Of God, Peak Oil and Turkeys …


Climate change- and Peak Oil deniers are like turkeys who gather in a corner of the farm convincing each other that this mysterious circumstance called ‘Thanksgiving’ is a fraud. According to rumors that race like wildfires through the community then evaporate just as quickly, when this ‘giving of thanks’ event draws near The Great Turkey God stuffs everyone into a truck (whatever that is), takes them somewhere and has them all put to death! Turkey corpses are then wrapped in plastic (whatever that is) and shipped to supermarkets (whatever these might be). The rumors are highly disturbing to the turkeys even as some of the more perceptive among them notice that turkeys who leave the community never return.

“Pay no attention,” cry the deniers. “This obviously cannot be so: God is the turkeys’ best friend. Every day he brings more and more delicious food, as much as the turkeys can eat. The more food we eat the more we have available to eat. All this food and much more has been provided by God for as long as us turkeys can remember.”

“Certain as one day follows the next, this incredible bounty will go on forever. We dare not change anything or leave. To do so would have us … living like savages in caves!”

“Where are the old turkeys?” asks a thoughtful, young turkey. Where are they indeed: there are old turkeys and bold turkeys but no old, bold turkeys. Recently the climate denying-gobblers had a chance to see that the turkey-god is a farmer with an ax and a calculating mind. This came in the form of Senate testimony from the insurance industry.

It’s one thing for the pimply-faced teenaged brigade of energy company shills/morons to scorn scientists and for middle-American turkeys to believe them. It’s another thing altogether for the shills to smear the insurance industry. The warming-related disasters are costing the top insurance gangsters real money, these costs ricochet through related real estate and finance rackets:

 

Climate Change: Insurers Confirm Growing Risks, Costs

Stakeholders from the insurance industry met with members of the U.S. Senate to acknowledge the role global warming plays in extreme weather-related losses, and to issue a call for action.

Pat Speer

The politics of global warming have typically involved much debate as to the role climate change plays in growing weather-related risk. Yesterday, however, at a Capital Hill a press conference on the cost of climate change, debate was not on the agenda. Pointing to a year of history-making, $1 billion-plus natural disasters, representatives of Tier 1 insurance companies took a definitive stance with members of the U.S. Senate to confirm that costs to taxpayers and businesses from extreme weather will continue to soar because of climate change.

Representatives from The Reinsurance Association of America, Swiss Re and Willis Re and Ceres, a nonprofit organization that leads a national coalition of investors, environmental organizations and other public interest groups working with companies to address a variety of sustainability challenges, joined Sens. Bernie Sanders (I-Vt.) and Sheldon Whitehouse (D-R.I.) yesterday to discuss the growing financial impact of global warming.

 

Reality about energy supplies begins to emerge and it’s as ugly for ‘Autoworld’ as Thanksgiving is for turkeys. Peak Oil has blitzed the Greek economy into the dumpster with stunning dispatch, so much so it seems beyond the ability of sensible Greeks to understand what happened to them. Greece isn’t a hedge fund or an over-leveraged investment bank peddling fubar MBS out of a back room but a modern, middle-class nation with a (semi)functioning government and a four-thousand year history: all that except for the history is gone … in a heartbeat. Fall asleep in Greece, wake up in Angola.

During the period of the Asian credit contraction or the Argentina default and the Latin American crisis that took place during the late 1990s there were exceptions to malaise. The industrialized economies such as Japan and the US performed well. In 2012, the economy of entire world finds itself stuffed into the back of the truck heading for the freezer.

It really is different this time!

Forget the turkey gobble about ‘Peak oil in 2035’ or ‘energy self-sufficiency’. Without drastic change in attitude, the world is never going to get to 2015 in one piece. From an energy standpoint there is no difference between Germany and Greece … or Japan! Berlin (Tokyo) must sell cars to millions of turkeys or the lights go out. Peak oil drives a stake through the heart of the auto-sexy sales pitch. What happens next? Both Japan and Germany have carefully constructed the model post-modern energy-arbitrage value-added economy: Peak Oil destroys it. What rampages through Greece is getting ready to cum inside quivering Germany, possibly within months.

Ominously, fuel prices are rising to record levels even as the world slips into recession. There is a slowdown in credit expansion, without credit there are less funds available ‘on the sidelines’ to push up crude prices. What pushes prices now is the world’s spare change … being burned up for nothing.

There are output declines in the UK, outliers in once-booming China, ongoing deflation as well as a new trade deficit in Japan, slowdowns in the countries which have depended on commodities sales to China and India: the EU is collapsing and the US is pincered between the need for more easing to keep debt costs under control and the steadily rising fuel prices amplified by more easing:

 

 

Figure 1: here is your Gasbuddy gift, red spreads across the US in the form of plus-four dollar gas prices. What sort of turkey will Gasbuddy bring in the future? Plus-five dollar gas or declining prices and faster declining ability to pay? Best to bet on declining employment and more poverty.

Energy

PRICE* CHANGE % CHANGE TIME
BRENT CRUDE FUTR (USD/bbl.) 125.520 0.180 0.14% 20:00
GAS OIL FUT (ICE) (USD/MT) 1,030.000 1.750 0.17% 20:00
HEATING OIL FUTR (USd/gal.) 325.400 1.110 0.34% 20:01
NATURAL GAS FUTR (USD/MMBtu) 2.263 -0.006 -0.26% 19:58
GASOLINE RBOB FUT (USd/gal.) 333.630 1.330 0.40% 20:01
WTI CRUDE FUTURE (USD/bbl.) 106.640 0.300 0.28% 20:00

Table from Bloomberg has Brent crude at a economy-crushing $125./barrel. The economic infrastructure has been built around an assumed $20./barrel forever. Crude costing more than $40 per barrel or so strands the entire fuel-wasting enterprise, this includes China. Meanwhile, the high fuel prices represent/require massively expanded credit. The reason for the credit in the first place was because there wasn’t enough cheap crude to satisfy all demand starting ten years ago! Credit access became a substitute for fuel and a way to ration it at the same time.

So far the current mini-spike hasn’t been able to push past last April’s high of $128./barrel for Brent. If the $128 level holds it indicates the world is too broke to afford higher prices. Prices pushing above that level indicate the turkeys’ best chances of buying their way past the consequences of their own waste are being hurled into the fire.

Greece’s oil problems were examined last June:

 

 

Figure 2: this chart is from Jonathan Callahan’s Energy Export Databrowser. Greece does not produce any petroleum energy to speak of: a few thousand barrels per day from offshore fields. It has to import fuel from overseas, mostly from Middle East producers such as Iran. Where does Greece get the hard currency to swap for petroleum overseas?

From an energy standpoint Greece is insolvent. It once borrowed — euros — from banks to buy fuel. Now it has to borrow from new banks to pay off the old banks AND to buy the fuel. Greece is on the road to oblivion. It buys less fuel even as it falls further into debt. Without some drastic change Greece will not only default but collapse.

Like the other countries, Greece obviously failed to earn enough from using the fuel to pay its energy bill otherwise it would not be insolvent.

Last Summer was really the EU’s last chance to put its energy house in order and get serious about conservation. It is too late when economies are stripped out there are no funds with which to ‘buy’ the saved btu’s. Greece from the ground:

 

“A harder Default To Come”

Wolf Richter

“We owed it to our children and grandchildren to rid them of the burden of this debt,” said Greek Finance Minister Evangelos Venizelos about the bond swap that had just whacked private sector investors with a 72% loss. While everyone other than the bondholders was applauding, the drumbeat of Greece’s economic horror show continued in its relentless manner.

In central Athens, a stunning 29.6% of the businesses ceased operations, up from 24.4% in August; in Piraeus 27.3%, a 10-point jump since March. The whole Attica region lost 25.6% of its businesses. “This worsening of the survival index in the commercial sector … shows that resistance is waning,” said Vasilis Korkidis, president of the National Confederation of Hellenic Commerce. “We must continue the battle of daily survival and keep our shops open,” he pleaded—while fourth quarter GDP was being revised down to -7.5% on an annual basis. The Greek economy has shrunk about 20% since 2008.

Unemployment is veering toward disaster. The overall rate of 21% in December, announced Thursday, was horrid enough, but youth unemployment rose to a shocking 51.1%, double the rate before the crisis. A record 1,033,507 people were unemployed, up 41% over prior year. Only 3,899,319 people had jobs—a mere 36.1% of a total population of 10.8 million!

No economy can service a gargantuan—and rapidly growing—mountain of debt when only 36.1% of its people contribute (by comparison, the US employment population ratio is 58.6%, down from 64.7% in 2000). Hence, another bout of red ink. The “cash deficit” at the end of 2011 hit €24.9 billion, 11.5% of GDP, far above the general budget deficit. Government-owned enterprises, such as the public healthcare sector, couldn’t pay their bills. Total owed their suppliers: €5.73 billion.

 

What a nightmare! Richter doesn’t mention that the only way for Greece to escape its straitjacket is to either borrow more and roll over debt or to repudiate it. There is no way for Greece — or Germany — to repay Greece’s finance debts even if 100% of its citizens hold jobs. The debts are simply too enormous.

 

Greece Undergoes An Energy Cramdown.

 

Greece’s GDP has declined right along with energy consumption. This is no accident or coincidence. The fairy-tale increase in GDP that everyone loved so much was powered by credit expansion which leaked into fuel bourses. Credit enabled the virtuous cycle of bull markets and ever-rising asset prices. Customers could meet the cost of expensive fuel (and everything else) by taking on more debt. At the same time credit expanded — as it must — so that internal costs of that credit could be managed.

The problem is that expensive fuel is that it returns the same ‘nothing’ by its use as does the cheap stuff! $20 fuel is a bagatelle to waste, it subsidizes the $50,000 automobile and the $500,000 tract house. Burning $125 per barrel crude oil is the same as burning a Jackson Pollock in the fireplace to keep warm. The mindless waste on a planet-wide scale digs a bottomless pit that economies are unable to climb out of; the automobiles and tract houses cease to be assets but become liabilities instead: ‘Welcome to Greece’.

Here is what the world’s economists ignore: that our Number One Investment for the past two-hundred years has been non-remunerative waste, paid for with an instrument that mandates its own ceaseless and perpetual increase. The beneficiaries of this waste have been a handful of very special turkeys. Like them, the economists insist that the waste is ‘productive’ and ‘progress’: that the wasting process is so fundamental to our way of life as to defy scrutiny.

Just like the turkey farmer, credit has been our best friend, the ready enabler of all our wants. The Credit God stuffed us with everything our hearts and stomachs desired, even as these became perverse then self-destructive. Waste for its own sake was elevated to a virtue, it became the basis of our economies.

With supply constrained relative to increasing worldwide demand, fuel costs rise until something important steps working, in 2008 it was the securitization industry and shadow banking, now looks to be repos and sovereign credit. The costs of fuel plus the debt needed to bid for it are breaking costs, countries can no longer borrow. Without credit there are vanishing chances of expanding GDP or to roll-over maturing debt … or to import fuel.

Here is the EU gas buddy (HT Zero Hedge):

 

 

Figure 3: Adding insult to injury: gasoline in Greece costs about $8.75 per US gallon, on the way to $50 per US gallon by way of black market profiteering and diminishing fuel supply. In the future, if Greeks want gas they will have to sell their children in order to afford it.

– Europe must borrow in order to obtain fuel even as the continent’s defective borrowing structure breaks down.

– The mercantile states such as Germany have been able to borrow against the accounts of their EU trading partners but now these partners are bankrupt. Unsurprisingly, the German economy is starting to contract.

– Europeans afford high priced fuel by cutting back on car purchases.

– Europe’s liabilities in euros are expanding dramatically along with the euro ‘rescues’ and bank bailouts. Germany has little choice but to exit the euro to escape mounting peripheral liabilities. Germany chooses its poison: defending the euro would be as suicidal for Germany as abandoning it.

– Euro-finance is a Ponzi-scheme, he who exits first escapes with something, the rest hold the bag. UK has exited the euro-concordat already, Spain looks to exit along with the Netherlands, France; Finland, Portugal and Italy are vulnerable. Germany cannot carry the bailout costs these other countries represent. As EU countries exit or default Germany will ditch the euro for the D-mark.

Germany is partially responsible for the multi-trillion euro ECB balance sheet. The collateral held by the ECB for its LTRO is deteriorating: there are margin calls. The central bank’s balance sheet is becoming largely unsecured debt: there is no lender of last resort, there are bank runs. Germany encounters the First Law of Economics: the cost of managing surpluses becomes greater than the surpluses are worth. Selling all those cars turns out to be worse than a dead loss; more costly than not selling the cars.

Germany has been running persistent current account surpluses with the peripheral states since the introduction of the euro. Now that the Europeans need money it is natural for them to look toward Germany, (click on for big):

 

 

Figure 4: Europeans have bankrupted themselves with their consumer luxuries; their automobiles. Current accounts don’t lie, the credit imbalances are vendor financing within a fixed exchange rate regime, all for the benefit of German industrial firms. As European managers remain silent about the need to conserve energy, energy conservation as a natural consequence of credit breakdown is scything through the turkeys.

It is astounding that the Europeans would throw Greece into the pit, it is certain that they did not mean to do so, circumstances forced them to it. Too bad nobody is willing to face reality and throw the automobiles into the pit, instead.

Next goes Europe, itself. The Greek default closes the book on Europe in its current form, which is a lost cause. It is the end of the beginning: there is not going to be any ‘recovery’ or way back from the abyss that is now engulfing the continent. Some fragments here and there might save themselves for a little while, then like sparks from a bonfire be swept away by the wind. The crisis must now burn itself out: Europeans, look to yourselves and may your turkey-God have mercy on your souls.

44 thoughts on “Of God, Peak Oil and Turkeys …

  1. Pingback: Of God, Peak Oil and Turkeys… | Doomstead Diner

  2. p01

    This about sums it up, plus I like it when you talk dirty. All those german carz will make some nice bonfires and pedestals for jumping up and down brandishing sharp pieces of metal.

  3. enicar333

    Greeks sell their children? Then they certainly haven’t hit the desperation that is striking here:

    “RACINE – A Franklin woman accused of giving birth in a bathroom and then leaving her newborn daughter to die in a trash bin was formally charged Tuesday with first-degree reckless homicide and concealing the death of a child.”

    Read more: http://www.journaltimes.com/news/local/crime-and-courts/article_d7c5bd5c-bac0-11df-a583-001cc4c03286.html#ixzz1p0jbfotb

    Background – She was an honors student who became pregnant in College. Dropped out of College and became a single working Mother at Perkins Resturant. Got pregnant again – WHY? Delivered the baby while at work, in a bathroom, left it to die, went back to work.

    I applaud her for her courage, and for making a hard choice – she did what was right for her, and I do not condemn her or see a reason to jail her. Society does for now – but that is beginning to change. Life boat ethics is a part of a cost and energy restrained World – the World of tomorrow. Good health will be PRICELESS. All others will be dead.

    Of course there are those who desperately misunderstand the Bible and will use it for nonsense. I believe that the interpretation presented by Zeitgeist is much closer to the Truth – set your mind free. http://www.youtube.com/watch?v=FTgwCSiZKsA

    Climate change is a game changer – whatever the cause – and the climate is surely changing. Galactic Superwaves originating from the center of the Galaxy seem to be a likely culprit, and Dr. Paul LaViolette has performed a great deal of research investigating them. Ice Cores, when analyzed for element content concentrations, confirm his theory. He believes that the Mag. 9 earthquake that struck Japan was caused by a Galactic Superwave, and that we are due for more. Educate yourself here: http://www.etheric.com/

    “the cost of managing surpluses becomes greater than the surpluses are worth.”
    SO – as the people can’t afford the fuel, they move and double/triple up or become homeless. Cars and houses are abandoned. Used good cars become very valuable, new cars, not so much. As credit disappears, businesses close, houses go unsold, jobs disappear, and what were assets become liabilities, and are abandoned as money is not available for their upkeep. The landscape is slowly being swept of all economic activity and the wealth is concentrated in greater amounts of the last people remaining in business, but especially that of government. Which is why Racine is a scavenger economy. Growth is contracting – government refuses to decrease wages and maintain full employment; due to the increased cost of living, and instead increases wages and decreases employment. A feedback loop is established, and the City, economically exhausted, collapses.

    For those unfamiliar with the Racine area, think American Motors, Chrysler and Kenosha. The carz economy here is now gone – along with the jobs and money. Here, we are Germany, only a little farther advanced. Infanticide is becoming mor common here – the paper is full of people arrested for beating, injuring and murdering their children – I tie it to the local economy. Our infant mortality rate here is higher than 3rd. World Countries. “Racine consistently has one of the highest infant mortality rates in the state, sometimes surpassing the rate in Milwaukee. For black infants, the rate in Racine is particularly bad, and, until recently, no one had ever really tried to find out why.”

    Read more: http://www.journaltimes.com/news/local/article_fde52a45-932d-5fdf-be3f-1aa7160acced.html#ixzz1p0u0WnF0

    Given the CARZ economy of Southeast Wisconsin, and the impact of peak oil, the area I am in has been hit especially hard by the current events – leading to collapse. Third World Greece = Third World Racine. Welcome to the future.

    1. Mr. Roboto

      When humans were hunter-gatherers, infanticide was a major method used for keeping our numbers down to sustainable levels. Some doomers think an eventual return of HG lifestyle is inevitable if humanity is to survive. So I guess that would include the infanticide.

  4. The Dork of Cork

    Interesting IEA European Gas flow interactive chart.
    http://www.iea.org/gtf/index.asp
    Click on indivdual countries to get more country specific info :

    Notice Italys extreme dependence on Gas at 38.8% of TPES
    Also UKs 39.7% Gas TPES

    What sticks out is Iberia’s dependence on LNG as it appears mainly cut off from the Northern European pipeline system.
    27.8 of the 36.7BCM of Spanish imports are expensive LNG.
    2.9 of the 5.1BCM imports into Portugal is also LNG

    France & Switzerland have a much lower TPES Gas at 15% & 10% respectively – why is that I wonder ?

    1. jb

      TDofC:

      Facinating graphic; thank you for posting. I am surprised by the wide difference in natural gas consumption by sector across Europe. For example, in Portugal, they use 61% for ‘electricity and heat’ whereas Germany uses just 22% for the same category.

      Perhaps this will change if/when Germany begins shutting down it’s nuclear power plants. Either more natural gas will have to come on-line, or Germany will be competing for a greater share. Rising prices will destroy lower efficiency consumption. The wide differences in energy use by sector suggests another fatal flaw in the make-up of the Eurozone.

      Jb

  5. The Dork of Cork

    @JB
    Well we in Ireland top that league at 64% ………….although these were advertised as the most advanced modern Combined cycle gas turbines (jet engines really).
    As I keep saying – this dash for gas in the 80s and beyond was when European utilties became privatised – first in the UK and then beyond – given the fact they are only really jet engines the capital cost was low so therefore the capitalist system had more money / resourses to spend on Grot and stuff.
    This low capital intensity seemed to favour EMU which really got going in 1987 – the periphery became a sort of energy foie gras dish after that with Ireland & Spain the most dramatic examples of oil and gas super consumption.

    Our base load is now mainly gas power with a older 1987 coal plant not operating at full capacity I think with 3 relatively modern domestic peat plants which is our only real organic power.
    en.wikipedia.org/wiki/West_Offaly_Power_Station

    But there is always some country worse off then you are…
    http://www.iea.org/stats/pdf_graphs/CYTPES.pdf

    1. jb

      TDofC:

      Here’s another look at Cyprus: http://www.energici.com/energy-profiles/by-country/europe-a-l/cyprus

      Call me naive, but this is just shocking to me: they have basically done nothing (except for a little solar) to diversify their energy profile. What are they thinking – the party is going to last forever?

      The last time I was in Germany was in 2002. As the guest of a roofing manufacturer, they drove me all over the country to see their factory and several installations. I remember being on the Autobahn at one point and looking both left and right, all you could see for miles was wind turbines. I was amazed by the beauty and the social intelligence of the installation.

      Steve – Rickards keeps saying ‘no one is leaving the Euro’ like it’s the Hotel California. His track record seems pretty good but your logic agrees with me.

      Jb

  6. The Dork of Cork

    @JB
    Getting off Fuel oil for electricity generation was so 1970s /early 1980s (even we Irish did that !!)
    Everything and I mean everything bar a token solar effort appears to be oil based.

    I guess they have a classic monetarist view on things – “why should we put capital into those things – somebody else will create a surplus and we can farm the tourism……….”
    I heard they hired a Russian Hunter Killer sub to throw its weight around those potential gas fields off its coast – don’t know if there is any truth behind that story but it was very Tom Clancyish.
    PS check out this other interactive map from the IEA
    (energy map indictors)
    http://www.iea.org/country/maps.asp
    Greece appears to be part of the non OECD world !!! WTF – while Turkey is part of Europe.
    I have been to Turkey and it most certainly is not European.
    Its a strange organisation this IEA – set up by Kissinger and the lads for purely Altruistic purposes I am sure.

    1. jb

      @ TDofC:

      That’s very cool; thanks. Everyone should peruse through the Energy Map Indicators by hitting the little green arrow in the upper right corner. One of the more interesting maps is the CO2 Emissions/GDP. Look at Europe right next to Russia / China. Europe is a major energy importer, but compared to their eastern neighbors, they are much more efficient OR I suppose their GDP is all based on swapping digital ‘money’ all day. Ha! Screw around with your statistical analysis enough and everything looks just fine.

      Jb

  7. The Dork of Cork

    @JB
    Thats the Nuclear / coal Bias showing up…….. the co2 difference between France & Poland is huge.
    PS Sarko the Midget has announced that Alstrom will be at the Vanguard of a light rail push during his first campaign speech last Sunday….. if you want to believe midgets
    Towns such as fr.wikipedia.org/wiki/Auch and fr.wikipedia.org/wiki/Agen will probally be linked again via Tramtrain I imagine.(Auch has a Skeleton DMU train line running out of Toulouse but is strangely rail seperated from its closest neighbour – fr.wikipedia.org/wiki/Ligne_de_Saint-Agne_à_Auch)
    The Auch Agen service ended in the early seventies with just the occasional cargo train using this branch line these days.
    en.wikipedia.org/wiki/Agen–Vic-en-Bigorre_railway
    Still I think it almost certain lines like these will be brought back on line especially since Agen train station has been improved with TGV services recently.
    France has the capacity to raise its game due to its Geography & heritage but Mountainous isolated Greece with multiple islands is in real trouble.
    Still that will not mean these Provincial towns will begin to like each other any better.

    http://www.youtube.com/watch?v=B4OWkHnS9tY

  8. RobM

    Turkey analogy is perfect and made me smile. From now on every time I encounter a denial idiot I will smile and think turkeys. Thank you.

  9. Ross

    Dear Steve,

    “DISQUS is a comments platform that helps you build an active community from your website’s audience. It has awesome features, powerful tools, and it’s easy to install.”

    It’s also much easier to follow a comment thread, especially compared to them bunching into 2″ columns the further the thread goes.

    For your consideration.

    1. steve from virginia Post author

      Modifying this website is a work in progress. Thanks for the patience.

      There are so many different options and whatnot, making choices is daunting. Google dominates blogging b/c most of what goes onto blog form is determined by Google page-rank and fitting into Google optimization. Of course, the easy way is to have a Google content carrier but last year’s Google collapse put an end to that as far as I am concerned.

      As far as the comments go: with only 20 or so comments per article there really isn’t enough demand to justify the (immense) IT hassle of having to integrate more outside software into this blog. Running things as they are is a bit much right now, since most of the time goes into the articles and other material I’m working on.

      Comment pages in general: I like Mish’s new comment page (it’s hard to log onto). In general I don’t like forums so that leaves out packages like Drupal. Disqus is also hard to log onto. Everything depends on how myincredible blogging adventure turns out over the next few months. I’ve been doing this for three years, I’ve learned a lot, I think I do a better job w/ the content now than I did when I started, I think I can add something to understanding economics whereby I can make a positive contribution. I can read articles of a year or so ago and not cringe …

      More readers will mean more changes as I will have to keep up.

      Right now I get 1000 page views on a good day, Mish gets 200,000 on an ordinary day. I’ve got a long way to go …

      🙂

      1. Reverse Engineer

        Mish gets 200K because he sells the shit the right wing wants to buy, that the Unions are resposible for the economic mess.

        Quite true commentary here doesn’t justify a bigger platform, but a better platform encourages more commentary.

        Anyhow, the route to bigger page hit numbers is getting your articles republished on Zero Hedge, FT, SA etc. Do you ever submit?

        RE
        http://www.doomsteaddiner.org

      2. steve from virginia Post author

        I’m not obsessed w/ page views, they will take care of themselves.

        Same thing w/ the comments. I like the dialog here at the comment section. There is none of the ‘yes you did!’, ‘Did not!’ nonsense found elsewhere. Not too many sites have energy stats, Heidegger and transition material in one place. This is all you, it has nothing to do with me.

        Things are going to change over time. Some of the people who were reading this blog back on 2009 have moved on, there are new folks and I appreciate the support and the interest.

        The best route (and the one I intend to take) is to refine my argument. This is also a work in progress, but the truism applies: Build a better mousetrap and world beats a path … etc. Right now I have the spring but I need a few more pieces.

        Time runs short, I am not a kid anymore, economics is not a disciple that one simply jumps into, I have handicaps: I did not study economics, I have no academic background so there is no group of natural allies as would be the case if I had gone to U of Chicago or Northwestern or some other economic academy. I have no enemies, either. I’m not going to be published in academic journals or get a job w/ the World Bank or the New York Fed. I’m not going to be the replacement for Paul Krugman at the Times. If I get some public attention it will be in the form of remarks about what kind of nitwit I am and how ugly/stupid/left-handed/short/etc. I am and how I should keep my pie-hole shut. Right now I am ignored which is fine.

        In addition … as Dmitri Orlov has pointed out, the Cassandras are never given employment opportunities. More than that, the entire system is eroding under our feet. Where do stand? Will people pay attention when alarms start going off? Will they wait until after the alarms before doing anything? (Likely)

        What happens if the Internet goes away? I recall one of my Blogspot commenters from a couple of years ago lamenting the end of the blogging communities. Makes sense, if there is no electricity or it’s rationed, there is little or no Facebook, it becomes trivial, anyway.

        I have been looking at the different ways to change/improve this site. In a lot of ways, dealing with Google was very easy. It was also very limiting. When I moved over here I thought about going with Tumblr or even putting up a new version of some other ‘Steve web-page’ (with no comments). All these things are tricky, I’m not yet at the point where I hire an IT person to manage the entire thing for me.

        Tomorrow? Who knows?

      3. Ross

        Steve,
        You da’ man!
        I’m not going anywhere. Just because I don’t get a new kitchen doesn’t mean I’m going Lysistrata on you.

      4. Reverse Engineer

        Quite true without the Sheepskins and Credentials, no matter what you write, how brilliant the analysis, it will never be published in an Academic Journal. So having some impact through this type of conduit won’t happen.

        If your material gets a popular following, then you achieve impact that way. Investment Advisors like Hussman (who of course does have a Ph.D.) get a following because people believe they will make a lot of money following his advice.

        While its fun to write in relative isolation and you can achieve some self-satisfaction simply by coming up with a coherent theory, unless it reaches a wider audience in the end its just mental masturbation and you are pissing in the wind.

        I am writing here as much about my efforts as I am about yours. In abstract, I’m not worried about Page Hits, hell I wrote inside a members only group for quite a while and was pretty happy with that until Yahoo Bots started messing with my posting. Very comfortable environment for writing, and I got just as much feedback as I needed from a good crew of intelligent posters. As soon as you start Blogging though, you obviously are presenting material for everyone to read, not just a few people. You made the observation that Mish gets 200K Page Hits/day whereas EU maybe gets 1000 on a good day. Implicit in the subtext there is that Mish’ Blog is a “successful” one, and you have to “see how it goes” before throwing more IT Bells and Whistles onto EU.

        Anyhow, you have a clear personal goal of trying to develop a new Macroeconomic Theory; in relative isolation you might believe its a better explanation, but it doesn’t get tested in any way. Even some assumptions you make don’t get tested. Money as a “risk free” Asset class? Money isn’t an Asset Class at all, its an abstraction and proxy for value of other things the society uses and holds to have some value. When the value of other things in the society rise or fall, the value of the money will change relative to that, so the money can be no more risk free than the other asset classes it is used to buy. All the value that anything has is dependent on complex interactions in a society where there is enough surplus extant that these things can be traded around for their relative value, with money serving as a convenient intermediary. Take away the surplus, the money won’t hold value compared to other more necessary assets (food), so money is not risk-free. Ina situation of scarcity, it just won’t buy food.

        Anyhow, despite the fact I am unconvinced by some of your arguments, I think many others are quite insightful and deserve a wider audience. Since you are not going to get that audience through Academic recognition, the only other means is popular recognition. Making your website more popularly accessible is a means to do that, and is just as important as what you write, because otherwise you are writing inside a comfortable coccoon where you think you got it all figured out, but its not really tested in any way.

        RE

      5. steve from virginia Post author

        Gawd, RE, you’re like my mother.

        Just wait until I get on Max Keiser, that will change everything …

  10. The Dork of Cork

    Irish Household budget figures for the mid 2009 to mid 2010 period published……before oil really got going up again – not good but no surprise

    So we had a drop in food expenditure of 8%…… think about that Food expenditure dropped by 8% in a first world (kind of) country
    Drink & fags (maybe?) by a whopping 16.3%
    We cut back on shoe leather & clothes by 6 %……..Mario wants the Irish to go barefoot for the team.
    Household durables & non durables dropped 15.5% & 5.3% respectively while transport costs dropped 5.2% as we cut our car capital purchases by more then a half.
    Our fuel & light expenditure increased by 15.3% as our consumption remained relatively static.
    So those were the 2004/5 to 2009/10 comparison figures

    Lets look at the 1999/00 2004/5 period…..& their % rise in expenditure

    Food exp. increased by : +21.3%
    Alcohol & fags : +7%
    Clothes & shoe leather : +21.5%
    Household non durables : +20.9 %
    Household durables :+32.4%
    Transport (our BTUs consumption & capital(cars) acquisition was rising back then) :+29.3%
    Fuel & light(ditto for fuel) : +42.4%

  11. charlie

    Re: Your bolg;

    Being a self confirmed ” Luddite” I like things left just the way they are, I can’t find anything wrong with the way this lay out works.

    Having been walking around on this planet for almost 77 yrs (DOB 10/24/35) I’ve seen a lot of things come in, and go out. I don’t have a lot of time left here that is obvious, so I have taken a seat on the side of the road, and will continue to observe the happenings as they come along as long as I last.

    keep posting as you have been, and I’ll keep reading just the same, and the comments that people make are just as interesting.

    charlie

  12. Reverse Engineer

    “Gawd, RE, you’re like my mother.

    Just wait until I get on Max Keiser, that will change everything …”-Steve

    Just trying to keep you honest Stevie 🙂 Make sure you wipe your nose before your Max Keiser interview, OK?

    Anyhow, I put up a historical retrospective on the MENA Oil issues which touches on the monetary issues as well. Your opinion is solicited. Unlike your Mom, I Blog also 🙂 LOL.

    Lawrence of Arabia
    http://www.doomsteaddiner.org/blog/2012/03/15/920/

    RE

    1. I. M. Nobody

      RE,

      A good retrospective, but I will note that you completely ignored the Japanese side of the story. The Usanistani embargo of oil and iron to Japan put them in a position where they had no choice but to run wild in the Pacific to cover their seizure of the Dutch East Indies and southeast Asia. They got to their oil and they were pretty successful at keeping our surface fleet away from the home islands and their shipping lanes. Not so successful against submarines, which lit up a lot of that oil on the high seas.

      1. Reverse Engineer

        I’ve got entire other rants which look at the Asian side of this game, starting with Matthew Perry’s Gunboat diplomacy taking Japan out of Isolation in the pre-Civil War Era. Patience IMN, much still to get up there.

        BTW, seems to me this comment would be more appropriate in the Diner. Are you afraid you’ll get Tomaine Poisoning if you post up there? LOL.

        RE

      2. I. M. Nobody

        When a new diner opens in town it is fairly common for the locals to wait for some back fence reviews before exposing themselves to the cuisine. 🙂 I do read your blog daily.

        I commented on your post here because I knew you would see it and so would any of Steve’s commentariat who might not have been tempted to click the link. Are you not grateful that I gave you an excuse to further pimp your blog?

        I largely commented myself out on TAE and now try to restrict myself to a few sites that do not attract such a large and disputatious following. TAE got to be not so much a community as a stadium sized cage fight. I like Steve’s blog precisely because it doesn’t get a hundred comments a day and I love his posts. Like him I have no truck with the skins of sheep, which allows me to really appreciate his self-education. He is unencumbered by the sort of mis-training that I perceive is so often foisted upon those who prize said skins.

        Neither he nor I will ever be noticed by the TBTJ and IMHO we should not wish to be noticed, except by those we would have as friends. I think you agree that nothing we or anyone else can do will save industrial society and the 7 billion humans, whom it made possible.

        Perhaps I will dive into your dumpster some day. We’ll see.

      3. Reverse Engineer

        A lot to be said for staying Under the Radar 🙂

        However, if you think TAE is a Blog version of Thunderdome, you should sample some of the menu over at TBP sometime. LOL.

        For a while at least, I expect DD remains just a tiny Restaurant off the beaten path only a few people know about, so I don’t think you’ll find any reviews of the cuisine. You just have to decide for yourself if it slides over your palate well.

        I also like Steve’s blog here a lot, despite the fact I act like his Mother all the time. 😉 Very comfortable place to post with good comments overall.

        RE

      4. steve from virginia Post author

        I’m afraid you’re wasting your massive advertising budget over here RE, this is already a post-transition web site, it is just ahead of the curve. Everyone has to chop their own firewood and milk their own cows.

        Ideas matters. Right now there are too many (foolish) ideas about how to properly manage a waste-based economy so as to make it work better. All these ideas have to fail before new ideas are considered. They will fail, they are nothing more than fads, nothing lasts forever, not even hot pants.

        Your ‘screen name’ (Reverse Engineer) is a direct link to your site, you don’t have to clutter up your comments with links also going to the same place. You can link within text although you have to enter the ‘a href’ tags by hand. A lot of ‘Brand X’ bloggers don’t like naked hot links off their site to 3d party blogs (such as The Oil Drum and Zero Hedge, where these are a good way to attract complaints/arguments).

        A big problem w/ ZH is that most of the articles (and some of the comments) are thinly disguised spam for finance newsletters or subscription services or for gold-silver bullion dealers.

        Readers will find the Undertow if they so desire, it’s not that hard.

        To get a lot more readers/comments I would have to emit a lot more content, which would mean the content quality would decline. Good content is hard to find. Most blogs simply scrape content intact from news media organizations, which is what TAE did for a long time. Once readership increases, the media providers complain about copyright. I have seen where FT (in particular) has complained to websites for re-publishing content so I know complaints do take place.

        The result is that content diminishes. Some providers like Mish or Calculated Risk recycle fundamental themes and follow a rigid form. Publishing independent content day after day, year after year becomes impossible, frankly. You run out of rants, you get tired of repeating yourself, you burn out. At the same time, if you have a sense of what you are about, your concepts become more focused which means more work on each component on the part of the writer. This is problem I have with blogs, I don’t see that much idea growth. I see fixed regiments of basic concepts represented (regurgitated) over and over. I know Scott Sumner or Paul Krugman or David Goldman are going to tell me the exact same story they told me when I first encountered their blogs three – five years ago.

        Zero Hedge gets bigger w/ more readers, more page views, more comments … also more drivel, more ‘silver, bitchez’ comments and less market-trading insight (which is what made ZH interesting in the first place).

        This is what happens, however. Sites become bulbous then they fall apart. The head writer runs out of things to say or gets tired of repeating him/herself. The junior varsity — who are good at regurgitating the basic concepts over and over — are promoted and quality nosedives. Roubini hasn’t fallen into that (Randall Wray and Ed Harrison are good) but the rest? TAE is now El Gallinazo (?) and Ashvin. I don’t think anyone would have bothered with an Ashvin or EG website in the first place. The mainspring of TAE was Stoneleigh and the power of her vision: she has vanished into pop-stardom and the scraped content is banished, what is left?

        Ditto with Yves Smith: she’s not as prominent while Philip Pilkington has taken over. He’s one smart dude, he never lets the reader forget it, beating everyone over the head with how smart he is. So what?

        This is what happens with blogs. George Washington’s blog is the same way, he has been replaced with a bunch of stand ins. This is one reason why I cull out the older blogs and replace them. So the goal is to keep working, develop better ideas, learn how to express ideas more competently … you dudes are guinea pigs in my science experiment!

      5. Reverse Engineer

        OK IMN, I was able to find my Mr. Peabody History of Japan in the archives 🙂 I’ll save it to publish tomorrow though. 2 long rants in one day is a bit much.

        RE

  13. James

    The internet has been a great resource for developing that inner space of the mind, like searching for missing puzzle pieces, even though the puzzle seems to be revealing a population of greedy, clueless humans, watching a beautiful sunset as the four horsemen gather in the darkness behind them.

    What I’ve gathered from reading and observation is that most people behave like primitive tribesmen dropped into our current technological setting. There is no awareness that the background, the matrix of their lives could change substantially, they’re just not able to see at that wavelength. Instead they act like social competitive animals, interested mostly in mating and sex, social dominance, gossip, mutual grooming and finding as much pleasure as possible with the least amount of effort.

    A recent poll (2007) shows that twenty-five percent of adults did not read a book the previous year. How many non-fiction books about the real world were read? Probably very few. The same survey stated that by far, if a book was read, it was the Bible or a religious book.

    A tribal mind (right hemisphere) can “feel” the interconnectedness of everything, but the language processing mind (left hemisphere) and the neocortex can assemble much more complex models, limited only by the effort and time devoted to the task. Unfortunately our society devotes very little time or effort in understanding the world around them. Finding the truth is as simple as picking up the Bible.

    As neuroscientist Paul MacLean said, “”You know what bugs me most about the brain? It’s that the limbic system, this primitive brain that can neither read nor write, provides us with the feeling of what is real, true, and important.”

    1. Sandor

      “Instead they act like social competitive animals, interested mostly in mating and sex, social dominance, gossip, mutual grooming and finding as much pleasure as possible with the least amount of effort.”

      This description of humans in general is spot-on. Humans are tribal by nature. Ultimately, I don’t expect that to change. While you may have evolved to incorporate the frontal lobe and scientific hypothecations into your decision making process, it doesn’t mean that those who don’t are wrong. It also doesn’t mean that if the whole modern society experiment fails, it was all a big ‘waste of time’.

      Humans are a flawed species. We do the best we can given our limitations and conflicting drives (pleasure vs. truth?). It’s actually quite unreasonable to expect most humans to be reasonable. We’re just not wired that way. Griping about the idiocy of modern society driving itself over a cliff does no one any good.

      Perhaps future humans will get far enough along the curve to begin genetically re-engineering the species. Perhaps the sex drive will finally be restrained to an optimal level (go in heat once a year?). In any case, I am not defending any position, certainly not willful ignorance. Those of us who are interested in ‘dis-covering’ or ‘re-membering’ or ‘creating’ the truth will do so. And the more the merrier.

      Let’s not throw in the towel just yet here. Keep the mind open to fresh possibilities. I still see a great deal of room for conservation measures to reduce our burn-rate, especially as costs become prohibitively high. Gasoline rationing, via price, is already occurring in the US & Europe. The next step is to turn the lights out, go to bed earlier, ‘work’ less, ‘consume’ less, ‘produce’ less.

      1. James

        Without growth the debt based financial system will collapse or commit suicide by hyperinflation. With modest growth, the world’s economy will double in size in 25 years and population will be approaching 9 billion. Won’t happen.

        Most likely, growth will stop. Investment in rebuilding America (energy infrastructure, housing, transportation) will not happen because the original expansion into pristine areas of farmland, forest, mineral and energy has already occurred and has stripped these areas of much of their return on investment. The roads, cities, pipelines, and other infrastructure were justified and paid for by extraction of the resources. Getting solar and wind to grow will be difficult since the existing promises of high returns on investments are contingent upon continued use of high EROEI fossil fuels. Once investment chases fossil fuels all the way down the depletion curve, there won’t be enough net energy to maintain society and rebuild all of the infrastructure needed for a new low net energy civilization.

        If solar panels and wind turbines returned 200:1 net energy, all investment would have found their way there already, but they will never produce the amount of net energy per unit time that we’ve reaped from fossil fuels. And when fossil fuels become so scarce as to reach price parity with solar and wind, our archaic civilization will be using the last of its resources just to continue breathing in its debilitated condition.

        Massive restructuring needed to occur thirty years ago. Why not? Because humans and their societies try to dominate one another and must use the highest EROEI energy they can obtain or fall behind economically and militarily. Voluntarily using more expensive energy dooms one to non-competitive hell, just as voluntarily using more expensive labor can doom one to bankruptcy at the hands of competitors.

        How do things play out over the next few decades? Will much of fossil fuel civilization simply return to dust and new solar “weeds” sprout in the sterile landscape, unconnected by roads and cars? From my perspective a collapse of civilization and continued environmental degradation seems inevitable as we close the book on the fossil fuel era.

      2. enicar333

        “Let’s not throw in the towel just yet here. Keep the mind open to fresh possibilities. I still see a great deal of room for conservation measures to reduce our burn-rate, especially as costs become prohibitively high.”

        That would be shared sacrifice. I’m not seeing that. Have you been to Daily Job Cuts lately? It’s scary.

  14. Ellen Anderson

    I have been a fan of Economic Undertow since “Betty Davis Eyes.” Be sure to warn us if a Mad Max appearance is coming up. I have very limited bandwidth but would devote a lot of it to watching that one.

    The new website at TAE is really hard to figure out. They have gotten the comments together with the posts now but it isn’t the same (and imho, that means it isn’t as good.) Stoneleigh is right to be taking her show on the road. Either the internet is going to go away or it is soon not going to be a good place for many of us to be. I am printing out as many “how to” papers about farming and soils and electricity as I can and trying to stay in the real world as much as possible. The weather is strangely warm here and I am trying to use my bike more and my poor old car less.

    Has anyone looked at the lead article in Wired Magazine and considered the new facility being built in Utah? What do you think of that??

    1. steve from virginia Post author

      RE: NSA super-base in Utah: there is an old saying that, ‘Generals are always preparing to fight the last war’ which is the same thing governments do outside of generals and whatnot. Governments do waste money, but that is their role within modernity as business and personal waste is never enough.

      Of course, the war underway is over not wasting but nobody would ever guess …

      Somebody should tell all these wannabe Richie Rich’s that wealth — even in a money sense — is achieved by husbandry of capital not its squanderous waste. Too much emphasis (by advertising) of the things upon which wealth is spent. Peeps think being rich means burning through fortunes rather than accumulating them.

      1. Ellen Anderson

        Re: fighting the last war – that is just what I said to my son this morning before I wrote my comment to you! I hope we are right. It sounds as though our fearless leaders have been spending too much time reading the Survival Blog and are prepping on a massive, industrial scale for the wrong doomsday.

  15. enicar333

    Here is a link to the Athens News – http://www.athensnews.gr/portal/1/54169

    Not sure if I got it here, or elsewhere, but here is an article for today, Mar 16th.:

    “The chief EU inspector for Greece said that more austerity can be expected, including more wage cuts, despite the government’s slashing of the minimum wage last month.”

    Meanwhile, in Economy news it states:

    “Germany has earned 380m euros in interest on the loans it paid to Greece under the first bailout for the country, according to German finance ministry documents obtained by Reuters.

    Berlin’s contribution to the 2010 rescue package for Greece amounted to 15.17bn euros, on which the Greek government paid interest ranging between 3.423 and 4.528 percent.

    As of the end of 2011, Germany had earned 380m euros on the loans.”

    Well, that means one German can buy fuel for another day – and another Greek can’t. The scavenger economy – which is what I see here. There is no more growth. Of course, I learned that here, on Economic Undertow, which is why I understand the interaction between Greece and Germany.

    More austerity for Greece buys more fuel, and time for Germany. Of course Germany wants to loan money – because some payback is better than none, and if they didn’t loan the money, they would have none – they export the money to to import the interest returns. Credit expanding debt.

    Germans are now producing carz that Greeks can’t afford, but Greeks have to keep borrowing to afford food/fuel. So, Germans, producing carz Greeks can’t afford can continue to be employed as long as Greeks can be squeezed for money – and the Carz don’t matter – they can be crushed immediately after manufacture – NOW – we’re all just running on a Hamster wheel – most of us, at least. Lots of surplus people. Running on the Hamster Wheel means you die tired, that’s all.

    Here in my crummy little corner of Wisconsin, they cut employees instead of shared scarifice for the same reason. Each person is either Greece or Germany – Germans get to live one more day and afford to waste fuel, at the expense of the Greeks. The number of impoverished Greeks (like me) will continue to grow (GROWTH in POVERTY) while the number of Germans will decrease. If we had shared sacrifice – the whole system would deflate, and we would only have domestic supplies of oil and rationing – well, sooner, rather than later – ultimately it’s unavoidable, unless we wage successful war and conquer the ME Oil Fields – do we try for Russia’s oil fields?

  16. Pingback: Titanicaca … | Economic Undertow

  17. Pingback: Disintegration … | Economic Undertow

  18. Pingback: Disintegration | Doomstead Diner

Comments are closed.