May 22, 2008
Elaine Meinel Supkis
Accountants struggle to deal with the mounting Enronic problems that plague modern banking and business. This is due to the epidemic of lying both in the banking system and in businesses. Also, we go back in time to review the issue of inflation, floating currencies and oil price hikes. And we look at both an old Time Magazine article that gives very bad advice to home owners and an even older Time Magazine article that accurately discusses the hazards of the Bretton Woods II system before it was fully instigated. Understanding how oil price hikes, wars and inflation interact is life and death for America. Oil dropped a tad today but there is no cause for celebration. We are trapped still and have been since 1972.
Citigroup's `Last Roman' CDO Shows Enron Accounting
Citigroup Inc. created a $2.5 billion mortgage-backed security called Bonifacius Ltd. in August as capital markets seized up and panic swept Wall Street.The issue took the name of a general, called by historian Edward Gibbon the ``last of the Romans,'' who fought and died for a fading empire. The bonds were created from subprime home loans as demand evaporated. Within six months, Bonifacius collapsed as homeowners fell behind on their payments in record numbers.
Citigroup, Merrill Lynch & Co., UBS AG and other banks created more than $1.5 trillion of collateralized debt obligations like Bonifacius, keeping an undisclosed amount in off-balance-sheet funds called variable interest entities. Bonifacius and $190 billion of similar securities have gone bust since October, spotlighting loopholes the Financial Accounting Standards Board failed to close when Enron Corp. went bankrupt in 2001 after disclosing investments that weren't on its books.
``They never got the real problem fixed after Enron,'' said Lynn Turner, the chief accountant for the Securities and Exchange Commission when the Enron scandal was exposed. ``When people find out how little FASB did, they're going to be shocked. FASB needs to be taken out behind the woodshed and given a good whoopin'.''
The FASB accounting organization slept through the Anderson mess. I knew an Anderson employee who escaped from the World Trade Center collapse and survived. But he got tangled in the collapse of the organization. A very sticky matter, that. Last January, the FASB released a report whereby they propose tightening up the standards. Nothing has been heard since then. Did all the people on the committee commit seppuku or did they go to Siberia? One would imagine, half a year later, they would say something about this proposal.
Who do they think they are? Congress?
Moody’s shares tumble on rating error
Moody’s awarded incorrect triple-A ratings to billions of dollars worth of a type of complex debt product due to a bug in its computer models, a Financial Times investigation has discovered.Internal Moody’s documents seen by the FT show that some senior staff within the credit agency knew early in 2007 that products rated the previous year had received top-notch triple A ratings and that, after a computer coding error was corrected, their ratings should have been up to four notches lower.
Standard and Poor discovered 'a computer glitch' gave AAA ratings to a bunch of aaa entities. As usual, they blame computers. This 'blame the computer' or 'blame the geeks running the computers' is as old as Univac. Geeks usually don't really care all that much about mere money but they care passionately about computers they run. I have some computer expert geeks for children and in laws so I can claim some knowledge as to how they function.
They HATE mistakes. So when I hear the news that 'computers' and the 'geeks' running them made mistakes, my blood boils. I know from talking to a whole lot of computer geeks, they are under intense pressure from the bosses on Wall Street to insure that the computers conform with the reality that exists within the brains of these bosses which are focused like a laser on one thing: profits no matter what. The 'hedges' that exist seem mostly to be 'whatever you guys can rig.' One computer expert tells us that he and his fellow workers get yelled at regularly by the pirates who hired them. 'Make it WORK, goddam it!' seems to be the supervision.
Freddie Mac Suffers Bout of Temporary Insanity
How long does the word ``temporary'' mean? The accountant who wants to stay employed knows the right answer: ``How long do you want it to mean?''That new twist on an old joke goes a long way toward explaining Freddie Mac's net loss last quarter of $151 million, which was smaller than analysts' estimates. In reality, Freddie is gushing much more red ink than that. Yet hardly any of it is showing up on the company's income statement.
That's mainly because the government-chartered mortgage financier has deemed $32.4 billion of paper losses from mortgage- related securities as ``temporary.'' Freddie's big sister, Fannie Mae, is in a similar, though less extreme, position with $9.3 billion of such losses.
To ordinary folks, temporary means something of limited duration. Under the accounting rules, the word means almost nothing.
The designation means the losses don't have to be counted in Freddie's calculations of net income or capital, which is supposed to be the company's financial cushion against losses.
Most of these losses are on securities backed by subprime mortgages. About $13.2 billion of them are on securities that have been valued below Freddie's cost for a year or longer. Some of the losses stretch back more than two years. All this has occurred under the tolerant eyes of Freddie's feeble regulator, the Office of Federal Housing Enterprise Oversight.
The refusal to list losses is at the heart of much of this unfolding banking collapse. No one wants to list worst case losses. They don't want to list ANY losses. When losses have been announced, they dribbled these out bit by bit over the last year. But this barely covers the whole losses. Much of these losses have been shuffled off to Freddie and Fannie. As well as Feddie the Reserve with no reserves! Bernanke has vacuumed up a huge dozens of billions in housing losses.
So we are looking at $35 billion in undeclared losses. When losses are shoved forwards in time, they become hyper-destructive of future wealth. Since most wealth is future promises, this poisons the well for years to come. The hope is, the wells won't notice this and animals can drink and not die. This is plainly silly. Ancient accounting rules state that a business must always state the worse case scenario when tabulating losses. This way, they can see clearly the worst and thus, prepare for it or warn investors.
But modern American finance is all about hiding the bad news. This is the 'Hitler' approach to news. Namely, when Hitler was hiding like the coward he was, in his Berlin bunker, he only wanted to hear good news. So he got it until the Soviets were firing rockets on his doorstep and he was driven to suicide.
Here is a Time Magazine insert from last February that tries to explain to readers how they can't save money by waiting for houses to drop in price:
This is a classic! Talk about insane! First, the PRINCIPAL MATTERS. When we sell our houses, we have to pay off any PRINCIPAL that remains. Not the interest rates. The principal. So a $200,000 house will have $20,000 more due at closing than a $180,000 house. As a person who has bought and sold more than one house for a profit, that $20,000 isn't 'nothing'. It is a lot of money! Secondly, the Times bastards assume one will pay more in interest. But we see from charts and graphs, the price of mortgages has not gone up or down much no matter what vacillations of the Fed! The mortgages are pretty set in stone. But even if it goes up, I have bought houses with high mortgage rates. I got them super-cheap! Then, when rates dropped, I sold for huge profits! Duh!
IT NEVER WORKS THE REVERSE! If you get low interest rates but pay a high price, unloading that white elephant is NEARLY IMPOSSIBLE. You take a haircut compared to people who are selling houses bought when rates were high and housing values low! Duh! all over again! Just as Freddie and Fannie Macs are both lying about material values, the accountants are silent as many organizations lie and lie and lie so much they resemble dead skunks on highways. P.U.
The insistence by Time Magazine that a $218,000 house is exactly the same as a $197,000 house is classic, by the way. Over the years, I have talked myself blue in the face to explain to people, it is not how much per month you pay, it is the PRINCIPAL that matters. When we pay off anything, we worry about that. When people think, 'I can afford the monthly payments' they fall into the 'cheap lending trap'. This is when they take on more and more and more debt and can barely pay the interest. Note that most credit cards do this: they have you pay say, $50 a month but the extra interest due is added to the PRINCIPAL so it swells in size and you never, ever pay the damn thing off. Doing this with $200,000+ houses is suicidal.
I think the only reason the Time Magazine editors wanted to lie to people is because they work for advertisers or their spouses are in real estate and need more chumps to rip off. Either way, they are a pack of lying thieves and pirates and should be arrested for fraud.
After the collapse, Wall Street’s attention naturally turned to the other investment banks, especially Lehman Brothers, perceived as the most vulnerable. So, investors were thrilled when Lehman topped earnings expectations on Tuesday—as the firm took pains to reassure the markets that it has plenty of cash to ride out the turbulence.
Yet aside from a smattering of attention here and there, investors and the media mostly overlooked the balance sheet.In other words, they forgot what happened mere hours earlier with Bear Stearns. Wall Street’s short-term memory is notoriously lousy, but this must set a record. (Could Jimmy Cayne be sharing his stash with his hedge fund buddies?)Lehman finished the first quarter was total assets of $786 billion, up almost 14 percent from the previous quarter and 40 percent from a year earlier. Other financial institutions are taking down their exposure right now amid the market turmoil to be prudent. Lehman says it wants to. It is not.
Just like Time Magazine lies about housing values versus interest rates, Lehman Brothers lies about its bottom line. Since the FASB has refused to rush through changes that will clearly state, 'Thou shalt not lie about the true value of assets and the true nature of losses', so it is here: it is too easy for everyone to lie. And since the central bankers are lying, the politicians are lying and the investment houses are lying, these liars are creating a Perfect Storm. We see a loss of 'confidence' as savers run for the hills or run for the gold, seeking some sort of shelter. This whole mess can be fixed by returning to the post-Great Depression financial rules. Combined with a return to the Gold Standard. And of course, cleaning house in our government by eliminating the lobbyists and the campaign finance messes.
The investment banks “gross” leverage hit 31.7 times equity, up from the fourth quarter and way up from last year’s 28.1. According to Brad Hintz, an analyst with Bernstein Research, Lehman’s leverage reached its highest point since 2000. Lehman, like all the investment banks, prefers to look at net leverage, excluding hedges, and that went down. And the firm says that the asset rise was mainly a result of increases in short-term items that have low risk. But we’ve heard a lot of that lately across the financial world. It’s quite simple: The more leverage Lehman has, the less room assets have to fall to wipe out its equity.
Gross leverage means they went into debt. Just like the Times Magazine article ignores gross debt while concentrating on monthly interest payments, Lehman Bros would love us to ignore its growss debts and focus only on how little they pay in interest per month! Since interest rates are very low compared to real inflation, this is treated as 'better than savings' since the loans are pretty much 'free'. But not quite. There is that pesky principal lurking there in the dark. It and the Derivatives Beast, continues to swell and grow.
As I pointed out earlier, the low interest rates mask the destruction of wealth. And the Federal Reserve never lowers rates to benefit home owners, they do this for Lehman Brothers and JP Morgan, etc.
Economic Toll Mounts From High Oil Prices
The Ford Motor Company, the American auto manufacturer, said on Thursday it would cut vehicle production for the rest of this year and fall short of reaching profitability in 2009, a long-held company goal. In a statement, a top Ford executive said rising gasoline prices “are having a tremendous impact on our sales, our manufacturing operations and our profitability.”Meanwhile, Europe’s biggest airline, Air France-KLM, warned of a profound reshaping of the world airline industry caused by what it called the “explosion” in the price of oil. And American Airlines said on Wednesday that it would slash flights and begin charging passengers to check bags, part of a company effort to cut costs in the face of skyrocketing fuel prices.
Oil futures spent months dancing around the $100 a barrel. But in the last two months, prices have taken off, gaining nearly $20 a barrel in May alone.
The transfer of wealth from the G7 West to the oil pumping nations continues. I suppose all Canadians are singing 'O, Canada, We are rich, rich as Russians....' Yes! And they play hockey, too! Goal!
Aside from these lucky duckies, the OPEC nations are raking it in. So we don't just have 'inflation', we have money moving out of America, Europe and Japan and moving to the 'wrong places'. Places that hate us. Well, maybe Canada hates us. Heh. We dare not ask them. Only when they own the Bruins and the Rangers, can we complain, right?
I suppose we get to keep the Devils.
Back to money: Always, always, always, when there are wars in OPEC nations, we have high oil prices, inflation and a collapse of the G7 economies. This has happened four times in my own life: in the early 1970's with the Arab Oil Boycott, the early 1980's Iran/Iraq war, the Gulf War I and now the Gulf War II. Each time, the exact same thing happened. In between each of these wars, we announce that the central bankers killed inflation. Or better: inflation is dead! Then another war comes in the door and inflation roars like a lion in March.
Here is a Time Magazine article from 1974 which talks about inflation and oil:
Time Magazine, Monday, Jan. 28, 1974
Saved by the Float
While it stunts industrial output and cramps consumers, the oil emergency has also stalled the movement toward reform of the international monetary system. The values of major currencies have been wildly gyrating—some up, some down. The dollar has been rising against other currencies because the U.S. has much more oil than Western Europe or Japan and thus stands to be hurt less severely than they by the energy emergency. In the past six weeks the dollar has climbed about 10% against the French franc, 8% against the German mark and 7.5% against the Japanese yen.Despite the wide fluctuations, international trade and investments have continued to flow without noticeable interruption. Ironically, the reason is that the finance ministers of the 126-country International Monetary Fund were unable to reach agreement on a new monetary system at their meeting in Nairobi last September. Postponing any further action on reform until July, they left in effect the ad hoc system of "floating" exchange rates that has existed since the last big monetary crisis a year ago. If they had agreed at Nairobi to fix rigid exchange rates, the pressures generated by the oil price hike in late 1973 could well have led to huge devaluations and other dislocations and paralyzed the monetary system. As Paul McCracken, former chief economic adviser to President Nixon, says: "It would have been a disaster. Whatever they had agreed on would not have survived the events of the last few weeks."
By contrast, the floating system, which allows exchange rates to be set mostly by supply and demand, absorbed the fluctuations with relative ease. Because the full impact of the oil price increases is still not known, the IMF'S Committee of 20—which is dominated by the industrialized nations that call the shots in monetary affairs—agreed at a meeting in Rome last week to put off indefinitely any plans to fix firm currency exchange rates. Even the French government abandoned its usual allegiance to fixed rates. It decided to stop propping up the value of the franc, which it had done by spending its foreign currencies to buy francs. Now the franc will probably decline.
OK: several things are obvious immediately. First, the 'floating exchange rates' which the US launched so suddenly when we dropped the gold standard totally, was AD HOC. I would suggest, this eternal temporary condition has put us into HOCK and ADDED to our principal we owe the world! Today, a defeated people accept the present, evil, destructive system as a good thing that works. But it doesn't work! Indeed, when the US foisted this upon the unexpecting world, we assured everyone, it was only for the nonce, not forever.
Welcome to eternity! Note how Time magazine admits that a fixed rate would not have survived the Arab oil boycott! HAHAHA. Most of my life, I have argued endlessly with fools who try to pretend that the oil price hikes have nothing to do with inflation. They even innocently echo the lying bastards of the Federal Reserve and Friedman and his other buddies such as Keynes, claiming that only the central banks can create inflation!
Well, they certainly can. BUT they often do this in response to the economic stresses caused by wars and oil. And the very toxic oil wars are the main wars we have had since the Vietnam war defeat. The central bankers flood the markets with dollars when dollars are moving to OPEC. We saw this repeatedly and today it is happening just like all the other times. They hope to dilute and degrade the dollars sent overseas.
Time, 1974:
While a monetary crisis has been avoided so far, international trade and payments problems are looming. The Organization for Economic Cooperation and Development predicts that the industrialized countries will have to pay $50 billion more for imported oil in 1974 than they did last year. Thus, instead of running up a combined trade surplus of $15 billion, as expected before the oil emergency, these nations could have a trade deficit of $20 billion to $25 billion. U.S. officials, including Treasury Secretary George Shultz, believe that the current sky-high prices will exact such a toll on the world economy that "something has to give." Shultz last week urged the oil-producing nations to cooperate with the rest of the world in reducing prices and "scaling down the magnitude of the financial problem."Some countries might still attempt to cushion the blow to their economies by sharply devaluing their currencies or trying to expand vastly their exports to other hard-hit nations while restricting their own imports. The result, warned IMF Managing Director H. Johannes Witteveen last week, could be a resurgence of old-fashioned protectionism and a devastating trade war.
The currency and trade problems could be eased if oil-producing countries were to put much of their new wealth back into the economies of industrialized nations. Witteveen proposed that the Arabs invest in the IMF itself. The IMF could then lend the money to Western nations or to poorer countries, helping to set their payments balances in order. These complex issues will take months to work out. In the meantime, it appears that the float will become a semipermanent fixture in the international monetary system.
HAHAHA. The Arabs give their money to the central bankers of the IMF who were...CIA agents! You know, even back then, the Arabs knew about the CIA. I assure all readers here, they knew. I know they knew because of my own family. Heh. Many foreigners were not stupid. Particularly kings and such like. They knew that the Americans coming to them in friendship were often shipped out by the CIA. And they would play along. It was all one big joke. Now, they own the CIA, except for the Israelis who also own the CIA. The CIA is now very fractured and at war with itself and is utterly useless to the US.
Note the clarity of this article! They said, countries would devalue their currencies to deal with the oil price hikes! And who did this? The US itself! Wow! This was what Bretton Woods was all about. The US couldn't debase the dollar vis a vis the Saudi currency. The Saudis barely had a banking system back then. They have one now: OURS.
Back then, the US devalued the dollar against Germany and Japan. Japan retaliated by restricting imports in various creative ways. They do this with great intensity whenever oil shoots up in price. I remember how they did it back then. By restricting wages and by complaining that imports were inferior. So Japan has a toilet paper shortage while we had Charmin that was so soft over here! They succeeded in this by dragging out negotiations over restrictions and lack of merchant outlets, each step of these negotiations taking years and years to conclude. Then new barriers rise right behind the ones negotiated away.
The US simply inflates its way out of these monetary wealth transfers. Only this time around, the Arabs have control of our banking system so this misses its target. We hope this will hammer China but China isn't stupid, either. They are cooperating with the Arabs to translate US dollars into ownership of the US itself. Doesn't it make us all sad, reading these old articles? It shows how custom grows out of desperate measures that everyone knew was wrong in the first place!!!!
Price Council Fears New Inflation Surge; Gasoline and Heating Oil Cited 11 Percent Food Rise Expected Reagan Aides See Quick End
WASHINGTON, Dec. 4--Rising prices for food and energy are likely to cause a new acceleration of inflation that will last well into next year, the Administration's inflation-monitoring agency said today in an unusually pessimistic appraisal.
Here it is again, in an old article from 1980. All these articles admit that oil has something to do with inflation. I would suggest the 'floating' dollar sinks like a rock in retaliation whenever there is a hike in oil prices! And the Arabs know this. This is why the present sinking of the dollar is failing miserably. They have had half a century to think of ways of retaliating.
Germany Battles Its Recession; West Germany's Battle Against Recession Bundesbank Is Firm on Rates Jobless to Top 1 Million Trade Unions Are Critical
Despite the clouds gathering over the economy and growing election pressures, officials in Bonn and bankers in Frankfurt are staying with a policy of tight money. Paying West Germany's dramatically higher oil bills is taking top priority.
HAHAHA. Class, what does Germany do every time the US drops the value of the dollar when oil price hikes cause 'inflation'? What are they doing this last 5 years?
Strengthening their home currency! This way, oil inflation is moderated! Why does Germany do the exact opposite of the US?
They have very high taxes on energy. So they have a cushion. The US has low taxes and deep debts. Back in 1974, our debts were manageable but we wanted to buy more and more oil so we let our debts run out of control. So our only weapon against high oil prices is to drop the value of the dollar. But this backfires! These days, the wily Arabs insure oil goes up even more. So, the more we kill the dollar, the more oil prices kill us. I don't think this is working and we should ask the Germans what to do next.
'Invade Russia and France!' they might say. Heh.
Unfortunately, many educated commentators have not learned this important truth. One of these is Robert Samuelson, who wrote in the Washington Post (“The Upside of Recession?” April 25) that government subsidies can increase inflation and that recessions can reduce it. But that ain’t so.To understand Friedman’s aphorism, let us consider this thought experiment: Suppose tonight, as we sleep, Harry Potter flies across the country and waves his magic wand to cast a money-doubling spell. The spell has no effect on the amount of goods and services; it affects only money. Every nickel becomes a dime, every quarter becomes a 50-cent piece, every dollar becomes two, every ten-dollar bill becomes a twenty, every checking account doubles its balance—in short, the money supply doubles overnight. What would we expect to happen to prices over the next day or two?
Helicopter Bernanke and Bush and Congress have done just that. We are all waiting for the Funny Money™ from the Federal government to wash over the land. Businesses are bracing for this money to come in and so prices are not dropping. If people are smart, they will either buy all of next year's heating oil or some such. Or park the money in some account like buying gold or some such. Then they can wait for the inevitable price drops. For this is very inflationary for oil and food and such. In the bitter end, it will not increase 'commerce' it will increase the money spend on survival stuff.
The inability to understand how this fake money feeds the wrong side of the equation is the whole problem with our pundits and rulers. They want to believe there is one sort of inflation. There is not. We have 'asset inflation' when easy lending encouraged by bankers is handed out like candy and then we get periods when the government gives lending to banks who hand it to speculators! And THEY bid up the price of things we need to survive, not houses, TVs or cars. No, it is food, fuel and medicines they bid up.
So what does cause inflation? Well, what or who increases the money supply? Central banks do. In the United States, the Federal Reserve System (the Fed) controls the money supply and thereby causes any inflation that occurs.Let us look at some of Samuelson’s specific points. He implies that high oil prices are driving inflation when he writes, “We all know about oil. Prices are about $60 a barrel,” and he asserts that government spending drives inflation when he writes, “[T]he government’s subsidies for corn-based ethanol are worsening inflation.” Samuelson is surely correct that government should not subsidize ethanol and thereby push up the prices of corn and all things made with corn. But high oil prices and government spending on ethanol do not change the money supply, so they cannot change the level of prices.
Surely higher prices for oil and corn drive up the prices of goods and services produced using oil and corn, such as transportation and many foods, so we should expect to see higher price levels in those sectors of the economy. But inflation is an increase in the prices overall, not in just some sectors. If the prices of transportation and food rise, then the prices of other goods and services must fall unless more money flows into the system. If we have no more to spend in toto, then when we must spend more money on gasoline, we have less money to spend on, say, clothing. This means that clothing makers would have to lower their prices in order to sell their wares; they in turn would have less to spend on cloth, labor, and other inputs, so we should expect to see lower price levels in those sectors of the economy. The higher prices in one sector would be offset by lower prices in other sectors, as long as there is only so much money to go around.
Except this whole analysis is crock. The problem with inflation is simple: prices of necessities go up. BUT NOT WAGES. When this happens, the working class which is the vast majority of people, get beggared. The excess money flows AWAY from the consumers, from the masses and OFF SHORE or to OPEC or somewhere but NOT within communities. So we have the horrors of inflation along with a LOSS OF MONEY CIRCULATION WITHIN THE COMMUNITIES AT HOME.
So Arabs get rich, the US gets poorer. Understanding this is very important. This has nothing at all to do with the money supply and everything to do with the money's direction of flow. And this matters a hell of a lot more. Slight changes in direction of flow has shattering effects. This month, China will cease to pass money out of China and will have it flow into China to pay for the earthquakes. This means the money won't flow to the US. This will change the dynamics of 'inflation' and will be very depressionary. We will have less money at home even as our central bank struggles to make more and more money. Yet we will have inflation of all global markets at the same time. Isn't that lovely?
Culture of Life News Main Page
This is absurd and unreal and it makes me sad, mad and scared beyond anything else:
http://www.bloomberg.com/apps/news?pid=20601103&sid=aZ2IzCD2ZoXY
" May 22 (Bloomberg) -- The market for derivatives expanded at the fastest pace in at least a decade last year as the global credit crisis spurred trading in contracts used to hedge against losses, according to the Bank for International Settlements.
Derivatives, including those based on debt, currencies, commodities, stocks and interest rates, expanded 44 percent from the previous year to $596 trillion, the Basel, Switzerland-based bank said in a report today."
It makes me think of the old saying:
"Things that cannot go on forever, will not"
The beast is not hidden, it's just too big to be recognized. And we are inside it's mouth, right between it's jaws !
Soon, it will bite and swallow...
Posted by: Hakan with the reindeer | May 23, 2008 at 12:43 AM
As I read your article, I am shell shocked; meaning I read and I am stunned, like left immobilized.
You write that some $1.5 trillion of collateralized debt obligations have been written, and an undisclosed amount is kep in off-balance-sheet funds called variable interest entities.
This means to me that the banks balance sheets are worthless because we do not know the extent of losses kept off the income statement and balance sheet.
And to make matters worse, the amount in VIEs could have been been treated as revenue for all we know, this means that their retained earnins is overstated.
And I never knew that Freddie has $32.4 billion in losses that it is keeping off its books; it's insolvent.
And when the article states For will fall short of reaching profitability in 2009, a long-held company goal, that makes me believe Ford is NOT a going concern; and I believe the only reason why it is trading at $7.16 is that it is owned by institutions, such as penison funds, and universities, which are reluctant to sell it.
Had I believed that the TAF, TSLF, and PDCF would have rallied the stocks, I would have bought a position in Ford.
Posted by: Richard | May 23, 2008 at 12:44 AM
Richard, current prices of traded stock are not much more than a shell game or Ponzi scheme, if you will, bankrolled by thousands of cutout Foundations, investor funds and banking institutions, predominantly nominees of the global elite who cause and create the current global scenario, while skimming their profits with every rise and fall of the markets they create, control and manipulate. They participate in this game using "play money", everyone else has to pay with "real money".
It's a stacked deck. Do not play with what you cannot loose. And even if you can afford to play, it's gambling odds. Unless of course you have an inside track, or you go for the long haul, not as a speculator.
Posted by: Carli | May 23, 2008 at 02:12 AM
The USA has multiple internal weaknesses. The VERY WORST is that we have Pandemic Success Compulsion (PSC). Everyone wants to go to school to become an accountant or a lawyer or a school principle. Anybody who actually produces anything is viewed as an utter failure. Manual labor? That is for someone in some distant land, or maybe "illegals." Real Americans do not do manual labor.
I was raised in the very period when this "ethic" took hold. We also have a Pandemic Anti-cooperation Compulsion (PACC). City and suburban people do not cooperate with one another on any level. In fact, they don't even know each other.
Probably most of the population has suffered from social derogation. They have had restraining orders placed, are on parole, on drugs, etc., since they no longer have elementary social skills. They have been atomized.
In the deep rurals (rural areas), you will still find people unafflicted with success compulsion or anti-cooperation compulsion, and there will be less social derogation. But 95% of us live in the American atomic hive culture. We can't physically do anything other than manipulate symbols. We cannot cooperate with each other, because we are not even taught to deal with one another. Now we are being watched by hidden cameras, with more surveillance, new laws will become enforceable. It will become unfashionable to even talk to one another. THIS IS SOCIALLY ENGINEERED HELPLESSNESS. And it has been systematically foisted upon us by the Ford Foundation types.
But Guess what? The Chinese are now taking it to the next level: Techno-feudalism! The following article is a MUST-READ!:
Rolling Stone
China's All-Seeing Eye
((----- Copy & Paste - W/O The Line Breaks -----))
http://www.rollingstone.com/politics
/story/20797485/chinas_allseeing_eye
With the help of U.S. defense contractors, China is building the prototype for a high-tech police state. It is ready for export.
by Naomi Klein
Posted May 29, 2008
«American commentators like CNN's Jack Cafferty dismiss the Chinese as "the same bunch of goons and thugs they've been for the last 50 years." But nobody told the people of Shenzhen, who are busily putting on a 24-hour-a-day show called "America" — a pirated version of the original, only with flashier design, higher profits and less complaining. This has not happened by accident. China today, epitomized by Shenzhen's transition from mud to megacity in 30 years, represents a new way to organize society. Sometimes called "market Stalinism," it is a potent hybrid of the most powerful political tools of authoritarian communism — central planning, merciless repression, constant surveillance — harnessed to advance the goals of global capitalism.»
It should be observed that these ant-farm cultures are arising at the very top of the Hubbert Peak Oil syndrome. Some of you probably know that I like to think in terms of Primitive Economics, which is actually a personal hangup, I suppose. I don't think in terms of money, interest, derivatives, etc. I think in terms of psychology and physical resources. The thing about this Peak Oil is that ENERGY IS ADDICTIVE. If energy becomes even slightly less accessible, this will have a non-linear "exponential" DEVASTATINGLY DESTRUCTIVE effect on the ant-farm hive cultures. Without energy they will die. And their populations, which cannot cooperate without authority from above, and are atomized, and derogated WILL NOT HAVE THE ABILITY TO ADAPT!
They will go insane and die.
That is why energy is very important right now. Scary, huh?
Posted by: blues | May 23, 2008 at 02:35 AM
Actual photo of the Shenzhen Hive itself:
((----- Copy & Paste - W/O The Line Breaks -----))
http://www.dailygalaxy.com/photos
/uncategorized/2008/05/21/shenzhen2_2.jpg
Posted by: blues | May 23, 2008 at 02:58 AM
While I would love that this whole mess is just a financial mess I think peak oil has something to do with it.
My predictions:
US will go throw a URSS style collapse.
Nuclear plants will be build.
A black market for US nuclear material will emerge.
Most countys will be in war like economy or a communist economy with rationed resources.
I don't see a WWIII.
Posted by: andrei | May 23, 2008 at 06:01 AM
Hi! I had to respond the this: " all Canadians are singing 'O, Canada, We are rich" I live in Edmonton Alberta, Canada. Our pump price for gas went from $1.24 a litre ($5.64 a gal) to $1.29 a litre ($5.86 a gal)!! Nobody here is cheering very much. The little people here ie: most of the population gets no benefit from the rise in price. Only the large corporations do.
Like our American cousins our cost of living is soring. Food is going up every week. Housing costs accross the board have gone up 300% in the last 3 years. Never in the 50 years I have lived here have I seen the homeless situation so bad. We actually have hidden Hooverviles! Not just an American problem.
All the manufacturing jobs that paid a good salary vanished. Service jobs that don't pay enough to cover the rent on a one bedroom apartment are in abundance. I guess that is what they call the booming Alberta economy. How many people have the skills to go up north and work at the tar sands? Never mind the cost of living up there will eat up most of your salary.
On a lighter note I enjoy reading your blog.
Patricia
Posted by: Patricia | May 23, 2008 at 06:19 AM
Thanks for the information, Patricia.
You are all suffering from global inflation as all the oil pumping nations have this. This is due to the US printing money for export. We always do this in order to get energy without exporting goods.
Europe is not doing this, by the way. Japan is doing this via proxy, through the dollar.
The 'little people' across the entire earth are being asked to fix the US oil addiction financial problems via reduction in our living standards. This is what inflation is in the end.
About the Derivatives Beast: I missed that Bloomberg story. I predicted it would DOUBLE EVERY YEAR and indeed, grow even faster.
When it was at $500 trillion, I was horrified. So now it is over a quadrillion dollars? If that doubles every year it will become as big as the entire universe. Because it is being compounded, not just linear growth. A thing that doubles in size every cycle goes from half full to full in one time cycle. And nothing ever goes to infinity.
Posted by: Elaine Meinel Supkis | May 23, 2008 at 07:27 AM
Well Patricia I’m afraid I’ll have to disagree with you pretty much in total. Energy prices are not driven by local conditions in the Edmonton market or even the Western Canadian market. We’re locked into a market driven supply demand schema, good or bad regulations and controls have been abandoned and deconstructed broadly. There is no public pressure to re-instate nationalization of resources or increased regulation at this point (unless you talk to someone from Eastern Canada, but they can’t change the constitution unilaterally, can they?).
Yes, oil companies are raking it in but so is the provincial government. If you’ve been checking the headlines and government WebPages lately you’ll see that provincial revenues and expenditures are at record rates (again), this is your oil revenues in action. We’ve got the highest provincial expenditures per capita in the country and that includes health care. Even though you don’t have to go far to hear about difficulties in the health care arena, believe me these are minor compared to what would be experienced with revenue shortfalls in the provincial arena.
Housing costs in the Alberta market cannot be accounted to a single cause, it certainly cannot be laid at the feet of oil affluence alone. Housing costs have risen in unison with American and European markets for the run up. Deflation in values has not as yet met with experiences in other parts of the world but signs are that this could easily be triggered. The primary differentiation in the Alberta market has been 8 – 10 years of net in-migration causing housing market pressures and specifically oil affluence causing up-scaling of accommodations. The up-scaling aspect has pretty much run its course and concluded approximately Aug. ‘07. Any continuation of net out migration as experienced in the early part of this year will have a drastic effect on pricing in the housing market.
Food costs are a global problem and are not unique to Alberta therefore with our energy affluence and the stronger economic Canadian position due to demand for our resources and the organization of our society we are in a better position to deal with this issue. We really aren’t in a position to complain in comparison to the majority of humanity.
I think you’ll be hard pressed to find any of the social agencies will disagree that net in-migration of people trying to over the last 8 – 10 years has not increased the numbers of people in the requiring assistance, these increased numbers are not indicative of increased unemployment, far from it. As for working poor being unable to get accommodation, this happens every single Alberta boom, for that matter it happens in just about every location there’s an economic boom. It comes with the territory. Check out the dormitories in China for wal-mart production workers if you think we have it so bad. People around here won’t even accept to live like that, they’ll demand the government handout first. We’ll be the first people in history to repair social ills with money? Hardly.
Patricia you must be blind, manufacturing jobs have vanished? Come on, really. I go to Ft. McMurray frequently and every single time during daylight hours I pass 3-12 huge manufactured modules heading north on Hwy. 63. Take a look and the module assembly yards in south Edmonton and see how much steel is there. There’s one off 17th street north of Sherwood Park Fwy. Go take a look if you don’t believe me. There’s literally 100’s of billions of investment in upgraders in the industrial heartland and the corridor to the extents of Ft. McMurray. I recently interviewed for a project coordinator position at the latest Scottford upgrader, they need 600 people for that projected construction alone, not even considering adjacent projects. Projects are slated for the next 10 – 15 years, these are on the books and approved now. We’re talking 100’s of billions of dollars here. Costs for us to rebuild a small high tolerance gear pack has gone from $15,000 to $35,000 over the last year, that’s due to demand. Check out the manufacured home businesses, the one in Barrhead is bringing in Chinese temporary workers for crying out loud!
Let’s get real, I travel the country frequently, the level of affluence here is astonishing. You can’t drive for two minutes just about anywhere in Alberta without seeing a 4 door mega ½ ton jacked up with flashy chrome monster wheels. Get out of the city, take a look at the opulent houses in remote rural locations, I drive past these houses constantly; they can’t be supported by a rural economy. People are rolling in cash; the help wanted signs are still everywhere and yes this is due to our resources. Look at all the trucks driving around Edmonton with business signs on the side for home construction and renovation, there everywhere.
You say you’ve been in Edmonton for 50 years, fine; I’ve been here my whole life. I remember struggling to try and find a job in the mid eighties, I remember when people were handing there house keys to the banks and having to auction their businesses, I worked in Nisku when it was a ghost town. Alberta’s still rocking with no end in sight despite frayed edges of the social structure.
Posted by: Canuck | May 23, 2008 at 09:05 AM
To Elaine, I would like to say that we Canadians (as I sense the feeling after studying it for most of eighty years) DO NOT HATE AMERICANS but have a profound sense of companionship with them. It is the elite wealth-accumulators of both countries that are dragging us down at an ever increasing speed.
To Patricia, I do commiserate with you, but at least in Alberta your provincial sales tax is zero, ours in Ontario is 8% on almost everything. For a century, Ontario was the driver and support of the Canadian Confederation, but now our manufacturing industry is rapidly draining away and we are becoming a "have not" province looking for a handout.
Posted by: Jim Smith | May 23, 2008 at 09:12 AM
Ahhh, some real gems over at http://market-ticker.denninger.net/. I especially like the quote about being 'all-in'.
Posted by: RobG | May 23, 2008 at 09:15 AM
To: Patricia and Canuck. You are both right. Re-read the story of the six blind men and the elephant!
Posted by: Jim Smith | May 23, 2008 at 09:21 AM
Jim Smith:
Canada is experiencing economic displacement. I would dare to say one that was greatly anticipated in Western Canada during the 70’s oil boom. This was deferred by global economic conditions and exacerbated by the National Energy Program.
Frankly Alberta was poised to take advantage of a transference of economic power during the 70’s and we were not particularly surprised that the Eastern Canadian establishment would take a position to block and prevent it from happening.
Due to Globalization and deregulation of energy markets Central Canada is unable to effect this transference of economic power at this time, either by legislation or restriction of credit.
Posted by: Canuck | May 23, 2008 at 09:53 AM
Generally speaking all commodity markets love easy money and hated the gold standard. History is very clear about this.
What happened when first the British then the US empire collapsed due to war costs, the pro-gold bankers gave up and joined the commodity people and turned everything in to commodity markets.
Posted by: Elaine Meinel Supkis | May 23, 2008 at 10:59 AM
ELeine,
Please your comments on this:
http://www.globalresearch.ca/index.php?context=va&aid=9042
http://www.globalresearch.ca
/index.php?context=va&aid=9042
Posted by: PJSV | May 23, 2008 at 11:31 AM
A must read on oil manipulation. The usual suspects of price rigging are: Goldman Sachs, JP Morgan/Stanley, Citigroup, Deutsche Bank. Excerpts from asiatimesonline:
Oil price mocks fuel realities
May 24, '08
By F William Engdahl
"As business and consumers consider the implications for them of crude oil selling at US$130-plus per barrel, they should bear in mind that, at a conservative calculation, at least 60% of that price comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York Nymex futures exchanges and uncontrolled inter-bank or over-the-counter trading to avoid scrutiny...The hoax of "peak oil" - namely the argument that oil production has hit the point where more than half all reserves have been used and the world is on the downslope of oil at cheap price and abundant quantity - has enabled this costly fraud to continue since the invasion of Iraq in 2003, with the help of key banks, oil traders and big oil majors.
Washington is trying to shift blame, as always, to Arab oil producers and the Organization of Petroleum Exporting Countries (OPEC). The problem is not a lack of crude oil supply. In fact, the world is in over-supply now......The US government's Energy Information Administration (EIA) concluded in its most recent monthly Short Term Energy Outlook report that US oil demand is expected to decline by 190,000 barrels per day (b/d) this year.......
CHINESE CONSUMPTION, the EIA says, far from exploding, is expected to increase this year by only 400,000 barrels a day. That is hardly the "surging oil demand" blamed on China in the media. Last year, China imported 3.2 million barrels per day, and its estimated usage was around 7 million b/d total. The US, by contrast, consumes around 20.7 million b/d.
That means the key oil-consuming nation, the US, is experiencing a significant drop in demand. China, which consumes only a third of the oil the US does, will see a minor rise in import demand compared with the total daily world oil output of some 84 million barrels, less than half of one percent of total demand.
Big new oil fields coming online
Not only is there no supply crisis to justify such a price bubble. There are several giant new oil fields due to begin production over the course of 2008 to further add to supply....
In the US, stockpiles of oil climbed by almost 12 million barrels in April according to the May 7 EIA monthly report on inventory, up by nearly 33 million barrels since January. At the same time, MASTERCARD'S MAY 7 US GASOLINE REPORT SHOWED THAT GAS DEMAND HAS FALLEN BY 5.8%. And refiners are reducing their refining rates dramatically to adjust to the falling gasoline demand. They are now running at 85% of capacity, down from 89% a year ago, in a season when production is normally 95%. The refiners today are clearly trying to draw down gasoline inventories to bid gasoline prices up..
Goldman Sachs again in the middle
The oil price today, unlike 20 years ago, is determined behind closed doors in the trading rooms of giant financial institutions like Goldman Sachs, Morgan Stanley, JP Morgan Chase, Citigroup, Deutsche Bank or UBS. The key exchange in the game is the London ICE Futures Exchange (formerly the International Petroleum Exchange). ICE Futures is a wholly owned subsidiary of the Atlanta Georgia International Commodities Exchange. ICE in Atlanta was founded in part by Goldman Sachs, which also happens to run the world's most widely used commodity price index, the GSCI, which is over-weighted to oil prices.
http://www.atimes.com/atimes/Global_Economy/JE24Dj02.html
Hubbert's Peak Oil is supported by none other than Matthew Simmons. Simmons is the Chairman of the Simmons & Company International, a specialized energy investment banking firm, and author of Twilight in the Desert...."The firm has completed approximately 600 investment banking projects for its worldwide energy clients at a combined dollar value in excess of $77 billion."
http://www.nps.edu/cebrowski/Docs/energy/Simmonsbio.doc
And according to atimes " friend of Vice President Dick Cheney."
To revise a Thomas Paine quote: All national/global institutions of investment houses and central banks, whether Goldman Sachs, JPMorgan/Stanley or Citigroup, appear to me no other than human inventions, set up to terrify and enslave mankind, and monopolize power and profit."
Hubbert's Peak oil is nothing more than a scam promoted and supported by those who profit on human misery.
Posted by: rockpaperscizzors | May 23, 2008 at 11:49 AM
Wouldn't it be fun if oil was infinite? Except this is IMPOSSIBLE. Oil is nothing except dead things from the past. The earth had limited number of dead things that could be turned into oil via earth tectonic plate movements and the rise and fall of the oceans.
Since we know oil is LIMITED this means...there is a peak! The peak has several features: easy to pump oil is definitely past its peak.
Harder to get oil is approaching its peak.
Very hard to get oil is barely begun to be used. There is a lot of oil under Greenland's glaciers and perhaps Antarctica.
BUT getting it is increasingly expensive! The longer we seek oil, the more expensive it is to get it out of the ground, process it and move it.
Any one who reads nuts online like Engdahl, for example, can believe in the Tooth Fairy, Santa Claus and infinite oil.
The Peak of EASY oil is already here and going fast! End of story. Fooling yourself about this is not going to help survival chances.
There is speculation about oil but this is due to an artificial restriction on oil because the US is making it as impossible as possible for Iran to sell oil on the open markets. Every time the US prevents either Iran or Iraq from selling oil, world oil prices shoot up.
We want to fix this? We stop hassling Iran.
Posted by: Elaine Meinel Supkis | May 23, 2008 at 02:01 PM
I have concluded that the Hubbert's Peak Oil is substantially correct, which basically says that petroleum is a finite resource. The only question, in my view, is whether there is much more oil left in the earth. Some people talk about new, or undisclosed oilfields. Maybe. Others talk about abundant hard-to-get oil, such as Russian ultra-deep wells, or deep water wells. maybe, maybe not, and it would be hard-to-get.
When it does run out, it truly will be gone. So far, there are no uncomplicated substitutes for oil, and if we are going to prepare for the future, it will be now or never. We need to stop the absurd wars, and begin preparing. The military/industrial complex shows no signs of ending our national protection racket, however.
It would seem that perhaps the only way around the hydrocarbon feast is fusion energy, if we want to keep technology going. But it produces a vast amount of neutrons, which contaminate containers, etc. There is also the fear that one could blow up suddenly. These problems of fusion reactors are far, far more tractable than those posed by fission reactors. It has recently been proposed that small fusion reactors would be even more efficient than large ones. Without some source of concentrated energy, extreme industrial operations, thus technology, will come to a halt. We will never get to fusion after the age of technology ends, so it's now or never.
Posted by: blues | May 23, 2008 at 02:16 PM
Re: Oil
(Just about to post this and notice Elaine and Blues have posted since I started t-y-p-i-n-g this. Have to go out, so no time to rewrite. Will check back tomorrow.)
Engdahl's writings are always interesting. He has also written about abiotic oil, the creation of oil deep in the bowels of the Earth's crust. The theory (traditionally dismissed in the West, but proposed and accepted in Russia) holds that the oil is produced at a deep level and seeps upwards. Our Western supposition that it is of a fossil origin is considered to be based on the observation of fossilised organisms within the oil. We supposed that the oil was a result of the fossils. The Russians thought that the organisms may have fed on the hydrocarbons (bear in mind the life-forms that exist around the oozing fissures at the depths of the ocean rifts) and had been brought towards the surface with the oil. Observations of the moons around Jupiter have detected atmospheres of hydrocarbons and lakes of the same, obviously not the result of mega-herds of dinosaurs!
If abiotic oil is the correct theory, then we can expect near-surface oilfields to have a rate of replenishment determined by their linkage to deeper levels, but we have probably tapped out the highly-pressurised accumulation and probably cannot expect to ever see those withdrawal rates again from the older fields.
Also, because the abiotic oil that we seem to be finding off the shores of Brazil is so deep, the environment and the temperatures are too extreme for this to be cheap oil.
The Hubbert Peak and the Simmons projections are not necessarily negated by the fact that oil may not be the result of hot, squeezed, fauna and flora, or even that it is not a finite resource (the extraction and replenishment rates determine any depletion rate). The peaking is a characteristic of a pressurised vessel (the oilfield) de-pressurising as it is emptied.
We well may find that we have oil still being generated deep in the crust, but this rate may still not be enough to meet our needs at present levels. Who knows?
The reality seems to be that we just have no remotely accurate model of the world oil situation, or even an agreed, proven model for its creation/generation. Even the data from existing fields are often treated as state secrets.
As to speculation: it happens. Prices overshoot and undershoot. That is the characteristic of a control mechanism. Look at any long-term commodities chart. However, it serves a useful, but painful mechanism for adjustment, but it is not long-term unless there is a real problem. The alternative - the possibility of no indication of a problem - is worse. A blatant exploitation, like the Hunt's attempt to corner the silver market - is not for the faint-hearted and is always temporary (the Hunt's were ruined by changes in the margin rules, if I remember correctly).
Fussing over windfall profits and speculation is good theatre, but that's about all. It adds nothing to our understanding.
BTW: Oil is held in oil-bearing rock, in the "pores" of the rock. I once thought that oil (always drawn as a black blob in my geography text books) was just a big lake of the stuff. When I asked the engineers at Schlumberger (to whom I had been demonstrating some control equipment) why the ground didn't collapse when the oil was removed, they all had a really good laugh at my stupidity! Then they showed me a rock core sample they'd drilled out. Ho, hum.
Posted by: Bear of Little Brain | May 23, 2008 at 03:06 PM
Blues: if you have time check out some of the "Free Energy" vids on you tube. "Joe Cell" and "Mayer" (I think)
Also the brilliant Tesla may have harnessed electromagnetic energy, but he was too naive to outwit the vested interests. This EM phenomenon is something which keeps popping up (and disappearing again!)
Must fly
All the best
Posted by: Bear of Little Brain | May 23, 2008 at 03:13 PM
Bear of Little Brain,
I've been reading about the abiotic theory of oil/hydrocarbons. Abiotic is not the accepted Western theory. Western endoctrination and not proven: fossil fuels. Peak Oil is surrounded by the same acceptance/belief/faith endoctrination that protects religion from producing proof of the all knowing all seeing man in the clouds, resurrection, and virgin birth mythology. The belief system of the tooth fairy, Santa Claus, and the the dinosaur of all: fossil fuels. Yes, Virginia, a bazillion dinosaurs perished in a mass grave, aka the Middle East and thus "fossil fuel" was created and now we've entered "Peak OIl."
"The modern Russian-Ukrainian theory of deep, abiotic petroleum origins is not the work of any one single man -- nor of a few men. The modern theory was developed by hundreds of scientists in the (now former) U.S.S.R., including many of the finest geologists, geochemists, geophysicists, and thermodynamicists of that country. There have now been more than two generations of geologists, geophysicists, chemists, and other scientists in the U.S.S.R. who have worked upon and contributed to the development of the modern theory. (Kropotkin 1956; Anisimov, Vasilyev et al. 1959; Kudryavtsev 1959; Porfir'yev 1959; Kudryavtsev 1963; Raznitsyn 1963; Krayushkin 1965; Markevich 1966; Dolenko 1968; Dolenko 1971; Linetskii 1974; Letnikov, Karpov et al. 1977; Porfir'yev and Klochko 1981; Krayushkin 1984)."
two competing theories concerning the origins of petroleum. One theory claims that oil is an organic 'fossil fuel' deposited in finite quantities near the planet's surface. The other theory claims that oil is continuously generated by natural processes in the Earth's magma. One theory is backed by a massive body of research representing fifty years of intense scientific inquiry. The other theory is an unproven relic of the eighteenth century. One theory anticipates deep oil reserves, refillable oil fields, migratory oil systems, deep sources of generation, and the spontaneous venting of gas and oil. The other theory has a difficult time explaining any such documented phenomena.
The notion that oil is a 'fossil fuel' was first proposed by Russian scholar Mikhailo Lomonosov in 1757. Lomonosov's rudimentary hypothesis, based on the limited base of scientific knowledge that existed at the time, and on his own simple observations, was that "Rock oil originates as tiny bodies of animals buried in the sediments which, under the influence of increased temperature and pressure acting during an unimaginably long period of time, transform into rock oil."
Two and a half centuries later, Lomonosov's theory remains as it was in 1757 -- an unproved, and almost entirely speculative, hypothesis."
http://educate-yourself.org/cn/davemcgowanstalinandabioticoil05mar05.shtml
CONFESSIONS OF AN "EX" PEAK OIL BELIEVER
http://www.financialsense.com/editorials/engdahl/2007/0925.html
"The [abiotic] theory is presently applied extensively throughout the former U.S.S.R. as the guiding perspective for petroleum exploration and... there are presently more than 80 oil and gas fields in the Caspian district alone which were explored and developed by applying [this] theory and which produce from the crystalline basement rock [i.e. where there could be no organic source for a fossil fuel]."
http://rongstad.blogspot.com/2008/03/abiotic-oil-theory.html
Personally, I would prefer a society that found alternative energy via, solar and wind that would protect the environment. Gas guzzlers may go the way of the dinosaurs again as they did during Carter's administration. And hopefully, public transportation will become the environment friendly government financed of the future. But then again, that may belong under wishful thinking and fairytales.
Posted by: rockpaperscizzors | May 23, 2008 at 05:27 PM
Good grief. Abiotic oil is idiotic. Oil is made from dead things. It does not come from the mantle. EVEN if it did, we would DIE if we try to tap it. For obvious reasons! The world can't be a ball of energy which we consume. That will kill us. Period.
As for understanding oil peaks: this is when the MOST OIL IS PUMPED. This is when we have seemingly endless oil! The price hikes are, as I keep proving, due to the US talking war, war, war against one of the top oil exporting nations on earth! So this causes uncertainty in markets and thus, price speculation.
Duh.
If the US stops this nonsense, the price of oil will drop by at least $50 a barrel. But we are talking even more about embargoing Iran totally. This will definitely drive oil to over $200 a barrel.
Peak oil is very simple: as new wells are found, old ones cease producing ever faster than the discoveries. We can't look at it as it happens. It is seen in RETROSPECT. One fine day, we all realize, the oil depletion rate is faster than the discovery rate and thus, the end of the Oil Era will be at hand over a 100 year period. Namely, the oil doesn't stop the next day. It slowly gets to be less and less and more and more expensive. Bit by bit. Over many years.
Posted by: Elaine Meinel Supkis | May 23, 2008 at 07:17 PM
This is why I warn everyone to not put off retrofitting for the decline of oil availability. If we prepare for the Peak, this PUTS OFF THE PEAK. See? The more we do smart things, the longer it takes for the peak to arrive.
If we guzzle oil, the Peak will hit very suddenly and we fall off a cliff. The more we prepare, the less hideous the downside of peak oil. I find this concept very simple. But most people think oil peaks=oil shortage. This is false.
Posted by: Elaine Meinel Supkis | May 23, 2008 at 07:20 PM
Another thing: oil comes mostly from dead SLIMY stuff, not 'animals' unless one thinks of algae and dense mats of ferns as 'animals' I suppose.
The oil comes from one sort of rock formation: where there is salt from the ocean flooding once-isolated waters that had millions of years of rotting swampland that was many hundreds of feet thick. This is why there is not oil all over the earth, just in very select places where oceans once were or where land was once at sea level but no longer due to tectonic plate movements. This is also why oil is so good at making other things like plastics, etc. It is organic, not rock.
Just as coal. Coal doesn't need the 'salt dome' to exist. It is also thick layers of rotting plant life that is crushed into coal after being covered by sand or mud [slate and shale] etc. Since it is not liquid, it and be folded by mountain making such as we see in the Appalachians, for example.
But it is still organic, like oil. And we know the coal in the Appalachians is very, very old, from when the first insects came out of the sea and evolved into insects and the first amphibians followed. But coal isn't dead amphibians. It is dead plants. Thick layers compressed brutally.
Posted by: Elaine Meinel Supkis | May 23, 2008 at 07:43 PM
Elaine,
Abiotic oil is not idiotic. However, it is interesting. It is a competing theory that explains oil being found 30,000 ft below ground/sea level in an environment and depth that is not compatible with the "dinosaur" explanation. The Russians have tapped oil at these depths and, apparently, have done the same for the Vietnamese oil fields. Now Petrobras has found oil at similar depths off the coast of Brazil, although the actual reserves have yet to be determined. Basically, we just don't know and cannot agree on what is going on and, as far as I know, have been unable to reproduce oil creation in the laboratory from either theory. However, the mere fact that Petrobras even considered exploring where they did shows that there must be some basic rethinking going on in the oil industry, because those test drillings would not have been cheap. None of this dismisses the possibility of peak oil having occurred or about to occur, it merely changes the way we discuss oil origination and our expectations of how it may be found. A scientific theory being disputed is not exceptional.
I don't disagree on the rest. I just wanted to highlight our lack of understanding.
Posted by: Bear of Little Brain | May 23, 2008 at 08:16 PM
Having read your latest posting, please correct my tongue-in-cheek use of "dinosaur" to "previously living matter". I wasn't being serious in using that word, but it is about as correct as "fossils" would have been.
Anyway, I really cannot claim sufficient knowledge on all this hydrocarbon stuff. I just find alternative theories interesting and prefer not to dismiss them too quickly.
I'll leave the electromagnetic cosmic theory and the notion of an expanding planet for a later day! ;-)
Take care.
Posted by: Bear of Little Brain | May 23, 2008 at 08:34 PM
The Russian claims have NOT been settled by any outside scientists. end of that story.
Also, the Caspian sea area is a part of the planet where the lithosphere has collapsed into the lower levels. This lithosphere has organic materials from earlier eons. See? Geology is not a layer cake, It is folded, curved, tilted and even falling back into the planet. http://elainemeinelsupkis.typepad.com/earth_news/
But the fact remains: NO geologist has proven that oil is NOT organic. Anyone can allege this but proving is a whole different kettle of fish.
I have the Earth News section here that talks about geology a lot.
http://elainemeinelsupkis.typepad.com/earth_news/
Posted by: Elaine Meinel Supkis | May 23, 2008 at 08:54 PM
PS: If you find my wandering notions too far off topic, possibly disruptive, please feel free to say so. There is usually little that I can contribute to your political/economic history and analysis, from which I have learned a lot, so I tend to find myself drawn to the minutiae, like this:
"Namely, when Hitler was hiding like the coward he was…"
Whatever anyone may say about Hitler (no, I'm not a fan), he was not by nature a coward. He was awarded the Iron Cross twice in the Great War for bravery under fire, if my memory serves me. His superior officers considered him recklessly brave. Interestingly, the same was said of the young Winston Churchill. Reckless bravery in battle is not a charge that can be held against the Leader of the Free World, or his VP (or Blair or Brown). We do not need to search the past for our cowards.
Posted by: Bear of Little Brain | May 23, 2008 at 08:58 PM
The question whether oil is of abiotic or biotic origin is irrelevant for the problem of peaking oil production. Regardless whether oil is abiotic or not, the problem is that the rate at which we consume crude oil exceeds by many orders of magnitude the rate at which oil is being produced by mother earth. In a couple hundred of millions of years, there will be again plenty of oil on earth. That oil will be either of abiotic or fossil origin. The problem is that this natural production of oil is too slow in order to sustain the pace of our economy. A myriad of depleted oil fields all over the world is convincing proof that oil, regardless whether of abiotic origin or not, is not being reproduced at a rate fast enough in order for the industrial society to have any sustainable future.
Any discussion of credit is incomplete without taking account the depletion of natural resources of which oil is perhaps the most important. The decline of the real US economy since the early 1970 is in my opinion clearly linked to the fact that US oil production peaked in 1970. As of today, more than 90% of the original US endowment with crude oil is gone (depleted). The occupation of Iraq (and Iran in the future) are acts of desperation by a dying empire.
Posted by: Robert Sczech | May 24, 2008 at 09:18 PM
Hitler hid in a bunker while Germans suffered bombs falling on them and their homes! Total cowardice.
About oil production: it isn't mere 'dead things': it is mostly dead things that aren't EATEN by other living things. In other words, most of earth's oil is from either extinction events or when there were no big animals to eat small creatures or plants. For example, the huge chalk formations we see today were the product of life forms dying and leaving tiny shells behind...because there were no whales to eat them, just for example.
Large filter feeders are all over the ocean ecosystems. If humans kill all of these creatures, the plankton can then peacefully die and create more chalk and oil. But once the large feeders evolved, the masses of dead things dropped dramatically.
It is hard for humans to accept this truth. The extinction events nearly always were due to violent changes in the earth via meteorites and volcanos. So the oil is VERY specific to time and place. It is NOT a continuing process. More oil is NOT being generated by earth processes!
Hard for humans to accept! But we must understand all this if we have even slight hope for the future.
Posted by: Elaine Meinel Supkis | May 25, 2008 at 11:09 AM
Any peat fields that could possibly become oil in the future can do so only if the fields are where oceans can overrun them and cover them with sand, mud and salt. Another very curious factor about oil geology is that these tend to be places where the ocean overruns the land and then evaporates repeatedly or are oceanic areas that dessicate due to Ice Ages, for example. This caps the dead plants and animals with a sealer of salt that allows it to 'cook' over the eons. Unsealed dead things can be crushed into coal, for example.
But this requires them being on land and located where they can be covered by dirt somehow, mostly from eroding mountains...usually, again, during extinction cycles.
Posted by: Elaine Meinel Supkis | May 25, 2008 at 11:13 AM
I came across this article re the causes of oil price increases. Here is the link: http://www.middle-east-online.com/english/?id=25878 The reasoning makes sense to me, but if any here could check it out and give their opinions, I would appreciate it.
Posted by: Paul S | May 26, 2008 at 12:06 PM