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Peak Nonsense

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

Re: Peak Nonsense

Unread postby MonteQuest » Thu 07 Jun 2007, 13:57:36

threadbear wrote:Yes, let's see if the Saudis can open the taps this summer! That might give us an idea as to how steep the depletion curve is. Right now, it's all speculative. Ask the real experts, Mkwin


So, you posit that SA can open the taps for another 20 years?

The point wasn't about the decline rate, but whether it is too late to mitigate peak oil.

I don' t think it is "speculative" to assert that peak oil is sooner than 20 years out.

Willing to bet the farm or civilization on it?
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Re: Peak Nonsense

Unread postby MonteQuest » Thu 07 Jun 2007, 14:09:34

mkwin wrote: 1) Its obviously pure speculation - the question is how much oil new production will bring to the market to reduce the aggregate rate of decline.


There are a few like Lynch who say it exists. Most say new production will only cover 60% of new decline.

2) My Uncle runs a number of restaurant businesses and he has never spoken about serious problems. I've also spent a number of summers at Lake Tahoe and had no electricity problems. I would be interested to see any statistics of brown and black outs - if you have some.


Blackouts, brownouts, Energy Crisis in California

ARTICLES ABOUT BLACKOUTS AND BROWNOUTS

3) If you could define this illusive point it would be appreciated. I made a rather simply statement about quite basic economics and you called it nonsense. Just to clarify, I'm no fan of lose monetary policy as it causes debasement of the currency and hence inflation but desperate times and all that.


Our Money System and Oil Depletion; Are they Compatible?
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Re: Peak Nonsense

Unread postby threadbear » Thu 07 Jun 2007, 15:03:53

MonteQuest wrote:
threadbear wrote:Yes, let's see if the Saudis can open the taps this summer! That might give us an idea as to how steep the depletion curve is. Right now, it's all speculative. Ask the real experts, Mkwin


So, you posit that SA can open the taps for another 20 years?


I posit no such thing and won't be corralled into a ludicrous fundamentalist back and forth with you.
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Re: Peak Nonsense

Unread postby mkwin » Thu 07 Jun 2007, 15:13:26

In my opinion the post regarding debt and oil depletion is right to a certain extent. The system will absolutely be in trouble but not simply because the economy is no longer growing. The real worry is derivatives - there are derivative contacts with a value of over 8 times all the assets in the world. As asset values around the world fall, almost every hedge fund in existence will fold and this will cause massive structural instability in the financial system. It's impossible to say what will happen but it won't be good.

As for debt – its existence relies on the ability to pay interest. This is true for government/corporate and personal debt. Even in a declining economy, resources can be transferred from other areas of the budget to cover interest payments - although widespread bad debt will be experienced by banks further undermining the system. Ultimately, the bailout could be government who could issue inflation indexed bonds to attract capital to support the system and restrict money withdrawal. If you have savings in the bank – you’ll get a lot poorer unless you buy into inflation hedges – such index linked government bonds/commodities/oil stocks or just useful goods.
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Re: Peak Nonsense

Unread postby threadbear » Thu 07 Jun 2007, 15:22:47

mkwin wrote:In my opinion the post regarding debt and oil depletion is right to a certain extent. The system will absolutely be in trouble but not simply because the economy is no longer growing. The real worry is derivatives - there are derivative contacts with a value of over 8 times all the assets in the world. As asset values around the world fall, almost every hedge fund in existence will fold and this will cause massive structural instability in the financial system. It's impossible to say what will happen but it won't be good.
.


Mkwin, Could you start a separate thread on derivatives? I think a lot of people here are confused about them. You can explain the problem in a little more depth than I can. People are wetting their pants over peak oil, which is highly problematic, but it's going to take second seat behind this fiasco.
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Re: Peak Nonsense

Unread postby MonteQuest » Thu 07 Jun 2007, 15:57:33

threadbear wrote:
MonteQuest wrote:
threadbear wrote:Yes, let's see if the Saudis can open the taps this summer! That might give us an idea as to how steep the depletion curve is. Right now, it's all speculative. Ask the real experts, Mkwin


So, you posit that SA can open the taps for another 20 years?


I posit no such thing and won't be corralled into a ludicrous fundamentalist back and forth with you.


Then explain yourself, as it is very unclear as to the point you are trying to make. It is out of context with the previous discussion.
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Re: Peak Nonsense

Unread postby MonteQuest » Thu 07 Jun 2007, 16:03:09

mkwin wrote:In my opinion the post regarding debt and oil depletion is right to a certain extent. The system will absolutely be in trouble but not simply because the economy is no longer growing. The real worry is derivatives - there are derivative contacts with a value of over 8 times all the assets in the world. As asset values around the world fall, almost every hedge fund in existence will fold and this will cause massive structural instability in the financial system. It's impossible to say what will happen but it won't be good.


Exactly. I have written on that as well.

As for debt – its existence relies on the ability to pay interest.


And the ability to pay interest comes from a growing economy and the increase in the money supply through loans.

No growth=no loans=a shrinking money supply.

Connect the dots.
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Re: Peak Nonsense

Unread postby coyote » Thu 07 Jun 2007, 16:24:27

mkwin wrote:I made a rather simply statement about quite basic economics and you called it nonsense.

This is the basic problem here; we're all talking past each other. You keep trying to educate us on the basics of economic theory, and MQ is telling you we've been there. Check the threads.

I'll be the last person to argue with anyone about likely global depletion rates; I just don't know enough. But I am betting the farm, as it were, that the currently accepted basic tenets of financial market dynamics will not be able to hold together for long in an era of permanently restricting energy supplies. Smith's invisible hand is going to get quite a swat as the magic carpet of cheap energy is pulled from under us.

Please pardon the mixed metaphors. But an ebb tide lowers all boats.

mkwin wrote: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.

Cool. Go for it. Good luck.
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Re: Peak Nonsense

Unread postby mkwin » Thu 07 Jun 2007, 16:48:44

MonteQuest wrote:
mkwin wrote:In my opinion the post regarding debt and oil depletion is right to a certain extent. The system will absolutely be in trouble but not simply because the economy is no longer growing. The real worry is derivatives - there are derivative contacts with a value of over 8 times all the assets in the world. As asset values around the world fall, almost every hedge fund in existence will fold and this will cause massive structural instability in the financial system. It's impossible to say what will happen but it won't be good.


Exactly. I have written on that as well.

As for debt – its existence relies on the ability to pay interest.


And the ability to pay interest comes from a growing economy and the increase in the money supply through loans.

No growth=no loans=a shrinking money supply.

Connect the dots.


The ability to pay interest comes from the resources available. Obviously, if you have no job you can't pay the interest. However, interest can also come from sacrificing other expenditure to meet the payment. You use your vacation money or you’re to meet the payments. The same is true for government - NASA's budget is diverted to meeting its debt payments.

Also, I doubt profitable industry, that associated with the response, will have any problems finding loans from private equity and relatively solvant banks.

What your equation could say is:

No growth = less tax revenue/unemployment = no loans (to consumers) = shrinking money supply

However, governments will be running deficits so this will be creating an expanding money supply.

MonteQuest, I’d be interested to know your views on Lynch, why are his arguments incorrect? I certainly don’t believe the peak if 2030 or whatever he says but I found his argument and experience compelling.
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Re: Peak Nonsense

Unread postby mkwin » Thu 07 Jun 2007, 17:00:15

coyote wrote:
mkwin wrote:I made a rather simply statement about quite basic economics and you called it nonsense.

This is the basic problem here; we're all talking past each other. You keep trying to educate us on the basics of economic theory, and MQ is telling you we've been there. Check the threads.

I'll be the last person to argue with anyone about likely global depletion rates; I just don't know enough. But I am betting the farm, as it were, that the currently accepted basic tenets of financial market dynamics will not be able to hold together for long in an era of permanently restricting energy supplies. Smith's invisible hand is going to get quite a swat as the magic carpet of cheap energy is pulled from under us.

Please pardon the mixed metaphors. But an ebb tide lowers all boats.

mkwin wrote: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.

Cool. Go for it. Good luck.


I don't doubt the financial status quo will have massive problems. This debate with me started by some guy saying there would be no investment in the oil industry post-peak.

The bottom line is there in no way of knowing what’s going to happen, there are far too many moving parts, and I was opposed to the prevalent view that we are definitely doomed to a break down of society.
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Re: Peak Nonsense

Unread postby coyote » Thu 07 Jun 2007, 17:11:41

hmmm... Okay. And if the economy were all we had to worry about, I might even be tempted to agree with you. If it were only the economy... then I suppose I'd be a hard lander, as you seem to be, instead of a hardcore doomer, as I am. But to my mind, the economy doesn't even make it to the top five in the list of converging catastrophes we're facing. Societal collapse... yeah, you bet. Because it's not just the economy.
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Re: Peak Nonsense

Unread postby mkwin » Thu 07 Jun 2007, 17:18:45

threadbear wrote:
mkwin wrote:In my opinion the post regarding debt and oil depletion is right to a certain extent. The system will absolutely be in trouble but not simply because the economy is no longer growing. The real worry is derivatives - there are derivative contacts with a value of over 8 times all the assets in the world. As asset values around the world fall, almost every hedge fund in existence will fold and this will cause massive structural instability in the financial system. It's impossible to say what will happen but it won't be good.
.


Mkwin, Could you start a separate thread on derivatives? I think a lot of people here are confused about them. You can explain the problem in a little more depth than I can. People are wetting their pants over peak oil, which is highly problematic, but it's going to take second seat behind this fiasco.


I'm not an expert on the derivative market so I can't really talk about specific implications.

But the basics, a derivative contract ia a highly leveraged bet on the movement in value of a particular asset. Can be anything from gold to Microsoft shares to property values. An investor will put down a certain amount of equity (money) say for example $1 and they will bet against the movement of a specific figure, say $100, of an asset, and say gold. If the price in gold increases $1, the investor makes a 100% return. If the gold falls $2 they lose their initial $1 dollar and are in the hole to the tune of $1 i.e. they make a 200% loss.

The implications for a major asset price deflation will mean anyone with exposure to the derivative market will be hit very hard. Bottom line, all the hedge funds (main investors/speculators in derivatives) will lose their shirts and with it a lot of money - hundreds of billions possibly even trillions.
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Re: Peak Nonsense

Unread postby MonteQuest » Thu 07 Jun 2007, 17:23:32

mkwin wrote: The ability to pay interest comes from the resources available.


Sigh....Obviously, you did not read the thread I linked to.

However, governments will be running deficits so this will be creating an expanding money supply.


That's what we are doing now. So, you say the solution to no growth is to print more money (monetize the debt), so that those things that are being produced with the declining energy supply will be driven sky high?

Who is going to buy this debt? 80% of the world's savings are already appropriated to keep America afloat.

U.S. Central Intelligence Agency (CIA)
Rank Order - Current account balance (in billions of dollars)

1 China $ 179 billions
2 Japan $ 174
3 Germany $ 135
4 Russia $ 105
5 Saudi Arabia $ 103
6 Norway $ 63
7 Switzerland $ 50
8 Netherlands $ 50
9 Kuwait $ 41
...
158 India $ -26
159 France $ -38
160 Australia $ -42
161 United Kingdom $ -58
162 Spain $ -99
163 United States $ -862

How is that a solution? Money does not create energy. Energy creates money.

MonteQuest, I’d be interested to know your views on Lynch, why are his arguments incorrect? I certainly don’t believe the peak if 2030 or whatever he says but I found his argument and experience compelling.


Read the Lynch thread. You are a lazy poster. You want us to do all the heavy lifting for you.

Sorry, not your errand boy.
Last edited by MonteQuest on Thu 07 Jun 2007, 17:28:15, edited 1 time in total.
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Re: Peak Nonsense

Unread postby threadbear » Thu 07 Jun 2007, 17:23:36

MonteQuest wrote:
threadbear wrote:
MonteQuest wrote:
threadbear wrote:Yes, let's see if the Saudis can open the taps this summer! That might give us an idea as to how steep the depletion curve is. Right now, it's all speculative. Ask the real experts, Mkwin


So, you posit that SA can open the taps for another 20 years?


I posit no such thing and won't be corralled into a ludicrous fundamentalist back and forth with you.


Then explain yourself, as it is very unclear as to the point you are trying to make. It is out of context with the previous discussion.


It's self explanatory.
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Re: Peak Nonsense

Unread postby MonteQuest » Thu 07 Jun 2007, 17:26:35

threadbear wrote: It's self explanatory.


Yep, you are out of the loop of the discussion. It's self explanatory if that was what we were talking about, but it is not...as I previously explained.
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Re: Peak Nonsense

Unread postby threadbear » Thu 07 Jun 2007, 17:31:26

A cursory glance at the thread tells me I'm in the loop. I'm just not stuck in your cul de sac of obsessive argument. Sorry.
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Re: Peak Nonsense

Unread postby mkwin » Thu 07 Jun 2007, 17:38:13

MonteQuest wrote:
mkwin wrote: The ability to pay interest comes from the resources available.


Sigh....Obviously, you did not read the thread I linked to.

However, governments will be running deficits so this will be creating an expanding money supply.


That's what we are doing now. So, you say the solution to no growth is to print more money (monetize the debt), so that those things that are being produced with the declining energy supply will be driven sky high?

Who is going to buy this debt? 80% of the world's savings are already appropriated to keep America afloat.

U.S. Central Intelligence Agency (CIA)
Rank Order - Current account balance (in billions of dollars)

1 China $ 179 billions
2 Japan $ 174
3 Germany $ 135
4 Russia $ 105
5 Saudi Arabia $ 103
6 Norway $ 63
7 Switzerland $ 50
8 Netherlands $ 50
9 Kuwait $ 41
...
158 India $ -26
159 France $ -38
160 Australia $ -42
161 United Kingdom $ -58
162 Spain $ -99
163 United States $ -862

How is that a solution? Money does not create energy. Energy creates money.

MonteQuest, I’d be interested to know your views on Lynch, why are his arguments incorrect? I certainly don’t believe the peak if 2030 or whatever he says but I found his argument and experience compelling.


Read the Lynch thread.



The government deficit is a function of our monetary system - if the government runs a deficit the central bank creates the necessary funds out of thin air and gives them to the government. The government then spends the funds on what they need to. This money then enters the money system when the government buys goods and services leading to an increase of the money supply (and your right, inflation).

Energy does not create money. Money has no correlation to energy.
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Re: Peak Nonsense

Unread postby MonteQuest » Thu 07 Jun 2007, 17:46:46

threadbear wrote:Mkwin, Could you start a separate thread on derivatives? I think a lot of people here are confused about them.


Quite simple. Derivatives are assets based upon the value of other assets. In a $40 trillion dollar world economy, you have $300 trillion in derivatives. This guy says he's heard $770 trillion.

The big banks cannot convert their supposed assets into the cash (liquidity) which they need to pay their bills. The cause of the gridlock is that the supposed assets are fake; they have no real value. And the fake assets swallowed up the real assets making them disappear. It's like converting all of your wealth into gold, then grinding up the gold into powder, mixing it with concrete and paving the roads with it. There's no way to retrieve the gold.


The amount of money involved needs to be put into perspective. The total annual product of the globe is around $30 trillion. I estimate that the total value of the global real estate is around $50 trillion. A few years ago, Alan Greenspan said the amount of derivatives on the books was $200 trillion. More recently, the figure was stated to be $300 trillion. Now, someone is saying $770 trillion. Even if we use the more certain figure of $300 trillion, that's about four times the total production and property value of the globe. This means the funnymoney cannot have a real value, because there is nothing of that much value in existence. It's like two persons flipping a coin for a trillion dollars, and afterwards someone owes a trillion dollars which never existed. The funnymoney is debt created in that manner.


http://nov55.com/economy.html

You think the inability to grow the economy will not pull down this house of cards?

Make the Crash of '29 look like an audition.
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Re: Peak Nonsense

Unread postby MonteQuest » Thu 07 Jun 2007, 17:50:07

threadbear wrote:A cursory glance at the thread tells me I'm in the loop. I'm just not stuck in your cul de sac of obsessive argument. Sorry.


Well, we were talking about mitigation, not the decline rate, so your comments were out of context to the discussion and shows you out of the loop.
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Re: Peak Nonsense

Unread postby coyote » Thu 07 Jun 2007, 17:57:28

mkwin wrote:Money has no correlation to energy.

... and I believe Monte has ferreted out the culprit ...
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