers to ChrisMartenson.com. Check out the great community for the latest REAL news and the forums that discuss many of the ideas and suggestions that Chris has proposed.

And start taking control!  Every little bit each of us does is part of reinventing our world…

China Called “The Biggest Risk to the World Economy” But History Shows that War Can Always Straighten This Sort of Situation Out (Update 1X: China Missile = “No-Go Zone” for U.S.?)

~~By InsightAnalytical-GRL

We’ve be writing later about the strength of China, but lately there has been some talk rising about a possible bubble being created in China.  In the Telegraph (U.K.),  Ambrose Evans-Pritchard has written a piece which looks at what’s going on titled China has now become the biggest risk to the world economy.

This article shed a totally different light on the views of Larry Kudlow that I wrote about in my previous post, Larry Kudlow Has a Fit as Obama the “Declinist” Opens His Mouth in Japan; Says Obama is “Not His President”.

Evans-Pritchard argues that China is not going to take over as the growth engine of the world economy.  I’ve heard quite often that China cannot pull the world out of its economic troubles.  The stats that I’ve seen indicate that China, no matter how robust, simply is still too small an economy to accomplish this.

Evans-Pritchard has concluded that China’s policies” continue to play havoc with global trade and risk tipping the world into a second leg of the Great Recession.”

Why?  According to the piece, there’s plenty of overcapacity in China.  I saw a report the other day showing empty structures, built for basically no use.  The article explains:

“The inherent problems of the international economic system have not been fully addressed,” said China’s president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.

While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. “I’m more worried about deflation,” he said.

Paul Krugman is quoted in this piece and he explains that China’s policy to hold the value of the yuan down versus the dollar is basically “stealing American jobs” as it relies on cheap exports to stave off massive unemployment. And other Asian countries must do it, too.

Of course, our capitalists use the cheap labor in China and, as the author says, “then lobby Capitol Hill to prevent Congress doing anything about it. This is labour arbitrage.”

But, China doesn’t hold all the cards, although it seems that way.  Evans-Pritchard writes:

Washington can bring China to its knees at any time by shutting markets. There is no symmetry here. Any move by Beijing to liquidate its holdings of US Treasuries could be neutralized – in extremis – by capital controls. Well-armed sovereign states can do whatever they want.

So, what’s the situation in China?  Their much-heralded stimulus has been spent building up more capacity to ship more goods and they’ve been investing in property and stocks. There is a huge credit explosion and production is booming.  BUT, Evans-Pritchard reveals:

Once you know that Hunan authorities have torn down two miles of modern flyway so that they can soak up stimulus by building it again, or that the newly-built city of Ordos is sitting empty in Inner Mongolia, you know what must come next.

A crash, right??

The Chinese consumer is supposed to be the solution to all this overcapacity and oversupply, but it won’t happen overnight.  Meanwhile, China’s central bank is tightening and fewer loans are being issued.

Evans-Pritchard concludes:

The world economy is still skating on thin ice. The West is sated with debt, the East with plant. The crisis has been contained (or masked) by zero rates and a fiscal blast, trashing sovereign balance sheets. But the core problem remains. The Anglo-sphere and Club Med are tightening belts, yet Asia is not adding enough demand to compensate. It is adding supply.

My view is that markets are still in denial about the structural wreckage of the credit bubble. There are two more boils to lance: China’s investment bubble; and Europe’s banking cover-up. I fear that only then can we clear the rubble and, very slowly, start a fresh cycle.

In my earlier post, I included the quote by Obama that Kudlow ridiculed:

While he also talked of multilateral cooperation and human rights, he came to Asia to deliver the message that the rapidly growing export-driven economies can no longer count on the U.S. consumer to keep them afloat.

It seemed a bit arrogant, particularly because Obama hasn’t really been pushing China much:

As for Obama, during the presidential campaign Obama promised to “crack down on China” but during the primaries there was chatter: “But his commitment to that point of view was thrown into doubt during the primaries when a Canadian official said an Obama adviser had privately characterized his tough stance on the North American Free Trade Agreement as political posturing.” (As an example, see: U.S. to Impose Tariff on Tires From China, Wall Street Journal, September 12, 2009.  Detractors figure that “the tariff won’t result in more jobs. Tires will simply come in from other low-cost countries, they say, and U.S. manufacturers, keep making their cheaper tires in China.”) Of course, this is classic Obama…all that “get-tough” talk and “insisting” while we have to go “hat in hand” to China…more blowing smoke.

But Evans-Pritchard comments (above) about Washington’s ability to really shove are food for thought. To repeat, “Well-armed sovereign states can do whatever they want.”

Now, I’m not suggesting Barack Obama is going to start a “real” war with China.  I don’t even think a sane Repbulican would.  (Then again, the Chosen One may just be arrogant enough????)

But, what about an INSANE Republican or Democrat, for that matter, since the elite in Washington are all about the same?  George W. Bush and his oil buddies decided to mess around in Iraq and look what we’re stuck with.  (George and his father were too busy with their long-time ties to China, so Iraq filled the bill for George II.) Barack Obama is worrying about that pipeline in Afghanistan that’s attacked so often by the Taliban that it hasn’t even been able deliver any oil yet.

But, there are lots of INSANE Republicans and Democrats around and who can trust ANY of them?

And, there’s history which shows a link between trade and wars.

Over at the RGE Monitor, Kevin O’Rourke wrote in a 2008 piece  titled “Lessons of 1000 Years of Trade History“: (my bolding)

Even more fundamentally, the continuation of a broadly liberal international trading environment will require that the geopolitical system adapt to the rise of China, India and other ‘Third World’ giants.  In a historical context, this represents of course the restoration of the status quo ante, the end of a “Great Asymmetry” in international economic and political affairs caused by the Industrial Revolution, which was itself in large part a product of the interactions between early modern Europe and the rest of the world.  But that is not to say that such an adjustment will be easy.  The international system has historically done a pretty poor job of accommodating newcomers to the Great Power club. German unification and industrialisation during the late 19^th century led to tensions with Britain and France over colonial and armament policy, while Japan’s rise to regional prominence during the interwar period, and its search for secure sources of raw materials, ended in war against United States and its allies.  Both precedents are worrying, in that similar questions are posed today, both in terms of the rights of emerging nations to rival the established powers’ military capabilities (notably with regard to nuclear weapons), and in terms of the strategic importance to countries like China of ready access to oil supplies and other natural resources.

The last point should cause us to reflect that, Cobden and Montesquieu notwithstanding, interdependence and trade do not necessarily guarantee peace.  The world economy of the late 19^th century was extremely interdependent, to the point where Norman Angell famously felt able to pronounce, on the eve of World War I, that major conflict was now unthinkable.  Interdependence implies vulnerability, and vulnerability can lead to fear, with unpredictable consequences, as Anglo-German rivalry in the run-up to the Great War, and Japanese reactions to the Great Depression and Smoot-Hawley, both indicate.

Impermanence appears to be the most enduring feature of the human condition, and if there is one lesson which we can safely learn from history, it is that history has not ended.  Hopefully it will not repeat itself.

We know that Barack Obama knows nothing about history (in fact, dismissing the entire Viet Nam experience), and I’d bet that none of our future leaders will know it either. And, even if they DO, I doubt they’d actually pay any attention to any lessons to be learned.

***

UPDATE 1

Looks like China isn’t missing this military angle:

Related Story from Bloomberg News, November 17, 2009 (excerpt):

China’s New Missile May Create a ‘No-Go Zone’ for U.S. Fleet

China’s military is close to fielding the world’s first anti-ship ballistic missile, according to U.S. Navy intelligence.The missile, with a range of almost 900 miles (1,500 kilometers), would be fired from mobile, land-based launchers and is “specifically designed to defeat U.S. carrier strike groups,” the Office of Naval Intelligence reported.

Five of the U.S. Navy’s 11 carriers are based in the Pacific and operate freely in international waters near China. Their mission includes defending Taiwan should China seek to exercise by force its claim to the island democracy, which it considers a breakaway province.

The missile could turn this region into a “no-go zone” for U.S. carriers, said Andrew Krepinevich, president of the Center for Strategic and Budget Assessments in Washington. (MORE)