DrumBeat: December 15, 2008

Red Flags as Washington Gears Up to Remake Energy Policy

President-elect Barack Obama's pick for energy secretary, Dr. Steven Chu, is a Nobel Prize-winning scientist who's on the record calling coal a "nightmare" and advocating raising U.S. gas taxes to European levels to promote conservation. (Here's video of the speech; the "nightmare" quote comes 28 minutes in.)

Mr. Obama himself has so far dismissed the idea of raising gas taxes, and worked hard during his campaign to reassure the utility and coal industries that he didn't plan radical steps to slash the use of coal in power generation.

This apparent difference of opinion between Mr. Obama and his likely nominee is just one of the many red flags waving as Washington gears up for the most ambitious effort to remake America's energy policy since Jimmy Carter slipped on a cardigan.

Toyota delays U.S. assembly plant that was to make Prius

NEW YORK -- Toyota Motor Corp. is delaying the start of production at its plant in Blue Springs, Mississippi, indefinitely as the top Japanese automaker copes with the downturn in the auto industry.

The plant was scheduled to begin production in 2010 and make the Prius hybrid.

Lt. Gov.: Mass. faces tough transport decisions

BOSTON (AP) -- Massachusetts Transportation Secretary Bernard Cohen was a no-show Monday for the announcement of a new commuter rail initiative, and Lt. Gov. Timothy Murray refused to tamp down speculation Cohen may be on the way out of the administration's Cabinet.

Algerian projects captures and buries carbon dioxide

KRECHBA, Algeria (AFP) – On a desolate, wind-pummeled expanse of central Algeria, natural gas is being pumped out of the Sahara Desert and sent on to energy-starved Europe, leaving nearly all its environment-damaging carbon dioxide buried deep beneath the earth's surface.

The In Salah gas project, a four-year old venture grouping energy majors Sonatrach of Algeria, BP of Britain and Statoil of Norway, is described by its managers as the world's first and largest onshore carbon capture and sequestration scheme.

Chrysler's plan to beat the Chevy Volt

NEW YORK (CNNMoney.com) -- Chrysler is pinning a huge part of its future on a plan to produce a full line of electric vehicles, at a reasonable cost to both the carmaker and the consumer.

While General Motors is moving ahead with its Volt electric midsized car, Chrysler says it already has plans in place, not just for electric cars, but also for minivans and even off-road vehicles.

Chryslers' strategy hinges on keeping it cheap. The carmaker will dispense with flashy designs in exchange for low cost and flexibility. And it plans to pile on more electric-powered models quickly once the program launches in 2010.

Russia’s Financial Market Meltdown: Energy Security Implications

The global financial crisis has by definition wrought havoc on all the world’s economies: although the pain is not evenly distributed. The Russian economy, a darling of emerging market investors over the past 8 years had been until May 2008 one of the world’s best performing markets. But since then the combined Russian exchanges have fallen more than 70% making Russia "one of the world’s worst performers over the past few months." It is yet not clear how the implosion of Russia’s financial market will affect that nation’s oil and gas sectors and in turn Europe’s overall energy security. There are however a few indicators to consider.

Mexico: Iceberg Dead Ahead!

Mexico is in for a severe crisis. Some of it is due to its unwillingness (or inability) to implement important economic reforms during the previous sexenio. However, much of it is due to factors that are outside its control.

The decline in oil prices will hit Mexico hard. With WTI projected to fall into the mid-30s, the Mexican government will soon face a gaping hole in the fiscal accounts. Oil represents about a third of government revenues.

OPEC Looks for Ways to Stabilize Declining Oil Prices

With the economy in the throes of a global recession, oil producers are facing their toughest business prospects in 25 years.

Oil demand is set to decline this year and next, the first drop since the energy shocks of the early 1980s. As economic growth slows down sharply, oil prices have collapsed from their summer peaks in record time.

The stunning speed of the downturn has made for a sudden nightmare for producers, who face shrinking revenues next year. Oil has lost $100 a barrel, or 70 percent of its value, since July and many analysts forecast further declines as the global economy worsens.

OPEC May Seek Russian Cut; Norway Won’t Participate

(Bloomberg) -- OAO Lukoil said OPEC may ask Russia to cut output this week to help arrest a five-month slide in oil prices. StatoilHydro ASA ruled out Norwegian participation.

Rosneft may seek $5bn bridge loan

Russia's Rosneft plans to seek a Western bridging loan of $1.0-$1.5 billion in the first quarter of 2009 and up to $4 billion from state bank VEB in the whole of 2009 to refinance its debt, an executive said.

"Next year we will need around $1 billion per quarter for refinancing needs," vice-president Sergei Makarov told reporters.

Plans to burn trash with plasma face hurdles

Plans to generate power and eliminate landfill waste by ripping trash apart at the molecular level in Florida and California are running into steep hurdles from local opponents.

The initial proposal in Florida, which has since been scaled back by about 80 percent, would have created the largest plasma arc gasification plant in the world. The proposed plant in Sacramento has been set back by a lack of financial details about just how much electricity would be produced and how much trash would be gasified by plasma.

Gas prices retreat after weekend spike

NEW YORK (CNNMoney.com) -- Gas prices posted gains this weekend for the first time in 86 days, according to a national survey of credit card swipes. But on Monday fuel prices began to retreat again.

...Low gas prices are starting to spur demand for fuel again in some areas, according to Jason Toews, co-founder of GasBuddy.com, a service that lets motorists post local fuel prices online.

According to Toews, gas prices could be in for a serious bounce once the spring and summer driving season hits next year.

L.A. gasoline spikes on BP refinery upset - trade

HOUSTON (Reuters) - Los Angeles whole gasoline premiums spiked 14.25 cents per gallon on Monday on word the gasoline-producing fluidic catalytic cracking unit was shut at BP Plc's 265,000 barrel per day Los Angeles-area refinery in Carson, California, traders said.

The 102,500 bpd cat cracker at the Carson refinery was shut on Sunday for unplanned repairs, sources familiar with refinery operations said on Monday.

OPEC wild cards: Size of output cuts, Russian help

ORAN, Algeria (AP) -- Even before a single barrel of oil is cut from world production, OPEC's strategy of talking up the price of the cartel's commodity appears to be working.

Although OPEC oil ministers will not be deciding on how to prop up the value of crude until Wednesday, a volley of comments from major oil exporters has pushed markets to expect both a substantial output cut as well as the prospect that energy heavyweight Russia might team up with the 13-nation cartel to reduce supply.

Reduced Oil Production Hurting Mexican Economy

Much lower oil prices seem to have concentrated the minds of Mexican leaders on their country’s fast approaching fiscal crisis. As I’ve written many times, roughly 40% the Mexican federal budget is financed by oil exports from the state-owned PEMEX oil company. But production is falling rapidly, has been doing so for a couple of years, and promises to continue falling even faster after 2010. Mexico was clever enough to hedge its oil at $70 a barrel through 2009, but leaders are quickly calculating how large the 2010 budget deficits will be if oil production continues to decline and oil prices do not rise substantially after 2009.

Obama to announce energy posts as Blagojevich questions linger

(CNN) -- President-elect Barack Obama is expected to announce key members of his energy team Monday as questions linger and media attention remains on the scandal involving Illinois Gov. Rod Blagojevich.

China joins U.S., Japan with shrinking oil demand

BEIJING (Reuters) - China's apparent oil demand fell last month for the first time in nearly three years as the world's second-largest energy consumer succumbed to the global economic crisis, data showed on Monday.

Long a major engine for rising crude oil markets, China now risks becoming a further drag on prices that have already tumbled more than $100 a barrel from their July peaks as it joins the United States and Japan in registering shrinking use, with worldwide economic woes taking a greater than expected toll.

Chinese oil production and trade figures released on Monday showed the effects of an export-led slow-down in economic growth coupled with domestic fuel prices that haven't been reduced since a shocking 18 percent increase back in June.

Emerging Asia will keep fuel prices on tight leash

HONG KONG (Reuters) - A dramatic crash in oil prices this year has prompted governments across emerging Asia to slash heavily subsidized fuel prices, but this should not be confused as a sign that the region is moving toward free energy markets.

Kurt Cobb: Energy and Ponzi schemes

In the absence of independent contrary information, unsuspecting investors will believe in Ponzi schemes as long as their returns are high. In the same way the public will put its faith in neoclassical economic theories which claim that perpetual economic growth is possible. What most investors and many Americans want is to get rich. Most recently they were led to believe that the stock market was a one-way ticket to wealth. While the stock market as a whole is not a Ponzi scheme, the companies on the exchanges are run on the basis of neoclassical economic assumptions about growth. When those assumptions are undermined, as is happening currently, investors and corporate leaders look for villains and bailouts rather than questioning the assumptions themselves.

In an effort to challenge those assumptions, systems ecologist and energy researcher Charlie Hall has long championed a biophysical approach to economics as an alternative to neoclassical economics which he likens to a Ponzi scheme. Why a Ponzi scheme? Each new wave of lending is made based on the faith that future flows of energy will increase sufficiently to create enough economic growth to pay off the new loans.

Is the Second Great Depression Imminent?

The world is currently facing the most serious financial and economic crisis since the Great Depression of 1929. How have countries responded to the crisis? Well as we know it, by lending huge amounts of money through bailouts and other tax cuts. So while the current crisis was caused by excessive lending, such as the subprimes, the only answer our governments and financial elites found was lending even more and making money out of nothing.

All of these measures will have an impact on economies, no doubt on that. Before the end of 2009 an –artificial- recovery will take place. Good news you may think? Not at all…

Solar-powered hangar opens in California

A new hangar at Bob Hope Airport in Burbank, Calif., is powered by the sun.

The $17 million Hangar 25, operated by charter flight operator Avjet, has rooftop solar panels that can provide enough electricity for lights, forklifts and tow vehicles.

Scientists urge caution in ocean-CO2 capture schemes

SINGAPORE (Reuters) - To some entrepreneurs, the wild and icy seas between Australia and Antarctica could become a money spinner by engineering nature to soak up carbon dioxide and then selling carbon credits worth millions of dollars.

To some scientists and many nations, though, the concept of using nature to mop up mankind's excess CO2 to fight global warming is fraught with risk and uncertainty.

Can The United States Drill Its Way to Energy Security?

Those who advocate increased oil and gas drilling generally, and quite reasonably, assume that increased drilling will result in significantly increased production of oil and gas. Drilling is certainly one of the rate-limiting steps to the eventual production of oil and gas. But beyond this crude notion that more is better, the innumerate naïveté of many energy projections is staggering.

In fact, many drilling advocates implicitly assume that the energy gained from increased drilling will be roughly linear: that is, doubling drilling effort is expected to eventually bring something like double the energy resources to market. In reality, the historical data give overwhelming and unequivocal evidence that the energy return on drilling in the United States will certainly be far less than this. For generations now, the energy return on increased drilling has been a quantitative relationship of sharply diminishing returns with increased drilling effort. In fact, for the last several decades, the relationship of drilling effort and energy return has been so unfavorable that there is little evidence that even vastly increased drilling will significantly increase U.S. domestic energy production. This stark fact must be incorporated into any strategic energy planning. To do otherwise is to put hope entirely before experience.

UK: Beyond laissez-faire

When the cabin crew admits to anxiety, it is time to panic. The International Energy Authority has always brushed off claims that oil will soon dry up, adopting the tone of a nonchalant air steward guiding jittery travellers through turbulence. This morning, however, the organisation's chief economist, Fatih Birol, tells the Guardian that he expects global production will stop growing in around 2020. It is a remarkable turnaround for the IEA, which only three years ago was insisting that there was no fundamental reason why oil should not continue to grease the cogs of the global economy.

Crude Oil Rises as OPEC’s El-Badri Says Sizeable Cut Is Needed

(Bloomberg) -- Crude oil rose, touching $49 in New York, after OPEC’s Secretary-General Abdalla El-Badri said the group needs to make a “sizeable” production cut at this week’s meeting in Algeria.

The Organization of Petroleum Exporting Countries, which pumps 42 percent of the world’s oil, will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, at a Dec. 17 meeting in Oran, according to 18 of 33 analysts surveyed by Bloomberg. Oil gained 13 percent last week, its biggest five-day gain in four years, on speculation production cuts will revive prices.

Prices are being “buoyed by expectations that OPEC will make a significant cut,” Robert Laughlin, a senior broker at MF Global Ltd. in London, said by phone today. “The necessity for cuts has never been so vital.”

Crude oil for January delivery rose as much as $2.72, or 5.9 percent, to $49 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $48.52 at 12 p.m. London time.

OPEC's oil supply cut could be its deepest

ORAN, Algeria (Reuters) - OPEC ministers could make their deepest oil supply cut ever when they meet on Wednesday to combat shrinking demand, bulging stocks and a $100 collapse in prices.

For many in the Organization of the Petroleum Exporting Countries, up to 2 million barrels per day (bpd) must be removed to keep up with a slump in consumption that has knocked two-thirds off prices since July.

Saudi makes oil cut ahead of OPEC meet - OPEC chief

ORAN, Algeria, Dec 15 (Reuters) - The world's top oil exporter Saudi Arabia has already cut supply in anticipation of OPEC agreeing further curbs at its meeting on Wednesday, OPEC's President said on Monday.

Chakib Khelil said the kingdom's oil minister Ali al-Naimi informed him Riyadh had cut its supply by eight percent. OPEC's last overall cut of 1.5 million barrels per day (bpd), agreed in October, was just over 5 percent.

OPEC’s divisions will be on display at meeting

CAIRO, Egypt - OPEC, the oil-producing group that consumers worldwide love to hate, is fine tuning its strategy heading into a meeting this week in Algeria, determined that its fourth attempt in as many months to reverse plummeting crude oil prices will succeed.

Working against the Organization of Petroleum Exporting Countries is its own past — a history pockmarked with the rival priorities of its 13 member states and major policy blunders in times of economic crises.

Lukoil: OPEC Expects Russia To Cut Oil By 300,000 B/D

MOSCOW (Dow Jones)--The Organization of Petroleum Exporting Countries expects Russia to cut its production of between 200,000 and 300,000 barrels a day, Vagit Alekperov, chief executive of Russia's biggest independent oil firm OAO Lukoil (LKOH.RS), said Monday.

OPEC member states meet Wednesday in Algeria to discuss lowering production for the third time this year, with oil prices now around a third of record levels reached in July. Members have called for non-OPEC producers, including Russia, to join the cut.

Russia's oil output down 0.6% to 2.9 bln barrels in Jan-Oct.

MOSCOW (RIA Novosti) - Russia's oil production declined 0.6%, year-on-year, in January-October to 406.4 million metric tons (2.9 billion barrels), the country's top statistics body said on Monday.

Russia takes on OPEC challenge

OTTAWA — Russia - the world's second largest oil exporter - has signalled its willingness to work with OPEC this week to prop up crude prices through another round of production cuts to be announced at a meeting in Algeria.

But for all its talk of the need to protect its national interest amid declining revenues, Russia is unlikely to contribute meaningful reductions beyond already expected declines in the country's production that are resulting from underinvestment.

Let's Give Inflation a Chance

OK, so I was wrong about the $100 oil before $150 but $200 before $50 forecast. The commodity markets have been clobbered by this global economic crisis. The World Bank’s latest forecast for commodities is “real food prices are expected to fall by 26 percent between 2008 and 2010, oil prices by 25 percent, and metals prices by 32 percent.” With the news that China’s exports are falling, the Baltic Dry Index in freefall and down over 90% from its peak this year and other signs that the global growth is plummeting, is there any hope for oil and other commodities?

Areas near parks dropped from oil drilling plan

SALT LAKE CITY – The Bureau of Land Management has dropped more than half the parcels it originally proposed for an oil and gas lease sale next week, many of which were criticized because of their proximity to southern Utah national parks.

Falling prices hurt some small gas stations

Small independent service station owners say they can't keep pace with plunging gas prices. By the time they empty a storage tank of gas, prices have fallen so far that the amount they must charge to recoup the purchase price appears exorbitant compared with high-volume chains.

Nigeria oil worker hostage freed

An Aberdeen oil worker taken hostage in Nigeria has been released.

Bruce Strachan, from Cults, was seized in November in the Port Harcourt area, but was set free at the weekend by his captors.

Battle in a poor land for riches beneath the soil

A battle is unfolding on the stark mountains and scalloped dunes of northern Niger between a band of Tuareg nomads, who claim the riches beneath their homeland are being taken by a government that gives them little in return, and an army that calls the fighters drug traffickers and bandits.

It is a new front of an old war to control the vast wealth locked beneath African soil. Niger's northern desert caps one of the world's largest deposits of uranium, and demand for it has surged as global warming has increased interest in nuclear power. Growing economies like China and India are scouring the globe for the crumbly ore known as yellowcake. A French mining company is building the world's largest uranium mine in northern Niger, and a Chinese state company is building another mine nearby.

Australia fast-tracks renewable energy funding

SYDNEY (AFP) – Australia will bring forward millions of dollars in funding for solar and other renewable energy sources, in part to help boost the economy, Prime Minister Kevin Rudd said Sunday.

Rudd said the government's 500 million dollar (329 million US) renewable energy fund will now be spent over the next 18 months rather than spread over six years as previously planned.

"It's time for Australia to begin the solar revolution, a renewable energy revolution and we have got to fund it for the future" he told reporters in his home state of Queensland.

China battery company launches plug-in hybrid car

(AP:SHANGHAI, China) Battery maker turned car company BYD Co. has launched China's first homegrown hybrid vehicle for the retail market, seeking an edge over its crisis-stricken international rivals.

BYD presented the vehicle, known as the F3DM, in a ceremony in the southern city of Shenzhen, where local officials have pledged to buy some of the cars in support of the project.

The vehicle can run up to 100 kilometers (62 miles) on its electric engine, and when it runs low on power shifts to a back up gasoline engine. Its battery can fully charge in nine hours from a regular electrical outlet, or much faster at BYD's own charging stations, the company said in a statement.

The car will sell for 149,800 yuan ($22,000), about the same as many Chinese-made mid-sized cars, it said.

Cheaper Plastic Solar Cells In the Works

Unlike the vast majority of today's solar cells, which are expensive because they are made from silicon-based, or inorganic, semiconductors, the solar cell we are creating will be less costly as it will be made from organic, or carbon-based, semiconductors made from polymers. We will use two different types of polymers: one which is electron-deficient, an organoborane polymer, and one which is electron-rich, a thiophene polymer.

Driven out by mud in Indonesia

The mud erupted here during exploratory drilling for natural gas, and it has grown to be one of the largest mud volcanoes ever to have affected a populated area.

...The steaming mud keeps bubbling up from under ground, spreading across the countryside, driving people from their homes, burying fields and factories and forcing the relocation of roads, bridges, a railroad line and a major gas pipeline.

As the earth disgorges the mud and the lake grows, the land is sinking by as much as 13 meters, or 42 feet, a year and could subside to depths of more than 140 meters just one hour's drive from Indonesia's second largest city, Surabaya, according to Richard Davies, a geologist at Durham University in Britain who specializes in mud volcanoes.

The biggest con job in the history of man

People like former governor Angus King and energy expert Matt Simmons are smart. They see the global warming rainbow coming and are placing their pots at the end of it.

Australia to cut pollution 5 to 15 percent by 2020

CANBERRA, Australia – Australia said Monday it plans to cut its greenhouse gas emissions by as little as 5 percent by 2020 — a reduction that critics say undermines international efforts to reach an effective global pact next year to avert dangerous climate change.

After dangerous lull, war on climate change faces crunch year

POZNAN, Poland (AFP) – After a year in which it nearly lost its compass, the campaign against climate change heads into 2009 needing top-level political commitment, creative thinking and a deep well of money.

Next year holds a big dream: by its end, the world will have forged a treaty in Copenhagen to shrink global warming from mankind-threatening juggernaut to manageable problem.

Obama left with little time to curb global warming

WASHINGTON – When Bill Clinton took office in 1993, global warming was a slow-moving environmental problem that was easy to ignore. Now it is a ticking time bomb that President-elect Barack Obama can't avoid.

Since Clinton's inauguration, summer Arctic sea ice has lost the equivalent of Alaska, California and Texas. The 10 hottest years on record have occurred since Clinton's second inauguration. Global warming is accelerating. Time is close to running out, and Obama knows it.

As a follow-up to the conversation Saturday about whether deflation is the only outcome to the current financial situation, here´s an article from Bloomberg that touches on the subject:


As you can see, the "experts" are all over the map on this one. However, with the Fed having flooding the markets with $8.5 trillion of new $$$$, and still counting, I will reiterate that the prognostication that deflation is the only possible outcome is without merit.

Hi Downsouth,

This link should explain what's happening so far. http://globaleconomicanalysis.blogspot.com/2008/12/humpty-dumpty-on-infl... (Mish doesn't get peak oil but is my favourite finance blogger)

Basically credit is being destroyed at light speed. Meredith Whitney recently mentioned that 2 trillion dollars worth of credit card lines are going to be pulled next year by the banks. That means that 50-100 trillion dollars is disappearing from the financial system in one swoop!

http://www.oftwominds.com/blogdec08/leverage12-08.html (psst he understands peak oil as well, predicts 1000 dollar oil in a few years!)

Even credit cards are a form of leverage. Let's say J.Q. Citizen has $100 in extra cash flow a month. He can spend the $100, of course, but if he uses the leverage offered by a credit card, he can buy $5,000 worth of stuff and pay only $100 (roughly 2%) per month.

And that's just one section of the economy.The leverage that HELOC's could afford, rising home prices allowed people to invest 3,000 dollars and make returns of 30,000!

The entire key to making a fortune in real estate is the leverage offered by mortgages/debt: put down 3% on a $100,000 house, sell it for $140,000, pay $10,000 in fees, commission, closing costs, etc., and the net is $30,000: not bad in terms of the full purchase price of the home *($100K) but absolutely stupendous in terms of actual cash invested: $3,000 down "earned" a return of $30,000.

Plus if the government did decide to monetize the debt, they would be slaughtered by bond holders with rising interest rate. Think how bad this depression would be with rising prices and interest rates at 18% or more?

EDIT: Not to mention all the other leveraged plays the financial wizards came up with. There's 1200 trillion dollars worth of derivatives out there, there's even things like compound derivates, leverage on leverage! The crazy CDS casino of which AIG is the blackhole etc etc etc. It just keeps on going. So that there's a lot of bad debt out there would be an understatement. This was the biggest bubble in the history of mankind and we haven't even seen the full effects of it yet.

I think credit cards are going to be a big deal.

On Thursday, new regulations on credit card companies are likely to be adopted. They will make it harder to raise interest rates, ban double-cycle billing, and otherwise close down the cash spigot card issuers are dependent on. The credit card companies have long resisted regulation, but they've given up fighting it, because of the current financial chaos, and because of the Democratic takeover coming next month. They know if they don't accept these new rules, worse could be inflicted by Congress.

I'm in favor of these changes, but they will cause some short-term pain. Credit limits are likely to be lowered, and interest rates raised. With more and more people dependent on credit for every day expenses, this could really hurt.

From, http://www.nakedcapitalism.com/2008/12/banks-supposedly-will-cut-consume...

You have to scroll downa bit, but this a letter received by Yves Smith (the host blogger) from an AMEX customer. And this is obviously from someone whose got a good job and spends a lot of money.

I am writing to tell you about my sincere disappointment with my recent service from American Express. I have been an American Express card member since 2003. I put almost everything on my Amex. I charged and paid-off $91,000 dollars on my card in 2007, it was an especially big year because I got married. So far in 2008 I have charged and paid off $75,000 or so on the card, I got a new job this year and relocated... This is an average of about $7,000 per month in charges and payments over the past 2 years I would think this would make me at least a decent card holder.

On December 12, 2008 the credit limit on 2 of my American Express Cards was cut from a total of $50,000 (way more than I needed, since I rarely carry a balance) to $3,200 (way too low, especially in December), this is a 95% cut and about 1/3 of my average monthly charges / payments over the prior 2 years.

The way to look at this is, how many people are being affected by this? How much combined purchasing power does this remove from the global economy? It affects each and every sector. If Joe Average's credit is curtailed or stopped his purchasing ability to buy cars, computers, big screen tv's etc falls through the floor. That in turn affects the global economy, export growth starts slumping in China, Japan, Korea, Germany etc. Which makes the global economy worse and thus banks will curtail more credit.

In short a vicious self reinforcing cycle. What makes this credit burst so bad is that the global economy is uttery dependent on credit, people hardly buy things with cash and most global players are to the leveraged to the hilt.

What is most frightening is what happens when natural gas companies, oil companies and alternative energy companies are forced to work from cash flows, no access to credit at all? I read that Rockman said his company has been forced to cut their budget from 1.4 bn to 700 million. That's half! And the worst lies ahead. Peak credit will only accelerate the downslope of peak oil.

The consumer simply won't be able to afford much oil and the leveraged producers simply won't be able to survive. It is a possibility but this crisis is getting exponentially worse, but could oil production plummet from 75mn to 60mn or less in one year due to lack of credit?

It's hugely deflationary and the potential is devestating. :-(

Strange that they would do that to someone who has been such a good customer.

Maybe he works in the financial industry or something.

That's the weirdest thing: they're cutting back people's credit based not on their payment history, but on what industry they work in, where they live, and what stores they shop at.

Not to sound contrite, but then they pay in cash.

This is not a bad thing, folks... Actually, this is VERY good in the long run. Here's why:

Let's say I go out and buy $1000 in Christmas gifts and put it on a credit card, and it has 20% interest that I pay off the rest of the year. Ignoring compound interest, I ultimately end up paying $1200 for the Christmas gifts. In other words, another $200 of income is taken from me and given to the credit card company.

If, on the other hand I pay cash for the gifts for $1000, I will not have to pay $200 in interest. I can use that extra $200 for other consumption or (heaven forbid) SAVING.

This is very good news. This gives people a chance to get off the credit card hell that they put themselves in. The alternative to credit cards are check cards... I use one. I never have to worry about a credit card bill... EVER. (I do have a credit card for emergencies, with a $500 limit, but that's always paid off). I am financially much better off not having to loan out my money from a credit card company.

I understand interest. I said I was in favor of more limitations on credit.

However, it seems odd from the credit card issuer's POV. They make money off each transaction, whether you run a balance or not, so it seems strange they would cut off one of their best customers that way.

I don't know if that is so strange Leanan.

I think you explained the reasoning quite clearly one post up - the credit card companies are cutting credit lines based on "the industry the card holder works in, where they shop, what they buy...etc"

Maybe the CC companies are screening the population of card (bag)holders based on their sources of income and buying habits for a good reason.

That reason being, source of income and buying habits likely determine which card(bag) holders will become extinct next.

Makes perfect sense.

If your models predict that 50% of the finance or insurance positions in city X are going tits up... you withdraw exposure to those card holders.

If you know the card holder shops at Department Store Z and your latest D&B suggests that Z is going down the tubes, you withdraw exposure. You don't want your receivables (transaction fees) tied up in court.

Multi-variate segmentation is very powerful.

"50% of the finance or insurance positions in city X are going tits up... you withdraw exposure to those card holders"

Yup. Or if the card holder is in the auto industry, shipping industry... lots of occupations will be losing creditworthyness.

It seems strange they would cut off one of their best customers that way.

Part of the new regulations that just went into effect include more data sharing between various cc companies - and who knows what else. Perhaps this newly married customer who charges $90k per year is a wee bit too risky for some other reason.

cfm in Gray, ME

Geckolizard, I agree that this would be wise. The problem is going to be the way it happens. For example, credit card companies will often lower limits to existing balances - that means a single charge will put people over limit, and send their interest rates up to 30% on their existing balances - which they won't be able to pay. This is likely to drive people into bankruptcy, into foreclosure.

The other issue is that when people are laid off, lose insurance, etc.., they usually do run up their credit cards - it isn't a good thing, but it does serve to mitigate some of the suffering - they can hang on for some months, they are still eating, they can still keep their interview clothes clean and their kids warm. Take away credit lines, and that fallback position is completely gone - period.

Add to that that those who lose them are likely to experience credit quality declines - which as more and more people move out of owned homes and into rental markets, mean that it gets harder to find an apartment. No credit means travel is harder - those looking for jobs in other areas end up sleeping in their cars, rather than a motel. And, all industries that rely on credit take the hit - instead of gradually declining sales, we see a sudden, full stop.

Don't get me wrong - I agree with you we need less credit, and wiser use of what we have. I don't carry a balance. But the truth is that some people do need large credit balances - small business owners, for example, or someone trying (if anyone still is) to build a house. This is going to really be another blow to the economy - just as we should be spending less, but the problem is that all of us spending less at once is an issue.


Very interesting counterpoint. Thanks!

FWIW...the new regulations wouldn't let them raise interest rates on existing balances, unless they were more than 30 days late.

.... the truth is that some people do need large credit balances - small business owners, for example, or someone trying (if anyone still is) to build a house.

And therein lies the answer to why the banks and credit card Capones cut credit to ''good'' customers. They simply can no longer afford to have so many people have so much outstanding credit, even if they pay it back at the end of the month. The numbers get too large. It's not just that one guy, there's millions of people like him. If 10 million people at one given company have $7000 outstanding basically continously, the company has to find financing and insurance for $70 billion at any given time, all the time. They simply don't have the collateral, and they can't take (re: pay for) the risk.

This is, among other things, what the term "credit crunch" means. It's not about the client paying back or not, though the risk factor increases hugely, and so does the insurance, whatever form it may take. It now comes down to the cold hard numbers in the morning: what do you have, what are you owed, and what are the chances you'll get that back?

Come January, this will be true for business throughout the economy, and the consequences will be disastrous. Everything runs on credit, nobody owns enough to do without. This has always been a great system for banks until now, they have worked hard to establish it. Imagine, every penny spent carries an interest rate owed to you, including all the money the government issues.

The new regulations will make credit availability worse, until credit is there only for who doesn't need it, and of course that has already been discounted in all sorts of rates. I say good riddance, because although people are used to credit, making loan shark operations an essential part of your economy is a process that cannot possibly end well. That said, expect the largest credit card companies to apply for bank holding company status when push come to shove. I think Amex already has?!

The end of credit will be a hard lesson, though. Think Clint Eastwood. Pay first, talk later. Lines of credit, letters of credit, they are disappearing so fast it's scary, and they are the sole lubricant of our economies.

The end of credit will be a hard lesson, though.

I saw a scary story on the BBC. Apparently the Commora (Italian Mafia) credit business is doing great. When people can't get credit from legitimate sources, they turn to those who aren't so picky. And the mob isn't so concerned about the credit risk, they have effective ways of preventing defaults.

And probably lower interest rates, too.

And fashionable Art-Deco redesigned kneecaps too.

Credit card interest rates are obscene. Anyone who actually does not pay off their cards every month is not very financially smart.

On the other hand, I have one card that rebates 3% on all gas, dining out, office suppy stores and hardware stores. I have another that rebates 2% on everything else. Well, that is a no brainer as long as you pay off the balance every month.

What if you lose your job and your credit at the same time like a lot of other people?
How would you buy food with no credit? Pay medical bills, car expenses, utilities.
Credit is a buffer, and without it, a lot of people will become homeless.
Even stocks, homes and savings are losing value.....
We may be living in tent cities soon!

What if you lose your job and your credit at the same time like a lot of other people? How would you buy food with no credit? Pay medical bills, car expenses, utilities.

I have money saved away. I'd have to be unemployed for about 3 years before I run out. So, I'm golden... But, I am unlike the 90+% of the population... Yeah, too many people have lived hand-to-mouth for too long (even going so far as to leverage themselves to the moon) and this is causing a lot of issues...

When I was much younger, but still not young, I remember that after I first got my job at a very big oil co, I applied for a credit card. No! Had to be there a year. Couldn't get a mortgage, had to change banks -- no credit history. By the time my kids were teenagers, and didn't have a pot to pee in, except mine, they were getting credit card offers every week.

I go thru the roof when every 5 years or so something slips up and a payment is late and I have to pay a penalty. I hate credit cards and don't use them for credit -- I use them simply as a way of not carrying around a lot of cash. And when I first got one, it was because you needed it to rent a car. I didn't have one then.

Credit cards don't solve the problem of losing jobs. They make it worse, even though one resorts to them if there's no choice.

The solution to losing jobs is, individually, savings, and societally to guarantee a job to everyone willing to work. What can't and shouldn't be guaranteed is high standard of living -- but the basics should be. The idea that the billionaires have worked for their money is becoming laughable. There needs to be steep progressive taxation, estates too, so that there is a net for people. Millions of people don't hit the bread lines because there's a sudden epidemic of laziness. The bailout money is totally misdirected.

I share your aversion with credit cards and have never had one in 40 years of
working. Why not get a number of debit cards to avoid carrying around cash?
You only spend what you have saved and there are no service fees, at least here in

Hm, I had to think about why I (we, my wife and I) don't use our debit card. I keep a minimal amount in my bank (debit card), and the rest someplace else. By using a credit card, we don't worry about overdrawing, and just make sure to pay on time, and add more to the account if needed. In other words, we do utilize the few weeks of free credit, free as long as we don't slip up.

I think they are doing it based on "Models", and we know how well those work?...

I also believe that social mood plays a prevalent role in how we feel and behave.
This 31 page PDF document was written in Dec 2007. Explains the kondratieff long cycle. Predicts the current fiasco pretty well. We are in the midst of a severe deflationary winter. These cycles tend to persist for some time - A generation or more from historical records and observances.


It's probably based on a change in his payment pattern/average payment amount.

I've had no change in my American Express credit line, and I've had no changes in my trading credit lines or personal credit lines.

Also, those "deflationary winters" and similar cycles don't hold up to back tests.

All that needs to happen to stop deflation in the prices of goods and services is for the rest of OPEC to follow through on the cuts Saudi Arabia has already announced.

If you have a job that requires a lot of travel, and I suspect that is why he charged so much on his amex card, a $3200 limit could easily be reached early in the month. Think of how many people this could affect in the world. It would require using several credit cards just to get through the month.

I travel a fair amount overseas, anything less than a 10k limit is useless since some of my trips may last a month. Try getting a reasonably safe hotel in Tel Aviv for less than $350 a night. It adds up pretty quick. I refuse to do business with AMex due to previous negative experience and use my personal Mastercard instead of a corporate card.

USAA for us vets charges 6% interest currently.

AMEX is a real PITA to their merchants too. I know!

They cannot go bankrupt fast enough for me.


That's the weirdest thing: they're cutting back people's credit based not on their payment history, but on what industry they work in, where they live, and what stores they shop at.

I think they may simply be applying tried and trusted actuarial principles, which are based on probabilities. Payment history is of course one important determinant, but clearly it is not the only one. Debtors may have identical payment histories but that does not mean that they have the same probability of default. All variables count -- where you live, your marital status, your ethnicity -- and possibly whether your dog is a Yorkshire Terrier or a Rotweiler!

Amex credit is based on RECENT amount spent. if you spent 5k a month 2 years ago but recently was only 100$ per month, they are going to limit your purchases. And vice versa.

I wonder if AmEx thinks of this person as a good customer. This person runs up a high balance and then pays it off every month. This leaves Amex with the need to get $7,500 (or whatever) a month to lend to a customer from whom they collect only an annual fee (what, $60-$100?) and never collect any interest. They probably think of this as a lousy customer, not a good one. They use credit cards merely as transaction instruments, not for access to credit. I'm not doing the calculation, but wouldn't a person who has a $3,500 credit limit, maxes it out, and pays the minimum every month be a much better customer from a profit perspective? Also, the total exposure is only $3,500 when that customer goes under, whereas someone with a $50,000 limit causes that much exposure when they go under.

I'm imagining a huge return to the cash economy. People realize it's easier to budget when you see bills and coins slipping through your fingers. There's only a month difference between the consumer who banks the $7,500 and pays cash all the following month and the guy who spends $7,500 using a credit card and pays it at the end of the month in full.

Of course, that transition month will be a real pain.

Very good points, that's why people who pay off their credit bills every month are known in the industry as deadbeats. The profit comes from the clients who don't and can't pay. Al Capone built an empire on the principle.

My guess is that this American Express customer is using one of their "cash back" cards. Their no annual feel Blue Cash card pays back up to 5% on some purchases. Over $75k this can add up to a lot vs. the useless junk the "points" get you on their other cards.

Years ago I dumped my AMEX green card for their Blue Cash card because I got cash instead of other incentives, and no annual fee. Best of my knowledge the traditional AMEX (green, gold, platinum, black) still have no preset spending limit - but must be paid in full each month.

So in this scenario I bet the decision to cut this guys spending limit was purely financial.


Overall lending by US banks is at a record high and has increased during the credit crisis.
Interbank lending is at record highs and has increased during the credit crisis.
Consumer credit is at record highs and has increased during the credit crisis.
Commercial paper markets are operating within their historical norms.
Lending by banks to businesses is at record highs and has been growing rapidly.
Municipal bond markets are operating within their historical norms.
Deposits at banks have shown a substantial increase since the start of the credit crisis


HELPP!! Ilargi, come to our rescue!

Is this a parallel universe, or what? http://www.celent.com/PressReleases/20081210/WhatCreditCrisis.asp

Nothing parallel. Of course lending is up, nobody owns anything anymore. To wit, the graphs straight from the St.Louis Fed that show Borrowed Reserves -red line- (they go through the roof since about February(?!)), and the Non Borrowed ones -blue line-, that fall through the floor of the basement. This one is Oct. 11.

These are the numbers that depict what banks have outstanding at the Federal Reserve. It's all borrowed!!!

click to enlarge

What Celent didn't consider, http://seekingalpha.com/article/110447-what-celent-didn-t-consider

As the chart indicates, bank credit has risen. OK. More importantly, where has it gone? One answer is to those that were granted credit on good terms during the credit boom and, in anticipation of a tougher credit environment going forward, tapped into these funds.

This is still lending, but it is not the kind of lending that satisfies the exact statements of politicians.

This crowds out those with less than perfect credit and makes their financing either incredibly expensive or impossible to obtain.

The article goes on

Even if some of the credit markets were operating under "historical norms" in terms of the flows of credit, they must also consider the fallout from the increasing cost of credit. If a company that needs debt to finance themselves (cough GMAC cough) can only tap it at an "historical" cost, is that really going to do them any good? The government was, yet again, the only entity in position to provide some relief for these borrowers. Some have failed, some have been saved, but by doing nothing, I can only believe the former would significantly outweigh the latter.

The cost of credit is well above normal, look at the TED spread, Junk Bonds, Commercial Paper markets that can't function without FED intervention, A2P2 spreads are at records(This is the spread between high and low quality 30 day nonfinancial commercial paper). Big companies also tapped all their credit lines and parked the cash into bank accounts in case their lines are shut off.

3 month Treasury yields are close to zero, most of the TARP money ended up back with the FED.

I would also point out that celent is simply trying to sell a report and news that says everything is fine, move along, sells.

Great work VK - I don't know how you have the time. I certainly hope you are not TOO unemployed. I would offer a nice bowl of soup but it would probably be cold by the time it got there.

Standing offer of free bowl to any TODERS


I have a lot of time at present as I just finished my university degree at the end of last month. So on a break of sorts. I love reading and learning and TOD is a great place to read and learn along with the blogosphere :-) Happy to interact, debate and learn.

Has anyone thought of doing away with credit cards? Those of us older than boomers know full well that people can actually live without credit cards. If you want to keep the convienience, only issue debit cards, no credit. You have to have the money in the bank before you can spend it ... my, what a novel idea.

We use credit card on internet purchases because of the liability limits but for almost everything else I use a debit card.

We are certainly not rich by any stretch but we are thrifty. Could the rest of the people do the same? Of course, but most would cry a lot during the transition.

I refuse to use a debit card. It simply does not provide the protection a credit card does. If a credit card is stolen and used fraudently, it's the bank's money that's lost. If a debit card is stolen, it's your own money that's lost.

Sure, they might give it back to you eventually...but your bank account could be frozen for weeks or months while they figure it out.

With a credit card, you're simply issued a new account, and the old one is no longer your problem.

And don't pay at the pump with a debit card.

You don't travel as part of your job do you? See above. If I didn't travel, I would still want a credit card for Internet purchases. I don't want some hacker stealing the mortgage or grocery money because these things take time to sort out. I also refuse to give anyone access to my bank account like health clubs, but some require it or a credit card. They are a very useful buffer between what you can live without and what you can't.

"Has anyone thought of doing away with credit cards?"

Yes. I know a number of families that did this voluntarily. And you are right, there was "cry(ing) a lot during the transition."

And I would not be surprised to see virtually everyone doing without credit cards within a few years - inspite of their advantages - whether they like it or not. And like you say, there will be a lot of crying.

Has anyone thought of doing away with credit cards?

Yes. I got rid of mine. The only reason I got a CC in the first place was because one was required for taking a vehicle into Mexico. It was handy for ordering online, I discovered, and so long as I paid off the monthly balance it didn't cost anything to use it. For many years I paid off the balance at the end of each month. But then I financed a trip to Brasil with my CC, and used it to pay for some unexpected auto repairs soon after I returned, and found myself forced to carry a balance for awhile. It really burned my ass to pay interest, so when I paid off the balance, I destroyed the card. I don't miss it. Neither do I like the idea of there being an electronic trail of my purchases and whereabouts. "Neither a borrower nor a lender be" is very sound advice.

Fine, everybody seems to understand, that the world is about to enter a deflationary deapth spiral. The world economy including CHINA is going to implode. Fine. There will be revolutions all over the world, the US will fall apart, the end of the world as we know it etc. etc...

I assume (hope), that the so called ELITE is aware of that coming catastrophe. WHERE the f*** are the worlds largest centralbankers, who have spent years in learning to avoid the desaster of the 1930's? Why aren't they able, for example, to declare tomorrow: We, the FED, the ECB and the Japanese central bank have decided to bypass (print) a total of 90 Trillion $ of money, better even 200 Trillion $ or Euros or whatsoever.

Why are they discussing about a 10 Bio. or 12 Bio. rescue package for the auto industry? We are talking about DEFLATION! Just let the FED print this money. There is no need to take money from the taxpayer.

Why is the FED privately owned? This FED needs to be nationalized!


Ever considered they don't want to?

Besides that, printing $90 trillion would be the surest way to collapse the entire enchilada.

Yes, now it's clear to me. They don't want to flood the earth with money. They just want to wait until a average house is worth 1 US$. Then they are going to buy it.

I made a fortune going short so far this year. But since November, people like Jim Rogers and Marc Faber cautioned to being short. So I went long. And I lost so far 70% of what I earned being short. Each time I go short I win money, and each time I go long I loose money.

the worlds largest centralbankers, who have spent years in learning to avoid the desaster of the 1930's?

No, they've spent years claiming this. Consider that they may have engineered the Great Depression.

Just like every general knows all about how to fight the last war.

Nationalizing the federal reserve is only part of the solution. Right now the government is paying the Federal Reserve (Fed) to create and maintian our financial system. Furthermore, the gov't (read taxpayers) are paying through the nose for this service. It's not that complicated. The gov't could print it's own money and be done with the Fed. The problem lies with the realization that you need money to bring about any meaningful governmental change. The ones who control the money are vested in keeping the central banking model. After nationalization, we have to move away from compound interest. That is what is driving the growth imperative. It's possible to create a money system that will remain healthy as it expands AND contracts.

Despite having my MBA from Penn State, I've learned more about money and banking from reading Ellen Brown's "Web of Debt." It was surely an eye opener. Our graduate level business schools aren't teaching the reality of the central banking system. Many of you have become aware that the Fed is a private consortium of banks. Kudos to you guys for figuring that out. For the longest time I thought the Fed was part of the government...one in the same...What a sham.

Until we can take control and power away from the central banking model, we'll never see any meaningful lasting change. One startling fact that I learned from reading "Web of Debt" is that there have been attempts to change the central banking system. Ellen Brown points out that every American President that has been asassinated has had one thing in common...They've all wanted to move away from the central banking model. Go try to find that in a High School History book.

Any politician who makes it to office is bought and paid for. They preach the required sermons or they get their funding cut. The MSM is also bought and paid for. This is a useful tool for the powers that be to make a fool of any politician who speaks out against central banking. Ron Paul comes to mind.

Check out Ellen Brown's website: www.webofdebt.com
She's been staying current by writing articles that are published on this site. She basically takes the principles from her book and talks about current events in those terms.

Take care.

In Britain we nationalised the central bank in 1948 and it just enabled politicians to cause inflation. That's why in 1997 it was given operational independence. Also 3 of the 4 American presidents assassinated served before the US central bank even existed.

RE the asassinations of presidents: They all wanted to switch the financial system away from debt based, central banking models with compound interest. The Federal Reserve is just a central bank which implements this system. It's the system that these presidents opposed, not specifically the federal reserve.


you should check out http://emsnews.wordpress.com/ for keen financial analysis.

Would you rather own gold at this juncture or 30 year u.s. Treasury bonds? I happen to find the endless inflation/deflation exercise tedious, but this question seems apt from an individual financial standpoint.

Also an interesting editorial today from the NY Times:


Obama´s appointment of Geithner, as well as other appointments he has made to his economic team, do not bode well for those of us who had hoped that Wall Street´s death grip on political power in America could somehow be broken.

Meanwhile, U.S. homeowners lost $2 trillion this last year:


This is a huge loss for rank and file Americans, but thanks to a Washington D.C. that is little more than the handmaiden of Wall Street, the multi-trillion dollar losses of bankers and financiers are also being heaped upon the hoi poloi.

I can certainly agree with this. But how do you square your point about $2 trillion lost by homeowners with your certainty that inflation is about to take off. The bailouts are almost all going to banks who are almost all just sitting on it. And that's not even considering the enormous downdraft--or black hole, as some have dubbed it--that CDSs and other derivatives represent.

I think we'e in for more deflation for a while, but eventually this will likely turn into hyper-inflation as resource limits really start hitting.

But who knows. If any one of us here were very good at predicting the future presumably they would be billionaires by now and not wasting their time posting on forums.

I do want to pause to thank Leanan for her great work in collecting these news items for our perusal. You do a great service and always have interesting things to say about them, too.

Thanks, and have great holidays.

I think we'e in for more deflation for a while, but eventually this will likely turn into hyper-inflation as resource limits really start hitting.

I'm in total agreement.

Buy a home.


Keep refinancing until the interest rates bottom out (and by the way, even if we go Japanese deflationary, this is a good idea.)

Then, ride the hyperinflation until your mortgage is practically worthless.

Oh, and yes, feel bad for your friends who are paying $10,000/month in rent 10 years from now, while your mortgage is paid off...

But, buy a house.

What if your friends are paying $10 a month in rent 10 years from now...and you can no longer refinance because you don't have a job and/or the value of the home has dropped below the amount you've borrowed?

Even the strongest advocates of eventual USA hyperinflation (i.e. Peter Schiff) do not foresee $10000 a month rentals becoming commonplace-what is more likely is that imported goods are no longer affordable for the majority. Rents could actually drop as the value of the dollar plummets (with the exception of properties with foreign buyer interest). Property values in Detroit and Buffalo are a small fraction of what they were 40 years ago (in real dollars).

I thought that would be what limited the government printing presses. Imports would become insanely expensive...including oil. But so far, the "flight to safety" means we can print money with impunity.

The job security is kind of moot... Here's why- If I rent and lose my job and don't pay rent, I get evicted. If I have a mortgage and lose my job and don't pay my mortgage, then I get foreclosed. Same outcome, just different people showing me the door. Besides, there is little I can do to make my job more stable other than showing up and being a good worker. And, due to my personal situation, I both earn a wage and collect Social Security (in the name of my kids because my wife is deceased) so I have more income security than most. I know that no one else here has that situation, but it works for me. And if Social Security gets cut, then there are bigger things to worry about.

Also, if rents are $10, this implies a ton of deflation. I can continue to refinance as deflation hits (assuming the spread between mortgage rates and inflation isn't too high). In theory, if I did not have any interest on my loan I would only pay $300/month, way less than I paid in rent not more than 6 months ago. However, with everything going on, I have doubts that we'll see this kind of deflation.

With respect to home value, I paid 20% down for my home and in a pinch can cover for another 20%. I also live an an area that was relatively unaffected by the boom and isn't experiencing the bust that everyone else is. Again, an unusual situation but I am taking advantage of it.

My bigger concern is the fact that when you rent, you basically add a middleman between you and the bank. The landlord pays property tax and a mortgage and upkeep on the property you rent. Of course s/he will pass those costs to you, and add a markup (remember s/he's a landlord because s/he wants to make money). I remove the middleman by purchasing a house. I also open up the possibility to eventually pay it off and have neither a mortgage nor rent.

And if the bank forecloses, guess what... The difference between the value of the home and the value of the mortgage is their problem. Ultimately, they assume that risk... Not that it's fair, or right, or I agree with it, but if I were totally out on my luck and I was massively upside down on my house the outcome would be that the bank would have egg on their face (although I'd have a trashed credit report).

If I rent and lose my job and don't pay rent, I get evicted. If I have a mortgage and lose my job and don't pay my mortgage, then I get foreclosed. Same outcome, just different people showing me the door.

Only if you didn't make a down payment or put any other money into the house.

I know that no one else here has that situation, but it works for me.

That's fine if it works for you, but IMO it's irresponsible to tell other people to do what works for you. You don't know their situation, and it's likely not the same as yours.

I also live an an area that was relatively unaffected by the boom and isn't experiencing the bust that everyone else is.

I think it's only a matter of time before it spreads from "boom" areas to the rest of the country. This is the top of the 2nd inning. Heck, maybe only the singing of the national anthem.

If you can afford to lose your down payment, fine. But not everyone is in your position.

P.S. I don't think this is true, since you have refinanced:

And if the bank forecloses, guess what... The difference between the value of the home and the value of the mortgage is their problem.

In most states, they can come after you even if you're foreclosed on, if you have refinanced. They can't do that if you have not refinanced. One reason to think carefully about refinancing.

That's fine if it works for you, but IMO it's irresponsible to tell other people to do what works for you. You don't know their situation, and it's likely not the same as yours.

And the other side suggesting you should keep renting is not equally irresonsible?

In most states, they can come after you even if you're foreclosed on, if you have refinanced. They can't do that if you have not refinanced. One reason to think carefully about refinancing.

Agree with you here, it is best not to refinance, to limit your risk.

I'm not telling him to sell his house and start renting. I'm just saying that there's a lot to think about before making a rent or buy decision. It's not as simple as he's making it out to be. Maybe it is the best thing for him to do. That doesn't mean everyone should do it.

That's fine if it works for you, but IMO it's irresponsible to tell other people to do what works for you. You don't know their situation, and it's likely not the same as yours.

Ok! I cry uncle. You are absolutely right... Let me modify my suggestion:

Buy a house *IF* you can comfortably afford it, have two sources of income (where one of which will still allow you to pay the mortgage comfortably) and can put at least 20% down and be able to cover more of it if need be.

And yes, I can afford my current payments without the refinance. I have not (nor will I ever) leverage myself out to not be able to afford my living expenses. It just makes sense to refinance a fixed rate when it drops and hold tight when it goes up (and lately, it's dropped quite a bit.) The mere act of refinancing will save me $100/month. (The bank said I could afford twice the amount of house than what I actually bought. I thought they were smoking something in the back room by even suggesting this.)

HOWEVER... If it places me in long term risk (which is news to me), thanks for the heads up.

The refinancing question and the question of whether the bank has "recourse" is very important, and yet, last month when I was about to refinance, I could not figure it out. There is a website of non-recourse states with comments, but I got very confused reading it. I had an email exchange with the bank (Chase) about it, but they made me feel like I was a moron for suggesting there was such a thing as a non-recourse mortgage. Anyway, I did not refinance, and now I am glad because rates are lower and we might be moving.

Ilargi's clear advice is to to avoid being in debt, meaning, I suppose, that renting is preferable. The way I understand it, it's because cash is the only thing that does not depreciate precipitously in a deflationary spiral. In the Great Depression, people could not sell and would thus lose everything. The better choices are to either rent or own outright.

I remove the middleman by purchasing a house. I also open up the possibility to eventually pay it off and have neither a mortgage nor rent.

My parents (in their 70's) bought a home 40 years ago and paid off their mortgage in 30 years and now in their retirement years have no mortgage payment. That's great for them but this is a Brave New World. My niece bought a home three years ago with her new husband and the in-laws pitched in the down payment - Nice! Now her husband has been offered a job in another city and he needs to take it so they need to relocate. The current value of the home is now less than what they owe so they are looking at the prospect of renting it out and they are interviewing property management companies. They are estimating out of pocket expenses of over $200 per month. They also need to keep two months of expenses in reserve. For a young couple in their twenties that is hugely stressful.

The financial problems we're in today is because middle-class Americans tried to make homes the national savings account. That Bank gone bust!



I suppose I'm not making myself very clear.

I never meant to infer that I believe with any great conviction that we will have inflation.

However, the debt bubble is without historical precedent. We're in unchartered water here. Because of the enormity of the debt, I believe there are only two possible outcomes: default or inflation(devaluation). I really don't see how the nation can possibly honor all its debts.

I believe inflation will be more politically palatable than default.

But either way it will be extremely painful for the American people. It's kind of like having to choose between the firing squad or the hangman's noose.

Job cuts adding to growing number of housing defaults

Unemployment is now the cause of almost half of all foreclosures on conventional mortgages, raising concerns that mounting joblessness will stall any housing recovery and could cause more foreclosures next year.

The increase in unemployment as a cause is a significant shift from 2007, when foreclosures were primarily driven by the large number of homeowners who had taken on risky loans. Many were first-time home buyers or those who bought during the housing boom that ended in 2006.

Now, layoffs and the recession are playing the pivotal role in driving mortgage defaults. The 4.3 million people collecting unemployment is the most since 1974, the Labor Department says.

This seems to be a proper place and time to meditate on the following:

That lovely graph showing the resets for ARMs does not include unemployment, of course, so, we must calibrate our guesses to include that graph AND potential unemployment.

Has anyone done this? Does anyone know if, for example, Meredith Whitney's 40% drop in home prices includes unemployment with the reset assumptions?


I love the convenient shift in attitude toward the masters of the universe from the NYT.

Maybe we'd be in slightly less of a mess if they'd been so insistent about questioning TPTB in say, I don't know, November 2000, March 2003, or November 2004.

But hey, what do I know, I'm just another crank on the Internet!

The NYT cannot go bankrupt soon enough.

+++++ oh about a 1000, what a worthless newspaper......barely suitable for toilet paper. And start the firngs with the flagship writer, Maureen Dowd who apparently thinks she doesn't have to write anything worthwhile.

Oh I dunno, they sometimes have a weird sense of humor like this juxtaposition of top stories on Dec 8. Irony maybe???

Detroit Bailout Is to Bring On U.S. Oversight
Congressional Democrats were drafting legislation for government control of the auto industry, including the possible creation of an oversight board.

In Hard Times, Russia Moves In to Reclaim Private Industries By CLIFFORD J. LEVY
The Kremlin seems to be exploiting the economic crisis to establish more control over financially weakened industries that it has long coveted.

Now that's funny! :)

Those are just the official numbers - actually homeowners lost much, much more than 2 trillion. Think about it - every homeowner now underwater whose bank won't permit a short sale and who can't afford to eat the loss, has just seen their house transmuted from a salable asset worth something to an asset worth nothing - because they cannot extract any value from it. They can't borrow against it, and they can't sell it. Every person who can't sell at any price they are willing to accept (and in many areas, homes aren't selling at all) now has a home that is worth $0 to them in real access - but generally takes a lot of money to maintain. Every person who can't get credit for a new loan, and doesn't have anywhere else to go, but can keep paying their mortgage has seen their house's value turn, functionally to $0 - and seen it continue to eat up their money. Everyone who knows in their hearts they will eventually lose it to foreclosure if things don't get better now have an asset worth functionally nothing - and an enormous purse-suck.

The only meaningful way to shift our housing from the debit to asset category is to move more potential earners into it, particularly ones who are set to make a living outside of the formal economy if necessary, and to transform the house from an asset-sucking space to an asset generating one. If you can functionally drop your mortgage payment, while growing food, fuel and fertility on the land, and also doing work from the house, you can potentially shift its value into the asset column - but this won't work for everyone's house - there are too many of them. And it won't work if everyone plays chicken and refuses to consolidate because they want their house. So ultimately it only works if there's a concerted effort to do so.

Sharon Astyk

I think it's important to realize that in some areas, such as California (and Florida?), the suburban houses are built on very small lots, as in 6 or 8 to an acre, as I recall. Growing food and fuel, etc, on such a small size lot, especially after the top soil has been removed, is a nearly hopeless situation...

E. Swanson

This is absolutely true - and true of many older suburbs in the Northeast as well. But it is also worth noting that even cities routinely produce significant portions of their food within city limits - as much as 20% of meat and produce. So yes, high density suburbs will produce less food - but that doesn't mean they are completely hopeless.

As for the topsoil - that does make it harder, although that's simply not the universal practice I sometimes hear about, at least in the Northeast. Soil can be built - but it will suck very badly to have to do it when times get rough.


Answer: Tilth, Nutrients, Microbes
Question: What I was learning about soils last night

Bless my wife, this is what we did.

We bought AND we rent, as in renting out. Owner occupied with two apartments, hence 5 salaries under one roof.. and a growing collection of energy harvesting gadgets on TOP of that roof.

I would ask anyone who is worried about housing security if they've made a very simple preparation apart from the Rent/Buy, which is to own a good Tent, maybe a couple cots, and other such long-term camping aids. It does sound pretty extreme to some, I suppose, but in my mind adds a level of resiliency without all that much bulk.


Cheaper Plastic Solar Cells In the Works

no details about pricing or production date.
nuclear fusion is also "in the works", but it won't be here for a looong time.

what happened to the big names of the spring - summer? nanosolar, A123, eestor, and many more. thin film solar sheets and better batteries, where are they?

The law of receding horizons.

Just when momentum was building...WHACK! Think you american's call it out of the ball park!

Even plastic solar cells is kind of an oxymoron, how can anything be renewable that's based on plastic (derivative of oil)

Making something out of plastic that will return many times the energy is not a bad idea. I do wonder though how long will those plastic solar panels last in actual usage. We like to think of "plastic" as indestructible, but the one thing that quickly turns most plastics to dust is sunshine (UV light).

how can anything be renewable that's based on plastic (derivative of oil)

Plants make oil to store energy for their seeds. This oil can be extracted from the seeds.


Is it possible to make plastic from plant oils?

Not from the oils specifically, but yes you can make plastics from plant matter.


Unfortunately the process is less "green" than plastics from petroleum.

I thought this quote was funny:

“We felt strongly that everywhere we can get out of petroleum products, we should,” says Newman’s Own CEO Peter Meehan. “No one has ever gone to war over corn.”

Gee whiz, Mr. CEO. Nearly every single war until modern times was about control of food and water.

Starches, actually. AFAIK..

Check around the Green-plastics.net site, for some good stories/samples..


Mervin's snowboards could actually be the closest thing to green. A bio-plastic top, called BEANS, is made entirely from castor beans. Cores are developed from fast growing renewable farmed wood such as bamboo, all graphics are created from their water-based ECO Sub sublimation system, and additive-free basalt fibre is used on many of their high-end boards. The shop itself, located in Carlsborg, Wash. is also a great model: it runs on biodiesel, has certified green power, uses only low volatile organic compound epoxy resins, citrus-based solvents and recycles as much scrap materials as possible.

Here's the Book at the heart of the site..
by E.S. Stevens
"No material on earth has been so highly valued for its usefulness, yet so maligned, as plastic."

It's interesting now that Russia is feeling the depletion curve, they would rather talk up OPEC style cuts. "We dropped on purpose"..."Ya, that's it".

The Only major Bank CEO to say sorry so far I believe

In a remarkably candid interview, John Varley, the group chief executive of Barclays, warned that Britain is only mid way through the house price slump - meaning the total fall could be as much as 30 per cent.

He described as "madness" the previous lending policies' of banks, in which 100 per cent mortgages and beyond were approved.

Mr Varley admitted that banks were partly to blame for the current recession, saying it was time they showed "humility" and said "sorry" to customers for their role in the sharp economic downturn.

He said banks needed "to take their share of responsibility".

One thing I admire about the British press is that even in their main publications they talk openly about peak oil (the guardian), they have their residential doomer (Ambrose Evans - Telegraph) and they have done really good reporting on the stories so far (Times, FT). They have been far more truthful and honest than the MSM elsewhere.

Maybe it's because the Brits are so dour?

The US press for the most part is like a laptop of big corporations and politicians except for bloomberg and The Daily Show :D

One thing I admire about the British press is that even in their main publications they talk openly about peak oil

Certainly it gets mentioned occasionally but I'd say most of the UK population has barely heard of it if at all.

The BBC really annoys me as I've no doubt they have a very strong handle on it but refuse to broadcast virtually anything about it nationally (other than as a fictional drama) and change the subject if a guest brings it up.

One major exception to this is BBC Newsnight Scotland which has had at least two debates on Peak Oil plus discussed how Peak Oil fitted in with the financial crisis just last week.

I don't know if Scotland has special dispensation because it's where the UK oil industry is based or whether it's just Scottish editorial staff sticking two fingers up to Paxman (who appears to just accept they can't talk about it nationally but soothes his conscience by putting on a gloomier face and becoming even more sarcastic while he continues to cash his pay cheque) & Co in London.

Maybe it's because the Brits are so dour?


It's the wind, rain and cold temperatures that gives us those frowns!! Walk into most British pubs (our equivelant of your churches as our diety is a pint of lager or eight) and things get livelier!

By the way we also get the Daily show and I love it.


Maybe it's because the Brits are so dour?
I was quite happy till I found out about Peak Oil. Now I am just sitting here like a frightened rabbit in the headlights as we zoom past the US going through Dimitry's stage 1, stage 2 and stage 3:


Well I don't think the UK press is really any better than the US's. A lot of people read tabloids and the television (even the BBC) is dumbed down beyond belief. Most people have absolute no idea what's going on - except those unfortunates who speak to me. Even then most of them are still expecting their house prices to recover in spring.

You guys in the US are pretty lucky - you have huge tracks of land and wilderness to support you if the worst got to the worst. I can't even find a bolthole with a bit of land as house prices are still insane here.

Actually i'm in Australia at the moment, though I am leaving soon to go back to Kenya (My home country). I understand what you mean about land prices and weather in the UK. It's really ridiculous!

I reckon BBC international does a better job than the local stations, the BBC's documentaries are fascinating, the TRAP comes to mind, 3 part documentary on the idea of freedom, negative and positive liberty and how it affects politics and the right wing economics of today that is so prevalent.

The Blue Planet series was top notch as well. I also love Top Gear. Clarkson should be PM, my that would be a lot of fun! :D

I think that most people in the UK read The Sun, that too for page 3 and keeley Hazell. LOL. I used to read the International Express a lot before, weekly infact. Was great fun once you got past page 5. As there would be only be bad news till than! Many fine publications such as the economist and the sunday times are good too. (Too bad they have low readership)

I have a soft spot for Britain though, it's history fascinates me and too have a Queen is cool! (remember Queen Elizabeth found out she became Queen at the Tree Tops lodge in Kenya)
It's a small, cold, rainy island but it managed to conquer the world. And along the way there were many fine scientists, thinkers and engineers. Britain changed the world. Even America is hugely influenced by Britain to this day.

... and who knows what the next repercussions might be. Most Americans don't even know the Republic has actually been disbanded, to whit..

Declaration of Revocation by John Cleese

To the citizens of the United States of America, in the light of your failure to elect a competent President of the USA and thus to govern yourselves, we hereby give notice of the revocation of your independence, effective today.

Her Sovereign Majesty Queen Elizabeth II will resume monarchical duties over all states, commonwealths and other territories.

Except Utah, which she does not fancy.


To aid in the transition to a British Crown Dependency, the following rules are introduced with immediate effect:

1. You should look up "revocation" in the Oxford English Dictionary. Then look up "aluminium." Check the pronunciation guide. You will be amazed at just how wrongly you have been pronouncing it.

The letter 'U' will be reinstated in words such as 'favour' and 'neighbour'; skipping the letter 'U' is nothing more than laziness on your part. Likewise, you will learn to spell 'doughnut' without
skipping half the letters.

You will end your love affair with the letter 'Z' (pronounced 'zed' not 'zee') and the suffix "ize" will be replaced by the suffix "ise."

You will learn that the suffix 'burgh' is pronounced 'burra' e.g. Edinburgh. You are welcome to re-spell Pittsburgh as 'Pittsberg' if you can't cope with correct pronunciation.


9. All American cars are hereby banned. They are crap, and it is for your own good. When we show you German cars, you will understand what we mean.

All road intersections will be replaced with roundabouts. You will start driving on the left with immediate effect. At the same time, you will go metric with immediate effect and without the benefit of conversion tables. Roundabouts and metrication will help you understand the British sense of humour.

10. You will learn to make real chips. Those things you call 'French fries' are not real chips. Fries aren't even French, they are Belgian though 97.85% of you (including the guy who discovered fries while in Europe) are not aware of a country called Belgium. Those things you insist on
calling potato chips are properly called "crisps." Real chips are thick cut and fried in animal fat. The traditional accompaniment to chips is beer which should be served warm and flat.


14. You will learn to resolve personal issues without using guns, lawyers or therapists. The fact that you need so many lawyers and therapists shows that you're not adult enough to be independent. Guns should only be handled by adults. If you're not adult enough to sort things out without suing someone or speaking to a therapist, then you're not grown up enough to handle a gun.

15. Please tell us who killed JFK. It's been driving us crazy.

16. Tax collectors from Her Majesty's Government will be with you shortly to ensure the acquisition of all revenues due (backdated to 1776).

Thank you for your co-operation.


and so on.

You know, absence makes the heart grow fonder, but if you keep printing things like that we might remember why we kicked you out. We'll give you our guns right after we're done killing all the lawyers and therapists. Then you have to come take them personally, just like you tried to do in 1776.

Of course, in all seriousness, we learned everything from the Brits, from slavery to the service economy. We're something like 50 years behind you in our evolution so our Suez Canal will be along soon. Back taxes? Well good luck with that, we're broke just like you guys after WWII. Plus ça change...plus c'est la même chose.

The queen is a timeless lady though, we'll take the old gal any day. But you have to keep Prince Charles to yourself. Just looking at him reminds me of the famous Dutch joke about ugly babies being dropped in the channel and swimming to England.

Just remember - this time you won't have the French to save your asses from us...

I'd heard it was a ruse.. but whatever, it's still funny. to me..

But I liked the US Responses in your link as well ..

9. We'll tell you who killed JFK when you apologize for Teletubbies.

But her fahher has Huge tracts of land. Seems that longing persists to today.

they have their residential doomer (Ambrose Evans - Telegraph)

It's this kind of thinking that really gets to me: the idea that the important thing is to have someone from the doomy point of view rather than having someone who's well thought out and right, and that rightness happens to be in a doomy forecast.

I don't read newspapers beyond the occasional linked online article, but from what I've seen Evans-Pritchard has a strong view on many things such as Euro integration and looks for evidence to interpret in a way supporting those positions. As for the British press being honest I think that's another case of viewing things through your own perception. I doubt the number of factual inaccuracies is different in the UK compared to elsewhere (it's probably reasonably high everywhere), the UK just happens to default to a "troubles coming" viewpoint rather than a "things'll get better and here's how you can gain from it" viewpoint. (When house prices were rising common reporting was "People are seeing the housing ladder start to be pulled out of reachability, and should worry if they don't get on now" -- negative viewpoint on a bubble-supporting story.) I doubt they have particularly good reasons why they are reporting the "troubles coming" viewpoint. (Ie, I think they're right but I don't really think they have solid reasons for being right.)

Also, foreign readers should be aware that the UK has developed a media culture over the past 20 years where the single, only important thing is to show publicly and convincingly contrition for what you've done. Once you've shown humility that's supposed to be all that matters. Maybe I've got the wrong kind of mind, but beyond a little I really don't care if you feel bad about what you did in the past, what I want to know is if you've figured out why things went wrong in the past, learned from it and are prepared to accept measures to stop the past repeating itself. If you'll do those things I couldn't care less if you feel like a Master of the Universe who should never know shame.

60 Minutes again - my have they become (more) topical all of a sudden. Yeah - I know it's not about energy.

A Second Mortgage Disaster On The Horizon?

(CBS) When it comes to bailouts of American business, Barney Frank and the Congress may be just getting started. Nearly two trillion tax dollars have been shoveled into the hole that Wall Street dug and people wonder where the bottom is.

As correspondent Scott Pelley reports, it turns out the abyss is deeper than most people think because there is a second mortgage shock heading for the economy. In the executive suites of Wall Street and Washington, you're beginning to hear alarm about a new wave of mortgages with strange names that are about to become all too familiar. If you thought sub-primes were insanely reckless wait until you hear what's coming.

I saw this segment in the bar & lounge at my local ski resort. I'm pretty sure they simply didn't bother changing channels after the 4 PM NFL game concluded.

The sparse number of teenage punks snowboarders present on Sunday night only made the scene more surreal.

I did drive by the local mall, and it did appear that many were out doing their best to uphold the non-negotiable "American Way of Life (TM)".

Speaking of TV, caught a glimpse of Bob James, the J-Pod man on ABC news in the San Fran area selling his J-Pod idea last night.

Way to go Bob.
(that being meant in both ways :-) )

Just one correction. Bill James.

On ABC news, you say?

Yes, something similar to this story

Ok, found actual ABC clip here

New $3 Trillion Bailout Is Coming to the Masses

The Hubbard-Mayer plan calls for the government to revive the moribund housing market by providing just about everybody with access to a 30-year fixed-rate mortgage with a 4.5 percent interest rate. That’s almost a full percentage point lower than the average national rate of 5.47 percent currently.

IMO the financial sector has the USA economy in a choke hold and the end result is not going to be pretty-add this 3 trillion to the 8.5 so far. 11.5 trillion dollars is only about 50 X total annual USA corporate income taxes. There has not been one thing done to date that is an honest attempt to better the economy of the USA-every single scheme (including this one) has been solely directed toward the financial sector.

4.5% is way to high for most Americans and 5% down is to much money few have that much.

It needs to be 1% with 1% or zero down to fly generally zero down and also it has to roll all the costs of the loan into the loan. And incomes must be stated or ignored.

In short anything that is not equal to the original subprime loans will not do any good.

In fact given the current state of the economy we probably would need the size of the loan to decline with home values i.e you get to lower the principal annually if home values decline. At the minimum you need a garunteed short sale with no mark on your credit. And of course you need hardship forebence with interest waived if you lose your job or have a hangnail. So a medical hardship part.

And of course it better work well for minorities.

So it needs a lot of stuff that present in Student Loans without the repayment pressure.

Then it might work !

Ptoemmes article estimates that 70% of the Pay Option Arms will default when they reset.

This article on the subject of Pay Option Arms is just out and includes a really interesting chart, about halfway down the article, showing the numbers of these mortages and the dates they will reset. This does not bode well for the 2009 and 2010 "recovery" that the MSM is hyping every day on TV.


There isn't going to be a "recovery". If we are more lucky than we deserve, we just might manage to level off and gain some time to adjust to the new reality for a while before the next step downward.

I would guess that once you reach a critical mass - maybe 20% of mortgages in default, the whole thing will topple. Apart from the bank finances, once everyone knows someone who has mailed the keys back without legal problems, then won't everyone do it? Then everyone who fancies a vacant house - just moves in..anarchy?

It'll be the new land run, possession becomes the law. Wait until people get desperate enough to start rioting, the local real estate agents and repo guys will be the scapegoats. We're such a different society than the 30s. Its going to be ugly, got bullets?

No, sorry, not anarchy....chaos maybe.

But not anarchy...I know.

Power Down.

I posted this on Robert Rapier's post, doing so on the drumbeat as well. Any more ideas/ suggestions?

How to mitigate peak oil

1) Compulsory education in High school and University on NET energy. 101 Energy and Thermodynamics.

2) Compulsory education about fertilizer. NPK 101, textbook by author Bob Shaw (Totoneila). Have you hugged your bag of NPK today?

3) Increase Efficiency across the board through strict regulation.

4) Raise consumption taxes of items that require more energy to produce through the roof. Items should be priced according to the energy they use!

5) Raise Gas taxes globally (Sure it'll guarantee a depression but do you want a depression now or a global collapse later?)

6) Make it patriotic to use less energy, to use less in general! Society should reward less.If women rewarded less, men would oblige with using less. The mess that got the world into this in the first place is competition for mates. All the MSM propagada tools are available for us!

7) Use the taxes gathered to create a sovereign alternative energy fund and keep Robert Rapier and Nate Hagens in charge. :-) (or atleast someone who knows money and energy) Invest in 100 different ideas if possible but all based on NET energy.

8) Invest in comprehensive public transport

9) Trains (Even if it's not high tech, let General Motors become General Trains)

10) Cut the working week to four days. Less time and energy wasted in commuting.

Make incandescent bulbs illegal, and develop a low cost LED or othr technology lighing source.

Build nuclear plants, and legalize waste reprocessing. Oh, and use Thorium as well as breeder reactors.

Build more wind turbines, develop ocean current turbines,

Reward working from home.

Dismantle the airline industry and invest in rail- especially electrified rail.

Tax subsidies for energy efficient doors, windows, insulation, and geothermal heating installation.

Quota on petroleum products like gas and deisel, with a free market for people to sell their quota.

Make the sale of any new car that gets less than 30 mpg illegal, raising this by 2 mpg per year for the next 10 years.

Implement regulation to stop further urban sprawl... In other words, force further growth to occur inside cities instead of the outskirts. This will reduce the need for long distance commutes.

Invest in solar R&D.

Free birth control (seriously.) Less population means less demand.

Recycle O-NPK from sewage (reduces need for I-NPK).

Recycle overall... Require that all items manufactured should be able to be recycled.

9) GM sold their locomotive division (EMD) to Warren Buffett.

Not Much Hope for GM,


We have a former GM assembly plant here in Dayton - great rail access - would be a great place to make rail cars.

Counds like the Fed is going to put the interest rate limbo bar to the floor...

Federal Reserve may cut interest rates to 0% soon

Economists expect the Fed's policymaking Open Market Committee to cut its short-term interest rate target, now at a scant 1%, to a record low of at least 0.5%, or further. The federal funds rate, which banks charge each other for overnight loans, is a benchmark for business and consumer loans.

If the Fed doesn't push its interest rate target to zero on Tuesday, many economists expect it to do so at its January meeting. Then the Fed will have to experiment with other strategies for pumping money into the economy to spur business activity.

...economists predict a big rate cut but expect little impact. Banks have pulled back from lending, and consumers are reining in spending. The federal funds rate has already fallen well below the Fed's 1% target in credit markets. The rate averaged just 0.14% on Thursday, for example. Interest rates on Treasury bonds have also fallen to historic lows as investors snap them up, desperate for a safe investment.

Why does this suddenly remind me of Japan?

This is a scheme worthy of Madoff-the Fed places a huge liability against the USA tax paying public (8.5 trillion), gives it to the banks, who in turn invest it in USA t-bills. The USA taxpayer is buying USA treasuries yet he gets no benefit-the assets are owned by the banks.

That Madoff ponzi scheme is unreal. Last night on CNBC they were going on about how only a few individuals who let greed overcome common sense got caught.

Today, we find out big banks like HSBC got caught, too. They may have lost a billion dollars to Madoff.

The scary thing is Madoff would be OK if his firm would have been able to tap into taxpayer funds like many others-he definitely wasn't the only one-when you see one cockroach in your apartment it usually isn't a lone wolf.

I heard a bit of CNBC this morning. The talking heads were whining about a lack of government regulation and oversight, as if the rules had not been changed to the benefit of the crooks. Where did the free market conservative/libertarian sect go?

I doubt if they will go all the way to zero. I am suspecting that they'll stop at 0.5 or maybe even 0.25, but leave it just short of zero for appearances sake, if nothing else.

I forgot again, what distinguishes a "Fast" crash from a "Slow" crash?

What kind of change, within what time frame ?

We're going back to the solar maximum of this planet over the next generation or three. How we conduct ourselves now determines whether we end with a lifestyle from 1940 … or one from 1490.

Building functional alternatives takes time … and oil. No utility scale wind turbine in this country went up without a whole lot of diesel powered construction equipment to install it. The same goes for any solar collector, hydroelectric dam, insulated house, or rail line...


What if we hit "1490" in less than one generation?

Is that even "possible"??? What would it take for that to happen?

What Ilargi is trying to convey is that credit is the lifeblood of the modern economy. It is getting sucked dry. We are seeing credit contraction on an epic scale. Likely to get exponentially worse.

Basically at present we have no alternative to oil, renewables are only scalable to a certain point and might never be large enough to replace fossil fuel use. And in reality what we call renewables are really derivatives of oil. You need oil to extract minerals, coal, power the machinery, transport the steel and equipment, you need oil to feed the workers etc as currently for every calorie of food consumed in America, Australia, Canada we require 7 - 10 calories of fossil fuels.

I believe that 12% of current energy use goes towards feeding the populace. Also once oil production peaks, that could mean the peak of everything. As we hit mineralogical barriers at some point and simply can't extract the metals and coal required at the same rate. Plus the NET energy content sharply declines as well on the downslope.

The 1490 scenario is the die-off event.

Without access to credit, the economy contracts, when the economy contracts, credit becomes even less available. What makes this recession/ depression far worse than normal is that the biggest credit bubble in history has burst. The banking system were it not for level 3 mark to myth fantasy accounting would be bankrupt. They are already insolvent (Liabilities > Assets)

So without access to credit, we enter a violent self feeding cycle. That is ever worsening due to the massive debt load. So as credit dries up, people lose their jobs, as people lose their jobs purchasing power erodes, as purchasing power erodes the economy worsens, countries which are net exporters suddenly find their exports falling off a cliff, so they start to contract, unemployment increases there, banks become increasingly panicky about making loans.

In the worst case scenario, it is quite possible that the demand for oil contracts sharply. Maybe 30-40% due to the lack of ability to pay. Than we have a situation where due to lack of credit the 26 trillion dollar investment required to prevent oil supply from contracting to 9-25 million bpd by 2030 is simply unfeasible and the financing is unobtainable. So than we have a race towards the bottom - between demand and supply, eventually supply wins IMO.

We could easily see MASS unemployment in countries like China lead to civil war, already there are 86,000+ protests there annually. We could see countries suffer very badly from collapsing oil prices and lack of investment, think of countries like Venezuela, Russia, Saudi Arabia with a restive population in quite explosive regions. Easily a recipe for turmoil and proxy wars.

What would be the result of unemployment levels of 30-40% in the US, UK and the EU? Think of what's happening in Athens times a 1000. The last time there was a depression it led to all sorts of crazy movements - fascism, nazism, rabid nationalism and countries sought to control the world's resources for themselves, hence global conflict. Only this time, many countries are armed to the teeth with nuclear weapons.

It is quite likely that a Greater depression could lead to such instability, chaos and violence. Also the collapsing oil supply means that industrial agriculture dies a painful death, leaving billions potentially cold and hungry. This is a recipe for disaster.

For more there's http://dieoff.org/

For Jay Hanson the only outcome is Nuclear War. I hope he's wrong but his logic is hard to beat. I hope Ilargi is wrong, his logic is hard to beat as well.

EDIT: Also oil pipelines need a certain amount of oil constantly flowing through them to function. If that goes below the threshold, than it doesn't matter if there's oil left. The oil will simply stop flowing. Also global electric grids are highly vulnerable to a lack of oil and also there needs to be massive amounts of repair required, as from what I hear and read the US grid has not gotten updated for a long time. Gail the Actuary has some excellent posts on this on TOD.

Also apart from the trillions that are required to find the 6 new Saudi Arabia's to prevent a supply collapse, the war on rust always goes on. The world's energy infrastructure is being eaten by rust and there has been little investment If one were to believe Matt Simmons in maintaining that infrastructure during the boom times. Much needed replacement is required and with the credit crunch, the money simply isn't there to do this on the grand scale required.

There are many feedback loops and so many things are intertwined. How Humans behave and react to all this is key as well. Will we power down and accept with grace our predicament or will be simply unleash fury that hell hath not seen even?

Why do you hope Hanson & Ilargi are wrong? In the first place, events are going to unfold however it is they unfold, regardless of what you or anyone else "hopes" for. And in the second place, the biosphere can't support a human population in the billions, without massive fossil fuel inputs which are unsustainable. Reduction of human population by an order or two of magnitude is inevitable. If the human species was capable of accomplishing this reduction by means of attrition (lowered birth rate to well below replacement level), we would already have begun the process. Given our inability to act in opposition to our own fitness, nature must take its course. Whether events unfold along the lines you have spelled out, or otherwise, remains to be seen. What is certain is that human population must - and will - be greatly reduced, probably sooner rather than later. What's the point in "hoping" that the inevitable won't occur?

I really don't have an answer. Wishful thinking might make me feel better I guess. Kind of like hoping for the best, expecting the worst? :-) And I believe humans are biased towards optimism. So that might explain it

Maybe we should have a targeting exercise to define those areas which will have the highest yield in terms of removing the most humans while doing the least amount of damage to the earth and requiring the least number of warheads?

I have said it before. The cities like NYC, LA, NOLA, ATL, etc. will be killing zones. Either from an outside force, or from the idiots run wild within.

We are 72 hours away from chaos in this country. That is what foodstuff will last during an emergency of national proportions. Don't even give a thought to moving food from one part of the country to another in time. The rail system ain't there. ( Ask Alan...)

How many people do YOU KNOW, that could go 2 weeks without shopping for food and water? How about 3 days?

The "targeting exercise" has already been done....just ask anyone in upper military.

Power Down...

How many people do YOU KNOW, that could go 2 weeks without shopping for food and water? How about 3 days?

I'm not Mormon but a lot of people around here are. It's a tenet of the LDS church that members have at least one year's food stockpiled per household member. Most church members abide by that teaching. A lot of people around here are Native American, too. While most perhaps don't have grains or canned goods stockpiled, the herds & flocks owned by extended family members amount to food stockpiled "on the hoof," so to speak. I know quite a few people who could go considerably longer than two weeks without shopping for food.

I haven't done a detailed inventory of the food my family & I have stockpiled, but our pantry is pretty well supplied with home canned & store bought canned goods. My wife and I canned 70 quarts of tomatos this past growing season, for instance, not to mention all the other produce we preserved in one way or another. Most of the grain we have stockpiled is for poultry feed, but could be cleaned & directly eaten by us. (Unfortunately, the grain cleaner involves an electric shop-vac.) We do have several dozen five gallon plastic buckets filled with cleaned grain & sealed with CO2. I think that we could go a year, supplementing stored food with wild game, if we had to.

But what then? Our property has better potential for sustainable food & fuelwood production than most but I am under no illusions about being able to grow sufficient food on it sans fossil fuel inputs. Even with a truck for hauling biomass for composting, I still resort to I-NPK inputs. And the garden is totally dependent on the maintenance of irrigation infrastructure far upstream from our own headgate. Without a diesel trackhoe for clearing out the cattails every other year or so, the ditch stops flowing. The point is: If even an old hippie back-to-the-lander like me, who owns his property free & clear, is going to starve, all you upper middle-class urban & suburban types with mortgages & credit cards & other heavy investments in BAU, who know little or no basic biology let alone horticulture or animal agriculture, haven't a chance in hell of surviving.

It's been done. File an FOIA request.

Why nukes? Why not pox? I'd say that smallpox would do a better and more long lasting job in culling homo sapiens than nukes ever could, and the environmental damage would be a lot less distinct, too. There's nothing better to keep population numbers down than a whole bunch of terminal diseases.

I bet Don Rumsfeld will sell you the GM vaccine too...needs a booster every week..how much??

...and then what? whoever remains would continue to overpopulate until the game replays again.

unless you convinced them all not to, but you can't because evolution works against that.

you could rule them with an iron fist, but for how long? and what concessions to infinite growth would you need to make, in order to maintain control over billions of people?

Darwinsdog, I bet you're fun to be around at a party.

"Be Prepared" Hope for the best, plan for the worst. Without hope, you're not going to last very long. All you have to do in the "1490" scenario is make it through the first year, after that life is a rebuilding job because everyone who couldn't make it....didn't. I see nature's carnivores making a huge comeback, and in some cases its already starting in the populated areas. Its a good thing because we're going to need the hides for warmth.

As the joke goes, you don't have to outrun the bear, you just have to outrun the guy next to you. How you do that is up to you.

I understand the big picture you are talking about - the symptoms of and feedbacks within a systemic collapse.

I guess I'm asking whether or not there is some sort of consensus on the definitions and timing of a "Fast Collapse" vs a "Slow" or "Moderate" collapse (leaving "soft landings" out of it for now).

If I remember correctly, Greer thinks we are looking at a step-wise fall over roughly 150 years.

And at your dieoff link there's Tainter's quote, which I guess would define what most would call the "Fast Crash" model:

"the "crash" that many fear -- a genuine collapse over a period of one or two generations, with much violence, starvation, and loss of population. "

So are those the two extremes for a fast crash, vs a slow crash? A period of say 40-150 years - until we hit a bottom (using Stranded Wind's worst case scenario of Year "1490" like conditions for the definition for "the bottom" seeTAE, Dec. 14).

I'm just wondering how many people consider the possibility of a Fast Crash with a "1490" bottom being completed within a decade or so ???

(((Edit - assume collapse without invoking a "nuclear war" or "sudden ice age" or "mud volcanoes deflating the earth"... etc.

Assuming Dmitry Orlov is right:

"Although many people imagine collapse to be a sort of elevator that goes to the sub-basement (our Stage 5) no matter which button you push, no such automatic mechanism can be discerned.

Rather, driving us all to Stage 5 will require that a concerted effort be made at each of the intervening stages.

That all the players seem poised to make just such an effort may give this collapse the form a classical tragedy - a conscious but inexorable march to perdition - rather than a farce ("Oops! Ah, here we are, Stage 5." - "So, whom do we eat first?" - "Me! I am delicious!") Let us sketch out this process.

Oh, man, you wrecked my day again asking that question. I'm in the "decade" category: one or more of nuclear war, local chaos, climate change and plague (induced or not doesn't really matter - the environment is soooo soooo ripe). You can't wish away those things and we've sawed away so much of the limb already. "Horses, horses, coming in from all directions."

If Matt Simmons speaks the truth and the IEA is really telling politicians around the globe that the jig is up and oil production will fall to 25mbd by 2030 or worse, how can anyone still believe that there will be anything else than a fast crash?

I think I've figured out one of the obvious clues that Simmons says Birol left in the published report to point at the real situation. In fact the strange inconsistency was discussed on TOD at the time.

Euan Mearns wrote at the time.

Chapter 10, p 243 of IEA WEO 2008 says this:

"On this basis, we estimate that the average observed decline rate worldwide is 6.7%. Were that rate applied to 2007 crude oil production the annual loss of output would be 4.7mmbpd."

So it seems reasonable to expect the decline rate on currently producing fields shown above should be 6.7%. Not so. The decline rate in the chart above seems to be much closer to 4%. So what's going on here? There's more below the fold.

Is what's going on simply this. The IEA's real figure for the average current decline rate of all currently producing fields is 6.7% and increasing with time. It's not for a subset of fields (eg. just the decliners and those at plateau) - it's for them all - including the brand new fields still ramping up. That was what was too unpalatable and the rest of the published report was fudged.

Everything else Simmons said in the interview seems consistent with that assumption.

No utility scale wind turbine in this country went up without a whole lot of diesel powered construction equipment to install it. The same goes for any solar collector, hydroelectric dam, insulated house, or rail line...

All five of the US transcontinental rail lines were built with a minimum of oil (oil lamps perhaps). Even the now defunct Old Milwaukee Line was built in the very early days of cars and trucks.

As were a number of early subways and streetcar lines.

Best Hopes for Learning History,


Good point Alan.

I think maybe they got the necessary energy from coal more so than oil. And they had a functional economy at that time.

Don't forget that Chicago dug sixty miles of narrow-gauge freight tunnel by hand.

Also, there is a local firm in Boulder,Co. that delivers their solar panels to the site with bicycles. Just sayin'

I had a conversation re: energy with an engineer I work with this morning. The topic has suddenly been on his mind since he's been living without electricity since the ice storm last week up here in NY.

We discussed a number of "solutions" (never really revealing the true depth of my pessimism) - he ended up sending me a link to a (short) story about the use of piezoelectrics in road surfaces.

Just thought I'd throw it out to TOD and see if y'all had any thoughts about it.

Seems like an interesting idea although I do realize that it must be cost prohibitive to scale something like this (especially in the current economic climate).


...perpetual motion machine...

The bigger the machine, the more cost prohibitive.

Maybe if we built one big enough, it could overcome the net energy loss though?

Must... build... bigger... stone... head!


Would the Burj Dubai count as a stone head? (Or perhaps a steel penis?)

Ours us bigger than yours!

That is one heck of a stone something-or-other.

As my brother used to tell me decades ago when I was young and foolishly in love... "use your head, your BIG head".


It looks like it could be Orthanc, Saruman's tower in The Lord of the Rings.

Antoinetta III

These ideas to harness (read: steal) energy from moving cars, people, cattle are always good for a head-shake on a Monday. Even if you converted 100% of the stolen energy to electricity, theft is still theft. But some, without an understanding of thermodynamics, seem to think that if you fine-tuned it enough, everyone would benefit. Sad.

However, on a local level, this could be interesting. Say you are an energy-starved locale with an interstate cutting through. You could covertly install this in the road surface, effectively taxing passing motorists. However, speed traps do the same thing with much less upfront capital, and the lights would go out anyway when the blizzard hits and traffic stalls. Not exactly a steady supply.

Spike mats? Drain the gas tanks. Strip the cars. Sell the women and children into prostitution. Put the men to the wheel. Bad for tourism, I guess.

cfm in Gray, ME, directly abutting I-95 - will partner with warlord

Overhead rail power lines always seemed a tempting power source for private consumption. With unmetered UK fresh water supply, micro hydro seems do-able..

I would like to know more about the expandibility of Piezo-Ceramic Manufacturing.. using roads seems a little backwards, and has all sorts of potential for countering it's gains with other losses. I can't say that the energy captured isn't going to be grabbing the waste energy that would have been absorbed by the asphalt, or would simply cost the vehicles in reduced MPG.. but it sounds a lot like the 'Electric Cars powered by their own Roof-mounted windmills, in some sense.

Here's where Piezo leads my brain towards.. again not knowing if the materials have a lot of embedded MFG energy or supply-constrained source materials. http://peswiki.com/index.php/Directory:Dickson_Piezoelectric_Generator

The embedded piezoelectric cells are linked in series within the mats, so that the combined effect of all the electricity generated from the vibrating water pressure in the water column directly above the mats is harnessed and transmitted to shore via power cables on the sea or lake bed.

Currently I'm 'stuck' at a very fancy resort in Mexico, where the sound of powerful waves crashing along miles of beach have my gadgety brain swimming in an Icestorm of paddles, levers and armatures..

No need to send a rescue team yet.. I can hang on a little while longer.


Just don't go and get kidnapped Bob, because there isn't enough dough in the TOD coffers to get you freed.

Apparently the experimentation for power generating floor has been going on since 2006.

JR East expects a generating capacity of total 1,400kW/sec per day.

"Is the Second Great Depression Imminent?"

"All of these measures will have an impact on economies, no doubt on that. Before the end of 2009 an –artificial- recovery will take place. Good news you may think? Not at all…"

The leader of the BNP is a believer in PO, among a few other Astonishing beliefs.

If this is an example of unforeseen consequences of PO, the future looks very brutish.

Griffin is indeed a PO believer. He had several road shows across the UK. I believe, that the BNP will be one of biggest winners within the next 5 years in the UK. For good reasons!
The corrupt elite is facing the wall.

Cheers from Switzerland.

I don't know about the "for good reasons". The BNP have primarily made progress in local council elections, and from what I recall they didn't do very much governing or even turning up to meetings, decidedly not as a point of principle about anything but because they weren't actually interested in running things other than race based policies.

There's obviously an issue about their central race-based focus and their links to groups like Combat-88, but if the UK unavoidably ends up with such a party in power it should at least be one that is concentrated enough to actually run stuff rather than apathetic unless it's a race issue or there are television cameras about.

"The biggest con job in the history of man"

"People like former governor Angus King and energy expert Matt Simmons are smart. They see the global warming rainbow coming and are placing their pots at the end of it."

"Because I'm also an economist and a professional business analyst. From these perches, I can see policies that purport to fix global warming - like cap and trade taxes, and legislation that enacts them, like the Regional Greenhouse Gas Initiative or the federal Climate Security Act - as pernicious and corrupting ideas in the arena of business and politics.

"They're elegant con jobs, which turn junk science into major dollars for developers."

And if it's not a con job?

Expect this obtuse thinking from an economist.

Did you read the comments? Every winter when there is a bit of cold weather I can expect some letters to the editor about the lack of warming and the need to "Drive my truck around and warm things up". It's like the ignorant rednecks have a nationwide network to write letters to the editor during cold snaps, with nearly word for word similarity.

To many of us righties, "global warming" is the cover story for peak oil by TPTB. Cap and trade isn't going to fix anything, and is just another tax. If something worthwhile actually was done with the money, like say water treatment plants, then it would be worthwhile. But if its just going to waste it on worthless feel good measures what's the point?

So far, everything I've seen on the "solutions" indicates a unlimited stream of grants for the scientists, a new ponzi scheme for Wall Street and a new tax for US.gov. Let's worry about things we can change, like local air pollution and clean water. Global warming will take care of itself either way. Half the funding spent on global warming would have installed an awful lot of scrubbers on the coal plants.

Do you actually know any scientists and how their minds work? Only a tiny fraction of a percent of scientists have the stomach for sitting on committees and horse trading that they'd need to do to pull a cover up for peak oil, no matter how well paid. If you want a conspiracy theory, go for:

Scientists want to be important and, with a strong humanitarian tendency in them, want to be save lives, particularly if they can do it by saving 'disadvantaged people's' lives rather than people in their own countries, showing they aren't just 'I got mine and screw you (and I'm having your boots and gold fillings)' kind of people who they don't like. (Ie, showing they aren't their caricature of right wing people.) The problem is that to convince yourself you're doing that, you need a big central problem that's got wide-ranging implications but is "simple" enough that they can truly identify themselves with devoting themselves to having shown how important it is, and how many lives it will affect. If global warming isn't happening, then it's down to all sorts of middling little problems that just don't have the scope to make you feel really important, so subconsciously interpret the data in a way that says big, bad things are coming.

That's a caricature and I personally don't believe it, but at least it's a conspiracy theory that actually matches the psychology of the "conspirators". (The "peak oil cover up" theory is a bit like claiming a jewish conspiracy to fake the moon landings: why would they in particular be the ones to muster the energy to care?)

Right. We sure don't want any scientists getting their hands on that money so that they can actually study the problems, test theories until answers and solutions are found, etc..

Of Course, if Exxon wants to express it's first amendment rights and hire scientists to study only the questions that can come up with defenses for their business agenda, that's just fine.. that's the market talking.. like it's just trying to simply and honestly sell you a 'science-timeshare' down in Puerto Vallarta. That's fine. That's what scientists are for, when they're not developing weapons systems and new pharmaceuticals through the major Universities.

Would scientific evidence that helped us shutter or regulate emissions on midwest coal plants, whose output is making a lot of Asthmatic and Mercury and Lead poisoned kids 'Feel Bad'.. simply be a Feel Good Measure? How do you design the scrubbers for those plants without scientists who are trained to focus on human and ecological health?

I'm just sayin'..

How can they account for the 120 meter rise in sea level during the last 20,000 years? Did they totally discount the geologists in favor of funding research of their shallow theories that only consider climate back to the industrial revolution. While this warming was happening the CO2 levels were lower. There are also some manmade pollutants that tend to cool the atmosphere such as ash, airborn dust from man's activities in the desert such as offroad driving and overgrazing in third world nations, and sulphur dioxide from high sulphur coal, natural gas, and petroleum products in countries that do not have strict low sulphur laws (most countries?). All these things block out the sun.

What triggered the ice age?

Ever heard of something called an "ice age"? During those periods, one was about 20,000 years ago, the sea levels were much lower due to so much water trapped in ice that covered much of the northern hemisphere, thus the sea level rising from 20,000 years ago.
As far as other pollutants like ash particles combatting warming, they actually contribute to warming by causing snow (which forms around such dust particles and which the free dust particles settle upon) to melt faster when exposed to sunlight. This caused the soil or water below the melted snow to warm faster, just as glaciers melt faster. So the dust particles may partly blot out the sun, but they can also cause snow melts and thus cause ocean levels to rise some.
Furthermore, natural gas (methane CH-4), is around 24 times more potent a greenhouse gas than CO-2.
So some of these gases & particles may partly block the sun but the final effect is to further warm the earth's atmosphere from less snow on the ground.

What triggered the ice age?

...Changes in the Atlantic thermohaline circulation are believed to be the direct cause of millennial-scale temperature changes in central Greenland during the glacial period. These temperature changes were closely preceded by ice rafting and associated meltwater events in the North Atlantic region (28). It is thought that the associated injection of fresh water reduces the deep water formation and initiates cooling in the North Atlantic region. Cooling then reduces melt rate and reestablishes North Atlantic Deep Water (NADW) formation, causing rapid warming in northern high latitudes. The temperature increase then leads again to a freshwater input into the North Atlantic and to gradual shutdown of NADW formation (29)....

Timing of Millennial-Scale Climate Change in Antarctica and Greenland During the Last Glacial Period
Thomas Blunier1 and Edward J. Brook2 , 2001

See also

Atmospheric CO2 and Climate on Millennial Time Scales During the Last Glacial Period
Jinho Ahn* and Edward J. Brook, 2008

What triggered the ice age?

Actually that should read ice ages, and interglacials, which have been going on throughout the Pleistocene era. The general picture is this: over thousands of years predictable changes in the earths orbit, and rotation axis, cause subtle changes in the distribution of sunlight (basically changes to the distribution of energy with lattitude and season ). This part was figured out a long time ago by a Serbian scientist called Milankovich(spelling?), and the irregular cycle is named after him. This change in the energy balance is a fraction of what is needed to explain the magnitude of climate change implied by ice age versus interglacials. But on the time scale of tens of thousands of years slow feedbacks, CO2 and other greenhouse gases, reflectivity caused by snow and ice cover changes, growth/loss of vegetation, which also affects the albedo (reflectivity) of the earths surface and the amount of dust in the atmosphere. These effects serve to greatly amplify the small changes caused by the Milankovich cycles several fold. In the natural cycle CO2 is not considered as a cause of climate change, but rather a feedback (amplifier of the changes). In our human induced changes, the timescale is orders of magnitudes faster, say a century versus ten thousand years. In this case CO2 can be considered to be a primary driver, and the other effects will provide slow feedbacks which will take a long tme to show up. Because of the human propensity to want to consider a single cause, rather than the more complicated realworld system of coupled causes/effects which are all mixed together, and can only be understood mathematically, all sorts of denialist propaganda can thrive, even though it is easily disproved.

In any case if one throws out the CO2 feedback, you can't get climate models of things like the earth at glacial maximum to work out, the cooling due to the ice and albedo changes is insufficient. But if you add in the CO2 effect, it works out. This provides a pretty decent test of the sensitivity of the climate to greenhouse gas forcing. And the results are consitient with current estimates of sensitivty (Charney factor...).

I notice that Leanan has an excerpt from the Guardian's leader (editorial).

Just wanted to point out that the Guardian has a video and several more articles today on the IEA report and peak oil. See

I'd especially recommend the video of George Monbiot interviewing Fatih Birol. He really rakes him over the coals, and ends by asking whether the IEA will apologize for calling peak oil people "doomsayers."

Energy Bulletin

Interesting how Birol says 'but this decline rate is now based on research of 800 actual oilfield production rates, while last years was just based on assumptions, estimates.. and that this is the FIRST TIME such research has ever happened' .. Is Simmons just chopped liver here? Or did Simmons say his data was only from 700 fields?

Here is my understanding

a. If nothing is done, conventional oil production will decline from 73mbpd from today to about 25 mpbd. My own simple Excel sheet calculation tells me it should be closer to 19mpbd in 2030 (and 30mbpd in 2020) at a 6% decline rate globally and no new discoveries happen. Of course my Excel model is about the simplest mathematical model probably know to mankind.

b. To stay at current production then we need to add about 50-54 mpbd/day of fresh output over the next 22 years.

c. This does not take into account any increased demand from economic growth (even if it came from another house of cards). If history is any indication then we probably need another 10-12 mbpd assuming some years of recession. So that means about 65 mbpd of fresh output.

d. So that is where the 6 extra Saudi Arabias comes in(?). I prefer to think of it as 10-11 Ghawar scale production coming on line over the next 22 years. One ever 2 years.

Some questions for the oil experts.

a. WHat has been the global track record of bringing new oil production over the past 20 years? How many mbpd of new production has been brought online? Is the trend a declining one? (e.g 2 mbpd in 1990 down to 1.5 mbpd in 2008).

b. If the trend is indeed a declining one, then what data suggests that we can add a net 2.6 mbpd of production each year or 1 Ghawar every 2 years? How many GB of reserves do we have to discover for this to be true? Is there a correlation that we can use to do this?

c. What has been our track record in terms of new fields being discovered? How many GB of discoveries over the past 20 years? Is it again a declining trend? Why should this trend not continue?

d. What sort of investment is needed assuming we discover everything we need? What should be the price of oil for a positive NPV on these projects?

I have a feeling too that the game is up. Fatih Birol has to do an extreme tight rope walk some 1000 ft off the ground balancing knives on his nose. The IEA will have internal politics just as any other organization would. If Fatih wants to keep his job (and he should) he will need to play by the rules. Which is why he keeps letting out the truth in small instalments.


a. If nothing is done, conventional oil production will decline from 73mbpd from today to about 25 mpbd. My own simple Excel sheet calculation tells me it should be closer to 19mpbd in 2030 (and 30mbpd in 2020) at a 6% decline rate globally and no new discoveries happen. Of course my Excel model is about the simplest mathematical model probably know to mankind.

It's even worse if you use 6.7% increasing towards say over 10% by 2030 which I believe is what Simmons claims is the true IEA projection. That brings you down to around the 9 mbpd in 2030 figure quoted by Simmons. (6.7% on it's own brings us down to about 16 mbpd by 2030). The reason this increases with time is that newer fields tend to peak then decline faster due to a combination of geology and recovery methods and the percentage of them in the mix is increasing with time.

I was thinking it would be a good time for some regional insight.

Could people post some eye-witness accounts of economic activity in your area? I am sure that this thing is not evenly dispersed.

I live near Boston, Ma. and people seam to be holding up well, so far. Rumors are all about waiting for the Christmas sales numbers to come in, then some may close shop in January. We had an ice storm in the western half of Massachusetts and the power was knocked out. They are saying that Christmas sales will not be able to overcome that down time.

Word is that the economic downturn hasn't impacted the San Juan Basin gas & oil patch too much. Home prices have continued to increase, altho not at the rate they were going up in recent years. New drilling is off by about half, but this is attributed to new pit rules concerning "produced water," and not to any decrease in demand. At least, this is the spin the local media puts on things. Anecdotally, the retail outlet parking lots seem to be as packed with large pickup trucks & SUVs as they ever are at this time of year.

This may not be the true story, however. A nice little house in my neighborhood has gone unsold for months now. The price has been reduced from $175K to $159K and still no buyer. There seems to be more homeless people on the streets. The food banks are reporting increased demand along with decreased contributions. Gun sales are reported up about 15% locally. Stores are sold out of pellet stoves. And even if the region has managed to avoid much of the pain from the downturn other regions have experienced, the heyday of the San Juan Basin fossil fuel extraction industry is long past. The fact that compressor stations are going in everywhere indicates that the Basin is in terminal depletion mode. So even if we avoid the worst consequences of the downturn for the time being, a day of reckoning for the region is coming.

contradiction? "Home prices have continued to increase, altho not at the rate they were going up in recent years."...Farther down, "A nice little house in my neighborhood has gone unsold for months now. The price has been reduced from $175K to $159K and still no buyer."



Western NC:

Fall tourism was noticeably off, and sales are way down at many of the local shops. Construction is gearing down as well. Small business owners are hurting.

Lots more houses now with "for sale" signs out front. They don't seem to be selling. I am not seeing much evidence that many of these are foreclosures, yet.

We haven't seen any huge layoffs yet, but that may be in part because we don't have that much manufacturing around here to start with, many of those jobs already left during the past decade or two. Much employment is in the tourism sector, and that has already pretty much shut down for the winter; I don't expect that all of those jobs will be back next spring. Retail is where the next round of big job losses will probably hit around here, right after Christmas.

We have about twice the retired population on a proportional basis compared to the US average. If the social security, pension, and other retirement income keeps coming in, and if Medicare continues operating, then that will set a floor under the local economy. Those are all very big "ifs", of course.

Local governments are trimming their budgets a little and deferring some capital projects. If that federal infrastructure money comes through then some local projects will be move forward, otherwise not. They are waiting to see what the state will do; last downturn, the state impounded money that was supposed to be distributed to local governments, which necessitated the local governments making sudden, huge budget cuts. We're all hoping that doesn't happen again, but it might.

Dayton (Southwest Ohio)

Two energy dependent industries are shutting their local doors here:

GM's Moraine Assembly which made mid-sized SUVs (Chevy Trailblazer, for example) will shut down permanently on December 23rd. At it's peak, the plant employed over 4000. About 1200 will be laid off next week. Several distribution and parts suppliers that feed the plant will also close their doors as a result.

Just to the southeast in Wilmington, OH, DHL is steadily reducing overnight air shipping operations at the Wilmington Airport. Announced in dribs and drabs of 100-200 losses per announcement, sometime next year the operation will be completely shut and all DHL overnight shipping will be handled by UPS under a subcontract. DHL was the largest employer in Wilmington.

Many news stories about strained public services for job seekers and private social service agencies/food pantries. Going to be a worse 2009 in Dayton than 2008.

Northern Virginia, inside the Beltway

The housing market has slowed; I don't think the price adjustment is severe close in to DC (not yet, anyway) though it is down. Houses are on the market much longer. There have been two houses for sale in our neighborhood recently: one was grossly overpriced to begin with; they finally priced it on the low side of the right price range and sold it quickly. The other house was priced on the high side of the right range and was withdrawn from the market.

Car dealer lots are piled high with inventory. I've chatted with folks at three different dealers over the last few weeks and there is very little movement. One dealer is holding well over 365 days of inventory and even economical small cars are not moving. Two service departments told me that many customers are deferring pricier maintenance on their cars.

The shopping mall parking lots appear full of Christmas shoppers. We haven't been carrying as many bags out as in previous years, but I can't really judge if others are downsizing as much as we have chosen to do.

I do the grocery shopping, and I'm convinced the cost of groceries has gone up considerably in the last couple of months. I see more people using coupons.

Discussion with a local school principal suggests that our school district is much relieved at the reprieve on fuel costs for buses, but there are also notices about routes being shortened (supposedly because stops are not being used, but . . . ). The word is to expect a bloodbath for the 2009-2010 school year budget due to anticipated declines in property tax revenue and shortfalls from Richmond. It's whispered that money for non-core subjects will be drastically cut and that class size will be way up come September. Additionally, reports are that public school enrollment is going up as folks pull their kids out of private schools--we have neighbors who anticipate doing this for next school year.

DC Metro ridership is way up (has been since the gas price spike last spring).

Silicon Valley (California): Lot's of pink slips handed out in semiconductor houses right before Christmas as industry braces for a 10-20% reduction in revenues next year. Of course, Yahoo employees not doing too well either. In the wealthier neighborhoods, some "had-been" millionaires are shocked to open their mutual fund letters and see that their 401K's have become 100.25L's (L for loser) as Bernie Madoff and other Ponzi schemes unfold. The feelings can be expressed in one word: Betrayed.

On the local Minneapolis, MN news last night there was a story about how Best Buy is offering "buy outs" to their employees. Essentially a sweetened severance package. They want to trim 4,000 positions "or else there will be layoffs." So far all the cutting has mostly gone under the radar, but when the big retailers located here start to cut thousands of jobs the local mood will probably sour very quickly.

Hello TODers,

Have you snorted your O-NPK today? Yikes!

Peru seizes 3 tons of cocaine mixed with guano

Wow. Fricking hilarious. Reminds me of Kopi Luwak.

Reminds me of Idiocracy, where our future nation has taken to irrigating fields with Brawndo: The Thirst Mutilator. Adding a little coke to your NPK may give your corn the edge it needs to get all that growing done before harvest.

Speaking of guano...

I recently read that the Cambridge greensands, which have been mined for fertilizer for centuries, may have originated as a pterosaur guano deposit! Fossil pterosaur materials are (relatively) common in phosphatic nodules embedded within the greensand glauconite. The idea is controversial & may not be correct, but some speculate that the deposits represent a near-shore pterosaur rookery. Cool idea, anyway, that greensand fertilizer may just be ancient pterosaur guano..

Not exactly a renewable resource, that.

Talk about a harsh buzz...

Talk about pumpin' up your veggies. Imagine the surprise of those who would have been snorting this s**t

It should be illegal to waste scarce fertilizer by mixing it with cocaine.

With gas now at $1.50 will all the electic car programs be cancelled or put on hold?

I'm sure the Chevy Volt will be cancelled; not because of gas but because of GM going belly up.

I have always doubted that anyone would actually ever be able to buy a Volt.

And now they are behind the BYD product from China. See link above.

And now they are behind the BYD product from China.

Assuming the BYD is real, and of decent quality, it is pretty stunning. Twice the (all electric) range of the Volt, for half the price. And brought to market for a fraction of the cost and development time as the Volt.

The feebleness of Australia's watered down carbon trading scheme may set the scene for what to expect under Obama. The good/bad news I think is that it may all ultimately be irrelevant. I think the dark forces that will drive events are all about 'lack of liquids'; declining oil production, water and food shortages (due to either global warming or cooling) and lack of liquidity in credit markets.

I think one reason that consumers are spooked and will stay that way for a long time is lack of respect for the corporate sector. Banks and car makers failed to see their predicament and turned cry baby. Now Big Metals and Big Coal have sabotaged carbon trading I think the public is rightly disgusted with them. They have created a lose-lose situation. If the markets fail to revive they got what they wanted. If warming makes a comeback it's all their fault. The public mood has changed.

A cap and trade system is intended to be a brick wall. The theory is that the magic of the market will mean that we won't smash into the brick wall at full speed. Businesses will borrow money to do what needs to be done to avoid hitting the wall. Who can believe that today? Either the prescience of the market OR their ability to prepare? Let's hope Obama's team reads Gail's comment.

Hello TODers,

Continuing from my earlier UN FAO weblink [PDF warning]:

Forecasting Long-term Global Fertilizer Demand [2015 & 2030]

Plus, using data from the last IFA Conference [PDF Warning]:

Medium-Term Outlook for Global Fertilizer Demand, Supply and Trade
2008–2012 Summary Report [May '08]

My standard disclaimer: I am not a statistical guru, so I welcome any elaboration or refutation. Continuing on..using [BS] to denote my comments:

[BS]How realistic is it that I-NPK supply will met the FAO's projected demand in 2015 or 2030 if we are going postPeak [+ credit crisis?] before then? Can we continue to ramp I-NPK mines & factories, plus recovered sulfur, if FFs are now on, or will be soon on, their respective Hubbert downslopes?

[BS]Even if we power all these fert. facilities with hydro, wind, PV, and nuclear: since we are heading into a liquid fuels crisis [Simmons & Hirsch], will we get these megatons moved globally to the final topsoil square foot for useful photosynthesis application, then still move the harvest to the hungry? Also, where are the govt. programs to ramp full-on O-NPK recycling & minimal water usage strategies?

[BS]Since we are evolved to sit in the nightly occuring darkness: can we globally muster the will to make sure the I-NPK supply will be there in 2015, 2030, as our population is projected to grow? Or will billions join Zimbabwe, Haiti, Darfur...?

[first link]: global forecast of 187.7 million Mt in 2015 and 223.1 million Mt in 2030.

[second link]: World demand would reach 169.4 million metric
tonnes (Mt) nutrients [2007/2008], compared to 162.7 Mt the
year before [2006/2007]...global fertilizer demand is projected to further grow in 2008/09 by some 3.1%, to reach 174.7 Mt. World fertilizer consumption in 2007 was 168.7 Mt, and is projected at 173.5 Mt nutrients in 2008, reaching 193.1 Mt in 2012.

[BS]So right off the bat, we notice differences. This reminds me of the FF differences in the USGS, EIA, IEA, CERA, API, OPEC vs ASPO & TOD debates. Recall that it took years of effort just to get these orgs to finally bend in the ASPO & TOD Peak direction. Will it take another similar multiyear effort on our part to get the UN FAO, IFA, MMS, Canpotex, USDA, Phosphate Group, Uralkali, etc to start issuing forecasts that include declining FF-energy scenarios?

[BS]Moving on, but just looking at the Element phosphorus [P] only:

[second link]: World production of phosphate rock in 2007
was estimated at 176.1 Mt...Based on the IFA 2008 survey of future
phosphate rock supply, world phosphate rock capacity is expected to reach 242 Mt in 2012,representing an overall 28 per cent growth over
2007. The global production of processed phosphates (MAP, DAP and TSP) grew by 5.5 per cent over 2006, to 25 Mt P2O5 [2007]. MAP production
accounted for all of the increase.

[BS] If one recalls the phosphate beneficiation process: 176/25 = approx 7:1 reduction to a finished P product [plus a hell of a lot of input sulfur, 2:1 to 3:1, and energy]. This 14% output tonnage roughly approximates the discussed P% content of raw ores [from memory about 17%] in determining production economics. Using the same 7:1 ratio for 2012: 242 Mt of ore reduces to 35 Mt of finished P. So in the next 3 to 4 years: we need to be boosting finished-P production by 9 million tons, but recall all my recent weblinks of curtailed I-NPK factories.

Okay, enough for now--I don't want this deleted for lack of brevity. Have you hugged your bag of NPK today?

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

What's to worry about, Bob? Economics teaches us that when the price of any given commodity becomes too high, a substitute for it will be found. As P deposits become depleted and the price goes up beyond the ability of farmers to pay for it, we can simply substitute Ca or Na or some other element for P. Natural selection can replace ATP with ATCa, or Na for P in the DNA backbone. Right? Don't listen to any naysaying scientists who may claim otherwise, either. Scientists don't get paid as much as economists so they must not be as smart.

I find it amusing that this blog has become full of moronic deflationary comments. "Tons of money lost in black holes" "bet which could not be covered". "30 trillion lost".
The simple fact is that the dollar is done sooner or later and with the dollars fall will come massive inflation. Maybe not in the way some our more articulate friends define it but in a real sense it will come.
If the dollar does not fall then it gives the fed an unlimited license to continue its stupid money printing and for the senate to continue its unlimited bailouts. They have collectively created 8 trillion in 3 months. That would be 60 trillion in 2 years and that is just the US. If you think under that scenario the dollar would go up and cash would be hoarded and prices for essential commodities which are declining in supply would not rise you are plain stupid.
And yes as far as credit expansion goes the fed can start sending out credit card offers from any of the 100 banks under FDIC protection.
Maybe an offer with 3% rebates, 1.5% minimum payments and 0% till 2013.

Probably neither deflation or inflation accurately describes what lies ahead. Most see an exaggeration of the late 70s early 80s when they picture hyperinflation-a future in which most USA real estate is cheap and unwanted, wages are very low and the cost of essentials such as food energy and proper medical care are very high and unaffordable to most is an interesting combo of deflation (real estate,equities and wages) and inflation (necessities) that will be a unique reality for the country.

new ideas for stimulus[& inflation].


from peter schiff

...the use of debit cards. The same idea could be used for fiscal stimulus. The Government could distribute millions of "Economic Stimulus Cards" to citizens, which could function more like retailer gift cards rather than debit or credit cards. Here's how they would work:

When the government wants a quick, fast stimulus, it authorizes expenditures on the cards which can only be used for consumer purchases and only for a set time frame. Knowing that they must use or lose their newly authorized funds, Americans will run to their nearest retail outlet and spend, spend, spend. The beauty of the system is that the consumers will spend exactly how much the Government deems necessary. What's more, the government could decide to direct the spending to specific areas of the economy...

Well, it's started here. One of my co-workers was just shown the door.

I will probably be limiting my time on TOD in the near future, to focus on keeping my job.

At my former place of employment, all our internet usage was monitored. One employee was discovered to have visited something like 200 porn sites in one month.

That happened where I used to work. They fired almost 100 people for looking at porn at work. I don't know what you would have to be thinking to look at porn on your work computer.

I just hope they don't track DOOMER porn...I'm guilty of that.

It sounds like a good example of " stimulation of the private sector "

That's genius! Pure genius!

Major Oil Projects Come Undone as Price Collapses

This should probably be re-posted tomorrow (Leanan will find it! - NY Times) as it's late on Monday and some TOD readers will miss it.

- Dick Lawrence

From the plains of North Dakota to the deep waters of Brazil, dozens of major oil and gas projects have been suspended or canceled in recent weeks as companies scramble to adjust to the collapse in energy markets.

In the short run, falling oil prices are leading to welcome relief at the pump for American families ahead of the holidays, with gasoline down from its summer record of just over $4 to an average of $1.66 a gallon, and still falling.

But the project delays are likely to reduce future energy supplies — and analysts believe they may set the stage for another surge in oil prices once the global economy recovers.

Oil markets have had their sharpest-ever spikes and their steepest drops this year, all within a few months. Now, with a global recession at hand and oil consumption falling, the market’s extreme volatility is making it harder for energy executives to plan ahead. As a result, exploration spending, which had risen to a record this year, is being slashed.

Simmons talks about this in the Financial Sense Newshour interview (alongside Hirsch) discussed in the drumbeat over the last couple of days.

Simmons refers to many of the new oil and gas fields as "just in time" fields and says "we have a matter of weeks to avoid shooting ourselves in the kneecap".

An additional loss of 4mbpd due to cancelled projects over the next 5 years (Peter Jackson of CERA's figure in your referenced article) will add an extra 800kbpd per year to the downslope. It is not clear if Simmons was already taking this into account when he stated 60 mbpd after five years. If not then we could be down to 56 mbpd in a mere 5 years based on the Simmons claim.

Meanwhile, discomfort grows in the big houses of the elite as the Bernie Madoff Ponzi hedge fund blowup keeps growing. The fear is spreading among the elite that this may not be the only fund or "fund of funds" to be a scam, and the request for redemptions will surely keep growing.



The truth is that most hedge funds will be completely unable to honor mass requests for redemptions even in good times. In the current environment, investors in hedge funds will find out that their money is essentially not liquid and they cannot in many cases touch it.

Things are going to get interesting now.


Not to worry.

CNN's Campbell Brown explains it all here (warning video clip) about how it cannot possibly be the government's fault (you know, the one's we are conned into paying taxes to so they can "protect" us) that they, the government did not protect us from these other con men (Madoff et al) because in the end it is always the victim's fault for not having been more careful.

Of course, sweet Campbell could not possibly be conning us about how the con game works. LOL. What a con piece.

Yes, most hedge funds are scams, but most don't realize that the functioning of the USA guv is a scam (IMO most cannot distinguish between a TRILLION and a BILLION)-the money thrown away so far equals 50 years of corporate income tax revenue.

The Norwegians are up to something other than North Sea Oil:
This is harder than it looks!

20 degree and 20 stryke will do the trick,

thanks hightrekker


Just informing the proletariat---

I'm sorry to spoil your fun.

Insomnia is a strange affliction


Hope it had a little doggy doodoo on it, for Mr. Treason.

Hello TODers,

Russian Industrial Production Shrinks Most Since 1998 Collapse

..Manufacturing fell an annual 10.3 percent compared with growth of 0.3 percent in October, as steel pipe production dropped an annual 36.9 percent and coking coal output fell 38.7 percent, the service said. Truck and car production dropped 58.1 percent and 7.2 percent respectively.

..Fertilizer output fell by an annual 51.6 percent as OAO Uralkali, Russia’s second-largest potash producer, cut output in half and lowered its forecast for fertilizer sales in the fourth quarter.