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If you have access to yesterday's Financial Times (or ft.com), check out "Hedge fund banking on higher than predicted interest rate rises [by James Mackintosh p.23]. It's mostly behind a paywall, but the gist of it isn't:
Clarium Capital, the $2bn San Francisco hedge fund run by Peter Thiel, the Paypal co-founder, is betting that central banks will raise interest rates far more than most people expect after concluding that the global wave of liquidity is being generated by petrodollars.
Mr Thiel's thesis is simple, if unconventional. Oil-rich Arab states and gas-rich Russia are earning $600bn a year, which they are investing back into geared financial assets such as structured products, hedge funds and property, supporting global asset prices. The resulting liquidity is helping the price of assets from London homes to equities to emerging market bonds bubble up.
Oddly enough, one of the ways he suggests avoiding assets affected by these petrodollars is to invest in the oil industry, as petrodollars seek to diversify.
Another article worth reading is in the special energy section "FT REPORT - ENERGY IN THE AMERICAS: Riches beyond the wit of politicians" which notes that the US gets much more energy from the Americas.
Thanks for the tip.
Here's a link that's not behind a paywall:
Clarium Capital bets on rates to rise more
Today's FT had the above article. Obviously, not everyone is going to be a winner out of net loss of $1.5 trillion!
Do the Chinese have a Year of the Vulture in their calendar cycle?
Well, it's either going to go Thiel's way or "helicopter" Bernanke's way. If we had the answer we could afford to outbid the Bush family for their retreat in Paraguay.
Question is, are you willing to bet on the fed doing the right thing for the people of the US? Mr. Thiel seems excessively optimistic.
Speaking of Paraguay...
Hezbollah builds a Western base
Yeah, that tri-border area pretty much is like the Bermuda triangle, everything goes and no one has any real control.
The Argentine army going in there is like the LAPD going into south central, it can be done, theoretically. LOL.
The Hezbollah article is priceless. Washington is alarmed not because of terrorists going to the US from the Triple Frontier, but because they all bought property in the area themselves. Oh, and there's already a large Arab population there. Sounds like fun for everyone.
Why are they all so anxious? There is a very good reason to settle in the region: water. Meet the Guarani Aquifer.
And it gets better still, quote Wikipedia:
On the other hand the US is rapidly losing influence in Mercosur, they are not going to roll over and play dead.
The background info is there but these things are pretty fluid and some links are either recycled or outdated.
We live in interesting times.
The edge is getting sharper and we will fall off on one side or the other. I still think its a toss up.
History would point to "inflate or die" as the last gasp most societies take.
I take the position that the Fed is in a catch 22. raise interest raise to keep foriegn investment in US debt and stiffle domestic demand or cut rates to increase domestic consumption and loose foriegn investment. Screwed either way. I wonder if in the rear view mirror how close we were to cratering with Greenspan, and if now we are shooting over the top.
KSA and Opec are in a catch 22 as well. Tell the world oil is running out and start a panic or tell the world we don't feel like pumping oil, could cause some nasty problems as well. I see they are taking the course of blaming refineries. A very good move imo. But what are they going to do long term?
Eventualy both of these groups will have thier hands forced by circumstances beyond thier control.
May we live in interesting times....
Say, what's the deal on Paraguay, anyhow? Should we all be looking into it?
IMO you should look into an area along the lines of it, meaning really autonomous and under no ones direct control, or at least remote enough to be more then one tank of gas removed, but you need a knowledge on the lay of the land.
Most people would probably be better off playing the cards they know very well even if they are not the best cards.
Your typical urban US citizen would probably last about 24 hours there if he is lucky.
The Fed already should be raising interest rates a lot higher to counteract the plunge of the US$ against other currencies. But they know that to do that with the housing market already as it is, plus the millions already struggling to avoid foreclosure, would be a disaster for the US economy.
NOT a fun time to be a Fed governor!
One could say the Fed is impotent for the foreseeable future.
If he raises interest rates, he collapses the economy.
If he doesn't, the government cannot sell its bonds - finance crunch. Then they have to resort to helicopter drops/printing press mania (which is already underway) which devalues the US dollar further, inflating the economy and at the same time causing price inflation...which will likely crash the economy as well.
Wait...don't forget to throw in energy price spikes, hurricanes, war, general resource competition.
No way out of this one. But maybe they have something better in mind. Top secret like.
Here's hoping for some miracles.
That statement makes sense only when you assume the Fed is trying to "save the economy".
The assumption is, however, contradicted by just about everything the Fed has done over the past 20+ years (Alan Greenspan's reign). Now you can counter that by saying that they are grossly stupid, or he is, but that is an even greater assumption.
So why not assume the opposite: the Fed is in the process of deliberately destroying the US economy.. That fits much better with what is going on. Moreover, it paints them as being far from impotent.
The 1990's run-up to the tech boom was fueled with credit facilitated by Fed policies. Today's housing and mortgage bust would not have been possible without an even far greater supply of cheap credit and even lower interest rates. Both are Fed policies. In both instances the Fed could have taken action once damage was becoming clear, even if they wouldn't have foreseen it. In both instances they chose not to.
In 9/11 terms: they have come to the conclusion that, for the people they represent (hint: not you), it's not worthwhile to save the building, so they have decided to bring in Alan Greenspan, whose responsibility it's been to plant the explosives needed to "pull the building", in the financial equivalent of "controlled demolition".
You postulate a "what" but not a "why". Why would the Fed choose to destroy the US economy? What is gained?
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
How about "crash the economy, and buy back all the Govt issue bonds out there for cents on the dollar"?
Debt reduced, ready to start again.
Or am I being way too naive here?
The problem of this scenario is that US will lose its status of debt-fueled empire. Nobody will ever trust the USD for international reserve currency again and the conveyor belt transferring resources, goods and services in exchange of paper dollars will stop forever.
I don't think that this is acceptable scenario for TPTB. Instead I expect a middle road to be persued, which is more like the combination of the two scenarios. In the medium term we will be seeing increasingly rampant inflation and continuing USD devaluation. At the point of time this starts to get out of control the FEDs will intervene by shooting the rates to the sky and saving the greenbacks even if this costs wrecking the US economy. In short we will see the 70s followed by the 80s again.
According to the "Separate Peace" article by Peggy Noonan in the WSJ about a year or so ago, the elites know the game is more or less up, if not now then soon. Old ones like Kennedy know they'll avoid it via lifespan. But in Noonan's article Kennedy sorrowfully notes he's glad he won't be around when the ship can no longer be saved.
There is a possible motive to squeeze the middle class down to sustainable levels and use the rest as a surplus (euphemistic, I know). It's an HG Wells sort of scenario. Not actually likely (I don't think they're that competent), but also not actually impossible.
ciao,
Bruce
I think to understand it better, you have to turn it around first: what is lost by destroying the economy? And the answer to that increasingly seems to be: not much. The US economy has become an unproductive monster. It no longer produces anything, because a much cheaper manufacturing base has been erected elsewhere.
At the same time, while not producing, US citizens consume more than anyone. And that is a big problem, of course. You can't consume without producing, other than on borrowed credit. Well, on every possible level there is more debt here than anytime in history, anywhere in the world. Encouraging, tens of millions to go into debt as far as they have predictably does not make for a healthy economy. But debt does give you power over those that owe you.
The only Americans who still own something substantial can, do and will just as easily move to Paraguay, Dubai or Bali: they have no geographic links left at home. In other words: "destroying the economy" is just a different way of saying "amassing as much wealth as you can, and then taking it out of the country".
The underlying reason is peak oil. America runs on oil, and without it can no longer function. If prices would even only double from where they are now, the machine stops, even the slow sputter will be gone. In the face of energy decline, this makes a lot of sense: demand destruction is the only solid way of mitigating the crisis.
Then all that is left is the biggest army on the planet, by far. And millions upon millions of soldiers to operate its weaponry in the inevitable and expanding resource battles that both are talking place already, and lie ahead.
Oil will become much more important than it is now, once reserves start running out. It will be the no. 1 issue, because all military equipment runs on oil, so ceding control over oil will be ceding all control.
Hey, I have no proof of all this, just blabbing. I find it heard to swallow, though, that the mightiest financial institution on the planet, which means the mightiest institution, period, would for 2 decades fail to execute any and all measures that would achieve its stated goals.
BINGO! HeIsSoFly has it exact. TPTB have no interest in saving any nation states, quite the opposite. The game is about garnering as much family wealth as possible so one can be a lord somewhere in the new global plantation.
Shhhh! You'll upset the people here who still don't believe the Federal Reserve is a private enterprise :-)
"You can never solve a problem on the level on which it was created."
Albert Einstein
This scenario only works until the generals figure out that with the biggest military in the world, they can turn their guns on TPTB and then THEY can become TPTB.
This story has happened so many times before in so many different places. America has thought that it is somehow unique and exempt. But we are rapidly on the way to becoming just another banana republic. No, change that -- we don't even grow any bananas to sell!
The Fed controls the US economy. Not Europe's. Not China's. Not Japan's. You talk as though there is one huge worldwide conspiracy that wants to knock down the US for the benefit of another region but that's not how it is. The Fed would be destroying the only thing of value to them.
In other words, you choose to believe in a grand conspiracy rather than simple human incompetence.
Whatever. I don't buy it and I doubt many others do either. Most of the forces at work against our species are not deliberate actions by human beings but simply gigantic trends that can be summarized by statistics and other mathematical models. And for me it is far easier to believe in human ignorance, stupidity, or greed than in a grand conspiracy.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
Amen.
Yummy deep thread profiteers of doom goodness!
The Fed is owned and run by banks. Who owns those banks? The Fed influences the economy for the benefit of banks, which means trying to keep the US economy from crashing entirely one would assume - but who are we to know for sure. Personally I don't BELIEVE they want to, but I don't know either.
But I do believe in conspiracy, despite the stigma attached to the word, simply because I know what the word means. Companies conspire every day (in the unlawful sense). Just look at the number of large corporations fined ever year and why they are fined. That's the tip of the iceburg.
The Fed may not be acting unlawfully (as far as we know), but the Fed board still conspires in secret (their public meetings are almost always closed to the public) to move things for their benefit. Call it greed if you want - if you're more comfortable with that word.
"You can never solve a problem on the level on which it was created."
Albert Einstein
I would agree, iff (if and only if) you could demonstrate that most politicians (and the fed chairman) understood their creation. They don't...it's black magic. They hope for the best IMO.
Deliberately destroying the economy is difficult to comprehend and a vile act from any viewpoint, IMO.
So, while conspiracy theories are all the rage, I suspect this is not the case...once again it is a combination of events such as lack of long term thinking, rash decisions, inappropiate models of the economy, FIAT money, and general stupidity.
However, even if you are right, I suspect it would be a bigger mistake since the destruction would be assured but the consequences are not so. NO ONE has any clue what the overall reaction to such an economic collapse would be.
I would suggest it will not be orderly...so even the RICH will not be SAFE.
They would be relatively safe watching from their penthouses if they can get all the ethnic groups fighting each other. Perhaps this explains out of control illegal immigration and it only is utter stupidity on the surface.
At some point Blackwater is going to need a new job.
How about balancing the books?
You could rescind the tax cuts. There is plenty of room for squeeze here, and it would be very patriotic of the rich to give and give again.
Or is mentioning that a treasonable offence in Bush's America?
The whole problem is that BushCo thought they would get away with a quick, cheap and profitable war in Iraq.
Cheap and plentiful oil was supposed to be flooding out of a newly created Satrap of Iraq by now.
Imperial overstretch can be a bitch. Especially when the rich of an Empire will not play a comensurate part in the sacrifices required. And that is the case here.
I thought the invasion/occupation's purpose is to set up a permanent military presence in the middle-east to prepare for the escalation of the oil war?
After reading everything I can get my hands on I just have to put in my $.0002 worth (inflation up the wazoo, but that is a digital two cents so I will leverage it 30 fold and tap into that "Great dark pool of liquidity"... hey now I'm stinking rich too, I can buy a McRancho next door to the Bin Ladens and the Bushes down south) anyway I digress.
I agree with HISF's assessment.
I am so sick if reading the money mgr, financial advisors, economists types hashing out the subtleties of the FED’s actions and how things didn’t go quite right, how they would have done it, or how they would address the situation now if it were up to them.
The directors, top financial minds of the century, are not winging it here. To not consider this when you try and figure out what is happening in the world these days is like
playing “Monday morning quarterback” without even having watched the game.
…or having watched the wrong game… or…. ah hell I’m terrible with metaphors.
The trouble with conspiracy theories these days is they are all to often being proved
true.