Sovereign Debt

Economists call it Sovereign Debt when a nation racks up the numbers on it's "credit card." 2010 we are told will be the year more nations go broke as they try to keep funding recovery programs and run out of taxes. The United States is in a bad way but not as bad as a whole raft of other countries that look set to go bankrupt. Take your pick: Greece, Ireland, Latvia, Ukraine are all listed as countries in difficulties. Spain has collected a total official unemployment rate of more than 20 percent. Japan has built up debt that is three times it's Gross Domestic Product. The trick there is that Japanese citizens own their government's debt through savings plans. The US copes with it's growing debt by holding the world's reserve currency so China and Japan who have bought up a great deal of the debt need to prop up the currency's value to retain the value of their debt purchases...Sovereign debt is a mess and predicting what will happen is a mug's game.

The nature of debt among the many united States in this country is a different game and things among the 41 states with debt is starting to get interesting and nasty. Unlike the Federal government states don't get to roll over budget deficits so the squeeze is on to cut down spending. The notion of increasing taxes is anathema so services are getting cut. It's pretty horrendous too, parks, libraries and social services are all going by the wayside. It's odd too that the services that are getting cut are going to affect the poor and destitute, those who are least well equipped to fight back. Taxes on people with wealth will remain low. The recipe is for social disintegration so we can at least hope that the wealthy will be forced to build taller fences and add armor plate to their limousines which we might consider a form of tax I suppose.

It is a time of change in the US and services that we have taken for granted will no longer be available. Even police and fire personnel are being cut in many communities and the Right is calling for unions and living wages to be decimated. As though creating even more poverty will somehow help our nation forge ahead. Perhaps it's time to stop fighting wars abroad and perhaps we need to decriminalize marijuana and tax the hell out of it. That would be bizarre: funding health clinics, libraries and meals-on-wheels by the sale of dope. We live in difficult times and if the military is desperate enough to "legalize" being gay to get more recruits perhaps we should stop jailing people for smoking and trading dope and make money off them instead of spending billions to jail them. How much of our civic life to we have to pare down before the unthinkable becomes common place? Pretty soon gay marriage will excite no comment at all. That will surely be the first sign of the Four Horsemen of the Apocalypse riding to rescue the republic! And then we'll notice them smoking joints and spreading money around. The end will definitely be nigh. The alternative will be to be even more impoverished than we are today and that is totally un-American.

No Name Pub

I don't often go to No Name Pub on Watson Drive on Big Pine Key, but I ride by now and again on my way to the walks on No Name Key itself, which is a bridge away from the pub. The pub prides itself on being hard to locate which piece of marketing is given the lie by the huge inevitable crowds to be found there every day of winter, and frequently during the summer.

I chose to take out of town guests to No Name on an extremely wet winter's day earlier this week, a day when it was pouring down like a sumer thunderstorm, which made exterior pictures difficult to take. as usual the crowd was tremendous and we were packed into the waiting room in the back which opens out onto a fenced yard at the time rapidly becoming submerged under the incessant rain.

If the food and drink isn't enough they have a range of merchandise featuring the panama hatted dude, parrots and their slogan about the difficulty of locating them. Just to prove you have been there, as it were.There is of course a television hanging off the wall which I dislike intensely. I can't stand TV as background, and the idea of having a TV blaring while I am supposed to be being sociable (something that's hard for me to do anyway) is very off putting. We didn't have to wait very long for a table but the choice of seating was nil so I found myself facing the hated screen. Oh well.Despite being packed the service is pretty fast and that would be helped by the kind of food offered here. The pizza is claimed to be the best in the Lower Keys though I dispute that. If you like heavy pizza dough weighed down by too many ingredients this is the pizza for you. I prefer the more intensely flavored and interesting pizza flavors sold at Slice of Paradise in Summerland Key. However that is a pizza parlor, No Name Pub sells beer and you get to eat the pizza at their tables if you like. A great many people do like.
The menu is mostly fried and so it is I have one dish, old reliable, that I stick with in the "keep it simple" department. I go for the fried grouper basket and it does the job.

The bar is as noisy as you might expect, dark and atmospheric I suppose. The furniture is rough hewn wood heavily varnished and the decor is,as you can see, all dollar bills stapled everywhere.The baskets come with salad and bread sticks (as if the meal lacked carbs!) and lots of silver dollar fries. They are round slices of real potato fried and covered in salt to keep you thirsty. They are quite delicious.I am not enamored of the beer selection, and I passed on Yuengling draft and went for a No Name amber in a small plastic cup for $2.75. Or you can go bottled if you prefer. The dollar bills are the pub's claim to fame and no one really knows how many there are:

Any guesstimate up to a round 100,000 will do. More if you prefer. Or less.Defacing the currency is part of the fun. I hope Jerry and Linda are still hearting each other (yech!). Jerry gets around:

In light of the intensely heavy rain still falling I ran for the car but on a normal day outdoor benches are available out front:And at night the place looks quite charming: When the place was built in the 30's as a convenience store this was the main road to Key West. The Ferry landed at the end of No Name Key, a journey of 40 miles over four hours from Lower Matecumbe Key, where the road from Miami ended. And from here one drove a series of wooden bridges and a narrow road 35 miles to Key West. Now it is a backwater and destination unto itself.

Endgame

Each week I read a column published Wednesday night by a man called John Michael Greer. If you Google "Archdruid" you will find his intensely intellectual, rigorous column discussing social attitudes, economic failures and their historical context.At last the Archdruid has reached a point in his musings that have taken a rather apocalyptic tone, joining the ranks of disaster freaks and survivalists who seem to rejoice in the imminent failure of our society. Greer manages to sound horribly apocalyptic without being hysterical which gives his column this week a dreadful sort of horror. So I wondered, in a week when I have chosen to pluck pungent commentaries from elsewhere, why not add his horror to the list. Here it is:

I’ve mentioned more than once in these essays the foreshortening effect that textbook history can have on our understanding of the historical events going on around us. The stark chronologies most of us get fed in school can make it hard to remember that even the most drastic social changes happen over time, amid the fabric of everyday life and a flurry of events that can seem more important at the time.

This becomes especially problematic in times like the present, when apocalyptic prophecy is a central trope in the popular culture that frames a people’s hopes and fears for the future. When the collective imagination becomes obsessed with the dream of a sudden cataclysm that sweeps away the old world overnight and ushers in the new, even relatively rapid social changes can pass by unnoticed. The twilight years of Rome offer a good object lesson; so many people were convinced that the Second Coming might occur at any moment that the collapse of classical civilization went almost unnoticed; only a tiny handful of writers from those years show any recognition that something out of the ordinary was happening at all.

Reflections of this sort have been much on my mind lately, and there’s a reason for that. Scattered among the statistical noise that makes up most of today’s news are data points that suggest to me that business as usual is quietly coming to an end around us, launching us into a new world for which very few of us have made any preparations at all.

Here’s one example. Friends of mine in a couple of midwestern states have mentioned that the steady trickle of refugees from the Chicago slums into their communities has taken a sharp turn up. There’s a long history of dysfunction behind this. Back in 1999, Chicago began tearing down its vast empire of huge high-rise projects, promising to replace them with less ghastly and more widely distributed housing for the poor. Most of the replacements, of course, never got built. When the waiting list for Section 8 rent subsidies, the only other option available, got long enough to become a public relations problem, the bureaucrats in charge simply closed the list to new applicants; rumors (hotly denied by the Chicago city government) claim that poor families in Chicago were openly advised to move to other states. Whether for that reason or simple economic survival, a fair number of them did.

Fast forward to the middle of 2009. Around then, facing budget deficits second only to California, the state of Illinois quietly stopped paying its social service providers. In theory, the money is still allocated; in practice, it’s been more than six months since Illinois preschools, senior centers, food banks, and the like have received a check from the state for the services they provide, and many of them are on the verge of going broke. Subsidized rent has apparently taken an equivalent hit. Believers in free-market economics have been insisting for years that the end of rent subsidies would let the free market reduce rents to a level that people could afford, but I don’t recommend holding your breath; this is the same free market, remember, that gave the United States some of the world’s worst slums in the late 19th and early 20th centuries.

The actual effects have been instructive. Squeezed between sharply contracting benefits and a sharply contracting job market, many of Chicago’s poor are hitting the road, heading in any direction that offers more options. Forget the survivalist fantasy of violent hordes pouring out of the inner cities to ravage everything in their path; today’s slum residents are instead becoming the Okies of the Great Recession. In the process, part of business as usual in the United States is coming to an end.

Illinois is far from the only state that backed itself into a corner by assuming that rising tax revenues from a bubble economy could be extrapolated indefinitely into the future. 41 US states currently face budget deficits. California has received most of the media attention so far, a good deal of it focused on the political gridlock that has kept the state frozen in crisis for years. Behind the partisan posturing in Sacramento, though, lies a deeper and harsher reality. The state of California is essentially bankrupt; nearly all the mistakes made by the once-wealthy states of the Rust Belt as they slid down the curve of their own decline have been faithfully copied by California as it approaches its destiny as the Rust Belt of the 21st century. I wonder how many local governments in neighboring states have drawn up plans for dealing with the tide of economic refugees once California can no longer pay for its welfare system, and the poor of Los Angeles and other California cities join those of Chicago on the road?

I could go on, but I think the point has been made. State governments are the canaries in our national coal mine; their tax receipts are one of the very few measures of economic activity that aren’t being systematically fiddled by the federal government. The figures coming out of state revenue offices strike a jarring contrast with the handwaving about “green shoots” and an imminent return to prosperity heard from Washington DC and the media. Across the country, every few months, states that have already cut spending drastically to cope with record declines in tax income find that they have to go back and do it all over again, because their revenue – and by inference, the incomes, purchases, business activity, and other economic phenomena that feed into taxes – has dropped even further. Now it’s true that state budgets get hit whenever the economy goes into recession, and keep on hurting even when the recession is supposed to be over, but compared to past examples, the losses clobbering state funding these days are off the scale, and a great many programs that have been fixtures of American public life for as long as most of us have been living are facing the chopping block.

A different reality pertains within the Washington DC beltway. Where states that fail to balance their budgets get their bond ratings cut and, in some cases, are having trouble finding buyers for their debt at less than usurious interest rates, the federal government seems to be able to defy the normal behavior of bond markets with impunity. Despite soaring deficits, not to mention a growing disinclination on the part of foreign governments to keep on financing the same, every new issuance of US treasury bills somehow finds buyers in such abundance that interest rates stay remarkably low. A few weeks ago, Tom Whipple of ASPO became the latest in a tolerably large number of perceptive observers who have pointed out that this makes sense only if the US government is surreptitiously buying its own debt.

The process works something like this. The Federal Reserve, which is not actually a government agency but a consortium of large banks working under a Federal charter, has the statutory right to mint money in the US. These days, that can be done by a few keystrokes on a computer, and another few keystrokes can transfer that money to any bank in the nation. Some of those banks use the money to buy up US treasury bills, probably by way of subsidiaries chartered in the Cayman Islands and the like, and these same off-book subsidiaries then stash the T-bills and keep them off the books. The money thus laundered finally arrives at the US treasury, where it gets spent.

It may be a bit more complex than that. Those huge sums of money voted by Congress to bail out the financial system may well have been diverted into this process – that would certainly explain why the Department of the Treasury and the Federal Reserve Bank of New York have stonewalled every attempt to trace exactly where all that money went. Friendly foreign governments may also have a hand in the process. One way or another, though, those of my readers who remember the financial engineering that got Enron its fifteen minutes of fame may find all this uncomfortably familiar – and it is. The world’s largest economy has become, in effect, the United States of Enron.

Plenty of countries in the past have tried to cover expenses that overshot income by spinning the presses at the local mint. The result is generally hyperinflation, of the sort made famous in the 1920s by Germany and more recently by Zimbabwe. That I know of, though, nobody has tried the experiment with a national economy in a steep deflationary depression, of the sort that has been taking shape in America and elsewhere since the real estate bubble crashed and burned in 2008. In theory, at least in the short term, it might just work; the inflationary pressures caused by printing money wholesale could conceivably cancel out the deflationary pressures of a collapsing bubble and a contracting economy – at least for a while.

The difficulty, of course, is that pumping the money supply fixes the symptoms of economic failure without treating the causes, and in every case I know of, governments that resort to it end up caught on a treadmill that requires ever larger infusions of paper money just to maintain the status quo. Sooner or later, as the amount of currency in circulation outstrips the goods and services available to buy, inflation spins out of control, the currency loses most or all of its value, and the economy grinds to a halt until a new currency can be issued on some sounder basis. In 1920s Germany, they managed this last feat by taking out a mortgage on the entire country, and issued “Rentenmarks” backed by that mortgage. In the wake of the late housing bubble, that seems an unlikely option here, though no doubt some gimmick will be found.

It’s crucial to realize, though, that this move comes at the end of a long historical trajectory. From the early days of the industrial revolution into the early 1970s, the United States possessed the immense economic advantage of sizable reserves of whatever the cutting-edge energy source happened to be. During what Lewis Mumford called the eotechnic era, when waterwheels were the prime mover for industry and canals were the core transportation technology, the United States prospered because it had an abundance of mill sites and internal waterways. During Mumford’s paleotechnic era, when coal and railways replaced water and canal boats, the United States once again found itself blessed with huge coal reserves, and the arrival of the neotechnic era, when petroleum and highways became the new foundation of power, the United States found that nature had supplied it with so much oil that in 1950, it produced more petroleum than all other countries combined.

That trajectory came to an abrupt end in the 1970s, when nuclear power – expected by nearly everyone to be the next step in the sequence – turned out to be hopelessly uneconomical, and renewables proved unable to take up the slack. The neotechnic age, in effect, turned out to have no successor. Since then, for most of the last thirty years, the United States has been trying to stave off the inevitable – the sharp downward readjustment of our national standard of living and international importance following the peak and decline of our petroleum production and the depletion of most of the other natural resources that once undergirded American economic and political power. We’ve tried accelerating drawdown of natural resources; we’ve tried abandoning our national infrastructure, our industries, and our agricultural hinterlands; we’ve tried building ever more baroque systems of financial gimmickry to prop up our decaying economy with wealth from overseas; over the last decade and a half, we’ve resorted to systematically inflating speculative bubbles – and now, with our backs to the wall, we’re printing money as though there’s no tomorrow.

Now it’s possible that the current US administration will be able to pull one more rabbit out of its hat, and find a new gimmick to keep things going for a while longer. I have to confess that this does not look likely to me. Monetizing the national debt, as economists call the attempt to pay a nation’s bills by means of a hyperactive printing press, is a desperation move; it’s hard to imagine any reason that it would have been chosen if there were any other option in sight.

What this means, if I’m right, is that we may have just moved into the endgame of America’s losing battle with the consequences of its own history. For many years now, people in the peak oil scene – and the wider community of those concerned about the future, to be sure – have had, or thought they had, the luxury of ample time to make plans and take action. Every so often books would be written and speeches made claiming that something had to be done right away, while there was still time, but most people took that as the rhetorical flourish it usually was, and went on with their lives in the confident expectation that the crisis was still a long ways off.

We may no longer have that option. If I read the signs correctly, America has finally reached the point where its economy is so deep into overshoot that catabolic collapse is beginning in earnest. If so, a great many of the things most of us in this country have treated as permanent fixtures are likely to go away over the years immediately before us, as the United States transforms itself into a Third World country. The changes involved won’t be sudden, and it seems unlikely that most of them will get much play in the domestic mass media; a decade from now, let’s say, when half the American workforce has no steady work, decaying suburbs have mutated into squalid shantytowns, and domestic insurgencies flare across the south and the mountain West, those who still have access to cable television will no doubt be able to watch talking heads explain how we’re all better off than we were in 2000.

Those of my readers who haven’t already been beggared by the unraveling of what’s left of the economy, and have some hope of keeping a roof over their heads for the foreseeable future, might be well advised to stock their pantries, clear their debts, and get to know their neighbors, if they haven’t taken these sensible steps already. Those of my readers who haven’t taken the time already to learn a practical skill or two, well enough that others might be willing to pay or barter for the results, had better get a move on. Those of my readers who want to see some part of the heritage of the present saved for the future, finally, may want to do something practical about that, and soon. I may be wrong – and to be frank, I hope that I’m wrong – but it looks increasingly to me as though we’re in for a very rough time in the very near future.
Posted by John Michael Greer

Change Denied

I encourage you to read the full article in the current edition of the Nation magazine, in my web list, discussing how to reform Congress and take back democracy. In this excerpt author Lawrence Lessig discusses the myriad ways President Obama has failed to give us true change:

A year into the presidency of Barack Obama, it is already clear that this administration is an opportunity missed. Not because it is too conservative. Not because it is too liberal. But because it is too conventional. Obama has given up the rhetoric of his early campaign--a campaign that promised to "challenge the broken system in Washington" and to "fundamentally change the way Washington works." Indeed, "fundamental change" is no longer even a hint.

Instead, we are now seeing the consequences of a decision made at the most vulnerable point of Obama's campaign--just when it seemed that he might really have beaten the party's presumed nominee. For at that moment, Obama handed the architecture of his new administration over to a team that thought what America needed most was another Bill Clinton. A team chosen by the brother of one of DC's most powerful lobbyists, and a White House headed by the quintessential DC politician. A team that could envision nothing more than the ordinary politics of Washington--the kind of politics Obama had called "small." A team whose imagination--politically--is tiny.

These tiny minds--brilliant though they may be in the conventional game of DC--have given up what distinguished Obama's extraordinary campaign. Not the promise of healthcare reform or global warming legislation--Hillary Clinton had embraced both of those ideas, and every other substantive proposal that Obama advanced. Instead, the passion that Obama inspired grew from the recognition that something fundamental had gone wrong in the way our government functions, and his commitment to reform it.

For Obama once spoke for the anger that has now boiled over in even the blue state Massachusetts--that our government is corrupt; that fundamental change is needed. As he told us, both parties had allowed "lobbyists and campaign contributions to rig the system." And "unless we're willing to challenge [that] broken system...nothing else is going to change." "The reason" Obama said he was "running for president [was] to challenge that system." For "if we're not willing to take up that fight, then real change--change that will make a lasting difference in the lives of ordinary Americans--will keep getting blocked by the defenders of the status quo."

This administration has not "taken up that fight." Instead, it has stepped down from the high ground the president occupied on January 20, 2009, and played a political game no different from the one George W. Bush played, or Bill Clinton before him. Obama has accepted the power of the "defenders of the status quo" and simply negotiated with them. "Audacity" fits nothing on the list of last year's activity, save the suggestion that this is the administration the candidate had promised.

Maybe this was his plan all along. It was not what he said. And by ignoring what he promised, and by doing what he attacked ("too many times, after the election is over, and the confetti is swept away, all those promises fade from memory, and the lobbyists and the special interests move in"), Obama will leave the presidency, whether in 2013 or 2017, with Washington essentially intact and the movement he inspired betrayed

The Back Of Bahia Honda

It looked aground as I looked around, I could see the anchor line pointing to shore. Perhaps the low low tide had taken the skipper by surprise though we were coming up on a full moon about then so s/he should have been ready for that. In a north wind anchoring south of the islands is easy and comfortable though why the boat felt the need to be so close inshore I wouldn't know. It was another in a series of good looking days in the Keys, this time near Bahia Honda.
The seas were flat and the view south toward Cuba seemed endless.Tourists sometimes wonder if you can see Cuba's mountains from the Keys but you can't. If you stand at sea level you can see about half a dozen miles depending on your actual height. The calculation is known as height of eye. Multiply your height of eye's square root by 1.17. The easy example is standing with your eye 9 feet above sea level puts your square root at 3 times 1.17 equals three and a half miles. As Cuba is ninety miles away at it's nearest point that puts it out of reach. A 900 foot mountain would be visible from thirty five miles which added to your height of eye would amount to to less than 40 miles. Here endeth the lesson as I have exhausted my meager mathematical skills (and I am not completely certain I have it right but it's close enough). The long and the short is that Cuba is always out of sight.
Cheyenne has been fishing and chewing on the dead carcasses of the fish killed in the Great Cool Down of 2010. The beaches have been littered with corpses and her diet has, as a result become a little too rich in dried fish.The fish are everywhere, slowly returning to their elemental forms. We explored the waterfront at the south end of the old Bahia Honda Bridge. There is what appears to be an old pump station built out of limestone along side the original, decrepit water pipe that the Navy installed in World War Two to supply the Navy Base in Key West with a regular supply of water.

The pipeline is rather the worse for wear which is okay as the new pipe runs alongside the Highway. It was of course a larger diameter pipe that they installed when it was built alongside the new highway in 1982. Considering the shortage of water in the aquifer in South Florida and the burgeoning population I'd recommend using a rainwater recovery system like the one that came with my house. But drinking rain water scares a lot of people. Conchs used to do it all the time in the good old days when everyone had a cistern. I was so involved in taking the picture I only freaked out about Cheyenne on the precipice after she was well away from the edge. She is smarter than she looks, and I enjoy her sense of adventure. The "new" Bahia Honda bridge is on the left.I rode the old bridge on my Vespa in 1981 and have no photos nor any memory of the journey. I was young and I try not to blame my former self for my inability to record the journeys of my life.The new bridge is a very inviting four lane but the Highway Patrol is well aware of how tedious the drive on the approaches can be and because of their frequent fines in the area as people speed up on the wide bridge, this area is sometimes known as the "Lower Keys toll booth":Seven weeks ago Cheyenne was in a cage at the pound:
Now the Lower Keys are her backyard. We spent a happy 45 minutes exploring the sliver of West Summerland Key shown in the picture below.It is a never ending source of amazement to me that these islands are so under explored by residents and visitors. Which I concede is just as well or else we'd be standing shoulder to shoulder and I enjoy the solitude

Cutter Ingham

It happened my wife was away, I had the dog at work and at six o'clock in the morning as I left work i got it into my head to take Cheyenne for a walk at the Truman Waterfront in the dark.I had forgotten but they recently towed an old US Coastguard cutter to the dock and there she sat in the dawn's early darkness:The Treasury class cutter was named for 19th century Treasury Secretary Samuel Ingham, and was built in 1934. The ship served on Atlantic convoy duty in World War Two and sank a German submarine in 1942, which was before the ship went to the Pacific to take up duties there.Later Ingham served in the Korean War and in Vietnam before being decommissioned in 1988. The ship was on display Up North until last year when after a refit was brought to Key West and now sits alongside the old Mohawk as part of the incipient Maritime Memorial Museum. The ship is a National Historic landmark and is also a memorial for the 912 members of the Coastguard who died in World War II and Vietnam. They say there is a plaque with the names on it on board but I wasn't able to check it out. I'm not sure the ship is open for tours yet, though I plan to go aboard when I can. The Mohawk was the object of my attentions in a previous essay and is visible in the photo below:Cheyenne loved every minute of her wild wandering around the dock, checking in with me from time to time as she ran back and forth:The ship looks to be in great shape:

And the Navy basin at that hour was delightfully peaceful. Even though there was evidence of the recent activity surrounding the yacht races:

I am not much of a one to discuss photographic techniques but I had managed brilliantly to forget my gorilla-pod in the car so I basically held the camera up with a shutter speed around a sixth of a second and did my worst:I wanted to illustrate the splendid signal flags flapping tightly in the breeze which may or may not have worked out:And there it is. Another attraction for Key West to boast about.