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David Galland: The System is coming unglued

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by David Galland
from Casey Research
Posted September 9, 2011

Our video host Stefan Molyneux speaks with Casey Research Managing Director David Galland about the debt situation in the US and whether the federal government can do anything about it… assuming they’d even want to.

TRANSCRIPT

Stefan: Hi everybody, it’s Stefan Molyneux, host of Conversations with Casey. I have on the line David Galland. Thank you so much, David, for taking the time to chat today.

David: Nice to be here.

Stefan: So, we are seven-tenths of the way towards fascism in the United States. I wonder if you could expand upon that. I sort of get a sense that that’s probably true, but you have a little bit more than my gut instinct – you actually have some pretty professional opinions to work with on that.

David: Well, all the elements for fascism are in place. We have a monetary system that is accountable to no one and that’s a very good start. If you think about it, the way that the monetary system is structured, the government at this point can literally spend money on anything. They talk about capping the federal deficits and all that, but they’ll get past that in no time at all. Probably by the time the viewers are watching this they will have announced a big deal, you know, that they have raised the debt cap. And you know, once you have – if you pin your money to nothing, if you have a monetary system that is based on nothing, then you can afford anything. You can afford all the wars you want, you can afford all the bureaucracy you want; and so they have. That’s a first step.

I mean, we’ve – just as an example, here in the little town in New England where Casey Research is located, they have a – they’ve just finished building a massive new Homeland Security center. This is a town of roughly 4,000 permanent residents; it’s a tourist town. It’s the kind of place where the worst crime you’ll ever see is somebody stealing skis from a ski slope, and yet we have something like 36 policemen. We’ve got this huge, brand-new Homeland Security center. Why? Well, because after 9/11 and the overreaction of 9/11 the government made this money available because it could make the money available, because there is nothing stopping it from doing that. And there’s all these local police departments, which should have an “Andy of Mayberry” type police force, took the money and they spent it, and now we’ve got a semi-militarized local operation. So this has gone on and this is multiplied right across the country… and the world.

Stefan: And of course, the decisions that people make in expanding the public sector have immediate implications in payroll, but I think what America is really facing are the long term implications of unfunded pensions that just run into the hundreds of billions of dollars. It’s a lot of the stuff that is not really counted in the public calculation of the debt, which is more immediate obligations, but the unfunded liabilities run $75 to $100 trillion according to many estimates. That’s not something that you see, which makes the whole conversation about should we have two trillion here or there ridiculous to anybody in the know.

David: Oh, absolutely. Again, on the point about whether we’re sort of on the way to a fascist state – and I – this isn’t just the US – it’s important that, you know, people understand this is all over the world. At this point, none of these governments is operating on anything that remotely resembles sound principles. They’re operating on a number of different priorities and a number of different interests – self-interests, because politicians after all are just people. So whatever it takes to kick the can down the road, they’re going to do. You mentioned $75 trillion in unfunded liabilities, absolutely. Because at this point, this is essentially sort of a rising tide of bureaucracy over the last hundred years that is cresting at this point. And they have done this because there are no real operating principles other than buying the votes that they need to get re-elected and to stay in office for as long as they can, and then they pass the baton to the next bureaucrat and the system continues. But it’s reaching the point where, I think, within a relatively short period of time it’s got to come to an end.

Stefan: Now you’ve written an article recently which I found very interesting – I just shared it through my Facebook as well – it’s called The Greater Depression. So you have the Great Depression and now we’re looking at the Greater Depression. I wonder if you could talk about the mechanics and the future as you see it as we go into this abyss.

David: Ultimately, what we’re faced with right now and this is, I think, just some fundamental principles – because there are so many aspects of what’s going on in the economy today that it makes it for most people – for virtually all people – it makes it very hard to really understand what’s going on. So sometimes you just have to sort of step back and ask a few questions to try to get some sort of a compass, if you will. And first and foremost the crisis we’re in right now is caused by debt, too much debt. As you mentioned before $75 trillion in government obligations – everybody knows that money is never going to get paid. So we’ve been brought to this point of extreme government borrowing. Who would have thought we’d see $1.5-trillion deficits? I mean, nobody – five, six years ago if you would have asked anybody on this planet if the US government could run a $1.5-trillion deficit they would have said no way. Well, here we are. So all of the conditions of what this – you can call it a debt-induced depression, all of the conditions that sort of brought us to this place have not improved since the beginning of this crisis; they’ve only gotten worse.

So what’s the ultimate outcome of this? Well, what’s the one thing that a heavily indebted person or an entity like the government can’t handle? And it’s rising interest rates. You can’t afford for the bank to bump your payments up to, you know, 20% because you’ve missed a payment. Well, the same thing’s true of the government and we are now – we are still – the US interest rates are still bouncing around, you know, all-time lows. It’s completely – it’s a complete aberration. And it can’t last. So why things are going to get worse is because interest rates have to go up. Even if they return to sort of a more normal five to six percent range, from a historical standpoint it would be devastating to the US economy. So the government is doing everything it can to try to get out of this trouble but there really is no way. They have very limited impact on long-term interest rates and if it wasn’t for the fact that Europe was such a basket case and that Japan was such a basket case right now, interest rates in the US would already be taking off but I don’t think we’re going to have to wait long for that and then things are going to get interesting.

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India halts all food imports from Japan after Fukushima fish found with excess radioactivity

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by Tyler Durden
Posted Zero Hedge, April 5, 2011

After dumping thousands of tons of radioactive water in the sea, Japan appears to have been stunned to find that the radioactive content of various fish has surged and is now above just imposed radiation safety thresholds.

From Kyodo: “Japan hastily set a legal limit Tuesday for the permitted level of radioactive iodine in seafood as safety concerns spread overseas in the wake of continuing leaks contaminated water into the Pacific Ocean from the crippled Fukushima Daiichi nuclear power plant. The limit of 2,000 bequerels per kilogram set by the Ministry of Health, Labor and Welfare for radioactive iodine in marine products such as fish and shellfish is the same as that already adopted for vegetables, Chief Cabinet Secretary Yukio Edano told a press conference.

The imposition of the limit followed the detection by Japanese authorities 4,080 bequerels per kilogram of radioactive iodine in young sand lance caught Friday off Kitaibaraki in Ibaraki Prefecture, which prompted the health ministry to consider setting a limit for fish and clams.

Different young sand lance, also caught near Kitaibaraki, were found to be contaminated with 526 bequerels per kilogram of radioactive cesium, exceeding the legal limit of 500 bequerels already set by Japan.” And now that Japan has another crisis scenario fall out to deal with, other countries no longer have faith that Japan has any control over the situation and are imposing complete bans on Japanese food imports: first India, and soon everyone else. Expect sushi prices to surge momentarily.

From Kyodo:

India said Tuesday it will suspend food imports from Japan for about three months to prevent food contaminated with radioactive substances leaked from the crisis-hit Fukushima nuclear power plant from entering the country, Press Trust of India news agency reported.

Specific food items subject to the suspension were not immediately disclosed, but marine products and fresh fruits are expected to be among them. India’s health ministry said the import suspension will last until it can obtain reliable data proving that the levels of leaked radioactive substances are safe, according to PTI.

Not to be outdone, Japan once again has proven it is completely clueless, and is dealing with the catastrophe in the only way it knows – denial:

Chief Cabinet Secretary Yukio Edano dismissed the need for an immediate ban on shipments of marine products from the affected areas, but he pledged to toughen inspections to ensure that contaminated products do not reach markets.

The government will make further efforts to provide sufficient information to other countries through diplomatic channels regarding its efforts to contain the leak of radioactive substances from the plant, the top government spokesman added.

Given that radioactive substances exceeding safety limits have only been found in a small number of samples so far, Edano said, ”We want to proceed by monitoring (contamination) closely and grasping the broader situation rather than immediately regulating” shipments.

And while the diplomatic wrangling over who is right and who is wrong is about to spike in earnest, Japan can kiss its fishing industry goodbye, as well as scrap food exports for the indefinite future.

Power corrupts; Nuclear power corrupts absolutely

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by C. Douglas Lummis
date unknown

IN THE EARLY 1970s I HELPED ORGANISE A TOUR OF STUDENTS FROM JAPAN TO THE HANFORD NUCLEAR FACILITY in central Washington State. We timed it so that our guided tour of the site would be on the anniversary of the nuclear bombing of Nagasaki. This knocked the official guide a bit off balance; when we came to the big photograph of the Hanford workers cheering when they learned that it was the plutonium they had made that went into the Nagasaki bomb, his words got a little mumbly and hard to hear.

But he was very energetic when it came to explaining how safe the Hanford Facility was. Waste plutonium, he said, was buried in pits dug deep into the ground, and then carefully monitored to make sure there was no leakage. I asked him, “But didn’t you tell us just now that plutonium has a half-life of 24,000 years? Who is going to monitor it for that long?” “The US Government, of course.” “In all of human history, has there ever been a government that lasted for 24,000 years?” He did not answer, but only looked at me with contempt. Evidently he thought I was lacking in patriotism.

This was the moment I realized that a very intelligent, highly trained nuclear engineer can be a fool.

My field, political science, has produced probably only one scientific law: Power corrupts, and absolute power corrupts absolutely. But few political scientists have noticed that the closest thing we have to absolute power is nuclear power. Nuclear power corrupts the thinking of its believers in a peculiar way. It seems to tempt them to imagine that they have been raised to a higher level, where common sense judgments don’t apply. Common sense judgments like, it’s very dumb to produce a substance that will continue to radiate death, and will therefore require “monitoring”, for tens of thousands of years.

And then there’s the problem of accidents. As my common-sense grandmother used to say, “Accidents do happen”. An “accident” means something unexpected, something you hadn’t planned for. In the case of some dangerous activities, we seem to be willing to take the risk. We (we who are not the direct victims, that is) are satisfied if the probability of auto accidents or airplane crashes is kept fairly low. But in the case of nuclear reactors, a low accident rate is not enough. The consequences of a full-scale meltdown are so horrifying that, to justify building a nuclear reactor, the promoters must guarantee that there will be no accidents at all.

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Japan: Disaster in figures

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EVENTS ARE MOVING VERY FAST IN JAPAN, so bear in mind that this graphic dated March 14th from Reuters, may be already slightly obsolete. Also, of course, there is so much chaos on the ground that some data is bound to be rounded off or estimated.

Japan update: It’s much worse than it looks

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by madhedgefundtrader
Originally posted March 15, 2011

I just got off the phone with several frightened, somewhat dazed survivors of the Japanese earthquake who work in the financial markets, and I thought it important to immediately pass on what they said. Some were clearly terrified.

Japan’s economic outlook now appears far more dire than I anticipated only a day ago. It looks like GDP growth rate is going to instantly flip from +2% to -3%, a swing of -5%, similar to what we saw after the Kobe earthquake in 1995.  We have just had a “V” shaped economy dumped in our laps, and we have just embarked on a precipitous down leg. Two very weak quarters will be followed by two strong ones. The initial damage estimate is $60-$120 billion, and that will certainly rise.

Kobe had a larger immediate impact because of its key location as a choke point for the country’s rail and road transportation networks and ports. But the Sendai quake has affected a far larger area. Magnifying the impact is the partial melt down at the Fukushima Dai Ichi nuclear power plant, forcing the evacuation of everyone within a 12 mile radius.

Most major companies, including Toyota, Nissan, Honda, and Sony have shut down all domestic production. Management want to tally death tolls, damage to plant and equipment, and conduct emergency safety reviews. In any case, most employees are unable to get to work because of the complete shutdown of the rail system. Tokyo’s subway system is closed, stranding 25 million residents there.

Electric power shortages are a huge problem. The country’s eight Northern prefectures are now subject to three hour daily black outs and power rationing, including Tokyo. That has closed all manufacturing activity in the most economically vital part of the country.

Panic buying has emptied out every store in the major cities of all food and bottled water. Gas stations were cleaned out of all supplies and reserves, since much of Japan’s refining capacity has been closed. There are 20,000 expatriates waiting at Tokyo’s Narita airport as foreign companies evacuate staff to nearby financial centers in Hong Kong and Singapore. Airlines are diverting aircraft and laying on extra flights to accommodate the traffic.

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Panic evacuations strike Tokyo where radiation levels are ten times normal, food hoarding empties stores in capital, fallout projected to blow to Pacific

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From Reuters
Posted March 15, 2011

RADIATION WAFTED FROM AN EARTHQUAKE-STRICKEN NUCLEAR power plant towards Tokyo on Tuesday, sparking panic in one of the world’s biggest and most densely populated cities. Women and children packed into the departure lounge at an airport, supermarkets ran low on rice and other supplies and frightened residents, tourists and expatriates either stayed indoors or simply left the city.

“I’m not too worried about another earthquake. It’s radiation that scares me,” said Masashi Yoshida, cradling his 5-month-old daughter Hana. The nail-biting eased in the afternoon after Chief Cabinet Secretary Yukio Edano appeared on national television saying radiation levels at the troubled Fukushima Daiichi nuclear-power complex had fallen dramatically since morning.

But confidence in the government is shaken and many decided not to take chances, especially after radiation levels in Saitama, near Tokyo, were 40 times normal – not enough to cause human damage but enough to stoke fears in the ultra-modern and hyper-efficient metropolis of 12 million people.

Many hoarded food and other supplies and stayed indoors. Don Quixote, a multistorey, 24-hour general store in Tokyo’s Roppongi district, was sold out of radios, flashlights, candles, fuel cans and sleeping bags on Tuesday.

At another market near Tokyo’s Yotsuya station, an entire aisle was nearly empty on both sides, its instant noodles, bread and pastry gone since Friday’s earthquake and tsunami killed at least 10,000 people nationwide and plunged Japan into a twin nuclear and humanitarian crisis.

At Haneda Airport, hundreds of young mothers lined up with children, boarding flights out of Tokyo.

“We are getting our of Tokyo and going to our home town because of the situation. For the time being we have bought a one way ticket and will wait and see what happens,” said a Japanese woman with an eight-month-old baby and four-year-old son, who declined to be identified by name.

Tourists such as Christy Niver, of Egan, Minnesota, said they had enough. Her 10-year-old daughter, Lucy, was more emphatic. “I’m scared. I’m so scared I would rather be in the eye of a tornado,” she said. “I want to leave.”

Winds over the troubled Fukushima Daiichi nuclear-power complex, about 240 km (150 miles) north of Tokyo, blew slowly southwesterly towards Tokyo for much of the day before shifting westerly later, a weather official said.

Some scientists, however, urged Tokyo to stay calm. “Radioactive material will reach Tokyo but it is not harmful to human bodies because it will be dissipated by the time it gets to Tokyo,” said Koji Yamazaki, professor at Hokkaido University graduate school of environmental science. “If the wind gets stronger, it means the material flies faster but it will be even more dispersed in the air.”

University of Tokyo professor of bioengineering Hiroyuki Takahashi added: “If the nuclear fuel remains contained, there will be very little health risk.”

The Czech Symphony Orchestra left Tokyo by bus for Ishikawa prefecture on the west coast. “Some of them wanted to go home after the earthquake but it’s pretty much impossible to get tickets for a hundred people now,” said Hitomi Sakuma, a friend of the orchestra who was seeing them off at a Tokyo hotel. About 350 Japan-based expatriates at Infosys Technologies Ltd , India’s second-largest software services exporter, are returning to India, its chief executive said.

“Some of them have returned, some are in the process of coming back,” S. Gopalakrishnan told Reuters. “The revenue from Japan is very small and overall it will have a minimal impact on business.”    U.S. banking giant Citigroup said it was keeping workers in Tokyo informed but there were no evacuation orders, said a spokesman, adding the bank was closely following guidance by the U.S. Embassy, which has not urged nationals to leave.

Some international journalists covering the disaster from the worst-hit region around the northeastern city of Sendai, devastated by Friday’s mammoth earthquake and tsunami that killed at least 10,000, were pulling out.

The Tokyo office of Michael Page International, a British recruitment agency, was closing for the week. “I am leaving for Singapore tomorrow,” said one employee. Levels of radiation had risen in Tokyo but for now were “not a problem”, the city government said.

And while Korea and Russia are reported to be safe for now, with radiation fallout simulated to head toward the Pacific, we expect America to be quite vocal about the threat of radioactivity coming from Japan via the Jet Stream as soon as it wakes up. From Kyodo.

South Korea’s Meteorological Administration on Tuesday released the results of a weather simulation which it said shows most of the radioactive particles from Japan’s damaged nuclear power plant will drift toward the Pacific.

The weather agency insisted that the results are entirely hypothetical, noting that it does not have concrete data with respect to the amount of radioactive vapor that escaped into the air, the timeframe and other details concerning the extent of damage to Tokyo Electric Power Co.’s No. 1 Fukushima nuclear power plant.

The agency said it conducted the simulation using the latest weather data to find how the radioactive particles will spread in the next 24 hours, assuming that the leak occurred at 9 a.m. Tuesday Tokyo time. The simulation shows similar results whether the leak occurred at 3 p.m. or 9 a.m. Tuesday, the agency said.