The COINTELPARTY

Message to anyone who considers themselves a part of the "Tea Party Movement" or whatever it might be called: If you can't understand why it is bad to spend $100,000 to have Sarah Palin speak at your convention, then you shouldn't be in politics. Please, go back to watching football.

There is a reason there are only two parties in power in Washington. Both the democrats and the republicans may not be accomplishing anything useful relevant to carrying out their constitutional duties. But rest assured they are spending millions assessing their options for staying in power. That is the one and only thing they can do, competently.

If you want to understand Sarah Palin, here's an appropriate Animal Farm analogy: Sarah Palin is the duplicitous fool the Pigs hired to cross out the word "bad" and replace it with the word "better".

Sarah Palin, putting the "better" in "two legs better".

All Hail The Power of the Printing Press

The Federal Reserve is now buying debt that is not explicitly government backed. Which means they have uninhibited power to print money. This is why the market is rallying. The Fed and its controllers have unlimited power to rally the market to whatever level they wish. Right now they need to restore confidence so that they can actually keep their power. (Otherwise the Fed will likely lose the power it has usurped.) I dont know how many different ways I have to say it for it to sink in: the Federal Reserve System has taken complete control of our monetary system, and has usurped the power given only to Congress by the Constitution. The Fed can now levy taxes any way it wishes via its control of the money supply. They can buy all the toxic assets, creating trillions out of thin air. By doing this they can pump the markets to whatever level they wish, be it DOW 2000 or 20,000.

The only problem is that the Fed cannot print barrels of oil or tons of coal, iron, aluminum, etc. But that only matters to those on the bottom rung of the economic ladder. And those on the bottom rung cant comprehend this stuff so they will lay blame on whatever demon the media wishes. The economy is firmly in the grasp of the occult ruling class. It will not matter how poor most Americans become. The Fed cannot make everyone rich. But the Fed CAN inflate the money supply and blow bubbles and push up corporate earnings and thus push up the markets. What's good for Wall Street is not what is good for Main Street, but they know that and they really couldn't give a damn. There is no political opposition as long as about 10% of the population gets to share in the wealth at the expense of the other 90%. This has been the foundation of American economics for 30 years and there is no reason to think it will change now that they have even more power. It wont matter until perhaps 50 million Americans are living in tent cities.

It is absolutely possible for the DOW to be at 15,000 even when 50 million Americans are living in camps. I think most intelligent contrarions are having trouble understanding how that is possible.

Karl Denninger describes the process of uninhibited printing as "Bernanke inserting a gun into his mouth". No that is not what he is doing. He is sticking a gun in some random poor person's mouth, and pulling the trigger. And repeating it a million times. I dont know why people like him cant understand that there is a very clear difference. The bond market wont call Bernanke's bluff, because the bond market loves it whenever he caps off another "useless eater". The Fed has the power to bail out the whole damn bond market now, even if it has to buy all the junk bonds on planet earth. But Bernanke cannot print loaves of bread and heating oil. So you tell me who is getting the shaft here, and who has the financial means and motive to alter this trajectory? Simply put, this is what this system is designed to do: transfer wealth to the rich in such a sophisticated manner that only a small percentage of the population can comprehend it, and then rely on systemic bribery and corruption to pacify that small percentage. My god, it works beautifully doesnt it? Hell, the primary opposition (Limbaugh, Beck, etc) was cheerleading all this for years, and they will cheer it again once the republican buttcheek is back in power. (Republicheek?) Sometimes you have to marvel at the sheer precision; the almost machine-like systematic nature of our destruction.

Prosperity and Decline

In an Earth Day speech, President Barack Obama said “The choice we face is not between saving our environment and saving our economy – it’s a choice between prosperity and decline. We can remain the world’s leading importer of oil, or we can become the world’s leading exporter of clean energy."

I may be a big critic of Obama, but this is one place where we totally agree. And even though I spend most of my time attacking the president, I have also offered solutions. In fact I believe I have offered the most ambitious and realistic 20 year plan for completely eliminating all foreign oil imports. That plan is outlined in the 21st Century Interstate Highway Project. This is not some pie-in-the-sky idea that has no basis in reality. It is a highly scalable solution that does not rely on ANY technology that is not yet proven, such as battery packs that can deliver 200 miles of range at a reasonable cost. Yes, it will be at least 20 years before we have the battery technology to build vehicles that can travel 200 miles on a single charge, at a price that is reasonable.

Consider the fact that it would cost $250 billion just to build the batteries for 50 million cars, assuming that each battery costed $5000 apiece. But $5000 wont get you more than 50 miles today. And a decade from now we'll be lucky to get a 100 mile range out of a $5000 battery. That is why we still dont have any appreciable number of electric cars on the road. Who is going to spend $5000 on a battery when even at $4 a gallon, $5000 worth of gasoline will fuel the average Toyota Camry for about 4 years? The math just doesnt work. At $2 a gallon, $5000 will fuel the average Camry for nearly a decade. Who is going to spend that much on a battery when there is no guarantee that the thing will even last 10 years? Before you scoff at the thought of $2 gasoline being used in a longer term calculation, be aware of the fact that electricity prices rise and fall along with gasoline prices. And surely you are not forgetting that it is going to cost a couple grand in electricity bills to charge the battery over the course of many years? If gas prices double, it is a good bet that electricity prices are going to go up by at least 50%. And here's another thing to consider: the cost of a battery is an upfront capital cost. By using gasoline, you are able to put off paying the upfront capital cost. How much is that worth? Well figure instead of buying that battery for $5000, you take that money and put it in a bank making 4% interest. In one year that gives you $200. Over the course of a few years you get quite a bit of free gasoline out of the deal. This illustrates the huge advantage of not having to pay upfront capital costs. Now imagine having to take out a loan to buy that battery! So instead of getting free gasoline, you are now paying ungodly amounts of interest just for the honor of having that big expensive battery that still costs money to recharge.

See, you have to run through an awful lot of numbers and do a lot of math before commiting to a certain national policy. I'm not convinced that most greenies have done their homework. What I've outlined above I can assure you is merely scratching the surface of the hidden costs of trying to replace gasoline with a battery. But even if you could make the math work, you then have to answer additional questions, like this one: "what happens to the cost of raw materials if we try and build millions of batteries quickly?" They could end up costing more if we have lithium supply problems. That illustrates another huge set of unknown variables that prevents anyone with deep pockets from investing down this path. Yes there is a very clear reason why we are "addicted" to foreign oil. Anyone who thinks that we can magically wean ourselves off of black gold without some very serious effort is simply deluding themselves.

The only realistic option that I see is to build a modular mass transit grid for automobiles. The grid doesnt require many exotic raw materials. Just steel and concrete and lots of labor primarily. (These are things we have in ample supply.) Once the grid is built, it will only cost $1000 per battery. That enables a completely electric vehicle to cost LESS than its gasoline-fueled counterpart, once mass production begins. And make no mistake, money talks. A lower price tag is required to make the transition. And this is without any subsidies at all.

The last time we embarked on an ambitious national highway grid, time proved it to be a valuable investment. Only after 50 years is the basic design starting to become a serious liability. It is that basic design that needs to be updated. By focusing our engineering efforts onto the grid itself and how vehicles travel on it, we allow the individual vehicles to shrink in weight and complexity, and thus shrink in price. That in turn allows more people to own a vehicle. At any rate I dont want to hear anyone say that all I do is attack Obama and never offer solutions. This IS a workable solution. It wouldnt be easy, it would requires many millions of man hours in both engineering and manual labor, but it CAN be done. Building a bunch of windmills and hoping that we somehow magically invent the means to transfer that energy into an affordable battery is not a workable solution. Not to mention there is a whole host of issues involved in the logistics of building a massive number of windmills. Dont forget that those pretty spinny things also require massive resources to build. Why spend all those resources building things that require unproven technologies in order to bring a usable product to the end user? That is a recipe for disaster. We are masters of steel, concrete, and automation. The 21st Century Interstate Highway Project requires only these things in mass quantity.

With all that being said, it is now time to resume my slugging on Obama. There is a problem in the economy that Obama just doesnt recognize. Global crude oil production has been flat for the last 4 years. This year it will register a very significant decline. Given the massive decrease in investment in the oil sector, as well as the severe decline in natural gas rig count, it is safe to say that it will be a long time before energy production reaches 2008 levels. There is a good possibility that we may never see as much total energy produced as was produced last year. That is going to make recovery problematic to say the least. I've been arguing for ages now that it was our energy situation that led to the financial collapse... that's been beaten to death so I'm not even going to get into it now. What I want to focus on right now is the disastrous consequences of Obama's bailout + stimulus strategy.

When we go into a recession, what brings us out of it is a more efficient use of resources and capital. Ideally, what will happen is that all the irresponsible debtors are forced to default. Then the people who know how to manage money and capital are able acquire assets at depressed prices. Meanwhile the irresponsible borrowers are forced to live within their means. This includes a reduction in the consumption of resources. This then causes a reduction in the price of all forms of energy and energy-related commodities. Anyone not in debt is able to take advantage of those lower prices. They are then left with more money to invest how they see fit. Since these are the people who have proven themselves to be best at managing money, they are the ones who are able to allocate capital most efficiently. This is how the free market is able to bring an economy out of recession.

In the bailout & stimulus scenario, here is what happens. Those who have proven themselves unable to manage money and resources are bailed out, which means their bad behavior is given a subsidy. This is ideologically flawed for obvious reasons. However, there is another negative effect. Because they are bailed out, they are not forced to reduce their consumption of energy and all other commodities. This creates a greater demand for these commodities, preventing the price from falling. Since the prices do not fall as much as they should, the responsible people who know best how to manage resources are unable to acquire a larger share of those resources and capital. So they are unable to perform their natural function of increasing resource efficiency in an economy. So the economy is unable to recover. If this dynamic is allowed to continue, the result will be that resources will continue to be wasted, the economy will be unable to restructure itself through free market means. The government simply cannot perform this role effectively. Even Obama concedes that this is a fact, by saying that his stimulus plan is aimed at the private sector. He wants to create private sector jobs, not government jobs, etc. By making such statements he admits that the private sector is more efficient at allocating capital. But what he fails to understand is that the very act of stimulus + bailout prevents the private sector from being able to restructure itself more efficiently. Bad debts must be allowed to be purged from the system. Money needs to change hands. Capital needs to be transferred from debtors to creditors. Only then can the capital be put to more efficient use. And only then can we begin to make more efficient use of resources.

Obama thinks its a good idea to try and keep 5 million people in their homes when they would otherwise be foreclosed upon. By doing so, he is creating an unjustified demand for 5 million extra loads on the electric grid. And 5 million extra loads on the natural gas supply. And 5 million cars sitting in those driveways that all need fuel. It also creates an artificially elevated demand for housing. This means that prices for wood and concrete and drywall and a hundred other things are all artificially inflated. Dont forget that it takes massive amounts of energy to produce or procure ALL that stuff. All that extra energy demand raises energy prices for everyone, including those that did nothing wrong. Thus the economy is not able to recover as it otherwise would. It is this bailout mentality that has, over the course of many years, created artificially high prices and has prevented capital from flowing into hands that can make best use of it. There can only be one result of this type of command and control economic system. Look what happened to the Soviet Union and every other economy that tried to do things this way. It is not capitalism that brings about this type of systemic failure. It is the failure to allow capitalism to run its course. The cycle of bankruptcy must not be impeded. If every insolvent person, corporation, and government were to declare bankruptcy today, the end result would be a massive transfer of ownership to those who best know how to manage resources and capital. As long as the rule of law were upheld, this would result in the most productive allocation of capital.

Peak Oil and The Future of Alternative Energy

I think it is very possible that 10 years from now we could be in the middle of a Japanese-style longterm recession, and the media will never allow the public to understand that it was ultimately caused by lack of sufficient growth in energy supplies. Everyone will be busy hating the bankster pigmen. No one will understand that despite exponential increases in energy sector investment, oil production still collapsed. No one will understand, despite the abundant evidence indicating that the vast majority of oil exporters have passed their peak production, including Saudi Arabia. (Saudi Arabia peaked in 2005. Despite prices skyrocketing, they were not able to beat their 2005 numbers last year.)

The result of this clampdown of information (called the Energy Iron Triangle) will be that alternative energy will never reach the sort of demand that is required to drive the prices up to stimulate steady longterm investment and growth. Instead, the economy will simply continue to contract according to the scenarios laid out by Kunstler and others. It will be the Long Emergency, and nobody will even realize what caused it. It's already been going for 4+ years, and so few understand. There is little reason to believe that this will change. All public opinion is manufactured based on service of elite interests. It serves the elite to make everyone afraid of climate change, because they will get their global carbon tax scheme in place. Does it matter that peaking fossil energy means less carbon emissions in the future? Even if we waste no resources on scams such as carbon capture & sequesteration? Nope, of course not. They want their carbon taxes, and they will get them. The "tax on life" is one of the ultimate goals of the eugenicists running this planet.

Picking Apart the Policy Journal

I read the Economic Policy Journal regularly, and certainly am no fan of Obama. But something I read today really struck a nerve.

Check out this quote from Picking Apart The President

The economic crisis was not caused by energy (energy prices have collapsed), it wasn't caused by healthcare or education defects. This a slippery attempt to bring in pet projects that have nothing to do with the crisis.

The economic crisis was not caused by energy? Oh really. Tell me something genius, what do you expect to happen when gas costs $3 or $4 a gallon, and every household is required to pay $300-$600 a month MORE on energy than what they had budgeted when they first bought their home?

You can have your opinions, but the FACT remains that global crude oil production was 74 mbpd in 2005, and the average daily production for 2006-2008 has shown no measurable increase, despite an exponential increase in capital investment. This is just the cold hard data. Global crude oil production has peaked, and THAT is what has popped all the bubbles. The sheer amount of investment in the oil sector during 2005-2008 proves that the nascent credit crunch had nothing to do with the failure to increase oil production. I've covered this in detail in a previous post.

Credit was created predicated upon growth rates that were not sustainable. The reason this happened is because people like you DENIED the geological facts time and time and time again and again and again to the point where the ENTIRE financial system was deluged in misinformation as to the extent of our resource base. If oil production had kept increasing, then all these new homes and cars would not have constrained supplies, prices for energy would not have spiked, and the bubble would not have popped. Sure, the bubble would have popped eventually, as all bubbles do, but the fallout would have been much less severe. Indeed, the bubble would never have occured if so many people did not take an active interest in denying basic geological reality. I've written about this specific subject in more detail as well.

I find it amusing that a google search for

"robert wenzel" "peak oil"

yielded only 10 results, none of them meaningful. I find it incredibly amusing that people in "your circle" simply did not discuss peak oil, denied it outright or through omission, while at the same time you pretend like you know what caused this mess. Buddy, you dont have the first clue. Want to know what caused this mess? Go look in the mirror. If you denied peak oil, then perhaps its time you accept a little personal responsibility for what has happened. I wont hold my breath waiting for that...

I have been writing about the impending catastrophe for years precisely due to the fact that so many people have been so wrong about everything. We've always had fraud in the financial system. We've always had wall street parasites sucking off the broader economy. None of that has changed in the past 5 years, or in the past 50. The multiple layers of ignorance, arrogance, and pure stupidity is what always leads to collapse.

The Haircut-to-Oil Ratio

I wonder what the "haircut to oil" ratio was during the Great Depression. That is, how many haircuts could you buy for one barrel of oil? In the Great Depression, it had to be at least 100 haircuts for one barrel of oil. Perhaps more. Today, you can buy about 4.

I think that number explains more than anything exactly what's wrong with our economy. Haircuts havent changed since the Great Depression. Yet somehow the market has been manipulated into believing that one barrel of oil, capable of doing the work of hundreds of laborers for hours, is only worth 4 measely haircuts. One barrel of the substance to which we owe our entire civilization, is worth that little? That belief leads to a logical fault. This is proof that the market is completely broken, and collapse is inevitable. The market will be closer to reality once you can buy at least 20 haircuts for a barrel of oil. But 200 is an even more realistic figure.

The Appauling Pall of the Paul Call

Just yesterday, I heard a caller mention Ron Paul's name on the Laura Ingraham show. He was right in the middle of making an intelligent comment about the economy, and was well within mainstream conservative thought boundaries. Ron Paul is totally relevant in conservative circles, because he predicted this entire debacle and is a champion of true conservatism. You'd think real conservatives would be talking a lot about Ron Paul.

Can you guess what that slimy disgusting Laura Ingraham did? She cut him off and said we cant take any "Paul calls". What the hell is a Paul call? That is yet more proof of how horribly badly the so-called mainstream conservatives on talk radio are "compromised". Yet the listeners are not savvy enough to understand what is going on. It is obvious that conservatism has been hijacked by something goddawful (neoconservatism). But people cannot think abstractly enough to see it for what it is. The same exact thing is happening on the left. That is why you cannot trust ANY voice on mainstream talk radio (ie Clear Channel). Right or left, they are all controlled, all manipulated. And they all serve the same master, and that master wants to see America in ruins.