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Peak Nonsense

General discussions of the systemic, societal and civilisational effects of depletion.

Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 14:18:09

threadbear wrote:
mkwin wrote:
Smudger wrote:[
Don't patronise me - I've a degree in economics and masters degree in real estate analysis and forecasting. I work as a real market analyst in the London. Believe me, I know how important oil is and what damage is has and will do to economies around the world.

What's a real market analyst?.....


Typo - real estate market analyst. Basically advise the property industry on investment and development opportunities in real estate markets by analysing macro-economic trends and the local situation. Funnily enough my firm doesn't factor in the immanent global depression into its models!!


In a nutshell, what issue stands out in your mind as the most prominent one that will plunge us into a depression?


A historic period of low inflation - due to the deflationary effect of globalisation - has lead to asset bubbles in almost everything.

The short to medium term cause of oil depletion will be inflation. This will represent a structural change in the economy pushing up interest rates and causing almost all asset classes -bonds, shares, real estate - to fall significantly. The only exceptions in my opinion will be inflation linked bonds, gold/silver, oil industry shares (majors and service companies) and possibly, dependant on the governmental response, infrastructural contactors. These would be good investment choices if you have any savings. Leaving your savings in the bank will destroy their value due to inflation.

Obviously, there will be widespread job losses in many other sectors and significantly reduced consumption all leading to an economic depression.
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Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 14:36:46

azreal60 wrote:
Do you know anything about the investment sector? My guess would be no. As soon as problems are experienced there will be chaos on the stock markets and capital will divert into industry and resources still deemed to be profitable. There will be literally TRILLIONS of dollars wanting to buy into the oil industry with its guaranteed high growth potential and inflation hedging ability. The same will be true of precious metals and many other industries likely to experience high growth due to infrastructure investment


Here's the point I guess people might have been trying to point out to you Mkwin. All the dollars in the world can't make oil that isn't there appear. The worlds oil supply is like an orange. You can keep squeezing the orange, and if you come up with new and inventive ways to squeeze it, then sure you'll get more juice. But after all a while, no matter how hard you squeeze, you won't get any more juice out. And we've been squeezing for a long long time now....

I reconize your frustration with the situation, most people who start dealing with this cognitively are in that situation. Just reconize in return that the people your talking with a few exceptions aren't idiots either. I think there are quite a few people on this site with college education or better. Sometimes alot better. And also quite a few with practical experence in the field they speak of.


I wasn't doubting oil depletion - but the decline in production will be far flatter with more exploration and investment in marginal fields. While all the super-giant fields have been found, there are still a significant amount of potential smaller fields that will become profitable with a sustained high oil price.

Essentially, I was responding to the doomer’s view that seems prevalent on this site. It's obviously heavily influenced by Olduvai Theory, which imho is pretty weak. Do you really think the power grids in the industrial world are going to fail within 5-7 years? Can you really simplify the situation to a single equation?

The point is there are actions that can be taken to manage a transition to a lower energy society without chaos breaking out. Ultimately no one knows how this complex situation is going to play out. My objection was to the constant doctrine that there is nothing that can be done to prevent the collapse of modern society into the pre-industrial state - when no one can possibly know what will happen.

Prepare for the worst and hope for the best is my philosophy.
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Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 14:41:41

coyote wrote:Aaron, your point is well taken... but I still don't see it as a guaranteed investment with guaranteed growth. There is the possibility of fairly immediate and increasing price volatility in all the markets. I have trouble imagining any sort of steady and predictable bull movement post-peak, for even a short time, even (or perhaps especially) in energy futures.

If you're talking about direct investment, and I think you are, then I think enormous profit taking will certainly be possible, but mainly for people who invested pre-peak -- and then get out at the right time, so taking advantage of a huge price floor difference. I'm sure there will certainly be a gold rush for new extraction, but it will include risky projects -- ultra deepwater, Arctic circle and so on -- and at a much higher initial cost. Some people will make a lot of money, but I think a lot will be lost by others as cost basis rises and some projects just don't pan out.

We may be saying the same thing here.

I suppose an interesting alternative investment would be the industries that provide materials and infrastructure for the oil industry. One step removed, as it were. That I could see as more of a steady bull. Most gold prospectors didn't get rich during the California gold rush -- but Levi Strauss sure made a bundle.


Shell and BP are trading at less than 10 times earning - i.e. you get your money back in 10 years. Given the likelihood that we will be producing and consuming all available oil for decades after peak oil, it looks like an easy call to me.
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Re: Peak Nonsense

Unread postby Aaron » Wed 06 Jun 2007, 14:50:35

I wasn't doubting oil depletion - but the decline in production will be far flatter with more exploration and investment in marginal fields.


I doubt it.

Modern well depletion is a cliff not a slope, in many cases.. Technology for advanced extraction causes many wells to deplete much more rapidly than historic examples.

Couple this with the meager extraction rate of less conventionaal oil sources (compared to super giants) & depletion could be quite rapid.

So instead of 3% depletion seen in the US for example, we would see 15% depletion like the North Sea or Yibel or Cantrell.

The answer hides behind the closed doors of OPEC & the oil majors. Unless they suddenly share their field data... we can only guess.
The problem is, of course, that not only is economics bankrupt, but it has always been nothing more than politics in disguise... economics is a form of brain damage.

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Re: Peak Nonsense

Unread postby coyote » Wed 06 Jun 2007, 14:51:50

mkwin wrote:Do you know anything about the investment sector? My guess would be no. As soon as problems are experienced there will be chaos on the stock markets and capital will divert into industry and resources still deemed to be profitable. There will be literally TRILLIONS of dollars wanting to buy into the oil industry with its guaranteed high growth potential and inflation hedging ability. The same will be true of precious metals and many other industries likely to experience high growth due to infrastructure investment

Yes, I certainly understand enough about investment to understand that a lot of money will be thrown at the oil industry, for the reasons you mentioned among others. However, throwing money at an industry does not a guarantee make. There is smart money and there is dumb money, and just lately the latter has dominated.

Would it be wise to invest in real estate right now? Why not? There's certainly been a hell of a lot of money thrown at the industry; and land, like oil, is something they're not making any more of. Shouldn't it just keep going up? Why not?

It's a growth industry because of investment, which happens because it's a growth industry? Circular. And bubble-making.

If there is a period of growth, it will likely, as Aaron noted, be a short one.

Guaranteed nothing.
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Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 15:23:59

Aaron wrote:
I wasn't doubting oil depletion - but the decline in production will be far flatter with more exploration and investment in marginal fields.


I doubt it.

Modern well depletion is a cliff not a slope, in many cases.. Technology for advanced extraction causes many wells to deplete much more rapidly than historic examples.

Couple this with the meager extraction rate of less conventionaal oil sources (compared to super giants) & depletion could be quite rapid.

So instead of 3% depletion seen in the US for example, we would see 15% depletion like the North Sea or Yibel or Cantrell.

The answer hides behind the closed doors of OPEC & the oil majors. Unless they suddenly share their field data... we can only guess.


The oil majors had cut their exploratory budgets as most of the big finds have been found. However, there are plenty of smaller finds not yet developed or yet to be confirmed by drilling. On the depletion side, your example is perfect - on the one had you have the US where mature fields are undergoing a large amount of IOR and declining slowly as opposed to less developed fields declining more rapidly. It's likely the depletion rate can be lessoned significantly with more investment. When this is factored in with heavy investment in heavy oils/deep oil and smaller fields it’s clear to see the possibility of a more gradual gradient on the decline slope.
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Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 15:35:48

coyote wrote:
mkwin wrote:Do you know anything about the investment sector? My guess would be no. As soon as problems are experienced there will be chaos on the stock markets and capital will divert into industry and resources still deemed to be profitable. There will be literally TRILLIONS of dollars wanting to buy into the oil industry with its guaranteed high growth potential and inflation hedging ability. The same will be true of precious metals and many other industries likely to experience high growth due to infrastructure investment

Yes, I certainly understand enough about investment to understand that a lot of money will be thrown at the oil industry, for the reasons you mentioned among others. However, throwing money at an industry does not a guarantee make. There is smart money and there is dumb money, and just lately the latter has dominated.

Would it be wise to invest in real estate right now? Why not? There's certainly been a hell of a lot of money thrown at the industry; and land, like oil, is something they're not making any more of. Shouldn't it just keep going up? Why not?

It's a growth industry because of investment, which happens because it's a growth industry? Circular. And bubble-making.

If there is a period of growth, it will likely, as Aaron noted, be a short one.

Guaranteed nothing.


Growth is guaranteed by constant demand in excess of supply causing prices and therefore revenue to continue to growth for a long time. The opposite is true for Real Estate in many markets. Demand is expected to temper as the US economy weakens later this year.
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Re: Peak Nonsense

Unread postby Aaron » Wed 06 Jun 2007, 15:45:11

The oil majors had cut their exploratory budgets as most of the big finds have been found. However, there are plenty of smaller finds not yet developed or yet to be confirmed by drilling. On the depletion side, your example is perfect - on the one had you have the US where mature fields are undergoing a large amount of IOR and declining slowly as opposed to less developed fields declining more rapidly. It's likely the depletion rate can be lessoned significantly with more investment. When this is factored in with heavy investment in heavy oils/deep oil and smaller fields it’s clear to see the possibility of a more gradual gradient on the decline slope.


Not really.

Smaller finds = limited rate of extraction... compared to super giants. They can on;y produce so much, so quickly. Measured against rapid depletion in existing modern wells & it won't even come close.

No amount of investment or technology has stopped Cantrell from it's nose-dive.

Same thing for Yibel & many others.

Your thinking on historic US depletion is way off base. These fields continue to produce very small amounts today only because when these fields were opened, secondary extraction technology didn't exist.

It's the rapid extraction that's possible with horizontal drilling, smart wells etc... which lead to rapid depletion, not the other way around.
The problem is, of course, that not only is economics bankrupt, but it has always been nothing more than politics in disguise... economics is a form of brain damage.

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Re: Peak Nonsense

Unread postby threadbear » Wed 06 Jun 2007, 16:50:53

Did any of you here notice that sentiments about global warming coming from the American govt seemed to turn on a dime, early this year? It was really strange. It's hard to tell if it was a critical mass phenomenon, or if some kind of conscious policy shift is taking place behind the closed doors of the corporatocracy. It seemed like the media had been given the "green" light to go all eco-conscious, all of a sudden. Also, tremendous emphasis on climate change...all of a sudden.

My brother's a journo and he did some digging into the cause of global warming, and kept hitting brick walls, trying to nail down a definitive answer about what is actually causing global warming.

He DID come up with something rather interesting though, and that is that the nuclear industry seems to be heavily involved in pushing the carbon emission causing climate change hypothesis. On the other hand, the solar cycle people seem to be heavily influenced and funded by the oil people.

It seems like much of the eco-consciousness we see of late could be the result of a brokered decision or series of decisions, to gradually let nuclear dominate and oil recede. Of course oil will still play a fairly significant role.

The Democrats have traditionally been closer to the nuclear industry, so you can see how it could be played as part of political platform that corrals the voter into equating oil preeminence over nuclear with ongoing wars and domestic nuclear with peace and as a solution to climate change.

There are already many contingency plans being sorted out to build "clean nuclear" all over the US. It's certainly happened in Europe and I can see no reason why it wouldn't happen in the US. It's horrendously expensive, true. That's why corporations will take it on, not govt.

These will be like the Depression era make work projects, as they will kick in when the US starts to hit dismal economic times. In this respect I agree with Mkwin. People will have to be pretty freaked out about energy issues before they sign on for it...but they will, I'm afraid, as energy becomes prohibitively expensive and news coverage shows people frozen as solid as fish sticks, being pulled out of their homes/freezers in the winter.
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Re: Peak Nonsense

Unread postby MonteQuest » Wed 06 Jun 2007, 17:10:59

mkwin wrote: There will be literally TRILLIONS of dollars wanting to buy into the oil industry with its guaranteed high growth potential and inflation hedging ability.


You mean high profit potential, don't you?

Terminal decline means no growth in production.
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Re: Peak Nonsense

Unread postby jedinvest » Wed 06 Jun 2007, 17:11:59

threadbare said:
My brother's a journo and he did some digging into the cause of global warming, and kept hitting brick walls, trying to nail down a definitive answer about what is actually causing global warming.


Threadbare, your journo bro' is not much of a journalist then, as anyone can find out what scientists believe the cause of global warming is. It's actually 'are', but it all boils down to mankind's activities. However, he wanted a 'definitive' answer and people like that never get the answer they want to hear.

Now how politics plays up or down these issues is another matter all together. I doubt if the nuclear industry is big enough to go against oil. But as many have said, peak oil is peak everything!
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Re: Peak Nonsense

Unread postby keehah » Wed 06 Jun 2007, 17:14:27

mkwin wrote:Growth is guaranteed by constant demand in excess of supply causing prices and therefore revenue to continue to growth for a long time. The opposite is true for Real Estate in many markets. Demand is expected to temper as the US economy weakens later this year.


Is this the new doublespeak for rising oil prices? Back in the day rising prices for a good was called inflation not growth.

It seemed like the media had been given the "green" light to go all eco-conscious, all of a sudden. Also, tremendous emphasis on climate change...all of a sudden.

The scientific reports on Global Warming have been coming out since the 70's for anyone who was not in denial. Yes what did change is last fall the MSM stopped its dialectic of countering science with think-tank economic mimed denial to keep the status-quo of propoganda fueled, corporate profit feeding, over-consumption (and Gia destruction) in place.

What happened last fall? Peak Oil was having (or about to have) undeniable impact on the Western economies. Understanding the full ramifications of Peak Oil would be a game ending realization for this current delusional game masquerading as capitalism and globalization. Thus by allowing consensus on climate change, specifically focused on stopping growth of fossil fuel consumption (CO2 emissions) can keep the slaves slaving most efficiently.

Oh and by-the-way this is not acknowledgement from our controllers that they are going to slow this runaway train. Not when (in my area anyway) the polios are responding by looking to the Terminator for techno-fixes (yet ignore all our local scientists), and the CO2 sequestration is a taxpayer funded way for the oil companies to pump more oil from depleting wells!

New CO2 Enhanced Oil Recovery Technology Could Greatly Boost U.S. Oil Supplies
Washington, DC – State-of-the-art enhanced oil recovery with carbon dioxide, now recognized as a potential way of dealing with greenhouse gas emissions, could add 89 billion barrels to the recoverable oil resources of the United States, the Department of Energy has determined. Current U.S. proved reserves are 21.9 billion barrels.

Beginning efforts to develop the 89-billion-barrel addition to resources would depend on the availability of commercial CO2 in large volumes.


The Oil Depletion Protocol: An Update; MuseLetter #182 / June 2007by Richard Heinberg
Now for the discouraging developments. There was not an enormous amount of immediate public or official response to the book. There has so far been no discussion of the Protocol at high levels of government in any nation-including Sweden, which has set a target for reducing petroleum dependence that is close to the Protocol’s mandate. And sales of the book have been relatively slow (about 5,000 copies so far). There are several possible explanations for the Protocol’s tepid take-off. One is the temporary moderation in global oil prices during the first months of 2007, which in turn generally cooled the growing media interest in Peak Oil (both situations will likely change soon). Another is the enormous attention focused on climate change as a result of Al Gore’s film and the release of several significant reports highlighting the rapidity of the onset of climate impacts from growing atmospheric CO2 levels. It is probably fair to say that environmental NGOs and their funders have become obsessed with the issue of climate change nearly to the exclusion of all other subjects, and discussion in government circles having to do with environmental and energy policy is being framed almost exclusively in terms of carbon emissions reduction. One gauge of the remarkable growth in attention to the climate issue is the fact that the arch-conservative owner of Fox News, Rupert Murdoch, has pledged to make his News Corp. media empire carbon neutral, and to feature the climate message in his TV programming and newspapers. When Murdoch jumps on board an environmental cause, as Amanda Griscom Little put it in her Salon.com article on May 17 “you know we’re past the tipping point on the issue. Think landslide.”
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Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 17:24:10

threadbear wrote:Did any of you here notice that sentiments about global warming coming from the American govt seemed to turn on a dime, early this year? It was really strange. It's hard to tell if it was a critical mass phenomenon, or if some kind of conscious policy shift is taking place behind the closed doors of the corporatocracy. It seemed like the media had been given the "green" light to go all eco-conscious, all of a sudden. Also, tremendous emphasis on climate change...all of a sudden.

My brother's a journo and he did some digging into the cause of global warming, and kept hitting brick walls, trying to nail down a definitive answer about what is actually causing global warming.

He DID come up with something rather interesting though, and that is that the nuclear industry seems to be heavily involved in pushing the carbon emission causing climate change hypothesis. On the other hand, the solar cycle people seem to be heavily influenced and funded by the oil people.

It seems like much of the eco-consciousness we see of late could be the result of a brokered decision or series of decisions, to gradually let nuclear dominate and oil recede. Of course oil will still play a fairly significant role.

The Democrats have traditionally been closer to the nuclear industry, so you can see how it could be played as part of political platform that corrals the voter into equating oil preeminence over nuclear with ongoing wars and domestic nuclear with peace and as a solution to climate change.

There are already many contingency plans being sorted out to build "clean nuclear" all over the US. It's certainly happened in Europe and I can see no reason why it wouldn't happen in the US. It's horrendously expensive, true. That's why corporations will take it on, not govt.

These will be like the Depression era make work projects, as they will kick in when the US starts to hit dismal economic times. In this respect I agree with Mkwin. People will have to be pretty freaked out about energy issues before they sign on for it...but they will, I'm afraid, as energy becomes prohibitively expensive and news coverage shows people frozen as solid as fish sticks, being pulled out of their homes/freezers in the winter.


I've heard a convincing argument contradicting human caused climate change. The possibility of the whole climate change agenda being driven by Governments knowledge of peak oil is compelling.

Peak oil is a complicated topic and explaining it to the masses would be difficult – so it makes sense to say we need to cut CO2 or we die. So, therefore, we need to go nuclear and have wind farms built behind our homes.
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Re: Peak Nonsense

Unread postby MonteQuest » Wed 06 Jun 2007, 17:28:47

mkwin wrote: I wasn't doubting oil depletion - but the decline in production will be far flatter with more exploration and investment in marginal fields. While all the super-giant fields have been found, there are still a significant amount of potential smaller fields that will become profitable with a sustained high oil price.


That's not what the numbers say. They say future production will only cover 60% of decline losses. Michael Lynch will differ..see his thread.

Do you really think the power grids in the industrial world are going to fail within 5-7 years?


The power grid goes down all the time. Here in Arizona it is so bad that we cannot import electricity for peak demand. We've had to build small NG plants just for the purpose. Major issue in the West is transmission grid. One of the reasons an electric car future is not yet viable.

The point is there are actions that can be taken to manage a transition to a lower energy society without chaos breaking out.


If you have a few decades to plan and mitigate it, yes. We don't have that time.

Ultimately no one knows how this complex situation is going to play out. My objection was to the constant doctrine that there is nothing that can be done to prevent the collapse of modern society into the pre-industrial state - when no one can possibly know what will happen.


No? What energy source do you see that can replace oil in the manner, and on the scale, we use it?
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Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 17:31:43

MonteQuest wrote:
mkwin wrote: There will be literally TRILLIONS of dollars wanting to buy into the oil industry with its guaranteed high growth potential and inflation hedging ability.


You mean high profit potential, don't you?

Terminal decline means no growth in production.


Exactly - growth in revenue and hence profits. This is attractive to investors as the dividend yield is only a small element of the return to the investor. Expected growth in future earnings - in this case by a rising all price - is a very big component. As, as oil is driving the inflation, the stock would be a good inflation hedge i.e. it rises faster than inflation.
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Re: Peak Nonsense

Unread postby MonteQuest » Wed 06 Jun 2007, 17:35:58

mkwin wrote: Exactly - growth in revenue and hence profits. This is attractive to investors as the dividend yield is only a small element of the return to the investor. Expected growth in future earnings - in this case by a rising all price - is a very big component. As, as oil is driving the inflation, the stock would be a good inflation hedge i.e. it rises faster than inflation.


But the growth will be in inflation, not oil production. Feeding hay to a dead horse for profits?

What happens when the demand for energy outstrips supply?

No growth. No growth in a fiat money system? No new loans. A shrinking deflating money supply as principal is retired?
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Re: Peak Nonsense

Unread postby MonteQuest » Wed 06 Jun 2007, 17:41:31

You do realize that we have been over every single point you bring up many, many times... for years on this site? This is a rehash. Nothing new here, I am afraid.
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Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 17:48:46

MonteQuest wrote:
mkwin wrote: I wasn't doubting oil depletion - but the decline in production will be far flatter with more exploration and investment in marginal fields. While all the super-giant fields have been found, there are still a significant amount of potential smaller fields that will become profitable with a sustained high oil price.


That's not what the numbers say. They say future production will only cover 60% of decline losses. Michael Lynch will differ..see his thread.

Do you really think the power grids in the industrial world are going to fail within 5-7 years?


The power grid goes down all the time. Here in Arizona it is so bad that we cannot import electricity for peak demand. We've had to build small NG plants just for the purpose. Major issue in the West is transmission grid. One of the reasons an electric car future is not yet viable.

The point is there are actions that can be taken to manage a transition to a lower energy society without chaos breaking out.


If you have a few decades to plan and mitigate it, yes. We don't have that time.

Ultimately no one knows how this complex situation is going to play out. My objection was to the constant doctrine that there is nothing that can be done to prevent the collapse of modern society into the pre-industrial state - when no one can possibly know what will happen.


No? What energy source do you see that can replace oil in the manner, and on the scale, we use it?


1) Its not just Michael Lynch who says this. CERA are another example and Hirsch says he expects a 2% depletion rate - although he expects a peak far sooner.

2) Well i'm sorry to hear of the localized problems you’re having in Arizona. Isn't Arizona a very large state? In the UK I’ve never experienced a power grid failure.

3) Again I assume you're referring to Hirsch - Firstly, he doesn't say if mitigation occurs after peak oil we are doomed to a Olduvai decline he says 'economic hardship'. Secondly, he assumes one of the problems with quick implementation of mitigation would be the hold up by NIMBY politics on the local level. The president will simply enable executive powers for immediate implementation. He already has the power to declare martial law.

4) Nothing on that scale in the short-term, we will see a vast reduction in demand - possibly rationing of oil supplies but also because of demand destruction in other areas of the economy. Following that, maybe 3-5 years hence, some of the alternative fuels Hirsch talks about - coal to liquids will major in the US and Europe and hybrid/electric cars and buses will become more widespread as will widespread use of mass transit or walking/biking places.

Another point - we will be experiencing high inflation so MASSIVE government defects are not a problem as inflation eats the value of the debt very quickly.
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Re: Peak Nonsense

Unread postby mkwin » Wed 06 Jun 2007, 17:53:19

MonteQuest wrote:You do realize that we have been over every single point you bring up many, many times... for years on this site? This is a rehash. Nothing new here, I am afraid.


If you've been over every single point, why am I finding clear weaknesses in some of the arguments put forward? I'm not saying I’m definitely right but I’m saying neither are you. We just don't know.
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Re: Peak Nonsense

Unread postby keehah » Wed 06 Jun 2007, 17:55:08

mkwin wrote: We just don't know.

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