Revisiting the Crisis Timeline

It has been just over two years now since I penciled-out an outline as to how I thought the future might unfold for Americans, and which I dubbed the "Timeline for Unfolding Crises". I wrote it not to test my skills at prediction but simply because I didn't see how it was possible to properly prepare for a highly volitile future without attempting to be as clear as possible about what it is I thought I needed to prepare for. And since the Timeline is a working model, and since anniversaries are as good a time as any to assess where we've been and where we're going, I thought I'd sit down and read it over again and see what comes up.

Ok, I'm done.

If you wish to go read it over for yourself, now would be the time...but you know, no big whoop...I know you're busy... Mostly this is just a project for my own edification, but I also hope it helps get your own gears turning to become more clear about where things are heading.

Now I won't go through it line by line and critique it or anything...instead I'll just try to offer up whatever thoughts come to mind, and maybe update how things are progressing and how my perspective on the future has changed over the past couple years.

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So keeping in mind that 2006 is not even half through yet, I'm surprised to note that the Timeline has proven amazingly accurate so far--which at least means I haven't been viewing things from completely out in left field. Here are the thoughts that come to mind as I read it over again:

The US is moving ever closer toward economic collapse.

If I'd written this any time before a few weeks ago I might have questioned how the US Dollar could be holding up so well, but then it took a header with a vengeance...and it's now widely accepted that we've probably seen the end of the "dead-cat bounce of 2005" for the greenback (2-year chart, 10-year chart) -- BTW, that phrase comes from the colorful market-addage "If you drop it from the top of the roof, even a dead cat bounces back a bit".

Now however the Dollar is coming under attack from seemingly every direction. Central Banks the world over are distancing themselves from it as carefully and quickly as they're able, but more significant is that Dollar-bashing has recently become a high-profile sport with the Russians. Not only have they launched verbal attacks against it, but just about a week ago Russia revealed her surprise special-attack-move when they announced they're (miraculously) completely ready to begin trading oil, oil products, and even gold in rubles next week--and presumably in Euros as well, since 2/3'rds of their oil and gas goes to Europe:

"For historic reasons, the dollar remains the world's "petrocurrency" - the only currency for the settlement of oil contracts on world markets. That makes the EU and Russia dependent on it. But with central banks switching to euros, the logical next step would be for fuel-exporting countries to start quoting oil prices in euros too."

And of course Iran’s new oil exchange plans are widely known, and Norway has even officially put the idea on the table as well. Venezuela has all but announced they're ready to take Euros as payment, so all in all it's clear the train has left the station, and there is little the White House will be able to do to stem the currency flight.

I'm strongly convinced that this mounting pressure on the Dollar is setting things up for a "triggering event" to happen over the next year or so which will precipitate a crash. This would likely then set-off a whole series of economic dominos to fall, from petroleum shortages in the US to a tumble in general housing prices (keep in mind that the well-publicized housing decline has so far really only affected second-home and speculator markets). So as Rich Dad, Poor Dad financial pop-star Robert Kiyosaki said recently, which expert do you choose to listen to? The one who tells you how to rearrange your deck-chairs, or the one who advises you to get your lifeboat off the ship altogether...?

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I'd say that while feelings of social discontent have definitely increased they've still remained fairly muted.

In May of 2004 the NeoCon administration's approval ratings were in a downtrend from their Iraqi Invasion levels, yet still hovering up at a respectable 50%. Now we hear that Bush is being polled as the most unpopular President in modern history....which hasn't affected the administration's ability to pass policy decisions going against the public interest, but that's a different matter entirely....

The electronic voting process continues to come under fire, and Robert F. Kennedy is initiating a high-profile public inquiry into the 2004 elections.

Cindy Sheehan emerged as a flag-bearer for an upsurge of anti-war sentiment which continues to grow.

The first sparks of xenophobia have leapt up, ignited by illegal immigration issues. I believe I've read somewhere that when times get tough people begin to divide most readily along cultural lines, so this is a troubling issue.

But perhaps most telling is not what is happening within the US as outside of it--how anti-NeoCon and anti-globalisation sentiments have increased and become more active around the world. I suspect the so-called "socialist revolution" that Chavez is leading in South America is going to quickly spread to other countries in the coming years...and if it doesn't do so "officially" then people will probably continue to take matters into their own hands by attacking corporate facilities directly.

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Rising petroleum costs and supply constrictions have become an undeniable problem.

Peak Oil is now widely recognized in informed conversation, although actual "peak dates" are still debated....which as I've said many times before is completely unimportant since what matters is whether end-users believe that oil supplies will be declining, since this leads to hoarding/hedging mentality which will drive up prices and spark warmongering among nations regardless of when the actual peak is crossed.

I don't think I need to reference anything on this subject since oil supply issues pretty much dominate our daily headlines in one form or another. I'd simply point to a few articles hinting at how pricing inflation is starting to negatively affect agriculture.

USDA Economic Research Service analysis shows that 2004 – 2005 were record years for agriculture profits, while 2006 has fallen off due to high fuel & fertilizer costs.

A recent local color story out of Iowa reveals how fuel and fertilizer costs are starting to hit hard.

Economic problems are starting to hit on more local levels in other ways as well, and a Google News search delivers a good overview of States' highway and road construction delays due to the soaring prices of cement, steel, lumber, basic metals and such.

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A couple notable forecasts in the Timeline stand out as not having happened yet.

The first was my presumption that American consumers would have reigned in their spending by now. This has not happened in any significant fashion...and yet I'm still confident it will before the end of the year. As an article from March shows, consumer spending keeps rising even as it drives savings into the negative. And then this piece in April explains that consumer confidence started slowing in the wake of rising gas prices...and yet still spending continues. In fact a NY Times analysis from February (subscriber only) worried over this trend, even going so far as to speculate that it is likely only blind consumer-idiocy that is keeping the economy going at all:

"The price of imported oil in the US doubled between summer 2003 and summer 2005, reducing consumers' purchasing power by more than 1 per cent of gross domestic product. Nevertheless, the economic slowdown that was widely expected never occurred. Consumers kept spending and businesses kept investing.

...The continued strong growth contrasts sharply with the economic weakness that occurred after almost every previous significant rise in the oil price. How do we explain this remarkable difference?

...The key to the economy's strength in 2004 and 2005 was that household saving declined dramatically while the price of oil rose. Household saving fell from 2.5 per cent of after-tax income in the third quarter of 2003 to a remarkable minus 1.8 per cent two years later. This 4.3 per cent shift of after-tax income was equal to a rise in consumer spending equal to 3 per cent of GDP."

And as a side-note to this issue, the only place where unemployment has not soared during the past few years is in the virtual world up on Capitol Hill. Among many others, the multi-credentialed Paul Craig Roberts stated it bluntly a few months ago:

"Economists who look beyond political press releases estimate the US unemployment rate to be between 7% and 8.5%. There are now hundreds of thousands of Americans who will never recover their investment in their university education.

Unless the BLS is falsifying the data or businesses are reporting the opposite of the facts, the US is experiencing a job depression. Most economists refuse to acknowledge the facts, because they endorsed globalization….

The economics profession has failed America. It touts a meaningless number while joblessness soars. Lazy journalists at the New York Times simply rewrite the Bush administration’s press releases."

The second forecast I made that quite curiously has not come about was the following:

"There is little doubt that Middle Eastern terrorist gangs are plotting attacks on American soil, and most likely the plans are of a sufficiently large scale to justify the effort. Most of these, however, will be poorly executed or thwarted altogether. Still, it’s likely that American society will have to suffer images of car-bombings at Pike Place Market in Seattle, or rockets fired into a major Las Vegas hotel, or some such."

I don't know that I even want to comment on this. I'm certainly thrilled that nothing like this has happened, but it doesn't stop me being completely puzzled over it. I mean, it's not like the back door through Mexico hasn't been left wide-open and swinging in the wind for any malcontent with a rocket launcher to walk in. It sorta makes me wonder if, way down deep, the average American-Hater actually knows better than to direct his/her rage at the average American...

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And as a final note, a couple items I'd anticipated would crop-up in roughly the 2007 - 2010 period have already come about. One is the Government's shutting down of the personal bankruptcy laws.

The other is that I thought it might be a little longer before we'd see the US declining as a respected superpower--and I mentioned that the crucial signal flare to watch for would be China's "repatriation" of Taiwan. I'm now convinced we're seeing this decline already underway, and a couple months ago we got the first blustering from Chinese officials in respect to telling the US to back away from Taiwan with your hands up where we can see 'um.

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Ok, one last comment since we're on the subject of declining US hegemony.

Two of the most striking items from the past year were not news pieces, they were warnings from insiders. The first was a rather straightforward article co-authored by Eric Janszen and "a 25-year veteran Wall Street analyst and fund manager who prefers to remain anonymous." It was essentially a collection of warnings by top CEO’s, and was subtitled "Why the U.S. will not solve its economic, educational, health, retirement, energy, and other major structural problems until it suffers a major financial crisis":

“All these leaders understand, but never admit, that the motivation and incentive for Americans to resolve these critical problems—to improve our education, healthcare, and energy systems; to control our debts, live within our means, and so on—have been gradually reduced by the U.S.-dominated global speculative financial system that they themselves have helped create.

...Meanwhile, all the U.S. apparently has had to do to "compete" in the global economy is to print more debt in its own reserve currency—debt that the world continues to accept—and use the proceeds to fund domestic consumption of foreign goods that the U.S. can no longer make.”

The conclusion the authors draw is that Americans--all of us, from top CEO's to bottom-dwelling cubicle-monkeys--are no longer hard working, creative people because we've seen so many easy investment opportunities come around for so many years that we no longer believe that hard work and creativity are the things that bring us riches and early retirement. We all want the easy money and we want it now, whether through internet stock-trading or globalization job-trading, whether through house-flipping or lottery-winning or book-fudging or bankrupting-the-company-to-break-the-union or lying-about-our-reasons-to-invade-another-country-for-war-profiteering....

Ok, they don't actually draw the argument out quite that far, but they should have...and it's a tough one to argue regardless.

"Can the U.S. transition to a more balanced and less dysfunctional global economy, so that these domestic problems get fixed? Not as long as the global speculative financial system is running. Until a new system is in place, there will never be enough incentive and motivation to fix the problems..."

I'd rehash what they're saying in this way: the desire to "get ahead" is much more widespread in our modern era than it has been throughout most of history, because most of history has consisted of conditions where "getting ahead" was not very easy at all. In light of this, people generally just tried to do a good job, work only as much as they have to, and enjoy their lives as fully as possible. As a matter of fact, these conditions still exist for many "marginal Americans" today.

And as we head into an era of energy decent we're going to see a return to those conditions. Opportunities like we've known all of our lives (whether we've personally benefitted from them or not) will become fewer and fewer. "Investing" as we know it today will largely disappear, since it is only a reflection of conditions of growth and progress. For ourselves--and most certainly our children--the American Dream will be something read about only in the history books. Or maybe instead I should simply say that it might mean something altogether different for them than it has for us....

The second pivotal warning this past year was the now infamous WSJ Editorial by Peggy Noonan in October of last year, about which I wrote:

“Reagan/Bush-1 speechwriter, WSJ columnist Peggy Noonan offers the opinion that the U.S. is ungovernable anymore--that the Presidency is an impossible job. But the realization she seems to just fall short of grasping (or admitting) is that there IS no "Presidency" anymore, there is only Corporatocracy. And there is not even an attempt at real leadership, only the grand Pump-and-Dump scheme for America.

So I resent her posing the argument that the "elites" should be faulted only for their powerlessness...when in fact it's their hubris in creating this situation that we all must suffer.”

Comments

[Cornfed]

"It sorta makes me wonder if, way down deep, the average American-Hater actually knows better than to direct his/her rage at the average American..."

My impression is that most Americans are criminally insane and complicit in the Washington regime's atrocities. For example, how many of them would support the goons carrying out the corporate War on Terra being held to account for their war crimes? The reason why there aren't legions of terrorists plotting to kill off American cubicle dweebs and burger flippers might be that people can't be bothered to go out of their way just to do them a favor. Besides, most Americans and other Westerners will likely starve to death in a short time when the system of global looting sustaining them collapses and their layers of body fat are depleted, so to kill a few in the interim would be redundant.

[Peter]

This is amazing 45 minute comedy standup/history lecture on oil.
http://karavans.typepad.com/karavans/2006/06/history_minus_t.html

Steven, I hope you can plug it as well.

[Shep]

This is an excellent post, Steven, one of your best IMO. I wish this, or something similar, were headlined in every major newspaper in America. It should be, but of course it won't be.

Regarding consumer spending slowing down, there's an article this morning in the business section of the Daytona Beach New-Journal indicating that is indeed what is happening. American consumers, it seems, are finally succumbing to the natural law of gravity and are 'coming down to earth'. This means that the TSHTF era is just around the corner. I wouldn't be surprised to see big reversals in housing prices within the next three months, and for the number of home foreclosures to spectacularly increase.

One point of contention: you're a bit puzzled as to why "Middle Eastern terrorists" haven't started an active campaign in the US yet. I submit that it has nothing to do with your speculation that the "average American-Hater actually knows better than to direct his/her rage at the average American."

It actually leads me to believe that there ARE NO organized middle eastern terrorist groups in America and probably never have been. What we're dealing with in this country is state-sponsored terrorism. That especially pertains to the event that started it all: 9/11. The more you look at that tragedy, the more its obvious that it was organized (not "allowed to happen") at the highest levels in the American government.

Therefore, while the media continues to demonize Arab males to scare the populace with the so-called words of a dead Osama, the real threats to American life and limb reside right in in Capitol Hill. I seriously doubt that Al-Quaeda actually exists, as such, but is actually an invention of the real 'axis of evil's' intelligence agencies.

Once you accept the aforementioned, then the lack of attacks on American soil aren't puzzling at all.

[Loveandlight]

Shep:

It only goes to show how mind-controlled people in this country have been that it was not screamingly obvious to everybody that the way the WTC buildings collapsed was consistent with a controlled demolition. In a controlled demolition, explosives are meticulously placed at vital structural points within the building which will be brought down. Those buildings should not have collapsed from jets ramming into them. Skyscrapers are designed to prevent such eventualities. And that's because if an impact of some kind were to make it fall, it would tip over while falling apart, resulting in a pretty major loss of life and destruction of property. But instead, the building collapsed mostly within its structural foot-print, or the kind of collapse you get with a controlled demolition.

[Wesley]

Thanks for keeping the faith, Steven. I think it's useful to revisit your timeline periodically, and I have to say it's been the most accurate one I've seen. Of course, we never did get to see the minutes from Cheney's Energy Task Force -- that might have helped clarify a few things.

Note also that the more the dollar declines, the less markets have to collapse. For example, the Dow hasn't moved much in the last five years, but the dollar is down about 30% (from your link). To the rest of the world, American real estate, stocks, and everything else just keep getting cheaper. I wouldn't underestimate the ability for the American economy to keep going along in its little bubble, while the value of the dollar against other currencies (and gold) continues to decline.

[Steven Lagavulin]

Wesley,

You bring up a good point, and one that I know several other analysts haven't failed to notice either...that the Dollar could collapse while the stock market marches ever onward. And I guess that at this stage of the game nothing would really surprise me.

And I'll note that I personally haven't considered the Dow Industrials to be an indicator of anything at all for years--it's just a familiar term that newspeople persist in clinging to in light of not having anything truly significant to say about financial matters. And in the past few years I'd say I don't really believe any of the other popular US stock market indexes are an indicator of anything significant either...

But still, I think when the economy begins to tailspin it will take the market averages down as well. How can it not? If companies see their earnings decline then they'll get sold...there's no way to gloss over that essential fact.

Although I'll reserve one caveat, which is that I'm willing to side with Jane Stillwater's suspicion which I referenced a week or so ago, that there may be so much illegal money flowing into the stock market anymore that even mass-scale bankruptcy couldn't bring the Dow down...

[James Samuel]

"I mean, it's not like the back door through Mexico hasn't been left wide-open and swinging in the wind for any malcontent with a rocket launcher to walk in. It sorta makes me wonder if, way down deep, the average American-Hater actually knows better than to direct his/her rage at the average American.."

I think it's not that people who disagree with American foreign policy are "anti-american" - the term itself lacks understanding of the issue - which is that we are all living on this one planet and we need to start thinking about how to share the resources available to us all in a fair and equitable manner, before we blow each other up.

See WE the film based on the words of Arundhati Roy that has gone viral in the public domain.

[Gwilym]

"I mean, it's not like the back door through Mexico hasn't been left wide-open and swinging in the wind for any malcontent with a rocket launcher to walk in. It sorta makes me wonder if, way down deep, the average American-Hater actually knows better than to direct his/her rage at the average American.."

Foreign extremists still hate the US but why risk going to America when you can kill American troops in Iraq or Afgahistan far more safely, and cheaply?

Unlike the UK or France I dont think there are any signs that the US is likely to have a domestic Islamic terrorist problem.

[jon]

thanks for writing these articles. i'd just like to agree with the posts above from shep and loveandlight. i'm convinced that we as americans are much less "at risk" for terrorist attacks than the government would have us believe, and that 9/11 was in fact orchestrated by the government. if you have an hour, check out this video: http://video.google.com/videoplay?docid=-8260059923762628848

it's an excellent analysis of of 9/11.

[David]

Something missed in the time line, but I consider important is when insurance companies start reducing their risk exposure to areas proned to climate change, such as the gulf, or flood zones. This certainly has now started to take place since last Sept, which means that we are head of schedule from their models for global warming.