Dedollarization at Yakaterinburg

This had to happen of course. Wall Street’s betrayal of US sovereign interests must have consequences. The damage was direct, though actually minor but clearly blamable on Wall Street taking complete advantage of fifty years of global confidence in the good sense of the US Federal Reserve.

I am saying that the damage was minor outside of the USA because the international credit system is still intact because governments stepped up to underwrite the capital losses immediately. They are now stimulating recovery trade to get it all working again. So this is a case in which the USA caught pneumonia while the rest of the world suffered a nasty flue. For fifty years, it has been the other way around and this is lost on no one.

What has changed is the size of US consumption. It has shrunk. It is easily replaced by a modest increase in global consumption which appears to have already happened. To put this in perspective, a ten percent drop in US consumption is easily repaired by a less than one percent increase globally. It really feels like this has happened and that global demand will support everything while the USA gets it act back together, however long they wish to spend on it.

The creation of a global currency has merit and needs to include the US dollar, the EU, and the Chinese and Indian Currencies in order to have the political weight to make it possible for everyone to fit in. The EU is a good example of the process itself.

Once the four major economies can create a working framework and get it out of the hands of the US political system, it will be easy for every one else to pile in. This is a good plan that must surely take years to implement. Thus Yakaterinburg is only the beginning of the beginning of a process that is both inevitable but also certain to limp along for years if not decades.

De-Dollarization: Dismantling America's Financial-Military Empire
The Yekaterinburg Turning Point

By Prof. Michael Hudson

URL of this article: www.globalresearch.ca/index.php?context=va&aid=13969

Global Research, June 13, 2009

The city of Yakaterinburg, Russia's largest east of the Urals, may become known not only as the death place of the tsars but of American hegemony too – and not only where US U-2 pilot Gary Powers was shot down in 1960, but where the US-centered international financial order was brought to ground.

Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO). The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).

The attendees have assured American diplomats that dismantling the US financial and military empire is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the United States, NATO or the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. That is what a multipolar world means, after all. For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.

Yet the meeting has elicited only a collective yawn from the US and even European press despite its agenda is to replace the global dollar standard with a new financial and military defense system. A Council on Foreign Relations spokesman has said he hardly can imagine that Russia and China can overcome their geopolitical rivalry,1 suggesting that America can use the divide-and-conquer that Britain used so deftly for many centuries in fragmenting foreign opposition to its own empire. But George W. Bush (“I'm a uniter, not a divider”) built on the Clinton administration's legacy in driving Russia, China and their neighbors to find a common ground when it comes to finding an alternative to the dollar and hence to the US ability to run balance-of-payments deficits ad infinitum.

What may prove to be the last rites of American hegemony began already in April at the G-20 conference, and became even more explicit at the St. Petersburg International Economic Forum on June 5, when Mr. Medvedev called for China, Russia and India to “build an increasingly multipolar world order.” What this means in plain English is: We have reached our limit in subsidizing the United States' military encirclement of Eurasia while also allowing the US to appropriate our exports, companies, stocks and real estate in exchange for paper money of questionable worth.

"The artificially maintained unipolar system,” Mr. Medvedev spelled out, is based on “one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks.”2 At the root of the global financial crisis, he concluded, is that the United States makes too little and spends too much. Especially upsetting is its military spending, such as the stepped-up US military aid to Georgia announced just last week, the NATO missile shield in Eastern Europe and the US buildup in the oil-rich Middle East and Central Asia.

The sticking point with all these countries is the US ability to print unlimited amounts of dollars. Overspending by US consumers on imports in excess of exports, US buy-outs of foreign companies and real estate, and the dollars that the Pentagon spends abroad all end up in foreign central banks. These agencies then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the “free market” force up their currency relative to the dollar – thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.

When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this buildup is not really voluntary. It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. “Free markets” US-style hook countries into a system that forces them to accept dollars without limit. Now they want out.

This means creating a new alternative. Rather than making merely “cosmetic changes as some countries and perhaps the international financial organisations themselves might want,” Mr. Medvedev ended his St. Petersburg speech, “what we need are financial institutions of a completely new type, where particular political issues and motives, and particular countries will not dominate.”

When foreign military spending forced the US balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in US Treasury bonds, as if these still were “as good as gold.” Central banks now hold $4 trillion of these bonds in their international reserves – land these loans have financed most of the US Government's domestic budget deficits for over three decades now! Given the fact that about half of US Government discretionary spending is for military operations – including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries – the international financial system is organized in a way that finances the Pentagon, along with US buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.

The main political issue confronting the world's central banks is therefore how to avoid adding yet more dollars to their reserves and thereby financing yet further US deficit spending – including military spending on their borders?

For starters, the six SCO countries and BRIC countries intend to trade in their own currencies so as to get the benefit of mutual credit that the United States until now has monopolized for itself. Toward this end, China has struck bilateral deals with Argentina and Brazil to denominate their trade in renminbi rather than the dollar, sterling or euros,3 and two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in renminbi.[4] Former Prime Minister Tun Dr. Mahathir Mohamad explained to me in January that as a Muslim country, Malaysia wants to avoid doing anything that would facilitate US military action against Islamic countries, including Palestine. The nation has too many dollar assets as it is, his colleagues explained. Central bank governor Zhou Xiaochuan of the People's Bank of China wrote an official statement on its website that the goal is now to create a reserve currency “that is disconnected from individual nations.”5 This is the aim of the discussions in Yekaterinburg.

In addition to avoiding financing the US buyout of their own industry and the US military encirclement of the globe, China, Russia and other countries no doubt would like to get the same kind of free ride that America has been getting. As matters stand, they see the United States as a lawless nation, financially as well as militarily. How else to characterize a nation that holds out a set of laws for others – on war, debt repayment and treatment of prisoners – but ignores them itself? The United States is now the world's largest debtor yet has avoided the pain of “structural adjustments” imposed on other debtor economies. US interest-rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles.

The United States tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets to squeeze out money to pay creditors. And at home, Congress blocked China's CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports and other sovereign wealth funds from buying into key infrastructure. Foreigners are invited to emulate the Japanese purchase of white elephant trophies such as Rockefeller Center, on which investors quickly lost a billion dollars and ended up walking away.

In this respect the US has not really given China and other payments-surplus nations much alternative but to find a way to avoid further dollar buildups. To date, China's attempts to diversify its dollar holdings beyond Treasury bonds have not proved very successful. For starters, Hank Paulson of Goldman Sachs steered its central bank into higher-yielding Fannie Mae and Freddie Mac securities, explaining that these were de facto public obligations. They collapsed in 2008, but at least the US Government took these two mortgage-lending agencies over, formally adding their $5.2 trillion in obligations onto the national debt. In fact, it was largely foreign official investment that prompted the bailout. Imposing a loss for foreign official agencies would have broken the Treasury-bill standard then and there, not only by utterly destroying US credibility but because there simply are too few Government bonds to absorb the dollars being flooded into the world economy by the soaring US balance-of-payments deficits.

Seeking more of an equity position to protect the value of their dollar holdings as the Federal Reserve's credit bubble drove interest rates down China's sovereign wealth funds sought to diversify in late 2007. China bought stakes in the well-connected Blackstone equity fund and Morgan Stanley on Wall Street, Barclays in Britain South Africa's Standard Bank (once affiliated with Chase Manhattan back in the apartheid 1960s) and in the soon-to-collapse Belgian financial conglomerate Fortis. But the US financial sector was collapsing under the weight of its debt pyramiding, and prices for shares plunged for banks and investment firms across the globe.

Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe. But this military domination is a vestige of an American empire no longer able to rule by economic strength. US military power is muscle-bound, based more on atomic weaponry and long-distance air strikes than on ground operations, which have become too politically unpopular to mount on any large scale.

On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat – and indeed, a militarily aggressive one as it seeks to hold onto the unique power it once earned by economic means. The problem is how to constrain its behavior. Yu Yongding, a former Chinese central bank advisor now with China's Academy of Sciences, suggested that US Treasury Secretary Tim Geithner be advised that the United States should “save” first and foremost by cutting back its military budget. “U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars.'”6

At present it is foreign savings, not those of Americans that are financing the US budget deficit by buying most Treasury bonds. The effect is taxation without representation for foreign voters as to how the US Government uses their forced savings. It therefore is necessary for financial diplomats to broaden the scope of their policy-making beyond the private-sector marketplace. Exchange rates are determined by many factors besides “consumers wielding credit cards,” the usual euphemism that the US media cite for America's balance-of-payments deficit. Since the 13th century, war has been a dominating factor in the balance of payments of leading nations – and of their national debts. Government bond financing consists mainly of war debts, as normal peacetime budgets tend to be balanced. This links the war budget directly to the balance of payments and exchange rates.

Foreign nations see themselves stuck with unpayable IOUs – under conditions where, if they move to stop the US free lunch, the dollar will plunge and their dollar holdings will fall in value relative to their own domestic currencies and other currencies. If China's currency rises by 10% against the dollar, its central bank will show the equivalent of a $200 million loss on its $2 trillion of dollar holdings as denominated in yuan. This explains why, when bond ratings agencies talk of the US Treasury securities losing their AAA rating, they don't mean that the government cannot simply print the paper dollars to “make good” on these bonds. They mean that dollars will depreciate in international value. And that is just what is now occurring. When Mr. Geithner put on his serious face and told an audience at Peking University in early June that he believed in a “strong dollar” and China's US investments therefore were safe and sound, he was greeted with derisive laughter.7

Anticipation of a rise in China's exchange rate provides an incentive for speculators to seek to borrow in dollars to buy renminbi and benefit from the appreciation. For China, the problem is that this speculative inflow would become a self-fulfilling prophecy by forcing up its currency. So the problem of international reserves is inherently linked to that of capital controls. Why should China see its profitable companies sold for yet more freely-created US dollars, which the central bank must use to buy low-yielding US Treasury bills or lose yet further money on Wall Street?

To avoid this quandary it is necessary to reverse the philosophy of open capital markets that the world has held ever since Bretton Woods in 1944. On the occasion of Mr. Geithner's visit to China, “Zhou Xiaochuan, minister of the Peoples Bank of China, the country's central bank, said pointedly that this was the first time since the semiannual talks began in 2006 that China needed to learn from American mistakes as well as its successes” when it came to deregulating capital markets and dismantling controls.8

An era therefore is coming to an end. In the face of continued US overspending, de-dollarization threatens to force countries to return to the kind of dual exchange rates common between World Wars I and II: one exchange rate for commodity trade, another for capital movements and investments, at least from dollar-area economies.

Even without capital controls, the nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars. Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson has called “the sorrows of empire” in his book by that name – the bankruptcy of the US financial-military world order. If China, Russia and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures.

US officials wanted to attend the Yekaterinburg meeting as observers. They were told No. It is a word that Americans will hear much more in the future.

Notes

1 Andrew Scheineson, “The Shanghai Cooperation Organization,” Council on Foreign Relations,
Updated: March 24, 2009: “While some experts say the organization has emerged as a powerful anti-U.S. bulwark in Central Asia, others believe frictions between its two largest members, Russia and China, effectively preclude a strong, unified SCO.”

2 Kremlin.ru, June 5, 2009, in Johnson's Russia List, June 8, 2009, #8.

3 Jamil Anderlini and Javier Blas, “China reveals big rise in gold reserves,” Financial Times, April 24, 2009. See also “Chinese political advisors propose making yuan an int'l currency.” Beijing, March 7, 2009 (Xinhua). “The key to financial reform is to make the yuan an international currency, said [Peter Kwong Ching] Woo [chairman of the Hong Kong-based Wharf (Holdings) Limited] in a speech to the Second Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), the country's top political advisory body. That means using the Chinese currency to settle international trade payments ...”

4 Shai Oster, “Malaysia, China Consider Ending Trade in Dollars,” Wall Street Journal, June 4, 2009.

5 Jonathan Wheatley, “Brazil and China in plan to axe dollar,” Financial Times, May 19, 2009.

6 “Another Dollar Crisis inevitable unless U.S. starts Saving - China central bank adviser. Global Crisis ‘Inevitable' Unless U.S. Starts Saving, Yu Says,” Bloomberg News, June 1, 2009.
http://www.bloomberg.com/apps/news?pid=20601080&sid=aCV0pFcAFyZw&refer=asia

7 Kathrin Hille, “Lesson in friendship draws blushes,” Financial Times, June 2, 2009.

8 Steven R. Weisman, “U.S. Tells China Subprime Woes Are No Reason to Keep Markets Closed,” The New York Times, June 18, 2008.

Indus Script Question

As my long time readers know, I have had a long time interest in the Bronze Age and piecing together its prospective history. The Bronze Age lasted at least two thousand years and culminated with the late Bronze Age collapse around 1159 BCE. It continued on in a transitioning form for many more centuries as the methods were not lost. But until the collapse, bronze was the currency of a global palace based economy.

I say global because the hunt for copper was global and the impact on societies able to supply copper was visible and direct and clearly shows up in the archeological record. These were not independent emergents but copy cat developments in often inhospitable locales like Lake Superior and the Andes.

Copper shows up poorly in the archeological record at sites because it was rarely left behind for any reason. Even today, finding a lost penny is a bit of a challenge and the few in place are in numbers that utterly misrepresent the amount of copper in our society.

So let us turn to the problem of ancient script. This article captures the nature of a known script and the problems in attempting to understand it with limited evidence.

What I want to say though, is that the idea of writing information down on some media surely goes back to hunting band lifestyles as indicated by recovered art and the knowledge that story tellers used aids to remembrance. That evolved naturally into a system of abstract icons is obvious. That abstract icons found a home in the palace economy of the millennia long global Bronze Age is also certain. They communicated for trading copper. Records had to be kept.

Those records were surely kept in most cases of prepared skins and anything else that possibly worked. We have evidence to support the use of wood and bark and Sumer gave us clay. The initial system was obvious to create. A sketch of a bull’s head, a hide, a fish are all obvious. Sticks and bundles give us numbers.

The Celtiberian civilization of the time used ogam which was a script capable of been put on a slab of wood. I suspect that it provided the incentive to develop a phonetic alphabet because wood forces a short symbol list and the Phoenicians were, if not a successor to the Atlantean Celtiberians, were certainly their partners and copper salesmen. In short, it is probable that the modern alphabet is a natural successor to Atlantean script. (go back and read my posts on the 1159 BCE collapse of Atlantis and also the nature of the large Atlantean copper trade. It is all there.)

The nature of the trade and the demands of a large city state drove alphabet development and certainly, Atlantis was in the right place and right time to execute.

Of course, the real problem with the Indus script is that we only have the cylinder seals and that is like trying to reconstruct English from a telephone book. It simply cannot be accomplished.

Indus script mystery: Part II

http://www.examiner.com/x-3315-Word-Geek-Examiner~y2009m5d9-Indus-script-mystery-Part-II?cid=examiner-email

By Diana Gainer

This is the second article I’ve written about the Indus script, discussing what may or may not be a real writing system used by people living in northwestern India and Pakistan back in the Bronze Age. Most scholars have assumed for a long time that this was a regular writing system but nobody has figured out to everybody’s satisfaction how to read it. Three academics, Steve Farmer, Richard Sproat, and Michael Witzel, recently made the claim that it’s not writing at all, getting a lot of linguists pretty excited. Still more recently, another linguist, a fellow by the name of Rao, countered their argument with a statistical study that purported to prove that it was so writing. Even more recently that that, Mr. Farmer has refuted this refutation, supposedly proving that the proof didn’t prove anything!

Now, when I was majoring in linguistics at Berkeley, way back in ancient times, it always amazed me that folks could get hot and bothered enough to shout and turn red in the face over topics like this, even though I was majoring in such arcane matters. But since I think obscure scripts are neater than sliced bread, I’m going to run on and on about this one a little more than usual. The three authors who made the original Big Splash object that although there are a large number of symbols in this so-called Indus script (about 400), too many for an alphabet, there are not enough for it to be pictographic writing, because the number of words would be too small for a language. That’s one of their arguments against it being real writing – or even proto-writing. See, Chinese, by comparison (supposedly a pictographic script) has a lot of words numbering in the thousands by anybody's count.

Leaving aside the rather odd description of Chinese as pictographic (an oversimplification), that’s one of their oddest assumptions to my way of thinking. That assumes that the Indus folk were writing about everything under the sun on those dinky, little seals. It’s almost as if the authors are assuming the content of those seals really was comparable to the newspaper headlines to which they compare this writing in their statistical measure. Statistics are great if you have too many items to shake a stick at, but I think they’ve made a completely unwarranted assumption.

You’re not going to write about everything on your jewelry, after all. There isn’t room for that, for one thing. How much history will fit on a gadget that’s only an inch or so long? There are things you don’t care enough about to mention, for another thing. How many modern-day news headlines mention the number of laundry loads I’ve washed in my washing machine each day? People around my house occasionally complain about the laundry, especially when something red gets in with their things and their underwear comes out pink. But I can’t imagine anybody putting that in the local newspaper, much less going to the bother to engrave something about it on a rock!

Then there may be things you mustn’t write about, things that it is forbidden to mention in polite society. I’ve spent an inordinate amount of my time discussing life with two-year-olds and they’ll happily talk about their poo, for example. But you very seldom run across that topic in your average daily newspaper. I very much doubt that anybody bothered to inscribe anything on that subject on any seal stones either.

Let’s be realistic. During the whole extent of the Indus civilization, those folks probably didn’t make any lists of possible baby names or give diet advice on those little stony gadgets. They didn’t put down recipes for herb teas that would improve your sex appeal or create any rocky job ads, nor is there likely to have been much advice for the lovelorn inscribed upon those thingamabobs. The ancients in the Indus Valley probably only wrote about a very small semantic domain, which is a fancy way of saying it was all on one subject or some very small number of carefully selected subjects. Eventually our authors (Farmer, Sproat, and Witzel) get around to saying this, too, but by the time they do, they’ve forgotten their objection about the small number of words earlier. So the point is lost on them.

Well, I don’t blame them one bit for forgetting about a minor, little point like that. It was a very long paper with lots of technical points and it was really very good. I especially liked their colorful graphs. You see, they compared the Indus script with these other writing systems, and I thought that was extremely clever because I couldn’t for the life of me figure out what the heck the graph meant. It involved math though and everybody in linguistics loves math because they don't understand it.

BUT (and it’s a big but), there’s another piddly bit about statistics (by which I mean math) that I really ought to bring up. Before you do your fancy number crunching, before you even do your data gathering, you have to decide on your sampling frame. What’s a sampling frame? You can think of it as the universe out of which you’re taking your sample. You need to make sure you know how random your sample is (the tidbits you're taking out of your universe or possibilities) before you get started. That’s because if you pick all of your sample apples out of the bottom of sampling frame of a barrel, you’re going to end up with an unreliably large proportion of bad ones. When they’re all from the bottom, your sample will be all nasty and bruised and rotten more often than a similar group taken mainly from the ones at the top of the barrel. That’s what happens to apples at the bottom. They get squished and go bad. The moral is, you need to get a truly random sample. You must take your apples from every part of the barrel equally.

But how do you know if your sample is taken from all parts of your barrel equally? That’s what I’m on about, you see, when I ask about that sampling frame. If we look at the Indus inscriptions, we don’t really know for sure that we’re seeing the whole of a language, even when we look at the whole set of inscriptions that has been found so far. Our universe is totally obscure. That’s what the point is about there possibly being some missing inscriptions on perishable materials – materials that mysteriously perished. Well, whether something mysteriously disappeared or not, if those ancient folks didn’t leave us the whole of their language, we’re not going to see all of it on the seal stones, are we? So, sampling those seal stones – even if we look at all of the seal stones – is not going to show us accurately what their whole language was like, or even necessarily what their whole writing system looked like. And if we don't necessarily know what their whole writing system looked like, how can these authors say they've proved anything about its nature?

As a comparison, let’s wander off to China for a moment. If we looked only at the Chinese oracle bones and what's written on them, we would not be seeing the whole of the Chinese language, for example. Scholars are well aware of this because we have modern Chinese as a comparison. There are now huge amounts of Chinese records to look at from over a thousand years of writing. Nobody would only look at the oracle bones and say of Chinese, “That’s not writing.” Because we know it became modern Chinese!

If we looked only at the Linear B tablets and never at anything else that the Greeks wrote later, we would not be seeing the whole of the Greek language, either. Similarly, nobody suggests the Myceneans were illiterate, mainly because everybody knows the Greeks later wrote fluently and abundantly. However, they didn’t continue writing in Linear B. There was a gaping hole, known as the Dark Age. Then they borrowed an alphabet from the Phoenicians and started anew with a better system!

Still, those oracle bones were written to be read by somebody speaking Chinese. And those Linear B tablets were written to be read by somebody speaking Greek. So, suppose the Indus script does encode a language, just one that’s no longer spoken anywhere and that’s the reason nobody has managed to figure it out yet. If there isn’t a modern language for scholars to make a comparison with, that would make the job of cracking the code without a bilingual inscription incredibly difficult. But that doesn’t prove that the inscriptions don’t encode a language, only that we haven’t figured out how to crack that code!

That’s the problem with the statistical measures, I suggest. If we’re comparing Indus symbol frequencies with modern Chinese character frequencies in newspapers, that’s like comparing apples and oranges. Modern Chinese is not a comparable system. It’s systematic and it’s standardized. It’s not alphabetic or syllabic but it’s nowhere near as aggravatingly inconsistent as ancient Egyptian was. All the symbols are the same size in modern Chinese. They’re all written in the same direction in modern Chinese. People don’t leave symbols out willy-nilly or throw in extra pictures for good measure if they feel like it or substitute some other picture as a shorthand in modern Chinese. None of these things could be said of ancient Egyptian or ancient Sumerian. Modern Chinese is simply not a comparable system. We should not expect ancient Indus script to be like it.

If we’re comparing Indus symbol frequencies with modern alphabetic English, then we’re really off the mark because the alphabet wasn’t invented in the West for quite a long time after the Indus civilization ended. Let’s compare it to something comparable to what it’s likely to have been. Compare it to Egyptian hieroglyphs, to Sumerian cuneiform, to Linear A, to Linear B, or even to proto-writing systems like the name + date symbols used by the Aztecs to show names of characters in their pictorial mnemonics. When we get to these proto-writing systems, which is what the authors really think it is, it seems to me we run into a different type of problem. There are too many symbols in the Indus corpus now, not too few!

But let's assume that it is just proto-writing for a moment. The authors talk quite a lot about magico-religious symbols from the Near East, such as those found on boundary stones. These appear in a standard sequence and represent specific deities. Certain deities appear more than once in the same list though, in various guises. They give as an example Ea, the Akkadian (or Babylonian) god of the Deep, who appears as a turtle and as the precursor to the zodiacal symbol of Capricorn, what they call the goat-fish. They make an odd little boo-boo in discussing this list by identifying a certain Sir Storm with an “Akkadian” fellow called Asshur. Actually Mr. Asshur was Assyrian, as one might guess by his name. The Akkadians didn’t much care for him or his proteges since they marched roughshod over them, deposing their previous king (and their previous Sir Storm). Oops! But the various incarnations of Mr. Thunder and Lightning were very popular in countries that tended to have problems with dryness and needed wetness for their crops. So we’ll be broadminded and ignore that minor slip about his precise name.

The authors don’t mention my personal favorite among those archaic deities, Miss Planet Venus, having two incarnations. She’s at the front of the line-up with her little 8-pointy star. That’s what she has for a symbol as Miss Meany, the Morning Star, when she really is Venus and Miss War. But when she cools off and is Miss Evening Star, she changes character, becomes Miss Love, and shows up near the end of the list. Then she is a funny-looking, little curlicue. This represents a real thingy that the earlier Sumerians made out of tall reeds, since they happened to live where there were few trees but loads of reeds, namely, in the swamps by the Persian Gulf. Or maybe it’s the Arabian Gulf. It depends on who you’re talking to. Anyhow, they stuck this big, tall, reedy curlicue in front of Miss Evening Star’s temple, which was also built out of bundles of tall reeds. In that neck of the woods (or rather, the swamp) she wasn’t Ishtar, as she was known upriver. Down south she was Inanna. But she’s essentially the same goddess in both places. That, too, is a minor point.

Anyhow, the busy authors suggest that the Indus Valley civilization, like that of the Land between the Two Rivers (i.e., Mesopotamia) was multilingual. Well, that’s plausible. Those so-called inscriptions had to do with religion. That’s also plausible. And the little symbols weren’t real writing but were symbols for gods and goddesses, arranged according to rules that we’ll never be able to figure out, but which had more to do with notions of symmetry and divine hierarchies than with the structure of language. Well, maybe. But deciding ahead of time that you can’t possibly figure something out is one way to make sure you never will figure it out. You can’t if you don’t try.

Still, the proof is in the pudding. If some Tamil-speaking scholar goes and figures out how to read this stuff, demonstrating that it's proto-Dravidian and thus the ancestor of Tamil, I'm prepared to believe him despite all that statistical derring-do. Even if Mr. Tamil Speaker should turn out to live a good ways farther south than his ancestor, what does that prove? We now know that the original Proto-Indo-Europeans lived somewhere in the vicinity of southern Russia. On the other hand, I live in North America, which is a long way from Russia. That suggests that somebody in the intervening interval moved and hopped on a boat to boot. Folks do that sort of thing from time to time. So why couldn't the proto-Dravidians all move south?

Navy Carrier Role

This article on the utility of the Carrier fleet challenges navel doctrine by playing up the apparent vulnerability of carriers. To the degree that the concerns have any merit whatsoever, it is totally true that any carrier is easily destroyed if it encounters simple ballistic firepower. Even a battery of world war one howitzers will get the job done. It is just that is not the role of an aircraft carrier.

Its role is to project force throughout the world while standing off from any such threat. It is not a bombardment platform; it is a mobile air power launch platform. As a force in place, it has been able to suppress military adventurism for over fifty years and occasionally support US military action in support of occasional geopolitical goals.

It is not a platform that can be applied easily against major states with deep hinterlands such as Russia, China, India and Brazil. And in the end, it is deployed in support of landing operations.

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Regardless, today the USA is the great power whose effective borders are up to the two hundred mile limit of every country on Earth. The high seas are dominated by this large carrier fleet. The fleet is also still been added to and will apparently climb into the twenties. This is likely way too large. A shooting war seems to demand having five on station with all the aircraft that entails.

Then why is the Chinese building anti carrier missiles? Why not? They want to enforce territorial control over their share of the waters around China and blocking any form of USA adventurism is surely part of that agenda.

I will go a little further. A close reading of Chinese history since 1800 would lead you to the same decisions.

Every nation prepared to build a modern navy, showed up and forced concessions from the Chinese government and that included the very dangerous Japan who was local and had real plans of hanging around for a while. If that was your history, you too would want a robust coastal defense.

As an aside, a close reading of Chinese history reveals that in the early nineteenth century, a failed scholar rewrote missionary tracts about Christianity and inspired a mass movement that succeeded in grabbing the southern half of China away from the central government and precipitating a twenty year civil war. Maoist communism was another western inspired but Chinese ideology that also turned the country upside down. Is it any wonder that the leadership is less than sympathetic to the emergence of the Falun Gong? How many lessons do they need?

Navy's Big Weakness: Our Aircraft Carriers Are (Expensive) Defenseless Sitting Ducks

By Gary Brecher, AlterNet. Posted April 3, 2009.

http://www.alternet.org/audits/134830/navy%27s_big_weakness%3A_our_aircraft_carriers_are_(expensive)_defenseless_sitting_ducks/?page=entire

Every single change in technology in the past 50 years has had "Stop building carriers!" written all over it. But the Navy paid no attention.

I've been saying for a long time that aircraft carriers are just history's most expensive floating targets and that they were doomed.

But now I can tell you exactly how they're going to die. I've just read one of the most shocking stories in years. It comes from the U.S. Naval Institute, not exactly an alarmist or anti-Navy source. And what it says is that the U.S. carrier group is scrap metal.

The Chinese military has developed a ballistic missile, Dong Feng 21, specifically designed to kill U.S. aircraft carriers:

"Because the missile employs a complex guidance system, low radar signature and a maneuverability that makes its flight path unpredictable, the odds that it can evade tracking systems to reach its target are increased. It is estimated that the missile can travel at Mach 10 and reach its maximum range of 2,000 kilometers in less than 12 minutes."

That's the U.S. Naval Institute talking, remember. They're understating the case when they say that, with speed, satellite guidance and maneuverability like that, "the odds that it can evade tracking systems to reach its target are increased."

You know why that's an understatement? Because of a short little sentence I found further on in the article -- and before you read that sentence, I want all you trusting Pentagon groupies to promise me that you'll think hard about what it implies. Here's the sentence: "Ships currently have no defense against a ballistic missile attack."

That's right: no defense at all. The truth is that they have very feeble defenses against any attack with anything more modern than cannon. I've argued before no carrier group would survive a saturation attack by huge numbers of low-value attackers, whether they're Persians in Cessnas and cigar boats or mass-produced Chinese cruise missiles.

But at least you could look at the missile tubes and Phalanx gatlings and pretend that you were safe. But there is no defense, none at all, against something as obvious as a ballistic missile.

So it doesn't matter one goddamn whether the people in the operations room of a targeted carrier could track the Dong Feng 21 as it lobbed itself at them. They might do a real hall-of-fame job of tracking it as it goes up and comes down. But so what? Let me repeat the key sentence here: "Ships currently have no defense against a ballistic missile attack."

Think back a ways. How old is the ballistic missile? Kind of a trick question; a siege mortar is a ballistic missile, just unguided. A trebuchet on an upslope outside a castle is a ballistic weapon.

But serious long-range, rocket-powered ballistic weapons go back at least to the V-2. A nuclear-armed V-2 would have been a pretty solid way of wiping out a carrier group, and both components, the nuke and the ballistic missile, were available as long ago as 1945.

A lot has happened since then, like MIRVs, mobile launchers, massively redundant satellite guidance -- but the thing to remember is that every single change has favored the attacker. Every single goddamn change.

You know that Garmin satellite navigation you use to find the nearest Thai place when the in-laws are visiting? If you were the Navy brass, that should have scared you to death. The Mac on your kid's bedroom desk should have scared you.

Every time electronics got smaller, cheaper and more efficient, the carrier became more of a death trap. Every time stealth tech jumped another step, the carrier was more obviously a bad idea. Smaller, cooler-running engines: another bad sign for the carrier.

Every single change in technology in the past half-century has had "Stop building carriers!" written all over it. And nobody in the Navy brass paid any attention.

The lesson here is the same one all of you suckers should have learned from watching the financial news this year: the people at the top are just as dumb as you are, just meaner and greedier. And that goes for the ones running the U.S. surface fleet as much as it does for the GM or Chrysler honchos. Hell, they even look the same.

Take that Wagoner ass who just got the boot from GM and put him in a tailored uniform, and he could walk on as an admiral in any officer's club from Guam to Diego Garcia. You have to stop thinking somebody up there is looking out for you.

Remember that one sentence, get it branded onto your arm: "Ships currently have no defense against a ballistic missile attack."

What does that tell you about the distinguished gentlemen with all the ribbons on their chests who've been standing up on carrier bridges looking like they know what they're doing for the past 50 years?
They're either stupid or so sleazy they're willing to make a career commanding ships they goddamn well know are floating coffins for thousands of ranks and dozens of the most expensive gold-plated airplanes in the history of the world.

That's why it's so sickening to read shit like the following:

"The purpose of the Navy," Vice Admiral John Bird, commander of the 7th Fleet, tells me, "is not to fight." The mere presence of the Navy should suffice, he argues, to dissuade any attack or attempt to destabilize the region.

From Yokosuka, Guam, and Honolulu, the Navy is sending its ships on missions to locales as far away as Madagascar. On board the Blue Ridge, the vice admiral's command ship anchored at Yokosuka, huge display screens allow officers to track the movements of any country's military vessels cruising from the international date line in the east to the African coast in the west -- the range of the 7th Fleet's zone of influence.

That's the kind of story people are still writing. It's so stupid, that first line, I won't even bother with it: "The purpose of the Navy is not to fight." No kidding. The 7th Fleet covers the area included in that 2,000 kilometer range for the new Chinese anti-ship weapons, so I guess it's a good thing they're not there to fight.

Stories like this were all over the place in the last days of the British empire. For some dumb-ass reason, these reporters love the Navy. They were waving flags and feeling good about things when the Repulse and the Prince of Wales steamed out with no air cover to oppose Japanese landings. Afterward, when both ships were lying on the sea floor, nobody wanted to talk about it much.

What I mean to say here is, don't be fooled by the happy talk. That's the lesson from GM, Chrysler and the Navy: These people don't know shit.

And they don't fucking care either. They're going to ride the system and hope it lasts long enough to see them retire to a house by a golf course, get their daughters married and buy a nice plot in an upscale cemetery. They could give a damn what happens to the rest of us.

Global Reserve Banking

A timely essay out of China on the need to create a global reserve currency that is able to obviously discipline members. This a natural response to the crash and burn imposed by the US financial leadership and equally the European financial leadership. The built-in conflicts of the current regime make it unlikely that such will be led by the USA particularly. After all, global acceptance of the US dollar is what greased the current disaster. It has been the golden goose until everyone became insanely greedy.

China and India need to join forces and start the process moving. If they create a viable reserve currency situation and convince most other countries to participate outside of America and Europe, the momentum will be established and the real problem can then be addressed. That is how to retire the ocean of US currency now acting as the reserve currency.

Odds are it will then have a natural solution that everyone is happy with.

China and India today have the growing moral authority to pull this off and it will also enhance their growing stature as they consolidate their economic gains. They needed this market break as badly as the overheated US did. Their cooperation now would be massively beneficial to the global economy.


China: Time For a New Global Currency

Tuesday, March 24, 2009 8:21 AM

China is calling for a new global currency controlled by the International Monetary Fund, stepping up pressure ahead of a London summit of global leaders for changes to a financial system dominated by the U.S. dollar and Western governments.

The comments, in an essay by the Chinese central bank governor released late Monday, reflect Beijing's growing assertiveness in economic affairs. China is expected to press for developing countries to have a bigger say in finance when leaders of the Group of 20 major economies meet April 2 in London to discuss the global crisis.

Gov. Zhou Xiaochuan's essay did not mention the dollar by name but said the crisis showed the dangers of relying on one nation's currency for international payments. In an unusual step, the essay was published in both Chinese and English, making clear it was meant for an international audience.

"The crisis called again for creative reform of the existing international monetary system towards an international reserve currency," Zhou wrote.
A reserve currency is the unit in which a government holds its reserves. But Zhou said the proposed new currency also should be used for trade, investment, pricing commodities and corporate bookkeeping.

Beijing has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves. Premier Wen Jiabao publicly appealed to Washington this month to avoid any steps in response to the crisis that might erode the value of the dollar and Beijing's estimated $1 trillion holdings in Treasuries and other U.S. government debt.

The currency should be based on shares in the IMF held by its 185 member nations, known as special drawing rights, or SDRs, the essay said. The Washington-based IMF advises governments on economic policy and lends money to help with balance-of-payments problems.

Some economists have suggested creating a new reserve currency to reduce reliance on the dollar but acknowledge it would face major obstacles. It would require acceptance from nations that have long used the dollar and hold huge stockpiles of the U.S. currency.

"There has been for decades talk about creating an international reserve currency and it has never really progressed," said Michael Pettis, a finance professor at Peking University's Guanghua School of Management.

Managing such a currency would require balancing the contradictory needs of countries with high and low growth or with trade surpluses or deficits, Pettis said. He said the 16 European nations that use the euro have faced "huge difficulties" in managing monetary policy even though their economies are similar.

"It's hard for me to imagine how it's going to be easier for the world to have a common currency for trade," he said.

China has pressed for changes to give developing countries more influence in the IMF, the World Bank and other finance bodies. G20 finance officials issued a statement at their last meeting calling for such changes but gave no details of how that might happen.

Russia also has called for such reforms and says it will press its case at the London summit.

Zhou said the new currency would let governments manage their economies more efficiently because its value would not be influenced by any one nation's need to regulate its own finance and trade.

"A super-sovereign reserve currency managed by a global institution could be used to both create and control global liquidity," Zhou wrote. "This will significantly reduce the risks of a future crisis and enhance crisis management capability."

Zhou also called for changing how SDRs are valued. Currently, they are based on the value of four currencies - the dollar, euro, yen and British pound.

"The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies," Zhou wrote. "The allocation of the SDR can be shifted from a purely calculation-based system to one backed by real assets, such as a reserve pool, to further boost market confidence in its value."

Eden Machine Pt II

The Eden Machine Part II

As I reported before Christmas some friends of mine who control the public company known as Lifespan LSPN.PK (lifespaninc.com) have decided that it is a great time to pursue the development of my atmospheric water harvester concept and are prepared to organize the necessary funding to make it all happen. As the first step in advancing this agenda, we have allocated the development task to a related company named USA Uranium Corp USAU.PK (name to be changed shortly). I stepped on as president just this last week.

My first step was to do something very unusual. I increased the number of authorized shares to one trillion shares. This is practically the only business proposition ever seen not financial in nature that is naturally capable of generating a trillion dollars in sales fairly quickly. The reason is simplicity itself. The Eden Machine can empower and enable the two billion people still eking out a subsistence living around the globe.

Remember the land boom that populated the United States in the nineteenth century when a mass migration of Europeans came over? Now imagine the same thing happening in Western China, the Persian Gulf Coast, the Sahel and the Southwest USA and Mexico.

It will be possible for two billion people to own land and create a livelihood for themselves and their families.

Thus I think that the declared potential to issue a trillion shares is appropriate to the scale of our ambition.

I formulated the original concept four years ago as part of writing my manuscript Paradigms Shift and then excerpted the key chapter as my third post when I initiated this Blog. You may want to read that particular post at:

http://globalwarming-arclein.blogspot.com/2007/02/global-terraforming-chapter.html

I have referred to the concept many times since. The problem can and has been solved expensively using classic technologies mostly as a drinking water system using household power. It is after all a variation on a refrigerator used to collect humidity.We have to go far beyond this, but we will give ourselves one break. We do not need to fuss with the water itself because it will go directly into the adjacent soils for irrigation purposes.

There are three primary subsystems besides the control system. We have already recognized the need for refrigeration. We also need energy storage but it does not need to be mobile which will let us work up prototypes with our old friends the lead acid battery.

Then we need an energy source other than the power grid.The first big saving comes from the mere fact that the power used will not travel removing the whole issue of transmission losses.

With the water also not traveling we are designing a stand alone unit that can be placed anywhere, set up on location and then potentially walked away from for months at a time, except for occasional maintenance.

We have already decided that the optimum design objective is a device capable of collecting 100 liters a day at close to 100 percent humidity.

We formulated this around the knowledge that a full grown fruit tree will respire 50 to 70 liters of water per day. This makes it easy for operators to manage their units in situations needing full capacity for a full grown tree to a situation in which the machine is supporting a number of young trees.

We am expecting to use a solar array to generate the working energy and was in fact waiting for the cost of solar energy to come down to around $1.00 per watt.

This past year, Nanosolar announced just that price and are now shipping. However, for prototyping, any supplier will do initially. We will simply design the device so that various panels can be switched in and out as needed.

The solar panel could be put on a mast as the trees grow larger, but in the early stages a simple upright sheet should be sufficient and save on excessive hardware.

In some respects, this part of the system can be expected to follow the development of the original satellite antenna that went from six feet across down to eighteen inches and design can easily accommodate that sort of shift. Having them initially close to the ground also allows easy cleaning protocols and maintenance.

We also recognize that we need to store the solar energy during the day and consume it at night after the temperature has broken for maximum yield. The most likely battery system will be the vanadium redox battery. It weakness is low energy density, but this is offset by the capacity to cycle millions of time without ever wearing out the battery, The energy is also stored by pumping the active fluids into tanks after been acted on. There is also no particular limit to the speed of the process.

The energy can be collected and stored for twelve hours and then dispensed in two hours, which may be the optimal design. The fluid tank can act as an anchor to the static system as well. The cost of the membranes is still custom driven, because no mass market has been yet developed for them. We may be the necessary mass market.

The good news is that the Vanadium Pentoxide is a one time purchase that will be recoverable. We do not know yet how many pounds will be needed and I would be guessing if I suggested a hundred pounds.

More recently, I have devised an energy storage protocol that could substantially lower the battery expense and possibly eliminate the need for sophistication.

The stored energy is then released at night to operate a solid state cooling system which passes already night cooled air over it to induce the separation of the humidity. The dried air is then passed over the hot obverse side of the same panel to carry off the heat produced by the panel.

The Eden machine is designed to cheaply, efficiently and continuously generate water for human, agricultural or industrial utilization.We know where we wish to end up and I know that it is possible to produce an expensive working machine.

We are in the same position that Henry Ford had at the dawn of the automobile age. A wide array of design elements will be pursued with the objective of driving the manufacturing costs down in incremental steps to achieve our goal. We expect that our first customers will be back yards in LA and later, the Great Valley. After that we are good to go.

It would also be fun to manage a million acres in the Empty Zone of Saudi Arabia. Note that efficient application of the technology will commence in high humidity areas and progress toward more arid zones bringing their water with them in the same manner that the Amazon is watered. Once proper tree cover is established with absorptive soils, we can expect natural precipitation to largely take over most of the work load.

We also plan to be Nanosolar’s best customer before we are finished. Anyone that can attract 300 million in private investment to build a couple of factories has my attention, to say nothing of their two million dollar tool that produces the power equivalent of one nuclear plant per year.

Global Drought Tightens

Eric deCarbonnel has done us a favour and assembled in a rough and ready manner, the apparent numbers developing in the global agricultural scene. He is an alarmist here but one gets the inescapable sense that it will be very difficult to cover shortfalls this year and that there will be plenty of pain to spread around.

I would speculate that the globe is readjusting back to normal climatic conditions with the typical disruptive lag biting everyone’s tail. We may well test our reserves this year, but that should be followed by a strong replenishing cycle world wide. This is going to be needed.

I also do not see quite were he is getting some of his more alarming numbers from, and perhaps we should just leave them alone for now. A lot of these droughts are localized within large growing regions and simply do not apply to the region as a whole. Some of these droughts are due to break as has happened in California. In fact, the evidence indicates that weather bands have shifted south and that suggests to me that the southern USA is about to have its drought broken as spring returns.

In spite of that, I think that the press will have a lot to talk about this year on the weather and drought front. However, if the global drought breaks everywhere it will be pleasant news for a change

Why am I so confident? I think that the present drought conditions are lagging results from the drop in global temperatures brought about by the Pacific Decadal Oscillation reversal and that global weather is rebounding back to conditions that stood twenty years ago. The impact of this is weather disruption that should now be ending as the tropical weather system re-expands again.

Monday, February 9, 2009

*****Catastrophic Fall in 2009 Global Food Production*****

http://www.marketskeptics.com/2009/02/2009-global-food-catastrophe.html

by Eric deCarbonnel

After reading about the droughts in two major agricultural countries, China and Argentina, I decided to research the extent other food producing nations were also experiencing droughts. This project ended up taking a lot longer than I thought. 2009 looks to be a humanitarian disaster around much of the world.

To understand the depth of the food Catastrophe that faces the world this year, consider the graphic below depicting countries by USD value of their agricultural output, as of 2006.

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjjt66T7_I3Jxd2_bmDtoz6O56ODM3CsA7YEQ8v2UKkqiMGmxhYDP9ZP6RzyPTXmkUWnZlR3CnaTBD37dmOh-bQReiZpxjQxjS9q-Y5OU1AAq-KJuclbawuD648RzoJ9vTLp3PsIQ0Qv22X/s1600-h/Countries_by_agricultural_output-753925.png

Now, consider the same graphic with the countries experiencing droughts highlighted.

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirXo1-dksOxDOF3c3lBygEs4_1E9n1JrWlZb3g9RAKGhGYhnxuNtyJKcRrJP3Xdm2CttxgtF9p4bH4sPLsTMgW8anzKCCYksINZYrs7p7VOSXqiajTw0HvGTBPm9kfOoXgaNU2kYegg4fa/s1600-h/Countries_by_agricultural_output%5B1%5D-747806.png

The countries that make up two thirds of the world’s agricultural output are experiencing drought conditions. Whether you watch a video of the drought in China, Australia, Africa, South America, or the US, the scene will be the same: misery, ruined crop, and dying cattle.

ChinaThe drought in Northern China, the worst in 50 years, is worsening, and summer harvest is now threatened. The area of affected crops has expanded to 161 million mu (was 141 million last week), and 4.37 million people and 2.1 million livestock are facing drinking water shortage. The scarcity of rain in some parts of the north and central provinces is the worst in recorded history.

The drought which started in November threatens over half the wheat crop in eight provinces - Hebei, Shanxi, Anhui, Jiangsu, Henan, Shandong, Shaanxi and Gansu.HenanChina's largest crop producing province, Henan, has issued the highest-level drought warning. Henan has received an average rainfall of 10.5 millimeters since November 2008, almost 80 percent less than in the same period in the previous years. The Henan drought, which began in November, is the most severe since 1951.

AnhuiAnhui Province issued a red drought alert, with more than 60 percent of the crops north of the Huaihe River plagued by a major drought.

ShanxiShanxi Province was put on orange drought alert on Jan. 21, with one million people and 160,000 heads of livestock are facing water shortage.

JiangsuJiangsu province has already lost over one fifth of the wheat crops affected by drought. Local agricultural departments are diverting water from nearby rivers in an emergency effort to save the rest.

HebeiOver 100 million cubic meters of water has been channeled in from outside the province to fight Hebei’s drought.

Shaanxi1.34 million acres of crops across the bone-dry Shanxi province are affected by the worsening drought.

ShandongSince last November, Shandong province has experienced 73 percent less rain than the same period in previous years, with little rainfall forecast for the future.

Relief efforts are under way. The Chinese government has allocated 86.7 billion yuan (about $12.69 billion) to drought-hit areas. Authorities have also resorted to cloud-seeding, and some areas received a sprinkling of rain after clouds were hit with 2,392 rockets and 409 cannon shells loaded with chemicals. However, there is a limit to what can be done in the face of such widespread water shortage.

As I have previously written, China is facing hyperinflation, and this record drought will make things worse. China produces 18% of the world's grain each year.

AustraliaAustralia has been experiencing an unrelenting drought since 2004, and 41 percent of Australia's agriculture continues to suffer from the worst drought in 117 years of record-keeping. The drought has been so severe that rivers stopped flowing, lakes turned toxic, and farmers abandoned their land in frustration:

A) The Murray River stopped flowing at its terminal point, and its mouth has closed up.B) Australia’s lower lakes are evaporating, and they are now a meter (3.2 feet) below sea level. If these lakes evaporate any further, the soil and the mud system below the water is going to be exposed to the air. The mud will then acidify, releasing sulfuric acid and a whole range of heavy metals. After this occurs, those lower lake systems will essentially become a toxic swamp which will never be able to be recovered. The Australian government's only options to prevent this are to allow salt water in, creating a dead sea, or to pray for rain.

For some reason, the debate over climate change is essentially over in Australia.The United States

CaliforniaCalifornia is facing its worst drought in recorded history. The drought is predicted to be the most severe in modern times, worse than those in 1977 and 1991. Thousands of acres of row crops already have been fallowed, with more to follow. The snowpack in the Northern Sierra, home to some of the state's most important reservoirs, proved to be just 49 percent of average. Water agencies throughout the state are scrambling to adopt conservation mandates.

TexasThe Texan drought is reaching historic proportion. Dry conditions near Austin and San Antonio have been exceeded only once before—the drought of 1917-18. 88 percent of Texas is experiencing abnormally dry conditions, and 18 percent of the state is in either extreme or exceptional drought conditions. The drought areas have been expanding almost every month. Conditions in Texas are so bad cattle are keeling over in parched pastures and dying. Lack of rainfall has left pastures barren, and cattle producers have resorted to feeding animals hay. Irreversible damage has been done to winter wheat crops in Texas. Both short and long-term forecasts don't call for much rain at all, which means the Texas drought is set to get worse.

Augusta Region (Georgia, South Carolina, North Carolina)

The Augusta region has been suffering from a worsening two year drought. Augusta’s rainfall deficit is already approaching 2 inches so far in 2009, with January being the driest since 1989.

Florida

Florida has been hard hit by winter drought, damaging crops, and half of state is in some level of a drought.

La Niña likely to make matters worse

Enough water a couple of degrees cooler than normal has accumulated in the eastern part of the Pacific to create a La Niña, a weather pattern expected to linger until at least the spring. La Niña generally means dry weather for Southern states, which is exactly what the US doesn’t need right now.

South America

Argentina

The worst drought in half a century has turned Argentina's once-fertile soil to dust and pushed the country into a state of emergency. Cow carcasses litter the prairie fields, and sun-scorched soy plants wither under the South American summer sun. Argentina's food production is set to go down a minimum of 50 percent, maybe more. The country's wheat yield for 2009 will be 8.7 million metric tons, down from 16.3 million in 2008. Concern with domestic shortages (domestic wheat consumption being approximately 6.7 million metric ton), Argentina has granted no new export applications since mid January

.Brazil

Brazil has cut its outlook for the crops and will do so again after assessing damage to plants from desiccation in drought-stricken regions. Brazil is the world's second-biggest exporter of soybeans and third-largest for corn.
Brazil's numbers for corn harvesting:

Harvested in 2008: 58.7 million tons
January 8 forecast: 52.3 million tons
February 6 forecast: 50.3 metric tons (optimistic)
Harvested in 2009: ???

Paraguay

Severe drought affecting Paraguay's economy has pushed the government to declare agricultural emergency. Crops that have direct impact on cattle food are ruined, and the soy plantations have been almost totally lost in some areas.

UruguayUruguay declared an "agriculture emergency" last month, due to the worst drought in decades which is threatening crops, livestock and the provision of fresh produce.The a worsening drought is pushing up food and beverage costs causing Uruguay's consumer prices to rise at the fastest annual pace in more than four years in January.

BoliviaThere hasn’t been a drop of rain in Bolivia in nearly a year. Cattle dying, crops ruined, etc…ChileThe severe drought affecting Chile has caused an agricultural emergency in 50 rural districts, and large sectors of the economy are concerned about possible electricity rationing in March. The countries woes stem from the "La Niña" climate phenomenon which has over half of Chile dangling by a thread: persistently cold water in the Pacific ocean along with high atmospheric pressure are preventing rain-bearing fronts from entering central and southern areas of the country. As a result, the water levels at hydroelectric dams and other reservoirs are at all-time lows.

Horn of Africa

Africa faces food shortages and famine. Food production across the Horn of Africa has suffered because of the lack of rainfall. Also, half the agricultural soil has lost nutrients necessary to grow plant, and the declining soil fertility across Africa is exacerbating drought related crop losses.

KenyaKenya is the worst hit nation in the region, having been without rainfall for 18 months. Kenya needs to import food to bridge a shortfall and keep 10 million of its people from starvation. Kenya’s drought suffering neighbors will be of little help.

TanzaniaA poor harvest due to drought has prompted Tanzania to stop issuing food export permits. Tanzania has also intensified security at the border posts to monitor and prevent the export of food. There are 240,000 people in need of immediate relief food in Tanzania.BurundiCrops in the north of Burundi have withered, leaving the tiny East African country facing a severe food shortage

Uganda

Severe drought in northeastern Uganda's Karamoja region has the left the country on the brink of a humanitarian catastrophe. The dry conditions and acute food shortages, which have left Karamoja near starvation, are unlikely to improve before October when the next harvest is due.

South Africa

South Africa faces a potential crop shortage after wheat farmers in the eastern part of the Free State grain belt said they were likely to produce their lowest crop in 30 years this year. South Africans are "extremely angry" that food prices continue to rise.Other African nations suffering from drought in 2009 are: Malawi, Zambia, Swaziland, Somalia, Zimbabwe, Mozambique, Tunisia, Angola, and Ethiopia.

Middle East and Central Asia

The Middle East and Central Asia are suffering from the worst droughts in recent history, and food grain production has dropped to some of the lowest levels in decades. Total wheat production in the wider drought-affected region is currently estimated to have declined by at least 22 percent in 2009. Owing to the drought's severity and region-wide scope, irrigation supplies from reservoirs, rivers, and groundwater have been critically reduced. Major reservoirs in Turkey, Iran, Iraq, and Syria are all at low levels requiring restrictions on usage. Given the severity of crop losses in the region, a major shortage of planting seed for the 2010 crop is expected.

IraqIn Iraq during the winter grain growing period, there was essentially no measurable rainfall in many regions, and large swaths of rain-fed fields across northern Iraq simply went unplanted. These primarily rain-fed regions in northern Iraq are described as an agricultural disaster area this year, with wheat production falling 80-98 percent from normal levels. The USDA estimates total wheat production in Iraq in 2009 at 1.3 million tons, down 45 percent from last year.

SyriaSyria is experienced its worst drought in the past 18 years, and the USDA estimates total wheat production in Syria in 2009 at 2.0 million tons, down 50 percent from last year. Last summer, the taps ran dry in many neighborhoods of Damascus and residents of the capital city were forced to buy water on the black market. The severe lack of rain this winter has exacerbated the problem.

AfghanistanLack of rainfall has led Afghanistan to the worst drought conditions in the past 10 years. The USDA estimates 2008/09 wheat production in Afghanistan at 1.5 million tons, down 2.3 million or 60 percent from last year. Afghanistan normally produces 3.5-4.0 million tons of wheat annually.

JordanJordan's persistent drought has grown worse, with almost no rain falling on the kingdom this year. The Jordanian government has stopped pumping water to farms to preserve the water for drinking purposes.

Other Middle Eastern and Central Asian nations suffering from drought in 2009 are: The Palestinian Territories, Lebanon, Israel, Bangladesh, Myanmar, India, Tajikistan, Turkmenistan, Thailand, Nepal, Pakistan, Turkey, Kyrgyzstan, Uzbekistan, Cyprus, and Iran.

Lack of credit will worsen food shortage

A lack of credit for farmers curbed their ability to buy seeds and fertilizers in 2008/2009 and will limit production around the world. The effects of droughts worldwide will also be amplified by the smaller amount of seeds and fertilizers used to grow crops.

Low commodity prices will worsen food shortage

The low prices at the end of 2008 discouraged the planting of new crops in 2009. In Kansas for example, farmers seeded nine million acres, the smallest planting for half a century. Wheat plantings this year are down about 4 million acres across the US and about 1.1 million acres in Canada. So even discounting drought related losses, the US, Canada, and other food producing nations are facing lower agricultural output in 2009.

Europe will not make up for the food shortfall

Europe, the only big agricultural region relatively unaffected by drought, is set for a big drop in food production. Due to the combination of a late plantings, poorer soil conditions, reduced inputs, and light rainfall, Europe’s agricultural output is likely to fall by 10 to 15 percent.

Stocks of foodstuff are dangerously low

Low stocks of foodstuff make the world’s falling agriculture output particularly worrisome. The combined averaged of the ending stock levels of the major trading countries of Australia, Canada, United States, and the European Union have been declining steadily in the last few years:

2002-2005: 47.4 million tons
2007: 37.6 million tons
2008: 27.4 million tons

These inventory numbers are dangerously low, especially considering the horrifying possibility that China’s 60 million tons of grain reserves doesn't actually exists.

Global food Catastrophe

The world is heading for a drop in agricultural production of 20 to 40 percent, depending on the severity and length of the current global droughts. Food producing nations are imposing food export restrictions. Food prices will soar, and, in poor countries with food deficits, millions will starve.

The deflation debate should end now

The droughts plaguing the world’s biggest agricultural regions should end the debate about deflation in 2009. The demand for agricultural commodities is relatively immune to developments in the business cycles (at least compared to that of energy or base metals), and, with a 20 to 40 percent decline in world production, already rising food prices are headed significantly higher.

In fact, agricultural commodities NEED to head higher and soon, to prevent even greater food shortages and famine. The price of wheat, corn, soybeans, etc must rise to a level which encourages the planting of every available acre with the best possible fertilizers. Otherwise, if food prices stay at their current levels, production will continue to fall, sentencing millions more to starvation.

Competitive currency appreciation

Some observers are anticipating “competitive currency devaluations” in addition to deflation for 2009 (nations devalue their currencies to help their export sector). The coming global food shortage makes this highly unlikely. Depreciating their currency in the current environment will produce the unwanted consequence of boosting exports—of food. Even with export restrictions like those in China, currency depreciation would cause the outflow of significant quantities of grain via the black market.

Instead of “competitive currency devaluations”, spiking food prices will likely cause competitive currency appreciation in 2009. Foreign exchange reserves exist for just this type of emergency. Central banks around the world will lower domestic food prices by either directly selling off their reserves to appreciate their currencies or by using them to purchase grain on the world market.

Appreciating a currency is the fastest way to control food inflation. A more valuable currency allows a nation to monopolize more global resources (ie: the overvalued dollar allows the US to consume 25% of the world's oil despite having only 4% of the world's population). If China were to selloff its US reserves, its enormous population would start sucking up the world's food supply like the US has been doing with oil.

On the flip side, when a nation appreciates its currency and starts consuming more of the world’s resources, it leaves less for everyone else. So when china appreciates the yuan, food shortages worldwide will increase and prices everywhere else will jump upwards. As there is nothing that breeds social unrest like soaring food prices, nations around the world, from Russia, to the EU, to Saudi Arabia, to India, will sell off their foreign reserves to appreciate their currencies and reduce the cost of food imports. In response to this, China will sell even more of its reserves and so on. That is competitive currency appreciation.When faced with competitive currency appreciation, you do NOT want to be the world’s reserve currency. The dollar is likely to do very poorly as central banks liquidate trillions in US holdings to buy food and appreciate their currencies.

Breakup GM

While I write this Gm and ford and Chrysler are struggling to find a way to get a quickie loan to carry them over their cash flow crisis from your favorite lender of last resort, the taxpayer. Right now, the momentum is to send them to the wall to learn the joys of chapter 11.

The current proposal floating around calls for giving the GM bondholders a huge haircut and trimming the labour contracts. Of course the shareholders will be asked to walk the plank. What happened to that old adage ‘Where GM goes, America goes’. Hmmm.

GM has begun discussions with chapter 11 lawyers and are reviewing their options. Is anyone getting happier?

GM exists for one reason and one reason only and that was to have efficient access to fresh capital as needed. That was how they became the huge multi model company that they are.

I will give you a clue. That game is now over. The shylock business has just been forcibly downsized. It is now not a good idea to be just big because the shylocks are bailing like crazy to just keep themselves afloat and betting the bank on a one stop borrower does not seem such a good bet these days.

There are at least six to seven healthy future high multiple car companies wrapped up in GM. Spin them out one at a time with a fresh financing package and everyone will walk away whole. It can be done and it will be an excellent way to reposition the auto industry in North America.

The foreign competitors have already shown us that the public can handle product coming from many manufacturers. So add several more. GE is set up to do this in a heart beat. Surely GM is up to it.

Financial gigantism has been shown to be the road to financial ruin for the same old reason. If you are big enough, it is possible to game the financial system for way too long until it wrecks the global financial system.

What the Auto industry and every stakeholder in the American economy needs today is a firm kick in the pants.

So why not invite the Chinese government to invest some of their vast horde of US funds in the industry while we are at it? The humiliation should focus a lot of minds.

Economic Winds

The one certain economic truth that we have once again been absorbing is that the price of oil matters everywhere. I do not know what percentage of economic activity it represents today, but last time during the late seventies it was around 12% of the economy. It declined as efficiencies rose but it certainly is still in the double digit zone or just under.

That means, children, that doubling the price as we saw in the past year or so is oil’s attempt to claw a much larger share of the economy. Avoiding this, the rest of the economy restructures the pricing of other elements. Thus food prices climb sharply and the US dollar sinks. This last year has seen a rolling price readjustment throughout the entire global economy unlike anything since the late seventies.

So far the damage has been controlled because the price move has been only three to four fold of the previous base and has moved slowly. Also the real estate and credit collapse has tempered all lending which would only worsen the situation. This time lending activity is no longer fueling a rising market which suggests that any inflationary adjustment will remain appropriate.

Although it still feels ugly, we may just slide by with a soft landing for the global economy. If that in fact occurs, then we will have been blessed.

What bothers me most is that there exists any number of scenarios whose outcome would be catastrophic and no sense that these minefields are been navigated with anything approaching good sense. How is that retail bank deposit type money is been solicited by brokers who never had the secure capital base to profitably handle the business. We always knew better, yet greed has persuaded another crop of greenhorns to gamble with the global financial system.

Eventually some generation will truly lose it and the financial destruction could be fatal. I abhor this recurrent recklessness and the ongoing inability of the institutions to counter it.

I have lived to see far too many hard won rule books converted into a manual for grabbing cash when the money flowed. I most recall a new stock salesman preparing for the broker exam, reading the admonishment over guaranteeing price, time and profit, turning around and enthusiastically using the admonishment almost word for word to sell stock to the public. It is really easy to imagine a young MBA in an investment bank jumping on past abuses and repackaging them.

Right now enough fear has been introduced into the global economy to generate a true slowdown. The price shifts are doing their own magic and a full year of this should fill every warehouse. In a way the horses are once again responding to the reins. Since it will take years for the banking industry to get over this last drunken binge, they will be back to been conservative.

Five years without ten percent growth would allow massive consolidation and proper redistribution of resources and wealth. Perhaps China can democratize from the bottom up and perhaps India can start paying their civil service so that bribery can be suppressed. It is this that will matter for the next wave of global growth.

I have also seen many unlikely scenarios work out over the past forty years and know, that so long as we continue to avoid war, Korea will reunite and rapidly become richer and Tibet will establish home rule with honored seats in the parliament of China. I know that the seventh century will also be silenced in the Middle East, again unleashing another people’s resourcefulness.

Again the ashes of yet another price upheaval are blowing in the wind and we will prevail.