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DrumBeat: November 26, 2008
Posted by Leanan on November 26, 2008 - 9:53am
Any international economic crisis afflicts different countries in different ways, but an unfortunate few experience every painful dimension of it. In the current crisis, Russia is confronting virtually all the negatives at once--sharply declining export earnings from energy and metals, over-leveraged corporate balance sheets and a chorus of bailout appeals, a credit crunch and banking failures, a bursting real-estate bubble and mortgage defaults, accelerating capital flight, and unavoidable pressures for devaluation.The Russian stock market is down 70 percent from late spring. The government has burned through more than 20 percent of its foreign-exchange reserves since August. The outflow of capital in October alone was $50 billion. Next year's budget is based on a projected average price for oil of $95 per barrel; now budget planners have to work with forecasts of $50 or lower. Since Finance Minister Alexei Kudrin has said that Russian government spending goes into deficit at $70 per barrel, pressures for spending cuts are starting to mount. Severe reductions have already been announced in housing and education programs.
Russia's average oil price to be $96 per barrel in 2008 - Kudrin
MOSCOW (RIA Novosti) - The average price for Russian crude oil in 2008 is expected to be around $96 per barrel, Finance Minister Alexei Kudrin said on Wednesday.
‘Sharp fall in price a challenge for oil firms’
New Delhi: Chairman of the country’s biggest private-sector oil and gas company, Reliance Industries, Mukesh Ambani, said on Wednesday that the sharp slump in the crude oil prices have posed big challenges for the oil refining companies.
U.S. Says 60 of 3,800 Gulf Oil, Gas Platforms Destroyed by Ike
(Bloomberg) -- The U.S. government said 60 of about 3,800 oil and natural-gas production platforms in the Gulf of Mexico were destroyed by hurricanes Gustav and Ike.The platforms were capable of producing 13,657 barrels of oil and 96.5 million cubic feet of natural gas a day, the U.S. Minerals Management Service said in an e-mailed statement today. An additional 31 platforms damaged by the storms may take three to six months to repair, the agency said in its final planned assessment of the impact of the hurricanes.
The Minerals Management Service, part of the U.S. Interior Department, previously said 49 platforms were destroyed by the storms.
Peak Oil and peak-everything. There is limited supply for many commodities, and although there are alternatives (curbing consumption and finding alternative sources of energy), it takes large investments to do so. In current markets, many of these investments are going to be put aside until the next crisis/shortage hits – at which point we will have years of a commodities bull run before an equilibrium is reached.
Persian Gulf Tanker Rates Fall to One-Year Low on Ship Glut
(Bloomberg) -- The cost of shipping Middle East crude to Asia fell to the lowest in more than a year as ship supplies accumulated and OPEC prepared to weigh up a new production cut.The Organization of Petroleum Exporting Countries will likely lower output before the end of the year, according to 18 of 21 analysts surveyed by Bloomberg. OPEC meets in Cairo on Nov. 29. Freight rates on the benchmark route from Saudi Arabia to Japan, as measured by the London-based Baltic Exchange, fell to the lowest since Nov. 13, 2007.
“With more than ample supply of vessels including a steady stream of newbuildings,” the chances of reversing the decline “appear slim for the moment,” Oslo-based shipbrokers Fearnleys AS said in a report today.
The benchmark rate fell for a third today, by 1.6 percent to 64.22 Worldscale points.
The Peak Oil Crisis: Electrical Efficiency
The most interesting presentation of the day, however, was made by a non-profit group called the American Council for an Energy Efficient Economy (ACEEE). This group believes that making the most efficient use of the electricity we already generate is the best and cheapest way to gain more electricity. While converting over to more efficient electricity consuming devices (such as compact fluorescent bulbs) is not free, the Council cites studies that replacing end user equipment, adding insulation, etc. can cost anywhere from one half to one quarter the cost of installing and fueling new electricity generating capacity. This includes wind generated electricity which gets its energy for free.
Robert Bryce: Gasoline’s Cheap Again, But Peak Oil Still Looms Large
Given the news from the past few months, it borders on the foolhardy to preach about the looming dangers of peak oil. Doing so seems a bit like warning about the possibility of drought while standing without an umbrella in the midst of a torrential downpour.Indeed, the price of oil has plummeted from its July peak of $145 per barrel (for West Texas Intermediate at Cushing, Oklahoma) to under $80 by early October. The price collapse coincides with a big drop in oil demand. The Energy Information Administration now expects that U.S. consumption will fall by 4 percent this year. And credit-card issuer MasterCard estimates that gasoline demand during the first week in October fell by 9.5 percent compared to the year-earlier period. Indeed, it appears that the demand destruction associated with the rapid run-up in oil prices has for the moment obliterated all talk of oil going to $200 in the next year or two, or three. Over the longer term, the key question appears obvious: will demand destruction take the “peak” out of peak oil? (I’ll come back to that in a moment.)
Oil Companies May Cut Spending to Pay Dividends, Bernstein Says
(Bloomberg) -- ConocoPhillips, Marathon Oil Corp. and other oil companies may cut investment plans to maintain dividend payments, Sanford C. Bernstein & Co. said.Royal Dutch Shell Plc, StatoilHydro ASA and other producers may postpone investment decisions in “marginal” projects such as North American tight, or hard-to-recover, gas and oil sands, and curtail an exploration and refining expansion, Neil McMahon, a London-based analyst at Bernstein, said in a report today.
“Staying free-cash flow positive next year could be a struggle if companies want to grow dividends,” McMahon wrote. With oil staying at about $50 a barrel “the industry is likely to see the first cuts in exploration” since 1999, he said.
Russia says gas OPEC will not set up output quotas
MOSCOW (Reuters) - The world's top gas exporting nations will set up a formal organisation at a December summit in Moscow, a Russian official said on Wednesday, but denied the new body will seek to copy OPEC's production quotas."No one is planning to regulate gas production volumes. It is a crazy idea," Deputy Energy Minister Anatoly Yanovsky told reporters.
Russia Gazprom says will maintain 10-year goals
MOSCOW (Reuters) - Russia's gas export monopoly Gazprom confirmed on Wednesday it will maintain its main financial and operational goals for the next 10 years and will reconsider them after the first half of 2009.
Toyota debt rating cut, Suzuki holds out hope for GM
TOKYO (Reuters) - Toyota Motor Corp had its top-notch credit ratings cut for the first time in a decade, hitting its shares and raising borrowing costs as an unprecedented slowdown reshapes the global auto industry.Fitch Ratings on Wednesday downgraded Toyota's long-term foreign and local debt ratings to AA from AAA, with a negative outlook, saying the company needed to review its global investments, product mix and speed of expansion to address the challenges it faces.
"The negative developments in the industry are so substantial and fundamental that even the strongest player -- Toyota -- can no longer support an 'AAA' rating," said Fitch Director Tatsuya Mizuno.
Now We’re Cooking With … Batteries
Electric storage is the weak link in a high-tech world. Fixing it could improve our lives—and the planet.
Low oil prices temporary phenomenon
Low oil price is a temporary phenomenon and price will rebound in the future, said experts at the DIFC Week."After recession there will be severe constraints on the supply side and we have the potential for much higher prices," said Dr Herman Franssen, Senior Associate, CSIS Energy and National Security Programme, and President, International Energy Associates.
"The centre of industrial activity is shifting from the West to Asia and that will increase the demand significantly. Today, 6.5 billion people consume 40 per cent of global energy, whereas 60 per cent is consumed by the Organisation for Economic Co-operation and Development (OECD). As times change, China, India and the rest of the developing world will move to higher consumption per capita and there will be enormous demand," he added.
Experts bet on oil climbing to 2005 levels by 2010
Dubai: The price of oil may rebound to about $80 per barrel next year and give a boost to output expansion projects, industry experts said on Tuesday.Sadad Al Hussaini, former executive vice-president for exploration and production at Saudi oil firm Aramco, said he believed oil prices - which have fallen to $50 per barrel from the record high of more than $147 in July - will climb back to the 2005 levels of $70-$80 by 2010.
OPEC Considers 1 Million-Barrel Production Cut as Oil Tumbles
(Bloomberg) -- OPEC nations, the producers of more than 40 percent of the world’s oil, may cut output for the second time in as many months as recessions in the U.S. and Europe drag oil below $50 a barrel.
IEA's Tanaka urges OPEC to take 'close look at the market'
OPEC should "look at the market closely" before deciding on a production target at its upcoming meetings, Nobuo Tanaka, executive director of the International Energy Agency, said Wednesday....While acknowledging that OECD oil stock levels were now at "very good levels," Tanaka said a severe winter could boost demand and accidental supply shortages and geopolitical risks were also factors OPEC needed to take into consideration.
Pemex weighs big boost in exploration budget
Mexico's Petroleos Mexicanos, the state-owned oil company, said it may boost its exploration budget by 27 percent next year as it tries to find new reserves to offset an almost five-year drop in crude output.Spending on exploration may increase to $2.1 billion this year, Carlos Morales, chief of exploration and production for Pemex, said Monday.
CARACAS: The arrival of the Russian President, Dmitry Medvedev, and a Russian naval squadron in Venezuela this week is an unequivocal message to the US president-elect, Barack Obama, that his greatest challenge in the Americas will be Venezuela's populist government and its oil-fuelled crusade against US influence, analysts say.
Kuwait Won't Reroute Oil Tankers on Piracy Concern, KUNA Says
(Bloomberg) -- Kuwait isn't considering rerouting its oil tankers to the Cape of Good Hope because of piracy in the Gulf of Aden, state news agency KUNA reported, citing Kuwait Petroleum Corp. Chief Executive Officer Saad al-Shuwaib.
Russian gas price will double if Ukraine has debt
Russia's gas monopoly Gazprom threatened on Wednesday to more than double the price Ukraine pays for natural gas next year if it fails to pay off a $2.4 billion debt.Gazprom spokesman Sergei Kupriyanov expressed hope that the gas dispute will not lead to a disruption of supplies to Ukraine and European consumers as was the case in 2006. Most of the gas Russia supplies to Europe goes through Ukraine.
Buyer’s Remorse Chills New Englanders Who Locked in Oil Prices
Buyer’s remorse is afflicting tens of thousands of customers in New England, where heating oil is used more than in any other U.S. region. Their eagerness to nail down a guaranteed rate backfired when oil prices fell.“There was a belief that heating oil could rise to $6 or $7 a gallon,” based partly on predictions by Goldman Sachs Group Inc. and billionaire oilman T. Boone Pickens, said Matt Cota, executive director of the 120-member Vermont Fuel Dealers Association in Montpelier.
“Some dealers had lines out the door,” Cota said. “People were coming in with their checkbooks to sign contracts. There was a palpable panic in the cold-weather states.”
Richard Heinberg: Top of the Food Chain
Today comes the startling news of a British government report showing a drop in oceanic zooplankton of 73 percent since 1960.For many people, this may seem relatively inconsequential as compared to daily cataclysmic revelations about the state of the national and global economy. This reaction is understandable: we care first and foremost about our own immediate survival prospects, and a new and greater Depression will mean millions losing their homes, millions more their jobs. It's nothing to look forward to.
It takes some scientific literacy to appreciate the implications of the catastrophic loss of microscopic sea animals. We need to understand that these are food for crustaceans and fish, which are food for sea birds and mammals. We need to appreciate the importance of the oceanic food web in the planetary biosphere.
The Parable Of The G-20:
Blind To The Elephant
The leaders of the G-20 Group of countries who met in Washington DC for an emergency meeting to revamp the global financial landscape can be compared to the well-known story of 'blind men and an elephant'. Like the six blind men who concluded that the elephant is like a wall, snake, spear, tree, fan or rope, world leaders grappled in bright light for six hours and yet failed to frame an action plan that could truly stimulate the global economy.The elephant in this case is the parasitical global financial system. It has thrived all these years on the hungry stomach of starving millions, extracting every last available ounce of blood. Untamed and unregulated, it demolished the borders of the nation-state to emerge unfettered and free - unrestrained by governments, and liberated from society's control. In the process, speculative and mobile financial capital has played havoc with the global economy. The elephant has been on a rampage.
Local conference's speaker talks of 'winning play' in energy crisis
BLOOMINGTON -- Best-selling author Robert Zubrin's answer to the world energy crisis comes down to a card game strategy. In cards, a trump suit can defeat all others.The same is true with fuels, only the suits are oil, coal, natural gas and biomass, said Zubrin, author of “Energy Victory: Winning the War on Terror by Breaking Free of Oil” and the featured speaker for the Illinois Commodity Conference in Bloomington.
“Right now, oil is the trump suit. … Oil is the suit in which the enemy is long and we are short,” Zubrin said Tuesday. “To win the game, you’ve got to change the trump suit. That’s the winning play.”
Plans to make Irish cars electric by '20
Plans for the mass deployment of electric vehicles in Ireland were set out today by the Energy Minister Eamon Ryan and Transport Minister Noel Dempsey.Government has set a target of 10pc of all vehicles in the transport fleet to be powered by electricity by 2020. This will represent some 250,000 cars on Irish roads over the next 12 years.
200-MW solar power plant on the cards
As efforts to bridge the demand-supply gap currently dogging Botswana continue, the Department of Energy Affairs (DEA) is spearheading plans for a possible 200-megawatt (MW) solar power station.
Credit crisis threatens gas markets: industry
CERNOBBIO, Italy (Reuters) - The credit crisis may threaten the security of gas supplies and hinder new investments in the sector after hitting confidence in gas trading, according to participants at an international energy conference."The effect of the credit crisis on new capital-intensive export projects will be material for security and diversification of supplies," Domenico Dispenza, chairman of the Eurogas association, told the European Autumn Gas Conference at the lakeside town of Cernobbio in northern Italy on Tuesday.
The knock-on effects of the crisis were affecting both the European Union and its gas suppliers, highlighting their interdependence, Dispenza said.
Saudi Gov't Won't Shrink Investments Amid Lower Oil Prices
Saudi Arabia's government won't reduce spending even if crude oil prices fall below what it had budgeted for in 2009, the kingdom's Finance Minister Ibrahim Abdulaziz Al-Assaf said Tuesday."Even if the oil price is lower, we are not going to shrink our investment program or expenditure," Al Assaf told Zawya Dow Jones in an exclusive interview,
"If oil reserves are less than what would cover the total budget then we will resort to our reserves," Al Assaf, who is attending a meeting of Gulf Cooperation Council states' finance and economy ministers in Oman's capital Muscat, said.
Emirates president downplays oil price concerns
DUBAI, United Arab Emirates – The president of the United Arab Emirates is downplaying concerns about falling oil prices ahead of an emergency OPEC meeting later this week.The Emirates is one of the world's top oil producers.
Sheik Khalifa bin Zayed Al Nahyan says fluctuations in the price of crude are nothing new. He says the Gulf nation has lived through periods were prices were below where they are today.
OPEC likely to debate, not decide another supply cut
LONDON (Reuters) – OPEC ministers will debate a deep cut in oil supply when they meet this weekend in Cairo for urgent talks aimed at arresting a downward price spiral that sucked oil below $50 a barrel.They have downplayed the prospect of any decision until a policy-setting meeting in Algeria on December 17, but OPEC needs to send a strong signal of its intention to remove more supply or the risk is oil prices will hurtle lower still.
Falling oil prices hurting OPEC members
CALGARY -- After throwing a wrench into Canada's oil sands growth and messing up Alberta's budget surplus, slumping oil prices are beginning to bite into the government budgets of many OPEC members, Tristone Capital Inc. said in a report.The Calgary-based energy investment dealer said Tuesday cartel outliers Iran and Venezuela are in the toughest spot, requiring oil at US$90 a barrel for their budgets to break even next year, while Nigeria and Bahrain need crude above US$70 a barrel.
Saudi Arabia can pump 11 mln bpd by end '09-Aramco
NEW DELHI (Reuters) - Saudi Arabia will be able to produce 11 million barrels of oil per day by the end of 2009 and sustain output of 12 million bpd subsequently, the chief executive of Saudi Aramco, Abdallah Jumah, said on Wednesday.
Oil majors eye $5 billion ships to cut LNG cost
LONDON (Reuters) - Oil and gas companies are racing to develop a new type of vessel they hope will revolutionize offshore gas production but even if the untested technology works, its deployment could be blocked by resource holders who fear it will undermine development goals.The industry hopes to build a fleet of ships or barges that can sail or be towed to offshore gas discoveries, extract gas, freeze it to liquefied natural gas (LNG) and offload the LNG to tankers for shipping to lucrative Western and Asian markets.
Iraqi Kurds to export crude next year for 1st time
BAGHDAD (AP) -- Iraq's self-ruled Kurdish regional government has announced it will export crude oil for the first time next year.A Kurdish oil official, Ashti Hawrami, says the oil will be exported from two fields in northern Iraq to the Turkish port of Ceyhan.
Food prices in '09 get aid from cheaper oil, grain
WASHINGTON (Reuters) – U.S. food prices are benefiting from the plunge in grain and oil prices, but consumers could still wind up seeing a 4 percent increase in their grocery bills next year, the Agriculture Department said on Tuesday.
Honey bee crisis threatens English fruit farmers
LONDON (Reuters) - Where in the United States, fruit farmers pay to have bees trucked thousands of miles to pollinate their crops and in parts of China, humans with feather dusters have taken on the task, in Britain most bees go nature's way.Britons have a deep nostalgia for home-grown honey and its associations with an ordered rural lifestyle. But here, too, the honey bee population is dwindling, and with winter under way faces a tough fight for survival.
Besides warnings the country will run out of English honey by Christmas, there is a threat to growers of fruits such as apples and pears.
Food banks can't meet growing demand
Donations to many of the USA's food banks are not keeping pace with growing demand as the sour economy forces more people to seek help, charitable organizations say."We have seen a 100% increase in demand in the last year … and food donations have dropped precipitously," says Dana Wilkie, CEO of the Community Food Bank in Fresno, Calif.
The group, which distributes food to 200 food pantries and feeding centers, is supplying cheaper chickens instead of turkeys for Thanksgiving, she says.
Nationally, donations are up about 18%, but demand has grown 25%-40%, says Vicki Escarra of Feeding America, the USA's largest hunger-relief charity. Feeding America, formerly America's Second Harvest, has a network of 206 food banks.
About 70% of new clients are making their first visit to a food bank, Escarra says.
America’s Perfect Storm: Transition to Survival After Peak Oil Hits
A “Perfect Storm” gathers on the horizon as Peak Oil, Economic Instability, Climate Change and Hyper-Population Growth collide within the United States. While Americans watch multiple breakdowns throughout their economic and environmental systems, a gathering citizen armada prepares for an uncertain future—that most assuredly looms on the U.S. horizon.Last night, Dana Miller, director of the “Denver Transition Movement” in Denver, Colorado, sponsored Michael Brownlee, a man sporting swept-back silver hair and wearing John Denver glasses, to speak about how average Americans can mobilize to deal with the coming loss of cheap oil energy, called “Post Peak Oil.” With his compelling power point program, Brownlee addressed a packed house on what all Americans face in the coming decades.
Pirates move hijacked oil tanker
MOGADISHU, Somalia — Somali pirates have taken their greatest prize — a Saudi supertanker with $100 million of crude oil — farther offshore in what appears to be a rare defensive move following threats by Islamic insurgents.
Shell Intends to Proceed With Delayed LNG Project in Sicily
(Bloomberg) -- Royal Dutch Shell Plc, Europe’s biggest oil company, intends to build a natural gas import terminal with refiner ERG SpA, even though the project is delayed because it lacks final regulatory approval.
British Airways to resume flights to Saudi Arabia from London in March after 4 years
LONDON (AP) _ British Airways PLC said Wednesday that it will resume flights to Saudi Arabia from London in March after a four year break, citing the increasing importance of the oil market.
U.S. ethanol sector pushes automakers for support
WASHINGTON (Reuters) - Ethanol industry groups on Tuesday urged U.S. auto executives to support increasing the ethanol-to-gasoline blend rate when they return to Capitol Hill next week to seek federal aid.General Motors Corp, Chrysler LLC and Ford Motor Co have asked Congress for $25 billion to save their businesses. Before they receive any money, however, lawmakers want the companies to lay out their strategies for developing more fuel-efficient cars and maintaining long term viability.
Vatican set to go green with huge solar panel roof
VATICAN CITY (Reuters) - The Vatican was set to go green on Wednesday with the activation of a new solar energy system to power several key buildings and a commitment to use renewable energy for 20 percent of its needs by 2020.The massive roof of the Vatican's "Nervi Hall," where popes hold general audiences and concerts are performed, has been covered with 2,400 photovoltaic panels -- but they will not be visible from below, leaving the Vatican skyline unchanged.
Carbon regulation could "cripple" Texas: Perry
HOUSTON (Reuters) - Texas Gov. Rick Perry said on Tuesday that the economy of the leading energy producing U.S. state would be "crippled" by a federal agency's proposal to regulate carbon dioxide emissions.Perry urged the U.S. Environmental Protection Agency (EPA) "to suppress the urge" to regulate greenhouse gas emissions, citing the "devastating implications for Texas' economy and energy industry."
UK says supports EU climate plan despite recession
LONDON (Reuters) - Britain supports the European Union's tough climate change proposals even as Europe falls into recession, the UK minister of state for energy and climate change told a conference on Tuesday."We do not believe the global economic downturn justifies postponing action on climate change until stability returns," Mike O'Brien said.
Climate change is a battle for existence in the Maldives
MALE (AFP) – Among the many grim predictions of climate change experts, the future fate of The Maldives stands out as a genuine doomsday scenario with the island chain nation facing nothing short of extinction.A one-metre (3.3-foot) rise in sea level would almost totally submerge the country's 1,192 coral islands scattered off the southern tip of India. Experts predict a rise of at least 18 centimetres is likely by the end of the century.
Move fast on climate, environmental groups tell Obama
WASHINGTON — Don't wait until the financial crisis is over to attack global warming because cleaner ways to produce and use energy will lead to a stronger economy, leaders of environmental groups said Tuesday as they outlined their wish list for President-elect Barack Obama.
Unbelievable values in the stock market, says Sprott CEO: Part I
I have a lot of trouble giving investors advice because it is such a difficult market. It is a difficult time. It’s really a once-in-100-years situation that’s going on and it is so volatile. There is so much risk in anything you do and you really have to be patient. I think most people should be giving their money to a good money manager with a great long-term track record to take advantage of this market and invest in good companies with strong balance sheets.I think oil and gas are going to do very, very well over the next five to 10 years. I believe in peak oil and I think the theme will play out. Buying quality operating companies that are reasonably low-cost producers is the way to go in a depressed market. You don’t need to gamble and go for the high-cost producers that give you more torque to the upside.
Economic slump may constrain US climate ambitions, Kerry warns
Barack Obama, who pledged only last week to write a "new chapter in America's leadership" on the environment, could find his hands tied by the economic crisis, a leading figure in global climate change negotiations said yesterday.John Kerry, who will lead the Senate delegation to the UN's climate meeting in Poznan, said that America was now in a position to play a leading role on global climate change negotiations. But he also warned that the incoming Obama administration would be constrained by the economic crisis in offering incentives to countries such as India and China to commit to action to lower greenhouse gas emissions.
ANALYSIS - Rushed EU climate talks on course for perfect storm
BRUSSELS (Reuters) - Stormy negotiations in Brussels this week on tackling climate change highlight heavy industry's success in watering down emissions curbs and mounting frustration in the European Parliament as the dealine looms.Lawmakers fear Europe has handed out too many concessions to industry in its rush to clinch a deal and have vowed to make a final stand. Analysts predict mounting friction in coming weeks and the risk that climate laws will be ruined in the crossfire.
Lloyd's Conference Finds Progress in Insurers Efforts on Climate Change
Lloyd's said that the key findings from the review show that:● The vast majority of members are taking the lead in risk analysis, through research into future risks posed by climate change, and are playing a key role in informing public policy making.
● Most members are finding ways of raising the awareness of customers in the issue, and encouraging environmentally friendly behavior. Half have designed products or services to help customers reduce their carbon emissions.
● However, members need to do more to incorporate climate change into their investment strategies. Half currently do so.
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Russia's decline may be steeper than many people expect.
In an interesting article is the Wall Street Journal this morning, Russia May Cut Oil Output in Tandem With OPEC. Note: A click on this link brings up only the first few sentences of the article, but a http://news.google.com/ search on the title brings up the entire article.
Lots of investment will be necessary just to keep Russian oil production between flat and a slight decline. With oil prices low and the Russian tax situation severely limiting company profits not much new investment is likely to happen.
Ron Patterson
Our model (principally Khebab's hard work) show that the HL based initial 10 year production decline for Russia is -5%/year plus or minus 2% (from mature basins):
http://www.theoildrum.com/files/image013.png
http://graphoilogy.blogspot.com/2008/01/quantitative-assessment-of-futur...
And our middle case shows Russian net oil exports approaching zero in about 18 years.
Ron,
How about this: "Russian oil companies may cut production and exports should they become unprofitable, Energy Minister Sergei Shmatko said on Tuesday. (11/18, #13)"
http://www.energybulletin.net/node/47309
Thanks for that link, Ron!
The forecast below is bottom up project based until 2012, followed by a steady decline rate of about 4%/year which between your link's 2% to 5%.
The decline in Russian output is a key factor in forecasting that world peak oil is probably 2008, excluding biofuels.
The forecast shows a steady decline because many of Russia's new oil projects have long ramp up periods.
Russia Crude Oil and Lease Condensate Production to 2020 - click to enlarge
Hello Ace, WT, Darwinian, Khebab,
As usual, thxs for the heavy lifting on the statistics, graphs, and analysis. As Russia goes postPeak in FFs, I think we also need to remember how important they are as a global exporter of I-NPK. The US, now a net importer of I-NPK relies on Russia for 12% [mostly N ammonia & urea].
From the POT website, a cool clickable graphic of each country's I-NPK and agro-statistics:
http://www.potashcorp.com/investor_relations/markets_information/world_m...
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webpage to launch World Agriculture & Fertilizer Market Map
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Russia net exports N = 4.65, P = 2.28, K = 5.72 [each millions of tons source: FAO,IFA, 2005 data]. I also believe they are a net exporter of recovered sulfur from sour crude & sour natgas, too.
Let's hope that Russia doesn't financially and socially implode so that these vital exports are curtailed. As you well know: we are evolved to sit in the dark, but we cannot do starvation. Have you hugged your bag of NPK today?
How long before postPeak women will go crazy for the guy with the biggest O-NPK compost pit and veggie plot?
This is amazing stuff!
From the NY Times:
I thought CBS Evening News, though, did a much better job of explaining what all this means:
http://www.cbsnews.com/video/watch/?id=4633456n
http://www.cbsnews.com/video/watch/?id=4633449n
Now that foreign investors have backed away from the plate, refusing to purchase more US corporate bonds, the US government is stepping up.
The problem with all this is that it does nothing to address the underlying problem, which is that Americans consume more than they produce. Don’t get me wrong, there’s nothing inherently wrong with consumption, as long as you produce as much as you consume. But therein lays the problem, as I don’t see how this policy enhances production.
The money to finance all these initiatives is to come from foreign investors (this is so because Americans don’t save, and these policies further encourage non-saving behavior), mostly foreign central banks, who are now refusing to buy corporate-issued bonds, but have thus far not demurred from buying US treasuries. Implicit in this financing, however, is the fact that it can best be characterized as being “consumer” financing--the money lent is to be used to boost consumption of exports from those countries doing the lending. And the US government is certainly falling in line like a trained goat.
But again, none of this addresses the underlying conundrum. Americans consuming more than they produce is not sustainable in the long term, and this policy surely has only two possible outcomes: default on the debt or devaluation of the currency.
The Fed attempts to protect the banking system-the long term health of the USA economy is not the responsibility of the Fed. The problem is that now both the Fed and Treasury are solely focused on protecting the banking system at any cost-from the overview of the whole economy, it is almost a kamakazi mission (with the elite sacrificing the vast majority of the population). IMO currently there isn't one person with any influence in the USA government who is motivated or interested in where this is going-7.7 trillion dollars spent without a discernable benefit and more where that came from? The USA government has no plans to even spend 10% of this amount on the actual needs of the economy. Amazing-Argentina the Sequel.
Maybe this is going to be a neat, backdoor way of getting the country to create Totoniela's SWR (Strategic Wheelbarrow Reserve).. since those devices will be replacing our Wallets and Pocketbooks for carrying cash pretty soon. (Insert PIC from HyperInflationary 1930's Germany)
Contrary to NY Times spin, the situation is that there are no longer any buyers at all for securitized garbage as all buyers have been burned badly. The grand plan is now to have the USA taxpayer buy the securitized garbage. Perfect plan: USA taxpayer borrows money he cannot repay, Wall Street takes a huge slice by putting it all in a fancy package, and the USA taxpayer pays for it all. It makes Ponzi's scheme look rather legitimate.
Brian-
They are monetarizing this virtual toxic paper, and making sure they were not the last one holding the bag in the Ponzi scheme.
This is a suicide economic model, with the players spinning the chamber, and pulling the trigger.
Of course, the second law does not care one bit, and this anthropocentric nonsense will soon end.
This isn't Russian roulette-in this version they spin the chamber and hold the pistol to your head, not theirs, as they pull the trigger.
Hightrekker, you write:
Peak Credit meets Peak Oil.
More like peak credit ensures peak oil, it is a lack of adequate profitable oil well investment that will cause/has caused peak oil.
Wall street needed one last sucker to be the last level in the pyramid scheme. The US gov't signed up to be that sucker.
Actually, the last suckers are more likely to be those countries which are awash with dollars as their reserve currency.
Here's my back-of-the-envelope prediction:
2009 - contraction plus deflation
2010 - hypercontraction plus inflation
2011 - hypercontraction plus hyperinflation
Perhaps I'm just an incurable optimist.
2012 hyperinflation produces gas giant
2012-2013 Gravitational collapse of gas giant, production of supernova
2014 neutron star residual of supernova found on ranch in Paraguay. Dust clouds everywhere else.
3000-- Development of new economic planet from consolidated dust clouds of supernova explosion
Speaking of Ponzi schemes, they happened to be the topic of today's Debt Rattle - From the Top of the Great Pyramid.
Stoneleigh,
thanks for your excellent site.
Perhaps you would clarify the alternative you advocate.
I can understand why the present approach of soaking up madly over-leveraged derivatives must fail, and it is obvious that there is no 'good' solution, but just the same it would be beneficial if we could get some better idea of our alternatives.
I take it that what you advocate is allowing the failed institutions to fail, but what else?
As the major banks go down, would the Governments compensate the people who have deposits in them?
What, in a ball-park, would be the cost as opposed to bailing out the banks?
Would you advocate setting up new banks to ensure liquidity for the economy?
What would it cost?
Would you advocate that new mortgages valuing houses at more realistic rates should be offered?
That would put huge losses directly onto the bank's books, and I doubt that any would survive.
No precise estimates are possible, of course, but perhaps you would give a better idea of what else could be attempted.
Sadly, there is nothing that can be done to prevent what is going to happen as the losses have already been incurred, just not recognized yet. What various governments and central bankers are dong now is running up vast amounts of new public debt to bail out a banking system that can't be saved. The only people really being bail out here are banking insiders who will walk away with a lot of money while everyone else is dispossessed. That's all bailouts ever do. They never reach the little guy, although the little guy is usually the justification for them.
I agree that the losses will occur.
Just the same, the argument you are making, with which I agree, is that further monies may be lost as the banks are bailed out.
If this argument is correct, then it should be possible to roughly guess what the savings will be.
Real estate, for instance, is going to depreciate and loose the value that was imputed to it, wither in nominal terms or via inflation.
However, it seems likely that even if we don't bail out the banks as an institution, some efforts will be made to recompense the people who have deposit accounts in the banks.
Since this would not go into the realms of the vastly leveraged CDS instruments etc, there is presumably a relatively modest cost involved, I believe on the order of the $1.5 trn that has already been spent on the ineffectual bail-out.
Presumably this monies couls also then be used to finance a new banking system, on sane levels of leverage.
Are my figures in the right ball-park?
IOW, for around the cost already committed to the bail out, could both depositors be given their money back and a new banking system set up, which would be able to bankroll business?
Not to worry Obama just brought in Volcker from the Fed to fix the economic crisis, LOL!
China should just do like the IMF & Worldbank do and give the money directly to their manufacturing industries, have the "STUFF" shipped here to us and send us the bill + interest.
Seems to me that the announcement on Bloomberg "...provide more than $7.76 trillion on behalf of American taxpayers..." is screaming out to the whole world "your dollars will soon be worthless".
I'm not so sure about this. I think a big component of the current crisis is a serious attitude adjustment, with saving for a rainy day (which might well be tomorrow) over consumption. Since consumer spending -particularly on things like appliances, and new cars is way down, much of the rest should be going into savings. Everyone is looking for a safe place to put what cash they have.
Why should people save dollars that will soon be worthless?
Because saving is what people do when they're afraid they'll lose their jobs.
And it's not clear that dollars will soon be totally worthless. Stoneleigh predicts that cash will be king, and I still think she may be right. Deflation could last for years.
Certainly, the average American doesn't believe dollars will soon be worthless. Americans are saving now, as they haven't in a long time.
I guess I shouldn't have said soon but it is hard to see how deflation will last for years with trillions of dollars being injected into the financial system.
I think it depends on what the definition of "soon" is. I don't have figures handy, but it seems that the amount of debt being destroyed is still very high. Even these large capital injections don't yet match the money being destroyed.
If the "debt" (especially the nominal value of all the "derivatives" contracts added up) is many times larger than the "real economy", as has been claimed here many times, then it seems to mean that those contracts go around in circles, i.e., mostly balance each other out. Therefore, does "deleveraging" of this "debt" really mean destruction of "money"? Makes my head spin. But really, if bankster A gets umpteen billions from "the government", pays his debt to bankster B, who can then pay his debts to bankster C, who then repays bankster A, then:
* bankster A (a friend of Hank) makes off like a bankster, and
* the giveaway destroyed several times its nameplate value in "outstanding securities", and
* bankster A is now ready to spend the new money, i.e. inflation.
When will economists learn to subtract?
It makes my head spin too.
Apparently CDS is the most poisonous of a very noxious brew.
Here is an article that I came across today explaining that the best way to deal with them is to let the firms go bust, firstly AIG, which would decrease leveraging to more manageable levels:
http://seekingalpha.com/article/108113-what-obama-needs-to-know-about-ti...
However, Government measures are likely to have lead to more dumb mortgages being issued, as they are now backed by the Government, and the issuers are now operating in an essentially risk-free manner, and are entirely unreconstructed, the same crowd of bozos who gave us sub-prime and Alt-A, and operating in the same way.
IMHO most of these analyses are flawed as they start with the assumption that the goal is to do whatever is best for the overall economy of the country-this assumption is based on quicksand-all monies distributed to date go exclusively to one sector which happens to have strong political influence.
Kunstler is saying "soon" is six months to 18 months from now. (From this week's column).
That sounds about right to me somehow (can't explain why, gut feeling I guess). It could be a little longer than that though if the Feds figure out how to drag out the process and slow it down.
Yeah, I suspect the "predicted economic turn around" based on this week's DOW +1000 if you subscibe to the DOW being 6 months forward looking - is gonna turn out to be anything but.
Pete
Whatever happens in between, the end game is already determined.
When peak oil is generally realized, all virtual assets (currency, company stock, etc.) will tend toward zero.
I'm not sure this is strictly correct, though it is complex. I would contend that Americans are not saving substantially more than they used to. What they are doing is not spending as much. Not spending does not mean one is saving. In the case of the United States and the UK it just means they are not accessing as much debt as usual. Their scared of getting into more debt. They are maxed out on debt. Considering how much debt they already have on the debit side, "saving" is a misnomer.
Well put. The talking heads on CNBC this morning (why do I still watch this crap??) said this latest injection all but assures the fed rate will drop to 0% before year end. Can't punish savers much worse than that.
I consider myself a student of both history and of current events. And I gotta admit I suspected the end of BAU was near an end, but I didn't see it going down like this.
Everyone here have a safe and fillinng holiday.
Holiday. You mean the third anniversary of Peak Oil?
Yup.
Hello Leanan,
Great photo! How long before Haitian Mud Cookies are standard Thxsgiving fare at the food banks?
http://www.denverpost.com/commented/ci_11064825
-----------------
They're dying in Haiti; why don't we care?
Last week, 26 severely malnourished children died in Haiti...
As we Americans watch our own crown tilting, it becomes easier to feel disdain than compassion about what happens to Haiti. However, one could argue that between America's strong shoulders there was once a heart that loved Haiti.
------------------------
I think most 'Murkans couldn't find Haiti on a map, much less give a crap about it. Speaking of too much crap causing polluted water:
http://www.smh.com.au/news/world/more-deaths-as-cholera-spreads-in-zimba...
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[Please see photo of sick woman in wheelbarrow]
More deaths as cholera spreads in Zimbabwe
Fifty-three more cholera deaths have been recorded in Zimbabwe in a single day along with 1600 new cases, the United Nations says, putting the death toll since August at 366 and the number of cases at 8887.
-------------------
It disgusts me that Mugabe let the water & sewage get out of hand when it would have been so easy to implement sound O-NPK recycling methods.
Will America do anything to implement Optimal Overshoot Decline? Or will we replicate Haiti and Zimbabwe postPeak?
FEMA's mitigation dept doesn't seem prepared to deal with a overflowing flood of countless postPeak 'brownies' when our water & sewage networks collapse:
http://www.fema.gov/about/divisions/mitigation.shtm
------------------
The Mitigation Directorate manages the National Flood Insurance Program (NFIP) and a range of programs designed to reduce future losses to homes, businesses, schools, public buildings and critical facilities from floods, earthquakes, tornadoes and other natural disasters.
----------------
If I had the power: I would forbid FEMA offices to have flush toilets; they would have to deal with their personal 'brownies'. I think they would quickly realize that O-NPK recycling to protect the pollution of potable water sources is crucial as we go postPeak.
Most likely, FEMA will have a feeble and futile postPeak response--I hope people will have rubber boots for wading through the sewage. Recall the Palestinian latrine pit that broke drowning people and flooding houses [about a year ago?].
If we have to have machete' moshpits: is it also required that FEMA fails so badly that femurs are hacked in the streets with raw sewage?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
If we have to have machete' moshpits: is it also required that FEMA fails so badly that femurs are hacked in the streets with raw sewage?
Thanks Bob. It's comments like this that really solidify TOD's position as the premier site for scientific discussion of oil-related issues.
Hello JD,
Thxs for responding. Recall Katrina + sewage, Rita + sewage, Gustav + sewage,... NYCity sewage train that practically traversed the US looking for a place to empty a few years ago...Need I go on about the need for O-NPK recycling, increasingly unaffordable I-NPK, and future energy for food at 10 energy-embedded calories/foodstuff calorie [1500 mile Caesar salad]? How about Pimental's calcs on energy-embedded per bag of I-NPK? Or is the latest UN FAO warning good enough?
The Drumbeat is precisely the place to discuss this interlocking food & energy situation, plus the possible ramifications, so that maybe we can avert the worse. I assume you have read the recent warnings by Norman Borlaug and William Doyle [POT's chief]? Happy Thxsgiving to you if you have donated some money or food to your local foodbank.
JD,
I've visited your site. It's one of the single most useless places on the internet, not for the subject matter, but because you are illogical, biased, and anything but scientific. Every time you peak out into the real world, like here, you get the crap beaten out of you (metaphorically), which is evident in your little insult above. And what better example could we hope for: don't fight with facts, but with attacks on the site you are posting at!
The irony is flowing like a newly tapped well.
Please, save it for your site.
Jeers
Bob,
Seems I sense a more irate, angry Totoneila of late.
The gloves coming off Bob?
'Bout time.
Airdale
I don't think that's correct. The savings rate is positive. It's still low compared to other countries, but the increase is quite sharp. It was negative earlier this year, meaning that people were buying things on credit. But it turned positive recently, meaning people were actually saving - spending less than they earned.
Modest, yes, but the increase is striking.
Writerman,
Strictly speaking, all a person can do with a dollar of income is to spend it on consumption or to save it. Paying off debt counts as "saving" because it has the same effect on both individual and national income statistics as saving.
However, it is possible that both saving and consumption can go down at the same time if disposable income is falling; when your income falls you are likely to both save less and spend less.
The famous paradox of thrift happens when everybody tries to save more, consumption falls, GDP falls causing a decline in disposable income--and you end up in a depression caused by lack of aggregate demand. In this depression situation both consumption and saving fall due to a big decrease is disposable income, created in large part by rising unemployment. The Keynesian theory is that tax cuts or increased government spending (based on increased deficit spending) will stimulate aggregate demand and thereby escape the paradox of thrift.
Note that what is good for the individual (increasing saving during a recession) is bad for the group, because the attempt to save diminishes total spending and hence also reduces aggregate demand.
Yes, that old problem of deflation/depression sounds a lot like the Tragedy of the Commons. What's good for the individual (or company) in exploiting a common resource turns out to be bad for the whole, as the resource tends to be over used. I think we should all remember that the last time we had a Depression, we all chose to consume our way out by using the most rapid form of consumption, i.e., a war. All that war time production was rapidly blown up or sunk into the oceans, along with lots of houses and factories in the war zones. Lots of jobs were created in the U.S., along with savings, since most individual consumption was limited by rationing. After WW II, there was a burst of productive effort as those savings were spent and the other nations' infrastructure and economies were rebuilt.
This time around, if we slide into Depression 2, the resources (especially cheap energy) to jump start the economy won't be available as before. I think that's why the U.S. and the rest of the industrial world simply must go to a massive effort to provide alternative energy sources, both to stimulate their respective economies and to offset the decline in cheap oil after The Peak. The alternative might be the old timey Rapid Destruction thru War routine...
E. Swanson
Perhaps this is one way that the depression may be counteracted, at least in some areas.
It would seem that China needs mainly to swap it's growth model, and to go to allowing it's currency to appreciate and to finance by deficits truly huge infrastructure projects, including for energy.
At a more personal level the introduction of a much more extensive health system would reduce unrest.
In contrast to the West, and like the US in the 30's, they have the spare productive capacity to allow this, and hopefully that might be the way they go rather than to war.
I don't think it matters which alternative scenario takes place - including war - they all have to take into consideration peak resources ... and no more fossil-fueled world economic growth!
Don,
I won't write a defence of Austrian economics here, but you should at least be aware that the 'paradox of thrift' is not only famous but also highly controversial.
You might be interested in reading this essay ('The Paradox of Thrift: RIP'):
http://www.cato.org/pubs/journal/cj16n1-7.html
Extract:
etc. etc.
Enjoy!
The paradox of thrift does not apply in ordinary times, but I think the evidence is strong that it does apply in a deep recession or a depression.
Austrian economics focuses on the long run. As Keynes quipped, "In the long run we are all dead." Of course in the long run a high savings rate is a good thing, because investment can be financed only out of saving (by a nation's consumers or by foreigners).
The paradox of thrift is only one reason why depressions tend to get worse in a vicious circle. At least as important is the reluctance of businesses to invest because of expectations of declining returns on investment caused by lower profits. As firms slash inventories and close down factories and idle equipment they also lay off more people. As people are laid off their disposable income falls by a lot, and hence they consume less, which causes less revenue and lower profits for business. Which in turn causes expectations for profits to fall and hence less investment in inventory, plant and equipment . . . .
The trick is to find a way out of this vicious circle. Ordinarily, expansionary fiscal and monetary policy can stimulate aggregate demand and break the vicious circle of worsening depression. But now we have Peak Oil as a barrier to real growth in GDP. If total spending goes up, the demand for oil will go up, and so will its price. Higher price and limited availability of oil will stop real economic growth and tend to cause an increase in the price level (inflation by non-Austrian definition).
What we need is an economics of decline. In my opinion, declining net exports of oil will lead to declining real GDP over the next fifteen to twenty years. Thus I think we need to focus on ways to deal with falling real incomes and massive increases in unemployment. Expansionary fiscal and monetary policy, as you predict in another comment, will lead to inflation, but given the barrier of Peak Oil cannot lead to real economic growth.
Well said. I can't wait until the first politician who will say that. We will try to grow our way out of this regardless of the consequences. As well all know, there are no limits. It is said that Obama has assembled the most brilliant minds in the country to deal with this meltdown and recession. I think these brilliant minds have learned virtually nothing about the real world in the last few decades at least.
Don, you writE:
Whatever 'run' they focus on, the Austrian economists got their predictions right. They are to Peak Credit what TOD is to Peak Oil.
Peter Schiff --- Austrian
Mike Shedlock --- Austrian
Marc Faber -- Austrian
Ron Paul -- Austrian
etc..
You left the pope off your list of Austrians but list four people who were born in the USA.
He was referring to their school of economics, not their nationality.
To offset the natural response of individuals in the form of "The paradox of thrift", governments can use increased fiscal spending. As I understand it, that was part of Keynes' solution. The trouble is, the other side of counter cyclical policy required reduced spending and increased taxes during the good times to pay off the debit (I know this is probably a simplistic view...). But, in a democracy where the political class feels beholden to the public, the part about increased taxes and reduced spending never gets done. That leaves the other option, monetary policy, to control the economy. We now see that the Fed has almost hit 0.0 interest rates, which implies that monetary policy is out of bullets, as Denninger has noted.
So, as the Government(s) implement various stimulus plans, one can only hope that these efforts can be directed toward our potentially larger problem of energy supply. One should also be aware that the claim that the economy is directly tied to oil consumption (as you mention later) has been shown to be incorrect. Certainly, from an engineering perspective, we know other ways to get things done. And, as the oil runs out, we will have no other choice but to switch to these other energy sources. It would be much better to start doing so NOW instead of waiting until after the present crisis is past as it may not be over any time soon (if ever)!
E. Swanson
Black_Dog,
Monetary policy is not out of bullets: Even with zero % interest rates the Fed can engage in "quantitative easing," and beyond that they can (and probably will) go to open monetization of the debt, what we colloquially call "printing money."
We could make a successful transition away from oil if and only if
1. The rate of decline in net exports of oil is low, say only 3% per year.
2. Ample investment funds were available to invest in alternative sources of energy.
From what Westexas writes, I expect the rate of decline in net oil exports to be relatively abrupt--worse than 5% per year and possibly substantially worse.
From what Gail the Acturary (and others) write, I expect there to be an extreme lack of funds to finance alternative energy. Now if the Obama administration were to use a huge amount of deficit spending to finance a transition away from oil, it could be done. Not without a lot of pain, but it could be done. My pessimism results from expecting business as usual and politics as usual until we are in an severe depression with unemployment above 25%. Perhaps great pain can bring forth drastic and constructive change--but what I fear it will bring forth is dictatorship.
Don,
Thing is, ideally we shouldn't be here at all, an economy staggering under the collosal weight of massive mountain of highly toxic and complex debt, which has the potential to crush it flat. It's a dangerous place to be, and trying to find a way out from under the anvil on our chest isn't going to be easy or painless. All the options are variations on bad, in my opinion. And that's just the economy. Pile on the massive challenges of Peak Oil, climate change, population growth, environmental degredation and things don't look good.
I may be wrong, but I get the impression that you are substantially underestimating the problems connected to "monetization of the debt." Printing money on vast scale is perhaps the worst option to take. This might have been a way out if the US economy was fundamentally sound, only it isn't. Menetization is a very risky play. It risks destroying the value of the dollar and it's position as the world's reserve currancy, which functions almost like a US "tax" on the rest of the world and conveys many other advantages. Devaluing the dollar would require, given the US' weak economic position, the agreement of those countries that supply the US with loans, debtor nations on the US scale are prisoners of their debts and are not in a position to just demand unlimited credit from the rest of the world for ever. Somehow the US has to get back to living and spending within its means and reducing its uncontrolled borrowing or it will eventually simply go bankrupt.
"Things don't look good" to say the least. Were it not for fiat money, most of the world would be bankrupt.
Allow me to rephrase your last sentence:
The US will get back to living and spending within its means and reducing its uncontrolled borrowing. One if the possibilities is through bankruptcy.
Physics won't have it any other way.
I do not advocate monetizing the debt. Of course increasing inflation will cause a lot of problems--but it will also decrease the burden of old debt and bring home prices up to what is owed on their mortgages. Also with prices increasing faster than wages living standards will be cut without reducing nominal wages. Thus regardless of what I think is good, in my opinion we are going to see a lot more inflation in years and probably decades to come.
As Keynes pointed out, debtors outnumber creditors; debtors have superior political influence in a democracy, and hence politics over time tends towards increasing deficits and increasing inflation.
If I were emperor of North America I would impose a monetarist rule on the money supply to stabilize prices without either much inflation or much deflation. Furthermore I would declare an austerity program, increase tax rates, and force saving, just as it was forced during World War Two. Instead of using these measures to finance war I would use them to make the necessary investments in energy alternatives, in expanding the rail system, in improving the electrical grid. I'd have massive public works and massive re-education to train people in the skills needed to make a transition away from fossil fuels. Finally, I'd put a five dollar a gallon tax on gasoline to internalize the negative externalities of gasoline consumption. Note that given our actual political institutions, not a single part of my program can be implemented; hence I stipulate being an emperor.
Don,
I think your imperial strategy has a lot going for it. A de facto wartime economy in peacetime, but in a democracy? I don't think it's likely. It implies, or means, the state stepping in and regulating and directing the economy to an extraordinary degree, probably impossible in peacetime. What happens to the capitalist class if one makes them almost permanently redundant?
But it could work in China or Russia, but in the USA, I doubt it, unless...
Hi, Don.
There is no way to make a successful transition of any meaningful size now. An extended contraction will collapse the financial system through an endless wave of bankruptcies. We're struggling to keep it going now and the bankruptcies are just beginning when compared to the total number of businesses that will eventually default on their loans.
I think Greer is quite off if he thinks we will have a staircase down for decades. Any way I look at it, the current financial system breaks down and we're forced to local currencies or whatever we can muster together, a la Argentina but worse because it will be global.
I am quite open to being shown that it's possible to execute this staircase down (using the same currency system) but nothing I've studied thus far seems convincing to me.
Now if we expand his definition and allow for one or more alternate currency systems to arise rather quickly as the current crop disappear, we still run up against the difficulty of re-establishing the network of trust and trading mechanisms between world currencies. Trade becomes very local very quickly and it will take decades to again create an extensive global trading system, if we can.
Someone please chime in if they see another way of this playing out. Worldwide financial collapse is still the sticking point for me.
Aangel,
Greer and Leanan could be right in their "slow squeeze" scenario. I think a gradual and long-term decline in real GDP could happen if decline rates in net oil exports are at a mild rate--say, no more than 3% per year.
However, I think a rapid decline rate in net oil exports--say, more than 5% per year--will result in discontinuities. I would not, however, bet on an endless wave of bankruptcies, because central banks are doing everything they can to bail out financial institutions, and so far they have been remarkably successful, Lehman Brothers notwithstanding.
I don't think that future inflation will necessarily go all the way to hyperinflation. What I think more likely is some years of double digit inflation to cut the value of the dollar in half over the next several years. Note that half a dollar is still valuable. Thus I expect the dollar to remain as the dominant world currency until something big and stronger replaces it. (I don't expect local currencies to flourish.) The Euro is even more vulnerable to Peak Oil than is the dollar.
The big reason that I expect neither hyperinflation nor significant deflation is that central banks (in cooperation with their governments) are powerful. So far, in my opinion, the central banks are winning the war against deflation. If there is to be deflation, it will likely be minor and only for a few months, because the enormous increase in the money supply will create huge inflationary pressures six to eighteen months from now. Monetary policy operates with long and unpredictable time lags, but the extreme expansionary policies of 2008 will be felt both in 2009 and 2010--and felt more on the price level than in an upward stimulus to real GDP.
Yes, all that you describe may be true -- until it's no longer true. When does it no longer hold?
My assertion is that the value of all virtual assets (cash, stocks, etc.) exist in a context of abundant energy. Take away the energy and the value of the (virtual) assets goes with it, no?
Or as Jeffrey puts it: what value do the ten largest banks have without the ten largest oil fields?
I say, "Not much." That's the discontinuity we approach. We have an entire system that's valid only when energy is abundant. And the energy is about to disappear.
If Nassim Taleb (Black Swan) and his mentor, Benoit Mandelbrot (Butterfly effect/Chaos Theory) are really worried, then so am I. I already was, of course. In fact, I see absolutely nothing that argues for a catabolic collapse.
These two call the current crisis the worst crisis since... wait for it... the American revolution!
http://www.youtube.com/watch?v=H3zZ6qNWeGw&feature=related
Taleb pissed at (stupid, arrogant) economists:
http://www.youtube.com/watch?v=ABXPICWjFIo&feature=related
And for you mathematically inclined folks, a new article from Taleb on his view on the mis-use of stats and how to map out future choices.
THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS
Cheers
ccpo
very good vids. thanks.
thanks to all for the discussion!
happy thanksgiving.
Don, Gee I love to read your stuff. It stimulates this weary mind.
The best way I have seen, to look at the savings issue, is to look at what happens at the extremes. If everyone saved and no one borrowed the bank gets no income and would quickly go belly up. There would be no place to save other than your mattress. If a lot of people saved, and the bank then lent out at ten to one as is normal, and everyone paid back on time, there would be plenty of money created to pay interest on the savings. Everyone wins, especially the bank, which is why they have such big, beautiful buildings.
The "legal" ponzis have thrown a monkey wrench into the entire system. I guess the real question for us, trying to determine where and how the works out, is how much created cash is out there that needs to be destroyed, and I'm not sure anyone really knows.
Why not set an example? Cash out all your investments and go to the public square and set fire to all those federal reserve notes. Do the same with your paychecks until you believe the economy is once again in good condition. Do your part in destroying all that fiat cash and save the world economy. Of course you would now soon be homeless and possibly in jail for violating local outdoor burning laws but your conscience would be clear.
"Note that what is good for the individual (increasing saving during a recession) is bad for the group, because the attempt to save diminishes total spending and hence also reduces aggregate demand."
- and why is that "bad for the group"? Seems to me that's exactly what we need, for many strong reasons. The real issue in the resulting "recession" is how to spread the pain around more evenly. If some people lose their jobs and others don't, that creates extreme inequity. If everybody kept their jobs but got paid a few % less, that's not so bad, both in material discomfort, and in psychological pain.
I used to have this argument with a dittohead acquaintance of mine. He was notoriously cheap (no cable, ancient B&W tv with no cable and no vcr, lived with his girlfriend for 20 years, but for tax reasons never married her, etc.) He'd gripe incessantly about people who wasted their money on Nintendos, pizzas, brand-name toothpaste, you name it. And I used to reply that if everyone lived as he did, we'd all lose our jobs...including him.
Now that I agree with. Congress passed a law mandating a 30-hour work week during the Depression, precisely for that reason. But FDR vetoed it, saying it was "socialism."
I don't see what that has to do with saving, though.
But such a practice is a MORTAL SIN from the Keynesian perspective. Wages are meant to be sticky downward. Even if 30% of the labour force is unemployed.
Don't do it. Don't even think of doing something sensible like that ...
Inflation is the means of giving everyone a pay cut across the board. Its like current in a river... swim forward or you get washed downstream. Its the way business and government keep us motivated to strive harder and harder for the "raise", which is more often than not just an adjustment that puts us right back where we were. The old horse and carrot cartoon.
Not only that, the increased numerics leads to additional taxation opportunity.
Personally, I had planned on rampant inflation by now, the dollar going in the toilet, and figured it would be the only thing we could do to wipe out the debts of the past - as such a move would keep the numerical debts payable while forcing everyone to subsidize it via the "hidden inflation tax".
A weak dollar would have also made our stuff cheaper to foreigners, while making their stuff more expensive for us. I figured that would be just the ticket for encouraging American businesses to produce something useful, not just real estate, finance, and insurance services amongst ourselves while importing our staples.
I wonder how long our Government can hold on given the new hemorhaging of the treasury supporting bailout programs and social obligations coupled with the decrease in tax recipts due to capital loss writeoffs, loss of business profits, and loss of job-related taxation.
It puzzles me a lot why anybody would even want our treasury bonds. I figured they were about as valuable as a promisory note from my spendhappy neighbor who I know is so far in debt he won't be able to pay off even if he lived to the year his granchildren should live to.
The government has taken some really unusual ( and to me - extremely idiotic ) manuevers these last six months.
Its gonna be interesting to see the end-game now. I do not think anybody can predict the outcome now, but I do get the idea its not gonna be pretty.
Nice analogy...
Perhaps you would be more inclined to lend your spendhappy neighbor some dough if he was also your biggest customer. Not saying it would necessarily be a smart move, but the prospect of your biggest customer declaring bankrupcy, possibly putting you out of business also, might nevertheless be an additional motivation to you.
So you lend him some money which he uses to buy lots of stuff in your store, and for a while longer, everything is fine... at least on paper.
"He'd gripe incessantly about people who wasted their money on Nintendos, pizzas, brand-name toothpaste, you name it. And I used to reply that if everyone lived as he did, we'd all lose our jobs...including him."
I'm not sure how this works, but I don't agree with your claim. I think it's more likely that we'd have less people in malls selling nintendos and brand-name toothpaste, and more people working in schools and hostpitals. There would also be more resources available for public works, such as levees.
Can you explain why employment MUST be dependant on wasteful products?
Why? There would not be greater need for schools and hospitals.
It doesn't have to be...but our system doesn't lend itself to anything else.
This article explains it:
The Gospel of Consumption
Of course, there are other solutions to this problem. One would be to work less efficiently. Get rid of EZ-Pass and hire human toll takers again. Junk the computers and go back to typewriters.
The other would be for everyone to work shorter hours. The Jetsons envisioned a future where people work only three hours a day, three days a week.
It didn't turn out that way, of course. Partly because of the expense of health insurance and other benefits, but even in countries where there's national health insurance, people don't work three hour weeks. Capitalism encourages efficiency, which means a lot of make-work if we want to keep everyone employed.
I don't think this is what you mean (or at least what you ought to mean :-) ). We have a lot of jobs that are based on high levels of disposable income, eg, expensive coffee shops, expensive chocolatiers, posh bars, expensive gyms, both those creating government paperwork and those filling it in,etc, that would not survive reduced money for consumption. If you'd said cutting the hours of people in businesses likely to remain viable, moving people from bad jobs to cover for the reduced hours then it would probably be "not so bad", except that the people having their hours cut to "make room" (including me if i was in that position!) wouldn't like it.
L eanan,
I think that of all places on TOD, we've surely learnt to to be sceptical about statistics. I'm not sure about the statistics your referring to. How accurate are they really? My experience with these kinds of numbers is that one should be extremely cautious about them, especially in periods like this. This doesn't mean they are false. They could just be wrong or manipulated, like the figures for SA reserves, or the accountancy firms that gave the banks clean bills of health not so very long ago. I think one needs more data over a longer period, before one decides what's really happening.
Don, I appriciate your feedback, but I'm aware of what your saying. I think we are differing, if we are, on how one defines these terms and the perspective one is employing. I think this entire issue of "savings" "debt" "income" is more complex than you state. But do we really want to get into that level of complexity here? I respect your view, I'm just not sure I agree totally.
I'm not sure what you mean by "good" for the individual, ie saving during a recession really means. Is not spending on something you want "good", or delaying it, or not spending because one is scared, really "good."?
I'm also not sure one can make these distinctions between what's good for the individual as opposed to the group. Of course one can make these distinctions, I'm just not sure they really mean very much.
I'm also not sure about Keynes' effacacy in our current situation. I'm not even sure it worked last time, but we're getting into even more complexity here I suppose.
Writerman,
You are correct that I have simplified (but not falsified) matters. TOD is not a place for long and intricate essays on conventional economics. However, I am using terms such as "saving" and "investment" as economists do--and not necessarily the way these terms are used in ordinary conversation.
The reason that attempting to save more is bad in a depression is that it makes the depression worse and thereby increases unemployment.
Increased long-term unemployment is the one issue that is too horrible to contemplate; I've been asking for TOD to do an article on unemployment caused by declining oil production, where we could hash out questions in more detail.
In my opinion, cutting back hours will not work to decrease unemployment. Why? Because if your hours are cut back 25% then your income and consumption will be cut back 25%, and this will lower aggregate demand and thereby increase unemployment. Worse, with a thirty hour work week, many would work two fulltime jobs, even as the rate of unemployment soars. The French have tried cutting back hours to diminish unemployment, with negative results. I know of no evidence that shows that cutting back hours below forty hours a week helps to decrease unemployment.
We should not plan for a steady-state economy in the near future. Due to Peak Oil we need to plan for falling real GDP over the next fifteen to twenty years, and especially we have to figure out how to deal with massive increases in unemployment. To a small extent, government investment in alternative energy projects can help. Ideally we would implement Alan Drake's proposals, and that would also make a dent in unemployment.
To discuss preparations for a declining economy is taboo--that which must never be spoken of. To deal with falling GDP and to avoid collapse caused by long-term decline in real GDP we need to have tools at hand to keep a disaster from turning into a catastrophe.
Don,
We agree - I think, but we define these complex terms somewhat differently. In the great scheme of things it's not that important, anyway not here and now.
I do understand your agrument about the dangers of unemployment in a deflationary depression. However, I'm not so sure that it's as correct as you imply or think. The vicious circle of unemployment feeding off unemployment and falling sales leading to closures and more unemployment and falling wages ect. seems obvious to most people, but not all economists and politicians!
What concerns me about Keynes' theories is that they might not have worked in a longer perspective if the second world war hadn't "conveniently" turned up to save the day. Was WW2 "turbo Keynes" or was it something else? A centrally regulated totalitarian war-state - for example, or Fascism with a human face, or even a kind of "National Socialism"?
Obviously this is way too big to get into here and way to controversial as well.
I think you're write about the prospects for a declining economy. But breaking this concept to the American people isn't going to be easy. It's close to heresy. It means the end of the age of American expansionism and empire. This is a cultural shift of dimensions.
I seriously doubt it's possible to create the numbers of new jobs required without some form of redistribution of wealth and power in the United States, which I suppose one could argue the New Deal was. Only the last thirty years has seen the New Deal and the Great Society systmatically dismantled and the distribution of wealth returned almost to what it was in the 1920's if not before. But I'm straying way off the path here, sorry.
Keynes' theories didn't work pre WWII because they weren't really tried. WWII showed that the theories worked because it was only then that we really did enough spending to do the trick.
I often over-simplify because of time and space retraints. I think it's an over-simplification to just state that Keynes' theories didn't work because they weren't really tried. I'm really not sure, looked at carefully, that WW2 showed that his theories worked either. After all, I don't see that Keynes wrote anywhere that a world war was an economically effective way to get capitalism out of a long and deep depression. One could argue that this was merely jumping out of the frying pan into the fire, even if it was true.
The recipe is therefore relatively simple, it's possible to spend ones way out of recession if only the state spends enough and pumps money into the economy in a "New Deal." But is it really that simple? More to the point, will it work now in the absence of war? Or do we have to have another world war to get us out of another Great Depression? I certainly hope not!
Is the United States really in a position to spend it's way out of the crisis it's in? How much more can the US borrow? Already one is supposedly borrowing 2 billion a day and the current exspenditure on the various bailouts is in excess of 7 trillion dollars and rising. Is this level of borrowing sustainable without recourse to war, a rather drastic way to save capitalism I would contend!
It's not about war; it is about government expenditures. In fact, I think this level of spending would be more beneficial in peace time since all that money wouldn't simply be spent on destruction and things that go away (like bullets) and things that would be around for years to come, like solar panels and wind turbines. I don't think it is an oversimplication to state that Roosevelt did not fully empbrace Keynesianism. He simply did not understand the level of spending required to get us out of the great depression. Economists like Krugman would agree. See this: http://www.nytimes.com/2008/11/10/opinion/10krugman.html
tstreet,
The over-simplification I was refering to was the idea that Keynesiansism worked in the 1930's and got us out of the Great Depression, which I tink is debatable, and the idea floated by Krugman that it'll work this time around.
Now I know Krugman has just won the Nobel Prize for economics, so I suppose I should bow to his superior knowledge, and I used to agree with most of what he wrote, but now I'm not so sure. I think he's simply too partisan a Democrat for my taste, and I think this colours his thinking. I think he's wrong about the methods required to stop the US sinking into a depression.
In an over-simplified nutshell, I don't believe the United States has the money to spend itself out of the coming Depression, and just printing money in the current debt ridden economic climate is highly problematic as well. It could destroy the value of the dollar, destroy the country's credit worthiness, ability to borrow and the entire financial system, dragging down what's left of the real economy into the bargain.
Upthread Don mentioned that we need an "economics of decline". Yes. All this talk about "fixing" things, about the tragedy of the commons because people are cutting back on consumption is off-base. We NEED to cut back on consumption drastically. Yes, we need to figure out "economics of decline". I don't think that fits in current Austrian, Keynesian, Friedmanite or anything we have.
cfm in Gray, ME
I would think the undersized recovery 1933-37, as a response to an undersized stimulation would add credence to the theory. Then 38, showed what eliminating the stimulus did. Adding in 33-40 should certainly improve the statistical significance of the data, even if taken by itself it isn't wholly convincing.
Writerman,
Keynes himself recognized that he was writing specifically for the the nineteen thirties--not stating eternally unchanging rules. Furthermore, Keynes was modest in his aspiration for success of expansionary fiscal and monetary policy: For example, he thought the best that expansionary macropolicy could do was to get unemployment down from over twenty percent to perhaps ten or twelve percent.
In one sense the deficit spending to finance the Second World War was "turbo-Keynesianism," but the more important change was from a market economy to a command economy. Instead of the consumer making buying decisions, the government made buying decisions and of course imposed rationing and wage and price controls.
In the long run a command economy, such as that of the Soviet Union, cannot work well. However, in the short run of a few years a command economy can respond marvelously to mobilize for all-out war, as was shown both by the USSR and the U.S., Britain, and Germany after Speer got contol of the German economy.
My own proposal to deal with income redistribution is the negative income tax. Those employed will hate it, because it will necessarily increase tax rates to distribute income to the unemployed. But in an environment of massive (25% to 40%) unemployment we need to decouple income from work, because with falling real GDP there just are not going to be enough productive jobs to go around. Of course the idea of a negative income tax has been around for a long time; it isn't really my idea, but I've adopted it as an alternative to our current mess of income redistribution programs--programs that seem to me to be hopelessly inadequate to deal with the consequences of Peak Oil.
Exactly Don, we are in a different set of circumstances than we were in the 1930's, especially in the United States. In many ways I think things are worse today, and we are in a far weaker position to climb out of the hole of Great Depression 2, should we be unfortunate enough to fall into it. We might never get out again. So the priority must be to do everything to avoid falling in. Unfortunately, I'm not optimistic that our current leadership is the right one to take up this enormous challenge and time is running out.
You might be interested in a poem written by Bernard de Mandeville around 1705 called "The Fable of the Bees: or, Private Vices, Publick Benefits.
Writerman,
I've read "The Fable of the Bees." It was an important influence on Adam Smith and hence on the history of economic thought.
New circumstances require new ideas--or more correctly, the rediscovery of old ideas, because most novelty in economic thinking is error. In other words, when you think you have a new idea, what it usually means is that you have not done your homework.
Nineteenth century British economists often worried what would happen as Britain ran out of coal--and what would happen to industrial societies in general. They were not fools and knew that fossil fuels were limited. True, oil is a good substitute for coal, but now we're at Peak Oil and not making any serious preparations to deal with declining oil production and declining net oil exports. Instead, the powers that be sooth themselves with the comforting forecasts of CERA and other organizations that see Peak Oil as decades away--and hence nothing to worry about now.
Conventional economics today (unlike the nineteenth century) assumes that their are good substitutes for fossil fuels and implies that we can make a transition away from oil (and eventually gas and coal) with relatively little pain. In my opinion we should go back to nineteenth century economics, Jevons and the others who worried about running out of coal and dump the complacency of the modern economists into the trash bin. Just as the economists of the day could not explain the Great Depression, I think most economists of today will not be able to explain the economic decline that we will face as oil production declines.
Here is hoping for a younger generation of economists who will take Peak Oil seriously; most of the older generation of economists is trapped by its chronic neglect of natural resource limits.
I am not sure we should climb out of the hole; at least not all the way out. That is, unless we can find a way to have a high level of economic activity that is environmentally sustainable. Even a steady state economy would probably represent too high of a level of economic activity. As it is, we are probably headed towards massive dieoff.
I think this leadership will be successful in pulling us out of this current recession, but, again, it may not be the best thing to do given the long term health of the planet.
We should be moving to the genuine progress indicator or to something like gross national happiness. We need to start replacing physical income with psychic income as was recognized by people like Robert F. Kennedy long ago.
Obama want us to return to a economy of growth. And, Mr. Obama, how long can we continue that growth? The implied answer is always indefinitely, or at least until I get mine.
Obama is trapped by his economic advisors. Obama himself recognizes that he does not know much about economics, and so he has surrounded himself by well-known conventional Democratic economists--and is prepared to take their advice. All of Obama's economic advisors look to economic growth as the solution--the unique solution--to our economic and even our social problems. To the best of my knowledge, not one of Obama's economic advisors "believes" in Peak Oil. Why is that? Because Peak Oil does not fit in with the economic paradigms they learned in graduate school. Here is what economists learn in grad school:
1. Never mind the problem, economic growth is the answer. Want to have rising living standards without inflation? More economic growth. Want to end poverty? More economic growth, combined with income redistribution financed out of economic growth. Worried about financing Social Security and Medicare? Growth is the only answer. Rising unemployment? Growth in real GDP is the only way we know how to reduce unemployment.
2. All worries about running out of natural resources are false alarms. Again and again people have warned about running out of natural resources; for example the nineteenth century economists who worried about running out of coal. Every single time the alarmists have warned about running out of topsoil or running out of oil, they have been proven wrong BECAUSE the market works to find substitutes and develop them. When the price is right, technological advances will come forth, just as high whale oil prices stimulated the development of kerosene production for lamps.
3. We, the economists, have a unique understanding of economics. Therefore we don't have to pay attention to the concerns of noneconomists, because they just don't get it.
4. The conventional wisdom of economics is right, and minority views (such as those of economists Kenneth Boulding or Herman Daly) are merely the opinions of cranks and should not be taken seriously.
5. Economics is a science just as much as physics is. Thus the opinions of economists are as well-grounded as the theories of physics.
You may think I have caricatured the views of economists, and perhaps I have exaggerated a bit to make my points. I do not mean to denigrate economists (and regard myself as an economist), but I think the education of economists is largely the teaching of dogma, and to advance in the profession of economics you must accept and preach the economic dogmas. Economists are very bright men and women. At some point, some of the brightest young ones are going to figure out that their dogmas don't work. Then economics will advance as the old economists die off, one by one allowing the old conventional wisdom to be replaced by a new paradigm.
Don,
I'm not in fundamental disagreement with you. However, we do emphasize things slightly differently and define certain terms differetly.
What you've written about economics and economists is broadly correct. There is of course the linkage between economists, who almost function as a priesthood, and legitimize the distribution of wealth and power in society as something, perhaps not god-given, then at least "natural".
James Galbraith, son of J.K., was asked recently how come given that the US contained 15.000 economists hardly any of them had forecast the crisis. He replied, something along the lines of, that many of them had, all fifteen of them! So we've got a long way to go before an alternative consencus emerges about a new way of looking at the world and the role of economists in it.
I don't think economists and economics primarily describe the world, so much as defend the way it is, the status quo.
I remember that Larry Summers also said, spread the news, the laws of economics are like the laws of engineering and can be applied everywhere. Or words to that effect. I find this attitude rather frightening, and I wouldn't have chosen him. I'd have chosen Stiglitz instead, but nobody is a magician.
Challenging the dogma and creating a new paradigm is a monumental task, which could take decades under normal circumstances. I don't think we've got that much time. I think we have to accept that radical political change is required first and that may only be really possible during something close to economic collapse, when the world supporting the old order crumbles and their grip on power loosens. Though, of course, nothing is guaranteed.
I am not picking on Obama per se. He is just a product of a society that has been completely conditioned to the idea that growth is forever and that any suggested alternatives comes from the mouth of lunatics. After all, I did vote for him and feel we could be doing much, much worse.
Mr. Obama, if he was not pushing the growth paradigm as the answer to all problems, would not have been elected president.
Growth will end. We can choose to deal with that reality in the least painful way possible. Or we can continue up until that point where all just comes crashing down.
For all I know, Obama actually realizes how insane all this if but has not figured out a way to successfully break the news to the people.
FWIW, Kenneth Boulding is my favorite economist and I took courses from him when I attended the University of Colorado. As you know and have pointed out, there is nothing new here.
"Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist." Kenneth Boulding
Boulding is also one of my very favorite economists. I liked his idea for population control, though it is radical. Also I very much liked his thin book, "The Economics of Love and Fear." He was a giant of economics, though never accepted by the mainstream economists.
In my opinion, all the ideas we need for a new paradigm in economics are out there in the writings of the great economists from Adam Smith through Herman Daly. The problem is to dig out the key elements and put them together into a new synthesis. When I was a young man I tried to do this--and of course I failed. What worries me now is that I don't know of serious efforts to bring forth a new synthesis, apart from the steady-state economists. And I don't think the steady-state economists have focused much on the problems of transition to a steady state. In my opinion, declining real GDP is going to be part of that transition, and we need to get ready and find ways to cope with economic decline. But such talk is taboo.
It's been a long time since I took Economics 101 (or what ever number it had back when). So, I obtained a copy of Mankiw's textbook, "Principles of Macroeconomics, 3rd ed" ($.99 on eBay). In the first few chapters, sure enough, I've seen many comments similar to those on your list. Remember Mankiw was one of Shrub's economic advisers.
There are other approaches to economic analysis, such as Ecological Economics. It's just that these tend not to maximize profits for TPTB. The prime directive for every corporate CEO is to maximize profit. I think obvious conclusion is that the structure of corporations must be changed, if the economic system is to move away from the growth paradigm toward true sustainability. To accomplish that would probably require revolutionary changes...
E. Swanson
I don't know precisely what you mean when you say ". . . the structure of corporations must be changed, . . ." Corporations are set up with the explicit goal of maximizing profits, within limits set by law. To maximize profits, corporations generally try to increase sales and market share. Perhaps rules could be changed to stop the incestuous appointing of CEOs by highly paid members of the Board of Directors, but while such changes might improve corporate governance they would do nothing about sales maximiztion or revenue maximization.
Indeed, one theory of corporate behavior is that corporations do not try to maximize profits at all; rather, they try to maximize sales, subject to a minimum profit constraint.
If growth is impossible, it still might make sense to buy a stock for the dividends that it can pay out, even if these dividends can be expected to do no more than to keep up with inflation and perhaps increase slightly to reflect improved productivity. Unfortunately, our tax laws penalize the payment of dividends with double taxation; debt is encouraged, because interest is tax deductible.
In an economy of decline, interest rates will be very low, except for risk premiums, which could be very high. If we encourage corporations to incur less debt and to pay higher dividends, that would be a good thing. Corporations have way too much debt, though during a period of manic growth debt can leverage profits to a higher level.
How about restructuring corporations so that they have (by law) no long-term debt at all?
Good morning Don.
I was trying to extend the thinking from the previously mentioned "Tragedy of the Commons". Corporations act as artificial people under the law (MOL). As they are structured, they can do most everything a human can do, except die (well...). But, corporations have that prime directive, which is to produce a profit and corporations don't really have feelings or suffer physical ailments from their interactions with the environment. Also, corporations and people are taxed differently by the Government. As a result, corporations do things which are negative for the entire population. They have been forced to remedy their excesses by regulation and civil actions, but the basic reason for their existence implies that they must always strive to cut every corner possible to maximize profit (or, income, as you mention).
My thinking is that maybe the basic organizational form is fundamentally flawed. Maybe what is needed is a new definition for "corporation", one which internalizes the pain caused by their actions, such that they would not need to be fenced in by massive webs of regulation. One wild thought is that maybe all corporations should be turned into non-profits, where all their excess (that is, not invested) profit is distributed to the shareholders at the end of the year. As things have evolved, the typical corporation on Wall Street seems to have forgotten about dividends.
For another wild idea, use the same progressive income tax rate on corporations as on individuals, except that the corporation's income is first divided by the average number of people who worked during the year. As it is, when a contraction hits the economy, corporations respond by reducing employment, which has other very negative effects, especially for the workers who are suddenly without income. If the corporate tax was based on the number of workers, then there would be much less incentive to implement wholesale cuts in workers. Remember, corporations are "people"!
Happy Thanksgiving!!
E. Swanson
This misses the mark a little bit. We should not resign ourselves to paying people not to work endlessly, forever. Instead we should pay them TO work. That is, instead of taxing employed people to give handouts to unemployed people with the goal of enabling them to stay unemployed forever, we should use those taxes to employ those previously unemployed people doing something productive. We need a new WPA. In the end, the ability to produce wealth in a nation is directly correlated with the percentage of its populace engaged in productive activities. Your approach would just set off a competition for avoiding work, because those who successfully avoid work still get paid. Why work and get paid when you can not work and still get paid? (This was the same problem experienced by economic systems that claimed to be based on the teachings of Marx.)
At bottom, the key to Keynesianism is not lots of spending, but getting lots of people working at productive activities. The spending is a means to that end, not an end in itself. Spending has to be done right so that it leads to the desired end of getting more people performing productive work. The current bailouts will never succeed so long as they focus on shoveling money into the non-productive sectors of the economy (FIRE: finance, insurance, real estate) and refusing to give a dime to sectors like manufacturing (e.g. auto industry).
Before the current gravitational collapse of the world economy, lots of people were working because everyone believed they could sell whatever it was they were doing (even if it was non-productive, such as shuffling debt instruments around). The economy hummed along due to self-fulfilling prophesy. When suddenly everyone stopped believing they could sell the stuff everyone was doing, suddenly lots of stuff stopped being done and lots of people lost their jobs. Again, self-fulfilling prophesy. Before the implosion, unproductive work like debt shuffling was still rewarded because those with the big bucks paid them to do it in the belief that they would get repaid with interest in the future. This belief was false, but the effect it had was to keep Keynesian-style spending going throughout the entire economy, thus keeping everyone employed doing something, and nobody starved. When the belief was changed, suddenly those with the big bucks didn't want to pay people to do stuff that was never going to generate a return for the investor.
People hate to pay other people to do nothing useful, i.e. nothing that will ever produce a return on the investment. Before the implosion, a lot of people were being paid to do useless things because those paying them *believed* they were doing useful things that would generate a return. Now, post-implosion, the rosy tinted goggles have come off and it is now starting to be realized (by everyone but those putting together government bail-out packages) that those things were in fact useless and will never generate a return. The answer is not, as you suggest, to start explicitly paying people to sit on their asses for the rest of their lives doing nothing. The answer is to start paying them to do public works. The government should not become an endless source of welfare payments that keep the nation idle, but should become the employer of last resort, paying people to do something useful. Like building wind turbines and rail lines.
(For a more tongue-in-cheek treatment of the same issue, see this posting, "Thought Experiment," actually written before the stock market implosion hit, but after the housing implosion was well underway:
http://home.comcast.net/~kevin.cherkauer/site/?/blog/view/20/
)
Utopia in Decay
http://home.comcast.net/~kevin.cherkauer/site
Kevin Cherkauer
The negative income tax would provide more incentives to work than does our current mess of income redistribution programs. For example, under the current law I receive both a pension and Social Security benefits. But if I go to work I lose all or most of these benefits; thus I have a strong incentive not to work. Social Securtity hands out income to wealthy people who do not need it. The way our unemployment compensation system works people can sometimes take home more income by staying unemployed rather than by taking a low-wage job. Food stamps and rent supplements and home heating aid hand out funds (or vouchers) in a haphazard way--not always to those who need them the most. Medicaid is too horrible to contemplate.
Now if we were to get rid of all the wasteful bureaucracies that hand out funds or services under our current system and expand only one bureaucracy (slightly), the Internal Revenue System, we would get rid of a lot of bureaucrats, which I think would be a very good thing.
The negative income tax always makes a person working better off than a person who is not working. Given similar rates of unemployment, the negative income tax could maintain current standards of living at lower cost than does our current hodge podge of bureaucracies that currently rewards things such as having illigitimate children or having imaginary disabilities.
If you're really interested about this topic, Google "negative income tax" and see how the proposed system would work (assuming we could get rid of our mess of government bureaucracies that now allocates income and health care).
In my opinion, the coming economic decline is going to result in a huge increase in unemployment. Also in my opinion, the negative income tax (as a replacement for current programs) is the best approach to deal with a massive increase in unemployment. Current programs are very expensive and do not work very well. I don't think they would work at all to deal with massive unemployment.
Don,
It just seems that whatever the exact details of your plan are, we could improve on it trivially by replacing payments for doing nothing with payments for doing something useful. You say, "Here's your check, now go home and watch TV." I say, "Here's a check you can have if you put in your eight hours working on this rail line, organic farm, [insert publicly useful productive activity of choice here]." Instead of paying out and getting nothing for society in return (kind of like the bank bail-outs), why not pay out and actually GET something society needs done accomplished?
Utopia in Decay
http://home.comcast.net/~kevin.cherkauer/site
Kevin Cherkauer
Kevin,
I am not opposed to public works projects. But note what Obama is proposing: more public works on roads and bridges and schools. No mention of building out rail or getting more people working on building nuclear power plants.
To a large extent, public works programs are the captive of pork barrel politics. Projects are handed out according to political pull, not according to social or economic need. Politics as usual means business as usual.
Short of dictatorship, I see no way to stop public works from being dominated by shortsighted politicians dominated by special interests who demand more pork for their districts. You vote for my proposal, and I'll vote for your proposal, and we'll get that bridge to nowhere completed in my district and more lanes for the Interstate Highway in your district.
Also there is the problem of time lags. First you have to recognize that you have an unemployment problem--a big one and getting worse. Then you have to design specific public works projects; this takes months or even years. Next you have to get Congress to appropriate the money and the President to approve it. Only then do you get to the implementation stage, perhaps two years after a big increase in unemployment. In other words, if public works are such a great idea, why don't we have huge projects right now to build and install wind turbines, produce solar panels, and build nuclear energy plants?
The theory of public works to deal with the energy crisis is fine, but it is the implementation that we find the devil is in the details.
Oh, let me count the ways. Mainly they boil down to those who benefit from business as usual also being those who run the show. I was talking about what we *should* do, not what we *are going* to do. And if we are choosing between two changes that are never going to happen -- negative income tax or public works -- I prefer the one that spends the money getting more people doing something productive, instead of spending it on enabling more people to stay permanently unproductive. What we *are going* to do seems to be crash and burn. After all, the alcoholic always refuses to change their ways until they have hit rock bottom. And the aristocrats aren't going to change their ways of endless bilking of the peasantry until they literally, physically cannot do it anymore -- perhaps because the peasantry is starving, and lo, eventually so are the aristocrats. Let them eat cake.
Utopia in Decay
http://home.comcast.net/~kevin.cherkauer/site
Kevin Cherkauer
This is a simplistic view.
Isn't the capitalist system defeating itself in times like these?
Public works are public works for a reason. Paid for with tax revenue?
What happens when government's begin building utilities? Do they try to sell them at give away prices or do they actually run them thus secumbing to socialistic values.
In a climate of declining finance and economic distrust, how will "renewable" industries be expanded?
After all the capitalist system demands a return on investment, they have a lot of hungry CEO's, board-members and shareholders to keep happy.
I guess that's why Barrack suggests building bridges and roads, without a war, what choice does he really have?
In an economy with even mild expectations of growth, building roads and bridges would appear to be a sensible choice.
What could we do if we had a socialist regime?
We would build windmills, solar panels, nuclear power stations and fast electric rail. Isn't that some of what France did under a socialist system? http://en.wikipedia.org/wiki/Socialist_Party_(France)
The government could of course get honest.
They could lay it on the line as to what the long term prospects for energy production is and subsequently, the consequences for the economy, employment and living standards.
I guess we could spend several decades arguing about ideologically loaded fixes to the system that might or might not operate better than the way things are currently run if they could ever get past the starting line, nevermind that the chance of that is about as high as everyone dumping all coal power plants in favor of magic pixie dust in five years.
This sort of economic ideology hobby horse is a favorite talking point for when you get into college and discover socialism, get into the marketplace and discover wealth isn't evil, or get into Ayn Rand and become a complete barking asshole. But it's just another distraction from energy issues here, especially since it has about as much chance of implementation as a tax code simple enough to put a number of accountants out of business: Not much.
"Their scared of getting into more debt."
This is exactly the problem and it is all pervasive from people all the way up to corporations.
Also those that can are scared of issuing more debt.
This is what is killing the banking/finance sector so TPTB are borrowing on behalf of the people weither they like it or not.
The rate of savings is being wiped out by the share of national debt owed by each taxpayer.
How much of this scared to borrow or loan has to do with an niggling idea of the constraints facing the world?
Certainly a dollar now will buy a lot more house or stocks and shares than it bought a year ago - the trick to benefit from this is not to own a house with neagtive equity at present, and have lots of cash ... saving CASH is currently a good personal strategy ie: don't buy anything with it, yet, that can fall in price, like stocks and shares. Then wait, prices will bottom out eventually (or you will be able to buy the whole world.)
The US Government pumping all those dollars into the economy will only cause inflation if they are spent - at the moment the money is not being spent, it is just replacing money that has vanished into thin air - just as magically as it was created out of thin air!
We currently have massive deflation, and individuals saving more only makes it worse for the people trapped in debt.
We need people to keep spending money they haven't got, on things they don't need, to impress people who don't care - and all while the world economy can't actually go any faster because of peak oil (+ many other resource limits) - does not compute for a sensible person, so the future will be something else other than the exponential growth we have come to expect.
The USA government is not "pumping all those dollars into the economy" as you state. So far all the guv has been doing is transferring massive amounts of wealth from taxpayers to certain financial firms. So far about 8.5 trillion has been transferred-add up the market caps of USA companies-the taxpayer could literally own the majority of the companies listed for 8.5 trillion dollars.
Not so. We're not paying any more in taxes, yet. That transfer of wealth is delayed: the guv borrows the money (from foreigners) to pay the banksters. The bill will come due later, since the guv is supposed to re-pay those foreign lenders. It can then either raise more taxes, default on that debt, or print the money. I bet on the latter. But that's still a "tax" on savers, since it'll destroy the value of their (US-dollar) savings.
Good point-it is a contingent liability on future taxpayers, which is probably why most are so nonchalant. IMO it is one of the last insane bubbles-8.5 trillion dollars for the connected and absolutely no one feels any pain from paying for it-fun while it lasts.
From what I've read, IMHO this seems to be a reasonable analogy: the liquidity sponge is bone dry from years of overleveraging. The dollars that are being printed now are slightly wetting the sponge, but until it's saturated, the liquidity will not return to the market. If they overshoot the print run we get hyperinflation. If they undershoot it, we get financial constipation/lack of liquidity. You have to fling enough cash at the sponge to encourage lending again...at a rate which drips cash back into the market slow enough to avoid hyperinflation..
No-one knows when to turn the dollar print tap off as there's always a lag. In the past it's been six months from printing to filtering through, but in this case the leveraging is so severe the extra mullah is just disappearing into a black hole of mistrust.
Interesting looking at what sort of fixed mortgage deals (aka bets on interest rates) you can get - there are still 5 and 10 year ones available implying they think that 6-7% will give them returns not you. They're not daft, they know untethered lending leads to inflation eventually... so does that mean they think we've got 5-10 years + of japanese style pain ahead? [Intermittent oil supplies and the fact that fiat currencies, based on Ponzi schemes, always self destruct anyway notwithstanding!]
This is the conundrum we're trapped in. Saving is the opposite of spending. You can't save and spend at the same time. If government policy encourages spending, it discourages saving, and vice versa.
The savings rate for the past few years I believe has been near zero, if not negative. Now Americans are cutting back on their consumption, which means the savings rate will go up. That's good, right? Well not entirely, because when Americans cut back on consumption, the economy goes into a tailspin, jobs are lost, etc.
The policy announced yesterday is designed to get Americans to spend again, to not save. But the products this policy encourages people to consume are not necessarily American-made products. They include foreign-made products too, so the trade deficit trundles on.
The bottom line is that there is no easy solution, no good vs. bad choice. There are only good vs. good, bad vs. bad dilemas.
The debt situation further complicates things. If we want to borrow money from, let's say China, will they lend us the money if the money isn't used to buy Chinese exports? Or in other words, if we want to borrow money from them to invest in American manufacturing that will diminish Chinese exports, will they loan us the money? I have my doubts.
The thing is we cannot continue down this road forever. What the policy initiative announced yesterday means is that somebody in our government has decided that it is best that Americans should spend and not save. And there's a full court press to get Americans to spend. It will be interesting to see how Americans react, whether they can be coaxed into spending again by policy makers. And while yesterday's policy initiatives may help push the day of rekoning down the road a bit, it represents no long term solution.
As a loan shark told me one time: "You can pay me now, or you can pay me later."
Downsouth,
The loan shark may not have told you the rest of the story, but I'm sure you must have figured it out for yourself. It's advisable to pay back the loan as quickly as possible because the longer you delay the more interest piles up and the bigger the debt becomes, until eventually you might not be able to ever pay it back and will have trouble with just the interest on the loan. You might even default on the loan. That would be the end of your ability to borrow and a personel disaster. If the loan shark had lots of people like you on his books he might be in serious trouble too and default on his loan to an even bigger fish, leading to a cascade of defaults and a sytemic failure of the entire house of cards. This is the situation the United States is getting into and the world.
The conundrum you refer to is part of the in-built systemic contradictions inherent in capitalism. This isn't meant as a political point. It's just an objective observation about how our economic system works, or, how it doesn't "work" quite the way we think it does. Instability would appear to be built into the system, into the "business cycle." This is obvious and incontravertable. It goes up and down. Boom followed by bust. Seven fat years followed by seven lean years. It's an old story.
So the system has in-built contradictions and instability. This is usually, according to the dogma and narative of capitalism as "good thing" as what isn't strong enough to stand is allowed to fall, and the "dead wood" is replaced by new, green, shoots ect. But it's also incredibly destructive and highly dangerous for society. In Germany in the Great Depression the collosal destruction didn't lead to that many "green shoots" but an awful lot of very "black ones and brown ones" with skulls on their caps and Swastikas on their arms. The social and political consequences of the "necessary" busts can be absolutely disasterous. Even if one doesn't slide into the fire as a society, the lesser busts can really harm millions of people who "only" loose their jobs and not their lives. And is it worth it? Is it worth taking the risk of terrible busts for the high of the boom years?
The system is therefore unstable, contradictory, destructive and potentially very dangerous. It's also non-self-regulating, unfair, wasteful, creates monopolies, and concentrates wealth and power in the hands of a minority of the super-rich; unless it's kept under strict and real democratic control.
The current "plan" is crazy in my opinion, but what are the ruling class supposed to do? They can't very well tell people, sorry the system is bust! They have to pretend there's a way out, a light at the end of the tunnel. It can not be the lamp on the front of an oncoming train!
The US economy is "simply" too big and too indebted in relation to what the US produces and sells. The creation of debt has been incredibly profitable for many people at the top, for example Paulson, who "earned" over $500 million dollars at GS. He's just one amoung thousands of aristocrats living in a virtual Versailles.
Drowning ordinary Americans in even more debt isn't the answer to the crisis. A return to some kind of reality is the answer, only how to get there is the problem. Reality isn't going to be as big or as rich as the dreamworld the USA has been living in for years. A lot of people are going to get burned and get angry when they realise they've been had, and delaying this dire realisation for as long as possible and the potentially terrible consequences is what's motivating and concentrating the minds of the ruling elite at the moment, as much as their, mostly futile attempts to reflate the debt baloon, which is really the Zeppelin Hindenburg, crashing and burning!
And then, as several back up the thread mentioned, you layer resource depletion on top of all this complexity.
It makes me dizzy just to think about it all.
Maybe insecurity and uncertainty are just part of the human condition, and despite all our efforts to eliminate them from our lives, they still manage to sneak their way back in.
Times like this make a person feel pretty small. A couple of weeks ago I would have been all in favor of a stimulus package. But if the stimulus doesn't lead to some constructive activity other than buying more big-screen TVs imported from China or producing more Hummers or suburban McMansions, I don't see how it can possibly help us in the long run.
The securitization of these loans has been a major part of the problem in the first place. It encourages irresponsible lending practices where the buck, so to speak is passed to someone else. In this case, the buck is stopping at the fed, which means all of us ultimately. Again, we are trying to solve the problem by using the same tools that got us into the problem in the first place. There seems little thought given to an alternative approach to this mess. Those executives and others who have made millions of dollars off these bogus practices will still be able to retain their millions while the rest of us are holding the bag. Sure, there will maybe be some lame attempts to limit future executive compensation, but nothing will be done to touch the millions that have already been pocketed.
The basic problem is that we are governed by the same people who have profited from this mess. I see little chance that will change under the Obama administration since he continues to supports these actions by the Fed and the Treasury.
The false solution of propping up the financial system cannot be avoided. Some can see it won't work but all to many will not. It must be tried producing failure before realistic measures can be considered.
Actually, you must produce more then you consume, to facilitate the consumption of the good people that govern you.
The underlying problem is the world attempting to consume more than can be prduced in a long term sustainable way, either environmentally and from resource availability. The world is now in a race between a potato in the tail pipe or water in the gas. Either way the ride is going to sputter to a stop, probably in the middle of Death Valley. Of course the finacial crisis is akin to the vehicle rusting out from under us. Similar result.
Food banks can't meet growing demand
CBS Evening News also had an interesting segment on this same subject:
http://www.cbsnews.com/video/watch/?id=4633479n
I addressed that at a local county budget hearing last night - that we need modest expansions in Extension services, community kitchens and so forth. The general consensus of the county commissioners, however, was that in difficult times we need more police. Looks like police and jails are getting more money and other services are being eliminated - Ag Extension services on that list, not for this year, but for next.
By that logic, the best thing to do is shut down the food banks. An empty food bank will be good only for brewing discontent.
cfm in Gray, ME
The posted "credit crisis threatens gas markets" article is one of many examples of credit/capital gaps for investments needed for energy production.
This means that governments are going to have to make some major subsidies in energy in the future, and this will mean less subsidies and less investment for alternatives, including nuclear.
We are in a Peak Oil economic environment
cj,
Not that I support the idea of the gov't pushing subsidies towards my part of the oil patch, I'll offer a very specific example of the current credit situation impacting domestic energy supplies. I consult for one of the major unconventional NG players in the US. My division just reduced their 2009 drilling budget from $1.2 billion to under $700 million. The reason: high credit costs. They decided to fund their budget strictly from cash flow. A sound corporate move but it does not bode well for the future of NG prices. Most understand that although the unconventional NG plays have boosted our supplies significantly, they also tend to decline very rapidly. As these players become less active the supply of NG will drop just as quickly as it rose. Great for producers but not so good for the consumers.
Hi Rockman,
Yes, just to keep things going, the federal government will have to subsidize more and more of the energy industry and state highway maintenance too. The idea of subsidizing Ford and General Motors is ridiculous, as the need for energy/tansportation subsidies will expand rapidly. Peak Oil is here.
"Just to keep things going" will become an important phrase. Hey, you heard it here first :)
cj
Not good for producers either as they make their profit on each marginal boe/scf.
The government could help NG producers and the car companies with rebates on new NG cars, trucks and buses. This 'subsidy' could reduce Peak Oil substantially.
We need to move 'sideways', back and forth is stupid.
Biggest durable orders drop in 2 years
Consumer spending drops 1%
A squeeze on Thanksgiving dinner
The decline in consumer spending will be more than made up by the increase in government expenditures and the decrease in imports. While consumer spending is a component of the all important and worshiped GDP, it does little to ensure that we make the investments necessary for a nation less dependent upon oil and other fossil fuels. This will depend, of course, on the actual choices made by the next administration over the next few years. Unfortunately, much of this government spending will just be shoveling money out to state and local governments. If they are mainly spending money on new roads, we will just be reinforcing unsustainability.
Best hopes that people don't waste their money on big screen TVs during the holidays. Save your money; the government needs it to pay off millionaires in the financial industry.
Just a stat to confirm the top story...Baltic Dry Index down to 804 last night.
Best hopes humans are smarter then shipping containers?
If international shipping is collapsing due to the credit crunch, how come we don't have shortages? The stores are still full of imported goods.
I would say that means people aren't buying.
They showed the unwanted new cars parked at the port in LA from the air on CNBC, and the camera man just gasped. Usually, those cars go straight to the dealers. But the dealers can't sell what they have, so they're parked at the port. Seemingly endless rows of them, all makes, all models.
Shipping is based on volume and weight. A pull back in the housing and auto markets alone is enough to collapse shipping.
And very few people seem to take the time to look at all the new ships ordered earlier that are now being delivered. Shipping has its own bubble to deal with.
Oil tankers to some extent did not bubble because of the transition from single hull to double hull tankers was removing tonnage as fast as it was added.
Oversupply lack of demand and your rates plummet.
Google for Expansion of bulk shipping fleet.
I don't know where to find the total number of ships under sail esp broken out by type but every single shipper I've looked at was adding at least 2-3 ships to its fleat and thats been going on for a few years. Generally you have say 10-20 ships so 2-3 is a very healthy growth rate. Or healthy until the economy turns on you.
Most of the economic contraction right now can be assigned to a pullback in purchase of big ticket items normally bought with debt that requires a long term payback. The collapse of housing represents a real pull back in oil usage.
The collapse of other durable goods from cars to dishwashers has a large economic impact but much smaller impact on oil consumption. It takes as much almost the same amount of oil to go to best buy and buy a CD vs buying a FlatScreen TV. Obviously it takes a lot less shipping and less "industrial" energy primarily coal from China. This is the bulk or volume effect on shipping since in general the more expensive goods are physically larger then cheaper items.
Eventually the economic contraction will go beyond big ticket debt items and begin to impact more ordinary goods and services but I doubt that this will result in a cheap oil environment. Overall I still see a onetime pullback in energy usage thats finite and its still not clear that its resulted in a significant imbalance in the supply demand equation. Expectations and financial problems are still in control of oil prices not longer term fundamentals.
However we can simply watch the weekly US supply data right now its effectively flat if it begins to decline over the next few weeks then we will return to a rising oil price situation. If it remains flat through Dec then we probably have ample oil supply.
I would say that means people aren't buying.
But retail sales are down only 1 or 2%. It looks like global shipping volumes are down much more than that.
I think there's a delay. IIRC, in previous years, Christmas merchandise arrived in August. So the drop in shipping now means the shortages and/or drop in sales won't be evident until next year.
Even last year, before the economy slowed down, there were concern in the shipping industry about over-supply of new ships.
Shipping rates would have gone down even with a good economy. Prices of oil are down too, and oil is a big cost for ships.
So for every dollar we spent in September we spent 99 cents in October and this is an economic disaster? How much of that drop could be the drop in fuel prices. I believe the effects of the recession which started last winter is having a disproportionate effect on lower income levels. For them the percentage drop in spending may be much, much more than the average. The rich may even had their spending go up in October since the worst effects of the market crashed happened late in the month. The sales of major retailers this friday may give us a good picture how bad things are for us at the bottom. I have a doctor appointment in Des Moines friday and my wife and daughter have cancelled their plans to go shopping while I'm at the clinic.
Spending down 1%. Prices down 5%. More things being bought with less money.
I notice the many posts (here and elsewhere) on ways to localize and on ways to prepare for localized economies.
I think that most are totally useless as these articles never mention nor deal with the topic of local politics.
I disagree Iggy in general, but do agree that the local politicians are not very helpful.
Probably the best route is to work with local volunteer services. You might be able to help prepare the local safety net, knowing in advance the local politicians will likely be of little help in a real crisis.
"...will likely be of little help.."
?!?!?!
Heck, I expect that they'll be a proactive negative force as they try to figure out how to keep the old paradigm going.
http://www.marketwatch.com/news/story/worried-about-depression-how-about...
The growth paradigm is usually accompanied with the idea that part of the millions paid to those at the top will trickle down to the masses. While this has not worked in practice, it is something that people still tend to buy into. It is a way of paying of the peasants or promising to pay the peasants in the future. As long as enough people can be convinced that this is happening, they will demand growth as a way to get part of their trickle down.
Wall street, especially, is highly dependent upon the growth paradigm. It also operates in a world of abstraction, where the physical and environmental consequences of that growth are irrelevant. It operates under the assumption that growth is unlimited because the planet and its ability to withstand the assaults of growth is unlimited.
All the efforts right now are devoted to get this growth machine going again.
A no growth economy is considered unacceptable because it would wreck wall street and it would require that real redistribution of income actually occur. Without growth,there is no trickle down, and the wizard behind the curtain will be revealed for the fraud that he is.
Putting aside the growth issue, wall street has become a monster that has taken total precedence over the real economy. Sadly, this monster has found a way to off load its horrible decisions on to the rest of us. Unless one believes in a free lunch, the piper will be paid.
I'd like to see the end of "trickle down" replaced by the opposite, "float up" economics. This would though, of course, require the world to be almost turned upside down and overturn the last thirty years economic dogma.
Sendoilplease,
Thanks for the great link -- a must-read.
I liked in particular:
Summary of Weekly Petroleum Data for the Week Ending November 21, 2008
Oil gives up early gains
Wow! Amazing what a little demand destruction will do, isn't it?
And yet, oil is up quite nicely.
Everything's up, despite the terrible economic news.
I think it's partly Obama's "Help is on the way" schtick, and partly China changing their money policy. There's now hope that Chinese demand can make up for the drop in ours.
And I am still expecting a "Santa Claus" rally this year. It won't last much past new year's, but I wouldn't be surprised to see a bounce through the holidays.
Western Civ's last dead cat bounce?
Probably second to last or third. We get a bull market rally now. And probably what a call a flat bubble as trillions are spent basically resulting in a stagnant economy. Then we get another as inflation finally takes hold this is a pure monetary driven burst. Then tough to say interest rate will be rising and hyperinflation would be at hand.
So bounce for first half of 2009 and I'm betting of course a strong rise in commodity prices.
Assuming 200 dollar oil towards the end of 2009 and finally inflation starting to take hold we get a bit of a pullback from high commodity prices then another probably last real money pump and a rally in 2010.
All hell begins to break loose in 2011.
The world is obviously willing to allow the US to print as much money as it needs to not collapse but I suspect that at some point they will require higher interest rates to finance this mountain of debt. Also since everyone else is busy stimulating oil demand should remain robust and in fact we should even start seeing signs of life in the housing market as price fall back into line with wages. The loans exist for borrowers who are credit worthy its really just a matter of housing prices aligning with incomes.
This does not mean new housing construction will recover or that housing prices won't keep falling it just means that once they are sane purchases will start increasing probably not enough to do much about the inventory glut but the transaction rate will for home purchases will at least fall at a slower rate at the minimum.
For a time at least the US will be able to pull off something like what Japan did but not for long.
Only Schroedinger can tell us if the cat is dead yet.
To me, this shows how intractable the problem is, whether it be PO, AGW or finance. I have sat here for the last 3 days watching the Dow etc. climb steadily when the only indicators out there are that things are getting, and/or are going to get worse..
A pep talk is all well and good if the masses are being pessimistic, (The only thing we have to fear...etc) but everything I have studied, including here, tells me that pessimism is very much warranted and should morph into realism and pragmatism. Just call me silly.
If all the geeks on Wall Street, with their supposedly sophisticated models and algorithms still exhibit knee-jerk responses, I see little hope for a rational and co-ordinated response to the serious and inevitable contractions yet to come.
I guess I am in denial about how powerful denial is. ;-)
This is why I think the collapse may be slower (but more complete) than many peak oilers expect. Sheer denial will keep things going for quite awhile.
I believe you are right. Six months ago I might have argued with you.
A short mea culpa here; I have had the luxury of studying "the situation" at a fairly deep level, and I have gone through my own paradigm changes. Although I think that I am adaptable and accept new data readily, I know I still have a way to go, and it has taken me over a year.
When the majority of people are simply trying to get through their day, and TPTB are telling them that this is just a bump in the road, very few will do anything until they are upside down in the ditch.
I have yet to decide if these rallying cries are malicious or due to a greater denial. Probably some of both.
Price Elasticity of Demand ?
4 week avg y-o-y and YTD
Alan
Given the substantial reduction in demand shown in Alan's table, why are import volumes running above last year's totals? If refinery outputs are lower by more than one million bpd from year earlier levels, who is making the decision to send all this extra oil to our shores? And why?
Perplexed in Madison
There was a big surge in Saudi oil in Oct its still showing up.
I'm pretty sure we also saw a bit of slow sailing going on since this stuff set at see for some time. I'd assume that this was related to simply being able to offload in the US as they repaired from the hurricane. Overall the several weeks of having our ports damaged in the gulf has contributed to a sort of constipation throughout the oil supply chain. This was coupled with a real increase in shipments over the same time period. Think python swallowing a pig and you get the picture. Next you would have to figure what they paid for this oil and I would guess that almost all refineries are now well in the red. With collapsed refining margins. Thus we are not getting huge builds in refined products.
But this will pass. Some very short term factors are having a large effect right now. They will clear over the next few weeks I goofed a bit and though they would already be past by then middle of Nov. But you have a 2-3 week amount of slope depending on how the inventory moves off of the ocean and onto land. So far at see inventories have been steadily falling and this will translate at some point into onshore inventories falling. And I'll freely admit that the timing seems a lot slower then I expected. But if a tanker does not have a new charter one would expect them to conserve on the current voyage.
Overall I think that the use of a six week voyage time for oil from the ME to the US is way to optimistic. Not to mention it depends on if the tanker is suezmax or not etc. Just looking at whats happened seems to indicate more oil went out via supertanker towards the states not via the suez canal.
Thats what you would see if its a lot of oil taking a while to get here. This fits fairly well with the ME sending oil first towards the east via supertanker then west. But overall its become clear that oil shipments have spent a lot longer at sea the second half of this year then they had previously.
Nice to see 7 million barrels added to the SPR. Hopefully they will add significant inventories at these prices. Support the price and cushion future needs.
Memmel:
Even though the weekly oil report today was bearish (11 mil bbl imports of crude) the oil price increased in the markets. Could it be that traders see the same thing as you, that deliveries are about to decline?
The OPEC meeting where cuts were announced was in October and cutbacks were to Dec production. On that basis, if delivery takes eight weeks, you wouldn't see a reduction in supply until late January? Do you see a reduction in supply in November, arriving here in late December?
Time to stir the "fear" pot.
"U.S. issues warning of threat on NY subway system"
http://news.yahoo.com/s/nm/20081126/ts_nm/us_usa_threat_newyork
Don in Maine
3 Hospitalized After Using Barbecue to Heat Home
Here's a bunch of numbers in connection with the article above, as I think anecdotes are not very informative on their own.
The November 26th, 2008 issue of the Journal of the American Medical Association (JAMA) reports a Center for Disease Control (CDC) study of "nonfatal, unintentional, non-fire-related carbon monoxide exposures" reported by emergency departments. The full article is available here: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5733a2.htm
The 2004-2006 tally (20,636 emergency department visits) appears significantly higher than the 2001-2003 tally (15,200 visits). These figures include 72.8% of exposures in homes (charcoal grills, space heaters, gasoline powered generators (during winter storms) and portable stoves are mentioned here) as well as 13.4% in workplaces. This appears to leave about 14% of exposures in other places, including cars (motorists stranded during blizzards, for example, and ??people living in their cars, one would think).
The 2001-2003 report, still available online at http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5402a2.htm has a somewhat different breakdown, which makes comparison difficult. They do mention 64.3% occurring in homes, and 21.4% in public places (including workplaces I assume), while 9% occurred in motor vehicles.
Increased financial hardship (which would be the cause concerning us here on DrumBeat) is not on the radar of the CDC for why the apparent increase. They mention the usual suspects (better case ascertainment, increased reporting, sampling errors). However, I think there would be a need to explain the differential rates of increase: 30% overall, but more than 50% for home exposures. In fact in numbers alone, the increased home exposures (5249) almost entirely account for the 5436 increase between the 2001-2003 and 2004-2006 time periods.
Thought for the cynics:
Almost had a Quadruple Darwin Award there...
(Notice the add for the Beautiful People at 90201.)
E. Swanson
What the heck is going on in India?
Another weblink on the Indian machete' moshpit:
http://www.smh.com.au/news/world/mumbai-terror-rampage/2008/11/27/122749...
Recall that some time ago that I said that we could expect all of Southern Asia to have increasing Overshoot problems as we go postPeak.
Pakistan, Kashmir, India, Bangladesh, Sri Lanka, Nepal, Myanmar, Thailand, etc--a brief news google of these countries shows that things are deteriorating instead of becoming a paradise. IMO, a little Peak Outreach could go a long way to point them towards Optimal Overshoot Decline...
Paraphrased Jay Hanson Quote: "Stuck in obsolete belief systems, they had no understanding why Everything fell to pieces."
Are we still on track for Jay's Thermo/Gene Collision fast-crash prediction timeline? Or is even that too optimistic and cornucopian?
You see "machete-moshpits" everywhere.
These are attacks carried out by terrorists inspired by religious fanaticism; nothing to do with population overshoot, resource depletion, etc. Are you saying they wouldn't have attacked if food & energy was cheap or India had only 300 million people instead of 1.1 billion?
Please, give it a rest.
Hello Suyog,
Your Quote: "These are attacks carried out by terrorists inspired by religious fanaticism"
Precisely!-->just another 'obsolete belief system' that facilitates scapegoating versus cooperation for Optimal Overshoot Decline. As posted before: A little Peak Outreach could go a long way... Malthus wrote the 'Universal Ecosystem Bible' over two hundred years ago, but I bet 99+% of 6.7 billion have no idea what he wrote, or would deny that it is a problem as we go postPeak.
But you are implying that the attacks are a symptom of overpopulation & resource depletion. That is not the case. Even if the world was swimming in oil & NPK, these terrorists would still want to kill others with a different set of beliefs.
I am doubtful that this is true. If every family on the planet owned 100,000 acres, I bet they would be overjoyed just to encounter their neighbors; the last thing on their minds would be to hurt anyone. They would be seeking future wives and husbands for their children. Picture the very few survivors after the Toba volcanic event.
It is when we get too crowded that some people think scapegoating and worse is effective. Google Hans Selye's General Adaptation Syndrome; the genetic desire to fight like cats in a sack when stress gets too high. It only makes sense that all life in an Overshoot situation evolved this response for facilitating rapid headcount decimation, then repopulation can start the cycle again. It imparts the least impact to the ecosystem; fast-crash is overall better than Catabolic crash.
Of course, I think a cooperative, Optimal Overshoot Decline is even better than a fast-crash or Catabolic grind. My feeble two cents to plug the need for Peak Outreach to all.
You have a one track mind. There are plenty of places in the world with a lot of poverty & overcrowding which don't produce psychotic terrorists. The root cause of the problem here is the Saudi Arabian idealogy which is hateful and intolerant. These barbarians want to convert everybody in the world to their backward and violent ideas; people who disagree with them are to be exterminated. Oil money gives them the power to spread their hateful world view by sponsoring mosques and madrassas.
They are so stupid, they don't even realize that the more people they kill, the more the rest of the world is going to hate their religion and country and what it represents. In the end they lose when the oil money runs out and they have nothing else to sell.
Hello Suyog,
Thxs for responding. Your Quote slightly modified:
===========
"The root cause of the problem here is the _______ idealogy which is hateful and intolerant. These barbarians want to convert everybody in the world to their backward and violent ideas; people who disagree with them are to be exterminated."
===========
Please choose one from hundreds possible, then insert above: Catholic, Spanish Conquistadors, Romans, Egyptian Pharaohs, Vikings, American settlers, Mayan Kings, Hitler, Genghis Khan, Samurai, Persian kings, Polynesian, Aztec......
Yet, a profound universal understanding of the dynamics of the Thermo/Gene Collision could unite us all.
The Vikings and Mongols did not try to spread an ideology, except perhaps "What is mine is mine, and so is yours".
Alan
Both you & Srivathsa ignore the blindingly obvious: it is religion & ideology which decides how people respond to problems and grievances. Terrorism is not inevitable when there is a resource crunch. And ideologically inspired terrorism can exist even in the absence of a resource crunch. The terrorists who attacked UK on 7/7 were British citizens of Pakistani origin. The UK does not have a problem with Hindu/Sikh/Buddhist/Taoist/Atheist immigrants.
If the middle-east was still Christian & Jewish and everything else stayed the same, would Al Qaeda exist? I don't think so. If Afghanistan was still Buddhist and Pakistan was Hindu and everything else stayed the same, would the Taliban exist? I don't think so.
If Pakistan is a basket case, it is because they cling to an obsolete belief system and insist on shoving it down everybody's throat. Just like the failure of E. Germany and N. Korea is a failure of communism, the failure of Pakistan is really a failure of political Islam. If they give up political Islam, they can prosper like everyone else.
I tend to agree. Terrorism rarely has mass appeal in resource rich places. You would find the odd Timothy Mcveigh. If I were born in Ramallah or the Gaza strip, I would be quite angry with the world.
While the proximate cause in Bombay is not resource overshoot (this is not a class conflict), the resource overshoot is happening in Pakistan. Not enough jobs, no hope for the future and...
Pakistan, sadly, is reaching failed state status rapidly. In uncertain times, people want certainty and if the Quran or the Bible offers predictable outcomes for actions, then their appeal increases. Add religious "leaders" to the mix and you have a deadly cocktail. These are ruthlessly manipulative people and will do anything to hold power over the masses.
Srivathsa
The terror attacks in England were carried out by British citizens of Pakistani origins. One of the biggest terrorists in Pakistan, Sheikh Omar, is a British citizen who graduated from London school of Economics. These were people born in a prosperous country. UK has had no problems with Hindu/Sikh/Buddhist immigrants.
It is their religion which inspires them. Even if they attain a per capita income of $100,000, they will still use violence to impose their backward ideas & superstitions on the rest of the world. As a matter of fact, access to resources only makes them more capable of creating mayhem around the world.
Without Saudi Arabia's money, none of this is possible. That is why I eagerly look forward to zero net exports from Saudi Arabia.
Pakistan, Kashmir, India, Bangladesh, Sri Lanka, Nepal, Myanmar, Thailand, etc--a brief news google of these countries shows that things are deteriorating instead of becoming a paradise.
Yeah, but these places have been "deteriorating" for centuries. They never were stable. Although terrorist attacks grab the news, the death rates are probably the lowest they have ever been.
Precisely. The internet & instant mass communication now make you aware of things that were always there. Riots & social unrest are nothing new in India and most parts of the world. When India was partitioned in 1947, millions died or were displaced. There was no google or CNN back then so you didn't know (even if you were around).
Most people in India believe that things are getting better. Perhaps they are misguided, but virtually no one in India thinks that things are deteriorating.
Does anyone in India understand thermodynamics, or are they still concerned about the controversy over Ram and his army of monkeys that built that bridge to Sri Lanka?
Just doing the numbers, the swirling humanity of that subcontinent is destine for collapse.
There will be no green revolution to save them this time.
But agreed, communication has increased international events awareness.
The proportion of Indians who understand thermodynamics is comparable to the proportion of Americans who understand it; I don't think it is a very large proportion in either case. The Indians who are concerned about the controversy over Ram are comparable to the Americans who are concerned about the controversy over gay marriage, prayer in school & abortion.
India has enjoyed good economic growth over the last 10 years. This is the first generation of Indians who believe that the future will be better than the present. With a lot of high wage jobs, 9% GDP growth, a booming (until 10 months ago) stock market, appreciating Rupee (until 4 months ago) and Indian corporations making acquisitions abroad, they are naturally optimistic about the future. Success in the recent past has given them confidence in their abilities and their country. Perhaps they are misguided, but no more than people anywhere else on earth.
Hello BobCousins,
In the postPeak years to come do you really expect to post future SouthAsian weblinks on how this area will be transformed to a land of milk & honey? I am not an expert, therefore I surely hope you are correct.
I really hope the Asians can solve the problem of melting glaciers so they can grow clover for bees to fertilize and cows to eat, plus all the other plants. For all our sakes, I hope you are proven true, but MPP* trends suggest that bees & bats & glaciers, plus much more, will continue to decline. As Matt of LATOC has often said, it will take time for everyone to get their fair share of disaster.
I hope we can somehow create a desire for a Minimum Power Principle instead of a *Maximum Power Principle. I think a TODer, or some other person affected by Peak Outreach, obviously much brighter than me, can mentally create a plausible plan if he/she thinks about it long enough. It could be a great help for Optimal Overshoot Decline and reducing the extinction rate of other species. Time will tell.
What the heck is going on in India?
India is being attacked by Ronald Reagan's former friends.
Hemp would have saved everything but our government insists its bad and engages in war against it. Thats coming from the CIA who were involved in several illegal drug transactions themselves.
This is the solution to bring humanity to a sustainable future. Nature has all the solutions.
Hemp is not the answer. No crop is. Algae, switchgrass, hemp, corn...none of them are the answer.
The problem is not the crop grown. The problem is the way we grow them. Industrial agriculture is the reason conventional crops need fertilizers, pesticides, etc. If we grew algae or hemp the way we grew corn, it would have the same problems.
Among other aspects of "industrial", I'd bet Leanan means to include "scale". :-)
Maybe he wasn't suggesting that..
AFAIK, the 'Hemp for victory' campaign wasn't intended to produce biomass - rather the bast fibres are more durable than cotton, the plant requires little if any fertilizer or pesticides, it's not 'fickle' like cotton - not to mention the seed oil produces omega oils in an identical ratio to that required by humans, or its effects on lowering interocular pressure in glaucoma, etc etc.
Hemp is not the answer. No crop is.
I will not say hemp is not the answer. But crops could be.
Provided the number of humans drop, crops could provide the answer - with less people.
From 3 quarks daily
Alright.. I just saw Wall-E with my Daughter and Nieces, and wanted to toss in a piece of Bob's 'Dumpster-Diving Thanksgiving Bounty' to fit in with the little Robot's Collecting Habits, and the thoughts that will be consuming me as I consume Turkey tomorrow..
One of my wacky creations was finally tested and proven last week. Made largely from reclaimed Political Campaign Roadsign Plywood, I have built a cellulose-insulation blower for tightening up my house, with it's Hollow 1850 Plaster Walls. It has a clear plexi top that allows me to move the 'blow tube' over the stuffing material where it is blown up the hose and into a 2" hole in the wall cavity. Works great, and I only got a little 'dusted' in the process. I'm looking forward to loaning, renting or bartering this with my neighbors who, like me, don't have the truck or the back needed to get the Home Depot rental unit into their homes..
There's probably a managable sized one available.. but I bet they don't show how much of energy is political like mine does!
Happy Thanksgiving People!
Bob Fiske
This was a sidebar article in the recent Automobile Magazine.
Renewable, sustainable? Well even with the exception of the 4.6L Northstar ICE I don't think so, but what will they think of next.
The Splinter - A Wooden Supercar
Good News, Everyone!
The Chevy Tahoe was named the 'Green Car of the Year', reported to Campbell Brown on CNN last night by the President of the United Auto Workers!
The UAW Don said: Congress must bail out (oh, I'm sorry, provide a 'bridge loan') to the 'Big 3'.
I almost fell off the treadmill...
BTW, rejoice in the knowledge that the Hybrid Tahoe gets a whopping 21 MPG city, the same as a Honda Accord or Toyota Camry. Every day I'd say I notice about 8/10 SUVs and pickemup trucks have only the driver; about 9.5/10 of pickemup trucks have absolutely nothing in the bed.
News reports are starting to speculate that $169/gallon gas will revive the demand for SUVs and big trucks and folks will drive more, rescuing the economy.
We truly have little hope when there are so many underducated and delusional people.
Fell off the what?.. I think this calls for a George Jetson!
"Jane, Get me OFF this crazy thing!"
Perhaps this is a stretch. but the Tahoe does have potential to do something useful, i.e. haul stuff.
GM's latest offering is the Cadillac Escalade Hybrid, which has no apparent purpose other than allow the user to say "Look! I'm an ostentatious twit."
Now, the hybrid version allows the user to say "Look! I'm an ostentatious green twit."
Our dependence on foreign oil and it's outrageous cost this past year have seriously damaged our economy and society. It is time this country wakes up, stands up, and demands our elected officials take serious steps toward getting us on the road to energy independence. Job and home losses are at an all time high. Every consumer product we purchase has risen sharply in cost directly related to the increased production and shipping costs. Electric companies have had their highest rate increases ever. We cut back, spend less because we have less to spend and unfortunately that results in more job losses. The 168 BILLION our gov. spent on the last stimulus pkg did nothing to improve our economy. That would have been a huge step towards becoming energy independent. We have so much available, solar, wind, hybrid, elec plug in cars that would cost the equivalent of 60 cents a gallon to drive. I just read a book by Jeff Wilson called The Manhattan Project of 2009. It is very informative and enlightening. I recommend it for anyone who yearns for our country to become energy independent. Congress needs to read this book asap.
www.themanhattanprojectof2009.com
I agree...
but as Rome burns, the reactionary scared old white men wing-nuts are fiddling songs about false issues of distraction: The boss men in my shop (seemingly 100% rabid militant republitard) go on every day about how Obama is planning a 9000% tax increase for ammunition in order to do a back door nullification of the second amendment; how Obama does not respect the sanctity of life wants all women to abort their fetuses; how Obama is a secret Muslim and wants to do in our Christian nation; how the whole economic crises is due to Obama (now that is rich); how the Jimmy carter-era CRA (Community Re-investment Act) circa 1979 has been the cause of the housing bubble, as magnified by perennial right-wing whipping boy Bill Clinton (ignoring the 8 years of Ronnie Raygun and George '41' 'thousand points of light' Bush and 8 years of Shrub 'ownership society', trumpeting all-time high house ownership rates as his big accomplishment); Obama will prostrate America before all its enemies by reducing our number of our sacred nuclear weapons and reducing our defense budget...these folks still refer to Obama as 'Osama' and have bumper stickers on their cars saying so.
To these folks the whole idea of sustainability, Peak Oil, over-population, climate change, etc. isn't even on the radar...if they think about these ideas at all they attribute them to commie, pinko, atheist, left-wing, socialist, terrorist plots to undo the glory of American capitalism and the gospel of prosperity and 'be fruitful and multiply'...who cares, the rapture is coming and the true believers will ascend to the eternal paradise. These are the same people who rail against the Muslim suicide bombers' motivation of achieving paradise...
Remember, the ~ half of our population who always vote Republican for these reasons and who never vote Democrat are in general more wealthy and own more guns than the other side...when reality hits these by-and-large privileged people are going to be the ones shooting, not the poor people who already know how to scrimp by.
These are the same brain surgeons who just this morning had a big rant in the office about our mercury thermostats being replaced by non-mercury models; they claimed this (mercury) is the latest 'liberal scare'...that before that it was asbestos, and before that, PCBs. So, these folks would be happier than clams if all the environmental protection laws that are 'hurting business' went away tomorrow. Maybe they should move to China and eat some lead-encrusted melamine-stuffed food.
Sorry for the rant, but it really upsets me that a huge fraction of our people don't get it, and apparently never will.
The people that will come out of this the best are the ones that can quickly recognize that things are changing and try to adapt.
Those that rigidly cling to old ideas will end up impoverished..
"when reality hits these by-and-large privileged people are going to be the ones shooting",
Yes shooting at each other either defending their "stuff" or trying to take their neighbor's "stuff ".