Monday, March 29, 2010

Washington is Talking About Peak Oil

Sorry for the article, it's been translated from its original French (it comes from Le Monde, a French newspaper). But if the article is accurate, this means that the Obama administration believes that a decline in oil production could come as soon as next year.

"The U.S. Department of Energy admits that “a chance exists that we may experience a decline” of world liquid fuels production between 2011 and 2015 “if the investment is not there”, according to an exclusive interview with Glen Sweetnam, main official expert on oil market in the Obama administration.
This warning on oil output issued by Obama’s energy administration comes at a time when world demand for oil is on the rise again, and investments in many drilling projects have been frozen in the aftermath of the tumbling of crude prices and of the financial crisis."

Also, going into 2015, only 6 of the 15 biggest oil producers in the world will be able to maintain or expand their oil output. Big oil-producing nations such as Russia, Mexico, Iran and Venezuela are headed towards a projected reduction in output, if they aren't there already. The Department of Energy expects that the largest increase of production would have to come from us, the United States, ourselves. The problem, of course, is that our oil production peaked 40 years ago and has been in a copious decline ever since.

No problem, our government says, because this increase can be achieved through what is called "the ethanol ramp-up." That means taking more of the crops that we had grown for food, and using them as biofuel. This could have negative consequences when it comes to the affordability of food.

The article is quite informative and is worth reading. Needless to say, this is a HUGE admission, with much potential for fallout. We're not going to take this lying down, and will attempt to secure our share of oil any way we can. Another thing that I found interesting, is that the cost of oil falling last year was really a double-edged sword. Yeah, it helped ease our "pain at the pump", but it also put the kibosh on many production projects that might have helped alleviate the price shocks that are bound to come.

Thursday, March 25, 2010

The Most Important Chart of the Century

Nestled in a report from the U.S. Treasury is this chart which, while self-explanatory to some, needs explaining to others. I was one of "the others", as I am no economist, but once it became clear to me, I did have to agree with those who are giving this chart the grandiose distinction of being "the most important chart of the century."

Simply put, the chart takes the change in GDP (Gross Domestic Product) and divides it by the change in debt, over a period of the past 45 years (starting in 1966). The chart shows the GDP and debt concurrently on the Y axis, and the years on the X axis. Back in 1966, bringing a dollar of new debt into the system would add almost a dollar to the nation's GDP. Over the years, as more debt entered the system, the productivity of the debt in adding money to the GDP decreased (e.g., in 1986, bringing a dollar of new debt would bring about a roughly 20 cent increase in GDP. The value zig-zags over time, but it's clearly decreasing). It's pretty much in accordance with the Law of Diminishing Returns. The chart's end result will be that by approximately 2015, each dollar added to our debt will do nothing for our GDP.

However, there is a new wrinkle in something known as debt saturation, which is something having to do with total income no longer being able to support total debt. As a result, every dollar of debt now being introduced into the system is now resulting in negative productivity in GDP (or, put in another way, the opposite of growth). Our current system is built on debt, it's nothing but debt, and adding even more debt to the system is only leading to more bad things down the road.

So, basically, we can no longer borrow our way to prosperity, and this chart is telling us that we can no longer kick the can down the road for future generations to deal with. This will be our problem. But TPTB want to keep this party going for as long as they can. This can only go on so long, of course. The only question is, how long? To this, I do not have the answer.

These links go into much more depth, and the comments are well worth reading:

Monday, March 22, 2010

Very Creepy Photos of an Abandoned Six Flags Park (Post-Katrina)

These pictures of an abandoned amusement park in New Orleans, as a result of Hurricane Katrina, are creepy as hell. It has been nearly five years since the park was abandoned, the hurricane damaged or destroyed most of it, and the elements and time have taken their toll.

At the end of the article, there is a link to another article with photos of more abandoned amusement parks.

Sunday, March 21, 2010

The Stock Market as Propaganda Tool

When I was younger and naive (around my early 20s), and new to the job market, for whatever reason (even though I did not own stock, still don't and probably never will), I looked to the daily stock market results as some kind of indicator for how the broader economy was doing. That was a long time ago, when I still lived under that old paradigm of continuous, everlasting economic growth. The other day, in a conversation with my mother, she told me that the economy was recovering because the stock market was rising every day. She also has never owned stock.

I thought of these things as I was reading this piece by Charles Hugh Smith, on how the rising stock market can be used as a propaganda tool to make the broader economy look better than it actually is. The stock market has risen 75% from last year, yes, but when you factor in that up to 91% of stocks are owned by the top 10 percent, it's just a matter of the rich getting richer. Yet the mainstream media is trumpeting the stock market as a sign that the recession has ended for all Americans, which is pretty insulting to the many millions of people out of work. But I do think many people are beginning to wake up to the fact that more wealth on Wall Street doesn't translate to better times for Main Street. I thought the last paragraph was worth including:

The stock market isn't about building middle class wealth, and the middle class seems to have finally figured that out. The equity market is all about concentrating wealth and managing perception: if the top 10% is doing well, then the bottom 90% are supposed to feel better about the whole thing, too, even if they are poorer by every financial metric.

Friday, March 5, 2010

The Hidden Hoard

I just got done reading a small snippet on the blog by Michael Ruppert. Ruppert is one of the most known "doomers" around, and I'm eagerly awaiting his documentary "Collapse" to be released on DVD. Other than that, not very familar with his work. I took out his book "Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil" and honestly didn't get that far into it. For one thing, it was huge and it seemed to go all over the place.

Anyway, he is apparently reporting from Greece. I look at Greece as a potential "canary in the coal mine", as far as how dire economic conditions are impacting the finances of sovereign countries. There are a few significant differences between Greece and the U.S., though. Their safety net and public sector are much more vibrant than ours, at least they were. Here, if "austerity measures" were imposed, there wouldn't be that much left to take away, other than Social Security or Medicare.

He did say something that interested me, though, and in which I agree:

Notice how the unions are arguing that the government is lying, meaning that there really is a hoard somewhere that someone is actually withholding. That's Old Paradigm thinking and it's very dangerous because the unions will rally their members with promises that cannot possibly be fulfilled. And by the time the union members see that they were lied to, it will be too late to do anything except fight, starve, and die.

The same could easily happen here, not just with untold monetary wealth but with energy. I just read an article in Newsday yesterday that gas could spike up to $3.50/gal. in Long Island by the summer. This is not due to speculation or gouging people, so much as it is about long-term energy supply problems affecting this country, as well as the rest of the world. But ask the average American his or her beliefs on the high cost of driving your car, and the surrounding costs of food and other supplies as a result, and they'll tell you that it's price speculation, or the oil companies are fucking us, or it's Washington, or the environmentalists, or some other phantom scapegoat. As Ruppert says, all this is "Old Paradigm thinking."

The energy question, as well as the jobs question, can lead to maniacs (Sarah Palin being just the most prominent example right now) being elected, with promises to "drill, baby, drill" in America for oil, or to somehow bring the well-paying jobs back that were long since exported to the east and south. And as Ruppert said about the Greece labor unions, these would be promises that can't possibly be kept.

The only way for us to survive and thrive is to let go of our dreams of expansion and limitless growth (which is impossible on a finite planet with limited resources, anyways) and take on dreams of a more realistic and scaled-down scale. The economy that is coming, I predict, won't be so much about jobs and money, but on the favors that each of us can do for each other.

Thursday, March 4, 2010

Snapshots of America's Shattered Economy

I have been reading a few articles on the state of employment in this so-called "recovery". One is this New York Times article, which is also noteworthy for the 30-somewhat pages of comments by other readers that accompany it. They are very substantial, in that they reflect a growing amount of disenfranchised and disillusioned people who no longer believe in how our economy works, and more specifically, the "American Dream" that has been sold to each and every one of us. I make a habit of going on what are called "doomer" sites (my most often visited being LATOC, or Life After the Oil Crash), and most of the comments seem to echo the kind of material on those forums. If you have an afternoon or you can save your tabs, I recommend going through them. A highly telling and important comment comes from an economist quoted in the main article itself:

“American business is about maximizing shareholder value,” said Allen Sinai, chief global economist at the research firm Decision Economics. “You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.”

If that is the philosophy guiding American business, and everything we have seen indicates that it is, than the government instituting any kind of major jobs program or initiative is pointless, if not counterproductive. Just as further tax cuts on business would be counterproductive. They would have you believe that it's the excessive regulation and overtaxation that has resulted in our jobs being outsourced. Actually, their endgame is for zero taxation, zero regulation, zero wages to employees. Their only goal is to siphon off the resources of nations as much as possible, and give nothing back in return. Welfare mothers on food stamps have nothing on business; they are the ultimate deadbeats.

In related news, this article from USA Today dwells on what's left of industrial communities in America, or what they call "the new ghost towns". Manufacturing is dead in America, and the "service economy" is proving to be woefully inadequate in maintaining the wages and benefits that kept America fairly prosperous in the mid to late 20th century.

My only gripe with both articles is that they don't deal with the energy scarities that lie ahead in the future. Even if we weren't presently going through an economic crisis, almost by definition, peak oil would make many of the jobs we currently do obsolete. It also further points to the folly of displaced workers going back to school to re-train themselves in positions for "soft skills" that will likely be useless in a post-peak world.