Oil prices are now as high as they have been for three years. At this writing, Brent is $74.14 per barrel and West Texas Intermediate is at $68.76. These prices aren’t really very high, if a person looks at the situation from a longer term point of view than the last three years.
Figure 1. EIA chart of weekly average Brent oil prices, through April 13, 2018.
There is always a question of how high oil prices can go, and for how long.
In fact, we have many resources, of many kinds, whose prices of extraction keep rising higher. For example, obtaining fresh water for the world’s population keeps getting more and more expensive. Some parts of the world need to resort to desalination.
The world economy cannot withstand high prices for any of these resources for very long. Certainly, it cannot withstand high prices for a combination of necessary resources, because people need to cut back on other purchases, in order to afford the necessities whose prices are rising. This article is a guest post by another actuary, who goes by the pseudonym Shunyata. He explains in a different way why high resource prices cannot last, whether they are for oil, or natural gas, water, or even fresh air.
Dear Readers:
As you are no doubt aware, Gail has created a fantastic portfolio of blogs that explore our energy/financial/economic system, blogs that reveal many hidden or misunderstood aspects of our situation. I have found these discussions invaluable and share them wherever I am able; to solve our societal problems we need to develop a societal understanding of these issues.
The problem I face is helping other people, like my grandparents, get a foothold in this complex discussion. They can understand why oil might “run out,” but trying to understand the problematic financial situation is more difficult. I like metaphors to explain things – metaphors that allow my grandparents to understand the major elements of the situation. The metaphors I am using are to the oil industry. My grandparents have been following the oil situation for a long time. If a person has been following the oil industry, they may be helpful.
Below you will see how I explain Gail’s detailed writing to my grandparents in three short chapters. I hope you find this outline helpful in your own discussions, and I welcome your suggestions for improving the transparency of the story.
PRODUCTION COST
What if air had to be produced from wells and purchased by businesses and families to conduct their normal affairs?
If air is readily available in the ground, we can always extract what we need, making it easy for businesses and families to operate, or even to grow.
What happens if air becomes harder to extract? Perhaps the easy air is gone and we are increasingly looking at extracting deep water air, or air dissolved in shale stone.
Technology may be able to help; sometimes it can help a lot. But there is an immediate production cost shock in funding the development of that technology. This cost shock occurs whether we are talking about conventional air or solar-based renewable air.
There is a lower but permanent increase in production cost, both to fund the complexity of the technology (a deep water air rig just costs more to operate than a land rig) and to pay off any debt needed to build the new technological infrastructure. This cost increase occurs whether we are talking about conventional air or solar-based renewable air.
This cost increase is a permanent drag on the economy. Wages don’t rise to compensate for the higher cost of air. There is no substitute for air, and air simply isn’t available in the quantities the economy previously enjoyed – unless we stop doing things that we were doing before and redirect those resources toward producing the same amount of air we used to have.
DEBT
In a modern financial system, we use “money” as a proxy for economic activity. In a barter system, I can obtain goods and services by trading my work product for your work product. But carting around packages of finished goods is unwieldy, so we use “money” as a medium of exchange. If you and I are both willing to trade our finished goods for a symbolic piece of paper, then I can trade my goods and services for paper, bring that paper to you and trade it for your goods and services. This medium of exchange makes it easy to trade complex goods and services over long distances, or at different points in time.
How would lending work in this barter system? Someone could produce many finished goods, trade it for symbolic paper, but not immediately trade it for other goods, and “save” their paper for later. Debt is a process of borrowing someone else’s saved symbolic paper to purchase goods and services for themselves. This is helpful when I need to build a deep water air rig but don’t have the money myself. I can borrow someone else’s money and pay them back later, after my rig is bringing in revenue.
This simple borrowing process only works if some people aren’t consuming goods and services in the economy, and are instead allowing others to “borrow” their ability to consume. What if there isn’t enough saving to make large borrowing possible? What if I want to maximize economic activity and don’t want people to defer their own individual consumption?
If we want more funding than barter can provide, this can be done in more than one way:
[a] Money can be loaned into existence. This happens every day, when people decide to buy a car, and take out a loan for that purpose. Or people buy something with a credit card, and decide to carry a balance, rather than pay it off immediately. Nearly all loans today represent new money to the system.
[b] Governments can also obtain money by issuing bonds. Or they can simply issue money certificates without having any backing for the money.
Let’s call the process of adding funding to the economy, over and above what would be available by debt, “money printing.” In each of these cases, symbolic paper is added to the economy without previous work having been performed.
[1] Money printing can be helpful when it represents an investment in growing the overall economy. Investment in deep water air rigs will make air more available in the economy and will spur an expansion of economic activity. In this case the goods and services in the economy eventually “grow into” the amount of money that has been printed and the extra economic activity in the future is used to repay the debt.
[2] Money printing is unhelpful when it simply becomes someone’s savings (i.e. growing wealth inequality). The economy is still obligated to repay the debt (usually through taxes) and economic activity becomes sequestered in wealthy people’s savings, without ever creating demand for someone else’s product.
[3] Money printing is also unhelpful when it is used to fund more air consumption without any investment in air production. For example, a family that borrows money for an air vacation (or for basic daily air subsistence):
- Now has a debt–repayment of which will reduce future air consumption
- Has created no permanent demand for air and does not require permanently expanding air production for the economy–so their vacation air demand tends to increase the cost of air for all other consumers.
PRICE
What happens when we put these two chapters together? When air becomes more difficult to extract:
[1] Production cost goes up permanently.
[2] Economic activity is redirected to maintain air production, and overall economic activity is reduced. With reduced overall economic activity there is a reduced need for air, resulting in excess air supply and a temporary reduction in air price.
[3] If air consumers spend their available money on air and defer other purchases, there is an additional reduction in economic activity, additional excess supply and further reduction in air price.
[4] Reduced price means less revenue to air producers.
[5] Owners of idled air rigs still have debts to pay (money borrowed to build air rig in the first place). They are willing to undercut the market price of air just to get revenue to pay their debts, even if they aren’t making a profit otherwise. This drives the price even lower.
So air prices fall, even though the cost of air production continues to rise.
This begins to look like an economic crisis. A natural response of governments is to print money so that consumers have more money available to purchase air, without deferring other purchases.
This can work for a while, but ultimately fails when there is no overall growth in economic activity to match the increased money supply. The debt comes due (usually in the form of higher taxes). There isn’t enough productive activity in the economy to easily pay back the debt. As a result, consumers must defer even more of their consumption to repay debt, ultimately resulting in even lower air prices.
Eventually either the debt market or air market runs the risk of failing entirely.
[1] When economic activity falters, people can no longer repay their debts (or earn enough income to pay taxes toward government debt). Either of these outcomes is bad both for borrowers and lenders.
[2] If economic activity falters, market forces push air producers to a zero-profit price point. At this point, producers have enough money to keep the rigs running and cover debt payments, but no more. Ultimately this cannibalizes the ability of air producers to maintain existing air supplies. They are unable to purchase replacement machines, if any one breaks. They cannot make new investments.
Clearly, this situation cannot continue. High prices cannot be passed on to consumers, or they will be unable to buy other necessities of life. At the same time, if the producers do not get high enough prices, they cannot continue to provide the air or any other commodity that is needed.
Bill Gates’ dire warning: U.S. could lose its global leadership role under Trump
https://www.usatoday.com/story/tech/2018/02/13/bill-gates-warns-china-other-powers-fill-void-if-u-s-foreign-aid-cuts-could-cede-leadership-china-ot/322177002/
Apple spent $22.8 billion buying back its own stock in the first three months of this year — more than any company in any quarter in American history,
http://money.cnn.com/2018/05/01/investing/apple-stock-buybacks-record/index.html
Anarchists crash May Day rally in Paris, burning cars and smashing shop windows
https://www.washingtonpost.com/news/worldviews/wp/2018/05/01/anarchists-crash-may-day-rally-in-paris-burning-cars-and-smashing-shop-windows/?utm_term=.d2b3807f8562
Long live the Antifa!
https://imgur.com/a/RiTEtn7
Baby D, you need to understand Europe -no fault that you don’t. It’s an older civilisation than yours, and just as corrupt but in slightly different ways.
1/ The ‘Anarchists’ do it for a lifestyle: it’s a game and they are mostly brainless and destructive egotists; and 2/ Agents provocateurs are also used by state forces to discredit the radical Left.
Sometimes they infiltrate existing groups, sometimes appear at otherwise peaceful demonstrations as violent ‘unknown’ groups,with masks and blag flags, etc. This has been caught on film, hilariously so.
There are regular police-v anarchist battles in parts of Barcelona, for instance, but it’s not an ‘uprising of the oppressed’, just street theatre.
Most people who think they are oppressed should try living in a Calcutta slum for a few days, then they would see how easy they have it.
What’s the purpose of a Universal Basic Income ?
Why are elites who earn their fortune in information technology obsessed with it , when they refuse to pay more taxes or pay hire wages?
https://www.bloomberg.com/view/articles/2018-04-26/finland-s-basic-income-experiment-was-doomed-from-the-start
I think part of the reason that people in positions of power do not want to pay more wages is 1) If they are listed on the stock market, they must show growth. That is easier to do if you don’t have to paying more wages 2) If too many people start making more money then consumption will increase – hastening the depletion of finite resource causing financial collapse much sooner. So, I think the idea is to pay enough wages to keep the system chugging along as long as possible. Thus allowing the already wealthy can live in relative comfort a bit longer.
From the article,
I’m more for ELR than UBI. I also think the Eurozone is a unique case, in that member contries are not monetarily sovereign
Global debt balloons to all-time high of $164 trillion
https://www.rt.com/business/425590-global-debt-record-high/
Since 2007, global debt has grown by US$57 trillion and it’s had disastrous results. Greece, Detroit, Puerto Richo, Venezuela are just the beginning of this trend. Soon, it will be followed by larger countries like China and United States.
Mac10 is spot on:
http://ponziworld.blogspot.co.uk/2018/04/zero-hedge.html?m=1
According to the industry organization the word here is *WHEN* . (not if…)
The industry organization has obviously not thought through what happens to the world economy when prices rise.
“CERI therefore concludes that no greenfield oil sands project is economically feasible under the current pricing environment.
However, the author concedes the same could be said for any new oil development around the world, and profitability will improve considerably when (not if) oil prices eventually recover.”
http://www.oilsandsmagazine.com/news/2017/2/9/oil-sands-breakeven-prices-decline-since-2015
Given the wild gyrations in oil prices since about 2005, can a person expect the oil industry to start drilling again when the prices “recover”? What is “recover”? $100/bbl? $200/bbl? I think the oil companies will take a wait and see approach to see if prices will stay up. Since it takes 5 to 10 years to bring new oil fields into production, I am sure the oil companies will want to ensure that prices will stay high enough long enough for them to make a profit.
Venezuela went from the 5th happiest country on earth to the 102nd in seven years
https://theconversation.com/why-venezuelans-are-some-of-the-unhappiest-people-in-the-world-95579
So the Venezuelans achieved 5th happiest country on earth status under Chavez and his brand of socialist govt?
There are no socialist countries existing today. Socialism is not when the government does stuff. Socialism is the process of putting the means of production into the hands of the workers and social ownership of that property. The reason it doesn’t work in modern countries is because the US doesn’t want it to work. Why? Who knows. Could be fear of revolution. The point is; socialism is very often misinterpreted as something it isn’t. Canada isn’t socialist, Norway isn’t socialist, Venezuela isn’t socialist, the USSR wasn’t socialist(it was state capitalism). The only example of Socialism was France immediately after the revolution.
No! No! No!
There are/have been a lot of employee owned consulting firms, and a lot of “mutual” insurance companies, owned by their policyholders. The problem that the social ownership of businesses is that they cannot raise “capital” for new investments. (In professional firms, they go around to their Partners, and ask them to buy more shares of stock, on a regular basis. as a partial solution.)
I have said before that it is growing debt that pulls and economy forward. It allows more investments in “tools” (like trucks, roads, and factories) that make the economy productive.
Too many people believe that barter would be good enough for the economy to grow on. This is not true. There has to be a way of financing “tools” (broadly defined) to make the future more productive. With social ownership of property, the economy behaves much more like barter. It becomes impossible to obtain the debt (or new shares of stock, which acts similar to debt) needed to pull the economy forward.
There’s a silly journalist in the Guardian – Aditya something or other – who is always writing excited articles about ‘workers shaking off the bosses and doing things for themselves’.
Always very small companies indeed, and I suspect a follow-up would show rapid failure. – but the Guardian never does that, which is a pity.
Xabier, is your neck of the woods abuzz with excitement about the local elections tomorrow?
there is talk of little else in the bazaars of the uk
But alas Scotland must miss out on the dizzying thrill of these local elections. The talk up here is instead about the new legislation ending the era of cheap booze. Looks like I shall have to forego some of the 75cl bottles of Buckfast with which I usually pepper my daily routine…
http://www.bbc.co.uk/news/uk-scotland-43948081
I don’t get your point, Gail. I understand the difficulties social ownership models can have raising «capital» for new investments in «tools», when they exist as small «islands» in an economy based on private ownership. The discussion what the system in the USSR is to be called put aside, in the 30s the Sovjet pulled of high growth rates, with massive investments in «stuff», without using the financial markedtools of the West. BTW without this massive investments in industrial plants, wich also produced weapons of different kind, Nazi-Germany would have beaten the Red Army, after Stalin had purged officers and the head of the army.
I know that both employee-owned consulting firms and mutual insurance companies have had difficulty raising capital. Consulting firms also have the difficulty that their principle consultants have a lot of their supposed net worth tied up in the firm. It is hard to get the funds back out without retiring. The consulting firm where I worked (at that time, Towers-Perrin) is now part of Willis Towers Watson, a publicly owned company, based in Ireland.
Mutual insurance companies work around their problem with raising capital by forming stock-based affiliates. For example, State Farm Mutual Auto Insurance Company is the parent of several wholly owned subsidiaries. https://www.statefarm.com/about-us/company-overview/company-profile/state-farm-companies Stock based affiliates also limit the exposure of the whole group to limit the chance of poor results in one state impairing the overall company. States which seem to have unique exposures (Florida, California, and New Jersey, for example) can be allowed to collapse, if there is a major catastrophe that affects results.
When I visited Russia, I visited a a family that had built their own home, basically one room at a time, on weekends, with the funds that they had saved. Both the husband and wife had fairly responsible jobs, and this was the only way they could build a house, because they could not borrow funds to build a home. They indicated that this approach to building homes was quite popular.
When I visited Cuba, one thing I was struck by was the lack of new homes for the people. The government had built a lot of homes, way back at the time Castro took over, in the period not too long after 1959. http://www.nationsencyclopedia.com/Americas/Cuba-HOUSING.html With the state providing many benefits for people, and very small actual incomes, there was no way that they could borrow funds to build a home themselves. Things have changed somewhat in recent years, but the common ownership model makes it very hard to get financing. (In fact, selling homes was prohibited.) This Washington Post article has more information about the situation. https://www.washingtonpost.com/world/75000-will-get-you-a-lot-of-house-in-havana–if-youre-cuban/2015/05/25/bbed3d78-fd8f-11e4-8c77-bf274685e1df_story.html?noredirect=on&utm_term=.37213c86a6c5
China had a common ownership model, but then started shifting to more individual ownership, because debt could be used much more extensively to pull the economy forward. The housing units that have been built are mostly condominiums, with the state retaining land ownership, I believe.
Thank for your answer, Gail. Debt can obviously pull the economy forward. But would it be any sustainable solution for Cuba (or indeed any other country) to construct a lot of new, private owned houses if they can’t pull off an increase in energy per capita? Should’t we think of this as a jobprogram embedded in a story about the bigger they are, the harder they fall?
Cuba has benefitted from the lack of housing, because it has indirectly acted to hold population down. People have been given housing, but it is not sufficient if the population increases. Families end up with three generations in a fairly small space. This, by itself, deters large families, and has helped the nation better live within limits. The education and medical program no doubt help as well in keeping population down–also emigration to the US.
Now, some people are benefitting from the new freedom to start some businesses, such as restaurants for tourists. They can probably borrow, and this new-found wealth can help the owners buy homes and cars. It is the wealth of the people that adds to world oil demand, and helps keep oil prices up. Since they did not run up debt in the past, they are more able to add debt (and therefore, more demand for oil and other energy products) than a lot of other places. So Cuba is probably in a place where it can increase its energy demand somewhat, with added debt, especially if oil prices don’t get too high.
$147 oil prices can make the people of an oil producing country very happy…
I was doing the geology on a heavy oil discovery well on an Indian Reservation in North Dakota in the 80s. The heavy oil we returned on the DST was like axle grease- nasty to work with- just like the Venezuela heavy crude.
Random question. Suncor extracts oil from tar sands. Presumably this operation is one of the costliest. How could they have been profitable last year? Revenue 9B. Net income 1.38B. (4th quarter). Anyone?
I guess it depends on the individual fields but, generally speaking, I thought shale oil was the costliest followed by offshore then tar sands then conventional crude. I think Canadian tar sands have been profitable for many years at least through 2015. I think their costs per barrel is about $20. I think shale is generally above $70 or even $100 or more in some cases. Canada has historically supplied a lot of oil to the US. Not sure about current Canadian tar sands production costs though. This is off the top of my head so I apologize if I am in err.
Tax rates are terribly important in all of this. Often, the amount paid in taxes is more than the direct cost of extraction. Without understanding taxes (and overhead expenses), it is hard to make any determination of profitability.
Oil sands requires a lot of front-end investment. Once the investment is in place, it can operate for a long time, with some energy input. This energy input is usually natural gas, which is cheap. Oil, in comparison, is much more expensive. So the infrastructure that has been put in place allows leveraging a modest amount of cheap natural gas input to produce an expensive form of energy output–oil. EROEI calculations miss the timing issue, and also miss the inexpensive to expensive transformation.
There is also a tax issue. A major way net energy is transferred to the economy is by the payment of taxes. The Canadian government has been smart enough to adjust the tax level to reflect the profitability (or not) of the output. So an oil extraction business can continue to operate, even if its net profit is not as high.
Investments in new oil sands developments become problematic, if oil prices are not high enough. When I look at Wikipedia Megaprojects website, I still see a lot of them. Perhaps they were started before oil prices dropped so much.
https://en.wikipedia.org/wiki/Oil_megaprojects_(2017)
https://en.wikipedia.org/wiki/Oil_megaprojects_(2018)
Alberta’s oil production (mostly oil sands) continues to rise.
http://economicdashboard.alberta.ca/OilProduction
The rise in oil sands production more than offsets the decline in Alberta’s conventional oil production.
What drove economic growth? Liberal ideas and bourgeois virtues, according to this lady.
«The new path was not about accumulation, or theft, or commercialization, or reallocation, or any other shuffling. It was instead about discovery, and a creativity supported by novel words. In terms of the seven principle virtues, of which I’ve written, the static routine of efficiency depends only on prudence, the virtue of prudence. What I’m claiming here is that discovery and creativity depend also on other virtues, in particular courage and hope. The conversational society honoring commercial courage and hope depended in turn on a new bourgeois construal of the virtues, of temperance, justice, love, and faith. As a result, previously unknown inputs were discovered—coal for steam engines, for example—and new goods and services were created: black tulips, common stocks, reinforced concrete.
All of it was very far from prudence. The new path led around 1700, from the change in rhetoric. I call it the bourgeois revaluation. It’s not so much that individual business people became psychologically more greedy or harder working. That’s Max Weber, and it’s wrong. It’s mistaken. What happened is that the rest of the society joined in praising bourgeois actors. Not entirely. England, to this day, has a certain sneering attitude towards people in trade, but that’s increasingly obsolete. In any case, between the time of Shakespeare and Jane Austen, it radically transformed, as I show in the books. We started to admit into civilized society the bourgeoisie, which we had formerly excluded.
Now, why did this happen? Why, around 1800, did commercially tested betterment become so frenetic, so insane? This factor of 30 or 40 or whatever you want. In brief, to use one word, it was liberalism. Adam Smith’s liberal plan of social equality, economic liberty, and legal justice»
https://ppe.mercatus.org/essays/deirdre-mccloskey-austrian-growth-and-humane-liberalism
I made this a few years ago..I thought Zombies seemed right.
https://imgur.com/a/ZqnD9I8
Self-driving cars’ shortcomings revealed in DMV reports
A demand from the California DMV of eight companies testing self-driving cars has highlighted a number of areas where the technology falls short of being safe to operate with no human backup.
All companies testing autonomous vehicles on the state’s public roads must provide annual reports to the DMV about “disengagements” that occur when a human backup driver has to take over from the robotic system. The DMV told eight companies with testing permits to provide clarification about their reports. More than 50 companies have permits to test autonomous vehicles with backup drivers on California roads but not all of them have deployed vehicles.
It turns out that a number of the issues reported are shared across technology from different companies. Some of the problems had to do with the way the cars sense the environment around them. Others had to do with how the vehicles maneuver on the road. And some had to do with what you might expect from systems made up of networked gadgets: hardware and software failures.
The disengagement reports themselves identify other problems some self-driving vehicles struggle with, for example heavy pedestrian traffic or poorly marked lanes.
In describing the events that caused their backup drivers to take the controls, the companies have provided a new window into the road-worthiness — or not — of their cars and systems.
Baidu, a Chinese internet-search giant, reported a case in which driver had to take over because of a faulty steering maneuver by the robot car; several cases of “misclassified” traffic lights; a failure to yield for cross traffic; delayed braking behind a car that cut quickly in front; drifting out of a lane; and delayed perception of a pedestrian walking into the street.
Automotive supplier Delphi noted that its autonomous system “encountered difficulty identifying a particular traffic light,” and also said a GPS problem meant a vehicle didn’t know where it was. Delphi’s system also had issues with unexpected — usually illegal — behavior by other drivers, the company said in its report to the DMV.
Drive.ai — which makes artificial intelligence software for self-driving vehicles — cited reasons for disengagement that included the swerving of a vehicle within a lane and “jerky or uncomfortable braking.” The firm also noted a “localization error” that meant a vehicle was uncertain of its location, and a discrepancy in data from different sensors on a vehicle.
GM’s Cruise Automation — which is building autonomous cars — said its on-board sensors didn’t always capture all data on vehicles approaching in opposite lanes, and its system didn’t always combine all the data at hand for analyzing the movement of another vehicle entering an intersection. Cruise vehicles also planned a turn into a lane of traffic where there wasn’t enough space; failed to give way to another vehicle trying to enter a lane; and planned a turn into a roadway with oncoming traffic approaching quickly. Other faults noted by Cruise included not braking hard enough when approaching a stop sign, taking a right turn too wide and difficulty around construction cones.
Cruise, like Delphi, said its cars had trouble when other drivers behaved badly. Other drivers had failed to yield, run stop signs, drifted out of their own lane and cut in front aggressively, all forcing human intervention, Cruise reported.
Nissan, testing its own autonomous cars, reported a software “crash” and said its system’s location accuracy could be affected by a not-always-steady GPS signal.
Telenav, a connected-vehicle technology company, reported that its system didn’t always keep to the three-second following distance it was supposed to maintain between a car and the vehicle in front of it. Also, the system steered a vehicle too close to a lane boundary, parked poorly at times, and mistook a bridge overpass for a car stopped in front.
Google spin-off Waymo described one of its vehicles failing to see that a “no right on red” signal had been turned on, and the company also cited hardware and software problems requiring disengagement.
The number of miles driven during testing and the number of disengagements varies considerably among companies. And the firms are at varying stages of developing self-driving vehicle technology.
As Telenav put it, “Our autonomous system is still being developed and we are working on improvement cycles. At this stage we expect that (the) driver will be taking over the car control from time to time due to the fact that it is new technology.”
https://www.mercurynews.com/2018/05/01/self-driving-cars-shortcomings-revealed-in-dmv-reports/
Gail how much influence does the value of the US dollar have on oil prices?
Quite a bit. When the dollar rises, the price of oil tends to fall, because oil becomes more expensive in other currencies. I should try to make a graph.
I seriously doubt we will see oil in the $50 range, ever again….
Because it will fall through that price too quickly? You have been reading too much peak oil literature.
https://imgur.com/a/LgK6MNi
14.2% of OECD 15 to 29-year-olds are not in employment, education, or training.
https://imgur.com/a/l8UnIXN
I would hope that some of them are mothers of small children, taking care of their families. This group should have a large number not in employment, education, or training.
Yes, there might be some of this “cultural determination” as notably in case of Italy, Greece and Spain, as these score the above 15% (20%) line on the graph. Interestingly, both France with its large immigrant ghettos and peculiar case of Ireland score high on this list too..
Tent city occupation in São Paulo, Brazil
https://imgur.com/a/qvyBewl
This would be possible only for 3 months a year in normal countries (June, July, August).
That picture looks to me like there is not enough energy and resources for everyone to participate in modern industrial civilization.
Pre-extinction.
there never has been
“[Canada’s] biggest banks began raising key borrowing rates last week, just as the busy season for residential real estate gets underway. In addition, the mortgage market looks set for a particularly heavy year of renewals in an environment where debt-servicing costs are already rising at the fastest pace in a decade.”
https://www.bloomberg.com/news/articles/2018-04-30/jumping-mortgage-rates-further-tighten-debt-vise-for-canadians
The article says that almost 50% of mortgages are coming up for refinancing this year, and thus will be affected by the higher interest rates. (They are variable rate loans.) Ouch!
Governments don’t know which way they are going! They don’t need to use interest rates to combat inflation. Taxes are a better way to combat inflation as it can be sector dependent.
The Fed is operating in a financial system that has had near zero rates for many years- and has largely destroyed interest rates as an indicator of the cost of money.
Now they are raising rates & reducing book at the time when the equity bubble is overripe, the RE sector is again rich, and the credit markets bubble is massive.
Not to mention that many americans are having serious trouble making ends meet.
There is no “cost of money” to the government. The interest rate has to be low so that government bonds don’t compete with the rate of return of the stock market.
Not only that but we are looking at massive issues of govt debt for infrastructure, the wall, new debt to replace old, rising interest payments on govt debt……..and whatever war our leaders seem to be cooking up.
So they will be issuing new debt issues at the same time that the Fed is reducing book.
And when you start a war with a serious country like Russ or China, versus a Libya, you don’t know exactly how things will end up. It’s likely that a serious war would rip the core out of the US economy at this point- we are in End of Empire dynamics.
Of course there are those who see more large military expenditures as some sort of sustainable Keynesian stimulus and who disregard the plight of the millions of innocents who will be bombed.
I agree that a war is a problem in that I don’t think we have any “slack” in our economy, the ability to “ramp up” rapidly without spiking oil prices and crashing – mainly because oil doesn’t have any excess affordable capacity.
U.S. Government debt is not a problem. Only if we spend so much that we outpace production are we in any risk.
“Investors are getting more comfortable with the idea of four interest rate hikes this year…
“”The collateral damage around that is going to be much more brutal than what people are currently thinking,” Paulson said. “I don’t think the Fed’s thinking we’re getting runaway real growth. They see the inflation evidence and are thinking it could get worse…”
“Fed policymakers had long insisted they were “data dependent” in their decision-making, but the most recent trajectory has looked more like a predetermined path toward normalization from the extreme accommodation that began in late 2008…
“Forecasters at Capital Economics were one of the first to predict a fourth rate hike, and they see the case only getting stronger in recent days.
“”Despite economic activity slowing in Q1, we expect the Fed to press on with three more rate hikes this year, not least because inflation has been higher than anticipated in recent months,” Andrew Kenningham, Capital’s chief global economist, said in a note…”
https://www.cnbc.com/2018/04/30/the-fed-is-about-to-get-more-aggressive-and-collateral-damage-may-ensue.html
“In one way, this shift from banks to nonbanks is beneficial: It supplies mortgage credit that might otherwise have disappeared. But it’s also dangerous, because the nonbanks are both lightly regulated and fragile. State regulators and government guarantors have set standards for capital and liquidity, but they lack resources to follow through and don’t share information with better-equipped authorities such as the Federal Reserve. In a crisis, banks might pull the lenders’ credit lines, crippling them at precisely the wrong time for the broader economy — and that could leave taxpayers to bear the costs of any bad loans.”
https://www.bloomberg.com/view/articles/2018-04-30/america-s-mortgage-market-is-still-broken
“Private-equity firms moved into subprime car loans in the years after the financial crisis, as big banks pulled back under tighter supervisory standards and tougher rules on capital.”
https://www.ft.com/content/f93fd9d8-4a62-11e8-8ae9-4b5ddcca99b3
It seems like the system gets more and more complex. I doubt if anyone has thought through all the things that could go wrong. I hadn’t thought about pension funds sharing in some of this revenue. With interest rates so low, they are no doubt looking for something that might offer a little yield.
Wow, pension funds depending on subprime car sales. What could possibly go wrong.
“Brazil’s Petrobras intends to raise US$21 billion with the sale of assets by the end of this year, according to its 2018-2022 business plan, as the company works to lower debt while carrying out activities, mainly in the presalt…
“According to Petrobras, divestment is one of the best ways for the company to reduce its giant debt—which stands at $84.9 billion—and acquire necessary resources to invest in its core ultradeep water and presalt activities.”
https://www.epmag.com/petrobras-chips-away-debt-asset-sales-1698646
“The legislation under consideration includes proposals to open up the Amazon rainforest to sugarcane farming — which was banned in 2009 owing to concerns about deforestation. Another proposal would weaken licensing requirements for infrastructure such as dams, roads and agricultural projects.”
https://www.nature.com/articles/d41586-018-05022-2
“A residential tower block has collapsed in Brazil after a huge blaze tore through the building in the middle of the night – leaving several residents trapped.
“One person has been confirmed dead so far – with further fatalities expected to be announced over the coming hours.
“The catastrophic collapse was caught on camera in the city of Sao Paulo as horrified onlookers filmed the unfolding carnage.”
http://www.dailymail.co.uk/news/article-5677337/Fire-ravaged-tower-block-collapses-Brazil-inferno-rips-building.html
Good luck to Petrobas! To get bidder to pay a high price, the country needs the illusion that oil prices can be high. Also, high interest rates are likely to depress interest in buying the assets.
“Fed up with the smog in Mongolia’s capital, residents have resorted to sipping “lung” tea and “oxygen cocktails” in a desperate bid to protect themselves from pollution, despite health officials saying there is no evidence they work.
“Ulaanbaatar topped New Delhi and Beijing as the world’s most polluted capital in 2016, UNICEF said in a report warning of a health crisis that has put every child and pregnancy at risk…”
https://www.straitstimes.com/asia/east-asia/mongolians-sip-oxygen-cocktails-to-cope-with-smog
This is not a fun life! Having fresh air to breathe and being able to see the clear blue sky are two gifts that we become accustomed to (except in the summer–the humidity muddies the blue sky around the edges). There seem to be a lot of coal countries with the smog problem. We forget how bad the smog was in the past, when the West depended on coal. Looking up in Google, I find “London Smog Disaster of 1952.” This smog seems to have killed at least 10,000 London residents. This is an article about the causes. https://today.tamu.edu/2016/11/14/researchers-solve-mystery-of-historic-1952-london-fog-and-current-chinese-haze/
“People have known that sulfate was a big contributor to the fog, and sulfuric acid particles were formed from sulfur dioxide released by coal burning for residential use and power plants, and other means,” Zhang says.
“But how sulfur dioxide was turned into sulfuric acid was unclear. Our results showed that this process was facilitated by nitrogen dioxide, another co-product of coal burning, and occurred initially on natural fog. Another key aspect in the conversion of sulfur dioxide to sulfate is that it produces acidic particles, which subsequently inhibits this process. Natural fog contained larger particles of several tens of micrometers in size, and the acid formed was sufficiently diluted. Evaporation of those fog particles then left smaller acidic haze particles that covered the city.”
“The difference in China is that the haze starts from much smaller nanoparticles, and the sulfate formation process is only possible with ammonia to neutralize the particles,” Zhang adds.
From Wikedia-
“Ulaanbaatar is located at about 1,350 metres (4,430 ft) above mean sea level, slightly east of the centre of Mongolia on the Tuul River, a subtributary of the Selenge, in a valley at the foot of the mountain Bogd Khan Uul. Bogd Khan Uul is a broad, heavily forested mountain rising 2,250 metres (7,380 ft) to the south of Ulaanbaatar. It forms the boundary between the steppe zone to the south and the forest-steppe zone to the north.
“As the main industrial center of Mongolia, Ulaanbaatar produces a variety of consumer goods [28] and is responsible for about two-thirds of Mongolia’s total gross domestic product (GDP).[29]
The transition to a market economy in 1990, which has led to a shift towards service industries making up 43% of the city’s GDP, along with rapid urbanization and population growth has so far correlated with an increase in GDP.[30]
Mining makes up the second largest contributor to Ulaanbaatar’s GDP at 25%. North of the city are several gold mines, including the Boroo Gold Mine, and foreign investment in the sector has allowed for growth and development. However, in light of a noticeable drop in GDP during the Financial Crisis of 2008 as demand for mining exports dropped,[30] there has been movement towards diversifying the economy.[29]
https://en.wikipedia.org/wiki/Ulaanbaatar
Britain powers on without coal for three days
http://www.bbc.com/news/business-43879564
“Power generated from wind and gas dominated the mix of energy for users in England, Scotland and Wales.”
We should be worried… Without the batteries like coal or natural gas storage, the power outages are here…
When the natural gas is going to be used more for electricity generation, the cheap supplies of it will run out faster.
I am having a love affair with coal… my research has lead me to the finest shiniest coal in NZ… and perhaps the world…
This coal is known as Ohai coal… and it comes in big fat 40kg sacks… for only NZ19.50!
Fire in a sack. And perfect for a Rayburn…. I must get enough to keep warm in the event that BAU fails during the winter season … which is just starting …
Tune into the History Channel this Thursday evening for a live broadcast of the historical event involving Fast Eddy buying coal…. and you will get the answers to:
How many sacks can Fast Eddy fit in the back of a ute and a 4 x 8 trailer????
Should Fast Eddy drive to Invercargill twice for a refill?
https://www.parklandsnz.co.nz/pages/coal/
In a blockbuster Thursday stay with the History Channel after FE and watch the latest episode of Junk Yard F789wits…. Paris Hilton makes a guest appearance performing lewd acts ‘out back of the yard with a Fred Sanford look-alike’ in an attempt to rekindle a dying career as a re tar ded moreon.
These messages brought to you by the good folks at Ohai Coal
I must let everyone in on a secret…
‘We own all of our own equipment, have a number of specialists on staff which allows us to manage our entire operation in-house. Everything from operators, admin, geologists, mechanics and electrical, we even have our own trucks and drivers to provide delivery for commercial sales. We’re your one stop shop for coal – from mining to delivered product,’ says General Manager, Antony Stodart.
‘We’d like to take this opportunity to introduce the new face of Ohai Coal…. Fast Eddy… we will be rolling out teevee and radio spots along with an intensive online campaign involving the slogan – created by Fast Eddy — Burn More Coal Now. This initial campaign will be followed by a global campaign involving Mr Eddy with the theme of XXX XXXXXing is a F789ing ho ax and a scam so burn all the bloody fossil fuels you like because it does not matter. We are confident that this two-tiered message will put King Coal back on his throne’ commented Mr Stodart.
https://www.newvaleohai.co.nz/about
http://thisnzlife.co.nz/dr-libby-selenium-iodine-deficiencies/
“Despite living in a country with an abundance of food, many New Zealanders are actually under-nourished. By this, I mean low or lacking in some very important nutrients.”
“New Zealand soil is devoid of certain minerals.”
As a school child in Wisconsin, I was given chocolate chewable iodine pills once a week, because iodine deficiency was a problem there. Now I buy iodized salt.
I have always looked for mixed nuts with brazil nuts in them for selenium, but I have not been able to find such a mix in recent months, because the brand I used to buy disappear from the grocer’s shelf.
Of course, if we have to live with only local resources, I would expect that there would be no workaround for nutrient deficiencies. This is likely one of the limits on population in a given area.
Glad you found the good stuff it is worth the extra cash.
It does sound like it is a bit cold May want to give it a few months before you take a bus trip.
http://nakedbus.com/nz/home/
us oil, too light too sweet : http://www.petroleum-economist.com/articles/markets/outlook/2017/us-tight-oil-too-light-too-sweet
“there is currently a limit to the market’s ability to absorb further volumes of very light US tight oil—a trend that won’t disappear in 2018”
Oh how I wish he would have hit a rock cut head on….
This is what delusional thinking does to people.
http://www.scmp.com/news/world/europe/article/2144111/tesla-driver-turns-autopilot-and-climbs-passenger-seat-while-going
https://www.bloomberg.com/graphics/2018-tesla-burns-cash/img/bills2.gif
Why did they decided to call this feature “autopilot,” when it is really only half-way there?
They should call it cruise control…. because that’s really all it is…
why June the 1st ? The economist magazine is owned by Rothschild who made a prediction in 1988 June the 1st that in 30 years our fiat currencies would go up in flames. Could this be a wild delusistani fantasy concocted by a finite worlder who iis desperately clinging to the hope that there is a plan B to our collective predicament or have the Elders been secretly working on plan B for over 30 years
Paddy and Seamus are walking around the Natural History Museum. Paddy points to a skeleton of a Tyrannosaurus Rex and says:
“Seamus, you see them bones, they’re seventy million and one years old, they are”,
“And how do you know that Paddy?”, asked Seamus,
“Well, you see Seamus, I was in this museum last year and a man told me them bones were seventy million years old.”
Boom boom.
I will have to admit that every day gets more worrisome. A recession is likely to hit with the combination of high energy prices, rising short-term interest rates, and quantitative easing. We usually don’t know when a recession hits until after the fact. The UK clearly seems to be in recession. Guessing where China is, is difficult, because China doesn’t give true economic growth rates. It doesn’t seem to be doing as well either.
In the US, the last recession officially began in December 2007, but oil prices did not start to fall until mid-July 2008. US employment hit a high point (on a relatively flat plateau) in December 2007. The bottom in employment came in February 2010. The US has recently been reporting increasing numbers of people employed. It seems to take a while for rising energy costs and rising interest rates to feed through to employment. This time, I am expecting that governments will be especially affected. Government employment has been close to flat (with a dip in the 2011-2014 period) since 2007. Recently it remains very flat–not growing with population growth. With the tax cuts, it seems like government employment will have to fall in the US. I understand that some other countries are facing similar pressures on taxes.
How the pieces all will fit together this time is not clear to me.
It does seem that generally the central banks are being very cautious. The UK and Australia don’t look likely to put up rates any time soon, likewise Japan, which has just removed its timeframe for achieving its 2 percent inflation target. I suspect Canada will keep its rates where they are for longer than people think. The EU is making noises about continuing QE because they can’t achieve their inflation data.
Unfortunately the Fed – the one that counts most – is looking rather gung-ho at this point. Very interested to see how things play out from here.
I think that to some extent, the US rates tend to spread elsewhere. This of course happens when businesses or governments borrow in US dollars. I think it also happens when currencies are tied to the dollar, as the Saudi currency is.
I am not certain what is happening in China. This article, Homeowners should brace themselves for rising mortgage rates as curbs on speculators continue is dated January 9, 2018.
For mortgages, it depends on whether the rates are fixed or floating rate mortgages. If the rates are floating rate, payments may rise in the middle of the loan terms. It sounds like most Chinese mortgages are floating rate. Thus, higher rates would affect existing homeowners as well as those buying new homes. This could very quickly adversely affect demand for all kinds of consumer goods. It could also lead to higher default rates.
The FT has a good article today about the vulnerability of China’s smaller banks but I’ve maxed out my allowance now, so can only reproduce this excerpt:
“In the event of a shock to China’s economy, problems are likely to emanate from a set of small banks with poor financials and a loan book exposure to China’s weakest provincial economies. In the wake of the global financial crisis, China saw an explosion not only in the level of debt in the economy, but also in the development of complex and opaque shadow banking structures…”
https://www.ft.com/content/563c08ee-48a3-11e8-8ee8-cae73aab7ccb
Yes, China’s banks are worrisome!
The U.S. Just Borrowed $488 Billion, a Record High for the First Quarter
https://www.bloomberg.com/news/articles/2018-04-30/treasury-s-488-billion-in-borrowing-sets-a-first-quarter-record
Next quarter: $602 billion borrowed…
Ford CEO Hackett’s decision to dump cars ‘may prove fatal’
https://www.cnbc.com/2018/04/30/ford-ceo-jim-hacketts-decision-to-dump-cars-may-prove-fatal.html?__source=sharebar|facebook&par=sharebar
Ford fires its oil industry economists, bets the house on cheap gasoline. Hey, if you’re already ignoring the possibility of an oil crisis you may as well go all-in.
I find that amazing, that Jim Hacker has become head of Ford. Of course there will be great decisions (roll eyes emoji here). I couldn’t think of anything else when reading that piece.
Only those that watched the English comedy Yes Minister will get it.
We are getting very close to be needing to spend more time watching comedy, while we still have power.
Sometime in the near future, ‘Hacker of Ford’ will receive a report not unlike this one:
“Well Minister, if you ask me for a straight answer, then I shall say that, as far as we can see, looking at it by and large, taking one thing with another in terms of the average of departments, then in the final analysis it is probably true to say, that at the end of the day, in general terms, you would probably find that, not to put too fine a point on it, there probably wasn’t very much in it one way or the other. As far as one can see, at this stage.”
My thoughts on reading this decison by Ford were: what will all the rental car companies and police departments use now? Then it hit me that they are already using a lot of Korean cars, Hyundais, Kias.
The Koreans could do with them using more:
“”A detailed look at the data amplifies concerns about the slowing [Korean] economy. The manufacturing operation ratio has dropped to the level of the global financial crisis, and corporate capital spending also turned downward for the first time in five months… Especially worrisome is the slump of both the production and export of automobiles.”
http://www.koreatimes.co.kr/www/opinion/2018/05/202_248257.html
Drive a Kia, not me! There was an accident on Sunday a few miles from my home. A family returning from a trip to the beach for some reason crossed over into oncoming traffic hitting a full sized SUV head on. Speed limit was 45 mph but the Kia was going a little faster. The Kia was completely demolished and four of the five family members including two small children died. The Yukon passengers suffered minor injuries.
Do you reckon if the KIA were a small sized Toyota — or some piece of junk American car — the people would have faired better?
Let me guess… you also think American beer is awesome… Bud or Coors Light?
Nothing like steel to keep you safe. My wife’s sub compact Buick SUV weighs 700 more pounds than those small cars. That Kia looked like a beer can that had been run over by a lawn mower. With the relatively slow accident speed the passenger compartment shouldn’t have disintegrated like that.
If you are looking to own a heavy car….
https://www.treehugger.com/cars/new-tesla-model-x-too-heavy-legally-drive-over-brooklyn-bridge.html
https://media.treehugger.com/assets/images/2016/02/sticker.jpg.860x0_q70_crop-smart.jpg
Or you could just buy a larger KIA?
I assume the steel in the KIA weighs the same as the steel used in the junk American Buick?
JHK (kunstler.com) has titled his Monday post “That Collapse You Ordered…?”
“Personally, I expect our collapse to be as sudden and unexpected as the USSR’s, but probably bloodier because there’s simply more stuff just lying around to fight over. Of course, I expect the collapse to express itself first in banking, finance, and markets — being so deeply faith-based and so subject to simple failures of faith. But it will become political and social soon enough, maybe all-at once. And when it happens in the USA, it will spread through the financial systems the whole world round.”
JHK is probably correct.
I think that he’s almost always correct…
just 10 to 20 years later than he thinks…
but I could be wrong…
could be June 1st…
who knows?
Not a big fan of JHK because he seems like a closet insta-doomer. The BAU of today is like the original Star wars movies. The BAU of 2030 will be the prequels. The BAU of 2040 will be the new Disney versions. As George Lucas said somewhere “like poetry, it rhymes”.
JHK reveals what he really believes in that latest article… he admits his World Made by Hand is koombaya (if you want to sell books you need to offer hopium)…. he also admits that when this goes it goes fast… and it resembles The Road.
JHK has redeemed himself.
He reads Our Finite World. it’s had an effect on him.
Yes, to some extent Kunstler is just peddling old wares, the man has to live after all.
The World Made By Hand was yesterday: all the elements that made it have gone.
The future will not be Faery-Craefty, nor Windy-Solar.
There might, though, be shamans beating drums, leading worship and sacrifices around a heap of disconnected solar panels……
If anyone remains alive post BAU …. it will be a nightmarish existence…
I’ve defended JHK on this very ground for some time already, he was not clear cut “koombayaist” all the time anyway, lets say at least for past decade..
http://kunstler.com/podcast/kunstlercast-303-jack-albert-unwinding-human-predicament/
that podcast is worth a listen–tho i skipped some of it because it gets a bit wild and wacky in places
https://imgur.com/a/9nVCnAB
I consider this fantasy. The drop is much steeper than that. We would need to keep the system operating to get that slow a decline.
https://imgur.com/a/yNIuD0t
rats…
I was just about to say how much I liked that chart…
looks like about a 10% drop in the 2020s…
I consider that a best case scenario…
I’ll take it…
Yep, the Campbell graph insinuates for the period of early-mid 2020s some sort of late 1970s analogue sized disruption – shock. That might be a possibility out of many, albeit with minuscule probability..
Even with a functioning economy it’s pretty grim. There’s a thread over on peakoilbarrel.com and the latest numbers for Norway is about 1.6M barrels per day. That’s down 50% from the peak in 2002. So in 15 years: -50%. That’s pretty grim IMO. The world has done better, but if all sources were in decline and no new developed, 15 years to half seems likely.
But like Gail says, it’s probably worse than that. 2030 will be interesting, and that’s just 12 years away and counting.
Yes, some countries/regions are falling like a rock on roughly decade to decade comparison, e.g. oil exports from Algeria. Although this is predominantly a natgas exporter country – sub region of NAfrica..
If the supply of oil can hold out till 2030…. then I recant and change my trigger to a financial one…. no way this economy can chug along till 2030… something has to give
It is giving… one person at a time stepping down one rung at a time. It’s just so slow… The newly-poor people don’t make the headlines, they are busy surviving and not making a fuzz about being poor.
Rich & powerful distract us with imagined threats to cling onto their gains
As inequality increases, the wealthy and powerful become more desperate to cling onto their gains and distract us with imagined threats and political sideshows. Jingoism, Russophobia and red-baiting are new opiates for the masses.
https://www.rt.com/op-ed/425477-wealth-poor-economy-inequality/
https://www.nytimes.com/2018/04/30/opinion/karl-marx-at-200-influence.html
Marxism was as is not right: The human race is not the product of its labor, but the product of the accumulated external energy. The human race was able to subordinate the nature to its needs thanks to the leverage effect of the external accumulated energy that only the humans learned to exploit.
The use of the external energy for the benefit of the human race is the key. Marx and Engels were right about the human resources that provide energy in the form of work, but did not see beyond it, i. e. how the human resources originated and how much the human race is dependent on the external accumulated energy.
Correct!
Add to which Marx and Engels were: naive Utopianists; they provided the ideological justification for mass murder of whole sections of the population/classes of people; had a perverted desire-fantasy to die themselves in the Revolution (not often referred to, but I found it in their Collected Letters); and could not see that their fantasies would be most likely manifest as totalitarian regimes based on torture and murder, humankind being what it is, above all when completely freed from the restraints of morality by pure materialism
Of course, some Americans are getting over-excited about Marx now, as they have been indoctrinated by Capitalism for so long now and this is merely the excitement which comes with conversion-syndrome and exposure to very unfamiliar ideologies.
US fails to rake in infrastructure cash
Investment and spending remains weak despite Donald Trump’s $1.5tn plan
President Donald Trump, in his inaugural White House address in January last year, lambasted spending “trillions of dollars overseas while America’s infrastructure has fallen into disrepair and decay”.
Thirteen months later he announced a $1.5tn infrastructure package and made the job of addressing the creaking transport network a cornerstone of his presidency.
The need to spend more on infrastructure is one of the few issues on which everyone in the US can agree.
The American Society of Civil Engineers, which provides a “report card” for the sector, gave the country a D grade for 2017, which signals that infrastructure is “mostly below standard . . . condition and capacity are of serious concern”.
The body estimated the investment shortfall at $2tn and said the effect on productivity was costing US businesses trillions of dollars.
“There is a much-publicised infrastructure gap in the US and it’s a clear priority for this administration, as it was for the previous administration,” says Tommaso Albanese, head of infrastructure at UBS Asset Management. “The perception is that it will be a very valuable market [in which] to invest.”
A developed market ripe with opportunity, combined with a pro-business administration, might reasonably have been expected to encourage an upswing in investment — yet data paint a mixed picture.
The level of direct infrastructure dealmaking has been underwhelming and it hit a near-four-year low in the last quarter of 2017. Just 220 deals, worth $8.4bn, were struck in the three months to December, according to Preqin, a data provider.
There are some signs that US investors are warming to the asset class after sitting on their hands before the 2016 election.
In contrast to Europe, Canada and Australia, infrastructure has been out of favour among US-domiciled investors. There were net redemptions in global infrastructure funds for much of 2014-16, according to eVestment.
This trend reversed last year but it is unclear how much these funds are buoyed by optimism and going to projects in the US, or whether institutional investors are simply following fashion by increasing the allocation to alternative assets.
“There is a definite demand for infrastructure from US investors, but the majority of this capital is flowing into European funds,” says Sarah Tame, associate director at Edhec Infrastructure Institute. “US investors like infrastructure but can’t find many opportunities to invest in their own back yard.”
In general, fund managers have been cool about Mr Trump’s plan, which commits only $200bn in federal funds with the balance expected to come from state, local and private sources.
“It’s the right noise to have, but frankly I can’t see [matters] changing in a hurry,” says Dylan Foo, head of Americas infrastructure equity at AMP Capital, the $147bn Australian investment manager.
Both Mr Foo and Mr Albanese say more investors are asking about the sector but they place this in the context of a general increased interest in infrastructure, as well as asset managers looking to diversify for better returns.
On top of this, asset managers say that the lack of a role for private companies in US infrastructure capital, relative to other global destinations, creates a challenge. The fragmented American political structure makes it difficult to develop a national privatisation model along the lines of Britain’s public-private partnerships (PPP) or Australia’s “asset recycling” privatisations.
“Infrastructure has always had a political overlay,” says Mr Foo. “Effectively selling assets is never a great move for a politician.”
Ms Tame adds: “Despite being a developed economy, the US is an emerging market when it comes to privately financing infrastructure. They have not found a definitive model. The majority of local authorities have no experience of PPPs; many states don’t even have PPP legislation in place.”
The US has relied on the municipal bond market to fund infrastructure. These investments are good at raising money quickly but are not tax-exempt for overseas investors as they are for domestic bondholders.
Asset managers do not think changes are likely. One fund manager, who did not wish to be named, said the risk of a China-US trade war and greater scrutiny of cross-border deals may make foreign buyers question whether direct investment is worth the trouble.
Nevertheless private capital is a key part of the world’s largest economy. “While prospects for 2018 are dim, we see a policy-driven increase in infrastructure spending as likely over time,” said analysts at Morgan Stanley last week. “Investors should start studying its implications today.”
AMP has looked for less obvious candidates to try to skirt the high level of public ownership in assets it would typically consider elsewhere in the world. Last year it acquired ITS ConGlobal, which operates cargo handling for ports in North America. Mr Foo says the group is increasingly paying attention to newer infrastructure, such as data centres.
“The US is still the biggest market in the world,” says Mr Albanese. “It is a big opportunity.”
Céline Tercier, head of infrastructure finance at Ostrum Asset Management, the French investment group, sees opportunities in the privatised energy sector as states including Iowa, South Dakota and Nevada make a push to renewable sources.
She urges caution, however: “It will take time to implement.”
https://www.ft.com/content/a25518ba-48ad-11e8-8ae9-4b5ddcca99b3
A $7 Trillion Debt Pile Looms Large Over Chinese Households
https://www.bloomberg.com/news/articles/2018-04-24/the-7-trillion-debt-pile-looming-large-over-chinese-households
Great Video by Steve Keen on including energy quantitatively in economics: https://www.youtube.com/watch?v=kUdzH47Mpow
Charting out labor and capital contribution to production to show the role of energy products.
at 19:40 or so he begins to discuss the energy per capita issue and the role of increasing machine energy throughput.
Thanks! I don’t think I have seen this video of his.
I still have a problem trying to model an individual country’s economy by itself, as economists seem to like to do. It seems to me that it is the world economy that is basically of interest. The USA can move quite a bit of its production of consumer goods abroad and save on its energy consumption, because it is not charged for the energy that China (and other Asian countries) now uses to make these goods.
But he does get it right that it that GDP per head depends on energy per head. I think it also depends on the increase in promised future energy (in the form of debt). Perhaps that is the unknown mysterious last term.
https://gailtheactuary.files.wordpress.com/2018/04/steve-keen-per-capita-real-income-depends-on-energy-per-head.png
This schenatic relationship seems very appropriate to repost and comment on in some of your future articles!
Thanks
Do you mean “schematic relationship”? That would seem to make sense. A few points:
The equation is based on variables that are not independent of one another. It gives the impression that all can go well, indefinitely. We are reaching diminishing returns in several ways:
1. Clearly (land per person) is falling, as population rises. To the extent that land, and resources extracted from land, are used in production of goods and services, this means that there is a downward drag real income per capita.
2. We extract the easiest to extract resources from the ground first. This means that more and more energy (and quite possibly human resources) must be used in extraction of fossil fuels, water, metals, rare earth minerals, and all of the other things we use from the ground.
3. There are diminishing returns to complexity. For example, we can, in theory, overcome lack of water by desalinating water and pumping it uphill to where it is needed, this complexity leads to a whole host of other problems that are likely not to be addressed: (a) Israel is finding that magnesium must be added back to the water, or the rate of heart attacks rises. There may be other missing minerals with different effects. Making these adjustments adds costs. (b) Dumping increasing amounts of salt and minerals back into the ocean is likely to lead to dead zones. (c) The whole operation will likely lead to the need for a huge amount of debt. (d) If all costs are addressed, the cost of water delivery is likely to rise, depressing demand for other goods and services. (e) There are really no efficiency gains added by this system, so repaying debt with interest is likely to be difficult, unless some sort of subsidy from elsewhere can be added. (f) The whole operation is likely to need a few high-wage workers, and not too many low-wage workers. It is likely to lead to greater wage disparity, and fewer workers who can afford the discretionary use of water.
4. The system likely needs to be funded with huge amounts of debt (and other debt-like promises, like Social Security, and sale of shares of stock). These are all, in effect, promises of future goods and services made with energy services. Much of the new investment is at very low rate of returns. Interest rates can be decreased farther and farther, but eventually the need for appropriate returns, and for money to pay taxes, pushes the system to collapse. Governments collapse from lack of tax revenue. Banks and other lenders collapse from lack of repayment of debt with interest.
5. Rising prices, in theory, can be used to encourage increased production of energy goods, and of other necessities, such as food (an energy good) and water. The catch is that prices depend on how much low-wage workers have to spend on necessities of life. Increasing complexity tends to increase wage disparity. What happens in practice is that rising energy prices quickly lead to recession in energy-importing countries, so prices cannot stay high for very long.
6. Low energy prices eventually drive energy producers to bankruptcy.
7. Efficiency, in theory, is a work-around for diminishing returns. But to implement efficiency changes, a whole complex network is needed that allows the production and transport of new, more efficient, goods and services. Like complexity, efficiency also reaches diminishing returns.
So diminishing returns work in many ways to make the whole operation collapse. It is all parts of the economy that tend to collapse. I am not sure I am good at drawing an image of this.
It’s a real pickle – I will be curious how Keen develops this further. He has been rather prescient on the issue of private debt. As we often talk about the problem of wages I’ve been trying to drill in on productivity – I think it’s a problem of diminishing returns on the process of complexity – using more machines/tools to burn ever larger quantities of energy – plus reducing energy resource quality.
I thought you’d like his quote on the idiocy of ignoring energy in economics: “labor without energy is a corpse. Capital without energy is a sculpture.” Funny!
That is a good quote–thanks!
Another way to look at this: It’s the production of goods and services we care about. This requires ever more work to be done – whether it is labor or capital or a mix of the two. This issue of the “solow residual” I think relates to the issue of debt and capital. Capital has always required large amounts of money – credit or debt take your pick – and I think it’s the diminishing returns of expanding capital (tools/machines which add productivity) which do us in. From his article on the same subject:
“It may also transpire that the available energy embodied in machinery, and the efficiency of its exploitation, is the major explanation for the “Solow Residual”—the apparent paradox that, despite economists seeing output at any point in time as a function of labour and capital, the vast majority of the change in output over time comes not from an increase in the amount of Labour or Capital employed, but from the relatively unspecified A(t) term in the standard Cobb-Douglas function.”
Good point! We really do have to pay for capital through debt or sale of shares of stock. It takes ever-more debt to provide the same amount of energy used to make the capital goods.
Yes, thanks it was a silly typo on my part.
My point was that Keen’s approach might open up different sort of minds to the OFW related issues, as to whether making this topic more mainstream digestible is completely another area of inquiry..
“Avalanche Beginning?”: Foreign Central Banks Dump Most Treasuries In Over 2 Years
ZH 4-30-2018
“It wasn’t just us and Bloomberg, however, warning about the sliding foreign appetite for Treasurys. This morning the WSJ also writes that “foreign investors’ appetite this year for U.S. debt hasn’t grown at the same pace as the government’s borrowing needs, which some analysts worry could push bond yields higher and eventually threaten to slow economic growth.”
WSJ focuses on another aspect of foreign demand represented in Treasury auctions, namely the takedown by Indirect Investors, which comprise mostly of foreign central banks and other official institutions:
“Investors in a broad category known as “indirect bidders,” which includes both mutual funds and foreign investors, have been winning the smallest percentage of the bonds they’ve bid for since 2011, according to bidding data for recent Treasury bond auctions. The average percentage of the auctions won by this group fell for the first time since 2012, a decline some analysts attribute to both lower demand from investors outside the U.S. and their recent tendency to post less-aggressive bids.
As the WSJ notes, “the behavior of these bidders is crucial for the ability of the U.S. to fund itself, at a time when the budget deficit is forecast to surpass $1 trillion by 2020 and remain above that level for the foreseeable future. Foreign investors currently hold about 43% of U.S. government debt, the lowest since November 2016, a proportion that has steadily declined from its peak of 55% during the 2008 financial crisis.”
Declining foreign demand at a time of soaring budget deficits and funding needs, not to mention a Fed which is no longer monetizing the $1+ trillion US budget deficit is, needless to say, a major problem.
“We cannot exist at these growth rates with these deficit projections without foreign participation,” said Andrea Dicenso, a portfolio manager and strategist at Loomis, Sayles & Co.”
https://www.zerohedge.com/news/2018-04-30/avalanche-beginning-foreign-central-banks-dump-most-treasuries-over-2-years
I used to worry about this kind of thing but have been forced to reconsider. Selling U.S. bonds results in more currency in circulation. It won’t effect the short term interest rate, which is set by the fed and is under our control. We’ve chosen to sell treasuries in an equal amount to spending, but we don’t have to. And even if we do, the Fed could just buy them.
If China isn’t saving in dollars it just means they are spending in dollars, which would be inflationary and allow taxation which negates the accounting need to print.
http://www.truth-out.org/opinion/item/19741-whos-afraid-of-china
I’ll take a stab at a response to the article. It’s good up to a point, but in the wider view, it may do more harm than good if the audience believes they have a complete picture. to complete the picture, you need to include banks, those things where liabilites are assets and assets are liabilities. After that you can move on to why the world is the way it is. (replacing “war” with “scam” gets you most of the way there), but that takes too long and people either lose interest or cannot stretch their credibility that far.
Tto the point, understand the difference between demand led inflation, and supply led inflation. Demand led inflation is where everybody is making a fortune and spending moeny like a …. fill in the metaphor. Supply led inflation is where the economy is imploding but money is either constant, as if on the gold standard, or expanding, as in the Weimar republic. So, simply saying “inflation” does not tell you very much about why things are inflating.
Looks more like “the migration toward a low energy society is unstoppable!”
We will get less energy, but it will be more expensive!
The good news is that the high prices will encourage innovation. (sarc)
We will get less energy, and it will provide fewer jobs that are paid well. The energy may seem more expensive, because many have no way to pay for it.
Just like Wiley Coyote “migrates” more than 2,000 feet to the canyon bottom below.
Steve Andrews and Tom Whipple share the following in today “Peak Oil Review,” (available by subscription and eventually at peak-oil.org).
Quote of the Week
“The migration towards the electrification of society is unstoppable.”
—Lord John Browne, former CEO of BP
Graphic of the Week
https://gailtheactuary.files.wordpress.com/2018/04/united-kingdom-electricity-generation-by-fuel-2012-2017-eia.png
what’s so renewable about a wind turbine or a solar panel?
Peak oil is a liquids fuel problem Not an electricity problem that renewable’s can solve. 90 percent of the worlds transportation runs on oil and there are no substitutes.
Our real problem is total energy consumption that is not rising fast enough. It needs to keep rising on a per capita basis–and this is becoming a problem. Even reduced coal consumption is a problem. It is not a simply a liquid-fuels problem. And it doesn’t wait until oil production starts to fall, so-called “peak oil.”
Electricity as much of a problem as any type of fuel. I would not be surprised if it is a problem before anything else. Wind and solar drive out backup generation.
I posted this regarding UK electricity supply in another comment.
https://gailtheactuary.files.wordpress.com/2018/04/united-kingdom-electricity-generation-by-fuel-2012-2017-eia.png
Because the solar panels and wind turbines need to be “renewed” every 15-25 years.
The batteries are also renewable … you just renew them by mining and refining lithium cobalt etc…. deliver that to factories … use coal generated electricity to manufacture them… ship them using diesel powered ships to the auto factories…
It’s a closed loop … completely self-sustaining…. some might even call it green.
And I might add… that if I could crawl through the Spark internet online chat and rip the throats out of the customer service people who have now been 10 DAYS!!! trying to transfer my connection …. I would not hesitate… I would bring along one of Elon’s flame throwers and burn the company HQ to the ground….. KILL KILL KILL!!!!
Now imagine Fast Eddy … when he is hungry …. if he could rip throats out over an internet connection … he is capable of ANYTHING>>.. we all are….
Is this the same guy who coined the phrase BP .. Beyond Petroleum?
As far as I know BP is still pumping petroleum…. basically he is full of sh it…. it’s running out of his mouth and dripping down his chin…. and the DelusiSTANIs are licking it off the ground….
Netanyahu claims proof that Iran has secret nuclear weapons program
https://www.ft.com/content/d8d4c6f6-4c9a-11e8-8a8e-22951a2d8493
WTI breaks $69 on fears over Iran. Yet at the same time housing starts and other indicators point toward demand destruction. Treading water!
Buy the WW3/Trade War/Oil Crisis…….
Nobel Laureate Economist Says American Inequality Didn’t Just Happen. It Was Created.
https://evonomics.com/nobel-prize-economist-says-american-inequality-didnt-just-happen-it-was-created/
Oil Hedge Fund Manager Says $300 Oil ‘Not Impossible’
https://www.bloomberg.com/news/articles/2018-04-30/oil-hedge-fund-manager-andurand-says-300-oil-not-impossible
300 oil would be like 10 dollars a gallon gasoline…..(Shoots himself).
$300 per barrel oil is impossible. The system crashes, even before the price hits this level! Somewhere, a connection is not being made.
Inadequate oil means inadequate jobs, and inadequate pay for the jobs that exist.
but at least you can see why he’s a hedge fund manager
He definitely deserves a 7 figure bonus this year… for his brilliance.
Doomer—in uk its already about $8 25—come and live her then help solve our overpopulation problem
Why is it so expensive their?
Each country decides which items to tax. In countries with limited oil supplies, the decision has been made to heavily tax fuel purchased by consumers, to encourage them to take public transit. Businesses and governments get much better prices.
This situation exists in Europe and in Japan.
in the early days of petrol usage, all of it had to be imported and paid for in dollars usually,
whereas in usa it just gushed out of the ground,it was thought of as effectively free
so you burned it as fast and much as possible, like there was no tomorrow…which of course there isn’t now.
problem is americans have become locked into a cheap fuel lifestyle, where most stuff is half the price it is in europe—all linked to the oil price being half too
this is why the usa will crash and burn at the first real downturn in oil availabity—doesnt have to be anywhere near a complete cutoff
Tesla Doesn’t Burn Fuel,It Burns Cash
https://www.bloomberg.com/graphics/2018-tesla-burns-cash/
Check out the hilarious graphic of Musk! LOL
“Investment [in the UK] is stagnating. Mortgage approvals in March slumped by almost 21%. Car output for the domestic market has dropped in the same month by 13%, for export by 12%. These are dramatic numbers.
“To drive the point home, on Friday we learned that in the first three months of the year, Britain grew at its slowest rate for five years. One comforting explanation is that the “beast from the east” hit construction. But dig a little deeper, and the cold snap also prompted a surge in demand for electricity and gas. As the Office for National Statistics observed, the weather alone explains little of the setback.
“Output from manufacturing and services was just idling in January and February before an ominous gathering slide in many areas in March. This should be sounding alarm bells everywhere – it is plainly why Bank of England governor Mark Carney signalled that an interest rate rise slated for next month may be deferred, and why the pound was sold so aggressively after the news. If there had not been a world boom over the last two years, it is clear that the UK would be hovering on the brink of a recession; indeed, as the world economy falters in the months ahead, there is now a real prospect of just that…”
https://www.theguardian.com/commentisfree/2018/apr/29/britain-economy-grinding-halt-no-new-growth-areas
“Is the world economy on the brink of another oil-induced slowdown? Anxiety has recently been gathering in a number of countries as economic growth has slowed in the first quarter. This applies to the US, the Eurozone and the UK.”
https://www.telegraph.co.uk/business/2018/04/29/oil-prices-highest-since-2014-will-fuel-global-slowdown/
One of my sons got notice today of a mandatory “all hands on deck” staff meeting tomorrow. He works as a subcontractor, doing computer-related work for the State of Georgia Department of Family and Children’s Services.
We had heard earlier, “We will renew your contract, when it runs out this summer.” Later, we heard, “Of course, this depends on our ability to retain the contract with the State of Georgia.”
We are guessing that Accenture’s contract with the State of Georgia did not get renewed. Ouch!
Honda has started advertising test-drives to me via the Linkedin inmail system – something I haven’t experienced before, and obviously a response to collapsing new car sales in the UK.
Hope your lad doesn’t find himself unemployed!
“Mortgage approvals in March slumped by almost 21%. Car output for the domestic market has dropped in the same month by 13%, for export by 12%.”
This is terrible!
http://media.economist.com/sites/default/files/cf_images/20080705/2708LD1.jpg
https://papundits.files.wordpress.com/2010/01/obama-economy-cartoon.jpg
UK = trigger?
Well, industrial civilization started here. There would be a pleasing symmetry…
“UK households are playing Russian Roulette with their finances. The savings rate dropped to 4.9 per cent of disposable income last year, a little more than half of what it was in 2015, for example. This reflects not just a lower tendency to put money by, so to speak, but also a significant shift in household borrowing patterns. In fact, UK households became net borrowers—with debt rising faster than the change in financial assets—for the first time since records began 1987, according to the ONS. This leaves the household sector particularly vulnerable.
“Things are not much more robust in the UK business sector. The level of economy-wide investment has surpassed the last peak just before the financial crisis in early 2008, but since the referendum, it has been growing by a mere 1 per cent per quarter. Business investment, accounting for roughly half of total capital spending, has been inching up at about 0.6-0.7 per cent per quarter, or about 2.5-3 per cent per annum. Business investment is just over 9 per cent of GDP, and so the UK needs much more robust investment to spark better growth.
“And therein hangs our tale. The early year GDP performance means the productivity pick up in the second half of 2017 has come to an abrupt end. The best that can be said of fiscal policy is that it is no longer a significant drag on the economy. The consumer is a spent force. Literally. And the investment outlook depends on a strengthening of business confidence on the part of local and foreign firms that is only likely in the event of the least disruptive outcome for Brexit.
“Failing that, a recession could come to pass all too readily.”
https://www.prospectmagazine.co.uk/blogs/george-magnus/is-recession-closing-in-on-the-uk
“The bank [Deutsche Bank] has already begun cutting staff, firing 400 US-based employees last week. The pace will accelerate and eventually result in more than 1,000 cuts, according to a person familiar with the matter.”
https://www.businesstimes.com.sg/banking-finance/deutsche-bank-unveils-yet-another-turnaround-plan
“Already over the past 12 months the shine has come off some of these [Nordic banks]. Several have even had declines in their share prices, underperforming the 2 per cent fall in the Euro Stoxx banks index.
“Last week’s results from Nordea, the area’s biggest bank (one-year share price decline: 13 per cent), will only have added to the questions hanging over the region’s lenders. Though chief executive Casper von Koskull insisted 2018 profits would exceed those of 2017, the bank’s first-quarter numbers were weaker than expected. Pre-tax profit fell 6 per cent, thanks in part to tighter mortgage margins.
“The Swedish property market does indeed look troubling. Fuelled by ultra-low interest rates, average house prices have spiralled. They now outstrip average earnings by a factor of 10, double the multiple of 20 years ago thanks to rampant house price inflation ever since Sweden’s last banking crisis in the early 1990s.
“Only Toronto ranked above Stockholm in UBS’s recent real estate “bubble index” that looks at cities whose property prices are out of kilter with economic fundamentals.”
https://www.ft.com/content/90de7642-4a3a-11e8-8ee8-cae73aab7ccb
The combination of rising interest rates, selling QE securities, and rising oil prices is very worrisome. The US Federal Reserve thinks it can make a small adjustment to cool the economy, but it basically doesn’t understand what it is doing.
It doesn’t matter if you loose one bank. There are many airlines which vanished, but still, air traffic is booming.
There is no airline that is as systemically vital as Deutsche Bank. If an airline goes bust, its assets – its staff, its planes – do not disappear and can theoretically be acquired by a rival. The failure of a major bank, as we saw with Lehman’s, can potentially lead to a general loss of confidence in other banks, a worldwide financial crisis and a deep global recession.
Confidence? The banks only need the confidence of a few people to remain viable. Nobody has confidence but then again nobodies don’t matter, we are just slaves and play things that do the work and fight the wars.
https://www.cnbc.com/2017/11/14/richest-1-percent-now-own-half-the-worlds-wealth.html
http://money.cnn.com/2016/08/18/pf/wealth-inequality/index.html
The one percent owns half of the worlds wealth.
https://media.giphy.com/media/5PfIasZsDSERa/giphy.gif
The Only Thing, Historically, That’s Curbed Inequality: Catastrophe
https://www.theatlantic.com/business/archive/2017/02/scheidel-great-leveler-inequality-violence/517164/
Is Nuclear War the Only Cure for Inequality?
https://blogs.scientificamerican.com/cross-check/is-nuclear-war-the-only-cure-for-inequality/
There is a question of what happens to the deposits that people/corporations have in that bank. If it can’t be bailed out, you have a big problem. A business cannot pay its payroll, with a collapsed bank. Individual citizens cannot repay loans, if they lose what they had on deposit. Bank failures tend to spread because of connections like this..
“Europe’s economy seems to have recovered from the dark days of the 2008 global downturn and Europe’s debt default crisis, which took the euro and European monetary union to the brink of collapse. But this has been possible only through massive intervention from the European Central Bank, riding to the rescue with negative interest rates and the bank’s €2.5 trillion (US$3 trillion) asset purchase programme. Whether the euro zone can stand on its own two feet once the ECB’s special measures end is still open to doubt.”
http://www.scmp.com/comment/insight-opinion/article/2143962/europes-financial-position-still-perilous-years-after-debt
“Spain, Greece, Italy and Portugal still have a ways to go in their economic recovery. Three of them still hold government dept that is greater than their GDP, with Greece at 178.6%, Italy at 131.8% and Portugal at 125.7%.”
https://www.verdict.co.uk/a-decade-after-the-global-financial-crisis-how-are-europes-southern-states-faring/
“Between 2000 and 2008, around five million homes were built in Spain as developers looked to take advantage of cheap credit and regulatory incentives provided by the government.
“But as the US subprime mortgage catastrophe unravelled and economies everywhere shuddered, Spain’s housing market collapsed while the world entered a global financial crisis.
“For Spain, the result is a number of small ghost towns of nearly-finished real estate projects that remain untouched today, many dotted along the country’s Mediterranean coastline.”
https://www.themorningbulletin.com.au/news/this-is-what-it-looks-like-when-a-credit-fuelled-h/3399728/
It’s two-tier in the EU: business owners are generally doing very well in Spain, it feels like a recovery, and they are also able to repress wages to get young people dirt cheap on shoddy contracts.
More jobs, certainly, but poor prospects.
It is now trending once again towards the classic 19th century situation: bourgeoisie v. growing proletariat and discontented graduates.
The glorious days of the late 90’s and early 2000’s in Spain seem ancient history.
No kidding! Wind and solar are no solution. Europe needs cheap fuels to operate. Negative interest rates are to cover up the problem.
“The deadline when an exemption expires for US tariffs on steel and aluminium imports from the EU is looming. Neither Emmanuel Macron nor Angela Merkel persuaded Donald Trump to drop the protectionist measures during their visits to Washington last week.
“Unless the US president changes his mind at the last minute, we are heading for a wider transatlantic trade conflict, starting on Tuesday…
“What makes the conflict particularly sensitive is that Mr Trump may succeed in driving a wedge between France and Germany. He has a problem with German cars, not French champagne. And the 2017 bilateral US trade deficit with France was $15bn against $64bn with Germany. I have often written about the economic damage that results from Germany’s 8 per cent current account surplus. It is now becoming a political problem for the EU.
“It is the EU’s misfortune that it is now confronted with a US president who will not put up with these beggar-thy-neighbour attitudes. He is doing so for the wrong reasons, but catches the EU at its point of maximum vulnerability…”
https://www.ft.com/content/ba483178-4a10-11e8-8ee8-cae73aab7ccb
Going below 0 here in Otago tonight… not even May yet…. I must put more coal in that Rayburn thing… burn the sumbiitch…. I need to call Al Gore and complain.
the operating manual for your rayburn was probably produced by me—thanks your support!
it sold far more copies than my ”other book”—lol
I bought Belgian: the British stove I first selected, from an ‘old-established company’, turned out to be rubbish – thermostat broke within 2 weeks, paint surface failed to cure.
When I complained to the firm, they said ‘How dare you question the quality of our our product!’ Just like the 1970’s: ‘What do you expect? The world? It’s good enough for others!’
I highly recommend SAEY cast-iron stoves, superb quality.
Also best to avoid steel stoves, especially those that heat water – they can decay quickly if you read up reviews.
oh well—i just produced the book—i didnt make the stove
my daughter has a rayburn and is delighted
Oh, I wasn’t referring to Rayburn -but obviously can’t mention the exact make. I chuckle when I see their ads though.
i live only 1/4 mile from the rayburn factory—gotta support local industry
I load the Rayburn up with coal at night… reduce the output… and it’s still chugging along in the morning…. the only problems so far are:
– trying to balance the system so all the radiators get heat (need the plumber to assist)
– trying to buy bulk coal — most areas have banned coal burning so one has to drive all the way to the mine to get anything but small expensive sacks… will hook up the trailer to the 2 tonnes of metal and plastic later this week and drive to the Ohai coal mine and fill er up with big sacks black gold…. can’t get more environmentally unfriendly than that!!!
Come to think of it … I deserve another championship belt — Worlds Most Un-Green Mutherfukkkker on the pLanet (after Al and Leo)
What do you reckon jupjiv? Is Fast deserving?
the 300 year anniversary of the parent rayburn company was last year i think—it was built right on top of a coalfield….very handy
sorry about the inconvenience Eddy—maybe if you took along a hard hat with a light on it—theyd let you ”pick your own”
I am going to put up a big sign out front of my house ‘BURN MORE COAL’ — and I will stand in front of the grocery store asking people to sign my petition to ‘allow all homes to burn coal now’
Bumper sticker on each of my vehicles…
https://rlv.zcache.ca/i_heart_coal_bumper_sticker-r7457736028374d3dbfca6c77760003c7_v9wht_8byvr_324.jpg
F789 the Green Groopies
If you burned your house down, Mrs Fast and yourself could dance nekkid around the fire before freezing to death—just as an object lesson to the locals
https://www.nzpam.govt.nz/our-industry/nz-minerals/minerals-data/coal/
Now we understand why you moved to Otago. I understand that 100% of New Zealand’s oil and natural gas are imported.
Yes, but you’re not the hypocrite those guys are. So you lose some points for being honest.
People laugh at my coal… It is easy
https://www.youtube.com/watch?v=uZNY7HzRHaw
I let the trees grow for the next owner
We are nearing the end of the largest monetary policy experiment of all time, and ascendant
nationalism, staggering inequality, and a widespread loss of hope among the younger generation
are among its varied fruit . The good news? Things only change when they absolutely must .
“When you reach the end of your rope, tie a knot and hang on” – Franklin D . Roosevelt
In our Q1 report we pointed to bubbles in the financial
markets as a theme; for Q2, we want to alert investors
to the fact that we are at the end of a cycle like no other .
We are nearing the end of the biggest monetary
experiment in history, when central banks replaced
politicians as decision-makers . Their maintaining of
low- and negative interest rate policies and quantitative
easing for far longer than the normal business cycle
would dictate was necessary kept markets in a good
mood, but with the unfortunate side effect of killing the
market-based economy .
Q1’s brief volatility spasms notwithstanding, today’s
capital markets are in a zombie-like state, with low
volatility and extreme valuations in all assets with no
net increase in growth and productivity, and a massive
increase in inequality .
While this monetary misallocation bought markets some
time, it concurrently increased the interdependency
between markets and countries in a globalised
economy . Federal Reserve easing did more to stimulate
emerging markets than the US itself, and China became
the main engine of growth, “saving” the world in 2008
by expanding credit and stimulus at an unprecedented
pace and consequently carrying the world through the
low in 2009 into 2010 .
The benefits from the globalised system and particularly
from the central bank’s asset-pumping response
accrued near-entirely to the already wealthy, while the
average economic participant lost out .
This is the process that drove the advent of Brexit and
Trump .
So now we have our first great new showdown since
the Cold War, which saw the victory of capitalism over
communism. Now comes the fight between nationalism
and globalism . Nationalism is winning big, as country
by country the outlook is turning inwards, with an
increase in placing the blame on external forces from
immigrants to the real and imagined misbehaviour of
trade partners . Talk of trade policy and protectionism is
now labelled “trade wars” .
That brings us to our theme: that this cycle is like
no other . So many prior attempts at understanding
our situation look back towards the last handful of
recessions and even the global financial crisis for
lessons .
DARE WE CLAIM THAT THIS TIME IS DIFFERENT?
More https://www.home.saxo/-/media/documents/quarterly-outlook/quarterly-outlook-q2-2018.pdf
THE IMPLICATIONS OF A GLOBAL TRADE WAR AND THE WORLD POSSIBLY HAVING REACHED PEAK GLOBALISM HAVE SUPER-CYCLE IMPLICATIONS
When a wellknown bank publishes sentences like this, faith in the sytem can disappear very fast!
Saludos
el mar
Too bad that these analysts don’t seem to understand the energy connection.
Nope…. they all seem to believe that after the deluges there will be a reset… because there has always been a reset … but then … there was always affordable resources to be extracted…
This time is different.
Deep down some may know this — but they will never admit it — because to admit it would and invitation to nightmares
I have a friend … who when presented with any of this sort of stuff — says he prefers to ignore it — because it causes him sleepless nights and bad dreams… he also mentions that he worries about the future of his kids… better to just play along pretending everything will be fine… no upside to acknowledging the real situation
Retirement Shock: Need to Find a Job After 40 Years at General Electric
Roughly $140 billion in GE stock-market wealth was lost in the past year, not just at Wall Street firms but among former employees who, like many small investors, long believed the company invincible
Gary Zabroski started working for General Electric Co. in 1976, at an aviation factory in his hometown of Lynn, Mass. The job paid well, came with benefits and, for Mr. Zabroski, provided a career ladder for a man with a high- school education who started out cleaning toilets.
“You had a job for life if you had gotten in there,” said Mr. Zabroski, 61 years old. He rose to punch-press operator and retired in 2016, after working 40 years at the century-old plant, which roared to life during World War II and still churns out engines for jets and helicopters. He left GE with an annual pension of $85,000 and company stock valued at more than $280,000.
Retirement looked pretty good until GE shares collapsed. His shares are now worth about $110,000, prompting a late-life job hunt. “I never planned on retiring and having to go back to work,” said Mr. Zabroski, who has monthly mortgage payments and supports a partially disabled wife. “It’s kind of scary.”
The rapid unraveling of GE has wiped out roughly $140 billion in stock-market wealth in the past year, not just at big Wall Street firms but among small investors. The industrial giant is one of the most widely held U.S. stocks.
By comparison, the stock value lost by GE in the past 12 months is twice the amount that vanished when Enron Corp. collapsed in 2001—and more than the combined market capitalization erased by the bankruptcies of Lehman Brothers and General Motors during the financial crisis. Longer term, GE’s market capitalization has fallen more than $460 billion since its 2000 peak.
GE’s recent losses haven’t been caused by scandal, catastrophic economic conditions or a market meltdown. They have arisen from badly timed investments, troubles in key markets and overly rosy financial projections that together have triggered a restructuring that could break apart the company.
GE executives have said that most of the company’s businesses were doing well, despite problems of the past year, and that the company has enough cash to fund operations and the dividend. “I am keenly aware of the pain our stock performance and dividend cut have caused with investors, retirees and their families,” said John Flannery, GE’s chief executive. The company is focused on improving its performance and earning back trust, he said.
“This is a show-me moment,” Mr. Flannery said, “and the most impactful thing we can do is continue to make GE simpler and stronger. We will not let up until the job is done.”
On Friday, GE reported its latest quarterly results, which included rising profits in its aviation and health-care units and continued woes in its power unit. Mr. Flannery backed his 2018 profit targets and said the company was making progress on its turnaround efforts.
About 43% of GE shareholders are retail investors, people who own stock in their personal accounts, according to S&P Global Market Intelligence. That compares with 32% at Johnson & Johnson and 21% at Boeing Co.
Among those hard hit by GE stock losses have been company retirees, including former factory workers who took advantage of a stock-ownership plan to build their savings. For decades, the company has had a program that encourages employees to buy GE shares by offering to match 50% of worker contributions, which were taken directly from paychecks.
The fall in GE stock prices has put more of the financial burden of retirement on pensions. More than 600,000 people have pensions from GE, which is one of many employers struggling with those obligations. Pension plans sponsored by S&P Composite 1500 companies have an average funding level of 87% and a combined unfunded liability of $286 billion, according to Mercer. In the public sector, state and local governments have an aggregate unfunded liability of $1.4 trillion, according to the Pew Charitable Trusts.
https://www.wsj.com/articles/retirement-shock-need-to-find-a-job-after-a-40-years-at-general-electric-1524418855
?Punch press operator /be it at aviation company/ pulling ~EUR6k monthly pension (+other benefits) is rather insane.. I’m afraid much more Americans are yet into discovering nasty surprises in terms of realistic future wage/pension levels.. lolz..
Well yes: for a time it worked: the Grand Illusion post-WW2 of describing an over-paid and secure US working class as ‘middle class’.
Dreadfully, though, hard for those who have to face the psychological shock, having believed in the illusion.
Wow, 600,000 people on pensions! I don’t understand how the guy has a $85K / year pension and $100K in stock is worried? Did he loose his pension? I know a lot of people much much worse off than that.
Psychology of expectation: someone with £30m feels like they are already in the gutter when they lose, say, £5m, and will say that they are ‘feeling poor.’
WOW he was on the inside and not see it in the pipe.
I put hundreds of hours of homework in before I shorted that dog…Guess I got some of his cash.
DUDE is not living on this planet if he cant live on 85k
Cant help him on the health care thing Just a fact of life in the US
If you have 100K, and 85K/year pension you have it better than a lot of people! Also shows the importance of rule #1 Get out of debt! Paying off your mortgage requires many tradeoffs and serious discipline.