Political Will, or more the lack of it

David Cameron has recently talked down the recent house price rises as more people are identifying its bubble like nature. He has used the recent 2007 peak as guidance for normality. It seems a distant memory when Mr Cameron was taunting Gordon Brown regarding credit bubbles and debt issues. As stated in the article if we are currently only 15% off the 2007 peak in real terms then we will soon be in real terms back at the bubble price and everyone knows with historical hindsight how that turned out. The Government deficit and debt levels are worse than 2007 and the interest rates are far lower along with Quantitative Easing propping up asset prices. Its funny how politicians when out of power convey the image of responsibility but when they obtain power act in the same reckless manner as the predecessor. I agree with a recent article published on moneyweek, both the Bank of England and the Government have no political will to reign in all these shenanigans and the real cause behind rising house prices is monetary policy, as I detailed in my eye of the storm post.

Any centralised system is doomed to failure, lawful anarchy based on the non-aggression principle is the end game for society. Democracy was a substantial step forwards for human liberty but suffers from mob rule and therefore acts of third party aggression. David Cameron is acting rationally as any democratic leader does. He is using monetary policy to engineer an artificial boom in order to obtain as much of the mob rule to win next years election. There is no reason for the Prime Minister to worry about the fallout. Political will, to do the "right" thing, is an illusion. In reality it never even existed, its all about the majority mob rule. Many just pretend it does.

Hung Parliaments

The British people have spoken electing a hung parliament. Negotiations began. Speculation was rife. Media groups with 24 hour coverage. It was 36 years since the UK had the last hung parliament the same time we last entered a period of stagflation. This time a coalition government was the outcome, a marriage between the Conservatives and Liberals. Labours bubble has burst with the 'no more Tory boom and bust' happening on their watch, ending the Utopian mirage the general public believed the party had delivered them. Despite the election defeat the party is still in good condition for the next leader with a sizeable number of seats and share of the vote. I said that if we got a Conservative Government the UK was in trouble (and not under the conventional wisdom), well we got two of the parties so my bets are for a Labour Landslide victory at the next election. David Milliband has put his hat in the ring for the leadership contest, another possible Blair but I get the sense he has more political beliefs than the later PM. Speaking of Prime Ministers, Gordon Brown had a dramatic exit on Tuesday evening. Despite having all the wrong polices I liked Brown. I think he genuinely believed in what he did, was obviously a highly intelligent person and had a strong work ethic who believes he is doing the right thing. There's not many like him in any more in Parliament that is a real politician not a PR Guru such as the other two leaders.

While all the electioneering has taken place we've barely even noticed the carnage in the markets. The DOW crashing 9% at one point. Major stock indices all around the world looking shaky. Markets continue to worry about Greece, Spain, Portugal the UK. A bailout was announced but they can't kid the market who is playing the game but knows that the Government have set up the next disaster. Reports of relative safe 'havens' such as the US is like telling someone the boat they are in is safer than the next one because they've only sprung half as many leaks. Over the long term all boats are sinking just at different rates.

As the wheeling and dealing of the parties took place a hot topic was electoral reform, with the liberals trying to move towards proportional representation. In my view it will be a dark day if the UK was to loose the first past the post system, especially in these choppy waters the world finds itself in now. Its the political system that ensured Britain has historically maintained one of the most liberal and open societies in the world.

The end of the First World War sparked great political upheaval. The old empires - Habsburg, Ottoman, 2nd Reich - all collapsed and with it a scramble for the power vacuums they left behind. Democracy was imposed on many European nations, nations that were not acquainted with democracy. Not only did they get democracy but many got it in the form of proportional representation. The newly drawn boarders of the continent further exacerbated the issue of trying to dictate common policy. History views Fascism in rightly a dark context, however people in such countries didn't vote for the perverse beliefs such parties were associated with as the Second World War drew to an end, such extreme views had evolved during their time in power. Such extreme parties were formed from coalition governments that aligned themselves with traditional pillars of society.

Many European nations contained fragmented parliaments during the interwar period. Governments would come and go in months, for example the Reichstag in Germany had 16 parties all contradicting one another making laws almost impossible to pass. Many parliamentary members were radicals compounding the lack of common ground to be found giving huge variance towards policy. When the 'Crisis in Capitalism' struck in 1929, so did the crisis in democracy within many such European countries. The public began to believe that democracy was too ineffective to solve their problems thus seeking more radical alternatives. As extremes were given platforms in the context detailed above, nation after nation succumbed to the far right. All the above never occurred in Britain, the most mature democracy in the world. We had our share Fascism, but the first past the post never favoured Oswald Mosley.

Italian Fascism began like this, opportunities created by PR and the alliances they were able to obtain. Over time it gradually morphed into the political party it became infamous for. Hitler rose to power under exactly the same circumstances, again aligning himself with traditional pillars of society that could agree on some aspects of common policy but ignored other more radical views, believing these could be controlled. As Hitler and others increased their grip on power, they also abolished democracy and so began the dictatorships that they have become synonymous with.

Now I'm not saying that PR means we are going to elect a Fascist government, times have changed and I think the majority of Europe is a far more tolerant place. But PR gives rise to radical groups and fragmented weak governments. When the economies ticking over and everything seems fine this isn't so much of an issue, but when we have a persistent crisis then things can get messy.

I realise that our current first past the post system has produced a hung parliament, however the majority of seats are held by mainstream progressive parties. If we had PR then the Fascist BNP would have gained around 12 seats. Our current system ensures no such political base for them. UKIP would have around 18, the Greens 6. I understand what people say when parties get a greater share of the vote but don't get a proportional amount of seats, but first past the post generally ensures a moderate parliament. First past the post has its flaws but I would prefer it to other suggested alternatives out there.

With the new policy of fixed term parliaments I currently can't see the current Government lasting the five years. Splits are already emerging and when tough choices are to be made, finger pointing will begin, deals and U-turns will take place, garnishing further support for the opposition. Another Labour Government within five years? I think so and with it, further relative decline for the UK.

Vote for Gordon

"Deflationary policy is costly for the treasury and unpopular with the masses. But inflationary policy is a boon for the treasury and very popular with the ignorant. Practically, the danger of deflation is but slight and the danger of inflation tremendous."
Ludwig Von Mises, Human Action

The prospect of a hung parliament. The prospect of a Labour victory. The prospect of divided politics once more. With the British polls showing a narrowing between the Tories and Labour, markets have begun to get the UK jitters once more. David Camerons indecivness on issues such as the deficit and the inflationist policies of the current Government have casted doubts in the British peoples minds. With so many of the populace aboard the Government Gravy train, do we really want cuts? Maybe the government can inflate their way out of this mess resulting in us all obtaining our free lunch, living in endless prosperity? I'm afraid the laws of economics are the same as the laws of gravity. It doesn't matter which way you jump off a cliff, or in this case how the government chooses to inflate, the end result is the same, just like gravity pulling you towards the earth the free market demands the required correction. All the government can do is lower our standards of living for the long term. The more it fights the free market, the worse the end correction will be.

Vote for Gordon may seem like an odd title, as Gordon Brown and the Labour party are carrying out the worst policies listed above, a contarian view if you may. It's important for me to state that I have no political affliation. All parties are as clear as mud, all with agendas to infringe on peoples liberties, distorting markets and impovishing people. Get rid of Government I say, but that is seperate topic for discussion. We need Labour to win the next election. We need another term to discredit statist policies. I fear if the Conservatives win, the UK will be in serious problems.

If, as the Conservatives say, they will cut spending as should happen, this will spark off a further deflationary collapse. This is the required medicine, however the majority will not see it this way. As Ludwig Von Misses states above, "...inflationary policy is a boon for the treasury and very popular with the ignorant". Another quote that has stood the test of time. Recently it has been stated in the news that the UK may not need to borrow as much as initially forecast. 'Economists' talk about the recovery, people say the recession is not that bad, the malinvestments are proped up providing the illusion that its business as usual, all of course are the product of an inflationary mirage. Governments have convinced themselves that all we need to do is drive down interest rates as low as possible and print money to fix our problems. We can avoid the required adjustments by simply trying to continue consuming and borrowing, the exact measures that created the problems.

People have very short term memories and short term outlooks which I have witnessed throughout my life. For example people always state what a disaster Thatcherism was, as they looked at the short term effects, high unemployment, less government support for individuals, the acceleration of industrial decline. Over the long term of course, it was for the benefit of Britain, my generation are all Thatchers children. We all benefit from goods that we used to make, that are now made in China at a lower cost. We have all moved into other areas of employment, better jobs in many cases.

Its peoples short term memory that is dangerous. If the conservatives win at the next election, will the squeeze provoke the public to turn to the left? "We were doing fine under Brown before he left?" - remember "people say the recession is not that bad", the required corrections would be painful. There is so much imbalance, I don't think the Tories could correct the mess in one term. I also think they don't have the spine or the conviction to go through with the required medicine. The temptation to eventually inflate after initial cuts will be too great, the short term benefits will give the government room for manove. This in turn would confuse the people, believing that cuts are the last thing we need, we need further Government action to solve the issues. A resurgance of left wing politics once more could take place. The free market will be blamed once more for the problems.

However if Brown were to win a second term, cuts would not be on the agenda nearly as much. Further inflationist policies will be carried out as the Government spends its way to popularity. The market would not tolerate this, instead capital would flee, interest rates would rise, currency instability or a full blown currency crisis would occur. Its better that this happens on Labours watch rather than the Tories. People would have a clearer picture of what caused the mess - continued Government intervention - "We need the free market to solve our issues, no matter what the cost".

You see the Tories are a classic scapegoat, they generally tell people the truth, that we need disipline. Labour are the weak parent, who give in to their children and let them run riot. We need labour to continue in power so that the Tories can say "Told you so". The end game is a deflationay collapse, hard times?, sure but good for the moral character. The only other alternative is the quote at the top of the blog, monetary collapse.

How likely is Hyperinflation?

It's a topic that comes up in various articles, with authors proclaiming its just around the corner, weeks or months away. Truth is Hyperinflation will happen if we as a nation wish it to happen, which is exactly the path we are walking towards. An excellent article has been published by Dr. Krassimir Petrov detailing the road to hyperinflation. It is only a road and at any point we are free to turn off it, but only if we wish to do so. Vote for Brown, it will build the moral fibre we need to avert such a situation and as Dr. Krassimir Petrov points out, buy some Gold in the meantime.

Britain, the Canary down the Western Coal Mine

"We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step."

Jim Callaghan - Speech at the Labour Party Conference, 28 September 1976

Gold prices had been on the rise for weeks, then all of a sudden fell back with a thud as we were told that only 11,000 jobs were lost in the US during November. Another Brown bounce in the polls left Cameron backtracking, austerity is so last month, instead 'growth' by government spending is now acceptable as policy is dictated by focus groups. The Middle Easts version of Las Vegas got a helping hand which was good news for many UK banks, however only a mere $80 Billion would have been at stake. Years ago it would have meant something, not today with Trillion dollar bailouts. China's vice governor at the peoples bank declared 'We must watch out for bubbles forming on certain assets, and be careful in those areas' referring to golds recent upward trajectory. Nice try, that deceit may wash with CNBC but those of us in the loop know full well that China would love to transfer much of their paper assets into hard assets such as Gold.

It's sometimes easy to forget what the average person thinks in relation to financial matters. Articles posted here are certainly not consistent with mainstream thinking. People are still on the same broken record, 'Buy a house now while prices are cheap before you get priced out', 'We are past the worst now and good times are ahead', 'The government will make a good profit for the taxpayers with the bank bailouts'. Ask people who read the financial sections of broadsheet newspapers about gold and you get told 'The price can go up as well as down' as though this is a unique quality that does not apply to other assets such as bonds, real estate or stocks. Indeed it is important to remember just what people are thinking, because you don't want to be on the same page as them. 'Repeat after me, Gold is a bubble, Central Banks can 'tame' markets, the sustainable recovery is here and there is no inflation! There is no spoon!' There's no analysis of the thunderstorm that is brewing in the distance.

So what about this Gold bubble then? People are right, however they are 5, 10, 15 years too early in calling it. People are buying the stuff because one day it will be a bubble as the Worlds Central Banks are busy blowing the next bubbles as I write. The currency and Government Bond bubbles will eventually burst causing mass inflation and creating the next bubble, commodities and precious metals. As Bernanke and Company try to assess how best to deal with bubbles, they fool the public as though these events are some mystical force that no one can control. I have a simple solution, how about stop printing so much money. We instead move from bubble to bubble, the Centrals banks policy after one pops is to inject further easy money into the system. Like some drunk who throws up after a bottle of vodka, 'I best have another to sort myself out'.

Could the US unemployment figures signal the turn with people getting back to work? Maybe in the short term, but I don't think this will be a long term trend. You have to remember governments everywhere are printing huge amounts of money and this is bound to give the so called 'prosperity' effect in the short term but it won't last, the free market hasn't healed. During the coming stagflation a lot of conventional indicators will seem to be healing when in fact the underlying fundamentals are deteriorating. For ten years after the credit crunch in 1973/74 the unemployment rate in the UK kept rising.

It didn't move up in a straight line, with periods of consolidation and even movements to the downside. When the correct path was taken it took years to fall. Numbered estimates in the news are useless, three million, four million, all have been given as figures for the short term, however no one can say for certain, all we do know is that history says it will keep rising over the long term.

For a developed country the British people sure do love their inflation. While many other nations inflation indices have plummeting like many a British Banks shares, the UK's inflation rate has remained remarkably 'sticky'. Whether its the appreciation of our assets, our rising incomes, our increased levels of debt or the fallacy that we believe the weak pound is good, we really do want to beat other nations in the race to the bottom. The yanks scream 'bloody murder' watching their beloved dollars debasement from the powers that be, not realising that one hundred years ago a British pound used to be worth $5. Anything you can do across the pond, we can do it much worse. Over the next decade I'm sure we will show the developed world what not to do. The problem I see is that British people want inflation. We want to see rising prices, we believe that this is a healthy state of affairs and will thus allow a greater level of leniency towards our policymakers compared with other nations when it comes to expansive monetary policy.

Will the BoE raise interest rates when the market forces their hand? Contrary to what people believe it is the market that controls long term interest rates. We may like to think of central banks under a paternalistic viewpoint, our saviours there to insulate us from financial destruction and chaos, to solve economic issues should they arise. Central bankers are just like their Communist Central Planning counterparts, eventually market forces get the better of them where eventually they follow the market, not set the tempo as they would have us all believe.

In order to understand how markets dictate prices such as interest rates its easier to compare the lowering of interest rates to say lowering the price of bread. If the government declared rather than liquidity not been easily accessible that the issue was now high bread prices, they therefore set forth a policy to fix the price lowering it below the market one. As suppliers begin making losses they shut down production, at the same time people consume more as they can purchase more of the product. Eventually the country runs out of bread with all stocks depleted. Rather than bite the bullet immediately the government would in all probability resort to rationing rather than admit the error of their ways with bread queues becoming a common occurrence. A black market may appear as people under their free will and against the governments law begin selling bread to one another for a price set by people, the marketplace. If however the government wishes to fix the state of affairs they must liberate the price once more, allowing the market to determine the price of production. As suppliers closed down long ago abandoning their supply networks it takes a short while for supply to meet demand once more. During this period the price of bread goes into the stratosphere as people bid up the cost of the present scarce bread. Eventually market forces will drive the cost down over time to a point of equilibrium.

How does bread relate to interest rates? Its the same principle. Governments can set the price low but eventually the market will force its hand to raise the price, with the price going into the stratosphere. This is why we had 18% interest rates when Thatcher tried to put things right, or when Paul Volker put US rates above 20%. The policy makers were just chasing the market, trying to reign in inflation which was driving the free markets interest rates haywire. During the 1973/74 credit crunch Central Banks had the same idea as now, that is they lowered interest rates in response to the recession, but the longer and lower you try to hold down these prices the higher and sharper they have to eventually rise as many an older reader will painfully remember.

The BoE could be forced to raise interest rates under a number of scenarios. They may have to raise rates if there is a currency crisis with the pound falling as investors flee. Like the bread situation above, they will put off the price liberation, instead they will put currency controls or limits on capital (like bread rationing) in order to try and provide a short term fix. Eventually the market beats them and they have to hike rates as over the long run a lack of foreign investment creates a less dynamic economy and higher inflation.

It could be forced to raise rates if inflation got out of hand with the free market demanding increased real rates of return to negate the depreciation of the currency. Even if central banks keep buying government debt at artificially low rates, private banks still lend to all of us, with this mortgage rates could rise for example. Its similar to what we see now, despite base rates at near zero average mortgage rates are far higher as the free market realises there are inflation risks over the medium to long term. They are also hedging against their potential losses as the government props them up.

However they could do none of the above. They could keep rates low, spurring on more inflation as the government can no longer afford increased rates on the ever expanding debt. They by pass the market and lend to individuals themselves at these rates. They print money directly to cover the shortfall in the various government payrolls. Currency collapse is ensured at this point as it becomes clear to all that its time to pack your suitcase. Marc Faber believes this is the conundrum America will face at some point in which its policymakers will not rise to challenge, instead they will shirk away from the correct action to take, opting for runaway inflation. At some point the stock market of such a country would be a screaming buy, just at the depths of the seemingly never ending hyperinflation when the average person has lost all confidence.

Could the UK be the Canary down the Western coal mine? There are many other nations with serious issues that have faced or will face issues sooner, but I wouldn't put them in the same tier as Britain, a nation who still has a recent innovative and industrious past. She could however, be the warning signal for many other Western nations that mass inflation and/or interest rate rises are just around the corner. Either option ain't pretty.

Central Banks are changing their Tune

This week the IMF began sales of their Gold reserves. I have mentioned previously that the IMF have been looking to do this, however how wrong was I regarding what may happen to Golds price! Two hundred tons came onto the market and rather than the price possibly dropping, the price instead soared. The Central Bank of India gobbled it all up in a single transaction. Many articles have already been published in relation to the event, and with good reason. The shiny stuff has risen in price for the past decade, despite european central banks selling huge quantities, the most infamous being my countries sale of half our reserves known appropriately as 'Browns Bottom'. The worlds central banks are suddenly looking at Gold from a different viewpoint. The move by India shocked everyone. The next sale could see multiple buyers apply, China, Russia, Brazil and other emerging nations will be feeling anxious - "How do we get out of our paper reserves"? One day there will be a rush for the exits, a dash for the ultimate form of cash. Meanwhile Geithner and Obama parade around the globe, reassuring foreigners of their strong dollar policy, their words contradicting their actions. A sound currency does not exist with zero percent interest rates, deficits as far as the eye can see along with printing more of the stuff. You don't need to be an 'A' grade economist to see the anomaly.

It's important to remember that you can't grow gold. Gold can't be produced in a factory, or planted as a tree. There has always been a finite supply throughout history and when there's no where for investors to turn, they head to safety, historically that has been precious metals. The limited supply can be seen with the recent "Sell your Gold" adverts, dealers buying the public's jewelry, melting it down, and selling it to institutional investors. While the recession continues to force the public to liquidate their hard assets for paper cash, the paper cash investors are diversifying into such assets. One only has to look at the events last autumn, bullion dealers ran out of stock which caused the adverts you now see. Hoarding along with limited ground supply has led the dealers to impell the public to sell.

One thing you have to understand is that China is sitting on 2 Trillion Dollars of paper promises. They currently have around 1,000 tonnes of gold. $2 Trillion could buy them an awful lot more, if they can find willing sellers. The recent IMF sale was $6.7 Billion for two hundred tonnes, I'm sure you can do the maths to see China's buying potential. Compared with nations in the West, many other emerging economies still have woefully imbalanced Gold reserves as the table details (original table taken from following article).



There are many countries who have plenty more cash to convert into Gold, histories ultimate form of payment. Germany, Italy and France hold approximately 70% of their nations reserves in Gold. Compared to China, India and Russia with 1.9%, 6.2% and 4.3% respectively, if I was a betting man I would say the latters percentages will inevitably increase.

For too long the West had a monopoly of talent and capital, corrupt regimes around the world ensured this. Battles between the far left and right in South America, Asia's experiment with Communism, Eastern Europe held back by the Iron Curtain, Middle Eastern states squandering the oil bonanza of the seventies and of course Africa's various despotic rulers. For too long during the 20th Century statism looked like the solution to peoples problems, when in fact it was the cause. Many talented individuals migrated to the West in search of a better life for their families. The collapse of Communism along with the revolution in telecommunications saw to it that many emerging nations began to realise their potential. Why emigrate to the West when they now have the same intellectually challenging jobs at home? Many Western countries still have one trump card - longevity in respect to human rights. No matter how bad my government messes up I always know I will be able to say what I want. I always know that the right path will eventually be trodden. I always know that Britain was the first nation to overthrow a monarchy on the continent during its Civil war, thus beginning the process towards the present inherently stable democratic system that has endured for centuries. The above may not seem much, but its amazing how we can all take this for granted. It won't stop the shift of power from West to East. Gold, it seems, is also moving in the same direction.

Japan a Deflation Death? - Nope Stagflation

Gordon Brown this week announced what can only be described as a car boot sale of UK PLC's bric-a-brac goods, an attempt to sooth markets regarding the budget deficit. Many of the items have been for sale before, but I'm sure the government in their current desperation will be willing to accept lower offers this time around. I agree with privatisation in getting the state out of our lives, but a student loan book and a crossing in Kent are hardly big ticket items, never mind the fact that they are assets that generate money. Thatcher sold the majority of the family silver during the eighties privatisation bonanza however contrary to common belief there's plenty more the state could sell. Institutions such as the NHS, education the road infrastructure and so forth could all be sold, but these are not politically palatable areas that the public can swallow, meaning they are off limits for any politician that doesn't want to ruin their career. The Prime Minister once more began another Keynesian rant stating that the Conservatives proposals would lead to the same problems experienced by Japan for the past two decades. The title 'Prudent Chancellor' seems ever more absurd as time goes on, his emphasis on yet more needless spending in an attempt to bankrupt the nation. It doesn't matter if its Americas Great Depression or the lost decade in Japan, economists, politicians and journalists all seem to draw the wrong conclusions. What Gordon Brown in fact proposes are the very same policies that were pursued during both periods above and resulted in stagnation. Japan didn't get ravaged by the 'dangers of deflation', it was instead a good old classic stagflation.

Many Keynesian economists are still baffled by Japan. Over the years, policy after policy has been proposed by their school of thought, all of which involve some form of government action, but time and time again they all seem to fail. The classic Keynesian rebuttal whenever these policies fail is "Well, the authorities didn't do enough". Just like they apparently didn't do enough during the Great Depression. Yet put forward the question regarding Americas 1920-21 Depression and all Keynesian theory goes out of the window. Here Warren Harding, Americas president at the time, cut government spending, cut taxes and in fact did very little during a time when the economy was contracting at an alarming rate with the measure of unemployment rising faster than during the subsequent Great Depression. Yet the economy with market forces in full control, liquidated unprofitable lines of production and subsequently America during the 1920's experienced one of the greatest economic booms in history. The unemployment rate came dramatically down in no time at all, without government spending to alleviate this process as we are now all told. Herbert Hoover, who was later to become Americas President during the next depression, unsurprisingly didn't agree with Harding's polices, a pre-cursor of what was to come. Don't mention any of this to the Keynesian's though, it will give them a real headache.

What did Japan do when their bubble burst? Cut taxes? Cut Government spending? Liquidate? They of course carried out the exact opposite. Their Government debt used to be as low as the UK's before its recent exponential trajectory however Japans now stands at 200% plus and keeps growing. They propped up their infamous zombie banks, crippling the pricing mechanism that is so vital for an economy to prosper. Increases in taxes will choke the economy as rising social costs increase. In order to assess what really happened we need to deal with the aspect of deflation, or what is currently assumed as the bogeyman to economic growth. Japan never entered a downward death spiral of prices, that consistently fell year on year, in fact the lowest their CPI hit during this time was -1%. During the mid-nineties it spiked back up to 2%. There was only around 6 years of official deflation during the two decades using the Governments metrics. What gave the impression of price deflation was in fact asset price deflation. Both real estate and stock prices completely collapsed and have not returned since, instead stagnating for years. The reason why they never recovered to their previous highs was exactly what the Government did, they took over and tried the command economy approach. Roads to nowhere, propping up banks that were insolvent, not allowing private enterprise to take over the means of production. Rather than money going into the private sector, Japanese savings that were accrued during their economic miracle were funneled into Government bonds, wasteful Government consumption. It was quite simply a classic stagflation, that is still ongoing.

The UK are now pursuing similar policies and will go into a long period of stagnation unless the current direction is reversed. However it is useful to try and make further sense of Japans situation during that time, compared with our own. When the crunch came for Japan they ran budget surpluses, had high domestic saving rates for years and were a creditor nation. The UK on the other hand has the complete opposite and relies heavily on overseas investors to buy our Government bonds. Japan only began to run double digit Government deficits eight years later. They were able to sell their bonds to domestic citizens. They were still obtaining plenty of foreign currency as they exported more than they imported. The UK has already printed in excess of 10% GDP to pay for the debts, is running a huge budget deficit only two years after the current financial crunch and for the past decade its citizens have had low savings rates.

So what does all the above mean? Quite simply the UK is in a much more highly inflationary situation that Japan was. Japan's government couldn't really print money until over 10 years later as a last resort due to there being ample savings to pay for the Government debt. Japans government created their budget deficit, the UK has a structural one in which politicians are notorious for not tackling the shortfall. While Japans significant industries, electronics and car manufacture, continued to grow with global demand, the UK's key revenue streams, finance and North Sea, are in decline.

Another key factor is if the Government Bond market is in a bull or bear market. During Japan's economic disaster the bond market was in a bull market. Interest rates kept falling, people still had faith in many paper financial assets. Since 1981/82 Government Bonds have been in a bull market however these things always move in cycles, typically we should be seeing the end to this trend at some point. 25 years plus is a good run and in the near future this will turn into a long, grinding bear market, we may have already crossed that point. In a bear market, interest rates on bonds rise, which means Governments have to increasingly spend more on interest payments, diverting money away from spending such as health or education. Recently the CEBR said interest rates will stay low for the foreseeable future during the first half of the next decade, however that would mean the bond bull market lasting for over three decades, a highly improbable situation.

History is always an important guide to future trends, however it is crucial to compare given contexts in their current time frame. I have seen articles recently stating that Britain had debts in excess of 200% of GDP after the Napoleonic wars, indeed I have mentioned it myself before, however this didn't count for much when the UK went broke in 1976 with debts as meager as 48% of GDP. In the prior scenario the UK was the global superpower but a much bigger factor was that the UK didn't have a Welfare State. There was little government expenditure, with the majority of taxes just going to pay off the debt as alternative expenses didn't exist. Contrast that with current Government spending in which the interest payments are now comparatively small along with a rainbow of other Governmental expenditure, we see how context is key. Somehow, within the time frame of 150 years, Britain had transformed itself from one of the leaders of laissez faire, into a nation that was almost turning Communist in 1976. An ever expansive state, a declining currency, an economy with little productive purpose, meant investors wouldn't lend the UK any more money, despite the debt being around a quarter the level than that of the early nineteenth century.

Japan recently has around the same debt as the UK did 200 years ago and is still able to pay for it. It's dangerous to compare Britain with Japan, as Britain will not be able to sustain a public debt level that high. Japan built this debt up during a bull market in Government bonds and had savings to pay for it. The UK doesn't have either of those luxuries. It's one of the key concepts that many forecasters and economic commentators overlook, the fact that interest rates can rise over time and enter bear and bull markets. Payments for the interest are already predicted to soar as the debt increases based on the current low rates, but what about if those rates double 10 years from now? The government admits the earliest they can balance the books is around then therefore debt is almost certain to keep going up.

Do not believe predictions regarding long term interest rates and the level of debt a country can absorb, no one can forecast precise figures in these areas. Instead look at the fundamentals. Are the government balancing the books? Has the printing press been shut down? Has liquidation occurred? Until fundamentals return then stagflation looks the most likely outcome here in the UK. Just like Japan, only I fear much worse.

British Pound Devaluation Delusions

"It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued."
Harold Wilson, British Prime Minister, after the Pounds devaluation in 1967

"A weak currency arises from a weak economy which in turn is the result of a weak Government."
Gordon Brown, During the Pounds devaluation after it was withdrawn from the ERM


Mervyn King the Bank of England's Governor has been causing a stir in the markets this week. Despite Sterling being a flawed currency it hasn't stopped Mervyn King from making comments that he feels a weaker currency is beneficial for the UK. Undeterred by the pound losing around a quarter of its value, it seems that the BoE still feel the need to send it lower. US-centric reporting has been emphasising the Federal Reserves draconian monetary actions, but yet it is the UK that leads the way in QE and the destruction of its currency. Labour Governments always seem to be in power when the pound gets a pounding. 1931, 1967, 1976 and recently 2008 and beyond. If Neil Kinnock had won the 1992 election like so many believed at the time, they would have got the whole set for the past one hundred years. So what does it matter that the pound has devalued of late? Is it as black and white as 'it will boost our exports', that the media and business pundits proclaim? I agree with the quote above, not Harold Wilson's, but Gordon Browns. Over the long term, Governments that use their currencies to try and solve their economic troubles are doomed to fail. If you try to alleviate trade deficits with this mechanism over the short term it may succeed, but eventually more devaluations will be required in order to 'boost' exports again.

Implications of Devaluations

An examination of the devaluation is required to understand what benefits/disadvantages it brings. Governments always claim that this will lower the cost of our exports, which it does, but no analysis is paid to what actually occurs. If we examine a factory that exports goods, they may be struggling to compete, say against similar German products. A devaluation would instantly lower the cost of the good on the export market. The German Government, for example, may hold steadfast and are not willing to allow their currency to depreciate by the same margin. The British company without doing anything have instantly gained a cost advantage, in effect a free handout. The German company on the other hand has to look for savings itself. Management immediately begin cost cutting, increase productivity or improving their processes. They look at their product, they start to innovate or add extra features or improve the quality to justify the short term price dynamic that has just occurred. The British management does not need to do the above. They can produce the exact same product, using the same processes as there is no immediate need to innovate.

Also something much worse occurs. For the sake of the example say the two products, German and British, now are priced at €500 and €400 respectively after the devaluation, whilst previously they were €500 and €550 respectively. The British management now can increase the price over the short term, to say €450 as they are still cheaper than the German products. This extra margin may go into inflating workers pay, or other company benefits. Not only have no product or business improvements happened, but the British company is also rewarding itself.

The Import Dynamic

Misreporting in the media leads us to believe that the cost of our overseas holiday is the biggest headache when the value of our currency goes down - if only. When the currency takes a fall the whole nation is immediately given a pay cut, all our imports now go up in price. If we have to buy raw materials or products produced abroad it now costs us more, our purchasing power has effectively fallen. In the example given above, if the British company has to import any materials to produce its end product these will drive up their costs. Also the public now have to pay more for the product in question. The cost may seem to have reduced to €450 but remember its all relative, the British people are still getting paid in pounds. People can't buy the same amount of products as imports go up. A price spiral starts. The mechanic who imports car parts from abroad must now charge the public more for car repair work. There are an infinite number of other business transactions that take the same format as the given example. All these costs eventually come back to the British company as their workers require higher wages to cope with the higher prices. This in turn keeps driving the cost of the product higher. Meanwhile in Germany, they have continued innovating lowering their costs through business improvements, driving costs down in order to compete and in turn producing a better end product. The end products cost after a year or two, could now be say €400 and €500, for the German and British companies respectively. The British company is back where it started but in a worse condition, as they have fallen further behind in terms of productivity and end product quality.

The above process can develop into a vicious spiral, with the British company loosing further export share and demanding further devaluation in order to 'boost' exports. There is no simple fix, if a currency goes down in value it doesn't help anyone.

What needs to occur is to let the market take the pain, not the currency. This may mean higher unemployment in the short term, but people and companies get competitive again. Any nation in history who has enjoyed an export boom has done so on the back of a strong domestic currency. Britain during the 19th Century, Germany and Japan through the second half of the 20th Century, the US when they rose as the global superpower. However times change. For the past 30 years or so US politicians have put forward the benefits of a lower Dollar for jobs and exports, but over the years it hasn't worked. Workers wages continue to decline, and US companies continue to disappear.

In Japan from the end of the second world war up until just before the lost two decades, the Yen dramatically appreciated against the US dollar. Yet Japanese exports during the same time frame also increased. Westerners used to joke that Japan only produced kimonos or tiny cheap ornaments. Japan subsequently underwent a huge economic development, beating the West on car manufacture and electronics to such a point that it has now become hard to name a handful of Western electronics companies. In 1970 the Yen was valued at around 357 to the US dollar. Within 20 years it was 146, more than doubling in value. During the lost two decades it hasn't moved much further, to around 90, however its worrying that its still appreciating despite the stagnation of the Japanese economy during this time.

Where does this leave the British Pound?

It's worrying when the people responsible for the defence of a currency welcome devaluation and even believe that this will solve the economic imbalances we face. You can't solve a domestic economies shortcomings by debasing the currency. The British Pound has resumed what it was prior to the late seventies and early eighties. It's once again the whipping boy in the currency markets. Investors beware, the British Pound will not be a place to be for the foreseeable future.

Oil - Our Deadly Addiction

"Now the only thing that saved the U.K. was the North Sea oil fields, even though Prime Minister Margaret Thatcher likes to take credit, but Margaret Thatcher has good PR. Margaret Thatcher came into office in 1979 and North Sea oil started flowing and the U.K. suddenly had a huge balance-of-payment surplus. You know, even if Mother Teresa had come in [as prime minister] in ’79, or Joseph Stalin, or whomever had come in 1979 – you know, Jimmy Carter, George Bush, whomever – it still would have been great. You give me the largest oil field in the world and I’ll show you a good time, too. That’s what happened."
Jim Rogers, Chairman Rogers Holdings


Since the modern world began to industrialise we have seen huge advancements in all aspects of technology and living standards in the West. Since the application of fossil fuels into our industries we have been able to grow our material wealth immeasurably compared to any other point in human history. Most of human history is marked by an agrarian focused system with closely knit communities that did not produce much of an economic surplus, other than to feed itself, a basic civil service, taxation system and law and order. But over the course of the last 200 years that has changed. Society suddenly began producing increasing amounts of labour surplus. Jobs became ever more specialised and productive leading to a feedback process of more productive surplus in society. There seemed to be no limits to the growth of the modern world as it embarked on the experimentation of modern globalisation into the next millennium. But where and how did all this wealth get created along with the extra productivity gains? People had not evolved significantly for thousands of years, yet their economies and populations had grown exponentially. The answer lies in the fossil fuel revolution that began roughly 200 years ago.

Rule Britannia

Beginning around the end of the 18th and the early 19th Century, a technological revolution was underway. The invention of the steam engine allowed the production of powerful machines that could do huge amounts of work and this meant large factories could be built on a massive scale. With the introduction of iron founding, railways and steam powered ships could be built and thus a mass haulage system was built to move the goods that were being produced in significant volumes by the new factories. The Coal age had arrived and with it a revolution in the way modern society would function. People would migrate from rural areas into the urban towns and cities to further produce more goods which in turn generated wealth that had never been seen before.

Land of Plenty

Oil had been known for hundreds of years however it was not until the mid and late 19th Century that it became used for productive purposes. It was originally used for lighting domestic homes due to the shortage of sperm whale oil, that was used before it. America was beginning to rise as a prosperous industrial nation spurred on by home grown technical innovation. As a resource rich nation it did not need a vast empire like Britain to grow. The turn of the 20th Century marked a great transition from coal to oil, something America possessed in abundance. With the advent of flight by the Wright brothers and the Model T Ford in 1908, new applications were found that required Oil, a hydrocarbon substance that was packed with energy. Demand for oil increased as the 1920's came along with increased use in agriculture and the start of Amercian's romance with suburbia as the motor car became more affordable. Further uses of energy became increasingly common with domestic labour saving devices running off electricity powered by various fossil fuels, creating further productivity gains in the economy. The Great Depression ushered in an era where the fossil fuel economy had simply being too over productive as people began to stop buying these new devices that had drove the unsustainable boom. A Second World War erupted in Europe, marking industrial countries reliance on oil. The Germans had ensured oil supplies from the start of the war with Russia in signing the Molotov-Ribbentrop pact. Hitler would later conquer western Europe - well almost. Later he would try to take Russia by surprise in an attempt to capture their oil reserves, that Hitler so desperately needed to sustain an efficient war machine. He simply didn't trust Stalin or Communism. Like Napoleon, over 100 years before him, he was beaten by the harsh Russian winter and the vastness of its terrain.

After the war America emerged as the new superpower of the world and its people over the course of the next two decades would enjoy some of the biggest improvements in living standards in human history. Oil is by far the most energy rich and versatile fuel humans have every come across and learned how to use successfully. The abundance of domestic cheap oil meant the American economy was powering ahead.

Dr M King Hubbert

In 1956 a geoscientist named Marion King Hubbert gave a talk proclaiming that American oil production would peak somewhere around 1965 - 1971. He was laughed at, as America had huge amounts of Oil, enough for many years and generations to come. Then in 1970, the US hit peak oil production. They would never again in history produce more domestic oil then they did in that year. Dr Hubbert had been proved right and suddenly America was now a net importer of Oil as demand continued increasing with domestic supply embarking on a long decline.

The Oil Shocks

1973 and the Yom Kipper War erupted in the middle east, in which an Oil embargo on the west would coincide. Overnight the price of Oil rocketed and the price went from roughly $3 a barrel to $5. With it the western economies suddenly began to break down, as everything was either made or transported with oil. Panic buying began with prices rising. Amercians and Europeans woke up to the fact that their economies could not function without Oil. This set off a decade of stagflation and general discontent. A Second Oil Crisis was to erupt in 1979 as the Shah was overthrown in Iran thus creating another Oil price spike (one of the reasons that the Americans would later bank roll Saddam Hussein against Iran).

North Sea Oil and the Alaskan Oil fields - The false illusion

Around the end of the seventies North Sea Oil and the Alaskan Oil field slopes had been discovered, giving Western Governments control over their own supplies once more. This extra supply along with improved middle eastern relations would bring prices back under control and bring in the illusion that the seventies was a false alarm, there would always be plenty of oil. During Britain's long decline since the First World War they had become the basket case of the West on the verge of going bankrupt and resorted to begging the IMF for money just before North Sea Oil began to come to the market. As Jim Callagahan would say, whoever won the 1979 election would retain power, the revenues from Oil would see to that. Thatcher won and had the full benefits of north sea oil and gas, the real Thatcherism was in fact surplus energy. Oil began two decades of stagnant prices and was as low as $10 a barrel in the late nineties. I remember my dad at the time having to announce a lot of redundancies in his industry and his remarks at how low the price of Oil was. It was not to last. Alaska peaked around 1988 while North Sea oil peaked around the turn of the millennium. The West was running on empty again.

A New Age of Price Shocks

The Globalised economy was beginning to take shape. Factories and jobs had been relocated to Asia with the emerging far east economies being titled as 'Tigers'. The mass investment of capital from West to East spurred forward further demand for oil and coal. China had once been a net exporter of oil. Now it had become a net importer with an insatiable appetite. Geological Analysts began reviving Dr King Hubberts work suggesting we were near worldwide peak oil. Again they were laughed at or denounced, just like Hubbert was 50 years ago. Meanwhile Countries began peaking in oil production. Mexico, Oman, UK, Indonesia all past their peak. The Saudis told us there was no problem they could cover the demand, however for years they had been pumping their oil wells with seawater to sustain the output. Some say the Saudis are now pumping at peak or will reach peak soon. From the turn of the millennium prices began a slow and long climb upwards, supply seemed to be hitting limits yet the further industrialisation of Asia demanded more. Americans and Europeans had been consumming, buying bigger cars with a 4x4 culture further increasing demand. The end of cheap oil and energy had come. A new era of price rises and economic turmoil had been ushered in. The first significant price spike occurred over the course of late 2007/2008 with Oil reaching just under $150 a barrel. Gordon Browns Solution - go ask the Saudis to pump some more. The price dropped to sub $100 prices as the global economy began to slow. People thought the earlier price spike was driven by speculators and oil companies and cheap energy would soon return with oil prices collapsing. In reality the price had been driven by the most simple economic dynamic - supply and demand. A new period of Oil Shocks was only just beginning with the potential to cause chaos in the industrialised economies of the world.

There's plenty of Oil still left

Of course there is plenty of Oil left. Estimates of proven oil reserves are around 1 trillion barrels of oil. Humans have currently used to date around the same amount, 1 trillion barrels. However the oil we have already used has been the easiest to access. Oil was first discovered on parts of the earths surface, you didn't even need to drill to get the stuff. Then to get further reserves you had to drill, but this was on land and there was little energy expended for the amount of energy returned. In the first part of the Twentieth Century you could expect to get 30 barrels of Oil for every 1 barrel you used in energy for getting the stuff out of the ground and to the market. This ratio has been going through a slow decline as time has gone on. Oil fields were routinely left with half the oil still there as it was not economical to extract the remaining amount. No doubt in time as prices rise these will be re-drilled. As oil in the reservoir declines so does the pressure therefore you have to expend more energy to pump the stuff out. As Oil became more scarce offshore drilling was used, however this is a lot more expensive to do than drilling on land and I don't mean economically but the return on the energy. Those offshore rigs have to be constructed and built through the burning of more fossil fuels. The early oil that was discovered and extracted was also the best quality oil, with little refinement costs, but as there has become less and less there has become more and more refinement costs.

The point is we may have lots of oil left. Everyone accepts this. The point is we have run out of cheap and easily accessible oil. Most of the oil in the world would be so hard to get that you would get negative energy returns. There's no point extracting a barrel of oil if it took 2 barrels to get it. Oil fields extract following a very exact pattern, following a bell shape curve. Production ramps up ever more until it reaches a peak. Once this peak is hit, you can never get more Oil at any given time again. This means even if there is lots of oil in the reservoir it can only flow at a specific rate, thus if demand increases supply can not. The oil field follows a set pattern, one of decline (see age of growth post for graph pattern). It doesn't matter how hard you pump, extra drilling, it will always never yield the same daily return.

We will just transition nicely onto the alternatives

Did we prepare for when Western Oil production peaked in the early seventies? Only a crisis brings about change within human society. Then we get onto the question of what alternatives? If there are more economical alternatives then wouldn't we be using them already? The bottom line is that oil is still dirt cheep and convenient compared with all other energy sources we know of and can exploit. It comes back to energy expended during extraction, compared with energy returned.

So what about hydrogen fuel cell technology thats in the news? When someone starts to go through the practicalities it becomes laughable. First you have to make the hydrogen, which is not like drilling oil that naturally occurs. It's an expensive operation using techniques such as electrolysis. Then you have to compress the gas in order to try allow it to be delivered to the refueling stations, yet it will still not contain any where near the same amount of energy as a tanker of oil would contain (in fact it barely becomes economical after the distribution network has expended energy in delivering the tanker). Then you need to unload it at the refueling stations, a highly explosive gas when combined with air (Hindenburg), into a high pressure container. Then the car would need to be fitted with a high pressure tank with high pressure connectors to put the pressurised gas into the car - a feat just to engineer all this. After which the user would be able to drive around in a car of highly flammable gas at which the piping system could burst in a crash or even just leak due to Hydrogen's corrosive properties over time. And the fuel making all this possible is of course fossil fuels which produces the hydrogen in the first place as things currently stand.

That leaves electric which is just not as energy dense as oil. First you have to make the electricity. Then you have to charge your battery powered car for hours, not like oil where it takes a few minutes to refill a tank. Then when fully charged the electric car still gives no where near the same mileage as oil. What are lorry drivers going to do that deliver goods over long distances (plus you are going to need some serious batteries). You could have an electric car running on an electric grid based road, but this is not going to happen overnight. Plus western government finances are already in a mess - do you really think they have money to retrofit our roads.

Hybrid is the other car being discussed, but again it still uses oil and merely dampens demand and the car itself is expensive for the majority of people. Renewables such as solar, wind and hydroelectric etc will never be able to meet our high energy demanding economies and our transportation network. Plus what do you think makes these viable at the moment? Again its Oil, Gas and Coal that are used to build and deploy the equipment. We could burn ethanol just at a time when the there will be huge demands on corn as the globe is becoming more affluent, aggravating global hunger (plus the energy yields again on ethanol are poor). Nuclear fusion is just a pipe dream along with lots of other futuristic technologies leaving just fission as the proven alternative. In the coming years political sensitivity will be ignored for the sake of increasing energy demands and narrowing alternatives.

Our whole transport infrastructure is based on Oil

It's not just cars that rely on oil. Its agriculture machinery, ships and lorries that transport goods, building equipment, mining trucks etc. If oil is becoming more expensive then guess what, your food will be more expensive as the tractors become more expensive to keep running. If the food you import is from overseas then the ship or aeroplane trip becomes more expensive. The supermarket van that delivers the goods near to where you live becomes more expensive. More of your income, your economic productive surplus gets consumed by higher energy costs leaving you less money to spend on other goods in the economy, thus starting the feedback process in reverse from the advent of the industrial revolution. Jobs become less specialised, reversing Adam Smiths theory's of increasing job specialisation (look at the back of a £20 note). The division of labour goes into reverse as you can no longer afford all your shopping so decide to grow your own vegetables leaving you less time to go to that gym you pay £30 a month for, to name one of many plausible permutations. It's the division of labour that has drove economic growth at such a rapid rate in the past two hundred years which has been accelerated abundant supplies of cheap energy and a technological ability to exploit it. Society has in fact been living off an invisible form of slave labour, machines powered by oil have done jobs and tasks that were typically done by many. There may be some wonderful future power source which may be much more convenient, efficient and cheaper than oil however they are just ideas or theories and I like to look at the current situation we face now. Claims of future scientific and engineering brilliance doesn't answer the current problem we have.

Oil Shale, Oil Sands and Synthetic Oil

With the recent discoveries of the oil sands and shale in Canada there has been great belief that this will flood the market with oil. However this is not conventional crude oil of the liquid type. First it has to be processed which is a very energy intensive process. Then there are all the environmental costs as a lot of toxic waste is produced that will be opposed by many environmental groups (which will probably be ignored when demand for oil becomes so desperate). All this extra processing means that for every 3 barrels of oil you produce, you use 2 barrels of energy to extract it. Sure there may be technological improvements and innovations but there are limits, specifically the laws of thermodynamics and it will never be as easy as it has been in the twentieth century.

You can create a synthetic oil from coal. Germany used the process during Hitlers time in power, as Germany had no oil reserves of their own. Again though there are costs, specifically the processing of it hence why Hitler still wanted access to the conventional liquid oil. It was out of necessity that they were processing oil from coal. People have made claims that it can be done as long as the price of oil is around $50 a barrel. I'm yet to see these huge coal synthetic processing plants, as oil long ago went beyond $50 a barrel.

Coal and Gas

The other two fossil fuels are Gas and Coal. We are told we have hundreds of years of coal but yet if we dig a bit deeper the practicalities remain to be seen. We have already used the best burning, high energy and easily accessible coal. We are already using lower quality grades of coal that do not yield the same energy performances as coal did 50 years ago. There's also the practicalities of getting it. We are having to dig deeper and further, expending more energy in order to extract it. If we believe the estimates that say we have hundreds of years of coal remaining, do you know that these estimates include certain grades of rocks. Gas is similar to oil in that it will be exhausted within the century. The problem with Gas fields is that unlike Oil where it slowly declines, gas just suddenly drops off when fields become empty giving little warning. With North Sea Gas in decline the UK is having to rely on the pipelines from Russia for the delivery of its energy needs, last in the western European chain except for Ireland. Can we really trust Russia? A nation that is still suffering from decades of internal decline with a corrupt political system.

Where from here?

It will be interesting that is for sure. Our leaders are still in denial and will still not face up to the realities of a transition occurring in human history. If history is any guide US peak discoveries occured in 1930, with peak production occuring in 1970, 40 years later. Worldwide discoveries peaked in 1965, so have we passed peak? We will only know in hindsight. All I do know is that our society is ill prepared for a world with ever increasing demand for a finite resource that is critical to our economy and the modern lives we lead. This could well be the biggest challenge we face in the near term future. We currently have an economic system that demands growth. We are so obsessed with growth that when our economies contract we call it negative growth. There are some people that believe China will never be able to fully industrialise and they arrived just as the party was ending. Our financial system has been stretched to its limits, our ageing population is due to retire, we have record levels of debts that are becoming more expensive to service, savings are at record lows thus we have no store of capital to pay for investments, just future promises to pay other nations. All this would be a big enough challenge as history I have looked at has no parellels, however our main source of energy that has powered all of the above to historic highs is now running out. The credit crunch could evolve to become the energy crunch.

This is why I'm such a beliver in higher commodity prices over the comming decade. Oil is used in all parts of bringing products to the market, agriculture is dependant on it, mining of base metals is dependant on it and so on. If materials and basic staples such as food increases then this leads to more inflation. In another 5-10 years if you want to add value to your house you won't be adding a conservatory or granite worktops in the kitchen, you will be adding solar panels or wind turbines (in fact you will be knocking down the conservatory). That is what will happen. The UK has been too caught up in the hysteria of North Sea Oil and Gas, and failed when it had the chance to invest in its decaying public transport infrastructure which will inhibit mobility in the future. The US experiment with suburbia will come to an end and with it the billions (more likely trillons) of dollars that was put into the unsustainable American dream.

I am a believer in technology and the ingenuity of people. I studied Physics, Computing and Mathematics during my A-levels. But I also studied history, and for all humanties brilliance there are always times of sheer stupidity. We could be ushering in a new dark age, a collapse of order, governments falling and widespread anarchy. If the world leaders allow peak to pass, there is no going back and we will be racing against the clock to find alternatives while our oil infrastructure is expossed for its reliance on a finite resource and how dependant we have all become on it. The world will become smaller once again. There will be no one left to turn up the pumps.


"Through our inattention, we have wasted the years that we might have used to prepare for lessened oil supplies. The next ten years are critical."
Kenneth S. Deffeyes, Author of Beyond Oil: The View from Hubbert's Peak

"Oil depletion and climate change will create an entirely new context in which political struggles will be played out. Within that context, it is not just freedom, democracy, and equality that are at stake, but the survival of billions of humans and of whole ecosystems."
Richard Heinberg, Powerdown