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Orlov: Predictions for 2014

Orlov: Predictions for 2014 thumbnail
The calendar ticking over into the next year is a traditional occasion to draw some conclusions and make some predictions. Lots of people take this to mean that they should talk about where they think the stock market will go, or how much gold bullion will cost, or what the cost of oil will be. And although I find such matters quite tedious, this year I will indulge them and do the same.
The equation that best describes the stock market at the moment is y=mt+b, a.k.a. the first order linear equation. Meaning, some market index or other (y) must be roughly equal to some fudge factor m (called the slope) times time t plus some base offset b (called the intercept). The way I imagine that works is, a bunch of gnomes that inhabit the entrails of big finance and have access to an endless supply of newly printed dollars lean on the “buy” button periodically to make sure that the index increases monotonically. (Actually, the gnomes might be robots, in which case we could all go extinct and the stock market would still continue to go up.) So, my prediction is that this will continue happening until something breaks. Nobody knows when it will break, or why, because printing money and using it to prop up the price of stocks is a brilliant business plan that can continue working forever. Yes, I know that some people are pointing out that nothing goes up forever. Look at the housing bubble circa 2008, they say, or the internet stock bubble circa 2000. Bubbles always pop, they say. Naysayers! Well, what I want to say to these naysayers is this: This Time It’s Different. This is a new and amazing breakthrough: infinite wealth creation is now achievable through infinite money printing. It’s like the Singularity! (Remember, you heard it here first.)
As far as the price of gold, the picture is also quite clear: it will stay roughly the same, because similar gnomes have the job of hammering it down whenever it shows signs of exceeding a certain threshold. Doing so is not necessarily a money-making proposition for them, but then who needs to make money when you can just print it? Again, this is a sound business plan with bright prospects as far as the eye can see. There is just one little snag: in places where actual savings do exist, people are switching out of dollars and into physical gold, meaning that at some point the cupboard will be bare, no matter what the price, resulting in something called market failure. Since physical gold cannot be willed into existence, and is currently selling for less than it costs to mine it and refine it, this is potentially a problem. Still, my prediction is that the price of gold will remain fixed, until the fix is off, but nobody knows when that will be, not even I.
Now, the price of oil is even simpler to forecast: it will be between $100 and $150 a barrel, roughly. It may briefly dive to as low as $20 a barrel, but that won’t last. The past few years have allowed us to empirically determine that $100/bbl is the price that’s necessary to keep the oil flowing in the quantities required to keep the economy humming along, now that all the supergiant fields are in depletion and all the new fields are super-expensive and involve deep-sea drilling or fracking or other expensive and/or risky ventures. Now, you might think that keeping the oil flowing in the quantities required to keep the economy humming along may turn out to be problematic at some point. Never fear! All that has to happen in case of a shortfall is that a bunch more workers suddenly get laid off. Yes, this will briefly affect the unemployment rate, but only until their unemployment benefits expire. After that it will only affect the labor participation rate, which has been trending toward zero, but nobody ever looks at it, so it doesn’t matter. When people get laid off, suddenly they are not driving to work or consuming beyond what their paltry SNAP and WIC benefits allows them to consume. This causes oil consumption to drop and the economy is in balance again. At the other extreme, $150/bbl is sufficient to put the breaks on the economy for an entirely separate set of reasons: when expenditure on oil rises above some magic percentage of GDP (empirically determined) expenditure on everything that isn’t oil drops enough to curtail economic activity, in turn curtailing oil consumption. So, you see, the system is self-regulating, and can continue this way forever. Until it can’t. But nobody knows when that will be, not even I.
The whole thing sort of reminds me of the electricity supply situation on my boat. The picture above is of the electric plug and socket through which up to 30A of juice at 110V flows to my boat from the electric grid on shore. Every month the meter is read, and my credit card is charged for the correct amount. This, I think, can go on forever. In the interests of full disclosure, I do need to tell you that there was a funny plastic burning smell late last night, and some strange buzzing and then snap-crackle-pop sort of thing going on, but it didn’t last long. And after that everything was fine again. I did end up having to spend oh maybe ten minutes stripping and splicing electrical cables, but that’s OK, I don’t mind. So, don’t you worry, the system is resilient and self-regulating and can go on and on. Until it can’t. But nobody knows when that will be. Not even I.
Happy New Year!
Club Orlov

19 Comments on "Orlov: Predictions for 2014"

  1. Danny on Tue, 31st Dec 2013 1:58 pm 

    I read this article to find out what caused your cord to melt like that. but it does not say…my guess is you were drawing too much current and breaker wasn’t tripping…but I guess I need more information….Danny

  2. J-Gav on Tue, 31st Dec 2013 2:45 pm 

    Notice that, in order to keep the article short I suppose, Dmitry mentions only 2 of the 4 horsemen here: the wheel coming off the markets and world economy and resource depletion.

    He doesn’t talk about climate or war (or pestilence for that matter, as resistant strains of new ‘bugs’ pop up almost daily). But hey, look on the bright side! With a little luck, we might squeak through 2014 without a major event there too …

  3. Dave Thompson on Tue, 31st Dec 2013 3:14 pm 

    I am thinking the pot boils over spring/fall 2015. Just in time for the presidential elections. That tosses the race into the air. Democrats will be blamed, voters will shift Republican, tax/entitlement cuts pushed CRUZ/Walker stroll into white house. We are doomed…………LOL.

  4. Northwest Resident on Tue, 31st Dec 2013 3:16 pm 

    “…because printing money and using it to prop up the price of stocks is a brilliant business plan that can continue working forever.”

    As long as the band of thieves (TPTB)stick together and don’t call in debts owed to each other, there is no telling how long that “brilliant business plan” can keep going. But Orlov is correct — it will only work in conjunction with the plan to keep laying off/firing employees to keep energy consumption down to a certain level. Stupendous!

  5. Makati1 on Tue, 31st Dec 2013 5:02 pm 

    Well, it is already 2014 here in Manila, and after three straight hours of fireworks that turns the sky over the city a gun smoke blue with the black power smell for hours, it was great! Until I moved here, I had never experienced a place where at least (no exaggeration) a thousand flashes a second goes on for so long. Everything from Roman candles to high sky bursts all over the city. They seem to come from everywhere and cover 10 square miles or more. Noise and fireworks for as far as you can see from the top of a 35 story building.

    As for 2014, I think this year is going to be the one where major events happen.
    The word for 2014 in my house is “Frugal”.

  6. Arthur on Tue, 31st Dec 2013 5:36 pm 

    To make a long story short, Dmitri doesn’t have a clue either about what is going to happen in 2014 (‘oil between 20-150$’, that’s pretty desperate for a professional forecaster). For a collapse guy like D, it was a rather uneventfull year… Snowden, gold below 1200$, Assad still in place, SA upset because of a deal between the US and Iran, stabilisation of the eurozone. Did I forget anything?

  7. ghung on Tue, 31st Dec 2013 6:51 pm 

    The slow deterioration will continue: more infrastructure will degrade than is replaced or repaired, like a home being gutted from within by termites while being painted over with cheap paint to pretend it looks new. Whatever investments are made in new or replacement infrastructure will be, increasingly, a case of diminished returns from higher costs, and we’ll still be investing in mostly the wrong things.

    Globally, growing demands on declining resources will continue, and cases of falling demand will be applauded as “efficiency improvements” when it’s mostly a reality of not being able to afford stuff. Of course, whatever Peter can’t afford will quickly be snatched up by Paul somewhere else. If Peter figures things out, he’ll realize there’s an advantage in winning the race to the bottom. Most will be wallowing in resentment and blame and won’t see this. They are still being programmed for more.

    Ecologically, awareness will grow, but these inconvenient truths won’t be addressed on any scale that matters; too inconvenient. Besides, the sense of entitlement that gives us permission to foist our waste streams on others and the future is well established; a tradition that goes back to the beginning. The lessons of history are just stories in books. Someone else’s problem.

    The drive to increase our numbers will continue to do battle with natures limits; the story of all life.

    All of this will continue to be papered over with increasingly corrupt financialization, while the masses are fed myths of how their conditions will improve, and shown more faux examples of their comfortable middle class future, not realizing that it’s quickly becoming a virtual future.

    As the age of consequences arrives, the age of ignoring them reaches its apex. Impotent leaders will continue to be sacrificed on the alter of blame, only to be replaced with those who know how to play the game better, or, at least, say they do. The professional liars skilled in the arts of delusion will continue to do quite well; a growth industry indeed.

    Baring some major Black Swan event, 2014 will seem much as 2013 did to most. There will be instances of Detroitesque decline, a disaster here or there, though we’ve seen it all before, somewhere else. Nothing new really. Mass societal inertia will likely ensure a slow, excruciatingly incremental collapse, and we all have our distractions and stories to keep the fear at bay. Besides, we’re the exceptional species. We’ll think of something, right? We always have….

  8. GregT on Tue, 31st Dec 2013 7:48 pm 

    As Orlov has so succinctly put it:

    ‘But nobody knows when that will be. Not even I.’

    It shouldn’t be too difficult, however, for most here to see the direction that we are headed, it is not so much a matter of ‘if’, as it is a matter of ‘when’.

    Given the propensity of exponential systems to collapse sooner than most can anticipate, I would guess much sooner than later. That is what my game plan is focussed on. I can only hope, that I will not be too late in it’s implementation.

    Time will tell………

  9. penury on Tue, 31st Dec 2013 7:49 pm 

    Let me see how I can do with wild predictions: American high School graduates will continue to be the least educated in the world. 67 per cent will not know how to find Afganistan on a globe. 50 per cent will not be able to find Canada on the globe/ 90 per cent will be unable to explain compound interest. 40 per cent will not be able to read their diplomma. 80 per cent will be Democans and vote for Jesus. The real world situation will become less stable and POTUS will not be a factor in our lives and’or government.

  10. ghung on Tue, 31st Dec 2013 8:51 pm 

    Oh, Yeah,, Happy New Year to all, and productive prepping for whatever comes!

  11. Northwest Resident on Tue, 31st Dec 2013 9:18 pm 

    I predict that once the combat troops from Afghanistan are extracted from that hell-hole (in 2014) and returned home to be integrated into hundreds of local police forces, then the stage will finally be set for the historic event that I will term “The Great Pulling of the Plug”. It makes zero sense to continue BAU past the time that is needed for TPTB to get all their strategic assets and collapse plans in place. Don’t fool yourself into thinking that TPTB are stupid, ignorant, unaware or blinded by greed — just the opposite, they know what is going on. Once all their ducks are lined up, look for the Great Pulling of the Plug — it will be an event that begins the financial collapse chain of events and leads ultimately to a complete shutdown of BAU. To maintain control, and to stay in the driver’s seat, TPTB CANNOT just let BAU plod along until it fizzles out — they have to pull the plug, secure vital assets, hunker down while the great die-off washes over the planet, then emerge with enough assets and energy at their disposal to build a new world order. 2014 could be the year that it all goes down — be ready.

  12. GregT on Tue, 31st Dec 2013 10:26 pm 

    Yes, Happy New Year everyone!

    We do, live in interesting times. All the best!

  13. Frank Kling on Wed, 1st Jan 2014 1:27 am 

    Hi Arthur,

    I sure hope you will read this request. I misplaced your brilliantly written summation of the beginnings of WW I. If you have a copy, would you kindly post so I may copy?

    Thank you.

  14. RICHARD RALPH ROEHL on Wed, 1st Jan 2014 5:54 am 

    So… ah… er… ah… what was the prediction?

  15. Kenz300 on Wed, 1st Jan 2014 4:48 pm 

    Prediction — endless population growth will make problems like Climate Change, food scarcity, water scarcity and declining fish stocks worse and harder to deal with………..

  16. Welch on Wed, 1st Jan 2014 5:16 pm 

    Live. Love. Laugh. Life is short, enjoy it while you can.

    Happy New Year!

  17. Arthur on Wed, 1st Jan 2014 5:21 pm 

    Frank, it really pays off to invest a little time in learning the most important google commands:

    google: “ arthur kaiser”

    to arrive at:

    peakoil . com/consumption/kunstler-unpaving-our-way-to-the-future

  18. FriedrichKling on Wed, 1st Jan 2014 10:40 pm 

    Thank you, Arthur, for the article and web site link.

  19. Pops on Thu, 2nd Jan 2014 5:31 pm 

    Outrageous Forecasts for 2014

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