Global financial system implosion begins

[elbows]

I'm not sure if you are referring to me, or the political vacuum and practice of telling people what they want to hear and leaving it for the next lot, rather than what they need to hear and tackling it now. If the latter, I agree. If the former, I'm not sure what way of dealing with it you think I'm proposing - I don't really know how you "deal" with it, if that means making tomorrow look like yesterday for a person on welfare or in a loss making firm in a country with a trillion pounds of debt. I'm observing that things are going to run their course and there are going to be a lot of surprised, disappointed and probably quite angry people when the music stops

I was referring to the hideous way that people & entire communities were sacrificed and written off when we went through a period of industrial transition. Rapid and troubling change may be necessary or desirable sometimes, but if it must be done then there is more than a duty of care towards those who are affected. Leaving them to the marketplace and blaming them for their own plight makes me angry, not sure that you are doing that - my point is really directed at those who decided how to manage that transition.

Im very prepared to accept the probably realities of peak oil & friends, the scale and nature of the challenge, the sacrifices people will have to make, the anger and suffering that may occur. So its even more important to treat everyone with dignity, and to manage the transition in such a way that no matter how grim things may get at times, nobody is permanently written off and abandoned along the way.

 

[frogwoman]

It's like people saying that the mines closures were a good thing because of global warming and the environment ... Thatcher didnt give a shit about the environment and wanted to crush a union, the environmental stuff wasn't even used as justification at the time.

i do think peak oil is real btw, but like climate change it's certainly being used to justify a lot of bad stuff.

 

[elbows]

i do think peak oil is real btw, but like climate change it's certainly being used to justify a lot of bad stuff.

By whom? We arent at a stage where many of the people who have power to shape things are admitting peak oil is a looming reality, let alone using this to justify bad stuff. If it played a big role in the financial woe and the grim path that has been set for the spending in years ahead, they arent admitting it. It could go on as a large but uncredited driver of woe for years to come, or it could burst out into the mainstream narrative, its still far from clear.

Certainly it has great potential to be used to justify all sorts of things, because it demands a change in direction and change at a pace that will be, at minimum, deeply uncomfortable. But thus far this isnt being harnessed by many organised political groups, and on the fringes where it is acknowledged and fretted over it is often used as a strange source of hope, used to justify a change which is supposed to sound appealing, where the transition may suck but the end result will be good.

Personally I am at the stage where I will factor it heavily into my thinking about our options for the future, but a lot of the stuff I come up with as a result of this that may sound bad, is more along the lines of a warning about the probable realities than a justification. OK gotta be careful with the 'there is no alternative' stuff being used to justify all manner of brutal paths we might be pushed along, and no doubt all sorts of forces will try to make the best of the opportunity for themselves and their agenda. But its sort of an equal opportunity in that people of all almost all persuasions will be able to use it to justify their cause & solutions, and for all we know some good ones might win out, especially if the resource realities eliminate some of the stupid ones as unworkable and we no longer have the luxury of entertaining some of our worst excesses or most deluded and wasteful ideologies anymore.

 

[free spirit]

OK. Public employment as a % of the total labour force in the EU 17, 1980 to 2002. UK remains the highest in the EU. I won't debate the difference between being dependent on public money as a handout or in return for administrative labour - either way, its not making and selling stuff, which is what somebody has to do somewhere if you want to save up enough for your old age.

I'm not sure if you are referring to me, or the political vacuum and practice of telling people what they want to hear and leaving it for the next lot, rather than what they need to hear and tackling it now. If the latter, I agree. If the former, I'm not sure what way of dealing with it you think I'm proposing - I don't really know how you "deal" with it, if that means making tomorrow look like yesterday for a person on welfare or in a loss making firm in a country with a trillion pounds of debt. I'm observing that things are going to run their course and there are going to be a lot of surprised, disappointed and probably quite angry people when the music stops

that graph is as dodgy as they come, the giveaway being that the EU17 average line is actually pretty close to the UK line, yet 6 out of the 7 other countries shown on the graph are significantly below the average line, and the 7th is only marginally above the average line. The only logical conclusion to this being most or all of the other 9 countries not shown on the graph are above the EU average, with many of them presumably above the UK line, meaning that the graph has blatantly been deliberately manipulated to make it appear that the UK has the highest level, when actually it's just a bit above average.

Then there's the issue of the graph almost certainly not comparing like with like, as in employees of industries / sectors that in some countries are state owned and in others are privately owned will show up differently on those graphs, yet fundamentally are doing the same job in both scenarios, the only difference been that in one country a private company is making money from their labour, and in another the state is benefiting from it (in one way or another). That's why the UK graph line falls so dramatically through the 80's as Thatcher sold off one state owned industry after another, and the workers moved from public to private sector, but were still mostly doing the same job (other than the new army of door to door salespeople trying to persuade you to switch from one supplier to another and back again).

 

[free spirit]

Also, you're ignoring the unemployment rates in those countries, all but 2 of which had much higher unemployment rates than we did at the time that graph ends (although again, I doubt the statistics are directly comparable)

 

[Falcon]

So its even more important to treat everyone with dignity, and to manage the transition in such a way that no matter how grim things may get at times, nobody is permanently written off and abandoned along the way.

I agree.

i do think peak oil is real btw, but like climate change it's certainly being used to justify a lot of bad stuff.

My take is that there have been abuses and game playing on both sides. I'm not going to debate the proportions. Capital has exploited labour and socialised many of its costs, and the market mechanism can't recognise what it regards as the "externalities" of social equity. The welfare system has been exploited by shirkers seeking "the path of least resistance" through life, socialising their claims in a "victimless crime" which actually deprives genuine recipients.

Surplus has permitted us to respond by tolerating it. Financial collapse, commercial collapse and the collapse of globalism are going to throw millions out of work. We can't sustain the present welfare system or service the debt overhang from its 40 year existence, let alone deal with that. So peak oil forces a sorting out. To the shirkers, it will feel like "bad stuff". For the genuine, it is good stuff (in comparison to pretending welfare "business as usual" can endure).

 

[Falcon]

Chronic US budget deficits, compounding debt and unfunded liabilities suggest the US financial situation will not be remedied, wiping out military funding. Surplus world oil production could disappear entirely by 2012, and reach a 10 million barrel a day shortfall by 2015. Coalition military operations would become essential to protecting US national interests. According to this year's remarkably candid United States Joint Forces Command Joint Operating Environment report (PDF), anyway.

 

[elbows]

That is a very interesting document indeed - not a lot of unheard of ideas but nice to see them come from that source and be laid out in a clear way. Still its not supposed to be a completely accurate prediction, just some of the more likely possibilities that we can actually see coming, we dont know what other chains of events will pull the world in other directions.

The future of oil production seems to be one of the easier things to get a handle on, I think economic woe, energy demand and the responses to energy crisis are obviously far harder to guess.

Even if the US economic woes deepen, I doubt military funding will not be wiped out, it will be under pressure and they already rely on partners to help, but its hard to say quite how rapidly US dominance will decline. They dont actually need to remedy their financial woes if they can just maintain the dollars special place as the currency of world trade. Losing that status suddenly is one of the largest threats they face, but as the wealth of most other powerful nations is tied to the dollar, a slow unwinding may be more likely.

 

[elbows]

There are suggestions that a deal is close to completion between the US and China on raising the value of the Yuan:

http://money.cnn.com/2010/04/09/news/economy/yuan_dollar_revaluation/index.htm?hpt=T2

 

[Falcon]

The future of public debt: prospects and implications

This is the best attempt I've seen so far to quantify the magnitude of the problem: Cecchetti, The future of public debt: prospects and implications (PDF, Bank for International Settlements).

Abstract: Since the start of the financial crisis, industrial country public debt levels have increased dramatically. And they are set to continue rising for the foreseeable future. A number of countries face the prospect of large and rising future costs related to the ageing of their populations. In this paper, we examine what current fiscal policy and expected future age- related spending imply for the path of debt/GDP ratios over the next several decades. Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable. Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability.

Basically, most OECD indicators of public debt (although in themselves terrifying) are misleading underestimates as they fail to indicate (1) future debt values due to interest rates and negative fiscal balance and (2) the net present value of future age-related costs.

Interests rates are exceeding growth rates, meaning the size of public debt repayment has to increase even faster to avoid runaway debt growth. We have no means of making any public debt repayments without fundamental reform of the public sector (for example, debt is increasing £167 billion this year, but we are paying £677 billion on the Public Sector). The population is getting old very quickly, meaning age related costs are escalating. But the majority of existing, let alone future, age related costs are unfunded.

Most countries are therefore much further underwater than is acknowledged, and many of them have no way of avoiding the debt spiral. One of the most underwater is the UK. We currently have a 100% debt/GDP ratio - this is forecast to rise from between 300% and 500% by 2040, depending on the level of cuts.

We are heading for some fascinating reversals of politics. Private sector workers depend on the private sector for their pensions. This won't happen. We will need a massive reduction of public sector "entitlement" to safeguard some minimum standard for those currently employed by the private sector. We also have a tense intergenerational equity issue - those of us of working age will be working until we are 75, so that those today who retire at 55 can enjoy their leisure on the golf course. That will come to a swift end soon.

(The appendix on budget accounting and debt dynamics is instructive, if brutal).

If the real interest rate on debt is higher than real output growth, then the debt/GDP ratio increases, even if a government manages to match its primary expenditure with revenue. In this case, new debt needs to be issued simply to cover the interest payments on the outstanding stock of debt.26 As new debt is added, interest payments will increase even further, thus leading to the issuance of ever greater amounts of debt. Roughly speaking, when a government “indefinitely” issues new debt to pay interest on the stock of debt (and any additional non-funded expenditure), it is said to be running a Ponzi scheme, and its debt is set to grow without limit.

 

[Fedayn]

My take is that there have been abuses and game playing on both sides. I'm not going to debate the proportions. Capital has exploited labour and socialised many of its costs, and the market mechanism can't recognise what it regards as the "externalities" of social equity. The welfare system has been exploited by shirkers seeking "the path of least resistance" through life, socialising their claims in a "victimless crime" which actually deprives genuine recipients.

How does it 'deprive genuine recipients'? Are you trotting out the myth that 'non genuine' claims take money from those who need it? The hoary myth that somenone getting 'more than they deserve/are entitled to' stops others getting money?

 

[Falcon]

How does it 'deprive genuine recipients'? Are you trotting out the myth that 'non genuine' claims take money from those who need it? The hoary myth that somenone getting 'more than they deserve/are entitled to' stops others getting money?

Yup. When government revenue is less than government expenditure plus debt repayment, that is exactly what happens. That is exactly the current situation and, unavoidably, the future situation. In surplus, there is scope for debate - a government can spend as much of its surplus on non-genuine claimants as it wants, until that surplus is exhausted.

In deficit, there isn't.

 

[Fedayn]

Yup. When government revenue is less than government expenditure plus debt repayment, that is exactly what happens. That is exactly the current situation and, unavoidably, the future situation. In surplus, there is scope for debate - a government can spend as much of its surplus on non-genuine claimants as it wants, until that surplus is exhausted.

In deficit, there isn't.

The problem with that argument is the belief that money is 'ploughed back' at any poitn. It also ignored the fact that the amount of unclaimed money dwarfs the amount if overpayment whether administrative errors or fraud. Plus it completely, and firtuitously for those who use the argument, completely avoids the issued of evaded and avoided tax which utterly dwarfs the amount of benefit overpaid by fair means, foul or error.

 

[Falcon]

completely avoids the issued of evaded and avoided tax which utterly dwarfs the amount of benefit overpaid by fair means, foul or error.

As does your avoidance of the obvious fact that our debts dwarf---by orders of magnitude---any of the factors you mention, and are without prospect of repayment.

 

[Fedayn]

As does your avoidance of the obvious fact that our debts dwarf---by orders of magnitude---any of the factors you mention, and are without prospect of repayment.

I am not ignoring it, simply pointing out the fallacy of the argument used re welfare/benefit 'fraud'. I am more than aware, as a public sector worker and union rep, of the debt in front of us.

 

[Falcon]

I am not ignoring it, simply pointing out the fallacy of the argument used re welfare/benefit 'fraud'. I am more than aware, as a public sector worker and union rep, of the debt in front of us.

Well good. Then since every incremental pound spent on welfare adds one incremental pound plus handling costs to our national debt, you will understand that we now have to choose whom to give money and whom not to. A great starting place is to separate those who really need it from those who don't. It isn't all that complicated or radical a proposal.

 

[Fedayn]

Well good. Then since every incremental pound spent on welfare adds one incremental pound plus handling costs to our national debt, you will understand that we now have to choose whom to give money and whom not to. A great starting place is to separate those who really need it from those who don't. It isn't all that complicated or radical a proposal.

Well perhaps a good idea, as long as you at the same time get the tax from those who avoid/evade it, which would make a much much bigger dent in the deficit than overpaid benefit.
Yes, and I choose not to give it to the rich in more tax breaks and helping them evade/avoid tax, the Lord Ashcrofts of this world being a prime example.

 

[Falcon]

Yes, and I choose not to give it to the rich in more tax breaks and helping them evade/avoid tax, the Lord Ashcrofts of this world being a prime example.

Sorry, that's a given. We need to turn a few more stones now.

 

[Fedayn]

Sorry, that's a given. We need to turn a few more stones now.

So, how do you propose not giving benefit to the wrong people?

 

[Falcon]

Well obviously it will start with a wholesale redefinition of the scope and purpose of the welfare state system. That in the 40's was grounded in post war optimism and expectation based on the unconscious assumption of the automatic generation, accumulation and distribution of wealth derived from an expanding energy supply.

The new system must be grounded in realism and a conscious recognition of the unavoidable destruction and dissipation of wealth and rationing of resources. The old war on squalor, ignorance, want, idleness and disease will have to be made relevant: ignorance was never tackled, hunger will transform idleness into a self-correcting problem. Squalor, want and disease are inevitable and the new goals will seek to ration resources to preserve life as far as possible by addressing these.

The task of "not giving benefit to the wrong people" is therefore a lot simpler than at present - there will simply be insufficient resource to support the current fiction of the cheat's "victimless crime". You will either have malnutrition, or you won't. You will either be at risk of dying from the cold, or you will not. There won't be enough to address even basic needs, there will be no room to support the current toleration of the "victimless crime" and good old fashioned social outrage (a.k.a. vigilanteism) will take care of the parasites and scavengers.

You just look at post-collapse Soviet Union (where infant and geriatric mortality soared) - necessity forced it to get very practical, very quickly, and operate on the basis of triage.

 

[Idris2002]

The task of "not giving benefit to the wrong people" is therefore a lot simpler than at present - there will simply be insufficient resource to support the current fiction of the cheat's "victimless crime". You will either have malnutrition, or you won't. You will either be at risk of dying from the cold, or you will not. There won't be enough to address even basic needs, there will be no room to support the current toleration of the "victimless crime" and good old fashioned social outrage (a.k.a. vigilanteism) will take care of the parasites and scavengers.

.

Jesus christ, you're a cunt. The eliminationist urge is never far from the surface with cunts like you.

 

[Crispy]

I don't think he's saying that such a situation is desired, just that it's inevitable

 

[Idris2002]

I don't think he's saying that such a situation is desired, just that it's inevitable

Hence the use of neutral, non-emotive terms like 'parasites' and 'scroungers'.

 

[elbows]

Well allow me to seize this rare opportunity not to be seen as the gloomiest most fatalistic doom-monger in the room.

Necessity will dictate that various problems are tackled in different ways, but the detail of what is done is firmly up for grabs, and when imagining what will happen it is all too easy to make too many assumptions and our own opinions of humanity will no doubt come into play.

There are many different ways of rationing stuff, and many different ways to distribute the burden of change.

 

[elbows]

Hence the use of neutral, non-emotive terms like 'parasites' and 'scroungers'.

It may well be that one of the consolation prizes for coming to terms with worst-case peak oil theories is that you can imagine it wiping out things you dont like. Maybe some people are relishing the prospect, but its sometimes hard to know in any particular case whether its just a poor choice of words, saying what they think will happen rather than what they hope for, or a sign of an ugly ideology. In Falcons case Im getting the idea that I wont exactly be standing shoulder-to-shoulder with him come the height of the crisis, but hey its early days yet.

 

[Dr Jon]

It's going to be shite. My guess is that many people will choose (or be encouraged by government) to commit suicide rather than take their chances in a collapsing civilisation.

Quietus anyone?

 

[Falcon]

Jesus christ, you're a cunt. The eliminationist urge is never far from the surface with cunts like you.

I don't think he's saying that such a situation is desired, just that it's inevitable

Crispy gets it.

I'm not going to debate whether benefit fraud exists, or its magnitude. We now spend £100's millions per year trying to prevent the fraud £billions - there is not a lot of room for debate.

Those who do it are employing stealth to live off others. A parasite is "an organism that lives in another organism". A scrounger "obtains money at the expense or through the generosity of others, or by stealth". When I use those terms, I am not employing emotive language - I am employing language. Don't confuse the feelings elicited by the description of the activity with the feelings elicited by the activity itself.

My point is not whether it is right or wrong, or whether we should do anything about it. My point, as Crispy says, is that its days are over.

Your outburst does raise an interesting question, however.

The purpose of welfare money for most claimants at the moment is to make life more agreeable. (To head off tiresome proxy arguments, I believe that is a necessary and worthy goal in any civilised society with the means). Society currently has sufficient means to meet the needs of claimants and cover fraud. The welfare system is open, in the sense that a pound that goes to a parasite is replaced from surplus resource rather than from genuine claims. The worst outcome of not compensating for fraud would be to make life less agreeable for some.

In the situation to which we are heading, the purpose of welfare money for all claimants will be to preserve life. Society will lack the means to meet all claimants needs. The welfare system will be closed, in the sense that every pound going to a parasite is a pound not going to someone who needs it. The worst outcome of not eliminating parasitism will be life threatening for some.

I'm not arguing in this thread that we should eliminate parasitism, merely that circumstances will cause it to become eliminated. On the other hand, if I understand your brief post correctly, you would prefer if this behaviour were not eliminated, and that parasitism continue to be tolerated even though under conditions of scarcity that would result in the severe hardship of genuine claimants.

Question: which of us is a cunt?

 

[Falcon]

In Falcons case Im getting the idea that I wont exactly be standing shoulder-to-shoulder with him come the height of the crisis, but hey its early days yet.

Elbows, there are quite a few people lining up as candidates for being your shoulder mate.

There are the legions of the economically illiterate, unable to grasp at any meaningful level the difference between an income of £1.01 and expenditure of £1.00, and an income of £0.99 and an expenditure of £1.00. These are the people who will squander what few resources we have on borrowing more and more money from the Chinese to prop up the fiction of our social system for as long as possible until it fails catastrophically, and still never know what hit them.

There are the technology optimists, long on ideas and short on pragmatism, who haven't done the back of the envelope calculation to work out how many multiples of your country's surface area you need to power society with 2 Watts per square meter intermittent power output from windmills, but will love to squander our resources on science projects to discover it's "too many".

And of course, there is the BNP and its like - quiet, but gimlet-eyed and in the front row of many "transition town" movement meetings these days, with an entirely different conception of "transition". They absolutely love all the paralysis and confusion that struggling with "business as usual" is creating. Now is an excellent time to be brushing up on the activities of Hitler's brown shirts in 1930's Germany.

Compassion is not sentiment. Sentiment is lovely, but it creates vacuum. There are all sorts of people who would love to fill that vacuum. I happen to prefer to stand shoulder-to-shoulder with the kind of people you would want making good "triage" decisions in accident-and-emergency, not brownshirts, geeks, the intellectually or emotionally paralysed or political opportunists. Remain compassionate by (literally) all means, but don't let it disable your judgement.

 

[Blagsta]

I don't think he's saying that such a situation is desired, just that it's inevitable

His argument is not neutral.

 

[Crispy]

Yeah, I'm seeing that now