Peak Oil is You
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Page added on September 15, 2015
The receding tide of oil price foreshadows the incoming DEFLATION TSUNAMI.
The receding tide of oil price foreshadows the incoming DEFLATION TSUNAMI.
Nothing grows indefinitely in a finite system, not even debt!
Almost all (90%) of ‘money’ in existence today is debt (credit) . This debt is created from thin air with every form of loan, from credit cards, through corporate debt to Treasury Notes. All this debt comes with an interest component that demands never ending growth in order to repay it. Again, the current monetary system REQUIRES that we have never ending economic growth.
It is one massive pyramid scheme because, if we ever stop growing, who is paying the interest?
Total U.S. debt has soared over the last 35 years:
Debts are claims on future goods and services with interest and are essentially a bet that the future economy will be bigger than the present.
However:
The economy is the summation of all goods and services and these are produced from work.
High order energy is required for work.
Oil is the master high order energy resource powering 95% of transport in our trade based economic paradigm.
Therefore increasing debts are, in part, a bet that oil production will increase indefinitely.
But NOTHING grows indefinitely in a finite system!
World conventional oil production (blue) has been on a bumpy plateau since 2005.
And the economy, which is derived from work, from high order energy, to service that exponential debt, has been constrained by the bumpy plateau of conventional oil since 2005.
What happens when we can no longer service the growing debt with real economic growth?
The great recession happens. Without real growth, central banks desperately print money (more debt) by the trillions and hold interest rates close to zero (Q.E.), in an attempt to heist future growth and to ease the pain of the existing debt. But prescribing more debt to cure debt only digs the hole deeper and means that even more real growth is required (read: more work, more energy).
The world is now absolutely loaded up to the eyeballs with debt, after every sector and every asset class of the economy has been force fed to the point of glutinous bursting . Newly printed debt produces less and less growth and credit intensity increases.
And what happens when the central banks policies cannot reduce interest rate further and the newly created debt does not increase real goods and services?
This is when deflation wins and this is where we are.
Without ongoing real growth, the exponential power of existing debt erodes the purchasing power of participants in the global economy. With fewer discretionary dollars to spend into the economy, a self-feeding loop of demand destruction ensues. Demand for real goods and services falls.
Demand for commodities, the primary resources that produce the real goods and services of the economy, is now falling:
A recent zero-hedge article notes that commodities are now experiencing a “Depression-Level Collapse in Demand”
Bloomberg: “Iron Ore Slumps to Five-Year Low as China Slowdown Curbs Demand”
Sydney Morning Herald “Glencore, the world’s fourth largest mining company and world’s biggest commodity trader, will suspend its Australian coal business for three weeks “in a move never before seen in the Australian market, to avoid pumping tons into a heavily oversupplied market at depressed prices.”
Bloomberg: “Jiangxi Copper Profit Falls as Slowing China Growth Curbs Demand”
Fox: “IEA Cuts Demand Outlook, Oil Continues Drop”
Now back to the master commodity, oil.
Demand for oil, the primary energy component of the global economy, has always been highly correlated to GDP :
In our economy of false signals, (Central Bank inflated stocks, a Quantitative Eased Bond Market, mind-numbingly exotic derivatives, quirky University of Michigan numbers, manipulated CPIs, arbitrary debt ceilings, smashed VIXs , etc. etc.) OIL is screaming the truth.
Price is falling because demand is falling because the real economy is contracting.
Deflation is coming and The Pyramid Scheme of Our Age is about to unravel.
When the oil tide recedes, prepare for the crash of the GREAT DEFLATION TSUMANI.
17 Comments on "The receding tide of oil price foreshadows the incoming DEFLATION TSUNAMI."
ohanian on Tue, 15th Sep 2015 6:23 pm
You spelled TSUNAMI incorrectly
Makati1 on Tue, 15th Sep 2015 7:37 pm
Inflation … Deflation … Reflation.
No one has even the slightest clue as to the future. No one. Nothing but guesses, opinions, and propaganda to sell their financial services or books or articles. But which ever way it happens, it ain’t gonna’ be pretty.
Roman on Tue, 15th Sep 2015 7:51 pm
It might be neither or slow inflation until obvious peak oil. What kind of assets do money printers and friends own? Cash, stocks, stuff, debt, everything?
marko on Wed, 16th Sep 2015 6:08 am
Excellent article . Short, well explained.
So interests are coming up, just to work for them .
Hello on Wed, 16th Sep 2015 6:54 am
Mak: “No one has even the slightest clue as to the future. No one”
Is that from the guy who constantly predicts the end of America?
Revi on Wed, 16th Sep 2015 7:22 am
It’s going to be interesting, starting around now…
Davy on Wed, 16th Sep 2015 7:53 am
We are in the age of extremes. We are at limits of growth must fully witnessed by overpopulation and over consumption. Our ecosystem is in decline or localized failure. Climate is showing signs of abrupt change. The economy is in disequilibrium from being on a bumpy plateau and or bumpy descent with consumption and population pressures screaming growth and not being capable of a minimum level of growth necessary for equilibrium.
This al points to entropic decay winning and our species in decline. We are seeing economic abandonment, irrational policies, and dysfunctional systems. It is really a time of turbulence because frankly we have issues from all directions. We really have little footing because of paradoxes and catch 22’s that are making any kind of activity paralyzed.
Since we are at the end of a cycle in so many ways any kind of movement hints at a break to a lower level. Any kind of movement has consequences and unintended consequences that are negative. This includes good choices. Even good choices are going to lead to a collapse of the status quo. We can’t go forward and our situation is irreversible. This is the ultimate in a fate of doom.
There of course is hope and purpose that comes with contemplating a place in a new postmodern world. Yet, one would be deceived to be too happy and optimistic considering the amount of pain, suffering, and death that is ahead. Overshoot means die offs. Less with a future of less means pain and suffering.
If we are going to be a species that survives all this we are going to have to have a profound reorientation of our spirituality away from exceptionalism in technology, knowledge, and developmental growth towards humility and subservience to nature. There is no other way for survival. Either we give up any hope of modern man and embrace a new postmodern man or we go extinct. We live by nature’s acquiescence nothing more.
waltz on Wed, 16th Sep 2015 10:24 am
Excellent!!
here is teh original article with graphs / refs:
http://poaec.blogspot.com/
marko on Wed, 16th Sep 2015 12:15 pm
Davy “There is no other way for survival. Either we give up any hope of modern man and embrace a new postmodern man or we go extinct. We live by nature’s acquiescence nothing more” as you said
and what’s a gonna be what do you think?
I think we are lost that is my opinion
Davy on Wed, 16th Sep 2015 12:41 pm
Marco, there are some things we can change with proper decisions and expedience. Part of this same thought is there are problems we can avoid from ending poor decisions, lifestyles and attitudes. There is allot of mitigation potentials for a whole range of problems and predicaments but first acknowledgement of these is required. This means the end of denial of limits of growth at all levels. The end of denial that populations must and will fall now not latter. The end of denial of any solutions based upon status quo solutions i.e. technology and development. This does not mean complete rejection of technology and development only the rejection of that as the only path. Then Marco there is just a whole shit storm of problems we are just going to have to endure. No two ways about that. People are going to suffer and die because that is what die offs are. Consumption and population are going to rebalance because that is what collapse is all about. On the individual and local level you can make a difference if you organize and prep now with proper mindset and location. Time is running out. IMA we all need to be adjusting to the idea of shorter lifespans. I am in my 50’s so instead of maybe 30-40 years I am planning for 15-20. Everything needs to get a haircut.
Makati1 on Wed, 16th Sep 2015 8:26 pm
Hello. Yep! That’s me. Do you think I am wrong? Do you know what is really going on? Or do you drink the government Koolaid?
More proof of my assertion:
“2 Planes With Hundreds On Board Bump Into Each Other On LAX Tarmac”
“Screaming woman removed from American flight”
“Hidden cameras reveal airport workers stealing from luggage” (US)
“The United States Probably Has More Foreign Military Bases Than Any Other People, Nation, or Empire in History”
“Garrisoning the Globe: How U.S. Military Bases Abroad Undermine National Security and Harm Us All”
“The Shale Delusion: Why The Party’s Over For U.S. Tight Oil”
“Ohio leads nation in metal-theft insurance claims”
“Copper theft impacts hundreds of Frontier customers” (US)
“Copper thieves ransack Newark church”
“As wildfires rage in West, ranchers lose cattle, range land”
“Snowpack in Sierra Nevada at 500-Year Low, Researchers Say”
“Online bed bug reports gnaw at hotel revenues”
“A rise in violence plagues South L.A.: ‘We can’t police our way out of this'”
“Number of homeless students in U.S. has doubled since before the recession”
“Valley and Butte Wildfires in California Have Destroyed 700 Homes”
“Empire State Manufacturing Survey Strikes Back! Falls 14.7%, Back To Great Recession Level”
“U.S. factory output declines on sharp drop in auto production”
“More MSM Fantasy—–August Retail Sales Were Punk, Not ‘Buoyant”
“Analyst Who Said “Buy Lehman” 20 Days Before Its Collapse Is Now On The Financial Stability Oversight Council”
And on and on … for more, see:
http://ricefarmer.blogspot.fr/
Yes, the US is going down. They are running out of gimmicks to keep the Titanic afloat much longer. Unfortunately, their sinking will affect most Western allied countries the most. But, the reset will be good for the rest of the world and may prevent that nuke exchange.
marko on Wed, 16th Sep 2015 11:42 pm
“This means the end of denial of limits of growth at all levels’
This is not going to happen EVER. Every day I look human greed and corruption and it just getting worse and worse. You and I are minority because we are aware and we accept the fact that we are going to die. Belive me a lot of people think they will live forever and they grab and grab like beasts. In this fact is the crucial problem of our specie .
Davy on Thu, 17th Sep 2015 5:45 am
Maybe Marko but I am hoping “In crisis there is change”. I am also hoping there will be time once a crisis hits for change. That is allot of hoping unfortunately.
Pops on Thu, 17th Sep 2015 8:57 am
Global debt is around 350% of GDP due to the great Trickle-Up financialization of the last 30 years. It only dropped slightly after the great recession and is higher than before the great depression. Pretty well unsustainable for much longer I’m thinking.
Remember one thing: deflation means cash increases in value and assets decrease — just the opposite of what we are all used to and the opposite of all the people who have hollered forever about the Great Hyperinflation “just like Weimar.” This is nothing like that.
So hold assets based on their practical value, not their dollar value.
Hold cash and equivalents rather than equities.
Of course that is free advice from a stranger… on the internet, so YMMV.
LoL
Davy on Thu, 17th Sep 2015 9:50 am
Global debt and assets are mostly held by a few. Most practical assets that are physically securable are held by many people even the poor.
When the house of cards fails the high net worth individuals will be low net worth individuals. If they have private armies they can be war lords otherwise it is the rich that are going to be fleeced by there own devices.
The real tradegy is the deflationary destruction of the system and commons that supports all of our delocalized locals. We all are going to find the world allot smaller with much less food. That is the real issue of the coming descent and that again is where will your next meal come from.
marko on Thu, 17th Sep 2015 3:10 pm
Davy there is one saying “the hope die last”. We are on that path. We had a chance after the ww2 we knew that ww3 will come but greed, hypocrisy prevailed.Now we will reap what we saw .
Kenz300 on Sun, 20th Sep 2015 9:36 pm
Depletion continues……….
Banks stopped lending to frackers……
Oil supply from frackers will decline in 2016