Meltdown

[BachQ]

London Times: Arctic is melting even in winter
The polar icecap is retreating and thinning at a record rate

The Arctic icecap is now shrinking at record rates in the winter as well as summer, adding to evidence of disastrous melting near the North Pole, according to research by British scientists.

They have found that the widely reported summer shrinkage, which this year resulted in the opening of the Northwest Passage, is continuing in the winter months with the thickness of sea ice decreasing by a record 19% last winter.

Usually the Arctic icecap recedes in summer and then grows back in winter. These findings suggest the period in which the ice renews itself has become much shorter.

Dr Katharine Giles, who led the study and is based at the Centre for Polar Observation and Modelling at University College London (UCL), said the thickness of Arctic sea ice had shown a slow downward trend during the previous five winters but then accelerated.

She said: "After the summer 2007 record melting, the thickness of the winter ice also nose-dived. What is concerning is that sea ice is not just receding but it is also thinning."

The cause of the thinning is, however, potentially even more alarming. Giles found that the winter air temperatures in 2007 were cold enough that they could not have been the cause.

This suggests some other, longer-term change, such as a rise in water temperature or a change in ocean circulation that has brought warmer water under the ice.

If confirmed, this could mean that the Arctic is likely to melt much faster than had been thought. Some researchers say that the summer icecap could vanish within a decade.

[BachQ]

Dm, I've had another read and listen today on this subject. Do you come across any other concrete forcasts for the present oil price surge? It's obviously volatile, but how volatile? I hardly believe in the world at all and know that the more serious something is the less people will really talk about it: is this the steep edge on the other side of the peak or just the start of a gentle slope?

Sean, you are asking about a "fast crash" vs a "slow crash."  Well, today (Oct. 29), some astonishing preliminary data has been leaked from the International Energy Agency's (IEA's) comprehensive report officially due out November 12, 2008.  This is unofficial data and has not been approved by the IEA, but if it's even close to accurate, it means that global oil extraction and production is falling far faster than had previously been expected.  This would have dire consequences for the global economy, because with production lagging behind demand, oil prices will again skyrocket.  It would also suggest that a "fast-crash" scenario is likely, given the steepness of the slope of annual decline in oil production.



Global Oil Production Is Falling Faster Than Expected, FT Says

By Angela Macdonald-Smith

Oct. 29 (Bloomberg) -- Global crude-oil output is falling faster than expected, leaving producers struggling to meet demand without extra investment, the Financial Times said, citing a draft of an International Energy Agency report.  Annual production is set to drop by 9.1 percent in the absence of additional investment, according to the draft of the agency's World Energy Outlook obtained by the newspaper, the FT reported. Even with investment, output will slide by 6.4 percent a year, it said. The shortfall will become more acute as prices fall and investment decisions are delayed, the newspaper said. The IEA forecasts that the rising consumption of China, India and other developing nations requires investments of $360 billion a year until 2030, it said.

Here's the original Financial Times piece

[BachQ]

What is a "classic trade-depression" ? Isn't that an oxymoron? It happened only once before, and under different circumstances (as the article admits).

I retain this:
Purging debt is the necessary medicine to regain full economic health. And from what I understand this is the way we are all headed. Given the enormous size of the world debt, it will indeed take at least a decade. And, just like domestic debts, there will be bad debtors and some countries will go bust.

A "Pitiful growth" is not a terminal illness. It's a very beneficial economic diet. Necessary and useful activity will keep going: producing food, goods and services that everybody needs, at the most competitive cost possible. We can do without pet manicure salons or cemetaries, and without all the status-affirming luxury goods that cost a fortune and add nothing to the economy. A full decade of such a cure minceur will also help realign personal, social and political values in the right direction.

Peter Schiff agrees with you (see also the following post).

In the end, by refusing to allow market forces to work their cure, our economy will inevitably die from the disease. Our economy will now face death by hyperinflation, which will cause a complete loss of confidence in the dollar and result in prices and interest rates skyrocketing out of sight. The evaporation of our national wealth will lead to civil unrest, food and energy shortages, and the possible imposition of marshal law. If such a scenario unfolds, what is left of our Constitution will surely be completely shredded.

LINK

[BachQ]

In an outstanding interview, Peter Schiff on Bloomberg (Youtube Oct 28: http://www.youtube.com/watch?v=TP_aJ7LcAAA) notes (1) that consumer confidence has dropped a record amount; (2) that the US government and US economy are broke; (3) that we need higher interest rates, and the Fed's lowering rates was a big mistake; (4) that the "recession is actually the medicine that is going to cure the economy from the disease that infected it during the boom"; (5) The dollar will soon "drop like a stone," and when that happens, it will pull the rug out from under our economy; (6) the government shouldn't be bailing out failed companies; (7) the US economy is built on consumer credit; once the credit stops flowing, the economy collapses.

Youtube: http://www.youtube.com/watch?v=TP_aJ7LcAAA


Highly recommended.  0:)

[ezodisy]

In an outstanding interview, Peter Schiff on Bloomberg (Youtube Oct 28: http://www.youtube.com/watch?v=TP_aJ7LcAAA) notes (1) that consumer confidence has dropped a record amount; (2) that the US government and US economy are broke; (3) that we need higher interest rates, and the Fed's lowering rates was a big mistake; (4) that the "recession is actually the medicine that is going to cure the economy from the disease that infected it during the boom"; (5) The dollar will soon "drop like a stone," and when that happens, it will pull the rug out from under our economy; (6) the government shouldn't be bailing out failed companies; (7) the US economy is built on consumer credit; once the credit stops flowing, the economy collapses.

Youtube: http://www.youtube.com/watch?v=TP_aJ7LcAAA


Highly recommended.  0:)

I watched that live yesterday, absolutely outstanding, even the presenter seemed taken aback by how forthright he was. Dollar will plunge, long gbp, euro.

[drogulus]

The key is to generate electricity from RENEWABLE sources (sun, wind, water).  But we are lightyears away from achieving the necessary infrastructures to accommodate that on a large scale.

     It's happening right now, and it will speed up. One way it will happen is that hydropower and wind will be hooked up together so excess capacity when winds are blowing will be used to pump water back over the dam, using reservoirs as "batteries". Also, you'll see more sophisticated ways of linking wind farms together so they can cover shortfalls, making them more suitable as base-power generators. But I think the biggest source for electricity generation will be coal, so there will be a major effort to learn how to use it cleanly, one of the options the crisis will price into existence.

     Building the new infrastructure will mean someone is going to make a whole lot of money creating the new energy economy. So this is a very dark cloud with a very silvery lining for smart investors. The main problem I have with doomsday prediction is that it depends on forward projection of current trends out to infinity*, the least likely scenario IMO. Just about anything is more likely than that, though I wouldn't bet on UFOs showing up with a new power source and a book called TO SERVE MAN. 

     


   <sub>* Mr. Doom: Doc, it hurts when I do this.

        Doc:            Then stop doing it.

        Mr.D:           I can't. It's a trend!</sub>

[BachQ]

I watched that live yesterday, absolutely outstanding, even the presenter seemed taken aback by how forthright he was. Dollar will plunge, long gbp, euro.

Exactly.  Schiff is brutally honest about our predicament.  Ain't lookin' pretty.

Here's Part II http://www.youtube.com/watch?v=coaI3d89kuA

PETER SCHIFF: "We're going to have massive unemployment; we're going to have rapid inflation, and our economy's gonna tank"

ANCHOR: "you're an upbeat guy, you know that Peter" 



But I agree with his solution: first and foremost: CUT GOVERNMENT SPENDING.

[BachQ]

Just about anything is more likely than that, though I wouldn't bet on UFOs showing up with a new power source and a book called TO SERVE MAN. 

Actually, I'm kinda hoping for aliens to show up with a new power source (but without the book "To Serve Man"  ).

http://www.youtube.com/v/WudBfRa0ETw  "It's a cookbook"

[drogulus]

But I agree with his solution: first and foremost: CUT GOVERNMENT SPENDING.

     Nothing he said is important to this crisis, except in making it worse. Cutting spending is positively insane, abolishing gov't departments is totally irrelevant where it isn't harmful, and cutting taxes on the wealthy is a misdirection, trying to convince people that giving more money to rich people causes other people to become rich. In the process it starves gov't of the revenues it needs to do things worth doing. This is just another instance of an ideologue using the crisis to promote pet nostrums he would be in favor of even under totally different circumstances.

     

even the presenter seemed taken aback by how forthright he was

     Either that or she understood economics and couldn't figure out what to say without insulting her guest. 

Actually, I'm kinda hoping for aliens to show up with a new power source (but without the book "To Serve Man"  ).

http://www.youtube.com/v/WudBfRa0ETw  "It's a cookbook"

     

[Lilas Pastia]

Government spending is an important source of economic stimulus when anemic domestic spending threatens to stall the whole economy. That much should be easily understood except if you're dogmatic about it. In general it tends to give work to people who badly need it. You know, repairing infrastructures, building roads, the usual stuff.

[ezodisy]

ah, crude back at $70, rebounding almost ten bucks in two days. Finally!!!!!! Get your resources while you can!

[BachQ]

     Nothing he said is important to this crisis, except in making it worse. Cutting spending is positively insane, abolishing gov't departments is totally irrelevant where it isn't harmful, and cutting taxes on the wealthy is a misdirection, trying to convince people that giving more money to rich people causes other people to become rich. In the process it starves gov't of the revenues it needs to do things worth doing. This is just another instance of an ideologue using the crisis to promote pet nostrums he would be in favor of even under totally different circumstances.

     
     Either that or she understood economics and couldn't figure out what to say without insulting her guest. 

     

So you think the US Gov't should spend more?

Spend more?

-- Bloomberg: The U.S. Treasury faces historic financing demands from a weakening economy and the added costs of a $700 billion Wall Street rescue program, the department's top domestic finance official said today. ``This year's financing needs will be unprecedented,'' said Anthony Ryan, the Treasury's acting undersecretary for domestic finance.

Spend more?

--   Bloomberg: ``The budget deficit for fiscal year 2009 might reach $1 trillion if Congress passes another stimulus package this winter,'' said Lou Crandall, chief economist of Wrightson ICAP, in a research note. ``And that's just the beginning of the bad news -- financing needs arising from off-budget items might be nearly as large as the on-budget deficit.''

Spend more?

-- Wall Street Journal: Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved. ...

Some 14 months ago, the projected deficit for the 2008 fiscal year was about 0.6% of GDP. With the $170 billion stimulus package last March, the add-ons to housing and agriculture bills, and the slowdown in tax receipts, the deficit for 2008 actually came in at 3.2% of GDP, with the 2009 deficit projected at 3.8% of GDP. And this is just the beginning.

The net national debt in 2001 was at a 20-year low of about 35% of GDP, and today it stands at 50% of GDP. But this 50% number makes no allowance for anything resulting from the over $5.2 trillion guarantee of Fannie Mae and Freddie Mac assets, or the $700 billion Troubled Assets Relief Program (TARP). Nor does the 50% number include any of the asset swaps done by the Federal Reserve when they bailed out Bear Stearns, AIG and others.

But the government isn't finished. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid -- and yes, even Fed Chairman Ben Bernanke -- are preparing for a new $300 billion stimulus package in the next Congress. Each of these actions separately increases the tax burden on the economy and does nothing to encourage economic growth. Giving more money to people when they fail and taking more money away from people when they work doesn't increase work. And the stock market knows it.

[BachQ]

ah, crude back at $70, rebounding almost ten bucks in two days. Finally!!!!!! Get your resources while you can!

It will be interesting to see what happens to the price of oil in November/December.


Oil Is Poised for Worst Month Ever on Concern Over Demand Drop Oct. 31 (Bloomberg) -- "Crude oil in New York was poised for its biggest monthly drop since trading began in 1983 on concern that the decline in the U.S. economy will further curb fuel demand in the world's largest energy consuming country. Oil retreated after the U.S. Commerce Department said yesterday that gross domestic product contracted at a 0.3 percent annual pace in the third quarter, the most since 2001." (continued)

[BachQ]

Richard Heinberg on the IEA 9% depletion rate:

The Financial Times has leaked the results of the International Energy Agency's long-awaited study of the depletion profiles of the world's 400 largest oilfields, indicating that, "Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent." This is a stunning figure. Considering regular crude oil only, this means that 6.825 million barrels a day of new production capacity must come on line each year just to keep up with the aggregate natural decline rate in existing oilfields. That's a new Saudi Arabia every 18 months.

*** But if nine percent is even close to being the final figure, then it's absolutely clear: July 2008 was the all-time peak in world oil production. Don't expect anyone at the IEA to officially admit that fact until 2025 or so.

(continued)

CAVEAT: These are unofficial IEA figures, which the IEA has stated may not be the final numbers to be publicized in 2 weeks.

[BachQ]

Chevron Project Offers Glimpse Of Future: More Work, Less Oil

Oct 30, 2008

RIO DE JANEIRO -- Chevron Corp. executive Ali Moshiri spent the past seven years scouring the globe for hard-to-get equipment, schmoozing foreign officials and taking billion-dollar risks to fast-track a new oil prospect off the coast of Brazil. Despite the full-out effort, Mr. Moshiri concedes Chevron's $3 billion Frade (pronounced Frah-jay) project is a mediocre prospect compared with the huge pools of easy-to-get oil the company has tapped in the past. Even if it fulfills its greatest promise, the deep-water oil field will contribute only a trickle to the global river of petroleum. And Frade, whose first well is now being drilled, could still fail to deliver enough oil to make all the effort worthwhile.

more

What does all the effort buy? Chevron believes it can extract about 270 million barrels out of Frade over the next 18 years. The world guzzles that much every three days. The global economic slowdown is shrinking demand for crude oil and has caused oil prices to plummet since this summer. Pressure on the global oil industry to find new sources of crude is receding, but the daily struggle of replacing production declines in aging fields is a problem that isn't going away. And cuts to capital budgets to cope with the downturn in prices could hobble the industry's ability to ramp up supply when demand returns. The result could be "a serious supply crunch" in as little as two years, says Paul Horsnell, commodities research head for Barclays Capital.

[BachQ]

UK Guardian: UK will face peak oil crisis within five years, report warns

The risk to the UK from [global] falling oil production in coming years is greater than the threat posed by terrorism, according to an industry taskforce report published today. The report, from the Peak Oil group, warns that the problem of declining availability of oil will hit the UK earlier than generally expected - possibly within the next five years and as early as 2011. Oil supply could then rapidly decline, or even collapse, the report warns, with potentially devastating implications for the UK economy.

The report was issued today by the recently established UK industry taskforce on peak oil and energy security, a group of eight companies including transport firms Virgin, Stagecoach and FirstGroup, engineers Arup, architects Foster and Partners, and energy giant Scottish and Southern. Entitled The Oil Crunch, the report argues that the risk of an early peak in oil production poses a bigger threat to UK society than tightening gas supplies, terrorism or the short-term impacts of climate change.

more

The new report marks the first time a group of businesses has weighed into this debate. At its core are two newly commissioned assessments of future oil production: one from Chris Skrebowski, consulting editor of Petroleum Review, and one from Shell. Skrebowski predicts that global oil production will peak in the period 2011-2013 and then decline steadily, with non-conventional sources such as tar sands failing to fill the gap in time to avoid a serious energy crunch. He also warns that supplies could collapse if a handful of huge, long-established oil fields go into terminal decline simultaneously.

[BachQ]

Out of Gas: We Were Warned

(Part 1) http://www.youtube.com/watch?v=1vPi7SEzzWg
(Part 2) http://www.youtube.com/watch?v=wDU94cTrXKY&feature=related
(Part 3) http://www.youtube.com/watch?v=znaVarGSP5Q&feature=related
(Part 4) http://www.youtube.com/watch?v=7iEpHAzbUWI&feature=related

[BachQ]

NYT: When Consumers Capitulate

By PAUL KRUGMAN
Published: October 31, 2008

The long-feared capitulation of American consumers has arrived. According to Thursday's G.D.P. report, real consumer spending fell at an annual rate of 3.1 percent in the third quarter; real spending on durable goods (stuff like cars and TVs) fell at an annual rate of 14 percent. To appreciate the significance of these numbers, you need to know that American consumers almost never cut spending. Consumer demand kept rising right through the 2001 recession; the last time it fell even for a single quarter was in 1991, and there hasn't been a decline this steep since 1980, when the economy was suffering from a severe recession combined with double-digit inflation.

Also, these numbers are from the third quarter — the months of July, August, and September. So these data are basically telling us what happened before confidence collapsed after the fall of Lehman brothers in mid-September, not to mention before the Dow plunged below 10,000. Nor do the data show the full effects of the sharp cutback in the availability of consumer credit, which is still under way. So this looks like the beginning of a very big change in consumer behavior. And it couldn't have come at a worse time.

[BachQ]

NYT: Specter of Deflation Lurks as Global Demand Drops

As dozens of countries slip deeper into financial distress, a new threat may be gathering force within the American economy — the prospect that goods will pile up waiting for buyers and prices will fall, suffocating fresh investment and worsening joblessness for months or even years. The word for this is deflation, or declining prices, a term that gives economists chills. Deflation accompanied the Depression of the 1930s. Persistently falling prices also were at the heart of Japan's so-called lost decade after the catastrophic collapse of its real estate bubble at the end of the 1980s — a period in which some experts now find parallels to the American predicament. "That certainly is the snapshot of the risk I see," said Robert J. Barbera, chief economist at the research and trading firm ITG. "It is the crisis we face." With economies around the globe weakening, demand for oil, copper, grains and other commodities has diminished, bringing down prices of these raw materials.

*** "We're entering a really fierce global recession," [Harvard Professor Kenneth] Rogoff said. "A significant financial crisis has been allowed to morph into a full-fledged global panic. It's a very dangerous situation. The danger is that instead of having a few bad years, we'll have another lost decade."



(continued)

[ezodisy]

So you think the US Gov't should spend more?

I just love the optimism of this thread!

The Financial Times newspaper has a very useful commentary section which posts all sorts of market and economic analyses. They have posted 2 pieces here aligning the bailout with "Japanese-style quantitative easing".

http://ftalphaville.ft.com/blog/2008/10/27/17448/the-unthinkable/

http://ftalphaville.ft.com/blog/2008/10/31/17669/where-bailout-money-comes-from/

and the site itself: http://ftalphaville.ft.com/