In
life there is no free lunch and as the second law of thermodynamics
states entropy or disorder inexorably increases with time. Any
countervailing order has to be paid for by expending energy, a part of
which is inefficiently wasted by generation of heat, which is dissipated
and leads to increased entropy. There is no Maxwell’s demon that can
separate the high energy fast moving gas molecules from the slow moving
ones without higher cost. Thus the diversion of corn harvests to
fructose syrup and ethanol to mix with gasoline, rapeseed oil to
artificial diesel fuel and water to clean burning hydrogen cells
consumes more energy than it can generate. Not only are the costs
prohibitive for a non-tropical country (Brazil can do it less
inefficiently from a low input crop like sugarcane), but also as an
unintended consequence, it accelerates food price inflation and
shortages, as the riots and unrest in Jordan, Morocco and China prove.
In nature the only free lunch is the invention of chlorophyll by
primitive organisms to harness the abundance of sunlight and use it to
synthesize all essential nutrients as plants do, with oxygen our
lifeline as a by-product. Even this basis of our existence is not
achieved energy efficiently.
Ludwig Von Mises and the Austrian school of economics believe that
irresponsible inflation of money supply and resultant artificially low
rates of short term interest eventually lead to a collapse of bubbles
and a depression like in 1929, similar to a biological phenomenon called
tachyphylaxis where excessive secretion of a hormone or enzyme leads to
progressive diminution of effect due to exhaustion of the substrate
responsible for generating the ultimate effect and the desensitizing of
the receptor mediating it. This is what America is facing. Maximum
opening of the money spigot and flooding the economy with money creation
is not unclogging the bottleneck of a credit crunch due to the
unreliability of and increase in counter-party risk between the
contracting parties (lenders and borrowers or credit default swap
traders) and the shrinkage of capital base of banks due to huge write
offs of imprudent loans and investments.
America like Adam Smith’s proverbial butcher, baker and candlestick
maker has not handed out Marshall plans, sheltered the growth of Western
Europe, Japan, the Asian tigers and recently China out of benevolence,
but initially for selfish motives of maintaining its supreme hegemony
and more recently for lulling to distraction its naive populace with
cheap bread and circuses, to surreptitiously enrich its fat cats who
fund the power lust of its crooked politicians. (China is doing the same
in Africa and South America currently) The result is the depreciation of
the dollar from 300 to 100 yen and from the Euro’s nadir of 82 cents to
152 cents. Now the time has come to pay the piper. The sub-prime crisis
is the last straw. The addiction to profligate spending has left
consumers, corporations and governments, both state and federal, so
burdened with debt and unfunded liabilities that mere band-aids like
shenanigans of accounting fudges will not stem the bleeding from gaping
wounds. Warren Buffett’s recent annual letter to shareholders highlights
the blatant lies and false assumptions of pension accounting by assuming
unachievable high rates of returns on pension assets to increase
reported annual earnings, merely to raise share prices to cash in on
huge windfalls from options by greedy unethical executives.
Japan for its American nuclear umbrella, China for its hunger for
technology and the desperate need to avoid unrest by its teeming masses
needing employment, who may challenge the rule of its crooked and
corrupt government and Europe because of its ethnic ties and gratitude
for American rescue from two world wars, are accepting of America’s
eroding currency and mounting debt. A limit will soon be reached as the
value and purchasing power of the former two’s reserves has plummeted by
nearly 50% (rise in price of gold, oil, wheat, corn, soybeans and other
commodities) despite their currency manipulation and the skyrocketing
Euro is decreasing Europe’s exports, reducing the growth of its economy
and increasing its unemployment and budget deficits due to its gold
plated safety net. China’s iron rice bowl has vanished and the crooked
farmer land acquisition of its corrupt local leaders, which the equally
crooked central government is unable to control, will morph into bigger
problems in the future.
The problem is that to bring the global economy
back into a stable state, America needs to generate trade, budget and
current account surpluses. This can only occur if American consumers
save instead of consuming, manufacturing returns to America and the
dollar loses a further 25% of its value. This would lead to severe
economic upheavals in Japan, China, the Asian tigers and even Europe
which they are unwilling to tolerate. On the other hand accumulating
dollars with rapidly shrinking value is equally unacceptable to them and
even to the illegitimate tyrants of oil rich Middle East countries being
tweaked further by Russia, Iran and Venezuela threatening to price
energy resources in currencies other than the dollar.
The above facts explain the desperate gamble by Cheney and his dummy
Bush to take over the energy assets of Iraq, threaten Iran, malign
Russia, capture Afghanistan for access to Caspian energy, cozy up to the
tyrants of Uzbekistan, Turkmenistan and Kazakhstan, give independence to
Kosovo to guard pipelines from the Bondsteel base, court Azerbaijan,
Georgia and Turkey, strengthen Israel as the local gendarme, persecute
Sudan for Darfur, foment unrest in Chad, destabilize Angola in the past,
while having ignored Rwanda and Congo genocides and supported the Khmer
Rouge genocide in Cambodia (as China did) and creating a new Africa
centric command force by the Pentagon. The control of energy resources
gives America a stranglehold on the energy needs of Japan and Europe to
keep them toeing its dictates. This is why it threatened India and Japan
not to have energy ties with rebellious Iran by building the IPI
pipeline or developing Iran’s energy fields. America wants a fatal grip
on the carotid arteries (energy) of major nations to make brain dead
those countries that disobey its dictates and threaten its supremacy and
hegemony (read Bush strategic doctrine and Quadrennial Defense Review of
the last four years). Only China and Russia can stand up to it. Cuba,
Venezuela and Iran do but they pay a formidable price. Do not expect any
significant change in American foreign policy if McCain, Hillary Clinton
or even Obama become the next president, though the last is least
beholden to vested interests or the power elite (see my two year old
articles “Hobbesian Hell “ at
www.atimes.com or “A History of International
Relations: Power & Hypocrisy).
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In
life there is no free lunch and as the second law of thermodynamics
states entropy or disorder inexorably increases with time. Any
countervailing order has to be paid for by expending energy, a part of
which is inefficiently wasted by generation of heat, which is dissipated
and leads to increased entropy. There is no Maxwell’s demon that can
separate the high energy fast moving gas molecules from the slow moving
ones without higher cost. Thus the diversion of corn harvests to
fructose syrup and ethanol to mix with gasoline, rapeseed oil to
artificial diesel fuel and water to clean burning hydrogen cells
consumes more energy than it can generate. Not only are the costs
prohibitive for a non-tropical country (Brazil can do it less
inefficiently from a low input crop like sugarcane), but also as an
unintended consequence, it accelerates food price inflation and
shortages, as the riots and unrest in Jordan, Morocco and China prove.
In nature the only free lunch is the invention of chlorophyll by
primitive organisms to harness the abundance of sunlight and use it to
synthesize all essential nutrients as plants do, with oxygen our
lifeline as a by-product. Even this basis of our existence is not
achieved energy efficiently.