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Prepare for a Bumpy Ride in 2017

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After two and a half years of opening up the taps (or rather: not closing them) OPEC has changed course in what is looking to be a gamechanger for the oil market. Market sentiment has shifted and the oil price has gone up. But that doesn’t mean we can go back to the status quo ante, writes geophysicist (ex-Shell) Jilles van den Beukel. Some things have changed permanently. Saudi Arabia’s position within OPEC has weakened, Iran’s has strengthened. US tight oil companies have shown their strength. As a result, writes Van den Beukel, volatility will be here to stay.

OPEC defeated?

Many have argued that OPEC’s decision to cut production on 30 November was a defeat. But was it really?

OPEC (and most of all: Saudi Arabia) over the last two years had been trying to deal as well as possible with the difficult situation that the 2009-2014 high oil price world had created for them.

Would they, from 2014 onwards, have defended price instead of market share, US tight oil production would have risen by about 2 mb/d (million barrels per day) by now (instead of the reduction of about 1 mb/d that actually materialised). The decline from non-OPEC conventional fields would have been 3 mb/d (instead of the 6 mb/d that actually took place). For Saudi Arabia it would have been a repeat of the early 1980s when they did defend price, resulting in a reduction of their production to a level as low as 2.5 mb/d (currently they produce over 10 mb/d) before they gave up.

Even if producers do not fully live up to their pledges, their ability to cheat and take away market share from Saudi Arabia has become limited

Thus, two years of defending market share instead of price has resulted in 6 mb/d lower non-OPEC supply than what it would have been otherwise. The large investment cuts in non-OPEC oil will reduce non-OPEC supply for years to come. That is major progress for OPEC. It has brought supply and demand close to equilibrium in 2017. Now a cut became a realistic option in order to bring on higher oil prices. A cut in 2014 would only have postponed the inevitable and increased the length of the subsequent painful rebalancing period.

They will have been disappointed by the resilience of US tight oil. US tight oil survived by drilling in the very best spots only, increased efficiencies and reduced service industry costs. Furthermore it was saved by their investors and financiers – for whom accepting severe losses was a better alternative than to let them go bankrupt.d85531c2f1fad37_size129_w1200_h677-opec at the helm-slider

In the end, OPEC did regain market share and, more importantly, some of their ability to move markets. US tight oil survived with break-even costs in the very best areas that are now at the lower end of the global non-OPEC cost curve. They both paid a heavy price. But it is high cost non-OPEC conventional oil that has lost the most in this battle.

Why cut now?

The timing of the production cut can be explained by various factors. First and foremost, markets had done their work and supply and demand were approaching a balance, enabling a meaningful cut.

Secondly, all producers were troubled by budget deficits. A country like Venezuela had been desperate for a deal. Unfortunately for Venezuela it has no clout whatsoever in OPEC. The defining push for the agreement was given by Prince Mohammed bin Salman (Saudi Arabia’s de facto ruler) and Vladimir Putin.

The situation within their countries is such that both have good reasons to cut oil production. Bin Salman wants to solidify his grip on power. For that he needs to limit hardship for the Saudi middle class and provide hope for the rapidly growing (and increasingly unemployed) number of young Saudis. Saudi Aramco’s planned IPO will benefit from higher oil prices. Putin also wants to limit economic hardship for the Russian population. He cannot be as indifferent to the well-being of the Russian population as Stalin once was; his grip on power is more secure if he keeps the Russian middle class happy.

Iran seems in a better position to overcome periods of low oil prices than Saudi Arabia. Its economy, hardened by years of sanctions, is better equipped to do so and is less reliant on oil income

Thirdly, Saudi Arabia needed to see pledges from other producers (Iran and Russia in particular) to be able to go ahead. These others producers needed to have confidence that limited cuts will lead to a meaningful increase of the oil price – something that the initial market reaction in September after the Algiers talks provided to them. Reaching an agreement in Vienna on 30 November then became a must; failure would have implied a substantial price drop, something they could ill afford.

Finally, what should also be considered is that OPEC spare capacity is at its lowest level since 2008. Iran is back at its pre-sanctions level of production and cannot raise production any further in the short term. Russian production is at a record level. Even if producers do not fully live up to their pledges, their ability to cheat and take away market share from Saudi Arabia has become limited. Saudi Arabia can be satisfied that cuts are shared. Iran and Russia can be satisfied as well; their pledges are not a great hardship for them.

What has changed?

Yet this does not mean that OPEC is back to where it once was. Some things have changed permanently.

Saudi Arabia has lost clout within OPEC. Iraq and especially Iran are challenging its dominant position. Their combined production starts to approach that of Saudi Arabia. Both have large undeveloped oil reserves, which can be developed at low cost, and are still producing way below their potential. In the long run they are likely to further ramp up production. After having been sidelined for a long time due to wars and sanctions both are now reclaiming their natural position in the OPEC pecking order. In the long term, reaching an agreement within OPEC will not become any easier.

Let us put things into perspective. The oversupply frequently described as a glut was no larger than about 2% of global production, at its worst

Iran in particular by now seems in a better position to overcome periods of low oil prices than Saudi Arabia. Its economy, hardened by years of sanctions, is better equipped to do so and is less reliant on oil income. Saudi Arabia’s pivotal role in OPEC was based on its being the largest producer by far, its ability to maintain a substantial spare capacity and its large financial reserves that (in combination with a relatively small population) enabled it to better sit out prolonged periods of low oil prices. Some elements of this dominance are now starting to fall away and Saudi Arabia is no longer the sole pivotal nation within OPEC that it used to be.

Oil has always been linked to politics. And Saudi Arabia has also lost political clout in the Middle East. The Saudi’s are struggling to deal with a Shia encirclement. Their economy is solely dependent on oil and is not performing well in comparison with countries like the United Arab Emirates (UAE). The religious establishment is a blocker when it comes to reforming education and increasing the role of women in the economy. Their special relationship with the USA is deteriorating now that the USA is moving towards energy independence and more reluctant to prop up fundamentalist regimes. In the meantime Russia has gained influence, by intervening in Syria and by playing a key role in brokering the recent OPEC agreement.

For a long time Saudi Arabia has been a source of stability in the region and Iran a source of instability. That is changing now.

Where do oil prices go from here?

All ingredients seem to be in place to keep oil prices in 2017 at a systematically higher level than in 2016. Compliance with the agreement will vary among the different producers, but the 700,000+ b/d cut from Saudi Arabia and other members of the Gulf Cooperation Council (Kuwait and the UAE) in itself is sufficient to bring supply and demand approximately into balance. Even if the level of compliance of other producers will be as low as 50%, the cuts will still lead to a meaningful reduction of oil inventories.

As oil producers see that the deal delivers the promised rise in oil prices, they will be less likely to cheat – at least initially. The pledged, gradual cut from Russia involves little more than natural decline and a reduction or freeze of all short term projects.

It does not take that much oversupply to send oil prices plummeting. In the same way, it does not take that much undersupply to send them through the roof

Yet volatility will be here to stay as stories of cheating, outages and potential production increases from uncapped Nigeria and Libya abound. Notes to refiners about shipment reductions will be duly leaked to the media (something that has already started). But throughout the year we will be seeing a return to oil prices that are closer to the long term sustainable price of oil: that of the marginal non-OPEC barrel, somewhere near $60-80 per barrel. 

160928163540-opec-algeria-1024x576And let us put things into perspective. The oversupply frequently described as a glut was no larger than about 2% of global production, at its worst. OECD oil inventories have hovered around 65 days of supply in 2016; little more than 5 days above the long term average. It does not take that much oversupply to send oil prices plummeting. In the same way, it does not take that much undersupply to send them through the roof. One should not blame analysts too much for not being able to predict the oil price, but a bit of blame for underestimating uncertainties might be justified.

How will US tight oil react?

A main source of uncertainty is how US tight oil will react to higher prices. Tight oil’s shorter cycle times and faster reaction to changes in oil price compared to conventional oil may keep a lid on oil prices. But to what extent?

If we compare a recent global cost curve of oil projects with a 2014 cost curve there are two developments that stand out. Firstly, the average break-even cost has decreased substantially, from about $70 per barrel in 2014 to about $50 per barrel today. Secondly, over the last two years US tight oil has seen the biggest cost decreases and it has shifted towards the left (more competitive) side of the global cost curve.

For those US tight oil companies that have survived and that have quality acreage there now seems to be a great promise for the future: break-even prices near the lower end of the global spectrum of opportunities and huge in-place volumes. This is the background for the recent outperformance of the share price of companies active in the Permian (the US region with the lowest break-even prices). Break-even prices for the very best areas have dropped to about $30 – $40 per barrel. As a whole the US tight oil industry is estimated to need about $55-$60 per barrel to maintain a flat production level.

US tight oil will indeed keep a lid on oil prices. But to a smaller extent than what is often assumed

There is one snag: break-even prices quoted above are for current cost levels of the service industry, widely seen as being unsustainably low. How much will these costs increase once that activities pick up in earnest? Rystad Energy estimated that for the Bakken about 40% of cost savings were structural (faster drilling, better well production) and about 60% cyclical (primarily lower service industry costs, to a lesser extent drilling in the very best sweet spots only). When activities pick up significantly, break-even costs are expected to increase by about 65%. Current break-even costs for the very best sweet spot areas would be expected to increase from $30 to $50 per barrel. Non-core areas (that currently see little activity) could see an increase from $50 to $75 per barrel. Other studies have reached similar conclusions.

Quoting from a recent panel discussion at an event of the Society of Petroleum Engineers (SPE): “If oil prices stay below $55/bbl, equipment availability can be relatively smoothly managed in the Permian. But at prices from $60/bbl to $70/bbl all of a sudden all of the other plays come back, and then for sure we reach the threshold of equipment not being available”.

I feel that many analysts overestimate the ability of US tight oil to act as a swing producer. Firstly, things take time. Hiring drilling crews to man the often less efficient rigs that have now been cold stacked takes time. Hiring fraccing crews takes time. Getting permits takes time. It took two years before the effect of low oil prices on US tight oil production had materialised in full. Secondly, costs of drilling and fraccing follow the oil price. US tight oil will indeed keep a lid on oil prices. But to a smaller extent than what is often assumed.

by

Jilles van den Beukel worked as a geologist, geophysicist and project manager for Shell in many parts of the world. This paper was first published on his blog JillesonEnergy.

Energy Post



79 Comments on "Prepare for a Bumpy Ride in 2017"

  1. Cloggie on Wed, 11th Jan 2017 5:25 am 

    End of natural gas age:

    https://www.nrc.nl/nieuws/2016/12/07/einde-van-het-gas-tijdperk-5684291-a1535389

    An energy accord has been decided upon in December in Dutch parliament that envisions that the existing natural gas network originating from 1960 will be completely replaced by geothermal networks in the coming 30 years. Holland will be once again one giant building pit in making this happen.

  2. Davy on Wed, 11th Jan 2017 6:09 am 

    Kathy, well said and again I am very happy to have a reasonable and effective American here commenting a point of view very close to mine. This site is replete with virulent anti-Americans most from the hypocritical Anglosphere. World history revisionist abound here. Conspiracy addicts ply their trade. Racism is a horrible shit stain here. Climate deniers and alternative energy fantasy buffs spew advertising. Asiaphiles preach war and hate. If you comment on reality your claim that is reality based and tests the reality of statements will be considered doom and gloom nihilism. This is what reasonable, modest and humble comments face. It is a battle I have faced for years now. I have had 5 people attack me at once in nasty gang-bangs. Some of the worst have faded away but more will come. This is the nature of the world and why I have little optimism. The blame and complain is so great anymore I doubt there is much room for global cooperation against such huge challenges. Hypocrisy and not in my back yard so great as to be too much to overcome.

    Yes I am an asshole and a hypocrite because I deal with them every day. I am not the smartest here by a long shot and the reason I stay is I continue to learn here despite the awfulness of many comments. If you go to war you are going to kill people. I have blood on my hands in this respect but that is not what I want. Kathy don’t weaken this is what this board is about and why you are so important here. It is a great intellectual challenge especially if you are an American with so many who hate us. We don’t have a corner on the truth but we are searching humbly for it. We have to get the truth out now because the end of times could be near.

  3. Davy on Wed, 11th Jan 2017 6:38 am 

    “U.S. Intelligence Agencies Have No Clothes”
    https://libertyblitzkrieg.com/2017/01/10/u-s-intelligence-agencies-have-no-clothes/

    “The true patriotism, the only rational patriotism is loyalty to the nation all the time, loyalty to the government when it deserves it. – Mark Twain, The Czar’s Soliloquy”

    “The significance of the above cannot be overstated. U.S. intelligence agencies, like so many other national institutions, have lost nearly all credibility in the eyes of the American public. The list is long, but includes economists, politicians, the mainstream media, central bankers, the financial system, and a lot more. The loss in credibility is well deserved and has nothing to do with Russia. Rather, it’s a function of a disastrous 21st century outcome for U.S. citizens both at home and abroad. A result that was achieved under eight years of Republican rule and then eight years of Democratic rule. The results were the same whether a donkey or elephant was in charge, because the people determining policy behind the scenes never really changed (same economists, central bankers, intelligence officials, etc), and the people selling the catastrophic policies to the public definitely never changes (mainstream media and its worthless pundits).”

    “So here we stand at a moment where trust in essentially all U.S. institutions is at a well deserved all-time low, and the best the establishment can come up with is to blame Russia. Even worse, those pushing the whole “Putin is to blame for everything” conspiracy theories, consistently refuse to back up their assertions with any evidence whatsoever. In fact, with each passing week the case looks increasingly flimsy, with the latest declassified document issued Friday being particularly suspect. Even many of those largely convinced of Russia’s meddling in the U.S. election admit the most recent report was pathetic, embarrassing and proved absolutely nothing.”

    “To conclude, I certainly think it is important to know if the Russian government hacked the DNC/Podesta and then handed that information to Wikileaks. Likewise, such an explosive claim necessitates publicly available evidence given the horrible track record of U.S. intelligence agencies. Until such evidence is made available I, like countless other Americans, will tend to believe Wikileaks, which has a track record of proving its claims and being accurate, as opposed to U.S. intelligence, which doesn’t.”

  4. Davy on Wed, 11th Jan 2017 7:07 am 

    “China’s Exorbitant Detriment (Mirror Image Of America’s Exorbitant Privilege) Is Costing It Dearly”
    http://tinyurl.com/glkgozk

    “The so-called Exorbitant Privilege of the United States, the power to conjure the world’s primary reserve currency, is reflected in the unique combination of being deeply in debt to the rest of the world (that is, having a massive negative net international investment position, or NIIP) while earning far more income abroad than it pays out in interest (that is, having massive positive annual net investment income, or NII). The U.S. NIIP averaged negative $7.5 trillion over FY15/16, while its NII was positive $167 billion, as shown in the top left of the graphic below. Basically, foreigners are willing to accept a trivial return to hold dollar-denominated assets.”

    “Far less well known is the mirror-image of the Exorbitant Privilege, or what we might call the Exorbitant Detriment. It is, not surprisingly, borne by China. It is, to some extent, the price the country bears as the world’s largest holder of dollar-denominated central bank reserves. Reserves account for half of China’s foreign assets, of which around 40 percent are invested in low-yielding U.S. Treasury securities. But it also reflects the fact that China is lending to the rest of the world at paltry rates. Chinese government institutions lend to Chinese, as well as foreign, firms operating abroad far more cheaply than alternative lenders. This reflects the Chinese government’s efforts both to subsidize its companies and to strengthen economic ties with resource-rich countries in, for example, Africa and Latin America. China’s Exorbitant Detriment is reflected in an NIIP of $1.6 trillion and NII of negative $80 billion in FY15/16.”

    “Can China continue supporting its Exorbitant Detriment indefinitely? Not if it wants to prioritize a halt to reserve sales, which have been necessitated by capital outflows. Negative investment income reduces the current account surplus, and therefore the amount of capital that can leave the country before the central bank has to match outflows with reserve sales. If China’s investment income balance had been zero over FY15/16 it would, all else being equal, have been able to absorb an additional $80 billion of capital outflows before having to sell reserves. This is equivalent to 17 percent of the actual decline in reserves over this period. China’s reserves fell to $3 trillion in December and, as we pointed out in an earlier post, could actually fall to what the IMF reserve-analysis rubric would deem dangerously low levels by summer if outflows continue at the pace seen over the last three months. China can slow this decline by demanding higher returns on its lending abroad, but this will require sacrificing its efforts to subsidize its companies as well as those aimed at putting dollars to the service of geostrategic objectives.”

  5. Cloggie on Wed, 11th Jan 2017 7:41 am 

    US will devalue debt and dollar:

    http://usawatchdog.com/banks-not-going-broke-they-are-broke-rick-rule/

  6. pointer on Wed, 11th Jan 2017 7:42 am 

    Peakoil.com posters: All these problems you so earnestly write about here will wither into irrelevance once you realize they are just trivialities that small minds use to distract you to maintain the illusion that they (the small minds) are of supreme importance, and that your true being is utterly unimportant.

  7. Cloggie on Wed, 11th Jan 2017 7:51 am 

    Peakoil.com posters: All these problems you so earnestly write about here will wither into irrelevance once you realize they are just trivialities that small minds use to distract you to maintain the illusion that they (the small minds) are of supreme importance, and that your true being is utterly unimportant.

    Not true. Every revolution begins with talking, discussing and informing and “enlightning”. There would not have been a French revolution without Diderot.

    https://en.wikipedia.org/wiki/Denis_Diderot

    And recent events in the US have shown that the internet (side-lining the MSM) can very well function as a tool for real political change.

  8. Davy on Wed, 11th Jan 2017 7:56 am 

    Clog, you do realize the worst banks in the world on almost all metrics are European. I am talking 1st world banks not banana republics. That should give you and your energy transition hopes a pause.

  9. JN2 on Wed, 11th Jan 2017 8:42 am 

    Davy said >> The amount of space for all these windmills, solar panels, and storage locations unbelievably large.<<

    Approx 4,800 square miles to replace Europe's 2014 production with 17% efficient PV. About 1/3 of 1% of EU land area.

  10. Davy on Wed, 11th Jan 2017 9:06 am 

    JN2, daa, that (4,800 sq/miles) is unbelievably large in my book but I realize for a techno optimist that is not much. JN2, what about the storage that will be needed. How much space is that going to take up? Do you have back up because one sentence is just like a popcorn fart in my book? Where is the real shit?

  11. Cloggie on Wed, 11th Jan 2017 9:07 am 

    Clog, you do realize the worst banks in the world on almost all metrics are European. I am talking 1st world banks not banana republics. That should give you and your energy transition hopes a pause.

    The ECB can repeat the stunt the US government did in 2008 and print.

    Furthermore, there are several bail-in mechanism in place in Europe. Everybody over 100k is not going to be compensated.

    I don’t trust banks anymore. If I would open an account at a bank the first thing I would ask what security it can offer.lol

    As I said before, I’m not totally convinced that after a financial crash everything would halt. It is bad news for people with savings accounts, meaning people who don’t need the money for direct survival anyway. It will take several years to recover, but sooner or later it will pick up again after vast wage decreases first.

    The “good news” is that all these old-timers can’t afford to retire and have to work again, which will speed up the transition effort.

    The basis of any economy is not money, it is people who can work for 40 or more hours per week. That’s what really creates wealth. Money is nothing but a means to lubricate economic processes and can always be created out of thin air. People have not choice but to trust fiat money.

  12. Cloggie on Wed, 11th Jan 2017 9:10 am 

    JN2, daa, that (4,800 sq/miles) is unbelievably large in my book

    Not really.
    Size Holland: 42,000 km2
    Size Dutch part North Sea: 56,000 km

    Space is not an issue, apart perhaps in Holland where every square foot is economically utilized:

    https://deepresource.wordpress.com/2016/12/31/solaroad-project-update/

  13. Davy on Wed, 11th Jan 2017 10:00 am 

    Clog, the EU has already done the money printing stunt. What are you talking about? “They can” when it is “they already have”. The EU Has no room for significantly more easing and still remain healthy.

  14. Davy on Wed, 11th Jan 2017 10:03 am 

    Oh, clog, one other thing a significant amount of the FED’ easing was to bail Europe out to begin with.

  15. JN2 on Wed, 11th Jan 2017 11:33 am 

    Davy said >> Do you have back up … Where is the real shit? <<

    EU-28 electricity production 2014 = 3M GWh.
    EU-28 land area = 1.7M sq miles
    EU average insolation: 146 W/m2

    Do the math!

    Or, this guy says 0.6% land area, but was written when PV efficiency was lower:

    http://bit.ly/2fOK18y (PDF)

  16. Cloggie on Wed, 11th Jan 2017 11:34 am 

    Oh, clog, one other thing a significant amount of the FED’ easing was to bail Europe out to begin with.

    They didn’t bail out, they compensated for European losses.

  17. Cloggie on Wed, 11th Jan 2017 11:39 am 

    Thanks JN2 for potentially an interesting blog post!

  18. Davy on Wed, 11th Jan 2017 12:38 pm 

    NO, JN2, the math is the easy part. Try attaching reality to your numbers. Try to frame 5000 sq/miles in terms of reality of production, maintenance and support. Then talk about how you are going to incorporate all that steel, glass and wires into the landscape. You didn’t even touch on the storage and grid upgrade all this will need. Where are all the resources going to come from and all the waste go from all the demolition? That is what I mean by support.

  19. Cloggie on Wed, 11th Jan 2017 12:38 pm 

    Wow, Trump basically siding with Russia against US intelligence agencies:

    https://www.youtube.com/watch?v=8FkHSi5gMQo

    German-NWO comment:

    http://www.spiegel.de/politik/ausland/donald-trump-nennt-berichte-ueber-russland-erpressung-absolute-schande-a-1129585.html

    Visibly angry against US media and “fake news” producing and leaking CIA.

    Promises “gigantic number of jobs”.
    Wall going to be built immediately and Mexico will pay for it. directly or indirectly.

  20. Davy on Wed, 11th Jan 2017 12:45 pm 

    “They didn’t bail out, they compensated for European losses.” Wow, that whole debacle swooshed right over your head Cloggie. You are good with science and engineering but finance is not your calling. European banks were part of the action and they were just as responsible for the mess as American banks were. They came to the FED who was the lender of last resort for liquidity just as American banks did. All western banks were illiquid then. Your European banks were some of the most egregious in their exploitation of American mortgage markets. Some of the dirtiest and greediest banks in the world are European. I love how you are always eager to rewrite history to suit your blameless people. What a joke.

  21. JN2 on Wed, 11th Jan 2017 2:08 pm 

    Davy said >> Try to frame 5000 sq/miles in terms of reality of production, maintenance and support. <<

    Davy, try to frame it in context of 4000 sq miles already installed globally. And doubling every two years.

  22. Cloggie on Wed, 11th Jan 2017 2:27 pm 

    finance is not your calling.

    That’s true, but my understanding of 2008 and the “subprime crisis” was that under the pressure of US politics, US banks were forced to hand out loans to those who should never have gotten these loans in the first place, if solid lending practices were applied. Keyword: political correctness, affirmative action.

    The US banks knew very well that these loans were shaky and sold them to (mostly European) suckers with unlimited faith in the strength of the US financial system. That was the core of the crisis that originated in the US, not in Europe.

    For the rest, I don’t see that much moral difference between US and European banks. All organisations that want to make a profit. The corruption in the system was that the bankers had a little bit too good relations with Washington, who bailed them out at tax-payers expense (Henry Paulson), where they should have gone bust, at the cost of the account holders.

    To blame:

    – US politics for applying undue pressure on US banks
    – European bank suckers, how didn’t check the loans they were buying

  23. Davy on Wed, 11th Jan 2017 2:57 pm 

    Jn2, it took 20 plus years for that. IMA much of it occurring when the global economy was at its peak. How many sq/miles a year? The doubling in relation to what and what is the time frame. You techno optimist constantly embellish and enrich your narrative. There is exciting things happening but not the fantasy you all are painting.

  24. Davy on Wed, 11th Jan 2017 3:08 pm 

    Bullshit cloggie, go back to school. You can do your usual blame the Americans and talk up your European people but it don’t work in this case. Most of the paper did not got to Europe either. The US bailed out greedy European banks becuase they were too big to fail. They were greedy just like the Americans. Most European banks operate in the US preying on US consumers. Both sides share blame but that is inconvenient for you and your blame game.

  25. JN2 on Wed, 11th Jan 2017 4:36 pm 

    Davy said >> The doubling in relation to what and what is the time frame. <<

    In 2006, installed solar was 8 GW. Doubling every 2 years would give us 256 GW today. It's actually 310 GW.

    This thing is exponential, man!

  26. Cloggie on Wed, 11th Jan 2017 5:16 pm 

    Davy, perhaps you want to read this, from a US source, sympathetic to both of us:

    https://www.lewrockwell.com/2007/09/thomas-dilorenzo/the-government-created-subprime-mortgage-meltdown/

    It is not to bash America or make Europe look good, but simply to understand what happened. Banks in America were forced by government leftists to against better knowledge provide loans to non-creditworthy individuals on political correct grounds.

    The thousands of mortgage defaults and foreclosures in the “subprime” housing market (i.e., mortgage holders with poor credit ratings) is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call “communities of color” that they might not otherwise make based on purely economic criteria.

    Obviously we will never hear this explanation in the PC MSM, neither in the US nor in Europe… “because you can’t say these things in public”.

  27. Davy on Wed, 11th Jan 2017 5:29 pm 

    JN2, this exponential progress is great and I am impressed. I hope for more. I want more. Yet, this is not impressive enough and you guys dismiss many of the challenges ahead. I am with you in the desire for this to succeed but I am not going to be fooled by excessive optimism. The real challenges are ahead. The easy part has been done. I am not against you just trying to keep this in perspective. It is hard to be the guy that rains on the parade but I feel it is necessary or unrealistic behavior results. The world is being overwhelmed by the fake and false all in the name of happiness and success. Happiness does not equal the truth.

  28. Davy on Wed, 11th Jan 2017 5:50 pm 

    Clog, your example was only a part of the overall debacle. We are talking a multiyear property bubble of which subprime was only a component. The creation and the packaging of exotic financial instruments became a growth industry without controls. We are talking about a huge global Ponzi of yield seeking without concern for risk. Everyone was in on it. Commodities were part of it. Credit was loose everywhere. When it blew global liquidity dried up and the Fed basically bailed the western world out. The FED had no choice because of the systematic dangers of the international banking arrangements. The US and Europe are most to blame but all nations were in on it. Yes, clog the US bear the most blame because it is with the US that control could have been used to stop this dangerous process. Instead the US promoted this Wild West rush to riches and the results were very close to catastrophic.

  29. Cloggie on Thu, 12th Jan 2017 4:29 am 

    Greg said (elsewhere): Trump isn’t the saviour that you make him out to be. If I was a religious man, I’d be more likely to call him the Antichrist.

    Well, I’m an “Antichrist” of sorts… as per Friedrich Nietzsche:

    http://www.gutenberg.org/files/19322/19322-h/19322-h.htm

    What does that mean… “savior”? Trump is an asshole? Perhaps/probably. I don’t like his casino’s either. His reality shows, his participation in these fake wrestling matches, his bragging.

    But… sometimes it takes a determined asshole to defeat far greater assholes if not outright criminals and you are about the last person on this board who needs to be informed about who I am talking. I could still be wrong, but his attack against CNN yesterday and his siding with Russia against this insane attack from the CIA, totally fabricated by a Brit…

    http://www.infowars.com/identity-of-former-intelligence-officer-behind-fake-trump-dossier-revealed/

    … confirm me once again that Trump could be for real. The Washington in-crowd is clearly desperate, just listen to Meryl Streep’s speech. I’m more thrilled by the defeat of the US establishment than with the personality of Trump, but he can still grow in office. Putin was an absolute mouse without any charisma in his shabby Adidas training gear, even shy, before he became the Russian leader. Look where he is now.

    This could be a chance of a lifetime to finally get rid of European-civilization destroying “Anglo-Zionism”, that began its attempt for global power grab in 1891 in London, with no other aim than to destroy Germany, that began to become a threat for 19th century British supremacy. After WW1 the center of geopolitical gravity moved from London to America’s East coast. And when Germany tried to free itself from the Versailles straight-jacket, America smelled the chance to play Britain & France out against Germany and the result was Anglo-Soviet colonization of Europe, that for 5 centuries had been the center of the world. Europe colonized by a former colony of three centuries and Mongols from Siberia, what an embarrassment.

    Trump is no fool. He has instinct and intuition for opportunity. Although he is from New York, he correctly sensed the mood in heartland USA and he dived in the gap of the political market, surprising everyone, totally against the intentions of said New York/Washington, that doesn’t even try to conceal its contempt for the white “deplorables”. All NYC really wants is to own the world and as such carry out the orders of the Soros mob and reject European-American nationalism.

    It is more than likely that under Trump, Washington will stop trying to acquire ever more vassals at gigantic humanitarian cost (Iraq, Syria, Ukraine), not to mention endless masses of “refugees” heading for Europe. Trump will stop trying to own the world and begin to mend America at home.

    The former German foreign minister (under Schroeder), Joschka Fisher and a full-blooded 1968 commie of the multicult variety, has announced that this could be the end of the West:

    http://www.sueddeutsche.de/politik/transatlantische-verbundenheit-das-ende-des-westens-1.3289483

    I don’t like Fisher, but at least he refused to join in the war on Iraq (just like France and Russia). And he could be right. He says that America is withdrawing from its leaderships-position within the West. Fisher, like the rest of the leftist European establishment doesn’t like that, they prefer to keep taking orders from Washington and have forgotten to learn to walk by themselves. No they need to organize their own defense. Fisher admits that there is no longer a global imperial option for the US anymore, although he still thinks that America is going to remain the strongest power on earth. I doubt that; I think that ever growing “diversity” will lead to the break-up of the US, but hard-core leftists like Fisher will never acknowledge that multi-ethnic societies don’t work. It is far more likely that China will become the #1 power on earth.

    The European Right wants to get rid of the (US-lead) West, but doesn’t want to get rid of America. For them the future lies in the East, not as “Lebensraum”, but as the opportunity to rise once again to global prominence after the end of the Anglo-Soviet era (Yuri Slezkine’s “Jewish Century”) and accept Russia as a great European power, on par with Germany and France. The rise of China will make that alliance/confederation almost inevitable. And radically halt the multicult-project as promoted by the Soros mob and begin to think (mildly) racial again. 19th century revisited. My hope and expectation is that the vision of the French president Charles de Gaulle (and carried on by Putin) of a “Europe of the Fatherlands”, will finally materialize and replace the EU. Less bureaucracy, more military and prestige projects (in outer space).

    Regarding America… as long as Trump remains president and no financial collapse will occur (a very big if), America will remain stable. But even with the Wall in place, demography will continue to shift to the disadvantage of the Euro’s. When Trump will leave office, vertically or horizontally, the breakup will begin. I can’t imagine that fly-over country will ever want to return into the open arms of George Soros again, give him the East Coast. The American Right, like Alex Jones, are openly flirting with “1776”.

    Global inventory:

    Europe (Atlantic-Ural)…10 million km2…700 million…more than 30 countries
    South-America………….18 million km2…410 million…13 countries
    USA……………………… 10 million km2…330 million…1 country
    Canada……………………10 million km2..36 million…..1 country

    I’m not going to bother to count Asian and African countries, but you get the point: the US is more than large enough to harbor 3 or more instead of 1 country.

    That’s how we in Europe like to see our Americans: as friends, prosperous, upbeat, happy… and preferably not too strong.lol
    I admit this is Euro-centric thinking but I would like to be pointed out by my esteemed green-leftist here opponents why this scenario is unrealistic?

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