The declining price of oil is a catalyst for calamity

Its obvious that the price of oil, high or low, has serious implications for financial markets and sovereign budgets.  Cheap accessible energy has been the fundamental driver of economic development.  It is also the major cause of conflict, a key reason the west is demonizing Russia, and the US persistence in meddling in the middle east and North Africa.

From Zero Hedge, look at the charts for oil and the US$.  The petrodollar and oil move in lockstep, but inverted.  As oil goes down (the cause) the US$ goes up (the effect).  Bill Holter at Miles Franklin helps us see through this:

I want to mention the recent explosive move higher in the dollar. It has rallied nearly 15% in six months, and nearly 10% of this in just the last two month. This I believe is the result of the dollar carry trade unwinding. Many commodities including oil were “carried” by borrowing dollars. This was a synthetic short position in the dollar. As the commodities (oil) imploded in price, traders were forced by margin calls to exit positions. The borrowed (shorted) dollars were paid back (covered) and has caused the rally in the dollar.

The US$, the petrodollar, is the global reserve currency through its relationship with oil.  i.e. the US$ is the expression of the price of oil, and the currency used for most oil transactions.  US treasuries held as FX reserves in countries around the world are in large part for buying oil, or more broadly energy.

The declining price of oil is the catalyst for a chain of events that is impacting the global financial system.  Here is how I connect the dots:

– oil is going down because supply is outstripping demand.
– this drives up the price of the US$ since it takes less petrodollars to buy oil.
– this causes deflation in anything priced in US$, meaning asset prices drop
– US$ denominated debt will be more costly to pay back in the future, since US$s are more costly than they were borrowed at.  The rising dollar is bad for borrowers of outstanding debt (i.e. corporate and government)
– holding US treasuries (UST) means you are long on the dollar.  USTs increase in value as the dollar increases, which means the yield will go down, i.e. downward pressure on interest rates
– the US has been rolling over trillions of dollars of debt, which of course are denominated in US$.  Since the number of dollars they roll over does not change, they need to roll the debt over in more costly dollars.  The rising US$ is good for buyers of USTs since they will be paid back in the future with more expensive dollars.  On balance this lowers risk, which will push interest rates down.

So, if this flow of cause and effect is correct,

– as oil continues to drop, the US$ will rise
– all currencies will fall relative to the US$
– oil exporting countries will see currencies fall even more
– US trade balance will get creamed
– interest rates will be pushed down further
– deflation will dig in and asset prices will drop
– as collateralized asset prices drop, borrowers will need to either come up with more collateral, liquidate assets or default

The key danger points:

– declining assets prices and the need to cover collateral could spiral out of control.  Bonds/loans to shale and tar sands producers are blowing up, especially if revenue streams were collateralized
– energy derivatives that were long on oil are going nuclear
– two-thirds of the hundreds in trillions of dollars in derivatives are interest rate derivatives.  Half of those must be on the wrong side of the bet

With a dollar carry trade of $9 trillion invested in risk assets, the coming six months are not going to be pretty.

Max Keiser interviews former British energy regulator Chris Cook. Great insight into some of the dealings with global energy prices. Interview starts at 12 mins, but the entire show is about oil.  Basic thesis is that since 2008, QE money flowing into financial markets was looking for yield, and inflation hedging via commodities, which pumped oil and commodities up.  Saudis lent oil to hedge funds, who lent money to Saudis.  Oil balloon deflated when QE stopped.  US and Saudis had a dark deal, guaranteeing floor at $80/barrel and US gas at pump less than $3.50 as the ceiling.  If US gas went up, Saudis supplied more oil to the US.  Brent at one time was $20 more expensive outside of the US.  US shale oil, viable at >$100, is a swing supplier, essentially putting a cap on the global price of oil.  At $91, shale producers on average were paying $130 for oil and receiving $100.  At current $56, well, do the math.  At $25, carnage, with only a couple shale producers viable.  Wow.
Here is an excellent article on the Russian cancellation of South Stream pipeline.  Not oil, but natural gas.  Europe is not happy being captive to the Russian monopoly Gazprom for a third of its energy needs.  South Stream was a cynical attempt by Europe to gain control of the transmission of Russian energy.  EU “energy security” is really a euphemism for the extraction of energy in other countries by its own companies under its own control, aka western capitalism.  Russia did not want to be manipulated, walked away from the deal and is now looking towards China, Turkey and the east for economic partnership.  “… by redirecting gas away from Europe, Russia leaves behind a market for its gas which is economically stagnant and which (as the events of this year have shown) is irremediably hostile. No one should be surprised that Russia has given up on a relationship from which it gets from its erstwhile partner an endless stream of threats and abuse, combined with moralizing lectures, political meddling and now sanctions.”
This thread on TFMetals Report has lots of good discussion on Russian energy.
Its not just oil.  Energy is being routed and here.  The price of oil has plunged 50% since June, the price of propane is down 50% since its recent high in mid-September, and natural gasoline is down 32% since recent high in mid-November.
by ending QE the US primed the drop in oil prices. The rising US$ is deadly for emerging economies dependent on importing oil, which they purchase in US$. The chain of events is the rising dollar means emerging economies can no longer afford as much oil, which chokes off demand for oil which inflames the excess supply already in the market.  In addition, EM debt, which is typically denominated in US$, are watching their debt increase as the $US increases against their domestic currency.  This situation is unsustainable.
The real cause of low oil prices: interview with Arthur Berman.  The price of oil will recover. All producers need about $100/barrel. The big exporting nations need this price to balance their fiscal budgets. The deep-water, shale and heavy oil producers need $100 oil to make a small profit on their expensive projects. If oil price stays at $80 or lower, only conventional producers will be able to stay in business by ignoring the cost of social overhead to support their regimes. If this happens, global supply will fall and the price will increase above $80/barrel. Only a global economic collapse would permit low oil prices to persist for very long.
– … in this analysis, by SRSrocco, oil demand is up over previous year, but below projected growth, and price is highly elastic. Small changes in demand result in large changes in price.  Further, for oil importing countries, especially emerging markets, declines in the price of oil have been offset by the increasing petrodollar relative to domestic currencies, again noting the inverse correlation between oil and the $US index.

– I am not sure what to make of this analysis, but the author suggests Saudis are being compensated for the falling oil price through CitiBank.  If this is true, it would point  the smoking gun for the drop in oil prices at a deal between the US and Saudis.

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US Torture – A Sad Day for Humanity

For me, the most troubling and perverse aspect of this conversation is the lack of condemnation against the US for the torture by the global community.

The world knows and understands as a fully documented fact that the US tortured and killed prisoners, and probably still does.  Torture is official US policy approved and implemented by the highest levels in the US government.  The Bush/Cheney cabal are on the record of having personally approved of torture and were personally engaged in understanding the techniques that would be used.  Cheney continues to beat the drum of the righteousness of torture, and would approve it again with a full understanding that he would be approving torture.  The government legal apparatus deliberately perverted the law to offer the cloak of legality for the torture.  The Obama administration must be complicit as well.

There is no question that what the US did is in violation of US law and are crimes against humanity, as defined and endorsed by the international community.  International law prohibits granting immunity to public officials who allow the use of torture.  This applies not just to the actual perpetrators, but also to those who plan and authorize torture.  If any individual orders, enables or commits torture, they cannot be granted impunity because of political expediency.  The US is not a member of the International Criminal Court, but did ratify the UN Convention Against Torture in 1994.  The US was fully complicit in the prosecution and hanging Japanese torturers in WWII who used the same waterboarding techniques the US did.

If it were any country other than the US that did this, there would be blanket condemnation and sanctions.  The offending state would become a pariah nation.  Leadership would be tried and convicted in absentia in the Hague, arrested and probably put to death were they to be nabbed outside of their own territory.

The US, however, is being given a pass.  Outside of the US, western countries do not condemn it.  Advanced countries like the UK, Canada, Australia, Germany, France et al are silent.  And it is totally perverse that half of US citizens approve of torture.

The international community has a legal and moral obligation to vigorously and unequivocally condemn US torture and try all those responsible.  Failure to do so makes a mockery of any moral justice the world pretends to impose on any individual or country.  Frankly, I cannot imagine this happening.  How sad for humanity.

Additional reference:

An article from Consortium news on US torture
NYT calls for the prosecution of torturers and their masters
Observations on the torture report
The CIA Didn’t Just Torture, It Experimented on Human Beings

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Orwell was only wrong about the date …

… a cartoon essay by Scott Stantis, Chicago Tribune:


Everyone thinks 1984 is a work of fiction.  Little do most realize that Orwell was from the future, sent back to warn us.  1984 is, in fact, an accurate account of the future Orwell came from, but not necessarily the one we are destined for.  Terminator got him, however.  That may well have doomed us for an alternate, hopefully better future.

To further manage the path to that particular future, they* sent back a bunch of cyranoids** whom have been placed in positions of power and influence.

“Them” have also sent back powerful surveillance technology to watch our every move. This spyware is engineered with highly advanced psychotropic properties that hopelessly addict the user.  So even if the user becomes aware of being under perpetual surveillance, s/he is unable to resist, and, in fact willingly and enthusiastically submits to further mind control.

Them walk among us.  Trust no one.

Of course, we are screwed now that the future has been secured, because we failed to act on Orwell’s warning.  So, just carry on and watch it unfold.

“None are more hopelessly enslaved than those who falsely believe they are free” – Johann Wolfgang von Goethe

Have a nice future 8^)

* actually it would be more accurate to call “they” “Them,” as Them are the mysterious operators we always suspect are manipulating things behind the scenes, mostly in what we call the “Deep State.”

** Cyranoids are people who do not speak thoughts originating in their own central nervous system. Rather, the words they speak originate in the mind of another person (or sentient being) who transmits the words to the cyranoid by some form of wireless transmission.  Them have been working on an app, or more accurately a virus, that will infect the user of a mobile device or smart phone after prolonged staring into the devices screen.  Once the app is uploaded into the persons memory, that person would effectively become a cyranoid, unable to act on their own ideas. Rumour has it that the app is presently in beta on some Android and iOS devices.

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Think Tanks, Shamanism and Shilling for Dollars

The NYT is reporting that “foreign powers” are buying political  influence through substantial contributions to “think tanks.”  These contributions ensure editorial discretion is favorable to the contributor’s cause(s) and criticism is censored. The article calls out the Center for Global Development, the Brookings Institution, the Center for Strategic and International Studies, and the Atlantic Council as particularly egregious examples.

I am surprised anyone is surprised that these think tanks are anything but paid shills.  Same goes for MSM and economists. Consider the voodoo trickle-down economics, proposed by Milton Friedman in 1970 and institutionalized as policy by the Reagan administration in 1982. This resulted in deep tax breaks for the wealthy on the expectation that their spending and investment would juice the economy. Turned out to be pure hokum. Even Forbes now calls it “The World’s Dumbest Idea” — in 2013, 43 years after Friedman first proposed it.

This is all part of the lies and misdirection practiced by the global elite to manage the masses by confusing the message.  Pick any controversial topic — e.g. fracking — and there are no shortage of “experts” on either side of the debate.  Who’s right?  From the pro-fracking camp, who cares.  The evidence is so convoluted, few are willing to invest the time and thought to decode the truth.  Win = pro-fracking.

Another good one — the downing of MH17.  Suppress the evidence. Repeat unsubstantiated lies over and over.  Who done it?  Who knows?  Ask anyone and most will say the Russians/Putin.  Win = USG

As the great propagandist Joseph Goebbels once (reputedly) said,

If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.

Additional reading:

Corruption is the price of empire: the buying of America’s Think Tanks
Political influence, in Virginia and ‘all creation, U.S.A.’

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The Jingoist’s Propaganda Playbook

On Ukraine, Paul Craig Roberts recently wrote about the US government’s unabashed use of propaganda to manage and shape the narrative.  He quotes Peter Duveen (and I will here as well, because it is so good), who suggests that having foreknowledge of news events that Washington orchestrates allows Washington to control the explanation before any evidence is available. By the time evidence is gathered, the narrative is established and the evidence ignored:

“Part of the US propaganda mill’s effort is into forming the conversation. Once certain narratives take hold, true or untrue, they edge out other narratives. So the effort is to get control of the narrative, to form the conversation with whatever materials, usually false, are available. Then, of course, the false information will be referenced as true, and the direction of the narrative will be fixed.

The narrative being lowered into place, for example, is that Russia was somehow responsible for the downing of Flight 17. With the help of the media, the hope is that the narrative will gain momentum. Eventually, if it catches properly, it will be impossible to question, just as people are considered freaks who question the official narrative of 9-11. That is why the narratives are introduced as quickly as possible.

Thus, we saw how quickly it was announced that Flight 17 was brought down by a surface to air missile. That would lead me to believe that it was actually not brought down by a surface to air missile. So also with this incredibly amateurish effort regarding Russian shelling of Ukrainian positions. Russian reaction is never obtained in the articles about it, and it is no longer mentioned that Russian territory has been shelled by the Ukrainian military.”

Thus, the US State Department points to and uses social media deliberately to bypass the arguably more rigorous and inquisitive press, and never having to actually prove their accusations with any evidence.  The Russians, meanwhile, have produced satellite images and other evidence that appears to indict Ukraine forces on the ground and in the air that had the means to down MH17.  They challenge the US to provide satellite images of their own, which the US clearly have due to a spy satellite coincidentally overflying the area during the time period the airliner was downed.  Meanwhile, the US continues to point an accusing finger and blame the Russians with fake accusations and no evidence.

The downing of MH17 is looking very much like a false flag operation, staged by the Ukraine government with full complicity of the US government.  The objective is to demonize Putin and galvanize European public opinion against Russia.  This would justify a full militarization of Ukraine by US/NATO and enable a long coveted permanent US/NATO intimidation presence on the Russian borderDoes the US/NATO really want war with Russia?  Read more here.

In this age of doctored images and other media, you can’t believe even half of what you see.

“To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them, to use logic against logic, to repudiate morality while laying claim to it, to believe that democracy was impossible and that the Party was the guardian of democracy, to forget, whatever it was necessary to forget, then to draw it back into memory again at the moment when it was needed, and then promptly to forget it again, and above all, to apply the same process to the process itself — that was the ultimate subtlety; consciously to induce unconsciousness, and then, once again, to become unconscious of the act of hypnosis you had just performed.” – George Orwell, from 1984

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The Jig is Up … Fed tapering is an illusion

“Who are you going to believe, me or your own eyes?” – Harpo Marx

Last summer, I wrote a research brief on the US QE, titled Bernanke cannot take his foot off the gas pedalYou can read it here.  The pithy summary is that I did not believe the Fed would be able to taper the QE program for the foreseeable future.  The US economy continued to struggle, unemployment was persistent, official inflation was low, the velocity of the money supply was low — in essence, the Fed objectives were not being met.  And like a junkie, the markets would likely tank without the electric kool-aid the Fed was juicing the markets with.

Well, here we are in June 2014.  Much has changed.  The US economy officially contracted by 1% in the first quarter.  And since the beginning of the year, the Fed has been tapering QE and intends to continue to do so.  I guess I was wrong …

… or have they?

Since 2008, QE officially totaled $85B / month, with the Fed buying $45 billion of U.S. government debt (US Treasury bonds, USTs) and $40 billion of mortgage securities (MBS).  But, the actual average monthly purchase of bonds and MBSs in 2013 turned out to be $94B.  So even an official initial taper of $10B would have put the monthly QE back where the Fed says it was in the first place.

What is even more interesting is the sleight of hand that has been occurring since the middle of 2013.  Here is the US Treasury report of Major Holders of Treasury securities.  Observe Belgium’s UST holdings from August 2013:

Aug = 166.8; Sept = 172.5; Oct = 180.3; Nov = 200.6; Dec = 256.8; Jan = 310.3; Feb = 341.2; Mar = 381.4

Monthly deltas from August: $6B, $8B, $20B, $56B, $54B, $30B, $40B.  Curious, no?

Speculation is rampant that while the Fed is tapering its domestic bond purchases, it has ramped them up using intermediaries, in this case, likely the ECB through Belgium.  Jim Rickards speculates that the Fed and the ECB are exchanging dollars for euros, and the ECB is then using the dollars to purchase and hold USTs through Euroclear (see the interview here, go to 20 minutes for this discussion.  Paul Craig Roberts also has some interesting insights into this, listen here, read here).

According to Wikipedia, Euroclear is a Belgium based financial services company that specializes in the settlement of securities transactions as well as the safekeeping and asset servicing of these securities.  It was founded in 1968 as part of JP Morgan to settle trades on the then developing eurobond market.  Using Euroclear makes a lot of sense given the close relationship the Fed has with JPM.

For the Fed, this would be an off-balance sheet transaction, essentially invisible to external scrutiny.  Despite the lack of transparency, it is clear that rather than a taper, the Fed is actually increasing its bond purchasing activity, with monthly purchases of somewhere between $55B and $85B, when you include the Belgium proxy purchases.

Why?  You ask.  Because the US economy sucks, the global economy sucks, and if the Fed was not buying USTs at 2.47% (today’s yield), rates would reset commensurate with risk.  Would that be 3%, 5%, 7%?  I don’t know, but it is certainly higher than 2.47%.

The system cannot tolerate higher interest rates.  Some speculate that 3% causes hurt.  Seems low, but perhaps.  5%, twice today’s rate and close to the long-term average, probably lots of pain.  7% strikes me as catastrophic.  The global economy would blow up because of the astronomical debt sovereign states and corporations have accrued, and the $trillions of casino bets in interest rate derivatives the financial markets have struck.  Stuck between a dog and a fire hydrant.

Here is where we at today (May 30):

  • the US economy is contracting, Q1 saw an official contraction of 1%.  I am certain it is much higher than that, likely in the range of 4-6%.  Growth in GDP is certainly less than 2% annualized, and inflation is certainly greater than 6%.  Net the two together and that is the real growth i.e. quite negative
  • Official inflation, as measured by the the bogus CPI, remains below 2%, even though anyone can see energy and food prices are spiking.  According to Shadowstats, consumer inflation, using what would have been the official methodology in 1980, is nearly 10% as of the end of April.
  • UST yields have been dropping, now sitting at 2.475%, and slowly drifting downwards.  The Fed is obviously intent on keeping money cheap in a desperate effort to juice the economy.  So, as with Japan, the Fed buys its own bonds and manages the yield downward.
  • US attempts at ostracizing Russia has encouraged Russia to dump its UST holdings.  From the Treasury report, you can see Russian holdings dropping off steeply in 2014.  Once April and May are reported, Russian holdings will certainly have dropped further.  This, of course, puts upward pressure on the yields as more treasuries hit the market … unless someone is vacuuming them up.  Thank you, Belgium … err ECB … err US Fed.
  • Gold has been predictably slammed, sitting at $1,245, down about $60 over the last couple of weeks. The Fed does not want gold to be seen as a safe haven from the US$, so they slam paper gold down on the COMEX and the GLD
  • The US$ index had recently slipped below $0.80, but now has recovered to above that psychologically important threshold. Yay for small graces
  • The $US as a reserve currency is showing increasing vulnerability.  The US misadventure in Ukraine has encouraged China and Russia, in particular, to establish a trade settlement mechanism outside of the petrodollar system.  As bilateral trade relationships increase which bypass the US$, the demand for dollars will drop as supply of dollars increases, which will put pressure on the US$ and raise the specter of out-of-control inflation and even hyperinflation.  The genie is out of the bottle.  The petrodollar is history.

… and here we are at June 30:


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krazy kyakers

Ottawa has the good fortune of being near lots of water, mostly in the form of two rivers, the Ottawa and the Rideau.  The Rideau drains into the Ottawa.  Historically, the Rideau Canal was built to accommodate trade between Ottawa and as far as Kingston.

To facilitate boat traffic, a number of locks were installed.  In addition to the locks, dams were built, typically next to the lock, to manage the flow of water.  Near to where I live is a lock/dam called Hogs Back.  The dam side flows over a series of rocks, that are typically quite nice to look at, but with the spring melt, become a raging rapid.

So, this spring (2014), I brought my video camera down to Hogs Back to capture the wild torrents, much more wild than in other years, crazy huge flows.  After a bit of filming, a fellow asks if I am there to video the kayakers.  “Huh?”, I said.  He tells me three kayakers are suiting up getting ready to run the Hogs Back rapids.

So, I stick around and capture the following video.  Amazing stuff.  For 20 seconds in the rapids, it must have been invigorating, not to mention very cold.

For comparison, here are some pix of the flow in June,  Very pretty, but not nearly as dangerous. Note when the initial kayaker goes over the first flow, that is the same point as the first picture below.  Pretty amazing.



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Ooo Eee Oo Ah Ah

A recording technique that has long been used for interesting and amusing effect is to change the speed of the playback.  Faster would raise the pitch, slower would lower it.  In some cases, artists slowed the tape speed down during tracking to make instrument parts easier to play or to hit higher notes, and then sped up for the final mix. Other times they would adjust the tape speed during mastering to get a sound they liked more.  The timbre of the notes changes.  Guitars played back at even slightly faster speeds sound chimier.  Vocals at slightly slower speeds have a deeper resonance.

One of my favorite Beatle songs, which coincidentally used this technique, is Rain, where the master was slowed down.  The guitars sound sublime, especially that little guitar break at 2:33.

In thinking about the Beatles use of the varispeed technique, it occurred to me that the backing vocals on Magical Mystery Tour sounded like they were pitched upwards.  And indeed they are.  Here are some parts with the final version followed by the slower playback which would have been used during tracking:


On a tape machine, this was easy to do, as you just needed to flip a switch for preset speeds (typically 30ips, 15ips, 7.5ips and 3.75ips), or change the voltage to the capstan motor (varispeed) for continuous increments.  In the digital world, this is, surprisingly, not  straight forward.  Pitch tuning (Autotune, Melodyne, …) allows you exceptional ability to change notes.  But this does not sound the same to me, and more extreme changes result in artifacts that sound bad.  Changing the playback speed for recording or mastering takes a couple of extra steps.

All that to say, as a little exercise, I took a run at Alvin and the Chipmunks, to see what the real voice behind the little critters actually sounds like.  Here is the amusing result at half-speed, from the original 1958 recording of Witch Doctor that started it all for Alvin:


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Finally, the most famous chord of all time …

… the opening chord of A Hard Days Night has been successfully dissected.

In this radio interview with Randy Bachman on CBC’s Guitarology program, RB talks about meeting Giles Martin, son of George Martin, at GM’s private studio at Abbey Road. In the studio, GM has access to digitized copies of all the Beatle’s multitrack source tapes.

After pondering what he would like to hear, RB is provided with solo’d track by track playback of “the chord”.  When it is all put together, HE NAILS IT!  Give it a listen …


Here is the breakdown he describes:

  • Track 1: George on Rickenbacker 12-string  GCFACG
  • Track 2: Paul on Bass playing D
  • Track 3: John on 6-string xxDADG

The notes being picked up are:  A-C-D-F-G

  • From a G perspective: 1-2-4-5-b7
  • From an F perspective: 1-2-3-5-6
  • From a D perspective: 1-b3-4-5-b7
  • From a C perspective: 1-2-4-5-6
  • From an A perspective: 1-b3-4-b6-b7

Closest thing to call it would be a Dm11 or an F6add9.  Whatever you call it, you can’t make the chord sound properly with only one hand (chording) and one guitar.

What a sound. This is TOO COOL!!

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The Age of Thirst

note: this post was originally published in May 2013.  It has been updated as new information is available.  I decided to republish it and move it to the top of my blog, as it is such a “hot” topic.  Latest updates are at the bottom of the post.

Amidst all the other crisis afflicting the world today, one that will surely inflict great misery and result in rising global tension is the unquenchable demand for clean drinking water. Already, one in six people in the world lack safe drinking water. In many of the poorest regions of the world, the availability of drinkable water would relieve much suffering and lift many out of extreme poverty.

The future does not look promising.  The climate change tea leaves are signalling a profound shift of precipitation patterns.  Here is a chart of the Americas (from the Lamont-Doherty Earth Observatory of Columbia University) that shows the projected change in precipitation for period 2021-2040 minus the average over 1950-2000 as a percent of the 1950-2000 precipitation.

The short analysis is that the north gets wet and the south gets dry. But the story here is that the dry gets VERY dry, uninhabitable dry.

Not to neglect the global impact this change is bound to inflict, but the prognosis for the pacific southwest is dire, and is being touted as “The Greatest Water Crisis in the History of Civilization.”

The pithy summary is that if you live in the Southwestern US, Mexico or Central America, you or your children and grandchildren will soon be living through one of the deepest droughts ever recorded.

The evidence appears to be conclusive.  It is already in transition with Lake Mead predicted to become Lake Dead by 2026, creating huge problems for the 27+ million people (in Southern California, alone) that depend on it for water.  Climate change skeptics can form their own conclusions, and make some shrewed land investments.

I intend to continue to track and add to this topic.  For starters, Saudi Arabia is already as concerned about Peak Water as it is about Peak Oil.

Water will become more precious than oil because life depends on it. It will be a source of escalating conflict around the world as various groups attempt to gain control of the available fresh water resources.

And if actual precipitation changes turn out as the models predict, with severe drought inflicting areas containing large human populations, we could see massive human migration to northern regions as water sources able to support these populations diminish in the south.  Based on the map above, all of Southern California, Mexico City, Arizona (ouch),  New Mexico, Texas and Central Americal are likely to be scorched.

This drama will be unfolding rapidly, year over year, in the coming decade.

As if we didn’t have enough to worry about.

Addendum and Updates

Dec2011: Natural weather cycles delivered the worst one-year drought in the historic record to Texas in 2011. Scientists examining tree rings had to go back as far as 1789 to find a worse one.

May2013:  The High Plains Aquifer, a waterlogged jumble of sand, clay and gravel that begins beneath Wyoming and South Dakota and stretches to the Texas Panhandle, is tapped out.  Vast stretches of Texas farmland lying over the aquifer no longer support irrigation. In west-central Kansas, up to a fifth of the irrigated farmland along a 100-mile swath of the aquifer has already gone dry.  Once an aquifer runs dry, it can take hundreds or thousands of years to replenish.  Basically, its over.

May2013: The worsening drought along the Colorado River will leave Lake Powell and Lake Mead, the Colorado River’s two giant reservoirs, at 45% capacity by year’s end, their lowest since 1968. The trend is clearly in the wrong direction.

Oct2013: Pine Flat Reservoir in the Fresno County foothills is currently holding only 16% of its capacity.  San Luis Reservoir, which gets water from the Sacramento-San Joaquin River Delta, is only 22% of its historical average for this time of year.  January through May 2013 were California’s driest in 90 years of record keeping.

Jan2014: After 14 years of drought, the declining water levels of the once-mighty Colorado are threatening to take a big bite out of water resources in the Pacific southwest.  Odds are 50-50 that by 2015, Lake Mead’s water will be rationed downstream.  Because of the water sharing agreements, Arizona will be very hard hit before California feels the pain.  But that will come.  Unless there is a radical reversal of trending weather patterns, this region will face continuous and increasing pain as fresh water resources diminish.  Los Angeles, San Diego, Arizona, Nevada … by 2020, it will not be pretty.

Jan2014: California declares drought state of emergency.


Jan2014: US Drought Monitor shows the deep drought that has the pacific southwest in its grip.  The situation is dire.  Read: “The Worst Drought in the History of California is Happening Right Now.”  Unfortunately for California and the southwest, dry is the historical norm.  The 20th century was the anomaly – the wettest century in the western half of the United States in 1000 years, and that extremely dry conditions are what we can expect for most areas from the Pacific Ocean to the Mississippi River.  This inevitable crisis was on the radar for a number of years, and has now reached a critical point where the impact is being broadly felt.  And there is no way out.  There is not enough water.  This is an epic crisis.

Feb2014: National Geographic article on ancient droughts, and what history may tell us what’s in store.  Research shows a roughly 50- to 90-year cycle of wet and dry periods over the last few thousand years, with some droughts lasting over a decade. But between 900 and 1400 A.D., during the ‘Medieval Warm Period,’ there were a couple of droughts that were over a century long.  The article is truly frightening.  If the pacific southwest is in a megadrought, the next decade must see a depopulation from that region, as there will not be enough water to sustain the populations we have living there.

Feb2014: California is a desert.  The last 100 years was a wet anomaly.  Prepare for a deep, decades-long drought.  Or a couple of centuries.  Things will get far worse before they get better in, what, 3 or 4 generations?

100 per cent of California is now classified as in “severe drought” and rivers are so low 27 million young migrating salmon are having to be taken to the ocean in trucks.

Feb2014: Brazil rations water.  Water will be a precious resource which nations will fight over in the coming years.  Oil (energy) is bad enough, but you need water to live.

May2014: Arizona town near the Grand Canyon running out of water.

May2014: Southern California is roasting.  Wildfires are raging in San Diego County, with arson suspected.  But here is what is really troubling.  This is the latest from the US drought monitor.  I think it is self explanatory:


July2014: Update from the US drought monitor of California.  This is just incredible.


May2014: Collapsing California aquifers sinking land.

June2014: Lake Mead well on its way to becoming Lake Dead.  Las Vegas likely to become victim of parched earth playing out.  It is, after all, a city built in a desert.  Lake Las Vegas is a surreal poster child for the obscene abuse of precious water resources.  Dry up and die.

Lake Mead July 2014

Lake Mead July 2014

June2014: Lake Mead is about to reach its lowest water level ever.  The dropping water levels, at up to two feet per month, are not only impacting recreation and water supply, but also putting hydro power in jeopardy. With less pressure as the water enters turbines that run the electricity generators, the current capacity is about 1,592 MW — down from the 2,074 MW that’s achievable. This could drop to about 1,120 MW by May 2016 if predictions hold.

June2014: Austin, Texas is on the precipice, with doubts about its survival.  It’s water supply comes from the Highland Lakes reservoirs, which are fed from the Colorado River.  Today, the lakes are at just 38% of their historic levels. It is estimated that if things get no better, the Highland Lake reservoirs are likely to dry up completely by 2016.  In the face of the catastrophic drought facing Texas and other regions of the US, climate science is considered subversive in Texas because it would force a major rethink of land development and resource use.  Gov. Rick Perry considers global warming a scientific hoax.

July2014: Corporations continue to remove groundwater and privatizing water sources even while those water sources are drying up.

Sept2014: The West Without Water — Dr. B. Lynn Ingram, a professor in the Department of Earth and Planetary Science at UC Berkeley, points to research that suggest there is a 50-60% chance that the drought enveloping the Pacific Southwest and California may last at least 35 years.  Medieval droughts in the area occasionally lasted decades more than that.  Ironically, every one-two centuries, California has been hit by mega floods. The last one was in 1861-62, and filled the entire Central Valley (350 miles long and 20 miles wide) with water 20 feet deep. This was caused by 43 days of rain from atmospheric river storms.

Oct2014: Latest National Weather Service projection for California is more of the same through January 2015.  Even El Niño is expected to be milder than usual, so no relief there.  Bummer.


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