ChrisMartenson.com News Feed

OPEC Has Lost the Power to Lower the Price of Oil

Gregor Macdonald — Tue, 22 May 2012 11:39:50 -0400

There’s been a lot of excitement in the past year over the rise of North American oil production and the promise of increased oil production across the whole of the Americas in the years to come. National security experts and other geo-political observers have waxed poetic at the thought of this emerging, hemispheric strength in energy supply.

What’s less discussed, however, is the negligible effect this supply swing is having on lowering the price of oil, due to the fact that, combined with OPEC production, aggregate global production remains mostly flat.

But there’s another component to this new belief in the changing global landscape for oil: the dawning awareness that OPEC’s power has finally gone into decline. You can read the celebration of OPEC’s waning in power in practically every publication from Foreign Policy to various political blogs and op-eds. David Ignatius of the Washington Post wrapped up nearly all of the recent claims in a nice bundle in his May 4, 2012 piece, An Economic Boom Ahead?, when he quoted PFC Energy’s David West:

“This is the energy equivalent of the Berlin Wall coming down,” contends West. “Just as the trauma of the Cold War ended in Berlin, so the trauma of the 1973 oil embargo is ending now.” The geopolitical implications of this change are striking: “We will no longer rely on the Middle East, or compete with such nations as China or India for resources.”

(Source)

While it’s true that the Americas hold great promise to convert natural gas resources to higher production levels, that is not the case with oil. The celebration of a geo-political swing in energy power therefore misses a crucial point: No region -- from OPEC to Non-OPEC, from Africa to Russia -- has the single-handed ability to lower the price of oil now, because none can bring on new supply quickly enough for a long-enough sustained period of time. read more »

Alasdair Macleod: All Roads in Europe Lead to Gold

Adam Taggart — Sat, 19 May 2012 19:50:07 -0400

This week we bring back Alasdair Macleod, publisher of FinanceAndEconomics.org, because, as he puts it, "every horror that we discussed last time we spoke is coming about." This is especially scary since our previous conversation with Alasdair was less than three weeks ago...

Today's interview continues building on his excellent synopsis from last month that detailed the origins of the Eurozone crisis. The fundamental shortcomings warned of at the euro's creation in 1997, combined with the excessive sovereign debts run up since then, have finally expressed themselves at a scale too large to be contained any longer.

Today, Alasdair details in depth the huge and serious challenges facing Greece and the major Eurozone countries and the likely impacts of the fast-dwindling options left remaining.

He sees no happy ending to this story, no outcome in which serious pain and permanent behavior change can be avoided. And for those looking for shelter from the unfolding economic storm, he sees few options besides the precious metals (which he believes are severely underpriced at the moment):

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Get Ready: We’re About To Have Another 2008-Style Crisis

cmartenson — Wed, 16 May 2012 08:30:21 -0400

Well, my hat is off to the global central planners for averting the next stage of the unfolding financial crisis for as long as they have. I guess there’s some solace in having had a nice break between the events of 2008/09 and today, which afforded us all the opportunity to attend to our various preparations and enjoy our lives.

Alas, all good things come to an end, and a crisis rooted in ‘too much debt’ with a nice undercurrent of ‘persistently high and rising energy costs’ was never going to be solved by providing cheap liquidity to the largest and most reckless financial institutions. And it has not.

Forestalled is Not Foregone

The same sorts of signals that we had in 2008 are once again traipsing across my market monitors. Not precisely the same, of course, but with enough similarities that they rhyme loudly. Whereas in 2008 we saw breakdowns in the credit spreads of major financial institutions, this time we are seeing the same dynamic in the sovereign debt of the weaker European nation states.

Acknowledging the Arrival of Peak Government

charleshughsmith — Mon, 14 May 2012 12:38:53 -0400

Most informed people are familiar with the concept of Peak Oil, but fewer are aware that we’re also entering the era of Peak Government. The central misconception of Peak Oil -- that it’s not about “running out of oil,” it’s about running out of cheap, easy-to-access oil -- can also be applied to Peak Government: It’s not about government disappearing, it’s about government shrinking.

Central government -- the Central State -- has been in the expansion mode for so long that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State. Thus we have little recent historical experience of Peak Government and few if any conceptual guideposts to help us understand this contraction.

Peak Government is not a reflection of government services or the millions of individuals who work in government; it is a reflection of four key systemic forces that drove State expansion are now either declining or reversing.

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Tom Murphy: Time to Be Honest With Ourselves About Our Looming Energy Risks

Adam Taggart — Fri, 11 May 2012 19:26:05 -0400

I want to take the lowest risk approach to the future. So much is riding on it.

Personally I feel that the scientific progress we have made over the last few hundred years is astounding. I don’t want to lose that. I think that is a gift to the future and I don’t want to run the risk of a collapse that could destroy all that we have.

Even if you think the collapse is a low probability -- let’s say it's 5%, 10% probability -- it is an asymmetric risk. The downsides of not treating it seriously are huge.

I mean, you buy fire insurance for your house even if it is a 0.1% probability that your house will burn down in your lifetime. But the consequences are so negative that you do it. And when you are talking about the accomplishments of all civilization, you need to buy insurance and treat that with the respect it deserves.

Tom Murphy -- associate professor of physics at the University of California, San Diego -- has mapped the distance between the earth and the moon to within a millimeter, and built instruments to study colliding galaxies. We feel comfortable saying he's a pretty smart guy, as well as an optimist about what human ingenuity and technology can do for the advancement of society.

In 2004, he became intrigued with the global energy situation and brought his disciplined, empirical approach to bear. He set out to determine which new sources were going to pick up the slack once fossil fuels began becoming scarce. Looking back, he says the theme underlying his findings was "disappointment."

The math showed him that there simply will not be nearly enough BTU yield from alternative energy sources to meet the rising global demand. In fact, if anything, his investigation made him realize how few minds today are truly aware of the extraordinary energy throughput we are getting from fossil fuels.

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'Cornucopians in Space' Deliver a Dangerously Misguided Message

Gregor Macdonald — Wed, 09 May 2012 12:44:50 -0400

Once a year the very chic and exclusive TED conference takes place in Southern California, bringing together entrepreneurs, inventors, and thought leaders from every corner of the world.

There, gathered around a stage, a kind of hive mind begins to unfold in which the most cutting edge ideas in healthcare, energy, social development, and behavioral psychology are shared from a very plugged-in, big-screen podium. It’s extremely well done.

And despite the reflexive criticism from outside the conference -- that the gathering is inward-looking and elitist -- TED usually does manage to disturb the zeitgeist, a little, with its unveilings in technology and innovation. It is plainly good that next-step advances in solar technology, data collection, and developing world health initiatives are explained and broadcasted from TED. Especially given that policy makers, or those who have the ear of policy makers, are also often in attendance.

A better charge to level against the TED conference, however, is that it’s routinely, if not unfailingly, optimistic.

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Alasdair Macleod: Why The Europe Situation is Certain to Get Worse

Adam Taggart — Fri, 04 May 2012 19:52:05 -0400

Alasdair Macleod, publisher of Finance and economics.org, sees little room for a happy ending to the worsening European credit crisis.

In this interview, he builds on his excellent synopsis from earlier in the week that detailed how the crisis originated, essentially embedding a fundamental structural shortcoming into the entire Eurozone construct starting back in 1997. This flawed monetary model was exploited for temporal gain and it worked very well as long as the pie was expanding and nobody was looking too carefully at the mounting imbalances created as it chugged along beautifully. Everybody was getting rich on their Mediterranean villas going up in price almost daily.

This whole thing was bound to work until, mathematically, it couldn’t work.

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The Europe Crisis from a European Perspective

Alasdair Macleod — Tue, 01 May 2012 08:35:23 -0400

[This week, we introduce a new contributing editor to ChrisMartenson.com, Alasdair Macleod. He will mostly be contributing commentary focused on the situation in Europe, where he's located. The credit crisis underway there is not Europe's problem alone; it has the potential to send crippling financial shockwaves to the US and elsewhere around the world. Please join us in extending a warm CM.com welcome to Alasdair. -- Adam]

The purpose of this report is to give readers the essential background to the economic problems in Europe and to bring you up-to-date in what has become a fast-moving situation. At the time of writing, there has been a lull in the news flow, but that does not mean the problems are under control. Far from it.

Flawed from the Start

When we talk about Europe today in an economic context, we really mean the Eurozone, whose seventeen members are the core of Europe and share a common currency, the euro. The euro first came into existence thirteen years ago, on January 1, 1999, replacing national currencies for eleven states; Greece joined two years later. In theory, the idea of a common currency for European nations with common borders is logical, and it was Canadian economist Robert Mundell's work on optimum currency areas that provided much of the theoretical cover.

However, the concept was flawed from the start.

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Bill Black: Our System is So Flawed That Fraud is Mathematically Guaranteed

Adam Taggart — Fri, 27 Apr 2012 15:09:38 -0400

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it."

- Frederic Bastiat

Bill Black is a former bank regulator who played a central role in prosecuting the corruption responsible for the S&L crisis of the late 1980s. He is one of America's top experts on financial fraud. And he laments that the US has descended into a type of crony capitalism that makes continued fraud a virtual certainty - while increasingly neutering the safeguards intended to prevent and punish such abuse.

In this extensive interview, Bill explains why financial fraud is the most damaging type of fraud and also the hardest to prosecute. He also details how, through crony capitalism, it has become much more prevalent in our markets and political system.

A warning: there's much revealed in this interview to make your blood boil. For example: the Office of Thrift Supervision. In the aftermath of the S&L crisis, this office brought 3,000 administration enforcements actions (a.k.a. lawsuits) against identified perpetrators. In a number of cases, they clawed back the funds and profits that the convicted parties had fraudulently obtained.

Flash forward to the 2008 credit crisis, in which just the related household sector losses alone were over 70x greater than those seen during the entire S&L debacle. So how many criminal referrals did the same agency, the Office of Thrift Supervision, make?

Zero.

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What Data Can We Trust?

charleshughsmith — Wed, 25 Apr 2012 01:33:27 -0400

Modern investing offers the promise that investors who "do their homework" and use data more intelligently than the herd can gain a valuable edge. But what if the underlying data available to the investing public is fundamentally flawed?

The federal government agencies that issue headline data and the mainstream media that reprints the data without skeptical analysis would have us believe that these indicators -- the unemployment rate and the consumer price index (CPI), for example -- accurately reflect economic realities.

The other indicator that is implicitly or explicitly assumed to reflect the economy’s health is, of course, the stock market, generally represented by the S&P 500 index.

That the government indicators and the stock market are both suspect is now a given.

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