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DrumBeat: August 4, 2007
Posted by Leanan on August 4, 2007 - 9:36am
U.S. fuel thirst deepens despite more mass transit
Lofty gasoline prices have helped push U.S. public transit ridership to the highest level since the country spawned its highway system in the 1950s -- but the growth is not enough to drive down demand for motor fuel any time soon.
Demand Destruction - Market Failure
Stern and others have pointed out that markets for coal, then oil and gas never quantified or priced their greenhouse gas emissions. As the potential serious consequences of climate change are now being understood, this externality can now be considered the biggest market failure ever. More importantly, this historic inability of markets to value something as important as the humanity endangering consequences of burning fossil fuels calls into question the central tenet of our socio-economy.
India mixes arms and energy access
India's energy needs and status as a big global arms purchaser from some and supplier to others are increasingly becoming intertwined. Having lost out to China in several direct bids for energy sources around the world, the tying up of energy needs with arms supplies or purchase contracts is emerging as a subtle, even if unstated, strategy.
As Congress debates a bill today that would block energy development on Garfield County's Roan Plateau, the Denver oil and gas lobby is preparing to roll out a counter-blitzkrieg.
Say bye bye to bananas, hello local with '100 Mile Diet'
Say goodbye to coffee. Adios to chocolate. Bananas, pineapples and olives, too. Store-bought cookies, crackers and cereal. Frozen dinners.Seattle residents committed to following the "100 Mile Diet" -- an experiment in eating only what's grown 100 miles from home -- said sayonara to all of these items for the month of August.
...The grass-roots non-profit Sustainable Ballard is coordinating the local effort to follow the diet. The group is hosting a kickoff event Sunday at the Ballard Farmers Market. Chefs will highlight meals made of local ingredients. During the month, the group is holding a canning and preserving class and people are encouraged to meet for local-food potlucks.
Electric Politics podcast: Yesterday This Day's Madness Did Prepare
One fact to keep in mind. Instead of taking their recent, unprecedented, and obscene profits and reinvesting them, big oil companies are returning the money to shareholders as dividends. Ergo there's no more oil to be discovered. We know that for other reasons, but if somebody tries to argue with you about Peak Oil, just point out to them that big oil has zero interest in getting at the truth. Or big oil's lackeys. To take another tour d'horizon of the Peak Oil situation I turned to David Strahan, an award-winning former BBC journalist who's written an outstanding book, The Last Oil Shock. David pulls the story together in a unique, intriguing and most persuasive way. I very much enjoyed talking with him and I hope you find this show interesting and useful.
Oil price in danger zone — OPEC concerned, US worried
Oil at an all-time high near $80 a barrel has pushed top fuel consumer the United States into the economic danger zone — and OPEC, too, is concerned.The 12 exporters are keeping a lid on supply for now given ample stocks of crude worldwide, but if prices stay this high or inventories continue to drain, they may reconsider when they meet on Sept 11. Expensive fuel has had only a modest impact on US consumers, but Energy Secretary Sam Bodman voiced concern the economy will suffer if prices do not fall soon. “That’s why I hope that both OPEC and non-OPEC nations will look carefully at the facts,” he said on Thursday — the day after US crude hit a record $78.77.
The E.U. and Russia: An Uneasy Oil and Gas Bond
There is no shortage of paranoia in the West these days over Russia's revitalized, energy-driven, superpower status. Much of it was fueled by the German-Russian Nord Stream gas pipeline mega-deal in 2005. Not only did it confirm Germany's status as Russia's preferred strategic European partner, but for many it also confirmed Europe's dangerous over reliance on Russian energy. Those fears were bolstered again in June when Italy’s Eni signed up with Gazprom to develop the huge South Stream pipeline.
In pursuit of sustainable communities
The SCD focus is indicative of our belief that all global issues can ultimately only be solved at the local level — community by community, region by region.It must be representative of our response to climate change, peak oil, water shortage, biodiversity loss, socio-economic disparity, localized employment, educational access, health care, transportation and commerce and a myriad of other issues.
Professor urges 'sustainable' solution
Contrary to the hope of rural America, ethanol and biodiesel aren't the "silver bullet" solution to the nation's looming energy shortage.In fact, the use of food crops to fuel Pontiacs, not people, is something akin to a crime against humanity -- at least in a world where Third World, peasant farmers allegedly are being pushed off their land by wealthy investors who want to capitalize on the biofuel boom.
South Africa: Petrol panic sweeps city
Panic petrol buying is sweeping Cape Town as the fuel industry strike bites and pumps run dry across the Peninsula.And there is no chance of more fuel until early next week.
The serious money says biofuel
Whether the market is gripped by irrational exuberance and zooming to new highs, or enduring one of its periodic meltdowns, it's risky to bet against the tide -- no matter what your personal views.Apparently, that lesson isn't lost on Alberta Energy Minister Mel Knight. He unveiled details of a $209-million program earlier this week to help Alberta biofuel producers ramp up output.
Sales tax on gas would boost roads, colleges
Early in the third year of Referendum C's five-year timeout from the Taxpayer's Bill of Rights, it's obvious Colorado has enough money to upgrade either its congested highway network or its tattered higher education system.
Insecure road funding is an unintended consequence of what is hailed as a healthy trend toward more fuel-efficient vehicles. Even though the number of cars on the road and miles traveled have grown, gasoline use - and thus gas taxes - have remained essentially flat. The result is that the gas-tax trust fund that has subsidized the nation's road system for decades will run out of money by 2009.Federal, state and local governments collectively spend about $70 billion each year on roads and bridges. That's $9 billion less than is needed to maintain them and $62 billion less than is needed to expand the system to handle growth, Federal Highway Administration figures show.
Byron King, editor of Outstanding Investments, examined investment opportunities among oil and gas stocks. Because the world is no longer awash in oil, King declared, the energy sector – both traditional and alternative – will be awash in great opportunities.The "cheap oil" days are over, he warned, which means the energy-dependent American lifestyle will become costlier to maintain...maybe much costlier. "We've invented the cheap-energy system that has given us prosperity and freedom," King explained, "now we begin the descent. We'll either have to invent our way out of it, or go back to the way it was before."
n He was talking, of course, about our petroleum-based economy... in the face of Peak Oil. Once mocked, denied and ridiculed, the realities of Hubbert's theory are now coming to pass as, one by one, the world's oil fields pass their peak production rates and ease into decline.
The Independent Philippine Petroleum Companies Association (IPCA) announced that the public will again expect (dread seems to be a more appropriate word) another round of fuel price increases averaging at P0.50 per liter in the coming weeks. This, IPCA Chairman Glen Yu said, will have to be implemented because of a $4 dollar per barrel increase in the price of oil in the world market, which he finds confusing because of the adequate supply of oil. Who is then responsible for the spikes in oil prices?
Crude Oil & Gold: Profiting From the Linkage
Regarding Crude Oil, among the many reasons for Deepcaster’s long-term bullishness is that the world is at about “peak oil” - - that is, the peak of possible production. Whether “peak oil” is actually this year, or in the next year or two or three, is rather irrelevant. The evidence, according to Matt Simmons, Boone Pickens, and others in a position to know, is that we are at “peak oil.” One salient fact is that the rate of consumption considerably exceeds the rate of discovery, and has for some time.
Helicopter Crashes In S Nigeria, Pilot Dead
Helicopters have taken on an increasing role in transporting oil workers amid rising insecurity in southern Nigeria, where all of Nigeria's crude is pumped. More than 150 foreigners have been kidnapped in Nigeria this year alone, with many taken from their vehicles as they traveled on the region's roads.But Nigeria's aviation industry has also had troubles. Hundreds of people have died in aircraft accidents over the past three years, with analysts blaming poor maintenance and untrained ground crews.
As gas prices decline, so does interest in buying hybrid cars
The latest Cars.com Consumer Search Index is showing a significant decline in searches for hybrids and other fuel-efficient cars, all of which saw dramatic increases during the last several months when gas prices were at all-time highs.
At a time when many countries are talking of energy efficiency and energy conservation, these are costly alternatives that also cause harm to the environment. Air-conditioning exhaust and power generation add carbon emissions to the atmosphere. Besides, these expensive appliances are useless in the face of power brownouts and a looming energy crisis.What many do not realize is that the biggest source of their problem is the roof.
Canada: Fuel-cell buses promised for 2010 Olympics
Whistler will become home to the world's largest fleet of hydrogen fuel-cell buses by the 2010 Olympic Games in a five-year, $89-million project announced Friday by the B.C. government.
Area food banks feel strain while prices rise - Donations drop as consumers struggle, charity officials say
The annual rate of increase of food prices for the first six months of this year was 8 percent, said Patrick Jackman, an economist with the federal Bureau of Labor Statistics. Last year, the rate was 1.4 percent, and the year before, 1.7 percent.
UK: Homeowners offered support to get 'green grants'
A new system to help homebuyers get green grants worth hundreds of pounds to lower their fuel bills and make their homes greener has been announced, linked to the introduction of Home Information Packs and Energy Performance Certificates.Most people are unaware that there are typical grants of £100 to £300 for cut price loft and cavity wall insulation.
UK: Lib Dems plan air tax to aid rail
The Liberal Democrats say they would put an extra £10 tax per ticket on internal flights in Britain to help fund improvements to the rail network.They are also proposing to put a toll on road freight, while encouraging private investment in railways.
Recycling and turning off the standby are apparently the new ways to a woman's heart according to a poll for men's magazine Nuts. Women quizzed for the survey on the personality traits they found most attractive in men, put caring about the environment top of their list, surprisingly ahead of a good sense of humour.
Russia warns it will reject any extra gas demand from Turkey
Turkey's largest natural gas provider, Russia, has warned state-owned Turkish Pipeline Company (BOTAŞ) to refrain from demanding more gas than the amount specified in a supply contract between the two countries, according to Energy Ministry officials, leaving Turkey with the threat of yet another natural gas crisis looming on the horizon.Turkey has been relying on Russia for natural gas, especially in the winter months, when Iran has failed in the past to provide the amount required.
Leaving questions about the issue unanswered, BOTAŞ officials hinted that Turkey was likely to face what could turn out a serious energy crisis this winter.
Equilibrium Metal Demand and the Relativism of Peak Resource Pronouncements
All of the debate on peak oil and peak resources in general overlooks that what is peak for the gander may not be peak for the goose. This is overlooked not because it isn’t obvious, but because the American financial establishment doesn’t want to face the political aspects of local and relative peak resource problems caused by environmental activism domestically and resource nationalism abroad. American financiers disguise their lack of interest in the future welfare of America by telling us that all markets are now global, and one has to go with the flow.The temporary salvation of America’s economy is the fact that we are the first industrialized country to reach major natural resource equilibrium. We, in America, already have most of the permanent metal product infrastructure that we need and we recycle on a massive scale, so that we need new metal only incrementally.
One of the greatest questions of the modern world concerns whether our recoverable oil supplies will decrease faster than we can replace them with economical new energy sources. If we can keep up, then civilization can continue relatively unchanged and make the leap to the next stage of development. If not, then our modern civilization will face a resource shortfall that could spell the end of our way of life, much like other resource shortfalls have wiped out ancient civilizations.
Gazprom, Beltransgaz Complete Payment Negotiations for Gas Supply
OAO Gazprom said it has completed negotiations with OAO Beltransgaz over the Belarussian company's US $456.2 million debt for natural gas supplies received this year."Negotiations have been completed, the first payment made," Gazprom said in a statement.
"In addition to this Gazprom expects full settlement of the outstanding debt within a week and 100 pct completion of current payments."
Saudi Arabia is the largest economy in the Middle East, comprising 25 percent of the Arab world's GDP. It is the world's leading oil exporter, possessing one-fourth of the world's proven oil reserves. For more than 35 years, Saudi Arabian economic development has been broadly governed by five-year economic development plans. The first five plans emphasized the development of the Kingdom's infrastructure, with later plans having an increasing focus on human resource and private-sector development. Over the past decade, the Saudi Government has placed an emphasis on privatization, particularly in the industrial and agricultural sectors. The 8 th Plan, approved in November 2005, reflects the emphasis placed on economic diversification and the increased importance of developing the non-oil sector in Saudi Arabia.
Joint Irano-Saudi oil project underway
Development of Forouzan Oil Field in cooperation with Saudi Arabia aimed at replacing the existing platforms has entered a new phase.
Even during periods of peak use, Utilities selling surplus electricity
Even though the summer’s been hot, with temperatures hitting 90 degrees or more for nine days last month, there were enough cloudy and rainy afternoons to decrease local electric use, Feltz said.“Clouds versus no clouds can make a 30-megawatt difference in demand,” she said.
New Book Discloses that Oil, Coal not Needed for Past Several Decades
A concerted effort, funded with tax-payer money through off-the-record' funding, has resulted in the discovery of an entirely new area of physics dealing with energy and propulsion, but special interests, by abusing the National Security Act, have kept these developments illegally classified.
Oil exploration boat attacked in Uganda
Gunmen attacked an oil exploration boat in western Uganda early Friday, killing one worker, officials said.The motive for the attack was unclear, army spokesman Maj. Felix Kulayigye said.
"We suspect that the gunmen were soldiers from the Congolese national army, though we have no idea why they would launch such an attack," Kulayigye said.
Peak Oil Passnotes: To Sir With love
The U.K. has a problem: Its local oil and gas have peaked. There is no argument, it is not heresy in the local industry and you can say it without being dragged out of your office and exposed as a communist. U.K. North Sea production peaked some years back at about 3 million barrels per day and continues to decline at around 1.8 million barrels per day at the moment. The decline rate is around 7% a year.The same thing has happened in the United States. Oil production peaked at the start of the 1970s and, despite the huge concentration of capital and wells, continues to decline. These are both basic facts.
U.S. publishes initial terms for Alaska oil leases
The U.S. Interior Department published on Friday the initial terms for its upcoming Alaskan lease sale, which will give energy companies the chance to drill for oil in the state's Chukchi Sea.
Suez: Codelco will control Chile LNG project
Suez Energy Andino, a unit of France's Suez, said on Friday it would have a sizable participation in a planned liquid natural gas complex in northern Chile, but the complex would be controlled by government-owned miner Codelco.
Ireland tidal energy project put on hold
A plan to install the world's biggest tidal energy turbine in Northern Ireland has been put on hold....The company said the delay is because the jack-up installation vessel it will charter is stuck on its current project for an extended period.
The Renewables Revolution Will Not Be Televised
To be sure, there have been some recent moments when the media turned its focus on energy. Like when President Bush proclaimed that we are "addicted to oil."Or like this week, with a slew of energy legislation making its way to the floor of Congress. Among the bills are some important ones that would set higher gas mileage standards for vehicles and establish a federal renewable portfolio standard (RPS) for generating of renewable energy. Some of them may even be voted on today.
But I resisted the urge to write about them, and exhort you to call your Congressmen in support. Why?
Because the renewables revolution will not be televised.
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Does anyone think the stock market plunge that we had this past week is anything investors should be worried about? Is this the start of something big? But the real question is what happened to that fabled “Plunge Protection Team” I have heard so much about? How could such a team, if it had any power at all, allowed removal of the Uptick Rule?
This rule, that stocks could only be shorted after an "uptick", was enacted in 1934 to protect against plunges such as we had last week. It was removed July 6th, 2007. Wow! Some power this Plunge Protection Team has. ;-)
Ron Patterson
Ron- the market was down 2% this week, hardly a plunge. The plunge is likely coming though, at some point in next few months. The financial sector is seeing its worst credit market ever - even including 1987 -according to Bear Stearns CFO on conference call yesterday.
Yes its the start of something big, in my opinion, because firms will have to pay more to borrow money going forward, or potentially not be able to borrow. Its bad news for peak oil awareness as well - if economy cracks, demand destruction sets in with a vengeance and we go south on oil prices, giving policymakers no incentive to rock the boat that needs rocking. The marginal barrel - she's a bitch.
Please correct me if I am wrong:
High on 7/19 was 14,121
Close on 8/3 was 13,182
Down 6.65%
The Dow went down 33% between Sept 1929 and Nov 1929. By the way, I was surprised that it was not larger than this.
Rick
It was alot larger than this, in 1930-1932.
And 7/19 was 2.5 weeks ago - "For the week, the S&P fell 1.77 percent, while the Nasdaq fell 1.99 percent."
I somehow thought my Great Depression numbers were small. I'll look into the following years.
Thanks,
Rick
Just an FYI but if the DJIA was to have "kept" growth pace according how the economy was "growing" then it would have had to have been at 14,000 to break even with the year 2000.
It hasn't, so the economy is somewhere like 95-96 right now i would guess.
That would have to be a pretty big crash for oil prices to plunge to the levels you seem to imply.
If it did happen, that would delay many new oil projects.
Let's say a severe global recession happens, and demand goes down a couple million barrels per day world-wide, with prices falling back to the lower $50's, or high $40's. I'll go out on a limb and say that this outcome would seal our fate — we would never again see production levels higher than they are today. I think this for a multitude of reasons, which I won't detail here.
Dave, for reasons you well know, I am a huge oil bull, meaning i think oil prices will be much higher than they are now going forward. I am also a trader and a student of the markets, and more and more I see that societies excesses are going to catch up to them at the worst possible time, when we need proper market signals to move away from oil. We are going to move away from oil, and from everything else that is a luxury, if we go into a steep recession or worse (I never really understood the difference between recession and depresssion, other than medication). On the one hand oil and high quality resource depletion are very inflationary. On the other hand, the worlds largest consumer is running on fumes, borrowing against this and that, highly leveraged, etc. In my experience, when leverage unwinds, as it ALWAYS does, it infiltrates farther than one can imagine, like a typhoon. If Sam Molinaro says this is the worst credit debacle hes seen in his career, then there is a lot more pain to come. In effect, the credit markets have tightened interest rates 250 basis points plus, in less than 6 weeks - the fed has never done more than 50 in this short of time period.
If you need an example of how low near term prices can go in the face of long term scarcity, look no further than natural gas - front month slipped below $6 this week and many traders are calling for so much gas in surplus that we'll have to let it go (i.e. flare it) because storage will be full. Colorado basis gas has been $3 or lower for much of last year - yet futures starting in 2009 are making ALL TIME HIGHS this week. In normal commodity markets (like gold) people would arb this - buy the stuff now and sell forward, thus locking in a profit. But if you buy nat gas now, how can you store it until 2010? This dynamic will be central to our energy debate going forward - how the market differentiates between having enough now and not having enough in the future other than the 'hope' that something will come through.
Of course, at sub $6 gas, the smart operators, those who arent yoked to shareholder demands, will shut-in production and stop drilling, which is a built in speedbump to price declines. This happened after Amaranth blew up last year when we had $4 gas handle.
We live in interesting times. But back on point, the worst thing for long term oil production would be a steep recession now, as you say, we would likely never get back to these levels again by the time the economy reloads.
And yet a recession is exactly what is staring us in the face, isn't it, Nate? Maybe Ace is not so far from the truth with his bottom up forecast that put all liquids peak last year and C&C in May, 2005.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Hello Nate,
Your Quote: "But if you buy nat gas now, how can you store it until 2010?"
Standard Disclaimer: I am no expert.
As mentioned before in earlier speculative posts: pass legislation to store the natgas in the chemical form of fertilizer to help support prices to signal paradigm change, and to help bridge the transition to relocalized, organic permaculture.
Recall my earlier posts on the eventual mining depletion of phosphates, and the plant nutrient essentials of the elements: NPK [nitrogen, phosphorus, and potassium]. We also need to avoid the burning of billions of trees, and the consequent habitat decimation; to not recreate a primitive potash industry again [see earlier post on New England tree-burning in early America].
http://futureopportunities.blog.com/171828/
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April 15, 2005
Brazil, China and India have all simultaneously discovered a great need for potash. Bill Doyle, chief executive of Potash Corp. of Saskatchewan, the world's largest producer of potash, told shareholders in the 2004 annual report that:
[Paragraph broken apart to emphasize--BS]
++++++++
the upside of potash [potassium source-K-an alkali metal] is even higher than the other two key nutrients in fertilizer - nitrogen [N], and phosphates [phosphorus source-P].
+++++++
Farmers have been skimping on potash, and now China needs to double its ration to catch up the U.S., while Brazil needs another 50 per cent to compete with U.S. yields of soybeans in particular.
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EDIT: IMO, I think people are drastically underestimating the postPeak importance of water and fertilizers: Please Wiki, "War of the Pacific" to see what countries did to gain access to NPK for fertilizers and explosives before the discovery of fossil fuels, or reread my earlier post on this topic. Thxs!
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Hello TODers,
If I was an expert bat-biologist: I would be going apeshit to quickly setup a North American franchise operation on renewable [biosolar mindset] batshit shelters to help support relocalized permaculture. The ERoEI of batcrap to FF-fertilizers needs to be expertly analyzed, IMO.
Have you priced guano lately? A repost below:
http://www.theoildrum.com/node/2268/158584
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Yesterday's Drumbeat had quite a subthread on organic vs FF farming. Below is a repost of a Jan. 24 posting that got no comments at that time. Could batshelters be the key to drastically raising organic yields?
Hello TODers,
In the recent natgas keythread: I posted again how we should be using natgas to stockpile fertilizer to help us bridge to relocalized permaculture. If this isn't done, I hope, at a minimum, we can go back to the future:
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What would the reader think, if he were asked to invest in a gold mine from which all of the ore had been taken out, and, at the end of a year, it had all replaced itself? What would he think, if he had, attached to his mercantile establishment, a warehouse in which, as fast as the goods were removed for display and sale, they would replace themselves without the expenditure on his part of one grain of energy or one cent in money!
------------------------------------------------------
EDIT: to make link below activated [Please see photos!]
http://www.soilandhealth.org/03sov/0302hsted/030212campbell/campbell%201...
I was astounded by the amount harvested. Are there any TOD biologists that care to comment? A postPeak future with very little FF-pesticide will require lots of bats to keep the bugs at bay.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Hi Bob Shaw,
The problem with storing natural gas as fertilizer is that the ammonia plants have mostly moved overseas in search of cheap gas.
Don't worry, nobody's going to flare gas. Its illegal, as well as economicially wasteful. What the pipelines will do is pro-rate how much gas a producer can sell, forcing them to shut in wells in accordance with the shut in provisions of the leases. All oil and gas leases have shut in provisions, gas has mostly been in surplus in the US. I'm a landman, we buy oil leases, this is in my area of professional expertise.
I like the bat farm idea. However, I'll bet the neighbors would complain a lot less with a worm farm, and worm castings are high dollar. Worms are high protein and can also be used in aquaculture as fish food or sold for bait. It might make a real commercial operation for a small farmer.
Bob Ebersole
Does the bat poop actually work any better than bird poop?
I think the difference is the lack of nitrogen leaching caused by the critters pooping in the dry. So a barn roost for swifts etc. would work as well.
Most of the huge deposits in places like Chile were made economically exploitable by steam power in the C19th have been used up, and what remains will be small beer. I would have bat roosts anyway, but I would for resilience' sake try to spread increased fertility across as many sources as possible.
Hello Oilmanbob and Lantern Rouge,
Thxs for responding. Good points by both of you,thxs. Worms and composting are good, but they don't eat the flying critters, and most birds poop everywhere. Yep, keeping any natural fertilizer free from water is the secret to reduce nitrogen leaching. We need 'em all; as many species as possible from extinction to optimize the decline: worms, birds for daylight, bats for night-time; the Circle of Life.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Interesting thought. Homemade bat roosts or bat boxes look pretty easy to build. Not much more than a couple of boards with a bat-width space in between and a little roof overhead. Maybe you rout some horizontal grooves on the interior boards to give the bats something to grab on to? Here's a link for one set of plans I have found, a Google will find you more:
http://www.dnr.state.wi.us/org/land/er/publications/bats/PDFs/BatHouseDi...
I suppose one could very easily set these things up over one's compost bin so that the droppings just go directly into the compost. That would keep the droppings from accumulating, assuming you turn your compost occasionally (and will thus keep down the smell) and it would also massively increase the fertilizer value of the compost. Plus that would eliminate any extra shoveling on one's part.
There are some do's and don'ts regarding bat house management - this link has all the good info:
http://www.batmanagement.com/Batcentral/batboxes/whyfail.html
Hmmm.... I wonder whether bags of fertilizer would be good to 'stockpile' as a personal asset? That would be something one could potentially always trade to those who wish to grow food, and yet not necessarily be something that would be pilfered by thieves. Hmmm.
I would be careful stockpiling fertilizer.
google Timothy McVay
until they get 'et or wet or greenish.
Hello Greenish,
Possibly consider stockpiling bird & bat guano: besides NPK, it also has the other essential minerals for enhancing plant growth and avoiding some unforseen mineral Liebig Minimum to curtail efficient photosynthesis. Might be the best way to avoid being labeled another Timothy McVay too. I am no chemist, but if kept dry: it might not degrade anywhere near as fast as FF-fertilizers. My feeble two cents from a woeful city-boy from the Asphalt Wonderland.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Phosphate would also make a great trade item, as would potash. Or just a premixed balanced fertilizer, like 20-20-20. If I wanted to keep fertilizer, I suggest plastic bags or 5 gallon pvc buckets, the paper bags would get brittle or soggy from humidity.
There is a USDA County Agent office in most of the country. They have arial photos to scale, and will do soil analysis to determine whats the best soil amendments to your garden. They're not free, but damn sure worth the low cost-maybe $20 a sample. They will tell you if you need sulfur to correct the PH, or crushed lime, or micro nutrients. The County agent can give advice as to what varieties do well in your area, all kinds of useful help. in Galveston County they even offer low cost classes and organise plant sales for stuff like citrus or fig trees.
Bob Ebersole
Hello Oilmanbob,
My guess is guano, because it contains a broad mixture of minerals besides NPK, would need chemical processing and inputed energy to separate the desired molecules to make explosives. In other words: it is naturally at an energy entropy level best suited for plant growth; it takes alot of work to refine into the separate chems to support warfare. In short: guano properly used minimizes violence, and optimizes the drive to relocalized permaculture.
Please read my new post at the very bottom of this Drumbeat.
Edit: Oops! use control F, then venture capital to find it. not quite at the very bottom.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Fertilizer does not have a good shelf life. In general, last year's purchase is not worth spreading on your plot of ground.
Nate, the S&P 500 plunged 2.66% on Friday! The S&P has plunged 7.5 percent since July 19th. Falling that far in that short a time is called a plunge by most market analysts. Google "market plunges" or "stocks plunge" and you will see what I mean. (The S&P 500 is a far better indicator of what the market is really doing than the Dow.)
A 10% drop is what most analysts look for before they call it a major correction. However such a correction normally takes several months.
Yes, a major recession, if it happens, will definitely create demand destruction and a drop in oil prices. However that may be what we are seeing right now. Oil prices this high is bount to have a dramatic effect on the economy, sooner or later. That is what we are seeing right now may be the effect of two years of very high oil prices. However everything affects everything else. It is hard to tell the chicken from the egg.
Ron Patterson
True but the SP was UP about 1% for the week going into Friday.
And I totally agree with the rest of your comments. Except we will know the egg when we see it..;)
jbunt
Ron
You are right!! Same as 1987, when on Monday, Oct 27th, Dow was down 508 points or 22.6% in one day. Oh wait - correct that - you were referencing a one day PLUNGE of 2.66% - I missed the decimal place.
There is an article about credit on DailyKos and the Germans are saying its worse than 1931.
I want to hide under the bed, but there isn't enough room to open the laptop there.
Obviously it's worrysome, even to non-investors like me. Only the most die hard jaw boner can keep on cheerleading this market on, (and those with the a lot to lose). But I think it will take a while for all the bullish sentiment to shake out. And it depends on how the Fed decides to deal with it. So there are still at least a few days of 100 DOW points to the upside.
Right now, the market appears to be counting on a rate cut later this year or some sentiment from the Fed in that direction to maintain orderly markets.
I think the market is at a wobbly teeter top that most likely will head south, except for the possibility that so much will be done to prop things up because so much is at stake. But ulitmately, if the housing and credit collapses follow thru, so goes the economy and the Fed may be able to slow the descent and cushion the bottom, but it's still down hill for the foreseable future.
So investors need to beware of getting suckered back in to the market and getting whipsawed on intraday volotility.
IMO, there is a lot of hot air and smoke spewed out by the financial industry and most of it is designed to further their own positions. It's their job to go out and talk the last sucker into putting his money in on an uptick and then yank the floor out from under him, only to turn around and do it again the next day.
IMO, the one true best time to buy is when there is so much fear in the market that it seems crazy to buy. But not many have the stomach or guts to do that.
-Don
A rate cut would help two areas:
1. Real estate market. Access to debt would be eased by lower rates. Could slow the descent a bit.
2. Easier access to debt for corporations. $60 billion in financing deals have collapsed since June 22 (46 deals failed). Last year zero deals failed. Debt is getting harder to finance, lower rates really help here.
A rate cut would help home owners and corporations. That's a win-win.
However, a rate cut would lead to more inflation. And the dollar has been weakening, it fell considerably yesterday.
We're between a rock and a hard place.
I look at what are foreign investors willing to get for their return on invested money on our debt with a falling dollar. I don't think they can cut rates IMHO.
If we don't go inflation it will be all out free fall in several market sectors and a probable weakening confidence in the USD.
I already locked myself in when gold hit 660 last week or so
If inflation picks up, gold goes up, if USD drops, gold goes up.
I figure its the best option now. but at 673 it's already started a rise. This coupled with most people not having a good handle on the oil industry (last I checked the gold/oil ratio was ~8.5 and is typically 10-20). The reason for the strong concordance between the price of gold and oil is because oil is an input into gold mining! (considering that 0.5 ppm is profitable gold ores... a lot of refining needs to be done.)
Gold price increases also tend to lag behind oil price spike,
i figure long shorts are out of the question now. but at the end of this ima pick up a ton of semiconductor stock and silicon manufacturing, wind, and nuclear.
jturpin:- The Fed rate directly affects only very short term rates. Real estate and company borrowing is always intermediate to long term, and these rates can remain quite a bit higher than short. However, it might help psychologically for awhile.
-
James Gervais
Hope was the last evil to escape Pandora's box.
I see it as a response to the short term outlook - profitable - versus the long term inevitability posed by consumer debt and asset valuation decline. There is no room for real estate to go up and no way for consumer debt to go down, so the market can't really expect any upside. However, corporate profitability keeps dropping those pesky P:E ratios.
This is a situation in which the parasite is doing well but the host is in serious trouble. While market crashes have big press, the majority of stocks didn't move much, if at all. You can expect that 5% of any stock at any time is froth, and that the lurking bargain hunters will kick in if Acme Nut and Bolt goes much lower - because it wasn't overvalued in the first place.
Huge and permanent crashes have usually entailed wacky P:E ratios like 35:1 dropping back to normal as they did in Japan in the late 80s. Despite the Anderson accounting, today's P:Es look pretty normal and boring. There's still enough money looking for a home out there that the market won't fall below 12K which, if you factor in inflation that isn't supposed to be there but is, makes this market equivalent to a Dow of 8000 maybe six years back.
What has happened is the wage shortfall versus inflation. How long corporate America can keep running these profit margins in the face of negative wage gains [in international currency terms] is the gamble. Time to short the long?
That repeal of the uptick rule is very interesting too. Thanks for posting that Ron. The article doesn't mention anything about why it was removed. Did it expire or something? Maybe they thought bear markets were a thing of the past.
It's removal definitely can have an effect on how this market retreats over the next few months.
-Don
Don, no the rule did not expire, it was voted out by the Securities and Exchange Commission Board of Directors. Here is part of a speech by the SEC Chairman explaining why it was removed.
Speech by SEC Chairman:
Opening Statement on Eliminating the Short Sale 'Tick Test'
Ron Patterson
I call BS on the explanation. If the rule has no impact then there is no need to remove it. Someone wants that rule removed or they wouldn't address it. Bets - the market tanks?
Removal of the uptick rule probably caused this correction/crash by making it easier to short stocks.
Thanks for posting the SEC chair's comments. I was amused to note that the SEC chairman was unable or unwilling to spell out the harm that the uptick rule causes.
Ron,
Watch this clip with the famed "Cramer", from CNBC, go literally nuts during an interview.
http://www.cnbc.com/id/15840232?video=452808336
So, when one of the most optimistic Bulls on the Street says we are in the midst of a financial "Armageddon", then its time to take notice.
The emerging financial crisis has taken me away from reading TOD on a daily basis. The ramifications of a global credit crunch will put the nail in the coffin concerning our energy availability as we move forward.
A comment from George Ure, on Urban Survival:
If people rush to pull their investments monday, there will be a panic in a hour or two, not a couple of years.
I personally think that the market will decline all week as fast as the circuit breakers allow. I am glad I cashed out of the market a month ago. Hopefully, the precious metal market will be hit hard along with the stock market, so I can make a big investment at a lower price. Either way, I am making a big investment this week in pms to add to my treasure chest.
FWIW, I'm with you enviro attny. I sold most of my long positions two weeks ago and got short, with about 1/2 my portfolio in cash. I may go more defensive yet, depending on the action next week. IMHO it's going to take months, not days or weeks, to unwind the effects of the "toxic" loans in the subprime sector. Cramer is right--the word on the street is MUCH worse than anybody seems to be admitting to in the financial press or at the Fed. I suspect that there is much bad news yet to be confessed in the financial sector and that it will ripple out to the rest of the market as managers are forced to sell perfectly good positions to cover and raise cash. "As go the financials, so goes the rest of the market." I think it's also a good time to have some assets not denominated in dollars.
As for the effect on oil...it seems inevitable that this will have the effect of slowing the economy down and therefore reducing our demand. But it's not at all clear that this will also be true for the oil-thirsty emerging economies. The Shanghai index hit successive new highs this last week even while the Dow was going in the toilet. So the global price of oil may not come down all that much--a situation that would only exacerbate the pain for those in the U.S..
Good luck everybody, and set your stops!
--C
Energy consultant, writer, blogger www.getreallist.com
I will be watching both the chinese stock market and the yen very closely sunday envening. If the chinese market plunges, I expect all global markets will follow.
The yen carry trade is in a very interesting position. There has been massive swings in yen value over the past two weeks, and we appear to be on the verge of a big pullback on risk taking in the forex market. The problem is that there is no such thing as a strong currency to draw the money into. Trying to determine the appropriate strengths of the currencies in relation to each other will be lots of fun for the banks.
I think the best option is to short all currencies and buy gold.
But in a deflationary crunch gold will get smacked. Cash and solar panels, my friend...;)
Nate:It is likely that if an actual deflationary depression occurred in the USA (a collapse of equity markets simultaneous with a collapse of real estate) the US dollar would tank big time. In this scenario, gold will soar as there would be an actual risk of default on US treasuries if the printing presses were not put on overdrive. In other words, the amount of government debt in relation to the size of the economy/tax paying capacity makes an deflationary situation wherein US treasuries hold up extremely unlikely/almost impossible.No matter how you spin it, inflation or deflation, US treasuries look to be toast (in a collapse).
There is difference between a deflationary depression and a collapse. Anything can happen. And it usually does. I am more confident that in general stocks will go down than I am that anything else will go up.
Nate: The price of gold is to a large extent a valuation of the US dollar. What you are predicting (a deflation whereby gold gets smacked) is only possible with a deflationary economy coexisting with a strong US dollar. Doesn't seem likely- I could be wrong- we shall see.
Just to be clear, this is what Im predicting:
1) A very sharp selloff in US equities - down double digits from here to end of year.
2)a recession, mild at the least, which causes a reduction in energy use, and a lowering in prices - how much I have no idea - could be $5 could be $35.
3)sharp reductions in most real estate markets, especially the 7+ digit variety.
3)much higher oil prices 3-4 years hence due to myriad departures of 'capacity' from 'actual production', now going to be exacerbated by the coming disincentives to invest in both oil and other energy infrastructure
4)gold market, currency market and bond market volatility like no one has seen since the early 1980s
Whether gold ends up higher than now or lower is not something I yet feel strongly about. In 20+ years of following the market, Ive learned one can be right as rain about the fundamentals, but have the timing wrong. Ive therefore become a trend follower. I've held the above beliefs for about a year now (except for #2), and think the timing /catalyst is now upon us. I think this is a really really big deal (the credit market unwind) and is going to trump concern on peak oil for some time to come.
The trend is now down. (for stocks and non-Treasury bonds)
There is one reason you may be right about gold. The amount of commodities available to invest in is a tiny fraction of the amount of money able to seek a home, especially with leverage. If the conditions are right, you could see multiples of current metals prices. I just see the flight to quality going to T-bills for some time, not metals. We shall see.
It is logical that the end game is for America to trick someone else into losing a fortune. The T-bill holders are largely foreign governments, which this Administration tricks and cheats morning, noon and night. When everything goes bad, our leaders will point to the much bigger collapses overseas as proof that God loves America and George W Bush.
I fully expect gold to be $35/ounce in the future. Of course, that will be 35 new dollars/ounce, or 3500 or 35000 or 350000 old dollars/ounce (depending upon when they give up on the fiat basis currency).
25$/oz, preRoosevelt, more or less.
The actual usd value of gold in those days was fixed, right?
now the usd value floats with the USD.
seems like apples and oranges to me.
Whats a 'pms'?
Precious Metals.
Really, I thought pms was premenstrual stress syndrome. You mean my ex-wife was actually telling me she had a lot of jewelry???
Bob Ebersole
George has wondered out loud if we're going to take out 12,000 in the next 2 weeks. If we do, he thinks September may not have a floor and there may be blood on Wall Street before we're done.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
IMO they will take 10 out easy this year.
My exact prediction (great minds think alike).
FYI: Washington is working on a massive bailout. Senators are calling on some of the largest lenders as well as the GSE's to gauge how big of a bailout the need immediately.
We should hear some news about this next week. Its likely to at least give some pause in the market. I wouldn't bet on the market heading straight down.
PMs will likely be stuck in a trading range for several years as many foriegn Central banks are dumping gold (Germany, Spain, Italy, etc) to finance debt. As long as this practice continues, the price of gold and other PMs will probably be contained. A US lead recession would also drive down demand for PMs (since manufacturing, jewelry consume significant amount of PMs).
FWIW: I really don't know what's going to happen over the next few weeks. The market could very well drop 10% to 20% in the coming weeks. My comments are to simply to inform you of other factors in play. Always invest with caution. The only future certainity, is an very uncertian future.
So is there anything to stop China from buying up all that European central bank gold?
For 6 years I've been wondering how the Chinese could get rid of that ever-growing tumor of dollars in their vaults without wiping out its value in the process. I understand that before the British hypocrites ramped up their opium racket, China had the biggest pile of gold in the world. Then the gold went to London, then the consequences of empire sent it to Fort Knox. Time to settle accounts, in Chinese eyes.
The markets dropped last Friday as well as yesterday, and were up again at the beginning of the week. Why should we expect them to be down Monday?
Wednesday and Thursday this week exhibited behaviors that indicate that maybe the PPT was involved. The market kept trying to go down further throughout the day then would spike back up near its starting position. At the end of the day it was then was led upwards with a closing spike in the final 30 minutes before the bell, yielding a "gain". This happened on both days, Wednesday and Thursday.
The spike began again on Friday, again about 30 minutes before the bell, but it survived less than a minute before being further wiped out. In other words, the investors were letting the market ride with losses in the 50-70 point range on Friday then taking out the PPT's upward play at the last minute by sheer volume because they recognized what the PPT was doing. Unless the PPT employs some other strategy, the market players cumulatively will continue to wait for the end of the day to place their "down" bets, and thus not give the PPT time to play "dead cat bounce" games.
Consequently, my bet next week would be for early morning upward spikes trying to set the "tone" of the market rather than corrective spikes at the end of the day trying to hide the sad state of the market. If these early spikes are successful in setting the tone, then the market will go up over the week. But if the mentality out there is like Cramer, no amount of fake pumping is going to change the downward fall.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Thursday this week exhibited behaviors that indicate that maybe the PPT was involved.
If the PPT owns all the public companies, is that more like fascism or communism?
| The problem will solve itself.
| But not in a nice way.
I don't expect them to ever take ownership, just to play shorts and longs in an effort to feed the psych of the investment community. Besides, playing shorts and longs lets them get far more bang for their buck than actually buying the stock outright. And what they are after is shaping opinion, not owning stock.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
So that would mean fascism. The Nazis never owned most of the German economy, but acted to protect the interests of their capitalist partners. "Hey, here's a great new war! Here's some slave labor!"
I once ran across the September 1939 issue of either Forbes or Fortune magazine. It had a scathing indictment of the Fuehrer's funny money, debt scams, hidden taxes and shoddy important substitution. The impression I got was that the author was hinting that Hitler would have to start a war very soon or face economic collapse.
But hey, at least the Reichmark was always worth 3.2 to the dollar, even as every city burned. Hitler couldn't let I. G. Farben and Prescott Bush down.
GZ I'd recommend Doug Noland's article this week.
You can skip down to the section (2/3 down)
Credit Market Dislocation
http://www.safehaven.com/article-8108.htm
And
Listen how Doug ends this one. He is NOT generally a dire, world gonna end, sell everything type of guy.
This is the first time, having been reading him for a few years, that there is genuine panic in his voice/keystrokes.
NOT GOOD kids.
How do you protect against the risk of physical possession of metals inside the US?
The government can pass any rules they want at any time under the excuse of Homeland Security.
How do you protect against the risk of physical possession of metals inside the US?
The government can pass any rules they want at any time under the excuse of Homeland Security.
A couple of points about this fear or perception.
You will be able to sell or use Au/Ag as easy as you can buy drugs or anything else on the street. There will be a precious metal dealer on every major city street. Either legally or illegally. Could you get a drink during prohibition? You will be able to spend your 1oz silver dollar.
I really agree with Jim Kunstler on this one. The "Authorities" will be lucky to be able to answer the phones. We will see the non-enforcement of many many low level crimes.
We are in the beginning throes of The End Of *MORE on many many fronts and levels. Many of our paradigms and ideals will no longer serve us. Unlimited Growth, Everyone can grab the brass ring, 2car garage/house in country, feed everyone, World Peace, Efficiency/cost at the price of sustainability
Basically the end of the mentality of
If Some's Good
More's Better,
and Too Much is Just Enough
Yeah, 1 oz maybe, but I compare the logistics of buying volume PM's in person today with 15 or so years ago, and it is much more complicated.
The every street corner isn't happening even now when people still have some funds.
One would pretty much have to have a established network, and the network would have to hold together.
Musashi -
I don't know where to Google this, but I saw essays by an Argentinian college instructor about life after the collapse there. He lived in a big city, doing a respectable job. The situation he described was truly apocalyptic, worse than 1932 here. When a college employee is giving you advice on what kind of firearms to carry when you drive to work because there are so many kidnappers out there, you pay attention. He also recommended a headlamp, like coal miners wear, for the long blackouts. There was other stuff about how one went about shopping that I can't recall. I know private and local currencies abounded for a while.
Sandor, thanks a million for this clip. I missed it when it was live. But it was so good I watched it twice.
Cramer has always been a screamer but I have never before seen him like this before. This (usual) perpetual bull is clearly in a panic. Why isn't he taking Will Rogers' advice? Doesn't he realize there is plenty of time left to panic? ;-)
"Will someone come on TV and tell the truth about how bad it is?" Jim Cramer on TV.
Ron Patterson
Cramer is full of $hit and dead wrong.
Bernanke, Poole, and others DO know exactly how bad it is out there because they engineered it.
Soup, we can do without the conspiracy theory bull$hit. If you have some proof then by all means post it. Otherwise it is just another harebrain conspiracy theory.
Ron Patterson
Dar - Cramer even talks about greenspan pushing subprime & arms then increasing rates 17 times creating the mess then Ben sitting on his hands.
Soup, quite often men in high places will do the wrong thing, especially if they are the Fed Chairman or Chairman of one of the Fed Branches. However they think they are doing the right thing.
Your insinuation was that they were deliberately trying to engineer a stock market crash, or a crash of the housing/credit market. You need proof, or at least post a valid reason as to why they would do that.
You have not done that and unless you can your posts amount to nothing more than hot air.
Ron Patterson
Ron applies an ancient and well tested truism - "never see malice where simple stupidity will suffice as an explanation".
We just can't imagine, as a society, the rug going out from under us, so we ... don't. But then it happens.
Sacred Cow Tipper, it is not that I never see malice where simple stupidity will suffice, it is that there always must be a reason for malice. That is unless you are a child and just do it for the fun of it. What would be the reason Bernanke or Poole would deliberately try to crash the market, or try to ruin the economy by doing everything they could to cause millions of home foreclosures.
Proof would help of course but in the absence of proof one would at least need a valid reason for their claim. There is no reason nor proof in Soup's claim. Therefore it is just his wild opinion. Hot air in other words. Such hot air adds no intelligence whatsoever to the discussion. In fact it does the exact opposite.
Ron Patterson
Uhh, that is what I was agreeing with in the first statement. Did this not appear to be the case?
We've had internet stock tulip mania, housing valuation tulip mania, and perhaps next an energy tulip mania. Our policies are set by juvenile, sociopathic virtual person corporations. They don't care who they hurt (sociopathic) and they have no ability to defer gratification(juvenile).
I don't doubt there are many people who see the writing on the wall and thusly benefit, but I don't find it likely that Greenspan & Greenspawn are purposefully causing a collapse - a systemic problem like the maturity and personality disorders of our newly minted virtual person corporations would seem to be the driving factor.
>Dar - Cramer even talks about greenspan pushing subprime & arms then increasing rates 17 times creating the mess then Ben sitting on his hands.
If they wanted to "engineer" a crash, they wouldn't have stopped hiking rates last year. Instead the capped the rates at 5.25%. The also provided loans below the "official" rate of 5.25% since last Feburary when the first round of subprime came up. This points to a policy to prevent a crash. The Fed hands are tied because if they started lowering rates, it would cause the dollar to fall (much faster).
Nobody wants to sit in a position of authority when the market crashes (that's probably one of the main reasons Greenspan bailed and left Ben in charge). Of course when Greenspan was still chairmen, he gave that famous speech about urging americans to take out adjustable rate mortgages in an attempt to get the economy moving again. This was back in 2003 or 2004 when the rates were already at 1%
The fed creates money through lending, this causes the business cycle, Milton Freidman was a strong proponent of this hypothesis and it has strong evidence to back it up.
It is no conspiracy that the fed sets the rate, and that 5 years ago it was ~1%, and today it is 5%, that is a 500% increase in payments for holders of those loans!
Bernanke is not an idiot, Darwinian. He knows what his predecessor did and so does anyone who watched what he did. Greenspan specifically engineered multiple bubbles and even wrote about using bubbles to keep the economy afloat, then having the Fed clean up the mess afterwards by inflating another bubble. So the 1990s saw the biotech bubble, then the dot-com bubble, and now the mortgage bubble, all engineered by the same people who run the Fed doing the exact same things over and over. Do you really believe the Fed was asleep at the switch every time these bubbles played out, year after year, in exactly the same way?
At itulip.com, they've written about this for years. Itulip was calling the housing bubble back in 2002 because they saw where the Fed was playing. And Itulip thinks there may still be at least one more bubble to play out, unless the mess from this one spirals out of control first. So if they can control this bubble, there will be another and my guess (if we don't crash outright) is that it will be a big bubble in carbon credits, because that market is so poorly defined, so new, and thus so ripe for exploitation.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
It seems that you either have to believe that TPTB are keystone cops, Laurel & Hardy, Numbskulls, or you believe that its all a conspiracy.
There is most likely many goofs but one would have to be pretty naive to write it all off as a whoops.
I have two young children who look to me for guidance and I have lost my ability to be Gullible.
Please read;
HOW THE PRESENT ECONOMIC ORDER WILL END
by J. R. Nyquist
http://www.financialsense.com/stormwatch/geo/pastanalysis/2007/0803.html
"According to Professor James, America’s economic dynamism locks Asia and Europe into a system of buying and selling and investing that everyone benefits from. This system continues because of American domestic stability, and because America’s sustained growth rates are consistently better than other developed countries. “The question about sustainability then turns into one about the probability of continued growth rates that are higher than those of the rest of the industrialized world,” noted James. “For much of the 1990s, foreign capital inflows reflected a foreign view that the peace dividend, fiscal prudence, and technological dynamism represented an ideal environment. In the years after 2001, this environment clearly deteriorated.”
Soup: Greenspan, Paulson, Bernanke-birds of a feather. These guys are smart-great at making money for themselves and their cronies. Expecting these guys to worry about the economic health of the nation as a whole is like expecting the fox to worry about the health of the chickens-it is absolute and utter stupidity.
Me thinks Cramer is and has always been a stooge of Mercurius.
Scroll down to watch video.
Wow. That's a great video clip. Cramer's predicting that 7 million people will lose their homes in the meltdown, while Bernanke is asleep at the wheel.Armageddon for the fixed income markets, which means to me that everybody's pension is screwed, every college endowment down the toilet, and every mutual fund that kept any position in Hedge Funds has lost the money. All the insurance companies finished.
Bob Ebersole
The housing market and auto sales are both in the toilet. There is way way too much debt out there. Logic says the market should go down, down, and then down farther.
Logic does not rule markets (at least in the short term). In the contest between fear and greed the outcome is uncertain. Volatility? For sure! Direction of market movement? Totally and completely unpredictable in the short term.
BTW, I've been out of the stock market for years and hold nothing except TIPs in the way of bonds. I began predicting a stock market decline in 1997 and was wrong consistently for three years. Since 2000, stocks have been a lousy place to keep your money. TIPs (Treasury Inflation Protected securities) have done well.
I'm out of the short-term prediction business now, but over the longer term of years to come I see Peak Oil producing very significant inflation--combined with negative economic growth.
The pain of peak oil will come with the misery index that combines the rate of unemployment with the rate of inflation. I expect to see both inflation and unemployment in double digits by 2012, and possibly sooner than that.
Coming at any other time in history, peak oil would have been massively inflationary. Coming at the end of the hugest credit bubble in history (notional and perhaps in % terms too), deflation may trump the inflationary aspects. My personal view is that we see both -first deflation, then inflation as many years down the road depletion overtakes destructed demand, without huge new drilling and exploration to stay on the treadmill.
Twenty cents (that is two cents, adjusted for inflation) says that we will have no deflation at all. There has been no deflation since the nineteen thirties. The Fed knows how to prevent deflation and has the power to do so.
Thus I think the inflation/deflation odds are about nine to one.
Of course, I've been wrong before. But let us take a close hard look at prerequisites to deflation:
1. Inaction by the Fed. (Inconceivable in my opinion.)
2. Impotence of the Fed. (Imaginable if we got into a liquidity trap. However, I think the Fed has the power to overwhelm any liquidity trap.)
3. Political acceptance of deflation. (Not going to happen.)
Thus I do not think it matters how big the financial fiasco is: The Fed has the power and the will to bail us out of any deflation--but at the cost of rapid and abrupt and unexpected increase in inflation.
BTW, I expect U.S. government deficits to soar to the highest levels in history--and as a percentage of GDP perhaps even to equal the World War II deficits. The solutions to the threat of deflation are to increase government spending, cut taxes, and monetize the deficit.
2008 is an election year, and as surely as water tends to go down hill, politicians tend to vote for inflationary policies.
If your choice is reduced to between deflation and hyperinflation (>100%) what would you choose ?
how much deflation are we talking about?
I'd choose hyperinflation.
At least hyperinflation wipes out debt; on balance, that can be a good thing.
Deflation results in depression--which means masses of people unemployed--a very bad thing, in my opinion.
I do not think the Fed will choose hyperinflation; I think that will be a result of frantic efforts to boost the economy out of Peak Oil induced recessions or depression.
It used to be thought that we could choose between increasing inflation and increasing unemployment. The stagflation of the nineteen seventies and early nineteen eighties showed that we could have the worst of both worlds.
Do I expect to see the prime rate at twenty percent again? You bet. Do I expect to see double digit inflation again. Once again, you bet I do.
Because the experience of the Great Depression is still vivid in the minds of the members of the Board of Governors of the Federal Reserve System, I think that whatever measures that may be necessary will be taken to prevent deflation. Inflation will not be the goal: The goal will be to fight recession and prevent (or allieviate) depression.
BTW, I do not expect hyperinflation next year nor the year after next nor in 2010-2012. We may never get to hyperinflation, but double and perhaps triple digit inflation will do the trick of wiping out old debts. Note that inflation of 100% per year is severe, but it is nowhere near true hyperinflation, that is, where prices increase more than 100% per day and sometimes 100% per hour.
That's semantics, Don. Did Argentina experience hyperinflation? With 5000% inflation over a couple of years in the 1980s that was not 100% per day or per hour but it was called hyperinflation by many, many people, including many economists.
Where is this rigorous economic definition of hyperinflation? Economists all argue about how many angels can dance on the head of a supply/demand pin so let's get rigorous about the rest of our definitions before I catch some other economist arguing in logical circles again.
Let me ask a question, Don - if the dollar lost 95% of its value tomorrow would that be hyperinflation? In other words if it took 20 dollars tomorrow to buy what one buys today? If that is hyperinflation then would it be hyperinflation if it happened over the course of a year? A decade? How about over the course of 94 years (1913-2007), since that is how far the value of the dollar has fallen according to the Federal Reserve itself? And remember that the Federal Reserve was ostensibly sold to the American public to provide "stability" to the dollar. I guess that is ANOTHER word that means something other than its normal definition to economists, huh?
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
I don't make the definitions; I use the definitions generally accepted within the discipline of economics.
Google "hyperinflation."
I have Googled hyperinflation. That is precisely why I asked your definition. If it's 100% or more per day then Argentina didn't hyperinflate despite experiencing 5000% inflation in the late 1980s.
Stop squirming and answer a question for once, please.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
my understanding was once inflation gets above 1000% per year you get hyperinflation, that is the level of inflation from which no economy recovers from without significant damage.
Look at Mugabe's country, 5000% annual inflation (official figure), with economists saying it's probably 10,000%.
Russia currently has 40% or so, and it is surviving. 100% is probably entering the danger zone, 1000% is for sure the danger zone. 5000%-10,000% is collapse in progress.
Germany in 1923 had true hyperinflation; Hungary in 1946 had true hyperinflation, and there are a number of other clear cases.
I can live with a definition of hyperinflation as anything greater than 30% per month. One characteristic of hyperinflation is that it keeps getting worse. Here is my favorite story from Nov. 1923 to illustrate what hyperinflation is. An old woman in Germany was withdrawing her life savings; she brought a wicker laundry basket to carry the trillions of marks which were bundles and bundles of currency. Because she was old and tired, she rested on a bench outside the bank, when a thief came up to her, grabbed the basket, shook out the nearly worthless bundles of currency and ran off with the relatively valuable basket.
You said to Google hyperinflation. Ok here is what came back on page one of the Google search:
1. In economics, hyperinflation is inflation that is "out of control," a condition in which prices increase rapidly as a currency loses its value. No precise definition of hyperinflation is universally accepted. One simple definition requires a monthly inflation rate of 20 or 30% or more. In informal usage the term is often applied to much lower rates.
The definition used by most economists is "an inflationary cycle without any tendency toward equilibrium." A vicious circle is created in which more and more inflation is created with each iteration of the cycle. Although there is a great deal of debate about the root causes of hyperinflation, it becomes visible when there is an unchecked increase in the money supply or drastic debasement of coinage, and is often associated with wars (or their aftermath), economic depressions, and political or social upheavals.
2. Hyperinflation is just inflation at an extremely high rate. Usually this also means the inflation is out of control and its level is not precisely predictable.
3. The term "hyperinflation" refers to a very rapid, very large increase in the price level. Measurement problems will be too minor to notice on this scale. There is no strict formal definition for the term, but cases of hyperinflation tend to be expressed in terms of multiples rather than percentages. "For example, in Germany between January 1922 and November 1923 (less than two years!) the average price level increased by a factor of about 20 billion." Some representative examples of hyperinflation include
4. Inflation is a sustained increase in the aggregate price level. Hyperinflation is very high inflation. Although the threshold is arbitrary, economists generally reserve the term hyperinflation to describe episodes where the monthly inflation rate is greater than 50 percent. At a monthly rate of 50 percent, an item that cost $1 on January 1 would cost $130 on January 1 of the following year.
5. http://www.hyperinflation.net/ - an ad for a book about hyperinflation...
6. In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper. Most Germans were taken by surprise by the financial tornado.
7. There is no precise numerical definition to hyperinflation. This is a situation where price increases are so out of control that the concept of inflation is meaningless.
8. http://www.tomchao.com/hb.html - page about currencies that have been hyperinflated.
9. http://www.milliondollarbabies.com/ - another page about inflated currencies
10. http://www.imf.org/external/pubs/ft/fandd/2003/06/pdf/reinhard.pdf - PDF about the looming threat of hyperinflation.
Now excuse me if in the top ten hits I found no rigorous definition of hyperinflation, despite at least 3 being from universities and one of the references says there is no agreement about what hyperinflation is. I think this demonstrates that economics is rather far from "rigorous".
However, I thank you for at least defining your definition, even if other schools of economics don't seem to agree with you.
Of course, if you want to reference some other source than maybe Google, we could continue the debate. I won't hold my breath though.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
"I do not think the Fed will choose hyperinflation"
I believe there are desperate actions taking place to try to prevent hyperinflation at all costs. They WANT deflation. They know all those US dollars are coming home to roost and I don't think there is any way in hell they can avoid hyperinflation.
Define deflation rigorously for me, Don. Is it a decline in M1? If so we have many such declines since 1929, just always small and usually correcting within a month or two. Is it a decline in general prices? What is deflation, according to you?
Before we get into a discussion of whether deflation will occur or not, I need to understand your definition. And don't tell me to read an economic textbook. I can find 5 different economic textbooks that say 5 different things. What is YOUR definition of deflation?
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Deflation is the exact opposite of inflation. In other words, deflation is an increase in the purchasing power of money.
Again, Google "deflation." I don't make the definitions--but I am careful to use the generally accepted definitions within the discipline of economics.
Unlike the other social sciences, economics has a well-defined and unambiguous vocabulary.
A decrease in the money supply is not (by itself) deflation, but generally speaking a decrease in the money supply is prerequisite to deflation. (However, this is not always the case. For example, during the ninety years that followed 1815 the British pound experienced deflation, even though the supply of pounds increased greatly during this period. In other words, the pound gained in value for ninety years after the defeat of Napoleon.)
My understanding from M. Friedman is that Deflation is when the Per capita number of dollars goes down. Deflation is trouble when this is significant (ie great depression saw something like a 2/3rds shrinking in the money supply over 3 years), but as population was growing during the depression this deflation was worse.
Inflation is the opposite, the increase in dollars per capita.
both of these measures refer the the amount of liquid capital in an economy, that which lubricates the economic engine, when the lube/liquidity is removed everything starts slowing down. It is the economic stalling which needs to be prevented.
The definitions I use are generally accepted by professional economists.
In my opinion we should use the generally accepted definitions.
Nate, I see the same sequence, Deflation then inflation.
Sort of like watching the water level as someone does a cannonball or can opener into the pool, First the water goes way down, then Whawooom, it comes shooting up really fast and really high into the air.
JOhn
This is my personal speculation, and green as a valley as far as investment savvy goes, but here goes my logic...
I figured energy stocks were by far the safest place for my retirement nest egg because, like food and shelter, people will always need energy. Its the thing we will pay for even if we don't have the money to pay for anything else.
We still have all the gold that's ever been mined. We actually need only a tiny amount for real needs ( medical/dental and electronics ), the rest traditionally held as a wealth storage indicator.
There is plenty of real estate, its value mostly "location, location, location", and the tony areas change from year to year. The main problem I see with land is that in a collapse scenario, trying to defend my right to it. Rights are a man made, not a physical, phenomena.
There can be a lot of substitution in the food category. We presently have abysmally low efficiencies in our system allowing us to enjoy any manner of "treats" - so much so that the poor in our country are having the worst obesity problems as the cheap foods are often the ones so high in caloric content.
Of all things we do, energy is the common denominator of doing ANYTHING. We have a finite supply of it in the form our existing infrastructure runs on. And that finite supply, like a sipped milkshake, is showing clear signs of depletion.
I have personally seen all sorts of money rushing to real estate, bidding the price of common houses up so high that families need to go into debt for the rest of their life just to have somewhere to live, providing one wants to live within commute distance to places of employment. The numerical value worth of real estate is set by the buyer's qualifying for immense loans - and we are seeing that unravel as I type.
What I consider is that big money knows infinite amounts of dollars or any other currency can be minted at the stroke of a pen.
Banks already hold tons of gold, and there is always the threat of them flooding the market if they should dump it.
Oil is the one commodity we cannot "recycle" when we run short of it, as we can metals or paper. I cannot capture exhaust gas and run it through the engine again. Each barrel burned is a barrel lost forever - and we are not getting it back.
Right now, energy is still priced so low its pocket change for most people to obtain thousands of times the energy we personally can produce with our own muscles. Its been my observation most of us won't even walk a tenth of a mile, instead gladly digging in our pocket for the cash to pay for the petrol to burn so we can have a huge SUV transport us there in style. As I type, a gallon of gasoline is priced less than a Coffee-shoppe latte! As far as I perceive, petrol is the only commodity still at fire sale prices... and once gone, there is no more of it.
From my perspective, I consider if houses were priced as energy is priced today, we would be seeing houses priced in the thousands of dollars - just the cost of assembling them.
In a way, I think of oil as "money" much like cigarettes were used as money among the soldiers in WWII. If the cigarette supply line were shut down for all eternity, every cigarette smoked increases the value of all the remaining cigarettes. The smokers will smoke. The people who have petrol will burn it.
I can see a real estate crash. Easily. To me, its a foregone conclusion seeing what a substitutable item it is. That house was there before the crash, it will be there after the crash. Nobody consumed it. We can always build more.
I can see the crash spilling over into the services industry, as people caught in the mortgage trap decide to forego restaurant meals, having their nails done, extravagrant vacation expenses, entertainment, etc.
Does one really *need* a new car if the one they have is still running. New ourfits? New computer? New TV?
I have a really hard time seeing whatever happens to the market hitting the energy sector all that hard because there is no substitutes for energy, and doing nothing is not an option. Once that SUV tank is empty, its really hard for the SUV owner to forego use of his $50,000 machine for want of a tank of gas - probably much harder than forgoing a luxury department-store purchase.
My guess and fear is that big money turns its immense quantities of M3 money onto securing rights to the remaining oil on earth. In California (USA), I witnessed extremely exhorbitant electricity costs when Enron and the Power cartels ramrodded our Governor Gray Davis into oblivion with their incessant and exhorbitant demands. Bottom line is we paid whatever they asked, then later litigated the mess out. We had the power to resolve this within context of US law.
I do not think we can use US Law to force OPEC, China, India, Europe, Venezuela, or Russia to sell us what we want at the price we feel we want to pay. We were able to do that with the US based energy cartels, resulting in the complete collapse of Enron.
I feel like I may go down kicking and screaming, but I flat do not want to sell off any of my oil/oil service stuff, as I strongly feel thats the only stuff I can possibly have that has any REAL value to it. Its the only thing I have that someone else can't create by the stroke of a pen.
Steve
Unless you actually have the barrels of oil in your backyard, you don't actually have anything. Owning stock in a company is no different than having a pile of dollars, and just as potentially worthless. The market can crash, and the value of your stock can drop to 25% of its value in one day. The company execs can rape the business (enron), making your stock worthless. The company can print as much stock as they want, diluting the value of your holdings. The company can be taken away by the government. I'm sure that there are dozens of other ways that the value of your oil stocks can be taken away.
Owning the actual commodity is the only way to perserve wealth. Gold just happens to be the easiest commodity to own and store, and the chances of its value dropping to zero, is zero. Lets face, which would you rather store in the basement, an ounce of gold or 10 barrels of oil. While the oil may be more useful, I will take the gold everytime.
If you feel (as I do), that civilization is facing the biggest crisis since the collapse of the roman empire, you cannot make determinations about the future based upon the rules and standards that have operated for the last 100 years. You have to look at the things that have always been needed since the start of civilization, and have never lost value. These are food, water, shelter, security, and GOLD.
Hardhat, Enviro Attorney,
I've seen huge crashes in both the price of oil and the price of gold in the last 25 years, and a big crash in the value of Houston real estate. If we get enough demand destruction in oil-and we had 22% decrease in the early '80's, nothing's safe. Oil fell like a rock to the $10-$12 a barrel for years. Gold fell, as I recall from about $800 per oz. to about $250 an oz. Ya'll are kidding yourself if you think anything has a permanent monetary value.
Just a little thought experiment, guys. If in a famine, you have a 100 lb sack of potatoes. Somebody offers you 10 oz. of gold for your family's chance of survival. Do you sell the potatoes, or do you wait until they're dead and loot their corpses?
But the odds of either a famine or a total monetary collapse are pretty low, so place your bets, gentlemen and let fortune's wheel spin. Personally, I like domestic oil and gas wells, but that's my business. I think there's going to be a lot of volatility in prices, but the demand is going to be there for grease for the rest of my life.
And, I have a serious question about gold; If its so good, why is anybody willing to take fiat currency for gold? All these guys with websites are in the business of selling gold, so their actions say that its worth less than you are paying for the stuff. Watch what people do, not what they say.
I rest my case.
Bob Ebersole
I never said that gold wouldn't drop in value. I said it couldn't drop to zero (as stocks, bonds and fiat money can). Gold is worth exactly what people feel it is worth. Everyone could collectively decide that it is not worth any more than an equivalent amount of copper, and it wouldn't be worth more than that. However, in the entire history of civilization, that has never happened. I would be willing to bet it won't happen in the future history of civilization.
Gold is simply a medium of exchange, to replace a barter system. It has served that function for thousands of years because it works better than any other device found. The dollar, backed by oil and guns, has only survived for 35 years (and will likely not make 40 in its present form).
Humans have proved time and time again, that if a medium of exchange is used that can be forged, arbitrarily increased, or diluted, it will be abused by the people in power until it is no longer a medium of exchange. America is just the latest country to prove that.
If civilization completely collapses, then yes, I would rather have a farm, lots of guns, and a trusted group of friends/family. However, I do not think civilization will completely collapse. I am, however, 100% convinced that our current economic model, and monetary system will collapse. When that happens, we will go back to a currency backed by something. That something will be gold. When that happens, gold will be worth at least 30 times what it is now, and possibly much, much more.
Before oil fell, production resumed its upwards climb, Bob. If production never rises again, I think it is dangerous to assume that oil will crash through the floor. The situation may not be the same.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
OilmanBob,
Since you personally, because of your medical condition, will die in any future collapse, you will go the other way in your investment strategy 100% of the time as you will lose either way otherwise. Your guesstimate of the possibility of a collapse is likewise extremely skewed against collapse by a psychological bias against data that would support that possibility.
Providing you're not near or past retirement age, it's hard to see how the best way to ensure your financial future isn't the same as it pretty much always has been - improve your skillset, and be mentally prepared for flexibility: I can't be sure that my skills as a C++/C# programmer are going to be very useful in 10 years, but I can be sure that my ability to formulate and implement efficient algoritms will be. Further, I hope to move into renewable energy technology (specifically PV, having contacts in the industry) once our debts are well enough under control that we can afford a drop in salary. No doubt it will be a whole new learning curve, but I know my strengths, and I'm confident I'll have useful skills to offer in that area for a long time to come. Which is not to say I'm 100% sure I won't find myself without a job at some point, but the prospect doesn't daunt me hugely (lose the house? Bummer...maybe we have to move back in with the olds for a while...).
Wizofaus,
I am ensuring I have electricity JUST so I can play video games after the crash. NEW video games, after the crash will be like drugs. You'll just have to make sure you have a sufficient supply of CDRW stock to meet the market demand.
EA.
Perfect. I said much the same in a post above.
It is the End of *MORE and all things will be affected by it.
Bob Dylan's "The Times they are a chang'in" could now be
"The Paradigms they are a chang'in"
BTW, I think that 1965-75 had a lot of the right ideas, peace movement, Earthday, and everything else, but Collectively America hit the snooze alarm for twenty more years. Reagan's "Morning in America" began and gave us the Gordon Gecko's and the last 20 and some odd years.
Though I have become more and more sympathetic to the anarchist component of the '60s counterculture in recent years, I think there was always a disturbing subtext in that movement. Back in the '90s a book came out claming that advertising agencies in the early '60s were looking to create a discrete "youth market" for whatever satanic purposes Big Business had at that moment. So instead of suffocating the first signs of rebellion under the type of collective corporate media blackout we see on so many issues today, the media reported it for the novelty, and cashed in on the record sales. Of course they had no idea that Vietnam would come along and mutate this artificial sales gimmick into something real and powerful.
I think this comes down to the division in Haight-Ashbury in 1967 between the residential group of committed social experimenters and the incoming flood of teenagers with no background in radical politics. The latter group had been indoctrinated with an empty shopping cart labeled "Freedom" into which all sorts of new products could be dumped, free of '50s inhibitions. They simply lacked the discipline to see that a real anarchist movement would have to be able to live within its actual means.
So the subsequent behavior of those consumerist, value-less teenagers was not a surprise. Eventually Big Business did get a payoff on its investment, once Vietnam was removed as an irritant. Without new values as strong as the jettisoned values, there was no basis for that generation to demand real sacrifices to carry out a program. So when the war ended, the protestors went home and few cared how to prevent the Vietnam cycle from being repeated. When the worst forms of pollution were slowed by early regulations, most kids didn't demand massive research in renewable energy and abandon their 12-mpg Firebirds. When Nixon got caught, we didn't have mass protests calling for major constitutional reforms to terminate the imperial presidency.
So here we are, 40 years later. Except this time the fatcats have made sure that prosperity (artificially inflated by Fed policy) will not produce idealism, only self-absorption. The Neocons have always viewed 9/11 as the chance to do Vietnam right, God help us, and they've got the public they needed for that.
As a side note to the above, I read a book called "Hackers" about 20 years ago, which discussed at some length the attempts by a 2nd wave in the San Francisco subculture around '68-69 to create cybernetic anarchism. This wave was very different than the first, science fiction nerds rather lacking in charisma. They begged and borrowed computer terminals to set up in record shops in the city, hoping to create a functioning barter network. They understood that money was, among other things, a form of market info, and hoped to undermine it with a better system for the exchange of goods. One of the leaders, Lee Greenblatt, was obsessed with designing a cheap, primitive computer that everyone could own which would facilitate a revolution against a future police state which he feared.
Interesting insight into the origins of Silicon Valley, eBay and Negroponte's $100 laptop.
To that list of people who just "lost the money" add Jim Cramer.
What he did not say is that he is (in my opinion) heavily leveraged and expected Bernanke to open the discount window, and Bernanke didn't. Then Bear-Stearns told too much of the truth.
Listen to how he says "He has NO idea how bad it is out there!" Listen to how he says "Forget the investors."
I think what he is really saying is "He has NO idea how bad it is out there [for me]". People rarely react so strongly about something unless it effects them personally (especially in regards to money).
I'll bet that Mr. Cramer's was leveraged so deeply that he stands to lose (or has already lost) a dollar amount with many zeros in it.
We can only hope so. If there is justice in this world, the Cramers of the market will all seek out highest ledge on the street and take a dive.
These parasites are one of the many reasons that the US economy is geared towards "service." I can only hope that his "service" industry, the manipulation of money, gets outsourced to smart countries which gladly took our unwanted factories when we so stupidly decided to screw the American worker in order to enrich the elite. Then we can finally become that third-world backwater, a really dumb Albania with nukes, that we all apparently decided we wanted.
Then, all the foreign scientists who trained up here can flee this hole in the wall country and go where the R&D monies are.
Then we can all watch as the infrastructure of our country falls apart bit by bit because of the traitorous reluctance of the Republican party to allow the government to do its real job. Yes, those Republicans look like such nice people now. Remember them patting each other on the back as they killed infrastructure bill after infrastructure bill?
Who needs enemies when you have Republicans?
I've heard over and over that America was stupid to send all its manufacturing jobs overseas, as if this were an explicit policy of the U.S. government.
But isn't this just a natural consequence of free trade? If Americans have a relatively high standard of living, and there is a policy of free trade, it makes sense that wages would be lower overseas, and therefore jobs would naturally shift overseas.
It makes sense that jobs which require no understanding of American culture or language (like manufacturing) would be the first to go.
I think people get overly excited about the recent loss of American manufacturing jobs because, in the few decades after WWII, America was so wealthy that even manufacturing jobs provided a salary sufficient to buy a nice house and nice cars, raise a large family, and receive free healthcare and a generous pension. For a while, a car assembly job paid about as well as a college professor's. In America.
I think people are nostalgic for those times, and imagine that if the jobs came back, the good times would return, too. In my opinion this is cargo cult-ism.
In 1950 the world's wealth was shared among 2.6 billion people. Today it's shared among 6.6 billion. So each person gets about 40% as much wealth as they would, had population remained constant.
We can make up for that by each consuming 2.5x as much resources, but as you might have learned from this website and elsewhere, there are limits to growth, imposed at least by the fact that we live on a sphere.
bmcnett,
It was an explicit policy of the US Congress to cut taxes on rich people and corporations, while shifting the burden to the middle class. They called it trickle down economics.
The only problem is that the middle class has to have money for corporations to get it from them. That's what I call trickle up economics. If you allow companies to move all their operations and good paying jobs overseas and don't charge them at least as much in taxes as a working person paying social security, medicare and an income tax , the whole country goes broke, and that's called our president and congress. We have the best government that money can buy.
Bob Ebersole
Bob,
I agree wholeheartedly that "trickle-down economics" was a transparent act of class warfare. Bravo!
Bryan
Bob, imagine this (an extentsion of your trickle up idea):
[tin-foil hat]
Econmic/tax policy/free trade leads to many good jobs going overseas.
American populations lose purchasing power.
Corporations move to up-and-coming countries like China, and all but abandon the US.
Economies like China boom.
Chinese government likes encouraging big business and enacts economic/tax and free trade policies and many jobs move to poor countries like America.
Chinese populations lose purchasing power.
Corps move to up-and-coming economies like America...
[/tin-foil hat]
"You can never solve a problem on the level on which it was created."
Albert Einstein
Hello Oilmanbob,
I have posted this following speculation before: Bernanke opening the discount window, or dropping cash from helicopters will be counter-productive precisely because it is SO TRANSPARENT. The topdogs will take their profitable cut first, and very little will trickle down; money velocity is quickly curtailed, and inflation grows faster than necessary to properly manage/control.
My Wild & Crazy Speculation for a better method:
Have Bernanke covertly pump big money $$$$ into the casinos and lottery games; don't announce the changed & beneficial odds [NON-Transparent]. A hidden way to pump up liquidity bigtime!
Lots more random winners, with some winning larger amounts. These people will then use the money to pay their bills, and go shopping which helps bootstrap the economy-->
-->>> true 'trickle up' theory and better money velocity.
Recall my earlier newslink posting on massive numbers of Japanese citizens suddenly finding lots of money in their mailboxes.
Of course, when even this last-gasp casino strategy fails: all Financial Hell breaks loose.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Bob,what do you think that 10 billion that evaporated in Iraq was....some real"helicopter money"
Bcm: Love that term- FREE trade. It must be good, goddarn it's FREE. This great country was built on FREEDOM (and Jesus).Nothing is free in this life. Somebody has to pay to run the country, and the schmucks decided to allow the persons who benefit the most from the society to opt out of paying for anything at all. Sounds reasonable-after all it is FREE.
I think the nostalgia matters because of the implied promise of capitalism:
"If you workers let me wreck the customs that ensured survival in shared poverty, and make enough money to totally control your government, culture and religion, I will give you eternal Paradise - after a period of extreme sacrifice."
That promise hit the bricks in 1914 and 1929, depending on where you lived. So then came the New Deal:
"If you workers and bosses create power-sharing arrangements over the big institutions once monoplized by the bosses, heavily regulated by my 2-party government, I will give you Paradise - after a period of extreme sacrifice."
That worked pretty well for a while, until around 1980 the bosses looked around and discerned that current workers no longer understood why the New Deal had been necessary. Time to welch on promises and recycle the original promise as Reagan's "Morning In America." And then ship the good jobs overseas to a new set of suckers.
The problem, I guess, was the essential part of the promise: Paradise. Why should any working man tolerate the child-molesting, pension-robbing, media-censoring scumsuckers known as the business class unless he is promised Paradise? I mean, bosses have as little understanding of how much their employees despise them as the US did in Iraq. The workers will give those bastards sacrifices for a while but they demand a future of permanent ease and comfort in exchange. I don't blame them!
Now we really understand that the promise is physically impossible. But if we tell the workers, all the accumulated bile and swallowed pride of generations of obedient stooges will explode. Why should we endure yet another era of extreme sacrifice once we don't believe there will be a sufficient reward?
My favorite bumper sticker Republicans for Voldemort
Really good piece Cherenkov. However There is no difference between the two parties at that level. They both have worked together to virtually eliminate the ability of anyone starting a 3rd party.
They are simply two different mafia type organizations with different methods and such. But they both will take your protection money.
Twain, is that all pure speculation, or do you have any knowledge of what's Cramer's actual exposure was/is?
Energy consultant, writer, blogger www.getreallist.com
ChrisN, my apologies that I was not clear in my post that everything said was only my opinion.
To be clear, I do not have any specific information on what Mr. Cramer's exposure is. So, my opinion should be considered "pure speculation".
But, then, the Market is also "pure speculation". However, most investors will add up certain facts, and subtract other facts, to try to find a less pure-ly speculative way to invest their money.
Mr. Cramer was originally a hedge fund manager (not counting a couple of years at G-S). This means that he is comfortable using leverage in investing. Why wouldn't he also use it for himself?
If memory serves, he has admitted to and been investigated by the SEC for several different illegal/questionable trading practices. If you are going to break the law, why not make as much money as possible by also leveraging?
Studying his words and actions in the clip leads me to believe that this is personal for him. "People are losing their jobs" [and money], says Mr. Cramer in the clip. Not just "people", but "people that he knows well". "It IS Armageddon", he says. People will tell you who they are and what is important to them if you just listen to what they are saying and how they are saying it.
I hold three beliefs in regards to peoples' motives in investing:
1. No matter how much money people have, they always want more.
2. If you take a risk and are very successful, it makes you more likely to take that risk again and again, until you are very unsuccessful.
3. In the long run, the Market will increase in value.
A question for you, ChrisN:
Why do you think Mr. Cramer said what he said, in the way that he said it?
MT
I do believe you are onto something with Cramer's personal finances. Also, his logic is lacking, by solving this by asking Ben to lower rates, since the liquidity crunch is being caused by interest rate spreads, so a 1 pt rate cut will not solve this problem which seems to be spiraling far beyond a rate cut at this point! (If I'm missing something in drawing that conclusion, please set me straight, someone.) Personally, I do not feel sorry for the people he is hurting for. They may bring us all down by their greed.
Kalpa,
The liquidity crunch is not being caused by interest rate spreads.
Its much worse than that.
The real problem is that there is no confidence in what a AAA bond actually contains. What are the real risks and values? Nobody really knows.
This whole crisis needs to play itself out, and a bailout would only perpetuate the problem.
That was EXACTLY what went through my mind when I watched the video. As though he gives two shits about Joe Sixpack who is going to lose his house.
This guy is a prime candidate to jump out of a building when things really go bad.
Really isn't it all show? These Wall Street pundits were pretty well trashed a few years back in the excellent Maggie Mahar book Bull!. It appears to me that this was quite rehearsed. What a joke just like WWF!!! I was waiting for the guy to body slam the chick.
I think it is interesting to oppose this to the "knowing" wink that Louis Rukeyser used to give years ago on PBS.
In fact this creates an interesting dialectic.
We will know soon enough if he is right eh? I mean hell it cant be that hard to tell if he is right if TSHTF.
jbunt
move 7 million people out of their homes and where do they go? No apartments for that #. Leave the country? Live on the streets? No! I guess that the 7 million will not occur.
unfortunately, there are more than enough bridge underpasses, street corners and subway stations to house another 7 million people. I'm pretty sure that is the planned solution.
I would recommend that they stay away from the bridge underpasses........
They'll just move in with friends and relatives (probably closer to or in the cities). Yes, it will be a shock for someone used to a 5,000 square foot home with four bedrooms and bathrooms to move into a small apartment with 13 other people and only one bathroom. But that's how much of the world lives. They'll adjust.
I don't think people are making the proper mental adjustments on the hypothetical 7 million figure. 7 million is the number of mortgages, not people. Since the most liable to go under are those overexposed and in debt, and those tend to be younger, poorer FAMILIES, 7 million mortgages could easily be 20-30 million people. Think about that. Last I heard about 70% lived in homes. That's 210 million in the US, give or take. 7 million mortgages might represent 10% of every mortgage in the country, and 5-10% of the people. That's a lot of social upheaval and a ton of empty houses.
Of course, 7 million might turn out to be a huge overestimate, but keep in mind, mortgages are probably average 3-4 people each.
I'm not so sure about each mortgage averaging 3 or 4 people. What about all the "no money down" crazies who have been borrowing money on multiple properties and living on the "equity" that they pull out of the property. I've got one owns a duplex next door to me and has 6-count 'em six mortgages on various properties. one across the street that has a three person family, but they own 4 houses and three of them are not rented, all with mortgages.
Bob Ebersole
Fred moves out of his 5K$/month condo.
Steve moves out oh his 5K$/month condo.
Fred's condo now rents to Steve for 1K$/month.
Steve's condo now rents to Fred for 1K$/month.
that's the damn trouble with borrowing money.......... you have to pay it back. i just wish our president and congress understood this.
Elwood: They do understand it-they aren't paying anything back-you are.
you are right. here i am stuck in this no free money universe and the politicians are in the money from thin air universe.
Those houses won't stay empty.
They won't disappear either.
SOMEBODY will live in them.
Where the somebodies used to live will now be available to someone else.
There will be some housing reallocation powered by financial maneuverings, but no housing stock will be created or destroyed.
I can't see anything overall being any worse or better than it is now. There will be asset reallocation come to pass, but the total integral of goods remains unchanged.
My take is Katrina did far worse, as she destroyed and left nothing but one helluva mess.
Why do we seem determined to implode our system just because somebody's numbers are undesirable. For the time being, we still have all the physical inputs to sustain the system, with our energy resource by far the most critical.
Currency can be created with the stroke of a pen, oil can't.
We need to know what our REAL problems are and stop frittering away our resources on frivolous bullshit.
Steve
Many people that still have incomes will stay in their houses even if they are slightly upside down.
Most of their debt is rolled into the houses and all the interest is a big tax write off. This is the main reason they rolled consumer debt into secured debt and is what ultimately will hang them.
But to walk away they have to be so far upside down that it isn't even worth the write off anymore.
Of course if they lose income they are toast, but it is the greed and the hunt for a free ride that did them in. Now they are the proverbial slaves in a golden cage.
All the vapor ware sales people are in for a rough ride.
we will see a return of Hooverville's only they will be called bushvilles.
Might I suggest 'Shrubtown'? How 'bout "NutBush City"?
http://www.youtube.com/watch?v=jLLarTWuB1s&mode=related&search=
New Orleans managed to cram 50% of it's population into 20% of the housing, and our homes are pre-1950 size.
Futons in the living room and air mattresses in hallways (for high social status people like MDs & judges in some cases).
Alan
Amazing clip, isn't it? Bye bye, bull Cramer! Hello terrified bear Cramer!
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Sounds like he lost a bundle...
There is a better filter on this tv camera in that studio.
RFLMAO!
I guess the "cork soaker" would love the sound of helicopter blades in the morning.
Maybe this has something to do with it
http://www.hubbertpeak.com/hubbert/monetary.htm
the "plunge" still leaves it in bubbleland 13,xxx or whatever. and what about the recent volitility ? couldnt this be a sign of manipulation < rhetorical ?
Thanks for that rule change info. That seems a bit
ominous. I will guess that this is one of the actions
the government is taking in order to allow certain
players to profit in the coming nasty environment.
Personally I think it is a change, (Shorting only on UpTicks) for GS and JPM (GoldmanSach and JP Morgan ron) to be able to make some obscene profits when They short the market big time at the "Right" moment.
(and by THEY I treat GS, JPM, Da FED, and BOE, BOJ as one entity which they virtually are.
"New Book Discloses that Oil, Coal not Needed for Past Several Decades"
Interesting that the article was written by the wife or daughter of the author of the book. Amazing how these appeals to authority pull in even the skeptical (like me). Of course its hooey, because if there was a 'free energy' machine or anything similar, the conspirators trying to stifle it would get stifled by other, bigger conspirators looking to use the higher energy gain for personal gain....
This happened during the last energy crisis in the '70s, too. Did you know that someone invented a car that runs on water? And there's trees in Brazil with diesel for sap. And satellites that can beam power from space back to earth. Etc. All stifled by Big Oil, of course.
A quick google, turned up this video of Dr. Greer:
http://video.google.com/videoplay?docid=-5970516724842544272
and a short bio of Dr. Greer, that certainly speaks for itself:
we havent heard much from the raylians lately.
Actually, Leanan, solar power satellites beaming energy back to earth via microwave are definitely possible. All the engineering has been done and it's been possible to build these since the 1970s. However, in the 1970s, NASA estimated construction costs of over $1 trillion dollars to supply all the then electrical consumption of the US. Convert that to today's dollars and be very, very afraid.
The engineering is doable, just as we could theoretically build levees over 100 foot taller than now to protect New Orleans from the meltdown of Greenland and the west Antarctic ice sheet. The question is not can we do this but should we?
Specifically for solar we would get much better payback by installing solar on every rooftop and building large solar power stations on the ground. So unlike the tree sap or the car running on water stories, power satellites have a grain of truth behind them, just not necessarily a very practical truth.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Yep. But there's money being raised. An acquaintance of ours just dropped a ton of VC money into a project to, yes, build gigantic microwave power stations in space. No, she didn't want to hear the reasons it was a bad idea. Cultivating investors need have little to do with reality.
IF they had the boosters they'd need (no), and IF they could afford them (no). and IF they could construct structures in space hugely larger than anything yet attempted (possible, but gimme a break), and even if they could get the permits (yeah, I'd like to see that process, since the microwave targets would have to be reasonably near centers of population)... then STILL there would be the rather thorny PR and geopolitical problems of what will be perceived as American death rays from space. The only reason that they wouldn't be shot down would probably be that they would be sabotaged/assasinated before even building the things. And these are supposed to compete on a level playing field with windmills?
Pardon my venting, but it would have been nice to see that VC going into something that wasn't a pure waste of money. Then again, VC usually ends up wasted in a larger sense, right?
To infinity and beyond!
Acronym explanation time-is VC money Viet cong money???
Bob Ebersole
Venture Capital
Hello Sandor,
Speaking of Venture Capital [VC]: Richard Rainwater, are you reading TOD today? How about investigating the possible potential, then possibly investing bigtime in batshelters and guano harvesting?
If the stock market tanks, and fuel prices nosedive: you might earn a better long-run ROI with guano. Vinod Khosla runs the real risk of his ethanol-VC big$$$ going bellyup in record time, but plants need a 'Rainbow of Nutrients' to optimize growth and harvest yields--there is No Substitutes!
Whomever becomes the 'Guano King' when FFs and P,K mining inevitably deplete will rule the world.
Wild & crazy speculation, or will owning/controlling this postPeak global monopoly make John D. Rockefeller look like a rank beginner?
Rockefeller foolishly invested in something that depletes, guano is endlessly renewable if the biosolar habitat is properly managed. Earthmarines would never let someone wantonly destroy a bird or bat guano factory.
EDIT: Remember when the Bass brothers tried to corner the silver market? Imagine if Rainwater, Gates, Buffett, and Carlos Slim got together and cornered the potash and phosphate markets. These are very concentrated and depleting mining industries. They could easily highly juice their profitable returns by cornering the guano market too.
Something to consider as we go postPeak, or just wild & crazy batshit speculation?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
"European farmers, realizing the need for a new nitrogen source in order to continue feeding burgeoning and increasingly urbanized populations, began employing guano imported from islands off the coasts of Chile and Argentina. The results were gratifying. However, after only a few decades, these guano deposits were being depleted. By this time, in the late 1890s, the world's population was nearly twice what it had been at the beginning of the century. A crisis was again in view."
Been there, done that. Peak Guano was in the 1890's.
http://www.energybulletin.net/7088.html
Hello Cid Yama,
Thxs for responding. Yep, I have read that link before, but always good to repost for any TOD newbies.
Since we are past the Guano Peak: ever the more reason for someone to try and corner this "Liebig Minimum Market".
Recall TODer Todd's post: grain plants will grow fabulously, but never fruit or head out, if there is a topsoil shortage of element P. All the applied water, mulch, and personal garden care will all be for nothing if the topsoil is deficient in some critical nutrient.
The best economic counter to someone trying to corner the fertilizer market is to jumpstart localized bat & bird guano shelters. IMO, we have got no other choice once FFs deplete past a certain volume flow; we will be in Deepshit without Batshit!
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
"once FFs deplete past a certain volume flow; we will be in Deepshit without Batshit!"
In other words, we'll wish we were in deep shit.
LOL
I believe that would be the Hunt Brothers cornering silver.
Jerome of Phx
>Actually, Leanan, solar power satellites beaming energy back to earth via microwave are definitely possible. All the engineering has been done and it's been possible to build these since the 1970s.
1. Micrometers would smash it to bits with in a short time. Every year the earth pass through the remainents of comet tails that are streams of dust traveling about 50K mph.
2. Solar flares can create an EMP effect. A strong one would short out the array of panels
3. Comsic rays shoot tiny holes through solar panels which degrade them over time. Ionizing radiation also degrades semiconductors.
There are dozen of other factors thats make this concept a hopeless dream.
Leanan, There really is a tree in Brazil that produces oil that can be used directly in a diesel engine. It is called Copaifera. We are growing test plots of it now. It remains to be seen how much oil per acre per year is realistic, but the existance of the tree and the oil is not in question. As to free energy, well, perhaps that is a stretch.
http://plants.usda.gov/java/profile?symbol=COOF2
http://www.rain-tree.com/copaiba.htm
"The part of the tree that is often employed medicinally is the oleoresin that accumulates in cavities within the tree trunk. It is harvested by tapping or drilling holes into the wood of the trunk and collecting the resin that drips out, much in the same manner as harvesting maple syrup. A single copaiba tree can provide about 40 liters of oleoresin annually, making it a sustainable rainforest resource that can be harvested without destroying the tree or the forest in which it grows. When tapped, the initial oily resin is clear, thin, and colorless; it thickens and darkens upon contact with air. Commercially sold resins are a thick, clear liquid, with a color that varies from pale yellow to golden light brown. The variety gathered in Venezuela is said to be thicker and darker in color. Although it is often referred to a balsam or oil, it is actually a oleoresin."
How's it work on frying French Fries?Bob Ebersole
"...a car that runs on water...and satellites that can beam power from space back to earth..."
...and the hooey widened when Ilya Prigogine won a Nobel prize for his understanding of nonequilibrium thermodynamics where the laws of entropy are temporarily overcome. So, when the DOD designed a machine containing [MESSAGE AMENDED - DEPT OF HOMELAND SECURITY] that could [MESSAGE AMENDED - DEPT OF HOMELAND SECURITY] everyone at the State Department cheered "so that's why electrons can keep going and going"!
Quality :)
"You can never solve a problem on the level on which it was created."
Albert Einstein
I just noticed a new Wal-Mart commercial that's built around high fuel costs. (Wal-Mart has been hammered by high gas prices, partly because their customers are low-income and more vulnerable, partly because their stores are out in the boonies, making people think twice about driving that far.)
It shows people complaining about the high prices and talking about what they're doing to deal with them. But they'd never cut back on shopping at Wal-Mart! 'Cause Wal-Mart saves you money, and at times like these, that's more important than ever.
I would hope that most people have a basic enough sense to add numbers together to see which is larger....
Not if they're shopping at Wally World. Smart ain't in it.Bob Ebersole
I saw a photo of the president's flyover of the Minneapolis bridge.
Did he actually fly from DC to Minnesota in that helicopter?
Did they transport one of his helicopters there so he could use it? (While he flew in on the behemoth 747...)
Do we have "presidential helicopters" prepositioned?
Does anyone know how this works... I can't find any references in the news coverage.
He flew in on AirForce One and transferred to Marine One. I don't know how they move the helicopters around, although they probably have pretty good range and a few different ones prepositioned around the country would do the job.
-Don
Will,
The position of Bush and Cheney at any given time are considered to be national security to prevent assasination attempts and/or terrorist attacks.
Another possibility is that the helicopter fly-over was faked, after the flak from his neglect of New Orleans, Bush can't afford to not appear to be concerened. Taking a full day to look at one more disaster seems like a waste of his time.
Yes, it's a very shrewed move by this wiley and sagacious politician and his dream team to keep the people enthralled by seeing his mug plastered all over the tv news programs on an otherwise slow news Saturday morning. So we can all feel better now about our country knowing that our leader has taken things under his control and he's concerned for the loss of life. (I just hope he doesn't tell anyone they're doing a heck of a job).
You are describing WHO?
My interest was not security oriented.
I was trying to understand how much energy we'd use to show him this bridge and I wondered if we would go to the extreme of flying one of his helicopters out there on a C5-A, like we do for his cars and Cheney's trailers.
Interestingly... I learned from Wikipedia, that when he helicopters around, he flies with 4 or 5 other helicopters, which are used as decoys.
I have no doubt whatsoever that they use an additional jet to ferry his helicoptor around, as well as any 'decoy' spares. Like the gravity of a black hole, the amount of energy waste as you approach the 'heart of darkness' rapidly approaches infinity.
He's probably not actually IN any of them, otherwise an enterprising person with a surplus stinger missile could just drive to the site of any recent disaster and wait for him to fly over. Cheney probably has no need for him to die just yet.
Patient, the Sith Lord is.
There to "help" no doubt. Just like he has "helped" the people of NOLA and Iraq.
If I ever find myself in the midst of a disaster, I think the first thing I will do is make a big sign that says:
PRESIDENT BUSH, PLEASE STAY AWAY!!
My understanding is that there are multiple planes and helicopters that are identically outfitted. Only when the President is on board are they designated Air Force 1 or Marine one. The same aircraft are used by the Vice President and are code named Air Force 2 or Marine 2 while transporting that individual.
Also if I have my facts right, there are multiple flight crews but usually the same crew pilots the President no mater which craft is used. Always a spare flight crew and aircraft available if something happens to the first one.
"Did he actually fly from DC to Minnesota in that helicopter?"
Yes, and Bernanke was throwing out money the whole way.
There's an interesting interview on ElectricPolitics.com with David Strahan about oil and his book, The Last Oil Shock. FWIW, Mr. Strahan does mention TOD by name.
http://www.electricpolitics.com/podcast/2007/08/yesterday_this_days_madn...
My goodness. Are reporters living in a different galaxy, or are they just incapable of basic research?
The reality, of course, is that gasoline consumption is increasing steadily and has never been higher. And overall fuel efficiency of U.S. cars and trucks has been trending down since 1988.
The explanation for flat gas tax receipts is twofold. One, vehicle miles traveled have leveled off or declined slightly over the past year. Two (and more significant to the total funding picture) is inflation. Inflation-adjusted gas tax receipts have been on the decline since 1994.
Also, this blog post says "On a month-to-month basis deliveries may not match up with consumption, says O'Keefe, but they do track closely over longer periods of time. Monthly comparisons are tricky because a number of variables, such as weather, can briefly skew the numbers."
Does anyone know what happened to Powerswitch? They've got a "site closed" sign up.
That looks like the generic sort of sign placed by an ISP when someone has exceeded their bandwidth or has an unpaid bill.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Does anyone know where I can find Ali Morteza Samsam Bakhtiari's testimony for the Australian Senate (?). I think he laid out his full case for peak oil, including his model of the different transition phases (T1, T2, T3, T4).
If that is not available, how about a detailed explanation of the different transition phases in his model?
Thanks!
The Australian Senate thing is here. (PDF)
A quick and dirty summary is here.
Re: "Record Supply Figures"
On a Days of Supply basis, US crude oil inventories are in the low twenties, versus the high twenties that we carried in the early Eighties.
Days of Supply for OECD Countries (area to right of dotted line is projected):
http://www.eia.doe.gov/emeu/steo/pub/gifs/Slide25.gif
Note the trend since late last year.
OECD inventories are inclusive of the US, and note that OECD data only covers about 60% or so of world consumption.
WT,
Would you care to expound on what exactly "US crude oil inventories" comprise. I am really not entirely pessimistic on the future, however, my basic understanding of these oil inventories, which OPEC now cites as reason for not reversing their supply cuts from last year despite new record high oil prices, is basically some above ground storage tanks. One might reasonably think this would be the last thing to go in an oil shortage and would indicate a complete breakdown of the system. I suspect one might see full "oil inventories" at $100 or more a barrel. Put another way one would really be in an emergency to be selling the last few weeks of supply into the market because no more was available at any price? Then again perhaps I am being negative and OPEC's new found concern about oil at greater than (40 no 60 now) $80/barrel indicates we will soon see massive export increases.
This was discussed in yesterday's DrumBeat.
What I found interesting was that it mentions PeakOil.com, and uses the term "demand destruction."
And says peak oil is "no longer just a theory."
German car statistics
In the first 6 months of 2007 new cars sold are down by 9,2%, with all car sizes down by about the same amount. So no shift to small cars. Ironically, the only segment of the market posting gains are SUV´s (up 5,2%) and sport cars (up 17%, due to the new Audi TT). Twenty three percent of German households do not own a car.
Hi Obdacher,
Could you post the source for these statistics? They are very interesting. Do you have a good source for German Vehicle Miles Traveled?
Jon Freise
Analyze Not Fantasize -D. Meadows
How'd you like them apples?
That is just too funny. Another example of the law of unintended consequences.
The argument is bogus for a lot of reasons. Here's one: A pedestrian walking at a slow stroll burns calories at the same rate as the body of a car driver (2 kcal/kg/hr). In some cases it takes more calories for a person to operate a vehicle than to walk, depending on the vehicle and the speed of the walker. Since most walking trips are completed in less time than most driving trips, on that basis alone walking trips take less energy.
There's more discussion on this comment thread.
How dare you throw common sense into cog-wheels of the theory!
"You can never solve a problem on the level on which it was created."
Albert Einstein
switch beef to something else, it's the worst case food.
also consider that most cars cost (including depreciation) about a buck/km to drive.
if they are just talking about carbon they are making a false statement because they are using different system boundrys with each example.
in the first they bound the system to the car. in the second they expand the system to the person, plus the food required to feed him, plus the cO2 required to produce the food.
very disconcerting.
making a ton of steel releases ~.5 tons of c02, so you can amortize the cO2 over the lifetime of the car.
i really don't know how much co2 an entire car requires but it's greater than zero.
i am also getting a thought that co2 is just a half-assed way for people to measure entropy generation. (it is a low energy molecule)
Perhaps, perhaps, eating less and driving would save energy. But who does that? I'll go way out on a limb and say that drivers put away just as many calories as walkers, despite not, you know, exercising. There's a reason North America is the fattest place on earth. Hell, the saving of a half hour on the round trip might just give drivers more time to eat. Not to mention in car eating.
The "eating less" assumption makes the entire argument. If that's not true, and it probably isn't to a significant degree, the rest falls apart.
I suppose you should also figure in the fact that the fat person who drives is both cutting years off his life, and has a statistical likelihood of killing other drivers, both of which would yield a CO2 benefit.
Though you'd have to adjust it some for the vegetarian pedestrians run down.
Really, if we'd just legalize heroin and give it away free, the useless wankers could smile their lives away without SUV's or beef. Just a little gruel with their drugs, and they'd be happier than they are now.
Pardon my attitude, I just had to make a rare trip to town to get medicine for an elderly relative, and the sea of SUVs, still running while parked, has me in a dark mood....
Oh where to begin. Aside from ignoring the presence of the driver in the car as was pointed out, and the arbitrariness of choosing beef to "refuel". How does 100g of beef lead to 36 times that amount of CO2, i.e 3.6 kg. in non-metric how does a 1/5 pound of beef lead to 8 lbs of CO2 emissions. Sounds like someone needs gasX! Both the human and the internal combustion engine are using redox reactions to "burn" hydrocarbons for fuel, likely the human more efficiently. To pretend that moving a ton and a half of steel and flesh over a set distance is as environmentally sound or efficient as a moving 180 lbs over the same distance is just stupid. And I'm not even an engineer.
Okay, then, what about using bicycles?
I have a question for people on here, as I value opinions in this regard and many would probably have appropriate knowledge...
I don't think it is completely off topic - the economy is suddenly showing signs of going south and the energy industry is looking like a better career bet.
...I have been working with Silicon Valley start-ups for years. Just in the process of getting my latest one funded - after years of working for other people I figured it was time to make money for ME not just other people. Partly because I think TSHTF pretty darned soon and I have no assets whatsoever to build any sort of reasonable future plan on (but my wife has lots of nice Louis Vuitton stuff - ugh! I should have clamped down on that nonsense years ago but was too busy working!)
So, given that what I do in the coming weeks/months locks me into the next few years of my career (I cannot take VC funds then walk away easily), yet won't see me achieving any sort of exit before 3-5 years... I am starting to believe that we don't have 3-5 years any more - not before the kind of dislocation that will make my tech company redundant.
I am seriously thinking about NOT relocating from Houston to the SF Bay Area, and instead trying to get a job in the Energy space, as I think that will provide more security. I once worked for Halliburton Brown & Root heading up their Tech Support team in Europe many years ago, but since then I have been working in product management and business development roles in high tech companies...
What is the best route in? I keep hearing that the energy industry is short of people - but is this just at the manual labor end of things? who is short of people? do they need people in all areas - or with specific experience...?
Anyone got any input - I am 35 - if I change careers it has to be my last change! But I have to think of my family...
--
When no-one around you understands
start your own revolution
and cut out the middle man
There are shortages in all kinds of areas in the oil patch. Check out the job postings at the rig zone, linked to the left. Why don't you look at some of the oil field service companies? believe me , if you can speak the language and have tech credentials there are all kind of jobs out there. There's a whole lot of energy software companies too, they're always looking for business development guys, and project management is managing people, always in demand.
Break a leg!
Bob Ebersole
Cheers for the tip Bob
I will check out those companies...
--
When no-one around you understands
start your own revolution
and cut out the middle man
Forget about 'careers' and pensions, those are history. Start thinking about contracting in the oil and gas engineering industry, which owing to the shortages of experienced personnel at all levels, is paying excellent rates up front. I use several engineering IT packages developed and supported out of our Houston office. I'm sure Haliburton and others are in a similar position, there are lots of unfilled job opportunities.
Records
Try www.oilandgasjobsearch.co.uk
There's a few listed in Houston, here's one
Information Management Coordinator,
This position is a 1 year + contract with. The IM Coordinator will work within the Oil and Gas Industry with a leading operator; working on major capital projects (MCP) within the company information management team. You will be supporting the MCP project management team in information management on the project. You will be responsible for the design, creation, implementation, and high level administration of the project electronic document management systems (DMS) and procedures. Coordinate with all necessary internal and external IM and IT suppliers to ensure the document management services are in place with the timing and capability to meet the needs of MCP team from early front-end engineering and design through to successful handover to Operations. You are also responsible for the performance and support of the project document control team to ensure efficient document processing through the DMS. Primary Job Duties and Responsibilities: • Manage and coordinate the necessary processes, procedures and systems for accurate document information management within a major capital project. • Communicate IT and IM systems and procedures effectively with the project team, management and outside company contractors. • Work with Company Information Management personnel in implementing DMS design and procedure changes in order to optimize document control. • Quality control checks to ensure accurate filing of records for all Project (includes technical, commercial, legal, public affairs) documentation generated by the Company, and outside parties. • Provide technical support and assistance for the electronic document management system. • Assist the project team as required to ensure that all project staff has a clear understanding of the policies and procedures related to document management and access. • Works closely with MCP Document Control on document procedures, processes, and workflows. • Establish contractual criteria for and carry out audits on the document control procedures f
Location:USA, Region:, Required Residency:USA, Type:Contract
Contact: Megan Holzman, ,Houston,US, mholzman@swift-houston.com
Posted by:Swift Technical (US)
Records
cheers for the good advice
of course you are right about contracting - why have some % of my income reduced for perceived stability that will vanish
--
When no-one around you understands
start your own revolution
and cut out the middle man
ResponsibleAccountable,
O.K., it's been awhile since I had to do one of these, but I think it's overdue...
First, bless your children, the last time I did a post of this type some half year or so ago was because a very well mannered gentleman was on here who had a small daughter who had Downs syndrome and other special needs. The poor guy was deeply distraught not about his own future but about the care of his child....most folks are pretty gutsy about themselves, but can be more easily panic stricken when the fate of a defenseless child they love greatly is at stake.
First, let me say with absolute certainty that you MUST take a great deal of what you being put forward by the so called "peak aware" community with a HUGE grain of salt. This is not to say that most are purposely misleading, because most aren't.
But there is a great deal of "herd mentality" and humans are more prone to believe the worst possible rumors than they are to believe good news (despite claims mad to the contrary...think of historical examples such as the Red Scare, the attack by Martians due to a 1938 radio show, the invasion by the Japanese "hoard", the Cold War and Communist Menace, the "killer bee" invasion, as examples.
Many here are following the herd, and it is a sad fact that most radical and outragous voices are the ones heard.
I have said it before, and will say it again: Much of what James Kunstler, Richard Heinberg, and a rapidly growing group of Johny come lately's are in the "Panic Peddling" business. Theya are NOT, REPEAT NOT engaged in the real business of Peak Oil, oil depletion, or any real energy based information, study or science.
Let me stress this: Oil Depletion, resource depletion, energy issues, greenhouse and polllution issues are greatly important to the world and to every modern nation. They deserve serious, thoughtful and careful study.
However, I am absolutely convinced that the business of "Panic Peddling" is immoral and wrong in every way. It creates the most fear among those who are ill, elderly, have sick or disabled family members, especially children, and among those who are already in a state of vulnerability.
Of a seperate catagory are those who are already prone to fear, hysteria and panic. Peddling unfounded and unproven hysterical scenarios that prey upon the weakest in our culture is a degradation of EVERYTHING that serious peak energy science and study should be doing, and is nothing short of despicable.
So some facts, but of course, you already know this: Peak oil when it occurs (and no one knows, it may have already occured or it may be decades away) does not mean running out of oil, running out of energy, the assured collapse of civilization, or the assured lack of ability to procure medication and provide good care for your children.
Notice I said "assured". Because world war, natural catastrophes, or complete economic collapse could create problems in any of the above areas completely, COMPLETELY seperate from the Peak Oil issue. The Great Depression was NOT caused by Peak Oil. The Second World War was NOT caused by Peak Oil. The Katrina catastrophe in New Orleans was NOT caused by Peak Oil.
So yes, we should all try to plan for every possible contigency, but that of course is not possible. In one way, Peak Oil is actually easier to plan for than many possible scenarios IF you know it is coming and have some idea of when. But despite what the prophets say, no one does.
----------
I would very much enjoy the discussion of the career thoughts you mention, not just regarding you, but regarding all of us, but I will handle that seperately, as this post simply HAD to be done or I would not have felt right.
Please, take all the scenarios with GREAT CAUTION. Some of what is said in many of the catastrophist scenarios is so devoid of common sense and so over the top, they cannot be accepted as anything other than the wildest science fiction by any thinking person. But if one is already concerned about the fate of his/her family, it is easy to get cought up in the herd, and be pushed off the end of a cliff by panicked bleating, assuring destruction before the real threat ever has a chance at you! If the real threat turns out not to have been nearly as threatening as originally thought, it won't matter, you are already over the cliff!
Thank you for your time and may you have good luck and fortune
Roger Conner Jr.
Remember we are only one cubic mile from freedom
Amen.
Kudos
However, some, what 50 million, were killed over 40 years by the establishment of communism in Russia so I guess you always do have to keep in the back of your mind that tomorrow night might be your Crystalnacht.
ZPDM123
Exactly, and I am glad you said that, because it makes such an important point:
There were Communists. They were a threat to the whole world. They were a danger, a real one that had to be dealt with.
However, not every member our fan of Communism was a mass murderer. Not every little Socialist part was Communist. Not everyone who differed with established policy was a Communist.
Such is exactly the case with "Peak Oil". Oil depletion is REAL. The future of the modern world rests on our understanding of oil, gas and energy in general, and our ability to deal with the problem.
However, "Peak Oil" is not the cause of every problem human beings have on the Earth. There are problems that are still with us, Peak Oil now or Peak oil later. The stock market was known to decline before the onset of "peak oil", as astounding as that may seem. Housing bubbles came and went many times before peak oil. Investor scams and bubbles long preceded peak oil.
The knowledge that oil depletion exists does not give us the right to turn off our common sense, anymore than the real existence of Communism gave us a right to turn off our ability to think. We have to re-learn to make distinctions.
You mentioned Crystalnacht. The great French writer and philospher once said of WWII,
"But for the lack of a few distinctions, a thousand cities were lost."
That's it in a nutshell.
Roger Conner Jr.
Remember we are only one cubic mile from freedom
Roger I am in the oil and gas industry, so lets talk about the here and now reality, rather than pontificating about future scenarios- which are ominous but unpredictable.
The desperate shortage of exeperienced personnel has lead to a virtual trippling of rates in contracting in the last three years. Staff jobs meanwhile have often done little better than keep pace with official 'inflation'. Further there is such a shortage of those willing to work as staff, given their contracting counterparts will be earning anything up to four times as much, that many project engineering companies I have worked for have senior roles, head of engineering, etc. occupied by contractors.
There is nolonger significant benefit in terms and conditions working as staff, the notice period for staff is often barely longer, and pensions and redundancy terms have been squeezed from generous final salary related, often to contributary pensions dependant on the performance of stock market and other assets eg. property investments......I worked for the first twelve years post university with a major petrochemical company which broke up, and the move to contracting four years ago wasn't by choice, but proved timely.
I have been asked repeatedly to attend interviews for an oil major in the last few weeks, however to accept a pay cut, and surrender control of where and how I work would be unhelpful. Close colleagues from the oil major are being despatched to South Africa and Singapore respectively, dislocating their families. My family is my prime concern and they are best served by maintaining as stable an environment as possible with financial security. Contracting is allowing appropriate, sometimes expensive, provisions to be made, for an uncertain future, whilst remaining in credit, which would not be possible in a staff role.
Records
Roger,
"But there is a great deal of "herd mentality" and humans are more prone to believe the worst possible rumors than they are to believe good news"
Actually, it is just the opposite. People are more prone to discount data that is contrary to their percieved best interests.
http://cogsci.uwaterloo.ca/Articles/self-deception.pdf
http://psychology.utoledo.edu/images/users/10/Geers%20and%20Lassiter%202...
Hi RA,
An option might be to move to Canada and take a job in the oil sands. I am sure there are many positions available for someone in the IT field. There's government health care, almost parity in the dollar, good wages (I am told), and a very low crime rate. While it isn't necessarily assured that tar sands will forever remain economically viable, they certainly are now. (Shell is currently investing $27B in an upgrader project).
There is an incredible labour shortage in Alberta at the moment.
http://www.workopolis.ca
http://www.cic.gc.ca/english/index.asp
Best of luck!
but my wife has lots of nice Louis Vuitton stuff
It's when your furniture starts having names that you're really in trouble. You will recognize this problem immediately as there will be furniture you are not allowed to sit on.
O.K., now the careers....
ResponsibleAccountable, you said
"..I have been working with Silicon Valley start-ups for years." You also mentioned that you have been closely involved with the VC industry, and that your two locations of choice seem to be SF Bay and Houston. You say you are now 35....all I can say is that given the above, absolutely priceless! :-)
But DON'T go over to the dark side young skywalker, take the renewable energy path! Just tonight, it looks like the Congress is going to put 15 billion bucks in the renewable kiitty, and companies from WalMart to GM, the VC funds, and major brokerages are all moving in....there has not been this kind fo buzz going on since the glory days of the dot com boom!
Some here say "solar will never provide all of America's energy" and of course they are right, but it doesn't have to, and it sure doesn't have to for a person to get rich on it. Imagine if solar doubles in capacity....and then doubles again, and then maybe a third time...it would still be less than ten percent of America's electric power production, but, would you care? You would have a career that took you to retirement and provided for your family, and have been a part of one of the most exciting and vital industries in history. The sun would still be shining, the growth would still be coming on strong, and you would ask yourself, "could oil and gas have doubled, and then doubled, and then doubled again, and still have 85% plus of the market to fill?
We are at the front of a 30 plus year revolution. I only wish I was your age again, and had prepared better when young. Think about it, and check out some links to see the big players and money pouring in....
http://www1.eere.energy.gov/education/careers.html
http://www1.eere.energy.gov/education/careers_renewable_energy.html
http://www.solartoday.org/2007/july_aug07/economic_powerhouse.htm
(Note the author, Roger Bezdek, he associated with the now famous Hirsch Report)
http://www.prometheus.org/
http://www.solartoday.org/links.htm#Photovoltaics
http://ezinearticles.com/?Careers-in-Solar-Energy-Considered&id=289658
http://www.boston.com/business/markets/articles/2007/07/01/alternative_e...
Roger Conner Jr
Remember we are only one cubic mile from freedom
You talk about the dark side with respect to the oil and gas industry, a somewhat evangelical black and white view of the world. Remember the major solar PV operations are operated by BP, Shell, RWE, Sharp, GE etc. You better pray that the dark side keeps functioning long enough to allow the investment, research, development and economic production of solar and other alternatives to see us through the energy bottleneck.
Records
Records - Can you say disruption: Q-Cells, First Solar, SunPower, Suntech, REC, SolarGenix, to name a few.
The future is bright and it is PV and solar thermal. Roger's advise is thoughtful and well-founded - even if the industry was in the hands of just a few (which it is not).
John, No bodies arguing about the need for solar and alternatives to secure the future. Its imperative that a combination of local domestic and large scale desert based solar applications are brought on line as quickly as possible. If you'd seen my previous posts you'll know I am investing in solar PV, solar thermal, and most importantly passive solar heating, and insulation for my home. However globally all these things are dependant on huge investment of capital, energy and resources to go from less than 0.5% of energy generated. The time required is a minimum of 20 years even with an emergency crash programme, which isn't happening. During that period, with shortages, enforced conservation, you'll have to pray that the depleting oil, gas and coal 'dark side', will sustain the burgeoning populations, food and energy requirements, plus the provision of new solar and alternatives infrastructure, without economic or environmental disasters disrupting progress. The oil and gas majors have signifcant market share in alternative energy, their investment and their energy resources are crucial to future success.
The dark side is not the oil and gas industry, though the corporate denial of depletion, necessitated by the rules of the stock market game, and government connivance to maintain the economy and avoid panicking the populous, all inhibit the initiation of the required mitigation schemes. The dark side is a manifestation of the genetic imperative, to survive and breed, which has been leveraged with unsustainable energy and resource consumption, to produce an uncontrolled population explosion and environmental devastation. If we were just to replace the oil and gas industry, with solar power the environmental devastation would continue until another limit to growth resulted in crash, as the population sizes, consumption and excretion are unsustainable. http://en.wikipedia.org/wiki/World_energy_resources_and_consumption
Records
Records - please accept my apologizes if I misread read your comment or misunderstood your intentions.
The dark side, whether for Jedi or Jung, resides within. The first step is to realize the problem is not 'them' - it is 'us'.
John, After viewing the following Horizon Global Dimming video, I fear that we may double global warmings nett effect in moving to a clean economy minus smog and soot. With temperature rises up to 10C a real possibility. The 1C increase in min max temperature differential in the three days post 911 in the absence of contrails is a real eye opener, and would make Hansen's 25m sea level rise on 2C temperature rise a short term inevitability, with worse to come. The Amazon rain forest is already into its second year of drought. We may in desperation have to engage in climate engineering via SO2 injection into the upper atmosphere, as discussed in this weeks New Scientist.
http://video.google.com/videoplay?docid=39520879762623193&q=global+dimmi...
Records
Thanks, Records, hadn't seen this. Caught first half but learned NOVA had updated version, corrected for hyberbola and including ... Jim Hansen. Read transcript. Checked out multiple posts at RealClimate. Wouldn't worry 'bout PV panels and dimming as per super360 below. More serious is masking of deltaT due to CO2. Actually very serious.
The problem is, as you cut back on burning coal, you reduce soot in the atmosphere much faster than you reduce CO2, so the temperature goes up. But if you keep putting out soot, you reduce the output of solar cells, so the solar break-even cost keeps receding into the horizon.
It seems, awful as it sounds, that we have to stop burning natural gas first, and slowly replace everything else with renewable stocks of firewood. The soot from the wood has to replace the soot from the coal, while growing the new trees will absorb some of the CO2. Also, we have to stop burning gasoline before diesel, because the diesel produces more soot and less CO2, but the soot will cause more disease in urban centers.
Most of all, this documentary indicates that we can't stop flying airliners or even clean them up. Even if they burned hydrogen, they would dump water vapor into the upper atmosphere, which will both reflect and trap sunlight for a net wash. But the price for that is a massive shift in rain distribution.
We are clearly operating the Earth's climate without a license.
Agreed. But let's make sure the case holds together. "operating ... without a license". That's writing that's memorable.
records,
Your right of course, and it wa a bit of an attempt at irony and humor on my part...the oil and gas boys will have the money for a very long time to come to hog up the best talent....on a related topic, has anyone really looked at how the ethanol/tar sand industries (which I think are dead ends) has swallowed talent, engineering and machinery that could be used elsewhere...?
But I never feel bad about picking on the oil and gas industry even if just in fun, they always seem able to defend themselves quite well, thank you...:-)
RC
Remember we are only one cubic mile from freedom
Roger, Shell was the latest to throw more money at tar sands, making a statement of 27bn dollar investement last week. EROEI, water, gas, effluent and environmental limitations, will throttle output and returns. 3.5million barrels a day by 2015 is the best tar sand output conceivable. The ethanol scam will probably come unstuck, EROEI, water, land degradation, and increased haze will be impossible to obfuscate, if thats not a contradition in terms. I did consider a scheme for deep sea methane hydrate recovery with self perpetuating circulation of top warm waters assisted by the buoyant hydrate boil off. There is a reference to developments in Alaska to bring on stream significant hydrates http://www.newamerica.net/events/2007/informing_u_s_energy_policy_debate
in the T21 energy modelling video, on Natts post. I haven't read anything on the oil drum specifically discussing hydrates. They would be another act of desperation, to sustain an unsustainable population, which could bring the whole (green)house down on us.
Records
Responsible, I made the career change at age 40, leaving 17 years in software to slog in the trenches of solar, so it can be done. I wouldn't recommend that same path to anyone at this point (unless you have a hot market and an "in" to working on large commercial accounts), but there are ample opportunities throughout the renewable energy sector, as well as in the traditional energy biz. I am encouraging all my software buddies to get involved in energy. We need all the talent we can get! Do it! In 3-5 years we could be just starting into the bumpy ride of the plateau...ask yourself what kind of work you'd like to have post-peak, and how long it will take you to get your chops together. And don't worry about picking the best entry point, just pick one. You'll move on soon enough. I'm already out of solar after only three years (and happy to be writing full time now).
Cheers & good luck.
--C
Energy consultant, writer, blogger www.getreallist.com
Of the multitude of comments regarding the economic question - stockmarkets, housing, inflation, money supply, and so on, not ONE mentioned the velocity of money.
This is like discussing automobile safety withpout mentioning speed.
The velocity of a dollar is as important as its value. We miss this on a personal level because money in our pockets is static; as soon as it becomes dynamic, it is gone as far as ourselves is concerned.
If you have trouble with the concepts of potential and kinetic energy - or any other facet of Newtonian physics - I suggest that you save your breath on economics.
An economy is about transactions, not money. When the transactions stop, money doesn't matter much. In the same vein, adding more money won't instantaneously produce more oil. That's why we're here, or so I thought.
The seeming disregard for the dynamic component of money never ceases to amaze me. It goes like this; a little money traveling fast can do the same work as a lot of money traveling slowly. Is it an exponential function? You betcha - to the chagrin of any central banker.
Greenspan's 1% solution went on WAAAY too long, and a mistake like that can have catastrophic repercussions. My sympathies. It was, like so many recent tactical blunders, totally predictable, but the will to accept reality wasn't there.
We're going into peak oil like an overweight prizefighter with a hangover.
Hi Petro,
re: "Of the multitude of comments regarding the economic question - stockmarkets, housing, inflation, money supply, and so on, not ONE mentioned the velocity of money."
Is there any possibility you could expand upon this? ie., what do you see as the connection between "velocity" or "dynamic component" and "inflation v. deflation" - or the idea of "economic collapse" - or not. And how does this tie in to "demand destruction".
I'm (sincerely) interested.
What makes "transactions" start, stop - and can this be manipulated in any way(s)? If so, how and by whom?
You've asked for a lot. We have been encouraged to think of a dollar as something tangible, and when that fails as a concept we revert to gold or whatever in order to get some material heft to the concept. Money is about as tangible as electricity - another thing that the public in general uses constantly but can't really define or see.
Electricity is more defined by what it does than what it is. Same with money. As an example, in the Soviet Union most everyone had a job or position and an income. The savings rate was very high, largely because there was so little to buy. Land was owned by the state as was industry, so there was no investment opportunity. Prices were low; there just wasn't a correlation between purchasing power and goods availability.
When the system collapsed and/or opened up, there was a tremendous ruble overhang. The ruble, which had been valued at something like $2 as I recall, suddenly was unleashed and people went on a buying spree for the foreign goods now pouring in. I recall an exchange of 8000 to one at the collapse point in 1997 or so. Velocity had gone from near nil to as fast as you could buy something just to get rid of them while you could.
This is something akin to short circuiting a battery. At the end, the pent up money was gone, some sort of new ruble was imposed [I'm not sure what the mechanism was] and folks soldiered on.
In our current western world setup, the velocity is theoretically controlled by the interest rate, savings are minimal or negative, and the cost of borrowing controls the availability of funds. If the velocity gets too high and prices rise too fast an interest rate increase will slow buying and swing the supply demand equation. This is what has just occurred in the housing market, so we get a ringside seat for a demonstration.
Certain difficulties pertain to this system. An overheated X market can be stopped by sufficiently raising interest rates, and conversely a slow employment situation can be prodded along by a low rate, but how do you deal with a stock market bubble and an employment slump at the same time?
The recent increase in rates makes borrowing to purchase stocks a bad deal if the interest exceeds the return on the stock. If there is an exit to bonds from stocks, then the price drop exacerbates the rout. Beating the housing bubble down to reality and wage rates, as Volcker did in the early 80's, has some nasty side effects that were neither needed nor warranted.
Thus, despite rather healthy profits and static wages and so on, we will be forced to accept the collateral damage that the blunt tool of interest rates does to the rest of the economy. Usually, the system in even the worst case only defaults to non borrowed spending and immediate necessities except for those with large cash holdings. I would guess that perhaps the economy can shrink to 70% of its usual size and employment and still function after a fashion. In other words, the velocity can drop by a third with the actual amount of money in circulation having remained the same. A part of it just isn't doing anything, much like a disconnected battery.
To restart the long term purchasing and more speculative parts of the economy, confidence that employment and purchasing power will return to 'normal' needs to be established. Public sector spending is a good method here as the government is in a capacity to initiate long term projects. The current bridge collapse panic would be an example of a public works long term project for the 'rust belt'. I hope we don't need another depression to get that underway. However, the petroleum situation makes roadway expenditures somewhat moot.
Wars are another public works alternative. When capitalism stalls, that largest of socialist enterprises picks up the slack. Yesterday's seemingly high 480 billion military spending bill is actually only equivalent to the 300 or so it was before the recent bout of unadmitted inflation. However, there are lots of 'off balance sheet' Enron supplements to finance the Mesopotamian adventure.
If we all had lots of money but nobody needed or wanted to buy anything...capitalism has been characterized as too many goods chasing not enough money and communism as too much money chasing not enough goods. In either case, it is the velocity that is important as sudden changes either way can spark an exponential rush to purchase or not purchase. This is how a rising housing market can have velocity outstrip production and then overnight nobody wants to enter a long term contract on a falling asset.
I hope this helps explain what I was referring to. The exponential factors I mentioned apply to the way that velocity drops and rises tend to be self encouraging once prices start to rise or fall very far from historical values and become hysterical values. A panic to buy usually indicates a coming panic to sell. With houses it is somewhat different because we live in them. Having 'refinanced' so many of them at prices far beyond what the wage regime could justify will be an ongoing nightmare. Thank you Mr. Greenspan. Expect inflation to amortize the debt, as there isn't any other practical and pragmatic solution. If you have money to store for the future, let me know how.
Hi Petro,
I did ask for a lot, and I appreciate your response. (I'm going to have to take some time to read, and also to look up a few things, so I can limit - or refine - my questions.)(eg.
1) I'd like to look up the article "The Harvard Boys do Russia" - saw the title and think it relates. What was the role of the US in relation to what you talk about?
2) I need some tutoring on the section about "stock market bubble and employment slump". You mean, people do borrow money to buy stocks?, etc. (big "etc.")
Important Q, though:
Have you talked about these ideas before? Any chance you might write them up and the editors post?
I'd be interested to see the response of people who like to talk about the economy.
re: "However, the petroleum situation makes roadway expenditures somewhat moot."
Because...(?) do you mean from just general lack of capital for the expenditure? Or, because it's a bad idea.
What about rail infrastructure?
re: "If you have money to store for the future, let me know how."
I guess that's what the discussion of storing fertilizer was about, huh. Well, I wonder...
what is the intersection between the idea of "storing money" and the idea of - (i.e., I didn't say likelihood, just idea) - of conservation of FF being tantamount to "money stored"?
How do you see the intersection of the "velocity of money" and energy inputs from the physical world?
How do you think about the question of "Is it possible to have a non-growth and/or steady-state and/or sustainable economy? And if so, how?"
Do you agree w. RR generally on the idea that "the future is electric", and if so, how does that relate to what you say here?
i dunno if this has been posted: "Iraqi power grid nearing collapse" http://news.yahoo.com/s/ap/20070804/ap_on_re_mi_ea/iraq
but the iraqi people are enjoying freedom and democracy.
Hi elwood,
It's worth noting. Chimp posted it under one of the legislation articles. Really awful situation.
Hello TODers,
Yikes! This could potentially get ugly fast.
Cue music from Jurassic Park, start chanting, "Nature will find a way, Nature will find a way......"
http://www.guardian.co.uk/uklatest/story/0,,-6828282,00.html
-------------------------------
Disease strain linked to nearby lab
The outbreak of foot-and-mouth disease on a farm in Surrey is being linked to a nearby animal research laboratory, with fears the virus could have leaked from the facility.
-----------------------------
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Hello TODers,
MEXICO UPDATE:
Obviously, when the MPLS/STP I-35 bridge tragically collapsed, we had a long series of Drumbeat postings on crumbling infrastructure in the USA.
Many will recall my newslink posting on Mexico City resembling a flooded Nawlins when their crumbling, big sewer drain becomes non-functional. Not IF, but WHEN is the operative word.
Well, this next newlink suggests that Mexico City could become a COMBO of post-Katrina Nawlins and the 1906 post-earthquake San Francisco,... "perhaps in the magnitude range of 8.1 to 8.4":
http://www.livescience.com/environment/070802_fault_backward.html
---------------------------
In Surprise, Major Earthquake Fault Slips Backward
A vast chunk of Earth sliding under Mexico has surprisingly reversed direction, puzzling geologists and leaving them wondering whether the ground might be poised to pummel Mexico City with a devastating earthquake.
Suddenly, in the latter half of 2006, the plate began moving the other way and quadrupled its speed, scientists announced today.
"A very large earthquake in Guerrero would produce seismic waves that would travel quickly to the Mexican capital, and since Mexico City is built on water-saturated lakebed deposits that amplify seismic energy, the results would be catastrophic," said University of Colorado at Boulder engineering professor Kristine Larson.
-----------------------------------------
Please click & read the entire link. THXS
EDIT: to show how quickly families can downsize to minimal housing, please click on the wiki-link below, then scroll down to the photo of single-story housing for 20,000 people in 720 square foot relief cottages:
http://en.wikipedia.org/wiki/1906_San_Francisco_earthquake
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Harnessing geothermal technology:
http://news.yahoo.com/s/ap/20070804/ap_on_sc/drilling_for_heat;_ylt=AjvF...