On the Nature of Debt: A Baited Trap

There are two excerpts I want to share about the nature of debt. Both are from my favorite site, www.theautomaticearth.blogspot.com. One is from one of the authors of the site, Nicole Foss (Stoneleigh) , and the other excerpt is written by another blogger who is quoted in one of their posts.

There are two ways to pay for expensive assets, whether you are a person, a business or a country. One way is through past earnings (savings) or through presumed future earnings (debt). Savings is tough. It requires discipline, frugality, and patience. These are real, hard won virtues. Debt requires nothing of you at the time you take it on. It's available now! Why wait! Is it any wonder that people have gravitated towards the enticing morsel on the mousetrap, rather than foraging in the wild? In a more balanced society, you might expect markets for large assets to be paid for roughly half in savings and half in debt. In our society, there are virtually no people who pay for houses with savings. Nearly everyone takes a mortgage. The coiled teeth of the trap have been hidden from our view in the past by selling us the notion that the debt is low-risk. That notion, however, is very sensitive to the assumptions that underly it. How reliable is your income, really? What emergencies might present themselves that divert the cash stream needed to pay back that loan? What happens when all you thought you knew about inflation and the change in value of your assets is thrown out the window. In these times, debt can be an extremely risky proposition. What happens if you try to buy a house out of savings, and something unexpected happens? Well, you go on renting for a while longer. What happens if you're trying to pay out of future earnings plus interest. In many cases, default - and the loss of all you thought you had. The trap is sprung, and the creditors get what they were really after.

Here's Stoneleigh: (http://theautomaticearth.blogspot.com/2009/01/january-9-2009-dr-doomlittle.html)

Bailouts are NEVER for the little guy no matter what spin their proponents use to sell them to the public (who will be paying for them through their taxes). The role of the little guy in a Ponzi scheme is to be the empty-bag holder. This is the tragedy of our times, and there's nothing anyone can do to prevent it, whether or not they might want to. The losses have already occurred, but as yet still lie out of sight in illiquid 'asset' accounts supposedly worth hundreds of trillions of dollars, but actually worth close to nothing.

A predatory lending structure has been sucking the wealth out of ordinary people through debt enslavement for a long time, by encouraging them to buy far more than they could actually afford on margin (ie with borrowed money). That is a recipe for paying far over the odds for everything, while the financiers collect the excess - an excess collected preferentially from those near the bottom of the income scale, who were most likely to carry a perpetual credit balance at a predatory rate. This is how credit bubbles form - a combination of predators and all-too-willing prey that doesn't understand the nature of the trap. Hansel and Gretel and the witch's Gingerbread House comes to mind, minus the escape at the end.

Unfortunately, it was easy to entice people into debt slavery, as the offer of access to material goods is always hard to resist, particularly when it seems like everyone else is enjoying new-found wealth. It doesn't take long to convince people that they deserve to have a large home, multiple cars and all manner of consumer goods, or to convince them that they are somehow inadequate and that their children will suffer if they don't participate in the consumer culture. The relentless marketing barrage played on our insecurities, conveying a message that happiness and social status could, and should, be bought.

A situation where ordinary people are able to buy anything on margin is historically very rare, as credit is normally only extended to those who do not need it. The last several decades have been an aberration, largely due to an increasingly reckless attitude towards risk. For ordinary people, low interest rates led them to believe that huge debt burdens could be sustained so long as the budget could be stretched to cover the monthly payment. For those higher up the financial food chain, the process of securitization created the appearance that risk could be passed on ad infinitum, until it ceased to exist. Unfortunately, low interest rates are a trap, and securitization, instead of minimizing or eliminating risk, actually magnified it into a systemic threat.

In terms of mortgages, even those that seemed conservative in recent years were not. In the latter stages of a credit bubble, even a deposit of over 50% and a monthly payment that could be covered by one of two salaries is a recipe for deep trouble. We are looking at a collapse of property prices and a huge rise in unemployment, which will combine to cause an unprecedented amount of negative equity, defaults and foreclosure, and, thanks to leverage, the resulting loses will snowball, further undercutting the supposed value of financial assets. The 'conservative' mortgagees are mostly just as trapped as those who over-extended themselves further.

Even those who own homes free and clear will find that, in a frozen property market, they can not move to where the jobs are, or to a more suitable property with some self-sufficiency potential. If they lose their jobs, they may lose their homes through being unable to pay the sky-rocketing property taxes that municipalities will introduce in a desperate attempt to fill the gaping holes in their own budgets. This is why we suggest that people generally rent rather than own (unless they own a homestead free and clear). Renting amounts to paying someone else a fee to take the property price risk for you, and that is a very good bet under today's circumstances. Rents will fall a long way in a deflation, and although landlord default is always a possibility (perhaps meaning more than one move), that risk is preferable to losing the bulk of one's assets in a property price collapse.

The middle class has been comprehensively fleeced by the debt trap, and the consequences for social stability will be extremely unpleasant once the chickens come home to roost. Except for a few of the super-rich, we will all share in the misery to come, and none of us can expect a bailout. Whether we've been gorging ourselves on the Gingerbread House or merely nibbling at it, we now find ourselves in a cage.

And here's Dan W.:

(http://theautomaticearth.blogspot.com/2009/01/january-25-2009-all-those-creeps.html)

As a little kid I was always fascinated by apparent contradictions, paradoxes and illusions. I marveled in the revelation that the only way to free oneself from a “Chinese Finger Trap” was to push one's fingers forward, toward each other, instead of pulling them apart---which of course was utterly counter-intuitive, and which also was why the trap was really so ingenious, because as people pulled harder and harder and the trap squeezed tighter and tighter and the anxiety grew and grew, finding the actual solution became a virtual impossibility. I so-enjoyed, as a stoned young schoolboy, holding a pencil loosely between my thumb and index finger and shaking my arm up and down and making the pencil look like it was wobbling and bending. I still don’t totally get how that works, and I haven’t smoked pot in decades!

Now, as an adult, my appreciation for contradictions, paradoxes and illusions has become even more profound, for I have come to believe that our ability as a species to accept truths that seem contradictory and/or paradoxical---and subsequently to choose consciously not to fight against these seeming contradictions but instead to accept them and hence use our acceptance as a route of escape from our own intransigence---may in fact save us from our ourselves.

OK, so back to the economy.

The paradox of riptides: The paradox of riptides is pretty obvious. Struggle to overcome the riptide by fighting against it and swimming directly into it and you die. Swim perpendicular to the tide, thus eventually freeing yourself from the rip current, and then with relative ease return to shore.

Our political and financial leaders believe that they can fight against the economic rip tide in which we find ourselves. They believe that our survival is predicated on the earnestness and intensity of our struggle against the current “tide”. Our leaders also think that we can return to the same shore from which we were unceremoniously dragged out to sea by the financial rip tides that we are currently experiencing. They think that a return to the beach means a return to 5% per annum growth and low single-digit unemployment and thousands of new 10,000 square foot homes and thousands of new brands of cereal on the shelves of our super-markets and 75 inch HD TVs in every home. In this way, Obama and Summers and Rubin and Frank and Dodd and Pelosi and all of the actors in Washington and New York are not only swimming against the rip currents, they are trying to swim back to a beach that simply no longer exists. That beach, the one built with trillions in debt and no capital production, is gone. It is a mirage destroyed by the mathematical realities of a world in which debt and gambling replaced production and savings, thus eroding the system to the point of complete extinction.

Remember, surviving a rip current means accepting the fact that a paradigm shift is inevitable. One cannot survive the perils of a rip current by swimming back to the same spot on the shore from which one was rent. One must swim parallel to the shore, only returning to solid ground once the rip current has relented. And so, playing out the metaphor even further, when the swimmer---the survivor---returns to the beach, it is not the same beach from which he first departed. It is a different place on the shore. Survival is predicated upon accepting the fact that a return to the same shore is simply impossible; that a new shore must be explored, and that this new shore must be accepted not for how it can be manipulated and exploited, but for what is has to offer.

In the current economic crisis, our survival intact means accepting the mathematical reality that we cannot return to the same point on the beach from whence we came. We must accept the following THREE realities in order to make it through this catastrophe at least somewhat whole:

Growth is deadThe days of 5%, even 3% GDP growth are over. In a country that produces virtually nothing, and in a country in which 72% of GDP is a measure of debt-based consumption, growth is a misnomer, a fallacy, an illusion created by those in power to perpetuate a system that makes them rich whilst simultaneously robbing the rest of us of our futures. Any attempt to “return” to the days of growth is but a lie---it is fighting against the realities of the current: sure suicide. And the choice of a few to fight against this reality eventually leads the rest of us into the waters against our will. Many of us are willing to accept smaller lifestyles, smaller homes, less in the way of uniquely American extravagances. But many are not. And of course the majority of those who are not willing to accept such new realities are the ones on Capitol Hill and on Wall Street, and they’re killing us. They are going to fight for their mansions and HD TVs and their lattes at Starbucks and their 8-cylinder sedans and their central air-conditioning , and when they eventually drown---which is mathematically inevitable---they’re going to take us down with them.

Banking is dead. Banks have been exposed to the world as usurious middlemen who play absolutely no productive role in society. In a smaller world, communities will develop their own “banking” solutions to help facilitate commercial interactions without levying useless, criminal interest rates upon participants in the system. Attempts to revive and save the global banking system will be met with violent revolution.

Money as debt is dead This is the biggie. In the same vain as #2, the system of “money as debt”, the system that has brought us to the point of societal collapse, is also dead in the water. And yet everything we hear from the powers that be is that our economic recovery is entirely based upon our ability to not only get the system of credit and lending and debt flowing again, but to find ways to expand this system so that “growth” can occur. Of course this is the penultimate delusion, as lending and debt and credit have absolutely nothing to do with growth; in fact, the current system of “money as debt” is productive of collapse rather than growth in that it is a total fallacy; growth based upon consumption of goods and services whilst simultaneously all capital is summarily destroyed.

A system based upon lending and credit and debt implies several apparent realities: (a) That the economy experiences growth, and the subsequent creation of “wealth”, based predominantly upon charging interest on the monies created and lent out, (b) that the system functions when those receiving said loans are both willing and able to service both the principle and interest of those loans, and (c) that the system perpetuates “successfully” when the exponential growth of debt can be serviced through the production of concomitant amounts of fungible capital. But as has been demonstrated on several previous occasions, the aforementioned characteristics that drive a “money-as-debt” society are fatally contradictory. Maintaining serviceable debt in an economy in which REAL growth is a fallacy is a mathematical impossibility. It is, as the metaphor demonstrates, suicidal.

How do we get our leaders to accept reality? And if our leaders continue on such a suicidal course, when does it become our legal and justifiable responsibility to remove them from their positions of power? How do we compel our leaders to recognize the changing currents, and to join us in finding peace and relative prosperity on new and pristine shores rather then fight the suicidal battle against the forces of nature?

Six Perspectives on Collapse - Part 4: Empires and Ponzi Schemes

In school and in the media, we are taught lies, half-truths and simplifications about how the world works. History is generally presented as a series of unrelated events. Foreighn world leaders are presented as good or evil, and terms like 'rebels', 'terrorists', 'drug lords', and 'guerrillas' are used to describe various groups without a true understanding of how these groups come about and what drives them to do the things they do. The U.S. and Western Europe is always presented as a force for good, while 'terrorists' are cast as comic book cartoon 'enemies of freedom'.
We are encouraged to view America's role in foreign policy as one of a benevolent police force, standing up for basic human rights and abstract concepts of democracy and freedom. This is a role that gained legitimacy from America's heroic role in defending human rights and sovereignity from the clutches of war, empire, and social Darwinism during World War I and World War II. It is a view that has been peddled by every president since that time, even as it has become less and less true. Today, it is increasingly difficult for U.S. leaders to maintain this facade. Iraq and Afghanistan have formed gaping cracks in this facade. Americans, for the first time since Vietnam are starting to see the ugliness and inconsistencies behind their country's foreign policy. Much like an iceberg, however, the visible part is only the tip. The real story goes much deeper. John Perkins' 'Confessions of an Economic Hitman (EHM)' goes a long way to illuminating the whole structure beneath.
John Perkins, through family ties to the National Security Administration was recruited into the ranks of an international consulting company called 'Chas T. Main' or MAIN for short, in the early 1960s. MAIN played a bridging role between the business and government in what Perkins refers to as the 'corporatocracy', an unholy cabal between industrialized governments, big corporations, and banks. The corporatocracy is a predatory entity that drives a new global empire. Contrary to popular notions of 'free trade' and ideals of poverty reduction and development of third world countries, the corporatocracy enforces exploitation, desperation, modern forms of enslavement, and vast transfers of real wealth from resource-rich 'developing' countries to resource-poor (in relation to demands for those resources) 'developed' countries. At heart, the reason for this exploitation is easily explained. There simply aren't enough natural resources to support first-world standards of living across the rest of the world. Our way of life relies on too much energy, mineral, and material wealth. This essentially zero-sum relationship describes the driving force behind empire-building, going back into ancient history. If one country is to prosper, it means it must co-opt the resources of other countries. In pre-industrial days, these resources were mostly in the form of human labor,food and precious metals. Today, the resources are expanded to also include oil, natural gas, water, and other minerals. In the past, the exploitation was impossible to hide, was obvious, and out in the open. Today, the exploitation is exceedingly subtle and insidious. As John Perkins describes,

"The subtelty of htis modern empire puts the Roman centurions, the Spanish conquistadors, and the eighteenth- and nineteenth- century European colonial powers to shame. We EHM's are crafty; we learned from history. Today, we do not carry swords. We do not wear armor or clothes that set us apart. In countries like Ecuador, Nigeria, and Indonesia, we dress like local schoolteachers and shop owners. In Washington and Pairs, we look like government bureaucrats and bankers. We appear humble, normal. W visit project sites and stroll through impoverished villages. We profess altruism, talk with local papers about the wonderful humanitarian things we are doing. We cover the conference tables of government committees with our spreadsheets and financial projections, and we lecture at Harvard Business School about the miracles of macroeconomics. we are on the record, in the open. Or so we portray ourselves and so are we accepted. It is how the system works. We seldom resort to anything illegal because the system itself is built on subterfuge, and the system is by definition legitimate."

Perkins was hired by Main, and due to his specific skills and vulnerabilities, he was recruited into an elite group at the firm, who understood the true machinations of the firm and its relationship the broader corporatocracy, which it supported, and which supported it. Despite only having a B.S. in business administration, Perkins soon became head economist at MAIN. Perkins' role was to come up with intentionally inflated economic projections for third world economies, should they choose to accept large loans for infrastructure projects from U.S. or international development banks, like the IMF and World Bank. As Perkins describes: "Like our counterparts in the mafia, EHMs provide favors. These take the form of loans to develop infrastructure - electric generating plants, highways, ports, airports, or industrial parks. A condition of such loans is that engineering and construction companies from our own country must build all these projects. In essence, most of the money never leaves the United States; it is simply transferred from banking offices in Washington to engineering offices in New York, Houston, or San Francisco. Despite the fact that the money is returned almost immediately to corporations that are members of the corporatocracy (the creditor), the recipient country is required to pay it all back, principal plus interest. If an EHM is completely successful, the loans are so large that the debtor is forced to default on its payments after a few years. When this happens, then like the Mafia, we demand our pound of flesh. This often includes one or more of the following: control over United Nations votes, the installation of military bases, or access to precious resources such as oil or the Panama Canal. Of course, the debtor still owes us the money, and another country is added to the global empire."

So the point is that these loans form the basis for permanent economic enslavement of the debtor nations to the creditor nation, and form the basis of negotiations for more obvious forms of imperial conquest. This doesn't mean, however, that the decision to partake in these projects (based on false premises, as they are) is subject solely to the sovereign decisions of the debtor countries. If the subject country refuses to accept such loans, the corporate global empire resorts to progressively subversive tactics. First, a coup or assassination is attempted against the 'stubborn' government. The model for first-world-directed modern coups was based on a model developed in Mossadegh's Iran in the 1950's. Basically, CIA operatives and corporations find groups within the country who are opposed to the current government, supply them with weapons, and pursue other means to foment uprisings, overthrow the 'stubborn' government, and install their own corrupt puppet government who then capitulates to the demands of the empire. If this is not an option, the same thing can be accomplished through assassinations. The more plausible deniability in these assassinations, the better. The preferred method is to have the foreign president die in a mysterious plane crash. If all this fails, the last resort is traditional war, as was the case in Panama, under the first Bush administration, and Iraq, under the second Bush administration.

Today, we can see the inevitable results of these more obvious forms of subjugation. Iraq's oil reserves were recently split up, and new oil fields are being developed all over the country by Shell, BP, Exxon and Chevron. In Afghanistan, geologists recently announced that Afghanistan has a trillion dollars worth of mineral resources (including rare-earth metals needed for renewable energy and high-tech industries) that are newly ripe for the picking. This new wave of obvious exploitation, however, belies a truth about foreign policy today: The subtle, cheap, and effective tactics of John Perkin's EHMs are becoming increasingly ineffective. There are simply not enough new, easily exploitable countries left to maintain the increasing flows of third-world wealth into the first-world. Continuation of 'growth' in the U.S. demands ever greater amounts of military spending on new wars, and continued maintenance of older, more reliable sources of subjugation. This is why, even under the new Obama administration, which promised the end to the hawkishness of the Bush Administration, military spending has continued to increase. To cut the spending, would be to forfeit these exploitive relationships and condemn the U.S. to economic contraction. The trap is set for the U.S., however, because to maintain the flows requires an ever growing slice of the nation's income be devoted to its military. This is a classic case of declining marginal returns on empire, as outlined in Part 1 of this series for the case of the Roman Empire. The hyperbolic nature of the continued drive to maintain empire is painfully obvious. The U.S. spends as much on military as the rest of the world combined. The next largest military spending (China's), is 8 times smaller than the U.S.'s.

The latter stages of empire here, represent a form of Ponzi dynamics - those that underly fraudulent pyramid schemes. Ponzi dynamics occur when the continuation of a financial or administrative structure is dependent upon the continued buy-in of larger numbers of new entrants. At first this relationship appears to be stable, but as the supply of new entrants into the scheme is finite, these structures always end in collapse. The Automatic Earth has a wonderful essay on the ponzi dynamics of empire from 2008, titled 'From the top of the Great Pyramid'. Quoting from that essay:

"Everyone has heard of pyramid, or Ponzi, schemes. In their simplest form they are short-lived deliberate frauds where a small number of existing members are paid from the buy-in of a larger number of newer members until the supply of newer members is exhausted, whereupon they collapse. Typically, the founders, and perhaps a few others who got in early and out before it was too late, end up making a lot of money at the expense of later entrants, who end up holding the empty bag. There are always many more losers than winners. What most do not realize, however, is that Ponzi dynamics are far more pervasive than people think. There are many human systems that ultimately rest on the buy-in of new entrants, and every one of them will ultimately meet the same fate, although it can take far longer for complex constructions than for simple pyramid frauds.

What allows a more complex pyramid to last for longer than a simple one is a supplementary source of funds to pay members, besides merely the buy-in of newer members. The more such sources there are, legitimate and otherwise, the more complex the pyramid can become and the longer it will last, as the apparent on-going success of early entrants will attract many more new ones. There's nothing like seeing one's friends and neighbours seemingly making a lot of easy money for a long time to eventually overcome the mental defenses of even the most skeptical.

Following the collapse of communism in Eastern Europe, there was a spate of such schemes - notably MMM in Russia, Caritas in Romania, Jugoskandic and Dafiment Bank in Serbia, TAT in Macedonia, and VEFA Holdings, Xhafferi, Populli, Gjallica and several others in Albania. They were the topic of my academic research at the time. All of these lasted for quite a long time, and some paid out spectacular returns for much of that time. For instance, the Albanian funds , or quasi-banks, began by paying out 3-5% per month over a 6 month term and were eventually paying out 10% per month (and briefly much more as an interest rate war ensued very late in the game).

They were able to do this temporarily because the income from the buy-in of new entrants was supplemented by revenue from drug smuggling, oil sanctions busting, money laundering, gun running, human trafficking and a thriving trade in car theft from across Europe. There was some revenue from legitimate business interests, but not much in a country that survived mainly on a combination of remittances and politically supported criminal activity. Ironically, Albania was the darling of the IMF at the time.

Over time, approximately 80% of the Albanian population was drawn into the pyramids, often selling their only real property in order to invest and then depending on the pyramids for all their income. When the inevitable happened, the vast majority of the population was completely dispossessed. Although many had realized that there was something too-good-to-be-true about their 'investments' they had succumbed to greed "in the belief that they were in the hands of properly structured criminality", as The Guardian newspaper put it in February 1997. The population believed, erroneously, that there was an implicit guarantee from the government, which was conspicuously and intimately entwined with the activities of the various funds.

In the developed world, there are many examples of pyramid dynamics where there is no intent to defraud at all - where even the founders really don't understand the underlying logic of their business model taken to its logical conclusion. Direct marketing, for instance, is essentially pyramid-based - depending on an ever-increasing network of sales people, each of whom receives a percentage of their income from those they can attract into the business. If these businesses can no longer grow by attracting new salespeople, then they are ultimately finished, but as they cannot grow perpetually (or eventually everyone in the country would end up making a living selling these products to each other), they are inherently self-limiting. They can last for many years thanks to legitimate business revenues, but not forever. Early entrants will always do very well, at the expense of later ones, and the last tiers will certainly lose their stake.

Large economic bubbles, typically formed in dominant economies during periods of manic optimism (see McKay's Extraordinary Public Delusions and the Madness of Crowds), have the same underlying dynamic. Without continual buy-in from new money - new investors or more money from existing investors - they cannot grow, and when they can no longer grow, they will collapse. Although grounded initially in legitimate business activity, they morph into structures where one has to question the motives and understanding of key individuals. In some cases there may be intent to defraud, but what is far more common is a characteristic recklessness as to the risks those in control are prepared to take with other people's money.

In their latter stages, such structures hollow out, feeding on their own internal substance as they lose the ability to attract new investment. In the terminal phase, there is the appearance of great wealth, but it is virtual, and therefore extremely ephemeral. The next step is implosion, as the virtual wealth disappears - where the claims to wealth generated through leverage that exceed the amount of underlying real wealth are extinguished en masse. Enron was a prime example, and on a much larger scale, so is the derivatives market. Bubbles, like all Ponzi structures, are inherently self-limiting and will always collapse in the end.

At the largest scale, empires are also grounded in pyramid dynamics, which is why they too have a limited lifespan. They grow by assuming control, either politically or economically, of new territories, positioning themselves to cream off surpluses from an ever-expanding geographical area in a form of involuntary buy-in. In the past political control through invasion or physical colonization was more common, but latterly globalization has enabled the development of a sophisticated system of economic control based on international debt slavery, supplemented with economic colonization for the purpose of resource extraction. Both resources and financial surpluses, in the form of perpetual interest payments, could be efficiently extracted from the periphery and accumulated at the centre, where they led to the development of an unprecedented level of socioeconomic complexity.

Such wealth conveyors in favour of the economic centre, at the expense of the hinterland, are the very heart of empire, but without continual expansion to feed rapidly developing central complexity, they eventually fail, leaving the centre unable to sustain its existing complexity level. As with economic bubbles, empires hollow out in the latter stages, consuming their own substance in a catabolic manner in order to compensate for the inability to strengthen wealth conveyors sufficiently quickly to keep pace with the expanding requirements of the centre.

As the hinterland is increasingly stripped of wealth and resources, and burdened with the increasing environmental impact of its own exploitation, an increasing fraction of it is left too impoverished to sustain a minimum level of internal order. In modern times we speak of failed states without realizing why many of these states are failing, or the impact that an increasing number of failed states will ultimately have on our own standard of living.

Wealth conveyors are breaking down, and no amount of financially squeezing the population in the central economies can compensate for the loss of that ability to accumulate wealth from virtually the whole world. The vast majority of the central population will be brutally squeezed as the elites try to hang on to their own privileged position, but this can only sustain a very small, and rapidly shrinking, fraction of the population, and at great cost.

We are living through the collapse of the final - and all-consuming - economic bubble at the end of the American empire."

What is the catabolic consumption, described in this essay? The global corporate empire does not explicitly serve the interests of the citizens of any given county. It is only the case, that we, in the U.S., in good times for the empire, are subject to a process whereby a rising tide lifts all boats. We benefit indirectly from the massive flows of resources to the first world from the third world. As the global corporate empire becomes stretched increasingly thin, and is more and more hard pressed to find new sources of wealth abroad, it responds by using predatory tactics to make up for the lost wealth within its own country of origin - essentially consuming itself, as it goes after the very sources of wealth that sustain its power. This takes the form of things like sub-prime mortgages and other predatory loans, other deceptive forms of business practices and marketing, bailouts, and other free sources of unearned income from the federal reserve, running the Wall Street casino that systematically funnels wealth from unwitting institutional investors to the high frequency trading arms of big banks - all transparent forms of continuing the illusion of growth, and making up, at least on paper, for the loss of other income streams. Why are these subprime mortgages and unearned income catabolic, you may ask? Well, right now, the U.S. government finds itself squarely in the very same debt trap that the third world was forced into in the past. Its debt levels have reached a point where they are unserviceable. The interest on the national debt alone will make up such an enormous chunk of the government's income stream, that it will become a ludicrous proposition to ever pay off that interest. Right now, old debt is being paid off by new debt, because that's the only way to continue the system. As more and more new debt is required, at some point, there will be no willing sources of new debt. Right now, the current big funder of our debt (besides China, as the media is so apt to point out) are our very own banks. They are sucking money out of the government to maintain their balance sheets at the cost of throwing the government into deeper and deeper stages of Ponzi-collapse. When the banks' sub-prime mortgages fail, the government steps in and bails out those same banks, and to do it requires ever more debt. We are watching the end-game of this process play out, and no amount of government insistence on things as laughable as 'sustainable recoveries' is going to change the inevitable outcome of this process.

Our Community Garden - Progress and Lessons Learned: Part 3: Fruiting and Early Harvest

It's now early August, and the garden is starting to look like a factory. The corn is the dominant feature of the plot. 25-30 tall stalks ranging from 5 to 7 feet tall are clustered around the center of the garden. I expected going in that 1 seed would yield 1 stalk that would grow 1 ear of corn. Not the case. The oldest corn plant in the garden is currently boasting 4 stalks and a total of 7 ears.

The older plants never grew as tall as the newer ones. One of the things that I think I am learning from this year is that the early plants seem to be smaller in stature. I think it must have to do with their early growth phase being slowed/interrupted by cold weather. The plants that were allowed (by virtue of warmth) to grow fast from the get-go eventually eclipsed the older plants (with the notable exception of the cauliflower, which I'll discuss later.) On the flip side, it is the older, smaller plants that are bearing fruit earlier. The two 5 foot corn plants are full of ears that are maturing rapidly, while their statuesque younger brothers have only recently sprouted some small ears that will likely be ready in a few weeks or so. I've harvested two ears so far, and the first of those two brought another lesson. It was only about 1/3 filled out with kernels, in a very scattershot manner. At first, I thought this meant that the kernels popped in sporadically (like popcorn!). Two conversations changed my mind about this and helped me to see what had probably happened. Our friend Landon mentioned that he had heard that each of the little string-like hairs that protrude from the top of the ear are connected to an individual kernal port, and if that hair isn't seeded with pollen, the kernel won't come. Our neighbor Paul, who used to be a corn farmer verified that the corn kernels come in all at once. Now this was one of the first two corn plants, and is relatively isolated in the garden. At the top of the corn stalks, a giant plant hand sprouts and eventually drops pollen.

This apparently happens in a short period of time (a few days). So this isolated plant must have dropped its pollen and only some if it made it to its target. If it had been part of a denser cluster of corn, planted all near the same time, the chances would approach 100% that each kernel would find some pollen because of the flurry of pollen activity in such a dense area.
Anyway, the second ear I picked came from the same plant, and was fully filled out. It was delicious!!

While stunted in stature, most of the tomato plants are growing green tomatoes of various sizes.

My plants aren't nearly as big or productive as James's are (James from my work is using about 20 square feet in the Northwest corner.) Despite being almost fully shaded from the sun by my enormous corn, James's tomato plants are growing along quite swimmingly. He's probably got 2-3 times the total number of tomatoes growing as I do. A persistent garden pest, old Brer Rabbit has been terrorizing the tomatos though. Have no doubt, Brer Rabbit is a spoiled bitch of a pest. He will come up and nibble a little corner of a tomato, then go over to another one and nibble a little corner of it and so in. In the process, he eats about 5% of each tomato, and leaves them all rotting on the vine. I've caught old Brer Rabbit 3 times in my garden. Each time, I hop over my fence, and he bolts like a bat out of Hellman's for the little hole he just gnawed in the fence (damn you, cheap (but free!) plastic mesh! This last time, I was fed up with his meddling, and reinforced the fence with pieces of barbed metal mesh I found lying around, concrete blocks, and clods of thorny tumbleweed. It's pretty ad hoc, but I'm hoping it will deter old Brer at least enough that he decides it's not worth the effort and munches on someone else's food instead. I'd really like to get a good harvest of tomatoes that I can make into some sauce and can it for the winter.
Another casualty of Mr. Rabbit was the cauliflower. He didn't go for the prize in the center, but he and his clan systematically ate the green leaves of the growing cauliflower, leaving it a skeleton. Only on the more mature plants did the leaves regenerate themselves enough to sustain production of a ball of vegetable. Some cauliflower plants were gnawed down to the roots and died. So it looks like we'll get two heads of cauliflower out of the garden. They are both getting rather large.

I'd pick one now if I wasn't already receiving a huge head of cauliflower every week in my CSA box. The first week after the cauliflower disappears from the box, I'm harvesting!
The big loser this year looks to be the melons. True, I do have a few tiny watermelon bulbs that have finally sprouted, but the melons were frustratingly slow in laying down vines of leaves, and never grew those leaves to full size.

While some of our neighbors and some other gardeners in the community garden have large watermelons growing by now, we've just got the little buds. I'm not holding out hope for a harvest there, but we'll see ;) I suspect that part of the problem might have been a soil that wasn't acidic enough. According to a book I just got on organic gardening, melons need a low-PH soil to flourish. I want to ask some people who have big melons what they did. I might not get a chance next year to apply the lessons, though. I'm not sure how melons will do in a cooler climate like Portland. We'll see!