Commentary for the Week of March 8

[The essay below by Cam Fitzgerald, a frequent contributor to Ricks Picks, is a stark reminder that humanity could soon be facing problems even more serious than the collapse of the global economy.  The alarming die-off of honey bees and other cross-pollinators may presage nothing less than the devastation of food supplies around the world.  A beekeeper himself, Cam warns that, unlike global warming, which is happening slowly, the death of bee colonies has been so precipitous that a solution needs to be found and implemented as quickly as possible, lest  the food chain suffer catastrophic damage. Although a pesticide called Clothianidin is suspected, we don’t have time for endless political debate, he warns. Time is running out, and that is why I would urge readers to spread awareness of the problem by disseminating this commentary as far and wide as possible. RA] Rick has invited me to contribute an article discussing my views of how the world will look in the coming years. I am afraid I have very, very bad news for everyone though. My story is not science-fiction nor is it conjecture and yet it has drawn me to a very sad conclusion following events over the past few years. The issue that follows has ramifications that may even suggest the eventual collapse of society itself. Let me explain. In the latter part of the 1800’s a novel new chemical was developed called DDT. This synthetic chemical’s true calling and use was not realized, though, until sometime around the Second World War when a Swiss chemist named Paul Hermann Mueller first discovered its properties as an effective insecticide. He won the Nobel Prize for his efforts. The chemical found widespread use in agriculture and in the control of malaria-bearing mosquitoes, and for decades was one of the major means of pest

[Discussion prompted by the commentary below continues to evolve and may yet enlighten us sufficiently to produce some useful conclusions about the banking system's looming endgame.  Hyperinflation, or deflation?  At this point, I'll concede that it could be either that brings us to economic ruin.  But I will nonetheless argue in a forthcoming essay that the dollar could collapse without triggering a hyperinflation.  Under this scenario, it would not be a question of paying $1,000 for a barrel of oil, or $100 for a carton of eggs; rather, those in a position to supply such basic necessities would simply stop taking dollars.  This clearly implies that we would move rapidly to barter, abandoning a currency system that might conceivably have become useless overnight. (The spectacularly bullish implications this holds for gold are impossible to miss).  To drive the discussion toward a conclusion, I would urge readers to immerse themselves in this idea. You can skip the commentary itself if you'd like, since whatever insights it might provide at this point pale in comparison to the gems that have turned up in the forum. Simply click on the "Comments" link above to enter the forum. When you jump into the fray, argue not from theory but from the logic of how you imagine your life would proceed in the wake of a collapse of the banking system and the dollar.  You might pretend that the catalyst for the collapse was a Treasury auction at which the Fed was the only buyer amidst wholesale dumping of U.S. paper by...everyone.  To heighten your acuity and stimulate the imagination, make this catastrophe a personal one. Pretend, for example, that it is the first of the month, that your employer and your $100,000 job are unexpectedly in dire jeopardy, and that you are about to send your mortgage lender a check for $2000 drawn on an account with $10,000 in it. The evening news is filled with reports that the Federal Reserve will do everything

[Yesterday's commentary touched off quite a debate, and so I am running it for a second day to encourage further discussion.  However, I am supplementing the essay with a link to one of my favorite bloggers, Charles Hugh Smith, who offers his own, compelling reasons for asserting that hyperinflation is simply not in the cards.  Basically, he argues that it would not suit the interests of the rich and powerful, who after all are heavily invested in financial assets that would plummet in value.  I have argued the same point, albeit from a different angle, by asking the inflationists to explain why the supposed Masters of the Universe would permit hyperinflation when it would effectively allow Joe Sixpack to pay off his mortgage and all other debts held by the rich and powerful with confetti.  Smith's paper is entitled  The Mechanics of Hyperinflation:  Bankers vs. Politicos, and it can be accessed by clicking here.  He provides a further link to an Austrian analysis that explains why Weimar's money blowout was quite different from anything that might occur in the U.S.  The crux of it is that Germany's money supply was controlled by the political class rather than by such rich and powerful behind-the-scenes players as created and still control the Federal Reserve.  I would ask that anyone who joins in the discussion from this point forward be familiar with Smith's argument, if not necessarily with the Austrian treatise. Please note that if your additional comments are not published it is because I have raised the bar to eliminate repetition.  RA] I awakened Sunday morning on three hours of sleep, lucid of mind and filled with dread from an essay linked below that I’d read before going to sleep. Amidst the desiccated hell of Colorado’s, and the entire Southwest’s, pine-forest die-off and a disturbingly winterless winter, even my wife still doesn’t get it.  She seems to think that because peak real estate

The term “Great Recession” first came into popular usage a couple of years ago, a tacit acknowledgment that the economic quagmire we entered in late 2007 was qualitatively worse than any mere recession this country had previously experienced. As indeed it was – or if you prefer, continues to be. Home prices in the U.S. have plummeted more than 30 percent, while unemployment has risen to its highest levels since the 1930s. These symptoms have not only persisted, they are apparently getting worse. Earlier this week it was reported that the three-year decline in real estate valuations across the U.S. continued into January, further ravaging such already down-and-out cities as Las Vegas, Cleveland and Detroit.  In at least 11 other major cities, prices were reported to have fallen to the pre-boom levels of 2003 or earlier. But prices also fell to ten-year lows in places where real estate never got quite as pumped, such as Denver, Atlanta, Minneapolis and Chicago. Imagine having zero equity in a home on which you’ve been making mortgage payments since 2000.  According to the latest statistics, that is exactly the situation facing many homeowners in areas of the country where property valuations until recently had been holding up relatively well.  You could hardly blame 30 million property owners who are underwater for thinking the recession never ended.  For in plain fact it never did, and only someone with a PhD in economics could be so blind to reality as to maintain otherwise. Two economist we would cite in particular are Princeton University’s Alan Blinder and Mark Zandi, authors of a paper entitled “How the Great Recession Was Brought to an End”.  That’s an oxymoron, as far as we’re concerned, since, these days, when the term “Great Recession” is used, it is meant to connote a recession

[The commentary that follows elicited a deluge of fascinating responses, and so I am letting it run for a second day.  Frequent contributors to the Rick's Picks forum were asked where the U.S. economy would be in five years. Below, Mario Cavolo, an expatriate whose business is based in Shanghai, says Chinese wealth is clamoring for bargains in the U.S. and that a falling dollar will bring enormous Asian investment to our shores, infusing the U.S. economy with new vitality.  The bad news is that large swaths of the American middle class will be devastated by the shifting economic landscape, unable to take advantage of the opportunities that voracious demand from foreigners will create. RA] On treating the theme Rick put forth for this recent series of contributing articles, it would be best to start with the fascinating and accurate point he makes that the “jig is already up,” as opposed to being a situation we think we are still attempting to put off.  There are far too many complex pieces to the puzzle across not only America but the entire global markets, so intricately interconnected, making it foolhardy to suggest their status or direction. I would suggest we can agree on a few core points giving us a sense of where we will be in five years and with that in mind, let’s say we have some very good news and some very bad news. No matter how many points we cover, there will be dozens of other points and counterpoints not touched, requiring a 600-page book to cover it all respectably. Yet, with regard to the core points put forth in this treatment, each of us needs to consider what possible moves, what choices, what adjustments he or she might make looking forward to their future from today -- not as being a

Watching the Dow Industrial Average cavort in the thin air above 12000 while the world goes to hell, we’re reminded of the famous exchange between Senator Joseph McCarthy and U.S. Army counsel Joseph Welch during the Army-McCarthy hearings:  “Have you no decency, sir?” asked Welch after the Commie-baiting McCarthy had smeared a junior lawyer from Welch’s firm with a ruinous accusation. We might ask the same question of the decision makers who in recent weeks have been driving stocks higher no matter how grave the news or world-shaking the event: Have you, the Masters of the Universe, no decency?  Apparently not -- at least none capable of registering even a mote of doubt or concern about what is going on in the real world. Granted, there was a fleeting loss of confidence in the literal wake of March 11’s epic earthquake and tsunami. Some investors wondered how global manufacturers would fare with their most important supplier of just-in-time parts out of commission. Others grew nervous that Japan’s very financial stability was in jeopardy. But it didn’t take long before such anxious speculation gave way to the sunny notion that it would take vast quantities of capital investment to rebuild Japan.  Ka-ching!  That was more than a week ago.  Since then, Japan’s predicament has grown increasingly menacing. Radioactive waste is spilling into the sea, a reactor containment vessel appears to have cracked, and there is no longer even a timetable for fixing the problem. Will Geiger counters in L.A. have to go crazy for Wall Street to at least act as though all of this matters?  And it’s not as though Japan’s problems were the only thing threatening to tilt the world off its axis economically and geopolitically. In Egypt, jihadists appear certain to carry the day, negating what little chance

[With debt metastasizing out-of-control and the States threatening rebellion against Washington, we asked some frequent contributors to the Rick’s Picks forum how they thought the nation would look five years from now, economically speaking.  In the essay below, Ross Moyer predicts that America’s growing energy needs will force the exploitation of heretofore off-limits local regions such as the energy-rich Bakken Formation, which includes large swaths of North Dakota and Montana. He also expects physical gold to increasingly become the world’s standard of value relative to fiat money, even if a gold standard itself has not taken root. RA] If, by some strange quirk of fate, some of us have forgotten the following fact of life, we have, of late, been only too well reminded that a great many things in the realm of human affairs can change drastically in a very short period of time. Sometimes immense transformations are wrought by acts of God, as in the horrific earthquake and tsunami in Japan; but, more often than not, it is our own collective actions that leave us absolutely stunned at how radically altered, literally and figuratively, mankind's circumstances can become in what seems like no time at all. With this less than cheery idea firmly in mind, I was asked by Rick to compose a piece on my vision of what the economic landscape will look like some five years hence. While I was honored to be asked, I have to admit that I've found the task daunting. The truth is, I have just a few firm convictions about what will constitute our collective financial and economic condition in the U.S., let alone globally, come the year 2016. Still, I do have a few ideas, so, for good or ill, here is some grist for the mill.  The events of

So, what was it that Europe and the U.S. sought to gain when they plunged head-first into Libya’s civil war?  Beats us. We can understand what motivated the French, since they were the first to act on the possibly mistaken belief that their former good friend Col. Qaddafy was headed toward certain defeat. Considering the way things are going, they may have to remove the word “Alive” from the “Wanted Dead or Alive” poster they’ve effectively pinned on Kadafy’s caftan. As for America’s involvement, no one seems to know why we got involved in the first place, much less what will be required of us after the bombing stops. Perhaps the French will be so kind as to instruct us when the time comes.  In the meantime, the “international coalition,” which also includes Great Britain, seems to be having a rollicking good time strafing loyalists forces and “protecting” the rebels. But it’s more than a little unsettling to see the ostensible allies squabbling over what is to come next, and who will lead.  If it is nation-rebuilding our politicians have in mind, then Kadhaffi may indeed have to be exiled, if not rubbed out, since he doesn’t seem like the kind of dictator who will be content to chill at the oasis. More likely, as we mentioned here earlier, is that he will do everything in his still-lethal power to avoid handing over Libya’s oil capacity to the U.S., France, Britain et al.   Meanwhile, events thus far have attracted the bemused attention of Germany, Russia, China and a few other ostensibly neutral spectators who, one gathers, would always be perfectly content to do business with Kadhafy. Although this coalition of the unwilling obviously relishes telling the world how appalled they are by the allies’ strategically senseless assault against Kadafie, the

[With debt spinning wildly out of control and the States threatening to revolt against the tyranny of Washington, we asked some frequent contributors to the Rick’s Picks forum how they thought the nation would look five years from now.  In the essay below, Wayne Razzi, aka “Red Will,” predicts that “They” will win – as They always do. However,  before any clear winners can emerge, the nation will feel the ravages of the catastrophic debt deflation that “we” have long predicted. RA] I’m always both happy and humbled whenever Rick extends an offer to me to contribute an essay to Rick’s Picks, given the respect that I have for him and many of his forum’s contributors.  On this go ’round I have to state that I remain humbled but I can’t honestly claim to feel happy at the moment!  Here’s the reason:  Rick asked that I peer deeply into my own crystal ball, which is actually more of a considerably beclouded marble, to attempt to foretell what the world might look like economically in five years.  I take solace only in the fact that he didn’t ask for stock market predictions! Attempting to compress so many thoughts, countless trends, variables and unforeseen elements into a succinct forecast is extremely challenging. I turned to my markets and business partner of many years, an exceedingly bright fellow, and solicited his opinions.  A rarity then occurred in that he and I came to distinctly different conclusions.  His side will reveal itself once you’ve read through my thoughts on things that follows but I did find it interesting that he’s in the very same camp as our esteemed Mr. Ackerman.  My conclusion is that he and Rick are envisioning what should happen due to something akin to cognitive dissonance, which I use with the most polite