Monday, March 28, 2011

Tax Breaks Adding To Deficits & Debt

Given its $1.5 trillion budget deficit, it's easy to argue that the federal government has a spending problem. But it's also true that the government has a revenue problem as well.

Due to high unemployment and lower incomes and wages, tax revenues have fallen to 15% of GDP, down from the historical average of !8% of GDP. As a share of GDP, income tax revenues are at their lowest level since 1951, when Harry S. Truman was president.

Federal tax revenues were much smaller in 2010 than in 2000, reports Pulitzer Prize winning writer David Cay Johnston. Total individual income tax receipts fell 30 percent in real terms. Since the population kept growing, income taxes per capita plummeted.

As Mr. Johnston notes, the historical data proves that, "Tax rate cuts did not pay for themselves, did not spur economic growth, did not increase jobs, and did not make America better off."

It was the combination of excess spending and irresponsible, unsupportable tax cuts that led to our growing deficits and potentially crippling debt.

Laura Tyson, an economist at the University of California, Berkeley, says a hodgepodge of tax loopholes — or "tax expenditures," as they're known — cost the Treasury more than a trillion dollars a year.

Even when the budgetary committees of the Congress are unwilling to increase spending, they are often willing to create a new tax credit. Congress is more inclined to approve a dollar of tax breaks than a dollar of direct federal spending, even though the effect on government coffers is the same.

For example, in December, Congress passed more than $800 billion worth of tax cuts in an effort to stimulate the economy. But spending that kind of money to achieve the same goal would have been virtually impossible.

Tax breaks can have unintended consequences, such as encouraging mal-investment or over-investment in a particular sector, such as housing for instance.

With our government so deeply in debt, it would be wise to end the multitude of tax breaks now.

In fact, the president's deficit commission recommended doing away with most tax breaks and creating a simpler system with lower rates.

The current system creates winners and losers. A simpler code, absent all the tax breaks and tax preferences for certain groups, would give taxpayers more confidence that everyone is paying a fair share.

The federal budget crisis is poised to worsen. Even if the government miraculously balanced its books and wiped out the deficit, it would still need trillions in additional revenues to begin shrinking the debt. It is time for the government to move to a multi-tiered tax system that eliminates all write-offs, credits and deductions.

According to the Congressional Joint Committee on Taxation, from 2010 to 2014, the cost of health care credits, mortgage interest and property tax write offs, plus deductions for retirement savings will be at least $2.5 trillion.

This essentially amounts to spending built directly into the tax code. However, the government can no longer afford the sum total of all the subsidies it has granted over the years.

The corporate tax system, in particular, is awash with abuses.

Although the top corporate tax rate in the United States is 35%, one of the highest in the world, companies have been increasingly using a complicated array of shelters, tax credits and subsidies to pay far less. Many big corporations actually pay very little, if anything at all.

For example, for the second consecutive year, Bank of America paid no federal taxes and actually reported a tax “benefit” of nearly $1 billion. And due to billions in accumulated losses, the mega bank will likely benefit from a reduced tax bill in future years as well.

Bank of America claims to have suffered a pre-tax loss of $5.4 billion in the U.S. in 2010. But an army of accountants and tax lawyers likely orchestrated that with a combination of smoke, mirrors and sleight of hand accounting.

Like other companies, Bank of America avoids paying taxes on profits they make in overseas operations by reinvesting these proceeds overseas, instead of bringing them back home. In essence, the tax code rewards behavior that is detrimental to the US.

Despite reporting US profits of $5.1 billion in 2010, and global profits of $14.2 billion, General Electric — the nation’s largest corporation — will pay no taxes for 2010. In fact, GE claimed a tax benefit of $3.2 billion.

How's that for self-enrichment?

Regulatory filings show that in the last five years, GE has accumulated $26 billion in American profits, and received a net tax benefit from the IRS of $4.1 billion.

It's not uncommon. The corporate share of the federal tax base has been shrinking for years.

The corporate share of federal tax receipts has dropped from 50% during World War II, to 30% in the 1950s, to 21% in 2001, to just 6.6% today. This amounts to nothing less than corporate welfare.

In 2004, Forbes magazine reported that one-third of America's largest and most profitable corporations paid zero taxes — or actually received credits — in at least one of the previous three years.

And, according to the Government Accountability office (the investigative arm of Congress), two out of three US corporations paid no taxes from 1998 through 2005. The study covered 1.3 million corporations of all sizes, with a collective $2.5 trillion in sales. It also included foreign corporations that do business in the US.

Corporations fiercely lobby for tax breaks and use every trick in the book to avoid paying taxes. GE’s giant tax department, for instance, includes former officials from the Treasury, the IRS and virtually all the tax-writing committees in Congress.

The present corporate tax system is wildly unfair, with some companies paying nothing, some paying 8% and others paying 35%.

To get a sense of just how inequitable the corporate tax system is, consider the tax rate paid by two of America's biggest companies: Wal-Mart paid 34 cents in taxes for every dollar of profit it made in the past three years. Meanwhile, General Electric paid just 3.6 cents on the dollar.

The tax code plays favorites, incentivizing and rewarding certain behaviors. It encourages mal-investment and the misallocation of money. In the end, tax breaks can make bad decisions seem like good ones.

For many companies, working the tax code is the key to higher profits. But American corporations are already doing quite well.

Of the 100 largest economies in the world, 53 are corporations; of those, 47 are U.S.-based.

No matter the rate, corporations will always complain about paying taxes, just as many individuals do. But while the statutory tax rate is 35%, the effective tax rate — the actual tax rate that companies pay after all the adjustments they make — is around 25% or so, says Roberton Williams of the Tax Policy Center in Washington.

If the government doesn't cut spending, simply the tax code, flatten rates and eliminate all deductions, credits and write offs, it will soon end up insolvent.

That will not be a good environment for any corporation or individual to do business.

Wednesday, March 23, 2011

While Farming Declines In US, Food Prices Soar

This was once an agrarian nation, but there is now a less than 1 percent chance that you are a farmer.

In Thomas Jefferson's day, 9 out of 10 Americans cultivated the earth.

When Abraham Lincoln created the U.S. Department of Agriculture, half the country still farmed.

Under F.D.R., 1 in 5 Americans was still a farmer.

But now it's just 1 in 150, and closer to 1 in 500 for full-timers.

Farming is a dying profession. Only 6 percent of farmers are younger than 35, while 26 percent are over 65.

This is a dangerous development. Most Americans have lost touch with something that was traditionally considered fundamental and rudimentary from the dawn of humanity. And it all happened rather quickly, in the span of just a couple of generations.

Most of us think we can just roll on down to the store and pick up whatever necessities we may need. But what happens when there are supply disruptions and the store shelves run bare, as is happening in Japan at present?

Perhaps a more immediate concern is inflation. Between March 2007 and March 2008, global food prices increased an average of 43 percent, according to the International Monetary Fund.

And due to continually rising grain and fuel prices, global food prices are still increasing.

Last fall, the U.S. Agriculture Department forecast that food inflation — which was already rising at the time — would continue to “accelerate” through the first six months of this year. The USDA projected that food prices will rise 2% to 3% this year.

However, that may have been optimistic; wholesale food prices rose 3.9% last month, the most in 36 years.

At the same time, global prices for corn, wheat, soybeans, coffee and other commodities have risen sharply in the past year. That, in turn, has raised the price of animal feed, which has pushed up the cost of eggs, ground beef and milk.

More expensive food means that people have less money for discretionary spending, which is critical to grow the economy and create jobs. And it adds to growing concerns about wider inflation down the road.

Many economists expect food prices to keep rising through the end of the year. Consumer food prices will be about 5 percent higher this fall than at the same time last year, according to RBC Capital Markets.

In January, the UN’s Food and Agricultural Organization (FAO) warned of a possible “food price shock” if prices continued to rise.

According to the FAO, a basket tracking the wholesale cost of food commodities such as wheat, corn, rice, vegetable oils, and meats, has already topped the peak values of 2008, reaching 214.5 points (compared to 213.5 in June 2008).

As it stands, food prices are already at their the highest level since the U.N. began keeping track in 1990.

There are a number of forces driving the spike in global food prices. Floods in Australia, drought in Russia, and excessively hot weather in Latin America hurt harvests and are putting upward pressure on prices. Russia and Argentina have even halted grain exports.

Now, the worst drought in sixty years is threatening the wheat crop in China, the world's largest wheat producer. Viewing food crops as part of its national security, China has historically been neither a wheat importer or exporter. With 1.3 billion mouths to feed, the Chinese government protects its vital food assets and has avoided a reliance on other nations.

However, China may now need to import wheat, which will drive global prices even higher.

The implications for the US may not be as dire as in the developing world, where higher food prices have pushed more than 44 million people into extreme poverty since 2010.

However, rising food prices do negatively affect millions of Americans presently living on the edge. As it stands, 1 in 7 of our fellow citizens are now receiving food stamps.

Americans would be well-advised to take some measure of control over their own food security, and start growing food at home, in the backyard, or on rooftop gardens in cities. The once common vegetable garden is largely a thing of the past; it's time to bring it back en masse.

The average food in the US travels 1,500 miles to get to your plate. Due to rising fuel costs, that is not sustainable. Food production needs to become more localized. For both health and economic reasons, the local food movement must, and will, grow.

The global demand for food is growing along with the global population, which is expected to increase from the current seven billion to nine billion by 2050. World food production must increase by 70% between now and then to feed them all.

This will pit supply against demand, and it appears that supply will lose that battle.

As Jason Clay of the World Wildlife Fund recently put it, to feed all those mouths, "we will need to produce as much food in the next 40 years as we have in the last 8,000."

That should make your head spin.

Personal sustainability will be a buzz word of this century. Taking control of our own food security by learning to cultivate the earth again, as our ancestors once did, is vital.

Friday, March 18, 2011

Bleak Data Shows U.S. Housing Far From Recovery

After a sharp January rise, construction of new US housing units plunged 22.5% in February, coming close to an all-time-low level set in March 1984.

While the January increase seemed like good news, it was due to an 87.4% surge in apartment starts — not single-family homes.

However, multi-family units subsequently dropped 46.1% in February.

Housing starts fell across all four regions of the country, with single-family housing starts hitting a record low in the Midwest.

The decline in housing starts is likely the start of a longer trend. Requests for permits to start new projects fell to a five-decade low.

Single-family homes — which make up roughly 80 percent of home construction — are the bellwether of the housing market and permit requests for single-family homes saw the biggest decline.

There are obvious reasons for these developments.

Due to the excess supply of existing homes, there's no need for new housing. Buyers are looking for cheaper foreclosures and short sales.

Slumping home prices have resulted in one of the best buyer's markets in memory, making this the wrong environment for builders to begin constructing new homes.

Even the good news comes with a caveat.

Data from the National Association of Realtors reveals that sales of previously owned homes climbed unexpectedly in January, to the highest level in eight months.

However, that increase was led by investors taking advantage of lower prices in distressed properties. Those investors are snatching up multiple properties, hoping to flip them for a profit. It's a decision they may come to regret.

Home sales remain slow and prices continue to fall. So it's little wonder that starts are down. The combination of all three factors points to just how far the market is from any sort of meaningful recovery.

Unemployment remains stubbornly high and housing inventories are excessively high. There were one million foreclosures in the US last year and an additional million are anticipated this year, which will push home prices down even further.

For all these reasons, potential buyers remain on the sidelines, cautiously watching and waiting.

A housing recovery will take many years and most people seem to recognize this. Consequently, the national sentiment is quite bad.

Case in point; the National Association of Home Builders said its index of industry sentiment for March improved slightly to 17.

While even a small improvement should be viewed as good news, any reading below 50 indicates negative sentiment about the housing market's future, and the index hasn't been above that level since April 2006.

Millions of construction jobs were among those lost in the recession. Yet, the latest housing data will likely result in even further layoffs.

That's a problem because housing cannot fully recover until the employment picture improves.

Further, housing cannot recover until prices stop falling and we have true price discovery in the market. That cannot happen until all of the so-called 'shadow inventory' enters the market and is liquidated.

The shadow inventory includes foreclosed properties that have yet to reach the market (some of which are being held back by banks futilely waiting for a recovery) and properties that will soon enter the foreclosure process.

The Census Bureau reports that 18.8 million homes are currently vacant. This indicates that banks may be holding onto a massive number of properties without listing them.

A recent report by Standard & Poor's says there were 1.7 million homes either owned by the bank or in some stage of foreclosure at the end of the third quarter of 2010. It would take 44 months, at the current rate of sales, to sell them off — a 25% increase from the beginning of 2010.

However, the foreclosure problem could get even worse. Morgan Stanley says that 8 million foreclosure-bound homes have yet to hit the market.

That's because banks are taking far longer to foreclose on homes than in the past. Last year there were nearly 2.9 million homes that received some kind of foreclosure notice, causing banks to struggle to keep up with the sheer volume.

Additionally, court delays and political pressure have constricted the flow of foreclosures onto the market to a trickle.

Simply put, there are millions more foreclosures to come, which will swamp the already depressed housing market.

According to Zillow, a Seattle-based real estate reporting company, 27% of US homeowners are now ‘underwater’ in their home, owing more than the home is worth.

Laurie Goodman, senior managing director at Amherst Securities, reports that 1 in 5 distressed homeowners in the US faces, or may face, foreclosure. She says 11.5 million home loans are non-performing or highly distressed at present.

And, in February, reported that some 15.7 million homeowners had negative equity. These people aren't just underwater; they have no skin in the game. That makes them quite likely, if not certain, to default.

There is no end in sight. The housing sector will remain depressed for years to come. We are in a long term buyer's market, which is great for younger, first-time buyers.

The downside is that many people will remain trapped in their homes, unable to sell due to negative equity. Many will default, while others will continue paying the mortgage on a home that may never be worth what they paid for it.

Wednesday, March 16, 2011

Budget Cutting A Highly Politicized Process

The U.S. Congress is now confronting a $14 trillion national debt that just keeps growing. Congress is charged with, at a minimum, ceasing its deficit spending.

However, even if Congress manages to balance its budget and stops adding to the debt, such fiscal discipline will do nothing to to decrease the debt itself.

There's an old adage that goes like this: The best way to get out of a hole is to first stop digging.

Yet, that only keeps you from going deeper into the hole. It does not extricate you from that hole.

That's the problem the U.S. is now facing. Even if Congress stops its profligate deficit spending, its fiscal problems are already baked into the cake. There is no plan, and likely no possibility, of reducing the debt. But even worse, there seems to be no near-term plan to stop adding to it.

Due to the weak economy, tax revenues have dropped considerably. There are fewer people working and paying taxes, while more are collecting unemployment and food stamps. Meanwhile, the extension of the Bush tax cuts will only depress the revenue side of the ledger even further.

Our government doesn't just have a spending problem; it also has a revenue problem.

The extension of tax cuts and unemployment benefits, plus the 2 percent payroll (Social Security) tax cut this year, have added almost $400 billion to this year's deficit, according to the CBO.

In a bid to reign in the federal government's massive $1.5 trillion deficit, Republicans in Congress are promising a slew of tax cuts, including ending President Obama's high-speed rail program, gutting the Environmental Protection Agency (EPA), and even cutting $74 million from the FBI's budget.

But that's not all.

There are also planned cuts to rather small budget items, such as food assistance for poor mothers and their children; the Head Start pre-school program; the National Institutes of Health; teacher funding; and financial aid for college students.

However, eliminating these and other popular targets — like the National Endowment for the Arts ($161.3 million), the EPA ($10.3 billion), NASA ($18.4 billion), and even foreign aid ($36.7 billion) — is just tinkering at the margins and won't make any meaningful difference in our long term fiscal position.

Given that the federal budget is $3.7 trillion, one percent of that equals $37 billion. What this means is that each of these budget expenditures amounts to less than one percent of the budget. In relative terms, it's just chicken scratch.

For blatantly political reasons, Republicans have left some very expensive sacred cows untouched, such as more than $5 billion spent every year on ethanol subsidies that neither help the environment nor save energy; $3.5 billion for an extra engine for the F-35 fighter jet that the Pentagon doesn't want; and $6.2 billion in tax credits for oil and gas companies flush in record profits.

In fact, earlier this month, 236 House Republicans and 13 Democrats voted down a motion to end taxpayer-funded subsidies for Big Oil. Ending those subsidies would have saved tens of billions of dollars over the next decade.

So much for fiscal responsibility.

As The Guardian reports, the three big US oil companies (ExxonMobil, Chevron and ConocoPhillips) together made nearly $60 billion after costs and taxes — a doubling of profits in 2010 compared with the previous year.

According to the CALPIRG, the government gives $19 billion in subsidies to the oil and gas industry.

How can anyone reasonably argue that these giant oil companies need taxpayer subsidies?

The truth is, all of the above programs have so far escaped cutbacks for political reasons.

Part of the F-35 engine is made in the district of House Majority Leader Eric Cantor (R-Va.) and another part in House Speaker John Boehner's district.

Despite this, Boehner promises, "You are going to see more spending cuts come out of this Congress than any Congress in the history of this country."

However, members of Congress don't typically vote against military spending for fear of being labelled soft on defense, or not supporting the troops, or not taking terrorism seriously.

For these reasons, defense spending has doubled over the last ten years, according to Ashton Carter, the Defense Department's undersecretary for acquisitions.

This must be reversed. Significant cuts must be made to the military, domestic security and intelligence budgets. In addition, war funding and nuclear weapons programs must also be curbed.

These items account for 66% of discretionary spending, according to the National Priorities Project. Major cuts cannot be avoided. To do so would be recklessly irresponsible and will prove ruinous to this nation.

The US spends more on its military budget than all of the other nations on earth combined. Clearly, there is plenty of fat to be cut.

For example, the Pentagon wastes $185 billion ordering obsolete military equipment, and $34 billion in Homeland Security contracts have been plagued with waste, abuse and mismanagement going back to 2001, according to CALPIRG.

The last farm bill passed by Congress cost $286 billion. It was filled with an array of loans, price supports, subsidized insurance, disaster aid and money-for-nothing handouts. According to TIME, the top 10% of subsidized farmers collect nearly three-quarters of the subsidies, for an average of almost $35,000 per year. The bottom 80% average just $700.

And, since the vast majority of the cash goes to five row crops—corn, soybeans, wheat, cotton and rice—more than 60% of our farmers receive no subsidies.

The program is a mess, filled with graft, cronyism and corruption. The Government Accountability Office report identified $1.1 billion of subsidies whose recipients were no longer breathing.

Yes, the farm lobby is powerful indeed.

The key is giving gutless politicians enough political cover to vote against the lobbyists and special interests that fund them. That cover may have already been granted.

Last fall, two disparate organizations, the National Taxpayer Union (NTU) and the U.S. Public Interest Research Group (PIRG), joined together to propose $600 billion in federal budget cuts over the next 5 years.

Though not typically aligned, the groups highlighted 31 specific examples of wasteful government spending they say can be eliminated.

In the report, Toward Common Ground: Bridging the Political Divide to Reduce Spending, the 31 examples fall into the categories of ending wasteful subsidies, improving contract and asset acquisition, improving program execution and government operations, ending wasteful or outdated military programs and systems, and aligning military spending with current needs.

Andrew Moylan, director of Government Affairs at the NTU, who co-wrote the report, says the contracting process should be reformed "so that we don’t order as many as 50 percent too many spare parts for defense purposes.”

The National Taxpayer’s Union’s goal from its outset has been “helping to protect every single American's right to keep what they've earned,” according to the group’s Web site.

U.S. PIRG, for its part, states that “tax and budgeting decisions are the most concrete way that government declares its public priorities and balances between competing values.”

Some of the cuts suggested in the report include:

• Eliminate the Overseas Private Investment Corporation, which subsidizes investment abroad. Savings by 2015: $154 million.

• Eliminate subsidies to big agribusiness. Savings by 2015: $35.4 billion.

• Eliminate refundable tax credits for ethanol. Savings by 2015: $22.6 billion.

• Eliminate ultradeepwater natural gas and petroleum research program. Savings by 2015: $158 million.

• Eliminate Department of Homeland Security contracts already identified as wasteful. Savings by 2015: $34.3 billion.

• End orders for obsolete spare parts and supplies for the Defense Logistics Agency, Army, Navy, and Air Force. Savings by 2015: $35.5 billion.

• Remove the ceiling on the collection of overpayments from the Supplemental Security Income program. Savings by 2015: $580 million.

• Better align Medicare payments to teaching hospitals with actual costs. Savings by 2015: $20.5 billion.

• Recalibrate Medicare reimbursement rates in high-cost regions. Savings by 2015: $11.7 billion.

• Return unallocated funds from the Troubled Asset Relief Program (TARP). Savings by 2015: $15 billion.

• Cancel F-35 Joint Strike Fighter and replace with more advanced, cheap and reliable alternatives. Savings by 2015: $22.5 billion.

• End spending for high risk satellites and replace them with lower-cost alternatives. Savings by 2015: $5 billion.

• Align nuclear arsenal with current needs and threats. Savings by 2015: $56.7 billion.

• Cancel the outdated, unreliable and unneeded Expeditionary Fighting Vehicle. Savings by 2015: $16.3 billion.

The bottom line is that cutting small programs for ideological reasons really won't affect the bottom line.

Yanking money from the most needy and vulnerable individuals in our society should only come as a last resort, after all the huge industries — protected by high-paid super lobbyists — have all their taxpayer-funded subsidies / corporate welfare ended once and for all.

Friday, March 11, 2011

Rising Poverty Affecting American Children & Families

The Census Bureau reports that 44 million Americans were living below the poverty line in 2009, or one in seven people — a rather remarkable statistic.

The one-in-seven figure perfectly matches the one-in-seven Americans currently receiving food stamps.

In other words, those 44 million Americans living in poverty accounted for 14.3 percent of the population — the highest level since 1994 — up from 13.2 percent in 2008.

According to the Census report, three million additional American families were only kept above the poverty line by unemployment insurance.

The government's U-6 unemployment number reveals that 15.9 percent of workers were unemployed or under-employed in February. The U-6 figure includes part-time workers seeking full-time work, as well as those who have gotten discouraged and stopped looking, but still want to work.

However, according to the work of economist John Williams at Shadow Government Statistics ("Analysis behind and beyond government economic reporting"), the real U-6 number is actually 22.1 percent. But that figure is too dire, so the government chooses to under-report it.

The unemployment crisis has taken a brutal toll on millions of American families. Nearly 14 million people have lost their jobs, which has led to an increase in homeless families.

There were a million foreclosures in the US last year and another million are expected this year. As a result, millions of children are being affected.

On Sunday night, 60 MInutes profiled the growing problem of homelessness among American children. The report was rather stunning.

The government considers a family of four to be impoverished if they take in less than $22,000 a year. Based on that standard, and government projections of unemployment, it is estimated that the poverty rate for kids in this country will soon hit 25 percent. Those children would be the largest American generation to be raised in hard times since the Great Depression.

Nationwide, 14 million children were in poverty before the Great Recession. Now, the US Census tells us its 16 million — up two million in two years. That is the fastest fall for the middle class since the government started counting 51 years ago.

When you consider just how loose the government's definition of poverty is ($22K for a family if four?), it's not difficult to imagine that millions more Americans are actually living in poverty, but not counted. The government tries to cover up the problem so the ugly truth isn't so obvious.

But you can't gloss over the fact that about half of all Americans are being left behind, as you'll see in a moment.

Though the nation's rampant unemployment is a significant part of the problem, even those who still have their jobs are regressing.

At just $49,777, the median family income was 5 percent lower in 2009 than it was in 1999. You could call it the 'lost decade'. What this means is that the median income is now less than a thousand bucks per week.

For a family trying to pay for housing, medical insurance, food and utilities in a large metropolitan area, that sum doesn't go far. Last year, the average health insurance cost for a family of four was $13,375, according to the Kaiser Family Foundation and the Health Research & Educational Trust.

Consequently, millions of Americans can no longer meet their most basic needs. According to Medicare/Medicaid Services annual report, 1 in 7 Americans did not have health coverage in 2009. However, a report by the Kaiser Family Foundation says that three-quarters of the 50 million uninsured in US are actually employed.

It's part of an ongoing pattern that is now four decades in the making.

According to Lawrence R. Mishel and David M. Frankel (The State of Working America), in 1973 the median male weekly wage was $486. Corrected for inflation, that is $2,361 in 2009 dollars, or $122,795 annually.

However, in its report entitled "Usual Weekly Earnings of Wage and Salary Workers: Second Quarter 2009", the Bureau of Labor Statistics reported that the median male weekly wage is now $815, or $42,380 annually.

So, there's been a nearly two-thirds reduction in male wages since 1973. Cheap and easy credit had previously concealed the ramifications of this collapse in real wages. That reality can no longer be hidden.

The sad fact is that a substantial portion of Americans are quite poor, while millions more are only part of the middle class by the slimmest of margins.

According to an analysis of wage data by Pulitzer Prize Winner David Cay Johnston, 33% of US workers make less than $15,000 annually. Roughly half of American workers make less than $500 per week, which is less than $26,000 annually. And 76% make less than $50,000 annually.

This supports the contention that the middle class is vanishing.

Before reading on, stop and consider those numbers for a moment.

Half of Americans make less than $26,000 per year. Remember, our government's definition of poverty for a family of four is $22,000. Naturally, in most of those families, both parents are likely working. But it's easy to imagine that roughly half of our fellow citizens are struggling to meet their most basic needs every single day.

This does not support the notions of equality or equal opportunity generally associated with the US. Perhaps we imagine this sort of inequality taking place in other nations, but not here.

However, the 30-nation Organization for Economic Cooperation and Development (OECD) released a report on income distribution and poverty in October 2008. The report highlighted global gaps between rich and poor. Guess what great industrialized nation had the fourth highest inequality in incomes, followed by Mexico, Turkey and Portugal?

Disturbingly, it was the US.

The report stated, "Rich households in America have been leaving both middle and poorer income groups behind. This has happened in many countries, but nowhere has this trend been so stark as in the United States."

So the wealth has not been getting spread around, as some contend; it's been going in one direction — up.

Yet the problem has grown even worse since then.

According to Federal Reserve Chairman Ben Bernanke, the US has now the biggest income disparity gap of any industrialized country in the world and this is "creating two societies."

In 2009, the top 20 percent of American earners — those making more than $100,000 annually — received 49.4 percent of all income generated in the country, compared with the 3.4 percent earned by those below the poverty line, according to data from the U.S. Census Bureau.

More stunning, the top 1 percent of Americans is now taking home almost a quarter of all income. In 1976, it was less than 9 percent.

According to economist Edward N. Wolff of New York University (2010), the financial wealth (total net worth minus the value of one's home) of the top 1% of households accounts for 42.7% of all privately held wealth in the US.

Again, stop and consider that for a moment.

Though we're told that the recession ended in 2009, some things are still getting worse — income disparity, wealth disparity and child poverty among them. Millions of American families are bearing these burdens.

As the 60 Minutes report noted, in Seminole County, Florida, 1,000 school students have recently lost their homes. That's just one county, in one state.

"Our numbers go up every day. Between five and 15 new homeless students a day," said Beth Davalos, who runs the Seminole County programs for homeless kids.

"When I first started this program eight years ago, homelessness lasted maybe two, three months," said Davalos. "But now with it lasting three, six months, a year or two years, this is when children are developing who they are and their foundation is broken."

Like the kids who came out of the Great Depression, this generation is being shaped by homelessness and hunger.

And for millions of families, the American dream isn't just slipping away; it's already been snuffed out.

Thursday, March 10, 2011

US Trade Gap Surges In January; Will Hurt GDP

The U.S. trade deficit widened by an exceptionally large $6 billion in January, reaching $46.3 billion.

Imports jumped 5.2 percent, the most since March 1993, while exports grew 2.7 percent. The weaker dollar aided exports.

Higher oil imports played a big role in the trade gap; the U.S. imported 290.7 million barrels of crude oil in January.

That trend is sure to continue in February and March as crude prices spike in response to the Mideast crisis.

The surge in imports was not due to oil alone, but also to purchases of business equipment, industrial supplies and consumer goods.

A wider trade gap subtracts from gross domestic product growth. So, unless the gap reverses course sharply in February and March, trade will likely subtract from U.S. GDP growth this quarter.

That will be especially challenging for a nation still reeling from the after effects of the Great Recession.

The size of the trade gap is all the more amazing since exports, on both a nominal and price-adjusted basis, hit a record high in January.

Saturday, March 05, 2011

'Prophets of Doom' Discuss Impacts of Peak Oil and Debt

Michael Ruppert, Nathan Hagens and James Kunstler were all featured on the History Channel special, 'Prophets of Doom'.

History teaches us one thing; change is inevitable. This most ancient truth has been illustrated time and time again, as every great empire — no matter how powerful — eventually falls.

In every instance, wise men have predicted their empire's end, with their dire warnings unheeded.

Is it possible in modern times that this may be happening close to home? Could America be headed for catastrophe? There are men among us today who think that a collapse is not only possible, but that it has already begun.

Unlike Nostradamus, or other bygone prophets, they look not to crystal balls or the stars, but to actual evidence to reinforce their claims.

Michael Ruppert is an investigative journalist and the author of 'Confronting Collapse' and 'Crossing the Rubicon'. He is certain that our society is now disintegrating from within.

'We cannot — as a nation, as a planet or as a species — continue to live the way we have, under the assumptions that we have. Because if we do, we are committing suicide," says Ruppert.

Ruppert believes that our explosive population growth over the past two centuries is the result of one thing; fossil fuel.

"One of the first applications was to create an internal-combustion-powered tractor for the purpose of plowing because you could multiply the number of acres that could be plowed," Ruppert says. "And then it was discovered that you could make fertilizers out of ammonia, which is produced from natural gas. So it became possible to feed many more people as oil and natural gas began to be used more and more.

"It is solely the fact of hydro-carbon energy — specifically internal-combustion-powered engines, ammonium-based fertilizers made from natural gas and pesticides made from petroleum — that has allowed the human population to expand in just over a little over a 120, 130 years.

"In the starkest terms, the human population was fairly stable, at just under 1.5 to 2 billion people from the time of Christ until oil was discovered. There was a slight dip for the bubonic plague; a slight increase as the beginnings of the Industrial Revolution came along with steam and with coal. But it was not until the discovery and use of oil that human population skyrocketed.

"From a simple arithmetic standpoint, if you just look at the numbers, essentially 5 billion too many people are living on this planet today that are not sustainable by any other means.

"As human civilization undergoes this enormous, painful transition, everything that mankind has held sacred is on the table. It's a matter of life and death now."

The United States' population more than tripled in the 20th Century. It is projected to increase yet another 46% by the end of the end of the year 2050. With fossil fuels running out, Ruppert does not see how our infrastructure will keep pace.

"You know, I think food exemplifies our problem as much as anything else. We have boxed ourselves into a situation where we transport food over enormous distances; where we fail to return nutrients to the topsoil so that it will grow anything else without those chemicals. And if those chemicals that come from oil and natural gas go away, the food goes away. And if the food goes away, people starve. And that process is beginning all over the world, now.

"Our population is still growing, even as the resources needed to keep that population fed are going away. Our population should be diminishing also, but we're in a condition of overshoot. We're still expanding.

"There aren't enough resources on a finite planet, a closed sphere, to sustain infinite growth. We just can't do it."

Ruppert believes the America of the future will bear little resemblance to the nation we know now.

"The indicators that the United States of America is collapsing are all around us. The changes now are going to come much more rapidly; they're going to be much harder to take; and the choices that we make now are going to determine how we're able to deal with those challenges.

"The way of life that the world has come to know since the discovery of oil about 130, 140 years ago is all coming to an end.

"We're going to see things like governments, cities and towns going bankrupt, which is happening. School districts are cutting back to four-day weeks. Everywhere, major cities are doing police cutbacks and fire cutbacks. We're seeing major infrastructure failures; an explosion in San Bruno, California of a natural gas pipeline that was laid in 1948. And nobody had the money to repair the infrastructure. We're going to see major failures and calamities and disasters like that.

"The bridge failure in Minnesota a few years ago, not to mention 30 million unemployed. Collapsing home values all over the place. Foreclosures soaring. We are seeing all the signs of collapse throughout this country and they're becoming more obvious every day."

Ruppert is certain these troubles aren't temporary. Nor are they the ordinary products of an economic downturn. He is convinced they are symptoms of a coming collapse.

"Collapse has happened to every empire in human history," says Ruppert. "That seems to be, if you will, a natural law — that empires can grow to a certain place and then they implode."

Two thousand years ago, the Roman Empire was the most powerful on earth. The similarities between Rome then and America today are striking. And the story of what ultimately befell that nation is told in museums around the world.

"Like here in America today, Rome's armies were spread too thin, in too many foreign countries," says Ruppert. "Barbarian invasions — like terrorist attacks and cross-border incursions as we see in Mexico's drug wars — were constant. The government was corrupt, and the only way to get anything accomplished was through bribery or by increasing taxes.

"This is no different than the stranglehold lobbyists, banks and corporations have on our government today. America, like ancient Rome, has this blind faith that we are superior to the rest of the world and it's our destiny to reign supreme forever. It's not gonna happen.

"We are going to learn some hard lessons and adjust to some hard circumstances. But we do have choices. The American empire is going to fall, but we do not all have to fall with it."

America dominates the world today on a scale far greater than even Rome could have imagined. But history, as well as nature, prove that size itself is no guarantee of continued survival.

"The question of survival is very much like the Titanic," says Ruppert, "a huge ship that was believed to be unsinkable, that could go forever. On its maiden voyage, it sank.

"The Titanic is going to sink, and there are some people that will not believe it until they're under water.

"If I had to sum all the problems down to one word, it is "overpopulation," because there are 5 billion people on the planet today who did not exist at the dawn of the oil age, and they exist only because of oil and natural gas."

Michael Ruppert isn't the only one with dark visions of the future. Others also anticipate the fall of America.

Dr. Nathan Hagens has a PhD in natural resources. He is also an economist and a former investment banker.

Hagens, formerly a VP at Solomon Brothers and Lehman Brothers, was managing a hedge fund when he came to the conclusion our current economic system was unsupportable. So he resigned.

He sees a financial collapse on the horizon.

"The near-term hurdle is, we have to deal with our excessive errors we've made in our financial system," says Hagens. "We've lived beyond our means, and we've extended that living beyond our means by issuing more credit, and there's gonna be reckoning there. The financial system as we know it is completely untenable, and there are gonna be big changes.

"Our economic system is actually a giant global ponzi scheme. And the way that translates is, a lot of this debt and credit that has been built may someday never be paid off. How that unravels is gonna have big consequences for the average American.

"Capitalism is gonna have to be retooled, or it's gonna completely go by the wayside. What we have now has been a failure. The future is going to look very different from the past in one primary regard, in that the world economy will no longer continue to grow."

"In the 1700s, we basically hit the energy jackpot when we figured out how to use coal and then subsequently, in the 1800s, oil. And then, in the last century, natural gas. Now the question is, what's gonna replace fossil fuels?

"Every American right now has 200 to 300 energy slaves standing behind them doing work that we take for granted: the energy in the taxi that got me here today, the lights in this building, our food system. The average food travels 1,500 miles to get to our plate. And that all uses energy.

"All these things are subsidized by a one-time endowment of fossil energy that is so powerful that, for all human intents and purposes, it is indistinguishable from magic."

Hagens believes the current global depression is the beginning of an economic collapse that will intensify as natural resources run out and alternative energies fail to replace them in time.

"Technology is in a race with depletion, and depletion is winning. People need to recognize, okay, we live on a finite planet and we have virtually infinite wants and perceived needs. But those two trends are butting up against each other, and what are we gonna do about it?

"We've been so endowed with natural resources for 60, 70, 80 years; we have not really thought that this was a problem. There have been some recessions and even a Great Depression, but we've always reset from that.

"We build our institutions and our expectations assuming that this sort of subsidy will continue in the future. And now we've built a lifestyle that is no longer sustainable. We can live within our means, but only when we acknowledge that there are limits. And our economic system right now does not acknowledge that there are limits. The financial system as we know it is completely untenable, and there are gonna be big changes."

The idea that our economic system is completely failing is hard to believe, but Hagens points to America's mountainous debt as proof. The balance between that debt and our available resources is delicate. When it tips, the system collapses.

"We have built an entire industrial civilization on the assumption that there will be more every year," says Hagens. "We now know that resources are harder to find and, in order to keep the system going, we've flooded the American economy — as well as the world economy — with more and more credit.

"We've created a large debt overhang, and right now we're kind of in this Wile E. Coyote moment where we've fallen off the cliff and the government is supporting the feeling that things are okay.

"But in reality, right around the corner, there are some very different trajectories. Basic needs; food procurement, water. Just knowing that people are gonna get fed is gonna become more prominent in people's minds, just like it did in the Great Depression.

"The 1920s were this kind of go-go period where a lot of people were invested in the stock market. On Black Tuesday, the stock market lost 12%. And it lost 40% two months later. And, eventually, the stock market — from its highs in 1929, to its lows in the mid '30s — lost 90% of its value. In the Great Depression, around 35 million people lived in families where no one had a job — out of a population of 120 million.

"So during that decade, the average income of those people that worked declined 40%. So it was pretty desperate back then.

"The government is attempting the same things that it attempted in the '30s, by borrowing money and stimulating the economy. But the problem is, we can't continue to inject money from thin air into a system and continue to think that it's gonna hold together. You cannot solve a credit crisis by adding more credit. Period."

The American Economy rebounded from the Great Depression to become larger and more dynamic than ever before, reinforcing the theory of cyclical markets, in which booms are followed by busts and then ultimately a bigger boom. Hagens cautions this belief is more faith than fact.

"I believe the United States is insolvent and that some of these debts that we've incurred from the past are gonna come home, and we're gonna have to face the reality. The moment of bankruptcy comes when people want the money, when they want the claims to be paid off.

"America, unfortunately, is asleep with a lot of these issues and part of this is due to cognitive dissonance. Cognitive dissonance is when our brains don't want to acknowledge the gravity or seriousness of a situation.

"A good example is in Jared Diamond's book "Collapse", where he talked about a dam that was about to break and people three miles downstream were really afraid. And people two miles downstream were, like, really freaked out. But people living within a mile of the dam, they weren't concerned at all.

"If things are too frightening and too threatening, our brains tune it out because it would affect our behavior and it would be too painful to accept. So peak oil and peak credit and the depletion of cheap fossil fuels — and what that means for the end of growth — it's too overwhelming.

"The financial reckoning that's coming could include many different scenarios. It could be no more US currency, and that our US currency is replaced by something else. It may happen that you have $100,000 in your bank, and the next day, you wake up and you have 10,000 patriot dollars, or something like that.

"It's happened many times. People remember Weimar, Germany in the 1920s, where there was the end of a system of claims and the end of a currency, and there was something that would replace it.

"The average American knows that something is wrong. But the problem is that they don't really speak up and get really vocal about it, because they don't know what to do."

Hagens feels this unprecedented financial crisis is the greatest threat to America today.

While the United States has seen its share of hard times, the expectation has always been one of boundless growth. History, however, promises one day we will take a long step back.

"Sometime in the next decade, there's going to be a financial reckoning where we're going to have to dramatically tighten our belts — use less, consume less — because there will be less available," says Hagens.

"The United States right now uses twice the energy as the country of Ireland, per individual. Yet, on subjective well-being studies, they're just as happy as we are. We use 37 times the energy as the average person in the Philippines. Yet, they are just as happy as we are. So I'm sure that whatever comes, we will be able to adapt to it. It's just the six-month window of when it happens that I worry about.

"Here's a subtle point; we evolved to not address a situation until it stared us in the face. There's something in economics called a "discount rate", which is how much we value the present versus the future. A discount rate of one means we care only about this second.

"If you feed a goldfish... if you go out of town for four days and give it four days of food at once, it will eat until it explodes. A discount rate of zero is like a robot, where you would live for a million years and you care about today the exact same as you care about the year 2177.

"Humans have very steep discount rates. And what this means is that we, as a species, won't really address our problems until the problems are staring us in the face.

"You know, Peak Oil and climate change, and all these grand super-themes that we read about, these are like 10, 20, 30 years down the road. That has the mental weight of zero to the average person hearing about it. If there's no toilet paper at the grocery store today, and you heard that there's not gonna be any anywhere in the country, that's like, "Oh my God, stock up on toilet paper." So people need an environmental cue showing them that scarcity or change is going to happen."

Hagens believes people don't recognize change until it's staring them in the face. Hagens also believes great changes could be upon us sooner than we realize.

"Eventually, the currencies we have right now might go away and might be replaced by something," says Hagens. "It's not even my imagination. Our own treasury secretary last year mentioned a global currency.

"I am absolutely convinced that the imposition of a global currency will expedite the crash of everything much faster," adds Michael Ruppert.

"You know, it's helpful to remember that paper currencies are only about 150 years old. This has been a very short-term experiment," adds James Howard Kunstler, an investigative journalist and author.

Kunstler's specialty, since the 1970s, has been the oil industry. He has lived through an oil embargo enforced by foreign suppliers. Now he is convinced the planet will soon impose a greater one that will likely lead to the collapse of society as we know it.

"What I'm seeing in our culture these days is what I call a disease of too much magic. And I think it's perhaps a very fortunate thing that the human race is facing what I would call maybe a reset of its activity — not necessarily a collapse — but let's call it a reset.

"When I was a young reporter starting out in the early '70s, I covered the OPEC oil embargo of 1973, and it made a huge impression on me. You started to see lines form at the gas stations. People were unable to get to work.

"You know, I have this vivid memory of somehow I managed to get a full tank of gas, and I wanted to drive down to New York City to see a girl. And I drove down the New York state thruway and I was the only car on the thruway for about 150 miles. And it was like the day the earth stood still.

"It made a big impression on me to see how fragile the everyday world that we've gotten accustomed to really was. That was 40 years ago.

"I think that the energy crunch of the 21st Century is going to be much different, much harsher, have permanent repercussions that are gonna thunder through the lives of generations to come. We are heading into uncharted territory of civilization.

"I think the people of the United States a generation from now are gonna be astounded at how we squandered the wealth of the 20th Century.

"I think the people of the future are gonna look back on us in wonder and nausea at what we've done. They're gonna be left holding the bag — and it's gonna be a very empty bag."

History is a graveyard of fallen empires. And today there are those who say America is in danger of suffering the same fate. Among them, James Kunstler is convinced diminishing oil supplies will play a critical role in our downfall.

"Peak Oil is the moment in history when an individual oil field, or a region, or a nation produces the most oil it ever will. The US had its moment of Peak Oil in 1970 — that was 40 years ago — when we produced 10 million barrels a day. And we're down to 5 million barrels a day now.

"The problem is when the world hits Peak Oil. And that's where we're at now. We're on that bumpy slope down that's gonna get rougher and rougher.

"The oil story really starts around 1860 in the USA. We are the first nation that ramps up a multi-layered, comprehensive oil industry, and it's been normal for many generations of Americans now. So, it's hard for us to imagine us not having oil. But, in fact, Peak Oil happened in America in 1970.

"Forty years ago, America produced the most oil that it will ever produce in a given year — which was around 10 million barrels a day. And ever since then, it's been going down. America made up for its problem of Peak Oil — and of entering the arc of depletion — by importing oil from other countries.

"The problem for the world is that, once the world passes their production peak, we're not gonna be able to import oil from other solar systems. The assumption is that the downslope is a gentle downslope, that we're just sort of gliding into depletion. But I think that that really misrepresents the reality of the situation.

"The real story is going to be how the major complex systems of daily life begin to destabilize and mutually reinforce each other's instabilities and failures as we get into trouble with this Peak Oil problem."

We consume 20 million barrels of oil each day in the United States, most of which is imported. And every day, our demand for oil increases. Oil, however, is a finite resource. The US government is aware of the problem.

"The US Department of Energy hired a scientific consulting firm run by a guy named Robert Hirsch," says Kunstler. "The Hirsch Report was published in 2005. Hirsch reported that we were indeed facing a Peak Oil predicament that was gonna rock our world, that was going to change all the terms of everyday life in advanced societies and deprive us of many of the comforts, conveniences, amenities, and necessities that we had come to take for granted.

"The Hirsch Report was buried by the Department of Energy because they saw no way that the American public could deal with the idea that this way of life might be threatened.

"The Hirsch Report was really rather bad news. It was telling the USA that we were facing an imminent crisis. America didn't want to hear it. It was too painful."

The Hirsch Report projects that oil production worldwide will peak either in this decade, or almost certainly by 2030. The report also states that the economic, social, and political costs will be unprecedented.

"The Peak Oil story is not really about running out of oil," says Kunstler. "It's about what happens to all these complex systems that we depend on for everyday life. The way we produce our food — that's one system. And that mainly means industrial agriculture, where you're applying a lot of oil and gas by-products to huge factory farms and producing cheese doodles, and chicken, and Pepsi-Cola, or hogs, or whatever it is.

"That's how we do farming. That's how we feed ourselves in America. That's gonna be coming to an end — and probably fairly shortly. And it'll be a huge problem. You can't imagine anything more destabilizing to a culture than people going hungry.

"The way we make things, buy things, sell things, move them around — that's all gonna change. There's been really one model for the last 30 years or so, and that's national chain retail. Giant corporations moving massive amounts of stuff. The semi-trucks that are incessantly circulating around the interstate highways — they pick the stuff up in San Pedro, California, and they schlep it across the nation to Philadelphia.

"And that's how we do commerce in America. It's normal for people. You know, they love the Wal-Mart. It's become enshrined as an institution now, like apple pie and motherhood.

"There's a lot of fantasizing that's going on right now — a lot of wishing that's going on in America right now — that we're gonna run this stuff by other means. That we're gonna run all the cars, and that we're gonna run Walt Disney World, and the interstate highway system, and Wal-Mart, and the US Army, and suburbia on something other than oil. It's not gonna happen. We're gonna be very disappointed about that."

We will develop alternatives to fossil fuels, but many experts believe we may never develop replacements. Oil is simply more potent and costs less to produce than any other energy source — at least for the foreseeable future. We are not the first society in history to face the depletion of its most precious resource. We just have to hope we are the first to overcome it.

"Other cultures have gotten into trouble with their resources and with their political response to their own resource problems," notes Kunstler. "Look at what happened to Easter Island. They were a Polynesian culture on a remote island in the pacific. If you go there now, what you'll find is a treeless island populated with giant stone heads left behind by the Easter Islanders.

"But the island wasn't always barren. It used to be covered by trees. And the trees were, to the Easter Islanders, what oil is to us today — their primary resource. They used it for all the important daily needs of life and their population grew to, we estimate, about maybe 20,000 people at the height of this culture. And before you know it, there's not a whole lot of wood left.

"And their population starts to crash, and they get pretty desperate. There's a lot of evidence that they actually started getting into cannibalism in the final florid phase of this collapse. They started building all these immense stone monuments. You know, they may have been an attempt to appease the gods to allow them to get some kind of resource back.

"You know, I think you can state categorically that as a society becomes more fearful and desperate and economically stressed, that the delusional thinking increases. I think it's a kind of thing that the human brain does in a state of desperation."

A world without fossil fuels would be a dark, difficult place. There are some who believe that we may still be able to find solutions if we act quickly. Many, like Kunstler, know that the consequences for not finding alternatives will have repercussions for generations to come.

"I think the people of the future are gonna look back on us in wonder and nausea at what we've done. They're going to be inhabiting a planet whose resources have been largely depleted. And we're gonna be back to living off the true solar energy of the planet, you know, the stuff that comes in from the sunshine every day. They're gonna be left holding the bag — and it's gonna be a very empty bag.

"I think the future is gonna be difficult for America. I think it's going to be a surprisingly austere place: struggling to stay warm in the winter, struggling to feed themselves or have any kind of a really a gainful occupation, living among the detritus and the salvage of the industrial age and trying to make something of the pieces that are left.

"America's gonna have to contract and probably, to some extent, retreat back into our corner of the world — the Western Hemisphere — with lower expectations for being able to influence and moderate the behavior of other people in the world and a reduced ability to control the great issues of world economy and global politics.

"We're so psychologically invested in all of the mythology of what we became in the 20th Century, you know, the greatest power that the world has ever seen and the greatest economy that the world has ever seen. And it was quite a trip. And it was a lot of fun. And it was exciting and comfortable and convenient — sometimes joyous and thrilling. And now we're done with that. It's over."

James Kunstler is convinced nothing can prevent Peak Oil. But he and others are equally certain that the havoc it creates will be lessened if we can make changes now.

"For me, the most important thing is to stimulate and liberate local food production," says Michael Ruppert. "To do anything possible to help people grow food where they live."

But how do you grow your own local food if you're living in a high-rise apartment?

"It's happening all over the world right now," says Ruppert. "There are rooftop gardens. There are window box gardens. Vacant lots in major metropolitan areas are being converted to community-supported agriculture."

"I think we're facing multiple crises," says Nathan Hagens. "I still believe that they will manifest first in the financial and currency system, and that does have implications — depending on how governments respond — for international trade and availability of resources and our supply chain.

"There are some core assumptions of our economic system that have to be reexamined, and I think that's happening now. I think 2008, Lehman Brothers, we came this close to a total unraveling. And people at the highest levels are thinking about how to avoid that in the future and how to redesign our financial system — and maybe our economic system — so that it doesn't happen again.

"I think the biophysical crises of energy and water and other things like that are gonna first manifest in social crises."

Asked what he sees as the most pressing, concrete problems, Ruppert is quick to answer.

"One in seven Americans now is below the poverty line. One in eight families is on food stamps. Those number are increasing. Thirty, 40 million unemployed — depending upon who is counting the statistics. The people are hurting and they're hurting as a result of an economic collapse, which is exacerbated and compounded by resource shortages, Peak Oil, energy, freshwater, everything else.

"I see signs of a shift in human consciousness," Ruppert notes, optimistically. "I see signs — very clear signs — of a global awakening. Many, many millions of people understanding this. The moves to relocalize food production. To start growing food where people live. To relocalize your support groups close to where you live is really a worldwide movement."

"There are a number of real big game-changers out there, and they seem to be converging," says Kunstler. "The energy narrative is pretty clear. The banking problems we have right now; the shortage of capital; the failures of governance and rule of law in our financial system. You know, these are amazing problems that are going to come back and bite us very hard, and they're gonna bite us all at the same time like a pack of wolves.

"And there are three things that I would recommend that we can do. The first thing is that we can re-establish the rule of law in our banking and financial practice. The second thing I would propose is, we need to direct our dwindling resources into the task of rebuilding local economies. The third thing that I think we need to do is rebuild the conventional railroad system in the United States, and we should do that right away. And if we don't do it, I'm not sure that there will be anything that will physically allow the United States to hang together as a culture, a people, and a nation."

Hagens shares Ruppert's optimism about the future, albeit a very different future.

"We've mentioned the collapse of advanced industrial civilization several times, and my gut and my research of historical civilizations suggests our population will, in the end, be more resilient than some people give credit to. The average person needs to start thinking about a future where instead of more every year, there might be the same every year or less every year.

"I agree that we need to relocalize our food systems. We also need to relocalize the production of a lot of basic needs. In effect, we need to insource where we have been outsourcing because of efficiency and profits around the world. I think "Buy American" makes sense because the things that we need to make, that we need for our lives, should be made locally."

"I think a consensus is emerging that re-localization is a solution to many problems," says Ruppert, "in terms of food production, resource usage and anything else. Also, in terms of starting a local currency. Anything you can do to be sustainable close to where you live."

Modern life moves so quickly it's hard for us to stop and consider where it's going. There are, however, times in our history when we simply have no choice. These men are certain that time is now.

"Pretty clearly, we're not psychologically prepared for the changes that we face," says Kunstler. "We can't afford to be cry-babies anymore. We can't afford to sit around wringing our hands. We have a very big to-do list.

"We face an array of problems. They're all equally severe. The assumption that if we get one thing right, or one part of this right, that we're just going to keep on going ahead and being a hyper-complex society — I think — is erroneous. Personally, I don't think this is the end of the world or the end of the human race. I think it's the end of a certain phase of history. I think we need a timeout from technology."

"I think the American financial system is completely unsustainable at these levels," says Hagens. "We should all strive to be less wasteful. But our economic system is kind of based on waste."

"What we're finding out is that the way we're going to have to live is the way should have been living all along anyway," says Ruppert. "And, in a way, that's probably much more fulfilling from an emotional, and spiritual, and psychological [perspective], and the standpoint of human interaction. I think it's going to be much more rewarding. I don't see it as all suffering, by any means."

It's been said that a generation which ignores history has no past and no future. Now, it is up to us to decide. Will we sit by and watch — as they watched in Rome, as they watched in Mesopotamia, as they watched time and time again — as everything we've built, all we have achieved, disappears into the mist of history?