Many people are concerned that we have an oil problem. Or they are concerned about recession and the need to lower interest rates.
As I see the situation, we have a problem of a networked economy that is not functioning well. A big part of this problem is energy-related. Strange as it may seem, energy prices (including oil prices) are too low for producers. If debt levels were growing more rapidly, this low-price problem would go away.
The “standard way” of encouraging more debt-based purchases is by lowering interest rates. But we are running out of room to do this now. We also seem to be running out of economic investments to make with debt. If expected returns on investment were greater, interest rates would be higher.
Without economic investments, demand for commodities of all kinds, including energy products, tends to stay too low. This is the problem we have today. Our debt problem and our energy problem are really different aspects of a networked economy that is no longer generating enough total return. History suggests that these periods tend to end badly.
In the following sections, I will explain some of the issues involved.
[1] Our problem is not just that oil prices are too low. Prices are too low for practically every type of energy producer, and in many parts of the globe.
Oil: OPEC oil producers have cut back production because they view oil prices as too low. OPEC reports a cutback in production of 2.7 million barrels per day between November 2018 and July 2019 (from 32.3 million bpd to 29.6 million bpd).
In the US, there has been an increase in bankruptcies of oil producers during 2019, relative to 2018. There has also been a reduction in the number of oil drilling rigs of 17% since the week of November 16, 2018, according to reports by Baker Hughes. These are signs of producer distress.
Natural gas: While recent US natural gas prices have bounced up off their recent lows, as recently as August 8, 2019, we were reading:
U.S. gas futures this week collapsed to a three-year low, while spot prices were on track to post their weakest summer in over 20 years. In other markets, such lackluster pricing would cause investment to retrench and supply to contract.
But gas production is at a record high and expected to keep growing. Demand is rising as power generators shut coal plants and burn more gas for electricity, and as rapidly expanding liquefied natural gas (LNG) terminals turn more of the fuel into super-cooled liquid for export.
Analysts believe the natural gas market is not trading on demand fundamentals because supply growth continues to far outpace rising consumption. Energy firms are pulling record amounts of oil from shale formations and with that oil comes associated gas that needs either to be shipped or burned off.
When we look worldwide, we see that the Wall Street Journal is reporting, “U.S. Glut in Natural Gas Supplies Goes Global.” A chart from that article shows falling natural gas prices in Europe and Asia, almost to the level of US natural gas prices.
Coal: The US Energy Information Administration writes, “More than half of US coal mines operating in 2008 have since closed.” USA Today writes, “Is President Trump losing his fight to save coal? Third major company since May files for bankruptcy.”
China has also been closing coal mines in response to low prices. Its coal production ramped up quickly after it joined the World Trade Organization in 2001, but since the 2012 to 2013 period, production has been close to level. An academic paper talks about a “de-capacity program” undertaken in China in 2016 in response to plunging coal prices and overall financial loss of coal enterprises.
Figure 1. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.
Uranium: A recent article says, “Plummeting global uranium prices hit Namibia hard.” Another article talks about the huge amount of capacity that has been taken off-line because of continued low uranium prices. The article estimates that 25% to 35% of global uranium production had already been taken off-line by the time the article was published (May 20, 2019).
Ethanol: According to the Wall Street Journal, the ethanol industry has been losing money since at least 2015, and is now closing ethanol plants in three states. The trade war has exacerbated its problems, but clearly its problems began before the trade war.
[2] The general trend in oil prices has been down since 2008. In fact, a similar trend applies for many other fuels.
Figure 2 shows that oil prices since 2008 have been trending downward.
Figure 2. Inflation adjusted weekly average Brent Oil price, based on EIA oil spot prices and US CPI-urban inflation.
Figure 3 shows that other energy prices have been following a similar price trend to that of oil. This situation happens because energy products are primarily used in finished goods and services of many kinds, such as cars, homes, vacation travel, and air conditioning. If demand for finished goods and services is high, prices for all commodities can be expected to be high; if demand for finished goods and services is low, prices for all commodities can be expected to be low. Thus, it shouldn’t be too shocking that the problem of prices that are too low for energy producers is very widespread.
Figure 3. Comparison of changes in oil prices with changes in other energy prices, based on time series of historical energy prices shown in BP’s 2019 Statistical Review of World Energy. The prices in this chart are not inflation-adjusted. They are annual averages, so smooth out quite a few smaller bumps.
[3] The situation of prices being too low for many types of energy producers simultaneously is precisely the problem I found back in December 2008 when I wrote the article Impact of the Credit Crisis on the Energy Industry – Where Are We Now?
The article mentioned was written in December 2008. If we look back at Figure 2, this was a time when oil prices were very low. I had first noticed a cutback in credit of various kinds (including credit card debt and mortgage debt) in the middle of 2008, about the time oil prices crashed. Later in the year, additional financial problems emerged, including the collapse of Lehman Brothers. Banks became less willing to offer credit to buyers who were deemed insufficiently creditworthy.
In my December 2008 article, I wrote about suppliers in various supply chains not being able to get credit. Without credit, supply chains could not operate. Businesses depending on supply chains were forced to cut back on their purchases. In fact, some suppliers went bankrupt. Workers were laid off in this process; these layoffs added to the lack of buyers for finished goods and services. Energy prices of many types crashed simultaneously because of the lack of demand for commodities used to make finished products of many kinds.
The fix for the problem back in late 2008 was for the US to begin Quantitative Easing. Quantitative Easing lowered longer-term interest rates and allowed more credit to get back to supply chains. By 2011, oil prices had risen to a level that was more tolerable for producers. These higher prices slowly slipped away, especially disappearing when the US discontinued its Quantitative Easing program in 2014.
If a person looks at the late 2008 situation, it is clear that a lack of debt availability indirectly led to low commodity prices. Prices dropped almost vertically when the debt bubble popped. This time, the situation is a little different. We arrived at low prices through the long diagonal black dotted line on Figure 2; this time other factors besides an obvious lack of debt have been involved.
One issue that seems to be involved this time is a shift in relativities between the dollar and other currencies, making energy products more expensive for those outside the US.
A second contributing issue this time is growing wage disparities, as goods are increasingly manufactured in low-wage countries. Low-wage workers (both in developing countries and in advanced economies trying to compete with developing countries) are less able to buy finished goods and services. This contributes to the lack of demand for finished goods and services using commodities of all kinds, including energy products.
[4] In the right circumstances, a rapidly growing supply of cheap energy products can help the world economy grow.
If we look back, there was a period of rapid growth in the world’s energy consumption between World War II and 1980. This was a period of rapid growth in the world economy.
Figure 4. Average growth in energy consumption for 10 year periods, based Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects (Appendix) together with BP Statistical Data for 1965 and subsequent.
In fact, both population and energy consumption per capita were growing. This growing energy consumption per capita allowed living standards to grow as well (Figure 5).
Figure 5. Energy growth amounts shown in Figure 4, divided between amount that supported population growth (based on 2019 world population estimates and earlier estimates by Angus Maddison) and all other, which I have called “living standards.”
Most people would agree that a major increase in living standards took place between World War II and 1980. New buildings were constructed to replace those destroyed or damaged during World War II. Many people were able to buy cars for the first time. Interstate highway systems were built. Electric transmission lines were built, and oil and gas pipelines were laid. In rural areas, homes were often electrified for the first time. With the aid of energy saving appliances and birth control pills, many women joined the workforce. The US, Europe, Japan, and the Soviet Union all saw their economies grow.
[5] It is striking that the period of rapid energy consumption growth between World War II and 1980 corresponds closely to the long-term rise in US interest rates between the 1940s and 1980 (Figure 6).
Figure 6. Three-month and ten-year interest rates through July 2019, in chart by Federal Reserve of St. Louis.
If interest rates rise, it becomes more expensive to borrow money. Monthly payments for homes, cars, and new factories all rise. Evidently, the US economy was growing robustly enough in the 1940 to 1980 timeframe that US short term interest rates could be raised without much economic harm. The big concern seemed to be an overheating economy as a result of too rapid growth.
The huge increase in interest rates in 1980-1981 put an end to any concern about an overheating economy (compare Figures 6 and 7). Oil prices came back down once the world economy was in recession from these high interest rates.
Figure 7. Historical inflation-adjusted Brent-equivalent oil prices based on data from 2019 BP Statistical Review of World Energy.
[6] Starting about 1980, the US economy began substituting rapidly growing debt for rapidly growing energy supplies. For a while, this substitution seemed to pull the economy forward. Now growth in debt is failing as well.
Figure 8 shows how the ratio of total US debt (including governmental, household, business and financial) has changed since 1946. It becomes clear that once the big “push” that the economy received from rising consumption of energy products began to fail about 1980, the US moved to the addition of debt as a substitute.
Figure 8. Ten-year average increase in US debt relative to GDP. Debt is “All Sectors, Liability Level” from FRED; GDP is in dollars of the day.
I think of debt as being one of many kinds of promises. Figure 9 illustrates that while the total amount of goods and services has been growing, debt levels and other kinds of promises have been growing even more rapidly.
Figure 9. Promises of future goods and services tend to rise much more rapidly than actual goods and services. Chart by Gail Tverberg.
Many things can go wrong with this system. If the growth in added debt slows too much, we can expect to start seeing financial problems similar to those we saw in 2008. Also, if the level of debt (such as student debt) gets too high, its payback interferes with the purchase of other needed goods, such as a home. If energy providers decide prices are too low and stop producing, then promised Future Goods and Services can’t really appear. Huge defaults on promises of all kinds can be expected. This happens because the laws of physics require the dissipation of energy for physical processes underlying GDP growth.
[7] Since 2001, world economic growth has been pulled forward by China with its growing coal supply and its growing debt. In the future, this stimulus seems likely to disappear.
Figure 10. Figure similar to Figure 5, with bump that is primarily the result of China’s accelerated growth circled.
China has been financing its rapid economic growth since 2001 with growing debt.
Figure 11. China Debt to GDP Ratio, in figure by the IIF.
We know that low prices for coal have led to flattening production since the 2012 – 2013 period (Figure 1). In fact, part of the reason for the flattening of non-financial corporate debt in recent years in Figure 11 may reflect swaps of uncollectible coal mine debt for equity, removing part of coal mine debt from the chart.
The failure of coal production to grow rapidly puts China at an economic disadvantage because coal is a very low-cost energy source. Any substitution, even imported coal, is likely to raise its cost of making goods and services. This makes competition in a world economy more difficult. And China’s debt level is already very high, putting it at risk of the problems discussed in Section [6].
[8] The world economy needs much more rapidly growing debt if energy prices are to rise to a level that is acceptable to energy producers.
Debt acts like a promise of future goods and services. Growing debt, plus increases in other types of promises of future goods and services, helps to keep energy prices high enough for energy producers. There are at least three reasons that growing debt helps an economy:
First, increasing debt can be used to build factories, and these factories hire large numbers of people. The factories utilize various raw materials and energy products themselves, raising demand for goods and services. Furthermore, the workers hired by the factories, with their incomes from their jobs, also raise the demand for goods and services. These goods and services are made with commodities. Growing debt thus raises demand for commodities, and thus their prices.
Second, increasing debt levels by governments are often used to hire workers or to raise benefits for the unemployed or the elderly. This has a very similar effect to building new factories. These workers and these beneficiaries can afford more goods and services, and these goods and services are made using commodities. Governments also use some of their funds to build schools, pave roads and operate police cars. All of these things require energy consumption.
Third, consumers can afford to buy more of the output of the economy, if their debt levels are increased. If debt can be structured so that anyone who walks into a car dealership can afford a new car (such as longer durations, lower interest rates, and no down payment), this added debt allows increasing demand for new cars. It also allows increasing demand for the energy products used to make and operate these new vehicles. Furthermore, if new homes can be made more affordable for young people, this works in the direction of adding more mortgage debt.
The Institute of International Finance (IIF) reports that the ratio of world debt to GDP (red line on Figure 12) has been falling since 2016. This falling ratio of debt to GDP no doubt contributes to the low-priced energy problem with which energy producers are now struggling.
Figure 12. IIF figure showing total world debt and the ratio of total world debt to GDP.
Non-debt promises of many types can also have an impact on energy prices, but it is beyond the scope of this article to discuss their impact. Some examples of non-debt promises are shown on Figure 9.
[9] The world economy seems to be running out of truly productive uses for debt. There are investments available, but the rate of return is very low. The lack of investments with adequate return is a significant part of what is preventing the economy from being able to support higher interest rates.
In a self-organizing networked economy, market interest rates (especially long-term interest rates) are determined by the laws of physics. Regulators do have some margin for action, however. They can raise or lower certain short-term interest rates. They can also use their central banks to purchase existing securities, thereby influencing both short- and long-term interest rates. In addition, they can indirectly affect the system by raising and lowering tax rates and by adopting stimulus programs.
Market interest rates, in some sense, tell us how productive investments truly are at a point in time. Years ago, investments that the economy was able to make were far more productive than the investments we are making today. For example, the first paved road in an area had a huge beneficial effect. New roads were able to open whole areas up to commerce. Once an area had been developed, later investments were much less beneficial. Fixing up a road that has many holes in it takes energy and materials of many types, but it doesn’t really add productivity to the system. It just keeps productivity from falling.
After a point, adding new roads or other infrastructure doesn’t add much of anything. This is especially the case if population is level or falling. If population is falling, it would likely make sense to reduce the number of roads, but this is difficult to do, once there are a few occupied homes along a road.
As another example, a car that gets a person from home to work is a great addition if the vehicle allows the person to take a job that he could not otherwise take. But added “bells and whistles” on cars, such as air conditioning, a musical system, sturdier bumpers, and devices to reduce emissions, are of more questionable value, viewed from the point of view of allowing the economy to function cheaply and efficiently.
Another type of investment is education. At one point, a high school education was sufficient for the vast majority of the population. Now additional years of schooling, paid for by the student himself, are increasingly expected. An investment in higher education can be “productive,” in the sense of helping to differentiate himself/herself from those with no post-secondary education. But the overall level of wages has not been rising enough to compensate for all of the extra education. It is the growing complexity of the system that is forcing the need for extra education upon us. In a sense, the extra education is a tax we are required to pay for having a more complex system.
The need for pollution control might be considered another kind of tax on the system.
Our hugely expensive health care system is another tax on the system. After paying the cost of health care, workers have less funding available for buying or renting a home, raising a family, food and transportation.
[10] Since 1981, regulators have been able to prop up the economy by reducing interest rates whenever economic growth was faltering. Now we have pretty much run out of this built-in source stimulus.
Many observers have noted that central bankers are running out of tools to fix our economic problems. The lack of room to take down interest rates can be seen in Figure 6.
Figure 13 shows that long-term patterns of reductions in interest rates (darker bands) have happened previously. These reductions in interest rates came to an end because they couldn’t go any lower, given inflation expectations and likely levels of defaults. We seem to be facing a similar situation today.
Figure 13. Chart from the Financial Times showing historic interest rates and periods during which interest rates fell.
According to Figure 13, there have been three periods of falling interest rates in the last 200 years:
- 1817-1854
- 1873-1909
- 1985-2019
In the gap between the first two periods of falling interest rates (1854 to 1873), the US Civil War took place. This was a period of very poor return on investments. Somehow it ended in war.
Immediately after the second two periods of falling interest rates (after 1909), the world entered a very unstable period. First there was World War I, then the Great Depression, followed by World War II.
Now we are facing the possibility of yet another end-point for the take-down in interest rates.
[11] The total return of the economy seems to be too low now. This seems to be why we have problems of many types, ranging from (a) low interest rates to (b) low profitability for energy producers to (c) too much wage disparity.
All of the problems listed above are manifestations of an economy that is not producing sufficient total return. The laws of physics distribute the problem to many areas of the economy, simultaneously.
A person wonders what could be ahead. We seem to be reaching the end of the line regarding the takedown of interest rates, as shown in Figure 13. If a takedown in interest rates is possible, it acts as a relief valve for some of the other problems the economy is facing, including too much wage disparity and energy prices that are too low for producers.
In Section [10], we saw that when the relief valve of lower interest rates had disappeared, wars and depressions have taken place. We can’t know the precise outcome this time, but our current situation doesn’t look good. Will we encounter wars, or a serious depression, or financial problems worse than 2008? We can’t know for certain. Or will we somehow find a way around serious problems?
The WSJ has a new article up, To Keep Exports Flowing, Saudi Arabia Looks to Import Oil
Attacks on the kingdom’s oil facilities are changing global trade flows in unusual ways
Excerpts:
Missiles knocked out roughly half of the country’s crude production, and the disruption to Saudi supplies is having knock-on effects all along the global oil-supply chain. To maintain its reputation as a reliable supplier, the world’s largest oil exporter is looking to buy crude oil from at least one of its neighbors and additional oil products from the global market, oil traders said.
Aramco was also in the market seeking products including diesel, gasoline and fuel oil for domestic use, according to traders. To preserve its own crude for exports, Saudi Arabia needs to reduce the amount of domestic crude it refines to make those products.
The attack on the Abqaiq oil processing plant is expected to cut activity at domestic refineries by up to 1.4 million barrels of crude a day, reducing the supply of products for domestic consumption and exports, said Iman Nasseri, managing director Middle East at consulting firm Facts Global Energy.
Aramco has told Indian refiners that it can’t deliver the premium-grade Arab Light crude they ordered. Instead, the company will send heavy, lower-grade crude.
Ghawar only contains salt water. El Trumpo knows this and isn’t interested in supporting the regime in their plans of stealing Iranian and Yemen oil.
“It’s an act of war”
Yes, indeed, between Yemen/Iran and depleted Saudi Arabia. Thus absolutely zero interest from the administration.
“Here’s some money, now go away”
https://media.giphy.com/media/TdwziQPhbNAzK/giphy.gif
Warsaw: https://photos.app.goo.gl/LHEKmA8NWzjWrs519
“Thus absolutely zero interest from the administration.”
Wasn’t the admin. locked and loaded awaiting instructions from SA?
Many people here say that the black swan that will bring down the modern human civilisation is something totally unknown, came out from nowhere and deliver the deadly blow. I will be damned if it is this liquidity issue.
Check out zerohedge.com. it happened again and it is worse than yesterday. Traders asking “what is next”? Already $200B in 3 days, gone in the black hole
I can see that if Saudi Arabia is suddenly trying to buy a lot of crude on the world market as well as make repairs, this might raise its cash needs. But $200 billion seems like a lot.
Gail,
Stuart Staniford did work in the early 21st century regarding depletion rates of the Ghawar field. Is he or Euan doing work like that now? Is it possible that the separation facility no longer needs to be as large as originally built? The holes in the tanks shown seem very neat with very little fire damage evident, perhaps they were empty. There is also very little damage to the associated piping in the released photos.
If I recall correctly Matt Simmons thought that as goes Ghawar so goes the world.
Dennis L.
I am fairly sure that Euan Mearns isn’t researching this. He did write a recent post on the drone strike knocking out 5% of global oil supplies.
http://euanmearns.com/drone-strike-on-saudi-arabia-knocks-out-5-of-global-oil-supplies/#more-23167
Stuart Staniford has a blog, but hasn’t written in a year. This is link to his blog. http://earlywarn.blogspot.com
I found this article that explains what little Saudi Arabia has said about Ghawar’s productive capacity recently.
No… “The biggest Saudi oil field is [NOT] fading faster than anyone guessed”…
Gail, if the Saudis are doing that, it gives the lie to their claim that things will be fixed in a couple of weeks. Their reserves could easily fill that gap; therefore, they expect a much longer hiatus.
It also says that this was not a Saudi false flag operation. Such would have been calculated to give maximum kaboom with minimum actual damage; what happened was exactly the opposite.
This is one of the zero hedge.com articles you mentioned:
Liquidity Shortage Getting Worse: Fed’s Repo Oversubcribed Even More As Funding Demand Jumps
This is another zero hedge article: The Paradoxical Instability Of Fed-Induced ‘Stability’
The author, Lance Roberts, points out that when the Fed has lifted the short-term lending rate to higher than the (self-organized) 2-year rate, bad stuff has historically followed:
https://gailtheactuary.files.wordpress.com/2019/09/fed-funds-2-year-crisis-chart-091719-lance-roberts-zerohedge.png
Another thing Lance Roberts points out is that the current in things are “ETF’s and “Passive Investing,” and levered credit.”
My comment: But some organization has to make these things happen. Banks need to be involved, or some other organization. They need to keep realigning investment portfolios to match Passive Investment portfolios, for example. And somehow they have to make ETFs happen. When lots of rapid changes start taking place, this becomes difficult. This may be part of what is behind the problems right now. An earlier comment by my friend who is a quant was that we should especially expect problems in late September.
okay, late September is not quite an ordinary time on the financial calendar…
if you haven’t mentioned it before, it’s the end of the third quarter of the year…
so there could be something significant to the next 11 days…
we’ll know more soon enough…
“Many people here say that the black swan that will bring down the modern human civilisation is something totally unknown, came out from nowhere and deliver the deadly blow. I will be damned if it is this liquidity issue.
Check out zerohedge.com. it happened again and it is worse than yesterday. Traders asking “what is next”? Already $200B in 3 days, gone in the black hole.”
but wasn’t the $200B just some digits on some CB computer somewhere?
but you could be right, that this could be a big black swan, if those hundreds of billions in digital money fail to patch the system, or even cause the system to go down…
as I just posted, the end of September may tell us how this chapter of the story ends…
things could normalize in October…
or get worse…
The 200 B is overnight lending for three days. I assume some overnight lending will have to be renewed, its not like it is 80 new Bs each day. I believe Fed can handle this with the digital printing press and eventually QE. I find it hard to believe that the Fed will be the weakest link in our global system. Something else will be responsible for the snap.
The news today on Zerohedge is Liquidity Scramble: Fed Announces Overnight Repos every day next week, introduces term repos.
https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/inline-images/FF%20vs%20reserves.jpg
Everybody Ready!? Climate Strike Tommorow and the Fast Eddie Challenge is on!
No future, no children: Teens refusing to have kids until there’s action on climate change
John Bacon, USA TODAY
USA TODAYSeptember 19, 2019, 9:33 AM EDT
A Canadian teen’s pledge not to have children until her government takes serious action against climate change is drawing support from young people around the globe.
Emma Lim, 18, launched a climate change movement this week called “#No Future, No Children” that includes a website where other teens can take her pledge.
“I am giving up my chance of having a family because I will only have children if I know I can keep them safe,” she says on her website. “It breaks my heart, but I created this pledge because I know I am not alone. … We’ve read the science, and now we’re pleading with our government
https://m.youtube.com/watch?v=uGlDSFrLX4A
Don’t these kids really that others will reproduce to make up the numbers????
We can’t help ourselves, wired to flat out full throttle BAU BABY…
https://m.youtube.com/watch?v=JBHKVAs85Ko
Makes more room for immigrant children from Africa and the Middle East. Also, some Middle American countries with high birth rates/
The Mormons, the Orthodox Jews, the Evangelical Christians, the Africans are all happy to pickup the slack. Race suicide is a bitter thing to watch.
Don’t ruin these people by introducing them to the horrors of the miserable and conformism producing government corporate complex in the west. Leave the people of Africa and Middle East alone.
Haven’t we done enough harm to this planet and inhabitants already?
This is sounding a lot like the 14 words! “We must secure the existence of our people and a future for white children.”
But with a funny twist Since we can not secure a future for our children we will not have children. So, only the morally suspect will have children.
Only those who can think beyond the few minutes needed to father a child will do so, at least in quantity……..
Hey Gail, remember what you said about a singularity?
I think the plan is to push it into the future as much as possible by rebranding capitalism with the “Green New Deal”. This means re-directing private consumption money to wind power, solar power, CCS and newer technologies such as EVs. You are thermodynamically right about their unviability, but until the bubble bursts there are billions, or, actually, trillions to be made by making or mining, selling, transporting and installing the cement, metals and materials needed for wind turbines, solar panels and EVs.
https://medium.com/@kim.hill/unpacking-extinction-rebellion-part-i-net-zero-emissions-5a5eed68d9ce
http://www.wrongkindofgreen.org/2019/01/17/the-manufacturing-of-greta-thunberg-for-consent-the-political-economy-of-the-non-profit-industrial-complex/
You may very well be right. Somehow, keep the bubble going!
Sort of reminds a person of the stone statues on Easter Island.
From the first article:
No kidding! But profits can be made now. Good summary of the issue.
Another good quote:
*Net-zero emissions is Not a Thing. There is no way to un-burn fossil fuels. This demand is not for the extraction and burning to stop, but for the oil and gas industry to continue, while powering some non-existent technology that makes it all okay.*
Good point!
You can un-burn fossile fuels. It takes some millions years. Of course, I mean… nature can.
As for thermodynamics, if I remember my lessons 30 years ago, an open system is stable if it gets energy from the outside and rejects entropy outside. It can even increase its complexity. Planet earth gets energy from the sun and dissipates entropy as heat in outer space. Then complexity came to the point of the human brain…
I would say the whole ecosystem of the earth is a manifestation of the spontaneous and immense complexity which nature automatically creates once the process of evolution is set in motion by the first singular instance of reproductive and evolving life and where there is sufficient energy and raw materials available. The complexity is far surpasses the crude centralized behemoths sprinkled with single points of failure from industrial civilization.
Man certainly want to put itself as the crown jewel in the center of this process. In fact we are a mere disastrous subsystem, a cancer which seeks to dominate the rest of the ecosystem and undermine our own basis of existence.
Agreed 100%. An open system with a stable energy input can sustain complex dissipative systems (“critters”) indefinitely. With one proviso: that they make a living using only zero entropy strategies. That is, they find existing energy gradients, and use some of that energy themselves. The beauty of this scheme is that entropy is created at the same rate, with or without the critters.
Species that depart from this strategy can easily be found, but only in the fossil record. Except, of course, for the one not yet extinct.
Probably correct: a fantastic, colossal , mal-linvestment, but the short-term profits might be huge. – for some……
The second article is in the form of a play. The Manufacturing of Greta Thunberg – for Consent has been written in six acts.
Follow the money and the influence peddling. The story doesn’t need to be right. It just needs to profitable for some investors.
“EU leaders have given Boris Johnson an ultimatum to come up with a new Brexit plan by the end of September or face up to a no deal. The deadline, agreed at a meeting in Paris on Wednesday evening, comes as the bloc’s chief negotiator Michel Barnier told Mr Johnson to stop “pretending” to negotiate.”
https://www.independent.co.uk/news/uk/politics/brexit-eu-boris-johnson-deal-plan-deadline-ultimatum-latest-a9111066.html
“Investors have taken out a record number of options contracts to bet on or hedge against moves in UK interest rates, amid rising concerns that Britain may depart the EU at the end of October without an agreement on its future relationship with the bloc…
“The options, if exercised, would allow investors to profit from unexpected rate cuts or protect themselves from the damage stemming from rapid rate rises.”
https://www.ft.com/content/c11aa992-daa9-11e9-8f9b-77216ebe1f17
Assuming that there are counterparts who will actually pay, if a large number of options are exercised, I imagine. Who guarantees these options?
Perhaps the EU might stop pretending itself, and try to arrive at a reasonable settlement which respects the Referendum result, instead of trying to quash it. Cuts both ways…..
It’s sad to Britain, the country which saved Europe from an unending, continent-wide, Fascism, humiliated in this way.
“Britain, the country which saved Europe from an unending, continent-wide, Fascism”
What an awful joke you wrote
If powerful people don’t want something they don’t have to nix it, they just have to turn it into something undecided. That’s what has happened to Brexit.
“Household wealth excluding property in the world’s 53 largest countries fell slightly last year, in a first since the financial crisis of 2008, German insurance giant Allianz said on Wednesday.
“The value of ordinary people’s bank deposits, pension savings and stock investments dropped 0.1% year-on-year in 2018, to around €172.5trn, Allianz said in its annual global wealth report.”
https://www.fin24.com/Economy/global-household-wealth-drops-for-first-time-since-2008-crisis-study-20190919-2
“The trade war between the United States and China has plunged global growth to its lowest levels in a decade, the OECD said on Thursday as it slashed its forecasts.
“The Organisation for Economic Cooperation and Development said that the global economy risked entering a new, lasting low-growth phase if governments continued to dither over how to respond.”
http://news.trust.org//item/20190919083525-8jlzq/
I expect that 2.9% is still an overestimate.
The Allianz report on global wealth can be found at this link: https://www.allianz.com/en/economic_research/publications/specials_fmo/GWR2019_18092019.html
https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-research/publications/specials/en/2019/AGWR_2019.pdf
A few things Allianz says:
Allianz is a big life insurer. Its big concern is that with low interest rates, people in Europe especially are not buying as much life insurance. They also are not buying shares of stock. Instead, they are putting the savings in bank deposits.
“The Federal Reserve has cut interest rates for a second time amid fears of a global economic downturn and concerns Donald Trump’s trade wars with China could risk further instability among world markets.
“The Fed previously cut the rate to a range of 2 to 2.5 per cent in July, while hinting at further cuts this year. Those cuts came on Wednesday, as the Fed announced a cut of the main target rate to a range of 1.75 to 2 per cent.
“Donald Trump, who had repeatedly slammed Federal Reserve Chairman Jerome Powell and demanded the Fed do a sweeping cut to the current rate, tweeted shortly after the announcement: “Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!”
https://www.independent.co.uk/news/world/americas/fed-rates-cut-us-trump-trade-war-twitter-recession-a9111136.html
“The S&P 500 is officially in an earnings recession for the first time in three years… The entirety of the S&P 500 index SPX, +0.03% has reported results for the second quarter, showing an average earnings drop of 0.35%…
“Analysts surveyed by FactSet currently project a steeper drop for the third quarter, with estimates calling for a 3.95% decline on average. Sentiment has worsened since the start of the year…”
https://www.marketwatch.com/story/the-sp-500-is-in-its-first-earnings-recession-in-three-years-2019-09-18
“In the latest warning from corporate America of a deteriorating outlook, Fred Smith, FedEx founder and executive chairman, said the world economy “continues to soften”…”
https://www.ft.com/content/90c4386e-da2a-11e9-8f9b-77216ebe1f17
It seems like FedEx would know as well as anyone how well demand for goods is holding up around the world.
An earnings recession doesn’t sound good. Companies have been known to cut back, especially if they cannot see a way out.
“Gross borrowings of OECD governments are set to reach a new record level in 2019 of $11 trillion. Government debt now exceeds annual GDP in Japan, Greece, Italy, Portugal, Belgium, France, Spain and the UK. McKinsey estimates that the overall global debt of governments, non-financial corporations and households has grown by $72 trillion since the end of 2007. Sovereigns account for 31% of that growth.
“Both Euromoney Country Risk (ECR) scores and data from S&P Ratings show the quality of sovereign debt has declined in aggregate. This reflects both overall indebtedness and a flood of new sovereign issuers.”
https://www.euromoney.com/article/b1h672whfwwjd2/the-fragile-edifice-of-sovereign-debt
“Demand for the riskiest — and often the most rewarding — form of bank capital debt, known as CoCo bonds, has risen sharply in recent months as the return on the bonds of Germany and other countries have dwindled to worse than nothing.
“Nearly half of European corporate debt now carries negative yields, and with rates falling in the United States, demand for bank capital has increased as investors accept higher risk in exchange for some sort of return.”
https://uk.reuters.com/article/uk-europe-banks-bankcapital/banks-gear-up-for-high-risk-debt-sales-in-once-in-a-lifetime-market-idUKKBN1W318A
“Deutsche Bank faces the threat of a European Central Bank investigation after buying and selling its own debt for more than three years without regulatory approval, said people familiar with the matter. … The bank did not get formal approval from the ECB for such transactions until 2017, a person said.”
https://www.ft.com/content/a3879cb2-da29-11e9-8f9b-77216ebe1f17
Cowboy Nation – Norway’s Wild West fantasy
https://dark-mountain.net/wp-content/uploads/2019/09/200415Hammerfest_Goliat-1024×682.jpg
Equinor (previously, Statoil), Norway’s state-owned oil and gas company, is riding headlong into the world’s fossil-fuelled sunset, whilst its cowboy nation is trotting comfortably along in its trail.
To put it in cowboy terms, ‘It’s your misfortune and none of my own’. This is a line from an old cowboy ballad, used by the historian Richard White to describe the attitude driving the exploitative, extractive, and environmentally disastrous economy of the Wild West. It still applies.
As I have pointed out, I am a descendent of immigrants from Norway, a little over a century ago.
The author of the article evidently think it is bad if Equinor and the Norwegian Fund pursue investments that the oil and gas industry would make around the world. This is the way the laws of physics make our economy operate. If there is a profit to be made, some company or person will figure out how to pursue that profit. If Equinor were to drop out, some other company would step in.
Unfortunately, that is the way a self-organizing economy works. It is a dissipative structure. It is always on the lookout for energy to dissipate. The author can make money by publishing an article that appeals to a particular group of people who feel guilty about how the system really operates. In this way, the author, too, is helping dissipate energy.
The farmers who worry about our phone batteries
https://ichef.bbci.co.uk/news/624/cpsprodpb/130BB/production/_108311087_atacamasaltflat.jpg
Lithium mining is causing water shortages and ecological collapse in Chile. Just one more example of how a transition to “renewable” “green” energy via massive extraction of nonrenewable resources will be just as deadly and foolishly unsustainable as burning FFs.
I remember reading about the water problem for lithium extraction in Chile before. This is a fairly recent article talking about the water problem related to lithium in Chile. Lithium firms depleting vital water supplies in Chile, analysis suggests The article is in “Engineering and Technology.”
USGS information indicates that Chile has the largest lithium reserves in the world. It only produced 19% of total world lithium production, however. Australia produced about three times as much as Chile. China and Argentina are also large producers.
Solving the problems of resource-hungry industrialism through further resource-hungry (and highly polluting) industrialism?
It’s not going to work.
Mankind’s final screw-up, I suspect.
Speaking of encephalopathy, has Danielle Park been afflicted? Listen to what she says this about PV’s and EV cars……
https://www.youtube.com/watch?v=5goTcil4FzU&t=1529s starting around 16:58
Bovine spongiform encephalopathy (BSE) prevention and Alzheimer´s disease (AD) connections? 33rd WVC in Incheon- Seoul, 2017. E-poster 196 BM- 0356.
“Purpose From the literature it is known that in British cows at 80s a higher incidence of subclinical (chronic), hypomagnesaemia was found and a new BSE disease appeared. After 1993 began to significantly reduce the incidence of the BSE. The aim of this study was to determine what changes in the period about 1985- 1995 (magnesium content in feed concentrates) have occurred in British cows, in this context. Materials and Methods In order to detect changes in the supply of magnesium in cows (1985-1995), in the form of mineral supplements, data from two British producers were examined. Results In the late of 80s were available only commercial Mg-blocks with very considerable variation in palatability, mostly very low Mg-intake. So usually the survey has been; the subclinical hypomagnesaemia was found in about 7-15 % of tested cows. Since the early 90s, it was in Britain gradually implemented, incorporating Mg in concentrates. To achieve the „extra dietary“ requirement level 30 g of daily Mg-intake with certainity, Mg was included in feed, thus not leaving any option to the dairy cow, about the Mg intake. In lactating cows at pasture, more palatable Mg-cobs were used. Subclinical/chronic hypomagnesaemia decreased to about 3-4 % in dairy cows. Conclusion Based on this interpretation ( BSE/Mg), should be similarly preventive do about the AD? Recent research has shown that increased magnesium (Mg) in the brain, prevents Alzheimer´s in mice. There the Mg acts as a „natural“ antagonist of NMDA receptors. In addition another, although „synthetic“ NMDA receptor antagonist (memantine) is a drug in AD. Keywords : Neurodegeneration , Magnesium deficiency , NMDA receptors , BSE in United Kingdom, Alzheimer´s Disease”
https://www.researchgate.net/publication/322699401_Bovine_spongiform_encephalopathy_BSE_prevention_and_Alzheimers_disease_AD_connections_33rd_WVC_in_Incheon-_Seoul_2017_E-poster_196_BM-_0356
This looks like another reason to look for magnesium supplements.
I have found some other resources on the webpage of the given person – Josef Hlasny, DVM, PhD (http://www.bse-expert.cz/). It looks interesting, like this PDF:
http://www.bse-expert.cz/pdf/Origin_BSE_TSE.pdf
“According to the BSE ammonia- magnesium theory , there the origin of BSE is a
long-term high protein intake with the coincidence of dietary
magnesium -deficiency. It seems that the same can be about the Alzheimer’s
disease .”
http://www.bse-expert.cz/pdf/Calcium_schizophrenia.pdf
This is long and somewhat over my head. One thing I did notice is
“According to the BSE ammonia-magnesium theory, there the origin of BSE is along-term high protein intake with the coincidence of dietary magnesium-deficiency. It seems that the same can be about the Alzheimer’s disease.”
I had heard earlier that India has a very low incidence of Alzheimers. Their diet is low meat, but they do eat some dairy. That combination seems to work.
India also has the highest rate of diabetes, and a very high vegetable and grain intake. Much of their protein is of low biological availability to humans (soy, any beans, etc).
The sword cuts both ways.
Maybe best is eating nose to tail along with seasonal veggies and fruits. Get fatter in the fall and everything ripens to last throughout the winter. Kinda like the diet of most bears
It hadn’t occurred to me that high potassium and nitrogen fertilization, and lack of magnesium fertilization, might be creating the imbalance we are seeing today. Also, too much meat in the diet.
Well, it’s kind of intuitively self explanatory – the soil food web is fed industrial inputs on different than natural conditions (+ bad timing, temperature, moisture, dosage, ..). Hence the end product in meat must be also altered – defective.
It’s also question of intersecting quality and quantity.
So, imagine having two comparable samples of population. One is going to be fed meet with high %share of junk fillers ala fastfood grade meat and the other is going to be high end luxury grade cold air finished grass fed meat.
Both of the sample groups receives a lot of meat each say >100kg per year.
This first group dies much sooner on very nasty diseases, while the other yet still somewhat obese marches much longer. So, it’s not quantity question only..
So to trivialize it, quality diet and self restrain gives you 85-110yrs longevity potential.
And for garbage and high volume intake consumption combo subtract 20-30yrs or more..
“However, rainfall and the available water capacity of the soil are major yield
determinants, with output in the U.K., for example ranging from 6000- 14000 kg DM/ha
under intensive fertilization.”
“More than one third of the BSE cases was found in Galicia… This province covers only 5.8 percent of Spain´s total surface and is located in Northwest Spain, with the 7.5 percent of the Spanish population. Annual mean temperatures vary from 8.3oC in the highest altitudes inland to 16oC in the southwestern coast. The average farm is very small with a total of 6.2 hectares made up of an average of 15.2 separate plots. Only 10.6 percent of the farms are over 10 ha. Annual rainfall varies between 700 to more than 2000 mm.”
http://www.bse-expert.cz/pdf/Spain_and_BSE.pdf
Too good conditions for agriculture create sooner depletion of crucial nutrients…
Right. And our fertilization only replaces some of them.
Yep, they most likely over stocked the farmland, it’s very easy in land locked areas with no serious attempt of setting aside, rotational grazing etc.. Not mentioning the area is probably under heavy farmland abuse for at least past ~3K yrs..
Also the EU agri subsidies were likely blown on other tangential stuff instead (fancy diesel burning equipment, leased dual use/family cars, reconstruction of the buildings etc..) not on the “priority #1” that meaning adjustments of farming practices per given locale..
So, the nature unhinged and simply fought back with the BSE..
https://link.springer.com/article/10.1007/s00267-015-0571-4
This paper is on scavenging wolf pop in the area, but includes valuable numbers on livestock carcasses before and after BSE outbreak..
So, what likely happened prior 2000 was overstocked depleted topsoil with too many livestock carcasses letting to rot there as per normal farming practice.. Not problem in healthy rich ecosystem (up to some animal density threshold), but disaster for depleted area..
Hence the “bug” was not being naturally dealt with (transmuted) properly by the lush vegetation and microbe-fungi layer => so the cows in effect were eventually eating their unprocessed dead elders, lolz, yuck..
This is also quite shocking:
https://www.researchgate.net/publication/236940025_Mechanisms_of_cataractogenesis_in_the_presence_of_magnesium_deficiency
Cataracts also seemed to be caused by a magnesium deficiency.
Another article about the Repo. I can’t say I understand everything in this article. But it says that the Repo is the lender of last resort for global banks. The banks need collateral to use the Repo. U.S treasuries are the finest collateral.
But the banks also use other collateral, like German Bunds, corporate bonds, junk bonds.
In 2008 the banks used mortgage back securities as collateral…until the subprime blew up. That froze the Repo market.
So what is going south now?
https://www.alhambrapartners.com/2019/09/17/nasty-number-four-repo-chaos-taf-makes-a-comeback-and-eff-shows-us-how-inept-officials-really-are/
One of the things of note in the repo article:
Not exactly a ringing endorsement of the Fed.
Seems like it was Saudi arabia that was pulling money from the markets. I wonder why they didn’t coordinate these withdrawals better with the markets? Is it some kind of threat ?
https://twitter.com/carlquintanilla/status/1173994491147096066
ElTrumpo isn’t interested in attacking Yemen. Thus this response from the Saudis.
It does seems like Saudi Arabia pulling billions out to support its own economy could be a problem. Thanks for the tip.
Saudi sells assets to pay for oil how ironic. Perhaps the dons bragging about unfortunate satellite accident not so bright? Whos laughing now? Im not. The think about brinkmanship. Its a long way to the bottom… I wonder… How much oil leaves Saudi on its west ports away from iran. Ghawar is on the east side just across the straight from iran…
200k here 200k there. it adds up after a while.
https://www.cars.com/research/lamborghini-urus/
Heh, heh, heh….
Every U.S. Grid Is Getting Greener, Except the One That Matters
(Bloomberg) — Every major U.S. electricity grid is getting greener.
Except for the massive one serving 65 million Americans.
That’s just as problematic as it sounds for the policymakers, power providers and climate activists looking to wean Americans off fossil fuels. While members of other systems move quickly to add solar and wind to their mixes and slash carbon emissions, the network that keeps the lights on from Chicago to Washington has effectively doubled down on natural gas
In the past two years, it has boosted the amount of power generated with gas by 11,131 megawatts. And developers are planning 34,507 megawatts more.
“How do you manage the gas build-out with more states boosting renewables targets?” asked Toby Shea, a New York-based analyst at Moody’s Investors Service. “There’s already an overbuild of gas.
https://finance.yahoo.com/news/every-u-grid-getting-greener-100015635.html
But, but, we are going in the right direction….sarcasm…..
https://m.youtube.com/watch?v=PKpQRjj_WbU
All talk and just plain crazy
“Britons are £128 a year worse off on average than they were in 2008, according to a report that reveals household incomes were hit harder in the wake of the financial crash than official figures have revealed.”
https://www.theguardian.com/business/2019/sep/17/britons-are-still-worse-off-than-in-2008-new-research-claims
“A record of number of Britons sought debt advice in the first half of 2019, and charities are warning that households are vulnerable to any future economic turbulence.”
https://www.bloomberg.com/news/articles/2019-09-17/record-numbers-seek-debt-help-with-u-k-on-brink-of-brexit
“Britain’s household savings rate – a measure of how much households save from their disposable income – stands close to record low levels. Households have also been net borrowers for 10 quarters in a row, an unprecedented stretch in records dating back to the 1960s.
“Their lack of financial headroom could spell trouble if a downturn hits, whether triggered by events at home or abroad.”
https://uk.reuters.com/article/uk-britain-economy-recession-graphic/stretched-households-could-mean-lengthy-uk-downturn-if-it-comes-idUKKBN1W11FV
“Companies across Britain have begun stockpiling beer, wine and spirits to keep the alcohol flowing at Christmas as concerns grow that Brexit could disrupt supplies over the festive period.”
https://www.theguardian.com/business/2019/sep/18/importers-stockpile-alcohol-for-christmas-to-avoid-brexit-drought
It seems like alcohol was an old way of storing up the calories of grain or grapes or potatoes, for winter or hard times. Little has changed!
Pigs were another store of the nutrition available from the growing season: one slaughtered in each month, November, December, January and February and the meat salted down after a good feast for everyone on pig-killing day. Poor people might have only one pig for the winter, richer farmers have four or more. Guess who survived best?
Vegans might reflect on this old reality: grain storage alone was never enough to survive hard Northern winters. Not to mention the useful skins….
I’ve never made potatoes last past january in a condition where I would like to eat them.
Suppose the february pig could eat the february potatoes…
And I look forward to the day when English beer replaces airlines and motor cars as our key “industry”, and the Scots give up North Sea Oil for North Sea Whisky. And while I’m dreaming, let’s restore the House of Plantagenet.
It seems like the countries that were doing best before the last recession most likely had the highest saving rates. If this is the case, then it would not be surprising that they returned to their pre-collapse GDP’s soonest.
I thought it was strange that the analysis excluded Greece and Italy. According to the note on the chart, these countries still haven’t returned to their pre-collapse GDP. Were they big savers, or were they already adding to their debt? We can’t tell from the analysis.
In the US, we know that wages rise less rapidly than GDP. In fact, we would expect that to be the case everywhere, because increasing complexity means that government programs keep growing, and businesses keep absorbing more of the total. The wages that have been increasing are often those of managers and of highly paid technical specialists.
For this reason, an analysis based on GDP per capita would almost certainly understate how well individuals are doing, as this article claims is true in Briton.
“Japan’s exports slipped for a ninth straight month in August as the Sino-U.S. tariff dispute hit demand from China and other Asian trading partners, heightening risks for the world’s third-largest economy.
“The negative reading adds some pressure to the Bank of Japan to expand stimulus at its policy meeting on Thursday… Exports in August slumped 8.2% from a year earlier, Ministry of Finance data showed on Wednesday, dragged down by autos, car parts and semiconductor production equipment.”
https://uk.reuters.com/article/us-japan-economy-trade/japans-exports-drop-for-ninth-straight-month-as-global-demand-falters-idUKKBN1W302P
“The pain for [Singapore’s] exporters continued in August with shipments down for the sixth consecutive month.
“Signs that the worst is over are now being offset by fresh geopolitical concerns that could hurt trade. Non-oil domestic exports fell 8.9% from the same month last year…”
https://www.straitstimes.com/business/economy/exports-fall-again-as-fresh-worries-emerge-on-horizon
“More than any other industry – with the possible exception of soybeans – Trump has dragged semiconductors into the global spotlight. Now, the fortunes of the two seemingly incongruous commodities have become entwined. Soybeans and Huawei are unlikely bargaining chips in China-US trade talks.
“But insiders say it is hard to discern exactly what impact the trade war is having. Both sectors have also suffered extreme supply chain shocks since July 2018, with the trade war coinciding with a major slowdown in electronics.”
https://www.scmp.com/economy/china-economy/article/3027856/trade-war-alone-did-not-cause-slump-asias-export-hubs-donald
“European car registrations dropped 8.6% in August as volume brands Nissan, Renault, Fiat and Volkswagen posted double-digit sales declines, according to industry data published on Wednesday… Registrations fell to 1.07 million cars last month from 1.17 million a year earlier across the European Union and EFTA countries, the Brussels-based association said in a statement.”
https://uk.reuters.com/article/uk-europe-vehicleregistrations/european-passenger-car-registrations-slump-8-6-in-august-acea-idUKKBN1W30JA
“Germany is the economic engine of Europe — and it’s running on fumes. After a decade of near-constant expansion, the economy is flirting with recession. Germany’s export-dependent companies are deeply exposed to fallout from rumbling trade disputes, and the critical auto industry is struggling with the shift to electric cars. That means pressure is rising on the government to abandon its longstanding aversion to splashing the cash.”
https://www.bloomberg.com/news/articles/2019-09-18/why-germany-may-need-to-fight-recession-with-spending-quicktake
“World Bank President David Malpass said the global economy is poised to decelerate more than previously estimated, with the pile of negative-yielding debt indicating growth will be slower in the future.
““The slowdown in global growth is broad based,” Malpass said Tuesday in a speech in Washington. Recent developments signal the 2019 world expansion will likely to fall short of the lender’s June projection of 2.6% in real terms, Malpass said.”
https://www.bloomberg.com/news/articles/2019-09-17/world-bank-chief-malpass-sees-steeper-global-growth-slowdown
“…extremely low interest rates may lead to slower growth by increasing market concentration. If this argument is correct, it implies that reducing interest rates further will not save the global economy from stagnation.
“The traditional view holds that when long-term rates fall, the net present value of future cash flows increases, making it more attractive for firms to invest in productivity-enhancing technologies. Low interest rates therefore have an expansionary effect on the economy through stronger productivity growth.
“But if low interest rates also have an opposite strategic effect, they reduce the incentive for firms to invest in boosting productivity. Moreover, as long-term real rates approach zero, this strategic contractionary effect dominates. So, in today’s low-interest-rate environment, a further decline in rates will most probably slow the economy by reducing productivity growth.”
https://www.fnlondon.com/articles/more-rate-cuts-wont-save-the-economy-in-fact-theyre-making-it-worse-20190918
A situation when inflation-adjusted interest rates are zero or below is just bizarre. Investment really doesn’t make sense, except to try to prevent losing value more quickly.
Yes but governments cannot operate with high interest rates because they are all carrying a high debt load. I guess the governments will be the investor of the future as they issue more debt.
As long as issuing more debt works. At some point, governments start collapsing, I fear.
“The traditional view holds that when long-term rates fall, the net present value of future cash flows increases, making it more attractive for firms to invest in productivity-enhancing technologies. Low interest rates therefore have an expansionary effect on the economy through stronger productivity growth.”
Except that with lower interest rates, nobody is willing to lend them the money for that investment. Instead, they move to riskier, but possibly higher yielding, places to put their money. Back to real Classical Economics: the source of investment is savings; the source of savings is thrift; lower interest rates discourage thrifty investment and so, in the longer term, contract the economy.
This tendency can be countered, for a time, by “free” debt; debt that everyone knows will covertly be repudiated. But at the end of the day the chickens come home. Or, as William Butler Yeats said: “At stroke of midnight God shall win”.
“After issuing more than 17 billion cedis ($3.1 billion) in bonds over the past two years to bail out banks and repay energy arrears, Ghana faces a new debt risk. Independent power producers dismissed a plan by Finance Minister Ken Ofori-Atta to renegotiate deals for surplus supply and said they will only accept a termination settlement of $2 billion.
“The West African nation has almost double the capacity to meet its peak demand of about 2,700 megawatts, a luxury that contributed to an additional 5.1 billion cedis, or 1.5% of gross domestic product, to Ghana’s liabilities this year alone.”
https://www.bloomberg.com/news/articles/2019-09-18/after-bank-bailout-ghana-power-deals-risk-new-debt-headache
“Nigeria has received a legal hiding after a UK court awarded a private company a $9.6 billion judgment debt against the West African nation. The ruling has generated significant attention in both domestic and international media. This is understandable given that the sum amounts to 20% of the country’s foreign reserves. This means it poses a significant threat to its economy…
“How did Nigeria end up in this costly situation? For the answer, we must look back to January 2010 and a gas supply contract that went horribly wrong.”
https://qz.com/africa/1710707/how-nigeria-got-hit-with-a-9-6-billion-judgment-debt-in-the-uk/
Brief and not necessarily unbiased summary:
A company called P&ID signed a contract with the Nigerian government to develop the latter’s gas industry. As part of the bargain, Nigeria would build gas pipelines and other transport facilities. They did nothing. P&ID likewise agreed to acquire land and build gas processing plants. They also did nothing.
P&ID therefore claims as damages the full amount of profit they estimated they would have acquired over the 20 years of the agreement, profit made from processing gas Nigeria could not supply to the processing facilities P&ID never built.
Why they won, I have no idea. Both parties were in breach of the contract, which, being a bear of little brain, I feel should have been reason enough for the Tribunal to declare the whole thing null and void and to tell both parties to suck it up and go away.
The contract further provided that arbitration, if needed, would be conducted in a venue agreed by both parties. P&ID named London. Nigeria did not agree, but the tribunal went ahead anyway. Any honest court would now rule that the actions of the tribunal were ultra vires, and overturn this judgement.
Sounds like a good analysis to me!
I tried to look up a little more about Ghana. Based on what the EIA has to say, the true availability of Ghana’s electricity is a lot lower than the high supposed capacity. Its generation is reported to be 42% from hydropower and 58% from oil and gas powered plants. The hydropower is subject to problems because of “low seasonal rainfall levels.” Obtaining natural gas has been a problem:
Burning oil to produce electricity is normally a stupid way of producing electricity because the cost of electricity produced in this way is too high to be used in manufacturing goods for export. Ghana may think the price is satisfactory, if the only use for its electricity is a few light bulbs and televisions for the people of the country. Even a few hot plates might work. These things make citizens happier, but they do not pay back debt used to produce this high-priced electricity. Somehow, the country has to really produce more goods for export, or use the electricity in a way that produces more than “feel good” impacts.
Your last paragraph means nothing to (or is ignored by) anyone operating the economic levers inside Ghana, only makes sense to those on the outside.
The important thing is to keep people happy around their TV sets, and to have electric light. No one wants to live in a hut with an animal fat candle.
Electric light makes a ‘modern society’ and politicians can point to it being so. And of course they will be believed–the flickering TV is proof of it. So they will get voted into office again and continue looting the country.
Until the country runs out of loot of course.
It’s not too much of a stretch of the imagination to scale up Ghana’s situation to the western industrialised world. The same things seem to apply.
Ghana, like nearby Nigeria where I grew up, has no rain for six months of the year, sporadic rain for two, and heavy rain for four. Which makes hydropower a really bad idea.
It is also tropical, which makes LNG a really bad idea also (the stuff boils unless kept very cold all the time, which itself takes massive amounts of energy).
We got along OK without electricity for a couple of years, using oil lamps and playing bridge instead of watching television. But of course the received wisdom was that every “emergent” backwater had to industrialise, at a great cost in debt and an even greater cost in human misery.
Thanks for the additional information.
Of course, it is not really possible to industrialize with very high cost electricity, which is what oil based electricity is, or renewables backed up with oil-based electricity is.
When people hear that hydroelectric works in Norway, Switzerland, and the US State of Washington, they assume that hydroelectric works everywhere. It is even quite variable in these locations. These locations are better because they have water from snowmelt to somewhat smooth things out. Even these locations do not have as smooth production of electricity by month as many would assume. This is a chart I made of hydroelectric generation for the State of Washington by month.
https://gailtheactuary.files.wordpress.com/2018/07/washington-state-hydroelectric-generation-by-month.png
One of the reasons why hydroelectric is viewed so favorably by many researchers is the belief that EROEI is extremely meaningful. EROEI for hydroelectric is often given as 100:1. But a source of electricity that is only available four or six months of the year is not very valuable. It really needs fossil fuel backup equal to the amount needed year around. And somehow, it is necessary to ask workers to be available year around. Otherwise, they will likely other jobs, and not be around when they are needed. No one will want to train for the intermittent fossil fuel jobs. Hydroelectric will have similar problems, because of its intermittency. So the system as a whole becomes very high-cost with double the infrastructure and workers.
Yes, and there are also additional longer term cycle forcing on top of that graph (~2.5x swing), e.g. (mini) ice age etc. That’s why historically (even pre fossil fuels) some regions with good hydro power available (low tech mechanization) prospered for some time and (shockingly) not at all in other centuries etc.. It’s not basis for base load techno civilization (on the order of leverage from burning coal) otherwise it would had been obviously applied in the past.
Big hydro (for power not mere irrigation known in Antiquity) came only afterwards and on the shoulders of the pre existing coal derived complex power system..
Good point. It need coal both for making the concrete for the dams and for power 24/7/365.
Come on Gail, that is a shallow analysis.
Of course the “free” energy stored in the dams will be used instead of burning fossil fuels. Ideally the dams should be almost empty when the snow melt or rainy season starts.
On top of that the hydro power stations are absolutely essential for stabilizing the grid since they are dispatchable power which responds to various loads on the grid almost instantaneously.
The energy behind the dams is not free. Somehow, a system needs to be put in place to pay for the dams. They don’t grow on trees!! The dams are made with fossil fuels, particularly coal and oil. They also need to employ trained workers. If there are to be enough trained workers, the schools to teach the trained workers need to stay open. There needs to be a whole system that “works.”
A hydroelectric system that works irregularly is especially at risk. For example, this is hydroelectric production in California on an annual basis.
https://gailtheactuary.files.wordpress.com/2018/08/california-annual-hydroelectric-production.png
Clearly, California would need to save up a lot of water from year to year, if it were to even out production. Evaporation would be a problem, if nothing else. Even the state of Washington has a problem with variability on a month to month basis. Wind energy has tended to be very abundant at precisely the time snowmelt is filling the dams to overflowing. The utilities in the State of Washington have had to figure out which to give priority to. They don’t have any real option of storing up the snowmelt for several months, to even out the pattern. The extra water would overflow the dams.
If there is nearby generation which can be ramped up and down (generally coal or natural gas), this can help provide the smooth 24/7/365 electricity generation pattern that industrial customers need. Residential customers can get some benefit from on-again-off-again supply. Televisions, for example, can run when the supply is on, as can electric light bulbs and recharging of cell phones. But industrial users have much more exacting requirements. The need a whole system that is on 24/7/365, and there needs to be be in place many other systems as well, such as paved roads. To pay for the system, customers need to be able to support an industrial system.
What happens is that highly variable supply (wind and solar, and hydroelectric in parts of the world that have rainy and dry seasons) doesn’t work well enough for industrial producers. There cannot be a way to pay for what is essentially half of a system: The system needs a coal or gas system balanced with it, and these require a whole lot infrastructure (pipelines or LNG terminals for the gas). What is needed is a full double system, if hydro or wind or solar is too variable. This high cost is what makes the use of this electricity for industrial use not feasible. Any products made with this high-cost electricity would be too expensive to sell on the world market. They would be too expensive relative to workers wages.
A recent McKinsey report analyzing the German electricity situation indicated that it was not working well at all. A big part of the problem was its very high cost. California’s costs also are very high, and it has a serious fire problem (from lack of maintained transmission lines). Venezuela depends heavily on long distance transmission of variable hydroelectric, and it too has had serious problems. Its loss of power seems to also be related to fires starting, where the grid upkeep has been neglected.
Once the investment have been done, as most dams in the west already were built in the early 19’th century the EROEI skyrockets towards the 100:1 range since minimal maintenance and additional infrastructure is required to keep them online, in comparison with say FF extraction and processing.
Most dams in Sweden, for example, isn’t built from concrete, but rather from naturally occurring materials, such as moraine, stone and gravel.
As far as California goes, it is important to evaluate the build up of the natgas/thermal baseload capacity on the grid before drawing too wide conclusions from the power output. The water level in the dams are more significant since it is a measurement of the energy available to be dispatched.
Do not compare thermal and intermittent power with the supreme ruler of power generation – dispatchable power. Dispatchable power can cover for a power shortfall within seconds. The guide vanes are directly coupled to the feedback signal from the grid frequency. Once the frequency drops (a large power outage or increased current draw). The guide vane blades immediately opens up for more water to flow through and thus sending the power to the generators. No other power generation can match this immediate availability. None actually even comes close to gravity fed systems.
https://youtu.be/fyLTjwAK8L8
Owning a hydro power station is an eternal gold mine.
https://image.slidesharecdn.com/diazbaiseitov-hydrospain-130916081223-phpapp01/95/hydro-energy-in-spain-7-638.jpg
I notice the slide you show says “The profit is made through the sale of energy and through the sale of renewable energy credits.” In fact, the renewable energy credits are emphasized. Sounds too good to be true!
The big thing I have learned about hydroelectric in Spain is how unreliable it is. BP shows the last four years of production to be as follows (in terawatt hours). I remember hearing from someone who lives in Spain what an issue this is, from a backup generation planning point of view.
2014 39.2
2015 28.1
2016 36.4
2017 18.8
2018 35.2
I am doubtful that hydroelectric dams in Sweden are purely earthen. This article is called What are hydroelectric dams made of?
The short answer: “These dams can be made of several different things but the primary building materials are: earth, concrete and steel.
There are certainly earthen dams in the United States, but the ones I have seen are not used for generating electricity. I cannot imagine one used for electricity generation that is made without steel and concrete, in addition to various forms of earth, in huge quantities.
Embankment dams are quite normal for hydro power plants all over the world. Concrete and steel is of course also used in limited amounts for various structures such as in the water ducts and other facilities where the machinery is located.
https://en.wikipedia.org/wiki/Embankment_dam
Hydro power plant owners are the main beneficiaries from the “green” scam, they can throttle their power plants however they wish on a second by second basis. They are the high frequency traders in the “renewable” energy industry.
It goes something like this: Sell off all your shitty coal or natgas thermal plants, then sprinkle the landscape with plenty of subsidized+helicopter money wind turbines to distort the market and grid, couple those together with a few proper hydro power stations you already own. Intermittent wind for making the newly offloaded thermal plants run in constant sub optimal operating region and then make the profits using dispatchable power to cover for the shortage and gluts as the wind subsides/increases with the thermal plants lagging from minutes to hours behind the sudden changes in demand.
When I look at these embankment dams, the part I see in the photos is still concrete and steel. It looks like it is a matter of proportion of earth, concrete and steel.
The Fed has lost control of the Repo rate? There’s a liquidity problem? The Fed will have to drop the rates to zero and restart QE?
https://www.zerohedge.com/markets/did-fed-fail-repo-rate-refuses-drop
“The Federal Reserve took action to calm money markets on Tuesday (Sept 17), injecting billions in cash to quell a surge in short-term rates that was pushing up its policy benchmark rate and threatening to drive up borrowing costs for companies and consumers.
“The US central bank also said it would do more Wednesday.
“While the spike wasn’t evidence of any sort of imminent financial crisis, it highlighted how the Fed was losing control over short-term lending, one of its key tools for implementing monetary policy. It also indicated Wall Street is struggling to absorb record sales of Treasury debt to fund a swelling US budget deficit.”
https://www.straitstimes.com/business/economy/new-york-fed-to-inject-us75-billion-to-control-us-interest-rates
“It was the NY Fed’s first such rescue operation in a decade, the last occurring in late 2008.
“”It’s unprecedented, at least in the post-crisis era,” said Mark Cabana, rates strategist at Bank of America Merrill Lynch.”
https://edition.cnn.com/2019/09/17/business/overnight-lending-rate-spike-ny-fed/index.html
“It seems like somebody needed a whole lot more cash than they had anticipated, and for some reason other banks were reluctant to lend it. Maybe that’s because the other banks really were short of cash. But it might also be because they knew who the counterparty was and they were afraid that even a 12-hour loan ran the risk of not getting paid back.
“It’s the kind of thing that happens during a banking crisis—which, as it happens, is the last time the Fed had to intervene in the repo market.”
https://www.motherjones.com/kevin-drum/2019/09/whats-wrong-with-the-repo-market/
This does look worrisome! More fund seem to be needed, regularly.
It failed again today… check out http://www.zerohedge.com
There are 2 articles. It does seem that banks do not trust each other now. This is not good news
I wonder which is the bank that has suddenly been deemed risky…
One thing of note: Friday of this week is supposed to be a particularly bad day for spiking interest rates.
Can governments handle high interest rates? It seems to me that the high debt load will crash governments.
This is a good article to read, because of the way it challenges our assumption. So Gail, if you want to write more about the (socialist) concept of a Green New Deal, you should read this article.
https://www.opendemocracy.net/en/oureconomy/degrowth-delusion/
Thanks this is very interesting material chiefly as far as mapping the agenda for the scene of possible factions forming among the new socialists (and other parties) who might get closer to levelers of power in major IC hubs before 2030. Any explicit overlap towards OFW/Surplus issues is also there although on very shallow and contextually different ground, but tangential links are discussed or hinted..
Yes, central planning for the win. What could possibly go wrong trying to break the government corporate complex and replace it with GND. Instead just wait for peak prosperity and then smile all the way down to serfdom and misery, it’s implicitly what you want and it’s what you will get. But GND must be oh so tempting for the government drones and other wastrels soon to be irrelevant.
For the reasonable and few remaining productive; just say no thanks to more centralized wickedness and go fully distributed and direct democracy. It’s enough to flush down the self-serving nomenclature together with their enablers in the mass production corporatist complex and their propaganda megaphones in MSM to reduce the resource depletion rate and pollution.
JUST SEND EM HOME!
Some good quotes:
I would strongly disagree with, “that degrowth is not necessary to solve ecological challenges and is a distraction from them.” We humans do not have the ability to solve the ecological challenges, with or without the ideas of degrowth. It promotes the idea that high-cost resources can substitute for low-cost resources. Unfortunately, it doesn’t work this way. The laws of physics set market prices. Distorting these prices doesn’t fix anything. High-cost resources make citizens poor!
” …however poor in the world we may be, we are nevertheless rich in spirit.”
While reading that, I was listening to Soave sia il Vento, from Cosi fan Tutte. The man who wrote that music was buried in a pauper’s grave. But name any ten bankers put together who have enriched us as much as Wolfgang Amadeus Mozart.
Yes, I am comfortably well off, after twenty years of thrift. But my greatest treasures are still my children and grandchildren; and after that, my library. Ars longa, vita brevis.
peak oil is for 2022 says norwegian DNV-GL
https://storage.googleapis.com/prd-blogs/2019/09/DNV-GL-peak-oil-2022.jpg
https://en.wikipedia.org/wiki/DNV_GL
Except with financial problems, the decline is a whole lot steeper. Peak oil people imagine an endless rise in oil prices.
I think so. I shared mostly because I was surprised to find a peak oil forecast
Art Berman is saying he sources are saying the attack was an inside job.
https://twitter.com/aeberman12/status/1173947179330887680?s=20&fbclid=IwAR0MwHogcUuipwSF5iEt-vpHerm0XS5QyHMj0bWJT7IDv4WfqZfFEoJCUpM
The hits on the oil tanks were way too precise. They struck me as awfully precise, too, to be done from any distance.
The “insiders” only needs to paint a big goddamn arrow only visible in IR on the pressure vessel. Above the arrow, write: “MAMA IM COMING HOME”.
https://youtu.be/K0siYUjV9UM
If a drone had a camera fitted on to it transmitting back, couldn’t the controller be very precise?
Saudi Arabia has a Houthi population and a Shia population that are suppressed by the Sunni tribes.
There are 1800 tribes fighting for power in Saudi Arabia. The attacks came after the Saudi king put one of his sons to head Aramco.
These kinds of things are worthwhile to know.
We in the United States have little idea of how the Middle Eastern countries really operate.
I read about the new appointment of a second person to be involved with Aramco in the last few days.
I am grateful again to Gail Tverberg to provide interesting data, and as usual I would also refer to Steve Keen for more discussion of the incredible debt bubble in “anglo american” culture countries since 1980.
As the to big picture my current best guess is that since 1980 “western” government have been keeping the real economy *deliberately* in a state of semi-recession, in part to keep down worker wages, in part to keep down commodity prices.
Government economic policy is about spending/taxing (“fiscal”) or debt (“monetary”) and since 1980 most “anglo american” governments have had a recessionary fiscal policy and an expansionary monetary policy, but only for debt “secured” with assets, with the effect that the real economy has been kept in a nearly permanent state of semi-recession, and the financial economy in a nearly permanent state of boom. The result has been falling wages and commodity prices, and rapidly rising asset prices and financial corporate profits. This has generally been summarized as wages and commodity prices being “inflationary” (as many people benefit from them) but asset prices and financial profits not being “inflationary” (as few people benefit from them).
I suspect that it all goes back to the oil shock of the 1970s and the dire unpopularity of Jimmy Carter’s *explicit* arguments and plans for *planned* reductions in energy growth rates: the governing elites decided then to achieve the same indirectly, with a fiscal squeeze, and to compensate only themselves with a long debt and asset prices and financial profits boom.
Looked at it another way, the “anglo american” elites have decided to asset strip their own countries, having classified large parts of those countries as “dogs” or “cash cows” by following the Bain Consulting Group “matrix”.
That is an interesting viewpoint. I haven’t heard it before.
it is no longer common, but that used to be the “orthodoxy” in the 1970s-1980s among political economists, the reasoning was explicit:
* In the short-medium term commodity production is fixed.
* Therefore at full capacity every increase in demand simply increases the price of commodities, transferring income from consumers to producers, and blowing up the trade deficit.
* The only way to avoid that is to keep demand below that fixed capacity.
* To limit the demand for oil the Carter way, explicitly by planning, is very unpopular.
* To limit the demand for oil, which goes into everything that is produced, then the only way is to limit the demand for everything.
* To limit the demand for everything means limiting the incomes and thus the living standards of most people, via a permanent semi-recession (“austerity”) disguised as “anti inflationary policy”.
Note: you point the side effect that keeping the demand for commodities below the current capacity is never going to stimulate and finance increases in that capacity, but that may be a good thing is that capacity is impossible or very expensive to increase (e.g. “peak oil”).
The difference with the original version is that the ruling elites did not enjoy their own incomes being limited, felt that themselves and their supporters were a minority so their demand for commodities was small, and thus awarded themselves enormous capital gains and rents via massive asset price and rent inflation fueled by a gigantic debt bubble. For example private jet planes and 100m long yachtes consume a lot of oil, but there are so few of them that their impact on oil price is small.
I have come to suspect that “carbon footprint” (that is, “global warming”) are in large part propaganda ruses to get most people to *voluntarily* limit their demand for commodities, so keeping their price low, and so perhaps is the “meatless burger” idea.
I think global warming is a “kill two birds with one stone” idea. We know that there is a lot of fossil fuels in the ground. We have two options:
1. If energy prices don’t rise very high, then most of them stay in the ground. People need to voluntarily cut back on their carbon footprint, to remain within what is available.
2. If energy prices do rise very high, then most of the fossil fuels can be extracted. If this happens, global warming of several degrees that models predict might be right. To prevent such a rise in temperature, people need to voluntarily cut back on their carbon footprint.
By the way, thanks for your comments on the political orthodoxy during the 1970s and 1980s. I wasn’t involved with this back then, so missed out on what was being said. I noticed that the International Energy Agency published forecasts that included both peak oil (Using Jean Laherrere estimates) and climate change issues, up until 1998. Then they dropped the peak oil issues, at the time that peak oil became uncomfortably close.
«the political orthodoxy during the 1970s and 1980s. I wasn’t involved with this back then, so missed out on what was being said.»
BTW that economic orthodoxy was the (sensible) motivation for very high levels of taxes on oil in european countries: those high taxes reduce a lot the demand for imported oil, and thus its price. If they were not applied, oil prices would rise and then the much of that money would go abroad as revenue for a foreign government, instead of the local government.
Nowadays that instead is justified with “carbon footprint”.
«I noticed that the International Energy Agency published forecasts that included both peak oil (Using Jean Laherrere estimates) and climate change issues, up until 1998.»
Fascinating discussion of Bubbert peak or not starting on page 95.
«Then they dropped the peak oil issues, at the time that peak oil became uncomfortably close.»
Note the first time: in 2011 the Bank of England published some scary statistics about how many UK mortgages were technically unrecoverable but had been frozen (“forbearance”), that created some worries, and they stopped; several other cases (mostly in the USA though).
The forecast added fresh ten year periods. Peak oil was getting alarmingly close. Also, the USGS came out with new oil resource numbers in 2000. These helped justify higher future extraction.
Which is perfectly useless because China and India happened. Try asking a the 2.7 billion inhabitants of those two countries to “cut back” on their newly found prosperity. It ain’t gonna happen.
Thus the oil will eventually become expensive as depletion progresses and demand will ultimately slump. No matter what, the humanoid wastrel “worker” drones will go the way of the dodo. However, the (few) elites will continue to reap the benefits from an almost completely automated production system of goods and services energized by the last remaining pockets of FF’s.
«Which is perfectly useless because China and India happened.»
But I think the opposite, that’s the point: arguably in the 1970s the oil price rose a lot because new demand from the expanding japanese economy pushed global demand above what was then the production capacity, and there was a massive transfer of wealth from “first-world” countries to oil producers.
Now that it is the chinese economy that is expanding, the “first-world” countries seem determined to accommodate the expansion of chinese demand for oil by cutting their own, also for example by offshoring whatever they can to China.
Also China is less of a problem (in some waysa) than Japan because it has been using mostly its own coal (making a mockery of “carbon footprint”) rather than imported oil, and the chinese government is very keen to reduce oil imports to avoid pushing demand above the current level of fixed capacity.
The developed world pretty much made it clear that it was turning production over to the Chinese and Indians. Go ahead and use as much coal as you like. We won’t tax these goods. We will tax similar goods made in our own country.
The offset from the first-world countries is in the single digit margin of error. The real growth in consumption is the Chinese and Indian domestic markets.
Well, at least for a little while longer, until adding more debt starts to generate an immediate inflationary situation as FW resource depletion issues incapacitates the silver bullet of printing.
Then the road to serfdom ensues.
http://sqapo.com/TheRoadToSerfdom.png
Do you have a reference to where Steve Keen is making this assessment?
Two of the main articles on the debt bubble by Steve Keen:
http://theconversation.com/i-predicted-the-last-financial-crisis-now-soaring-global-debt-levels-pose-risk-of-another-84136
https://neweconomics.opendemocracy.net/the-ten-graphs-which-show-how-britain-became-a-wholly-owned-subsiduary-of-the-city-of-london-and-what-we-can-do-about-it/
Thanks for the links! I don’t agree with everything, but the charts are good.
In particular, Steve Keen says in the second article:
You either need a rising cheap energy supply, or a rising supply of ever-cheaper debt. Without cheap energy, I don’t think you can go back.
This article about Keynes is interesting in the context discussed above.
«In Keynes’ view, it was sufficient for government intervention to be limited to the macroeconomy–that is, to use monetary and fiscal policy to maintain total spending (effective demand), which would both sustain growth and eliminate political pressure for radical actions to reduce unemployment. “It is not the ownership of the instruments of production which is important for the State to assume,” Keynes wrote. “If the State is able to determine the aggregate amount of resources devoted to augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary.
https://evonomics.com/keynes-was-really-a-conservative/
Well looks like trump inc doesn’t want war just yet. Thank god! There is no way a war with Iran would be contained. Iran comes out long and strong out of this. They can hit Saudi any time they want. Those holes on the tanks… Each in exactly the same place on the tank. Demonstration of precision munitions. Iran wont be like Iraq. The spice flow will end. Unthinkable!
All out war in the Middle East really would send oil prices into the stratosphere (until the price spike inevitably started puncturing debt bubbles left, right and centre) – and Trump does not want the cost of living rocketing upwards for US consumers with his re-election bid pending.
And for all that his negotiating style is bellicose, he does not seem to have much stomach for real military conflicts. You may recall that he was all set to order a strike on Iran in January after they shot down a US spy drone but had a last minute change of heart because he didn’t like the idea of 150 dead people and felt it was disproportionate.
My feeling is that Trump will do everything he can to avoid war.
Right–he did the same thing with North Korea. People are onto him.
The report now seems to be that Saudi production could be restored in weeks. This is what led to today’s big price drop. WTI price is now about $60.
If the problem is machines that can be repaired and the world needs lower prices due to the huge debts then the quick lower prices are logical. If somebody is poor, he or she simply delays purchases. And this dynamics will finally make the zero interest rates (which means that the banks charge other fees they make profit from) not functioning. The process of the demise of the human species goes on.
I would suggest munitions with pattern recognition: not that hard to do. Put the intelligence in the missiles, not in the generals, and certainly not in the Pentagon!
And one thing in Trump’s favour: he may be a loud mouth, but he evidently prefers “jaw jaw” to “war war”. Good for him. Now, Donald, do us all a favour and scrap the F35.
Indeed, drone wizardry with various cameras are cheap an’ easy today.
IR sensors 65×65 pixels res including lenses at $35 a pop.
CMOS cameras 5mpix 100fps wide angle lenses with NIR capability at too cheap to bother.
Short range radar arrays at less than $100
FPGA/MCU at close to for free
IMU IC’s; and why not put in ten of them to average out any tolerance and mfg issues.
GPS/GLONASS/Galileo modules, well, also ridiculously cheap
PCB’s milled out of prototype boards using $1000 Chinese CNC’s
3D metal print the engine parts, cheap ass Chinese CNC machined for finer tolerance details.
Why not throw in a Saudi 3G/4G module to stream the whole escapade on YT or Twitch. I’d watch.
Pattern recognition, control systems, AHRS and navigation software readily available and downloadable from the internet.
Assemble it all inside a home built or Chinese hobbyist airframe powered by micro jet turbines or rockets, just send it, then call it a day.
https://youtu.be/zWvYe37r44c
JUST SEND IT.
https://youtu.be/mzOUgwsQ_hM
Trump said China would never be allowed to use artificial islands for a naval/military base.
He also drew a red line saying NK would never be allowed to be a nuclear power. Then he said Iran was responsible for the drone attacks on the Saudi’s oil facilities and he was locked and loaded.
China has their military base on artificial islands. NK is a nuclear power. No military action against Iran so far. Hmm, anyone see a pattern?
Do I see a pattern? Perhaps; perhaps not: you be the judge. I see Trump’s belligerent comments as created to appease the warmongers in his administration, and his inaction as a response to the sane military advisors who tell him that the US no longer has the weapons, the competence, or the prestige to wage a major war.
The US “hyperpower” fantasy is disintegrating under their feet. I believe Trump knows this, and is doing as much damage control as his limited discretion allows.
Let me quote Sun Tzu:
http://img.picturequotes.com/2/2/1390/all-war-is-deception-quote-1.jpg
https://i2.wp.com/www.spongecoach.com/wp-content/uploads/2019/02/JPEG-image-58DCDC3B8D75-1-2.jpeg
😉
I certainly hope Trump is scared of a war with Iran. I know I am. Iraq was a diferent era. Saddam made big big mistakes. I would assume that Iran has studied the US wars and capabilities in the region. There proxy certainly did b4 the 1996 lebanon conflict. Now at least some technical expertise is demonstrated. The results of Us intervention in iraq and libya are clear. Failed states and extremism. And thats when usa “won”. I hope trump is smart enough to see this. His not taking the obama deal with Iran was stupid. I believe it was because he just wanted to tear down all that obama did. If we couldnt establish working USA friendly regimes in Iraq and libya how on earh could we in Iran? I ran has certainly figured out some game plans and teched up. Straight gets closed. Saudi infrastructure gets demolished. Both Iran and saudi stop oil production at the same time. No wonder media is treating this like a non event. No wonder saudi is not to retaliate.Yes the USA could carpet bomb Iran. Would this demonstrate we are a trusted world power? What would this demonstrate? The sad part is lack of options. It would be nice to have some graceful options. Blowing up the world not very graceful. Getting choked out by a clever opponent not very graceful. Blundering about using force because your image of yourself is a tough guy not very graceful. Really not responding is the most graceful action. Trump shows class in this path if that is his motive even if his lack of skill has removed the more graceful less humiliating options. He says he doesnt want war. He fired Bolton. The last two presidents both started wars. If Trump doesnt start a war thats improvement. Even as flawed as trump is he is less scary than self righteous social justice war monger. Ive never seen such hate and intolerance as i am witnessing from the left. They are insane. Whipped into a frothing mouth fury from the propaganda. Their ideas are no more crazy than the rights. Their attitude is truly frightening. i wouldnt want them fixing a slurpee machine let alone in control of the USA military. Thats when the fireworks start. When a leftist sanctimonious war monger extremist gets elected. Inspector klusko trump will probably stumble through.
“Do I see a pattern? Perhaps; perhaps not: you be the judge.”
Pattern; All bark and no bite.
“Do I see a pattern? Perhaps; perhaps not: you be the judge.”
Pattern: All bark and no bite. That pattern loses credibility really fast.
I’m not advocating war, because I’m anti-war. Just saying if a President wants to keep credibility, vacuous bluffing is not be a good strategy on the international stage.
If you can work all this out, I’m sure Trump’s adversaries in Iran, China and elsewhere can, in which case everything is going to be hunky dory and we have no reason to fear a major US-led war like the aggressions launched by G.W. Bush and B. Obama.
Perhaps this POTUS is not overly concerned about credibility on the international stage and is content to leave such vanities to the likes of Elton John and Mick Jagger. As long as his vacuous bluffing helps keep America Great, he can sleep easy while deranged Democrats pace the floor at night doing passable impersonations of Inspector Dreyfus.
https://youtu.be/LEcsgbwBFRs
Chrome Mags, agreed 100%. That’s why I mentioned Trump’s “limited discretion”. I think he would like to move towards a general peace, but he can’t. He tried it with North Korea, and Pompeo promptly torpedoed him. He tried it with Iran, and John Bolton threw a hissy fit.
But he cannot confront the warmongers directly, because behind them stands AIPAC, and behind AIPAC stands Mossad. As John F Kennedy discovered in Dealey Plaza. They are the eminence grise, the power behind the throne.
Shaped charges to cut through the skin of the pressure vessel, image recognition SW for path/position calibration/planning before the mayhem starts, celestial navigation for global positioning the drone/rocket and MEMS IMU + AHRS dead reckoning for the final approach since cameras are no longer viable when the fireworks starts as the first rocket hits. Not a single radio TX/RX needed for this operation. Basically any tech savvy engineer could make it happen.
Boy, talk about BS Pretzel Logic!
Pleaaasssseeee….😜
Duke Energy to accelerate coal-plant closings, target ‘net zero’ carbon emissions by 2050
John Downey
American City Business Journals•September 17, 2019
Partly as the result of a review of carbon-reduction targets announced by the state earlier this year, Duke Energy Corp. has established more ambitious goals to reduce carbon emissions from its electric power operations
The 2050 targets in Duke’s new effort to address issues surrounding climate change match some of the most aggressive carbon-reduction plans in the industry. That will require Duke to speed up the closure of its remaining coal plants, says Diane Denton, vice president for state energy policy.
“Duke … recognizes that reducing carbon dioxide emissions is a critical part of addressing the global challenge of climate change,” she says. “And we believe that reducing risks associated with a changing climate, including greenhouse gas emissions and hardening the system against more extreme weather, is good for our customers and good for our business
Duke’s new internal goals still come with caveats. For instance, the company talks about “net zero” carbon emissions by 2050 rather than saying no carbon emissions by 2050. That leaves open the possibility that the company will use offsets — possibly including the purchase of renewable energy credits or other mechanisms — to account for some carbon emissions that may remain from the use of natural gas plants.
Oh, some creative accounting will make it net zero! Have a Coke!
https://m.youtube.com/watch?v=ZbuUovLQxn4
Gail has stated the grid is likely to be the first infrastructure to go down…
The Fast Eddie Challenge…
HONDURAS-BLACKOUT/
TEGUCIGALPA, Honduras (AP) — A failure in Central America’s electrical grid left millions of people without power for hours in at least four countries Monday.
Honduras was the country hardest hit, with the entirety of its territory and its more than 9 million inhabitants affected. Traffic snarled as more than 600 stoplights went dark in the capital, Tegacigalpa.
Leonardo Deras of Honduras’ state electric company said at a news conference that the problem arose from an overload at a substation on the Caribbean coast
https://news.yahoo.com/blackout-hits-4-nations-central-223353218.html
Power began to be restored in the afternoon. Honduras’ government said the process would take three or four hours.
El Salvador and Guatemala also had partial outages.
The four nations plus Costa Rica and Panama have shared a linked electrical network since the late 1980s.
It seems like electricity goes out easily. It can be difficult to restore. It seems like it is the most difficult form of electricity to maintain.
Sounds like a problem that could have been solved by a few hundred people directing traffic…
What is very interesting is the rather muted (in my opinion) reaction to the attack on Saudi oil fields. The press is very quick to talk about the ‘massive’ jump to $67/barrel, but inflation adjusted, $67 oil is what we had back in the early-to-mid 2000’s. So what does this say? That with a larger global population than in 2000-2005 (by ~1.5B people) supply of oil has massively outstripped demand? Or that 15-20 years of economic growth were a mirage?
The only substantial growth is in consumption. Which is a pretty lousy measure of real economic and societal development.
Now with Ghawar drying up, well, the end of consumerism is approaching. Are we ready for less stuff we don’t need, bought with money we no longer have, to impress people we don’t like.
I wonder what the wastrels will busy themselves with as prosperity goes down the tubes?
It’s early days, of course, and there are still so many unknowns, but I was also expecting a more stratospheric spike in the first instance, given that this was an unprecedented but worryingly repeatable attack on the most important oil refinery on the planet, and which knocked 5% of global supply off-line in one fell swoop.
We briefly had Brent as high as $86 p/b on Iranian sanctions at the start of October 2018.
It does feel like the gravitational pull of Gail’s affordability limits are going to keep sucking prices down, ultimately.
I see that WTI is at about $60 now. Brent seems to be at $64. Not really heading for the stratosphere! Down from yesterday.
The last 30 years of “growth” were nothing more than a debt powered hallucination.
Since 1980, the economy has pretty much been powered by growing debt. Coal from China helped too, but growing debt was very important.
The issue is not any of the things you suggest.
Oil companies and oil exporting economies today are not receiving nearly enough money for their products. If this keeps up, they will go out of business. Or they will get involved in wars, to try to eliminate some of the competition. We have imagined that prices go up because of “scarcity.” In fact, they go up because of more “demand,” when the economy is growing rapidly.
Growth in the economy can come in two ways:
1. From greater productivity, as human labor is leveraged with more and more devices (broadly defined) made with cheap to produce energy. For example, electricity transmission lines and paved roads greatly help an economy become more productive. So do trucks, and machines used in factories.
2. From greater debt (at ever lower interest rates) pulling the economy along. This debt can be used to hire workers or to make more devices that could, in theory, leverage the labor of worker. Or it can be used to hand out benefits to retired and unemployed people, so that they too, can afford the output of the economy.
Neither of these ways is really sustainable, because the (1) the cheap energy becomes more expensive to extract and (2) the interest rate on the debt eventually falls so low that it cannot go any lower. We seem to be reaching the second of these limits now.
Gail,
I’ve been following you for quite a while now. I believe I have a pretty firm grasp on your ideas about the networked economy and energy. I can’t find any hole in your reasoning (though not being a person of faith, I don’t share your hope for any sort of divine intervention).
I made the typical survivalist mistake of thinking the world was going to end the day after I learned about peak oil, and ended up looking pretty silly ( my Mormon canned food is now 9 years old, and it looks like I should have been more proactive in building my business). I understand how shale oil and monetary easing staved off disaster for the last decade, and that it can’t go on forever. Despite this, BAU lumbers along. Although your ideas point to a relatively fast collapse, I’m wondering if you would indulge us with any thoughts you have about a slow collapse, and particularly what might be prudent steps for a household to take financially? You always seem to have a unique way of looking at problems. Thanks.
Here are a few ideas:
1. With respect to funds you have available to invest/put in bank accounts, diversify to the extent possible. Have accounts in more than one bank, so if a weekly limit on withdrawals is imposed, or one bank has derivative problems, the other bank account will work, for example. Diversify non-bank investments, to include at least a little precious metals. If you are old enough, an insurance company annuity might work for part of your funds. Even a Swiss bank account might work in this diversification. This way, if there are bailouts in one sector but not another, you are better covered. Or if one segment does better, it helps also.
2. Keep some spare cash around the house, under the mattress or wherever. (I see that fake Campbell’s soup cans are for sale.) Even if bank withdrawals are not available, cash will likely have some value. Probably not too high denominations, though. If there is deflation, the value of the cash will rise.
3. Don’t depend on just one form of income, such as Social Security, or one person’s job. From the point of weathering crises, it is best to be able to work with family members. Or if a person is depending on Social Security, have a part time job as well. Strengthen ties with adults children, if you are older.
4. Regarding debt, I am not sure what to say. Running up a lot of credit card debt, buying stuff that you really don’t need, is a bad idea, regardless of how the economy is operating. I generally don’t suggest that a person make a huge effort to get out of debt, because once a person has a lot of debt, there is generally not a lot a person really can do. I doubt that there will be a huge number of foreclosures on home and farm loans if there are a lot of layoffs and similar problems, but I could be wrong on this. There very well could be. If payments are not made on auto loans or leases, it is very possible that vehicles will be repossessed. But after a certain point, there will no point in repossessing any more vehicles. If there is no job to go to, the need for vehicles will go way down.
5. Think about what went wrong in the 2008-2009 crisis in your area and at least try to work around those issues, to the extent you can.
Thank you!
“Between 2007 and 2012 the [US] government’s publicly held debt doubled as a share of the economy. That was partly due to the Great Recession, but even since then the debt has continued to mount.
“It now stands at its highest level since the Truman administration and is on course to eclipse the size of the entire economy in about a decade. At some point investors will abandon Treasury notes or demand much higher returns.”
https://thehill.com/opinion/finance/461477-tom-price-the-fiscal-crisis-at-hand
“Year-over-year freight volume is down nine consecutive months starting December of 2018. The Cass Freight Index report cites “More Signs of Contraction”
“…weakness in demand is being seen across most modes of transportation, both domestically and internationally, with many experiencing increases in the rates of decline.”
https://www.fxstreet.com/analysis/cass-freight-index-down-9th-month-signaling-economic-contraction-201909160104
“Parts of Wall Street’s debt securitisation engine are back running at levels not seen since the pre-financial crisis boom.
“Data group Dealogic’s indices of US securitisation activity show that issuance of collateralised debt obligations — structured products made up of bundles of bonds and loans — rose above its pre-crisis peak late last year and is currently back close to those levels this year.”
https://www.ft.com/content/482f7ba6-d884-11e9-8f9b-77216ebe1f17
The Cass Fright also has some non-US findings:
Ouch!
The Hill article is one written by Tom Price. It is a popular opinion, but the system really needs rising debt to function. Of course, the promises will not really be repaid. Somehow, something that cannot grow anymore will come to an end.
“Shares in African diamond miner Petra Diamonds hit an all-time low on Monday after reporting a net loss of $258.1 million for the year ending in June, compared to a $203.1 million-loss in 2018, amid challenging market conditions.
“The company, which has mines in South Africa and Tanzania, said the loss reflected an impairment charge of $246.6 million triggered by lower diamond price assumptions.
“Richard Duffy, who has been at Petra’s helm since April, said the diamond market was in its worst state since the financial crisis in 2008…”
https://www.mining.com/petra-diamonds-shares-hit-all-time-low-as-loss-widens/
All materials seem to move together. Energy prices have been generally moving down (before the attack in Saudi Arabia). Diamonds are feeling the same downdrafts. If the world economy is growing more slowly, there is less need for diamonds in industrial uses. If young people are poorer, buying diamond engagement rings goes out of style. I understand styles have already changed.
Diamonds are not really a commodity that can be freely bought and sold, like gold is, and so make a terrible “investment.” Due to the difficulty of detecting flaws etc., diamond merchants won’t do business with anybody they don’t absolutely trust, which means you can’t resell your second-hand diamonds and get anything like what they’re theoretically worth.
I recall that historically the De Beers cartel held a monopoly and fixed prices accordingly. They were fined US$295 million class-action settlement for that in 2008 and now “market supply and demand dynamics, not the De Beers monopoly, drive diamond prices.”
https://www.kitco.com/ind/Zimnisky/2013-06-06-A-Diamond-Market-No-Longer-Controlled-By-De-Beers.html
The main barrier to selling your old diamonds is not De Beers, but the fact that the predominantly Orthodox Jewish (in the USA, in India it would be Jain) merchants who dominate the industry will trust each other, but not you. Michael Roach (a New Yorker who became a Tibetan lama, and went kind of crazy) wrote an interesting book about his experiences in diamond industry, which he did manage to break into.
++++++++++
Synthetic diamonds are superior, conflict free and manufactured to specifications and not arbitrarily by the random processes of nature.
https://youtu.be/s1h4gze_ktk
So naturally there is some feeling that artificial diamonds are not as good as regular diamonds (and so have to be specially labeled). Which is no more irrational than any other aspect of the valuation of diamonds.
We are talking about transparent and an incredibly hard crystal of goddamn COAL!!! Yes, it consists of the same atoms that we burn to form the molecule CO2 + electricity in power plants.
What a marketing scam.
You mean, when we run out of coal we can produce energy by burning diamonds? You may have just saved industrial civilisation! But I hope de Beers have installed good defences against drones.
de Beers diamonds will hopefully end up as drill bits as we scavenge earth for the final barrels of cheap oil. With the majority of gold gone into industrial processes, it is only natural if diamonds follow course.
Kowalainen, for a really good show about diamond drill bits, mounted on the front of a machine designed to visit the centre of the Earth (!) check out “Journey to the Centre of Toronto”, Murdoch Mysteries season 7 episode 11.
The financial markets hit the panic button on the Saudi attacks. The black swan event?
https://pbs.twimg.com/media/EEnPjvlXYAYoQyy?format=png&name=900×900
I think that this is related to the spiking repo rate that CTG wrote about in a little bit earlier comment. The New York Federal Reserve has added $53 billion dollars into the banking systems via repurchase agreements after the benchmark fed-funds rate moved outside its target range.
When it rains, it pours and flood
https://www.zerohedge.com/markets/something-just-snapped-chaos-hits-repo-market-dollar-funding-storm-makes-thunderous
This is not easy to understand. Basically, as I understand it, there is a lack of liquidity in the banking system right now. One sign of this is the lack of liquidity is today’s spike in the Overnight Repo Rate.
https://www.zerohedge.com/markets/something-just-snapped-chaos-hits-repo-market-dollar-funding-storm-makes-thunderous
This lack of liquidity is expected to get worse in the next few months. The only cure would be to resume quantitative easing. Except that that the new QE would send the stock market soaring again, until it comes crashing down.
I don’t understand how this would fit in with all of the other things happening, like the many derivatives that have been sold. If they don’t work right, there could easily be defaults.
If you read carefully the last paragraph, there were only a few banks that has liquidity issue. That is why it spiked. The public does not know which bank but certainly the insiders know
It looks like the Federal Government has stepped in. According to the WSJ:
Fed Steps Into Repo Market to Control Soaring Rates
New York Fed adds $53 billion into the banking systems via repurchase agreements after the benchmark fed-funds rate moved outside its target range
https://oilprice.com/
I suppose everyone has seen the $8+ oil price increase this AM in response to oil infrastructure drone attack on Saudi’s?
OIL (BRENT) PRICE COMMODITY
68.02 USD 7.77 +(12.90%)
Yep, about 8.
We will see if it can be spun to a lower price tomorrow.
Inquiring minds will be watching——-
It probably will gradually drop back down as it already has some today. It is now a race between drone damage frequency and extent of damage vs. how fast repairs can be made, with the knock on effect of oil price fluctuation. But too much damage for too long and oil price will stress an already slowing global economy.
Another crack in the floor, as Macron pivoted to Russia a week or so ago, at the same time his state msm channel France24(EN) ran two ~20min exclusive segments (HK+CAN angle) on the story. Folks, that’s not coincidence, they mean it, so the fragmentation of the legacy unilateral world order continues..
Obviously, it’s very very late to jump the ship, but extra few years of larger% share of global energy traded in EUR would help prop up the Europeans slightly. Perhaps they also got boost in acting more boldly when China announced ~.5T investments into Iran energy sector & infrastructure making the US sanction regime a joke, hoping to get some scraps from the table (deals) there and elsewhere as well.
So, there will be either a war soon in the region or more likely (giving the domestic situation of approaching election) just another loss and egg on the face.
oops the Snowden story..
“China has also been closing coal mines in response to low prices.” Could it also be due to the requirements of the Int. Emmissions Comp. Committee and cost to include systems and devices for the reduction of polutants that was causing health issues in the area.
Statements:
“First, increasing debt can be used to build factories (etc).”
Second, increasing debt levels by governments are often used to hire workers or to raise benefits for the unemployed or the elderly (etc).”
Third, consumers can afford to buy more of the output of the economy, if their debt levels are increased (etc).”
These three concusions appear to indicate that the global economy is in a never ending downward spiral. Goverment leaders appear to apease voters with promises they are unable to fulfill without upsetting them, and meeting their demand without increasing taxes or incurring debt to pay benefits as promised. A prime example is currently being played out in France. Rail workers are upset over a hike in the retirement age from 59+. Promisses made at a time when the average person died around 60-65. Averaging 10 years of payout. Now folks are living into their 80s. And revenues/expenses have not increased taking GDP etc into account.
You are right about the never-ending promises. When something isn’t working out, new promises are added to the previous promises. For example, a number of pension plans have been having trouble making payouts. This was fixed by offering the pension plans loans with which to make current payouts. This kicks the problem down the road a bit. In the future, the pension plans will still have as much (more, probably) to pay out to retirees, plus it will have its government loan to repay.
Similarly, I understand that Greece’s debt problems have been “solved” buy simply giving it larger loans, so that if the new loan can be repaid, it will repay the old loans plus interest.
I am not sure what group you are talking about when you say, “Int. Emmissions Comp. Committee.” China certainly has had a huge problem with particulate emissions. I looked up to see what I could find out about China’s air pollution problem. I found an January 2019 article in Science Daily called, China’s war on particulate air pollution is causing more severe ozone pollution.
So you are right about China starting a war on particulate air pollution about 2013. They are replacing it with a different kind of air pollution–ozone pollution similar to what Los Angeles has been fighting.
The thing about energy production however, is, that it doesn’t matter whether the cutback in coal production was intentional or caused by factors outside the economy’s control. The result is the same for the economy. It is extremely negative, either way. When the cutback in coal production was made, a huge number of unprofitable coal plants closed and workers laid off work. All of the laid off workers were a particular problem. I find it hard to believe that China would undertake such a plan without thinking through the headaches it would create. China has imported coal to try to at least partly make up for the shortfall.
My bad. That should be:
The International Network for Environmental Compliance and Enforcement (INECE)
I am afraid I still don’t know too much. I looked up a Fact Sheet on the International Network for Environmental Compliance and Enforcement. The organization was founded in 1989. It is an informal network of government and non-government enforcement and compliance practitioners. The funding for the organization comes from:
If, in the future, countries and world organizations are not doing well financially, this seems like the kind of organization that could expect to lose funding.
Very true, on the whole there were just a few years of retirement to pay for in the comparatively recent past: in a memoir about village life in England, c 1920’s, the author says (in 1976) that they were so used to men dying in their late 50’s or early 60’s that they didn’t think of it as ‘untimely’ at all, as we would today – that was your lot. Women lasted longer – no doubt when relieved of their husbands……
Exactly, when Germany setup a safety net for “old folks”, the Chancellor was given the age of @65. He was told most would be buried by that age and the payouts would me minimum.
Germany became the first nation in the world to adopt an old-age social insurance program in 1889, designed by Germany’s Chancellor, Otto von Bismarck. The idea was first put forward, at Bismarck’s behest, in 1881 by Germany’s Emperor, William the First, in a ground-breaking letter to the German Parliament. William wrote: “. . .those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.”
One persistent myth about the German program is that it adopted age 65 as the standard retirement age because that was Bismarck’s age. This myth is important because Germany was one of the models America looked to in designing its own Social Security plan; and the myth is that America adopted age 65 as the age for retirement benefits because this was the age adopted by Germany when they created their program. In fact, Germany initially set age 70 as the retirement age (and Bismarck himself was 74 at the time) and it was not until 27 years later (in 1916) that the age was lowered to 65. By that time, Bismarck had been dead for 18 years
https://www.ssa.gov/history/ottob.html
And, on 1916, Imperial Germany was deep in food shortage so older people didn’t have food to eat. The Brits were very harsh on Germany.
Gail and all
A penny’s worth 1h ago British ST this morning September 16th from Kit Juckes of French bank Société Générale re Saudi. Puts it neatly I think:
“Slower global growth was beginning to act as a drag on oil prices, but the risk premium goes the other way and that in turn is another drag on global growth”
best Phil H
That is an interesting way of putting the problem:
“Slower global growth was beginning to act as a drag on oil prices, but the risk premium goes the other way and that in turn is another drag on global growth”
This is a big reason why Robert Rapier’s article about oil prices perhaps ratcheting up to $100 per barrel doesn’t work. The price goes up with risk premium, but then the risk premium acts to pull it back down. So the ratcheting up doesn’t really build on itself.
Well, what does removal of 5.5 million barrels do?
OIL (BRENT) PRICE COMMODITY
66.37 USD +6.12 (10.16%)
(Just giving reality a check)
It’s only 1st day, maybe we’ll see series and it ends up $80+ for brent. Luckily enough this incident happened on Saturday just imagine the panic it could create if it was mid week when markets are open.
The 52 week low was 49.93.
This could move, but 80 might be optimistic.
Could it be a stockholder/org with a long position who financed the attack on the Saudi processing plant?
Look at it this way: The financier could be any house owner in IC. 100 drones a thousand dollars a pop is almost less than a shitty 35m^2 single room student apartment located in a dusty mid size town in Sweden.
Spending a couple of million dollars on hobbyist gear is nothing compared to the profits that can be made from “introducing” an artificial scarcity.
What I am saying is that it could be basically anyone with an axe to grind or profit to make “helping” out the Houthis. So who is long on oil?
https://fredericklocalyokel.files.wordpress.com/2017/02/remeber-to-always-follow-the-money.jpg
The key aspect of any “meddling” is to enter the game and support a faction within the power structure and with right timing the pot is yours for few pennies in true pirate/gambling attitude. For example, there was no apparent moral hazard to support former Stalinists who later in the 1960’s started flirting with reforms in the CEE (and when they lost – emigrated they landed on cushy capitalist jobs and pensions), well finally succeeded two decades later, similarly meddling in Asia, S/C America or any other setting.
In terms of ME this is truly jamming pit of snakes as the Gulfies hate each other, plus the Iranian and Israeli vector, and the underlying US dependence on petrocurrency recycling. And the latest development Chinese plan of sending troops and hundreds of $B into Iran..
So in this Yemen case there are evidently multiple parties – suspects, too soon to call without further clues and info as msm never plays fair. I’ve not watched it so closely yet, so perhaps you and others figured it out already from available material.
Another theory I entertain is that Ghawar is drying up and the Saudis want to feed their processing plants with Iranian and Yemen crude extracted utilizing their latest reservoir management tech.
Staging a false flag attack forcing the US to respond by ousting the Iranian regime and putting an end to the Yemen rebellion securing the access to that crude is a possibility.
Wonderful analysis of current global economic conditions and pending (historical) resolution.
“About 48,000 members of the United Auto Workers union [USA] went on strike early Monday as contract talks with General Motors broke down.
“Union members walked out of factories and set up picket lines at 33 plants across the nation as well as 22 parts warehouses. The strike, depending on its length, could easily cost GM hundreds of millions of dollars.”
https://www.cnbc.com/2019/09/15/uaw-calls-strike-against-general-motors-for-the-first-time-since-financial-crisis.html
Terrible time to start a strike with auto sales trending down. People are having a tough time affording to buy or lease new vehicles.
Excellent time to start a strike, for GM. Why pay workers to build cars nobody wants to buy? And take those hundreds of millions out of the strikers’ pension fund.
Strikers chance of getting the benefits they are striking for would seem to be low.
See, a completely automated car mfg site can simply throttle down as demand slumps. No industrial robot ever went on strike, got lazy or demanded a pay hike.
https://youtu.be/OqDL3jsdUB4
Yes, Mazak manufactures CNC machines and other industrial automation equipment. We’re going full circle here with machines building machines, problem free for the owners at the cost of pennies a dime, raw materials and cheap energy.
Yep, the spoiled wastrel humanoid worker drone is going the way of the dodo. Now I would like to hear something about Henry Ford and shred those “counter” arguments to dust.
At one point Musk conceded he went over board with robots on the car assembly plant and scaled it down.. But surely this AI arena evolves in gargantuan pace so at some point it will be likely increased up again..
Not exactly true, as those robots are most likely purchased on credit, so their owner has no make payments on them, whether they are working or not.
Money is cheap these days. People on the other side; go on strike costing the owners billions.
“EU officials have rejected Boris Johnson’s claim that “a huge amount of progress” is being made in Brexit talks, as Jean-Claude Juncker warned that time is running out.
“Juncker, who will stand down as European commission president on 31 October, is expected to ask Johnson to spell out his ideas for replacing the Irish backstop when the pair meet over lunch in Luxembourg on Monday.”
https://www.theguardian.com/politics/2019/sep/15/eu-officials-reject-boris-johnson-claim-huge-progress-brexit-talks
“Brexit uncertainty and a global economic slowdown amid the US-China trade war has set Britain on course for the most prolonged slump in business investment in 17 years, according to the British Chambers of Commerce…”
https://www.theguardian.com/business/2019/sep/16/britain-facing-most-prolonged-investment-slump-in-17-years
Slump in business investment cannot help!
“The slowdown in China’s economy deepened in August, with industrial production growing at its weakest pace in 17-1/2 years amid rising U.S. trade pressure and softening domestic demand. Retail sales and investment gauges also worsened, data on Monday showed, reinforcing views that China is likely to cut some of its key interest rates this week…”
https://uk.reuters.com/article/us-china-economy-activity/chinas-aug-industrial-output-growth-grinds-to-17-1-2-year-low-idUKKBN1W102H
“Emerging market central banks have turned more dovish than at any point since at least the global financial crisis, according to analysis of the language in 4,000 monetary policy publications.”
https://www.ft.com/content/111d9ec2-d60e-11e9-8367-807ebd53ab77
Rate cut would mean lower interest rates for borrowers within China. But Yuan could fall farther relative to other currencies, making the price of imported fuels and metals more expensive. The cost of its exports might be lower to US purchasers, however, if the US doesn’t cut interest rates as much.
Every country has to keep up with its neighbors in this whole game.
“While the trade war has been commonly blamed for a slowdown which also saw China’s economy grow at its lowest rate on record in the second quarter of this year, others have pointed to challenges to growth that predate last July, when the first tariffs were enacted, such as the deleveraging campaign that started two years ago to reduce debt and risky lending.”
https://www.scmp.com/economy/china-economy/article/3027508/china-economic-slowdown-sparks-debate-over-what-caused-slump
“The record oil-price surge after a strike on a Saudi Arabian oil facility couldn’t come at a worse time for a world economy already in the grip of a deepening downturn.
“While the severity will depend on how long the price spike endures, the development will further erode business and consumer confidence that already are fragile amid the U.S.-China trade dispute and slowing global demand. A manufacturing slump around the world is hammering growth in export powerhouses China and Germany.
““A negative supply shock like this, when global growth is in a synchronized slowdown with many geopolitical hotspots simmering, is just what we don’t need,” said Rob Subbaraman, head of global macro research at Nomura Holdings Inc. in Singapore.
“The oil shock comes amid a flurry of warning signs for the global economy…”
https://www.bloomberg.com/news/articles/2019-09-16/oil-price-shock-couldn-t-come-at-worse-time-for-world-economy
“Saudi Arabia’s economic transformation is under threat from the kingdom’s ballooning debt pile as recession worries strike bond markets, economists have warned.
“Emerging markets enter the latest global downturn “in an even more precarious state of solvency”, with public finances in the kingdom and South Africa most under threat, said Bank of America Merrill Lynch.”
https://www.telegraph.co.uk/business/2019/09/14/soaring-debt-threatens-saudi-drive-transform-economy/
“The global economy is slumping as the trade war infects nations across the world, putting growth this year and next year on track to slide to its worst performance since 2009, at the height of the financial crisis… investment banks …slashed forecasts for almost every economy.”
https://www.telegraph.co.uk/business/2019/09/14/global-growth-slump-lowest-since-2009-trade-war-forces-banks/
I would agree with the Bloomberg article on its expected imparts:
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When do the drones hit the still intact half? and prestige targets in the cities?
Probably sooner than we think, unless the Saudis withdraw from their war against Yemen. The Houthis have vowed that this is only the beginning, and that the UAE is also in their sights.
Yemen vows more attacks against Saudi unless war ends, says blaming Iran shows ‘cowardice’
https://cdn.presstv.com/photo/20190916/127aff74-e4a7-46cc-8dba-a3fbaf3ffe46.jpg
“These attacks will automatically stop when Saudi Arabia ends its aggression and lifts its blockade against Yemen”… “These operations will only expand and target facilities that are more vital and more sensitive than oil facilities.”
The fake ‘Last Leonardo’ will somehow get hit so as to claim the insurance on what is now a most dubious asset…..
Thank you, Xabier, for sending me on a wild goose chase. I’d never heard of the “Last Leonardo”, and after several hours research and pondering wish I still hadn’t!
It’s not by Leonardo, that much is obvious. It is clearly based on a mosaic in Ravenna’s Basilica of Santo Apollinaire Nuovo, but with three crucial changes. It’s full face aspect is most unlike Leonardo, but typical of Byzantine art.
First change: the halo and cross have been omitted. Second change: the first and second fingers of the right hand are crossed. So the student adapted to image to be a representation of John the Baptist, not Jesus. Third change: the left hand is holding what is not a crystal ball. Crystal balls do not have a refractive index of zero, so this ball is an allegory, and in gnosticism represents the Pleroma, or, if you prefer, the crystal sphere of the fixed stars.
So the student was aware of, or perhaps even an adherent of, the Mandaean heresy, which taught (among a lot of other stuff) that John was the true Messiah.
Yep, Ghawar these days probably mostly contains salt water.
Do people really believe that the Saudis are going to sit idly by as the reservoirs depletes. The brutalist regime will do anything to stay relevant.
Saudi Arabia claims they were hit by missiles:
https://www.cnbc.com/2019/09/15/saudi-arabia-aims-to-restore-one-third-of-lost-oil-output-by-monday-wsj-says.html
so two thirds down for how long?
The missiles came in from the West. From Yemen it’s 1200 kilometers to Abqaiq.
Some of the targets that was hit in Abqaiq.
https://pbs.twimg.com/media/EEh-EKoXkAA95e1?format=jpg&name=900×900
I would presume that there were quite a few eye witnesses who saw the direction the missiles came from.
I saw some Twitter discussion yesterday about the apparently precise targeting of the tanks, and whether that kind of precision would have had to have come from Iran, or from technology available in Iran.
It is not obvious to me that this is missile damage. It would seem to be something that could be fixed pretty quickly.
My rough guess is down for 9 to 12 months. Oil extraction can be brought back up quickly, since wells are cheap and simple. But if you cannot process the crude oil into a marketable product, you might as well leave it in the ground. And the processing plants are expensive, complicated, and need to be fine tuned or they don’t work properly. The drones hit exactly the right point of the value chain. And when it’s repaired, why they can just hit it again.
The drone has shifted the balance of force in favour of small, irregular armies that know their adversary’s weak points and pressure points. Saudi Arabia has no defence against these weapons. And neither do Israel or the US. Last week, Vladimir Putin faced down Netanyahu with a direct threat of war. This is a tectonic upheaval roughly comparable to the moment when Gaius Popililus Laenas faced down Antiochus Epiphanes (Titus Livius, Ab urbe condita, xlv:12).
But the idiot US military state, and the even bigger idiot (and warmongering thug) Pompeo, didn’t even notice.
I noticed when I was in Israel this summer that they have bomb shelters everywhere. They also seem to have regular practices using them. Two of our hotel rooms doubled as bomb shelter. There were metal shutter that could be pulled closed across the windows. There was also a heavy metal door second door on the hotel room, leading from the hallway.
In the kibbutzes we visited, theres were several above-ground entrances to underground shelters. We were told about regular practice drills using these shelters.
So while Israel (and I imagine other countries in the area) don’t have defenses against drone attacks, they can to some extent protect their people (if not their infrastructure) against them.
Thank you, Gail, and I think you are correct. Unless of course chemical or biological weapons are used, which I think most unlikely.
But infrastructure is a vulnerable target, and especially the water supply, which relies on complex technology in fixed locations: in other words, ideal drone fodder.
You are indeed correct regarding infrastructure being a target. Infrastructure is critical to keep the system going. It generally depends on world trade to be operating properly. It needs lots of energy and metal products in its production. It usually takes quite a long time to fix.
Here’s a current example of what is likely to happen on a larger scale. I’m told the ingredients in some of the medication being developed defies current water purification methods and return to the main water supply even though going through the filtration system.. Maybe at low levels now, but will they tell us when they reach dangerous levels. Currently in Dekalb County Ga the warning is out not to drink the water due to contamination:
“Customers should continue to boil their water until they are notified that the water system has been restored to full operation, and that the microbiological quality of the water in the distribution system is safe for human consumption.” We are captive to the unknown by those who govern.
I worked in DeKalb County for a long time. These “boil water” alerts are not new. I can remember at least two of them in past years.
DeKalb County water system has old pipelines, among other things. It seems to have a lot of problems.
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WTI is now about $60
Brent is now about $67
the highs for the year are about $66 and $76
until a few days ago, it seemed likely that those yearly highs would prevail through December 31…
that black swan attack, er, I mean, that black drone attack may turn out to be the most significant event of 2019…
Yes very likely the 2019 will be remembered for
– heatwave and drought
– nominal negative interest rates
– China and some Euros for the first time not respecting US sanctions to 3rd parties anymore (Iran, ..)
– attack (real or false flag) on Saudi oil infrastructure
– perhaps some more events ricocheting from the above before the end of the year
The yearly highs may still prevail. We are dealing with a ratcheting type system. The price ratchets up a bit, and then the higher price forces it to slide back down. Then there is another attack of some sort, and the price spurts higher for a bit, only to slide back down.
We may or may not be on the way to some form of World War III. But if we are, it might be fought in a whole different way. It might be fought in taking down each other’s cloud storage or electric systems. It might be fought through encrypting the data bases of local governments. Or attacking other parts of our systems that seemed invulnerable.