Making Sense of the US Oil Story

We frequently see stories telling us how well the United States is doing at oil extraction. The fact that there are stories in the press about the US wanting to export crude oil adds to the hype. How much of these stories are really true? If we believe the stories, the US is now the largest producer of oil liquids in the world. In fact, it has been the largest producer since the fourth quarter of 2012.

Figure 1. US Total Liquids  production, including crude and condensate, natural gas plant liquids, "other liquids," and refinery expansion.

Figure 1. US Total Liquids production, including crude and condensate, natural gas plant liquids, “other liquids,” and refinery expansion.

Oil “Extenders”

One of the issues is that a few years ago, the US created a new oil-related grouping, combining valuable products with much less valuable (lower energy content, less dense) products. Using this new grouping, the US was able to show much improved growth in total “oil” supply. The US EIA now calls the grouping “Total Oil Supply.” I refer to it as “Total Liquids,” a name I find more descriptive. Besides “crude and condensate,” the mixture includes “other liquids,” “natural gas plant liquids,” and “refinery expansion.”

“Crude and condensate” is the original grouping. Often, it is just referred to as “crude oil.”

“Other liquids” is primarily ethanol from corn. If we produced coal-to-liquids, it would be in this category as well.

Natural gas plant liquids (NGPL) are the liquids that condense out of natural gas when they are chilled and compressed in the natural gas processing plant.

Refinery expansion occurs when a refinery breaks long chain hydrocarbons into shorter ones. The resulting products take up more volume, but don’t really have more energy content. In some ways, the process is like making whipped cream out of whipping cream–more volume, but not really more product. The new products tend to be more valuable–say, diesel and lubricating oil made from something close to asphalt.

The process of breaking (cracking) long hydrocarbon chains is a valuable service to those producing heavy oils, because it makes valuable products from crude that otherwise would not have been useful for most purposes. The cracking process uses natural gas. Because natural gas in the US is inexpensive relative to its price in most other countries, the US can perform this process more cheaply than other countries. Because of this, it makes financial sense for the US to import heavy crude oil and process it in this way, whether or not US citizens can afford to buy the finished products. (Cracking is not useful on very light oil, such as Bakken oil, since it has primarily short chains to begin with.) If US citizens can’t afford the finished products, they are exported to others.

Whether or not the US should be credited with this expansion of volume is somewhat “iffy,” since the process doesn’t add energy content. Quite a bit of the oil processed in this way uses imported oil, such as oil from the Canadian oil sands.

If we look at the base figure reported by the US Energy Administration, that is, “Crude and Condensate”(Figure 2), the US does not come out as well in original comparison (Figure 1).

Crude and Condensate Prodution US Saudi Russia

The United States makes much greater use of extenders than do Russia and Saudi Arabia. If we calculate the ratio of extenders to the base (crude and condensate), the ratios are as follows:

Figure 3. Extenders as a percentage of crude oil production.

Figure 3. Extenders as a percentage of crude oil production, based on EIA data.

Both Russia and Saudi Arabia have much lower ratios of extenders. For both of these countries, the extenders are Natural Gas Plant Liquids.

Natural Gas Plant Liquids (NGPL), have varied in price. For a while, the price was up with the price of crude, but as supply increased, the US price dropped during 2011 (Figure 4).

Figure 4. Price Comparison per Million Btu for Oil (West Texas Intermediate), Natural gas plant liquids, and natural gas, based on EIA data.

Figure 4. Price Comparison per Million Btu for Oil (West Texas Intermediate), Natural gas plant liquids, and natural gas, based on EIA data.

This drop  in NGPL price occurred because the US market for at least some components of this grouping became saturated. With too much supply for demand, prices dropped. Excess ethane, for example, could be sold to be burned as natural gas, putting a floor under its price. As a result, recent prices seem to be influenced by changes in natural gas prices.

With the drop in NGPL prices, we hear more talk about the need for exports. We don’t really have use for all of the low value products that are being produced, other than to burn them as part of natural gas. Perhaps someone else does. If someone else does, it might get the price back up.

What is the Real US Trend in Production/ Consumption?

The US EIA makes fuel comparisons based on Btu energy content. This approach makes it easy to see how much of our fuel is US produced, and how much is imported (Figure 5).

Figure 5. Comparison of US production and consumption of oil plus NGPLs, based on EIA data.

Figure 5. Comparison of US production and consumption of oil plus NGPLs, based on EIA data.

Production is indeed rising, but it is still far below consumption–about 55% of consumption in 2013. Many articles make this situation confusing.

The emphasis in most news reports is the drop in imports–that is the difference between the blue line and the red line in Figure 5. If we look at the chart, though, we see that a big reason for the drop in imports is a drop in consumption, with the big step down coming in 2007 and 2008. Oil use is associated with jobs. It takes oil to make and transport goods. Also, workers with good jobs can afford cars and the oil to operate their cars. If they remain students forever, they can’t afford cars.

A person can better see the drop in consumption by looking at consumption on a per capita basis.

Figure 6. US per capita oil and Natural Gas Plant Liquids production and consumption, based on EIA data.

Figure 6. US per capita oil and Natural Gas Plant Liquids production and consumption, based on EIA data.

If prices don’t fall, consumers don’t feel the effect of more production. What they do feel the effect of is falling consumption-the top line. Young people especially have been finding it hard to get good paying jobs. With all of their student loans, it is hard to be able to afford to get married and buy a house. This holds down demand for new homes, and all of the things that go into new homes.

If we look at total per capita energy production and consumption in the US, we see even more of this trend. While production per capita is rising, an even bigger issue is falling consumption.

Figure 7. Total per capita energy production and consumption for the US, based on EIA data.

Figure 7. Total per capita energy production and consumption for the US, based on EIA data.

US per capita energy consumption has been dropping since 2000. 2000 is the year of peak US employment, as a percentage of the total population.

Figure 6. US Number Employed / Population, where US Number Employed is Total Non_Farm Workers from Current Employment Statistics of the Bureau of Labor Statistics and Population is US Resident Population from the US Census.  2012 is partial year estimate.

Figure 8. US Number Employed / Population, where US Number Employed is Total Non_Farm Workers from Current Employment Statistics of the Bureau of Labor Statistics and Population is US Resident Population from the US Census. 2012 is partial year estimate. (Sorry, not updated.)

With a smaller percentage of the US population employed (and lagging salaries for those employed), US consumers cannot afford to buy as large a quantity of energy products. Rising US oil production is not really helping US consumers, because at its high price, we cannot really afford it.

Rising oil production has not brought down oil price, making it more affordable. In fact, the situation is the reverse–high prices are needed for today’s oil production. It is questionable whether today’s prices are even high enough. Oil companies have to  keep adding debt, to keep extracting oil.  The EIA recently wrote an article about the situation called, As cash flow flattens, major energy companies increase debt, sell assets. Steven Kopits shows this chart of cash flows for Independent Oil Companies in a recent post.

Figure 9. Image by Steven Kopits showing Free Cash Flow of US independent oil and gas producers, from Platts Guest Blog.

Figure 9. Image by Steven Kopits showing Free Cash Flow of US independent oil and gas producers, from Platts Guest Blog.

With negative cash flows, companies have to keep increasing their debt levels–something that eventually becomes impossible.

When those producing the oil see that US oil prices are at times not as high as world oil price (Brent), they hope that selling their crude to world export markets, they will be able to get higher prices for their crude. If they are successful, there will be less crude available sold to US producers, perhaps raising the price of this crude sold in this country as well. The net impact may be higher prices for US consumers, making the US consumers even less able to afford the oil products.

Energy Growth is Needed for Economic Growth

There is a close tie between energy consumption and economic growth. Perhaps my statement “Energy growth is needed for economic growth,” in the header is a little too strong. Perhaps if energy consumption is flat, with the benefit of technological progress and efficiency changes, there can still be economic growth. There is definitely a connection, though. Energy of the right type is needed for every process we can think of–getting to work, shipping goods, operating our computers, heating metals when they are refined.

The problem comes when what we are facing in shrinkage of energy consumption, over and above what can be accommodated by technological progress and efficiency. Figure 7 hints that this is already happening. Then we have danger of a collapsing financial system, as the low energy consumption growth pushes the economy toward contraction. The economy has been held together since 2008 with quantitative easing and zero interest rates. The plan has been to allow consumers more income to spend, by keeping interest rates artificially low. I heard an excellent presentation on this subject recently called Global Financial System on Life Support by Roger Boyd.


I wrote a post recently called The Absurdity of US Natural Gas Exports. The situation with exports of crude oil is not quite as absurd. The issue is that current oil refineries are not configured for the influx of very light oil. Many of them are busy “cracking” long hydrocarbon chains, often using imported oil as their energy source. If US oil producers have the option of selling their crude oil abroad, perhaps they can get a higher price for it. If US oil producers can get higher prices for their oil, this may very well filter through to higher oil prices for US consumers, and less oil consumption by US consumers, but this is not the concern of oil companies.

A major concern with falling per-capita energy consumption it that the financial system may soon reach limits where it is stretched beyond what it can stand. The economy needs energy growth to grow, but the economy is not getting it.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to inadequate supply.
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1,009 Responses to Making Sense of the US Oil Story

  1. edpell says:

    Elon Musk, has a vision. The only source of energy is solar, PV captures solar, batteries store solar. He is building the worlds largest PV plant in Buffalo, New York. He plans to build the worlds largest lithium battery factory in California. The backup colony on Mas well that is just for fun.

    • edpell says:

      Mars, the “r” key is sticky

      • tfouto says:

        Is there oil in Mars?

        Paul, Bill Gates left Microsoft long ago. He has a foundation as you know. He also, has a power company. You can look for it. Nuclear researc.

        I guess he’s aware of oil peak danger but maybe is just relying on technology…

        • Paul says:

          yes I am aware of that.

        • Jarle B says:

          Paul wrote:
          “I have a problem with people referring to these titans of industry as if they know everything about everything.”

          +1. Gates is just a guy with a lot of money from luck with computers, forget about him contributing good to what’s ahead.

        • Dave Ranning says:

          Nuclear and Gates may possibly bring a new meaning to The Blue Screen of Death, all M$$F users encounter.

      • Paul says:

        Good luck to elon – he is in the wake of huge failures:

        Ten Reasons Intermittent Renewables (Wind and Solar PV) are a Problem

        Solar – After Hundreds of Billions of Dollars of Subsidies and R&D and this is what we get?

        The German Solar Disaster: 21 Billion Euros Burned

        Spain’s disastrous attempt to replace fossil fuels with Solar Photovoltaics

        • Jarle B says:

          Mr Musk is just taking advantages of peoples fascination with technology, people who wants to feel green and like here in Norway, people who don’t want to pay car tax/road toll/ferry tickets etc and think it’s nice to drive in the bus lane. Hurrah for Musk!

          • Paul says:

            Yes – there is big money to be made in tapping into the green religion. The true believers in the green saviour are great customers — they drink the kool-aid without questioning anything — and they are often a wealthy demographic — so if you can come up with something that appeals to them you can make a whole lot of money…

            Probably the most hypocritical group of people on the planet…

            The only way to go ‘green’ is to do this Of course Tesla and Prius owners would laugh at you if you suggested that … while sipping the premium double latte machiatto grande while taking a break from buying hemp bags (in a mega mall with AC) that have been shipped half way around the world.

            Heck if you suggested these people take the bus to the mall they’d be insulted.

          • Jarle B says:

            Fact: A majority of the respondents in a recent survey (in Norway) said electric car would not be an option if the government take away all the incentives.

            • tfouto says:

              Yes. That’s why the govenrment give all incentives. That’s also a fact. If not no need for subsidies…

            • Jarle B says:

              “That’s why the govenrment give all incentives. That’s also a fact. If not no need for subsidies…”

              Sorry, I didn’t get that…

            • Jarle B says:


              you do understand that a government need the car taxes/ road tolls etc – or the will have to build less roads etc?

            • tfouto says:

              i didn’t get what you wanted to prove. That’s why subsidides exist. If it would be an option then government wouldn’t need to give incentives.

              That’s what subsidies are for… Any type of subsidies…

            • tfouto says:

              Yes of course i understand the need for car taxes and road taxes…

  2. dolph9 says:

    Broadly speaking, I would make a last stand in any temperate region with decent agriculture/water/demographics. That narrows it down but there are still choices.

    I personally would avoid extremes of cold or heat, and any place that, for whatever reason, you have doubts about the capacity of the people there to handle themselves in a very long emergency triage situation when international capital breaks down, and with it the big nanny/corporate state.

    • InAlaska says:

      When New York yesterday got a record of 13″ of rainfall in 9 hours and Alaska has had the warmest summer in recorded history, how do you find “temperate regions” and “avoid extremes?” That’s the whole point of climate chaos: the game is changing and we don’t know the rules.

  3. wadosy says:

    after two hundred years of experience with the roundeyes’ imperial dope peddling, china has had quite enough, thank you, of our benevolence…

    so china seems like it’s gonan build the nicaragua canal so they can haul orimulsion to china and not be subject to the israeli american imperial shims at the panama canal

    well, we dont really know how serious the chinese are about that canal… they made that feint towards gwadar, pakistan… plans for pipeline terminals, refineries, LNG liquefaction plants, tanker ports… the spent a ouple hundred million to lure the US into spending trillions to block it –maybe

    maybe the chinese are playing go while the americans are playing checkers… who knows

    • wadosy says:

      despite his sins, nixon seems to have had a puritanical streak, and probably admired moa because mao kicked the chinese opium habit

      that must have distressed the drug cartels, but they recovered by moving their operations to burma and loaos, where they were protected by US mlitary and paramilitary organizations

      and big manufacturers were thrilled at the prospect of a massive population of cheap, sober labor

      mao was a very immoral man, depriving opium industrialists of their prime market and production area, and nixon, by hobnobbing with mao, sealed his fate

      or something like that

      history had to have made sense to somebody, didnt it? …or else it wouldnt have happened that way

      • Paul says:

        Actually the drug cartels have not left China at all — the biggest pushers were Swire and Jardines… they are two of the biggest listed companies in Hong Kong.

        • wadosy says:

          wouldnt be much a surprise if swire and jardine had a slice of the afghanistan opium/heroin pie…i mean, if the empire changes suppliers and markets, there’s no need to junk the distibution and financial setup, is there? …it’s got to be a pretty smooth operation, having had a couple hundred years of practice

          you’re not trying to imply that the big drug guys are still selling opium to china, though, are you? …because i think you’d be wrong about that…

          yeah, there’s probably still a market for opium and heroin in china, but nothing like it was before mao

          but the point i was making is this: we owe a huge karma debt to china, and i hope they dont hold grudges

          i get the feeling that china is just waiting, hoping against hope, that we grow up before we do something terminally stupid… judging from our actions lately, maybe it’s gonna be a vain hope and a long wait

          • Paul says:

            No – I don’t think those companies would be involved in any drug related activities.

            They leave that stuff to HSBC

            Of course HSBC = Hong Kong and Shanghai Banking Corporation …. so no doubt they are returning to their roots as the bankers of the drug barons.

            • wadosy says:

              do you have any urls pointing to opium use growing in china?

              if so, please post them

              and the HSBC is a brit bank….

              well, maybe the brits havent given up on renewing opium use in china, but we still need some numbers

            • Paul says:

              Drug offenses in China will get you a bullet in the head — the country was destroyed by the British insistence on forcing opium on China in the 1800s so I doubt there is a major problem now. The government would not stand for it.

    • wadosy says:

      the chinese went along with the gag, but they probably didnt think they had much choice

      they realized they had to industrialize to be able to defend themselves from our benevolent global hegemony –our ambitions had become evident in NATO’s expansion and our escapades in asia

      then comes the global warmng scare, but chinese press on with their industry, apparently preferring to deal with sea level rise rather than our benevolence

      who can blame them? …they’d experienced our benevolence during two hundred years of opium

    • wadosy says:

      ia this stuff below science fiction, or some moldy plan laying in the basement of the AEI building, just waiting to spread its wings as the latest loony tunes neocon idea? ..giben the empire’s contempt for humanity, it’s hard to tell

      the empire finally came up with a plan that pleased everybody, even the empire’s victims and human rights activists… it especially pleased the imperial bankers and drug cartels

      the plan consisted of heroin drops on victims prior to bombing them

      the drop volume was calculated from target population… the formula was: population multiplied by lethal dose multiplied by legth of drop period…

      for instance, a target population of 1,00,000 multiplied by 75 mg per person, multiplied by 14 days of drops

      the heroin was dropped in one-dose packets, dispersed over the target area to reduce the possibility of the heroin being collected, packaged and sent back to the US and europe where heroin prices were skyrocketing due to increased demand caused by the empire’s heroin distribution project

      the heroin was dropped in conjunction with non-lethal drops of cluster bombs designed to inflict maximum pain… the pain intended to encourage use of heroin… the two-week drop period was assumed to be the max endurance of normal humans to extreme pain without pain medication

      tthe opium growers, refiners, cartels, and bankers were especially pleased by the project… anyone suffering adverse financial effects from the project were reimbursed by the imperial government if a reputable bank confirmed that aggrieved parties had suffered financial losses

      it worked good

      • wadosy says:

        imperial chemists, psychiatrists and medics calculated that human suffering in target populationswas reduced by 934.33%, and the project was praised by liberals of all stripes
        the idea for the project first surfaced at at pembroke college, oxford, billed as “a modest proposal II” and was adopted by a british think tank whose members were distressed by the amount of suffering caused by imperial necessity

        the idea migrated to the US via the American Enterprise Institute, and from there to the University of Chicago where it was adopted by politically correct professors

        the idea eventually became a key argument for those advocating the use of armed might to achieve benvolent global hegemony

    • Stilgar Wilcox says:

      Being African-American, this is a great opportunity for Obama to show some leadership and get down to Ferguson to help stabilize that situation. If he really had some guts he’d walk right out in between both factions (with plexiglass protecting him), face the angry crowd and with mega phone in hand come up with something more than a canned sound-bite.

      • Rodster says:

        Obama and leadership in the same sentence, laughable.

        • Paul says:

          It amazes me that Americans – despite the obvious — still continue to vote and bicker about which party is better than the other.

          They might differ on innocuous issues such as gay marriage and abortion but when it comes any issue involving corporations, money and foreign policy — they are ONE AND THE SAME.

          The President has ZERO power…. as does Congress and the Senate. They are entertainment value at best – like a Cowboys Redskins game — at the end of the day one or the other wins — but the result is meaningless.

          The puppet masters know this – they play you off against each other like rabid sports fans — and they are laughing at you — I bet they even crack jokes over a glass of fine single malt and say ‘oh these blind deluded morons — they continue to vote and sing America the Beautiful — hahaha isn’t it great to be the king!’

          THIS is who is in charge They do not care about you — you are ‘the little people’ — you are there to fight their wars — to run their enterprises (or not – look how pleased they were to send the better paying jobs overseas)

          I know it is difficult to WAKE UP when you are indoctrinated from birth to believe America is the chosen country — when you are bombarded day after day after day by the lies on CNN, the NYT, FOX, etc….

          But when you can’t identify the sucker at the table —- it is you.

          Tip: read a few of Noam Chomsky’s essays – he does an excellent job of explaining the reality that is America

          • Rodster says:

            I’m not a red vs blue person. Both parties are one and the same, “good cop vs bad cop, Diet Coke vs Diet Pepsi”. I figured that out a long, long time ago.

            • Paul says:

              It is a perfect system — the puppet masters remains behind the curtain — and the trot out their stooges to front their policies….

              So you get Bush — he gets his marching orders to go into Iraq — he is the one to get in front of the cameras and tell all the lies — and when it all goes badly wrong and the lie is exposed – the vitriol gets directed at him… the anonymous puppet masters are nowhere to be seen…

              The real beauty of this is that Bush disappears and whoever replaces him gets a clean slate (like replacing a whore with a virgin)

              So it’s as if Iraq never happened (oooh that Bush he was a bad guy but lets move on…)

              Of course the new guy does not engage in witch hunts — because that would mean that he would be next up for the noose because he will be doing exactly the same thing as the last guy…. don’t wan to set that precedent.

              Rinse repeat rinse repeat rinse repeat…

              And the heavily indoctrinated masses fall for the same BS again – and again — and again…. because they believe the lies that the US stands for good in the world — if a president did something bad he was an anomaly — a bad apple — in general they still believe America is a bright shining light…

              Difficult to see I suppose — if you are born in America — but for many of us not born there — we see people like this as no different than brainwashed people living anywhere in the world…. you are unable to see the forest through the trees — even if we point the forest out to you.

              In a diabolical way this is truly brilliant….

              And what is amazing is that even though I have exposed exactly what is happening I am sure there are people on this site who will still believe Obama is justified in doing what he is doing… that he is somehow different from Bush.

              He is no different — he takes orders from the same people who gave Bush his orders.

      • Jarle B says:

        If only he were more then a hand puppet…

        • Paul says:

          Watch this

          And then try to tell me the Deep State does not run the show…. the guy treating the President like a 6 year is a very senior banker who was inserted into the administration to offer ‘guidance’ to the president.

          US politics is nothing more than a made for TV drama to convince the masses that they actually have a say in how things are run.

  4. Jarle B says:

    Gail or others,

    as a Norwegian I sometimes think: When the going gets tougher, what are the chances that someone decide that they don’t want to pay for oil any more, and invades Norway to get to our nice Brent wells?

    • Perhaps at that point your elites realize for good that the no questions asked super obedient alliance with NATO was a grave mistake. Similarly as your national sovereign wealth fund holding paper promises around the world and very little real assets. Simply that per capita gargantuan oil and gas wealth endowment was put on the altar of silly ideology and greed. But in the end Norway is still a very nice country, and if the ocean won’t go completely dead zone in short order, it can provide for some fraction of todays population. Relatively speaking don’t be afraid you have it good.

      • Jarle B says:

        Cut us some slack: 1) It’s hard for a small country with a lot of oil not be obedient to USA. We did our best; for instance we didn’t give the oil away to big US companies, but took care of business ourself. 2) Bying IOUs are risky, but what real asses would have been a better investment (Our national fund owns some real estate, for instance in central London – what is that good for when things fall apart?)?

    • Jarle B says:

      Spesific: Will USA go down without trying to save themselves by invading and seizing oil even in “friend countries”?

      • Openly only as the very last resort.
        They will have to come with some cheesy cover story in the first try, like protection of shared values etc. Because the heavy hand approach on formely friendly-allied countries would meant global markets meltdown, resulting in US economic crash and fast implosion into couple of former US regions ala Orlov’s scenario. This is unlikely at the moment, I guess what’s next is 10yrs window of slowly enforced unconsumption – deflation hellhole, gorillataping all crucial systemic supports like crazy, however the 2020-30 period could be start of rather chaotic future in the west also.

      • antares71 says:

        Jarle, I personally think that up there in the North, Russia will try to dominate the area, and Norway is a good bounty. Greenland will also be an eye-catcher, especially from China. In that case what can Denmark do? Now that the ice is smelting there will be more people interested to explore what’s underneath.
        However, I think it’s also a military strategy to have control of the North. “Remember” how Hitler rushed to Norway before the British could? It was swift and fast!
        So, yes, US and Canada, will “help” as you suspect to “protect” the Nordic Union. I personally prefer the latter two then the former two.

        • InAlaska says:

          As a formal student of history and politics, I can see the world fracturing into hemispheres again. Russian will own Europe (sorry Norway), most of Eurasia, and the north on their side of the world. The US will focus on controlling Canada and South America, very resource rich. Russia will have the counterweight of China that it will be competing with for control of the Eurasian land mass, but China will likely focus on dominating Southeast Asian resources. Both of these giants will have their hands full dealing with unpredictable nuclear-armed N. Korea and Pakistan. These will be their wildcards. India, also nuclear-armed will be in a death struggle with Pakistan. Israel will be in the doughnut hole of a glowing nuclear slag pile as it slings atomic arms in a circle around itself to fight off jihadist terror armies. The Eastern hemisphere will be a very dangerous neighborhood to live in. All in all, I think if you end up living in the West, you will have a better time of it–geopolitically speaking. I know it is easy to bash America, but it has the advantages of “splendid isolation” with the protection of two very wide oceans east and west and two very weak neighbors north and south. It still has somewhat deep soils, plenty of rainfall, inland waterways, hardwood forests…and once the die off occurs this may be enough.

          • antares71 says:

            Yes, I think you’re right.
            Where did you learn about macro-regions? I first read it in The Clash of Civilization by Samuel Huntington

            • InAlaska says:

              One of my degrees is in Foreign Affairs. Samuel Huntington’s article came out over 20 years ago and still holds true.

            • PeterEV says:

              Did you ever read “The Nine Nations of North America” by Joel Garreau? Copyright is 1981 It started as a craziness to define areas of North America by what reporters sensed when visiting various areas in North America. The author assembled those impressions into nine areas that could be considered fairly uniform by various traits. He thought there was enough similarity in some, they could form their own nation (e.g., Quebec, the Breadbasket, Mexamerica, the Empty Quarter, Ecotopia, the Foundry, The Islands, Dixie, and New England).

      • wadosy says:

        norway and russia share a border and the barents sea… oil and gas there

        so it’s a perfect setup for a false flag attack on a statoil drill rig in the barents, blamed on russia

        russia will be is convicted in a trial by media before the investigation even starts… just like the malyasian airliner caper in ukraine

        oughta work… for a week or so, anyhow

        • Jarle B says:

          “norway and russia share a border and the barents sea… oil and gas there

          so it’s a perfect setup for a false flag attack on a statoil drill rig in the barents, blamed on russia”


          just the sort of thing I’m worried about…

      • wadosy says:

        i’m hoping there’s a “cold civil war” going on now in the US… but it’s gonna be tough sledding for the american siloviki because the neocon philosophy seems to have spread like cancer through many western governments, and the main media seems to be on noeons’ side…

        the russian siloviki had a relatively easy time of it when they pruged the russian neocons, and the russian people apparently approved of that action

        but the neocons have never forgiven russians for that, especially for repossessing yukos, because the neocons need to control russian energy if they’re to accomplish their benevolent global hegemon

        • InAlaska says:

          Do you actually follow American politics? The neocons are on a downward slide into oblivion. Except for a large chunk of gerrymandered congressional districts, they have lost the “culture war” in the US, they have lost the hispanic vote, never had the black vote and are on their way to losing over issues of immigration, legalized marijuana and so forth. In the next few decades the majority white population will become only the largest of several minorities. The neocons are finished. That doesn’t mean that the US won’t have an interventionist foreign policy, it might. But it will be one of desperation rather than ideology. Maybe not even that as their is a strong, and growing, isolationist movement in the general population. The neocons were a virulent strain in US thinking, but they are on their way out.

          • Paul says:

            Remind of me who is who at the zoo.

            I know Cheney is a neocon …. but Obama is doing the same things as Cheney — war in Libya, war in Syria, war in Ukraine, war in Yemen…. war in Afghanistan… back in Iraq….

            Would Obama be considered an ultra-neocon? A mega-neocon? He has more wars under his belt…

            But he has a Peace Prize — even Orwell didn’t think of that — the Nobel Peace Prize – awarded to the leader who initiates the most wars

            Because as we know – WAR is PEACE.

            Clinton – Bush – Nixon – Obama – same same same — they are the front men for the Deep State.

            The last front man to attempt to stand against the Deep State — got a bullet through the head.

            America the Beautiful yadda yadda yadda….

            • InAlaska says:

              Obama is certainly not a neo-con, but he is certainly having his hand forced by events in the middle east. The deep game is that he may forced to go back into Iraq so that it doesn’t seem that the Democrats lost it to ISIL after all of the American lives sacrificed. This will allow the Democrats to keep the presidency. Notice how Hillary Clinton, is already distancing herself from the Administration policy so that she can go her own way in 2016 regardless of what is done in the next two yearas. That is the deep game you are seeing being played out.

            • Paul says:

              Ok — so let’s play this game — you can be the Cowboys — I am the Redskins…

              You say that your QB was forced to do what he did in the Middle East etc…. What forced him to invade Libya? What forced him to arm and support Al Qaeda and Al Nusra in Syria? What forced him to arm and support terrorists who are attacked and overthrew a democratically elected government in Ukraine?

              My QB only invaded only two countries. He did it because he was ordered to do it by the Deep State.

              I will save you some time — your QB was indeed forced to do what he did — but not by circumstances… but because he takes his marching orders from the same people that give my guy his marching orders….

              And here we get a rare peak at how that works

              Now lets have a look at a member of the Deep State — you will note that Don Regan was never elected — yet he is able to chide the president as if he were a janitor at Merrill Lynch who was taking to long to mop up some spilled champagne after the the celebration that followed the repealing of Glass Steagall


              Wake up people — you are being played for fools.

          • wadosy says:

            the original neocons were so successful in propagating their philsophy that tthey can hide out now…

            meanwhile, people like biden (PNAC signatory), mccain (PNAC signatory), victoria nuland (wife of PNAC founder rober kagan), jeb bush (PNAC signatory) and radek sikorski (AEI fellow and PNAC signatory, married to anne applbaum who writes a necon column for the washington post) havent gone away… an now hillary has turned into a warrior princess

            the main media, which ued to at least try to maintain a semblance of truth, are nothing but mouthpieces for the neocon agenda

            if you ant lists of neocons, here you go…

            mplete List of PNAC Signatories and Contributing Writers

            List of American Enterprise Institute scholars and fellows

            American Committee for Peace in Chechnya

          • wadosy says:

            of course, one of the reasons the noeocns ahve been so successful at propagating their philsophy is because of 9/11…

            …which must have been one of the reasons they needed a new pearl harbor, dont you think?

            • Paul says:

              Remind me why Mr Obama has not initiated a proper inquiry into 911?

              Oh right — it’s because he wants us to look forward — let’s bury the past and be positive — and hopey and changey (while he marches the US into more wars)

              What do you think would happen to Obama if he got in front of the US and said — there are serious questions about 911 that need answering — and that he was allocating a 50m budget to an investigation.

              I will tell you what — he would be put in a room and shown the Zapruder film once — and then asked if he wanted to continue with his investigation…

              But Obama is not a stupid man — he knows that it pays to not rock the boat — he knows who the master is — he is a slave just like every other president — and he knows that when he steps down if he has been a good boy — he will — like Clinton, like Blair, like most other leaders who do the bidding of the Deep State…. he will be worth tens of millions from speaking engagements alone.

              Heck — if it were me in that position I’d be saying ‘yes sir’ left and right if that was the payoff… 911? I don’t see nothing there worth investigating … let’s move on … who did you guys say we need to drone next? Where do you want me to invade next? Would you like some more coffee – I’ll run right down and get it… two sugar right….

            • wadosy says:


              you seem to understand how badly the neocon cancer has spread


            • InAlaska says:

              wadosy, Paul,
              You two are so paranoid it makes me laugh (;-D You want to believe so badly in this deep subterranean machine that controls all that you mistake it for basic human incompetence, vanity, greed, and the inability for anyone to juggle more than a few balls at the same time. All of these secret motives belong in a book by Dan Brown. If invading Iraq was about Oil, why did the US exit? If the president is in the pocket of this alleged Deep State, why does he have to “chided” by anyone. If the deep state were so controlling, clearly the Cowboys would beat the Redskins every time.

            • Paul says:

              IA – we are not paranoid…. I used to be deluded to some extent as well — I used to believe America stood for good (mostly)— but then I started to think a bit — and dig a bit — and I eventually realized what the reality was…

              Which I have outlined in an earlier post.

              I understand how difficult it is to grasp what I am saying — I have had this discussion with many Americans — few every escape the matrix — it is powerful — it bombards you day and night

              One of my epiphanies came when I read John Perkins Confessions of an Economic Hitman — I can save you reading it — now you can dogmatic — or you can open your mind a little and see what Perkins has to say

              I am very much interested in what you have to say about America after watching that short talk.

            • wadosy says:

              people dont want to believe it… that’s why it’s all been so successful

              i surely dont want to believe neocons –israelis and americans– did a false flag attack to kickstart their PNAC project…

              but that’s where the dircumstanital evidence points

              the real phisical evidence was shipped off to korea as soon as possible and turned into tuna cans and KIAs, the bush administration resisted hearings and the hearings, when they finallty happened, were restricted

              no proof of bin laden’s involvement has ever surfaced, these people restored the opium growing and lied us into iraq

              what it boils down to in the absense of real evidence is: we’re reduced to the “motive, means, opportunity and character” method of compiling a suspect list for 9/11, and the neocons and israelis emerge at the top of the list

              there’s just no getting around it

            • Paul says:

              People don’t want to believe it because if they did then that would destroy one of their fundamental beliefs — i.e. that America is not good — it is run by psychopaths — and they would know they are powerless to do anything about it — so best to tuck that knowledge into a dark corner of the mind and pretend…

              If anyone things the Deep State is not capable of killing Americans you need to read this:


              Here is the actual document with highlights

              This was signed off by the JOINT CHIEFS and the SECRETARY OF DEFENSE.

              JFK killed it — and he was dead 6 months later.

              Now if you can’t see the forest through the trees after reading that…. you probably never will

            • InAlaska says:

              I can believe in resource depletion, climate change, peak oil, financial collapse, and state actors pursuing their own interests, as well as all of the other converging dilemmas of the 21st century without having to buy into paranoid delusions about a masonic-like, deep-state run by psycopaths plotting to rule the world.

            • Paul says:

              Paul Craig Robers was a high ranking member of the Deep State (high Reagan official, WSJ senior editor) — and he has seen the light — he has turned against both parties — I suggest you subscribe to his regular diatribes against the Deep State and its minions the Democrats and Republicans.

              As he says — he has lost most of his friends by doing what he has done — the Deep State and its acolytes do not appreciate when one of their kind exposes them.

              David Stockman is another — he has equal vitriol for both parties – because there is no difference between the two – there can be no difference — because the same people control both of them.

              And it is because the masses refuse to acknowledge this that you never see hope or change… you just get the same shite over and over and over…

              Ask yourself — has Obama done anything to roll back the power of the NSA? Did Bush?

              Does that not tell you something?????

              Well — that is all about to become nothing more than verbal diarrhea…. because the Deep State is soon to be done… they might have a last hurrah firing those 1.6 billion rounds … but they are over… because this is over.

            • CTG says:

              InAlaska, I have no part in any discussion on the blue-red team or American politics although I know what is going in there. However, when it comes to conspiracy theory, I always remember the age old proverb – “there is no smoke without fire”. The person who came out with the conspiracy (other than aliens, etc) cannot that creative. There has to be some truth in it. When you dig further, you will realize that there are many things that you do not want to know and may not know if you did not dig them out. However, you must have an open mind. In my country, we have been using blogs and alternative media for local politics for more than 6 years and we know that there are many things that are hidden in our politics and conspiracy is abundant here. So, I am not surprised at all on deep state. Think MH370, MH17 – many of our citizens know that there are stories behind it and they accept that deep state is involved.

    • xabier says:

      Jarle B

      Watch out for the Scots!

      • InAlaska says:

        Yes, indeed. Any people who can happily eat haggis are to be feared.

      • Jarle B says:

        The Scots are our friends. I have had some of the best pub nights in Scotland – we are brothers and sisters separated at birth by the North Sea!

  5. Stilgar Wilcox says:

    ‘Euro zone economy grinds to halt even before Russia sanctions bite’

    Germany, Europe’s largest economy contracted by 0.2 percent on the quarter.

    France fared little better, flatlining for the second successive quarter.

    Italy, the euro zone’s third largest economy, slid back into recession for the third time since 2008 in the second quarter, shrinking by 0.2 percent.

    Zero growth reported by statistics agency Eurostat on Thursday was alarm bell for politicians and policymakers in the 18-nation economy, which is already bracing for the impact tit-for-tat sanctions against Russia over Ukraine.

    Keep in mind that the US GDP for the 1st qtr. ended up at -2.9% then rebounded in what must be one of the most historically incredible turnarounds in history, particularly since QE is in the process of tapering, to +4% in the 2nd quarter. Maybe the US policy makers should contact the EU to let them know their secret to shifting into a much higher gear to increase growth in one quarter from the previous by a whopping 6.9%

    I still am vexed by that turnaround. Some say it’s clear from the stats, while others say the government is lying. I guess we’ll just have to wait to find out what possible corrections are made to 2nd qtr. GDP. But if 4% stands and that transition from the first qtr. to the 2nd qtr. remains on that same trajectory, then the 3rd quarter should come in at 10.9% and the 4th qtr. at 17.8% Ok, so I’m being sarcastic, but really something must be up with 4%. If this country can end QE, and continue to greatly reduce the deficits while streaking into the stratosphere with monumental GDP increases, then get on the hotline to the EU. Explain to them how it is done.

    • Rodster says:

      “I still am vexed by that turnaround. Some say it’s clear from the stats, while others say the government is lying.”

      You know what i’m vexed about? That they are still referring to Europe’s problems as a recession when it’s in fact a Depression. Gotta love the MSM who just spins stuff to keep the clueless from figuring out what they are really up against and how bad the upper 1% have screwed them and future generations.

      • Paul says:

        The MSM does once in a blue moon write something that is useful but for the most part the ONLY purpose it serves is to allow you to rule out whatever they are printing as the truth — that is valuable because you can then move on to other explanations on an issue.

        Once a person becomes aware of this they will watch the ‘news’ in an entirely different light… I seldom watch the ‘news’ (I don’t have a TV) but when I happen to be in an airport lounge or somewhere a TV is on — I watch with bemusement (while others are gripped by what is being presented believing they are doing their civic duty and being informed)

        When I watch CNN it’s like I am watching a drama — most of what they report is lies — the presenters are actors — they never ask hard questions. I sit there and think – why don’t you ask this or that… but nope — they read from the script. They are not journalists — Glenn Greenwald is a journalist as is Jeremy Scahill… Christine Amanpour is trained as a journalist but she is a whore in the sense that she sells out her integrity for a big salary.

        Zero Hedge is without question the best source of news on the web — why? — because they pull stuff directly from the MSM and they a) add context by commenting on the relevance of the story (the MSM often publishes accurate stuff — but they fail to give it context so it goes in one ear and out the other) and b) they expose the lies in the MSM propaganda.

        ZH deserves at least one Pulitzer per month.

        Chomsky is correct when he says to follow the MSM but also look at the MSM of other countries — I follow Al Jazeera,, and others… because they give me the story from different perspectives — and only when you see the angles can you work out what the truth MIGHT be.

        If you simply shortlist sources that have a western bias — you will forever remain in a state of ignorance.

        Europe is without question in a massive Depression. Some of the countries have youth unemployment rates in the region of 50%… 50%!!!!!! And people are still willing to believe the EU is improving????

        Frog boiling in pot being told by the MSM the water is refreshing cool — and they want to believe so badly that they do

        • wadosy says:

          did mr chomsky ever explain why the neocons needed a new pearl harbor?

          …or explain why bibi thouoght 9/11 was “very good”?

          …or explain what those mossad kids were so happey about?

          • Paul says:

            Why don’t you google his name with these subjects to find out what he thinks…. he is one of the great thinkers of the last 50 years… well worth spending some time reading his works…

            He does have quite a few video presentations online as well…

            • wadosy says:

              does chomsky explain why bibi thought 9/11 was such a good deal?

              please post urls pointing to that explanation

              please also post urls pointing to chomsky explanation of why PNAC needed a new pearl harbor

            • wadosy says:

              while you’re at it, please post urls where chomsky explains why europeans were entitled to move to palestine and terrorize thenatives from their land

            • Paul says:

              I think chomsky wrote a book on that — he was banned from Israel because of it (btw – he is jewish — self-hating of course)

            • wadosy says:

              no urls, then

              why is that?

            • JMS says:

              I’m with wadosy here. I was a big fan of Chomsky, until I found the truth about 9/11. Since Chomsky continues to play dumb about 9/11, defending the liberal “blowback tesis”, I don’t care what he says anymore. Fortunately, another of my youth heroes – Gore Vidal – saw the light and had the guts to promote the book of David Ray Griffin.

            • Paul says:

              I am not aware of his take on 911.

              I do take issue with his position that Israel is not the tail wagging the dog (America).

              Where did I read recently that ‘American politicians live in fear of Israel’

              Of course Obama makes statements against Israel — which makes it appear that the dog is wagging the tail — but look at the actions — America always vetoes any UN sanctions against Israel — America NEVER halts arms shipments to Israel even when they commit war crimes — in fact America is pouring arms into Israel now which are being using to destroy Gaza — BUT John Kerry is on CNN saying he is concerned….

              So Chomsky is not necessarily right on everything — but he is right generally in his analysis of how the US operates — and he is right when he suggests reading a wide variety of news sources

        • Stilgar Wilcox says:

          “When I watch CNN it’s like I am watching a drama — most of what they report is lies — the presenters are actors — they never ask hard questions. I sit there and think – why don’t you ask this or that…”

          I do the same thing – LOL! Sometimes I reach out with my hands in exacerbation at the lack of any sense to ask easy, obvious questions, let alone the hard ones. They take everything ver batum, and then just say, OK.

          Should be interesting to watch them when it is reported that, “The economy has collapsed, there is mayhem in the streets and we see no way to get the economy going again.” Are those automatrons going to say, “Ok”

          • Paul says:

            If in a conversation someone refers to CNN as their source for ‘news’ I immediately know which direction to take the discussion — so how about those Yankees… how’s the weather been…

            I also feel somewhat the same about NYT readers — although I forgive them because the NYT is a really sneaky beast — they drop in some real stuff from time to time — which makes the readers believe that everything they publish is not propaganda…. when most of it is…. that is a very powerful trick.

            I used to recommend the international edition to people in Bali when I first moved there — but then I eventually became aware of their scam — and I cancelled my subscription.

          • Coast Watcher says:

            I spent 40 years in the news business — dailies, weeklies, magazines — and what I see today on CNN, MSNBC, et al is so bad that I can’t watch it. Today’s print media isn’t far behind. I never had much respect for TV news, but to watch the decline and fall of American print journalism just sickens me. I get most of my news these days from foreign sources. The handful of corporations that own the vast bulk of American media kowtow to their advertisers, which is why you’ll never see a honest, in-depth story about GMOs or the Occupy movement or Peak Oil.

            • Paul says:

              I have an interest in a small media business and I recall some years ago a story was run that apparently upset the wrong people — apparently the phone call came — that first threat that was made was ‘we will contact all your advertisers and inform them of what you are doing and your business will suffer’

              Unfortunately for them the business was not in the US and most of the advertisers were not American companies — so they were told to go ahead with what they had threatened because other advertisers would respect the integrity of this media for not giving in to these threats.

              The story continued to run — and to my knowledge the threat was not carried out.

              Now imagine if you are CNN, BBC, etc … and you write something that upsets your advertisers… most being big American corporations …. they can crush you.

              Now think about the Iraq War — trillions of dollars were made off of that war — corporate America LOVES war — it is great for the bottom lines of a lot of companies… companies with big ad budgets….

              Now you know one of the main reasons the MSM was a cheerleader for that — and every war.

              They cannot afford not to be — they are riding on the gravy train just as much as Haliburton and Raytheon….

              How anyone can believe the utter bs about America standing for good is beyond me.

              America is a death machine — run by cold calculating psychopaths — completely amoral people — they do not care about you…. I repeat they do not care about you — you are chattel

              They send you off to wars to be killed and maimed not to protect America — but to bolster their wealth and power by subjugating other countries. They are the cowardly bully in the playground and you are the fools who fight their battles.

              They offshore your jobs because they don’t like that they should have to pay you a living wage when they know there are billions out there who will gladly work for a buck a day.

              No – there is not changing the situation because they are very clever and they have worked out how to manipulate the masses very effectively —- but do you want to be played the fool by believing the idiocy that America is a bright shining light in the world?

              When it is very obviously a beacon of darkness run by sinister forces.

      • Stilgar Wilcox says:

        “You know what i’m vexed about? That they are still referring to Europe’s problems as a recession when it’s in fact a Depression.” I concur, Rodster.

    • Paul says:

      I actually don’t buy the EU number — it surely MUST be far worse than that….

      And keep in mind the tools normally used to fight a recession — particularly the lowering of interest rates — are exhausted.

  6. J says:

    US GDP must now be completely decoupled from wages! Just check out this chart! If anything, Q1 was a tad stronger than Q2!

    • Paul says:

      J – all data coming out from countries is a lie or an obfuscation… particularly the US. There is no growth – there is only stimulus… how can you have growth when labour participation has plummeted … when 50M are on food stamps …. when real wages have dropped nearly 10%?

      The numbers that we are being fed are meaningless. I ignore them.

      if you want to get real numbers you can check out — but I don’t even bother with that because I know that the real numbers are abhorrently bad — but that they would be FAR worse if the US gov was not engaging in all sorts of crazy stuff such as massive subprime auto loans…

      Of course all of these games are aimed at making the masses feel that recovery is around the corner… that there is hope.

      There will be no recovery. This is the best it’s going to get (and then it will collapse in a heap of rubble)

      • Coast Watcher says:

        I very much agree with your comment, Paul. Official government statistics from any country can be viewed with only the utmost skepticism these days.

    • InAlaska says:

      GDP=Gross Domestic Prevarication. Corporate profits are soaring due to mergers and acquisitions, coupled with productivity and efficiency gains. They are doing this by continuing to keep a lid on wages. The only thing that is keeping this from being explosive is that we are in a deflationary spiral so the price of food remains affordable even with stagnant wages. And any time you hear that housing is rebounding, its only because corporations and the Chinese are purchasing huge tracts of real estate at bargain prices. Real Americans are not buying and selling their homes in any statistically significant way, and in fact households are combining (young people back to their parents) in order to save money. All this talk of GDP growth is how it is being measured (ala chained CPI). They are numbers on paper but they don’t reflect the reality on the ground. And later on there is always the revision downward.

  7. CrisisMaven says:

    Hello, thanks for the good wrap-up and esp. the illustrative graphics. I have taken the liberty to translate a few pertinent passages into German and posted it on the widely-read German politics and econonomics forum “Das Gelbe Forum”: “Making Sense of the US Oil Story” – Die USA das neue Saudi Arabien (hinsichtlich Oelproduktion)?

  8. J says:

    I agree it’s a little difficult to get a feel for what’s happening in the world. Media is spinning it. The number of people begging for money and gas prices (down = recession) are my current indicators in my community. Guy moving in with another guy across the street. Visible increase in the number of people living in run down RVs and sometimes even station wagons. Kind of like liveaboard boat but without the moorage cost and the cops hunting you every night.

    KMO ( has an awesome podcast (number 426) out with Greer that talks about the end of upward mobility among other things.

  9. InAlaska says:

    J. I was unfortunate enough to be in a Walmart a couple of weeks ago on one of my provision runs into town from our remote homestead. As I walked around and looked at the unhappiness on the faces of everyone in there, coupled with the sheer amount of cheap crap for sale, I almost ran out and vomited in the parking lot. It was like the tactile realization of the accumulating ruin of North America all came rushing at me at once. I’ll check out that link.

    • Paul says:

      IA — I feel the same sort of thing when I go to a Costco or Walmart when I am in Canada

      I went there to buy some shaving blades a couple of weeks ago — automatons roaming around in zombie trances stuffing super sized packages into super sized shopping carts — people programmed to shop by Edward Bernays acolytes…

      I look at this — and I get an strong sense of discomfort — I think is this what we have become – I shop therefore I am?

      Then I look at the traffic jams and I think look at all those cars — they are all filling up once a week — and I think this is just one traffic jam – how many cars across the entire world are there — all filling up once a week — and I think where in the hell does all the oil come from to fill up all these cars? It truly is amazing that we have not run into a problem sooner — the amounts involved here truly are staggering…

      I used to thrive in the city having lived in Hong Kong for many years — but now I feel as if I am on another planet when I go anywhere near a metropolis… I feel nothing but a sense of unease because it reminds me of how we are raping the planet to death.

      • InAlaska says:

        You totally captured how I feel when I have to engage the beast. All of the zombie people living their lives under the sword of Damocles and they don’t even know it. And like you say, this is just one place in one town, in one state, in one country in a world full of places doing the exact same thing. It truly is staggering that we have burned through half a billion years of solar energy and photosynthesis in 200 years just to create a world full of crappy junk that is designed to break. We’ve scraped the crust of the earth for all its easy minerals and cast millions of years of soil into the wind, used the ocean and the atmosphere for a sewer…and for what? McDonalds, WalMart and Ford Motor Company. Its disgusting. We haven’t earned the right to remain on this once beautiful planet.

        • Paul says:

          “We haven’t earned the right to remain on this once beautiful planet.”


          We have maxed out on wrath, avarice, sloth, pride, lust, envy, and gluttony.

          At risk of being a hypocrite, unfortunately we are all participants in this — it is just a matter of degree… but then what choice do we have — even if one were to go off grid and life off the land… what difference would it make?

          But that said, it is still disturbing and embarrassing to see this behaviour from our species.

          I was in the pasture here in BC pulling out thistles earlier — we let the neighbour graze his cows here so a dozen of them were up there including a 2000+ pound bull… they all surrounded me and watched me for a few minutes — I pulled some grass and the big bull approached — and took the grass — i patted the big guy and scratched his ears… the other cows gathered closely … trusting…

          The level of innocence in those animals… shame on us for doing this.

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  12. Vassilis Serafimakis says:

    Dear Gail, on August 6, 2014 at 8:25 pm you wrote:
    “…The issue I am concerned about is the fact that governments are funded by the surpluses of an economy. If we hit recession again, governments will be hard-put to collect enough taxes, to fund broken banks and pay unemployment to workers.”

    The United States is a fiscally and monetarily sovereign nation, with a monopoly on issuing its national currency. It follows, rather directly if not automatically, that the U.S. is always solvent in debt denominated in that currency. I’d challenge anyone to offer a scenario whereby the U.S. is insolvent in U.S. dollars.

    The government collects taxes not to fund its expenses but mainly to regulate disposable income (and, through that, effective demand), and to redistribute said income according to the government’s political views. It would be absurd to believe that the U.S. government “needs” something, e.g. U.S. dollars, when that “something” is created solely by the same U.S. government!..

    All the dollars in the world are the creation of the U.S. government, either directly or indirectly (through the privilege afforded to private banks to create (give out) loans denominated in U.S. dollars). Note that this has nothing to do with the “real” economy.

    When all is said and done, all that remains to put in place are accounting entries.

    • Debt is only a claim on future resources. If the resources, particularly energy resources, aren’t there, the debt does not have any real value. Either the system falls apart, of the debt when someone tries to make use of the $$ generated by its dollars doesn’t buy much.

      It is resources, including energy resources, that count. Money and debt are only vehicle for transferring these resources. Debt attempts to transfer resources forward in time. But this may not really be possible.

      • Don Stewart says:

        I think that debt can be used to facilitate investments which should never have been made. These are frequently called ‘malinvestments’. For example, many people think that our society is giving current resources to the shale companies in return for their high yield bonds. On a larger scale, people give current resources to the US government in return for Treasury bonds. Yet there is a considerable likelihood that neither of these categories of bonds will be worth very much when one tries to trade them in for future resources.

        The automobile companies are giving current resources, assembled automobiles, to sub-prime credit risks in return for their signature on a piece of paper. This is a little more complicated, since the car can be repossessed. So it is not clear whether the car finance companies are taking advantage of the poor credit risks or vice versa. Just after 9/11, I drove by a huge lot of repossessed double-wides in Virginia. There was a big sign: Support The American Way of Life. Most objective observers have concluded that the double-wide finance companies are essentially loan-sharks.

        We should also be aware that psychology studies always show that people think everything will be easier in the future. I can have the dessert today, because I know I can start the diet tomorrow, when it will be easier. I can borrow against my paycheck today, because I know that I will be able to control discretionary spending next month, and have plenty of money to pay back the loan. Right up to the Federal Government, which thinks it can spend lots of money on the military today because this time we really will ‘win the peace’ and have a ‘peace dividend’ next year so that repaying the bonds will be easier.

        Don Stewart

        • Unfortunately, it is these mal-investments that are what keeps up demand for oil and other fossil fuels, and keeps the whole system operating.

          • Paul says:

            Likewise with other resources such as copper and steel — the ghost cities in China are what’s driving the market for those materials

            • PeterEV says:

              China’s population is 1400 million (1.4 billion). A one percent increase in their population is 14 million. The population of New York City is 8.5 million. So basically, if they expect a 6/10 of 1% rise in their population in one year (population doubling once every 120 years), they could fill a New York City.
              The important questions are:
              How many are being born each year?
              How many are dying each year?
              That should put the “ghost” cities into perspective. Their leadership is evidently thinking that it will rise. If not, why not build something more useful? Fishing boats? Oil Derricks? Solar Farms?

            • Paul says:

              I have lived in China — when you hear that millions are moving to cities most of these people are peasants — dirt poor — they cannot afford to rent high rise apartments…

              So what if you have population increasing — if they are poor they will not take up the relatively expensive housing that is being built (average wage in Shanghai is only about $7000 per year

              We have some business in Shanghai — the guy who runs was telling me recently that he visited one of these ghost towns — hundreds of villas – he saw only a few people — the properties were a couple of years old and falling to pieces already … you cannot leave housing empty for years without it breaking down…

              How many flats in China are sitting empty? The media recently floated a story – denied by power companies – that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. That led to a theory that China has enough empty apartments to house 200 million people

            • PeterEV says:

              I think you have to look at the dynamics and take that into consideration. Where are these migrating peasants going to live that are moving into the cities? I assume they move in with friends, relatives, or someone creates a “bunk house” apartment or company dormitory. When we had an oversupply of housing and a recession, housing prices fell. As a Chinese leader or a banker with my capital tied up in these projects, I can not see them not trying to find a solution. A very very slight increase in population and they **could** fill one of those cities by the numbers. That is what I would expect to see. Filling 64.5M unused apartments is a very tall order and points to a lot of stupidity.

              Will there be other dynamics?? Sure. Peak Oil, food supplies, job opportunities, etc. all play a part. Will the Chinese leadership direct companies and people to move operations to these cities? I think it is likely. Especially if the population grows but that appears that will be coming to an end.

            • Paul says:

              The primary reason you have a credit crisis in China — which the PBOC is holding at bay by printing more money and lending it to insolvent entities so that they can pay the INTEREST on loans they will NEVER repay…

              Is because of the massive investments that have been made in things that are not needed. There are not enough people to pay rent on these millions of apartments — so they sit empty year after year after year….

              That is not the way an economy works — it’s not like the movie Field of Dreams — build it they will come….

              That does not work — because if you build it — and they don’t come soon — you are bankrupt — if you build 64 million and they remain empty — the banks are bankrupt…. (and the assets deteriorate)

              That is the situation in China …. tick tock

            • PeterEV says:

              I hear you and it is distressing as you paint it.

              64 million apartments divided by 1400 million Chinese is 4.5% If my neighborhood has 100 houses, that is like building 4.5 extra houses. The kid next door is graduating and so are a few others. Where are they going to live? Likely in an apartment vacated by someone who is likely to buy one of those houses.

              China has a “Command Economy”. I assume that the leadership can direct a number of “surplus” people and industries to these new cities. Is there overcrowding by 4.5% in other cities?

              Again, this all depends upon dynamics.
              Is the economy of China still growing at 7%?
              Does China have upward mobility?
              Are more people being born than dying?
              Can the rents be lowered so the loaners take a haircut instead of a bath?
              As pressures mount to do something, what will they do?
              These maybe greedy people but they are not stupid.

              We were greedy ala the housing bubble until 2008. We used a lot of creative finance to keep the banks from imploding. It was/is a real mess but we are still limping along. A lot of predictors of doom made the mistake of putting dates to their doom predictions. We are still here.

              Please do not take this to mean that I do not think they are right wrt their doom forecasts. We are in trouble but I have seen troubles go on for a lot longer than forecast. Catherine Fitts (Solari Report) says she saw the housing bubble coming in 1997; the year my parents bought a condo. We helped him sell it for double the price in 2005 because I thought 2006 was going to be the year the bubble popped. It wasn’t until later that it actually popped. In the meantime, that condo resold for 20% more in 2006. In 2011, it was on the market for half the peak price **and it did not sell**. My father made out okay but someone is sitting on a large investment that has turned sour. They still have the condo. What are they going to do with it???? What would you do with it?

      • Vassilis Serafimakis says:

        How is $1 billion of U.S. government debt a claim on future U.S. resources? What right does government debt paper give to its owner on U.S. real resources, today or in the future? We agree that it’s real resources, i.e. real products and real services, that matter. We also agree that it is on these real resources that our planning for the future should be – and not on mere convention such as money and debt. This means that the claims about, for instance, Social Security not being solvent are pure, unadulterated bull.

        • by the very nature of our way of life, we all make a claim on the future.
          If your pension (as an example) is to pay out sufficient money between your retirement age and death, which could be 30 years, then there has to be sufficient economic activity to support that.
          And as the ultimate source of all real wealth derives from burning fuel of one sort or another, then your future is directly linked to the constant availability of fuel sources.
          Those who convince themselves that wealth derives from passing money hand to hand (Krugmanomics) are in for a very nasty shock.
          The reality is that we do not have a future, because the will be no energy sources to support it.

          • Vassilis Serafimakis says:

            Wealth, in any case, does not derive from passing money around (Paul Krugman does not advocate anything like that). You do not seem to understand the gigantic difference between money and real products & services. To begin some measure of understanding try to realize that, although money has no tangible use (we cannot eat money), a “free-market economy” cannot function without money.

            • to quote Krugman:
              My neighbour’s spending pays my wages, my spending pays his wages

            • Paul says:

              Wealth actually ultimately derives from energy — particularly oil — particularly oil that is low priced but not so low that companies will not extract it.

              Krugman from what I can see believes we need to stimulate the economy (he’s never seen a stimulative policy he did not like — and there is never enough)…

              On the surface that would appear idiotic — however let’s assume Krugman understands that we are out of cheap oil — so the only way to grow the economy is by pouring on more stimulus to counter the impact of expensive oil — and to keep the price of oil from collapsing…

              If he is aware of the real problem we are facing — and surely he must be — he knows stimulus will not result in a recovery — but it will keep civilization going a bit longer.

    • the US may appear solvent in monetary terms, but that is an irrelevance
      The critical factor is energy
      The USA uses 18mbd of oil, produces 10Mbd, and imports the remaining 8Mbd
      This like saying you have an expenditure of $18 per day, earn $10 per day and borrow 8$ to make up the difference.
      You are in sub prime territory, and this is unsustainable

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