DrumBeat: August 13, 2007

NHC Tracking Atlantic Tropical Depression Four

A tropical depression in the eastern Atlantic Ocean off the coast of northwest Africa could develop into a tropical storm and possibly a hurricane in the next few days, say forecasters at the U.S. National Hurricane Center.

Tropical Depression Four, which is causing thunderstorms and strong winds, is currently located southwest of the Cape Verde Islands and is expected to travel west, reaching the Windward Islands in the southern Caribbean in the next few days, the NHC predicted.

U.S. energy markets are eyeing the depression closely, amid concern that if it strengthened into a tropical storm or hurricane headed for the U.S. Gulf of Mexico, it could disrupt oil and natural gas production there.

Peak Oil and Peak Investment Constraining Production Levels

Although peak oil theories have been largely flawed by their main incapacity to take into account future technological developments and the effects of high crude oil prices, current production situation looks like a precursor of production plateaus.

Several peak oil protagonists have been lately hitting the headlines, showing their willingness to support the theory that production levels have peaked and doomsday scenarios have at last become a reality. The latter, based on current E&P technology, seismic technology and the fact that there are still vast portions of land unexplored - just think about Russia’s drive towards the North Pole lately – is, however, not the main reason for current high oil prices. It seems at present, as even the International Energy Agency (IEA) indicates, that high crude oil prices are the main constraining factor in increased global production levels. The latter is not only the case with crude oil production but increasingly with natural gas and LNG operations. The high levels of liquidity currently amassed by oil producing countries and the oil and gas majors has not yet led to a situation that there is a booming E&P sector showing a continuous upward potential the coming years.

Nigeria: Crisis - Oil Workers Threaten Pull-Out From Niger Delta

A major crisis loomed in the nation's oil and gas industry yesterday as senior workers threatened to withdraw from the Niger Delta if the current spate of killings in the region continues.

Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) which issued the threat also charged the Federal Government to summon enough political will to tackle increasing violence in the region.

UAE to Shut in 0.28M b/d Lower Zakum Oil Output

The United Arab Emirates is to shut down the Lower Zakum West field, which produces 280,000 barrels a day of crude oil, in late October for between 17 and 25 days, officials said Monday.

"There will be a total shutdown of Upper Zakum West from Oct. 26 for tie-ins of a new gas (reinjection) facility," a planning official at Abu Dhabi Marine Operating Co., or ADMA-OPCO, responsible for developing Abu Dhabi's offshore oil and gas reserves, told Dow Jones Newswires by telephone. "It is a debottlenecking project to increase production of oil," he said.

Peak phosphorus

Peak oil has made us aware that many of the resources on which civilization depends are limited.

An electric car for the common man

One company is hoping to bring a $30,000, 80-mph battery-powered sedan to the market by 2009.

Russia's defense banks on oil and gas exports

Russia's naval chief said recently that his fleet would get six new aircraft carriers with nuclear propulsion in the next 20 years as part of a major expansion and modernization of Russian maritime power.

Admiral Vladimir Masorin added that three of these carriers and their naval escorts would be assigned to Russia's Pacific fleet while the remainder would serve with the Northern Fleet in European waters.

While some analysts dismiss such talk of rebuilding a Soviet-type force with global reach as nationalistic bluster ahead of parliamentary elections in Russia later this year and a presidential poll in 2008, Moscow's plans for a stronger navy appear serious. They will have repercussions in Asia, not least in China where debate in high-level political and military circles over whether to go for aircraft carriers -- the most visible and impressive form of maritime power projection -- has been underway for some years.

Blackmail, Sex & Corporate Secrets

Browne had his critics outside the oil industry too. The company was accused of committing human rights violations while building a pipeline in Colombia, and concerns were expressed about North Sea pollution. Greenpeace selected Browne for its Best Impression of an Environmentalist award. Matt Simmons, whose Houston-based Simmons & Co. is one of the largest investment-banking businesses serving the energy sector, was deeply skeptical of Browne’s 1999 prediction that, because of a worldwide market glut, oil prices would never reach $40 a barrel. “There was a vision of unreality in John Browne’s business plan,” Simmons says. “That generally works until you slip up.”

Chrysler chemist lashes out

A senior management figure at Chrysler has hit out at five groups he sees standing in the way of alternative fuels.

The Grim Reaper pays a visit to Wall Street

Congress should initiate a program of incentives for reopening American factories and provide generous subsidies to rebuild US manufacturing. The emphasis should be on reestablishing a competitive market for US exports while developing the new technologies which will address the imminent problems of environmental degradation, global warming, peak oil, overpopulation, resource scarcity, disease and food production. Offshoring of American jobs should be penalized by tariffs levied against the offending industries.

The oil and natural gas industries should be nationalized with the profits earmarked for vocational training, free college tuition, universal health care and improvements to the nation’s infrastructure.

The Pillars of the Next Real Revolution

I will do each of them a disservice by trimming them down to a few sentences, but the 8 basic pillars of the next real revolution are:

1- the End of the Oil Age

2- the End of the Hospitable Climate

3- the End of the Human Population Boom

4- a Narrowed Circulation of Money

5 - a Suddenly Endangered Superpower

6- the Scary Are Becoming Powerful

7- the Rise of Hard-core Fundamentalism

8- an Increasingly Toxic Planet

Kurds refuse to allow oil fields to lie fallow

Although the Iraqi Cabinet approved draft legislation in June, Kurds and Sunnis have rejected it as giving too much power to a yet-to-be-established national oil company. Kurds want greater control over their own fields - not surprising since they could be some of the richest in the world.

"It's very high quality," expert Leslie Blair says of the Kurdish oil found so far. "You can almost put it in your car."

Iran investment woes are its fault

The United States is on a concerted campaign to discourage foreign energy companies from doing business in Iran. But analysts say Iran's investment woes are its own fault -- it could dodge international pressure and attract more foreign money by simply offering better deals.

Turkey heading toward electricity crisis at full speed

As electricity consumption continues to increase with the extreme heat, the Energy Ministry seems willing to try almost anything to get power to the people.

Centrica plans east England gas fired power plant

The country's biggest energy supplier, Centrica, plans to build another big gas fired power plant at one of its existing sites in East Anglia, a spokesman for the company said on Monday.

Kazakh stake in nuclear company

Japanese firm Toshiba has sold a 10% stake in its majority-owned nuclear firm Westinghouse to uranium maker Kazatomprom for $540m (£268m).

The Kazakh firm hopes the investment will help it to expand. Toshiba aims to gain access to key uranium sources.

Bridges to somewhere

Just raising the gas tax, without locking the money into bridge maintenance and safety repairs, would be a mistake. President Bush is right about that. A good chunk of it would get diverted to new interchanges and highways that will make well-connected developers rich and to other home-state boondoggles, like our own Bridges to Nowhere. But the talk in Washington these days is about a small tax boost, 5 cents a gallon, that would be dedicated to maintenance and repairs -- period. Such a small increase would hardly be noticed if gas prices continue to bounce up and down as much as 50 cents a gallon.

Venezuela to Extract Off-Shore Oil in 2007

Petroleos de Venezuela state oil company -PDVSA- confirmed that the first off-shore oil barrels in the country's oil history will be extracted by the end of 2007, VEA daily published on Sunday.

China's CNOOC wins bid to explore for oil in Australia

China National Offshore Oil Corp, the parent of CNOOC Ltd, has won a bid to begin oil exploration in Australia, the Ministry of Commerce said.

CNOOC will initially invest 81.3 mln aud to conduct 3-D seismic survey and drill five wells on an oil field in the Bonaparte Basin, in coastal waters off the north coast of Australia, it said.

Alberta's oil sands seem as strong as ever - until you dig

Now the oil sands outlook has darkened. Alberta is wracked by a labour shortage, its jobless rate hitting a historic low of 3.4 per cent last year. The Conference Board of Canada predicts that, by 2025, Alberta will be short as many as 330,000 workers; other forecasts are more dire, envisioning a demand for 400,000 more labourers by 2015. (So frustrated are some by a lack of bodies that, in an interview with Maclean's, one observer charged Dave Bronconnier, the mayor of Calgary, with throwing too much manpower at the city's current infrastructure works.) Above those local considerations, prices for raw materials jumped worldwide. Driven largely by insatiable China, steel prices, for example, rose by 70 per cent in the past five years.

The result has been oil sands overruns -- and even the occasional surrender to circumstance. Capital costs have tripled in a decade, and doubled in the last three years.

Global economic expansion hinges on oil

August 1 marked a significant date in the history of oil prices. It was on that day that sweet crude oil futures for September delivery traded at a record $78.77 a barrel in New York.

Sugar-fuelled superpower

Brazil might already be heading for Saudi status were it not for America's 54-cent tax on Brazilian ethanol. But in March George Bush and his Brazilian counterpart, Luiz Inacio Lula da Silva, agreed to promote ethanol’s wider use. Brazil could become a crucial exporter of energy.

And yet, in Brazil, all the talk is of a looming energy crisis. Most of the country's power comes from its massive rivers, via hydro-electric dams, supplemented by gas- and oil-fuelled thermal plants. But the economy is growing so fast that these might not suffice in a few years’ time.

Charcoal - fuel or fertiliser?

"Agrichar" or "biochar" is indeed an extremely interesting process that fixes carbon in the soil for a very long time. It does so with what I call a catalyst-fertiliser. Furthermore it provides an energy source that is an alternative to fossil fuels. These researchers tell us that we can have an alternative fuel source that, instead of increasing the carbon dioxide in the atmosphere, traps carbon in the earth for an exceedingly long time and also acts as a fertiliser - a negative carbon fuel!

Iran oil minister replaced, caretaker picked

Iranian President Mahmoud Ahmadinejad replaced his oil minister, Kazem Vaziri-Hamaneh, on Sunday, a move some analysts saw as a bid to stamp his control on an industry that is the source for most of Iran's revenues.

Foreign Investment in Saudi Arabia Rises

The Kingdom of Saudi Arabia has attracted SR68.6 billion in foreign direct investment (FDI) last year, a recent statement issued by the Saudi Arabian General Investment Authority (SAGIA) said.

Foreign hostage dies in Nigeria

A foreigner taken hostage amid increased lawlessness in oil-rich southern Nigeria died of an illness Sunday while being taken to a hospital, community leaders said.

The man, whose nationality wasn't known, died after he had been released to state officials by the hostage-takers but before he reached the treatment center, said Joseph Benemiesia, a prominent community leader and member of a government team trying to calm the restive Niger Delta.

For Nicaragua's Ortega, leading is balancing act

"Nicaragua is a really poor country that is dependent on international assistance. Any president, left or right, has a limited set of choices," Thale said. "While Daniel would like to be independent of the U.S., just because he wants [to be] doesn't mean he can be."

The juggling act has been evident this month as Nicaragua battles an energy crisis that has forced rationing of electricity. Neighborhoods in the capital, Managua, often endure long stretches in the dark, while government offices and factories are forced to interrupt work or rely on pricey generators.

Conventional nonsense about unconventional fuels

Among the findings released last week of a long-awaited report from the national Strategic Unconventional Fuels Task Force, is this: “Measured” support from the federal government in assisting the nascent development of a national synthetic fuels industry — i.e., tweaking an environmental dictate here and lowering a regulatory hurdle there — could produce a yield of “several million” barrels of oil a day from shale, tar sands and other unconventional energy sources inside of 20 years.

Well, that is certainly interesting. So interesting is it that we can’t help wondering, from what planet did the task force members come to reach that conclusion?

Consensus Emerges on Energy

In America's highly polarized political debate, a rare consensus is emerging among presidential candidates that America needs to stop using foreign oil and move on, instead, to other energy sources.

Politician And Pundits Look To $100 Oil

The question before the House comes down to this. Will troubled credit markets hurt the developed nation economies enough to bring oil down much further or will long term demand and lack of supply growth drive prices up?

Cold fusion - The Salvage from the Energy Crisis?

In 1989 the chemistry professors Stanley Pons and Martin Fleishman reported that they had achieved cold fusion in a palladium anode emerged in a solution of sodium deuteroxide in heavy water D2O. Due to a bad exactness of their report, only few other scientists managed to replicate their findings in the first place. The findings were then dismissed as due to misunderstandings and bad scientific practice, and the matter of cold fusion has since been regarded as a taboo area.

However, some scientists did manage to replicate the findings, and quietly an enormous amount of positive research findings based on experiments of a lot better quality have been published. The phenomenon is again becoming accepted as a legitimate field of research by steadily more scientists.

Heat on Australia PM over climate skeptic MPs

A report questioning climate change and calling global warming a "natural phenomenon" on Monday led to accusations Australia's Prime Minister John Howard was a climate skeptic, possibly denting his re-election hopes.

A group of four government lawmakers -- two of them former ministers -- said climate change had been observed on other planets and moons including "Mars, Jupiter, Triton, Pluto, Neptune and others."

Zerocarbonbritain – a new energy strategy

Britain must eliminate all carbon emissions within 20 years by halving energy demand and installing massive renewable energy generation, according to a new report from the Centre for Alternative Technology (CAT).

The UK Government’s target of 60 per cent reduction in carbon dioxide emissions by 2050 is one of the strictest emissions targets in the world. But if we are to avoid uncontrollable ‘runaway’ climate change, we need to make bigger cuts faster, according to the Zerocarbonbritain report.

Scientists try new ways to predict climate risks

Scientists are trying to improve predictions about the impact of global warming this century by pooling estimates about the risk of floods or desertification.

"We feel certain about some of the aspects of future climate change, like that it is going to get warmer," said Matthew Collins of the British Met Office. "But on many of the details it's very difficult to say."

"The way we can deal with this is a new technique of expressing the predictions in terms of probabilities," Collins told Reuters of climate research published in the journal Philosophical Transactions of the Royal Society A.

Trees Won't Fix Global Warming

The plan to use trees as a way to suck up and store the extra carbon dioxide emitted into Earth's atmosphere to combat global warming isn't such a hot idea, new research indicates.

Scientists at Duke University bathed plots of North Carolina pine trees in extra carbon dioxide every day for 10 years and found that while the trees grew more tissue, only the trees that received the most water and nutrients stored enough carbon dioxide to offset the effects of global warming.

A new guest Round-Up by ilargi has been posted at TOD:Canada.

In a café Sunday afternoon, this old Bowie song was playing. Only when going back to the articles for the Round-Up, did it hit home. The addiction theme pops up time and again. Junkie behavior describes the market, and money that came from nowhere, from ashes, is now on its way back there. Hitting an all-time low?!

Ashes to ashes, funk to funky
We know Major Tom’s a junkie
Strung out in heavens high
Hitting an all-time low

It’s Monday , August 13, and tons of people await the coming week with sweaty palms. We thought it best to wait till Tuesday to post a new Round-Up, Monday could be real crazy after all, but we decided against it. There’s too much good material. If need be, we can always update. The Fed is buying waste outright, and European and Asian institutional investors are knee-deep in that same waste. One thing should be clear: the money vehicles that all this is based on, are barely in their teens. And someone soon, having lost $billions, will question their legal status, and ask for an ID.

The Fed's Path

It has now become obvious to me the path of the Fed. No, Mr. Bernanke is not going to be tough on markets. He is not going to give the medicine that is needed. He has chosen his path, the seeds of which were planted in his November 2002 speech about monetization (dropping dollars from helicopters).

The Fed today injected $65 bln of repos, extending credit to banks to shore up their liquidity needs. Normally the Fed only accepts treasuries as collateral. But the banks no longer have enough treasuries, or they don't want to sell their "safe" assets in exchange for credit. But they do have lots of risky assets like CDOs that everyone wants to get rid of. The Fed bent over and today announced they will take those "off their hands".

This is the monetization Mr. Bernanke referred to. He is talking tough in his rhetoric about inflation and keeping interest rates stable. I think he may stick to that. But out of the other side of his mouth he has decided to be even more aggressive by issuing credit to banks and buying risky assets for their balance sheet.

Mr. Bernanke thinks he can control markets. To be truly successful he must be willing to buy vast amounts of things like stocks and junk bonds in order to get the "liquidity" he wants into the markets.

This is alchemy finance in its truest form. All it will do is stave off the inevitable and make it worse when it happens.

Bonddad is talking about such things over at DailyKos. This whole thing is quite unprecedented. The government starts taking on poorly understood risk in the form of these mashed up CDOs? How crazy is that? We won't know for another few months but I think its right up there with the Iraq invasion in terms of "seemed like a good idea at the time".


The Federal Reserve System never buys stocks. I do not recall whether or not its charter permits it to buy equities, but it never does that. What the Fed buys is Treasury Securities. In addition, the Fed has very broad powers to lend--usually to banks, but the Fed has the legal power to lend almost any amount to almost anybody.

As I have stated before, the power of the Federal Reserve System to inject liquidity into financial markets is (for all intents and purposes) unlimited. Watch what Ben says, but even more watch what he does: The helicopters are flying. For the time being the fight against inflation is on the back burner, but the fight against the credit crunch is on "high" on all the front burners.

Never underestimate the power of the Fed.

Note that credit is a flow concept while money is a stock. By increasing the flow of credit the stock of money can be increased; that is exactly what is happening now.

Don, I have to agree that none of us can comprehend (entirely) the power of the central banks.

But in more IMMEDIATE matters, all this cash flow is entirely PRE-EMPTIVE. They are worried about Wednesday, Aug. 15th - Hedge fund redemption day. I suspect that is what Cramer is ranting about last week too...the storm that is coming. Which the FED hopes this free CASH will wash away.

However, I don't know if the FED has enough money to stop PANIC, if and when it occurs. And, there is just enough fear in the air to trigger panic at any moment.

Speaking of storms - Anyone else watching Invest 90L

Which should become a TD later today and seems to have a nice clean path straight into high SSTs and a good probability of turning into the gulf. But it's arrival would be at least a week and a bit away (more time to nash teeth).

As of 11AM EDT, Invest 90L...Now, Tropical Depression FOUR.

They have been using the term "vigorous" alot associated with this one.

NOAA advisories on FOUR

And here's the Reuters story:

Storm forming over Atlantic

I'm no geologist, but I can read a weather map.


The door is open for a while.

I was going to buy oil futures today but it's getting too close to the 22nd of the month, when fundamentals rarely drive the price.

Last night, this was the first threat this year that the local weather people took seriously as "a possibility".

Best Hopes for High Shear Winds,


Sorry Alan not this time..

Best hopes for the eastern seaboard having done sensible construction... But thats unlikely... Historically these storms hammer hard when developing this strong.


Worst Case 60mph forward movement slamming into NYC.

Cape Verde storms always worried me. I posted yesterday I grew up in the Flordia Keys.. They suck and usually rip things apart...

Bermuda High is working against us this year and EXPLOSIVE heat in the oceans.

http://www.wunderground.com/data/640x480/atlm_shear.gif And that is SCARY!! its so favorable...

Somebody is going to get hurt its just a matter of where the wobble is going. Right now the NHC places it hurricane heading just south of Haiti.. We will see how that goes there is still quite a bit of time while it moves this way.

Give Jeff Masters blog a look and then start placing bets on 100$ oil.

While you are at it, take a look at the Tropical Discussion link. They note this:
1130 AM EDT MON AUG 13 2007


That storm could reach U.S. landfall before TS #4, which is still out in the Atlantic. That depends on the track, of course. It's worth noting that the weather station at Key West has been reporting record low minimum temperatures for a couple of weeks now. If that data is representative of warm water temperatures in the Gulf of Mexico, this little storm could pop into something big in a hurry.


E. Swanson

Jeff Master's (and others) don't believe it could develop beyond a weak TD (*at this point*, of course).

However, if it slows over that nice warm water...who knows.

With the new data and Hunter data, I imagine Jeff will be revising his comments shortly.

NOAA says Hurricane by Friday Morning

Photo Sharing and Video Hosting at Photobucket

Never Underestimate The Power Of The Fed!

stealth dollars

My understanding is that in it's history the Fed has only accepted TBills as collateral from banks needing these cash infusions. Last week, the Fed accepted the CDO's and mortgage obligations that the banks are having difficulty finding buyers for.
If that is correct, the Fed essentially took the toxic mortgage investments off the banks books and gave them $$.
The US taxpayer foots the bill for the toxic investments by way of a depreciating currency while the banks and institutions enjoyed the profits in the past years.
The key question is: what did the banks have to provide as collateral during last weeks Fed interventions?

Inhaling deeply on a fatty, he continued “We’ve been tinkering with our model, which served us well for Enron and the Telecoms in ‘02, and our stress testing shows that the probability of loss in the senior tranche is close to zero.”
Oh man,,I'm dying,,I'm laughing so hard, Thanks , I needed that this morning.

Laughter is the best medicine,
Thanks Bro

Strictly speaking, the Fed can lend as much as it wants to to any bank with no collateral at all. To the best of my recollection, the Fed charter does not limit its lending power to collateralized loans, and it has certainly loaned money before with no liquid collateral for the loan.

When it comes to making purchases (as opposed to loans) during Open Market Operations (OMO), the Fed buys only Treasury securities. It never buys mortgages, never buys corporate bonds, never buys equities. Buying Treasury (i.e. U.S. Treasury) securities is the main way in which the Fed injects liquidity into the system. Every time the Fed buys a Treasury bill (or note or bond) the check that the Fed writes is new money; it is trading new money for another asset, namely, a Treasury security. Typically the Fed does not buy new securities directly from the Treasury but rather deals through certain selected (a few dozen, I think) brokers on an "open market," and hence the name "Open Market Operations."

When the Fed wishes to reduce liquidity in the system it sells Treasury securities on the open market, and the money from these sales is, in effect, annihilated. It vanishes into thin air, just as the Fed can create money out of thin air when it buys Treasury securities on the open market.


I asked this very question last week. "Why doesn't the Fed just create some money and give it to banks to maintain liquidity, in the short run, so that assets (including mortgages) can be readjusted and lower payment schedules can be set up on devalued housing stock." My thought was that the Fed doesn't need to inject cash to the full value of the bad loans only enough to allow house prices to reset and new more valid loans to be set up so that the new owner can make a lower payment re-establishing liquidity.

The answer was that the Fed can't own equities so they can't create cash to cover the liquidity crunch..

You are saying the Fed can't own equities but it can hold them as collateral on a loan? I know a loan has to be paid back but this is a semantics statement. The value of these mortgage products appear to be just as unreliable as a stock traded on the market.

Since the paper is not going to reflect the new value of the housing stock (as house prices fall) how is the Fed valuing the loan?

Just curious for an explanation. My thought was that the big banks will have to make up the difference using profits from some better financial instrument which would reduce the profitability of finance stocks a bit going forward.

The Fed values its loans at face value. I say again, the power of the Fed to lend to banks is unlimited. They can quite literally take a dead bank that is insolvent and breathe life back into it. Typically the Fed does not take drastic action like that, but if push comes to shove the Fed has the legal power to lend without limit.

Now it has been very very very careful not to abuse this power; it does revive dead very large banks because these have been decreed "too large to fail," and the Fed has the legal authority to revive any failed bank unless it has officially gone through the liquidation process. For that matter, the Fed has the power (though it has never used it) to lend unlimited amounts of money to nonfinancial corporations. Thus if push came to shove, the Fed could bail out Ford and G.M. and every other large corporation in America. Rather than do this, the Fed leans on Congress to make special appropriations to bail out major corporations; but the Fed has enormous powers to fight debt deflation directly, and if need be, they would use these powers.

Also it should be noted that the Fed can act almost instantly: Half an hour after a decision is made (and a crisis decision typically is made in less than an hour) the action can be put into effect. Thus if there is a financial crisis at 1:20 p.m. Eastern Time, the Fed can resolve this with decisive action within ninety minutes--and possibly less than that.

In addition to the power of Open Market Operations, the Fed can make announcements as to what it will do, and these announcements have 100% credibility, because the Fed always has the power and the will to follow through with any of its plans for actions.

In my opinion, those who are concerned about the dangers of a credit crunch and debt default deflation simply do not understand the powers of the Fed. Bernanke hase spoken. Thus it shall be.

Ipse dixit.

Don, thanks for the distinction.

So to my original question about a loan. How does the Fed get paid back? What are the terms? If I understand you right the Fed will be paid back exactly the amount it loaned. But over what time frame?

That last one has me scratching my head. I am assuming they can loan for any time horizon out to 30 years? Never called?

By creating a loan they increase money supply and by getting paid (or call in a loan) they decrease the money supply?

If true they could build into the system the ability to create subtle deflation in the future to counteract some as yet inflationary event?

The Fed can renew any loans it makes over and over again if it wants to. Now in practice this does not happen; typically when the Fed lends money to a bank through the discount window it gets paid back fairly quickly--often in a matter of weeks. Now how it arranges to get paid back, ah now there is some white magic involved: Frequently the Fed will arrange a merger or buyout so that an insolvent bank is taken over by a larger and stronger bank. I cannot recall when the Fed last wrote off a loan as uncollectable, but if it wanted to do so, it could, and it could do so without practical limit.

The Fed has the power to create bank reserves, and these bank reserves tend to become "high powered" money, i.e., new money that is created as a multiple (say about 3) of the original new reserves. Now the Fed cannot force the banking system to create new money by lending out new reserves, but typically this happens. Even if a bank finds no credit-worthy businesses to lend to it can buy U.S. government securities and thereby lend money to the government. In extreme cases, this results in "monetization" of the debt, whereby government debt becomes, in effect, money, and the government deficit new money. Thus the Fed can cooperate with the Treasury to, in effect, print money without limit. (Of course the printing presses do not literally run faster to create new currency; instead demand deposits (checking accounts) are created.)

On Federal Reserve Notes is printed the blasphemous sentence: "In God We Trust." God created the heavens and the earth, but the Fed in combination with the banking system and the borrowing public creates money. God has nothing to do with money, and in the olden days that phrase (which I find offensive) was not to be found on our currency and coins. Faith in the Fed--and nothing more--is what stands behind money, because there is no gold or silver backing up our currency any longer.

Money is based on trust. The Fed has a tough job in that it needs to create enough money to avoid credit crunches but not so much that the dollar goes the way of the Mexican peso over the past sixty years. I think that ultimately the Fed will lose the war against inflation because it will be fighting the recession/depression brought on by Peak Oil, but that day has not yet come.

Don Sailorman,

Was the last tme the Fed wrote off loans during the collapse of First City National Bank of Houston in the mid 1980's? At any rate, its very rare.
Bob Ebersole

I don't recall the details on that one. The big point is that if it wanted to, the Fed could lend money using brass spitoons as collateral and then write these loans off when a bank failed and could not be merged with a solvent bank.
Never again is the Fed going to allow a cascading series of bank failures to contract the money supply. Thus any liquidity squeeze or credit crunch can be and will be contained. We'll never see another situation of a run on banks; there is no way the Fed will ever again allow anything resembling the financial collapse of the Great Depression.

So, in light of what you said, do we really have a "free and fair" marketplace? Is our market free of partisanship? Does the Fed publicize all occasions where it intervenes in the "normal" market processes?

Bernanke has done an exceptionally good job of "open information" at the Fed. To prevent market manipulation from secret "leaked" information, some deliberations are quite properly kept secret for a period of time, but eventually all minutes of meetings go into the public domain. It is not in the Fed's interest to do things in a sneaky or underhanded way: The bright light of publicity is always shining on what the Fed says and does.

Insofar as is humanly possible, the Fed does act in the public interest and it does its actions in daylight; it wants its intentions and actions to be understood and publicized.

I have the highest opinion of the personal characters of the members of the Board of Governors of the Federal Reserve System. What I foresee is a Greek tragedy for these fine people who will eventually be forced to create inflation and then more inflation to mitigate the effects of Peak Oil. Sometimes the very best people, people of the highest integrity, can be forced by a situation to betray their trust.

We trust the Fed to keep the dollar from eroding in value more than two percent per year. At some point in the not too distant future, in my opinion, the Fed will be forced to choose between depression and a sharp upward move in the rate of inflation. The Fed will do what it takes to prevent recession spiralling downward into depression.

Now monetary policy is not a good tool with which to try to deal with the effects of Peak Oil. But monetary policy is all that the Fed has. The government has fiscal policy, and that will be used too; I expect to see deficits as a percentage of GDP to rise to levels not seen since World War II.

But I am not a doomer. Even hyperinflation does not destroy real assets, does not destroy real skills. To a large extent, the U.S. is a wealthy nation because of accumulated real (tangible) capital and also human capital of knowledge and skills embodied in people. Peak Oil, in my opinion, is going to lead to rates of inflation not seen in the U.S. since the Civil War, and I expect the dollar to equal the Mexican peso in value once again. But none of this implies doom for and destruction of the real economy.

God, dear God, in God we trust, I hope you're right!

The FDIC gets involved and the Fed hands it off to them.

The point of the liquidity injections is to keep good banks solvent. I don't know about the rest of you, but my money sits in banks and I'd rather not lose it on a "daily reserves" technicality.

I really think a lot of people are looking for an issue that simply doesn't exist. Banks lend billions to each other EVERY NIGHT day after day. The Fed is a bank. It also lends money to other banks. Usually not everyday, but it can. It does this so that my check doesn't bounce. And they can take a duck as collateral as long as the duck is investment grade and has a value.

LIBOR - London Inter Bank Overnight Rate

What the Fed does NOT have the power to do is to do all of the above and then ALSO prevent the US dollar from taking a crash dive. I don't think that there are many people that will be fooled by standing on 5.25% while these monetization ops are going on.

But all of the world's central banks are pumping like mad. Every major central bank. If this goes on we're going to get global massive inflation, maybe even global hyperinflation if it spirals out of control.

What the market is trying to do is kill the bad credit in its midst. This is a contraction. This is what the market has done historically when faced with bad credit. But the Fed is not letting it contract because the last really big contraction (1929) scared the pants off these guys. They are literally terrified of that, leading to what Don points out - the Fed is the lender of last resort.

They think they can regain control (of the financial system) even at the end of a hyperinflation but they are terrified that they cannot regain control after a deflation. This is their motivation, yet even still the market is trying to deflate which leads me to believe that Ben and friends are going to have to pump even harder which should make the next 12-24 months really really really interesting on the inflation front. Either that or all this new liquidity finds a new sucker bubble into which to get sucked.

"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone

Hmmm...perhaps this explains Rove's early exit from the sinking ship. I really believe it is a sign that they are going to abandon Bushie before it gets truly nasty. Look for Cheney to have a long stay at the hospital starting in the near future....another by-pass surgery or something that requires he leave his position.

>My understanding is that in it's history the Fed has only accepted TBills as collateral from banks needing these cash infusions. Last week, the Fed accepted the CDO's and mortgage obligations that the banks are having difficulty finding buyers for.
If that is correct, the Fed essentially took the toxic mortgage investments off the banks books and gave them $$.
The US taxpayer foots the bill for the toxic investments by way of a depreciating currency while the banks and institutions enjoyed the profits in the past years.
The key question is: what did the banks have to provide as collateral during last weeks Fed interventions?

They did not! They lent out money (with interest charges ~5.25%). I do believe that over in Europe some toxic financial assets were sold off to gov'ts (bailout). Europe has inject about a $250 Billion USD so far. To the best of my knowledge, No US gov't funds have been used to bail anyone out.

There are some large hedge funds in the US (Citadel) that have been buying up the assets of liquidated hedge funds. I assume that they are trying out Richard Rainwaters strategy to turn millions into billions. Although I seriously doubt they have much success.


The debt the Fed purchased was higher quality than is being described.

Here's a Bloomberg article with a lot of details:

Here's a choice quote:
The Fed accepted mortgage-backed debt issued or guaranteed by federal agencies, so-called agency debt and Treasuries as collateral for today's repos.

Federal agencies probably means Freddie and Fannie. And their guidelines keep most sub-prime and border line borrowers out of their portfolios (still a lot of risk here, but it's not like the Fed is accepting sub-prime blocks of mortgages).

As well, the Fed regularly does repos with mortgage backed securities, just search this link for "mortgage" (the link is the last 25 transactions of the Temporary Open Market Desk of the New York Fed):

The real difference was the volume of repos.

No, they don't buy stocks. What they do is lend banks money for a short period against which the banks have to offer something as collateral.

Normally the Fed would only accept things like US Treasuries as collateral. What is new about Fridays actions is that the Fed accepted CDOs and MBS as collateral, lending money at the papers face value when it is, in reality, worth nothing.

The Fed can't fix the problem by lending people ever more money. The problem isn't that the banks are illiquid, it is that they are insolvent and that is something the Fed can't fix.

Those CDOs aren't worthless, its just hard to determine value. If I'm reading it correctly they've(hedge funds) taken to swirling various levels of risk into single instruments and calling that hedging, rather than packing prime /w prime and crud /w crud ... so now the bad stuff is everywhere, in unknown quantities, and those who expect to buy high grade investments are sitting on their hands.

What did the Fed take on? We don't know but one would assume that a sucker buyer trying to stop a panic got saddled with a higher amount of crud than the average.

Its going to implode, I just hope its a controlled implosion like 1987 rather than an ass over teacup detonation like 10/1929.

I think we can assume that the best case scenario will merely leave all of us working stiffs a wee bit poorer. That's the best case...

See! Fraud. Big Lender Fraud. Boiler room operation fraud.

"Eager to keep up loan volume and generate sales, the two groups allegedly colluded to falsify loan documents by beefing up income and lowballing outstanding debts. And some suits allege that lenders perpetrated the fraud on their own, even deploying teams of employees that resembled boiler-room operations. In some cases the lender fraud appears to have involved forged signatures and other deceptive practices."

Don't you dare bail these F*****rs out!

I would rather have the Greater Depression for the next 10 years than see these ----- get bailed out. Ahhhrrrrggg!


Hmmm, presents a course or action


"Israeli media reported on Monday that Syria has acquired an array of advanced Russian-made anti-aircraft missiles as part of a military build-up ahead of a possible war with the Jewish state.

Syria currently has "the densest anti-aircraft deployment in the world," Israel's mass-selling Yediot Aharonot daily quoted a military source as saying.

"Syria has purchased from the Russians the world's most advanced surface-to-air missiles. This is the last word in plane interception technology."


"Israeli media (Jerusalem Post) also reported on Monday" that Syria fears an attack from Israel and has cancelled military excersizes so as not to give Isreal an excuse to start a conflict.

Very complicated web we've weaved in the middle east. By "we" I mean all of us, not just the US or whatever your personal least-favorite character in this global charade.

Rove’s August Surprise

It’s 7:58 a.m. Eastern time, and Karl Rove’s exit from the White House emerged several hours ago in a Wall Street Journal column titled “‘The Mark of Rove.’”

At first it would seem an odd choice, especially since the headline fails to divulge the huge, unexpected news. But also because identifying his mark on any given news story or policy is never this easy for those dedicated to Rove speculation.

In confirming the exit, Deputy Press Secretary Dana Perino said it was not clear how he would be replaced. “It’s a big loss to us,” she said. If anyone on the White House staff is irreplaceable, it would be the man described in The New York Times this morning as “the midwife of Mr. Bush’s political persona itself.”


This is only a speculation! Is Rove about to get indicted over perhaps Valerie Plame and they are throwing Karl over the sleigh to the wolves?
Bob Ebersole

Bob, I figured that Cheney and/or Gonzales would hit the exit prior to Rove. Must be much more to this story than is being reported at this time...or, ever. I believe that the Plame civil suit against various figures in the administration has been dismissed...could be wrong about this.

Hello Oilmambob,

My speculation: the fix is in-- at some point in time: Pres. Shrub gives the full Pardon so Rove is free to work in the meantime with the next Presidential topdog--> Hillary, Obama, Romney, Guilani, whomever. Then the Quid Quo Pro returns for Bush...Arrrghhh!

Bob Shaw in Phx,Az Are Humans Smarter than YEast?


Bush can't give Rove a pardon until January, 2009 when he's headed out of office. Its a tactical thing.

If rove (or whoever) takes a pardon, that person has admitted he's guilty and is still on the hook for civil suits such as Valerie Plame's. She could get a summary judgement on her suit. They need an indictement first, as otherwise which set of crimes is he being pardoned for?

Also, If Rove or whoever has to testify at a congressional hearing or a trial, they can't take a fith amendment right to not speak, because they have already been pardoned.

The last reason is it gives Bush and Cheney blackmail material to hold against Rove so he won't cut a deal and talk. It assures his loyalty.

This is the reason that Scooter Libby received a commutation of his sentence, not a pardon.They don't want Scooter testifying or writing a tell all book. The pardons will come in January 2009, IMHO..

I also'd like to add that this is my conjecture, I don't have an inside line to the Whitehouse and I'm not an expert in criminal law. I value your opinion, and would like to hear your good guesses.
Bob Ebersole

Haven't you paid one bit of attention to Fitzgerald and what he has said? There are no more indictments coming. There will never be an indictment for leaking Plame's identity. The only crime in all of this was Scooter perjuring himself and that's the only crime that Fitzgerald will pursue (and has pursued). The rest is all water under the bridge. Plame's own autobiography has been censored by the organization that laid the initial complaint - the CIA. And given what they censored, I don't see how her lawsuit against Rove, Cheney, etc., can ever happen either.

"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone

from Ben Stein's NYT article this weekend

The total mortgage market in the United States is roughly $10.4 trillion. Of that, a little over 13 percent, or about $1.35 trillion, is subprime — certainly a large sum. Of this, nearly 14 percent is delinquent, meaning late in payment or in foreclosure. Of this amount, about 5 percent is actually in foreclosure, or about $67 billion. Of this amount, according to my friends in real estate, at least about half will be recovered in foreclosure. So now we are down to losses of about $33 billion to $34 billion.

The rate of loss in subprime mortgages keeps climbing. In time, perhaps it will double, maybe back to $67 billion. This is a large sum by absolute standards, and I would sure like to have it in my bank account.

But by the metrics of a large economy, it is nothing.

CNN rousted Lou Dobbs out of bed this morning at the crack of dawn to talk about the mortgage crisis. He called for more regulation of the mortgage industry, then said nothing going on right now should be of any concern to the small investor. Small investors aren't in hedge funds, so they have nothing to worry about.

And stocks are up sharply at open. Retail sales came in better than expected. Party on...

When I read that Ben Stein article yesterday, I noticed his overt omission of hedge funds, CDO's and other derivatives in the article and in his numbers. Then, I concluded that he was trying to play a role in calming the markets. Bill Gross stated last week on "Nightly Business Report" that this is a "between the ears" problem. In other words, fear could fuel a crisis, calm could help prevent a crisis.

It's hard to believe that Ben Stein is a stupid as he sounds in that article. And I don't. I don't believe this guy can't see a connection between housing problems and the stock market. I don't believe he doesn't understand why markets are reacting as they are. He's a shill. Don't believe a word he says.

I clearly remember him yapping up the benefits of invading Iraq back in 2003 and what a war monger he was. Although he now admits that mistakes have been made. I can't believe the NY Times is such a sucker for a news plant like this. Didn't they learn anything from getting played by Rove prior to Iraq.


Dear Mr. Stein, you don't know what you're talking about.

Misdiagnosed Economic Insanity

How big is this thing? Well, Jim Willie CB of the Hat Trick Letter figures that the total cost of the subprime/collateralized debt obligation fiasco "is an initial figure of $2 to 3 trillion in bond losses from CDO plus MBS bonds at a minimum. Match that with $4 to 6 trillion in home equity losses at least. Included in my estimate is the collateral damage of another $1 trillion in losses to high grade mortgage bonds and corporate bonds."

The last thing I remember before blanking out is that this totals to about 80% of GDP! Or more! And even now I still feel kind of woozy about it! Losses suddenly totaling 80% of GDP? Yow!

In fact, Bill Bonner at DailyReckoning.com reports that already "U.S. stocks have lost more than $1 trillion in value in the last three weeks - an amount equal to about 8% of annual GDP. Goldman Sachs - the alpha business of Wall Street - has lost 20% of its value."

Hmmm, who to believe Ben Stein who has worked for US Presidents or The Mogambo Guru from the Daily Reckoning..hmmmm

Who To Believe? The Ben Stein who loves his Cadillac ...


... or the Ben Stein who noticed that the middle class is getting hammered?


Indeed, who to believe as we attempt to prevent, minimize or coverup one crisis after another.
China’s "nuclear option" to dump the dollar is real
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan Administration

But the President says the Chinese won't do us,,err ..it.. to us


"China’s "nuclear option" to dump the dollar is real"


Great counterpoint,, an unnamed source in a Yahoo article.
Thanks for advancing the discourse.

I think I saw this in the Financial Times that two (named) Chinese think-tank types talked about the "nuclear option". And that the Chinese government sometimes uses these think-tank types to "send messages" to foreign countries. I don't have a link, but it was in the past few days.

Yes, that's how China works. That's why you'll have "Chinese officials" who say surprisingly alarming things, only to be contradicted by other Chinese officials the next day. It's their way of sending warnings without being too direct.

But this warning has no teeth.

To quote the Treasury Secretary:

"And then another point I've made for some time is the Chinese are the second-largest holder of U.S. Treasuries, but what the Chinese hold in treasuries is less than one day's trading volume in treasuries. We have a broad, liquid market."


I've held US Treasuries in the past. If they suddenly fell to 50 cents on the dollar because of Chinese self-nuking, it would be the greatest financial opportunity of a lifetime.

As we now know, the central banks of the world would flood the market with emergency liquidity so that those incredible bargains could be snapped up. Turmoil would resolve in days. And the Chinese people would be substantially poorer with their leaders looking silly.

For the record one of them He Fan, an official at the Chinese Academy of Social Sciences.

'"Chinese officials" who say surprisingly alarming things, only to be contradicted by other Chinese officials the next day'

We have a winner! Financial Times yesterday (pg 4): "China affirms dollar's global reserve status".

Leanan (she or he -- that issue's been covered already.) wins the TOD "predictor" award -- which includes the right to strut around (using html tags only) and generally pronounce "I told you so!" (for about a day before we all get tired of it, or until some other prediction goes sour).

"$4 to 6 trillion in home equity losses"

This might be true, but it is unrealized losses -- equity that appeared in the last few years and is now disappearing. This mingling (confusing) of two separate concepts is typical of fringe websites and perma bears.

Sure enough, but many are banking(literally) on the gains (savings) in their houses. The remaining personal savings is negative.

This is one of those Big picture moments...it isn't the above absolute values (FED can attest to this), it is about the fallout.

On the personal side, if people lose what savings they *thought* they had, their behavior will change *significantly*, and that IS the problem.

Unfortunately, all the money the FED drops in will assist the funds and banks, but will do LITTLE to help the homeowners.

This isn't over...it is just beginning.

A quick search turned up this: "According to the National Center for Policy Analysis, some 40 percent of homeowners have no mortgage on their homes" (of course there will be varying amounts of equity in the remaining 60 percent). This percentage appears to be somewhat stable over time. So people may go back to saving in the usual way rather than letting their house do it for them. I don't see a crisis in that.

The crisis mongers, like Daily Reckoning, always end up comparing changes in asset values (U.S. assets are about $111 trillion) with annual income (GDP of $12 trillion). This just doesn't make sense. Every wiggle in the market looks big compared to annual income.

Also, the personal savings rate calculation has well known flaws.

It is currently unrealized, but what happens when the owners need to sell for whatever reasons or refi to cover other debt taken on, i.e. credit card, in order to meet monthly expenses? That's when those losses become very real.

GDP is less than 10% of the total amount of money that changes hands every day. The overwhelming percentage is in the securities markets. If the dollar amounts traded daily were made common knowledge the working people of America would scream about all these untaxed sales while they can't escape taxes on both their earnings and purchases. A 5% tax on securities sales could replace all federal, state and local taxes as well as finance universal health care and needed infrastructure improvements.

First off, gains on these transactions are taxed. Second, I really doubt that you could fund anything with such a tax. Part of the value of a stock is that it can be sold at any time for market value with very little transaction cost loss. (it is liquid) If you lose 5% of the value of my investment right off the top, and another 5% when you sell, plus taxes on your gains, very few stocks would make any sense to purchase. If you do purchase it, you would only do so at a steep discount to bring your expected yield back up to where it needs to be to compensate for the risk. The likely result, IMHO, would be that in the weeks leading up to the day the tax was to be implemented, the value of stocks would plummet, likely 50% or so. This would create a massive decrease in federal income tax paid as the losses offset other income. The few people left in the market would thereafter not sell very often, thus generating very little tax revenue. Thus, the bureaucrats well intentioned plan would create a massive economic crisis and actually decrease federal tax revenue at the same time. And the biggest losers would be the working class people who lose their 401k’s and probably their jobs. Don’t we have enough problems to worry about without intentionally destroying the stock market?

Clearly such a tax wouldn't work. What do you think about a Tobin tax?

There would be no other taxes under this concept. The overwhelming majority of stocks are held for the long term. 5% is trivial if a stock doubles in value after several years. In the meantime dividends would not be taxed. What you need to explain to me is why I pay 7% sales tax on a pair of socks from Walmart but little or no tax on stocks from the same corporation. Sales taxes don't stop people from buying socks and won't stop people from buying stocks, bonds, futures, etc if it looks like a good deal. With the elimination of the capital gains tax the motive for investment would increase. The elimination of taxes on labor will free up funds which the little guy could use to invest or just spend.
What's a Tobin tax?

Let's say a farmer sells his crop in the futures market, gets taxed 5%, and his profit margin was say 7%. He has a 2% return on investment -- maybe not enough to survive.

Taxes change behavior. In this case, I beleive a 5% transaction tax would completely change the "game." The tax would not only alter the value of securities, it would completely change investing strategies. The reason you pay tax on your socks is because your state and local governments deemed that to be a good way to raise revenue. 7% on top of your $5 pack of socks is unlikely to change your purchase decision. Now imagine a mutual fund pondering about a $1 billion stock purchase, and a 50 million dollar transaction tax, and another tax when they want to get out. It completely changes the investment decision... in a negative way. It prevents mutually benneficial transactions from taking place. I am all for reducing taxes... but the American public seems oblivious to the fact that in the long run, to truly reduce taxes, you must reduce government spending. In time, they will learn... the hard way!!

Why would the tax be applied twice to the same investment? As a sales tax the seller would be legally responsible for the tax.
How much money which the goverment spends for your benefit are you willing to give up. Be sure to include the tax advantages you may have that most people don't enjoy. Perhaps you could give up maintenance on that bridge you drive across every day? How about not having police protection or not calling the fire department when you need it? How about not having someone making sure the gas pump you use is accurate? Those who advocate lower government spending ought to start with themselves.

Ben it correct, it is a small number compared to the rest of the market.

wstephens missed some of the gold in Stein's piece:


This economy is extremely strong. Profits are superb. The world economy is exploding with growth. To be sure, terrible problems lurk in the future: a slow-motion dollar crisis, huge Medicare deficits and energy shortages. But for now, the sell-off seems extreme, not to say nutty.

Some smart, brave people will make a fortune buying in these days, and then we’ll all wonder what the scare was about.

But but but but the credit markets attempt to discount the future!! (i.e. take it into consideration) The number of elite technocrats that are peak oil aware grows steadily as TOD documents (including Mr. Stein, it appears). Peak oil didn't cause the mortgage bubble pop, but it's in many people's heads.

I used know a hedge fund manager who had a prior career in the credit markets. Latest word, he's still in the hedge fund biz 10 years later. I can verify that some of those guys are not nearly as flighty as a bunch of "Fast Money" traders. No matter how manic the relieved market may get, you can bet that risk is being appraised differently in some quarters and that the fundamentals are being scrutinized very carefully.

Even Stein knows in his gut, that the world is different.

"This economy is extremely strong. Profits are superb. The world economy is exploding with growth. To be sure, terrible problems lurk in the future"

This is important (to me anyway). In my business (financial) if someone is wrong for a year, they are wrong. Stein is saying that right now it's not a problem, but in the future we have problems -- whereas (posted above) the Daily Reckoning has been calling for unfulfilled calamity for years.

It was some time ago I concluded that the Daily Reckoning was beneath notice.

And I agree that if you are wrong on timing, you are wrong.
Consider Kunstler with his dow 4000 last year. Dude has a decent idea or two once in a while, but how much horse doey do you have shovel out of the way to get at it?

But I guess a lotta folks who no longer go to church still enjoy a good hell-fire sermon! At that craft, Kunstler is the artiste his name suggests.

Yes, but Kunstler will be right sometime in the near future [less than two decades], and it will be forever! To quote a well known Yankee catcher, "Prediction is hard; especially about the future".

James Gervais
Hope was the last evil to escape Pandora's box.

And quoting that same well known catcher...

"If you come to a fork in the road, take it."


"right sometime in the near future"

Thomas Malthus -- died 1834 (173 years ago)
Lester Brown -- first book 1963 (44 years ago)
Club of Rome -- founded 1968 (39 years ago)

from Wikipedia: "Malthus [in 1798] made the famous prediction that population would outrun food supply, leading to a decrease in food per person."

(edit to add)

How is it that everyone who predicts collapse finds that collapse will always happen within their own lifetime? It's never "collapse will happen 2 years after I'm gone".

'It's never "collapse will happen 2 years after I'm gone".'

I guess you didn't read Limits to Growth. You should try the real thing and not the smear campaign.

Jon Freise

Analyze Not Fantasize -D. Meadows

I would encourage all techno-cornucopians* to read Limits to Growth, and all doomers to read The Ultimate Resource.

Ideally, read both.

* And note, I don't think any regular TOD posters really qualify here.

Did "Limits to Growth" not imply the following (just like the critics say)?

* gold to run out by 1981
* silver and mercury to run out by 1985
* zinc to run out by 1990
* out of oil by 1992

And if "Limits to Growth" was so good and accurate, why was a "revised" version called "Beyond the Limits" published in 1993, and "Limits to Growth: The 30-Year Update" published in 2004? Clearly, there is something wrong with the mathematic modeling of resource constraints -- however sophisticated (including Hubbert's and others with which we are all familiar).

from the Wiki entry on "Beyond the Limits" (1993 - 14 years ago)

"Current crop yields can only sustain the world's population at subsistence levels, … while nonrenewable energy resources and fresh water supplies are dwindling, and greenhouse gases and other pollutants increase. But while the prognosis is disaster within decades if nothing is done, there are encouraging signs. Technology offers greater efficiency in energy consumption and pollution control, international response to the ozone crisis has been relatively swift, and recycling efforts are gaining headway. [However] … the conditions underlying limit overshoots--population growth and resource depletion in a finite world, for example--remain unaddressed in the corridors of power."

Already, we're seeing wind, solar, and (existing) nanotechnology point the way to the solutions. Scaling up is the next step.

The only way that these repeated predictions of non-sustainability can be accurate is to somehow predict that heretofore unknown solutions will not be found. There's no way to do that.

How did they justify out of oil by 1992 when Peak production was predicted for 1995-2005?

"You can never solve a problem on the level on which it was created."
Albert Einstein

Limits to Growth may have made some inaccurate predictions, or used false assumptions, but I think it would be a mistake to dismiss as unjustified apocalyptic doom-mongering. It is exactly because scientists have raised concerns about environmental limits that are fast approaching that we are seeing the technological and political trends we are being to see today.

That is, if Limits to Growth had never been published, and no scientist had ever persuaded anyone that certain limits were fast approaching, humanity would indeed be in a lot of trouble.

In other words, yes, we are smarter than yeast. Sure, we could do a lot better, but we are capable of genuine forward thinking and long-term planning for the future, unlike virtually any other animal species.

It is a good idea for scientists to do even simple mathematical projections -- sounding alarms. This has produced political results. And cost factors have produced economic and technological results.

There are unfortunately people still doing "unjustified apocalyptic doom-mongering" -- right here in TOD. They seem to me to be focused on 'the inevitable' and ignoring the technological solutions rapidly advancing.

Do you think all this (here in TOD) is producing some desirable result? Aren't past doomer inaccuracies watering down the message?

I don't think anyone can realistically judge whether TOD is producing some desirable result for society at large - but I will say that if it weren't for LATOC (which is most definitely unjustified apocalyptic doom-mongering for the most part), there would far fewer people aware of P.O. - including potentially myself. In that sense, it's probably "justified" as an effective means of spreading awareness, and I'm firmly of the opinion that the greater the awareness, the more likely it is that change and preparedness actually occurs. The idea of mass panic breaking out because everyone suddenly thinks oil is running out is whimsical at best, or at worst an accurate prediction of what might happen once oil really is close to running out, if nothing at all was done to spread awareness early.

"Actually, not only did this report never foresee the end of oil for 2000, but it didn't foresee anything else in a precise way. Its sole strong conclusion is that perpetual material growth will lead sooner or later to a "collapse" of the world that we live in, and that, even with very optimistic hypothesis regarding the development of efficient technologies to come, the ability to recycle or to save natural resources, the mitigation of pollution, or the initial stock of non renewable resources that we begin with (the high end of the bracket for the initial stock of non renewable resources was 5 times the known reserves in 1970, and, for oil, that leads to higher reserves in 2000 than what we really have today, given what we have consumed meanwhile ; I checked !), this collapse will happen before 2100."
What was there in the famous "Report to the Club of Rome" ? - Jean-Marc Jancovici

I used the word "imply" to try and get around the "precise" prediction problem.

Clearly the intent of these publications was to get people to worry about sustainability -- even though, say, the metals listed cannot ever be destroyed (they are atomic, so we will never "run out").

For these publications to repeatedly say that consumption within a fixed supply is un-sustainable isn't really enlightening.

No, but then the problem is that the losses on the underlying collateral may only be $33 billion BUT that collateral was taken, re-packaged, leveraged up and sold on and used as basis for even more leverage.

So that $33 billion loss suddenly balloons, via the miracles of modern finance, into Trillions of dollars.

That is the problem.

This is exactly right. In a downturn, losses will be magnified dramatically when financial instruments are highly leveraged.

To be honest, I had no idea that the total subprime market totaled 10% of GDP. That's impressive, even if only a small percentage is going belly up.

Goldman and other key investors have just pumped $3 billion into a $3.6 billion fund- Global Equity Opportunities-to prevent its collapse, which gives you a sense of the level of loss exposure you get from a high level of leveraging.


Bull Crap. Wait till the ARMs Reset. We haven't even got to this crisis yet. You're like the story about the man falling past the 30th floor window who is asked how he is doing, who replies, "ok, so far".

I'm puzzled, If it is that small, why the Fed/Central banks need to intervene? The amount of liquidity injected last week is already three times this amount!

It's not that hard, really: all "real" assets have been used as leverage to invest many times what they are worth. Because of this, losing $60 billion might have to be multiplied by a factor of 100.

Mike Shedlock writes about the Goldman Sachs Alpha Fund debacle, and compares in to the 1998 LTCM collapse

Genius Fails Again
Roger Lowenstein explains how Long-Term became arrogant due to its success and eventually leveraged $4 billion into $100 billion in assets. This $100 billion became collateral for $1.2 trillion in derivatives exposure!

The losses at LTCM are trivial compared to today. The Fed would not bat an eye over a $4 billion hedge fund failure today. In Who's Holding The Bag? I reported "Notional amounts of interest rate derivatives outstanding grew almost 14 percent to $285.7 trillion in the second half of 2006." Look closely at that figure. Yes, that is trillion not billion. And that numbers was from 2006. It is higher today. Is it any wonder the Fed is spooked?

Inquiring minds might be asking "What's behind the explosive use of derivatives, CDOs, LBO, computer trading, massive leverage, and enormous faith in poor models including implicit trust in automated scoring algorithms that supposedly could measure risk of default but obviously failed to deliver. The answer is simple: the Fed. Central banks are enablers of risk. Greenspan himself had high praise for derivatives and encouraged massive use of derivatives, adjustable rate mortgages at the bottom in interest rates, computer modeling and other such nonsense. And when anything has gone wrong the Fed has always been there to provide liquidity (see Bernanke Panics & Gold Responds).

But there comes a time when all such models break down. We saw it with LTCM, we see it now with Moody's, Fitch and the S&P, and we see it again with Goldman Sachs's Global Alpha quant fund that simply cannot trade. There is one more model that's going to fail as well. That's the model that thinks the Fed can keep engineering bigger bubble after bigger bubble to bail out the markets. That model is on the verge of collapse right now and that is what has nearly every central bank spooked.


I had a tenant notify me last night they were approved for a
100% loan on a house. First time buyer, no credit and no money. The party continues on ...

Some states and the Feds do help first time buyers with low-interest loans and subsidies on their monthly mortgage payment.

Perhaps that is what your tenant had happen.

No Fed money here, conventional through a mortgage broker.

Boby, I continue to receive offers by phone and mail for refinance deals on my home. The number of offers seem to have decreased recently...probably will not be able to heat the house for the entire winter with saved junk mail offers this year.

My eMail to Gen. Kelley

Former Commandant of the USMC and current energy policy lobbyist

Subject: Strategic Implications - CERA vs. ASPO

Dear Gen. Kelley,

There are profound differences in the "ideal" strategic response to American and world oil consumption depending upon whether CERA's vision of the future world oil production is correct, or ASPO's vision is correct (and even ASPO may be too optimistic).

Two specific examples.

Because I believe that world oil production will shortly start falling (if May 2005 was not the world production peak for conventional oil) and world oil exports will fall much
faster than world oil production I differ from SAFE and Cassidy on two policies.

1) I oppose drilling in ANWR and offshore in restricted areas for the moment. This oil needs to be saved for later, for essential uses such as agriculture, food distribution,
garbage collection, medical care and so forth.

2) I favor an ever increasing gas tax. My suggestion would be a six month delay and then increasing the gas tax by 3 cents/gallon/month for 25 years (inflation adjusted
quarterly). Funds to be rebated via reduced payroll taxes and Medicare premiums. This would provide maximum warning to change and minimum actual pain at the pump and minimum
(not certainly not zero !) pain in household budgets (take from one pocket and put back into the other).

If I believed CERA projections, I would oppose both policies. Thus, determining "who is right" is a critical strategic decision.

I again urge you to attend the ASPO-Houston conference.


Several highlights.

T Boone Pickens (He recently announced $6 billion investment in Texas wind turbines (4 GW) and chain of compressed natural gas filling stations). His money is certainly where his mouth is regarding Peak Oil. He has bet on Peak Oil and tripled his money already.

Matthew Simmons (Houston Oil Investment Banker and author of "Twilight in the Desert" an detailed engineering examination of Saudi oil reserves that shows them to be significantly overstated.

Stuart Staniford (with others) has expanded on Simmons work in considerable detail for North Ghawar, the source of about 40% of Saudi production in 2004 using many small tidbits of public data (mainly old engineering papers, but also pre-1982 data and one graphic from an oil service firms technical advertisement boasting of work they did on Ghawar).

The conclusion is that the different sections of North Ghawar will water out in the next 1 to 5 years at 2004 levels of production. His analysis is the best analysis I have seen on any subject in my life. Would that the CIA were half as good !

Jeffrey Brown (independent geologist currently bringing new 1,000 barrel/day field on-line) has a very interesting insight; world oil exports are likely to fall much faster than world oil production.

The reason is that high oil prices stimulate the economies of oil exporters and their domestic consumption increases significantly, squeezing exports. Russian oil production
is up, but their exports are flat due to this effect. Putin will take care of Moscow taxi drivers before worrying about USA SUVs. And Saudi will fill the tanks of their many new
teenage drivers before filling the tanks of Americans and others.

Jeffrey is looking at two cases. The worst one foresees annual decline in world oil exports of -5% to -8%/year and I fear that is the more accurate estimate.

And I will be speaking on building non-oil transportation alternatives, mainly electrifying and expanding our freight rail lines and building lots of Urban Rail.

ASPO is run by a group of unpaid professionals that devote thousands of hours/year because of their sense of public duty.

Best Hopes,

Alan Drake

Hello AlanfromBigEasy,

Clever idea--kudos! Jay Hanson, who has a very enviable prediction track record, has long predicted a military style command economy to wring out the last of the detritus MPP, and newsevents seem to increasingly point in this direction.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

AlanFromBigEasy, excellent letter, thanks for posting it. Have you considered sending a cc to General Odom? Odom has an excellent mind and has posted numerous articles on the net about what should be done in the ME to achieve the best outcome possible in that arena. I do not know if Odom has written on the topic of PO but he would be an excellent man to have inquiring and writing about the subject since he has so many contacts, in and out of the military.

Kunstler's at his finest this morning in his ClusterCoitus Nation column:

What you're seeing now is a simple matter of financial sector players trying desperately to evade the consequences of their own actions.

The fake wealth generated by the synthetic securities they created is now being recognized for what it is: a swindle.

The hallucination is over.

The collective denial that supported that hallucination is dissolving.

The losses are become manifest.

The Fedz are running outta paper and electrons.

The endless critics of the ethanol "scam" please take note.
Kuntsler describes a real scam and even calls the Fed action a bail out of a swindle. This scam is many times any supposed ethanol scam. Where are the cries of outrage for subsidies to banks and charlatans on Wall Street?

Obviously, you are not reading the other posts. These scammers in the Financial markets need to eat their bad loans. No Bailout. Ethanol kills. Food acreage that would have grown food sold to starving nations or charitable organizations to provide to starving nations, instead grew corn for the ethanol market. Ethanol is being sold to the highest bidder, thus shipped to China, rather than being used to lower domestic gas prices as it's proponents claim. Food producing acreage converted to ethanol producing acreage has caused a dramatic increase in food prices without any measurable savings in fuel costs. Ethanol IS a scam as well.

It's worse than a scam Cid, it's a crime against humanity. They should call it Zyklon B-iofuel after another substance implicated in a holocaust.

Triumvirate of collapse - Economy, Ecosystem, Energy

Personally I think that rather then bailing these investment bankers and hedge fund thieves out they should declare open season on them with no bag limit.

If you consider that the whole enchilada is costing me nothing other then inflation, you can imagine how other middle class people should be feeling about now.

GM is thinking about renting the battery pack:

GM eyes electric car initiative

Justin Ward, a Toyota engineer, told a research conference last week that lithium-ion battery technology, "hasn't proven that it's ready for the automotive market yet".

The two companies are pursuing different lithium-ion chemistries. Toyota uses nickel cobalt aluminium oxide, while GM has turned to a newer nano-phosphate technology.


Chevy Volt Running Costs: Pay No Attention to that Plug Behind the Curtain

... an average owner would pay about $25/month for gas, compared to $125 for a traditional Malibu. The battery pack would rent for about $100/month giving a similar total operating cost. Oops! Unless we're missing something, Weber forgot the cost of plugging in to recharge the battery. ...


On the Chevy volt battery renting:

Maybe they are pricing in the cost of gas in a couple years...then the battery pack renting at $100 will seem cheap. (Plus they may be counting on some Green/GW willingness to pay)

Say...gasoline doubles or more. Great deal...plus electricity will subject to less chance of shortages (or at least you could generate some yourself).

Fly on the wall stuff...they may be becoming more peak oil aware everyday.

It will be interesting to see how GM attempts to market a 'battery lease' or 'battery rental' to the Merkin People. Perhaps GM will start by leasing the 'Energizer Bunny,' that most irrating of all ad campaign symbols, and have the bunny banging the drum for Li-Ion? How will GM make it simple enough for Joe Sixpack to understand in a 30 second spot in the middle of a NFL playoff game? Of course, 30 seconds of undivided attention is a long time for some folks.

Quite ingenious. GM must have been looking enviously at oil companies and the fact that people need to fill up their cars every month, month after month, and all that money goes to oil companies, not GM. The oil comapnies are making all that money off of our product! So they must have been wondering how to get that income stream to come to them rather than Exxon. So, if they ever get the batteries to work, look for the automotive industry to become the largest global warming boosters and supporters of massive gas tax.

That aspect occurred to me, but I also wonder if they are uncertain about battery life. If Consumer Reports finds that owners have to spend $5,000 on batteries every few years, buyers will shy away. That would be worse than replacing a V-8 engine every year. But if owners are leasing the battery, it can be replaced every so often with less adverse publicity.

Battery life is what concerns me most about EVs, followed by cold weather performance. The Lion prices are a lot lower than the Tango or Tesla, and I can make my weekly commute with a 200 mile range, but I wonder how long the batteries will last.

It's sticker shock/upfront costs issue, I believe.

Choose one:
GM Elektryk with 200 mile range for $35,000


GM Elektryk with 200 mile range for $14,000 (plus $150/mo).

Which one looks more palatable? Which one are people more likely going to be able to get a car loan for? It's like the sticker shock on PV, you're not paying in increments but for the entire generating lifespan all up front.

I was wondering about another variation.

Suppose you could have a car that had sufficient watthours for daily life, and you just rented extra battery capacity for a weekend trip, or longer excursion to take? This might take the form of a Battery Trailer, but I can see the safety issues forming around this one..

The other model I keep chewing on is where you and your local 'tribe' have a bunch of vehicles among you.. where one is still a long-range gas vehicle, most are local electrics, and maybe someone has a van or pickup. Yeah, I know. That means dealing with other people, even GASP! having to make some compromises.. but who knows, maybe we can learn that again.


Merkins making compromises? Havent you heard?...Cheney said that the Merkin Way Of Life is non-negotiable! That means we dont have to make no stinkin' compromises! We dont have to talk to nobody!...And, if you happen to live in Florida and somebody has the nerve to try to talk to you, you can leagally shoot them! Remember, we are the deciders!

No doubt. I just have to wonder how many of us he actually is speaking for. Of course, if he's as hypocritical as GWB and Papa, he's already stocked up on Solar Panels, and well invested in windpower, but he'd poke out his own eyes before ever recommending that course to his countrymen.. Grrr, lemme bite him, just one, rabid love nip!

standardize batteries, and you have this for sure.

leave it open to finagling by every market power, and have fun shooting yourself in the foot.

"Suppose you could have a car that had sufficient watthours for daily life, and you just rented extra battery capacity for a weekend trip, or longer excursion to take?"

I've thought of that too. Something like the "Long Ranger" range extending trailer from AC Propulsion.


Just drive on down to U-haul or Avis or something and rent one for extended trips.

Hello TODers,

These Li-On batteries may end up being at lot more expensive than anticipated. When googling around on potash, I came across this article:

...But I do know that lithium-ion technology looks like the anointed successor to the nickel-metal hydride battery that powers present-day hybrids. That lithium has to come from somewhere, and more likely than not, that somewhere is Chile.

According to the U.S. Geological Survey, fully 75% of the world's lithium reserves are chillin' in Chile. The world's largest producer is Chemical & Mining Company of Chile (NYSE: SQM), or Soquimich for short. Like its large shareholder, Potash (NYSE: POT), Soquimich is a large fertilizer company. That angle alone is enough to make the company worth investigating. Shares of fertilizer companies like Potash and Mosaic (NYSE: MOS) have been absolutely ripping over the past year. The rosy demand picture for lithium just makes Soquimich that much more intriguing.
SQM has rocketed from roughly 20 to over 150 in 4 years.

Don't you just hate market monopolies in vital depleting commodities? Isn't that a violation of infinite growth in supplies per economics?--where is the cheap substitute? =(

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

The precious metals market has been booming, (along with the non pm metals)

the metals market probably wont hold up more than another 6 months (stocks of lead, rubidium, nickel, copper and some others) are due to RUN out entirely within the next 6 months, (yearly demand is much greater than yearly supply, stocks will be run to zero within 6 months)

then DD will occur with metals, and the market burps!

Sources, please?

I'm certainly aware that copper and other inventories have been hovering around record lows, but I wasn't aware of any serious concerns about them running dry: it's not like there's any shortage of resources in the ground.

If it really did look inventories would run dry in 6 months, the prices would be through the roof.

Xcuse me, fellow. You ought to know that any gloomy prediction doesn't need any proof, 'cause it is a truism in itself. Metals 'r goin down, mister, and if you don't buy this, then sir, you're an heretic of the Great Truth. Like Pilates, you are put before the Path of Enlightment and can't even recognize it! Acolytes, prepare the furnaces!

So Joe goes to the dealer, or online, and purchases a car that runs on a battery but the battery does not belong to Joe. Joe has his auto paid off but loses his job and can no longer make payments on his leased battery. GM sends out the battery repo team to get Joes battery out of his car. Joe has taken the precaution of removing the GM battery and hiding it in some secure location. Does GM have a remote control that will render Joes battery inoperable? The only way that I can see for this system to work is for GM to maintain control of all the batteries that it leases to prevent Joe from stealing someone elses battery after his is repoed. If not, stealing batteries would quickly become a growth industry.

... and then GM sends the loan-collectors to quietly take John's car. Just try to miss a couple of car payments and you will see how it works.

Has this "Think City" electric car been discussed here?


Think an electric car has a chance in todays market? In the 1990s General Motors spent nearly $1 billion on their EV1. Ford pumped about $150 million into an electric car known as "Think" but sold it 5 years later. As Think was in bankruptcy, Norwegian entrepreneur, Willums, picked up Think, its factory, and Ford's nearly completed design for a new-model "City" for the fire-sale price of about $15 million. His company, Think Global, has raised $60 million in funding to roll out a new and improved version of the City this fall.

$43 million battery deal with Tesla Motors
Willums, whos experience is in solar panels, went to a brainstorming session at the Googlplex in California. Google billionaires, Sergy Brin and Larry Page, had test driven earlier versions of the Think. They are also major investors of another electric car, the Tesla. Tesla will sell customized batteries to Think Global. The group also came up with these radical ideas:

Sell the car on the internet.
Never build a car before it's paid for.
No car showrooms or sales force.
Sell the car but lease the batteries.
Every car will be Internet and Wi-Fi enabled.
Components will be open sourced modules.
Assemble cars locally (no exporting).
Use the car's batteries to feed the electric grid during power shortages.
Car sharing companies like Zipcar and Flexcar allow trying before buying.
Batteries are separate.
By taking out the cost of the battery ($34,000) the "City" car will only cost from $15,000 - $17,000 in the United States. A "mobility fee" of $100 to $200 a month that might also include services like insurance and wireless Internet access seems to be part of the business plan. Managing a two way exchange of electricity with the electric grid is another possibility. Thousands of cars plugged into the electric grid could be tapped during energy demand spikes. PG&E plans to buy batteries that have outlived their usefulness for transportation but still retain capacity. The utility will install them in the basements of office towers and at electrical substations to store green energy produced by wind farms and solar arrays.

JWS, Dean Kamen is involved in this project as well:


It sounds like exactly the sort of thing you'd expect from a Berkeley think-tank. Meanwhile, the Chinese are manufacturing $300 electric bicycles by the tens of millions.

Sounds good. Perhaps they are building them with recycled metal from the 100,000s of manhole covers that are stolen over there ;-)

"You can never solve a problem on the level on which it was created."
Albert Einstein

According to the "Chrysler Chemist" in the story at top, OPEC is hindering biofuels by simultaneously producing too much of- and charging too much for- their fine product:

Finally OPEC came under fire for "needing to support high production rates at high prices."

Perhaps he was misquoted.

Besides, there is some bickering within the biofuel family:

Renewable Diesel: Biodiesel' s Nightmare


screw Chrysler and OPEC, they will both fold

biofuels can't work when doing crops for oil, however some waste products can go back to oil/oil replacements.

Net Energy a Useless Metric

The problem with net energy, says Dale, is that it makes an assumption that all sources of energy (oil, coal, gas etc) have equal value. "This assumption is completely wrong - all energy sources are not equal - one unit of energy from petrol is much more useful than the same amount of energy in coal... and that makes petrol much more valuable," says Dale.

Would someone please comment. This heightens confusion.

He is a biofuel supporter so of course he is against the use of net energy.

Biofuel has low net energy and so needs a heat source, which is either coal or natural gas.

Here in North America natural gas has peaked and increased consumption must be imported. So using NG to create ethanol is just trading oil imports for NG imports. So what is ethanol? Imported diesel, plus imported NG made fertilizer, plus imported NG distilling to create, ta da, renewable *all-american* ethanol. This is the kind of thing that happens when your media is "fair and balanced" instead of "true".

Oh, and if we switch to coal for the ethanol heat source, then the green house gas benefit goes away. If you believe the Energy Watch study, then coal energy has peaked as well. So increasing coal use for ethanol will cause energy contraction elsewhere.

I hope the farming community sees this for what it is, a big Christmas present from the American taxpayer. I hope they are using the extra cash to pay off debts and prepare for peak oil (PV and earth sheltered houses etc) and not leverage up into foreclosure territory.

Jon Freise

Analyze Not Fantasize -D. Meadows

Thank you for calling him on it.

Prof Dale is the recipient of the prestigious

Halliburton Outstanding Young Faculty Award

That says it all right there, like Enron Field or something.

That article is despicable. Just another apologist academic among the optimistic (or self-interested, take your pick) head-in-the-sand herd. In essence the message is the opposite of what academia should be (and is where all the problems stem from in the frigid, sheepish world of "education".)

If I had a twenty dollar bill for every contradiction in this typical corporate/academic POV I would be a rich man!

No need for that, because I'm sure Dale and his buddies are having a great time sucking off the wasteful teat of the Federal government.

Clearly the guy is "smart"--then why the hell do I get the impression he's totally full of shit? I wouldn't have a problem with these people if they didn't make such absurd claims, like "lets not be critical". Perhaps it's just me, I hope he figures out his cellulosic ethanol powered by cold fusion soon. A couple more grants and clippings in his support, and he'll be all set.

In the mean time I'll have my assistant send over to MSU the following, c/o Prof Bruce:

follow the money...

follow the money

Thank you for calling him on it.

gTrout/Jon and Cid: He, him? Who?

ehh..distinguishing personal pronouns of the third-person singular: he/him/his..., vs proper pronouns, either Dale or b3NDZ3La, would be really helpful. Just use names.

My random sample of past comments by b3NDZ3La would suggest you meant Dale. A check of Dale suggests Dale. Do I need to work that hard?

b3NDZ3La, I hope both gTrout and Cid clarify their intended target.

Sorry there. I meant he = Dale. When you are in the edit box, it all seems clear....

Jon Freise

Analyze Not Fantasize -D. Meadows

Thanks, gTrout.

The Democratic Energy Bill hasn't made it through the House-senate conference bill committee, where it will go to both bodies to be voted on and then must be signed. Bush has already promised to veto, no matter what. Don't look for any signed Energy Legislation before about May, 2009.

So farmers, don't borrow any money on the strength of susidies that may or may not come.And don't be discouraged by the time.
Bob Ebersole

That is true to some extent, but nevertheless, if the net energy is not positive, you don't have an energy supply but a storage mechanism! If a biofuel has marginal EROEI, it doesn't matter that the fuel is more "valuable" since it cannot by itself form the basis of an industrial economy. Net energy is ultimately the surplus energy that can be applied to get work done and hence is critical from the macroeconomic perspective.

However, it is correct that petrol is more valuable because it can be stored and used in different situations more readily than coal, so the net energy can be applied at point solutions (e.g. vehicles, diesel generators, etc.) rather than in centralized points (e.g. coal burning powerplants). Because of lack of substitutability between current fossil fuels, net energy is not the only measure of the value of a source.

This guy doesn't get it.

Don't count on government for fuel price solution

...If we really have a fuel shortage how come there aren't long lines of cars at gas stations waiting to fill their tanks? And why have Exxon, Shell, BP, Chevron, ConocoPhillips, Total and Marathon, which own most of the refineries, continued reporting record profits? Kind of makes one wonder if the refinery breakdowns, leaks, fires, etc. are contrived exaggeration and poppycock and purposefully engineered.

...Fuel prices are high because Big Oil wants them high and they are paying Congress for protection to keep those prices high.


Earthbound Misfit,

This column is a veritable fountain of misinformation and hatred against big oil, and is basicially evil. Leaanan linked to it last week in Drumbeat when it was in the Chicago Herald. Big oil is the designated scapegoat in the energy situation, and trying to say Standard of New Jersey was a great supporter of Hitler is inflamitory, an excuse to "punish" big oil instead of changing his own behaviour. Its as inflamitory as statements can get. Nobody working at ExxonMobil, the succesor company was even born when the events Berko talks about happened. Big oil has quite a bit of blame for our situation, and possibly XOM is more culpable than most, but this is a contemptable bit of lying propoganda. Everybody on the Oil Drum should read this.
Bob Ebersole

Bob, I share your disgust with this article, and I agree with pretty much everything you said. The article also fills me with a certain sadness mixed with dread.

I understand that it is human nature to find scapegoats when things go bad. In the case of Peak Oil, however, I am of the conviction that we don't have time for this kind of folly. It only serves to cloud the issue at a time when clarity may be our only hope for getting through this without starting WWIII.

I find myself increasingly resigned to the fact that, human nature being what it is, we will not change our course of self destruction :(

Britain must eliminate all carbon emissions within 20 years by halving energy demand and installing massive renewable energy generation

I am ready to bet $1000 (inflation-adjusted) that in 2027 Britain will emit at least 80% of the CO2 it emitted in 2007. Initially I was ready to bet that in 2027 it will emit more than 2007, but the proximity of PO and PNG made me rethink that. Those two events have the power to change something, unlike some utopical plans. Any takers?

I would bet that Britain will have stopped keeping track of carbon emissions by 2027. But have my doubts about being able to collect on that bet.

I'd take you on - there has to be a better than even chance that over 20 years CO2 emissions can be reduced at 1.2% a year, enough to bring them down to 79% of today's emissions. Of course, more realistically, they'll go for another 3 years or so, then drop at closer to 1.5% per annum.

If you can find a site that manages such bets (and is likely to be still running in 20 years), let me know.

I could not find a site but you can reach me at levin at abv.bg

Over that sort of time period, you need some agency that is likely to stick around. The chances of us staying in contact for 20 years otherwise is pretty slim.

FWIW, the main reason I'm confident I'll win is oil depletion.

The main reason I'm confident that I'll win is coal :) UK in specific has many closed coal mines plus many closed or idling CPPs.

I don't expect anything spectacular from renewables in the next 2 decades and carbon capture is not in this timeframe even in the official government forecasts. And it is almost certain we will not see the first new nuclear station before 2020... consiquently this is what my crystal ball is showing for the future:

It looks like a perfectly safe bet to me. Spare severe depression (not too unlikely) or a nuclear war this is where we are all headed.

I think you underestimate what sort of political resistance there is going to be to firing up loads of coal plants. First world countries that still have rapidly climbing GHG emissions in 5 years times will risk being seen as pariahs, potentially losing the ability to trade as easily. The UK will be forced to find alternative methods to meet its energy "needs" one way or another.

But what you just said will not happen is already happening in the last several years. Where is the public outrage? Where is the international condemption?

That we (UK icluded) will continue to burn coal in ever-increasing quantities is the politicians dirty little secret. OK not so little, but dirty for sure. Maybe it's just the cynic in me but I'm convincingly betting on what has just quietly begun, to continue accelarating in future. The politicians will find a way to talk it around - this is their job. To get elected. By talking.

The EU has been getting "condemnation" here, usually by those who want to prove that Kyoto is a waste of time.

Anyway, by your argument we'd still be pumping out huge amounts of sulphur dioxide, CFCs, using lead in our petrol etc. etc.

It's the cynic in me that sees it unlikely that levels will much lower than 75% of today's level in 20 years.
Only the most dewey-eyed optimist would genuinely believe it could lower than 25%.

It sounds like a good market opportunity for pompous arrogant assholes who are so absolutely convinced about something in the future that simply being right isn't nearly as fun as rubbing it in.

Oh wait, is that me?

Then theres the problem of what to bet, considering many feel society is headed down the tubes and money will be worthless. Betting with a doomer isn't really that worthwhile for me, they'll insist on gold or guns or food, or maybe a golden gun that you can eat.

I will take it.

It's in the detail: ''within 20 years '' should really read by 20 years.

In 20 years time, halving energy demand wont be a voluntary act. We will have no choice as carbon is no longer available as the fuel of choice as Gas, Oil or Coal become beyond our means and the lack of any plausible or even heroic direction (now) will mean few other available energy sources.

But it wont be a carbon free utopia. It will be a place as miserable as the thirties, but without the personal access to coal - even for the small coal fires common as a heat source for almost the entire population.

We WILL meet all of our targets, but it will be involuntarily and by shivering in the dark...

As for your bet: I will be 70 years old in a low prosperity era. You may need to talk to my heirs and assigns...

You are right - the likehood of some kind of economic collapse doing it is very high.

I'm still ready to take it under (more or less) BAU conditions though.

sorry if this has been posted previously

Hello TODers,

My grateful thxs to Leanan for the topthread links on 'Peak Phosphorus' and 'Trees won't fix Global Warming'. I urge all TODers to give these a glance and reconsider my past posts on the inevitable depletion of spectrum nutrients including NPK for optimal photosynthesis. Entropy Rules All.

Also my thxs to those who have responded to my postings. I am a hopeless city-boy when it comes to agriculture, permaculture, and NPK criticality in regards to Liebig Minimums. I need and welcome all the elaboration and refutation to help my own learning process--please keep it up.

Big, Big Kudos to Bart at EB and in cooperation with Patrick Déry for the Hubbert Linearization [HL] tagteam article on Peak Phosphorus. I hope they can extrapolate Westexas' ExportLand Model to fertilizers too; for example: how long before Brazil cannot afford the long-distance shipments from Saskatchewan?

I fear the topdogs are way ahead of us: recall my posting on the Russian minister calling for a possible future farming, NPK, and FF-energy confederation of Russia, Belarus, Ukraine, and Kazakstan. Makes alot of sense to me if one considers Peak Everything. Will Cascadia include Saskatchewan for the limited NPK? Seems obvious in retrospect now.

My unexpert beef on the tree article is: I think the authors are talking about synthetic forest fertilization and the effects on water quality, but I am not sure. I would think organics and mulch added to tree plantings would help improve water quality. Maybe they are talking about surface-broadcasting fertilizer.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Bob, clearly you are aware of the implications of Liebig's Law for plant nutrition and growth. This is one of the first things that they drum into you in intro soil science courses. It's a very important concept -- a reminder that there is no such thing as a free lunch.

FYI, most large-scale tree plantations of the type that would be required for C-sequestration, are fertilized and sprayed by aerial application. Obviously, the ability to precisely control application under those circumstances is limited. My understanding is that the helicopter guys can be pretty precise (under good conditions). Fixed-wing aircraft are presumably less precise.

Hello Peakoil Tarzan,

Thxs for responding. I never knew that was how they applied fertilizer to forests--Thxs.

Did you ever get doused while you were swinging thru the trees? =)

So I guess the helicopters won't be spraying much longer if Bernanke commandeers them as aerial cash dispensers for 'Financial Climate Change', eh? LOL!

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Bob, I've never been doused that I know of, though I had a couple of close calls. It kind of gives you the willies when you aren't sure what they are dropping.

So I guess the helicopters won't be spraying much longer if Bernanke commandeers them as aerial cash dispensers

All that paper would make a nice mulch though :)

Bob, Western Sahara is the sixth biggest exporter of phosphate and is currently occupied by Morocco. Wouldn't you know it, the US is there already with their special ops, helping sort out the al-Qaida problem with their Moroccan allies. You're not the only one looking ahead regarding fertilizer availability.

Triumvirate of collapse - Economy, Ecosystem, Energy

Ther's still a lot of phosphate in the US, at least in Texas. The phosphate percentage here is only about 20%, but it works fine. The rock is called green sand, and I saw some outcropping a little north of Lake Buchannnan, north of Austin Its what makes the peach belt so productive.

As I recall, its in Fisher and Galloways book on Texas Stratigraphy, and should be available online with the Bureau of Economic Geology website.
Bob Ebersole

Green sand is a source of potassium (the "K" in NPK), not phosphate. Lots of phosphate in FL, though.

Actually, sgage, I think oilmanbob is correct: greensands can contain a significant amount of P though, as you note, they are primarily known as a source of K.

The primary mineral in greensands -- glauconite -- is:


As for P deposits, the US is in relatively good supply (if you don't extrapolate out too many years). According to the Florida Institute of Phosphate Research, Florida currently supplies 75% of US P and 25% of world P.

At a typical 0-1-6 or 0-1-7, you wouldn't want to use greensand as your phosphate source. For one thing, you'd be husbanding it as your K source. It's all about balance.

It's all about balance.

Can't argue with that.

Yeah, we were coming back from a concert in Gainsville (Bob Dylan) one night and my buddy, a truck driver for Kraft and supposedly familiar with all the roads in Florida, got lost. We ended up in a phosphate open pit mine with the huge trucks driving all around us at 3AM. The entire operation is lit by huge lights and operates 24-7. Perhaps our driver was high on phosphate?

Many igneous rocks contain about 0.25% of the mineral apatite, a relatively insoluble calcium phosphate similar to bones and teeth. That's about 6 kg per cubic metre. If we can unlock that by way of micro-organisms, charcoal or whatever it could help.

We need funded research into 'industrial' organic farming with renewable fuelled tractors and so on. As it stands it will be left until there is a crisis.

microorganism decomposition still requires energy, nothing is free. So your way produces phosphates very slowly(by definition).

as someone else posted, the best method for renewing phosphate is with human waste manure. period.

Human waste manure (or greywater) recycling + high adsorption-absorption coefficient soils reduces the losses significantly. (these soils are high in active carbon, ergo high surface area to area ratios)

Composted organic chicken litter is about 5% N, 3% P, and 5% K. The analysis seems low but composted fertilizer is readily available to plants and does not leach like synthetic forms of fertilizer. This is the type of soil amendment that builds soils, I used it on my grassland for 3 years starting in 2000 and use none now with higher production. It's all about getting the biological activity going in the soil, the unpaid workers so to speak.

Ok, but currently what happens to sewage? Is it mostly treated in such a way that it completely unusuable for fertilization purposes? I saw something once on TV about a sewage treatment plant in Boston that produced and sold fertilizer products ("sludge-to-fertilizer"), implying it wasn't the norm.


There is also Milorganite which is composted/heat treated? municiple sewage, but this is not the norm.

wiz, sewage sludge is a potentially valuable resource but be aware that some municipal sludges are pretty high in metals and other contaminants (and thus expensive to clean up).

Heavy metals-laden manures, if applied repeatedly, will poison the soil. Copper (a common feed supplement) in swine manure is a classic example.

Well of course, there are risks with any solution.

Extracting heavy metals from sludge doesn't sound particularly difficult though, given the sorts of things we already extract them from.


DANNY SCHECHTER: I’ve been writing about it, and I also made the film In Debt We Trust, and we have a website, stopthesqueeze.org, to try to organize a campaign for debt relief in America. In other words, Bono has called for debt relief in Africa. We have to start fighting for debt relief in America. A moratorium on these foreclosures would be a first step, and also an investigation into the profiteers on Wall Street. We're talking about literally billions of dollars that have just been spent by the Federal Reserve and by central banks around the world to try to prop up the system. A lot of that is really benefiting the people who created the problem in the first place: the hedge funds, the financial analysts who went ahead with this effort.

This subprime thing is really serious. I don't know if your viewers are all clear of it, or your listeners, but basically people who didn't have adequate credit to get homes were told, “No problem. Just pay us a little bit more, and we will give you the mortgage.” Then they took the mortgage. They resold the mortgage back into Wall Street into what are called securitization trusts. These trusts then not only financed more acquisitions and buyouts and the like, but they also basically made incredible amounts of money for these people.

So we're now facing a situation, the New York Times -- I love this phrase -- just the other day talked about a “moral hazard,” meaning that the risk takers who brought on this panic would feel bailed out again. And they are being bailed out again. And the problem is the opposition is not saying much about it. The Democrats are not talking about it. Activists are ignoring it, maybe because economics is the dismal science.

But we have been getting a lot of response to our film, In Debt We Trust, and to this issue, because it’s an issue that brings together people across the partisan lines, across class lines, across racial lines. It could be the issue that could lead to a fight for economic justice in this country.

AMY GOODMAN: You talk about the hedge funds, for example, and how they're connected to this. Do you think that it's not a major issue in the presidential race, because the very moneyed class that these politicians are both coming from, some of them, but also appealing to for money are those that are a part of this?

DANNY SCHECHTER: Yeah, well, we saw this, and I document this in my film, In Debt We Trust, about the bankruptcy reform bill, where tremendous amounts of money were spent on lobbyists, $151 million to try to get this “reform” passed, and Democrats supported it, as well as Republicans. So it wasn't just, you know, the big bad Bushies here, but it was sort of the Democrats, as well, who were implicated. And part of the reason was, is because their campaign donors include these very wealthy companies and financial institutions and real estate developers. So it's very much a part of the deeper corruption of our financial and economic system.

AMY GOODMAN: How do you think it has to be dealt with right now?

DANNY SCHECHTER: Well, it has to be dealt with -- first of all, we have to become more aware of it and put this issue more on our agenda. I mean, the military has just tried to spur reenlistments to Iraq by saying, “We'll help you pay off your debts. If you have college loans, we’ll help you pay them off.” So debt is central and part of that crisis, as well. So what we need to do, it seems to me, is (a) inform ourselves -- screenings of In Debt We Trust might help in that process -- secondly, we need to push for regulation. We need an investigation. We need to have prosecution of these big corporate guys who have been making so much money off the misery of so many Americans and to try to put an end to these processes. So it's a -- you have to stop talking about subprime, you have to start talking about subcrime, which is an article that I wrote on mediachannel.org the other day, and it’s gotten a tremendous response. We have to criminalize these practices, not just nod at them and bail out the people who have put us in the situation.


I've been out of town for a few days. Did anyone see the full text of the following story? I pieced together the excerpt from the website and a from a Google search. The comment about year to date exports, 2007 versus 2006, seems to conflict with other news releases. Anyone a Moscow Times subscriber?

Thursday, August 9, 2007. Issue 3717. Page 6.
Sinopec Seeks Middle East Oil as Russian Supplies Run Dry

BEIJING -- China's Sinopec refinery in Beijing starts operating at near full rates in August, some 30 percent above year-earlier levels, and is processing more Middle East crude after its Russian supply dried up, a company official said Wednesday.

The newly expanded Sinopec unit stopped receiving Russian crude oil moved by rail via the northern Chinese region of Inner Mongolia since late last year, the official said.

Total Russian crude exports, including a small portion of seaborne shipment, were down 6.7 percent in the first half of 2007 versus a year ago.

Have read some reports that western Siberia fields were going into decline and that eastern Siberian production due to be brought into the pipeline might be used to offset declines elsewhere.

Russian car sales have shown very high growth rates, foreign car sales growth was reported at levels close to triple digits. This would indicate a need for more oil inside Russia. In 2006 the Russians were reported to have increased exports only slightly.

The report cannot be discredited from the context cited here.

God, dear God, in God we trust, I hope you're wrong about ELM!

The only way in which it could be "wrong" is the assumption that most oil producers will preferentially feed their growing domestic economies before supplying oil to export markets, which seems a reasonable enough assumption to make.

But the only way in which it genuinely represents a huge problem is if the world major oil's exporters all simultaneously hit flat production in the very near future and maintain rapidly growing oil-dependent economies for a significant period of time, which seems highly unlikely.

I would less surprised to see oil-producing countries start to focus more heavily on reducing the oil dependency of their internal economies, because they are all too aware of the finiteness of the resource, and likelihood of declining production in the near future. Just read about U.A.E.: