The Round-Up: August 3rd 2007

The situation in the credit markets continues to worsen as a sudden attack of risk aversion rapidly dries up liquidity. And this is before the resetting of adjustable rate mortgages (ARMs) begins in earnest - to the tune of $50 billion - in October. Watch this space.

On the Canadian energy scene, Shell pumps $27 billion into the oil sands, even as oil patch profitability falls. Abu Dhabi wants to invest in Canadian power plants, and there are plans for BC to host an LNG terminal. Wind power grows rapidly in Ontario and Quebec, making a few enemies along the way. In BC they ask: should public transit be free?

On the climate front, water is the issue - too little and too much. Finally, in the tug-of-war between efficiency and resilience, efficiency has the upper hand, but what price will we pay for allowing our life support system to become brittle?

Going With The Flow?

You may remember that our definition of household cash is as broad as can be. We include all household "banking products", per se, but also include all household holdings of bonds, inclusive of Treasuries, Agencies, corporates, muni's and mortgage backed paper. Implicitly, we are assuming bond holdings could be converted to cash at a moments notice. So what follows is simply total household cash less total household liabilities over the last six decades.

Finance chiefs vie to soothe mortgage, credit 'crisis'

Finance chiefs and international banks voiced caution Thursday, reminding investors that stock markets can fall as well as rise, as fears about the distressed US mortgage market and a credit "crisis" continued to unsettle global markets.

Stock markets in the United States, Europe, Asia and Central America have endured volatile trading this week as worries about America's multitrillion-dollar mortgage sector and tightening credit have triggered broader concern.

Analysts say market swings have been magnified because of US investments held by foreign investors and banks.

Cold feet becoming the factor: Fear of risk sending investors into retreat

The widening fallout in the U.S. mortgage industry has reminded investors of a risk they had forgotten: the fear of risk itself.

As unpaid mortgages and bankrupt lenders bring the weakest segments of the mortgage industry to its knees, investors have begun dumping debt and other investments that would seem to have nothing to do with home loans.

Corporations are paying higher interest rates on their bonds, some private-equity firms are having trouble raising money to close big purchases, and the stock market has lost 7 percent of its value in less than two weeks — all mainly because of an exodus from risk.

“I would characterize it as a loss of excessive risk appetite,” said Ian Lyngen, an interest-rate strategist at RBS Greenwich Capital. “There is a lot more apprehension about layering on riskier assets.”

For the markets, global chill

The 1970s British Broadcasting Corp comedy show Monty Python's Flying Circus once did a skit about a new way that council flats - public housing - were being built near the town of Peterborough in England. Instead of building these 25-story towers through the conventional employment of construction workers, concrete and steel, this council was employing the services of El Mystico (Terry Jones), a magician in cape and top hat, along with his curvaceous assistant, in her sequined leotard, the Amazing Janet....

....These flats constructed with the black arts were just as reliable and sturdy as those conventionally constructed - with one exception. According to Clement Onan, identified as an architect to the council, "They are as strong, solid and as safe as any other building method in this country - provided, of course, people believe in them."

If tenants did start to doubt the actual existence of the buildings they were then living in, the building would fall down, until their faiths were restored, then the buildings would magically reassemble themselves....

....If you want a contemporaneous example of something held up only by the faith of its participants, take a look at the corporate debt markets of the past few years. And if you want an example of what happens when that faith evaporates, look at the world's stock markets last week.

Bear, Lehman, Merrill, Goldman Traded as Junk, Derivatives Show

On Wall Street, Bear Stearns Cos., Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Goldman Sachs Group Inc., are as good as junk.

Bonds of U.S. investment banks lost about $1.5 billion of their face value this month as the risk of owning the securities increased the most since at least October 2004, according to Merrill indexes. Prices of credit-default swaps based on the debt imply that their credit ratings are below investment grade, data compiled by Moody's Investors Service show.

The highest level of defaults in 10 years on subprime mortgages and a $33 billion pileup of unsold bonds and loans for funding acquisitions are driving investors away from debt of the New York-based securities firms. Concerns about credit quality may get worse because banks promised to provide $300 billion in debt for leveraged buyouts announced this year.

Running Scared

Sign of the times: On a day when another mortgage lender, American Home Mortgage, teetered toward liquidation, Standard & Poor's said the U.S. corporate bond market was officially speculative grade.

The big ratings agency said 50.7% of the corporate bond market is now rated speculative grade, the first time this has happened, marking a decade-long shift toward more aggressive finance strategies and the evolution of the leveraged finance market. S&P calls anything below BBB- "speculative," but most people just call it junk. These days, the market calls it scary.

The report came out as another mortgage company fell to the mercy of its lenders after a big financial shock in the subprime mortgage market. American Home Mortgage isn't a subprime lender, but it did underwrite loans that require little or no documentation of a borrower's income, so-called Alt-A loans.

The company said Tuesday it was getting margin calls from its banks because loans and securities it was holding as collateral against those loans have dropped in value because of the broader credit market turmoil that began over a week ago.

Totally Discredited S&P

The S&P is sure right on top of things as this 3:42 PM headline shows: S&P Puts AHM Rankings on Negative Watch. Wow. What a bold, stunning, and timely move by the S&P. Let's take a look.

Standard & Poor's Ratings Services on Tuesday placed its "average" residential prime ranking for American Home Mortgage Investment Corp. on credit watch with negative implications.

The ratings agency also removed the home lender from its "select servicer list."

S&P believes the company's financial troubles could result in higher turnover in its servicing operation and hurt servicing performance.

How clever of the S&P to figure out that a company that has stopped doing business might experience "higher turnover in its servicing operation and hurt servicing performance". That is simply stunning analysis. Who else could have figured that out?

Now that American Home Mortgage has ceased doing business, I suppose it's safe for the S&P to remove AHM from its "select servicer list".

The Housing Finance Breakdown: Interview With

Q:Mozilo caused quite a stir recently when he announced that it's not just subprime borrowers who are defaulting on Countrywide, but also the borrowers with prime loans. If this is occurring at Countrywide, is it safe to assume this is an industrywide problem?

A: Yes. That's because this isn't really a mortgage problem per se, it is a consumer debt problem, and a deteriorating incomes problem. When you cut through the specious apologetics, real incomes for most Americans have been declining since the mid-70s. It is probably much worse than acknowledged because inflation rate estimates by the government are generous to say the least (again for obvious conflict-of-interest reasons), and those are what is used to normalize all of the relevant data series.

The trend has accelerated under the Bush admin. Interestingly, even four-year college grads are seeing declining starting incomes. The education canard, which the Fed loves to use, is a lie.

We as a country have been able to paper over the problem (no pun intended) through the unprecedented expansion of debt. It has turned the economy into a huge Ponzi scheme, with housing at the core.

We now are in manifest trouble because we have reached the point where the real income generated by society as a whole is no longer enough to service all of that debt. This goes for individuals and their mortgages and credit cards, it goes for corporations trying to fund LBOs and M&A, and it goes for the government and general spending.

Subprime Defaults Blamed for U.S. Earnings Setbacks

"The subprime slime is oozing," said Gary Shilling, president of A. Gary Shilling & Co. in Springfield, New Jersey, who correctly predicted the recession in 2001. "As home equity evaporates, that takes out the foundation of strong consumer spending growth, which has been the mainstay of the economy."

More on Alt-A

As I mentioned in the comments, it appears August rhymes with February. In February standards started to be tightened for many subprime products - or the products were eliminated completely. Now the same appears to be happening for Alt-A.

Keep Your Eyes on Adjustable-Rate Mortgages

So far, most of the loans gone bad were among the worst of the worst. Some were based on outright fraud, either by the lender or the borrower. In many cases, buyers were never going to be able to make their monthly payments and were instead banking on a rapid appreciation in home values.

But the pool of people falling behind on their house payments is starting to widen beyond this initial group, and adjustable-rate mortgages are the main reason. Starting in the spring of 2005, these mortgages began to get a lot more popular, largely because regular mortgages no longer allowed many buyers to afford the house they wanted.

They turned instead to a mortgage that had an artificially low interest rate for an initial period, before resetting to a higher rate. When the higher rate kicks in, the monthly mortgage bill typically jumps by hundreds of dollars. The initial period often lasted two years, and two plus 2005 equals right about now.

The peak month for the resetting of mortgages will come this October, according to Credit Suisse, when more than $50 billion in mortgages will switch to a new rate for the first time. The level will remain above $30 billion a month through September 2008. In all, the interest rates on about $1 trillion worth of mortgages, or 12 percent of the nation’s total, will reset for the first time this year or next. A couple of years ago, by comparison, only a marginal amount of mortgage debt — a few billion dollars — was resetting each month.

So all the carnage in the mortgage market thus far has come even before the bulk of mortgages have reset. “The worst is not over in the subprime mortgage market,” analysts at JPMorgan recently wrote to the firm’s clients. “The reason for our pessimism is that loans originated in late 2005 and all of 2006, the period that saw peak origination volumes and sharply decreased underwriting quality, are only now starting to reset in large numbers.”

Too big to fail: Germany rescues subprime lender

The German government has pulled together a rescue operation -- drawing in all three pillars of the country's banking system -- to shore up Europe's first major casualty of the subprime crisis.

The rescue of IKB, a specialist lender based in Dusseldorf, began on Sunday when Peer Steinbruck, the German finance minister, called leading banking executives to discuss a bailout. According to people who took part in the conference call, Jochen Sanio, head of Germany's financial regulator, is said to have warned of the worst banking crisis since 1931.

IKB announced a big fall in its earnings because of subprime exposure. The news sent its shares plunging and prompted KfW, the state-owned development bank, to step in with a pledge to guarantee obligations of more than E8 billion ($10.93 billion) -- more than five times IKB's stock market value.

The intervention suggested that the problems at IKB are much worse than thought. Mr Steinbrück phoned several banking executives, including Josef Ackermann, chief executive of Deutsche Bank, on Sunday to bring them on board.

Credit derivatives 'performing poorly' in crisis

The cost of insurance against credit defaults hit record levels on both sides of the Atlantic on Monday amid concerns that some investors were being forced to sell assets to cover losses on subprime mortgages.

Investors rushed to buy contracts that would protect them against corporate credit defaults after it emerged that more European institutions had suffered losses following the crisis in the US subprime mortgage market.

IKB, a German lender specialising in providing credit to smaller companies, and Commerzbank, the country's second-biggest bank, both warned they would be hit by losses from risky US home loans to borrowers with poor credit histories.

One sided coins and unwanted tools

Italian banks, including UniCredit and Banca Italease SpA, have sold swaps to as many as 100,000 small businesses, according to lawyers and industry groups. Concern about the contracts intensified last month, when Milan-based Italease said about 2,200 clients may lose 600 million euros on derivatives. Italy's central bank this week barred Italease from selling its most- profitable derivatives and ordered directors to resign.

The Bank of Italy estimates that non-financial companies had 3 billion euros of liabilities on derivatives at the end of 2006.

Bear Stearns hedge funds file for bankruptcy protection

Two Bear Stearns Cos. [BSC-N] hedge funds heavily exposed to the flagging mortgage industry filed for bankruptcy protection late Tuesday, two weeks after the company told investors one was essentially worthless and the other had lost more than 90 per cent of its value.

The Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd. and the Bear Stearns High-Grad Structured Credit Strategies Enhanced Leverage Master Fund Ltd. — which invested in securities backed by risky mortgages — filed for protection under Chapter 15 of the bankruptcy code, according to court documents.

3rd Bear Stearns fund in jeopardy

A Bear Stearns' hedge fund with about $900 million in mortgage investments is reportedly facing huge losses and is refusing to return investors' money, according to a news report published online Tuesday.

Revelations of the imperiled hedge fund comes weeks after the investment bank closed two hedge funds that suffered losses arising from the subprime-mortgage market.

The value of the Bear Stearns Asset-Backed Securities Fund has fallen amid a flurry of mortgage markdowns, the Wall Street Journal reported, sparking fears the bank will have to close the fund as it has done to two others.

Dr Doom on stock markets, the Hindenburg Omen and what next

Marc Faber, aka Dr Doom, notes that Michael Kahn, who writes technical comments for Barron’s, recently highlighted the fact that according to the Hindenburg Omen, the US stock market had given several strong sell signals in July.

“Normally a single signal is not of great significance, but when several signals occur within a short period of time, the odds for a stock market crash increase”, says Faber.

As of Tuesday, July 23, the Hindenburg signal had fired at least eight times over the previous six weeks. The Hindenburg Omen is the alignment of several technical factors that measure the underlying condition of the stock market and warns of either impending market crashes or severe declines.

Longer mortgages ease pain, report says

The heated competition has led to lower fees for consumers and products such as interest-only mortgages, as well as the extended 40-year amortization period. In Canada, anyone with less than a 20% down payment on a home must get mortgage insurance, if borrowing from a financial institution covered by the Bank Act.

The 20% down payment rule was lowered from 25% this year, another factor helping to fuel the housing market.

"All the changes have made a big difference in this housing cycle from the one in the 1980s. If rates go up one percentage point, consumers can just extend the amortization period," Mr. Holt says in the report.

The report suggests Canadians have been taking advantage of the longer amortization period. "There is enough evidence to convince us that a very material amount of mortgage originations are going for much longer amortization periods," it says.

The trend is also driving up housing prices because consumers can deal with what Mr. Holt calls "down payment shock" by increasing the amortization period.

Beazer Shares Plunge; Bankruptcy Speculation Denied

Shares of Beazer Homes USA Inc., the homebuilder facing investigations by the FBI and securities regulators, plunged the most ever on speculation the homebuilder may file for bankruptcy. Beazer said in a statement there was no truth to the rumor.

"We do not know where these scurrilous and unfounded rumors started," Beazer said in a statement distributed by Business Wire.

Atlanta-based Beazer's shares fell $2.53, or 18 percent, to $11.46 as of 11:59 a.m. in New York, after earlier dropping as much as 42 percent to $8.10.

Beazer led shares of U.S. homebuilders lower. The worst housing slump in 16 years has left eight homebuilders nursing losses of $1.97 billion and expenses of more than $3.1 billion as property values fall and land purchases are abandoned.

Chapter 11 for BZH?

I do not know whether the chapter 11 story is a rumor or a fact as BZH is now down a mere 20%. What I do know is that congratulations are in order to BZH insider Ian J. McCarthy who on November 14, 2006 exercised an option to buy 179,535 shares at $8.02 and on the same day unloaded all 179,535 shares for $43.07.

On April 17,2006 Ian J. McCarthy did the same thing with 13,149 shares. Ian J. McCarthy is the president and CEO of Beazer Homes. No doubt this was all part of a broader diversification strategy.

Market catches debt flu

Worries about falling demand for corporate credit hammered bank stocks yesterday, while energy stocks dipped despite oil prices touching new highs on another wild day for the Toronto Stock Exchange.

The exchange's main index, the S&P/TSX composite index, fell 213.89 points, or 1.5%, at 13,645.74 in a volatile session. At one point, the benchmark plummeted 341 points.

The index has shed 992 points, or almost 7%, in the past two weeks over concerns from investors about falling demand for subprime lending, its potential impact on underwriting fees among banks and on big bank earnings.

Mounting earnings fears deal another blow to TSX

Two analyst reports, one questioning the health of Alberta's oil patch and the other on Canadian banks' exposure to the U.S. subprime market, plunged those heavily weighted stocks into a sea of red.

Fred Ketchen, director of equity trading for ScotiaMcLeod, said liquidity problems and credit-risk concerns are taking their toll on blue-chip stocks.

"We are worried where all the money has gone and where it hasn't been," he said. "Most of these problems are in the United States but the close interlink of our markets means that sooner or later, we are going to have to at least adjust."

Mogambo Guru: Negative Inflation - Courtesy of Coke Chocula

Investors who are still sitting on their stocks apparently have a Big Undying Belief (BUB) in the ability of the Fed, Wall Street and the Plunge Protection Team (that was created by an Executive Order issued by President Ronald Reagan to "manage" any stock market "surprise") to keep the markets from falling, or are very stupid, or are all playing with someone else's money, or are whacked out on drugs either prescription, over-the-counter or illegal (or all three at once), or something even more bizarre, like believing in the complete absence of counter-party risk in the hedge "insurance" provided by buying enormous amounts of mysterious derivatives at huge degrees of leverage.

Dow Jones Industrials Skating on Thin Ice

Perhaps the most important market in the world today is the vast network of foreign currencies, where total trading volume, including derivatives and futures, average around $2.9 trillion a day. This is ten times the size of the combined daily turnover on all the world's equity markets. And as world's economies have become increasingly integrated, so have the foreign exchange and global capital markets.

But the foreign exchange market is only one piece, albeit a very important one, of a bigger puzzle. Turnover of interest rate, currency and stock index derivative contracts rose 24% to a mind boggling $533 trillion in the first quarter versus the previous quarter, underscoring the enormous leverage in the global markets. Thus, any major unexpected event in the currency markets can touch off a panic and violent market reactions in the global bond and stock markets, or gold.

Gold, Silver Fall as Equity Markets Tumble on Credit Concerns

Gold and silver fell in New York on speculation a decline in equity markets will reduce investment demand for precious metals.

Gold fell 3.6 percent last week when stocks worldwide suffered a $2.1 trillion sell-off. Shares dropped today amid concern that defaults among U.S. subprime mortgages may be spilling over to other credit markets. Bear Stearns Cos. blocked investors from withdrawing money from a hedge fund, and Macquarie Bank Ltd. warned two of its funds may lose 25 percent.

Strong ARMing the Market

Is this what the deflating of a credit bubble looks like? Yes, it is. And there's plenty more where that came from.

Ludwig von Mises once said:

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

"Unfortunately, it's too late to stop the crackup," says our friend Mike "Mish" Shedlock. "All you can do is be ready for whatever market volatility is headed down the pike."

Headwaters of Disaster

While debt is natural result of our modern banking system, debt’s actual role in the modern banking economy is that of a parasite. Debt, in and of itself, cannot exist, it needs to be attached to something in order to survive; and, in modern banking, the host-body to debt is productivity and savings.

Eventually in a debt-based system, the increasing accumulation of debt, like free-radicals in the body, overwhelms the host-body and the system collapses. This is where the economy is today—the tipping point where the debt driven destruction of productivity and savings is gaining momentum....

....In savings-based economies, producers and savers are rewarded for producing and saving. In debt-based economies, they are penalized because in debt-based economies the value of money declines as increasing amounts of debt money are continually created; diluting and debasing the value of money held by producers and savers while benefiting those closest to credit.

While debt-based money looks and acts the same as savings based money, it is not. Debt-based money can be leveraged many times its original value by investment banks. This is why modern banking is on the verge of collapse today. Investment banks, those closest to the spigots of credit, have leveraged their proximity to credit by such high multiples that the global economy is now vulnerable to systemic risk.

Takeover going ahead: BCE

Shares of BCE closed down 39 cents yesterday at $39.89 on the Toronto Stock Exchange as investors appear to be reacting to concerns over whether private equity suitors will be able to secure the cash necessary to close a rash of recent deals involving everything from pharmacy chains to car manufacturers.

Rising interest rates and a crisis in the U.S. subprime mortgage market has lenders scrutinizing borrowers more closely – particularly when it comes to higher-risk debt financings. Last week, for example, a group of U.S. banks was unsuccessful in marketing a $12 billion debt package linked to the sale of Chrysler to Cerberus Capital Management LP.

Bank warns hedge funds of liquidity crunch

Credit Suisse has warned hedge funds that banks' risk appetite, credit availability and global liquidity is in danger of evaporating "as fast as water off the desert tarmac", leading to more collapses such as that suffered by Sowood Capital, a $3bn (€2.2bn) US manager.

Credit Suisse warned in a paper by its fixed income analysts that banks are carrying a large exposure to new bond issues and, if they cannot sell them on, then "rightly or wrongly, the most natural response would be to sharply curtail other credit lines to hedge funds and smaller counterparties. Beyond a certain point that could precipitate a cascade of position liquidation".

The warning came the day after Sowood Capital, a US hedge fund manager, said it was winding down its funds. Its assets under management had been worth $3bn at the start of last month. It had been caught in a vicious circle of losses, margin calls and asset sales.

The U.S. Credit Crunch Reaches from Main Street to Wall Street

The “credit crunch” that started on Main Street with the U.S. housing market has now spread to Wall Street. But the next question is how bad this liquidity squeeze will get: At its worst, it could terminate the buyout wave that’s been a big part of the reason U.S. stock prices have achieved record highs this summer – sending U.S. shares into a tailspin. And that, in turn, would turn into a bear-market contagion that spreads to international markets.

To understand just how bad things could get, it’s important for us to look at how this liquidity squeeze got started, and then to see how it could affect the corporate debt market – for that will help determine the ultimate affect on the buyout market, and then stock prices.

How Much Liquidity is Enough?

Over the last year, fuel for the equity markets has largely been coming from cheap debt available to private equity firms mostly due to the yen carry trade. The Dow Jones "Private Equity Analyst" reports that the US private equity firms raised $137 billion during the first half of 2007, a 42% increase over the first half of 2006. The cash from Leveraged Buyouts (LBOs) flooded the markets and was reinvested pushing stocks to their all-time highs. The key point here is - the stock market is being pushed up by borrowed funds. Since a lot of the debt will have to be repaid in yen, the sharp rise in the Japanese currency last week spooked all markets.

The crash that could come

Investors and ordinary citizens have good reason to worry about a perfect economic storm: a deepening loss of confidence in the dollar leading to higher interest rates; the higher rates bringing a crashing end to a hedge-fund, private equity, and merger binge that has depended heavily on cheap borrowed money; the boom in bait-and-switch mortgages ending in a morning-after of rising defaults and sinking housing values; inflationary pressures in food, oil, and other commodities leading to still higher interest rates -- all unsettling stock and credit markets and putting a new squeeze on consumers borrowed to the hilt.

Some lessons for investors: Stay out of the deep end

It's not pretty out there. But a few basic lessons can help. It's still summer, but as the financial markets declared last week, back-to-school season for U.S. investors has arrived.

With the equity markets off sharply for the week and the credit markets seizing, investors are being forced to relearn some of the basics forgotten during the private-equity, easy-credit, corporate-buyout boom of recent years.

American moves to Canada reach record high

The number of Americans admitted to Canada last year reached a 30-year high, with a 20 per cent increase over the previous year and nearly double the number that arrived in 2000.

Oilpatch profits expected to drop, for now

Profits in Canada's oilpatch are expected to pull back from record levels this year, dropping nearly 25 per cent as costs for labour and materials soar, the Conference Board of Canada predicts.

With lower oil prices earlier this year and costs continuing to rise at a rapid pace, Canada's oil industry is expected to earn $12.6 billion this year, down from a record of $16.7 billion in 2006, the board said in a report released Wednesday.

Canadian oil industry profits seen tumbling in 2007

"Rising costs in Canada's oil sector are becoming increasingly problematic for energy companies," said the report. "Labour and material shortages in Alberta are pushing the cost of new investment projects to near-prohibitive levels."

Cost increases will moderate this year, but next year are expected to grow by double-digits on average over the next four years, the report said.

Beyond petroleum: It's time to rebrand Alberta

Forecasts show a continuing world demand for energy that fossil fuels alone are unlikely to satisfy. Last week, CIBC World Markets warned of $100-a-barrel oil by the end of next year. Although Canada is self-sufficient, satisfying North American demand will require exploitation of all forms of energy, including renewables.

Alberta could engage other Canadians in a positive dialogue, because all regions of the country have the potential to develop forms of bio-energy. Alberta could build strong alliances with Ontario, Quebec, Atlantic Canada, Saskatchewan and other regions, sharing an energy future by working together as key stakeholders.

Two years ago, the Energy Council of Canada brought together a coalition of 20 energy industry associations, which successfully persuaded energy ministers from across Canada to work with them in devising a Canadian energy policy. Their central message was simple: Supply is lagging behind demand.

Shell pumping $27B to oilsands

In its first major move since privatizing Shell Canada Ltd., Royal Dutch Shell PLC said yesterday it will spend up to $27-billion to build the biggest oilsands upgrader yet.

The Anglo-Dutch oil major said in a regulatory filing that it wants to build Scotford 2 in the Fort Saskatchewan area near Edmonton, beside its existing Scotford 1, where a multi-billion-dollar expansion is now underway. It will join a dozen other upgraders proposed or under construction in the region. Shell's mammoth structure will process up to 400,000 barrels a day of bitumen from its Athasca project as well as from in-situ projects in other parts of the province.

The price tag, one of the biggest spending plans in the country, reflects the scale of the oilsands business in Alberta and its rising costs. It comes on the heels of Petro-Canada's announcement last month that it will spend with its partners as much $33.4-billion on its Fort Hills project, which involves a mine in Northern Alberta and upgrading facilities near Edmonton.

B.C. island proposed for new $2B liquid natural gas terminal

Texada Island, located between Vancouver Island and the B.C. mainland, was proposed Tuesday as the site of an ambitious $2-billion energy project incorporating an import terminal for liquid natural gas and a 600-megawatt electricity generating station.

WestPac LNG Corp. made the announcement in Vancouver, saying the project would meet future energy needs of residents of coastal B.C. communities as well as Vancouver Island residents.

The LNG (liquid natural gas) facility would be one of the first of its kind on the western coast of North America, serving as a receiving terminal for ships bringing in gas from other nations, possibly including Russia and Saudi Arabia.

The facility would be served by one ship coming in about every 10 days.

Abu Dhabi eyes Canadian power plants

Abu Dhabi National Energy Co. (Taqa) is looking at both buying existing power plants in Canada and developing new generation capacity, the company's chief executive said yesterday.

Taqa plans to expand into the Canadian power market as part of its target to more than double its assets by 2012. The company aims to complete $4-billion of acquisitions in the next year.

"We would look at buying existing power facilities and also select greenfield opportunities in Canada," chief executive Peter Barker-Homek said after the company announced its second-quarter results. "We're in discussions with a number of key players in Canada about co-operation on developing various power projects."

Mr. Barker-Homek said he hoped for progress on the deals this year. Taqa is also looking at the possibility of developing wind farms on land that it owns in Canada after it bought upstream oil and gas company Northrock Resources for $2-billion in May.

Taqa is 75% owned by Abu Dhabi's government, which controls over 90% of the oil reserves of the United Arab Emirates. It aims to boost its assets to between $40-billion and $60-billion by 2012 from around $16-billion as it plays its part in Abu Dhabi's drive to use record oil revenues to diversify.

Wind power ardour cools

Alongside the expansive hectares of traditional crops, mammoth steel towers with spinning blades are springing up from concrete roots planted firmly in the soil.

Wind turbines dwarf everything around them -- most are equipped with 40-metre blades and stand as high as the Peace Tower on Parliament Hill. The trend is no longer just one or two stray turbines scattered amid farmers' fields, but rather dozens of them clustered together in major power-generating operations across the countryside.

Canada has 77 wind farms, but that number is expected to rise to more than 100 with all the projects in the development stage or under negotiation for the next five years. Just last week, the first commercial wind project in Newfoundland and Labrador was launched.

Projects are picking up the most speed in Ontario, where the provincial government has embraced wind energy as a symbol of its green friendliness, and municipalities are signing on with a fervour because the province's above-market prices mean they can reap cash in land sales and tax revenues.

But as Canada experiences a rapid rise in these developments, there is a growing opposition to wind power as a clean energy alternative, with complaints that it is high-cost, energy-inefficient, causes noise pollution and even wreaks havoc on birds' migratory patterns.

Quebec moves to forefront of Canada's rapidly growing wind industry

The nationalization of Quebec's hydroelectric power in the 1960s was the crowning achievement of Rene Levesque, then a Liberal energy minister, who later became the first Parti Quebecois premier. More than 40 years later, some suggest the province should follow in his footstep and nationalize a booming new industry - wind power.

Government-owned Hydro-Quebec has become a symbol of Quebec's pride and know-how and developed into the largest single electricity producer in North America. The utility has a virtual monopoly on the distribution of electricity in the province, most of it produced by its own dams.

Quebec has been called the "Saudi Arabia of wind energy" and experts say it gives the province a bright future.

Ont. judge asks uranium firm, native protesters to compromise

A uranium mining exploration company that is suing Algonquin protesters in eastern Ontario is to appear in court Thursday after the two parties were asked by a judge to reach a temporary truce.

Frontenac Ventures Corp. is claiming $77 million in damages against the protesters from the Ardoch and Shabot Obaadjiwan Algonquin First Nations, who have been blocking an area in North Frontenac Township that the company is interested in developing for uranium mining.

The company is also seeking a court order to remove the protesters from the site, which comprises mainly Crown land that is the subject of ongoing aboriginal land claim negotiations with the provincial and federal governments.

As talks proceeded between the company and the aboriginal group this week, Randy Cota, Chief of the Ardoch First Nation, told the CBC that local aboriginal people would never agree to allow drilling or brushing in the area.

"We're going to be open-minded and see what they have to say but our goal is to protect the watershed at all costs," he said.

No Fares! A Reader-funded Solutions Series

The project took him to Washington State for a look at a successful fare-free transit system, and all over the Internet and libraries in search of information about the pros and cons of offering the public a free ride. The outcome is this five-part series, which he says gives him hope for change. "The examples shown here are irrefutable and wholly applicable to B.C."

Free Transit? Experts Are Wary

Two weeks ago, the Tyee ran a five-part series that made the case why transit should be free of charge to riders.

The response to the series' main argument -- namely that to fight global warming we must cut out cars and pull down barriers to taking the bus -- was dramatic. Traffic crashed our site, series author Dave Olsen went on national and local radio, versions of the article went viral on the Internet, and Atlantic magazine columnist Andrew Sullivan praised Olsen's argument as "a great idea." In a nutshell, the series hit a nerve.

"Should people really be paying for something that's benefiting society?" asks Lawrence Frank, an urban transportation expert at the University of British Columbia. If anything, it's drivers who should shell out more for their dirty deeds, the logic goes.

Timely as the argument is, it remains to be seen that free transit can work where it's needed most: in big cities. While taking out the fare box makes sense in smaller communities, where the costs of collecting fares often outweigh the benefits, in the city fees keep systems on their feet.

So could they really do without charging riders? Asking a number of experts, The Tyee set out to discover why past attempts to go fare-free city-wide failed in cities in New Jersey and Texas, degraded services in downtown Miami, succeeded in portions of Portland and Seattle, and might yet bear fruit in San Francisco.

A revolutionary report on the future of oil

The IEA Medium Term Market Report is 82 pages long and contains much more of interest than I have summarised here.

The most pessimistic supporters of peak oil believe that decline of total world oil production is imminent. Indeed, I previously described how major figures in the industry such as energy investment banker Matt Simmons, oil entrepreneur T. Boone Pickens and retired National Iranian Oil Company Vice-President Ali Samsam Bakhtiari believe we are now at peak.

Nevertheless, the IEA Medium Term Report is refreshingly open and balanced in its approach to this most vital of topics. It is a further nail in the coffin for the irresponsibly optimistic future oil production scenarios painted by industry cheerleader Cambridge Energy Research Associates and the biggest of Big Oil - ExxonMobil. The publication of the IEA report means that the writing is now on the wall for all governments and industry to see.

Much higher oil prices can be expected within five years at best. Before this, a short, but deceptive, fall in oil prices may occur in 2008-9. It remains to be seen whether the political courage exists to openly discuss this issue and begin the painful process of weaning ourselves off oil. I am not optimistic.

Nine countries warn EU against energy unbundling

Nine European countries, including Germany and France, appear on a letter sent to the European Commission warning against a proposal to break-up utilities, the French environment and energy ministry said on Tuesday.

Germany's economy ministry on Monday confirmed a report that France, Germany and a group of allies had signed the letter.

France detailed the list of countries: France, Germany, Austria, Bulgaria, Slovakia, Cyprus, Greece, Luxembourg and Latvia.

"Along with eight other states, France believes that the ownership unbundling between network grids and commercial activities has not been successful," the ministry said, adding that break up brings no guarantee of low prices or sufficient investment.

It said the proposal had to remain optional.

Australia urged to focus on clean coal

Australia should focus its efforts on developing clean coal and helping other countries establish nuclear power ahead of cutting its own emissions, according to former Telstra boss and head of the Federal Government's taskforce on nuclear energy, Ziggy Switkowski.

Speaking to engineers at a University of Technology, Sydney, function this morning, Dr Switkowski said those efforts, in the long term, could include developing a global nuclear waste repository and a system of "nuclear leasing" in Australia.

However, nearer term, our influence on how other countries dealt with climate change was important, he said.

How Efficiency Maximizes Catastrophe: The Case for Resilience

Resilience. You may not have heard much about it, but brace yourself. You're going to hear that word a lot in the future. It is what we have too little of as our world slips into unpredictable climate chaos. "Resilience thinking," the cutting edge of environmental science, may someday replace "efficiency" as the organizing principle of our economy.

Our current economic system is designed to maximize outputs and minimize costs. (That's what we call efficiency.) Efficiency eliminates redundancy, which is abundant in nature, in favor of finding the one "best" way of doing something -- usually "best" means most profitable over the short run -- and then doing it that way and that way only. And we aim for control, too, because it is more efficient to command than just let things happen the way they will. Most of our knowledge about how natural systems work is focused on how to get what we want out of them as quickly and cheaply as possible -- things like timber, minerals, water, grain, fish, and so on. We're skilled at breaking systems apart and manipulating the pieces for short-term gain.

Think of resiliency, on the other hand, as the ability of a system to recover from a disturbance. Recovery requires options to that one "best" way of doing things in case that way is blocked or disturbed. A resilient system is adaptable and diverse. It has some redundancy built in. A resilient perspective acknowledges that change is constant and prediction difficult in a world that is complex and dynamic. It understands that when you manipulate the individual pieces of a system, you change that system in unintended ways. Resilience thinking is a new lens for looking at the natural world we are embedded in and the manmade world we have imposed upon it.

Rethinking biochar

Imagine a simple agricultural soil amendment with the ability to double or triple plant yields while at the same time reducing the need for fertilizer and therefore decreasing nitrogen- and phosphorus-laden runoff. As if that's not enough, what if this amazing ingredient also had the potential to cut greenhouse gases on a vast scale? This revolutionary substance exists, and it isn't high-tech, or even novel—the history of its use can be traced back to pre-Columbian South America.

The ingredient is charcoal, in this context called biochar or agrichar, and if a growing number of scientists, entrepreneurs, farmers, and policy makers prevail, this persistent form of carbon will be finding its way into soils around the world. "Biochar has enormous potential," says John Mathews, a professor of strategic management at Macquarie University in Australia. "When scaled up, it can take out gigatons of carbon from the atmosphere," he adds.

Agrichar's benefits flow from two properties, says Cornell University soil scientist Johannes Lehmann. It makes plants grow well and is extremely stable, persisting for hundreds if not thousands of years. "Biochar can be used to address some of the most urgent environmental problems of our time—soil degradation, food insecurity, water pollution from agrichemicals, and climate change," he says.

Farmers negotiate water deal

The U.S. government appears poised to turn over the rights to billions of gallons of water to a politically connected group of farmers, even as residents across the West are being asked to let their lawns go brown and adopt other emergency measures to conserve water.

Under a proposed settlement that federal regulators are likely to present today in Washington, landowners in the Westlands Water District would gain the rights to 1 million acre-feet of water, or 15 percent of the federally controlled water in California. That would make it the largest grant to irrigators since the U.S. Bureau of Reclamation was created in 1903, agency officials said.

If droughtlike conditions persist, the deal would guarantee the farmers' irrigation pumps will flow, even if that means some Bay Area cities will get less drinking water. That prospect has alarmed environmentalists and others seeking to preserve the state's water supply for cities and an estuary inhabited by an imperiled species of fish.

High Plains Water Crisis Will Force Farmers to Think Like Environmentalists

If Midwest farmers continue pumping water at current rates, they'll be forced to revert to dry-land agriculture and livestock grazing within decades -- they could change their habits now and make the High Plains sustainable for the future.

Waterways, crops gasping in July heat

Near-record heat and persistent drought are shrinking lakes, baking crops and taxing water supplies.

The Mississippi River's headwaters in Minnesota are so dry that it is possible to cross on foot in some places, says an Army Corps of Engineers hydrologist.

Several cities in the West are close to setting records today for the warmest July. Boise is on track to break a 133-year-old record for its warmest July ever. Reno is one-tenth of a degree below its July record set in 2005. The Nevada city has not had any rain in eight weeks.

Nearly two-thirds of the contiguous USA is abnormally dry or in drought, according to the national Drought Monitor.

Despite recent showers in the Southeast, much of that region remains extraordinarily dry. The worst-hit area in the USA includes most of Alabama, Tennessee and Georgia. Topsoil moisture, critical for crops, is poor in half of Georgia, two-thirds of the Carolinas and Alabama and three-fourths of Tennessee.

Sunny California

There is no better year for farming in California than the first year of a drought. The lakes and reservoirs still hold ample water from the year before, and the farmer can go about his chores without inconvenient rains confounding his schedule. Sunlight pours down from a cloudless sky. The crops prosper. Life is good.

That’s our situation in the Sacramento Valley at the moment. We’ve had an unusually dry year, and I had to start irrigating in January — ordinarily our rainiest month — and I’ve kept at it all through the spring and summer.

Even if I were housebound and someone else was doing the irrigating, I would know from one glance at the electric bill. It takes a lot of power to move that water around, and it’s the single biggest expense on my farm. Some of my neighbors, who farm on a bigger scale than I do, have electric bills in the summer of $8,000 a month.

This year I’m converting my irrigation to solar power, installing silicon panels that turn sunlight into electricity. This will drive the pumps that lift water from underground and push it through the eight miles of plastic pipes that make up my irrigation system. Even though the panels are expensive, the return on my investment is about 12 percent, better than almost any stock or bond fund I could buy.

Extreme weather brings flood chaos round the world

People in countries across the world, from China to India and Sudan to Indonesia, are coping with severe wet weather, highlighting the position of flooding as the most deadly of all natural disasters.

While single events cannot be linked to climate change, the flooding come as research suggests that global warming will increase rainfall in some parts of the world, including the Indian monsoon, and increase the number of hurricanes – both due increased evaporation in a warmer world.

One person in 10 worldwide, including one in eight city-dwellers, lives less than 10 metres above sea-level and near the coast. This is an "at-risk zone" for flooding and stronger storms exacerbated by climate change, a recent study found.

China climate change storms ‘have affected 200 million’

Violent storms and floods that experts say are a consequence of global warming have hit 200 million people in China.

Up to five million residents have been evacuated from their homes, while nearly 700 have lost their lives – a toll that threatened to climb yesterday as 69 miners remained trapped in a flooded shaft. Worse may be yet to come. Describing the floods as the most severe the country had suffered in a decade, Chinese officials cautioned that more deadly weather would wreak havoc before the end of the summer.

The floods, an annual threat for China, have affected nearly 20 per cent of the country’s 1.3 billion population. The economic losses are estimated officially to be 52.5 billion yuan (£3.5 billion).

Dangerously high water levels along the main rivers have led to mass evacuations, while hundreds of thousands of homes and millions of hectares of crops have been destroyed. More flash floods, downpours and landslides are expected over the next few days, the Red Cross said, starting an emergency appeal for aid. High temperatures have made life even more uncomfortable for those displaced.

"Asian Brown Cloud" is speeding melt of Himalaya glaciers: study

The haze of pollution that blankets southern Asia is accelerating the loss of Himalayan glaciers, bequeathing an incalculable bill to China, India and other countries whose rivers flow from this source, scientists warned on Wednesday.

In a study released by the British journal Nature, the investigators say the so-called Asian Brown Cloud is as much to blame as greenhouse gases for the warming observed in the Himalayas over the past half century.

Rapid melting among the 46,000 glaciers on the Tibetan Plateau, the third-largest ice mass on the planet, is already causing downstream flooding late summer. But long-term worries focus more on the danger of drought, as the glaciers shrink.

The new report triggered an appeal from UN Environment Programme (UNEP) chief Achim Steiner, who urged the international community "to ever greater action" on tackling climate change.

Traditional ways a solution for natives on thin ice

Canadian natives struggling to keep their traditions alive are being told that the old ways can be life-saving for aboriginals who are on thin ice.

A four-year study in six northern Quebec communities into climate change by the Kativik Regional Government is recommending that if people want to avoid falling through thinning ice being blamed on global warming, they should use dog teams instead of snowmobiles.

"The switch from dogsled to snowmobile has had an impact on the security of transport," the report notes. "To minimize the negative impact on travel security of thin and unstable ice due to global warming, the use of sleds pulled by dog teams could be favoured during some periods of winter, such as the beginning."

The report makes plain the impact global warming is having on the traditional trail network of the north.

It stresses that dogs represent a "very efficient navigation device," able to sniff around for trails, signal when the ice is thin, and can help pull a sled out of the water should it fall through. The report quotes Inuit elders saying that the number of accidents increased in the north with the introduction of snowmobiles.

Arctic players poles apart on bears, caribou

Global warming is reshaping the Arctic landscape, but the speed and consequences of those changes are still unclear.

In the face of that uncertainty, scientists, conservationists and Inuit are having a tough time agreeing on how best to protect the Arctic's iconic wildlife.

Controversies playing out over the polar bear and Peary caribou have brought those issues into greater focus.

Polar Melting May Raise Sea Level Sooner Than Expected

The Earth's warming temperatures are on track to melt the Greenland and Antarctic ice sheets sooner than previously thought and ultimately lead to a global sea level rise of at least 20 feet, according to new research.

If the current warming trends continue, by 2100 the Earth will likely be at least 4 degrees Fahrenheit warmer than present, with the Arctic at least as warm as it was nearly 130,000 years ago. At that time, significant portions of the Greenland and Antarctic Ice Sheets melted, resulting in a sea level about 20 feet (six meters) higher than present day.

These studies are the first to link Arctic and Antarctic melting during the Last Interglaciation, 129,000 to 116,000 years ago.

"This is a real eye-opener set of results," said study co-author Jonathan T. Overpeck of The University of Arizona in Tucson. "The last time the Arctic was significantly warmer than present day, the Greenland Ice Sheet melted back the equivalent of two to three meters (about six to ten feet) of sea level."

Nation's oldest trees undergo growth spurt

If a grandmother suddenly started growing, something would be amiss. Now research has found that something similar is happening to the nation's oldest trees.

Clues found in old-growth tree rings from Michigan to Maine show an increasing growth spurt during the last century, possibly from global climate change, according to Neil Pederson, an assistant professor at Eastern Kentucky University.

Normally, trees, like people, slow down growing as they age, said Pederson. But ring patterns in oaks, poplars and cedars -- some up to 400 years old -- instead show trees started growing faster in recent decades.

Brazil, Alarmed, Reconsiders Policy on Climate Change

Alarmed at recent indications of climate change here in the Amazon and in other regions of Brazil, the government of President Luiz Inácio Lula da Silva has begun showing signs of new flexibility in the tangled, politically volatile international negotiations to limit human-caused global warming.

The factors behind the re-evaluation range from a drought here in the Amazon rain forest, the world’s largest, and the impact that it could have on agriculture if it recurs, to new phenomena like a hurricane in the south of Brazil. As a result, environmental advocates, scientists and some politicians say, Brazilian policy makers and the public they serve are increasingly seeing climate change not as a distant problem, but as one that could affect them too.

Losing Forests to Fuel Cars

Jaguars, blue macaws and giant armadillos roam the fickle landscape of Brazil's Cerrado, a vast plateau where temperatures range from freezing to steaming hot and bushes and grasslands alternate with forests and the richest variety of flora of all the world's savannas.

That could soon come to an end. In the past four decades, more than half of the Cerrado has been transformed by the encroachment of cattle ranchers and soybean farmers. And now another demand is quickly eating into the landscape: sugarcane, the raw material for Brazilian ethanol.

"Deforestation in the Cerrado is actually happening at a higher rate than it has in the Amazon," said John Buchanan, senior director of business practices for Conservation International in Arlington. "If the actual deforestation rates continue, all the remaining vegetation in the Cerrado could be lost by the year 2030. That would be a huge loss of biodiversity."

Early springs show Siberia is warming fast

Siberia is experiencing earlier springs, a study of satellite images has revealed. The trend is likely to be triggering more forest fires, say researchers, and to be linked to global warming.

In a study of a wide range of Siberian ecosystems, Heiko Baltzer of the University of Leicester, UK, and his colleagues found that from 1982 to 1999 spring began and peaked increasingly earlier for almost all the ecosystems.

The advance was greatest in urban environments, where the start of the growing season advanced by an average of 0.7 days per year – a total of 12.6 days over the 18 years. The advance was also significant in non-evergreen broadleaf forests – an average of 0.5 days every year.

The growing season is starting earlier because of warmer temperatures, which are causing the snow to melt earlier. "Global warming in Siberia is happening faster than the global average," says Baltzer. "This has been documented by the UN's Intergovernmental Panel on Climate Change."

Food sovereignty and the collapse of nations

It seems that Mr. Gaidar is basically saying that the collapse happened because a large portion of the population of the Soviet Union moved from the country to the city and stopped growing their own grain. But what is even more interesting to me is that that the author of the article himself seems not to make the connection or just skips over it in a bit of conditioning and goes on to blame the collapse on economics- on the inability of the Soviets to feed themselves not because there weren't enough people growing grain in that country but because of their inability to *buy* enough grain from other people to feed themselves because of decreasing oil and natural gas revenues. The idea that the Soviet collapse was due in part to the fact that the Soviet Union gave up on its capacity for food self sufficiency (food sovereignty) in an effort to pursue industrialization seems to elude the article’s author. And then from there implications for the continuation of the American empire and parallels about our own situation regarding food sovereignty started to pour out into my mind.

Russia seeks to ban Exxon gas exports to Asia

Moscow wants Exxon Mobil to ship gas from Sakhalin to Russia rather than Asian markets, the energy ministry said on Thursday, signalling a new round of pressure on the country's last big foreign-led energy project.

“The state representatives informed the investors' consortium about Russia's priority to supply gas from Sakhalin-1 to the domestic market,” the ministry said in a statement following a meeting of Sakhalin-1's supervisory committee.

Exxon signed a preliminary agreement in 2004 to supply 8 billion cubic metres (bcm) of Sakhalin-1 gas to China's CNPC but it has also held talks with Japan and India, which want to import Sakhalin's gas as liquefied natural gas (LNG).

Russia's Gazprom, which has monopoly right to export Russian gas, asked the government in June to block the plan saying it would create shortage on the Russian domestic market.


Since the death of Saparmurat Niyazov, the US has been maneuvering to take patronage of Turkmenistan away from Russia. The new ruler, President Gurbanguly Berdimuhammedow, is trying to play both sides against the middle. Half-loyalty will buy him time, but soon he will have to make decisions.

Turkmenistan is an important pawn because it has the second largest Caspian oil reserves: they are the only serious competitor to Russian oil and gas in Europe.

Russian Ships Reach North Pole

An expedition aimed at strengthening Russia's claim to much of oil and gas wealth beneath the Arctic Ocean reached the North Pole on Wednesday, and preparations immediately began for two mini-submarines to drop a capsule containing a Russian flag to the sea floor.

The Rossiya icebreaker had plowed a path to the pole through an unbroken sheet of multiyear ice, clearing the way for the Akademik Fedorov research ship to follow, said Sergei Balyasnikov, a spokesman for the Arctic and Antarctic research institute that prepared the expedition.

"For the first time in history people will go down to the sea bed under the North Pole," Balyasnikov told The Associated Press. "It's like putting flag on the moon."....

....The voyage, led by noted polar explorer and Russian legislator Artur Chilingarov, has some scientific goals, including the study of Arctic plants and animals. But its chief goal appears to be advancing Russia's political and economic influence by strengthening its legal claims to the gas and oil deposits thought to lie beneath the Arctic sea floor.

The symbolic gesture, along with geologic data being gathered by expedition scientists, is intended to prop up Moscow's claims to more than 460,000 square miles of the Arctic shelf - which by some estimates may contain 10 billion tons of oil and gas deposits.

MacKay dismisses Russia's Arctic claim

Russian explorers dived deep below the North Pole in a submersible on Thursday and planted a national flag on the seabed to stake a symbolic claim to the oil and gas wealth beneath the Arctic Ocean.

A mechanical arm dropped a rust-proof titanium Russian flag onto the Arctic seabed at a depth of 4,261 metres, Itar-Tass news agency quoted expedition officials as saying.

"Look, this isn't the 15th century. You can't go around the world and just plant flags and say 'We're claiming this territory,'" MacKay told CTV's Question Period co-host Jane Taber.

The foreign affairs minister asserted that there was no threat to Canadian sovereignty in the Arctic, despite the latest claims by Russia.

"Our claims over our Arctic are very well-established," MacKay said in Charlottetown, where the federal Conservative Caucus is meeting this week.

Arctic sovereignty operation Nanook set to launch in Nunavut

Canada's eastern Arctic will be the scene of a simulated environmental spill and counter-drug operation next week as part of the Canadian Forces' latest Arctic sovereignty exercise.

Operation Nanook, a $3-million, 10-day sovereignty and security exercise that begins Tuesday, will bring more than 700 army, navy and air force members to Nunavut, along with 30 Canadian Inuit Rangers and members of the RCMP, coast guard and various government departments.

Frankenforests: GE Trees Threaten Ecosystem Collapse

GE forestry research is already alarmingly prevalent across the globe. The United States leads the world in research projects, with 150 tree test plots -- two-thirds of the world's known research areas -- and they are joined by Australia, Brazil, Canada, Chile, China, Finland, France, Germany, Japan, New Zealand, Portugal, Spain, Sweden, the United Kingdom and the United States.

Despite the prevelance of the practice, GE forestry has remained somewhat obscured by GE crops, which have raised more immediate health concerns, as forestry "doesn't seem to affect the daily shopping trip -- or at least, less visibly," according to Larry Lohmann, a researcher with U.K.-based Corner House, a nonprofit that fights for social and environmental justice.

"But the problems transgenic trees pose are just as severe. Whether it's endangering wild species or pollen drift, the fact is we're in danger of setting off a chain of events that's irreversible. We don't know what we're messing with," he says.

Canada's great for slapstick., got to give 'em that.

"You can't go around the world these days dropping a flag somewhere. This isn't the 14th or 15th century.""

Hello, 14th Century? Like, say, 1325, MacKay? Eric the Red was the only one planting stuff in those days, I'd say. And he planted seed, not flags.

This MacKay guy is Canada's Minister of Foreign Affairs, guys. How do they select these characters? Lowest common denominator....

Let's just invade and have it over with, if only to save them more embarrassment.

Anybody want to bet MacKay vs Putin when the chips are coming down for real?

Ottawa assails Moscow's Arctic ambition

'You can't go around the world these days dropping a flag somewhere,' MacKay says. 'This isn't the 14th or 15th century'

Prime Minister Stephen Harper vowed to defend his country's sovereignty over its northernmost territories yesterday after Moscow sent two submarines deep under the North Pole ice to plant a flag on the ocean floor.

"It shows once again that sovereignty over the North and sovereignty over the Arctic is going to be an important issue as we move into the future," Mr. Harper told reporters at a news conference in Charlottetown where his Conservative party was holding a summer caucus meeting.

"This government has put a real emphasis on northern and Arctic sovereignty and we will continue to do so and we will move quickly in that regard." Foreign Affairs Minister Peter MacKay had even tougher words for the Russians.

"There is no question over Canadian sovereignty in the Arctic," Mr. MacKay said. "We've established a long time ago that these are Canadian waters and this is Canadian property. You can't go around the world these days dropping a flag somewhere. This isn't the 14th or 15th century."

I am sure Mr. MacKay is on the same intellectual level as many politicians in the United States. However, I agree with the invasion thing. My choice of occupier would be Switzerland.


That isn't a Canadian, minister of foreign affairs, that guy and his government are just Yankees in muck lucks, I think he studied his malapropisms under Quayle, or was that Regan or maybe Bush?

The bet? Okay, I'll take Putin.:)

Here is something that I found more interesting than any of Harpers goons, it is from the Union Farmer Monthly, sorry to put full bit in here as I can't give a link, it came by ground mail:

Advocates of ethanol and biodiesel like to call their products "renewable fuels." These fuels are admittedly, renewable, but are they sustainable? The distinction is critical.
At one time, the houses of Europe and America were lit, largely, by biofuels. A vast industry existed to hunt and slaughter whales, cut up their flesh and squeeze out a flammable lamp oil. Whale oil production rose rapidly during the first half of the 1800s, peaked around 1850, then fell off rapidly as whales become increasingly scarce. The whale oil industry was largely finished by the late-1800s.
Whales, as a biofuel source, were renewable-whales could reproduce and maintain their numbers, under a certain range of conditions. But the rate at which we harvested that renewable resource was unsustainable - our source of whale oil could not renew themselves as fast as we chose to extract that resource.
Similarly (though a food issue rather then energy), our harvest of cod, a renewable resource, was not sustainable. All renewable resources - food, energy, fiber, etc. -- become unsustainable at some point as our rate of consumption increases.
Wood is a renewable fuel, the original biofuel. The owner of a small cabin in a forest clearing could harvest and burn wood for heat and never degrade the surrounding forest. Perhaps the same is true of a small village. But you couldn't fuel modern civilization with wood without very quickly creating an Easter Island landscape. In fact, the transition from a wood-fuelled European civilization to a coal-fuelled one was spurred, primarily, by deforestation and wood shortages that resulted from the vast quantities of fuel needed for iron smelting.
Petroleum is a renewable fuel: the Earth creates a bit more each year. And petroleum use could even be sustainable, under certain conditions - if we pumped it more slowly then the biological and geological processes of the Earth renewed it. In very rough figures, our petroleum supply was created during various periods over the past 500 million years We will use up the bulk of it, however, over a 110-odd year period stretching, very roughly, form 1940 to 2060. The period in which petroleum was created is about 5 million times longer than the period in which we will use it up. Thus, our renewable petroleum supply could be a sustainable petroleum supply if our extraction rate was approximately one-five millionths as rapid as it is now.
Ethanol and biodiesel are, certainly, renewable fuels. Plants renew themselves, growing every year from seeds water nutrients and sunshine. One can imagine walking to a stand of corn, taking a bit of the seed, and making ethanol in a process fuelled by wood from a field-edge fluff of frees. Backwoods moon shiners and their stills produced their ethanol just this way. In such a scenario corn-ethanol would be renewable and sustainable.
The problem is that as scale and rate of production increase, sustainable renewable processes become unsustainable Early forestry whale oil harvesting, and ethanol production were all sustainable. As these activities expanded, intensified and accelerated all became unsustainable.
Large-scale (and even medium-scale) renewable fuel production is unsustainable. This is partly because it is built atop and draws from our unsustainable food production system. Our food supply-now scaled up to feed 6.5 billion people and their livestock - is increasingly a product of fossil fuels. Nitrogen fertilizer, the main feedstock for our foodstuffs, is created directly form fast-depletinq natural gas (see box at end of article). Gas provides the feedstock chemicals as well as the energy to drive the reactions that make nitrogen fertilizer. Similarly, our farm chemicals are made primarily from fossil fuels. Likewise, our processing and distribution systems run on fossil fuels. The fossil fuel inputs into our meals are huge. We are, as many have observed eating oil Thus as goes oil, so goes our food supply. And so goes our supply of grain and oilseeds from which to make ethanol and biodiesel.
The problems with the sustainability of our food supply do not end with fossil fuels: As we move form our current population of 6 5 billion people toward a probable 9.5 billion, we are encountering limits to our irrigation water supply. We are drawing down fossil aquifers. Our water use is unsustainable, and it will become even more so as we move to increase food production for humans by 50%.
We are losing soil to erosion and cropland to urban sprawl, salination and desertification. Our use of the Earth's soils is probably unsustainable.
Thus, if the energy and fertility sources of our food supply are unsustainable, if our use of soil and water is unsustainable we can be pretty sure that the food system overall is currently unsusustainable. It naturally follows that any corn or soybean or canola biofuel source taken out of that food supply will be similarly unsustainable-renewable, but unsustainable; think whale oil.
In the face of such chilling facts about our food and grain supplies, biofuel proponents often stage a tactical retreat and begin talking about cellulosic ethanol -- ethanol made from the fibrous cellulose found in wood and straw. The idea here is to take wood chips and crop waste and to turn them into fuel with the help of exotic processes or yet-to-be-discovered bacteria. It's not a bad idea to turn wood waste into usable fuel. And we can even imagine that it could be sustainable to capture the sawdust and chips currently rotting in heaps around a sawmill and use them to create a bit of ethanol. Where such a scheme becomes unsustainable is when we pretend that we could replace a significant part of our global motor fuel supply with ethanol derived from wood or straw.
Such a scheme would require removing mega-tonnes of plant materials from the land. This plant material would then be vaporized along with the nutrients it contains. Removing those nutrients, however, will only make our unsustainable system even less sustainable. If you remove the straw, you remove the raw material of tomorrow's soil. You also accelerate wind and water erosion Running the global car feet, even partly, on energy extracted from the land will deplete that land. We will replace the problem of Peak Oil with one of Peak Soil. By depleting our soils as well as our fuel sources, we will reduce not only the capacity of future civilizations to fuel themselves, but also even to feed themselves. Biofuels made from unsustainably produced grains, oilseeds or cellulosic feed stocks mean using tomorrow's food to make today's fuel.
When thinking about so-called renewable fuels, the bottom line is this: Sources of renewable energy are plentiful - wood whale cow dung, a horse fuelled by a bale of hay and a handful of oats. Sources of sustainable energy are much rarer Moreover it is almost certain that there are no sustainable ways to fuel this civilization. That is true simply because the energy draw of this civilization is too large relative to the capacity of the Earth to create usable energy. Further, our energy use is too large relative to the Earth's capacity to reintegrate the emissions from that energy conversion back into the biosphere -- instead, the energy conversion by-products

The lie implicit in the promises made by biofuel proponents is that their energy fixes are not only renewable but also sustainable They are not. Using such fuels will empty the Earth of resources and fill the atmosphere with bi-products. Using such products will degrade the very possibility of our grandchildren and their grandchildren living lives as comfortable as ours. Biofuels like all unsustainable energy sources, benefit the present at the expense of the future. The major questions surrounding Biofuels are neither technical nor economic; they are ethical.
-nfu- Union Farmer Monthly / Volume 57 Issue 4 June / July 2007

Not bad for a farmers mag eh? But watch out though, this might be one of those Survivalists front organizations.

Possibly like this one?

Thanks again Stoneleigh - there's so much going on right now, and I have so little time to keep up with it. It is great to have collections of valuable and relevant information to rely on.

I canceled my cable subscription. You have given me a lot to work with, thanks Stoneleigh.

I wish I could get more people to peruse your links so I could have intelligent conversations with them instead of talking about tabloid news crap.

By the by there is a great graphic over at Calculated Risk that really helps to visualize the housing/mortgage thing.

Thanks again.

Thanks for the vote of confidence :)

I wish I could get more people to peruse these links too, for exactly the same reason.

Thanks for the graphic by the way. I'll see if I can figure out a way to post it.

Wow! This is my first visit to TOD Canada from the TOD US. I am amazed at the depth and quality of this Roundup. Nice work.

Thanks :)

Stoneleigh, thanks for another great roundup.

What continues to overwhelm me is the convergence of multiple issues concurrently, from global warming, to peak oil, to other resource depletion, to fresh water access, to erosion, to biodiversity loss, to ecological destruction... all the way down to economic collapse.

And the frightening thing is what happened the last time there was an economic collapse and that occurred when everything was still on the upslope.

"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone

I couldn't agree more GreyZone - it's the convergence that worries me too. This financial crisis is shaping up to be much larger than the last one, all against a backdrop of limits being approached (or exceeded) on many fronts simultaneously.

Stoneleigh, how do you think it will all play out? My own thoughts are that the financial turmoil will cause paralysis, effectively stopping us from dealing with the most threatening problem, climate change. Energy depletion will basically rear its ugly head whenever we organise ourselves sufficiently to attempt mitigation. The lack of energy will narrow our window of solutions to the point where civilisation, as it stands, cannot get through the bottleneck intact.

I'd appreciate your thoughts on this and anyone else's thoughts too. The problem with laying out a strategy for the future is the error prone assumptions that have to be made regarding future likelihoods.

Triumvirate of collapse - Economy, Ecosystem, Energy

Burgandy, here's my take:

As far as I can tell there are only two outcomes to play out. A positive outcome would result from a complete reordering of our priorities stemming from an understanding of and acceptance of our place within this earthly creation.

As Aldo Leopold put it: "The question is, does the educated citizen know he is only a cog in an ecological mechanism? That if he will work with that mechanism his mental health and material well being can expand indefinitely? But that if he refuses to work with it, it will ultimately grind him to dust?"

Unfortunately, the way "civilization" is presently enacted I do not see such a 'Land Ethic' reordering occurring, or at least not without seeing our arrogant humanistic hubris and presumption of control vanquished in overwhelming fashion.

As far as I can see, before any positive outcome can occur, the dire straits and many dangers we are stuck living in will continue to play out until the mistaken and misapplied pretensions of control that we've learned to live by are either made to submit or relinquished.

I do think that some portion of individuals, and perhaps they are a growing portion (including even those not so yet moved but capable of such humbled acceptance and adaptation), already recognize that the self-destructive elements of our civilization and their lives in it needs to be given up. Their is hope in this.

Even so, I do believe that submission will be necessary to turn the tide and it will be fought against. When it does finally come the question that remains to be seen is how much is still left intact in the world to get on with living within the means of creation as it is and not as we keep trying to make it. Will it be enough? We'll have to wait and see.

That's how I see it playing out.

I'll offer my opinion and this is much more philosophy than economics.

I suspect any scenario is possible for the future and I suppose some are more likely than others are. However, when you think about how things will play out you have to provide an operational definition of the future.

When I fool around (basically gamble) in currency markets, my "future" is measured in minutes. When I go to work my future is in years until I quit. When I think about my small family, my future is the duration of my life.

When one considers industrial capitalism, there are many of these sorts of "futures" simultaneously at play. Peak oil, the owner of a factory, the workers, and industrial capitalist governments all have various time horizons which occupy various moments of their thought (geological "thought" too in the case of PO) and operate simultaneously.

These multiple future can mitigate or activate events. For example, when credit dries up (which it seems to be doing) we do not see an immediate and instantaneous macro economic effect. One is still employed. If one had to layoff staff to accommodate budget cuts, that process might take months to unwind. During that process, other events might occur to forestall or reverse the pending layoffs. However, during that time, one, personally, might lose money in the stock market. There are many of these little futures within the overall future.

Small time horizons are noisy and many different chaotic outcomes are possible. Longer time horizons are quiet and move towards a more predictable outcome. Big daily volatility in the market is noticed, but Chinese manufacturing overcapacity is hardly mentioned. Both, I believe, are dysfunctional results of loose credit and both can be articulated in terms of this time duration. It is easy to sell and buy electronically; some people make money and some lose money and this is a little chaotic. It is difficult to shut factories quickly; when they do shut down there is a singular orderly outcome: unemployment.

Consequently, because of these simultaneous "futures" at play the future is really unknowable and strategic planning for the future becomes extremely difficult in "normal" times and virtually impossible (in my opinion) in complex times. Consider, if you will, the many “strategic planning” documents collecting dust on the shelves of middle managers.

Having taken a few paragraphs saying nothing, I will offer my opinion. I do not think this credit problem will be a very big deal at all: this time.

I think there are too many vested interests to let the global capitalist system deconstruct overnight. I am sort of with the Central Bankers on this. They will move mountains to avoid a big problem (and sow the seeds of yet another problem down the road). Do not listen to the Bank for International Settlements. It is merely there for comic relief.

Over the next 2 years I suspect a good pullback to about 10,000 for the DOW (at the worst), the US dollar to hover around 80 on the dollar index (as it's doing now) gold to go nowhere ($600-700 per ounce), OECD inflation to be under reported and be really at around 6-8%, and oil to move between 50-80. I think this will cover the current noise.

I do not think responses to climate change and peak oil will affected by this. We have had many years of industrial capitalism and, in my opinion, equitable social change has not materialized (and I think radical social and individual change is what is needed). I just can’t wrap my head around the current economic system (either healthy or sickly) sorting this out. It is, after all, the cause of the problem.

Stoneleigh, how do you think it will all play out? My own thoughts are that the financial turmoil will cause paralysis, effectively stopping us from dealing with the most threatening problem, climate change. Energy depletion will basically rear its ugly head whenever we organise ourselves sufficiently to attempt mitigation. The lack of energy will narrow our window of solutions to the point where civilisation, as it stands, cannot get through the bottleneck intact.

Essentially I agree with you. I think we haven't really begun to see the extent of the problems in the credit markets yet, and when we do (my best guess is October when the ARMs begin to reset in earnest) I think we will be looking at some very serious consequences. I think we'll end up in a state of short-term crisis management (paralysis mixed with fear) that would mean longer term issues such as climate change would be forgotten. Mitigation requires both attention to the problem and resources available to devote to it, and I think we will have neither, potentially for a very long time.

My scenario is that we will see a market crash of at least several thousand points, but probably not until the autumn IMO. Until then I expect more jaw-dropping volatility, but not a crash. We haven't seen a real credit crunch yet - people are still buying property on margin, are still maxing out credit cards and still getting loans for all manner of things. So far the corporate world is finding deals harder to put together, but ordinary people are still conducting business as usual. IMO that won't be happening further down the line. A full-blown credit crunch means essentially NO credit, except for the very wealthy who don't really need it anyway. It means the mother of all margin calls and very high interest rates in real terms (ie adjusted for a large contraction in the money supply). It means many, many people losing jobs, homes, investments, savings, pensions, and access to centralized services, as well as access to credit. Under those circumstances, it's not particularly surprising that people would forget about longer term considerations.

We could, temporarily, see a surplus of energy as demand falls with purhasing power, but I doubt if it would last for long. I think recent years have seen manouvering towards a global resource grab, which I think these events could precipitate rather than derail. I would expect energy resources to be sown up in bilateral contracts wherever possible and fought over in other places, at the cost of destroying much of the necessary infrastructure. The net effect would be (IMO) a significant fall in oil and gas supply, independent of how much may be left in the ground. That would see oil prices rise, and if nominal prices (ie unadjsted for changes in the money supply) are rising into the teeth of a deflation, then prices are going through the roof in real terms.

In short, I think this will be a crisis the like of which none of us alive today have ever seen.

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

**Does the above need attribution? According to my wife, yes. She figured it was Woody Guthrie, close but no ringers, so for any other phlegmatic soul, that's Bobby.

Hokay Stoneleigh or anyone, so where do I park all my ill gotten gains till the universe unfolds? :$)

--Cash in a sack?

--Bag of beans and rice?

--Land, hopefully arable?

--Gold, silver and such?

--Energy stocks?

--Give it away to kith and kin?
(in the hopes they will kiss you on both cheeks and comfort you in times of need. Sure would think we were on the way to a right world if this last one would work).

At the moment my favourite horse is Cash (for sure) and Bonds (make me curious but nervous) but with inflation or super dooper inflation in the wings whither then??? Unless there is a great world wide awakening I would think we will have some sort of market to place bets on for the foreseeable future? So I would assume a quick duck back into stocks to avoid the whirling dervish of galloping inflation? Or would this be the point of time to put one's little all into a seaside cucumber and tomato ranch?

As you can see I am pretty unversed in financial matters as I think many lurking about are. I see two or three who hold to wisdom in these matters (but speak mightily in tongues) and would expect many more would be apparent if there were great familiarity in these matters among that multitude conspicuous by their absence who I surmise would also appreciate some light to expand their own labyrinthian vision tunnels.

Oops, almost forgot,

--house in a tree?

Very appropriate song - I have a Bob Dylan tape of that somewhere :)

First I should say that I am not now, nor ever have I been, a professional financial advisor, analyst or a trader. I'm a hobby farmer and a former academic jack-of-all-trades with a keen interest in the big picture. I'm happy to share my opinions with you though :)

Number one is to get out of debt - debts are a killer in a deflation.

Cash or cash equivalents such as short-term government bonds are number two. Cash is king in a deflation. I wouldn't trust the banking system and I wouldn't own shares in funds that own assets (ie mutual funds) when you could own the assets on your own name.

If you're lucky enough to still have resources beyond those two things then land is good, but IMO only if you can buy it free and clear. Renewable energy infrastructure, tools and some essential supplies would be next. Learning the skills to provide for yourself would be a great investment of time and resources. If your place can accommodate others then you can achieve greater flexibility in providing for the necessities of your own existence and theirs.

Unlike many I wouldn't recommend gold and the like (unless you're wealthy enough to keep a pile of it in a Swiss vault, in which case you can afford professional advice :) because it can be complicated and impractical. In the 1930s gold ownership was banned and gold was confiscated without compensation. If that happens again then how would you trade it for things you might need?

I personally wouldn't own stocks at all, energy or otherwise. A rising tide may float all boats regardless of merit, but an ebbing one can beach them all far more quickly. The best time to buy stocks is when no one else would touch them with a barge pole, because at that point they'll be a bargain. Right now it's conventional wisdom that stock ownership is a good thing, which tells you that a consensus has been building for a long time. The longer a consensus has been building, and the more broadly based it has become, the closer you are to a trend reversal.

Helping your nearest and dearest while you can would be a good investment, especially if they are younger or less fortunate and may therefore not be able to prepare properly on their own. Social capital is very valuable in hard times.

I must admit, I do like the sound of the tree house though :)

Thanks for your thoughts Stoneleigh, it helps to know one is not alone in his thinking and as far as the tree house goes I spend most of my time treed one way or the other so that idea not far from wrong for this simian.


While I agree with Stoneleigh that deflation is a major threat, IMO it will likely come to pass full blown at the end of semi-coordinated Central Bank efforts to avoid this calamity with highly inflationary resuscitative attempts. In short I think deflation will be the ultimate end game result of the financial stresses now occurring but not what we can expect in the interim.

At such an end time whatever cash reserves one has may well be king, but then again at such an end time it may be no better than toilet paper either; but better than none at all for tp that is. ;-)

Because no one can predict exactly how this will fall out, especially in the interim, I'm spreading my spare paper financial eggs in a mix of holdings, good for both inflation or deflation. For deflation I've got some cash (foreign denominated & US) reserves in interest bearing accounts or instruments. Against inflation I've got some gold and silver holdings.

Ultimately I consider all of these well laid plans at risk of being rendered completely worthless; but in this very uncertain interim one does what one can and I am presently spreading my bets and risks out against both inflation and deflation.

My precious metals holdings are primarily not stashed bags of coins, although I think some at hand is worth having. Instead, I am using a Gold Money account.

Purchased PM holdings with Gold Money are guaranteed in the name of the purchaser, independently audited and verified as such, and held in a private gold storage vault in London (where the largest physical gold exchange market is). Gold Money itself is incorporated and located on the Channel Island of Jersey which is a highly autonomous Crown dependency with its own long standing rule of law.

Should the US govt. declare gold & silver illegal to hold, they would have a very difficult time confiscating mine from such an entity in another sovereign land. Besides, I tend to believe that should such an attempt be made in this day and age it would be tantamount to global financial chaos and all manner of other political anarchy already arrived. As it is the US Treasury dept. has all but decreed that ANY financial assets and/or instruments can be confiscated or otherwise regulated in an emergency at the behest of the President. (See:

In the meantime I can access my PM holdings 24/7 and exchange them into cash and electronically deposited in my bank account*. But at present my PM stash of this kind is for holding against cash depreciation via inflation that I expect is more likely in the short term than deflation.

Still, the PM market is as volatile as any other (not to mention manipulated by TPTB, but what isn't these daze?**) and not for the faint of heart; but if one can buy on the dips and then park and hold, one should do well against the re-inflationary PTB efforts. (Should there be a large stock market correction in store this fall gold & silver might be real good buys then as they too will take their hit but should then bounce back smartly.) Unlike PigglyWiggly, IMO I think gold & silver will continue to appreciate, albeit erratically, so that over the next year gold @ 700 will be breached and eventually become the new support low.

In any event, other than this 2¢ opinion of mine, there is no fail-safe paper financial haven in these turbulent and uncertain daze. A debt-free home with good soil in a decent community may be one's sanest bet, along with other valuable practical skills and tools. Beyond that it's one giant crap shoot we are heading into and no one is in control.

* note: A well-managed small and independent regional bank or credit union should be a safer, not to mention saner bank to rely upon than one of the big corporate banks BTW. However one can disengage from the tapeworm economy and those who most profit off it at our expense is worth avoiding.

**note: Such a reference does not mean I believe in any grand conspiracy but rather just an ability to tweak and influence the markets along the lines Stoneleigh mentioned about self-interest. And it is in the self-interest of the various economic powerhouse PTB to do whatever is necessary to keep the game and faith in it going. Gold is one such signal that the faith is faltering and hence the need to try and control its price.

First of all, I don't like this, because there is nothing to be gained but scorn and ridicule. But it needs to be done. This sentence contains an enormous and all-persuasive superstition, or belief system if you will: will likely come to pass full blown at the end of semi-coordinated Central Bank efforts to avoid this calamity....

For a reason that I can't seem to entirely fathom, we have an unshakable faith in the idea that our central banks have above all the goal to prevent calamity. The very simple question: "Do they?" will be met unfailingly with high-pitched talk of conspiracy theories.

Some questions cannot be asked, and this is one of them. You can't even ask the question, unless you can provide 110% proof of the fact not being true. Which is kind of hard. Neither we, nor our media, have anything resembling free access to those who control what is arguably the most important single control tower in our society: money creation.

In other words: you can't ask the question unless you know the answer?! You're either with us or with the enemy, that sort of thing. It makes me nervous.

Never mind that the other view is just as impossible to prove. No believer feels compelled to prove God exists. He just does, obviously.

While ever more people feel free, even called upon, to discuss whether Bush and Dick have the best interest of all Americans at heart, no-one dares ask whether the Federal Reserve system does.

In the fast moving credit stampede we face today, and of which none of us, none, have a single clue when it comes to size and impact, for it will be too severe to imagine, we will need to ask that very question: did/does the Fed try to avoid disaster?

I have an opinion on this, but I'll let Mike Whitney speak, he put it in very simple terms. I know he's loose-cannonish, but he's also well-informed.

Housing bubble smack-down

Nov 21, 2006

[..]"Did the Federal Reserve double the money supply in the last seven years?

Did they know what they were doing?

Did they know that printing more money creates inflationary pressures and reduces the value of money already in circulation?

Did they realize that the money was going directly into the real estate market where it was creating an unsustainable equity bubble that would eventually crash and destroy the lives of hundreds of thousands of Americans whose greatest asset is their home?

Of course, because it's the Federal Reserve which produces all the relevant facts and figures, charts and graphs, about increases (and trends) in the housing market. How could they NOT know?

In other words, they doubled the money supply and then sat back and watched while $4.5 trillion went directly into the real estate market via mortgage loans to people who were under-qualified, knowing that these same people would eventually fail to meet their payments and adversely effect the entire market.

The Federal Reserve knew all of this. In fact, they knew where every dime was going, but decided to persist in their swindle to the bitter end."

That done, I will say that I feel that believing in the Fed trying to save the US economy, equals believing that the 1000's of high-paid people working there all suffer from (to me) inexplicable mental black-outs. Granted, they might miss a beat, or even two, but they could have stopped the cheap credit machine at any given point in the past 7 years. At all of these points, every single day, they decided not to. They weren't all playing with their privates all that time, I'm not buying that.

No, what happened is that the Fed lowered US interest rates, arbitrarily, for no free market based reason, over a short time period, from 6.5% to 1%. Not satisfied, they had both Greenspan and Bush, and both repeatedly, go public in speeches, TV and papers, cheerleading the many benefits for Americans of the new creative mortgage opportunities, as well as the feel-good properties of home ownership..

Neither were both of them unaware of what made all that new mortgage space available: the sale of risky credit, re-packaged, to investors on Wall Street. They knew, all the way. They also knew it was a Ponzi scheme.

And the mortgages are zero compared to the leveraged hedges built on top of the collateral that they provide: down the line, every shoddlily built and financed pile of bricks was used as leverage to lend and borrow ten times more that it wasn't even worth to begin with.

How does that rhyme with trying to do the best for a population and its economic welfare?

I personally find it impossible to believe the Fed is attempting to save the US economy. They've had some 2000 days to do that, with the numbers right in front of their faces, and have not. I'm starting to think the conspiracy theory here is to keep latching on to the idea that Greenspan et al are on your side.

Matter of fact, I'll repeat what I've said many times before: the American economy has been deliberately gutted over the past 20 years. Americans are non-productive and over-consuming liabilities to economic growth. Stick a fork in their ass and turn them over. They're done.

I'll leave you with Jim Guido:

The Debt Endgame: A Theory

With interest rates at historic lows American’s lost their appetite for savings and soon for the first time since the depression the US had a negative savings rate. This trend has continued and now we’ve gone nearly two years with the US having a negative savings rate.

As the US and its citizens began to pile up debt at mind boggling levels, I began to think that maybe it was getting to the point where consumers were never going to be able to pay it back. Whether this debt situation was by accident or design the question became what does a society do when its citizens carry unserviceable debt?

The lending policies of the US, the World Bank and the IMF have often put developing nations into the same scenario that the US consumer now finds itself in. What did the US do when debtor nations became overwhelmed in debt?

The short answer is that the above agencies usually found a way to cut a deal allowing a portion or all of the debt of a developing nation to be pardoned. Usually this process involved an exchange in which debt was forgiven for ownership or assets and resources.

The US government or US corporations usually became the owners of resources like oil, or cash crops such as bananas or coffee in return for a release from debt. Sometimes the debt was forgiven for military favors such as US bases on their soil, or for ownership or control of state or dominant companies to be handed over to US interests.


I agree 100% with this assessment: "the American economy has been deliberately gutted over the past 20 years." As well as the view point that what has been done is nothing less than economic warfare upon the US citizens and their collective welfare or ability to be anything other than sheep to be continually fleeced.

Even so, the stakes here are not just with the "American economy" (of which the US citizenry is just one component to profitably manipulate) but with the "globalized economy", and it is about this latter one that I was opining that we would witness semi-coordinated Central Bank efforts to try and avoid the calamity of a globalized economic depression via deflation.

I don't think they will succeed at avoiding this outcome for a lot of reasons, not the least of which is that this globalized economic juggernaut is now spinning out of control! Even so it does not mean that all the various Central Banks won't still try to exert by whatever means available to them to suppose they can still control this unfolding calamity.

For it must be noted that the same arrogance of cleverness that fully participated in unleashing the financial instruments of US economic warfare we've undergone for many years and that have now gone global is still arrogantly presumed to be controllable by more of the same.

In the end I don't think so at all. This train is coming off the tracks but it is still a mighty big train and can plow ahead a long way even as it sheds failing components while the various clever engineers push and pull on levers in an all out effort to alter it final destination.

I think this answers your question as to my belief about the Central Bankers abilities to avoid this calamity. As to any thoughts about these clever monkeys knowing what their actions would ultimately result in, I do believe they thought and still think themselves way too smart and capable to ever believe they couldn't control the damage now unwinding upon us all.

As the ancients knew well: Hubris is a real bitch and tragedy is her main calling card.

Hi Godraz,

Thanks for showing what your plans are I appreciate your openness and am sure many others do as well.

I am a reluctant player in this market as it seems to be the only game in town. It is a shame we are not ready for anarchy and couldn't even get that 'way station on the route' working properly, I speak of the former USSR.

That said, what I have been doing over many years is, first, finding myself a place that has the potential to weather the coming storm. That, along with learning how to produce my own food. About the place it is of about a quarter of an acre in size. That size, I find, is enough to produce almost all the fruit and vegetables one needs with a shortfall in calorie producers like potatoes or corn. This, I feel, is more than offset by being located in a small town (aprox 40,000). I have lived in remote country situations but they are lonely places and fraught with the difficulties that being on one's own imply.

Lately what I have done is move out of the market by 60% into cash, not something I like to do as I have reached the nominal retirement age (actually left that business of 'off to work' several years ago). I plan to put that cash into short term Treasury bonds, and might further decrease my market exposure of stocks and non treasury bonds depending on what the next few days or weeks or months look like.

If things unfold as I personally feel they will there will be more than one slide before Peak Oil kicks in with a vengeance (I think we are beginning to be affected now, but like a bicycle tire, when it slowly becomes deflated we aren't immediately aware of the event. (Incidentally, I lately found myself racing down a hill and trying to turn the corner at the bottom before getting the message...flat tire stupid! thereby this analogy). I think each slide will give some opportunity to recoup what one looses in each drop. I hope this will me get around that corner at the bottom before Peak Oil takes all the air right out of my tires. I mean that if I have anything of value at that bottom, it will be into the local economy. Let's hope there will be a local economy worthy of the name.

About gold, I have not thought much about it but when you say that it could be taken by the government and therefore you hold it in a foreign bank, would not a tin can buried under the apple tree serve almost as well? When the revenuers come you just look sorry as hell, but golly, you lost it in a game of craps?:)

If there is no Devil, then why did we do this?

Stoneleigh, thanks for the reply and everyone else.

Something I've noticed generally when strategies are discussed, investing quite often appears as a mitigation strategy. This always puzzles me. It is as though there is an unconscious belief that the worst of a collapse can be overcome by speculating financially (ie. via stocks, commodities, metals, currencies, etc). I think this is a mistake and attempting to invest ones way through a collapse is a kind of self-deception, a convenience or a pseudo action; possibly to avoid the very real inconvenience of lifestyle change. A sort of Survival lite :)

I think anyone looking to survive a collapse of the kind of magnitude we're looking at, simply by re-arranging their financial affairs, needs to review their strategy again.

My own opinion, rightly or wrongly, is that individuals must prepare to de-link themselves from the failing system as much as possible, which obviously means eschewing most institutions we've come to depend upon (especially financial institutions). People must prepare to pull back from near total dependence on the global economic system and take more personal responsibility for their own lives and livelihood. Basically this means investing in oneself, family and friends - not in anything where the individual has no personal control. I suppose I should add, this doesn't mean going to live in the wilderness either. People may find that they have to live with little or no income and for people dependant upon the wage economy this may be fatal.

What to invest in? I think Stoneleigh, westexas and others have already covered this, but not to be left out, I'll go over what I think, what I've done and what I'm doing.

1. get out of debt
2. own your own home, land and source of water
3. have a skill or skills that are useful to yourself and community in case of unemployment (forget computer skills, MBA's, etc)
4. the wherewithal to produce food
5. the wherewithal to produce goods for sale
6. the wherewithal to move goods around
7. help family, friends and community to do the same

If there's any money left after doing the above, keep it in cash. If you don't have enough money, or it's not possible to do the above where you live, look to live somewhere else where you can do it.

Triumvirate of collapse - Economy, Ecosystem, Energy

Hi Bugundy,

Maybe you didn't read the rider in my blurb above?

I mean that if I have anything of value at that bottom, it will be into the local economy. Let's hope there will be a local economy worthy of the name.

I don't know how you are presently supporting yourself but whatever it is it is likely part of the world economy and not a home based locally derived way?

If that is the case you will need to find some way to get from that express way into that local economy which we both seem to agree is coming. If you jump out of what you are doing, be it job, business, or market based way of getting your daily, then you stand a good chance of breaking something, likely your neck. The people I would worry about are those on or expecting market based pensions that have not the opportunity to move those assets, working the market, into a local economy and so stand IMO a good chance of having their means of sustaining themselves dissolve in their hands. I don't have any hope in the market as salvation, merely a means of transition. Make the devil do some honest work:)

If there is no Devil, then why did we do this?

Hi Crystal. I wasn't responding to anyone's post in particular, more a case of thinking out loud about an underlying theme I'd sensed. You are absolutely right concerning the global economy, it is all encompassing and near impossible to exit, we're all well and truly enmeshed in it.

As I said, it is a matter of preparing to de-link, not necessarily pulling the plug immediately. I'm certainly on the side of using the current system to help prepare oneself, no argument there. However, I'm also very much in the risk adverse camp, speculating with what you currently have (including time) and risk loss when losses may prove fatal, is not a good strategy IMO. A bird in the hand is worth two in the bush.

When the music stops, those without a chair are going to be out of the game. Which basically means those who've not prepared in advance may well be caught rushing for the exit with everyone else. You have to ask yourself, if TSHTF and everyone is waving their wad of cash trying to buy meaningful assets, will those sitting on such lifesaving assets sell them for cash? Would you exchange cash now for a subprime mortgage based CDO?

I myself sold my business, it was profitable and had no debt, but it didn't stand a chance in an economic downturn. It was too risky and had to go. The same probably applies to most businesses these days, few produce anything worthwhile and most are services. In fact most businesses are up to their eyeballs in debt, which reduces their chance of survival even more.

In the corporate world, increasing costs of capital will no doubt start another downsizing episode which will only intensify once turnover is hit due to the debt implosion.

"When the time for action comes, the time for preparation has passed"


I am in complete agreement with you. In a full blown SHTF collapse I am not counting on ANY of my paper or PM financial arrangements to save my ass. However, we aren't there yet.

I have already done much to prepare myself and my family for the incalculably rough road ahead and all of it is entirely along the lines you spelled out. These things and the community I am living in are my one and true collapse mitigation investments that I am hoping to still be able to work with in the full blown SHTF aftermath.

A financial collapse is just one element of what we face but I do not think it will happen over night. This particular SHTF aspect has quite a ways to unwind before it will be seen or felt for what it really is -- all the while being told glib reassurances that it is just a 'unfortunate correction' that TPTB will manage, so please do not panic, keep shopping, etc. The devastation of 1929 stock market crash took several years to really sink in. I think the same will prevail this time too. The world in its entirety will not just fold up shop and completely stop should the stock markets tank big time this fall. I might wish it would but that's not how the world works. We'll see.

Still, I have a personal responsibility to try and strategize for this interim period of financial meltdown within the confines of the game as it is presently rigged. I can not get around having to use a bank, but as mentioned above I'm doing so with a local area bank that is as independent as they come and whose 150 year old charter mandates local service and support. It isn't perfect but it is one small thing that has merit. This and many other means of disengagement from the tapeworm economy I am doing my best to practice.

While you might not agree, I think that exchanging cash for PMs is one way of de-linking from the failing system as well as putting pressure on it to fail sooner rather than later! There are many other monkey wrenches lying about and I do my best to see they get tossed into the works, hoping they slow the beast down.

In any event, I do not think I am at all unaware of how useless such interim financial mitigation strategies may ultimately prove to be. Yet I'll do what I think is reasonable with such resources I own and can make use of as responsibly and in as controlled a fashion as I can in this interim period before the deluge.

One way or another we are all going to get hosed.

Godraz, can't say I disagree with you too much, other than PMs. But because collapse is a long protracted affair, doesn't mean everyone has the luxury of time on their side. Collapse may be slow, but the unexpected won't be.

For example, I sold my nice riverside house in the UK, because I'd decided with climate change it was too risky. I could have hung on to it in the hope of squeezing a bit more profit out of it, but luckily I didn't. After the recent floods in the UK, the house is probably unsellable now. If I hadn't sold it when I did, I may now have been locked into a depreciating asset and unable to undertake the preparations I deemed necessary even though collapse hadn't yet taken place.

I strongly believe if peoples' current situation is unsustainable in a collapse, then they shouldn't risk being trapped in it and make the necessary changes now. But that's only my opinion and of course I have no crystal ball.

Triumvirate of collapse - Economy, Ecosystem, Energy

Hi Again Burgundy,

Also not much to disagree with what you say in fact what you say here bears repeating IMO.

I strongly believe if peoples' current situation is unsustainable in a collapse, then they shouldn't risk being trapped in it and make the necessary changes now. But that's only my opinion and of course I have no crystal ball.

On your Bird in the hand analogy though, what if that budgie turns to vulture. I agree that fooling about in the market is a risk but to look at a longer term to see your cash eaten by inflation and possibly very badly, maybe quicker than one could imagine, is also a risk. One can hold goods one can hold gold or cash all have certain risks. I think whats important is to get the mix right for oneself. One reason to come here is to pass ideas about all this back and forth so we can cut our cloth to suit our needs.

BTW did you know we have the odd mile of riverside in Canada?

If there is no Devil, then why did we do this?

What follows is more 2¢ of mine to CrystalRadio's & Burgandy's replies.

First of all, no one knows exactly how the implosion of all this financial excess will proceed, but IMO this implosive process manifesting in a sudden & severe stock market sell off will not be the be all and end all of everything to do with one's financial affairs. It will be a signal event and a very significant one at that when it happens, but it hasn't yet and so we'll just have to wait and see if it does so, when it does so and how badly it does so. Such a complete & total financial collapse breakdown via all the stock markets at once and all together is pretty darn unimaginable. I'll believe that when I see it.

I can imagine that as this full blown financial meltdown proceeds and gets severe enough governments could very well enact freezes on certain transactions or other confiscatory acts (especially so here in the US). But as mentioned before, IMO this sort of thing would be tantamount to conceding that uncontrolled financial collapse has already happened and god knows what else. I think we will be surprised by how long this financial meltdown process might take. In the interim there may well be some very narrow windows to make new moves or cut and run completely.

While wondering what could happen to one's PM holdings, the same could be said about one's cash deposits or equivalent investments. A run on bank withdrawals or fire-exit sales of Treasury notes is not something the government is going to idly let spiral out of control, and yet who's to say it won't ever get that bad or what they will do to arrest it. Ultimately, in such a state of severe financial collapse what one doesn't control outright in one's own personal possession can not be vouched safe. And even then who's to say the govt under such dire emergency won't think to scrap the $ with some other substitute and in many other ways usurp our property rights?

Now obviously all of this speculation is exactly that -- pure speculation. But once again we have no way of predicting how bad things will get or from which directions things might happen to exacerbate it all, nor how people will respond to any such govt dictums in such a crisis. We are stuck in the present and all we have to go by are the good reasons to expect that some future financial shocks are in store.

Will the shock(s) and responses to it result in inflation or deflation no one can predict for certain. Hence my two-way bet pending a clearer view of how this mess unwinds and how much control and in which direction the various PTB push their levers. In a financial crisis a lot will be tried but just what that will be, how effective and for how long is unknowable until it occurs. A lot too may well depend upon how well or not the various parties are able to coordinate their efforts. Not everyone may see eye to eye about doing it all the exact same way.

In the meantime we must wait and prepare as we each see fit. The GoldMoney account is not so much a bank as it is private depository, the holdings of which happens to be measured in bars of silver and gold. Compared to a regular bank's holdings of digital numerals and some paper fiat reserves, or any other manner of paper/digital investment, I tend to sleep better with this hard monetary asset arrangement. In highly inflationary times, as I imagine will be the primary U.S. mechanism to deal with the financial crunch, gold & silver should appreciate in price concurrently. Despite all the recent efforts to erase its monetary value in our fiat and digital backed system, it remains a fundamental monetary asset that is still highly regarded and valued as a hedge against fiat inflation (and geo-political turmoil).

As such it is my inflationary hedge until such a moment when I hope to judge it's time to cash this out and conceivably buy up useful property within my vicinity that may well be available for putting up extended family and friends in need, or some other worthwhile purpose. We'll see how this pans out.

One final note. I am not particularly in favor of purchasing US T-notes as I do not care to support this government any more than I have to via my taxes. The sooner we all stop supporting and funding its various reckless and dangerous ways the better IMHO.

But enough of this. It's time for me to go read the last chapters of Harry Potter to my eleven year old son and find out how that story ends. Our story ending has yet to be written although I'm not looking forward to living it. So it goes...

Crystal, Godraz. I've certainly thought the same way as yourselves, I've had plenty of time to think about it since I started in 2002. Initially I thought I would be able to profit from collapse, short the market, etc. I gave up on that idea since.

I guess at some stage I got to the point where it was simply impossible to have a good enough view of the future to risk speculating upon it. Even if the future is known, bad timing can still ruin the best made plans. So I moved to a strategy of minimising speculation, minimising risk and maximising personal control. Of course none of these can be done 100%, it is messy and sometimes frustrating.

It took me 2 years to unwind my position in the UK and a further 2 years to find the right place to settle in France. Even now I'm still a long way from being prepared, it isn't something that can simply be bought, it has to be learned by doing. I reckon it will take me a further 5 years to put myself into a position I'll be happy with. So here's hoping that everything holds together reasonably well until 2012. But I wouldn't bet on it :(

Currently prices are rising for grazing land and cereal acreage as the price of food increases. Climate change, energy depletion and economic failure are already quietly making their presence felt, but without alerting the main stream public. I believe that when confirmation arrives about how the collapse will play out, it will be too late to do anything. People will quite simply be locked in, unable to unwind their long positions on civilisation.

Triumvirate of collapse - Economy, Ecosystem, Energy


Thank you for your great coverage of finance and energy issues. Its great to have a Canadian perspective on the energy situation.

It seems very clear that Mexico and Venezuela are depleting so fast, that within 10 years the US will have no regular exporters except Canada. I suspect that as soon as the US army leaves Iraq the Saudis will stop their exports too. Its Jeffry,Khebab, and Ace's export/import land model on steroids.

Is there much movement toward Canadian resource nationalism ? It seems so far that Canada has rolled over to allow the Alberta bitumen to be produced. The giant surface disposal pits would never be allowed in the United States, and the Alberta royalty rates of 1% amount to a gift to the American oil companies. They are rapidly depleting the Alberta natural gas for production, plus a huge amount of fresh water.
Bob Ebersole

On the whole, Canadians take Canadian resource control completely for granted, although it's already mostly fictitious. Our Prime Minister tells us that we're an energy superpower and that we needn't be concerned about energy constraints at all. Meanwhile our resources are being bought out, the environment in northern Alberta is being destroyed, the royalty regime is a joke and our government is negotiating deep integration with the US and Mexico without public consultation. When Canadians wake up and realize what's going on, they'll be furious, but IMO it will probably be too late to do anything about it by then.

One thing to keep in mind is that if the US economy does go into "correction" mode, the price of oil will be pushed down quite significantly. This will make some of the Fort McMurray excesses quite unsustainable.

That $27B upgrader project by Shell might not look so good then.

But what I don't understand is the environmental thing. I mean we are talking about the destruction of the Athabasca river, using up all the natural gas, and god knows what else all to get a lousy 3 mbd with some tiny little EROEI?

It's madness.

There was something called the National Energy Policy many years ago under the Trudeau regime. Albertans didn't like it and whined that all the money was going to French people and those in Ontario.

Until there is a manifestly significant in your face problem, there won't be another NEP.

Albertans are a bunch of whiners alright. There are only about 3 million of them today and there were about 2 million in 1980. How can they claim over 50% of the money. Their share has to be based on their fraction of the Canadian population.

So my question is how much of this convergence has been orchestrated.

I am having a hard time believing that all this is just a big WHOOOOPS!

I’m not suggesting that TPTB are controlling CC & PO but I have to believe that they know at least as much as us all, and with their resources I have to believe that they have an even better understanding of the ramifications.

As to the financial crisis, I should say Global Financial Crisis, I am 100% convinced, that it has been engineered based on the changes in the rules over the last 10 years or so.
(sorry no links).

However I don’t necessarily believe that TPTB have in all in hand, in fact it looks more and more like it is all way off the play book and everything they do to regain control just makes it worse. I have a hard time believing that they are trying to make it critically worse (rapturesque) as some believe.

I just think there is or at least was a Grand Plan. So what is now occurring with this convergence can be analyzed two ways; It is all just a freak coincidence and we can theorize on the effects and the solutions, OR we look at it from the perspective of a somewhat engineered event and what might be the outcome and the best ways to address those outcomes.

…or I should just start taking the anti-psychotics again and hum my little tune.

My view is that we're seeing the outcome of a world built on the sum of millions of self-interested individual decisions made to maximize short-term personal gain. In the process we have lost a sense of both the long-term and the public good, both of which are necessary foundations of a healthy society IMO. What else should we expect when unconstrained greed has become the major organizing principle of our society (and the world as a whole through globalization)?

I don't see this as a grand plan because that would require a longer-term view of the world than I think humans are collectively capable of. A relatively small group has, however, benefitted far more than most from the current arrangements. Never before have so few commanded the labour of so many. As the current masters of a large portion of the world's resources, they may at the moment be in a position to influence many things, but I do not think they will be able to control what has been created as it unravels. I would expect the future to be highly chaotic as a result.

Thanks for responding Stonleigh.

So it's a collective whoops? I don’t disagree.

Someone earlier wrote that greed itself in not the thing, it's the unconstrained greed that has ruined us.

It's just that I can't help but feel that the constraints were purposefully removed even with complete understanding of the outcome. Am I reading too much into this?

Hi Souperman 2,

I don't think the problem is greed, more like rampant lack of trust that we will each get our fair share. Get enough and there is someone trying to take it away, so better get more eh? and when does more get to be enough or does it just become one endless Capitalist runaway nightmare escalator ride? Used to hate those escalators when I was a kid I figured I would get caught in one, and guess what eh?

If we could solve that lack of trust that keeps us out of the commons we might have a chance. What do you figure?
If there is no Devil, then why did we do this?

Thanks for responding CrystalRadio,

Interesting perspective, kind'a turns it upside down for me but I do see the logic.

P.S. your handle always brings back to mind the first radio I made at age 9 and how blown away I was sitting on the floor in the bathroom and grounded it to the cold water shutoff.
Wow, magic!

Maybe radio will come back again as an important means of 2 way communication. When solar conditions are right it takes very little energy to communicate. 5 watts or less will let you "talk" around world.

Oh!!! gee Souperman2,

My dad said I should ground it to the 220v... I also said "Wow, magic!"

If there is no Devil, then why did we do this?

Maybe you could say that those exceptionalists that can not be asked about started the ball rolling with their corrupt philosophy, and as time went by the hired help went off the reservation, and in that sense you are dealing with millions of independent decisions because they have lost control of it.

So basically you could say that their failure was to understand the exponential function, just applied differently.

They created the virus that was to benefit them, but it ran away from them.
Now they will be along for the ride.


Thanks for the detailed list of financial perspectives on the credit, debt and housing front. As with peak oil, the important pieces needed to form the whole picture are not reported in my newspaper or local radio/TV broadcasts. You have tied the mortgage/debt issue to the PO issue for me so that I can plan some actions.

I will be sure to check out your future roundups when you post them on the main TOD site. Be assured that your posts will be read by many even if there is not a lot of posting. I agree with other posters here that your collection of links should be mandatory reading for most people but, alas, reality rarely sells as good as fantasy.

Thanks again for all the hard work putting this site together.

Thanks - a major aim of the Round-Up is to set peak oil in context because there are so many factors that will interact with each other in complex ways in the coming years. IMO the energy surplus of the oil age has driven the complexity of the financial house of cards that we see today, but understanding how this will play out on the downslope requires more than an understanding of energy. IMO we need to look at the unique dynamics of the financial world in times of contraction - the swings of positive feedback based on human herding behaviour and the psychology of shortage. We also need to understand the constraints imposed on us by the physical world, and how our impact on the environment is moving the goal posts for us all the time - limiting our scope for mitigation of our other problems.

In short, we aim to embrace and interpret complexity in an effort to understand the big picture. Welcome aboard :)

understanding how this will play out on the downslope requires more than an understanding of energy

Yes! It takes a healthy economy to keep extracting increasingly expensive oil, and all well-lubricated gears must keep turning and working together.
Stoneleigh, in your opinion, do you think this housing credit bubble will lead to the derivatives collapse that Warren Buffett warned of a few years ago?
Also, a couple of weeks ago, Bill Gross stated that we could handle loan default rates of up to 7%. At that time the rate was a little over 3%. I'm assuming that with the upcoming fall reset amounts, we might reach that 7% before the end of this year or by early next year. Does anyone have a mathematical opinion on that?

Yes I do. Derivatives really do have the potential to be weapons of financial mass destruction due to the huge amount of leverage involved. They introduce systemic financial risk. The whole inverted pyramid rests on the ability of those at the sharp end continue servicing their debts. I think we'll be looking at default rates far in excess of 7% once the ARMs start to reset, and IMO that will trigger a far greater collapse of leveraged debt (taking much of the money supply with it).

Just to reflect the thoughts in NC's post above.

IMO most posters from the other side of TOD read your roundup's as they are very valuable, the reason (again IMO, LOL) that there isn't all that much discussion is because those that are fishing for grants, subsidies or government cheese can't do so from the canadians. Yet. LOL.

Wells Fargo, Rivals Cut Lending Amid `Credit Crunch'

U.S. mortgage lenders such as Wells Fargo & Co. and Wachovia Corp. are raising rates and imposing stricter standards on some of their most creditworthy borrowers as slumping demand in the mortgage bond market chokes off funding.

San Francisco-based Wells Fargo, the second-biggest U.S. home lender, curbed its funding of Alt-A loans, made to some borrowers with good credit ratings who don't document income or buyers of second homes. Charlotte, North Carolina-based Wachovia, the fourth-largest U.S. bank, stopped making Alt-A loans through brokers and smaller lenders and curtailed some adjustable-rate mortgages, spokeswoman Christy Phillips-Brown said.

"The credit crunch is here,'' said Keith Shaughnessy, president of Foundation Mortgage Corp. in Littleton, Massachusetts.

Making it tougher for the most creditworthy borrowers to get mortgages may worsen the two-year-old housing slump and threaten U.S. economic growth by reducing the number of people who can buy houses or how much they can afford to pay. Pasadena, California- based IndyMac Bancorp Inc., the ninth-biggest home lender, is making ``major changes'' after the market for mortgage bonds became ``panicked and illiquid,'' Chief Executive Officer Michael Perry told staff in an e-mail this week.

I guess later tonight we see what the twin sisters HSI and NNI have to say.

Tokyo shares open sharply down on Wall Street plunge, firmer yen

Tokyo shares opened sharply lower Monday, as Wall Street's plunge on Friday revived fears about potential global fallout from the US subprime mortgage woes.
Foreign investors led the selling, fuelling concerns that hedge funds have begun unwinding big big blocks of shares in global markets.

At 9.15 am, the Nikkei 225 Stock Average was down 300.47 points, or 1.8 percent, at 16,679.39, just off a low of 16,675.39. This is the lowest intraday level since March 16.

Australian shares plunge in early trading, following Wall Street's fall

Australian share prices fell nearly two percent in early trading Monday as investors reacted to a fall of similar magnitude on Wall Street Friday on continuing concern about debt markets and on unexpectedly weak US employment data for July.

At 10.40 am here (0040 GMT), the S&P/ASX 200 was down 97.6 points or 1.6 percent at 5,923.2 and the All Ordinaries index was down 99.2 points or 1.6 percent at 5,956.7.

Bell Potter Securities private client adviser Stuart Smith said likely sellers included leveraged spread betters, who might be selling to cover margin calls.

He said that on top of the fallout from the US credit crunch, there was worry about interest rates in Australia because of the strong possibility that the Reserve Bank of Australia will increase its official cash rate by a quarter of a percentage point to 6.50 percent on Wednesday.

Hi again Stoneleigh

"In October, more adjustable-rate mortgages are coming due," said Marc Thomashaw, a vice president of "I expect much higher foreclosure numbers early next year because of that."

What is the periodicity of this adjustment?, semi annually?

About gold, likely you are right there, but I heard that gold was made an illegal currency in Sparta, their currency being in iron. Sparta went down but gold continued to be used in trade before during and after Sparta. I was led to understand that one of the reasons for Sparta's fall was it refusal to honour gold as a currency.

I suggested to Godraz above that gold in that little tin box in th garden could not be confiscated, do you have views on this? (quietly now, the feds may be listening and we may end up missing the disaster, being in durance vile:)

BTW I agree with you about supporting kith and kin, but wouldn't expect any return. Always nice if things work out well for oneself too though.

If there is no Devil, then why did we do this?

CR, I can't seem to match the quote with the comment link in your post.

Perhaps this famous little graph from Credit Suisee answers a few questions. How accurate it is is hard to say, but it does provide an indication.

Note: the starting point in the bottom timeline is January '07, so you just count the months from there. Hence, Oct/Nov '07 will see a large rise in resets, but today is already much higher than this spring.

I don't think we can really tell exactly how much time will pass before this leads to actual foreclosure.

Hi HeIsSoFly,

Thanks for being so diplomatic it was pretty stupid to post ones own address, eh?! Try this instead:

Thanks for the graph, it sure looks like surf's up!!!

If there is no Devil, then why did we do this?

I suggested to Godraz above that gold in that little tin box in the garden could not be confiscated, do you have views on this?

You could do that, but then your wealth might not be much good to you because you wouldn't have much freedom regarding the use of it. I suppose it would depend how much you have and whether you can afford to squirrel some away in a fairly inaccessible form for potentially a very long time.

There are many things I would do first, particularly things that increase your degree of self-sufficiency. If you still have a surplus once everything else is taken care of then you're a lucky man indeed :)

Stoneleigh, your advice is as ever sane and sage and I will be off to the Electric Welder department of my 'favourite' Canadian corporate entity on first light on the morrow. I feel there will be profit in small towable load carrying devices. Though If I have another visitor like I had last night (see yesterday's Drumbeat ) the section dealing in Varmit relief will be the number one stop:)

Let the rivers flow within their banks and the gold remain in the hills.
If there is no Devil, then why did we do this?