Are In A Bad Fix
By Mathew Maavak
09 October, 2007
is a planet in denial. While the existential question gets a red hot
"apocalypse now" for an answer, our stock markets seem to
have regained paradise lost.
We are witnessing nothing
less than history's first confluence of unsustainable "peaks."
Perhaps, we are incapable
of piecing them all, for when crude oil reached an all-time intra-day
high of $84.10 per barrel on Sept 20, its entitlement to a front pager
screamer was conceded to the tale of a few thousand empty -- or emptying
-- American homes.
It was like the Butterfly
Effect, with a twist. The flapping rooftops of confiscated homes were
now whipping up an economic tsunami worldwide.
Here is how it works.
US mortgage lenders, voracious
as ever for "more," had extended loans to the default-income
group, who, were in turn hit by bad economic management. Credit card
issuers followed suit to bloat consumer fantasies, and banks tightened
the noose with additional loans for cars, tuition and businesses.
In the world of finance,
debt is ironically regarded as an "asset." Think of the rock-solid
house that can be repossessed in the event of a default.
Debts, with the outward promise
of a steady cash flow, are regularly pooled, "securitized"
and converted into a bewildering array of financial products along an
upward chain, where, they are hawked off by fund managers to the global
This money buys up commodities,
stocks, and yes, more "securities and derivatives," along
with junk bonds and blue chips.
It was easy come, easy go,
wherever the money takes you...a 24/7 electronic casino...a Las Vegas
London bankers were toasting
to the dawn of "the haves and the have yachts" at cocktail
parties where sauv?ui peut was the vintage.
One of the greatest scams
in recent memory was unfolding, exposing a pyramid scheme of epic proportions.
When this reached the point
of metastasis, stock markets began to collapse.
The bottom feeders could
not pay up anymore. Even the middle class were finding it difficult
to pass the buck upwards.
This is called a liquidity
crisis, and it happens when the laws of gravity finally exert a pull
on the cash flow.
Still the champagne flowed.
Lip-smacking advertorials continued to gush over "securities,"
"derivatives," and "comprehensive financial suites,"
set in a Jacuzzi lilting to Ponzi's version of "money for nothing
and chicks for free."
The pyramids may come crashing
down, but the missing capstones are free to roam, investing in gold
here, financial products there and junk bonds everywhere.
To avert a panic run though,
central banks worldwide pumped $400 billion to maintain liquidity's
Stock markets were no longer
in the bearish or bullish mode; rather they were cancroidal, allowing
fund managers to sidewheel from one market to another in search of profits,
suckers, and a subtle pullout before the big bang.
It was the dawn of the crab,
of cancer in stock market terminology, if one was needed. Suspicions
were mounting. European banks were facing insolvency.
For three days beginning
Sept. 14, savers across the United Kingdom removed ?2 billion ($4 billion)
from Northern Rock, Britain's fifth largest lender. The Bank of England
had to step in to guarantee all deposits in all banks ? a move with
little or no precedence.
However, the banks were not
convinced either. Inter-bank lending, which profitably cycled cash from
one bank to another as demand dictated, was now deemed an inter-bank
debt trap. Available cash was hoarded up.
The Bank of England's cash
auction of ?10bn -- at a rate of 6.75% over three-months -- has been
shunned for the third consecutive week.
Either the "have yachts"
have sailed away, or banks may actually find it difficult to repay the
Bank of England.
Worldwide, the full weight
of the "asset-backed" collateralized debt obligations (CDOs)
and structured investment vehicles (SIVs) may run into more than the
$400 billion which central banks coughed up to keep the system afloat.
CDOs and SIVs are the sleek-sounding
trillion-dollar apexes built on loans taken from simple homeowners.
Banks are still tallying
what is real and redeemable, and what was created and whirling in thin
air. Their best bet now is for a deux ex machina.
Bull in the China
The biggest economic success
story of our times was the product of Western consumerism. It created
a real supply and demand situation, which forced the relocation of factories
to the Third World of cheap labor.
China was the champion recipient.
Demand for toys, screws, machinery, computers and cellphones could never
ebb, whether it came leaded or unleaded. Beijing's policymakers decided
that the perennial flow of greenbacks demanded a domestic infrastructural
revolution dictated by the export market -- a first in history if there
Factories, coal-fired plants,
superhighways, skyscrapers were springing up at breakneck speed to fulfill
the export craze. Excessive pollution and the plight of "unregistered"
migrant workers from rural China mattered little.
What mattered were prestige,
kickbacks and $1.2tr in hard currency-based reserves. It did not matter
that China's domestic consumption vis a vis its GDP was actually decreasing;
it was more a matter of consumer opiates, of who was boss in the center
of the universe.
It did not matter that Chinese
cities were shrouded in toxic gray, where "only 1 percent of the
country's 560 million city dwellers breathe air considered safe by the
European Union." 
The Chinese may cough but
the 'days when the world caught a cold whenever Uncle Sam sneezed was
over." Or so it seemed.
Uncle Sam sneezed.
Global finance began hemorrhaging,
and it had to be resuscitated through an intravenous flow of taxpayer
Western consumers finally
realized that girths had to be tightened, and what to better way than
to curb spending, and let a market correction take place in the import
An entire supply chain leading
to China's factories are in danger of folding up. Mineral resources
from Africa, semiconductor plants in Malaysia, raw textile products
elsewhere, now face acute market uncertainty.
China is in a bad fix. However,
this is not deterring factories from coming online next year to meet
the projected "global demand." If Western consumers are scaling
down their purchases, Africans are not in a position to be the replacement
buyers, and without a market, they will not be able to sell their raw
In such circumstances, moods
can shift. When "Beijing rolled out the red carpet for more than
40 African heads of state last November, billboards depicting Africans
clad in leopard skin underwear, and an indigenous man from Papua New
Guinea, plastered the city."  It is no wonder that China's list
of "allies" is getting shorter by the day.
Events in Myanmar are not
proving helpful. China enjoys a near monopoly over Myanmar's estimated
2.46 trillion cubic meters of gas and 3.2 billion barrels of crude oil.
Beijing had plans to develop two parallel oil and gas pipelines stretching
2,380-km to link the deepwater port of Sittwe to Kunming, in the Chinese
province of Yunnan. Upon completion, a good portion of Middle Eastern
oil and gas is expected to bypass the Straits of Malacca.
The quid pro quo was arms
supply and support at the UN for Myanmar's military junta. Any new government
now might negate all existing deals, and pull Yangon into the US orbit.
This is a timely revolution from Washington's perspective.
North Korea too is seeking
rapprochement. There is enough operational space now to tackle Tehran,
Damascus and the Hezbollah.
China can of course play
the spoiler by providing arms to these regimes via a proxy. It is still
a bad idea as the Israelis are just itching for war.
The IAF recently destroyed
a Syrian installation that was purportedly an embryonic nuclear facility,
but may well turn out to be a Kolchuga-type passive radar system, ideal
for downing B2 stealth bombers. Coincidentally, the Russians have pledged
to upgrade Syrian radar defenses after the attack.
If a wider conflagration
breaks out in the Middle East, there will be no oil flowing from the
Straits of Hormuz to China, either through Sitte, or through the Straits
The best option for Beijing
will be to lock its oil and gas grid to the Russian Far East at a breakneck
speed, and clean up some level of air pollution in time for the 2008
If an all-out war in the
Middle East is our worst nightmare, think of the following unfolding
The Peak Crises and
Fossil fuels, compressed and formed over aeons in subterranean geological
layers are now releasing the telltale sibilant whispers of a punctured
gas tank ?- low as it was on petrol in the first place. With crude oil
hovering above $80 per barrel, the various subsidies built into national
economies are bound to burst at the seams, and precipitate price increases
for basic necessities.
There is however a unique
solution -- falling consumer demand worldwide. That would crimp industrial
demand for fossil fuel. It is no wonder oil majors were reluctant to
build new refineries when profits seemed guaranteed in the era of "peak
oil." This day would surely come!
Peak oil is also tied to
the current dollar crises. With the US dollar dipping against other
major currencies, crude oil should come cheaper for Washington.
Oil and other commodities
are traded in dollars, and dollar-denominated assets outnumber assets
weighed in other currencies. Beijing can dump its hundreds of billions
in dollar reserves for euros, only to trade them back into dollars to
buy crude oil, gold and other assets.
The dollar blackmail will
not work, especially with the US Army entrenched in the oil-rich Middle
Doomsday theorists are however
predicting another Great Depression ahead, where the value of the dollar
may mean little in the event of a global financial meltdown.
If this occurs, a global
depression will have to deal with the following phenomena that was absent
in the 30s.
More than half of the world's population will live in urban areas in
just... a few months, according to a United Nations Population Fund
report. That translates to 3.3 billion people in an urban concentration
camp of shantytowns and high-rise pigeonholes.
Children are growing up in
a peculiarly boxed-in environment, removed from the soil that births
their identity. They do not wake up to the sound of a crowing rooster,
which is nature's way of sowing repentance and a turning of mindsets
outside the conventional thinking box.
They wake up to beastly clangor
instead. It is either the alarm clock or the barking dog, installed
as "pets" to yelp any perceived intruder during the morning
rush hour. The urban jungle is an industrialized Ziggurat, which pecks
out a hierarchy from childhood. The ones right at the bottom will be
the ones shouldering more concrete, or the biggest debt burden.
Close human proximity also
leads to petty competitiveness and conflict. That is why "civilization"
is held at gunpoint; by the police, by the army and by "treaties."
The urban life is delicate
and vulnerable to all sorts of hazards, from plagues to a breakdown
in the utilities, communications and transportation services. And political
upheavals. A disaster will grind down traffic to a gridlock, far from
the escapist countryside.
What if an energy warfare
broke out? What if a global depression hits us? Can three billion people
grow a patch of greens on their balconies?
When it comes to greens,
the outlook is not at all verdant...
Peak Grain: Global
grain stockpiles are down to their tightest levels in three decades
after two years of unusual weather patterns. Heatwaves have wilted crops
in the granaries of the world while floods and other environmental scourges
have devastated some of the poorer "self-sustaining" regions.
Global wheat stockpiles will
fall to a 34-year low by June 2008, according to the International Grains
Council. U.S. stockpiles will fall to lowest level since 1951-52. Wheat
futures in Chicago reached $9.3925 a bushel late September when major
supplier Ukraine slashed exports.
The price of a bushel has
more than doubled in the past year.
The bushel of woes includes
rice, barley, soybeans, sorghum, oats and lentils as well, and they
are all sagging under record prices. The grapes of wrath have gone on
to stalk eggs, cheese, milk, meat and the a la carte menu.
There may come a point when
the industrial food chain has little choice but to pass the rising costs
to consumers in a dramatic fashion.
Creeping upticks in the price
of milk and bread are turning Europeans livid. Milk is now dubbed as
the "new white gold."
It is not just bad weather
to blame. Rising demand from China is pushing up prices, despite the
fact that only half of its urban population has basic health insurance.
Tragically, processed food re-exported through Beijing's food chain
is causing a global health nightmare.
But why pick on China? The
current biodiesel craze is inducing farms to purpose-plant their crops
for the profitable bioenergy industry, according to the Hamburg-based
"It is high time to
realise that the world community is approaching a food crisis in 2008
unless usage of agricultural products for biofuels is curbed or ideal
weather conditions and sharply higher crop yields are achieved in 2008,"
Bad news gets worse.
Peak Water: There
is not enough freshwater around to sustain the planet's inland ecosystem
and its human population. Rivers that help supply drinking water are
laden with toxic industrial wastes. Population growth is already straining
the capacities of water treatment plants worldwide while desalination
plants remain the prerogative of wealthy nations. According to the Pacific
Institute: "Over 1 billion people don't have access to clean drinking
water; more than 2 billion lack access to adequate sanitation; and millions
die every year due to preventable water-related diseases. Water resources
around the globe are threatened by climate change, misuse, and pollution."
It estimates that "over 34 million people might perish in the next
20 years from water-related disease -- even if the United Nations 'Millennium
Development Goals,' which aim to cut the proportion of those without
safe access by half, are met." 
Lots of water will be diverted
to industries and agriculture, or the highest bidder as privatization
of water supply gains currency. In some regions, the situation is so
acute that water diversion in one country may precipitate conflict with
a neighbor. As early as 1974, Iraq reportedly mobilized its army to
target Syria's al-Thawra dam on the Euphrates. Israel has cast its own
eyes on Lebanon's Litani River.
According to Former UN Secretary
General Boutros Boutros-Ghali, "The next war in the Near (Middle)
East will not be about politics, but over water."
If this watery grave is not
enough, think of the next one...
There is some fishy business going on in our oceans. Like oil and water,
we are trawling deeper and deeper for our fish supplies. Such piscatorial
adventures have led to a global decline in fish stocks. "Ecologists
worry that entire fisheries will collapse as... 'junk fish' are used
up." Aquaculture, which substitutes marine catches to an extent,
comes with its own environmental problems. 
The Times of London paints
a similar gloomy scenario. According to some experts, 90% of fish around
British waters "will disappear within 20 years" in the absence
of an immediate intervention.
With 75% of fish stocks fully
exploited, declining numbers across species worldwide hint at a collapse
point by 2048, beyond which replenishment is not possible.
Peak Fish "comes at
a time when their nutritional value is recognized more than ever."
"World Health Organisation
officials recommend a weekly intake of 200 to 300 grams of fish each
week but today's catches can only just meet this target. Since the 1950s
an estimated 60 per cent of stocks in British waters have collapsed..."
The Times invokes the paradox
that "measures proposed to limit fishing to a sustainable level
will only place a cap on the nutritional flow for the coming decades."
The full circle
What began as sub-prime woes
in the US housing sector may ripple into something we cannot yet imagine.
Will there be a severe global recession, or worse? If wars are yet contained,
bidding wars will yet emerge over wheat, water, fish, medicines and
oil. What will the future hold in this ecology of crises?
Here is a refrain from the
book of Hosea (4:3):
Because of this the land
and all who live in it waste away;
the beasts of the field and the birds of the air
and the fish of the sea are dying.
 As China Roars, Pollution
Reaches Deadly Extremes, NYT, Aug 26, 2007
police round up and beat African expats Guardian, September
Water Crisis Pacific Institute.
shortages will leave world in dire straits USA Today, 26th
will vanish from British waters in 20 years, says author Times
Online, Sept 15, 2007
Most of Mathew Maavak's commentaries
can be read here
or visit the Panoptic World
Copyright 2007@Mathew Maavak
Share Your Insights
it! And spread the word!
Here is a unique chance to help this article to be read by thousands
of people more. You just Digg it, and it will appear in the home page
of Digg.com and thousands more will read it. Digg is nothing but an
vote, the article with most votes will go to the top of the page. So,
as you read just give a digg and help thousands more to read this article.