Monday, December 31, 2007

The Storm Approaches

We leave it as an exercise to the student to list the 99 ways this trend is going to play out (hat tip to Calculated Risk for the story):

Mortgage crisis takes a bite out of states and cities
By Stephanie Simon, Los Angeles Times Staff Writer
December 31, 2007

DENVER -- Dozens of states, counties and cities across the nation will enter the new year facing deep and unexpected budget holes as the widening mortgage crisis cuts sharply into tax revenue.

Elected officials, scrambling to adjust, are trimming money for public schools, reducing grants to help the homeless, even asking police to dry-clean their uniforms less often.

"We're talking about a pretty tough fiscal environment for the next four or five years," said Christopher W. Hoene, the director of policy and research for the National League of Cities. "Libraries, parks, after-school programs . . . you'll see lots of questions raised about cities' abilities to fund them."

Here's an extra credit research project for you. Go to your local library (while it is still open) and find copies of your city or town's budget from 1958. Review the line items covered by the budget (ignore the costs associated). Now compare it to the line items covered in the FY08 budget. Keep that in mind when the debates begin over "essential services" in your community.

Another expected outcome - you'll see parks, police, trash collection and fire departments get cut before you see things like "diversity coordinator" or the "cultural affairs office" cut. Remember the mindset of many politicos - you are a tax sheep to be sheared for the Common Good (as they define it). Agitating for cutting back on government intrusion or mission creep by government programs is heresy. The citizens must be shown how much it hurts to have government cut back, so the things that will be cut back are protection and services. I hope to be wrong for my cynicism here, but I am not banking on it.

Socionomic Trendspotting for 2008

As you know, we like to pull out Robert Prechter's theory of socionomics on occasion and use it as a lens through which to view current events and plan for the future. For those that are not familiar with this theory, click here for a brief overview.

It is just one of the tools in the FutureJacked toolkit, but an important one. The theory basically states that collective mood or herding can impose powerful trends on the behavior of markets and communities. On a basic level, the theory implies that humans are subject to some of the same types of behavior you see when ducks migrate south for the winter or when thousands of individual fish form huge schools as an aid to survival.

One way to view socionomic trends is to lay out two opposite poles of behavior and try to game out which "pole" the vast majority of people will tend towards during times of negative behavior versus times of positive behavior. One key way of measuring this is use market indices as gauges of real-time sentiment. If the trend is up, the investing public, the financial and political elites and even academics tend to herd in a more positive manner. So if we see DJIA above 12,000, we should remain towards the positive pole, if we see it drop substantially below 12,000, you can expect more behavior from the negative end of things. This is very simplistic, but if you want more, check out the Socionomics Institute for details.

With that in mind, assuming that the herding impulse, or collective mood, is the real driver of events (as we reviewed in a variety of scenarios in Catastrophic Abundance), then here are some trends we can look for in 2008:

The FutureJacked Top 5 Socionomic Trends to Watch in 2008

1. Discord wins out over Concord. The past year turned out to be full of far more positives than I would have expected going in. Financial markets held up in the face of incredibly negative news (the ongoing credit and derivatives debacle, the continuing collapse of real estate investment markets in many parts of the U.S., etc.) and that indicates that the mass mood was still quite positive overall. In response we saw what counts for progress in Iraq, an easing of tensions between the U.S. and Europe, the North Koreans making serious moves to disable their nuclear capability and credit markets that, while stressed, continued to function reasonably well in response to central bank actions.

I expect 2008 to mark the shift point from the setup to the payoff. If discord gains the upper hand, watch for renewed violence in Iraq (this time, U.S. forces versus Shia insurgents and allied with ex-Saddam and Sunni forces), an attack on Iran by the U.S. and/or Israel, a very bitter U.S. presidential race, intense partisan divisions in the U.S. federal government, a wave of protests and possibly violence as the home foreclosure tsunami gains in strength. Anything that requires cooperation to work well will be vulnerable.

2. Protectionism wins out over Openess. This will be an easy call, again assuming DJIA strongly below 12,000. Protectionism, tariffs, use of government powers to seize foreign-owned assets, etc. - some or all will rear their ugly heads this coming year. Right now, foreign investment in financial firms is hailed as free markets at work and as a good thing for American companies. In 2008, you can expect it to be viewed very, very differently. Foreign sovereign wealth funds that move in to buy U.S. assets will be characterized as looters and plunderers with no stake in the communities in which their assets operate. Trade barriers could go up and the results could make Smoot-Hawley look like the efforts of enlightened geniuses.

One thing to keep ticking in the back of you mind - the U.S. is still an agricultural powerhouse. If recent UN reports on food shortages and low grain stocks turn out to be correct, a disruption of trade could spell disaster for some countries that already live on the edge...

3. Inclusion loses out to Exclusion. We've been following the occasional appearance of the Secession bogeyman recently and, if my amateur take on socionomic theory turns out to be correct, you can expect to hear a lot more about regions wanting to secede in the coming year. We may see some counter-trend movement, such as Belarus being absorbed by Russia, but overall, I expect the trend to not be the friend of nation-states this year.

I won't speculate too much here - the idea of the viability of micro-states was reviewed in-depth in Catastrophic Abundance - but I will produce a list of places where I expect to hear more about secessionist movements.

Likely: Scotland, Quebec, Kosovo, portions of Nigeria, Northern Italy, the shattering of Iraq, Baluchi movements towards independence in both Pakistan and Iran.

Possible (but 2008 may be too early for much traction): the Lakota movement, Aztlan, coastal regions of China, the rupture of Spain, defacto independent gang provinces in Los Angeles, independence for Puerto Rico, Aceh agitation in Indonesia, the Transylvania region of Romania.

4. The tension grows between Magical Thinking and Practical Thinking. This is one area where my amateur analysis comes up at odds with the socionomic theory as worked out by Prechter, et al. Theory states that in times of negative social mood, magical thinking (interpreted by me as the neglect of reason and a belief that faith and confidence will result in positive, practical developments in the real world) trumps Practical Thinking (reason, science, free markets, etc.). I personally view this as a transition category. Practical Thinking most certainly drives economic expansion, new ideas and progress (hallmarks of positive social mood) - but I think that it has its roots in negative mood.

It is my interpretation that Magical Thinking actually kicks in during the 5th wave advance of the positive trend. During this long afternoon of progress, economic expansion and positive mood - societies become convinced that this is a permanent condition, that risk never has a downside and that what in earlier times would have been considered pathological conditions (rampant drug use - and I'm talking psych meds as well as dope, coke, etc., massive levels of debt, a focus on finance instead of agriculture or manufacturing, etc.) are now considered as benefits of progress. Debt is fine! Ignore the fact that incomes aren't growing quickly enough to service it. The hollowing out of manufacturing and the graying of farmers is fine! The food will always be there - it always has been. Don't build any new coal or nuclear plants - use natural gas - a rapidly depleting resource, because we like it better!

When a downtrend is firmly in place (after the 4th wave up has reversed itself and the 5th wave down of the main trend is recognized) then it is my interpretation that the fantasies and faith that could thrive in better times and linger in bad times are finally overturned. It sinks in that if individuals are to survive, then the blinders have to come off and the bullshit needs to be dispensed with. That said, the long, ugly slide can wreck education and social insitutions beyond recognition and, if the negative mood plunges deeply enough, the magical thinking can become institutionalized via laws and religious enforcement.

In 2008, expect more delusional thinking. Expect more "bailout" programs, more budget deficients, more willful ignorance on the part of political and economic elites to recognize that the U.S. can no longer live beyond her means. Even if we run up against a credit crisis that destroys the retail lending "industry" you can expect that we are still too early in the downturn for rational action.

5. Forebearance gets knee-capped by Anger. I interpret this as an intensely local response, but part of a larger trend. I regard this as the roots of vigilante and riot actions and the lubrication that will see society slide away from remarkable tolerance for individual misdeeds (and non-conformity to social "norms") to small-scale sanctions against everything from gangs (as well as the disintegration of truces between gangs) to the (perceived or real) lack of supervision of teenagers by parents, attacks on county tax officials and a general rise in violence.

I am seeing this one play out in my very own town. Columbia, Missouri, is generally regarded as an island of left-wing liberalism and touchy-feely citizenry. Throughout 2007, there have been an increasing number of home invasions and car-jackings. These incidents generally went off without a hitch for the criminals - until the last week, that is. In the past week we saw one intruder shot to death and two other incidents where crime victims fought back successfully. We'll see if this is a trend, or just a few outliers. I personally expect the lead to be thick in the air in 2008.

Sunday, December 30, 2007

A Thought Experiment

Check out a short "thought experiment" (my term, not John Robb's) that has been written up by the author of Brave New War, entitled USA, Inc.

And yes, that is me down in the comments section being taken to task (with reason) by Zenpundit for a bit of hyperbole I threw out in a comment. Check out Zen's take on Robb's post here.

Friday, December 28, 2007

The Top 10 Nuclear Stories for 2007

Here at FutureJacked, we try to keep an eye on developments in the world of nuclear science. My main focus is nuclear power – as I see it as the one developed source of power that can keep urban civilization functioning as fossil fuels decline. However, I do like to keep an occasional eye on nuclear weapons as well.

Dan Yurman over at Idaho Samizdat made a suggestion to blog on the top nuclear stories for 2007. I am taking up that suggestion and present to you my personal top ten stories in the world of nuclear science for 2007:

The FutureJacked Top Ten Nuclear Stories - 2007

10. The extended shut-down of the NRU at Chalk River in Canada. The National Research Universal Reactor, located at the Chalk River facility in Canada, is a major source of Mo-99 (and a wide variety of other radioisotopes for medical and industrial uses). Mo-99 is the parent of Tc-99m, which is the single most widely used medical isotope for imaging in the world. It was shut down for a planned maintenance outage at the end of 2007 and then remained shut down due to a dispute with the Canadian nuclear regulatory authorities over the state of emergency backup systems for power and pumps. While down, thousands of medical procedures were delayed and MDS Nordion, a huge player in the world of radiopharmaceuticals lost production capabilities for many of its primary products. The reactor has since come back online, but the shutdown showed the policy-makers in the U.S. who were paying attention that we are extremely vulnerable to a foreign source of supply for a critical medical product. The U.S. currently has zero capability to manufacture Mo-99. One wonders if that will change in light of recent events, and in the face of rising demand for critical medical isotopes. I am calling this a positive development as it might spur the U.S. to rouse herself from complacency and re-enter the market to produce Mo-99.

9. The potential deal between MHI and South Africa on a PBMR buildout. Dan Yurman blogged on this story and I think it could be a big one. If the Japanese can find a way to partner with South Africa to build Pebble Bed Reactors in a profitable manner, this could open up a huge wave of buildouts in the developing world. This is very promising as this design can’t melt down and can be used in a thorium-cycle (a “fertile” element that can be used to generate U-233 and vastly expand the resources available to fuel nuclear reactors). My optimism is tempered by the long history of “paper reactors” that look great in the design phase but never get built.

8. Anti-nuke predictions of stock price collapse for utilities planning on new builds is proven correct! This blog post by Eric McErlain over at NEI Nuclear Notes throws some cold water on the anti-nuke crowd’s assertion that their influence is so vast as to cause stock prices to crater at mention of the N-word…

7. The 4S design gets love. At the end of 2007, there has been an internet flurry about Toshiba’s 4S design. This was recently covered by FutureJacked here. I regard it as an important story because of my opinion that the developed world will be facing numerous challenges to the electric grid as well as to the transportation networks that keep coal-fired plants fueled. I believe that the 4S design is part of the solution to getting us through the decades it will take to transition from the Post-WWII world to what comes next.

6. Congress neuters GNEP. The Global Nuclear Energy Partnership is envisioned as a way to move the U.S. towards a (in my opinion) rational rethink of our fuel cycle policies. Basically, it means that we would begin to look once again at reprocessing and recycling the used fuel rods from nuclear power plants instead of sticking them in a hole in the ground. Congress has recently voted to cut funding in half for GNEP. Well, the Baby Boomers, who are in full bloom of their generational stranglehold over governmental institutions in the U.S., have never been known for their long-term thinking. When they die, it will be someone else’s problem is what this means.

5. Baby steps towards new nuclear plant construction. Utilities in the U.S. are slowly edging towards actually laying out money for construction of new plants (by that I mean the stuff involved in digging the big hole and filling it with a reactor – not the paperwork stuff). Down the road from me, Ameren has reserved forgings for a potential new build at the Callaway site (a US-EPR as part of the Unistar coalition) and manufacturers are ramping up in anticipation of new builds as well. That’s where the rubber meets the road – real money going towards real, tangible manufactured products. We aren’t there yet, but slowly, much like teen-age fumblings with a bra strap, utilities are trying to make something happen…

4. North Korea disabling Yongbyon. This could turn out to be a big, big win for the non-proliferation folks. If Ambassador Hill and the other parties are able to get the North Koreans to agree to a verifiable closure of Yongbyon and to account for the plutonium stockpiles, then that will be an outstanding precedent for future work towards disarmament.

3. Intellectual Ventures going nuclear. This one may look a little out of place, but let me provide some context. Intellectual Ventures is an “invention company” that buys up existing patents and develops their own through bright minds in-house. They then take the concepts, build businesses from them and spin them off. I noticed an Intellectual Ventures ad back in the middle of 2007 in Nuclear News. I’ve had some contact with headhunters out on prowl for nuke talent (I, unfortunately, am woefully underqualified at the moment to even sharpen pencils at a place like Intellectual Ventures, but some day, who knows?) for them and they seem very, very serious. There is a huge pile of money behind this firm and if they are making nuclear a focus of their attention, then we can expect some very big things in the future. My guess is that they will be looking at nuclear medicine applications, small-scale power (I refer again to the Toshiba 4S, above) and who knows what else they might come up with. To make a big paradigm shift you need talent, capital and reasonably free markets. Intellectual Ventures will be providing the first two. We’ll see if the regulators will kill the applications in the U.S.

2. The 6 COL’s filed with the U.S. NRC. In order to build a new nuclear plant, utilities must file for a “combined operating license” to build and then operate a new reactor. In 2007, we saw applications for 6 units at 4 sites in the U.S. – the first such applications in decades. Again, a COL just gives a utility the legal ability to build a new reactor, not an obligation to do so – but it is very pricey to file one of these things and, with many more COL applications due in 2008, the trend is our friend.

1. The ongoing credit crisis. I hate to end with a negative note, but I have to regard the ongoing (and growing) credit crisis (followed here, here and here, among many, many other places on the web) as a clear and present danger to the nuclear renaissance that my country so desperately needs. The plants that are to be built in the U.S. will cost around $5 billion each. That requires significant and stable funding. If the credit markets continue to deteriorate, then all of this planning will be for naught and the demand-side need for power will go unfulfilled because there won’t be enough credit available to extend to the utilities to build these plants. The recent passage of loan guarantees might help, but the financial markets could wind up being a bigger threat to the new plants that a bunch graying, feeble-minded anti-nuke hippies ever were.

Thursday, December 27, 2007

Pakistan Mourning

We've followed the slow disintegration of the Pakistani state througout 2007 (see Pakistan and the Coming Chaos, Pakistan Simmering, Rumblings, and Pakistan Burning). This slow disintegration may pick up speed with the latest tragedy to befall that troubled land.

With the death of Benazir Bhutto, we are now entering worst-case-scenario territory. A Pakistan that has devolved into Iraq-style globalguerrilla violence will create a huge node of instability, threatening India and Iran (not that I am losing sleep over that one) and pretty much guaranteeing that Afghanistan will not find stability for decades to come.

Pakistan's Bhutto killed in gun, bomb attack
By Augustine Anthony

RAWALPINDI, Pakistan (Reuters) - Pakistani opposition leader Benazir Bhutto was killed in a gun and bomb attack after a rally in the city of Rawalpindi on Thursday, her party said.

"She has been martyred," said party official Rehman Malik.

Bhutto, 54, died in hospital in Rawalpindi. Ary-One Television said she had been shot in the head. Police said a suicide bomber fired shots at Bhutto as she was leaving the rally venue in a park before blowing himself up...

UPDATE: As the potential fallout from this assassination sinks in, the one thing I fear is that this could be a defining moment in the slow boil of the coming breakdown of Pakistan. Much like the bombing of the Al-Askariya Mosque in 2006 plunged Iraq into a cauldron of sectarian-based slaughter (read John Robb's take on this effect here), what I fear is that the Bhutto assassination will spark a similar change in mindset among her potential supporters - a change from (relatively) peaceful opposition to the State to the beginnings of a 4GW conflict. Here's hoping I'm wrong.

UPDATE 2: The operative quote is now "God Save Pakistan" as the situation deteriorates:

Police Given Shoot To Kill Orders

(CNN) -- Angry protesters burned cars and shops into the night following the assassination Thursday of former Pakistani Prime Minister Benazir Bhutto.

Benazir Bhutto supporters in Peshawar burn items from the party that backs President Pervez Musharraf on Friday.

"It's all mayhem everywhere," Shehryar Ahmad, an investment banker in Karachi, told CNN by telephone Thursday night. "There's absolutely no order of any kind. No army on the streets. No curfew."

At least five people were killed in Karachi in the violence, GEO TV reported, and dozens more were wounded. Police in Khairpur fired on an angry mob, killing two people, the station reported, and two more people were killed in Larkana...

More on Peak Oil

I'm finally back from a much-needed break. More posts to come, including a year-end roundup of important trends, the top stories in nuclear power this year and another round of "silver linings" we can expect in a devolving world of networked tribes.

Until then, enjoy the latest from the Tom Whipple at the Falls Church News-Press:

The Peak Oil Crisis: Storm of the Century
by Tom Whipple

...There is no question that a lot of bad things are about to happen –- more or less simultaneously. If some “peaks” we can see looming ahead occur at the same time, they will reinforce each other leading to a far more serious situation than if they occurred decades apart where they could be dealt with separately. Simultaneous shortages of fuel and water in the same area would have serious consequences as large resources would have to be devoted to providing life-sustaining water supplies, putting additional pressure on oil supplies and prices. If the drought in the Southeastern U.S. continues much longer, Atlanta may be the first large city in the U.S. to experience this phenomenon.

Other peak situations cut both ways and may have unforeseen and unintended consequences. Food grain-based biofuels (peak oil vs. peak food) should in theory help to mitigate the peak oil situation but is contributing significantly to peak food and higher food prices. The amount of corn-based ethanol being produced today is making a minimal contribution to keeping down oil prices while resulting in much higher food prices. Increases in fuel and food prices arestarting to result in significant inflation which in turn is complicating efforts to deal with peak money...

Friday, December 21, 2007

More Small Nuclear

I've seen a whirlwind of speculation on several forums and news services on a small-scale nuclear reactor being offered by Toshiba. The 4S design (Super Safe, Small and Simple) has been kicked around by Toshiba for a number of years and I'm glad to see it finally get some play outside of the small world of nuclear engineers.

Check out this PowerPoint presentation that was put together to discuss the design and it's applications to isolated rural environments where they currently burn diesel to keep the lights and heat on. Basically, you would deliver the reactor core as a module, "plug" it into a small station that you built to house the secondary side for steam generation and the turbines for generating the electricity. Once it is in place, the core is designed to last ~30 years at around 30 MW(thermal) and 10 MW(electric). Constant heat for your turbines, 24/7, no refueling outages, no worries about diesel or coal deliveries - this is the kind of small-scale solution that could redeem the nuclear power industry in the coming years, especially if things get as chaotic as I fear.

In short, the 4S is based on a lot of proven fast reactor technology, specifically on work done in both Japan and the U.S. (notably the EBR-II facility). My only question is on how well the fuel cladding will hold up. I attended a talk by some Toshiba engineers at an ANS Conference in Washington, D.C. a couple of years ago where they were discussing this design and they seem confident that they have the materials issues worked out.

Here's hoping they succeed in getting a few deployed. I've discussed other ideas for decentralized nuclear power before and still believe that the near-term future of nuclear may well be networks of small plants like this that keep urban areas alive in an era of energy shortages.

Thursday, December 20, 2007

The Positives of GlobalGuerrilla Groups and the Coming 4GW Devolution

Many of the posts here at FutureJacked deal with concepts that I have stolen from the theories of Fourth-Generation Warfare and John Robb's GlobalGuerrillas I tend to combine these theories (the asymmetric war-fighting concepts of 4GW and the strength of primary loyalties in areas of black globalization, connectivity and will to fight of the GlobalGuerrillas thesis) within the framework of socionomics - which basically tries to find patterns in human behavior (be they stock markets, popular fashion trends or the urge to go to war), combine it with the projected effects of Peak Oil, and then I try to make assessments on the direction that financial markets and political developments are headed and plan my career, work and finances accordingly.

My reading of the above tea leaves has often led to some conclusions that seem quite "negative" or "pessimistic" or, as FutureJacked reader Elle put it:

I do appreciate your and others in depth and astute analysis of 4GW topics. The future you and other 4GW bloggers paint is quite dystopic and bleak, is there an upside to any of this? You know, ".... triumphs and absurdities of the human race"? If so I would humbly ask you to post them, especially triumphs so that I may better understand.

Silver Linings

I actually am quite optimistic that the changes in store for civilization, the economy and the fate of the United States in particular can be very beneficial - in the long term. What I worry about is the transition phase between the post World War II military-welfare state-industrial complex that has dominated U.S. and most Western (and Eastern) political, economic and social theory. Putting that aside for now, here are some trends that I think will emerge from the decline of the current system under the pressure of 4GW, black globalization and the various crises that will result:

  1. The death of delusional expectations. This may take decades to finally take hold, but in a world where the ability of governments to tax productive citizens, run massive deficits and deliver that money to large numbers of non-productive citizens will atrophy, the value of hard work, property rights, stable currency, etc. will be re-discovered. I don't mean to make this sound like a moral judgment on the Welfare State - it is what it is and frankly it has operated well enough for 60 years or so in the U.S. That said, it has resulted in perverse incentives (you only get a check if you are a member of an oppressed group, separate from core society, or you have a disorder of some sort - this list of which has grown over time and the effects on costs associated with systems that get government payouts such as health care and education) and has resulted in programs that grow ever-larger. A world where you are answerable to your community, your tribe or your family (as a globalguerrillas world would be) means that we won't see humans wasting as much of their talents on non-productive or negative pursuits. I hope. Plus, in a world that will experience disruptions in the supply of easy credit, safety and energy supplies, we will see a generation that truly appreciates the cost-benefit ratio of electricy generation, manufacturing and agriculture. The Baby Boomers have never known a time where electricity wasn't abundant and cheap, where transporation wasn't easy and where the economy only grows over time. The harder world we are moving into will allow a new generation to make decisions based on a more realistic frame of reference.
  2. A rediscovery of the importance of science. This may seem odd as we are living in a time where there are more engineers and scientists alive than ever before. That said, many of us are little more than computer clerks, moving data around in models created by geniuses. In the 4GW world we are entering, where the sharing of actionable data between groups is key to thriving (be it a better way to build an IED or a better way to rig a portable generator for a home), there should be an explosion of practical applications of the many theories of new technologies created during the Long Boom of the latter half of the 20th century. Results will matter to the wealthy individuals and private foundations that will step in to fund the applied research of this coming new world of ours.
  3. A return to sound money. This may seem odd, but I regard this as a key factor in the coming death of the omnipotent nation-state and the coming rise of networked tribes, city-states and micro-nations. The nation-state system has much of its legitimacy rooted in a continually rising standard of living. In recent years the credit activities needed to keep this debt-based system afloat has gotten out of control and central banks around the world are facing a credit implosion the likes of which have never been seen. This has been made possible by fiat money controlled by central banks and credit structures controlled by hedge funds and investment banks. In a world where trust in central institutions will be minimal, hard money and all the virtues inherent in it (and the problems as well) will return to prominence in financial transactions. Excessive debt will be frowned upon. Stable stores of value will command a premium. Initially nation-states will fight things like gold and silver money or private currencies, but in the end, assuming the globalguerrillas trend continues in force and smaller groups continue to undermine larger ones, then hard money will make a comeback and this will allow for long-term planning for property, agricultural and manufacturing developments as well as allow for the poor to slowly build up capital over time, instead of seeing their earnings vaporized by the acid of inflation.

This is just a partial list. I'll try to have a few more Silver Linings up before Christmas.

As usual, keep your eyes open, your powder dry and some cash on hand.

The Secession Meme Crops Up Again

Let's kick off today with another example of an event that socionomic theory calls for in times of increasingly negative social mood:

Lakota Indians Withdraw Treaties Signed With U.S. 150 Years Ago
Fox News

"We are no longer citizens of the United States of America and all those who live in the five-state area that encompasses our country are free to join us,'' long-time Indian rights activist Russell Means said.

A delegation of Lakota leaders has delivered a message to the State Department, and said they were unilaterally withdrawing from treaties they signed with the federal government of the U.S., some of them more than 150 years old.

The group also visited the Bolivian, Chilean, South African and Venezuelan embassies, and would continue on their diplomatic mission and take it overseas in the coming weeks and months.

Lakota country includes parts of the states of Nebraska, South Dakota, North Dakota, Montana and Wyoming...

...The Lakota relaunched their journey to freedom in 1974, when they drafted a declaration of continuing independence — an overt play on the title of the United States' Declaration of Independence from England...

Note that the last time this issue cropped up was 1974 - a period of intensely negative social mood that saw market turmoil, high inflation and political unrest in the U.S. Let's keep on eye on this one and see how it plays out.

Tuesday, December 18, 2007

Busy, Posting to Resume Soon!

I am working over ideas for several new posts and owe Elle a series of posts in reply to her excellent comments on "4GW Chameleon" from Sunday. However, I have a huge project that must get wrapped up this week, so posting will be spotty. Please check back in and we'll be back to FutureJacking soon.

The fact that you take time to read this blog is much appreciated, as are the comments and emails.

Sunday, December 16, 2007

The 4GW Chameleon

Q: How do you eat an elephant?
A: One bit at a time.

Q: How do you eat out the foundations of the nation-state system of governance?
A: One infiltrator at a time.

Straight from the Pages of Brave New War
This MSNBC story could have come straight from the pages of Brave New War as part of John Robb's Globalguerrillas thesis.

What is surprising to me is how long it took these 4GW operatives to figure out that the cost-benefit ratio for the "tatooed, intimidating look" versus "the quiet infiltrator look" was not in their favor. That said, maybe the smart ones figured it out long ago and are quietly running their black enterprises out of the media spotlight.

Or, maybe the tatooed, publicly intimidating look was a necessary phase for these 4GW entities to pass through. Maybe they had to build up enough street cred in the minds of the locals before they could go for a more straight look?

Quiet Competition for the State
Note the emphasized sentence below - another 4GW competitor for the state in the area of taxation. Makes one wonder how the productive class is going to respond. Will they turn to 4GW entities of their own - encrypted cyber transactions, Blackwater security guards, a return to older, guild-like operations?

Gangs ditch tattoos, go for college look
from the AP

Because [ex-gang member Ingrid Vicente] didn't look like a typical mara, she easily smuggled guns from El Salvador, earning about $650 a day. She also helped uneducated gang members figure out how much they could extort from a storekeeper without bankrupting him.

"These guys don't know what is possible," Vicente told The Associated Press. "They didn't even know how to drive a car or a motorcycle, so I showed them how to drive..."

Saturday, December 15, 2007

California DeathWatch (Part One)

It has been said that California is the trend-setter for the U.S. in many social and political movements. Working from that assumption, I'm instituting a California DeathWatch. California will be the testbed where the pathogenic mix of gangs, economic implosion due to debt overload, ethnic tensions (African American, Anglo, Hispanic, Asian) goes prime time in the U.S.

Generation after generation has come to expect an easy lifestyle in a service economy and ever-rising property values. Debt fueled this delusional lifestyle and the many good and bad things that went with it, such as the optimism to construct a vast social welfare structure that has turned from a lifeboat into an anchor tied around the throats of California citizens.

Watch how the governing elites handle the coming crisis - you'll get a preview of what will be instituted in the rest of the country, be it currency controls, debt defaults or restructuring, riots, a restructuring of property laws to deal with the coming wave of squatters settlements, etc.

I watch this from out in Fly-Over Country with great interest. Here it comes.

Schwarzenegger Will 'Declare Fiscal Emergency' In Weeks
NBC 11 - San Jose, San Francisco, Oakland

Gov. Arnold Schwarzenegger said Friday he will declare a "fiscal emergency" in January to give him and the Legislature more power to deal with the state's growing deficit.

Schwarzenegger made the announcement Friday after meeting with lawmakers and interest groups this week to tell them California's budget deficit is worse -- far worse -- than economists predicted just a few weeks ago. The shortfall is not $10 billion, but more than $14 billion -- a 40 percent jump that would put it in orbit with some of the state's worst fiscal crisis, those who have met with him said...

Thursday, December 13, 2007

The K-Wave

George Ure over at UrbanSurvival has a new post up describing the Kondratieff Wave. With his permission, I am reposting it below. For those interested in finding patterns in human behavior (be it war, finance, social trends, etc.), it is one more model to use, in addition to others such as socionomics.

From UrbanSurvival, December 13, 2007:

A Longwave Econ Primer

Grab the coffee, it's time for a quick review of the Kondratieff Wave and what it means, and why not only me, but several colleagues think that a lot of economist's assumptions about the Longwave are wrong.

First, let me give you the 'academically blessed' viewpoint, summed up well in this picture out of Wikipedia that gives an idea about how the Longwave is thought to look - a 48-62 year, nominally 54-56.8 year, depending on who you talk to) cycle.

The problem with the conventional Longwave is that it is assumed to be somehow mechanistic, and as a very wise colleague who I referred to in last night's update, myself, and the time monks as it turns out, agree, the 'accepted' interpretation of Kondratieff as a fixed-length cycle is likely wrong because it is rooted in the old paradigm of a mechanistic/reductionist world, and fails multiple reality checks.

The Wars
One telltale that 'things ain't right' for the mechanists of this wave theory is that by their interpretation, the deflationary/depression lows of 1933 (and then the secondary depression of 1937) should have happened with clock-like regularity some 56 years later. Plus or minus a couple.

By this reasoning, 1989 (or thereabouts) should have been a Kondratieff depression low. To be sure, a few colleagues from the old Longwave econ discussion group, hosted by the Center for a Sustainable Future at the University of Colorado have steadfastly held to this view, and to make their case, they point to 1987's mini-crash as being the functional equivalent of 1929, and conveniently for them, it occurred about 58-years after the '29 event.

However, there's a small cadre of independent-thinking researchers, including yours truly, who have held that the K-Wave is not mechanistic, and like all waves in Nature, will have a variable periodicity, based on environmental constraints.

A key highlight of the K-Wave is that there are Peak Wars and Trough Wars: When the K-Wave has decimated an economy, you get a war to spark recovery. Such was World War II - a trough war. At the other end of the spectrum, about halfway through a K-Wave, you get a Peak War. Yes, Vietnam was our most recent Peak War. Little wars happen, such as Gulf War I, but they have not been sufficiently large to spur the kind of infrastructure destruction required, and most importantly the repudiation of sufficient debt, to reset the Longwave cycle clock. You need something really, really big.

You might speculate, as I often have, that the bursting of the Internet Bubble in 2000 was the final blow-off top prior to a collapse into a Longwave abyss. So far, that's been a good general model. Trillions of debt were destroyed/repudiated, and interest rates have been in a general decline.

On a conspiratorial note, the occurrence of the Twin Tower attack seemed too perfectly timed from a Longwave standpoint: It gave government an opportunity with no economic discussion, to implement a massive public works program of comparable magnitude to the Civilian Conservation Corp of the 1930's and the Works Progress Administration.

From a policymaking standpoint, it could be argued that 9/11 although a terrible tragedy, has served to prevent a much broader collapse of the economy by starting a second war with Iraq and giving the Bush administration the equivalent of carte blanche to spend on the WOT - a money pit of gigantic size. Regrettably, there will be no heritage in terms of infrastructure enhancement like there was in the 1940's from CCC and WPA (did I mention the Rural Electrification Administration, too?).

No, this time we get depleted uranium and thousands of injured, but perhaps there's an agenda here to make healthcare the next 'big industry'. Speculation going to the idea that the capitalistic system needed to waste some significant portion of its output perhaps even 30% +, has been openly discussed since Leonard Lewin's satirical book (or is it?) the "Report from Iron Mountain on the accessibility and desirability of peace" (full text).

Three K-Wave Driver Options
As my learned colleague and I discussed in a couple of papers/reports in early 2001, not only is there a mathematical basis for a variable Longwave period, but as a consequence of malinvestment in the economy, you will see toward the end of a K-Wave expansion (just before the Bust), a huge increase in debt and financial abstractions. We called this mighty accumulation of debt immediately prior to a crash the Debtberg©.

While it's not nice to 'rub people's noses in it', I'd offer that our work in late 2000 and early 2001, prompted by the absolute crystal clarity of the Roaring Nineties being analogous to the Roaring Twenties, has been a 24 kt. thought tool to prepare for 'what's next' and upon which I've based all major long-term personal decisions.

Just as people flocked to the cities in the population shifts of the post automobile era from 1920 on, so too, I believe the reverse strategy will be best this time around, a return to a diversified rural setting where individual sustainability will be more achievable and certainly less energy intensive, but that's something I'm putting into the book I'm working on "13-Acres and Independence", and update of the classic 1930's work "5-Acres and Independence" applied to current times.

We have to ask ourselves a simple question: What has changed since the 1920's that could possibly change the length of the K-Wave?

The first possible event-driver, dealt with in purely mathematical terms by my learned colleague, is that due to fluctuations in interest rates during a Longwave cycle, there is an upper limit of about 84-years to any fiat-money runaway inflation. The accumulation of the long-term debt along the way constituted what we called the Debtberg and just as an iceberg rolls over when it gets top-heavy, we expect that what we're seeing now in financial market debt-saturation will be about as easy to stop as an iceberg going turtle. Can't be stopped, only slowed or ameliorated along the way.

The second possible Longwave driver is one that I personally favored (until yesterday, when Cliff at proposed a third which we'll get to in a second); it's based on the idea that maximum average lifetime length is the ultimate limit. It's when all the lessons of the recent economic past as conveniently wiped from living memory, as so the pathway is clear for repetition of the excesses that cause collapse.

A saeculum is "a length of time roughly equal to the potential lifetime of a person or the equivalent of the complete renewal of a human population." While there are people around today that carry with them the lessons of living through the Great Depression, their numbers dwindle daily as the Grim Reaper harvests 24/7/365. Evidence of how the 'living memory' is fading comes as I watch how my own kids now in their late 20's never ask my 92-year old mother about concepts like 'thrift'. They live in a plastic world.

The third possible driver of the Longwave was identified by my friend Cliff yesterday when he asked something to the effect "George, why do you insist on denominating everything in time or dollars? Capitalism is denominated in souls. It requires new participants all the time because lacking those, it is up against the edge of the Petri dish and that's its end. The reason we're at the bursting point now is that once we have gotten Indians in the Amazon to cut down their rain forests for consumption by the capitalistic system, then you know the end is near. Can you name a single large group of humans anywhere in the world who haven't been harnessed by runaway capitalism? Heck, India, Indonesia, anywhere you look, globalism has pushed us out to the edge of the Big Dish."

Truth and Consequences
At the end of the discussion only a few things are clear.
1. 1987 was not a big enough economic collapse to reset the debt accumulation/Debtberg sufficiently to reset the economic clock. Thus, the Great Reset is still ahead of us.

2. Even as the denial of the existence of the inevitability of the Longwave comes into focus, the financial establishment will continue to deny excess and events like yesterday's coordinated Central Bank money infusions to save capital markets will likely fail from viewed from the historical perspective. Runs on banks such as Northern Rock, and the truth of pension promises becoming undeliverable as recently occurred in Florida and as now happening in Japan by the millions, will continue to leak out. Not that it will matter and teenagers going forward won't be able to save for retirement in any meaningful way, and given the dicey condition of some funds, maybe there's little point. Elaine and I bought a ranch because it is in a small way, an investment in owning the means of production.

3. Whether the specific timing of the Longwave collapse is a function of compound debt, the average number of folks around with a memory and ethics forced on them by the last Depression, or as Cliff figures, maybe we're just running out of souls to feed 'the machine' is a bit like arguing about the color of the train coming down the tracks and about the smack you flat.

As the market heads for a lower open, hope springs in financial circles that bailouts can happen forever, that interest has outgrown it's 'risk of complete loss' dimension, and that an economic Eden has dawned.

Count me skeptical. The market today heads for a lower open. From a Longwave perspective, as the Baby Boomers come up on retirement, unless there is an at least equal amount of new money going into the market to hold up share prices as Boomers (and their proxy funds) withdraw money, lower prices seem inevitable, unless inflation is ratcheted up to maintain the appearance of high share prices. Certainly one way to do that would be to free up gobs of money to 'needy' investment firms and banks. Which sort of sounds familiar, like $100 billion, does it not? But that's only a firebreak says a UK paper. Sadly, the facts would seem to line up that way.

Make Your Voice Heard!

Wired Magazine's Danger Room is asking for you to vote for The Most Awesomely Bad Military Patch. Click on over and make your voice heard. Being a nuke, I have to say I am a fan of "Death Wears Bunny Slippers" but the medevac jockies run a close second...

Wednesday, December 12, 2007

Combating an Insurgency

Check out this video from Iraq. For those of us expecting violent problems to follow in the wake of economic problems, here's an example of how bad things can get and the tedious nature of COIN ops:

Monday, December 10, 2007

The Foundation of the Credit System Continues to Crumble

Uh oh...

From Crane Data, Publisher of Money Fund Intelligence
More Enhanced Cash Troubles: Columbia StratCash Halts Redemptions. Market rumors swirled Friday that the largest entrant in the "enhanced cash" space, Columbia's Strategic Cash had halted redemptions. Enhanced cash pools, or "3c-7" funds, are private placements available to only the largest qualified institutional investors. We've received no official word from Columbia yet, but multiple investors and sources tell Crane Data that redemptions have been frozen temporarily but may be made "in kind", and that the pool is beginning the process of winding down or liquidating. Over half of the pool, $21 billion, has been separated into a "StratCash 2" portfolio, perhaps signaling a very large "in kind" separation. Assets of the now 2 pools have not declined precipitously, contrary to some rumors. StratCash has been gradually declined from $40 billion to $33 billion over the past several weeks. Columbia parent Bank of America reportedly set aside $300 million to support the pool previously. As in Florida, we don't believe any investors have suffered losses to date, and the fund's NAVs have remained at $1.00 a share so far. StratCash becomes the latest enhanced cash product to retreat from the besieged sector. Federated returned investors' money in full from its small entrant last month, taking a $4.9 million loss, and GE Asset Management liquidated its GE Enhanced Cash at $0.96 cents on the dollar.

This is still limited to the Institutional Investors, but how long before someone decides to pass the pain along to the retail guys?

Saturday, December 8, 2007

Remain Calm, All Is Well (Part Nineteen)

The Mortgage Lender Implode-O-Meter just hit 200 imploded mortgage finance companies.

But don't worry, the problem is contained, there is no way that losing all that high-octane finance can cause a credit contraction and the bail-out of the liars, frauds and cheats who gamed the system to unsustainable levels will fix everything - but since everything is contained, it's okay anyway.

Friday, December 7, 2007

Decentralized Nuclear Power

A question haunting the back of my mind is - will the U.S. be able to build out enough nuclear and other non-fossil fuel sources of energy before Peak Oil throws the system of finance and logistics into complete turmoil? With standard nuclear power still facing major hurdles in cost and public acceptance (and because the Elliott Wave structure looks to be in its final days of advance), I fear the answer is no.

However, a reliable, decentralized series of nuclear reactors could be used to power everything from industrial sites to shale oil extraction facilities to small communities (or even large ones if done in series).

A new patent from Dr. Otis Peterson of Los Alamos National Laboratory shows us a way to do it. It would have zero moving parts, would generate heat in the mid-500 degree C range (ideal for steam generation) and could be encased and buried with zero maintenance (due to the characteristics of Uranium Hydride fuel).

This is the kind of thing I went into nuclear engineering for - an exciting idea that is workable and can be scaled up or down as needed. In a world that may be facing an unreliable grid and an ever-increasing ability of small groups to disrupt large operations, small-scale solutions like this reactor become much more important.

Hat tip to the blog Advanced Nanotechnology for posting a link to the LANL announcement. Read the take on the blog and pay special attention to the aspects of using Thorium to generate U-233 - it could be vastly expand the availability of fuel sources for nuclear power.

Like I said, I worry that the U.S. might not be able to hold its engineering and R&D infrastructure together long enough to take full advantages of ideas like this in the short run, but a small reactor that can be assembled in a factory, then buried (to prevent sabotage) and left for years on end could provide an outstanding stopgap source of heat for process steam and electricity generation - and it avoids the problems inherent in massive new plants that must rely on a stable grid.

Thursday, December 6, 2007

Head Trip

Now for a detour. One of the key requirements for the chaotic future I believe is upon us will be a flexible mind. The fact that most of us (yours truly included) don't come anywhere near to maximizing the capabilities inherent in our brains can be viewed as a positive challenge - we have this wonderful tool between our ears at all times. Perhaps we can find ways to tinker with it and learn to use it better and author Jeff Warren offers some (non drug-induced) ways to alter your states of consciousness for fun and potentially creative profit in:

The Head Trip: Adventures on the Wheel of Consciousness

Table of Contents


Here is an interview with Jeff, so you can get a feel for the work. He's maybe a bit flaky, but I have a soft spot in my brain for heretics and freethinkers...

Check out the book if you are so inclined. The subtext reminds me of some of Heinlein's fiction, stories like Stranger in a Strange Land, Gulf or Friday, stories spun by that ex-Navy engineer, describing visions of men and women who train their minds to do extraoridnary things.

This may seem to be a random aside from geopolitics, 4GW, finance, socionomics and history - but it ties back in a very serious way. Creative, disciplined thought is the driver of the trends we see around us and if we aren't training our minds to face the rough battlefields of the future (be they struggles in the realms of violence, finance or even basic survival) then we are doing a disservice to ourselves and to those who are counting on us to be aware and, when the time comes, to act fiercely, creatively and successfully.


A few odds and ends for you while I ponder the NIE on Iran and try to guess how long the equity markets can ignore the ongoing credit debacle and, more importantly, what that means to daily life before and after.

First off, Defense and the National Interest has moved to a blog format. I've updated the link on the blogroll and you can check them out here.

Second, check out Future Scanner - a very cool and potentially useful site for gathering details of trends that hopefully fit into whatever future we are weaving for ourselves today.

Third, on a more personal level, check out the recent news stories about medical isotope shortages in Canada. That is my day job, but I work at the largest nuclear reactor for medical isotope producer in the U.S., not at Chalk River. The particular isotope mentioned in the news article is not produced at my facility at the moment, but it does illustrate how critical the few reactors left operating can be to the medical system.

Tuesday, December 4, 2007

Iran WarWatch - Canceled?

I'll be the first to admit I am surprised by the new National Intelligence Estimate on Iran.

Iran has no nuke program, U.S. intel says
By Greg Miller, Los Angeles Times

WASHINGTON -- U.S. intelligence agencies have concluded that Iran halted its nuclear weapons program in 2003 and that the threat of international sanctions has worked in compelling the Islamic republic to back away from its pursuit of the bomb.These judgments were among the key findings of a long-awaited intelligence report in which U.S. spy agencies retreated from earlier assessments that were more hard-line in their view of Iran's nuclear ambitions and intentions.

The document, and the nuanced tone it strikes toward Iran, is likely to generate fierce new debate within the U.S. government, challenging the positions of officials, including Vice President Dick Cheney, who have urged taking a hard line against Tehran...

Could a rapproachment be in the works between the U.S. and Iran? That would be an enormous diplomatic coup on the part of the Bush 43 White House if they could pull off a "Nixon Goes to China" moment with Iran. Much to ponder here. This would be a very good thing if the U.S. could get an agreement in place with Iran prior to any economic downdraft - stabilizing the geopolitical picture now could pay big dividends in the future.

Monday, December 3, 2007


Here is your homework assignment - two thousand words describing the Black Swan that would erupt if PayPal has to "break the buck" on their money market fund - the fund that forms the backbone of their online payment system. Just in time for Christmas...

PayPal customers' cash exposed to illiquid assets
By Tim McLaughlin

NEW YORK (Reuters) - Illiquid assets in a portfolio investing the cash of eBay Inc (EBAY.O: Quote, Profile, Research) customers surged 39 percent in the third quarter, exposing them to a larger chunk of troubled corporate debt, U.S. regulatory filings show.

The money market fund of PayPal, eBay's online pay service, invests cash parked by Internet shoppers in a portfolio that holds $1.63 billion in illiquid assets, or 5.5 percent of total holdings, according to the filings. That's up from $1.17 billion, or 4.6 percent of holdings, in the second quarter.

Bonus points for those of you can describe which Circle of Hell the investment manager at PayPal will be plunged into once the lynch mob is done with him (or her)...

(In the interests of full disclosure, it must be noted that I have swept most of the cash that had been held in my PayPal account out a month ago, worrying about this very thing)

Sunday, December 2, 2007

Where Have All The Adults Gone?

We've touched on the psychology of denial in A Case For Optimism and Denial. We've also looked at the consequences of incompetent men and women not having the tools to recognize their shortcomings in a link posted in Incompetence.

Well, a bunch of Real Estate Agents down in Arizona have provided an absolutely stunning example of denial and incompetence reinforcing themselves in an event being held today called "The Day The Real Estate Market Turned".

I don't know what to say. I thought it was a spoof at first (hat tip to Housingpanic for the link - I figured it was one of Keith's jokes).

Here's an example of their "revolutionary" thinking:

"...Through the force of positive perception, the Law of Attraction, and with help from local and national media, we will collectively change Arizona Real Estate History as we kick off an industry revolution..."

And from the press release:

“Like all perception, and according to the Law of Attraction, Arizona residents will be enlightened by the positive energy created by the highly publicized symposium, and the market WILL begin to change. By saying it’s OK to buy real estate again, it’s OK to re-finance your home, it’s OK to become a first time homeowner….the exhale, relief, and then positive action taken by the residents of Arizona will reverberate nationwide. As a group, and with the media’s help, we can turn the industry around one person, one city, one county, one state at a time.

Not one word on correcting supply imbalances. Not one word about assessing the impact of unbelievably lax underwriting "standards" during the housing bubble. Not a word about exploiting cheap illegal labor by builders. Not a word about the ongoing credit crunch that is hammering lending in both Europe and the United States and its impact on future lending. Not a word about mortgage fraud. They are going to "think" their way out of this collossal nightmare unfolding before their very eyes.

This "thinking" is on the level of a small child, laying in bed, eyes clamped shut after a nightmare, repeating over and over "if I have my eyes closed the monster can't eat me!" Right now, as I am typing these words, there is a room full of people, ostensibly professionals, being told by a hired shill of the Magical Thinking Industry, that they can "create their own reality." It will work out for them about as well as it worked out for Bush 43 and his gaggle of reality creators inside the Beltway.

Just another aspect of socionomics in action. One of components of mood proposed by Prechter in The Wave Principle of Human Social Behavior was "practical thinking/magical thinking," described as:

"Practical thinking manifests itself in philosophic defenses of reason, self-providence, individualism, peacemaking and a reverence for science. Magical thinking manifests itself in philosophic attacks on reason, self-abnegation, collectivism, witch hunts, war-making an a reverence for religion."
(WP, page 229-230)

And what we have going on in Arizona is good old-fashioned backwoods religion at its most primitive and a hyperventilating attack on reason. They have their revival preacher (Nicholas Tutora, a "certified consultant") and their holy text (The Secret). They are going to miracle their asses out of a predicament that loose credit, bad underwriting and fraud landed them by "thinking positively."

Where have all the adults gone?