Savoir-Faire (and Hot Air) is Everywhere!

Mike Shedlock had this to say about U.S. Federal Reserve Chairman Ben Bernake

Bernanke is a disingenuous liar with a memory problem. He is also an economic dunce who does not understand the cause of great depression nor could he spot a housing/credit bubble visible to nearly every blogger in the country. However, like his mentor Greenspan, Bernanke believes that every problem can be cured by throwing money at it. Finally, he is a creative, political power grabbing hack who gives memorable speeches about throwing money out of helicopters.

I could say that about everyone working in the government's economic and data reporting system. Still, Bernake will, and should be, reappointed. He has done exactly what was asked of him.

"Savoir-Faire is Everywhere!" Klondike Kat


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I have no faith in the data coming from the government, World Bank, or IMF. Not that I think they are trying to deceive us. I don't. Nor do I think that the world stock markets will bang through to new lows this year - there is simply too much stimulus cash sloshing around. But stimulus cash won't solve the state and local tax revenue declines (or that of the Federal Government). I have laid out the declines of Oil supplies to the importing nations over the next 5 years, and I do not see any of the big data aggregators taking that into consideration. That does not mean that markets cannot surprise to the upside in any given year, and any such surprise would likely come in the next year or 2.


I see the possibility of some kind of systemic shock in the Muni Bond market as EXTREMELY high. Not that I know what it is going to look like... it won't be as simple as what we are all expecting (California to default) - things are never that simple - yet California WILL default, and so will a number of other Muni bond issuers.


If I am correct in this, money will come flying out of the Muni bond market. Where will it go? THAT, is the $64 question. How ironic would it be if the money fleeing Munis went into Treasuries who then turn around and bailout the state and local governments. Delicious!!

"Savoir-Faire is Everywhere!!"

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The Oil import numbers I covered in my recent post "A Review of the Data", along with media reports and manipulations, agricultural data, and the body politic have left me with a rather unpeaceful, uneasy feeling (from the unEagles).

I will be covering this over the next several posts, as I want to speak with my brain trust, but I will touch on it here.

The numbers I laid out in the Review of the Data post could easily have a lull (flatlining rather than declining supplies), but they could also have a downdraft (black swan, war, whatever/what may). Donal Lang pointed out to me recently that rarely is the the problem outright/absolute shortages of Ag products - the problem is an inability to pay for them (lack of money). That rang true with me. I have been conducting independent research into self sufficiency over the past 4 years. At first I thought, "hey, this is doable"... but the more I think about it, it is only doable IF you have significant means (the ability to own the small holding with no mortgage and furnish the homestead with all of the tools, implements, and equipment needed without borrowed money), are incredably motivated, are in excellent shape (relative to today's average obese person), and have the support of your wife and family. As a statistical repreresentation of the populace, this number is NIL.

So that ain't gonna work on a macro level.

The media comes into play here with their reports of assumptions from the economist community. "Green shoots", an economy that is "leveling out", etc... might even be true, BUT, the economist community is assuming that the Oil will be there to support growth - and the data says otherwise.

How can I be so sure of the Oil supply data? "Sure" is not a word we use in probility mining. We are looking for the most likely outcomes - not what we "want" to happen nor "wish" would happen - but that which is most likely to happen.

The Peak Oil Community, in my humble opinion, has been worried about the wrong thing(s) (at least for the next 10 years): "The 3,000 mile ceaser salad", lack of fuel for farm equipment due to fuel shortages, transportation costs for food... while these energy inputs are a significant protion of the industry's energy footprint - when compared to the larger economy that become quite manageable (at least for 10 years).

SO..... here comes the body politic's contribution to the "fine mess we are in"...

It seems to me that we have become a nation of James Carville's (Bill Clinton's BRILLIANT operative)... running a personal war/quick response media room to spin every issue that comes up: Our guy/group f*cked up here (Obama and Iran)... so we are going to counter with XYZ and 123 (he's a wonderful family man!) - but we are not going to fix our error. No, that would require us to admit the error in the first place... we can't do that! That would be, well.... UNAMERICAN!!

Talk is cheap. Programs and agencies are expensive. What, exactly, has the department of energy done that is worth its $28 BILLION budget? What have they done that is worth a $1 BILLION budget? And where, exactly, does the money come from for the $28 Billion? Do you have any idea how many of these worthless programs we have? But that ain't the bad part... The bad part is we have TENS of MILLIONS of people that have been so addicted to certain social programs and policies (this includes the pensions and disability payment for people that worked for these worthless programs... in addition to the usual suspects). These people have little to no idea how to do anything for themselves, and the policiy response has been non-existant, and when you bring that fact up... the James Carville wannabee's come out of the woodwork and bring up all of the ghosts of administration's past.

It looks to me that the U.S. will lose about 25% of its total daily Oil supply into the system between the end of 2007 and the beginning of 2013. That's 25% over 5 years, and we are a third of the way through those 5 years. Now throw in a $2 TRILLION budget per year deficit that just isn't going away, at a time when the unemployment rate is 10% (and the U6 number is 16%) and climbing, savings are at a historical low (so the idea that folks can go out and buy the equipment - fencing, tools, amendments, seeds, livestock, etc... - they would need to become more self-sufficient just is NOT GOING TO HAPPEN)... Where are the resources going to come from for the transition? After all, as Donal so correctly (IMHO) pointed out, the problem will be an inability to PAY for it all.

This would have to be the most impressive balancing act EVER.

Mentatt

The Body Politic's ADD

In my last post, "Obama finished on World Stage", as in previous posts, I point out a measurable failure on the part of the Administration, and the commentary and emails go off on a million tangents.

Why?

Is it because, for well over a generation, the world's body politic has been awash in the media reports of politician's refusal to answer the question directed at them, or address the issue at hand?  I spoke of Obama's poor handling of Iran, and I got email about how all of the world's problems were caused by Ronald Reagan!  

The GWB cause celebre has got to come to an end.  Yo!  You Democrats! You Liberals!  You WON!  Now you have to govern, and have your actions measured, scrutinized, reviewed, considered, reconsidered, etc... You have to ANSWER for your promises, your claims, your mistakes, and even your successes.  Welcome to the winner"s circle.  This is true in any high profile success.  Hit it big as an actor, businessman, or politician - this is your reward.

All presidents after George Washington inherited somebody else's issues. Every generation blames the one before.  But after a while... you gotta stand on your own two feet.

Barak Obama is not Chairman of the U.N.  He is president of the United States of America.  He better get over the idea that everyone is going to love him.  Just ask Arnold out in Cal.

 

Obama Finished on the World Stage

I am just sick at the opportunity squandered by the Obama Administration, and the absolute inability of his supporters and their political sensibilities to see what they have wrought.

Iran's Junta just stole a MASSIVE election and murdered their own people, and are intent on murdering more. Every regime in the world looked at that, then looked at the Weeney-in-chief at the White House, and laughed up their sleeve. Way to go guys! First California's complete and utter economic destruction and now the end of any opportunity Obama had in effecting any kind of international policy. The Left is batting 1.000!

Just a couple of words to you Obamaphiles:

The U.S. does not NEED to influence our friends and other liberal democracies. We NEED to influence authoritarian regimes. You will wind up with far more blood on your hands than your boogey man, GWB.

The presidency is not for the faint of heart.

"Can You Hear Me Now?"

The glad handers and happy slappers on Wall Street and in Washington just got a smack to the ear.

"China’s central bank reiterated a call for a 'super sovereign currency,' "

After all of the denial about the U.S. Budget Deficit and our silly social programs that we have NOT been paying for, the Chinese felt the need to clarify.

In other words... "Can you hear me now?"

There is an old adage that The Powers That Be really should listen to:

"When you find yourself in a hole - stop digging."

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As I laid out in my previous post, the U.S. saw Peak Oil in 2005, and supplies began to decline earnest in 2008.

In earlier posts I have made the case that because of the size of the U.S. Budget Deficit, the interest on the debt will outpace any possible growth in GDP. Without more Oil, growth is going to be hard to come by.

Now China is making it clear that things must change.

Things could really come unglued politically and economically in the next several years. So what should you do?

"Don't worry, be happy."

Most of us are completely broke, we just don't know it yet (If you had you had a Billion German Marks at the end of WWII, you had less net worth than a guy with 100 live chickens). If you are not willing to make any serious adjustments in your life, well, "no decision" is a decision, too. Besides, when you think about it, the average (poor as a church mouse) person in the U.S. lives to be 79. The Rich and Famous Kings of Rock and Pop (Elvis died at 47, Michael Jackson at 50), can't seem to make it past 50.

Life is short. Go to the beach.

Mentatt

Review of the Data

Total Petroleum supplies into the U.S. peaked in 2005 (not 2007, as I had previously reported) at 20,802,000 barrels per day ("BPD").

For the last 4 weeks, total petroleum supplies into the U.S. system were 18,320,000 BPD.

The official decline: -2,482 BPD.


Well, sort of.

Ethanol supplied into the system in 2005 was immaterial (not zero, but close enough for statistical analysis). Over the past 4 weeks ethanol supplied 731,000 BPD of U.S. total supply(under "other liquids new supply").

In order to make an "apples to apples" comparison we should remove that number as well. Ethanol is NOT petroleum.

20,802,000 - 2482 - 731 = 17,589,000, or a decline in supply of 3,213,000 BPD. That is a decline of 15.44% over 4 years, with most of the decline ( nearly 15%) coming over the past 2 years.

OK so far?

Petroleum supplies to the U.S. have declined from 20,802,000 BPD in 2005 to 17,589,000 BPD in 2009. Here is a table for total products supplied 1990 - 2009. Please notice that we are back to 1997 levels of supplies.

(BTW and just FYI

U.S. population on January 1, 1997: 266,490,000

U.S. population on Janurary 1, 2009: 305,529,237

40,000,000 more folks, no more petroleum, and this metric is going to get much, much worse.)

Will the U.S. total products supplied continue to fall by 7% per year, as it has over the past 2 years? I think that the rate of decline should accelerate for several years, with the period 2010-2015 having the steepest rate of decline. This is due to domestic production remaining nearly constant (perhaps a 2-3% decline) while declines in imports accelerate. As the proportion of domestic supplies increases as a percentage of total supplies, the rate of decline will by necessity decline (provided that the rate of domestic decline remains in the 2 - 3% range. The Mad Scientist thinks that the decline rate for domestic production this year will be at least 3.5% and 6% in 2010 because of collapsing rig counts for NG production).

For the sake of argument, and for our purpuses here, let us assume that I am correct. Let us move the discussion 3 years hence, 2012, and let us assume that total products supplied has continued to decline at 7 % per year and total supply into the U.S. system is somewhere in the 15,000,000 BPD area.

What are the ramifications and outcomes? And "what if" the market place recognizes that this trend is going to continue?

This is really happening. Right now.

For those of you that beleive that the NG people are correct in their claims... the data does not support them just yet. Yes, we are going to have NG storage full this October/November, and yes, that likely means a significant decline in NG prices for 2009. Which also means a significant decline in E & P for NG, which results in less Crude production...

This does not mean that either commodity will move in a straight line. I think it means wild swings which will be far more damaging to the economy than if we could project the E & P budgets better.

Now throw in $2 Trillion per year U.S. budget deficits for as far as the eye can see...

This just gets weirder and weirder.

Mentatt (at) yahoo (com)

The Grind Goes On...

The world is grinding through its Oil supply, talking "green shoots" to keep people going into debt, and aging, with all of aging's attendant societal costs...


Energy will be the dominant issue of the next decade, 2010 to 2019. How to pay for all of the alta cocker's (that is a technical term for senior citizen, something that I am not as far from as I would like to be) dragging a prostate behind them (I know a thing or two about BPH), will be the dominant societal issue after 2020.

"The 2020s for most of the developed world will be an era of fiscal crisis, with a real long-term stagnation in economic growth and ugly political battles over old-age benefits cuts," said Richard Jackson, director of the Global Aging Initiative at the Washington-based Center for Strategic and International Studies.

"In emerging countries like China, they will face the real prospect of a humanitarian aging crisis," he said.

(and from the same article)

In the U.S., immigration of younger residents has helped slow aging of the total population. Still, Medicare is projected to become insolvent by 2017, and President Barack Obama has said that overhauling Social Security and Medicare is critical. In making reforms, Obama and a Democratic-controlled Congress risk alienating a 65-and-older voting group by cutting benefits or their younger generation by raising payroll taxes.

"As they age, boomer support on issues like Medicare and retirement security will be just as key for continued Democratic success as the party's hold on younger minority voters," said William H. Frey, a demographer at Brookings Institution, citing higher voting rates among seniors who could prove important in key states such as Ohio, Pennsylvania and Missouri.

Talk about your uncanny grasp of the obvious...


A serious decline in imported Oil into the U.S. at a time when largest slice of the American pulation will be the aged - and given our propensity for obesity - decrepit and infirm, does not bode well for the economy. For those of you who think we will simply open the immigration spigot... The human migration pattern since the beginning of time has been one in which people migrate to follow resources, and the most important resource they have been following into the U.S. has been Oil (first domestically produced and then imported)... and that is now trailing off.


For our markets to function they must provide a positive return over time, after all, if the market's provided a continuous negative return, no one would participate in them - and that would be the end of that. Therein lies the rub.


In real terms that is beginning to look, from my perspective and at this moment, as the most likely outcome. This is not to say that by 2040 we have not sorted most of this out... but seeing how I will be nearly 79 in 2040 (if the fates allow), well I think I will focus on the nearer future.


The question is this: Do you earn and save US$ for the purpose of providing for your needs in old age or not? Today is easy. Watch your weight, get enough rest, play, make love, etc... these are fairly easy decisions. In what field should your children be trained? How much should you pay for the training? These questions offer some unique challenges.


(It is a cost/benefit analysis, after all. I have seen reports of kids graduating from Harvard and other elite private colleges that are "relieved" to not have the option of making too much money on Wall Street, partying like a rock star, traveling the world, and having a love life that would make Caligula blush for the first decade or 2 out of college (talk about FOS!), and instead are thrilled with the prospect of $45k per year teaching jobs so that they can help save the world... (I am rolling my eyes at this point)... well, kiddies, only a rich kid would talk like that. Poor kids would be too busy doing the math on how long it would take to pay back $200k in student loans on a $45k salary. I guess there are advantages to being poor or working class after all. You don't have to spend as much time Bullsh*ting yourself.)


Speaking to my contemporaries, people with kids in high school and college: What, exactly, are our kids going to do for a living armed with an undergraduate degree in Woman's studies, art appreciation, english literature, or my favorite... "marketing" ? Especially when all those over paid/under worked positions in Academia dissapear? (In my next life, I want to come back as a professor at a business school - I won't have to make payroll, deal with regulators, survive recessions, and actually perform a useful service to the market place! I will merely pontificate from on high. It always staggered me that Wall Street went recruiting almost exclusively from the elite business schools - people with absolutely NO EXPERIENCE of accomplishing ANYTHING, with the glaring exception of navigating the selection process of their Alma Mater - while there were THOUSANDS of guys (and gals) that started a business from sratch, built it to millions in sales, and actually had profits from all over the U.S.... Nah, Wall Street did not want to recruit rifraf like that... they were looking for folks that walked and talked just like them. They wanted people that had training assembling Lego models from Harvard's Business School rather than a guy had built a few things and made a few bucks. Go figure.)


The kids from my adoptive home town of Boca Raton in South Florida don't even know how to run a dishwasher (but they have DRAMA down pat). The "help" does that for them. I was reading the sad story of former star NFL quarterback and fellow Hurricane, Bernie Kozar's bankruptcy filing (If anybody can come back, he can. Bernie, by all accounts, is as sharp as they come). In one of the articles he was complaining that his kid's idea of cleaning their room was telling the cleaning lady to do it, and that the live-in nanny's had cleaning ladys. Talk about "unintended consequences". (Though we could easily afford it, my wife and I do not have a nanny or a cleaning lady. We have found that if you keep your home and life humble, small, and simple, and you get the kids to help, you can get it all done - provided that you live on one income AND your wife is not corrupted by "The Real Housewives of Horrorville".) Kids raised in this environment frequently develop "afluenza", and have a difficult time adjusting to paying their own way as adults.

But I digress...

The slow grind is on... with misdirection and deceit from our political leaders and entrenched interests the order of the day. The "unintended consequences" from a myriad of actions and decisions derived from indutrialized society have brought us to this cusp, and as industrial society winds slowly down over the coming decades we will adjust - like it or not. While the world won't come to an end nor the waves cease to crash onto the shore the world will change. And that is the kind of "Change You Can Believe In".

You see, we are nearly half way through 2009. Oil imports into the U.S. are down 5.7% from 2008 (and total products supplied are down 6.1%, year over year, and if I take ethanol's incfrease out of the picture, and compare apples to apples, petroleum supplies are down over 8% year over year), and in 2008 imports were down 8% from 2007. The U.S. will NEVER AGAIN be able to import the amount of Oil the U.S. imported in 2007. The Powers That Be can debate, argue, cajole, deny, and even persecute those that point out the obvious... but you can't fool the markets for long.

Mentatt (at) yahoo (d0t) com

Things Change, Times Change

Things change.  Times change.

Look at Iran.  The Islamic revolution of 1979 was, in fact, a PEOPLE'S revolution.  That was then, this is now.  The children of the people from that revolution feel differently about their place in the world than their parents' and grand-parents' did.  

The funny thing is that the older generation literally sowed the seeds of this generation's "revolution".  The older generation were religious fundamentalists. In keeping with their beliefs, they had HUGE families with many, many children.  Consequently, Iran has among the youngest populations on earth - nearly 70% of the population is under 30.  And it is the children of the Islamic Revolution Generation that are have decided to reject their parent's politics AND religion - theocracy - and here we are, with people being slaughtered in the streets.  (Ironic does not begin to describe that.)  The same thing is occurring here in the U.S. with the NAACP, NOW, JDL, South Florida Cubans, etc... and, so far, absent the pesky slaughtering of innocents.

"When strange peoples meet... first they fight, then they fornicate".  

DNA wins all wars.  Groups that have been successful in avoiding assimilation do so by controlling the reproductive options of their females, using techniques like head scarves (to differentiate), "honor killings" (Oxymoronic at its best, moronic at its worst), and dietary restrictions (if you can't eat together, its kind of tough to meet new peoples, and even if you did the relationship isn't going very far), among other strategies. (Look, I am not a qualified sociologist (whatever that is),  just a self-educated, white trash, multi-ethnic mutt American, in an inter-racial marriage that grew up in the world's biggest ethnic melting pot (New York) with a half century of doing my best to keenly pay attention to the human condition around me... well, if you feel you know someone more familiar with assimilation, I am all ears...)

In my recent post where I  beat the hell out of Special Interest Groups ("SIG"), the thing I was trying to point out is that times CHANGE.  While there may have been a time when certain SIG's were absolutely necessary in bringing about social change there will ALWAYS come a time when either the change has already happened, OR the group has been assimilated into the society and now no longer exists in its previous form and there is nobody left that cares, except those in power at the SIG. ( If history shows us anything, it is that groups that absolutely refuse to assimilate into a given society will go through periods of acceptance and oppression - not suggesting that this is right or wrong, just that it IS the human condition - and that the "leaders" of these groups will use this to further their agenda of rejecting the broader society around them - again not attempting to indict nor applaud, just calling 'em like I see 'em - until either they become the dominate group or SIG or die out.)

Things change, people change, data changes, politics change, etc... Each day is a new day - but not for Special Interest Groups.  For them nothing changes.  

Just look at Iran.

Mentatt (at) yahoo (dot) com