American Consequences - August 2018

Shale Revolution

“This Is It”

Solar Life


E D I T E D B Y P . J . O ’ R O U R K E


AUGUST 2 0 1 8

Make sure you subscribe by clicking here. We’ll send you valuable updates and always send an alert when the next issue is published. When you subscribe, you’ll be the first to knowwhen future issues are published. CLICK HERE


AUGUST 2018 : ISSUE 14









4 Inside This Issue

52 The El Paso Salt War BY BILL SHAW


6 Letter From the Editor BY P.J. O'ROURKE

58 How Government Saps Our Energy BY DAVID BOAZ 66 Millionaires Will Be Minted By a New Energy Revolution BY DR. DAVID EIFRIG

Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Managing Editor: Steven Longenecker Contributing Editors: Brett Aitken, David Boaz, Tom Bodett, Dr. David Eifrig, Andrew Ferguson, Nick Giambruno, Leslie Haines, Ricardo Hausmann, Buck Sexton, Bill Shaw, Dr. Steve Sjuggerud Newswire Editors: Scott Garliss, John Gillin, Greg Diamond Assistant Editors: Cartoon Director: Frank Stansberry General Manager: Jamison Miller Advertising: Sam DeCroes, Jared Kelly, Jill Peterson Editorial feedback: feedback@ Chris Gaarde, Laura Greaver Creative Director: Erica Wood

12 What Moved the Market

14 What Could Possibly Go Wrong?

16 From Our Inbox

72 What Does Energy Cost? BY P.J. O'ROURKE 78 Lose Money or Make 1,400% BY DR. STEVE SJUGGERUD

22 "This Is It" On the Ground With Cactus BY BRETT AITKEN 28 PJ 's Tips for Saving Energy and Protecting the Environment BY P.J. O'ROURKE

82 The Venality of Evil


30 Solar Life

86 A Conversation With... Carter Page


92 Losing a Trade War with China BY JOSEPH E. STIGLITZ

36 Shale Revolution BY LESLIE HAINES

96 Read This

42 The Third 'Oil Shock' Is Coming BY NICK GIAMBRUNO

98 The Final Word


46 And DOEn't You Forget It! BY ANDREW FERGUSON

102 Featured Contributors

American Consequences 3


T his month, we’re talking about the American energy boom... There’s a whole new Persian Gulf worth of oil in America. Who’s going to get rich on it ? If you’re at all interested in making money in this boom, you must read financial analyst Brett Aitken’s report from Texas, where he meets legendary wildcatter Cactus Schroeder. .. and visits a forgotten oil play that has been hiding in plain sight. Editor in Chief P.J. O’Rourke details a time when his family went “off the grid”... that is, they got kicked off the grid. And Tom Bodett – yes, of “ We’ll Leave the Light on for You ” fame – really does leave the lights on in his energy efficient, money deficient, very much on-the-grid house. Leslie Haines , longtime editor of Oil & Gas Investor , gives us an overview of the Shale Revolution – it’s not just blood, guts, and oil anymore. Financial analyst Bill Shaw uses the El Paso Salt War to detail mineral rights. And Nick Giambruno speculates that the third oil shock is coming... a crisis much worse than in 1973. Veteran journalist and former presidential speechwriter Andrew Ferguson reports on former Texas governor Rick Perry – of “Oops!” fame – who once wanted to abolish the Department of Energy and now finds himself at the head of it. David Boaz , executive vice president of the Cato Institute, explains how government

saps our energy by taking a closer look at the Solyndra solar scandal. But Dr. David Eifrig has another perspective: that despite skeptics, a green energy revolution will still be minting millionaires... but you have to know what to buy . Steve Sjuggerud asks whether you’d rather lose money or make 1,400%. Again, it all depends on which of these two seemingly similar investments you buy. Don’t miss P.J.’s tongue-in-cheek top 15 tips for saving energy and protecting the environment – masterfully inked by cartoonist Kevin “Kal” Kallaugher . And P.J. also weighs in on the true cost of energy. It’s a simple question that should have a simple answer. So why is it so confusing? Then, we speak with Carter Page , American oil industry consultant and former foreign policy adviser to Donald Trump. Finally, Nobel laureate in economics Joseph E. Stiglitz writes that the U.S. is at risk of losing a trade war to China... Ricardo Hausmann reports on Venezuela and the venality of evil... And Buck Sexton shows how Iran could drop the global energy market at the Strait of Hormuz. Enjoy the issue. And tell us what you think at Regards, Steven Longenecker Managing Editor, American Consequences

4 August 2018


Dear American, The timing here is nothing short of scary. A few months back, we began preparing to release a controversial book from one of the most well-connected and successful investors in America. Why would a book about investing be so controversial? Well, it’s because its author – multi- millionaire Doug Casey – is known to be brutally honest. He has friends in the highest of places – but that’s never stopped him from telling the truth. For instance, Al Gore once invited him to speak before Senate leaders... but that didn’t stop him from describing global warming as having “so little scientific basis, it can only rationally be considered a political scam.” You see...whether it’s secrets about making money...or the political system...or science... ...there are just some truths in America you’re not allowed to tell! Here are some of the least offensive revelations he’s making in this new book: ... “Without Western, ideas the whole world would resemble Africa, or Cambodia, or Mongolia—not even today, but 200 years ago.” (pg. 22) ... “There was once a time when journalists often had intelligence, integrity, and competence. Today, reporters have none of these qualifications” (pg. 79) ... “You're supposed to be politically correct—if not, you must be a Nazi or a Klansman.” ... “you’re not supposed to use the word “migrant” but that’s exactly what these people are. These refugees are an informal

and unarmed invading army of a totally different culture, race, religion, and language.” It gets far, far more shocking. You see, this book isn’t just a series of controversial thoughts... It’s also a vital guide to surviving the changes happening in America well as a road map for where they’ll take us...and how they’ll affect you... In fact, I think that might be the real reason Google banned us just weeks before this book was set to be released. ...But that didn’t stop us...or Doug... In fact, he ordered us to “double down” and come up with a way to offer a free copy of this shocking new book to any American with a physical address. Claim yours, for a limited time, right here... P.S. Besides being brutally honest, Doug is known as a kind of prophet in the investment world. He was one of the first to talk about bitcoin (all the way back in 2011!)...He called the gold boom back when gold was under $400...He was one of the first investors to realize the potential of cell phones...and the Internet!...He called a spike in the price of silver (right before it went up 740%!)... That’s a short list... In his new book, Doug reveals his next big investment that could lead to what he calls an “avalanche of wealth”... Click here... Sincerely, Justin Spittler

From Editor in Chief P.J. O’Rourke


6 August 2018


To hell with nature. Living in an artificial world is the best thing ever. We need “unnatural,” artificial human interference with the environment. This is because nature provides very few sources of energy that are worth a damn. The sun is useful, in its way, but notably absent when illumination is most needed at night. In the natural world, fire is available only from forest fires, volcanoes, and lightning strikes. Using forest fires to keep warm is problematical, using molten lava more so, and cooking with lightning is a culinary technique that’s hit or miss, so to speak. The natural kinetic energy of earthquakes and avalanches is difficult to harness in any practical way. And hydro, in the state of nature, takes the form of riptides, torrential rains, and flash floods. Without unnatural, artificial human interference, the only useful natural source of energy is what we can find to eat – transformed by metabolic process into muscle power, most of which is expended on finding other things to eat.

My family and I don’t live in an artificial world. We live in the natural world. By mistake.

American Consequences 7


those pre-mobile days) a phone line and thereby being cut off from the world. It was restful. I had a wood stove and kerosene lamps. And, anyway, I could find the scotch bottle in the dark. Plus no worries about the food in the fridge spoiling. I could stick the burger patties in the draft coming from under the front door and they’d keep until June. Then a wife and children happened. A wood stove in the kitchen with toddlers afoot is a standing invitation to the emergency room. And my wife was convinced, probably rightly, that no child could resist stuffing Beanie Babies into the chimney of a lit kerosene lamp or quaffing the kerosene itself as if it were the contents of a Juicy Juice box. So we stocked the house with flashlights and batteries. Flashlights are of two types – lost and broken. Batteries are of one type – dead. As for heat, what we discovered during our first winter as a family was that, without electricity, there wasn’t any. The house has seven fireplaces, all child- proofed with massive hearth screens and fenders. The fireplaces are picturesque and do a nice job of taking the chill out of the air on a crisp fall evening when the outside temperature has fallen to, say, 60 o . What they do when the outside temperature is -20 o and the wind is blowing at the I-93 speed limit is they take a cold room and make it smoky too. One year, there was an electrical blackout accompanied by cryonic temperatures, Mach 1 wind gusts, and driveway-blocking drifts so large that if they could have been formed into a snowball it really would have stood a chance in hell. The blackout lasted for three-

However, that said, my family and I don’t live in an artificial world. We live in the natural world. By mistake. We’re “off the grid.” But we didn’t mean to be off the grid. We got kicked off the grid. Our power is out – again. The power is out at our house a lot. We live in a big old drafty colonial on a high ridge above a river valley. Our house faces west, straight into the prevailing wind. And that wind prevails . Few are the days when you can open an umbrella in our yard without being blown into the Atlantic 58 miles to the east. And when the west wind doesn’t prevail it’s because the river valley, running north-south, is channeling an Alberta Clipper from the frozen wastes of Canada to us, frozen up to our waists in snow. The house is out a long country road, up a driveway through the woods, at the very end of the power line. And, being at the very end of the power line, anything – a spouting sapling, an autumn leaf, a suicidal squirrel – will cause the O’Rourkes to go dark. (Not that I’m blaming the electric company, even though the recorded message on their power outage hotline says, “See you next summer.”) When I lived here alone I didn’t really mind getting snowed-in without electricity or (in I’ve never worked harder in my life – in order to produce absolutely no unnatural artificial human interference with the environment whatsoever.

8 August 2018

and-a-half days. I lasted for almost that long. I’ve never worked harder in my life – in order to produce absolutely no unnatural artificial human interference with the environment whatsoever. We did survive, but we remained on the verge of hypothermia, with frost-bitten food and no water except from (very slowly) melting pots and pans full of snow. In some ways it was our own fault. We not only didn’t have the woodstove any more, we had “remodeled” (definition: “made a Buckingham Palace out of ”) the kitchen and the bathrooms, adding something like 300 yards of new plumbing that was about to freeze. (Back when I was “flushing for one,” I had the house set up so that I could open a basement tap and drain the whole place in five minutes. Now any attempt at emptying the pipes would have required a PhD in mechanical engineering and a consulting team from Kohler.) Furthermore, my in-laws had bought the house down the road, and I had frozen plumbing worries there as well. I dearly love my in-laws. They are wonderful people. But not so wonderful that they weren’t spending the winter in Florida. My wife bundled the six-year-old, the toddler, the baby, the Filipino au pair (probably wishing her Green Card away), and herself into the bedroom that was most in the lee of the blizzard. I made a fire that would have done 1871 Chicago proud. The room temperature rose from brass-panty girdle to hibernating toad.

Then I built fires in the other six fireplaces, put on my snowshoes, made my way to my in-laws’ house, built fires in their two fireplaces, trudged home, and brought firewood up from our basement. Our basement was dug in an apparent (and nearly successful) attempt to get to China and has stairs that, when you’re facing them with an armload of logs, make the Spanish Steps in Rome seem like an ADA-compliant sidewalk curb cut. By the time I’d gotten the firewood to the ground floor, the fires in all the fireplaces were too low to toast s’mores. For three days my routine was to haul wood, build fires, trek to the in-laws’, build more fires, trek back, drink a coffee mug full of scotch, pass out on the floor in front of the fireplace in our living room, and wait for the cold to wake me up. Repeat. After 72 hours, I passed out for good. After 78 hours, the power came back on. We bought a generator. (So did the in-laws.) Buying a generator resulted, of course, in no notable winter power outages for the next several years. Then the power went all the way out . For weeks. In an ice storm of Quaternary glaciation ilk. Everything visible from the top of our ridge across the ten miles of river valley was covered in an inch-thick glittering transparent crystalline rime. It was very beautiful. For a moment. Then, with the weight of the ice, everything visible began to break. There was a sound like the Brobdingnagians of Gulliver’s Travels pouring milk on Rice Krispies the size

American Consequences 9


of the Lincoln Monument into a bowl as wide as Lake Tahoe. Trees snapped, phone poles crackled, and power transformers popped. After that, with a big crash, the woods around our house fell across our driveway. But we had a generator! All was well. For a moment. What we didn’t have was gasoline to run it. Although the generator had been sitting idle and had a full tank, that tank held just half a gallon, which would last us only about six hours. I had gas cans in the garage. They were empty. I needed to siphon gasoline from our cars. I found a length of plastic tubing – a “Tijuana credit card” we called it when I was a teenager If you ever say to me that some cheap hootch or bad cocktail “tastes like a mouthful of gasoline,” you are – I’ll tell you to your face – lying.

(and a petty criminal). But I was woefully out of practice in petty criminality. It had been 50 years since I’d “liberated” gasoline from a car. In the meantime, car manufacturers had equipped gas tank filler necks with something called an “anti-rollover valve.” In theory this prevents gas from spilling out of the tank if the car flips. In practice this prevents me from being the petty criminal teenager I once was. It’s almost impossible to get a siphon past the anti-rollover valve. Almost impossible... but not completely. It took me an hour of poking and twisting with the plastic tube. Then I forgot that the key to sucking gas out of a gas tank is to quit sucking at just the right moment. That moment passed me by. If you ever say to me that some cheap hootch or bad cocktail “tastes like a mouthful of gasoline,” you are – I’ll tell you to your face – lying. If, on the other hand, you say to me that a mouthful of gasoline is a good way to stop smoking, you’re telling the truth. I had to quit for three hours for safety’s sake. The other problem with siphoning gas from my wife’s Suburban and my Jeep was that there wasn’t much gas to siphon. My wife – who thinks fuel gauges are prone to false panics – had been driving around on empty. And I think “E” means “Eh – there are a couple of gallons left.” Thus I had to clear the timber on the driveway and go find gasoline. Before I’d even gotten my chainsaw started I found out that my insulated Sorel Caribou boots could put Tonya Harding back into World Figure Skating Championship competition, if she can find a skating rink that slopes downhill as steeply as my driveway. After I’d gotten my

chainsaw started I found out that chainsawing on ice made me eligible to file an OSHA workplace health hazard complaint against myself. I would have died a mangled death if it weren’t for the fact that using a chainsaw on ice-encrusted tree limbs is as effective as using a chainsaw on concrete rebar. One thing, however, ice has going for it is that’s it’s “slippery as ice.” Using the natural form of kinetic energy known as being overweight I was able to slide away enough of the fallen trees to let my Jeep pass. Which it did, like a luge. Austrian luger Manuel Pfister reached a top speed of 96 mph on a track in Whistler, Canada, during a practice run for the 2010 Winter Olympics. But I may hold the world record. The drive into the closest town in the river valley, without ice storm obstructions, takes 15 minutes. With ice storm obstructions it took an hour and a half and included an encounter with the severe sag of what must have been the only live power line left in the region. I have a front turn signal on my Jeep that is still permanently blinking. The electricity was out in town. No gas stations were operating. I made my way to the next town down the valley. There, one gas station had auxiliary power. The line for the pump was a mile long. My generator was running low on fuel back at the house. The needle on my Jeep’s gas gauge had flopped over to the left of empty and disappeared from sight. Did I go home and reenact the drunken drudgery and resulting catatonic state of three years before? Or did I abandon my family and go in search

of gasoline with a faint hope that my wife (of very slender build) and three kids could get enough firewood up from the basement suburbs of Shanghai to keep themselves from freezing to death? I listened to the radio. The newscaster said thousands of people were without power. The power company estimated power-line repair would take three weeks. The baby was now four and could probably help with the firewood. I abandoned my family. I drove west, up out of our valley and into the low hills on its far side. And there on those hills I discovered one more thing about nature that isn’t worth a damn. She’s utterly fickle. The spectacular ice storm had encompassed our entire river valley, but it had encompassed only our entire river valley. At the westward hills, the storm had simply given up and quit leaving nothing but a dusting of snow on the ground. In a way I was disappointed by nature’s lack of ambition, scope, and drive. If I had a spectacular ice storm like that going, I wouldn’t have been satisfied until everyone from Kansas to Quebec and Boston to Boca Raton was living inside the Good Humor truck. But that would be unnatural. Besides, in this case, I was gratified by the fickle uselessness of nature. I saw a gas station with its lights on and no line at the pump. I drove up and, with great excitement, shouted at the sullen, pimply kid in the cashiers’ booth, “DO YOU HAVE GASOLINE ?” “We’re a f***gas station,” said the kid. I was back in the artificial world.

American Consequences 11



Claude Juncker visited the White House to work out a trade agreement, but trade relations between the U.S. and China remain stalled... The latest war of words has the US placing 25% tariffs on an additional $200 billion worth of Chinese exports. China has threatened a tit-for-tat retaliatory response, but the local Chinese markets have been the clear losers. The Shanghai stock market is down roughly 18% in 2018, and the yuan was down 3% versus the dollar in July. Dollar strength and rising interest rates have weighed on other emerging markets as well... Turkey, South Africa, and Argentina are the “canaries in the coal mine,” as each wrestles with weak currencies and huge debts... and their bills will become more expensive in a rising rate environment. As second-quarter earnings season winds down, S&P 500 earnings estimates continue to move up. According to data firm FactSet, 79% of reporting companies have had a positive earnings surprise, while 72% have had a positive sales surprise. If this earnings trend holds, it will be the second-highest quarterly growth rate since 34.1% growth in the third quarter of 2010. WHY YOUWANT TO OWN U.S. STOCKS...

CORPORATE EARNINGS DROVE GROWTH, U.S. INDEXES PERFORMED... The S&P 500 Index was up 3.72% for the month of July, led by industrials, financials, and consumer staples. All eleven S&P 500 sectors managed a monthly profit, with the above leading sectors up 5% or more. The reason for the gains – the best since January – was corporate earnings. Ninety- one percent of S&P companies that reported earnings beat second-quarter estimates, and U.S. corporate earnings growth is on-pace to be up 24.6%, year over year. Manufacturing results were also on firm footing, with the most recent Purchasing Manager’s index (PMI) data showing continued growth in U.S. manufacturing. The factors above resulted in U.S. second- quarter GDP rising 4.1% on an annualized basis. U.S. bonds sold off on the positive news, driving the 10-year yield back above 3%, and a stronger dollar saw gold trading at 2018 lows while also putting further pressure on oil prices. THE REST OF THEWORLD LAGGED U.S. PERFORMANCE...

For real- time market updates from some of Wall Street’s most plugged- in analysts, CLICK

HERE to get instant

access to NewsWire.

TUNE IN Stansberry NewsWire , everymorning at 8:30 a.m.

The MSCI EAFE (Europe, Australia, Asia, and the Far East) Index was up 2.4% for the month, but still down 2% year to date.

Recent data also indicates that money managers remain underinvested in U.S. stocks and holding around 5% cash versus

European Union president Jean-

12 August 2018

EDITORS John Gillin Greg Diamond Scott Garliss

Money managers are expecting the worst from the trade war, and their “near full” cash holdings are evidence of this... If they thought the trade war was a home run for U.S. assets and investments, they’d be putting their money to work. The turmoil and angst around trade sanctions has asset and money managers fearing the worst... but growth and earnings in the U.S. remain strong. And with most asset managers underinvested, it’s a good time to own U.S. stocks. September 4 The Institute for Supply Management releases its Manufacturing, New Orders, Prices Paid, and Employment data. It’s widely followed and judged to be an important near-term barometer of economic activity. The data is based on the responses of 300 purchase and supply chain executives across the country. September 7 The Bureau of Labor Statistics releases its monthly update on unemployment and job gains. Money managers are watching

the 10-year average of 4.5%. If the market refuses to pull back, at some point they will invest. And if the market does pull back, there’s a good chance any sell-off will be short lived. According to a recent Bank of America survey, one of the sticking points holding back asset managers is the fear of a global growth implosion and the threat of a trade war. The more sensational the trade-war news cycle becomes, the more they worry.

August 23 Markit releases its preliminary

manufacturing, services, and composite PMI data in the U.S. and the eurozone. This is a vital gauge for judging the state of global growth. August 29 The U.S. releases its second round of second-quarter GDP data. This is a key gauge for the health of the U.S. economy and will confirm whether the recent acceleration in growth is accurate.

this gauge to judge the underlying fundamentals of the U.S. economy.

American Consequences 13


Financial follies and disaster in the making

“Financial market disruptions can have large costs in terms of societal welfare by causing persistent losses in the level of GDP,” the study concluded. And there was other troubling news from the Fed this month... The Federal Reserve’s Board of Governors reports that consumer credit outstanding grew about 4.5% in the second quarter, and total consumer debt now sits at $3.91 trillion... nearly 50% higher than the previous credit- cycle peak of $2.67 trillion in the summer of 2008. As has been the case of late, both student and auto loans jumped to new all-time highs of $1.53 trillion and $1.13 trillion, respectively. And revolving credit – which includes mostly credit-card debt – rose to more than $1 trillion. This is a new record for the second quarter, and second only to the U.S. consumers are still binging on debt...

U.S. households are still paying for the 2008 recession... According to research from the Federal Reserve Bank of San Francisco, America never made up the growth it lost in the 2008 global financial crisis. Today, GDP remains well below its 2007 trend, and it’s unlikely the economy will ever make up that lost ground. Fed research estimates that the 2008 recession lowered output so much – about 7 percentage points more than in a mild recession – that the average American will take a $70,000 hit to their income over their lifetime. The researchers also noted that the effects of financial markets on the economy are asymmetrical... A financial shock will slow down economic growth in good times, but favorable financial conditions won’t necessarily stimulate economic activity in bad times.

14 August 2018

But that expansion was fueled by foreign- currency debt. Making matters worse, inflation in the Turkish economy hit 16% in July... much greater than its central bank’s target of 5%. Raising interest rates could have helped stem the massive increase, but Turkish President Recep Tayyip Erdogan has said he’s in favor of lower interest rates to continue driving growth. All told, Turkey has racked up hundreds of billions in U.S. dollar-denominated debt... And since the debt must be paid back in dollars, it becomes more and more expensive to service as the lira weakens. This, in turn, pushes up the country’s borrowing costs as concerns about its economy grow, creating a vicious cycle. So why should global markets worry? The answer has to do with the risk of “contagion,” not only to other emerging markets that are heavily dependent on dollar- denominated debt, but also to Europe. Banks in Spain and Italy are particularly exposed to this debt. If the lira continues to fall, Turkey is likely to default on some or all of its debt. This could lead to a new round of problems in the “weakest links” of the European banking system, and risks pushing the euro back into crisis. A record $4 trillion of U.S. consumer debt... $70,000 of lost lifetime income... and a Turkish debt spiral... What could possibly go wrong?

fourth quarter of last year – which tends to see a seasonal spike due to holiday spending – as the highest ever. Sooner or later, this boom will turn to bust, as they always do. A huge amount of this debt will go bad, and another crisis will likely follow. Of course, what is far less certain is when . It’s incredibly difficult to predict the timing of these events. And while there are plenty of reasons to be cautious today, most measures of credit-market stress remain relatively low to date... But this trend can’t go on forever. And while U.S. inflation and the dollar remain somewhat stable... The markets finally ‘woke up’ to the problems in Turkey... The country’s currency – the lira – has been falling for months. Through Thursday, August 9, it had plunged a massive 32% versus the dollar this year... a huge move for even an emerging currency. And yet, global markets had largely shrugged it off. Until Friday, that is... The lira plunged another 15% to close the week, bringing its year-to-date loss to nearly 45%. And markets began to worry. Like other emerging market crises of the past, this one is largely due to excessive borrowing and foolish government policies. Turkey has been one of the fastest-growing economies in the world recently, even outperforming China and India last year. In the second quarter of 2018, the country reported 7.22% GDP growth.

American Consequences 15


Re: Our Newest Readers Weigh In

is its screenwriter, Michael Cristofer. Julie Salamon’s book, The Devil’s Candy , reveals their idiocy page after delicious and horrifying page. So, basically, don’t let idiots have at really good novels. Re: Reading the Wealth of Nations All the Way Through July issue of American Consequences I must say your article hasn’t given me the motivation to read Wealth of Nations . Hence I never have read this, but once again after reading I decided not to buy this book. – Al M.I. P.J. O’Rourke comment: Al, have I got deal for you! Back in 2007 I read the Wealth of Nations in its entirety (plus most of the rest of Smith’s works), and wrote On the Wealth of Nations (“A Minor Mister Opines upon a Master’s Magnum Opus”). My book, if I do say so myself, moves along at a somewhat snappier pace than the original. (I read it all so that you don’t have to read it at all!) Re: The Coastals vs. the Heartlanders June issue of American Consequences PJ, you’re a wonderfully sarcastic wit, and I’ve loved your humor since I snuck copies of National Lampoon into my catholic school locker. (The religion issue still burns in hell somewhere.) I’ve been catching up on past issues of American Consequences and was

I have been following your writings for a long time, back in the Rolling Stone days, and am looking forward to reading your opinions on the world as it is today. – Skip T. P.J. O’Rourke comment: Skip, if only my opinions were printable! But, sorry, we try to make American Consequences a family publication. I’ve been a P.J. O’Rourke fan for a few decades, and I look forward to seeing a magazine built around his brand of sensible yet irreverent commentary. – Robert G., PhD. P.J. O’Rourke comment: Robert, that means a lot to me. And the more so because the closest I ever came to a PhD was a 1960s-era degree in “Street Pharmacology.” Re: Why the Best Books Turn Into the Worst Movies July issue of American Consequences Exhibit A for this phenomenon is The Bonfire of the Vanities , which I remember from reading in my business-school days when released. TomWolfe was one of the greats of American literature, and Brian De Palma was one of the worst American filmmakers. What could possibly go wrong? – Kevin B. John Podhoretz comment: What went wrong is that Brian De Palma is an idiot, and so

16 August 2018

Send us a message, question, or criticism at

kinda ticked off at your June Heartland vs. Coastal editorial. I’m an East Coast boy, raised in Maryland, educated all over the place, and now in Georgia, and although I agree that making fun of the Gwyneth Paltrow-esque “coastal elite” is fun to read, it’s as much of a caricature as the wisdom-spewing old farmer in the John Deere hat. Yes – some folks in the heartland knowwhere the food in Kroger comes from, but they also believe in angels, and I wouldn’t let them crowd- think the pentagon’s missions. Conversely, many of us “over-educated” Coastals fish and hunt, drink too much beer, and read Vonnegut in tree stands... and still think critically about almost everything (it’s a curse). My point is that trying to mono-classify either is trying to polarize – and that crap needs to end. It’s too easy; it’s Bill Maher- simple and it only helps to set the concrete. You’re right that the Heartland goes for Trump because they “hate the coastal elites,” but that’s because they’ve been sold caricatures that are easy to hate. We’re now in a place where fundamentalist Christians give a serial philanderer and high-paying “john” a pass and blindly prop him as president, and people angry at the Wall Street con-artists and thieves want the “99% to be the 1%”... despite knowing the math! American Consequences is a useful and informative resource – but please try to limit the building of a crowd and then playing to

it. Or at least keep the safety on while giving a trigger warning. – Yer Pal, Bill K. P.J. O’Rourke comment: Bill, much as I love an argument, I’m forced to admit that I agree with everything you say. (Except about the angels. There’s one that, for years, has been watching over me every time I start my chainsaw.) I can say that we were just trying to be funny. (Which is true – although it’s not up to us to judge whether we succeeded.) But what I can also say – and I’m not trying to be funny here – is that humor is first and foremost a destructive art. It can be enjoyable sometimes, but it shouldn’t be mistaken for any kind of righteous virtue, brilliant insight, or positive action. This is something that Bill Maher (and we humorists who are much less talented than Bill, which is most of us) should always keep in mind. Re: Grim News on Social Security July 18 issue of American Weekly Consequences You continue to promote the falsehood that there exists a “Trust Fund”. This so-called fund is a bunch of IOUs representing the fact that Congress starting in the Reagan years, decided to spend the excess on general revenues. Social Security runs into a crisis point in about 2025 when worker revenues equal retiree’s collection. At this point the Congress will have to decide to either raise

American Consequences 17


the tax or lower the benefit. There is no investment of Social Security funds so the comparison with market investment is not valid. – Richard B. P.J. O’Rourke comment: Whoa, Richard. You’ll never hear anything about a Social Security “Trust Fund” from me. Money itself is a government IOU. The government can’t create a trust fund by saving its own IOUs any more than I could create a trust fund by writing “I get a big chunk of money when I turn 21” on a piece of paper. Social Security is just such a piece of paper, except it reads, “You get a big chunk of money when you turn 65, the government promises.” Consult American Indians for a further discussion of government promises. Steven Longenecker comment: Richard, that was all me – I mentioned that Social Security was “ dipping into its trust fund... which will run out by 2034 ” in the weekly update linked in the title. In my defense, real or not, that’s what Social Security calls it. I’m with P.J. on the worth of government promises, though. Re: ‘The Carnage to Come’ July 11 issue of American Weekly Consequences I just finished reading The Great Terror (about Stalin), and then I saw Jim B’s comment. I know I’m ignorant of a lot, but I get the impression (from the comments that you post) that a lot of people are even more ignorant. I mean Stalin started by murdering his opponents but moved onto his supporter’s just to make sure everyone was

afraid of him. Stalin’s rise was almost 100 years ago, but after reading Red Notice by Bill Browder, it sounds like Russian leaders are still fine with murdering whoever gets in their way. – Evan W. P.J. O’Rourke comment: Evan, there ain’t nothing ignorant about being right. And you are. I wish I could put you in touch with a certain president of the United States on this subject. The reader “Jim” and his harangue against America really irks me. If he lives in Afghanistan or Syria, I can forgive his ignorance and even his arrogance. If he lives in the States, my first response would be “shame on you.” No matter where you live, “Jim,” if you hate us so much you should avoid us and all things American. If you live in America, move. I hear Venezuela has a socialist nanny state. Go there. Oh, and stop reading American publications. In fact, stop using all of the products America has ever produced. To do that you’ll need to give up computers, cell phones, the Internet, television (and computer monitors) and even indoor plumbing. Basically, to avoid all things American, “Jim,” you’ll end up in the Middle Ages. If you can find a country like that, since you hate the rich, you’ll be a serf, subject to the whims of royalty. Have fun with that. If there never was an America, would someone else have eventually invented democracy and all those wonderful technologies somewhere else? Who cares? They were invented here. The greatest most powerful nation in the history of man is so

18 August 2018

great because of its founding principles that protect the individual’s right to life, liberty and the pursuit of happiness, combined with a system of laws that impose individual responsibility and grant individual rewards including property rights. “Least empathetic?” Ask the Germans and the Japanese about America. If they know their history they will recall that America literally rebuilt their nations after defeating them in World War II. We did it at great expense and by sending them some of our best people, the ones who survived the war they started. “Jim,” read statistics about charitable giving. You’ll find that Americans give more voluntarily than anyone and that conservatives are far more generous than the America-haters on the far left. Talk about “self-centered.” For heaven’s sake, “Jim,” stop complaining, forget yourself and get to work. If you’re unhappy, look in the mirror. If you live in America, you are still the master of your own destiny, in spite of all the damage the left has done. Each of us is in America, and there are consequences for idleness just as there are rewards for individual courage, effort and ingenuity. That’s how things work here. If you want someone to erase natural consequences and make everyone exactly the same, good luck with that. It ain’t gonna happen, not in America or anywhere else in this world. – Frank H. P.J. O’Rourke comment: No comment needed, Frank. What you say!

percentages (“the lowest 60% of America only pays about 17% of the bill”) is immaterial. Taxes are levied on economic activity and not drawing breath. Therefore, a substantially more relevant representation of relative tax burdens is to compare income to tax burden and see if there are substantial disparities. There are not. A meaningful look into the ITEP data you referenced shows that lowest 60% of Americans make just over 21% of the income and pay about 17% of the tax burden. The ITEP data is as follows:

Share of

Share of

Total Taxes


Total Taxes 2.0% 5.1% 9.8% 18.4% 14.8% 10.7% 15.3% 23.8%


as a %


of Income

Lowest 20% Second 20% Middle 20% Fourth 20%

3.3% 6.9% 11.1% 18.6% 14.2% 10.1% 14.2% 21.7%

-1.3% -1.8% -1.3% -0.2% 0.6% 0.6%

19.1% 23.1% 27.5% 30.8% 32.3% 33.0% 33.4% 34.1%

Next 10% Next 5% Next 4%

1.1% 2.1%

Top 1%

When you look at total tax burdens in relation to the amount of income, you find a very mildly progressive structure. It is a widely held but incorrect myth that higher earners pay massively, or even remotely, disproportionate taxes. You wonder why a reckoning is coming? These types of lies are priming the pump. – Patrick M.F. Steven Longenecker comment: You look at that table and focus on the disparity, labeling it “very mildly progressive”? I see a huge “spread” between what the bottom 40% pays in taxes compared with income (about 21%) and the top 40% (31%). And that mild disparity? It’s not so small once you quit breaking out the top percentages into increasingly tiny segments...

Comparing tax receipts to population

American Consequences 19


Share of

Share of

Total Taxes

immediately wrote him, and asked for mine. It seems that he does not have the money to start bread lines, clinics, work-force programs and dole out monthly checks; but he thinks that the government everywhere should do it. He IS advocating socialism, but being filthy rich; cannot seem to understand that the average person is just too damn busy working to pay for his “ideals”. And you see; that is what such ideals embrace. Let someone else take care of me at all times. Every country that has embraced socialism has starving people, no progress and total control of all markets... but they, too, dole out just enough to make it look like there is no problem. Where there is no capitalism; there are no jobs and there are starving people. Yes, we have problems here. Corruption is everywhere; but socialism just puts more corrupted people at the top. Too bad the people who chastise you for your views cannot process this. – Lauran F. P.J. O’Rourke comment: Lauran, the only thing I can add to what you say is a request that you say it louder. Get up on a rooftop (or the social media equivalent thereof ) and shout it to the world! Our nation can afford it all, as it can pay any debt that is in our unit of account. The realworry is, are there going to be adequate resources to satisfy the demand when those checks are sent out? Funny, it wasn’t “pie in the sky” until Reagan and Thatcher – who introduced the proven failure of supply side, exchange value economics. – Matthew M.C.


Total Taxes 7.1% 9.8% 83.0%


as a %

Income 10.2% 11.1% 78.8%

of Income

Lowest 40% Middle 20%

-3.1% -1.3% 4.2%

21.1% 27.5% 31.3%

Top 40%

The problem here is that the lowest 40% don’t have much income. And that is a problem. But taxing the rich more (or poorer folks less) isn’t going to solve it. And again, this is our current system... We’d hate to see how much “more fair” we’ll have to get to pay for all the free-money promises that will come from the progressive left in the coming years. Re: Who Pays for Freedom? July 4 issue of American Weekly Consequences Dear P.J. and Friends: I am truly amazed at the idiots that write you that cannot seem to see what is happening all around us, everyday. They speak of socialism as that it is a “new thought”; drummed up to sell conservative magazines. Every day we lose more of our rights as a state, and as a nation. Socialism and Communism NEVER sleep, and are as alive today, as in the 1950s; but the people cranking on you for your Patriotic stance on the 4th of July; want to target corporations, the idle rich, greed, etc. for the fact that some have and some do not. It is very easy to be a liberal or a socialist! All you have to do is just blame everyone for your lot in life, never read anything, never study, and never really think out anything. I just read an article from Richard Branson saying that everyone should be given an income per month to “adjust equality”. I

20 August 2018

P.J. O’Rourke comment: Matthew, I not sure quite where you’re going with this. For most of human history “Demand Side” economics was the rule – as in, hungry bellies demanding to be filled. Then came modern capitalism and the industrial revolution, and suddenly there was a supply of the good things in life. But no supply of anything is infinite. And, as Margaret Thatcher said, “Sooner or later you run out of other people’s money.” Re: A Few Political E-Mails How many politicians donate part or all of their salaries to the veterans? Oh... I know one. He is Donald J. Trump. President of the United States of America. How much did Hillary, Obama, Schumer, Pelosi, and their ilk donate? Just asking. – Charlie F. P.J. O’Rourke comment: As well you might ask, Charlie. I believe the answer, rounded out, is “not much.” Steven Longenecker comment: I’d note that President Obama did donate about one year’s worth of salary (nearly $400,000) to the Fisher House Foundation, which supports families of veterans. As for Hillary and Bill Clinton... well, they’ve given a fair amount (more than $18 million) to charity, but it was mostly directed “down the street” to their Clinton Family Foundation... That foundation gave about $100,000 to organizations which benefit veterans... but it gave millions to the Clinton’s better-known charitable venture, the Bill, Hillary and Chelsea Clinton Foundation. In total, it has collected more than $2 billion since it was formed... and given essentially

nothing to veterans groups according to an investigation by the Washington Times in 2016. In my opinion no public university president or administrator or professor should receive more than 3 times the median income for the local public. Those who can’t accept that should find another line of work. Those who do accept that will more than likely be better humans than those who won’t. The best people are usually not the greediest. Or any public servant, for that matter. No politician should receive any more than this either from the public taxes. And those who represent us should be like us. If they have assets on their own that make them what would be considered to be wealthy, they should receive no more than the median from the state and should donate even that to charity or back to the state. Perhaps the wealthy should not even be considered for public office if they take pay for it. If they are successful on their own why should they ride on the public dole? I think this would do a lot to reverse the corruption in government, I think it is simple. Divest the elites from the public dole. – Roger S. P.J. O’Rourke comment: Roger, I take your point. Unfortunately, elite greed is focused much more on power than on pelf. I’m all in favor of taking the rich and the influential off the public dole. But I’m even more in favor of limiting the power of politicians in our government and the power of bad ideas in our universities. along with making all payments from lobbyists direct and indirect illegal.

American Consequences 21


22 August 2018

I now know what the “Fifth Avenue of Oil” looks like.

A few weeks ago, I spent some time traveling around Texas with my good friend Cactus Schroeder. Cactus has been drilling oil for more than 30 years and is the president of Chisholm Exploration, an oil and gas development and exploration company. He knows everyone in the industry, and they all call him for advice. As we drove around Texas oilfields that week, he took a call from a Houston Chronicle reporter asking Cactus’ outlook on the oil sector, OPEC, and where prices are heading. Others called wanting advice on land or leases. From the cab of Cactus’ truck, I could see oil rigs dotting the landscape. Huge tanks lay nearby with pipelines gathered around. A vibrant flare burned high above them. As we passed one site on the left, we would see another off to the right. And more lay on the horizon.

The longer we drove, the faster the drill sites came. We went from seeing a drill site every few miles... to seeing several in as many minutes. “In the past 30 minutes, we have probably driven over 100 million barrels of oil , ” Cactus said at one point. I didn’t doubt it. This was the Eagle Ford Shale. At 400 miles long and 50 miles wide, it is one of America’s largest shale-rock oilfields. Discovered in 2008, it spreads over roughly 30 Texas counties. And it’s oily. A recent study by the U.S. Geological Survey estimates the Eagle Ford has 8.5 billion barrels of oil in reserves. Eagle Ford (along with the Permian Basin in West Texas) played a major role in the American oil renaissance that has gone on for the past 10 years. The Permian in West Texas is America’s largest oil play and produces more than 3.5 million barrels per day (bpd). And it’s growing... Reports indicate it will hit more than 4 million bpd by 2023. Our bet is sooner. The Ghawar of Saudi Arabia is the biggest oil field, producing 5.8 million bpd. With around 85,000 square miles of quality light

By Brett Aitken

“In the past 30 minutes, we have probably driven over 100 million barrels of oil.”


American Consequences 23

The remarkable thing about the Austin Chalk is it has been hiding in plain sight. The rock formation lies atop the Eagle Ford. Most of the drilling we saw on our drive was likely tapping the Eagle Ford shale below. But the dynamic is shifting, and drillers are about to attack the Austin Chalk in earnest. Reports suggest the Austin Chalk holds about 4 billion barrels of recoverable crude and about 16 trillion cubic feet of gas. But it will likely be a lot more than that... It almost always is. That’s why I was in Texas. Cactus identified the opportunity in the Eagle Ford play back in 2010 – before any serious production began. Back then, the region produced around 50,000 bpd. He said it was so large it could become one of the largest oilfields in the history of the United States. And he was right. He knew because he owned acreage there. The big firms were drilling all around him. Today, the Eagle Ford produces more than 1.4 million barrels per day and climbing. So when Cactus called to tell me about new activity in this forgotten oil play, it caught my attention. THE INDUSTRY IS SUDDENLY FOCUSED ON THE AUSTIN CHALK If you’re thinking to yourself, “ Why now ?” then you’re asking the right question. If we’re 10 years into the American oil renaissance... and we knew about the Austin Chalk for decades before that... and we’ve

crude that’s cheap to extract, the Permian is within reach of becoming the world’s largest oil play. As we approached the town of Kenedy, Cactus mentioned that just a few years ago this tiny place had little more than a post office and gas station. Today, car dealerships, retailers, and fast-food chains flank the streets. An oil fest is going on in Kenedy. Everyone is busy. Big, brand-new cars roam the streets. Shops and restaurants are full. We stopped for lunch at a roadhouse called Jerry B’s on the outskirts of the city. Right at noon, the parking lot was filling up. We grabbed one of the few tables available. As we chatted, I told Cactus, “The past two hours was like a shopping spree for oil... And we had just strolled down the equivalent of Fifth Avenue.” The only difference is that in Oil Country, world-class petroleum companies control the streets instead of high- end jewelry and fashion stores. “That’s Texas,” he replied with a grin. Cactus had plenty of oil stories to share with me that week. But this particular day, he seemed more excited than usual. Before the trip, he told me how he was hearing more and more about a new field... And he explained it’s not so much new as forgotten . It’s called the Austin Chalk. Given the recent activity there by large operators – like EOG Resources and multinational ConocoPhillips – expect to hear a lot more about this play in the coming months and years.

24 August 2018

Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104

Made with FlippingBook Annual report