Saturday, May 31, 2008

Back in the USA

I'm back. It was a good trip to the UK. I had never been to Oxford and came away impressed with the city and what little I saw of the university and the museums. What a wonderful place.

Looks like there is lot's to discuss in the world. Once I'm caught up on email and done with my trip report, we'll delve back into things.

Thanks to all of you who continue to check in and follow along with the musings here at FutureJacked. Events continue to spiral towards some transition period that should prove to be memorable for generations to come.

Friday, May 23, 2008


Blogging will be sparse to none for the next week. I have to go to the U.K. on business. I'll be back the first week of June.

In the meantime, please check out these sites for news and views:

Have a safe week. Here's hoping all the positive trends we are seeing manage to produce tangible fruit - a peace between Israel and Syria, an accord between the JAM and the Iraqi "government," and real talks between the U.S. and Iran.

Wednesday, May 21, 2008

I Weep For My Country

Congressman Steve Kagen, WI-08?

The United States Congress. A place where great issues were once debated. Titans of politics strove to maintain and strengthen the greatest Republic the world had ever seen.

Now those hallowed halls are infested by brain-dead monkeys. We get the government we deserve and that frightens me no end.

House passes bill to sue OPEC over oil prices
By Tom Doggett
WASHINGTON (Reuters) - The House of Representatives overwhelmingly approved legislation on Tuesday allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices, but the White House threatened to veto the measure.

The bill would subject OPEC oil producers, including Saudi Arabia, Iran and Venezuela, to the same antitrust laws that U.S. companies must follow.

The measure passed in a 324-84 vote, a big enough margin to override a presidential veto...

Not one word on the mechanics of oil depletion. Or the Export Land model. Or the fact that OPEC is f*!@king based on the Texas Railroad Commission - which still exists. Or about how Congress has defunded a variety of alternative fuels research. Or about growth in demand from countries such as China and India.

Pandering of the lowest sort. Self-destructive, delusional lawmakers, guiding the Republic into a storm with no preparations.

I need a drink.

The Marrano Option and Resilient Communities

One theme of Catastrophic Abundance and of a variety of posts here at FutureJacked over the past year has been a discussion about new ways of organizing society at a base level. In times of transition and economic upheaval, there is an incentive for groups to shear off from the main body of society and try out new ways of organizing communities - whether on a macro scale in the form of secessionist movements, or on a more micro scale in the form of small groups working on new ways to live, survive and thrive. We've termed these latter potential new movements "networked tribes."
Big Thinkers like John Robb and Richard Heinberg call them "resilient communities," or "rhizome communities," (per Jeff Vail's extensively worked-out theory) and the ideas have been discussed in a variety of places where you wouldn't always expect it, like at Zenpundit. It shows that the meme is spreading from the fringes into thought leaders, people that are presenting the big visions to policy makers and hopefully shaping ideas for the future.
These types of communities and utopian outfits have been scattered all over the United States since the colonial era and continue to this day - often known as "intential communities." The last major upheaval and transition was the Great Depression, where large, top-down government programs helped fill this role of providing a mechanism to reorder society - through income redistribution, direct payments to the unemployed and aged and the host of other programs that fell under the "New Deal" and later "Fair Deal" and "Great Society" programs.
It is my opinion that a new wave of communities - intentional and otherwise - will be taking shape as the economic and social landscape shifts in an era of expensive energy, expensive food and restricted transportation options.

Step out of line, the Man come, and take you away...
I come not to praise these resilient communities, but to warn them.
Any time you set out to reorder society and try to do it from the fundamental building block - the local community - you better expect The Powers That Be will not be pleased. Now, this is not some rant or conspiracy theory - it's just that when you want to try out new structures and new ways of defining relationships, of raising children, of building a future that does not involve materialist consumerism, 9-5 jobs, worshipping at the temple of Hooters on the weekend and processing your children through the public school mills, then you best be ready for blowback. Remember, these communities are striking at the heart of big companies who want to sell you stuff, of lawmakers and judges who want to tell you to live according to the old model, priests and pastors who see you leading portions of "their" flock "astray," and are a subtle insult to the great majority of men and women in surrounding communities who will view your project with extreme skepticism and view it as a repudiation of their "right thinking" ways of behavior.
Some of these communities very well may be run by whack-jobs and will be doomed for failure. Others may be little more than cults. But it is my strong opinion that new ways of organizing local communities are going to arise in the face of Peak Oil and the coming downturn in social mood.
I want to avoid judgment here and just remind people of the challenges that will face these "resilient communities."
Case in point - the recent raid by Texas officials on the Yearning for Zion Ranch, which was run by the Fundamentalist Church of Jesus Christ of Latter Day Saints.
This is a community that holds many views that are incompatible with current mainstream thinking on how society should be organized. The focus has been on the practice of "spritiual marriage" involving underage girls. The raid was conducted by heavily armed SWAT teams and lurid headlines were the order of the day when the raid, inspired by a hoax caller, happened:
Now, I personally think a good number of this community's practices are creepy, but let's look at it strictly from the point of view of the government running a hit job against a budding "intentional community."
You had a community that was not, as far as has been reported, engaged in organized violent actions or fraud against surrounding communities. They had their spread of land on which they farmed, raised families and worshipped God in their own way. Taking down a bunch of pastoral communalists doesn't make for good headlines, so the raid needed to be framed "properly" by the Man - and it was, at first. The Info Ops against the FLDS has been well-orchestrated - underage girls forced into sexual slavery, a community cut off from the outside world, vague allegations of abuse against the boys swept up, the "class action" grab of the children and then the splitting up of the siblings to weaken them when isolated and questioned (and, for those of you who have never been interviewed by the cops, take it from me, a well-run "good cop, bad cop" session can get you close to confessing to a crime you never committed or to agreeing with their allegations, especially if you are young and impressionable) and the host of other nuggets that are in pretty much every story that has been written - that Warren Jeffs, the spiritual leader of the "sect" has been convicted of accesory to child rape.

The Questions Only Arise Post-Raid
This particluar "reslient community" node was smashed and scattered. This is a key point that future community builders need to realize. Should TPTB decide to target your community, it won't matter what facts may exist to muddy the black-and-white picture they are going to paint to the media and to the judicial branch.
Only after the community is crushed do the questions pop up - things like, if they were so isolated from the outside world, why did the women and children all have their cell phones confiscated? Cell phones? Cults demand that all information channels be routed through the guru... The 60 underage pregnant girls? Well, turns out many of them were adults... And to be honest, there were pregnant 14 year olds in my junior high back in the 1980's - but I guess it wasn't "organized" to knock them up, so it was okay...

The Fight Against Voldemort in Texas
As an example of the extreme lengths that TPTB will go to, witness another aspect of the Info War against the FLDS children, what I call the "Voldemort Protocol":
Sect children not to hear leader's name, Texas CPS says

By LISA SANDBERG and TERRI LANGFORD, of the Houston Chronicle and San Antonio Express-News
SAN ANGELO — Texas child welfare officials acknowledged today that the agency has isolated the children it removed from a polygamist community from any mention of the group's spiritual leader, who was convicted as an accomplice to rape last year for arranging the marriage of a 14-year-old girl.

The name of Warren Jeffs cannot be uttered, even by family members visiting their children in foster care at facilities around the state, a Child Protective Services attorney confirmed.

And Jeffs' picture cannot be circulated, even in religious literature, a CPS caseworker confirmed in court today during the first week of custody hearings for children taken from a Fundamentalist Church of Latter Day Saints' ranch in West Texas...
This reslient community leader has been brought down to the level of a character out of the Harry Potter books. I wonder how the children of Warren Jeffs are supposed to refer to their father? He Who Must Not Be Named?
Texas CPS has some interesting folks running this op.

Community Builders: Implement a Marrano Option
Any community builders out there need to be ready for this type of attack, especially in the early days of any transition crisis that creates the kind of vacuum in society where such communities have a chance to flourish on a large scale. When groups of people are ready to walk away from materialist consumerism, you can bet that the social and political landscape will be tense. Scapegoats will be sought and you can rest assured that communities that set themselves apart from the herd will get their fair share of abuse.
That's why I suggest that every resilient community out there have as part of their ideologic training of new members a "Marrano Option."
The Marranos were Jews who, under threat of persecution in Spain after the Alhambra Decree in 1492, pretended to convert to Christianity, but retained their faith in secret. These Marranos would publicly be devout Christians, but behind closed doors they retained their allegiance to the faith of their fathers.
A Marrano option would allow for a node of a resilient community to be crushed in public, but provide a support system for those members who are caught up in the maelstrom of persecution and give them hope that in the future, once the dust has settled, they could join a new or different node in the network of resilient communities being built up by their group.
In the example provided by the FLDS community at the YFZ Ranch, a Marrano Option would encourage them to say anything that Texas CPS wants to hear, to publicly adhere to whatever plan that Texas CPS forces them to live by and to even publicly disown the FLDS if it came to it. All the while, both moral and financial support would be forthcoming, whether through charities set up as fronts to funnel money to FLDS members, through legal defense funds, housing owned by secret FLDS members, etc.
The Marrano option, in extreme forms, will require the ability to hide financial assets, to communicate securely and secretly (PGP? Steganographic methods? Other?) and some way of building trust that a resilient community member has not been "turned." It will also require some sort of indoctrination that spells out to members that they may have to act on their own, without direct orders at times from what little hierarchy a resilient community would have. Whether a few leaders are taken out by a Hellfire missile strike or the community is broken up and scattered, some sort of indoctrination and "us versus them" schema will probably be necessary - and can even be quite motivational.
Many of the tools necessary to implement a Marrano Option for a networked tribe/resilient community/rhizome community already exist in intelligence agencies across the globe. Should be interesting to see what kinds of hybrids grow up during the coming years and decades.
For those of you who would change the world, one community at a time, be aware that you are playing with fire and have a backup plan in place to deal with the inevitable persecution.

Tuesday, May 20, 2008

This Choppy Plateau

We do our best here at FutureJacked to provide a unique look at the world of geopolitics, economics and war. One of the models we use to map the actions of 6 billion people across the globe is socionomics, a useful tool that allows you to get a feel for coming trends in government, markets and society - when you are correct in measuring the trend, whether it is towards a more net positive "social mood" or if the herding impulse is being driven by a more negative stream of thought.

At this point, we are still in a choppy transition period, in my opinion. The struggle between which mood will dominate the mass tastes in investments, politicians and war is fierce. Let's review each case and discuss some potential action items that could allow you to prepare yourself for either trend.

If you want more details and investment advice, take a look at the offerings from Elliott Wave International on the side bar - they have a huge number of free reports that can help you get a perspective on current events that you won't see anywhere else. You may not always agree with the conclusions (I certainly don't always), but you will have new data points to use to prepare yourself for an exciting future.

A Net Positive Social Mood - Climbing a Wall of Worry

I must first admit that I am biased in believing that the near-term and medium-term trends will be net negative. But I have to give the positive side its due - in the face of extremely negative fundamentals in the banking and finance sector, declining real estate values (in some parts of the U.S., quite severe declines), a cratering of various niche markets in the derivatives industry, and a variety of news items that could have been used as excuses for downturns in the markets and anger in the populace, we've watched the U.S. continue to weather an incredible storm and stay positive. The equity markets have held up well, the U.S. treasury markets are in good shape, the dollar has not melted down completely and there have been no riots in the streets over high gasoline prices or foreclosures.

While I am not convinced this trend is sustainable, I do think we will make it further into the summer than many bears expect with flat to rising equity markets (DJIA fluctuating between 12,500 and 13,500), strong prices for oil, natural gas, gold and silver. Housing will continue to deteriorate, but I think that the system will continue to function reasonably well for a few more months.

Action Items
  • Until a firm trend is in place in the major equity indices, I am still wary of committing precious money to the equity markets. If you must be invested, either really do your homework or find an ETF that throws off a good dividend and has a strong international presence. This is NOT trading advice and frankly, if the U.S. tanks, the world will go with us, so the international presence might not do you much good. Tread carefully here. Do your homework.
  • Deploy any intellectual capital you might have as quickly as possible. If you are sitting on a patent or other protected material, find a licensee or get that business plan written quickly and find funding. This era of ridiculously easy credit may be approaching a close and you might want to lock in some sort of up-front money soon. Again, not trading advice, just something to consider.
  • Network. Expand your circle of friends and contacts now, while a positive and open mood is still dominant or at least even with negativity. It's easier to build networks of acquaintances and frienships in a more open and optimistic environment.
  • If you don't have a Plan B drawn up for yourself and your family (in case of being fired, property taxes spiking, onerous legislation being passed that impacts your business) - do so. It's easier to scope out these scenarios when it is more of a "game" and its impersonal, not when you are out of a job with a stack of bills staring at you.
A Net Negative Mood - Sliding Down a Slope of Hope

The fundamentals, to me, look horrid. The one aspect that truly frightens me is the credit picture. We get all these great plans for bailing out house speculators, but where is the realization that even if the foreclosures are somehow contained future demand is incredibly weak and credit standards are tough and getting tougher? In a fractional reserve banking system, it's grow or die.

When a huge overhang of inventory on the market meets more restrictive lending standards, then that is going to crush house prices and the fallout will cause commercial real estate to follow, which in turn drags down the property taxes paid out to cities and counties, causes big-ticket spending to crater when fewer folks are splurging at Lowe's and Home Depot.

While it looks horrid to me, there is no mass revulsion yet to the current situation. Sure, we are seeing more bearish stories in the mainstream media outlets, but the actions that follow negative social mood are not firmly entrenched.

My guess is that social mood in the U.S. is something like 55% negative to 45% positive (I know that the recent consumer surveys show a bigger negative figure, but I am going off of equity prices that are still firm, a bond market that is still functioning and a leading candidate - Obama - that is running a campaign based on hope, not fear and anger).

Action Items
  • If you think that we are in the early stages of a negative wave of social mood, you best be battening down the hatches. Make sure you are very liquid and very safe in the assets you hold. If you are in cash, make sure your bank is safe.
  • Network. Same advice as in the positive mood action items. Get to know your neighbors and the local politicians. Go to city and county government meetings. Don't be an ass. Listen, be respectful, learn who the players are. When TSHTF, you never know when a local politico or cop who knows you and thinks you are a decent person might come in handy.
  • Be working a skill or skills useful in hard times. Things like scrap metal work, bicycle repair, pistol and rifle repair, electrical and plubming work, bankruptcy law, etc.
  • Watch for the coming populism in politics. If the markets crash in the fall this will have spillover effects in war (maybe we wind up bombing Iran?) and in domestic politics (xenophobic legislation, draconian legislation in areas of investments and real estate, stringent "national security" laws and restrictions on movements, etc.
  • Expect a lot more local and personal violence.
  • Dust off your Plan B and Plan C.

Again, even if we do enter this period of very negative social mood, this is not the end of the world. Downturns allow for the deadwood of delusional policies the grew up in the waning days of the boom to be cleared out. It allows a lot of people who were marginalized in the old system a chance to start over with new ground rules. Downturns wipe out debt loads and allow for the purchase of productive assets at bargain prices.

Even if all about you are fearful and angry, be positive and work to secure a base of friendships and assets that will pay off for you and yours in the coming decades. After this coming Collapse, I believe we will see one last great boom and if you are positioned correctly, you'll be ready to take advantage of it.

Monday, May 19, 2008

The $10,000 Dollar House

If you want an in-depth look into the troubles in real estate, please take some time out today and read Gary North's latest. Gary is a strong proponent of owning rental properties and real estate - when done right - and knows his stuff. Please pay special attention to the structural problems caused by the securitization of house loans:

The $10,000 Atlanta Houses
by Gary North
You read that right. You can buy a house in Atlanta for $10,000.

That's if you're a high roller. How about one for $5,900?

Whenever you see something like this, you should think to yourself: "This sounds crazy; so, the government has to be involved." This may be incorrect, but you will save a lot of time barking up wrong trees by starting with this assumption.

In this case, it's a conclusion, not just an assumption. I will get to this later on. But first...


There are a dozen houses listed by local real estate agents that you can buy for $10,000 per home. You can buy ten times as many if you are willing to pay $20,000.

How can this be? It is true that we are somewhere in the unwinding of a housing market that has suffered from mania. But this is more than unwinding...

Read it - it will probably be the best ten minutes you spend today.

Friday, May 16, 2008

A Rough Day in Canadian Nuclear History

We normally focus on economics, socionomics and geopolitics here - with a dash of nuclear power and nuclear proliferation postings thrown in for good measure. This is a niche story a little outside the normal area we cover, but I wanted to draw your attention to it, plus it hits close to home for me since I play in the radioisotope production sandbox (down in the U.S., not up in Canada).

Canada pulls plug on costly medical reactor plan
By David Ljunggren
OTTAWA, May 16 (Reuters) - Canada said on Friday it was scrapping a nuclear reactor project designed to produce medical radioisotopes, a move that means half the world's supply will be made by a 50-year-old reactor that was temporarily shut down for safety reasons last year.

The Canadian Association of Nuclear Medicine said the announcement was "a major concern" and said Ottawa had to ensure it could access back-up supplies...

That is a huge blow to AECL. I am shocked that it came to this. They have had problems with the design (an issue with an unexpected positive reactivity coefficient popping up during operation - that's bad) but I had assumed that the engineers would have figured out the problem and proposed a fix. I was actually looking forward to reading the paper on it.

This is one of those things that probably won't affect you directly right now, but AECL is a major supplier to the North America radioisotope market via Nordion. They make a lot of Mo-99, which is the parent of Tc-99m, which is used, oh, about 35,000 times per week in the U.S. and the Canadians are the only supplier in North America. The U.S. hasn't had commercial production capability of Mo-99 for a decade and a half.

If you hear about more isotope supply issues, or if a terrorist attack causes the borders to get sealed, you can expect shortages of certain types of analysis and diagnosis procedures here in the U.S.

As usual, for those that like to follow along in the world of nuclear, I suggest checking out the following sites on a regular basis:

Thursday, May 15, 2008

When Smart People Say Dumb Things

Sometimes it takes a very smart person to stake out a position that is transparently stupid. Let's look at one from the world of science and one from the world of geopolitics.

I touch on this because we are entering an era of massive change. You need to always remember that the "experts" no longer have a real leg up on the rest of us when it comes to the macro scene. Yes, you should turn to specialists for medicine, law and financial markets, but when it comes to mapping out this new era of change, you are going to have to do the heavy mental lifting on your own - and often question the experts in their judgments.

Kaku - So Smart, Yet So Dumb
Michio Kaku, who is quite a brilliant theoretician, was recently interviewed by the Times of India. One of the topics was nuclear energy. Pardon me while I interject my comments:

TOI: Would you say nuclear energy is the future?
MK: Going for nuclear energy is like jumping from the frying pan into the fire. Fusion (based on hydrogen) is clean. But fission (based on uranium) generates tremendous waste. Nature uses fusion; for example, allowing the stars to recycle themselves cleanly. But nature does not use uranium, which is filthy.
Bullshit. Now, I'll be the first state that fusion is my future power of choice, but it is a long way from practical development. What really chaps me, though, is the completely uneducated manner in which he speaks of fission. Stating that "nature does not use fission" is a bald-faced lie and someone of his caliber would know that, if he weren't blinded by his ideology. Nature has run her own natural nuclear reactor in Africa in the past and we have the science to prove it. As for the "filth" generated by the fission process, that includes Mo-99, the parent isotope of Tc-99m, the world's most widely used imaging isotope, responsible for saving untold thousands of lives every year through diagnosis of deadly conditions. The fissions products also include a variety of other isotopes used to treat cancer, to use in industry and to leverage in basic research.

Nature only uses fusion, the power of the stars. Like nature, we should go on without uranium power. I can think of four reasons to avoid nuclear energy: 1. Risk of proliferation: the technology of commercial nuclear energy is identical to what is required to make an atomic bomb — there is no wall separating the two.

That's a lie. The technology behind making fuel pellets is vastly different than the technology behind highly-enriched uranium and plutonium metallurgy and the complex systems required to detonate a device. Yes, you can make highly-enriched uranium using the same technology used to enrich for fuel or reprocess plutonium using the technology used to make MOX fuel for plants - but that is where the similarities end. The weapons complex requires a vastly different system for processing the metals, shaping it and maintaining it over time. That's like saying you can't separate the technology for making cars that are responsible for tens of thousands of deaths in auto accidents each year from that used to make structural steel for buildings because they both use raw metal. It's a false analogy and someone as intelligent as Kaku would know that, which means he is doing it on purpose.

2. Vulnerability to accidents and meltdowns

He seems to forget that a fusion plant will be "vulnerable" to losing the plasma out of the containment structure, ending in disaster. While we must be vigilant and maintain high standards at nuclear power plants, the risks are tiny and the rewards are huge.

3. Radioactive waste disposal

Sigh. We can reprocess it, pull out the useful stuff and store the rest adequately. Hell, we have the know-how to build fast reactors to burn up the worst portions of the waste stream. He knows that too. Just because we have not decided to nut up and build out a rational nuclear energy structure in the U.S. and the West in general does not mean it can't be done.

and 4. To make any dent in global warming, we would have to increase our commitment to nuclear energy by 10 to 50 times, which is totally impractical. So there is no necessity to go nuclear. No nation is going to multiply reactors 10-50 times because of inherent dangers. The marketplace will eventually decide, especially since the cost of solar hydrogen will continue to go down.

Yes, we'd have to increase our committement to nuclear. Yes, it would require a fast reactor and fast breeder fleet to be built out because the current light water reactors would use up the vast majority of U-235 in five or six decades. We can do it. Will we is the question? And as for hydrogen - uh, where are you going to get it? You have to have a power source to crack it out of whatever molecule it is bound to. Nuclear is actually a prime candidate for that too.

Kaku obviously has an agenda, but it is still galling that a brilliant mind like his would willfully lie and omit facts in an effort to trash a technology he doesn't like.

McCain Issues His Light at the End of the Tunnel Pronouncement

And then we get this from a man who certainly should know better:

McCain: U.S. can win Iraq war within 4 years
MSNBC News Services
COLUMBUS, Ohio - Republican presidential candidate John McCain said on Thursday he believes the Iraq war can be won within four years, leaving a functioning democracy there and allowing most U.S. troops to come home...

...McCain, running in the November election to succeed Bush in 2009, described a scenario he thought he could achieve within his first four-year term.

"By January 2013, America has welcomed home most of the servicemen and women who have sacrificed terribly so that America might be secure in her freedom," McCain said in prepared remarks he was to deliver in Columbus, Ohio. "The Iraq war has been won. Iraq is a functioning democracy, although still suffering from the lingering effects of decades of tyranny and centuries of sectarian tension. Violence still occurs, but it is spasmodic and much reduced," McCain said...

I know this is an effort to give the American voting public some hope, but after all the "cakewalk" pronouncements from 2003, back when the war was "going to pay for itself" and with the rise of the intricate network of 4GW forces in Iraq, the influences of Iran and the fact that we are supporting Badr Brigade scum instead of nationalists like JAM, makes me think that turning Iraq into Southern California (another democracy that experiences spasmodic violence) will take longer than 4 years - and a Vietnam vet should know that. If our time in Iraq ever since "Mission Accomplished" has taught us anything, it should be that making confident statements about the near future of that country should be avoided.

Wednesday, May 14, 2008

Stratfor on Mexico

Stratfor has been following the violent stew that Mexico is becoming for many months now. Their most recent report picks up the theme we've been following here at FutureJacked - Mexico's slide towards a Hollow State. Right on the heels of Zenpundit on 4GW in Mexico, we get:

Mexico: On the Road to a Failed State?
May 13, 2008
...Mexico now faces a classic problem. Multiple, well-armed organized groups have emerged. They are fighting among themselves while simultaneously fighting the government. The groups are fueled by vast amounts of money earned via drug smuggling to the United States. The amount of money involved — estimated at some $40 billion a year — is sufficient to increase tension between these criminal groups and give them the resources to conduct wars against each other. It also provides them with resources to bribe and intimidate government officials. The resources they deploy in some ways are superior to the resources the government employs...

...A purely passive defense won’t work unless the economic cost of blockade is absorbed. The choices are a defensive posture to deal with the battle on American soil if it spills over, or an offensive posture to suppress the battle on the other side of the border. Bearing in mind that Mexico is not a small country and that counterinsurgency is not the United States’ strong suit, the latter is a dangerous game. But the first option isn’t likely to work either.

One way to deal with the problem would be ending the artificial price of drugs by legalizing them. This would rapidly lower the price of drugs and vastly reduce the money to be made in smuggling them. Nothing hurt the American cartels more than the repeal of Prohibition, and nothing helped them more than Prohibition itself. Nevertheless, from an objective point of view, drug legalization isn’t going to happen. There is no visible political coalition of substantial size advocating this solution. Therefore, U.S. drug policy will continue to raise the price of drugs artificially, effective interdiction will be impossible, and the Mexican cartels will prosper and make war on each other and on the Mexican state...

I have no good answers, other than the one answer that would never be implemented - legalization of drugs.

From my perspective, this isn't about Mexico getting a little more violent or losing some Spring Break business because of the ongoing turmoil. This is about the potential for several decades of intense violence throughout Mexico and, due to the ties of gang loyalty, kinship and huge amounts of drug money to be won, this violence will spill over into the United States. This will take the form of increased street battles between gangs, hollowing out of local and potentially even state governments as vast sums of money are used to bribe officials (when a local sherrif's deputy is faced with a choice to either take a huge sum of cash as a bribe or be shot, I can give you the statistically likely outcome of said choice) and who knows what other kinds of ugly blowback?

For you property owners in what is currently the American Southwest, you might take note...

Monday, May 12, 2008

Expect More of This...

Expect a lot of this in the future, until the reality of flat or declining petroleum production finally penetrates through the thick fog of delusion that envelopes current political discourse in the U.S.

Saudi smile likely for Bush on oil plea, not more
by By Tabassum Zakaria , Reuters
...During his last visit to Saudi Arabia in January, Bush called on OPEC to increase production, but the plea fell on deaf ears, and oil prices have since jumped more than $30 to a record $126 a barrel.

He was expected to again urge that OPEC increase production. But analysts say the request would be largely symbolic to show the American public that he was trying to do something about high oil prices, rather than based on any expectation that it would lead to action by Saudi Arabia, the world's largest oil exporter, and OPEC, which is next scheduled to meet to decide oil output policy in September.

"I can't see that it will work this time, it didn't work the first time," said Robert Ebel, senior adviser on energy at the Center for Strategic and International Studies.

What is the president likely to come away with? "Just smiles and a handshake, that's about it," Ebel said...

How long before even the smiles and the handshake disappear?

Friday, May 9, 2008

Countertrend Thinking on Oil

I invite you to consider the possibility that a significant drop in petroleum prices may be headed our way.

I've mentioned before that the FutureJacked working thesis on how Peak Oil will play out expects that this current spike in prices will lead to demand destruction and coincide with a severe recession, which also reduces demand. Combined with significant new fields coming onstream, we could see several years of reduced prices as production outstrips demand, with any supply shocks due to infrastructure problems or war providing temporary price spikes which will continue to come down.

This would, in my opinion, lead to the Peak Oil meme suffering a severe setback as folks focus on just scraping by and reorganizing how large portions of society provides for its food, shelter and jobs. The next big upswing in the world economy will be where we finally face the true meaning of Peak Oil, as an economy primed to roar from the ashes crashes into a resource constraint exacerbated by the fact that if we DO see a severe recession, a lot of "alternative energy" programs are going to starve from lack of funding.

First, I suggest you read Oil: One Last Head-Fake?, an analysis by the formidable Charles Hugh Smith. Be sure to make it to the final paragraphs of the analysis and check out his chart, which explains succinctly what I believe will play out.

Second, I would also suggest you check out a three-part series of videos and analysis from Elliott Wave International entitled Why Oil Prices Change. This is obviously based on their specific form of analysis, but a lot of their work on the oil market, while counterintuitive, has held up.

In the interests of full disclosure, I am partnered with Elliott Wave, as is obvious from the site. I do get a small credit for anyone who buys a service after clicking through, but that is not the reason for providing all the links - I don't make much from EWI. I do regard their analysis as important and think everyone with an interest in trying to model coming events in markets, society and politics can benefit from the massive amounts of free information provided by EWI.

Zenpundit on 4GW in Mexico

A crime-scene technician inspects the car in which police Capt. Saul Peña López was slain Tuesday in Ciudad Juarez. He was the 15th officer slain in the city since the beginning of the year. (Fort Worth Star-Telegram)

A short and to-the-point post from Zenpundit on the continuing troubles down Mexico-way.

Taking the War to the Mexican State, 4GW Style
May 9th, 2008
Mexico’s equivalent to an acting FBI director was assassinated earlier on Thursday, most likely by Zetas or similarly skilled team of hitmen working for one of several of Mexico’s crime cartels currently being pressured by recently dispatched Mexican Army troops.

Reminiscient of attacks on the Italian state during the 1970’s and 1980’s by leftist Red Brigades and Mafia, the drug cartels of Mexico are hobbled neither by antiquated Marxist ideology nor old-time, rustic, crime family traditions. They are adaptive, professional, transnational in outlook and far better equipped than state police forces on either side of the border. Mexico’s corrupt political elite by contrast, cannot be bothered to restrain their greed enough to properly pay, train and arm the very security forces that defend their primacy.

Zenpundit is spot on, in my opinion, especially when he mentions the fact that the forces acting to hollow out the Mexican state are not self-blinded by ideology. They are after power and money. They are highly trained, well armed and well funded.

Friends, this spiral of violence really matters for the variety of reasons that we've discussed in Aztlan Rising? and The Bazaar of Violence, Open for Business in Mexico, not to mention the potential follow-on effects of Mexico transitioning from an oil exporter to an oil importer in PEMEX Numbers (by the way - the numbers we looked at in that post have only gotten worse).

Hezbollah, Lebanon and Israel

Lebanese soldiers take position as pro-government loyalists burn tyres and set up barricades on the main highway leading to southern Lebanon in the Jiyeh area south of Beirut, May 8, 2008 (Reuters)

It's gotten ugly in Lebanon:

Hezbollah impose control on Beirut
By Tom Perry

BEIRUT (Reuters) - Lebanon's Iranian-backed Hezbollah took control of the Muslim part of Beirut on Friday, tightening its grip on the city in a major blow to the U.S.-backed government.

Security sources said at least 11 people had been killed and 30 wounded in three days of battles between pro-government gunmen and fighters loyal to Hezbollah, a Shi'ite political movement with a powerful guerrilla army...

...Backed by the Shi'ite Amal group, Hezbollah fighters have been handing control of the offices to the army -- which is trying to play a neutral role in the crisis. A security source said Hezbollah and its allies were in control all of the mainly Muslim half of Beirut after pro-government gunmen laid down their weapons in their last bastion...

Rough times for the Lebanese. Quite a power struggle going on there. With Syria talking peace with Israel and with the Western-backed Siniora government being more aggressive recently Hezbollah has got to be nervous.

And you know they are worried about an Israeli attack while they are distracted with this offensive in Beirut. Nasrallah will be walking a fine line in the coming weeks.

Thursday, May 8, 2008

Georgia, Russia, Abkhazia and the Fallout from Kosovo

I'm swamped today and don't have time for a more in-depth analysis, but it looks like Georgia is going to pay the price for the support the U.S. and Europe gave Kosovo in seceding from Serbia:

Russian military threatens to boost Georgia force
MOSCOW (Reuters) - Russia may further increase troop numbers in the Georgian breakaway region of Abkhazia if Tbilisi builds up its forces near the conflict zone, the Russian defense ministry said on Thursday.

A Georgian government minister said this week Abkhazia was "very close" to war following Russia's announcement it was sending in hundreds of extra peacekeeping troops to counter what it called Tbilisi's plans for an attack...

Check out A New 4GW Theater on the Horizon? for a previous discussion of a Russian-Georgian throwdown.

Again, my rationale for caring is the fact that the BTC pipeline goes through Georgia. If Russia wanted to make a strong point - and boost the value of her oil sales - she might "accidentally" drop a few bombs on the pipeline to shut it down for a few weeks. Just something to consider.

Wednesday, May 7, 2008

California DeathWatch (Part Four)

Update: It gets worse. Subprime disease breeding ground: pools

I've held off on comenting about the Golden State for a few months. It's been a time of house prices grinding lower, corporate bankruptcies and layoffs, more talk of loading up debt to fuel budget shortfalls - but no major discrete events have jumped off the screen or come in via email.
That has changed. As I've mentioned before, I regard California as a key leading trendsetter, and here is a trend I expect to see a lot more of later this year. I still think we make it through June without terrible trauma, but I would suggest you have an economic Plan B and Plan C in place before fall.

Vallejo, California City Officials Vote to File for Bankruptcy
By Michael B. Marois
May 7 (Bloomberg) -- Vallejo, California's city council voted to go into bankruptcy, saying the city doesn't have enough money to pay its bills after talks with labor unions failed to win salary concessions from fire fighters and police.

The city council's unanimous decision makes the San Francisco suburb the largest city in California ever to file for bankruptcy and the first local government in the state to seek protection from creditors because it ran out of money amid the worst housing slump in the U.S. in 26 years.

The city of 117,000 is facing ballooning labor costs and declining housing-related tax revenue that have left it near insolvency. The city expects a $16 million deficit for the coming fiscal year that starts July 1. Under bankruptcy protection, city services would keep running. It would freeze all creditor claims while officials devise a plan for emerging from bankruptcy...

It will be interesting to see how the city and, in my opinion more importantly the unions, handle the cuts in bankruptcy. This could set a lot of trends for other cities in similar shape.

Tuesday, May 6, 2008

The Secession Meme Continues to Flourish

Image courtesy Strategic Forcasting, Inc.

Separatism is alive and well in Bolivia.

Bolivia: A Referendum and the Threat of Military Force
May 5, 2008
Bolivia’s Santa Cruz department passed a referendum May 4 that grants it the fundamental tools of independent statehood. The move leaves it up to Bolivian President Evo Morales to call the province’s bluff and decide whether to use military force to ensure Bolivia’s unity. If Morales decides to use force against the secessionist regions, he will risk destabilizing the country and may prompt neighboring countries to intervene.

The Bolivian department of Santa Cruz passed a declaration of autonomy by popular referendum May 4, with 85 percent of voters in support of the measure. Three other departments — Pando, Beni and Tarija — are expected to hold their own referendums in June. Designed to give Santa Cruz autonomy from the central government — and the policies of President Evo Morales, in particular — the referendum grants Santa Cruz the ability to sign treaties with foreign nations, form parliament, create a local police force and decide all matters related to land distribution...

Image courtesy Strategic Forcasting, Inc.

Notice how the separatist movement corresponds to fossil fuel deposits. This trend towards securing local resources at the expense of the larger political unit is classic negative-trend socionomics.

We should continue to look for these types of separatist ventures and/or coups in the future. For wealthy individuals and corporations, sponsoring secession movements through a variety of dummy fronts makes a lot of economic sense. Plus, there will be very real grievances held by local populations that could be used as an excuse for any coups or independence movements.

The FutureJacked short list for potential secession hot spots and the potential spoils to be gained, for those of you interested in funding or working to foment (via service in a mercenary company or an NGO used as a front agency):

Those are just three examples, in addition to Santa Cruz from Bolivia. If the world economy becomes as stressed as I expect it to this fall (I still think we'll have a reasonably stable late spring and early summer), this list will grow to include places you don't expect right now.

Monday, May 5, 2008

A Rose By Any Other Name...

Note to self. The world no longer experiences "food riots" - they are now to be termed "food demonstrations." Ahhh, the battle for control of the memes that are introduced into our minds is a fascinating thing to watch.

Mogadishu rocked by food demonstrations
By Abdi Sheikh and Abdi Mohamed

MOGADISHU (Reuters) - A young man was killed when thousands of Somalis protested in Mogadishu on Monday over food traders' refusal to take old currency notes blamed for stoking spiraling inflation, witnesses said.

A shopkeeper shot the man dead after dozens of demonstrators wielding clubs and stones broke into his store. Locals said police wounded a teenage boy while trying to disperse hundreds of angry residents...

Just remember, it's a demonstration, not a riot. Keep repeating until you believe it.

Rush on Oil

Chart from EIA Data

A few props to Rush Limbaugh before the mockery begins. His radio show helped get me fired up about, and engaged in, politics back in the 1990's. I actually believed that when the Repubs gained control of the organs of governance, that they would live up to the ideals of balanced budgets, small government, pulling back from being the World Cop, etc. Plus, how could I not have a soft spot in the heart for a boy from Southeast Missouri who made good?

The problem is, his act has grown stale as he has shifted from vigorous outsider and gadfly-to-the-powers-that-be to whiny lackey and lickspittle-to-the-powers-that-be.

Fool me once, shame on you. I won't get fooled again.

And now, Herr Limbaugh has decided to talk about Peak Oil (hat tip to Fabius Maximus for bringing his quotes to my attention):

The Four Horsemen of the Energy Apocalypse Caused This Oil Mess
Rush Limbaugh
...You have China and India growing rapidly, folks. The supply has to grow in proportion or these prices are going to keep rising. The only people getting what they want out of this are the environmentalist wackos. They are the only people happy about this. Have you seen these stories, these scaremongering, fear-oriented stories? Some people predicting $200 a barrel per oil. Somebody out there saying $10 a gallon gasoline. Now, let's not get carried away here and pile on the panic, but for heaven's sake, can we look at the real world? Not at the windmill wackos and how they would like us to see the real world. Let me give you some reality, and this is from Bloomberg: "Brazil may be pumping 'several million' barrels of crude daily by 2020, vaulting the nation into the ranks of the world's seven biggest producers." Several million barrels of crude daily by 2020. They're talking about pumping oil 12 years from now, folks. How can that be if we're running out? That stupid question that Bush got about we're reaching our peak, asinine. Absolute BS, undiluted, pure stinky BS...

Rush is funny. Not one of the Four Horsemen he talks about is named "geology."

Herr Limbaugh talks about oil as if he's never heard of the concept of "depletion rate" or has ignored the fact that Cantarell is doing just what Texas did after her Peak - declining and declining at a prodigious rate.

(Easy exercise for you FutureJacked readers who have not already done this - go to this link at the Energy Information Administration, click on the "Download Series History" tab next to the MS Excel icon, then choose the tab "Data 1", then select columns A and B from 1920 to the most recent montly data point and graph it as a scatterplot - that is Peak Oil. Real simple. Too simple for Rush.)

This is going to be bad, bad, bad, folks. Like we talked about in Catastrophic Abundance, the transition crisis we face is going to be made far worse than it needs to be due to the cognitive dissonance faced by the population of wealthy western countries. The vast majority of men and women in Europe and North America have their mental "software" coded in such a way as to view as "normal" this amazing period of cheap and ridiculously abundant energy - a period of history that is now ending.

Imagine the conspiracy theories and ugly populist politicians that are going to flourish in an environment where people can't view as "normal" the hard choices and changes we are going to have to endure in the coming decade. The new normal is going to be so far outside the processing ability of their mental software that I am not sure how they are going to react. I just know that angry herds of men can do great damage when they feel "stabbed in the back..."

P.S. Just as an aside, the techno-optmist inside me is rooting for a solution to the "oil problem" and I have no doubts that alternatives will be found to petroleum - and probably alternatives that are far more sustainable and friendly to the earth - it's just that I am not convinced they can be put in place in any sort of time frame that is not two decades out, at least.

Saturday, May 3, 2008

Something to Ponder

UPDATE: Mexico to reduce oil exports to US in 2008

Deal with reality, or reality will deal with you.

The challenges we face are surmountable - with the appropriate sacrifices, hard work and a willingness to be flexible in the face of massive change in "business as usual." My worry is that we have too many systems (economic, political and social) that are not built to be flexible.

Thursday, May 1, 2008

Remain Calm, All Is Well (Part Twenty)

It's eerie out there. A lot of potentially bad news continues to bubble up, but reaction to it is muted at best. This fine, as far as I am concerned. The longer we can keep the current world system alive, the more time we have to prepare.

I still strongly believe a storm is coming, but here's hoping we have several months before it truly descends into something orders of magnitude beyond a few food riots and foreclosed homes.

What? Me Worry?

The secession meme continues to metastisize, just as socionomics would predict heading into a downturn. Hawai'i will be a flashpoint for this, as illustrated as a Group occupies Hawaii palace.

And, just what Iraq needs - more potential disarray is coming, because unless a deal is worked out, on May 13 about 70 percent of Iraq's mobile telephone network will cease to operate.

Russia and Georgia may got at it as Russia sends extra troops to Georgian rebel region. We've followed the Georgia-Russia story since last year (click here for a selection of posts). There is potential for real problems if Abkhazia and South Ossetia decide to secede (there's that darn separatists meme again). Violence that close to the BTC Pipeline will NOT be good for petroleum prices.

A trillion here, a trillion there and pretty soon, you are talking about the kind of money that will plunge the U.S. into a devastating economic correction that will result in a country vastly different than the one you live in today as a Washington think tank is warning that housing prices are falling at an accelerating level, destroying wealth at a pace that will cost the average homeowner $85,000 in lost wealth this year alone.

The U.S. debt situation grows worse by the day.

The Embers of the Coming Conflagration

And the above are just snapshots that indicate a world political and economic system fraught with tension.

I don't suggest obsessing over the various potential flashpoints - be it war with Iran (still unlikely in my opinion, the blowback would just be too terrible), massive government debt and deficit, a cratering housing and lending market and the collapsing cease-fire in Iraq between the JAM and U.S. forces.

Stay aware of the data, have potential scenarios in your head on how you would deal with some of the more likely of the unlikely scenarios, such as war with Iran constricting petroleum supplies or a failure of a major bank in the U.S. that causes a ripple effect leading to things like runs on ATMs and banks.

We are in the early innings of a world in tremendous flux. Remain aware, but don't despair.