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“ I don’t think it’s too much of a mystery as to why energy costs are going up,” said Bowyer.
He said China’s current oil imports at 3.7 million barrels a year, and by 2030, the figure is expected to be 10.9 million barrels.
How the heck is China able to afford such rapid increases though? It isn't like we're sending them our money. Okay, okay, it is like we're sending them our money with our massive trade deficit. You've got me there.
“ Any nation or company that isn’t prepared for what’s coming is in for a world of hurt,” said Bowyer. “And I would say that the United States is unprepared.”
I Katrina find Katrina that Katrina hard Katrina to Katrina believe. Katrina where's Katrina the Katrina proof Katrina to Katrina back Katrina such Katrina a Katrina questionable Katrina claim?
“ Instead of petroleum coming to a refinery, it will be trees,” said Bowyer, who envisions standard paper mills being reconfigured for producing not just reams of paper, but barrels of biofuel, derived from trees.
I bought wooden dowels from Home Depot's lumber department today. There's a sticker on them: Made in China. No joke. What is it we do as a country these days? Please don't say Structured Investment Vehicles. They are only cheap on paper.
“ The value of lumber is always going to be more than whatever energy you can derive from it,” he added. “But it could potentially affect the cost of things like pulp wood, so you could see the price of paper go up.”
Note to self: Keep hoarding nonmonetary paper products. Toilet paper has very little backside risk. Oops. I meant downside risk. That's enough to make me flush. Um, I mean blush!
The rapid march to biofuels has its skeptics.
“ I’m old enough to remember the oil crisis of the early ‘70s and how that generated a lot of talk around different forms of energy,” said retired MSU forestry professor Bob Daniels.
There's that '70s word again. Go figure. The oil crisis of the early '70s was political and monetary. We better hope this oil crisis isn't political, monetary, and geological. That last one's a bear.
Hey, it isn't like we've got troops fighting overseas in a forever war (i.e., Vietnam) and we've got negative real interest rates (1970s style) at home. Okay, you've got me again. We do. But geological? That's too silly to contemplate. That would imply peak oil is here. Just because United States oil production peaked long ago doesn't mean it must peak globally though. That would be an amazing coincidence, don't you think? Heck, even that's not a problem. We can simply print more "paper" money to compensate (assuming we can use the paper as a heat source as stated in this article). No harm, no foul.
Weimar Republic
Inflation 1923–24: a woman feeds her tiled stove with money. At the time, burning money was less expensive than buying firewood.
© AdsD der Friedrich-Ebert-Stiftung
I live in a darkly sarcastic dream world. I should point that out. I should also point out that I'm not bracing for hyperinflation. I'm in the deflationary Great Depression combined with the inflationary 1970s camp. Two wrongs seem unlikely to make a right.
17 comments:
Stag,
Energy demand is increasing - that's nothing new. Energy costs are also increasing. But I still see a lot of wasteful energy use. Simple conservation seems like the logical first step to me. Many energy conservation efforts are painless & free.
A second logical step is to improve energy efficiency. For instance, in the 1970s many drove VW Rabbits & Ford Fiestas that got 40 miles/gallon.
Eventually, people will realize they simply can't afford to leave the lights on or own two monster SUVs. I'd like to believe that in a FREE market, efficiency & conservation would be weighed against completely revamping the system to maintain wasteful consumption.
I enjoy complaining about high energy costs as much as the next person. But I'm not going to let energy break my budget without a fight.
MAB,
Energy demand is increasing - that's nothing new. Energy costs are also increasing.
Buy one kilowatt at the regular price and get one more kilowatt at that very same price! It's a two-fer sale! Double the money and no money back!
Electric Infrastructure
http://illusionofprosperity.blogspot.com/2007/09/electric-infrastructure.html
Eventually, people will realize they simply can't afford to leave the lights on or own two monster SUVs.
For instance, in the 1970s many drove VW Rabbits...
Watch me pull a Rabbit out of my hat.
Since our electric infrastructure might not be able to handle millions of electric cars, I have a possible perpetual motion machine style solution.
We use the extra monster SUVs to charge the electric cars via the cigarette lighters. Of course, the SUVs will need to burn gasoline to power the alternators. The good news is they won't need to move.
Tada! Waste removed!
And now for my next trick. I'm going to saw a stretch limo in half!
In all seriousness, check out this article.
China's plastic bag ban kicks in to mixed response
http://www.reuters.com/article/latestCrisis/idUSPEK210811
"My tofu is only worth 50 cents a piece. It will be very hard to sell if I have to charge 20 cents for the plastic bag," the Beijing Times quoted a vendor as saying.
Question. Which makes the most sense?
Ultra-thin bags are the main target of the crackdown because they are typically used once and then thrown away, littering streets, fields and streams and creating what the Chinese call "white pollution".
China enviornmentally conscious?
China consumes 37 million barrels of crude oil each year to manufacture more than one trillion plastic bags.
China scared?
Stag,
I have a possible perpetual motion machine style solution.
We use the extra monster SUVs to charge the electric cars via the cigarette lighters.
Good idea. We could also run the SUVs in reverse and recapture the previously expended energy. It has all been conserved you know.
You may be right about China being scared about future oil shortages. But they could also be concerned about future dollar gluts.
Perhaps oil has soared due to hoarding by producers keeping (hoarding) the oil in the ground and goverments like China stock piling for the future or just using their dollars now. This behavior makes sense given the falling dollar and negative real interest rate policies of our FED. I think OPEC countries, Russia and China are realizing they already have too many dollars.
The other day I watched Bernanke give a commencement speech at Harvard. He said that economists generally accept that monetary policy performed poorly in the 1970s. I sure hope he wasn't implying that things have improved. If memory serves, houshold net worth increased (if you believe the numbers) faster in the 1970s than during the 80s, 90s & 00s. Go figure.
It really is an illusion of prosperity (and a lot of other things too). Same as it ever was.
MAB,
If memory serves, houshold net worth increased (if you believe the numbers) faster in the 1970s than during the 80s, 90s & 00s.
Memory is only serving on a pre-inflation basis. Inflation adjusted net worth was taken out behind the wood shed and old-yellered. The bulk of the pain came from financial assets. In sharp contrast, the run from 1980 to 2000 was spectacular/parabolic though.
http://illusionofprosperity.blogspot.com/2007/12/1973-seeds-of-stagflation.html
That spectacular/parabolic run is meeting up with the wood shed yet again. This time it isn't just financial assets being old-yellered. The tangible assets are too. For the past year, neither housing nor stock prices are going up even in nominal terms, much less inflation adjusted terms. Perhaps we can follow the "core" net worth once we exclude stocks and housing though. What's the core? Food and energy! There's what's stored in the pantry and there's what's stored in the gas tank! Oh yeah, those "core" staples are doing quite well lately.
He said that economists generally accept that monetary policy performed poorly in the 1970s. I sure hope he wasn't implying that things have improved.
Did Bernanke mention what his better monetary policy grand plan is?
Is he going to lower rates to prop up the crashing housing market?
Is he going to raise rates to put a lid on parabolic oil prices?
Inquiring minds want to know! Heaven forbid he's wishy-washy and tries to do both at once. Central bankers were similarly wishy-washy in the 1970s (what else could they do?), and we know how that worked out.
Perhaps oil has soared due to hoarding by producers keeping (hoarding) the oil in the ground and goverments like China stock piling for the future or just using their dollars now. This behavior makes sense given the falling dollar and negative real interest rate policies of our FED. I think OPEC countries, Russia and China are realizing they already have too many dollars.
I love that Bernanke's referring to the 1970s so much lately, much like the star of a horror movie running scared through a forest. It's hard to see where you are running when you keep looking back over your shoulder to see what the monster is doing. I've got news for him. The stagflationary monster needs to feed.
Stag,
Memory is only serving on a pre-inflation basis. Inflation adjusted net worth was taken out behind the wood shed and old-yellered. The bulk of the pain came from financial assets. In sharp contrast, the run from 1980 to 2000 was spectacular/parabolic though.
I'll take another peek at the data, but I'm sure you are correct. I think it's important to consider that it's not really an apples to apples comparison in real terms. In the 1970s, house price appreciation was considered inflation. Today, it's considered to be the sweetest form of wealth as it requires no actual work. Also, financial asset prices are fickel. Valuations vary greatly based on public sentiment and a lot of other factors. There is a reason financial assets like stocks are excluded from savings calcs.
House prices appear to be permanently anchored. Inflation expectations appear to be unmoored. Another conundrum. Go figure.
Here's something else to consider. What if house prices rise, but banks still won't lend freely against equity? I'll bet soaring house prices would look like inflation then.
MAB,
In the 1970s, house price appreciation was considered inflation. Today, it's considered to be the sweetest form of wealth as it requires no actual work.
Good point. It is also a joint venture between the government and the homeowner.
The homeowner likes house price appreciation. It makes us feel wealthier, perhaps even to the point of retiring way too early.
The government likes house price appreciation too. The property taxes really add up.
Happy, happy, joy, joy! (in theory)
http://www.youtube.com/watch?v=ABWyXKT5qt4
Don't they understand that we don't even get trees from this country any more? We get them from Canada. I thought everyone knew. I live in a county that's predominately National forest, but they stopped letting them cut trees a long time ago.
As for those SUVs, well you must not be living in the right place. Now we see GEO metros everywhere. Personally, I am planning to start sleeping in my car at work at least a couple of nights a week. It's the only way I can see to get to work, given fuel prices and what I make.
Teri,
It truly amazed me to see wooden dowels made in China. As you say, we also get a lot of our wood from Canada. This is insanity.
Here's some more insanity.
Seattle parks may ban beach bonfires
http://www.bellinghamherald.com/northwest/story/432816.html
SEATTLE -- The city of Seattle may ban bonfires on park beaches to help fight global warming.
I heard on the radio that there are a whopping 18 fire pits. One can only imagine how much better off our country will be once we get rid of them. Meanwhile, we ship our money to China and India on the hopes we can get everyone on this planet to drive a car.
Personally, I am planning to start sleeping in my car at work at least a couple of nights a week. It's the only way I can see to get to work, given fuel prices and what I make.
I'm sorry to hear that. In my opinion, the following is what free trade really looks like.
Inside Apple's iPod factories
http://www.macworld.co.uk/news/index.cfm?home&NewsID=14915
The Mail visited some of these factories and spoke with staff there. It reports that Foxconn's Longhua plant houses 200,000 workers, remarking: "This iPod City has a population bigger than Newcastle's."
The report claims Longhua's workers live in dormitories that house 100 people, and that visitors from the outside world are not permitted. Workers toil for 15-hours a day to make the iconic music player, the report claims. They earn £27 per month. The report reveals that the iPod nano is made in a five-storey factory (E3) that is secured by police officers.
Yeah, iPod city. Sure am glad to hear that the workers' living conditions doesn't prevent anyone from buying those iPods. It only seems to affect buying clothes and athletic shoes.
People do not seem to understand that the big difference between today and the 70s is shift work. A lot of people do not work 9-5 or even 8-5. In some situations, like call centers and factories, you might change shifts every three months or even every week. You can't carpool under those circumstances, like I was able to do back in the 70s. There is one guy here that works the same shift as me but he is off Fridays. And he lives in town, so there's no way I can carpool with him. In the 70s, I worked at a factory where I had several different folks I could carpool with.
The other thing making me crazy is how much everyone is focused on the poor middle class and how they are surviving. Those people can keep going a couple more years even as it deteriorates, given that they have more assets and better pay. They can afford to buy a new or used car. They probably can arrange some sort of alternative transportation. They need to take a look at those on minimum and slightly better wages. They should also be doing stories on those of us in our 50s. Because, given the sorts of low paying jobs we seem to be in these days, we're not going to be able to put much away for retirement. That's going to make the Social Security problem even worse than predicted.
Teri,
For what it is worth, income inequality is a very big deal to me. We're not fine just because we have one foot in boiling water and the other in liquid nitrogen. The average might seem okay but the actual condition of the feet screams otherwise.
Main Causes of the Great Depression
http://www.geocities.com/capitolhill/senate/6854/greatdep.html
This speculation and the resulting stock market crashes acted as a trigger to the already unstable U.S. economy. Due to the maldistribution of wealth, the economy of the 1920's was one very much dependent upon confidence. The market crashes undermined this confidence. The rich stopped spending on luxury items, and slowed investments. The middle-class and poor stopped buying things with installment credit for fear of loosing their jobs, and not being able to pay the interest. As a result industrial production fell by more than 9% between the market crashes in October and December 1929. As a result jobs were lost, and soon people starting defaulting on their interest payment.
Sure rings a bell to me, if you tack on crashing housing prices and outsourced jobs. History will paint David Lereah as one of the best confidence men of all time.
Billionaire Henry T. Nicholas III built 'sex cave under mansion'
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article4083455.ece
What is a man to do with $2.3 billion?
U.S. Stocks Plunge as Unemployment Tops Forecast, Oil Surges
http://www.bloomberg.com/apps/news?pid=20601103&sid=acqVd3PVJH_g&refer=news
``The unemployment increase is going to feed into further negatives for consumer confidence,'' said Charles Smith, who helps manage $1.2 billion as chief investment officer at Fort Pitt Capital Group in Pittsburgh. ``That's what the market's worried about.''
Bernanke's grand montery printing press plan to avoid the Great Depression was tried in the 1970s. I doubt it works out any better this time around.
About the only confidence I have is that I seem to have picked a relatively good name for myself. Hindsight is 20/20 though. I'm not all that confident that it will be a good name going forward, but that's how I have felt all along. Nothing has changed. The trend isn't our friend.
Stag,
Inside Apple's iPod factories
It's difficult to be an outsider looking in. Especially when the place doesn't have any Windows!
And I thought our financial instituions were opaque.
Stag,
I read somewhere (sorry no link) that FDR abandoned the gold standard as a result of extreme wealth concentration. The wealthy were hoarding too much capital.
No doubt the depression had a lot of Deflationary Marks.
The current system is unstable in many ways. It's no wonder people don't feel fincially safe today - rich or poor.
MAB,
It's difficult to be an outsider looking in. Especially when the place doesn't have any Windows!
LOL! The Windows™ they do have are probably pirated!
Ba-dum-ching!
I read somewhere (sorry no link) that FDR abandoned the gold standard as a result of extreme wealth concentration. The wealthy were hoarding too much capital.
When times turn tough people tend to hoard. During the Great Depression they hoarded gold. During the 1970s they hoarded gold. Right now people are hoarding gold.
Not really much of a conundrum when you think about it.
Stag,
Hordes hoarding.
Perhaps we need a 13th day of Christmas.
On the 13th day of Christmas..... thirteen horders hoarding...
Hordes hoarding leads to hordes of central bankers printing.
MAB,
Hordes hoarding leads to hordes of central bankers printing.
That's just a hop, skip, and a jump from:
Vast hordes vastly hoarding leads to vast hordes of central bankers vastly printing.
Vast is a word I don't get to use that often. I relish the opportunity. I find it amusing that the definition of vast at Dictionary.com uses "vast sums of money" as an example and the definition of hoard uses "vast hoard of silver" as an example. There is clearly some sort of link between vast hoarding and money. Coincidence?
Speaking of coincidences, why is there coin in coincidence yet there's not even a "sliver" of silver in coins any more? Coincidence?
If you rearranged the letters of "housing" you get hugonis. If you rearrange the letters of "soar" you get rosa. I used an online word jumble program and tried various words looking for patterns. Imagine my surprise when I found a pattern.
Rosa Hugonis
http://www.olyrose.org/Rosahugonis.htm
In China this species is found growing in rather poor, dry and/or rocky sites.
Surely that can't be a coincidence.
I think we're really starting to break The Bernanke Code. The patterns are unraveling much like a "soaring housing" market with too much inventory.
Can you keep secrets? Can you hear a thing and never say it again? And puzzles and codes, I imagine they lay down to you like lovers. Sir Leigh Teabing, The Da Vinci Code, 2006
I do imagine they lay down to us like lovers. Pardon my language, but I think we're seriously f***ed once people begin to decypher the writing on the wall. Using elementary (literally) decyphering skills the writing says "Limit 5 bags" and/or "4.00" depending on the wall. Hopefully people won't put five and four together. That's nine and as we all know there are nine levels of hell. There' also "hell" in Shell. Coincidence? Could it be the "S" in Shell was once the symbol for money ($)? Could Shell literally mean Dollar Hell? Dare I ask these questions publicly? So many patterns, sarcasm, and dark gallows humor. So little time!
4.00 Gas
http://money.cnn.com/2008/06/08/news/economy/gas_prices/?postversion=2008060809
Stag,
but I think we're seriously f***ed once people begin to decypher the writing on the wall.
I can't figure out how so many can ignore so much for so long. Still way too much hope.
The latest piece of the Bernanke code is a REAL gem too. Apparently, we're supposed to believe that all is well since wages aren't rising along with the costs of living. As such we don't need to be fearful of a 70s style wage/price spiral. Looks like a recipe for debt defaults & bankruptcies on an enormous scale to me. And after the bankruptcies, just how are all these people going to be nursed back to financial health? Higher wages? Cheaper food & oil? Broke is temporary, poor is permanent. Where are we heading?
Inflation is relative.
If it looks like a rosa hugonis and smells like a rosa hugonis.....
MAB,
The latest piece of the Bernanke code is a REAL gem too.
REAL gems have been appreciating. His fight against deflation is working exceedingly well.
IDEX Online Research: Polished Diamond Prices Surge 12.3% in May
http://www.idexonline.com/portal_FullNews.asp?id=30454
Large, high-quality diamonds posted the most remarkable price increases. On a year-over-year basis, three, four, and five carat diamonds posted price increases of 47 percent, 64 percent, and 77 percent respectively.
I saw a guy on the TV early who offered the following analogy (and I paraphrase heavily from memory).
The oil markets used to be the little craps table in the back of the casino nobody wanted to play at. The table could handle maybe 20 people at most. Now there's 200 people at it with fists of money who all want big profits.
I love the casino reference. The elephant in the room nobody seems willing to talk about is where the 200 people got all that money in the first place. They clearly didn't always have it (as seen in the MZM per capita chart in my link below). It didn't really begin to appear until we fell off the gold standard.
We're told wages are the thing to look at. Instead, I'm looking at the previous "winnings" of 200 people at such a tiny table.
Real Wages, Retail Sales, and the Money Supply
http://illusionofprosperity.blogspot.com/2007/10/real-wages-retail-sales-and-money.html
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