CNN/USAToday/Gallup: There are "major problems..." (oh, if you only knew...)
Posted by Prof. Goose on March 17, 2006 - 12:57am
Here's a summary piece on the USAToday/CNN/Gallup oil/energy poll that has some interesting, and shall we say somewhat contradictory results...
WASHINGTON (CNN) -- Although Americans don't believe the country faces an imminent energy crisis, most believe there are "major problems" --- from potential oil shortages to possible terrorist attacks -- and they are harshly critical of the leadership on the issue from the White House, according to a new CNN/USA Today/Gallup poll.
CNN/USAToday/Gallup: There are "major problems..." (oh, if you only knew...)
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CNN/USAToday/Gallup: There are "major problems..." (oh, if you only knew...)
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37 comments
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I hazard the guess that the same poll taken 3 years hence will show 50% thinking the world will run short of oil within 5 years rather than the 30% within 25 years in this poll.
Logical perceptual inconsistencies are common as mindset begins shifting, so maybe that's a positive sign. Or maybe their heads are still mostly stuck where light can't shine, bit like their president.
yeah, but what they forget to mention is that the EIA arbitrarily doctors future supply figures to match projected demand, with no basis in reality whatsoever. so this is willful deceipt, not just delusion, on the part of the US govt and the OECD's little brother, the IEA. it just seems too convenient that such bullshit is right in line with what EXXON, BP and Shell also choose to spout publicly.
apparently, 12% of the american public believe the country is already in an energy crisis. so possibly a quarter of that, or 3%, really understand PO. sounds about right to me.
I noticed they didn't define what exactly is this problem the American public is wary about.. Was it high costs of something else bothering the public?? I suspect the problem is high gasoline prices and they are looking to the government to help bring the prices down.. I don't believe they know why the cost of gas is going up with all the noise they hear about Iran one day or Nigeria the next. All they know is that the price is going up again..
And here I thought the number one issue in the 2008 election was going to be energy but energy might be the #1 issue sooner than that..
People like to bitch about gasoline prices, so they get a lot of attention, but the home heating bills are the thing that really hurt a lot of people.
Q) What are you doing to reduce your consumption of oil products?
Q) How will you cope with $10 a gallon gasoline?
Q) On a scale of 1-5 where 1 is not at all and 5 is most definitely, how would you evaluate the following statement - the current energy situation is the a direct result of the type of economic system we have developed over the past 150 years.
Any one care to add others?
I fear that a great one-two punch of money system resetting is coming: 1) dry up the money supply causing deflation. Everyone is losing their jobs and their houses. 2) Once assets of real value are back in the hands of those who control the money supply, begin the process of hyperinflation wiping out anybody's savings and destroying the dominant currency.
And that will wipe out USA demand for oil, giving China and India a chance to use up what the USA no longer is. Then they have their money system reset and some as yet unknown player gets to use some oil for a while.
This is how the downslope of oil is going to be managed. Now remember, I called it.
Possibly. But my reading of economic history suggests that the odds of extreme inflation (as opposed to deflation) are at least five to three and possibly as high as ten to one, depending on the assumptions that one makes.
Deflations are rare in history--and none has happened since the Great Depression. Fears of a rerun of the Great Depression are so great among central bankers today, that I find it hard to come up with a convincing deflation scenario for future deflation.
Remember the superior political clout of the debtor class, pointed out by John Maynard Keynes. Note also that to rob older people of their Social Security and Medicare benifits that were promised to them, the easiest way to do this is to destroy the value of money (while keeping caps on Medicare reimbursement--i.e. medical care cheap but unavailable). To decrease Social Security payments directly is political suicide, but cost of living adjustment to benefits (the last time I looked) are capped at 3% per year. Thus, all you have to do is to inrease inflation at more than 3% per year to transfer income away from the elderly.
But I've been thinking --- this insane credit bubble has gotta end and before it does of course the bankers need to get all their assets back. So they cause a deflation and people can't pay back the loans and thus lose the property. The key thing is the funnelling of wealth from many to few by those who have control over the money supply. And who knows what they'll do now that they're discontinuing the m3 report. I think its magic time.
Isn't the convincing scenario simply cascading debt defaults? For what it is worth, I don't see this as an unlikely occurence particularly given the prsent nutty patterns of real estate related loans and other consumer debt ... the fact that it is seen as wildly unlikely by the average Joe is potentially a contrary indicator.
Applying a little quick psuedo science and I can conclude that a cascading debt debacle deflation is just a little less likely than a massive monetary pumping inflation to reduce the real debt load.
Default or inflate?
Your thoughts?
When it fails hyperinflation is the most probable short term outcome based on current policy. If that doesn't get too out of hand it could be managed back to a semblance of current economic reality over perhaps a decade or more. More likely it will break down into a collapse of current money and economic systems. If instead of hyperinflation an immediate deflation is 'chosen' the result will be very painful but less bad than that following a failed hyperinflation.
Current evidence suggests the worst of these outcomes IMO.
Compared to what?
Fearless Ben B., our Super Hero at the Fed has to get consensus; he is the guy who always (by Fed convention) votes last. Check his background--an expert on the Great Depression.
The Fed hates the idea of (in effect) printing money. The only thing the Fed hates worse than printing money is triggering or allowing another Great Depression.
I have no crystal ball. However, when the cow manure flops onto the the big barn fan there are going to be very disturbed bovines in agony, and I think central bankers will do the equivalent of Roman generals who lost a battle and then fell on their swords: They will pump up the money supply sufficiently to prevent cascading defaults of financial institutions--which is what turned the Crash of '29 into the Great Depression of 1929-1940.
Then, of course, we can all blame the central bankers;-)
I know that you have a good idea what has been going on economically the last few years. Deflation has become unacceptable, yet deflationary periods are a necessary part of a stable economic cycle. Things have got too far out of kilter, the necessary adjustment is not permissible. The rope stretches thinner and thinner, higher and higher.
Some things make this situation unique. Globalisation, de facto $ reserve currency, fungible oil / energy, US consumer of last resort financed by 80% of global savings, possible imminent resource constraints, I could mention more.
Probably the most significant is the dependence of the $ and US economy on foreign support. This could change in a day. When it does the current global economic and financial systems undergo a phase shift. We really have no idea what will happen then.
Very, very likely the $ and US economy will plunge. The interdependencies are truly scary. The Fed will inflate, probably hyperinflate since it is hard to see how mere inflation would suffice. It then becomes a question of whether that inflation can be managed back to something reasonable within a viable time and economic stability gradually recovered. Unlikely. If not then money printing will probably fail and deflation ensue since currency is likely to lose nearly all value - at some point printing paper ('money') becomes meaningless, severe deflation becomes almost inevitable then.
It will be different this time: we have got too good at avoiding the relatively little shocks (necessary adjustments). Now there is probably no choice: we must walk the tightrope and hope everything conspires to allow us to reach stability at the other end, going back is no longer an option. That chance is improbably small, and the fall is almost inconceivably great. I don't know if anyone can realistically envisage the result without being branded insane. I can see what happens but I am not yet brave enough to stare it in the face, nor are you.
I will leave you a last thought to ponder: if uncle Ben and the deflation fighters fail, if their bag of clubs don't work, how bad might the result be?
Should deflation occur despite multiplying the money supply by a factor of ten or a hundred or a thousand, what then?
Hm. Are you familiar with the TORRO scale for tornado intensity? It is an extension of the Beaufort scale. A T1 tornado has winds of 55-72 mph, pretty Mild as tordados go. A T5 tornado has winds of 137-160 mph, and here we find heavy motor vehicles levitated, let's call that Intense. Now a T10 tornado with winds of 270-299 mph finds entire frame houses lifted from foundations and locomotives carried some distance, let's call that Super. To date the most severe tornado observed is a T11 (1999 Oklahoma Tornado Outbreak in Moore, Oklahoma).
Well, now, how strong can tornados get? Nobody knows. Probably at least T12 and maybe higher than that.
Let's rate the Great Depression as a T10 by analogy. Then my guess for a worst case future deflationary scenario is T12+.
BTW hyperinflations do not last long. Mere triple digit inflation can go on for years and years, but not hyperinflation. I cannot recall a case where deflation followed hyperinflation. Can anybody?
Agreed that hyperinflations are brief, and that I don't know a case where extreme deflation has followed hyperinflation. But the current economic situation is pretty unique in many ways, the imbalances are in uncharted territory, in the past adjustments have always occured before this point has been reached. In a sense we (eg. the Fed, the markets) have become too good at palliative care. Perhaps the (economic) patient will pull through, perhaps it won't.
The future is uncertain.
The tightrope walker may be able to dance on piano wire; stranger things have happened.
But because of the unusually great magnitude of the uncertainties involved, I think anybody who puts financial bets on a future deflation is taking an immense chance of self-destruction of personal wealth.
BTW, I'm not borrowing to take advantage of what I think will be marked and severe rates of increase in inflation over the next ten years. I do not know what is going to happen. Nobody does.
But chances are it will be nasty.
Or worse.
http://www.financialsense.com/Experts/2006/Brussee.html
In one sense I think he's right but I expect the Fed's clubs may postpone it one last time resulting in significant inflation, possibly hyperinflation, before the inevitable, unavoidable, Greater Depression ensues.
Then, of course, we can all blame the central bankers;-)"
And why shouldn't we? Maybe not just the central bankers. Maybe all bankers. It' the debt. The potential for cascading defaults is a natural consequence of a leveraged for perfection or beyond perfection world. :-)
Now for the really interesting question given that this is peak oil forumn: What't left to save of the economy in a hyper inflationary environment when we can't afford to buy foreign oil and domestic producers of all sorts have no usable medium of exchange?
Which brings me to a comment you made on another thread about the lack of significance in the discountinuation of the publication of M3. You wrote that you and M. Freidman preferred to follow M2. Why not get the whole picture for the pittance that gathering the M3 data entails?
I don't know that it will work, but doesn't the M3 gambit strike you as one more attempt at economic obfuscation by Uncle Sam?
One last thing on lighter note: Is there any truth to the rumour that you are the real Jubal Harshaw?
Now, about M3: There is some useful information in M3 that you do not get in M2--but not much. Thus, the official explanation, that the costs of gathering and publishing the M3 data are greater than the benefits is correct.
But here is the kicker: To understand WHY it is correct requires a heckuva lot of knowledge of the history of data collection, the history of the changing definitions of M1, M2, M3, M4 . . . and at one time it got up to about M7, if memory serves. Essentially it comes down to this: Any useful information that is contained in M3 is also contained in other data series that will continue to be collected and published. In fact, if you wanted to, you could reconstruct M3 from other data (pretty accurately, not perfectly), but there would be point to doing that.
Anybody who seriously tracks money tracks a whole bunch of numbers, and anybody who fixates on one particular statistic just "doesn't get it." Similarly, anybody seriously interested in GDP growth doesn't look just at one measure of national income (e.g. real GDP) but at a whole bunch of series of numbers.
However, having said that, if you could only track one money number, M2 is your best bet for most purposes. Similarly, if you wanted to track one number for national income, it would probably be per capita real GDP growth.
The problem is that a single number, while interesting, does not tell you a whole lot. When you go to the doctor for a physical exam, she takes your temperature and blood pressure--well, those are two good numbers to know. But when you get the printout on your blood work, your treadmill test, your urine sample, etc., there are a whole bunch of numbers--maybe about fifty or sixty, that your doctor should look at and understand. Similarly, to figure out what is going on either with money or with the "real" (corrected for price-level changes) economists have to look at many different numbers--and understand thoroughly what they mean and how they are connected to one another.
A doctor cannot tell you whether you will have a stroke or a heart attack during the next year. They can tell you what you should keep an eye on or sometimes tell you emphatically that you must do something to change the number. Furthermore, what they can and often actually do is to tell you to exercise, keep your weight down, get enough sleep, eat healthy food and avoid bad things such as promiscuous unprotected sex, illegal drugs, pizza, cheap beer, and excessive stress.
Now, do we follow our doctors' advice?
Haven't the M3 numbers been out running the narrower measures of monetary expansion recently. I recognize that at some point it is necessary to acknowledge the difference between data and information. M3 still strikes me as information and I smell a rat.
Bill Cosby had a comedy album back in the 60's titled Why is there Air". If his old girlfriend [who inspired the title] had been an student of economics rather than philosphy, the title might have been "What is Money." IMO very difficult question to answer made more so by having one less number to ponder. :-)
The M3 data will still be collected and collated, the only thing that will not be done with M3 data is publish it. The specific thing that M3 includes that M2 doesn't is a measure of short term money injection into the markets (Repos). The obvious conclusions are almost certainly correct, infusions of liquidity into the financial markets will continue and probably increase but the Fed would rather it be less easy to see. That liquidity injection is the only reason that stocks have not fallen significantly already. The great inflation began before 9/11 but hasn't impinged on consciousness yet.
There is plenty of circumstantial evidence that the Fed has been buying its own debt via proxies in the last year or so. That is tantamout to the US being on the verge of bankrupcy. In January and February 2006 overseas investments in US plus purchase of US debt has been less than the US current account deficit, that means that the bankers the US depends on are perhaps getting cold feet. If this doesn't change very soon the $ will tank.
Assuming that our collapse doesn't destroy the rest of the world, I would expect to see at least a 1o-fold decrease in the value of the dollar against most currencies, and massive inflation of the cost of most commodities.
The only thing that probably won't massively inflate is real estate and house prices.
The media need to get over they easy "blame" stories and teach a little cause and effect.
Crude Oil Declines as OPEC Lowers Its Global Demand Forecast
March 17 (Bloomberg) -- Crude oil fell after OPEC lowered its forecast for world demand amid signs that surging U.S. supplies are sufficient to make up for a possible disruption.
Demand will average 84.5 million barrels a day this year, the Organization of Petroleum Exporting Countries said today in a monthly report. That's 100,000 barrels a day less than was forecast a month ago. U.S. inventories jumped 6 percent to 339.9 million barrels in the past five weeks, an Energy Department report on March 15 showed.
``The fear that demand would accelerate later this year is fading,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``There will come a point when there will be a shortage of storage. We are getting closer to the point where you can't ignore the fundamentals, and we'll then see prices fall below $60.''
Crude oil for April delivery fell 18 cents, or 0.3 percent, to $63.40 a barrel at 10:01 a.m. on the New York Mercantile Exchange. Futures are up 12 percent from a year ago.
Stockpiles may rise further in the weeks ahead because spot prices are cheaper than futures for oil delivered later in the year, a price difference traders call ``contango.'' Crude oil for May delivery was unchanged at $65.10 a barrel, a $1.63 premium over the April contract. The June contract fell 1 cent to $65.95 a barrel.
``In a contango market you are going to build inventories,'' said Mark Routt, oil analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``You are being paid to take delivery now.''
Oil futures in New York have closed above $60 a barrel for all but five days this year as export disruptions in Nigeria and tensions surrounding Iran's nuclear program overshadow rising U.S. oil inventories.
``The rise in prices has been driven by concern about future supply, not the present situation,'' Routt said.
Brent crude oil for May settlement declined 11 cents to $64.10 a barrel on the London-based ICE Futures exchange.
To contact the reporter on this story:
Mark Shenk in New York at mshenk1@bloomberg.net
Last Updated: March 17, 2006 10:07 EST
Demand is 84.5 mbpd because that's all the producers can produce. Inventories are building to take advantage of prices now to avoid disruptions later. The lesson from Southwest Airlines ought to be huge to other large corporate consumers of liquid hydrocarbon fuels. If the market is going to be volatile, buy now at the best low price for delivery later, while the JIT guys get hammered by market volatility over and over again.
What concerns me is that the end result will be social turmoil with most of the effort being made to point fingers.
I will allow that the American voters are a bit befuddled on energy policy and markets, given the years of disinformation and continual demagoguery they are subjected to.
http://polipundit.com/
I'd like to see them ask, do you think human ingenuity will be able to come up with solutions to Peak Oil that let people continue to live as comfortably as today? Or do you think we will take a significant hit in our living standards?
I'd also like to see them ask about global warming: do you think people today should sacrifice so future generations will not have major problems from warming? Or is it better to wait and deal with it once things get bad, when we will have better technologies and knowledge?
What, you ask? Pray, of course.
To be fair, there are few other suggestions at their Web site:
http://www.christiansandclimate.org/
For the Non-Christian this seems all a bit fanciful. But just think. If you really look are Christ's teachings, He did not say go out and spend it all on a big house and big car and waste everything you can.
More people Christians included should be asking "What can we Do?" Christians Just ask a Spiritual Source.
My prayer has always been, Come Lord Jesus, Come Soon.
Everyone should act responsible
I believe he said almost the opposite. Something about giving away all your positions to follow him? And that it's easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven?