IEA Investment Report – What is Right; What is Wrong

Recently, the IEA published  a “Special Report” called World Energy Investment Outlook. Lets’s start with things I agree with:

1. World needs $48 trillion in investment to meet its energy needs to 2035. This is certainly true, if we assume, as the IEA assumes, that world economic growth will actually improve a bit, from 3.3% per year in the 1990 to 2011 period to 3.6% per year in the 2011 to 2035 period. It is likely that the growth in investment needs will be even higher than the IEA indicates.

In my view, this is a CYA report. The IEA sees trouble ahead. There is no way that investment of the needed amount (which is likely far more than $48 trillion) can be met. With the publication of this report, the IEA can say, “We told you so. You didn’t invest enough. That is why energy supply ran into huge problems.”

2. Without reform to power markets, the reliability of Europe’s electricity supply is under threat. The current pricing model, in which wind and solar PV get feed in tariffs and electricity prices for other fuels is set using merit order pricing, produces huge market distortions.

In my view, the problem is even worse than the writers of the report understand. The value of wind and solar PV are inherently difficult to determine, because they produce intermittent supply, and this is not comparable to other types of electricity. Furthermore, a big chunk of costs relate to transmission and distribution–42% of electricity investment costs in the New Policies Scenario. Many well-meaning researchers looked at wind and solar PV and thought they were a solution, but they tended to look at the situation too narrowly.

To look at the situation properly, one really needs to look at the total system cost of generating electricity with intermittent renewables (of a given amount) compared to the total system cost of generating electricity without intermittent renewables. Proper pricing needs to include all of the additional costs involved, including the additional cost for storage, the additional cost for long distance transmission, and the additional costs encountered by fossil fuel providers in ramping up and down their generation to match changing output from intermittent renewables.

A study by Weissbach et al.(here or here) suggested that wind and solar PV were “an order of magnitude” less effective than fossil fuels, hydroelectric or nuclear, when full costs were considered. Broader analysis also raises questions as to whether there is any real carbon savings from wind and solar PV–did the belief they were helpful just come from underestimating true system costs?

I would raise the question as to whether competitive markets for electricity even make sense. Regulated markets allow the various players to make an adequate return, and allow utilities to collect adequate fees for infrastructure. The overseer can increase or reduce investment of a particular kind, based on the needs of the particular system. I notice a recent Bloomberg article says, Europe Faces Green Power Curbs to Stop Grids Overloading. The current system is clearly working badly.

3. Tight oil from shale deposits will need significant supplementation from other sources, if it is to be sufficient to meet our needs to 2035. This is the chart I made from data provided by the IEA in its November 2012 World Energy Outlook, with respect to its New Policies Scenario.

FIgure 1. My interpretation of IEA Forecast of Future US Oil Production under "New Policies" Scenario, based on information provided in IEA's 2012 World Energy Outlook.

FIgure 1. My interpretation of IEA Forecast of Future US Oil Production under “New Policies” Scenario, based on information provided in IEA’s 2012 World Energy Outlook.

The current report is not intended to be a report regarding future oil production, but one highlight is, “Meeting long-term oil demand growth depends increasingly on the Middle East, once the current rise in non-OPEC supply starts to run out of steam in the 2020s.” This implies that not only is US tight oil not going to solve our problems, neither will tight oil elsewhere. Instead IEA is back to its old plan of “calling on OPEC”–hoping that the Middle East is there to help, if no one else is around. This is wishful thinking–something I will discuss later.

4. IEA’s investment report is one documenting diminishing returns, even though it never uses that term. Diminishing returns take place if society is becoming less and less efficient at producing energy products. For oil, the issue is that the easy to extract resources were pulled out first; we must now move on to more difficult to extract resources. For electricity, the issue is that the old resources produced too much carbon; we must now move on to higher-priced approaches that (hopefully) produce less carbon.

We can see diminishing returns many places in the report. The major point of the report is that investment costs are expected to rise faster than either the amount of oil or the amount of electricity produced. There are other more specific statements, too. In US tight oil, “High production rates mean that resources are rapidly depleted, with a corresponding rise in costs per barrel as operators move out of the sweetspots to areas where the recovery per well is lower”(page 65). EU will need prices higher than today’s prices for LNG transported from America (page 76). In refineries, the drive is toward more complex and expensive technologies (page 77). There is a steady upward trajectory of the oil prices in the New Policies Scenario (page 81). Offshore wind is expected to move farther offshore, with higher expected costs (page 104).

The point that the IEA does not seem to understand is that diminishing returns affects buyers’ ability to pay higher prices for products. The IEA assumes that buyers will be able to pay higher prices (than the general rise in inflation) for energy products, without it adversely affecting the economy. This clearly isn’t true because salaries do not rise to match the higher cost of energy products. Buyers will cut back on discretionary goods, when energy prices rise. This leads to layoffs in discretionary sectors and quite possibly recession. It also leads to higher default risk.

In fact, wages tend to drop from diminishing returns, because workers are becoming, in some sense, less efficient and thus producing less goods per hour of work. Joseph Tainter in The Collapse of Complex Societies says that diminishing returns were what led to the collapse of ancient civilizations.

Points of Disagreement

1. Many OPEC countries which hold the largest, lowest-cost reserves are deliberately limiting their production rates so as to keep reserves for the longer term.  This is common misbelief, repeated by the IEA, but it not true.

The true cost of production in the Middle East is not just the cost of pulling the oil out of the ground. Instead, one has to look at the full cost of the entire system needed for the extraction, including whatever costs are needed to pacify the people in the area, plus whatever costs are needed for additional infrastructure. Even if Iraq can in theory ramp up oil production, this does not automatically happen. Even if Libya can in theory ramp up production, we shouldn’t expect fighting to stop tomorrow. With these costs, the cost per barrel is up close to, or above, today’s oil cost.

Saudi Arabia publishes high reserve numbers, but there is no indication that Saudi could, if they wanted to, greatly ramp up production. Saudi’s big recent addition was 500,000 barrels a day of refinery capacity in 2013, so that it could make use of heavy, polluted oil from Manifa field, that was supposedly part of its “spare capacity.” An additional 400,000 barrels a day at the same facility is supposed to come on line in 2014. There are declines going on elsewhere, so it is not clear that even these additions will actually add to its total oil production. Saudi Arabia’s total output was slightly lower in 2013 than in 2012, according to the EIA.

The Saudi “proven oil reserves” are unaudited numbers. Its big oil field is Ghawar, producing something like 5 million barrels a day. We don’t know how long it can continue producing. We know that horizontal wells can keep production from declining for a while, but that if a drop-off comes, it is likely to be more severe than with vertical wells. If Ghawar production starts declining significantly, world oil production is likely to drop.

We know that Saudi Arabia has some heavy oil it can in theory develop, not that different from Canadian oil sands or Venezuelan Oronoco belt heavy oil. Such oil would require large front-end investment and flow very slowly. According to the Wall Street Journal, “That the Saudis are even considering such a project shows how difficult and costly it is becoming to slake the world’s thirst for oil. It also suggests that even the Saudis may not be able to boost production quickly in the future if demand rises unexpectedly.”

2. It makes sense to find new sources of investment that will provide funds at lower rates for energy project finance. The report talks trying to find new sources of investment for energy projects other than the traditional source. In particular, it mentions the possibility of tapping funds held by institutional investors (pension funds, insurers, sovereign wealth funds and so on). Pensions and insurance companies are of course currently involved by holding stocks and bonds of oil and other energy companies.

The reason why new sources of lending are needed (besides the problem with high costs) is that the fact that prior sources are getting burned out at the same time huge amounts of new lending are needed. Governments used to be sources of funds, but can no longer be taken for granted (page 38). Changes in Basel III rules make it harder for banks to make long-term energy loans, without charging higher rates (page 39). Quite a bit of the lending in the future will relate to developing countries (see Figure 2 below). Many who have lent to developing countries in the past have suffered losses (page 39). With respect to oil projects, there are many examples where oil companies have made big investments, with virtually no return, such as Kazakhstan oil (page 81).

Figure 2. Energy investment required by part of the world--IEA exhibit.

Figure 2. Energy investment required by part of the world–IEA exhibit.

Perhaps sovereign wealth funds, if they feel that the risk is appropriate, can lend in situations where past experience suggests prudence is needed. But with a background in the insurance industry, I am not sure that makes sense for insurance companies and pension funds to get into financing ports in Iraq, refineries in India, or long distance transmission lines to offshore wind turbines. If they do, it needs to be as part of program where adequate risk premiums are included in the interest rates, and the risk is distributed over a large number of participants using bonds or securitization of some form.  It seems like an intermediary such as a bank would need to be involved.

The big interest in those writing the report is getting costs down for the borrowers. If risk is going up, it is not at all clear that interest rates should be going down. Furthermore, developing an undeveloped country using $100 barrel oil is far more difficult than developing an undeveloped country using $20 barrel oil. This is a big reason that financing debt in undeveloped countries doesn’t work well.


What the IEA has inadvertently stumbled upon is the reason why oil limits are a problem, and in fact, the reason why energy limits in general are a problem. It looks like there are plenty of resources available and plenty of ways to reduce energy use through mitigation. In fact, it becomes to impossible to finance everything that needs to be done.

An energy-providing device, or an energy-saving mitigation, requires up front payment. This payment reflects the fact that oil and other scarce resources (high priced metals, for example) need to be used in creating these devices. Oil and other scarce resources need to be used in developing new oil, gas and coal fields and power plants as well. This puts pressure on both debt markets and on scarce resources. At some point, the use of scarce resources becomes too great, and debt needs become too high. The projects with high up-front costs are among the worst contributors.

The plan to keep adding more and more debt doesn’t work. The economy is growing too slowly. People’s salaries are not rising to match the higher costs involved. The locations where the debt is needed are not in the part of the world with adequate banking services. It is the inability to finance all of the investment that is needed that will bring the system down. Resource scarcity will be behind the scenes, playing a role as well, but its problems will be hidden behind the problems of financing the needed energy investments.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to inadequate supply.
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709 Responses to IEA Investment Report – What is Right; What is Wrong

  1. Don Stewart says:

    Dear All
    I have written many times about the advantages of lightweight solar electric fences to enforce rotational grazing. Some of you may not have any idea what I am talking about. See this very short video:
    At the beginning, the fencing has been disconnected from the PV system and the man (Joel Salatin?) is winding it on a reel The cows know exactly what is going on, wait rather impatiently for him to finish, then trot enthusiastically to the fresh grass. You will note that the grass in the field they were in is grazed and trampled and manured and urined. The cows hooves push organic matter into the soil. As the cows leave, a host of critters will attack the field and turn the detritus into carbon rich soil. The cows will not be back in this field for some months.

    Don Stewart

    • Paul says:

      I have great admiration for Joel Salatin…

      • Dave Ranning says:

        I see you are not a food fascist.
        They really harsh my mellow.

        • Interguru says:

          L have read about Joel’s Polyface Farm, and admire him. He does a wonderful job recyling the nutrients from his animals’ waste. It brings up a question to me. Let us suppose we all switched to permaculture like Joel uses. Polyface is almost self-sufficient in fertilizer and feed – great!!

          My question is; where would vegetable and grain farmers get their fertilizer, since livestock farms like Polyface re-use all of theirs. This is a serious question, not a troll.

          • Don Stewart says:

            Dear Interguru
            The answers to your question are varied. The first thing to note is that Joel DOES export fertility. He has about 600 members of his ‘buying club’. Any food delivered to those people takes nutrients out of his soil and moves therm into town. Absent a method to get the nutrients back to the farm, the nutrients will probably end up in a landfill or sewage plant.

            The Asians were notable recyclers of nutrients from the towns back to the countryside. Their methods were quite laborious. The biggest methods used today in the US are commercial recyclers (such as former commenter here, Jody Tishmack) and recycling from sewage plants. There would be problems with both methods if fossil fuels disappeared.

            There is a small but continuous resupply of nutrients from the weathering of rock. Skillful gardeners can live with the ‘weathering budget’. For example, see Emilia Hazelip’s You Tube describing her gardening practices. Or look at Masonobu Fukuoka’s methods. Neither ever used commercial fertilizers or mineral supplements. There are examples of grain farmers who live within the weathering budget.

            One of the key dynamics is that living within the weathering budget requires that one not use NPK fertilizers and plowing. These fertilizers and plowing disrupt the normal ‘nutrient seeking and delivery system’ of the soil food web. A healthy soil food web yields fewer weeds and stronger plants. One of the best current books on that subject for a lay audience is, I think, Dan Barber’s book The Third Plate: Field Notes on the Future of Food. Dan is the executive chef at Stone Barns in the Hudson Valley. Dan tackles not only the production of food, he also tackles the remainder of the process through how we prepare the food and what we choose to eat.

            I would summarize by saying that the current system is doomed, that adapting will require great changes, that many people will not or can’t adapt, that adapting while there are massive subsidies and political gifts to the current system is hard, and that the notion of recycling nutrients will require just as big a change of mindset as the notion of adapting to interruptible supplies of electricity and limited ability to transport goods.

            You should also note that the three biggest nutrients required are carbon, nitrogen, and water. All are free gifts of Nature, but the art and science of using them is evolving rapidly in a variety of biological farming and gardening movements.

            Don Stewart

          • Jan Steinman says:

            “where would vegetable and grain farmers get their fertilizer, since livestock farms like Polyface re-use all of theirs.”

            The answer is to stop growing annual crops! Grow perennial food crops in complementary groups (“guilds”) and they will largely self-fertilize.

            That, and return your borrowed nutrients to the earth, rather than to a sewage treatment centre.

            It’s not easy in an urban setting, but fertigation via urine collection is dead simple — humanure is only a bit more challenging, mostly due to the socially-induced “ick” factor.

          • Good point. Where does all of the humanure go? Is it too laced with chemicals to go anywhere?

            • Jan Steinman says:

              “Where does all of the humanure go? Is it too laced with chemicals to go anywhere?”

              I am not a proponent of sewage sludge, which is not approved for organic crops. People dump all sorts of crap (worse than actual crap!) into their toilets: used motor oil, old paint, expired medications, old household chemicals and cleaners, etc.

              When I write about “humanure,” I mean personal waste from those tending the food crops. In my opinion, that is the only way to ensure it is fit for use.

              As I mentioned, urine collection is dead simple: just pee in your handiest, most convenient receptacle, then mix 1:10 with water. This is easier for men, but we all can do it, sister! The only thing stopping you is the “yuk factor” — just get over it!

              I use two litre plastic honey containers. They have a tight-fitting lid and a handle! My understanding from the fairer sex is they make a good target. Dead simple! One could also use a 20 litre bucket with a regular toilet seat atop.

              At farm scale, we dump these into 200 litre (55 gallon) plastic drums, then pump 100 litres into a 1,000 litre “tote,” add an equal amount of wood ash slurry (see below), top off the tote with clear water, then pump through a disk filter into our greenhouse dripline irrigation. You should see plants shoot up overnight after two 30-minute applications of that wonderful stuff!

              If you heat with wood, the next step up would be to collect the soluble nutrients from your wood ash. Use a 20 litre bucket half-full of wood ash, fill with water, stir thoroughly, let it sit for a few days, carefully decant the solution off the top, mix 1:1:8 with urine and water to come up with a balanced 1:1:1 fertilizer. Simply apply with a sprayer. And it’s free!

              No, let’s not spread stuff from our industrial sewer system onto our industrial farm lands. Let’s take charge of our own food supply, and do personal waste recycling right.

            • interguru says:

              “People dump all sorts of crap (worse than actual crap!) into their toilets: used motor oil, old paint, expired medications, old household chemicals and cleaners, etc”

              Even without the dumping of nasty chemicals human waste ( including urine ) is contaminated with endocrine disrupter chemicals both from contamination from plastics, and from pills we deliberately take such as birth control pills. In the Shenandoah river (VA), which does not drain large urban areas, the fish are transexual because of these chemicals.

            • interguru says:

              Before harvesting bird guano and then industrial fertilizer, in spite of all the recycling that was done using animal and human manure, there was a real shortage of fertilizer. Chinese farmers put highly decorated outhouses along the road to entice travelers to leave something behind. Land was left fallow every few years, reducing production.

              Do we know something, that was not known to traditional farmers, on how to grow with limited fertilizer?

            • Jan Steinman says:

              “Do we know something, that was not known to traditional farmers, on how to grow with limited fertilizer?”

              Stop depending on annual plants!

              Annual plants evolved to thrive in disturbed soils, like landslides or recent fires. We’ve essentially turned most of our food-producing land into landslides and fire sites! And we wonder why we have to keep applying fertilizer.

              Perennial plants in guilds, or mutually-supporting plant communities, don’t really need any fertilizer — beyond putting back what we take away, of course.

            • That same question has crossed my mind. I think now we have a huge number of animals, all producing manure. If all that manure continued, there would be no shortage. But as a practical matter, diets that are mostly plant-based can be planted in a smaller area than grains for a huge number of animals–so we may not be able to keep up all of the animals. If this is the case, I wonder if you may be correct.

  2. Paul says:

    This Debt Is Explosive, And it Sits on the Shelf Everywhere, Waiting to go off

  3. Stilgar Wilcox says:

    ‘Myth Of An Economic Recovery’

    “The economic recovery that the media and talking heads have been bantering around does not exist and is just a myth. A manipulated stock market distorted by recent economic policy hides and mask the real truth, in many ways it is ground zero in the war to convince us all is well. The American people and Main Street will tell you they are far from convinced that it is smooth sailing ahead. Huge weakness in the economy has been shown by numbers that barely get by even after record amounts of stimulus. Fact is if QE or the massive government deficit spending that props up our economy is removed it will fold like a cheap umbrella.

    Recent changes in how the GDP is figured , which boosted growth thus reducing the debt to growth ratio, and attempts to spin poor numbers regarding employment have been met with skepticism. Auto and new home sales have recovered a bit from the levels hit during the crises mainly as a result of QE and massive government deficits coupled with low interest rates that make both mush less expensive to finance, but we are still in an economic morass. Poor job creation and stagnate wages have left millions in a protracted state of financial weakness. We are not in recovery we are dead n the water.”

    • Don Stewart posted this link to an article by David Stockman saying that it looks like the GDP numbers include numbers with lowballed inflation numbers, so that economic growth looks better than it really is, and so that growth in worker productivity looks better than it really is.

      • Stilgar Wilcox says:

        The extent of fudged numbers at the government level is really unfortunate for those not doing well, as I am sure they look at certain stats and wonder why they aren’t doing better. “Look Honey, unemployment is down, inflation is minimal, GDP is up, growth is steady, but we just keep falling behind. What’s wrong with us?”

        There should be a disclaimer by the government:
        These falsified numbers have been manipulated (not to be vindictive to the masses falling behind), but instead to fool ‘The People’ into thinking things are better than they really are, to spur as much growth as possible (with this diminished level of net energy input).

        • VPK says:

          Senator Kay Hagen of North Carolina is being attacked for “lack of growth” and high unemployment in a PAC commercial showing a young college graduate headed for her menial looking restaurant job complaining about her situation with a college degree, no job opportunity and being “forced” to buy health insurance, she can not afford.

          The problem…”spending”. OY

      • VPK says:

        Listen to Dave Stockman;s interview…He tells it like it IS:
        Unbelieveable…BUBBLES EVERyWHERE around the world…only a matter of time before a PANIC

  4. VPK says:

    This is more for an illustration of the disconnect our “leaders: have of the actual situation regarding the world we live in today:

    Dick Cheney’s amazing chutzpah on Iraq
    By Paul Waldma

    “Of all the former Bush administration officials who have emerged in the last few days to blame the deteriorating situation in Iraq on Barack Obama, one might think Cheney would be among the last.
    It’s one thing to turn on your TV and hear that Obama is a dangerous weakling from people like Paul Wolfowitz and William Kristol, the ones who told us that war with Iraq would be cheap and easy, then bring a wave of peace and democracy across the Middle East.
    But Cheney?”

    Cheney and his “partners have done very well indeed

    Halliburton Stock January 2003…..8.32
    Halliburton stock today…………….. 70.24

  5. Jeremy says:

    This article was based on BP’s World Energy Report 2014 and it shows the real progress of “alternative energy” since 1999:

    “There’s a fair bit of optimism in green circles that fossil fuels are dying and renewables like wind and solar are set to take over. Al Gore has a hopeful new essay in Rolling Stone along these lines, arguing that “a powerful, largely unnoticed shift is taking place.”


    One problem? It’s hard to see this shift in the numbers — at least so far. Yes, solar panels are getting cheaperand coal is on the wane in the United States. But the growth of fossil fuels in Asia is still swamping those clean-energy trends. The result: more carbon-dioxide emissions and more global warming.

    Here’s a simple way to see this: In 2013, coal, oil, and natural gas provided 87 percent of the world’s energy. That fraction hasn’t changed since 1999. The world has basically made zero progress in moving away from fossil fuels over the last 15 years. If we want to slow the pace of climate change, that has to shift very drastically.

    Those numbers come from BP’s new Statistical Review of World Energy 2014, which is worth a careful read for anyone interested in the global energy system. I’ve put some of their data in chart form to tell the story below:”

    But avoiding a 2°C rise in global temperatures — the ostensible goal of most countries — would require reducing worldwide emissions 40 to 70 percent by mid-century. That’s a huge shift. To get things started, the International Energy Agency has argued that such a cut would require $24 trillion in clean energy investments between now and 2020 (and more thereafter). That would include:

    Each year, on average, 15 power plants and industrial facilities would have to be fitted with technology to capture carbon emissions and store it underground rather than emit it into the atmosphere. (This technology, known as CCS, is still in its infancy.)
    On average, 32 new nuclear plants and 17,500 wind turbines would need to be built each year to provide carbon-free electricity.
    The world would need to make its transportation sector much more efficient between now and 2020. That means lighter vehicles, putting 20 million electric cars on the road, and more efficient airplanes. Buildings and factories would also need to become dramatically more efficient at using energy.

    • Thanks! What happens is that the new renewable energy gets added to the fossil fuel energy. Nothing replaces anything else. In fact, it takes quite a bit of fossil fuels, very often coal, to make “renewables” Wind and solar PV from China are generally made using coal.

    • Stilgar Wilcox says:

      “Here’s a simple way to see this: In 2013, coal, oil, and natural gas provided 87 percent of the world’s energy. That fraction hasn’t changed since 1999. The world has basically made zero progress in moving away from fossil fuels over the last 15 years.”

      This substantiates what I’ve been arguing for some time now, whatever renewables that get produced are simply ‘added’ to the energy mix. As we can see from the above quoted data, on a global scale they do not replace FF. The reason why is because humankind’s mantra is GROWTH, which requires ever more energy input. So renewables simply help create more growth. Now there may be some improvements here and there, but globally overall there is no transition. 87% FF usage in 1999 is still the same % in 2013.

      There are smart people and we generally know what we should be doing, but what we ‘actually’ do is push the pedal to the metal, driving the economy as hard as possible for as much growth as we can muster. There is no overall global plan to make a sensible transition because everybody’s primary goal is chasing the mighty dollar in various denominations.

      • Stilgar Wilcox says:

        Sorry Gail, from the 5 minute difference in posting times it appears we were both working on our posts simultaneously. Apparently though we are both of the same opinion that renewables simply gets added to the energy mix.

      • I think that it is really part of the laws of physics. Humans are dissipative structures. We use up as much energy as we can before we die.

  6. Don Stewart says:

    Dear All
    A brief report from Charles Hugh Smith’s weekend letter to his subscribers.

    He refers to the two articles listed below. Charles believes that we have to reinvent society and the economy. He is working on that, and asks that we stay tuned. If you would like to follow such an effort, you might make Charles one of the people you pay attention to.

    Also, he references the third article below, written by Gail.
    Don Stewart

    • VPK says:

      I, of course, have read Gail’s article here, but the first Guardian piece “It’s simple, if we can’t change our economic system, our number’s up”, fits perfectly with “Our Finite World’s” message and what Gail is trying to get across.
      I encourage everyone to read it

    • It is always amazing the many places my posts show up.

    • ordinaryjoe says:

      Interesting. The article claims USA less exposed to oil shock than 2007 due to percentage of household income spent on gas. So libya oil production has fallen off a cliff with no recovery in sight. Saudi is making up the difference? If Iraq production falls thats two majors they will have to cover for? How long can they push those fields, they must be awfully tired. Im confused (no sarcasm I dont understand). I thought shia Iran/ Russia was the “bad guys”. Sunni ISIS Saudi/USA equipped is the “bad guys” too? So the shia Iraq government is “bad” the ISIS is “bad” Iran is “bad”. Who is the media saying is the good team or does there not have to be one anymore? Or is Iran the “good” team now? Could someone explain who the “good” team is – no TV. Or is it no longer possible to portray the good bad dichotomy because all parties are hostile to the USA?
      It feels to me that the three state Iraq is here to stay, territories marked by by sectarian lines. Kurds arnt going to give up their autonomy gained. Iran backed shia south Iraq aint going anywhere. ISIS runs the ship in the sunni areas. This seems more stable to me than the imaginary created non sectarian coalition government. They cant get along so they divide the land/oil and proceed with business. Am I wrong?

      • timl2k11 says:

        Any state or other entity that is perceived as a threat to the global power of the US is the “bad guy”. So at various times it’s been Russia, Iraq, Iran, China, Snowden, Assange, even Europe. I remember there were grumblings about Europe’s GPS system from our defense dept, and earlier about the Euro from various corners of our bureaucracy.

      • You hit on the reason why there can be no US intervention this time. We are on both sides of the dispute. So a three state Iraqi state may be here to stay.

        The question is what that does to oil production. Will ISIS cut off production, or be content with a cut of the total?

  7. VPK says:

    This one is for Paul
    The Federal reserve has more “MAGIC” up its sleeve!

    fficials also have come to accept the bond holdings as a fact of life. In 2011, when the Fed first described its exit plans — which at the time it expected to enact much more quickly — officials believed that reducing the Fed’s bond holdings was a necessary step to maintain control of inflation. They now insist other tools will serve the purpose, and that the size of the balance sheet doesn’t really matter.

    John Williams, president of the Federal Reserve Bank of San Francisco, said at a news conference last month that the reinvestment issue was simply “not that important” and that changing the policy would just create a distraction.

    “My view is that we want to keep the communication as clear as possible,” he said.

    Indeed, some officials argue that raising short-term interest rates may be a more important measure to prepare for future downturns than reducing the Fed’s bond holdings.

    Already, the current recovery has run longer than the average period of growth between recessions since the Great Depression. And with short-term rates near zero, the Fed has little ability to respond if the economy falters.


    • Well, not really recovery. Thanks for posting this link.

    • Paul says:

      I suspect we have no even begun to see the truly desperate tactics — I think the end game approaches when cash held in bank accounts is confiscated … it seems governments have a list of things they can do — and they are walking us down it as necessary…. They know there will be no recovery so they drip feed ‘solutions’ into the market that delay the collapse

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