The Greatish Game …


Petroleum prices are getting hammered: from Bloomberg:

Energy

PRICE* CHANGE % CHANGE TIME
BRENT CRUDE FUTR (USD/bbl.) 89.430 -3.260 -3.52% 16:02
GAS OIL FUT (ICE) (USD/MT) 809.250 -27.500 -3.29% 15:59
HEATING OIL FUTR (USd/gal.) 253.390 -5.350 -2.07% 16:01
NATURAL GAS FUTR (USD/MMBtu) 2.584 0.067 2.66% 16:00
GASOLINE RBOB FUT (USd/gal.) 255.200 -3.820 -1.47% 15:59
WTI CRUDE FUTURE (USD/bbl.) 78.430 -3.020 -3.71% 16:00

The price level is creeping toward the cost of producing new fuel. Producers can operate with negative cash flow until their lines of credit are exhausted then assets must be sold and unprofitable wells shut in. This is not an instant process but prices cannot remain low for too long.

US and world stocks are taking blows as well, the precious metals are a leading indicator:

Precious Metals

PRICE* CHANGE % CHANGE TIME
GOLD 100 OZ FUTR (USD/t oz.) 1,567.100 -48.700 -3.01% 16:00
HKMEx GOLD (USD/t oz.) 1,587.700 -16.200 -1.01% 11:55
SILVER FUTURE (USD/t oz.) 26.860 -1.529 -5.39% 16:02
HKMEx SILVER (USD/t oz.) 28.040 -0.330 -1.16% 11:55

 
Cherished ideas are dying hard and ugly right under our noses: the right to earn without labor, the ‘power’ of central banking to effect outcomes, the moral supremacy of debt-driven industrialization and ‘progress’, the parallel ascendancy of industrial ‘democracy’, the centrality of the automobile and ‘mobility’ to culture. The managers stand trembling at the abyss: they look to their prerogatives as they wring their hands anxiously.

There are two Big Ideas emerging from the background noise: the unraveling of the resource dependent ‘real’ or physical economy that monetizes waste. The use of fuel does not return enough to pay the cost of recovering the fuel. The gap between what the use affords (zero) and what extraction requires must be bridged with larger and unaffordably expensive loans. Fifty years and more of such loans has left the world overwhelmed with (bad) debts.

The other Big Idea is the institutionalization of theft, the ‘Greatish Game’. This isn’t a particularly new, what inspired the Spanish Conquistadors hard on the heels of Chris Colon post-1492 was theft from American natives of whatever wasn’t bolted down, then the theft of the natives themselves. Not much has changed since the 16th century, the methods have become more diverse and the natives have become slightly more skeptical. The popular instrument is investment fraud/currency traps: cars, suburban ‘villas’, ‘collectibles’, swim-pools, stocks, credit default swaps, subordinated- and un-subordinated loans, REITs, gold mines and gold mining stocks, mega-yachts, private submarines … the Endless China Boom that will save/overrun the world, (Bloomberg):

 

Commodities slumped today amid signs that manufacturing in China, the world’s biggest user of energy and metals, will shrink for the eighth straight month, matching the slump that started in 2008. The 48.1 preliminary reading for a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics compared with a final 48.4 for May. A reading above 50 shows expansion.

 

Here is China PMI, looks like the wheels are coming off, (Financial Times):

 

China factory data add to economy fears

Simon Rabinovitch

China’s manufacturing sector has slowed further in June and a decline in new orders shows that the weakness is likely to drag on, according to a survey released on Thursday.

HSBC said its Chinese purchasing managers’ index was on track to fall to 48.1 in June from 48.4 in May, which would mark a seven-month low. In dipping further below the 50 threshold, the flash figure, which is the earliest piece of monthly economic data for China, indicates a steepening contraction of factory activity.

The data added to concerns about the health of the Chinese economy, with the benchmark stock index in Shanghai down 1.5 per cent in morning trading.

 

Maybe China isn’t going to conquer the world after all just steal it, from Patrick Chovanek:

 

Evergrande Allegations

The big story today, in my opinion, is the report issued by Citron Research accusing Evergrande, one of China’s ten largest property developers, of massive fraud and arguing that the company is deeply insolvent and nearing the end of its rope. I can’t vouch for any of the allegations, but the report is well worth reading. Concerns about dodgy accounting practices have dogged Evergrande ever since its 2009 IPO, but Citron’s multi-barrelled shotgun blast takes them to an entirely new level, forcing the Hong Kong-listed company to issue an official denial today.

The allegations of rampant bribery and misuse of funds are certainly titillating, and do expose Evergrande to certain risks, but the really critical issue here is the company’s solvency and liquidity — whether it is a genuine going concern, or a house-of-cards Ponzi scheme. Citron notes that Evergrande, which just this week shocked markets by paying a record-high RMB33k/sq meter auction bid for a plot of land in Guangzhou, has run a cumulative RM 26 billion operating (pre-Capex) cashflow deficit since 2006, sustaining itself by running up ever-rising levels of debt …

 

Just like all the other companies and all the countries, running up ever-rising levels of debt because nobody is expected to repay but refinance instead. The entire economy is a gigantic house-of-cards Ponzi scheme. The managers are thieves along with the precious entrepreneurs and ‘innovators’, looking for more unique ways to steal.

No wonder nobody trusts anyone!

With finance doing the heavy lifting it is our physical endeavors that are proven failures. We can create tokens or icons of success but returns must be borrowed using the icons as collateral. Relying on the icons to pay for themselves is proving to be an exercise in futility.

How much is that doggy in the window?

 

 

Unknown photographer ‘???? (Norman Foster)’ Here is a gigantic, dildo-ish monument to debt and living as far as possible from your job.

When the entire economy is banditry, where are the limits, or are there any?

Banks are failing, to be bailed out by nations needing bailouts themselves: both nations and finance are insolvent. Creditors demand citizens take losses in creditors’ place. This strategy fails as citizens lack the means to absorb any more losses. Creditors’ positions are too large to be liquidated without effecting markets in a vicious cycle. The efforts of central banks to date have kept pace with speculator redemptions which have prevented markets from crashing. These efforts succeed to the extent that speculators do not rush the exits at once.

When creditors take losses the real panic begins: it is every creditor for himself. Nobody cares when ordinary citizens lose everything and wind up on the streets, the elites losing fortunes is too much to bear. Deleveraging means a frozen credit market and a shortage of liquid funds. As time passes there is less the establishment is able to do: there are diminished returns to central bank credit and Treasury guarantees. Instead of being accepted at face value, guarantees are tested and held to account. As more credit is demanded the associated costs balloon: the credibility of guaranteeing institutions deteriorates. This is underway at this moment in the Eurozone. The managers can exercise discretion to regain their footing and allow decrepit finance firms to fail: the Lehman bankruptcy in 2008 demonstrated that doing so is too dangerous.

  • The outcome of credit shortages is fuel shortages. Fuel is rationed by way of access to credit. Without credit there is rationing the old-fashioned way: limited physical availability. The entire fuel supply chain is credit dependent, failure of the weakest links strand the rest.

The US wages financial war against the rest of the world, not to gain dominion over money itself but over the world’s energy.

The current US regime channels its inner Dick Cheney as it maneuvers to steal the world’s crude oil. Even as it crumbles under its own weight, the American consumption lifestyle remains non-negotiable.

The Europeans have trouble borrowing: the Continent is rich, it is also vulnerable. It is not structured to monetize- or lend to itself but depends entirely upon external sources for loans in a ‘foreign’ currency. If the outside creditors refuse to lend there are no alternatives other than the fakery underway: ‘Troikas’ and their alphabet soup of useless agencies.

The external creditors state by way of their actions that Europe is worth more in liquidation than as a going concern. Make no mistake about this: Europe is subject to a loan embargo until existing loans are paid off at once. This demand is extraordinary. Since the end of the war credit embargoes, capital flight and demands for repayment have been levied by developed countries upon 3d world slave/resource- states in order to strip them bare. What is unprecedented is the employment of these tactics against the rich West itself, with the same actors — US banks, the IMF and the US Treasury Department — having prominent roles.

The pillaging of Greece and Spain is little different from the pillaging of Latin America and South-east Asian countries during their finance crises.

The creditors hold Europe hostage: because Europe cannot pay at once — or pay at all — it will fail. This endangers the creditors, but their gains are to be had elsewhere outside of Europe. As with the developing slave-states repayment will be in the form of energy- money returns that flow to lenders’ indirectly from ruined Europeans.

Modernity ‘succeeds’ for a few in one place at the expense of others, elsewhere. Advertised conceits of national moral supremacy evaporate: the world is run by criminals, not all of whom are Chinese.

What comes next? The gains by creditors and businessmen are assumed, that European- and others’ failures will equal success in ‘Conquistador America’. As with all other enterprises, what matters are costs. Stealing from the rest of the world appears cheap compared to alternatives however there is no escaping entropy which does not recognize borders.

47 thoughts on “The Greatish Game …

  1. The Dork of Cork

    ACEA june 28
    “Brussels, 28/06/2012- In May, new commercial vehicle registrations continued the downward trend commenced in January, facing the sharpest decrease since 2009 (-17.8%, compared to May 2011). The UK was the only market to post growth in the month (+10.0%), while Germany (-13.6%), France (-22.1%), Spain (-27.4%) and Italy (-42.4%) all recorded double-digit downturns. From January to May, the EU* market shrank by 11.8%, compared to the first five months of 2011. The decline ranged from -4.0% in Germany to -6.2% in the UK, -8.5% in France, -24.8% in Spain and -37.9% in Italy. In total, 735,993 new vehicles were recorded throughout the period”

    The Bus market is the most interesting segment from my point of view with the UK keeping the entire European market from collapsing once again (goods substitution ?)

    “In May, new bus and coach registrations were down 3.5%, despite the good performance of the British market (+109%), which remained the largest. From January to May, the positive results in the UK (+61.1%) and Germany (+2.6%), the two largest markets, counterbalanced the downturn recorded in France (-18.9%), Italy (-30.9%) and Spain (-42.5%), leading to an overall 3.1% increase of the EU* market.”

    If we look at the Jan to May Bus figures the UK market is the equivalent of the French , Italian & Spainish market combined !!

    Jan to May
    France : 1,812
    Italy : 1,101
    Spain : 803
    Total : 3,716

    UK :3,608

  2. The Dork of Cork

    Video of very very busy Istanbul coupled Tram units taken this month , including new Alsthom Citadis cars that give greater capacity.
    http://www.youtube.com/watch?v=JqaIYzTpVk4

    Turkey is the current Darling of the credit markets…. with french style high speed lines planned between its major cities……..
    Lets hope the demand will remain when the credit leaves the station for another sucker.
    Its the banks… their pursuit of yield is causing massive misallocations of capital.
    Turkey is more corrupt then Greece in my opinion … why do they have a excess diesel ration now ?

    omrpublic.iea.org/demand/tu_dl_ov.pdf

  3. Sandor

    http://www.zerohedge.com/news/europes-monetary-twilight-zone-neutron-bomb-nirp

    As I discussed a few months ago, the onset of Demurrage currency, in the form of negative nominal rates, gets closer. This is merely an extension of the war against deflation. It is a structural expedient against economic entropy that may help forestall deep deflation, but at what costs? It may collapse the money markets, and with it commercial credit. This is hazardous territory, and such a policy would probably be engaged only in desperation. I think it would ultimately lead to a preference for equity and commodities over debt and a ‘pay as you go’ system that embraces a no growth world. It would also lead to less consumption, more investment, and perhaps more active conservation of resources. This may prove to be a fruitful line of thought pursue in the future as a bridge towards a more resilient dispatch between energy and currency.

    http://en.wikipedia.org/wiki/Demurrage

    1. steve from virginia Post author

      I haven’t read the ZH article yet, but I have to admit to pimping demurrage money here at the Undertow as a way to revive moribund regional/national economies and put people back to work.

      The uncertainties are profound, but that is where we stand at the edge of some kind of new era we aren’t prepared for.

      More on this later, thanks.

  4. The Dork of Cork

    You can clearly see this divergence of Gasoline to Diesel demand in France where there is major multiple construction projects ongoing.
    Where Gasoline demand is down 11.8 % in April YoY while diesel demand is down just 0.3%
    omrpublic.iea.org/demand/fr_dl_ov.pdf
    omrpublic.iea.org/demand/fr_gs_ov.pdf

    For example the truely massive Tours Bordeaux LGV project seems to be getting into gear.
    http://www.youtube.com/watch?v=WNc9wnM_i5o

    While gasoline consumption will be further reduced by the Brest tramway , Orleans line B , and Rouen higher capacity tram replacement in June alone.

    http://www.youtube.com/watch?v=54DZNMtDe8c

    Is Montis role to gift the Italain Diesel ration to the French ?

    1. steve from virginia Post author

      We Americans have so much excess diesel we export it. Monti can ship diesel to the Far East (as long as demand holds up). China used to be a certain diesel customer, but that is not a sure thing anymore.

      Right now it looks like the Euro-crash is a matter of some days away.

      1. Sandor

        Steve, what did you mean by ‘gasoline is an economic loss-leader for the rest of the economy’? This would mean fuel refineries are profit negative enterprises, and could only exist with fiscal subsidies. Please elaborate if you have time. Much appreciated.

      2. steve from virginia Post author

        Very cheap fuel worked for a long time because it cost so little to lift, refine and ship petroleum to the customers. The cheap fuel subsidized the entire US (and copycat) suburban buildout, just like ‘cheap’ Latin American gold subsidized the industrial revolution starting in the 1500s.

        … as long as fuel wasn’t too cheap: in the 1930s the Texas Railroad Commission set production quotas and fixed prices not just for the US but the entire world. Before the Commission, competition between drillers pushed prices to 50¢ per barrel.

        The oil companies made money on volume sales (including refiners), the ‘big’ money was made by auto industry as a whole, retail, development, highway construction, central city ‘redevelopment’, related ‘soft’ industries like auto insurance and financing. All good as long as fuel production costs were low: the fuel itself was a subsidy.

        To answer your direct question, yes the US directly supports the entire petro supply chain as a matter of policy. “Peak oil,” asks Energy Secretary Chu, “what’s that???”

        John D. Rockefeller pretty much wrote the rulebook for pricing fuels, he built his Standard Oil monopoly on very low prices instead of following the railroad cartels’ practice of price gouging.

        Because the refinery business is a middleman operation it is very dependent upon credit lines to moderate volatility. Every now and then there are crises and refineries close because they are squeezed: they sometimes pay more for crude than they can obtain by sales of the refined products, they have to tap the capital markets (or are parts of giant integrated companies who can tap them).

        The overseas producers run local economy ‘deficits’ and subsidize consumption. This is a version of the ‘loss leadership’ strategy just applied differently. In Venezuela, gas costs 25¢ per gallon but cars are hard to come by.

        In the US if you can fog a mirror you can walk into a dealership and drive away. Houses, buildings, roads and the other bits of infrastructure can be had with (heavily subsidized) debt.

        I always wonder how this country would have turned out if we had $10/gallon gas starting in the 1950s?

  5. The Dork of Cork

    Something rather dramtic is happening in Italy.

    omrpublic.iea.org/demand/it_dl_ov.pdf

    Diesel use is a signal of commercial activity , construction etc…….
    From the IEA
    Total “Oil demand in Italy fell even more sharply , down a staggering 14.9 % in April to 1.2mbd as the dire economic backdrop quelled consumption”

    Also Spain & Greece experienced YoY drops of 7.8% & 16.5% !! respectively.

  6. different clue

    I offer another possible word for “dildo-ish”, if anyone wants it. And that word is . . . dildoid.

  7. The Dork of Cork

    @JB
    Well you can do demand destruction the Irish way or the French way , the Irish way is perhaps far more effective but so is starvation.
    http://www.youtube.com/watch?v=-XQELsFbHJk

    Two celtic people , different goverment….although to be fair our non consumption is feeding the cores slow beating heart.

    1. steve from virginia Post author

      I can’t believe there would be so many to celebrate the opening of a streetcar line.

      That’s the way to go, more rails. Switzerland is another small, hilly country that has chosen to use more rails and less roads.

      1. The Dork of Cork

        Yes its great , although there is a element of forced state happy clappy stuff about such events.
        Although its good to see people happy about something at least.
        There is a maritime festival on there in a few weeks so I guess there was a incentive to get the Tram operational before that time.
        rendezvousenfrance.com/en/events/les-tonnerres-de-brest-2012
        Efforts now should focus on those old lines to the rural Hinterland of that peninsula that are now mere tourist lines such as this summer service to Quentin.
        fr.wikipedia.org/wiki/Quintin
        http://www.youtube.com/watch?v=7P7sCHtDLU8
        (the irony is these old rail cars are probally more effiecent then the new given they are nearly 20 tons lighter , carry almost the same seated passengers but are much less comfortable)
        fr.wikipedia.org/wiki/X_3800

        Although the new efforts seems to be focused on providing a tram train (higher frequency communter stop service) on the existing busy mainline into Brest which should be more effiecent if everything keeps running as normal…….

        Montpellier down south also put on a good Christmas show for a couple of extra lines (line 3 & 4) which opened in April.
        http://www.youtube.com/watch?v=CSpN_IqsOv8

        Anyway France has the capacity to reverse its post war /post 1970s bus feeder like system to mainline stations if it desires as its old branch lines have not been cut to pieces.

    1. steve from virginia Post author

      I’d like to think something rational like this is a plan somewhere in the Energy Department. When people are paying $3.50-4.00 per gallon holding that price is a bigger step toward energy independence than drilling more and more costly wells.

      Gasoline as an economic loss- leader for the rest of the economy offers negative returns. It’s a question of, ‘when do we stop beating ourselves?’ … because this is what we are doing.

      Pander-first politics doesn’t allow for a reasoned discussion: the Wall Street Journal says we have plenty so don’t worry, be happy!

  8. enicar333

    “In suburban America, middle class begins to confront poverty

    BOULDER, Colo. – The small communities that dot the picturesque mountain landscape outside Boulder, Colo., conjure up an image from long before the great recession. Here the manicured lawns and expensive cars are a testament to the achievements of a fiercely independent and educated middle class; a 21st century version of suburban bliss. But often these days, the closed doors of well-kept houses hide a decidedly different reality: hushed conversation about food stamps and Medicaid, depleted bank accounts and 401K’s, kitchen shelves stocked with groceries from food pantries.

    “It’s this dirty little secret,” said Joyce Welch, a stay-at-home mother of three whose husband, a mechanical engineer, lost his job six months ago. “Everybody is supposed to be able to buy the new car, supposed to buy the new house. And what we don’t talk about is people who struggle, and they’re struggling more and more.” The Welch family lives in Superior, a Boulder suburb that was listed by Money Magazine as one of the “Top 20 best places to live in America” in 2011. Neighboring Louisville was ranked number one.”

    http://insidedateline.msnbc.msn.com/_news/2012/06/23/12376840-in-suburban-america-middle-class-begins-to-confront-poverty?lite

    Perhaps it is best they don’t realize what is happening – but here is where the aware and prepared have the advantage. These people will never make it because they are soft and their mindset is all on the material world. However, as much as they claim poverty – they, like most Americans have never experienced true poverty – it’s a guarantee they all have cell phones, multiple flat screen TV’s, gas guzzling vehicles and toys, lots of clothes, and eat out the majority of the time. It just annoys them that they can’t afford a new and improved bigger house (to fill with more junk than their neighbor) and a new Chevy Camaro convertible. Those new Camaros are all over Racine’s streets!

    BTW – I always notice when I read these articles – that when the story relates to the sacrifice made to pay, for instance, the medical bill, it was FOOD. Think about it – as Americans we have come to view every other material creature comfort as being more important than food – it is part of our advertising controlled, Corporate world consumer mind-set – which is why I am so glad I don’t watch TV or listen to commercial radio anymore. The dirty little secret in America was that there were MANY more important things than paying that medical bill – like the size of the house, the “proper” neighborhood, the cell-phone, the DSL service, the computer, the size and age of the SUV, etc.

    AND, it’s ironic that large numbers of the people who help to produce, process, package, distribute and sell that food are stuck at poverty wages and could never live like those whiners in the article. Nothing has changed. Around Fairchild WI. I witnessed the large numbers of illegal aliens (mostly Mexican) who lived in the trailers on some of the huge Corporate Dairy Farms that supply you Milk. As a union Carpenter I witnessed the largely Mexican and poorly paid workers at Patrick Cudahay in Wisconsin – and I saw them in the Slaughterhouses in Green bay – it was fascinating to see the production line of slaughtering and cleaning Cattle – a pneumatic gun slammed a stainless dart into their brain – they were chained up by the hind legs, lifted up, moved to stations where various cuts were made – then the entire hide pulled off mechanically. As a teenager I worked a Summer in the cabbage fields – and the white owners kept us separate from the Mexicans – who they treated harshly. ONE MORE: When I first returned from Fairchild to Racine, I found ads on-line to work on the Fish Farms in Arkansas – lots of them – and I applied. I finally got one response from an honest man who told me they were forced to run the ads to first prove that no legal Americans wanted the jobs and then they could legally use the illegals. I was an anomaly in that I replied – I thought it would be fun – the truth was is that the Fish Farmers don’t want Americans because they plan to violate any and all labor laws, and probably decency too – they just need to jump the hoops before hiring the illegals.

  9. The Dork of Cork

    More Denmark stuff…..
    While Denmark is most certainly not a island in the main with the Oresund bridge now and its fortune or misfortune to share a border with Germany…..
    Despite its much different & flat topography to the awl unfit & bumpy whore Hibernia – much may be gained via a comparsion.

    First of all most of the electricity shared between Norway and Denmark comes from Hydro rich Norway , not “wind rich” Denmark…… which is merely recycling its petro wealth into employment white wind elephants.

    Now lets look at its transport policey more closely………
    Well despite the major geographical difference Denmark shares some similar characteristics to the Island of Ireland in so much you have one major city that dominates all the others and its population and density is not too different although lets not go into ireland’s post 1987 settlement pattern……
    Anyway lets have a look.
    Well road freight completely dominates as in Ireland.
    But the principles of transport policey is very different…..”Denmark shall be a green test bed for transport”

    http://www.oecd.org/dataoecd/43/37/49996793.pdf

    So despite the green spin…. (I don’t like this term green – as if you must put a environmental label onto a rational transport policey )

    Still far too much resourses flowing into roads although a major rail programme is underway and as people realise what a pickle we are all in almost all fixed capital investment will have to go into this stuff.

    That report was from 2010.
    In todays world.
    “Four separate projects are under development as part of the government’s strategy to prepare the network for a doubling of passenger traffic within 20 years. Hansen said the infrastructure manager was currently considering whether these should be tendered as a single package to benefit from potential economies of scale.

    Top priority is the line from Lunderskov to Esbjerg, totalling 114 km, where electrification by 2015 was authorised earlier this year. Also due for completion in 2015 is the DKr750m Vamdrup – Vojens double-tracking project to raise speeds and increase capacity on the line to Germany through Jylland, requiring a further 20 track-km of wiring.

    The biggest single scheme is the new 250 km/h line between København and Ringsted, for which the initial civil works packages are now being tendered. Involving 120 track-km of electrification, this DKr8·1bn project is due for completion in 2020.
    Finally, the existing Ringsted – Nykøbing – Rødby line is to be doubled, electrified and upgraded for 160 km/h operation in conjunction with the Fehmarn Belt fixed link. Work on the 258 track-km of electrification is planned for 2018 following resignalling under the national ETCS programme. Hansen said a decision is expected in the autumn over whether to refurbish the 75-year old 3 km long Storstrøm bridge at a cost of DKr1·7bn, or replace it with a new double-track structure for DKr3·7bn.”

    Meanwhile back in Ireland

    http://www.youtube.com/watch?v=pzz9WuUdfQM

  10. Twilight

    This process depends on the leadership of these soon-to-be-looted countries being connected to the international system. They sell out their nation’s assets because they personally are not at risk, and indeed will do better to go along with the looting. Certainly they cannot make credit with which to buy oil appear, and they have nothing with which to offer for the oil, at least nothing which the (also owned) leaders of the oil exporters would take. However, these are nations with still powerful militaries, which if they worked together would have other options. But they cannot because their leadership has other interests, and to be fair their populations do not understand what is at stake and so would not support it. There will be some for whom the obvious solution to this problem is not lost.

    Eventually things will get bad enough and other aspirants to power will arise from outside the present system. These will seek to use the anger of the populations as a power base to displace the present leadership. That’s when things will get interesting – I don’t know how long it will take.

    In the meantime I think the present round will proceed as you have laid it out, although it is quite possible that the present financial system is too interconnected and exposed and it might not be possible to contain and/or control what happens. I’m not at all sure it is possible to have any part keep functioning while Europe is priced out of the fuel market, and Russia and China and India fall apart for their various reasons. That much chaos could go anywhere.

    And on top of all of it is the climate driven extreme weather wild card. Heck of a show, isn’t it?

    1. enicar333

      Here is a life changing event that is well within the realm of reality and may even happen soon –

      “In fact, the biggest solar storm on record happened in 1859, during a solar maximum about the same size as the one we’re entering, according to NASA.

      That storm has been dubbed the Carrington Event, after British astronomer Richard Carrington, who witnessed the megaflare and was the first to realize the link between activity on the sun and geomagnetic disturbances on Earth.

      During the Carrington Event, northern lights were reported as far south as Cuba and Honolulu, while southern lights were seen as far north as Santiago, Chile. (See pictures of auroras generated by the Valentine’s Day solar flare.)

      The flares were so powerful that “people in the northeastern U.S. could read newspaper print just from the light of the aurora,” Daniel Baker, of the University of Colorado’s Laboratory for Atmospheric and Space Physics, said at a geophysics meeting last December.

      In addition, the geomagnetic disturbances were strong enough that U.S. telegraph operators reported sparks leaping from their equipment—some bad enough to set fires, said Ed Cliver, a space physicist at the U.S. Air Force Research Laboratory in Bedford, Massachusetts.

      In 1859, such reports were mostly curiosities. But if something similar happened today, the world’s high-tech infrastructure could grind to a halt.

      “What’s at stake,” the Space Weather Prediction Center’s Bogdan said, “are the advanced technologies that underlie virtually every aspect of our lives.”

      http://news.nationalgeographic.com/news/2011/03/110302-solar-flares-sun-storms-earth-danger-carrington-event-science/

      BTW – I’ve also been doing some reading over at Nature Bats Last after a long hiatus – Mr. Roboto – if you find me unkind and intolerant, well, you better NOT go there…. I seem soft by comparison….

  11. The Dork of Cork

    Another scandinavian sovergin country with a oil surplus and negative real yields lately – Denmark , is investing in rail big time including a tram train project.

    railway gazette.com
    12 June 2012

    DENMARK: New electric multiple-units and additional double-deck coaches for København commuter services are included in a DKr2·6bn investment package announced by Transport Minister Henrik Dam Kristensen on June 12. The investment forms part of a package of proposals to boost the use of public transport agreed by the government with the Red-Green Alliance and Danish People’s Party.

    Other projects covered by the investment package include procurement of an additional 55 double-deck coaches in 2013-17 to expand the current fleet of 112 vehicles working push-pull commuter and services in Sjaelland, refurbishment of existing locomotives and network enhancements around the country. Funding is also to be provided for improved frequencies on the København metro, cutting headways from 120 to 100 sec to boost capacity by around 20%.

    Further studies will be undertaken into light rail and metro expansion projects in various cities, including the Ring 3 orbital line around København, a scheme in Aalborg and a 14 5 km light rail line in Odense which the city hopes will open by 2020. Funding will be provided for electrification of the Grenaa line as part of the Aarhus tram-train project authorised in May.

    To encourage greater use of the facilities being provided, the agreement allocates DKr662m a year from 2013 to facilitate fare reductions, making public transport around 20% cheaper to use off-peak. Next year will see the introduction of a youth card offering further savings. Funds are also being allocated for the establishment of ‘super bike paths’ in the larger cities to encourage more cycling.”

    Meanwhile in Ireland the rumour is the EIB will stretch the rules of dealing with bankrupt banks and endeavour to complete 2 major road projects in a little Keynesian like package of maybe 200million
    Lord give me strength.
    Ireland is full of petrol heads who don’t have any petrol.

  12. The Dork of Cork

    @Steve
    These raw material rich countries be they Australia ,Canada , Saudi Arabia, Norway even are living the high life ……for the moment.
    omrpublic.iea.org/demand/au_dl_ov.pdf
    omrpublic.iea.org/demand/ca_dl_ov.pdf
    omrpublic.iea.org/demand/nr_dl_ov.pdf

    While Europe does its Europe thingy
    omrpublic.iea.org/demand/demov_eu.pdf

    Australian public transport is a joke

    Norways policey has been a bit more enlightened lately……they have cheap Hydro electricity and their huge pension investments abroad might not work out……..so

    Its best to dig railway tunnels while they still can rather then get a yield off a nothing.
    en.wikipedia.org/wiki/Oslo_Commuter_Rail
    And electrify lines while they still can
    en.wikipedia.org/wiki/Trøndelag_Commuter_Rail
    If they are a good neighbour its really the best they can do for us (continue to run a surplus export oil capacity)
    en.wikipedia.org/wiki/Jæren_Commuter_Rail

    Meanwhile another Scandavian country that got into a spot of bother during 2007/08 is sitting pretty because of its geothermal (it does not import any nat gas because of this and its excess Hydro capacity)
    They are all Petrol heads in Iceland who think public transport is for second class citizens…. their small capital would be perfect for a tram like operation given their cheap electricity and all but why bother when you are rich again.

    Total TPES , Y2009 :5.52 MTOe
    of which Geothermal:3.55 MTOe
    Hydro :1.06 MTOe
    of which oil……… : 0.84MTOe

    Of course since2008 / 2009 its oil demand has slumped……but thats because they can’t afford to drive their 4*4s on the Icelandic Plateau anymore so they simply hike it like the old days.

    omrpublic.iea.org/demand/ic_tp_ov.pdf

    omrpublic.iea.org/demand/ic_dl_ov.pdf

    Indeed when times are hard they don’t need any oil for heating …zero.
    omrpublic.iea.org/demand/ic_ho_da.pdf

    They just need some of the spice to move around the Reykjavik burbs (60% of the pop)
    en.wikipedia.org/wiki/Greater_Reykjavík
    And to hunt their fish stocks.

  13. Mark N

    Great stuff as always Steve, I do have a couple of questions.

    “The creditors hold Europe hostage: because Europe cannot pay at once — or pay at all — it will fail. This endangers the creditors, but their gains are to be had elsewhere outside of Europe”

    These creditors, if they let Europe fail –banks included- how do they avoid cascading defaults in the derivatives markets that make 2008 look like a cake walk? How can the global economy function if Europe fails?

    Europe is too big to fail and industrial civilization is to broke to bail. From where I am sitting the global financial system seems too interconnected for the USA, or any creditor to let any major economic block fail. Mutual annihilation is assured; I cannot even see how the current debt backed monetary system survives this ongoing meltdown. Could a new economic model be adopted on the fly? Maybe I have on doom colored glasses but it looks to me like we a near the collapse of the global economic system.

      1. christiangustafson

        Hmm, that should be “inner doomster”. Auto-correct on an iPad. Since when did Doomstead register as a noun? I blame RE.

      2. Mark N

        That is funny that doomstead would show up on auto-correct, the times they are a changing. I sometimes worry I am embracing my inner doomer so much that it clouds my judgment. I just want to avoid conformation bias because the timing of the collapse of industrial civilization is crucial moving forward.

  14. steve from virginia Post author

    More on China as the ‘Great White Hope’ that ain’t:

    http://www.nytimes.com/2012/06/23/business/global/chinese-data-said-to-be-manipulated-understating-its-slowdown.html?_r=1&hp

    Here’s one for the rail fans:

    http://crudeoilpeak.info/nsw-regional-railway-clock-stopped-at-midnight-but-hunter-coal-trains-are-rolling

    Trains, planes and automobiles:

    http://www.bbc.co.uk/news/world-middle-east-18562210

    Indeed, a war in the Middle East becomes more likely by the day. A good cover for instituting gas rationing in the US. What is the gallon-per-week over/under. I’ll go for the under on ’5′ as in less than 5 gallons allowed per week per licensed driver. Sorry folks, national security.

    1. Ross

      I’ll take 5 gallons and give you the over and the under.

      Care to venture the “off market” price? In silver?

      1. Ellen Anderson

        Really? Do you really think anyone in authority is ready to throw the “American Way of Life” under the bus, even temporarily? (Not that I don’t wish they would.) But the two pillars of the economy they seem to want to support are home builders and car manufacturers. Gas rationing strikes at the heart of that type of “economic growth.”

      2. steve from virginia Post author

        You are absolutely right about the car- and real estate businesses. The establishment is clever and determined but so far their best-laid plans have all failed.

        The ‘Plan Strangelove’ for the EU will also fail, the financiers underestimate the knock-on effects/unintended consequences of EU finance collapse.

        What is the ‘Plan C’? (You can do the ‘over $5′!)

        :)

      3. Ellen Anderson

        I don’t believe anyone is really in charge. But there is so much inertia in the system so it looks as though someone is in charge. It’s kind of like saying that the universe is so complicated and well made that it couldn’t have happened by chance – that there must be an infinitely wise creator.
        I am amazed by the complacency of the people I know who I think are close to what we think of as “the establishment.” They are bankers and politicians and media types who believe themselves to be in charge. The last thing on their minds is gas rationing. They are united in doing whatever will make tomorrow resemble today and so far so good….
        The military/police/security types are probably aware of energy problems and would love to ration gas but they are far from being able to do so since it would bring down the civilian economy. Plan C is probably being hatched by some crackpot who will come out of the shadows of the security complex. I think it will lead quickly to no gas at any price.
        I really hope I am wrong so I will take the “over $5″ option.

    2. Jb

      Five gallons sounds good: that’s 10 gallons a week for a family of two parents with licenses. That’s enough to fill my hybrid. However, what about the millions of people who live in high density cities that don’t own cars or have been forced to give up their car? Won’t this create an enormous black market? Single parents will certainly be looking for more.

      Why not ‘per licensed vehicle’ with a maximum of two vehicles per household? Or maybe you could voluntarily forgo your allotment of gas in exchange for college debt relief or additional SNAP credits?

    3. christiangustafson

      I have some friends going RV’ing from Seattle to Moab, Utah, this week. They have a F-350 towing a giant trailer, with more amenities than the bungalow I rent.

      They just added a spare 90-gallon fuel tank to their rig. I wished them well, that they may enjoy the Happy Motoring age while it lasts.

      At $4+/gallon here in western WA, even a weekend hiking trip out to the Olympics in my old 325ic ragtop gets hard to justify.

    4. Reverse Engineer

      A straight rationing system of 5 gal/wk per driver seems unlikely to me. I suspect there would be some sort of “need” testing and an online Application process. In the Ap, you would fill in the distance from your workplace (if you have one) to your McMansion (if it’s not foreclosed on), plus perhaps some ancillary needs like driving kids to school if there is no schoolbus system or public transport, etc.

      To hand a 5 gal/wk ration coupon to every licensed driver with a car who lives in NYC is just asking for a black market to grow around people selling off ration coupons they don’t need. Of course I suppose that could be curtailed by making them Non-transferrable, which is easy when using plastic debit cards.

      I’m still not convinced that with ongoing demand destruction that rationing will be necessary in the near term here in the FSofA though. With China in the process of imploding here, that is going to take a shitload of the “wealthy” urbanized Chinese off the roads around Beijing. Then of course just about all of Eurotrashland will be Pedestrian here pretty soon as well. So who is left to sell the remaining Gas to?

      War in the M.E. of course changes that, especially if a few VLCC tankers are sunk in the Straights of Hormuz or the Ghanwar Fields get bombed.

      RE
      http://www.doomsteaddiner.org

      1. steve from virginia Post author

        Food/fuel ration cards are likely to be the new ‘money’. No card, no food: how about that for instrument of governmental control? The gov would like to see people behaving or else.

        Passive-aggressive how the government works.

        People buy-sell the SNAP cards on the street now. A black market/currency arbitrage makes inflation possible/likely … inflation being almost impossible under the current regime/dollar monoculture.

        I haven’t really worked on the concept too far … however it would make sense for all citizens to have access to cards so that commercial ventures could accumulated them by way of that black market trade. There would be a certain amount of fuel ‘supply’ on all the cards together with them sold to the highest bidder …

        Watch this space for more pondering!

      2. Reverse Engineer

        If the cards are tied to the SS Number of the individual and the indivdual is also required to produce goobermint ID that the card actaully belongs to them, the transfer between people becomes near impossible.

        There are also crypto methods for making sure that the card is only used by the person it is issued to as well, using Private keys for the funds transfer. Nobody is gonna give up their private key of course because then all in your card account could be vacated.

        Every person’s fuel usage can be strictly accounted for and it can be made non transferrable as long as the net and the electronics are running. No way around that until you hack the system and take it out.

        RE

      3. Ellen Anderson

        What happens to those cards when the lights go out and the guys who need to get gas for their trucks to get to fix the lights can’t make their own cards work? Running the world electronically from the center is not as easy as the techs would have you believe.

      4. Jb

        If the lights go out, the pumps won’t work either.

        Best case scenario, we get rolling black-outs. The informal barter / black market economy springs to life out of necessity. We adjust like people living in Egypt, India, and Pakistan. I think we will see this play out in Greece, Spain and Italy first.

        http://www.energyshortage.org/

  15. enicar333

    “The other Big Idea is the institutionalization of theft, the ‘Greatish Game’”

    I agree with all of your listings, except you forgot to include the GREATEST THEFT that has been foisted upon the American people:

    SOCIAL SECURITY!

    Then you can add: Any government wealth transfer entitlement program, the funding of unwanted children and irresponsible parents, the funding of keeping bodies alive for economic gain, the funding of medical expensive medical procedures for those who have failed to be responsible with their body, the funding of those who cannot become productive members of Society, the funding of the prison camps and an unjust legal system, PROPERTY TAXES -i.e. INSTITUTIONALIZED SLAVERY and a Feudal System and INCOME TAXES.

    We seem to ALWAYS forget that which we favor – and that which benefits us – RIGHT? Despite the results being self-evident! It is the government, through it’s ENDLESS promotion of war and the instruments of war that created a massive industrial civilization doomed to failure – GOVERNMENT IS THE PROBLEM – and your Creators told us so! WHICH is why – in the people – there is to be a Lawful Anarchy – not chaos!

  16. Reverse Engineer

    “The current US regime channels its inner Dick Cheney as it maneuvers to steal the world’s crude oil. Even as it crumbles under its own weight, the American consumption lifestyle remains non-negotiable.”-Steve

    We make money the old fashioned way. We STEAL it.

    Problem of is if the money you want to steal is a proxy for Oil in the ground, the bank is outta cash. The Bubblin Crude that came gushing out of Jed Clampett’s backyard is gone, all that remains is goo that takes as much energy to pull up as you get back from it.

    However, demand destruction can ringfence a few boutique economies for a while, and certainly if China’s energy consumption drops by 50% this leaves some supply still coming up from the older wells, for a while.

    Anyhow, the Big Liquidation Sale of the Century is on its way here. Everybody trying to sell the flotsam and jetsam they collected up during the Age of Oil all at the same time. Low, Low Prices Every Day at the Yard Sales. Soon enough the big Yachts and Private Jets will be on the Auction block also, not to mention piles of Facepalm and Apple stock certificates. Lots of Sellers out there, no Buyers.

    RE
    http://www.doomsteaddiner.com

  17. Ken Barrows

    If prices remain about $80 (WTI) or lower [$90 Brent] for the rest of this year, it will be interesting to see how world oil extraction rates change. Is the lag that short a time period or will the production maintain its current level?

    1. steve from virginia Post author

      That’s a good question. I think it depends on which country is facing the most stress. If it is a big producer the fall-off will appear pretty fast. Probably the most urgent are Russia, Iran (which is subject to sanctions). Russia has output problems even with high prices.

      The Saudis would probably cut output but all cuts effect income. Saudis have a lot of bills to pay: how much?

      Meanwhile …

      From The Oil Drum: Discord Overshadows Rio Summit

      … the gathering — which has drawn officials from around the world — came under fire from the leftist presidents of Bolivia and Ecuador, along with indigenous peoples, who said capitalist greed lurked beneath its promotion of the green economy.

      Bolivian President Evo Morales described the green economy as “a new colonialism” that rich nations sought to impose on developing countries.

      “Countries of the north are getting rich through a predatory orgy and are forcing countries of the south to be their poor rangers,” he said. “They want to create intervention mechanisms to monitor and assess our national policies using environmental concerns as an excuse.”

      Morales, Bolivia’s first indigenous president, also pressed African countries to protect their mineral wealth from transnational companies.

      In an interview with AFP, President Rafael Correa of Ecuador accused rich countries of “looting the planet, consuming environmental assets freely.”

  18. Robert

    Steve,

    Your post reminded me of the “Lifeboat Earth” theory that was circulating during the 70s. The idea being that there are only enough natural resources for a small fraction of the world’s population to live “in the lifeboat”, and that the rest couldn’t be let on or it would sink. Funny how these kinds of theories come back into fashion during times of scarcity. Oh well, guess its time to kick out all the new comers. Anybody that wasn’t in the boat during the 70s has to get off now. If we still need more room, we can always kick out the French.

  19. The Dork of Cork

    Interesting (albeit technical study) of possible low cost electrification of community rail branch lines in the UK.
    Google : Low Cost Electrification for Branch Lines. July 2010 … DeltaRailES2010003 Issue 1
    for the PDF report….see section 15 for the 2 case studies.

    One of these two examples is the scenic Looe valley line in Cornwall
    en.wikipedia.org/wiki/Looe_Valley_Line
    Notice the very large increase in passenger numbers over the last few years which is a characteristic of English community branch lines of this nature
    With Looe station (terminus) exceeding 100,000+ passengers for the first time.(2010/2011)
    en.wikipedia.org/wiki/Looe_railway_station

    Now the EU mandarins in Brussels are wondering why the British local train model is a success and european rural branch lines mostly empty !
    http://www.therailengineer.com/2012/06/20/uk-railways-value-for-money

    The rail engineer mag gives various complex reasons for this …..while their Blitz culture plays a part in all this the Monetary envoirment is not understood by most engineers.

    The discrepancy is almost entirely because of the different monetary envoirment withen the UK ,although the population density down south plays a part.
    If the French were using the Franc again their X73500 local railcar type operations would be making a profit and investment would flow to more local services rather then to high speed stuff.
    Instead it flows to high speed as only the rich have suffiecent medium of exchange withen the eurozone and can therefore afford the higher cost of the LGV line tickets.
    (the poor and indeed the lower middle class people withen France simply do not have enough money tokens in their pockets to buy regular regional train tickets despite generous fiscal subsidies for public transport.)
    i.e.if you don’t have the money you are not going to buy half price tickets

    PS – The ownership is of no direct day to day consequence although it does have long term capital transfer effects (taxpayer money flowing towards non state actors)
    Indeed SNCF service is far better service when compared to most private rail companies in the UK with a few exceptions such as Scotrail and some others.

    However these community branch lines typically take advantage of second hand equipment which would be retired by state run companies such as Northern Irish rail recent retirement and destruction of its thump er DMUs
    en.wikipedia.org/wiki/NIR_Class_450
    And use single car rail cars during the quiet Winter months….. i.e. they make the best use of scarce resourses.
    I have tried to use these arguments in Ireland but with little success.
    A town where JFKs forefathers came from (New Ross) has a ancient unused branch line to Waterford city that could be brought back on line for perhaps 75 million but you meet deaf ears in Ireland as they are all petrol heads now.
    It would have a similar mixed tourist / commute passenger numbers i.e. 1 railcar in Winter / 2 in summer but they just don’t get it over here.
    Their thoughts have become clouded by a weird credit opium haze.

    Looe town has a population of 5000+
    en.wikipedia.org/wiki/Looe
    while New Ross has a population of 8000+
    en.wikipedia.org/wiki/New_Ross

  20. dolph

    We are slowly but surely moving from the dollar/Treasury/American centric world to a multipolar world.

    And good riddance. Americans used the resources to build out suburbia. They are as incapable of running the world as the Europeans of old.

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