Why Being a Politician Is No Longer Fun

As a society, we are ill-prepared for the end of "politics is the solution."

It's fun to be a politician when there's plenty of tax revenues and borrowed money to distribute, and when the goodies get bipartisan support. An economy that's expanding all household incomes more or less equally is fun, fun, fun for politicians because more household income generates more income tax revenues and more spending that generates other taxes.

Despite the usual ideological squabbles, the general mood is upbeat: the horse-trading is about the relative share of the spoils each constituency will receive. Nobody gets everything they want, but everybody gets a good chunk and after an appropriate period of whining, resentment and indignation eventually counts their blessings.

But once the pie starts shrinking, the mood darkens: rather than goodies being distributed, losses and belt-tightening must be distributed. The game is now zero-sum: one constituency's gain is another's dead loss.

Politics is no longer fun once the pie starts shrinking. The illusion of "growth" can be maintained for a while by borrowing enormous sums and distributing the windfall as if it were real, organic growth but eventually the wheels fall off the substitute debt for income and tax revenues game and the entire rotten structure collapses.

The other dynamic in play that's visible in the chart below is the distribution of wealth and power is so asymmetric that it's destroying politics as a "solution."Financialization, neoliberalism and its handmaiden globalization have skewed income, wealth and power to the very top of the distribution pyramid: the rich are getting richer, and the super-rich are getting super-richer--and more politically powerful as a result.

But the asymmetry isn't driven solely by the perversities of neoliberalism / financialization: beneath the surface, the economy is shifting in fundamentally dramatic ways that exacerbate wealth-income distribution asymmetries: there are fewer winners and more losers.

These forces have polarized politics into two camps: one with an ideological faith that markets left to themselves will sort it all out to everyone's satisfaction and the other camp with an ideological faith that the central state is the only solution via redistribution of income.

As I've explained here many times and in my many books, both are wrong:neither the market nor the state can maintain the status quo in an era of DeGrowth and tectonic shifts in demographics, natural resources, energy, technology, etc.

Humans being humans, the failure of politics as a "solution" only hardens the ideological resolve of each camp, insuring even more bitter partisanship and more zealotry, as neither side is willing to admit that both "solutions" are wanting, as both "solutions" only work in periods of rapid growth that generates more goodies for everyone.

That era ended a decade ago, and the illusion of growth has been generated by the temporary artifice of debt and money-creation.

As a society, we are ill-prepared for the end of "politics is the solution." No wonder being a politician is no longer fun.

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.


My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Cooper K. ($10/month), for your outrageously generous subscription to this site-- I am greatly honored by your support and readership.

Read more...

Lesson of the S-Curve: Doing More of What's Failed Will Fail Spectacularly

That nothing is truly "free" will be another lesson of the S-Curve.

I often refer to the S-Curve because Nature so often tracks this curve of ignition, rapid expansion, stagnation and decline.

One lesson of the S-Curve is that the human bias to keep doing more of what worked so well in the past leads to doing more of what failed even as results turn negative.

The dynamic in play is diminishing returns: the yield on the policy that worked so splendidly at first diminishes with time.

Credit offers a cogent real-world example. When credit becomes available in a credit-starved economy, it generates a rapid, sustained expansion as credit-worthy borrowers borrow and spend on new productive capacity, consumer goods, housing, etc., all of which further drives expansion.

But once credit has saturated the entire economy, the only pool of borrowers left are uncreditworthy (i.e. at risk of default), and the only projects left unfunded by credit are laden with risk.

Either way, credit expansion stops: either lenders prudently refuse to issue credit to risky borrowers and ventures, and credit expansion grinds to a halt, or they foolishly lend money to borrowers and ventures which predictably default, triggering a credit crisis that brings imprudent lenders to their knees and triggers cascading defaults as declining asset prices push marginal borrowers into bankruptcy.

Doing more of what was successful in the boost phase of the S-Curve--expanding credit-- is now doing more of what's failed. Expanding credit in a credit-saturated economy only sets up cascading defaults.

The human response to the failure of what worked so well is disbelief: the problem, we reckon, is we didn't do enough the first time. So the answer to the failure of extending more credit is to extend even more credit and lower lending standards so anyone who can fog a mirror can get a loan.

At this point, diminishing returns become negative returns: doing more of what's failed is now not just unhelpful--it's actively destructive. Cramming more credit down the throats of risky borrowers and ventures guarantees a full-blown credit crisis when the defaults start taking down lenders and crushing asset prices that were dependent on credit expanding into eternity.

We are at the juncture where doing more of what's failed will push the economy into profound recession. Now that the economy is totally dependent on ever-expanding credit, there is no alternative (TINA) to expanding credit, no matter how destructive this expansion of bad credit will be in the near future.

It's no surprise that calls for free money (Universal Basic Income, UBI) are rising: the only real "solution" to soaring defaults is to give the borrowers free money to service their debt, or print trillions of dollars to pay off the soon-to-default debts.

That nothing is truly "free" will be another lesson of the S-Curve. The initial wave of free money will work wonders. Then diminishing returns will set in, and the response will be to jack up the printing and distribution of free money, i.e. do more of what's failed until the free money printing and distribution destroys the currency and the economy.

Thanks to the S-Curve, all this is clearly visible in the crystal ball.

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.


My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Cooper K. ($10/month), for your outrageously generous subscription to this site-- I am greatly honored by your support and readership.

Read more...

Forget "Money": What Will Matter Are Water, Energy, Soil and Food--and a Shared National Purpose

If you want to identify tomorrow's superpowers, overlay maps of fresh water, energy, grain/cereal surpluses and arable land.

The status quo measures wealth with "money," but "money" is not what's valuable. "Money" (in quotes because the global economy operates on intrinsically valueless fiat currencies being "money") is wealth only if it can purchase what's actually valuable.

As the world slides into an era of scarcities, what will matter more than "money" are the essentials of survival: fresh water, energy, soil and the output of those three, food. The ability to secure these resources will separate nations that fail and those that survive.

In a world of abundance, it's assumed every essential resource can be bought on the open market. Surpluses are placed on the market and anyone with "money" can buy the surplus.

Things work differently in scarcity: "money" buys zip, zero, nada because nobody with what's scarce can afford to give it away for "money" which can no longer secure what's scarce.

Parachute into a desert with gold, dollars, euros, yen and yuan, and since there's nothing to buy, all your money is worthless. Once you're thirsting to death, you'd give all your money away for a liter of fresh water. But why would anyone who needs that liter for their on survival trade it for useless "money"?

Imagine the longevity of a regime which sold the nation's food while its populace went hungry. Not very long once the truth comes out.

Having resources is only one component: consumption is the other half of the picture. Having 4 million barrels a day of oil (MBPD) is nice if you're only using 3 MBPD, but if you're consuming 8 MBPD, you still need to import 4 MBPD.

Water and soil are not tradable commodities. Nations which share water resources (rivers and watersheds) have to negotiate (or fight wars over) the division of that scarce resource, but as a generality, fresh water and fertile soil can't be bought and sold like grain and oil.

The number of nations with surplus energy and food to export is small. As I noted in Superbugs and the Ultimate Economic Weapon: Food, there are contingencies in food production which could quickly erase surpluses and exports and trigger widespread shortages that have the potential to unleash social unrest.

Energy exports are also a natural economic weapon with which to reward needy friends or punish desperate enemies (no oil or natural gas for you!).

But energy exports are also contingent: natural gas and oil pipelines can be blown up by non-state players, shipping chokepoints can be closed or mined, regimes can change overnight and so on.

The value of a nation's currency can be understood as a reflection of its essential resources, what I have called the FEW resources (food, energy, water) which I would now amend to FEWS (food, energy, water, soil).

Nations which are frugal about creating currency (either via printing/issuance or borrowing it into existence) while prudently managing their fresh water, energy, soil and food will in effect be "backing" their currency with their surpluses of what will be increasingly scarce.

Nations which borrow into existence or emit currency profligately while having scarce FEWS resources and enormous needs for imported food and energy will find their currency rapidly loses value.

When there's not enough energy and food to go around, who will trade what's scarce and valuable for what's abundant and worthless ("money")? The answer is no one.

If you want to identify tomorrow's superpowers, overlay maps of fresh water, energy, grain/cereal surpluses and arable land: those nations with abundances that can yield sustainable surpluses in food and energy while taking care of domestic needs will have wealth and power.

Those with diminishing resources that are inadequate to meet domestic demand will have very little wealth, no matter how much "money" they print or borrow into existence or how much consumerist "stuff" they produce.

There are two other attributes that matter: being able to defend your FEWS resources from would-be thieves and a widely shared national sense of purpose that enables shared sacrifice for the common good. Without that shared source of unity, the elites with wealth and power will grab more and more, bringing down the house around them with their limitless greed.

Sacrifice either starts at the top or it means nothing. Forcing commoners to suck up sacrifices only exacerbates disunity and national dissolution.

There are no guarantees that any nation will be able to assemble all that it will take to survive an era of scarcity. But some have better odds than others. Place your bets accordingly.

I'm reprinting these charts to emphasize how few nations have geopolitically meaningful surpluses of food.

Corn is often the primary food for livestock. No corn, not much meat.

The exportable surpluses of wheat are concentrated in a few hands.

The same is true of soybeans, a source of protein in Asia and livestock feed everywhere. This chart shows the top producers and the top consumers.

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.


My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Justin D. ($5/month), for your marvelously generous pledge to this site-- I am greatly honored by your support and readership.

Read more...

Superbugs and the Ultimate Economic Weapon: Food

The food-exporting superpowers are easy to identify.

As my esteemed colleague Michael Snyder chronicled in a recent Zero Hedge post, world agricultural production is under assault from extreme weather and diseases such as African swine fever. Floods & Drought Devastate Crops All Over The Planet; Is A Global Food Crisis Be Coming?

Everyone understands extreme weather is a danger to food production. The overuse of antibiotics is less well understood. As this article explains, most antibiotics are given to livestock, which then become breeding grounds for antibiotic-resistant microbes, which are known as superbugs once they develop immunity to all conventional antibiotics.

Are antibiotics turning livestock into superbug factories?

Almost 80% of all antibiotics in the United States aren’t taken by people. They’re given to cows, pigs, and chickens to make them grow more quickly or as a cheap alternative to keeping them healthy. These drugs could give rise to superbugs—bacteria that can’t be treated with modern medicine—and things are only getting worse. In 2013, more than 131,000 tons of antibiotics were used in food animals worldwide; by 2030, it will be more than 200,000 tons.

Here's the problem with superbugs: you can't kill them with standard-issue antibiotics. They spread like wildfire through monoculture crops and livestock yards and kill with indiscriminate alacrity.

The only solution, poor as it is, is to kill every animal that might be infected--tens of millions or hundreds of millions in the case of African swine fever.

Pigs and chickens are breeding grounds for diseases that jump the low barrier between livestock and humans. So the superbug that starts out killing animals can, with generally modest genetic modifications via variability, start infecting and killing humans with the same alacrity.

Super scary: animal agriculture linked to global 'superbug' threat

How industrial farming techniques can breed superbugs

Superbugs to Kill More People than Cancer if Industrial Agriculture Doesn't Ditch Antibiotics and Pesticides

How Drug-Resistant Bacteria Travel from the Farm to Your Table Antibiotic-resistant bacteria from livestock pose a deadly risk to people. But the farm lobby won't let scientists track the danger.

A Mysterious Infection, Spanning the Globe in a Climate of Secrecy The rise of Candida auris embodies a serious and growing public health threat: drug-resistant germs.

While these articles focus on the dangers of superbugs to livestock and humans, superbugs are equally dangerous to cereal and other commodity crops. Blights, fungal pathogens and other plant disease vectors can arise that cannot be controlled by herbicides. Insects undergo genetic modification and become resistant to pesticides. As pesticides become more toxic, more systemic and more ubiquitous, they start killing or weakening the "good" insects global agriculture depends on--the pollinating insects.

Superbugs don't respect national or ideological borders. Every agricultural economy based on monocultures and mass use of antibiotics, pesticides and herbicides is vulnerable to superbugs.

As I've often noted here, centralization itself creates systemic vulnerabilities.A handful of industrial-scale super-farms raising monoculture crops and livestock are exquisitely vulnerable to the rise of superbugs. A thousand smaller farms and livestock operations that manage diseases without antibiotics and chemicals are more resilient, just as matter of distance from each other and the variability of genetic lineages in their crops and livestock.

As many others have pointed out, oil and food production are now essentially one system: industrial-scale agriculture depends on industrial fuels and petrochemical fertilizers; no oil and natural gas, no food.

But we can't eat oil. A nation might have the financial means to buy energy or be blessed with energy resources within its borders, but if superbugs wipe out much of its cereal and other commodity crops and its livestock, its people will go hungry.

And hungry people topple governments. Governments can lie about all sorts of statistics such as unemployment, GDP, inflation and so on, but a government that claims food is abundant when it is actually scarce is a government on its way to the dustbin of history.

The Bastille was torn down by a raging mob in Paris as bread prices skyrocketed beyond the reach of the poor.

So let's project what happens when some nations don't have enough food and others manage to have a surplus. Food becomes the ultimate economic weapon, as long as there's still enough energy to transport it from exporter to importer and distribute it to the hungry mobs.

As this chart from the World Bank shows, the world has enjoyed steadily increasing yields of cereals. Nobody expects a decline back to the levels of 20 years ago, but extreme weather and a handful of superbugs could very quickly reverse this upward trend.

The majority of many commodity crops feed livestock, not humans, and as a general rule it take five or more kilos of grain to produce one kilo of meat. No corn and soybeans, no meat.

Wheat and rice are staples of the human diet, and the exportable surpluses of wheat are concentrated in a few hands.

The same is true of soybeans, a source of protein in Asia and livestock feed everywhere. This chart shows the top producers and the top consumers.

The asymmetry between exporters and importers delineates the power implicit in food. Those with surpluses to sell hold power over those who need the surpluses to feed their restive, hungry populations.

The food-exporting superpowers are easy to identify: The U.S., Russia, Ukraine, France, Brazil, Argentina, Canada, and weather permitting, Australia. This reduces down to three superpower regions: North America at the top, Russia and Ukraine, and Brazil and Argentina, with France replacing Germany as the continental superpower once food matters.

As for rice, the top exporters are India, Thailand and Vietnam. Recalibrate their potential power in the era of food scarcity accordingly.

It only seems farfetched to say that food will, with energy, redefine political power in the decades ahead because the superbugs haven't yet devastated global tradable food. Rivals without enough food will surrender power to those with scarce surpluses to use to reward allies and cripple enemies.


Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.


My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, John V. ($5/month), for your superbly generous pledge to this site-- I am greatly honored by your steadfast support and readership.

Read more...

China's Insurmountable Global Weakness: Its Currency

If China wants superpower status, it will have to issue its currency in size and let the global FX market discover its price.

Quick history quiz: in all of recorded history, how many superpowers pegged their currency to the currency of a rival superpower? Put another way: how many superpowers have made their own currency dependent on another superpower's currency?

Only one: China. China pegs its currency, the yuan (RMB) to the U.S. dollar. It adjusts the peg a bit here and there, but the yuan's value is set by the Chinese state, not by the market of buyers and sellers.

(Yes, various nations have used gold coins minted by rival powers (Spanish pieces of eight were money everywhere, for example) but we're talking about fiat currencies, backed by nothing but supply and demand, not intrinsically valuable gold coins.)

Second question: is pegging your currency to a rival power's currency a sign of strength? The obvious answer is no. It's a sign of weakness. A real financial power issues its own currency and let's the global FX (foreign exchange) market discover the relative price / value of the currency. The financial power trusts the market to discover the value / price of its currency, and it responds by raising or lowering the yields on its government bonds and other pricing inputs.

If the issuing nation won't allow users and owners of its currency price discovery, few will want the currency because they can't trust the state's arbitrary, non-market price. This reality is reflected in the chart below of global currencies' relative share in global payments, loans and reserves. China's currency, the yuan (RMB) is basically signal noise: its global role in payments, loans and reserves is near-zero.

Why does China cling to state control of its currency's valuation? The obvious answer is that China's economy and global role are too fragile to absorb a major revaluation of its currency up or down: a major loss in purchasing power would raise the cost of energy and other imports, while a major strengthening of the yuan would crush the global competitiveness of China's goods and services.

As for the idea that China will unpeg its currency when it backs it with gold, recall that "backed by gold" means "convertible to gold." If the yuan weakens and other nation-state owners of the currency decide gold is the safer bet, China will have to exchange yuan for gold if it wants to make good on its claim to be backing its currency with gold.

If the currency isn't convertible to gold, it isn't backed by gold at all; it's just another fiat currency backed by nothing.

If China wants superpower status, it will have to issue its currency in size and let the global FX market discover its price. Anything less leaves China dependent on the U.S. and its currency, the dollar.

If China is so powerful, why doesn't it let its currency float on the FX market like other trading nations? Until its currency floats freely like other currencies and the yuan's price is discovered by supply and demand, China's global role in currency payments, loans and reserves will remain near-zero. That is a weakness that appears to be insurmountable.

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format.


My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Andrew H. ($5/month), for your splendidly generous pledge to this site-- I am greatly honored by your support and readership.

Read more...