DrumBeat: November 19, 2008

Oil falls; Americans cut driving by 90B miles

SIOUX FALLS, S.D. – Oil slipped below $54 a barrel Wednesday as stock markets across the globe fell and yet another U.S. government report illustrated the disarray in the housing market.

U.S. motorists, stung by record gasoline prices, job losses and falling home prices, left the roadways in droves, logging almost 11 billion fewer miles in September, according to the Transportation Department.

Governments, businesses and consumers have slashed energy expenditures, which has halved the price of crude since record highs in July.

Melting ice now main driver of rising sea levels: study

PARIS (AFP) – Runoff from ice caps in Antarctica and Greenland along with melting mountain glaciers have replaced expanding oceans as the main driver of rising sea levels, according to a new study.

The rate at which the global ocean water mark rises could have a devastating impact on hundreds of millions of people living in low-lying areas around the world.

Kuwait revamps repo amid $12bn bourse plan

KUWAIT CITY/DUBAI: Kuwait’s central bank revamped monetary policy tools yesterday by introducing new repurchase agreements as Gulf Arab oil producers stepped up efforts to boost bank liquidity and bolster investor confidence.

In the latest move by Gulf states to unthaw credit markets, Kuwait’s central bank said it would offer repo agreements with maturities of one day and one month from Wednesday, in addition to the one-week repo it had offered previously.

Alberta cuts royalty hikes because of economy

EDMONTON, Alberta: Canada's oil-rich province of Alberta is rolling back a large portion of the its royalty hikes that were to take effect in January, in order to encourage drilling in the province's sagging energy industry.

Premier Ed Stelmach said Wednesday the province is reacting to the global economic crisis in order to protect thousands of jobs in Alberta's energy industry.

Gulfsands discovers oil in Syria

Gulfsands Petroleum, the oil and gas production, exploration and development company with activities in Syria, Iraq and the US, has announced an oil discovery at the Yousefieh-1 well in the Gulfsands' operated Block 26, Syria.

The Hops Shortage and Eating Locally

Much like the way in which the gas shortage of the seventies and the recent high prices we have seen at the pump have begun to change our view on energy consumption, the hops shortage made brewers take a closer look at their supply chains. This has led to a movement toward localization for many craft breweries, including partnerships with local farmers to grow hops and grain in close proximity to their operations. This adjustment lowers the effect of price fluctuations, reduces the impact of transportation and allows breweries to have better quality control regardless of their relative size. It turns out there are great hop growing climates throughout the country that have gone unused as the model shifted toward large multinational producers. Now, with prices on the rise and scarcity threatening the brewing of great beers, the local grower is starting to look better and better.

Dingell loses early bid to retain chairmanship of energy committee

WASHINGTON -- In a stunning setback for Rep. John Dingell of Michigan, the Democratic Steering and Policy Committee voted Wednesday for his rival to be the next chairman of the House Energy and Commerce Committee.

Dingell got 22 votes while rival Henry Waxman got 25 votes.

The final decision will be made in a vote by all House Democrats Thursday. The Steering group's nomination carries great weight historically.

OPEC Output Cut Could Push Crude Over $80 a Barrel

(Bloomberg) -- A ``significant'' reduction in OPEC's oil production may drive the average price of crude back above $80 a barrel next year, aiding the Russian economy, according to OAO Lukoil.

Russia should support any decision by the Organization of Petroleum Exporting Countries to cut output, Leonid Fedun, deputy chief executive officer of the country's largest non-state producer, said today in an interview broadcast by Vesti-24.

Possible outcomes of Venezuela regional elections

(Reuters) - Venezuela votes on Sunday in elections for governors and state mayors that will test support for President Hugo Chavez's left-wing reforms in one of the United States' most important oil suppliers.

Remarks by the Director of National Intelligence Mr. Mike McConnell (PDF)

By and large, it says that the potential for conflict over the next 15 to 20 years is going up not down. That’s because of the competition for resources. That’s because of the explosion in global population. Over the next 15 years, we’ll add another 1.4 billion people. It just so happens that number, 1.4 billion, also coincides with a number of people in 36 countries that will not have access to water – water for drinking or water for agriculture. During this period of time, the price of food will go up 50 percent.

Production of oil in most of the countries that produce oil is currently on the decline. We will see a shift away from oil. But most likely, what we will see a shift to is coal and natural gas, unless there is a technological breakthrough that we don’t know about currently. So the pressure across the globe is going to change in the context of competition for natural resources. We’re going to see not only government groups compete for – governments compete for resources – we’re going to see nongovernmental organizations, businesses, and terrorist groups also have something to say about it.

Gas falls to half of record high

NEW YORK (CNNMoney.com) -- Gasoline prices dropped to below half of the record high Wednesday, declining for the 63rd straight day in a national survey.

$500 Oil Coming Part 1

Matt Simmons spent his career in the oil business. He was such an oil insider he helped the Bush campaign’s comprehensive energy plan in the 2000 election. For over 35 years his investment bank, Simmons & Co., has financed much of the United States oil services industry.

Simmons changed from an industry expert to an A-list pundit by his book in 2005 “Twilight in the Desert: The Coming Oil Shock and the World Economy,” The book points out that Saudi Arabia’s oil supplies are much more limited than they claim.

Since the book Simmons has moved to the forefront of the “Peak Oil” movement. Experts who believe in the “Peak Oil” theory believe we are near the point where oil production will not meet world demand. Simmons believes we have already passed that peak. While we are not going to run out of oil in the next number of years, easy to find oil is over.

Part 2 is here.

More trouble for auto bailout

NEW YORK (CNNMoney.com) -- Auto industry executives were back on Capitol Hill Wednesday morning to ask for a federal bailout but they once again faced an uphill battle in winning the necessary support from Congress.

Snapshot: Carbon stores

A newly updated atlas from the US Department of Energy shows how North America might store its excess carbon dioxide — if it could figure out how to do so.

U.S. Fuel Use in First 10 Months Fell Most Since 1981, API Says

(Bloomberg) -- U.S. fuel demand fell 5.2 percent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said.

Deliveries of petroleum products, a measure of consumption, averaged 19.6 million barrels a day in the period, down from 20.7 million barrels a day a year earlier, according to a report from the industry-funded API.

“Not only have higher prices for much of 2008 been altering consumers’ behavior, but more recent economic uncertainties have increasingly been putting a damper on demand,” said Ron Planting, an analyst with the Washington-based institute, who helped prepare the report.

Petrobras Says It's Too Early to Decide on Oil Plans

(Bloomberg) -- Petroleo Brasileiro SA, Brazil's state-controlled oil company, said it's too early to decide whether the decline in oil prices and the worldwide credit crunch will require a revision of exploration and output plans.

Braskem, Endesa Chile Face Refinancing `Trouble' as Yields Soar

(Bloomberg) -- Braskem SA, Brazil's biggest petrochemicals company, and Empresa Nacional de Electricidad SA, Chile's largest electricity provider, may have ``trouble'' repaying $2.5 billion of debt in the next 15 months, according to analysts at RBC Capital Markets.

Halliburton says it's well-positioned for downturn

Oilfield services company Halliburton said Wednesday it is well-positioned to ride out the economic downturn and sharply lower crude prices, even saying that it's open to potential acquisitions.

ExxonMobil enters Black Sea with exploration agreement in Turkey

Exxon Mobil Corporation announced its affiliate, ExxonMobil Exploration and Production Turkey B.V., has signed an agreement with Turkish national oil company, Türkiye Petrolleri Anonim Ortaklýðý (TPAO), to explore in two large deepwater blocks offshore Turkey, marking ExxonMobil’s entry into Black Sea exploration.

Moore’s Curse and the Great Energy Delusion: It is delusional to think that the United States can install in 10 years wind and solar generating capacity equivalent to that of thermal power plants that took nearly 60 years to construct.

“Energy transitions” encompass the time that elapses between an introduction of a new primary energy source oil, nuclear electricity, wind captured by large turbines) and its rise to claiming a substantial share (20 percent to 30 percent) of the overall market, or even to becoming the single largest contributor or an absolute leader (with more than 50 percent) in national or global energy supply. The term also refers to gradual diffusion of new prime movers, devices that replaced animal and human muscles by converting primary energies into mechanical power that is used to rotate massive turbogenerators producing electricity or to propel fleets of vehicles, ships, and airplanes. There is one thing all energy transitions have in common: they are prolonged affairs that take decades to accomplish, and the greater the scale of prevailing uses and conversions the longer the substitutions will take. The second part of this statement seems to be a truism but it is ignored as often as the first part: otherwise we would not have all those unrealized predicted milestones for new energy sources.

Consumer prices in record decline

Inflation falls by a record 1% in October, worrying economists that falling prices will become a disturbing trend.

Byron King: Unsustainable Energy Trends

Just over the horizon, things are about to become dicey. This week, the International Energy Agency (IEA) will release a new report on the future of world energy. In its World Energy Outlook, the IEA will state categorically that "Current global trends in energy supply and consumption are patently unsustainable."

There's not much wiggle room in that statement. According to the IEA, despite the recent fall in oil prices, the medium- and long-term outlooks for energy supply are grim. Conventional oil output is destined to decline. Demand will still grow, however, especially in the developing world. And the twain shall only meet by prices rising to clear the market. "It is," as our Arab friends like to say, "written."

Russia: Electricity Providers Face Bankruptcy

Electricity suppliers across the country are cracking down as the number of delinquent private and corporate customers surges. They have little choice.

The dilapidated industry is mired in debt linked to unpaid consumer bills and the multibillion-dollar investment programs that investors signed onto when they acquired electricity assets from the state during the privatization of Unified Energy System, which wrapped up just weeks before the financial crisis struck. A chunk of the industry also operates on a system of short-term loans — funds that have dried up in the crisis.

Kyrgyzstan: Energy Crisis Threatens Country's Stability

It is the main topic of conversation at every dinner table in the country. After nine months of erratic blackouts and broken government promises, the Kyrgyz are growing restless. Many are even saying the situation is worse than before the Tulip Revolution in 2005.

Jordan: Cabinet addresses fuel crisis

AMMAN - The Cabinet on Tuesday looked into alternatives to the controversial pricing mechanism of oil derivatives, which was adopted after fuel subsidies were removed in February, a government official told The Jordan Times after the Cabinet’s weekly meeting.

He added that the government discussed the current crisis in the local market due to a severe fuel shortage that prevailed over the past few days, adding that authorities are considering feasible solutions and alternatives “to neutralise the profits and losses of gas station owners” when updating fuel prices.

Owners of hijacked tanker in ransom talks-Saudi FM

ROME (Reuters) - The owners of a hijacked Saudi supertanker with a $100 million oil cargo are in negotiations over a possible ransom payment, Saudi Arabia's foreign minister said on Wednesday.

With gas prices dropping, commuters get back in their cars

The Metropolitan Transportation Authority just released their statistics for October ridership: with the exception of the subway, ridership fell slightly from September as gas prices began their free-fall.

Medvedev Warns Crisis Is Spreading

MOSCOW -- President Dmitry Medvedev warned that the crisis gripping Russia's banks and capital markets has spread to the real economy and pledged to use the Kremlin's still-massive oil wealth to provide more state aid for stricken industries.

His comments, his frankest on the subject yet, came as the World Bank cut its growth forecast for Russia next year by more than half because of the country's acute dependence on oil prices. The bank said it expects the ruble to keep softening as it tracks oil prices lower.

Ruble May Slide 13% Against Basket on Oil Decline, Survey Shows

(Bloomberg) -- The ruble may weaken 13 percent by the end of next year as the plunging price of oil and the erosion of Russia's current-account surplus compels the central bank to devalue the currency, a survey of analysts and investors showed.

Oil prices fall below $54 a barrel

VIENNA, Austria – Oil prices slipped further Wednesday, dipping below $54 on fears of global economic weakness that have sent crude down more than 60 percent in four months.

But analysts suggested that prices might be bottoming out as they moved closer to the psychologically significant $50 mark.

Consumer Prices in U.S. Probably Tumbled as Spending Slumped

(Bloomberg) -- The cost of living in the U.S. probably slid in October by the most in almost six decades as fuel costs plummeted and retailers discounted merchandise to entice shell-shocked customers, economists said before a government report today.

Consumer prices probably dropped 0.8 percent last month, the most since 1949, after being unchanged in September, according to the median estimate in a Bloomberg News survey. Excluding food and energy, so-called core prices may have risen 0.1 percent for a second month.

Shell, Aramco, Petrobras Speed Project Spending Cuts

(Bloomberg) -- The biggest oil companies including Saudi Aramco, Royal Dutch Shell Plc and Petroleo Brasileiro SA are accelerating spending cuts and delaying projects as the world enters a recession, said Morgan Stanley & Co.

As many as 44 projects have been delayed and faced cuts in investments as of Nov. 18, compared with 19 in a Nov. 5 report, analysts Theepan Jothilingam and James Hubbard said in a note today.

Aramco projects unscathed by crisis

"All our projects are long-term projects and not short-term ones therefore we don't see an impact," Abdullah Naim, vice president for petroleum engineering and development at the state-run conglomerate told Al Arabiya television.

"We don't think this crisis would be a long one. It will be a short one. It will pass like previous ones did," he added.

Petrobras postpones 28 rig tenders

Brazilian state oil company Petrobras has postponed construction tenders for 28 deep-sea drilling rigs to the coming year.

The rigs were to be tendered exclusively to Brazilian construction companies this year.

Chevron Says Nigeria Oil Link Breach May Halt Exports

(Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, suspended export obligations on some Nigerian production following a pipeline breach at the Escravos oilfield.

The so-called “force majeure” clause, invoked yesterday after the loss of 90,000 barrels a day last week, will last until Dec. 31, company spokesman Scott Walker said in an e- mailed statement.

China to impose fuel tax "very soon": paper

BEIJING (Reuters) - China will impose a long-awaited fuel tax "very soon," the head of National Development and Reform Commission's (NDRC) Energy Research Institute said in comments reported on Tuesday by the China Daily.

"The announcement will come very soon, and actually specific plans have already been suggested to the government long ago," Han Wenke, director general of the research body, was quoted as saying.

The perils of cheap oil

On Sunday, "60 Minutes'" Steve Kroft asked President-elect Barack Obama if the astonishing drop in gas and oil prices made dealing with energy issues "less important." Obama responded forcefully: "It makes it more important." He observed that there is a cycle of "shock and trance" in American attitudes toward energy. When gas prices go up, there's a "flurry" of activity, but when they go back down, well, never mind.

That's exactly what I want to hear from my president, because the truth is that the current low gas and oil prices are engendering a false sense of security. We are being set up for an even more painful energy crisis in the very near future.

No plans to restore broad drilling ban

WASHINGTON – House Democrats have no interest in restoring the broad ban on oil and gas development off the Atlantic and Pacific coasts but will seek to "delineate areas available for drilling" when Congress returns next year, the second-ranking Democrat in the House said Tuesday.

Advocating for Urbanism

With the global mortgage and climate crises making sprawl less and less sustainable, planning issues can no longer be consigned to the fringes of progressive politics. Barack Obama seems to realize this and promised during his campaign that if elected, he would establish a White House Office of Urban Policy. At a meeting of African American columnists last week, Obama senior adviser Valerie Jarrett confirmed such an office would exist but didn't give more details.

Vietnam president in Venezuela to boost energy ties

CARACAS, (AFP) – Vietnamese President Nguyen Minh Triet arrived in Venezuela where he was set to promote oil and gas cooperation during a two-day official visit, the first by a head of state from the communist nation.

Indian navy destroys pirate boat, more ships taken

MOGADISHU (Reuters) – An Indian warship destroyed a pirate ship in the Gulf of Aden and gunmen from Somalia seized two more vessels despite a large international naval presence off their lawless country.

The buccaneers have taken a Thai fishing boat, a Greek bulk carrier and a Hong Kong-flagged ship heading to Iran since Saturday's spectacular capture of a Saudi supertanker carrying $100 million of oil, the biggest ship hijacked in history.

The explosion of piracy off Somalia this year has driven up insurance costs, made some shipping companies divert around South Africa and prompted an unprecedented military response from NATO, the European Union and others.

Suspected US missile strike kills 6 in Pakistan

ISLAMABAD, Pakistan – A suspected U.S. missile strike hit a village deep inside Pakistani territory Wednesday, officials said, killing six alleged militants and indicating American willingness to pursue insurgents beyond the lawless tribal regions.

China eyes cheaper electricity for aluminium firms

HONG KONG (Reuters) - China's electricity producers have started cutting the fees at which they sell power to aluminium producers, smelter and power sources said on Wednesday, which could help smelters avoid further output cuts and boost flagging demand for electricity.

The aluminium industry in the world's biggest producer and consumer of the metal uses around 6 percent of the country's electricity output, but has been cutting back sharply in the face of lower prices.

GM's possible bankruptcy weighs heavily on Detroit

CHICAGO (Reuters) - Devastating.

That's the word being used to describe the impact on Michigan and its largest city, Detroit, should financially ailing automaker General Motors file for bankruptcy protection.

Consumers will suffer if GM goes under

Higher car prices, the end of incentives and vehicle shortages could occur if GM and other Big Three automakers don't get a bailout, according to experts.

Will Detroit's cash crisis kill the electric car?

With its cash dwindling and U.S. auto sales crashing to 25-year lows, GM has joined Ford Motor Co and Chrysler LLC in seeking $25 billion in federal handouts, which are under consideration this week by the U.S. Congress.

That has critics concerned that a meltdown for Detroit could delay the rollout of green cars like the Volt. Others see a chance to prod GM and rivals to move faster as a condition of providing funding the industry says it needs to survive.

Toyota will show hybrid vehicle fueled by CNG

Toyota will reveal a Camry hybrid concept at the Los Angeles Auto Show with an engine that uses compressed natural gas.

The concept signals that Toyota's hybrid technology will be used with engines that operate on a variety of fuels.

Sumitomo Rubber plans tires free of oil

TOKYO (Reuters) - Sumitomo Rubber Industries Ltd, Japan's second-biggest tire maker, plans to start selling in Japan tires that include no petrochemical materials by 2013, a company spokesman said on Tuesday.

The company has set a medium-term strategy to fight climate change by introducing a tire which uses as little raw material made from oil as possible and at the same time that spins more smoothly to save more fuel than a conventional tire.

German group SolarWorld bids 1bln euros for Opel car plants

FRANKFURT (AFP) – German solar energy company SolarWorld has prepared an offerfor the four German auto factories owned by Opel, a division of US giant General Motors, worth one billion euros (1.26 billion dollars), a statement said on Wednesday.

The solar panel maker would offer 250 million euros in cash and 750 million euros in the form of a bank credit under certain conditions, the statement said.

The Impact Of The Slowdown In Construction Of Wind Generation

The last few months have seen a significant stalling in plans and proposals to build new wind-based power generation. These delays and cancellations have significant implications for two important components of American energy: (1) the Renewable Portfolio Standards (RPSs) that have been passed in many states and (2) the reliability of the North American electric grid.

U. S. greenhouse gas regime will impact exporters

As if a credit crunch and recession aren't enough for Canadian manufacturers to deal with. Now those exporting to the United States have to watch how their greenhouse gas emissions will impact their business.

UK: Financial crisis gives green builders a welcome boost

Government climate change targets and the financial crisis are giving green builders added incentive.

Rainforest nations want coordinated carbon effort

MILAN (Reuters) - Rainforest nations will lobby the United Nations to set up a single body to coordinate the use of carbon credit trading to stop deforestation at a conference next month in Poland, an official from the countries said on Tuesday.

"A new body should be built to coordinate initiatives (on cutting emissions from deforestation) that are going around now," Federica Bietta, Deputy Director of New York-based Coalition for Rainforest Nations, which represents about 40 countries, told Reuters on the margins of a deforestation conference in Milan.

Green groups ramp up attacks on oil sands

CALGARY - Environmental organizations in Canada and the United States are stepping up their campaign to derail Alberta's oil sands and seeking funding from deep-pocketed endowments, including the Rockefeller Brothers Fund.

Schwarzenegger opens climate summit with Obama

BEVERLY HILLS, Calif. – Gov. Arnold Schwarzenegger opened his international climate change summit on Tuesday by upstaging himself with an even bigger political star — President-elect Barack Obama.

Schwarzenegger, a Republican whose efforts to combat global warming in California have generated worldwide acclaim, wants to show that governments can balance environmental protection and economic growth. He hopes his summit will influence negotiations over a new climate treaty during a U.N. gathering in Poland next month.

UK: MPs pass landmark climate change bill

LONDON (AFP) – MPs have given final approval to a bill committing Britain to cut greenhouse gas emissions by 80 percent by 2050 -- the first country to have such a legally binding framework on climate change.

Climate Change Secretary Ed Miliband said on Tuesday that the bill, which must now be signed into law by the queen, "makes Britain a world leader on climate policy".

This is the top story at Reuters right now:

Texas grand jury indicts Cheney, Gonzales of crime

HOUSTON (Reuters) - A grand jury in South Texas indicted U.S. Vice President Dick Cheney and former attorney General Alberto Gonzales on Tuesday for "organized criminal activity" related to alleged abuse of inmates in private prisons.

I doubt they'll actually go to jail or anything, though.

This is just one more episode in a long history of S TX indictments. A south TX DA could charge a pig with contributing to poor public health and get away with it. Just part of our odd sense of humor down here. Similar to when Lyndon Johnson won his senate seat with the help of one county casting more votes in his favor then there were residents in the county. We just smile and carry on.

Does that really mean anything, or is that just another in an endless series of journalistic distractions? Keep looking at the finger, never mind the moon it is pointing at.

This story makes it clear that the DA is pretty much a nut...and is probably only doing it for attention since he won't be in office longer than six weeks....

It's kind of like indicting Hitler for jay walking. Still, I give the jurors credit.

Man, all this Dick-Cheney-not-going-to-jail talk is making me depressed.

Did the French ever capture Rumsfeld?


Is he living in a hole in the ground somewhere??

Get the Foreign Legion on the case, they'll mix it with anyone.

Re: Will Detroit's cash crisis kill the electric car?
and GM's possible bankruptcy weighs heavily on Detroit

To add to the discussions about the possible bankruptcy of the auto industry, here we have a comment by a national leader of the Free Market persuasion. The notion that unions have caused the problems by negotiating higher wages and benefits ignores the total lack of concern for the oil and climate situations we now face . If the car companies can't make the change to renewable, low carbon energy sources, we can kiss the planet goodbye.

E. Swanson

imo, if anything, the collapse of gm will speed-up(npi) the developement of the electric car.

and part of the reason detroit has to build high margin cars is becuse of the high cost of health insurance. how 'bout a wpt on health, drug and insurance companies ?

How about corporate excess as well? From another source...

Rep. Brad Sherman, D-California, asked the three CEOs to "raise their hand if they flew here commercial. Let the record show, no hands went up. Second, I'm going to ask you to raise your hand if you are planning to sell your jet in place now and fly back commercial. Let the record show, no hands went up."

Maybe they took the train to D.C. like Joe Biden.

Looked for this on YouTube, I guess it's not up yet.

I can't decide if Romney really believes his own BS or not. Put US workers on a parity with those in Japan? Does that mean national healthcare, like they have in Japan? Somehow, I doubt it.

On the bright side, Romney does seem to be aware of the peak oil problem. (As well he should be, being a long-time friend of Matt Simmons.)

Presumably the parity he is talking about is with the Japanese transplants in the US.
However, much of the problem has been the progressive reduction in wages leading to lack of demand save by increasing debt, balanced by a rapid growth in profits and executive wages which have been put into inflating asset values rather than to any productive use.

Both much of the pension costs and healthcare in Europe, and presumably Japan, are general to the society rather than showing up as a cost on that company.
How much they will be honoured in the future is another question.

Basically, TPTB have tried to have a consumer-driven economy while depressing wages. Their answer to "how can people buy cars with depressed wages" has been to have the car buyers run up unsustainable debt. Welcome to 2008.

Now Romney wants to drive wages down further to help American car manufacturers? Who is going to buy the cars, Mitt? He's probably right, though, that wages are going down. So is car ownership.

Because of the bursting of the credit bubble, the world now has a huge amount of excess automobile production capacity. Car manufacturers around the world need to scale back and/or go out of business. Bloated corporations with crappy management like GM should be the first to go.

GM, already has a plan to offload the legacy healthcare issue to a union managed fund, starting in 2010. It is claimed that the biggest loses at GM, are caused by GMAC (Ditech etc. bad loans), which it still owns 49% of. Without the legacy healthcare costs, and some nonwage union issues, (such as full pay during shutdowns), supposedly GMs costs would be much lower.

Sounds like a "ham and eggs" problem. If I had some ham, I could have some ham and eggs, if only I had some eggs.

They need more cash, lower costs, and better products. It's worth asking exactly what they have to offer.

GMAC was the cause of roughly 1/4 of the GM's losses this most recent quarter. GMAC's losses were roughly $3bil during the 3rd quarter of 08. 49% of that goes to GM, the rest to Cerberus, which is also the owner of a majority stake in Chrysler.

I've always wondered why they named their company after the three headed guard dog of hell.

And why they made these very bad investments.

Basically, TPTB have tried to have a consumer-driven economy while depressing wages. Their answer to "how can people buy cars with depressed wages" has been to have the car buyers run up unsustainable debt. Welcome to 2008.

This is the nature of capitalism and the root cause of crises. The increasing use of debt has been one the chief means of extending the length of the time between crises at the risk of deepening them when they finally do come.

Is this the nature of capitalism or simply the side effect of cheap credit? Many nations have struggled with excess debt in the past, whether capitalistic or not. Capitalism simply makes an efficient business of helping individuals and companies run up unsustainable debt.

Regulatory frameworks that favor 3-month horizons are just as guilty. Without an incentive for short-term gain with long-term gain, bubbles would be smaller and slower.

Just like politicians with longer terms would probably make better decisions. There are advantages to being a private company...better long term decisions. I don't think its a coincidence that Bechtel has been the world leader in engineering/construction companies and has stayed private.

The US auto makers are no different from the banks. They made a conscious decision to go after higher profits with large trucks and SUVs knowing that this strategy was extremely risky due to energy supply and demand.

I loved the response to the senate committee's question where the CEO's said that according to research people won't buy a car from a bankrupt company. Well they aren't buying a car from you anyways so what's the difference?

The reigns of Elizabeth I and Victoria were very long, and were the most successful in history. Just imagine what GWB could have done, given a longer term!

On the contrary, I doubt that length of term corresponds very neatly to effectiveness of decisionmaking.

Right now, it looks like the credit shortage will totally destroy the automobile industry; it will price itself out of existance.

How much of the average car cost represents credit? How many people go into a dealership and buy a car with cash?

Not too many.

With credit declining the amount available to individual purchasers to buy a car shrinks. This amount is certainly substantially less than the average cost of a new car in the US, that amount being almost $30,000:

A new car is second only to a home as the most expensive purchase many consumers make. According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400. That’s why it’s important to know how to make a smart deal.


The amount taken as down payment is instructive, more than $3,000 (with the balance financed by the auto makers themselves). Certainly, people would pay more if they had the means:

Tighter credit standards are forcing many car buyers to put down more cash up front to get a loan.

The average down payment last month was $3,108, up 42% from $2,194 in the same month two years ago, Edmunds.com reports. That's the highest average down payment since the car-buying research site began tracking the number in 2002.


The prices of used cars is a better guide since most buyers pay cash for their used cars. Here the most recent figures (2004) suggest the average for a used car at wholesale auction is a little more than $10,000.

The auto auction company ADESA Inc. of Carmel, Ind., reports the average wholesale price in August was $9,086. That was 1.4 percent higher than the price of $8,959 in the year-ago month. It was 2.2 percent lower than the July average price of $9,295.


It becomes a bit of an art to discern what a car would cost if credit is unavailable. It is hard to see people being able in an economically constrained situation to raise ten or more thousands of dollars in cash ... to buy a car. At the same time, it is hard to see an auto industry surviving with their products selling for less than half the price they sell for now. It is also difficult to see any 'alternative' fuel vehicles being viable since costs of production and developement of these vehicles is effectively subsidized by the sale of larger, more profitable SUV's and pick up trucks.

The auto industry is exceptionally complex. The supply chain, the manufacturing process, financing, dealer network, aftermarket suppliers, (not to mention fuel inputs and infrastructure) all require oceans of cash. Removing any part and the whole fractures. The entire system requires second by second management in the current 'just in time' regime. The current situation ... where the US makers are reduced to beggary ... is the result of relatively small inputs against the cost structure of the industry. Even low cost producers are having serious problems:



There are huge amounts of cost which can be stripped from cars.
Some of it will need the legislation to be re-written to do so though.
Most of the stuff that is in a modern car wasn't there 30 years ago, so that can be ditched, from electronics to most of the weight.
Wages will also likely drop, to around minimum wage now, and perhaps labour be substituted for materials, so that you have carbon-fibre cars etc.
Materials costs will also drop hugely, if the depression is as great as now seems likely.

Any cars turned out would not much resemble the present palaces though, and it still seems likely that not many people would be able to afford them, and of those who could likely many would prefer to keep their old, less utilitarian models.
In the UK our cheapest cars are around £6500, and they are still pretty far from absolutely basic, so something perhaps could be built for $6-7k with the intense pressure there will be on costs.
Collapsing volume might rule that out though.

Ever hear of the Geo Metro? The cars are only about 20 years old now.

Check out what this guy did to his to get 75 MPG.

Yeah, the cheap older cars got good mileage - and still do. Not much weight and a lot fewer horses.

Older Honda Civics and CRX's are good too, better than the Insights, even. Certainly better than the Prius, which is a real pig in my opinion.

I keep looklng online for 'micro- diesels'; that someone would make a small (1 or 1.5 horsepower) diesel 'motor' that could power a light vehicle via a chain and deraileur.

The makers can't do it, they are strangling in their legacy investments - sunk capital. Just like the rest of us!

Lighter means smaller (less drag, too), or more expensive (because aluminum, magnesium, and plastic are more expensive than steel. Carbon fiber is much more expensive than steel.
Pollution control (catalytic converters) is much heavier than safety, which is very lightweight seat belts and airbags. Crumple zones mean that cars have to be longer and wider. That raises weight by more than airbags and seatbelts.
Possibly we might get rid of catalytic converters for cars that use computerised fuel injection (which is most of them) because it does a great deal to make cars less polluting all by itself and also raises mileage.

It's not just the weight of the safety equipment, it is the cost.
My guess is that special categories will be created that don't have to observe the same restrictions for crumple zones and so on - the golf-cart like things which are restricted to some streets and speeds only in the US, and in Europe those tiny Kei cars which are common in Japan:
Something like this, but with the luxury features taken out! ;-)

These cars minus everything, including safety, will gradually represent more and more of the market, and be allowed in more and more places.

IMO mobility will last a lot longer than many think, but details like safety, speed and comfort will go.

As regards composites vs steel, I don't know what the trade offs are for labour and material costs, but in the UK some of our very cheapest 'cars' were horrible Reliant 3-wheelers, which were fibre glass.

What I am imagining is some large production of things like engines, or perhaps batteries as well if we manage to swap over to electric, and most of the body work and so on carried out in small bucket-shops, with runs of only a few thousand cars.

I don't know anything about oil, but I know "healthcare" from the bottom up. This country could easily improve the health of all its citizens on about one third of what it is spending now. But it would require a complete restructuring, and a commitment to service rather than profit.

Currently, the upper management of insurance companies, hospitals, medical equipment manufacturers, durable equipment manufacturers, all their shareholders, and the like are the beneficiaries of obscene amounts of "profit". A relatively small fraction actually goes to doctors, nurses and useful medicines. Since much of that profit generation is tied up in the current funny-money scheme that is unraveling world wide, there may actually be a forced restructuring.

I believe that one should be required to post a comment with a negative greenie. Cheap shots are meaningless

I believe that one should be required to post a comment with a negative greenie. Cheap shots are meaningless

Profit simply enables reinvestment in making the company better and more efficient. Without a profit motive, no one would do anything but sit around.

At least that is what I learned in the cartoon about the shoemaker and the elves I saw as a youngster (the first part -- the second part is just what I'd do).

Hope that qualifies for a negative.


I believe that one should be required to post a comment with a negative greenie.

I don't. The last thing we need is more clutter. If they don't want to explain it, fine.

Rather than continuing to sink resources into old holes - the banks - nationalizing and socializing the US health care system would cost far less money than we are wasting on the banks. And it would have the effect of "bailing out" Main street, town hall and the state capitals all in one whack. It would all all sorts of people to leave the rat race and to take on work that pays a lot less. Farming, environmental recovery, education, elder care - the list is endless.

I'm of the opinion that socialized health care, in a "public health" model and NOT as the privatized version we have in the US, might well be a powerful key into our paradigm change. A health care system in the public health model would be able to address environmental and systemic issues.

cfm in Gray, ME

Looks like the medical profession agrees with your assessment. Needless to say, this isn't a new problem. There are lots of specialists in cities, while there's a reported shortage of primary care physicians everywhere. The last time I looked into it, in my county there's only 1 physician who accepts Blue Cross. There are other doctors who do, but they are in the next county, some 35 miles away. Anyone who is in need of a specialist, such as my friend who just went in for cancer surgery, must travel to a major medical facility even further away.

E. Swanson

I find it absolutely halirious the description of socialized health care and then calling the current system better, when in fact everything they say that socialized health care is, isn't and all the current system is, is what they claim socialized health care is.

it was claimed that in socialized health care one will be told where he or she can get care, yet in the so called better privatized and profit based system. THATS exactly what happens, which you point out. if you have x insurance, you can only go to who takes x insurance.

I DON'T know the health care industry inside out. But I do know people who work in it and I've experienced it. All point to you're being 100 pct correct. The doctors are scared to death of liability exposure on the one hand and the insurers on the other. They send you for MRI's, tests and so on, and/or send you off to other specialists. You can't have a frank estimate of what the real risks of anything are.

Prescription medicines forget about. I take one. I get it overseas for a price that is roughly one tenth of the price here -- not a knock off, the exact same med. And they're making a profit!

And talk about paperwork and paper pushing! One doctor, how many people doing paper work? UFB!

I also read that doctors want out in increasing numbers. And I know that money is the big if not sole motivator of those going in.

BTW, there's a book I recommend: Nortin Hadler -- Worried Sick. Basically he tells how the Bush Doctrine (pre-emption, Sarah) has taken over medicine.

Obama's picked Tom Daschle for Secretary of Health and Human Services.

I have had a 20 year interest in the American health care system. I grew up in Canada, went to medical school at McGill University, then moved to the US for residency in Family Medicine and worked in community health centers until I "retired" a few months ago to take care of my kids. My husband is a specialist physician, recently graduated.

Here's my take on Tom Daschle's proposals for health care. I am not terribly excited, but we shall see. The following are quotes from a Huffington Post article at http://www.huffingtonpost.com/sen-tom-daschle/progressive-solutions-to-_...

There are three fundamental problems plaguing our health-care system today: skyrocketing costs, lack of access, and disparity of quality care.

Today, 47 million Americans lack health-care coverage. Just as troubling is the fact that medical bills have become the leading cause of bankruptcies in the United States. It is projected that the U.S. will spend nearly $2.4 trillion on health care this year. That is almost $7,500 per person. Premiums have increased [PDF] nearly 98% since 2000. Most troubling is that this increase is nearly four times faster than the growth of wages during the same period.

For individuals that do have health care coverage, the quality of health care they receive is often inadequate. For instance, the U.S. lags behind other industrialized countries in basic health measures such as life expectancy and infant mortality. Moreover, we have less same-day access to primary-care physicians as individuals in other countries. And, it is estimated that 98,000 Americans die annually from medical errors, caused by bad physician handwriting, incomplete charts, or other "low-tech" problems.

So far, so good. Except, I would say, that in all the literature I read about infant mortality and life expectancy, it was less than clear that those are problems that can be remedied by medical care. The Surgeon General was quoted as saying that medical care accounts for 10% of health outcomes. Those two, particularly, are strongly related to income inequality, public policy, drug use, racism, you name it.

Onward with the quote:

The time is now for us to take this challenge head-on. What we need is a change in approach. In my book, Critical: What We Can Do About the American Health-Care Crisis, I have proposed a Federal Health Board (emphasis added) that would be a foundation from which we could address all three problems. In many ways, the Federal Health Board would resemble our current Federal Reserve Board for the banking industry. Just as the Federal Reserve ensures certain standards, transparency and performance for our banking industry, the Fed Health would ensure harmonization across public programs of health-care protocols, benefits, and transparency. Ultimately, the Fed Health would offer a public framework within which a private health-care system could operate more effectively and efficiently.

I'm not sure comparing anything to the financial system works to anyone's favor in these times, but anyway, interesting.

The Fed Health could help reduce administrative costs. Roughly 30 cents of every dollar in health care is spent on administration rather than health benefits. Our administrative costs, on a per capita basis, are seven times higher than that of our peer nations. Each state has their own system for Medicaid and insurance regulation. We have different health-care systems for active duty military members versus veterans. And private insurers spend billions trying to enroll the healthy and avoid the sick. A Federal Health Board that sets evidence-based standards for benefits and quality for federal programs and insurance will lower this complexity and thus costs.

We already have programs with low administrative costs, called Medicaid and Medicare. I'll admit, I have been impressed by my firsthand view of the Canadian medical system. I'm not sure how this will be an improvement.

The Fed Health could also promote quality and save money by making the health-care system more transparent. Today, the lack of transparency in the system makes it virtually impossible for people to grasp what they are paying for and who provides them with the best care. This shroud of secrecy allows for wildly different prices for similar quality care. For example, a Pennsylvania report on heart surgery found hospitals with similar outcomes charge from $20,000 to $100,000. The Board, by ensuring transparency, would increase competition based on price and quality rather than cream skimming and cost sharing.

Oy vay... I thought we had established the reasons why competition in health care is of a completely different stripe than, say toasters, or cars... I want to see who will shop around while suffering from undiagnosed symptoms to determine the best place for treatment of what they don't yet know they have.

Additionally, the Fed Health could set standards for quality and coverage, promoting best practices and identifying the trade-offs on services. It would use information on the comparative clinical and cost effectiveness of different treatment options to set standards for Federal programs. The Congressional Budget Office recently credited this idea with the potential to produce substantial system-wide savings.

That could be useful.

But the Federal Health Board is just one element of comprehensive reform that would drive down the cost of the system. Cost shifting, preventable illness, and uncontrolled chronic disease add to our health care costs - and will be reduced by insuring all Americans.

Unfortunately, I don't believe this. As a practicing family physician, I can tell you I was waging a losing battle against the food "industry", and what unemployment does to alcoholism rates. Preventive care is not cost effective, except in the case of vaccinations. Sorry. (Not that we shouldn't have health care, but it's not to save money, it's to improve quality of life).

The decisions made by the Federal Health Board would be tough. But this model undoubtedly beats the alternative. Imagine what would happen if Congress revoked the Federal Reserve's power to set interest rates and decided to legislate new interests rates instead. It would be a disaster - no less so than the results of mismanagement of our health-care system.

OK. Too bad. Expected more from the Hopefully Smarter Than Yeast President-Elect.

I have proposed a Federal Health Board (emphasis added) that would be a foundation from which we could address all three problems. In many ways, the Federal Health Board would resemble our current Federal Reserve Board for the banking industry.

Is this crossposted between huffingtonpost and the onion? Thing is, the Democrats - the political class - probably do think this will work. It will work long enough for their wealthy buddies to suck yet another ten years at the teat of that system. Campaign contributions, yadda yadda. Just the the defense industry is now giving big time to the Democrats, so will pharma and disease care.

The Democrats don't want to deal with the health care problem. They want to keep the issue alive so they can preserve some sort of political edge. Those in power don't really represent people without health care; they represent the $200k+/year class.

I suspect that's what Obama is going to do: put a friendlier face on everything across the board from plunder of the treasury to preserving the disease care industry to torture. And in a certain sense, there is not a lot else he can do; he is, after all, every bit the slave to the empire that GWB was, little more than the face on the machine. Until the system changes, the behavior of those within the system will not change.

CFM in Gray goo.


Certainly what does NOT seem to be necessary is yet another Federal bureaucracy.

And overall population health has very little to do with doctors, as you have noted, and nothing at all to do with the price of coronary artery bypass graft surgery.

As long as we continue to view medicine as an "industry" there is little hope for improvement.

my partial solution to the health care problem:

Give all doctors free liability insurance IF they sign on to a program which will provide a prioritized list to possible of tests to be performed when all the patient's symptoms are emailed in to the CDC computer in Atlanta. This will result in a huge statistical base of info with various probabilities listed. Further tests will narrow the search for a cure. Then a prescription will be suggested.

The beauty of the system is that we already have that computer and it will save wasted consultations by pulmonary specialists for patients with an ulcer. doctors would be allowed to give additional tests at patient's expense .

No doctor would be forced to join, but failure to adhere to protocol and then being proven in error would eventually be removed from the program.

My senators and rep all sent me letters thanking me for my interest.

In some ways, this is an academic discussion. The healthcare 'industry' is following the auto industry into the dead end ... of pricing itself out of existance.

The only real solution is to challenge the industry head on; the business as usual approach is self- defeating since it represents a subsidy where the health care client is simply a bearer of it, a proxy. The government in collusion with the insurance companies sets prices; the government needs to remove itself from the process, thereby stranding the insurane, hospital management and pharmaceutical imonopolies. What exists currently is another expression of cheap credit 'liquifying' the system; a health care 'bubble'.

The government can and should compete directly with the current system. Right now, we users can only vote with our feet and opt out of the system - which is what is happening - leaving the rest to shoulder the increasing burden. As the burden grows, more people opt out which drives the cost spiral forward. The 'Establishment' approaches adjust the subsidy levels or prevents the opt- out by police power.

A better approach is to borrow from Wal Mart and create storefront (big box) healthcare centers that only accept cash and price services at levels all can afford. Staff would be paid salaries, management and recordkeeping would be computerized, liabilities would be headed off (by requiring arbitration and strengthening state medical review) and middlemen and gatekeepers eliminated.

HEY! Preditory capitalism sucks ... but it works! A smart govenment would at least thresten the current crop of thieves with it.

I wonder if Hillary would have preferred this post...versus Secty of State.

My guess is no. Sec. of State is a more prestigious position.

could it be the downside of the market is a response to Obamas cabinet picks?

I agree 100% that the profit in health care is going to a select few while service receives a pittance. That said, going to a socalized system like Europe or Canada doesn't fix the problem. Gov't systems have huge waste and fraud, just look at Medicare. None of my Canadian relatives have much good to say about their system. Recently when a family member north of the border needed a MRI, he paid cash to have one immediately rather than wait 3 months. A friend that works at the Mayo clinic says they are awash in Canadian patients seeking faster and better service than they receive for "free" back home.

The problem in the USA is that employers got in the business of providing health benefits. Somehow now everyone thinks health care is some kind of right. I would prefer that the public be tasked with individually finding their own health coverage, rather than employers or gov't playing big brother. We know that won't happen since a good portion of people would blow their money on fast food and Disneyland and then end up worse off than with the current inefficient system. I would have no sympathy, but politicians do.

You appear to be happy for people earning low wages, perhaps $7 an hour, to either provide for medical attention for themselves and their families or go without, and what is more you refer to them with contempt as being wasters for not having put sufficient aside from their vast incomes to pay a doctor who might get $100,000 a year.

One perhaps hopes that in the world you wish to inhabit, if you were taken hostage for ransom as is commonplace in the more 'forthright' societies you seem to admire such as in South America, that no efforts will be made to pay your ransom or attention paid to your whining about being tortured since you did not provide enough for bodyguards.

Cancer can be torture too, you know.

Your lack of humanity is hopefully merely due to immaturity.

How is expecting accountability from someone contrived as being inhumane? I have close friends that have lived for years without health insurance for their family, all the while enjoying exotic vacations and purchases of new SUV’s. Each of them work for small employers that give a health insurance stipend, but no group plan. They deem the instant gratification spending higher priority and openly joke that the state will help them should something catastrophic hit.

Granted, that example doesn’t fit everyone but I have been in the position of being without health insurance and had to pay cash to a doctor earning “$100,000.” Oddly enough their prices are negotiable and quite reasonable when insurance/gov’t isn’t involved.

I also never advocated dismantling of the health insurance industry. It has a very clear place for catastrophic coverage. That type of coverage I have bought for myself at very reasonable rates.

Point is, I am not the parsimonious person you think I am. My wife and I give generously to charities, many of which are health care providers. There will always be those that need help, but unfortunately there are many “victims” out there unwilling to help themselves. For those I have no sympathy.

Furthermore, how does being in support of a free market health system translate into support of a lawless state such as your "South American" example? I believe the state should be tasked with upholding the laws which would nullify your hostage/ransom analogy.

If society is not willing to pay for health, which benefits everyone, is charged for, why should the law, which protects not only the person but property, and hence is more beneficial to those with most, be free?

As for your examples, without knowing the details of your particular location, if the people you are referring to have children and they prefer fancy cars and holidays to providing for them, they should be criminally charged.
They are hardly poor though, and it seems you have no actual conception of what poverty is, and what it is likely to mean to many people, including Americans, soon.

Have a look at Mexicans, who have no legs, having to haul themselves through the dust because they can afford no artificial limbs or wheelchairs.

I do advocate for the elimination of the health insurance industry. They are bigger economic parasites than hedge fund investors. The biggest problem I had with the Clinton plan was that it was devised to produce more customers for the insurance industry and did nothing to improve the health of the majority of Americans. Operating costs for the Veterans Health care system is one half that of private providers on a per patient basis. As a disabled veteran I find the service to be of high quality and a good model for providing care to all Americans.

Downgrade explanation: I believe Canadians would not overwhelmingly vote for an American medical system for themselves. Having been a physician in both systems, I can tell you Canada's is more fair, though income-related health disparities persist. The final observation is that Canada's life expectancy is higher, that this is probably the result of public policy, and it is my strong belief that we should stop harping on health care and implement the policies that will result in the least suffering. Thinking outside the box. Finding the spot with the best leverage.

Also, see DaveMart below - I agree. I have met thousands of low-income people, and can vouch for having acquired a respect for the strength of character it takes to keep on going when you are homeless or doing worse than the majority of society. The attitude that the poor are less virtuous (or they wouldn't be poor) is deplorable.

As a Canadian, I can tell you that the only ones who would take an American style health-care system are the ones who can afford to go to the US to get treatment. The rest of us will happily wait a bit if it means we don't have to put up with HMOs and all that insurance BS.

I'm a Canadian living in the U.S. and I would much rather have the health care system in Canada, though I have received excellent care while here. (I also received excellent care in Canada.)

Why? My wife has coverage with no upper limit but I have a limit. And if for any reason either of us has to stop our coverage then we get some sort of serious condition, we may find renewing our coverage impossible.

BTW, the waits here for MRIs might be three months too if there were 45 million more people in the system being taken care of. Care here is fast because there isn't as big a job to do.

I have been extremely sick in both the US and Canada. The American system is pathetic, the poor die or suffer. The Canadian system has some problems (which are often fixed by public outcry), but is very good. Americans should not be afraid of a system like Canada's. There can be wait times to see a specialist or to have a non-immediately needed operation. However, if you're acutely ill, you go directly to the head of queue, in my experience. Getting a phone calling from the specialist saying "Hi, we told you to come back in 6 months, but we now want to operate tomorrow. We wanted to operate today, but we couldn't get a hold of you before you ate breakfast." is not good news in my experience. It's much better to be in the 6 month wait queue, hoping you don't need that promotion to the head of line, if you get my drift. Those who whine the most about waiting for a few months are rarely acute cases that need immediate attention. Not always, and that's when the public noise should occur.

I didn't mean to compare the US system to the Canadian health care system. Both have their strengths and weaknesses. Yes, most Canadians I've run across are deathly afraid of a US style system. And yes, most of the horror stories that American's hear about the Canadian system are exaggerations. That said, my wife and I have experienced both systems. For American's with decent health insurance we've see little to no difference. My wife has had significant surgeries in both countries and received very good care in each case.

The problem I have with the Canadian style system is it has significant upper boundry limits. I have a relative in Alberta that has had an undiagnosed condition for years. After seeing specalists in Calgary, Edmonton and even Toronto they finally suggested going to the states to find help.

Thankfully my family is doing well in the Alberta oil boom and could afford care in the states, which has him doing much better today. But my point is, even with the safety net of the Canadian system, those with money still get the best care. I don't for a minute believe that changing the US to a similar system will give everyone equal access to the care my relative received in the US. We can agree to disagree on how the safety nets should work for the poor, but if I'm extremely sick I want to be in the US.

if I'm extremely sick I want to be in the US.

Only if you have VERY good medical insurance with a very high upper limit, or a net liquid worth approaching $1 million.


Try to get a quote if you have chronic illness anywhere with a 'free-market' health insurance system - or if you are unlucky enough to have a child who is born with such.

So many people in the US can't afford the basic drugs to control their conditions, let alone in poorer countries - are you an advocate of 'Die, Baby, Die!'

Take the Canadian system, add 0.8%# of GDP (more specialists, more MRIs, more preventative & public health care) and the USA would have a damm good health care system. And a much cheaper one (4% less GDP ? memory too vague).


# SWAG, it could be +1.2% of GDP to "fill the holes" of the Canadian system, but in that range.

Is it clear that Japan can support its cost structure without a viable US market either?

Starting off at the level of US Toyota and Honda employees seems reasonable, though. If Toyota can build Prii and Honda can build Civics here at a profit, any necessary vehicle should be within production reach. I'm not sure that's yet a given though.

It may well be that lower wages and no nationalized healthcare is to be the result.

A lot of the difference in cost will be simply because the transplants were set up at a later date.
As new hirers they would have had a younger workforce, and so things like healthcare would likely cost less.
The pensions burden is also much less.
I don't have the figures for the US, but that is how it worked in the UK.

Davey Boy,,,,don't know much about the US?

The new plants built in Indiana, my home state another lifetime ago, as a rule, hire the older more mature workers for the lines. They have that, Midwestern work ethic not found in the youth of today or in the UK. The last Greenfield Auto Plant was built by Honda, actually a very good company in many ways, and I believe just opened a short time ago in Indiana. Cost of transportation for the finished product to market, the Steel, made and finished in the Midwest, also has a great deal to do with transportation cost. Tax abatements from local governments go into the mix as well. Pensions and healthcare have actually very little to do with it.

Almost nothing is made in Detroit or the UK any longer. Except crap cars.

I've been there -I don't know if you have been to the UK?
Older workers, maybe - that is not who the transplants hire in the UK, where incidentally they make excellent cars, but you ought to write to all of the major financial journals, as they all mention the heavy burden which the pension funds are putting on GM.

What? A DeLorean? Ha! Yah, that saved your ass...

But seriously folks, GM's "heavy burden" of pension funds is of their own doing. Honda did not make the decision to locate the plant in Indiana, based on GM's problems. It's becoming quite clear, nobody but the criminals in washington give a rat's behind about GM. How many of the exec's that are whining for my tax dollars are willing to take a 50% pay cut? How about the fatass UAW workers? They willing to give up the $90 an hour (with beni's) for a 50% cut? I doubt it.

Time for the dinosaurs to give it up.

From the Straits Times...

'The dramatic falls in demand for new vehicles in the UK, Europe and around the world, combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability.' Although Britain is no longer home to any major British car manufacturer, the country is the base for sizable factories owned by auto giants such as BMW, Honda and Nissan. -- AFP

Not many British run companies there in the UK anymore...oops..

There are plenty of good cars being made in the UK though - by transplants.
Probably about the same as the situation in the US in around a year to 18 months.

Hey... Imagine the world without the Delorean.

We'd have no Doc Brown.

And, we'd never have seen John Delorean get entrapped by the FBI.

But, on a serious note, the DeLorean company was flawed, had a bad business model, and went under. The government didn't bail them out. The same should probably happen to at least one of the big three.

I disagree that national healthcare is only dependent on robust government finances. Even if Toyota and Honda disappear, there can still be an economy that can provide some basic level of healthcare. I must say that the hospitals here in Japan are old (but clean) and many are small. Rooms are for six people or even more (no private rooms); OK my experience is limited to the maternity ward but still my sister in Maryland had a private room as a matter of course when she had a baby.

A lot of doctors have dual clinic/private house set ups that let them save money on rent and autos since they don't have to commute. Everything related to healthcare is small and sparse here (except maybe major teaching hospitals in Tokyo etc). I lived in the US for 30 years and never saw a physician in his house but here it's very common. To save the doctor's cleaning costs, you have to take your shoes off at the door. Many little things are done to save money.

Japan has the longest longevity in the world (or is in the top three, not sure) DESPITE the fact that many people (especially men) smoke heavily. I think part of the reason is the good basic health system here. It isn't fancy but it is available and accessible and affordable. And even if Toyota and Honda go the same way as GM I think the doctors in their house/clinics will continue to provide basic affordable care to their patients.

The fundamental problem with the “Big 3″ is that they mostly make overpriced crap that few people want to buy. I suppose that their pickup trucks are OK for farmers and people in the building trades. For the average person that just needs to drive to work or around town on errands, why would they want to buy anything that GM, Ford or Chrysler has on offer?

“Quality is Job 1″ - remember that? When was the last time you heard that? For just a few years, Ford (much more than GM or Chrysler) kinda, sorta “got it”, and got halfway serious about improving product quality. The Ford Escort was a first step in the right direction, still crappy compared to a Toyota Corolla or Honda Civic, but a start toward closing the gap. They just couldn’t keep it up, though.

Quality improvement is very hard work. It requires doing things very different than the typical American way of doing things, especially when it comes to management. It requires CEOs to be humble, to admit that they don’t know it all, that everything they do isn’t perfect, that there must be better ways of doing things, and that just maybe the people beneath them might know better how to improve things than the CEOs do, and could do so if given a chance. You can imagine how well THAT idea was received by America’s titans of industry!

No, the CEOs in most industries decided that instead of doing the hard, humiliating work of quality improvement, it was a lot easier to just shut down US factories, offshore or outsorce to China or India (anyway, Asians get this quality stuff better than Americans), and become the masters of shell corporations mostly engaged in financial game playing. If you are looking for a reason why the US economy is being hollowed out, doesn’t make things any more, and is importing its way into bankruptcy, this is a big one.

Unfortunately for the Big 3, they had built up the UAW into an unusually powerful political force - a political force which was able to manipulate the government into placing trade restrictions on auto imports which limited the Big 3 CEOs ability to play the same game that their counterparts in other industries were able to play. Furthermore, they were able to delude themselves into thinking that such protectionism was actually beneficial for them. “If those blankety-blank US consumers won’t buy the crap that we make, we’ll force it down their throats by limiting their choices.” Not a good recipie for long-term business success, as we’re now seeing.

What to do? At this point, I think that at best maybe the US can support only one or possibly two much-downsized domestic automakers - IF said domestic automakers are allowed to reorganize with a “clean slate”, free of legacy commitments, and IF said domestic automakers are under new management that finally “gets it” and is committed to producing affordable, energy-efficient, quality automobiles. It is not possible to get from here to there without all of them going through Chapter 11 plus some very drastic, unprecedented, and stern government intervention. I doubt very much that this will happen, but it is their best hope.

(this comment previous posted here

Any serious discussion of the problems of the Big Three need to deal with the problems of wages and benefits.


hey also need to deal with how the CAFE standard law is written, too.


I keep hearing and seeing in print this discussion of the "problems of wages and benefits."

It seems to me that the unspoken assumption here is that the free market, entrepreneurialism and the general strategy of using your wits to get ahead are reserved only for the ownership class.

If laborers have used the rules that are set up to get the corporate heads to sign a contract, I'm not sure where the corporate ownership as any place complaining. They signed the contract. In short, labor used the rules of the existing market to price their product, they demonstrated entrepreneurial spirit by organizing themselves and used what they had at their disposal to get their piece of the pie.

Now, I see room for an argument that labor may be poisoning the goose that lays the golden egg, but to suggest that "wages and benefits" are a "problem" is simply to admit the corporate heads were bested when it came to divvying up the spoils. So, now they want to change the rules of the game? Ok, go for it, but recognize that there is no "right" on the part of corporations to have access to cheap labor.

There is also no "right" for individuals to have high-paying jobs.

And no 'right' for corporations to import goods from countries which pay lower wages, or to import more and more people, legal and illegal, to hold wages down,

Corporations do not in fact operate in a manner whereby they employ the cheapest directors, and hold their own wages and huge bonuses down.

The management of companies in Germany for instance, increased their multiple of average wages from 20 times to 400 times from the 60's - does anyone believe that their productivity increased comparably?

Under the dubious cover of Laffer-curve nonsense the economy has been pillaged by the elite, to the detriment of shareholder and worker alike.

The excess money went into both conspicuous consumption and into asset value bubbles, rather than much productive investment.

High tax rates on high earners, retroactive 95% taxes on bonuses and wages paid to those who have scarpered from subsequently bankrupt companies and prison sentences for fraud might create a degree of credibility.

Sweden recently had to take over a bank, they just nationalised it and sacked the entire board. They will be very lucky if they escape imprisonment, never mind collecting bonuses.

Exactly. In the case of the "Big Three" it would appear that over time the management of these companies was simply outmaneuvered by the labor unions. Why should we reward that management for this?

Neither should be rewarded for striking an inefficient and market-unsupported bargain. Which is why bankruptcy will result.

But after the bankruptcy, the management will still be filthy rich, while the union members will be unemployed. Who won and who lost? Management won, and everybody else lost -- taxpayers, car buyers, union workers, and of course shareholders.

I would agree that neither should be rewarded and bankruptcy will result.

The management will take what they can out of the carcass, but their extraction of wealth occurred in the past, as did the unions. I'm not sure that management (or ownership, which isn't always the same thing) will win in the sense that the gravy train ride comes to an end - but yes, overall the system is set up to benefit that portion of the society.

I'm not sure I see a loss for taxpayers or car buyers. Union workers, certainly, as with all the non union workers. The shareholders..., hey, equities markets are nothing but a casino with the veneer of respectability.

It is not only well paid, highly skilled UAW members that would go down with the end of the Big 3. There are thousands of small non union low wage suppliers to the Big 3 that would go down with them. Any bankruptcy reorganization must include all those small businesses along with the big boys. Then there are the dealer networks which have employees in nearly every town in America. The only people who would benefit from this mega scale bankruptcy environment would be the lawyers. They always get their cut before anyone else.

As long as vehicles aren't selling, the dealer cuts and support industry cuts are coming anyway. Operating in Chapter 11 should neither help nor hurt that. Certainly the "won't buy from a bankrupt company" syndrome is already in full force.

2/3 of the GM dealers need to close to match Toyota. The supplier base needs to scale down and consolidate with a 10M market instead of 17M market.

Sure it's going to hurt, but there is no other possibility. Any size bailout, as for banks with bad debt, will dribble away and merely delay the inevitable.

The problem is that many of the domestic carmakers are making an inferior product... Inferior in quality, inferior in price, and inferior to the needs of Americans. The only thing that kept them afloat was cheap fuel and the SUV/truck craze, a market which they dominated...

The Escalade: So big you can live in it

Well, since fuel went through the roof (followed by the economy going through the floor), there ain't a whole lot of SUV's being sold. They should have invested in smaller, fuel efficient and less expensive vehicles. There's a reason that it's a Toyota Prius and not a Ford Prius...

Edit: It's appropriate that this vehicle is named the Escalade. The definition of 'Escalade' is a siege warfare tactic of scaling defensive walls or ramparts with the aid of ladders or siege towers. Do we really need seige towers barreling down the highway doing 70?

Something like 5,000 Escalades sold in the last year. It's a failed vehicle, IMHO, and is one of many that simply must die. Just another datapoint about GMs decision-making prowess (or lack thereof).

Those who own first-generation Saturn's know that GM once COULD produce a high-quality, efficienty, reliable, and practical car using a new paradigm. Of course as soon as it gained some success, the political insiders pulled it "into the fold" and replaced the lineup with traditional GM clones. Now it's just one more flabby appendage.

There is nothing wrong with GM and Ford engineering in Europe, or in China where they are regarded as a premium brand.
That indicates to me that the fundamental problems are elsewhere, in the management, historic legacy and regulatory control of the car companies in the US.

I don't know if any of that will help much though, as once it dawns that the car market is not going to revive, the Europeans will likely just rapidly fold the European branches of the companies into other operations, as they are probably too small anyway for independent survival, or even just let them wither entirely, keeping in preference VW, Renault etc.

In the US there is basically no way they have the time to re-engineer their line-up.
In a rational world they might simply ship what they needed from their European plants to produce small cars like the Ford Fiesta, together with the engineers to get the lines running, sacrifice their European plants and use their political clout to get standards altered in the US so that the vehicles were street legal instead of having to be re-engineered to comply with different regulations.

I doubt they have the vision, as they are going to keep right on hoping for a rebound in sales.

The auto makers made, make and sell that which the consumer desires.
Be it an SUV or hybrid.

In the mix of consumerism we have shareholders and human nature.
Now the Monday morning quarterbacks arrive with their version of what they should have done.

If you are a farmer and grow sustainably but it costs more and what you grow is not the most popular how do you think you will fare in the market place? How do you think Joe up the road will fare if he simply grows and sells to maximize profit.

What the auto makers built and sold was simply to maximize profits and satisfy shareholders.
They understood the consumer better than she understood herself.

I'm fairly sure most also understand what is good for us and what we "should" do or not do but human nature takes over and we think "FYJ I'll let someone else be the good guy while I make the most of the situation".

Like I have written many times, if living in a sustainable manner involves voluntarily suffering then it will not happen. It will happen only when we have no choice. Self preservation prevents us from deliberately harming ourselves.

Who is/was going to be the first to stop pillaging the oceans, tearing up the earth, give up their car, turn down the heat, move to a smaller home, allow relatives to move in, stop eating fast food or dump the TV.

Suffering in the name of sustainability will only happen when it is forced upon us and we all know by then it's far too late.

Before we condemn a person, group or corporation we must look within. Look at our human nature. Try to understand why we do what we do.

You left out one thing missing from the executive calculus in the US: There must be consequences for bad decisions. This does not mean rewards that start at "very high" for awful performance and go all the way to "spectacular" for good performance. At the end of the day, this kind of measurement not only gives us short term thinking, it converts savings into consumption - consumes capital - at a very high rate. This ruling class has become a plutocracy of entitlement and left everyone else behind to struggle to meet day to day expenses. No wonder "Left Behind" is such a popular series. In an economic sense, nearly all of us have been left behind. Time for the mother of all class action suits?

Here's my automotive bailout plan, which I have advocated before, but for some strange reason, Shrub & Pauley Walnuts have not gotten back to me:

1. Gov will buy the first 2,000,000 cars which come off assembly lines with the following attributes for $60,000 each:

A. Get 80 mpg or are electric
B. Get 5 star crash ratings from all angles
C. Have seating for 5 people
D. Can go 0-60 in no more than 15 secs & at least 85 mph top speed

2. Gov will give out the first 100,000 of these free via lottery. The remaining 1.9 million will be auctioned off monthly as they come off the lines. Customers wanting to buy one at auction will be allowed to trade in their current vehicles for (purchase price – 10 year straight line depreciation).

To facilitate the switchover, a $2B LOC would be available to each carmaker @ 2% interest.

Example: If you bought a $50K Escalade in 2006, you could buy one of these cars for lets say $25,000 at auction and trade in your escalade to the Gov for $35,000 meaning you would get paid $10,000 for the switch. Gov would pay $60K for the car, Get back $25K from the auction, and wind up with an Escalade that they could send to KSA in exchange for lets say $15K worth of oil for the SPR.

Net loss to Gov: $20K. Reduction in oil consumption: Priceless.

Hello Consumer,

I think JHK's & Alan Drake's standard-gauge RR & TOD ideas are a better idea for a bankrupted, then reorganized Big3. We have plenty of autos & trucks to meet our needs [not wants] for a long time as our economy shatters into Powerdown.

The Big3 could also rapidly gear up very cheap [but still high quality], narrow-gauge RR & TOD to help the growing poor still move about, plus move local goods and recycle O-NPK as we gradually transition to pedal railbikes, bicycles & wheelbarrows.

[2 photos of narrow-gauge train & track]:


Notice how the track is small & light, and no elevated stations are required for safe entrance/exit. IMO, this can solve the problem for parents with toddlers and packages, and/or handicapped people. Imagine a fold-down ramp on a small flat-car for someone who is wheelchair bound. Even the blind can easily utilize these trains for mobility instead of presently having to hire a cab.

If the guts of a Toyota Prius can power a train like in the photos above--> 100, 200, 300 people per Prius? I have no idea, but I doubt if the loco-engine illustrated above has an engine larger than 500cc.

Also, I have posted much before on how small, containerized, human-scale freight boxes can be used on narrow-gauge freight trains that can easily fit into the standard-gauge rail/ship/truck containers. Then when FFs [and electricity?] are mostly Unobtainium:


This photo is standard-gauge, but no reason not to also have narrow-gauge Spiderbikes first because we may be able to run electrified standard-gauge trains for some time if we get our act together. Recall my speculation that the narrow-gauge networks basically function as the 'ribcage' to the standard-gauge 'spine & limbs'. Time will tell.

EDIT: IMO, sure beats the iconic pictures of carrying heavy loads of firewood, water, etc, on our heads for short distances only as we plod barefoot thru the broken glass and overflowing sewage like in Zimbabwe and other spots.

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

Dick lawrence posted a comment at the end of the thread yesterday about a new study looking at the limits to growth modeling and I went looking for more info and found the press release at CSIRO.

"Reducing consumption key to a sustainable future"


"Based on then ground-breaking modelling, the forecasts of global ecological and economic collapse by mid-century contained in the controversial 1972 book; The Limits to Growth, are still ‘on-track’ according to new CSIRO research."

This seems important and should get wide distribution.

I posted it at the top of the DrumBeat the day it came out. Nobody seemed much interested.

Sorry leanan I must have missed that.

Here is a podcast of the author of the study talking about it;

"Examining the limits to growth"


"In this podcast, Dr Graham Turner talks about his recent study that validates one of the book’s key scenarios."


A PDF of the study itself is online
"A Comparison of the Limits to Growth with 30 Years of Reality" - http://www.csiro.au/files/files/plje.pdf

Energy Bulletin


Self-flagellation is never very popular, not even on the DrumBeat. Try it a few times, though, and it starts feeling good!

Someone just gave me Andrew Bacevich's book The Limits of Power, which is a sobering read, and in the tradition of the Limits of Growth. I doubt either one of them will make it to daytime TV.

Second that comment on Bacevich's book...very powerful read on how the US got itself into the predicament it's in (hint: it started long before 2001).

The problem is that the current economic model is to consume lots of (useless) stuff. "Shop or the terrorists win" as Bush said. Reducing consumption to even a reasonable level (i.e.: living within one's means), would crash the economy. (Although there might not be much left to crash...)

Because most people are doing useless jobs. The only thing we really need are food, shelter, some health care and a bit of entertainment. And what % of the workforce is that?

I live in Asia where labour is cheap, and most people are paid to do completely useless stuff, like army of gardeners mowing grass by the roads every day, more clerks than customers in shops, people paid to put groceries in bags, doormen, people washing the same cars every morning,....

Either we have an ecological collapse, or huge levels of unemployment.

At least with the end of cheap oil, more manual labour will be needed. Maybe shorter days will help spread that work around.

The Toyota story above points out exactly why the Big 3 SHOULD fail. Having tested the waters with hybrids and CNG vehicles over the years, they are now showing off a CNG hybrid Camry.

Assuming that it gets a little worse mileage than the current Camry hybrid and cost a bit more, the car should sell for less than $30K, get 40mpg or so, have CNG fuel costing about a buck per gallon equivalent, and seat 5 decently for around-town family use.

I wonder what Toyota and Honda could accomplish if we just bought and GAVE them GM and Ford, and a few billion to re-tool plants for producing cars like these?

The failure of the big 3 would also rather neatly reduce car production capacity to what is actually being sold now.
However, if anyone thinks that the incoming Democrats will allow the collapse to be anything other than protracted, as they say as least on television in London's East End:
'Yer 'avin' a giraffe!'

I wouldn't say "neatly". Car prices (or at least cost) would rise a lot as economies of scale for parts and finished cars collapse.

Once you took out the proprietary parts for those manufacturers then most of the rest of the reduction for the suppliers then the present reduction of maybe a third could likely to re-engineered for without an overall huge effect on costs, I would guess - the engineers here will perhaps correct me if I am too far out there.

If the downturn takes another leg though and car sales crash further, as I suspect will happen, things should get 'interesting'

It is worth noting here that EV's use far less components than ICE cars, and that it is only really the battery holding them back.
Electric motors and batteries apart, they lend themselves well to being built by small companies, using composites rather than metals, and at a much lower energy cost.

Perhaps the 'death of the dinosaurs' will create an ecological niche? :-)

Many part suppliers are shared by Japanese and American auto companies. Toyota said they are worried about GM failing because many of their shared suppliers could go out of business.

I have worked at suppliers to the auto companies and I would expect that many would go out of business unless the car companies work to offset it. First as a supplier I hated the car companies way of doing business. Purchasing award the business by squeezing every dollar they can out of the supplier, often by lowering specs, support or response times. Then the business owner comes in and asks for things and the supplier has to say no way, we got squeezed so hard there is no margin for error left. Then the business owner complains about purchasing interfering with what is best for the business. Essentially purchasing and the business owner are often operating at odds with each other.

If congress don't vote for a bailout then the car companies have to do the following, take whatever cash they have left and pay the suppliers as much as they can next week so they are current, to try and stave off supplier bankruptcy, then the car companies go into chapter 11 and the suppliers can keep supplying.

In the long run they would accomplish nothing. The roaming the range on my own horse (Mustng or whatever) will die, either quickluy or slowly. This will leave the rich as the only ones able to afford something similar. It would be better to let them fail and expropriate any divisions that can build rail and marine infrastructure and let the rest go. But in the USA this is considered communism so never going to happen. Having surveyed the activities and efforts of the politicians and those with real power (ie money) concerning eneregy, economy and climate change I am now in the camp of let it crash quickly. We will all suffer horribly but then my generation should pay some price for our wasteful indifference over the past 60 years. However many of us seem only concerned with it holding together so we can enjoy our retirement living, winter holidays and summers at the cottage and die peacefully leaving the mess for our children and grand children to suffer through. I used to simply believe that the futire would inevitably be horrible, at least for a transition period. I now say: "Bring it on!" Lets get our efforts into dealing with it.

Here is an interesting German variant on the problems at GM - Opel is the European part of that:
German Energy Firm SolarWorld Announces Billion-Euro Opel Bid

In an unusual twist to the current Opel story, German solar energy firm SolarWorld announced Wednesday, Nov. 19 that it was preparing a one billion-euro ($1.26 billion) offer for four of the car manufacturer's factories.

The solar panel maker would offer 250 million euros ($314.9 million) in cash and 750 million euros in the form of a bank credit under certain conditions, the statement said. SolarWorld added that, if successful in its bid, it would continue to produce Opel cars in the plants, and would develop "a new generation of low-emission and energy-saving automobiles


I'm not sure how many plants GM has in Germany.
Presumably they are planning some sort of electric car or very light weight vehicle.

OK, so here's my chance to repeat my standard advice on how to save the world.

1) Solar thermal in the deserts
2)high voltage DC transmissions to population centers
3) pumped hydro at both ends of HVDC for 24 hr service
4) pay for it by diverting useless auto assets to all of above
5) result. paradise on earth for ever, and I get rich because I have a lot invested in solar thermal.

Trouble is, everybody ignores this stellar advice, no matter how often I repeat it, and how unarguable it is,--- presumably--- because--- well, maybe they don't want it to be true because they want me to stay poor.
Yea, that's gotta be it. Nothing else makes sense.

"Reasons" that don't make sense:

Too expensive
Oh yea? more expensive than total collapse and everybody dies?

Nobody would give up a new car every third year.
If that is true, then everybody deserves to die anyhow.

Not the best way to spend assets.
Sure, so what is better, and why isn't it also too expensive, etc etc.?

Politicians couldn't advocate such a scheme and get elected
Right. So change the politicians to those who can talk sense and also get elected, or give up on elections, which, given the state of the heads of most voters, might be the best anyhow.

And so on. Time for supper. I quit.

5) result. paradise on earth for ever, and I get rich because I have a lot invested in solar thermal.

Why do you advocate solar when wind is cheaper?

Probably no solution lasts forever, but without population stabilization (preferably prefaced by population decline) as one of you bullets, your plan is guaranteed not to work forever. Aren't you lacking some other things, like the building of high speed rail that will be used for both passengers and freight?

"Bring it on"? Trouble is, once again, it is the kids that will suffer the most. The old folks who created the mess are dying anyway. We don't have much more to lose.

Yes, the kids will suffer the most. But lets say we're able to keep BAU going for another 20 years. What then? It will still be the children who will suffer the most. Only they'll be more of them.

And olur generation will have gotten off relativly unharmed .. there will be suffering aplenty but it seems to me now many just want to postpone the suffering past their inevitable death.

I wonder what Toyota and Honda could accomplish if we just bought and GAVE them GM and Ford

This is something I've wondered about in connection with the proposed 25 billion price tag. The market capitalization of GM common stock is only about $2 billion, Ford $4 billion. I understand that there are other non-common stocks, but don't know the rules well enough to know how much of those you'd need to buy to take control of the company.

But it is not clear to me why you would loan $25 billion to companies that may not even be worth that much in total.

You have to keep the 25 billion in context-trillions of USA taxpayer dollars have already been dolled out to companies worth comparatively little-the USA taxpayer could have purchased pretty well all the large financial companies for what has already been thrown away.

But the $25B is only the start, and throwing good money after bad isn't a lucid investment rationale.

I think that Pelosi and Obama will not be able to refrain from bailing out the Big 3 multiple times to keep the UAW happy. That's a price Obama will have to pay.

Our best chance is for GM to go bankrupt before Christmas. Then Obama can "help" after the fact, rather than trying to prevent the fact, at least.

But it is not clear to me why you would loan $25 billion to companies that may not even be worth that much in total.


And, China just might start using this argument while they're snapping up T-bills when we kick around another stimulus package. Would you keep loaning money to an unemployed gambler?

I'm not sure the Chinese have a real choice. If the economies of the US, Europe and Japan continue to contract, China is going to be in REAL trouble. Their continued growth is predicated on a strong export market.

The Chinese will try to keep things going. But if it starts getting too silly, they have a better plan B than just about anyone else.
They had a command economy until the recent past, and many of the structures needed to resurrect it.
If it becomes clear that the world economy is going down the pan, then they will revert to the planned approach, and with great difficulty could divert the resources currently going to export to swap trades and infrastructure investment..
My guess is that in this world they will also want to strengthen their military, so between that an revamping energy production they should have plenty to keep them busy.

The real problem they face, though, is the rapid de-ruralization they have been going through the past 20 years or so. And it just keeps speeding up. They removed rules that kept people on farms once they needed them in factories.

So the question is can they generate enough economic activity on their own to allow that continued migration? That answer is not clear at all. And if they are not successful in doing so, there is no pleasant alternative - either growing numbers of displaced urban unemployed or even more rural discontent with new rules trying to stem the migration.

We need to remember that China remains majority rural and that dealing with the "rural problem" is key to the stability of the country.

Things might come apart in China. They have a lot more going for them than most places though.
For a start, the recent industrialisation means that most folk at least have a place in the country they can return to when things get tough, and that is just what a lot of them have recently done.

Secondly, China has been producing too much and not consuming enough. That is a lot easier to put right than the reverse.
IOW, they can produce enough to pay for oil, raw material and advanced technology with only part of their present production.

The remainder which previously went to savings, a lot of it in American real estate, can be re-allocated to build a truly modern infrastructure and power generating capacity.

In a command economy, it is not too difficult to keep people busy, although making the jobs actually productive is a different matter.
You can bet there are elements in the Politburo who are right now looking to move towards a command economy.

None of this will be easy or smooth, but it is a lot easier than what the west confronts.

Perhaps we will see an 'East Asia Co-Prosperity Sphere', with China, Japan, Indonesia and Australia making a formidable combination and economic power zone.

China, India and SouthEast Asia all have another 800 lb gorilla facing them. I read some time back that with Climate change, man-made or otherwise, the Himalayan glacial melt is accelerating and is poised to loose almost all glacial melt within 30 yrs. Problem is this contributes significantly to water flow to all the major rivers, Indus, Ganges, the major rivers in China, etc. We could be seeing over 3 Billion people with significantly reduced water as a source of irrigation, impacting cultivation. Peak Oil, Financial Chaos,Climate Change, Water shortages... Next?

Loss of glacial melt will mean a seasonal shift in river flow but not a loss of river flow per se. (precipitation falls as water instead of snow, or as snow and melts completely every spring/summer). GW will likely mean altered rain patterns (problems for the monsoon ?), but increased total global rain.

Massive dams can better alter the timing of these river flows to meet the needs of agriculture.


I suspect that the social problems are going to be at least as critical to the Chinese as the economic. Theory of rising expectations and all. Seriously, though, levels of discontent in the countryside are already causing problems for the central gov't - add to that millions returning to their ancestral homes for lack of work and you have a mix that could threaten the party's hold on power.

The party rose to power based on its connections to the rural base, but that has been allowed to wither in the last few decades as the party has increasingly allied itself with the commercial classes. If that arrangement becomes problematic in the eyes of a large number of Chinese, it won't just be a return to a command economy that will be of concern (can you spell Tiananmen 1989?

Add to that the hugely lopsided demographics from the one-child policy: huge numbers of young, un(der)employed men, with no prospect of marriage, now losing their jobs and/or forced back to the countryside...?

There are 1000s of riots each year in China. Mostly in the countryside, as conditions there are real bad (extreme level of corruption, unemployment, poverty....). As long as it was only in the countryside, Beijing didn't mind that much, as it provided lots of cheap labour for their factories on the coast.

But with factories closing now, riots are spreading to the coastal areas. China needs to create something like an extra 20 millions jobs each year just to face the rural exodus. Which is not an easy task when no one is buying their exports.

At least there seems to be some smart people high up in the Chinese government. Their one child policy means that there aren't that many young unemployed (compared to places like Africa or Indonesia). And their policies (so far) have been much better to the economic crises than the west.

One can hope that the civil unrest will lead to a fall in corruption levels.
Another option would be a war. Nothing better than a world war to reduce unemployment.

I doubt that China will look much like the comparatively liberal place it is at present. The failure of the markets would likely lead to a hard-line ascendency, whilst the mass of young men would provide a military resource.

If you couple this to the likely collapse of American power, as detailed in this thread by Steve of Virginia, then you have to ask where this military power would be most profitably employed?

The obvious answer would be to secure resources, and there are three possibilities there: Russia, Australia and the Middle East.

Assuming that the leadership of China do not completely loose it, tackling Russian sovereign territory does not seem to be a good option, as it invites nuclear attack, and anyway the isolation of the Russian East from European Russia means that it anyway naturally falls into a Chinese sphere of influence, so they can probably get what they need by trade.

The main hassle about tackling the other two is the lack of a Chinese blue water navy in any strength, and it seems likely that building that up will be a Chinese priority for the next few years.

Since access to oil is likely to be the really critical thing, increased Chinese pressure on the Central Asian Republics and gradually ramped up forces in the Middle East is perhaps likeliest.
After all, if American power implodes that would leave it's client state, Israel, basically orphaned, and in addition there are many other conflicts between the states and religions in the area, which divisions are a classic lure for imperial powers to exploit to gain control.

Such control could be much less energy intensive than American attempts, since it could basically be based on vast numbers of troops rather than technological superiority or sophisticated logistics.

Under the sort of regime I would envisage in China I doubt insurgency would be possible, as current insurgencies are based on the unwillingness of the US to eliminate entire populations, and I doubt that that restraint would be observed.

Australia is perhaps an intermediate case in difficulty between Russia and the Middle East, as it would need considerable naval resources to attempt, and the response of the US, still heavily armed with nuclear weapons, would be uncertain.

I think you may be mostly right, but the target will be Africa. Who would complain if China landed 10,000 troops and added a few ships to control piracy? Between quietly buying up rights and placing workers and maybe sprinkling some much needed aid here and there, and perhaps a newfound military presence in trouble spots, China could quickly become a semi-colonial power. They could probably do most of it with UN blessing if they play nice, up until the point they don't have to.

Here is a disturbing report on neo-colonialist moves from the far East, in this case Daewoo, in a ploy reminiscent of the East India Company:
Daewoo to pay nothing for vast land acquisition

Daewoo Logistics of South Korea said it expected to pay nothing to farm maize and palm oil in an area of Madagascar half the size of Belgium, increasing concerns about the largest farmland investment of this kind.
The Indian Ocean island will simply gain employment opportunities from Daewoo's 99-year lease of 1.3m hectares, officials at the company said. They emphasised that the aim of the investment was to boost Seoul's food security.

I take the move into Africa for granted, and far eastern colonialism is likely to be far more oppressive than the Western variety.
In particular, piracy is only viable whilst the big boys play nice.
As conditions worsen I expect that to be dealt with by the same method it always has been, by eliminating the bases.
Just as Churchill did to suppress rebellion in Iraq, the likeliest way seems to me in view of the distributed nature of piracy in Somalia, to simply take out all settlement within perhaps 20 miles or so of the coast, perhaps by poison gas.
Wells and water supplies would likely then be poisoned, and periodic airborne sweeps made to kill anyone in the area.

Much of the likely fall in population seems likely to me to occur in Africa, and resources there will be taken quite ruthlessly.
However, that is not really enough to keep things going, and the big prize remains the Middle East and Central Asia.

Power abhors a vacuum, and what seems to me the inevitable rapid decline of American power will lead to others moving in.

And to think that people used to say the Chinese economy would do wonders during a US/European meltdown. Why is then that they are worried about a recession and just had to inject $550 billion into their own economy to make up for the shortfall in exports? We are all connected. If the US or Eurozone goes south, so will the Asian Tiger economies.

Nobody was talking about a meltdown in the West at that time though. What you are talking about is what people said well before the lehman collapse. But when lehman and the near total collapse of the global financial system took place, of course nobody thought that China would be unaffected.

I listened to a radio report in the shop last nite-hard to hear it well-whose premise was that bankruptcy was the best thing for the 3.

It was the only method by which these companies could go forward.

GM was shown with a dealership problem- approx 7000 US to approx 1000 US for Toyota (don't recall specific #'s)

So many problems, the piece argued, that bankruptcy was the only method for dissolving old, strangling issues.

Bankruptcy seems the preferable solution, we've already bailed Chrysler once, but it seems it has become habit forming. I suspect alot of the yells to keep them afloat stem from subcontractor issues in the States, and not insignificantly, the role many would like them to carry with new health care proposals.

It is delusional to think that the United States can install in 10 years wind and solar generating capacity equivalent to that of thermal power plants that took nearly 60 years to construct.

Is it? I'm not so sure. Are we appreciating just how much resources society could potentially mobilize, if we really had to? Whether such WWII-scale mobilisation will happen is another matter.

Sadly, part of the problem is if these new technologies are ramped up too fast there is no net energy during the installation phase since you have to invest fossil fuel energy to make the device (say a windmill or nuclear plant) and the devices that can use the electricity ( electric everything) and this at a time when oil, at least, is becoming less affordable.

We are going to have to learn to live on less energy, that's all there is to it. The more renewables that we can bring on line, the better - and the less painful the degree of powerdown will going to be. Powerdown we will most certainly have to do, however - count on it.

Let's say energy consumption is halved over ten years while, renewables are increased to a level that represents 30% of current consumption, wouldn't renewables end up contributing roughly 60% of the energy? In other words, as overall energy consumption is reduced, the increased contribution by renewables will become increasingly significant.

If Obama sticks to his stated objective of a massive investment in infrastructure (electrified rail?) and renewable energy, things might turn out better than they might otherwise be.

I know that halving enrgy consumption seems unrealistic but, IMHO the level of energy waste in the US is scandalous plus, what will happen if the US is forced to reduce consumption drastically?

Alan from the islands

Might be hard to achieve increase to 30% of current consumption with a failing economy. We could have some Gov't sponsored programs, but I think soon the Gov't is going to learn...

We can't borrow our way out of Debt!

Between 2000 and 2004 China increased power generation by 60%--almost 1000 Twh in 4 years. The US uses 4000 Twh of mostly thermal power plants.


If you look at wind in the US wind corridor between Texas and North Dakota there is about 5000 Twh of capacity on a fraction of the land area. A million 2 MW wind turbines covering 200000 square miles could produce this amount of electricity per year.

Assuming starting at zero and increasing by 20,000 2 MW wind turbines per year each year we could do that in 10 years. First year cost $20 billion, last year cost $200 billion for generation. We'd have to put money into a smart grid in the first few years, maybe $250 billion total for a total of around $1.25 trillion dollars over ten years.

The number of US housing starts in 2005 was almost 2 million per year at a price of +$200000 each.
The number of cars produced in the US in 2005 was about 4.4 million units at about $28000 each.

Vaclav Smil is a brainless doomer.

I too found Vaclav Smil's commentary to be rather poor.

Dr. Smil conflates facts about energy supply from many periods as if they are equal. He also ignores demand modification and conservation efforts. Comparing the wood to coal transition with what we are facing is silly, as there has also been a massive gain in engineering know-how during the 20th century. He also ignores the fact that hydro power is a renewable source of electricity when he lists renewables, thus understating the amount of renewables already on line.

He also ignores the impact of the Reagan administration's destruction of the renewable energy R&D efforts, along with their decision not to renew the tax credits for solar energy. Coupled with the Saudi flooding of the oil market, which pushed the price of oil down to about $10 a barrel, these actions practically killed the solar energy industry, which has only recently begun to recover as oil prices have risen. And, he insists that the only source of solar PV will be from lands in the southwestern desert regions, which makes it difficult to supply the eastern half of the U.S. where the majority of the people live. He also ignores the fact that the investment in energy supply which has been made over many years will eventually need to be replaced as all of it will wear out, especially the thermal power generating plants fueled with fossil fuels or nuclear energy.

Looking at the early 1970's, before the OPEC/Arab Oil Embargo, the growth rate in the U.S. electric demand/supply was about 7% a year. Had that rate of growth continued, the entire U.S. electric system would have been duplicated over the next 10 years. There were projections that this rate of growth would continue and that some 1000 new power plants would be required by the year 2000, many of them to be nukes. The reason for that rapid growth was cheap prices for energy and the addition of AC systems to the countries buildings. When the price of electricity increased, the rate of growth slowed considerably.

E. Swanson

Smil's article was pretty bad, I'll admit. But you just don't ramp up power generation as fast as China did without having to build factories to make the components for coal, nuclear, or wind power, or lay more track for coal production. This will take time.
Solar photovoltaic concentration can be ramped up much, much, faster, and you can build ten acre power sites all over the place so that power peaks (cloudless summer days) are offset in transmission as well as production, but it only works during the day.

Big Oil: We told you so

With prices sharply lower from the summer's highs, Big Oil's decision to hold off on new production now seems rather wise.

Back when oil prices were going nowhere but up, public officials, consumer rights groups and newspaper editorials chastised the major oil companies for not investing enough in new production...

The oil companies, in turn, argued that commodity prices are cyclical and would fall soon enough... In short, they just didn't believe the high prices were here to stay.

With oil prices now barely a third of that they were just 4 months ago, it seems they were right.

Anyone think that this was the best decision?

Typical MSM article-pile assumption upon assumption. IMO majors didn't want to spend more on oil exploration because they could not justify the expense-it has to be expected to pay off-the level of oil prices doesn't affect the ability to locate new oil deposits one way or the other.

Brian -- allow me to pick apart your words for the benefit of others. If you mean by "locate new oil deposits" the process of generating an idea as to where to drill a well then oil prices don't have too much bearing. But it's also a function of exploration budget: man power and data acquisition tends to be driven by price expectations. High expectations = bigger budgets. And visa versa.

But every drilling opportunity is evaluated against a future price model for the targeted commodity. During 2008 most operators used $70 - $80 per bbl initially in their price forecast. Many (including my company) actually lowered that price 10% or so for years 2 and 3 in the forecast and then allowed a small inflation factor (somewhere around 3%). A key parameter in the decision process is how quickly the well pays back the initial investment and the rate of return. These factors are heavily influenced by the early pricing assumptions. Obviously few if any companies are using price forecast much higher then $60/bbl for the next 12 months but that isn’t really too far below what they used for the last 12 months.

It is my understanding that the money the majors have spent on oil exploration over the last 10 years have not yielded a profit so there is no justifiable reason to increase expenditures in this area-pick apart at your leisure.

Denninger says all signs are pointing to a deflationary Depression.

And he says Obama is on the wrong side of reality.

I have said it before and I'll say it again - President Obama is going to find himself on the wrong end of reality, and be forced into austerity measures that neither he or Americans are going to like one little bit. I wouldn't want his job when he is forced to go on Prime Time TV to tell America that we simply can't finance our profligate spending any more and that serious, real, across-the-board cuts are going to have to be made to our federal budget, entitlements and "promises" - that we simply cannot keep those promises.

Historically there is only one other way out of the trap we are now in.

Start a war.

A really big one - big enough to kill a couple million Americans (reducing competition for jobs) and destroy a trillion or more dollars in American "stuff" (that will have to be replaced.)

Starting with the premise that we can't afford the level of government spending that we have, and assuming that Obama does not realize that Canada is part of the Axis of Evil and we declare war on Canada--and assuming that foreign creditors increasingly refuse to lend us money to maintain our high consumption lifestyle--it seems to me that there are three choices: (1) Much higher taxes; (2) Vast reductions in spending, including Social Security & Medicare; (3) The Fed acts as buyer of last resort and monetizes the debt.

I would assume that we are going to see some combination of all three.

I would agree-OTOH China increased their purchases of t-bills last month so I would assume they have agreed to fund the USA stimulus program at this point. They still have a large trade surplus with the USA which cannot be criticized by Obama while they are the sole lifeline-I would also assume that whatever plans China has for Taiwan are A-OK as well as their rather aggressive expansion into Latin America (starting with Costa Rica).

I think we'll see all three and a big war (or several).

But it won't help. If destroying stuff was enough to fix the economy, why not just load a bunch of weapons, etc., on a barge and sink it to the bottom of the sea?

War with whom? Isn't Obama's plan to pull back from Iraq and restore image of US in the world?

The idea that death of Americans would lower the competition for jobs is a bit nutty too. Those who die used to be consumers too.

Bush's plan was to avoid getting involved in foreign wars, and look how that turned out.

I think it might turn out to be very difficult to avoid conflict as resources decrease and the economy worsens. Might not be in Obama's term, but I am expecting more wars.

But another world war might not be the tonic for the economy Denninger imagines. It still comes down to resources.

War is useful only if it promotes economic development. WW2 triggered a long period of growth, but WW3 might not have the same effect, as resources are projected to shrink anyway.

I think that banks stopped lending to tell the governments (and people): cut the crap, we know we aren't going anyway.

WW2 triggered 60 million people dead. Not an economic use of labor. Economic recovery was occurring before the war. People were dirt poor during the war, they had to plant their own vegetable gardens to get food, recycled metal, got gasoline and tires rationed to them. Many who took part in the war could claim no victory, they did not live to see its end.


Some people thought war was good, until it blew up in their faces.

WWII was fought mostly in Europe, Russia, the far east. Post war Europe including the UK was a very depressing place for about 15 years.

I think the war will look more like civil and uncivil unrest. The Somali pirates is just the tip of things to come.

Yes, I agree---"gangs" "squads" "militias" "groups" etc. will struggle with each other as jobs and income disappear. I do think there will be civil and uncivil unrest even if there isn't a big war. I hope it will gradually tail off as populations age and die off anyway. There are so many old people here in their 70s, 80s and 90s it's hard to imagine them ganging up to fight.

Actually PE Obama's stated plan is to pull out of Iraq and escalate the war in Afghanistan and increase efforts to battle Al Quida on other fronts. Pick your front....the body bags are the same color.

It's not the destroyed stuff that is key, IMHO, it's that replacing the destroyed high-value capital pulls people out of unproductive parts of the economy (retirement, low-value services, etc.) and into "the war effort".

Raising real production improves overall efficiency but also uses a lot of resources. But if the real problem is resource constraint, even with a war we'd fail. Following Greer's model, couldn't resource shortages coupled with capital destruction (in a war, say) lead to a situation where we face both a resource crisis and a maintenance crisis -- not enough cheap resources and productivity to support what we have or build what we want either one?

I kinda feel like we're there already, without another big war. Adding a big war would imply collapsing an entire tier of "capital", wouldn't it.

War is not the answer here (although it was in the 1940's because of the threats of Imperial Japan and Nazi Germany).

The answer is the following:

1. Make investments reducing dependence on foreign (and even doestic) sources of nonrenewable energy
2. Make investments increasing use of renewable energy
3. Make investments increasing energy conservation

That's it. That's the war.

There need to be investments in things like local and long distance rail; investments in energy saving technologies; tax breaks for those using energy saving technologies (like a 100% tax break on energy efficient windows, insulation and geothermal heat exchange for starters); investments in nuclear, and more specific breeder reactors and fuel reprocessing; investments in wind, tide, ocean current and hydro technology; investments in energy efficient lighting technology; investment in vehicle fuel efficiency and/or electrical vehicles; and investments in the electrical grid. Hell, even investments in things like roundabouts in new construction projects.

There also need to be laws and regulations reducing energy consumption. Laws to eliminate incandescent lighting; to eliminate poor fuel efficiency cars and trucks; and even possibly a quota system for fuel consumption.

All of these investments (on average) will pay themselves back. These have real, tangible assets as deliverables, assets that will reduce our trade deficit and increase the money staying in America. They will provide a permanent jolt to the economy... For example, if I spend $500 less to heat my home this winter because I put in better insulation and windows, I'll spend it on something else (It's the American way!) or I'll save (or invest) it and help someone else indirectly with my savings or investment.

If there must be a war, the war must be against spending on energy, like oil, coal, gas and a war to spend more on renewables or not spending on energy at all...

War is not the answer here (although it was in the 1940's because of the threats of Imperial Japan and Nazi Germany).

I'm sure there will be an equivalent threat for the next go-around. Nothing like an energy transition to get those sabers rattling.

When resource constraints were not a major issue, war mighta worked. In WW2 resource constraints were minimal for the US, but lethal for the axis side. Of course you are envisioning a non-nuclear war, the nuclear version is over way too quick, and destroys too much stuff to stimulate anything. The longer conventional sort certainly stimulates high consumption, of anything deemed likely to help the war effort. But, all that would entail is desperate wasteful consumption of resources, with little regard for the future. The basic assumption, is that winning is everything, and everything after the expected date-of-victory is just assumed to be coming up roses.

Now, we might still be dumb enough to try it. But, it won't come about due to a rational evaluation of options.

Biological warfare destroys essentially no property and so could lead to quick economic recovery in terms of your standard of living. If you live.

The reason the war model works is NOT because you reduce humans or you reduce demand. The war model works because you have a command economy and a) the commanders have precise production/consumption information and b) they get to impose wage controls.

When they control production/consumption... they avoid things like "financial assets". Paper wealth does not make strong economies or win wars. Navies and air-forces represent real capital.

When they control wages... they avoid things like CEO's, CFO's, hedge fund managers, etc... making 500 times more than the average worker. This forces earnings compression. Managers make less, workers make more. Or to put it in Democratic terms... management and workers have wage parity.
Wage parity creates demand.

This is the way FDR did it. Read Krugman's "Conscious of a Liberal". It's very, very, illuminating.

I think it was more than that. The US had a lot of natural resources. And before we got involved in the war, we sold goods to all sides. Afterwards, we were in a privileged position because aside from Pearl Harbor, the war did not happen on our soil. Our factories and bridges weren't bombed. We didn't have to rebuild.

I agree--

The war model works because you have a command economy and a) the commanders have precise production/consumption information and b) they get to impose wage controls. Military economies from Sparta to North Korea do not seem to have been spectacularly more successful than any other form of social organization.

Identifying resources, then exploiting them is what works. People are exactly as smart as yeast.

Yes... the U.S. did end the war with a lot of resources.

But your narrative (intact industrial base) is the one the Heritage Foundation, Cato Institute, etc... would love us all to believe. Because believing that social parity drove the great post-war boom would be da-bomb.

In the war years, we nationalized our industrial policy to build the factories that drove the war effort. Now we have nationalized financial wealth. It is very different.

The key thing though is from 1935 to about 1970, we flattened wages so that we could produce a lot of stuff. We needed 500 workers more than one CEO. The benefit, of course, was that 500 workers represented real human capital. Because 500 workers produce more than one CEO or one Wall Street trader. And they consume more too. 500 cars, not 3 Lamborghinis. 500 houses, not one Central Park coop and a weekend mansion on Long Island. It really is a zero sum game. 500 workers = 1 fat cat with a big bank account.

Before the war we were in a Depression and sold very little to anyone. After the war we were a well paid, highly skilled society... until the invisible handers got hold of Congress.

I think you would need to add to this discussion that cheap oil was increasingly becoming the engine of the American economy in the post war period.

I think you are exactly right.

Without the cheap and easy oil we might now ever have pulled out of the last depression. We would not have grown into such a global mass of stupidity.

The economists said oil could not go to triple digit prices because the economy could not take it. They were wrong about the price, but right about the economy - it is collapsing.

Wars are a symptom, not a stimulus. War is just a faster way to the bottom.

...cheap oil was increasingly becoming the engine of the American economy in the post war period.

But is that not also true for the Soviet Union during the post war period? Didn't the USSR have similar natural resource potential, including minerals and oil?

In the case US vs. USSR, we accept that both countries had resources, yet only one became wealthy.

We attribute this to political structure.

Now the politics of market fundamentalism have concentrated US wealth to levels unseen for decades... we watch our financial system fail.

We could have survived high oil. We cannot survive 1% owning everything, including our Congress.

"In the case US vs. USSR, we accept that both countries had resources, yet only one became wealthy.

We attribute this to political structure."

Couldn't you also attribute that to having some people and stuff left after the war? The fact that the war was fought on USSR soil and not US soil I think accounts for a lot. Stalin probably could have done big things had he inheirited the US in 1945.

Excellent observation... Stalin killed the best and brightest in Russian society. If he'd done that here in the US... we'd have had the same legacy results he achieved.

Back to wage parity, I read somewhere that in recession times, increasing the purchasing power of the poorer segments of society did more for the economy than increasing income inequality (I think that's Keynesian idea). I want to link this with the discussion upthread that increasing US income inequality led to having to increase the availability of credit to keep consumers active, which eventually results in a bubble. I am mulling this over. I think it explains a lot.

So as I see it increasing wage parity would have worked along with cheap oil and having an intact infrastructure to give the US an advantage post-WW2.

Precisely. We hit the trifecta.

But without the wage parity, which we've lost, we also lost our financial system's checks and balances.

We are looking at the results of 1% financial (mis)rule today.

The Soviet Union did very well economically in the 50s and 60s. At the time, the Soviet model was seen as an efficient economic model that brought development in a rapid way. It wasn't until the 70s that it became clear that the model was too top-heavy to work in an ever more complicated economy. But prior to the 70s, the Soviet model brought huge development (even in North Korea, it actually had higher economic growth than South Korea for many years).

Actually, the Soviet Union became dramatically more wealthy during the 1950s and 1960s. Even given their horrendous losses in the war, they managed an average 2.2% GNP growth during the forties. On top of that, growth during the first three five year plans approached 6%. The problem for the Soviet Union was not a lack of growth, but that they started at a much lower level of wealth in the first place.

"The US had a lot of natural resources. And before we got involved in the war, we sold goods to all sides. Afterwards, we were in a privileged position because aside from Pearl Harbor, the war did not happen on our soil. Our factories and bridges weren't bombed. We didn't have to rebuild."


And, we stayed out of it long enough to profit handsomely before committing our own resources. (The Brits were TICKED that we offered only lend/lease rather than just giving them arms for a war they saw as in our benefit, too.)


That certainly seems to be close to what happened in the UK during WWII: you had dramatically reduced consumption (supported by the populace), an awful lot of men busy on the fronts and women busy in factories rather than engaged in dubious entrepreneurship, and industrial capacity being built up on war work that could be used after the war. Obviously many places got blasted heavily, but I honestly don't know how much that contributed to demand creation after the war. I suspect it's more the period of low consumption relative to industrial output that was a bigger issue than command economy per se. (It didn't hurt that we still had an empire generating income at that point of course.)

Even then the UK came out finanically badly (partly I gather because we didn't bring home and demob the troops quickly enough and kept paying them for about six-nine months longer than is apparently viewed as appropriate in hindsight) and needed a loan from the US that we didn't finish paying off until 2004 (?).


Your comment gets us around to a fundamental problem - we've been trying to operate with just an income statement, and no balance sheet.

When you don't have a national balance sheet, then it can seem that breaking stuff and then replacing it boosts the economy. If we also had a balance sheet, the folly of that would be immediately obvious.

We've been operating without a balance sheet for years, so we've been fooling ourselves for years.

If a business tries to operate that way, it will inevitably end up in bankruptcy. It thus shouldn't be a surprise that the USA is heading for the same fate.

It doesn't matter who has been making the prescriptions or what the prescriptions might be, they are all wrong, because they are all in response to the wrong questions. There is only one right question: What will best enable us to at least PRESERVE, and if possible IMPROVE, our net national WEALTH?

I doubt that there has been a single person in a position of authority or influence that has seriously thought about this all-important question.

There is only one right question: What will best enable us to at least PRESERVE, and if possible IMPROVE, our net national WEALTH?

I'm not sure why wealth would have anything to do with the "one right question." This seems to me to be an unwarranted acceptance that the goals of the current system are the correct ones. Personally, I think any future worth living will come from giving up on the pursuit of wealth as a measure of our lives.

Understand that "net national wealth" does not just include money, but all assets (net of depreciation and liabilities) which can be valued. It includes all land and the petroleum and minerals it contains, all fisheries and wildlife, all livestock, all houses and schools and hospitals and factories and other buildings, all vehicles and equipment, all infrastructure, even all intellectual property. We, collectively, are better or worse off depending upon the extent to which these assets are conserved and enhanced or squandered. Maybe we should even be counting human capital.

It is true that a nation can sit on a lot of wealth but its people still be very poor, due to its assets not being employed in a productive manner. This is why we need to be looking at BOTH a balance sheet and an income statement.

My point, though, is that you can show a lot of "income" by depleting your fisheries, mining and depleting the topsoil and aquifers, and all the other stupid things we've been doing. You can even show a lot of income by gathering up a bunch of resources, throwing them away in a war, and then replacing them. The national income statement looks great - for a while. Unfortunately, it comes at the cost of killing our national balance sheet.

To run a national economy that is protective of its national balance sheet would require that we do just about everything differently:

-Any non-renewable resource that we take from the land would require that we charge ourselves a depletion allowance equal to the market value of the resource extracted. In other words, we recognize that our economy doesn't really GAIN anything by depleting our non-renewable resources. That depletion allowance needs to not just be an abstract accounting entry, but probably some type of severance tax or other arrangement that results in funding for the development of renewable resources that will replace the non-renewable resources being depleted.

-Renewable resources like fisheries need to be managed for maximum sustainable yield. This is the only approach that both maximizes income and protects the value of the asset.

-Anything we import needs to be paid for by stuff we export. If we import anything and pay for it by debt instead of an exchange of real goods, it needs to be for some capital investment that is going to provide a long term real productive return that will generate the funds to pay off the debt.

- Paying as we go and living within our means needs to be pretty much the rule across the board, from individual households to businesses and institutions to government. As with foreign trade, borrowing needs to be used only to finance the acquisition of a productive asset that is going to produce sufficient funds (and this might be through cost savings) to cover the debt service.

- Needless to say, such an economy probably cannot afford to support very many people who are not gainfully employed in doing something of real value to society, and who are thus earning their living through honest work.

-Furthermore, most people living in such a society probably can't afford to buy much stuff that isn't really necessary and important. Such a society and its people especially can't afford much waste, and certainly not "planned obsolescence". Individual households, businesses and institutions, and governments would need to be focused on preserving and protecting their assets.

-The very last thing such a society would want to do is to throw away massive quantities of manpower, materials, and money in foreign martial adventures. National DEFENCE is an absolute necessity to protect our national assets; national OFFENSE is a luxury we really cannot afford.

This is what a REAL economy that REALLY WORKS looks like. This is not what the USA looks like, and hasn't for a very, very long time.

IMHO, this is your best post ever.

This same model shows the fallacy of throw-away computers, cell-phones, and cars versus durable investments in dams, rail-roads, communications infrastructure, and education. ROI and TVM calculations should take your factors into account.

Well, it's clear to me that your heart is in the right place. But I find the underlying rationalization to be lacking in realism.

Let's consider a simple example. let's suppose that we have done a full accounting of our national wealth as you describe it. Let's further suppose that their is some empty parcel of land out in the middle of Utah. Under this land is a million tons of some scarce resource. Also on this land is one of the last few wild vistas of a particular land formation.

Now, your party is in power and you have evaluated the vista to be worth $100 billion and the scarce metal to be worth $50 billion. So the land is not touched. Next election your party loses power and the incoming party reverses the balance sheet values and leases out the land to strip miners. By the time you regain power so much damage has been done to the vista that even you must admit it is no longer worth the value of the scarce resource.

Likewise with your other passages which appear to not understand how the tragedy of the commons plays out or how frugality is dissuaded in a "free market" economy.

Sure, if you could guarantee that someone with your set of values always gets to set the rules, than you are on to something. But that simply isn't going to happen. The trick is not changing the rules, its changing hearts.

Sure, putting together a national balance sheet wouldn't be easy, and certainly wouldn't be perfect. Anyone on this board who is a CPA I am sure would be glad to discuss at length how very difficult it is just to come up with a balance sheet that halfway approximates reality even just for a large corporation. That is a piece of cake compared to what I am talking about.

The thing is, though, it doesn't have to be absolutely perfect to be useful. Furthermore, nothing at all (which is what we have to guide us now) is certainly far less useful than something which may be less than 100% perfect.

Hello WNC Observer,

Recall my earlier postings on 'counting down' excessive specie extinctions by universal digit amputation. I wonder if Obama & Medevdev would volunteer to join me as the first three to chop our way to ecosystem health & wealth. My guess is that they would first prefer to perfect their national balance sheets 100% ASAP.

90% of our fingers to go with 90% of the other species is much better than 10% of our fingers to match only 10% of other lifeforms [a 90% Dieoff of them means a 90% Dieoff, or more, of us]. :(

For those that downrated my posting above:

Can you think of a better way to make EVERYONE Peak Everything Aware and eager to quickly shift into Optimal Overshoot Decline? The ever diminishing bats, bees, bears, whales, wolves, tuna, salmon, sequoia trees, sahauro cactus, etc..... await our answer.

Recall that this all started when I read a weblink about a primitive? tribe in Borneo where the wife chopped off her finger when her husband was killed in battle. Now imagine the Shrub's White House Xmas tree adorned with over 4,000 dead soldier pinky digits that the parents of these kids could send in-- I think the Iraq War would have ended several thousand pinkys ago. IMO, it would be easy to pass a law to insure that the Oval Office has barrels of pinky fingers stacked around the President's desk.

I admit that I am not the sharpest pencil in the box, therefore I would encourage all TODers to put on their thinking caps and come up with an even better way to protect our one and only ecosystem.

EDIT: the wife wore her digit on a necklace. Picture the Shrub dragging over 4,000 pinkys...

Pulling a clean, non-toxic salmon out of the river is wealth. Leaving many others to swim by is real wealth.

Hello Dryki,

Absolutely excellent-->IMO, post of the day! Kudos!

Excellent post! I used the up arrow for the first time because, you have expressed very eloquently how I have always felt about the relationship between wealth and income.

For example, mining bauxite in Jamaica does not create wealth it, generates income. What is done with that income can help to generate more income through investments or not, by using it for consumption. A wise prime minister of Jamaica once said that loan funds should never be used to finance recurrent expenditure (consumption) but, can be used to fund capital projects (investments).

It has always bothered me that high powered execs in service industries can have multi-million dollar incomes when the quantity and quality of the wealth they are responsible for creating is dubious. Should company execs be earning 500 times the amount of a factory worker or customer service clerk? Is their contribution to the income generated by the enterprise worth that income disparity?

I can see clearly now!

Alan from the islands

Wealth vs money (being rich) is the real issue since they are not the same but people have been convinced they are.

Having a few million dollars, from either legacy money, winning the lottery or pulling down a big salary means your are rich.

Having ownership of or being associated with an asset that keeps generate income of a few million dollars over time is being wealthy.

Because most people don't comprehend the difference they delude themselves, and others, that paper assets valued at $X.xx, which are the same as money in a way, can be the basis for wealth. The problem we all see now is that there is very little wealth in the U.S. underpinning all the paper money in its various forms, U.S. dollars, stocks, bonds, hedge funds, CDO, etc.

But this can easily be reversed by investing money into making tangible assets of lasting value, which by definition will build wealth. No difference than an individual spending $20,000 over one year to install solar cells vs spending $20,000 over one year to buy gasoline, beer, and airplane tickets to fun places. The same $20,000 was spent but one investment created wealth and the other one didn't.

But I suspect spending $20,000 on trips and beer made that person feel rich.

I am in total agreement.

I had a similar experience when my wife passed away... I ended up finding a surprise life insurance policy of $150K through her work. Did I feel rich? Hell yeah. I could have gone out and bought a lot of hookers (OK, maybe poor taste) or a lot of beer or go to Las Vegas and have a damn good time.

But, I looked at this money as an *investment* opportunity. I used this to pay off things like my Pruis, some of her student loans that didn't go away when she passed and I inherited, lingering credit card debt, her car loan (inherited that too), and had ample enough for a downpayment on a house, which was something she always dreamed of. I still have a large chunk of it left over... And, when spring comes, I will be putting energy efficient windows and possibly a geothermal unit on my house, and will still have some left over.

Now, am I rich? Nope. But, I have no car payment, very little debt (save for a mortgage and a student loan), and have managed to reduce my expenses quite a bit through destroying a lot of my debt.

Do I feel more wealthy because my money will go a lot farther than it did before? You bet.

It's the difference in how money is viewed... One may feel rich by *spending* their money, but one becomes wealthy by *investing* their money.

My guess is that we are going to see (3) monetization of the debt in full force which will result to some extent in (2) reductions in real spending on Medicare and Social Security. For political reasons I do not think we will see much higher taxes, though wage inflation will push more tax payers up into higher brackets. Instead of higher taxes we'll have bigger and bigger multitrillion dollar deficits financed by the Fed buying unlimited quantities of Treasury securities.

Note that double-digit inflation can wipe out half of old debts in just a few years--no need for hyperinflation to result from inflation at 10% or 15% per year. If we were to get stuck in a deflationary depression, then I expect hyperinflation to wipe out debts in an attempt to restart the economy from a clean slate.

Up until now the Fed and the Treasury have been effective in preventing a deflationary depression; I expect this success to continue. Probably we will see inflation combined with long-term economic decline--the slow squeeze.

I think we are in for a century of small wars. Who exactly is going to fight a major war? No country is likely to attack the U.S. in the foreseeable future, and the lesson of Iraq is that the U.S. invasion and occupation of another country to secure oil resources does not work.

In the seventies our period of inflation was accompanied by wage inflation. But since then wages have not kept pace with even the low level of inflation we have had. For an inflationary strategy to work to "heal" debt would require us to somehow also inflate wages. I'm having trouble imagining how we would pull that off. Are you thinking wage controls that raise wages? raising the minimum wage?

For an inflationary strategy to work to "heal" debt would require us to somehow also inflate wages.

Not so. Here's the math:

Let's say I'm Harry Homeowner. It's 2008 and I have a $100,000 mortgage. I work hard, and earn about $50K/year.

Inflation hits; it runs 10% annually for 5 years. At the end of year 5, prices are (roughly) 60% higher than in 2008.

My mortgage, which might still be $100,000(ish, assuming I don't pay off any principal), is now worth 100,000/1.6 = 62,500 in 2008 dollars. In other words, $37,500 of my mortgage has disappeared due to inflation.

However, I only get 3% raises, and end up with a salary only 16% higher at the end of year 5... or $58,000. When compared to 2008 dollars, however, I make $58,000/1.6 = $36,000/year.

My real wage went down.

But my real debt also went down too.

I fully expect this to happen in the future... Which is why I bought my first house recently.

Time will tell.

You miss one critical component - while the value of the loan in 2008 dollars may be lower, my actual monthly payment remains the same.

So, while inflation requires me to dedicate ever increasing percentages of my income to things like food, electric, clothing. The percentage of my income going to the debt has come down only a small amount.

Good point- and here is where I agree with you... I will be spending more on necessities. But, back to my analogy:

I might make $58,000 at the end of year 5, but it's only worth $36,000, way less then the $50,000 I started with. So, that shortcoming will be less discretionary income for things like internet and cell phone service.

However, I must pay for shelter. Let's say I pay $700/month for my mortgage in 2008, and (for simplicity's sake) rent is also $700 for the same size place. (There's more there, I know, but I will try to keep it simple).

At the end of year 5, my mortgage is still $700/month.

However, rent (if I did not buy my own place) would go up with inflation... At the end of year 5, with 10% inflation, rent would be $700*1.6 = $1100/month.

So... I've just saved myself $400/month by having a *fixed* mortgage and not *increasing* rent that goes up with inflation... But, yes, in all reality, my income (and standard of living) has gone down.

And if I buy this piece of plasticrap that's on sale this week, I'll have saved myself $5.95!

But not if you weren't going to buy it in the first place.

So, rather than chase your renter's red herring, let's look as some simplified numbers to get a sense of what will really happen to a mortgage holder.

Year One:
Income $50000 = Taxes $12,500 + Mortgage $8000 (a little less than your $700 a month, but it makes the math easier) + Non mortgage living expenses $28000(subject to inflation)+ Savings $1500 (would make you a good saver in the US)

Now, assume your figures are accurate - inflation in 5 years results in a 60% increase in prices for non mortgage living expenses and an income that goes to $58000.

End of Year Five
Income $58000 = Taxes $14,500 (assuming same nominal tax rate) + Mortgage $8000 + Non Mortgage living expenses $44800 + Savings ($17300).

So clearly that 17K has to be made up somewhere. My savings is gone real quick. And unless I am willing to give up my house, it clearly will come out of my non-mortgage living expenses. To balance my budget I will need to reduce these expenditures by nearly 40% just to make ends meet.

Depending on where I am in my mortgage, I may have paid down the principle a bit, but clearly I am much poorer than I was in year one.

Oh, I don't argue your logic about being worse off. It's gonna suck if we're stuck in stagflation for the forseeable future. Everyone will be worse off.

There is absolutely no doubt from me on that.

Now, you use the equation above:

Income = Taxes + Mortgage + Living Expenses + Savings

I'll modify it a touch as follows:

Income = Taxes + (Mortgage or Rent) + Living Expenses + Savings

Now, in an inflationary environment with low wage growth, which of these do I have control of?

Income... Nope. This is a function of my career and the economy, and if wages stagnate I can't demand more. A better example is that a checker at Wal-Mart won't get $20/hour if they demand it.

Taxes... Nope. Set by the government. And if I don't pay, I go to jail.

Living Expenses... Well, yes, I can cut back. Maybe buy less meat and more veggies. Fewer trips. Less internet, cell phone, etc. So, my standard of living WILL go down.

Savings... I can save less or save none. Or, go into negative savings (they call it consumer debt). In the long term, this can't ever be less than 0, but may at some time become zero if things get bad.

And, finally... Mortgage/Rent. I need to live somewhere (as do my kids). I can't live somewhere for free (unless it's my parents, but I'm 30 :) ). Rent, if it follows inflation, will increase as well. Mortgages by their nature are fixed. So, I am better off with a fixed expense rather than an increasing expense.

So... in an inflationary environment, I am better off with a mortgage under the following circumstances:

1) The inflation rate is bigger than the rate I pay to the bank (which at 10%, it will be).
2) Rents inflate along with everything else.

I am worse off if:

1) The inflation rate is much smaller than the rate I pay to the bank, or the economy becomes deflationary.
2) Rents deflate or stay stagnant.

I agree I will have a worse standard of living... But it will be independant on whether I have a mortgage (as long as we don't go deflationary). It will depend on the rest of my living expenses increasing faster than I can pay for them... Which you clearly do show, and I have no doubt will happen.

Good discussion :)

No, I don't think wage controls will be put in place to raise wages. On the contrary, if wage and price controls (The two tend to go together.) are put into place the purpose will be to limit increases in wages and prices, just as happened during the Nixon administration.

Rising prices will tend to pull up wages, though I expect the increase in wages will be smaller than the increases in prices. Note that rising prices and wages will tend to reinflate housing prices, and thus they provide a way to make houses worth more than the mortgages against them.

Because I expect wages to rise, say 5% when price levels go up, say, 10%, the result will be a lower standard of living. I expect declining oil production to lower our living standards in two ways:

1) Most painfully with huge increases in unemployment, eventually rising to the 25%-40% range.

2) Double-digit price inflation accompanied by only single digit increases in wages; in other words wage earners lose much real income over the years as real wages fall eventually to about half what they are now.

We're never going to pay off the national debt, but we can inflate our way out of most of it--and there is not one single thing the Chinese or Japanese can do to stop the Fed from monetizing huge government deficits. Who cares if foreigners stop buying U.S. Treasury securities? The Fed can buy U.S. Treasuries without limit, and I expect them to do so over the next few years.

I'm not sure I understand how double digit inflation combined with minimal wage increases solves anything.

In such a scenario the fed maybe able to monetize all federal debt, but what would become of the economy in general. The population will be getting poorer and poorer, paying fewer taxes and spending less relative to inflation. Monetization may reduce the value of the federal debt, but at what cost?

The cause of future declines in living standards is going to be falling oil production. The question is, how exactly are those declines going to be experienced?

Of course inflation cannot solve the problem of declining oil output. My thought is that the inevitable declines in living standards will come about in exactly two ways:

1. Massive increases in unemployment, both structural and cyclical.

2. Falling real wages: In other words prices rise faster than wages do.

I am not advocating any of this, but it is how I think things will play out over the years. Living standards will decline until we make a successful transition away from oil, and at best this will take twenty to thirty years. At worst, we do not make a successful transition; then we would have the slow squeeze followed by collapse.

Actually, it would work like this:

- interest rates go up,

- interest payment on deficit becomes a greater part of the budget,

- creditors ask for even more interest, (just like a credit card company),

- a third or more of the Federal budget becomes interest,

- creditors decide the Feds are monetizing the debt and demand more interest and cease lending,

- Fed raises interest rates to 15 - 20% which triggers a flight from Treasury debt,

- without backing the dollar plummets,

- the dollar is no longer accepted by the creditors, who include Saudi Arabia and Kuwait,

- the Treasury starts to buy yen and euros, but the creditors refuse to accept these 'dollar proxies' which causes these currencies to crash also,

- the US grinds to a halt as 9 million barrels of oil a day are withdrawn from the US economy;

- the US military is stranded in Iraq and Afghanistan without support,

- the dollar is abandoned and refused at American businesses, which close,

- the lights go out all over the country, supermarkets are ransacked,

- a mob in Washington, DC loots and guts the Treasury building as troops and police stand by and watch,

- the President boards a plane and leaves the country for Canada,

- the Congress is chased out of town by enraged citizens,

- the Pentagon is surrounded by troops and tanks,

- most government offices are pillaged and burned,

- several lobbyists and high ranking admninistrators are gunned down, some in front of their families, others defending their offices and staff,

- the military takes control of Washington, DC. Congress convenes in a military base in upstate New York and appoints a successor President who is acceptible to the military.

By this time, armed gangs are in control in most cities, there is no power or running water, police, courts, fire departments, other organizations are either at home trying to find some food for their families or to make some contact with some legitimate authority.

American military is at a crossroads, without fuel, it has 250,000 Americans far from home in hostile situations without air support. The Afghan NATO force is cut off, running out of food and ammuntion under constant, heavy Taliban attacks. Wounded cannot be extracted; the only way out is to cut their way out through Pakistan or Iran on foot. The Iraqi forces are marching out = also on foot - under continuous heavy attack. In both theaters, there are thousands of casualties. Tanks, artillery, aircraft are abandoned as there is no fuel available to move them. Upon reacing Kuwait there is the issue of transport as there is insufficient shipping for 200,000 soldiers and contractors, the many wounded plus thousands more of pro- US refugees; there simply aren't enough US ships to carry so many people.

Eventually, Americans organize themselves. A provisional government is elected and the country is put into a command economy. Ration cards become the 'New Dollar'. These cards are jokingly referred to as 'Obamas'.

Steve, you are so "on the list" They will be watching your grandchildren. Chuckle.

Good one.

Don in Maine

Your scenario assumes that oil magically disappears overnight. Why wouldn't the Iraqi army have lots of oil?

And the US still produces 4 or 5 million barrels a day, that could be rationed by the military. The military has also access to the SPR, which would let them go on for months or years.
Most western countries have 3+ months of oil imports in stock (IEA requirements). So if anyone is going to run out of oil, it will the be the masses way before the tanks.

Most of the world uses the us$ for trade or as reserve. A lot of countries even use the us$ in markets, as no one trusts the local currencies. So a crash of the us$ will affect everyone, not just in the USA.

Your scenario assumes that oil magically disappears overnight. Why wouldn't the Iraqi army have lots of oil?

The answer in a word is ... 'Transport'. The military uses a 'just in time' fuel and logistic delivery system just like General Motors. Our forces don't use local fuel; I'm not sure Iraq even produces a fuel that could be used in US military aircraft. The Iraqis get their fuel through US contractors.

The miitary is top heavy with fuel guzzling 'assets' that all have to function simultaneously to be effective. Everything in the military requires a vehicle to provide power, command and control, communications, food and ammunition supply plus firepower. On foot, without helicopers and aircraft, trucks and AFV's, the US military is just another army. Without ammunition, food and water, the US military is a defeated other army.

I look at the military as a microcosm of how the rest of the country does business and its vulnerabilites are identical with ... Wall Street's. There is too much sunk capital directed at inefficient technologies that are politically expedient to produce but create vulnerabilities because they need ever- more systems and inputs to support them.

I've made this argument before and the response is quite similar to the 'technology will solve the problem in the nick of time' response that is given to energy shortage matters. If one part of a system - say, food delivery, here - is vulnerable in a particular way, the another part of the same system is equally vulnerable in the same way, no?

Murphy's Law usually rules ...

Most of the world uses the us$ for trade or as reserve. A lot of countries even use the us$ in markets, as no one trusts the local currencies. So a crash of the us$ will affect everyone, not just in the USA.

For sure. It would be a catastrophe. That's why I am buying a years worth of food, water and other supplies. Best to be prepared ... for the worst.

Yours is a scenario I can agree with except for one point, the last one, where "Americans organize themselves". That will be most unlikely in a situation with no electricity, functioning media, elections, and resources like food and fuel to assist the "organizers".

I think it will be more like a spiral into further and further chaos and disorganization, as things get more and more local. Kunstler gets this right in "World Made by Hand". But eventually things ARE local enough to be manageable without electricity and cars. And then maybe some harmony, some peace, as communities form and stabilize. (I hope!) However that could take a few years at least. Maybe then there won't be a dollar but many little local currencies.

But your scenario has all the details that one would require in such an exercise. I love how the President makes his exit to Canada, instead of somewhere else.

Have you thought about making this into a novel or a screenplay ?????? I hope I am not being ghoulish but this is action/adventure that might really be useful as a warning/ alert also.

I mean that society might be able to prepare better (emotionally and otherwise) for this kind of event by encountering it in fictional form first.

"Start a war."

I don't really see anything in the works with the potential for a world war on a large enough scale to have the desired effect.

A bunch of small wars like we now have simply will not do the trick.

It may be that this Global Economic War can accomplish the same thing by creating massive demand destruction then a global "sustainability" re-devlopement race.

Course I suppose that would then cause global resource wars.

Please stop the merry-go-round I'm getting dizzy, urp!

The idea that war is an economic boon is a fallacy, many societies across history have exhausted themselves in war. We're basically in a zero sum resource game at this point, new wealth is going to have to come from transference instead of creation. Lucky thing for America is we are the most wasteful civilization in history, we can transform much.

Yes, it is basically the "Broken Window Fallacy" highlighted by the French economist Frédéric Bastiat in 1850. War only seems to create an economic boon due to the incomplete accounting for the total cost. What is lost does not appear in the accounts giving the illusion of economic benefit.

From an economic viewpoint, Germany was a winner after being completely destroyed in WW2. In reality, only a fool our an economist could believe the war was good for Germany.

Summary of Weekly Petroleum Data for the Week Ending November 14, 2008

U.S. crude oil refinery inputs averaged nearly 14.6 million barrels per day during the week ending November 14, up 95 thousand barrels per day from the previous week's average. Refineries operated at 84.9 percent of their operable capacity last week. Gasoline production fell last week, averaging 8.8 million barrels per day. Distillate fuel production increased last week, averaging 4.4 million barrels per day.

U.S. crude oil imports averaged about 9.9 million barrels per day last week, up 368 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 9.9 million barrels per day, 71 thousand barrels per day above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 860 thousand barrels per day. Distillate fuel imports averaged 122 thousand barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased from the previous week. At 313.5 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 0.5 million barrels last week, and are near the lower boundary of the average range. Finished gasoline inventories fell last week while gasoline blending components inventories increased during this same time. Distillate fuel inventories declined by 1.5 million barrels, and are in the lower half of the average range for this time of year. Propane/propylene inventories rose last week and remain below the lower limit of the average range. Total commercial petroleum inventories increased by 2.7 million barrels last week, and are in the lower half of the average range for this time of year.

And here's what was expected:

The report is expected to show that oil stocks rose 1.2 million barrels last week, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The Platts survey also projects that gasoline inventories rose 700,000 million barrels and distillates increased 900,000 barrels last week.

Gas inventory is up 700 billion barrels? Happy days ARE here again!

Oil imports up slightly YOY during the biggest slowdown YOY in the USA economy in many decades.

I'm curious to where you got this information? According to this weeks reports Imports are down in both the 4 week avg vs. last year and cumulative to date:

Total Net Imports
4-week avg: 11,171(2008) 11,511(2007)
Cummulative year to date: 11,117 (2008) 12,130 (2007)

Looks like a drop to me.

Price Elasticity of Demand ?
4 week avg y-o-y and YTD

Products Supplied
Finished Motor Gasoline     9,029   9,233  -2.2% -3.0%
Kerosene-Type Jet Fuel      1,291   1,620  -20.3%    -6.2%
Distillate Fuel Oil         4,012   4,149   -3.3%    -5.9%
Residual Fuel Oil             420     692  -39.3%   -19.3%
Propane/Propylene           1,221   1,197   +2.0%    -6.4%
Other Oils                  3,105   3,614  -14.1%    -9.0%

Total Products Supplied    19,076  20,504  -7.0% -5.7%


The Race to the Bottom of the Pile...

Poverty an asset; assets a burden

Chris writes of a paradox: lack of assets may be the greatest asset of all.

I don't believe that this is a paradox: the higher you climb, the harder you fall. A place that is used to an artificially high standard of living inevitably develops artificially high standards.

These standards cannot be undone overnight, as soon as the standard of living collapses, delaying commonsense adaptations until it is too late.

Prosperous places have expensive infrastructure, and, once it can no longer be maintained, it becomes much worse than no infrastructure at all.

Lastly, poverty takes practice, and a sudden lapse into poverty is far more traumatic than the habit of a stable but constrained existence.


ELP Plan (April, 2007)

Author Thom Hartmann, in his book, “The Last Hours of Ancient Sunlight,” described a high tech company that he consulted for that went through several rounds of start up financing, and then collapsed, without ever delivering a real product. At the peak of their activity, that had several employees and lavish office space--until they ran out of capital. His point was that this company was analogous to a large portion of the US economy, which has the appearance of considerable activity and uses vast amounts of energy, but how much of this economic activity delivers essential goods and services?

I have read, and it seems reasonable, that the majority of Americans live off the discretionary income of other Americans. We are therefore facing a wrenching transformation of the US economy--from an economy focused on meeting “wants” to an economy focused on meeting needs--and the jobs of a vast number of Americans are thereby directly threatened in a post-Peak Oil environment.

As I previously suggested, one of the advantages of the ELP plan--and similar recommendations that numerous other people have independently made--is that it better prepares one to compete for a dwindling number of jobs. One might want to consider marching into your boss' office and demanding a pay cut, perhaps in exchange for some kind of upside participation (which is what I did in the late Eighties).

One might want to consider marching into your boss' office and demanding a pay cut, perhaps in exchange for some kind of upside participation...

Aha! The new socialism...

What if you are the "boss", and you already took a pay cut? Or several?

Thanks for that link WT. This line is perfect:

"from an economy focused on meeting “wants” to an economy focused on meeting "needs."

I'm sure many of us here would fall into the catagory of "ELPers" - and many of us started relocating etc, years ago.

Unfortunately, I'm also sure most of us still live in, or near, ELPless communities and will suffer the same consequences.

"One might want to consider marching into your boss' office and demanding a pay cut, perhaps in exchange for some kind of upside participation"

The problem is the tacit assumption that the job or company is actually viable. In the UK for example, 70% of the economy is Services, most of which have been servicing credit bubbles. Perhaps the UK could support say 20% of the economy as services in reality which would mean a considerable chunk of the existing economy is unviable. So many jobs and companies may simply have no "raison d'etre" and will simply vanish.

My view is that BAU will not continue and any attempt to continue with BAU via alternative means will likely fail. ELP has to be undertaken with a radical rearrangement of the dependencies a person has with the current economic system. It stands to reason that those who depend upon the current economic system will be taken down when it ceases to function.

I also repeatedly said "Cut thy spending and get thee to the non-discretionary side of the economy," and the excerpt that I used noted that a lot of jobs on the discretionary side of the economy are going away.

I believe that many people's idea of non-discretionary will have been distorted by recent history and will also be found to have no "raison d'etre". If Services contract from 70% of the economy to say 20% then there will be little distinction, all and sundry may find themselves out on the street.

Anyone with dependency on paid employment for their basic survival needs is on the roulette table and only one spin away from potential life threatening poverty. ELP as a principle is sound, but needs to be done properly to succeed.

I often wonder, even with well briefed people such as here on TOD, how many have actually done enough to survive what's coming? How many still need BAU to continue to keep a roof over their heads, food on their table and enough warmth to get them through the winter?

I often wonder, even with well briefed people such as here on TOD, how many have actually done enough to survive what's coming?

Not a single one of us.

Not me, for damn sure. I need BAU or a reasonable facisimile thereof. I'm not ready for totoneila's (or worse yet mcgowanmc's) world yet.

Really wish I had learned about this stuff sooner.

Hello Consumer,

IMO, Our big mistake was not making the writings of Malthus Our Universal Bible over two hundred years ago when it was first published.

BTW, losing a digit should be much less painful than seeing a child or grandchild die of disease or starvation, or having a machete' viciously swing into our own, or their soft abdomen. But sadly, and most likely: that is probably how it will go down. It is already occurring too often for my tastes when I google the machete' moshpit news for Third World Countries.

Meanwhile: Hugh Jackman is the People's sexiest man alive; Britney seeks to restart her career; and Jocko is being sued as usual....BARF.

Agreed. Why bother anyway, it is going to be hell in any case. I have some money (in the bank, yuck) and I might buy some gold with it. If this fails, God help me. =)

I admit it, I am not a big fan of working on a farm. I know extremely well how to spend free time unproductively though. If TOD stays during The Great Decline, I know I will have fun with you guys/gals. To the hell with food, I am a bit overweight luckily anyway =)

"Not a single one."

I have a feeling, which is as valid as your is, that the ones who stand the best chance of surviving are those who are NOT posting here on TOD anymore,with a few exceptions.

Those who do have grown tired of making the same statements over and over just to see a new crop of cornucopians and googlemeisters come onboard and begin to rehash that which has been discussed to the point of sheer boredom.

I suspect that those who do post about their plans and beliefs might feel that they are performing something of value but its soon crushed by the rest of the dialogues here.

Thats ok. Thats fine. I don't mind. Yet I do take issue with many posts here and find that I always can't just keep silent , though I am going to try harder in the future.

Its pretty much a dead issue AFAIAC,survival,etc. I just come here mostly for the key posts and DB is just something to skim thru very fast on my way to a logoff.

Your either very serious and actually do something about it or perhaps just want to talk it to death, or on the other hand have given up and
don't care.

I hope the upcoming survey results will shed some light on this.

I am ready for it. Totally? No. Never will be that ready. But having seen what I have seen and lived thru what I have lived thru, I am very optimistic. I really did ,early on ,live in a sustainable manner back in my childhood. No autos, no electricity, no shopping malls,no toys,no shoes in the summer,kill all your meat,grow and can all your vegetable...yada yada ...so I know the drill. Most here cannot relate to that in any manner. We weren't starving,it was very healthy,we didn't know any different, we missed none of what we didn't know existed for we had no TVs, and very little radio. No newspapers either. Yes they existed...but we didn't have them. Only the mailbox.
And word of mouth. It wasn't hell on earth,it was rather good.

Airdale-fact is I live kinda like that now in many ways. I am waiting for the rest of the changes that must be made.

Well I actually think I'm close. Small, easy to heat house all paid for. 4 chords keeps us toasty thru whatever the Maine winter throws at us. I will need about $700 a year for taxes. Woodlot that has supplied me for the last 25 years of wood burning. My own drilled well, hit water at 85 feet came up to 20 ft and has never in the last 25 years gone lower. Hand pump in the basement as backup. Somewhat isolated, off the beaten path so to speak. An abundance of game, deer etc. Damn turkeys peck at the cellar window to get me to throw out bird seed. We garden, but the season is short. Put quite a bit by, but there is probably where I am lacking. Doing a large expansion on the garden for more root crops. Potatoes, onions, and carrots. Not as vulnerable to climate vagaries. May be kind of a bland diet and not what I'd prefer but might be enough in tough times. Certainly better than most.

As long as I stay healthy or have some younger help it's all doable with just manual labor.

How did I do?

Don in Maine

Honestly if we get to the point where your garden is your subsistence then you'll be sharing those onions and carrots with a whole lot of hungry Boston folk. I don't know why people think they can avoid systemic collapse by growing a few vegetables or lagging the loft.
We're all in this together - that is the sub-billionaires :)

China tops Japan as No. 1 holder of U.S. Treasury debt

Like nearly everyone else, the Chinese wanted the security of holding short-term U.S. Treasury bills in September as markets worldwide crumbled.

With China’s purchases of T-bills that month, the country surpassed Japan to become the No. 1 owner of U.S. Treasury debt, according to government data reported today on foreign investment in U.S. securities.

As I read this, I remember a great line from Mad Max: Beyond Thunderdome:

"Who run Bartertown...?"

I beleive the Chinese run Bartertown.

I would think that the recent financial melt down would have gotten across the point that owning someone else's debt isn't always the most secure position to be in.

US car firms 'should go bankrupt' - for once I agree with the Republicans.

Yes this will cost much in the way of jobs, but it will also be a big step in killing the car culture in this country. Of the 3 companies, I also think Ford is the only one that may come out alive (because of it's small car presence in Europe [and Mexico?]). Now the new small car companies like ZENN auto have a chance to succeed... or Toyota will just takeover the market.

Unforunately this is a large source of manufacturing, but for long time readers of this site, these are the kind of "free market" changes that are better for us in the long run. Now instead of saving these guys we use this labor to build bicycles, trains, and tools for organic farming ...

There are lots of options for the big three besides liquidation. If they are not bailed out they will just go into Chapter 11 or, out of court revise all their high overhead contracts with retirees, UAW, suppliers, etc. It is obvious how they got here and it is obvious how to get out. Only a big handout congress/administration would think otherwise in finance or autos. Business is business, with rewards come risk. Huh? Sorry, old time thinking.

There will be a lotta people who do not like this post.

The car companies want 25 Billion dollars bailout money.

Waggoner was mentioning 3 Million jobs.

That's just a bit shy of $10,000 per job, isn't it?

NOW is a great time for a Union Contract negotiation.

If I were making that kind of money, would I pay $10,000 to keep that job? Or would I stick to my guns and demand from my employer so much it puts him under?

Especially true for the higher echelons.

"Give a Man a Fish, Feed Him For a Day. Teach a Man to Fish, Feed Him For a Lifetime." - Lao Tzu

These folks have been handed fish before... And they ain't fishing now, and want more fish.

I say stop giving them fish and let them starve.

Teaching him to fish won't help now - most of the fish have already been caught by first world deep sea trawlers.

The EU spends millions paying fishermen not to fish, then spends more millions paying for the latest high tech radars so that they can exterminate the few remaining fish even more efficiently.

As nest eggs shrink, many defer retirement

Like many msnbc.com readers, Laursen admits to some resentment that, having played by the rules and managed his money wisely, he’s caught in a predicament that wasn’t of his own making.

“I am very upset that I managed my money, bought only what I could afford, only to be penalized for making wise choices,” he said. “While others bought when they should not have, spent well above their income and now get bailed out, I am left wondering about survival.”

Not sure if this Hitler flipping his house real estate bubble bailout parody was already posted on TOD since created on youtube earlier this month~ enjoy

Coming to a store near you: chainless bicycles

Bjorling said the new belts are a low-maintenance solution to a chain, which has roughly 3,000 parts including all the links and connectors.

Aside from the whisper-quiet ride, the lighter and longer-lasting carbon-fiber composite belts won't rust, can't be cut, won't stretch or slip and won't leave grease marks around your ankles. A guard over the belt-drive and the construction of the system makes getting your pants stuck an unlikely scenario, Bjorling said.

Somebody please let us know when this comes out in an electric assist model.

The strida is a truely awful machine. Almost unridable. This is a folding bike.

Newsweek recommended this folding bike that uses a Kevlar drive system:


Video comparison of the A-bike versus Strida:


"Single speed and internal 8 speed hubs." Sounds like it might be a good winter or urban machine. Not your long haul road or touring bike. A chain drive - on a single speed or internal hub -can be tensioned to run much better than one with derailleurs and runners. And a chain guard for the pants cuff. None of the benefits have anything to do with the carbon-fiber belt.

Interesting link, Leanan!

I am interested in technologies useful for other purposes.

For example, a clothesdryer belt makes a dandy way of spinning a small DC generator from the rear wheel of a modified stationary bicycle. The dryer belt does not have as much bending loss as a conventional automotive style fan belt on small diameter pulleys.

I have one of these chainless bikes. It is great, Miyata. !0 years old. Light and easy to ride, but still strong enough for bags of library books.

The bike chain is something like 98% efficient when well maintained. Inventors have been trying to improve it for a century now.

There is one invention that dramatically improves the lifespan and efficiency of a chain - and it was standard fit 40 years ago on all bikes -
a fully enclosed chain guard (you need hub gears) . I top up the oil on my chain once or twice a year. It will outlive me...

Dow closes below 8,000!!

Although closing trades could push it just back over. Currently 7997

S&P closes at 807.

and NAS under 1400 - almost 3 for 3...the S&P stayed above 800.


It's days like this that make me long for the good old times of circa 1996-2000, when Harry Dent made some predictions about the stock market...

Call It a Boomer Boom
MARCH 27, 2000

The Dow Jones industrial average's bad behavior may give you cause to doubt the durability of the great bull market. Don't worry, says Harry S. Dent Jr., the author, lecturer, and money manager. The bull market is as vast and powerful as the baby boomer generation, and the two are inextricable... His target for the Dow is 40,000--which he believes it will hit somewhere around 2008.

Hey, we're right around 40,000, right? Sure. But now what?

After that, watch out. As an economic force, the boomers will have peaked, and there just aren't enough Generation Xers to sustain the economic and stock market boom... In Dent's view, the economy goes into a deflationary funk for another 10 or so years... Dent's warning: Make your money now, and secure it before the inevitable bust that can take the Dow down to 10,000 again.

Heaven forbid it gets down to 10K... That'd be a damned tragedy.

Looking abroad, he recommends investing in Asia, where nearly every nation but Japan has market-friendly demographics. Asia, in fact, will continue to be on demographic upswing even after the U.S. economy heads south later in the decade.

For now, says Dent, the sell-offs are just buying opportunities to carry investors through the next eight years. He's betting that 80 million boomers can't be wrong.

No Harry, they can't be wrong. :)

Their timing was off (perhaps because of Greenspan), but Davidson & Rees-Mogg pretty accurately predicted and described what is presently happening in their circa 1994 book, "The Great Reckoning: Protecting Yourself in the Coming Depression."


One could argue that the recession/depression was only postponed, and made worse, by Greenspan's interest rate cutting. We would have been a lot better off if the housing "boom" had never happened.

Prechter similarly got everything right but the timing in Conquer the Crash.

Always interesting to retrace history. Here is Mr Dent today:

In his new book, The Great Crash Ahead (Free Press, 2008), Harry Dent outlines how this next great downturn is likely to unfold in three stages, with an interim boom stage between 2012 and 2017 before the long-term slowdown finally turns into the next global boom in the early 2020s. India, not China, will dominate in this next global boom and the U.S. will outpace Europe. Dent shows which countries will have stronger growth trends during the downturn as well. More important, he shows how the economy’s life cycle will affect life, business, and investment strategies throughout a person’s lifetime, including career opportunities and children’s educational costs. No other time period is as likely to affect your wealth and well-being as the period from late 2009 into late 2012—especially late 2009 to mid 2011.

I definitely miss the good old days when the biggest problem the USA fretted over was the stained dress. I guess the country didn't realize what a privelege it was to obsess over nonsense.

Hello TODers,

Will PostPeak America do better than this?

EDIT: Jay Hanson Thermo/Gene Quote [paraphrased]: "Stuck in obsolete belief systems: Americans didn't understand why everything got worse, then even more dire, then headed into catastrophe".

Hungry in Zimbabwe: `If you rest, you starve'

Katy Phiri, who is in her 70s, picks up single corn kernels spilled from trucks that ferry the harvest to market. She says she hasn't eaten for three days.

Rebecca Chipika, a child of 9, prods a stick into a termite mound to draw out insects. She sweeps them into a bag for her family's evening meal.

..Mhangura, a town of about 3,000 people, has had no running water for months. Power outages happen daily because of a lack of cash to maintain utilities. People walk about three miles to a dam to fill pails or gasoline cans.
Let's hope Obama understands the need for Optimal Overshoot Decline planning here in the US. Have you hugged your bag of NPK today?

The following sentence in that Zimbabwe article:

"The teachers still willing to work in this once-thriving farming and mining district 160 miles northeast of Harare, the capital, say parents pay them in corn, cooking oil, goats or chickens. One trip by bus to the nearest bank to draw their government salaries costs more than teachers earn in a month."

seems to indicate that lack of wage-raising power on the part of workers does not prevent price-inflation. Would that hold for the USA?

I expect massive unemployment in the U.S.A. due to falling oil production over the next twenty years. This unemployment (above the 20% level) will tend to hold wages down. The Fed will (metaphorically) drop money from helicopters as it monetizes the national debt. Multitrillion dollar deficits will feed price inflation.

As I said above in an earlier comment, declining output of oil will lead to falling living standards. These falling living standards will be experienced as increasing unemployment and wages going up perhaps half as fast as prices do. In other words, real wages will fall a great deal during the next ten years and probably during the next twenty years.

Twenty-seven ethanol plants closed in the economic downturn:


Meat producers have protested the demise of the meat industry attributed to ethanol producer's competition for corn feed acres. Food producers and concerned citizens organize to ask for an end to corn ethanol subsidies and quotas:



From your Link:

But financial woes have led at least 27 plants to close, halt construction or be scrapped, according to DTN, an agricultural news and information service.

I think there are, actually, 2 "operating" plants that closed down. The Gateway plant, and one in New Mexico shut down, temporarily.

I don't hardly think a push-pull poll done by a Grocers' advocacy group is a consumer uprising.

China to cut electricity prices for aluminium smelters. China to impose tax on liquid fuels.

Well anything to get a short term advantage. If aluminium producers feel they are entitled to pay 80% less for electricity than everybody else they should move to Quebec or perhaps Africa when they build the Grand Inga hydro dam.

Since China clearly has no intention of cutting back on coal use then I think their exports should be carbon taxed at the border. A case by case assessment would be too difficult so just make it 20% on everything; kids toys, dog food, salad shooters and aluminium bar.

Yeah, the richest country in the world uses coal for half of its electricity, and it demands that countries as poor as Swaziland (China) to cut back on coal use. It's like the fat guy demanding that the guy who just recovered from near-starvation starts to lose weight.

This issue is certain to be discussed a lot in the next few years. Both Obama and the Australian PM have committed to cap-and-trade but there is still the offshoring escape route. If the West has carbon caps but China doesn't a carbon import duty will hurt consumers in the West as well. It creates an incentive for China to join a low carbon club with no border adjustments.

The thorny issue is that US and Australia start from a much higher baseline of per capita emissions than China. OK but who said they needed 1.3 billion people? After the dust has settled from the financial meltdown the problem will come back.

Would it make any difference if China was not one country, but 50 small ones like in Europe or Africa? Are you suggesting that Americans should forever have a god-given right to consume four times as much carbon as the average Chinese? If you think population size is irrelevant, we might as well demand that the US should not consume more than France, after all who said you needed 300 million people?

China can pledge that the average Chinese would never emit as much carbon as the average American. That sounds more reasonable to me. So the fattest guy in town better start go on a diet ASAP, the more fat get lost, the lower emission permits for poorer countries like China or Swaziland.

China has huge inequalities. If you split it up into 50 countries, then the rich cities would probably pollute as much or more than western countries.

A lot of elites in poor countries are using the 'on average we don't pollute much' as an excuse for their extremely wasteful lifestyles. China is one of the places where Hummers are still selling like hot cakes.

That is simply not true. Huge numbers of people move to the most developed ares on the coast every year from the countryside, effectively reducing the gap between city and countryside. The richest cities in China are still far far from the level of development of rich countries. The inequalities in China is about the same as in the US, but keep in mind that the average Joe in the US would be considered the elite in China. The number of Hummers in China is probably 1% of the number in the US.

Is richest really accurate? Most consumptive yes, but richest?

DJIA -427

This morning's Reno paper said the gaming industry will be back to BAU in about two years. Of course there was no justification or proof or even a good argument that it would happen. Just happy talk. Two years is long enough for people to forget who said it.

The CNBC hairdos seemed to be arguing tonight that this would never have happened if only they'd bailed out Lehman. Can they really believe that?

Sure, the painful realization that a massive fault was inevitable is too much for many to bear.

I think a better question to ask would be "what would have happened if we'd bailed out nobody?"

The economic collapse is coming next summer.

This is an unbeleiveable graph from that article.

We've had a bigger correction than 1929... The biggest correction ever, and we're still trending down. That says something.

At least Gordon Brown can still claim to be leading the world - we should beat the States to collapse quite comfortably.
When we do though, I don't think it will take long for the penny to drop about the true position of the US.

By mid 1932, the DJI was almost 90% down from summer 1929. We're still less than 45% down from the 2007 peak. So there's still a long way to go :)

Oh my. Hard to believe that Eurozone would fare better though.

Got gold?


Is this a free site or do you subscribe?

I don't subscribe. They sell subscriptions, but also post free articles.

Why GM can't get no love....

Pity the poor one million General Motors shareholders.

GM shares now trade at less than three bucks — they’re almost certainly worth zero. And the company can’t even produce a CEO who knows how to properly beg for Washington bailout money.

The testimony of GM boss Rick Wagoner before the Senate banking committee came across as defensive and arrogant. In the Wagoner-ian universe, everything was just fine at GM before this nasty recession came along.

Of course, it would be a small miracle if Wagoner wasn’t delusional. He’s been at GM since 1977.



GM stock price since 1998:

Annual oil prices since 1986, through 2007 (2008 will probably average around $100):

So, are the bikes moving huge freight loads in the CSX commercial for real?

Hello VTpeaknik,

My guess is that they are pedaling those heavy loads, but not very far at all. If the trailer tires are pumped to a high PSI it wouldn't take much to make them roll. A single person can easily push a fairly decent sized family funboat [18-25 feet] on a trailer out of a garage to wash it or do some other task.

Google 'Lords of the Logistic' to see how the Chinese move loads. As I recall: there is a posting of a Youtube link where a male bicyclist was level ground pedaling 1,000 lbs on three trailers. The drawback to a bicyclist moving a heavy load on a road is if it gets downhill-- the inertial weight [momentum?] will overcome the frictional ability of the bicycle's contact patches to stop the load.

Hello TODers,

Regarding Leanan's Toplink about how we reduced our driving by 90 billion miles in 11 months:


Let's do some simple math:
11 months = 365-30 or 335 days


Overall, there were an estimated 250,851,833 registered passenger vehicles in the United States according to a 2006 DOT study--Let's call it 280 million if we add 2 more years of car sales, plus add the motorcycle #s.

90 billion miles/280 million vehicles = 90,000/280 or 321 miles/vehicle less over the past eleven months.

321 miles/335 days = .96 of a mile driven less each day avg.

My guess is that if a bunch of employees just ate a sack lunch at their desk [or ate at the company cafeteria], or didn't make the usual morning detour to Starbucks--that this could entirely account for this .96/day/vehicle reduction. In other words: I don't think very many people gave up their vehicles to take the bus or ride a bicycle to work.

Since gasoline is now much cheaper--Let's party on with a double latte' as the easy-motoring lifestyle is oh so affordable again. :(

The 250mm is all registrations incl motorbike & heavy trucks, and was increasing around 3mm/yr net. Light vehicle category was 234.5mm of the '06 total.
Lv sales this yr are forecast around 12mm vs recent 16-17mm.

Ok, you do the math this time. :)

What do you get, 1.1 miles? :)

I wouldn't be so gloomy.

#1 I think you can attribute some of the lack of car sales to an attitude where people are waiting for hybrids, NG engines, etc. to get cheap or for some new technology to come out so they can get much better mileage.

#2 The events of the past year will cause people to save (or conserve) more money than in the past, especially kids. Hopefully this could translate to conservation of energy as well.

#3 If you talk to random people at the pump and ask how much do you think gas will be in 2011, they won't say $2. From what I understand, our new president feels the same way.

#4 I think it's going to be very hard in the future for a lower class person to be able to buy a home, car, etc. Hopefully that will lead to better mass transit. The problem with the US is that the population density isn't even close to places with good mass transit.

There are wayyy too many Starbucks around to account for the drop. :-)

Follow-up on the Waxman article:

Longtime Head of House Energy Panel Is Ousted

WASHINGTON — Representative Henry A. Waxman of California ousted Representative John D. Dingell of Michigan from his post as chairman of the influential Committee on Energy and Commerce on Thursday, giving President-elect Barack Obama an advantage in his plans to promote efforts to combat global warming.

By a secret vote of 137 to 122, House Democrats ended Mr. Dingell’s nearly 28-year reign as his party’s top member on the committee. In doing so, Mr. Waxman’s backers upended the seniority system to install a leader more in tune with House Speaker Nancy Pelosi on a variety of issues.

Besides seating a committed environmentalist as head of the energy committee, the vote also removes one of the auto industry’s best friends from a key leadership post — further evidence of how much power the American car-makers, whose executives have been pleading for federal money, have lost in Congress.

I think this might prove to be influential, in the least that there is no longer someone is is firmly in the pocket of the auto industry as the gate-keeper for any new legislation.