[GHung]

OXI! Ugo Bardi, Gail Tverberg, Steve Ludlum & RE discuss the Greek Referendum .... and other stuff:

http://www.doomsteaddiner.net/blog/2015 ... eferendum/

Some of you may enjoy this vidcast, especially Ugo's and Steve's rants about halfway through; Ugo's about the failed Eurozone experiment and Steve's about "stuff". All agree that people, especially westerners will have to learn to live on a lot less, a tough reality for societies and economies geared to always more.

[GHung]

.... and none of those countries at the bottom of the chart have much of a manufacturing base (Italy excepted, perhaps), so their oil consumption is largely unproductive, especially in terms of exports, and these countries must import many of their essential resources. The need to import large amounts of dollar-denominated resources (OIL) with the currently strong dollar adds insult to injury. So it goes.

Of course, emigration to stronger economies is an option in the EU, though folks may not be so welcome,, and 'stronger economy' is relative, like greener grass.

[lateStarter]

Funny that such an old map is used. I was looking at Poland and saw Danzig. It hasn't been called that for quite some time, at least by people living in Poland.

Also, Lodz hasn't been an industrial area since before WWII (which might explain the Danzig thing) - it was a big textile producer.

But, it is true. We do have a lot of coal in Poland. At the moment it is cheaper to by coal from Russia and leave our coal in the ground. Polish coal miners, not so happy with the situation.

[davep]

OXI! Ugo Bardi, Gail Tverberg, Steve Ludlum & RE discuss the Greek Referendum .... and other stuff:

http://www.doomsteaddiner.net/blog/2015 ... eferendum/

Some of you may enjoy this vidcast, especially Ugo's and Steve's rants about halfway through; Ugo's about the failed Eurozone experiment and Steve's about "stuff". All agree that people, especially westerners will have to learn to live on a lot less, a tough reality for societies and economies geared to always more.

It's good to see our old friend ReverseEngineer at work in his new home.

[kublikhan]

Dependency on ever-more-costly peaking-oil is the reason the PIGGS have suffered.

I find the link between the crisises in the PIIGS and oil prices tenuous at best. Hawaii gets even more of it's energy from oil than the PIIGS. Yet Hawaii's economy is doing fine. The same is true for just about any island: they rely heavily on imported oil yet their economies are not on the verge of imploding like the PIIGS either. Clearly, something besides oil must be responsible for the problems in the PIIGS economies.

Hawaii, in addition to being President Obama’s first U.S. state to call home, has the most expensive energy in the country. Because it is isolated from the U.S. mainland and it does not have oil, natural gas, or coal reserves of its own, its energy infrastructure and consumption are unique among the states. Because oil, natural gas, and coal are transportable, Hawaii depends heavily on these imported fuels to meet energy demand. Close to nine-tenths of Hawaii’s energy comes from petroleum, followed by coal and natural gas. Its electricity prices are over 3 times higher than the average electricity price in the nation. Because its main industry is tourism and because of its mild climate, Hawaii’s economy is not very energy intensive. In fact, per capita energy consumption in Hawaii is among the lowest in the nation. Due to heavy jet-fuel use by military installations and commercial airlines, the transportation sector is its leading energy-consuming sector, accounting for about one-half of the state’s total energy consumption.

Hawaii: An Energy and Economic Analysis

Overall, Hawaii’s economy, as measured by real GDP, is projected to show a 2.5 percent increase in 2015. Real GDP growth in 2016 is expected at 2.4 percent. Hawaii’s unemployment rate is projected to be 3.9 percent in 2015 and 3.6 percent in 2016. Beyond 2016, the economy will be on an expansion path, with job growth expected to be 1.0 percent in 2017 and 1.1 percent in 2018.

OUTLOOK FOR THE ECONOMY

[kublikhan]

Haiti was in poverty even back when oil prices were low. And even with the high oil prices in 2013 and 2014, it's GDP grew 4.2% and 2.8%, respectively. It is one of the fastest growing economies in the Caribbean. As a whole, unemployment was lower and GDP growth was higher in the Caribbean than in Europe, despite their higher usage of oil. These facts do not support your premise.

Preliminary estimates indicate that the regional recovery continued in 2014, with 16 of CDB’s 19 BMCs expanding during the year. The ongoing recovery in tourism appears to have strengthened in 2014, with almost all regional destinations recording increased visitor arrivals.

Labour market conditions were largely a reflection of the general improvement in real sector activity, with unemployment rates falling in several BMCs, while inflationary pressures generally eased. Regional financial soundness and stability indicators generally exhibited improved compliance with prudential guidelines.

2014 Caribbean Economic Review & Outlook for 2015

[kublikhan]

No, I don't think the problems with the PIIGS was southern irresponsibility anymore than it was peakoil. I think the Euro is a flawed currency.

The attempt to establish a single currency for sixteen separate and quite different countries was bound to fail. The shift to a single currency meant that the individual member countries lost the ability to control monetary policy and interest rates in order to respond to national economic conditions. It also meant that each country’s exchange rate could no longer respond to the cumulative effects of differences in productivity and global demand trends.

In addition, the single currency weakens the market signals that would otherwise warn a country that its fiscal deficits were becoming excessive. And when a country with excessive fiscal deficits needs to raise taxes and cut government spending, as Greece clearly does now, the resulting contraction of GDP and employment cannot be reduced by a devaluation that increases exports and reduces imports.

Why, then, is the United States able to operate with a single currency, despite major differences among its fifty states? There are three key economic conditions—none of which exists in Europe—that allow the diverse U.S. states to operate with a single currency: labor mobility, wage flexibility, and a central fiscal authority.

When the textile and shoe industries in America’s northeastern states died, workers moved to the West, where new industries were growing. The unemployed workers of Greece, Portugal, and Spain do not move to faster-growing regions of Europe because of differences in language, history, religion, union membership, and so on. Moreover, wage flexibility means that substantially slower wage growth in the states that lost industries helped to attract and retain other industries. And the U.S. fiscal system collects roughly two-thirds of all taxes at the national level, which implies an automatic and substantial net fiscal transfer to states with temporarily falling incomes.

The European Central Bank must set monetary policy for the eurozone as a whole, even if that policy is highly inappropriate for some member countries. When demand in Germany and France was quite weak early in the last decade, the European Central Bank reduced interest rates sharply. That helped Germany and France, but it also inflated real-estate bubbles in Spain and Ireland. The recent collapse of those bubbles caused sharp downturns in economic activity and substantial increases in unemployment in both countries.

The Euro’s Fundamental Flaws

I'm not saying oil played no part in the 2008 crash. I am saying the PIIGS are suffering from much more than just high oil prices. I welcome the change in tone around here where not every single problem of the world is blamed on peak oil. For a long time this site suffered from ascribing every ill in the world to peak oil. I guess when all you have is a hammer, everything looks like a nail. Here's what this site used to be like:

PS: Its really funny how everything is now peak oil related.

Joe: "My wife does not sleep with me anymore"

Jim: "Yep, As free energy wains so does industry and jobs, prices rise, your wife will lock you out of the bedroom more often"

[kublikhan]

Pstarr, we have already gone 12 rounds on the topic of what caused the 2008 recession. I suggest you put it back in your pants and table that discussion for now.

[kublikhan]

I was referring to you tabling the discussion of what caused 2008 recession. Feel free to continue to talk about the discussion in the OP

[ralfy]

"Oil Supply Limits and the Continuing Financial Crisis"

http://ourfiniteworld.com/oil-supply-li ... al-crisis/

[kublikhan]

I think trying to equate oil prices and GDP growth is too simplistic. GDP encompasses a wide set of variables and trying to simplify it down to to only energy, or worse, only oil, gives you an incomplete picture. During the decade of 1975 - 1985, energy costs averaged 11.6% of US GDP. And the US averaged 3.4% of annual GDP growth. If you want to see when energy prices were really putting a drag on the US economy check out 1980-81. Energy costs approached 14%! During the decade of 1990-1999, energy costs fell to 7.1% of GDP. US GDP growth also fell to 3.3%. Despite this cheaper energy, US GDP growth still fell. Thus something besides energy costs impacts GDP growth. For the decade of 2000-2010, energy costs rose to 7.8% of US GDP. That's less than a 1% increase. Far shy of the energy costs of 1975-1985 which were over 11%.

Energy Consumption, Expenditures, and Emissions Indicators Estimates, Selected Years, 1949-2011

US Real GDP Growth Rate by Year

But Greece like all the PIIGS cratered in 2008. That was/is peak oil.

The epicenter of the great recession was not the PIIGS, it was the US. The flash point was in the financial sector. Then it spread to main street. Then to the rest of the globe.

The financial crisis (Wall Street) spread to the real economy (Main Street). While the recession became noticeable in late 2008, it actually started much earlier. The recession began in the housing market. This is a common feature of post-WWII US recessions. Residential investment posted a 22.8% decline in the fourth quarter of 2008 and a 32.8% decline in the first quarter of 2009. The decline in the housing market spilled over into the labor market in late 2007.

Why is the current recession longer and deeper than the norm? Part of this is illusory. The recessions in 1990 and 2001 were unusually mild, and the last major recession was in 1984. This implies that anyone under the age of about 45 has no memory of a serious recession.

That said, we can identify two reasons for the severity of this recession. The first is that the recession was caused by the financial crisis. Since all businesses. need financing to operate, the recession was not concentrated in one sector of the economy, but was felt by nearly all.

Another reason for the long recession is the long recession. In other words, there are negative feedback mechanisms (“vicious circles”) that make things worse over time. For each of the last two recessions (1990 and 2001), the recession was over before people even knew for sure we were in it. As a result, there was little opportunity for the negative feedback effects to occur. In the current recession, the financial crisis was so public and traumatic, and the government response so dramatic that by late 2007 consumers appeared to be very aware of the precarious nature of the economy. In response, they drastically cut back on their spending.

The US Recession

The global economy was ripe for panic due to historically unprecedented economic integration, tight credit, limited scope for monetary policy and limited room for fiscal policy due to high debt levels.

While the recent financial crisis originated in the US, in 2008-09 we witnessed a steep decline in output, consumption and investment that was of similar magnitude in the rest of the world. This evolution is surprising from a historical perspective, since we have never observed such close business cycle co-movements. Both the Great Depression and post WWII recessions witnessed far weaker co-movement of business cycles across countries.

In 2008-09 the world economy was ripe for a panic
There were also several factors that made the global economy more sensitive to a global panic:

* First, credit was tighter due to the financial crisis, making firms more vulnerable when hit with lower demand and lower profits.
* Second, there was limited scope for monetary policy as interest rates were already approaching the zero lower bound.
* Third, there were constraints on countercyclical fiscal policy due to increasing debt levels and new fiscal rules.
* Fourth, economic integration, although incomplete, had substantially increased in previous decades.

Explaining the global Great Recession

[kublikhan]

Pstarr, I too am tired of rehashing this. That's exactly why I earlier asked you to table it.