What Can America Learn from the Collapse of the USSR?

This article fails to discuss the relevance in the drop in oil prices, and the overspending on the military and the general revolution that occurred as a result of discontent with the western communist model.



The collapse of the USA will most likely be similar.

Amplify’d from www.historyorb.com

The Collapse of the Soviet Union

Collapse of the Soviet Union Series

What caused the mighty Soviet Union to fall apart in less than six years?

Introduction Glasnost Perestroika Democratisation Ethnic Problems Baltic Independence The Conservative Coup

by James Graham

The collapse of the Union of Socialist Soviet Republics radically changed the world's economic and political environment. No other conflict of interest dominated the post World War Two world like the cold war did. One man is credited with ending the cold war, Mikhail Gorbachev. This however was not the biggest event Gorbachev was responsible for. The end of the cold war was just a by-product of the other major event he was involved with. That is the fall of communism in the USSR and the collapse of the USSR itself.

Gorbachev a communist reformer was appointed General Secretary of the Communist Party of the Soviet Union in 1985. His appointment followed the death of three previous Soviet leaders in three years. Leonid Brezhnev was first to go followed by Yuri Andropov and Konstantin Chernenko. Not being able to afford another short term leader the old guard appointed the youthful 56 year old Mikhial Gorbachev as General Secretary.

From the outside it seemed as if this great superpower self destructed in only three months. The USSR's demise is of course more complicated than this. The break up of the USSR can be traced back to Gorbachevs appointment and his early reforms. Gorbachev introduced a wide ranging program of reform. His major reforms were glasnost, perestroika and democratisation. These reforms allowed the problems of the USSR to be uncovered and become public knowledge.

Ethnic unrest, economic inefficiency and historical atrocities were the major challenges Gorbachev faced. How he dealt with these challenges and how successful he was is examined in this report.

Collapse of The Soviet Union Series: Glasnost | Perestroika | Democratisation | Ethnic Problems Baltic Independence | The Conservative Coup Read more at www.historyorb.com

 

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Forget Fracking Impact on Health & Environment, Natural Gas Has It All!

So you've heard about peak oil and Russia made a comeback after the fall of the Soviet Union with natural gas to the rest of Europe. We have a chance to rebuild America with natural gas. Who cares that fracking is poisoning our water supplies and our soil where our food grows and causing health problems for the people that live near fracking sites. That's liberal hogwash, rgith? We can just move to a pill based society. Big pharma would love that!

Amplify’d from oilprice.com

Is Natural Gas About to Make a Comeback

Written by Mad Hedge Fund Trader

Thursday, 14 April 2011 22:57

Today’s surprise release of figures showing a shocking draw down in natural gas supplies throws a great spotlight on what has undoubtedly been the red headed step child of the energy space for the last three years. While oil prices have been soaring to near all-time highs, gas prices have plummeted from a high of $18 per million BTU’s to as low as $2. Gas is now selling for one fifth of the cost of crude on an adjusted BTU basis. You would think that people would be in love with natural gas already. This simple molecule, CH4, produces only half the greenhouse gas emissions of oil, and is easily available in large quantities in the US though a web of interstate pipelines. The byproducts of its combustion are only water and carbon dioxide, not the noxious sulfur and nitrous oxides that diesel fuel spews off. Half the electric power plants in California already burned the stuff. I was part of a team in college that built a car that ran on natural gas, and it was so cleaning burning that it didn’t need a tune up for its first 100,000 miles. The problem is one of simple supply and demand. Thanks to the new “fracking” process, large swaths of the country once thought tapped out of oil and bearing coal of a grade considered too poor to mine have been found to be sitting on Saudi Arabia sized natural gas supplies. New horizontal drilling technologies have also been a big help. As a result, the US is now sitting on top of a giant 100 year supply of untapped natural gas, and there is probably a second century’s worth there if people bothered to look. Areas of the world with similar geology, like Europe and China, can expect to find the same. These staggering discoveries have led to the greatest reassessment in global energy supplies in since the massive Saudi discoveries of the 1930’s. The problem is one of basic supply and demand. So much gas has been discovered so fast that the price collapse has decimated the existing industry. Storage facilities around the country are filled to capacity. Unlike crude, the excess can’t be exported because there is no global market and very expensive liquefaction and re-liquifaction plants and specialized tankers are unavailable. Not only did industry leaders like Chesapeake Energy (CHK) have to fight off bankruptcy, a few major hedge funds, like Amaranth, blew up as well. While gas looks great on paper, it will require a $1 trillion investment and a decade of deregulation to create the infrastructure such enormous new supplies demand. All of this may be about to change. After a Herculean three year, $100 million lobbying effort, legendary oil man T. Boone Pickens, an old friend of mine, is close to gaining passage in the House of HR 1830, which promises to greatly speed up the natural gas conversion process with a whole raft of government subsidies. At the top of the list are incentives to build a nationwide network of natural gas stations to fuel the nation’s 18,000 heavy long distance trucks. Weaning these off oil will cut America’s oil imports by 2 million barrels a day, the amount we currently bring in from the Middle East. That would save us the cost of the now three wars we are fighting there. I smell a trade here, and not a scalp but a ten bagger, even though natural gas is odorless and colorless. For a start, to bring gas prices in line with oil at $110/barrel for Cushing, gas has to rise 500% to around $20/MBTU. There are large scale liquifaction plants now under construction or on the drawing board to deliver large scale gas exports to ever energy hungry China. This is all happening when Japan’s 40 year contracts to buy LNG from Asia, which are tied to high oil prices, are expiring, and the country’s nuclear industry has been unexpectedly pushed into the back seat. This could enable the US to become a net energy exporter within a decade. Higher oil prices also make all alternatives, including gas, much more attractive. The great question the entire energy industry is now grappling with is when supply and demand will come back into balance. No one knows. It could be as early as this summer or a few years off. The only certainty is that it is coming. When it does, every trader in the country will flip from selling rallies in gas to buying dips, for a long time. When the sea changes does come, whatever you do, don’t rush out and buy the natural gas ETF (UNG), which thanks to a contango in the futures markets, has the worst tracking error in the industry. Instead, buy industry leaders like (CHK) and Devon Energy (DVN) and the pipeline companies. I’ll keep you informed of more interesting gas plays as I come across them. By. Mad Hedge Fund Trader John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets. He has one of the best performing newsletters and has just launched a new investment service for Investors and Traders. Click here for more information. Read more at oilprice.com

 

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Rare Earthquake in Virginia - Is the Earth Telling Us Something?

Amplify’d from www.ibtimes.com

Mapping Virginia Earthquake 2011 Locations, Tremor, Damages and Hazards

By IBTimes Staff Reporter | August 24, 2011 4:18 AM EDT

The 5.8 magnitude Virginia earthquake of 2011 occurred at 1:51 p.m. (EDT) Tuesday, Aug. 23, in the Central Virginia Seismic Zone, which is believed to have produced the strongest magnitude in the history of Virginia in May 1897, a 5.9 earthquake in Giles County. The U.S. Geological Survey says the area has produced “small and moderate earthquakes since at least the 18th century.” The last known earthquake to have originated from the zone's epicenter occurred in 1875, when effective seismographs were not invented, but the damage from the shock suggested that it had a magnitude of about 4.8, USGS said. “The 1875 earthquake shook bricks from chimneys, broke plaster and windows, and overturned furniture at several locations,” the agency's statement said. Another earthquake from the Central Virginia Seismic Zone that caused minor damage occurred Dec. 9, 2003, and had a magnitude 4.5. Though Virginia earthquakes rarely have caused injury, tremors can be felt over a wide region. Like us on Facebook “East of the Rockies, an earthquake can be felt over an area as much as 10 times larger than a similar magnitude earthquake on the West Coast,” USGS stated. Here are a few maps that explain the earthquake, its locations, shocks that were felt across eastern U.S., damages it caused and more.

According to the USGS PAGER (Prompt Assessment of Global Earthquakes for Response) system that provides shaking, fatality and economic loss impact estimates following significant earthquakes worldwide, the shaking alert level for the Virginia earthquake is orange, which accounts for economic losses only. Significant damage is likely and the disaster is potentially widespread. Estimated economic losses are less than 1% of GDP of the United States.

See more at www.ibtimes.com

 

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True Inflation Since 2000 is Over 11% - CPI is Rigged

How many of you think the measurement of inflation as tracked by our current method of tracking CPI is completely off?

Amplify’d from advisorperspectives.com

For a longer-term perspective, here is a column-style breakdown of the inflation categories showing the change since 2000.

See more at advisorperspectives.com

 

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True Inflation on pre-1982 method

The Consumer Price Index: Headline and Core CPI

The Consumer Price Index: Headline and Core CPI

The Consumer Price Index: Headline and Core CPI

Merger of the Stock Market & USG Would Be Fascism, Right?

Amplify’d from www.zerohedge.com

Did the Fed Buy the Market to Stop the Collapse?

Submitted by Phoenix Capital Research on 08/22/2011 21:51 -0400

Now that the market has rolled over and erased most of the gains from last week, I can’t help but wonder just why the market rallied at all. True, it was oversold… but the FOMC announcement wasn’t exactly bullish (Seriously… ZIRP for another year was reason for an 8% rally in four days?).   I found it interesting that the New York Post published a story containing the following quote just 3 hours before the post-FOMC market ramp job started.   Back in October 1989, a guy named Robert Heller, who had just quit his post as a Fed governor, suggested that the government should purchase stock index futures contracts to calm the markets in times of distress.   "The Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole," Heller wrote in an op-ed piece in The Wall Street Journal after saying the same thing in a little-noticed speech. "The stock market is certainly not too big for the Fed to handle."…   This is a rather odd turn of events… a former Fed official urges the Fed to step in and buy the stock market… just three hours before the markets mysteriously reverses and rallies hard on no real news of note.   This begs the question… did the Fed buy the market to put a floor under the collapse? There’s no telling for sure. But it’s rather odd that this article came out just three hours before the market magically reversed and exploded higher   If the Fed did actively buy the stock market to try and put a floor under it, we can assume three things:   1)   The Fed is becoming truly desperate 2)   The Fed realizes QE isn’t helping 3)   QE 3, if it arrives, will be coming later down the line   If the Fed did in fact buy the market two weeks ago, then the Fed is getting extremely desperate. We know the Fed has been supplying juice to key Wall Steet firms who then bought the market, but never before has it been so obvious that the Fed itself may have been buying the market.   Remember since March 2009, QE has been the primary tool the Fed used to deal with the Financial Crisis. QE 1 was something of a success in that in restored investor confidence in the system. However, as I’ve noted in previous articles, by the time we got to QE 2, the negative consequences of QE (inflation) far outweighed the positive consequences (stocks rising).   So the fact the Fed did not announce QE 3 two weeks ago but chose to buy the market (at least it looks that way), indicates then we’re are DEFCON 1 RED ALERT for the entire financial system as it indicates that the Fed is abandoning its more traditional monetary tools and simply trying to buy the market it means the Fed is losing control of the system in a big way.   It also indicates that the Fed realizes that the benefits of QE come at too high of a cost for it to engage in more of this for now. Instead, the Fed will save QE 3 for a little further down the road as a final Hail Mary pass.   Which brings me to the most important point from yesterday’s Fed FOMC: there were three dissenting votes (an 18 year high). This tells us that Bernanke’s “inflate or bust” mentality is coming up against serious friction at the Fed. And it also tells us that there will be fierce resistance to QE 3 if the Fed chooses to unveil it down the road.   The take home point here is that the Fed is not as market friendly as before. There is growing dissent amongst Fed officials. And we’re beginning to see signs of desperation.   In plain terms, the situation in the markets right now is very VERY dangerous. It is easily the most dangerous market I’ve ever seen. We are going to see greater losses and sharp rallies. But the overall trend is now down.   I warned to get defensive several weeks ago. That warning is even more important now. Many people will lose everything in this mess. Yes, everything. However, you don’t have to be one of them. Indeed, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.    Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).   Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.   Good Investing!   Graham Summers   PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years or the best most profitable strategy for individual investors looking to profit from the upcoming US Debt Default, my reports covers it.   And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com. Read more at www.zerohedge.com

 

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Ron Paul, Barnie Franks, and Sen Dodd pushed to audit the Fed and get a 2 year delay. This should be enough to convince the world that the USA, the Bank of the United States, and the Federal Reserve and the US Treasury run the country more so than Congress and the President. Abraham Lincoln warned us of the banks taking over, just like Eisenhower warned of the military industrial complex.

Amplify’d from bangordailynews.com

Wall Street aristocracy got $1.2 trillion in secret loans By Bradley Keoun and Phil Kuntz, Bloomberg News Posted Aug. 23, 2011, at 5:39 a.m. Last modified Aug. 23, 2011, at 7:08 a.m.

NEW YORK — Citigroup and Bank of America were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits. By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret. Fed Chairman Ben Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. “These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.” It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms. They included Edinburgh-based Royal Bank of Scotland, which took $84.5 billion. Germany’s Hypo Real Estate Holding borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees. The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg. The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools. The Fed has said it had “no credit losses” from the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said they netted $13 billion in interest and fee income from August 2007 through December 2009.

“We designed our broad-based emergency programs to both effectively stem the crisis and minimize the financial risks to the U.S. taxpayer,” said James Clouse, deputy director of the Fed’s division of monetary affairs in Washington. “Nearly all of our emergency-lending programs have been closed. We have incurred no losses and expect no losses.” While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, the economy remains stressed. Homeowners are more than 30 days past due on mortgage payments for 4.38 million properties, and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Fla.-based Lender Processing Services Inc. “Why in hell does the Federal Reserve seem to be able to find the way to help these entities that are gigantic?” Rep. Walter B. Jones, R-N.c., a said at a June 1 congressional hearing in Washington. “They get help when the average businessperson down in eastern North Carolina, and probably across America, they can’t even go to a bank they’ve been banking with for 15 or 20 years and get a loan.” Fed officials had resisted releasing borrowers’ identities, saying it would stigmatize banks, damaging stock prices or leading to depositor runs. Last year’s Dodd-Frank Act mandated an initial round of such disclosures in December. A group of the biggest commercial banks last year asked the Supreme Court to keep some details secret. In March, the high court declined to hear that appeal, and the central bank made an unprecedented release of records. Data gleaned from 29,346 pages of documents and from other Fed databases reflect seven programs from August 2007 through April 2010: the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, discount window, Primary Dealer Credit Facility, Term Auction Facility, Term Securities Lending Facility and single- tranche open market operations. The data show for the first time how deeply the world’s largest banks depended on the U.S. central bank. Even as firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness. Two weeks after the bankruptcy of Lehman Brothers Holdings in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had “strong capital and liquidity positions.” Its Sept. 29, 2008, press release, touting a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group, said nothing about Fed loans. That day, Morgan Stanley’s borrowing from the central bank peaked at $107.3 billion. The loans were the source of almost all of the firm’s available cash, based on lending data and documents released more than two years later by the Financial Crisis Inquiry Commission.

Mark Lake, a spokesman for New York-based Morgan Stanley, said the crisis caused the industry to “fundamentally re- evaluate” the way it manages its cash. While Lake said the bank had applied “the lessons we learned from that period,” he declined to specify what changes the bank had made. For most loans, the Fed demanded collateral — securities that could be seized if the money wasn’t repaid. As the crisis deepened, the Fed relaxed its standards for acceptable collateral, increasing its risk. Typically, the central bank accepts only bonds with the highest credit grades, such as U.S. Treasuries. By late 2008, it accepted “junk” bonds, those rated below investment grade, and stocks, which are first to get wiped out in a liquidation. “What you’re looking at is a willingness to lend against just about anything,” said Robert Eisenbeis, a former research director at the Federal Reserve Bank of Atlanta and now chief monetary economist in Atlanta for Sarasota, Fla.-based Cumberland Advisors Inc. While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time. The rate was less than a third of the 3.8 percent that banks were charging each other for one-month loans on that day. New York-based JPMorgan Chase took $48 billion in February 2009 from TAF, a temporary alternative to the Fed’s 97- year-old discount window lending program. Chief Executive Officer Jamie Dimon said in a letter to shareholders last year that JPMorgan used TAF “at the request of the Federal Reserve to help motivate others to use the system.” The data show that JPMorgan’s TAF borrowings peaked on Feb. 26, 2009, more than a year after TAF’s creation and the same day the program’s balance for all banks peaked at $493.2 billion. “Our prior comment is accurate,” said Howard Opinsky, a spokesman for JPMorgan. Goldman Sachs Group, which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Michael Duvally, a spokesman for Goldman Sachs, declined to comment. The size of bank borrowings “certainly shows the Fed bailout was in many ways much larger than TARP,” said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard University.

TARP is the Treasury Department’s Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided public capital injections to banks. Because most of the Treasury’s investments were made in the form of preferred stock, they were considered riskier than the Fed’s loans, a type of senior debt. Citigroup, the most chronic Fed borrower among the largest U.S. banks, was in debt to the central bank on seven of every 10 days from August 2007 through April 2010. Its average daily balance was almost $20 billion. Jon Diat, a Citigroup spokesman, said it used programs that “achieved the goal of instilling confidence in the markets.” “Citibank basically was sustained by the Fed for a very long time,” said Richard Herring, a finance professor at the University of Pennsylvania in Philadelphia who has studied financial crises. Whether banks needed the Fed’s money for survival or used it because it offered advantageous rates, the central bank’s lender-of-last-resort role amounts to a free insurance policy for banks in a disaster, Herring said. Access to Fed backup support “leads you to subject yourself to greater risks,” Herring said. “If it’s not there, you’re not going to take the risks that would put you in trouble and require you to have access to that kind of funding.” Where the money went The following is a list of the biggest borrowers, by peak amount, from liquidity programs offered by the Federal Reserve during the financial crisis. The facilities are the discount window; the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; the Commercial Paper Funding Facility; the Primary Dealer Credit Facility; the Term Auction Facility; the Term Securities Lending Facility; and so-called single-tranche open market operations. Rank Company Amount (in billions) Date 1 Morgan Stanley $107.3 Sept. 29, 2008 2 Citigroup $99.5 Jan. 20, 2009 3 Bank of America $91.4 Feb. 26, 2009 4 Royal Bank of Scotland $84.5 Oct. 10, 2008 5 State Street Corp. $77.8 Oct. 1, 2008 6 UBS $77.2 Nov. 28, 2008 7 Goldman Sachs $69.0 Dec. 31, 2008 8 JPMorgan Chase $68.6 Oct. 1, 2008 9 Deutsche Bank $66.0 Nov. 6, 2008 10 Barclays $64.9 Dec. 4, 2008 11 Merrill Lynch $62.1 Sept. 26, 2008 12 Credit Suisse Group $60.8 Aug. 27, 2008 13 Dexia $58.5 Dec. 31, 2008 14 Wachovia $50.0 Oct. 9, 2008 15 Lehman Brothers Holdings $46.0 Sept. 15, 2008 16 Wells Fargo $45.0 Feb. 26, 2009 17 Bear Stearns $30.0 March 28, 2008 18 BNP Paribas $29.3 April 18, 2008 19 Hypo Real Estate Holding $28.7 Nov. 4, 2008 20 Fortis Bank $26.3 Feb. 26, 2009 21 Norinchukin Bank $22.0 June 29, 2009 22 Commerzbank $22.0 July 16, 2009 23 Dresdner Bank $18.4 July 2, 2008 24 HBOS $18.0 Nov. 20, 2008 25 Societe Generale $17.4 May 22, 2008 26 Guggenheim Partners $16.4 Dec. 10, 2008 27 Hudson Castle Group $16.2 March 31, 2009 28 AIG $16.2 Jan. 27, 2009 29 General Electric $16.1 Nov. 21, 2008 30 Natixis $15.5 Dec. 22, 2008 Data compiled by Bloomberg from the Federal Reserve Read more at bangordailynews.com

 

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Funny how we outspent the former Soviet Union into bankruptcy, with Afghanistan possibly being their Achilles heel. Meanwhile the USA is now facing bankrtupcy at the hands of Osama Bin Ladin and Al Queda. Either way, they win. http://amplify.com/u/a1br4u

Peak oil does have an impact in China, even though we dont hear about it.

Amplify’d from seekingalpha.com

White Gold, Black Gold and China's Energy Crisis

China has an ongoing energy crisis. Severe electricity power shortage spreads throughout most of China since spring time 2011. The power shortage occurred long before the summer peak power consumption season. Meanwhile, city residents complain about high food prices while desperate farmers had to destroy their harvest corps because no one is coming to their fields to buy their food produces. The reason: even though the prices of produce may be dirt cheap at locations of harvest, the cost of transporting them and distributing them into the basket of city dwellers is prohibitively expensive. The transportation bottleneck in China is just another facet of the energy crisis in China: There are not enough trucks and diesel fuel to transport the goods around the country, because diesel fuel is also needed to generate electricity.

Meanwhile, highways connecting Inner Mongolia to Beijing is severely congested -- tens of thousands of coal carrying trucks, lined up one after another on a parking lot stretching hundreds of miles, barely moving. China desperately needs the coal supply from the Mongolian coal mines, roughly 800 million tons a year, transported by trucks. But the coal trucks barely move.

China has close to 1.4 billion people. The world population is about to break the 7 billion mark. Rapid economic development in China and other emerging markets means more energy is consumed to produce and transport all the goods and food to feed the world's population. But we are quickly approaching the limit of how much planet earth can supply to feed the population of this world, both in terms of fossil fuels and in terms of other natural resources.

Every investor needs to understand the physics of the limit of growth. The goal of any investment is to grow fortune. Economists believe that sustainable growth is always possible given enough incentive of demands. But in a world of physical limits, sustainable growth is NOT possible. How do you grow your share of the fortune when there is a limit of growth for the world as a whole? A while ago I pointed out the fact that the most successful investor in the world, Mr. Warren Buffett, actually saw his fortune SHRINK by 75%, in the last 13 years, in real terms. You should pause and think: Why couldn't Mr. Buffett grow his fortune in the last 13 years? What chance do we, the small potatoes, have, in beating Warren Buffett and do better than him in growing our own investment fortune?

Opportunities exist if you recognize how resource constraints are limiting the growth of China and the world. Let's look at some numbers. According to BP World Energy Review 2011: China produces and consumes more than half of the world's coal in 2011: China produced 1800.4 MTOE (million tons of oil equivalent) of coal out of the world's 3731.4 MTOE, and consumed about as much. One ton of average coal is equivalent to 0.55 tons of oil in energy content. So in real tonnage, China produced and consumed 3.3 billion tons of coal per year. That number had been increasing annually at 10% pace in recent years!

China's domestic coal production cannot catch up with demand growing at such a pace. It has to import! China only begin to import significant amount of coal in 2009. By 2010 the net coal import reached 150 million tons. The staggering growth is sure to continue in 2011, to 233 million tons according to Citigroup.

This year China faces a power shortage of 30GW, or even 40Gigawatts. It costs about 0.55 kilograms of coal to generate one kilowatt-hour of electricity. So 30GW shortage means a need of an extra 145 million tons of coal per year to fill the gap. That's more than the 125 million tons of coal that South Africa's ESKOM burns in a year to generate electricity!

Looking around the world, you have to wonder where China can get its coal in the next few years. The global international coal market is only roughly 1 billion tons per year. At 3.3 billion tons per year basis, one year of China's demand growth at 10% pace is big enough to consume 1/3 of the world's total available exports. The world doesn't have any spare coal export to meet China's growing demand, unless major coal producers drastically ramp up their production and exportation.

Figure in India, a developing economy with a population soon to exceed China, and one which is growing almost as fast as China. India also has an insatiable appetite for coal. It is also facing a severe domestic coal shortage and is looking around the world for coal. India produces 400 million tons of coal per year but consumes 555 million tons, numbers that are much lower than China's, meaning a much bigger potential for demand growth. The Indians are flying around the world to sign coal contracts just as the Chinese do. So where can the Indians and the Chinese find extra coal supply?

Let's turn attention to South Africa, the only place that foreign importers can hope to buy more. According to a recent report on the operation of ESKOM, south Africa's national electricity company, they buy domestic coal at prices much lower than international market price, and collect electricity revenue at electricity prices much cheaper than any other countries. In last year, ESKOM burned 125 million tons of coal, paid 35.8 billion rands for the fuel and collected 91 billion rands from electricity tariffs. Using 0.55 kilogram of coal per kilowatt-hour electricity, and one US dollar equals to 6.70 rands, I calculated that ESKOM is paying less than $43 per ton of coal, and South Africa is paying an average of US$0.06 per kwh of electricity. Actually the subsidized big industry is paying way much less, at about 0.25 rands per kwh, or 3.73 US cents.

The coal price ESKOM is paying is not competitive against potential international importers, who are now paying more than US$120 per ton (FOB price, meaning buyer pays for shipping) for South African coal. The country has such a crumbling electricity supply infrastructure that this year, before the arrival of the winter season, which is July in the southern hemisphere, ESKOM could not afford to shut down the power generators for routine maintenance on a rotational basis.

With ESKOM's power generators working overtime without proper maintenance, burning lowest quality coal that frequently clogs up the equipments, and more over they probably will not be able to get supply of even such lowest quality coal for much longer because the Indian and the Chinese importers are eager to pay a much higher price to buy lower quality coal, how long will it be before the country's electricity grid crumble down once more, triggering a panic rally of prices of precious metals platinum and palladium like in early 2008? South Africa is the world's major producer of PGM metals, producing 85% of the world's platinum and 40% of palladium.

Mining and production of PGM metals is extremely energy intensive. According to data from major platinum producers, it costs roughly 1x10^10 joules of energy, or 2778 kwh of electricity to produce just one troy ounce of PGM metals. That's only direct energy cost. Count in exploration and development of mines, mining equipments, and labor cost etc, the total direct and indirect energy cost could be 5 times higher at 13890 kwh. If fair cost of energy is US$0.15 per kwh, then the fair cost of PGM metals should be at least $2100 per ounce.

So the best way to leverage on China's energy crisis due to shortage of the black gold, the coal, is surprisingly in metals that South Africa produces: the white gold, platinum and palladium. Coal shortage means platinum and palladium shortage one way or another: either South Africa keeps price of its electricity low and it leads to a crumbling electricity grid, which collapses the country's PGM mining industry, or ESKOM has to pay fair market price for coal and charge big industry fair electricity cost, bringing the PGM mining industry out of business unless they ask for much higher prices for platinum and palladium.

How to play platinum and palladium? Buy the physical precious metal, or the physical metal backed ETFs, PPLT and PALL. As for mining companies, I would not recommend South Africa based PGM mining companies -- they are restrained by the country's electricity grid. Instead you should look in North America: Stillwater Mining (SWC) and North American Palladium (PAL) are the world's only primary palladium producers. Located in North American and being the world's only PGM producers with the capacity to grow production, they are best positioned to take advantage of a situation created by China, India and South Africa.

Now turning attention back to China's coal needs. South Africa alone cannot satisfy China, nor can Australia. The only country with the capability to supply China's extra coal needs, is the USA. Currently U.S. coal is traded at far below international market price, and major U.S. coal mining companies see their stock prices plummet, like PCX, ACI, ANR, JRCC, etc. I think that is buying opportunity.

Disclosure: I am long SWC, PAL, PCX, CDE. Read more at seekingalpha.com

 

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Central Banks Demand Gold Like Never Before

Amplify’d from www.wallstreetjournal.com

Central Banks' Demand for Gold Quadrupled in Second Quarter

COMMODITIES AUGUST 19, 2011

BY RHIANNON HOYLE LONDON—Central banks are topping up their gold reserves, quadrupling their total purchases from the market in the last quarter as they seek to reduce their dependence on traditional reserve currencies such as the U.S. dollar. Even with gold prices at record highs, emerging markets' central banks have revived the official sector's gold-buying interest. They are diversifying their foreign-exchange reserves, which have grown along with their export industries. More recently, they have also bought gold in reaction to the persistent sovereign-debt crises affecting traditional reserve currencies, like the dollar and the euro. Analysts say this trend is likely to continue. "We ... Read more at www.wallstreetjournal.com

 

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The End of the American Empire, Beginning of Depression2.0 #collapse #crisis

Most didn't heed the words of people like this before the 2008 financial crisis in the US. Now, here are stronger words for an even larger depression. At what point will you realize that you need to leave your current city and flee for the forest? Perhaps when you also realize that democracy has been eroded as capitalism expands to the brink.



This has happened before in the US, but, like always, this time IS different.

Amplify’d from www.zerohedge.com

The Great Collapse Has Officially Begun

Submitted by Phoenix Capital Research on 08/20/2011 16:51 -0400

I’ve been warning of this for well over two years. My primary warnings were:

1)   That 2008 was just a warm-up 2)   That the REAL Crisis had yet to unfold 3)   That the REAL Crisis would make 2008 look like a picnic

Well, the period I’ve been warning of is now here.  What’s happening right now is not just a market crash, bear market, deflation, or any other item related to just one asset class.

Instead, this is a collapse of the entire US monetary and political system and the mentality of spending one’s way to wealth.

For 80+ years, the US has operated under a crony capitalist system in which politicians dole out political and economic favors to the chosen few whose bribes/donations funded their campaigns.

This system was aided and abetted by the US Federal Reserve, which dealt with any and all economic issues by printing more money. Whether it was the Asian Crisis, Long Term Capital Management, or the 2008 Crash, the Fed dealt with the issue by opening the floodgates and flooding the financial system with liquidity.

Aside from making moral hazard (the notion that those large firms who screwed up were never actually allowed to fail) the bedrock of the financial system, the Fed also blew a credit bubble which in turn funded bubbles in virtually every asset class: bonds, stocks, real estate, emerging markets, even some commodities.

Indeed, the vast majority of US economic growth over the last 40 years has been fueled by the Fed’s loose money policies. Bill King, an analyst and investor whom I admire, shared the below chart with me a while back. It charts US GDP growth in nominal terms (the dark blue line), the performance of the Dow Jones Industrial Average (the black line), and REAL GDP growth or growth that accounts for inflation (the light blue line).

As you can see, when we account for inflation, the US economic “miracle” of the last 30 years is in fact not all that miraculous. Take away easy credit and Fed funny money and the US GDP has barely grown at all since the ‘70s.

When your entire financial system is built on debt eventually you hit a brick wall. We did this in 2008. The Fed barely held the system together by going “all in” and funneling over $11 trillion in bailouts, backstopping the major US banks, and transferring north of $2 trillion in garbage debt to the public’s balance sheet (these are just the moves we know about).

This effort has now failed as the world collectively realizes that the Fed cannot hold the system together. This began to become clear when QE 2 spent $600 billion and the US got at most three months’ worth of improved economic data (while inflation exploded throughout the global economy, leading to riots, coups, and more).

In simple terms, we’ve now entered the Real Crisis, the END GAME, for our current monetary system. Before the dust settles on this mess, the US and its political, economic, monetary structure will look very very different.

However, before we get there, we will see riots, civil unrest, possibly martial law, for certain a Government shutdown, bank holidays, a debt default/ restructuring, the re-instatement of the Gold standard or something like it (possibly a basket of commodities), food shortages, and more.

We will also see trade wars, possibly another World War, a temporary backlash against globalization, a de-consolidation or fragmentation of corporate America, and other items.

In plain terms, we’re entering a period in history that will rival the Revolutionary war. This country will be very very different by the time it has ended. Many people will lose everything in this mess. Yes, everything. So if you have yet to take steps to prepare for this, you need to get moving NOW!

I can show you how. Indeed, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.

Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).

Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab. Read more at www.zerohedge.com

 

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The Great Heist 1980-2011 - How the Wealthy 1% Redistributed Wealth Away from the Middle Class

Amplify’d from www.alternet.org

Debt, Debt, Debt: 90% of Americans Experience Income Decline As Wealth Gets Sucked Back Into Top .1% -- Debt Explodes As We Try to Make Ends Meet

By David DeGraw, Amped Status Posted on August 14, 2011, Printed on August 18, 2011 http://www.alternet.org/story/152016/debt%2C_debt%2C_debt%3A_90_of_americans_experience_income_decline_as_wealth_gets_sucked_back_into_top_.1_--_debt_explodes_as_we_try_to_make_ends_meet

The cuts in taxes for the mega-wealthy have led to record wealth inequality and resulted in a huge national deficit. Meanwhile, to make up for the deficit created in part by tax giveaways to one-tenth of one percent of the population, Democrats and Republicans are committed to making draconian budget cuts to vital social services, which target the poor, middle class, elderly and sick, while handing out billions more in corporate welfare annually. (Inequality = Debt = Austerity)

Just as the government has done, to make up for tax revenue lost to the mega-wealthy, Americans have made up for the decline in income by taking on large amounts of debt as well. (Inequality = Debt)

In a severely unequal society, massive debt will always be created, thus forming a vicious cycle of increasing inequality and increasing debt, until the fragmentation of society reaches a breaking point when those in debt cannot afford to pay back their debts without starving to death. (Inequality = Debt = Austerity = Civil Unrest)

The Indebted Citizen

As for statistics on Americans being buried in financial debt: As mentioned before, from 1990 – 2010 costs of living have increased 67%, while wages have stagnated and declined. As the national debt has reached a record $14.6 trillion, total personal debt is now over $16 trillion. Consumer debt is $2.5 trillion. Credit card debt is $805 billion and student debt now exceeds $1 trillion.

Obviously, the more severe your debts are, the more you have to cut back in spending and the less money you have to buy new items. (Debt = Austerity)

Meanwhile, a perfect storm circles overhead as society breaks down and falls into an economic death spiral – health care, food and gas costs are skyrocketing, while income and home values are plummeting. (Inflation + Deflation = Stagflation)

Given these conditions, it is not surprising that over 250 million Americans, another record-breaking number, are currently living paycheck-to-paycheck struggling to make ends meet.

The following charts, from Adviser Perspectives, show the increase in costs of living since 2000:

As you can see, the price of basic necessities are consistently increasing; only clothing (apparel) has declined. The second chart highlights the crucial skyrocketing cost of energy:

The third chart highlights the pernicious skyrocketing cost of education:

The cost of education essentially buries young people in debt they will spend a significant portion of their lives attempting to get out of. Given the increasing costs of living, and the decreasing ability to make an expected income from such an expensive level of education, this young demographic will most likely live an entire life locked into spiraling levels of debt. Propaganda Inflation When reporting on inflation, the Bureau of Labor Statistics has twice, since 1980, revised its methodology to mask the severity of inflation, similar to how it masks the severity of unemployment. In its Consumer Price Index (CPI), which measures inflation, it has heavily discounted the measurement weight of energy, food and education – three of the most significant costs for most American households. To understand the significance of its revised methodology, current “official” CPI is at a 3.6 percent annual rate. However, if calculated the way it was before former Federal Reserve Chairman Alan Greenspan altered it in 1980, it would be 11.1 percent, three times worse than officially stated. So while the government and the Federal Reserve claim that inflation is low, at 3.6 percent over the past year, food prices have increased 39 percent and US gas prices have increased 34 percent over the same time frame. The increase in gas cost over the past year masks the severity of total gas price inflation, which is currently 125 percent more expensive since December 2008, increasing from $1.67 per gallon to $3.75. Stagflation As 90 percent of Americans experience income declines, and the value of the dollar declines, the price of necessities are rising, while the one major asset many Americans have, a house, is also declining in value. Already, thanks to declining home values, 28 percent of US homeowners owe more on their mortgages than their home is currently worth. With 10.4 million American families having lost their homes to foreclosure since 2007, Amherst Securities, a leading broker/dealer focused on mortgage-related investments, estimates that another 10.8 million homes are at risk of default over the next six years. This will obviously continue downward pressure on home values. Deliberate Systemic Attacks

The dramatic increase in economic inequality and poverty, along with the unprecedented rise in wealth within the top one-tenth of one percent of the population has not happened by mistake. It is the designed result of deliberate governmental and economic policy. It is the result of the richest people in the world, and the “too big to fail” banks, using the campaign finance and lobbying system to buy off politicians who implement policies designed to exploit 99.9 percent of the population for their financial gain. To call what is happening a “financial terrorist attack” on the United States is not using hyperbole; it is the technical term for what is currently occurring.

As Che Guevara, a man who took on the global financial elite, said, “The amount of poverty and suffering required for the emergence of a Rockefeller, and the amount of depravity that the accumulation of a fortune of such magnitude entails, are left out of the picture, and it is not always possible to make the people in general see this.”

The rich have never been richer, while their paid-off politicians make budget cuts for the poor and middle class, and cause the cost of basic necessities to skyrocket.

The unfortunate reality of this crisis is that an economic war has been launched against us.

As a wise old friend once said, “You can’t be neutral on a moving train.”

This post is an adapted excerpt from David DeGraw’s new report on the financial destruction of the United States. The full report can be read here: Analysis of Financial Terrorism in America. Read more at www.alternet.org

 

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