Drumbeat: April 9, 2009

The Peak Oil Crisis: Priorities

In the next few years, most of us are going to have to make many important decisions that will profoundly affect the rest of our lives. How soon these decisions come will depend on one's individual circumstances.

If you are one of the millions who have lost their jobs or homes in the last year then you already know that something is happening. Returning to the way we have lived for the last 100 years simply is not in the cards. The world is entering a great paradigm shift and our place in it will be markedly different 10 or 20 years from now. The most alarming thing to remember is that 95 percent of us have not discovered that major changes are underway and are waiting for economic recovery and new jobs to open up.

Oil prices rise sharply on new corporate data

NEW YORK – Oil prices rose sharply Thursday despite recent indications that energy use is way down, with traders focused instead on a rising stock market and upbeat earnings reports that suggest Americans may begin spending more.

Benchmark crude for May delivery rose nearly 4 percent, or $1.88 to $51.26 a barrel in light trading on the New York Mercantile Exchange. Trading was very light on a shortened trading week. Nymex is closed Friday for a holiday.

Peak Oil: China vs. USA

Anyone catch Steven Kopits’ article in Barron’s this weekend titled “A Global Portrait of Peak Oil”? In it, Kopits echoes thoughts I have written recently on how badly the US is being outmaneuvered by China with respect to energy policy.

Platts Survey: March OPEC Oil Output Fell to 27.98 Mil. Barrels Per Day

LONDON /PRNewswire/ -- Platts -- The 12 members of the Organization of the Petroleum Exporting Countries (OPEC) pumped an average 27.98 million barrels per day (b/d) in March, as the oil producer group continued its efforts to slash oversupply and prevent oil prices falling further, according to a Platts survey of OPEC, oil industry officials and analysts just released. This is down 90,000 b/d down from February's 28.07 million b/d.

Baker Hughes Rig Count Falls to Lowest Since May 2003

(Bloomberg) -- The number of oil and natural gas rigs operating in the U.S. fell to the lowest in almost six years as natural gas producers cut exploration, according to data published by Baker Hughes Inc.

Chevron Production Rises, Halting Two-Year Decline

(Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, said production headed for a quarterly gain for the first time since 2006 as new platforms in the Gulf of Mexico and offshore Africa began operation.

Chevron says 1Q profits will be sharply lower

Chevron Corp. said today its earnings will be sharply lower for the first quarter due to falling oil and natural gas prices.

Like the entire industry, Chevron, the second-largest U.S. oil company, has struggled with wide swings in crude prices. Benchmark crude soared to more than $147 a barrel last year before plunging below $35 this year.

Indonesia scrambles to sell diverted gas at home

Indonesia has sold just three of 18 cargoes of LNG originally bound for Japan, Taiwan, and South Korea, according to oil and gas officials.

Report: Ethanol raises cost of nutrition programs

WASHINGTON (AP) -- The increased use of ethanol could cost the government up to $900 million for food stamps and child nutrition programs, a congressional report says.

Higher use of the corn-based fuel additive accounted for about 10 percent to 15 percent of the rise in food prices between April 2007 and April 2008, according to the nonpartisan Congressional Budget Office. That translates into higher costs for food programs for the needy.

The Peakist (audio)

In a world confronted with climate change, financial crisis and peak oil, this is the story of a highly individual response to the challenges ahead. Lloyd Morcom, a former oil man and ex hippy, has not only made radical changes in his own life, he's also encouraging friends and neighbours in his small, rural home town to reconsider their lifestyles.

However, when he calls a public meeting to outline his fears for the future he knows deep down that his message won't make him universally popular. Wary of what he calls 'doomer porn', Lloyd believes small communities should adapt housing, transport and food production to survive the coming storm.

John Michael Greer: Peak Oil Advice from German Poets

Fairly often, during the three years or so since these essays first started trying to map out the topography of the deindustrial future ahead of us, people have responded with a straightforward question: what do you think we should do about it? Even when it’s posed rhetorically, as it so often is, this question strikes me as a good sign.

It’s one thing, after all, to treat the twilight of the industrial age as an abstract possibility, or a dumping ground for Utopian or apocalyptic fantasies, as so often happens these days. It’s quite another to grapple with it as a reality that can be expected to shape the rest of our lives. Those who make the subtle transition from one to the other tolerably often find themselves confronted with some form of the same message the German poet Rainier Maria Rilke received from the statue of Apollo: Du musst dein Leben aendern, “you must change your life.”

UK Oil Services Cos Braced for Steep But Short Decline

The U.K.'s oil services sector is braced for a sharp downturn as low oil prices have raised fears of capital expenditure cuts, project delays and financing difficulties. However, the dip, though deep, should be brief, with signs of a rebound in 2010, analysts say.

"It is our belief that the downturn will be short and sharp, and that the recovery is likely to be equally rapid and certainly apparent in 12 months' time," Evolution securities said in a note.

Turkmenistan: Russia's Gazprom To Blame For Pipeline Blast

ASHGABAT, Turkmenistan (AFP)--Russian energy giant OAO Gazprom caused a pipeline explosion in the Central Asian state of Turkmenistan Thursday by overstraining the network, Turkmenistan's Foreign Ministry said.

Louisiana Reps Urge Salazar to Authorize More Offshore Drilling

Louisiana representatives encouraged U.S. Interior Secretary Ken Salazar to authorize more offshore drilling for oil and gas at a regional meeting held in New Orleans Wednesday.

The representatives asked Salazar not to forget the importance of the oil and gas industry in the U.S. economy as a source of jobs and tax dollars.

Study shows bioenergy benefits for rural poor

Bioenergy, when produced on a small-scale in local communities, can play a significant role in rural development in poor countries, according to a new report jointly published by FAO and the UK's Department for International Development (DFID).

Cars converted to the future - 100 miles per gallon

In a windowless workshop near the county landfill, a small Raleigh company has spent the past year trying to solve the nation's energy crisis one car at a time.

Science Chief Discusses Climate Strategy

The Obama administration might agree to auction only a portion of the emissions allowances granted at first under a cap-and-trade system to limit greenhouse gas pollution, White House science adviser John P. Holdren said yesterday, a move that would please electric utilities and manufacturers but could anger environmentalists.

Former oilsands exec named head of climate working group

OTTAWA — The Harper government has named a former oil and gas industry executive who led a company active in the Alberta oilsands as a representative on a U.S.-Canada working group on clean energy.

Thomas Homer-Dixon: Make room for doom and gloom

Scorning pessimists as 'Cassandras' is destructive: Reckless optimism is what got us into this mess and it may take worry and prudence to get us out

Fear is bad, according to conventional wisdom. Our economy is in trouble, we hear, because banks are too afraid to lend and consumers and companies too afraid to spend. Less lending and spending further depresses the economy, which begets more fear. And to top it all off, some analysts irresponsibly exploit these fears for their own ends, by arguing that the crisis may get far worse before it gets better, and in the process sensationalize and exaggerate the problem.

But, in this case, conventional wisdom is wrong. The truth is that fear is good. The economic crisis we're facing is not at root the result of too much fear but of too little. If we had been more afraid for our economic well-being, we would have saved more, borrowed and speculated less, and been more cautious about letting financial wizards make bets with our money using opaque mathematical models.

Pessimists don't get a free pass

Thomas Homer-Dixon is a deep thinker who matters. Lots of smart people read his books and plenty of powerful people -- some of whom are smart, too -- seek his counsel.

So it matters when the leading light of the University of Waterloo's Balsillie School of International Affairs writes something that is seriously misguided.

Crude Oil at $50 Is a ‘Good Thing,’ Algeria’s Khelil Tells APS

(Bloomberg) -- Oil prices of about $50 a barrel are a “good thing” for now, Algerian Oil Minister Chakib Khelil told Algerie Presse Service.

“If prices stay where they are, at about $50, or even drop a little, it will be a good thing because we should not forget that the global economy is shrinking,” Khelil told the state- run news service in Algiers yesterday.

Fleet of tankers store fuel at sea

DUBAI/LONDON (Reuters) - A deep drop in demand has forced many oil companies to use tankers floating at sea to store surplus refined products, with the volume off Europe equating to more than a quarter of the world's daily fuel use.

Shipbrokers and oil traders said at least 24 million barrels of gas oil, used for diesel or heating oil, and jet fuel were being stored on more than 30 floating long-range tankers in Europe. Some traders say the stored volume might be even larger and would add to the pressure on bearish products markets.

Nigeria Unrest Cost $24B Oil Rev in First 9 Months of 2008

Nigeria's unrest could worsen after the country lost at least $23.7 billion to oil theft and sabotage in the first nine months of 2008, a presidential committee report says.

Ledum Mitee, chairman of the committee, said the figure shows that "if we were to buy peace, we would be spending less than what we are losing in the crisis."

ConocoPhillips Said to Plan German Oil Refinery Shutdown

(Bloomberg) -- ConocoPhillips will shut its German oil refinery, the country’s third largest, in the fourth quarter for maintenance, two people familiar with the situation said.

Shell to restart gasoline unit April 21 - sources

SINGAPORE(Reuters) - Royal Dutch Shell (RDSa.L) is expected to restart a 33,000 barrels per day long residue catalytic cracker at its Singapore refinery on April 21, following an outage last week due to catalyst problems, industry sources said on Thursday.

Big firms staking claims in ethanol

Heavy debt loads and historically high corn prices have been lethal to independent ethanol firms. "The growth in ethanol is mandated, but most U.S. independent ethanol producers have failed or are struggling to survive as stand-alone entities," wrote Chi Chow, an energy industry analyst for Tristone Capital Co.

Destroying urban gardens in the wake of peak oil: Will we build sustainable communities or follow the US off a cliff?

The price of oil as of 8 April 2009 has stabilized at about $50. One of the main reasons for this is due to the collapse of the global economy – when the economy slows down we use less oil. This may sound like a loop, that’s because it is: growth in the economy is dependent on cheap oil, and since we are at or near peak oil, we get cheaper oil only when the economy collapses.

'You can't get there from here' in R.I., either

We were in the midst of soulless suburbia, where the car was king and people an afterthought. The desk clerk had told us a Panera Bread was very close by. Probably within walking distance -- in theory, anyway. But only a fool would walk here. And driving was looking increasingly like a gamble as well.

Is Global Warming a Myth?

How to respond to people who doubt the human impact on the climate.

What will global warming look like? Scientists point to Australia

Drought, fires, killer heat waves, wildlife extinction and mosquito-borne illness -- the things that climate change models are predicting have already arrived there, they say.

Reporting from The Murray-Darling Basin, Australia -- Frank Eddy pulled off his dusty boots and slid into a chair, taking his place at the dining room table where most of the critical family issues are hashed out. Spreading hands as dry and cracked as the orchards he tends, the stout man his mates call Tank explained what damage a decade of drought has done .

"Suicide is high. Depression is huge. Families are breaking up. It's devastation," he said, shaking his head. "I've got a neighbor in terrible trouble. Found him in the paddock, sitting in his [truck], crying his eyes out. Grown men -- big, strong grown men. We're holding on by the skin of our teeth. It's desperate times."

A result of climate change?

"You'd have to have your head in the bloody sand to think otherwise," Eddy said.

Oil above $51 on signs of higher US consumption

VIENNA – Oil prices rose above $51 a barrel Thursday as upbeat reports from some U.S. retailers suggested Americans may be willing to spend more once again.

Gazprom sees gas demand, output depressed for 5 yrs

MOSCOW (Reuters) - Russian gas export monopoly Gazprom believes global demand and it own gas production will be depressed by around 10 percent for the next 4-5 years, its deputy chief executive said on Thursday.

'A reduction in demand of 10 percent will continue for the next 4-5 years,' Valery Golubev told a conference.

Shell secures new supplies of Russian gas to sell in Europe

(Platts) - Shell has secured new supplies of Russian gas from Gazprom to sell in Europe, Shell said in a statement Wednesday.

Gazprom: pipeline blast halts Turkmen gas, EU

MOSCOW (AP) — MOSCOW (AP) ? Russia's natural gas monopoly Gazprom says a blast on a Central Asian pipeline has halted the supply of Turkmen gas to Russia.

China's Sinopec Shanghai expects to post a profit in Q1 2009

Singapore (Platts) - Chinese petrochemicals and oil products producer Sinopec Shanghai Petrochemical Co. expects to report a profit for the first quarter of 2009 after posting a loss of Yuan 200.36 million ($29.2 million) in the corresponding period of the previous year, SSPC said Wednesday.

Iran Open to Oil Talks with US

LONDON, April 09 (IranMania)- Iran announced on Wednesday it is not opposed to talks with US oil companies providing that they accept the conditions Tehran defines Fars News Agency reported.

"If Iran's conditions and the country's regulations on oil agreements are accepted by various Western and Asian companies, Tehran is ready for negotiations," Iranian Deputy Oil Minister Hossein Noqrehkar said in a press conference here in Tehran today.

Iran Might Be Deterred by U.S. Nuclear Umbrella, Gulf Ally Says

(Bloomberg) -- The Obama administration should consider countering an Iranian threat by offering Middle East allies protection under a “nuclear umbrella,” a United Arab Emirates official said, as the U.S. announced plans to join international talks with Iran.

The official referred to a similar proposal by then-Senator Hillary Clinton during an April 2008 presidential campaign debate with then-Senator Barack Obama. Such a security guarantee would assuage widespread fears about Iran’s nuclear program among its neighbors, the U.A.E. official said yesterday in Washington.

$200 Oil Is Coming While We Waste a Perfectly Good Crisis Part 1, Part 2, and Part 3

The peaking of hydrocarbon supply is vital not just to our country’s future, it is enormously critical to our global economic conduct. Optimists argue that oil has not peaked, and will not peak for decades. They base this on widely held beliefs, including the extent of the world’s energy resource endowment, the ability of technology to recover larger amounts of oil once left behind, the lag time between high oil prices and the ramped-up drilling they kindle, the remarkable amount of unconventional oil that has become commercially feasible because of high prices, and undetermined technology advancements. Those who ridicule peak oil, think the term means "running out of oil" instead of the true definition: "oil production can no longer grow."

Drilling the Undrillable

The oil and gas industry is always looking for ways to get more from mature field developments. New technology is fundamental to the success of those efforts. Brett Borland of ConocoPhillips explains how directional casing while drilling is one of the technologies helping to open up what might once have been undrillable wells.

Gas pipeline through Treasure Coast could mean $102 million in property taxes to region

TREASURE COAST - The Treasure Coast could receive $102 million in property taxes from Florida Power & Light over the next four decades because the power company has announced plans to run a 300-mile natural gas pipeline through the region.

It would also create 7,500 jobs, of which 3,500 will be for construction.

Striking French Workers Cut Output at Nuclear Plants

(Bloomberg) -- Electricite de France SA, Europe’s biggest electricity generator, may be forced to buy power on the spot market after a one-day pay strike led to production cuts at two of its nuclear reactors, a union said.

Output was reduced at the Cruas-Meysse and Penly plants, according to the Confederation Generale du Travail, or CGT, union. GDF Suez SA, operator of Europe’s biggest natural-gas network, may have to reduce supplies after employees walked out. A protest at the port of Le Havre reduced the number of vessels able to load or unload by half. Total SA said operations at its Normandy refinery weren’t affected.

Is this the end of the Oil Age?

Huge and rapid increases in the price of oil last July may well have marked the "peak" of oil supplies and are part of the financial crisis we are now experiencing. This was the context set out by Rob Hopkins, founder of the Transition Towns movement when he spoke before an audience of more than 200 at the Regal Theatre in Minehead on 2nd April.

Mayor Gregor Robertson lends support to UBC Farm, flags peak oil

Mayor Gregor Robertson again touched on peak oil as an issue when he recorded a video address in support of the UBC Farm.

“In a world with peak oil and accelerating climate change, the importance of local food security has never been greater,” Robertson said in the video shown to farm supporters April 7. “We’ve seen entire civilizations wiped out because of a lack of food security, and it’s going to be really critical in this next phase of human existence that we value the land, the soil, and the people that look after and grow our food. And we’ve got to ensure, particularly in an urban setting, that we’re focused on a good solid locally-based food system. UBC Farm is a critical piece of that.”

So what is 'permaculture' anyway?

What my line of work (investigating energy issues and agriculture at UT) has taught me is that we really need propagate well designed systems. The three biggies…peak oil, climate change and soil depletion will make it imperative that more of our food is grown close to home. What permaculture really communicates is that this transition that humanity must make in the next 50 to 100 years does not need to be a drag, it can be really a lot of fun, you can work your body and mind, you can meet your neighbors, you can reduce your expenses, and you can eat good healthy food.

Lingering Spilled Oil in Alaska’s Prince William Sound Affects Aquatic Life, Residents

Scientists say oil still lingers in Alaska's waters, affecting aquatic life and the local community that depend on it 20 years after Exxon Valdez oil spill.

Shell, BP Should Disclose Carbon Liabilities, Ecologists Say

(Bloomberg) -- Royal Dutch Shell Plc, BP Plc and other energy companies would have to disclose projects’ carbon liabilities under an ecology proposal sent to the U.K.

Mexico Plans Carbon Market for Pemex, Power, Cement Companies

(Bloomberg) -- Mexico has talked with Petroleos Mexicanos, the Federal Electric Commission and cement makers about including them in a domestic carbon market to help the country meet its goal to cut global-warming gases.

Mexico, which last year set a target of cutting its carbon- dioxide output in half from 2000 levels by 2050, wants to bring in a system of capping emissions by companies “as soon as possible,” said Rodolfo Godinez Rosales, director of environmental issues at the country’s foreign ministry.

Rain Forest Credits May Be Used for 5% of UN Climate Compliance

(Bloomberg) -- Rich nations could use tradable credits from poorer countries that reduce deforestation for 5 percent of compliance with emissions-reduction requirements, according to a United Nations option.

Holdren Puts U.S. Climate Goals Before International Agreement

(Bloomberg) -- Securing a climate-change policy for the U.S. that cuts greenhouse gases and stimulates the economy is more pressing than reaching an accord with other nations on the contentious issue, said John Holdren, the top science adviser to President Barack Obama.

At U.N. Talks on Climate, Plans by U.S. Raise Qualms

BONN, Germany — At the start of the United Nations climate talks here 12 days ago, the Obama administration’s chief climate negotiator, Todd Stern, received a round of rowdy applause. It was the first appearance of the new negotiating team at any global meeting.

But by Wednesday, as the meetings drew to a close, some delegates — and even some United Nations officials — were grumbling that the United States was not moving fast enough to take action on global warming.

Liars' Loans, Bernie Madoff was a piker, I was startled by the revelations in this interview!

This interview of William Black by Bill Moyers is really a shocker. As Chris Martenson says "Don't miss this!"

•Bill Moyers & William K. Black (Video, H/T CM --- Repost Please Don't Miss This)

There is a transcript here if you are on dial-up.

WILLIAM K. BLACK: Liars' loans mean that we don't check. You tell us what your income is. You tell us what your job is. You tell us what your assets are, and we agree to believe you. We won't check on any of those things. And by the way, you get a better deal if you inflate your income and your job history and your assets.

Ron P.

Gail wrote an article arguing her thesis that the recent run up in FF prices impacted consumer spending and made it impossible for many to service their monthly mtge payments, leading to mtge defaults, bank failures, and international credit crisis.

The truth of the matter is that many folks were put into loans they could not afford regardless of the current price of FF.

In addition to Liar Loans there were various schemes such as "no cash down," immediate second mortgages to cover the closing costs on the property, mortgages in which no interest costs were paid in the first two years and this accrued interest was added into the principal so that the loan became more expensive, and adjustable mortgages which offered interest of 2% for the first few years followed by a reset to above market interest rates to compensate for the initial below market rates.

The "FF costs resulted in the financial meltdown" thesis is a big red herring and is extremely misleading as it suppresses awareness of the institutionalized criminal activity that gave rise to the financial crisis, leaves the public confused over the issues, and more importantly the corrective action required. Key to this is the fact that the folks who performed "regulation" of the corrupt market are still performing that regulatory role together with the fact that the public is getting ripped off twice: 1) the value of their assets have been eroded by the actions of the banksters; 2) Public funds are being used to make the banksters whole, pay their bonus money and retain their places of employment.

American socialism is worse than any Russian communism.

I would argue that until gas prices spiked last summer a lot of these folks could still pretend that they could afford their lifestyle.

Debt overload at all levels was obviously the cause of the meltdown but the oil price spike was the pin that popped the bubble, IMHO.

I am not in the US so my figures may not be comprable. My gas purchases went from $30 a fill to $44 at peak. A friend who drives a van went from a $50 fill to just under $100 at peak. How do those figures compare with a mortgage reset that bumps the monthly payment up from $1,200 to $2,400?

If the Gail thesis were correct then why do we have continued financial instability? Why are house prices forecast to drop another 20 to 30%? Oil is one third of the price at peak. If oil prices were the cause of the fiscal problems then why did these problems not correct when oil prices dropped?

A friend who drives a van went from a $50 fill to just under $100 at peak. How do those figures compare with a mortgage reset that bumps the monthly payment up from $1,200 to $2,400?

Think of it as a domino effect. At three fills per month, expenses balloon by $150/month, putting you behind on car and/or house payments, pre-reset.

Even if you don't face an option ARM reset and car payment, a $150/month bite to discretionary income is tough on the economy. Some of that is reversing now, but the asset loss takes longer to overcome.

What person in his right mind would extend a loan of several hundred thousand dollars to an individual who will be unable to service the loan when the general price level rises by $150?

What you are describing is a situation in which a homeowner gets a parking ticket and has to default on his mortgage because he cannot afford to pay both. If this homeowner has a child then they will have to default. If this homeowner faces unexpected car repairs then they will have to default. If this homeowner has to make a hospital visit then they will have to default.

If this is the true nature of American enterprise then the whole world is laughing at you. And you want to be responsible for the world reserve currency, direct the IMF and World Bank, and dictate to Afghani yak herders how they should live?

Unfortunately, your middle paragraph sums up the situation that a great many Americans find themselves in. I wouldn't go so far as to say most, but certainly a very large minority live nearly exactly like this.

Regarding your lead question:
Somebody who isn't taking the risk of default on themselves.

It is and was obviously and criminally insane, yet somehow nobody is being called to task for it.

Somebody who isn't taking the risk of default on themselves.


Mortgages were no longer held to maturity by the originating institution. They were sold to investment banks who packaged them as MBS and sold them on to investors. Everyone involved in this "value chain" collected a fee and so everyone had an economic incentive to look the other way, collect the fee, rinse and repeat.

somehow nobody is being called to task for it.

One of the key people responsible is Larry Summers. Each morning he calls his blue phone from his red phone and gives himself heck for being a duffus and almost singlehandedly destroying countless American lives.

I understand Al Capone did an equally bad job investigating organized crime in Chicago. C'est la vie.

But even under this system, the buck has to stop somewhere. It should have stopped with those holding the mortgage backed securities. But unfortunately, the buck is stopping with the American tax payer.

It just seems like a fairly good principle that there should be consequences for one's actions. In this case, however, the big banks do not have to suffer the consequences. And what will be the lesson here? And why wouldn't this whole episode or something like it be repeated again? This is so wrong on so many levels that I feel this black mark will cancel out whatever good Obama may accomplish in other areas.

the buck has to stop somewhere

Scenario: US banks default on debt, CDS bond-insurers go t*ts-up.
US Govt says 'gee too bad' to all holders of worthless US paper.
China (for example) sells it's 1 trillion US dollars of treasury notes, dollar totally collapses, china buys most all oil futures and expects delivery by tanker, siezes taiwan and the spratlys, fails to prevent Kim Jong Il believing that he should shell Seoul or use Japan for target practice.

Buck stopped. Easy when you know how ;)

.. and while they're at it, knock out a few US important satellites, sink a few carriers - in short: laudable restraint.

and thereby kill their export based economy?

I don't think so.

No person in his right mind would do so. Working in foreclosure defense, I have seen loans from 2005 or so where banks refinanced 100% loan to value for borrowers in their 70's. It's beyond insane.

What you are describing is a situation in which a homeowner gets a parking ticket and has to default on his mortgage because he cannot afford to pay both.

Go ahead and laugh. We deserve it--and besides, this is an accurate description. In my county, a prominent billboard on all the public transit buses says something to the effect: You shouldn't have to choose between paying your phone bill and taking your sick child to the doctor.

It's reality. Americans bought up (still?) everything in sight and spent every last dime because they thought the party would never stop. One slight change--and bang, the troubles begin. There is no plan B, not even a Plan A. No thought for tomorrow. Instant gratification.

Real estate already peaked by 2006/2007. Once that happened, people couldn't sell or refinance their homes to avoid the payment resets. It takes a few months after that to get behind on payments, go into foreclosure, etc. High gas prices didn't help the long distance commuters with McMansions 50 miles from work. It might even be enough to push a fixed-rate borrower over the edge, but nobody with a big payment reset was going to make those payments.

but nobody with a big payment reset was going to make those payments

And those payment resets and the sudden transition to a housing market surplus drove down prices and destroyed any equity held by those who had paid 20% down. This same price drop also undermined the value of all MBS. These were deemed to be extremely safe investments and were widely held. They were deemed "safe" as house prices generally increase or hold steady. Banks which held MBS were now under capitalized and those who had invested in derivatives were technically insolvent. And so the house of cards began to collapse.

This collapse would have occurred even if the price of oil had remained steady. I believe the rise in the price of oil was likely a result of the housing bubble (and not the cause of the bubble's collapse as the Gail thesis argues).

Think of it. Thousands of people suddenly had access to credit they had previously been denied. Housing became increasingly "affordable." The result of freely available credit was a rise in the price of houses as buyer A can now easily outbid buyer B. The house price rise sparks a boom as it provides false confirmation of housing as a "fail safe" investment, and this growing bubble draws more builders, more lenders, and more buyers.

An identical boom and collapse took place in Holland circa 1650. This one concerned tulips rather than houses but the mechanism was much the same.


It's all a matter of timing.

Without the oil price increase due to the production plateau things might have run smoothly for another year or three.

This probably would have made things even worse, though my imagination balks at the concept.

My gas purchases went from $30 a fill to $44 at peak. A friend who drives a van went from a $50 fill to just under $100 at peak.


Don't you know that when oil goes up everything gets more expensive, not in the last place food ?
When oil prices drop the problems are not over, because for the current type of mass economy to stay healthy it needs to grow and therefore will consume increasing amounts of oil. To avoid major problems with dwindling amounts of oil the only possibility is decreasing globalisation and less FF dependent cars.

Whats your missing and what Gail should probably emphasize with the oil/housing bubble connection is new home buyers. Remember its a ponzi scheme you have to keep sucking in fresh blood. Continued home buying in the US using 3% down mortgages for 400k homes still way beyond reasonable prices indicates they did not run out of suckers however rising oil prices reduced the amount these suckers could pay for a new house.
So the bottom level ponzi entrants could not put as much down. 100 dollars a month finances about 15K so if your overall expenses go up 200 a month then you can finance 30k less a month.

Also of course interest rates where also increasing and this is something else thats being ignored.

The combination of rising interest rates and rising oil prices and general feeling of being squeezed and actually paying attention to your finances probably adds up to a 30-100k pull back in what you feel like you can finance. Also of course Americans where deferring the expenses via credit cards but you get the bill every month with the rising balance.

Its a confidence scheme and rising oil prices played a significant part in popping the scheme especially at the marginal end. Understand near the end they where selling 500k homes to dishwashers and strawberry pickers these people are impacted by this sort of increase.

I take the approach that money and oil are so intertwined that trying to determine the chicken and egg is fruitless. The truth is that our monetary system evolved in a period of cheap abundant energy and in general excess resources as this became increasingly false from both population increases and real constraints the overall system hit its breaking point. There or so many intertwined feedback loops many running over decades that you can't split it out.

I dont think oil prices were "the" cause of this mess but they were sure a contributing factor, and as the economy does recover rising oil prices will put the brakes on all sectors of the economy.

as the economy does recover rising oil prices will put the brakes on all sectors of the economy

I think that is a key insight. China is already working on the creation of a SE Asia free trade area and is engaging in currency swaps with regional central banks. The likely outcome is that the yuan will become a "regional" reserve currency and be used as the primary trade currency in SE Asia area. Since SE Asia remains a relatively dynamic economy I suspect it will lead the way out of the global slump.

If this is correct then the Chinese and other Asian nations will be able to bid a higher price for oil ( to put this another way: the cost per bbl relative to growth in Chinese GDP will be lower than the same ratio in the US or Euro region). As US/EUR seek to climb out of recession they will be hit with higher fuel costs and have less ability to cover those costs. This will slow the pace of US/EUR recovery.

What makes a currency a reserve currency? Simple answer - it's usefulness for trade and / or finance. Now, ask yourself, how much does SE Asia export to China? Import from China? How much does SE Asia export to the U.S.? Import from the U.S.?

Now ask the same questions about Financial flows.

Still think the Yuan will become the regional reserve currency?

This is the thing that all hand-wringing about China doesn't get. Even with all its growth over the last twenty years, the U.S. (and Japan, for that matter) are more important to the economy of east asia then China (despite what Hugo says).

Bankers had no idea they would get into trouble by issuing Liars' Loans. They figured that even if the borrower did default on his mortgage, the property would still be worth more than he paid for it because real estate prices were going up so fast. Se even if the borrower defaulted, they could just resell the property and make even more profit. But when the real estate market collapsed the property became worth a lot less than the amount of the mortgage.

But I disagree with your last sentence. This is not American Socialism, it is unregulated capitalism. A little socialism would have helped because it would likely have meant tighter regulation. The extreme right insisted that we drop all regulation. Laissez-faire literally means; "Leave us alone." And the government did exactly that, no regulation whatsoever. That is a far cry from socialism.

Ron P.

Maybe your shock should help you understand that there is a lot happening that you are unaware of.

Bryan, why are your comments always so mean and snarkey? Was that comment really necessary?

I have always understood that there is a lot happening that I am unaware of. I, like almost everyone else in the nation, was totally unaware that liars' loans were being conducted. Or that they were later packaged and sold with a triple A rating.

Ron P.

It is just that this story has been posted and discussed numerous times already-other posters and sites have been all over this thing for a very long time and now you are shocked along with "everybody else". Often you attack posters who attempt to relay useful info by calling them "conspiracy nuts". I have no idea how it took you until April 9/09 to understand that this garbage was sold with a triple A rating. I agree that both of these comments are unnecessary.

Still, you did not answer my question, which was:

Bryan, why are your comments always so mean and snarkey?

There is a kind way and a mean and nasty of saying anything. Some people always choose the latter.

Ron P.

American Socialism starts not when the banks failed but when the government gave money to those banks.

We sure have unregulated capitalism which led to the collapse but what we did afterward is pretty much socialism in reverse -- taking the money from the poor and the weak to give to the rich and powerful.

Yeah -- the right is the worst of the bunch. Not only they want this "stolen" money but they also want a tax break on top of that. I am speechless -- to be fair, the democrats are just barely a bit better.

That is a far cry from socialism.

Absolutely correct. It's not socialism--it's crime.

After that long list of flaws with american capitalism, how do you then make the completely illogical leap to american socialism?

{edit: sorry, didn't see Darwinian's posting of same message before mine. Still worth a double entry.}

If there are any profits then those profits belong to the banker and hedge fund operators. Any and all losses belong to the people.

We, the people, have undertaken to compensate and keep whole the bankers and hedge fund operators. And this to the tune of several trillion dollars. You provide social safety nets for your wealthy elites and little or nothing for ordinary people. You permit your elites to prey on their fellow citizens and then when it all goes wrong you support them so they can make their payments on their mortgages. But you can go live in your car.


a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done

The American System is not Socialism. Check your dictionary for the use of the term "Facism" sp?

Looks a lot like serfdom to me unless we get off our rears and take our country back.

I'd have to agree with Penury here.

If you read that definition of socialism and compare it to what is happening in the united states now is definitely not socialism:

... unequal distribution of goods and pay according to work done

I'm not sure what to call what's happening in the US, but definitely not socialism!

Re: I'm not sure what to call what's happening in the US, but definitely not socialism!

Members of congress would disagree with you.
Gotta remember socialists are sneaky. They disguise themselves as your neighbours and then give trillions to the poor on Wall St.

Rep. Spencer Bachus, R-Ala., knows that some of his colleagues in the U.S. House are socialists. In fact, he's counted, and he knows exactly how many members of Congress are secret supporters of socialism. But, for now, he's not naming names.


That "hidden" socialism is the entire democratic party

Please lets not get into a paranoid mind set

Is the leap entirely illogical? Politics make strange bedfellows.

In the real world, where politicians get ahead by looting Peter to purchase the votes of Paul and Mary, what is socialism about other than looting producers to purchase the votes of freeloaders? And plenty of strange freeloading bedfellows sure enjoyed the ride, romping through their very "own" borrowed palaces while returning nothing of value in trade.

It helped immensely that the free rides, first made available by foolish regulation, could be widely expanded by foolish deregulation. Once that penny dropped, the politics became wildly popular, pervasively bipartisan, and totally unstoppable.

the institutionalized criminal activity that gave rise to the financial crisis,

I'm not so sure that it isn't this "institutionalized criminal activity," which is built into the structure of capitalism that is the red herring. This has always been a part of our economic system, so unless you can demonstrate some special and unique spike in this activity in the last few years, there is no explanatory power in it.

I would like to stay out of a "Darwin" debate as there is a substantial difference between the early and late Marx but Das Kapital is not entirely lacking in explanatory power apropos the current crises. Marx argues for declining returns to capital and the need to squeeze harder and harder to make a profit, this to be followed by popular recognition of the cultural contradictions inherent in capitalism, followed in turn by a legitimization crisis, followed by some new form of social structure. This theme was more fully explored in a subsequent movie Duck Soup.

Lenin, Trotsky et al operationalized Marx's theory so I suspect you may be aware there is much opportunity for confusion in this topic.

American socialism is worse than any Russian communism.

After a perfectly lucid comment on the situation, you resort to crude name-calling at the end. Why? Does it make you feel better to use the latest bogeyman term to characterize the criminality of the system? And is this even correct: corporate socialism is fascism, not socialism.

Fair comment.

I agree with various posters on the difference between socialism and fascism. I find it curious that various posters react very strongly to the US being referred to as a socialist state but appear to have no problems accepting the US as a fascist state.

As for socialism as a bogeyman, I live in a socialist state. I don't see that as a problem. I think it has many benefits. Many of the European states are socialist states with strong social safety nets and significant government intervention in the economy.

America provides safety nets for the rich and for the investors in large enterprise. I concur that this is more typical of fascism. I just didn't want to use that name as I didn't wish to be exposed to the charge of "crude name calling." While America is flirting with fascism I don't think it is there yet. Wolin describes a condition of "managed democracy and inverted totalitarianism" which I suspect is a good fit with reality. See the outline of his thesis here:

With regards to the last comment I was thinking of Dimitri Orlov's description of Russian collapse vis a vis an American collapse. He posited that the US is much less well prepared for such a collapse then the USSR as USSR had features which better enabled it to manage the crash. That was the intended meaning of the last phrase. Could not make it more lucid as I was called away on other tasks and had to hit SAVE in a hurry.

This Week's European Gas Storage Figures are out. Here they are presented in the form used by the EIA plus some charts.

Week 14 (6-April)
Working gas in storage was 396 Bcf (11318 mcm)as of Monday, April 6, 2009, according to GSE estimates. This represents a net increase of 9 Bcf (271 mcm) from the previous week. Stocks were 337 Bcf (9642 mcm) lower than last year at this time.


This could be storage bottoming out for the year although we might still see some further falls depending on weather. Stocks rose in Germany, UK, Italy. The refill rates over the next month or so will be interesting to watch. Changes to hub total storage may have slightly affected the data for this week (German uptick looks a little odd) but this should sort itself out next week assuming no more changes.

Total EU storage now 23%, (last year 42%)

Lowest Regions: France/Italy 15%/13% (33%/34% last year)

The following change has been made since last week

Please note following updates on DTMTS (Declared Total Maximum Technical Storage) :
Germany Hub total updated from 12275 mcm to 12480 mcm
PSV Hub total updated from 9020 mcm to 9235 mcm
TTF Hub total updated from 1451 mcm to 1426 mcm

And here's a few selected charts for the EU as a whole plus regions Italy, France and Germany.

Undertow, how do European nations store their natural gas? Do they hollow out underground salt deposits like we do in the US?

At any rate this should be alarming for most Europeans, storage at this point is about half what it was last year. Is this a trend?

Ron P.

The UK's main storage is in a depleted gas field under the north sea. Not sure about the locations in other countries.

The huge storage falls are due to a 50% or so drop in Russian exports since the beginning of the year. Officially this is because European Gas companies are refusing to buy their full pre-contracted (how you refuse to buy pre-contracted gas I don't understand either) amounts of Russian gas so that they can get it cheaper later - which I liken to playing a game of chicken with Gazprom. However the low level of European storage has been raised in the UK parliament and Italy restricted outbound flow recently citing "National Security" concerns which suggests something more going on.

Also we have Matt Simmons claiming that Russia is post-peak, is in rapid decline and next winter "Europe is toast - cold toast". Plus there was the strange statement from the IEA's Tim Gould (reported in The Moscow Times of all places) that Europe has been temporarily saved from a Russian supply shortage crisis only by the financial crisis led recession - so thank goodness for the recession then...

And the assorted earthquake:

ITALIAN Prime Minister Silvio Berlusconi caused outrage yesterday by telling earthquake survivors to treat their ordeal like it was a camping trip.

The gaffe-prone premier said the 18,000 people who have lost houses, family and friends were enjoying plenty of home comforts at “tent city” camps.

Berlusconi, 72, dismissed suggestions that victims were enduring freezing mountain temperatures and that some were without tents and basic provisions.

As the death toll reached 267, including 16 children, he told a television station: “They have everything they need, they have medical care, hot food.

“Of course, their current lodgings are a bit temporary. But they should see it like a weekend of camping.”

He also advised survivors, who include 98-year-old Maria D’Antuono, who sat in the rubble of her bedroom for 30 hours before being rescued, to head for hotels on the Italian coast – adding that they should “put some sun block on”.


He upset the Queen as well last week

Queen Elizabeth's anger at Berlusconi a YouTube hit

LONDON, England (CNN) -- Queen Elizabeth II has become a YouTube hit after apparently losing her temper with Italian Prime Minister Silvio Berlusconi during a photocall for G-20 leaders.

Just after this photo was taken, the Queen, center, appears to get annoyed with Silvio Berlusconi.

The queen joined the G-20 leaders for an official photo to mark the summit.

After the photo is taken, Berlusconi can be heard yelling: "Mr Obama," at the U.S. president in an attempt to get his attention.

The noise appears to rile the queen who turns in Berlusconi's direction, shrugs her shoulders and says: "What is it? Why does he have to shout?"

The UK's main storage is in a depleted gas field under the north sea. Not sure about the locations in other countries.

In Germany in one location it appears they use an old NG field.
http://www.wingas.de/speicher_rehden.html?&L=1 (in english)

They claim it is the largest in western europe.

Hello Speedy, Darwinian, et al,

Perhaps some geologist here on TOD has the expertise to answer this question:
How long can you pressurize, then depressurize a underground storage area before geo-fracture cracks form?
I would sure hate to read about some country spending big bucks$ to refill/repressurize a huge storage field for the coming winter, then a sudden geo-fracture quickly making much of this natgas disappear as the pressure rapidly decreased.

It would be especially dangerous if this leaked off gas reappeared in an a bad location: underground aquifers & water-wells, sewage networks, subway tubes, etc. Imagine having your tapwater hissing off natgas bubbles.

Thxs for any informed reply as I have no idea on the probability of this event occurring. My feeble guess is that salt dome storage may be more geo-stable that natgas storage in an old natgas reservoir.

Toto, I am no geologist either but with the aid of the internet we can figure this thing out. There would be no danger at all in old depleted gas fields, after all, they are nothing but porous rock so there is nothing to crack. And they are so deep that there is nowhere to go even if they did rupture.

I did a little googling and found that in the US we also use mostly old gas fields to store gas. Only 3 percent of Working Gas Capacity and 17 percent of Daily Deliverability gas is stored in salt caverns. I read the following link and am still unsure as to what the difference between the two are. Storage of Natural Gas

Underground salt formations offer another option for natural gas storage. These formations are well suited to natural gas storage in that salt caverns, once formed, allow little injected natural gas to escape from the formation unless specifically extracted. The walls of a salt cavern also have the structural strength of steel, which makes it very resilient against reservoir degradation over the life of the storage facility.

Ron P.

Ron: There were problems with gas leaks from the salt caverns in Hutchinson KS about 6-7 years ago. Leaks can occur even from these, apparently.

Perhaps some geologist here on TOD has the expertise to answer this question:
How long can you pressurize, then depressurize a underground storage area before geo-fracture cracks form?


Short answer is that it will depend on the petrophysical properties of the stratum being targeted for storage. And these properties are going to vary greatly from one rock type, e.g. porous sandstone, to another type, e.g., a tight shale with some fractures, and even within a single stratum because of spatial variations in original or secondary porosity, cementation trends, or grain size, for example.

Determining the actual P&P (porosity and permeability) values for a reservoir is done incrementally, traditionally by laboratory analysis of selected core and/or outcrop samples, and by analysis of samples in thin section via a petrographic microscope. The choice of which sample is to be cut and thin sectioned is a fascinating and interesting process, and it can and frequently does involve much trial and error. Decisions may be based on visual appearance of a core or outcrop sample, and these decisions can be biased by prior experiences of the geologist or by the presence of an oil stain, a coarser lense of sand, or a zone of vuggy porosity. Our eyes are often drawn to differences, so a pebbly zone in a core might be thin sectioned and end up being an interval of very low porosity, whereas the thicker and more monotonously-bedded and finer-grained sandstone above or below it might in fact be a more porous and permeable interval.

You ask specifically about the time, i.e. how long, that a reservoir can be pressurized before fracturing.

Much modern frac technology, including the pressures needed to fracture the rock, is client-confidential of course. When an old, exhausted oil or gas field is identified as a potential gas storage area, it would be ideal if the records of the petroleum engineer(s) who were involved with the initial development work were available. Why? Well, it can logically be assumed that if the original pressure that existed just as the first wells were being drilled into the reservoir was not so high that the rock fractured and the hydrocarbons leaked upward and away, then we'd have a target maximum, if not optimum, pressure to aim for when re-pressurizing the field today or next year. Then, additional tests could be run at higher pressures to see what would happen, but the higher pressures should certainly be kept well below the pressures used by the frac process (whatever those pressures may be for a given reservoir. Such records may or may not exist of course.

That's one of probably many "short" answers to your question, IMHO. The long answers, which might be forthcoming from one or more of the other TODer geologists, might of course be based on much crunching of numerical values obtained from P&P analyses, reservoir thickness, lateral and vertical variations in rock type, and other factors that I'm no doubt forgetting about at the moment.

BTW, I always enjoy your postings on NPK happenings etc., so keep 'em coming please.

Thxs for the replies--good to know more details. So it seems that if good common geo-engineering sense is applied: a storage area should last indefinitely until a strong earthquake essentially makes it useless from geo-fractures.

I'm no geologist either, but Google Hutchinson KS and gas leak for an example of what can go wrong.

well hell, i'm no geologist either......... maybe a half a$$ed geologist.

there is always some leakage, as any geochemical survey will confirm. the hydraulic frac gradient is typically in the range of 0.65 - 0.75 psi/ft of depth - vs a normal gradient of about 0.43 psi/ft. nearly all hydraulically induced fractures are vertical.

creating a fracture all the way to the surface would be nearly impossible, except in a completly impermeable rock. a hydraulically induced fracture will reach an equilibrium height such that the "leak off" from the face of the fracture would equal the pump rate and the fracture would stop growing.

there are examples where water injection has apparently triggered an earthquake.

"Europe has been temporarily saved from a Russian supply shortage crisis only by the financial crisis led recession - so thank goodness for the recession then..."

Yeah -- next winter when it's cold and the Brits don't have money to pay, nothing of value to exchange then hmmm.... May be that is what we are going to experience in the near future: an oscillation of energy & financial crisis until we die all exhaustion.

I had the opportunity to visit with a well known oil & gas individual earlier this week. Here in the US, he thinks that we may face NG supply problems within 18 months due to the slowdown in drilling and because of high decline rates. He is concerned that the industry may not ever be able to get back to 2008 production levels.

He also suggested that the NG reserves in the North Field in Qatar may be overestimated, since at least one recent infield well has resulted in a dry hole.

I was surprised to see that the 2006 NG net exports from Qatar were relatively low, about 3 BCF/day, although they continue to expand their LNG facilities.

Qatar NG data (EIA):


He also suggested that the NG reserves in the North Field in Qatar may be overestimated, since at least one recent infield well has resulted in a dry hole.

Dr. Bakhtiari claimed that this field's (which is shared with Iran so he should know) claimed reserves were overstated by a factor of about 2:1

Florida Power & Light must think there is sufficient NG. They are converting oil plants to NG. and building their own pipeline.

Pipeline to bring natural gas, jobs to region

They'll listen to the EIA and CERA. According to CERA, US natural gas production can now be increased to infinity ("production is no longer constrained") and this can be done by drilling fewer wells.

I think CERA employees must be on some amazing drugs.

The EIA's a little more conservative but still predicts increased production.

From the article above....

"Energy Secretary Steven Chu uncorks quite the mission statement in an op-ed published in Newsweek, writing "our dependency on oil is dangerous and shortsighted.""

Wooooo Hooooo,,, boy that over educated, taxpayer paid technodroid, sure has a grasp on the situation!!! Dontcha Know?????

Said it before, still true. Chu wouldn't know a good energy policy if it bit him on the A$$.

Local generation. Local distribution. Local consumption. The only way to go. Plant a few trees Mr. Chu.


“Nothing has changed with the fundamentals,” said Meredith A. Whitney, a prominent banking analyst who has been bearish on most financial institutions.

Yves here, Note the failure to point out that Whitney has been the most accurate in calling bank performance during this downturn. No, she is instead a mere bear. And the article also fails to mention that Leon Black, a distressed investor who has long been active in the real estate industry, is forecasting $2 trillion in real estate losses. I doubt the stress tests have that factored in. Consider the worst case scenario:

The tests, led by the Federal Reserve, rely on a series of computer-generated “what-if” projections in the event the economy deteriorates. Those include unemployment rising to 10.3 percent by next year, home prices falling an additional 22 percent this year, and the economy contracting by 3.3 percent this year and staying flat in 2010.

Based on the work of Carmen Reinhart and Kenneth Rogoff on financial crises, the expected trajectory for this crisis is for unemployment to peak in the 11-12% range, a fall in GDP of 5%, with it taking three years after the bottom for growth to return to normal levels, and housing takes over five years to bottom. And that is the typical trajectory for crisis countries, none of whom faced a backdrop of a global contraction. Whitney is calling for real estate prices to fall another 30%. So the worst case falls short of even likely outcomes, let alone a real disaster.

And the theater continues:"


"Unemployment (U-6) is well on its way to 20%. These are depression conditions. For more on a comparison between unemployment today and that during the Great Depression, please see Census Hiring To Create 1.4 Million Jobs, and scroll down to the section called Depression Statistics."

Mike "Mish" Shedlock

"...Unemployment (U-6) is well on its way to 20%. These are depression conditions...."

Yeah -- just applied the "Export Land Model" to the unemployment... One one side : population growth, on the other side : job loss due to energy crisis... Anyone want to venture?

For western countries and indeed the world you have to include women entering the work force so to get down to depression levels you need to consider and unemployment rate of 40% not 20%. U-6 is the correct measure vs the Great Depression.

Next you also have to consider disposable income and the nature of expenses. Here we find that Americans spend far more of their income on debt service then they did during the Great Depression. We have a lot more credit. All of this credit can be defaulted on to increase cash flow.

Next we do have social programs created in general in response to the Great Depression and this work to add a safety net at least until they are dismantled.

Next we have a large precentage of undocumented/illegal aliens performing a lot of jobs that most Americans refused to do. As Americans get poorer unemployment will increase in this class as they compete with citizens for jobs. This is not exactly some "red blooded" American replacing a recent mexican immigrant but a naturalized citizen say from Mexico that speaks decent english replacing a recent Mexican immigrant with poor english skills in some jobs generally higher up. This person who is more Americanized will be willing to hire more "citizens" etc. So the recent immigrant get a lot of pressure as the entire pyramid of workers move to compete for lower paying jobs.

What this does is result in incresinly undocumented increases in unemployment which don't show in the stats. In many cases these people may give up and go home or more likely in desperation they increasingly resort to crime putting immense pressure on crime employment. Its not surprising that gang wars are escalating. And of course as society as a whole gets poorer people have less money to spend on recreational drugs and prostitution and gambling. This is obvious in Las Vegas for example one can assume that illegal recreation is facing its own equivalent of the great depression.

All of this is really deflation of leverage most simply did not exist during the Great Depression so talking this initial period of leverage deflation as signs we are in the Depression is wrong. We have a long way to go to reach the same level. At worst right now we are about 20-25% down the road towards a Depression more likely closer to 10% with 90% of the downturn still out in the future.

First you have to get to the point that most families are dependent on a single member working and if this worker loses his job the family is left without income. For two worker families a similar case would be two people working part time with one losing there job. A single person working part time cannot sustain a family so the family is now at financial crisis levels similar to the depression.

In my opinion as long as people are willing to ignore debt monetization and continue to value their currencies then we will not enter a real depression. And also as long as deflation is primarily of the form of defaulting on debt then we are not yet in a depression.

Next our economy for better or worse is more sophisticated then during the 1930's. If its possible at some point to begin to expand borrowing again then we get a deep recession not a depression. I define a recession as a contraction of debt followed by and expansion. However if it goes deeper and begins to really cause people who either carry no debt or have defaulted on all debt and also reduced their living expenses to a minimal level to fail in significant numbers then we enter into a true depression.
People no longer generate enough cash flow to survive and provide food/clothing/shelter.

My opinion is this point will only be reached when resource levels are no longer sufficient to support the population we simply don't have enough basic resources to maintain our overall population. If the resource levels are sufficient and our fiat monetary system remains intact then we can and will eventually be able to inflate enough to overcome the debt deflation.

If however we lack the basic resources then no monetary game on the planet can get blood out of a turnip.

Best guess is we are 2-4 years away from entering our real depression we have a long long way to go.

Our "Exports" actually Increased in Feb. This recession is about over. We'll be "positive" by the 3rd quarter.

NAFTA, and the WTO have saved us, again.

I concurr, economic doomerism will peter-out by Q3/year-end and will be rapidly replaced with Inflation fears again...

I was in Central London last night and I've never seen so many people milling about.

Mostly Euro tourists probably taking advantage of our well stuffed Pound but its hardly that poor Depression Era woman nibbling her nails with two crying kids is it?


Last night on the news they were talking about the hackers & the power grid. One thing that I heard mentioned only once was that it was also possible to shut down the petroleum refining & distribution system.

My question is: Why have we made everything so complicated? What was wrong with having someone go out & turn a valve manually? Yes, it takes some forethought, but hey, what's a frontal lobe for?

It struck a personal note because I'm trying to find a simple cooking timer for my kitchen and can't seem to locate one. They're all electronic (means I have to buy batteries every so often); can't even find an hourglass timer either.

Darn you Mr. Goldberg!

I have several simple cooking timers, most bought at the grocery store for a few bucks. I use them to make sure I don't spend too much time online, among other things. ;-) I don't care for the electronic timers. That beeping is so obnoxious.

However, they aren't very well-built. My mom's lasted for decades. Mine sometimes don't most more than a few months.

I'm reminded of that article I posted awhile back, by that woman who interviewed her grandfather for tips on Depression spending. He was careful not to buy anything he didn't need...but if he did need something, he bought the highest quality he could afford, because buying cheap costs more in the long run.

My mom's also lasted for decades... even though me & my siblings used it for games every chance we got. Today's timers, wristwatches, mechanical clocks, etc. all need to be replaced after a year's time... even the "high quality" ones.

Darn, 1960s technology was sustainable... 21st Century technology has one foot in the grave before you even get the store receipt.

And software!... I can't even read the files that I still have on my 5 inch floppies! It's even hard to find a reader for my 3 inch disks.... Not to mention the heavy metals we dump into the environment with each new (MISAPPLICATION of) t- t- te- tec- techno- technol- technology.....

[On and on I go.]

This is a feature of fractional reserve banking and the resulting inflation it causes.

It's more important to get rid of your money today than it is to invest in products which will last for decades. Companies must continue to increase revenues to pay for credit lines. What follows therefore is a planned obsolescence strategy.

Both Comical and Unbelievable.

Re: My mom also lasted for decades.

So did mine. Best timer I ever had though a bit grating at times.

My mom is in her 8th decade. However she does not use cooking timers.

And software!... I can't even read the files that I still have on my 5 inch floppies! It's even hard to find a reader for my 3 inch disks

I was involved in filling a time capsule back in 1989, and I remember someone brining some computer art saved to an 8 inch floppy. I also remember thinking at the time - and I think I even mentioned it out loud to this person - "How on earth do you think that anyone will be able to find something that can actually READ that floppy?"

I think I could read it.
I have one of the very first IBMPCs created. A 5100 ? Not looked at it lately.
It has twin 7 1/4 (or was it 71/2) floppy drives.

I also have the original monitor. And I think the KB as well.

It does have slight short in the bus which I haven't gotten around to fixing yet.

I keep it as a remembrance of when I purchased my first one in Durham, NC from Computerworld.

My copy of my request to purchase has the real signature of Donald Estridge. I kid you not, from Boca. First name Philip.

I also have some real floppies from the IBM PC Club I belonged to way way back. Not the micro-floppies. I also have a working Zip drive.

Stuck in with all my olden ham gear, paddle keyers,etc. And a real telegraph key like used by Navy radio operators who Flew the Blue.

Airdale-it cost me somewhere north of $4,000 and that was with the employee discount..I placed my order within a few weeks of the availability announcement and I waited for about 2 months to get it


Are you thinking of the original 8088 pc? That had 5 1/4" drives. I had one and paid $500 for an aftermarket ST-506 20 Mb full height hard drive. Standard issue XTs had a 5 Mb HDD and I figured getting 4 times that would provide a lifetime of storage. Ha! I now have a camera which is less than half the size of the HDD and stores multiple files each larger than 20 Mb.

That Estridge signature is likely of some value. He was lost in a plane crash shortly after the PC was launched.

Yes, your right. Should have went and looked. Its 5 1/4...

I used to work in engineering test where I was product testing a suitcase computer that we had built to test our own drives. This used the bigger floppies. A diagnostic portable suitcase computer. It was the start of what was to later become the original IBMPC.

Don was a wild goose. Thats why he was given charge of the IBU.(independent business unit) to bring a PC to the market place.

I don't see the wording 'IBM COMPATIBLE' anymore on the sides of boxes.
Speaking of the bios code.


I also have a field drive tester in a suitcase that weighs like 35 lbs. Built by Compucorp for field engineers.

It has every signal brought out to pins that can be scoped. A keyboard for input and so on to set various modes of activity. Several input ports of various types and outputs as well. there is likely very little this dude could not read.


Blame it on mass production, globalization and fashion/design. New tech mass-produced with $.30/hr labor costs less than the spare parts alone to repair your old tech, assuming spare parts can be found. The Apple iPod's slim and sleek design is one of the worst examples of sealed, throwaway tech. Ironically, their resale value is relatively high, so there is a DIY community of iPod repairers. I've opened one, and it's a *very* delicate operation. Example of Nano 3G here:


I've repaired ipods, you just need the right tools---
Not overwhelming, just be careful. And my thesis dealt with the Russian Revolution.

I'm reminded of that article I posted awhile back, by that woman who interviewed her grandfather for tips on Depression spending. He was careful not to buy anything he didn't need...but if he did need something, he bought the highest quality he could afford, because buying cheap costs more in the long run.

Yep, so very true. I've always tried to buy top quality (or very nearly so) whenever I could, and have always ended up regretting it when I bought cheap durable goods instead. The thing is, though, it is getting harder and harder to find those top quality goods, and the price differential between them and the cheap junk keeps getting wider and wider.

First CFL's and now timers...maybe you produce some sort of electro-magnetic field that destroys complex items...

If true, I want credit for first proposing the "leanan effect"! Happy Spring!

Leanan -

'They don't make 'em like they used to' is not just a trite cliche, particularly when it comes to household appliances.

I recall that sometime in the mid 1970s my late mother had to get a new refrigerator after her old one finally crapped out after some 24 years of service. She even complained about! Her toaster lasted about the same length of time. In comparison, during the last 24-year period we have been through at least three refrigerators and at least as many washing machines. And as far as toasters go: getter a new toaster seems to be now something you do every three or four years, at best.

One thing though, automobiles have gotten better and last longer, but when you do have to get major repairs done, the cost is outrageous. Once upon a time ordinary folks did most of their own work on their cars. But today, forget about trying to fix anything major on a late-model car yourself unless you have a fully equipped auto mechanics shop complete with electronic diagnostic equipment. Again, more and more layers of complexity just waiting for cascading failures once the system becomes stressed beyond a certain point.

I had a 20" Mitsubishi television set with a build date of 1983 on the back that I used up until last summer. The tuner finally gave out and couldn't hold a channel. That was the first "remote control" television set my father bought and he vividly recalls spending $800 on it (in 1983 dollars). I took it to college with me and had it ever since.

According to an online inflation calculator that $800 would be over $1700 in 2008. If a new 20" television set cost me $1700 these days I sure would hope that it would last 25 years. Instead a tv like that can be had for a couple hundred and will last 5 years, give or take. In the end you're money ahead these days at the expense of overflowing landfills, etc.

I'm all for a return of high quality consumer goods that last a long time. Then again, there's a reason people can afford all the stuff they have these days, and it's more than just expansion of consumer credit. As for automobiles, they are one item that has outpaced inflation, and also something that today is totally dependant on consumer credit unlike toasters and most televisions sets.

aquapura -

Indeed, there is no doubt that the initial purchase price of most appliances in real dollars is cheaper than it was several decades ago. But it appears that part of the price of that is a lower service life. So, in some ways it's a tradeoff. The manufacturers appear to have selected low initial purchase price as their business model for maximizing profits.

Clearly, the average purchase price of a car has far exceeded the inflation rate. One of the reasons is the vastly increased complexity of even the most modest modern automobiles. Back in the 1950s and early 1960s even high-end cars were not all that terribly complex. To make matters worse, the auto industry has steadily increased the 'content' of their cars, such that they come loaded up with all sorts of gadgets and unnecessary features whose main purpose is to build up the sticker price.

I happen to have a 1968 Beetle that I use mainly as an occasional fun car. However, it would make a perfect post-peak car: the only power option on the entire car is the engine itself, no electronic anything, manual everything, rugged, reliable, and simple to work on. Additionally, there is such a vast aftermarket network of parts suppliers that I could almost entirely rebuild my Beetle from parts catalogs. And to get a bit more paranoid, not having an electronic ignition means that my Beetle would be impervious to the electromagnetic pulse of a nuclear burst.

Got to get back to basics.

"The manufacturers appear to have selected low initial purchase price as their business model for maximizing profits."

Manufacturer A sells widget for $1000
Manufacturer B competes by cutting costs on a few components and sells similar widget for $950
As manufacturer A loses market share they cut costs, change designs and produce a new version of the widget for $900
And so on...

And we wonder why 40 years later the $200 widgets are a pile of crap?
Few people notice the gradual decline in standards until they look back a few decades...

The only manual timer I could find was a low-cost China-made product. Once set, I have to tap the edge of it against a wall to get it started. This followed on the purchase of three other low cost gadgets all of which have underperformed, including a handheld pencil sharpener which tends to dump the filings into your palm.

Maybe you should try a few antique stores. The old stuff was built so well that a lot of it STILL works - and will probably do so even after today's brand new stuff breaks down.

Second hand shops, garage sales, estate sales. The upside of Depression era folks passing on is that their stuff won't be going with them.

You can't go wrong with the old-style, filled with sand, shaped glass timer--at least until you accidently drop it or knock it over somehow.

If someone was a postPeak glass-blower: you could probably have a pretty good income stream making and selling this item in various time sizes such as a 3-minute egg-timer, hourglass, 24-hour size [it would be big, but be so cool to own!], etc.

Post peak, glass blowing is going to be an expensive endeavor. I fire a wood fired pottery kiln. While you may not think about oil prices affecting wood prices, just two years ago I could find wood for $125-150/cord, free delivery. This year, the best price I could find was $175/cord with most people wanting $200 or more and many charging an extra $10-15 for delivery. I use about 4.5 cords per firing, so the price increase turns out to be significant. Melting minerals is one of humanity's more energy intensive technologies, and those sand timers will definitely become pricey fast.

Use an electric pottery kiln , should be lots of cheap wind powered electrical energy; you did mean post peak oil!

Wood will be too valuable to burn, will need to use it to produce chemical feed-stocks to replace petrochemicals.

In Areas Fueled by Coal, Climate Bill Sends Chill

This article touches on the great difficulty that we face in attempting to address CO2 emissions reductions. Some of the comments from individuals in Missouri show staggering usage of electricity, which is especially troubling because their rates are much lower than in other areas. These folks pay a per kWhr charge which is about half of what I pay and my dollar cost per month is around $50, since I don't need AC.

The reason these folks pay so much less is the fact that they are using electricity generated by power plants built decades ago. As new plants are built, the capital cost will be much greater per unit of generating capacity, thus the user will see their rates increase just to pay to replace obsolete capacity. Now, think of what will happen as efforts to reduce CO2 emissions are added on top. Building nukes wouldn't help much, since the cost per megawatt is so much greater than that for coal.

It's just another disaster in the making and more reason to build renewable systems instead of adding more fossil powered generation.

E. Swanson

“My problem is that the brunt of the improvement is going to be put on the backs of those who can’t afford it.” ---from article linked.

Just like the financial mess and bailout. Get used to it. It's never been different.

the brunt of the improvement is going to be put on the backs of those who can’t afford it

Just like the negative effects of climate change (replace "consequence" for "improvement"). Just like just about everything, really.

Feel free to remove if not on topic, but I am seeking the truth. :)

Wells Fargo projects record $3 billion 1Q profit

San Francisco-based Wells Fargo, which has receive $25 billion in funds as part of the government's bank bailout plan, anticipates earnings after preferred dividends of about 55 cents per share. Revenue for the period ended March 31 is expected to climb 16 percent to $20 billion.

Someone help me here. Is this $3 billion profit before or after you account for the $25 billion in bailout money. Revenue is $20 billion, we gave them $25 billion, that's a net of -$5 billion. Where's the $3 billion in profit coming from?

Attracting bailouts is obviously the latest business idea.

The $25 billion was a loan. It counts against / for the balance sheet, but does not impact revenue. The impact on expenses is only the interest paid. Essentially, its impact on "profit" is negligible.

Got it. So I go to the bank, take out a $10K loan for 2 years. Based on the interest rate, I owe $250 a month. At my job I then make $1000/month. So I can count the $750 as profit even though I am still in the hole for the 10K. Correct?

And so Wall Street is poised to go into the stratosphere today because of this? Wow.

That's essentially how it works. Willem and BOP add some very good comments about what this hides. And I think those are important to remember. But also remember that from the perspective of the corporate mindset, this quarters results and what they do to the stock price are the most important figures to be concerned about.

But you have to wonder if the "improved balance sheet" (very low cost loans from the government) did not trigger underwriting higher risk loans again at higher interest rates and that profit goes then go to the bottom line. Also, an improved balanced sheet might allow them to take less provisions for losses at this moment, again a P&L item.
Everything comes at a price. It may be that the US taxpayer subsidizes the profits of the banks that are helped by the government.

The "improved balance sheet" also avoids having to address the potential insolvency of the bank. The government loans are propping up weak institutions which would likely fail and close were it not for the government support.

No similar level of support will be available to those whose unemployment benefits run out. So the correct response is for the unemployed to band together, incorporate as a bank, loan each other a big whack of cash, and then apply for TARP funding. It is the American way and it is non-negotiable.

Hmmm, the headline says:

Wells Fargo projects record $3 billion 1Q profit

But the first paragraph says:

Wells Fargo & Co. said Thursday it expects record first-quarter earnings of $3 billion

I am no financial guru, but aren't earnings and profit generally two different animals?

Also, here are the final two paragraphs of the Wells Fargo article posted above:

Wells Fargo said charge-offs are expected to total $3.3 billion for the first quarter, compared with a combined $6.1 billion between Wells Fargo and Wachovia during the fourth quarter. Charge-offs are loans written off as not being repaid.

The bank is still facing loan losses as customers fall behind on repaying loans during the recession. It said its loan-loss provision will total about $4.6 billion for the first quarter, including adding $1.3 billion to its credit reserves. Wells Fargo now has $23 billion in reserves to cover future loan losses.

Again, I am a financial moron, so someone needs to explain to me where the record $3B profit is found in these 1Q numbers. How is the DJI up 200 points on this?

As always, I futilely ask, "Who writes this crap?"

Earnings and profit are the same thing.
Charge-offs also called "provisions" are expenses and reduce your profit. Lesser charge-offs (6.1 in Q4 vs 3.3 expected in Q1) increase your profits.

Again, I am a financial moron, so someone needs to explain to me where the record $3B profit is found in these 1Q numbers.

The loan writeoffs are considered as 1 time flukes. A better statement would be we made $3B from ongoing operations, but had to pay an unexpected bill of $4.6B. That is like me earning $3000 at my job for the month, but having to pay a $5000 tax due bill. My net assets have still gone down, but not as much as they would have if I didn't have the job. Of course we all know that there will be more massive writeoffs next quarter, and the quarter after that...

I think the operating plan for Timmy G. is to loan the banks funds cheaply, so they can make huge profits from new loans. Eventually they should accumulate enough profits to fill in the various black holes in their balance sheet. The key is to avoid being forced to evaluate solvency, until such time as enough operating profits have been accumulated to make the bank solvent.

I don't have (too much of) a problem with them doing this -assuming it would be catastrophic to allow one or more of the big banks to go under, we simply delay the day of reconing until they can work their way out.

"Is this $3 billion profit before or after you account for the $25 billion in bailout money. Revenue is $20 billion, we gave them $25 billion, that's a net of -$5 billion. Where's the $3 billion in profit coming from?"

Mr Denninger calling it as he sees it: http://market-ticker.denninger.net/

Alan Reynolds of the Cato Institute comments at the NY Post on recession and Hamilton:


What really triggered this recession should be obvious, since the same thing happened before every other postwar US recession save one (1960).

In 1983, economist James Hamilton of the University of California at San Diego showed that "all but one of the US recessions since World War Two have been preceded, typically with a lag of around three-fourths of a year, by a dramatic increase in the price of crude petroleum." The years 1946 to 2007 saw 10 dramatic spikes in the price of oil -- each of which was soon followed by recession.

In The Financial Times on Jan. 3, 2008, I therefore suggested, "The US economy is likely to slip into recession because of higher energy costs alone, regardless of what the Fed does."

Interesting comments from Russian banks.

Gref Warns of a New Banking Crisis

Sberbank CEO German Gref warned that a second wave of the crisis was about to sweep over the banking sector on Wednesday, two days after Prime Minister Vladimir Putin told State Duma members that banks were out of trouble.

Gref said bad debt is piling up as worsening economic conditions make it more difficult for businesses and individuals to meet loan payments, which in turn leaves banks with insufficient cash to extend new loans.

"The crisis is just beginning for the banking industry ... and it will arrive from the real sector," Gref, who runs the country's largest bank, state-owned Sberbank, said at a conference at Moscow's Higher School of Economics.

Gref's comments came amid sparring between top bankers and government officials over the health of the banking system. Bankers say the crisis mounting in the real economy will soon engulf the banking system with a slew of defaults and cause hundreds of small lenders to close. But Putin, Central Bank Chairman Sergei Ignatyev and even relatively more pessimistic Finance Minister Alexei Kudrin maintain that the sector is on the road to recovery.

Nice! A video game about gardening!

A New App for Your Green Thumbs

“First ever” product claims are often dubious, but it’s hard to argue the point with the makers of “Gardening Mama,” who are marketing it as the first video game about gardening. If it’s not, it’s surely one of the first — after all, planting isn’t an activity that delivers the action-packed punch of, say, “Grand Theft Auto.”

Hopefully, it is better than Cultivation.

High Barriers to Global-Warming Legislation in the U.S.
For some time I've been thinking about and commenting on this forum about financial implications of global warming legislation, if it ever comes to pass. Whether it's in the form of a carbon tax or a cap-and-trade mechanism, the whole intent is to raise the cost of carbon-based fuels to the point where the "invisible hand" does its thing and forces reductions in consumption, and investments in alternatives.

What isn't said - and is grossly ignored in the media - is the fact that these taxes and costs will be simply passed through the energy companies to the end consumer - because, in the end, it's the consumers' behavior that must change. The consumer will be forced, through application of economic pressure, to use less and to consider alternatives.

Now factor in that 41% of U.S. citizens feel that the media is exaggerating the risks and dangers of climate change; combine this with the loud (and scientific-sounding) "hoax" and "fraud" accusations coming from the hard-core denial fraternity, and you've got the ingredients for big trouble. Especially liberal Democrats who intend to do the right thing, will start hearing the screams loud and clear from their constituents when they realize what this means to their electric bills.

This is going to require the most carefully-played leadership imaginable from the Obama administration if any climate-change policy is to ever succeed with actual bills passed in Washington DC. The article quoted here points out the initial skirmishes. Obama will find his relationship with fundamental supporters severely tested.

Dick Lawrence

Black Dog already posted this link upthread. You should have posted this as a reply to his comment.

And, no doubt, their house has zero insulation. When propane prices around here doubled and then tripled I didn't hear any legislators around here trying to push back to get propane prices reduced. The market changes that we have experienced probably have had a much greater impact than changes in electricity prices that will result from whatever lame cap and trade or taxes we impose on carbon.

A market based approach will not fly politically, period. Any rise in prices that would actually change behavior will not be legislated. It will be a feel good bill that promises to make it all better by 2050.

What we really need is a WPA for the environment and energy.

Note to self. Must learn to embrace and love global warming.

For some time I've been thinking about and commenting on this forum about financial implications of global warming legislation, if it ever comes to pass. Whether it's in the form of a carbon tax or a cap-and-trade mechanism, the whole intent is to raise the cost of carbon-based fuels to the point where the "invisible hand" does its thing and forces reductions in consumption, and investments in alternatives.

What isn't said - and is grossly ignored in the media - is the fact that these taxes and costs will be simply passed through the energy companies to the end consumer - because, in the end, it's the consumers' behavior that must change. The consumer will be forced, through application of economic pressure, to use less and to consider alternatives.

Fortunately if the increased price is in the form of tax revenues (or revenues to somebody), the money represented by the increased price paid isn't destroyed, simply passed from the customer to someone else. The best method would be tax and dividend -tax the carbon, and return the proceeds as a dividend to every citizen. The incentive to conserve is still there, only think of it as an incentive to not contribute to the national dividend fund. Of course as new energy investment (or conservation) is made that wouldn't have been cost effective under the pre-carbon-tax regime, then the cost to society does increase. But presumably we are doing it to capture the externalities into the market price.

Most feel that a tax was never an option because the cap and trade scam will be so lucrative for Wall Street-this guy sums up the mood http://www.realclearmarkets.com/articles/2009/04/carbon_cap_and_trade_ba...

I've been thinking along the same lines, Dick. I think the hard shift to climate-change oriented policy could produce a very unfortunate backlash, both in energy supply and in political support.

See my article this week, on why politics is a terrible way to go about formulating energy policy but there is no real alternative. Also why we should forget about global warming, enact a carbon tax, and start thinking about energy policy in 50-year (min) timeframes:

How To Profit from Energy Illiteracy

CNBC is talking about a massive new development planned for Ft. Myers, FL. The place with the second-highest foreclosure rate in the country. Talk about bringing coal to Newscastle.

But the guy behind it thinks there will be a market, because they are positioning it as a "green" development, with sustainably built homes and its own power plant. It will also offer community wireless Internet.

Some of the talking heads think this is crazy - that housing prices still have a lot further to fall. Others think the old housing stock might just be bulldozed, and this kind of "starting over" is a good idea.

Nary a word on the sustainability of a community built in hurricane territory, 14 ft. above sea level.

Of course the developer doesn't consider this a problem. The money will be in his account and he'll be long gone when half the place disappears after a Cat 5. The suckers that bought the houses and FEMA get to pick up the pieces.

And the taxpayer that bails out the bank that provided 100% financing.

and the debt holder that bails out the taxpayer via tax cuts ?

Do American truth in lending laws mandate notifying the buyer that when he finishes paying off the mortgage the mean local sea level will be -2 ft. (plus minus 18.5 in)?

That does put an entirely different spin on being "underwater" on one's mortgage.

I don't think they will, home buyer's arn't even told if their house lays in a flood plain..

Leanan wrote: "CNBC is talking about a massive new development planned for Ft. Myers, FL. The place with the second-highest foreclosure rate in the country. Talk about bringing coal to Newscastle."

A CNBC video of the discussion can be found here:
Building in Foreclosure Country

The key to Florida's recovery might be creating jobs and investing in new cities. CNBC's Diana Olick investigates the wave of investments in her realty check, with Dani Babb, The Babb Group and Jack McCabe, McCabe Research.

So the key to Florida's recovery is in more residential building? Hmm, when you put it that way it doesn't sound like that good an idea.

This is the new scam...brand new 'green' communities. Some developer is trying the same thing down in Yeehaw Junction (no, really), a truck stop on the side of the Florida Turnpike between Kissimmee and Ft. Pierce. They want it to be a new 'eco-community' built in the swamps.

Meanwhile we (well not like I was consulted) just let go of another 10% of our workforce yesterday.

Hey, Florida has long been home to the most creative development scam artists. It's almost like it's a state tradition.

Of course, then we have the state rep from Ocala (Dockery) who is doing her best to prevent the central florida light rail project from being approved by the legistlature (again) - her argument? It's really just a bill for developers who want to build up new subdivisions and commercial centers around the stations.

Yup. Maybe its the sunshine - it gets to those of us who live down here.

Haven't we ruined enough of the state? Instead of ruining all new areas, how about we just bulldoze empty homes and rebuild those?

Personally, I'd prefer bulldozing without replacement.

This recession has been a boon for the natural environment in Florida. We don't have the hyper population growth that has defined the state for decades. Indeed, some UF team is projecting that our growth over the next few years will be half what it has been.

Nary a word on the sustainability of a community built in hurricane territory, 14 ft. above sea level.

14 feet? Are you sure? Ft. Myers is just 7 feet in elevation. Is this guy going to raise the elevation by 7 feet? This would probably lower the local elevation to 3 or 4! Anyway, it's no fun living 3 or 4 feet above sea level, as near Cocoa Beach (where they launch shuttles). And with mega hurricanes possibly on the horizon? Ah, well, FEMA can rescue them, eh?

who can forget the late night radio broadcasts of carl mcintire.


"The radio program generally began with a homily from the Bible, followed by a monologue by McIntire on a wide range of subjects, including apostasy in mainline churches, liberalism in government, opposition to coexistence with communism, and cultural issues of the moment, including gambling, sex education, socialized medicine, and fluoridation of the water".

old mcintire used to tell the flock to send their money and they would recieve free phamplets. mcintire insisted on calling the area cape canaveral.

Auto-Safety Pick Faces Criticism From Environmentalists

President Barack Obama named the head of Mothers Against Drunk Driving to run the National Highway Traffic Safety Administration, but environmentalists said he is the wrong person to oversee a big increase in the fuel economy of cars and trucks.
Mr. Hurley's nomination is already encountering some opposition from environmental groups. In the early 1990s, Mr. Hurley, then an official with the Insurance Institute for Highway Safety, supported the auto industry's arguments against raising automobile fuel economy standards, contending that such a move would result in smaller and more dangerous cars.

I've been thinking about the current refi boom given low interest rates and I think the net effect is to harm the economy.

The first assumption is that housing prices bottom when both prices are within the historical 3X income range and when rents and mortgage rates are effectively equal making buying a home to cash flow on rent and buying a home vs renting a balance. Certainly home prices can overshoot this metric but its a decent one.

Now with the large number of refi's we find that generally you have two situations those that qualify and those that don't. If you don't qualify your in hot water.

However if you do refi your house and lets say you bought it seven years ago before the boom then what you find is that your already low payment is even lower. Now lets say your trying to sell the house and can't get the price you deserve your in a much better position to aggressively lower your asking rent price. Other landlords are also refinancing thus lowering their monthly payment and thus are in a position to offer lower rents. This includes apartments.

Now for the people that can't the cash flow problem gets even worse as rents fall on average these people now enter foreclosure faster. So overall the net result short term may well be a increase in foreclosure rates. Now this lowers housing prices but also at the same time rents are falling so its a bit of a race. Given on average housing prices are still elevated vs rents the rent vs owing equation continues to be poor for new purchases and thus people buyng SFH to rent tend to hold off or get rapidly into trouble.

So now what you have a home you have had for several years payments are low and you have some equity and you can't get the price you deserve so you rent undercutting the market.

Now you either also rent a new place or since your such a financial guru and recognize rates are low you buy a new house and now have two. However since you did not sell your old home your downpayment on your new home is small and you almost certainly paid more than you did for your old house so your monthly payments are higher !

Now if you lose your job or have other financial difficulties your in over your head on your second house and it probably will go into foreclosure. If you can't keep up the payments on your first house even say if you kick out the renters and move back its certainly going into foreclosure because the loan value is less than the house is worth or you are forced to sell maybe for little more than the loan value under duress further depressing home prices.

Now if you keep your home ans simply stay there you may or may not spend the difference in payments. Most likely you will pay down other bills if your prudent which you probably are since your a good debtor. Overall the difference is probably not a huge boost to the economy longer term. For housing whats important is your even less likely to move unless you have to. If you have too you probably get yourself in the first situation.

All that really happens is the banks collect the fees on the refi and they probably cash flow better on the new loan since they are borrowing at close to zero and lending at 4%+ don't forget banks make money on the difference in interest rates not the absolute level. And maybe you spend a bit more or pay down balances both helps the banks.

The overall housing market is arguably worse off in almost every scenario I can imagine. All point to either falling rents falling prices or both and often higher probability for a person to get themselves in a situation where they will default.

And last but not least although I hesitate to say interest rates can't go lower if they do go much lower then the difference between zero and the current rate declines. Remember banks are borrowing at zero from now on out if rates go lower bank profits decrease this would decrease lending. Even giving the banks negative interest rates does not work since why take any risk ?

And of course most of the people refinancing now won't unless rates drop substantially say to 2% so your pool of people capable of refinancing is shrinking its a one time deal. Thus banks would need to soon see rising interest rates probably by the end of the year and to continue to borrow at close to zero to keep profit margins up. Rising rates of course flush more poor debtors into default and foreclosure.

And they make the chance of someone moving even lower or if they move and rent their old house then they are even more leveraged.

Bottom line all thats happening is one more one time desperate gamble that keeps the banks alive for another year.

And last but not least on the oil side I've said numerous times that falling rents and falling home prices will free up cash flow for commodities all of this new cash flow will eventually get soaked up paying higher oil prices. All its doing from the resource standpoint is allowing Americans to pay more for oil.
Both the people who default on debt and those that refinance have higher cash flows. Falling rents offset falling wages to a good extent.

Real wealth continues to erode.

I'm thinking of doing a re-fi, but not to lower my payments; instead I want to reduce the number of years I have remaining until I'm paid off. I suspect that is what a lot of people are doing.

You could do that already just by making extra principal payments, as long as there's no prepayment penalty. Still might be worth it if the lower rate covers the points and fees.

Another variation. Outside of the one time fee to banks this accomplishes nothing in the short term.
Maybe in your case you pay the house off in five years vs ten. The banks get their one time stimulus then BFD.

Its actually a bit surprising how little good low interest rates do. It seems that it was rising housing prices that really drove the boom not the low interest rates.

Free permits under cap-and-trade. This is what makes the European scheme useless along with generous and irrelevant offsets. If you give a ten year holiday to industries like coal fired electricity then softer targets like petrol and town gas have to carry the load. Or worse the planned reductions under the cap don't get nearly achieved.

Watering down C&T carries some political dangers. When the next Katrina hits a scapegoat will be needed. That could be the industry that got a freebie. When there is not enough funding for green jobs people will say it's because some major polluters are not paying their way. If coal power stays cheaper than the alternative there won't be much alternative. Also we don't get to find out if major conservation gains are even possible because the incentive has been removed.

The US has to do it right for the world's sake because other countries have failed so far.

From the DB toplink [Thxs Leanan!]:

Destroying urban gardens in the wake of peak oil: Will we build sustainable communities or follow the US off a cliff?

..“The Green Revolution increased the energy flow to agriculture by an average of 50 times the energy input of traditional agriculture. In the most extreme cases, energy consumption by agriculture has increased 100 fold or more. In the United States, 400 gallons of oil equivalents are expended annually to feed each American (as of data provided in 1994). Agricultural energy consumption is broken down as follows:”

* 31% for the manufacture of inorganic fertilizer
* 19% for the operation of field machinery
* 16% for transportation
* 13% for irrigation
* 08% for raising livestock (not including livestock feed)
* 05% for crop drying
* 05% for pesticide production
* 08% miscellaneous

“Energy costs for packaging, refrigeration, transportation to retail outlets, and household cooking are not considered in these figures.”
So a 'Murkan family of four uses 4 X 400 = 1600 gallons annually to eat, and the Duggar family uses 21 X 400 = 8,400 gallons or basically a large fuel tanker truck:

Tank trucks are referenced by their size or volume capacity. Large trucks typically have capacities ranging from 5,500 gallons (20,820 litres) to 9,000 gallons (34,069 litres).
Imagine the Duggars having an extra-large tanker set on fire in their front yard once a year just to equal their food consumption! Instead, I sure hope they have a giant organic garden and monumental compost pit on their property.

31% of 8,400 gallons = 2,604 gallon equivalent of I-NPK alone. At 3-5 energy-embedded gallons per 40 lb bag of I-NPK: 859-1,302 bags would have to be delivered to the Duggars annually if they wanted to grow all their food with I-NPK.

My guess is that a 40 ft trailer filled with tall, stacked pallets of I-NPK would roughly equal this annual 859-1,302 bag amount. Since high potency I-NPK is much condensed compared to O-NPK: The Duggars would probably O-NPK require annually about 20-40 standard dump-truck loads of local manure, mulch, and other compostable materials for their compost pit [if they just normally flushed their toilets and ground up most food residue with their garbage disposal, then sent it down the sewage system].

Let's hope the Duggars and Octomom have hugged their bags of NPK today!

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

The employees at this firm are complaining they don't have enough light to do their jobs. Give me a sec, gotta think on this one...

We'll be replacing their HID fixtures (455-watts with ballast losses) with 6-lamp T8 high bay fluorescents (222-watts) and eliminating 10 per cent of their fixtures, for a 150,000 kWh/yr savings. We'll also reposition the new fixtures to clear various obstructions; this, combined with the greater operating efficacy of the new system will more than double current light levels.

Pretty much the same thing for this client -- lighting load cut by more than half and light levels double that of their previous readings.

Two more examples of why we don't need new coal or nuclear; we simply need to make better use of what we already have.


I love your posts. I wish you would come down here and be our energy secretary.

Thanks for your kind words. I realize most of my posts are on the periphery and are somewhat repetitive in nature, but the key point is that we waste enormous amounts of energy and that we can eliminate much of this waste through any number of simple, cost-effective solutions.

As one more example, we're working with a car dealership that consumes about $25,000 in electricity each month. It's a fairly large complex that's loaded with HID fixtures. This small jog is 56 x 70 ft in size and is illuminated by twenty 455-watt HIDs -- 9,100-watts divided by 3,920 sq. ft. gives us a power density of 2.32-watts per sq. ft. (25-watts per sq. metre).

We will be replacing these fixtures with sixteen high bay fluorescents at 222-watts each, for a total of 3,552-watts -- that drops us down to 0.91-watts/ft.2 or just under 10-watts per m2. The dealership operates approximately 90 hours per week, so the energy savings in this one area alone are just under 26,000 kWh/year. You can take this number and multiple by twelve to cover-off the remaining service bays.

Everywhere I turn I see tremendous opportunities to use electricity more efficiently. Our biggest challenge is getting our hands on the materials and labour we need to undertake this work.


Your posts are always interesting, like to see more on hot water tanks. It's hard to believe how wasteful we are in using cheap electricity

Hi Neil,

I see a lot of electric water heaters in my travels, ranging from small 1.5 kW units for hand sinks to 45.0 kW behemoths. In a recent post I mentioned a 24.0 kW tank in an elementary school we retrofitted last month. We would need to retrofit eight hundred 2-lamp T12 fixtures just to offset the load of this one water heater. So I'm busting my ass changing lamps and ballasts to lower demand whilst this thing cycles on and off whenever it damn well pleases. I really wish we could do more in the way of timers and load controllers.



Thanks for your posts. Please keep them coming!

Any recommendations on electric heat-on-demand domestic water heaters? I was researching these locally as replacement for an upright tank but found that they were not recommended for a Canadian climate. Reason for this is that the intake water will be so cold in a Canadian winter that the unit may not be able to bring it to required temp on demand.

Are you aware of any similar units suitable for Canadian environment?


Thanks, BOP. I'm not aware of any instantaneous electric units suitable for our colder inlet temperatures. Personally, I think a well insulated storage tank equipped with an internal heat trap is the way to go; going forward, I suspect most utilities will be migrating to time-of-use rates and so there will be a strong economic incentive to shift water heating to off-peak hours.

When shopping for a conventional electric water heater, consider a model with an EF (energy factor) rating of 0.95, the highest in the industry (tankless units have an EF of 0.99). The standby losses of a good quality water heater are in the range of 40 to 45 kWh/month for a 40 Imperial gallon size and 50 to 55 kWh/month for a larger 60 gallon/270-litre model. Of course, we Canadians typically heat our homes for six or seven months of the year and if the unit is located inside a conditioned space, these losses help offset some of our space heating requirements.

For higher volume applications, a heat pump water heater such as these are the cat's meow.

See: http://www.geconsumerproducts.com/pressroom/press_releases/appliances/en... and http://www.architectureanddesign.com.au/Article/Rheem-MPi-325-Heat-Pump/...


While it might not be the most cost-efficient option now, having a "warm" tank with an On-Demand heater looks to me to be the most energy-efficient solution for those of us in northern climes.

Standby losses essentially disappear if you are holding your stored water close to room temperature.

I have a lot of interest in using multiple fluids and heat exchangers.
If you heat a small amount of fluid to a high temperature then you can play games with the volume of secondary fluid heated via a fluid fluid heat exchanger.

You could create a sort of unified design with both flow through and tank storage.

Best of both worlds.

You could do this with one fluid but a secondary working fluid can provide a lot of benefits.

This could well be water/steam heating water but it would be distilled water for example.

I'm a little paranoid about legionella bacteria which can happily multiply at temperatures between 20C and 50C (see: http://www.iphe.org.uk/health/legionnaires.html), so I have our electric water heater set to 78C (170F). This 67-litre, 1.5 kW tank pre-heats the feed supply to a SuperStor Ultra indirect water heater powered by our oil-fired boiler, and although the latter is set to 50C (122F) to prevent scalding and to minimize standby losses, its stainless steel construction supposedly offers suitable protection from legionella contamination. In addition, temperature stratification, which allows legionella to take hold at the bottom of the storage heaters, is minimized by the fact that the heat exchanger is located at the bottom of the tank. Lastly, under normal usage, the water entering at the bottom of the tank is some 20C to 25C hotter than the set temperature of this second tank.

For more information, see: http://www.hydroquebec.com/advice_hot_water/index.html


Thanks for the info, I didn't know about that risk and it definitely would be a problem in a public facility as the chance of the system getting infected is more of a "when" than an "if".

When the IEA begins to sound like Matt Simmons. . .

The IEA warns of shortages - "The next oil crisis is coming"

A shortage of oil could trigger another global recession around 2013 – says the IEA. By 2010 the price will reach new highs. . .

According to the IEA, the oil price could then exceed the records achieved in the summer of 2008 and reach $200 per barrel.

This IEA article should be pasted on every oil trader's forehead. The and they alone have guaranteed the next oil price bubble by taking the oil price below the cost of new finds by 50%. Thousands of oil workers have been let go. Thousand of other will retire soon. $200 billion in new oil projects have been scraped or substantially scaled down. The promise of oil sands and oil shale is destroyed because of costs. For what-greed for oil traders short on oil? Wall Street capitalism has failed us all. Many will be misled in this Country. Good luck in restarting new oil projects. Again, thanks a lot oil traders and banks.

The IEA has been warning about 2010 for about two years now. It's really what drove me to put personal food production and energy efficiency into high gear. I don't disagree with most of the POers analyses and they can be downright disturbing, however, when the IEA states that we are screwed within a couple of years that is downright horrifying. This article actually sounds more hopeful to me, if the economic condition doesn't improve and I keep my job, I have until 2013!

Hello TODers,

Recall from an earlier weblink: the British author stated a typical 18-hole golf course was about 50 hectares; roughly equivalent to a small farm. I hope the Duggars lead the postPeak way by buying a local, bankrupt 18-hole golf course soon. Once they have dug this up into an fully functioning organic farm: it can serve as a good example for the rest of the USA.

As posted before: Justin Timberlake, Tiger Woods, and the Duggars are terrific names for the coming Paradigm Shift!

Useful conversions from Wiki:

A hectare (symbol ha, pronounced /ˈhɛktɛər/) is a unit of area equal to 10,000 square metres (107,639 sq ft), or one square hectometre (100 metres, squared), and commonly used for measuring land area.

2.4710439 U.S. survey acres = one Hectare
The USA had, at it peak, 16,000 golf courses [but numerically shrinking since 2006]:

16,000 X 50 hectare = 800,000 hectares of potentially plowable urban and suburban golf course land. Converted to US acres: 800,000 hectares X 2.471 = 1,976,800 acres.

Of course, some of these golfing venues are only 9-holes, but some golfing communities have 36-holes, with some communities even having 72-holes courses [4 different 18-hole courses in their neighborhood].

Therefore, to keep it simple: I will just round it up to 2 million acres of potentially relocalized permaculture golf land or land converted back to a nature preserve [with lots of added beehives & PV-powered bat shelters, of course].

To give you a size-perspective on what 2 million acres of golfing land is approximately equal to:

Both the longest[1] and the largest island in the contiguous United States, Long Island extends 118 miles (190 km) from New York Harbor, and has a maximum width of 23 miles (37 km) between the northern (Long Island Sound) coast and the southern Atlantic coast.[2] With an area of 1,401 square miles (3,629 km2), Long Island is the 11th largest in the United States, and the 149th largest island in the world. The land area of Long Island is larger than that of the state of Rhode Island and larger than any U.S. territory except Puerto Rico.[2]
1,401 sq. miles X 640 acres/sq. mile = 896,640 acres. So essentially: imagine TWO Long Islands of golf courses scattered across the suburban and urban areas of the USA!

Remember, this acreage pales in comparision to all the front and backyards that could be converted into home gardening plots.

A quarter acre housing block is about a tenth of a hectare ie .25 ac ~ .1 ha

As far as I'm aware Tiger Woods will still play in Melbourne Australia for an $A3m appearance fee. He's not so fussed about the more prestigious tournament in Sydney which only has prizemoney.

Sometimes when it seems there will never be enough money for grid improvements or whatever they can always find the cash for sport, the military and bank bailouts.

Hello Boof,

Thxs for responding. I will take a 'Wild & Crazy' guess that Professional Golfers could be turned into pretty proficient gardeners rather quickly: ie, Master Golfers into Master Gardeners.

Consider that they have spent their lifetimes becoming acutely attuned to what degree the wind and sun can dry the fairways and greens, plus how it affect the ball's flight and bounce/spin characteristics. How rain and/or sprinklers can change the playability of the course. How the length & directional cut of the rough, the fairways, and the greens affects the play-ability, speed, and direction of the ball. How the sand bunker's granular texture and moisture content may have to be mentally figured into their swing/stroke to efficiently loft the ball up onto the green. Plus lots more learned sensitivity to entirely natural outside conditions that I am not aware of as I am neither a golfer or gardener. [EDIT: Just a hopeless city boy in Asphaltistan]

Anyhow, the learned traits might speedily transfer over to greater awareness of topsoil conditions, moisture levels of soil and plants, greater green color variation awareness of plant health, noticing plant disease more quickly, etc, etc. Compare a golfer [who has spent many hours outside amidst greenery]-->turned into a gardener versus a video gamer or a yachtsman-->turned into a gardener.

Perhaps Airdale, Jason Bradford, Todd, or other farmer/gardener could add a lot more to my speculation: that a great golfer could be a great gardener if he/she really applied themselves to this new goal.

GOLFERS are unleashing their fury at the Government and practising their aim by firing balls at the faces of Prime Minister Gordon Brown and Chancellor Alistair Darling.

..Brown and Darling both have targets painted on their foreheads and are positioned in full view of the hydraulically powered driving ranges for thousands of players to hit them with a Tiger Woods-like shot.
Makes one wonder how soon we will actually read about a politician who was beaten to death with a 5-iron.

Holland Country Club closing after losing 80 members, auction set for Thursday by Myron Kukla | The Grand Rapids Press

After 87 years, the Holland Country Club is closing..The Holland Country Club, which opened in 1921, will go up for auction Thursday.

"We had our hands tied. These are hard economic times for country clubs," Zwiers said.
Fascinating--> No Problem for this golf course to survive during the Great Depression, but our 'Greater Depression' killed it off in record time.

Now will this 120 acres be turned into a 'Shruburb' for the homeless? Or is it destined to become an open, stinking landfill, an abandoned auto junkyard, a farm, or a wildlife preserve?

A friend of mine told me a story about checking out some land in Florida that he inherited from his father, who had bought it, I think for cents per acre, in the Thirties after the 1920's Florida land boom collapsed. It was a forested area, but something about the land was familiar. He finally realized that it was a golf course that had been reclaimed by the forest.

Hello WT,

Thxs for the info. I wonder how many golfers are now googling to become 'Peak Informed' when they see their favorite golf course close?

I am not a duffer, but you would think the TV Golf Channel and the major golf magazines would Clearly Explain to golfers why so many courses are closing. If I was the publisher of a major magazine: I would be trying to save the lives of golfers and their families by encouraging them to plow their local golf course.

Union County turning Oak Ridge golf course into a huge divot

..The other day I heard reports that the course was being torn up by bulldozers. I jumped in the car and drove to the course, which was in playable shape when I saw it two weeks ago. I put on my running shoes and trotted out to check the devastation. Where the greens had been there were now piles of red clay...

Hello TODers,

Any guesses on what closes first?

1. Augusta National [Site of the Masters Tournament in Augusta,Georgia]

2. Golf cart manufacturing in Augusta,Georgia

Augusta’s Golf-Cart Industry Suffers as Courses, Players Drop

April 9 (Bloomberg) -- The world’s two leading makers of golf carts like to refer to their slow-moving, four-wheeled vehicles as cars.

“Carts are what you push around a grocery store,” said Gary Michel, 46, president of Ingersoll-Rand Co.’s Club Car Inc.

Michel’s company and its chief rival, Textron Inc.’s E-Z Go, make almost 90 percent of the world’s golf carts from factories in Augusta, Georgia, the site of this week’s Masters Tournament. Just like the carmakers in Detroit, they are struggling through what’s likely to become the longest recession since 1933.
My bet is on GM driving these two companies into bankruptcy so they won't compete against the Chevy Volt. Expect a repeat much like when the car manufacturers earlier drove rail mass-transit out of cities back in the 1900s.

Imagine sometime in the future [a repeat of Zimbabwe]:

A long since laid-off golf-cart employee wheelbarrowing a dying, cholera-stricken family member past Augusta National. Meanwhile, a bunch of GM and other auto mfg. executives, laughing and guzzling cocktails, speed from hole-to-hole on very rare golf-carts.

Thats almost funny. I'd suggest anyone with money spend some time in a third world country.
It really opens your eyes to how the world works.

Hello Memmel,

Thxs for the reply. Yep, certainly not good news,IMO.

I expect Ronald McDonald's Housing for Cancer-Kids to be the next to close:

Facing hard times, Shriners may close 6 hospitals

GREENVILLE, S.C. – Shriners Hospitals for Children, which has provided free care since before the Great Depression, is considering closing a quarter of its facilities as donations stagnate, costs increase and the charity's endowment shrivels.

The group's director says it's the only viable option.

.."Unless we do something, the clock is ticking and within five to seven years we'll probably be out of the hospital business and not have any hospitals," Ralph Semb, chief executive officer of Shriners Hospitals for Children, told The Associated Press.
Families should mentally prepare to just wheelbarrow a dying family member to the graveyard as the Greater Depression's cascading blowbacks gain ever greater strength. :(

Well one of the big effects I've been predicting for peak oil/ economic contraction is that the social safety net will be withdrawn as western economies move to third world demographics. People will become unwilling and increasingly unable to help those in need.

Expect at some point for unemployment benefits to start getting cut pensions to go unfunded and eventually even prisons to suffer a dramatic cut in funding and reversion to third world like conditions.

I'm going to guess that on our judicial side what will happen is you will get this massive backlog of cases and that even if ones are decided nothing is done. At some point you will get significant corruption in the Judicial branch and since most of our law is based on case law a rapid repeal via changing decisions will result. At first it will be seen as a good thing as peoples ability to sue is curtailed but eventually it will become obvious that we have been stripped of any real rights under the law.

The US simply cannot afford much longer to run its massive prison system and pour money into its legal system socially a contraction here will probably have the largest effect overall.

The turning our backs on the poor is just the tip of the iceberg soon it will be the poor the old and the criminals that will be left to starve and die.