DrumBeat: October 19, 2008

Gazprom Debt Priced as `Distressed' Amid Russian Market Turmoil

(Bloomberg) -- Russia's worsening financial crisis drove the cost of protecting against a default by OAO Gazprom to more than 1,000 basis points, the level for borrowers that investors term ``distressed.''

Credit-default swaps on Gazprom, the state-controlled monopoly for natural gas exports, climbed 79 basis points to a record 1,011, according to CMA Datavision.

Russia's main Micex Index of shares has lost more than 68 percent this year. Finance Minister Alexei Kudrin said he sees further declines because of the risks from the global credit crisis, Interfax reported. The government will invest 175 billion rubles ($6.7 billion) in highly rated Russian securities next week, Kudrin told reporters in Moscow today.

Interview: Lord Browne of Madingley on biofuels alarmism

The IEA predicts global oil production will reach 116m bpd by 2030 - a level some have disputed. Do you believe production can rise this far? For how long can it be sustained?

I do not believe there are serious geological constraints in getting to that level. The biggest barriers are likely to be above ground, mostly stemming from politics associated with the growing concentration of oil and gas supplies. At the same time, oil demand is actually declining in the OECD – by 800,000 barrels or more this year. If a serious global slowdown occurs, demand growth will also fall in non-OECD countries. In my view, peak oil is more likely to occur because of falling demand rather than supply constraints.

OPEC Plans to Cut Supply as Oil Prices Head Toward $50 a Barrel

(Bloomberg) -- OPEC, the supplier of more than 40 percent of the world's oil, plans to cut output for the first time in almost two years as the worst financial crisis since the 1930s sends crude toward $50 a barrel.

Options contracts to sell oil at $50 by December soared 28- fold in the past two weeks on the New York Mercantile Exchange. Goldman Sachs Group Inc. and Merrill Lynch & Co. analysts say crude, which fell more than 50 percent from a record high in July to $71.85 a barrel last week, may drop another 44 percent should the world economy slip into a recession.

Oil majors to post bumper quarter amid crude crash

The start of the third quarter in July, the month when U.S. crude oil CLc1 topped out at $147, must seem a very long time ago for all energy producers now that a barrel goes for half that price.

So while they roll out more fat profits, some even setting new records, big oil companies will also face tough questions about what they plan to do with all the accumulated cash and how their outlook has changed now that crude and natural gas are trading near their lowest levels in more than a year.

Venezuela Blackout Hits Capital Caracas, Eight States

A nationwide power outage on a Sunday, when demand is low, is unusual, and authorities haven't discounted possible sabotage, he said.

The Venezuelan government is investing billions of dollars to modernize the country's electricity infrastructure to supply with increased demand.

Shell denies selling stake in UK wind farm

LONDON (Reuters) - British oil major Royal Dutch Shell has denied a report that it has withdrawn from the UK wind energy sector by agreeing to sell its stake in a project off the Blackpool coast to partners Scottish Power and Denmark's Dong Energy.

Oil Industry Must Step Up Cooperation on Carbon, Executive Says

(Bloomberg) -- Oil and gas companies need to step up cooperation with each other and with regulators on carbon capture and disposal to help address climate change, said Leo Roodhart, president of the Society of Petroleum Engineers.

Analysis: What would the bank-bail out money buy for the environment?

Countries could protect nature, help halt climate change, and provide food and clean water for a billion people for little more than has been pledged to bail out the world's banks in the last week, according to a series of authoritative economic reports from the UN, world bodies, major charities and banks.

Estimates of the sum committed this week by governments to rescue the world's financial system range between $2-4 trillion. Investment on this scale to reduce greenhouse gas emissions and protect nature would not only be repaid up to 100 times over, say the studies, but would also save trillions of dollars having to be spent later.

Analysts: 1 million barrel OPEC cut not enough

CAIRO, Egypt - A production cut of even 1 million barrels per day at OPEC's upcoming emergency meeting is unlikely to reverse slumping crude oil prices in the short term, said analysts Sunday, amid mounting calls by several cartel members to take decisive action to keep prices at the US$80 per barrel level.

OPEC Targets Higher Prices, Market In Flux

Consumers at present are happy; their petrol bills at the pump have gone substantially down. This could be however only a short term gain, as a re-emerging economic growth worldwide will again be confronted by production shortages. Maybe it is better to reduce the current gains, get used to higher price levels and have enough oil production capacity for years to come. An additional gain of higher crude oil prices is the fact that alternative energy sources are being considered. Peak oil is still not a real fact of life, but on the long term, a decline of oil production will be. To counter a shutdown of the global economy at that time, new sources of energy need to be found. Without investments in all sectors, this will not be able to be done.

Energy Security In Mexico: Problems and Implications

With the 2004 peaking of Cantarell, the second most productive oil field in the world and the source of half of Mexico's oil, national production faces terminal decline. The ongoing decrease now confronting Mexico has been widely documented in the energy industry and has become part of the U.S. Energy Information Administration's (EIA) International Energy Outlook 2008. Further, energy security is the looming shadow over the scene. The rapid decline in Mexico's proven oil reserves, about 75% since 1997, is taking its toll and scheduled deliveries to several refineries in the U.S. were cancelled in July.

China plans 150,000 km of oil and gas pipelines

BEIJING (Reuters) - China will build a further 150,000 km (93,000 miles) of oil and gas pipelines in the next 12 years, the official Xinhua news agency said on Sunday, as the energy-hungry nation looks to guarantee supplies.

China has already built pipelines to bring gas from its far western region of Xinjiang to its booming coast, and is also considering a crude oil and gas pipeline from Russia.

Gazprom invited for geological prospecting on Alaska shelf-Miller

MOSCOW (Itar-Tass) - Gazprom received an invitation to start geological prospecting on Alaska shelf, said Gazprom board chairman Alexei Miller in an interview with the Rossiya TV networks, circulated by the Gazprom press service.

Executives of the Russian company and specialists from other countries participated in a scientific seminar in Alaska on development of oil and gas deposits.

State officials concerned over lower energy prices

OKLAHOMA CITY (AP) — Lower oil prices will have an adverse effect on Oklahoma if they continue to fall, but officials say the decline in natural gas prices are a larger concern for the state treasury and the state economy.

Indonesia: Fuel Lines

Hundreds of motorcyclists and motorists queue for fuel at a gas station on Jl. Mayjen Wiyono in Malang, East Java.

Capitalism isn't working

THE FINANCIAL MELTDOWN: Special report on how the global economic recession is affecting us all ... from housing to food to the environment.

Why do we need economic growth?

With recession looming and unemployment rising, politicians and economists are trying to find ways of stimulating economic growth. But is growth a good thing? Does it have harmful consequences? Could we live without it?

Financial woes a blow to Russia

Analysts say the chain of debt crumpled when it was hit by an overlapping series of factors. In addition to the drying lines of credit:

Fuel: The economy relies heavily on revenue from natural resources, and the price of oil plunged from a record high of $147 in July to below $80 last week.

Invasion: After Russia invaded Georgia in August, many foreigners withdrew their money. Officials say $16.7 billion left the country from July to September, and some analysts say the real figure is higher.

How do we deal with an energy crisis?

More than 30 years have passed since President Jimmy Carter called for the creation of a national energy policy to address the nation's greatest peacetime challenge of his life - ensuring reliable energy for the nation.

Carter's message went largely unheeded in Southern Illinois and elsewhere until recently, when working people began feeling the pinch of higher utility rates, skyrocketing gasoline prices and lost purchasing power for the oil-related necessities of life - food trucked to groceries and consumer goods hauled to stores.

New answers to projected electric power shortfalls in Texas

Most Texans have been lucky enough during the past decade to have the luxury of viewing the news about summer brownouts and nearly avoided rolling blackouts in other states from a safe and comfortably air-conditioned distance. Few outside of the energy industry and the state government are aware that this comfortable distance is steadily shrinking.

Energy giants plot revival of coal power

Britain's electricity generators are planning to build several coal-fired power stations despite the controversy over the greenhouse gas emissions that they would produce.

The firms say they need to replace existing coal-fired stations because so many are being closed by European directives aimed at cutting pollution.

Federal Officials Seek to Relax Rules for Dumping Mine Waste

WASHINGTON (AP) — The Interior Department has advanced a proposal that would ease restrictions on dumping mountaintop mining waste near rivers and streams, modifying protections that have been in place, though often circumvented, for a quarter-century.

‘Energy independence' cry now takes a back seat

When oil prices almost touched $150 per barrel in mid-July, the cry for drill, drill, drill, resounded so shrilly that it became No. 1 on the presidential campaign hit parade. Even the House Democratic leadership caved in lest the Republicans ride this issue to victory in November.

But on the way to election day, “demand destruction” in the U.S. combined with the Chinese-buying hiatus during and after the Olympics to drive the oil per barrel price down to the $70 mark, far lower than had been anticipated.

Living Smaller: Big houses may someday look as outdated and impractical as big cars, for many of the same reasons

The aftershock came in the form of a series of scientific disclosures about the deteriorating state of the physical environment, particularly global warming. Family cars, as well as power plants, were among the chief sources of carbon-dioxide emissions, so dependence on automobiles was seen as a problem once again. The more general issues of conservation of energy, physical resources, and land were also again raised, and critics were quick to point out that the suburban house lavishly consumed all three. The abundant resources that accounted for the success of the large single-family suburban house—unlimited land, cheap transportation, and plentiful energy—can no longer be taken for granted.
(This article is dated 1991. Just as we started on that SUV and McMansion binge.)

From Subprime to Meltdown: Is Peak Oil Responsible?

So yes, the financial crisis finds its roots in the oil crisis and nobody seems to care about it. The current events that nobody saw coming, were already announced as early as 2006 by Dr. Colin Campbell, a geologist, former Vice-President of Fina Oil Company and founder of the nowadays respected ASPO (Association for the Study of Peak Oil).

On a video interview available on YouTube, he declared:

Expansion becomes impossible without abundant cheap energy. So I think that the debt of the world is going bad. That speaks of a financial crisis, unseen, probably equalling the Great Depression of 1930; it’s probable we face the Second Great Depression. It would be a chain reaction, one bank would fail, and another one would fail, industries will close…

OPEC could cut 3mn barrels a day, says Iran

Iran said on Sunday that OPEC will consider an output cut of one to three million barrels per day (bpd) of oil in its upcoming meeting, the Mehr news agency reported.

"It seems that a (oil) production cut from one to three million bpd will be examined in the October 24 meeting," Iran's ambassador to the oil cartel, Mohammad Ali Khatibi, was quoted as saying.

"Iran is seeking a production cut to create stability in the market," he said.

OPEC Pres: Oil Can't Fall Under $70 For Some Projects-Report

LONDON (Dow Jones)-Some hydrocarbon projects won't be sustainable if the price of oil remain below $70 a barrel, although the Organization of Petroleum Exporting Countries doesn't have a price goal, the oil producer group's president said in remarks reported late Saturday.

The statements come as OPEC moved forward the date of its extraordinary meeting to Oct. 24, where OPEC president Chakib Khelil has previously said a "significant" cut would be decided.

In remarks reported on the Web site of Algerian state newspaper Al-Moudjahid, Khelil said crude from Canada's oil sands and offshore Brazil "can't be produced if the price falls below $70 a barrel."

Crude plunge rings alarm bells in Iran

TEHRAN: Iran should ban imports of luxury and non-essential goods given falls in crude oil prices, central bank chief Mahmoud Bahmani was quoted yesterday as saying, in a sign the Opec producer is concerned about sliding oil income.

Officials say Iran’s international isolation means it is more immune than others to the world financial crisis but the governor’s remarks reflect growing concern about one consequence of the turmoil – tumbling oil prices.

Chavez Says Oil Between $80 and $90 Is `Sufficient'

(Bloomberg) -- Venezuela, the biggest oil exporter in the Americas, will remain solvent as long as oil prices hold between $80 and $90 a barrel, President Hugo Chavez said.

The surge in oil prices in the first half of this year was ``irrational,'' Chavez said today in comments broadcast by state television. Since touching a record $147.27 a barrel in July, oil prices have plunged more than 50 percent.

``If the price of oil stabilizes between $80 and $90, that's more than sufficient,'' he said.

Kuwait faces cuts in budget spending

Kuwait's finance minister warned in remarks published on Saturday that a recent decline in oil prices might force the country to cut spending and revise downward its 2009-2014 five-year plan.

Kuwait would have to cut spending in its next budget if the price of its crude fell below $60 per barrel, Mustapha Al Shamali told Al Rai newspaper.

Alberta a 'prime location' for terrorists: experts

CALGARY - Oil-and-gas rich Alberta has become a "prime location" for terrorists looking to capitalize on shaky economic times in Canada and the United States, terrorism experts said at a national conference for emergency officials in Calgary on Saturday.

"While Alberta might not be a first choice for mass-casualty attack terrorism - you're unlikely to see a major bomb going off in downtown Edmonton - it certainly is a prime location for economic terrorism, because of the ability to disrupt the oil and gas industry," Mercedes Stephenson, a Calgary-based defence and security analyst, told reporters.

Credit crunch puts Petrobras plan on hold

Brazilian giant Petrobras has postponed the disclosure of its new business plan until the end of the year so that it can evaluate the impact of the global financial crisis.

The business plan for 2009-2012 was scheduled to be disclosed this month, with details on investments for the exploration of pre-salt oil reserves, Reuters reported.

Egypt expects oil price to fall to $60 a barrel

CAIRO (Reuters) - Egyptian Oil Minister Sameh Fahmy said on Saturday he expected oil prices to fall to $60 dollars a barrel in the medium term because of the international financial crisis.

...The Egyptian government will not now reduce the subsidies it pays on fuel sold inside Egypt, he added. Egypt is a medium-sized producer of oil and gas and a net export of energy.

Kuwait has no plans for strategic oil reserves abroad - official

(KUNA) -- Kuwait has no plans to set up strategic oil reserves in China, Vietnam or elsewhere in Asia, said Abdullatif Al-Houti, Managing Director of International Marketing at state-run Kuwait Petroleum Corporation (KPC). "We have no plan to discuss anything about crude oil stockpiles abroad, especially when oil prices go down," Al-Houti said in an interview with Kuwait News Agency (KUNA) in Tokyo, denying speculation that KPC is considering the establishment of crude oil bases in Asia in anticipation of international conflicts.

..."The lower the crude price is, the more it will be unattractive to store petroleum abroad," explained Al-Houti, citing a recent downward trend in international prices.

Chinese oil workers kidnapped in Sudan

KHARTOUM, Sudan (AP) -- A Chinese diplomat in Khartoum says nine Chinese oil workers have been kidnapped by unknown assailants in the southern Kordofan province.

The diplomat says the men were kidnapped Saturday and their vehicle was also taken. The kidnapping was discovered because several oil workers escaped and told authorities about it.

Next president faces another crisis — in nation's infrastructure

WASHINGTON - As if the next president won't have enough on his plate - with the implosion of the financial markets, two foreign wars, persistent security threats and a host of other concerns - America's infrastructure is collapsing.

Whether major highways or inland waterways or the electrical grid or a quarter of all bridges, the nation's physical plant needs billions of dollars in repairs.

Sparse plug-ins for electric cars spark creativity

(AP:SEATTLE) Owning an electric vehicle requires more than global-cooling ambitions. It takes guile, planning, sharp vision, a silver tongue _ and a 50-foot extension cord.

Steve Bernheim knows accessible outlets like a firefighter knows hydrants. He has to _ his Corbin Sparrow runs only 25 miles on a charge.

Wal-Mart to cut plastic bag waste

NEW YORK (AP) — Wal-Mart Stores Inc. plans to slash its global plastic shopping bag waste by 33 percent over the next five years, eliminating more than 135 million pounds of trash. If the plan succeeds, the world's largest retailer would cut the equivalent of 9 billion plastic bags from stores each year.

Repowering America

The problem is that, despite the current boom in green power, renewable sources such as the sun and the wind still provide just a tiny fraction of the U. S. electricity supply. The rest is mainly dirty stuff: coal, gas, oil. To replace one with the other over the course of a decade, energy experts say, would make the Manhattan Project look like a science-fair volcano.

And even if we wanted to try Gore’s plan, his goal is likely to get more distant every year. That’s because, even as Americans demand more action on climate change, their laptops and flat-screen TVs are demanding more electricity every year — and they’re not asking whether it’s clean or dirty.

“This goal is so far outside the realm of possibility,” said Richard Newell, a professor of environmental economics at Duke University. “It would be practically infeasible, politically impossible and economically and environmentally unwise.”

Green energy is not a middle-class conceit, more the only way forward

So that's it, then, choruses the commentariat. Collapsing confidence, crashing stock markets and credit-starved banks spell doom not just for the economy, but for environmental concerns. Saving the planet may be all very well in the good times, but is an unaffordable luxury when things turn bad.

The argument is pervasive, persuasive and gaining ground. Even some environmentalists half-accept it, believing they should mute their message. But it is plain wrong. Never have green concerns and measures been more important.

Brilliant article in the WSJ.

Most people now living have never seen a credit crunch like the one we are currently enduring. Ms. Schwartz, 92 years old, is one of the exceptions. She's not only old enough to remember the period from 1929 to 1933, she may know more about monetary history and banking than anyone alive. She co-authored, with Milton Friedman, "A Monetary History of the United States" (1963). It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression.

It goes on to say

Ms. Schwartz won't say so, but this is the dirty little secret that led Secretary Paulson to shift from buying bank assets to recapitalizing them directly, as the Treasury did this week. But in doing so, he's shifted from trying to save the banking system to trying to save banks. These are not, Ms. Schwartz argues, the same thing. In fact, by keeping otherwise insolvent banks afloat, the Federal Reserve and the Treasury have actually prolonged the crisis. "They should not be recapitalizing firms that should be shut down."

Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich." The trouble is, "that's not the way the world has been going in recent years."

This is exactly the type of sophistry one would expect from the free market fundamentalists at the Wall Street Journal and the acolytes of Milton Friedman. It is replete with half-truths and verisimilitudes.

Missing from the picture is of course the twenty-ton elephant in the room, which was the deregulation of the financial industry that grew like a snowball rolling down a mountain over the last 35 years.

We're going to be hearing a lot of these sorts of half-truths and re-writes of history coming out of the main stream media in the days, weeks and months ahead, but thank heavens we have blogs like Calculated Risk and The Big Picture to remind us of the facts and call these zealots of neoliberalism onto the carpet for the incredible destruction their ideologies have wrought:

The problem I have with this piece is it centers on Greenspan's monetary policy and ignores Greenspan's far larger mistake; opposing oversight when many people were pointing out the extremely lax lending standards.


I believe that infact a LACK of free markets has been the real problem. Mish has answered this in full many times.

Is More Regulation The Answer?

Actually the answer is no. The reason is that no one traces problems back to their original origin. The problems in the 1920's and the problems now did not arise from insufficient regulation. The problems then and now stem from rampant and excessive extension of credit. The origin of credit problems lies in fractional reserve lending.

Fractional reserve lending allows banks and other institutions to lend more money out than they have on deposit. Credit expansion now dwarfs what we saw in the 1920's. You can thank President Nixon for that. When Nixon closed the gold window (Ron Paul discusses the gold window in The End of Dollar Hegemony) the last remaining control over credit expansion was removed. Credit has since exploded.

Glass-Steagall is nothing but a smokescreen. The problem is massive credit expansion that created artificial booms such as we saw in housing. The party ends when borrowers are no longer able to service debt. That happened in 1929 and it is happening now.

In the 1920s, had banks not lent more than was on deposit there would not have been so many bank failures and bank runs. Look at what the solution "accomplished". By guaranteeing deposits, money has flowed to banks offering the highest rates on savings accounts and CDs.

This in turn sponsored insane activity and lending for massively overbuilt condo towers in Florida, California, Las Vegas and other places. Money continues to flow into banks that are going to go under.

Thus, the FDIC which came into existence during the great depression as a "solution" has done nothing but make the problem worse. By preventing periodic local bank failures, FDIC interim stability guaranteed a bigger systemic failure down the road.

What Mish ignores is that allowing firms to release fraudulent financial statements isn't a free market at all. The SEC doesn't enforce current regulations, so he is right that more regulation is a joke.

VK, I have no doubt that you could enlist a whole army of economists to parrot the party line. After all, the finance industry owns 100% of the economists that work directly for it, 100% of those that work for the government and probably 90% of those in academia.

At least once in a blue moon we do get an economist in a rare moment of candidness, such as Nouriel Roubini the other day with Charlie Rose:

And you don't have enough independent thinkers and scholars who are willing to speak the truth.


But that really isn't the issue. The issue is whether deregulation was the chief culprit that led to the financial collapse that we are now seeing unfold. I say it is. You say it isn't. This is what Obama defined as one of those "fundamental" differences between him and McCain. And it is a fundamental difference between you and me.

Don't you find it just a little bit hypocritical that the free market fundamentalists, who for the past 35 years have had a privileged seat at the policy table and had their hands firmly on the levers of power--who were largely responsible for getting us into this mess--now want to rewrite history to exculpate themselves from any blame and at the same time make this outrageous claim that it is they who can now save us?

I believe in Austrian Economics (What Ron Paul espouses) . I am a member of Nouriels blog as well and follow his articles, I am a regular visitor and contributor to the Big Picture, Calculated Risk as well as Naked Capitalism.

I DON'T believe that Paulson and Bernanke can solve this problem, you can't solve debt by adding more debt. The FED distorts the Free Markets.

What you're missing as well as Roubini and co is that we wouldn't really need regulation if weren't for Central Banks determining the rate of money i.e. interest. Nearly all forms of Government Intervention backfire. The FDIC insurance encourages people to engage in risky practices knowing full that government will come to the rescue.

The central problem is Fractional Reserve banking, unsound currency not backed by gold and silver and the ponzi scheme that is fiat money and leverage. Have you even read the articles I pointed out? Or are you merely reading the block quotes? In a TRULY free market what is happening, would NEVER have happened. Roubini, CR, Barry Ritholz don't get to the heart of the problem - The monster that is slowly killing the real FREE markets, the FED and it's copy cat central banks around the world.

From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

The problem I see with people like Ron Paul is that they believe history began in 1929. It did not. Classical liberal economics was implemented, put to the test during the 18th and 19th centuries, and it proved as big a failure then as Communism did in the 20th century.

Why do we have to keep re-inventing the wheel?

Adam Smith, Ricardo, Malthus, Nassau Senior, J.B. Say, Bastiat and J.S. Mill all proclaimed the dogma of "laissez-faire," the free market as the regulator of supply and demand. And by the beginning of the 19th century this was the dominant economic phiosophy in Europe.

And its adherents did not then, as Ron Paul does not now, advocate that their economic prescriptions be applied inconsistently:

It is a mistke to suppose that its creators and proponents were hypocrites moved by the desire to justify their friends, the captians of industry, while callously disregarding the sufferings of the workers. The science disregarded equally the sufferings of the factory owner who failed when overproduction periodically caused a string of failures.

Jacques Barzun, From Dawn to Decadence

But this did nothing to make the theory workable in the real world, for your "TRULY free market" is something that only exists in the minds of the disciples of market fundamentalism.

Simonde de Sismondi was perhaps the first heretic among Smith's disciples. As Barzun goes on to explain:

He had visited England and had been struck by the misery resulting from industrial progress. Why did the seemingly beneficial production of goods by machinery bring on "poverty in the midst of plenty"? The answer was: free competition keeps wages low, free enterprise makes for overproduction, which leads to recurrent "crises"--shutdowns or failures entailing unemployment and starvation.

His detailed criticism of the new society includes the observation that it splits labor from capital and makes them enemies, with the power all on one side. The idea of their "bargaining" over wages is absurd. Tyrant and victim describes the relation, yet without cruel intent of the one or knowledge by the other of who his oppressor is...

Sismondi does not oppose machinery; he rejects the idea that the economic situation is the inevitable effect of a law of nature, as the orthodox then affirmed. He saw the evils as the result of social and legal arrangements that could be changed.

Sismondi was of course only the first of a multitude of critics of market fundamentalism, and by the end of the 19th century liberal economics was discarded into the trashbin of history, where it should have stayed. But unfortunately, and especially unfortunately for the United States, Milton Friedman and the Chicago school went and doug it back out in the 1960s. It didn't work back in the 18th and 19th centuries. It hasn't worked since the 1980s when it was implemented anew in the United States. It has never worked.

What is the object of human society? Is it to dazzle the eye with an immense production of useful things? Is it to cover the sea with ships and the earth with railways? Is it, finally, to give two or three individuals out of each 100,000 the power to dispose of wealth that would suffice to maintain in comfort those 100,000?

Sismondi, Studies in Political Economy (1818-36)

What is the object of human society? Is it to dazzle the eye with an immense production of useful things? Is it to cover ... the earth with railways?

Well ...

Alan :-)

Speaking of railways... how to build more when the ones we have are going bankrupt?

MTA may have to cut commuter service

The next potential victims of the nation's credit crunch: nearly 1.5 million people who ride buses and trains each weekday in Los Angeles County. Transit officials say riders could soon be facing serious service cuts...

"The potential is pretty horrendous across the industry," said James LaRusch, the chief counsel for the American Public Transportation Assn., a trade group for transit agencies.

"It's typically going to impact the largest transit agencies," he said, "because they were the ones that had the kind of assets necessary to get into these kind of deals."

LaRusch said about 30 of the largest transit agencies in the nation have some involvement in such deals...


You will note that I have not strongly advocated fossil fuel buses. The most I have supported is small buses serving as collectors and limited electric trolley buses.

We are seeing the first steps of what I expected. Rising fuel costs and a strained economy are putting diesel buses in jeopardy. The failure is not with electrified trains but with diesel buses.


You need to read the full article.


Yes, my fault !

They are talking about a complex method of selling depreciation expense (useless to a gov't entity) to private investors. Loophole as noted closed in 2003, but if the investors fall through (as AIG seems to be doing) then financial/cash flow problems ewsult. I vaguely remember that a lot of non-profit hospitals did the same thing.

Another failure mode for our overly complex system :-(

Best Hopes for reading before Commenting :-(


What you're missing as well as Roubini and co is that we wouldn't really need regulation if weren't for Central Banks determining the rate of money i.e. interest. Nearly all forms of Government Intervention backfire. The FDIC insurance encourages people to engage in risky practices knowing full that government will come to the rescue.

The central problem is Fractional Reserve banking, unsound currency not backed by gold and silver and the ponzi scheme that is fiat money and leverage.

But that is not what you said at the beginning. You just said "more regulation isn't the answer" when what you meant was "The system is untenable. We need zero regulation in the sense of no banks, no fractional reserve system."

Had you said that in the beginning, you'd have gotten different responses.


Just what deregulation do you have in mind? Care to name examples? Merely saying deregulation caused the current economic problems offers us nothing but a "cocktail party remark."

You talking about which presidents and which congress? We have had Carter & Clinton as well as Regan & Bush. We have had Democratic congresses with Republican presidents and the exact opposite. Congress passes all laws. So please be specific; just which laws are you speaking about? Which congress passed them and which president signed them?

I also suggest you compare the size of federal regulations from 1975 to the most current date you can find. I believe you will find they have more than doubled.


You are absolutely correct that the drive to deregulation has been bi-partisan.

As for as those most culpable, you might start with Phil Graham:


Then, as noted above, there's Greenspan, who served under both Republican and Democratic presidents.

Barry Ritholtz over at The Big Picture has been writing on this subject almost daily for the past month or two, this I suppose being his latest post:

My beef is not political, its evidentiary: There are no facts shown, no regulatory historical record dissected, no comprehension of what actually occurred -- just how to duck resposibility.


...and over the past couple of months in numerous posts he has pretty much hammered together the "evidentiary" case he refers to and you are requesting.

And if you're really interested you can pick up a copy of Kevin Phillips's Bad Money and read the three chapters "Finance," "Bullnomics" and "Secutitization" where he lays out much more of the sordid history in all its inglorious detail.

I don't totally buy the Phil Graham bit.

See http://online.wsj.com/article/SB122428201410246019.html

And especially


There are many other articles, too.

Tell me, did Phil Graham deregulate the UK, France, Germany, Belgium, Switzerland, and Russia, too? Oh, lets not forget Japan and Singapore! How about Iceland?

By the way Phil's law let a commercial bank bail out an investment bank without any government money; something that would not have been allowed under the old laws.

I think cheap interest, goofy government regulations encouraging lousy loans,young naive stupid Wall Street types...Think anybody who lived through the S&L crises thought subprime loans should be 60-70% of their business and the real estate market would rise forever? I could go on, but I believe you get where I am coming from.

I believe that infact a LACK of free markets has been the real problem. Mish has answered this in full many times.

Mish does some interesting and intelligent analysis. His major flaw IMO is his ideological adherence to libertarianism. One simple measure of the hypocrisy this engenders is his shilling for gold on his site. It we are indeed entering a deflationary depression, gold is not the place to be. Look at how it has plummeted in price. Libertarianism is pure utopianism and nothing more.

His major flaw IMO is his ideological adherence to libertarianism.

If Mish suffers from adhering to a single point of view, he is not alone.

Adherence to any point of view to the exclusion of all others will always produce a blind spot. It's in the nature of points of views to show only a portion of the whole; to see as much of the whole as humanly possible requires using multiple views.

Of course people will say that they have looked through the other views — and then discarded them as "wrong" or "inadequate," leaving the remaining view (the one they currently hold) the "true" and "only correct" view. But in discarding the other views they have missed the point entirely: there is no one correct point of view.

P.S. Of course, this is just one point of view ;-).

aangel, I agree completely. I'm sure it would be possible to go to Russia and find an old-school communist who would insist that the only reason for the collapse of the USSR was that communism wasn't practiced in a pure enough form. Same is true of any 'pure' ideology.

Let's get practical. Lately I've become extremely averse to speaking in terms of 'solutions' to any social problems. Rather, I like to think in terms of 'strategies'. This seems to be more open-ended in how one reacts to unpredictable developments along the way, while a 'solution' seems to imply a set plan that must not be altered.

Indeed. I've just listened to a good BBC radio programme on lax regulation and how US lawyers are busy filing law suits against banks for using fancy financial instruments to puff up their value.


Includes the thoughts of Prof. Roubini. Plenty of blame laid in London.

(note: the programme actually starts about a minute in)


Indeed. I've just listened to a good BBC radio programme on lax regulation and how US lawyers are busy filing law suits against banks for using fancy financial instruments to puff up their value.


Excellent. Thanks for that. The programme was from last tuesday so it'll be overwritten by next tuesday by the next edition. MP3'it if you want to save it..


The File on 4 A Financial Timebomb podcast is downloadable at




Thanks for the link. Great stuff.

If you haven't already seen it, here's a video that shows Fuld and his some of the lavishness of his lifestyle:


More wondrous workings of the "free market" http://biz.yahoo.com/ap/081019/the_influence_game_housing.html

Just to clear up a bit of linguistic confusion, the economic concepts covered by the term "Neoliberal" would include Reaganomics.

I think one might characterize Sarah Palin's far right Repuglican economic viewpoint as Neoliberal.

E. Swanson

I've always reserved the term 'reactionary' for people like Reagan and Palin and their ilk.

About time the term "reactionary" got back into use for short-termists like the neo-cons. Reactionary doesn't just mean over-reacting. If it did, it deserves falling out of use.

No, reactionary is a blind or dogmatic man's substitute for prudent forward-looking "pro-active" planning using minimal buffer stocks and risk thresholds.

For example, when the oil price drops we need to use the opportunity to put enough of a floor under it that big cars and other energy irrationalities are not given a boost.

Isn't it time to bring North America into line with the rest of the world? Otherwise, we are relying on the Hummer crowd to save us from a new Depression. Burn, baby, burn.

Ms. Schwartz did of course get half the storty right, and that is the current problems facing the finance industry are balance sheet problems and not liquidity problems.

In this regard only the first shoe--subprime home loans--has dropped thus far.

The NY Times' lead editorial today talked of what may be the next shoe to drop--business and corporate loans.

The Bubble Keeps On Deflating

By now everyone knows that reckless and even predatory mortgage lending provoked the financial meltdown. But bad lending did not stop there. The easy money also fed a corporate buyout binge, with private equity firms borrowing huge sums to buy up public companies and pay themselves big dividends.


There is $11 trillion in outstanding corporate and business debt laying in wait for us out there. This is actually slightly greater than outstanding mortgate debt:


As the NY Times story explains, corporations and businesses, unlike homeowners, have been able to delay the day or rekoning:

So far relatively few companies have gone bust. But that is not necessarily a hopeful sign. Instead, loose lending has very likely allowed many troubled companies to postpone a day of reckoning — but not forever.

Under the lax terms of many buyout loans (deemed “covenant lite”), borrowers could delay payments, say, by issuing i.o.u.’s in lieu of payment or adding the interest to the loan balance rather than paying it.

And of course the second wave of residential morgage debt won't even begin to unwind until 2010, as this graph so effectively points out:


Can we have her for sec. of treasury?I know shes...well aged...but I like her style...I bet she could do some damage to those snakes running this rip-off

Purple Line (DC Suburbs) Environmental Impact Study

A Washington Post article on the released EIS for the Purple Line. Maryland is going to delay the application for federal funding till this spring.


One of many steps required in the USA before building can start under our current system; which I call rationing by queue. Make cities wait long enough and many will fall out of line.


Mudlogger, thanks for the links on the skills and workforce shortages in the oil industry. Here they are again since they were posted late in the day a couple days back:

Help wanted: Oil jobs
The oil industry is scrambling to attract young workers as 80% of its aging workforce is headed for the door.

Crisis in the Oil and Gas Industry
A skilled labor shortage threatens to stall the boom in investment and exploration.

Labour and skills crisis could stall oil and gas boom
“With the average retirement age for the industry being 55 years, it is obvious that the industry faces a crisis in the next 7 to 10 years as more than half of the employee base leaves the work force.”
"Today, there are some 1,700 people studying petroleum engineering in 17 US universities compared with over 11,000 in 34 universities in 1993." (2004)

Thanks for the thanks:-)

But I have just read a book review putting all into perspective:-(

In the fullness of time (100 million years), the Anthropocene will amount to not much more than a thin strata…


From The Sunday Times

October 19, 2008
The Earth After Us: What Legacy Will Humans Leave in the Rocks?

by Jan Zalasiewicz
The Sunday Times review by Philip Ball

Futurology isn't what it used to be. The space operas that fill the future with intergalactic empires, or the Wellsian dystopias that depict a pre-technological regression, typically encompass barely more time than a geological blink. Jan Zalasiewicz suggests we get a little more perspective. A geologist at the University of Leicester, he gazes for a living into the giddy abyss of deep time, where millions of years pass like days.

Nice one.
As well as the mass extinction event recorded in the geological stratum there will be an interesting concentration of heavy metals. I guess also that evolution's re-start following the human-event will include some bizarre genetic start-ups containing artificial DNA and some equally bizarre rearrangements of existing genotypes left-over from our efforts at tinkering.
I can't however see an advanced technology coming around for the second time based on advances made in the use of fossil fuels and able to do the geology.

I know, all that Mozart, all that Tolstoy, all that Marx Brothers compressed into a few centimetres of heavy metal rich mudstone....

On another, urgent note:


How the hell do you get the smell of Diesel out of a washing machine?

(dont ask. source of problem: 19 year old boy)

I am about an hour away from having Total Unrestricted Warfare being declared on me.


First, any diesel would have floated to the top when the washing was done, so you will have to increase the water level from where it was deposited - if it was on the highest level, wait until it fills and then add old towels or old sheets. Use a high suds (cheap) detergent, and add some Dawn. You may have to do this a couple of times, wiping everything down in between.

I had a girlfriend who came over and washed some oily jeans (mine) in my washer, and that is how I got rid of the problem. Kept the girlfriend, though.

Hey Mudlogger,

Sounds like trouble on the homefront.

Quick consultation with my wife on your question: she suggests trying to flush it out by running the machine though a cycle of washing or baking soda and hot water.

I wish you well. Peace be with you.


Just leave it out on the front porch for a few weeks to air out :-). I am sure the neighbors would understand.

My wife just suggested that gasoline would work. She is more of a smartass than I am, it seems..

As a serious suggestion, I can suggest running a cycle empty using a good grease cutting cleaner (maybe Pine-Sol) with warm or hot water. Haven't tried it, of course..

Thanks. I will lety you know how I get on. :-(

Is Peak Oil responsible?

Dmitry Orlov:

"Slide [6] An economic collapse is amazing to observe, and very interesting if described accurately and in detail. A general description tends to fall short of the mark, but let me try. An economic arrangement can continue for quite some time after it becomes untenable, through sheer inertia. But at some point a tide of broken promises and invalidated assumptions sweeps it all out to sea.

ONE such untenable arrangement rests on the notion that it is possible to perpetually borrow more and more money from abroad,

to pay for more and more energy imports,

while the price of these imports continues to double every few years. Free money with which to buy energy equals free energy, and free energy does not occur in nature.

(Edit-you do not need to be an MIT alumni to see this)This must therefore be a transient condition. When the flow of energy snaps back toward equilibrium, much of the US economy will be forced to shut down."

Someone also mentioned (Editors Inbox: From Super Investment Resource to 'Eco-nitwits' in Under a Year) that the only time the dollar has deflated was 1929-1933. which was also one of the very few times time that the US wealth disparity
gap came together.


"the U.S. economy slowed in 1973 for reasons still not completely understood." At TOD many have put forth the arguement that 1972/3
was when US oil production peaked(I agree).

Since then the top quintile is the only segment of America that has improved. We now move to where only the top 1% will improve.

"In 1970, for example, the average for all CEO pay was about 30 times that of an average worker's; this multiple has increased steadily to about 100 times today. And as much as the chart speaks for itself, there's more: the multiple is actually closer to 500 times if you include benefits and stock options.

If that's not enough, recent data can show the income disparity in other ways, such as how the highest one percent of income earners in the U.S. accounted for nearly 25% of total income in 2006. In 2007, it's likely that the current trend eclipsed the 1929 high."


With the American people being shown complete and utter contempt
in the passing of the $700 Billion Bailout, the stage is now set.

dmitry again:

"In spite of all this, I believe that in every age and circumstance, people can sometimes find not just a means and a reason to survive, but enlightenment, fulfillment, and freedom. If we can find them even after the economy collapses, then why not start looking for them now?

Thank you."


An economic arrangement can continue for quite some time after it becomes untenable, through sheer inertia. But at some point a tide of broken promises and invalidated assumptions sweeps it all out to sea.

ONE such untenable arrangement rests on the notion that it is possible to perpetually borrow more and more money from abroad,to pay for more and more energy imports, while the price of these imports continues to double every few years. Free money with which to buy energy equals free energy, and free energy does not occur in nature.

This must therefore be a transient condition. When the flow of energy snaps back toward equilibrium, much of the US economy will be forced to shut down."

What a quote to savor! No wonder this guy is one of my heroes.

The article that you quoted from is absurdly one-sided. He presents a long list of differences between the USSR and the current USA, and then draws conclusions from every single difference how the USA will fare more poorly in a collapse. There's little supporting evidence or any sort of reasoning whatsoever behind predicting the worst possible outcome from any set of circumstances. He blithely ignores the contradiction inherent in simultaneously pointing out the vast differences between the two states while predicting identical challenges to be faced in collapse.

This guy is obviously bitter about how things turned out for the Soviets, and he's been driven over the edge rooting for an American collapse. I had to wipe the bias off my monitor after I finished reading the piece. Why you would choose to make such a person your hero is beyond me. I am pretty damn far to the left of the political spectrum for an American but I haven't given up on reason like that author has.

I suggest you put your bias aside and read his book,"Re-inventing Collapse".His analysis is spot on and damning.

Iraq is trying to boost its daily oil production to 4.5 million barrels per day. Iraq has the reserves yet needs to develop acceptable contractual agreements before the oil will flow.


Reliance industries petroleum/natural gas disocvery in the Bay of Bengal has inspired Bangladesh to invite offshore exploration.

Mozambique has invited offshore exploration as natural gas has been discovered in offshore Tanzania to the north. A new coal mine should allow Mozambique to increase domestic power generation and export coal. There have been new coal discoverie in Mozambique previously torn by strife.


"There have been new coal discoverie in Mozambique previously torn by strife."

Notice the implication (always) that the strife occurred BEFORE
the mines were discovered. Just uneducated tribal conflicts.

nothing to really do with nothing. ;}

There was a wide coal seams outcropping at the surface (see photo in article linked above). The surface coal must have been discovered long ago. The civil war deprived the region of stability necessary for development and exploration drilling. What is on the surface is a very small percentage of the total volume of the coal deposit. Once they started to drill and prospect they discovered there was actually more resource than appeared on the surface. If they did nothing, they might have nothing.

My point was that the coal started the fighting. ;}

And to the -1 comment:

That we never seem to get that the Conoco building became the
US Embassy/Mogadishu. That Siad Barre was overthrown after giving
away offshore oil drilling contracts to same Conoco.

That oil just happens to lie under Darfur. That Angola just couldn't
seem to get it's act together with it's 2 mbpd oil exports as long as Jonas Savimbi was being given CIA carte blanche.

That Iraq was a good guy until April Glaspie gives Hussein the green light. Venezuela. best buddies, until they start keeping some
of XOM's oil wealth at home.

And on and on, all the way to Georgia.

The super power is responsible for the bad as well as the good.
That's what superpower means to the world.

Interesting point about China & India:

Dr. Saif K. Lalani

I think that given appropriate powers in place deflation is possible in the US. It would be healthy and purge some excesses from our system. But I think Mike Shedlock and others are dreaming if they think that we will have a protracted period of global money supply contraction. Credit standards and interest rates in the US are about as low as they can get. Not so elsewhere. Until recently it was considered a “loose lending standard” in India to give someone a loan for 50% of the property value. None of the exotic products that prevailed here have had widespread dissemination. 95% of Chinese cars are bought with full payment. 95%! Think of that. 70% of Indians and Chinese have never used a credit card and have savings over 20%. Interest rates and reserve requirements are quite high in both countries and have plenty of stimulatory potential.

Mish Continues to make the silly (to my mind) argument that is the equivalent of saying “Someday a person will die” i.e. the end is deflation. He may be right at some point but he will not be right on a global basis for a protracted period of time. Now Mish has a huge problem as he is about as deceptive as any one I know in using things to promote his point of view. When oil prices were rising he repeatedly said that rising prices are not a sign of inflation, and those that argue otherwise are stupid and do not know what inflation is. Now that prices are coming down, every post is about prices coming down - and that is supposed to be evidence of deflation. Let us take a longer-term view. The US dollar has lost 99% of its purchasing power since 1930. Let us for argument's sake say that it gains 50% from here over 5 years before inflation sets in again. It would still have lost 98.5% of its purchasing power at its best moment.

It's called relativity.

Yes, I said the price of crude was going to $167, and then
"float down" from there until the slide increased to a fall
into the gorge of deflation.

The FedRes is scared of deflation. The only time the wealth disparity gap closes is with deflation.

But the gov't is looking ahead to stop deflation(too late) by pumping
"unlimited dollars" into the system. but the system can no longer absorb these "unlimited dollars".

"Buffett is suggesting that we invest in America. It sounds nice. But when a government starts "investing" in banks, it's time to realize that the game is almost over. To get to where we are today, took a lot of "common sense" and the desire to get rich. The normal reward for stupidity, greed and incompetence in business, is bankruptcy. Paulson and Bernanke are trying to keep that from becoming a financial reality.

Warren's right, the market will recover (after it tanks)--just not in my lifetime."


This game has been played since 1972 when the US oil peaked.

Derivatives were created(Enron/special purpose vehicles, never outlawed) to hide this hyper inflation. Now, when debt can no longer be sustained, much less issued, they're coming into the light. One quadrillion, valued now at 8 cents on the dollar. If
that. So that now the actuals are being grabbed up in panic.
1/2 the world's opium crop has vanished(BBC).

The CB's are/have been balancing the low pressures of deflation with the high pressures of inflation. a perfect storm vortex has been created. Sucking in everything.

Inflation is a result of the expansion of money supply and credit.
Deflation is a result of the contraction of money supply and credit.

MV = PQ , Now money supply may still be increasing but the velocity of money has substantially slowed down in recent months, with banks scared to lend to each other, credit markets relatively tied up, people cutting back on consumption.

Thus we have a resulting decline in the aggregate price level, house prices have declined,stocks are down 40%, oil and other commodities are well below their peaks. The FED's current inflationary and expansionary measures are having no effect on the market as velocity for now has slowed tremendously. Resulting in a fall in aggregate price level and a lower consumption of goods and services. All credit booms result in busts, just as night follows day. Deflation I believe is here and now.

Sorry VK, after correctly stating the money x velocity of circulation equals prices x goods sold, you completely missed the V in your explanation. The authorities are increasing M (printing money) because V has fallen in the toilet and can't get out.

The US borrowing well dried up even before Cantarell. Who'd a thunk it! Get ready for a reinflation with oil price increases - new highs within a year - driven by massive new numbers of dollars. No different from any self-respecting South American backwater.


The article snip you post is a bit not going much of anywhere. Or something. The difference in credit requirements is certainly interesting, but Germany has strict standards too, and no housing bubble, and they just spent $680 billion bailing out their banks. What gives?

Moreover, a 20% savings rate in rural India doesn't lend much evidence to anything, I'd say. Not if people make $25 a month. I'm having to guess, since he 'critiques' Mish, that the author connects this to a possible inflationary trend, but I don't see him offering much in the way of proof.

The way he squeezes TheOilDrum into his 'argument' seems out of place as well. What is this, a buzzing budding deflation conspiracy nest? Really?

We've been through the same thing a 100 times, so let's keep it short; rising prices for one single commodity, or a few, doesn't constitute inflation. The fact that politicians and media push that meaning for the word doesn't make it so.

The problem with it is of course that you would have to find an entire new term for what 'inflation' truly means: price rises across the board on account of increasing money supply. These days, meaningless terms like 'consumer inflation', 'price inflation' and even 'food inflation' [sic] are all the fad. Down the line, that'll lead to what I named "cookie inflation", which all of us can recognize as a silly notion (though, I just googled it, there is a browser functionality related version, just brilliant!)

Mish has made lots of mistakes, especially in claiming until recently that things 'wouldn't be as bad as the tech bubble'. He posted a piece today on preserving food, though. I think he's waking up.

Still, on deflation, Mish has been very consistent, whereas the author's comments make little sense to me. Yes, falling commodity prices are an indicator for deflation, even though rising prices earlier in the year were not. The reason is the $30 trillion lost in global equity -and commodity- markets in just the past year. Feel free to add $5 trillion in lost equity in the US housing market, and another, say, $10 trillion in the rest of the world.

We are approaching losses to the global financial system, in one single year, that equal the entire $50-odd trillion global GDP. No mean feat, losing as much as you make. And I still haven't seen anyone offer me proof, or even an explanation, of how inflation could possibly occur against that backdrop. What has been pumped in is perhaps 10% of what disappeared.

From the original post:

We have great stocks trading at 3-5 times expected earnings. Sure many estimates will come down but many will not. Those are bargains of the century....

Wait a minute, I happen to know where Dr. Saif Lalani, PhD, lives. In La-La land.

Anyway, I'm up to 22 countries in doo-doo now:

Deadly Sins and Screaming Giveaways

Jeffrey Brown has been talking about reducing your exposure to the discretionary economy for a long time. Today is a good time to heed his advice.

ilargi, great to have your input.

In your opinion, is there anything we should be on the lookout for this week? Are you gleaning any further monsters sloshing around the abyss about to pop their heads above water to take a few more landlubbers for a deep dive? In other words, what dangers are you keeping a close eye on now?

Enquiring (inquiring) minds need to know. Thanks.


Zadoc, we are in the clear until tomorrow, Monday - then Lehman settlements are coming due and we find out how much everyone owes:

Hugh Johnson, head of Johnson Illington, an American fund manager, said: “I hope the $6 billion estimate is correct — that would be a real gift — but I don't believe anybody really has a good handle on the size of the net settlement. I have heard a range of $2 billion to $300 billion and have no idea what it is.” Mr Johnson said that “significant net settlement figures” could require further government intervention and may force down financial shares as investors fret about exposure to CDS contracts.


So, get a good night's sleep is the best bet! - things may be interesting again shortly!


It's as simple as it is hard to oversee. We are entering the phase where every institution, private or public, that needs credit lines to survive, is at risk. TED and Libor spreads may be down a tad, but not nearly enough to justify a multi-trillion hand-out. The banks are too deep in debt, simple as that. All the extra mullah they get only serves to fill a tiny bit of a huge pre-existing hole. Since all this credit needs to be rolled over ever 3 or 6 months, victims could drop down anywhere now; that's the hard to oversee part.

There are a zillion enterprises around the globe hanging on by the skin of their teeth, losing turn-over because customers scale back their spending, while at the same time their lenders, if they are willing to lend, do so at much higher rates. This will lead to a zillion pink slips first, and a long line of bankruptcies later.

I wrote today that Latvia is a likely next victim when it comes to countries, that 30 major US transit agencies face large service cuts, and that lower-level governments are in a boa constrictor squeeze. Since it is sort of a 3-D domino game, nobody knows what goes first; chaos theory has its 15 minutes of fame. Keep an eye on Pakistan. Nuclear state, full of wild-eyed youth, and rejected for help by the US and China until now. Iceland will have a hard time, but they have only 300.000 people, a midsize town. Pakistan has 175 million, and one of the fastest growing populations on the planet.

That said, watch the Ukraine. (I like saying The Ukraine, like The Lebanon, and The Netherlands). Everything west of Russia that was once behind the Rusty Curtain has gone from rags to riches in 20 years, with nothing real to show for it. How could they have known? Mortgages in Yen and Swiss Francs. Today, the redefine "wasteland".

Well, if you want more, you know where to find me.

Thanks ilargi, read you everyday.

One would think Pakistan's strategic role for supply lines in and out of Afghanistan would make it too strategically significant not to be rescued by the US -- a prime candidate in the same league as those other entities deemed, "too big to fail". The fact that a nuclear armed country of 175 million is teetering on the precipice with cap in hand to the IMF says, IMO, much about how overextended the US really is geo-politically and financially.

Take Pakistan out of the equation, goodbye western forces in the region. Both the Wolfowitz and Carter Doctrines will be dead in no time.

It really is TEOTWAWKI. It's like watching a car wreck... in the midst of the action time seems to slow down to reveal the unfolding events one painful step at a time.

And thanks Dave for pointing out Lehman settlements are what to watch for Monday.

There really hasn't been a boring week this summer or autumn. I don't expect the upcoming one to be any different.

Well said!

Wait a minute, I happen to know where Dr. Saif Lalani, PhD, lives. In La-La land.

Actually it is Calgary.And the stocks I was talking about are energy and fertilzer companies.

Your loss numbers of 50 trillion...could you explain how you got that?
Sure the fed has replaced 10% or so ..anything you know that stops them from replacing the rest?
The more that is destroyed the more they can create without creating inflation. In fact the stronger dollar allows them to do so easily.

"The US dollar has lost 99% of its purchasing power since 1930. Let us for argument's sake say that it gains 50% from here over 5 years before inflation sets in again. It would still have lost 98.5% of its purchasing power at its best moment."

What I find even more interesting is to compare the US dollar with other countries currencies. Comparisons before WWII are rather difficult because of the war, comparisons after the war are rather easier. If you were to compare with pre-WWII would you rather have German Marks, Italian Lira, Chinese, French franks or Argentinian money? I think you will find that the dollar pre-WWII or post WWII is not quite as shabby as you think when you compare it with other countries. I believe it would be more useful to compare the dollar against other countries during the same period.

What I find even more interesting is to compare the US dollar with other countries currencies. Comparisons before WWII are rather difficult because of the war, comparisons after the war are rather easier. If you were to compare with pre-WWII would you rather have German Marks, Italian Lira, Chinese, French franks or Argentinian money?

Oh I have no doubt about that. My point is that currencies do not float they just sink at different rates. The govts will creat whatever amount of money necessary at this point. Deflation could win but not globally and not in the long run.

Re: OPEC production cut no enough

Depends on what the real consumption of oil is. The current price is a reflection of hysterics and not fundamentals. OPEC has to be careful not to decrease too much or they will push their customers into a deeper recession. We are at an interesting juncture: if the recession lasts for a few years we may see it be continued by the natural decline of oil production.

If OPEC does not cut, they are in deep recession.


Everyone should read the link up top: From Subprime to Meltdown: Is Peak Oil Responsible?

I have stated before that the economy is in such a damn mess because cheap energy has disappeared and oil production stopped growing almost four years ago. Money is loaned into existence. The economy must grow in order that interest on loans can be repaid. When the economy stops growing then borrowed money no longer creates new money, new money to pay the interest on all those loans.

People are looking for scapegoats like the CEOs of the large financials, but these guys are victims just like the rest of us.

Oil is the lifeblood of all the world's economies. When the oil supply stops growing, or gets so expensive that many cannot afford it, then economies stop growing. Economies must grow or money dries up and hundreds of millions lose their jobs. The world can survive short term periods of no growth. They are called recessions. Longer periods of no growth are called depressions. There is no name for what we are beginning to experience. That is the period when not only does growth stop but in fact economies all over the world begin to shrink.....forever.

But when one understands the process that has been responsible for population growth, it becomes clear that an end to growth is the beginning of collapse.
David Price, Energy and Human Evolution

Ron Patterson

Ron, I agree with most of the things you write. And, I can, very easily, see a severe recession, or depression, on our horizon. However, I can't see it being the "end of growth." For one reason. Oil, quite simply, CAN be replaced. And, if we lose a little eroei in energy production, we can "make it up" in another. ie: how we USE energy - more efficient engines, boilers, less travel, etc.

From Alan's "electrified rail," to my "biofuels," to Nuclear, to incredible advances in micro-biology, to nano-solar, etc. I just can't see "the end of growth."

Need to keep an eye on Toto's "Phosphates," though. That looks more dangerous to me than depleting oil.

Kdolliso, constant growth on a finite planet is impossible. At some time, growth must stop! And we have been, for the last decade teetering on the edge of the collapse of just about everything. This is because we are actually reaching Peak Everything

The problem, well one of many problems, is that the population keeps growing at about 70 million people per year while everything else is declining. Water tables are dropping, grain harvest are dropping, thousands of species are going extinct, forest are disappearing, deserts are expanding, rivers are drying up, lakes are either drying up ,(the Aral Sea, Lake Chad), or becoming cesspools, (the Black Sea, the Caspian Sea), and I could go on and on along this line.

And you think growth can continue? I think that calls for denial of everything!

Ron Patterson

Sure, the question is When. I think, later.

Pop. is growing? Why?

Water tables dropping? Desalination is getting cheaper.

Grain harvests are dropping? No they're not. A few bloopers like that and game's over. Lord have mercy; we could grow 10 times the grain we grow now if there was a "market." (ie: if the poor people just had something of value to trade.)

Species are, constantly, going extinct. Every time the climate shifts some species die (and, some are created.) The Polar Bear used to be a Brown Bear fer ex.

Deserts are, always, being created somewhere. Forests are destroyed by fire, chopped down, die from asteroids, or disease, and then they regrow. Same ol, same ol.

Rivers come, rivers go. Weather patterns change. Where I live used to be the middle of an Ocean. Lakes are polluted. We can fix that, and Produce energy while we're doing it. Brooklyn is installing some new stirling engines to produce electricity from the biogas from their anaerobically digested sewage. Those cities on the Caspian will eventually do the same. Why? To save money. The best reason in the world. Encinada will, one day soon, start processing their solid waste into biogasses, and or ethanol. Why? To make money. The best reason in the world.

Look, Ron, I agree that there's a "Limit" somewhere. I just think it's a little farther out, that's all. Jes sayin.

Water tables dropping? Desalination is getting cheaper.

That sentence is totally absurd and totally wrong. The cost of desalination is tied directly to the cost of energy. And besides, no one in the world uses desalinated water for irrigation. Way too expensive for that. And irrigation is why the water tables are dropping.

Grain harvests are dropping? No they're not.

Per capita they are dropping.

Despite growing harvests, several factors are actually decreasing the amount of grain available per person as food, which peaked at 376 kilograms in 1986.....
World Grain Harvest

And the rest of your post is just down in the dirt stupid. Deserts were originally caused by nature but the current desertification is caused by humans! Forest are being cut down and destroyed by humans. The Yellow River does not reach the sea for most of the year because its water is being diverted by humans for irrigation. The Aral Sea and Lake Chad dried up because the water was diverted for irrigation. Water tables are dropping, in some places by several meters per year, because the water is being pumped out for irrigation. In India less and less land is irrigated because the wells are all running dry and people are starving.

And species are going extinct at a rate not seen in 65 million years.

You have been reading too much Bjorn Lomborg or some other idiot.

Ron Patterson


Ron, we took an old "sand-farm" and made it produce. With the new seeds, and technology it would be easier, today. If man can cause desertificatio, man can fix it.

If they want that water to flow into the sea, and become salt-water they can move to "drip" irrigation. Or, maybe they can use the newer drought-resistant seeds.

"down in the dirt stupid?" :) Cool.

I met up with Bjorn Lomborg a few weeks ago and he is still spouting out the same old story, he's just increased the amounts that should be spent say from $50m to $75m on any one project. Unfortunately he is still using very old figures for climate change etc. but won't accept new figures unless they help his case.

Of course prioritising things makes sense, but not when pet projects are promoted. I guess as Upton Sinclair says: "It is difficult to get a man to understand something when his salary depends on his not understanding it."

If you can't literally SEE that we're Peak(Everything) you must be living under a rock(and watching too much TV).
All 'fixes' are sub-optimal and all we have are these 'fixes'.
There's a reason we aren't living on the Moon or in cities under the sea; that crap doesn't work.
For example you mention digesters as in Mad Max Beyond Thunderdome--in reality 1000 pigs could make just enough methane to run ONE of the 4 burners on your stove top range (continuously).


We're burning through all the fossil fuel/ancient sunshine accumulated over 300 million years in a couple of centuries.

K, you're delusional.
Maybe all these down ratings have gotten to you.

Don't know about your "pig-poop proposition," Majorian; but, 4 cows can produce enough electricity to run a household (and we have One Hundred Million Cows, and calves in the U.S.)

Also, a major part of any city's operating budget is electricity to run the sewage plant; and with anaerobic digestion they will power themselves, and provide a little left-over.

What down ratings?

That looks wrong.

The average household uses 11000 kwh per year or 30 kwh per day.
The digester for cows(10 times that of sows) produces 3.1 kwh/ day per head so you'd need 10 cows(not 4) to make enough gas to run generators according to this manufacturer of digesters.


So how much energy could 100 million cows produce? 310 GWh per day, right? There are ~110 million households; to supply them with power as you suggest would require 1 billion cows. A cow eats 200 pounds of feed a day so a billion cows would need 36.5 billion tons of feed per year. The US corn crop is ~350 million tons. Your world would require 100 times as much feed.

It doesn't make sense.

Ease up, Bud. I never said that you could produce enough electricity for all our houses with poop-power. My prop was that you could produce enough electricity for approx 25 million households. I saw some farmer on tv that said that 4 of his dairy cattle could power a house. Maybe his cows are super-poopers (or, maybe he is.)

Anyhoo, 10%, or 25%, it's a start, right. Bee bees, baby, bee bees.


IMO in order to grow economically we must use ever more energy, which means it must become ever more affordable - not likely.

IMO to continue/resume economic growth this means that any alternatives to our current mix of fuels must be more affordable than now - again, not likely, certainly not for the forseeable future anyway.

I have a hunch that since in the real world there is no such thing as a free lunch (laws of thermodynamics), subsidising alternative energy sources to make them appear more affordable is just 'smoke and mirrors' - the energy has to be paid for from the overall economy somehow.

The reason we use Fossil Fuels is because compared to current alternatives they are ultra affordable at the point of use. Beware, even they are becoming less and less affordable - if you take the 10 year view, massively less affordable.

I would disagree with the comment "growth must stop". Assume we are currently at peak everything and shortly thereafter 90% of the worlds population is wiped out leaving the smartest and strongest as the survivors. Since the remaining 10% are the most intelligent,creative and strongest humans the world has known they would simply start anew. These remaining 10% now have all the resources to themselves and no longer have to share with the weaker 90% that were wiped out in very short order. Now having an abundance of resources the 10% will create new technologies and growth will once again continue. This is all conjecture on my part and I truly hope it does not go down like this.

No no no no. The strongest and smartest will not necessarily survive. The least ambitious and the "meek" (according to the Bible the meek will inherit the earth) will survive.

The people who live simple lives in rural areas where they can grow their own food will probably do better than the "smart" "strong" ones who went to good colleges and then to the cities to get rich.....

The people who don't compete but cooperate, the people who aren't focused on getting ahead all the time, but just enjoy life's simple pleasures, will IMO do better.

The people who use their body strength rather than machines to do work and who live without luxuries will just keep going. There are many all over the world even now.

The clever ones will be trapped by their own cleverness. Aesop has many fables warning about being overly clever and confident. "The Tortoise and the Hare" is one example if you don't believe the bible.


what do you make of the work behind The Limits to Growth? Is their model fundamentally wrong, then?

Scenario 1

They created another scenario in which they doubled the resources, which could be looked at as getting double the utility of non-renewable resources via substitution:

Scenario 2

In both models, growth does in fact end.


pardon any typing errors; I'm laughing so hard I can hardly keep my laptop on my lap. It looks like a plate of spaghetti to me. I'm Not an Academic, (I don't even play one on the intertubes) and I haven't read the book.

Look, I have NO idea what the limit is. I just think it's quite a ways farther out than is being posited by some at the "Drum." I don't think it will be the demise of oil that does it. I think "Phosphates" might be a different story. That's probably 30, or more, years out. Beyond 20, or 25 my crystal ball starts getting real murky.

I figure a few people in the early years of the OD, for whatever reason, paid a disproportionate amount of interest to the "Patzeks," and "Pimentals" of the world. Groupthink set in; and, it's hard to get away from. I think biofuels will contribute much more than most, here, believe. Solar, wind, biomass, wave, geothermal will, also.

We'll see.

It looks like a plate of spaghetti to me.

Yes, new graphs can seem like that at first to me, too.

If you are interested in understanding the issue of growth on our planet, I recommend that you read Limits To Growth: The 30-Year Update.

Even if you disagree with their conclusions, you'll find that it is a seminal work and comes up often in this discussion.


I'll try to take a look at it, aangel. I must admit, however, I'm pretty much an incurable optimist. I'll probably spend most of my time trying to come up with reasons why they're "full of beans." :)

They're working on the cure. Stay tuned.

Exponential growth I reckon is something really difficult to grasp. That is why we have so many people have so many illusions regarding the future. We've reached or are very close to the limits. Net oil exports have never reached their 2005 level. Those who are regular readers and contributors to TOD know that no combination of wind, solar, biofuels (biodreams?), nuclear, coal etc can fill the gap of liquid fossil fuels, otherwise that process would have already started!

Again it has been addressed by Nate Hagens time and time again that people can't fully grasp the level of change and the swiftness with which it will occur. There are inherent biases in our brains that looks at something like the limits of growth and says "Yes, that makes sense BUT i'm an optimist and we'll pull through. Faith and hope will drive my car!"

What action needed to be taken, needed to be started in 1990. I reckon we're too late at this point. (But I hope i'm wrong and biodreams becomes bioreality)

I think we're getting started up pretty good.

In 2003 Patzek said it couldn't be done. (and, again in 2004, 2005, 2006, 2007, and, last week, I think.)

In 2008 we're just a hop, skip, and jump from supplying 10% of our transportation needs with ethanol. Corn ethanol, at that. And, it's like we haven't really even gotten started yet. Corn is still $4.00/bu., and wheat is $6.50 front contract (a heck of a lot less at the elevator.)

The bad news, VK, is that a Free-Enterprise System always starts off "behind the curve." The Good News is that it always Ends Up "Ahead of the Curve." It's just the way it works. :)

Exponential growth I reckon is something really difficult to grasp. That is why we have so many people have so many illusions regarding the future. We've reached or are very close to the limits.

Not to minimize the crisis of the massive costs of switching tens of trillions of dollars of infrastructure, but given the total energy budget of civilization is 10^13 watts and solar insolation is 10^17 watts, I'd say we still have a ways to go before reaching these limits. Given we can produce 1 GW year from 1 tonne of thorium or uranium and there are some 160 trillion tonnes of uranium and thorium avaliable, that gives us several million years to think about running at the total limit of heat dissapation. Thats only on earth mind you.

I've done this calculation.

With a modest 2-3% annual exponential growth we hit total insolation in a few hundred years. The entire planet covered with solar panels.
No room for oceans, people, plants. Increasing efficiency to 100% against 20% now gives us an extra 80 years or so. If we could build a shell of solar panels the size of the earth's orbit round the sun we might make it to the end of the millennium. (of course, we should build the
shell closer to the sun and just leave a rotating gap to let light out to illuminate the earth). Also, if we directed the entire energy of the sun's output directly towards the earth via mirrors we would have a working death star.

La la land.

At 2% growth (the historic average for the last century) it would take 500 years before we consumed total insolation, and 1600 years to consume the total output of the sun.

So what? The point is we're not at the limit now, nor are we approaching it any time soon, and we have no reason to expect a flat growth rate of 2% for hundreds of years either.

Albert Bartlett's presentation is a useful introduction.

I also like Lester Brown's book "Plan B 3.0" as it covers some of these same points. Brown is actually somewhat more optimistic that humans can turn it around before things really go to hell.


I forget who it was that said this (Mish, Willie?) in the last few days but the word was DISINTEGRATION.


"Disintegration" is used at this website for two links to articles about it:


Matt Savinar's site with news dated october 17th. He hasn't updated that page at least as of this time.


Does somebody know what was the inflexion point?

I have stated before that the economy is in such a damn mess because cheap energy has disappeared and oil production stopped growing almost four years ago. Money is loaned into existence. The economy must grow in order that interest on loans can be repaid. When the economy stops growing then borrowed money no longer creates new money, new money to pay the interest on all those loans.

As Colin Campbell so eloquently put it:

Tomorrow's growth is collateral for today's debt.

And now that the growth has stopped and the collapse proceeds in earnest, we can thank those like Mr. Orlov quoted above for giving us a heads-up on what to expect.

Five years of preps here and counting...

Germany opened a solar cell plant in Oregon capable of producing 500 MW/yr, enough for 100,000-125,000 houses. An extended tax credit subsidizes the solar power industry at taxpayers' expense.


2,000 high-wage jobs

What is high-wage ?

Less than an investment banker's salary, and more productivity to boot. Think of the ROI versus that of the bailout, and it seems like a great deal.

My high-wage question goes to my job hunting task, as I am graduating with an HVAC/R A.A.S., Dec.

BTW, Huntsville AL. is on my shortlist of leads to research. You can email me (bio page) if you wish to reply. I'm looking for what's generally called 'on-staff' or 'in-house' positions.

Q. What is high-wage ?" A. more than minimum wage :-) depends on your perspective.

Thanks tonyw - and you to Paleocon ...

I was hoping for a response from
someone 'in the field' :)

Oman was another nation able to reverse declining oil production in the first half of 2008 with higher oil prices financing increased E&P activity:


Great Britain has the lowest oil production trend this year since 1994.


According to recent statements Norway is exporting about 2 million barrels a day and does not plan to join the OPEC export cut. They were exporting an average of 2.2 million barrels a day in 2005 (EIA).

The Mexican production decline story is well known.

West Africa, North Africa, and Brazil all growing in production. The South Pacific rim abuzz with activity. Canadian tar sands not as economical as Venezuelan tar sands, but the political situation in Venezuela is such that Chavez might want to cut his oil production.

Russia might be down one year, up another, it depends on how much the Russian govt. wants to support their oil companies.

Sorry for the error that data was only for one North Sea field, it was not a nationwide chart.

So, some countries are in terminal decline, but other regions--such as West Africa, North Africa, and Brazil--will have stable to increasing production forever? Here is an alternative theory--peaks happen, even in regions developed by private companies, using the best available technology, with virtually no restrictions on drilling.

Peak oil happened for some nations, more frequently it was noticed for individual oil fields. When reading a chart one may use the term new worldwide total liquids production high instead of, "this must be peak oil." AFter all the oil has been counted in decline for a few years and OPEC has no spare capacity left, one might tenatively call a peak. Peak onshore light sweet crude may have occurred. Total liquids peak may not be confirmed at this time. Saudi Arabia had plans to turn its associated natural gas into liquids (GTL). Qatar has GTL projects too. There are more ethanol plants being built around the world. Obama wants cellulosic ethanol research. Am not sure the motorists will want to pay that much for fuel.

Hello TODers,

Pakistan reported nearing default, to seek IMF help
My condensed edits from the comments section:

--There will never be enough money to help Pakistan, India or Bangladesh until they have the will power to CONTROL their out of control population GROWTH.

--hypothethical IMF/Pakistan conversation: if you give us Bin Laden and your nuclear weaponry, then drastically raise your taxes, maybe then we will consider loaning money [@ high interest] to you.

Hello TODers,

Here is a recent link on Pakistan and the fast-crash effects of their fiat currency devaluation. While reading the link: Imagine if the same trend was happening to our 'dead presidents':

45 percent rupee depreciation halts growth

..The officials said that the government is unable to decrease the fuel and fertilizer prices due to the record devaluation of the currency against dollar despite the prices of fuel, fertilizers and some food items had decreased in the international market.

The depreciation of the currency is also multiplying the cost of doing business and badly affecting the industrial, manufacturing and agriculture sectors as Pakistan has to import fertilizers, food items and industrial raw material.

..He further said that the prices of all medicines would shoot up in the country in the days to come as the pharmaceutical industry is importing raw material, the price of which has surged due to devaluation of currency.
IMO, with Pakistani growth over: I would expect numerous cascading blowbacks to rapidly overwhelm the Overshoot. They could easily be as unfortunately sad and dire as Haiti in five years or less. Time will tell.

Chart of Pakistani Death rate [2003-2008]:


This was during the last gasp of cheap and affordable FFs. With all the current, in-country strife: I wonder how fast this very slight decreasing trend will now ratchet in the other direction?

...While India ranks 66 out of the 88 countries on the 2008 Global Hunger Index, Pakistan stands at number 61. Bangladesh made the list at number 70. According to the authors of the report, three leading indicators - prevalence of child malnutrition, rate of child mortality, and the proportion of people who are calorie deficient – were the standards upon which the countries were rated.
I suggest that all of Southern Asia needs to go to maximum Peak Outreach ASAP.

Soil feed prices eating at farmers

..Farmers will likely pay between 25 percent and 150 percent more to fertilize next year’s crop, Hurt said. Fertilizers containing potassium nutrients are projected to rise the most – between 75 percent and 150 percent. Soaring fertilizer and seed prices are likely to be the fastest rising farm costs.
As posted before: if someone could invent a tractor-mounted, real-time topsoil nutrient and PH tester that would feed this data into a custom [NPK + trace elements] blending machine for instant soil dispersion--huge income potential.

There is already such a system in place. It works this way.

You pull soil samples on a farm/field or whatever.
You input the values into a farming program that will burn a PC Card(like a thumb drive if you will).

Plug this card into a reader on a Controlled Variable Rate fertilizer spreader. You then apply on those nutrients needed based on a GPS map basis of nutrients(N,P,K)..

The hard part is sampling N. Some university test labs don't return N values.

This practice came about 3 years ago. Many farmers decided it was worthless. Some went for it. Most couldn't handle the technology.

I did all the above except burn the card. The farmer/operator I did al l this for decided that computers were junk, even though I am typing this comment on his shop computer that was once mine that I installed for him when his old one died.

Trying to convince him that the soil sample maps were correct was a wasted effort. He just couldn't handle the concepts of it all. I think due to a poor education mostly. He just couldn't think 'outside the box' like a lot of farmers I know. Yet I work on his semi's using a handheld tech scan tool to access the ECU and EEPROMs in the semis.

VRA is the acronym. Its not going over too big as I can see.
When N,P,K get really really expensive perhaps more will join in.


Hello Airdale,

Thxs for responding with more info. As you know: I am a hopeless Asphalt Wonderland resident, so I welcome any elaboration from you or other experts. I hope you have time to consider my latest NPK posting further below as it is a rough postPeak sketch, with many assumptions, but IMO, the general thrust of the logic seems sound.

I hope that any TODers with expertise in biometrics & human performance capabilities will speak up [text up?] with more research in just what we are leverage capable of moving over time and distance with food calories with wheelbarrows, bicycles, and SpiderWebRiding.

If we can find a way to 'juice' just the uphill runs with PV or Windturbine charged batteries/e-motors as a briefly applied parasitic pusher unit on these Spiderbikes: it could greatly extend the usable range and areal coverage of small, cheap, light, narrow gauge SpiderBikes. As posted before: hopefully as the 'ribcage' to the 'spine and limbs' of Alan Drake's RR & TOD ideas.

In direct contrast to my previous link where the Purdue University agronomist projects I-NPK prices going up:

Potash and Agrium Targets Slashed - UBS Analyst

..UBS cut its 2009-2011 average price forecasts for fertilizers such as potash, diammonium phosphate [DAP] and urea by 19%, 45% and 36%, respectively.
It will be interesting to see which expert forecast is proven correct going forward. My hunch [maybe wrong?] is that the I-NPK cartels' global pricing and production flowrate collaboration, legally allowed by the Webb-Pomerene Act [plus other countries' similar legislation], will generally be effective in quickly curtailing any massive buildup of excess JIT inventories, thus keeping prices and profits high. Time will tell.

This will allow the companies to achieve their goal of adequate cash flow and internal capital reserves to keep operating even if most debt financing seizes up. IMO: with the ongoing global de-leveraging, the increasing requirement that the farmers prepay far ahead for their needed inputs will further help finance this global 'pull system' supply chain.

In short, not borrowing from future generations, but now having to cough up the present real assets to gain access to future real assets.
We will see...have you hugged your bag of NPK today?

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

A little more thinking on this topic:

In the olden days, the ships dead-reckoning sailing for human bones, Egyptian cat mummies, bird & bat guanos, and Atacama Desert nitrates did not leave port with a convenient Mastercard{Tm}, but had to be provisioned beforehand with real assets such as water, food, grog, gold, clothing, and whatever else was required for the long months at sea ahead.

It took real goods to have a chance to return back to the UK with the future goods of non-substitutable NPK to hopefully leverage their topsoil towards a Liebscher's Law of the Optimum and avoid a Liebig's Law of the Minimum.

I suspect the same real asset/future asset tradeoff will eventually be postPeak required to get Morocco's phosphates, Canada's potash, Russia's urea, etc, to be moved globally. If the farmer's topsoil is trending towards Liebscher's Optima: approx. 100 lbs of I-NPK can generate one ton of foodstuffs; a transformed 20:1 food ERoEI. IMO, this will be a very powerful global force, especially when the FF's ERoEI becomes far less than the NPK's ERoEI.

So, as an postPeak example, instead of taking US dead-President fiat toilet paper: Morocco could demand 'real asset' sulfur and foodstuffs in exchange for their beneficiated phosphorus.

Hello TODers,

Recall that Matt Simmons and our AlanFBE both say to move as much as possible by boat first, then electrified mass-transit [E-RR] for max. efficiency. I would postPeak offer SpiderWebRiding and wheelbarrows for the last, local miles to the final square footage dispersion and/or initial accumulation [for the other flowrate direction].

If we are postPeak forced to use our nuclear aircraft carriers to transocean move non-substitutable NPK: let's hope that money can be found to build a huge fleet of non-luxury sailing ships like Perkin's 'Maltese Falcon' megayacht:

Google Images Link:


Recall the earlier weblink that stated that moving I-NPK far inland and/or up in altitude can result in the cost multiplying by four to six times. Of course, this is purely fixed by the laws of physics, but if the US transport infrastructure is non-FF optimized as much as postPeak possible: tremendous competitive advantage should accrue as the FF ERoEI declines.

Let's say a postPeak 50 lb. bag of Moroccan DAP is twenty bucks at their seaport. If moved by a US sailing ship: the transocean cost is mostly the food and grog cost for the captain & crew. In contrast, a FF-burning ship headed to a seaport for overland transhipment to Zimbabwe is already at an embedded energy cost disadvantage.

US [Nola seaport] @ $21, Mozambique [Xai-Xai seaport] @ $25. Next, the US bag is moved upstream by a combo wind & [pantograph equipped?] E-barge, while the barge leaving Xai-Xai burns more postPeak expensive, but low ERoEI FFs while steaming up the Limpopo River towards Zimbabwe. US: $23, Zim: $35.

Next, the bag is moved to US E-RR in St. Louis for the next transport leg vs the competing Zim bag is moved to truck at Parfuri. The US bag moves quickly, easily, and efficiently far inland and far up in altitude to Denver [now $27]. The Zim bag had to travel slowly over bad roads and a badly tuned truck [now $50/bag in Harare].

From Denver, the 50 lb. bag is easily 3-hour moved by a pedaling SpiderWeb rider going 10 mph for 30 miles on Denver's relocalized permaculture network for mostly the food cost of $5 for a nutritious meal. The bag is now $32 in Boulder. The Zim worker, having neither a wheelbarrow or bicycle, much less an even more energy-efficient SpiderBike, could only carry this bag on his head for 5 miles for the same caloric intake [bag now $55 in the Harare suburbs].

The last distance in Boulder to the final farming/gardening acre is quickly covered by a worker moving and dispersing this 50 lb bag in a wheelbarrow that also has an additional 100 lbs of locally recycled, and well-composted O-NPK manures and mulches mixed in, plus 50 lbs of diluted urine than can be efficiently drip-targeted to the crops. Let's say another 3 hours of work and $5 more food: US cost per acre of both I/O-NPK at ideal Liebscher's Optima--> $37 per acre input will yield 1,000 lbs of food with ideal weather.

Meanwhile back in Zimbabwe: to move the 50 lb I-NPK bag the last 25 miles by the iconic, but tragic head-transport method--> it takes five more workers at a slow and arduous 5 miles apiece, or another $25 dollars in food calories [$55 + $25 = $80]. The I-NPK bag has now reached the final acre, so let's add $2 in food calories for human topsoil dispersion; $82/acre, but no O-NPK was recycled [the sewage is piled up in the houses and streets back in urban Harare--see earlier weblinks].

Thus, the Zim acre is barely above a Liebig Minimum, has poor soil mulching and low worm and micro-organism growth--nowhere near a Liebscher's Optimum. Final result with ideal weather: $82/acre input, but only 350 lbs of generated food.

US: $37 input-->1,000 lbs output [easily moved far back into town or city on Spiderweb and AlanFBE's RR to feed many].

Zim: $82 input-->350 lbs output [most likely consumed entirely by the local, nearby village at starvation rates].

The Zim topsoil being non-optimized caused the plants to be weaker, grow slower, be more susceptible to disease and insect pests, and produce less harvestable yield/acre/bag.

Oops, I forgot to add the additional yield from the US O-NPK recycling per acre to the I-NPK yield. My SWAG is now the $37 input would now generate 2,000 lbs of output, or one ton of foodstuffs.

Of course, I welcome any TODer enhancement or disputation to this hasty essay.

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

I find this analysis disturbing. More disturbing that oil at 147$. Can it be right? It just doesn't seemed to be based on fundamentals. What is the opposite of a market bubble?

Commodities Index Could Lose 40%:


Hello TODers,

From Bahrain [since they are huge food importers, it is obvious that they avidly watch global crops]:

Wheat prices in Britain may no longer be high enough to cover even variable costs, particularly on lower yielding land, a consultant said.

"It is quite clear that for lower yielding land there is a big question mark at these current prices whether you should go ahead (and plant)," he said.
Recall that the UN FAO and Bill Doyle [POT's topdog] urge record planting to rebuild global food reserves. IMO, plus Pres. Clinton, ramping O-NPK recycling is the best way to keep I-NPK affordable, for as many as possible, for the assertion of Optimal Overshoot Decline.

Remember David Suzuki?

SCIENCE MATTERS: When mammals are threatened, we are threatened

..Humans are the most numerous mammal species and our influence now extends to every square inch of this planet, as well as the atmosphere. But if we think we can survive such a rendering of the web of life as the extinction of one quarter of all mammal species, we're living in dreamland. The long-term consequences could be catastrophic because, as the top predator on the planet, our survival and well-being depend on the health and well-being of all life that supports us. (And remember that long-term in this case is only 30 years!).
IMO, we will never convince sufficient numbers of people with the climate change facts--we will have much better success by keeping extinctions prominently in the news. Imagine the loss of the panda, chimpanzee, collie shepherd dog, tomato, rose bushes....

Hello TODers,

Eyes Turn to the Fear Index

Fear is running high on Wall Street. Just look at the Fear Index.

..The index is not an arbitrary number: it offers guidance for the expected percentage change of the S&P 500. Based on a formula, Friday’s close of around 70 suggests that investors think the S&P 500 could move up or down about 20 percent in the next 30 days — an almost unheard-of swing.
Yow! That kind of volativity means that owning TUMS, MYLANTA, or PEPTO-BISMOL is a sure thing.

What has happened to oilwatch monthly?

The PDF says next update 15th September and neither that one or Octobers has appeared yet.


I know Rembrandt is working on a new one now.

Is it going to be a pretty picture?