Credit Liquidity and H2O Liquidity Are Both Drying Up

These two diminishing resources have a common cause for their disappearance: a broken neo-classic capitalist system.
There is some poetic justice in the fact that the world is running out of credit and water at the same time. These two diminishing resources have a common cause for their disappearance; a broken neo-classic capitalist system that forgot to price in the replacement cost of natural resources and the costs of pollution.

I know this is a fact because I see that the insurance industry is now getting out of this capitalism-essential business because they can no longer afford to be in this business. The whole premise of insurance is that the rate of claims will be less than the rate of premiums. As various global eco-systems collapse, the rate of premiums can't keep up, so companies like State Farm are simply getting out of the business.

As the insurance industry disappears, it will take what we call "free market capitalism" along with it. Without insurance no entrepreneur will take any meaningful risks on building large industrial projects that are the basis of global industrial society.

Loans will be negotiated bilaterally outside of any current capitalist system with the lender owning most of any project. We are heading back to feudalism. Mercantilism is dead.

This is the end of a 300 year period going back to the creation of the Bank of England in 1694, and the beginning of 'derivatives.'

Financial innovations paved the way for GWP (Gross World Product) growth to jump from virtually nothing during the Middle Ages to 1, 2 and occasionally 3 percent -- and so did the rate of pollution -- but Earth could handle it at the time. At the height of the dotcom bubble Alan Greenspan suggested that growth rates had entered a new paradigm and could go even higher (without inflation, the vaunted "Goldilocks" theory). But Greenspan, like the rest of the neo-classic economists, failed to price in GDP growth's true costs.

During the post WWII years we've heard the sound of one hand clapping in terms of eco-accounting. Or, as Enron, if they were still alive might put it, "Special Purpose Entity Accounting." That is, put all the ecological risks off the balance sheet and hope they go away.

Now these risks are coming back onto the globe's eco balance sheet. Floods, deforestation, fresh water depletion, "Peak Oil," fish stock depletion, nuclear waste, to name a few.

Insurance companies are pulling back and bank credit is getting scarce in large part because planet Earth's carrying capacity (for humans) has been used up. Earth can't handle us anymore.

The liquidity of easy credit is disappearing right alongside the global fresh water supply.

Max Keiser has been involved with markets and finance for 25 years. He started his career as a stock broker on Wall Street after graduating from NYU. He is the creator of the Hollywood Stock Exchange (that operates via his patented Virtual Specialist technology).
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