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Secular Stagnation Bulletin, 2015

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[Dec 27, 2016] Suicide rates rise after jobs move overseas, study finds

Notable quotes:
"... In Bristol County, which includes Fall River, New Bedford, and Taunton, manufacturing employed nearly a quarter of the workforce in 2000; now it provides jobs for only one in 10 workers. ..."
"... Most of the manufacturing jobs lost since 2000 are unlikely to return, economists said. Automation has made manufacturing much more specialized, requiring more education and fewer workers, leaving parts of the country struggling to figure out how to reinvent their economies. ..."
"... "We will probably never have as many manufacturing jobs as we had in 1960," Dunn said. "The question is how do we train workers and provide them opportunities to feel productive. What's clear from the election is an increasing number of people don't have those opportunities or don't feel that those opportunities will be available." ..."
"... Characteristics of people dying by suicide after job loss, financial difficulties and other economic stressors during a period of recession (2010–2011): A review of coroners׳ records ..."
Dec 27, 2016 | economistsview.typepad.com
Fred C. Dobbs : December 27, 2016 at 03:37 AM

Suicide rates rise after jobs move overseas, study finds
http://www.bostonglobe.com/business/2016/12/26/suicide-rates-rise-after-jobs-move-overseas-new-study-funds/yVhFkZOslgnODKEjTfcDTK/story.html?event=event25
via @BostonGlobe - Deirdre Fernandes - December 27, 2016

FALL RIVER - In this struggling industrial city, changes in trade policy are being measured not only in jobs lost, but also in lives lost - to suicide.

The jobs went first, the result of trade deals that sent them overseas. Once-humming factories that dressed office workers and soldiers, and made goods to furnish their homes, stand abandoned, overtaken by weeds and graffiti.

And now there is research on how the US job exodus parallels an increase in suicides. A one percentage point increase in unemployment correlated with an 11 percent increase in suicides, according to Peter Schott, a Yale University economist who coauthored the report with Justin Pierce, a researcher at the Federal Reserve Board.

The research doesn't prove a definitive link between lost jobs and suicide; it simply notes that as jobs left, suicides rose. Workers who lost their jobs may have been pushed over the edge and turned to suicide or drug addiction, lacking financial resources or community connections to get help, the authors suggest.

The research contributes to a growing body of work that shows the dark side of global trade: the dislocation, anger, and despair in some parts of the country that came with the United States' easing of trade with China in 2000. The impact of job losses was greatest in places such as Fall River and other cities in Bristol County, along with rural manufacturing counties in New Hampshire and Maine, vast stretches of the South, and portions of the Rust Belt.

"There are winners and losers in trade," Schott said. "If you go to these communities, you can see the disruptions."

The unemployment rate in Fall River remains persistently high and at 5.5 percent in September was a good two points above the Massachusetts average. Nearly one in three households gets some sort of public assistance.

Opposition to global trade policies became a rallying cry in Donald Trump's campaign, propelling him into the White House with strategic wins in the industrial Midwest and the South. Trump has threatened to impose tariffs on Chinese goods and has bashed recent US trade pacts. ...

Fred C. Dobbs -> Fred C. Dobbs... , December 27, 2016 at 03:41 AM

... Previous trade deals, including the 1994 North American Free Trade Agreement with Canada and Mexico, chipped away at US manufacturing towns. But economists say the decision to normalize relations with China was far more disruptive. Some economists have estimated the United States may have lost at least 1 million manufacturing jobs from 2000 to 2007 due to freer trade with China.

In Bristol County, which includes Fall River, New Bedford, and Taunton, manufacturing employed nearly a quarter of the workforce in 2000; now it provides jobs for only one in 10 workers.

Most of the manufacturing jobs lost since 2000 are unlikely to return, economists said. Automation has made manufacturing much more specialized, requiring more education and fewer workers, leaving parts of the country struggling to figure out how to reinvent their economies.

"We will probably never have as many manufacturing jobs as we had in 1960," Dunn said. "The question is how do we train workers and provide them opportunities to feel productive. What's clear from the election is an increasing number of people don't have those opportunities or don't feel that those opportunities will be available."

Officials in Fall River and Bristol County said they are trying to provide appropriate training, including computer programming, a prerequisite for many manufacturing jobs.

They also point out there have been recent victories.

Mayor Tom Hoye said Taunton has also been more active in recent years, holding community meetings and expanding social services for residents facing distress and drug addiction.

Despite the hits the city and its residents have taken, there is reason to be optimistic about the future, he said.

Jobs are returning, and the county's suicide rate dropped from 13 per 100,000 people in 2014 to 12 per 100,000 in 2015.

"We're reinventing ourselves," Hoye said on a recent morning as he sat in an old elementary school classroom that has served as the temporary mayor's office for several years.

"It's tough to lift yourself out of the hole sometimes. But we're much better off than we were 10 years ago."

Fred C. Dobbs -> Fred C. Dobbs... , December 27, 2016 at 03:55 AM
'The research doesn't prove a definitive
link between lost jobs and suicide; it
simply notes that as jobs left,
suicides rose.'

Pierce, Justin R., and Peter K. Schott (2016). "Trade Liberalization and Mortality:
Evidence from U.S. Counties," Finance and Economics Discussion Series
2016-094. Washington: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/econresdata/feds/2016/files/2016094pap.pdf

http://faculty.som.yale.edu/peterschott/files/research/papers/pierce_schott_pntr_20150301.pdf

Fred C. Dobbs -> Fred C. Dobbs... , December 27, 2016 at 04:00 AM
(Note: The 2nd link is to a
different paper, same authors.)

'The Surprisingly Swift Decline
of US Manufacturing Employment'

Fred C. Dobbs -> Fred C. Dobbs... , December 27, 2016 at 04:27 AM
Understanding vulnerability to self-
harm in times of economic hardship
and austerity: a qualitative study
M C Barnes, et al.

'This is the first UK study of self-harm
among people experiencing economic or
austerity-related difficulties.'

December 2015

http://bmjopen.bmj.com/content/6/2/e010131.full.pdf

---

Characteristics of people dying by suicide after job loss, financial difficulties and other economic stressors during a period of recession (2010–2011): A review of coroners׳ records
Caroline Coope, et al

Journal of Affective Disorders
Volume 183, 1 - September 2015

http://www.sciencedirect.com/science/article/pii/S0165032715002694/pdfft?md5=bebc4ce035acbeeee6cb0b9bd586a5e3&pid=1-s2.0-S0165032715002694-main.pdf

Chris G -> Fred C. Dobbs... , -1
Suicide rates rise after jobs move overseas, study finds

That's consistent with the GOP's notion of how to most effectively cover health problems: shoveled dirt.

[Dec 27, 2016] Trump should say, Thanks, Obama!

Notable quotes:
"... I would say both parties are for the rich and both do their best to distract their respective base with talk of abortion or race, while neither would like these red meat distractions disappear by being in any solved. ..."
"... Why do they like these particular distractions? Because the rich don't care about either. ..."
"... Trump broke the mold by talking about jobs in a meaningful way immigration and exporting factories both boost unemployment, suppressing wages while boosting profits; these topics have been forbidden since Ross Perot spoke of millions of jobs going south on account of Nafta, exactly what happened. ..."
"... 8mm official unemployment. 16mm reduced participation since 2005 in 25-54 age group. ..."
"... 24mm total, not counting part timers that want full time and 10mm fewer voted for dems in 2016 than 2008. ..."
"... Exactly the same number that voted for Romney voted for trump, so Hillary lost obamas third term not because of a wave of trump racists but because there was somehow dissatisfaction among former dem voters regarding the great jobs program, low cost healthcare, and prosecution of bankers and other elites that drove the economy off the cliff. Granted, nominating the second most unpopular person in America might not guarantee success ..."
Dec 27, 2016 | www.nakedcapitalism.com
John k, December 26, 2016 at 2:33 pm

Dems are the party of the rich and poor.

Really? When did they do something that benefitted the poor?

I would say both parties are for the rich and both do their best to distract their respective base with talk of abortion or race, while neither would like these red meat distractions disappear by being in any solved.

Why do they like these particular distractions? Because the rich don't care about either.

Trump broke the mold by talking about jobs in a meaningful way immigration and exporting factories both boost unemployment, suppressing wages while boosting profits; these topics have been forbidden since Ross Perot spoke of millions of jobs going south on account of Nafta, exactly what happened.

8mm official unemployment. 16mm reduced participation since 2005 in 25-54 age group.

24mm total, not counting part timers that want full time and 10mm fewer voted for dems in 2016 than 2008.

Exactly the same number that voted for Romney voted for trump, so Hillary lost obamas third term not because of a wave of trump racists but because there was somehow dissatisfaction among former dem voters regarding the great jobs program, low cost healthcare, and prosecution of bankers and other elites that drove the economy off the cliff. Granted, nominating the second most unpopular person in America might not guarantee success

Anyway, Trump should say, Thanks, Obama!

Synoia , December 26, 2016 at 2:40 pm

8mm official unemployment. 16mm reduced participation since 2005 in 25-54 age group.
24mm total, not counting part timers that want full time

Obama's legacy. Read it and weep.

John k , December 26, 2016 at 3:23 pm

I mis spoke.
Nominating her had risks, but it assured Bernie would not be president, and Bernie was a far greater risk to bankers and the other dem paymasters than trump. Remember, for them it was existential, bernie would have jailed bankers. Trump is one of the oligarchs.
With her nom bankers let out a sigh of relief and could thankfully murmur, 'mission accomplished!'

WheresOurTeddy , December 26, 2016 at 3:29 pm

Bernie would not be president only if they Bobby Kennedy'd him.

It didn't come to that. They just fixed the primary.

Vatch , December 26, 2016 at 7:12 pm

If Sanders had won the Democratic nomination, and he had been "Bobby Kennedy'd", people besides the conspiracy enthusiasts would have started to notice a pattern. Instead, there are millions of people who actually believe that Sanders lost the primaries to Clinton fair and square. Some of us know better. . . .

As for patterns, Trump's nominations for cabinet level offices are showing a pattern: billionaires, hecto-millionaires, overt vassals of the ultra-rich, and at least one (alleged) criminal: Ryan Zinke.

Yves Smith , December 26, 2016 at 10:22 pm

The one unambiguously positive feature of Obamacare was Medicaid expansion, which does help the poor.

marym , December 26, 2016 at 10:47 pm

It does help people, but increased privatization and estate recovery make it not unambiguous.

ambrit , December 27, 2016 at 4:42 am

True. Because of estate recovery, I am doing without medical "insurance" of any kind. As I tell Phyllis, if I get anything serious, just put me in my ragged old canvas chair in the back yard and keep the beer coming until I stop complaining.

This entire Medicade story is curious. I had thought that any self respecting oligarchy would want reasonably powerful clients to buttress the oligarch's power and influence. Instead, the Medicade Oligarchy buys into a "power base" of the poor and disenfranchised. The funds for this complex relationship are supplied, as best as I can discern, by the central government. What will the Medicade Oligarchs do when the "X" Oligarchs cut off or even just restrict the flow of funds from the central government?

Cry Shop , December 27, 2016 at 5:36 am

Not just estate recovery. Loading Medicaid with more claimants, particularly poor, ethnic minority claimants, was a great way to stress it's gonig to need a neo-liberal cure, if the neo-cons don't use the opportunity Obama gave them to out right kill it. Medicaid isn't Medicare, and the retired folks know it. They, the retires, would kill it in a second if they could get an extra $100 per annum in free drugs.

ambrit , December 27, 2016 at 5:46 am

I'm not too sure about the "Retired" "Poor" divide anymore. The two groups are converging and merging. Any animus experienced here would be the result of restriction of total benefits available. In other words, an artificially engineered conflict.
Once the "old folks" realize that they, as a class, are the poor, all bets will be off.

marym , December 27, 2016 at 8:44 am

Once the "old folks" actually are poor enough to qualify for Medicaid (dual eligible) they are at risk for being tossed off Medicare into Medicaid managed care .

marym , December 27, 2016 at 8:50 am

Nor is Medicare Medicare, in the sense of being a fully public program. Medicare Advantage, Medicare supplemental insurance, and prescription drug insurance are all privatized.

Tully , December 27, 2016 at 11:41 am

the funds supplied by the central government. No.
they are supplied by the taxpayers.
That is the system – taxpayers subsidize private sector profits.

steelhead , December 26, 2016 at 2:59 pm

43 years. The decline started in 1973, the year I graduated from high school.

Nittacci , December 26, 2016 at 3:00 pm

"I'm guessing that upwards of 90% of United States voters work for wages"

How is that possible with a 62% labor participation rate? Do you believe unemployed, retired, students and stay-at-home parents don't vote?

grayslady , December 26, 2016 at 5:48 pm

Yes, I had a problem with that phrase, as well; especially as older people (read "retired") are known to have the highest percentage of actual voters. Assuming that the 90% is an overstatement, I don't believe it negates the point that all ages and all races can find common ground on certain issues–Medicare for All being one of those issues. Seniors would definitely get behind an improved Medicare, just as students, unemployed, working poor, and others would support such a sensible universal health care program.

ambrit , December 27, 2016 at 4:46 am

" sensible universal health care program."
Sensible for whom? For the presently entrenched oligarchs, the system in use now is perfectly sensible.

Baldacci , December 26, 2016 at 9:31 pm

Only 30-35% of the total US population votes in any one election. 90% would be possible.

funemployed , December 27, 2016 at 9:34 am

They old though – retired folks love them some voting. Work or have worked for wages, or had vital domestic labor supported by a wage earning family member would surely get us over 90 IMO. (sorry for quibbling Lambert. I think we all get the point. Thanks for the lovely essay)

[Dec 27, 2016] The government's 20th century growth as a factory underestimates service sector growth and our continued share shrink in 20th century

Dec 27, 2016 | economistsview.typepad.com
AngloSaxon : December 26, 2016 at 10:24 PM , 2016 at 10:24 PM
In my opinion, probably not. The government's 20th century "growth as a factory" underestimates service sector growth and our continued share shrink in 20th century industrial production means our "potential" growth is by this factory methiod, in decline. If we grow 3% it is a gaudy number by the government's own statistical backwardness.

To regenerate American factory growth is not possible right now under a market system. I mean, it simply isn't. If we tried, we would crater industrial growth as well with consumption cuts.

likbez -> AngloSaxon... , -1
Growth of the service sector is also under attack due to increasing "robotization", replacing salaried workers with "perma-temps" and underpaid contractors (Uber) as well as offshoring of help desk and such.

What's left? Military Keynesianism ?

[Dec 27, 2016] On Krugman And The Working Class - Tim Duys Fed Watch

Notable quotes:
"... Excellent critique. Establishment Democrats are tone-deaf right now; the state of denial they live in is stunning. I'd like to think they can learn after the shock of defeat is over, but identity politics for non-white, non-male, non-heterosexual is what the Democratic party is about today and has been the last decade or so. ..."
"... That's the effect of incessant Dem propaganda pitting races and sexes against each other. ..."
"... And Democrats' labeling of every Republican president/candidate as a Nazi - including Trump - is desensitizing the public to the real danger created by discriminatory policies that punish [white] children and young adults, particularly boys. ..."
"... So, to make up for the alleged screw job that women and minorities have supposedly received, the plan will be screwing white/hetro/males for the forseeable future. My former employer is doing this very plan, as we speak. Passed over 100 plus males, who have been turning wrenches on airplanes for years, and installed a female shop manager who doesn't know jack-$##t about fixing airplanes. No experience, no certificate......but she has a management degree. But I guess you don't know how to do the job to manage it. ..."
"... Bernie Sanders was that standard bearer, but Krugman and the Neoliberal establishment Democrats (ie. Super Delegates) decided that they wanted to coronate Clinton. ..."
"... Evolution of political parties happens organically, through evolution (punctuated equilibrium - like species and technology - parties have periods of stability with some sudden jumps in differentiation). ..."
"... If Nancy Pelosi is re-elected (highly likely), it will be the best thing to happen to Republicans since Lincoln. They will lose even more seats. ..."
"... The Coastal Pelosi/Schumer wing is still in power, and it will take decimation at the ballot box to change the party. The same way the "Tea Party" revolution decimated the Republicans and led to Trump. Natural selection at work. ..."
"... The central fact of the election is that Hillary has always been extraordinarily unlikable, and it turned out that she was Nixonianly corrupt ..."
"... I'm from Dallas. Three of my closest friends growing up (and to this day), as well as my brother in law, are hispanic. They, and their families, all vote Republican, even for Trump. Generally speaking, the longer hispanics are in the US, the more likely they tend to vote Republican. ..."
"... The Democratic Establishment and their acolytes are caught in a credibility trap. ..."
"... I also think many Trump voters know they are voting against their own economic interest. The New York Times interviewed a number who acknowledge that they rely on insurance subsidies from Obamacare and that Trump has vowed to repeal it. I know one such person myself. She doesn't know what she will do if Obamacare is repealed but is quite happy with her vote. ..."
"... Krugman won his Nobel for arcane economic theory. So it isn't terribly surprising that he spectacularly fails whenever he applies his brain to anything remotely dealing with mainstream thought. He is the poster boy for condescending, smarter by half, elite liberals. In other words, he is an over educated, political hack who has yet to learn to keep his overtly bias opinions to himself. ..."
"... Funny how there's all this concern for the people whose jobs and security and money have vanished, leaving them at the mercy of faceless banks and turning to drugs and crime. Sad. Well, let's bash some more on those lazy, shiftless urban poors who lack moral strength and good, Protestant work ethic, shall we? ..."
"... Clinton slammed half the Trump supporters as deplorables, not half the public. She was correct; about half of them are various sorts of supremacists. The other half (she said this, too) made common cause with the deplorables for economic reasons even though it was a devil's bargain. ..."
"... I have never commented here but I will now because of the number of absurd statements. I happen to work with black and Hispanic youth and have also worked with undocumented immigrants. To pretend that trump and the Republican Party has their interest in mind is completely absurd. As for the white working class, please tell me what programs either trump or the republican have put forward to benefit them? I have lost a lot of respect for Duy ..."
"... The keys of the election were race, immigration and trade. Trump won on these points. What dems can do is to de-emphasize multiculturalism, racial equality, political correctness etc. Instead, emphasize economic equality and security, for all working class. ..."
"... Krugman more or less blames media, FBI, Russia entirely for Hillary's loss, which I think is wrong. As Tim said, Dems have long ceased to be the party of the working class, at least in public opinion, for legitimate reasons. ..."
"... All Mr. Krugman and the Democratic establishment need to do is to listen, with open ears and mind, to what Thomas Frank has been saying, and they will know where they went wrong and most likely what to do about it, if they can release themselves from their fatal embrace with Big Money covered up by identity politics. ..."
"... Pretty sad commentary by neoliberal left screaming at neoliberal right and vice versa. ..."
"... The neoliberals with their multi-culti/love them all front men have had it good for a while, now there's a reaction. Deal with it. ..."
Dec 27, 2016 | economistsview.typepad.com
Jason Nordsell : , November 27, 2016 at 08:02 AM
Excellent critique. Establishment Democrats are tone-deaf right now; the state of denial they live in is stunning. I'd like to think they can learn after the shock of defeat is over, but identity politics for non-white, non-male, non-heterosexual is what the Democratic party is about today and has been the last decade or so.

The only way Dems can make any headway by the midterms is if Trump really screws up, which is a tall order even for him. He will pick the low-hanging fruit (e.g., tax reform, Obamacare reform, etc), the economy will continue to recover (which will be attributed to Trump), and Dems will lose even more seats in Congress. And why? Because they refuse to recognize that whites from the middle-class and below are just as disadvantaged as minorities from the same social class.

If white privilege exists at all (its about as silly as the "Jews control the banks and media" conspiracy theories), it exists for the upper classes. Poor whites need help too. And young men in/out of college today are being displaced by women - not because the women have superior academic qualification, but because they are women. I've seen it multiple times firsthand in some of the country's largest companies and universities (as a lawyer, when an investigation or litigation takes place, I get to see everyone's emails, all the way to CEO/board). There is a concerted effort to hire only women and minorities, especially for executive/managerial positions. That's not equality.

That's the effect of incessant Dem propaganda pitting races and sexes against each other. This election exposed the media's role, but its not over. Fortunately, Krugman et al. are showing the Dems are too dumb to figure out why they lost. Hopefully they keep up their stupidity so identity politics can fade into history and we can get back to pursuing equality.

bob -> Jason Nordsell... , November 28, 2016 at 03:02 PM
"There is a concerted effort to hire only women and minorities, especially for executive/managerial positions."

Goooooolllllllllllllly, gee. Now why would that be? I hope you're not saying there shouldn't be such an effort. This is a good thing. It exactly and precisely IS equality. It may be a bit harsh, but if certain folks continually find ways to crap of women and minorities, then public policies would seem warranted.

Are you seriously telling us that pursuing public policies to curb racial and sexual discrimination are a waste of time?

How, exactly, does your vision of "pursuit of equality" ameliorate the historical fact of discrimination?

Jason Nordsell -> bob... , November 29, 2016 at 10:17 AM
You don't make up for past discrimination with discrimination. You make up for it by equal application of the law. Today's young white men are not the cause of discrimination of the 20th century, or of slavery. If you discriminate against them because of the harm caused by other people, you're sowing the seeds of a REAL white nationalist movement. And Democrats' labeling of every Republican president/candidate as a Nazi - including Trump - is desensitizing the public to the real danger created by discriminatory policies that punish [white] children and young adults, particularly boys.

Displacement of white men by lesser-qualified women and minorities is NOT equality.

Paid Minion -> bob... , December 26, 2016 at 01:29 PM
So, to make up for the alleged screw job that women and minorities have supposedly received, the plan will be screwing white/hetro/males for the forseeable future. My former employer is doing this very plan, as we speak. Passed over 100 plus males, who have been turning wrenches on airplanes for years, and installed a female shop manager who doesn't know jack-$##t about fixing airplanes. No experience, no certificate......but she has a management degree. But I guess you don't know how to do the job to manage it.

God forbid somebody have to "pay some dues" before setting them loose as suit trash.

This will not end well.

Richard -> Jason Nordsell... , November 30, 2016 at 03:45 PM
You had me nodding until the last part.

Back when cultural conservatives ruled the roost (not that long ago), they didn't pursue equality either. Rather, they favored (hetero Christian) white men. So hoping for Dem stupidity isn't going to lead to equality. Most likely it would go back to favoring hetero Christian white men.

Todd : , November 27, 2016 at 08:46 AM
"...should they find a new standard bearer that can win the Sunbelt states and bridge the divide with the white working class? I tend to think the latter strategy has the higher likelihood of success."

Easy to say. What would that standard bearer or that strategy look like?

Bill -> Todd... , November 27, 2016 at 08:59 AM
Bernie Sanders was that standard bearer, but Krugman and the Neoliberal establishment Democrats (ie. Super Delegates) decided that they wanted to coronate Clinton. Big mistake that we are now paying for...
Bob Salsa -> Bill... , November 28, 2016 at 12:56 PM
Basic political math - Sanders would have been eaten alive with his tax proposals by the GOP anti-tax propaganda machine on Trump steroids.

His call to raise the payroll tax to send more White working class hard-earn money to Washington would have made election night completely different - Trump would have still won, it just wouldn't have been a surprise but rather a known certainty weeks ahead.

dwb : , November 27, 2016 at 10:47 AM
Evolution of political parties happens organically, through evolution (punctuated equilibrium - like species and technology - parties have periods of stability with some sudden jumps in differentiation).

Old politicians are defeated, new ones take over. The old guard, having been successful in the past in their own niche rarely change.

If Nancy Pelosi is re-elected (highly likely), it will be the best thing to happen to Republicans since Lincoln. They will lose even more seats.

The Coastal Pelosi/Schumer wing is still in power, and it will take decimation at the ballot box to change the party. The same way the "Tea Party" revolution decimated the Republicans and led to Trump. Natural selection at work.

In 1991, Republicans thought they would always win, Democrats thought the country was relegated to Republican Presidents forever. Then along came a new genotype- Clinton. In 2012, Democrats thought that they would always win, and Republicans were thought to be locked out of the electoral college. Then along came a new genotype, Trump.

A new genotype of Democrat will have to emerge, but it will start with someone who can win in flyover country and Texas. Hint: They will have to drop their hubris, disdain and lecturing, some of their anti-growth energy policies, hate for the 2nd amendment, and become more fiscally conservative. They have to realize that *no one* will vote for an increase in the labor supply (aka immigration) when wages are stagnant and growth is anemic. And they also have to appreciate people would rather be free to choose than have decisions made for them. Freedom means nothing unless you are free to make mistakes.

But it won't happen until coastal elites like Krugman and Pelosi have retired.


swampwiz -> dwb... , November 28, 2016 at 12:59 AM
My vote for the Democratic Tiktaalik is the extraordinarily Honorable John Bel Edwards, governor of Louisiana. The central fact of the election is that Hillary has always been extraordinarily unlikable, and it turned out that she was Nixonianly corrupt (i.e., deleted E-mails on her illegal private server) as well - and she still only lost by 1% in the tipping point state (i.e., according to the current count, which could very well change).
bob -> dwb... , November 28, 2016 at 03:09 PM
You know what will win Texas? Demographic change. Economic growth. And it is looking pretty inevitable on both counts.

I'm also pretty damned tired of being dismissed as "elitist", "smug" and condescending. I grew up in a red state. I know their hate. I know their condescension (they're going to heaven, libruls are not).

It cuts both ways. The Dems are going into a fetal crouch about this defeat. Did the GOP do that after 2008? Nope. They dug in deeper.

Could be a lesson there for us.

Smugly your,

dwb -> bob... , November 28, 2016 at 06:27 PM
Ahh yes, all Texas needs is demographic change, because all [Hispanics, Blacks, insert minority here] will always and forever vote Democrat. Even though the Democrats take their votes for granted and Chicago/Baltimore etc. are crappy places to live with no school choice, high taxes, fleeing jobs, and crime. Even though Trump outperformed Romney among minorities.

Clinton was supposed to be swept up in the winds of demographics and the Democrats were supposed to win the White House until 2083.

Funny things happen when you take votes for granted. Many urban areas are being crushed by structural deficits and need some Detroit type relief. I predict that some time in the next 30 years, poles reverse, and urban areas are run by Republicans.

If you are tired of being dismissed as "elitist", "smug" and condescending, don't be those things. Don't assume people will vote for your party because they have always voted that way, or they are a certain color. Respect the voters and work to earn it.

Jason Nordsell -> bob... , November 29, 2016 at 10:27 AM
The notion that hispanic=democrat that liberals like bob have is hopelessly ignorrant.

I'm from Dallas. Three of my closest friends growing up (and to this day), as well as my brother in law, are hispanic. They, and their families, all vote Republican, even for Trump. Generally speaking, the longer hispanics are in the US, the more likely they tend to vote Republican.

The Democratic Party's plan to wait out the Republicans and let demographics take over is ignorant, racist and shortsighted, cooked up by coastal liberals that haven't got a clue, and will ultimately fail.

In addition to losing hispanics, Democrats will also start losing the African American vote they've been taking for granted the last several decades. Good riddance to the Democratic party, they are simply unwilling to listen to what the people want.

RJ -> bob... , December 06, 2016 at 11:20 PM
You might be tired of it, but clearly you are elitist, smug, and condescending.

Own it. Fly your freak flag proudly,

Tom : , November 27, 2016 at 11:42 AM
This is a really shoddy piece that repeats the medias pulling of Clintons quote out of context. She also said "that other basket of people are people who feel that the government has let them down, the economy has let them down, nobody cares about them, nobody worries about what happens to their lives and their futures, and they're just desperate for change. It doesn't really even matter where it comes from. They don't buy everything he says, but he seems to hold out some hope that their lives will be different. They won't wake up and see their jobs disappear, lose a kid to heroin, feel like they're in a dead-end. Those are people we have to understand and empathize with as well."

Now maybe it is okay to make gnore this part of the quote because you think calling racism "deplorable" is patently offensive. But when the ignored context makes the same points that Duy says she should have been making, that is shoddy.

dwb -> Tom... , November 27, 2016 at 12:07 PM
There are zero electoral college votes in the State of Denial. Hopefully you understand a)the difference between calling people deplorable and calling *behavior* deplorable; b) Godwin's Law: when you resort to comparing people to Hitler you've lost the argument. Trump supporters were not racist, homophobic, xenophobic, or any other phobic. As a moderate, educated, female Trump supporter counseled: He was an a-hole, but I liked his policies.

Even my uber liberal friends cannot tell me what Clinton's economic plan was. Only that they are anti-Trump.

Trump flanked Clinton on the most popular policies (the left used to be the anti-trade party of union Democrats): Lower regulation, lower taxes, pro-2nd amendment, trade deals more weighted in favor of US workers, and lower foreign labor supply. Turn's out, those policies are sufficiently popular that people will vote for them, even when packaged into an a-hole. Trump's anti-trade platform was preached for decades by rust belt unions.

The coastal Democrats have become hostages to pro-big-government municipal unions crushing cities under structural deficits, high taxes, poorly run schools, and overbearing regulations. The best thing that can happen for the Democrats is for the Republicans to push for reforms of public pensions, school choice, and break municipal unions. Many areas see the disaster in Chicago and Baltimore, run by Democrats for decades, and say no thank you. Freed of the need to cater to urban municipal unions, Democrats may be able to appeal to people elsewhere.

Nick : , November 27, 2016 at 01:16 PM
Where can you move to for a job when wages are so low compared to rents?
The young generations are not happy with house prices or rents as well.
Giant_galveston -> Tim C.... , December 05, 2016 at 08:43 PM
Tim, I believe you've missed the point: by straightforward measures, Democratic voters in USA are substantially under-represented. The problem is likely to get much worse, as the party whose policies abet minority rule now controls all three branches of the federal government and a substantial majority of state governments.
Tim C. : , November 27, 2016 at 02:50 PM
This is an outstanding takedown on what has been a never-ending series of garbage from Krugman.

I used to hang on every post he'd made for years after the 2008 crisis hit. But once the Clinton coronation arose this year, the arrogant, condescending screed hit 11 - and has not slowed down since. Threads of circular and illogical arguments have woven together pathetic - and often non-liberal - editorials that have driven me away permanently.

Since he's chosen to ride it all on political commentary, Krugman's credibility is right there with luminaries such as Nial Ferguson and Greg Mankiw.

Seems that everyone who chooses to hitch their wagon to the Clintons ends up covered in bilge..... funny thing about that persistent coincidence...

dazed and confused : , November 27, 2016 at 02:58 PM
"And it is an especially difficult pill given that the decline was forced upon the white working class.... The tsunami of globalization washed over them....in many ways it was inevitable, just as was the march of technology that had been eating away at manufacturing jobs for decades. But the damage was intensified by trade deals.... Then came the housing crash and the ensuing humiliation of the foreclosure crisis."

All the more amazing then that Trump pulled out such a squeaker of an election beating Clinton by less than 2% in swing states and losing the popular vote overall. In the shine of Duy's lights above, I would have imagined a true landslide for Trump... Just amazing.

Jesse : , November 27, 2016 at 04:29 PM

The Democratic Establishment and their acolytes are caught in a credibility trap.

dimknight : , November 27, 2016 at 11:48 PM
"I don't know that the white working class voted against their economic interest".

I think you're pushing too hard here. Democrats have been for, and Republicans against many policies that benefit the white working class: expansionary monetary policy, Obamacare, housing refinance, higher minimum wage, tighter worker safety regulation, stricter tax collection, and a host of others.

I also think many Trump voters know they are voting against their own economic interest. The New York Times interviewed a number who acknowledge that they rely on insurance subsidies from Obamacare and that Trump has vowed to repeal it. I know one such person myself. She doesn't know what she will do if Obamacare is repealed but is quite happy with her vote.

Doug Rife : , November 28, 2016 at 07:17 AM
There is zero evidence for this theory. It ignores the fact that Trump lied his way to the White House with the help of a media unwilling to confront and expose his mendacity. And there was the media's obsession with Clinton's Emails and the WikiLeaks daily release of stolen DNC documents. And finally the Comey letter which came in the middle of early voting keeping the nation in suspense for 11 days and which was probably a violation of the hatch act. Comey was advised against his unjustified action by higher up DOJ officials but did it anyway. All of these factors loomed much larger than the deplorables comment. Besides, the strong dollar fostered by the FOMC's obsession with "normalization" helped Trump win because the strong dollar hurts exporters like farmers who make up much of the rural vote as well as hurting US manufacturing located in the midwest states. The FOMC was objectively pro Trump.
Nate F : , November 28, 2016 at 07:57 AM
I was surrounded by Trump voters this past election. Trust me, an awful lot of them are deplorable. My father is extremely anti semetic and once warned me not to go to Minneapolis because of there being "too many Muslims." One of our neighbors thinks all Muslims are terrorists and want to do horrible things to all Christians.

I know, its not a scientific study. But I've had enough one on one conversations with Trump supporters (not just GOP voters, Trump supporters) to say that yes, as a group they have some pretty horrible views.

Giant_galveston -> Nate F... , December 05, 2016 at 08:38 PM
Yep. I've got plenty of stories myself. From the fact that there are snooty liberals it does NOT follow that the resentment fueling Trump's support is justified.
Denis Drew : , November 28, 2016 at 08:41 AM
One should note that the "The racist, sexist, homophobic, xenophobic, Islamaphobic - you name it ... " voted for Obama last time around.

When the blue collar voter (for lack of a better class) figures out that the Republicans (Trump) are not going to help them anymore than the Dems did -- it will be time for them to understand they can only rely on themselves, namely: through rebuilding labor union density, which can be done AT THE STATE BY PROGRESSIVE STATE LEVEL.

To keep it simple states may add to federal protections like the minimum wage or safety regs -- just not subtract. At present the NLRB has zero (no) enforcement power to prevent union busting (see Trump in Vegas) -- so illegal labor market muscling, firing of organizers and union joiners go completely undeterred and unrecoursed.

Recourse, once we get Congress back might include mandating certification elections on finding of union busting. Nothing too alien: Wisconsin, for instance, mandates RE-certification of all public employee unions annually.

Progressive states first step should be making union busting a felony -- taking the power playing in our most important and politically impacting market as seriously as taking a movie in the movies (get you a couple of winters). For a more expansive look (including a look at the First Amendment and the fed cannot preempt something with nothing, click here):
http://ontodayspage.blogspot.com/2016/11/first-100-days-progressive-states-agenda.html

Labor unions -- returned to high density -- can act as the economic cop on every corner -- our everywhere advocates squelching such a variety of unhealthy practices as financialization, big pharam gouging, for profit college fraud (Trump U. -- that's where we came into this movie). 6% private union density is like 20/10 bp; it starves every other healthy process (listening blue collar?).

Don't panic if today's Repub Congress passes national right-to-work legislation. Germany, which has the platinum standard labor institutions, does not have one majority union (mostly freeloaders!), but is almost universally union or covered by union contracts (centralized bargaining -- look it up) and that's what counts.

Gary Anderson : , November 28, 2016 at 09:47 AM
Trump took both sides of every issue. He wants high and low interest rates. He wants a depression first, (Bannonomics) and inflation first, (Trumponomics), he wants people to make more and make less. He is nasty and so he projected that his opponent was nasty.

Now he has to act instead of just talk out of both sides of his mouth. That should not be as easy to do.

C Jones : , November 28, 2016 at 10:31 AM
Hi Tim, nice post, and I particularly liked your last paragraph. The relevant question today if you have accepted where we are is effectively: 'What would you prefer - a Trump victory now? Or a Trump type election victory in a decade or so? (with todays corresponding social/economic/political trends continuing).
I'm a Brit so I was just an observer to the US election but the same point is relevant here in the UK - Would I rather leave the EU now with a (half sensible) Tory government? Or would I rather leave later on with many more years of upheaval and a (probably by then quite nutty) UKIP government?
I know which one I prefer - recognise the protest vote sooner, rather than later.
Bob Salsa : , November 28, 2016 at 12:48 PM
Sure they're angry, and their plight makes that anger valid.

However, not so much their belief as to who and what caused their plight, and more importantly, who can and how their plight would be successfully reversed.

Most people have had enough personal experiences to know that it is when we are most angry that we do the stupidest of things.

Lars : , November 28, 2016 at 05:58 PM
Krugman won his Nobel for arcane economic theory. So it isn't terribly surprising that he spectacularly fails whenever he applies his brain to anything remotely dealing with mainstream thought. He is the poster boy for condescending, smarter by half, elite liberals. In other words, he is an over educated, political hack who has yet to learn to keep his overtly bias opinions to himself.
Douglas P Anthony : , November 29, 2016 at 08:16 AM
Tim's narrative felt like a cold shower. I was apprehensive that I found it too agreeable on one level but were the building blocks stable and accurate?

Somewhat like finding a meal that is satisfying, but wondering later about the ingredients.

But, like Tim's posts on the Fed, they prompt that I move forward to ponder the presentation and offer it to others for their comment. At this time, five-stars on a 1-5 system for bringing a fresh approach to the discussion. Thanks, Professor Duy. This to me is Piketty-level pushing us onto new ground.

JohnR : , November 29, 2016 at 12:07 PM
Funny how there's all this concern for the people whose jobs and security and money have vanished, leaving them at the mercy of faceless banks and turning to drugs and crime. Sad. Well, let's bash some more on those lazy, shiftless urban poors who lack moral strength and good, Protestant work ethic, shall we?
Raven Onthill : , November 29, 2016 at 04:12 PM
Clinton slammed half the Trump supporters as deplorables, not half the public. She was correct; about half of them are various sorts of supremacists. The other half (she said this, too) made common cause with the deplorables for economic reasons even though it was a devil's bargain.

Now, there's a problem with maternalism here; it's embarrassing to find out that the leader of your political opponents knows you better than you know yourself, like your mother catching you out in a lie. It was impolitic for Clinton to have said this But above all remember that when push came to shove, the other basket made common cause with the Nazis, the Klan, and so on and voted for a rapey fascist.

Rick McGahey : , November 30, 2016 at 02:44 PM
"Economic development" isn't (and can't) be the same thing as bringing back lost manufacturing (or mining) jobs. We have had 30 years of shifting power between labor and capital. Restoring labor market institutions (both unions and government regulation) and raising the floor through higher minimum wages, single payer health care, fair wages for women and more support for child and elder care, trade policies that care about working families, better safe retirement plans and strengthened Social Security, etc. is key here, along with running a real full employment economy, with a significant green component. See Bob Polllin's excellent program in https://mitpress.mit.edu/books/back-full-employment

That program runs up against racism, sexism, division, and fear of government and taxation, and those are powerful forces. But we don't need all Trump supporters. We do need a real, positive economic program that can attract those who care about the economics more than the cultural stuff.

Sandra Williams : , December 01, 2016 at 12:20 AM
How about people of color drop the democrats and their hand wringing about white people when they do nothing about voter suppression!! White fragility is nauseating and I'm planning to arm myself and tell all the people of color I know to do the same. I expect nothing from the democrats going forward.
Robert Hurley : , December 01, 2016 at 11:04 AM
I have never commented here but I will now because of the number of absurd statements. I happen to work with black and Hispanic youth and have also worked with undocumented immigrants. To pretend that trump and the Republican Party has their interest in mind is completely absurd. As for the white working class, please tell me what programs either trump or the republican have put forward to benefit them? I have lost a lot of respect for Duy
Giant_galveston -> Robert Hurley... , December 05, 2016 at 08:32 PM
Couldn't agree more.
RJ -> Robert Hurley... , December 06, 2016 at 11:26 PM
No one should advocate illegal immigration. If you care about being a nation of laws.
[email protected] : , December 01, 2016 at 06:13 PM
I think much of appeal of DJT was in his political incorrectness. PC marginalises. Very. Of white working class specifically. it tells one, one cannot rely on one's ideas any more. In no uncertain terms. My brother, who voted for Trump, lost his job to PC without offending on purpose, but the woman in question felt free to accuse him of violating her, with no regard to his fate. He was never close enough to do that. Is that not some kind of McCarthyism?
Eclectic Observer : , December 05, 2016 at 10:55 AM
Just to be correct. Clinton was saying that half (and that was a terrible error-should have said "some") were people that were unreachable, but that they had to communicate effectively with the other part of his support. People who echo the media dumb-ing down of complex statements are part of the problem.

Still, I believe that if enough younger people and african-americans had come out in the numbers they did for Obama in some of those states, Clinton would have won. Certainly, the media managed to paint her in more negative light than she objectively deserved-- even if she deserved some negatives.

I am in no way a fan of HRC. Still, the nature of the choice was blurred to an egregious degree.

Procopius : , December 05, 2016 at 08:40 PM
"The tough reality of economic development is that it will always be easier to move people to jobs than the jobs to people."

This is indisputable, but I have never seen any discussion of the point that moving is not cost-free. Back in the '90s I had a discussion with a very smart person, a systems analyst, who insisted that poor people moved to wherever the welfare benefits were highest.

I tried to point out that moving from one town to another costs more than a bus ticket. You have to pay to have your possessions transported. You have to have enough cash to pay at least two months' rent and maybe an additional security deposit.

You have to have enough cash to pay for food for at least one month or however long it takes for your first paycheck or welfare check to come in. There may be other costs like relocating your kids to a new school system and maybe changing your health insurance provider.

There probably are other costs I'm not aware of, and the emotional cost of leaving your family and your roots. The fact that some people succeed in moving is a great achievement. I'm amazed it works at all in Europe where you also have the different languages to cope with.

Kim Kaufman : , December 07, 2016 at 10:03 PM
I'm not sure the Hillary non-voters - which also include poor black neighborhoods - were voting against their economic interests. Under Obama, they didn't do well. Many of them were foreclosed on while Obama was giving the money to the banks. Jobs haven't improved, unless you want to work at an Amazon warehouse or for Uber and still be broke. Obama tried to cut social security. He made permanent Bush's tax cuts for the rich. Wars and more wars. Health premiums went up - right before the election. The most Obama could say in campaigning for Hillary was "if you care about my legacy, vote for Hillary." He's the only one that cares about his legacy. I don't know that it's about resentment but about just having some hope for economic improvement - which Trump offered (no matter how shallow and deceptive) and Hillary offered nothing but "Trump's an idiot and I'm not."

I believe Bernie would have beat Trump's ass if 1) the DNC hadn't put their fingers on the scale for Hillary and 2) same with the media for Hillary and Trump. The Dems need more than some better campaign slogans. They really need a plan for serious economic equality. And the unions need to get their shit together and stop thinking that supporting corrupt corporate Dems is working. Or perhaps the rank and file need to get their shit together and get rid of union bosses.

IHiddenDragon : , December 10, 2016 at 09:01 AM
The keys of the election were race, immigration and trade. Trump won on these points. What dems can do is to de-emphasize multiculturalism, racial equality, political correctness etc. Instead, emphasize economic equality and security, for all working class.

Lincoln billed the civil war as a war to preserve the union, to gain wide support, instead of war to free slaves. Of course, the slaves were freed when the union won the war. Dems can benefit from a similar strategy

IHiddenDragon : , December 10, 2016 at 09:05 AM
Krugman more or less blames media, FBI, Russia entirely for Hillary's loss, which I think is wrong. As Tim said, Dems have long ceased to be the party of the working class, at least in public opinion, for legitimate reasons.

Besides, a lot voters are tired of stale faces and stale ideas. They yearn something new, especially the voters in deep economic trouble.

Maybe it's time to try some old fashioned mercantilism, protectionism? America first is an appealing idea, in this age of mindless globalization.

Jesse : , December 26, 2016 at 11:08 AM
All Mr. Krugman and the Democratic establishment need to do is to listen, with open ears and mind, to what Thomas Frank has been saying, and they will know where they went wrong and most likely what to do about it, if they can release themselves from their fatal embrace with Big Money covered up by identity politics.

But they cannot bring themselves to admit their error, and to give up their very personally profitable current arrangement. And so they are caught up in a credibility trap which is painfully obvious to the objective observer.

c1ue : , December 26, 2016 at 12:11 PM
Pretty sad commentary by neoliberal left screaming at neoliberal right and vice versa.

It seems quite clear that the vast majority of commenters live as much in the ivory tower/bubble as is claimed for their ideological opponent.

It is also quite interesting that most of these same commenters don't seem to get that the voting public gets what the majority of it wants - not what every single group within the overall population wants.

The neoliberals with their multi-culti/love them all front men have had it good for a while, now there's a reaction. Deal with it.

[Dec 27, 2016] How Americans Spent Their Money In The Last 75 Years (In 1 Simple Chart) Zero Hedge

Dec 27, 2016 | www.zerohedge.com
How Americans Spent Their Money In The Last 75 Years (In 1 Simple Chart) Tyler Durden Dec 25, 2016 11:55 PM 0 SHARES Consumer spending makes up 70% of the United States economy. We all have bills to pay and mouths to feed, but where do Americans spend their money? Here is a breakdown of how Americans spent their money in the last 75 years...

In the chart above, spending is broken into 12 categories: Reading, alcohol, tobacco, education, personal care, miscellaneous, recreation & entertainment, healthcare, clothing, food, transportation and housing. Each category is further broken down into spending by year, from 1941 to 2014, and each category is given a unique color. The data were collected from the Bureau of Labor Statistics . The data is adjusted for inflation and measures median spending of all Americans.

Unsurprisingly, housing expenses have almost always been the largest area of spending in America for over 70 years. The only exception is 1941, when spending on food averaged $8,311, whereas spending on housing came to $7,537. However, in 1941 the government included alcohol in the food spending category, which inflates the food spending data for that year. In the other years, alcohol was given its own category. In every other year measured, spending on housing outpaced every other category.

Another interesting trend is the downward slope of spending on clothing. Americans spent the most on clothing in 1961 for an average of $4,157. In every year measured since 1961, spending on clothing fell, even when accounting for inflation.

At the same time, Americans began spending more on education, transportation and healthcare. Spending on education has increased far more than any other category, jumping from $242 in 1941 to $1,236 in 2014. Education spending increased at a particularly fast rate between 1984 and 1994 and onward. While spending on healthcare increased between 1941 and 2014, overall spending dipped between 1973 and 1984, but then began rising rapidly thereafter.

Between 1941 and 2014 Americans spent money on most of the same things, with a few changes. Housing has persisted as a large area of spending for Americans, as has the food category. However, spending on food and clothing has fallen when adjusting for inflation while spending on education and healthcare has risen quickly.

[Dec 26, 2016] Neoliberalims led to impoverishment of lower 80 pecent of the USA population with a large part of the US population living in a third world country

Notable quotes:
"... Efforts which led to impoverishment of lower 80% the USA population with a large part of the US population living in a third world country. This "third world country" includes Wal-Mart and other retail employees, those who have McJobs in food sector, contractors, especially such as Uber "contractors", Amazon packers. This is a real third world country within the USA and probably 50% population living in it. ..."
"... While conversion of electricity supply from coal to wind and solar was more or less successful (much less then optimists claim, because it requires building of buffer gas powered plants and East-West high voltage transmission lines), the scarcity of oil is probably within the lifespan of boomers. Let's say within the next 20 years. That spells deep trouble to economic growth as we know it, even with all those machinations and number racket that now is called GDP (gambling now is a part of GDP). And in worst case might spell troubles to capitalism as social system, to say nothing about neoliberalism and neoliberal globalization. The latter (as well as dollar hegemony) is under considerable stress even now. But here "doomers" were wrong so often in the past, that there might be chance that this is not inevitable. ..."
"... Shale gas production in the USA is unsustainable even more then shale oil production. So the question is not if it declines, but when. The future decline (might be even Seneca Cliff decline) is beyond reasonable doubt. ..."
Dec 26, 2016 | economistsview.typepad.com

ilsm -> pgl... December 26, 2016 at 05:12 AM

"What is good for wall st. is good for America". The remains of the late 19th century anti trust/regulation momentum are democrat farmer labor wing in Minnesota, if it still exists. An example: how farmers organized to keep railroads in their place. Today populists are called deplorable, before they ever get going.

And US' "libruls" are corporatist war mongers.

Used to be the deplorable would be the libruls!

Division!

likbez -> pgl...

I browsed it and see more of less typical pro-neoliberal sentiments, despite some critique of neoliberalism at the end.

This guy does not understand history and does not want to understand. He propagates or invents historic myths. One thing that he really does not understand is how WWI and WWII propelled the USA at the expense of Europe. He also does not understand why New Deal was adopted and why the existence of the USSR was the key to "reasonable" (as in "not self-destructive" ) behaviour of the US elite till late 70th. And how promptly the US elite changed to self-destructive habits after 1991. In a way he is a preacher not a scientist. So is probably not second rate, but third rate thinker in this area.

While Trump_vs_deep_state (aka "bastard neoliberalism") might not be an answer to challenges the USA is facing, it is definitely a sign that "this time is different" and at least part of the US elite realized that it is too dangerous to kick the can down the road. That's why Bush and Clinton political clans were sidelined this time.

There are powerful factors that make the US economic position somewhat fragile and while Trump is a very questionable answer to the challenges the USA society faces, unlike Hillary he might be more reasonable in his foreign policy abandoning efforts to expand global neoliberal empire led by the USA.

Efforts which led to impoverishment of lower 80% the USA population with a large part of the US population living in a third world country. This "third world country" includes Wal-Mart and other retail employees, those who have McJobs in food sector, contractors, especially such as Uber "contractors", Amazon packers. This is a real third world country within the USA and probably 50% population living in it.

Add to this the decline of the US infrastructure due to overstretch of imperial building efforts (which reminds British empire troubles).

I see several factors that IMHO make the current situation dangerous and unsustainable, Trump or no Trump:

1. Rapid growth of population. The US population doubled in less them 70 years. Currently at 318 million, the USA is the third most populous country on earth. That spells troubles for democracy and ecology, to name just two. That might also catalyze separatists movements with two already present (Alaska and Texas).

2. Plato oil. While conversion of electricity supply from coal to wind and solar was more or less successful (much less then optimists claim, because it requires building of buffer gas powered plants and East-West high voltage transmission lines), the scarcity of oil is probably within the lifespan of boomers. Let's say within the next 20 years. That spells deep trouble to economic growth as we know it, even with all those machinations and number racket that now is called GDP (gambling now is a part of GDP). And in worst case might spell troubles to capitalism as social system, to say nothing about neoliberalism and neoliberal globalization. The latter (as well as dollar hegemony) is under considerable stress even now. But here "doomers" were wrong so often in the past, that there might be chance that this is not inevitable.

3. Shale gas production in the USA is unsustainable even more then shale oil production. So the question is not if it declines, but when. The future decline (might be even Seneca Cliff decline) is beyond reasonable doubt.

4. Growth of automation endangers the remaining jobs, even jobs in service sector . Cashiers and waiters are now on the firing line. Wall Mart, Shop Rite, etc, are already using automatic cashiers machines in some stores. Wall-Mart also uses automatic machines in back office eliminating staff in "cash office".

Waiters might be more difficult task but orders and checkouts are computerized in many restaurants. So the function is reduced to bringing food. So much for the last refuge of recent college graduates.

The successes in speech recognition are such that Microsoft now provides on the fly translation in Skype. There are also instances of successful use of computer in medical diagnostics. https://en.wikipedia.org/wiki/Computer-aided_diagnosis

IT will continue to be outsourced as profits are way too big for anything to stop this trend.

[Dec 26, 2016] Someone needs to buy Paul Krugman a one way ticket to Camden and have him hang around the devastated post-industrial hell scape his policies helped create.

Notable quotes:
"... Someone needs to buy Paul Krugman a one way ticket to Camden and have him hang around the devastated post-industrial hell scape his policies helped create. ..."
"... Krugman should be temporarily barred from public discourse until he apologizes for pushing NAFTA and all the rest. Hundreds of millions of people were thrust into dire poverty because of the horrible free trade policies he and 99.9% of US economists pushed. ..."
"... Extremes meet: extreme protectionism is close to extreme neoliberal globalization in the level of devastation, that can occur. ..."
"... But please do not forget that Krugman is a neoliberal stooge and this is much worse then being protectionist. This is close to betrayal of the nation you live it, people you live with, if you ask me. ..."
"... To me academic neoliberals after 2008 are real "deplorables". And should be treated as such, despite his intellect. There not much honor in being an intellectual prostitute of financial oligarchy that rules the country. ..."
Dec 26, 2016 | economistsview.typepad.com
Lincoln / McKinley tariffs...
Economists are still oblivious to the devastation created by 40 years of free trade.

Someone needs to buy Paul Krugman a one way ticket to Camden and have him hang around the devastated post-industrial hell scape his policies helped create.

Krugman should be temporarily barred from public discourse until he apologizes for pushing NAFTA and all the rest. Hundreds of millions of people were thrust into dire poverty because of the horrible free trade policies he and 99.9% of US economists pushed.

They have learned nothing and they have forgotten much.

pgl -> Lincoln / McKinley tariffs ... , December 26, 2016 at 11:25 AM
Oh yea - bring on the tariffs which will lead to a massive appreciation of the dollar. Which in turn will lead to massive reductions in US exports. I guess our new troll is short selling Boeing.
likbez -> pgl, -1
I tend to agree with you. Extremes meet: extreme protectionism is close to extreme neoliberal globalization in the level of devastation, that can occur.

But please do not forget that Krugman is a neoliberal stooge and this is much worse then being protectionist. This is close to betrayal of the nation you live it, people you live with, if you ask me.

To me academic neoliberals after 2008 are real "deplorables". And should be treated as such, despite his intellect. There not much honor in being an intellectual prostitute of financial oligarchy that rules the country.

[Dec 26, 2016] Vehicle Sales Forecast: Sales Over 17 Million SAAR Again in December, On Track for Record Year in 2016

Dec 26, 2016 | www.calculatedriskblog.com
by Bill McBride on 12/26/2016 09:53:00 AM The automakers will report December vehicle sales on Wednesday, January 4th.

Note: There were 27 selling days in December 2016, down from 28 in December 2015.

From WardsAuto: December Light-Vehicle Sales to Push U.S. Market to New Record

December U.S. light-vehicle sales are forecast to finish strong enough for 2016 to top 2015's record 17.396 million units. However, actual volume largely will be determined by results in the final third of the month, because a major portion of December's deliveries typically occur after Christmas.

The forecast 17.7 million-unit seasonally adjusted annual rate is below November's 17.8 million, but above December 2015's 17.4 million.
...
Despite the drop in December's volume, total 2016 sales will end at 17.41 million units, barely edging out the all-time high set last year.
emphasis added

Here is a table (source: BEA) showing the 5 top years for light vehicle sales through November, and the top 5 full years. 2016 will probably finish in the top 3, and could be the best year ever - just beating last year.

Light Vehicle Sales, Top 5 Years and Through November
Through November Full Year
Year Sales (000s) Year Sales (000s)
1 2000 16,109 2015 17,396
2 2001 15,812 2000 17,350
3 2016 15,783 2001 17,122
4 2015 15,766 2005 16,948
5 1999 15,498 1999 16,894

[Dec 26, 2016] Wolf Richter: New Census Data Shows Why the Job Market is Still "Terrible" (as Trump said)

Notable quotes:
"... By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street ..."
"... should head down ..."
"... not ..."
"... A population of less than 100 million in 1945 became more than 200 million in 1976 and over 320 million in 2016! Tripling your population in 70 years is a really bad idea. At this rate over a billion US citizens will exist in 2086. ..."
"... 'Merika is the third most populous nation in the world followed by Indonesia, Brazil, Pakistan and Nigeria. ..."
Dec 26, 2016 | www.nakedcapitalism.com
Posted on December 26, 2016 by Lambert Strether Lambert here: I blame Putin.

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street

Hardly any improvement for individuals since the Great Recession.

When Donald Trump campaigned on how "terrible" the jobs situation was, while the Obama Administration touted the jobs growth since the employment bottom of the Great Recession in 2010, it sounded like they were talking about two entirely different economies at different ends of the world. But they weren't. Statistically speaking, they were both right.

Since 2011, the US economy created 14.6 million "nonfarm payrolls" as defined by the Bureau of Labor Statistics – whether or not they're low-wage or less than full-time jobs. But for individuals, this job market, statistically speaking, looks almost as tough as it was during the Great Recession.

Obviously, a lot of people have found jobs, and some of them have found good jobs since then, and there are a ton of "job openings." But the Census Bureau just told us why the job market is still, to use Trump's term, "terrible" when it released its population estimates for 2016, just before clocking out for the holidays.

According to this report: From the beginning of 2010 – in terms of jobs, the darkest days of the Great Recession – through December 2016, the US "resident population" (not counting overseas-stationed military personnel) grew by 16 million people.

But since the beginning of 2010 through November 2016, nonfarm payrolls grew by only 13.8 million.

Note that in 2010, nonfarm payrolls declined by 900,000, after having plunged by over 5 million in 2009. The first year with growth in nonfarm payrolls was 2011.

The chart below shows this peculiar relationship between the "resident population" of the US (top green line) and nonfarm payrolls (bottom blue line). Both rose. But the bottom line (nonfarm payrolls) didn't rise nearly enough.

The difference between the two is the number of people that are not on nonfarm payrolls. They might be students, unemployed, retirees, or working in a job that the "nonfarm payrolls" do not capture (more on that in a moment). This is reflected by the red line, whose slope should head down in an economy where jobs grow faster than the population:

For the first five years of this seven-year period, the number of people not occupying a job as captured by nonfarm payroll data, kept growing (red numbers), even as the touted jobs growth was kicking in. Why? Because population growth outpaced jobs growth over the five years from 2010 through 2014.

Only in 2015 and 2016 has growth in "nonfarm payrolls" edged past population growth. Those were the only two years since the Great Recession when people on an individual basis actually had improving chances of getting a job.

The nonfarm payrolls data is not a complete measure of the US jobs situation. According to the Bureau of Labor Statistics , it excludes "proprietors, the unincorporated self-employed, unpaid volunteer or family employees, farm employees, and domestic employees. It also excludes military personnel, and employees of a big part of the intelligence community, including the CIA, the NSA, the National Imagery and Mapping Agency, and the Defense Intelligence Agency.

There are many folks who'd contend that this population growth is mostly young people who are not yet in the work force and old people who refuse to die, and that for working age people (say, 18 to 65), the jobs growth has been phenomenal.

But that's not the case. According to the Census report, in 2016, the percentage of people 18 and over grew to 249.5 million, making up 77.2% of the total US population, up from 76.8% in 2015 (247.3 million), and up from 76.2% in 2010! The millennials have moved into adulthood, elbowing each other while scrambling for jobs.

And boomers are not retiring from the working life. Why should they. Many of them are fit and don't want to sit around bored, and many of them have to work because they can't afford to quit working, even if they would like to. So the number of workers 65+ has soared 45% since the end of 2009, from 6.2 million to 9.0 million. So now there are nearly 3 million more of them on nonfarm payrolls than there had been in 2010:

The natural growth rate of the population (births minus deaths) has been declining for years. In 2016, it dropped to 0.38%, a new low. The growth rate from immigration, which fluctuates somewhat with the economy, edged down to 0.31%. So total population growth dropped to a new low of 0.69%. Of note: the natural growth rate via births won't impact the labor force until the babies are young adults. But the vast majority of new immigrants are of working age, and they add to the labor force immediately.

So the number of jobs since 2010 has risen by 13.8 million – which the economists are endlessly touting, along with the even better sounding 14.8 million since 2011. But the population has increased by 16 million since 2010. Most of them are people of working age, jostling for position to grab one of these jobs that would put them on the nonfarm payrolls. And this is why the job market for many individuals is "terrible," as Trump said.

But those might have been the good times. Read Red Flag on Recession Crops up in NY Fed's Coincident Economic Index, first time since November 2009

0 0 0 0 1 1 This entry was posted in Dubious statistics , Guest Post , Politics , The destruction of the middle class on December 26, 2016 by Lambert Strether . About Lambert Strether

Lambert Strether has been blogging, managing online communities, and doing system administration 24/7 since 2003, in Drupal and WordPress. Besides political economy and the political scene, he blogs about rhetoric, software engineering, permaculture, history, literature, local politics, international travel, food, and fixing stuff around the house. The nom de plume "Lambert Strether" comes from Henry James's The Ambassadors: "Live all you can. It's a mistake not to." You can follow him on Twitter at @lambertstrether. http://www.correntewire.com KK , December 26, 2016 at 5:55 am

A population of less than 100 million in 1945 became more than 200 million in 1976 and over 320 million in 2016! Tripling your population in 70 years is a really bad idea. At this rate over a billion US citizens will exist in 2086. There are resource limits to growth. And a car, house, vacation, pension, healthcare,and large family will cease to be possible for all or even the majority. Study how the average Indian or Chinese family live and that albeit with a few bits of technology is the future.

Arizona Slim , December 26, 2016 at 6:53 am

True.

But the pro-natalists don't want to hear any discussion of overpopulation. Because of all those inconvenient facts.

MtnLife , December 26, 2016 at 8:41 am

A lot of "pro-natalists" are religious fundamentalists who do actually see the population/resource crunch coming for which they are trying to stack the numbers on their team.

TG , December 26, 2016 at 9:54 am

Good points!

But I think most of the "pro-natalists" are rich people who, more than anything else, want cheap labor. And there is no better way to get cheap labor than to force population growth ever higher.

We are not importing foreign workers because the natives refuse to breed 'enough' children. The natives (of all races) are limiting their family sizes because they are worried about having more children than they can support, just like they did in the great depression. Left to themselves, that would start to tighten up the labor market and produce powerful forces raising wages. But not if we keep forcing ever more foreign workers into the labor pool. Which is of course the whole idea.

Cheap labor uber alles!

jefemt , December 26, 2016 at 10:26 am

'Merika is the third most populous nation in the world followed by Indonesia, Brazil, Pakistan and Nigeria. Seems to be a mind-jarring fat to most when I bring it up .

Ed , December 26, 2016 at 11:10 am

Alot of poorer countries in the "developing world" ensured they stayed poorer by letting their population growth get out of control. A big, if not the main, reason for China's economic success since 1975 was in getting its population growth under control, that is a big reason for the contrast between China and India.

Unlike, for example, Japan, the rulers of the United States decided to emulate the developing countries that let their populations expand too much, importing people from the developing world to get the job done.

sd , December 26, 2016 at 6:29 am

Interesting about excluding domestic employees when it would appear there's been a huge surge in nannies as well as home aides since the 1990s.

Larry , December 26, 2016 at 7:35 am

Very true, though most of these positions are by definition crappy jobs.

McWatt , December 26, 2016 at 8:44 am

The key to saving the planet is dealing with population growth.

diptherio , December 26, 2016 at 10:02 am

The planet can take care of itself. I think you mean "the key to saving ourselves." Also I think consumption patterns of the "global North" are more of a problem than simply population.

George Phillies , December 26, 2016 at 8:46 am

That resident population number appears to include under-16-year-olds who are in most cases not looking for employment. I have no idea how that number has changed. Ditto, it includes the voluntarily retired.

Jack , December 26, 2016 at 9:10 am

This article appears to be another argument for immigration. I am very much a progressive liberal, excepting the standard progressive immigration stance that more is better and that illegal immigration is o.k.

What would our job market look like without immigrants, even just legal immigrants?

Between 1970 and 2014, the percentage of foreign-born workers in the civilian labor force more than tripled, from 5 percent to 17 percent. In 2014 immigrants accounted for 17% of the work force; 27.6 million out of 159.5 million. What is that number was cut in half?

The number of US unemployed peaked in 2009 at 15,352,000. Today its 7,400,000 (if you believe the official numbers).

That means if we had cut immigration by just 30% there would be 0 unemployment. Of course this is a simplistic analysis but it is interesting to compare the two. And of course with near 0 unemployment wages would be pushed up.

No wonder the powers that be keep yammering about immigration but never do anything about it. More people in the country willing to work for less money means increased profits for the rich.

diptherio , December 26, 2016 at 10:13 am

Did you not read the article or simply fail to grasp it? Richter points out that the population has grown faster than the number of jobs and also that immigration is the largest part of that pop. growth (especially the adult population). He nowhere makes an argument for more illegal (or legal) immigration.

On immigration, how about we ask ourselves why it is that so many people are immigrating here and what we might do to discourage them? For instance, a kind of Marshall Plan for Central and South America would probably go a long way, as most people prefer to stay where they are from, if they can make a reasonable life there.

Pat , December 26, 2016 at 10:30 am

Call me crazy, but considering that the Clinton campaign had access to a certain portion of this information, their inability to understand the appeal of Sanders and Trump is clearly delusional.

Certainly the latest data just came out, but some of this about the period until 2014 and even a little after had to be out there. They had to know that until recently there really were not enough jobs to go around, and that there was a good chance that any gains in the last year or so were not enough to remotely cover the deficit up to that point. I get they might not have had the information that beyond not being enough most of the jobs created were part time and benefit free. That doesn't explain not seeing and getting that most Americans have seen little or no recovery.

It appears the DLC Democratic Party must be similar to that narrative driven NY Times environment, you only survive if you embrace the narrative even as the success of the enterprise you are apart loses more and more.

Art Eclectic , December 26, 2016 at 10:46 am

"It is difficult to get a man to understand something, when his salary depends on his not understanding it."

― Upton Sinclair

All career elected politicians on both sides of the aisle are paid to not understand the jobs problem by donors with very large wallets who do not want the jobs problem solved. Follow the money. Who wants cheap labor and what's the best way to get it if you can't offshore operations?

We cannot rebuild the DLC or any leftist party until we figure out how to fund campaigns without donor money that is interested in maintaining the status quo.

cocomaan , December 26, 2016 at 10:58 am

You can use data points ("14 million jobs created!!!!") to push whatever narrative you want.

Data driven decision making really is just excuse making by outsourcing your choices to endless computer-created pages of data.

Ed , December 26, 2016 at 11:16 am

I will comment elsewhere, but I keep on hearing arguments on the lines that if only Hillary Clinton had understood the problems of the white working class she would have won or something along these lines.

The Trump and Sanders campaigns were protest vehicles -- and there were precursors in previous elections -- over how the country has been run for the past several decades. Since 1981 either the Clintons or the Bushes have either lived in the White House or held really high ranking positions in the US government.

Members of neither family can credibly run against globalization (or "invade the world/ invite the world" as Steve Sailer puts it) or really other major policies pursued by the US government since the 1980s. They own it.

They have to run on a globalization platform. Hillary Clinton in fact did surprisingly well at the polls, considering this.

Enquiring Mind , December 26, 2016 at 11:13 am

There can be types of verbal Marshall Plans, too. Some percentage of the US transient population has self-deported already, although likely not enough to upset the temporary Obama Rush of 1,500+ per day streaming in to claim amnesty prior to January 20th. Announce that undocumented entrants will be turned back, instead of throwing benefits at them, and that will help stem the human tide.

Supplement that with specific policies to aid and abet Mexico and Central American governments in their internal and border control efforts to stop the human tide further south. Publicize those efforts and stick to them.

Both policies would change the dynamic and would allow some degree of US control over its own population growth. Then put in place specific, actionable steps to identify and facilitate thoughtful population growth to meet US needs and to allow for legitimate humanitarian relief instead of bleeding heart efforts that externalized ill-considered policies.

[Dec 26, 2016] IBM Promises To Hire 25,000 Americans As Tech Executives Set To Meet Trump

Dec 26, 2016 | politics.slashdot.org
(reuters.com) 241 Posted by BeauHD on Tuesday December 13, 2016 @10:30PM from the lick-and-a-promise dept. IBM Chief Executive Ginni Rometty has pledged to "hire about 25,000 professionals in the next four years in the United States " as she and other technology executives prepared to meet with President-elect Donald Trump on Wednesday. Reuters reports: IBM had nearly 378,000 employees at the end of 2015, according to the company's annual report. While the firm does not break out staff numbers by country, a review of government filings suggests IBM's U.S. workforce declined in each of the five years through 2015. When asked why IBM planned to increase its U.S. workforce after those job cuts, company spokesman Ian Colley said in an email that Rometty had laid out the reasons in her USA Today piece. Her article did not acknowledge that IBM had cut its U.S. workforce, although it called on Congress to quickly update the Perkins Career and Technical Education Act that governs federal support for vocational education. "We are hiring because the nature of work is evolving," she said. "As industries from manufacturing to agriculture are reshaped by data science and cloud computing, jobs are being created that demand new skills -- which in turn requires new approaches to education, training and recruiting." She said IBM intended to invest $1 billion in the training and development of U.S. employees over the next four years. Pratt declined to say if that represented an increase over spending in the prior four years.

[Dec 23, 2016] The Case for Protecting Infant Industries

Notable quotes:
"... The fact remains, however, that every single developed country got there by using protectionist policies to nurture the develop local industries. Protectionism in developed countries does have strongly negative consequences, but it is beneficial for developing economies. ..."
"... You are exactly right about Japan and I lived through that period. Please name one advanced economy which did not rely on protectionist laws to support domestic industries. All of the European industrial countries did it. The US did it. Japan and Korea did it. China is currently doing it and India has done it. ..."
"... Nobody cared about US labor or about hollowing out the US economy. Krugman frequently noted that the benefits to investors and 'strategic' considerations for free trade were more important that job losses. ..."
"... This extra demand for dollars as a commodity is what drives the price of the dollar higher, leading to the strategic benefits and economic hollowing out that I noted above. ..."
"... There really is no "post-industrialization era", no matter what fantasies the FIRE sector wants to sell. To the extent there is, the existing global trade agreements (including the WTO, World Bank, IMF, and related organization) accomplish that as well by privileging the position of first world capital. ..."
"... "Over the long haul, clearly automation's been much more important - it's not even close," said Lawrence Katz, an economics professor at Harvard who studies labor and technological change. No candidate talked much about automation on the campaign trail. Technology is not as convenient a villain as China or Mexico, there is no clear way to stop it, and many of the technology companies are in the United States and benefit the country in many ways. ..."
"... Globalization is clearly responsible for some of the job losses, particularly trade with China during the 2000s, which led to the rapid loss of 2 million to 2.4 million net jobs, according to research by economists including Daron Acemoglu and David Autor of M.I.T. ..."
"... People who work in parts of the country most affected by imports generally have greater unemployment and reduced income for the rest of their lives, Mr. Autor found in a paper published in January. Still, over time, automation has had a far bigger effect than globalization, and would have eventually eliminated those jobs anyway, he said in an interview. "Some of it is globalization, but a lot of it is we require many fewer workers to do the same amount of work," he said. "Workers are basically supervisors of machines." ..."
"... Clarification of 3: that is, infant industry protection as traditionally done, i.e. "picking winners", won't help. What would help is structural changes that make things relatively easier for small enterprises and relatively harder for large ones. ..."
"... Making direct lobbying of state and federal politicians by industry groups and companies a crime punishable by 110% taxation of net income on all the participants would be a start. ..."
"... "Over time, automation has generally had a happy ending: As it has displaced jobs, it has created new ones. But some experts are beginning to worry that this time could be different. Even as the economy has improved, jobs and wages for a large segment of workers - particularly men without college degrees doing manual labor - have not recovered." ..."
"... So why have manufacturing jobs plummeted since 2000? One answer is that the current account deficit is the wrong figure, since it also includes our surplus in trade in services. If you just look at goods, the deficit is closer to 4.2% of GDP. ..."
"... trade interacts with automation. Not only do we lose jobs in manufacturing to automation, but trade leads us to re-orient our production toward goods that use relatively less labor (tech, aircraft, chemicals, farm produces, etc.), while we import goods like clothing, furniture and autos. ..."
"... There are industries that are closely connected with the sovereignty of the country. That's what neoliberals tend to ignore as they, being closet Trotskyites ("Financial oligarchy of all countries unite!" instead of "Proletarian of all countries unite!" ;-) do not value sovereignty and are hell bent on the Permanent Neoliberal Revolution to bring other countries into neoliberal fold (in the form of color revolutions, or for smaller countries, direct invasions like in Iraq and Libya ). ..."
"... Neoliberal commenters here demonstrate complete detachment from the fact that like war is an extension of politics, while politics is an extension of economics. For example, denying imports can and is often used for political pressure. ..."
"... Now Trump want to play this game selectively designating China as "evil empire" and providing a carrot for Russia. Will it works, or Russia can be wiser then donkeys, I do not know. ..."
"... The US propagandists usually call counties on which they impose sanction authoritarian dictatorships to make such actions more politically correct, but the fact remains: The USA as a global hegemon enjoys using economic pressure to crush dissidents and put vassals in line. ..."
"... Neoliberalism as a social system is past it pinnacle and that creates some problems for the USA as the central player in the neoliberal world. The triumphal march of neoliberalism over the globe ended almost a decade ago. ..."
Dec 23, 2016 | economistsview.typepad.com
Noah Smith:
The Case for Protecting Infant Industries : I must say, it's been almost breathtaking to see how fast the acceptable terms of debate have shifted on the subject of trade. Thanks partly to President-elect Donald Trump's populism and partly to academic research showing that the costs of free trade could be higher than anyone predicted, economics commentators are now happy to lambast the entire idea of trade. I don't want to do that -- I think a nuanced middle ground is best. But I do think it's worth reevaluating one idea that the era of economic dogmatism had seemingly consigned to the junk pile -- the notion of infant-industry protectionism. ...
DrDick -> pgl...

The fact remains, however, that every single developed country got there by using protectionist policies to nurture the develop local industries. Protectionism in developed countries does have strongly negative consequences, but it is beneficial for developing economies.

DrDick -> sanjait... , December 22, 2016 at 04:52 PM
You are exactly right about Japan and I lived through that period. Please name one advanced economy which did not rely on protectionist laws to support domestic industries. All of the European industrial countries did it. The US did it. Japan and Korea did it. China is currently doing it and India has done it.
JohnH -> pgl... , -1
Japan and other developed countries took advantage of the strong dollar/reserve currency, which provided their industries de facto protection from US exports along with a price umbrella that allowed them export by undercutting prices on US domestic products. The strong dollar was viewed as a strategic benefit to the US, since it allowed former rivals to develop their economies while making them dependent on the US consumer market, the largest in the world. The strong dollar also allowed the US to establish bases and fight foreign wars on the cheap, while allowing Wall Street to buy foreign economies' crown jewels on the cheap.

Nobody cared about US labor or about hollowing out the US economy. Krugman frequently noted that the benefits to investors and 'strategic' considerations for free trade were more important that job losses.

JohnH -> anne... , December 22, 2016 at 05:06 PM
Even pgl's guy, Milton Friedman, recognized that "overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate or the flow of trade to re-adjust."
https://en.wikipedia.org/wiki/International_use_of_the_U.S._dollar

This extra demand for dollars as a commodity is what drives the price of the dollar higher, leading to the strategic benefits and economic hollowing out that I noted above.

John San Vant -> JohnH... , -1
That is because you get a persistent trade surplus in services, which offsets the "Goods" trade deficit. The currency depreciated in the 2000's because said surplus in services began to decline creating a real trade deficit.
DrDick -> Mike Sparrow... , December 22, 2016 at 04:57 PM
"What about the post-industrialization era?"

There really is no "post-industrialization era", no matter what fantasies the FIRE sector wants to sell. To the extent there is, the existing global trade agreements (including the WTO, World Bank, IMF, and related organization) accomplish that as well by privileging the position of first world capital.

anne -> DrDick... , -1
There really is no "post-industrialization era", no matter what fantasies the Finance, Insurance, and Real Estate sectors want to sell....

[ Interesting assertion. Do develop this further. ]

Greg : , -1
The Long-Term Jobs Killer Is Not China. It's Automation.
( http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.html?ref=economy&_r=0 )

1. I'm moderately surprised that this piece hasn't shown up in Links.

2. The Lump of Labor Fallacy is exposed as a fallacy - Sandwichman has been right all along.

3. Infant industry protection won't help in this environment

anne -> Greg... , December 22, 2016 at 01:08 PM
http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.html

December 21, 2016

The Long-Term Jobs Killer Is Not China. It's Automation.

By Claire Cain Miller

The first job that Sherry Johnson, 56, lost to automation was at the local newspaper in Marietta, Ga., where she fed paper into the printing machines and laid out pages. Later, she watched machines learn to do her jobs on a factory floor making breathing machines, and in inventory and filing.

"It actually kind of ticked me off because it's like, How are we supposed to make a living?" she said. She took a computer class at Goodwill, but it was too little too late. "The 20- and 30-year-olds are more up to date on that stuff than we are because we didn't have that when we were growing up," said Ms. Johnson, who is now on disability and lives in a housing project in Jefferson City, Tenn.

Donald J. Trump told workers like Ms. Johnson that he would bring back their jobs by clamping down on trade, offshoring and immigration. But economists say the bigger threat to their jobs has been something else: automation.

"Over the long haul, clearly automation's been much more important - it's not even close," said Lawrence Katz, an economics professor at Harvard who studies labor and technological change. No candidate talked much about automation on the campaign trail. Technology is not as convenient a villain as China or Mexico, there is no clear way to stop it, and many of the technology companies are in the United States and benefit the country in many ways.

Mr. Trump told a group of tech company leaders last Wednesday: "We want you to keep going with the incredible innovation. Anything we can do to help this go along, we're going to be there for you."

Andrew F. Puzder, Mr. Trump's pick for labor secretary and chief executive of CKE Restaurants, extolled the virtues of robot employees over the human kind in an interview with Business Insider in March. "They're always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex or race discrimination case," he said.

Globalization is clearly responsible for some of the job losses, particularly trade with China during the 2000s, which led to the rapid loss of 2 million to 2.4 million net jobs, according to research by economists including Daron Acemoglu and David Autor of M.I.T.

People who work in parts of the country most affected by imports generally have greater unemployment and reduced income for the rest of their lives, Mr. Autor found in a paper published in January. Still, over time, automation has had a far bigger effect than globalization, and would have eventually eliminated those jobs anyway, he said in an interview. "Some of it is globalization, but a lot of it is we require many fewer workers to do the same amount of work," he said. "Workers are basically supervisors of machines."

When Greg Hayes, the chief executive of United Technologies, agreed to invest $16 million in one of its Carrier factories as part of a Trump deal to keep some jobs in Indiana instead of moving them to Mexico, he said the money would go toward automation.

"What that ultimately means is there will be fewer jobs," he said on CNBC....

Greg -> Greg... , December 22, 2016 at 01:08 PM
Clarification of 3: that is, infant industry protection as traditionally done, i.e. "picking winners", won't help. What would help is structural changes that make things relatively easier for small enterprises and relatively harder for large ones.

Making direct lobbying of state and federal politicians by industry groups and companies a crime punishable by 110% taxation of net income on all the participants would be a start.

anne -> Greg... , December 22, 2016 at 01:09 PM
http://cepr.net/blogs/beat-the-press/what-s-different-about-stagnating-wages-for-workers-without-college-degrees

December 21, 2016

What's Different About Stagnating Wages for Workers Without College Degrees

There seems to be a great effort to convince people that the displacement due to the trade deficit over the last fifteen years didn't really happen. The New York Times contributed to this effort with a piece * telling readers that over the long-run job loss has been primarily due to automation not trade.

While the impact of automation over a long enough period of time certainly swamps the impact of trade, over the last 20 years there is little doubt that the impact of the exploding trade deficit has had more of an impact on employment. To make this one as simple as possible, we currently have a trade deficit of roughly $460 billion (@ 2.6 percent of GDP). Suppose we had balanced trade instead, making up this gap with increased manufacturing output.

Does the NYT want to tell us that we could increase our output of manufactured goods by $460 billion, or just under 30 percent, without employing more workers in manufacturing? That would be pretty impressive. We currently employ more than 12 million workers in manufacturing, if moving to balanced trade increase employment by just 15 percent we would be talking about 1.8 million jobs. That is not trivial.

But this is not the only part of the story that is strange. We are getting hyped up fears over automation even at a time when productivity growth (i.e. automation) has slowed to a crawl, averaging just 1.0 percent annually over the last decade. The NYT tells readers:

"Over time, automation has generally had a happy ending: As it has displaced jobs, it has created new ones. But some experts are beginning to worry that this time could be different. Even as the economy has improved, jobs and wages for a large segment of workers - particularly men without college degrees doing manual labor - have not recovered."

Hmmm, this time could be different? How so? The average hourly wage of men with just a high school degree was 13 percent less in 2000 than in 1973. ** For workers with some college it was down by more than 2.0 percent. In fact, stagnating wages for men without college degrees is not something new and different, it has been going on for more than forty years. Hasn't this news gotten to the NYT yet?

* http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.html

** http://www.stateofworkingamerica.org/chart/swa-wages-table-4-15-hourly-wages-men-education/

-- Dean Baker

Peter K. : , -1
http://jaredbernsteinblog.com/inequality-technology-globalization-and-the-false-assumptions-that-sustain-current-inequities/

Inequality, technology, globalization, and the false assumptions that sustain current inequities

by Jared Bernstein

December 22nd, 2016 at 3:24 pm

Here's a great interview* with inequality scholar Branko Milanovic wherein he brings a much-needed historical and international perspective to the debate (h/t: C. Marr). Many of Branko's points are familiar to my readers: yes, increased trade has upsides, for both advanced and emerging economies. But it's not hard to find significant swaths hurt by globalization, particularly workers in rich economies who've been placed into competition with those in poorer countries. The fact that little has been done to help them is one reason for president-elect Trump.

As Milanovic puts it:

"The problems with globalization arise from the fact that gains from it are not (and can never be) evenly distributed. There would be always those who gain less than some others, or those who lose even in absolute terms. But to whom can they "appeal" for redress? Only to their national governments because this is how the world is politically organized. Thus national governments have to engage in "mop up" operations to fix the negative effects of globalization. And this they have not done well, led as they were by the belief that the trickle-down economics will take care of it. We know it did not."

But I'd like to focus on a related point from Branko's interview, one that gets less attention: the question of whether it was really exposure to global trade or to labor-saving technology that is most responsible for displacing workers. What's the real problem here: is it the trade deficit or the robots?

Branko cogently argues that "both technological change and economic polices responded to globalization. The nature of recent technological progress would have been different if you could not employ labor 10,000 miles away from your home base." Their interaction makes their relative contributions hard to pull apart.

I'd argue that the rise of trade with China, from the 1990s to the 2007 crash, played a significant role in moving US manufacturing employment from its steady average of around 17 million factory jobs from around 1970 to 2000, to an average today that's about 5 million less (see figure below; of course, manufacturing employment was falling as a share of total jobs over this entire period).

....

* https://newrepublic.com/article/139432/understand-2016s-politics-look-winners-losers-globalization

Peter K. : , -1
market monetarist Scott Sumner makes a good point about the post-war years.

http://www.themoneyillusion.com/?p=32214

Do current account deficits cost jobs

Over at Econlog I have a post that suggests the answer is no, CA deficits do not cost jobs.

But suppose I'm wrong, and suppose they do cost jobs. In that case, trade has been a major net contributor to American jobs during the 21st century, as our deficit was about 4% of GDP during the 2000 tech boom, and as large as 6% of GDP during the 2006 housing boom. Today it is only 2.6% of GDP. So if you really believe that rising trade deficits cost jobs, you'd be forced to believe that the shrinking deficits since 2000 have created jobs.

So why have manufacturing jobs plummeted since 2000? One answer is that the current account deficit is the wrong figure, since it also includes our surplus in trade in services. If you just look at goods, the deficit is closer to 4.2% of GDP.

But even that doesn't really explain very much, because it's slightly lower than the 4.35% of GDP trade deficit in goods back in 2000. So again, the big loss of manufacturing jobs is something of a mystery. Yes, we import more goods than we used to, but exports of goods have risen at about the same rate since 2000. So why does it seem like trade has devastated our manufacturing sector?

Perhaps because trade interacts with automation. Not only do we lose jobs in manufacturing to automation, but trade leads us to re-orient our production toward goods that use relatively less labor (tech, aircraft, chemicals, farm produces, etc.), while we import goods like clothing, furniture and autos.

So trade and automation are both parts of a bigger trend, Schumpeterian creative destruction, which is transforming big areas of our economy. It's especially painful as during the earlier period of automation (say 1950-2000) the physical output of goods was still rising fast. So the blow of automation was partly cushioned by a rise in output. (Although not in the coal and steel industries!) Since 2000, however, we've seen slower growth in physical output for a number of reasons, including slower workforce growth, a shift to a service economy, and a home building recession (which normally absorbs manufactured goods like home appliances, carpet, etc.) We are producing more goods than ever, but with dramatically fewer workers.

Update: Steve Cicala sent me a very interesting piece on coal that he had published in Forbes. Ironically, environmental regulations actually helped West Virginia miners, by forcing utilities to install scrubbers that cleaned up emissions from the dirtier West Virginia coal. (Wyoming coal has less sulfur.) He also discusses the issue of competition from natural gas.

If Economists hadn't ignored US and World Economic History they would have had a clue : , December 22, 2016 at 07:53 PM
The historical record is totally unambiguous. Protectionism always leads to wealth and industrial development. Free trade leads you to the third world. This was true four hundred years ago with mercantilist England and the navigation acts; it was true with Lincoln's tariffs in the 1860's, it was true of East Asia post 1945.

Economists better abandon silly free trade if they want to have any credibility and not be seen as quacks.

Peter K. : , -1
http://www.cnn.com/2016/12/21/politics/donald-trump-tariffs/

Trump team floats a 10% tariff on imports

By John King and Jeremy Diamond, CNN

Updated 3:57 PM ET, Thu December 22, 2016

Washington (CNN)President-elect Donald Trump's transition team is discussing a proposal to impose tariffs as high as 10% on imports, according to multiple sources.

A senior Trump transition official said Thursday the team is mulling up to a 10% tariff aimed at spurring US manufacturing, which could be implemented via executive action or as part of a sweeping tax reform package they would push through Congress.

Incoming White House Chief of Staff Reince Priebus floated a 5% tariff on imports in meetings with key Washington players last week, according to two sources who represent business interests in Washington. But the senior transition official who spoke to CNN Thursday on the condition of anonymity said the higher figure is now in play.

Such a move would deliver on Trump's "America First" campaign theme, but risks drawing the US into a trade war with other countries and driving up the cost of consumer goods in the US. And it's causing alarm among business interests and the pro-trade Republican establishment.

The senior transition official said the transition team is beginning to find "common ground" with House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady, pointing in particular to the border adjustment tax measure included in House Republicans' "Better Way" tax reform proposal, which would disincentivize imports through tax policy.

Aides to Ryan and Brady declined to say they had "common ground" with Trump, but acknowledged they are in deep discussions with transition staffers on the issue.

Curbing free trade was a central element of Trump's campaign. He promised to rip up the North American Free Trade Agreement with Mexico and Canada. He also vowed to take a tougher line against other international trading partners, almost always speaking harshly of China but often including traditional US allies such as Japan in his complaint that American workers get the short end of the stick under current trade practices.

Gulf with GOP establishment

It is an area where there is a huge gulf between Trump's stated positions and traditional GOP orthodoxy. Business groups and GOP establishment figures -- including Ryan and Senate Majority Leader Mitch McConnell -- have been hoping the transition from the campaign to governing would bring a different approach.

Ryan did signal in a CNBC interview earlier this month that Trump's goals of spurring US manufacturing could be accomplished through "comprehensive tax reform."

"I'll tell him what I've been saying all along, which is we can get at what he's trying to get at better through comprehensive tax reform," Ryan said.

The pro-business GOP establishment says the new Trump administration could make clear it would withdraw from NAFTA unless Canada and Mexico entered new talks to modernize the agreement to reflect today's economy. That would allow Trump to say he kept a promise to make the agreement fairer to American workers without starting a trade war and exacerbating tensions with America's neighbors and vital economic partners.

But there remain establishment jitters that Trump, who views his tough trade message as critical to his election victory, will look for ways to make an early statement that he is serious about reshaping the trade playing field.

And when Priebus told key Washington players that the transition is mulling a 5% tariff on imports, the reaction was one of fierce opposition, according to two sources who represent business interests in Washington and spoke on condition of anonymity because the conversations with the Trump team were confidential.

Priebus, the sources said, was warned such a move could start trade wars, anger allies, and also hurt the new administration's effort to boost the rate of economic growth right out of the gate.

Role of Wilbur Ross

One of the sources said he viewed the idea as a trial balloon when first raised, and considered it dead on arrival given the strong reaction in the business community -- and the known opposition to such protectionist ideas among the GOP congressional leadership.

But this source voiced new alarm Tuesday after being told by allies within the Trump transition that defending new tariffs was part of the confirmation "murder board" practice of Wilbur Ross, the President-elect's choice for commerce secretary.

At least one business community organization is worried enough about the prospect of the tariff it already has prepared talking points, obtained by CNN Wednesday night.

"This $100 billion tax on American consumers and industry would impose heavy costs on the US economy, particularly for the manufacturing sector and American workers, with highly negative political repercussions," according to the talking points. "Rather than using a trade policy sledgehammer that would inflict serious collateral damage, the Trump administration should use the scalpel of US trade remedy law to achieve its goals."

The talking points also claim the tariffs would lead to American job loss and result in a tax to consumers, both of which would harm the US economy.

Trump aides have signaled that Ross is likely to be a more influential player in trade negotiations than recent Commerce secretaries. Given that, the aides know his confirmation hearings are likely to include tough questioning -- from both Democrats and Republicans -- about Trump's trade-related campaign promises.

"The way it was cast to me was that (Trump) and Ross are all over it," said one source. "It is serious."

The second source was less certain about whether the tariff idea was serious or just part of a vigorous debate about policy options. But this source said the unpredictability of Trump and his team had the business interests nervous.

The business lobbying community is confident the GOP leadership would push back on any legislative effort to impose tariffs, which organizations like the Chamber of Commerce, the Business Roundtable, the National Association of Manufactures and others, including groups representing farmers, believe would lead to retaliation against US industries heavily dependent on exports.

But the sources aligned with those interests told CNN the conversation within the Trump transition includes using executive authority allowed under existing trade laws. Different trade laws enacted over the course of the past century allow the president to impose tariffs if he issues a determination the United States is being subjected to unfair trade practices or faces an economic or national security threat because of trade practices.

likbez : , December 23, 2016 at 08:25 AM
There are industries that are closely connected with the sovereignty of the country. That's what neoliberals tend to ignore as they, being closet Trotskyites ("Financial oligarchy of all countries unite!" instead of "Proletarian of all countries unite!" ;-) do not value sovereignty and are hell bent on the Permanent Neoliberal Revolution to bring other countries into neoliberal fold (in the form of color revolutions, or for smaller countries, direct invasions like in Iraq and Libya ).

For example, if you depends of chips produced outside the country for your military or space exploration, then sabotage is possible (or just pure fraud -- selling regular ships instead of special tolerant to cosmic radiation or harsh conditions variant; actually can be done with the support of internal neoliberal fifth column).

The same is probably true for cars and auto engines. If you do not produce domestically a variety at least some domestic brans of cars and trucks, your military trucks and engines will be foreign and that will cost you tremendous amount of money and you might depend for spare parts on you future adversary. Also such goods are overprices to the heaven. KAS is a clear example of this as they burn their money in the war with Yemen as there is no tomorrow making the US MIC really happy.

So large countries with say over 100 million people probably need to think twice before jumping into neoliberal globalization bandwagon and relying in imports for strategically important industries.

Neoliberal commenters here demonstrate complete detachment from the fact that like war is an extension of politics, while politics is an extension of economics. For example, denying imports can and is often used for political pressure.

That was one of factors that doomed the USSR. Not that the system has any chance -- it was doomed after 1945 as did not provide for higher productivity then advanced capitalist economies.

But this just demonstrates the power of the US sanctions mechanism. Economic sanctions works and works really well. The target country is essentially put against the ropes and if you unprepared you can be knocked down.

For example now there are sanctions against Russia that deny them advanced oil exploration equipment. And oil is an important source of Russia export revenue. So the effect of those narrow prohibitions multiples by factor of ten by denying Russia export revenue.

That's how an alliance between Russia and China was forged by Obama administration. because China does produce some of this equipment now. And Russia paid dearly for that signing huge multi-year deals with China on favorable for China terms.

Now Trump want to play this game selectively designating China as "evil empire" and providing a carrot for Russia. Will it works, or Russia can be wiser then donkeys, I do not know.

And look what countries are on the USA economic sanctions list: many entries are countries that are somewhat less excited about the creation of the global neoliberal empire led by the USA. KAS and Gulf monarchies are not on the list. So much about "spreading democracy".

The US propagandists usually call counties on which they impose sanction authoritarian dictatorships to make such actions more politically correct, but the fact remains: The USA as a global hegemon enjoys using economic pressure to crush dissidents and put vassals in line.

The problem with tariffs on China is an interesting reversion of the trend: manufacturing is already in China and to reverse this process now is an expensive proposition. So alienating Chinese theoretically means that some of USA imports might became endangered, despite huge geopolitical weight of the USA. They denied export of rare metals to Japan in the past. They can do this for Apple and without batteries Apple can just fold.

Also it is very easy to prohibit Apple sales in China of national security grounds (any US manufacturer by definition needs to cooperate with NSA and other agencies). I think some countries already prohibit the use of the USA companies produced cell phones for government officials.

So if Trump administration does something really damaging, for Chinese there are multiple ways to skin the cat. Neoliberalism as a social system is past it pinnacle and that creates some problems for the USA as the central player in the neoliberal world. The triumphal march of neoliberalism over the globe ended almost a decade ago.

[Dec 23, 2016] Top Ex-White House Economist Admits 94% Of All New Jobs Under Obama Were Part-Time

Growing inequality. We are already at Gini coefficients normally only found in banana republics.
Notable quotes:
"... from 2005 to 2015, the proportion of Americans workers engaged in what they refer to as "alternative work" soared during the Obama era, from 10.7% in 2005 to 15.8% in 2015. Alternative, or "gig" work is defined as "temporary help agency workers, on-call workers, contract company workers, independent contractors or freelancers", and is generally unsteady, without a fixed paycheck and with virtually no benefits. ..."
"... The two economists also found that each of the common types of alternative work increased from 2005 to 2015-with the largest changes in the number of independent contractors and workers provided by contract firms, such as janitors that work full-time at a particular office, but are paid by a janitorial services firm. ..."
Dec 23, 2016 | www.zerohedge.com
Just over six years ago, in December of 2010, we wrote " Charting America's Transformation To A Part-Time Worker Society ", in which we predicted - and showed - that in light of the underlying changes resulting from the second great depression, whose full impacts remain masked by trillions in monetary stimulus and soon, perhaps fiscal, America is shifting from a traditional work force, one where the majority of new employment is retained on a full-time basis, to a "gig" economy, where workers are severely disenfranchised, and enjoy far less employment leverage, job stability and perks than their pre-crash peers. It also explains why despite the 4.5% unemployment rate, which the Fed has erroneously assumed is indicative of job market at "capacity", wage growth not only refuses to materialize, but as we showed yesterday, the growth in real disposable personal income was the lowest since 2014 .

When we first penned our article, it was dubbed "fringe" tinfoil hattery, or in the latest vernacular, "fake news."

Fast forward 6 years, when a report by Harvard and Princeton economists Lawrence Katz and Alan Krueger , confirms exactly what we warned. In their study, the duo show that from 2005 to 2015, the proportion of Americans workers engaged in what they refer to as "alternative work" soared during the Obama era, from 10.7% in 2005 to 15.8% in 2015. Alternative, or "gig" work is defined as "temporary help agency workers, on-call workers, contract company workers, independent contractors or freelancers", and is generally unsteady, without a fixed paycheck and with virtually no benefits.

The two economists also found that each of the common types of alternative work increased from 2005 to 2015-with the largest changes in the number of independent contractors and workers provided by contract firms, such as janitors that work full-time at a particular office, but are paid by a janitorial services firm.

Krueger, who until 2013 was also the top White House economist serving as chairman of the Council of Economic Advisers under Obama, was "surprised" by the finding.

Quoted by quartz , he said " We find that 94% of net job growth in the past decade was in the alternative work category ," said Krueger. "And over 60% was due to the [the rise] of independent contractors, freelancers and contract company workers." In other words, nearly all of the 10 million jobs created between 2005 and 2015 were not traditional nine-to-five employment.

While the finding is good news for some, such as graphic designers and lawyers who hate going to an office, for whom new technology and Obamacare has made it more appealing to become an independent contractor. But for those seeking a steady administrative assistant office job, the market is grim. It also explains why despite an apparent recovery in the labor market, wage growth has been non-existant, due to the lack of career advancement and salary increase options for this vast cohort which was hired over the past decade.

The decline of conventional full-time work has impacted every demographic. Whether this change is good or bad depends on what kinds of jobs people want. " Workers seeking full-time, steady work have lost," said Krueger. He then added, perhaps sarcastically, that "while many of those who value flexibility and have a spouse with a steady job have probably gained."

Yes, well, spousal support aside, it also confirms another troubling finding this website reported first earlier this month, namely that the number of multiple jobholders has recently hit the highest number this century.

[Dec 22, 2016] Oil Consumption Is Immune To A Transport Transformation

Notable quotes:
"... ...in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit estimates the average vehicle life globally to be about 15 years, which means that the impact of new vehicle technologies is expected to take time to materially affect the vehicle fleet and overall fuel demand. ..."
oilprice.com

...in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit estimates the average vehicle life globally to be about 15 years, which means that the impact of new vehicle technologies is expected to take time to materially affect the vehicle fleet and overall fuel demand.

[Dec 22, 2016] Huge Decline In U.S. Proved Oil And Gas Reserves

Proved reserved are price dependent and low price leads to the decline of proved reserves estimates.
oilprice.com

Proved reserves of crude oil in the U.S. declined by 4.7 billion barrels or 11.8 percent from their year-end 2014 level to 35.2 BBbls at year-end 2015. Natural gas proved reserves decreased 64.5 Tcf to 324.3 Tcf, a 16.6 percent decline.

... ... ...

Proved reserves are volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

[Dec 21, 2016] The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches

Notable quotes:
"... At some point the GOP has to decide how much of Trump's populist agenda they can stuff in the toilet without inducing an uncontrollable backlash. ..."
"... The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches. ..."
"... If the GOP just go ahead with a traditional "rule for the rich" policy (because they won) there could be serious fireworks ahead - provided the Dems can pull out a populist alternative policy by the the next election. ..."
"... I have no idea what's going to happen, but my guess is that Trump and the Republicans are going to completely sell out the "Trump voters." ..."
"... But they still tried to push through Social Security privatization even though everyone is against it. ..."
"... If recent history is any guide, incumbents get a second term regardless of how bad the economy is. Clinton, Bush, and Obama were all reelected despite a lousy economy. The only exception in recent memory was Bush 41. ..."
"... Upper class tax cuts were central to his policies. Anybody who believed he was anything other than an standard issue Republican would buy shares in Arizona swampland. ..."
"... trump did indeed state that he would give bigger tax cuts to the rich, repeatedly. the genius of trump's performance is that by never having a clear position his gullible followers were able to fill in the gaps using their own hopes and desires. ..."
"... That is correct, but also the weakness in his support. They will almost certainly be disappointed as the exact interpretations and choices between incompatible promises turns out to be different from the individuals hopes and desires. ..."
"... And consider how dysfunction from laissez faire healthcare policy readoption leads to rising prices/costs above current trend to limit disposable income even more, it will be amazing if we do not have stagnation and worse for the bulk of society. ..."
"... Bush implemented and expanded a community health clinic system, that reallnwoukd be a nice infrastructure play for the US, but this Congress is more likely to disinvest here. They certainly don't want these do-gooder nonprofits competing against the doctor establishment. ..."
"... The question is first of all whether Trump can bully the Fed away from their current and traditional course (which would not allow much of a stimulus, before they cancelled it out with rate hikes). ..."
"... Second whether the Fed itself having been traditionally prone to support GOP presidents (see inconsistencies in Greenspan's policies during Clinton vs. Bush) will change its policies and allow higher inflation and wage growth than they have under any Dem president. ..."
"... The little people go to the credit channels to help finance the purchase of durables and higher education too. The Fed's actions themselves will see these credit prices ratchet, so nit good fir basic demand. Veblen goods will see more price rises as the buyers will have lots of rentier/lobbying gathered money to burn. ..."
Dec 21, 2016 | economistsview.typepad.com
DeDude -> jonny bakho... December 20, 2016 at 07:40 AM
At some point the GOP has to decide how much of Trump's populist agenda they can stuff in the toilet without inducing an uncontrollable backlash.

The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches. It was the old tea-partiers insisting that their anti-rich/Anti-Wall street sentiments be inserted into the GOP.

If the GOP just go ahead with a traditional "rule for the rich" policy (because they won) there could be serious fireworks ahead - provided the Dems can pull out a populist alternative policy by the the next election.

Peter K. -> DeDude... , December 20, 2016 at 07:56 AM

hey, a good comment!

I have no idea what's going to happen, but my guess is that Trump and the Republicans are going to completely sell out the "Trump voters."

George W. Bush wasn't completely horrible (besides Iraq, John Roberts, tax cuts for the rich, the Patriot act and the surveillance state, Katrina, etc. etc. etc.). He was good on immigration, world AIDS prevention, expensive Medicare drug expansion, etc.

But they still tried to push through Social Security privatization even though everyone is against it.

To some extent Bush demoralized the Republican base and they didn't turn out in 2008.

JohnH -> DeDude... , December 20, 2016 at 08:04 AM
If recent history is any guide, incumbents get a second term regardless of how bad the economy is. Clinton, Bush, and Obama were all reelected despite a lousy economy. The only exception in recent memory was Bush 41.

About the only thing that can derail Trump is a big recession in 2019.

DrDick -> DeDude... , December 20, 2016 at 08:18 AM
"The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches."

While generally enthusiastically embracing them. Upper class tax cuts were central to his policies. Anybody who believed he was anything other than an standard issue Republican would buy shares in Arizona swampland.

DeDude -> DrDick... , December 20, 2016 at 08:35 AM
He never came out directly saying or tweeting that he would give bigger tax cuts to the rich than anybody else - he said he would give bigger tax cuts. It is true that people with a college education had an easy time figuring him out even before the election. But the populist messages he campaigned on were anti-establishment including suggesting that the "hedge-fund guys" were making a killing by being taxed at a lower rate.
yuan -> DeDude... , December 20, 2016 at 10:00 AM
trump did indeed state that he would give bigger tax cuts to the rich, repeatedly. the genius of trump's performance is that by never having a clear position his gullible followers were able to fill in the gaps using their own hopes and desires.
DeDude -> yuan... , December 20, 2016 at 11:19 AM
"his gullible followers were able to fill in the gaps using their own hopes and desires"

That is correct, but also the weakness in his support. They will almost certainly be disappointed as the exact interpretations and choices between incompatible promises turns out to be different from the individuals hopes and desires. The reason Trump was able to beat even a Tea party darling, was the backlash against big money having taken over the Tea party. The backlash against Trump_vs_deep_state being "taken over by big money" interest will be interesting to observe, especially if the Dems find the right way to play it.

yuan -> DeDude... , December 20, 2016 at 11:36 AM
i hope you are right! however, history shows that a political movement can remain irrational longer than your government can remain democratic.
DrDick -> jonny bakho... , December 20, 2016 at 08:14 AM
And that is the least of the damage they will inflict.
New Deal democrat said in reply to pgl... , December 20, 2016 at 05:10 AM
Following up on Johnny Bakho's comment below, let's assume that average wage growth YoY for nonsupervisory workers never reaches 3% before the next recession hits. Wage growth rates always decline in recessions, usually by over 2%.

If in the next recession, we see actual slight nominal wage decreases, is a debt-deflationary wage-price spiral inevitable? Or could there be a small decline of less than -1% without triggering such a spiral.

Got any opinion? Is there any research on this?

pgl -> New Deal democrat... , December 20, 2016 at 06:04 AM
"is a debt-deflationary wage-price spiral inevitable?"

Good question. It all depends on the response of policy makers. If we continue with the stupid fiscal austerity that began in 2011, it may be inevitable. Which is why doing public infrastructure investment is a very good idea.

New Deal democrat said in reply to pgl... , December 20, 2016 at 06:28 AM
We're doomed.
DrDick -> New Deal democrat... , December 20, 2016 at 08:19 AM
I knew that immediately after the election.
JF -> DrDick... , December 20, 2016 at 01:07 PM
And consider how dysfunction from laissez faire healthcare policy readoption leads to rising prices/costs above current trend to limit disposable income even more, it will be amazing if we do not have stagnation and worse for the bulk of society.
Peter K. -> pgl... , December 20, 2016 at 07:08 AM
"Which is why doing public infrastructure investment is a very good idea."

If Hillary Clinton was so progressive according to people like you and Krugman, then why was her infrastructure plan so meager?

Alan Blinder said it would be small small that it wouldn't effect the Fed's thinking on its rate hike schedule.

JF -> Peter K.... , December 20, 2016 at 01:10 PM
Bush implemented and expanded a community health clinic system, that reallnwoukd be a nice infrastructure play for the US, but this Congress is more likely to disinvest here. They certainly don't want these do-gooder nonprofits competing against the doctor establishment.
ilsm -> Peter K.... , December 20, 2016 at 03:52 PM
EMike said it about Bernie..... no soup for you!

For Clinton dems, the ones the wiki revealed are con artists, doing for the peeps [like Bernie stood for] is too far ideologically for the faux centrists.

They are neoliberals market monetarists who keep the bankers green and everyone else takes the back seats.

DeDude -> pgl... , December 20, 2016 at 07:49 AM
At this point in time pretty much anything the policy makers do will be countered by the Fed. The question is first of all whether Trump can bully the Fed away from their current and traditional course (which would not allow much of a stimulus, before they cancelled it out with rate hikes).

Second whether the Fed itself having been traditionally prone to support GOP presidents (see inconsistencies in Greenspan's policies during Clinton vs. Bush) will change its policies and allow higher inflation and wage growth than they have under any Dem president.

pgl -> DeDude... , December 20, 2016 at 07:55 AM
As long as the FED thinks the natural rate of the employment to population ratio is only 60% - you'd be right. But then the FED is not thinking clearly.
yuan -> Peter K.... , December 20, 2016 at 10:59 AM
like many of my fellow socialists, i fulminated about bernanke's coddling of banks and asset holders. i was somewhat wrong. bernanke was a evidently a strong voice for banking regulation and an end to the moral hazard of TBTF. it is a pity that obama did not listen to him.

https://www.brookings.edu/blog/ben-bernanke/2016/05/13/ending-too-big-to-fail-whats-the-right-approach/

JF -> yuan... , -1
The little people go to the credit channels to help finance the purchase of durables and higher education too. The Fed's actions themselves will see these credit prices ratchet, so nit good fir basic demand. Veblen goods will see more price rises as the buyers will have lots of rentier/lobbying gathered money to burn.

Will the Fed use rulemaking to control bubbling in the financial asset marketplaces as they wont want to rause rates too much. I hope they are paying attention

[Dec 21, 2016] Bad News for America's Workers

Dec 21, 2016 | economistsview.typepad.com
anne : , December 20, 2016 at 05:34 AM
https://www.project-syndicate.org/commentary/trump-economy-hurts-workers-by-joseph-e--stiglitz-2016-12

December 19, 2016

Bad News for America's Workers
By JOSEPH E. STIGLITZ

NEW YORK – As US President-elect Donald Trump fills his cabinet, what have we learned about the likely direction and impact of his administration's economic policy?

To be sure, enormous uncertainties remain. As in many other areas, Trump's promises and statements on economic policy have been inconsistent. While he routinely accuses others of lying, many of his economic assertions and promises – indeed, his entire view of governance – seem worthy of Nazi Germany's "big lie" propagandists.

Trump will take charge of an economy on a strongly upward trend, with third-quarter GDP growing at an impressive annual rate of 3.2% and unemployment at 4.6% in November. By contrast, when President Barack Obama took over in 2009, he inherited from George W. Bush an economy sinking into a deep recession. And, like Bush, Trump is yet another Republican president who will assume office despite losing the popular vote, only to pretend that he has a mandate to undertake extremist policies.

The only way Trump will square his promises of higher infrastructure and defense spending with large tax cuts and deficit reduction is a heavy dose of what used to be called voodoo economics. Decades of "cutting the fat" in government has left little to cut: federal government employment as a percentage of the population is lower today than it was in the era of small government under President Ronald Reagan some 30 years ago.

With so many former military officers serving in Trump's cabinet or as advisers, even as Trump cozies up to Russian President Vladimir Putin and anchors an informal alliance of dictators and authoritarians around the world, it is likely that the US will spend more money on weapons that don't work to use against enemies that don't exist. If Trump's health secretary succeeds in undoing the careful balancing act that underlies Obamacare, either costs will rise or services will deteriorate – most likely both.

During the campaign, Trump promised to get tough on executives who outsource American jobs. He is now holding up the news that the home heating and air conditioning manufacturer Carrier will keep some 800 jobs in my home state of Indiana as proof that his approach works. Yet the deal will cost taxpayers $7 million, and still allow Carrier to outsource 1,300 jobs to Mexico. This is not a sound industrial or economic policy, and it will do nothing to help raise wages or create good jobs across the country. It is an open invitation for a shakedown of the government by corporate executives seeking handouts.

Similarly, the increase in infrastructure spending is likely to be accomplished through tax credits, which will help hedge funds, but not America's balance sheet: such programs' long track record shows that they deliver little value for money. The cost to the public will be especially high in an era when the government can borrow at near-zero interest rates. If these private-public partnerships are like those elsewhere, the government will assume the risks, and the hedge funds will assume the profits.

The debate just eight years ago about "shovel-ready" infrastructure seems to be a distant memory. If Trump chooses shovel-ready projects, the long-term impact on productivity will be minimal; if he chooses real infrastructure, the short-term impact on economic growth will be minimal. And back-loaded stimulus has its own problems, unless it is managed extremely carefully.

If Trump's pick for US Treasury Secretary, the Goldman Sachs and hedge-fund veteran Steven Mnuchin, is like others from his industry, the expertise he will bring to the job will be in tax avoidance, not constructing a well-designed tax system. The "good" news is that tax reform was inevitable, and was likely to be undertaken by Speaker of the House Paul Ryan and his staff – giving the rich the less progressive, more capital-friendly tax system that Republicans have long sought. With the abolition of the estate tax, the Republicans would finally realize their long-held ambition of creating a dynastic plutocracy – a far cry from the "equality of opportunity" maxim the party once trumpeted....

anne -> anne... , December 20, 2016 at 05:36 AM
https://www.theguardian.com/business/2016/dec/19/what-the-us-economy-doesnt-need-from-donald-trump

December 19, 2016

What the US economy doesn't need from Donald Trump
The only way he can square higher infrastructure and defence spending with tax cuts is voodoo economics
By Joseph Stiglitz - Guardian

As Donald Trump fills his cabinet, what have we learned about the likely direction and impact of his administration's economic policy?

To be sure, enormous uncertainties remain. As in many other areas, Trump's promises and statements on economic policy have been inconsistent. While he routinely accuses others of lying, many of his economic assertions and promises – indeed, his entire view of governance – seem worthy of Nazi Germany's "big lie" propagandists.

Trump will take charge of an economy on a strongly upward trend, with third-quarter GDP growing at an impressive annual rate of 3.2% and unemployment at 4.6% in November. By contrast, when Barack Obama took over in 2009, he inherited from George W Bush an economy sinking into a deep recession. And, like Bush, Trump is yet another Republican president who will assume office despite losing the popular vote, only to pretend that he has a mandate to undertake extremist policies.

The only way Trump will square his promises of higher infrastructure and defence spending with large tax cuts and deficit reduction is a heavy dose of what used to be called voodoo economics. Decades of "cutting the fat" in government has left little to cut: federal government employment as a percentage of the population is lower today than it was in the era of small government under Ronald Reagan about 30 years ago.

With so many former military officers serving in Trump's cabinet or as advisers, even as Trump cozies up to the Russian president, Vladimir Putin, and anchors an informal alliance of dictators and authoritarians around the world, it is likely that the US will spend more money on weapons that don't work to use against enemies that don't exist. If Trump's health secretary succeeds in undoing the careful balancing act that underlies Obamacare, either costs will rise or services will deteriorate – most likely both.

During the campaign, Trump promised to get tough on executives who outsource American jobs. He is now holding up the news that the home heating and air-conditioning manufacturer Carrier will keep around 800 jobs in my home state of Indiana as proof that his approach works. Yet the deal will cost taxpayers $7m, and still allow Carrier to outsource 1,300 jobs to Mexico. This is not a sound industrial or economic policy, and it will do nothing to help raise wages or create good jobs across the country. It is an open invitation for a shakedown of the government by corporate executives seeking handouts.

Similarly, the increase in infrastructure spending is likely to be accomplished through tax credits, which will help hedge funds, but not America's balance sheet: such programmes' long track record shows that they deliver little value for money. The cost to the public will be especially high in an era when the government can borrow at near-zero interest rates. If these private-public partnerships are like those elsewhere, the government will assume the risks, and the hedge funds will assume the profits....

Fred C. Dobbs : , December 20, 2016 at 05:37 AM
Millennials aren't lazy, they're workaholics
http://www.bostonglobe.com/business/2016/12/19/millennials-aren-lazy-they-workaholics/3ZD86pLBYg954qUEYa3SUJ/story.html?event=event25
via @BostonGlobe - Katie Johnston - December 20, 2016

As soon as he awakes, Brian Porrell checks his e-mail, sometimes firing off a message before he gets out of bed. He makes calls during his commute to the Waltham staffing firm WinterWyman, spends 10 to 12 hours at the office and out visiting clients, and keeps his phone by his side at night, checking work e-mails while he watches sports on TV.

Like many workers today, Porrell, 30, is on the job wherever he is - and he doesn't count out-of-office exchanges in his 50-plus hour week.

The millennial generation, the first to grow up with smartphones in their hands, is often stereotyped as lazy and entitled. But workplace experts say workaholics are common among 19-to-35-year-olds, perhaps more so than among older members of Generation X and baby boomers.

In one online study, more than 4 in 10 millennials consider themselves "work martyrs" - dedicated, indispensable, and racked with guilt if they take time off.


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What's more, nearly half of millennials want to be seen that way, according to the survey of 5,600 workers by Project: Time Off, a Washington, D.C., coalition that promotes vacation time.

So why are millennials bent on being workaholics? Even though the economy has improved markedly in recent years, young people in the workforce today have record levels of student loan debt. They are also less likely than previous generations to earn more than their parents, according to a Stanford University report. The percentage of children who are better off than their parents has dropped dramatically - 50 percent of those born in the 1980s have a higher standard of living than their parents, compared with 90 percent of those born in the 1940s.

(December 8, 2016 - Today's children face tough
prospects of being better off than their parents,
Stanford researchers find http://stanford.io/2ghwtmj
via @Stanford)

The way millennials were raised may play into their always-on mindset, too, said Bob Kelleher, a Boston-based employee engagement consultant and author. Many of them were highly scheduled, he said, going to soccer camps, enrolling in SAT prep courses, and competing on the debate team in order to get into a good college.

And some have delayed several of the responsibilities of adulthood, he noted, living with their parents and putting off marriage and kids. That frees them up to work even more.

"This is a driven generation," he said.

Jane Alexander, 26, a staffing manager at WinterWyman, said she is often one of the first to arrive and the last to leave the office but acknowledged she will probably work less when she has kids. "That is part of why I want to crank it now while I do have time," she said.

The concept of 24/7 work has become so prevalent that workplace analysts are starting to talk about "work-life blending" instead of "work-life balance."

The ability to work anytime, anywhere, helps propel this blending of work and life, in part because answering a work text at a coffee shop doesn't feel as much like work as sitting in a cubicle. Indeed, nearly one in five people said they don't consider after-hours texts from clients or customers to be work, according to Workforce Institute at Kronos Inc., a think tank set up by the Chelmsford human resources software provider.

"If a friend texted me at the gym I would answer their text. Answering a work e-mail is just a natural extension of that," said Jessica Molson, a 24-year-old integration manager at Beacon Communities, the Boston real estate developer and property management firm. "I don't think of it as working; it's just communicating."

Molson finds herself answering e-mails and jumping on conference calls even when she's on vacation, once distracting other participants with the sound of seagulls in the background while she was in Florida with her family. But going on a real vacation is a rarity for Molson, who tends to take long weekends because she's afraid of missing something at work - and also because she loves what she does.

Like many millennials, Molson came of age when the economy was reeling, and the uncertain job market had a profound effect on her.

"I'm very anxious to rack up as much experience as possible," she said.

Millennials are also more likely to forfeit paid days off than older generations of workers, with a quarter of 18-to-25-year-olds reporting they weren't using any of their paid vacation days this year, according to the personal finance website Bankrate.com. The rise of companies offering unlimited vacation time may contribute to that, workplace consultants say, noting that when there is no set bank of "use it or lose it" vacation time, people are less likely to take days off than they otherwise would be.

But not being able to truly get away from work can have serious downsides. Employees who don't disconnect experience more stress and anxiety, which leads to reduced productivity and a higher rate of burnout, said Dan Schawbel, research director at Future Workplace, an executive development firm in New York.

"If all you're doing is trying to be the perfect employee, it's actually not going to work out in your favor because it's going to make you less happy," said Schawbel, who describes working too much as "a weakness disguised as a strength."

Seeing co-workers hunched over their desks late at night can cause others to feel they should be doing the same and increase guilt, or resentment, among employees who strive to keep their work and home lives separate.

It can also lead people working around the clock to hold it against their employer - "even if it's your own fault," Schawbel noted. Indeed, people who see being a "work martyr" as a good thing are more likely to be unhappy with their jobs, and less likely to receive bonuses, according to the Project: Time Off study.

That can lead to retention problems, particularly among millennials, who aren't afraid to quit. Two out of three young workers expect to leave their current job by 2020, according to a recent study by Deloitte.

Still, workaholics aren't necessarily unhappy - many are ambitious or simply enjoy their work. At Beacon Communities, several employees work 60 to 70 hours a week no matter what adjustments supervisors make. Adding more people to an overachiever's team doesn't help, said chief administrative officer Darlene Perrone: "They just find another project." ...

reason -> Fred C. Dobbs ... , December 20, 2016 at 05:44 AM
I have enormous problems with generationism. Anything that starts with {generation} is/are(n't) I know what is coming is mostly nonsense. It is exactly the same as if you replaced {generation} with {race} {gender} {nationality} it is sure to be wrong for a significant (perhaps even a majority) of the addressed category.
Fred C. Dobbs -> reason ... , December 20, 2016 at 06:06 AM
It never concerned me (much) whether I
was 'doing better' than my parents, but
as a parent, my children's success does
concern me. Go figure.
point -> reason ... , December 20, 2016 at 06:17 AM
There does seem to be a fruitful direction to take in "generational" analysis, though.

It may be that the mechanism by which increasing inequality works is by reducing the prospects of new young workers while generally maintaining the income of older ones. Thus by age cohort, lifetime incomes follow a lower and lower track as the young age compared to older workers.

If that is what is happening, and someone with sufficiently fine data may be able to show it, then it would be trivial to forecast future inequality by re-composing forecasts of lifetime income profiles for the various cohorts and the inflow of new young cohorts.

The possibility is that there is a much more severe inequality on the way that is embedded in the current age cohorts, if we could display them.

Pinkybum -> reason ... , December 20, 2016 at 09:59 AM
I agree with this. I don't believe all the bullshit categories come up with like Generation X, Millenials etc. However, the ruling classes like to use age divisions to divide and conquer so we will keep on hearing about how unengaged, bored, lazy, vapid, greedy and irresponsible young people are. And we have heard it going back at least to Plato and Socrates!
Peter K. -> Pinkybum... , December 20, 2016 at 01:36 PM
Or Clinton supporters like pgl Krugman talking about Bernie Bros.
Pinkybum -> Peter K.... , December 20, 2016 at 06:39 PM
I know you love Krugman really.
Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 06:03 AM
Today's children face tough prospects
of being better off than their parents
http://stanford.io/2ghwtmj
via @Stanford - Dec 8

Parents often expect that their kids will have a good shot at making more money than they ever did.

But young people entering the workforce today are far less likely to earn more than their parents when compared to children born two generations before them, according to a new study by Stanford researchers.

In a new study, Stanford economist Raj Chetty found that the link between income and life expectancy varies from one area to another within the United States.

The findings show that the fraction of kids earning more than their parents has fallen dramatically – from 90 percent for kids born in the 1940s to 50 percent for kids born in the 1980s.

"It's basically a coin flip as to whether you'll do better than your parents," said economics Professor Raj Chetty, a senior fellow at the Stanford Institute for Economic Policy Research and one of the study's authors.

One of the most comprehensive studies of intergenerational income mobility to date, the study used a combination of Census data and anonymized Internal Revenue Service records to measure the rate of "absolute income mobility" – or the percentage of children who earned more than their parents – for people born between 1940 and 1984.

What emerged from the empirical analysis was an economic portrait of the fading American Dream, and growing inequality appeared to be the main cause for the steady decline.

"One of the defining features of the American Dream is the ideal that children have a higher standard of living than their parents," Chetty said. "We assessed whether the U.S. is living up to this ideal, and found a steep decline in absolute mobility that likely has a lot to do with the anxiety and frustration many people are feeling, as reflected in the election." ...

The paper was co-authored by David Grusky, a SIEPR senior fellow, sociology professor and director of the Stanford Center on Poverty and Inequality; Maximilian Hell, a sociology doctoral student at Stanford; Professor Nathaniel Hendren and doctoral student Robert Manduca, both of Harvard; and Jimmy Narang, a former SIEPR predoctoral fellow who is currently a doctoral student at the University of California, Berkeley.

The study – and more information about the team's research – can be found on The Equality of Opportunity Project website run by Chetty and Hendren.

http://www.equality-of-opportunity.org/

Fred C. Dobbs : , December 20, 2016 at 06:20 AM
Which Trump Will the World See?
http://nyti.ms/2i4v5UT
NYT - DESMOND LACHMAN - Dec 20

One of the basic themes of Donald J. Trump's election campaign was that the United States was being ripped off by foreign countries and that his administration would reduce our trade deficit.

Yet the budget policies he is now proposing would be sharply at odds with that goal. By advocating an expansive budget through tax cuts and infrastructure spending, Mr. Trump's plan would most likely lower national savings and propel the United States dollar ever higher, creating the very conditions to widen rather than to narrow the trade deficit.

Mr. Trump seems to be overlooking a matter of basic arithmetic. While a country's trade balance is the difference between a country's exports and imports, it is also the difference between the amount it saves and invests, as can be derived from rearranging the components of a country's aggregate demand equation. If a country saves more than it invests, it will run a trade surplus. Conversely, a country that saves less than it invests will run a trade deficit.

Seemingly oblivious to this basic math, Mr. Trump is proposing far-reaching and seemingly unfunded cuts in both corporate and household tax rates. Worse yet, he is simultaneously proposing large increases in both public infrastructure and military spending.

He is doing so in the unrealistic hope that these policies will cause the economy to accelerate from its present 2 percent growth rate to between 3 and 4 percent. And he is counting on such faster economic growth to generate additional tax revenue.

Should a significant pickup in economic growth not materialize, the net effect of these tax cuts and public spending policies will almost certainly lead to a significant widening of the budget deficit and to a corresponding decline in public savings. That, in turn, would in all probability lead to a significant widening of the trade deficit as the country's overall savings rate would decline.

A further basic weakness of Mr. Trump's budget proposal is that it would add stimulus to the economy at the very time that the economy is at or very close to full employment. That policy is bound to raise concerns about inflation and to push the Federal Reserve to raise interest rates more than it is currently contemplating in order to meet its inflation target.

One of the distinguishing characteristics of the global economy right now is the divergence of monetary policy stances among the world's major central banks. The United States Federal Reserve is now embarked on a path of raising interest rates at a time when the European Central Bank and the Bank of Japan are still engaged in aggressive rounds of quantitative easing in an effort to kick-start their moribund economies.

Forcing the Federal Reserve to raise interest rates at a faster pace than it is presently contemplating will only serve to widen the difference between it and the other major central banks. This would more than likely put further upward pressure on the dollar.

Since the November election, the United States dollar has already appreciated significantly, to its strongest level in the past 14 years. The last thing that the country needs if it is to reduce its trade deficit is a further dollar appreciation. Such an appreciation would make our exports across the board more expensive in foreign markets and make our imports cheaper in United States dollar terms. That would hardly seem to be the way to reduce the country's trade deficit. ...

Related:

Room for Debate: Can Trump's Infrastructure
Plan Work? http://nyti.ms/2i4tuye

Much of President-elect Donald J. Trump's pledge to
be a job creator rests on his call for a $1 trillion in
infrastructure spending over 10 years. While few question
the need for such investment, many have questioned how he
would finance it and what it would fund. Can Trump's plan
effectively repair the nation's infrastructure?

(Five pundits discuss.)

Peter K. -> Fred C. Dobbs ... , December 20, 2016 at 08:05 AM
"A further basic weakness of Mr. Trump's budget proposal is that it would add stimulus to the economy at the very time that the economy is at or very close to full employment. That policy is bound to raise concerns about inflation and to push the Federal Reserve to raise interest rates more than it is currently contemplating in order to meet its inflation target."

Centrist fail.

Krugman might be right that Trump's policies don't add much actual stimulus.

(He's better on economics than on politics.)

And so Obama's Fed might actually raise rates too quickly.

Combined with a strong dollar and weakening exports this could bring on a recession.

(EMichael is horrified at the fact that Obama's Fed might be considered anti-worker.)

Mohammed El-Erian talks about the international aspect in today's links.

He says the same thing as Krugman and pgl (except adds the Republican BS about tax cuts and deregulation being pro-growth.)

https://www.project-syndicate.org/commentary/international-cooperation-for-trumps-economic-plan-by-mohamed-a--el-erian-2016-12

DeDude -> Fred C. Dobbs ... , December 20, 2016 at 08:21 AM
"Mr. Trump seems to be overlooking a matter of basic arithmetic. While a country's trade balance is the difference between a country's exports and imports, it is also the difference between the amount it saves and invests,"

Exactly, his understanding of economics is at the 5'th grade level. Furthermore, just as he thinks he known "more than the generals", he also thinks he knows more than the economists. We have elected a narcissistic moron like Turkey's Ergodan and the Philippine's Duterte. We will se the same erratic and destructive policies they have seen, because he is equally incapable of leading a nation. The hope is that our institutions checks and balances will prevent us from slipping into the same type of semi-democracy.

RGC -> Fred C. Dobbs ... , December 20, 2016 at 10:02 AM
This is a very misleading presentation.

"If a country saves more than it invests, it will run a trade surplus. Conversely, a country that saves less than it invests will run a trade deficit."

But:

GDP (Gross Domestic Product) is the value of all goods and services sold within a country during one year. GDP measures flows rather than stocks (example: the public deficit is a flow, the government debt is a stock). Flows are derived from the National Accounting relationship between aggregate spending and income. Ergo:

(1) Y = C + I + G + (X – M)
where Y is GDP (expenditure), C is consumption spending, I is private investment spending, G is government spending, X is exports and M is imports (so X – M = net exports).

Another perspective on the national income accounting is to note that households can use total income (Y) for the following uses:
(2) Y = C + S + T
where S is total saving and T is total taxation (the other variables are as previously defined).

You can then bring the two perspectives together (because they are both just "views" of Y) to write:
(3) C + S + T = Y = C + I + G + (X – M)
You can then drop the C (common on both sides) and you get:

(4) S + T = I + G + (X – M)

Then you can convert this into the following sectoral balances accounting relations, which allow us to understand the influence of fiscal policy over private sector indebtedness. Hence, equation (4) can be rearranged to get the accounting identity for the three sectoral balances – private domestic, government budget and external:

(S – I) = (G – T) + (X – M)

The sectoral balances equation says that total private savings (S) minus private investment (I) has to equal the public deficit (spending, G minus taxes, T) plus net exports (exports (X) minus imports (M)), where net exports represent the net savings of non-residents.

Thus, (S-I) can be positive if (G-T) ( the federal deficit) is greater than (X-M) ( an assumed trade deficit).

Also:

"Should a significant pickup in economic growth not materialize, the net effect of these tax cuts and public spending policies will almost certainly lead to a significant widening of the budget deficit and to a corresponding decline in public savings."

But (S – I) = (G – T) + (X – M), i.e., a federal deficit increase that exceeds a trade deficit increase means greater public savings.

https://en.wikipedia.org/wiki/Sectoral_balances

DeDude -> RGC... , December 20, 2016 at 11:34 AM
"a federal deficit increase that exceeds a trade deficit increase means greater public savings."

Or "export" of treasuries, dollars and other pieces of paper that allow the private sector and government to run deficits at the same time. Nobody in the US need to save as long as we either print more money or sell more paper assets to savers in the non-US part of the world.

RGC -> DeDude... , December 20, 2016 at 11:42 AM
The equation includes all exchanges.
anne : , December 20, 2016 at 06:36 AM
http://cepr.net/blogs/beat-the-press/how-to-get-new-drugs-at-generic-prices

December 20, 2016

How to Get New Drugs at Generic Prices

The New York Times had an interesting piece * discussing the National Institutes of Health collaboration with private companies in the development of new cancer drugs. As the piece points out, this collaboration has proven very profitable for the drug companies, but leads to drugs that are very expensive because the drug companies are allowed to have patent monopolies, with no restriction on the price they charge.

It also suggests an alternative path. It shows, contrary to conventional wisdom in right-wing circles, everything the government funds is not worthless garbage. If the tables were turned, and all the funding came from the government (rather than relying on government imposed patent monopolies), then the new drugs could be sold at generic prices since everyone already would have been paid for their research.

In many cases, the generic price would be less than one percent of the patent protected price. New cancer drugs that might sell for $100,000 for a year's treatment, might sell for hundreds of dollars. ** Policy types who don't work for the pharmaceutical industry should be looking into more efficient alternatives for financing drug research.

* http://www.nytimes.com/2016/12/19/health/harnessing-the-us-taxpayer-to-fight-cancer-and-make-profits.html

** http://www.thebodypro.com/content/78658/1000-fold-mark-up-for-drug-prices-in-high-income-c.html

-- Dean Baker

anne -> anne... , December 20, 2016 at 06:43 AM
http://www.nytimes.com/2016/12/19/health/harnessing-the-us-taxpayer-to-fight-cancer-and-make-profits.html

December 18, 2016

Harnessing the U.S. Taxpayer to Fight Cancer and Make Profits
By MATT RICHTEL and ANDREW POLLACK

Enthusiasm for cancer immunotherapy is soaring, and so is Arie Belldegrun's fortune.

Dr. Belldegrun, a physician, co-founded Kite Pharma, a company that could be the first to market next year with a highly anticipated new immunotherapy treatment. But even without a product, Dr. Belldegrun has struck gold.

His stock in Kite is worth about $170 million. Investors have profited along with him, as the company's share price has soared to about $50 from an initial price of $17 in 2014.

The results reflect widespread excitement over immunotherapy, which harnesses the body's immune system to attack cancer and has rescued some patients from near-certain death. But they also speak volumes about the value of Kite's main scientific partner: the United States government.

Kite's treatment, a form of immunotherapy called CAR-T, was initially developed by a team of researchers at the National Cancer Institute, led by a longtime friend and mentor of Dr. Belldegrun. Now Kite pays several million a year to the government to support continuing research dedicated to the company's efforts.

The relationship puts American taxpayers squarely in the middle of one of the hottest new drug markets. It also raises a question: Are taxpayers getting a good deal?

Defenders say that the partnership will likely bring a lifesaving treatment to patients, something the government cannot really do by itself, and that that is what matters most.

Critics say that taxpayers will end up paying twice for the same drug - once to support its development and a second time to buy it - while the company reaps the financial benefit.

"If this was not a government-funded cancer treatment - if it was for a new solar technology, for example - it would be scandalous to think that some private investors are reaping massive profits off a taxpayer-funded invention," said James Love, director of Knowledge Ecology International, an advocacy group concerned with access to medicines.

The debate goes squarely to one of the nation's most vexing challenges: rising health care and drug prices. Kite is one of a growing number of drug and biotech companies relying on federal laboratories. Analysts expect the company to charge at least $200,000 for the new treatment, which is intended as a one-time therapy for patients.

While the law allows the government to demand drug-price concessions from its private-sector partners, the government has declined to do so with Kite and generally disdains the practice.

Insisting on lower prices, federal researchers say, would drive away innovative partners that speed the drug-development process and benefit patients. But with the government doing so much pivotal research, others say that the private sector cannot afford to walk away.

"The market is so reliant on the knowledge and know-how that comes out of the government and academic labs," said Dr. Aaron Kesselheim, director of the Program on Regulation, Therapeutics and Law at Brigham & Women's Hospital in Boston....

Fred C. Dobbs : , December 20, 2016 at 06:46 AM
Paul Krugman ‏✔ @paulkrugman · 8 minutes ago

Are people noticing that the Trump economic team is shaping up as a gathering of gold bugs? 1/

Treasury goes to a guy with little public profile, but hangs out with John Paulson (who is also close to Trump) 2/

(Trump's Treasury Pick Moves in Secretive Hedge
Fund Circles http://nyti.ms/2i3aZu6
NYT - MATTHEW GOLDSTEIN and ALEXANDRA STEVENSON - Dec 19)

And Paulson has been predicting inflation -- sometimes double-digit -- from Fed policy for years 3/

(John Paulson: Gold Will Rise In
Proportion To Bernanke's Dollar Printing http://www.forbes.com/sites/afontevecchia/2011/04/14/john-paulson-gold-will-rise-in-proportion-to-bernankes-dollar-printing/ Forbes - April 14, 2011)

Budget director appears to be John Bircher and conspiracy theorist (but aren't they all? But note economic views 4/

(Trump's Budget Director Pick Rick
Mulvaney Spoke at a John Birch Society Event
http://www.motherjones.com/politics/2016/12/trump-mulvaney-john-birch-society via @motherjones)

Birchers want return to gold and silver, Mulvaney seems to agree 5/

https://twitter.com/paulkrugman/status/811217899528429569

In this crew, Kudlow -- who thinks it's always the 1970s, but doesn't seem to see hyperinflation under his bed -- is the most reasonable 6/

Whoops -- forgot Mulvaney's Bitcoin derp: "He praised bitcoin as a currency that is "not manipulatable by any government."" 7/

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 06:47 AM
https://twitter.com/paulkrugman/status/811219022695890948
Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 07:15 AM
(Is there also a place for Jim Cramer?)

Kudlow Close to Being Named
Trump Chief Economist, Paper Says http://www.bloombergquint.com/global-economics/2016/12/15/kudlow-close-to-being-named-trump-chief-economist-adviser-says
via @Bloomberg - Dec 18

President-elect Donald Trump's transition team is close to picking economic commentator Larry Kudlow to be chairman of the White House Council of Economic Advisers, according to a report in the Detroit News.

Kudlow, 69, has served as an informal adviser to the Trump campaign, primarily focused on tax policy and teaming primarily with Stephen Moore, a visiting fellow at the Heritage Foundation and fellow alumnus of President Ronald Reagan's economic team. Moore was cited by the newspaper as saying Thursday the selection of Kudlow would be announced in the next 48 hours.

Kudlow's appointment, which would require Senate confirmation, marks another non-traditional pick by the incoming administration. Kudlow doesn't hold a Ph.D. in economics, unlike former heads of the CEA. For five years, he hosted a show on CNBC on business and politics, and he's worked at the Federal Reserve Bank of New York. During Reagan's first term, Kudlow was associate director for economics and planning in the White House's Office of Management and Budget. ...

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 04:05 PM
Kudlow & Cramer (was) a CNBC American business
and politics television program hosted by
conservatives Lawrence Kudlow and Jim Cramer, which aired weekdays from 2002 to 2005. (Wikipedia)
Peter K. -> Fred C. Dobbs ... , December 20, 2016 at 07:32 AM
"In this crew, Kudlow -- who thinks it's always the 1970s, but doesn't seem to see hyperinflation under his bed -- is the most reasonable 6/"

Maybe pgl will insult Krugman like he insulted Bernstein who pgl said was soft on Kudlow.

pgl -> Peter K.... , December 20, 2016 at 07:58 AM
Misrepresenting 24/7 we see. No - Krugman got this right. And yes Jared was nicer to Kudlow than I could ever be. But soft? A day without a PeterK lie is like a day without sunshine.
Peter K. -> pgl... , December 20, 2016 at 08:16 AM
It's funny how you refuse to stand up for your own arguments.

Your inconsistency reminds me of Kudlow in a way.

DeDude : , December 20, 2016 at 07:16 AM
What is the appropriate response when an adversary throws the election to ensure their favorite candidate becomes our president?

http://www.vox.com/world/2016/12/20/14001118/putin-russia-hack-dnc-clinton-trump-election-podesta-emails

Peter K. -> DeDude... , December 20, 2016 at 07:34 AM
Whip up some xenophobic, anti-Russia hysteria to distract people from the fact that your lame centrist candidate lost to a laughable reality TV star?
DeDude -> Peter K.... , December 20, 2016 at 09:09 AM
Oh buh-hu-hu. Get over it and stop the whining.

You candidate was to weak to win the semifinals, and he would have been crushed in the finals. He didn't have what it takes to win in little league, and he wouldn't have had what it takes to win in the big league either. Maybe the democrats could have found someone who would have won against Trump; but it sure as hell wasn't any of the losers of their primary contest.

anne : , December 20, 2016 at 07:32 AM
http://cepr.net/blogs/beat-the-press/someone-has-to-tell-john-williams-inflation-is-not-accelerating

December 20, 2016

Someone Has to Tell John Williams Inflation Is Not Accelerating

The Federal Reserve Board raising interest rates last and seem poised to do so again in the not distant future. The rationale is that the economy is now near or at full employment and that if job growth continues at its recent pace it will lead to a harmful acceleration in the inflation rate.

We have numerous pieces raising serious questions about whether the labor market is really at full employment, noting for example the sharp drop * in employment rates (for all groups) from pre-recession levels and the high rate of involuntary part-time ** employment. But the story of accelerating inflation is also not right.

This is particularly important, since John Williams, the president of the San Francisco Federal Reserve Bank, cited accelerating inflation as a reason to support last week's rate hike, and possibly future rate hikes, in an interview in the New York Times this morning. Williams has been a moderate on inflation, so there are many members of the Fed's Open Market Committee who are more anxious to raise rates than him.

A close look at the data does not provide much evidence of accelerating inflation. The core personal consumption expenditure deflator, the Fed's main measure of inflation, has risen 1.7 percent over the last year, which is still under the 2.0 percent target. This target is an average, which means that the Fed should be prepared to allow the inflation rate to rise somewhat above 2.0 percent, with the idea that inflation will drop in the next recession.

Anyhow, the 1.7 percent rate is slightly higher than a low of 1.3 percent reached in the third quarter of 2015, but it is exactly the same as the rate we saw in the third quarter of 2014. In other words, there has been zero acceleration in the rate of inflation over the last two years.

Furthermore, even this modest acceleration has been entirely due to the more rapid increase in rent over the last two years. The inflation rate in the core consumer price index, stripped of its shelter component, actually has been falling slightly over the last year. It now stands at 1.1 percent over the last year.

[Consumer Price Index Minus Food, Energy and Shelter, 2006-2016]

It is reasonable to pull shelter out of the CPI because rents do not follow the same dynamic as most goods and services. In fact, higher interest rates, by reducing construction, are likely to increase the pace of increase in rents rather than reduce them.

This issue is hugely important, since if the Fed prevents the labor market from tightening further it will be preventing millions of people from getting jobs. These people are disproportionately African American and Hispanic and also less-educated workers. The decision to tighten will also lessen the bargaining power of a much larger group of workers, making it more difficult for them to get pay increases.

The weak labor market of the Great Recession resulted in a large redistribution from wages to profits. The tightening of the labor market in the last two years has reversed part of this shift. If the Fed raises interest rates enough to prevent further tightening, then it will be locking in place this redistribution to profits. That would be bad news for tens of millions of workers, especially if the decision was based on a misreading of inflation data.

* http://cepr.net/blogs/beat-the-press/men-who-don-t-work-when-did-economists-stop-being-wrong-about-the-economy

** http://cepr.net/blogs/cepr-blog/the-rise-of-involuntary-part-time-employment-by-race-gender-age-industry-and-occupation

*** http://www.nytimes.com/2016/12/20/upshot/feds-john-williams-feels-uncertainty-among-business-leaders.html

-- Dean Baker

anne -> anne... , December 20, 2016 at 07:34 AM
https://fred.stlouisfed.org/graph/?g=cbCB

January 15, 2016

Consumer Price Index Less Food and Energy & Consumer Price Rent Index, 2000-2016

(Percent change)


https://fred.stlouisfed.org/graph/?g=cbCD

January 15, 2016

Consumer Price Index Less Food and Energy & Consumer Price Rent Index, 2000-2016

(Indexed to 2000)

Fred C. Dobbs : , December 20, 2016 at 07:36 AM
(Only 4 billionaires though,
counting Trump, totaling $12.65B.)

Trump's Cabinet picks so far worth a combined $13b
http://www.bostonglobe.com/metro/2016/12/20/trump-cabinet-picks-far-are-worth-combined/XvAJmHCgkHhO3lSxgIKvRM/story.html?event=event25
via @BostonGlobe - Matt Rocheleau - December 20, 2016

President-elect Donald Trump boasted about his wealth during his campaign. Now he's surrounding himself with people who have similarly unimaginable riches.

Collectively, the wealth of his Cabinet choices so far is about five times greater than President Obama's Cabinet and about 34 times greater than the one George W. Bush led at the end of his presidency.

And Trump still has four more key advisory spots left to fill.

The net worth of the Cabinet Trump had selected as of Monday was at least $13.1 billion, based on available estimates, or more than the annual gross domestic product of about 70 small countries.

That included the $3.7 billion Trump is estimated to be worth, according to Forbes. (Trump has claimed to be worth much more - around $10 billion.)

It also included the $5.1 billion in net worth that Forbes estimated belongs to the family of Betsy DeVos, the former Michigan Republican Party chair and education activist selected to be education secretary.

Investor Wilbur Ross, picked to become commerce secretary, is estimated to be worth $2.5 billion, according to Forbes.

Linda McMahon, a former WWE executive and U.S. Senate candidate, has been picked to serve as small business administrator. She and her husband Vincent McMahon are worth at least an estimated $1.35 billion, according to Bloomberg.

Exxon Mobile CEO Rex Tillerson, nominated to become secretary of state, is estimated to be worth $365 million, according to Bloomberg.

Steven Mnuchin, the former Goldman Sachs executive in line to become Treasury secretary, is worth at least $46 million, according to Politico.

Retired neurosurgeon and former presidential candidate Ben Carson, who is in line to become the housing and urban development secretary, was worth $26 million, according to a Forbes estimate from 2015.

The pick for transportation secretary, Elaine Chao, the former labor secretary, was worth an estimated $16.9 million as of 2008, when she last held public office, according to the Center for Responsive Politics, a Washington-based nonprofit that tracks campaign finance data.

Two other Cabinet picks - Alabama Senator Jeff Sessions for attorney general and Georgia Representative Tom Price for health and human services secretary - were estimated to be worth about $7.5 million and $13.6 million, respectively, as of 2014, according to the center.

Former Texas governor and presidential candidate Rick Perry, selected to be energy secretary, is estimated to be worth about $3 million, according to the Associated Press.

U.S. Representative from South Carolina Mick Mulvaney, picked to become director of the Office of Management and Budget, was worth an estimated $2.6 million as of 2014, according to the center.

Fast-food executive Andrew Puzder, picked to fill the role of labor secretary, is also a multi-millionaire, according to Politico.

U.S. Representative from Montana Ryan Zinke, picked to become interior secretary, was worth an estimated $675,000 as of 2014, according to the center. ...

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 08:31 AM
The 5 richest Cabinet members of all time http://on.mktw.net/2h8iBvr

(Andrew Mellon tops the list. Treasury
secretary under Harding, Coolidge and
Hoover, worth $50 billion in current
dollars. No one else is even close.)

Mellon was the third-richest American of his time - behind only John D. Rockefeller and Henry Ford - and has been ranked the 14th richest American of all time, in inflation-adjusted dollars.

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 09:34 AM
'Collectively, the wealth of his Cabinet choices so far is about five times greater than President Obama's Cabinet and about 34 times greater than the one George W. Bush led at the end of his presidency.'

So, the Obama cabinet is worth $2.6B apparently.

That would largely be due to Penny Pritzker,
#3 on the MarketWatch list above,
who is said to be worth $1.85B.

And, believe it or not, the Bush Jr
cabinet was apparently only worth
$382M, a pittance.

Peter K. : , December 20, 2016 at 08:08 AM
Mohamed A. El-Erian on Trump's macro and international economics.

https://www.project-syndicate.org/commentary/international-cooperation-for-trumps-economic-plan-by-mohamed-a--el-erian-2016-12

This sounds a lot like what pgl and Krugman are saying about a strong dollar providing headwinds to the economy.

My question though is consider a thought experiment where Comey didn't throw the election to Trump.

Hillary's fiscal policies were supposedly budget neutral and wouldn't really effect the rate of Fed hikes.

Would the strong dollar effect have been applicable to a strengthening Clinton economy as well to a Trump economy?

Much depends on the rate of Fed hikes?

Peter K. -> Peter K.... , December 20, 2016 at 08:11 AM
Obviously without the tax cuts for the rich, Hillary's budget would have allowed more fiscal room for stimulus in the event of a downturn.

Her infrastructure spending, such as it was, would have provided more automatic stabilizers and helped give the Fed room to lower rates later on.

Peter K. -> Peter K.... , December 20, 2016 at 08:14 AM
When Yellen says there's no need for fiscal stimulus - which should be blasphemous to all "real" progressives* - what she's saying is that the Fed can just use uncoventional monetary policy again the next time there is a downturn.

They gave us the recovery they wanted this past time after all.

* of course pgl refuses to discuss this episode. His lies of omission are the biggest of all. Krugman too refuses to address Yellen's blasphemy. Only DeLong was brave enough and honest enough to disagree.

im1dc : , December 20, 2016 at 08:21 AM
Good News For Guys and the Gals that love them and outstandingly clever science

"Surgeons have described a new treatment for early stage prostate cancer as "truly transformative"

http://www.bbc.com/news/health-38304076

"Prostate cancer laser treatment 'truly transformative'"

By James Gallagher, HEalth and science reporter...BBC News...12-20-2016...7 hours ago

"The approach, tested across Europe, uses lasers and a drug made from deep sea bacteria to eliminate tumours, but without causing severe side effects.

Trials on 413 men - published in The Lancet Oncology - showed nearly half of them had no remaining trace of cancer.

Lifelong impotence and incontinence are often the price of treating prostate cancer with surgery or radiotherapy.

Up to nine-in-10 patients develop erectile problems and up to a fifth struggle to control their bladders.

That is why many men with an early stage tumour choose to "wait and see" and have treatment only when it starts growing aggressively.

"This changes everything," said Prof Mark Emberton, who tested the technique at University College London.

Triggered to kill

The new treatment uses a drug, made from bacteria that live in the almost total darkness of the seafloor and which become toxic only when exposed to light.

Ten fibre optic lasers are inserted through the perineum - the gap between the anus and the testes - and into the cancerous prostate gland.

When the red laser is switched on, it activates the drug to kill the cancer and leaves the healthy prostate behind..."

Fred C. Dobbs -> im1dc... , December 20, 2016 at 01:40 PM
Light therapy effectively treats early prostate
cancer: New non-surgical treatment for low-risk
prostate cancer can effectively kill cancer cells
while preserving healthy tissue
https://www.sciencedaily.com/releases/2016/12/161219202008.htm

Padeliporfin vascular-targeted photodynamic
therapy versus active surveillance in men with low-
risk prostate cancer (CLIN1001 PCM301): an open-
label, phase 3, randomised controlled trial
http://www.thelancet.com/journals/lanonc/article/PIIS1470-2045%2816%2930661-1/abstract

Peter K. : , December 20, 2016 at 08:22 AM
Krugman:

http://krugman.blogs.nytimes.com/2016/05/09/the-facts-have-a-well-known-center-left-bias/

The Facts Have A Well-Known Center-Left Bias

MAY 9, 2016 8:01 AM

"But I'm also hearing from Berniebros, insisting that anything I say must be wrong, because I criticized their hero. And this suggests to me that we may need a clarification of the doctrine that facts have a well-known liberal bias. More specifically, they seem to have a center-left bias: conservatives are big on empirical denial, but so is some of the U.S. left."

I'd say the center-left is big on empirical denial, especially when it comes to the rise of populism and globalization.

They'd rather focus on Putin's hackers.

But some are coming around or at least asking questions. See Tim Duy, DeLong, and Noah Smith.

http://economistsview.typepad.com/timduy/2016/12/responsibility.html

https://www.bloomberg.com/view/articles/2016-12-16/four-ways-to-help-the-midwest

http://www.bradford-delong.com/2016/12/is-the-problem-one-of-insufficient-market-wages-inadequate-social-insurance-polanyian-disruption-of-patterns-of-life-.html

Peter K. -> Peter K.... , December 20, 2016 at 08:24 AM
From a New York Times article on the growing popularity of the universal basic income idea.

http://www.nytimes.com/2016/12/17/business/economy/universal-basic-income-finland.html

"he search has gained an extraordinary sense of urgency as a wave of reactionary populism sweeps the globe, casting the elite establishment as the main beneficiary of economic forces that have hurt the working masses. Americans' election of Donald J. Trump, who has vowed to radically constrain trade, and the stunning vote in Britain to abandon the European Union, have resounded as emergency sirens for global leaders. They must either update capitalism to share the spoils more equitably, or risk watching angry mobs dismantle the institutions that have underpinned economic policy since the end of World War II."

The center-left, like Krugman, EMichael, pgl, Bakho, etc. argue that's just racism. That's it.

There's been an upsurge in racism and tribalism worldwide for some inexplicable reason. Fox News.
Or Obama.

Peter K. -> Peter K.... , December 20, 2016 at 08:27 AM
Krugman discusses the 1930s but fails to recall how the Great Depression helped lead to the rise of National Socialism and Hitler.

He forgets Keynes's The Economic Consequences of The Peace.

https://en.wikipedia.org/wiki/The_Economic_Consequences_of_the_Peace

Peter K. -> Peter K.... , December 20, 2016 at 08:32 AM
Even the U.S you had Father Coughlin, the populist Huey Long, and Charles Lindbergh's America First movement which was isolationist just like Trump.

"Europe as a whole was badly hit, in both rural and industrial areas. Democracy was discredited and the left often tried a coalition arrangement between Communists and Socialists, who previously had been harsh enemies. Right wing movements sprang up, often following Italy's fascist mode."

Like Greece's fascist Golden Dawn.

im1dc : , December 20, 2016 at 08:29 AM
Not expecting this, but here it is anyway

The shocking election of demagogic hate monger Trump has let Genie out of the Bottle, the Liberal Genie

"Why US liberals are now buying guns too"

http://www.bbc.com/news/magazine-38297345

"Why US liberals are now buying guns too"

By Brian Wheeler...BBC News, Washington DC...12-20-2016...6 hours ago

"Gun ownership has traditionally been associated with the right wing in America but the election of Donald Trump has prompted some left-wingers to join gun clubs - and even start preparing for the collapse of society.

"I really didn't expect to be thinking about purchasing a gun. It was something that my father did and I rolled my eyes at him."

Clara, a 28-year-old nursing student, grew up in the Mid-West, where "the folks that had guns were seen as hicks" or were just "culturally different", she says.

But since the election of Donald Trump in November she has started going to a gun range for the first time and is shopping around for a semi-automatic pistol.

"It's been seeing the way that Trump's election has mobilised a lot of the far right and given them hope," she says, citing a rise in reports of hate crimes and neo-Nazi activity.

As a transgender woman, she does not fear for her personal safety in the Californian city where she now lives but she says she knows people in rural areas "who woke up and found a bunch of swastikas and words like 'faggot' and 'trannie' scrawled all over their building".

She foresees a wide-ranging struggle between the Trump administration and the left over issues such as immigration and racial politics.

But won't buying a gun just increase tensions?

"Things are already escalating and they will continue to do so and me not engaging or being prepared to defend my friends by force... isn't going to stop people from being attacked or harassed," Clara says.

Gun sales in America hit record levels in October amid fears a Hillary Clinton election victory would lead to increased controls.

Many expected the election of Donald Trump, whose candidacy was backed by the National Rifle Association, to bring an end to the panic buying. Shares in gun manufacturers dropped by as much as 18% following his victory.

But instead FBI background checks for gun transactions soared to a new record for a single day - 185,713 - during the Black Friday sales on 25 November, according to gun control news site The Trace.

Some of this has been put down to gun retailers selling off stock at reduced prices, but there have also been reports of more "non-traditional" buyers, such as African Americans and other minorities, turning up at gun shops and shooting ranges..."

im1dc : , December 20, 2016 at 08:59 AM
Item #1 of 3 in your Briefing that explains THE WAY BACK

http://www.nbcnews.com/politics/first-read/single-greatest-force-american-politics-partisanship-n698186

"The Single Greatest Force in American Politics? Partisanship"

by Chuck Todd, Mark Murray and Carrie Dann...Dec 20 2016...8:56 am ET

"Why partisanship is the single greatest force in American politics"

Want to know why partisanship -- or party identification -- is the single greatest force in American politics today? Just check out these shifting attitudes about the economy and nation's direction in the latest NBC/WSJ poll:

... 68% of Republicans believe the economy will get better in the next 12 months (versus just 14% of GOPers who said this a year ago in the Dec. 2015 NBC/WSJ poll).

... By contrast, only 19% of Democrats said the economy will improve next year (compared with 37% of them who said this last December).

... Right now, 52% of Republicans say the country is headed in the right direction (versus just 5% who said this in December 2015).

... Conversely, only 18% of Democrats say the country is headed in the right direction (compared with 37% of them who said this a year ago).

Folks, the underlying dynamics of the U.S. economy have remained pretty much the same over the past year. The only thing that has changed is the party that will be in the White House next year. It's all confirmation that so much public opinion is shaped through Americans' partisan lenses, and little else. Want another example of this from our NBC/WSJ poll? A combined 86% of Democrats say they are bothered a great deal/quite a bit by Russia's interference in the 2016 presidential election, versus just 29% of Republican respondents who say this..."

im1dc -> im1dc... , December 20, 2016 at 09:01 AM
Item #2 of 3 of THE WAY BACK briefing

same NBC source

"Asymmetrical warfare: Democrats have knives, Republicans have guns"

"But if partisanship is the greatest force in American politics, there's maybe a more important dynamic at play -- the asymmetrical warfare between the two parties. As the New York Times' David Leonhardt writes in comparing how Barack Obama is leaving the White House versus how Republican Pat McCory is leaving power in North Carolina, Democrats are wielding knives while Republicans have guns. Think of the 2011 debt-ceiling standoff. Mitch McConnell denying Obama's Supreme Court pick to even get a hearing. And now what's playing out in North Carolina. Republicans are playing a different game than Democrats are playing."

im1dc -> im1dc... , December 20, 2016 at 09:02 AM
Item #3 of 3 of THE WAY BACK briefing

same NBC source

"Trump's popularity improves -- but he's still the most unpopular president-elect in the history of our poll"

"Also from our NBC/WSJ poll: 40% of Americans now have a positive view of Donald Trump, versus 46% who have a negative view. That's up considerably from his 29%-62% rating in the October NBC/WSJ poll. Still, Trump's 40%-46% fav/unfav score is the WORST in the history of our poll for a president-elect and the first time it's a net-negative. Bill Clinton's was 60%-19% in Dec. 1992, George W. Bush's was 48%-35% in Dec. 2000, and Barack Obama's was 67%-16% in Dec. 2008.

For the rest on our poll, click here. http://www.nbcnews.com/politics/first-read/poll-majority-americans-pessimistic-or-uncertain-about-trump-presidency-n697971

im1dc : , December 20, 2016 at 09:12 AM
My prescription and takeaway is for the next four years for the Democratic Party especially those in D.C. is for Hyper Partisanship, no holds barred bare knuckle deliberate faithless drug out deliberations and negotiations with the GOP, and the ceaseless cacaphonic BLAME, BLAME, BLAME media game of imagined, fake, and real failures of every Republican especially Donald Trump and his family.

There you have it, your assignment for the next next Presidential Election.

im1dc -> im1dc... , December 20, 2016 at 09:23 AM
This is, of course, the opposite of the Democratic Party Obama-way and the Clinton-way that reasonably expected the American Electorate to see through and reject those same tactics used on President Obama and Hillary Clinton when they relied upon logic not lies, facts not falsehoods, and intellectual and scientific critical thinking instead of rants, ravings, and unhinged screeds to win the argument and sway the Electorate.

IOW, time to stick it to Middle America Fly Over country and make them see how wrong they were to vote for Trump while aiding the BiCoastal States, and the majority of voters in the last Election, survive the next 4 years.

First and foremost start by insisting on cutting off or at least severely reducing any and all AG support welfare and corporate welfare for noncompetitive manufacturers before any support for cutting Obamacare, SS, and Medicare, which are the highest items on Ryan's and the GOP's agenda.

im1dc : , December 20, 2016 at 09:40 AM
Trump and his assembled Cabinet picks and Team are a full month away from taking the Oath of Office and have loaded the DEMS up with issues at the heart of every American Worker, Blue and Middle Class: Class Warfare and Pay Inequality

http://www.nbcnews.com/business/business-news/why-donald-trump-could-spell-doom-ceo-pay-transparency-n698156

"Why Donald Trump Could Spell Doom for CEO Pay Transparency"

by Martha C. White...Dec 20 2016...7:49 am ET

"Outsized CEO pay is an issue coming under increasing scrutiny, and Donald Trump has already promised to do away with legislation that would require companies to be more transparent.

However, compensation experts say an executive branch filled with corporate titans could benefit the relative few atop the corporate ladder at the expense of everyone else.

The implicit assumption is that these CEOs will look out for their own.

Furthermore, because Trump is one of those CEOs himself, it might very well "put a halo effect around the whole issue [of executive pay] for a while," said John Challenger, CEO of executive outplacement firm Challenger, Gray & Christmas.

Repeal of Dodd-Frank?

"I think the first year will be a true measure of who he is as a policy person," said Lawrence Mishel, president of the Economic Policy Institute, a left-leaning think tank...

...Starting next year, the Securities and Exchange Commission planned to require companies to disclose how much their CEO makes as a ratio of median employee pay, giving shareholders - and ordinary Americans - a window into how companies treat their CEO compared to the rank-and-file workers, but the future of that rule is in limbo.

Donald Trump, although he railed against fat CEO pay packages during his campaign, calling them "disgraceful," also vowed to "dismantle" the Dodd-Frank Act, which provided the mandate for the new SEC rule...

...For the future, many expect the SEC's push for increased transparency to be scuttled, in keeping with Donald Trump's promise to roll back regulations of all types...

..."they believe now that it's likely to be pulled out is when you look at the cabinet Trump is putting together, there are a lot of billionaires, a lot of CEOs," Kropp said.

"It seems to me that the pressure is going to abate. There's going to be less scrutiny," Challenger predicted..."

Observer : , December 20, 2016 at 09:48 AM
This doubling of the sub fleet was outlined in a defense White Paper earlier this year. Basically, its due to concerns about China. The article doesn't say, but I assume these are AIP powered.


Australia, France sign submarine deal

"Australia and France on Tuesday signed the final agreement for French naval contractor DCNS to build 12 submarines in what Prime Minister Malcolm Turnbull called a "critically important step in the development of our security."

The 34.9 billion euro ($36.3 billion) deal, including separate agreements with US and Australian contractors, is one of the world's largest defense contracts.

Turnbull described the deal as the "last foundation stone needed to ensure Australia is able to develop a cutting-edge sovereign submarine capability."

The submarines will be a conventionally-powered version of France's 4,700-tonne nuclear-fuelled Barracuda complete with stealth technology. France and Australia agreed in April to the deal, for which Germany and Japan were also contending.

Most of the submarine production will be in the southern city of Adelaide and create 2,800 high-skilled jobs, Turnbull said.

US defense giant Lockheed Martin will produce the combat systems for the Barracudas."

http://www.dw.com/en/australia-france-sign-submarine-deal/a-36839878

Fred C. Dobbs -> Observer... , December 20, 2016 at 11:56 AM
Submarines deal: Why is
Australia paying for old technology?

Dick Smith (#) furious at $50 billion submarines 'fiasco' - September 14, 2016
http://www.news.com.au/finance/business/dick-smith-furious-at-50-billion-subs-fiasco/news-story/6f85752a58e5a7afa5472c0ac5453065

A war of words has erupted between a group of prominent Australian businessmen and seemingly the entire southern state over the Federal Government's controversial French submarines deal.

(Adelaide, South Australia, is to be
a recipient of much employment related
to this deal.)

The group, which includes entrepreneur Dick Smith, Gary Johnston of Jaycar Electronics and adman John Singleton, took out a full-page advertisement in
The Australian on Tuesday slamming the move to go with French producer DCNS, suggesting buying off-the-shelf nuclear subs would be a better option.

They warned the current deal, announced on April 28 this year, will "condemn our sailors to their graves". The group says it can't understand the Federal Government's decision to award a multi-billion deal to French supplier DCNS, which will be required to deliver 12 diesel-powered submarines for which there are no drawings and no plans.

They said under the deal, the navy's next fleet of conventionally-powered subs would come into service at a time when the rest of the world would be operating nuclear fleets, which would be "like putting a propeller plane up against a modern jet".

"We will be condemning our sailors to their graves," the advertisement said. It also questioned the economics of the decision, saying it would be cheaper to subsidise car industry jobs, if creating jobs was the desired outcome. Mr Johnston said DCNS was being asked to build a diesel-powered version of what is essentially a nuclear-powered sub.

"It's a bit like trying to turn a cat into a dog. It's crazy. Why would you do it?" he told Sky News. "They haven't got a drawing, they haven't got a plan. Their current nuclear submarine, the Barracuda, is sitting on a slipway. It won't even be tested until next year."

DCNS declined to comment on the row, but the Federal Government said the decision to award the contract to the company came after a competitive evaluation process, which involved the best experts available. It said the new subs would be regionally superior and would allow Australia to pursue its national and international interests. ...

The government estimates building the submarines in Adelaide will create 2800 jobs.

That would be the equivalent of giving every single one of those 2800 workers a cheque for $5.4 million - or handing every single man, woman and child in South Australia a cheque for nearly $9000.

Speaking on 2GB, Mr Johnston said "if we were smart" we would simply buy the French or British nuclear sub, or even the "ultimate" US Virginia class nuclear submarine, which has 33 years of fuel.

"You don't have to have a nuclear industry in Australia - you just simply buy the thing and 33 years later you trade it in on a new one," he said.

"It's unbelievable how these things are just such an order of magnitude better than a diesel sub. Every one of the enemy we would hopefully not ever encounter, but if we do, would have nuclear submarines which will blow diesel submarines out of the water."

But the group was dismissed as "sad old men" by South Australian Premier Jay Weatherill, who rubbished their proposal to go nuclear. "[It] looked like it was scribbled on the back of a serviette after a long lunch," Mr Weatherill tweeted on Tuesday.

Defence Industry Minister Christopher Pyne, who holds the South Australian seat of Sturt, described the criticism as "misinformed, misguided" and "entirely wrong". "We don't have nuclear energy in Australia and therefore we can't have nuclear submarines," Mr Pyne told ABC radio on Wednesday.

"The advice from defence was entirely clear and that was that the French DCNS design was the best for what we needed.

"Quite clearly we are not getting a Short Fin Barracuda submarine, we are getting a unique design for Australian conditions. We've chosen DCNS because we believe that they have the best record and the best designs in terms of large submarines both nuclear and non nuclear." ...

#- Richard Harold "Dick" Smith, AC (*) is an Australian entrepreneur, businessman, aviator, philanthropist, and political activist. He is the founder of Dick Smith Electronics, Dick Smith Foods and Australian Geographic, and was selected as the 1986 Australian of the Year. In 2010 he founded the media production company Smith&Nasht with the intention of producing films about global issues. In 2015 he was awarded the Companion of the Order of Australia (*), and is a fellow of the Committee for Skeptical Inquiry. (Wikipedia)

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 12:30 PM
Fun facts: (Wikipedia)

Shortfin barracuda may refer to:
Australian barracuda, a fish found
mainly outside Australia & New Zealand

(Australian barracuda, arrow barracuda,
Australian sea pike, sea pike, snook, or
shortfin barracuda, Sphyraena novaehollandiae)

Shortfin Barracuda-class submarine, a submarine class proposed for Australia's Collins-class replacement

ilsm -> Fred C. Dobbs ... , December 20, 2016 at 04:12 PM
Super batteries, high efficiency motor generators, materials......

going diesel is not old tech!

In fact there are cost suggestions that CVN's are too expensive to have to find oilers all the time for gas guzzling jets.

Where all that waste goes for two full reactors 'sets'............

im1dc : , December 20, 2016 at 10:05 AM
From the GOPsters Playbook 'First move on the poor to deny necessities of life'

Wisconsin, US - 6m ago

"Wisconsin Gov. Scott Walker asks President-elect Trump for flexibility to implement drug screening, testing of some adults on SNAP - statement"

Read more on walker.wi.gov

im1dc : , December 20, 2016 at 10:10 AM
Gee, what a surprise...more lying disingenuousness from Republicans in D.C.

2016 US elections - 1h ago

"Senate Majority Leader Mitch McConnell says no select committee needed to investigate Russian meddling; says 'no question' on election interference - The Hill"

Read more on thehill.com

im1dc -> im1dc... , December 20, 2016 at 10:13 AM
This should serve as a warning to those here that put their faith in some Republican senators such as S. Lindsey Graham and S. John McCain, they can not trusted, they are straw men, sent out to make their Party look less extreme than it is in fact.
im1dc -> im1dc... , December 20, 2016 at 10:22 AM
Embracing xenophobia is not the way for Americans

US immigration reform debate - 2h ago

"Wisconsin Gov. Scott Walker asks Donald Trump for more control over refugees - AP"

Read more on madison.com

ilsm -> im1dc... , December 20, 2016 at 04:16 PM
let's have the committees read the wikileaks' stuff into the congressional record!
anne : , December 20, 2016 at 10:30 AM
http://www.nytimes.com/2016/12/19/opinion/how-republics-end.html

December 18, 2016

How Republics End
By Paul Krugman

Roman politics involved fierce competition among ambitious men. But for centuries that competition was constrained by some seemingly unbreakable rules. Here's what Adrian Goldsworthy's "In the Name of Rome" says: *

"However important it was for an individual to win fame and add to his own and his family's reputation, this should always be subordinated to the good of the Republic. The same belief in the superiority of Rome that made senators by the second century BC hold themselves the equals of any king ensured that no disappointed Roman politician sought the aid of a foreign power."

* http://erenow.com/ancient/in-the-name-of-rome-the-men-who-won-the-roman-empire/7.html

anne -> anne... , December 20, 2016 at 10:31 AM
http://erenow.com/ancient/in-the-name-of-rome-the-men-who-won-the-roman-empire/7.html

2003

In the Name of Rome: The Men Who Won the Roman Empire
By Adrian Goldsworthy

General in exile: Sertorius and the Civil War

Quintus Sertorius (c. 125–72 BC)

The Roman political élite was not unique in its competitiveness and desire to excel. The aristocracies of most Greek cities – and indeed of the overwhelming majority of other communities in the Mediterranean world – were just as eager to win personal dominance and often unscrupulous in their methods of achieving this. Roman senators were highly unusual in channelling their ambitions within fairly narrow, and universally recognized, boundaries. The internal disorder and revolution which plagued the public lives of most city states were absent from Rome until the last century of the Republic. Even then, during civil wars of extreme savagery when the severed heads of fellow citizens were displayed in the Forum, the Roman aristocracy continued to place some limits on what means were acceptable to overcome their rivals. A common figure in the history of the ancient world is the aristocratic exile – the deposed king or tyrant, or the general forced out when he was perceived to be becoming too powerful – at the court of a foreign power, usually a king. Such men readily accepted foreign troops to go back and seize power by force in their homeland – as the tyrant Pisistratus had done at Athens – or actively fought against their own city on their new protector's behalf, like Alcibiades.

Rome's entire history contains only a tiny handful of individuals whose careers in any way followed this pattern. The fifth-century BC, and semi-mythical, Caius Marcius Coriolanus probably comes closest, for when banished from Rome he took service with the hostile Volscians and led their army with great success. In the story he came close to capturing Rome itself, and was only stopped from completing his victory by the intervention of his mother. The moral of the tale was quintessentially Roman. However important it was for an individual to win fame and add to his own and his family's reputation, this should always be subordinated to the good of the Republic. The same belief in the superiority of Rome that made senators by the second century BC hold themselves the equals of any king ensured that no disappointed Roman politician sought the aid of a foreign power. Senators wanted success, but that success only counted if it was achieved at Rome. No senator defected to Pyrrhus or Hannibal even when their final victory seemed imminent, nor did Scipio Africanus' bitterness at the ingratitude of the State cause him to take service with a foreign king.

The outbreak of civil war did not significantly change this attitude, since both sides invariably claimed that they were fighting to restore the true Republic. Use was often made of non-Roman troops, but these were always presented as auxiliaries or allies serving from their obligations to Rome and never as independent powers intervening for their own benefit. Yet the circumstances of Roman fighting Roman did create many highly unorthodox careers, none more so than that of Quintus Sertorius, who demonstrated a talent for leading irregular forces and waging a type of guerrilla warfare against conventional Roman armies. Exiled from Sulla's Rome, he won his most famous victories and lived out the last years of his life in Spain, but never deviated from the attitudes of his class or thought of himself as anything other than a Roman senator and general....

ilsm -> anne... , December 20, 2016 at 04:18 PM
Anne, the analogy to the Roman republic is so far fetched.

I am deeply dismayed with pk.

anne -> anne... , December 20, 2016 at 10:36 AM
Paul Krugman has drawn on the writing of Adrian Goldsworthy to make sense of and point out what he obviously considers to be a possible undermining of the American republic. The complete Goldsworthy passage strikes me as critical in understanding Krugman.

Though Krugman has mentioned Goldsworthy before, I only began to read "In the Name of Rome" yesterday.

im1dc : , December 20, 2016 at 10:43 AM
Update re F-35

The Pentagon's fight for the F-35 with Trump has broken into the open

http://www.upi.com/Business_News/Security-Industry/2016/12/20/F-35-program-is-not-out-of-control-JSF-chief-fires-back-at-Trump/9951482251830/

"F-35 program is not 'out of control', JSF chief fires back at Trump"

By Ryan Maass ... Dec. 20, 2016 ... 1:01 PM

"WASHINGTON, Dec. 20 (UPI) -- The F-35 program is not "out of control" as President-elect Donald Trump suggests, the head of the F-35 program office asserted.

F-35 executive director Lt. Gen. Christopher Bogdan maintained the program was going as planned in response to the incoming president's controversial tweet, which appeared to threaten the plane's funding.

"The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th," Trump tweeted on Dec. 12.

The Lockheed Martin-led effort has been characterized by numerous delays since its inception. Despite the setbacks, however, Bogdan contends the program's leaders have reined in the finances for the production of the 5th-generation fighter.

"I have no doubt, that given the controversy on the F-35 program over the years, that there's a perception that this program is out of control," Bogdan told reporters. "That's in the past."

The program director went on to say industry partners have made necessary adjustments and cut excessive expenditures. However, he also conceded the development phase of the program could face additional delays..."

ilsm -> im1dc... , December 20, 2016 at 04:22 PM
Before Bogdan came to F-35 he sold the KC 46 (Boeing*) tanker which is going to be a $47B boondoggle.

Development delays.......

there are 160 "production" aircraft on the line and how much development is undone and more untested.

Out of control is buy something that ain't yet designed.

Control is relative.... what is 'in control' in Bogdan's staff meeting is not the real world.

*losing money on a fixed price Boeing will get bailed out like F-35, neither know the extent of the bail out.

im1dc : , December 20, 2016 at 10:46 AM
The only problem with Trump and the GOP today is what they think and what they do

THOUGHT OF THE DAY:

"There is always an easy solution for every human problem - neat, plausible, and wrong."

H.L. Mencken

RGC : , December 20, 2016 at 11:02 AM
Stuck

A Reason writer returns to Appalachia to ask: Why don't people who live in places with no opportunity just leave?
...............
So why don't people just leave? That question is actually surprisingly easy to answer: They did. After all, 80 percent of McDowell's population, including my grandparents, cleared out of the county to seek opportunities elsewhere during the last half-century.
......................

http://reason.com/archives/2016/12/10/stuck

anne -> RGC... , December 20, 2016 at 11:10 AM
So why don't people just leave? That question is actually surprisingly easy to answer: They did. After all, 80 percent of McDowell's population, including my grandparents, cleared out of the county to seek opportunities elsewhere during the last half-century.

[ This is critically important to understand. What has been and is necessary in economically depressed areas where development over several years time would be unlikely is to assist migration. This is precisely what was done in East Germany to pronounced benefit through Germany but is little recognized or accepted by American analysts. ]

anne : , December 20, 2016 at 11:14 AM
http://www.bradford-delong.com/2016/12/must-read-simon-wren-lewis-_understanding-free-trade_-there-you-have-in-one-calm-and-measured-paragraph-the-con.html

December 20, 2016

Simon Wren-Lewis: Understanding Free Trade: * "There you have, in one calm and measured paragraph, the contradiction at the heart of the argument...

...put forward by Liam Fox and others that leaving the European Union will allow the UK to become a 'champion of free trade'. You cannot be a champion of free trade, and have sovereignty in the form of taking back control. It is not a contradiction, of course, if you are happy to accept the regulatory standards of the US, China or India. That appears to be the position of Leave leaders like MP Jacob Rees Mogg. Ellie Mae O'Hagan spells out what this may mean in practice. Lead in toys--bring them in so we can sign a trade agreement with China. And you can be sure that this will be the nature of the discussion every time a trade deal is signed. In each case we will be told that we have to accept this drop in regulatory standards, because British export jobs are on the line.

This is the point of Dani Rodrik's famous impossible trilemma: ** you cannot have all three of the nation state, democratic politics and deep economic integration (aka free trade). His trilemma replaces sovereignty, by which is meant in this context the nation state being able to do what it likes, by democracy. In the past I have always found this problematic. Surely a democracy can decide to give away a bit of its sovereignty in return for the benefits of international cooperation (in the form of trade deals, or indeed any other kind of international cooperation). After all, every adult in a relationship knows that this relationship means certain restrictions on doing just what they would like...

* https://mainly macro.blogspot.com/2016/12/understanding-free-trade.html

** http://rodrik.typepad.com/dani_rodriks_weblog/2007/06/the-inescapable.html

-- Brad DeLong

anne -> anne... , December 20, 2016 at 11:15 AM
"Mainly Macro" must be divided to post a reference link.
anne -> anne... , December 20, 2016 at 11:33 AM
Having carefully read the essay by Simon Wren-Lewis, along with this passage from Brad DeLong, the argument here against leaving the European Union makes no sense. Though I think the UK would fare better in the EU, the bitter argument by Wren-Lewis leaves me indifferent. The idea that the UK apart from the EU would suddenly be exploited by the likes of India or China has no logic that I can find.

I have not understood the bitterness of Wren-Lewis to the Labour Party of Jeremy Corbyn since the Brexit vote, especially so since Corbyn wanted the UK to remain part of the EU.

im1dc : , December 20, 2016 at 11:19 AM
The Trump Two-Step

Carlos Slim travels to Trump at Mar-a-Lago yet tells the Lousiana victory rally ""Do not worry. We are going to build the wall,"

So who gets what they want Trump voters or Carlos Slim?

https://www.washingtonpost.com/politics/trump-dines-with-carlos-slim-as-relations-warm-with-mexican-leaders/2016/12/19/652ccf7c-c60f-11e6-bf4b-2c064d32a4bf_story.html

"Trump meets with Carlos Slim as Mexican leaders seek better relations"

By Philip Rucker, Robert Costa and Joshua Partlow...December 19 at 7:29 PM

"In the closing days of his campaign, Donald Trump vilified one of the world's richest men - Mexican billionaire Carlos Slim - as part of a globalist cabal conspiring to extinguish his populist candidacy.

Yet over the weekend, Slim journeyed to Mar-a-Lago, Trump's estate in Palm Beach, Fla., for what the president-elect described as "a lovely dinner with a wonderful man."

The peacemaking gesture - the culmination of weeks of back-channel negotiations that included a secret visit to Mexico City by a Trump envoy - signals a possible thawing between Trump and Mexico's business and political elite, which he had used relentlessly as a foil throughout his campaign.

The communications raised hopes in Mexico's business community that Trump might reconsider his vow to tear up the North American Free Trade Agreement and be persuaded to adopt less hard-line immigration and economic policies, which were cornerstones of his campaign..."

Fred C. Dobbs -> im1dc... , December 20, 2016 at 11:33 AM
"Do not worry. We are going to build the wall,"
Trump said, reiterating his promise to erect a
wall along the U.S.-Mexico border to keep out
undocumented immigrants and to make Mexico pay for it.
im1dc -> im1dc... , December 20, 2016 at 01:27 PM
Clarification

Carlos Slim travels to Trump at Mar-a-Lago yet Trump tells the Lousiana victory rally ""Do not worry. We are going to build the wall,"

im1dc : , December 20, 2016 at 01:36 PM
Trump running the country is a train wreck waiting to happen, imo, of course

POLITICS

"China Crisis Was Over Before Trump Even Tweeted About It
President-Elect Would Have Known If He Took Daily Intel Briefing"

ilsm -> im1dc... , December 20, 2016 at 04:26 PM
A crisis is when a CVN goes under.

Losing a less than useful drone on a mission of no consequence......

What did Trump say? Let them keep it.

Why not?

The better question is why waste your money and sailors time chasing a UUV?

To show a huge land power US is a maritime bully?

Fred C. Dobbs : , December 20, 2016 at 01:50 PM
Obama Races to Empty Guantánamo Before Term's End

Obama Administration Intends to Transfer 17 or 18
Guantánamo Detainees http://nyti.ms/2i9aL0z
NYT - CHARLIE SAVAGE - December 19, 2016

WASHINGTON - When Prime Minister Matteo Renzi of Italy visited the White House in October for a state dinner, he made a commitment to President Obama: Italy, which resettled a Yemeni detainee from Guantánamo Bay last summer, would take one more person on the transfer list. But before the deal was completed, Mr. Renzi resigned.

So a day after his successor, Paolo Gentiloni, formed a government on Dec. 14, Secretary of State John Kerry called to congratulate Mr. Gentiloni - and to urge him to follow through on the commitment, according to an official familiar with the negotiations. Mr. Gentiloni agreed, leading a rush to finalize the details and paperwork.

The effort was part of a burst of urgent, high-level diplomatic talks aimed at moving as many as possible of Guantánamo's 22 prisoners who are recommended for transfer. By law, the Pentagon must notify Congress 30 days before a transfer, so the deadline to set in motion deals before the end of the Obama administration was Monday.

By late in the day, officials said, the administration had agreed to tell Congress that it intended to transfer 17 or 18 of the 59 remaining detainees at the prison; they would go to Italy, Oman, Saudi Arabia and the United Arab Emirates. If all goes as planned, that will leave 41 or 42 prisoners in Guantánamo for Donald J. Trump's administration. Mr. Trump has vowed to keep the prison operating and "load it up with some bad dudes." ...

ilsm -> Fred C. Dobbs ... , December 20, 2016 at 04:27 PM
7.5 years too slow!

Of course we are growing his Iraq ending!

Good thing we dumped the crook!

anne : , December 20, 2016 at 01:56 PM
December 20, 2016

Valuation

The Shiller 10-year price-earnings ratio is currently 28.08, so the inverse or the earnings rate is 3.56%. The dividend yield is 1.98%. So an expected yearly return over the coming 10 years would be 3.56 + 1.98 or 5.54% provided the price-earnings ratio stays the same and before investment costs.

Against the 5.54% yearly expected return on stock over the coming 10 years, the current 10-year Treasury bond yield is 2.56%.

The risk premium for stocks is 5.54 - 2.56 = 2.98

anne : , December 20, 2016 at 01:56 PM
http://www.multpl.com/shiller-pe/

Ten Year Cyclically Adjusted Price Earnings Ratio, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 PE Ratio ( 28.08)

Annual Mean ( 16.71)
Annual Median ( 16.05)

-- Robert Shiller

anne -> anne... , December 20, 2016 at 01:57 PM
http://www.multpl.com/s-p-500-dividend-yield/

Dividend Yield, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 Div Yield ( 1.98)

Annual Mean ( 4.38)
Annual Median ( 4.33)

-- Robert Shiller

im1dc : , December 20, 2016 at 01:56 PM
"The Subpoena That Rocked The Election Is Legal Garbage, Experts Say"

http://www.huffingtonpost.com/entry/the-subpoena-that-rocked-the-election-is-legal-garbage-attorney-say_us_58597cd9e4b03904470b0633

"The Subpoena That Rocked The Election Is Legal Garbage, Experts Say"

'The warrant assumes that the mere existence of emails from or to Hillary Clinton is probable cause that a crime occurred'

by Matt Ferner, National Reporter, Ryan Grim, Washington bureau chief & Nick Baumann, Senior Enterprise Editor all of The Huffington Post...12/20/2016... 02:25 pm ET...Updated 16 minutes ago

"The warrant connected to the FBI search that Hillary Clinton says cost her the election shouldn't have been granted, legal experts who reviewed the document released on Tuesday told The Huffington Post.

FBI Director James Comey shook up the presidential race 11 days before the election by telling Congress the agency had discovered new evidence in its previously closed investigation into the email habits of Clinton, who was significantly ahead in the polls at the time.

When Comey made the announcement, the bureau did not have a warrant to search a laptop that agents believed might contain evidence of criminal activity. The FBI set out to rectify that two days later, on Oct. 30, when agents applied for a warrant to search the laptop, which was already in the FBI's possession. The FBI had seized the computer as part of an investigation into former Rep. Anthony Weiner, the estranged husband of Clinton aide Huma Abedin.

The unsealed warrant "reveals Comey's intrusion on the election was as utterly unjustified as we suspected at time," Brian Fallon, a Clinton campaign spokesman, said on Twitter Tuesday.

Clinton's lead in the polls shrank in the wake of Comey's announcement. Then, just days ahead of election, the FBI announced its search was complete, and it had found no evidence of criminal activity. Clinton officials believe that second announcement damaged her as much as, or more than, the first, by enraging Trump supporters who believed the fix was in.

The legal experts' argument against the validity of the subpoena boils down to this: The FBI had already publicly announced that it could not prove Clinton intended to disclose classified information. Without that intent, and without evidence of gross negligence, there was no case. The warrant offers no suggestion that proving those elements of the crime would be made easier by searching new emails.

The essence of the warrant application is merely that the FBI has discovered new emails sent between Clinton and Abedin.

That's not enough. The idea that the mere existence of emails involving Clinton may be evidence of a crime is startling, said Ken Katkin, a professor at Salmon P. Chase College of Law.

"The warrant application seems to reflect a belief that any email sent by Hillary Clinton from a private email server is probably evidence of a crime," Katkin said. "If so, then it must be seen as a partisan political act, rather than a legitimate law enforcement action."

The warrant never should have been granted, attorney Randol Schoenberg argued. "I see nothing at all in the search warrant application that would give rise to probable cause, nothing that would make anyone suspect that there was anything on the laptop beyond what the FBI had already searched and determined not to be evidence of a crime, nothing to suggest that there would be anything other than routine correspondence between Secretary Clinton and her longtime aide Huma Abedin," Schoenberg wrote in an email.

"I am appalled," he added, noting that the name of the agent in charge had been redacted in the copy of the document publicly released.

Katkin agreed. "This search warrant application appears to have been meritless. The FBI should not have sought it, and the magistrate judge should not have granted it," he :

...Federal Magistrate Judge Kevin Fox, who approved the search warrant, didn't immediately respond to a request for comment.

"The Fourth Amendment requires you to pretty much know that what you're looking for is there ― not speculation. This is just speculation," Cunningham said."

ilsm -> im1dc... , December 20, 2016 at 04:29 PM
Find an expert who actually read the Federal Records Act.

Then find another expert who has held a security clearance and stayed awake for the annual refreshed.

Appeal to unproved authority......

anne : , December 20, 2016 at 01:56 PM
http://www.multpl.com/s-p-500-dividend-yield/

Dividend Yield, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 Div Yield ( 1.98)

Annual Mean ( 4.38)
Annual Median ( 4.33)

-- Robert Shiller

anne -> anne... , December 20, 2016 at 02:08 PM
Accidentally posted here, should have been and was subsequently posted above.
im1dc : , December 20, 2016 at 03:11 PM
Bogle on factoring in Total Return on stocks vs Speculative Return

http://www.marketwatch.com/story/jack-bogles-secrets-to-becoming-a-winning-investor-2016-12-20

"Jack Bogle tells you the secret to becoming a winning investor"

By Chuck Jaffe, Columnist...Dec 20, 2016...11:40 a.m. ET

..."On smart beta investing in general:

Bogle: Smart beta is stupid.

So not one of these new index products is intriguing?

Bogle: No, no, no, no, no. Academics can find anything with these masses of data they have on their computers. They can find something that works in the past, it's as easy as rolling off a log. But it almost never works in the future – and not for very long - because they all forget the most important single thing that happens in our markets reversion to the mean. As the Good Book says, 'And the first shall be last and the last shall be first.'...

On what to expect from the market:

Bogle: The key to stock market investment returns is today's dividend yield [around 2%] plus future earnings growth. Nobody knows what that earnings growth will be, but I am guessing it will be maybe in the range of 4% to 5%. That seems like an informed reasonable expectation.

You compare that with history and we are looking at something very different. An average dividend yield not of 2% but of maybe 4.5%, and earnings growth has averaged over 6% over the last 50 years.

So we have lower earnings forecast and a much lower dividend yield built in. No one is going to change that. It's like buying a bond, what is the interest rate when you buy in. So we're talking about lower returns from investment side, from what corporations do.

The other side of total return on stocks is what we call speculative return, and that's how bullish or bearish investors are, which is measured by the price/earnings multiple -- how many times earnings your companies sell at or the total stock market sells at. Over the long-term past, that number has been about 15 times earnings. Today, depending on who you are listening to, it could be as high as 25 times earnings. ...I look backward at reported earnings after all the bad stuff and I'm looking at a p/e of 25. So the market is at least fully valued and I think it is reasonable to expect possibly negative returns but certainly no positive speculative return.

So we're looking at future market returns, if we are lucky, of 4-5% before the costs of investing are deducted."

Mr. Bill : , December 20, 2016 at 03:14 PM
"So many opinions, yet, only one truth".

Mr. Bill (maybe)

Mr. Bill -> Mr. Bill... , December 20, 2016 at 03:18 PM
I mean that I am suffering, physically, about the ramifications of Donald Trump being officially elected as the next President of the United States of America. I feel despondent, looking through gloomy glass, looking for a bright shiny object to deflect, even if only for a moment.
ilsm -> Mr. Bill... , December 20, 2016 at 04:31 PM
Come to Massachusetts weed is legal!
im1dc -> Mr. Bill... , December 20, 2016 at 04:32 PM
Relax, the Republic will survive, but stay vigilant and active.
Mr. Bill : , December 20, 2016 at 03:22 PM
I mean if we immediately try to impeach him, we would have Mike Pence (ak Tung) as president. Maybe we could embroil him in a four year impeachment process.

As he slashes his way, destroying Social Security and Medicare.

Mr. Bill -> Mr. Bill... , December 20, 2016 at 03:35 PM
Oh my God, who is a female, doesn't like me much and is totally disgusted with humans, in general.

Mike Pence as president of the new nighted state of merica.

Double, or triple, the security around Trump.

im1dc : , December 20, 2016 at 03:55 PM
About the US Weekly Rig Count - DETAILS

http://maritime-executive.com/article/us-rig-count-up-on-land-flat-offshore

"U.S. Rig Count Up on Land, Flat Offshore
permian"

By MarEx...2016-12-16

"For the seventh week in a row, the benchmark Baker Hughes Rig Count trended upwards, bringing the combined count of active oil and gas rigs in the U.S. to 637. However, only 22 of these were offshore rigs, essentially unchanged from the same period last year.

The largest part of the onshore increase was in Texas, where activity in the Permian Basin and Eagle Ford fields has brought the state's count by 14 rigs in one week. Taken together, the Permian and Eagle Ford accound for nearly half of U.S. drilling activity, with 302 rigs between them. Compared with offshore projects, onshore shale drilling campaigns like those in the Eagle Ford are remarkably inexpensive and brief; a shale well's breakeven price point is typically in the range of $30-40, depending on the field, and it is often a matter of weeks between setting up a rig and pumping first oil.

West Texas Intermediate crude prices were at $52 per barrel on Friday, well above the price point that would induce shale producers to begin new drilling, analysts say. In addition, Goldman Sachs raised its outlook for crude oil prices for mid-2017, predicting WTI prices at $57.50 by the second quarter. Goldman cited the recent OPEC and non-OPEC agreements to cut production by 1.6 million barrels per day, and said that it expects compliance with the cut agreement in excess of 80 percent.

However, assuming that the OPEC agreement holds and that competitors do not raise output to offset it, a price of $57.50 is still below the level at which many offshore projects become competitive, says Wood Mackenzie. In July, the firm found that only 20 percent of deep- and ultra-deepwater projects at the pre-FID stage are commercially viable at $60 per barrel – suggesting that offshore activity may remain quiet until prices rise further."

im1dc : , December 20, 2016 at 04:19 PM
U.S. Tests Autonomous Swarmboats

aka CARACaS

http://maritime-executive.com/article/us-tests-autonomous-swarmboats

"U.S. Tests Autonomous Swarmboats"

YouTube Video link:
https://www.youtube.com/watch?v=pGsdaqpq-5w

"...The autonomy technology being developed by ONR is called Control Architecture for Robotic Agent Command and Sensing, or CARACaS. The components that make up CARACaS (some are commercial off-the-shelf) are inexpensive compared to the costs of maintaining manned vessels..."

ilsm -> im1dc... , December 20, 2016 at 04:32 PM
If they work as good as a littoral combat ship......

What could go wrong?

ilsm : , -1
Results of the coup:

Unfaithful Electors:

Clinton -5

Trump -2

Cuckoo beats crook! Again.

[Dec 21, 2016] Michigan Lame Duck Legislature

Dec 21, 2016 | angrybearblog.com

The Republican controlled House and Senate has been largely busy passing bills in the few days left in 2016. This particular one caught my eye.

Michigan had put in place a new Unemployment System (Michigan Data Automated System or MiDAS) to help in detecting unemployment fraud. With the passage of Senate Bill 1008 by the Republican led House , $10 million is transferred from the Unemployment Contingent Fund to the General Fund to be done with in the General Fund as determined by the Republican held Legislature.

Just a little history; MiDAS was put in place (2013) by Governor Rick Snyder of Flint, Michigan fame to automate the system away from the manual process. The system sends out a series of questions, which the Unemployment Applicant has to answer picking from listed answers. There is no room for explanation. The claimants chosen answers from the list of answers are then loaded into the MiDAS data base and notification is sent to the former employer who then confirms the answers the claimant has listed in the system. If there is any discrepancy, MiDAS assumes the claimant has committed a potential fraud.

Another questionnaire is then sent to the claimant, which is also limited to listed responses. If you do not respond in 10 days, it is assumed a fraud has been committed as determined by MiDAS. A notice is "supposedly" sent out and the claimant has 30 days to answer. If no notice is sent out and the claimant does not answer, MiDAS assumes fraud and the issue goes to collections where just about anything can take place to collect the unemployment funds already given to the claimant. There is little or no human interaction throughout the process and little can be done to explain circumstance during the process.

" The Michigan Unemployment Insurance Agency , partly at the request of the federal government and partly on its own, reviewed 22,427 cases in which a computer determined a claimant had committed civil fraud between October 2013 and October 2015 and found that 20,965 of those cases did not involve fraud. Unemployment Insurance Agency spokesman Dave Murray said on Wednesday. That's an error rate of more than 93%."

The $10 million will be transferred from the Unemployment Contingent Fund which had already grown by 400% after the MiDAS caused spike in fraud cases of which nearly all of them unfounded. Senate Bill 1008 is balancing the state budget on the backs of innocent citizens wrongfully accused of false unemployment claims.

Governor Rick Snyder spent $47 million of taxpayer funds to install MiDAS which has been shown to be correct in determining fraud < 7% of the time. Rather than give the funds to those who were unjustly denied Unemployment Compensation by MiDAS, the Republican led Michigan legislature and Republican governor Rick Snyder are keeping much of it in the Unemployment Contingent (used to train workers and for rainy days) and will also transfer $10 million of it to the General Fund to help balance the budget. This is the same as using the additional Medicaid funding received from the expansion to balance the budget rather than set it aside for later years which would have kept Michigan from having to add to Medicaid funding till 2027. It too was used to balance the budget. By doing so in both cases, the Republicans do not have to raise taxes on the rich in income.

Longtooth , December 18, 2016 8:14 pm

What? You mean to tell me that a conservative right wing republican controlled government is trying to eliminate or grossly reduce a valued safety net feature provided by government (public funds)?

What is the world coming to?

P.S. Did you perhaps think conservatives favor and support public funds use in safety nets for labor (as opposed to capital owner's safety nets)? Whatever gave you that idea? Reagan's "welfare queen" speech perhaps?

run75441 , December 18, 2016 10:24 pm

Actually, it is the failure of Snyder and the Repubs to acknowledge the error of "MiDAS" in swindling all Michigan citizens in general and have chosen to keep the funds they have swindled rather than acknowledge the error publically and give the funds to those hurt by "MiDAS." Mistakes do happen and it would have been easy enough to fix by adding an area for explanation and in doing two mailings of the questionnaire to the Unemployment applicant. The state is attempting to eliminate people using a computer system which does not allow for applicant error and inturn is not 100% fool-proof in mailing out notification.

The state has already acknowledged that 93% of the time it has made an error and yet they have failed to reconcile it.

beene , December 19, 2016 7:26 am

Run, if you want to correct problems like this; where error is a feature. Make it a criminal fraud to sell the state or federal government a program that the error rate is more than 4%.

Beverly Mann , December 19, 2016 9:13 am

The problem with that suggestion, Beene, is that fraud-criminal or civil-requires knowledge of falsity, or intent to steal. The idea of declaring a particular error rate a criminal fraud is a non sequitur; it's absurd.

But selling a system that so clearly had no ability to accomplish its supposed purpose, and whose purpose seems to have actually been to simply kill the unemployment compensation program-and whose method was accusing virtually everyone of fraud who applied for unemployment compensation-does not appear to be mere incompetence. It does appear to be knowing-i.e., a fraud.

And I would think it is prosecutable. The Justice Dept. apparently hasn't pursued the matter, and of course under Sessions it won't. But two years from now, there will be a Democrat about to be inaugurated as governor and, hopefully also, a Dem as AG. Ingram County (Lansing, the state capitol) is always Dem, I believe, and even now it's prosecutors probably could launch a criminal-fraud inquiry-and it should. But the statute of limitations probably will not have run by, say, mid-2019, so it will still be prosecutable then by a Dem AG's office. And presumably, this will be a big campaign issue statewide in 2018.

Which brings me to this: In virtually every instance (the one exception is Romney during his first two years as governor after running as a moderate, before starting to run as far-right presidential primary candidate) of some rightwing successful businessperson winning a state governorship (and now, president), on the claim that he's been such a success at business, and, well, shouldn't the government be run like a business, that person has proved utterly incompetent. Snyder and Illinois governor Bruce Rauner are exhibits A and B; Florida governor Rick Scott is Exhibit C.

As for people who were falsely accused of fraud under what itself was a fraudulent system, they should file a class action lawsuit in state court against the folks who sold the state that snake oil.

Warren , December 19, 2016 9:44 am

You seem to be assuming the problem is with the computer system. If the computer system is simply implementing the law, then there is no fraud by the company that created it. Perhaps the problem is in the law itself, or with the people who do not return the forms when they are supposed to.

Bill White , December 19, 2016 1:44 pm

There is a very interesting book, written by the estimable Math Babe (www.mathbabe.org), Cathie O'Neill about this phenomenon called Weapons of Math Destruction. I can't recommend it enough. Combining the supposed lack of bias of statistics, conservative's ardent desire to treat the government as just another tool for personal monetary profit and the right's natural desire to kick people when they are down and steal their lunch money means these stories will just proliferate.

The headline in last Sunday's San Jose Mercury News was all about AI as the next wave of technological profit making. The future is not likely to be comforting. Instead of asking where our jetpacks are, we will be asking where all our stuff went.

[Dec 20, 2016] What's shocking about that chart AlexS is that even with the sharp price increases of oil between 2000 and 2014, the oil R/P ratio has still steadily declined. With investment having been crushed in the last few years, looks like we are facing a Seneca cliff

Notable quotes:
"... What's shocking about that chart AlexS is that even with the sharp price increases of oil between 2000 and 2014, the oil R/P ratio has still steadily declined. With investment having been crushed in the last few years, looks like we are facing a Seneca cliff. ..."
Dec 20, 2016 | peakoilbarrel.com

AlexS says: 12/19/2016 at 8:28 am

George,

The situation with global natural gas is different.

1) There is significant spare capacity in a number of countries. For example, Russia has reduced gas production in the past few years due to falling demand from Europe, but can easily increase it if demand returns.

2) There are significant developed and undeveloped proven reserves. Reserves/production ratio is much higher for natural gas (see the chart below).

3) Natural gas resources are generally explored less than oil. Potential for increase in proven reserves is much bigger for natural gas.

The countries and regions with significant resource potential and able to sharply increase production include: Iran, U.S., Russia, East Mediteranean, several countries in Asia (including China).
Several countries in Africa are not producing at full potential.

Global proven reserves / production ratio for oil and natural gas
source: BP Statistical Review of World Energy 2016

VK says: 12/19/2016 at 4:27 pm
What's shocking about that chart AlexS is that even with the sharp price increases of oil between 2000 and 2014, the oil R/P ratio has still steadily declined. With investment having been crushed in the last few years, looks like we are facing a Seneca cliff.
Synapsid says: 12/19/2016 at 5:46 pm
George Kaplan,

I got a bit of a shock when I read the caption in small print: Data excludes onshore Canada, US lower-48 onshore, and US shallow-water.

AlexS says: 12/19/2016 at 6:01 pm
The chart is named "Annual conventional oil and gas volumes discovered".

Onshore Canada production is dominated by oil sands; US lower-48 onshore – by tight oil.
Conventional output in both cases is from mature fields; and there were no major conventional discoveries for many years.

US shallow-water GoM is also a mature province. New discoveries were made in deepwater GoM.

[Dec 19, 2016] Michigan unemployment agency made 20,000 false fraud accusations – report

Notable quotes:
"... One bankruptcy attorney told the Detroit Metro Times he had as many as 30 cases in 2015 tied to debt from the UIA; before the automated system was implemented, he said he would typically have at most one per year with such claims. The newspaper also found claimants who were charged with fraud despite never having received a single dollar in unemployment insurance benefits. ..."
"... A pair of lawsuits were filed in 2015 against the UIA over Midas. According to a pending federal case, in which the state revealed it had discontinued using Midas for fraud determinations, the system "resulted in countless unemployment insurance claimants being accused of fraud even though they did nothing wrong". ..."
"... Blanchard told the Guardian in February that many unemployment applicants may not have realized they were even eligible to appeal against the fraud charge, due to the setup of Midas. Attorneys representing claimants have said that many refuse to ever apply for unemployment benefits again. ..."
"... Levin, who represents part of metropolitan Detroit, said in his statement that Michigan officials had to fully account for the money that has flowed into the unemployment agency's contingent fund. ..."
Dec 18, 2016 | www.theguardian.com
Michigan government agency wrongly accused individuals in at least 20,000 cases of fraudulently seeking unemployment payments, according to a review by the state.

The review released this week found that an automated system had erroneously accused claimants in 93% of cases – a rate that stunned even lawyers suing the state over the computer system and faulty fraud claims.

"It's literally balancing the books on the backs of Michigan's poorest and jobless," attorney David Blanchard, who is pursuing a class action in federal court on behalf of several claimants, told the Guardian on Friday.

The Michigan unemployment insurance agency (UIA) reviewed 22,427 cases in which an automated computer system determined a claimant had committed insurance fraud, after federal officials, including the Michigan congressman Sander Levin, raised concerns with the system.

The review found that the overwhelming majority of claims over a two-year period between October 2013 and August 2015 were in error. In 2015, the state revised its policy and required fraud determinations to be reviewed and issued by employees. But the new data is the first indication of just how widespread the improper accusations were during that period .

The people accused lost access to unemployment payments, and reported facing fines as high as $100,000. Those who appealed against the fines fought the claims in lengthy administrative hearings. And some had their federal and state taxes garnished. Kevin Grifka, an electrician who lives in metro Detroit, had his entire federal income tax garnished by the UIA, after it accused him of fraudulently collecting $12,000 in unemployment benefits.

The notice came just weeks before Christmas in 2014.

"To be honest with you, it was really hard to see your wife in tears around Christmas time, when all of this went on for me," Grifka said.

The computer system claimed that he had failed to accurately represent his income over a 13-week period. But the system was wrong: Grifka, 39, had not committed insurance fraud.

In a statement issued on Friday, Levin called on state officials to review the remaining fraud cases that were generated by the system before the policy revision.

"While I'm pleased that a small subset of the cases has been reviewed, the state has a responsibility to look at the additional 30,000 fraud determinations made during this same time period," he said.

Figures released by the state show 2,571 individuals have been repaid a total of $5.4m. It's unclear if multiple cases were filed against the same claimants.

The findings come as Michigan's Republican-led legislature passed a bill this week to use $10m from the unemployment agency's contingent fund – which is composed mostly of fines generated by fraud claims – to balance the state's budget. Since 2011, the balance of the contingent fund has jumped from $3.1m to $155m, according to a report from a Michigan house agency.

The system, known as the Michigan Integrated Data Automated System (Midas), caused an immediate spike in claims of fraud when it was implemented in October 2013 under the state's Republican governor, Rick Snyder, at a cost of $47m.

In the run-up to a scathing report on the system issued last year by Michigan's auditor general, the UIA began requiring employees to review the fraud determinations before they were issued.

The fraud accusations can carry an emotional burden for claimants.

"These accusations [have] a pretty big burden on people," Grifka said. While he said the new findings were validating and his own case had been resolved, he called for state accountability.

"There's no recourse from the state on what they're doing to people's lives. That's my biggest problem with all of this."

Steve Gray, director of the University of Michigan law school's unemployment insurance clinic, told the Guardian earlier this year that he routinely came across claimants facing a significant emotional toll. As a result, he said, the clinic added the number for a suicide hotline to a referral resource page on the program's website.

"We had just a number of clients who were so desperate, saying that they were going to lose their house they've never been unemployed before, they didn't know," said Gray, who filed a complaint with the US labor department in 2015 about the Midas system.

The fines can be enormous. Residents interviewed by local news outlets have highlighted fraud penalties from the UIA upwards of $100,000 . Bankruptcy petitions filed as a result of unemployment insurance fraud also increased during the timeframe when Midas was in use.

One bankruptcy attorney told the Detroit Metro Times he had as many as 30 cases in 2015 tied to debt from the UIA; before the automated system was implemented, he said he would typically have at most one per year with such claims. The newspaper also found claimants who were charged with fraud despite never having received a single dollar in unemployment insurance benefits.

A pair of lawsuits were filed in 2015 against the UIA over Midas. According to a pending federal case, in which the state revealed it had discontinued using Midas for fraud determinations, the system "resulted in countless unemployment insurance claimants being accused of fraud even though they did nothing wrong".

Blanchard told the Guardian in February that many unemployment applicants may not have realized they were even eligible to appeal against the fraud charge, due to the setup of Midas. Attorneys representing claimants have said that many refuse to ever apply for unemployment benefits again.

A spokesman for the unemployment insurance agency, Dave Murray, said it appreciated Levin's work on the issue and said it was continuing "to study fraud determinations".

The agency had already made changes to the fraud determination process, he said, and "we appreciate that the state legislature this week approved a bill that codifies the reforms we've set in place".

Levin, who represents part of metropolitan Detroit, said in his statement that Michigan officials had to fully account for the money that has flowed into the unemployment agency's contingent fund.

"While I am pleased that $5m has been repaid, it strikes me as small compared to the amount of money that was collected at the time," he said. "Only a full audit will ensure the public that the problem has been fully rectified."

ManuSHeloma 12 Feb 2016 9:02

Another failure of Gov Snyder's administration: first Flint water, now this. What can the people of Michigan expect next? The recall of Snyder should be automated.
stuinmichigan pepspotbib 12 Feb 2016 10:02
It's not just Snyder and his lackies. You should see the radically gerrymanderd Michigan legislature, run by rightist extremists, directed by the Koch Brothers, the DeVos family and others, via the ALEC program that provides them with the radical right legislation they have passed and continue to pass. Snyder ran saying that sort of stuff was not really on his agenda, but continues to sign it. He's either a liar, an unprincipled idiot, or both. It's bad here. And it's getting worse.
DarthPutinbot 12 Feb 2016 9:09
What the f*ck is wrong in Michigan? Split it up among the surrounding states and call it good. Michigan destroyed Detroit and cutoff their water. Michigan deliberately poisoned the residents of Flint. Too many Michigan lawyers are crooks or basically inept. The court system screws over parents in divorce cases. And now, Michigan is wrongly trying to collect money from people on trumped up fraud charges. Stop it. The federal government needs to take over the state or bust it up.
Non de Plume 12 Feb 2016 9:23
Hell, when the system *works* it's ridiculous. Watching my Dad - who had worked continuously since 14 years old save a few months in the early 90s - sitting on hold for hours... At least once a week, to 'prove' he still deserved money from a system he paid into. Hours is not an exaggeration.

And now this. Goddammit Lansing! How many other ways can you try to save/take money from the poor and end up costing us so much more?!?

Bailey Wilkins stuinmichigan 12 Feb 2016 21:56
Nothing against The Guardian's reporting, but if you follow the links, you'll see FOX 17 has been covering the story locally since last May. It's their investigation that got the attention of all the other publications (including Detroit Metro Times.) Local papers could have done a better job though, agreed on that.
talenttruth 12 Feb 2016 12:48
Leering, Entitled Republican bastards like Governor Snyder simply HATE poor people. And THAT is because all such bullies are cowards, through-and-through, always selecting as their "victims" those who can't fight back. And, since such Puritan Cretins as Snyder "Believe" that they are rich because of their superior merit, it stands to reason (doesn't it) that "poor people" (actually, all us Little Folk) have NO merit, because we didn't inherit a Trust Fund, Daddy's Business or other anciently stolen wealth. These people deserve stunningly BAD Karma. Unfortunately, Karma has its own timeline and doesn't do what seems just, on a timely basis (usually).
Jim Uicker 12 Feb 2016 13:29
With today's sophisticated algorithms, computers are used to flag insurance claims all the time. The hit rate is usually much better than 8%. But how can they even consider automating the adjudication of fraud? Fraud is a crime; there should be a presumption of innocence and a right to due process. Without telling people they had a right to appeal, didn't this system violate the constitutional rights of Michigan's most vulnerable citizens: those with no job and therefore no money to defend themselves?

And what about the employers who paid unemployment insurance premiums month after month, expecting the system to protect their employees from business conditions that would necessitate layoffs? Michigan has defrauded them as well, by collecting premiums and not paying claims.

Jim Uicker 12 Feb 2016 13:51
Even if the problem with Midas can be entirely blamed on the tech workers who built and tested the software, there is no excuse for the behavior of the Snyder administration when they became aware of the problem. Just like the cases of legionnaires disease, where the state failed to alert the public about the outbreak and four more people died, the Snyder administration is again trying to sweep its mistakes under the rug.

Before taking Midas offline, the UIA refused to comment on the Metro Times investigation, and Snyder himself artfully avoided reporters' questions after being made aware of the result of an investigation by a local television station. Now the state only revealed that it shut down Midas to a pending lawsuit.

The state spent $47 million dollars on a computer system and then took it offline because it didn't work. The flaws in the system are now costing the state many millions more. This level of secrecy is evidence of bad government. The state is supposed to be accountable to taxpayers for that money! Even if the Snyder administration isn't responsible for all of these tragedies, it is definitely responsible for covering them up.

Jefferson78759 12 Feb 2016 13:55
This is the GOP "governing"; treat the average person like a criminal, "save" money on essential infrastructure like water treatment, regardless of the consequences.

I get why the 1% votes GOP but if you're an average person you're putting your financial and physical well being on the line if you do. Crazy.

MaryLee Sutton Henry 12 Feb 2016 22:30
I was forced to plead guilty by a public defender to the UIA fraud charge & thrown in jail for 4 days without my Diabetic meds or diet in Allegan county. As it stands right now the State of Michigan keeps sending me bills that are almost $1000 more then what the county says I own. I have done community service, and between witholding tax refunds and payments I have paid over $1200 on a $4300 total bill. I have literally spend hours on the phone with UIA and faxing judgements trying to straighten this out, yet still get bills for the higher amount from UIA. Its a nightmare, I have a misdominer, until its paid and refuse to pay no more then $50 per month until they straighten this out. Maybe joining the class action law suit would help. Does anyone have any better ideas??
Teri Roy 13 Feb 2016 13:27
My son and I both got hit, I was able to dispute mine but he has autism and they would not dismiss his, so at 24 yrs old he's paying back 20 grand in pentailies and interest. Just not right
Outragously Flawless 14 Feb 2016 9:42
I also received a letter stating I owe and hadn't file taxes since 2007. I had to find all of my taxes from 2007 to 2013 my question is why did they wait over 5yrs to contact me, or is that the set up H&R block does my taxes and they didn't have records that far back.#sneakyass government

[Dec 16, 2016] Deplete America first as national policy. The US is wasting its precious oil deposits like there is no tomorrow

Dec 16, 2016 | peakoilbarrel.com
Instead of switch to hybrids and smaller cars as well as using nat gas for local city tranport they are trying to comsume as much as possible. Without high tax of SUVs and opther "oil waisting" personal tranporation veiches it is impossible to sustain the US economy. the only question is when it falls from the cliff.

Boomer II says:

12/15/2016 at 1:00 pm
I've never understood the urgency of using up US oil so quickly. Better to buy someone else's at a cheap price and save ours for a time when it is depleted elsewhere.
robert wilson says: 12/15/2016 at 1:50 pm
Burn America First
shallow sand says: 12/15/2016 at 3:44 pm
I was going to type deplete America first, LOL.
likbez says: 12/16/2016 at 10:54 am
Its' not only the USA. KAS, Iran and Russia are doing the same. There are a lot of short termism obsessed politicians besides Obama administration

Especially KAS in 2014-2016. Who were instrumental in the current oil price crash.

But behavior of the Iran and Russia was also deplorable. Iran decided to get back its former market share at all costs. But they like KAS are governed by religious fanatics, so what we can expect?

At the same time Russia, which theoretically should be a rational player and have enough space and steel to build huge national oil reserves, using it as alternative currency reserves, did nothing. Instead Russia also increased oil production selling its national treasure left and right, while prices were hovering below $50.

Another bunch of short termism obsessed suckers. So much about Putin as a great statesman. And what he got in return for his stupidity - only additional sanctions and allegations that he fixed elections for Trump. Such a huge payoff.

IMHO of big oil producing nations only China behaved rationally.

Oil is not renewable resource and burning it in large SUVs and small trucks carrying one person to commute to work is a suicide. That's what the USA is doing on the national scale. Add to this all those wars for the expansion of the US neoliberal empire, the USA is fighting, which also consume large amount of oil and it looks even worse. See
http://www.ucsusa.org/clean_vehicles/smart-transportation-solutions/us-military-oil-use.html

The U.S. military is the largest institutional consumer of oil in the world. Every year, our armed forces consume more than 100 million barrels of oil to power ships, vehicles, aircraft, and ground operations-enough for over 4 million trips around the Earth, assuming 25 mpg.

So out of the total US oil consumption (let's say 20 MB/day) around 0.3 MB/day is consumed by military. I think that the figure in reality might be twice larger that cited as it is not clear how consumption of planes operating in Iran, Syria, Libya, Yemen (and generally outside the USA) is counted. But even 0.3 Mb/day is approximately the same amount that Greece, or Sweden, or Philippines are consuming. The latter is a country with over 100 million people.

In twenty-forty years this period would probably be viewed as really crazy.

[Dec 15, 2016] 12/14/2016 at 7:41 pm

Dec 15, 2016 | peakoilbarrel.com
According to OPEC Monthly Oil Market Report for December, the group's crude oil production rose by 150 kb/d from 33.72 mb/d in October to 33.87 mb/d in November. These estimates are based on secondary sources.
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMR%20December%202016.pdf

The IEA's estimate from its Oil Market Report shows an even bigger growth: by 300 kb/d to 34.20 mb/d, led by increases from Angola along with Libya and Saudi Arabia. The group's output stood 1.4 mb/d higher than a year ago.
https://www.iea.org/oilmarketreport/omrpublic/

According to a Reuters survey, in November, OPEC produced a record 34.19 million barrels per day (bpd) from 33.82 million bpd in October.
https://www.rt.com/business/369348-oil-russia-budget-opec/

OPEC countries are pumping oil at the highest rate for the past several years, ahead of the announced output cuts in January 2017.

OPEC crude oil production, 2014-16
Source: OPEC Monthly Oil Market Report, December 2016 (secondary sources)

AlexS says: 12/15/2016 at 5:40 am
China's crude oil production increased 3.6% in November from the previous month to about 3,915 kb/d, the highest since July.
Output was down 382 kb/d (8.9%) from the same month last year.
Crude production has fallen 294 kb/d (6.9%) in the first 11 months of 2016 to 3,984 kb/d.

Comment from Bloomberg:

"China's output has declined this year as state-owned firms shut wells at mature fields that are too expensive to operate at current prices. The country needs oil above $50 a barrel to stabilize production, according to analysts at Sanford C. Bernstein, as well asFu Chengyu, the former chairman of both Cnooc Ltd. and China Petroleum & Chemical Corp. Production is forecast to drop 335,000 barrels a day this year, followed by a further slide next year of 240,000 barrel a day, the International Energy Agency said Tuesday.
"November's output pickup is probably just a blip, which won't likely persist," said Gao Jian, an analyst with Shandong-based industry consultant SCI International. "For the next six months, unless oil prices stay above $50 a barrel, we we won't see solid recovery."
The rise in production last month was in anticipation of higher crude prices amid OPEC meetings, said Amy Sun, an analyst with Shanghai-based commodities researcher ICIS-China.

China's annual crude output is seen falling to 200 million tons this year (about 4 million barrels a day), down roughly 7 percent from nearly 215 million tons last year, according to estimates from SCI International and ICIS-China."

https://www.bloomberg.com/news/articles/2016-12-13/china-oil-output-rebounds-from-7-year-low-on-opec-led-price-gain

China's crude + condendate production (mb/d).
Source: China's National Bureau of Statistics

AlexS says: 12/15/2016 at 5:47 am
China's C+C production in 2002-2016 (mb/d)

Heinrich Leopold says: 12/15/2016 at 6:51 am
AlexS,

It could be also a clever strategy to buy cheap oil from the market and leave China's oil in the ground as a strategic oil reserve.

AlexS says: 12/15/2016 at 7:40 am
I agree. It was a rational decision to cut output from high-cost fields, which was loss-making at low oil prices, rather than maximizing production.

I think that, with oil prices at $50-60, China will be able to temporarily stabilize output

shallow sand says: 12/15/2016 at 11:35 am
Yes, the US clearly needs some kind of energy policy, and I think one thing that highlights how badly this is needed is the ability of anyone who can raise the money to be able to drill 96 horizontal wells in one section of land (two if the laterals are the two mile variety).

But, I guess any mention of conservation in the US industry these days is heresy.

I would not be too critical of Chinese production falling. Seems to me they are buying up all the cheap oil they can from overproducing nations, and storing it. Makes sense to me.

[Dec 13, 2016] Both China and India experienced record crude oil demand in November

Dec 13, 2016 | peakoilbarrel.com
shallow sand, 12/13/2016 at 12:05 am
Read on CNBC that both China and India experienced record crude oil demand in November, 2016, with China up 3.4% yoy and India up 12.1% yoy.
Boomer II, 12/13/2016 at 12:28 am
"Read on CNBC that both China and India experienced record crude oil demand in November, 2016, with China up 3.4% yoy and India up 12.1% yoy."

I went looking for something about this and have found nothing on CNBC or anywhere else. Do you have a link?

Watcher, 12/13/2016 at 2:48 am
China's consumption growth was 5% last year. India 7%.

Of course it's growing, maybe even accelerating. Population does.

There really isn't much doubt how this ends, once ppl get past the pearl clutching.

likbez,, 12/13/2016 at 10:52 am
According to Yahoo ( http://finance.yahoo.com/news/iea-ups-oil-demand-forecast-095410829.html ):

IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate.

likbez, 12/13/2016 at 11:40 am

Realistically the only country that can substantially increase its oil production in 2017 in Libya. But that requires the end of the civil war in the country which is unlikely. Iran card was already played.

Iraq is producing without proper maintenance. At some point they might have substantial difficulties.

[Dec 13, 2016] IEA ups oil demand forecast for 2017, says next few weeks are 'crucial' for markets after OPEC deal

Notable quotes:
"... The IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate. ..."
finance.yahoo.com

...OPEC ... crude output in November was 34.2 million barrels per day (mb/d) - a record high - and 300,000 barrels a day higher than in October.

The IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate.

[Dec 13, 2016] OPEC Monthly Oil Market Report

Notable quotes:
"... Peak oil is not just about cars. Oil is the reason why our civilization exists in its current form. Oil is why we have 7 billion people on this planet. Oil is about agriculture and food supply, it is about distribution of everything we buy and not least it is about the raw materials for many if not most of our goods. It is about almost every economic and social transaction that takes place. ..."
"... It is unbelievable what misinformation has been spread by the media. I attended a public forum of the Australian Energy Council and one participant thought that OPEC had increased oil production. My presentation on the need to replace oil by natural gas as transport fuel (instead of exporting it as LNG) was met with silence and did not spark a debate. Another participant was running away when he heard the word peak oil. ..."
"... Further re climate, most agree CO2 is a greenhouse gas but estimates of the temperature change caused by a doubling of its concentration have been coming down over the last 15 years. In other words, it may not warrant the type of policy response that is being promoted at present. ..."
"... Meanwhile the IPCC projections continue with climate sensitivity estimates of 3 to 6 degrees when the more recent estimates of ECS and TRC are consistently under 2 degrees. So contrary to what is alleged above, there is lots of doubt about the IPCC models. ..."
"... I agree with author. If you look at 2 previous OPEC meetings, the players claim disorder and inability to control output only to find resolution the day after the meeting. I believe OPEC is setting up for a freeze as we are only 1% oversupplied now. If the OPEC big wigs need to fatten the bank accounts, what better way than to set up your own long call on the cheap? ..."
"... Balance this with Iran and Iraq incapable of proper well maintenance and we will soon see inadequate supply not later than 2qtr 17′. ..."
Dec 13, 2016 | www.opec.org
is out with crude only production numbers for October 2016. All charts are in thousand barrels per day.

OPEC crude only production reached 33,643,000 barrels per day in October. This includes Gabon. Since May, OPEC production has increased 1.05 million barrels per day.

World oil supply is very near its November 2015 peak.

steve from virginia says: 08/10/2014 at 12:30 pm
All this oil tens of billions of barrels all of it non-renewable, never to be seen- or made use of again for a hundred million or more years, for all practical purpose, ever!

the greatest bulk of it put into cars where it is wasted, by people driving aimlessly in circles from gas station to gas station for entertainment purposes only By way of this idiocy we destroy ourselves and our futures. We aren't doomed, we are damned.

Mike, Sydney says: 10/10/2014 at 6:05 pm
The big mistake most energy illiterates make is to talk about their cars when the peak oil subject comes up. Most hope or assume that another form of fuel or energy will power their ride post oil.

Peak oil is not just about cars. Oil is the reason why our civilization exists in its current form. Oil is why we have 7 billion people on this planet. Oil is about agriculture and food supply, it is about distribution of everything we buy and not least it is about the raw materials for many if not most of our goods. It is about almost every economic and social transaction that takes place.

When oil becomes expensive our economies and societies will implode, jobs and goods imported from far away will disappear. This will apply worldwide. The citizens of Addis Ababa are just as dependent as the ones in Amsterdam or Atlanta.

We have exhausted most of our soils and lost the skill to eke out a living from Mother Nature without fertilizers and machines. Could it be that the least "developed" countries will lead post oil because our "developed" nations are the least able to cope without oil?

Ron Patterson says: 10/10/2014 at 6:45 pm
Mike, that's exactly what I have been trying to tell folks for years. Most just don't want to believe it. They see solar, wind and other such things as keeping BAU going for awhile.

Why don't you post over on the post section. We get a lot more traffic over there.

Peak Oil Barrel

Argh says: 04/06/2015 at 1:35 pm
Big mistake thinking that this crisis will not arrive with plenty of time to avoid it. Oil prices will rise slowly over time. However we create energy, we will find a way to pay for locomotion or create food.

Oil is down 50% This is because of new sources of supply combined with continuing energy efficiency improvement. Doomed or damned, don't hold your breath. I am sure you will find something else -- perhaps global warming, now climate change, to scare people with.

Don Wharton says: 06/10/2015 at 7:54 pm
Argh. Your comment suggests that you are a militantly ignorant troll. 97% of the competent climatologists fully support the IPCC global warming summary model. There is no reasonable doubt about this science.

In my opinion there has been a revolution in drilling technology over recent years. However, the measured rate of additional improvement is now very modest as measured by the US EIA.

Most of the recent improvement is explained by the discovery and exploitation of sweet spots which are being rapidly drained. For an objective look at prospects going forward for oil and gas you should read David Hughes' Drilling Deeper report.

This is an exhaustive analysis based on a data base of all existing US oil and gas wells. It impressively documents a future of peak oil and gas based on fully exploiting fracking technology. I don't see any magical technology that will get the projected fossil fuel resources required for business as usual. It is just not there.

Nick G says: 12/15/2015 at 2:43 pm
Oil is the reason why our civilization exists in its current form.

Not really. There's nothing magical about oil. 100 years ago civilization was pretty recognizable, and it didn't require oil.

Oil is about agriculture and food supply

For the moment. Batteries and synthetic fuel can move tractors. Electricity (from many sources) can create fertilizer.

it is about distribution of everything we buy

Rail works awfully well.

is about the raw materials for many if not most of our goods.

Meh. It produces some of our raw materials. But plastic can be produced from a lot of different hydrocarbons, and it's production doesn' necessarilly create CO2, so we could produce plastic from coal for centuries. That's plenty of time for a smooth transition.

jay says: 09/24/2016 at 7:36 am
"Not really. There's nothing magical about oil. 100 years ago civilization was pretty recognizable, and it didn't require oil." You missed his point entirely. The reason there is 7 billion people now is because of oil and what it has done for industrial, agriculture ect ect ect.

There was 1.7 billion people 100 years ago. How many people do you think would be here if not for oil and all it has done?

">For the moment. Batteries and synthetic fuel can move tractors. Electricity (from many sources) can create fertilizer<".

This is lack of a better word retarded for you to even consider that a battery will be used even in the distant future to power agricultural machinery on a mass scale. Maybe the little ride on mower you cut grass with, but that is it.

" Rail works awfully well."

Ya it does, but when it gets to a terminal, it will have to be unloaded and transported then. Which basically happens now, so what is your point? And your last comment I wont even pick apart because you obviously know little to very little about the uses of oil and the advantages it has brought humanity.

Johnny Honda says: 10/13/2015 at 2:44 am
@ Steve from Vaginia: Did you ever consider that some People have to drive to *work* and *produce* so that you can sit around and swing your testicles and so that your mommy can prepare your lunch and dinner?

So when you sit around the whole day you can think what happens in 300 years, when most of the oil and gas has been used up. We don't have time for that, but we are sure that People will find a solution.

Rubber Johnny says: 10/13/2015 at 5:59 am
One or the solution will be not driving to work and wasting time in gridlock so we can have more time to swing our balls be 'productive' on our own and our real community's terms. Real community that includes momma

Rubber Johnny

Argh says: 04/06/2015 at 1:30 pm
Oil will get more expensive, some day slowly. Right now the cost is down (50%!!!) because of new sources and efficiency improvements. I think that those who predict doom will be disappointed.
SRSrocco says: 10/12/2015 at 1:23 pm
Argh,

The falling EROI destroys your lousy assumption in spades. Your time might be better spent burning books or working on one of the dozen worthless Presidential campaigns.

Steve

RSAldeen says: 04/29/2015 at 1:50 pm
Oil is very precious raw material, our demand for oil increases day after day, year after year and century after another. The search and use other sources such as atomic, wind, tide, solar, geothermal and others will continue but the prospects / trend to keep on using oil as a main source of energy still quite high and will continue with time due to the following reasons:
Matt Mushalik says: 05/12/2015 at 7:25 pm
Thanks for the graphs. Saudi Arabia may be ramping up production ahead of the air-conditioning season. Around 600 kb/d are needed in the hottest month.

It is unbelievable what misinformation has been spread by the media. I attended a public forum of the Australian Energy Council and one participant thought that OPEC had increased oil production. My presentation on the need to replace oil by natural gas as transport fuel (instead of exporting it as LNG) was met with silence and did not spark a debate. Another participant was running away when he heard the word peak oil.

Greg Surgener says: 08/20/2015 at 3:57 am
Matt,

Im lost by ur comments. 1st of all the graphs clearly show that Opec has increased production by 2+m/d in the last year.

2ndly, Saudi's oil output charts above are for just Oil not NG. Ive never been there, are you suggesting they run generators from oil for electricity and subsequent air conditioning. Why wouldn't they run thier power plants on Natural Gas? Please educate me.

No doubt that investor sentiment and market makers are playing a significant role in price decline, as opposed to actual supply/demand issues. How do you find out how much the Opec nations have sold oil short in the various markets. Not a bad deal for them, if they can lay rigs down World wide and make the money in the commodity markets while doing so. But prices can only slide so far and for so long before that game is up. It seems like if short selling or hedging slows, buyers will outweigh sellers and the price should rise soon

Your thoughts?

Greg

Ron Patterson says: 08/20/2015 at 5:41 am
Greg, Saudi Arabia is very short of natural gas and have been for several years now. They would love to run all their power plants and desal plants on natural gas if they just had enough of it. They don't. They do burn a lot of natural gas but their supply is far short of what they need.
Nick G says: 12/15/2015 at 12:48 pm
Ron,

As best I can tell, KSA is short of NG because they've fixed the price at a very low level to subsidize domestic companies that use NG.

What have you seen about that?

Ron Patterson says: 08/20/2015 at 8:43 am
...Saudi is producing flat out right now just like every other OPEC country except Iran. Sanctions are holding Iran back. Political violence is holding Libya back, but they are still producing every barrel they can. It's just that violence keeps them from producing any more.
Keith says: 08/29/2015 at 4:55 am
A few comments:

Most polls show a split of about 60 40 in terms of views on climate science, rather than 97 3 despite what POTUS may have tweeted.

Further re climate, most agree CO2 is a greenhouse gas but estimates of the temperature change caused by a doubling of its concentration have been coming down over the last 15 years. In other words, it may not warrant the type of policy response that is being promoted at present.
http://climateaudit.org/2014/09/24/the-implications-for-climate-sensitivity-of-ar5-forcing-and-heat-uptake-estimates-2/

Meanwhile the IPCC projections continue with climate sensitivity estimates of 3 to 6 degrees when the more recent estimates of ECS and TRC are consistently under 2 degrees. So contrary to what is alleged above, there is lots of doubt about the IPCC models. The latter point comes from peer reviewed science, by, among others, Nic Lewis.

Keith says: 08/29/2015 at 6:44 am
Another point of interest is the relative steadiness of Venezuelan production. Allegedly various of the empresas mixtas (Joint Ventures between PDVSA and International Oil Co.'s) are not proportionally funded by PDVSA as they should be. As a result production is down or is not reaching targets. Apparently contractor companies will not accept new contracts from PDVSA unless they set up an escrow account or other arrangement that guarantees payment in foreign currency. It is surprising therefore that Venezuelan production shows a slight rise since December.
skykingww says: 10/22/2016 at 4:35 pm
Yes one day we will be without oil that is pumped from the earth. This is not going to happen for 100's of years. Our intellect will probably find chemical or biological solution to this problem long before we run out. If not humanity will survive. Global warming, yes its real and one day the Sun will double in size and engulf the earth. I am not worried about either. I hate winter anyway.

The problem humanity will face and not discussed near enough is the lack of clean drinking water. Everyday it becomes harder to deliver enough clean water to all areas in need. States fight over the rights to what little water pass through their terrain every year. Many times it has to be pumped from other states at a premium. The worlds population grows larger every second. crops demand more and more. Ethanol was forced on us without thought as usual by the oil fear mongers. You do not grow food to solve a commodity problem.

The land resources, water resources, and corrosive properties that Ethanol introduced far out weigh any benefit accomplished but still its forced down our throats destroying everything its poured into. So please build those oil pipelines all across the country and pump that oil at rates that keep our prices low so I can drive in circles any time I feel like it. I am not going to worry about it because about the time we run out of oil we will need those pipelines to pump clean water to all that need it.

Eric Sepp says: 11/01/2016 at 2:56 pm
I agree with author. If you look at 2 previous OPEC meetings, the players claim disorder and inability to control output only to find resolution the day after the meeting. I believe OPEC is setting up for a freeze as we are only 1% oversupplied now. If the OPEC big wigs need to fatten the bank accounts, what better way than to set up your own long call on the cheap?

OPEC will shut in wells before the Fed adjusts interest rates resulting in magnified downward pressure on oil.

Balance this with Iran and Iraq incapable of proper well maintenance and we will soon see inadequate supply not later than 2qtr 17′.

cmejunkie says: 11/14/2016 at 4:05 pm
Angola: October 2016 decline – chiefly due to Dalia maintenance (though might have peaked in this cycle as no major is rushing to invest in Angola's deepwater wells). http://www.brecorder.com/markets/energy/europe/314268-angolan-oct-crude-oil-exports-to-fall-as-dalia-enters-maintenance.html

[Dec 11, 2016] Comic Book Hayek The Planners Promise Utopia

Notable quotes:
"... I had always thought Hayek made some good critical points about the illusions of socialists/utopians and then chose to ignore the fact that his criticism also applied to his ..."
"... So maybe Hayek didn't overlook the fact that his critique also applied to his utopia. Maybe he knew full well he was misrepresenting what he was selling, engaging in exactly the same propaganda techniques that he attributed to others. ..."
"... A Rovian strategy - conceal your weakness by attacking others on precisely that issue. ..."
"... The Road to Serfdom put out in the US after WWII, which was full of this inflammatory sort of thing that doing anything to ameliorate the harder edges of capitalism put one inexorably on the road to serfdom. ..."
"... In the actual RtS one finds Hayek himself supporting quite a few such amiliorations, most notably social insurance, especially national health insurance well beyond what we even have in the US now with ACA. ..."
"... The problem for lovers of Hayek, and arguably Hayek himself, is that he simply never repudiated this comic book version of his work, even as he and many of his followers got all worked up when people, such as Samuelson, would criticize Hayek for this comic book version of the RtS, pointing out his support for these ameliorations in the original non-comic book version. ..."
"... However, Samuelson in his last remarks on Hayek, which I published in JEBO some years ago, effectively said that Hayek had only himself to blame for this confusion. ..."
"... I have been thinking that maybe both "sides" in our mostly brainwashed America today could agree with the meme of "DRAIN-THE-SWAMP" and hope to see it carried proudly on protest signs by the non-zombies of both sides in the ongoing social upheaval. ..."
"... I agree that "accuse the other side of doing what you are doing" is a familiar ploy of the right. ..."
Dec 11, 2016 | angrybearblog.com

Sandwichman | December 10, 2016 12:51 am
In his neo-Confederate "Mein Kampf," Whither Solid South , Charles Wallace Collins quoted a full paragraph from Hayek's The Road to Serfdom regarding the emptying out of the meaning of words. My instinct would be not to condemn Hayek for the politics of those who quote him. Even the Devil quotes Shakespeare.

But after taking another look at the Look magazine comic book edition of Hayek's tome, I realized that Collins's depiction of full employment as a sinister Stalinist plot was, after all, remarkably faithful to the comic-book version of Hayek's argument. With only a little digging, one can readily infer that what the comic book refers to as "The Plan" is a policy also known as full employment (or, if you want to get specific, William Beveridge's Full Employment in a Free Society ). "Planners" translates as cartoon Hayek's alias for Keynesian economists and their political acolytes.

To be sure, Hayek's sole reference to full employment in the book is unobjectionable - even estimable almost:

That no single purpose must be allowed in peace to have absolute preference over all others applies even to the one aim which everybody now agrees comes in the front rank: the conquest of unemployment. There can be no doubt that this must be the goal of our greatest endeavour; even so, it does not mean that such an aim should be allowed to dominate us to the exclusion of everything else, that, as the glib phrase runs, it must be accomplished "at any price". It is, in fact, in this field that the fascination of vague but popular phrases like "full employment" may well lead to extremely short-sighted measures, and where the categorical and irresponsible "it must be done at all cost" of the single-minded idealist is likely to do the greatest harm.

Yes, single-minded pursuit at all costs of any nebulous objective will no doubt be short-sighted and possibly harmful. But is that really what "the planners" were advocating?

Hayek elaborated his views on full employment policy in a 1945 review of Beveridge's Full Employment in a Free Society, in which he glibly characterized Keynes's theory of employment as "all that was needed to maintain employment permanently at a maximum was to secure an adequate volume of spending of some kind."

Beveridge, Hayek confided, was "an out-and-out planner" who proposed to deal with the difficulty of fluctuating private investment "by abolishing private investment as we knew it." You see, single-minded pursuit of any nebulous objective will likely be short-sighted and even harmful unless that objective is the preservation of the accustomed liberties of the owners of private property, in which case it must be done at all cost!

Further insight into Hayek's objection to Keynesian full-employment policy can be found in The Constitution of Liberty . The problem with full employment is those damn unions. On this matter, he quoted Jacob Viner with approval:

The sixty-four dollar question with respect to the relations between unemployment and full employment policy is what to do if a policy to guarantee full employment leads to chronic upward pressure on money wages through the operation of collective bargaining .

and

it is a matter of serious concern whether under modern conditions, even in a socialist country if it adheres to democratic political procedures, employment can always be maintained at a high level without recourse to inflation, overt or disguised, or if maintained whether it will not itself induce an inflationary wage spiral through the operation of collective bargaining

Sharing Viner's anxiety about those damn unions inducing an inflationary wage spiral "through the operation of collective bargaining" was Professor W, H, Hutt, author of the Theory of Collective Bargaining, who "[s]hortly after the General Theory appeared argued that it was a specific for inflation."

Hutt, whose earlier book on collective bargaining "analysed [and heralded] the position of the Classical economists on the relation between unions and wage determination," had his own plan for full employment . It appeared in The South African Journal of Economics in September, 1945 under the title "Full Employment and the Future of Industry." I am posting a large excerpt from Hutt's eccentric full employment "plan" here because it makes explicit principles that are tacit in the neo-liberal pursuit of "non-inflationary growth":

Full employment and a prosperous industry might yet be achieved if what I propose to call the three "basic principles of employment" determine our planning .

The first basic principle is as follows. Productive resources of all kinds, including labour, can be fully employed when the prices of the services they render are sufficiently low to enable the people's existing purchasing power to absorb the full flow of the product.

To this must be added the second basic principle of employment. When the prices of productive service have been thus adjusted to permit full employment, the flow of purchasing power, in the form of wages and the return to property is maximised .

continued .

The assertion that unemployment is "voluntary" and can be cured by reducing wages is the classical assumption that Keynes challenged in the theory of unemployment. Hutt's second principle, that full employment, achieved by wage cuts, will maximize the total of wages, profit and rent thus would be not be likely to command "more or less universal assent," as Hutt claimed. But even if it did, Hutt's stress on maximizing a total , regardless of distribution of that total between wages and profits, is peculiar. Why would workers be eager to work more hours for less pay just to generate higher profits? Hutt's principles could only gain "more or less universal assent" if they were sufficiently opaque that no one could figure out what he was getting at, which Hutt's subsequent exposition makes highly unlikely.

Hutt's proposed full employment plan consisted of extending the hours of work, postponing retirement and encouraging married women to stay in the work force. He advertised his idea as a reverse lump-of-labor strategy. Instead of insisting - as contemporary economists do - that immigrants (older workers, automation or imports) don't take jobs, Hutt boasted they create jobs, specifically because they keep wages sufficiently low and thus maximize total returns to property and wages combined. He may have been wrong but he was consistent. Nor did he conceal his antagonism toward trade unions and collective bargaining behind hollow platitudes about inclusive growth .

The U.S. has been following Hutt-like policies for decades now and the results are in :

For the 117 million U.S. adults in the bottom half of the income distribution, growth has been non-existent for a generation while at the top of the ladder it has been extraordinarily strong.

Or perhaps Hutt was right and what has held back those at the bottom of the income distribution is that wages have not been sufficiently low to insure full employment and thus to maximize total returns to labor and capital. The incontestable thing about Hutt's theory is that no matter how low wages go, it will always be possible to claim that they didn't go sufficiently low enough to enable people's purchasing power to absorb the full flow of their services.

coberly , December 10, 2016 11:52 am

I can't claim to know all of what Hayek meant. but I did read one of his books and it was clear he did not mean what the right has taken him to not only mean, but to have proved.

In any case it is dangerous (and a bit stupid) to base policy on what someone said or is alleged to have said. Especially economists who claim to have "proved" some "law" of economics.

That said, i wonder if some of what is said here is the result of over-reading what someone (else) as said: to be concerned with policies "to the exclusion of all else" is not the same as rejecting the policies while keeping other things in mind. and to recognize the potential of labor unions to force inflationary levels of wages is not the same as opposing labor unions.

neither the advocates in favor of or those opposed to the extreme understanding of these cautions –including the authors of them if that is the case - are contributing much to the development of sane and humane policy.

Sandwichman , December 10, 2016 12:40 pm

I had always thought Hayek made some good critical points about the illusions of socialists/utopians and then chose to ignore the fact that his criticism also applied to his neo-liberal utopia. But I followed up the passage quoted by Collins and it turns out that Hayek was discussing a statement made by Karl Mannheim, which he quoted out of context and egregiously misrepresented -- a classic right-wing propaganda slander technique. So here is Hayek talking about emptying out the meaning from words and filling them with new content and he is doing just that to the words of another author.

So maybe Hayek didn't overlook the fact that his critique also applied to his utopia. Maybe he knew full well he was misrepresenting what he was selling, engaging in exactly the same propaganda techniques that he attributed to others. By accusing others first of doing what he was doing, it made it awkward for anyone to point out that he was doing it, too. A Rovian strategy - conceal your weakness by attacking others on precisely that issue.

Barkley Rosser , December 10, 2016 1:21 pm

One of the problems with Hayek is that there was always this conflict between the "comic book Hayek" and the more scholarly and careful Hayek. In fact, there really was a comic book version of The Road to Serfdom put out in the US after WWII, which was full of this inflammatory sort of thing that doing anything to ameliorate the harder edges of capitalism put one inexorably on the road to serfdom.

In the actual RtS one finds Hayek himself supporting quite a few such amiliorations, most notably social insurance, especially national health insurance well beyond what we even have in the US now with ACA.

The problem for lovers of Hayek, and arguably Hayek himself, is that he simply never repudiated this comic book version of his work, even as he and many of his followers got all worked up when people, such as Samuelson, would criticize Hayek for this comic book version of the RtS, pointing out his support for these ameliorations in the original non-comic book version.

However, Samuelson in his last remarks on Hayek, which I published in JEBO some years ago, effectively said that Hayek had only himself to blame for this confusion.

psychohistorian , December 10, 2016 3:08 pm

To me it comes down to whether government is structured to serve all or some obfuscated minority of all. With that as the divider it is easy to decipher Hayek's work and others.

I have been thinking that maybe both "sides" in our mostly brainwashed America today could agree with the meme of "DRAIN-THE-SWAMP" and hope to see it carried proudly on protest signs by the non-zombies of both sides in the ongoing social upheaval.

coberly , December 10, 2016 6:41 pm

Sammich

I agree that "accuse the other side of doing what you are doing" is a familiar ploy of the right.

I don't know what Hayek was really saying, or if he let the comic book version stand because he was so flattered to have his child receive such adulation, or just because he was in his dotage and didn't really understand how he was being misrepresented if he was.

but the fun thing to do with Hayek is to point out what he "really" said to those who have only heard the comic book version

if anyone is still talking about him at all. seems there was a big rush of talk about Hyak a few years ago and now it has faded.

[Dec 11, 2016] The solution to limited Earth resources is to substitute redistribution for growth. A refinement is to redefine standard of living, so it isnt just standard of consumption but measures quality of life

Notable quotes:
"... I'd like to see a lot more about steady-state economics on here; that means I and you should dig up articles and sources and send them to "blogger" or to Lambert for the Watercooler. They don't take assignments and they're infernally busy, but they do appreciate suggestions. ..."
www.nakedcapitalism.com

Webstir December 10, 2016 at 12:40 pm

From the Automatic Earth link:

"Every species that finds a large amount of free energy reacts the same way: proliferation. The unconscious drive is to use up the energy as fast as possible. If only we could understand that. But understanding it would get in the way of the principle itself. The only thing we can do to stop the extinction is for all of us to use a lot less energy. But because energy consumption provides wealth and -more importantly- political power, we will not do that. We instead tell ourselves all we need to do is use different forms of energy."

In the wake of the election, I have heard many on here (including the curators) talking about how the election was all about jobs - read economic growth. As Herman Daly has pointed out, perpetual growth is an oxymoron when constrained by a finite number of energy resources. So please, can someone on here offer an explanation for the obvious cognitive dissonance? In general, I'm convinced most of the people that interact on this page would call themselves environmentalists.

So how, out of the other side of our mouth, can we talk about focusing on economic growth as a panacea to our political problems? This goes to the root of what I think my most important mission is moving forward. Namely, finding a way to bring labor and environmentalism together. Thoughts anyone?

MyLessThanPrimeBeef December 10, 2016 at 2:34 pm

To avoid death, for many people, it means having a job (or more).

When one is not facing death, one can elevate oneself to think about high ideals when one is exceptional, perhaps one can do that while looking at the Grim Reaper.

I believe we can happier with a smaller GDP. That's not growth. That's opposite of growth.

As it turns out, the destination is easy to understand. Perhaps because its too late to avoid arriving there, as more a few have commented, the game now is about taking control during the journey with many climate renaissance sweet spots to live comfortable around the globe. That game is tied to wealth and power inequality.

It's not about cutting down overall carbon emissions, but who should cut more. It's not that there will be droughts, but securing water sources huge underground aquifers, for example.

And so on and so forth.

To the extent the deplorables are visible now, it gives hope that the journey will not be one where they're simply jettisoned along the way.

Grebo December 10, 2016 at 2:35 pm

An important question.

Growth means an increase in wealth. Wealth and energy do not have a one-to-t-one relation, it seems to me. A low-energy appliance can be more valuable than a high-energy one, for example. So sustainable growth means doing more with less. Recycle old inefficient wealth into new, more efficient wealth.
Wealth can also mean services, and many services can be performed without much use of energy or resources.

Oregoncharles December 10, 2016 at 3:07 pm

You're not alone. In fact, there's NC slang for the concept: "groaf."

The contradiction is built into liberal economics, including MMT. The political motive is that reality turns economics into a zero-sum game: the "grim science." As far as I know, Daly and his movement are the only ones to really address the problem.

The solution is to substitute redistribution for growth. A refinement is to redefine "standard of living," so it isn't just "standard of consumption" but measures quality of life. Of course, redistribution is a big political challenge; furthermore, it tends to encourage growth – poor people spend all they get.

I'd like to see a lot more about steady-state economics on here; that means I and you should dig up articles and sources and send them to "blogger" or to Lambert for the Watercooler. They don't take assignments and they're infernally busy, but they do appreciate suggestions.

Here's the basic source: CASSE, http://steadystate.org/ .

craazyboy December 10, 2016 at 5:55 pm

Pretty easy really. I'll wing it and create a new offshoot of economics.

I'll call it Refrigerator Economics. Growth for the consumer would be if it could purchase the good old refrigerator that lasted 25 years and pay 10% more to include energy saving technology. More insulation and more efficient motor/compressor. Even if this doesn't sound very innovative.

Growth for the industry is when they crappify and sell 9 year refrigerators for the same money. Then the consumer has to buy a new one and have the old one hauled to a landfill. Industry is busy digging holes to obtain resources to make the new crappy refrigerator. In spite of industry being known for it's beady eyed efficiency, typically these are not even the same hole in the ground. Buying furniture works the same way.

Conventional economic theory tells us the second way is better. One more reason to hate economics.

Jeremy Grimm December 10, 2016 at 7:47 pm

I believe in the growth of knowledge as contributing to the GNP. We could invest in basic research. The H1-B problem could be eliminated with major research efforts employing the brightest and best from around the world. We used to do that kind of thing - the space race provides a pale example. There are problems to solve - major problems - and we are on the cusp of great discoveries in many fields. I am most bullish on chemistry and biochemistry.

If unused or under-utilized labor really is available to be employed through the machinations of fiat currency I can't think of a better application of excess capacity than putting the many researchers we've trained to work doing research.

Oregoncharles December 10, 2016 at 11:28 pm

Another approach: http://www.truth-out.org/news/item/38675-stop-fixating-on-economic-growth-let-s-talk-about-quality-of-life ;

Grebo December 10, 2016 at 7:34 pm

I skimmed it the other day. Found it too long and whiny I'm afraid, but then I'm technically minded and long familiar with the issues.

It seems unlikely to me that we can prevent the collapse of technological civilisation worldwide due to our exhaustion, pollution and destruction of the ecosphere. We would need to reduce our population quite quickly, keep (or put) most of it in poverty and only allow a small elite to live like Americans. This seems to be the current gameplan.

A more ethically acceptable, but less certain, approach would be to try to quickly bring everyone up to a level of prosperity and security where population falls naturally, whilst minimising resource use and pollution. The latter will require technological improvements and is a race against time and energy depletion. It will also require some kind of defeat of the current elite.

[Dec 11, 2016] 2016 should see a new record for OPEC exports due to ramp-up in production and exports from Saudi Arabia, Iran and Iraq.

Dec 11, 2016 | peakoilbarrel.com
AlexS says: 12/08/2016 at 5:40 am
BP's numbers for oil exports (available from 1980) and production less consumption (available from 1965) are slightly different, which may reflect changes in inventories and other balancing items.

According to BP, Middle East oil exports in 2015 was 20.6 mb/d, the record for the period from 1980.
Production less consumption was 20.5 mb/d vs. all-time high of 20.8 mb/d in 1976-1977.
But 2016 should see a new record due to ramp-up in production and exports from Saudi Arabia, Iran and Iraq.

Middle East oil exports (mb/d)
Source: BP Statistical Review of World Energy

[Dec 09, 2016] It looks like shale oil is a USA phenomenon with no appreciable production anywhere else in the world but the shale oil phenomenon has given the entire world the illution the peak oil does not exist, an idea that had no valid support in the real world

Notable quotes:
"... The real danger is that the media, as well as the general public, has been sold the idea that peak oil has now been discredited because of shale oil. It has not. And that only increases the dramatic shock effect it will have when it finally becomes obvious that peak oil has arrived. ..."
"... Of course some will agree but say that "No big deal, renewables will make peak oil a non event!" And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion anyway. ..."
"... To me, that is like a farmer saying I estimate next year and beyond that the cost of seed, chemicals, fertilizer, fuel, labor, real estate taxes, etc, will fall by 60%. I am not familiar with any commodity based business where that is reality. Yet almost ALL US LTO did the same thing, 30-60% reduction. ..."
"... The point is, had they not done that, they would have basically lost ALL of their proved reserves at 2015 prices. My point is, how can a company that is losing large amounts, pre-reserve write downs, have any economic reserves? If the costs cannot all be recovered for the well at SEC prices, there are no reserves for that well. ..."
"... 2016 SEC prices are about $10 lower. We shall see what they come up with. ..."
"... I also agree peak oil will be obvious before long, I think eventually (by 2020 at least unless a big recession intervenes) oil prices will rise, maybe to $100/b. Most will expect a big surge in output, but any surge will be small (1 Mb/d at most) and likely short lived (if it happens at all). ..."
Dec 09, 2016 | peakoilbarrel.com
Survivalist says: 12/07/2016 at 5:06 pm
Hi Ron. Thanks for your awesome website. The word blog doesn't do it justice.. It is truly the best, and attracts a great group of commenters. May I ask how you might see 'serious depletion' playing out, roughly speaking? Do you have any predictions or wild ass guesses on the slope of the production decline or perhaps where world crude plus condensate production might be by 2020 and/or 2025? Given your wisdom and insight into human nature what are your feelings about the human response to these future conditions?
Ron Patterson says: 12/07/2016 at 6:57 pm
Do you have any predictions or wild ass guesses on the slope of the production decline or perhaps where world crude plus condensate production might be by 2020 and/or 2025?

Not really. We all had a pretty good idea where things were heading until shale oil raised its ugly head. No one that I know of predicted that. But now it looks like shale oil is a USA phenomenon with no appreciable production anywhere else in the world.

My strong feeling right now is that the shale oil phenomenon has given the entire world the idea that peak oil is, or was, an illusion or an idea that had no valid support in the real world.

But peak oil is as real as it ever was. The amount of recoverable oil in the ground is finite. We may have had the numbers wrong in our personifications because of shale oil. But that does not change the big picture. The peak oil phenomenon is as real as it ever was.

The real danger is that the media, as well as the general public, has been sold the idea that peak oil has now been discredited because of shale oil. It has not. And that only increases the dramatic shock effect it will have when it finally becomes obvious that peak oil has arrived.

Of course some will agree but say that "No big deal, renewables will make peak oil a non event!" And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion anyway.

shallow sand says: 12/07/2016 at 7:27 pm
Ron.

Like the "US phenomenon" comment.

2016 10K will be out in late February-early March for US LTO producers.

It will be interesting to compare 2014, 2015 and 2016. In particular I am waiting to see the estimates of future cash flows to see how much more the engineering firms let them slash future estimated production costs and estimated future development costs.

In my opinion, there was a lot of hocus pocus in those particular numbers, which, of course provide the basis for proved reserves and PV10.

The amounts slashed from 2014 to 2015 were incredible, for example Mr. Hamm's CLR dropped its estimate of future production costs by 60%.

To me, that is like a farmer saying I estimate next year and beyond that the cost of seed, chemicals, fertilizer, fuel, labor, real estate taxes, etc, will fall by 60%. I am not familiar with any commodity based business where that is reality. Yet almost ALL US LTO did the same thing, 30-60% reduction.

The point is, had they not done that, they would have basically lost ALL of their proved reserves at 2015 prices. My point is, how can a company that is losing large amounts, pre-reserve write downs, have any economic reserves? If the costs cannot all be recovered for the well at SEC prices, there are no reserves for that well.

2016 SEC prices are about $10 lower. We shall see what they come up with.

Oldfarmermac says: 12/08/2016 at 3:15 pm
"And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion anyway."

I think the odds are pretty good that Ron is right. We can hope that Dennis C and the others who think production will stay on a plateau for a while and then gradually decline rather slowly are right.

If they are, and the electric car industry does as well as hoped, then the economy national and world wide can probably adapt fast enough to avoid catastrophic economic depression brought on specifically by scarce and expensive oil.

If for some reason, any reason, oil production declines sharply and suddenly, for a long period or permanently, we are going to be in a world of hurt.

People need not starve, at least in richer and economically advanced countries, but millions of people could lose their jobs and a lot of businesses dependent on cheap travel would fail. The effects of these lost jobs would expand outward thru the economy doing Sky Daddy alone knows how much damage.

In poor countries, starvation is a real possibility.

The time frame I have in mind in making this comment is out to twenty or thirty years. After that, it's anybody's guess what the population will be, and what the economy will be like.Hell, it's anybody's guess as far as next week is concerned, so far as that goes.

Dennis Coyne says: 12/07/2016 at 6:30 pm
Hi Ron

I agree.

Plateau until 2019 or 2020 then some decline slow at first and gradually accelerating. Unless a recession hits in that case acceleration is more rapid.

Ron Patterson says: 12/07/2016 at 7:00 pm
Thanks Dennis, on the rare occasion where we agree. :-)
Dennis Coyne says: 12/07/2016 at 8:00 pm
Hi Ron,

I also agree peak oil will be obvious before long, I think eventually (by 2020 at least unless a big recession intervenes) oil prices will rise, maybe to $100/b. Most will expect a big surge in output, but any surge will be small (1 Mb/d at most) and likely short lived (if it happens at all).

Whether oil prices spike and this leads to either Great Depression(GD) 2 or a lot of EV and plugin sales is unknown, it might be the latter at first with GD2 following between 2025 and 2030. It will depend on how quickly oil output falls, I think it might be 1% or less until 2030 if oil prices are high with faster decline rates once the depression hits.

As usual big WAGs by me. Of course nobody knows, but your insights on how things might play out would be interesting.

Guy Minton says: 12/07/2016 at 8:00 pm
You are a smart man, Dennis 😊
Dennis Coyne says: 12/07/2016 at 8:01 pm
Hi Guy,

When I agree with Ron of course. LOL.

BloomingDave says: 12/07/2016 at 9:07 pm
Hi Dennis,
If I am not mistaken, you have moved up your estimate of global petroleum peak, and perhaps the pace of the decline.
Just months ago, your opinion was that it would not occur until 2025. Are you moved by any specifics that you would like to share?
Thank you, and as a follower of your good work, I appreciate your insight.
Javier says: 12/09/2016 at 6:48 am
Yes, that is a change of position. It used to be 2025. Another advance and we are in.

[Dec 09, 2016] EIAs Short-Term Energy Outlook Peak Oil Barrel

Dec 09, 2016 | peakoilbarrel.com
VK says: 12/07/2016 at 1:17 pm
Steve at SRS Rocco report has a new, very informative post up showing that Middle East oil exports are lower today than 40 years ago!

"According to the 2016 BP Statistical Review, the Middle East produced 30.10 mbd of oil in 2015 compared to 22.35 mbd in 1976. This was a growth of 7.75 mbd. However, Middle East domestic oil consumption increased from 1.51 mbd in 1976 to 9.57 mbd in 2015. Thus, the Middle Eastern economies devoured an additional 8.06 mbd of oil during that 40 year time-period."

Would be great to see an update on the global export land model that Jeff Brown (westexas) used to update us on. How much C+C is available on the global markets as of today after domestic consumption?

Jeff says: 12/07/2016 at 2:04 pm
I´m not Jeff B. but if I remember last version of BP stats. correctly, the net export market has been on a bumpy plateau between 2005-2015. It has varied between 41-44 Mb/day (approx.). 2015 set a record which was just slightly higher than 2005. It´s possible that 2016 will be slightly higher.
Survivalist says: 12/07/2016 at 3:31 pm
I like this link.

http://mazamascience.com/OilExport/

World exports have been bumpy flat for 10 years or so.

Ecuador might be an importer soon'ish.

I like this site as I take an interest in observing the changes as exporters become importers. The country charts provide some rough idea of those timings.

Jeff says: 12/08/2016 at 3:39 am
2015 was indeed a net export record. The increase came mainly from Canada, Iraq and Russia. Iran may boost net exports in 2016, Kazakhstan will also add some. At least to me it seems unlikely that net-exports will grow substantially above the 2015/16-level. Increase from the mentioned countries will be needed to compensate decline in Mexico, Colombia, etc (+problems in Venezuela). Seems more likely it will continue on the plateau or decline. Nigeria and Libya are wildcards.

mazamascience also use BP-data but seems to give a much higher number, ~48Mb/day. Don't know why.

AlexS says: 12/08/2016 at 6:01 am
How do you calculate world total net export numbers if total global exports = total global imports?

Meanwhile, BP statistics for world oil exports (not net exports) show a rising trend.
I expect further increase in 2016, due to rising exports from Saudi Arabia, Iran, Iraq and Russia.

AlexS says: 12/08/2016 at 6:50 am
The IEA Oil Market Report, November 2016 on Iran's oil production and exports:

"With gains of 810 kb/d so far this year, Iran has emerged as the world's fastest source of supply growth. Crude oil output rose by 40 kb/d in October to reach a pre-sanctions rate of 3.72 mb/d and shipments of crude oil climbed well above 2.4 mb/d, a rate not seen in at least seven years.
For six straight months, the National Iranian Oil Co (NIOC) has been exporting more than 2 mb/d of crude – double the volume seen under sanctions."

AlexS says: 12/08/2016 at 6:54 am
Iraqi oil production and exports in 2016 were also above 2015 levels

source: IEA OMR, November 2016

AlexS says: 12/08/2016 at 6:59 am
According to JODI, Saudi Arabia's crude and refined product exports in January-September 2016 was about 460 kb/d higher than 2015 average.

Watcher says: 12/08/2016 at 10:16 am
So that says KSA domestic consumption is 2ish mbpd?

Are we comfortable with that?

AlexS says: 12/08/2016 at 10:36 am
3.3 mb/d in 2015

http://peakoilbarrel.com/texas-update-november-2016/#comment-587974

Watcher says: 12/08/2016 at 4:32 pm
But that's not what your chart says, in controvention to BP's data.

Your chart says KSA exports at 9. Production is known or thought to be 10.5. And since consumption is all liquids, that chart's products level is the correct number.

9 subtracted from 10.5. Leaves 1.5 consumption.

This looks bogus.

Did email BP. Waiting.

AlexS says: 12/08/2016 at 5:13 pm
10.5 is crude only.
Total liquids (including condensate and NGLs) was 12.0 mb/d in 2015 (BP number)
Jeff says: 12/08/2016 at 7:00 am
BP data. Only include countires if production > consumtion. Net export = sum(production – consumption).

Compared with your figure, US, for example, is thus not included, Canada has a lower value (import light), etc.

[Dec 05, 2016] Neoliberalism has only exacerbated falling living standards

Notable quotes:
"... the capitalist economy is more and more an asset driven one. This article does not even begin to address the issue of asset valuations, the explicit CB support for asset inflation and the effect on inequality, and especially generational plunder. ..."
"... the problem of living standards is obviously a Malthusian one. despite all the progress of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming, and now irreversible. "the market" is now moving rapidly to real assets. This will eventually lead to war as all war is eventually for resources. ..."
Aug 07, 2016 | www.nakedcapitalism.com
Sally Snyder , August 5, 2016 at 11:57 am

Here is an article that explains the key reason why economic growth will be slow for the foreseeable future:

http://viableopposition.blogspot.ca/2016/08/the-baby-bust-and-its-impact-on.html

No matter what central banks do, their actions will not be able to create the same level of economic growth that we have become used to over the past seven decades.

JEHR , August 5, 2016 at 12:57 pm

Economic growth does not come from the central banks; if government sought to provide the basics for all its citizens, including health care, education, a home, and proper food and all the infrastructure needed to give people the basics, then you could have something akin to "growth" while at the same time making life more pleasant for the less fortunate. There seems to be no definition of economic growth that includes everyone.

David , August 5, 2016 at 1:25 pm

This seems a very elaborate way of stating a simple problem, that can be summarised in three points.

And that's about it.

jgordon , August 5, 2016 at 8:10 pm

Neoliberalism has only exacerbated falling living standards. Living standards would be falling even without it, albeit more gradually.

Neoliberalism itself may even be nothing more than a standard type response of species that have expanded beyond the capacity of their environment to support them. What we see as an evil ideology is only the expression of a mechanism that apportions declining resources to the elites, like shutting shutting down the periphery so the core can survive as in hypothermia.

I Lost at Jeopardy , August 5, 2016 at 6:57 pm

I really don't have problem with this. Let the financial sector run the world into the ground and get it over with.

In defference to a great many knowledgable commentors here that work in the FIRE sector, I don't want to create a damning screed on the cost of servicing money, but at some point even the most considered opinions have to acknowledge that that finance is flooded with *talent* which creates a number of problems; one being a waste of intellect and education in a field that doesn't offer much of a return when viewed in an egalitarian sense, secondly; as the field grows due to, the technical advances, the rise in globilization, and the security a financial occuptaion offers in an advanced first world country nowadays, it requires substantially more income to be devoted to it's function.

This income has to be derived somewhere, and the required sacrifices on every facet of a global economy to bolster positions and maintain asset prices has precipitated this decline in the well being of peoples not plugged-in to the consumer capitalist regime and dogma.

Something has to give here, and I honestly couldn't care about your 401k or home resale value, you did this to yourself as much as those day-traders who got clobbered in the dot-com crash.

nothing but the truth , August 6, 2016 at 11:46 am

the capitalist economy is more and more an asset driven one. This article does not even begin to address the issue of asset valuations, the explicit CB support for asset inflation and the effect on inequality, and especially generational plunder.

the problem of living standards is obviously a Malthusian one. despite all the progress of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming, and now irreversible. "the market" is now moving rapidly to real assets. This will eventually lead to war as all war is eventually for resources.

[Dec 02, 2016] Since 2014 The US Has Added 571,000 Waiters And Bartenders And Lost 34,000 Manufacturing Workers Zero Hedge

Notable quotes:
"... the great schism inside the American labor force get wider. We are referring to the unprecedented divergence between the total number of high-paying manufacturing jobs, and minimum-wage food service and drinking places jobs, also known as waiters and bartenders. In October, according to the BLS, while the number of people employed by "food services and drinking places" rose by another 18,900, the US workforce lost another 4,000 manufacturing workers. ..."
"... National Restaurant Association's Restaurant performance activity index showed in October, overall industry sentiment is the worst since the financial crisis, due to declines in both same-store sales and customer traffic, suggesting that restaurant workers should now be in the line of fire for mass layoffs. ..."
"... Putting this divergence in a long context, since the official start of the last recession in December 2007, the US has gained 1.8 million waiters and bartenders, and lost 1.5 million manufacturing workers. Worse, while the latter series had been growing, if at a slower pace than historically, it has now clearly rolled over, and in 2016, some 60,000 manufacturing jobs have been lost. ..."
Dec 02, 2016 | www.zerohedge.com

As another month passes, the great schism inside the American labor force get wider. We are referring to the unprecedented divergence between the total number of high-paying manufacturing jobs, and minimum-wage food service and drinking places jobs, also known as waiters and bartenders. In October, according to the BLS, while the number of people employed by "food services and drinking places" rose by another 18,900, the US workforce lost another 4,000 manufacturing workers.

This is the fourth consecutive month of declining manufacturing workers, and the 7th decline in the past 10 months.

The chart below puts this in context: since 2014, the US had added 571,000 waiters and bartenders, and has lost 34,000 manufacturing workers.

While we would be the first to congratulate the new American waiter and bartender class, something does not smell quite right. On one hand, there has been a spike in recent restaurant bankruptcies or mass closures (Logan's, Fox and Hound, Bob Evans), which has failed to reflect in the government report. On the other hand, as the National Restaurant Association's Restaurant performance activity index showed in October, overall industry sentiment is the worst since the financial crisis, due to declines in both same-store sales and customer traffic, suggesting that restaurant workers should now be in the line of fire for mass layoffs.

However, what we find more suspect, is that according to the BLS' seasonally adjusted "data", starting in March of 2010 and continuing through September of 2016, there has been just one month in which restaurant workers lost jobs, and alternatively, jobs for waiters and bartenders have increased in 80 out of the past 81 months, with just one month of job losses, something unprecedented in this series history.

Putting this divergence in a long context, since the official start of the last recession in December 2007, the US has gained 1.8 million waiters and bartenders, and lost 1.5 million manufacturing workers. Worse, while the latter series had been growing, if at a slower pace than historically, it has now clearly rolled over, and in 2016, some 60,000 manufacturing jobs have been lost.

Like last month, we remain curious what this "data" series will look like after it is revised by the BLS shortly after the NBER declares the official start of the next recession.

[Nov 28, 2016] I think oil prices are a long way away from being high enough to save the shale oil industry.

Notable quotes:
"... I do not understand the financial behavior of shale oil development, no. In the Bakken and the Eagle Ford it was indeed about reserve "growth," as Alex points out. Growth at the expense of profitability. That model failed (look at the debt, debt to asset ratios and losses for operators in those two shale oil plays) because the price of oil collapsed. ..."
"... Now, in spite of that, the Permian is using the same business model; growth at the expense of profitability. It is borrowing billions in the bottom of a price down cycle (it thinks) believing prices have no where to go but up. ..."
"... I think oil prices are a long way away from being high enough to save the shale oil industry. ..."
"... We may be overthinking all this and Alex is right again; it may be a simple matter of everyone taking advantage of a loosey goosey monetary policy in America. Money gets printed, Central Banks give it away, lenders are in desperate need of miniscule yields and CEO's and upper management borrow it, make millions personally on bonuses and incentives for growing reserves, then walk away from the whole shebang (Sheffield) before the loans come due. America looks the other way because they get cheap gasoline. ..."
Nov 28, 2016 | peakoilbarrel.com
Mike says:

11/27/2016 at 12:12 pm
I do not understand the financial behavior of shale oil development, no. In the Bakken and the Eagle Ford it was indeed about reserve "growth," as Alex points out. Growth at the expense of profitability. That model failed (look at the debt, debt to asset ratios and losses for operators in those two shale oil plays) because the price of oil collapsed.

Now, in spite of that, the Permian is using the same business model; growth at the expense of profitability. It is borrowing billions in the bottom of a price down cycle (it thinks) believing prices have no where to go but up. I would say this particular shale play might work, except that from the data I see the UR's on those wells are going to be pitiful at best, far less than the Bakken. Unless it is by the shear number of wells those operators are not going to have a lot of reserves that will appreciate with rising prices. It will therefore fail too, just like the others, perhaps for different reasons, I don't know. I think oil prices are a long way away from being high enough to save the shale oil industry.

We may be overthinking all this and Alex is right again; it may be a simple matter of everyone taking advantage of a loosey goosey monetary policy in America. Money gets printed, Central Banks give it away, lenders are in desperate need of miniscule yields and CEO's and upper management borrow it, make millions personally on bonuses and incentives for growing reserves, then walk away from the whole shebang (Sheffield) before the loans come due. America looks the other way because they get cheap gasoline.

John S says: 11/27/2016 at 1:46 pm
http://fuelfix.com/blog/2016/11/22/pioneer-denied-request-to-reclassify-oil-wells/

Happy Thanksgiving Mike! This article is for you! The RRC just refused to allow Pioneer to reclassify oil wells in the Eagle Ford to .. wait for it .GAS WELLS.

I believe Pioneer just admitted the you, Shallow, Alex, and the others have been right all along about the GOR going up, up and up.

It seems that Pioneer is trying to take advantage of the "high cost gas tax credit" designed to encourage gas production in HIGH COST low permeable tight gas reservoirs.

Interestingly, this move by Pioneer has initiated a discussion about whether there should be a new category for classifying wells. Hmmm sounds like the industry is about to hit the new Texas Legislative session up for some new tax relief to encourage horizontal drilling in its new favorite geological province the Permian Basin. But it will apply to the Barnett, Haynesville, Eagle Ford, and all those other disasters.

Mike says: 11/27/2016 at 7:22 pm
Happy Thanksgiving to you too, John -- I had actually seen this before. Scoundrels they are, one and all; Pioneer too, a Texas Company start to finish. The TRRC will roll over in another year or so, watch.
Dennis Coyne says: 11/27/2016 at 8:01 pm
Hi Mike,

Despite the CEOs not worrying about profits, I would think at some point the people buying the bonds or stock of these companies would realize that the Emperor is naked.

Eventually when enough investors get burned, the money will stop flowing. Maybe not in 2016, and perhaps not in 2017, but if oil prices remain low for the long term as experts in the field seem to suggest is a likely event (though nobody really knows future oil prices), the money will dry up. In that case these companies are done.

Dennis Coyne says: 11/27/2016 at 8:04 pm
Hi Alex,

Eventually the piper must be paid, low oil prices (for another 2 years) will be the LTO focused companies undoing in my opinion.

[Nov 28, 2016] IEA expects oil investment to fall for third year in 2017

Notable quotes:
"... "Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said, speaking at an energy conference in Tokyo. ..."
"... Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want. ..."
"... BMI's outlook is more optimistic than groups like the International Energy Agency, which said last week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances. Oil prices still hover around $50 a barrel, less than half the level of the summer of 2014. ..."
"... The chart below shows Exxon's E&P capex in 2007-2015 (in US$bn). There was a sharp increase in US capex (both in absolute in relative terms) following the XTO deal. In 2015, the company cut spending both in the US and abroad ..."
Nov 28, 2016 | peakoilbarrel.com
AlexS says: 11/26/2016 at 5:50 am
IEA expects oil investment to fall for third year in 2017

Thu Nov 24, 2016
http://www.reuters.com/article/us-iea-oil-investment-idUSKBN13J08H

Investment in new oil production is likely to fall for a third year in 2017 as a global supply glut persists, stoking volatility in crude markets, the head of the International Energy Agency (IEA) said on Thursday.

"Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said, speaking at an energy conference in Tokyo.

"This is the first time in the history of oil that investments are declining three years in a row," he said, adding that this would cause "difficulties" in global oil markets in a few years.

Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want.

The Organization of the Petroleum Exporting Countries meets next week to try to finalize to output curbs.

"Our analysis shows that when prices go to $60, we'll make a big chunk of U.S. shale oil economical and within the nine months to 12 months of time, we may see a response coming from the shale oil and other high-cost areas," Birol told Reuters, speaking in an interview on the sidelines of the conference.
"And this may again put downward pressure on the prices."

Birol said that level would be enough for many U.S. shale companies to restart stalled production, although it would take around nine months for the new supply to reach the market.

The IEA director general said it is still early to speculate what Donald Trump's presidency in the United States will have on energy policies.

"Having said that, both U.S. shale oil and U.S. shale gas have a very strong economic momentum behind them," Birol said.

"Shale gas has significant economic competitiveness today, and we think it will be so in the next years to come."

AlexS says: 11/26/2016 at 7:50 am
Оpposite view on 2017 global upstream capex from BMI Research:

Oil Firm Spending Seen Up in 2017 for First Time Since 2014

September 23, 2016
https://www.bloomberg.com/news/articles/2016-09-23/oil-firms-seen-spending-more-next-year-for-first-time-since-2014

• Capital spending seen growing 2.5% in 2017 and 7%-14% in 2018
• U.S. independents, Asian giants seen spurring spending growth

The oil industry may be ready to open its wallet after two years of slashing investments.

Companies will spend 2.5 percent more on capital expenditure next year than they did this year, the first yearly growth in such spending since 2014, BMI Research said in a Sept. 22 report. Spending will increase by another 7 percent to 14 percent in 2018. It will remain well below the $724 billion spent in 2014, before the worst oil crash in a generation caused firms to cut back on drilling and exploration to conserve cash, the researcher said.

North American independent producers, Asian state-run oil companies and Russian firms are prepared to boost investments next year, outweighing continued cuts from global oil majors such as Exxon Mobil Corp. and Total SA, BMI said, based on company guidance and its own estimates. Spending will increase to a total of $455 billion next year from $444 billion this year, BMI said.

"North America is where we're really expecting things to turn around," Christopher Haines, BMI's head of oil and gas research, said by telephone. "We've seen a push to really reduce costs, reduce spending and take out any waste and inefficiency. These companies have gotten to the point where they're all set up to react."

BMI's outlook is more optimistic than groups like the International Energy Agency, which said last week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances. Oil prices still hover around $50 a barrel, less than half the level of the summer of 2014.

shallow sand says: 11/26/2016 at 1:18 pm
From what I am reading, Permian hz wells will be drilled in greater numbers in 2017, regardless of price.

These wells are generally less prolific than those in the Bakken and EFS. However, the money has been raised and therefore it will spent.

To me, a good question is how much money is being diverted away from longer term projects that will ultimately produce more oil, to drill these Permian wells?

The Permain wells have no staying power. Under 50 bopd after 24 months is the rule, not the exception. Under 200,000 cumulative in 60 months is the rule, not the exception.

We shall see.

AlexS says: 11/26/2016 at 4:00 pm
"To me, a good question is how much money is being diverted away from longer term projects that will ultimately produce more oil, to drill these Permian wells?"

shallow sand

The companies that are postponing longer term projects are not the same companies that are planning to increase drilling in LTO plays.

Boomer II says: 11/26/2016 at 4:12 pm
"The companies that are postponing longer term projects are not the same companies that are planning to increase drilling in LTO plays."

I assumed he meant investment money. If investors want to be in gas and oil, are they picking the companies with best chance of long-term success (if there is such a thing anymore)?

AlexS says: 11/26/2016 at 4:53 pm
"I assumed he meant investment money. "

Yes, but international oil majors and U.S. shale companies generally have different investor base.

Oil majors are viewed as defensive stocks, slowly growing, but with strong balance sheets, paying high dividends and buying back shares.

On the contrary, shale companies are viewed as high risk – high reward stocks, with aggressive growth strategies, highly leveraged.

shallow sand says: 11/26/2016 at 6:46 pm
I meant both.

ExxonMobil, Chevron, ConnocoPhillips, Hess, Marathon and Oxy all have significant LTO production and all are, or were considered international upstream producers.

I agree the supermajors are defensive stocks. But there were many "growth" stock US companies which explored and produced offshore/internationally or both, prior to the LTO boom.

I may be wrong, we shall see.

AlexS says: 11/26/2016 at 7:39 pm
Most of large US E&Ps and mid-sized integrateds have divested their overseas assets during the years of shale boom.

I'm not sure that Exxon and Chevron are planning to increase their shale exposure in the near term. For Exxon, US upstream operations were hugely loss-making in 2015-16. And it has recently made two relatively large discoveries outside US.

shallow sand says: 11/26/2016 at 11:10 pm
AlexS. Are those XOM international discoveries primarily oil or gas?

Also, for the international assets you refer to which US companies divested, do you know whether the buyers are aggressively developing them? Just a guess, but I suspect maybe not.

11/30 is a big day, hoping for a cut, hard to say if it occurs whether it will be adhered to, other than by maybe the Gulf States.

AlexS says: 11/27/2016 at 6:33 am
shallow sand,

Both are oil discoveries:

1) Liza discovery offshore Guyana, with potential recoverable resource of 800 million to 1.4 billion oil-equivalent barrels

http://news.exxonmobil.com/press-release/exxonmobil-says-second-well-offshore-guyana-confirms-significant-oil-discovery

2) Owowo field offshore Nigeria with a potential recoverable resource of between 500 million and 1 billion barrels.

http://news.exxonmobil.com/press-release/exxonmobil-announces-significant-oil-discovery-offshore-nigeria

shallow sand says: 11/27/2016 at 9:27 am
AlexS. Thank you for the information.

Interesting to note Nexen is a partner in both ventures, while Hess and Chevron are in one each.

I agree XOM has sustained significant losses in North America, but they continue to spend money on new wells. Had they not spent the money they have in North America (both shale and tar sands) would the money have been spent elsewhere. A tough one to know the answer to.

I recall XOM was going to partner in Russia on projects and those were halted for political reasons? Did those projects go ahead without them?

AlexS says: 11/27/2016 at 6:39 pm
shallow sand,

I'm not saying that Exxon stopped investing in U.S. upstream. My point is that oil supermajors, like Exxon, Chevron, BP, Shell and Total are not diverting investments from deep offshore, LNG and other long-term projects to U.S. shale. They cut upstream capex both in U.S. and in overseas projects.

The chart below shows Exxon's E&P capex in 2007-2015 (in US$bn). There was a sharp increase in US capex (both in absolute in relative terms) following the XTO deal. In 2015, the company cut spending both in the US and abroad

[Nov 28, 2016] Oil companies shoulder pain of downturn with lower output

Notable quotes:
"... In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley. ..."
"... Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop. ..."
"... "Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond." ..."
"... We haven't even begun to see a "steep downward trend" yet. As to "softening" – there is less new production coming on next year, overall and for the IOCs, than this – highlighting Canada, Brazil etc. doesn't change that. ..."
"... Also when are they going to actually understand that the companies don't ever "slash" output, like its a choice – depletion does it for them. ..."
"... I don't know when peak decent reporting happened but it's well into decline now (another big internet age negative). ..."
"... Also, the author quotes a report by Morgan Stanley (that we haven't seen). Apparently, those "109 listed companies that produce more than a third of the world's oil" are covered by MS equity research team. And changes in their output may not fully reflect trends in overall global oil production. ..."
"... But I agree that articles in Reuters, Bloomberg and other MSM sources often misinterpret third party research. A recent example are numerous article about USGS assessment of TRR in the Wolfcamp formation ..."
Nov 28, 2016 | peakoilbarrel.com
AlexS says: 11/26/2016 at 5:25 am
Oil companies shoulder pain of downturn with lower output

Nov 24, 2016
http://www.reuters.com/article/us-oil-production-idUSKBN13J0I0

The world's listed oil companies have slashed oil output by 2.4 percent so far this year.

The aggregated production of 109 listed companies that produce more than a third of the world's oil fell in the third quarter of 2016 by 838,000 barrels per day from a year earlier to 33.88 million bpd, data provided by Morgan Stanley showed.

In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley.

The firms include national oil champions of China, Russia and Brazil, international producers such as Exxon Mobil and Royal Dutch Shell, as well as U.S. shale oil producers like EOG Resources and Occidental Petroleum.

The drop in oil companies' output is particularly compelling given the increase in 2015, when third-quarter production rose by some 1.9 million bpd.

"Clearly, we have seen a large swing in the year-on-year trend in production, from strong growth as recent as a year ago, now to steep decline. This is the outcome of the strong cutbacks in investment," Morgan Stanley equity analyst Martijn Rats said.

Capital expenditure for the companies combined more than halved from $136 billion in the third quarter of 2014 to $58 billion in the same period this year, according to Rats.

Oil executives and the International Energy Agency have warned that a sharp drop in global investment in oil and gas would result in a supply shortage by the end of the decade.

Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop.

Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production.

"These declines should temporarily soften in 2017 as new fields are coming on-stream in Canada, Brazil, the former Soviet Union and U.S. tight oil probably stabilizes," Rats said.

"Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond."

George Kaplan says: 11/26/2016 at 6:03 am
We haven't even begun to see a "steep downward trend" yet. As to "softening" – there is less new production coming on next year, overall and for the IOCs, than this – highlighting Canada, Brazil etc. doesn't change that.

When is someone in Reuters or Bloomberg going to figure out that 2017 + 3 (or 5) + 1 (for FEED and FID approval at the beginning and ramp up at the end) = 2021 (or 2023) so there is no way to cover drops "at the end of the decade" now. Also when are they going to actually understand that the companies don't ever "slash" output, like its a choice – depletion does it for them.

And how about this paragraph

"Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production."

He/she has suddenly started to talk about company finances rather than production, but without actually telling the reading public.

Cost reductions caused the drop for heavens sake. "Increased efficiencies" and "technological advancements" – do you think the author has the faintest idea what that actually means and how it is related to anything else he says.

I don't know when peak decent reporting happened but it's well into decline now (another big internet age negative).

AlexS says: 11/26/2016 at 8:29 am
"When is someone in Reuters or Bloomberg going to figure out that 2017 + 3 (or 5) + 1 (for FEED and FID approval at the beginning and ramp up at the end) = 2021 (or 2023) so there is no way to cover drops "at the end of the decade" now."

It should be actually 2015 + 3 (or 5), as pre-FID projects have been posponed since end-2014 – early 2015.

Also, the author quotes a report by Morgan Stanley (that we haven't seen). Apparently, those "109 listed companies that produce more than a third of the world's oil" are covered by MS equity research team. And changes in their output may not fully reflect trends in overall global oil production.

But I agree that articles in Reuters, Bloomberg and other MSM sources often misinterpret third party research. A recent example are numerous article about USGS assessment of TRR in the Wolfcamp formation

[Nov 19, 2016] 11/16/2016 at 3:49 pm

Notable quotes:
"... I am a petroleum Geologist drilling wells in the Wolfcamp, the USGS report means nothing. They periodically review basins to assess how much petroleum is there, we have been drilling Horizontal wells in the Wolfcamp for almost a decade, and vertical wells for many decades. Right now there are as many rigs running drilling this rock formation as there are in the rest of the country combined, so it is already baked in to the US production data. This is not like a Saudi Arabia field with a low drill and complete and development cost, it will take many billions of drilling capital to get a small percentage of the oil in place. The big deal is that the area is fairly resilient to low oil prices and will cushion the drop in US production due to lack of investment in other basins. ..."
"... I think when seismic, land, surface and down hole equipment is included, the number is much higher. With $20-60K per acre being paid, land definitely has to be factored in. Depending on spacing, $1-5 million per well? ..."
"... In reading company reports, it seems they state a cost to drill and case the hole, another to complete the well, then add the two for well cost. This does not include costs incurred prior to the well being drilled, which are not insignificant. Nor does it include costs of down hole and surface equipment, which also are not insignificant. ..."
"... Land costs are all over the map, and I think Bakken land costs overall are the lowest, because much of the leasing occurred prior to US shale production boom. I think a lot of acreage early on cost in the hundreds per acre. Of course, there was quite a bit of trading around since, so we have to look project by project, unfortunately. For purposes of a model, I think $8 million is probably in the ballpark. ..."
"... I would not include equipment for the well, initially, as OPEX (LOE is what I prefer to stick with, being US based). The companies do not do that, those costs are included in depreciation, depletion and amortization expense. ..."
"... Once the well is in production, and failures occur, I include the cost of repairs, including replacement equipment, in LOE. I am not sure that the companies do that, however. ..."
"... I think the Permian is going to be much tougher to estimate, as there are different producing formations at different depths, whereas the Bakken primarily has two, and the Eagle Ford has 1 or 2. ..."
"... What most interests me are suggestions that there is so much available oil in Wolfcamp and what that will do to oil prices and national policy. Seems like any announcement of more oil will likely keep prices low. And if they stay low, there's little reason to open up more areas for oil drilling. ..."
"... The key question is what part of these estimated technically recoverable resources are economically viable at $50; $60; $70; $80; $90, $100, etc. ..."
"... In November 2015, the EIA estimated proven reserves of tight oil in Wolfcamp and Bone Spring formations as of end 2014 at just 722 million barrels. ..."
"... AlexS. Another key question, which is price dependent, is how many years will it take to fully develop the reserves? ..."
"... If oil prices go back to $100/b in 2018 as the IEA seems to be concerned about, it could ramp up at the speed of the Eagle Ford ..."
"... It's impossible for IEA to make statements like: "the end of low cost oil will negatively affect economic growth", "geology is about to beat human ingenuity" etc. ..."
Nov 19, 2016 | peakoilbarrel.com
JG 11/16/2016 at 3:49 pm
I am a petroleum Geologist drilling wells in the Wolfcamp, the USGS report means nothing. They periodically review basins to assess how much petroleum is there, we have been drilling Horizontal wells in the Wolfcamp for almost a decade, and vertical wells for many decades. Right now there are as many rigs running drilling this rock formation as there are in the rest of the country combined, so it is already baked in to the US production data. This is not like a Saudi Arabia field with a low drill and complete and development cost, it will take many billions of drilling capital to get a small percentage of the oil in place. The big deal is that the area is fairly resilient to low oil prices and will cushion the drop in US production due to lack of investment in other basins.
Mike says: 11/17/2016 at 8:28 am
Thank you, JG -- Straight from the horses mouth, respectfully. The USGS lost all credibility with me as to estimating TRR in the Monterrey Shale in California. It baffles me, after five years of publically discussing unconventional shale oil resources, that modelers, internet analysts and predictors completely ignore economics, debt and finances. Extracting oil is a business; it must make money to succeed. If it does not succeed, all bets are off regarding predictions.
Dennis Coyne says: 11/17/2016 at 8:49 am
Hi Mike,

The Monterrey shale estimate was by the EIA not the USGS. The EIA had a private consultant do the analysis and it was mostly based on investor presentations, very little geological analysis.

It would be better if the USGS did an economic analysis as they do with coal for the Powder River Basin. They could develop a supply curve based on current costs, but they don't.

Do you have any idea of the capital cost of the wells (ballpark guess) for a horizontal multifracked well in the Wolfcamp? Would $7 million be about right (a WAG by me)?

On ignoring economics, I show my oil price assumptions. Other financial assumptions for the Bakken are $8 million for capital cost of the well (2016$). OPEX=$9/b, other costs=$5/b, royalty and taxes=29% of gross revenue, $10/b transport cost, and a real discount rate of 7% (10% nominal discount rate assuming 3% inflation).

I do a DCF based on my assumed real oil price curve. Brent oil price rises to $77/b (2016$) by June 2017 and continue to rise at 17% per year until Oct 2020 when the oil price reaches $130/b, it is assumed that average oil prices remain at that level until Dec 2060. The last well is drilled in Dec 2035 and stops producing 25 years later in Dec 2060.

EUR of wells today is assumed to be 321 kb and EUR falls to 160 kb by 2035. The last well drilled only makes $243,000 over the 7% real rate of return, so the 9 Gb scenario is probably too optimistic, it is assumed that any gas sales are used to offset OPEX and other costs, though no natural gas price assumptions have been made to simplify the analysis.

This analysis is based on the analyses that Rune Likvern has done in the past, though his analyses are far superior to my own.

shallow sand says: 11/17/2016 at 9:00 am
I think when seismic, land, surface and down hole equipment is included, the number is much higher. With $20-60K per acre being paid, land definitely has to be factored in. Depending on spacing, $1-5 million per well?
Dennis Coyne says: 11/17/2016 at 10:07 am
Hi Shallow sand,

I am doing the analysis for the Bakken. A lot of the leases are already held and I don't know that those were the prices paid. Give me a number for total capital cost that makes sense, are you suggesting $10.5 million per well, rather than $8 million? Not hard to do, but all the different assumptions you would like to change would be good so I don't redo it 5 times.

Mostly I would like to clear up "the number".

I threw out more than one number, OPEX, other costs, transport costs, royalties and taxes, real discount rate (adjusted for inflation), well cost.

I think you a re talking about well cost as "the number". I include down hole costs as part of OPEX (think of it as OPEX plus maintenance maybe).

shallow sand says: 11/17/2016 at 11:19 am
Dennis. The very high acreage numbers are for recent sales in the Permian Basin.

In reading company reports, it seems they state a cost to drill and case the hole, another to complete the well, then add the two for well cost. This does not include costs incurred prior to the well being drilled, which are not insignificant. Nor does it include costs of down hole and surface equipment, which also are not insignificant.

Land costs are all over the map, and I think Bakken land costs overall are the lowest, because much of the leasing occurred prior to US shale production boom. I think a lot of acreage early on cost in the hundreds per acre. Of course, there was quite a bit of trading around since, so we have to look project by project, unfortunately. For purposes of a model, I think $8 million is probably in the ballpark.

I would not include equipment for the well, initially, as OPEX (LOE is what I prefer to stick with, being US based). The companies do not do that, those costs are included in depreciation, depletion and amortization expense.

Once the well is in production, and failures occur, I include the cost of repairs, including replacement equipment, in LOE. I am not sure that the companies do that, however.

I think the Permian is going to be much tougher to estimate, as there are different producing formations at different depths, whereas the Bakken primarily has two, and the Eagle Ford has 1 or 2.

An example:

QEP paid roughly $60,000 per acre for land in Martin Co., TX. If we assume one drilling unit is 1280 acres (two sections), how many two mile laterals will be drilled in the unit?

1280 acres x $60,000 = $76,800,000.

Assume 440′ spacing, 12 wells per unit.

$76,800,000/12 = $6,400,000 per well.

However, there are claims of up to 8 producing zones in the Permian.

So, 12 x 8 = 96 wells.

$76,800,000 / 96 = $800,000 per well.

Even assuming 96 wells, the cost per well is still significant.

If we assume 96 wells x $7 million to drill, complete and equip, total cost to develop is $.75 BILLION. That is a lot of money for one 1280 acre unit, need to recover a lot of oil and gas to get that to payout.

Dennis Coyne says: 11/17/2016 at 1:22 pm
Hi Shallow sands,

I am neither an oil man nor an accountant, so regardless of what we call it I am assuming natural gas sales (maybe about $3/barrel on average) are used to offset the ongoing costs to operate the well (LOE, OPEX, financial costs, etc), we could add another million to the cost of the well for surface and downhole equipment and land costs. Does an average operating cost over the life of a well of about $17/b ($14/b plus natural gas sales of $3/b of oil produced)seem reasonable?

That would be about $5.4 million spent on LOE etc. over the life of the well (assuming 320 kbo produced). Also does the 10% nominal rate of return sound high enough, what number would you use as a cutoff? You use a different method than a DCF and want the well to pay out in 60 months. This would correspond to about a 14% nominal rate of return and an 11% real rate of return (assuming a 3% annual inflation rate.)

AlexS says: 11/17/2016 at 9:05 am
"The Monterrey shale estimate was by the EIA not the USGS. The EIA had a private consultant do the analysis and it was mostly based on investor presentations, very little geological analysis."

Exactly. USGS' estimate as of October 2015 is very conservative:

"The Monterey Formation in the deepest parts of California's San Joaquin Basin contains an estimated mean volumes of 21 million barrels of oil, 27 billion cubic feet of gas, and 1 million barrels of natural gas liquids, according to the first USGS assessment of continuous (unconventional), technically recoverable resources in the Monterey Formation."

"The volume estimated in the new study is small, compared to previous USGS estimates of conventionally trapped recoverable oil in the Monterey Formation in the San Joaquin Basin. Those earlier estimates were for oil that could come either from producing more Monterey oil from existing fields, or from discovering new conventional resources in the Monterey Formation."

Previous USGS estimates were for conventional oil:

"In 2003, USGS conducted an assessment of conventional oil and gas in the San Joaquin Basin, estimating a mean of 121 million barrels of oil recoverable from the Monterey. In addition, in 2012, USGS assessed the potential volume of oil that could be added to reserves in the San Joaquin Basin from increasing recovery in existing fields. The results of that study suggested that a mean of about 3 billion barrels of oil might eventually be added to reserves from Monterey reservoirs in conventional traps, mostly from a type of rock in the Monterey called diatomite, which has recently been producing over 20 million barrels of oil per year."

https://www.usgs.gov/news/usgs-estimates-21-million-barrels-oil-and-27-billion-cubic-feet-gas-monterey-formation-san

Mike says: 11/17/2016 at 1:24 pm
I am corrected, RE; USGS and Monterrey. I still don't believe there is 20G BO in the Wolfcamp. Most increases in PB DUC's are not wells awaiting frac's but lower Wolfcamp wells that are TA and awaiting re-drills; that should tell you something. With acreage, infrastructure and water costs in W. Texas, wells cost $8.5-9.0M each. The shale industry won't admit that, but that's what I think. What happens to EUR's and oil prices after April of 2017 is a guess and a waste of time, sorry.
Dennis Coyne says: 11/17/2016 at 8:54 am
Hi JG,

What is the average cost of drilling and completion (including fracking) for a horizontal Wolfcamp well?

Does the F95 estimate of 11 Gb seem reasonable if oil prices go up to over $80/b (2016 $) and remain above that level on average from 2018 to 2025?

Boomer II says: 11/17/2016 at 3:25 pm
What most interests me are suggestions that there is so much available oil in Wolfcamp and what that will do to oil prices and national policy. Seems like any announcement of more oil will likely keep prices low. And if they stay low, there's little reason to open up more areas for oil drilling.
AlexS says: 11/16/2016 at 3:53 pm
"Their assessment method for Bakken was pretty simple – pick a well EUR, pick a well spacing, pick total acreage, pick a factor for dry holes – multiply a by c by d and divide by b."

The EIA and others use the same methodology

AlexS says: 11/16/2016 at 4:09 pm
USGS estimates for average well EUR in Wolfcamp shale look reasonable: 167,ooo barrels in the core areas and much lower in other parts of the formation.

I do not know if the estimated potential production area is too big, or assumed well spacing is too tight.

The key question is what part of these estimated technically recoverable resources are economically viable at $50; $60; $70; $80; $90, $100, etc.

Significant part of resources may never be developed, even if they are technically recoverable.

Dennis Coyne says: 11/16/2016 at 5:17 pm
Keep in mind these USGS estimates are for undiscovered TRR, one needs to add proved reserves times 1.5 to get 2 P reserves and that should be added to UTRR to get TRR. There are roughly 3 Gb of 2P reserves that have been added to Permian reserves since 2011, if we assume most of these are from the Wolfcamp shale (not known) then the TRR would be about 23 Gb. Note that total proved plus probable reserves at the end of 2014 in the Permian was 10.5 Gb (7 Gb proved plus 3.5 GB probable with the assumption that probable=proved/2). I have assumed about 30% of total Permian 2P reserves is in the Wolfcamp shale. That is a WAG.

Note the median estimate is a UTRR of 19 Gb with F95=11.4 Gb and F5=31.4 Gb. So a conservative guess would be a TRR of 13.4 Gb= proved reserves plus F95 estimate. If prices go to $85/b and remain at that level the F95 estimate may become ERR, at $100/b maybe the median is potentially ERR. It will depend how long prices can remain at $100/b before an economic crash, prices are Brent Crude price in 2016$ with various crude spreads assumed to be about where they are now.

AlexS says: 11/16/2016 at 7:01 pm
Dennis,
where your number for proven reserves in the Permian comes from?

In November 2015, the EIA estimated proven reserves of tight oil in Wolfcamp and Bone Spring formations as of end 2014 at just 722 million barrels.

http://www.eia.gov/naturalgas/crudeoilreserves/

AlexS says: 11/16/2016 at 7:16 pm
US proved reserves of LTO

Dennis Coyne says: 11/16/2016 at 9:11 pm
Hi Alex S,

I just looked at Permian Basin crude reserves (Districts 7C, 8 and 8A) and assumed the change in reserves from 2011 to 2014 was from the Wolfcamp. I didn't know about that page for reserves. It is surprising it is that low.

In any case the difference is small relative to the UTRR, it will be interesting to see what the reserves are for year end 2015.

Based on this I would revise my estimate to 20 Gb for URR with a conservative estimate of 12 Gb until we have the data for year end 2015 to be released later this month.

My guess is that the USGS probably already has the 2015 year end reserve data.

AlexS says: 11/16/2016 at 9:26 pm
Dennis,

The EIA proved reserves estimate for 2015 will be issued this month. I think we will see a significant increase in the number for the Permian basin LTO.

Also note that USGS TRR estimate is only for Wolfcamp.
I can only guess what could be their estimate for the whole Permian tight oil reserves.
But the share of Wolfcamp in the Permian LTO output is only 24% (according to the EIA/DrillingInfo report).

Dennis Coyne says: 11/16/2016 at 10:09 pm
Hi Alex S,

http://www.beg.utexas.edu/resprog/permianbasin/index.htm

At link above they say Permian basin has 30 Gb of oil, so if both estimates are correct the Wolfcamp has 2/3 of remaining resources.

AlexS says: 11/17/2016 at 4:32 am
Dennis,

Wolfcamp is a newer play than Bone Spring and Spraberry. That's why its share in the Permian LTO production is less than in TRR.

Dennis Coyne says: 11/17/2016 at 8:21 am
Hi AlexS,

That makes sense. I also imagine the USGS focused on the formation with the bulk of the remaining resources. It is conceivable that the 30 Gb estimate is closer to the remaining oil in place and that more like 90% of the TRR is in the Wolfcamp, considering that the F5 estimate is about 30 Gb. That older study from 2005 may be an under estimate of TRR for the Permian, likewise the USGS might have overestimated the UTRR.

shallow sand says: 11/16/2016 at 5:18 pm
AlexS. Another key question, which is price dependent, is how many years will it take to fully develop the reserves?
Dennis Coyne says: 11/16/2016 at 5:38 pm
Hi Shallow sand,

If oil prices go back to $100/b in 2018 as the IEA seems to be concerned about, it could ramp up at the speed of the Eagle Ford (say 2 to 3 years). It will be oil price dependent and perhaps they won't over do it like in 2011-2014, but who knows, some people don't learn from past mistakes. If you or Mike were running things it would be done right, but the LTO guys, I don't know.

AlexS says: 11/16/2016 at 7:08 pm
shallow sand,

Yes, you are correct. And there are multiple potential production scenarios, depending on the oil prices.

Boomer II says: 11/16/2016 at 3:39 pm
From the USGS press release.

USGS Estimates 20 Billion Barrels of Oil in Texas' Wolfcamp Shale Formation

"This estimate is for continuous (unconventional) oil, and consists of undiscovered, technically recoverable resources.

Undiscovered resources are those that are estimated to exist based on geologic knowledge and theory, while technically recoverable resources are those that can be produced using currently available technology and industry practices. Whether or not it is profitable to produce these resources has not been evaluated."

Watcher says: 11/16/2016 at 4:11 pm
This is an important way to assess.

If it requires slave labor at gunpoint to get the oil out, then that's what will happen because you MUST have oil, and a day will soon come when that sort of thing is reqd.

George Kaplan says: 11/16/2016 at 3:16 pm
This follows on from reserve post above (two a couple of comments). In terms of changes over the last three years – there really weren't anything much dramatic. We'll see what 2016 brings, especially for ExxonMobil, but it looks like they already knocked a big chunk off of their Bitumen numbers already in 2015.

Note I went through a lot of 20-F and 10-K reports watching the rain fall this morning and copied out the numbers, I'm not guaranteeing I got everything 100%, but I think the general trends are shown.

Note the figures are totals for all nine companies I looked at.

Jeff says: 11/16/2016 at 3:20 pm
IEA WEO is out: http://www.iea.org/newsroom/news/2016/november/world-energy-outlook-2016.html presentation slides, fact sheet and summary are available online (report can be purchased). IEA seems to be _very_ concerned about underinvestment in upstream oil production. Several pages of the report is devoted to this, the title of that section is "mind the gap". More or less all of the content has been discussed on this website, including the issue with high levels of debt and that this can affect suppliers' capacity to rebound, and how much demand can be reduced as a result of a stringent carbon cap.

From the fact sheet (available free of charge):
"Another year of low upstream oil investment in 2017 would risk a shortfall in oil production in a few years' time. The conventional crude oil resources (e.g. excluding tight oil and oil sands) approved for development in 2015 sank to the lowest level since the 1950s, with no sign of a rebound in 2016. If there is no pick-up in 2017, then it becomes increasingly unlikely that demand (as projected in our main scenario) and supply can be matched in the early 2020s without the start of a new boom/bust cycle for the industry"

Presentation 1:09 – Dr. Birol gives his view: "depletion never sleeps"

George Kaplan says: 11/17/2016 at 3:42 am
I wonder who that paragraph is aimed at. As I indicated above the companies that would be investing in long term conventional projects don't have a very large inventory of undeveloped reserves (17 Gb as of end of 2015, some of this has gone already this year and more is in development and will come on stream in 2017 and 2018 (and a small amount in later years for approved projects). I'd guess there might only be less than 10 Gb (and this the most expensive to develop) that is currently under appraisal among the major western IOCs and larger independents; allowing for their partnerships with NOCs in a lot of the available projects that could represent 20 to 30 Gb total. That really isn't very much new supply available, and a large proportion is in complex deep water projects that wouldn't be ramped up fully until 6 to 7 years after FID (i.e. already too late for 2020). Really the main players need to find new fields with easy developments, but they obviously aren't, probably never will, and actually aren't looking very hard at the moment.
Jeff says: 11/17/2016 at 7:24 am
My interpretation is that this is IEAs way of saying that it does not look good. Those who can read between the lines get the message. Also, a few years from they will be able to say "see we told you so".

It's impossible for IEA to make statements like: "the end of low cost oil will negatively affect economic growth", "geology is about to beat human ingenuity" etc.

WEO have become more and more bizarre over the years. On the one hand they contain quantitative projections which tell the story politicians wants to hear. On the other hand, the text describes all sorts of reason of why the assumptions are unlikely to hold. Normally, if you don't believe in your own assumptions you would change them.

[Nov 19, 2016] Why Economic Recovery Requires Rethinking Capitalism

Notable quotes:
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"... "On both sides of the Atlantic, public companies are sitting on record piles of cash-around $2 trillion in the U.S. and a similar amount in Europe" ..."
"... The first function of unemployment (which has always existed in open or disguised forms) is that it maintains the authority of master over man. The master has normally been in a position to say: "If you don't want the job, there are plenty of others who do." When the man can say: "If you don't want to employ me, there are plenty of others who will," the situation is radically altered. ..."
"... Illiberal libertarians: Why libertarianism is not a liberal view ..."
"... "Sustained exponential growth is mathematically impossible." ..."
"... creative destruction ..."
Nov 19, 2016 | www.nakedcapitalism.com
Wen November 19, 2016 at 6:58 am

To me it feels like Mazzucatto is promoting keynisanism. That's not really new and, if Philip Mirowski is to be believed, the neoliberal thought collective already has a strategy to shoot it down. May I suggest a more genuine example of rethinking(from Mirowski himself) – https://www.youtube.com/watch?v=xfbVPDNl7V4&list=PLQWdiYL5PMXHtFu6RpVfKyHftAmYlkxW7&index=10 and his accompanying paper – 'Markets Come to Bits: Evolution, Computation and Markomata in Economic Science' https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwj5yNvb4bTQAhVBNY8KHWNLBnIQFggcMAA&url=http%3A%2F%2Fwww.uq.edu.au%2Feconomics%2FPDF%2Fint%2FMirowski.pdf&usg=AFQjCNGWnjLqCE3459qPKnbW161SC7c6VA

linda a November 19, 2016 at 7:31 am

Where is the sustainable part? It is not in goals of growth. The goal should be sustainable evolution.

Government enshrines process and practices. It doesn't evolve well. Government also has a devastating track record on picking investments to incentivize - oil over ethyl alcohol back in the 1920's. Promoting land development and farming practices in the western plains that created the dust bowl. Government does do an amazing job of steam rolling contrary information, ideas, etc.

Sound of the Suburbs November 19, 2016 at 8:06 am

The rigorous and scientific economics profession just needs to decide

"Which way is up?"

40 years ago, most economists and almost everyone else believed the economy was demand driven and the system naturally trickled up. Now most economists and almost everyone else believes the economy is supply driven and the system naturally trickles down. Economics has been turned upside down in the last 40 years.

For a supply side, trickle down world you need Neo-Keynesian stimulus, where money is fed into the top of the economic pyramid, the banks, to be lent out, invested and trickle down.

For a demand driven, trickle up world you need traditional Keynesian stimulus, where money is fed into the bottom of the economic pyramid through infrastructure spending, to create jobs and wages which will be spent into the economy and trickle up.

The West has been doing Neo-Keynesian stimulus for the last eight years and asset prices have been maintained but little has trickled down to the real economy.

Oh dear, today's economics is upside down, let's try some good old Keynesian fiscal stimulus.

Brexit and Trump are the result of not working out "which way is up?" a little sooner.

Sound of the Suburbs November 19, 2016 at 8:06 am

China did fiscal stimulus after 2008, how did that go? China was the engine of global growth after 2008, its insatiable demand for raw materials made lots of other emerging economies boom too. Keynes is the man; he's the right way up.

Sound of the Suburbs November 19, 2016 at 8:12 am

Let's form a global economy guided by ideas of economic liberalism where we put the economy first over the interests of people.

1980s – boom
Early 1990s – bust
Late 1990s – boom
Early 2000s – bust
Mid 2000s – boom
Late 2000s – bust
2008 on – stagnation

Unfortunately, no one really understood how the economy worked.

2008 – "How did that happen?"
What more evidence do we need?

What is wrong with economics when science can successfully send space craft to the outer edges of the solar system?

Science has been allowed to develop successfully as it cannot be modified to suit certain vested interests to make them richer.

Economics is not like this.

There is something wrong with economics that was first spotted at the end of the 19th century and pretending it is a real science today is little more than wishful thinking.

Thorstein Veblen wrote an essay in 1898 "Why is economics not an evolutionary science?". Real sciences are evolutionary and old theory is replaced as new theory comes along and proves the old ideas wrong. Economics jumps about like a cat on a hot tin roof and is not evolutionary, in the late 1970s Keynesian ideas were ditched for the ideas of Milton Freidman. We threw out the old Keynesian economics and bought in something new and untested just as we are about to embark on globalisation, it was asking for trouble. Milton Freidman hadn't realised real science is evolutionary.

Looking back we can see other problems.

Malthus came up with an economics that worked for the vested interests of the land owning class.
Ricardo came up with an economics that worked for the vested interests of the financial class.
Marx came up with an economics that worked for the ideology he was trying to put forward.

It's complex, quite fuzzy and can be easily biased to suit vested interests.

Early on it became very apparent to the wealthy and powerful that economics needed to be biased in the right direction for their interests.

As Classical Economics reached its zenith in the 19th Century it had come to some unfortunate conclusions powerful, vested interests didn't like so they backed a new, neoclassical economics that missed out the undesirable conclusions from Classical Economics like the differentiation of "earned" and "unearned" income.

Most of the UK now dreams of giving up work and living off the "unearned" income from a BTL portfolio, extracting the "earned" income of generation rent.

The UK dream is to be like the idle rich, rentier, living off "unearned" income and doing nothing productive.

This distinction between "earned" and "unearned" income has been buried ever since, but was hidden is later revealed by who this economics favours.

Neoclassical economics led to the Wall Street Crash of 1929 and the Great Depression, where its ideas just made things worse.

Keynes came up with some new ideas that were incorporated into the "New Deal" and the recovery began in the US.

Keynes ideas had some unpleasant conclusions as well and so economists moulded some of Keynes ideas into neoclassical economics ready to use after the Second World War. Keynes had said that capitalism was inherently unstable and recognised the dangers from financial asset investing, not the sort of ideas that were desirable.

The Golden Age of the 1950s and 1960s followed.

The new hybrid Keynesian ideas went wrong in the 1970s and its ideas did not lead to recovery.

The powerful vested interests sought an opportunity to bring back their really biased pure neoclassical economics and use it as the basis for a global economy.

It was improved, but still had all the old problems:

Left to their own devices, powerful vested interests will develop an economics that is so biased the economic system will collapse due to the polarisation of wealth at the personal and national level (like now).

Lots of other inconvenient stuff is missing too, which has lead to many of the recent mistakes, including 2008 and its aftermath:

1) The true nature of money and how it is created and destroyed on bank balance sheets.

2) The work of Irving Fischer, Hyman Minsky and Steve Keen on debt inflated asset bubbles. Their inflation, bursting and the debt deflation that follows.

3) Richard Koo on balance sheet recessions.

You can bias economics to suit vested interests but you can't make that biased economics work.

Economics needs to be rebuilt form the bottom up in an evolutionary, scientific, manner not missing out the bits that are inconvenient for wealthy and powerful vested interests.

You can't put the economy first without good economics.

Let's get busy.

doug November 19, 2016 at 8:18 am

If we are to rethink capitalism, let's make sure to include as one key element the banishment of the phrase "human capital".

Sound of the Suburbs November 19, 2016 at 8:21 am

"On both sides of the Atlantic, public companies are sitting on record piles of cash-around $2 trillion in the U.S. and a similar amount in Europe"

Keynes called it the "liquidity trap". 1929 and 2008 were both debt inflated asset bubbles, where securitising loans increased leverage. Keynes studied the Great Depression and noted monetary stimulus lead to a "liquidity trap". Businesses and investors will not invest without the demand there to ensure their investment will be worthwhile. The money gets horded by investors and on company balance sheets as they won't invest. Cutting wages to increase profit just makes the demand side of the equation worse and leads you into debt deflation. Central Banks today talk about the "savings glut" not realising this is Keynes's "liquidity trap".

US firms engage in share buybacks as they don't want to invest in expansion.

Investors pour into negative yielding bonds and gold for safety.

Keynes realised wage income was just as important as profit as wage income looks after the demand side of the equation.

This is why you need fiscal stimulus to create jobs and wage income to spur demand.

Say may have said "supply creates its own demand" but he was wrong.

As we can see businesses and investors don't believe Say either and this why they are hoarding.

a different chris November 19, 2016 at 8:35 am

>Stagnation is not caused by the deterministic forces of an ageing population, high savings, and exhausted tech opportunities. Rather, it is a result of falling private and public investment that has prevented the emergence of new investment opportunities.

So I expected an explanation of why "falling investment" isn't directly correlated to "exhausted tech opportunities" and the like. Didn't get it.

The usual techno-libertarian babble with the libertarian part jammed into the closet so as to appeal to the political classes.

tegnost November 19, 2016 at 11:37 am

I think the problem with your problem is that it's not clear where the next phase of growth will come from, and as tech has reached a pinnacle, maybe the new thing will turn out to be surprisingly luddite and the searching for it may be better done by collective action which then is picked up by the private sector with the public part moving on to lead the thing that replaces that because this old world keeps spinning around in spite of the fact that people are always haunted with the notion that it might stop .think y2k, jan 1 2000 was going to and did happen regardless of the perceived capacity for our systems to bear it. Like in the election where the private sector thought it could lead us where they wanted us to go but it turns out they were wrong and they're actually following

a different chris November 19, 2016 at 12:22 pm

(not that I don't believe in the general idea, that's what made me sad..)

Sound of the Suburbs November 19, 2016 at 9:07 am

The secret is in how money works, which is why hardly any economists understand either the problem or the solution.

Money and debt are opposite sides of the same coin. If there is no debt there is no money. Money is created by loans and destroyed by repayments of those loans.

From the BoE:

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

After the system has been flooded with lots of debt by encouraging bankers to maximise profit with their debt products, you get to a point where everyone is paying down debt and few people are taking on new loans. This makes the money supply contract, making it harder to pay down the debt.

When the repayments are larger than the new debt being taken on, the money supply starts contracting. The Government needs to step in as the borrower of last resort to keep the money supply stable, otherwise you head into a deflationary spiral.

Central Banks are the lender of last resort and Governments are the borrowers of last resort.

Central Banks print money for banks (QE) and, as no one is borrowing, it stays in the financial system blowing bubbles and doesn't get to the real economy as seen from the low inflation round the world.

Central Banks printing money for the Government to engage in fiscal stimulus gets the money directly into the economy.

What they have been trying to do all along, the intermediary has just changed.

Banks never got the money into the real economy.

Keynes studied a similar situation in the Great Depression where debt deflation had taken hold.

He realised businesses and investors won't invest in the real economy when there is no demand. Today we see all the global businesses hoarding cash and engaging in share buybacks, they won't invest because there is no demand to make this worthwhile.

Keynes realised wage income was just as important as profit, wage income creates demand.

Keynes understood money.

Today's businesses think they should maximise profit by cutting wages, reducing wage income and demand and making the whole thing worse.

Today's economics is basically the same as that of the 1920s, its neoclassical economics and its core remains unchanged.

Neoclassical economics believes supply creates its own demand "Say's Law". It didn't then and it doesn't now.

Neoclassical economics believes capitalism naturally reaches stable equilibriums. It led to a Wall Street Crash and Great Depression then and it led to a Wall Street Crash and global recession now.

The FED engaged in QE then, it has engaged in QE now, it didn't really work either time.

It was the "New Deal" that bought the US out of the Great Depression, it's what the world needs now.

Saturating an economy in debt will always lead to debt deflation and the only way out is fiscal stimulus.

Richard Koo studied this in the Japanese debt deflation from 1989 to today:
https://www.youtube.com/watch?v=8YTyJzmiHGk

He explains the mistake Christina Romer made analysing data from the Great Depression leading Central Banks to think they could get us over 2008 with monetary policy.

In the first 12 mins.

Austerity is the worst thing you can do as it accelerates the contraction of the money supply. When the US was panicking about the fiscal cliff it was because Ben Bernanke had read Richard Koo's book and knew cutting Government spending would drive the US economy into recession.

Richard Koo understands money, he has worked in a Central Bank (New York Federal Reserve).

The secrets of money are not included in the neoclassical economics studied by economists outside the Central Banks. The consequences of the secrets of money are understood by very few who work in the Central Banks, they often favour austerity when it is the worst thing you can do.

Kent November 19, 2016 at 9:07 am

While I don't disagree with the this essay in the whole, I think it misses an important piece. There must be something that drives government investment. In the 1950s the government's investment in the highway system crowded in investment in the auto industry as well as investments in suburban housing. Those were things that could drive generations of wealth creation.

Green energy investments might do some of that today, but nowhere near on that scale. Besides that, what else is there?

Anon November 19, 2016 at 4:11 pm

What else?

Maybe a conversion to "single-payer" medicine expanded to include a geater range of services; child-services, elder care, and the like. These are people intensive services that can be performed by a wide range of skilled and semi-skilled people. It puts people to work at a job that is becoming essential as boomers age.

financial matters November 19, 2016 at 9:09 am

I think Mazzucato's work is very timely.

I think that her idea of private public partnerships may be the opposite of that of Trump.

There is worry that Trump's idea of this is privatization of assets to benefit a few in line with crony capitalism.

Mazzucato on the other hand wants the public to share profits and not just losses.

I think Trump does understand that fiscal stimulus is important and can outweigh the austerity oriented goal of balancing a budget.

Government has the deep pockets that can get huge projects like energy alternatives and public transportation off the ground. Mazzucato wants to do it in a way that benefits the public rather than what we have been seeing with the profits of these projects funneled to the 1%.

a different chris November 19, 2016 at 12:25 pm

>I think that her idea of private public partnerships may be the opposite of that of Trump.

Oh the Judean People's Front not those right b*stards in the People's Front of Judea. Got it.

>Government has the deep pockets that can get huge projects like energy alternatives and public transportation off the ground.

Well then just do it. What does the private financial sector have to do with it? I'm pretty sure Solyandra didn't cost anybody a single vote they would have gotten otherwise so why did they even involve the private financial – again note the important word, here – sector?

financial matters November 19, 2016 at 12:54 pm

I'm not opposed to a more socialistic type response and actually see this as a move in that direction.

She wants though to work within a capitalist system. Recognizing that the government has a lot of control even in so called 'free markets' this often leads to monopoly type activities. The government gives away important work such as in drug research or technology to the private sector and lets them run with it with little control.

She would like to see more control over this work. It can be given to pharmaceutical and tech companies to improve and market but not without controls in the public interest such as limiting excessive drug prices and not having all the tech gains of a product go to a few execs but be distributed to the overall public which helped fund the research in the first place.

In infrastructure it would emphasize the overall good to the economy of good infrastructure and not let a few companies benefit by control over tolls for example.

ali November 19, 2016 at 9:27 am

trying to better capitalism is the wrong path. the lack of investments is caused by the growing impossibility to get profit out of it – which is the effect of capitalism itself (tendency of falling profit rate).

Yves Smith Post author November 19, 2016 at 2:40 pm

Kalecki disagrees with you and later empirical work backs him up.

Capitalists choose to run the economy at less than full employment because they don't like workers having the power they'd have (more say over work conditions, less of a pay gap with capitalists) if they could quit their jobs and find another one readily. They seek a higher profit level than is necessary and chronically underinvest as a result.

ChrisAtRU November 19, 2016 at 4:47 pm

+1 YES! See also Joan Robinson (re: unemployment):

The first function of unemployment (which has always existed in open or disguised forms) is that it maintains the authority of master over man. The master has normally been in a position to say: "If you don't want the job, there are plenty of others who do." When the man can say: "If you don't want to employ me, there are plenty of others who will," the situation is radically altered.

January 23rd 1943 – Alternative Solutions To A Dilemma

washunate November 19, 2016 at 9:31 am

Uh, one small problem. Capitalism isn't the problem. Unless we're simply using the word capitalism to describe any fascist combination of imperialism abroad and corporate subsidies at home.

For example:

The failure by policy-makers to fully understand the dynamics of the capitalist system

This is the state of economic discourse on the left? Policy-makers understand the dynamics quite well. That's why they have done everything possible to undermine the rule of law and individual rights at the heart of market-based economics.

Concentration of wealth and power isn't a failure of public policy. It's the point.

JTMcPhee November 19, 2016 at 9:39 am

Yas, No True Libertarian would allow erosion of the ruleoflaw and individualrights if only those could be preserved, everythiing would fall into its preordained place Market-based economics

http://www.nakedcapitalism.com/2011/11/journey-into-a-libertarian-future-part-i-%e2%80%93the-vision.html , in six parts for those who want to imagine the Libertarian Paradise

Code Name D November 19, 2016 at 12:27 pm

Accept Libertarians don't belive in rights, but rather in a batch of comodities they call "rights" that exist for the soul purpous of being bartered away to the ownership class.

Science Officer Smirnoff November 19, 2016 at 4:37 pm

We are lucky to have this freely available-

Illiberal libertarians: Why libertarianism is not a liberal view
by Samuel Freeman in Philosophy and Public Affairs
http://sites.sas.upenn.edu/sfreeman/files/illiberal_libertarians_ppa_2001.pdf

Two highlights
p.147

. . . What is striking about libertarians' conception of political power is
its resemblance to feudalism . By "feudalism" I mean a particular conception of political power, not the manorial system or the economic system that relies on the institution of serfdom (as in European medieval feudalism).

p.149

. . . Liberalism evolved in great part by rejecting the idea of privately
exercised political power, whether it stemmed from a network of private
contracts under feudalism or whether it was conceived as owned
and exercised by divine right under royal absolutism. Libertarianism
resembles feudalism in that it establishes political power in a web of
bilateral individual contracts. Consequently, it has no conception of
legitimate public political authority nor any place for political society,
a "body politic" that political authority represents in a fiduciary capacity.
Having no conception of public political authority, libertarians
have no place for the impartial administration of justice. People's
rights are selectively protected only to the extent they can afford protection
and depending on which services they pay for. Having no conception of a political society, libertarians have no conception of the common good , those basic interests of each individual that according to liberals are to be maintained for the sake of justice by the impartial exercise of public political power.

paulmeli November 19, 2016 at 11:31 am

"Concentration of wealth and power isn't a failure of public policy. It's the point."

This gets to the root of the problem.

Norb November 19, 2016 at 9:54 am

Rethinking capitalism and rolling back the corporate coup d'etat will be difficult as most citizens have no idea what has taken place. Trumps election is good in one sense, it will be no longer possible to obfuscate corporate interests as somehow also in the best interests of the citizenry. The are in fact opposites.

Rethinking capitalism leads to rethinking the legitimacy of power centers. The cyclical political theatre between a sham duopoly hopefully is over, or will be over when Trump fails to deliver in any meaningful way for the working class. The time is now for rediscovering the true power in government lies with the people, not with some enthroned elite. It is somewhat ironic that it took the Queen of England to point that out in her indirect way.

lyman alpha blob November 19, 2016 at 10:27 am

The author seems to have a hard time shaking certain conventional assumptions.

If future growth is to take a different path

If that path is negative then maybe they have a point but we can't have perpetual growth in a closed system which is what this planet is.

And then this part:

As early as 1821, David Ricardo worried about the effect of mechanization on labor displacement. What was important then, and should inform our thinking now, was that profits (from mechanization) be reinvested into production, meaning that, in Ricardo's time, while some jobs fell away, others were created.

This also seems a little shortsighted and somewhat vague. How much exactly do we need to produce? Based on the amount of garbage floating around in the ocean and the rising global temperatures it would seem we've probably already overdone it.

This is another author who seems to think that money really does grow on trees, ie it's a naturally occurring phenomenon like the weather that we are subject to and can't change much rather than a tool made by human beings that can be used any way we see fit.

Rather than factories running 24/7 producing mounds of cheap crap that breaks down and needs to be replaced on a regular basis just to keep enough people marginally employed and constantly buying stuff, would it really be so bad to have automation that produces enough of what we need and then stops for a while until there's a new need, coupled with a job guarantee and BIG?

cnchal November 19, 2016 at 5:16 pm

It boils down to, do you want a rip roaring economy for all or a habitable planet?

Perhaps we can escape this with a combination of jawb guarantee and BIG. You're hired and your jawb is to do nothing. The problem is when you are off the jawb, spending the money earned by doing nothing

Jef November 19, 2016 at 11:24 am

What caused the economic collapse was hitting the obvious limits of economical resource extraction and environmental limits to absorbing our industrial waste stream.

The global economy is 100% dependent on resource extraction, production, and disposal.

We have tried to deny this reality by jiggering around with economic, monetary, and financial theories as if they, along with technolology can over come it. All that has done is increase inequality and empower what I call the cannibalistic phase of capitalism.

What is needed is just about the opposite of capitalism. We need to figure out how to pay people to do less way less, have less, consume less, procreate less .

Yves Smith Post author November 19, 2016 at 2:31 pm

We are facing a longer-term economic collapse if we don't restructure the economy to be vastly less wasteful. But the crisis in 2008 was not the result of resource extraction. This was a financial crisis and I (and many others) described at great length how it came about. My argument was that it was the result of bad economic ideology, applied over a period of 50 years.

Thor's Hammer November 19, 2016 at 11:30 am

Sigh- another blind Economist wandering through the zoo, stumbling upon an elephant's trunk, and conjuring up ideas to make it GROW longer.

Sustained exponential growth is mathematically impossible. At any rate of growth, the end result is that humans and their things end up occupying every square inch of territory, using every joule of energy, and consuming every natural resource until collapse intervenes.

Natural capital - the physical characteristics of the biosphere- is the foundation of all life including that of homo sapiens. Any economic theory that fails to build from this fundamental fact is mere econobabble.

Humans are a tribal species who have devoted much of their "human capital" to warfare since the current genetic strain succeeded in exterminating the Neanderthals. Any discussion of contemporary capitalism in the USA that fails to examine the pivotal role of the military-industrial state is fatally flawed.

The goal of economic policy should be the maximization of quality of life for a population level that can live in harmony with the billions of other inhalants of the biosphere- a goal diametrically opposed to homo sapiens goal of growth in ability to dominate it.

paulmeli November 19, 2016 at 11:39 am

"Sustained exponential growth is mathematically impossible."

Two things. Growth is more like an annuity of 1 at compound interest. if we are growing at r% per year the growth curve would be (1+r)^n.

Growth can be based on human resources, rather than real resources, i.e. services as opposed to consumption.

Code Name D November 19, 2016 at 12:37 pm

You are wrong on both counts. If "growth" is just "compound intrest," than you have a pointless economey, one that is not based in the real world,

Second, "human resourcs" is a "real resource" and thus havefundemental limits.

This is the origial point. You can not have an economey that violates the 2nd law of thermal dynamics. Economist need to stop pretending physics dosn't apply.

susan the other November 19, 2016 at 1:45 pm

the entropy that exists in our economies is a failure to organize at a much more complex and complete level – they say that nuclear energy is an incomplete technology and we all know how disastrous it can be – so is economics and it is because capitalism is a simplistic theory. Steve Keen is so good on this subject. He almost makes me see in graphic form how we should reverse our thinking from outward fractals of "productivity and profits" to something that goes deep instead. We need to change the concept of vertical integration to deep integration – make productivity be coherent all the way down the economic food chain from the profits to the bacteria in the ground. Repair the environment at all levels of production and account for the costs of using even the smallest thing – this would indeed put a cramp in capitalism.

OpenThePodBayDoorsHAL November 19, 2016 at 2:07 pm

"Economists need to stop pretending."
There, fixed it for you, the idea that an infinitely-complex system that is massively swayed by human emotion is somehow "model-able" is silly. The queen called everybody's bluff, recall what the august "economists" finally said after she asked what happened and why: "We don't know".

Second-order silly is the idea that a centrally-planned, command-and-control approach can work on such a system. Keynes and the others that came up with this hoo-haw were admirers of Stalinist Russia, at the time the Bloomsbury and other pink crowd were gushing "I have seen the future and it works!". The idea is "let's raise X number cows because we project we will need leather for Y number of shoes". After you're done falling off your chair laughing take a moment to realize that's exactly what they try to do today with the price of money and the level of demand in the economy.

There are too many unintended consequences, look at ZIRP for example, they thought free money would make people borrow more but (being rational) people saw they would get no current income so boosted their savings instead.

So:
Let bad debts clear, otherwise you're just suppressing brush fires on the forest floor and eventually the whole thing burns to the ground. Mario Draghi buying CCC-rated junk is precisely what you should not do.

And to Watt4 Bob below, the only "creative destruction" we have today is for people and households. Zombie banks, oil companies, insurers, big pharma, military companies, the surveillance-industrial complex are completely isolated from creative destruction by the big fat thumb of the gumment on the scales.

Thor's Hammer November 19, 2016 at 4:17 pm

Paul, Please step back and analyze the logical fallacy in your statement. Exponential growth based upon human resources ("rather than real resources" means that at some point in the growth cycle humans have to eat human resources rather than food.

Anyone who makes the (common) claim that you do simply does not understand the meaning of exponential growth. Model growth at any rate and you eventually reach the point where the next increment of growth fills the entirety of any finite universe. If production grows exponentially at the 3% target often bandied about as desirable the entire world would be covered by the human capital you hope will provide an escape from mathematical certainty. It only takes about 400 years of 3% exponential growth starting with only one Einstein or one bite of information to reach the finite limit of our planet. And it matters not a whit whether the human capital walks around in a physical body or is condensed into bits & bites and stored on a flash drive, the mathematics are the same.

Because we live in a real world with real physical limits, sustained long term growth will always be impossible and collapse of growth inevitable. Any theory of economics worth more than toilet paper should recognize that fundamental fact.

For those confused about real world limits to exponential growth, watch this short lecture:
https://www.youtube.com/watch?v=bRc-YfcXVYo

Thor's Hammer November 19, 2016 at 4:42 pm

Perhaps a more straightforward introduction to exponential growth:
https://www.youtube.com/watch?v=W2rTQpdyCFQ

paulmeli November 19, 2016 at 6:17 pm

Thor, with all due respect you've misunderstood what I wrote. Your response killed a bunch of straw men.

The point about human resources was that the growth in consumption is some 20 times greater than population growth. Take that for what it's worth, I think that is a big part of the problem.

The first point was purely arithmetic. An annuity of 1 at rate r for n periods fits the curve of GDP growth (a proxy for growth) like a glove. Compound interest is calculated using the same formula. Beyond that I don't know what you're arguing against.

You can do the same for growth in federal spending, growth in Investment, etc. They all fit the annuity curve. Your "3% exponential growth" is an annuity of 1 at 3% compounded for n periods.

Which IS an exponential relationship, but it puts growth in perspective when you look at it as analogous to compounding interest. For me at least.

Watt4Bob November 19, 2016 at 11:33 am

Rethinking capitalism and rolling back the corporate coup d'etat will be difficult as most citizens have no idea what has taken place.

It's worse than that.

Hysteresis, one of my favorite new vocabulary words, is the reason there's no easy fix for the system that is currently circling the drain.

That being the damage done by neo-liberal, creative destruction was actually destructive destruction.

It is impossible to simply turn-back the hands of time, the damage is done, the manufacturing base that supported a healthy working-class has been destroyed, and there is no actual path for revival of that reality.

This is the reason we are faced with the necessity of creating a new economy, TPTB have destroyed any path to what we might call a 'normal' economy from our current condition.

Hysteresis, means "Nope, you can't get there from here."

That used to be a Yankee farmer joke, now it's a perfectly good explanation for our situation.

Gaylord November 19, 2016 at 11:51 am

Assuming infinite growth on a finite planet is the fatal hubris of capitalism, which assumes that economics exist apart from the laws of nature. We are experiencing inevitable contraction because we have exceeded the limits of earth's ability to sustain our species' rapacious demands and destructive lifestyles. We are already experiencing catastrophic effects from our destruction of the planet's climate moderating system, which ultimately will destroy our habitat. We have seen this coming for a long time, yet leaders, heads of state, and academicians (including this author) continue to think in outmoded ways, particularly about our disregard of the ecosystem which will result in near-term mass extinction. Human exceptionalism is the fatal flaw that will wipe out most if not all life on this planet.

Disturbed Voter November 19, 2016 at 11:55 am

In the past, disaster was local, because hubris met its match locally. With a global civilization, we dream of going to Mars to trash another planet from scratch. But when disaster is truly global, the result will be truly apocalyptic. Humanity has had a good run; eat, drink and love while you still can.

Disturbed Voter November 19, 2016 at 11:52 am

There is an ancient battle between Heraclitus and Parmenides. Either dynamics is reality, or statics is reality. The reality is, both are real. Change is liberal, stasis is conservative. Unfortunately neither is a panacea, because there is no panacea, it all depends on context. When change is required, conservative-ism brings us the French Revolution as an unintended consequence. When stasis is required, liberal-ism brings us the French Revolution as an intended consequence. Sometimes change happens, sometimes things stay the same and either can be good or bad for you individually. Generalizing beyond this is over-generalization.

Katharine November 19, 2016 at 12:04 pm

While I acknowledge that this was written for an audience of economists, I do not think economists should expect to have much influence on the development of new systems until they learn to express themselves in language intelligible to an educated general audience. I can parse the clause, "Skills have always been an endogenous function of investment." I know the meaning of every word in it. I have no idea what it is supposed to communicate. It is not my problem, but the author's, that she fails to state what she considers a key point in language that conveys meaning. In fact, the sentence which follows the jargon appears to say what needed to be said; it is not at all clear what purpose the jargon was intended to serve, other than to signal membership in a professional club. Its primary effect is to break the flow of thought and annoy the non-specialist reader.

susan the other November 19, 2016 at 2:04 pm

i got that feeling as well – too many economists fail to make a satisfying point when it is pretty obvious by now what's wrong

Synoia November 19, 2016 at 12:25 pm

The point about companies hording profits is, I believe a key point. The money belongs to the shareholders, and the individual shareholder have to place investments and not indulge in share buybacks.

A second point not mentioned, after the great recession the chose solution was to preserve as much debt and debt service as possible, ignoring the asserting "debt which cannot be repaid, will not be repaid."

Code Name D November 19, 2016 at 12:46 pm

Why does money BELONG to the shareholder? The author did note that there was $3 trillion in buybacks but investment still remains mis-directed.

susan the other November 19, 2016 at 2:08 pm

" shareholders have to place investments " in order for capitalism to progress. But oops, we have come to the end of an era and altho there are trillions of dollars on the sidelines, there is no place to invest. Like the guy in MASH said re Christianity: You guys haven't come up with a new idea for 2000 years.

Altandmain November 19, 2016 at 6:40 pm

The fatal flaw of the current system is that it is not designed to benefit the majority of people. It is a system of rent extraction, made to benefit a few people on top at the expense of the general public.

It needs more than just a rethinking. It needs a ground up design. The problem is that the rent seekers have control of business and government. Both institutions will not be used for public benefit, but rather for the benefit of the extractive elite at the expense of the rest of society.

As for what has been learned – the elite do not "want" to learn the lessons that need to be learned. That is the problem that we face.

[Nov 19, 2016] Men arent interested in working at McDonalds for $15 per hour instead of $9.50. What they want is... steady, stable, full-time jobs that deliver a solid middle-class life

Notable quotes:
"... The economic point is that globalisation has boosted trade and overall wealth, but it has also created a dog eat dog world where western workers compete with, and lose jobs to, people far away who will do the work for much less. ..."
"... But neither Trump nor Farage have shown any evidence of how realistically they can recreate those jobs in the west. And realistically god knows how you keep the wealth free trade and globalisation brings but avoid losing the good jobs? At least the current mess has focused attention on the question and has said that patience has run out. ..."
"... Compared to the real economic problems, the identity politics is minor, but it is still an irritant that explains why this revolution is coming from the right not from the left. ..."
"... And what "age" has that been Roy? The "age" of: climate change, gangster bankers, tax heavens, illegal wars, nuclear proliferation, grotesque inequality, the prison industrial complex to cite just a few. That "age"? ..."
"... the right wing press detest one kind of liberalism, social liberalism, they hate that, but they love economic liberalism, which has done much harm to the working class. ..."
"... Most of the right wing press support austerity measures, slashing of taxes and, smaller and smaller governments. Yet apparently, its being socially liberal that is the problem ..."
Nov 19, 2016 | profile.theguardian.com
goodtable, 3d ago

A crucial point "WWC men aren't interested in working at McDonald's for $15 per hour instead of $9.50. What they want is... steady, stable, full-time jobs that deliver a solid middle-class life."

The economic point is that globalisation has boosted trade and overall wealth, but it has also created a dog eat dog world where western workers compete with, and lose jobs to, people far away who will do the work for much less.

But neither Trump nor Farage have shown any evidence of how realistically they can recreate those jobs in the west. And realistically god knows how you keep the wealth free trade and globalisation brings but avoid losing the good jobs? At least the current mess has focused attention on the question and has said that patience has run out.

Compared to the real economic problems, the identity politics is minor, but it is still an irritant that explains why this revolution is coming from the right not from the left.

If you're white and male it's bad enough losing your hope of economic security, but then to be repeatedly told by the left that you're misogynist, racist, sexist, Islamophobic, transgenderphobic etc etc is just the icing on the cake. If the author wants to see just how crazy identity politics has become go to the Suzanne Moore piece from yesterday accusing American women of being misogynist for refusing to vote for Hillary. That kind of maniac 'agree with me on everything or you're a racist, sexist, homophobe' identity politics has to be ditched. Reply

EnglishMike -> goodtable 3d ago
Funny, I've been a white male my whole life and not once have I been accused of being a misogynist, racist, sexist, Islamophobic, or transgenderphobic. I didn't think being a white male was so difficult for some people... Reply
garrylee 3d ago
"Are we turning our backs on the age of enlightenment?".

And what "age" has that been Roy? The "age" of: climate change, gangster bankers, tax heavens, illegal wars, nuclear proliferation, grotesque inequality, the prison industrial complex to cite just a few. That "age"?

Bazz Leaveblank -> garrylee 3d ago
I agree hardly an age of enlightenment. My opinion... the so called Liberal Elite are responsible for many of the issues in the list. The poor and the old in this country are not being helped by the benefits system. Yet the rich get richer beyond the dreams of the ordinary man.

I would pay more tax if I thought it might be spent more wisely...but can you trust politicians who are happy to spend 50 billion on a railway line that 98% of the population will never use.

No solutions from me ...an old hippy from the 60s "Love and peace man " ...didn't work did it :)

aronDi 3d ago
I have come under the impression that the right wing press detest one kind of liberalism, social liberalism, they hate that, but they love economic liberalism, which has done much harm to the working class.

Most of the right wing press support austerity measures, slashing of taxes and, smaller and smaller governments. Yet apparently, its being socially liberal that is the problem.

[Nov 19, 2016] We should not use the term capital when referring to credit/lending that is not related to economically real outputs

Notable quotes:
"... "And even though neoliberals and international banks would have you believe otherwise, a fall in these money movements is entirely a good thing. As Ken Rogoff and Carmen Reinhart found in their study of 800 years of financial crises, high levels of international capital flows are correlated with more frequent and severe financial crises. Similarly, a 2010 Bank of International Settlements study by Claudio Borio and Petit Disyatat ascertained that cross border capital flows were over 60 times trade flows, meaning they had almost nothing to do with them. " ..."
"... I think it is apparent that the entire edifice of finance has been jiggered to benefit, Davos man and NO ONE ELSE. ..."
"... hy shouldn't Davos man want it to continue – the aftermath was set right for the 0.1% remarkably fast in the aftermath of the Great Recession – by HUGE infusions of government money, guarantees, credit, forbearance, etcetera – which for some reason can NEVER be made available to the 90% ..."
"... This is probably the most salient reason Hillary lost, but it can never, ever be proffered as a reason for it would reveal that ALL our problems are due to the rich . ..."
"... I've often wondered how "The Multiplier Effect" of money, [not] circulating and recirculating in our local economies, at the consumer level, is affected by money sent out of the country by "immigrants"? ..."
"... Is this such a small amount as not to be considered part of "cross border capital flows"? How does it affect local economies that are more important to us than what happens on Wall Street? ..."
Nov 19, 2016 | www.nakedcapitalism.com
Sound of the Suburbs November 19, 2016 at 8:27 am

You can only pillage the world once, though I think they are going for second helpings in Brazil right now.

tegnost November 19, 2016 at 11:13 am

m'kay so kind of like robbing peter (emerging markets with growth potential) to pay paul (goldman et.al.) until peter goes broke (asset bubble collapse) so paul can't be paid until he "natural" growth potential of emerging markets recovers (peters growth potential recovers from the asset bubble/debt overhang with best performance to those with more flexible currency) so that paying paul (new grifts, oops financial innovations) can be foisted on them again leading to, in hindsight only of course, and notably after paul has been paid, another collapse? rinse and repeat .is there any sense to this postulation?

JF November 19, 2016 at 11:47 am

Why do you use the term 'capital' when referring to credit/lending that is not related to economically real outputs. The rest of the article tells this story but the lead groups it all as 'capital' flows.

This is an editorial suggestion really one that does not conflate or mislead when treating credit creation used for financial asset trading as if it were the same general thing as FDI, that is, direct investment.

We have seen the financial system react to the crisis by recognizing their own unhinged behavior, and doing much less of it for good reasons. They know their credit creating behavior was nit coverting Savings into Investment, they know it was not 'capital' – so editors, let us help our writers to bring more clarity.

Grebo November 19, 2016 at 1:19 pm

I agree. We need a separate word for 'financial capital'. I am thinking 'ante' or 'stake' or some similar word from the world of gambling and confidence tricks.

fresno dan November 19, 2016 at 11:56 am

"And even though neoliberals and international banks would have you believe otherwise, a fall in these money movements is entirely a good thing. As Ken Rogoff and Carmen Reinhart found in their study of 800 years of financial crises, high levels of international capital flows are correlated with more frequent and severe financial crises. Similarly, a 2010 Bank of International Settlements study by Claudio Borio and Petit Disyatat ascertained that cross border capital flows were over 60 times trade flows, meaning they had almost nothing to do with them. "

================================================================

This is probably something that not one in 10,000 people understand (I don't really either) – but I think it is apparent that the entire edifice of finance has been jiggered to benefit, Davos man and NO ONE ELSE. And why shouldn't Davos man want it to continue – the aftermath was set right for the 0.1% remarkably fast in the aftermath of the Great Recession – by HUGE infusions of government money, guarantees, credit, forbearance, etcetera – which for some reason can NEVER be made available to the 90%

This is probably the most salient reason Hillary lost, but it can never, ever be proffered as a reason for it would reveal that ALL our problems are due to the rich .

Dave November 19, 2016 at 12:31 pm

I've often wondered how "The Multiplier Effect" of money, [not] circulating and recirculating in our local economies, at the consumer level, is affected by money sent out of the country by "immigrants"?

Is this such a small amount as not to be considered part of "cross border capital flows"? How does it affect local economies that are more important to us than what happens on Wall Street?

Three numbers hopefully to provide 'balance':

[Nov 19, 2016] Wolfcamp oil reserves

Notable quotes:
"... Right now there are as many rigs running drilling this rock formation as there are in the rest of the country combined, so it is already baked in to the US production data. This is not like a Saudi Arabia field with a low drill and complete and development cost, it will take many billions of drilling capital to get a small percentage of the oil in place. The big deal is that the area is fairly resilient to low oil prices and will cushion the drop in US production due to lack of investment in other basins. ..."
"... The USGS lost all credibility with me as to estimating TRR in the Monterrey Shale in California. It baffles me, after five years of publically discussing unconventional shale oil resources, that modelers, internet analysts and predictors completely ignore economics, debt and finances. Extracting oil is a business; it must make money to succeed. If it does not succeed, all bets are off regarding predictions. ..."
Nov 19, 2016 | peakoilbarrel.com

JG says: 11/16/2016 at 3:49 pm
I am a petroleum Geologist drilling wells in the Wolfcamp, the USGS report means nothing. They periodically review basins to assess how much petroleum is there, we have been drilling Horizontal wells in the Wolfcamp for almost a decade, and vertical wells for many decades. Right now there are as many rigs running drilling this rock formation as there are in the rest of the country combined, so it is already baked in to the US production data. This is not like a Saudi Arabia field with a low drill and complete and development cost, it will take many billions of drilling capital to get a small percentage of the oil in place. The big deal is that the area is fairly resilient to low oil prices and will cushion the drop in US production due to lack of investment in other basins.
Mike says: 11/17/2016 at 8:28 am
Thank you, JG -- Straight from the horses mouth, respectfully. The USGS lost all credibility with me as to estimating TRR in the Monterrey Shale in California. It baffles me, after five years of publically discussing unconventional shale oil resources, that modelers, internet analysts and predictors completely ignore economics, debt and finances. Extracting oil is a business; it must make money to succeed. If it does not succeed, all bets are off regarding predictions.
Dennis Coyne says: 11/17/2016 at 8:49 am
Hi Mike,

The Monterrey shale estimate was by the EIA not the USGS. The EIA had a private consultant do the analysis and it was mostly based on investor presentations, very little geological analysis.

It would be better if the USGS did an economic analysis as they do with coal for the Powder River Basin. They could develop a supply curve based on current costs, but they don't.

Do you have any idea of the capital cost of the wells (ballpark guess) for a horizontal multifracked well in the Wolfcamp? Would $7 million be about right (a WAG by me)?

On ignoring economics, I show my oil price assumptions. Other financial assumptions for the Bakken are $8 million for capital cost of the well (2016$). OPEX=$9/b, other costs=$5/b, royalty and taxes=29% of gross revenue, $10/b transport cost, and a real discount rate of 7% (10% nominal discount rate assuming 3% inflation).

I do a DCF based on my assumed real oil price curve. Brent oil price rises to $77/b (2016$) by June 2017 and continue to rise at 17% per year until Oct 2020 when the oil price reaches $130/b, it is assumed that average oil prices remain at that level until Dec 2060. The last well is drilled in Dec 2035 and stops producing 25 years later in Dec 2060.

EUR of wells today is assumed to be 321 kb and EUR falls to 160 kb by 2035. The last well drilled only makes $243,000 over the 7% real rate of return, so the 9 Gb scenario is probably too optimistic, it is assumed that any gas sales are used to offset OPEX and other costs, though no natural gas price assumptions have been made to simplify the analysis.

This analysis is based on the analyses that Rune Likvern has done in the past, though his analyses are far superior to my own.

shallow sand says: 11/17/2016 at 9:00 am
I think when seismic, land, surface and down hole equipment is included, the number is much higher.

With $20-60K per acre being paid, land definitely has to be factored in. Depending on spacing, $1-5 million per well?

[Nov 19, 2016] Helicopter money by Stefan Gerlach

www.project-syndicate.org

Years of low interest rates and quantitative easing have not restored growth to developed countries, and many observers lately have been calling on central banks to inject stimulus into economies directly. But do the rewards of "helicopter money" outweigh the risks?

ZURICH – The world has been on pins and needles since Donald Trump's upset victory over Hillary Clinton in the United States' presidential election last week. No one – including, perhaps, the president-elect himself – quite knows what shape the next US administration will take, or what its policy priorities will be.


Compounding this uncertainty is the fact that, around the world, geopolitical tensions are rising, with developed economies continuing to experience tepid growth, even after years of record-low interest rates. For Trump to stimulate enough activity in the US economy to satisfy his zealous base, he will have to find the right balance between fiscal measures and monetary-policy tools.

Whether Trump continues the post-1945 US tradition of international leadership, or instead chooses an "America first" approach, he will not be alone in his quest for growth: Japan and eurozone countries are also struggling to bring about sustainable recoveries and meet central banks' inflation targets. Project Syndicate commentators have been at the forefront of the ongoing debate about what policymakers can do to achieve these goals. In particular, while Trump and policymakers elsewhere are embracing fiscal activism, how far they are willing or able to go remains uncertain, raising the question of what more central banks could do to stimulate demand and boost growth.

Spinning in Circles

The recent shift toward fiscal expansion reflects widespread agreement that policymakers are running out of stimulus options. Central banks can no longer rely on "forward guidance," such as half-promises that interest rates will remain low indefinitely. And quantitative easing (QE) is quickly losing its potency, perhaps because it is inherently more effective as a crisis-response mechanism than as a long-term fix.

[Nov 19, 2016] That 20-billion-barrel oil "deposit" in Texas, isn't.

Nov 19, 2016 | www.nakedcapitalism.com

Synapsid November 17, 2016 at 5:03 pm

[Nov 16, 2016] Being now a party of Wall street, neolibral democrats did not learn the lesson and do not want to: they attempt to double down on the identity politics, keep telling the pulverized middle class how great the economy is

Notable quotes:
"... I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. ..."
"... I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn't know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil ..."
"... Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll released Thursday, a signal that despite years after the Great Recession, Americans' finances remain precarious as ever. ..."
"... These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill. ..."
"... Even for the country's wealthiest 20 percent - households making more than $100,000 a year - 38 percent say they would have at least some difficulty coming up with $1,000 ..."
"... Chronicle for Higher Education: ..."
"... Meanwhile, 91% of all the profits generated by the U.S. economy from 2009 through 2012 went to the top 1%. As just one example, the annual bonuses (not salaries, just the bonuses) of all Wall Street financial traders last year amounted to 28 billion dollars while the total income of all minimum wage workers in America came to 14 billion dollars. ..."
"... "Between 2009 and 2012, according to updated data from Emmanuel Saez, overall income per family grew 6.9 percent. The gains weren't shared evenly, however. The top 1 percent saw their real income grow by 34.7 percent while the bottom 99 percent only saw a 0.8 percent gain, meaning that the 1 percent captured 91 percent of all real income. ..."
"... Adjusting for inflation and excluding anything made from capital gains investments like stocks, however, shows that even that small gains for all but the richest disappears. According to Justin Wolfers, adjusted average income for the 1 percent without capital gains rose from $871,100 to $968,000 in that time period. For everyone else, average income actually fell from $44,000 to $43,900. Calculated this way, the 1 percent has captured all of the income gains." ..."
"... There actually is a logic at work in the Rust Belt voters for voted for Trump. I don't think it's good logic, but it makes sense in its own warped way. The calculation the Trump voters seem to be making in the Rust Belt is that it's better to have a job and no health insurance and no medicare and no social security, than no job but the ACA (with $7,000 deductibles you can't afford to pay for anyway) plus medicare (since most of these voters are healthy, they figure they'll never get sick) plus social security (most of these voters are not 65 or older, and probably think they'll never age - or perhaps don't believe that social security will be solvent when they do need it). ..."
"... It's the same twisted logic that goes on with protectionism. Rust Belt workers figure that it's better to have a job and not be able to afford a Chinese-made laptop than not to have a job but plenty of cheap foreign-made widgets you could buy if you had any money (which you don't). That logic doesn't parse if you run through the economics (because protectionism will destroy the very jobs they think they're saving), but it can be sold as a tweet in a political campaign. ..."
"... The claim "Trump's coalition is composed of overt racists and people who are indifferent to overt racism" is incomplete. Trump's coalition actually consists of 3 parts and it's highly unstable: [1] racists, [2] plutocrats, [3] working class people slammed hard by globalization for whom Democrats have done little or nothing. ..."
"... The good news is that Trump's coalition is unstable. The plutocrats and Rust Belters are natural enemies. ..."
"... Listen to Steve Bannon, a classic stormfront type - he says he wants to blow up both the Democratic and the Republican party. He calls himself a "Leninist" in a recent interview and vows to wreck all elite U.S. institutions (universities, giant multinationals), not just the Democratic party. ..."
"... Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference. ..."
Nov 16, 2016 | crookedtimber.org

mclaren 11.16.16 at 9:52 am 7

Eric places the blame for this loss squarely on economics, which, it seems to me, gets the analysis exactly right. And the statistics back up his analysis, I believe.

It's disturbing and saddening to watch other left-wing websites ignore those statistics and charge off the cliff into the abyss, screaming that this election was all about racism/misogyny/homophobia/[fill in the blank with identity politics demonology of your choice]. First, the "it's all racism" analysis conveniently lets the current Democratic leadership off the hook. They didn't do anything wrong, it was those "deplorables" (half the country!) who are to blame. Second, the identity politics blame-shifting completely overlooks and short-circuits any real action to fix the economy by Democratic policymakers or Democratic politicians or the Democratic party leadership. That's particularly convenient for the Democratic leadership because these top-four-percenter professionals "promise anything and change nothing" while jetting between Davos and Martha's Vineyard, ignoring the peons who don't make $100,000 or more a year because the peons all live in flyover country.

"Trump supporters were on average affluent, but they are always Republican and aren't numerous enough to deliver the presidency (538 has changed their view in the wake of the election result). Some point out that looking at support by income doesn't show much distinctive support for Trump among the "poor", but that's beside the point too, as it submerges a regional phenomenon in a national average, just as exit polls do. (..)
"When commentators like Michael Moore and Thomas Frank pointed out that there was possibility for Trump in the Rust Belt they were mostly ignored or, even more improbably, accused of being apologists for racism and misogyny. But that is what Trump did, and he won. Moreover, he won with an amateurish campaign against a well-funded and politically sophisticated opponent simply because he planted his flag where others wouldn't.

"Because of the obsession with exit polls, post-election analysis has not come to grips with the regional nature of the Trump phenomenon. Exit polls divide the general electorate based on individual attributes: race, gender, income, education, and so on, making regional distinctions invisible. Moreover, America doesn't decide the presidential election that way. It decides it based on the electoral college, which potentially makes the characteristics of individual states decisive. We should be looking at maps, not exit polls for the explanation. Low black turnout in California or high Latino turnout in Texas do not matter in the slightest in determining the election, but exit polls don't help us see that. Exit polls deliver a bunch of non-explanatory facts, in this election more than other recent ones."
http://blogs.lse.ac.uk/usappblog/2016/11/11/23174/

"Donald Trump performed best on Tuesday in places where the economy is in worse shape, and especially in places where jobs are most at risk in the future.

"Trump, who in his campaign pledged to be a voice for `forgotten Americans,' beat Hillary Clinton in counties with slower job growth and lower wages. And he far outperformed her in counties where more jobs are threatened by automation or offshoring, a sign that he found support not just among workers who are struggling now but among those concerned for their economic future."

http://fivethirtyeight.com/features/trump-was-stronger-where-the-economy-is-weaker/

Meanwhile, the neoliberal Democrats made claims about the economy that at best wildly oversold the non-recovery from the 2009 global financial meltdown, and at worst flat-out misrepresented the state of the U.S. economy. For example, president Obama in his June 1 2016 speech in Elkhart Indiana, said:

"Now, one of the reasons we're told this has been an unusual election year is because people are anxious and uncertain about the economy. And our politics are a natural place to channel that frustration. So I wanted to come to the heartland, to the Midwest, back to close to my hometown to talk about that anxiety, that economic anxiety, and what I think it means. (..) America's economy is not just better than it was eight years ago - it is the strongest, most durable economy in the world. (..) Unemployment in Elkhart has fallen to around 4 percent. (Applause.) At the peak of the crisis, nearly one in 10 homeowners in the state of Indiana were either behind on their mortgages or in foreclosure; today, it's one in 30. Back then, only 75 percent of your kids graduated from high school; tomorrow, 90 percent of them will. (Applause.) The auto industry just had its best year ever. (..) So that's progress.(..) We decided to invest in job training so that folks who lost their jobs could retool. We decided to invest in things like high-tech manufacturing and clean energy and infrastructure, so that entrepreneurs wouldn't just bring back the jobs that we had lost, but create new and better jobs By almost every economic measure, America is better off than when I came here at the beginning of my presidency. That's the truth. That's true. (Applause.) It's true. (Applause.) Over the past six years, our businesses have created more than 14 million new jobs - that's the longest stretch of consecutive private sector job growth in our history. We've seen the first sustained manufacturing growth since the 1990s."

None of this is true. Not is a substantive sense, not in the sense of being accurate, not in the sense of reflecting the facts on the ground for real working people who don't fly their private jets to Davos.

The claim that "America's economy is the strongest and most durable economy in the world" is just plain false. China has a much higher growth rate, at 6.9% nearly triple the U.S.'s - and America's GDP growth is trending to historic long-term lows, and still falling. Take a look at this chart of the Federal Reserve board's projections of U.S. GDP growth since 2009 compared with the real GDP growth rate:

http://www.frbsf.org/economic-research/files/2015-03-2.png

"[In the survey] [t]he Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

"Well, I knew. I knew because I am in that 47 percent.

" I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5-literally-while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs.

I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn't know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil ."

http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/

" Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll released Thursday, a signal that despite years after the Great Recession, Americans' finances remain precarious as ever.

" These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.

" Even for the country's wealthiest 20 percent - households making more than $100,000 a year - 38 percent say they would have at least some difficulty coming up with $1,000 .

"`The more we learn about the balance sheets of Americans, it becomes quite alarming,' said Caroline Ratcliffe, a senior fellow at the Urban Institute focusing on poverty and emergency savings issues."

http://bigstory.ap.org/article/965e48ed609245539ed315f83e01b6a2

The rest of Obama's statistics are deceptive to the point of being dissimulations - unemployment has dropped to 4 percent because so many people have stopped looking for work and moved into their parents' basements that the Bureau of Labor Statistics no longer counts them as unemployed. Meanwhile, the fraction of working-age adults who are not in the workforce has skyrocketed to an all-time high. Few homeowners are now being foreclosed in 2016 compared to 2009 because the people in 2009 who were in financial trouble all lost their homes. Only rich people and well-off professionals were able to keep their homes through the 2009 financial collapse. Since 2009, businesses did indeed create 14 million new jobs - mostly low-wage junk jobs, part-time minimum-wage jobs that don't pay a living wage.

"The deep recession wiped out primarily high-wage and middle-wage jobs. Yet the strongest employment growth during the sluggish recovery has been in low-wage work, at places like strip malls and fast-food restaurants.

"In essence, the poor economy has replaced good jobs with bad ones."

http://www.nytimes.com/2014/04/28/business/economy/recovery-has-created-far-more-low-wage-jobs-than-better-paid-ones.html

And the jobs market isn't much better for highly-educated workers:

New research released Monday says nearly half of the nation's recent college graduates work jobs that don't require a degree.

The report, from the Center for College Affordability and Productivity, concludes that while college-educated Americans are less likely to collect unemployment, many of the jobs they do have aren't worth the price of their diplomas.

The data calls into question a national education platform that says higher education is better in an economy that favors college graduates.

http://www.huffingtonpost.com/2013/01/29/underemployed-overeducated_n_2568203.html

Don't believe it? Then try this article, from the Chronicle for Higher Education:

Approximately 60 percent of the increase in the number of college graduates from 1992 to 2008 worked in jobs that the BLS considers relatively low skilled-occupations where many participants have only high school diplomas and often even less. Only a minority of the increment in our nation's stock of college graduates is filling jobs historically considered as requiring a bachelor's degree or more.

http://www.chronicle.com/blogs/innovations/the-great-college-degree-scam/28067

As for manufacturing, U.S. manufacturing lost 35,000 jobs in 2016, and manufacturing employment remains 2.2% below what it was when Obama took office.

Meanwhile, 91% of all the profits generated by the U.S. economy from 2009 through 2012 went to the top 1%. As just one example, the annual bonuses (not salaries, just the bonuses) of all Wall Street financial traders last year amounted to 28 billion dollars while the total income of all minimum wage workers in America came to 14 billion dollars.

"Between 2009 and 2012, according to updated data from Emmanuel Saez, overall income per family grew 6.9 percent. The gains weren't shared evenly, however. The top 1 percent saw their real income grow by 34.7 percent while the bottom 99 percent only saw a 0.8 percent gain, meaning that the 1 percent captured 91 percent of all real income.

Adjusting for inflation and excluding anything made from capital gains investments like stocks, however, shows that even that small gains for all but the richest disappears. According to Justin Wolfers, adjusted average income for the 1 percent without capital gains rose from $871,100 to $968,000 in that time period. For everyone else, average income actually fell from $44,000 to $43,900. Calculated this way, the 1 percent has captured all of the income gains."

https://thinkprogress.org/the-1-percent-have-gotten-all-the-income-gains-from-the-recovery-6bee14aab1#.1frn3lu8y

http://www.nytimes.com/2015/03/14/upshot/wall-street-bonuses-vs-total-earnings-of-full-time-minimum-wage-workers.html

Does any of this sound like "the strongest, most durable economy in the world"? Does any of this square with the claims by Hillary Clinton and Barack Obama that "By almost every economic measure, America is better off "? The U.S. economy is only better off in 2016 by disingenuous comparison with the stygian depths of the 2009 economic collapse.

Hillary Clinton tied herself to Barack Obama's economic legacy, and the brutal reality for working class people remains that the economy today has barely improved for most workers to what it was in 2009, and is in many ways worse. Since 2009, automation + outsourcing/offshoring has destroyed whole classes of jobs, from taxi drivers (wiped out by Uber and Lyft) to warehoues stock clerks (getting wiped out by robots) to paralegals and associates at law firms (replaced by databases and legal search algorithms) to high-end programmers (wiped out by an ever-increasing flood of H1B via workers from India and China).

Yet vox.com continues to run article after article proclaiming "the 2016 election was all about racism." And we have a non-stop stream of this stuff from people like Anne Laurie over at balloon-juice.com:

"While the more-Leftist-than-thou "progressives" - including their latest high-profile figurehead - are high-fiving each other in happy anticipation of potential public-outrage gigs over the next four years, at least some people are beginning to push back on the BUT WHITE WORKING CLASS HAS ALL THE SADS!!! meme so beloved of Very Serious Pundits."

That's the ticket, Democrats double down on the identity politics, keep telling the pulverized middle class how great the economy is. Because that worked so well for you this election.

Cranky Observer 11.16.16 at 12:34 pm ( 11 )

= = = mclaren@9:52 am: The rest of Obama's statistics are deceptive to the point of being dissimulations -[ ] Only rich people and well-off professionals were able to keep their homes through the 2009 financial collapse. = = =

Some food for thought in your post, but you don't help your argument with statements such as this one. Rich people and well-off professionals make up at most 10% of the population. US homeownership rate in 2005 was 68.8%, in 2015 is 63.7. That's a big drop and unquestionably represents a lot of people losing their houses involuntarily. Still, even assuming no "well-off professionals" lost their houses in the recession that still leaves the vast majority of the houses owned by the middle class. Which is consistent with foreclosure and sales stats in middle class areas from 2008-2014. Remember that even with 20% unemployment 80% of the population still has a job.

Similarly, I agree that the recession and job situation was qualitatively worse than the quantitative stats depicted. Once you start adding in hidden factors not captured by the official stats, though, where do you stop? How do you know the underground economy isn't doing far better than it was in the boom years of the oughts, thus reducing actual unemployment? Etc.

Finally, you need to address the fundamental question: assuming all you say is true (arguendo), how does destroying the Affordable Care Act, Social Security, and Medicare help those in the economically depressed areas? I got hit bad by the recession myself. Know what helped from 2010 forward? Knowing that I could change jobs, keep my college-age children on my spouse's heath plan, not get hit with pre-existing condition fraud, and that if worse came to worse in a couple years I would have the plan exchange to fall back on. Kansas has tried the Ryan/Walker approach, seen it fail, doubled down, and seen that fail 4x as badly. Now we're going to make it up on unit sales by trying the Ryan plan nationally? How do you expect that to "work out for you"?

WLGR 11.16.16 at 4:11 pm

mclaren @ 7: "high-end programmers (wiped out by an ever-increasing flood of H1B via workers from India and China)"

I'm on board with the general thrust of what you're saying, but this is way, way over the line separating socialism from barbarism. The fact that it's not even true is beside the point, as is the (quite frankly) fascist metaphor of "flood" to describe human fucking beings traveling in search of economic security, at least as long as you show some self-awareness and contrition about your language. Some awareness about the insidious administrative structure of the H1-B program would also be nice - the way it works is, an individual's visa status more or less completely depends on remaining in the good graces of their employer, meaning that by design these employees have no conceivable leverage in any negotiation over pay or working conditions, and a program of unconditional residency without USCIS as a de facto strikebreaker would have much less downward pressure on wages - but anti-immigration rhetoric remaining oblivious to actual immigration law is par for the course.

No, the real point of departure here from what deserves to be called "socialism" is in the very act of blithely combining effects of automation (i.e. traditional capitalist competition for productive efficiency at the expense of workers' economic security) and effects of offshoring/outsourcing/immigration (i.e. racialized fragmentation of the global working class by accident of birth into those who "deserve" greater economic security and those who don't) into one and the same depiction of developed-world economic crisis. In so many words, you're walking right down neoliberal capitalism's ideological garden path: the idea that it's not possible to be anticapitalist without being an economic nationalist, and that every conceivable alternative to some form of Hillary Clinton is ultimately reducible to some form of Donald Trump. On the contrary, those of us on the socialism side of "socialism or barbarism" don't object to capitalism because it's exploiting American workers , we object because it's exploiting workers , and insisting on this crucial point against all chauvinist pressure ("workers of all lands , unite!") is what fundamentally separates our anticapitalism from the pseudo-anticapitalism of fascists.

marku52 11.16.16 at 5:01 pm 16

Maclaren: I'm with you. I well remember Obama and his "pivot to deficit reduction" and "green shoots" while I was screaming at the TV 'No!! Not Now!"

And then he tried for a "grand bargain" with the Reps over chained CPI adjustment for SS, and he became my active enemy. I was a Democrat. Where did my party go?

politicalfootball 11.16.16 at 5:27 pm ( 17 )

Just chiming in here: The implicit deal between the elites and the hoi polloi was that the economy would be run with minimal competence. Throughout the west, those elites have broken faith with the masses on that issue, and are being punished for it.

I'm less inclined to attach responsibility to Obama, Clinton or the Democratic Party than some. If Democrats had their way, the economy would have been managed considerably more competently.

Always remember that the rejection of the elites wasn't just a rejection of Democrats. The Republican elite also took it in the neck.

I'll also dissent from the view that race wasn't decisive in this election. Under different circumstances, we might have had Bernie's revolution rather than Trump's, but Trump's coalition is composed of overt racists and people who are indifferent to overt racism.

engels 11.16.16 at 7:12 pm 18

I find the discussions over identity politics so intensely frustrating. A lot of people on the left have gone all-in on self-righteous anger

Identity politics (and to some extent probably the rhetorical style that goes with it) isn't a 'left' thing, it's a liberal thing. It's a bęte noire for many on the left-see eg. Nancy Fraser's work.

The Anglo/online genus what you get when you subtract class, socialism and real-world organisation from politics and add in a lot of bored students and professionals with internet connections in the context of a political culture (America's) that already valorises individual aggression to a unique degree.

Omega Centauri 11.16.16 at 7:15 pm ( 19 )

As polticalfoorball @15 says. The Democrats just didn't have the political muscle to deliver on those things. There really is a dynamic thats been playing out: Democrats don't get enough governing capacity because they did poorly in the election, which means their projects to improve the economy are neutered or allowed through only in a very weakened form. Then the next election cycle the neuterers use that failure as a weapon to take even more governing capacity away. Its not a failure of will, its a failure to get on top of the political feedback loop.

Manta 11.16.16 at 7:32 pm 20

@15 politicalfootball 11.16.16 at 5:27 pm
"Throughout the west, those elites have broken faith with the masses on that issue, and are being punished for it."

Could you specify some "elite" that has been punished?

nastywoman 11.16.16 at 7:36 pm ( 21 )

@13
'I'm not sure what the thinking is here.'

The definition of 'Keynesianism' is:

'the economic theories and programs ascribed to John M. Keynes and his followers; specifically : the advocacy of monetary and fiscal programs by government to increase employment and spending'

– and if it is done wisely – like in most European countries before 2000 it is one of the least 'braindead' things.

But with the introduction of the Euro – some governmental programs – lead (especially in Spain) to horrendous self-destructive housing and building bubbles – which lead to the conclusion that such programs – which allow 'gambling with houses' are pretty much 'braindead'.

Or shorter: The quality of Keynesianism depends on NOT doing it 'braindead'.

mclaren 11.16.16 at 8:28 pm ( 25 )

Cranky Observer in #11 makes some excellent points. Crucially, he asks: "Finally, you need to address the fundamental question: assuming all you say is true (arguendo), how does destroying the Affordable Care Act, Social Security, and Medicare help those in the economically depressed areas?"

There actually is a logic at work in the Rust Belt voters for voted for Trump. I don't think it's good logic, but it makes sense in its own warped way. The calculation the Trump voters seem to be making in the Rust Belt is that it's better to have a job and no health insurance and no medicare and no social security, than no job but the ACA (with $7,000 deductibles you can't afford to pay for anyway) plus medicare (since most of these voters are healthy, they figure they'll never get sick) plus social security (most of these voters are not 65 or older, and probably think they'll never age - or perhaps don't believe that social security will be solvent when they do need it).

It's the same twisted logic that goes on with protectionism. Rust Belt workers figure that it's better to have a job and not be able to afford a Chinese-made laptop than not to have a job but plenty of cheap foreign-made widgets you could buy if you had any money (which you don't). That logic doesn't parse if you run through the economics (because protectionism will destroy the very jobs they think they're saving), but it can be sold as a tweet in a political campaign.

As for 63.7% home ownership stats in 2016, vast numbers of those "owned" homes were snapped up by giant banks and other financial entities like hedge funds which then rented those homes out. So the home ownership stats in 2016 are extremely deceptive. Much of the home-buying since the 2009 crash has been investment purchases. Foreclosure home purchases for rent is now a huge thriving business, and it's fueling a second housing bubble. Particularly because in many ways it repeats the financially frothy aspects of the early 2000s housing bubble - banks and investment firms are issuing junks bonds based on rosy estimates of ever-escalating rents and housing prices, they use those junk financial instruments (and others like CDOs) to buy houses which then get rented out at inflated prices, the rental income gets used to fund more tranches of investment which fuels more buy-to-rent home buying. Rents have already skyrocketed far beyond incomes on the East and West Coast, so this can't continue. But home prices and rents keep rising. There is no city in the United States today where a worker making minimum wage can afford to rent a one-bedroom apartment and have money left over to eat and pay for a car, health insurance, etc. If home ownership were really so robust, this couldn't possibly be the case. The fact that rents keep skyrocketing even as undocumented hispanics return to Mexico in record numbers while post-9/11 ICE restrictions have hammered legal immigration numbers way, way down suggests that home ownership is not nearly as robust as the deceptive numbers indicate.

Political football in #15 remarks: "I'll also dissent from the view that race wasn't decisive in this election. Under different circumstances, we might have had Bernie's revolution rather than Trump's, but Trump's coalition is composed of overt racists and people who are indifferent to overt racism."

Race was important, but not the root cause of the Trump victory. How do we know this? Tump himself is telling us. Look at Trump's first announced actions - deport 3 million undocumented immigrants who have committed crimes, ram through vast tax cuts for the rich, and end the inheritance tax.

If Trump's motivation (and his base's motivation) was pure racism, Trump's first announced action would be something like passing laws that made it illegal to marry undocumented workers. His first act would be to roll back the legalization of black/white marriage and re-instate segregation. Trump isn't promising any of that.

Instead Trump's (bad) policies are based around enriching billionaires and shutting down immigration. Bear in mind that 43% of all new jobs created since 2009 went to immigrants and you start to realize that Trump's base is reacting to economic pressure by scapegoating immigrants, not racism by itself. If it were pure racism we'd have Trump and Ryan proposing a bunch of new Nuremberg laws. Make it illegal to have sex with muslims, federally fund segregated black schools and pass laws to force black kids to get bussed to them, create apartheid-style zones where only blacks can live, that sort of thing. Trump's first announced actions involve enriching the fantastically wealthy and enacting dumb self-destructive protectionism via punitive immigration control. That's protectionism + class war of the rich against everyone else, not racism. The protectionist immigration-control + deportation part of Trump's program is sweet sweet music to the working class people in the Rust Belt. They think the 43% of jobs taken by immigrants will come back. They don't realize that those are mostly jobs no one wants to do anyway, and that most of those jobs are already in the process of getting automated out of existence.

The claim "Trump's coalition is composed of overt racists and people who are indifferent to overt racism" is incomplete. Trump's coalition actually consists of 3 parts and it's highly unstable: [1] racists, [2] plutocrats, [3] working class people slammed hard by globalization for whom Democrats have done little or nothing.

Here's an argument that may resonate: the first two groups in Trump's coalition are unreachable. Liberal Democrats can't sweet-talk racists out of being racist and we certainly have nothing to offer the plutocrats. So the only part of Trump's coalition that is really reachable by liberal Democrats is the third group. Shouldn't we be concentrating on that third group, then?

The good news is that Trump's coalition is unstable. The plutocrats and Rust Belters are natural enemies. Since the plutocrats are perceived as running giant corporations that import large numbers of non-white immigrants to lower wages, the racists are not big fans of that group either.

Listen to Steve Bannon, a classic stormfront type - he says he wants to blow up both the Democratic and the Republican party. He calls himself a "Leninist" in a recent interview and vows to wreck all elite U.S. institutions (universities, giant multinationals), not just the Democratic party.

Why? Because the stormfront types consider elite U.S. institutions like CitiBank as equally culpable with Democrats in supposedly destroying white people in the U.S. According to Bannon's twisted skinhead logic, Democrats are allegedly race traitors for cultural reasons, but big U.S. corporations and elite institutions are supposedly equally guilty of economic race treason by importing vast numbers of non-white immigrants via H1B visas, by offshoring jobs from mostly caucasian-populated red states to non-white countries like India, Africa, China, and by using elite U.S. universities to trawl the world for the best (often non-white) students, etc. Bannon's "great day of the rope" includes the plutocrats as well as people of color.

These natural fractures in the Trump coalition are real, and Democrats can exploit them to weaken and destroy Republicans. But we have to get away from condemning all Republicans as racists because if we go down that route, we won't realize how fractured and unstable the Trump coalition really is.

bruce wilder 11.16.16 at 10:33 pm 31 ( 31 )

The short version of my thinking on the Obama stimulus is this: Keynesian stimulus spending is a free lunch; it doesn't really matter what you spend money on up to a very generous point, so it seems ready-made for legislative log-rolling. If Obama could not get a very big stimulus indeed thru a Democratic Congress long out of power, Obama wasn't really trying. And, well-chosen spending on pork barrel projects is popular and gets Congressional critters re-elected. So, again, if the stimulus is small and the Democratic Congress doesn't get re-elected, Obama isn't really trying.

Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference.

engels 11.16.16 at 10:33 pm 32

Ps. Should prob add that identity politics isn't the same thing as feminism, anti-racism, LGBT politics, etc. They're all needed now more than ever.

What we don't need more of imo is a particular liberal/middle-class form of those things with particular assumptions (meritocratic and individualist), epistemology (strongly subjectivist) and rhetorical style (which often aims humiliating opponents from a position of relative knowledge/status rather than verbal engagement).

Helen 11.16.16 at 10:35 pm ( 33 )

I don't know why I'm even having to say this, as it's so obvious. The "leftists" (for want of a better word) and feminists who I know are also against neoliberalism. They are against the selloff of public assets to enterprises for private profit. They want to see a solution to the rapidly shrinking job market as technology replaces jobs (no, it's not enough for the Heroic Workers to Seize the Means of Production – the means of production are different now and the solution is going to have to be more complex than just "bring back manufacturing" or "introduce tariffs".) They want to roll back the tax cuts for the rich which have whittled down our revenue base this century. They want corporations and the top 10% to pay their fair share, and concomitantly they want pensioners, the unemployed and people caring for children to have a proper living wage.

They support a universal "single payer" health care system, which we social democratic squishy types managed to actually introduce in the 1970s, but now we have to fight against right wing governments trying to roll it back They support a better system of public education. They support a science-based approach to climate change where it is taken seriously for the threat it is and given priority in Government policy. They support spending less on the Military and getting out of international disputes which we (Western nations) only seem to exacerbate.

This is not an exhaustive list.

Yet just because the same people say that the dominant Western countries (and my own) still suffer from institutionalised racism and sexism, which is not some kind of cake icing but actually ruin lives and kill people, we are "all about identity politics" and cannot possibly have enough brain cells to think about the issues I described in para 1.

I don't find it instructive or useful.

Main Street Muse 11.16.16 at 10:54 pm 34

The slow recovery was only one factor. Wages have been stagnant since Reagan. And honestly, if a white Republican president had stabilized the economy, killed Osama Bin Laden and got rid of pre-existing condition issue with healthcare, the GOP would be BRAGGING all over it. Let's remember that we have ONE party that has been devoted to racist appeals, lying and putting party over country for decades.

Obama entered office as the economy crashed over a cliff. Instead of reforming the banks and punishing the bankers who engaged in fraudulent activities, he waded into healthcare reform. Banks are bigger today than they were in 2008. And tell me again, which bankers were punished for the fraud? Not a one All that Repo 105 maneuvering, stuffing the retirement funds with toxic assets – etc. and so on – all of that was perfectly legal? And if legal, all of that was totally bonusable? Yes! In America, such failure is gifted with huge bonuses, thanks to the American taxpayer.

Meanwhile, homeowners saw huge drops the value of their homes. Some are still underwater with the mortgage. It's a shame that politicians and reporters in DC don't get out much.

Concurrently, right before the election, ACA premiums skyrocketed. If you are self-insured, ACA is NOT affordable. It doesn't matter that prior to ACA, premiums increased astronomically. Obama promised AFFORDABLE healthcare. In my state, we have essentially a monopoly on health insurance, and the costs are absurd. But that's in part because the state Republicans refused to expand Medicaid.

Don't underestimate HRC's serious issues. HRC had one speech for the bankers and another for everyone else. Why didn't she release the GS transcripts? When did the Democrats become the party of Wall Street?

She also made the same idiotic mistake that Romney did – disparage a large swathe of American voters (basket of deplorables is this year's 47%.)

And then we had a nation of voters intent on the outsider. Bernie Sanders had an improbable run at it – the Wikileaks emails showed that the DNC did what they could to get rid of him as a threat.

Well America has done and gone elected themselves an outsider. Lucky us.

[Nov 16, 2016] We need the adoption of a federal job guarantee, a policy that would insure the option for anyone to work in a public sector program, similar to what the Works Progress Administration established in the 1930s.

Notable quotes:
"... Each job offered under a federal employment assurance would be at a wage rate above the poverty threshold, and would include benefits like health insurance. A public sector job guarantee would establish a quality of work and the level of compensation offered for all jobs. The program would be great for the country: It could meet a wide range of the nation's physical and human infrastructure needs, ranging from the building and maintenance of roads, bridges and highways, to school upkeep and the provision of quality child care services"" ..."
Nov 16, 2016 | www.nakedcapitalism.com
financial matters November 16, 2016 at 8:30 am

Not sure if Trump realizes this but there is already a blueprint for creating infrastructure jobs. (hat tip SK)

http://www.nytimes.com/roomfordebate/2016/07/11/are-we-ready-for-the-next-recession/a-guaranteed-federal-jobs-program-is-needed

""A lot of this has to do with the fact that Americans continue to be subjected to bad jobs or unstable employment - and those who are employed often face stagnant or even declining wages. The fragility of Americans' economic well-being is epitomized by the National Coalition for the Homeless' estimate that 44 percent of homeless persons actually have jobs, albeit poorly paid jobs.

The expansion of "flex work" arrangements, which make work hours uncertain, contribute significantly to income volatility for workers in low-pay sectors of the economy. Around 50 percent of Americans could not meet a $400 emergency expense by drawing upon their personal savings if they had to.

An alternative to these conditions is the adoption of a federal job guarantee, a policy that would insure the option for anyone to work in a public sector program, similar to what the Works Progress Administration established in the 1930s.

Each job offered under a federal employment assurance would be at a wage rate above the poverty threshold, and would include benefits like health insurance. A public sector job guarantee would establish a quality of work and the level of compensation offered for all jobs. The program would be great for the country: It could meet a wide range of the nation's physical and human infrastructure needs, ranging from the building and maintenance of roads, bridges and highways, to school upkeep and the provision of quality child care services""

[Nov 16, 2016] It looks like this month (Nov.) will probably be a new global oil supply record barring major disruptions anywhere

Notable quotes:
"... But it gets more apparent with each report they are concerned with a sudden drop in supply in the medium term (I think supply will decline gradually through 2017 but then accelerate in 2Q2018 and fall off a cliff in 2019 given current project planning. ..."
"... It is now becoming too late to do much that will impact supplies then and with the likelihood of low prices through next year and few attractive recent discoveries (and getting worse each quarter in that respect) there are unlikely to be many more FIDs next year than this – I think only 12 so far and more gas than oil – therefore that supply drought will probably extend through 2020. ..."
"... Decline rates could increase on existing fields at the same time as in-fill drilling marginal gains start to decline and the impact of reduced maintenance and brownfield spending during these low price years start to impact. ..."
"... People may point to US LTO fields to be able to quickly fill any gap, but I'd point out it took about 5 years for Bakken to ramp up to 1 mmbpd ..."
Nov 16, 2016 | peakoilbarrel.com

George Kaplan says: 11/11/2016 at 3:51 am

IEA OMR came out yesterday (summary only – have to wait two weeks for full details for free).

https://www.iea.org/oilmarketreport/omrpublic/

It looks like this month (Nov.) will probably be a new global oil supply record barring major disruptions anywhere. But it gets more apparent with each report they are concerned with a sudden drop in supply in the medium term (I think supply will decline gradually through 2017 but then accelerate in 2Q2018 and fall off a cliff in 2019 given current project planning.

It is now becoming too late to do much that will impact supplies then and with the likelihood of low prices through next year and few attractive recent discoveries (and getting worse each quarter in that respect) there are unlikely to be many more FIDs next year than this – I think only 12 so far and more gas than oil – therefore that supply drought will probably extend through 2020.

Decline rates could increase on existing fields at the same time as in-fill drilling marginal gains start to decline and the impact of reduced maintenance and brownfield spending during these low price years start to impact.

People may point to US LTO fields to be able to quickly fill any gap, but I'd point out it took about 5 years for Bakken to ramp up to 1 mmbpd, and that was when the sweet spots were available and with an industry not already loaded down with debt. That rate is not much better than a new conventional basin with similar reserves would have achieved (as long as it wasn't in Kazahkstan of course).

"It is not the role of the IEA to urge any oil industry player to take one course of action rather than another, and we are not doing so now. Over time, market forces will do their job and the oil price will respond to the signals provided by demand and supply. What the IEA has argued for consistently is the need for investments necessary to meet rising oil demand. Such investments ensure that the market remains close to balance and that prices are as stable and as fair for both producers and consumers as can ever be possible in such a dynamic industry."

Related to ExxonMobil – they are the only major company so far this year to have had a couple of good successes with exploration, that is a reverse previous history when they were known having much more success "drilling on Wall Street" to boost their reserves – part of the reason for the Mobil acquisition who always did pretty with with wildcatting.

It would be interesting to know how their reserves (and other companies as well) are broken down between developed and undeveloped for oil and gas, before Liza in Guyana and the Owowo (Nigeria) discovery this year they were pretty short of oil projects of any kind, irrespective of price, except in support of some OPEC countries on buyback contracts, and I don't know how that oil is counted against their reserves if at all.

Other majors might be in worse shape than them once the current bubble of projects works through.

[Nov 16, 2016] The cuts in maintenance and brownfield work, exhaustion of marginal in-fill drilling benefits and extended use of horizontal drilling over the last 15 years will mean that decline of existing fields is likely to accelerate

Notable quotes:
"... The approved projects coming on line are about 500 kbpd in 2019, 700 in 2020 and 200 in 2021. There will also be about 1 mmbpd still ramping up, but I think the supply will be slightly in deficit and any stock overhang will have largely gone by the end of 2018 (assuming demand stays as predicted). In terms of decline existing fields it is minimum 3.3% (based on Core labs) up to 5.5% by Rystad – but I think the cuts in maintenance and brownfield work, exhaustion of marginal in-fill drilling benefits and extended use of horizontal drilling over the last 15 years will mean this is likely to accelerate. ..."
"... I, like many, quote start-up date for end of project development but often it takes 12 to 18 months to ramp up to plateau, so all that lack of new supply in 2019 to 2021 can impact through to 2023. ..."
Nov 16, 2016 | peakoilbarrel.com
George Kaplan says: 11/12/2016 at 7:41 am
Price depends on supply and demand – I don't know what is going to happen in demand: it seems to be predictable until suddenly it isn't. Recessions can have reasonably large impacts to demand and these have proportionally larger impacts on price.

The approved projects coming on line are about 500 kbpd in 2019, 700 in 2020 and 200 in 2021. There will also be about 1 mmbpd still ramping up, but I think the supply will be slightly in deficit and any stock overhang will have largely gone by the end of 2018 (assuming demand stays as predicted). In terms of decline existing fields it is minimum 3.3% (based on Core labs) up to 5.5% by Rystad – but I think the cuts in maintenance and brownfield work, exhaustion of marginal in-fill drilling benefits and extended use of horizontal drilling over the last 15 years will mean this is likely to accelerate.

Note there will of course be other projects added, but another low price year in 2017 with additional cuts (e.g. see CoP, Statoil, PetroBras, Pemex news over the last weeks) and there just won't be enough time to get much online before 2021, especially as the service industries and development groups in the E&Ps are still getting thinned out (see Weatherford, Heerema, Hess news recently).

I, like many, quote start-up date for end of project development but often it takes 12 to 18 months to ramp up to plateau, so all that lack of new supply in 2019 to 2021 can impact through to 2023.

[Nov 16, 2016] OPEC increased production in October defying its own policy of cutting one million barrel a day. But steep deline of KAS production is probably in cards as they abuse infill drilling

Notable quotes:
"... It would appear that perhaps a lot of infill drilling is taking place in Saudi Arabia, Kuwait and UAE in order to achieve these recent oil production values. It'll be interesting to see how this infill drilling might one day impact the decline side of the curve. ..."
"... According to Bedford Hill and the oil engineers at the Hills Group, Saudi oil production will experience at SENECA CLIFF like decline. I agree. ..."
"... I'm no expert but from what I understand infill drilling causes what might have been a roughly Hubbert shaped production curve to flatten out at the top for a while and then in the future experience a steeper decline curve; basically representing future production on the Hubbert curve being brought forward to maintain a plateau at the peak. This does seem to move the curve profile from Hubbert to Seneca, so to speak. ..."
"... This image from Matt certainly represents a plateau at approx 72 million barrels a day taking place in all jurisdictions outside of Canada and USA. ..."
"... I'm very interested in the timing and the steepness of this impending decline. Figure 10 mentioned above shows the rig count in Kuwait, Saudi and UAE really taking of 'bigly' in 2010-2011 'ish. ..."
Nov 16, 2016 | peakoilbarrel.com
Survivalist says: 11/11/2016 at 10:23 pm
OPEC MOMR is out
OPEC up 236.7G

Angloa down 165G
Saudi down 51G
Venezuela down 22G
Iran up 27G
Iraq up 88G
Libya up 176G
Nigeria up 170G

Ron Patterson says: 11/12/2016 at 11:37 am
The page OPEC Charts has been updated with the October data.
Survivalist says: 11/12/2016 at 1:37 pm
I find figure 10 from this article interesting

http://euanmearns.com/oil-production-vital-statistics-october-2016/

It would appear that perhaps a lot of infill drilling is taking place in Saudi Arabia, Kuwait and UAE in order to achieve these recent oil production values. It'll be interesting to see how this infill drilling might one day impact the decline side of the curve.

SRSrocco says: 11/12/2016 at 1:50 pm
Survivalist

According to Bedford Hill and the oil engineers at the Hills Group, Saudi oil production will experience at SENECA CLIFF like decline. I agree.

Steve

Survivalist says: 11/12/2016 at 3:35 pm
I'm no expert but from what I understand infill drilling causes what might have been a roughly Hubbert shaped production curve to flatten out at the top for a while and then in the future experience a steeper decline curve; basically representing future production on the Hubbert curve being brought forward to maintain a plateau at the peak. This does seem to move the curve profile from Hubbert to Seneca, so to speak.

This image from Matt certainly represents a plateau at approx 72 million barrels a day taking place in all jurisdictions outside of Canada and USA.

http://crudeoilpeak.info/wp-content/uploads/2016/02/Incremental_crude_world_growth_decline_OPEC_US_Canada_2001_Oct2015.jpg

And this one from Euan that is addressing world conventional oil production looks similar enough.

http://www.euanmearns.com/wp-content/uploads/2015/06/C-Cdec141.png

I'm very interested in the timing and the steepness of this impending decline. Figure 10 mentioned above shows the rig count in Kuwait, Saudi and UAE really taking of 'bigly' in 2010-2011 'ish.

[Nov 16, 2016] If the unsecured credit lines that make the payments system function smoothly are liquidity, then are these credit lines also money?

Notable quotes:
"... ""This analysis raises a host of questions: If the unsecured credit lines that make the payments system function smoothly are liquidity, then are these credit lines also money? Should they be money? If these credit lines that are so important to the operation of the payments system are not money, then what is the point of defining money at all? I am still puzzling over these questions so I only ask them and don't pretend to answer them here."" ..."
"... Sissoko acknowledges the role that sovereign governments play in establishing money systems but I think gives too much credit :) to private bank credit creation. ..."
"... If money grew on trees it would be worth very little (Wray 2004) ..."
"... Money is the result of the struggle between debtors' demand for money and creditors' belief that the state can service its debt, which in turn depends on tax revenues. And it is the need to work for a taxable income that gives it value. (Ingham) ..."
"... Taxes don't finance spending but are necessary for money to have state backed value. They are also an important way for the state to transfer resources whether for bank bailouts, wars, social security, health care or whatever the state deems important. ..."
Nov 16, 2016 | www.nakedcapitalism.com

financial matters November 16, 2016 at 7:50 am

Carolyn Sissoko has an interesting new paper out, Financial Stability , in which she takes on the nature of money problem.

I think her concluding paragraph is interesting

""This analysis raises a host of questions: If the unsecured credit lines that make the payments system function smoothly are liquidity, then are these credit lines also money? Should they be money? If these credit lines that are so important to the operation of the payments system are not money, then what is the point of defining money at all? I am still puzzling over these questions so I only ask them and don't pretend to answer them here.""

As a derivatives expert she takes on the interesting question of how these complex sources of credit function, they provide credit but are they really money.

I think Ingham makes a great point relevant to this, "all money is credit but not all credit is money"

Sissoko acknowledges the role that sovereign governments play in establishing money systems but I think gives too much credit :) to private bank credit creation.

If money grew on trees it would be worth very little (Wray 2004)

Money is the result of the struggle between debtors' demand for money and creditors' belief that the state can service its debt, which in turn depends on tax revenues. And it is the need to work for a taxable income that gives it value. (Ingham)

Taxes don't finance spending but are necessary for money to have state backed value. They are also an important way for the state to transfer resources whether for bank bailouts, wars, social security, health care or whatever the state deems important.

BecauseTradition November 16, 2016 at 8:55 am

If money grew on trees it would be worth very little (Wray 2004)

That would depend on the rate of growth and, assuming every citizen had an equal number and quality of such trees, be an ethical means to create fiat apart from normal deficit spending for the general welfare.

Of course there are no such trees but equal fiat distributions to all adult citizens could have the same effect.

[Nov 16, 2016] It would appear that perhaps a lot of infill drilling is taking place in Saudi Arabia, Kuwait and UAE in order to achieve these recent oil production values. It'll be interesting to see how this infill drilling might one day impact the decline side of the curve.

Notable quotes:
"... It would appear that perhaps a lot of infill drilling is taking place in Saudi Arabia, Kuwait and UAE in order to achieve these recent oil production values. It'll be interesting to see how this infill drilling might one day impact the decline side of the curve. ..."
Nov 16, 2016 | peakoilbarrel.com

Survivalist says: 11/11/2016 at 10:23 pm

OPEC MOMR is out
  • OPEC up 236.7G
  • Angloa down 165G
  • Saudi down 51G
  • Venezuela down 22G
  • Iran up 27G
  • Iraq up 88G
  • Libya up 176G
  • Nigeria up 170G
Ron Patterson says: 11/12/2016 at 11:37 am
The page OPEC Charts has been updated with the October data.
Survivalist says: 11/12/2016 at 1:37 pm
I find figure 10 from this article interesting

http://euanmearns.com/oil-production-vital-statistics-october-2016/

It would appear that perhaps a lot of infill drilling is taking place in Saudi Arabia, Kuwait and UAE in order to achieve these recent oil production values. It'll be interesting to see how this infill drilling might one day impact the decline side of the curve.

SRSrocco says: 11/12/2016 at 1:50 pm
Survivalist

According to Bedford Hill and the oil engineers at the Hills Group, Saudi oil production will experience at SENECA CLIFF like decline.

I agree.

Steve

Survivalist says: 11/12/2016 at 3:35 pm
I'm no expert but from what I understand infill drilling causes what might have been a roughly Hubbert shaped production curve to flatten out at the top for a while and then in the future experience a steeper decline curve; basically representing future production on the Hubbert curve being brought forward to maintain a plateau at the peak. This does seem to move the curve profile from Hubbert to Seneca, so to speak.

This image from Matt certainly represents a plateau at approx 72 million barrels a day taking place in all jurisdictions outside of Canada and USA.

http://crudeoilpeak.info/wp-content/uploads/2016/02/Incremental_crude_world_growth_decline_OPEC_US_Canada_2001_Oct2015.jpg

And this one from Euan that is addressing world conventional oil production looks similar enough.

http://www.euanmearns.com/wp-content/uploads/2015/06/C-Cdec141.png

I'm very interested in the timing and the steepness of this impending decline. Figure 10 mentioned above shows the rig count in Kuwait, Saudi and UAE really taking of 'bigly' in 2010-2011 'ish.

[Nov 15, 2016] Trump in the White House by Noam Chomsky

Notable quotes:
"... The angry and disaffected are victims of the neoliberal policies of the past generation, the policies described in congressional testimony by Fed chair Alan Greenspan ..."
"... As Greenspan explained during his glory days, his successes in economic management were based substantially on "growing worker insecurity." Intimidated working people would not ask for higher wages, benefits, and security but would be satisfied with the stagnating wages and reduced benefits that signal a healthy economy by neoliberal standards. ..."
"... in 2007, at the peak of the neoliberal miracle, real wages for non-supervisory workers were lower than they had been years earlier, or that real wages for male workers are about at 1960s levels while spectacular gains have gone to the pockets of a very few at the top, disproportionately a fraction of 1%. Not the result of market forces, achievement, or merit, but rather of definite policy decisions, matters reviewed carefully by economist Dean Baker in recently published work. ..."
Nov 15, 2016 | www.defenddemocracy.press
According to current information, Trump broke all records in the support he received from white voters, working class and lower middle class, particularly in the $50,000 to $90,000 income range, rural and suburban, primarily those without college education. These groups share the anger throughout the West at the centrist establishment, revealed as well in the unanticipated Brexit vote and the collapse of centrist parties in continental Europe. The angry and disaffected are victims of the neoliberal policies of the past generation, the policies described in congressional testimony by Fed chair Alan Greenspan – St. Alan as he was called reverentially by the economics profession and other admirers until the miraculous economy he was supervising crashed in 2007-8, threatening to bring the whole world economy down with it. As Greenspan explained during his glory days, his successes in economic management were based substantially on "growing worker insecurity." Intimidated working people would not ask for higher wages, benefits, and security but would be satisfied with the stagnating wages and reduced benefits that signal a healthy economy by neoliberal standards.

Working people who have been the subjects of these experiments in economic theory are, oddly, not particularly happy about the outcome. They are not, for example, overjoyed at the fact that in 2007, at the peak of the neoliberal miracle, real wages for non-supervisory workers were lower than they had been years earlier, or that real wages for male workers are about at 1960s levels while spectacular gains have gone to the pockets of a very few at the top, disproportionately a fraction of 1%. Not the result of market forces, achievement, or merit, but rather of definite policy decisions, matters reviewed carefully by economist Dean Baker in recently published work.

The fate of the minimum wage illustrates what has been happening. Through the periods of high and egalitarian growth in the '50s and '60s, the minimum wage – which sets a floor for other wages – tracked productivity. That ended with the onset of neoliberal doctrine. Since then the minimum wage has stagnated (in real value). Had it continued as before, it would probably be close to $20 per hour. Today it is considered a political revolution to raise it to $15.

With all the talk of near-full employment today, labor force participation remains below the earlier norm. And for a working man, there is a great difference between a steady job in manufacturing with union wages and benefits, as in earlier years, and a temporary job with little security in some service profession. Apart from wages, benefits, and security, there is a loss of dignity, of hope for the future, of a sense that this is a world in which I belong and play a worthwhile role.

The impact is captured well in Arlie Hochschild's sensitive and illuminating portrayal of a Trump stronghold in Louisiana, where she lived and worked for many years. She uses the image of a line in which these people are standing, expecting to move forward steadily as they work hard and keep to all the conventional values. But their position in the line has stalled. Ahead of them, they see people leaping forward, but that does not cause much distress, because it is "the American way" for (alleged) merit to be rewarded. What does cause real distress is what is happening behind them.

... ... ...

These are just samples of the real lives of Trump supporters, who are deluded to believe that Trump will do something to remedy their plight, though the merest look at his fiscal and other proposals demonstrates the opposite – posing a task for activists who hope to fend off the worst and to advance desperately needed changes.

Exit polls reveal that the passionate support for Trump was inspired primarily by the belief that he represented change, while Clinton was perceived as the candidate who would perpetuate their distress. The "change" that Trump is likely to bring will be harmful or worse, but it is understandable that the consequences are not clear to isolated people in an atomized society lacking the kinds of associations (like unions) that can educate and organize. That is a crucial difference between today's despair and the generally hopeful attitudes of many working people under much greater duress during the great depression of the 1930s.

[Nov 13, 2016] As any macro economist will demonstrate, working lower/blue-collar men, predominantly white, born from the 1960s to 1980s have experienced virtually no prosperity, no 'American dream'.

Nov 13, 2016 | discussion.theguardian.com
Sulphurman 4d ago 18 19 As any macro economist will demonstrate, working lower/blue-collar men, predominantly white, born from the 1960s to 1980s have experienced virtually no prosperity, no 'American dream'. Their incomes have not kept up with the cost of living, their job sectors have crumbled in the face of outsourcing and technology efficiencies, they are usually debt laden and increasingly angry. Trump captured all of that vote. His team actively targeted that demographic in their state visits.

These voters have been labelled 'off the grid' by the idiotic pollsters, because they dont engage in social media particularly.

The most useful statistic about this victory comes from the Federal Reserve survey in 2013 that found an astonishing 47% of respondents would struggle to pay for a $400 emergency car or heating repair. That breeds disillusion, and gave Trump his majority.

The sexism, racism, misogyny and dark behaviour of Trump made no difference to the fact his winning votes came from people on the wrong end of the distribution of wealth, millions and millions of them. They'll let him continue that behaviour if theres a financial improvement in their lives.

[Oct 31, 2016] Taylor v. Summers on Secular Stagnation

That is politics not economics and, clearly, as for Taylor, it comes down to the usual question: are Republicans more stupid of more evil.
Notable quotes:
"... Which is another way to say that Taylor is a stooge of financial oligarchy. A Trojan horse which plays the role of an academic economist. ..."
Economist's View

Here's the Jared Bernstein response to John Taylor that Roger Farmer is referring to:

Taylor v. Summers on Secular Stagnation: ... In a recent speech I've featured here in numerous posts, Larry Summers raised the possibility that the economy is growing below its potential, with all the ancillary problems that engenders (e.g., weak job and income growth), and not just in recession, but in recovery. Stagnation is by definition expected in recession, but not in an expansion...
Taylor argues, however, that secular stagnation is "hokem." His argument rest on two points, both of which seem obviously wrong.
First, he claims that the current recovery has been weak is not due to any underlying problems in the private sector or lousy fiscal policy, but due to "policy uncertainty, increased regulation, including through the Dodd Frank and Affordable Care Act." But the recovery began in the second half of 2009, well before either of those measures took effect. And, in fact, since they've done so, if anything, growth and jobs have accelerated. Financial markets have done particularly well...
Taylor's antipathy toward fiscal stimulus leads him to completely omit the fact of austerity in the form of fiscal drag as a factor in the weak recovery. ...
His second argument is that if secular stagnation were a real problem, we would have seen it in the 2000s expansion, yet instead we saw "boom-like conditions, especially in residential investment." ...
Yes, there was a lot-too much-residential investment, but employment growth was terribly weak...,the share of the population employed actually declined. Real GDP grew almost a point more slowly per year over the 2000s business cycle relative to the prior two cycles. Business investment grew less than half as fast in the 2000s than it did in the 1990s. In fact, after rising pretty steeply in the 1990s, CBO's estimate of potential GDP fell sharply in the 2000s..., a serious cost of the problem Summers is raising and Taylor is wrongly debunking.
It's also worth noting that middle-class incomes and poverty rates did much better in the 1990s, thanks to full employment conditions in the latter half of that cycle, than in the 2000s, when slack labor markets led to a flattening trend in real median income and increasing poverty rates.
I doubt any of this will convince Taylor and others who simply want to go after the ACA, the Fed, stimulus measures, et al. But those of us interested in blazing the path back to full employment should recognize these arguments as politically motivated distractions. ...

This post from Brad DeLong on the same topic is also worthwhile

pgl said...

If one has been reading Taylor's blog - ECONOMICS ONE - none of his latest partisan garbage in this oped would have come as a surprise. In the olden days - we would have to turn to Lawrence Kudlow and those Jerry Bowyer Fuzzcharts for such insanity. I wonder if Stanford is proud of its most famous macroeconomist. Cough, cough.

DeDude :

The thing that holds back businesses from deploying their stash of cash, is not "policy uncertainty" or "increased regulation". It is lack of demand.

If the demand is there then the product/service will be produced. When demand is not there then the cash will sit idle or be used non-productively for things like stock buybacks or takeover of competitors. Any individual business owner who fail to meet demand (because of policy uncertainty or regulation) will simply give up market share to those of his/her competitors that chose not to be held back by those things.

DeDude -> Matt Young...

I am actually not talking about GDP. The issue is why do businesses not hire more people. The explanation that right wing fools and smart business people love to give is that it's because of regulations and policies that they don't like. However, as pointed out over on "calculated risk" they always complain about regulations and there is no correlation between their complaining (or not) and their actual hire of new employees. The only thing that determine whether a business will hire more people is whether the demand for its products/services is in excess of what can be delivered by its current workforce. And they will respond to such demand regardless of cumbersome regulations - or they will lose market share to competitors that are more than happy to fill the demand.

Fred C. Dobbs:

(Found out on the web.)

Definition of the term secular stagnation theory is presented. It refers to the protracted economic depression characterized by a falling population growth, low aggregate demand and a tendency to save rather than invest.

Dictionary of Theories;2002, p478

David:

I don't think the right word for Taylor's erroneous claims as chiefly "political". It's moral prejudice. The absolute belief in totally unregulated markets is based on the belief that

1. The wealthy are more virtuous than the poor.

2. Only the strong should survive (see Abba's song "The winnner takes it all").

So it goes from a.Moral Prejudice to b. Political ideology to c. Economic chicanery.

Moral prejudices are the most deeply rooted in human beings because they don't only dictate how the world is, but how it should be.

pgl -> David...

Aren't your comments better directed towards Greg Mankiw? Oh wait - they are both toadies for Mitt Romney. Sorry about my question!

bakho:

Taylor isn't right or wrong. Taylor is simply irrelevant to the largest social ill of 2014- Unemployment.

If one of the basic assumptions of your model is "Assume Full Employment" then employment doesn't become a goal but a constant.

Under the Assumption of Full Employment, is secular stagnation even possible?

Taylor's model does not even look at Unemployment, and reducing unemployment is not his priority.

If as a policy maker, your goal is to reduce unemployment as quickly as possible, you should find another model that addresses unemployment directly. Once unemployment is fixed, other models may be more useful as new problems pop up.

anne -> bakho...

http://www.nytimes.com/2008/11/30/opinion/30leuchtenburg.html

November 30, 2008

Keep Your Distance
By WILLIAM E. LEUCHTENBURG

Chapel Hill, N.C.

On Nov. 22, Hoover welcomed Roosevelt to the White House. Throughout the meeting, he treated his successor as though he were a thickheaded schoolboy who needed drilling on intransitive verbs. He sought to bully the president-elect into endorsing the administration's policies at home and abroad, especially sustaining the gold standard at whatever cost. Alert to Hoover's intent, Roosevelt smiled, nodded, smiled again, but made no commitment. A frustrated Hoover later vowed, "I'll have my way with Roosevelt yet."

Hoover returned to the attack in February. He sent the president-elect a hectoring 10-page handwritten letter that misspelled Roosevelt's name (as "Roosvelt"). As a consequence of the flight of gold and runs on banks, Hoover wrote, there was "steadily degenerating confidence in the future." His wise policies, he claimed, had brought an upturn in the summer of 1932. Since then, though, he said, there had been a sharp decline because the country was unnerved by Roosevelt's election, for it feared that the new president would embark on radical experiments. Hoover concluded by asking Roosevelt to restore confidence by stating publicly that there would be "no tampering" with the currency and that "the budget will be unquestionably balanced, even if further taxation is necessary."

Three days after writing this letter, Hoover told an archconservative senator that "if these declarations be made by the president-elect, he will have ratified the whole major program of the Republican administration; that is, it means the abandonment of 90 percent of the so-called new deal." To another Republican senator, he spelled out what he demanded that his successor renounce: aid to homeowners burdened with mortgages, public works projects and plans for a Tennessee Valley Authority. He also wanted Roosevelt to raise tariff barriers and impose a national sales tax.

Roosevelt, who regarded the letter as "cheeky," let days go by without replying, fibbing that his response had miscarried. He would not let himself be trammeled by being identified with an unpopular dying administration, so he refused to issue any statement. He would not permit Hoover to rob him of the fruits of victory. On March 4, unfettered, he announced to the nation a new beginning....

William E. Leuchtenburg is the William Rand Kenan, Jr. professor emeritus at the University of North Carolina at Chapel Hill.

sherparick:

I wonder if Tyler Cowen, James Hamilton, and Steve Williamson will take John Taylor to task for saying that Larry Summers and Ben Bernanke are just putting out a bunch of hokum to protect the Obama administration from its policy errors? No, I don't think so, civility and treating those who disagree with you with respect and deference is only something economists with liberal political leanings, who kind of care what happens to the rest of the American people, and not just the 1%, owe to their conservative, "scientific," betters.

It should not be forgotten that Professor Taylor was the Deputy Undersecretary of Treasury for Economics and Financial Issues from 2001-2004. That economic growth was anemic during this time is well documented.

http://www.calculatedriskblog.com/2014/01/question-1-for-2014-how-much-will.html

Has he ever explained his policy errors? As to hokum, I do acknowledge that Professor Taylor has a lot of experience peddling that for his political masters.

http://www.treasury.gov/press-center/press-releases/Pages/js452.aspx

How can Mark Thoma, Noah Smith, or Brue Bartlett have an honest argument with the likes of John Taylor. I hope he finds his bubble comfortable in side the right wing machine. I am sure he finds it lucrative.

P.S. Again, the evidence is that economic growth is picking up, just as both Dodd-Frank and the Affordable Care Act are coming into full effect. Correlation or causation? Are more likely just co-incidence?

kievite said...

This is an interesting topic which sadly attracted very few comments.

I think there are two issues not covered in comments:

  1. That is politics, not economics and, clearly, as for Taylor, it comes down to the usual question: "are Republicans more stupid or more evil" (see Robert Waldmann comment to the post from Brad DeLong ).
  2. The level of debt and the price of energy are two important variables that should probably be taken into account in any discussion of secular stagnation.

As for Taylor personal legacy, I would suggest that the underlying assumption that there is an exogenous NIARU (non-inflation-accelerating rate of unemployment) imposing an unavoidable constraint on macroeconomic possibilities is wrong on both historical and analytical grounds. From a historical standpoint, a NIARU, if it exists at all, must be regarded as highly variable over time and place.

To me it smells with the desire to enlist the fear of inflation to justify the maintenance of a "reserve army of the unemployed" in the society (which is a Marxist term, but probably is applicable here). In a way high level of unemployment is a precondition to the fast redistribution of wealth that we observed under the current neoliberal regime.

Which is another way to say that Taylor is a stooge of financial oligarchy. A Trojan horse which plays the role of an academic economist.

[Oct 30, 2016] During the next upturn in the price things will be different, most of the easy oil was developed during the last high price cycle

Oct 30, 2016 | peakoilbarrel.com
Rune Likvern: 10/29/2016 at 11:10 am

I am working (on and off) on something on world crude oil supplies that may end up as a post on Fractionalflow.
I agree with Rystad Energy (ref Caelan's post further up. Disclosure, I have never had anything to do with Rystad) that global oil extraction will decline towards the end of this decade.

I look at this through the lenses of discoveries (and their sizes) not FID, expected changes to the oil companies' balance sheets at end 2016 (financial leverage will by default come up, assets/equity come down due to lower oil price and lower reserves [of which some will be rebooked at a higher price]), CAPEX constraints, their Reserves Replacement Ratios (RRR), likely near term (oil) price and cost developments to name the most important ones.

The chart below [note scaling on the right axis] is now my conceptual understanding of global crude oil supplies towards the end of 2018. We are soon entering November 2016 which makes me now expect the period with decline to last longer.

I expect capacity of about 5 Mb/d of global crude oil capacities to vanish by end 2018. That will have some implications. It took years with a high oil price ($100/b) to grow supplies with 5 Mb/d.
During the next upturn in the price things will be different, most of the "easy" oil was developed during the last high price cycle.

I do not expect the decline to accurately follow my suggested span. Depletion induced declines never sleeps and some portion of world crude oil supplies is now from sources (like LTO, "small" offshore discoveries) that depletes fast and other legacy sources are also in general decline.

The decline is already baked into the cake. It does not matter if oil prices moved above $80/bo as of next week. This would stimulate more drilling for tight oil, but for other developments, it would take anywhere between 2-4 years from these are FIDed (Final Investment Decision) until they flow.

The oil companies drew down their portfolios of discoveries being profitable at $80/bo during the high oil price period that ended during the summer of 2014, and still there are some developments in the pipeline that will start up during the next few years, but this portfolio is shrinking fast. The tight oil companies have drilled most of their sweet spots and are now cash flow constrained wrt drilling.

[Oct 29, 2016] Jeffrey Frankel overestimates how good the recent recovery has been. No wonder, he was once on Clintons council of economics advisers.

Notable quotes:
"... "But last month, when the Census Bureau released its annual economic statistics, they showed that median household income had increased by 5.2 percent [$2,800] in 2015, the biggest rise on record. Furthermore, every part of the income distribution benefited, with the biggest percentage gains going to those in the bottom tier and the smallest gains going to those at the top. These are big changes and offer important confirmation that lower-income families are finally sharing in the economic recovery." ..."
"... "The flip side in this story is that because we have not been investing as much as we would in a fully employed economy, our potential level of output is lower today than if we had remained near full employment since the downturn in 2008. The Congressional Budget Office estimates that potential GDP in 2016 is down by 10.5 percent (almost $2.0 trillion) from the level it had projected for 2016 back in 2008, before the downturn. ..."
"... The Fed is overly afraid of inflation and tight labor markets. They did not provide the economy with enough help after the worst financial crisis since the Great Depression and with Congress forcing unprecedented austerity on the economy. ..."
"... Let's see...how much of the income gains since 2008 have the 1% captured? And how much of that has been due to the appreciation of stocks and other assets caused by low interest rates? Exactly in line with Bernanke's desire for a wealth effect. ..."
"... Problem is, the wealthy don't have a particularly high marginal propensity to consume, so it would have been better to tax them to fund stimulus and distribution to people who live hand to mouth and will spend the money. ..."
Oct 29, 2016 | economistsview.typepad.com

Peter K. : October 29, 2016 at 01:16 PM

http://www.jeffrey-frankel.com/2016/10/28/the-fed-and-inequality/

Jeffrey Frankel overestimates how good the recent recovery has been. No wonder, he was once on Clinton's council of economics advisers.

"But last month, when the Census Bureau released its annual economic statistics, they showed that median household income had increased by 5.2 percent [$2,800] in 2015, the biggest rise on record. Furthermore, every part of the income distribution benefited, with the biggest percentage gains going to those in the bottom tier and the smallest gains going to those at the top. These are big changes and offer important confirmation that lower-income families are finally sharing in the economic recovery."

Those numbers have been qualified.

"What about those who think that easy monetary policy is bad for income inequality? What are they thinking? Not all of them are fringe populists. For example, British Prime Minister Theresa May said earlier this month that low interest rates were hurting ordinary working class people while benefiting the rich."

Yes and people like Senator Bob Corker or RGC and JohnH here.

As Dean Baker writes:

"The flip side in this story is that because we have not been investing as much as we would in a fully employed economy, our potential level of output is lower today than if we had remained near full employment since the downturn in 2008. The Congressional Budget Office estimates that potential GDP in 2016 is down by 10.5 percent (almost $2.0 trillion) from the level it had projected for 2016 back in 2008, before the downturn.

This is real money, over $6,200 per person. But if we want to have a little fun, we can use a tactic developed by the deficit hawks. We can calculate the cost of austerity over the infinite horizon. This is a simple story. We just assume that we will never get back the potential GDP lost as a result of the weak growth of the last eight years. Carrying this the lost 10.5 percent of GDP out to the infinite future and using a 2.9 percent real discount rate gives us $172.94 trillion in lost output. This is the size of the austerity tax for all future time. It comes to more than $500,000 for every person in the country. "

The economy is not reaching it's potential b/c of bad macro (monetary + fiscal + trade) policy.

Frankel:

"In any case, the Fed and other central banks are not balancing rapid growth against equality, but rather are balancing rapid growth against dangers of future overheating and financial instability."

The Fed is overly afraid of inflation and tight labor markets. They did not provide the economy with enough help after the worst financial crisis since the Great Depression and with Congress forcing unprecedented austerity on the economy.

Frankel treats us like we're dumb.

JohnH -> Peter K.... , October 29, 2016 at 04:26 PM

"What about those who think that easy monetary policy is bad for income inequality?"

Let's see...how much of the income gains since 2008 have the 1% captured? And how much of that has been due to the appreciation of stocks and other assets caused by low interest rates? Exactly in line with Bernanke's desire for a wealth effect.

Problem is, the wealthy don't have a particularly high marginal propensity to consume, so it would have been better to tax them to fund stimulus and distribution to people who live hand to mouth and will spend the money.

[Oct 29, 2016] Those economists who deny that unemployment can drive people into crime are idiot jerks.

Notable quotes:
"... In Huntsville Alabama, I was part of a group that visited prisoners in the county jail. I visited the women prisoners every Sat. There was a recession in Reagan's term, and Reagan didn't think the government should help the unemployed. Before the recession, there were usually only one or two women prisoners at a time. The most they had at one time was four. ..."
"... During the recession, the number of prisoners grew greatly. The number of women ballooned to at least a dozen. Because of the increase in the number of male prisoners, the women were all crowded into a single cell, with mattresses on the floor. Most of the women were in jail had children, and were in jail for passing bad checks. ..."
Oct 29, 2016 | economistsview.typepad.com

Patricia Shannon : October 29, 2016 at 12:47 PM

Those economists who deny that unemployment can drive people into crime are idiot jerks.

http://voxeu.org/article/relationship-between-job-displacement-and-crime

In Huntsville Alabama, I was part of a group that visited prisoners in the county jail. I visited the women prisoners every Sat. There was a recession in Reagan's term, and Reagan didn't think the government should help the unemployed. Before the recession, there were usually only one or two women prisoners at a time. The most they had at one time was four.

During the recession, the number of prisoners grew greatly. The number of women ballooned to at least a dozen. Because of the increase in the number of male prisoners, the women were all crowded into a single cell, with mattresses on the floor. Most of the women were in jail had children, and were in jail for passing bad checks.

When they were able to get jobs, they did not pass bad checks.
There was a national increase in crime at this time, and Reagan claimed that the high rate and long duration of unemployment did not cause an increase in crime.

If you have ever been out of work so long that you were losing weight because you couldn't afford enough food, and were in danger of having to live in your car, you would know how wrong Reagan was. It would have to be much worse for parents. I guess if you are unemployed, you are expected to allow yourself and your children to starve to death, so as not to inconvenience those more fortunate.

This is one of the reasons that if I believed in such things, I would consider Reagan to be a manifestation of the anti-Christ.

[Oct 28, 2016] World Oil Reserves

Notable quotes:
"... China and Mexico are in rapid decline at the moment but are supposed to have respectively, contingent 10 and 8 Gb and undiscovered 17 and 56 (!) – that has to be assuming a big shale resource for Mexico I'd guess. ..."
"... China has more rigs relative to its production than anywhere and this year is probably going to drill the most wells of any country. And yet they haven't found a new oil field for many years (quite a bit of gas though) and have only bought on a couple of small offshore fields recently. ..."
"... Norway and UK combined have developed a lot of their older contingent fields over the last few years, at very high cost and in some cases are now losing money on the investment. ..."
"... The biggest two confirmed finds are gas offshore Angola and Senegal (400+ and 800+ mmboe respectively), both probably need to be developed through LNG so might be years away given the current glut and normal schedules for such projects). ..."
"... In the North Sea reserves have been downgraded, not only because of price but also as some of the smaller finds no longer have options for tie backs because the possible hubs are coming to the end of their lives an new finds are in the 20 to 50 mmbbls range and heavy (also a number of dry wells there). I'd say it will likely be significantly worse than last year (which was the worst for 70 years) for both oil and gas discoveries. ..."
"... By coincidence, this morning: "BP dumps plans to drill for oil in the Great Australian Bight" ..."
"... I would imagine the reserve numbers by Rystad Energy are likely to be more FICTION than REALITY. I spent a few hours talking to Bedford Hill of the Hills Group on their "Thermodynamic Oil Collapse" model, and the more I find out about it, the more I am convinced the reserve numbers shown in the table above are completely out of touch with reality. ..."
"... According to the Hills Group Thermodynamic Oil Limit model, they took the total amount of energy in a barrel of oil and subtracted the waste heat. They then programmed into the software all the inputs from the oil industry. Bedford stated that according to the second law of Thermodynamics the amount of energy consumed in the production of oil continues to increase. Their model predicted the oil price collapse and forecasts that within a decade (+/- 4%) there will be no more net energy from a barrel of oil by the oil industry. ..."
"... There is this notion that SUPPLY & DEMAND or CREDIT & DEBT have distorted this thermodynamic oil limit. While these factors have changed the oil production graph, the Hills Group model suggests this has not changed the date. What has changed is that we have pulled future oil production forward which will make the Seneca Cliff much steeper. ..."
"... EROI is falling for new sources of oil but I don't know that it would count as "rapid" yet and it doesn't change much for already developed fields as they age – in fact if energy for the development stage is taken out then the EROI increases during operations. ..."
Oct 28, 2016 | peakoilbarrel.com
George Kaplan , 10/11/2016 at 4:36 am
The numbers are even harder to understand looking at some of the other individual countries. China and Mexico are in rapid decline at the moment but are supposed to have respectively, contingent 10 and 8 Gb and undiscovered 17 and 56 (!) – that has to be assuming a big shale resource for Mexico I'd guess.

China has more rigs relative to its production than anywhere and this year is probably going to drill the most wells of any country. And yet they haven't found a new oil field for many years (quite a bit of gas though) and have only bought on a couple of small offshore fields recently. Mexico has decided they need help from outside IOCs to find and develop all that resource.

Norway and UK combined have developed a lot of their older contingent fields over the last few years, at very high cost and in some cases are now losing money on the investment.

Exploration success is now very low, reserve are being downgraded and yet they are supposed to have 7 + 4 Gb contingent and 13 + 6 Gb undiscovered. The 13 Gb for Norway includes frontier territory in the Barents Sea, but I think it's turning out that there is more gas there (TBC).

George Kaplan , 10/10/2016 at 3:49 pm
It will be interesting to see the final discovery number for this year from IHS, Richmond Energy Partners, Rystad and Wood Mackenzie. I doubt if they will include the recent Alaska discovery given that the test well wasn't flowed – the announcement looks to be more of a ploy to get some tax break and/or outside money into the private company. The other supposed monster find by Apache in Permian shale is 3 Gb equivalent oil in place, I'd expect it to be at the lower end for shale recovery, say 3 to 5%, so that could be only around 75 to 125 mmbbbls oil.

In GoM Fort Sumter was 125 mmbbls (equivalent) but it cn only be developed through Appomatox so might be many years away before there is processing capacity for it. Anadarko announced Caisco, but with no numbers which is usually a bad sign. On the other hand Hopkins looks to have been downgraded maybe 50%, so it is only a tie back option. Kaskida has gone quiet (HTHP and high sand), Shenandoah/Coronado (very HTHP probably needing 20 ksi wellheads) looks like it might be relatively smaller as a development than expected (or a series of smaller projects) , Freeport MacMoran projects (such as Horn Mountain Deep) are all on hold while it tries to sell up. Next year there is only Thunder Horse extension (27,000 bpd) and the year after Stampede (75,000) and Big Foot (80,000) ramping up in late 2018 through 2019.

A couple of highly anticipated and expensive frontier wildcats have been dry (Total offshore Uruguay and Shell offshore Nova Scotia – still drilling a second well there though). The Bight Basin in Australia is delayed because of environmental concerns.

The biggest two confirmed finds are gas offshore Angola and Senegal (400+ and 800+ mmboe respectively), both probably need to be developed through LNG so might be years away given the current glut and normal schedules for such projects).

In the North Sea reserves have been downgraded, not only because of price but also as some of the smaller finds no longer have options for tie backs because the possible hubs are coming to the end of their lives an new finds are in the 20 to 50 mmbbls range and heavy (also a number of dry wells there). I'd say it will likely be significantly worse than last year (which was the worst for 70 years) for both oil and gas discoveries.

At some point soon there's surely going to be realisation, maybe starting with the investors, that oil and gas industry BAU as it's been for the past 40 odd years is over and isn't going to come back the same no matter what the oil price does. I don't know what comes in it's place though.

George Kaplan , 10/11/2016 at 2:52 am
By coincidence, this morning: "BP dumps plans to drill for oil in the Great Australian Bight"

http://www.smh.com.au/federal-politics/political-news/bp-dumps-plans-to-drill-for-oil-in-the-great-australian-bight-20161011-grzjzv.html

Matt Mushalik , 10/10/2016 at 4:10 pm
I did this post on Rystad's oil reserves:

19/8/2016
Oil reserves and resources as function of oil price
http://crudeoilpeak.info/oil-reserves-and-resources-as-function-of-oil-price

On US inventories:

8/10/2016
U.S. Storage Filling Up with Unaccounted-For Oil
http://crudeoilpeak.info/u-s-storage-filling-up-with-unaccounted-for-oil

Dennis Coyne , 10/11/2016 at 12:31 pm
Thanks Matt.

Great job. Both pieces are excellent in my opinion (which has been the case for everything I have read which you have written).

Dean , 10/12/2016 at 3:16 am
Hi Matt, thanks for the interesting posts. I sent a comment to Art Berman to both his websites (artberman.com and forbes.com) about the post dealing with the unaccounted oil storage and I report it below (the comment is not yet visible there):

"Hi Art,

I agree with most of your article, but I would like to point out your attention to a possible explanation which can account for part of the unaccounted oil storage.

In the last 4 years, I have developed a methodology to re-construct the "real" Texas oil and gas production data using the data published by the Texas RRC: as it is well known, these data are only preliminary and it may take up to 2 years to have the final estimates. My method has proved to be reliable over time, providing estimates of Texas oil production very close to the final data and much earlier than the latter are published. Moreover, these estimates proved to be closer to the real data than the official EIA data for Texas: for example, on the 31/08/2016, with more than a 1-year delay, the EIA revised its Texas data for 2014 and 2015 and aligned it to my corrected Texas RRC data.

See below for more details about my methodology,

https://sites.google.com/site/deanfantazzini/nowcasting-texas-rrc-oil-and-gas-data-ongoing-project

and here for the latest update and additional comments on my methodology:

http://peakoilbarrel.com/texas-oil-and-natural-gas-update-sept-2016/

Having said that, if we compare my corrected Texas RRC data with the EIA data, it is visible that the EIA has started to increasingly underestimate Texas crudeoil production data since July 2015, and the cumulative sum of this discrepancy is approximately 46 million barrels.

Of course, this does not explain all unaccounted oil storage, and I agree with you that the real inventories are probably much lower than what is reported. However, one (minor) reason is the underestimated EIA production data for Texas. Thanks"

SRSrocco , 10/10/2016 at 4:21 pm
I would imagine the reserve numbers by Rystad Energy are likely to be more FICTION than REALITY. I spent a few hours talking to Bedford Hill of the Hills Group on their "Thermodynamic Oil Collapse" model, and the more I find out about it, the more I am convinced the reserve numbers shown in the table above are completely out of touch with reality.

The reason the Hills Group decided to design the software model to forecast the Thermodynamic oil Limit was due to one of the members losing money when a shale oil company overstated reserves by a wide margin. Thus, these engineers were tired of the crapola put out by either the EIA or the companies themselves.

It took several years and about 10,000 hours to create this ETP Oil price model as well as the Thermodynamic Oil Limit model. After they hit "ENTER", it took several hours before the results came out. From what Bedford told me, the results were so shocking, that they decided to sit on them for a few years before publishing.

From what I understand, a small team of oil engineers helped design the program. I asked Bedford how many of the engineers DID NOT AGREE with the results. He replied by saying, "Not one disagreed."

Furthermore, The Hills Group sent their report to dozens of professors in leading colleges (mostly professors teaching Thermodynamics), and none of them disagreed with the results, even though some had questions on the data or inputs used.

There is this notion that SUPPLY & DEMAND will continue to be the leading driver in controlling the price of oil in the future. However, the rapidly falling EROI is destroying the remaining net energy, thus leaving very little supply. Thus, Thermodynamics has been and will be the leading economic driver of human economies, not supply and demand.

This new story of a huge oil discovery in Alaska is just more WHITE NOISE in a sea of worthless chatter. I wrote about this in my newest article, Delusional Mainstream Media Distorts The Disaster & Reality As We Head Over The Cliff: https://srsroccoreport.com/delusional-mainstream-media-news-distorts-the-disaster-reality-as-we-head-over-the-cliff/

I gather I will see replies suggesting that I am completely insane on this issue. That's fine. Nothing wrong with a little debate.

steve

Rune Likvern , 10/10/2016 at 5:33 pm
Steve,

Would you care to elaborate more on the claim below and illustrate it by some numbers and real world examples?

"However, the rapidly falling EROI is destroying the remaining net energy, thus leaving very little supply."

SRSrocco , 10/10/2016 at 9:03 pm
Rune,

According to the Hills Group Thermodynamic Oil Limit model, they took the total amount of energy in a barrel of oil and subtracted the waste heat. They then programmed into the software all the inputs from the oil industry. Bedford stated that according to the second law of Thermodynamics the amount of energy consumed in the production of oil continues to increase. Their model predicted the oil price collapse and forecasts that within a decade (+/- 4%) there will be no more net energy from a barrel of oil by the oil industry.

There is this notion that SUPPLY & DEMAND or CREDIT & DEBT have distorted this thermodynamic oil limit. While these factors have changed the oil production graph, the Hills Group model suggests this has not changed the date. What has changed is that we have pulled future oil production forward which will make the Seneca Cliff much steeper.

With Chevron, ConocoPhillips and ExxonMobil losing $18 billion in the first six months of 2016 after CAPEX and Dividends were paid reveals just how bad the situation has become in the Major Oil Companies.

Furthermore, the U.S. Energy Sector interest on the debt consumed 86% of their operating income in the first quarter of 2016. The situation is much worse than the market has realized.

Anyhow, I will be interviewing Bedford Hill and Louis Arnoux in a few weeks on their ETP Oil Price Model and Thermodynamic Oil Collapse.

steve

Rune Likvern , 10/10/2016 at 9:50 pm
"According to the Hills Group Thermodynamic Oil Limit model, they took the total amount of energy in a barrel of oil and subtracted the waste heat. They then programmed into the software all the inputs from the oil industry."

And the explanation in English is? Burning oil will ultimately lead to some thermodynamic losses. Hint oil is about 30-33% the worlds total energy consumption.

"Their model predicted the oil price collapse and forecasts that within a decade (+/- 4%) there will be no more net energy from a barrel of oil by the oil industry."

Was the oil price collapse due to thermodynamic reasons? If that is so [no net energy from a barrel of oil within a decade (2026)], then there should already be several real world examples to support this with.

What portion of present global oil production (C+C) is consumed by the oil industry? Surely the Hills Group must have the estimates for that as they have projected the development for the next decade.

"With Chevron, ConocoPhillips and ExxonMobil losing $18 billion in the first six months of 2016 after CAPEX and Dividends were paid reveals just how bad the situation has become in the Major Oil Companies. "

Are you confusing losses/profits with cash flows? Using figures for only Q1 16 does not justify a trend and certainly not justify a conclusion or projection.

SRSrocco , 10/10/2016 at 10:18 pm
Rune,

Yes, I was referring to the companies Free Cash Flow minus Dividends. While one quarter does not justify a trend, the Hills Group forecasts the price of oil to fall to $12 by 2020. This is due to what a net barrel would be worth to the Global Industrialized World.

Rune, they have calculated the waste energy of a barrel of oil to be one-third. So, what remains is net energy. However, the energy cost to produce this energy has continued to increase since the world started producing oil.

The waste energy of a barrel of oil is missed by most economists or analysts when forecasting price.

Rune, you are more than welcome to check out the Hills Group work at the site here: http://thehillsgroup.org/

steve

Caelan MacIntyre , 10/11/2016 at 3:12 am
I am getting 40.7% for oil (in 2012?) and electricity is a secondary energy source, so I am wondering if the 40.7% includes some oil for that.
Even so, how does that reflect the utility of oil, compared with the rest on that list? How well can the projection of political/military power and control be run on them?

In any case, money/price, as a symbol, is a detachment from reality, along with too many human detachments from reality to list, so whatever the price of oil is, once thermodynamic reality and reality in general really start to kick in, the price of it, among a litany of other human detachments, won't matter anymore. I guess that's when things will be considered increasingly in the process of collapse or decline.

Steve, I am unsure about gold or silver by the way, since they are still mere symbols for reality (that rely on some sort of 'trust' of some system that may be dubious). Maybe they are more 'pegged' to it, but still symbols nonetheless, and so woefully-limited in their peg, their 'visceral tangibility'.

Also, as gold and silver are hoardable, would those who have and hoard more of it, such as governpimps and the elite, etc., be able to control it more, such as at the expense of those who have less of it?

I say, 'gift economy'. A real economy.

Rune Likvern , 10/11/2016 at 8:24 am
Electricity is NOT an energy source – it is an energy carrier like hydrogen.
BP SR 2016 has oil at about 33% of global energy consumption in 2015 which does not include biofuels and biomass.
Doug Leighton , 10/11/2016 at 9:14 am
Electricity is considered a SECONDARY ENERGY SOURCE derived from whatever (nuclear power, wind, etc.). Of course, strictly speaking, electricity is just an accumulation OR motion of electrons. Therefore, a battery or a capacitor (accumulation of electrons) is a potential energy carrier.
Rune Likvern , 10/11/2016 at 11:32 am
I should have specified primary energy sources. Lumping together primary and secondary sources confuses the issue. Where in nature is there free electricity (apart from lightening)? Follow the flow and all energy is solar. :-)
Rune Likvern , 10/11/2016 at 8:18 am
To some degree costs acts as a proxy for EROI. The general trend is for costlier oil.
Low priced oil => Higher (composite) EROI (Unprofitable oil is shut down)
High priced oil => Lower (composite) EROI

This article by Ron is about stocks and flows.

Thermodynamics is about flows.
– If net energy from oil move towards zero during the next decade, this implies that the oil companies would morph into giant heat engines and become bankrupt long before this (net energy becomes zero) happens.
Are there now any signs of this happening?

– If EROI declines at the rate referred and estimated by the Hills Group, net oil (energy) would enter a steep decline and prices would move significantly and steadily up to reflect this.

It could be useful to present estimates at what EROI (based on flow) a well or field becomes shut in and later P&A ed.

Caelan MacIntyre , 10/12/2016 at 3:51 am
Hi Rune,

'Cost', to me at least, is real and is different from 'price', which is symbolic, and 'Energy Returned on Energy Invested' is different than 'Energy Return On Investment', but I suppose it is treated the same to some.

Right now, from what has been read and understood at least, the 'money/finance/banking/BAU-cum-government-as-usual' clusterfuck of 'establishments' are looking very strange/bizarre/weird/crazy/etc. to the clusterfuck of many 'analysts/experts/pundits/etc.'. This seems indicative of an overlying symbolic/sociopolitical/socioeconomic (denialistic/extend-and-pretend) 'formative' response to an underlying thermodynamic issue/problem and maybe other problems as well, some as feedbacks/perturbations in/from the system.

Syria, Ukraine, ISIL, Brexit, national bankruptcies/debt crises, guaranteed income, refugees, etc….?

Along with the ostensibly-increasing and increasingly perverted financial smoke-and-mirrors, I wonder, in part, what the statistics are on company bankruptcies, takeovers and cannibalizations these days, as well as investments in so-called alternative energies.

Where's this stuff going?

Steve apparently says 'gold and silver', yes?, but I don't buy it (pun intended too) from a fundamental-problem-solving standpoint and neither should he.
Gold and silver seem just part of the same or similar scams, but just operate a little differently.

Steve, if you're reading this, I noticed, under one of your articles on Zero Hedge, you arguing with some of the 'commentgentsia'…

Well, of coure, they know 'nothing', I know 'nothing', you know 'nothing' and Rune knows 'nothing'. Of course we know things, but we are all 'insignificant' cogs in this machined clusterfuck with limited autonomy and spending too much of our industrially-derived/putrified food energy and internet energy arguing about known unknowns and unknown knowns and what we and 'the others' know, don't know, think they know and want everyone to know, even if it's not true– whatever that means.

Alas, 'Leviathan', as Oldfarmermac has put it, will do what it has to to survive, come hell or high water or the puny little humans that it squishes along the way– maybe in its death throes. Why, there appear to be purveyors of Leviathan, or aspects thereof, right here on this very blog.
I just wish that I was not on the same ship, as I really dislike being dragged along for the ride.

This comment was brought to you this week by the word, clusterfuck .

Rune Likvern , 10/12/2016 at 7:45 am
Caelan wrote;

"Where's this stuff going?"
That is something I observe a growing number of people wants to inform them about.
As we come to learn something we discover it is just a small piece of the BIG puzzle. We all have blind spots and are delusional.

Sometime ago I watched some (BBC) documentaries about Keynes, Hayek and Marx and a very interesting interview with Bank of England's former director Sir Mervyn King (this appears to be a man of integrity and good moral compass).

There is one common message from all these;
"It is not possible to accurately predict human behavior."
Therein lies a very important bit of information.

Caelan MacIntyre , 10/13/2016 at 2:03 pm
I hear you, Rune.
(That BBC piece might be on You Tube.)
Alas, it is of course impossible to predict anything with 100% certainty. If we could, then there would no consciousness, maybe no universe. And what fun would that be? 'u^
Rune Likvern , 10/13/2016 at 5:41 pm
Yes, the BBC 3 part series (from 2012) "Masters of Money" is available on YouTube
First episode below
https://www.youtube.com/watch?v=nZNRfzkiies

As Nate Hagens put it in one of his speeches:
"Embrace Uncertainties!" :-)

Caelan MacIntyre , 10/14/2016 at 1:32 am
Thanks for the link. While it is uncertain, I might have already seen it, as it rings a bell, but will check it out, just to be sure. 'u^
George Kaplan , 10/11/2016 at 4:39 am
" … within a decade (+/- 4%) there will be no more net energy from a barrel of oil by the oil industry."

EROI is falling for new sources of oil but I don't know that it would count as "rapid" yet and it doesn't change much for already developed fields as they age – in fact if energy for the development stage is taken out then the EROI increases during operations.

If no more wells were drilled starting today then world oil production would fall at around 5%. So in a decade there would be 60% of current supply. The EROI on that wouldn't have changed much from today – there'd be proportionally a bit more water and gas to handle, but equally it could all go to the most efficient refineries. Therefore for the overall net energy to be zero would imply all new stuff bought on line is hugely negative. No such project would be even considered at conceptual stage and it would stand out a mile. The closest anything gets to that is Tar Sands where there is arbitrage from energy in natural gas converted to energy in synthetic oil, but while energy in gas is cheap this still makes sense (or made sense rather – as soon as the economics became bad, partly as a result of the net energy issues, the projects were stopped). So if new projects are so bad don't do them – the world might be in a mess at that point but the remaining oil would be a much sort after entity.

Also the shale reserve that initiated the study wasn't overstated because it's net energy was incorrectly estimated, it was because someone in the E&P company lied, or rather let's say 'dissimulated'.

SRSrocco , 10/11/2016 at 10:46 am
George Kaplin,

The reason much of the damage of the rapidly falling EROI is not made its way into global oil industry and the world financial-economic system is due to the massive amount of debt.

The Hills Group model calculates that the second law of Thermodynamics says that the amount of energy to produce oil has continued to increase since we started producing the liquid over 150 years ago.

They have developed this model showing the average increase in energy cost in terms of a barrel of oil. They remove the waste heat which is approximately one-third of the barrel. They model shows that within a decade, the Thermodynamic limit for oil will be reached, thus no net energy will be available.

Again, the massive amount of debt has distorted the global oil production curve, not the ultimate date of the thermodynamic collapse. So, we experience a much higher on violent SENECA CLIFF due to the massive amount of debt that has brought forward production.

You can check out their work here: http://thehillsgroup.org/

[Oct 28, 2016] Anybody notice the stimulus of low gasoline prices didnt improve GDP?

Notable quotes:
"... Anybody notice the "stimulus" of low gasoline prices didn't improve GDP? ..."
"... Offset by the lack of oil field activity. The USA was becoming very tied into the oil field sector. ..."
"... Somewhat, but these things are global. A chart of global GDP has a similar look. No uptick, and QE globally has been about constant - with Japan and the EU taking over from the Fed. ..."
"... Expecting oil prices to affect overall GDP is a very US-centric point of view. And, in this case, Fernando is correct: the decline in oil spending was offset by the decline in oil-patch investment and employment. Of course, that's a short term effect. At some point after the oil patch stabilized at a lower level, continued low oil prices (admittedly, an unlikely thing) would help the US. ..."
Oct 28, 2016 | peakoilbarrel.com
Watcher , 10/11/2016 at 12:45 am
Anybody notice the "stimulus" of low gasoline prices didn't improve GDP?

http://www.tradingeconomics.com/united-states/gdp-growth

Fernando Leanme , 10/11/2016 at 3:20 am
Offset by the lack of oil field activity. The USA was becoming very tied into the oil field sector.
Watcher , 10/11/2016 at 10:32 am
Somewhat, but these things are global. A chart of global GDP has a similar look. No uptick, and QE globally has been about constant - with Japan and the EU taking over from the Fed.

Lower gasoline prices did not goose GDP.

Imagine that.

Nick G , 10/11/2016 at 3:49 pm
Lower gasoline prices did not goose GDP.

Which only makes sense for the whole world. Higher or lower prices: they just transfer income from one country to another. If oil prices rise, oil exporters have more money, and importers have less. If oil prices fall, then importers have more money, and exporters have less. It's a zero sum game.

Expecting oil prices to affect overall GDP is a very US-centric point of view. And, in this case, Fernando is correct: the decline in oil spending was offset by the decline in oil-patch investment and employment. Of course, that's a short term effect. At some point after the oil patch stabilized at a lower level, continued low oil prices (admittedly, an unlikely thing) would help the US.

Reno Hightower , 10/11/2016 at 10:47 am
Oil and Gas costs are a smaller percentage of our budget and have been shrinking over the decades. I am not surprised that shrinking prices have less impact.

[Oct 28, 2016] the engineer in me cannot be blinded by the physics of logistics underlying the quintessential challenge posed by oil: how to replace the 560 exajoules of energy that is required every year to keep the world turning

Oct 28, 2016 | peakoilbarrel.com

Longtimber ,

10/11/2016 at 9:07 am
Some are waking up to the Magnitude of the Challenge:
"At the same time, the engineer in me cannot be blinded by the physics of logistics underlying the quintessential challenge posed by oil: how to replace the 560 exajoules of energy that is required every year to keep the world turning.

That's 5.6 followed by 20 zeroes, whose magnitude was explored in my previous post hocus pocus. 80% of the world's energy requirements are supplied by hydrocarbon combustion."

http://oilpro.com/post/27823/to-147-and-beyond?utm_source=DailyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2016-10-10&utm_content=Article_4_txt

[Oct 28, 2016] Banks sell public money as their product and they extract interest for doing so. They thus act as a transfer agent of wealth from the real economy to rentiers.

Oct 28, 2016 | economistsview.typepad.com

RGC : , October 28, 2016 at 05:42 AM

Your Money

You know that money that your bank lent you to buy your new house? Well, I want to let you in on a little secret: That wasn't the bank's money they lent you. And it wasn't some billionaire's money either. It was some of your own money, along with a little bit of mine and Tom's and Susie's and everybody else in this country. Can you imagine that?

It's a fact. It's why Henry Ford supposedly said that "if people understood our banking and monetary system, I believe there would be a revolution before tomorrow morning".(1)

When the bank lent you that money it took your promise to pay them back (a promissory note and title to the house as collateral) and in exchange it punched some numbers into a computer, creating your deposit account and thereby creating the money it lent to you.(2)

But how can that be, you say. How can the bank just invent money like that? Well they do "just invent money" and they can do it because our government agrees with them that they can do it.

But don't they have to pay for that money, you say. No, they don't. But they do have to be a depository institution ( a place you can keep your money on deposit) and there is some expense for them to that.

But they are charging me interest on that money, you say. Yes indeed, they are charging you interest on your own money, and mine, and Tom's, and Susie's, etc.

But that bank is a private business, and banks make a lot of profit, why should we pay them to loan us our own money, you say. Good question.

(1)
http://www.brainyquote.com/quotes/authors/h/henry_ford_3.html
(2) http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

pgl -> RGC... , October 28, 2016 at 05:58 AM
"But don't they have to pay for that money, you say. No, they don't. But they do have to be a depository institution ( a place you can keep your money on deposit) and there is some expense for them to that."

Again? Take a look at the income statement of any bank. There is interest expense for them on those deposits. OK, it is low but then there are those subsidized services which is why noninterest expenses exceed noninterest income. Again - no exactly a total expense of 5% but mortgage rates today are not exactly 6% either.

RGC -> pgl... , October 28, 2016 at 06:23 AM
I said they incur some expenses.
pgl -> RGC... , October 28, 2016 at 07:18 AM
We all do. But I see you waste no time doing actual financial economics. If you did, you might realize how to capture monopoly profits. Look at the average return to equity compared to what you'd predict from a CAPM model. When I do this for health insurance companies, their average return is 3 times what they would be from a competitive market. When I do this for major banks, the average return to equity = the CAPM prediction. Estimated monopoly profits = 0.

Of course you have no idea what any of this means as all you know is word salad.

RGC -> pgl... , October 28, 2016 at 07:29 AM
Should health insurance companies exist?

Banks sell public money as their product and they extract interest for doing so. They thus act as a transfer agent of wealth from the real economy to rentiers.

pgl -> RGC... , October 28, 2016 at 05:59 AM
"banks make a lot of profit".

The return to equity for banks is about what one would expect from a risk-adjusted return perspective. Oh yes - the Capital Asset Pricing Model properly applied would show what utter nonsense this is.

RGC -> pgl... , October 28, 2016 at 06:27 AM
Jamie Dimon makes a bundle in comp, which reduces profit. Bankers are highly compensated for lending us our own money.

You defending banks now?

RGC -> RGC... , October 28, 2016 at 06:32 AM
Plus banks' access to public money means they get to blow up the economy periodically.
pgl -> RGC... , October 28, 2016 at 06:47 AM
Banks will always exist. Of course proper regulation of financial institutions can address this problem. But your word salad has nothing to do with the real issues.
pgl -> RGC... , October 28, 2016 at 06:46 AM
He does but what is the percentage of JPM's total assets? Do you even know? You might need a microscope to see it. And no - I am not defending banks. But your word salad is not getting at the real issues. And yet you persist.
RGC -> pgl... , October 28, 2016 at 06:50 AM
And you are not refuting anything I said. What are the real issues?
pgl -> RGC... , October 28, 2016 at 07:19 AM
Yea I have. Which is pretty amazing since you have said nothing of substance.

What are the real issues? Do you even read the various posts our host puts up? Or do you just babble BS 24/7?

RGC -> pgl... , October 28, 2016 at 07:41 AM
What did you refute, specifically?
RGC -> pgl... , October 28, 2016 at 06:47 AM
But the product they are selling is your own money, and mine. They are basically legalized counterfeiters.
pgl -> RGC... , October 28, 2016 at 06:47 AM
You must love word salads.
anne -> pgl... , October 28, 2016 at 06:47 AM
https://en.wikipedia.org/wiki/Capital_asset_pricing_model

In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio.

pgl -> anne... , October 28, 2016 at 07:23 AM
Let's do this for a bank. Expected return to assets = risk-free rate (1%) plus a 1% premium for bearing operational risk. But then the equity to asset ratio for banks is only 10% so the expected return to equity includes a 10% premium for bearing both operational risk and leverage risk. As such, the expected return to equity = 11% for these highly levered firms. And on average that is their actual return to equity.

For a great application of these thoughts - see that paper by Sarin and Summers. You may not remember when I put it up weeks ago but my internet stalker put up a link to it just yesterday. Of course this was PeterK's childish way of attacking someone who actually contributes to this blog. I said he should read it. So should RGC. They might learn something.

JohnH -> pgl... , October 28, 2016 at 07:56 AM
LOL! pgl assumes that banks' investors have a god-given right to a risk premium of 10%.

Of course, risk premiums are more in the range 4-5%, far below pgl's banker-coddling assumption.

"Some economists argue that, although certain markets in certain time periods may display a considerable equity risk premium, it is not in fact a generalizable concept. They argue that too much focus on specific cases – e.g. the U.S. stock market in the last century – has made a statistical peculiarity seem like an economic law."
http://www.investopedia.com/terms/e/equityriskpremium.asp#ixzz4OOLOzdqg

As for the economic concept of the time value of money, whereby savers get rewarded for setting money aside...the longer the time, the greater the reward, well, central banks have pretty well destroyed that with negative interest rates.

Time value of money: RIP. Nonetheless investors are still supposed to reap their extravagant risk premiums!!!

Fred C. Dobbs -> RGC... , October 28, 2016 at 06:30 AM
It's a Wonderful Life movie clip:
Bailey vs Potter - Democrat vs Republi... https://youtu.be/n2G0n3035Ns via @YouTube

(from about 1:30)

It's A Wonderful Life Bank Run https://youtu.be/iPkJH6BT7dM via @YouTube

(from about 1:00)

See also: the Mae sisters, Fannie & Ginnie

https://en.wikipedia.org/wiki/Fannie_Mae

https://en.wikipedia.org/wiki/Government_National_Mortgage_Association


EMichael -> Fred C. Dobbs... , October 28, 2016 at 07:44 AM
Fred,


the "wonderful Life" thing is a perfect example for this topic.

kudos

EMichael -> RGC... , October 28, 2016 at 06:42 AM
The stupidity never stops.

Fantasy land bs.

Damn.

pgl -> EMichael... , October 28, 2016 at 06:48 AM
Notice when I tried to introduce some real economics to the discussion - he changed the subject.
EMichael -> pgl... , October 28, 2016 at 07:16 AM
He can't figure out this aggregator thing. He cannot figure out the investor thing. He certainly has no knowledge of the secondary market.

He takes tiny little pieces of things, ignores the rest and then comes to a conclusion. Of course the conclusion is that MMT makes sense. Everyone knows it doesn't make sense and cannot work world.

Which is why he stays in his own world.

EMichael -> EMichael... , October 28, 2016 at 07:16 AM
oops

"cannot work in the real world"

pgl -> EMichael... , October 28, 2016 at 07:24 AM
He ignores basic finance. But then so does PeterK as actual thinking just gets him all angry. Which means you and I are tagged "liar". This is the intellectual garbage that is ruining this place.
RGC -> EMichael... , -1
"Money creation in practice differs from some popular misconceptions - banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they 'multiply up' central bank money to create new loans and deposits."

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

[Oct 28, 2016] IMFDirect - futures markets point to slight gains in oil prices to 60 dollars per barrel

Oct 28, 2016 | economistsview.typepad.com

pgl :

IMFDirect - "futures markets point to slight gains in oil prices. But a glance at shifts in futures-price curves in the past few months suggests that the prospects for higher prices have been worsening (see Chart 3)."

Ten years ago, oil prices were $60 a barrel. These charts are pointing at $60 a barrel. Which would translate into $2.50 per gallon for gasoline. Of course that assumes the current level of gasoline taxes.

A carbon tax is sounding more and more like a good idea. Greg Mankiw insist this should be "revenue neutral". Some of his would spend some of the extra revenue on public investments in green technology and infrastructure investment. Reply Friday, October 28, 2016 at 01:44 AM likbez -> pgl... , -1

IMF is always predicting lower oil prices :-). That the nature of the beast.

I am not a specialist, but I do see the picture differently.

Outside the Middle East, there is not much oil left in the world that can be extracted profitably for $60 a barrel. IMHO spikes to $100 are now quite possible. Sustained oil price over $100 per barrel means recession and reversal of neoliberal globalization with its crazy and often useless transport flows from one continent to another (salmon caught in Europe processed in China, apples flown to NJ, etc).

The current period of low prices masks rapid depletion of major oil reserves in non OPEC countries and decimation of shale oil industry in the USA.

Capital investment is now slashed to the bone. And that might have an outsize effect on oil production in non-OPEC countries in 2018 - 2020 (such predictions always skip the next year in a hope that people will forget about them, if they do not materialize :-)

That means that while the crisis of supply is not immediate it is looming on the horizon. And might well be within less then a decade to reach.

Obama administration policy in this area was classic "after me, the deluge". Low oil prices partially reversed the replacement process for private transportation and made SUVs the most popular class of personal cars in the USA. In other words they reversed the trend to more economical cars in the USA. So the USA might enter the crisis in worse shape then it would be, if the energy saving policies were the focus of the current administration. Obama focused on wars of neoliberal expansion.

The USA pretty shrewdly used Saudis and Iran as two Trojan horses able to keep prices low since late 2014. Saudi Arabia is now issuing bonds left and right as they can't balance the budget at prices below $100 or so. Iran in general behaves pretty crazy in this respect as if it has unlimited reserves and does not need to save them for future generations. They are fighting for return of their pre-sanctions market share in $40-$50 environment, as if this is the life and death question for them. But if they managed to survive sanctions for so long, why the rush ?

In any case my point is simple: if something can't run forever it will eventually stop. That include both Saudis and Iran. They have large reserves, but they are not unlimited and the most profitable fields with high quality oil already substantially depleted. Low quality high sulfur oil still is more plentiful.

The problem is that high oil prices mean trouble for Western economies. That's why Western MSM reacted so paranoid on OPEC+Russia decision to freeze production starting Nov. 1.

Also it is not clear how the US oil stocks were/are kept on such a high level (depressing oil prices): manipulation of stats by EIA, hidden sale from the strategic reserve, unaccounted by state oil production (black market oil ;-)

Art Bergman has an interesting article on the subject

http://www.artberman.com/u-s-storage-filling-up-with-unaccounted-for-oil/

[Oct 27, 2016] In late 2007, before the recession started, the prime-age employment-to-population ratio in the U.S. was about the same as in other Group of Seven developed nations (which also include Canada, France, Germany, Italy, Japan and the U.K.). The U.S., however, experienced a much larger decline during the recession, and remains much farther from undoing the damage.

Oct 27, 2016 | economistsview.typepad.com

Peter K. : October 26, 2016 at 08:07 AM , In late 2007, before the recession started, the prime-age employment-to-population ratio in the U.S. was about the same as in other Group of Seven developed nations (which also include Canada, France, Germany, Italy, Japan and the U.K.). The U.S., however, experienced a much larger decline during the recession, and remains much farther from undoing the damage.

https://www.bloomberg.com/view/articles/2016-10-25/the-u-s-job-recovery-is-a-global-laggard

Kocherlakota on U.S. macro policy fail:

"In late 2007, before the recession started, the prime-age employment-to-population ratio in the U.S. was about the same as in other Group of Seven developed nations (which also include Canada, France, Germany, Italy, Japan and the U.K.). The U.S., however, experienced a much larger decline during the recession, and remains much farther from undoing the damage. As of June, the G-7 as a whole had recovered almost completely, while the U.S. was only 60 percent back from its lowest point:"

[Oct 25, 2016] The Problem with unemployed men in the USA

Oct 25, 2016 | economistsview.typepad.com

anne : October 25, 2016 at 05:09 AM

http://cepr.net/blogs/beat-the-press/the-problem-with-the-problem-with-men

October 24, 2016

The Problem with the Problem with Men

We continue to see a steady drumbeat of news stories and opinion pieces about the problem of men, and especially less-educated men, in the modern economy. The pieces always start with the fact that large numbers of prime-age men (ages 25–54) have dropped out of the labor force. The latest entry is a New York Times column * by Susan Chira that highlighted recent research showing that a large percentage of men who are not in the labor force are in poor health and frequent users of pain medication.

... ... ...

Undoubtedly many are, although the extent to which these problems are the result of their unemployment or a cause will often not be clear. Nonetheless, steps that can improve public health will be a good thing, but the better place to look to solve the problem of unemployment is Washington.

* http://www.nytimes.com/2016/10/23/opinion/campaign-stops/men-need-help-is-hillary-clinton-the-answer.html

** http://jaredbernsteinblog.com/more-on-the-non-mystery-of-non-work-germany-v-us/

*** http://cepr.net/blogs/beat-the-press/men-who-don-t-work-when-did-economists-stop-being-wrong-about-the-economy

-- Dean Baker

Reply Tuesday, anne -> anne... , October 25, 2016 at 05:10 AM
http://cepr.net/blogs/beat-the-press/men-who-don-t-work-when-did-economists-stop-being-wrong-about-the-economy

September 14, 2016

Men Who Don't Work: When Did Economists Stop Being Wrong About the Economy?
By Cherrie Bucknor and Dean Baker

... ... ...

Since there is a drop in prime-age EPOPs for all groups, this would seem to suggest that the main problem is a lack of demand and not some new difficulty that some relatively narrow group of workers has in dealing with the labor market. Before going through these trends, it is worth making an additional point; this decline in EPOPs was not expected before it happened.

For example, the Congressional Budget Office (CBO) in 2001 projected that EPOPs would continue to rise from their 2000 peaks. It projected that the potential labor force would grow at an average annual rate of 1.1 percent over the next decade, implying that it would be 11.6 percent larger in 2010 than in 2000. This growth was driven in part by population growth, but also by the expectation that the trend of rising EPOPs for women would continue.

In fact, the labor force in 2010 was just 7.9 percent larger than in 2000. This 3.7 percentage point difference corresponds to a labor force that was 5 million smaller in 2010 than CBO had projected for that year in 2001. (It is worth noting that the CBO projections were not an outlier. CBO tries to ensure that its projections lie close to the middle of the pack for economic forecasters.)

If the argument that structural factors have led to a permanent lowering of prime-age EPOPs is right, as opposed to just weakness in demand reducing employment, then the 2001 projections for the growth of the potential labor force were clearly wrong. Of course official projections have often proven wrong, but this should give us caution about our ability to accurately assess the structural determinants of employment rates. After all, it's not obvious that our knowledge of the economy is very much better in 2016 than it was in 2001.

The figure below shows the employment to population ratios for prime-age workers by gender and education levels.

[Figure]

The ratios for 2000 are set at 100 to allow for a clear view of the drop off from this peak. As noted, all groups see some drop from this peak, with the smallest drop for college-educated women, followed by college-educated men. The drop for prime-age workers with some college is considerably sharper, with the drop for women being somewhat larger than the drop for men. The drop for workers with a high school degree or less is even greater, but here also the drop is larger for women than for men. The decline in EPOPs for prime-age men with a high school degree or less is 7.8 percent, while the drop for women is 14.0 percent. Given the much sharper drop in EPOPs for less-educated women, it is difficult to understand why the policy debate has focused on men leaving the labor force.

The more fundamental issue is that it is difficult to explain a drop in EPOPS for all workers, regardless of education levels, as being a problem of workers lacking skills or a desire to work. This looks pretty clearly like a story of weak demand. In other words, the problem is not them; it is us, where "us" is the people who make economic policy.

* https://www.bloomberg.com/view/articles/2016-09-12/debating-government-s-role-in-boosting-growth

________________________________

[1] This discussion focuses on EPOPs rather than labor force participation rates (LFPR) because the latter has likely been affected by the tightening of rules for getting unemployment insurance. It is widely recognized that many unemployed workers drop out of the labor force when they are no longer eligible for unemployment benefits. With many states having instituted stricter rules on benefits over this period, we would have expected a decline in LFPR even with no changes in the workforce or the economy.

JohnH -> anne... , -1
Economist should also be looking at labor participation rates in other industrial growth which are experiencing the same economic stagnation as the US. In the UK and Japan EPOPs are near record highs, while US rates are near 40 year lows. Why such a disparity?

My hunch is that economists are trying to find ways to explain away the low EPOP rates in the US, because the crux of the problem goes back to investor friendly/worker hostile policies that they have advocated for years--trade policy and trickle down monetary policy.

[Oct 23, 2016] Why money should not be considered to be a fuel for economics

Notable quotes:
"... I'm increasingly interested in the metaphors around banking, which seem to still come out of early 19th c invention of engines, all of which used ' fuel ' as a central tenet: 'the money supply fuels the economy'. Economics seems drenched in outdated, antiquated metaphors where ' fuel ' is always and everywhere a good thing, with no polluting externalities, and no downside costs. ..."
"... Fuels don't lie, cheat, or steal - continuing to use fuel as a central metaphor enables banks, economists, and central bankers to put their fingers in their ears and howl "La! La! La! Using metaphors shaped by sail-powered whaling ships hunting for blubber is working just great for us!!" After all, calculus had been invented by the 1820s - so math + moneyAsEngineSpeak = economics. ..."
"... If money were more widely regarded as a social tool: recognized as a tool that requires communication, social networks, and flourishes within civil society, then Haldane's observations would be met with "Doh, you betcha!" ..."
"... Then, also, Bill Black's observations that crime actually does exist, and often looks exceptionally respectable, would be impossible to ignore. ..."
"... I interpreted Brexit as a 'tea leaf' that the banks could no longer be made fine-proof without triggering social unrest. ..."
"... The way that I read this, contemporary economics and finance leads to utter, unmanageable disaster from which there is absolutely no way out. The engine 'melts down', so to speak. I feel as if I have spent the past 8 years watching systems nearly implode, be saved by extraordinary (lunatic) measures, and in the end the systems of thinking that created these problems are precisely the mental pathways that keep people stuck in a labyrinth of dysfunction. ..."
"... It's hard to work out how "1. Implode, not too violently" could give rise to anything other than lethal shortages, especially in urban environments, and how this could lead to anything but "2. blow up, social unrest" anyway. ..."
"... Money is social relations, power relations, if Gold is law then the powerful will grab the gold. If not, they'll grab the money creating buttons in various spreadsheets, unless opposed by all. ..."
"... Maybe there is a way to make the vulnerability that the central banks and banksters and CorpoStates like GE and Cigna and Goldman Sux nd the rest impose on the vast rest of us into a mutual exposure? ..."
"... There is nothing wrong with interest, as long as the rate is reasonable. It is a service charge for someone handing you money now to buy what you want now instead of waiting to save up the money. Interest does not make an economic system unstable. It's the same as a massage or other service you buy. You just need enough income to cover it, and the principal payment of course. ..."
"... "As noted in the article [money is] a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few." ..."
"... The Big Lie that the federal government needs tax revenue in order to operate, so we "can't afford" the social benefits that help the non-rich, must be constantly debunked and rejected. ..."
"... The terminology of finance is designed to hide predatory and extractive activities behind a curtain of beneficial-sounding words. These terms are deeply embedded, and serve both to put some friendly makeup on the business, and allow the "consumers" to feel better about their capitulation. The process is akin to the way politicians wrap themselves in the flag while they sell out the citizenry. We know deep down that they are lying, but we prefer the false patriotism because it serves the lies we prefer to tell ourselves. We bitch and moan, but we play our part, because not doing so leads to trouble. It is the way most of us live our lives. ..."
"... Most people go along the big lie because of hope. ..."
"... Money is nutrition, not a snack. It's food and fertilizer. It makes things grow. You have to share it with other life like bacteria and worms: without these organisms in your gut ecology, you get sick (autism, diabetes, obesity, M.S.). Idiots try to convince us these organisms are parasites instead of symbionts just like Monsanto thinks bees are disposable or Donald Trump likes to think of pregnant women as drags on business profits. ..."
"... If you think altruism is for suckers, your Ayn Rand economy collapses because you confuse parasites with symbionts and symbionts with parasites. You can't distinguish between compensation for earned and unearned income. What's a tax and what's theft? Try living without bacteria making butyrate in your gut. Wells Fargo can no more survive without little people like airport janitors to scrub out the TB and Ebola stains than our cells can breathe without mitochondria. Yet who gets their pay driven down in corporate America? ..."
Oct 22, 2016 | www.nakedcapitalism.com
... ... ...

ReaderOfTeaLeaves made an important observation yesterday on a post by Bill Black , i n reply to a comment by another NC regular and sometimes guest blogger, Clive . It describes a set of seductively inaccurate metaphors used to depict banking, money, and finance. Needless to say, some of the recent coinages, like "sharing economy" are downright Orwellian yet taking hold, but the older ones, by being well worn tropes, are so routine that the implicit messaging gets nary a thought.

By ReaderOfTeaLeaves

Clive, FWIW, I'm increasingly interested in the metaphors around banking, which seem to still come out of early 19th c invention of engines, all of which used ' fuel ' as a central tenet: 'the money supply fuels the economy'. Economics seems drenched in outdated, antiquated metaphors where ' fuel ' is always and everywhere a good thing, with no polluting externalities, and no downside costs.

Hence, what matters is 'efficiency': it's moneyAsEngineSpeak, so to speak.

Lordy, it's all petrochemical: from a time when chemical and mechanical engineering (and physics) were in their relative infancies and whaling schooners were sailing out of Nantucket.

Fuels don't lie, cheat, or steal - continuing to use fuel as a central metaphor enables banks, economists, and central bankers to put their fingers in their ears and howl "La! La! La! Using metaphors shaped by sail-powered whaling ships hunting for blubber is working just great for us!!" After all, calculus had been invented by the 1820s - so math + moneyAsEngineSpeak = economics.

Egads.

In that paradigm, Bill Black is a mere scold, an oddball, a scruffy prophet in the wastelands, so to speak.

If money were more widely regarded as a social tool: recognized as a tool that requires communication, social networks, and flourishes within civil society, then Haldane's observations would be met with "Doh, you betcha!"

Then, also, Bill Black's observations that crime actually does exist, and often looks exceptionally respectable, would be impossible to ignore.

Timmy Geithner is probably not a fan of: (a) Bill Black or (b) the idea of money as inherently social. Fuel is an emotionally sterile construct to work within; it enables one to avoid moral qualms, or any sense of personal responsibility when ' engines blow up', or when they 'run out of fuel '.

The fact that Haldane's observations and analysis are not more widely embraced suggests that somehow the business schools, economics departments, and bankers all still use thought processes shaped in the era of whalers seeking blubber for lanterns and lamps. Also, they probably still receive endowments from the Kochs, Exxon, and other fuel obsessed interests.
Egads.

Until the metaphors move to biology, with a concomitant recognition that some kinds of ' fuel ' (aka Coke, Fritos, Doritos, donuts) work for short-term energy bursts, but carry extremely negative longer term costs, I doubt that even the best attempts to muddle through will get us out of this mess. Without amendment, this system is going to do one of two things: (1) implode (not too violently) or else (2) blow up (social unrest).

I have no idea what the banker equivalent of 'chard, lettuce, and celery' would be, but some bright mind ought to be thinking about it. (You distinguish yourself as such a mind; I hope that my metaphor is not too offensive…)

I interpreted Brexit as a 'tea leaf' that the banks could no longer be made fine-proof without triggering social unrest. Then I read your comment, esp:

the U.K. government is stuck with its vast holding in RBS. The only way it could ever be rid of the RBS albatross is for RBS to have some vague hope of (eventually) earning its way back to being something other than a complete basket case.

Apart from, ironically, the central banks' own ZIRP policy, the biggest threat to this is endless redress for wrongdoing.

The way that I read this, contemporary economics and finance leads to utter, unmanageable disaster from which there is absolutely no way out. The engine 'melts down', so to speak. I feel as if I have spent the past 8 years watching systems nearly implode, be saved by extraordinary (lunatic) measures, and in the end the systems of thinking that created these problems are precisely the mental pathways that keep people stuck in a labyrinth of dysfunction.

Banking needs to be completely rethought, using the social sciences, which include the realities of criminal conduct corroding the system to such a degree that it is threatening to implode. I'm moving toward being agnostic as to whether this is a good thing, or not. Either way, the present systems as I've read you describe them do not seem even remotely sustainable.

John Merryman October 22, 2016 at 7:21 am

The metaphor I think applies is that we use money as both medium of exchange and store of value. While the first is inherently dynamic, the second is static, so a good analogy is that in the body, the medium is blood, while the store is fat. The trick has been how to store extreme amounts of notional wealth and that is largely by having the government borrow it back out and spend in ways which support the private sector, but don't compete with it in the hunt for profits. So are all those pallets of money going to fund our wars really about war, or is it about keeping that money flowing in one end and out the other? Consider all those super secure US savings bonds are mostly just being poured down various rat holes, rather then building a sustainable society.

This probably goes back to Roosevelt, who borrowed a lot of unemployed capital to put a lot of unemployed workers back to work.

Money is not a commodity to be mined or manufactured, whether gold or bitcoin, but a contract. Every asset is the other side of an obligation. It allows a large economy to function, but it also reduces community reciprocity, creating atomized societies.

Like blood, the economy needs very regulated amounts of money, as it functions as a voucher system and storing lots of excess vouchers eventually causes the system to collapse, when everyone tries to dump them at once. If government threatened to tax excess out, people would have to find other ways to store value, like in stronger communities and healthier environments, aka the commons. Most people save for the same general reasons, housing, healthcare, retirement, etc, which are ultimately community functions anyway.

Finance as a public utility doesn't have to be subservient to government. Much as government is analogous to the central nervous system, finance is to the circulatory system and the head and heart are separate organs.

Government started out as a private business, institutionalized as monarchy, before becoming a public utility. Now is the time to do the same with finance.

Never let a good crisis go to waste.

Edward Morbius October 22, 2016 at 8:54 pm

I'm leaning strongly to the idea that money is information . More specifically, it's information about general claims on national commerce. That gold coin in your hand is a bidding right . The obligation isn't to any one person, but your possession of it means that there's one less gold coin's bidding power throughout the rest of the economy.

I'm still sorting out my thoughts on this, but Frederick Soddy, the Technocrats (a short-lived 1920s – 1930s US movement), and the ecological economists (Georgescu-Roegen, Daly, Boulding, etc.) seem to make more sense to me.

The more I read of traditional / classical / neoclassical / post-Keynesian monetary theory the more I suspect nobody has much of a clue.

PuzzleMonkey October 22, 2016 at 7:30 am

Excellent and original points that make a tremendous amount of sense. Thank you.

One tiny quibble. It's hard to work out how "1. Implode, not too violently" could give rise to anything other than lethal shortages, especially in urban environments, and how this could lead to anything but "2. blow up, social unrest" anyway.

scott 2 October 22, 2016 at 8:13 am

US Grant rode in a horse-drawn carriage from his inauguration to a White House lit with coal-gas, while oil or candles. Medicine, sanitation, and agriculture was hardly different than it was in Roman times. The railroad and the telegraph represented technological progress.

A little more than 30 years later McKinley rode in an automobile to a White House lit with electric lamps, that had running water and sewage. Steel framed buildings could rise more the 3-4 stories off the ground. The causes of many diseases were known and somewhat preventable. The first radio transmission was months away, and the first powered flight was 3 years away. The standard of living of an average American doubled during that period. And it was all done under the gold standard.

DGP per capita of the US peaked in 1973, the same time Bretton Woods formally ended. A dollar today buys what 3 cents could buy when the Fed was formed. Do these FACTS escape the Krugmans of the world or are they merely inconvenient and in conflict with what seems to be the true nature of academic economics, to provide pseudo-science cover to political policy?

BecauseTradition October 22, 2016 at 9:14 am

By all means let's go back to worshipping a dumb, shiny metal rather than, for instance, removing all priviledges for the banks. And let's replace theft by inflation and deflation with theft by deflation alone.

And let's confuse correlation with cause since the massive gold and silver strikes during that period greatly increased the money supply and indeed, in some places, caused huge price inflation. And let's forget that it is the government's authority to tax that gives value to fiat and give gold owners a huge bonanza by making fiat needlessly expensive.

Tinky October 22, 2016 at 9:28 am

Setting aside your implied straw man, that it's a binary choice between unconstrained credit creation, and "worshipping" gold, would you argue that today's society is better or worse than that of 1970, just before the final (golden) constraint was broken?

Pespi October 22, 2016 at 10:36 am

Does the answer to this question answer the question? Money is social relations, power relations, if Gold is law then the powerful will grab the gold. If not, they'll grab the money creating buttons in various spreadsheets, unless opposed by all.

craazyboy October 22, 2016 at 1:54 pm

Or both. Hitler thought Chartalism (grandfather to MMT) was a great idea, then invaded France and stole France's sizeable gold horde too! These greedy people want it all!

BecauseTradition October 22, 2016 at 11:48 am

just before the final (golden) constraint was broken? Tinky

The central bank should not be allowed to create fiat for the private sector (e.g. Open Market Purchases) AT ALL so no constraint is needed there other than absolute prohibition.

As for the monetary sovereign, price inflation is a restraint wrt fiat creation since the voters hate it.

Also, please note that the demand for fiat is greatly reduced via other privileges for the banks. Eliminate those and the demand for fiat shall greatly increase – greatly increasing the amount of new fiat that can created without significant price inflation. This will be especially the case when government provided deposit insurance is properly abolished since a huge amount of new fiat should be required*.

*For the xfer of at least some currently insured deposits to inherently risk-free accounts at a Postal Checking Service or equivalent.

Tinky October 22, 2016 at 12:38 pm

Sounds good in theory, but how do you imagine that we might get to the point at which central banks are prohibited from creating credit for the private sector?

JTMcPhee October 22, 2016 at 12:55 pm

How much of that fiat creation gets done via electronic means? Maybe there is a way to make the vulnerability that the central banks and banksters and CorpoStates like GE and Cigna and Goldman Sux nd the rest impose on the vast rest of us into a mutual exposure?

I mean, "they" can leverage and disappear and derivatize "capital" and ZIRP and NIRP with impunity, and steal people's homes and garnish and change contract terms on personal accounts unilaterally.

Is there a turnabout, or are "we" so terrified of "instability" (where no "stability" really exists, "disruption " and all that, not to act? As well demonstrated in many posts in this very blog, it's not like the Fortress of FIRE's walls are any stronger than the foundations it is "coded" on…

John Zelnicker October 22, 2016 at 9:49 am

@scott 2 – "A dollar today buys what 3 cents could buy when the Fed was formed."

That something is true does not make it relevant; it can also be misleading. The real (domestic) purchasing power of a dollar is determined by the amount of labor it takes to earn that dollar. With the gains in labor productivity since 1913, it takes much less labor to earn today's dollar than it took to earn that 3 cents 103 years ago. Comparing the nominal cost of a loaf of bread in 1913 with its nominal cost today tells us nothing useful.

BecauseTradition October 22, 2016 at 10:08 am

Adding that deflation rewards risk-free money hoarding – a self-defeating strategy since progress requires taking risks.

OpenThePodBayDoorsHAL October 22, 2016 at 6:52 pm

Yes isn't it awful when the prices of goods and services go down, I hate it when I have to spend less money to eat and obtain shelter and all of the other necessaries of life.

https://mises.org/library/deflating-deflation-myth

Agricultural productivity rises so food costs less; industrial productivity rises so goods cost less; and these are what is known as "progress". Increasing productivity is what raises our standard of living.

But ah, there's a fly in the ointment, we have a debt-based money creation system. Problem

1.): Banks can print the principal but they can't print the interest. This leads to Problem

2.): people borrow either because they think they can grow money faster than the debt service, or because they are desperate and have no other choice.

Problem 2 (a) is that debt pulls demand from the future to the present, and when enough demand is pulled forward people will no longer feel they should borrow for future growth because there is none in sight. This leaves only desperate people borrowing to service existing outstanding debt and that prophecy fulfills itself.

We are told this is somehow a "steady state" system but that is mathematically and obviously incorrect. Even with unnatural acts like interest rates below zero (how can time preference be below zero, and what does that say for the prospects for growth?) the system winds down and needs to be completely reset.

The percentage of times that debt-based currency systems have failed in the past and gone to zero = 100…leave it to alchemists economists to insist they can pull it off though.

OpenThePodBayDoorsHAL October 22, 2016 at 7:09 pm

Like the Soviet Union we now live in an era of centrally-planned price fixing for the most important price of all in the economy: the price of money.
It's true that in eras where the price of money fluctuated wildly there were also wild fluctutaions in the economy, booms and busts.

But someone made the statement: "The Fed makes the economy more stable. But I do not think that word means what you think it does".

So no more busts…and no more booms, either. So put the periods of fastest economic growth and fastest rises in the standard of living out of your mind, those are history. And given the mathematics of "unlimited" debt creation, we'll get the bust anyway.

craazyboy October 22, 2016 at 7:19 pm

There is nothing wrong with interest, as long as the rate is reasonable. It is a service charge for someone handing you money now to buy what you want now instead of waiting to save up the money. Interest does not make an economic system unstable. It's the same as a massage or other service you buy. You just need enough income to cover it, and the principal payment of course.

Some people seem to have this idea that x amount of money was created to buy a car, but none was made to pay the interest. This causes the world to end. Not so. Money circulates and we know that around a trillion or so in circulation seems to be enough to support our $18 T in annual GDP. What is does mean is to pay off the 5 year car loan, you spent 4 years paying off the car and another year paying the interest.

A benefit of interest is it may allow people to live past retirement age – but there there is little economic focus on this phenomena.

Vatch October 22, 2016 at 8:15 pm

There is nothing wrong with interest, as long as the rate is reasonable.

In principle this is true, but it leads to a paradox in an economy in which money is based on debt. You start your second paragraph with an acknowledgement of this, but then you back down. In such an economy, money is created when it is loaned - this money is the principal of the loan. When the money is paid back, the money disappears.

But wait - the debtor must also pay back more than the principal of the loan; he or she must also pay back the interest. How is the interest created? The same way as the principal, but it is created by someone else's loan. So in a debt based economy, the amount of money in existence is less than the total amount of people's debts.

If everyone is thrifty, and pays back their loans promptly, some people will never be able to get the money to pay their interest. It's a game of musical chairs.

craazyboy October 22, 2016 at 8:51 pm

Pretty close, but consider this. The loan got paid back, the "money" disappeared, but the bank gained it as new loan capacity. The bank makes a new loan. So far I think I'm repeating what you stated. One minor problem is you say money is less than debt – it will be – debt is the contract for the entire amount. But not everyone pays it all off at once – we just need the liquidity to be there so the payor's personal bank account, or the one of their employer, doesn't run dry.

So at this point it's a matter of the banking system and the Fed managing liquidity. But the size of the Fed balance sheet and reserves steadily increases over the years to account for growth and any other liquidity needs the banks may have. It's either done directly with banks – buying treasury bond assets or loans to banks, or they buy Treasuries in the market, the money goes somewhere, then there is interbank lending to make it go where it's needed. (all in theory, of course. But the theory seems sound, when uncorrupted.)

OpenThePodBayDoorsHAL October 22, 2016 at 10:06 pm

You make it sound like a steady state system, but it's not, debt is *always* issued in excess of people's capacity to pay whether for political, psychological, or other reasons. The Fed knows this. So they desperately want to reduce the total indebtedness by inflating it away, and this puts everyone on a giant rat race treadmill, working two jobs trying to outrun the rise in prices. Given the rise in productivity we're all supposed to be living like the Jetsons by now but Oh No gatta keep running to stay in one place.
The Fed has forgotten that there is another way to reduce serial overindebtedness and that is B-A-N-K-R-U-P-T-C-Y. It has the added advantage of being an actual capitalistic endeavor, and not the inverted hyper-socialism we have today.The Fed keeps putting out brush fires so the dead wood keeps building up, eventually there is an unholy crowning conflagration that takes the whole forest with it.

craazyboy October 22, 2016 at 10:24 pm

Firstly, I said there is nothing wrong with interest . If you want to shift to "could something go wrong with principal_plus_interest in a fractional reserve central banking system", then, why yes! Plenty!

No, the system is by no means steady state – the economy has ups and downs and there are those occasional "credit crunch" periods where banks get spooked over some such thing and stop lending completely and then it seems like all the money disappeared. But that's why we have the Fed and everyone furiously managing liquidity.

Sluggeaux October 22, 2016 at 2:12 pm

Since we're on a terminology thread (and my grandfather was a whaler), the whaling vessels out of Nantucket tended to be square-rigged - barques, brigs, etc. Schooners were coastal vessels used by fishermen more often than by whalers, who travelled long distances to launch their hunts.

Great post - I want to puke every time I hear Wall Street referred to as an "economic engine." More like "social engineering" - of fraud schemes.

uncle tungsten October 22, 2016 at 10:07 pm

Ah! a new term is coined (pun intended):- fraudgineering always included in any sentence where the words "Wall Street" or a named bank is used.

Moneta October 22, 2016 at 8:32 am

A couple of generations ago most people lived on farms. Many would trade grain to pay the miller. In essence, hard cash was needed for goods at the general store.

Debt was used to finance big projects that were based on hard assets, land, commodities.

Fast forward to today…. banks still favour collateral based on hard assets yet services are a much bigger part of our economy. I would venture to say that banks lend on soft collateral when it is fed by sectors that have hard asset collateral or with a government guarantee.

IMO, get government out of everything and watch the economy drop to an economy of sustenance based on hard asset collateral which will get increasingly constrained with world population going from 7 to 9B. Exactly what rentiers LOVE!

Moneta October 22, 2016 at 8:38 am

Services are a bigger measured part of our economy. Family members on farms would do all kinds of work or services but these were not recorded.

scott 2 October 22, 2016 at 8:57 am

Debt was used to finance increases in productivity. Unless you have a sweat shop in your basement, a house is not a productive asset. It's a slowly appreciating consumer of capital, real and financial (utilities, maintainance, and taxes). In distorted markets like California, it can make a lucky few a lot of money while turning the area into a feudal system of land owners and serfs.

A side effect of financialization has been to turn the US economy into one that lives, temporarily, on housing speculation. When people realize that spending $2 million on a bungalow that should only cost $40K is the TRUE mis-allocation of capital, let's hope they don't realize that all at once.

lyman alpha blob October 22, 2016 at 10:06 am

A couple generations ago land in many places was still relatively cheap. Asked my father once how our family of dairy farmers managed to have as much land as we do and was told that my grandfather often received land as payment. He'd give someone an animal or a side of beef and they'd give him an acre they owned abutting his property that they weren't using for anything anyway. I've seen some of the old ledgers found in his attic and as you noted, cash was not just in essence but in fact used for goods at the general store. The barn itself was built with the help of the community although I'm not sure how that was paid for but I'd wager that any financing was minimal.

The economy was a few steps above just sustenance but the population was a lot less and there weren't nearly as many rich people from the city coming in looking for second (or 3rd or 4th) homes in the country driving up the cost of real estate. Two generations later land is much more dear to the point where our family likely wouldn't be able to afford to purchase property if they needed extra acreage.

There are far too many economists who seem to think that money actually does grow on trees in the sense that it's a naturally occurring resource that human beings can't control – it's all determined by markets. In that sense I'd describe money not so much as a fuel but as a weapon. I believe Jon Perkins had a similar description in his Confessions of an Economic Hitman. Weaponized war is no longer the first option among advanced economies – first they'll try to bleed other countries dry with economics. It's only when the victims won't cave that the bombs start dropping now.

But money does not occur naturally and it should not be considered a fuel or a weapon. As noted in the article it's a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few.

John Zelnicker October 22, 2016 at 12:22 pm

@lyman alpha bob – "As noted in the article [money is] a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few."

Adding: The Big Lie that the federal government needs tax revenue in order to operate, so we "can't afford" the social benefits that help the non-rich, must be constantly debunked and rejected.

TheCatSaid October 22, 2016 at 2:05 pm

Weaponizing money. That's a valuable concept. It reminds me of the end of David E. Martin's (true-story-called-fiction-to-avoid-lawsuits) book "The Apostles of Power". And this was the reason he wrote the book, actually–to fend off a major play to steal all the electronically-stored reserves of the Fed into their own accounts, and destroy the evidence of their actions by triggering a nuclear explosion of the precise nuclear power station that provided the power to the NYC/NJ computers that stored the data. By telling enough about the plan in process (only the minor, human-created fake "earthquake" at the Santa Ana reactor occurred, as the charges had been set before the book was published; the book predicts the "earthquake"), a nuclear disaster and major financial theft were averted.

Martin spoke about this, and the other real events described in the book, in a number of radio interviews he gave in 2012, the year the book was published.

Steve H. October 22, 2016 at 8:37 am

Not sure if this is meta or not:

"Here's the [Machine] trick: Design the machine that will produce the result your analysis indicates occurs routinely in the situation you have studied. Make sure you have included all the parts – all the social gears, cranks, belts, buttons, and other widgets – and all the specifications of materials and their qualities necessary to get the desired result."

Howard S. Becker

JTMcPhee October 22, 2016 at 8:58 am

Well, great! That part of the great discourse has been decoded and unpacked and all that, I feel much better for the personal increase in awareness of how fokked things are.

Now, how are "we" going to get billions of other humans to the same state of awareness, to stop talking about "fuel" when talking (using a gazillion other "terms of art" and memes and tropes that are similarly opaque and whitewash and FUD-laden) about "the economy" and "economics" and while generating ever more momentum for those same deadly (but profitable for the few) terms, tropes, memes and shorthands? "Profitable" being one of them, "profit" being part of the disease process, because after all, for the individual or the firm s/he belongs to, "profit" (ignoring externalities, of course) is the summum bonum that lets you buy stuff and experiences galore?

Other Juggernaut words, just a very few: "bonus", "healthcare", "entitlement", "MArket", "free trade," and a personal favorite, "donor" meaning very simply "BRIBER/corrupter" but hey, those very few squillionaires who own everything including the "political process" are described millions of times a DAY on the intertubes as "donors," "donors" to political candidates and PACs and "think tanks" (??another fave). Giving a kidney to a person with terminal kidney failure, "donating" one's corneas and body parts or those of deeply loved ones suddenly deceased, those are ""donations." Not Koch or Adelman or Soros or Gates etc. billions to "Foundations" or operas or art museums.

"We," who are Aware, perceive some of this, often argue and debate and cavil over nitty bits of those perceptions. That is so very effective, isn't it, the few hundreds or thousands of "us" who participate in or observe the Flow in NCspace, in bringing about any kind of regression to a mean that is hardly defined or maybe undefinable, a mean that might actually be "kind" and "decent" and "fair" and "just" (whatever those terms are taken to mean)?

What is to be done about it? "We" ain't either powerful or certain enough to do something like a "global search and replace" across the entire internet, with a burning of all the books and papers, and a quarantine of all the GeithnerDimonGreenspanKrugmans and their myriad of citers and followers and extenders, that carry the infection forward into the label minds of future "policy makers" who like most humans who (I am assured by others) are wired to seek dominance and pleasure and reproductive success? And who obviously are the dominant, successful vector and segment of the "political economy?"

The plagues that Pandora was tricked into loosing on "humanity" have been out there probably too long to be re-packaged. Nice effort for those who try, try and try again, but that effort seems to me mostly pissing into the wind…

griffen October 22, 2016 at 9:27 am

TINA. Sadly it's true, we appear somewhat stuck in this mode of what's working. I personally appreciate the credit union / co-op model of accomplishing financial intermediation but that is also a continuation of what we have.

Biggest problem in the US, no one competing with the FED.

Dave October 22, 2016 at 11:40 am

"some of the recent coinages, like "sharing economy" are downright Orwellian". Yes, but that phrase can be and is easily replaced in casual conversation with "the sharecropper economy". (Be prepared to deliver a short explanation what a sharecropper is to the youg 'uns.)

Another valid word out of the past is "the man," as in the giver of overpriced credit to the sharecropper who often ended up with zero profits and thus was kept in perpetual debt. Central bankers?

"The company store" is another one. Applepay?

"Papal indulgences" another. Hillary?

Word substitution is a fun game.

Dave October 22, 2016 at 11:48 am

Speaking of Big Brother, how can we forget "Thought leader"

diptherio October 22, 2016 at 12:24 pm

Everybody talks about "thought leaders" but no one ever talks about "thought followers," much less actually claims to be one. But without "thought followers" how can you have "thought leaders"? I'm suspicious….

And anyway, wouldn't "thought leader" be applicable to anybody whose thinking ends up being followed by others, for good or ill? Wouldn't Charles Manson be a "thought leader"? He certainly was for the Manson Family….just a thought…

Jeremy Grimm October 22, 2016 at 5:33 pm

I always thought the exhortation to be thought leaders was a ruse for encouraging people to speak up and try to act as thought leaders. That way those who worked us could identify the taller daisies and thereby identify which flowers to top.

Steven October 22, 2016 at 12:28 pm

Seems like some combination of Frederick Soddy and Michael Hudson is called for here. Soddy is apparently a tough slog even for otherwise intelligent people. So at the risk of over-simplification here is my attempt to convey his ideas about money and wealth:

Money is not wealth. It is a claim on wealth, i.e. debt.

Wealth. Soddy provides both a practical and a more abstract definition of (the ingredients of) wealth:

"But economics, in a national sense, is concerned with wealth as what is produced by human beings to maintain their lives.

Discovery, Natural Energy and Diligence, the Three Ingredients of Wealth

For Discovery, think research and development (R&D) and of course education so R&D is even possible. For Natural Energy, think, for most of the Industrial Revolution (IR), fossil fuels. (Pretty obviously we need to do something different if we want to keep the machine the IR built functioning, sustainably producing the wealth which sustains our civilization.)

One of my favorite passages from Soddy's "Wealth, Virtual Wealth and Debt" is:

"As Ruskin said, a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science."

But without a science-based definition of wealth, i.e. continuing to use profit and money as a measure of 'productivity', just 'printing' more money (even Hudson's MMT) will solve nothing. Put these observations together and you get an idea what should 'back' money – wealth not gold or as Hudson puts it "Debts that can't be repaid (and) won't be."

Hudson's 'clean slate' provides the other part of the solution. As Hudson notes, the 'miracle of compound interest' is not sustainable – particularly when the West's 'financial engineers' are busy cranking out money (as debt) at rates well in excess of going interest rates. Just continuing to use profit and money as a measure of 'productivity', 'printing' more money (even Hudson's MMT) will solve nothing. Probably by the middle of the 20th century, the West had 'enough' wealth its people could begin to find other purposes in life than creating ever more of it (to make ever more money, i.e. acquire ever more debt to be paid by someone – the unborn?). Again from Soddy / Ruskin – real "Wealth rots." That's what's happening to the West's 'culture' as its ruling classes mindlessly attempt to acquire ever more money.

It isn't just the 1% who are going to have to take their lumps, to stop playing games with the world's future so they can, as candidate Trump put it, 'run up a bigger score' with money for which they have no immediate need. It is those of us in the 99% who do not possess the skills and aptitudes required for the genuine creation of wealth, wealth the world needs and can sustainably afford. Those numbers are going to grow as the Industrial Revolution succeeds, with human labor and rote intelligence replaced more and more by machines powered by "natural energy". But, even if we can't find our niche, I take it as a given that we are all born with a right to life.

Moneta October 22, 2016 at 1:27 pm

Wealth is hard to define because what we view as wealth might be a money pit that guarantees our decline…

For example, instead of injecting money directly in the faculty of medicine, a university might have decided to fund a football team to attract the capital and end up building a stadium… Instead of just funding the faculty.

All these activities related to the sports team contribute to GDP. The bankers might have been productive and efficient in raising capital, the coach might be productive and make a winning team, the builders of the stadium might have been very productive building a fine structure but all these activities sucked up resources and energy that could have been used by other sectors to better serve the future of the country. Maybe these activities are totally unsustainable. They might appear as wealth currently but will lead to poverty over time.

Since ou basic needs have been met, we have been investing in a forever greater number of non-essential resource intensive activities which show how disconnected we have become from the earth supporting us.

redleg October 22, 2016 at 12:50 pm

All the analogues to fuel and engines, yet nobody takes the next step to Power. Power is the key to both engines and finance.

Hudson, Black, Keen and other non-mainstream people are exceptions, but is anyone listening to them besides this choir?

Edward Morbius October 22, 2016 at 8:51 pm

"Wealth, as Mr Hobbes says, is power." Adam Smith, Wealth of Nations . It's only the second discussion (after definition) of the term in the book.

Smith doesn't get everything right, but he's considerably more savvy and left-wing, bleeding-heart liberal than he's commonly given credit for.

Les Swift October 22, 2016 at 1:13 pm

The terminology of finance is designed to hide predatory and extractive activities behind a curtain of beneficial-sounding words. These terms are deeply embedded, and serve both to put some friendly makeup on the business, and allow the "consumers" to feel better about their capitulation. The process is akin to the way politicians wrap themselves in the flag while they sell out the citizenry. We know deep down that they are lying, but we prefer the false patriotism because it serves the lies we prefer to tell ourselves. We bitch and moan, but we play our part, because not doing so leads to trouble. It is the way most of us live our lives.

One of the biggest problems people face in discussing matters financial, is that the very terminology of the system undercuts the critiques. Just as criticizing the wars invokes in some the specter of failing to support the troops and the specter of criticizing America, criticizing Wall Street's predatory aspects invokes in many the specter of criticizing institutions we have been led to believe represent the essence of American freedom. Doing so makes you at least a malcontent or troublemaker, and maybe even some sort of subversive pinko. Either way, you're rocking a boat many do not want rocked.

Using analogies and metaphors to discuss such matters can outflank the loaded-terminology question to a significant degree. You can cut through a lot of the fog of jargon by describing the activities in other terms. (E.g., Dave's "sharecropping" for "sharing economy.")

We are in an era in which the financial world is being downsized and consolidated, the giant speculative bubble which dominated most of our lives is being deflated and wound down before our eyes. There is still speculative activity, to be sure, but there is also a rise in the use of rentier income. This downsizing process involves shifting losses wherever possible down the food chain, including to institutions which previously were integral parts of the system. Insiders are finding themselves outsiders, jettisoned by other insiders.

This reminds me of the situation of a pack of wolves, grown large in an era of plentiful food, but now finding that food supply dwindling. The pack must shrink to survive, the excess members culled in often brutal ways. The strongest eat the most, the rest are left with the scraps, or nothing at all. The financial system is similar, a pack in which the herd is being culled. Individual institutions, even important ones like Barings or Lehman, are ephemeral. They come and they go, just like individual wolves in the pack. But the pack lives on, and so does the financial system. To the wolves, the pecking order, who lives and who dies, is very important. But for the creatures the pack eats, such concerns are irrelevant.

tongorad October 22, 2016 at 2:40 pm

Either way, you're rocking a boat many do not want rocked.

Perhaps. Or perhaps the alternatives to our ruling narratives and power mechanisms have been ruthlessly dismantled and extinguished. For example, I would love to join a union. But I live in a right-to-work state.

I would love to have representation at my workplace and have some degree of bargaining power. I guess there's always the complaint box. Or the "freedom" to hit the bricks.

Luckily, I went to school when it was affordable, so I don't have student loan debt. I rent, and although rents continue to rise every year, I don't have a mortgage hanging over my head.

My younger colleagues are saddled with outrageous student loan debt that they will never likely repay. Unfortunately many/most of them bought into the housing market. How likely are they to even entertain the idea of speaking truth to power?

I'm past 50, and you know what that means to my prospects of finding another job. Young and old, we just keep our mouths shut and do what we're told.

moneta October 22, 2016 at 2:44 pm

The US represents 5% of world population but consumes a much larger share of world energy and resources. The 99% are concerned about fairness but if they truly cared, they'd understand that the global economy needs to shrink their share of resources to 5%. And the leveling is getting stronger by the day. Most people go along the big lie because of hope.

Jeremy Grimm October 22, 2016 at 5:51 pm

Question about your numbers - I think our share of resources needs to shrink but I'm not sure 5% is the right number. Are some of the resources in that 5% dedicated to our Industry? Is our industry productive? and who gets the stuff? It may be we need to shrink our use of resources to 4%. And what about the who uses how much of what resources? How do you count the resources used to support our car, bus, and truck industries while deliberately stifling mass transit. I only make these quibbles to avoid your logic of proportions. Clearly we must take/steal less from the rest of the world and share what we have. I believe there is enough to go around - once a few (quite a few) problems here and there are taken care of.

I'm not sure how much hope continues to hold up the big lie. I think the supports for the big lie need a lot of maintenance to keep it from falling. Maybe we can simply stop using that road.

moneta October 22, 2016 at 6:13 pm

I don't know what the number is but from my vantage point , it looks like the western work is heading for a world of pain. Americans want America to be great again but it's based on materialism.

To be great again would mean a different kind of greatness where the economy is based on a reduction of it share of resources.

But the population is still very far away from the fact that its way of life depends on an unfair distribution of world resources which will probably lead to a big world struggle meaning a focus on the military.

This is not what I want by what I see in the horizon.

There's a reason money and fuel are in the same sentence. It's because the a nation's power depends on energy.

Vatch October 22, 2016 at 8:25 pm

It might seem trite, but if an American is patriotic, he or she will try to reduce the nation's energy use by using energy efficiently. Whether it's transportation, home heating, home cooling, or nighttime illumination, one should use the energy efficiently. Aside from the immorality of using so much more than many other people in the world, it's a way to reduce pollution and to avoid sending money to the Wahhabi nut jobs in Saudi Arabia. Plus, energy efficiency saves money!

Jeremy Grimm October 22, 2016 at 8:39 pm

I think you and I are on the same page.

Our country has the capacity to help the world get through the crises of Global Warming and the end of oil. Our country has responsibility as one of the guilty parties - one of the most most guilty in taking more than our share and sharing less than we are able or should share. The meaning of riches is best enjoyed through the sharing of those riches. In ancient times - at least in some places - that was the privilege and obligation of the rich.

I would feel deep shame for our country if it is to be remembered in the future for what it has done so far.

Orn October 22, 2016 at 1:17 pm

An alternate metaphor could be the slime mold .

knowbuddhau October 22, 2016 at 2:48 pm

Great comment, ROTL! Accords very well with my understanding of the power of metaphors, to bring into being the world stage on which we strut our stuff.

Many here at NC often comment on the quasi-religious nature of economics. I'm always struck by the conflation of the organic/natural world with mechanics. Wrongly conceiving of market forces as natural forces and so on. I think you've struck a blow against this wrong-headed mythos at its weakest point. If the metaphors that bring into being this world of pain we're living in themselves are discredited, the whole edifice could come crashing down in no time.

If anyone's interested in a little exercise, trying paying attention to the metaphors one uses for organic systems, and society at large. Even though I'm aware of their inappropriateness, it's hard not to think in mechanistic terms. And not just mechanistic, but weaponized, at that. You can't even listen to a baseball game without hearing metaphors of war all the damn time. Then there are "Twitter wars" and "Facebook wars" ad nauseaum.

I like lyman alpha blob's mention of financial warfare, too. In 2010, forensic economists found confirmation of the "economic hit man hypothesis" by studying the effectiveness of the CIA's overseas efforts wrt US exports.
http://www.slate.com/articles/business/the_dismal_science/2010/05/industrial_espionage.html

If we agree that we need a most fundamental and profound change to our ways of being in the world, our use of metaphors is a great place to start.

Wade Riddick October 22, 2016 at 6:46 pm

Money is nutrition, not a snack. It's food and fertilizer. It makes things grow. You have to share it with other life like bacteria and worms: without these organisms in your gut ecology, you get sick (autism, diabetes, obesity, M.S.). Idiots try to convince us these organisms are parasites instead of symbionts just like Monsanto thinks bees are disposable or Donald Trump likes to think of pregnant women as drags on business profits.

Where does he propose business find future workers if not in wombs? From where will his future customers come?

Perhaps in sharing economy of future America, companies will have to share their dwindling customers and make do with less?

If you think altruism is for suckers, your Ayn Rand economy collapses because you confuse parasites with symbionts and symbionts with parasites. You can't distinguish between compensation for earned and unearned income. What's a tax and what's theft? Try living without bacteria making butyrate in your gut. Wells Fargo can no more survive without little people like airport janitors to scrub out the TB and Ebola stains than our cells can breathe without mitochondria. Yet who gets their pay driven down in corporate America?

Money weaves a supporting web of trust, a mutual network of obligations and payments – and what happens biologically when that web inside us is broken and friends become enemies and we treat enemies as friends? Is fraud any different than autoimmunity or cancer?

readerOfTeaLeaves October 22, 2016 at 7:16 pm

Well, I was gobsmacked to see this show up when I finally logged on to the Internet today. Many heartfelt thanks to all who commented so thoughtfully and insightfully; and also to the remarkable NC crew (Yves, Lambert, Jerri-Lynn, the IT folks), as well of course to Clive.

I think that we are all rooting for the time when Haldane's insights are met with 'Doh', and when we celebrate Bill Black as a Nobel in Economics ;-)

[Oct 22, 2016] Volcker and Peterson: Ignoring the Lack of Demand Problem

Oct 22, 2016 | economistsview.typepad.com

anne : October 22, 2016 at 08:37 AM , 2016 at 08:37 AM

http://cepr.net/blogs/beat-the-press/volcker-and-peterson-ignoring-the-lack-of-demand-problem

October 22, 2016

Volcker and Peterson: Ignoring the Lack of Demand Problem

Former Federal Reserve Board Chair Paul Volcker and private equity billionaire Peter Peterson had a New York Times column * this morning complaining that not enough attention is being paid to the national debt. The piece uses wrong-headed economics and xenophobia to try to scare readers into backing their austerity agenda.

On the economic side, it implies that the prospect of a rising debt to GDP ratio implies an imminent crisis.

"Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II.

"Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140 percent of G.D.P., far above that in any previous era, even in times of war."

There are several points to be made here. First the ratio of debt service to GDP is currently just 0.8 percent. (This is net of interest payments rebated by the Federal Reserve Board.) This is near a post-war low. By comparison the ratio was over 3.0 percent in the early and mid-1990s. In other words, the reality is the exact opposite of what Volcker and Peterson claim, the burden of the debt on the economy is unusually low.

Second, if interest rates rise precipitously, which they imply will happen for unexplained reasons, we can always buy back the debt at large discounts, ** thereby reducing the debt to GDP ratio. This would be an absolutely pointless move, but if distinguished people who can get columns in the NYT think the debt to GDP ratio is important, it can be done to humor them.

Finally, the widely respected Congressional Budget Office (CBO) has repeatedly been wrong in predicting that interest rates will rise. (They also seriously over-estimated the cost of the Affordable Care Act and health care more generally.) Ever since 2010 CBO has projected that interest rates will bounce back to pre-recession levels. Each time they have been shown wrong as interest rates remained low. ***

The reason for the low rates is the weak level of demand in the economy. In this context, the deficit is a good thing and a bigger deficit would be better. It would generate more demand, output, and employment. It would also make us richer in the future since at higher levels of output firms invest more. Also, many workers who are out of the workforce for long periods of time can end up permanently unemployable.

As a result of the low deficits and weak demand in the post-recession years the widely respected Congressional Budget Office estimates that the economy's potential GDP in 2016 is almost 10 percent smaller **** (almost $2 trillion) than the potential it had projected for 2016 before the crash in 2008. This "austerity tax" is costing the country $6,200 per person in lost output. For some reason, Volcker and Peterson would have us ignore this huge and growing burden that the country now faces as a result of a sustained period of weak demand and instead concern ourselves with the improbable scenario they paint in their piece.

To push their Social Security and Medicare cutting agenda (they seem to have not noticed that the rate of growth of health care costs has slowed sharply) they then turn to Trumpian xenophobia:

"The projected rise in federal deficits would compete for funds in our capital markets and far outrun the private sector's capacity to save, to finance industry and home purchases, and to invest abroad. Instead, we'd be dependent on foreign investors' acquiring most of our debt - making the government dependent on the 'kindness of strangers' who may not be so kind as the I.O.U.s mount up."

To make this evil foreigner case we have to turn economic reality on its head. First, the country's problem for the last decade and really for the whole century, has been a lack of demand, not the lack of supply which they are implying. While it might be nice to see the economy again operating near its potential and be supply constrained, it is not a situation we have seen for a long time.

Second, one of the reasons that we have a lack of demand is that foreigners, and most importantly foreign central banks, are buying our debt. (Yes, China is the biggest actor here, but not the only one.) The large purchases of U.S. government debt have driven up the value of the dollar causing the trade deficit to explode. It was around 1.0 of GDP in the mid-1990s. The run-up in the dollar following the East Asian financial crisis pushed the trade deficit to almost 4.0 percent of GDP by the end of 2000. It eventually peaked at almost 6.0 percent of GDP in 2005 and 2006.

Since the recession the trade deficit has fallen back to less than 3.0 percent of GDP (@ $500 billion in 2016), but this trade deficit is creating the gap in demand that is being in part filled by the budget deficit. If foreigners would show less of the "kindness of strangers" we would have a smaller trade deficit, more output, more jobs, and a smaller budget deficit.

In other words, Volcker and Peterson have the story upside down. We should not want foreigners to be buying our debt, at least if the goal is a lower budget deficit.

There is one last point that is worth mentioning. Japan's ratio of debt to GDP is close to 250 percent. Investors are currently paying the Japanese government to borrow their money. ***** In other words, the imminent debt crisis that Volcker and Peterson want to scare us with exists only in their heads.

* http://www.nytimes.com/2016/10/22/opinion/ignoring-the-debt-problem.html

** http://cepr.net/publications/reports/financial-engineering-the-simple-way-to-reduce-government-debt-burdens

*** http://cepr.net/blogs/beat-the-press/budget-deficit-mania-and-the-congressional-budget-office

**** http://cepr.net/blogs/beat-the-press/the-washington-post-peter-peterson-austerity-tax

***** http://markets.ft.com/data/bonds/government-bonds-spreads

-- Dean Baker

[Oct 09, 2016] The IMF, Globalization, and All The Other Losers

Notable quotes:
"... The EU and IMF have not delivered on what they promised, in the same way that traditional parties have not, from the US to UK to basically all of Europe. They promised growth, and growth is gone. They may have delivered for their pay masters, but they lost the rest of the world. ..."
"... Anything else is just hot air. But that doesn't mean they will hesitate to use their control of the military and police to hold on to what they got. In fact, that's guaranteed. But it would only be viable in a dictatorial society, and even then. ..."
"... We are transcending into an entirely different stage of our lives, our economies, our societies. Growth is gone, it went out the window long ago only to be replaced with debt. And that's going to take a lot of getting used to. But there's nothing that says we couldn't see it coming. ..."
"... There is very little social conscience when all the wealth goes to the extreme rich elite. Not content with this, they want all the wealth. There is a middle ground, but can politicians get an agreement, when performance is always measured, but an ever increasing quarterly profits expectations? ..."
"... "The Governor of the Bank of England became a frequent visitor. . . we had to listen night after night to demands that there should be immediate cuts in Government expenditure.. . Not for the first time, I said we had now reached the situation where a newly elected government with a mandate from the people was being told, nor so much by the Governor of the Bank of England but by international speculators, that the policies on which we had fought the election could not be implemented." ..."
"... "The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." ..."
"... "The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public." ..."
"... "The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. ..."
"... "The value of markets is always in some respects different from, and even opposite to, that of the public." ..."
Oct 09, 2016 | www.nakedcapitalism.com

naked capitalism

Because it's the people that bear the brunt of the failure, not the leadership; even Greece's politicians still pay themselves a comparatively lush salary.

As for Britain, it's the textbook example of utter blindness. Those who were/are well provided for, be they politically left or right, missed out on what was happening around them so much they had no idea Brexit was a real option. And in the 15 weeks since the Brexit vote, all anyone has done in the UK is seeking to blame someone, anyone but themselves for what they all failed to see coming.

Perhaps the biggest beneficiary of free trade over the past generation, China, still restricts access to many of its key industries, with economists worried about increasingly mercantilist policies. It's also seeking a larger role in the existing global framework, with entry of the yuan into the IMF's basket of reserve currencies on Oct. 1 the most recent example. An all-out trade war would be a disaster for China's economy, with Trump's threatened tariff potentially wiping off almost 5% of its GDP, according to a calculation by Daiwa Capital Markets.

John Williamson, whose Washington Consensus of open trade and deregulation was effectively the governing ethos for the IMF and World Bank for decades, said the 2008-09 financial meltdown had undercut support for economic integration. "There was agreement on globalization before the crisis and that's one thing that's been lost since the financial crisis," said Williamson, a former senior fellow at Peterson Institute for International Economics who is now retired.

The growing opposition to economic integration has been fueled by a sub-par global recovery. "Perhaps the most striking macroeconomic fact about advanced economies today is how anemic demand remains in the face of zero interest rates," former IMF chief economist Olivier Blanchard wrote last week in a policy brief for the Peterson Institute.

These 'experts' seem to have an idea there's something amiss, but they don't have the answers. Which is impossible to come and say out loud if you're an expert. Experts must pretend to know it all, or at least know why they don't know. "There was agreement on globalization before the crisis", and now it's no longer there. That they see.

That they ain't coming back, neither the agreement on it nor globalization itself, is a step too far for them. To publicly acknowledge, at least. That Blanchard expresses surprise about 'anemic demand' at the same time that interest rates are equally anemic is something else.

That both are two sides of the same coin, or at least may be, is something he should at least mention. That is to say, low rates induce deflation, though they are allegedly supposed to induce the opposite. Economists are mostly very misguided people.

The world economy is getting some lift after rising at an annual rate just shy of 3% in the first half of this year, according to David Hensley, director of global economics for JPMorgan. But much of the boost will come from a lessening of drags rather than from a big burst of fresh growth, said Peter Hooper at Deutsche Bank Securities, a former Federal Reserve official. Recessions in Brazil and Russia are set to come to an end, while in the U.S. cutbacks in inventories and in oil and gas drilling will wane.

Please allow me to chip in here. 'Lessening of drags' in a nonsense term. And so is the idea that "..recessions in Brazil and Russia are set to come to an end". That's all goal-seeked day-dreaming. Smoke or drink something nice with it and you'll feel good for a few hours, but that doesn't make it real.

"I'm characterizing the global economy as something akin to a driverless car that's stuck in the slow lane," said David Stockton, a former Fed official and now chief economist at consultants LH Meyer. "Everybody feels like they're being taken for a ride but they're pretty nervous because they can't see anybody in control."

I really like this one, because off the bat I thought Stockton had it all wrong. What I think is the appropriate metaphor, is not "a driverless car that's stuck in the slow lane" , but one of those cars in a car ousel at a car nival, a merry-go-round, where you can sit in it forever and you always end up in the same spot. And the only one who's in control in the boss who hollers that you need to pay another quarter if you want to keep on riding.

Or, alternatively, and to stay at the carnival, it's a bumper car, which allows you to hit other cars and get hit, but never to leave the rink. That's the global economy. Not getting anywhere, and running out of quarters fast.

Still, for the first time in the past few years, Stockton said he sees a real upside risk to his forecast of continued global growth of around 3% next year. And that's coming from the possibility of looser fiscal policy in the U.S. and Europe. In the U.S., both Clinton and Trump have pledged to boost infrastructure spending on roads, bridges and the like. In Europe, rising populism provides a powerful incentive for governments to abandon austerity ahead of the elections next year – and perhaps beyond. Whether such a shift will be enough to mollify those who have been on the losing side of globalization for decades is debatable, however.

"The consensus in policy-making circles was that more trade meant better economic growth," said Standard Chartered head of Greater China economic research Ding Shuang, who worked at the IMF from 1997 to 2010. "But the benefits weren't shared equitably, so now we see a round of anti-globalization, anti-free trade. "Globalization will stall for the moment, until we can find a way to share those benefits," he added.

Globalization is done. And while we can discuss whether that's of necessity or not, and I continue to contend that the end of growth equals the end of all centralization including globalization, fact is that globalization was never designed to share anything at all, other than perhaps wealth among elites, and low wages among everyone else.

The EU and IMF have not delivered on what they promised, in the same way that traditional parties have not, from the US to UK to basically all of Europe. They promised growth, and growth is gone. They may have delivered for their pay masters, but they lost the rest of the world.

Anything else is just hot air. But that doesn't mean they will hesitate to use their control of the military and police to hold on to what they got. In fact, that's guaranteed. But it would only be viable in a dictatorial society, and even then.

We are transcending into an entirely different stage of our lives, our economies, our societies. Growth is gone, it went out the window long ago only to be replaced with debt. And that's going to take a lot of getting used to. But there's nothing that says we couldn't see it coming.

Adrian October 8, 2016 at 5:42 am

Yves, people have, or are loosing faith in all things financial/political as the policies have mostly enhanced the professional politicians, corporations, and the few. It's no longer generally possible to work hard and do well in life, coupled with all forms of QE had boosted asset prices and put even accommodation, either buying, or renting ever more expensive. The cost of living via many measures is increasing and the CPI is no longer a realistic measure. Ok you might be able to buy a cheap flat screen relatively, but many now can't even find a "full time job". The bogus employment metrics help the sense of stability, but try living on a part time wage.

There is very little social conscience when all the wealth goes to the extreme rich elite. Not content with this, they want all the wealth. There is a middle ground, but can politicians get an agreement, when performance is always measured, but an ever increasing quarterly profits expectations?

I don't know what the answer is, but you need people to earn if you want GDP growth, and AI/robots don't consume, so don't the elite get it?? Finally, we have our youth with low job prospects, looking at an uncertain future, and probably a very big student loan and how are they supposed to contribute to the economy.

Thanks for the post.

Sound of the Suburbs October 8, 2016 at 7:58 am

When Nelson Mandela walked out of prison the South African Rand fell 10% and the South African stock market collapsed.

The prospect of the masses getting a better standard of living was going to be bad for profit.

Economic liberalism is an idea that was first tried in Chile in the 1970s, it bought wide spread poverty and vast wealth for a few.

Everywhere it has been tried the effects have been pretty much the same, the more economically liberal the economy, the more profound the inequality and poverty.

The West and its strong democratic institutions posed a problem.

How do you enforce it without IMF "conditionalities" for loans?

Margaret Thatcher got the ball rolling in the UK, but she didn't think she could go as far as Milton Freidman wanted.

A softly, softly approach was taken to gradually roll back the welfare state, privatise previously public companies, remove regulations and cut taxes on the wealthy, but that bothersome democracy was always going to be a problem.

There is now mass migration from the more economically liberal nations to the Western nations that still have a welfare state and where life looks altogether more pleasant.

The hope for Eastern Europe when the Berlin Wall fell has gone and they can't wait to get away from their economically liberal nations and get into Western Europe with the style of capitalism they had always wanted.

Economic liberalism has progressed far enough in the West to now provoke a backlash.

With the UK ignoring business and thinking of looking after the people, it must be punished by the markets.

What Harold Wilson experienced in the 1960s has been perfected into a global system through the free flow of capital and freely floating currencies.

From Harold Wilson's memoirs:

"The Governor of the Bank of England became a frequent visitor. . . we had to listen night after night to demands that there should be immediate cuts in Government expenditure.. . Not for the first time, I said we had now reached the situation where a newly elected government with a mandate from the people was being told, nor so much by the Governor of the Bank of England but by international speculators, that the policies on which we had fought the election could not be implemented."

Nelson Mandela is free from jail and will want to look after the people – we must slam their currency.

The UK is thinking about looking after the people – we must slam their currency.

Do they have some little buttons to push at the BIS when nations step out of line?

Sound of the Suburbs October 8, 2016 at 8:33 am

In the early days of small state, raw capitalism slavery was found to be the ideal for maximising profit.

Then those medalling politicians abolished it against the wishes of the business community.

Those medalling politicians also abolished child labour against the wishes of the business community.

Adam Smith observed:

"The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."

NAFTA is going to be great for the US and jobs.
They should have listened to Adam Smith.

Adam Smith observed:

"The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public."

When the ideal for maximum profit is slavery, the public are always going to be in trouble.

"Western workers are so much trouble, where can we set up a nice sweatshop where there are almost no regulations?"

Sound of the Suburbs October 8, 2016 at 10:21 am

Adam Smith observed:

"The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public.

In the 21st Century we might observe:

"The value of markets is always in some respects different from, and even opposite to, that of the public."

Markets just being an aggregate of business interests and in no way influenced by the general well-being of the public.

RBHoughton October 8, 2016 at 9:49 pm

To Sound of the Suburbs,

Yves has given you a platform for your comments and you have said something worthwhile.

How about tidy it up in a brief article and see if she will publish it?

I totally agree with you that democracy seems to have had its day but its still being avoided in subtle and concealed ways. Are we ready to debate a new system?

Yves Smith Post author October 9, 2016 at 2:54 am

Yes, SotS, that's a good idea. Are you game?

[Oct 09, 2016] Economic Recovery Feels Weak Because the Great Recession Hasnt Really Ended

Notable quotes:
"... The banking and corporate elites certainly have a problem. The agenda for many decades has been to steal and rape enough from the 99% to maintain positive balance sheets and earnings per share. ..."
"... Fewer and fewer of the 99% can now afford to pay for the promoted goods and services. It has reached a tipping point. Name one major bank that could afford to mark-to-mark its balance sheet assets. Name one S&P corporation that has shown solid earnings growth absent stock buybacks. And from here on, it only gets worse. ..."
Oct 09, 2016 | www.nakedcapitalism.com
cnchal October 9, 2016 at 9:11 am

Global debt has now reached about a hundred and fifty-two trillion dollars . This includes government debt, household debt, non-financial firms' debt. What does all this debt mean for the global financial system and for everyday people here, Michael?

That works out to only USD $20,540 for every man, woman and child on the planet. I'm sure the debt serfs can take double or triple that.

a different chris October 9, 2016 at 10:03 am

Yup, barely over 2 million dollars per 1 percenter. You can barely buy a passable vacation mansion for that, let alone staff it with peons. C'mon, guys, work harder for (and borrow more from) your betters!

apber October 9, 2016 at 9:50 am

The banking and corporate elites certainly have a problem. The agenda for many decades has been to steal and rape enough from the 99% to maintain positive balance sheets and earnings per share.

It has worked too well, but pure math has a way of biting the 1% in the ass.

Fewer and fewer of the 99% can now afford to pay for the promoted goods and services. It has reached a tipping point. Name one major bank that could afford to mark-to-mark its balance sheet assets. Name one S&P corporation that has shown solid earnings growth absent stock buybacks. And from here on, it only gets worse.

[Oct 08, 2016] Possible demographic factor in secualr stagantion

Oct 08, 2016 | economistsview.typepad.com

pgl : October 08, 2016 at 02:49 AM Noah Smith links to this paper:
http://www.federalreserve.gov/econresdata/feds/2016/files/2016080pap.pdf
Since the Great Recession, the U.S. economy has experienced low real GDP growth and low real interest rates, including for long maturities. We show that these developments were largely predictable by calibrating an overlapping-generation model with a rich demographic structure to observed and projected changes in U.S. population, family composition, life expectancy, and labor market activity. The model accounts for a 1Ľ–percentage-point decline in both real GDP growth and the equilibrium real interest rate since 1980-essentially all of the permanent declines in those variables according to some estimates. The model also implies that these declines were especially pronounced over the past decade or so because of demographic factors most-directly associated with the post-war baby boom and the passing of the information technology boom. Our results further suggest that real GDP growth and real interest rates will remain low in coming decades, consistent with the U.S. economy having reached a "new normal."

[Oct 01, 2016] The ruling class has figured out that a happy and productive population with free time on their hands is a mortal danger

Notable quotes:
"... Why all the bullshit jobs? And why are the most necessary and useful jobs, almost inevitably the lowest prestige and lowest paid? Capitalism. It's a nasty, nasty, nasty tangle of perverse incentives and evil. ..."
Oct 01, 2016 | www.nakedcapitalism.com
Kurt Sperry October 1, 2016 at 11:44 am

David Graeber I think hits one out of the park today: http://evonomics.com/why-capitalism-creates-pointless-jobs-david-graeber/

Why all the bullshit jobs? And why are the most necessary and useful jobs, almost inevitably the lowest prestige and lowest paid? Capitalism. It's a nasty, nasty, nasty tangle of perverse incentives and evil.

BecauseTradition October 1, 2016 at 12:52 pm

The answer clearly isn't economic: it's moral and political. The ruling class has figured out that a happy and productive population with free time on their hands is a mortal danger (think of what started to happen when this even began to be approximated in the '60s). And, on the other hand, the feeling that work is a moral value in itself, and that anyone not willing to submit themselves to some kind of intense work discipline for most of their waking hours deserves nothing, is extraordinarily convenient for them. David Graeber from http://evonomics.com/why-capitalism-creates-pointless-jobs-david-graeber/

Also, as several here have noted, one can work without a job if they have such resources as land or a workshop and, dare I say it, an income.

Nice article!

Jomo October 1, 2016 at 2:28 pm

Yes! Just read! Forwarding to friends and family! Love comments community on NC site.

[Sep 28, 2016] Wolf Richter Negative Growth of Real Wages is Normal for Much of the Workforce, and Getting Worse – New York Fed naked cap

Notable quotes:
"... If you're wondering why a large portion of American consumers are strung out and breathless and have trouble spending more and cranking up the economy, here's the New York Fed with an answer. And it's going to get worse. ..."
"... That the real median income of men has declined 4% since 1973 is an ugly tidbit that the Census Bureau hammered home in its Income and Poverty report two weeks ago, which I highlighted in this article – That 5.2% Jump in Household Income? Nope, People Aren't Suddenly Getting Big-Fat Paychecks – and it includes the interactive chart below that shows how the real median wage of women rose 36% from 1973 through 2015, while it fell 4% for men... ..."
"... Nominal wages are sticky downwards but not real wages. That is why the FED, the banks, the corporate sector and the economists support persistent inflation, i.e. it lowers real wages. The "study" correlating wage growth with aging is one of those empirical pieces by economists to obscure the role of inflation in lowering real wages. ..."
"... Real Wage Growth chart very interesting, crossing negative at about 55 for no college, and 43 for a Bachelor's degree. 43!! Not even halfway through a work-life, and none better since 2003 at best. ..."
Sep 28, 2016 | www.nakedcapitalism.com
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

The New York Fed published an eye-opener of an article on its blog, Liberty Street Economics , seemingly about the aging of the US labor force as one of the big economic trends of our times with "implications for the behavior of real wage growth." Then it explained why "negative growth" – the politically correct jargon for "decline" – in real wages is going to be the new normal for an ever larger part of the labor force.

If you're wondering why a large portion of American consumers are strung out and breathless and have trouble spending more and cranking up the economy, here's the New York Fed with an answer. And it's going to get worse.

The authors looked at the wages of all employed people aged 16 and older in the Current Population Survey (CPS), both monthly data from 1982 through May 2016 and annual data from 1969 through 1981. They then restricted the sample to employed individuals with wages, which boiled it down to 7.6 million statistical observations.

Then they adjusted the wages via the Consumer Price Index to 2014 dollars and divide the sample into 140 different "demographic cohorts" by decade of birth, sex, race, and education. As an illustration of the principles at work, they picked the cohort of white males born in the decade of the 1950s.

That the real median income of men has declined 4% since 1973 is an ugly tidbit that the Census Bureau hammered home in its Income and Poverty report two weeks ago, which I highlighted in this article – That 5.2% Jump in Household Income? Nope, People Aren't Suddenly Getting Big-Fat Paychecks – and it includes the interactive chart below that shows how the real median wage of women rose 36% from 1973 through 2015, while it fell 4% for men...

Sally Snyder September 28, 2016 at 7:22 am

Here is an interesting article that looks at which Americans have left the workforce in very high numbers:

http://viableopposition.blogspot.ca/2016/08/exiting-workforce-growing-pastime-for.html

The current real world employment experience of millions of Americans has shown little improvement since the end of the Great Recession.

Damian September 28, 2016 at 7:35 am

The number of public companies have been cut in half in the last 20 years. Just for one metric.

So for those born in the 50's, reaching middle or senior management by the time they were in their mid 40's (1999) was increasingly harder as the probability of getting squeezed out multiplied. In the last ten years, the birth / death rate of startups / small business has reversed as well.

There is probably ten other examples of why age is not the mitigating criteria for the decline in wages. It's not skill sets, not ambition, not flexibility. Pure number of chances for advancement and therefore associated higher wages has declined precipitously.

Anti Trust Enforcement went out the window as Neo-Liberal policies converted to political donations for promoting consolidation.

Now watch even those in their 20-30 age group will experience the same thing as H-1b unlimited takes hold with the Obama / Clinton TTP burning those at younger demographics. Are you going to say they are "too old" as well to write software?

Tell me where you want to go, and I will focus on selective facts and subjective interpretation of those selective facts to yield the desired conclusions.

Barack Peddling Fiction Obama – BS at the B.L.S. – has a multiplicity of these metrics.

Jim A. September 28, 2016 at 7:37 am

Hmm…Because wages are "sticky downwards" it would be helpful to see the inflation rate on that first chart.

Reply ↓
Ignim Brites September 28, 2016 at 8:35 am

Nominal wages are sticky downwards but not real wages. That is why the FED, the banks, the corporate sector and the economists support persistent inflation, i.e. it lowers real wages. The "study" correlating wage growth with aging is one of those empirical pieces by economists to obscure the role of inflation in lowering real wages.

Steve H. September 28, 2016 at 8:05 am

Real Wage Growth chart very interesting, crossing negative at about 55 for no college, and 43 for a Bachelor's degree. 43!! Not even halfway through a work-life, and none better since 2003 at best.

[Sep 28, 2016] The Consequences of Long Term Unemployment - NBER

Sep 28, 2016 | www.nber.org

[Sep 27, 2016] DeLong on helicopter money

Sep 27, 2016 | economistsview.typepad.com

Peter K. : September 27, 2016 at 06:45 AM DeLong on helicopter money: "The swelling wave of argument and discussion around "helicopter money" has two origins:

First, as Harvard's Robert Barro says: there has been no recovery since 2010.

The unemployment rate here in the U.S. has come down, yes. But the unemployment rate has come down primarily because people who were unemployed have given up and dropped out of the labor force. Shrinkage in the share of people unemployed has been a distinctly secondary factor. Moreover, the small increase in the share of people with jobs has been neutralized, as far as its effects on how prosperous we are, by much slower productivity growth since 2010 than America had previously seen, had good reason to anticipate, and deserves.

The only bright spot is a relative one: things in other rich countries are even worse.
..."

I thought Krugman and Furman were bragging about Obama's tenure.

"Now note that back in 1936 [John Maynard Keynes had disagreed][]:

"The State will have to exercise a guiding influence... partly by fixing the rate of interest, and partly, perhaps, in other ways.... It seems unlikely that the influence of banking policy on the rate of interest will be sufficient by itself.... I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment; though this need not exclude all manner of compromises and of devices by which public authority will co-operate with private initiative..."

By the 1980s, however, for Keynes himself the long run had come, and he was dead. The Great Moderation of the business cycle from 1984-2007 was a rich enough pudding to be proof, for the rough consensus of mainstream economists at least, that Keynes had been wrong and Friedman had been right.

But in the aftermath of 2007 it became very clear that they-or, rather, we, for I am certainly one of the mainstream economists in the roughly consensus-were very, tragically, dismally and grossly wrong."

DeLong sounds very much left rather than center-left. His reasons for supporting Hillary over Sanders eludes me.

Hillary's $275 billion over 5 years is substantially too small as center-leftist Krugman put it.

Now we face a choice:

Do we accept economic performance that all of our predecessors would have characterized as grossly subpar-having assigned the Federal Reserve and other independent central banks a mission and then kept from them the policy tools they need to successfully accomplish it?

Do we return the task of managing the business cycle to the political branches of government-so that they don't just occasionally joggle the elbows of the technocratic professionals but actually take on a co-leading or a leading role?

Or do we extend the Federal Reserve's toolkit in a structured way to give it the tools it needs?

Helicopter money is an attempt to choose door number (3). Our intellectual adversaries mostly seek to choose door number (1)-and then to tell us that the "cold douche", as Schumpeter put it, of unemployment will in the long run turn out to be good medicine, for some reason or other. And our intellectual adversaries mostly seek to argue that in reality there is no door number (3)-that attempts to go through it will rob central banks of their independence and wind up with us going through door number (2), which we know ends badly..."

------------

Some commenters believe more fiscal policy via Congress is politically more realistic than helicopter money.

I don't know, maybe they're right. I do know Hillary's proposals are too small. And her aversion to government debt and deficit is wrong given the economic context and market demand for safe assets.

Some pundits like Krugman believe helicopter money won't be that effective "because the models tell him." We should try it and find out. Reply Tuesday, September 27, 2016 at 06:45 AM

reason -> Peter K.... , Tuesday, September 27, 2016 at 08:40 AM

"Moreover, the small increase in the share of people with jobs has been neutralized, as far as its effects on how prosperous we are, by much slower productivity growth since 2010 than America had previously seen, had good reason to anticipate, and deserves."

?????? The rate of (measured) productivity growth is not all that important. What has happened to real median income.

And why are quoting from Robert Barro who is basically a freshwater economist. Couldn't you find somebody sensible?

pgl -> reason ... , Tuesday, September 27, 2016 at 09:08 AM
Barro wants us to believe we have been at full employment all along. Of course that would mean any increase in aggregate demand would only cause inflation. Of course many of us think Barro lost it years ago.

These little distinctions are alas lost on PeterK.

Peter K. -> pgl... , Tuesday, September 27, 2016 at 01:05 PM
run a long stupid troll.

Go read some hack Republican analyses.

Peter K. -> reason ... , Tuesday, September 27, 2016 at 01:06 PM
DeLong is quoting Barro.
Paine -> Peter K.... , Tuesday, September 27, 2016 at 09:57 AM
Really it's Delong on the context that has produced a return to HM fantasies

I'm sure u agree

He doesn't endorse HM in this post does he ?

Peter K. -> Paine ... , Tuesday, September 27, 2016 at 01:09 PM
Sounds to me like he does:

"Now we face a choice:

[1] Do we accept economic performance that all of our predecessors would have characterized as grossly subpar-having assigned the Federal Reserve and other independent central banks a mission and then kept from them the policy tools they need to successfully accomplish it?

[2] Do we return the task of managing the business cycle to the political branches of government-so that they don't just occasionally joggle the elbows of the technocratic professionals but actually take on a co-leading or a leading role?

[3] Or do we extend the Federal Reserve's toolkit in a structured way to give it the tools it needs?

Helicopter money is an attempt to choose door number (3). Our intellectual adversaries mostly seek to choose door number (1)-and then to tell us that the "cold douche", as Schumpeter put it, of unemployment will in the long run turn out to be good medicine, for some reason or other. And our intellectual adversaries mostly seek to argue that in reality there is no door number (3)-that attempts to go through it will rob central banks of their independence and wind up with us going through door number (2), which we know ends badly...""

---------------------
Conservatives want 1 and 2 ends badly, so 3 is the only choice.

[Sep 26, 2016] Another way of eliminating employees and forcing the customer to do the work

Notable quotes:
"... I refuse to use self-checkouts at grocery stores, as well. I see that, and this new Sam's app, as doing nothing more than 'outsourcing' the job onto the customers themselves (but even better, as they have to pay no one), eliminating jobs, while increasing their profits by cutting the overhead for the company we're patronizing. ..."
"... IMO I think we, as the public, should refuse to use such apps, forcing companies such as these to keep employees rather than allowing them to eliminate jobs to increase their profits. The words 'customer service' are rare enough in businesses these days, already. ..."
Sep 26, 2016 | www.nakedcapitalism.com

Walmart's Sam's Club Scan-and-Go App May Make Cash Registers Obsolete

As of 2014, nearly 30% of the US households no internet access. How do you think that maps onto WalMart customers? Plue get outside the big cities, you see a big drop in smart phone use. Even in wealthy Mountain Brook, Alabama (yes, believe it or not, it looks like the better parts of Westchester County), you see a fraction of the device use in NYC. These analysts need to get out and see more of the heartland.

KurtisMayfield September 25, 2016 at 7:39 am

Re: the street article on the Walmart app.

#1 I am happy that the news industry has found new sources of revenue, because that story read like a Walmart advertisement. Don't they have to disclose if they are getting paid for it?

#2. They already have these prescan guns in supermarkets. I see a very small percentage of people us them. I doubt that it saves you any time shopping because the register person can probably scan the items faster than an amateur. If you wanted to save time at the store you would have ordered online.

crittermom September 25, 2016 at 11:13 am

I certainly agree with you on #1. It did read like a Walmart ad.

The part that jumped out at me was: "If the item doesn't have a barcode, it could be easily looked up."

Really? How is the barcode looked up? And by whom? The customer?
It didn't say how in that 'ad'. (poor reporting)

It all sounds like another way of eliminating employees and forcing the customer to do the work. Obviously 'checking out' is one job that can't be outsourced, so now they've discovered a way to still eliminate the employees by forcing the customer to do the work instead.

As Yves mentioned, many of us living rural don't have dumbphones because we don't have service. I've never had a cell phone because there's never been coverage where I've lived out in the country, but even if I did, I'd resent having to 'check myself out' to increase the profits of the company. Oh, hell no!

I refuse to use self-checkouts at grocery stores, as well. I see that, and this new Sam's app, as doing nothing more than 'outsourcing' the job onto the customers themselves (but even better, as they have to pay no one), eliminating jobs, while increasing their profits by cutting the overhead for the company we're patronizing.

SS recently required a cell phone to access your account online. They quickly dialed that back when they realized that many of us don't have one. Duh? I agree with Yves that these analysts need to get out into the heartland more.

And I hope their vehicle breaks down while there, so reality smacks 'em hard. To quote a comedian, "Here's your sign!"

Regarding #2, I have no experience with those. My nearest Walmart is hours away so what little I do buy from them I order online and have it shipped to me.

IMO I think we, as the public, should refuse to use such apps, forcing companies such as these to keep employees rather than allowing them to eliminate jobs to increase their profits. The words 'customer service' are rare enough in businesses these days, already.

[Sep 26, 2016] EconoSpeak All Models are False The Internet-Computer Explanation of Major Recessions

Notable quotes:
"... Female labor force participation in the U.S. is well below its pre-crisis level. Maybe video games are now marketed equally toward men and women. ..."
"... Cowen is an idiot. I think the man needs to get some serious first hand experience on how much "fun" unemployment is. ..."
Sep 24, 2016 | econospeak.blogspot.com
Uneasy Money has a wonderful post on the "all models are false dodge". Nothing really to add but I especially enjoyed this:
Romer's most effective rhetorical strategy is to point out that the RBC core of modern DSGE models posit unobservable taste and technology shocks to account for fluctuations in the economic time series, but that these taste and technology shocks are themselves simply inferred from the fluctuations in the times-series data, so that the entire structure of modern macroeconometrics is little more than an elaborate and sophisticated exercise in question-begging.
I used to ask the New Classical crowd what the great negative real shock was during the early 1980's. The massive real appreciation of the dollar may have lowered net export demand but that was one of those Keynesian things. One would think the rise in the relative price of domestically supplied goods would have increased employment. Same with the alleged wonders of the Reagan tax cut. Oh but it was paid for by reducing transfer payments – another one of those Keynesian things. If poor people got less government assistance, then they should have gone all Jeb! and worked harder. And of course we were enjoying the start of the computer and technology revolution. But here is where the list gets hysterical – the line was that these new tools were being used to do less work in the office. But before you fall in the floor laughing at this excuse consider a recent excuse ala Tyler Cowen :
There are a few reasons, but the internet may be the biggest. It is easier to have fun while unemployed. That's a social problem for some people.
Tyler was debating Noah Smith. Noah had just argued for more infrastructure investment on the Keynesian notion that we were still below full employment. Tyler seems to think the low employment to population ratio is still somehow consistent with full employment. Noah disagreed noting that real wage growth is weak to which Tyler continues:
Maybe employers just aren't that keen to hire those males who prefer to live at home, watch porn and not get married. Is that more of a personal failure on the part of the worker than a market failure?
Oh my – boys will be boys! Noah had some good counters including:
Female labor force participation in the U.S. is well below its pre-crisis level. Maybe video games are now marketed equally toward men and women.
Thankfully Tyler did not respond by suggesting the ladies in the office were going crazy over hot dudes on Instragram. Posted by ProGrowthLiberal at

DrDick said... September 25, 2016 at 10:45 AM

Sweet spreadable Jeebus on a matzoh, Cowen is an idiot. I think the man needs to get some serious first hand experience on how much "fun" unemployment is.
Anonymous said... September 25, 2016 at 4:38 PM
I take it you don't put much stock in articles like this in The Post, then?

https://www.washingtonpost.com/news/wonk/wp/2016/09/23/why-amazing-video-games-could-be-causing-a-big-problem-for-america/

ProGrowthLiberal September 25, 2016 at 4:46 PM
The Washington Post article noted this presentation:
"Leisure Luxuries and the Labor Supply of Young Men"
Presenter: Mark Bils, University of Rochester
Coauthors: Mark Aguiar, Kerwin Charles, and Erik Hurst
Discussant: John Kennan, University of Wisconsin

https://www.frbatlanta.org/news/conferences/2016/0922-unemployment-wages-productivity/agenda

did not provide a link so I have not read this "research".

Until I do - I am not taking stock into this thesis.

Anonymous said... September 25, 2016 at 5:51 PM
Fair enough.

As it happens, Dean Baker was the only person who noted that "the drop in employment rates among less-educated women over the last 15 years has been even sharper. Furthermore there has been a decline in employment rates among all groups of prime age workers (25-54), even those with college degrees."

This seems to put a pretty big whole in the idea from the get go, doesn't it?

ProGrowthLiberal September 25, 2016 at 6:42 PM
Anon- Dean's point was pretty clear. We have seen a broad based drop in the employment to population ratio which is better described by weak aggregate demand than some strange tale that the kids stay home to watch video games. And the weakness in real wage growth is better explained by demand rather than supply factors. The rest is details.

[Sep 26, 2016] countercyclical fiscal policy should be our equivalent of a first responder to recessions,

Sep 26, 2016 | economistsview.typepad.com

RGC : September 25, 2016 at 09:45 AM , September 25, 2016 at 09:45 AM

San Fran Fed president calls for fiscal policy as automatic stabilizer:
.......................
Turning to policies that can help stabilize the economy during a downturn, countercyclical fiscal policy should be our equivalent of a first responder to recessions, working hand-in-hand with monetary policy. Instead, it has too often been stuck in a stop-and-go cycle, at times complementing monetary policy, at times working against it. This is not unique to the United States; Japan, and Europe have also fallen victim to fiscal consolidation in the midst of an economic downturn or incomplete recovery.

One solution to this problem is to design stronger, more predictable, systematic adjustments of fiscal policy that support the economy during recessions and recoveries (Williams 2009, Elmendorf 2011, 2016). These already exist in the form of programs such as unemployment insurance but are limited in size and scope. Some possible ideas for the United States include Social Security and income tax rates that move up or down in relation to the national unemployment rate, or federal grants to states that operate in the same way. Such approaches could be designed to be revenue-neutral over the business cycle; they also could avoid past debates over fiscal stimulus by separating decisions on countercyclical policy from longer-run decisions about the appropriate role of the government and tax system. Indeed, economists across the political spectrum have championed these ideas (Elmendorf and Furman 2008, Taylor 2000, 2009).
.......................
http://www.frbsf.org/economic-research/publications/economic-letter/2016/august/monetary-policy-and-low-r-star-natural-rate-of-interest/

Are some people waking up a little bit? Will they totally wake up?

pgl -> RGC... , Sunday, September 25, 2016 at 09:45 AM
"Turning to policies that can help stabilize the economy during a downturn, countercyclical fiscal policy should be our equivalent of a first responder to recessions".

Just love it!

RGC -> RGC... , Sunday, September 25, 2016 at 10:05 AM
Three points to note:

1. "fiscal policy should be our equivalent of a first responder" (fiscal policy first)

2. "One solution to this problem is to design stronger, more predictable, systematic adjustments of fiscal policy" (systematic is key - not ad hoc)

3 "....that move up or down in relation to the national unemployment rate,..." (automatic and applicable to up or down)

And this from a Fed guy.

pgl -> RGC... , Sunday, September 25, 2016 at 10:55 AM
"And this from a Fed guy."

A FED guy who managed to escape the FED borg!

RGC -> pgl... , -1
I am pleasantly surprised.

Must be that San Francisco air.

[Sep 26, 2016] In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression.

Notable quotes:
"... "In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression. If we were back at 1965 levels today, nearly 10 million additional men would have paying jobs. The collapse of male work is due almost entirely to a flight out of the labor force-and that flight has on the whole been voluntary. The fact that only 1 in 7 prime-age men are not in the labor force points to a lack of jobs as the reason they are not working." ..."
"... "these unworking men are floated by other household members (wives, girlfriends, relatives) and by Uncle Sam. Government disability programs figure prominently in the calculus of support for unworking men-ever more prominently over time." ..."
Sep 26, 2016 | economistsview.typepad.com

pgl : , In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression.

A hat tip to PeterK for alerting us to the latest from Nicholas Eberstadt (AEI):

http://time.com/4504004/men-without-work/

"In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression. If we were back at 1965 levels today, nearly 10 million additional men would have paying jobs. The collapse of male work is due almost entirely to a flight out of the labor force-and that flight has on the whole been voluntary. The fact that only 1 in 7 prime-age men are not in the labor force points to a lack of jobs as the reason they are not working."

Uh Nick – thanks for telling us what we already knew – labor force participation is down. But do you realize how you just contradicted yourself. Keynesians like myself would agree that is due to a lack of jobs (aka low aggregate demand). So is this a voluntary thing?

Let's read on:

"these unworking men are floated by other household members (wives, girlfriends, relatives) and by Uncle Sam. Government disability programs figure prominently in the calculus of support for unworking men-ever more prominently over time."

Since government provided benefits have not been scaled up by our policy makers – he must think the hard working ladies are cuddling young men for their good lucks or something. Uh Nick – come to NYC and you will see that the ladies here think this is so stupid. His next excuse is all those dudes in prison. Seriously? Does this AEI clown not realize crime is much lower than it was a generation ago? This piece was dumb even by AEI "standards". But at least he did not dwell on the Tyler Cowen porn thing.And at the risk of repeating myself (and Noah Smith) if their thesis that young men had suddenly decided to loaf, then the inward shift of the labor supply curve would mean higher real wages than we are seeing.

pgl -> pgl... , Sunday, September 25, 2016 at 10:43 AM
I decided to put these thoughts in the following Econospeak post which goes a little further debunking the misrepresentations from the AEI hack:

http://econospeak.blogspot.com/2016/09/the-new-men-without-jobs-conservative.html

RC AKA Darryl, Ron : , Sunday, September 25, 2016 at 10:10 AM
[A reply from Paine:

"paine -> RC AKA Darryl, Ron...


Joe playing hill
courtier

Who knows what he thinks

Reply Friday, September 23, 2016 at 01:29 PM"

Reminded me of this entirely by accident or maybe incident:]

http://unionsong.com/u017.html


Joe Hill

A song by Alfred Hayes, Music by Earl Robinson©1938 by Bob Miller, Inc.

I dreamed I saw Joe Hill last night
Alive as you or me
Says I, But Joe, you're ten years dead
I never died, says he
I never died, says he

In Salt Lake, Joe, says I to him
Him standing by my bed
They framed you on a murder charge
Says Joe, But I ain't dead
Says Joe, But I ain't dead

The copper bosses killed you, Joe
They shot you, Joe, says I
Takes more than guns to kill a man
Says Joe, I didn't die
Says Joe, I didn't die

And standing there as big as life
And smiling with his eyes
Joe says, What they forgot to kill
Went on to organize
Went on to organize

Joe Hill ain't dead, he says to me
Joe Hill ain't never died
Where working men are out on strike
Joe Hill is at their side
Joe Hill is at their side

From San Diego up to Maine
In every mine and mill
Where workers strike and organize
Says he, You'll find Joe Hill
Says he, You'll find Joe Hill

I dreamed I saw Joe Hill last night
Alive as you or me
Says I, But Joe, you're ten years dead
I never died, says he
I never died, says he


[More about Joe Hill and Alfred Hayes at the link.]

RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Sunday, September 25, 2016 at 10:14 AM
Fortunately I will have very little spare time for idle or addle minded leisure now until well after the election and even well after the subsequent coronation save those days so rainy that outdoor activity is entirely impractical.
pgl : , Sunday, September 25, 2016 at 11:55 AM
I never liked Ross Douhart. The political right thinks he has written something very important:

http://www.nytimes.com/2016/09/21/opinion/campaign-stops/clintons-samantha-bee-problem.html?_r=0

"At the same time, outside the liberal tent, the feeling of being suffocated by the left's cultural dominance is turning voting Republican into an act of cultural rebellion - which may be one reason the Obama years, so good for liberalism in the culture, have seen sharp G.O.P. gains at every level of the country's government. This spirit of political-cultural rebellion is obviously crucial to Trump's act."

Vote for a racist like Trump because liberals are suffocating. Did I say I really do not like Ross Douhart?

Peter K. -> pgl... , Sunday, September 25, 2016 at 01:38 PM
Again we agree. (Signs of the apocalypse? I guess Trump is going to win.)

Douchehat is the worst hypocrite. He wants readers to believe he's an expert in morality and morale rectitude and that's what conservative should be known for when in reality Republicans chose Trump as their candidate, one grand example of immorality and dishonesty.

And still Douthat turns on the liberals as behaving badly. Suffocating? Howabout the insanity of the Republican convention? That was suffocating.

He even quotes Internet Troll Steve Sailor!!!

*rubs eyes*

"(The alt-right-ish columnist Steve Sailer made the punk rock analogy as well.)"

It's like Douthat writing about JohnH or BINY. Every one of Sailor's Internet comments would be racist ones about immigration. He's mentally unhinged.

"But it remains an advantage for the G.O.P., and a liability for the Democratic Party, that the new cultural orthodoxy is sufficiently stifling to leave many Americans looking to the voting booth as a way to register dissent."

Clueless Douthat. The culture is getting better in certain ways because the TV executives just want to sell advertising and these performers are popular. It's capitalism at work.

Kudos to John Oliver for winning an Emmy.

"Among millennials, especially, there's a growing constituency for whom right-wing ideas are so alien or triggering, left-wing orthodoxy so pervasive and unquestioned, that supporting a candidate like Hillary Clinton looks like a needless form of compromise."

Note the disdain for millennials. "Triggering."

Conservative like Douthat and Bobo Brooks "trigger" the hate and anger centers of my brain.

The fact is that Samantha Bee is right and NBC facilitated the rise of Trump with the Apprentice and treating him well on other shows like Jimmy Fallon and SNL.

Here's the offending video.

http://www.huffingtonpost.com/entry/samantha-bee-slams-jimmy-fallon-nbc-for-softball-donald-trump-interview_us_57e12dbbe4b0071a6e095c1f

anne -> Peter K.... , Sunday, September 25, 2016 at 02:44 PM
--------- is the worst hypocrite....

[ Do not use sickening language on this blog. Never ever use such language here. ]

pgl : , Sunday, September 25, 2016 at 12:24 PM
I have provided this link to some of the papers by Michael Bruno – many co-authored by Jeffrey Sachs – for a couple of reasons:

http://www.nber.org/authors/michael_bruno

The minor reason is they have a nice paper on the Dutch Disease – something JohnH thinks he understands but he needs to read up on this topic. But the main reason has to do with a stupid comment from Paine on my Econospeak post, which goes to show how very little Paine actually learned in graduate school.

I was try to paint a picture of some Real Business Cycle claim that Bruno and Sachs emphasized when I was in graduate school. I never truly bought their story as I was (and still am) a die hard Keynesian. But here is how it went as applied to the early 1980's (the period I was talking about). If a nation enjoys a massive real appreciation and if aggregate demand does not matter (the New Classical view which we Keynesians do not buy) then the real wages of its domestic workers rise. These workers supply more labor driving down wages relative to domestic prices. So domestic firms hire more workers.

That is their story. I do not buy it as I was clearly mocking it. Alas Paine never learned this. And so he mocks someone who did. Just another day at the EV comment section. Aals.

[Sep 26, 2016] Neoliberal prostitute Cowen about unemployment

Sep 26, 2016 | economistsview.typepad.com

anne -> djb... September 25, 2016 at 07:29 AM https://www.bloomberg.com/view/articles/2016-09-12/debating-government-s-role-in-boosting-growth

September 12, 2016

Debating Government's Role in Boosting Growth: Cowen and Smith
By Tyler Cowen & Noah Smith

Smith: If that's true -- if we're seeing a greater preference for leisure -- why are we not seeing wages go up as a result? Is that market also broken?

Cowen: Maybe employers just aren't that keen to hire those males who prefer to live at home, watch porn and not get married. Is that more of a personal failure on the part of the worker than a market failure? Reply Sunday, DrDick -> djb... , Sunday, September 25, 2016 at 07:49 AM

This is a man who has never visited reality.
Paine -> DrDick... , Sunday, September 25, 2016 at 12:03 PM
And he's well compensated for his pipe dreaming

Why seek truth from facts
When from scratch
story telling pays so much better

DrDick -> Paine ... , -1
;-)
cm -> djb... , -1
And I thought it was "video games".

There will always be water carriers "explaining" lack of success by lack of virtue. Likewise, before large scale automation and "globalization", we didn't need PISA studies to highlight the failures of the education systems and alleged lack of student/graduate preparedness.

Sandwichman had multiple expositions on the early lump of labor fallacy debates where the plight of laborers was ascribed to their carrying their money to the ale house.

pgl -> djb... , -1
He lacks basic logic. If his story was valid, real wages would have risen. Inward shift of the supply curve v. movement along a supply curve? Hello? What do they teach the kids at GMU?
Peter K. -> pgl... , -1
This month's Time magazine - with Kaepernick on the cover - has a column by an AEI hack, Eberstadt, who pushes the exact same line Cowen is pushing. The lazy/entertained male meme.

His reasoning is that the decline in the labor force participation rate is consistent through boom times and recessions. (I'm not going to bother linking.)

"Consider: America's prime-male workforce participation has been declining at a virtually linear rate for half a century - a trajectory unaffected by good times or recessions."

Again I suspect the conservatives are just lying. The Age of Niallism.

Excellent Econospeak post by PGL. He can be quite good when not trolling or mud-wrestling with trolls.

Peter K. -> Peter K.... , Sunday, September 25, 2016 at 06:42 AM
Dean Baker also takes on the new conservative meme:

http://cepr.net/blogs/beat-the-press/if-men-don-t-work-because-of-video-games-what-explains-women-not-working

If Men Don't Work Because of Video Games, What Explains Women Not Working?

by Dean Baker

Published: 24 September 2016

As is widely known the Washington Post never misses an opportunity to blame the victims of policy for bad outcomes, rather than rich and powerful folks who design policy. We are treated to yet another example of this charade with the Post running a major article that claims that video games are a major reason that fewer young men are working today than 15 years ago.

The basic story is that many young men, particularly those with less education, have dropped out of the labor force in the last 15 years. According to survey data, they appear to be spending much of their time playing video games. They also report to be relatively happy. See, all you people who thought it was a bad economy are mistaken, the problem is the video games are just too much fun.

Okay, that's a great Trumpian level of analysis, but let's get back to the real world. Less-educated young men are not the only group with declines in employment rates. In fact, the drop in employment rates among less-educated women over the last 15 years has been even sharper. Furthermore there has been a decline in employment rates among all groups of prime age workers (25-54), even those with college degrees.

This general drop in employment rates might suggest that the real problem is a lack of demand. In other words, young men are not working for the same reason young women are not working, the Washington Post and other advocates of austerity have been successful in reducing demand in the economy by reducing the government budget deficit. So the problem has little to do with video games, the problem is the policy, but hey, if the Post can use video games to distract attention from what its favored policies are doing to people -- why not?

Peter K. -> Peter K.... , Sunday, September 25, 2016 at 06:43 AM
Not just Time magazine, but the Washington Post as well. A large problem is MediaMacro or the corporate media.
cm -> Peter K.... , Sunday, September 25, 2016 at 08:40 AM
What, is there a presumption that young women don't play video games? (Or indulge in other online/"social media" entertainment formats?)

Of course lack of employment is not the consequence but the cause of filling one's day with any available entertainment - and due to cheap offshore manufacturing the hardware is overall a minor expenditure, as well as due to the near zero marginal cost of software replication, the games are quite affordable. For online games there are data center expenses but they are distributed over many players which fits the budget of involuntary or semi-voluntary "Hotel Mama" residents.

Of course puritans cannot have it that the un(der)employeds are not suffering every inconvenience there is, particularly the soul crushing boredom of an absence of any engaging activity. Hence the mindset that the welfare state must provide exactly the measure of life support that keeps the beneficiaries from death but in this particular state of suffering. Being able to play games or having sexual relations (with others or oneself) defeats the whole purpose.

Peter K. -> cm... , Sunday, September 25, 2016 at 09:16 AM
Well said.
JF -> Peter K.... , Sunday, September 25, 2016 at 10:25 AM
You mean reducing Spending in the economy, and yes via political controls that stop the govt from spending at levels that might fill the gaps.

But the point is, to me, that private spending is where it is and will not increase to fill the gaps. Only the public acting as society's agent vua its govt can increase spending to fill the gaps - uh, jusy as Keynes and many ithers have said for quite some time.

I'm pretty sure you agree, but the point is about spending, not about the fiscal math (a deficit is just 2nd grade math, not a policy). The other party does not want to fill gaps and does not want the public to understand its role in governance - political control for infirm reasons, and that is not a word containing a typo.

Spending to cause gaps to fill. How to get this.

pgl -> Peter K.... , Sunday, September 25, 2016 at 09:23 AM
I will have to take a peek at this Eberstadt piece. Maybe he will explain to us how a supposed inward shift of the labor supply curve is consistent with weak real wage growth. Oh wait - he writes for the AEI so maybe not.
Peter K. -> pgl... , Sunday, September 25, 2016 at 10:15 AM
That's what I thought. When I saw he was from AEI I knew we were getting lies. Just like with Trump.

That it was in a column in Time magazine depressed me.

Reading your blogpost shredding Cowen cheered me up!

Thanks.

pgl -> Peter K.... , Sunday, September 25, 2016 at 10:45 AM
I have a new Econospeak post going after this horrible AEI post. Thanks again for the alert.
pgl -> Peter K.... , Sunday, September 25, 2016 at 09:39 AM
Just posted a link to this really awful piece from this AEI goofball. Thanks for the tip. Along with the link, I rip its sheer stupidity. Tyler Cowen was really bad but this AEI guy is incredibly incoherent.
Paine -> pgl... , Sunday, September 25, 2016 at 11:18 AM
Try this on for incoherent

" ...One would think the rise in the relative price of domestically supplied goods would have increased employment. "

Typo or
banana peel ?

pgl -> Paine ... , Sunday, September 25, 2016 at 11:45 AM
I see standard aka Econ 101 theory - which is what the New Classical crowd pushes - is lost on you. Do try to follow the discussion before your usual babbling. Jesus H. Christ - even JohnH is trying to grasp the economics of the Dutch disease. OK - he is doing his usual terrible job but you do not even try.
Paine -> pgl... , Sunday, September 25, 2016 at 12:24 PM
Look carefully my friend

It's your good fortune no ump stands over your shoulder to rub your face in this goof

Higher dollar leads to lower domestic employment in trade good industries
That or lower wage rates

Or some combo of both

Paine -> Paine ... , -1
RBC. Modelers
Largely Ignore the complications of open systems
U invoke the forex rate

Then fumble the ball behind the line of scrimmage

You are actual more careless and over confident then most here realize

My adivice avoid actual economists
Stay in the boon docks
And at that very gentl hetero fox site econo speak

Where loons can flock with mavericks
Lions lie down with skunks

anne -> pgl... , Sunday, September 25, 2016 at 07:00 AM
https://en.wikipedia.org/wiki/Real_business-cycle_theory

Real business-cycle theory (RBC theory) are a class of New classical macroeconomics models in which business-cycle fluctuations to a large extent can be accounted for by real (in contrast to nominal) shocks. Unlike other leading theories of the business cycle, RBC theory sees business cycle fluctuations as the efficient response to exogenous changes in the real economic environment. That is, the level of national output necessarily maximizes expected utility, and governments should therefore concentrate on long-run structural policy changes and not intervene through discretionary fiscal or monetary policy designed to actively smooth out economic short-term fluctuations.

According to RBC theory, business cycles are therefore "real" in that they do not represent a failure of markets to clear but rather reflect the most efficient possible operation of the economy, given the structure of the economy.

DrDick -> pgl... , -1
Conservative economics, like RBC, cannot survive exposure to reality. Your post in the list today quite nicely shreds that kind of nonsense.

[Sep 16, 2016] There is no alternative to austerity under neoliberalism

likbez,
there is no alternative to austerity under neoliberalism. And thus stagnation.

Ideology of neoliberalism does not permit state intervention and consider it as a threat to neoliberal order.

In addition to that, in the USA military expenses prevent forming Reserve fund during expansion that can be used during recessions.

As financial institutions are the "head" in neoliberal organism, warm blood in the form of money should go to the head even if the other parts of the organism are cold and freezing.

[Sep 16, 2016] Secular stagnation The long view The Economist

This is weak. The energy factor is completely missing from the discussion. Also the crisis of neoliberalism due to redistribution of wealth up, which suppress the growth is never mentioned. But what you can expect from a such a stalwart neoliberal publication as Economist.
Notable quotes:
"... Either way, the trend is clear; nominal GDP growth has slowed below 4% a year, real GDP growth below 2% (in Italy, it is negative). ..."
"... Below are the numbers from the OECD for the old age support ratio, the number of workers aged 20-64 relative to those aged over 65. ..."
"... As you can see, things are going to get a lot worse, rather than better. Why is old age dependency a problem? After all, a lower birth rate means there are fewer dependent children. Yes, but the cost to society of old people is greater, once you factor in pensions, healthcare, nursing home care and increased longevity (a 65 year old can expect to live for 20 years or more). ..."
"... Crucially, the workforce is no longer growing; indeed it is expected to shrink in Italy, Germany and Japan. The EU is set to lose 40m workers over the next 40 years ; without immigration, that would be a 96m decline. ..."
"... Economic growth consists of having more workers and making them work more efficiently (productivity). Even if one is not as pessimistic as Robert Gordon about technological change, one can see that productivity will have to work very hard indeed to offset demography. ..."
"... Larry Summers noted that those periods which tended to have rapid economic growth were also marked by the build-up of debt and asset bubbles ..."
"... the record of industrial countries over the last 15 years is profoundly discouraging as to the prospect of maintaining substantial growth with financial stability ..."
"... Sometimes bubbles can have positive economic impacts; the railways and canals were built in a flurry of speculation in the 19th century. Many investors lost money but the economy gained from the increased capacity and lower transport costs. The economic benefits of property booms are not as great, especially if the effect is to create derelict apartments and houses (eg Ireland and Spain). ..."
Apr 08, 2016 | www.economist.com

here has been much talk in recent months of "secular stagnation" after the former Treasury secretary Larry Summers made a speech on the issue in February. As you can see the problem for the developed world has not arisen overnight. The chart shows the rolling 10-year growth rate for leading economies in both real and nominal terms. This smooths out the effect of the economic cycle. Either way, the trend is clear; nominal GDP growth has slowed below 4% a year, real GDP growth below 2% (in Italy, it is negative).

There are many potential explanations for this shift, but the most plausible relates to demography. Growth was rapid in the aftermath of the Second World War, as Europe was reconstructed, and some of the benefits of pre-war technological change filtered through to the economy; then from the mid-1960s onwards, the baby boomers joined the workforce. But the birth rate fell and the baby boomers are retiring. Below are the numbers from the OECD for the old age support ratio, the number of workers aged 20-64 relative to those aged over 65. 

                                          1950             1980           2010        2050 (projected)
   US                                     6.97              5.04          4.59         2.53 
   UK                                     5.58              3.74          3.59         2.14 
   Germany                                6.26              3.68          2.91         1.54 
   France                                 5.13              3.96          3.50         2.04 
   Italy                                  6.99              4.21          3.00         1.46 
   Japan                                  9.98              6.67          2.57         1.27

As you can see, things are going to get a lot worse, rather than better. Why is old age dependency a problem? After all, a lower birth rate means there are fewer dependent children. Yes, but the cost to society of old people is greater, once you factor in pensions, healthcare, nursing home care and increased longevity (a 65 year old can expect to live for 20 years or more).

Crucially, the workforce is no longer growing; indeed it is expected to shrink in Italy, Germany and Japan. The EU is set to lose 40m workers over the next 40 years; without immigration, that would be a 96m decline.

Economic growth consists of having more workers and making them work more efficiently (productivity). Even if one is not as pessimistic as Robert Gordon about technological change, one can see that productivity will have to work very hard indeed to offset demography.

What about the other factors? Larry Summers noted that those periods which tended to have rapid economic growth were also marked by the build-up of debt and asset bubbles, or as he put it

the record of industrial countries over the last 15 years is profoundly discouraging as to the prospect of maintaining substantial growth with financial stability

Sometimes bubbles can have positive economic impacts; the railways and canals were built in a flurry of speculation in the 19th century. Many investors lost money but the economy gained from the increased capacity and lower transport costs. The economic benefits of property booms are not as great, especially if the effect is to create derelict apartments and houses (eg Ireland and Spain).

Why have so many bubbles built up recently? One key factor seems to be the decline in the level of real interest rates (this is the focus of the Summers essay); lower real rates have encouraged investment in financial assets for all sorts of reasons.*

Summers argues that a number of factors have pushed down real rates: companies have reduced demand for debt, in part because the new breed of tech companies has less need for capital investment; slower population growth is associated with lower real rates; wider inequality means more income in the hands of the rich, who save more than the poor and central banks have also accumulated vast reserves (a greater supply of savings means a lower real rate, other things being equal).

... .... ...

[Sep 14, 2016] Yes, Donald Trump is wrong about unemployment. But he's not the only one

Spirited defense of the establishment from one of financial oligarchy members. " The economy overall is doing just fine." Does this include QE? If the Fed is pouring billions of new money into the economy, how accurate is it to say that the economy is doing just fine?
Notable quotes:
"... "That was a number that was devised, statistically devised, to make politicians - and in particular, presidents - look good. And I wouldn't be getting the kind of massive crowds that I'm getting if the number was a real number." ..."
"... In the 1950s and 1960s, for instance, organized labor was fairly convinced that the government was purposely underestimating inflation and the cost of living to keep Social Security payments low and wages from rising. George Meany, the powerful head of the American Federation of Labor at the time, claimed that the Bureau of Labor Statistics, which compiled both employment and inflation numbers, had "become identified with an effort to freeze wages and is not longer a free agency of statistical research." ..."
"... Employment figures are sometimes seen as equally suspect. Jack Welch, the once-legendary former CEO of GE, blithely accused the Obama administration of manipulating the final employment report before the 2012 election to make the economic recovery look better than it was. "Unbelievable jobs numbers … these Chicago guys will do anything … can't debate so change numbers," he tweeted ..."
"... His arguments were later fleshed out by New York Post columnist John Crudele , who went on to charge the Census Bureau (which works with BLS to create the samples for the unemployment rate) with faking and fabricating the numbers to help Obama win reelection. ..."
"... The chairman of the Gallup organization, Jim Clifton, sees so many flaws with the way unemployment is measured that he has called the official rate a "Big Lie." In the Democratic presidential campaign, Bernie Sanders has also weighed in, saying the real unemployment rate is at best above 10 percent. ..."
"... What a useless article. The author explains precisely nothing about what the official statistics do and do not measure, what they miss and what they capture. ..."
"... I had the same impression as well. Notice he does not mention that the Gallop number is over 10% and is based on their polling data. ..."
"... But never mentioned that Reagan changed how Unemployment was figured in the early 80's. He included all people in the military service, as employed. Before that, they was counted neither way. He also intentionally left out that when Obama, had the unemployed numbers dropped one month before the election, from 8.1% to 7.8% --because it was believed that no one could be reelected if it was above 8%. ..."
"... U6 is 9.8% for March 2016. We still have 94 million unemployed and you want to say its 5 % what journalistic malpractice. ..."
"... Trump has emphasized that he is looking at the percent of the population that is participating in the workforce - and that this participation rate is currently at historical lows -- and Trump has been clear that his approach to paying down the national debt is based on getting the participation rates back to historical levels ..."
"... "The government can't lie about a hundred billion dollars of Social Security money stolen for the Clinton 'balanced budget', that would be a crime against the citizens, they would revolt. John, come one now. " ..."
"... I didn't say it first, Senator Ernest Hollings did, on the Senate floor. ..."
"... And here is how they did it: http://www.craigsteiner.us/articles/16 ..."
"... There is plenty of evidence the figures are cooked, folks, enough to fill a book: Atlas Shouts. Don't believe trash like this article claims. GDP, unemployment and inflation are all manipulated numbers, as Campbell's Law predicts. ..."
"... I can't believe the Washington Post prints propaganda like this. ..."
"... I do remember when the officially-announced unemployment rate stopped including those who were no longer looking for work. That *was* a significant shift, and there's no doubt it made politicians (Reagan, I think it was) look better; of course, no President since then has reversed it, as it would instantly make themselves look worse. ..."
"... Working one hour a week, at minimum wage, is 'employed', according to the government. No wonder unemployment is at 5%. ..."
"... Add in people who are working, but want and need full time jobs, add in people who have dropped out of the labor market and/or retired earlier than they wanted to, and unemployment is at least 10%. Ten seconds on Google will show you that. ..."
"... The writer should be sacked for taking a very serious issue and turning it into a piece of non-informative fluff. Bad mouthing Trump and Sanders is the same as endorsing Hilly. ..."
Apr 08, 2016 | The Washington Post
Yes, Donald Trump is wrong about unemployment. But he's not the only one. - The Washington Post

Listen to President Obama, and you'll hear that job growth is stronger than at any point in the past 20 years, and - as he said in his final State of the Union address - "anyone claiming that America's economy is in decline is peddling fiction."

Listen to Donald Trump and you'll hear something completely different. The billionaire Republican candidate for president told The Washington Post last week that the economy is one big Federal Reserve bubble waiting to burst, and that as for job growth, "we're not at 5 percent unemployment. We're at a number that's probably into the 20s if you look at the real number." Not only that, Trump said, but the numbers are juiced: "That was a number that was devised, statistically devised, to make politicians - and in particular, presidents - look good. And I wouldn't be getting the kind of massive crowds that I'm getting if the number was a real number."

It's easy enough to dismiss - as a phalanx of economists and analysts did - Trump's claims as yet another one of his all-too-frequent campaign lines that have little to do with reality. But with this one, at least, Trump is tapping into a deep and mostly overlooked well of popular suspicion of government numbers and a deeply held belief that what "we the people" are told about the economy by the government is lies, damn lies and statistics designed to benefit the elite at the expense of the working class. The stubborn persistence of these beliefs should be a reminder that just because the United States is doing well in general, that doesn't mean everyone in the country is. It's also a warning to experts and policymakers that in the real world, there is no "the economy," there are many, and generalizations have a way of glossing over some very rough patches.

Since the mid-20th century, when the U.S. government began keeping and compiling our modern suite of economic numbers, there has been constant skepticism of the reports, coming from different corners depending on economic trends and the broader political climate. In the 1950s and 1960s, for instance, organized labor was fairly convinced that the government was purposely underestimating inflation and the cost of living to keep Social Security payments low and wages from rising. George Meany, the powerful head of the American Federation of Labor at the time, claimed that the Bureau of Labor Statistics, which compiled both employment and inflation numbers, had "become identified with an effort to freeze wages and is not longer a free agency of statistical research."

Over the decades, those views hardened. Throughout the 1970s, as workers struggled with unemployment and stagflation, the government continually tweaked its formulas for measuring prices. By and large, these changes and new formulas were designed to make the figures more accurate in a fast-changing world. But for those who were already convinced the government was trying to paint a deliberately false picture, the tweaks and innovations were interpreted as a devious way to avoid spending money to help the ailing middle class, not trying to measure what was actually happening to design policies to help address it. The commissioner of BLS at the time, Janet Norwood, dismissed those concerns in testimony to Congress in the late 1970s, saying that when people don't get the number they want, "they feel there must be something wrong with the indicator itself."

Employment figures are sometimes seen as equally suspect. Jack Welch, the once-legendary former CEO of GE, blithely accused the Obama administration of manipulating the final employment report before the 2012 election to make the economic recovery look better than it was. "Unbelievable jobs numbers … these Chicago guys will do anything … can't debate so change numbers," he tweeted after that last October report showed better-than-expected job growth and lower-than-anticipated unemployment rate. His arguments were later fleshed out by New York Post columnist John Crudele, who went on to charge the Census Bureau (which works with BLS to create the samples for the unemployment rate) with faking and fabricating the numbers to help Obama win reelection.

These views are not fringe. Type the search terms "inflation is false" into Google, and you will get reams of articles and analysis from mainstream outlets and voices, including investment guru Bill Gross (who referred to inflation numbers as a "haute con job"). Similar results pop up with the terms "real unemployment rate," and given how many ways there are to count employment, there are legitimate issues with the headline number.

[The bizarre optimism in Donald Trump's theory of the economy]

The cohort that responds to Trump reads those numbers in a starkly different light from the cohort laughing at him for it. Whenever the unemployment rate comes out showing improvement and hiring, those who are experiencing dwindling wages and shrinking opportunities might see a meticulously constructed web of lies meant to paint a positive picture so that the plight of tens of millions who have dropped out of the workforce can be ignored. The chairman of the Gallup organization, Jim Clifton, sees so many flaws with the way unemployment is measured that he has called the official rate a "Big Lie." In the Democratic presidential campaign, Bernie Sanders has also weighed in, saying the real unemployment rate is at best above 10 percent.

Beneath the anger and the distrust - which extend to a booming stock market that helps the wealthy and banks flush with profit even after the financial crisis - there lies a very real problem with how economists, the media and policymakers discuss economics. No, the bureaucrats in the Labor and Commerce departments who compile these numbers aren't a cabal engaged in a cover-up. And no, the Fed is not an Illuminati conspiracy. But the idea that a few simple big numbers that are at best averages to describe a large system we call "the economy" can adequately capture the stories of 320 million people is a fiction, one that we tell ourselves regularly, and which millions of people know to be false to their own experience.

It may be true that there is a national unemployment rate measured at 5 percent. But it is also true that for white men without a college degree, or white men who had worked factory jobs until the mid-2000s with no more than a high school education, the unemployment reality is much worse (though it's even worse for black and Hispanic men, who don't seem to be responding by flocking to Trump in large numbers). Even when those with these skill sets can get a job, the pay is woefully below a living wage. Jobs that don't pay well still count, in the stats, as jobs. Telling people who are barely getting by that the economy is just fine must appear much more than insensitive. It is insulting, and it feels like a denial of what they are experiencing.

The chords Trump strikes when he makes these claims, therefore, should be taken more seriously than the claims themselves. We need to be much more diligent in understanding what our national numbers do and do not tell us, and how much they obscure. In trying to hang our sense of what's what on a few big numbers, we risk glossing over the tens of millions whose lives don't fit those numbers and don't fit the story. "The economy" may be doing just fine, but that doesn't mean that everyone is. Inflation might be low, but millions can be struggling to meet basic costs just the same.

So yes, Trump is wrong, and he's the culmination of decades of paranoia and distrust of government reports. The economy overall is doing just fine. But people are still struggling. We don't have to share the paranoia or buy into the conspiratorial narrative to acknowledge that. A great nation, the one Trump promises to restore, can embrace more than one story, and can afford to speak to those left out of our rosy national numbers along with those whose experience reflect them.

the3sattlers, 4/8/2016 1:05 PM EDT

" The economy overall is doing just fine." Does this include QE? If the Fed is pouring billions of new money into the economy, how accurate is it to say that the economy is doing just fine?

james_harrigan, 4/8/2016 10:14 AM EDT

What a useless article. The author explains precisely nothing about what the official statistics do and do not measure, what they miss and what they capture.

Derbigdog, 4/8/2016 11:40 AM EDT

I had the same impression as well. Notice he does not mention that the Gallop number is over 10% and is based on their polling data.

captdon1, 4/8/2016 5:51 AM EDT

Not reported by WP
The first two years of Obama's presidency Democrats controlled the house and Senate. The second two years, Republicans controlled the Senate. The last two years of Obama's term, the Republicans controlled house and Senate. During this six years the national debt increase $10 TRILLION and the Government collected $9 TRILLION in taxes and borrowed $10 TRILLION. ($19 Trillion In Six Years!!!) (Where did our lovely politicians spend this enormous amount of money??? (Republicans and Democrats!)

reussere, 4/8/2016 1:43 AM EDT

Reading the comments below it strikes me again and again how far out of whack most people are with reality. It's absolutely true that using a single number for the employment rate reflects the overall average of the economy certainly doesn't measure how every person is doing, anymore than an average global temperature doesn't measure any local temperatures.

One thing not emphasized in the article is that there is a number of different statistics. The 5% figure refers to the U-3 statistic. Nearly all of the rest of the employment statistics are higher, some considerably so because they include different groups of people. But when you compare U-3 from different years, you are comparing apples and apples. The rest of the numbers very closely track with U-3. That is when U-3 goes up and down, U-6 go up and down pretty much in lockstep.

It is unfortunate that subpopulations of Americans are doing far worse (and some doing far better) than average. But that is the nature of averages after all. It is simply impossible for a single number (or even a group of a dozen different employment measurements) to accurately reflect a complex reality.

Smoothcountryside, 4/8/2016 12:04 PM EDT

The alternative measures of labor underutilization are defined as U-1 through U-6 with U-6 being the broadest measure and probably the closes to the "true" level of unemployment. Otherwise, all the rest of your commentary is correct.

southernbaked, 4/7/2016 11:02 PM EDT

Because this highly educated writer is totally bias, he left out some key parts, I personally lived though. He referred back to the late 70's twice. But never mentioned that Reagan changed how Unemployment was figured in the early 80's. He included all people in the military service, as employed. Before that, they was counted neither way. He also intentionally left out that when Obama, had the unemployed numbers dropped one month before the election, from 8.1% to 7.8% --because it was believed that no one could be reelected if it was above 8%.

Then after he was sworn in--- in January, they had to readjust the numbers back up. They blamed it on one employees mistakes-- PS. no one was fired or disciplined for fudging. Bottom line is, for every 1.8 manufacturing job, there are 2 government jobs, that is disaster. Because this writer is to young to have lived in America when it was great. When for every 1 government job, you had 3 manufacturing jobs.

I will enlighten him. I joined the workforce -- With no higher education -- when you merely walked down the road, and picked out a job. Because jobs hang on trees like apples. By 35 I COMPLETELY owned my first 3 bedroom brick house, and the 2 newer cars parked in the driveway. Anyone care to try that now ??

As for all this talk about education-- I have a bit of knowledge about that subject-- because I paid in full to send all under my roof through it. Without one dime of aide from anyone. The above writer is proof-- you can be heavily educated, and DEAD WRONG. There is nothing good about this economy. Signed, UN-affiliated to either corrupted party

Bluhorizons, 4/7/2016 9:43 PM EDT

"we're not at 5 percent unemployment. We're at a number that's probably into the 20s if you look at the real number." Trump is correct. The unemployment data is contrived from data about people receiving unemployment compensation but the people who's unemployment has ended and people who have just given up is invisible.

"It may be true that there is a national unemployment rate measured at 5 percent. But it is also true that for white men without a college degree, or white men who had worked factory jobs until the mid-2000s with no more than a high school education, the unemployment reality is much worse "

The author goes on and on about the legitimate distrust of government unemployment data and then tells us Trump is wrong. But the article convinces us Trump is right! So, this article its not really about the legitimate distrust of government data is is about the author's not liking Trump. Typical New Left bs

Aushax, 4/7/2016 8:24 PM EDT

Last jobs report before the 2012 election the number unusually dropped then was readjusted up after the election. Coincidentally?

George Mason, 4/7/2016 8:15 PM EDT

U6 is 9.8% for March 2016. We still have 94 million unemployed and you want to say its 5 % what journalistic malpractice.

F mackey, 4/7/2016 7:57 PM EDT

hey reporter,Todays WSJ, More than 40% of the student borrowers aren't making payments? WHY? easy,they owe big $ money$ & cant get a job or a well paying job to pay back the loans,hey reporter,i'd send you $10 bucks to buy a clue,but you'd probably get lost going to the store,what a %@%@%@,another reporter,who doesn't have a clue on whats going on,jmo

SimpleCountryActuary, 4/7/2016 7:57 PM EDT

This reporter is a Hillary tool. Even the Los Angeles Times on March 6th had to admit:

"Trump is partly right in saying that trade has cost the U.S. economy jobs and held down wages. He may also be correct - to a degree - in saying that low-skilled immigrants have depressed salaries for certain jobs or industries..."

If this is the quality of reporting the WaPo is going to provide, namely even worse than the Los Angeles Times, then Bezos had better fire the editorial staff and buy a new one.

Clyde4, 4/7/2016 7:34 PM EDT [Edited]

This article dismissing Trump is exactly what is wrong with journalism today - all about creating a false reality for people instead of investigating and reporting

Trump has emphasized that he is looking at the percent of the population that is participating in the workforce - and that this participation rate is currently at historical lows -- and Trump has been clear that his approach to paying down the national debt is based on getting the participation rates back to historical levels

The author completely ignored the big elephant in the room -- that is irresponsible journalism

The author may want to look into how the unemployment rate shot up in 2008 when the government extended benefits and then the unemployment rate plummeted again when unemployment benefits were decrease (around 2011, I believe) - if I were the author I would do a little research into whether the unemployment rate correlates with how much is paid out in benefits or with unemployment determined through some other approach (like surveys

dangerbird1225, 4/7/2016 7:25 PM EDT

Bunch of crap. If you stop counting those that stop looking for a job, your numbers are wrong. Period. Why didn't this apologist for statistics mention that?

watchkeptoverthewatcher, 4/7/2016 6:27 PM EDT

Ya with a labor participation rate of 63%

http://data.bls.gov/timeseries/LNS11300000

AtlasRocked, 4/7/2016 5:12 PM EDT

"The government can't lie about a hundred billion dollars of Social Security money stolen for the Clinton 'balanced budget', that would be a crime against the citizens, they would revolt. John, come one now. "

I didn't say it first, Senator Ernest Hollings did, on the Senate floor.

"Both Democrats and Republicans are all running this year and next and saying surplus, surplus. Look what we have done. It is false. The actual figures show that from the beginning of the fiscal year until now we had to borrow $127,800,000,000." - Senate speech, Democratic Senator Ernest Hollings, October 28, 1999

http://www.c-span.org/video/?c3319676 at 5:30

And here is how they did it: http://www.craigsteiner.us/articles/16

rgengel, 4/7/2016 5:03 PM EDT

Go to New Orleans Chicago Atlanta Los Angeles Detroit stop anybody on the street and ask if unemployment is 5% and that there is a 95% chance a guy can get a job.

Then you will have a statistic reference point. Its not a Democratic or republican issue because both of them have manipulated the system for so long its meaningless. Go Trump 2016 and get this crap sorted out with common sense plain English

AtlasRocked, 4/7/2016 4:37 PM EDT

There is plenty of evidence the figures are cooked, folks, enough to fill a book: Atlas Shouts. Don't believe trash like this article claims. GDP, unemployment and inflation are all manipulated numbers, as Campbell's Law predicts.

I can't believe the Washington Post prints propaganda like this.

TimberDave, 4/7/2016 2:23 PM EDT

I do remember when the officially-announced unemployment rate stopped including those who were no longer looking for work. That *was* a significant shift, and there's no doubt it made politicians (Reagan, I think it was) look better; of course, no President since then has reversed it, as it would instantly make themselves look worse.

astroboy_2000, 4/7/2016 1:28 PM EDT

This would be a much more intelligent article if the writer actually said what the government considers as 'employed'.

Working one hour a week, at minimum wage, is 'employed', according to the government. No wonder unemployment is at 5%.

Add in people who are working, but want and need full time jobs, add in people who have dropped out of the labor market and/or retired earlier than they wanted to, and unemployment is at least 10%. Ten seconds on Google will show you that.

The writer should be sacked for taking a very serious issue and turning it into a piece of non-informative fluff. Bad mouthing Trump and Sanders is the same as endorsing Hilly.

Manchester0913, 4/7/2016 2:12 PM EDT

The number you're referencing is captured under U6. However, U3 is the traditional measure.

Son House, 4/7/2016 2:24 PM EDT

The government doesn't claim that working one hour a week is employed. Google U 3 unemployment. Then google U 6 unemployment. You can be enlightened.

Liz in AL, 4/7/2016 7:21 PM EDT

I've found this compilation of all 6 of the "U-rates" very useful. It encompasses the most restrictive (and thus smallest) U-1 rate, though the most expansive U-6. It provides brief descriptions of what gets counted for each rate, and (at least for more recent years) provides the ability to compare at the monthly level of detail. U6 Unemployment Rate Portal Seven

[Sep 12, 2016] The Strong Case Against Central Bank Independence Critically Examined

Notable quotes:
"... The deficit obsession that governments have shown since 2010 has helped produce a recovery that has been far too slow, even in the US. ..."
"... The Zero Lower Bound (ZLB) raises an acute problem for what I call the consensus assignment (leaving macroeconomic stabilisation to an independent, inflation targeting central bank), but add in austerity and you get major macroeconomic costs. ICBs appear to rule out the one policy (money financed fiscal expansion) that could combat both the ZLB and deficit obsession. ..."
Mar 8, 2016 | economistsview.typepad.com
Simon Wren-Lewis has a follow-up to his recent post on central bank independence:
The 'strong case' critically examined : Perhaps it was too unconventional setting out an argument (against independent central banks, ICBs) that I did not agree with, even though I made it abundantly clear that was what I was doing. It was too much for one blogger, who reacted by deciding that I did agree with the argument, and sent a series of tweets that are best forgotten. But my reason for doing it was also clear enough from the final paragraph. The problem it addresses is real enough, and the problem appears to be linked to the creation of ICBs.

The deficit obsession that governments have shown since 2010 has helped produce a recovery that has been far too slow, even in the US. It would be nice if we could treat that obsession as some kind of aberration, never to be repeated, but unfortunately that looks way too optimistic.

The Zero Lower Bound (ZLB) raises an acute problem for what I call the consensus assignment (leaving macroeconomic stabilisation to an independent, inflation targeting central bank), but add in austerity and you get major macroeconomic costs. ICBs appear to rule out the one policy (money financed fiscal expansion) that could combat both the ZLB and deficit obsession.

I wanted to put that point as strongly as I could. Miles Kimball does something similar here , although without the fiscal policy perspective ...

Skipping ahead (and omitting quite a bit of the argument):

... The basic flaw with my strong argument against ICBs is that the ultimate problem (in terms of not ending recessions quickly) lies with governments. There would be no problem if governments could only wait until the recession was over (and interest rates were safely above the ZLB) before tackling their deficit, but the recession was not over in 2010. Given this failure by governments, it seems odd to then suggest that the solution to this problem is to give governments back some of the power they have lost. Or to put the same point another way, imagine the Republican Congress in charge of US monetary policy.

But if abolishing ICBs is not the answer to the very real problem I set out, does that mean we have to be satisfied with the workarounds? One possibility that a few economists like Miles Kimball have argued for is to effectively abolish paper money as we know it, so central banks can set negative interest rates. Another possibility is that the government (in its saner moments) gives ICBs the power to undertake helicopter money.

Both are complete solutions to the ZLB problem rather than workarounds. Both can be accused of endangering the value of money. But note also that both proposals gain strength from the existence of ICBs: governments are highly unlikely to ever have the courage to set negative rates, and ICBs stop the flight times of helicopters being linked to elections.

These are big (important and complex) issues. There should be no taboos that mean certain issues cannot be raised in polite company. I still think blog posts are the best medium we have to discuss these issues, hopefully free from distractions like partisan politics.

Posted by Mark Thoma on Tuesday, March 8, 2016 at 12:24 AM in Economics , Fiscal Policy , Monetary Policy , Politics | Permalink Comments (28)

[Sep 12, 2016] Future Economists Will Probably Call This Decade the 'Longest Depression'

Sep 12, 2016 | economistsview.typepad.com
Brad DeLong:
Future Economists Will Probably Call This Decade the 'Longest Depression' : ... Back before 2008, I used to teach my students that during a disturbance in the business cycle, we'd be 40 percent of the way back to normal in a year. The long-run trend of economic growth, I would say, was barely affected by short-run business cycle disturbances. There would always be short-run bubbles and panics and inflations and recessions. They would press production and employment away from its long-run trend -- perhaps by as much as 5 percent. But they would be transitory.
After the shock hit, the economy would rapidly head back to normal. The equilibrium-restoring logic and magic of supply and demand would push the economy to close two-fifths of the gap to normal each year. After four years, only a seventh of the peak disturbance would remain.
In the aftermath of 2008, Stiglitz was indeed one of those warning that I and economists like me were wrong. Without extraordinary, sustained and aggressive policies to rebalance the economy, he said, we would never get back to what before 2008 we had thought was normal.
I was wrong. He was right. ...

[Sep 12, 2016] 'It Pays to Work: Work Incentives and the Safety Net'

Sep 12, 2016 | economistsview.typepad.com
Via Brad DeLong:
It Pays to Work: Work Incentives and the Safety Net: Isaac Shapiro, Robert Greenstein, Danilo Trisi, and Bryann DaSilva, CBPP : Some critics of various low-income assistance programs argue that the safety net discourages work. In particular, they contend that people receiving assistance from these programs can receive more, or nearly as much, from not working - and receiving government aid - than from working. Or they argue that low-paid workers have little incentive to work more hours or seek higher wages because losses in government aid will cancel out the earnings gains.
Careful analysis of the data and research demonstrates, however, that such charges are largely incorrect and that it pays to work. In the overwhelming majority of cases, in fact, adults in poverty are significantly better off if they get a job, work more hours, or receive a wage hike.

Various changes in the safety net over the past two decades have transformed it into more of what analysts call a "work-based safety net" and substantially increased incentives to work for people in poverty. ...

[Sep 12, 2016] Volcker overcorrected and defanged labor to the delight of the wealthy elites.

September 02, 2015 economistsview.typepad.com

bakho said...

The late 70s 80s inflation was due to 2 components.
1. Wage inflation fueled by COLA.
2. Price inflation fueled by the oil shock and the response of fuel switching and conservation, both of which were expensive and subtracted from productivity. (Same amount of product made, more work if you count work dedicated to remediation).

Volcker overcorrected and defanged labor to the delight of the wealthy elites.

That inflation did not return even when unemployment declined to low levels validates that other factors were driving inflation (oil) and that was corrected by Carter energy policy.

The wealthy elites give zero credit to regulatory and fiscal policy under Carter for fixing the problem. Reagan fiscal policy made inflation worse, but by then, Carter energy policy had taken full effect.

During the Great Moderation, we do see inflation start to appear during oil shocks (such as Gulf War 1).

We have rewritten history discounting policies that worked, thus preventing us from learning the truth about the value of fiscal and regulatory policy and limitations of monetary policy.

Monetary policy only worked by creating a bad recession with high unemployment.

Fiscal and regulatory policy tackled the energy issues without causing the social harm from high unemployment.

[Sep 09, 2016] Brexit and Americas Growing Nationalism Movement

Looks like now line in 1920th the global pendulum moves toward nationalism. So in a way neoliberalism breeds nationalism and transnational elite paves the way for dictators like Mussolini, Hitler and Stalin in the past. Transnational elites start to recognize the danger, but they can do nothing about it as Trump has shown so vividly in the USA.
High unemployment logically lead to nationalism and all those neoliberal politicians understood that they are destroying the county but continue to plunder it anyway. Biden already cried uncle about the danger of far right nationalism on CNN. But reality in the USA is not then different from the reality in Britain.
Notable quotes:
"... No wonder Donald Trump's campaign has ignited a growing nationalism movement. We're creating jobs and giving them away. We've let globalization get away from us. It's abundantly clear that we don't have the right public policies in place to incentivize corporations to keep Americans gainfully employed. ..."
"... Grove's bold piece was embraced by some, panned by others and largely ignored. Whether he or Trump have exactly the right solution to the globalization and immigration problems plaguing free-market economies throughout the western world doesn't matter. What matters is that they've identified a problem that needs to be solved before it's too late. So did the British people when they voted to exit the EU. ..."
"... Economic prosperity and security must trump political correctness and ideology. The Brits got it right. Will we? ..."
Jul 04, 2016 | Fox Business
Just five weeks ago, polling indicated that Brits overwhelmingly favored remaining in the European Union by an 18-point margin, 57% to 39%. What changed? Maybe it was a startling report showing that 80% of new jobs over the past year had gone to foreign-born workers taking advantage of the EU's free movement policy.

It's hard to say if that was the wakeup call that led to a sharp reversal and Thursday's historic vote to leave the EU, but it was nevertheless a stunning realization that Prime Minister David Cameron had failed to stem the tide of immigrant workers flooding the UK's job market, as he had promised to do.

Meanwhile, a laundry list of commentators from the Washington Post and Esquire to Vox and the New York Times chalked it all up to millions of racist xenophobes who are terrified of immigrants mucking up their pristine white privileged world. If that sounds at all similar to the anti-Trump rhetoric, you can sort of see where this is going.

The thing is, there's nothing even remotely irrational or bigoted about the alarming transformation of Britain's job market. Since 1997, the number of foreign-born workers has doubled to one in six. And since 2014, three EU migrants have found jobs for every Brit, according to official government figures. And, as we'll see in a minute, there are concerning parallels on this side of the pond, as well.

I hear from college grads and experienced professionals looking for jobs all the time, but a recent inquiry from a 27-year-old Edinburgh, Scotland woman with a BS in microbiology and excellent grades got my attention. She has applied for more than 400 jobs without managing to secure an interview. Not a single one.

... ... ...

While the situation in America isn't nearly as bad, there are clear parallels. In 1970, foreign-born workers accounted for just 5% of the U.S. civilian labor force, but that number has since more than tripled to one in six – identical to the UK figure.

More concerning is that the workforce itself has continued to shrink over the same period. Whether that reflects increasing competition, lack of in-demand skillsets or both doesn't really matter. The net result is that foreigners are getting more of our jobs, and that's as true of offshore jobs as it is of onshore jobs.

Think about it. Apple has created well over a million jobs, but 90% of them are outsourced to China. Google may not make phones and tablets, but the vast majority of Android-enabled mobile devices are manufactured in Asia. Of course, that's true of nearly every industry, old or new.

We may not face the identical migrant worker problem that the UK has, but the net result is the same: By giving up more and more jobs we create to foreign-born immigrants and offshore contractors, that leaves fewer and fewer jobs and increasing competition for American citizens.

No wonder Donald Trump's campaign has ignited a growing nationalism movement. We're creating jobs and giving them away. We've let globalization get away from us. It's abundantly clear that we don't have the right public policies in place to incentivize corporations to keep Americans gainfully employed.

Back in 2010, former Intel chairman Andy Grove penned How America Can Create Jobs. The front-page Bloomberg BusinessWeek feature clearly outlined the perils of losing our manufacturing muscle and declared the need for public policy that puts jobs first, even if it does means constraining free trade with tariffs, trade war be damned.

Grove's bold piece was embraced by some, panned by others and largely ignored. Whether he or Trump have exactly the right solution to the globalization and immigration problems plaguing free-market economies throughout the western world doesn't matter. What matters is that they've identified a problem that needs to be solved before it's too late. So did the British people when they voted to exit the EU.

Economic prosperity and security must trump political correctness and ideology. The Brits got it right. Will we?

[Aug 24, 2016] Good jobs disaappered and middle class had shruk dramatically in the USA

Notable quotes:
"... That said, what I believe is needed in the USA is a doubling down on Corporate Boards of Directors and CEOs to create a crisis, an American intervention, if you will, that demands companies bring back the idea that Profits alone are not all that matters. Serving the Nation you are born in, raised in, educated in, and then making a profitable income from certainly needs to be focused in on. ..."
"... An additional factor in the financial woes of the falling middle class is the changing demographics here in the US - the growing numbers of single mothers, who are far more likely to struggle financially than a two income household. I make no judgment regarding how people form their family units, but life is especially hard for single mothers. ..."
"... Its even more difficult for journalists in Guardian. They have to destroy chances of only candidate addressing inequality and climate change (Bernie), completely surrender their integrity to corporations, lament over those issues post factum, and yet be paid miserably only in hundreds of thousands for such colossal betrayal of humanity. Its worth at billions to actively participate in destroying future of your kids. Or is it? ..."
"... We need a new Federal Minimum Wage, and the wealthiest need to start paying up. Trump claims that business in the US pay the highest tax rate. That's just not true. I'm not talking about putting the burden on small business, but the multi-nationals and Wall Street. ..."
"... And we can blame Billary and Hussein for it. Their "free-trade" decisions, along with their shameful endorsement of open-borders, have lowered wages for everyone, except for financiers. Interestingly, it was those who've suffered the brunt of the elites' decisions who voted for Britain to leave the EU. Ironically, those who professed to stand for the middle and lower classes, revealed their hypocrisy when they joined the Mandarins in opposing for Britain to leave the totalitarian EU. ..."
"... Like the Trojans fearing present-giving presents, so should the working man loath the elites who promised to have their best interests at heart. That is the same promise communism gave the workers, only to turn on and enslave them. Today the workers don't stand a chance: the Marxists and bankers are on the same side sneering at the working classes who are demeaned as being racist, jingoistic xenophobes. ..."
"... An article in Forbes that explains why Obamacare is a scam. ObamaCare Enriches Only The Health Insurance Giants and Their Shareholders ..."
"... I agree with you that he never did. Obama is a corporatist and globalist. If you think Obamacare is bad wait until his trade deals are past. He sold Americans out for the profits of multinational corporations. Hillary will continue his work. I understand the true meaning of his words now. ..."
"... The US middle class has been disintegrating for decades as inequity grows ..."
"... Clinton is in hiding. I can't find her in the Guardian today. She is a habitual liar and the whole world has all the evidence it needs. All of her promises are bullshit. Bernie has been right the whole time and he is smart not to endorse. Bernie has always known what she is and Bernie's supporters have no reason to support her. ..."
"... It means she is corrupt, dishonest, and unqualified to be anything but an inmate. ..."
"... the middle class has been decimated.. This financial category is only about 35% of was it was in the early 70's.. additionally the definition of middle class has changed drastically as well.. believe it or not your middle class if your earn more than 50k a year!.. this is part of the reason we are as a nation borrowing a trillion dollars a year.. when will the silenced majority wake up and start voting and stop spending on products that are vastly over priced. ..."
"... My kid had a persistent tummy ache. Doc said intestinal blockage; take him to the ER immediately. Seven hours and one inconclusive CAT scan later, he's home again with symptoms unchanged. Two days later the pain went away. Cost: $12,000 with about $10,000 covered by union health insurance. So that's at least $2,000 out of pocket to me for seven hours in hospital, zero diagnosis and zero relief from symptoms. Medicine as a criminal enterprise? So what? Who's gonna stop it? The press? The law? ..."
"... I sympathize. I also agree with you. The US medical system is criminal. It is cruel, discriminatory, ruthless, often ineffective, and often incompetent. The only reason the administrators ("health" maintenance corporations) aren't in jail is because they use some of their obscene profits to buy Congress -- which passes laws like Obama's ACA or Bush's big Pharma swindle. I have no idea what to do about it though -- maybe if everyone refused to pay their premiums and medical bills, the money managers would notice. A sort of strike. ..."
"... SIngle-payer is the answer. Of course, the insurance companies and big pharma use scare tactics to stop that from happening. They talk about government waste, completely ignoring their own waste. They ignore the billions of dollars that they skim off of the top each year before applying any money for actual medical care. Wake up, people. Medical care should be run by the government or non-profit organizations, not by for-profit corporations. ..."
"... Despite the financial situation in middle-and lower income families that has been steadily declining under the past 8 years of the Obama administration, most in that group will support Hillary and propagate the Same problems for 4 more years. They stand no hope unless they break from the knee-jerk support of the "Democratic" Party. ..."
"... So they should support Donald Trump and the conservative party? Last time I checked raising taxes on the middle class while lowering taxes on the rich didn't really help anyone but the rich. The Republican party never gave two shits about middle and lower class, and there's no point believing they will start now. ..."
"... Isn't choosing to have three children very selfish if you cannot support them financially. People always find someone else to blame. ..."
"... "Race" card!!?? Where the hell did I mention anything about race or are you really as dumb as your reply suggests. Plus, you don't require a test to decide if you can afford children or not. It basic family planning. It's people like you in society that has the place in a mess with your "blame anyone but meself attitude" If I'm considered horrible, at least I'm not totally dumb and irrisponsible like you. ..."
"... Bill Maher recently (July 1, 2016; Overtime) editorialized about the state "laboratories" where new ideas are tested and evaluated. Maher compared the divergent fates of California and Kansas plus Louisiana. ..."
"... It's interesting. According to my household income I'm in the "upper" tier for the DC-metro region. But it really doesn't feel that way. Even those of us who make a good income are more and more stretched. In comparison to most of the country, I am well off. I own a car, just bought a house, I can afford to go out to eat a couple times a week. But, I even get to the end of the month with only $100 in the bank. That's because other downward pressures on pay aren't taken into account, such as student debt. My expensive undergraduate and graduate education didn't come cheap, and while that education affords people higher pay, if you end up taking less of it home. It kinda equals out. ..."
"... Sometimes my husband and I think about having kids, and then we realise that even with our good paying jobs, we can't afford day care in our area. I get paid the most, so I can't quit my job but if my husband quit to care for a child, we would really be strapped. Can I really be considered an upper tier household if I can't afford to have kids? If I can't afford to go on vacation once a year? If I haven't bought new clothes in two years? If I have no savings and a freak medical bill might just tip me over the edge? ..."
"... Suggest you give Andrew Tobias' book a read to think outside the box a good education often constructs for us: https://www.amazon.com/Only-Investment-Guide-Youll-Ever/dp/0544781937?ie=UTF8&ref_=asap_bc ..."
"... You can cut student debt in the U.S. by attending a good community college for two years and then transferring to a state university. Most kids are unwilling to do this--no frats or prestige in community colleges! ..."
"... Beginning in the 1970s, a majority of the middle class began to resent the taxation needed to continue support for these liberal policies, and they began to vote for conservative politicians who promised to remove them as they "only helped the undeserving poor." White racism played a role in this as the lower class was invariably portrayed in political speeches and advertising as group of lazy black people. ..."
"... No, it was created in response to the Bolshevik revolution, in particular, to that genius who said "Let's just shoot the royal family and be done with this." ..."
"... All of these things have come under attack since the USSR fell apart, probably on that exact day. And who overthrew the USSR? Overeducated middle class, not the poor or the rich. Who was Occupy Wall Street, Arab Spring... the recent protests against the French labor law tightenings, ALL the middle class. ..."
"... The greatest threat to governments has, and always will be, from within. And this threat is from the middle class, almost exclusively. Therefore, we are to be crushed and controlled tightly ..."
"... funny how this media outlet didn't publish these types of reports while the primary was hot. It was all "Hilary is inevitable and supporting Bernie is supporting Trump" type garbage. ..."
"... Probably he means to say Americans habitually ask new acquaintances, "What do you do for a living?" That's absolutely a query about income and personal worth, though slightly disguised, and it's a question I have never widely encountered anywhere else in the world, nor while living overseas the last ten years. ..."
"... This article is extremely dishonest. First, it claims that she has 'three other jobs'. Second, she has children, for whom she presumably gets child support. So what's her *real* income? ..."
"... When those in poverty or on the verge of it are single mothers, you tend to wonder if there are some other issues as well. I don't recall a time in American history where a single mother of several children could take care of herself when completely on her own. ..."
"... I teach in inner city schools. There are so many problems, money is one of them but all the money won't solve the problem of poor learning attitudes, disaffection, poor discipline and nonexistent work ethic . ..."
"... A lot of the students get no discipline at home and their parents don't expect them to learn anything. They are resistant to the whole process of focus on new knowledge , absorb, drill, recall , deploy newly learned thing. ..."
"... I don't know what solution there is to this. My nieces and nephews did well in school, studied hard, and went on to university. They didn't do drugs, rape or be raped, and stayed away from unsavory kids. BUT--they went home to two parents every night, a father and mother, which I think would have made them successful at school no matter what their income. ..."
"... The US economy isn't competitive anymore. It started with the labor cost being too high, so factories moved out. Then the entire supply chain moved out. Now the main consumer market is also moving out. Once that is gone, we will have no more leverage. ..."
"... The US education is good, but students are lazy, undisciplined, and incurious. In silicon valley, more than 75% of highly paid technical personnel are foreign born. Corporations making money with foreign workers here and abroad, on foreign markets. Taking these away and you will see the economy crash. ..."
"... Labor costs were too high. Have some more kool-aid. The elite didn't want labor to have any bargaining power whatsoever . They wanted to dictate the terms to labor believing that they were the only ones who should have any say in matters. The elite wanted to maximize their profits at the expense of their own citizens. They wanted slave labor . They wanted powerless people to dance to their tune. How could an advanced nation's labor possibly compete with slave labor . ..."
"... Sadly ..... thee isn't any hope for these people in the foreseeable future . Their economic decline has been happening for quite some time now and shows no sign of abating whatsoever . The economic foundations of their lives have been steadily pulled out from under them by the financial elite and their subservient political cultures , the Republican and Democratic Parties . The Republicans have never really given a damn about them and the Democrats have long abandoned them . These poor people of North Carolina are adrift on a sinking raft on easy ocean of indifference by the political cultures of America . To those in power , they don't exist . They don't count . They don't matter . ..."
"... The trend in the U.S, along with almost every other major nation in the world over the past 35 years has been to exclusively serve the interests of the financial elite and only their needs . All sense of fairness , justice and decency have been totally discarded . ..."
"... Tax breaks after tax breaks , tax shelters , free movement of capital , etc., etc. would sum up the experience of the financial elite over the past 35 years . They have become incredibly wealthy now and are still not satisfied . They want more . They want it all . They want what little you have and their political servants which help them get . ..."
"... Political discourse pertaining to the plight of those like these folks in North Carolina is all window dressing . In the end , you can be certain that it will amount to nothing . Just like it has for decades now . The financial elite are in control and they are not going to give any of that control up . As a matter of fact , they are going to tighten their grip . They will invent crisis to have their agendas imposed upon an increasingly powerless and bewildered public . They will take advantage of every naturally occurring crisis to advance their agenda . ..."
"... The problem is the job exporting American elite class. NAFTA was an economics, political, and social experiment with all the downside on the former, mostly lower middle class. Non-aligned examination of the available data shows how disastrous NAFTA has been to America's bubbas. Thanks to Bush 41 and Bill Clinton. WTO was all Bill. Of the mistakes Obama has made TPP would be the worst. The question is, really, do we favor global fairness (an even playing field for all earth's peoples) and a climate-killing consumerist world, or our own disadvantaged (courtesy of our financial and political elite) citizens. Not an easy choice. Death by poison or hanging. No treaty can benegotiated fairly in secret. ..."
"... The tragic irony is that the anger against rule by the 1% manifests in things like support for Trump, a typical example of the greed and excess of the 1%. Americans need to question outside their desperately constrained paradigms more. It will help focus their anger more strategically, and possibly lead to solutions. Don't hold your breath, the inequality gap is accelerating the wrong way. ..."
"... I think the US is heDing for trouble. It is the middle class that maintains civil society and gives a sense of hope. This is an interesting open letter by a zillionaire to his peers warning them what happens without a string middle class. A thought provoking read. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014 ..."
"... The elite of the USA have done exactly what the Romans did and what the Pre-Revolutionary French did.... drain the lower classes while enriching themselves. "Taxes are for little people" is not just a pithy quote, it has become the reality as the elite rig the system so they benefit and the lower classes pay. They need to wake up or they will get exactly what the Romans Got (collapsed empire) or the French got (Violent Revolution). Wake up America! It is time to choose your side in the class war the elite continue to execute while telling us there is no "Class War" - you can't pull yourself up by your boot straps while they are pulling the rug out from under you! ..."
"... My wife used to employ recent graduates from Georgetown University with poli. sci., psychology, sociology degrees, to stack books for $10/hr. It took them on average 2-3 years, before finding work in their field. ..."
"... Education is NOT about finding a job! It's about learning ways to seek wisdom and rationality, and to assimilate (not deny) new knowledge throughout your life--and that's exactly what's lacking in the US! Our schools are factories to turn out standard robots to be used by the owners of this country, whether they practice law or flip burgers. ..."
Aug 24, 2016 | www.theguardian.com
HopeWFaith, 9 Jul 2016 16:04

I was stumped by the very idea that someone has the $money, the time, the energy to go out and study for 3 bachelor degrees. This woman doesn't look old enough to have had time to get 3 degrees.

That said, what I believe is needed in the USA is a doubling down on Corporate Boards of Directors and CEOs to create a crisis, an American intervention, if you will, that demands companies bring back the idea that Profits alone are not all that matters. Serving the Nation you are born in, raised in, educated in, and then making a profitable income from certainly needs to be focused in on.

Why on earth isn't Main Stream Media doing this, along with all of CONGRESS and the President? What is their excuse? Even if you brought back all the robotic jobs to US soil, you would also end up bringing a large number of administrative jobs back here, too, just to keep up with the business at hand. It is critical that we rebuild our infrastructure, yet we see NO immediate or Long-term plans to do so. How can we, without the support of the Business Class to support the whole nation through Paying their Taxes to the US Tax System? There is no excuse that will do, in my book. Profits to the top tier need to be STOPPED so long as businesses are going outside of the United States Borders. Period.

SluethforTruth , 2016-07-07 12:39:08

Typical of what's happening around the world. The trillions of dollars lurking in tax havens is the reason why economies are stagnating. Money makes the world go round, however detouring to the Cayman Islands, the flow stops and the poverty begins. Spend locally and reject multi national corporations. Give your local communities a chance to prosper,
Snaggletooth718 , 2016-07-07 12:40:07
An additional factor in the financial woes of the falling middle class is the changing demographics here in the US - the growing numbers of single mothers, who are far more likely to struggle financially than a two income household. I make no judgment regarding how people form their family units, but life is especially hard for single mothers.
saladbowl , 2016-07-07 12:46:52
"The 2016 presidential race has superficially been dominated by talk of this declining middle. First from Bernie Sanders, then Hillary Clinton and even Donald Trump's promise to Make America Great Again"

"And even"??? What a laugh. Even if you hate Trump its clear The Guardian has written every article possible to prevent his rise and they have failed miserably. Hillary amd Sanders are dominating conversatiin. Trump is by far.

One thing us for sure. 15 million illegals and thousands more every month is not making the middle class more secure.

They are shrinking, and you expect them to tolerate "Make America Mexico Again"? In these times?

Donor money is ruining the country. They hate Trump because he doesnt need these arrogant donors who have never heard "no" their whole lives.

peonyrose , 2016-07-07 12:47:08
If ordinary people have to work three jobs to make ends meet, then you need to say that wages in the US are too low.
Slavenko Sucur -> peonyrose , 2016-07-07 14:29:52
Its even more difficult for journalists in Guardian. They have to destroy chances of only candidate addressing inequality and climate change (Bernie), completely surrender their integrity to corporations, lament over those issues post factum, and yet be paid miserably only in hundreds of thousands for such colossal betrayal of humanity. Its worth at billions to actively participate in destroying future of your kids. Or is it?
SusanPrice58 , 2016-07-07 12:53:59
It isn't immigration that costing jobs - it's employers who know they can pay these people less for their work. We need a new Federal Minimum Wage, and the wealthiest need to start paying up. Trump claims that business in the US pay the highest tax rate. That's just not true. I'm not talking about putting the burden on small business, but the multi-nationals and Wall Street.
RaceOfStalwarts -> SusanPrice58 , 2016-07-07 14:06:02
You can see in western Europe at the moment that a minimum wage desn't work without a whole host of other protective legislation. A minimum wage doesn't reach to the self employed, and it doesn't prevent the use of flexible or non-guaranteed hours contracts making use of a larger than is required labour pool. Not to mention the black market / cash in hand trade.
BritainFirst2016 , 2016-07-07 12:55:21
And we can blame Billary and Hussein for it. Their "free-trade" decisions, along with their shameful endorsement of open-borders, have lowered wages for everyone, except for financiers. Interestingly, it was those who've suffered the brunt of the elites' decisions who voted for Britain to leave the EU. Ironically, those who professed to stand for the middle and lower classes, revealed their hypocrisy when they joined the Mandarins in opposing for Britain to leave the totalitarian EU.

Like the Trojans fearing present-giving presents, so should the working man loath the elites who promised to have their best interests at heart. That is the same promise communism gave the workers, only to turn on and enslave them. Today the workers don't stand a chance: the Marxists and bankers are on the same side sneering at the working classes who are demeaned as being racist, jingoistic xenophobes.

pawildcat -> BritainFirst2016 , 2016-07-07 13:51:28
You realize most of the votes in favor of NAFTA were Republican and most against were Democratic, right? You know that "free trade" has been an item in the Republican platform (and increasingly the Democratic one) for years before Clinton and Obama were ever in office, right? Know some elementary facts about U.S, politics before posting nonsense.
daWOID -> Ed Thurmann , 2016-07-07 13:47:41
Ed Thurmann: it's not teacher-bashing, it's just the old recycled "black family values" spiel that was introduced into the poverty debate in the '60s by Daniel Patrick Moynihan. Moynihan, not so BTW, is Hillary Clinton's intellectual hero. So you can expect a hell of a lot more of these cliches after January of next year.
Juillette , 2016-07-07 13:26:03
An article in Forbes that explains why Obamacare is a scam. ObamaCare Enriches Only The Health Insurance Giants and Their Shareholders

Robert Lenzner , CONTRIBUTOR
I'm trying to wise up 300 million people about money & finance

So far in 2013 the value of the S& P health insurance index has gained 43%. Thats more than double the gains made in the broad stock market index, the S & P 500. The shares of CIGNA are up 63%, Wellpoint 47% and United Healthcare 28%. And if you go back to the early 2010 passage of ObamaCare, you will find that Obama's sellout of the public interest has allowed the public companies the ability to raise their premiums, especially on small business, dramatically multiply their profits and send the value of their common stocks up by 200%-300%. This is bloody scandalous and should be a cause for concern even as the Republican opponents of the bill threaten the close-down of the government.

We warned you back on December4, 2009 in my blog " The Horrendous Truth About Health Care Reform" that the Obama White House was handing a " free ride for the health insurance industry" that would allow premium hikes of 8%-10% a year by CIGNA, Humana HUM +1.56%, Aetna AET +0.45%, UnitedHealth Group UNH +0.58% and Wellpoint, and as well a $500 billion taxpayer subsidy, a half trillion dollars without any requirement that the health insurers had to spend the subsidy on medical care. Several US Senators including Jay Rockefeller of West Virginia spoke to me openly of the outrageous sellout being foisted on the nation's uninsured citizens.

At the time I wrote, Goldman Sachs research operation estimated that the 5 giants would increase profits by 10% a year from 2010 to 2019, sending their shares up an average of 59%. In truth, the shares of CIGNA and some others are up a multiple of several times since the contest was resolved by a very tight vote in early 2010. One startling reason for this amazing performance was that Obama took off the table "proposals to significantly reduce health care costs" as the giveaway in getting the bill through, according to Ron Susskind's best-selling book ,"Confidence Men," which I wrote about in a blog on September 24, 2011. ( "Obama's Incoherent Policy-Making") Some 3 years later, UnitedHealthCare Group(UNH) was rewarded by being added to the elite list of the Dow 30 industrials.

I understood belatedly that there would have been no Affordable Care Act of 2010 if the White House had not given into demands from the giant profit-making health insurance companies. Had he not done so, I am being assured that there would have been no bill passed, a priority goal that Obama promised in his 2008 Presidential campaign. How the profits have risen so impressively requires further investigation as the bill is meant to limit the profits earned to 20% of the revenues.

One of the other downsides to the supposed reform bill was the surprisingly unfair treatment of small business owners who faced even larger potential premiums for their employees. It has been the fear of these higher health costs that has resulted in the overwhelming trend toward hiring part-time employees whom the employers need not offer healthcare insurance.

So much for the reforms embedded in the mis-labeled Affordable Care Act of 2010. It may not die a bloody demise this month, but it is certain to be reformed itself, let's hope for the benefit of the 300 million, not just the millions of lucky shareholders who may have understood the ramification of ObamaCare, which was to multiply the profits of five giant insurance companies, just as the major bank oligopoly was rewarded by the federal bailouts and Fed monetary policy.

Juillette -> Andrew Kac , 2016-07-07 14:16:34
I agree with you that he never did. Obama is a corporatist and globalist. If you think Obamacare is bad wait until his trade deals are past. He sold Americans out for the profits of multinational corporations. Hillary will continue his work. I understand the true meaning of his words now.

"We are a nation of immigrants" meaning he prefers cheap illegal labor when 46 million Americans live in poverty. Soon cheap foriegn will be unlimited and legal in the US with worker mobility. Even for professional jobs. Can you imagine competing with foreigners in the US who make 30 cents an hour? It's depressing really. Here are some of the highlights of the TPP that will throw Americans further into poverty.

http://www.citizen.org/TPP

Also research Tisa.

barbkay , 2016-07-07 13:49:42
My heart goes out to these beleaguered families. In the late 1970s/80s I held down a full-time job in DC and freelanced feverishly to make ends meet. I lived below the official poverty line in an expensive, yet thoroughly crappy, flat. That recession-riddled era of energy chaos, leading into Reagan's 'voodoo' economics regime (the risible idea of 'trickle-down', the US becoming the world's largest debtor), was another hot mess.

The US middle class has been disintegrating for decades as inequity grows, thanks in large part to the poor governance of Republican presidents (Nixon's stagflation, the disastrous shifts under GW Bush).

FugitiveColors , 2016-07-07 13:53:22
Clinton is in hiding. I can't find her in the Guardian today. She is a habitual liar and the whole world has all the evidence it needs. All of her promises are bullshit. Bernie has been right the whole time and he is smart not to endorse. Bernie has always known what she is and Bernie's supporters have no reason to support her.

Her disapproval ratings will top Trump now. The voters are now going to show her what the meaning of is, really is.

It means she is corrupt, dishonest, and unqualified to be anything but an inmate.

MasonInNY -> FugitiveColors , 2016-07-07 16:08:57
Her disapproval ratings are high, but not up with Trump's and they never will be. You can vote for Jill Stein, the Green Party candidate, in November. Or Gary Johnson, the Libertarian. But Bernie will not be a candidate, and he will eventually endorse Clinton -- after he is sure he's won certain concessions in the Democratic platform. That's your reality in July 2016, not in February.
brianBT , 2016-07-07 14:16:48
the middle class has been decimated.. This financial category is only about 35% of was it was in the early 70's.. additionally the definition of middle class has changed drastically as well.. believe it or not your middle class if your earn more than 50k a year!.. this is part of the reason we are as a nation borrowing a trillion dollars a year.. when will the silenced majority wake up and start voting and stop spending on products that are vastly over priced..Turn off your phone, stop buying all but essentials.. we need to force prices down until we complain and start voting with our dollars little will change
MtnClimber -> ojeemabalzitch , 2016-07-07 15:37:37
What about the millions of married couples with kids..when the parents lose their jobs? That happens very frequently. Should we take the kids away? Are you suggesting that poor people not be allowed to have children?

Then we have the religious nutcases that are against contraception and abortion, yet demonize poor women for having children.

NYbill13 , 2016-07-07 14:34:59
My kid had a persistent tummy ache. Doc said intestinal blockage; take him to the ER immediately. Seven hours and one inconclusive CAT scan later, he's home again with symptoms unchanged. Two days later the pain went away. Cost: $12,000 with about $10,000 covered by union health insurance. So that's at least $2,000 out of pocket to me for seven hours in hospital, zero diagnosis and zero relief from symptoms. Medicine as a criminal enterprise? So what? Who's gonna stop it? The press? The law?

Hahahahahahahaha.

ojeemabalzitch -> NYbill13 , 2016-07-07 14:58:00
So? If your car breaks down it will cost a fortune to repair. Same if you have to replace the roof on your house. Life ain't fair, is it?
MiltonWiltmellow -> NYbill13 , 2016-07-07 15:14:26

Medicine as a criminal enterprise? So what? Who's gonna stop it? The press? The law?

I sympathize. I also agree with you. The US medical system is criminal. It is cruel, discriminatory, ruthless, often ineffective, and often incompetent. The only reason the administrators ("health" maintenance corporations) aren't in jail is because they use some of their obscene profits to buy Congress -- which passes laws like Obama's ACA or Bush's big Pharma swindle. I have no idea what to do about it though -- maybe if everyone refused to pay their premiums and medical bills, the money managers would notice. A sort of strike.

MtnClimber -> MiltonWiltmellow , 2016-07-07 15:35:28
SIngle-payer is the answer. Of course, the insurance companies and big pharma use scare tactics to stop that from happening. They talk about government waste, completely ignoring their own waste. They ignore the billions of dollars that they skim off of the top each year before applying any money for actual medical care. Wake up, people. Medical care should be run by the government or non-profit organizations, not by for-profit corporations.

Corporations have only one goal...to make as much money as possible for themselves. Health care is just a necessary nuisance.

Ykuos1 , 2016-07-07 14:37:56
Despite the financial situation in middle-and lower income families that has been steadily declining under the past 8 years of the Obama administration, most in that group will support Hillary and propagate the Same problems for 4 more years. They stand no hope unless they break from the knee-jerk support of the "Democratic" Party.
Sam Ahmed -> Ykuos1 , 2016-07-07 14:45:51
So they should support Donald Trump and the conservative party? Last time I checked raising taxes on the middle class while lowering taxes on the rich didn't really help anyone but the rich. The Republican party never gave two shits about middle and lower class, and there's no point believing they will start now.
KMdude , 2016-07-07 14:43:46
This article mentions Latonia Best and her three children. Is there a Mr Best around? It has always been tough to raise a family on the salary of a single parent.

The breakdown of the American family is a probably the biggest reason for the supposed struggles of the middle class. People have to take responsibility for their lives.

Elephantmoth -> KMdude , 2016-07-07 14:56:57
Sure, because every misfortune can be blamed on the individual. You have no idea why Mr Best isn't around so please spare us your moralising.
rebeccazg -> KMdude , 2016-07-07 14:57:51
traditionally, the middle class had the guy going out to work, and his wife staying at home to look after the kids. Once children are in school and childcare is reduced, I don't see how a woman working and raising her kids alone, is any more expensive than a man supporting himself, his wife and their kids.

It used to be possible. It used to be doable. wealth disparity ind income inequality mean that is no longer the case, at least certainly not for the average middle class. In the UK anyway, it's now a sign of wealth. This has nothing top do with the family and everything to do with income disparity.

Liverpooljack1 , 2016-07-07 15:02:53
Isn't choosing to have three children very selfish if you cannot support them financially. People always find someone else to blame.
MtnClimber -> Liverpooljack1 , 2016-07-07 15:27:08
Ah. I was waiting for some "bubba" to pull the race card. Congratulations. Maybe we should make everyone take a test to prove that they can afford children. No children for poor people. Nice.

You are a horrible person.

Liverpooljack1 -> MtnClimber , 2016-07-07 16:05:10
"Race" card!!?? Where the hell did I mention anything about race or are you really as dumb as your reply suggests.
Plus, you don't require a test to decide if you can afford children or not. It basic family planning. It's people like you in society that has the place in a mess with your "blame anyone but meself attitude" If I'm considered horrible, at least I'm not totally dumb and irrisponsible like you.
Quesera -> Donald Inks , 2016-07-07 16:00:32
$3,333.33 is actually not a lot of money to raise a family of four on. Let's do some math, shall we?!

Taxes: $800 (rough estimate)
Health Insurance: I'm going to estimate $300 because she probably has dependents on her coverage and that's what I paid one dependent a while back.
Car: I'm going to estimate $150. My car payment is $300, but let's say she got a cheaper, used car.
Rent: Let's say $1,000/month (I did a quick search and found that this seemed like a good price for a two bedroom)
Bills: Let's round up to $150/month for gas, electricity, water, sewage
Food: Let's say she spends $80/week, so roughly $320 a month (you know, she's a thrifty shopper)

All of that leaves about $313 left for gas, phone, college tuition, maybe internet and cable at home. I don't know how she does it.

MiltonWiltmellow , 2016-07-07 15:04:56

Worst of all was the town of Goldsboro – one of three metropolitan areas in North Carolina at the bottom of the national league table.

North Carolina, Michigan, Kansas, Louisiana, Oklahoma ... more ...

Sad stories in states run by Republicans. Toxic rivers, shootings, poisoned tap water, bankruptcy, daily earthquakes ...

Bill Maher recently (July 1, 2016; Overtime) editorialized about the state "laboratories" where new ideas are tested and evaluated. Maher compared the divergent fates of California and Kansas plus Louisiana.

Kansas is going bankrupt under the Republican governor and legislature, the Louisiana economy is a basket case thanks to Republican Bobby Jindal while just a few years ago, under Republican Arnold Schwarzenegger, California was billions in debt.

In California they threw out the Republicans, put Democrats in charge, raised taxes on the rich and voila -- now with a surplus, California is ranked as the sixth largest economy in the world:

Only five countries produced more last year than California: the U.S., China, Japan, Germany and the United Kingdom.

So -- North Carolina with fouled rivers, a collapsing middle class, discriminatory laws -- or a thriving California?

Goldsboro remains far from the sort of economic catastrophe seen in parts of the rust belt, but these are signs of financial stress that are hard to ignore. The strain on the middle class across much of the country may not have gone unnoticed by politicians, but locals here fear there is little talk of the investment in skills, high-paying jobs and civic infrastructure needed to arrest the slide.

Republican shills will have to admit -- finally that Republican policies ruin lives, ruin the economy and ruin the environment. Truth appears more powerful than slogans and slanders. Who knows? They might even acknowledge climate change.

Profhambone -> MiltonWiltmellow , 2016-07-07 15:47:30
I believe it is the wars and needs of the military-industrial-banking complex that sap far too much from the economy. Both parties are guilty of supporting them.
ehmaybe -> MiltonWiltmellow , 2016-07-07 15:52:52
North Carolina with fouled rivers, a collapsing middle class, discriminatory laws -- or a thriving California?

Since 2013, North Carolina has the fastest GDP growth of any state. The NC economy is not in bad shape. This lady lives in one of the poorest areas in the state, she should move 45 minutes north to thriving Raleigh or Durham - the population in that area is booming, they need teachers.

The dumping of coal ash into the Dan river was a corporate crime, not a policy decision. Neither party is responsible for criminal actions by individuals or corporations, that's just silly. (The republicans have been too lax in holding Duke Energy to account but the damage done is not a political issue)

HB2 is a disgrace but the legislature is in the process of correcting it and the Governor is likely to lose the election in the fall which bodes well for anti-HB2 people. Don't forget that California voters voted to ban gay marriage not even 10 years ago. It's not a paradise of wealth and enlightenment, no place is.

Voltaire21 , 2016-07-07 15:16:57
Why should we feel sorry for the American middle class they have elected for all the misery that has befallen them!

If America was a fascist state I could sympathise but it's not. Americans have let their social rights being eroded by a mendacious and cunning establishment.

One good example of how Americans don't give a shit is the very expensive wars in Iraq and Afghanistan which have cost gazillions to the US taxpayer and not a whimper from the US population.

If one can compare that to the Vietnam war which created its own critical cinema genre, protest songs, large demonstrations etc...you know that todays average Americans responsibility for the mess they find themselves in is non existent. They just bend over and take it and have little whine about it from time to time.

Quesera -> Voltaire21 , 2016-07-07 15:48:37
What about the people that didn't vote for the "misery" as you call it?

What about the fact that whichever way you vote in the US you're screwed?

And I don't know about you, but you must not know many Americans. The number of my friends who have been tear gassed during marches against the Iraq war flies in the face of your argument. Have you, yourself, even uttered a whimper against it?

Bardolphe , 2016-07-07 15:20:20
I will support proper child-support and healthcare and everything that can be done to make this woman's life easier and secure her kids' futures BUT

Three kids is a LOT for two people to handle, let alone one.

To paraphrase Lady Bracknell, to raise one child alone may be regarded as a misfortune; to attempt to raise three looks like carelessness. To try to raise three alone in the United States is MADNESS.

I live in the USA. I'm in a stable long-term relationship. I don't make much money. I can't afford kids.

2 + 2 = 4

Poor me. I don't say I have a right to kids because I need them or I have so much love to give or blah, blah, blah. I just can't. Not here. This is a cruelly individualistic country. It is built to serve those who serve themselves. Namely, the young, healthy, smart, motivated and single. There is no political foundation or tradition of altruism here. Maybe back in Ireland where there's a system to support me and some healthcare and family. Not here. Madness.

Happyduckling -> Bardolphe , 2016-07-07 15:36:41
But she's got the kids now. What is she supposed to do? Hand them back to someone? If she and the childrens' father had them when life was looking more stable and she didn't have to work 4 jobs to make ends meet, she can hardly be blamed now for their existence.

You are living in the now and choose not to have children because you feel you can't afford them. However, in the future, you may find that you can afford them, and therefore choose to conceive. If your circumstances change after that and you are no longer able to afford to care for them without working excessive hours and living in poverty, there's not a lot you can do other than get on with it. No point blaming her for something that is irreversible.

Bardolphe -> OinkImSammy , 2016-07-07 15:41:05
That is not my point and you absolutely know it is not my point.

Stop pretending that birth control doesn't exist. It exists.

Quesera , 2016-07-07 15:42:11
It's interesting. According to my household income I'm in the "upper" tier for the DC-metro region. But it really doesn't feel that way. Even those of us who make a good income are more and more stretched. In comparison to most of the country, I am well off. I own a car, just bought a house, I can afford to go out to eat a couple times a week. But, I even get to the end of the month with only $100 in the bank. That's because other downward pressures on pay aren't taken into account, such as student debt. My expensive undergraduate and graduate education didn't come cheap, and while that education affords people higher pay, if you end up taking less of it home. It kinda equals out.

Sometimes my husband and I think about having kids, and then we realise that even with our good paying jobs, we can't afford day care in our area. I get paid the most, so I can't quit my job but if my husband quit to care for a child, we would really be strapped. Can I really be considered an upper tier household if I can't afford to have kids? If I can't afford to go on vacation once a year? If I haven't bought new clothes in two years? If I have no savings and a freak medical bill might just tip me over the edge?

There's something very, very wrong. How rich do you need to be before you don't feel like you're struggling?

Scott Plantier -> Quesera , 2016-07-07 15:55:19
Thanks for the great post, but whatever will be, will be, unless you get in front of it and plan.

Suggest you give Andrew Tobias' book a read to think outside the box a good education often constructs for us: https://www.amazon.com/Only-Investment-Guide-Youll-Ever/dp/0544781937?ie=UTF8&ref_=asap_bc

Spunky325 -> Quesera , 2016-07-07 20:31:21
You can cut student debt in the U.S. by attending a good community college for two years and then transferring to a state university. Most kids are unwilling to do this--no frats or prestige in community colleges!
Nash25 , 2016-07-07 15:48:56
The huge middle class in the USA was created by the liberal economic polices of the 1930s, which were designed to help the lower class.

Beginning in the 1970s, a majority of the middle class began to resent the taxation needed to continue support for these liberal policies, and they began to vote for conservative politicians who promised to remove them as they "only helped the undeserving poor." White racism played a role in this as the lower class was invariably portrayed in political speeches and advertising as group of lazy black people.

What the middle class did not understand was that their continued existence depended on these liberal programs, as most of the benefits went to the middle class, not the lower class as they assumed. As the liberal programs began to disappear, so did the economic security of the middle class.

One would think they would have figured all of this out by now, but they have not, and they continue to vote for conservatives.

pbalrick -> DrSallyWinterton , 2016-07-07 17:21:27
No, it was created in response to the Bolshevik revolution, in particular, to that genius who said "Let's just shoot the royal family and be done with this." When that happened, the ruling class got scared, and said "OK, minimum wage, vacation, sick pay, 40 hr work week, no child labor, great schooling, etc"

All of these things have come under attack since the USSR fell apart, probably on that exact day. And who overthrew the USSR? Overeducated middle class, not the poor or the rich. Who was Occupy Wall Street, Arab Spring... the recent protests against the French labor law tightenings, ALL the middle class.

The greatest threat to governments has, and always will be, from within. And this threat is from the middle class, almost exclusively. Therefore, we are to be crushed and controlled tightly.

Scott Plantier , 2016-07-07 15:49:55
" squeezed middle class tell tales of struggle " Too bad they voted for the big squeeze herself -- Bernie could have set them free from the path of exploitation she has planned for them immediately after her election by imposing the TPP upon the very fools who will elect her. Stop watching the Kartrashians and read about actual policy implications for your family and especially your children, if you had, none of you would have supported Clinton.
pbalrick -> Scott Plantier , 2016-07-07 17:15:29
funny how this media outlet didn't publish these types of reports while the primary was hot. It was all "Hilary is inevitable and supporting Bernie is supporting Trump" type garbage.
biglio , 2016-07-07 15:58:38
Education in the US...oh boy....

I lived in Pittsburgh for 8 years, being European I sent them to public school...well, after a year in which my six years old son was suspended twice for running around at lunchtime when he shouldn't (six years old tend to do that), numerous recesses where they were put in front of a TV (we cannot send them outside, insurance doesn't cover if they get hurt and we got sued before), and notes from teachers full of spelling mistakes......I had to send them to private school perpetuating a cycle of poor people in public system and rich people (or middle class as i was at the time) to private schools....

i don't know what needs to be done to fix the issue but it's the whole society that is really divided along money lines and race lines and inequality is getting worse. But money trumps everything, the US is the only place int he world where it's not considered unpolite to ask people :"what's your worth?" meaning how much you make, what are your assets, etc.....instilling in people a mentality of self worth based on money and consequentially a cutthroat environment where the more you have the more you are worth, so at the top they squeeze the lower end, to make more money but also because they think they are really not that worthy....its a perverse cycle that history taught us doesn't bring any good because at a certain point the poor reach a critical mass that will just revolt......I'm waiting for that, good luck...

biglio -> ehmaybe , 2016-07-07 16:24:09
I'm afraid my friend we disagree on that, excellent public schools are exceptions, there are some but they are a minority (International statistics on education quality validate that), I don't live in the US anymore but travel a lot there for business (at least 20 times a year). As for the worth question I had it asked to me quite a few times and kind of everywhere, maybe it's unpolite, I believe it's unpolite, but it happens regularly and only in the US (let me rephrase, in the rest of the world it wouldn't be considered unpolite, that's too mild of a term, it would be considered inconceivable). Said that I hope the US makes it and the "American Values" that you talk about prevail, but i am afraid those values have changed and being substituted by less noble ones...
jsaralan -> ehmaybe , 2016-07-07 16:33:16
Probably he means to say Americans habitually ask new acquaintances, "What do you do for a living?" That's absolutely a query about income and personal worth, though slightly disguised, and it's a question I have never widely encountered anywhere else in the world, nor while living overseas the last ten years. The question is so ingrained, though, that Americans who ask it don't think of it as a query about net worth. They do, however, react with overflowing respect toward those who answer in certain ways, and something akin to sympathy to those who answer in other ways. All my foreign friends have noticed it, and all think it's weird.
DrSallyWinterton , 2016-07-07 16:45:46
This article is extremely dishonest. First, it claims that she has 'three other jobs'. Second, she has children, for whom she presumably gets child support. So what's her *real* income?
Michael Williams , 2016-07-07 17:50:39
I do not know how things stand today, but I went to school in the UK and in the US in the 70s and 80s.

The schools in the UK were so superior to the US that I thought I had been placed in a remedial class when I returned to the States.

At the time, I would have bet that the average 16 year old in the UK was better educated than most American college graduates.

I would like to hear what you all think.

biglio -> Michael Williams , 2016-07-07 18:22:25
Agree, I did my last year of high school in the US, in North Carolina of all places, in a top private school, i was a middling student in Europe with flashes of brilliance in some subjects but definitely far from the top of the class. When I arrived (it was in the 80s) I didn't speak English. Well, I graduated with high honors int he top 5% and got my high school diploma, honestly without having to study that much, school was not totally comparable but definitely way less challenging.
eastbayradical -> biglio , 2016-07-07 18:33:35
Contrary to conventional wisdom, a lot of private schools in the United States are severely lacking in the rigor department. This is even true for many--not all--private schools that cater to well-to-do families.
LelouchVIBrittania , 2016-07-07 18:13:10
When those in poverty or on the verge of it are single mothers, you tend to wonder if there are some other issues as well. I don't recall a time in American history where a single mother of several children could take care of herself when completely on her own.

I know of single mothers who are doing fine, but they employed and are also being helped by siblings and parents who already have some wealth and free time to take care of the child. Maybe the issue is the fact that these people are having kids at the wrong time or without enough thought. Divorce rates are incredibly high in the US, and the percentage of children who have non-birth parents is very high as well. What this all means is that the USA isn't teaching its citizens about having kids and the responsibility.

The USA is also not teaching men and women about birth control, or about being holding potential partners to higher standards (and I don't mean looks). A lot of people in the USA are too shallow and focus too much on aesthetics over reliability and now we have single mothers with fathers who refuse to pay child support at all costs. There are too many problems with the USA, but I feel that personal hygiene and responsibility with sexual partners should be on the top.

PlatosNave , 2016-07-07 18:35:03
I teach in inner city schools. There are so many problems, money is one of them but all the money won't solve the problem of poor learning attitudes, disaffection, poor discipline and nonexistent work ethic .

A lot of the students get no discipline at home and their parents don't expect them to learn anything. They are resistant to the whole process of focus on new knowledge , absorb, drill, recall , deploy newly learned thing.

Americans have a religious reverence for individualism and learning new things is a humbling experience and many people don't like it. Sure the adults bang on about education but they aren't serious about it. They think all you need is to spend more money , not do any actual work.

Spunky325 -> PlatosNave , 2016-07-07 20:18:08
The problems in the inner city are so intransigent that I doubt anything can fix it. I have three friends, all dedicated teachers, who taught in inner city schools in New Jersey and the stories they have told me make my mind reel: a mother who punched a teacher (and gave her a concussion) who "disrespected" her kid (by failing him, deservedly, in algebra), 15-year-olds who had pagers so their pimps could call them, children who had five brothers and sisters--all with different fathers. You couldn't make this stuff up.

I don't know what solution there is to this. My nieces and nephews did well in school, studied hard, and went on to university. They didn't do drugs, rape or be raped, and stayed away from unsavory kids. BUT--they went home to two parents every night, a father and mother, which I think would have made them successful at school no matter what their income.

thomasmccabe , 2016-07-07 18:49:47
The Pew survey you cited noted that "...the share living in middle-income households fell from 55% in 2000 to 51% in 2014. Reflecting the accumulation of changes at the metropolitan level, the nationwide share of adults in lower-income households increased from 28% to 29% and the share in upper-income households rose from 17% to 20% during the period." In other words, most of the decline in the middle class was due to their moving into the upper class.

The article was mostly about a declining rural area. The Guardian grinding its usual axes and reaching the conclusion it intended to reach?

NoSerf , 2016-07-07 19:24:28
Middle class job death inflicted by cronie capitalism entertained by the political establishment (examples): Private equity is not scrutinized by anti-trust legislation, buys any company and sends jobs overseas. Cronie supporters of politicians get help in that some industry gets indicted (e.g. more or less entire coal industry) or regulated into oblivion, for fake reasons, so that cronie (solar panel) company gets subsidies. Of course, the latter goes under, no company on IV survives without IV. Banks get bailed out, others not. GM gets bailed out, to maintain jobs, then outsources.

The old members of middle class are not tolerated by our government and the cronies. Who is tolerated as middle class is any kind of civil servant, and new immigrants. Revenge from 2 sides. Or call it cultural revolution Mao style: Take their habitat.

Curtis Gomez , 2016-07-07 19:49:24
Growing up in the SF Bay Area during the 70's there was a large disparity in academics between schools even in the same district. At 11 years old the school district was rezoned and the new school that I attended had much lower standards. So much so, that I came home the very first day and complained to my mother that I had been assigned to a class for slow learners. Being so bored, my grades started to drop. At 13 years, I tested out of mathematics and eventually tested out of high school altogether and joined the military.

There my intelligence was appreciated (believe it or not). The military provided a valuable work ethic and training in technology that have provided a decent career and lifestyle since. It's too bad that America can't seem to provide adequate learning to the vast majority.

jacknbox , 2016-07-07 19:54:54
The US economy isn't competitive anymore. It started with the labor cost being too high, so factories moved out. Then the entire supply chain moved out. Now the main consumer market is also moving out. Once that is gone, we will have no more leverage.

The US education is good, but students are lazy, undisciplined, and incurious. In silicon valley, more than 75% of highly paid technical personnel are foreign born. Corporations making money with foreign workers here and abroad, on foreign markets. Taking these away and you will see the economy crash.

Then you have Hillary wanting to sub divide a rapidly diminishing pie, and Trump wanting to return to 1946. Good luck to them both.

enodesign -> jacknbox , 2016-07-08 01:25:43
Get real .

Labor costs were too high. Have some more kool-aid. The elite didn't want labor to have any bargaining power whatsoever . They wanted to dictate the terms to labor believing that they were the only ones who should have any say in matters. The elite wanted to maximize their profits at the expense of their own citizens. They wanted slave labor . They wanted powerless people to dance to their tune. How could an advanced nation's labor possibly compete with slave labor .

This is the same argument that slave owning , southern plantation owners used to fight against the freeing of slaves . They to said that they would not longer be competitive and the overall economy would suffer .

Are you telling us that an economy needs slave labor to exist ?

enodesign , 2016-07-07 20:02:24
Sadly ..... thee isn't any hope for these people in the foreseeable future . Their economic decline has been happening for quite some time now and shows no sign of abating whatsoever . The economic foundations of their lives have been steadily pulled out from under them by the financial elite and their subservient political cultures , the Republican and Democratic Parties . The Republicans have never really given a damn about them and the Democrats have long abandoned them . These poor people of North Carolina are adrift on a sinking raft on easy ocean of indifference by the political cultures of America . To those in power , they don't exist . They don't count . They don't matter .

The trend in the U.S, along with almost every other major nation in the world over the past 35 years has been to exclusively serve the interests of the financial elite and only their needs . All sense of fairness , justice and decency have been totally discarded .

Tax breaks after tax breaks , tax shelters , free movement of capital , etc., etc. would sum up the experience of the financial elite over the past 35 years . They have become incredibly wealthy now and are still not satisfied . They want more . They want it all . They want what little you have and their political servants which help them get .

Political discourse pertaining to the plight of those like these folks in North Carolina is all window dressing . In the end , you can be certain that it will amount to nothing . Just like it has for decades now . The financial elite are in control and they are not going to give any of that control up . As a matter of fact , they are going to tighten their grip . They will invent crisis to have their agendas imposed upon an increasingly powerless and bewildered public . They will take advantage of every naturally occurring crisis to advance their agenda .

There will be an end to their abuse , greed and domination until one day when everything changes . The day when people have had enough . When people can't take it any more . History has demonstrated this fact so often before . The mighty do fall . They always fall ..... but their fall is nowhere to be seen at this time .

There is going to a great deal more pain for average folk before things get better .

A Presidential election featuring Donald Trump and Hillary Clinton is clear evidence of this fact.

Hopefully , these two bottom feeding , utter human failures represent the bottom of the barrel but I doubt if they do .

Good luck to the good folks of North Carolina and countless others like them .... they / we / myself are going to need it .

enodesign -> DrSallyWinterton , 2016-07-08 01:18:46
On the contrary .... it's money that the elite have not paid out in wages .

It's money that the elite have illegally hidden from the taxman . It's money the the elite need to pay for the infrastructure that makes it possible to do business in the first place . It's money that has been made from insider trading and backroom deals . It's money from the wealth that labour has basically created in the first place .

It's money that contributes to the social maintenance on a safe , civil society . It's money that the wealthy do not need .... they have all they could ever need now .

It is money that when distributed fairly keeps money in motion creating it's transfer into additional hands which further circulates that money creating even more spending by people and the consumption of goods and services which result in the creation of even more wealth .

Static capital kills economies .

I know that the elite like to think that they are the exclusive ones to create wealth but wealth creation is the marriage between capital and labour . You can have all of the capital in the world but without labour transforming it into greater wealth it can not possibly grow .

If anyone is guilty of stealing money it is the elite who steal from the economy causing the economy's ill health .

The last 35 years are more than testimony to this fact .

Economies are dying wherever the elite have gotten their way .

The elite are the real killers of wealth and economies . Just look at any economy in the world throughout history where the elite had all of the wealth to themselves . Their economies are highly dysfunctional and their societies are full of social problems and crime .

This is an indisputable fact .

Greed kills wealth development .

Wealth development is directly tied to the well being of labour which allows for mass consumption of goods and services .

You would have to be a complete idiot not to see this fact .

So my good doctor .... the money in any given economy really belongs to everyone , not just the greedy elite .

You need to get a real perspective instead of constantly eyeing you own pile of wealth .

Matt C , 2016-07-07 20:32:07
so the woman chose to have 3 daughters, is now choosing to foot the bill for their college education, and wants me to feel sorry because she has to work her ass off to do all these things? how about this.... don't have children you can't afford. a little personal responsibility in one's life goes a long, long way.
Bajanova -> Matt C , 2016-07-07 21:03:04
She is taking personal responsibility! She is working!
DrSallyWinterton , 2016-07-07 20:35:37
Everybody here is debating the life of a person who probably doesn't even exist.
JudeUSA -> DrSallyWinterton , 2016-07-07 23:20:41
Go to the website of the school she works for. Her picture is on the website and the NC pay for a 3 year teacher is about 40K. I think she exists.
jecoz , 2016-07-07 20:59:28
We need to redefine middle class. I grew up middle class. We had one TV. Not a lot of clothes. Took short, cheap vacations. Had no credit cards. Our lives were perfectly enjoyable. Many people here in the US live way beyond their means.
Turrialba -> jecoz , 2016-07-07 21:36:59
We piled into the station wagon and headed out on short trips in the region. We visited historic sites and were enriched by the experience. None of this $1000s on the trip to Disneyland. We didn't feel deprived or entitled.
jacknbox -> jecoz , 2016-07-07 23:26:14
The key is not money but optimism. America is still richer, cleaner, and better run than most other places. But the gap is rapidly closing. Scaling back the spending would not help here. It would only further reduce the drive.
skwawshbug , 2016-07-07 22:08:36
As a North Carolinian, there are two major issues. One, the right to bear arms and also, teacher tenure and working conditions. Republicans have already taken away tenure from my younger colleagues, but as an older teacher, I still have mine. Secondly, democrats want to take away gun rights on the federal level, but state dems are usually more pro-gun in the conservative state.

SO for me, I will vote for a democratic state government and a republican federal government. I will be proudly putting a Roy Cooper bumper sticker on my car. But due to the peaceful liberals, I would be afraid to put a TRUMP sticker on my car because of recent violence against Trump supporters.

DrSallyWinterton -> skwawshbug , 2016-07-07 22:30:35
Teachers who can't be thrown out, no matter how incompetent they are, are a major reason why the US educational system is in such a mess.
Shillingfarmer , 2016-07-07 22:15:18
The problem is the job exporting American elite class. NAFTA was an economics, political, and social experiment with all the downside on the former, mostly lower middle class. Non-aligned examination of the available data shows how disastrous NAFTA has been to America's bubbas. Thanks to Bush 41 and Bill Clinton. WTO was all Bill. Of the mistakes Obama has made TPP would be the worst. The question is, really, do we favor global fairness (an even playing field for all earth's peoples) and a climate-killing consumerist world, or our own disadvantaged (courtesy of our financial and political elite) citizens. Not an easy choice. Death by poison or hanging. No treaty can benegotiated fairly in secret.
SocratesP , 2016-07-07 22:30:13
The tragic irony is that the anger against rule by the 1% manifests in things like support for Trump, a typical example of the greed and excess of the 1%. Americans need to question outside their desperately constrained paradigms more. It will help focus their anger more strategically, and possibly lead to solutions. Don't hold your breath, the inequality gap is accelerating the wrong way.
DrSallyWinterton , 2016-07-07 22:40:20
Fake, fake fake. A woman with $40k and three children would *not* be paying 1/3 of her income in tax. This woman does *not* live on $40k net or gross - she has three other jobs. And her name looks *very* made up.
Bronwyn Holmberg , 2016-07-07 22:41:01
I think the US is heDing for trouble. It is the middle class that maintains civil society and gives a sense of hope. This is an interesting open letter by a zillionaire to his peers warning them what happens without a string middle class. A thought provoking read. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014
Chris Westcott , 2016-07-07 22:41:01
The elite of the USA have done exactly what the Romans did and what the Pre-Revolutionary French did.... drain the lower classes while enriching themselves. "Taxes are for little people" is not just a pithy quote, it has become the reality as the elite rig the system so they benefit and the lower classes pay. They need to wake up or they will get exactly what the Romans Got (collapsed empire) or the French got (Violent Revolution). Wake up America! It is time to choose your side in the class war the elite continue to execute while telling us there is no "Class War" - you can't pull yourself up by your boot straps while they are pulling the rug out from under you!
veloboldie , 2016-07-07 22:41:01
My wife used to employ recent graduates from Georgetown University with poli. sci., psychology, sociology degrees, to stack books for $10/hr. It took them on average 2-3 years, before finding work in their field. I keep telling my kids you need to earn a degree that has a skill for life and will always be in demand, i.e. doctor, dentist, vet, engineer, scientist. Additionally, include work oversees in your career.
Ardnas1936 -> veloboldie , 2016-07-07 22:41:01
Education is NOT about finding a job! It's about learning ways to seek wisdom and rationality, and to assimilate (not deny) new knowledge throughout your life--and that's exactly what's lacking in the US! Our schools are factories to turn out standard robots to be used by the owners of this country, whether they practice law or flip burgers.

I was lucky that my parents were born and raised before that happened. They went to what used to be called "country schools"--my dad to a 1-room schoolhouse. Some of the so-called "knowledge" was patriotic trash, serving only the rich elites, but they learned to be sturdy and to think for themselves, so I was lucky and learned a lot at home. Without parents who practice the empathetic, rational morality needed in a democracy, all the jobs in the world--especially if most are for flipping burgers--won't save this dreary country.

nataliesutler -> veloboldie , 2016-07-07 22:41:01
You make an excellent point. Thinking about your life rather than just going for a crip major in college would be an excellent way NOT to wind up stacking books for $10 an hour with a degree. I can't count the number of my kids friends who select communications majors, or sociology or women's studies and then are completely surprised when there are no jobs demanding their educational background. What is it that they think they will be qualified to do after college?
mikegood , 2016-07-07 22:41:01
From the article.... "Some lucky families saw themselves promoted to the upper income bracket." Here in a nutshell we see the author's underlying worldview. Getting to the upper income bracket has nothing to do with effort. Rather it's the result of luck. It's something that is done to you by an outside force.

[Aug 24, 2016] We cant fix the bridges. We cant get basic healthcare to all our citizens, but somehow we have to update the entire grid in the next 15 years while drastically reducing storage costs. Meanwhile, in the next 10, 20, 30 years we have to be concerned about where we get the remaining 75 or 50 percent of our power.

Notable quotes:
"... A recent MIT-Argonne report concluded deployment of short-term battery storage could be economical at certain scales in the near future if prices continue to fall, but that's a far cry from making extremely deep penetration of renewables imminently possible. Their conclusion, as I understood it, was that zero-carbon energy in the next decade or so would probably require a flexible zero-carbon source as a large part of the mix. Flexible nuclear is really the only possibility in that regard at present. ..."
"... I've become kind of jaded about breathless pronouncements about advanced battery technologies by new startups. Those articles seem to appear right next to the ones about the startups from a couple of years ago going tits up. I'm no expert, though. They could be advancing faster than I realize. ..."
"... We can't fix the bridges. We can't get basic healthcare to all our citizens, but somehow we have to update the entire grid in the next 15 years while drastically reducing storage costs. I'm sorry, but I'm pessimistic about that happening that quickly. Meanwhile, in the next 10, 20, 30 years we have to be concerned about where we get the remaining 75%, 50%, etc. of our power. We are so far away from the last 10% being an issue that it is pointless to talk about. Steven Chu has been quoted as saying that 50% by 2050 is probably a realistic goal. There is no technological solution if it isn't financially viable. ..."
"... Krugman is way out of his depth when discussing any specifics regarding climate change and related technologies, but he persists in overstepping his knowledge. He probably couldn't tell you the difference between kilowatt-hour and a kilowatt. He gets the big picture and the talking points, but I wish he'd stay away from things he really doesn't understand. ..."
"... There is lots of profit in wars. The connected make a lot of money at war and prepping for it forever. ..."
"... There are lots of money to be made fighting terror with first world weapons. Terrorism could get in the way of the Saudi royals taking your money at the gas pump. ..."
Aug 24, 2016 | economistsview.typepad.com

A. U. Contraire : Tuesday, August 23, 2016 at 12:09 PM

I'd be interested on what Krugman bases the claim "that progress in energy storage looks increasingly likely to resolve the problem of intermittency." As an avid reader of publications like Technology Review I've yet to read any such optimism from engineers who should know that economical, utility-scale energy storage is anywhere near solved. The price of wind and solar is no longer the bottleneck in renewable pricing. Storage, batteries, and installation costs are an increasingly high percentage of total costs, and those prices are not rapidly decreasing.

Our current grid literally cannot handle a high percentage of renewable power. Germany is running into problems at levels of 25% renewables. In fact, their neighbors are complaining that the Germans are dumping excess power that they can't use immediately or store on foreign grids, causing blackouts in those countries. A breakthrough could happen at any time, of course, but we could possibly be decades away from renewables being able to technologically provide more than 50% of our energy with even concerted effort. As an engineer, I tend to find pessimistic assessments more accurate. In determining the cost and time for developing a new engineering solution, whether it be code or widgets, do due diligence to analyze the challenges, come up with an estimate, and then multiply everything by three.

My reading of the technology, and I could be wrong, is that many environmentalists are probably living in a fantasy world if they believe that we could switch to 100% renewables any time soon if only we had the will.

DeDude -> A. U. Contraire... , Monday, August 22, 2016 at 01:36 PM
Here is a good start for a reasonably up to date overview of energy storage:

http://rameznaam.com/2015/10/14/how-cheap-can-energy-storage-get/

The other articles in that series are also worth a read:

It covers some of the classic right wing concerns and myths about the shift to alternative energy.

A. U. Contraire -> DeDude... , Monday, August 22, 2016 at 11:31 PM
I don't claim to understand all or even most of the nuances myself, but I'm not sure that these non-power engineers who just look at price curves truly understand the scope of the challenge. It's not just right-wing oil shills that point out the current hurdles for economical storage. Germany has had as little as 5% of renewable capacity available for as long as at least a week. An incredible amount of long-term storage has to be available to guarantee power with no flexible source.

A recent MIT-Argonne report concluded deployment of short-term battery storage could be economical at certain scales in the near future if prices continue to fall, but that's a far cry from making extremely deep penetration of renewables imminently possible. Their conclusion, as I understood it, was that zero-carbon energy in the next decade or so would probably require a flexible zero-carbon source as a large part of the mix. Flexible nuclear is really the only possibility in that regard at present.

Naam like a lot of folks doesn't seem to believe that lithium-ion is the ultimate solution, but flow batteries are even more speculative at industrial scales. I've become kind of jaded about breathless pronouncements about advanced battery technologies by new startups. Those articles seem to appear right next to the ones about the startups from a couple of years ago going tits up. I'm no expert, though. They could be advancing faster than I realize.

DeDude -> A. U. Contraire... , Tuesday, August 23, 2016 at 06:46 AM
No you are not an expert, yet you have these unspecified concerns that things may not work out. The question is not whether there will be unforeseen hurdles that delay things, we know that to be very likely. The question is whether: "that progress in energy storage looks increasingly likely to resolve the problem of intermittency.". There is nothing in the current reality that would contradict that statement. There are currently working storage technologies that could be deployed locally to obtain the grid level storage capacity needed. That would be less efficient than what they are working on for the future, but if all else fails it would be good enough. So the issues is financial not technological. You are putting up a straw man when you talk about carbon free grid or a grid "without a flexible source" and "imminently possible".

Neither Krugman nor anybody else here have set the bar that high. The last 10% of getting there would be very expensive - and not make much difference for global warming.

A. U. Contraire -> DeDude... , Tuesday, August 23, 2016 at 01:07 PM
We're talking time scales here. There are enough people working on cancer that I'm confident in saying that "a cancer cure is likely to be resolved", unfortunately just not likely in my lifetime despite a lot of impressive advances. Likewise, I'm quite confident that energy storage will be resolved eventually, but policy decisions have to be based on what time scales those solutions are likely to arrive. Those are my concerns, which I have specified in detail.

There is no technology that is anywhere near proven at present that could provide the "grid level storage capacity needed" at any but low levels of renewable penetration. Naam's prices, if I interpreted his meaning correctly, were looking at economical one-day storage at 2015 demand by like 2040. However, that's not near enough storage for 90% renewables to even be on the horizon by that late date.

We can't fix the bridges. We can't get basic healthcare to all our citizens, but somehow we have to update the entire grid in the next 15 years while drastically reducing storage costs. I'm sorry, but I'm pessimistic about that happening that quickly. Meanwhile, in the next 10, 20, 30 years we have to be concerned about where we get the remaining 75%, 50%, etc. of our power. We are so far away from the last 10% being an issue that it is pointless to talk about. Steven Chu has been quoted as saying that 50% by 2050 is probably a realistic goal. There is no technological solution if it isn't financially viable.

A. U. Contraire -> DeDude... , Tuesday, August 23, 2016 at 04:32 PM
Okay, I went back and read Naam's article very carefully. If you want specific concerns, here they are:

1. His "potential" solutions happen to be two technologies in which he is invested and which, by his own admission, don't have enough of a track record on which to base even his relatively simple price-volume analysis. He's a bright guy, and I doubt he's being deliberately deceitful. However, I also assume that he is not the one person on the planet that is immune to confirmation bias when his self-interest is at stake. If I'm not going to take the word of Chevron's CEO that his natural gas doesn't need to be regulated for methane, I'm not going to assume Naam is completely objective in making projections about technologies in which he is invested. It's a good bet that he is overly optimistic.

2. You rake me over the coals for bringing up a total zero-carbon energy portfolio, but that's exactly what Naam appears to be implying in his conclusion that "the world is very much on path to achieving cheap enough storage to allow 24/7 clean energy, and doing so in the next 15-20 years." That's in a section entitled "Cheap, Zero-Carbon Power, 24/7." If you think that standard is silly, ....

Moreover, his highly speculative projection doesn't have enough capacity for one full day of storage being economical until after 2036. As I have explained, that's not near enough storage to depend on variable sources. Actual data on the dependability of renewable generation argues against that. Power engineers can't keep their jobs providing energy 99% of the time. That 1 day in a 100 will get them fired.

3. His analysis on how cheap batteries must get to be viable is confusing to me. The advantages that he claims batteries have so that they don't have to compete with base generation include:

a) reduction in peaker plants.
b) reduction in transmission and distribution lines.
c) utilities can keep their transmission lines full even during low-demand hours, using them to charge batteries.
d) batteries reduce outages

That analysis seems to ignore the barrier to entry costs in making the grid smarter so that it can handle a higher percentage of distributed renewables. Determining how to evolve the grid is going to require some time-delaying trial-and-error research as well.

Also, his own graph shows that low demand is at night. How do solar panels charge batteries in the dark when demand is low? That would seem to imply that source capacity would have to greatly exceed peak demand during the day, which would make advantage 'a' unlikely as well. Wind might be viable at night, depending on the location, the time of year, and daily weather. The extreme variability of when charging is possible goes back to the scope of storage needed to accommodate an extra watt of renewable energy on the grid. For 'd' to be true you better have more than one day in storage.

None of these problems are technically infeasible at any cost or any time frame, but solving them all and implementing them in an economical manner is quite possibly, likely in my view, a project with much longer time scales than he envisions. As such, the "OMG, we're all gonna burn up" crowd probably needs to start making hard choices between promoting natural gas or nuclear. For the next few decades none of the above probably isn't an option.

mulp -> A. U. Contraire... , Monday, August 22, 2016 at 02:20 PM
Well, the solution is to return to slavery to reduce the costs of storage.

But, we should return to slavery to make everything cheaper.

Just think how high the labor force employment rate will be with broad slavery, and by slashing labor costs, profits will soar, and with soaring profits, gdp will grow at 10-20%!

So, let's make you a slave in a lithium production operation or in a Gigafactory making battery Packs!

After all, as a worker, you are purely a drag on the economy, taking money and burning it, or eating and pooping it, but never spending it.

We need to eliminate workers and have government put tax cuts in the pockets of consumers so consumers will drive demand for robot production.

tew -> A. U. Contraire... , Monday, August 22, 2016 at 02:20 PM
Krugman is way out of his depth when discussing any specifics regarding climate change and related technologies, but he persists in overstepping his knowledge. He probably couldn't tell you the difference between kilowatt-hour and a kilowatt. He gets the big picture and the talking points, but I wish he'd stay away from things he really doesn't understand.
tew -> A. U. Contraire... , Monday, August 22, 2016 at 02:25 PM
I'd add that "magic bullet" thinking is a common enemy. Let's not forget about the demand side. Demand response and efficiency have great potential to accommodate higher renewables grid penetration and reduce total energy requirements, respectively.

There are probably plenty of pragmatic "environmentalists", but I agree that the most visible "environmentalists" are often either clueless are so deep into their dogma that they cannot accept the complexities of implementation and change. It's all "the corporations" and such.

A. U. Contraire -> tew... , Monday, August 22, 2016 at 10:58 PM
We are using energy more efficiently, and that helps. However, I'm skeptical that demand response is going to be a very large part of the solution. I just don't see American customers, private or corporate, being willing to go out of their way to modulate their energy usage, but perhaps I underestimate their willingness.
anne -> A. U. Contraire... , Monday, August 22, 2016 at 02:39 PM
Again, the data suggest that Paul Krugman is not correctly assessing the relation being economic growth as such and greenhouse gas producing energy consumption.
anne -> anne... , Monday, August 22, 2016 at 02:43 PM
http://krugman.blogs.nytimes.com/2014/10/07/slow-steaming-and-the-supposed-limits-to-growth/

October 7, 2014

Slow Steaming and the Supposed Limits to Growth
By Paul Krugman

[ An important read, though I think wrong. ]

anne -> anne... , Monday, August 22, 2016 at 02:48 PM
http://www.commondreams.org/views/2014/11/07/paul-krugman-and-tortoise-why-limits-growth-are-real

November 7, 2014

ken melvin : , Monday, August 22, 2016 at 01:24 PM
We can go to war for a perceived slight, go neurosis over global terrorism, jump and down and scream oover a couple ebola cases, ... but we're going to watch: the waters rise, the people be displaced and die trying to immigrate, people by the millions die over global warming; and do almost nothing.
ilsm -> ken melvin... , Monday, August 22, 2016 at 03:42 PM
There is lots of profit in wars. The connected make a lot of money at war and prepping for it forever.

There are lots of money to be made fighting terror with first world weapons. Terrorism could get in the way of the Saudi royals taking your money at the gas pump.

Ebola is a human interest story........ Lots of TV ad time sold.

Fighting wars, terror and Ebola makes money for suppliers.

Fighting climate disaster takes money from suppliers like the Kochs and Saudi royals.

There is no money for most of the .1% in fighting climate change.

mulp -> ilsm... ,
You have not listened to anyone on the right!

And the hatred on the right of Elon Musk is probably higher than for Obama and only exceeded by hatred for Clinton.

Of course, enough of the .1% are giving Elon billions to change the world, so much so that money losing Tesla keeps going up in market cap and whenever SpaceX needs money, plenty of people happily give him money even as he makes even crazier promises like a colony on Mars before he dies. Elon is not claiming to be the saviour like Trump does, but he is working like hell to save mankind from the disaster that Trump might create.

[Aug 16, 2016] Norway oil production in July reached its highest level exceeding previous high by 10 percent

Notable quotes:
"... The Norwegian Petroleum Directorate reported that Norway's oil production in July reached its highest level in 5 years because many fields were "producing above prognosis ..."
"... Oil output of 1.728 million b/d was 10% above July 2015 and about 18% above this past June, which had 1.449 million b/d. [June production was low due to maintenance ..."
peakoilbarrel.com
AlexS , 08/16/2016 at 8:06 pm
"The Norwegian Petroleum Directorate reported that Norway's oil production in July reached its highest level in 5 years because many fields were "producing above prognosis."

Oil output of 1.728 million b/d was 10% above July 2015 and about 18% above this past June, which had 1.449 million b/d. [June production was low due to maintenance – AlexS].

The July liquids total averaged 2.136 million b/d after combining the oil number with 375,000 b/d of natural gas liquids and 33,000 b/d of condensate."

http://www.ogj.com/articles/2016/08/npd-july-oil-production-highest-level-in-5-years.html

Norway liquid hydrocarbons production (mb/d)

source: Norwegian Petroleum Directorate

http://www.npd.no/en/news/Production-figures/

likbez, 08/16/2016 at 8:27 pm
The more they produce the more money they lose.

[Aug 15, 2016] Economist's View Paul Krugman Wisdom, Courage and the Economy

economistsview.typepad.com
Chris Lowery :

The reasons for slow growth should be fairly clear by now --

(1) With labor costs held in check by the combination of a global surplus of labor, businesses' ability to offshore production, and the suppression of unions, there's little reason for businesses to invest to enhance productivity.

(2) With demand no longer artificially boosted by consumers taking on excessive debt, and with their wages suppressed -- there's little reason for businesses to expand production.

(3) With profits boosted by increasing rents, there's little reason for businesses to invest in expanding production or improving or introducing new products/services.

(4) With distorted equity markets and stock-based compensation rewarding profit extraction and punishing investment, there's actual disincentive for businesses to invest in enhanced technology and increased productivity.

(5) With the taxation of business/capital income near historic lows, there's little incentive to divert profits to investment rather than to distribution and wealth accumulation.

Combine all of these factors and we've got an economy that is consuming its seed corn and failing to share the wealth and invest for the future. Welcome to the real World of John Galt!

A ₵ 4 Your Ą -> Chris Lowery ... , -1

consuming its seed corn and failing to share the wealth and invest
"

Second the motion! There are about 600 billionaires within the billionaire caste of this nation. There are about 44 million of millionaire families in the millionaire caste of this nation. There are over 222 million hapless poor folks of this nation.

After each election the regressive taxation against the poor folks rises. Sure!

Federal tax is progressive, but the hooker is the state income tax and state sales tax plus regressive licensing fees and the list goes on. Look!

We don't know what kind of taxes the Krugmann class pays. Only know what they hint at, but we know what we pay and it gets bigger after each election, each election chock full of pK promises from the political insider establishment that rules over the poor folks. And we're getting

'tard of
it --

Paine : , -1
Center left


Okay I see the center and I guess she's facing left or should I say forward
But she's one of two possible faces of Janus
The god of the status quo
Ie the god of the center looking right or left as the ind blows
And going as close to no where as is practical

It's hard to imagine what PK thinks he's accomplishing here


He's like these old men I see on road bikes peddling like crazy and moving forward like a slug

He's more liberal academic
I guess
then academic progressive

DrDick -> Paine... , -1
Have to agree in general. I think the "left" bit is that she wants to make some small tweaks to mitigate (though not significantly lessen) inequality. Only baby steps are allowed, no great leaps forward can even be considered (though, as Reagan demonstrated, great leaps backward are perfectly possible).
Peter K. -> Paine... , -1
"For while the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis, longer-term economic growth is looking very disappointing."

Wage earners and the job class haven't done reasonably well. Krugman is just wrong. The center-left want citizens to be thankful they just have a job.

Economic growth is the worst on record. But yes let's blame it on structural factors.

JohnH -> Paine... , -1
"Center-left"...the new posture for the sales pitch...what gets delivered will be far different...just like Obama, who invested the most political capital into TPP.

JohnH -> anne...

, -1
Far be it for PK to acknowledge what actually happened at the end of Clinton42's term that might have depressed long term growth--granting China access to the WTO (ushering in the great sucking sound of jobs going to China;) end of Glass-Steagall, and deregulation of commodities trading.

A good start for the presumptuous Clinton45 would be to disavow some of the damage her husband did. Otherwise her promises ring hollow.

Disavowing Clinton42's bad economic policies at the end of his presidency would also make Krugman more credible.

Paine : , -1
"When centrists urge us to look away from questions of distribution and fairness and focus on growth instead, all too often they're basically running away from the real issues that divide us politically."


Now that is a truth we can hold to be self evident
But worth a whole column
Here it's merely the background motivator
To a st hill valentine
Made of melting fudge

Dan Kervick -> reason ... , -1
I'm pretty sure all they do is average the actual trends over the previous full business cycle to smooth away the booms and busts, then adjust for things like changes in the projected population or labor pool size, and extrapolate into the future.

It's all based on the idea that, despite downturns, over the *long run* the country's actual ouptut equals its potential output.

[Aug 12, 2016] My personal view is that it is in the hands of Wall Street and US oil producers, where oil prices are heading.

Notable quotes:
"... As worldwide net exports capacity barely changed over the last ten years, the fall of net imports from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even higher Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports. Should US producers really increase production (and reduce US net imports further) over the coming years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil independence over the next ten years, it will take ten years until the oil price can go up again as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d. This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next ten years. ..."
"... It would make much more sense for US producers to cut production another 2 mill b/d, which will bring up the oil price with the help of higher Chinese and Indian net imports over the next two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce net imports at a slower rate than Chinese and Indian growth. This could be done at much higher oil prices and much less pain for shareholders and investors. ..."
"... With hindsight this is what US oil producers should have done over the last five years. It was just unnecessary greed, which has led to the current disaster. It is unrealistic to expect low cost oil producers to cut net export capacity. As long this capacity is there, it will be used. It is however another question how much oil net exporter can increase their capacity. This is in my view another unlikely scenario. ..."
"... That shows nothing, of course. The price of oil in Argentina is now over $67/barrel. ..."
"... Oil price won't be low for long – deep see oil will see no investments if prices keep low for longer, 3rd world states with low production costs but high deficit will go into political unrest – and won't invest in infill drilling, gas injection to keep up performance, but in weapons and bribing important people. ..."
"... No one except the US shale producers can keep producing red ink permanently – so if there will be cheap oil, it will be much less than now. It's like filling a car in the socialistic countries in the 80s – you will pay only cheap money, but will have to wait to get some gas. ..."
peakoilbarrel.com
Heinrich Leopold , 08/10/2016 at 9:29 am
The future of oil prices

As oil moved down during the last few days, the question arises about where oil prices are heading for the next few years. Wall Street and friends have advertised for the x-th time that oil prices will be at 70 by year end , by the summer, by fall …
…some people are not so sure about higher oil prices in the future.

http://www.investing.com/analysis/oil-has-not-bottomed-bottom-200146938

My personal view is that it is in the hands of Wall Street and US oil producers, where oil prices are heading. Below chart shows that US oil producers triggered themselves the fall in oil prices by rapidly reducing US net imports since 2008. From 1991 wordlwide increasing net imports – up a staggering 15 mill b/d – drove the oil price to record highs when net imports went over available net exports of 40 mill b/d.

As worldwide net exports capacity barely changed over the last ten years, the fall of net imports from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even higher Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports. Should US producers really increase production (and reduce US net imports further) over the coming years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil independence over the next ten years, it will take ten years until the oil price can go up again as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d. This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next ten years.

It would make much more sense for US producers to cut production another 2 mill b/d, which will bring up the oil price with the help of higher Chinese and Indian net imports over the next two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce net imports at a slower rate than Chinese and Indian growth. This could be done at much higher oil prices and much less pain for shareholders and investors.

With hindsight this is what US oil producers should have done over the last five years. It was just unnecessary greed, which has led to the current disaster. It is unrealistic to expect low cost oil producers to cut net export capacity. As long this capacity is there, it will be used. It is however another question how much oil net exporter can increase their capacity. This is in my view another unlikely scenario.

Watcher , 08/10/2016 at 9:48 am
That shows nothing, of course. The price of oil in Argentina is now over $67/barrel.

http://oilprice.com/Energy/Crude-Oil/Would-Regulated-Oil-Prices-Argentine-Style-Help-US-Shale.html

Eulenspiegel , 08/10/2016 at 10:51 am
Oil price won't be low for long – deep see oil will see no investments if prices keep low for longer, 3rd world states with low production costs but high deficit will go into political unrest – and won't invest in infill drilling, gas injection to keep up performance, but in weapons and bribing important people.

North sea oil will die, it's already in decline and if a few producers stop the common infrastructure will be too expensive for the rest to maintain.

No one except the US shale producers can keep producing red ink permanently – so if there will be cheap oil, it will be much less than now. It's like filling a car in the socialistic countries in the 80s – you will pay only cheap money, but will have to wait to get some gas.

[Aug 12, 2016] Its like filling a car in the socialistic countries in the 80s – you will pay only cheap money, but will have to wait to get some gas.

Notable quotes:
"... As worldwide net exports capacity barely changed over the last ten years, the fall of net imports from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even higher Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports. Should US producers really increase production (and reduce US net imports further) over the coming years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil independence over the next ten years, it will take ten years until the oil price can go up again as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d. This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next ten years. ..."
"... It would make much more sense for US producers to cut production another 2 mill b/d, which will bring up the oil price with the help of higher Chinese and Indian net imports over the next two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce net imports at a slower rate than Chinese and Indian growth. This could be done at much higher oil prices and much less pain for shareholders and investors. ..."
"... With hindsight this is what US oil producers should have done over the last five years. It was just unnecessary greed, which has led to the current disaster. It is unrealistic to expect low cost oil producers to cut net export capacity. As long this capacity is there, it will be used. It is however another question how much oil net exporter can increase their capacity. This is in my view another unlikely scenario. ..."
"... That shows nothing, of course. The price of oil in Argentina is now over $67/barrel. ..."
peakoilbarrel.com
Heinrich Leopold , 08/10/2016 at 9:29 am
The future of oil prices

As oil moved down during the last few days, the question arises about where oil prices are heading for the next few years. Wall Street and friends have advertised for the x-th time that oil prices will be at 70 by year end , by the summer, by fall …
…some people are not so sure about higher oil prices in the future.

http://www.investing.com/analysis/oil-has-not-bottomed-bottom-200146938

My personal view is that it is in the hands of Wall Street and US oil producers, where oil prices are heading. Below chart shows that US oil producers triggered themselves the fall in oil prices by rapidly reducing US net imports since 2008. From 1991 wordlwide increasing net imports – up a staggering 15 mill b/d – drove the oil price to record highs when net imports went over available net exports of 40 mill b/d.

As worldwide net exports capacity barely changed over the last ten years, the fall of net imports from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even higher Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports. Should US producers really increase production (and reduce US net imports further) over the coming years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil independence over the next ten years, it will take ten years until the oil price can go up again as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d. This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next ten years.

It would make much more sense for US producers to cut production another 2 mill b/d, which will bring up the oil price with the help of higher Chinese and Indian net imports over the next two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce net imports at a slower rate than Chinese and Indian growth. This could be done at much higher oil prices and much less pain for shareholders and investors.

With hindsight this is what US oil producers should have done over the last five years. It was just unnecessary greed, which has led to the current disaster. It is unrealistic to expect low cost oil producers to cut net export capacity. As long this capacity is there, it will be used. It is however another question how much oil net exporter can increase their capacity. This is in my view another unlikely scenario.

Watcher , 08/10/2016 at 9:48 am
That shows nothing, of course. The price of oil in Argentina is now over $67/barrel.

http://oilprice.com/Energy/Crude-Oil/Would-Regulated-Oil-Prices-Argentine-Style-Help-US-Shale.html

Eulenspiegel , 08/10/2016 at 10:51 am
Oil price won't be low for long – deep see oil will see no investments if prices keep low for longer, 3rd world states with low production costs but high deficit will go into political unrest – and won't invest in infill drilling, gas injection to keep up performance, but in weapons and bribing important people.

North sea oil will die, it's already in decline and if a few producers stop the common infrastructure will be too expensive for the rest to maintain.

No one except the US shale producers can keep producing red ink permanently – so if there will be cheap oil, it will be much less than now.

It's like filling a car in the socialistic countries in the 80s – you will pay only cheap money, but will have to wait to get some gas.

[Aug 07, 2016] Oil production decline will continue into 2017

Notable quotes:
"... Output was 79,784 kb/d in April 2016, I believe the decline rate will decrease by Oct and output will be around 78.5 +/- 0.5 Mb/d in Nov 2016, decline will continue into 2017 and the rate of decline may reach zero some time in 2017. ..."
peakoilbarrel.com
World C+C using EIA data, but substituting the Russian Ministry of Energy Data for Russia shown in the chart below. The monthly peak was 81, 047 kb/d in Nov 2015. The centered 12 month running average is also shown with a peak at 80,642 kb/d in Sept 2015. The annual decline rate since the Nov 2015 peak has been 4.2% per year or about 3.4 Mb/d over a 12 month period if the rate does not change before Nov 2016. That would imply 77.6 Mb/d by Nov 2016.

Output was 79,784 kb/d in April 2016, I believe the decline rate will decrease by Oct and output will be around 78.5 +/- 0.5 Mb/d in Nov 2016, decline will continue into 2017 and the rate of decline may reach zero some time in 2017.

http://www.eia.gov/totalenergy/data/monthly/index.cfm

http://minenergo.gov.ru/en/activity/statistic

[Aug 07, 2016] No matter what central banks do, their actions will not be able to create the same level of economic growth that we have become used to over the past seven decades

August 5, 2016

Here is an article that explains the key reason why economic growth will be slow for the foreseeable future:

http://viableopposition.blogspot.ca/2016/08/the-baby-bust-and-its-impact-on.html

No matter what central banks do, their actions will not be able to create the same level of economic growth that we have become used to over the past seven decades.

JEHR , August 5, 2016 at 12:57 pm

Economic growth does not come from the central banks; if government sought to provide the basics for all its citizens, including health care, education, a home, and proper food and all the infrastructure needed to give people the basics, then you could have something akin to "growth" while at the same time making life more pleasant for the less fortunate. There seems to be no definition of economic growth that includes everyone.

David , August 5, 2016 at 1:25 pm

This seems a very elaborate way of stating a simple problem, that can be summarised in three points.
The living standards of most people have fallen over the last thirty years or so because of the impact of neoliberal economic policies.
Conventional politicians are promising only more of the same.
Therefore people are increasingly voting for non-conventional politicians.
And that's about it.

jgordon , August 5, 2016 at 8:10 pm

Neoliberalism has only exacerbated falling living standards. Living standards would be falling even without it, albeit more gradually.

Neoliberalism itself may even be nothing more than a standard type response of species that have expanded beyond the capacity of their environment to support them. What we see as an evil ideology is only the expression of a mechanism that apportions declining resources to the elites, like shutting shutting down the periphery so the core can survive as in hypothermia.

I Lost at Jeopardy , August 5, 2016 at 6:57 pm

I really don't have problem with this. Let the financial sector run the world into the ground and get it over with.
In defference to a great many knowledgable commentors here that work in the FIRE sector, I don't want to create a damning screed on the cost of servicing money, but at some point even the most considered opinions have to acknowledge that that finance is flooded with *talent* which creates a number of problems; one being a waste of intellect and education in a field that doesn't offer much of a return when viewed in an egalitarian sense, secondly; as the field grows due to, the technical advances, the rise in globilization, and the security a financial occuptaion offers in an advanced first world country nowadays, it requires substantially more income to be devoted to it's function.
This income has to be derived somewhere, and the required sacrifices on every facet of a global economy to bolster positions and maintain asset prices has precipitated this decline in the well being of peoples not plugged-in to the consumer capitalist regime and dogma.
Someting has to give here, and I honestly couldn't care about your 401k or home resale value, you did this to yourself as much as those day-traders who got clobbered in the dot-com crash.

Yata , August 5, 2016 at 7:33 pm

Let the financial sector run the world into the ground and get it over with.
In defference to a great many knowledgable commentors here that work in the FIRE sector, I don't want to create a damning screed on the cost of servicing money, but at some point even the most considered opinions have to acknowledge that that finance is flooded with *talent* which creates a number of problems; one being a waste of intellect and education in a field that doesn't offer much of a return when viewed in an egalitarian sense, secondly; as the field grows due to, the technical advances, the rise in globilization, and the security a financial occuptaion offers in an advanced first world country nowadays, it requires substantially more income to be devoted to it's function.
This income has to be derived somewhere, and the required sacrifices on every facet of a global economy to bolster positions and maintain asset prices has precipitated this decline in the well being of peoples not plugged-in to the consumer capitalist regime and dogma.
Someting has to give here, and I honestly couldn't care about your 401k or home resale value, you did this to yourself as much as those day-traders who got clobbered in the dot-com crash.

nothing but the truth , August 6, 2016 at 11:46 am

the capitalist economy is more and more an asset driven one.

this article does not even begin to address the issue of asset valuations, the explicit CB support for asset inflation and the effect on inequality, and especially generational plunder.

the problem of living standards is obviously a malthusian one. despite all the progress of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming, and now irreversible. "the market" is now moving rapidly to real assets. This will eventually lead to war as all war is eventually for resources.

Crazy Horse , August 6, 2016 at 4:23 pm

My comment never made it to the site. It trust it was a technical error rather than censorship. The basic content argued that income levels have little to do with economic well being unless you factor in consumer debt. That accounts for the fact that "wealthy" Americans fall just below poor Greeks on the scale of median net personal worth.

[Jul 19, 2016] The economy can grow as long as there is surplus affordable energy in that account. The economy stops growing when the cost of energy production becomes unaffordable.

peakoilbarrel.com

Javier , 07/15/2016 at 5:14 pm

Art Berman also has an article dealing with Peak Oil for economic reasons. It looks like a lot of agreement lately on this issue between experts.

Oil Prices Lower Forever? Hard Times In A Failing Global Economy

Ron Patterson , 07/15/2016 at 5:32 pm
Yeah, this is a very good article. Art understands how the world works.

Energy is the economy. Energy resources are the reserve account behind currency. The economy can grow as long as there is surplus affordable energy in that account. The economy stops growing when the cost of energy production becomes unaffordable. It is irrelevant that oil companies can make a profit at unaffordable prices.

[Jul 19, 2016] Conventional producers no longer can significantly ramp up production when they like

Notable quotes:
"... There seems to be a general assumption that the larger conventional producers can choose to significantly ramp up production when they like, but I doubt that is true. Saudi have just bought on line the Shaybah extension which was a pretty big job to extend production facilities for 'just' 250,000 bpd. ..."
"... Usually in mature fields the wells become limiting. For example as water cut increases not only does the water displace the oil but also, as it is significantly heavier than the oil/gas mix in the wellbore, the overall flow rate declines rapidly. ..."
peakoilbarrel.com
George Kaplan , 07/14/2016 at 8:27 am
There seems to be a general assumption that the larger conventional producers can choose to significantly ramp up production when they like, but I doubt that is true. Saudi have just bought on line the Shaybah extension which was a pretty big job to extend production facilities for 'just' 250,000 bpd.

Production from a given field may be limited by different parts of the facilities at different times. Typically the limit will be the lowest nameplate capacity between each of: the reservoir / wells; oil processing; produced water handling; associated gas compression; total liquids flow; water (or gas) injection capacity. Overall power availability may also be limiting at some combination of oil/water/gas flow below each one of their individual limits.

Usually in mature fields the wells become limiting. For example as water cut increases not only does the water displace the oil but also, as it is significantly heavier than the oil/gas mix in the wellbore, the overall flow rate declines rapidly. However this need not always be the case. In Saudi I think they design and manage their facilities to keep the production at the oil flow design capacity, which is nominally set to give 2% depletion of the original estimated ultimate reserves per year. To maintain this they maintain excess capacity in the other key facilities. In particular they need to control the water cut by using intelligent wells, expandable liners, and recompletions, or when needed drill new wells higher in the formation. If they lose control of the water cut, which must happen one day (ideally for them it would be the day they flow the last barrel of oil and shut in but that is not going to happen) then the likely limit will be water injection capacity. Water has to be pumped in to maintain pressure to exactly balance the volume pumped out. For the produced water in the oil that is about one for one, for a stock tank barrel of oil it is higher because the oil shrinks as it cools, but mainly because of the gas that is lost. This is ratio is called the formation volume factor and typically is 1.1 to 1.8. Say for a field the water cut is 50% and the FVF is 1.5, this means 2.5 bbls of injection water are needed to give one bbl of oil. I don't know the Saudi figures but something like that for them means 25 mmbwpd injection (that represents a huge amount of large pipes and pumps, and power – the water isn't like domestic supply, it has to be at high pressure). It's not normally economic to build in much spare capacity for the piping systems (but who knows with Saudi). Once water can't be controlled in horizontal wells the cut increases quickly, if it can't be handled within the facilities and enough pressure maintenance from injected water supplied then the oil production has to fall (i.e. wells choked back) accordingly.

If at a capacity limit (or limits) increasing production may need new wells, but more than that completely new topsides facilities, anything more than a few tweaks would need at least 2 to 3 years engineering, procurement and construction effort.

Doug Leighton , 07/14/2016 at 9:35 am
Informative comment. Thanks George
Fernando Leanme , 07/14/2016 at 10:52 am
Very good overview. I worked with a field set up to handle extra water, but they forgot the water heat capacity requires more heaters. So as water cut climbed we had to use lots of chemicals to get clean oil, until we could install more heaters and heat exchangers. These bottlenecks can be really subtle, so I took to asking for full surface system simulation runs at 90 % field water cut to see where the troubles were bound to pop up.
Javier , 07/14/2016 at 3:01 pm
I think Survivalist and Petro have nailed a very good analysis of the situation. When prices crashed most National Oil Companies and many independent producers tried (and are trying) to produce more to maintain income. The real tragedy comes when prices remain low and production falls like in Venezuela. Lack of investments guarantees that this will happen eventually to most producers, and then once production falls enough we will get very destructive price spikes.
Petro , 07/14/2016 at 3:36 pm
Bingo!

…while indeed initiated by geology, this time "PEAK" shall be by the way – and in the form of low prices…

As I said before:
….more than $65-$75/brl/oil kills economy….less than $60brl/oil kills Shallow and his colleagues…. take your pick….

We have reached our limits…
Let's keep the party going for a little while longer and enjoy it responsibly.

Be well,

Petro

shallow sand , 07/14/2016 at 4:20 pm
$60 doesn't kill us. I have been hoping for a $55-$65 price band, but we are way below that.

We got $44 average for all of 2015, $32 average for first six months of 2016. We are around $5 off WTI.

That's why break even at $50 is crap. We haven't been there for 20 months on a sustained basis.

As AlexS notes elsewhere, I'm starting to think $50 breakeven refers to per BOE, which means $70+ WTI.

shallow sand , 07/14/2016 at 5:12 pm

Petro. I understand.

My point is our savior, US LTO, needs a higher price than our 111 year old stripper field.

Which means to me there is a real problem on the horizon.

Hickory , 07/14/2016 at 9:29 pm
Petro, we see eye to eye on much these issues, but I do think that the world economy will be able to pay much more for oil than 60$ without crashing. Probably more than $100.
The stuff is too useful, and money will be diverted from other uses to keep buying it.
We'll see, one way or another….

Javier , 07/15/2016 at 6:25 am

Hickory,

You cannot simply look at the oil price between 2010 and 2014 and deduce that those prices are sustainable for the World economy. You need to understand the situation under which those prices were made possible at the time. The period 2009-2014 was a time when Chinese debt was growing at unsustainable levels to fuel an oil demand that compensated the demand contraction from an overindebted Europe that could not accept those high oil prices and went into recession and debt crisis. The period 2009-2014 was also a time when central banks engaged in exceptional ZIRP and quantitative easing policies with most countries significantly increasing their public debt.

But there is only one China and all significant economies have now a high level of indebtment so a very rapid growth of debt has become a lot less likely. At the same time ZIRP and quantitative easing policies are a one way avenue of increasing risk, decreasing effect, and extremely difficult return.

The oil price crash has probably delayed the next economic crisis. However the world economy is in no position to assume the oil prices required to guarantee the level of investment required to increase oil production above 2015 levels.

Oil depletion, debt, and low economic growth, will all work to make 2015 the year of Peak Oil. If we enter a period of high oil price volatility due to mismatches between production and demand that will be very destructive both to the economy and to oil production.

Dennis Coyne , 07/15/2016 at 10:07 am
Hi Javier,

Possibly $100/b is a problem, but there is a lot of room between $50/b and $100/b. When oil supply decreases, oil price will increase. How much oil prices can increase without damaging the World economy is far from clear.

One can arbitrarily claim $75/b is the magic number that will make the economy crash, nobody knows. There might be a sweet spot between $75/b and $95/b where oil supply can either be maintained or possibly increase slightly and not cause World output to decline. World debt to GDP has been relatively stable since 2010 based on BIS data.

Hickory , 07/15/2016 at 11:30 pm
Javier- you (and Petro etc) may be right, and the civil difficulties of Venez and poverty of Moldova may be coming to places far and wide.
I'm thinking that most commerce will still churn on, even if oil is 100$. Maybe just wishful thinking.
Dennis Coyne , 07/15/2016 at 6:38 am
Hi Hickory,

I agree. There is very little evidence that oil over $75/b kills the economy, what it has done recently is result in too much oil production relative to demand.

What has changed is that there is no one willing to cut back on output. From 1930-1970, Texas was the World's swing producer and from 1985-2014 Saudi Arabia fulfilled that role. Now we will see volatility in oil prices unless some new cartel is formed, maybe OPPC (Organization of Petroleum Producing Countries).
US, Norway, UK, Russia, Brazil, and Canada could join the OPEC nations and have a production agreement to control oil prices.

This would never happen, but maybe each nation should regulate output as the RRC once did for Texas, it would help with oil price volatility. Reply

[Jul 19, 2016] E P spending is much lower this year than was expected even after the big cuts initially announced. US independents and Canada in particular are hurting

Notable quotes:
"... Survey of international spending reveals a 19% decline compared with an initial estimate of 14% in January. The Middle East remains an area of stability while the largest negative revisions come from large IOCs, Latin America, and the Asia Pacific region, excluding China. Latin America is still the weakest region, where spending is expected to decline 30%. ..."
"... IOCs and independents are projected to have spending declines of 24% this year, while other independents are expected to spend 45% less. This compares with prior decline estimates of 10% and 17%, respectively." ..."
peakoilbarrel.com

George Kaplan , 07/13/2016 at 1:48 am

E&P spending is much lower this year than was expected even after the big cuts initially announced. US independents and Canada in particular are hurting. Middle East is the only place holding up.

http://www.ogj.com/articles/2016/07/cowen-global-n-american-e-p-spending-fall-revised-downward.html

"In its midyear E&P spending update, Cowen & Co. now estimates global expenditures to fall 24% compared with a 16% decline in its January survey. The downward revisions were primarily driven by larger spending cuts from North America-focused E&Ps and major international oil companies.
In this update, Cowen & Co. expects US spending to decline 45%, reflecting oil prices of $40/bbl and natural gas prices of $2.50/MMbtu. This was down from a 22% estimate at the time of January's survey, which was based on $48.5/bbl oil and $2.50/MMbtu gas. Canada spending is expected to fall 33% compared with an earlier estimate of an 18% falloff.

Survey of international spending reveals a 19% decline compared with an initial estimate of 14% in January. The Middle East remains an area of stability while the largest negative revisions come from large IOCs, Latin America, and the Asia Pacific region, excluding China. Latin America is still the weakest region, where spending is expected to decline 30%.

IOCs and independents are projected to have spending declines of 24% this year, while other independents are expected to spend 45% less. This compares with prior decline estimates of 10% and 17%, respectively."

[Jul 19, 2016] Oil is becoming much harder to find

Notable quotes:
"... Steve Kopits at Princeton energy advisors has shown that between 1998-2005 $1.5 Trillion was spent on oil CapEX to increase oil output by 8.4 Mbpd and that from 2005-2013, $4.0 Trillion was spent on CapEx to increase output by just 2.4 Mbpd. ..."
peakoilbarrel.com

VK , 07/13/2016 at 4:12 pm

The price of oil seems pretty darn important. Art Berman had an interview with Chris Martenson on peak prosperity that projects with some 20 Billion barrels of oil have been deferred due to the current low price. That's a pretty large amount of oil that's not coming online when required as a result of price.

Not to mention that oil is becoming much harder to find, Steve Kopits at Princeton energy advisors has shown that between 1998-2005 $1.5 Trillion was spent on oil CapEX to increase oil output by 8.4 Mbpd and that from 2005-2013, $4.0 Trillion was spent on CapEx to increase output by just 2.4 Mbpd.

Society is energy constrained and it's showing up in the economy with crazy effects like NIRP, where $13 Trillion worth of global bonds now yield negative returns from Zero just a few years ago, think about that, paying someone to borrow your money!! Also an economy where young people aren't getting decent jobs to pay for incredibly overpriced house prices as evidenced by affordability ratios, where populism and extremism is on the rise globally as well as large swathes of society are left out of prosperity. Energy is the ability to do work, without increasing energy supplies society has to fundamentally change.

[Jul 19, 2016] Has depletion finally gained the upper hand?

Notable quotes:
"... There are still a lot of projects due this year and next and even into 2018, but not quite enough to make up for the declines. ..."
"... Probably 2.5 to 3.5 mmbpd fall over the three years barring big, unexpected outages. In 2019, 2020 and 2021 there will be dramatic and accelerating falls unless a lot of expensive, and currently delayed, oil developments are fast tracked soon, or a lot of very cheap oil is found somewhere, or in fill drilling ramps up quickly on the big reservoirs. ..."
"... It's time lag. Simply said, when prices where at 100$+, everyone had lot's of money to invest and drilled like mad to get even more oil, explored, developed new fields. These operations have normally completion times of a few years, so they come alltogether online now. A typically pork circle. Price does matter – now new projects are delayed or canceled, ready to go into the next round. ..."
"... How can anyone possibly deny the effect the price of oil has on the production of oil? The very high price of oil brought on the shale revolution. Oil prices above $80 a barrel caused shale oil production to boom. However shale oil production is just uneconomical at prices below $60 a barrel, or somewhere in that neighborhood. ..."
"... Almost every barrel being produced cost a different amount to produce. There is a thing called "the margin". That is what it cost to produce the most expensive barrel of oil being produced. As the price of oil drops, barrels being produced "at the margin" starts to drop off. More expensive oil stops being produced, less expensive oil continues to be produced. Of course there is a delay between the price dropping below the margin and that marginal barrel dropping from production. ..."
peakoilbarrel.com

Florian Schoepp ,

07/12/2016 at 1:09 pm
Has depletion finally gained the upper hand? My back of the envelope calculation:
Conventional: 78 million barrels at 4% = 3.1 million barrels.
All other: 19 million barrels at 10% = 1.9 million barrels.
Total: 5 million barrels per year
2015 was a year where a lot of projects came online that were developed in previous years. There is less of that this year. So 2 million for this year seem reasonable. Next year will be interesting.
If demand keeps growing, there should be a substantial shortfall, draining storage. The only way to close the fast growing gap is a miraculous recovery of Libya and others that are currently hampered by political unrest.
George Kaplan , 07/12/2016 at 1:28 pm
There are still a lot of projects due this year and next and even into 2018, but not quite enough to make up for the declines.

Probably 2.5 to 3.5 mmbpd fall over the three years barring big, unexpected outages. In 2019, 2020 and 2021 there will be dramatic and accelerating falls unless a lot of expensive, and currently delayed, oil developments are fast tracked soon, or a lot of very cheap oil is found somewhere, or in fill drilling ramps up quickly on the big reservoirs.

We'll get to see the truth behind LTO sustainability and flexibility; that and depending on how demand goes, plus the real storage numbers will determine prices and therefore future supply developments. Overall though I agree, I think we will suddenly find ourselves short at some point in the next 5 years, and without many options.

Watcher , 07/12/2016 at 4:50 pm
Why would you want to drain storage when you can kill competing consumption with weapons.
Dave P , 07/12/2016 at 11:14 pm
Because the people you are trying to kill will then attempt to kill you?
clueless , 07/13/2016 at 3:51 pm
Watcher – I think that Ron "almost" has you pegged. Basically he notes that no one can be that Fu–ing stupid. But, he may be wrong. What in the hell are you talking about when you say "you can kill competing consumption with weapons?" Why would anyone in the supply chain want to kill "CONSUMPTION?"
Fernando Leanme , 07/13/2016 at 11:48 am
It's erroneous to decline "all other" at a fixed rate like you propose.
Watcher , 07/12/2016 at 4:54 pm
Output of KSA vs July 2014 at $100+ /b up about 600K bpd. Less than 1/2 price and up 600K bpd.

What's the latest Russia vs July 2014, Ron? Similar? Probably.

Imagine that. Price didn't matter.

Till , 07/12/2016 at 5:33 pm
It's time lag. Simply said, when prices where at 100$+, everyone had lot's of money to invest and drilled like mad to get even more oil, explored, developed new fields.

These operations have normally completion times of a few years, so they come alltogether online now. A typically pork circle. Price does matter – now new projects are delayed or canceled, ready to go into the next round.

Dennis Coyne , 07/12/2016 at 6:15 pm
Hi Till,

You won't convince Watcher that price matters, but most of us agree that price matters.

Ron Patterson , 07/12/2016 at 6:34 pm
How can anyone possibly deny the effect the price of oil has on the production of oil? The very high price of oil brought on the shale revolution. Oil prices above $80 a barrel caused shale oil production to boom. However shale oil production is just uneconomical at prices below $60 a barrel, or somewhere in that neighborhood.

Dammit, it is as plain as the nose on your face. Price determines production. Does Watcher really deny that simple fact? No, Dennis, you are simply mistaken. Watcher is not so dumb as to deny that simple fact…. Is he???

Oldfarmermac , 07/12/2016 at 8:48 pm
Watcher has BEEN denying it, as steadily as if somebody were paying him by the word, for as far back as I can remember.

Some people, quite a few actually, believe God looks after their lives for them on an every day basis, and no amount of evidence, good or bad, is enough to shake this conviction.

Watcher apparently believes in some UNIDENTIFIED POWER that keeps oil coming regardless of the price, or perhaps more accurately, keeps it coming even while controlling the price and forcing it down by half or three quarters.

Of course there might be another explanation. Maybe he just enjoys rubbing everybody nose in the apparent failure of the market system in the case of oil.

The explanation is simple enough, in principle. The oil industry is the biggest and slowest moving of all industries, when it comes to NECESSARILY operating on a five to ten year time scale in terms of making production decisions.

Being an orchardist, I am personally quite comfortable with such planning time scales, because my kind of work is planned on a very similar time scale. If I miscalculate , meaning guess, really, what the price of apples will be ten years down the road, and plant too many new trees, I am not just going to take a chainsaw or bulldozer to my orchard because the price collapses. I wait it out, and hopefully OTHER orchardists go broke first. Old trees will be dying, there is depletion in apples, lol.

The production decision making process is triply compounded in difficulty by what we usually forget , because in a forum such as this one, the discussion is centered around BUSINESSMEN out to make a living, folks such as Mike, Shallow Sand, Texas Tea, etc. They make rational decisions, as best they can.

What we forget is that the oil industry is an industry dominated by governments, and governments are notoriously clumsy in managing their business affairs when circumstances demand action.

Politicians, be they Saudi kings or socialist Venezuelans, or right wing dictators or more middle of the road types, are NOT going to do anything to upset their citizens, or piss them off, if it can be avoided. Laying off a few tens of thousands of people is just not DONE until there is NO OTHER choice.

Nobody would notice if we laid off half the people who work in the post office here in the USA. Every body I know , excepting my cousin who is a carrier, and the post master, thinks we could get along JUST FINE delivering the mail three days a week instead of six.

Politicians at the top of the heap are mostly interested in one thing, that thing being to stay in power, and to do that, they play an incredibly complicated, fluid game maintaining the network of supporters who ENABLE them to STAY in power.

Expecting them to act like BUSINESSMEN running a business is naive. As a rule, they will never do anything proactive in order to solve a problem that might just go away by itself. When they DO do something , it is to be expected that the doing will be undertaken much later than it ought to be, and that it will be inadequate to deal with the problem until the problem becomes an existential emergency.

ONCE all the chips are on the table, and it's literally do or die, or be sent home, out of office and out of power, governments can do some pretty spectacular things, such as mobilize to fight a flat out war.

Things aren't that bad yet, in the countries dependent on oil revenues,excepting Venezuela. Maduro is actively constructing a police state in hopes of staying in power.

The industry has excess capacity. It took years to build that capacity, and the economy couldn't absorb the amount of oil coming to market at a hundred bucks, so the price collapsed. The economy IS absorbing the oil coming to market, about the same amount , at about forty bucks.

It will take a WHILE for the excess capacity to dry up.Maybe another year or two, maybe less, maybe longer. If the economy turns sour, it will take longer.If the electric car revolution really comes to pass, on the GRAND SCALE, and very quickly, demand destruction will mean there is so much excess capacity that the price will stay low for a long time.

There is nothing involved in understanding the oil price question that requires more than a basic understanding of supply and demand, plus an additional understanding of the relevant time scales and the nature of GOVERNMENTS as opposed to BUSINESSMEN making decisions.

If businessmen were running the post office, we would have half as many postal employees, lol. Maybe even less.

Watcher , 07/12/2016 at 8:53 pm
OTOH, I notice 2 yrs later KSA is producing 600K bpd more oil at less than half the price.

And what is Russia producing now at less than half the price? (asking again since Ron tracks them)

Oh, and more fun, y'all recall the big drilling investment from the majors got cut in Jan 2014?

Frugal , 07/12/2016 at 9:08 pm
It`s called delayed effect.
Oldfarmermac , 07/13/2016 at 6:28 am
Farmers have generally done the same thing, collectively, when the price of whichever crop they produced crashed.

As an individual guy growing corn, or wheat, or rice, or apples, I cannot produce enough, or cut back far enough, to influence the market price. What I CAN do, is go flat out to produce every possible last bushel, going for the all important marginal dollar that might enable me to survive short term. This is what the SMALLER oil producers are doing, by and large.

While producing flat out individually, and collectively, we make the price crash even lower, and stay in the pits longer, but then this is what drowning men who cannot swim do in the water- try to survive by pushing themselves up by pushing another man under.

The game changes when one (or more) supplier is big enough and rich enough to have pricing power and staying power running at a loss. In that case, the big boy can "sweat" the little fellow , in the words of John D Rockefeller, running him out of business, deliberately.
Now this didn't take long at all while Rockefeller was running a small local company out back in the early days of big oil, but it can take a hell of a long time when the little guy is a sovereign government, or a giant corporation. I should say that SA and Russia are engaged in BOTH ways, producing flat out to maximize revenues, plus hoping to run some competitors out of the market, at least temporarily.

Folks who aren't TOO simple minded to think a little also realize there is such a thing as war and politics, and that war can be fought in markets as well as with guns. The USA basically broke the old USSR by making it impossible for that now dead empire to compete with us on building guns, never mind butter, plus encouraging the Saudis to flood the market and deprive the Soviets of oil revenue. Hard core D types will never admit that this is true however, because it is grounds for being kicked out of the party to admit that a Republican has ever succeeded at doing anything at all except creating more and bigger problems.

There is an element of WAR being played out in the oil markets now, and for the last year or two, and it will continue to be important for a while.

Anybody who thinks anybody in DC, excepting oil state congress critters and oil lobbyists, gives a flying fuck about the oil industries problems has a near zero understanding of economic politics. Cheap gasoline is an elixer that is damned good for the OVERALL economy, and as good as a zanax for soothing the nerves of consumers. To expect the Obama administration to do anything to raise the price of oil, when raising it would cost D 's elections, is tantamount to insanity. Who can remember this quote? "It's the economy, stupid"?

Hells bells, the R party rakes the D 's over the coals for LOWERING the price of oil by insisting on higher fuel economy standards, lol.

And one last little bit of ranting, and I will lay off for an hour or two , at least, so help me Jesus. This is history we are talking about, not a goddamned thirty minute tv show.

Things that matter take time in real life.

R DesRoches , 07/13/2016 at 8:10 am
Looking at what Ron has said that the threshold for LTO production is $60, what I find important is that just a few years ago that threshold was in the $80 to $100 range.

Even at today's prices, $45 to $50 range, we have seen the oil directed rig count, increase over the past few weeks.

This indicates that some of the better plays have a lower threshold.

As we go out in time I would not be surprised that the $60 threshold will move down again.

texas tea , 07/13/2016 at 1:27 pm
R DesRoches,
absence of some new technology, I expect we are at the lows of what LTO break-even cost will be for the best LTO plays. As oil prices pick up and balance sheets get better the drilling companies, Fracking co will begin to have some better pricing power and I expect they will use it. So for a time expect break even to stay low but begin to rise "somewhat" as prices move up. I still think $75 WTI is what the best companies in the best plays really need to MAKE MONEY not just break-even in a normal business environment. (lets says 1200 rigs running lower 48 ) I know I would be drilling in the areas I am active at that price, $50 not so much and only with a gun to my head :-)
clueless , 07/13/2016 at 3:45 pm
RDR – I am never sure of what anybody said about breakeven, unless it is accompanied by a complete financial statement.

If an oil company has undrilled land in an LTO area, that (1) needs production to "hold" the lease, and/or (2) has bank debt related to its lease acquisition, then: Their breakeven point and perspective is totally different (lower) than if you or I tried to determine our breakeven point if we went someplace, bought acreage and drilled a well.

Ron Patterson , 07/13/2016 at 10:43 am
OTOH, I notice 2 yrs later KSA is producing 600K bpd more oil at less than half the price.

And what is Russia producing now at less than half the price?

Watcher, you cannot measure every barrel produced with the same yard stick.

It cost KSA about $20 a barrel to produce oil, more in some places less in others. Therefore they want to produce every barrel possible in order to meet their budget.

It cost Russia pretty much the same to produce oil from their old fields. But it cost them much more to find new oil and produce it. The price of oil is hitting Russia very hard but will hit them much harder unless the price rises soon.

The low price of oil is killing Venezuela. Their production is dropping. It will drop much further unless the price starts to rise soon.

Almost every barrel being produced cost a different amount to produce. There is a thing called "the margin". That is what it cost to produce the most expensive barrel of oil being produced. As the price of oil drops, barrels being produced "at the margin" starts to drop off. More expensive oil stops being produced, less expensive oil continues to be produced. Of course there is a delay between the price dropping below the margin and that marginal barrel dropping from production.

Watcher, it is just fucking insane to claim that price has no effect on production. You have to know better than that. Why on earth do you think the number of oil rigs working in North Dakota dropped fro 215 rigs four years ago today, to 30 today? It was because the price of oil dropped and for no other reason. And that decline in the number of rigs is currently having a dramatic effect on oil production in North Dakota.

Dennis Coyne , 07/13/2016 at 1:09 pm
Hi Watcher,

Prices dropped in June 2014, maybe you mean Jan 2015?

Dennis Coyne , 07/13/2016 at 12:49 pm
Hi Ron,

It may be that I am misinterpreting Watcher. I have been mistaken in the past and history tends to repeat. :-)

Ron Patterson , 07/13/2016 at 3:09 pm
Dennis, I was just being sarcastic. I know that Watcher really does believe that the price of oil makes no difference. Imagine that! He also believes that money is just a piece of paper.
R DesRoches , 07/14/2016 at 8:35 am
If you go to any of the big LTO independent oil companies web sites and look at their investor presentations you will find two trends.

First the day to drill wells have come down in the last couple of years, in many cases by over 30%.

Second with bigger fracs and changes in the mix, IPs and EURs have gone up, in many cases above 25%.

What this means is that the break even price of oil has been coming down.

We are starting to see rigs coming back to the patch at oil prices below $50. IMO as the oil prices moves up towards the $60 level the rate of increase in rig counts will also increase.

Dennis Coyne , 07/14/2016 at 9:19 am
IPs have gone up due to more proppant and more frack stages, this increases well cost.

I doubt the breakevens have fallen below $75/b for full cycle costs.

R DesRoches , 07/14/2016 at 10:54 am
Yes they have added more stages with closer spacing, but total well cost to drill and complete have gone down.

According to EOG, 2/3 rds of the lower cost is from sustainable efficiency improvements and the rest is from lower service costs.

According to EOG spud to td has gone down by 43% to 59% (Bakken), and LOE has gone down 30% from $17.02 to $11.86.

At the same time 120 day production rates in 2014 has gone from 10.7 Bbl per foot to 20.9 Bbl in Q1 2016.

Bottom line more oil at lower cost has reduced break even oil price?

Dennis Coyne , 07/14/2016 at 2:31 pm
Hi R DesRoches,

Well costs went down and then back up as more esoteric well designs have become common. Note that supd costs may have gone down and LOE might also have gone down, but you are leaving out completion costs which is about 2/3 of the capital cost of the well, the decrease in spud cost has been more than offset by increases in completion costs (this includes the fracking). On balance total well cost has probably not decreased much and for the newer designs with more stages (up to 40 or so in the Bakken) and higher amounts of proppant, total well cost has probably increased.

The "lower well cost" presented in the investor presentations is for an older "standard well design". The newer well designs that have increased the output per well cost an extra 1 or 2 million per well (in the ND Bakken/Three Forks).

shallow sand , 07/14/2016 at 11:10 am
What does frac water cost per barrel, or at least a range? How many barrels of water are needed to drill and complete a hz well? How much does trucking the water cost.

I know all this can vary, so just some ranges will do.

Dennis Coyne , 07/14/2016 at 2:56 pm
Hi R DesRoches.

I took a look at oil rigs operating in the Permian, Bakken and Eagle Ford.

For those 3 plays we have:

Total oil rigs- 213
Horizontal-191
Vertical- 22

Bakken – 28T, 27H
EF- 27T, 26H
Permian-158T, 138H, 74% of oil rigs in the big 3 LTO plays.

Of the 28 oil rigs added since May 27, 2016, 22 were added to the Permian and all were horizontal rigs. The Bakken added 5 horizontal rigs and 1 vertical and the EF 1 vertical rig.

Based on this, Eagle Ford is probably the high cost play, then Bakken, with the Permian perceived as best at the moment of the LTO plays.

Data from Bakker Hughes pivot table.

http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother

Petro , 07/12/2016 at 11:49 pm
"…Imagine that. Price didn't matter…"

Watcher,

just like you were wrong when you wrote: "…countries with CBs cannot default…", you are incorrect with this one, as well.
(I clarified that for you here: http://peakoilbarrel.com/petroleum-supply-monthly-texas-cc-estimate-permian-and-eagle-ford/#comment-575038 )

-Not only price does matter, but It is PRECISELY due to the low prices that everybody is producing in a " …the last big party…" mode, … last oomph, if you will!
All in!
All they can!

….and has little to do with the "delayed effect"…. if there is such a thing.

Be well

Petro

[Jul 19, 2016] Oil Prices Lower Forever Hard Times In A Failing Global Economy

Notable quotes:
"... "Today, because of improvements in horizontal drilling technology, you've got a play that could be the largest onshore play in the country, not only in size of potential reserves but also in a real extent." ..."
"... The End of Normal ..."
"... The End of Normal ..."
www.forbes.com
by Arthur Berman

Forbes

When energy costs are low, the costs of doing business are correspondingly low. When energy prices are high, it is difficult to make a profit because the underlying costs of manufacture and distribution are high. This is particularly true in a global economy that requires substantial transport of raw materials, goods and services.

The global economy expanded in the mid-1980s through 1990s when oil prices averaged $33 per barrel. Then, oil prices nearly doubled to an average of $68 per barrel from 1998 to 2008, and subsequently increased after 2008 to 2.5 times more than in the 1990s. When oil prices exceed $90 per barrel, the global economy is no longer profitable.

... ... ...

America's Golden Age

The United States experienced a golden age of economic growth and prosperity during the 25 years following World War II. This period forms the basis for U.S. and indeed global expectations that growth is the norm and that recessions and slow growth are aberrations that result from mis-management of the economy. This is the America that today's populists want to return to.

The Golden Age, however, was a singular phenomenon that is unlikely to recur. After 1945, the economies and militaries of Europe and Japan were in ruins. The U.S. was the only major economy that survived the war intact. Having no competition is a huge competitive advantage.

The U.S. was the first country to fully convert to petroleum, another competitive advantage. A barrel of oil contains about the same amount of energy as a human would expend in calories in 11 years of manual labor . Crude oil contains more than twice as much energy as coal and two-and-a-half times more than wood . And it's a liquid that can be moved easily around the world and put in vehicles for transport.

In 1950, the U.S. produced 52% of the crude oil in the world and was largely self-sufficient. Texas was the largest U.S. producing state and the Texas Railroad Commission (TXRRC) controlled the world price of oil through a system of allowable production that also ensured spare capacity.

... ... ...

Tight oil used the same horizontal drilling and hydraulic fracturing technology that had been pioneered in earlier shale gas plays. The technology was expensive but once oil price topped $90 per barrel in late 2010 and stayed high for the next 4 years, the plays were deemed successful by producers and credit markets.

U.S. tight oil and deep-water production resulted in a second coming of sorts with monthly crude oil output reaching 9.69 million barrels per day in April 2015. That was 350,000 bopd less than the 1970 peak of 10.04 million bopd.

The difference of course was cost. In 1970, the market price of a barrel of oil in 2016 dollars was $20 per barrel versus $100 from 2011 to 2014, and $55 per barrel in 2015.

And this is precisely the problem with the almost universally held belief that technology will make all things possible, including making a finite resource like oil infinite. Technology has a cost that its evangelists forget to mention.

The reality is that technology allows us to extract tight oil from non-reservoir rock at almost 3 times the cost of high-quality reservoirs in the past. The truth is that we have no high-quality reservoirs left with sufficient reserves to move the needle on the high global appetite for oil. The consequence is that to keep consuming and producing as we always have will inevitably cost a lot more money. This is basic thermodynamics and not a pessimistic opinion about technology.

... ... ...

Nevertheless, in a zero-interest rate world, there was great enthusiasm for yields greater than conventional investments like U.S. Treasury bonds and savings accounts that continue to pay less than 2%. Bank and mezzanine debt, high-yield corporate ("junk") bonds and share offerings promised yields in the 6 to 10% range. As long as prices were high and the plays were marginally profitable, risks were downplayed and capital was almost unlimited. Two years into the oil-price collapse, capital is more limited because banks and investors have been burned.

Producers continue the mantra that costs keep going down and well performance keeps getting better. Those with some history and perspective, however, know and remember that they always say that but the balance sheets never reflect the claims.

In 1996, the late Aubrey McClendon made the following statement about the Louisiana Austin Chalk play:

"Today, because of improvements in horizontal drilling technology, you've got a play that could be the largest onshore play in the country, not only in size of potential reserves but also in a real extent."

That play was a total failure for McClendon's Chesapeake Energy Corporation and today Chesapeake is on the verge of bankruptcy for the second time.

People want to believe that things keep getting better and that they won't have to change their behavior-even if these beliefs defy common sense and the laws of nature.

... ... ...

Post-Financial Collapse monetary policies, the cumulative cost of nearly four decades of debt-financed growth, and the return of higher oil prices have exhausted the economy. Most debt is non-productive, interest rates cannot be increased, and 2016′s low oil prices are still one-third higher than in the 1990s (in 2016 dollars).

Producers and oil-field service companies are on life support. One-third of U.S. oil companies are in default . Yet some analysts who have no experience working in the oil industry proclaim break-even prices below $40 per barrel and breathlessly predict that the business will come roaring back when prices exceed $50. Producers don't help with outrageous claims of profitability at or below current oil prices that exclude costs and are not generally applicable to their portfolios.

As a result, the public and many policy makers believe that tight oil is a triumph of American ingenuity and that energy will be cheap and abundant going forward. The EIA forecasts that U.S. crude oil production will exceed the 1970 annual peak of 9.6 mmbpd by 2027 and that tight oil will account for almost 6 million barrels per day. Although I have great respect for EIA, these forecasts reflect a magical optimism based on what is technically possible rather than what is economically feasible.

Renewable energy will be increasingly part of the landscape but its enthusiasts are also magical thinkers.

In 2015, renewables accounted for only 3% of U.S. primary energy consumption. No matter the costs nor determination to convert from fossil to renewable energy, a transition of this magnitude is unlikely in less than decades.

Solar PV and wind provide much lower net energy than fossil fuels and have limited application for transport–the primary use of energy– without lengthy and costly equipment replacement. The daunting investment cost becomes critically problematic in a deteriorating economy. Although proponents of renewable energy point to falling costs, more than half of all solar panels used in the U.S. are from China where cheap manufacturing is financed by unsustainable debt.

It is telling that energy and its cost can hardly be found among the endless discussions about the economy and its failure to grow. Technology optimists have disparaged the existence of an energy problem since at least the 1950s. Neither unconventional oil nor renewable energy offer satisfactory, reasonably priced, timely solutions to the dilemma.

As political leaders and economic experts debate peripheral issues, the public understands that there is something horribly wrong in the world. It is increasingly difficult for most people to get by in a failing global economy. That is why there are political upheavals going on in Britain, the United States and elsewhere.

The oil industry is damaged and higher prices won't fix it because the economy cannot bear them. It is unlikely that sustained prices will reach $70 in the next few years and possibly, ever.

The British exit from the European Union adds another element of risk for investors. Lack of investment will inevitably lead to lower production, supply deficits and price spikes. These will further damage the economy.

The future for oil prices and the global economy is frightening. I don't know what beast slouches toward Bethlehem but I am willing to bet that it does not include growth. The best path forward is to face the beast. Acknowledge the problem, stop looking for improbable solutions that allow us live like energy is still cheap, and find ways to live better with less.

--------------------------

*J.K. Galbraith, 2014, The End of Normal , p.54. Much of the economic interpretation in this post is based on Galbraith's work.

**J.K. Galbraith, 2014, The End of Normal , p.57.

Art Berman
Petroleum Geologist and Professional Speaker
Visit my website for more information: artberman.com

[Jul 18, 2016] Automatic Braking Systems To Become Standard On Most U.S. Vehicles The Two-Way

NPR
Some 20 carmakers have committed to making automatic emergency braking systems a standard feature on virtually all new cars sold in the U.S. by 2022, according to a new plan from the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety.

Automatic brakes are designed to stop a vehicle before it collides with a car or another object. Experts say that making them standard could prevent as much as 20 percent of accidents.

NPR's Sonari Glinton reports for our Newscast unit:

"Many cars on the road now have automated brakes. And when you're new to them, it's pretty scary when the car stops on its own. But experts say automatic brakes could make the fender bender a thing of the past.

...

"It's part of a push to fight the growing problem of driver distraction and a step closer to driverless cars. Now carmakers have to figure out by 2022 how they'll integrate the systems."

NHTSA released a list of the car companies that have committed to the system:

"Audi, BMW, FCA US LLC, Ford, General Motors, Honda, Hyundai, Jaguar Land Rover, Kia, Maserati, Mazda, Mercedes-Benz, Mitsubishi Motors, Nissan, Porsche, Subaru, Tesla Motors Inc., Toyota, Volkswagen and Volvo."

"In 2012, one-third of all police-reported crashes involved a rear-end collision with another vehicle as the first harmful event in the crash," according to the government's information page on Automatic Emergency Braking systems. It adds that AEB systems can either avoid or reduce the severity of some of those rear-end crashes.

In a statement about the plan, NHTSA says the "unprecedented commitment" from the automakers will bring the safety technology to "more consumers more quickly than would be possible through the regulatory process."

[Jul 17, 2016] Ron Patterson

peakoilbarrel.com
, 07/15/2016 at 7:52 pm
Looking at Art Berman's chart below. World oil production since 2005, less US and Canada, has been pretty much flat. This is despite the fact that prices have risen dramatically in that period of time. So lets look at the other huge gainers since 2005.

Russia: See the EIA's take above. Even if they are wrong, Russia's huge gains are gone forever.

Angola, Brazil, China and Colombia: China and Colombia have definitely peaked. Angola peaked in 2010 and has declined slightly and been flat since then. Only Brazil has any hope of increasing production, and tat not by very much.

Iraq: I believe Iraq has peaked. Some may disagree but there is no doubt that their best days are behind them. They have far more downside potential than upside potential.

There is little doubt that all those countries will decline in the next few years regardless of what the price of oil is. After all, if oil above $100 a barrel in the past did not sent them producing massive amounts of oil, there is no reason to believe it will do so in the future.

That leaves the USA and Canada. To those massive high prices in the past few years, only the USA and Canada responded. So… will higher prices bring on enough US and Canadian production, to make up for the decline in the rest of the world… plus increase production enough to push production above the 2015 peak?

Not a snowball's chance in hell will that happen.

photo CC Production by Cuntry_zpsmmrubi3z.jpg

Caelan MacIntyre , 07/15/2016 at 9:29 pm
Sobering, as Euan writes. Alarming I'd say.
In a possible future's retrospect, it may turn out to have come as a surprise how fast things unraveled sociogeopolitically so close after the peak.

Fossil fuel, within a certain EROEI range is, of course, power. It powers pseudoeconomies, governpimps, and their militaries. And now China and Russia, for two examples, are not nearly as 'backwoods' as they may have been, historically. They have become, 'Westernized'…

LTG , 07/15/2016 at 10:12 pm
Hi Ron,
What are your reasons for calling the Iraq peak?
Thanks
Ron Patterson , 07/16/2016 at 7:15 am
After a year of trying to increase their production they have been unable to do so. Now things are likely to get worse. Iraq depends almost entirely on outside contractors. Also there has been a steady stream of skeptical news coming out of Iraq.

Iraq struggles to match January's record oil production

Iraq is Opec's second-largest producer after Saudi Arabia and has ambitious plans to increase production capacity to between 5.5m b/d and 6m b/d by 2020.

This target, which has been revised downward in recent months, has been viewed with scepticism as a budget crisis is limiting the federal government's ability to pay companies that are producing oil in Iraq. These include from BP, Royal Dutch Shell and Russia's Lukoil.

Although they are developing some of the lowest cost easy-to-access deposits of oil in the world, the fields need more investment to maintain production at current levels and increase future capacity. At the same time, the government in Baghdad is requesting companies reduce spending.

"We're taking more risk to keep production the same, while not getting paid. We can't continue to produce for 2-3 years like this, it's not possible," said one executive at an oil company operating in Iraq. "Maybe they can achieve 6m b/d by 2030."

photo Iraq_zpsmk9hg42n.png

These numbers are through June. As you can see they still have not matched January's numbers. And their contractors are not getting paid. Now what would you think would be the likely effect on Iraqi oil production?

LTG , 07/16/2016 at 11:23 am
Hi Ron,

My guess is that Iraq oil production will struggle to maintain current levels over the next couple of years and then drop rapidly as their ongoing religious civil war makes the situation too dangerous for continued foreign investment.

Another guess is that the global economy will be in recession by 2020, reducing demand, lowering world oil prices, and pushing many national economies into bankruptcy. The impact for countries highly dependent on oil revenue to maintain social services and stability will be devastating and we'll see the breakdown of societies and the rise of dictatorship.

All wags of course. But it seems to me, generally, that geopolitics and social/economic problems will begin to overtake any geologic and technological limitations in world oil production. Venezuela is a current example, and now Iraq, starting with their "budget crisis" and workers "not getting paid", as your article describes. In other words, above ground factors are determining production and not the lack of oil in place.

Thanks for your reply, always appreciate your clear-headed thinking.

Javier , 07/16/2016 at 5:05 am
Ron,

Matt Musalik has been making similar graphs for a long time showing the same:
http://crudeoilpeak.info/latest-graphs

Probably Art is basing his incremental graph in Matt's ones.
Also very noteworthy is Matt's graph on "Conventional Oil Plateau" from his May 2015 update on that link.

[Jul 17, 2016] The Stagnation Capitulation and The Taper Tantrum

Notable quotes:
"... He argues that what just happened is that investors suddenly decided that economies were not going to return to normal any time soon. ..."
July 12, 2016 | Angry Bear

Paul Krugman interpreted the recent decline of 10 year safe interest rates from extremely low to astonishingly low as a capitulation to stagnation. He argued (convincingly) that investors have decided that short term safe interest rates will remain extremely low for a long time (evidently at least 10 years) and that the post 2008 pattern of slack demand, low inflation and extremely low interest rates is the new normal. It is probably best to just read his op-ed, but he considered and rejected the arguments that the low safe interest rates are the result of a flight to quality.

I want to compare the recent sharp decline in interest rates to the sharp increase in 2013 which is called the "taper tantrum". I can't manage an alliteration however, stagnation capitulation rhymes and is (arguably) the mirror image of the taper tantrum.

I make the comparison for two reasons. The first is that the conventional term "taper tantrum" asserts that the cause of the 2013 increase is an announcement by the Federal Reserve Open Market Committee (FOMC) that they were considering tapering the monthly pace of quantitative easing (not reducing their assets but reducing the rate of increase). This interpretation would imply that I have been wrong for years as I argue that quantitative easing has only small effects. This is a silly personal reason for continuing to discuss the taper tantrum, so I will move that discussion after the jump.

The second reason is that there is an alternative interpretation of the 2013 increase which is the exact mirror image of Krugman's stagnation capitulation hypothesis. I tried to present it here. I expressed the idea even worse than usual so I will try again now (and ask the reader to trust me that this is what I had in mind then)

The story is that investors assumed back in 2012 and 2013 that the economy and interest rates would return to normal some time fairly soon. Then in Spring 2013, they decided that this time had come so they all demanded higher returns on bonds. This (not successfully written) story is the exact mirror image of Krugman's op-ed. He argues that what just happened is that investors suddenly decided that economies were not going to return to normal any time soon.

This is relevant to the old debate about QE, because if markets can shift one way without FOMC action, they could have shifted the other way for reasons other than a bland FOMC announcement. More grinding old axes after the jump.

... ... ...

[Jul 17, 2016] Cassandra's Legacy Some reflections on the Twilight of the Oil Age - part I

cassandralegacy.blogspot.in

If we had a whole century ahead of us to transition, it would be comparatively easy. Unfortunately, we no longer have that leisure since the second key challenge is the remaining timeframe for whole system replacement. What most people miss is that the rapid end of the Oil Age began in 2012 and will be over within some 10 years. To the best of my knowledge, the most advanced material in this matter is the thermodynamic analysis of the oil industry taken as a whole system (OI) produced by The Hill's Group (THG) over the last two years or so ( http://www.thehillsgroup.org ).

THG are seasoned US oil industry engineers led by B.W. Hill. I find its analysis elegant and rock hard. For example, one of its outputs concerns oil prices. Over a 56 year time period, its correlation factor with historical data is 0.995. In consequence, they began to warn in 2013 about the oil price crash that began late 2014 (see: http://www.thehillsgroup.org/depletion2_022.htm ). In what follows I rely on THG's report and my own work.
Three figures summarise the situation we are in rather well, in my view.
Figure SEQ Figure \* ARABIC 1 – End Game

For purely thermodynamic reasons net energy delivered to the globalised industrial world (GIW) per barrel by the oil industry (OI) is rapidly trending to zero. By net energy we mean here what the OI delivers to the GIW, essentially in the form of transport fuels, after the energy used by the OI for exploration, production, transport, refining and end products delivery have been deducted. However, things break down well before reaching "ground zero" ; i.e. within 10 years the OI as we know it will have disintegrated. Actually, a number of analysts from entities like Deloitte or Chatham House, reading financial tealeaves, are progressively reaching the same kind of conclusions. [1]

The Oil Age is finishing now, not in a slow, smooth, long slide down from "Peak Oil" , but in a rapid fizzling out of net energy. This is now combining with things like climate change and the global debt issues to generate what I call a "Perfect Storm" big enough to bring the GIW to its knees.

In an Alice world


At present, under the prevailing paradigm, there is no known way to exit from the Perfect Storm within the emerging time constraint (available time has shrunk by one order of magnitude, from 100 to 10 years). This is where I think that Doomstead Diner's readers are guessing right. Many readers are no doubt familiar with the so-called "Red Queen" effect illustrated in REF _Ref329530846 \h Figure 2 08D0C9EA79F9BACE118C8200AA004BA90B02000000080000000E0000005F005200650066003300320039003500330030003800340036000000 – to have to run fast to stay put, and even faster to be able to move forward. The OI is fully caught in it.
  1. Dominik Lenné July 13, 2016 at 12:51 PM

    I find in this article too many crass claims and too few simple facts, and even those questionable.
    Take graph 1. It suggests, that in 2015, i.e. a year ago, the EROI of oil were 1.17. In fact it was always more than 5, in most cases even more then 10, afaik, even for the "new sources", i.e. tar sands &c.
    Concerning the energetic cost of the transition: In a first approximation, energy investment in renewables and saving has paid for itself within a year. This means, that if we transform 10 % of our energy infrastructure to renewables and saving per year, we have to use 10 % of our available power for it. This is certainly a lot. But it is certainly doable, if we want. The latter, of course, is the nub of the matter.
    I have the feeling i have to wade through a rhetoric jungle to search for valuable information. May be a matter of taste, i admit.

    1. Dr Louis Arnoux July 14, 2016 at 1:02 AM

      It is important to not confuse EROi or EROEI at the well head and for the whole system up to the end-users. The Hill's Group people have shown that the EROIE as defined by them passed below the critical viability level of 10:1 around 2010 and that along current dynamics by circa 2030 it will be about 6.89:1, by which time no net energy per barrel will reach end-users (assuming there is still an oil industry at this point, which a number of us consider most unlikely, at least not the oil industry as we presently know it). Net energy here means what is available to end-users typically to go from A to B, the energy lost as waste heat (2nd principle) and the energy used by the oil industry having been fully deducted - as such it cannot be directly linked in reverse to evaluate an EROI.
      Re the necessary energy investments to build-up a renewable capacity, Parts 2 and 3 will elaborate on the matter. Let's just say for now that we are talking here of whole system replacement, globally, and not just considering the energy embodied in the implementation of this or that bit of renewable technology - the pictures look very different at the micro and macro levels.

[Jul 16, 2016] China's Oil Output Tanks , Hits 4 Year Low

Notable quotes:
"... In June alone, China pumped 8.9 percent less crude than a year earlier, with state-owned giants such as PetroChina and CNOOC shuttering unprofitable fields ..."
"... Crude oil imports in January-June jumped 14 percent, China's national Bureau of Statistics said ..."
Jul 15, 2016 | OilPrice.com

China's crude oil output over the first half of the year stood at 101.59 million metric tons, down 4.6 percent and the lowest six-month figure since 2012, Bloomberg reports. The decline reflects China's stated shift from an industry-focused economic model to a more service-oriented one. It is also related to a drive by the government to cut the country's environmental footprint, struggling with a reputation of China as one of the most polluted places on earth. Low oil prices were also a factor in the production trend.

In June alone, China pumped 8.9 percent less crude than a year earlier, with state-owned giants such as PetroChina and CNOOC shuttering unprofitable fields and turning to low-cost imports instead.

Crude oil imports in January-June jumped 14 percent, China's national Bureau of Statistics said, with June recording the weakest growth.

[Jul 05, 2016] New estimate for reserves and resources from Rystad

Notable quotes:
"... The developed proved and probable is 655 Gb, which would equate to about 4.5% natural decay rate. ..."
peakoilbarrel.com

George Kaplan , 07/04/2016 at 1:25 pm

New estimate for reserves and resources from Rystad:

http://www.worldoil.com/news/2016/7/4/us-now-holds-more-oil-reserves-than-saudi-arabia-rystad

The developed proved and probable is 655 Gb, which would equate to about 4.5% natural decay rate.

There is supposed to be about 900 Gb undiscovered, which at last years rates would take about 300 years to find (and my guess is that if there is that much hydrocarbon it has a significant amount of gas).

And there are 500 Gb discovered and undeveloped, I don't follow that much but there is a country break down to check out, but the IOCs stopped development with prices at $110 per barrel so it's probably going to cost more than $8 trillion to put that much on line.

[Jul 05, 2016] Arthur Berman Why The Price Of Oil Must Rise Peak Prosperity

Notable quotes:
"... So he's covered. I'm about to publish something here maybe today and the sub title of this section is called "It's not a lie if we tell you it's a lie." That's the name of the game. As long as the investor presentation or the news release says somewhere that we're using language here that we would never ever use in an SEC filing because they'd put us in jail. And so you guys need to know that. In other words, "we're lying," then it's technically not a lie. It's not fraud because we told you it was a lie. ..."
"... Well we started this conversation with your important observation that we're only talking about a million or million and a half barrels a day of oversupply. So we could go from over supply to deficit pretty quickly ..."
"... So just the capital cuts in US companies have effectively deferred $20 billion-or maybe the world, I'm sorry-$20 billion barrels of development of known proven reserves. ..."
"... Well there's a big lag. There's a huge time lag between when the price responds and people actually get around to drilling and they actually start bringing the oil onto the market and it becomes available as supply, because they've been asleep at the wheel for how many months or years. You don't just turn a valve and all of a sudden everything is okay again. ..."
"... There's this tremendous gap between "okay we know there's a reserve," but what's it take to turn it into supply? Well it takes time and it takes money and it doesn't happen overnight. ..."
"... EIA says average price in 2016 will be $53 a barrel. They're not always right and in fact they're often wrong but they're not stupid either. They're doing the best they can. They have got some good people there. ..."
"... Well just turn the clock back to 2012-2013 when oil prices were sky high, were $100 a barrel or more, and what we saw was consistent negative cash flow from virtually all of the major players. So what that says is they weren't making money when oil prices were high, so is it a big shock that they're hemorrhaging when oil prices are lower? So oil prices go back up-the bottom line Chris is the only way that they were able to stay looking fairly good back then to somebody, not me, was that people were giving them money. They had infinite access to capital at almost no cost, and so they were spending it. But their income statements and balance sheets look like crap and the investment community I guess was willing to look past that or didn't want to look at it or whatever. ..."
www.peakprosperity.com

Chris Martenson: ... And still when I look at the operators in those plays they're claiming that they're going to get twice that, sometimes even more than twice that out of each well. When I've calculated the economics in that play myself-I got a little spreadsheet, I did my level best. And then I found that you had calculated what's going on in that play as well. So let's cut right to that. In the Bakken, how many wells that get drilled out here right now would be economic in today's prices?

Arthur Berman: Almost none at today's prices. The latest from the North Dakota Department of Mineral Resources says that wellhead prices are in the 20's so… I published a report not very long ago that said that 1% of the Bakken was breaking even at $30 oil prices. So now we're below that and I don't remember exactly what percentage of wells but it was something like maybe 5 or 6%. But so right now let's face it Chris, let's just get it right out there in the open: Everybody is losing their ass at current oil prices. I don't care what they say. I'm in this business, okay? I just drilled two discoveries in the last month or two at the bottom of the cycle and we can make a weak profit off of what we found-first of all they're conventional reservoirs so they didn't cost us $6-$10 million to drill. And we don't have to drill them horizontally. We don't have to frack them. And we have got no overhead and we have got no debt; so that puts us in kind of a really different situation for most public companies.

The truth is that everybody-the best positions in the best plays in the United States, the core of the core, if you will-nobody can break even at less than about $45 a barrel and that's just reality. That's not sticking them with their land costs that they sunk and wrote off long ago; that's just basic operating expenses and severance taxes and stuff that I publish in all of my reports and nobody ever argues with me about that. They may disagree with a lot of my conclusions or etc. but they never say "Oh no, your economic assumptions were way off base." No they're not off base.

So take that to the bank and let's just get that whole silly conversation off the table. Everybody is losing their ass at $20 or $30 oil, everybody. And that includes Saudi Arabia, Kuwait and everybody in the world is. But certainly US producers, very best of the best, they got to have $45 or $50, and that's a small subset of their wells in a play. And realistically $60-$65 is bare bones for the average well positioned company, all of their better wells or current wells in play. That's just the way it works. And if you hear something else, ask a lot of questions, like: "Tell me what costs you're excluding," because that's the only way to get there is just be excluding costs.

Chris Martenson: ... When I look at it that way, just sort of high level, I'm looking at 10 billion barrels, what are the reserves? Total reserves? Across all the plays that these operators are in? It can't be a whole heck of a lot more than that, can it?

Arthur Berman: Proven reserves in the United States as of EIA's latest report a couple weeks ago are 40 billion barrels of oil. Now there is a Proven Undeveloped which is another category that is also proven, which you can add another 40 or 50% but the number you're talking about there is a huge proportion of the total United States' proven reserves, any way you cut it. And so yeah, be scared. That's the message. .

... ... ...

Arthur Berman: There is no difference between what EIA is saying and the companies are saying, okay? So there's two realities here. There is the reality of truth, like go to jail truth-that's what the companies actually report in their quarterly and annual filings to the Securities and Exchange Commission. That's where EIA gets its data. That's where EIA's proven reserves come from; so there's that reality and that truth, and I think it's reasonably close to the truth. And then there's what companies tell investors, who believe almost anything and don't understand-again like Yergin's lifting cost. They don't understand, nor should they be required to understand that he's not actually talking about total cost. He's talking about a subset of costs. So your question: The proven reserves of the Bakken, according to the latest EIA, which comes from companies, is 6 billion barrels. The Eagle Ford is a little more than 5, and the Permian is about 700 million. You add up all the rest of them, the Niobrara and the whatever, the Mississippi Lime and you name it, and the total is about 13.5 billion barrels. That's the truth. And there's probably an almost – there's a slightly smaller but large proven undeveloped reserve category as well.

Chris Martenson: Art I was just reading an investor presentation where one company claimed to have access to almost that same number just in the Spraberry play.

Arthur Berman: Well yeah, Pioneer Natural Resources, that truthfully is not a bad company, if you just look at their financials. But their CEO, Scott Sheffield, has been making just absolutely preposterous claims for several years now about this Spraberry resource that they have out in the Permian Basin. The Spraberry was discovered in 1946 for God's sake. In the industry, we talk about and have talked about the Spraberry as being the largest non-commercial field in the world. And we've talked about that for 50 years because nobody can figure out how to make money off of that deal. So Sheffield says that they've got 10 billion barrels in the Spraberry. But listen to his words; what is he really saying? He's got himself protected. He says that they've got 10 billion net recoverable, resource potential. That's not a reserve.

Okay so what is a resource? Well a resource-and I'm going to the Society of Petroleum Engineers here. The definition is a known and yet-to-be-discovered accumulation. It's vapor. We kind of know it's there but we haven't found it yet. And so that's a resource, and now he's talking about a resource potential. So it's not even a resource; it's a potential resource. So what he's saying is that it's some vague number that we kind of think may be out there. And of course a resource has nothing whatever to do with price. It's absolutely not – it doesn't have anything – it's any price. It just says it's technically recoverable. So it means nothing, zero, zip. It means nothing.

So he's covered. I'm about to publish something here maybe today and the sub title of this section is called "It's not a lie if we tell you it's a lie." That's the name of the game. As long as the investor presentation or the news release says somewhere that we're using language here that we would never ever use in an SEC filing because they'd put us in jail. And so you guys need to know that. In other words, "we're lying," then it's technically not a lie. It's not fraud because we told you it was a lie.

... ... ...

Chris Martenson: Well yes with over 200 trillion dollars of debt outstanding of course you have to service that debt and high oil prices just don't help that. The model I've been working with for a long time is there's a price of oil at which the world economy chokes and there's a floor at which the energy company's don't want to pursue oil anymore and that ceiling and that floor have been coming closer and closer together. So here we are, we're clearly at a price below which oil and natural gas-in America here, I'm staring at natural gas at $1.83 is the quote I've got on my screen right now, yikes. That's way below the all-in costs for most companies that I've been looking at.

But let's dial this back a bit. Globally we've see this astonishing pull back in CAPEX spending by the oil majors, by the mids, the minors, national oil companies, all of them-over a trillion dollars, by a bunch of estimates. Talk to us about what's the impact on future oil supplies with this just absolute destruction of CAPEX spending globally?

Arthur Berman: Somewhere between profound and extreme [laughter]. We've got to be constantly discovering several million barrels of oil per day to make up for our consumption. It's easy to get confused and to say well geez, we've got such an oversupply right now, we don't have to worry about that. Well we started this conversation with your important observation that we're only talking about a million or million and a half barrels a day of oversupply. So we could go from over supply to deficit pretty quickly because we're not investing in finding that additional couple of million barrels a day that we need to be discovering. So we're deferring major, major investments and we're not just deferring exploration, we're deferring development of proven reserves. So just the capital cuts in US companies have effectively deferred $20 billion-or maybe the world, I'm sorry-$20 billion barrels of development of known proven reserves.

And so if we get to a point- and we will, we almost certainly will-where suddenly everybody wakes up and says "Oh my God we don't have enough oil." We're now half a million barrels a day low, and what happens? The price shoots up, okay? That's the way commodity markets work. And everybody says "Whoopee, let's get back to drilling big time." Well there's a big lag. There's a huge time lag between when the price responds and people actually get around to drilling and they actually start bringing the oil onto the market and it becomes available as supply, because they've been asleep at the wheel for how many months or years. You don't just turn a valve and all of a sudden everything is okay again.

We saw this during the Libyan Civil War. Saudi Arabia said "Don't worry guys, we've got all this spare capacity. We'll just turn it on and produce it and the world won't see a shortage." It never happened because they had to actually drill wells. Their spare capacity means they have got to drill wells to produce it and that takes time. They have got to drill it, they have to test it, they have to build pipelines, and by the time they actually got any of that work done, the Libyan conflict was over. We've now seen low production because the Civil War continues, but that's another story.

There's this tremendous gap between "okay we know there's a reserve," but what's it take to turn it into supply? Well it takes time and it takes money and it doesn't happen overnight.

Chris Martenson: Well no and as you mentioned it hasn't just been the exploration but the more pedestrian stuff like infill drilling-that's pretty much come to a complete halt in the North Sea as far as I can tell. And it looks like Mexico is not doing a lot with their investment down in their plays at this point in time, and Brazil doesn't even begin to know how to get started with their whole Petrobras scandal and drilling through those really, really expensive deep water finds they've got. Just don't make any sense at this price. So when I look across really where the oil supply growth is coming from, Art, I'm pretty much-like it's really down to the Middle East and this hope that the United States could rapidly ramp up its shale "miracle" if prices spike back up.

But I'm with you. I think that as much as people are focused on the oversupply right now-and in two or three years I'll be really surprised, unless the world economy crashes and demand goes down, with that caveat attached-I think the world will be equally surprised by the shortages that are coming, because you can't just… Here's what I see: I look at this chart and I talk about this in talks and I say "Hey look from 2005 to 2012 the world spent about three trillion dollars on upstream oil and gas exploration and production and basically got the same amount of crude and condensate out of ground for its trouble," right? We doubled our investment on a yearly basis from $300 to $600 billion and basically held production flat. I can only imagine what happens to production once you take a trillion in spend off of the top of that.

Obviously it looks like to me we're going to be facing a multi-million barrel a day shortfall, as long as things don't fall apart on the world economy stage.

Arthur Berman: And I think even if things do fall apart on the world economy stage. I haven't done this, because the records aren't there, but you go back to a period like the Great Depression in the world and it's not as if people stopped buying and selling goods or transporting themselves or materials. It was a big – it was a depression, and there were a lot of people out of work, but the world moves along and consumption of oil and natural gas isn't going to go to zero. I think the forecast that we've just recently seen from the International Energy Agency just last week, they're saying "okay so demand is probably going to be down from 1.8 million barrels a day of growth to 1.2 million barrels a day of growth," and that's awful. But wait a minute, 1.2 million barrels a day of growth is – you're still growing at a fairly high rate. So you have got to be replenishing your supply or else you reach this zero point where you're in deep trouble.

So I'm with you Chris. Even in my darkest view of where the economy could go, I find myself on a very different page than most of the forecasters who think that we're in for a decade or decades of low oil prices. I think we're going to be struggling under the yolk of much higher oil prices, probably beginning next year. I'm not a price forecaster but it's hard for me to see-I am a supply/demand kind of guy and I would be very surprised if by this time next year we're not seeing oil prices moving toward something like $60 a barrel. And you look at the forecast- EIA says average price in 2016 will be $53 a barrel. They're not always right and in fact they're often wrong but they're not stupid either. They're doing the best they can. They have got some good people there. So I think this notion that we're somehow stuck in $30 or $40 oil forever and ever, it just doesn't square with the reality.

Chris Martenson: Well it would mean that we're anticipating that oil is going to stay below its marginal cost of production for a very long time. It's very difficult for any commodity to stay there for long but oil in particular because of its stock versus flows. Yes there's 3 billion barrels above ground right now but hey, that's only so many days of consumption if you decided to stop producing. So yes, I'm with you. I think that obviously oil has to go up in price at some point and that's even exclusive of any geopolitical accidents that might happen in the Middle East; just simple supply/demand and all of that.

If oil does go back up, last question, you study the companies that are involved in this very carefully and I think a lot of investors, especially the banks who have put the lines of credit out there, are really double fingers crossed hoping that the price of oil moves back up and all these problems that these companies are facing economically will sort of be in the rear view mirror. Would you share that view or do you think that even if oil rebounds there's a number of companies here that have gotten themselves in over their heads with respect to debt versus assets?

Arthur Berman: Well just turn the clock back to 2012-2013 when oil prices were sky high, were $100 a barrel or more, and what we saw was consistent negative cash flow from virtually all of the major players. So what that says is they weren't making money when oil prices were high, so is it a big shock that they're hemorrhaging when oil prices are lower? So oil prices go back up-the bottom line Chris is the only way that they were able to stay looking fairly good back then to somebody, not me, was that people were giving them money. They had infinite access to capital at almost no cost, and so they were spending it. But their income statements and balance sheets look like crap and the investment community I guess was willing to look past that or didn't want to look at it or whatever.

So rearview mirror? No, these are companies that are highly leveraged and unless and until that changes-maybe that's one of the positive outcomes of this. Maybe we see a turnover of players. There are better companies whose balance sheets look better and they're the ones who can afford to say "Okay, we're going to slow down production right now because we don't have the same debt service that the guy next door does." So my hope is that like all crises this is going to flush out a lot of the bad players, or at least some of them. But will higher oil prices solve the problem and save the day for the people that hold the debt? No. It won't hurt, but if they couldn't make a profit at higher prices, going back to higher prices doesn't fix the problem.

Chris Martenson: So for many of these investors and players, in many cases, the best that they can hope for if oil prices rise is a higher recovery of cents on the dollar, but they're probably not going to get back to whole on this?

Arthur Berman: No. Unless somebody is willing to forgive debt. If we get that bad, then there's the solution of last recourse, right?


[Jul 03, 2016] Men Exiting Workforce as Low-Wage Jobs Vanish by Yves Smith

Notable quotes:
"... The report dismisses the myths that access to Social Security disability or that men are not choosing to work as culprits. More than a third were in poverty. Fewer that 25% of the men not working have a spouse supporting them and that percentage has dropped in the last 50 years. The CEA's analysis find that Social Security disability explains at most 0.5% of the reduction. ..."
"... Similarly, the problem with European-style job training programs is that US employers do not want to hire people with general training, even in a particular skill area. Their strong preference is to hire someone who is doing the exact same job for a similar company, so as to minimize their effort (in theory; in practice, the extra time spent on the search probably offsets the theoretical savings). The cure for that is a much more robust job market, where employers realize they are not going to find the perfect candidate and take someone approximate and give them the training and other guidance they need to become productive. ..."
"... Friends of mine visited Germany last year, noticed that for curb, pothole repair where in the US you see 2-3 guys and a bunch of equipment, there he would see 8 guys with shovels and little to no equipment. ..."
"... Yes, when I was working at UT-Austin, they cut the janitorial staff so that offices were only vacuumed once a month. ..."
"... The reality of what is happening is on the economic/political level. It involves a small number of people, living in a rich, opulent high tower, who for years acted and enacted without the slightest bit of empathy or selflessness. These same people have literally no depth to their thought and are ruled by the very gluttony/ego so valued in todays consumerist society. This type used to live in Rome during Diocletian's rule, in Egypt during the Hyskos invasion, in the Mayan Empire during the Postclassic period, etc ad infinitum. The overall picture has repeated itself, as an empire is a microcosm of any living organism; it gets old and becomes very susceptible to change, that is, the ruling class become so removed from reality that their decision making begins to deviate further and further from the actuality of the current situation. The Housing Crisis is a prime example. The banks saw fit to literally scam their own customers with no government intervention! Twice! This type of thinking quickly affects the entire nation. People begin to see a futility in living morally and truthfully, and start to wonder if the entire system is a scam. ..."
"... I've visited enough towns in the Mid West where everyone is on some pharmaceutical, usually Percocet or valium, yet have no money for a proper house with heating and cooling. ..."
"... So entire industries now eschew people older than 30 in favor of being staffed entirely by 20 something's. This will surely end well. ..."
"... They are bring these workers from India where starting IT salaries are $10,000/year. Check early in the morning and late at night and you will see the buses delivering the workers who lived crammed in surrounding apartments. One told me his Indian outsourcers had eight of them living in a two-bedroom apartment with one bathroom - while working 80-100 hours per week. They are threatened with deportation if they complain, and in some cases, their families back home are physically threatened. ..."
"... granting automatic work authorization to all H-1B spouses. ..."
"... expanding Bush's "Optional Practical Training" now allowing stem graduates to work for three years ..."
"... lowered qualifying requirements for L-1B visas. L-1b visas allow corporations to import their foreign employee to work in the US at the home nation salaries. And has lead to widespread abuse such as foreign employees being paid $1.73/hour. ..."
"... modified the B-1 visa, used attended training and meetings, to incorporate the "B-1 in lieu of H-1B" which now allows some foreign workers to work in the US on the B-1 visa ..."
"... There are now well over a million foreign guest workers in the US and the numbers are growing. Curiously (ha ha!), DHS does not even keep count of the above admissions. ..."
"... Wow, didn't know they expanded the student work permission to three years. Used to be one year. Essentially if you go to college here you have bought yourself a ticket to live in America and take a job from an American. ..."
"... I was replaced by a 20-something. Actually, at my last job (3 years ago) both the older employees, myself and another employee, were replaced. One employee who had worked there for 15 years and was 60, so TWO years away from retirement, was let go. (I hope he sued the pants off that horrible firm!) ..."
"... Yes indeed, there's a reason big business doesn't want medicare for all – it would result in the ultimate 'flexible workforce'. Workers immediately bailing out of every shit show employment situation they manage to fall into at the drop of the hat with no COBRA or insurance dead zones. But on the other side of the coin, it would ramp up the Uber jitney economy of on-demand disposable workers lined up holding signs displaying their skill sets for a day's pay at the highway on-ramps at 6:30 AM (or, as the neo-liberal mindset would frame it – the entrepreneurs). ..."
"... Thats pretty much how the movie/tv industry operates in Hollywood. ..."
"... History of Work Comp as I remember it - speaking of how "the company" counts its beans: Johns Manville had a problem with people getting slowly sicker on the job (handling asbestos) starting late in the 1800s paid doctors to do studies that proved the asbestos-asbestosis-mesothelioma connection, and gave some rates of worsening of the diseases and hence points at which workers could no longer work. The researchers and doctors were paid for and threatened into silence on the findings, and required to ignore their Hippocratic obligations. Workers had to go to company doctors, who would nurse them along until they were fired for inability. ..."
"... All labor reform policies put forth by Republicans and their policy activation arm (Dems) have been to make life easier and richer for CEO's, not to help workers. So now economists are surprised by the results? What a useful profession they are. ..."
"... The 40 hour work week was established under Roosevelt. If you wish to reverse or stave off the declining Participation Rate, then decrease the required number of hours work to 32. We have agreed before that Labor is the lowest cost when compared to Overhead or Materials. In the end, the difference in cost would be made up by higher productivity. ..."
June 21, 2016 | nakedcapitalism.com

A new Council of Economic Advisers study released by the White House on the fall in labor force participation among men of prime working age (25 to 54) should be subtitled, "It's the Neoliberal Economy, Stupid."

The report does a useful job in documenting where the level and nature of the decline in male workforce participation, which peaked at 98% in 1954 and is now at 88%, the third lowest among OECD countries. The decline is concentrated among less educated:

Screen shot 2016-06-21 at 4.20.59 AM

Blacks have been hit harder than other groups:

Screen shot 2016-06-21 at 4.22.31 AM

And the general outlook for employment has been deteriorating over time. However, bear in mind that this decay somewhat overlaps with the story that less educated groups have been harder hit. US educational attainment has fallen over time.

Screen shot 2016-06-21 at 4.09.30 AM

The report dismisses the myths that access to Social Security disability or that men are not choosing to work as culprits. More than a third were in poverty. Fewer that 25% of the men not working have a spouse supporting them and that percentage has dropped in the last 50 years. The CEA's analysis find that Social Security disability explains at most 0.5% of the reduction.

The cause is the state of the job market:

• Participation has fallen particularly steeply for less-educated men at the same time as their wages have dropped relative to more-educated men, consistent with a decline in demand.

o In recent decades, less-educated Americans have suffered a reduction in their wages relative to other groups. From 1975 until 2014, relative wages for those with a high school degree fell from over 80 percent of the amount earned by workers with at least a college degree to less than 60 percent

While doing a fine job dimensioning profile of the groups that have been hit the worst, the authors, after invoking hoary neoliberal defenses, as in these workers are the losers in a globalized market, the paper gives a coded acknowledgment that policies that are hostile to workers have produced the expected result:

This reduction in demand, as reflected in lower wages, could reflect the broader evolution of technology, automation, and globalization in the U.S. economy.

Conventional economic theory posits that more "flexible" labor markets-where it is easier to hire and fire workers-facilitate matches between employers and individuals who want to work. Yet despite having among the most flexible labor markets in the OECD-with low levels of labor market regulation and employment protections, a low minimum cost of labor, and low rates of collective bargaining coverage-the United States has one of the lowest prime-age male labor force participation rates of OECD member countries.

It is remarkably cheeky to see the authors attempt to depict "flexible" labor markets, where workers can be tossed on the trash heap, as beneficial to laborers.

The recommendations are tepid, and the authors assert "A number of policies proposed by the Administration would help to boost prime-age male labor force participation." In other words, we are to believe the problem is those Republican meanies in Congress, as opposed to Obama not pushing hard for these measures in his first term, when he had the opportunity to pass wide-ranging reforms.

One proposal is the new conventional wisdom of more infrastructure spending to create more jobs for unskilled workers directly, improving community colleges and other training so workers will have skills that line up with hot job markets. The problem with the latter idea is that demand can shift quickly (look at how the oil patch was robust a few years back and is now just starting to get back on its feet). Moreover, employers are extremely prejudiced against both older people and people who've been out of the workforce, and the age which is deemed to be "older" has collapsed. Per Wolf Richter (emphasis original):

Now I've come across a fascinating piece on MarketWatch, an article on what to do to get into the cross hairs of a recruiter whose algos are combing through millions of profiles on LinkedIn.

No recruiter in his right might is personally clicking through LinkedIn profiles. They're all scanned by algos by the millions in nanoseconds. And so the trick is structuring your profile to get the algos to pay attention. This isn't a human-to-human scenario, but a human-to-algo scenario. You're trying to second-guess an algo that's going to decide your future….

But apparently the lifespan of a degree has been shortened from 20 or 25 years to just 10 years! Then it rots, and it has to be swept under the rug. The article put it this way (emphasis added):

Older job-seekers….

I mean, I'm already seething.

Older job-seekers need to walk a fine line. Unless you made the cover of "Time" or discovered a solar galaxy, experience has a shelf life on LinkedIn, says Scott Dobroski, career trends analyst at Glassdoor. There's no need to wax lyrical about a job that's more than 10 years old, he says. And those who g raduated from college a decade ago may want to exclude the date they graduated. "Your college graduation date will age you," he says, "and although ageism is illegal, it's happening all the time." On the other hand, if you're applying for a job as CEO of a Fortune 500 company and you graduated in 1986, it's okay to leave the date, Dobroski says.

Note the word "older job seekers" in connection with a college degree from 10 years ago. Those older job seekers are early Millennials!

Yves here. Admittedly, candidates on LinkedIn are more educated than the group this study is most concerned about, but consider the message: even among the educated, the shelf life of a degree has diminished greatly due to ageism. Why would it be less bad among the less well educated?

Similarly, the problem with European-style job training programs is that US employers do not want to hire people with general training, even in a particular skill area. Their strong preference is to hire someone who is doing the exact same job for a similar company, so as to minimize their effort (in theory; in practice, the extra time spent on the search probably offsets the theoretical savings). The cure for that is a much more robust job market, where employers realize they are not going to find the perfect candidate and take someone approximate and give them the training and other guidance they need to become productive.

And finally, the report claims that Obama has been pumping for one of the most needed remedies:

Increasing wages for workers by raising the minimum wage, supporting collective bargaining, and ensuring that workers have a strong voice in the labor market.

Help me.

So I'm at a loss to understand the political purpose of this report. It's useless as a policy driver given that this is an election year when Obama is a lame duck. Perhaps it is a weak effort at legacy-bolstering by showing that even though the decline in labor force participation among men was marked in the Obama Administration, it started long before he took office. But it still ignores some elephants in the room, like the fact that employers stopped sharing the benefits of productivity gains with workers starting in the mid-1970s and lack of sufficient demand in the economy. What it does reveal is one of the many time-bombs that Obama has left for the next President.

Marco , June 21, 2016 at 7:27 am

Time to start blaming those darn "stay-at-home" dads!! (PEW via CalculatedRisk) How much more evidence will it take for orthodox economists to stop manufacturing silly excuses for a crappy job market.

Benedict@Large , June 21, 2016 at 8:52 am

Economists since the 1970s have been primarily involved with explaining away unemployment; that is, saying it doesn't exist. This is because their theory of inflation (printing money = inflation) breaks the rules of elementary algebra if unemployment does exist. To normal people (non-economists) confronted with such a situation, the theory would quickly be abandoned as nonsense, but to economists this is not an option, because this theory also says that big government is bad, a truism that in the economics profession needs no explanation.

So you see, Marco, there is no crappy jobs market because there's no such thing as unemployment. Ask any economist. They'll tell you.

Simon , June 22, 2016 at 9:08 am

Here are some nice nuggets from the CEA study on the stay-at-home dad myth:

"Participation rates have fallen for both parents and nonparents alike, but prime-age males without children saw a larger decline of 9.4 percentage points since 1968 compared to 4.9 percentage points among prime-age males with children. This suggests that men dropping out of the labor force to be stay-at-home fathers is likely not an important factor in the overall decline; moreover, only around a quarter of prime-age men who are not in the labor force are parents (down from around 40 percent in 1968)."

and

"Based on [American Time Use Survey] data, there is little evidence that men are staying home to care for children or to do house work. "

Of course, I am preaching to the choir here!

ambrit , June 21, 2016 at 7:34 am

"Blame the victim."

av av , June 21, 2016 at 10:20 am

Blame technology. Low skilled workers are easiest to replace. Example, you used to have people sweeping and washing floors in shopping centers or subway stations.
Now you have one person on a sweeper or washer.

Pat , June 21, 2016 at 11:50 am

And how well is that working out? I'm serious. Perhaps they need a couple of more people ALONG with the washers and sweepers. Sorry to use Disney, but part of the reason the parks are pristine is because they have a whole lot of people going along picking up the trash and sweeping up.

It is not just technology, it is a management that doesn't understand how much labor they really need and ignore the signs they do not have enough, because then their numbers might be down. And this is even when their numbers are already down.

jsn , June 21, 2016 at 3:06 pm

It's really about how the priorities are set and by whom.

In a sane society, the issuer of the currency would pay people to do things people like to do or benefit from doing themselves and pay for equipment/robots to do things people don't like.

We live a long way from there.

collins , June 21, 2016 at 4:26 pm

Friends of mine visited Germany last year, noticed that for curb, pothole repair where in the US you see 2-3 guys and a bunch of equipment, there he would see 8 guys with shovels and little to no equipment.

SpringTexan , June 21, 2016 at 4:27 pm

Yes, when I was working at UT-Austin, they cut the janitorial staff so that offices were only vacuumed once a month.

There is work to do. But not willingness to have people do it.

Steve Gunderson , June 21, 2016 at 5:08 pm

Maybe teaching people to pickup after themselves should be a Freshman level course?

Michael , June 21, 2016 at 8:19 pm

Carpets need to be vacuumed.

inhibi , June 22, 2016 at 4:26 pm

It is not as simple as "technology". I often find that those who say lines like "robots are going to take away all the jobs!" are those without actual degrees in those subjects. Technology simply moves the plane of thought, processing, manufacturing, etc to the next level. The invention of the computer spawned an entire multi-TRILLION dollar industry with millions of jobs. Robotics will be/is the same.

The reality of what is happening is on the economic/political level. It involves a small number of people, living in a rich, opulent high tower, who for years acted and enacted without the slightest bit of empathy or selflessness. These same people have literally no depth to their thought and are ruled by the very gluttony/ego so valued in todays consumerist society. This type used to live in Rome during Diocletian's rule, in Egypt during the Hyskos invasion, in the Mayan Empire during the Postclassic period, etc ad infinitum. The overall picture has repeated itself, as an empire is a microcosm of any living organism; it gets old and becomes very susceptible to change, that is, the ruling class become so removed from reality that their decision making begins to deviate further and further from the actuality of the current situation. The Housing Crisis is a prime example. The banks saw fit to literally scam their own customers with no government intervention! Twice! This type of thinking quickly affects the entire nation. People begin to see a futility in living morally and truthfully, and start to wonder if the entire system is a scam.

Now imagine the modern US economy as a sinking ship. The top level execs, elites, are busy pillaging as much as they can, because they all see that US supremacy isn't going to last. Manufacturing all moved to China, now Mexico, retail is dead in the water, the US consumer is getting weaker and weaker. Only healthcare is staying afloat, due more to political reasons than anything else.

The easiest and most common method to increase your salary as a corporate exec is to get rid of overhead: sell off portions of the business, layoffs, etc. They are all doing it regularly with no impunity. US manufacturing is all but GONE. Its all been sold to PE firms that install a puppet as the CEO, who then begins the extraction process of selling off parts of the business, instating capital controls, and layoffs. Now it moved to retail. Eventually, America will be a literal husk. Every place will just have the same options of a few fast food and retail chains. The entire Midwest is already there, hence "Rust Belt". The only places that will be spared in America will be the bubble of wealth concentrated on the coasts, but even these will begin to whither as wealth starts to move to other, happier countries.

So in this milieu, put yourself in the place of a average HS educated American. You have two options for your career: work your ass off and make next to nothing, or go to college and graduate a debt-slave, also making next to nothing. However, a third option presents itself, complements of the Welfare State: collect unemployment and have all the free time in the world. Then imagine what you see and hear everyday. Banks illegally foreclosing on homes, executives getting away with fraud in the hundreds of millions, a militarized police, potent pharmaceuticals given away like candy, a plant that causes mild decrease in heart pressure illegalized, politicians lying again and again, the wealthy talking on TV about how "easy" it is to open a business and selling books about it, etc. It all concentrates down to the worst of all emotions: depression, self-loathing, and envy.

The depression comes from the hopelessness of most American's situation: poorly educated with no future career, not even a path to take which will ensure a brighter future. The self-loathing comes from the media, as most people get an HOURLY reminder of how shitty they look, how poor they are. Even shows like Shameless don't touch on the reality of being poor in America. It isn't a day to day struggle to pay bills. Its a day to day struggle to even feel worth something. To feel part of society.

Then there's envy. You feel envious of the wealth, the attractiveness of others you see in the media, which you misplace as being the vast majority of people in America because you see them everyday and everywhere: online, on billboards, in movies, commercials, etc. You begin to feel like SOMETHING should be given to you. The Government, fearing rebellion, realized this during the last Great Depression when they began to expand the Welfare State. Welfare is a form of suppression. It keeps people on the lowest rung just happy enough to forget about rebelling. Big Pharma is a BIG factor in this as well. I've visited enough towns in the Mid West where everyone is on some pharmaceutical, usually Percocet or valium, yet have no money for a proper house with heating and cooling.

So in summary, the extraction of wealth by the upper class, (through "global" trade agreements, stock market manipulation, tax evasion, offshoring, etc) along with lax regulation & prosecution by the political body (they are very much one and the same these days) caused immense physical (monetary) and mental depression/suppression of the masses, which are steadily moving toward Welfare as it becomes the only of options with a glimmer of stability & free time.

FedUpPleb , June 21, 2016 at 8:10 am

So entire industries now eschew people older than 30 in favor of being staffed entirely by 20 something's. This will surely end well.

Arizona Slim , June 21, 2016 at 8:55 am

I would like to see where all of these highly skilled and motivated 20-somethings are coming from. Because I am not seeing them around here.

NoGig , June 21, 2016 at 11:06 am

They are bring these workers from India where starting IT salaries are $10,000/year. Check early in the morning and late at night and you will see the buses delivering the workers who lived crammed in surrounding apartments. One told me his Indian outsourcers had eight of them living in a two-bedroom apartment with one bathroom - while working 80-100 hours per week. They are threatened with deportation if they complain, and in some cases, their families back home are physically threatened.

With the defeat of H-1B expansion, Obama has now vastly increased foreign guest workers through executive actions that include:

  1. granting automatic work authorization to all H-1B spouses.
  2. expanding Bush's "Optional Practical Training" now allowing stem graduates to work for three years in the US on a student visa. The OPT has no caps, little labor protections, and no salary requirement.
  3. lowered qualifying requirements for L-1B visas. L-1b visas allow corporations to import their foreign employee to work in the US at the home nation salaries. And has lead to widespread abuse such as foreign employees being paid $1.73/hour.
  4. modified the B-1 visa, used attended training and meetings, to incorporate the "B-1 in lieu of H-1B" which now allows some foreign workers to work in the US on the B-1 visa

There are now well over a million foreign guest workers in the US and the numbers are growing. Curiously (ha ha!), DHS does not even keep count of the above admissions.

America, this is not YOUR government.

John , June 21, 2016 at 11:00 pm

Wow, didn't know they expanded the student work permission to three years. Used to be one year. Essentially if you go to college here you have bought yourself a ticket
to live in America and take a job from an American.

perpetualWAR , June 21, 2016 at 11:25 am

I was replaced by a 20-something. Actually, at my last job (3 years ago) both the older employees, myself and another employee, were replaced. One employee who had worked there for 15 years and was 60, so TWO years away from retirement, was let go. (I hope he sued the pants off that horrible firm!)

weinerdog43 , June 21, 2016 at 11:51 am

Oh, they're all out beating down the door over in Philadelphia to work as substitute teachers for $75 per day. Just google 'substitute teacher shortage' and you'll see plenty of job opportunities.

snark

inhibi , June 22, 2016 at 4:36 pm

Its called "turnover" and companies use it nowadays to suppress wages. Why pay a 30 yr old 85K when you can pay a 20 yr old 50k?

Most of the work is simple anyways, unless you work in the STEM field. And unfortunately, in the STEM field, the largest industry (software) takes this approach to the next level.

flora , June 21, 2016 at 8:14 am

Great post. Thanks.

mark , June 21, 2016 at 9:08 am

Yes it is.

"supporting collective bargaining"

Guffaw.

fresno dan , June 21, 2016 at 8:17 am

Incentives matter – if the end all and be all is GDP, you get GDP. TPP is an "industrial" policy, or more accurately a re-distribution policy – yeah – re-distribution – the fact that it is re-distribution from the poorer to the richer is a novel use of the concept, but we should never under estimate the cleverness of Davos man.

The fact that it is espoused by those who incessantly yammer about how government policy should be "neutral" exposes that these people are just making the rules for their own benefit. The fact that so many laws ("reforms") must be instituted to advance this agenda just exposes the intellectual dishonesty. Or would they have us believe that the advent of neoliberalism and the increase in inequality is just a happy (sarc) coincidence? The idea that this is some unstoppable force of nature just wants to make me puke.

If you think that work matters, that participation in society is important, and that a nation is more than airbnb beds for Davos man conference attendees, you can have policies that punish outsourcing, decide that limiting H4B workers increases demand for workers here with commensurate increases in wages. There are a zillion ways the tax code as well as other laws are inimical to US workers. It STARTS with the idea that paying labor more does NOT harm society….

These policies are not a function of physics or of God's will – they are made by men at the behest of the few to reward the few. It can be changed if we choose to change it – although I fear we are rapidly reaching a point, and may have already reached it, where we are a defacto plutocracy and any "reform" is mere window dressing.

Linda , June 21, 2016 at 8:41 am

I agree with you wholeheartedly. We are on a straight path to plutocracy and I too fear we have already passed the point of no return. I hear (read) daily the awful word, redistribution; always in the context of taking a small amount away from the rich and powerful to give to those not as fortunate; but never in the context of what is actually happening on a grand scale; the taking from the lower classes and giving it to the upper 1% and above. When will it stop? I don't know; I do know that unless we continue to try and make the masses actually understand what is happening to them and to get them off their apathetic arses and involved in the political process, thereby voting out of office the scrads of politicians devoted to and enamored of neoliberalism, we will continue down this prophetic road of self destruction. It is our choice. It will be hard. It may, in fact, already be too late. But, we have to try. We have to keep working; working to explain the awful policies of neoliberalism.

templar555510 , June 21, 2016 at 9:20 am

Agreed. So what MUST the demand be ? Let the capitalist go after FULL AUTOMATION and balance that with UNIVERSAL BASIC INCOME . Everything to do with money can be defined as a balance sheet so this should be the balance sheet for the 21st Century . The demand should come from all . And it's coming. I know the Swiss just rejected it , but the fact that they just called a referendum to decide it ( for now ) tells us it's there in the ether and the Swiss are not alone ; the Dutch, the Finns are all working on this . It's the genuine great leap forward.

tegnost , June 21, 2016 at 9:52 am

sorry but basic income guarantee is simply creating demand for the plutocrats, and is exactly why food stamps are in the agriculture budget. This is why the 13,000/yr BIG floated a week or two ago already, at it's inception, takes 3,000 and puts it towards medical care-oops, i mean insurance- you won't get care unless you pay extra, don't kid yourself. And this gravy train will have as many cars attached to it as it can carry, how much will your BIG be in the form of food stamps? rent subsidy? by the time it's implemented the person at the root of the issue won't get a thin dime, but the cronies will have a basic income guarantee, the true purpose of this terrible idea, I and others like me want things to do, not a snap card (more likely digital wallet brought generously to you by apple and jp morgan, which of course will charge a fee, and conveniently keep track of where you are at all times) that allows me to buy gmo food (yes, there will be foods that are for the poor and foods for the rich, want organic? what's your net worth?) The silicon valley parlors where these moronic ideas are hatched are filled with people who are trying to cement their presence in the upper class which is funny on the meritocrat side because many of my tech friends didn't go to college, they were good at video games and now it's robots robots robots because that's their gravy train and the BIG is their lame ass apology, while getting some demand into the economy to pay for their craptastic junk toys.

TheCatSaid , June 21, 2016 at 11:59 am

Great observations about BIG. I never thought of it that way, and you make it very obvious. Thank you.

lightningclap , June 21, 2016 at 1:21 pm

++ I have long been in favor of BIG but you point to the obvious strings that would be attached if formulated by our Valley "disruptors".

jrs , June 21, 2016 at 4:03 pm

then instead provide the basics of life to people, like healthcare and shelter, rather than money? That completely solves that problem doesn't it?

samhill , June 21, 2016 at 8:10 pm

Excellent, my vote post of the week. The best answer is to pay people to actually work, the work would be to pay them to undo the damage of the last 300 years of industrial revolution. We had created a large middle middle class and secure working class destroying the planet, we can create the same wealth cleaning it up. Instill hope on a dying planet, and for the first time in its history give humanity a reason to get up in the morning other than just exploiting each other in a rat race.

Norb , June 22, 2016 at 2:35 am

One way of looking at how a BIG can be manipulated by owners is considering slavery. It seems we are entering a new phase in the never ending capitalist struggle to secure cheep labor. Cheep labor and resources are the driving force of the current system. The logical end result is to have a self-sustaining labor force. One that makes just enough to survive and work- with little room for anything else. That is where we are headed.

Advancing technology and the desire to shed costs related to slave upkeep can be argued as important factors in slavery's demise in it's original social form as one individual owning another as property. Why bother taking on the responsibility for slave upkeep when you can rig the system in ways that require workers to enslave themselves to businesses and the system as a whole. You need the labor power, not the person.

A BIG will be sold for all the typical humanitarian half-truths, but in reality is a natural development to maintain the capitalist system. The powers that be have demonstrated no interest in maintaining a middle class workforce. Debt bondage and BIG coercion are on the horizon.

As Goethe observed: None are more hopelessly enslaved than those who falsely believe they are free.

lin1 , June 22, 2016 at 1:47 pm

Your using an abstract moral excuse to argue against fulfilling a real actual need.Until the revolution comes, BIG is a solution I will support.

Fred Rucker , June 21, 2016 at 10:52 am

How wonderfully well stated, thank you

Bill Smith , June 21, 2016 at 8:34 am

Why does there have to be a political purpose for the release of the report? I would guess that the end of a presidency works a little like late Friday afternoon when stuff get dumped to the public at their point of lowest interest.

Raising the minimum wage works at cross purposes. It helps in the short run but in the longer run – other things held constant – it makes automation more likely.

When the small company I worked for years ago was faced with replacing a piece of equipment, at some point after the minimum wage had been raised, the company replaced it with one that was more automated and took few people to operate. The cost of labor had moved up and cost of capital was lower due the interest rates. The numbers were close enough that it could have gone either way but the feeling was that the cost of labor would continue to go up. Going with the more automated equipment locked in more of our costs.

a different chris , June 21, 2016 at 9:02 am

It's weird how people can pretend to conflate technology assisting labor with replacing labor with cheaper labor, in order to derail the subject.

As far as your "point", they invented the nail and hammer and now we don't have to drill holes and put pegs in. Fine. Nobody is talking about going technologically backwards, in fact just the opposite. We are talking about the race to the bottom in labor itself. I suspect a bit of looking around can find a lot of places where 1 American + 1 machine is slightly more expensive than 4 third-worlders + shipping + no machine. Sometimes the machines have progressed so fast that work has moved back onshore (and funny that all the moaning about "helping people that live on 2cents/day" isn't heard when that happens), which is cool but it still is the exception.

But: how limited is the number of "capitalists" that are going to bother to invest in bringing down the cost of that machine when you can drive the cost of humans down in almost unlimited fashion? - there are actually limits, and we will eventually hit them but it will get a lot uglier if we do it that way.

Cry Shop , June 21, 2016 at 9:32 am

And the whole issue is treating fellow human beings as less deserving, less worthy of employment just because of their nationality.

There will always be that other half of the working class that can be used to kill the other half when pushed hard enough, any definition will do for separating the class in to us vs them, so that the war can start. Unions blew it when in the 1970s when their leadership sold out, refused to go international with trade agreements, and focused on protecting an indefensible position, indefensible from both an economics view and from an ethics view.

Jay M , June 21, 2016 at 3:48 pm

During the cold war the American Labor union movement was thoroughly anti-communist and in bed with the CIA as far coordinating with international labor. See wiki on Jay Lovestone for a bit of the flavor of the times.

Bill Smith , June 21, 2016 at 11:41 am

My point was that we ended up with one less minimum wage job because the cost of labor made it better for the company to buy the more automated piece of equipment.

That example had nothing to do with off-shoring – though I now work in a company of about two dozen people who has off-shored some work. I am going to guess about the equivalent of two full time jobs.

I was quite surprised when that decision was made given our small size but it has worked as explained to us when it started.

Steve Gunderson , June 21, 2016 at 5:12 pm

How many things does the new machine buy?

cnchal , June 21, 2016 at 11:40 pm

Looked at that way, the machine buys it's consumables and raw material used in the process. It would have done that anyway, were Bill's company to decide to buy a simpler machine and employ one more person, but because of the automation, and as long as sales justify it, the more advanced machine will process more raw material and use more consumables because it has the potential to run 24 hours per day, whereas an employee would be seeing stars after an eight hour shift, due to repetitious boring work.

Felix_47 , June 21, 2016 at 9:26 am

Good point. Also consider litigation costs which to most employers in Ca at least is a huge financial and management burder. A couple of worker's comp sore backs or knees combined with chiropractor, "pain management doctors," surgeons, secondary psychic stress etc. makes a lot of employers including me realize that every employee is a ticking liability time bomb just waiting to call that 1-800-hurt at work number. No business can hire Americans in this legal environment unless they are very well paid well beyond their value so they have no option but to do the job. In fact, in my business litigation/medical/disability costs are far more significant than hourly wages. We just can't take the risk and we outsource everything and hire as few as possible and I am not alone.. We do everything possible to avoid hiring low level workers and when we do we want young recent immigrants who are not "Americanized" and lawyer prone. Even then we get burned more often than not with claims for age related conditions. Then it is simply 1-800-Lastimado en Trabajo and you can see the ads all over the busses in TJ before they come over….ads for Ca worker's comp attorneys!!!! Lawyers, since they control the democratic party are a huge part of our unemployment problem. No employer can take the worker's comp risk of an older employee. If they feel back ache or knee ache or neck ache on the job…it is "aggravated" and the employer is often out hundreds of thousands….thanks to the lawyers who write the laws. Don't count on this lawyer in chief or the next one to do anything about it. Age discrimination and automation and outsourcing are survival tactics for most of the businesses I work with, including my own.

tegnost , June 21, 2016 at 9:58 am

medicare for all

JohnnySacks , June 21, 2016 at 10:41 am

Yes indeed, there's a reason big business doesn't want medicare for all – it would result in the ultimate 'flexible workforce'. Workers immediately bailing out of every shit show employment situation they manage to fall into at the drop of the hat with no COBRA or insurance dead zones. But on the other side of the coin, it would ramp up the Uber jitney economy of on-demand disposable workers lined up holding signs displaying their skill sets for a day's pay at the highway on-ramps at 6:30 AM (or, as the neo-liberal mindset would frame it – the entrepreneurs).

Steve Gunderson , June 21, 2016 at 5:13 pm

Thats pretty much how the movie/tv industry operates in Hollywood.

armchair , June 21, 2016 at 10:17 am

Damn it, we could unleash potent forces if we just got rid of the lawyers. When a person's knee gets torn up on the job, give em' a couple grand, an aspirin and tell them to get over it. That's all you need to do.

Think about this. If the states weren't so desperate for money, they wouldn't have to run the system on the cheap. If health costs were lowered, then the system wouldn't be so expensive. A worker's comp agency has to balance its objectives between not bankrupting the state and not screwing over hurt people. A hurt worker without an advocate is a sitting duck. One way to make lawyers go away is to abolish worker's rights. Alternatively the worker's comp system would be cheaper if health costs were cheaper, and realistic settlements without the assistance of a lawyer might be possible if states had more revenue to pay bills.

JTMcPhee , June 21, 2016 at 12:41 pm

History of Work Comp as I remember it - speaking of how "the company" counts its beans: Johns Manville had a problem with people getting slowly sicker on the job (handling asbestos) starting late in the 1800s paid doctors to do studies that proved the asbestos-asbestosis-mesothelioma connection, and gave some rates of worsening of the diseases and hence points at which workers could no longer work. The researchers and doctors were paid for and threatened into silence on the findings, and required to ignore their Hippocratic obligations. Workers had to go to company doctors, who would nurse them along until they were fired for inability.

At first, the court system's tort law provided the persistent with some compensation and support commensurate with the harm. Many cases settled, but all contained non-disclosure mousetraps (tell anyone and you lose everything.) And of course the "experts" who testified for both sides were sworn to secrecy too, for money or from fear. But Manville and other corporate creatures got inspired, starting around the 1890s I think, to pitch and successfully write (lobby) into law that "workers comp" system that persists - places an administratively determined value on the "injury," percent of disability, and the rest, bars tort litigation for WC-"covered" injuries. Even with all that, a lawyer is often needed because the fokking corporate swine do everything in their considerable power and corrupting reach to avoid even paying out the pittance WC provides, especially long-term treatments and care for the many horrific injuries. Once again, the hope is that the injured worker will GO DIE. And yes, there are cheaters, but gee, how surprising that the profits from fokking over the workers so far outweigh the little bits that a few people scam from the other side. Many of the patients I tried to help when I worked as a nurse were WC, and the treatment they got from the insurers, and the "employee advocates" and "nurse case managers" and defense lawyers acting on screw-the-worker policies of long standing, was amazingly cruel.

"Bankrupting the state?" WC is paid, far as I know, at least in FL, out of an insurance pool that is funded by employers. Subject to the same kinds of actuarial calculations that any other large-pool insurance game undertakes in underwriting. And yes, universal health care (not Obamacare) would, if it could be managed without the full usual apparently inescapable corruption by neoliberal interests and thinking, reduce EVERYONE's costs. And states are "desperate for money" largely because the Chamber of Commerce and other neoliberal fokkers like the Kochs have strangled the public general-welfare income stream and diverted most of what is left to various kinds of "white man's welfare" and corporate gifts.

Here in FL, "worker's rights" are already largely abolished, and the mopping up continues. Just so's you know. There are still lawyers who will (for a cut of the limited amounts that WC will pay out if they finally prevail, to the worker's and family's detriment, "take cases." What I learned in law school, first week in Contracts and Torts and Constitutional Law, is that "There are no rights without effective remedies." What remedies do workers have?

And for those who want to shoot at the VA, on "inefficiency" grounds and the other neoliberal overt and covert assaults, VA disability is a Workers Comp program too. Max payout for a GI who is 100% permanently and totally disabled is around $30,000 a year. There is no component as with other kinds of insurance structures for enhanced damages for "bad faith" on the part of the government and the privatized functions that make up the disability administration. "Thank you for your service, Sucker!!" And that "award" usually only comes after a decade or more of fighting with a well documented opposition from the people who administer the "system" and requires persistence, luck, and occasionally benefits (not so much any more) from intervention by the injured GI's elected representative…

animalogic , June 21, 2016 at 8:57 pm

All this talk of workplace injury, lawyers and workers comp misses the obvious point that some of these workplaces must be UNSAFE. (It's always the other workplace that's unsafe–"our" worker comp payouts are always rorts).

The answer to all worker comp issues is the same: universal mandatory insurance run by the state and work that minimises physical/psychological injury.
Naturally it won't occur as its a cost to business….

reslez , June 21, 2016 at 1:03 pm

Heaven forbid employers pay for the body parts they use up and destroy in their workers.

I agree with Anon, universal health care would resolve a lot of these issues. When the cost is spread out employers whine less when their workers are hurt.

allan , June 21, 2016 at 8:36 am

Yet despite having among the most flexible labor markets in the OECD-with low levels of labor market regulation and employment protections, a low minimum cost of labor, and low rates of collective bargaining coverage-the United States has one of the lowest prime-age male labor force participation rates of OECD member countries.

Francois Hollande to the white courtesy phone.

Larry , June 21, 2016 at 9:56 am

This song was made in 1983…and the same crap that Run-DMC mention in the lyrics still exists today:

Unemployment at a record highs
People coming, people going, people born to die
Don't ask me, because I don't know why
But it's like that, and that's the way it is
People in the world tryin to make ends meet
You try to ride car, train, bus, or feet
I said you got to work hard, you want to compete
It's like that, and that's the way it is
Huh!
Money is the key to end all your woes
Your ups, your downs, your highs and your lows
Won't you tell me the last time that love bought you clothes?
It's like that, and that's the way it is
Bills rise higher every day
We receive much lower pay
I'd rather stay young, go out and play
It's like that, and that's the way it is
Huh!
Wars going on across the sea
Street soldiers killing the elderly
Whatever happened to unity?
It's like that, and that's the way it is

https://www.youtube.com/watch?v=_hN1SKVx31s

tony , June 21, 2016 at 3:36 pm

https://www.youtube.com/watch?v=yUoiFH6Aw7o

I like old Ice-T.

The thing about being a man near the bottom in a country with low social mobility means it is extremely hard to get girls. Jordan B Peterson said in The Age of Unequals discussion that the primary motivation for men to become criminals is because it is the only way to have a chance at attractive women. That has been my personal experience with crime too.

Enquiring Mind , June 21, 2016 at 9:56 am

Ageism takes many forms, some more subtle than others. When your friendly local HR department makes a few tweaks to benefits, the newer employees don't notice, but the wizened veterans take notice. They see the handwriting earlier, and brace themselves for the next steps.

The HR folks are acting rationally in their supply-side worldview as they look out for shareholders first and consider employees well down the list, if not at the bottom. That treatment of personnel represents a policy of a very high effective discount rate on human capital in the aggregate. When parsed out, there are a few nuances that make the picture clearer. When the top handful get outsized payouts, they are incentivized to reinforce that high human capital discount rate, to the detriment of those down range.

The graphics showed an acceleration in the ominous trends in the early and mid 1990s. That coincided with the great outsourcing, re-engineeing, re-euphemising of jobs and the economy. In that era, Fortune magazine published a series of articles about the changing nature of the social contract at work.

One takeaway reflected the new bargain: companies needed to provide interesting work to retain employees, and the latter had to continue to make themselves employable. Those veteran employees referenced above discerned that there wasn't a bargain but a mandate to become more efficient, all presented with the window dressing of so-called interesting work.

A more honest presentation would have said work that meets the interest or discount rate, as part of the increasing financialization of the world. The decline in trust also accelerated during that period, whether in companies or the media. We continue to reap the results of that widespread mistrust and discontent during the current election cycle.

wobblie , June 21, 2016 at 10:08 am

A result of blind Liberal/Conservative policies.

https://therulingclassobserver.wordpress.com/2016/06/15/ruling-class-axioms/

Winston , June 21, 2016 at 10:16 am

a different Chris , please listen (see below) and read what Clayton Christensen has been saying. Big companies are mostly brands now. Have offshored main parts of company. Last stage in that development is decline of company, as in case of steel. IBM is presently also classic case as on road to failure as well for same reason. It started at IBM with Gerstner.

http://www.forbes.com/sites/stevedenning/2011/11/18/clayton-christensen-how-pursuit-of-profits-kills-innovation-and-the-us-economy/#3e737b19992a

Clayton Christensen: How Pursuit of Profits Kills Innovation and the U.S. Economy

Christensen at Gartner Symposium:
http://gartner.mediasite.com/mediasite/play/9cfe6bba5c7941e09bee95eb63f769421d?t=1320659595

Gartner Symposium ITExpo

Oh and state/local gopvts favor large companies over small companies!

http://www.forbes.com/sites/stevedenning/2014/05/30/why-ibm-is-in-decline/#5aaa6e284c53

Why IBM Is In Decline

http://finance.yahoo.com/news/no-end-in-sight-for-ibm-decline-as-shares-near-six-year-low-141729837.html
No end in sight for IBM decline as shares near six-year low

http://www.goodjobsfirst.org/shortchanging
Shortchanging Small Business: How Big Businesses Dominate State Economic Development Incentives

Denis Drew , June 21, 2016 at 10:59 am

In a labor market that contains for the sake of argument 50% rich country workers (e.g., American raised) and 50% poor country workers (anywhere else raised) - must be something like Chicago which is 40% white, 40% black, 20% Hispanic …

… where pay is set by what I call "subsistence-plus"; meaning set STARTING at the absolute minimum pay workers will tolerate (e.g., $800/wk for American born taxi drivers, me; $400 for foreign born) and then PLUS some more for each additional level of skill (bottom for McDonald's, more for better English in Starbucks, more for college English and more competent organizing in Whole foods?) …
instead of pay set by the highest price the consumer is willing to pay - by collective bargaining or a minimum wage …

… a huge dropout of low skilled, rich country workers will occur as low skilled work pays much below what rich country workers look at as "minimum subsistence" (the labor market will not clear). E.g., American born taxi drivers (me again) and the Crips and the Bloods. How else explain that 100,000 out of my guesstimate 200,000 Chicago, gang-age males are in street gangs?

To make the psychological point about "minimum subsistence", today's rich county labor would gladly work for half of today's poor country minimum - if it were 100 years ago and that's the best a much less productive economy could pay. It's psychological, but a lot of psychological if DNA immutable.

Now here's the wind-up - that should implant permanently the unquestionable need for collective bargaining in all labor transactions: A what I call subsistence-plus labor market with 100% rich country workers will have lower pay levels than a collective bargaining labor market with 50% rich/50% poor country workers.

That's the whole law and the profits about the need to make union busting a felony (starting in progressive states) as far as I'm concerned.

PS. This is not an endorsement of Donald Trump's anti-immigration bender - that would kick down the pillars that our whole civilization is built on (sorry Native Americans) - that could mean 250 million Americans by 2050 instead of the anticipated 500 million. This IS an endorsement or rebuilding high labor union density - the missing balance-of-power pillars of our civilization. (Don't forget centralized bargaining - the "compleat" balance-of-power pillar of a unionized labor market.

Charger01 , June 22, 2016 at 2:48 pm

David Simon covered this in "The Wire" and "Show me a Hero", you have entire sections of the population that are forced to leave or participate in crime as a viable form of employment. We have a surplus population now- and going forward that are not supporter by their labor or any other resource other than transfer payments.
Please pause a moment and consider that concept. We have a paucity of credible jobs that people can cobble together a living, let alone increase their opportunities going forward.

nothing but the truth , June 21, 2016 at 11:33 am

when everyone is trying to game the system no one has the right to cry morality.

i have some small businesses that i am selling off. Too many overhead, insurance and legal costs. The line of business is becoming a slave to govt mandated costs and regulations. Customers more interested in injury lawsuits. IQ and attitude of younger employees noticeably poor.

not looking good.

Sandwichman , June 21, 2016 at 11:44 am

"THE LONG-TERM DECLINE IN PRIME-AGE MALE LABOR FORCE PARTICIPATION" report states:

"Conventional economic theory posits that more 'flexible' labor markets-where it is easier to hire and fire workers-facilitate matches between employers and individuals who want to work. Yet despite having among the most flexible labor markets in the OECD-with low levels of labor market regulation and employment protections, a low minimum cost of labor, and low rates of collective bargaining coverage-the United States has one of the lowest prime-age male labor force participation rates of OECD member countries."

I have been following this so-called "conventional economic theory" closely for nearly 20 years now and can attest that it is not a theory but a hollow assertion. Empirical "evidence" for this assertion is based on "strong priors": models containing assumptions that generate outcomes consistent with the assertions. GIGO!

At the core of the flexible labour markets dogma is obeisance to the great god NAIRU, which Jamie Galbraith exposed in all its Emperor's New Clothes nakedness 20 long years ago: "Time to Ditch the NAIRU"

https://www.aeaweb.org/articles?id=10.1257/jep.11.1.93

"The concept of a natural rate of unemployment, or non-accelerating inflation rate of unemployment (NAIRU), remains controversial after twenty-five years. This essay presents a brief for no-confidence, in four parts. First, the theoretical case for the natural rate is not compelling. Second, the evidence for a vertical Phillips curve and the associated accelerationist hypothesis that lowering unemployment past the NAIRU leads to unacceptable acceleration of inflation is weak. Third, economists have failed to reach professional consensus on estimating the NAIRU. Fourth, adherence to the concept as a guide to policy has major social costs but negligible benefits."

In "Unemployment: Macroeconomic Performance and the Labour Market" Richard Layard, Stephen Nickell and Richard Jackman grafted the dubious NAIRU concept onto the anachronistic lump-of-labor fallacy claim to create the hybrid chimera "LUMP-OF-OUTPUT FALLACY" in which central banks enforcing NAIRU anti-inflation policy would ensure that you couldn't redistribute working time. You can't make this stuff up. But Layard, Nickell and Jackman did. Nonsense on stilts.

"To many people, shorter working hours and early retirement appear to be common-sense solutions for unemployment. But they are not, because they are not based on any coherent theory of what determines unemployment. The only theory behind them is the lump-of-output theory: output is a given. In this section we have shown that output is unlikely to remain constant."

This is simply not true. Shorter working hours is based on the same theory as the theory of full employment fiscal policy. Keynes's theory. But don't take my word for it. In an April 1945 letter to T.S. Eliot, Keynes wrote:

"The full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will not do the trick. Less work is the ultimate solution."

Galbraith's "Time to Ditch NAIRU" has 293 citations on Google Scholar. Layard et al's "Unemployment" has 5824. Economists flock to dogma like flies to shit.

Jefe , June 21, 2016 at 12:01 pm

Old and in the way….

dc , June 21, 2016 at 12:30 pm

The Oxycontin Report

Ishmael , June 21, 2016 at 2:00 pm

Some strong starting points without requiring additional govt interference:

Shut down both legal and illegal immigration. When you can not employ the ones who are here why let more in.

Inforce the borders and deport people who are here illegally.

Get rid of anchor babies

Put tariffs on imports and I mean substantial tariffs. Worrying about Smoot Hawley is a canard. At that time the US was the biggest exporter now we are the biggest importer. I would also have a sliding scale depending upon labor rights. Some would scream we need to worry about the poor in these countries. How about worrying about the poor in this country. It has reached the point that you need to look around at your family and friends and say what would you do so that these people prosper. If you are not willing to say practically anything legally then you will probably not prosper.

Cut back govt at all levels. This is a major misallocation of resources. This is especially true of the military industrial security area. Come up with new health care laws. Focus resources to generate more doctors in the US and less people with unproductive degrees.

Close down overseas bases. Stop wars.

Ishmael , June 21, 2016 at 2:10 pm

One other thing, if you look at a lot of the jobs that men use to take and make a good living it was construction, plumbing, gardening, janitorial, cooks and etc. All of these jobs have been filled by illegal aliens who live 25 to a house, pay no taxes, get free health care and suppress wages.

I know, I am a racist!

tony , June 21, 2016 at 3:23 pm

Assuming there are enough natural resources, it is quite possible to arrange an economy in a way that benefits the population of the recipient country. Think about it. The immigrants are healthy, hardworking adults. So you get their labour without investing in twenty years of raising them and then taking on the burden of those who are unhealthy or anti-social.

The US is an immigrant country with a weak safety net so an intelligent policy could easily benefit both parties.

hunkerdown , June 21, 2016 at 4:10 pm

With respect, if your givens were in the least interesting or useful to the greater good, rather than articles of faith (which is just a polite term for self-delusion that benefits the power structure) designed to benefit your imaginary friends, satisfy your need to dominate and abuse others, and give your poor lonely misery some company, you might have something worth a detailed, thoughtful response. As it is, I think you need to explain yourself a bit better.

Ishmael , June 21, 2016 at 4:52 pm

Seems very clear to me. You must have a low IQ if you need someone to explain it to you.

Illegal aliens generally do not pay taxes because they get paid with cash! Sorry, if they have to pay such taxes like sales tax that everyone else needs to pay.

hunkerdown , June 21, 2016 at 5:52 pm

"Stupid" is typical American conformist speak for "would offend my bosses".

You had two points that sounded reasonable: "Shut down both legal and illegal immigration. When you can not employ the ones who are here why let more in." Because markets. Those who own a government that was designed to be bought want to drive down the price and increase the availability ("flexibility") of all labor, of course. Plenty of Americans would be happy to work off the books for a less demeaning wage under less demeaning conditions and less demeaning people. (As if Social Security isn't going to be looted by the oligarchs by the time I'm of age to retire) They wouldn't risk death and torture to come here if EMPLOYERS weren't withdrawing the benefits of employment from those already here and offering those benefits to others. While stopping the influx would be a fine idea, until you get control over those who are paying them to come here - making EMPLOYERS into felons for any support of immigration violations would be a far, far more effective use of enforcement power than beating down brown people at arm's length to satisfy your cultural conceits - supply and demand works both ways.

And "Put tariffs on imports and I mean substantial tariffs" is in the right spirit, but fails to acknowledge, with the usual hostility to self-awareness and past actions that defines the USAmerican "mind", that other nations have just as much right to respond any way they feel like, and the "trade agreements" the USA has signed grant them contractual grounds (pacta sunt servandum, remember?) to respond disproportionately with their own tariffs, penalties against the USG, and other demerits in the international sphere which are not constrained by your triumphalism in any way. Those means would not be as effective as simply repudiating every multilateral "trade"-related agreement the USA has ever signed and not, quite literally, pawning the USA for a mess of bourgeois pottage.

It's ridiculous that you should be depending on the US government to evaluate human rights conditions, when human authorities are never bound by evidence unless they want to be. Malaysia's admission into the TPP, and the politically-driven mulligan they received on their human rights conditions, shows the utter folly of letting ambitious bourgeois careerists hide behind corporate veils of any sort.

If you only believe that people who pay taxes should have rights, you support the very definition of plutocracy, and that makes you a disease vector.

ProNewerDeal , June 21, 2016 at 4:25 pm

"illegal aliens…pay no taxes, get free health care"

You have it back-a*ward. Undocumented workers pay taxes (FICA, SS, etc deductions), that they will not receive when they reach old/SS age, even if they are in the US at that future time. There is no "free health care" for undocumented workers, not eligible for Medicaid or ACA. Emergency room service does not qualify as health care.

Even US citizens have to go through a bureaucratic nightmare to get & maintain Medicaid or ACA, which is CRAPPY INSURANCE, not ACTUAL HEALTH CARE. At the point of needing actual health care, USians are often denied the service or the insurance refuses to pay after the service is done & face another bureaucratic nightmare in fighting the payment refusal. Undocumented workers lack access to even this crapified level of "health coverage".

I do agree that increasing supply (H1-B for STEM pros, undocumented for HS-degreed workers) lowers wages. Also, restricting supply (AMA restricting physician graduates such that US physicians per capita lower than OECD levels) increases wages. Econ101 supply & demand, perhaps neoliberal economists need "retraining" & should enroll in Econ101 at the local community college.

If there was an actual desire to limit undocumented immigration, the solution is large fines on Illegal Employers. How about $100K per undocumented worker found. In addition, end the Drug War, which causes violence & refugees, especially in Mexico & Central America. Revoke or at least amend NAFTA to un-decimate the MEX agricultural industry.

Ishmael , June 21, 2016 at 4:53 pm

Generally I have no problem with large fines for companies which employ illegal aliens.

marym , June 21, 2016 at 4:39 pm

People who work "off the books" don't pay income taxes regardless of their immigration status. They do pay many other types of taxes, often regressive – sales tax, excise tax, property tax (or their landlord's property tax.

DarkMatters , June 21, 2016 at 11:58 pm

1. "When you can not employ the ones who are here why let more in."
Cui bono? Because EMPLOYERS love it, from large corporations to my neighbors who hire low-paid gardeners. Maybe this class-ifies me, but that would have considered to be an extravagance when I was growing up. I wonder how many people who complain about illegal immigrants actually rely on their services?

2. "Inforce the borders and deport people who are here illegally. Get rid of anchor babies"
Bit late for that. I do agree we really have made a mess that needs attention and an intelligent cleanup. Even so, do you think we could competently amend the Constitution at this point, which is what it would take? Practically, I do think that better border security coupled with (really) improved labor conditions, both here and in Mexico (Imagine! An international labor effort!) could improve things. But TTIP and TTP are pushing the other way.

3. "Put tariffs on imports and I mean substantial tariffs."
I like the idea, but only sovereign nations can do this, and we're not. We're subject to international courts. In this case, specifically, expect corporate lawsuits against the USA, arguing that the US should compensate corporations for loss of profits caused by said tariffs. These will be arbitrated by Investor-State Dispute Resolution panels, courtesy of said TTIP and TTP, where the no-appeal panels are staffed by international trade lawyers, who otherwise work for international corporations. Yes, by all means, worry about the poor in this country, but don't leave out anyone else.

4. "Cut back government at all levels."
Down with traffic lights! (This statement of yours hooked me into writing this entire reply). Strict libertarians strike me as being more than a little Pollyann-ish. The only historical example that comes close are now called the dark ages. In those idyllic times, a bunch of French Norman good-ol' boys could hie themselves over to Italy and wreak havoc, I mean make their fortune. Governments are necessary to contain dispute resolution, and so require power superior to all other factions, but, for the sake of equal justice, should be accountable in some way to all. I could go on, but "no government" advocacy in our times leaves a power vacuum just at a time when corporations and financiers are doing their best to take over. As the Federalists argued, we do need a strong government, to ensure that the will of the people can be vigorously asserted. Not to say that it's working out so great right now, but it would be nice if we could in some way place competent people at the helm to right the ship. Speaking of Pollyanna….

RD , June 21, 2016 at 4:33 pm

All labor reform policies put forth by Republicans and their policy activation arm (Dems) have been to make life easier and richer for CEO's, not to help workers. So now economists are surprised by the results? What a useful profession they are.

run75441 , June 21, 2016 at 7:59 pm

Yves:

You already have him on your thread. The 40 hour work week was established under Roosevelt. If you wish to reverse or stave off the declining Participation Rate, then decrease the required number of hours work to 32. We have agreed before that Labor is the lowest cost when compared to Overhead or Materials. In the end, the difference in cost would be made up by higher productivity.

Sandwichman is a proponent of this and I agree with his analysis.

[Jul 02, 2016] Peak Oil in Asia and oil import trends (part 2)

Notable quotes:
"... In a business as usual demand case (linear trends), Asia needs an additional 11 mb/d of oil imports (crude and products) by 2031. That oil would have to come from following sources ..."
crudeoilpeak.info

In a business as usual demand case (linear trends), Asia needs an additional 11 mb/d of oil imports (crude and products) by 2031. That oil would have to come from following sources

8.4 mb/d or 76% would have to come from taking away market share of other importing countries. That's what the Asian Century will be all about.

[Jul 01, 2016] The STEO has Colombia production holding at around 1 mmbpd for the next two years, but in fact they are declining at about 12 persen year over year

Notable quotes:
"... The STEO has Colombia production holding at around 1 mmbpd for the next two years, but in fact they are declining at about 12% y-o-y ..."
"... Their internal consumption is rising fast as well and at this decline rate they could need to import within three or four years (Figures in chart from Reuters and Energy Ministry, one value for March 2015 looked a bit off so I interpolated). ..."
"... Note also for Norway May figures are down 87,000 bpd and a bigger drop expected for June, mainly for maintenance but overall they are now expected to be in decline again following a small secondary peak until Johan Sverdrup starts up in 2020. ..."
peakoilbarrel.com

George Kaplan , 07/01/2016 at 2:44 am

The STEO has Colombia production holding at around 1 mmbpd for the next two years, but in fact they are declining at about 12% y-o-y (903 kbpd for May). Some might be due to sabotage, but they have a low R/P ratio (2.2 Gb of reserves so only about 6 years) and rig counts have dropped by 90% over the year.

I think they were using some EOR methods to boost production as well. Therefore a rapid decline might not be unexpected. They might have some offshore oil, but only two exploration wells so far, and both dry, and some shale potential (either way any production is at least 5 years away).

Their internal consumption is rising fast as well and at this decline rate they could need to import within three or four years (Figures in chart from Reuters and Energy Ministry, one value for March 2015 looked a bit off so I interpolated).

Note also for Norway May figures are down 87,000 bpd and a bigger drop expected for June, mainly for maintenance but overall they are now expected to be in decline again following a small secondary peak until Johan Sverdrup starts up in 2020.

http://www.npd.no/en/news/Production-figures/2016/May-2016/

[Jul 01, 2016] The Monthly Energy Review has US production dropping 212,000 bpd in April and 148,000 bpd in May.

Notable quotes:
"... The US was down 2.4% in April and 7.9% since April of 2015. ..."
peakoilbarrel.com
Ron Patterson, 06/30/2016 at 2:11 pm
The EIA's Petroleum Supply Monthly is out with US and individual states production data through April, 2016.

photo US CC_zps7c8gom58.jpg

The Petroleum Supply Monthly now agrees almost exactly with the Monthly Energy Review. The Petroleum Supply Monthly has US production dropping 222,000 barrels per day in April. The Monthly Energy Review has US production dropping 212,000 bpd in April and 148,000 bpd in May.

photo Texas_zpsjrnb0t3n.jpg

Texas production fell 47,000 barrels per day in April. Texas production is down 414,000 barrels per day since peaking in March 2015.

shallow sand , 06/30/2016 at 4:58 pm
Ron, are you able to post a graph comparing this peak to the 1970s and 1980s peaks?

I looked at the one on EIA website from 1920 to date, really shows how the shale boom rose much more steeply, and looks poised to likewise fall much more steeply than in early 1970s or mid 1980s.

AlexS , 06/30/2016 at 5:13 pm
US C+C production in 1920-2016 (mb/d)

AlexS , 06/30/2016 at 5:56 pm
US C+C production in 1920-2016 by source (mb/d)

shallow sand , 06/30/2016 at 10:16 pm
Thanks Alex.
Dave P , 07/01/2016 at 1:32 am
I wonder what the purple graph will end up looking like when all is said and done?
AlexS , 06/30/2016 at 5:19 pm
EIA's most recent weekly and monthly U.S. oil production estimates

STEO – Short-Term Energy Review, 06/12/2016
MER – Monthly Energy Review, 06/27/2016
PSM – Petroleum Supply Monthly, 06/30/2016

Ron Patterson , 06/30/2016 at 5:31 pm
Looks like there was some disagreement between the weekly and everyone else earlier, but now they are all in agreement, or very nearly so.
AlexS , 06/30/2016 at 5:37 pm
Yes, there was a big discrepancy between weekly and monthly numbers in 2015, but since January 2016 they show a similar trend
Ron Patterson , 06/30/2016 at 5:50 pm
This EIA site, Monthly Crude Oil and Natural Gas Production , gives us the percentage change for the last month and the last 12 months for the US and all states and other producing areas. The US was down 2.4% in April and 7.9% since April of 2015. Texas was down 1.4% in April and down 10% since April 2015. North Dakota was down 6% in April and down 10.6% since April 2015. It looks like April was just a catch up month for North Dakota.

[Jul 01, 2016] Ron Patterson

Notable quotes:
"... China produced 7.4 percent less domestic crude oil in May compared to a year ago, settling at 16.76 million tonnes. This was due to plans by state-owned oil companies to slash output that is weighed down by languishing oil prices, official data showed. ..."
"... All the Chinese decline is not due to the price drop. China had peaked and would be in decline even if the price had stayed high. The price drop just made it a bit worse. ..."
peakoilbarrel.com
, 06/30/2016 at 9:28 am
Low Oil Prices See China's Oil Output Shrink 7.4%

China produced 7.4 percent less domestic crude oil in May compared to a year ago, settling at 16.76 million tonnes. This was due to plans by state-owned oil companies to slash output that is weighed down by languishing oil prices, official data showed.

photo China_zpshhxlv7nj.jpg

Javier , 06/30/2016 at 10:12 am
Ron,

Time for a special post on rate of decay from peak oil? I am not liking what I am seeing because it matches quite well my [bad] outlook. Perhaps there is hope that prices will increase to a level that will reduce the rate of fall. It is going to be very difficult to recover production.

Ron Patterson , 06/30/2016 at 11:26 am
All the Chinese decline is not due to the price drop. China had peaked and would be in decline even if the price had stayed high. The price drop just made it a bit worse.

[Jul 01, 2016] For 2016, the decline is expected to continue increasing with a 700 kbbl/d increase in the yearly decline from the mature oil fields.

Notable quotes:
"... Higher declines were observed for several of the major non-OPEC countries such as Russia, United States, Canada and Norway in 2014 and 2015. For 2016, the decline is expected to continue increasing and in terms of barrels, this represents a 700 kbbl/d increase in the yearly decline from the mature oil fields. ..."
"... The 2016 report will be more interesting but it might not be issued and/or available for free for some time. For oil they give 168 Gb reserves and 12 Gb production – without any discovery, extension or purchase that would give 7.5% natural decline. ..."
peakoilbarrel.com

Ron Patterson , 06/29/2016 at 11:27 am

INCREASED FIELD DECLINE ON MATURE FIELDS IS BECOMING VISIBLE

June 02, 2016

Rystad Energy's latest analysis shows that, for the first time since the 1980s, we will have two consecutive years of decreased global E&P investments. A lot of the investment cuts have been related to new projects and shale drilling, but we have also observed lower activity on mature producing fields. This decreased activity is starting to show on the production side, with the decline rates starting to increase. Higher declines were observed for several of the major non-OPEC countries such as Russia, United States, Canada and Norway in 2014 and 2015. For 2016, the decline is expected to continue increasing and in terms of barrels, this represents a 700 kbbl/d increase in the yearly decline from the mature oil fields.

photo Decline Rate Rystad_zpskbnz4eqh.jpg

George Kaplan , 06/29/2016 at 1:28 pm
This is quite interesting from 2014, showing a summary of oil and gas production for the top IOCs and independent E&Ps.

http://www.amcham.ro/UserFiles/articleFiles/EYG%20No%20%20DW0454%20Global%20oil%20and%20gas%20reserves%20study_12151230.pdf

The 2016 report will be more interesting but it might not be issued and/or available for free for some time. For oil they give 168 Gb reserves and 12 Gb production – without any discovery, extension or purchase that would give 7.5% natural decline. I think that might be what's coming in 2018 at current discovery and development levels (only covering 35% of production though, NOCs should still be holding up better overall).

[Jun 29, 2016] The fact that imports are rising even faster than production is declining is a sure sign that production is actually falling

Notable quotes:
"... Imports are definitely rising. The three month NET imports of crude oil and petroleum products bottomed out last November at 4,661,000 barrels per day and last week stood at 5,890,000 bpd for an increase of 1,229,000 bpd. ..."
"... The fact that imports are rising even faster than production is declining is a sure sign that production is actually falling and not just an anomaly of the EIA's measuring algorithm. This decline is real people. ..."
peakoilbarrel.com

Ron Patterson , 06/29/2016 at 10:24 am

Imports are definitely rising. The three month NET imports of crude oil and petroleum products bottomed out last November at 4,661,000 barrels per day and last week stood at 5,890,000 bpd for an increase of 1,229,000 bpd.

The fact that imports are rising even faster than production is declining is a sure sign that production is actually falling and not just an anomaly of the EIA's measuring algorithm. This decline is real people.

photo US Net Imports_zpsmsawgbgi.jpg

Reply

[Jun 29, 2016] A decline of 406,000 barrels per day of total liquids in one month is not a decline but a collapse.

Notable quotes:
"... Looking at the drop in iranian export of 20% you would have to assume that the story is similar….which makes their approach/policy even more idiotic ..."
"... Ron, the Monthly energy review also gave an estimate for May natural gas plant liquids of 3,256,000 bpd. A decline of 258,000 bpd (7.3%) from April's estimate of 3,514,000 bpd. So, thats a decline of 406,000 bpd crude and ngpl. ..."
"... It is starting to look worrisome. US has lost almost 1 mbpd from peak and almost 0.5 mbpd in the last 5 months. It is looking as if US loses might constitute the bulk of the world oil production loses in 2016. ..."
peakoilbarrel.com
daniel , 06/27/2016 at 11:54 am
Looking at the drop in iranian export of 20% you would have to assume that the story is similar….which makes their approach/policy even more idiotic

http://www.bloomberg.com/gadfly/articles/2016-06-26/iran-s-oil-boom-fizzles-out

Ron Patterson , 06/27/2016 at 10:58 am
The EIA's Monthly Energy Review is out with US production numbers for May 2016. US production down 148,000 barrels per day. US Lower 48 down 161,000 bpd, Alaska up 13,000 bpd.

photo US CC_zpsw579iad0.jpg

dclonghorn , 06/27/2016 at 6:40 pm
Ron, the Monthly energy review also gave an estimate for May natural gas plant liquids of 3,256,000 bpd. A decline of 258,000 bpd (7.3%) from April's estimate of 3,514,000 bpd. So, thats a decline of 406,000 bpd crude and ngpl.

Even if it is an estimate, thats a huge decline.

Ron Patterson , 06/27/2016 at 7:01 pm
A decline of 406,000 barrels per day of total liquids in one month…??? That's not a decline, that's a collapse.
Javier , 06/27/2016 at 1:55 pm
Holy cow, Ron.

It is starting to look worrisome. US has lost almost 1 mbpd from peak and almost 0.5 mbpd in the last 5 months. It is looking as if US loses might constitute the bulk of the world oil production loses in 2016.

Also, Art Berman has a new article explaining why oil rig count matters:
http://www.forbes.com/sites/arthurberman/2016/06/27/rig-count-matters-separating-the-signal-from-the-noise-in-oil-market-opinion/#568464c94527

[Jun 28, 2016] This new drop in oil price has to do with extreme financial instability and not with supply and demand

Notable quotes:
"... This new drop in oil price has to do with extreme financial instability and not with supply and demand. Everybody is pumping with full force regardless of price for various reasons. Price does not matter at this point. When Total went to buy Iranian oil it brought with them Airbus people to pay for the oil. ..."
"... you have to keep dancing even if you don't like the music. Look at the drop in US production in the last 1 year and that is still with 400-600 rigs running in the last year with all extra printed money (aka "new investors") being available to them. It's very bleak. ..."
"... At some point there can be shortages. That would be a game changer. Before that this is just kicking the can down the road. ..."
"... In a short term shortages will be avoided by removing credit to certain countries and certain segments of population in synchronized effort by major Central Banks so it will appear that there are no shortages. ..."
"... There is no shortage of oil in Greece but there is a shortage of credit. But if Greece wants independent policy they get threatened with a shutting down of their banking system. ..."
"... The Brexit marks the end of the ideological domination of this neoliberal economy. How long the disintegration process will last it is very hard to predict but it could be very short like in the case of Soviet system. ..."
peakoilbarrel.com
Eulenspiegel , 06/27/2016 at 9:48 am
Oil prices are deep in the red again.

Is there already a reaction in the oil countries, this should demotivate companies to pick up drilling again, or creditors to hand out new billions to be buried in the rocks?

Watcher , 06/27/2016 at 5:19 pm
It's all because of profound changes in supply and demand the past 48 hrs.
Ves , 06/27/2016 at 6:43 pm
Eulenspiegel,

This new drop in oil price has to do with extreme financial instability and not with supply and demand. Everybody is pumping with full force regardless of price for various reasons. Price does not matter at this point. When Total went to buy Iranian oil it brought with them Airbus people to pay for the oil.

NA producers are taking paper for oil because there is no other option and with negative interest rates approaching it is a losing option even if the oil goes somehow to unimaginable price at this point of $70-80. But if you stop drilling the game is over. So you have to keep dancing even if you don't like the music. Look at the drop in US production in the last 1 year and that is still with 400-600 rigs running in the last year with all extra printed money (aka "new investors") being available to them. It's very bleak.

likbez , 06/27/2016 at 8:41 pm

Ves,

At some point there can be shortages. That would be a game changer. Before that this is just kicking the can down the road.

Ves, 06/27/2016 at 10:14 pm

likbez,

In a short term shortages will be avoided by removing credit to certain countries and certain segments of population in synchronized effort by major Central Banks so it will appear that there are no shortages. That is why you see all the effort in creating big currency blocks that could control emission of the currency. One of the reasons is to control oil consumption by the center through credit emission. Then you depend on the center for credit emission.

There is no shortage of oil in Greece but there is a shortage of credit. But if Greece wants independent policy they get threatened with a shutting down of their banking system.

So they are allocated certain amount of credit and that is their available oil foot print. But it is the same in so called "rich" G7 countries where large segments of population live below poverty line and that is because they don't have access to credit. That's why it was so easy to pull Brexit stunt because elite already had very fertile ground to work with. Majority felt less well off then 20 years ago. That is the main reason; all other reasons like EU bureaucracy, refugees are just nonsense. Bureaucracy, refugees of course exist but these are just borrowed reasons that they have been told to adopt on TV to frame the debate.

likbez, 06/28/2016 at 7:37 pm

Ves,

Allocation of credit works while there are growing economies. In this case this is a regular neoliberal redistribution of wealth by other name. So countries with "exorbitant privilege" can just print money while everyone else are the second class citizens who were robbed at daylight. Debt slaves by other name.

But after conversion of most countries into debt slaves, in order for the system to work you need positive GDP growth. Otherwise there is nothing to rob. Even if the GDP "growth" is fake and is just an accounting trick based of underestimating of inflation or including in the total vices like prostitution and gambling, the system can work. Get negative GDP for a substantial period of time (secular negative growth) and all bets are off. Capitalism was not designed for such an environment, and neoliberalism, which is just a modern flavor of corporatism, can't work either.

In shrinking economies allocation of the credit is like pushing on the string. You just can't pay credit lines back in shrinking economies. That means financial collapse. Now what ? Barter?

Ves, 06/28/2016 at 10:31 pm

" That means financial collapse.Now what ? Barter?"

Well, it looks to me we are watching collapse "LIVE". Look, the magnitude of Brexit is hardly even understood or no-one seems comprehend the consequences. This is on the scale of fall of Berlin wall in 1989 and shortly after the dissolution of the USSR in 1991.

The Brexit marks the end of the ideological domination of this neoliberal economy. How long the disintegration process will last it is very hard to predict but it could be very short like in the case of Soviet system.

Brexit is more response and break with Wall Street then EU in order to save what can be saved and that is mainly finance of the City of London for probable Yuan trade in near future. So this pretty much tells you where this is all going in terms of global trade.

In terms of debt that is straightforward "Debt that cannot be paid will not be paid".

In terms of trade it will be much smaller world for trade then in the past and with new sets of rules.

I don't think it will be barter but it will start with clean slate and with a new currency in the indebted countries.

[Jun 20, 2016] Year over year declines are leading the actual production data and indicate that the drop in production will march on much further even if drilling resumes

Notable quotes:
"... It is also interesting to see how year over year % declines are leading the actual production data and indicate that the drop will march on much further. Even if drilling resumes, natgas production will not rise before year end due to the drilling time lag. ..."
peakoilbarrel.com

Heinrch Leopold , 06/20/2016 at 10:07 am

Texas RRC data for April 2016 are out. As others will probably elaborate more on the data, I cannot resist to show the interesting situation of Texan natgas production (see below chart), which is in a stage of freefall and in complete contradiction to above scenarios for US natgas production.

It is also interesting to see how year over year % declines are leading the actual production data and indicate that the drop will march on much further. Even if drilling resumes, natgas production will not rise before year end due to the drilling time lag.

In the meantime, natgas prices continue to soar, smashing through USD 2.70. A heat wave in the SouthWest helps as power burn will reach very likely 5.5 bcf/d over the next few days. Natgas consumption soars despite – and in my view because of – high solar capacity in California. The high solar capacity does not reduce natgas demand yet drives it to record highs.

[Jun 19, 2016] Catch 22 in oil production: only a fraction of current oil reserves will ever be recovered and the true amount will never matrialize

Notable quotes:
"... Some commentators have asserted that the 2008 financial crises was due to high fuel costs, and not necessarily due to the cascading collapse of Wall Street financial legerdemain (although this undoubtedly helped fan the flames). ..."
"... Social Security is a big part of the "unfunded liabilities". That's a transfer. It's not available to the working person who gets it deducted from their paycheck, but it's available to the retiree who gets it. And, the retiree is more likely to spend it. ..."
peakoilbarrel.com
Mike Sutherland , 06/17/2016 at 12:40 am
Hi Dennis

Thank you for your excellent reply, and as Cracker says the extensive work you've done provide a constructive counter to the less optimistic among us, of which I am one.

I am with Cracker in that I think your charts are chronically optimistically lopsided, but held my opinion on this for a long time until now.

The resources amounting to URR 8-9.2GB of oil as you surmise may indeed be there, however I remain highly skeptical of this reported volume for a variety of reasons.

At the end of the day, whether the URR of 8-9.2GB is there or not, I am of the opinion that only a fraction of it will ever be recovered and the true amount never realized. The reason is that the condition of the world economy won't support anything higher than $50 based on what I've seen this year. To wit;

1. Student and consumer debt is at an all-time high, compounded with the problem that most highly paid jobs are disappearing for the middle class . The June 2016 jobs report was pretty lackluster, with a +38,000 nonfarm payroll jobs increase reported. It is to be noted that the civilian long term unemployed has changed little at about 7.4 million.

2. Most driving is of itself for non-productive activities, and includes travel to jobs that are generally non-productive. If fuel gets more expensive, I expect that much of this non-essential travel will drop off. Some commentators have asserted that the 2008 financial crises was due to high fuel costs, and not necessarily due to the cascading collapse of Wall Street financial legerdemain (although this undoubtedly helped fan the flames).

3. The FED has pumped over $4 trillion of cash into the US economy, but the net benefit is estimated to be less than $1 trillion to GDP. It is unknown how the FED is going to unload this pure dreck on its books, and I suspect that it will not comport with higher oil prices in the cogs and wheels of the economy;

4. US debt is at a fantastic level of $19.3 trillion, with another $67 trillion of unfunded liabilities on the books. It's hard to see how this debt will be reduced to manageable levels with higher oil prices.

5. An Internet 2.0, or some other economically transformative technology, doesn't appear to be on the horizon. Currently, all we know how to do is burn fuel, heat a working fluid, and use it to drive a piston or turbine. The alternatives, such as solar and wind, will only come on as oil heads into it's retirement party.

6. Related to point #1; if the current trend to transfer jobs over to automation continues, it's hard to see how there will be people driving to their (former) employment, and for that matter afford things that are (of course) produced by petroleum;

7. For what it's worth, I think that the 2008 crises hasn't gone away despite massive money printing efforts. They're trying to keep demand artificially supported with easy money and the incurring of unrepayable debt, which is terrifyingly criminal as it is simply passed unto the very young and the unborn. How can we expect them to pay our debts and then go out and buy fuel, when their jobs have been outsourced and/or automated? The whole thing has gone far over the top and is way beyond the point of no return. As mentioned previously, I see no significant industrial (i.e inventive) development or for that matter, improvements in demographics that will turn this around.

So at the end of all this, I think that baring hyperinflation the prospects for oil over $50-$55 for the next couple of years is looking fairly dim. Hence, that claimed 8-9.2 GB UR is not going to be realized in real production.

Dennis Coyne , 06/17/2016 at 7:38 am
Hi Mike,

There are many that are very pessimistic about the economy. Unfunded liabilities are not the same as debt, so I don't count those.

The retirement age can be raised and eventually the US will follow the rest of the advanced economies and reform the health care system to control costs.

(First we need to exhaust all other possibilities, before doing the right thing.)

Note that my scenario has oil prices rising very gradually. Also oil prices were over $100/b for 3 years with the World economy continuing to grow.

All that money printing has had very little positive or negative effect, mostly the velocity of money has slowed because most of that money is just sitting in bank accounts. Inflation is not high, if it were the Fed would simply reduce the money supply.

A debt of $19 trillion for an economy with an income of $18.2 trillion is not really a problem. A debt free consumer with a good credit rating and a 20% down payment in savings can typically borrow up to 3 times their income for a mortgage. The US government debt is at 104% based on fred data.

According to BIS for the US total non-financial sector debt is about 250% of GDP.

For all counties that report to the Bank for International Settlements (BIS) the total non-financial sector debt to GDP was 235% in the fourth quarter of 2015 (most recent data point) at market weighted exchange rates. (220% using PPP weighted exchange rates.) See

https://www.bis.org/statistics/totcredit.htm

Hickory , 06/17/2016 at 9:40 am
Dennis- you say that

"Unfunded liabilities are not the same as debt, so I don't count those."

I'd like to point out that both of these things act as a dead weight on a chain that must be carried by those who are working and generating income, as we go forward in time.

And income, or savings derived from it, must then be used to service the debt and pay for the liabilities/entitlements.

This is money that then cannot go towards buying fuel, or funding innovation and transition- things like EV, solar, etc.

A dead weight is a dead weight.

And going into a crisis you have a better chance of surviving it if you are lean and mean, not if you have this ugly balance sheet. It doesn't help that most of the worlds countries are in poor shape in this regard as well.

I have to agree with Mike Sutherlands view that these factors could very well decrease the URR significantly.

On the other hand, the other 7 Billion people of the world will keep increasing their demand and, along with depletion, this will leave less cheap oil for the USA to import. This will tend to raise the price here.

These are conflicting forces, and I think we will end up with a scenario with both lower URR of these domestic sources, and yet also higher prices. Good for solar/wind I suppose- if we can afford it.

Very tough on the average family and local businesses.

Nick G , 06/17/2016 at 10:33 am
Hickory,

Social Security is a big part of the "unfunded liabilities". That's a transfer. It's not available to the working person who gets it deducted from their paycheck, but it's available to the retiree who gets it. And, the retiree is more likely to spend it.

So, SS doesn't slow down the economy, it helps it.

Hickory , 06/17/2016 at 1:26 pm
Nick,

Transferring money from a working family to a retired one doesn't help the economy, it helps the elderly person, and hurts the working family (in the here and now).
Its overall pretty neutral, but it surely takes resources that could go towards energy infrastructure and development and shifts it towards the pharma industry, for example.
I'm not trying to make a value judgement here, just pointing out that in the scope of our prior discussion, this is fairly neutral and doesn't change the conclusions.

Nick G , 06/17/2016 at 3:20 pm
Currently, all we know how to do is burn fuel, heat a working fluid, and use it to drive a piston or turbine. The alternatives, such as solar and wind, will only come on as oil heads into it's retirement party.

Well, no, we know a lot more than that. We have superior alternatives for most of the uses for oil, and adequate ones for the rest.

The single biggest use is personal transportation, and EVs will work fine for that. We don't need turbines for that, electric motors will do just fine.

And…we don't need wind or solar to get rid off oil. Not at the moment. All we need is electricity, and we have plenty of that, right now.

Cracker , 06/16/2016 at 11:50 am
Mike S and Dennis,

Hilarious! Coynecopian really fits.

My humble apologies, Dennis, just too funny, and appropriate. I do appreciate your charts, but I wish you would occasionally plug is some other values to provide a contrast to your ever-optimistic assumptions. My reaction to your chart was the same as Ron's.

Make your chart reflect lower and fluctuating oil prices, instead of coynecopian, steady-state high prices and it might make more sense. Add a factor for debt restraining new wells at higher oil prices (see SS's comment about $75 without debt below). Your assumptions just seem too optimistic to be realistic. Maybe I just underestimate BAU's ability to fund stupidity and you don't:-)

It will be interesting to see what really happens.

Thanks to all for your comments. Always educational.

Jim

[Jun 15, 2016] Seasonal pattern of oil consumption -- going from Q2 to Q3 increases demand by about one and a half million barrels a day

Notable quotes:
"... Yes it is the normal cycle pattern, but going into Q3, we have been seeing draws over the last few weeks, and world S/D has been close to being balanced. ..."
"... It is normal for Q2 to have storage builds, and this year the builds were on the low side. ..."
"... The market is not expecting to see higher demand than supply, and the next step in prices may be soon than expected. ..."
peakoilbarrel.com

R DesRoches , 06/13/2016 at 11:41 am

I know that this presentation is about production, but on the other side of production, that is demand, according to the IEA demand tables, going from Q2 to Q3 increases demand by about 1.5 million barrels a day.

There is also a additional small increase going from Q3 to Q4.

With supply decreasing and demand increasing looks like oil prices may be headed higher over the next six months.

The Alberta fires along with Nigeras problems came at the right time yo tighten things up a bit.

AlexS , 06/13/2016 at 12:08 pm
"according to the IEA demand tables, going from Q2 to Q3 increases demand by about 1.5 million barrels a day"

This is a normal seasonal pattern. Demand in Q3-4 is always higher than in Q1-2

R DesRoches , 06/13/2016 at 12:36 pm
Yes it is the normal cycle pattern, but going into Q3, we have been seeing draws over the last few weeks, and world S/D has been close to being balanced.

It is normal for Q2 to have storage builds, and this year the builds were on the low side.

The market is not expecting to see higher demand than supply, and the next step in prices may be soon than expected.

[Jun 15, 2016] Global oil demand remand very strong

Notable quotes:
"... Global demand is indeed strong. All key forecasting agencies are still projecting annual demand growth of 1.2mb/d, but it may surprise on the upside (~1.4mb/d). But supply/demand rebalancing is mainly due to declining non-OPEC output and supply outages. ..."
peakoilbarrel.com
AlexS , 06/13/2016 at 12:46 pm
Global demand is indeed strong. All key forecasting agencies are still projecting annual demand growth of 1.2mb/d, but it may surprise on the upside (~1.4mb/d).
But supply/demand rebalancing is mainly due to declining non-OPEC output and supply outages.

Quarterly global oil demand (mb/d)
source: IEA Oil Market Report, May 2016

Reply

[Jun 15, 2016] Production of oil increasing while exports stayed flat due to groqwing demand in oil importing coutries, which like the USA and Canada which are also oil producting countries

It appears that world oil exports has increased very little, if any, since 2005.
Notable quotes:
"... I can only guess that oil production in importing nations, which are generally capitalist countries, is more sensitive to oil price changes than exporters (whose systems of govt allows for maintaining production regardless of price). ..."
"... The largest increase in production, by far, came from the US which is an importing nation. And huge declines came from Norway, the UK and Mexico, all exporting nations. That is largely why we see production increasing while exports stayed flat. ..."
"... Exporting nations, the UK and Indonesia, became net importers during that period. There may have been others, I haven't looked that closely. ..."
"... I find Mexico to be an interesting case. I read somewhere that 30% of federal tax revenue is received from taxation of Pemex. Mexico exports are down 21% in 2015 compared to 2014. I'm not sure what is going to happen to Mexico when it becomes a net oil importer. ..."
peakoilbarrel.com
Ron,

This mostly means that importers have simply increased production right?

Gains in U.S. and Canadian production reduced imports, and allowed countries like China and India to import more even though net export availability remained flat.

I can only guess that oil production in importing nations, which are generally capitalist countries, is more sensitive to oil price changes than exporters (whose systems of govt allows for maintaining production regardless of price).

The next 12 months may see increasing prices even if net exports do not decline simply due to increased export demand from countries like the U.S. that flip from a multi-year decline in import demand.

Ron Patterson , 06/14/2016 at 5:11 pm
Yes, exactly. The largest increase in production, by far, came from the US which is an importing nation. And huge declines came from Norway, the UK and Mexico, all exporting nations. That is largely why we see production increasing while exports stayed flat.

Exporting nations, the UK and Indonesia, became net importers during that period. There may have been others, I haven't looked that closely.

Survivalist , 06/14/2016 at 5:35 pm
Hi Ron, according to the Energy Export Data Browser UK is an importer.

I find Mexico to be an interesting case. I read somewhere that 30% of federal tax revenue is received from taxation of Pemex. Mexico exports are down 21% in 2015 compared to 2014. I'm not sure what is going to happen to Mexico when it becomes a net oil importer. Whenever it is it won't be good. Perhaps Mexico will join their neighbors to the south (El Salvador, Guatemala and Honduras) in being failed states.

[Jun 15, 2016] Oil Industry to Cut $1 Trillion in Spending After Price Fall

Notable quotes:
"... Worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22 percent, or $740 billion, lower than anticipated before prices plunged in 2014, with the deepest cuts in the U.S., Wood Mackenzie said in a statement Wednesday. A further $300 billion will be eliminated from exploration spending. Global production this year will be 3 percent lower than previously forecast, the consultant said. ..."
Bloomberg

The oil and gas industry will cut $1 trillion from planned spending on exploration and development because of the slump in prices, leading to slower growth in production, according to consultant Wood Mackenzie Ltd.

Worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22 percent, or $740 billion, lower than anticipated before prices plunged in 2014, with the deepest cuts in the U.S., Wood Mackenzie said in a statement Wednesday. A further $300 billion will be eliminated from exploration spending. Global production this year will be 3 percent lower than previously forecast, the consultant said.

[Jun 08, 2016] Current cuts in capex will be felt 2-3 years from now.

peakoilbarrel.com
Eulenspiegel, 06/08/2016 at 3:07 am
The best thing here is:
Capex is slashed worldwide, hidden capex from 3rd world states I think even more since they are simply broke with the current oil prices.

And the production continues to increase – why this Capex frenzy the last years, if you can increase production simply on no money spending, rust and decline being no problem anymore.

Something smells fishy.

AlexS, 06/08/2016 at 3:35 am
Production is increasing in some countries or remains stable in others because of " this Capex frenzy the last years".

Current cuts in capex will be felt 2-3 years from now.

[Jun 08, 2016] Peak Oil Review - June 6 2016

Notable quotes:
"... The major factor pushing prices higher last week was the unplanned production outages in Alberta, Nigeria, and Venezuela. Although the fires are now well past the Alberta tar sands, it will be several weeks before the 1 million b/d of production that had to be shut down during the firestorms can return fully to production. In the meantime, the Alberta outage and the one in Nigeria have likely removed much or all of the production surplus that has overhung the markets and for now, there may be a rough balance of supply and demand. ..."
"... In recent years, these companies have seen a string of massive cost overruns such as in the Caspian and Bering Seas, and disasters such is Deepwater Horizon in the Gulf of Mexico. Last year the oil industry discovered only 12 billion barrels of new reserves, about a third of annual global consumption. ..."
"... Nearly all of the major oil companies reduced capital spending to less than half of what it as been in recent years. With decreasing oil production, supply is likely to start falling short of demand later this year, if it has not already, due to the various outages. ..."
www.resilience.org

1. Oil and the Global Economy

Oil prices hovered just below the $50 level last week with Brent closing just above $50 on Thursday before settling at $49.46 on Friday. As has been the case lately, there were numerous factors pressuring oil prices one way or another. The week opened with much enthusiasm that OPEC would agree to a production freeze, but this went away when the OPEC meeting failed to take any action. The major factor pushing prices higher last week was the unplanned production outages in Alberta, Nigeria, and Venezuela. Although the fires are now well past the Alberta tar sands, it will be several weeks before the 1 million b/d of production that had to be shut down during the firestorms can return fully to production. In the meantime, the Alberta outage and the one in Nigeria have likely removed much or all of the production surplus that has overhung the markets and for now, there may be a rough balance of supply and demand.

While production in Alberta is returning to normal, the political/economic situations in Nigeria and Venezuela continue to get worse with the likelihood that both countries will soon see a significant drop in oil production – possibly enough to offset surplus production elsewhere. There is no end in sight to the problems in either of these countries, and their situations seemed destined to get worse before they get better.

The US crude inventory saw a small drawdown last week, which is not surprising considering the outages in Alberta over the past month. The EIA continues to estimate that US production is still dropping. However, the US oil rig count climbed by nine units last week as drillers responded to oil prices approaching $50 a barrel coupled with a buyers' market for oil production services and oilfield workers. The meager increase in US employment last week has some worried about the outlook for US economic growth in the near future. At a minimum, the widely expected interest rate increase by the Federal Reserve is likely to go on hold for a while.

The problems of the oil industry continue, however, with US bank earnings down 2 percent in the first quarter largely due to delinquent loans to the oil industry where bankruptcies continue to be announced. Observers are starting to talk about the inevitable decline of the large international oil companies. These companies are finding it increasingly difficult to find new reserves to exploit and those that are available are mostly in deepwater projects where the costs of extraction are well above the current selling price of oil. In recent years, these companies have seen a string of massive cost overruns such as in the Caspian and Bering Seas, and disasters such is Deepwater Horizon in the Gulf of Mexico. Last year the oil industry discovered only 12 billion barrels of new reserves, about a third of annual global consumption.

Nearly all of the major oil companies reduced capital spending to less than half of what it as been in recent years. With decreasing oil production, supply is likely to start falling short of demand later this year, if it has not already, due to the various outages. Global crude reserves are still at record levels, so daily shortages of even a million b/d or two are unlikely to send prices into three figures right away.

By 2020, give or take a bit, prices are likely to start climbing into new territory as shortages become larger, and rationing-by-price again comes into effect.

[Jun 07, 2016] Short-Term Energy Outlook June 2016

IEA is probably OK for use as historical data source, but any use of their forecasts is a sign of gross negligence, based on their track record. Their 'waterfall" style forecasts are just propaganda.
My feeling is that 80 dollars bbl are needs to increase shale oil production. Before that it will might be continue to decline. Saudis are a spent bullet. So chances of them coming into play again with more oil to suppress oil price further are close to zero.
If so, the key question we need to answer is when oil will hit this magic price point.
U.S. Energy Information Administration (EIA)

U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015. Production is forecast to average 8.6 million b/d in 2016 and 8.2 million b/d in 2017, both unchanged from last month's STEO.

EIA estimates that crude oil production for May 2016 averaged 8.7 million b/d, which is more than 0.2 million b/d below the April 2016 level, and approximately 1 million b/d below the 9.7 million b/d level reached in April 2015.

[Jun 06, 2016] To me Saudis recent posturing is about setting up excuses for post peak declines, without having to admit they dont have as much oil as theyve stated.

peakoilbarrel.com

George Kaplan , 06/04/2016 at 7:36 am
Here is an interesting post by Jean Laherrere on GoM and overall US production, apologies if it has been posted before.

http://aspofrance.org/files/JL_2016USoilultimate.pdf

Dennis – you asked at some previous post about discovered, undeveloped reserves. Overall I'd go with Jean Laherrere, he knows more about these things than most and definitely understands the politics behind some government forecasts, looks at things globally and probably still has access to some of the more confidential figures. My less informed view is as follows.

So far about 1350 billion barrels C&C have been produced. Current production is about 28 billion per year excluding extra heavy oil. Recently Rystad indicated mature filed decline rates at 5% per year, if that held through the complete depletion (unlikely but all I have to go on) that would mean another 540 billion, at 3% average decline it would be 900 billion. For 2200 billion total that could mean (say) another 100 billion to find, 50 billion which is developed but offline (in Libya, neutral zone, Abqaiq maybe, Syria etc.) and 150 billion discovered but undeveloped. If there is that amount (or more for higher URR or higher overall decline rates, maybe up to 900 billion by your figures) it must be in OPEC Middle East countries or Russia. A lot of the older undeveloped, mostly heavy oil, reserves elsewhere have been developed recently (e.g. in the North Sea) in response to high oil prices. Similarly deep sea in GoM and offshore Africa and Brazil (see the paper above – there isn't much left in the GoM and discoveries have dropped to near zero per year). The larger reserves that I know about are complicated and expensive to develop (e.g. Brazil pre salt, Kazakhstan high sulphur) or have some political issues (offshore Nigeria). I don't think these would total more than 50 billion though.

If the Middle East OPEC countries have significant known undeveloped reserves they don't act like it – i.e. why develop tight gas fields, or explore deep sea pre-salt, or double or more the number of exploration and in fill wells, or get IOCs to come in and redeveloped existing fields.

Somewhere I read that Saudi assume 75% recovery and develop their fields to deplete 2% of the field per year during plateau phase. That sounds about right for a URR of 250 billion (i.e. assuming they report total recoverable resources, not what is left) but would mean pretty much everything they have is on production with nothing much known but undeveloped. 75% may be high but I think probably achievable for huge onshore fields (not so much for heavy oil offshore like Safinayah; Abqaiq, which may be exhausted by now; or the neutral zone, which sounds like it needs steam flood to recover much more). To me Saudi's recent posturing is about setting up excuses for post peak declines, without having to admit they don't have as much oil as they've stated. Also Kuwait's initiative as described in terms of new exploration and debottlenecking existing facilities, not developing known fields.

IHS, Rystad and Wood Mackenzie probably know more, but their past performance at predicting anything makes you wonder (Rystad seems better than the others though).

For extra heavy oil I think the recovery factors are probably overstated and based on the early, and easiest to exploit developments. However this probably doesn't make much difference as the limiting factor is the surface production facilities, and will be for the next few decades. CAPP predict Canadian oil sands rising to about 3 to 4 mmbpd by 2030, but even this presupposes another two pipelines approved and built and a sustained, high oil price (i.e. above $100, and probably more if natural gas prices start to rise at the same time).

In Venezuela exploiting the extra heavy oil would be difficult even for a stable society. It needs a large amount of oil wells in areas without that great infrastructure (I think around 5 to 10,000 per mmbpd), additional pipelines (I guess piggybacked so the Naphtha diluent can be recycled), and a bunch of new upgraders – one for every new 200 to 300,000 bpd. The existing upgraders aren't in great shape, a lot of the skilled workforce from these actually left for USA when the industry was nationalised. There is a significant shrinkage (I think 15 to 30%) in the upgraders as they take out carbon to make the oil lighter (compared to hydrocrackers used in places in Canada which add hydrogen from natural gas). They produce highly toxic waste streams of coke, sulphur and heavy metals, which need to be safely stored for ever after (I wonder how that's going there at the moment). The three phases of the Carabobo development, which was supposed to get to 1.2 mmbpd by 2018 don't seem to be going anywhere – oil is still being trucked I think, the new upgraders are on permanent hold, the well services companies are pulling out, and the government can't afford to buy the diluent naphtha. That is a recipe for prolonged decline, not growth to 8 mmbpd, which was once proposed.

Ecuador has ultra heavy oil, discovered and undeveloped, of about 6 billion – but no-one has figured out how to develop it commercially. The upgrader required has really been proved technically. They were working with Ivanhoe on something that looked to me a bit like a CTL system, but Ivanhoe went bust so I don't think this is going anywhere. Overall anything more than about 5 or 6 mmbpd from extra heavy sources would be stretch over the next 20 to 30 years.

[Jun 06, 2016] The US prediction is for a gentle decline of about 15 percent overall to 2021, but if a lot of the smaller producers get shut down in the near term it might be a bit steeper.

peakoilbarrel.com

George Kaplan ,

06/04/2016 at 7:18 am
The recent UK production benefited mostly from Golden Eagle ramp up through 2015. Buzzard is by far the largest single producer at about 180,000 bpd. It is due for an extended turn around this year. It also more than doubled it's water cut over the last six months, so could be coming off plateau quickly (ramp up was through 2007). It will be a contest between it's decline against new production from Clair Ridge and Glen Lyon and 3 or 4 smaller projects over the next 2 years (about 300,000 bpd combined plateaus).

The government prediction is for a gentle decline of about 15% overall to 2021, but if a lot of the smaller producers get shut down in the near term it might be a bit steeper.

[Jun 03, 2016] Oil prices crush lures US drivers back into gas guzzlers

peakoilbarrel.com
AlexS , 06/02/2016 at 6:40 pm
Interesting trends in transportation fuel demand:

OPEC's Cheap Oil Strategy Lures Drivers Back Into Gas Guzzlers

http://www.bloomberg.com/news/articles/2016-05-30/opec-s-cheap-oil-strategy-lures-drivers-back-into-gas-guzzlers

• Decade-long improvement in fuel efficiency in U.S. seen ending
• Light trucks, vans, SUVs account for 60% of U.S. vehicle sales

Last year, SUVs outsold any other type of passenger vehicle in Europe for the first time, according to auto industry consultants JATO Dynamics. The trend has continued in 2016, with demand for SUVs … accounting for a quarter of sales in the biggest European countries.
Europe is a mirror of what's happening across the world. From China to the U.S., drivers are buying bigger vehicles, while sales of fuel-efficient hybrids struggle.

[In the U.S.] the average car sold in April achieved a fuel economy of 25.2 miles per gallon, down from a peak of 25.8 set in August 2014, just before oil prices crashed, according to data from the Transportation Research Institute at the University of Michigan. At current trends, this year will mark the first drop in average U.S. fuel economy since at least 2007, the data show.

"Fuel-economy improvement is really flatlining," said Sam Ori, executive director of theEnergy Policy Institute at the University of Chicago. "The gains completely stopped right at the same time that oil prices started to decline."
Today in the U.S., light trucks, vans and SUVs account for 60 percent of total vehicle sales - a level only reached briefly in 2005, when Brent crude, the global oil benchmark, averaged $55 a barrel. It's now around $50. The International Energy Agency said in May that less-efficient vehicles, including four-wheel drives, "remain very much in vogue, a consequence of persistently lower retail pump prices."

In 2008, when oil prices averaged $100 a barrel, the share of gas guzzlers in U.S. total vehicles sales dropped at one point to just 43 percent.

With larger vehicles hitting the roads and Americans driving longer distances as the economy recovers, U.S. gasoline consumption is set to rise to a record in 2016, according to the Energy Information Administration. U.S. gasoline demand will average 9.3 million barrels a day this year, surpassing the peak set in 2007, the EIA said in its most recent monthly report.

The EIA forecast U.S. drivers will enjoy the cheapest gasoline this driving season in 12 years.

In China, the world's second-biggest oil consumer, drivers are also opting for larger vehicles as never before. While cheaper gasoline and diesel helps, analysts said it's higher incomes - and a desire to impress relatives and friends - that's driving the purchases. According to official data, vehicles such as light trucks and SUVs accounted for almost 35 percent of total Chinese passenger sales in April, up from 10 percent in 2010 and less than 5 percent a decade ago.

U.S. average sales-weighted fuel-economy rating

AlexS , 06/02/2016 at 6:44 pm
chart 2

GoneFishing , 06/02/2016 at 7:03 pm
You are right AlexS, Americans need to be more frugal and forward thinking.

My town wants to allow a gas station to be put in near the highway, there is a gas station a short drive away. Not only will the gas station be mere feet from a Category 1 trout stream, it will be almost at the level of the stream. The three large tanks will be actually buried in the aquifer for the town and have to be held down from floating. Everything runs off wells here, so contamination will effect much of the town and wreck the aquifer.

To top it all off, the land is now a ride-sharing lot, something that reduces fuel use and pollution as well as reduces the wear and tear on cars (slowing down the need for vehicle replacement and all the energy/pollution that involves).

There are gas stations just a few miles in either direction along the highway.

Sound dumb to you?

Lightsout , 06/02/2016 at 10:26 pm
I think the market share argument was always a smoke screen and this was always the Saudi's real intent.

[Jun 02, 2016] Iranian Oil Is Disguising A Significant Decline In Global Production

Notable quotes:
"... But… the decline has only just begun. The price collapse caused the plateau in world oil production that begun about March 2015. However, the decline did not actually begin until January 2016. The dramatic rise in production from Iran has kept the decline from becoming obvious to everyone. However when the May production numbers come in, I think it will then become obvious to everyone. ..."
OilPrice.com

In conclusion, In spite of the recent increase in Russian production, as well as the slight increase from the North Sea, and in spite of the dramatic production increase from Iran due to the lifting of sanctions, world crude oil production is in decline. And while it is true that most of this decline is due to the price crash, it remains to be seen just how much production will recover when the price returns to… to… wherever it returns to before it stops.

But… the decline has only just begun. The price collapse caused the plateau in world oil production that begun about March 2015. However, the decline did not actually begin until January 2016. The dramatic rise in production from Iran has kept the decline from becoming obvious to everyone. However when the May production numbers come in, I think it will then become obvious to everyone.

[Jun 02, 2016] Offshore decline rate can reach 30 percent per yar and that mean that the sudden halt to offshore development will result in big offshore production declines

Notable quotes:
"... It is hard to pinpoint these decline rates exactly since each field is unique unto itself. What the industry generally believes is that offshore production declines at twice the rateof conventional onshore. ..."
"... That would put the offshore decline rate somewhere between 15-20% per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines. ..."
"... Off a 22 million barrel per day production base-15-20%= 3.3-4.4 million barrels a day-gone. That is substantially more than the spare capacity of OPEC right now. That means that in just one year, the world oil supply could be put into deep undersupply (pardon the pun) as offshore exploration and development stagnate. ..."
peakoilbarrel.com

andy hamilton , 06/01/2016 at 10:32 pm

A cracking read – offshore contraction:

http://www.oilvoice.com/n/This-Wipes-Out-Any-Spare-Capacity-OPEC-Has/33091bb719f9.aspx

"Offshore production has lower decline rates than shale does, but considerably higher decline rates than onshore vertical developments.

It is hard to pinpoint these decline rates exactly since each field is unique unto itself. What the industry generally believes is that offshore production declines at twice the rateof conventional onshore.

That would put the offshore decline rate somewhere between 15-20% per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines.

Off a 22 million barrel per day production base-15-20%= 3.3-4.4 million barrels a day-gone. That is substantially more than the spare capacity of OPEC right now. That means that in just one year, the world oil supply could be put into deep undersupply (pardon the pun) as offshore exploration and development stagnate.

[Jun 01, 2016] The Offshore Oil Business Is Crippled And It May Never Recover

Notable quotes:
"... Offshore production has lower decline rates than shale does, but considerably higher decline rates than onshore vertical developments. ..."
"... That would put the offshore decline rate somewhere between 15-20 percent per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines. ..."
"... That is substantially more than the spare capacity of OPEC right now. ..."
oilprice.com

OilPrice.com

... ... ...

Offshore Oil Production By The Numbers

Offshore production accounts for 30 percent of total global oil production. The percentage of global production has remained the same since the early 2000s but the absolute amount of production has grown.

(Click to enlarge)

Today nearly 22 million barrels of oil per day is produced offshore; the figure in the chart above includes all liquids.

Offshore production has lower decline rates than shale does, but considerably higher decline rates than onshore vertical developments.

It is hard to pinpoint these decline rates exactly since each field is unique. What the industry generally believes is that offshore production declines at twice the rate of conventional onshore.

Related: Nigeria's Oil Production In Free Fall After More Attacks

That would put the offshore decline rate somewhere between 15-20 percent per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines.

Off a 22 million barrel per day production base, 15-20 percent would equal 3.3 to 4.4 million barrels a day-gone. That is substantially more than the spare capacity of OPEC right now. That means that in just one year, the world oil supply could be put into deep undersupply (pardon the pun) as offshore exploration and development stagnate.

... ... ...

[May 30, 2016] The vast majority of large, conventional undiscovered oil and gas fields are offshore and are uneconomical to develop with oil prices below 80 dollars per barrel

peakoilbarrel.com
Ron Patterson , 05/26/2016 at 9:51 pm
Peak Oil 2.0: Is It Time to Panic?

On Friday, May 13, IHS Energy released an alarming new study. It found that the volumes of oil and gas discovered outside of the U.S. last year were the lowest since 1952.

Oil alone set a record low, with only 2.8 billion barrels of oil equivalent found during 2015.

photo Oil and Gas Discoveries_zps07lvdq31.jpg

The vast majority of large, conventional undiscovered oil and gas fields are offshore. Unfortunately, these fields are uneconomical to develop with oil prices below $80 per barrel.

That's why a few years ago, when prices first dipped under $60, many oil companies refocused their efforts. They bet big on U.S. shale.

Now, many are regretting that decision. Most shale basins – other than the Permian – are losers at current WTI prices. (Though there are some winners, as I showed you here .) Reply

[May 24, 2016] At The Edge Of Time This is Peak Oil

Notable quotes:
"... Some days ago I had the opportunity to watch a picture titled "The Big Short", an opus on the 2008 financial crisis. It portraits remarkably well how the marriage of ignorance with the lack of scruples can concoct the most toxic of outcomes. The so called "shale oil boom" is not much of a different story, only perhaps at a different scale. ..."
"... This contraction cycle will resound for years to come. Existing fields decline at a rate somewhere between 4% to 5% per year, meaning that the industry needs to bring online additional 3 Mb/d to 4 Mb/d every year just to keep extraction levelled. The investment deferrals under way and the time lag required to bring new fields online guarantee this replacement will be missed several years going forwards. ..."
"... Rystad Energy, a Norwegian petroleum and gas business intelligence consultancy, projects new extraction projects to miss the yearly decline of existing fields for at least the next five years . This consultancy expects an overall extraction decline of 300 kb/d this year, 1.2 Mb/d in 2017 and 2018 and deeper declines in 2019 and 2020. ..."
"... There are also reasons to believe the IEA is underestimating consumption , but this estimate produces a conservative (nearly best case) scenario: growth of 1.25 %/a. ..."
"... the extra stocks built by the OECD can alone keep consumers happy until the end of 2017; to go beyond that China has to follow the same strategy. However, if the trends identified here prevail, by the beginning of 2018 consumption will be exceeding extraction by almost 3 Mb/d, exhausting the remaining stocks of 0.5 Gb in a matter of months. ..."
"... The successive supply destruction - demand destruction cycles are the key dynamics of peak oil at an yearly scale. These cycles push left and transform each curve in succession, eventually producing a stall of traded volumes and finally a decline. The petroleum market has endured a supply destruction cycle for almost two years now, that while clearly closing, is yet far from the 100+ $/b price required to provide a reversing signal to the industry. With various petroleum exporting nations on the brink - in great measure due to the financial machinations concocted in the US - this supply destruction cycle might have been just too long. ..."
"... Present supply destruction cycle is coming to an end. ..."
blogspot.co.uk

Titling the last press review of 2015 I asked if that had been the year petroleum peaked. The question mark was not just a precaution, the uncertainty was really there. Five months later the reported world petroleum extraction rate is pretty much still were it was then. This is not a surprise, but the impact of two years of depressed prices is over due.

Nevertheless, during these five months of lethargy the information I gathered brings me considerably closer to remove the question mark from the sentence and acknowledge that a long term decline is settling in. Understanding the present petroleum market as a feature of the supply destruction - demand destruction cycle makes this case clear.

Looking Backwards

Worldwide petroleum extraction hit some sort of ceiling back in 2004, once it crossed above 70 Mb/d. The volume coming to the market kept increasing, but at a shy pace. From 2004 to 2012 the extraction rate grew only 3%, from 72 Md/b to 74 Mb/d.

At the same time, the Brent index endured a remarkable rise from 2004 to 2008. Some called this the "end of cheap oil", alluding to the increasing need for lower return-on-investment resources: ultra-deep water, heavy petroleums, Arctic, etc. Nevertheless, the price collapsed to a third from 2008 to 2009. Back then I explained how the concept of an ever rising petroleum price was at odds with "peak oil" . For the world extraction to enter a declining trend, periods of supply destruction must take place to keep those higher entropy resources at bay.

Today the market lives the second supply destruction cycle since the 2004 shift. In reality these cycles are lasting far longer than I anticipated, showing a considerable time lag in the adjustment of the supply curve. There is however something especial to this supply destruction cycle, that could possibly be sealing the end of growth to what petroleum is concerned.

The Miracle

Some days ago I had the opportunity to watch a picture titled "The Big Short", an opus on the 2008 financial crisis. It portraits remarkably well how the marriage of ignorance with the lack of scruples can concoct the most toxic of outcomes. The so called "shale oil boom" is not much of a different story, only perhaps at a different scale.

From 2011 to 2013 the extraction of petroleum from source rocks and other low permeability reservoirs in the US grew almost 2 Mb/d. These were remarkable days for the industry, with plenty of jobs created and a major revival to the American hands-on approach to business. However, such a rapid growth on a relatively small resource left many wondering if something else was at play.

By the beginning of 2014 it was becoming evident that the "shale oil boom" had been largely fuelled by the finance industry, that was feeding relentless amounts of what is sometimes called "dumb money" to be burned on America's source rocks. The scheme was simple: petroleum companies inflated their reserve assessments 10 times or more and imprudent investors kept buying bonds irrespective of losses. They thought they were investing on conventional 30 years petroleum bearing wells, when in fact were getting 3 years lifetime wells.

By late 2014 "shale oil" extraction in the US had increased 3.5 Mb/d since 2011, but at that point the price of petroleum in international markets was already coming off a cliff. 200 G$ rested on the American junk bond market, left to be trounced by a deep supply destruction cycle.

A bond default and bankruptcy wave formed throughout 2015, and is still surging today. One third of the companies involved in the "shale boom" should go belly up this year alone . However, these financial owes have not yet translated into a visible decline in extraction rates. This means that even bankrupt, petroleum companies are still bringing new source rock wells online, only deepening further the present supply destruction cycle.

When the WTI index (the regional equivalent to Brent) sank under 40 $/b late last year, Arthur Berman produced a most elucidating set of maps spatially portraying well profitability. At those prices only a small fraction of the wells extracting petroleum in the Permian formation were profitable.

And this is the remarkable achievement engendered by the marriage of America's petroleum and finance industries. Petroleum extraction became effectively insulated from prices; bankrupt or not, the wells on the Permian, Bakken and Eagle Ford formations will keep pumping - because the dumb money keeps burning. For the rest of the world, this is like inserting a sliver of 4 Mb/d at 0 $ at the far left of the supply curve, pushing all other resources rightwards. For an international industry already in contraction, this is like adding gasoline to the fire.

Supply Destruction

The present supply destruction cycle dates back to the beginning of 2014 - it actually unfolded before the price collapse. While prices still held above 100 $/b, international petroleum companies started facing issues regarding shareholder revenues. The supply curve is simply becoming too steep, when resources such as "Arctic oil" or "pre-salt" enter the portfolios of petroleum companies. The scale down of exploration activities started that year, as so the slashing of staff. In 2014 circa 100 000 jobs were laid off by the industry .

The price rout brought about by the shale miracle only accelerated this contraction. In 2015 the number of jobs laid off is estimated to have hit 250 000 . 2016 could end up close to that.

In panic mode, petroleum companies have been postponing or outright cancelling projects. Recent estimates point to a total of 400 G$ in deferred investments . A new wave of mergers in the industry is now expected.

Throughout 2015 only 2.8 Gb were identified in new reserves , the lowest score since the end of the II World War. This figure is less than one tenth of yearly consumption.

This contraction cycle will resound for years to come. Existing fields decline at a rate somewhere between 4% to 5% per year, meaning that the industry needs to bring online additional 3 Mb/d to 4 Mb/d every year just to keep extraction levelled. The investment deferrals under way and the time lag required to bring new fields online guarantee this replacement will be missed several years going forwards.

Rystad Energy, a Norwegian petroleum and gas business intelligence consultancy, projects new extraction projects to miss the yearly decline of existing fields for at least the next five years . This consultancy expects an overall extraction decline of 300 kb/d this year, 1.2 Mb/d in 2017 and 2018 and deeper declines in 2019 and 2020.

Looking Forwards

In a previous post I analysed the gap between petroleum extraction and consumption reported by the IEA. Using data fragments published by the press I then produced an estimate for China's stock flows that greatly explains what have been heretofore unaccounted barrels. In essence, the OECD and China could have amassed together a total of extra 900 Mb in stocks since the beginning of 2014.

Using this estimate for worldwide stocks I was then able to compute world petroleum consumption for the past two years. There are also reasons to believe the IEA is underestimating consumption , but this estimate produces a conservative (nearly best case) scenario: growth of 1.25 %/a.

Matching the outlook produced by Rystad with this consumption trend one can start the always risky exercise of predicting the future. In this case I projected forwards the consumption pattern of 2015 - with a double slump in later Winter and Spring, and the Summer up-tick - increasing at the steady pace identified before. As for extraction, I simple spread Rystad's outlook into a monthly dataset. The end result can be observed in the graph below.

The extraordinary stocks built by the OECD and China since 2014 are projected to hit 1 Gb right about now, but also to soon stop growing. None of this counts with the fires in Alberta, or the social-economic owes endured presently by Nigeria or Venezuela. Still, in this conservative scenario consumption is just about to exceed extraction.

In the scenario above I also made the exercise of estimating how long can these extraordinary stocks last if they are immediately released on the market to stave off an immediate price reaction. That being the case, the extra stocks built by the OECD can alone keep consumers happy until the end of 2017; to go beyond that China has to follow the same strategy. However, if the trends identified here prevail, by the beginning of 2018 consumption will be exceeding extraction by almost 3 Mb/d, exhausting the remaining stocks of 0.5 Gb in a matter of months.

How likely is this scenario? Is the OECD willing to bring its stocks promptly on the market to keep prices where they are now? Or will it wait for prices to rise to provide breathing air to the petroleum industry? And for how long can countries like Iraq, Nigeria or Venezuela withstand prices under 100 $/b?

As the events of recent months show, it might be far more likely for some disruptive happening to shake things up, than for these pretty trends to endure. In any case, this supply destruction cycle is coming to an end sooner rather than later. The market will eventually have to fix the widening gap projected in the graph above.

Consequences

These two years of supply destructive prices have pushed various important petroleum nations and regions to the brink. If there is some unexpected event shaking up the petroleum market, it will likely be in one of these places.

Conclusion

Depending on how the OECD (and perhaps China) decide to manage their extra petroleum stocks, the shift to a new demand destruction cycle closing the gap portrayed in the graph above will be complete by early 2018 the latest. If something goes seriously wrong with one of the key petroleum exporting nations, this shift could happen overnight.

What will such new cycle bring? Recent experience provides some clues: it took eight years for world extraction to rise from 72 Mb/d to 74 Mb/d; the so called "shale boom" required four years at prices above 110 $/b. These long time lags mean that Rystad's declining outlook is by this time almost certain.

The coming demand destruction cycle is therefore likely to be a long one too. And at some point it can invert the extraction trend upwards. In such a scenario, can extraction return to the 80 Mb/d rate of 2015? That is the big question, which I will abstain from answering definitively. Looking at it from the other side of the equation, for such a scenario to ever materialize, demand must withstand again a good number of years at high prices without undershooting.

The successive supply destruction - demand destruction cycles are the key dynamics of peak oil at an yearly scale. These cycles push left and transform each curve in succession, eventually producing a stall of traded volumes and finally a decline. The petroleum market has endured a supply destruction cycle for almost two years now, that while clearly closing, is yet far from the 100+ $/b price required to provide a reversing signal to the industry. With various petroleum exporting nations on the brink - in great measure due to the financial machinations concocted in the US - this supply destruction cycle might have been just too long.

The Take Away

[May 20, 2016] Has anything really changed beyond dodgy economics and a slowing economy to prevent oil peak occuring in 2015

Notable quotes:
"... I also question as to whether or not this extreme debt-fueled LTO production will ever be able to ramp up again as we have recently seen? It looks as if gullible investors are lining up with every increase in price, but the real onslaught of bankruptcies are just beginning, imho. ..."
"... This is a pretty big bust, and as mentioned by a few insiders in the last post, (Doug Leighton and a few others), will the experienced and knowledgeable 'hands' be available to ramp up production in such big numbers, ever again? Will there be financing? Will they be forced to produce by Govt decree/intervention? How about by a 2 for 1 tax incentive like Canada has done in the past? ..."
"... Not to doom and gloom a new reality, mostly because I am optimistic by nature, nevertheless, an acknowledged Plateau or decline will shake society to its very core as we move forward. I think it will be like those cheap B level movies about the looming asteroid casting a shadow on Earth, with hordes of people frantically looking for any means to escape the ramifications. ..."
peakoilbarrel.com

Paulo , 05/19/2016 at 3:47 pm

regarding statement: "but the USGS may be mistaken in assuming that US reserve growth is a good analog for the rest of the world."

Is oil distribution different than every other resource as it applies to the US? I don't think so. That is a very big assumption and does not take into account misrepresented reserves by more secretive countries, as well as political unrest and other disruptions that may occur going forward. Furthermore, as the Majors seem to be dropping in profitability will they be able to continuing producing at today's rates, or will they wind down and/or diversify with respect to their shareholders, their first responsibility? I also question as to whether or not this extreme debt-fueled LTO production will ever be able to ramp up again as we have recently seen? It looks as if gullible investors are lining up with every increase in price, but the real onslaught of bankruptcies are just beginning, imho.

This is a pretty big bust, and as mentioned by a few insiders in the last post, (Doug Leighton and a few others), will the experienced and knowledgeable 'hands' be available to ramp up production in such big numbers, ever again? Will there be financing? Will they be forced to produce by Govt decree/intervention? How about by a 2 for 1 tax incentive like Canada has done in the past?

Every one of these graphed scenarios but one show the 'Peak' 15-20 years out. Ron P, who I respect very highly, has said in the past he believes that 2015-16 will/might/just may be the peak, which we will know only in hindsight. Has anything really changed beyond dodgy economics and a slowing economy? I suppose if the economy continues slowing the peak might ultimately be delayed, but then if this is the case BAU is finished, anyway.

Not to doom and gloom a new reality, mostly because I am optimistic by nature, nevertheless, an acknowledged Plateau or decline will shake society to its very core as we move forward. I think it will be like those cheap B level movies about the looming asteroid casting a shadow on Earth, with hordes of people frantically looking for any means to escape the ramifications.

I sent an oil post to my best friend last week. Actually, it was the article I shared with this forum in the last post about Ft Mac. His response was, "wasn't Jeff Rubin the guy who once predicted Peak Oil"? I wrote back with several other articles attached and said, "This is Peak right now, it is beginning….the effects are simply not acknowledged, etc etc etc". The conundrum, as I see it, is that every time this industry goes bust, for whatever reason(s), the entrenched say, "See, there's no Peak, what a bunch of bullshit. If there was a Peak the prices would be climbing"!

Dennis, I would really appreciate reading a strong prediction from you, and others from this forum. I appreciate that you kind of did this with the caveat, (very polite I might add) that said, "a more realistic decline scenario might be"… (or words to that effect), but it's driving me nuts. I kind of see why TOD shut down, now. Their reasons were that there were simply not enough solid articles about PO to keep a good discussion flowing. I reluctantly switched to PO.com for daily background reading and the quality of discussion and ideas have been reduced on that site to playground levels of name calling with lots of swearing and personal attacks tossed in. The contibutors on this forum are the only game in town these days. I thank you all in advance for sharing you opinions and knowledge.

What's really going on?

regards

Fernando Leanme , 05/20/2016 at 2:23 am
Denis does good work, but its very difficult to pin down numbers when nobody releases detailed data. The ones who have the better data bases are IHS and the oil companies which purchase it from IHS. But nobody is about to release something that's probably worth several hundred million $.

For example, what is the usgs estimate for reserv increases at El Furrial in Venezuela? That reservoir has been badly mismanaged over the last 10 years. The mismanagement reduces booked reserves, and also makes impossible the introduction of a large tertiary process project such as CO2 injection.

The same applies to dozens of fields. Several Venezuelan heavy oil fields with more than 10 billion barrels of oil in place are headed towards less than half of the pdvsa booked reserves. And given the current practices and political regime, the reservoirs will be left gutted, which makes impossible introducing meaningful changes in the future. The Maduro regime has turned into a full blown dictatorship as of this week, it will change for the worse, so it looks like the ongoing reserve destruction will continue for at least a decade.

[May 18, 2016] Oil Markets Balancing Much Faster Than Thought

OilPrice.com
The International Energy Agency estimates that the world is dealing with a supply surplus of 1.3 million barrels per day (mb/d) right now, which should last through the end of the second quarter. By the third and fourth quarters, however, the surplus shrinks to just 0.2 mb/d.

The IEA reiterated its forecast that demand will hold at 1.2 mb/d, and expressed a growing sense of confidence that oil markets are only a few months away from moving into balance.

For its part, OPEC largely agreed in its May Oil Market Report. But OPEC also chose to focus on the slightly longer-term, citing the massive cut in capital expenditures taken over the past two years. The industry has slashed $290 billion from 2015 and 2016 spending levels so far, with more cuts expected. The spending reductions contributed to the shockingly low level of new oil discoveries last year – the industry discovered less than 3 billion barrels of new oil reserves in 2015, the lowest level in six decades. With few new discoveries, and a rising number of projects deferred, there is a very low level of new projects in the pipeline, so to speak. In other words, oil supply and demand curves are converging towards a balance, and could even cross over at some point a few years down the line as supply fails to keep up with demand.

... ... ...

Canadian wildfires knocked off more than 1.2 million barrels per day of production, a disruption that will be temporary, but ultimately could last a few weeks. Nigeria has lost roughly 0.4 to 0.5 mb/d due to a handful of attacks on oil pipelines and platforms. Shell and Chevron have shut down facilities and evacuated personnel because of attacks from the Niger Delta Avengers. Venezuela has seen production decline at least 0.1 mb/d from last year, and could fall another 0.2 mb/d at least over the course of 2016.

All of these supply disruptions come on top of the expected decline in output from around the world, especially high cost U.S. shale. U.S. oil production has fallen to 8.8 mb/d as of early May, taking the loss in U.S. oil production to about 900,000 barrels per day since April 2015.

[May 17, 2016] Nigerian oil production drops after militant attacks

Notable quotes:
"... Angola has become Africa's biggest oil producer as Nigeria's output slumped to 1.4 million barrels a day, Oil Minister Ibe Kachikwu said Monday, endangering a budget based on production of 2.2 million barrels. ..."
"... Some 70 percent of Nigerians are living below the poverty line, according to the United Nations, despite the country's wealth. ..."
"... The threatened strike comes as militants in the Niger Delta resumed attacks and forced oil majors to evacuate some workers. There are reports the Niger Delta Avengers are sponsored by southern politicians to sabotage Buhari. The president has deployed thousands of troops to the area, where the Avengers are demanding a greater share of the country's oil wealth and protesting cuts to a 2009 amnesty program that paid 30,000 militants to guard installations they once attacked. ..."
bakken.com

LAGOS, Nigeria (AP) - Militant attacks on oil installations and a threatened nationwide strike are driving Nigeria's petroleum production and its naira currency to new lows.

Angola has become Africa's biggest oil producer as Nigeria's output slumped to 1.4 million barrels a day, Oil Minister Ibe Kachikwu said Monday, endangering a budget based on production of 2.2 million barrels. Angolan production was steady at near 1.8 million barrels daily, according to the Organization of Petroleum Exporting Countries.

The naira fell to 350 to the dollar on the parallel market, against an official rate of 199, amid reports and denials that President Muhammadu Buhari's government plans an imminent devaluation, bowing to demands of the International Monetary Fund in exchange for soft loans.

Nigeria's National Labour Congress and the Trade Union Congress, which say they represent 6.5 million workers, and some civic organizations called for a strike Wednesday to protest a 70 percent increase in gasoline prices, forced by shortages of foreign currency. Nigeria is dependent upon imports with oil accounting for 70 percent of government revenue.

The crisis is dividing labor leaders on religious and ethnic lines, with those from the mainly Muslim north against the strike and Christians who dominate the oil-producing south urging citizens to "Occupy Nigeria!" Buhari is a northerner.

The division may mean that the country will not be subjected to the massive protests that forced the previous government to shelve plans to do away with a fuel subsidy in 2012, although many Nigerians are stocking up on food and water.

Inflation officially rose nearly 14 percent last month and prices of food and electrical goods have doubled while tens of thousands of workers have not been paid in months. Many angry Nigerians say the government could not have chosen a worse time to drop the fuel subsidy, though shortages forced people to pay double the fixed price anyway.

Some 70 percent of Nigerians are living below the poverty line, according to the United Nations, despite the country's wealth.

Buhari took over a year ago from President Goodluck Jonathan, whose government is accused of looting the treasury of billions of dollars.

The threatened strike comes as militants in the Niger Delta resumed attacks and forced oil majors to evacuate some workers. There are reports the Niger Delta Avengers are sponsored by southern politicians to sabotage Buhari. The president has deployed thousands of troops to the area, where the Avengers are demanding a greater share of the country's oil wealth and protesting cuts to a 2009 amnesty program that paid 30,000 militants to guard installations they once attacked.

[May 12, 2016] Even if oil prices reach $60 per barrel, a decline of US shale still is imminent

Notable quotes:
"... Daniel Katzenberg, a senior analyst at Robert W. Baird, says investors aren't worried about profits as much as production. Quarter after quarter, the output of Pioneer's new horizontal wells has exceeded expectations, and that's why the stock price keeps rising. "What the market sees is that they're sitting on one of the most attractive and economic resource plays in the world," says Katzenberg. "Pioneer is tasked with proving their acreage is as good as the hype." ..."
"... I like this way of thinking: "investors aren't worried about profits as much as production". However absurd it sounds, that is true. There is a class of investors that aren't worried about profits. Same can be said about investors in Tesla: "investors aren't worried about profits as much as new EV technologies". ..."
"... New financing will be tough for survivors, and debt overhand will not dissipate any time soon. As for investors putting money into questionable companies (that Alex used as a counterargument) this is just throwing good money after bad. Most of those "new" investors are already up to the neck in this s**t and are afraid to write down holdings. So they decided to double down hoping that rising oil price will bail them out. ..."
"... Nothing new here. America became the nation of speculators, big and small, so a new sucker is born every minute. They expect that the rising tide will lift all boats. And they already forgot lessons of 2008: I do not think investors memory (as a class) lasts more then five years. So a new bubble and related fraud can have any period larger then five years. Almost eight year passed from previous crash, so it's about time to milk those suckers again :-) ..."
"... I think there will observable divergence between oil price rise and energy mutual funds/ETFs price rise. The latter will rise more slowly as bankruptcies might spoil the show. ..."
"... US Production is falling (substantially) and rigs are still declining so obviously "investors" are not interested in production either. So Mr Katzenberg is talking baloneys. There are no investors. This just last gasps of money printing. You can see the cracks everywhere. ..."
"... "If oil prices average $40 per barrel, U.S. shale oil production will likely decline by 3 million barrels per day between 2015 and 2020, and even if oil prices reach $60 per barrel, a decline is still imminent, according to the International Energy Agency (IEA). US shale production is not expected to halt the decline until we reach prices of $70 per barrel over the same period." ..."
"... There will be time in a year when EIA will report the same and Wall Street will proclaim "We are shocked. No one could have predicted this". Same old same old. ..."
peakoilbarrel.com
Ves , 05/11/2016 at 5:30 pm
US E&Ps were able to sell 10 billion not for the purpose of investing but for hiding the losses for little bit longer. That shale business model is dead.
AlexS , 05/11/2016 at 8:17 pm
"That shale business model is dead."

But investors don't think so.
Despite all those bankrupcies, they continue to invest in shale players, particularly in those who continue to increase production volumes.

A good example is Pioneer, which is up almost 60% from 52-week lows.

Interesting quotes from an article in Bloomberg:

"The company, meanwhile, is spending a lot of money now in the belief that oil prices will soon rise. Not everyone thinks it will pay off. Criticizing shale drillers at the Sohn Investment Conference a year ago, David Einhorn singled out Pioneer, in which he has a short position, as the "Mother-Fracker." Einhorn, president of Greenlight Capital, argued that Pioneer lost $12 for every barrel it developed over the previous nine years. "That's like using $50 bills to counterfeit $20s," he said.
……………………..
Daniel Katzenberg, a senior analyst at Robert W. Baird, says investors aren't worried about profits as much as production. Quarter after quarter, the output of Pioneer's new horizontal wells has exceeded expectations, and that's why the stock price keeps rising. "What the market sees is that they're sitting on one of the most attractive and economic resource plays in the world," says Katzenberg. "Pioneer is tasked with proving their acreage is as good as the hype."

http://www.bloomberg.com/news/articles/2016-05-11/how-oil-s-most-boring-ceo-found-himself-atop-10-billion-barrels

I like this way of thinking: "investors aren't worried about profits as much as production". However absurd it sounds, that is true. There is a class of investors that aren't worried about profits. Same can be said about investors in Tesla: "investors aren't worried about profits as much as new EV technologies".

likbez , 05/11/2016 at 8:47 pm
That shale business model is dead.

Dead - no. Severely squeezed - yes. New financing will be tough for survivors, and debt overhand will not dissipate any time soon. As for investors putting money into questionable companies (that Alex used as a counterargument) this is just throwing good money after bad. Most of those "new" investors are already up to the neck in this s**t and are afraid to write down holdings. So they decided to double down hoping that rising oil price will bail them out.

Nothing new here. America became the nation of speculators, big and small, so a new sucker is born every minute. They expect that the rising tide will lift all boats. And they already forgot lessons of 2008: I do not think investors memory (as a class) lasts more then five years. So a new bubble and related fraud can have any period larger then five years. Almost eight year passed from previous crash, so it's about time to milk those suckers again :-)

I think there will observable divergence between oil price rise and energy mutual funds/ETFs price rise. The latter will rise more slowly as bankruptcies might spoil the show.

Ves , 05/11/2016 at 11:02 pm
" Daniel Katzenberg, a senior analyst at Robert W. Baird, says investors aren't worried about profits as much as production"

Alex,

" investors aren't worried about profits as much as production".

Is this America? Profits are not important? Well if investors are not worried about profits than what is this? Charity, non-profit think-tank venture?

US Production is falling (substantially) and rigs are still declining so obviously "investors" are not interested in production either. So Mr Katzenberg is talking baloneys. There are no investors. This just last gasps of money printing. You can see the cracks everywhere.

Tesla is different. Tesla is still in hype 'stage" considering the number of vehicles sold.. You can run up Tesla stock so high just outside solar system and crash back and nobody will notice a thing. Oil is different because all 7 billions of us are using it.

Ves , 05/12/2016 at 9:36 am
Alex,

Here is what IEA saying this morning:

"If oil prices average $40 per barrel, U.S. shale oil production will likely decline by 3 million barrels per day between 2015 and 2020, and even if oil prices reach $60 per barrel, a decline is still imminent, according to the International Energy Agency (IEA). US shale production is not expected to halt the decline until we reach prices of $70 per barrel over the same period."

IEA is completely disagreeing with anyone who is still claiming that shale has life below $70. And you know what is interesting is that that 2 years ago IEA & EIA were singing the same song but at this point IEA is splitting with that narrative because it is so obvious that you cannot hide it anymore.

There will be time in a year when EIA will report the same and Wall Street will proclaim "We are shocked. No one could have predicted this". Same old same old.

[May 09, 2016] Can Iran And Saudi Arabia's Production Claims Be Believed

Notable quotes:
"... From the Iranian side, I have no doubts that an increase of another 1m barrels a day is precisely what they hope will happen, but the reality will surely be different. For all oil production, whether it is from an independent oil company or a sovereign nation, capital expenditures will determine the increase or decrease that can be achieved. Iran has a decidedly arthritic oil infrastructure, slowed by the lack of Western technology and the impact of a decade of sanctions. Their own economy is too weak to generate anywhere near the capex required to increase another 1 million barrels in the next year, and their overtures to foreign oil companies for leases inside Iran has been met cooly by prime contenders Total (TOT) and Eni (E). There is a lagged amount of already developed barrels that Iran can push onto the global market – perhaps 300,000 barrels a day; but by my reckoning, already 150,000 of those barrels have been added – making their ultimate targets very unlikely indeed to be reached. ..."
"... It wouldn't be consistent to believe that for the last year and a half, the Saudis have been capable of increasing their production by another 20 percent, but have so far kept that potential under wraps. Instead, I am fully of the opinion that the Saudis are near, if not at their full production potential right now. ..."
"... The oil market seems to agree – in February, if the threat of another 3 million barrels of oil hitting the global market had been unleashed, oil might have reached below $20 a barrel; today, oil is getting very close to rallying towards $50 a barrel instead. ..."
OilPrice.com

In light of the missed opportunity at Doha to curb OPEC production, angry statements have emerged from both Iran and Saudi Arabia on oil production – the Iranians saying that they cannot be stopped in increasing their exports another 1m barrels a day in the next 12 months, the Saudi oil minister in turn threatening to increase production another 2m barrels a day. Both of these statements need to be taken with not a grain, but a 5-pound bag of salt.

From the Iranian side, I have no doubts that an increase of another 1m barrels a day is precisely what they hope will happen, but the reality will surely be different. For all oil production, whether it is from an independent oil company or a sovereign nation, capital expenditures will determine the increase or decrease that can be achieved. Iran has a decidedly arthritic oil infrastructure, slowed by the lack of Western technology and the impact of a decade of sanctions. Their own economy is too weak to generate anywhere near the capex required to increase another 1 million barrels in the next year, and their overtures to foreign oil companies for leases inside Iran has been met cooly by prime contenders Total (TOT) and Eni (E). There is a lagged amount of already developed barrels that Iran can push onto the global market – perhaps 300,000 barrels a day; but by my reckoning, already 150,000 of those barrels have been added – making their ultimate targets very unlikely indeed to be reached.

The Saudis do not have any of the capex or technology problems that plague the Iranians. But the question of how much capacity the Saudis actually do have comes into play when they threaten to increase production by another 2 million barrels. For my entire career in oil, there has always been a dark question on Saudi 'spare capacity' – How much could the Saudis ultimately pump, if they were willing to open the spigots up fully? For years, the speculation from most oil analysts was near to 7.5m or 8m barrels a day – a number that was blown out in the last two years as Saudi production rocketed above 10m barrels a day.

But the strategy the Saudis have pursued has been clear – they have been working towards full production and an aggressive fight for market share since the failure of the Vienna OPEC meeting in November of 2014. It is very difficult to believe that the Saudis have had much, if any, remaining capacity to easily put on the market since that time, or if any spare capacity could be developed at all. It wouldn't be consistent to believe that for the last year and a half, the Saudis have been capable of increasing their production by another 20 percent, but have so far kept that potential under wraps. Instead, I am fully of the opinion that the Saudis are near, if not at their full production potential right now.

The oil market seems to agree – in February, if the threat of another 3 million barrels of oil hitting the global market had been unleashed, oil might have reached below $20 a barrel; today, oil is getting very close to rallying towards $50 a barrel instead.

[May 07, 2016] Is This The Biggest Red Herring In Oil Markets

Notable quotes:
"... Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 (Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional. ..."
OilPrice.com

Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 (Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional.

... ... ...

From April 2015 to March 2016, oil production decreased 660 kbpd (-7 percent) but net crude oil imports increased 800 kbpd (+10 percent) (Figure 5).

[May 07, 2016] Reserves replacement problem resurfaced again

Notable quotes:
"... Last year, the seven biggest oil companies in the West only replaced 75 percent of their reserves. This is seriously bad news, especially combined with the fact that many new discoveries made in the last four years have disappointed. ..."
"... In the last four years the industry has seen disappointing - largely gas prone - exploration results, with the volume of liquids discovered annually falling from around 19 billion barrels between 2008 and 2011 to 8 billion barrels between 2012 and 2015 ..."
OilPrice.com

A 4.5-Million-Barrel Per Day Oil Shortage Looms Wood Mackenzie OilPrice.com By Irina Slav

The third part of the problem is reserves replacement. New exploration is not just a form of art for art's sake, or a means of expansion to boost bottom lines. It's an essential part of the operations of an oil business. Oil is finite, and in order to stay profitable, an oil company needs to maintain a consistent rate of reserves replacement.

And here's more bad news: Last year, the seven biggest oil companies in the West only replaced 75 percent of their reserves. This is seriously bad news, especially combined with the fact that many new discoveries made in the last four years have disappointed.

Wood Mac's exploration research vice-president told Offshore magazine that "In the last four years the industry has seen disappointing - largely gas prone - exploration results, with the volume of liquids discovered annually falling from around 19 billion barrels between 2008 and 2011 to 8 billion barrels between 2012 and 2015."

[May 07, 2016] Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest in 20 years

Notable quotes:
"... Chevron Corp. shut down about 90,000 barrels a day of output following an attack on a joint-venture offshore platform that serves as a gathering point for production from several fields. Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg. ..."
peakoilbarrel.com
AlexS , 05/06/2016 at 5:08 pm
Nigerian Oil Output Plunges to 20-Year Low as Attacks Mount

http://www.bloomberg.com/news/articles/2016-05-06/nigerian-oil-output-plunges-to-20-year-low-as-attacks-escalate

• Strike on Chevron platform cuts output by about 90,000 b/d
• Crude output fell in April to lowest in more than two decades

Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest in 20 years, as attacks against facilities in the energy-rich but impoverished nation increase in number and audacity.

Chevron Corp. shut down about 90,000 barrels a day of output following an attack on a joint-venture offshore platform that serves as a gathering point for production from several fields. Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg.

Ves , 05/06/2016 at 6:24 pm
and Alberta oil sands outage are now in range of 650k bpd and up 150k from yesterdays numbers.

[May 07, 2016] Haliburton following Schlumberger in pulling out of Venezuela:

peakoilbarrel.com

George Kaplan ,

05/06/2016 at 3:05 pm
Haliburton following Schlumberger in pulling out of Venezuela:

http://www.worldoil.com/news/2016/5/6/halliburton-joins-schlumberger-in-cutting-venezuelan-activity

Extra heavy oil needs a lot of wells, so this should show up in production numbers fairly quickly.

[May 06, 2016] If you think productivity increase is going to compensate for overall depletion and lack of new exploration success then I think you are wrong.

Notable quotes:
"... that ND general stats show 13012 wells producing in Feb 2016 and 13212 in Oct 2016 (this is net i.e. wells added minus wells shut in), and 5) that taken together these do not indicate that there is any potential for a large production increase in the near or far future. ..."
"... I think we will have to see what happens when oil prices rise to $75/b or so, my expectation is that there will be at least 15,000 more wells completed in the Bakken/Three Forks in the next 10 years or so if oil prices rise to $75/b and remain at that level or higher. ..."
"... I expect ND Bakken/Three Forks output will increase gradually to maybe 1.22 Mb/d (only 60 kb/d above the previous peak) by about 2022 and then will gradually decline. This is under a scenario where the completion rate increases to 155 new wells per month and then gradually declines along with output. Total ERR of about 8.4 Gb and 27k total Bakken/Three Forks wells completed. The scenario requires high oil prices ($155/b in 2015$) by 2020, lower oil prices will mean less output. ..."
"... They know where it is because they searched heavily up to 2012. They didn't stop searching because of the price, or because they had so much acreage they didn't need any more. They stopped because they were hitting dry holes and ran out of places to look. That definitely does mean lack of success at the periphery. ..."
peakoilbarrel.com
George Kaplan , 05/06/2016 at 11:45 am
Dennis, I didn't look at well productivity, which is what you seem to be discussing. My points were:

1) that there is no exploration drilling being conducted at present and that it declined quickly after 2012 when prices were high, implying that there aren't any areas left worth looking at,

2) that 5 counties had high exploration success and these are the ones now responsible for almost all production (and actually all in decline) and that the development in each county quickly followed the exploration, suggesting core areas are key for overall production rates,

3) that other counties have been explored without success and are likely to be unproductive,

4) that ND general stats show 13012 wells producing in Feb 2016 and 13212 in Oct 2016 (this is net i.e. wells added minus wells shut in), and 5) that taken together these do not indicate that there is any potential for a large production increase in the near or far future.

If you think productivity increase is going to compensate for overall depletion and lack of new exploration success then I think you are wrong.

Dennis Coyne , 05/06/2016 at 12:10 pm
Hi George,

They know where the oil is, there is not much need for exploration. I do not expect well productivity to continue to increase, the chart was intended to show that there has been no productivity decrease so far. I agree that at some point the sweet spots will be fully drilled and drilling will need to move to less productive areas.

When that point is reached we will see new well productivity decrease.

Older low output wells from the non-Bakken formations have been shut in at faster rates due to low prices, though some may be reactivated as oil prices rise. The NDIC seems to think there are another 30,000 potential well locations, perhaps they are mistaken, the USGS also thinks there are that many potential well sites and they could also be wrong.

I think we will have to see what happens when oil prices rise to $75/b or so, my expectation is that there will be at least 15,000 more wells completed in the Bakken/Three Forks in the next 10 years or so if oil prices rise to $75/b and remain at that level or higher.

I also agree there won't be a large production increase (though we have not defined large).

I expect ND Bakken/Three Forks output will increase gradually to maybe 1.22 Mb/d (only 60 kb/d above the previous peak) by about 2022 and then will gradually decline. This is under a scenario where the completion rate increases to 155 new wells per month and then gradually declines along with output. Total ERR of about 8.4 Gb and 27k total Bakken/Three Forks wells completed. The scenario requires high oil prices ($155/b in 2015$) by 2020, lower oil prices will mean less output.

AlexS , 05/06/2016 at 12:26 pm

George,

Exploration drilling in shale plays is important only in early stages of development. The geology of the Bakken, Eagle Ford and the Permian is already very well known, and there is no need for additional exploration. The fact that activity is currently concentrated in the sweet spots does not mean lack of exploration success in the periphery. Resources are there, but they are too costly to produce at current oil prices.

George Kaplan , 05/06/2016 at 2:09 pm
They know where it is because they searched heavily up to 2012. They didn't stop searching because of the price, or because they had so much acreage they didn't need any more. They stopped because they were hitting dry holes and ran out of places to look. That definitely does mean lack of success at the periphery.

[May 05, 2016] Capex cuts

peakoilbarrel.com
likbez , 05/05/2016 at 3:32 pm
Capex cuts (billions): 
Deepwater                $87.65

LNG                      $63.10

Onshore                  $44.61

Oil sands                $28.50

Shallow water            $23.30

Offshore gas             $13.90

Heavy oil                $7.97
Source: Rystad Energy
Note: Data through March 2016

[May 05, 2016] Oil production cut by unforseen events

Notable quotes:
"... Iraq: Production at an oilfield near Kirkuk, in northern Iraq, has been stopped after unidentified gunmen set at least two wells on fire on Tuesday night. ..."
"... US: An official update will be released next week, but Director of Mineral Resources Lynn Helms told an oil industry group in Williston he expects to see a "severe" production drop. ..."
"... IPD's prediction comes on the heels of its quarterly sector survey, which estimated Venezuela's oil output tumbled 6.8 percent to 2.59 million bpd in the first quarter compared with the same period of 2015, due to drilling delays, insufficient maintenance, theft, and diluent shortfalls. ..."
"... …Morgan Stanley's Benny Wong … estimates that the total number of offline capacity will be anywhere between 400 and 500 mbbl/d, with the shut-in expected to last about 10 days, potentially reducing total market output by as much as 5 million barrels. ..."
"... Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional. ..."
peakoilbarrel.com

Ves , 05/05/2016 at 11:32 am

Just in the last 24 hours.

Canada: Taken together this amounts to some 0.5 million [barrels a day] of capacity that is currently offline. Infrastructure is being affected too, with the 560,000 b/d Corridor pipeline shut down and movement along the 140,000 b/d Polaris pipeline significantly curtailed.

Lybia: An official at the port told the news agency that tanks at Hariga were 7-10 days away from hitting their full capacity. This means, Reuters reported, that with no tankers loading oil at the port, Libya will be forced to shut in about 120,000 bpd of output, which is the export capacity of the port.

Iraq: Production at an oilfield near Kirkuk, in northern Iraq, has been stopped after unidentified gunmen set at least two wells on fire on Tuesday night.

US: An official update will be released next week, but Director of Mineral Resources Lynn Helms told an oil industry group in Williston he expects to see a "severe" production drop.

And all of that is worth a $1.17 of increase on WTI/Brent in the last 24h!!! Really? :-)

AlexS , 05/05/2016 at 1:36 pm
Militants attack Chevron platform in Niger Delta: navy spokesman

Thu May 5, 2016
http://www.reuters.com/article/us-nigeria-oil-delta-idUSKCN0XW1PL

---------------

Venezuela 2016 oil output seen down at 2.35 million bpd: consultancy

Tue May 3, 2016
http://www.reuters.com/article/us-venezuela-oil-output-idUSKCN0XU22R

Venezuela's oil output may fall to average some 2.35 million barrels-per-day this year, as the South American OPEC country's cash crunch and shortages weigh on production, according to energy consulting firm IPD Latin America.

IPD's prediction comes on the heels of its quarterly sector survey, which estimated Venezuela's oil output tumbled 6.8 percent to 2.59 million bpd in the first quarter compared with the same period of 2015, due to drilling delays, insufficient maintenance, theft, and diluent shortfalls.

That estimate is a whisker above the 2.53 million bpd Venezuela produced in the first quarter, according to OPEC numbers. But it marks the first time since the third quarter of 2008 that production fell in all districts, including the extra-heavy crude Orinoco Belt, IPD added.

likbez , 05/05/2016 at 11:42 am
500,000 Barrels And $1 Billion In Losses The True Cost Of Canada's Wildfire OilPrice.com

"…Analysts noted that Shell shut its Albian Sands mine and Suncor shut its base plant, while producers Syncrude Canada and Connacher Oil & also reduced output in the region."Taken together this amounts to some 0.5 million b/d of capacity that is currently offline. Infrastructure is being affected too, with the 560,000 b/d Corridor pipeline shut down and movement along the 140,000 b/d Polaris pipeline significantly curtailed. On top of that, trains are not operating near Fort McMurray, according to the Canadian National Railway," said the analysts.

…Morgan Stanley's Benny Wong … estimates that the total number of offline capacity will be anywhere between 400 and 500 mbbl/d, with the shut-in expected to last about 10 days, potentially reducing total market output by as much as 5 million barrels.

likbez , 05/05/2016 at 11:53 am
Is This The Biggest Red Herring In Oil Markets OilPrice.com by Arthur E. Berman

Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional.

…From April 2015 to March 2016, oil production decreased 660 kbpd (-7 percent) but net crude oil imports increased 800 kbpd (+10 percent) (Figure 5).

[May 04, 2016] Of 72 percent of petroleum used is for transportation 63 percent is used by light duty vehicles

Notable quotes:
"... 72% of petroleum used is for transportation. 63% of that is light duty vehicles. So of 90mbod, 40 million barrels are subject to potential substitution by electric vehicles. The adoption curve need only stay ahead of the decline curve. ..."
"... As an ex Mack Trucks sales person. I always considered SUVs and pickups as light duty. I agree they will be electrified but it's going to take a little longer than passenger vehicles. Right now hybrids are much more feasible because of the more extreme workload they preform. Towing a 10k trailer a couple of hundred of miles is going to take a lot of juice. ..."
"... America already runs hybrid buses if you consider that electric. To get were the world needs to be, we're going to need a lot of f'n batteries. Once the world solves the battery issue, there is not much reason class 8's can't be electrified starting with local delivery trucks. ..."
peakoilbarrel.com
05/02/2016 at 8:15 am

Differences of opinion are what make discussion interesting.

72% of petroleum used is for transportation. 63% of that is light duty vehicles. So of 90mbod, 40 million barrels are subject to potential substitution by electric vehicles. The adoption curve need only stay ahead of the decline curve.

Why worry about Caterpillars first when transportation is the biggest slice of the petroleum pie, and the most readily subject to supercession by other energy sources?

Transition may be improbable, but that's different than impossible.

Bob Nickson , 05/02/2016 at 9:06 am
Assuming that an ICE is 20% as efficient as an EV, which seems reasonable as one barrel of oil is energy equivalent to 1628.2kWh, and will produce 19 gallons of gasoline, and 12 gallons of diesel. Assuming 30 mpg economy for each, the barrel of oil provides 930 miles of travel, while 1628.2 kWh at 3mpkWh will provide 4,884 miles of travel.

So if the light duty transport fleet was replaced 100% with electric vehicles, 40.8 mbo/day would require 13.3 TWh of electric power substitution.

We have increased global annual renewable power production by 3,250 TWh's in the last decade, so to increase renewable power production by 2030 to produce 13TWh/day to offset 40.8 MBO/day used in the transportation sector would require that we accomplish in the next fifteen years what we have accomplished in the last ten (+3,250TWhp/decade).

As for the vehicles, all we must do is replace 100% of the light duty fleet with EV's in that same 15 years. Easy as pie, right? :-)

Nick G , 05/02/2016 at 1:31 pm
Heavy duty vehicle can be electrified too. SUVs and pickups are considered heavy duty.

Heck, Chinese buses are going heavily electric: there are projections that they'll be 100% electric in 10 years.

ChiefEngineer , 05/02/2016 at 2:17 pm
Hi Nick,

As an ex Mack Trucks sales person. I always considered SUVs and pickups as light duty. I agree they will be electrified but it's going to take a little longer than passenger vehicles. Right now hybrids are much more feasible because of the more extreme workload they preform. Towing a 10k trailer a couple of hundred of miles is going to take a lot of juice.

America already runs hybrid buses if you consider that electric. To get were the world needs to be, we're going to need a lot of f'n batteries. Once the world solves the battery issue, there is not much reason class 8's can't be electrified starting with local delivery trucks.

Cheers

[May 04, 2016] Peak Fracking, Perpetually Higher Oil Prices by Bill James

Notable quotes:
"... As a warning to investors, EIA (Energy Information Administration) and IEA (International Energy Agency) data is reliable; however, their judgments are politically motivated. ..."
"... Also, there is no "glut" of oil. The market need is to power a 365-day food cycle. The reported "glut" is a storage problem of having 33.8 Days of Supply, 10 days more than the 24 Days of Supply typical for the past decade. ..."
May 2, 2016 | Seeking Alpha

UGA increased from $20.40 on February 2016 to $28 in April.

Fracked oil wells deplete quickly, and account for half of US oil production.

The current drilling rig count is 420. To sustain fracking production at least 1,840 drilling rigs are required (rig count in December 2014) to replace depleting wells.

As a warning to investors, EIA (Energy Information Administration) and IEA (International Energy Agency) data is reliable; however, their judgments are politically motivated. Here is a graph by the Dallas Federal Reserve on how, year after year, EIA forecasts repeatedly estimated oil prices would drop as the 2008 economic collapse approached.

...As with failing to warn of higher oil costs in the ramp to the 2008 economic collapse, the EIA is failing to warn the nation of the economic consequences of Peak Fracking. This provides investors a knowledge gap.

... ... ...

To better understand oil geology and economics here are two links:

The mega-trends will force oil prices higher much faster than most believe.

Also, there is no "glut" of oil. The market need is to power a 365-day food cycle. The reported "glut" is a storage problem of having 33.8 Days of Supply, 10 days more than the 24 Days of Supply typical for the past decade. Economic fragility is created by not having 365 Days of Supply to meet the needs of a 365-day food cycle; Examples: 1973 Oil Embargo, 1979 Iranian Revolution. Having 33.8 Days of Supply is only a 9% safety factor on a survival need. Take away the 18 Days of Supply required to fill pipelines and there is a 4% safety margin on a non-elastic survival need. Fragility is extreme.

[May 04, 2016] A 4.5-Million-Barrel Per Day Oil Shortage Looms Wood Mackenzie by Irina Slav

Notable quotes:
"... a true crisis is looming-and for the moment, there is no apparent way around it. ..."
"... Wood Mac's exploration research vice-president told Offshore magazine that "In the last four years the industry has seen disappointing - largely gas prone - exploration results, with the volume of liquids discovered annually falling from around 19 billion barrels between 2008 and 2011 to 8 billion barrels between 2012 and 2015." ..."
May 03, 2016 | OilPrice.com

A report by Wood Mackenzie has warned the world may face a daily oil shortage of 4.5 million barrels by 2035. The amount represents around half of the global consumption estimate of the International Energy Agency (IEA) for 2016. In other words, a true crisis is looming-and for the moment, there is no apparent way around it.

The most obvious reason is that energy companies don't want to spend money on exploration when prices are so disappointingly low. Many of them simply can't afford to spend on exploration if they want to survive in today's price environment. Ironically, their long-term survival can only be guaranteed by further exploration spending.

A lot of costly projects have been shelved since the summer of 2014 when oil prices started falling, with the initial investments basically written off. Reviving these projects will cost more money. Where this money will come from is unclear-there is no certainty where oil prices are going in the near term, let alone any longer period, and the European Commission today forecasted $41/barrel oil for the rest of this year and just over $45 for 2017.

... ... ...

The third part of the problem is reserves replacement. New exploration is not just a form of art for art's sake, or a means of expansion to boost bottom lines. It's an essential part of the operations of an oil business. Oil is finite, and in order to stay profitable, an oil company needs to maintain a consistent rate of reserves replacement.

And here's more bad news: Last year, the seven biggest oil companies in the West only replaced 75 percent of their reserves. This is seriously bad news, especially combined with the fact that many new discoveries made in the last four years have disappointed.

Wood Mac's exploration research vice-president told Offshore magazine that "In the last four years the industry has seen disappointing - largely gas prone - exploration results, with the volume of liquids discovered annually falling from around 19 billion barrels between 2008 and 2011 to 8 billion barrels between 2012 and 2015."

Related:

[Apr 29, 2016] 50 percent of proved oil reserves may have just vanished

Notable quotes:
"... According to Professor Michael Jefferson, who spent nearly 20 years at Shell in various senior roles from head of planning in Europe to director of oil supply and trading, "the five major Middle East oil exporters altered the basis of their definition of 'proved' conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their 'proved' conventional oil reserves of some 435 billion barrels." ..."
"... Global reserves have been further inflated, he wrote in his study, by adding reserve figures from Venezuelan heavy oil and Canadian tar sands – despite the fact that they are "more difficult and costly to extract" and generally of "poorer quality" than conventional oil. This has brought up global reserve estimates by a further 440 billion barrels. ..."
"... Jefferson's conclusion is stark: "Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the 'peak oil' issue remains with us." ..."
April 27, 2016 | OilPrice.com

An extensive new scientific analysis published in Wiley Interdisciplinary Reviews: Energy & Environment says that proved conventional oil reserves as detailed in industry sources are likely "overstated" by half.

According to standard sources like the Oil & Gas Journal, BP's Annual Statistical Review of World Energy, and the US Energy Information Administration, the world contains 1.7 trillion barrels of proved conventional reserves.

However, according to the new study by Professor Michael Jefferson of the ESCP Europe Business School, a former chief economist at oil major Royal Dutch/Shell Group, this official figure which has helped justify massive investments in new exploration and development, is almost double the real size of world reserves.

Wiley Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed publications which runs authoritative reviews of the literature across relevant academic disciplines.

According to Professor Michael Jefferson, who spent nearly 20 years at Shell in various senior roles from head of planning in Europe to director of oil supply and trading, "the five major Middle East oil exporters altered the basis of their definition of 'proved' conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their 'proved' conventional oil reserves of some 435 billion barrels."

Global reserves have been further inflated, he wrote in his study, by adding reserve figures from Venezuelan heavy oil and Canadian tar sands – despite the fact that they are "more difficult and costly to extract" and generally of "poorer quality" than conventional oil. This has brought up global reserve estimates by a further 440 billion barrels.

Jefferson's conclusion is stark: "Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the 'peak oil' issue remains with us."

The study referred to here is: Overview A global energy assessment,

See also: Where did all the oil go? The peak is back

[Apr 26, 2016] Oil Bulls Plunge Into Market as U.S. Gasoline Demand Hits Record

Bloomberg

U.S. gasoline consumption, averaged over four weeks, rose 3.9 percent from a year earlier to 9.39 million barrels a day through April 15, Energy Information Administration data show. Demand this summer will increase 1.4 percent to a record, the EIA said April 12. Americans drove 232.2 billion vehicle miles in February, up 5.6 percent from a year earlier, Transportation Department data show.

"Gasoline demand is quite strong and that's all price driven," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. "Demand for gasoline should provide support for crude."

The average price of regular gasoline at the pump nationwide was $2.136 a gallon on Sunday, down 15 percent from a year earlier, according to data from Heathrow, Florida-based AAA, a national federation of motor clubs.

Speculators' net-long position in WTI gained by 30,357 futures and options combined to 245,987, CFTC data show. Long positions, or bets that prices will rise, increased 4.8 percent, while shorts tumbled 19 percent.

In other markets, net bullish bets on Nymex gasoline climbed 15 percent to 23,357 contracts. Gasoline futures declined 3.5 percent in the period. Net bearish wagers on U.S. ultra low sulfur diesel decreased 11 percent to 7,773 contracts, the least since June as futures slipped 1 percent.

[Apr 25, 2016] While old supergiants would not all go into terminal decline together most of them are past peak and begin to go downhill fast soon

Notable quotes:
"... All of them are already in decline, as well as fields discovered in the sixties and seventies. There are a few exception – fields discovered several decades ago, but developed only recently (Manifa in Saudi Arabia, Kashagan in Kazakhstan). ..."
"... Rystad Energy estimates that only 9 Billion boe were discovered during 2015. This is 30% down from 2014 which was an all-time low. For comparison, world oil production is in the order of 30+ billion barrels each year. ..."
"... only 19% of the produced conventional resources were replaced by new discovered volumes last year, says Nils-Henrik Bjurstrřm, Senior Project Manager, in Rystad Energy ..."
"... Regrettably, the negative trend continues. In January 2016, only 250 million boe were discovered (in comparison, the Goliath field in the Barents Sea has reserves of approximately 200 MMbo), indicating a possibility for an even lower exploration result in 2016, says Bjurstrřm. ..."
"... So potentially going from just 9 billion BOE in 2015 to maybe 3 billion BOE in 2016. When will the oil markets take notice of this? Also, wonder how much of that is natural gas and condensate? ..."
"... Nobody is arguing that "all the supergiants" will come off their plateaus at the same time. That's a cheap straw man argument. Plus it's meaningless because there's no sense of that "at the same time" means. ..."
"... We don't need all of the super giants to go into decline all at the same time - two or three going into decline within a five year period would suffice. Or just one - Gawhar - would do. I think the probability of several super giants going into decline more or less at the same time is quite possible. But since nobody knows what the probabilities are, making any statements about the probabilities is pointless. ..."
"... I agree. Furthermore, I think everyone here realizes most oil comes from oilfields discovered prior to 1970 and almost all oilfields that still produce an average of over 500,000 barrels per day are 70-ish years old. So, ignoring Ghawar, Burgan and Daquing, oilfields that HAD a productive capacity exceeding one million barrels a day include Samotlor (1965), Prudhoe Bay (1968) and Cantarell (1976). That's not a flush but it is three of a kind. ..."
"... And all of those 1mb/d+ supergiants are already in decline (the most recent – Daquing) ..."
peakoilbarrel.com
Dennis Coyne , 04/24/2016 at 6:16 pm
Hi Doug and George,

From a statistics perspective the chances of all the supergiants coming off their plateaus at about the same time is quite an unrealistic assumption. Do you guys get a lot of straight flushes when you play poker (no wild cards)? I have played a little poker and have never seen a straight flush in real life, only in the movies.

Oldfarmermac , 04/24/2016 at 7:03 pm
Hi Dennis,

You are no doubt correct that the old supergiants won't all go into terminal decline together, but it does seem reasonable to assume that most of them will peak and begin to go downhill within some particular time frame measured from first production.

Now I am going to pull some numbers out of thin air to illustrate my point, and then maybe somebody who knows more can elaborate on the significance of it.

Let us suppose that the really big oil fields mostly peak between say thirty and forty years from first production.

It is my impression as a casual observer rather than a numbers cruncher or hands on investor that just about all the really big oil fields were discovered and put into production at least that long ago.

So taken as a group, they will probably begin going into decline AS A GROUP all together over about the same time frame as they were discovered as a group.

Fields discovered and first produced in the fifties, if I am right about this, will probably mostly all go into decline together over a period of about a decade or so, by way of example.

Basically what I am trying to say is that oil fields probably have a statistically predictable life span, and that most of the really big ones are probably all roughly about the same age, in terms of being produced. Nearly all of them will probably peak with in ten to fifteen more years, since all of them are getting to be up around thirty or forty years of production history.

IIRC, it's been a hell of a long time since somebody discovered a new super giant or giant field.

Somebody like Fernando ought to be able to take this observation and run with it.

Maybe you can run with it.

AlexS , 04/24/2016 at 7:09 pm
OFM

"Fields discovered and first produced in the fifties, if I am right about this, will probably mostly all go into decline together over a period of about a decade or so, by way of example."

All of them are already in decline, as well as fields discovered in the sixties and seventies. There are a few exception – fields discovered several decades ago, but developed only recently (Manifa in Saudi Arabia, Kashagan in Kazakhstan).

Rune Likvern , 04/24/2016 at 7:49 pm
AlexS, thanks!

There is something called Google, and Wikipedia (for what that is worth) has a list of the world's biggest oilfields.
https://en.wikipedia.org/wiki/List_of_oil_fields

And as you point out most of these are in decline.
New developments (recent decade) have been smaller ones with short plateaus and high decline rates.

AlexS , 04/24/2016 at 8:40 pm
Thanks, Rune

As I understand, the main sources of growth in global proved oil reserves in the past 10 years were:

1) Rising oil prices, which enabled to include Venezuela's ultra-heavy oil from the Orinoco belt and some other high-cost resources into proved reserve category;
2) New discoveries (which, as you say, are now much smaller than in previous decades);
3) Upward revisions of reserve estimate of the already developed fields due to reserves extension, new reservoir discoveries in old fields, use of improved recovery techniques or equipment, etc.;
4) Inclusion of part of LTO resources into proved reserve category.

The contribution of new discoveries was actually a secondary factor.

AlexS , 04/24/2016 at 9:03 pm
Rystad Energy on oil and gas discoveries:

The year 2015 was a global all-time low in terms of conventional oil and gas discoveries, says Nils-Henrik Bjurstrřm in Rystad Energy.

Rystad Energy estimates that only 9 Billion boe were discovered during 2015. This is 30% down from 2014 which was an all-time low. For comparison, world oil production is in the order of 30+ billion barrels each year.
– As a result, only 19% of the produced conventional resources were replaced by new discovered volumes last year, says Nils-Henrik Bjurstrřm, Senior Project Manager, in Rystad Energy , to geo365.no.

Regrettably, the negative trend continues. In January 2016, only 250 million boe were discovered (in comparison, the Goliath field in the Barents Sea has reserves of approximately 200 MMbo), indicating a possibility for an even lower exploration result in 2016, says Bjurstrřm.

source: http://www.geo365.no

Note: 9 Billion boe discovered during 2015 and 250 mboe discovered in 1Q16 are oil and gas. And the discovered volumes are not immediately included in proved reserve category

shallow sand , 04/24/2016 at 10:36 pm
So potentially going from just 9 billion BOE in 2015 to maybe 3 billion BOE in 2016. When will the oil markets take notice of this? Also, wonder how much of that is natural gas and condensate?

Note: XOM produces over 4 million BOEPD. In 2015 proved reserves fell 24%. First time they didn't replace 100% of reserves since 1990s.

Yes, I understand price has something to do with that. But still?

AlexS , 04/25/2016 at 6:25 am
shallow sand,

Exxon's total liquids proved reserves actually increased from 13713 million barrels on December 31, 2014 to 14724 million barrels on December 31, 2015
(source: 10-k)
There was a sharp downward revision in nat gas proved reserves, reflecting lower gas prices.

from OGJ:

ExxonMobil replaced just 67% of output in 2015

02/22/2016
http://www.ogj.com/articles/2016/02/exxonmobil-replaced-just-67-of-output-in-2015.html

ExxonMobil Corp. added 1 billion boe of proved oil and gas reserves in 2015, replacing just 67% of production during the year compared with 115% over the past 10 years.
In 2014, the firm replaced 104% of its production by adding proved oil and gas reserves totaling 1.5 billion boe.
The 2015 total includes a 219% replacement ratio for crude oil and other liquids.
However, proved reserves of natural gas were reduced by 834 million boe primarily in the US, reflecting the change in gas prices. The company expects this gas to be developed and booked as proved reserves in the future.
At yearend, ExxonMobil's proved reserves totaled 24.8 billion boe. Liquids represented 59% of proved reserves, up from 54% in 2014. ExxonMobil's reserves life at current production rates is 16 years.
Reserves during the year were added in Abu Dhabi, Canada, Kazakhstan, and Angola. Liquid additions totaled 1.9 billion bbl.
ExxonMobil added 1.4 billion boe to its resource base through by-the-bit exploration discoveries, undeveloped resource additions, and strategic acquisitions.

The firm's exploration activity in 2015 included the Liza oil discovery offshore Guyana (OGJ Online, May 20, 2015), and additional discoveries in Iraq, Australia, Romania, and Nigeria. Strategic unconventional resource additions were made in the Permian basin, Canada, and Argentina.

Overall, the company's resource base totaled more than 91 billion boe at yearend 2015, taking into account field revisions, production, and asset sales. The resource base includes proved reserves, plus other discovered resources that are expected to be ultimately recovered.

Silicon Valley Observer , 04/24/2016 at 8:13 pm
Really Dennis? From a statistics perspective? Assuming what probability distribution and correlation matrix?

Nobody is arguing that "all the supergiants" will come off their plateaus at the same time. That's a cheap straw man argument. Plus it's meaningless because there's no sense of that "at the same time" means.

We don't need all of the super giants to go into decline all at the same time - two or three going into decline within a five year period would suffice. Or just one - Gawhar - would do. I think the probability of several super giants going into decline more or less at the same time is quite possible. But since nobody knows what the probabilities are, making any statements about the probabilities is pointless.

Doug Leighton , 04/24/2016 at 8:28 pm
I agree. Furthermore, I think everyone here realizes most oil comes from oilfields discovered prior to 1970 and almost all oilfields that still produce an average of over 500,000 barrels per day are 70-ish years old. So, ignoring Ghawar, Burgan and Daquing, oilfields that HAD a productive capacity exceeding one million barrels a day include Samotlor (1965), Prudhoe Bay (1968) and Cantarell (1976). That's not a flush but it is three of a kind.
AlexS , 04/24/2016 at 8:44 pm
And all of those 1mb/d+ supergiants are already in decline (the most recent – Daquing)
Dennis Coyne , 04/25/2016 at 10:20 am
Hi Guys,

I was responding to a comment by George Kaplan, he said:

…all the supergiants have been developed with extensive IOR/EOR methods and may come off plateau and collapse production at about the same time (for me this sudden high decline rate, more than the actual peak is what is going to destroy the world economy if we don't do something – in fact a lot – beforehand).

So based on the excellent comments by AlexS and Rune Likvern, we know that most of the supergiant fields are already declining, but the question would be is it very likely they all begin a "collapse in production" at about the same time time.

I believe the probability is low and I interpret "about the same time" as within 5 years and "collapse in production" as a field decline of 10% or more.

It would be interesting in hearing other opinions on how likely this scenario is, I would guess it is less than 5%.

Hi Doug,

Using the Wikipedia list of giant oil fields there are 59 fields that have a URR of 5 Gb or more. The point is that the most notable "collapse" has been Cantarell, as long as the "collapse" doesn't happen "at about the same time" in all 59 fields we are unlikely to see a steep decline in World output, as long as there is adequate demand for oil to keep oil prices at a level where it continues to be profitable to develop reserves.

If there is an economic collapse due to excessive debt, or some other reason (high oil prices maybe), then decline might be steeper, essentially this will depend on the extent of the economic downturn. That is difficult to predict.

[Apr 24, 2016] Theres a new parliamentary group in UK on Limits to Growth that had its first meeting this week

Notable quotes:
"... 'There's an interesting theory – called the 'green paradox' – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues. ..."
"... The German economist Hans-Werner Sinn has argued that "if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly" thus pushing their prices down' ..."
peakoilbarrel.com
George Kaplan , 04/22/2016 at 2:14 am
There's a new parliamentary group in UK on Limits to Growth that had it's first meeting this week.

'A 2015 analysis of the remaining fossil fuel resources in China, USA, Canada and Australia, which includes unconventional resources, suggests that overall oil production is in fact peaking already'

I hadn't heard this before:

'There's an interesting theory – called the 'green paradox' – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues.

The German economist Hans-Werner Sinn has argued that "if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly" thus pushing their prices down'

http://limits2growth.org.uk/wp-content/uploads/2016/04/Jackson-and-Webster-2016-Limits-Revisited.pdf

[Apr 24, 2016] Oil discoveries have dropped to being almost insignificant over the last 5 years

Notable quotes:
"... Oil discoveries have dropped to being almost insignificant over the last 5 years, ..."
"... There is very little reserve growth on discoveries over the last 10 years ..."
"... The arctic is at least 25 years away or never the Atlantic and Pacific coasts are off limits, ..."
"... The current CAPEX collapse is going to be extremely disruptive ..."
"... Once investors see oil companies repeatedly unable to replace reserves they will pull all their money, ..."
"... All the supergiants have been developed with extensive IOR/EOR methods and may come off plateau and collapse production at about the same time ..."
"... Spot on George. The only thing I might have included in your list is Reservoir Creaming whereby horizontal production holes are put across the caps of oil pools to maintain high production rates at the expense of increasing depletion rates. This seems to have become standard practice ..."
"... All your six points are true (although point 5 needs clarification - you need stable oil price and diminishing reserves for this to happen; otherwise speculative forces will drive stock prices up in anticipation of higher oil prices). ..."
peakoilbarrel.com

George Kaplan, 04/24/2016 at 12:19 pm

I'd also recommend this paper from Michael Dittmar, who I think has commented here before, which has similar findings:

http://arxiv.org/pdf/1601.07716.pdf

and the Robelius PhD paper is good too but missed the LTO impact:

http://uu.diva-portal.org/smash/record.jsf?pid=diva2%3A169774&dswid=-8797

I think things will be worse than Jeffersons study indicates for several reasons:

  1. Oil discoveries have dropped to being almost insignificant over the last 5 years,
  2. There is very little reserve growth on discoveries over the last 10 years (technology is so good now at estimating the oil in place, projects are so expensive that the operators need to know exactly what they will recover before investing, and putative drilling in deep sea is too expensive),
  3. The arctic is at least 25 years away or never the Atlantic and Pacific coasts are off limits,
  4. The current CAPEX collapse is going to be extremely disruptive (the GoM curve above stops just at the point when production is going to collapse as there will be very few new projects being completed and the surge of projects that came online over the last 2 to 3 years will suddenly come off their short plateaus and go into 10% plus decline rates,
  5. Once investors see oil companies repeatedly unable to replace reserves they will pull all their money,
  6. All the supergiants have been developed with extensive IOR/EOR methods and may come off plateau and collapse production at about the same time (for me this sudden high decline rate, more than the actual peak is what is going to destroy the world economy if we don't do something – in fact a lot – beforehand).
Doug Leighton, 04/24/2016 at 1:21 pm
Spot on George. The only thing I might have included in your list is Reservoir Creaming whereby horizontal production holes are put across the caps of oil pools to maintain high production rates at the expense of increasing depletion rates. This seems to have become standard practice.
likbez , 04/24/2016 at 3:53 pm
Hi George,

An excellent post !

All your six points are true (although point 5 needs clarification - you need stable oil price and diminishing reserves for this to happen; otherwise speculative forces will drive stock prices up in anticipation of higher oil prices).

So the main efforts now should be in oil conservation area and to start those we heed high (as in over $100 per barrel) oil price. And I think it is coming.

[Apr 24, 2016] Given that proved reserves are largely a function of price it is inevitable that reserves would significantly drop as price dropped

Notable quotes:
"... As for OPEC reserves, I have no clue how those are arrived at, same as I seriously doubt Kuwait is producing almost 3 million BOPD from less than 2,000 oil wells, especially as the major field, Burgan, had first production 70 years ago. ..."
"... I would note your chart ends in 2014. The average oil price in 2014 was about $95 WTI. ..."
"... As Warren Buffet is fond of saying, it's only when the tide goes out that you find out who's been swimming naked. It should be obvious to anyone that countries with static reserve numbers are not being truthful. But there is a willingness among analysts and news providers to accept the published numbers. What else can they do? They can't make up their own numbers or rely on guesses from gadfly oil watchers. When production from these coutries starts going into steady decline, the truth will be known. ..."
"... Venezuela Orinoco Belt accounted for 68% of the increase in the world proved oil reserves between 2005-14, according to BP's estimate. This is entirely due to higher oil prices. Interestingly, according to BP's estimate, Canada' oil reserves actually declined in the past 10 years. ..."
peakoilbarrel.com

Andrew McKay ,

04/24/2016 at 2:19 pm
Given that proved reserves are largely a function of price it is inevitable that reserves would significantly drop as price dropped. The only reasons proved reserves have grown over the last ten years when very few new discoveries have been made has been refined drilling techniques (fracking) and high prices.
Ron Patterson , 04/24/2016 at 2:45 pm
Andrew, although proven reserves are reserves that must be "economically recoverable" and that would change somewhat if the price of oil changes drastically, you will find that no oil company or nation changes their reserves up or down with the price of oil. It is assumed that what is economically recoverable will average out as the oil price moves up and down over the years.

So no, proven reserves are not largely a function of the price of oil as you put it. Proven reserves should decline as the oil is extracted and only about one fourth of the extracted oil is replaced with new discoveries. But neither nations nor oil companies change their stated proven reserves in response to the changes in the price of oil.

Publically traded oil companies are obliged to change the value of their proven reserves up or down according to the price of oil however, but not the amount in barrels.

Fernando Leanme , 04/24/2016 at 3:16 pm
Ron: SEC rules do require reserve changes as oil prices change. This is reflected in the standard measure forms. However, we can change opex and do have other considerations….for example, when prices drop we cover the required reserve drop with performance increases (if we can back it up). It's all done in a back office ceremony we do while wearing black robes and golden masks. So I can't discuss it any more.
Ron Patterson , 04/24/2016 at 3:57 pm
Well, looking at this chart I think it would be difficult to make the argument that proven reserves are largely a function of the price of oil.

photo Proven Reserves_zpstfqdlknc.jpg

Crude Oil Proved Reserves (Billion Barrels) ,

shallow sand , 04/24/2016 at 5:49 pm
Ron,

Reserves calculated per SEC guidelines definitely are affected by oil prices, although as Fernando seems to imply, especially when there has been such a large crash in price, some magic is performed.

As for OPEC reserves, I have no clue how those are arrived at, same as I seriously doubt Kuwait is producing almost 3 million BOPD from less than 2,000 oil wells, especially as the major field, Burgan, had first production 70 years ago.

I would note your chart ends in 2014. The average oil price in 2014 was about $95 WTI.

Silicon Valley Observer , 04/24/2016 at 7:56 pm
As Warren Buffet is fond of saying, it's only when the tide goes out that you find out who's been swimming naked. It should be obvious to anyone that countries with static reserve numbers are not being truthful. But there is a willingness among analysts and news providers to accept the published numbers. What else can they do? They can't make up their own numbers or rely on guesses from gadfly oil watchers. When production from these coutries starts going into steady decline, the truth will be known.
AlexS , 04/24/2016 at 7:29 pm
Venezuela Orinoco Belt accounted for 68% of the increase in the world proved oil reserves between 2005-14, according to BP's estimate. This is entirely due to higher oil prices. Interestingly, according to BP's estimate, Canada' oil reserves actually declined in the past 10 years.

World proved oil reserves (billion barrels)
source: BP Statistical Review of World Energy 2015

[Apr 24, 2016] Will the Upheaval in Fossil Fuel Industry Take the Rest of the Economy Down With It?

Notable quotes:
"... By Nafeez Ahmed,s an investigative journalist and international security scholar. He writes the System Shift column for VICE's Motherboard, and is the winner of a 2015 Project Censored Award for Outstanding Investigative Journalism for his former work at the Guardian. He is the author of A User's Guide to the Crisis of Civilization: And How to Save It (2010), and the scifi thriller novel Zero Point, among other books. Originally published at AlterNet ..."
"... I'm not a huge Rolling Stones fan, but whenever I see a complex economic analysis like this, I'm reminded of what Mick Jagger said when they asked him why he dropped out of the London School of Economics: "There's too many variables." ..."
"... It's a lot more complicated even than that, it really depends on where you draw the boundaries of the system. Prieto and Hall did an analysis of Spanish solar that was probably the most comprehensive yet, including things like the truck trips to lay the gravel for the surface roads, maintenance trips to clean the panels, etc, and got a much lower EROEI figure than is typically given for solar. ..."
"... The carbon-energy situation needs to be placed in a context of the slow burn debt deflation we are experiencing, which at a minimum is usually death for the financial performance of commodities and any long term debt supported business. NC has well documented the issues this poses for actuarial based investments (life insurance, think Japan in the early '90s, pensions, etc.). ..."
"... Last thought, the debt situation is likely much worse in the short run as the decline in oil revenues are likely already causing local and regional recessions (e.g., Bakken, Houston) and correlated impact on commercial real estate, home values, mortgages, etc. plus are we facing a sovereign debt crisis in such countries as Venezuela (which used PDVSA to massively borrow on the countries behalf), Brazil, Russia, etc. ..."
"... This short term glut will probably accentuate the coming problems because it gives the impression that there is no peak oil. People have trouble understanding that there are short-term cycles within a long-term cycle. This bad signal is giving us the impetus to continue investing in energy intensive projects instead of reshaping our economy. And this will make things even worse in 5-10 years. ..."
"... If the total cost of extraction is more than 40$ and consumers are paying $40 or less, then somewhere along the way, someone is subsidizing the cost. It could be low tax rates, eZ money, growing deficits, underfunded pensions, underfunded restoration funds, etc. ..."
"... There is no glut. All the oil is being bought. The problem is that there in not yet enough of a shortage to drive the price up. A small distinction but huge ramifications if you understand it. And by the way higher prices is not a solution to what ails us. ..."
"... The way I see it is that you have convinced yourself that you will be on the winning side when calamity strikes. Whether you are is another matter… just like the slowest bug does not get to the field on time to get exterminated by the sprayed pesticides, work and efficiency do not guarantee anything. ..."
"... The author blames the oil patch bust on a geophysical crisis. There is some truth to this argument but by far the biggest driver of the bust is Fed policy. Artificially cheap debt financing led to overcapacity and a vicious cycle of continued overproduction as drillers desperately try to avoid defaulting. ..."
April 23, 2016 | nakedcapitalism.com

Yves here. The strength and weakness of this article is the range of information it covers. That comes at points at the expense of providing context. For instance, it describes how 65% of the independent oil and gas companies are at risk of going bankrupt. But it doesn't tell you how large the independents are relative to the "majors". Similarly, it appears to switch two paragraphs later to the total debt of oil and gas companies, which is $2.5 trillion. So one should read this with some attention to definitions and context.

By Nafeez Ahmed,s an investigative journalist and international security scholar. He writes the System Shift column for VICE's Motherboard, and is the winner of a 2015 Project Censored Award for Outstanding Investigative Journalism for his former work at the Guardian. He is the author of A User's Guide to the Crisis of Civilization: And How to Save It (2010), and the scifi thriller novel Zero Point, among other books. Originally published at AlterNet

It's not looking good for the global fossil fuel industry. Although the world remains heavily dependent on oil, coal and natural gas-which today supply around 80 percent of our primary energy needs-the industry is rapidly crumbling.

This is not merely a temporary blip, but a symptom of a deeper, long-term process related to global capitalism's escalating overconsumption of planetary resources and raw materials.

New scientific research shows that the growing crisis of profitability facing fossil fuel industries is part of an inevitable period of transition to a post-carbon era.

But ongoing denialism has led powerful vested interests to continue clinging blindly to their faith in fossil fuels, with increasingly devastating and unpredictable consequences for the environment.

Bankruptcy Epidemic

In February, the financial services firm Deloitte predicted [3] that over 35 percent of independent oil companies worldwide are likely to declare bankruptcy, potentially followed by a further 30 percent next year-a total of 65 percent of oil firms around the world. Since early last year, already 50 North American oil and gas producers have filed bankruptcy.

The cause of the crisis is the dramatic drop in oil prices-down by two-thirds since 2014-which are so low that oil companies are finding it difficult to generate enough revenue to cover the high costs of production, while also repaying their loans.

Oil and gas companies most at risk are those with the largest debt burden. And that burden is huge-as much as $2.5 trillion [4] , according to The Economist. The real figure is probably higher.

At a speech at the London School of Economics in February, Jaime Caruana of the Bank for International Settlements said [5] that outstanding loans and bonds for the oil and gas industry had almost tripled between 2006 and 2014 to a total of $3 trillion.

This massive debt burden, he explained, has put the industry in a double-bind: In order to service the debt, they are continuing to produce more oil for sale, but that only contributes to lower market prices. Decreased oil revenues means less capacity to repay the debt, thus increasing the likelihood of default.

Stranded Assets

This $3 trillion of debt is at risk because it was supposed to generate a 3-to-1 increase in value, but instead [6] -thanks to the oil price decline-represents a value of less than half of this.

Worse, according to a Goldman Sachs study [7] quietly published in December last year, as much as $1 trillion of investments in future oil projects around the world are unprofitable; i.e., effectively stranded.

Examining 400 of the world's largest new oil and gas fields (except U.S. shale), the Goldman study found that $930 billion worth of projects (more than two-thirds) are unprofitable at Brent crude prices below $70. (Prices are now well below that.)

The collapse of these projects due to unprofitability would result in the loss of oil and gas production equivalent to a colossal 8 percent of current global demand. If that happens, suddenly or otherwise, it would wreck the global economy.

The Goldman analysis was based purely on the internal dynamics of the industry. A further issue is that internationally-recognized climate change risks mean that to avert dangerous global warming, much of the world's remaining fossil fuel resources cannot be burned.

All of this is leading investors to question the wisdom of their investments, given fears that much of the assets that the oil, gas and coal industries use to estimate their own worth could consist of resources that will never ultimately be used.

The Carbon Tracker Initiative, which analyzes carbon investment risks, points out that over the next decade, fossil fuel companies risk wasting up to $2.2 trillion of investments in new projects that could turn out to be "uneconomic" in the face of international climate mitigation policies.

More and more fossil fuel industry shareholders are pressuring energy companies to stop investing in exploration for fear that new projects could become worthless due to climate risks.

"Clean technology and climate policy are already reducing fossil fuel demand," said James Leaton, head of research at Carbon Tracker. "Misreading these trends will destroy shareholder value. Companies need to apply 2C stress tests to their business models now."

In a prescient report published last November, Carbon Tracker identified the energy majors with the greatest exposures-and thus facing the greatest risks-from stranded assets: Royal Dutch Shell, Pemex, Exxon Mobil, Peabody Energy, Coal India and Glencore.

At the time, the industry scoffed at such a bold pronouncement. Six months after this report was released-a week ago-Peabody went bankrupt. Who's next?

The Carbon Tracker analysis may underestimate the extent of potential losses. A new paper just out in the journal Applied Energy, from a team at Oxford University's Institute for New Economic Thinking, shows [8] that the "stranded assets" concept applies not just to unburnable fossil fuel reserves, but also to a vast global carbon-intensive electricity infrastructure, which could be rendered as defunct as the fossil fuels it burns and supplies to market.

The Coming Debt Spiral

Some analysts believe the hidden trillion-dollar black hole at the heart of the oil industry is set to trigger another global financial crisis, similar in scale to the Dot-Com crash.

Jason Schenker, president and chief economist at Prestige Economics, says [9] : "Oil prices simply aren't going to rise fast enough to keep oil and energy companies from defaulting. Then there is a real contagion risk to financial companies and from there to the rest of the economy."

Schenker has been ranked by Bloomberg News as one of the most accurate financial forecasters in the world since 2010. The US economy, he forecasts, will dip into recession at the end of 2016 or early 2017.

Mark Harrington, an oil industry consultant, goes further. He believes the resulting economic crisis from cascading debt defaults in the industry could make the 2007-8 financial crash look like a cakewalk. "Oil and gas companies borrowed heavily when oil prices were soaring above $70 a barrel," he wrote [6] on CNBC in January.

"But in the past 24 months, they've seen their values and cash flows erode ferociously as oil prices plunge-and that's made it hard for some to pay back that debt. This could lead to a massive credit crunch like the one we saw in 2008. With our economy just getting back on its feet from the global 2008 financial crisis, timing could not be worse."

Ratings agency Standard & Poor (S&P) reported this week that 46 companies have defaulted on their debt this year-the highest levels since the depths of the financial crisis in 2009. The total quantity in defaults so far is $50 billion.

Half this year's defaults are from the oil and gas industry, according to S&P, followed by the metals, mining and the steel sector. Among them was coal giant Peabody Energy.

Despite public reassurances, bank exposure to these energy risks from unfunded loan facilities remains high. Officially, only 2.5 percent of bank assets are exposed to energy risks.

But it's probably worse. Confidential Wall Street sources claim [10] that the Federal Reserve in Dallas has secretly advised major U.S. banks in closed-door meetings to cover-up potential energy-related losses. The Federal Reserve denies the allegations, but refuses to respond to Freedom of Information requests on internal meetings, on the obviously false pretext that it keeps no records of any of its meetings.

According to Bronka Rzepkoswki of the financial advisory firm Oxford Economics, over a third of the entire U.S. high yield bond index is vulnerable to low oil prices, increasing the risk of a tidal wave of corporate bankruptcies: "Conditions that usually pave the way for mounting defaults-such as growing bad debt, tightening monetary conditions, tightening of corporate credit standards and volatility spikes – are currently met in the U.S."

The End of Cheap Oil

Behind the crisis of oil's profitability that threatens the entire global economy is a geophysical crisis in the availability of cheap oil. Cheap here does not refer simply to the market price of oil, but the total cost of production. More specifically, it refers to the value of energy.

There is a precise scientific measure for this, virtually unknown in conventional economic and financial circles, known as Energy Return on Investment-which essentially quantifies the amount of energy extracted, compared to the inputs of energy needed to conduct the extraction. The concept of EROI was first proposed and developed by Professor Charles A. Hall of the Department of Environmental and Forest Biology at the State University of New York. He found that an approximate EROI value for any energy source could be calculated by dividing the quantity of energy produced by the amount of energy inputted into the production process.

Therefore, the higher the EROI, the more energy that a particular source and technology is capable of producing. The lower the EROI, the less energy this source and technology is actually producing.

A new peer-reviewed study [11] led by the Institute of Physics at the National Autonomous University of Mexico has undertaken a comparative review of the EROI of all the major sources of energy that currently underpin industrial civilization-namely oil, gas, coal, and uranium.

Published in the journal Perspectives on Global Development and Technology, the scientists note that the EROI for fossil fuels has inexorably declined over a relatively short period of time: "Nowadays, the world average value EROI for hydrocarbons in the world has gone from a value of 35 to a value of 15 between 1960 and 1980."

In other words, in just two decades, the total value of the energy being produced via fossil fuel extraction has plummeted by more than half. And it continues to decline.

This is because the more fossil fuel resources that we exploit, the more we have used up those resources that are easiest and cheapest to extract. This compels the industry to rely increasingly on resources that are more difficult and expensive to get out of the ground, and bring to market.

The EROI for conventional oil, according to the Mexican scientists, is 18. They estimate, optimistically, that: "World reserves could last for 35 or 45 years at current consumption rates." For gas, the EROI is 10, and world reserves will last around "45 or 55 years." Nuclear's EROI is 6.5, and according to the study authors, "The peak in world production of uranium will be reached by 2045."

The problem is that although we are not running out of oil, we are running out of the cheapest, easiest to extract form of oil and gas. Increasingly, the industry is making up for the shortfall by turning to unconventional forms of oil and gas-but these have very little energy value from an EROI perspective.

The Mexico team examine the EROI values of these unconventional sources, tar sands, shale oil, and shale gas: "The average value for EROI of tar sands is four. Only ten percent of that amount is economically profitable with current technology."

For shale oil and gas, the situation is even more dire: "The EROI varies between 1.5 and 4, with an average value of 2.8. Shale oil is very similar to the tar sands; being both oil sources of very low quality. The shale gas revolution did not start because its exploitation was a very good idea; but because the most attractive economic opportunities were previously exploited and exhausted."

In effect, the growing reliance on unconventional oil and gas has meant that, overall, the costs and inputs into energy production to keep industrial civilization moving are rising inexorably.

It's not that governments don't know. It's that decisions have already been made to protect the vested interests that have effectively captured government policymaking through lobbying, networking and donations.

Three years ago, the British government's Department for International Development (DFID) commissioned and published an in-depth report [12] , "EROI of Global Energy Resources: Status, Trends and Social Implications." The report went completely unnoticed by the media.

Its findings are instructive: "We find the EROI for each major fossil fuel resource (except coal) has declined substantially over the last century. Most renewable and non-conventional energy alternatives have substantially lower EROI values than conventional fossil fuels."

The decline in EROI has meant that an increasing amount of the energy we extract is having to be diverted back into getting new energy out, leaving less for other social investments.

This means that the global economic slowdown is directly related to the declining resource quality of fossil fuels. The DFID report warns: "The declining EROI of traditional fossil fuel energy sources and its eventual effect on the world economy are likely to result in a myriad of unforeseen consequences."

Shortly after this report was released, I met with a senior civil servant at DFID familiar with its findings, who spoke to me on condition of anonymity. I asked him whether this important research had actually impacted policymaking in the department.

"Unfortunately, no," he told me, shrugging. "Most of my colleagues, except perhaps a handful, simply don't have a clue about these issues. And of course, despite the report being circulated widely within the department, and shared with other relevant government departments, there is little interest from ministers who appear to be ideologically pre-committed to fracking."

Peak Oil

The driving force behind the accelerating decline in resource quality, hotly denied in the industry, is 'peak oil.'

An extensive scientific analysis [13] published in February in Wiley Interdisciplinary Reviews: Energy & Environment lays bare the extent of industry denialism. Wiley Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed publications which runs authoritative reviews of the literature across relevant academic disciplines.

The new WIRES paper is authored by Professor Michael Jefferson of the ESCP Europe Business School, a former chief economist at oil major Royal Dutch/Shell Group, where he spent nearly 20 years in various senior roles from Head of Planning in Europe to Director of Oil Supply and Trading. He later became Deputy Secretary-General of the World Energy Council, and is editor of the leading Elsevier science journal Energy Policy.

In his new study, Jefferson examines a recent 1865-page "global energy assessment" (GES) published by the International Institute of Applied Systems Analysis. But he criticized the GES for essentially ducking the issue of 'peak oil."

"This was rather odd," he wrote. "First, because the evidence suggests that the global production of conventional oil plateaued and may have begun to decline from 2005."

He went on to explain that standard industry assessments of the size of global conventional oil reserves have been dramatically inflated, noting how "the five major Middle East oil exporters altered the basis of their definition of 'proved' conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their 'proved' conventional oil reserves of some 435 billion barrels."

Added to those estimates are reserve figures from Venezuelan heavy oil and Canadian tar sands, bringing up global reserve estimates by a further 440 billion barrels, despite the fact that they are "more difficult and costly to extract" and generally of "poorer quality" than conventional oil.

"Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the 'peak oil' issue remains with us."

Jefferson believes that a nominal economic recovery, combined with cutbacks in production as the industry reacts to its internal crises, will eventually put the current oil supply glut in reverse. This will pave the way for "further major oil price rises" in years to come.

It's not entirely clear if this will happen. If the oil crisis hits the economy hard, then the prolonged recession that results could dampen the rising demand that everyone projects. If oil prices thus remain relatively depressed for longer than expected, this could hemorrhage the industry beyond repair.

Eventually, the loss of production may allow prices to rise again. OPEC estimates that investments in oil exploration and development are at their lowest level in six years. As bankruptcies escalate, the accompanying drop in investments will eventually lead world oil production to fall, even as global demand begins to rise.

This could lead oil prices to climb much higher, as rocketing demand-projected to grow 50 percent by 2035-hits the scarcity of production. Such a price spike, ironically, would also be incredibly bad for the global economy, and as happened with the 2007-8 financial crash, could feed into inflation and trigger another spate [14] of consumer debt-defaults in the housing markets.

Even if that happens, the assumption-the hope-is that oil industry majors will somehow survive the preceding cascade of debt-defaults. The other assumption, is that demand for oil will rise.

But as new sources of renewable energy come online at a faster and faster pace, as innovation in clean technologies accelerates, old fossil fuel-centric projections of future rising demand for oil may need to be jettisoned.

Clean Energy

According to another new study [15] released in March in Energy Policy by two scientists at Texas A&M University, "Non-renewable energy"-that is "fossil fuels and nuclear power"-"are projected to peak around mid-century … Subsequent declining non-renewable production will require a rapid expansion in the renewable energy sources (RES) if either population and/or economic growth is to continue."

The demise of the fossil fuel empire, the study forecasts, is inevitable. Whichever model run the scientists used, the end output was the same: the almost total displacement of fossil fuels by renewable energy sources by the end of the century; and, as a result, the transformation and localisation of economic activity.

But the paper adds that to avoid a rise in global average temperatures of 2C, which would tip climate change into the danger zone, 50 percent or more of existing fossil fuel reserves must remain unused.

The imperative to transition away from fossil fuels is, therefore, both geophysical and environmental. On the one hand, by mid-century, fossil fuels and nuclear power will become obsolete as a viable source of energy due to their increasingly high costs and low quality. On the other, even before then, to maintain what scientists describe as a 'safe operating space' for human survival, we cannot permit the planet to warm a further 2C without risking disastrous climate impacts.

Staying below 2C, the study finds, will require renewable energy to supply more than 50 percent of total global energy by 2028, "a 37-fold increase in the annual rate of supplying renewable energy in only 13 years."

While this appears to be a herculean task by any standard, the Texas A&M scientists conclude that by century's end, the demise of fossil fuels is going to happen anyway, with or without considerations over climate risks:

… the 'ambitious' end-of-century decarbonisation goals set by the G7 leaders will be achieved due to economic and geologic fossil fuel limitations within even the unconstrained scenario in which little-to-no pro-active commitment to decarbonise is required… Our model results indicate that, with or without climate considerations, RES [renewable energy sources] will comprise 87–94 percent of total energy demand by the end of the century.

But as renewables have a much lower EROI than fossil fuels, this will "quickly reduce the share of net energy available for societal use." With less energy available to societies, "it is speculated that there will have to be a reprioritization of societal energetic needs"-in other words, a very different kind of economy in which unlimited material growth underpinned by endless inputs of cheap fossil fuel energy are a relic of the early 21st century.

The 37-fold annual rate of increase in the renewable energy supply seems unachievable at first glance, but new data just released from the Abu Dhabi-based International Renewable Energy Agency shows that clean power is well on its way, despite lacking the massive subsidies behind fossil fuels.

The data reveals that last year, solar power capacity rose by 37 percent. Wind power grew by 17 percent, geothermal by 5 percent and hydropower by 3 percent.

So far, the growth rate for solar power has been exponential. A Deloitte Center for Energy Solutions report [16] from September 2015 noted that the speed and spread of solar energy had consistently outpaced conventional linear projections, and continues to do so.

While the costs of solar power is consistently declining, solar power generation has doubled every year for the last 20 years. With every doubling of solar infrastructure, the production costs of solar photovoltaic (PV) has dropped by 22 percent.

At this rate, according to analysts like Tony Seba-a lecturer in business entrepreneurship, disruption and clean energy at Stanford University-the growth of solar is already on track to go global. With eight more doublings, that's by 2030, solar power would be capable of supplying 100 percent of the world's energy needs. And that's even without the right mix of government policies in place to support renewables.

According to Deloitte, while Seba's forecast is endorsed by a minority of experts, it remains a real possibility that should be taken seriously. But the firm points out that obstacles remain:

"It would not make economic sense for utility planners to shutter thousands of megawatts of existing generating capacity before the end of its economic life and replace it with new solar generation."

Yet Deloitte's study did not account for the escalating crisis in profitability already engulfing the fossil fuel industries, and the looming pressure of stranded assets due to climate risks. As the uneconomic nature of fossil fuels becomes evermore obvious, so too will the economic appeal of clean energy.

Race against time

The question is whether the transition to a post-carbon energy system-the acceptance of the inevitable death of the oil economy-will occur fast enough to avoid climate catastrophe.

Given that the 2C target for a safe climate is widely recognized to be inadequate-scientists increasingly argue that even a 1C rise in global average temperatures would be sufficient to trigger dangerous, irreversible changes to the earth's climate.

According to a 2011 report by the National Academy of Sciences, the scientific consensus shows [17] conservatively that for every degree of warming, we will see the following impacts: 5-15 percent reductions in crop yields; 3-10 percent increases in rainfall in some regions contributing to flooding; 5-10 percent decreases in stream-flow in some river basins, including the Arkansas and the Rio Grande, contributing to scarcity of potable water; 200-400 percent increases in the area burned by wildfire in the US; 15 percent decreases in annual average Arctic sea ice, with 25 percent decreases in the yearly minimum extent in September.

Even if all CO2 emissions stopped, the climate would continue to warm for several more centuries. Over thousands of years, the National Academy warns, this could unleash amplifying feedbacks leading to the disappearance of the polar ice sheets and other dramatic changes. In the meantime, the risk of catastrophic wild cards "such as the potential large-scale release of methane from deep-sea sediments" or permafrost, is impossible to quantify.

In this context, even if the solar-driven clean energy revolution had every success, we still need to remove carbon that has already accumulated in the atmosphere, to return the climate to safety.

The idea of removing carbon from the atmosphere sounds technologically difficult and insanely expensive. It's not. In reality, it is relatively simple and cheap.

A new book by Eric Toensmeier, a lecturer at Yale University's School of Forestry and Environmental Studies, The Carbon Farming Solution, sets out in stunningly accessible fashion how 'regenerative farming' provides the ultimate carbon-sequestration solution.

Regenerative farming is a form of small-scale, localised, community-centred organic agriculture which uses techniques that remove carbon from the atmosphere, and sequester it in plant material or soil.

Using an array of land management and conservation practices, many of which have been tried and tested by indigenous communities, it's theoretically possible to scale up regenerative farming methods in a way that dramatically offsets global carbon emissions.

Toensmeier's valuable book discusses these techniques, and unlike other science-minded tomes, offers a practical toolkit for communities to begin exploring how they can adopt regenerative farming practices for themselves.

According to the Rodale Institute [18] , the application of regenerative farming on a global scale could have revolutionary results:

Simply put, recent data from farming systems and pasture trials around the globe show that we could sequester more than 100 percent of current annual CO2 emissions with a switch to widely available and inexpensive organic management practices, which we term 'regenerative organic agriculture'… These practices work to maximize carbon fixation while minimizing the loss of that carbon once returned to the soil, reversing the greenhouse effect.

This has been widely corroborated. For instance, a 2015 study [19] part-funded by the Chinese Academy of Sciences found that "replacing chemical fertilizer with organic manure significantly decreased the emission of GHGs [greenhouse gases]. Yields of wheat and corn also increased as the soil fertility was improved by the application of cattle manure. Totally replacing chemical fertilizer with organic manure decreased GHG emissions, which reversed the agriculture ecosystem from a carbon source… to a carbon sink."

Governments are catching on, if slowly. At the Paris climate talks, 25 countries and over 50 NGOs signed up to the French government's '4 per 1000' initiative, a global agreement [20] to promote regenerative farming as a solution for food security and climate disaster.

The Birth of Post-Capitalism

There can be no doubt, then, that by the end of this century, life as we know it on planet earth will be very different. Fossil fueled predatory capitalism will be dead. In its place, human civilization will have little choice but to rely on a diversity of clean, renewable energy sources.

Whatever choices we make this century, the coming generations in the post-carbon future will have to deal with the realities of an overall warmer, and therefore more unpredictable, climate. Even if regenerative processes are in place to draw-down carbon from the atmosphere, this takes time-and in the process, some of the damage climate change will wreak on our oceans, our forests, our waterways, our coasts, and our soils will be irreversible.

It could take centuries, if not millennia, for the planet to reach a new, stable equilibrium.

But either way, the work of repairing and mitigating at least some of the damage done will be the task of our childrens' children, and their children, and on.

Economic activity in this global society will of necessity be very different to the endless growth juggernaut we have experienced since the industrial revolution. In this post-carbon future, material production and consumption, and technological innovation, will only be sustainable through a participatory 'circular economy' in which scarce minerals and raw materials are carefully managed.

The fast-paced consumerism that we take for granted today simply won't work in these circumstances.

Large top-down national and transnational structures will begin to become obsolete due to the large costs of maintenance, the unsustainability of the energy inputs needed for their survival, and the shift in power to new decentralized producers of energy and food.

In the place of such top-down structures, smaller-scale, networked forms of political, social and economic organization, connected through revolutionary information technologies, will be most likely to succeed. For communities to not just survive, but thrive, they will need to work together, sharing technology, expertise and knowledge on the basis of a new culture of human parity and cooperation.

Of course, before we get to this point, there will be upheaval. Today's fossil fuel incumbency remains in denial, and is unlikely to accept the reality of its inevitable demise until it really does drop dead.

The escalation of resource wars, domestic unrest, xenophobia, state-militarism, and corporate totalitarianism is to be expected. These are the death throes of a system that has run its course.

The outcomes of the struggles which emerge in coming decades-struggles between people and power, but also futile geopolitical struggles within the old centers of power (paralleled by misguided struggles between peoples)-is yet to be written.

Eager to cling to the last vestiges of existence, the old centers of power will still try to self-maximize within the framework of the old paradigm, at the expense of competing power-centers, and even their own populations.

And they will deflect from the root causes of the problem as much as possible, by encouraging their constituents to blame other power-centers, or worse, some of their fellow citizens, along the lines of all manner of 'Otherizing' constructs, race, ethnicity, nationality, color, religion and even class.

Have no doubt. In coming decades, we will watch the old paradigm cannibalize itself to death on our TV screens, tablets and cell phones. Many of us will do more than watch. We will be participant observers, victims or perpetrators, or both at once.

The only question that counts, is as follows: amidst this unfolding maelstrom, are we going to join with others to plant the seeds of viable post-carbon societies for the next generations of human-beings, or are we going to stand in the way of that viable future by giving ourselves entirely to defending our 'interests' in the framework of the old paradigm?

Whatever happens over coming decades, it will be the choices each of us make that will ultimately determine the nature of what survives by the end of this pivotal, transitional century.

susan the other , April 23, 2016 at 11:47 am

And one such solution is at hand. People. Too many people to subsist in a crazed-fossil-fueled capitalists world means there will be changes. If the MIT professor is correct and the solution is decentralized regenerative farming, aka organic farming on a vast scope, then we've certainly got the people power to do it. It's always good to hear that China understands these things. I'm sure India does too.

meeps , April 23, 2016 at 5:44 am

Thanks, Yves, for posting this information rich and pertinent article. Your curation is impeccable.

The cited documents are lengthy and I intend to read further. At a glance, I was surprised to learn that, despite years of Peak Oil investigations:

1) EROI is virtually unknown in conventional economic and financial circles.
2) Lack of institutional awareness and disinterest at DFID is widespread, such that research isn't influencing policy. The essence of irony!
3) Experts remain focused on comparitively high energy solutions (such as underground carbon capture technologies) over low energy biological solutions (such as carbon sequestration by soil organisms, trees and plants).

I'm heartened, though, to see some regenerative farming citations. Eric Toensmeier and the Rodale Institute are wonderful. Bill Mollison, David Holmgren, Brad Lancaster, Geoff Lawton and Darren J. Doherty are also excellent resources. BTW, the 60999 EROI Global Energy Resources pdf cites a Lambert, et al 2013. Is that THE Lambert?

A broader understanding of energy is and will remain critical in a post-capitalism, post-carbon future. Currently, work is neglected because "it doesn't pay" to do it. That is a tragic squandering of available resources. By any meaningful metric, it pays to liberate latent energy to do the work of restoring the environment.

There was a lively discussion this week about community building. I'm happy to spend my days installing earthworks, natural building, growing yummy stuff…

TheCatSaid , April 23, 2016 at 10:24 am

Thx for highlighting the regenerative agriculture references. An important resource I'd add to the list regarding regenerative agriculture and large scale carbon sink benefits is the Savory Institute . Their website is constantly adding links to recent research.

EndOfTheWorld , April 23, 2016 at 6:54 am

I'm not a huge Rolling Stones fan, but whenever I see a complex economic analysis like this, I'm reminded of what Mick Jagger said when they asked him why he dropped out of the London School of Economics: "There's too many variables."

Tom Ford , April 23, 2016 at 7:10 am

Fascinating article. One niggling question about EROI. I get how it's relatively easy to calculate the EROI of a barrel of oil - the barrel holds a specific number of gallons and each gallon is capable of producing X amount of energy. But what about renewables? You know the production cost of a wind turbine, for instance, but the energy it produces over its lifetime is much more open-ended. So the Energy Return for it must be the total expected energy returned over the turbine's projected service life, right? If so, the longer it lasts, the higher it's EROI.

Paper Mac , April 23, 2016 at 7:30 am

It's a lot more complicated even than that, it really depends on where you draw the boundaries of the system. Prieto and Hall did an analysis of Spanish solar that was probably the most comprehensive yet, including things like the truck trips to lay the gravel for the surface roads, maintenance trips to clean the panels, etc, and got a much lower EROEI figure than is typically given for solar. As far as wind goes, turbines tend to fail at a higher frequency than manufacturers estimate (go figure) so the best way to measure things like turbine lifespan is to look at those in the field. The article is generally correct that renewable EROEI tends to be lower than that of fossil fuels, although it seems not to contemplate that there is a lower bound on EROEI beyond which these systems can't/won't be sustained anyway. It's not just that less energy is available for non-energy production use but that there is an EROEI return below which you probably can't operate the infrastructure necessary to mine/smelt materials for renewables on the scale being contemplated here (total replacement of FF-burning infrastructure)

Steve H. , April 23, 2016 at 7:40 am

It's best to think of these as order-of-magnitude comparisons with each other. Local conditions provide huge variability on energy generated by renewables. Likewise fossil fuel extraction.

I've invested in LED lighting for a long time. Output per unit increases by a rule-of-thumb called Haitz's law, about a factor of 20 per decade. Many bulbs tout a lifetime of 20 years, but haven't been around that long, so that's an extrapolation, and I have the dead bulbs to prove the point. So when someone talks about LED efficiency, it's not a static number, but it's still useful for discussion.

Brooklin Bridge , April 23, 2016 at 8:36 am

A factor that I believe is missing from EROI is cost of clean up or, lacking clean up, the cost of consequences, which should be determined taking into account the negative effects of our propensity for corruption, personal gain at the expense of the whole, (which is why nuclear should have a stratosphericly high cost, for ex.). For oil, coal and uranium, this is a high cost that should be subtracted from EROI. For solar and wind, the cost is much less, except possibly in the manufacture of components that convert sun/wind into electricity. Life span is supposed to be around 30 years so the clean up/consequence cost of manufacture should be divided by that number.

mikeW , April 23, 2016 at 7:22 am

I am quite a bit disappointed with this "article". First off, we have to acknowledge that other than meteorologists (and yes demographics) we have we skill at forecasting the future. So to me this article reads as though it started from a future condition than constructed a series of facts and thesis that get you there. The reality is we don't know and one may as well flip a coin.

That said, there is clearly right now much to be concerned about. Humans seem to be internally wired to be short-term based. "Tell me where my next meal is coming from is all I care about". So, tackling issues like climate change is not something we're good at; and there is no historic precedent I can think of for all of mankind collaborating to solve a problem.

The carbon-energy situation needs to be placed in a context of the slow burn debt deflation we are experiencing, which at a minimum is usually death for the financial performance of commodities and any long term debt supported business. NC has well documented the issues this poses for actuarial based investments (life insurance, think Japan in the early '90s, pensions, etc.).

Last thought, the debt situation is likely much worse in the short run as the decline in oil revenues are likely already causing local and regional recessions (e.g., Bakken, Houston) and correlated impact on commercial real estate, home values, mortgages, etc. plus are we facing a sovereign debt crisis in such countries as Venezuela (which used PDVSA to massively borrow on the countries behalf), Brazil, Russia, etc.

Moneta , April 23, 2016 at 7:56 am

This short term glut will probably accentuate the coming problems because it gives the impression that there is no peak oil. People have trouble understanding that there are short-term cycles within a long-term cycle. This bad signal is giving us the impetus to continue investing in energy intensive projects instead of reshaping our economy. And this will make things even worse in 5-10 years.

If the total cost of extraction is more than 40$ and consumers are paying $40 or less, then somewhere along the way, someone is subsidizing the cost. It could be low tax rates, eZ money, growing deficits, underfunded pensions, underfunded restoration funds, etc.

A country's most important asset is energy and historically, countries have never willingly cut total energy consumption. They might increase efficiencies but the total does not drop. This means that most countries, as long as there exist other sectors that can be squeezed, will continue to subsidize the energy sector squeezing out these sectors that are deemed less important or simply those with less clout.

It is quite obvious that our lives are even more energy dependent than they were when this monetary cycle started in the early 70s. And our system is still based on growing this even more. With NIRP, we are getting very close to the end of this cycle.

Jef , April 23, 2016 at 10:19 am

There is no glut. All the oil is being bought. The problem is that there in not yet enough of a shortage to drive the price up. A small distinction but huge ramifications if you understand it. And by the way higher prices is not a solution to what ails us.

Fantastic tour de force article.

divadab , April 23, 2016 at 8:03 am

A few thoughts:
-time scale – this thing we are in will roll on for thousands of years – the K-T mass extinction took 2-3 million years before species started to increase again;

-They (we) will keep the oil flowing as long as they can – look how ugly the coal industry's slow death is getting – until climate events are overwhelming and require extraordinary efforts just to mitigate. My money's on sea level rise focusing all attention;

-billions of humans will die – many in climate change-triggered wars and famines – the Four Horsemen are saddling up;

-like it or not, people in the developed world, less densely populated parts, anyway (USA, Canada, e.g.) once they are over the necessities like lower standards of living (no more trinkets and geegaws ) and hard physical labor in sustainable agriculture, are way better off than over-populated places. However, it will get ugly at the borders, as Europe is experiencing right now.

-expect more authoritarian governments – the human response to crisis. Tribalism will rule.

-and the doom-and-gloomers can fuck off they are useless, unable to adapt or evolve, and are just scaring the stupid unnecessarily. The living planet will adapt and evolve as it has always done – and humans in some form or other also. DO you really think the most adaptable species, inhabiting every biome, will not?

Moneta , April 23, 2016 at 8:12 am

Billions will die yet bash the doomers? Your strategy is happy thoughts?

Something tells me that many of your doomers would adapt better than your positive thinkers.

divadab , April 23, 2016 at 8:48 am

No my strategy is hard work. Respectful of the planet's living processes. And honesty.

Most doomers are at an early stage of consciousness of the magnitude of our society's death spiral. My aim is to shake them out of their (totally understandable) depression – work is the cure. COllective efforts on a large scale but managed locally – resilient ecology requires complexity – monocultures are doomed.

Moneta , April 23, 2016 at 8:57 am

The way I see it is that you have convinced yourself that you will be on the winning side when calamity strikes. Whether you are is another matter… just like the slowest bug does not get to the field on time to get exterminated by the sprayed pesticides, work and efficiency do not guarantee anything.

The doomers are those who are not convinced they will be spared. Maybe they can place themselves in the winning group with positive thinking and hard work, but maybe not so in such a case they need help deluding themselves so they can become perma-optimists.

divadab , April 23, 2016 at 9:34 am

Well I'm glad you have that insight into my thinking! Not!

I see it rather that my own death is inevitable, and that of my lineage and tribe as having a probability of greater than 0. Luck (divine providence?) counts for a lot, as you note.

Deluded optimists can be organized to do useful work. Better than idle pessimists.

I utterly reject the "winning side" as a useful concept – there is only living struggle through the generations.

Moneta , April 23, 2016 at 10:01 am

My point is that to feel serene, one has to convince oneself of something positive whatever it is.

The doomers probably haven't. And I believe your representation of the doomer philosophy perpetuates doomerism.

cnchal , April 23, 2016 at 11:22 am

. . . work is the cure. . .

Depends on the type of work. Sitting on one's ass and doing sweet eff all uses the least amount of energy. So relax, kick back and save the planet.

Brooklin Bridge , April 23, 2016 at 8:46 am

I have to wonder, if it is really so easy to clean up the carbon and other toxins we have polluted the atmosphere and oceans with, then why bother to stop producing oil, coal and nuclear other than that they come to be less economical?

i strongly doubt the projected ease of such a clean up whether it be the biological feasibility or the willingness of humans to work together for common goals – extinction seem to be almost an afterthought – (or conversely, the more realistic "Hillary" element in people to work feverishly for personal gain at the expense of others). Going from coal to sunlight is easy. Going from Clinton to Sanders, not so much.

divadab , April 23, 2016 at 8:51 am

Well President Trump will make the thing go faster and expose the failings of fossil-fueled society as he has the corruption of our fundamentally racist nation. By being the bad thing.

Nicholas Cole , April 23, 2016 at 9:41 am

"Endless growth in materials and energy usage will be impossible in the economies of the future."

two paragraphs later:

Experts are convinced solar energy can continue to grow exponentially to 100% of our electricity supply!

Otherwise a very good article, but come on…

Moneta , April 23, 2016 at 9:44 am

Well cavemen depended mostly on solar, no?

polecat , April 23, 2016 at 11:11 am

…If they stood in the right direction….

ke , April 23, 2016 at 10:18 am

All major cultures are in terminal decline, which should be expected, and is not to say that they will not be replaced or that some will not recover, which is neither good nor bad.

The geneticists and psychologists are snakeoil salesmen. All the geneticists have proven is that you have the same basic gene set as a worm, making up about 2% of your DNA. They haven't begun to decipher the 98% if then feedback code. Science tells you that the last thing you want to do is inject everyone with the same mitochondrial DNA, but medicine isn't about science; its about printing money on fear.

What the psychologists learned is that an irrational majority can be conditioned to do whatever you want. Ironically, in America you are an unfit parent if you have a scientific mind or believe in others, as a Christian, leaving the majority, which lives in fear, to raise children, which doesn't bode well except for the morons running the show, for now.

Projecting the future on biased data is a waste of time, the status quo. Too funny, critters who have never developed seed debating corporate versus yuppie farming techniques.

ke , April 23, 2016 at 10:42 am

Medicine will never understand synaptic response, immunological adaptation, intercellular signalling or blood clotting / mRNA feedback, because it is not paid to do so. You are nature's test tube, and the majority fears the unknown, as conditioned by the cave people running public education.

As a carbon based life form, it is in your interest to learn how that carbon chain is popped on and off the stack to maintain event horizons.

dots , April 23, 2016 at 11:38 am

That last line is too funny, but I agree with you.

Getting out there and doing something now that we understand what is going on is probably a better use of our time than trying to protect the current economic structure. Build a new energy paradigm that better fits our ecosystem and see what kind of economic, social, and political structures begin to develop around that.

Surely, whatever develops will model what has come before it but it needs to be rooted in the physical environment, which clearly it is not currently.

Eduardo Quince , April 23, 2016 at 11:23 am

The author blames the oil patch bust on a geophysical crisis. There is some truth to this argument but by far the biggest driver of the bust is Fed policy. Artificially cheap debt financing led to overcapacity and a vicious cycle of continued overproduction as drillers desperately try to avoid defaulting.

[Apr 24, 2016] Much broader and flatter Hubert curve is frequently mis-characterized as an undulating plateau

Notable quotes:
"... Jean Laherrere's graph confirms that inflection point happened around 1980, roughly 20 years after the peak in discoveries. This puts a 40 year lag between the peak in discoveries and the peak in production, the latter being scheduled for about the year 2000. ..."
"... We are now at the peak of that much broader and flatter curve (which has been frequently mis-characterized as an "undulating plateau") with conventional global annual production well below 40 Gb and looking very much like it is finally on its way down. This despite the giant pump and dump scheme otherwise known as the "shale revolution". ..."
peakoilbarrel.com

Jerry McManus , 04/24/2016 at 5:25 pm

Jean Laherrere's graph is particularly interesting.

Anyone familiar with Hubbert's full statistical analysis knows that the peak of proved reserves roughly corresponds to the same point in time when the production curve crosses the discovery curve (also backdated), which is roughly the halfway point between the peaks of the discovery and production curves.

Jean Laherrere's graph confirms that inflection point happened around 1980, roughly 20 years after the peak in discoveries. This puts a 40 year lag between the peak in discoveries and the peak in production, the latter being scheduled for about the year 2000.

All of which is perfectly consistent with Hubbert's 1972 Congressional analysis of global discoveries and production which he put at about 2 trillion bbl URR and a production peak of about 40 Gb per year in 1995 or thereabouts.

What happened, you may ask, to the production peak? The years 1995 and 2000 have come and gone. Simple, the global geopolitics of oil. The Arab oil embargo and Iranian revolution of the 70's but a huge crimp in the global production curve and pushed a significant portion of the area under the curve into the future by a decade or two.

http://peakoilbarrel.com/wp-content/uploads/2015/02/Laherrere-1.jpg

In Jean Laherrere's world discoveries and production graph above you can clearly see the inflection point in 1980, before which the world was clearly on the "ideal" Hubbert curve that would have reached 40 Gb per year in 2000. After 1980 the reality of the geopolitics of oil and energy set in and constrained global production which visibly flattened out the curve.

Something which Hubbert himself fully acknowledged could happen, both in his analysis and in subsequent interviews.

We are now at the peak of that much broader and flatter curve (which has been frequently mis-characterized as an "undulating plateau") with conventional global annual production well below 40 Gb and looking very much like it is finally on its way down. This despite the giant pump and dump scheme otherwise known as the "shale revolution".

Silicon Valley Observer , 04/24/2016 at 7:33 pm
It would seem that maybe one of Dennis' earlier projections may be correct.

http://peakoilbarrel.com/oil-shock-model-dispersive-discovery-simplified/

[Apr 24, 2016] Crude Oil Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production

Notable quotes:
"... The level of effort dedicated to overcoming challenges will depend in part on sustained high oil prices to encourage sufficient investment in and demand for alternatives. ..."
US GAO

The U.S. economy depends heavily on oil, particularly in the transportation sector. World oil production has been running at near capacity to meet demand, pushing prices upward. Concerns about meeting increasing demand with finite resources have renewed interest in an old question: How long can the oil supply expand before reaching a maximum level of production--a peak--from which it can only decline? GAO (1) examined when oil production could peak, (2) assessed the potential for transportation technologies to mitigate the consequences of a peak in oil production, and (3) examined federal agency efforts that could reduce uncertainty about the timing of a peak or mitigate the consequences. To address these objectives, GAO reviewed studies, convened an expert panel, and consulted agency officials.

Most studies estimate that oil production will peak sometime between now and 2040. This range of estimates is wide because the timing of the peak depends on multiple, uncertain factors that will help determine how quickly the oil remaining in the ground is used, including the amount of oil still in the ground; how much of that oil can ultimately be produced given technological, cost, and environmental challenges as well as potentially unfavorable political and investment conditions in some countries where oil is located; and future global demand for oil. Demand for oil will, in turn, be influenced by global economic growth and may be affected by government policies on the environment and climate change and consumer choices about conservation. In the United States, alternative fuels and transportation technologies face challenges that could impede their ability to mitigate the consequences of a peak and decline in oil production, unless sufficient time and effort are brought to bear. For example, although corn ethanol production is technically feasible, it is more expensive to produce than gasoline and will require costly investments in infrastructure, such as pipelines and storage tanks, before it can become widely available as a primary fuel.

Key alternative technologies currently supply the equivalent of only about 1 percent of U.S. consumption of petroleum products, and the Department of Energy (DOE) projects that even by 2015, they could displace only the equivalent of 4 percent of projected U.S. annual consumption. In such circumstances, an imminent peak and sharp decline in oil production could cause a worldwide recession. If the peak is delayed, however, these technologies have a greater potential to mitigate the consequences. DOE projects that the technologies could displace up to 34 percent of U.S. consumption in the 2025 through 2030 time frame, if the challenges are met.

The level of effort dedicated to overcoming challenges will depend in part on sustained high oil prices to encourage sufficient investment in and demand for alternatives. Federal agency efforts that could reduce uncertainty about the timing of peak oil production or mitigate its consequences are spread across multiple agencies and are generally not focused explicitly on peak oil. Federally sponsored studies have expressed concern over the potential for a peak, and agency officials have identified actions that could be taken to address this issue.

For example, DOE and United States Geological Survey officials said uncertainty about the peak's timing could be reduced through better information about worldwide demand and supply, and agency officials said they could step up efforts to promote alternative fuels and transportation technologies. However, there is no coordinated federal strategy for reducing uncertainty about the peak's timing or mitigating its consequences.

[Apr 24, 2016] There's a new parliamentary group in UK on Limits to Growth that had it's first meeting this week

peakoilbarrel.com
George Kaplan , 04/22/2016 at 2:14 am
There's a new parliamentary group in UK on Limits to Growth that had it's first meeting this week.

'A 2015 analysis of the remaining fossil fuel resources in China, USA, Canada and Australia, which includes unconventional resources, suggests that overall oil production is in fact peaking already'

I hadn't heard this before:

'There's an interesting theory – called the 'green paradox' – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues. The German economist Hans-Werner Sinn has argued that "if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly" thus pushing their prices down'

http://limits2growth.org.uk/wp-content/uploads/2016/04/Jackson-and-Webster-2016-Limits-Revisited.pdf

[Apr 23, 2016] The end of cheap oil probably means end of neoliberalism

Notable quotes:
"... "There can be no doubt, then, that by the end of this century, life as we know it on planet earth will be very different. Fossil fueled predatory capitalism will be dead. In its place, human civilization will have little choice but to rely on a diversity of clean, renewable energy sources." ..."
"... My quibble is that predatory capitalism will be dead. The Machiavellian ideology arrived prior to fossil fuels of any sort, and I think likely will be around quite a bit longer. ..."
"... Large top-down national and transnational structures will begin to become obsolete due to the large costs of maintenance, the unsustainability of the energy inputs needed for their survival, and the shift in power to new decentralized producers of energy and food. ..."
"... The end of cheap oil probably means end of neoliberalism. It is still unclear what will replace it as a dominant social system. ..."
www.nakedcapitalism.com
thoughtful person , April 23, 2016 at 12:27 pm

This article seems to me to be an attempt at taking a long term look at a huge issue – humanities future over the next 85-years or so. Given the available text space (no doubt many volumes could cover a small fraction of the subject) Ahmed does a great job of summarizing and provides some promising links to sources.

One quick quibble, Ahmed writes,

"There can be no doubt, then, that by the end of this century, life as we know it on planet earth will be very different. Fossil fueled predatory capitalism will be dead. In its place, human civilization will have little choice but to rely on a diversity of clean, renewable energy sources."

Of course, I agree life will be different in 2100. I also agree that we are witnessing the fossil fuel end game (as Amory Lovins at RMI would say), and certainty if one looks at current rates of investment in various energy technologies, renewable sources are the future. My quibble is that predatory capitalism will be dead. The Machiavellian ideology arrived prior to fossil fuels of any sort, and I think likely will be around quite a bit longer.

Granted, Ahmed makes some caveats in the article about how difficult the next few decades will be. He then writes,

" Large top-down national and transnational structures will begin to become obsolete due to the large costs of maintenance, the unsustainability of the energy inputs needed for their survival, and the shift in power to new decentralized producers of energy and food.

In the place of such top-down structures, smaller-scale, networked forms of political, social and economic organization, connected through revolutionary information technologies, will be most likely to succeed. For communities to not just survive, but thrive, they will need to work together, sharing technology, expertise and knowledge on the basis of a new culture of human parity and cooperation."

Imagine the Sanders campaign working on issues outside electoral politics, run by occupy wall street organizers for example. I suspect there is some truth in Ahmed's speculations. Enough to be hopeful about. It may just come down to a choice – despair in business as usual, or taking a leap to hope, and work for, the success of some rational changes for the better.

likbez, April 23, 2016 at 3:51 pm

The end of cheap oil probably means end of neoliberalism. It is still unclear what will replace it as a dominant social system.

[Apr 23, 2016] Sometime between 2018 2020 we will begin to see substantial declines of 3% to 7% per year (slow at first, but increasing over time).

Notable quotes:
"... My guess at this point is sometime between 2018 & 2020 we will begin to see substantial declines of 3% to 7% per year (slow at first, but increasing over time). The current investment in CapEx isn't sufficient to prevent much higher depletion rates. ..."
peakoilbarrel.com
TechGuy, 04/22/2016 at 11:27 am
DC wrote:

"The scenario I think most likely is and undulating plateau in C+C output to about 2021 and then gradual decline of under 1.5% though about 2027 and by 2030 that declining output will cause an economic crisis and a World recession."

I have serious doubts that infill drilling will hold out anywhere near that long. if it wasn't for infill drilling scraping the bottom of depleted fields, we would already be in a serious decline, even with the shale bubble. How long can infill drilling last, I don't know, but its not-sustainable.

My guess at this point is sometime between 2018 & 2020 we will begin to see substantial declines of 3% to 7% per year (slow at first, but increasing over time). The current investment in CapEx isn't sufficient to prevent much higher depletion rates.

DC Wrote:

"By that time it will be clear that peak oil has been reached and perhaps policy measures will be aggressively implemented to alleviate the problem."

It will be to late by then. Its already too late now. I expect when production problems develop. the World gov't will turn to the same old tactics that make the problems worse: Price Controls, Rationing, even more excessive gov't regulation, cronyism, and of course, more war.

DC wrote:

"An economic crisis (such as the 1930s in some parts of the World) can lead to positive social changes, they can also be very negative."

I cannot recall a single period in history that an economic crisis lead to positive social change. Its only after a wave of bloodshed and destruction that civilization makes a change. However, never in history did the world experience a economic collapse rife with revolution/social change, armed with nuclear weapons and nuclear power plants. Whatever remains of humanity in the aftermath, will likely be another 1000 years of the dark ages (ie the fall of Rome)

Also consider in most cases it was war that made the economy better. Since the beginning of the industrial revolution, war has create a rapid progress in technology. For instance, WW1 paved the way for rapid use of machinery (farm tractors, trucks, cars, etc). The factories built to make tanks, trucks, etc during the war, started mass producing consumer goods after the war, and increase worker productivity. WW2 create the electronic revolution (computers, development of broad antibiotics, new materials: Plastics, etc).

Unfortunately nuclear weapons rules out future tech revolutions since our weapons can now destroy civilization and damage the global environment for hundreds to thousands of years. A nuclear war will be over in a matter of a few days perhaps as long as few weeks, killing billions and there will be no time to develop new technologies. Nuclear weapons are the Apex of war developed tech. We've become the Suicide race.

DC Wrote:

"Hopefully we will not forget our history."

We already did! See the rise of socialism in the West as a prime example. The lessons of war and politcican follies are lost after the last generation that suffered the horrors dies off. The WW 2 generation is nearly gone, Thus ushering in a new wave of folly.

[Apr 17, 2016] Towards a Theory of Shadow Money by Daniela Gabor

Notable quotes:
"... Minsky famously quipped that everyone can create new money; the problem is to get it accepted as such by others. ..."
"... But even money-proper is not the same for everyone. Central banks create the money in which banks pay each other, while private banks create money for households and firms. Money is hierarchical , and moneyness is a question of immediate convertibility without loss of value (at par exchange, on demand). ..."
"... To convert shadow money into settlement money in case of default, repo lenders sell collateral. An intricate collateral valuation regime, consisting of haircuts, mark-to-market, and margin calls, maintains collateral's exchange rate into (central) bank money. ..."
"... What makes repos money – at par exchange between "cash" and collateral – is what makes finance more fragile in a Minskyan sense. ..."
"... Liquid markets become more fragile, he argued, by giving investors the "illusion" that they can exit before prices turn against them. This is a crucial insight for crises of shadow money. ..."
"... Criminality and corruption is embedded at the top of the financial food chain, by law. ..."
"... Motion seconded: Government sanctioned counterfeiting. ..."
"... …and does anyone remember the triumph of the desk slaves of the Crimson Permanent Assurance? Monty Python understood something about political economies and how one might achieve more fairness in outcomes… https://vimeo.com/111458975 ..."
"... Shadow money sounds to me like fictional capital by another name. And contractual based deposits sounds like counterfeiting. With the distinction that the man with counterfeit printing press robs the train, while the man who runs the Wall St Investment bank repo trading desk robs the whole railroad. ..."
"... Therefore, Money becomes a victim of the ontological argument for God by St Anselm. If God does not exist, an all powerful, all knowing, all present infinitely great in all categories of Supreme Being could not be written or spoken about, lacking the quality of existence. The fact that we CAN speak about an Omnipotent Supreme Deity means that one in fact exists, due to existence is part and parcel of Omnipotence. But of course, because we can talk or write about something, does not make it real. ..."
"... It can become socially acceptable as in the case of shadow money, but it is fictional capital, a shadow of the real thing. Time to get out of the cave of finance with its shadows dancing from the light of the fires and walk eyes wide open in the bright light of sunshine! ..."
"... Money is actually the easiest thing to write about, because it's formless energy. It's not that the phenomenon is shadow money, it's shadow assets. ..."
"... You have to be able to separate in your mind the ideas of 1) Quantity and 2) Form. That's why economics is a mental disorder, because it doesn't separate quantity and form. If you can't or don't, then yes, it's diabolically hard to write about because you're writing about two different things simultaneously without realizing it. Money is a quantity that is infinite and continuous, but form is an idea that is discontinuous and finite. People do what the forms tell them to do. The money is just like electricity that powers the animation of the forms. Repo is a form it's not money. It's existence results in a certain ordering of social relations, that's also a form. But money is just the energy that makes the forms potent. ..."
"... I guess that's why they used to call it "political economy" before the mental disorder fully usurped the power of perception and reasoning. ..."
"... Marx failed to acknowledge that supposedly hard-headed Capitalism is actually all about living beyond your means and mortgaging the future. ..."
"... It was designed from the Fuggars' and the Medici's to be about debt and fractional reserves and interest. A system based on a finite supply of money is going to grow not much faster, at best, than the money available allows. ..."
"... Capitalism allows explosive growth by supplying explosive amounts of credit. All this shadow banking activity is designed to get around reserve requirements; nothing else I can see calls all this complexity into existence. The banks always need more, because lending is how they make their money, so they want an infinite amount to lend in order to drive their profits towards the infinite. ..."
"... This article I think defines shadow money alright as starting where bank deposits leave off but as the above comments suggest seems to miss some key points. I think a major problem with the article is seeing central banks as separate from the state rather than seeing the central bank along with the Treasury as the state itself. ..."
"... The article gets Treasury debt wrong by seeing it as the central bank funding the state rather than as actually coming from the state. This leads to wrong policy choices such as this state money being used to bail out useless financial transactions and asset appreciation rather than the public purpose. I think crazyman has it right. We left behind the power of perception and reasoning by not realizing the importance of political economy . ..."
"... This is reminscent of Gramsci's idea that the state and civil society are to be distinguished only for purposes of exposition. ..."
April 16, 2016 | www.nakedcapitalism.com

By Daniela Gabor, associate professor in economics at the University of the West of England, Bristol, and Jakob Vestergaard, senior researcher at the Danish Institute for International Studies. Originally published at the Institute for New Economic Thinking website

Struggles over shadow money today echo 19th century struggles over bank deposits.

Money, James Buchan once noted , "is diabolically hard to write about." It has been described as a promise to pay, a social relation, frozen desire , memory, and fiction. Less daunted, Hyman Minsky was interested by promises of unknown and changing properties . "Shadow" promises would have fascinated him. Indeed, Perry Mehrling, Zoltan Pozsar , and others argue that in shadow banking, money begins where bank deposits end. Their insights are the starting point for the first paper of our Institute for New Economic Thinking project on shadow money. The footprint of shadow money, we argue,* extends well beyond opaque shadow banking, reaching into government bond markets and regulated banks. It radically changes central banking and the state's relationship to money-issuing institutions.

Minsky famously quipped that everyone can create new money; the problem is to get it accepted as such by others. General acceptability relies on the strength of promises to exchange for proper money, money that settles debts. Banks' special role in money creation, Victoria Chick reminds us, was sealed by states' commitment that bank deposits would convert into state money (cash) at par. This social contract of convertibility materialized in bank regulation, lender of last resort, and deposit guarantees.

But even money-proper is not the same for everyone. Central banks create the money in which banks pay each other, while private banks create money for households and firms. Money is hierarchical , and moneyness is a question of immediate convertibility without loss of value (at par exchange, on demand).

Using a money hierarchy lens, we define shadow money as repurchase agreements (repos), promises to pay backed by tradable collateral. It is the presence of collateral that confers shadow money its distinctiveness. Our approach advances the debate in several ways.

First, it allows us to establish a clear picture of modern money hierarchies. Repos are nearest to money-proper, stronger in their moneyness claims than other short-term shadow liabilities . Repos rose in money hierarchies as finance sidestepped the state, developing its own convertibility rules over the past 20 years. To convert shadow money into settlement money in case of default, repo lenders sell collateral. An intricate collateral valuation regime, consisting of haircuts, mark-to-market, and margin calls, maintains collateral's exchange rate into (central) bank money.

Second, we put banks at the center of shadow-money creation. The growing shadow-money literature, however original in its insights, downplays banks' activities in the shadows because its empirical terrain is U.S. shadow banking with its institutional peculiarities. There, hedge funds issue shadow money to institutional cash pools via the balance sheet of securities dealers. In Europe or China , it's also banks issuing shadow money to other banks to fund capital market activities. LCH Clearnet SA, a pure shadow bank, offers a glimpse into this world. Like a bank, it backs money issuance with central bank (Banque de France) money. Unlike a bank, LCH Clearnet only issues shadow money.

Third, we explore the critical role of the state beyond simple guarantor of convertibility. Like bank money, shadow money relies on sovereign structures of authority and credit worthiness. Shadow money is mostly issued against government bond collateral, because liquid securities make repo convertibility easier and cheaper. The legal right to re-use (re-hypothecate) collateral allows various (shadow) banks to issue shadow money against the same government bond, which becomes akin to a base asset with "velocity." Limits to velocity place demands on the state to issue debt, not because it needs cash but because shadow money issuers need collateral.

With finance ministries unresponsive to such demands, we note two points in the historical development of shadow money in the early 2000s. In the United States, persuasive lobbying exploited concerns that U.S. Treasury debt would fall to dangerously low levels to relax regulation on repos collateralized with asset and mortgage-backed securities . In Europe, the ECB used the mechanics of monetary policy implementation to the same end. When it lent reserves to banks via repos, the ECB used its collateral valuation practices to generate base-asset privileges for "periphery" government bonds, treating these as perfect substitutes for German government bonds, with the explicit intention of powering market liquidity.

Fourth, we introduce fundamental uncertainty in modern money creation. What makes repos money – at par exchange between "cash" and collateral – is what makes finance more fragile in a Minskyan sense. Knightian uncertainty bites harder and faster because convertibility depends on collateral-market liquidity.

The collateral valuation regime that makes repos increasingly acceptable ties securities-market liquidity into appetite for leverage. Here, Keynes' concerns with the social benefits of private liquidity become relevant. Keynes voiced strong doubts about the idea of "the more liquidity the better" in stock markets (concerns now routinely voiced by central banks for securities markets). Liquid markets become more fragile, he argued, by giving investors the "illusion" that they can exit before prices turn against them. This is a crucial insight for crises of shadow money.

A promise backed by tradable collateral remains acceptable as long as lenders trust that collateral can be converted into settlement money at the agreed exchange rate. The need for liquidity may become systemic once collateral falls in market value, as repo issuers must provide additional collateral or cash to maintain at par. If forced to sell assets, collateral prices sink lower, creating a liquidity spiral . Converting shadow money is akin to climbing a ladder that is gradually sinking: The faster one climbs, the more it sinks.

Note that sovereign collateral does not always stop the sinking, outside the liquid world of U.S. Treasuries. Rather, states can be dragged down with their shadow-money issuing institutions. As Bank of England showed , when LCH Clearnet tightened the terms on which it would hold shadow money backed with Irish and Portuguese sovereign collateral, it made the sovereign debt crisis worse. Europe had its crisis of shadow money, less visible than the Lehman Brothers demise, but no less painful. "Whatever it takes" was a promise to save the "shadow" euro with a credible commitment to support sovereign collateral values.

Shadow money also constrains the macroeconomic policy options available to the state. That's because what makes shadow liabilities money also greatly complicates its stabilization: it requires a radical re-think of many powerful ideas about money and central banking. The first point, persuasively made by Perry Mehrling , and more recently by Bank of England , is that central banks need a (well-designed) framework to backstop markets , not only institutions . Collateralized debt relationships can withstand a systemic need for liquidity if holders of shadow money are confident that collateral values will not drop sharply, forcing margin calls and fire sales. Yet such overt interventions raise serious moral hazard issues.

Less well understood is that central banks need to rethink lender of last resort. Their collateral framework can perversely destabilize shadow money. Central banks cannot mitigate convertibility risk for shadow money when they use the same fragile convertibility practices. Rather, central banks should lend unsecured or without seeking to preserve collateral parity.

We suggest that the state, as base-asset issuer, becomes a de facto shadow central bank. Its fiscal policy stance and debt management matter for the pace of (shadow) credit expansion and for financial stability. Yet, unlike the central bank, the state has no means to stabilize shadow money or protect itself from its fragility. It has to rely on its central bank, caught in turn between independence and shadow money (in)stability, which may require direct interventions in government bond markets.

The bigger task that follows from our analysis, is to define the social contract between the three key institutions involved in shadow money: the state as base collateral issuer, the central bank, and private finance. In the new FSB or Basel III provisions, we are witnessing a struggle over shadow money with many echoes from the long struggle over bank money. The more radical options, such as disentangling sovereign collateral from shadow money, were never contemplated in regulatory circles. Even a partial disentanglement has proven difficult because states depend on repo markets to support liquidity in government bond markets. Our next step, then, will be to map how the crisis has altered the contours of the state's relation to the shadow money supply, comparing the cases of the U.S., the Eurozone, and China.

cnchal , April 16, 2016 at 4:10 am

Financial anarchy is my interpretation of shadow banking.

. . . The legal right to re-use (re-hypothecate) collateral allows various (shadow) banks to issue shadow money against the same government bond , which becomes akin to a base asset with "velocity." Limits to velocity place demands on the state to issue debt, not because it needs cash but because shadow money issuers need collateral .
----
The bigger task that follows from our analysis, is to define the social contract between the three key institutions involved in shadow money: the state as base collateral issuer, the central bank, and private finance .

Who does shadow banking serve? It is so far from capitalism, it should be illegal.

Bernie Sanders: The business of Wall Street is fraud and greed.

Robert Coutinho , April 16, 2016 at 7:32 am

Well…yes and no. There is real "need" for some shadow banking services. However, the idea of having Central Banks (issuers of money, or whatever) loaning based on … nothing?

Less well understood is that central banks need to rethink lender of last resort. Their collateral framework can perversely destabilize shadow money. Central banks cannot mitigate convertibility risk for shadow money when they use the same fragile convertibility practices. Rather, central banks should lend unsecured or without seeking to preserve collateral parity.

"Europe had its crisis of shadow money, less visible than the Lehman Brothers demise, but no less painful. "Whatever it takes" was a promise to save the "shadow" euro with a credible commitment to support sovereign collateral values."

Yes, but Lehman was not a taxing authority (although to be fair, Ireland et.al. were not money-issuing sources).

I am having a hard time understanding all of this–but as far as I can tell, the authors are basically suggesting that sovereign governments should be backing up the shadow banking system. However, I have not seen them suggest any reason for it except that the entire house of cards could come falling down. Boo hoo for the banksters–tell them to do things out of the "shadows".

Jujeb , April 16, 2016 at 4:20 am

Why is there a need for 'shadow money' in the first place?
Afaik, banks create money when they loan and central banks(especially the Fed) issues the most secure assets, their securities, which are used as collateral.

abynormal , April 16, 2016 at 7:44 am

Thanks Yves for sharing Gabor…what a Mess! towards the end of 2012 the US shadow banking was said to be around 67 Trillion …did something get baked-in? 2014 the IMF has a much smaller 'account'…(Japan being the worst laughing stock). the gaps are no small detail:

The IMF's latest Global Financial Stability Report analyzes the growth in shadow banking in recent years in both advanced and emerging market economies and the risks involved.

According to the report, shadow banking amounts to between 15 and 25 trillion dollars in the United States, between 13.5 and 22.5 trillion in the euro area, and between 2.5 and 6 trillion in Japan-depending on the measure- and around 7 trillion in emerging markets. In emerging markets, its growth is outpacing that of the traditional banking system. https://www.imf.org/external/pubs/ft/survey/so/2014/pol100114a.htm

Stephen Verchinski , April 16, 2016 at 9:34 am

That sure seems a Rx for destabilizing the world currencies to precipitate a collapse. Track and publicize the visits of Congressmen and Senators to the BIS and COL to start. Why are they making these visits under cover? Who are they meeting with? Are they being prepared as to what to expect a deliberate world currency crash? . Our political elite are so beholden to the bankers to allow for the theft of the wealth of nations for unattainable expanding growth and skimming of millions. Is it possible in regard the corporate banks to have the strings attached on the use of shadow money at time of chartering or in the case of the do over at time of bankruptcy?. How is this done? I'd also like to know a good proposal for the private investment boutique banks. Have any bills at state and federal levels been proposed and if not, why not? What would the main sections of such a bill look like. Thanks.

ke, April 16, 2016 at 8:04 am

A derivative promise made by a Wall Street prostitute, ultimately contingent upon the ability to liquidate the very users of the instrument, with currency debasement, and war to restock.

Paying people to buy stuff from others being paid to buy stuff, with the full faith and credit of dependent seniors in a collapsing actuarial ponzi, with nothing more than made for TV mercenaries, isn't likely to end well.

Craps, the bank moves to the next suckers, with nothing more than the promise of an exotic vacation, billed to someone else.

Steve H. , April 16, 2016 at 9:27 am

– Limits to velocity place demands on the state to issue debt, not because it needs cash but because shadow money issuers need collateral.

There's a dirty linchpin. Even if the diabolical multiplier from cnchal's quote were removed, and the dollar was hard-pinned to a pound of silver to pay the sheriff with, infinite debt issuance can step in to the feed the hungry beast.

Promises to pay kept mercenaries in line during the city-states. If you didn't win you didn't get paid. Unless you turned around and took your employers gold instead. Which is a bit like capturing the central banks.

Still, debt can be put to good uses. Infrastructure, maybe. Basic necessities and health. 'When the people are strong, the nation is strong.' Instead, the gearing seem like the machine in Princess Bride, sucking time from peoples lives.

Watt4Bob , April 16, 2016 at 10:06 am

With regard to velocity;

Ask any highway patrolman, the faster the speed limit, the worse the accidents.

On the famed autobahns of Europe, the no speed limit means that when an accident occurs, the results are likely to be catastrophic.

And I really love the observation that central banks need a mechanism to backstop the market.

Reminds me of the main problem with the famous Vincent Black Shadow motorcycle, it could attain speeds close to 200 mph, but brake designs at the time didn't work at those speeds, so as Hunter S. Thompson remarked;

"If you rode the Black Shadow at top speed for any length of time, you would almost certainly die."

Wall $treet wants to go fast, the faster the better, but they haven't got any brakes, and worse than that, we're all along for the ride whether we like it or not.

Jim Haygood , April 16, 2016 at 2:04 pm

Richard Thompson got it too:

Oh, says Red Molly to James, "That's a fine motorbike
A girl could feel special on any such like"
Says James to Red Molly, "My hat's off to you
It's a Vincent Black Lightning, 1952"

[James gets shot in a robbery]

When she came to the hospital, there wasn't much left
He was running out of road, he was running out of breath
But he smiled to see her cry
And said I'll give you my Vincent to ride

Oh, he reached for her hand then he slipped her the keys
He said, "I've got no further use for these
I see angels on Ariels, in leather and chrome
Swooping down from heaven to carry me home"

And he gave her one last kiss and died
And he gave her his Vincent to ride

It was sorta like that when Bernanke handed J-Yel the keys to his QE penny farthing bike.

Watt4Bob , April 17, 2016 at 9:09 am

I'd flesh out that analogy a bit;

The Bernanke and J-Yel witnessed the header that Greenspan took on that bike, and decided to leave it standing against the wall. When you consider the fact that neither of them could reach the pedals, let alone mount the thing and ride, that was probably a good idea.

Chauncey Gardiner , April 16, 2016 at 10:53 am

When did the central banks' framework to backstop markets morph into an organized effort to push the value of repo collateral relentlessly upward forever?…

What about increasing the relentless decline in the Velocity of Money by gradually increasing interest rates? Yes, that might be a catalyst to trigger a "liquidity spiral". So what? We now have moral hazard in spades and at some point will have to cross the Rubicon, whether willingly or not.

washunate , April 16, 2016 at 11:38 am

Here's a simple theory: Shadow banking is government approved fraud.

cnchal, April 16, 2016 at 12:07 pm

i am reading one of the links from the post titled "Regulating money creation after the crisis", and it's even worse than government approved fraud. I am only part way through it, but here is a gem.

On page 10

. . . Instead, OLA was designed to preserve the value of the assets of failed financial firms until they are liquidated, a worthy aim, but a very different one. At the same time, the Dodd-Frank Act has imposed significant new limitations on the government's freestanding panic-fighting tools . These limitations, absent future congressional action, would render next to impossible the kind of aggressive government rescue operation that was staged during the recent crisis.

Criminality and corruption is embedded at the top of the financial food chain, by law.

Paul Tioxon , April 16, 2016 at 2:20 pm

Motion seconded: Government sanctioned counterfeiting.

Keith , April 16, 2016 at 11:54 am

Before we complicate the issue, it is fairly obvious no one understands conventional money and it is one of the best kept secrets on the planet.

Learn how normal money works and how its mismanagement has led to many of today's problems.

Banks create money out of nothing to allow you to buy things with loans and mortgages (fractional reserve banking).

After years of lobbying the reserve required is often as good as nothing. Mortgages can be obtained with the reserve contained in the fee.

After the financial crisis there were found to be Ł1.25 in reserves for every Ł100 issued on credit in the UK.

Having no reserve shouldn't be a problem with prudent lending.

Creating money out of nothing is the service they really provide to let you spend your own future income now.

They charge interest to cover their costs, for the risk involved and the service they provide.
Your repayments in the future, pay back the money they created out of nothing.

The asset bought covers them if you default, they will repossess it and sell it to recover the rest of the debt unpaid.

At the end all is back to square one.

The bank has received the interest for its service.

You have paid for the asset you have bought plus the interest to the bank for its service of letting you use your own money from the future.

Today's massive debt load is all money borrowed from the future for things already bought.

It can also go wrong another way, when banks lend into asset bubbles that collapse very quickly. The repossessed asset doesn't cover the outstanding debt and money gets destroyed on the banks balance sheets.

When banks lend in large amounts, on margin, into stock markets, the bust shreds their balance sheets (1929).

When banks lend in large amounts on mortgages into housing markets, the bust shreds their balance sheets (2008).

If banks don't lend prudently you are in trouble.

Then they developed securitisation …… oh dear (no need to lend prudently now).

Housing booms and busts around the world …… oh dear.

All that money borrowed from the future and already spent …… oh dear.

susan the other , April 16, 2016 at 12:16 pm

This is so interesting. It seems to be approaching the subject that Wray speculated about a while back – that we should give central banks fiscal responsibility. Because otherwise a sovereign state has no control over its sovereign money? It seems to me that money itself becomes a rehypothecated asset by virtue of being invested over and over again – if it is well allocated and under good fiscal control all is well. If not we get the Great Recession.

So let the state become the defacto shadow central bank so it had direct control of its own money. Instead of hanging on to the old gold standard mindset of top down management, why not think of people, not collateral, as the root of the system – the grass roots. How much money does a system – a sovereign country – need per person. And then establish a sovereign central bank to deal directly, bringing the shadows into the sunlight of fiscal control.

JTHcPhee , April 16, 2016 at 12:35 pm

…and does anyone remember the triumph of the desk slaves of the Crimson Permanent Assurance? Monty Python understood something about political economies and how one might achieve more fairness in outcomes… https://vimeo.com/111458975

Paul Tioxon , April 16, 2016 at 12:38 pm

Moneyness, like doggitas, you just can't scratch behind its ears. If shadow money is distinguished by its relationship to collateral, as opposed to money issued by the state, with the entire human enterprise of civilization as its basis, it still seems to me that at the top of the money hierarchy is fiat money, the real money by the real social order empowered by the social forms of power that sustain human life in all of its aspects, not just the financial conveniences. Shadow money sounds to me like fictional capital by another name. And contractual based deposits sounds like counterfeiting. With the distinction that the man with counterfeit printing press robs the train, while the man who runs the Wall St Investment bank repo trading desk robs the whole railroad. Am I right or Am I right. What a bunch of Losers!!!

And if there is any doubt about the fictional quality of $Trillions and $ Trillions of dollars, physicists can not find anything naturally occurring in the universe beyond billions and billions. Money, simply a numbered record, a counting or cardinal number, transforms into money in name only, MINO, when it refers to fictional amount that can only appear contractually as words, and do not count how much economic activity or output has been produced.

Therefore, Money becomes a victim of the ontological argument for God by St Anselm. If God does not exist, an all powerful, all knowing, all present infinitely great in all categories of Supreme Being could not be written or spoken about, lacking the quality of existence. The fact that we CAN speak about an Omnipotent Supreme Deity means that one in fact exists, due to existence is part and parcel of Omnipotence. But of course, because we can talk or write about something, does not make it real.

It can become socially acceptable as in the case of shadow money, but it is fictional capital, a shadow of the real thing. Time to get out of the cave of finance with its shadows dancing from the light of the fires and walk eyes wide open in the bright light of sunshine!

craazyman , April 16, 2016 at 12:43 pm

I don't know about this one. It seems to me to be some pretty queasy thinking. It kind of wanders around in circles of confusion. "my existence led by confusion boats, mutiny from stern to bow".

That's pretty funny somebody would say that money is diabolically hard to write about. That's pretty funny.

Money is actually the easiest thing to write about, because it's formless energy. It's not that the phenomenon is shadow money, it's shadow assets.

You have to be able to separate in your mind the ideas of 1) Quantity and 2) Form. That's why economics is a mental disorder, because it doesn't separate quantity and form. If you can't or don't, then yes, it's diabolically hard to write about because you're writing about two different things simultaneously without realizing it. Money is a quantity that is infinite and continuous, but form is an idea that is discontinuous and finite. People do what the forms tell them to do. The money is just like electricity that powers the animation of the forms. Repo is a form it's not money. It's existence results in a certain ordering of social relations, that's also a form. But money is just the energy that makes the forms potent.

The primary challenge is to come up with an ordered way of thinking about the forms themselves. That's frankly not easy. The ideal would be to understand them in the manner in which Euclid understood geometrical ideas. If you can get the vision, then you can see all the possibilities for structure and ordered relationships. there's really no triangle in reality and there's no point and there's no line and there's no plane. They just made them up to approximate physical reality. Then they thought to themselves "Holy shit! These ideas interrelated in an astounding range of symmetries and causations." Then they became a lens or a framework through which physical reality was interpreted. But they didn't confuse the idea of "number" with the idea of "triangle" or "circle".

Certainly in math the algebraic interpretation doesn't rely completely on the geometrical interpretation. But if there is no geometrical interpretation and it's only algebra, then so much is missing, so much is lost. I guess that's why they used to call it "political economy" before the mental disorder fully usurped the power of perception and reasoning.

susan the other , April 16, 2016 at 2:18 pm

lovely to read you

Watt4Bob , April 17, 2016 at 8:58 am

Certainly in math the algebraic interpretation doesn't rely completely on the geometrical interpretation. But if there is no geometrical interpretation and it's only algebra, then so much is missing, so much is lost.

With that firmly in mind, I think it's necessary to mention the fact that the " study " of "economics" relies on calculus, wherein we are introduced to the notion of change over time, volume, motion, acceleration, rates of change, vectors, etc.

Algebra and geometry are, as you point out, obvious abstractions, but once you add volume motion, and rates of change, the models become very seductive, and it's easy to see how one can be convinced that they are approaching an understanding of 'reality'.

The trouble is of course, that the egg-heads busy trying to describe economic "reality" with calculus, are, for the most part in the employ of savages who will forever cling to a simple arithmetic where their only interest is in "having it all".

Genius employed to make excuses for demented indifference.

Jim Haygood , April 16, 2016 at 1:27 pm

'Central banks should lend unsecured … we suggest that the state, as base-asset issuer, becomes a de facto shadow central bank.' - Daniela "Zsa Zsa" Gabor

This statement desperately needs Walter Bagehot's qualifications: "to solvent institutions" and "at a penalty rate."

Otherwise, we're just talking about another squalid round of "TARP for Jamie," as we peasants reach for our pitchforks.

cnchal , April 16, 2016 at 2:07 pm

Bagehot, eh.

It should however be pointed out that the idea of shadow banking is not remotely new. The concept was presaged well over a century ago by Walter Bagehot, the legendary English banker, essayist, and theorist. In 1873, Bagehot wrote Lombard Street: A Description of the Money Market, his canonical work on the money market and central banking. In it, he observed that the great London banks were accompanied by a parallel set of financial firms, known as "bill brokers," which in many ways resembled modern-day securities dealers. Like today's dealers, these bill-brokers financed themselves with borrowings that, Bagehot informs us, were "repayable at demand, or at very short notice."

Formally speaking these firms were not banks but to Bagehot they might as well be. "The London bill brokers," he observes, "do much the same [as banks]. Indeed, they are only a special sort of bankers who allow daily interest on deposits, and who for most of their money give security [i.e., collateral]. But we have no concern now with these differences of detail." At times, Bagehot is careful to note that the short-term obligations of bill-brokers were not technically deposits; he observes that the maturing of these liabilities "is not indeed a direct withdrawal of money on deposit," although "its principal effect is identical."

Other times, however, Bagehot dispenses even with this distinction: "It was also most natural that the bill-brokers should become, more or less, bankers too, and should receive money on deposit without giving any security for it." Here we have an unambiguous identification of the shadow banking phenomenon about 140 years ago .

Bas , April 16, 2016 at 1:30 pm

it's all been reduced to gambling with no meaningful value in "The House" to back it up. Money will disappear, like in Star Trek.

fresno dan , April 16, 2016 at 1:36 pm

I would posit that there are two types of money
A – money of the 0.001% – if they walk into a casino, real estate transaction, or any asset for that matter they can NOMINALLY lose money – in fact the 0.001% NEVER lose any of THEIR money, they just lose your money. All winnings, of anybody doing anything anywhere, belong to them.
B – money of everybody else – this money nominally is yours to do with as you see fit, but it ALL belongs to the 0.001%. The collateral that backs it up is everything you earn and own and when necessary your, and your family's, internal organs…

Jamie , April 16, 2016 at 4:46 pm

"The nation [England] was not a penny poorer by the bursting of these soap bubbles of nominal money capital. All these securities actually represent nothing but accumulated claims, legal titles to future production. Their money or capital value either does not represent capital at all … or is determined independently of the real capital value they represent."

– Marx
Banking Capital's Component Parts
Capital: Volume Three

James Levy , April 17, 2016 at 6:07 am

Marx failed to acknowledge that supposedly hard-headed Capitalism is actually all about living beyond your means and mortgaging the future.

It was designed from the Fuggars' and the Medici's to be about debt and fractional reserves and interest. A system based on a finite supply of money is going to grow not much faster, at best, than the money available allows.

Capitalism allows explosive growth by supplying explosive amounts of credit. All this shadow banking activity is designed to get around reserve requirements; nothing else I can see calls all this complexity into existence. The banks always need more, because lending is how they make their money, so they want an infinite amount to lend in order to drive their profits towards the infinite.

Sy Krass , April 16, 2016 at 10:41 pm

A sovereign can create its own currency, but theoretically couldn't it create any currency? Couldn't Greece for example click a few key boards put some ones and zeros in and say, "oh our account with $1,000,000 US is actually $10,000,000,000 US?

HAHAHAHAHA!!!!!!!

financial matters , April 17, 2016 at 5:49 am

This article I think defines shadow money alright as starting where bank deposits leave off but as the above comments suggest seems to miss some key points. I think a major problem with the article is seeing central banks as separate from the state rather than seeing the central bank along with the Treasury as the state itself.

The article gets Treasury debt wrong by seeing it as the central bank funding the state rather than as actually coming from the state. This leads to wrong policy choices such as this state money being used to bail out useless financial transactions and asset appreciation rather than the public purpose. I think crazyman has it right. We left behind the power of perception and reasoning by not realizing the importance of political economy.

Lambert Strether, April 17, 2016 at 7:22 am

This is reminscent of Gramsci's idea that the state and civil society are to be distinguished only for purposes of exposition.

ewmayer, April 17, 2016 at 4:45 pm

Some issues with the piece and questions for the authors (and fellow NCers):

I really wish such analyses would use the more-precise term "credit-money" in reference to money creation by banks, to distinguish it from government money creation, which similarly may have repayment requirements attached (bonds), but need not be so. The "need not be so" may occur via outright fiat emission, but more commonly appears in form of a public debt stock which continually increases with time, at least in nominal terms.

The legal right to re-use (re-hypothecate) collateral allows various (shadow) banks to issue shadow money against the same government bond, which becomes akin to a base asset with "velocity."

Fine, but what about that other crucial element of modern bank credit-money creation, leverage? Are there any practical limits on shadow banks' issuance of multiple units of shadow money against the same government-bond money unit? If so, how are they enforced (if at all)? Note also the key concept of "implied leverage" inherent in such schemes, where the leverage ratio may fluctuate drastically with the mark-to-market valuation of the collateral. Banks play endless games with "fictional reserves"; it would be naive to imagine that non-bank shadow lenders don't do similarly with their alleged collateral.

The first point, persuasively made by Perry Mehrling, and more recently by Bank of England, is that central banks need a (well-designed) framework to backstop markets, not only institutions.

Erm, markets are the *only* thing the government should be committed to ensuring functioning of - we have overwhelming evidences from multiple boom-bust-crisis episodes over the last 3 decades of the toxic results of governments backstopping hyperleveraged fraud-riddled institutions and the crooks running same.

[Apr 13, 2016] Annualized drop by almost two billion barrels a day is expected in the USA

Notable quotes:
"... The weekly decline stands now at -31 kb/d which is annualized 1.6 mill b/d. In my view decline rates will now accelerate until oil prices – and more importantly drilling – are up. So, it is also my opinion that the next rise in US liquid hydrocarbon production will not be up before summer 2017. ..."
peakoilbarrel.com
Heinrich Leopold, 04/13/2016 at 10:01 am
The weekly status report came just out.

http://ir.eia.gov/wpsr/overview.pdf

The weekly decline stands now at -31 kb/d which is annualized 1.6 mill b/d. In my view decline rates will now accelerate until oil prices – and more importantly drilling – are up. So, it is also my opinion that the next rise in US liquid hydrocarbon production will not be up before summer 2017.

Interesting also that 'other supply' (including fuel ethanol and processing gains) is down 70 kb/d. So, the market works and lays the foundation of a price recovery.

[Apr 12, 2016] 70-90% Decline In Well Completions Raises Hope For Oil Gas

Notable quotes:
"... Producers are not just shrinking production; they are also laying off staff in the thousands. Over the short-term, this will help them, or at least some of them, to survive. In the medium-term, however, production curbs and layoffs will benefit the energy industry in another way: it will make them temporarily less capable of responding to the growing demand for oil and gas. ..."
"... A report from Bernstein puts the mean growth rate for oil demand at 1.4 percent annually for the next five years, up from 1.1 percent for the last decade. The International Energy Agency expects average annual demand growth of 1.3 percent, much of which will come from non-OECD economies. ..."
OilPrice.com
There's not much money in new well drilling these days. In fact, the latest figures from the American Petroleum Institute (API) reveal a 70 percent annual decline in new natural gas well completions along with a staggering 90 percent drop in new oil wells as of the start of April.

The drop hardly comes as a surprise, especially in the light of the continual reduction in active drilling rigs across the U.S. as reported on a weekly basis by Baker Hughes. As of April 8, there were 354 active oil rigs-8 fewer than the week before, and 406 fewer than a year ago. The number of active gas rigs was 89, down from 225 on April 8, 2016.

Given the low oil and gas prices that have pushed many energy firms to the brink of bankruptcy, these developments were only to be expected, although they are certainly worrying with regard to the resilience of some players in the sector. Yet, gloomy as the news seems, its implications for the future are rather positive.

Prices of crude oil and natural gas are at multi-year lows. Producers are not just shrinking production; they are also laying off staff in the thousands. Over the short-term, this will help them, or at least some of them, to survive. In the medium-term, however, production curbs and layoffs will benefit the energy industry in another way: it will make them temporarily less capable of responding to the growing demand for oil and gas. And demand will grow.

A report from Bernstein puts the mean growth rate for oil demand at 1.4 percent annually for the next five years, up from 1.1 percent for the last decade. The International Energy Agency expects average annual demand growth of 1.3 percent, much of which will come from non-OECD economies.

See also: How The Oil Crisis Has Impacted Military Spending

[Apr 11, 2016] Why Low Oil Prices Haven't Helped The Economy

Notable quotes:
"... ...calculations suggest that while there was a modest boost in spending in the second half of 2014 and first half of 2015, it was significantly less than would have been predicted from the historical relation between spending and energy prices. Moreover, any boost seems to have completely vanished by this point, with actual consumption even a little below what would have been predicted had there been no drop in energy prices at all ..."
"... there can be little debate that lower oil prices have meant a major hit to the incomes of U.S. oil producers. One place that this is starting to show up in the GDP numbers is in capital expenditures. Spending on mining exploration, shafts, and wells was contributing $146 B at an annual rate to U.S. GDP in the second and third quarters of 2014. By the end of 2015 that number was down to $65 B, a drop of about half a percent of GDP. ..."
OilPrice.com,

...calculations suggest that while there was a modest boost in spending in the second half of 2014 and first half of 2015, it was significantly less than would have been predicted from the historical relation between spending and energy prices. Moreover, any boost seems to have completely vanished by this point, with actual consumption even a little below what would have been predicted had there been no drop in energy prices at all.

A study of individual credit and debit card transactions by JP Morgan Chase Institute found that at the individual level, consumers did seem to be spending most of the windfall on other items. Their evidence for this was that if you compared the spending of an individual who had formerly had a big share of their budget going to gasoline with someone who did not, you saw the spending by the first person rise relative to the second by almost the full amount of the first person's gain. The reconciliation between this micro evidence, which suggests that consumers did spend much of the windfall, and the macro evidence, which shows no evidence of a significant increase overall, is that there were other factors besides oil prices that were holding everybody's consumption back, such as slower income growth and more precautionary saving. Spending by households with big gasoline expenses may have risen relative to other households at the same time that the average spending by all households came in close to trend. These aggregate factors show up as part of the "error term" in regression models like Edelstein and Kilian's. If that's the right way to interpret this, it means that aggregate consumption spending did get a boost from lower oil prices in the sense that we would have seen much more anemic growth of spending had oil prices not come down so dramatically.

On the other hand, there can be little debate that lower oil prices have meant a major hit to the incomes of U.S. oil producers. One place that this is starting to show up in the GDP numbers is in capital expenditures. Spending on mining exploration, shafts, and wells was contributing $146 B at an annual rate to U.S. GDP in the second and third quarters of 2014. By the end of 2015 that number was down to $65 B, a drop of about half a percent of GDP.

[Apr 11, 2016] Not only KSA but most of the global production has been maintained from old depleted wells, using new techologies to sweep up remnants of trapped oil.

Notable quotes:
"... KSA is the primary driver into the turmoil in Syria. KSA is sitting on vast NatGas fields underneath their oil fields. However, producing NatGas from these fields would cause severe Oil production issues, so they won't tap the NatGas until their Oil fields are tapped out. KSA needs to path to get its NatGas into Europe, which requires a pipeline through Syria. So if they are pressing to remove Assad from power, I suspect that KSA production problems aren't too far into the future. ..."
"... Iran & KSA appear to be gearing up for war. Both nations are buying military equipment and are running multiple proxy wars. I believe KSA is now has the 4 or 5 biggest military budget for 2016. Both KSA and Iran also have a limited number of nuclear weapons. Should the proxy wars turn into a hot war, then it really doesn't matter how much oil is left to be produced. ..."
"... I have wondered this for awhile too. They appear to handle so much water. As I have stated, handling water is a major expense in producing oil. I wonder how much chemical KSA has to use and as well how much electricity. I also wonder what pressure is required on the injected water. There are very few water floods in the US with LOE much under $15 per BOE. Most are well over $20. Same applies to steam floods, CO2 and polymer floods. ..."
"... What happens as the "old" big fields that provided decades of oil comes to an end of their economic life, shortened by the collapse in the oil price and the lasting low oil price? Generally the discoveries that wait in line for development are smaller, so to keep the level and/or grow becomes THE Red Queen race. Then throw in that several of the majors have had a Reserves Replacement Ratio (RRR) of less than 100%, meaning reserves are depleted faster than they are being replaced. ..."
"... Let's say Ghawar begins to decline, that is one field, I imagine that you believe it is unlikely that all the large fields in the World will begin their decline phase simultaneously. So let's assume they do not. For simplicity we will assume Ghawar produces about 5 Mb/d and that it will decline at 3%/ year (similar to US before LTO production started from 1985-2004), we will also assume each year the equivalent of one Ghawar begins to decline until all World production is eventually declining at 3% per year. For simplicity we will assume all fields decline at 3% (in reality some will be more than this and some will be less and the rate won't be constant over time. This is a very simple model. ..."
"... I expect than when the Oil column dips some where between 10 feet and 3 feet, Production is going to collapse at a much faster rate than 3% per year, Perhaps as high 10 to 20% per year. I think as the remaining Oil column shrinks its going to be much harder to extract oil since it will be difficult to steer laterals to follow the uneven remaining oil column. The water cut will grow increasing problematic, and drilling will need to increase to keep laterals on near the top of the oil column. ..."
"... My understanding average large fields are declining at a rate of 5% to 7% per year. Horizontal and other advance drilling\extraction tech has prevented significant production declines so far, but this trend isn't sustainable. At some point I believe we will see shocking decline rates no matter what tech is developed, or how much the Price of Oil increases into. ..."
"... Yes. But I think KSA would likely go to war first as a diversion to internal unrest. Ron Patternson would be a better source than me, since I never visited or worked in KSA. Ron has. So far KSA is using brutal tactics to prevent protests and uprisings. ..."
"... Will economic and social problems become a crisis before Oil production collapses begin? Lots of nations are downing in debt, have aging population with no or inadequate retirement savings, and younger labor pools unequipped (educated/skilled) to meet the needs of businesses. I can't image that the global economy can be sustained for much longer (EU, Asia & South America in recession & the US teetering on the end of another recession). Since when in history have major industrial powers have negative interest rates? ..."
"... I believe the most of the Ghawar formation has a profile where its narrow at the bottom and much wider at the top. There is more volume at the top of the formation than at the bottom. So the decline in oil column depth is not linear. ..."
"... "The 2009 study focused on 331 giant oil fields from a database previously created for the groundbreaking work of Robelius mentioned above. Of those, 261 or 79 percent are considered past their peak and in decline." "The average annual production decline for those 261 fields has been 6.5 percent. " ..."
"... "Now, here's the key insight from the study. An evaluation of giant fields by date of peak shows that new technologies applied to those fields have kept their production higher for longer only to lead to more rapid declines later. As the world's giant fields continue to age and more start to decline, we can therefore expect the annual decline in their rate of production to worsen. Land-based and offshore giants that went into decline in the last decade showed annual production declines on average above 10 percent." ..."
"... The increased use of in-fill drilling (e.g. moving horizontal producers up dip) and IOR/EOR techniques was foreseen with it's effect on prolonging the plateau, we are yet to see if the sudden collapse that was also predicted. The thing that was missed in the predictions around 2009 to 2013 was a flood of free money and with it the ability of the oil industry to ramp up non-conventional production, and I'd also say for Iraq. ..."
"... Great post George: an excellent summary of PO describing rapid ongoing production decline from most key fields that has been temporarily deferred by enormous pulse of infill drilling and EOR paid for via free money leading to current situation. What else do we need to know? ..."
"... As I have repeated many times on this blog, Saudi has been able to mask the decline of its old giant oil fields by bringing old oil previously mothballed fields back on line. These fields are Shaybah, Khurais and Manifa. ..."
"... to even suggest that Ghawar might go into decline is preposterous. Ghawar has long been into decline. I am shocked that you are ignorant of that fact. ..."
"... I have no idea what Ghawar's current production numbers are because it is a Saudi state secret. But I would guess somewhere in the neighborhood of 3 million barrels per day. But if it were not a state secret and Saudi were proud of the numbers, then it would be in the neighborhood of 5 million barrels per day. ..."
"... "Although Saudi Arabia has about 100 major oil and gas fields, more than half of its oil reserves are contained in eight fields in the northeast portion of the country…The Ghawar field has estimated remaining proved oil reserves of 75 billion barrels" ..."
"... The EIA estimates Saudi Arabia's oil production capacity (ex NGLs) at around 12 mb/d, including ~300kb/d in the Saudi part of the Neutral zone. The latest estimate by the IEA is 12.26 mb/d ..."
"... Alex, Ghawar can in no way produce anywhere near 5.8 million barrels per day. But then if you believe anything that is printed on the internet then….. ..."
"... Incidentally, the EIA agrees with Saudi Arabia on their proven reserves of 266 billion barrels. Which says nothing other than "We take Saudi's word for everything. ..."
"... The recent increase in Saudi Arabia's oil production was largely due to higher utilization of production capacity. The last large increase in capacity was in 2009, when Khurais field capacity was increased to 1.2 mb/d. The start of the Manifa field in 2013 and its ramp-up in 2014 largely offset declining production at the mature fields. ..."
"... If we assume a 6.5% annual decline rate since 2009 we would be at 3.4 Mb/d in 2015. At some point Saudi Arabia as a whole will begin to decline, when this will happen I do not know. Just as in the US where there has been extensive infill drilling and secondary, tertiary recovery methods employed and decline rates have remained under a 3% annual rate, the same is likely to be true of other large producing nations with a combination of on shore and offshore projects. ..."
"... The best analogy for Ghawar is probably Cantarell, they have both been developed with the best available secondary and tertiary recovery methods. Cantarell production dropped like a stone once those techniques were exhausted (about 15% per year in 2006 to 2008). My guess is Ghawar will go (or is going) even faster as the IOR/EOR techniques and software models available for its development are more advanced and it is onshore, making their application easier. Daqing might go the same way. Samotlor has been declining at around 5%. ..."
"... I know this is probably an impossible question but how long do you think it will take to deplete the remaining oil column? If it is correct that it took 10 years to drop from 100 to 25 feet (assuming this is correct too) then that doesn't bode well for future production from Ghawar over the next decade. ..."
"... The next five years should tell a lot if the oil column is now that thin. 5 mbopd can't continue forever, nor can 3% decline in a permeable reservoir under water flood. When the water mostly reaches the top, the oil stained water becomes too expensive to separate out and production stops at greater than a 3% rate. ..."
peakoilbarrel.com
TechGuy, 04/08/2016 at 12:35 am
My Thoughts on KSA Production:

1. Ghawar started with a Oil column of ~1300. I believe by 2005, the Oil column shrunk to about 100 feet. Today its about 20-25 feet. The remaining Oil is floating on water and KSA is using horizontal drilling to extract it. In some regions of Ghawar they are on their second or third string of horizontal wells as the water column flood above the wells, and they had to drill above to get back into the Oil column.

2. KSA restarted production in existing wells that have already been depleted decades ago. Better tech and mapping information permitted them to sweep up trapped oil in these wells.

3. KSA is now using advanced Oil recovery in Ghawar and other fields (CO2/Nitrogen injection) in order to free up trapped oil.

4. Saudi Americo, posts tech articles (quarterly) on their website. They usually don't include which fields they are discussing, but with a little bit of effort, its not to difficult to determine which fields discussed. This is where I found the three above items. I posted excerpts on this blog over the past couple of years from SA tech articles.

5. KSA is the primary driver into the turmoil in Syria. KSA is sitting on vast NatGas fields underneath their oil fields. However, producing NatGas from these fields would cause severe Oil production issues, so they won't tap the NatGas until their Oil fields are tapped out. KSA needs to path to get its NatGas into Europe, which requires a pipeline through Syria. So if they are pressing to remove Assad from power, I suspect that KSA production problems aren't too far into the future.

FWIW: Its just not KSA that is the problem. Most of the global production has been maintained from old depeleted wells, using new tech to sweep up trapped oil. Obviously this can't be continued indefinitely. I fear that at some point all of the major fields will begin to see sharp declines as remains of trap oil is extracted, an newer technology isn't going to extract Oil that doesn't exist. With the extremely low oil prices, no one is developing any new fields (deep water, arctic, etc). By the time oil prices recover that makes it profitable resume these expensive projects it will be too late and there will likely be permanent crisis. It may take 5 to 7 years to develop new project to produce Oil. 5 to 7 years is a long lag time, which depletion continues to march on.

That said, its possible that other problems trump Oil production problems, such as, the Debt crisis or the demographic crisis (aging populations). We are very close to another major debt crisis as gov'ts start going bankrupt (ie rest of the PIGS – Portugal, Spain, Italy), China, Japan, Most of South America, and perhaps a lot of US cities and even US states (Puerto Rico, Illinois, Pennsylvania, West Virginia, and perhaps California).

Iran & KSA appear to be gearing up for war. Both nations are buying military equipment and are running multiple proxy wars. I believe KSA is now has the 4 or 5 biggest military budget for 2016. Both KSA and Iran also have a limited number of nuclear weapons. Should the proxy wars turn into a hot war, then it really doesn't matter how much oil is left to be produced.

clueless, 04/08/2016 at 2:45 am
Great info techguy. Based upon your thoughts, what do you think that the average cost per barrel is for KSA oil?
shallow sand, 04/08/2016 at 7:14 am
I have wondered this for awhile too. They appear to handle so much water. As I have stated, handling water is a major expense in producing oil. I wonder how much chemical KSA has to use and as well how much electricity. I also wonder what pressure is required on the injected water. There are very few water floods in the US with LOE much under $15 per BOE. Most are well over $20. Same applies to steam floods, CO2 and polymer floods.
Rune Likvern, 04/08/2016 at 10:04 am
Thanks TechGuy.
What happens as the "old" big fields that provided decades of oil comes to an end of their economic life, shortened by the collapse in the oil price and the lasting low oil price? Generally the discoveries that wait in line for development are smaller, so to keep the level and/or grow becomes THE Red Queen race. Then throw in that several of the majors have had a Reserves Replacement Ratio (RRR) of less than 100%, meaning reserves are depleted faster than they are being replaced.
Dennis Coyne , 04/08/2016 at 12:47 pm
Hi Techguy,

Let's say Ghawar begins to decline, that is one field, I imagine that you believe it is unlikely that all the large fields in the World will begin their decline phase simultaneously. So let's assume they do not. For simplicity we will assume Ghawar produces about 5 Mb/d and that it will decline at 3%/ year (similar to US before LTO production started from 1985-2004), we will also assume each year the equivalent of one Ghawar begins to decline until all World production is eventually declining at 3% per year. For simplicity we will assume all fields decline at 3% (in reality some will be more than this and some will be less and the rate won't be constant over time. This is a very simple model.

Spreadsheet at link below:

https://drive.google.com/file/d/0B4nArV09d398ZXY4Q2V0c1VWd3M/view?usp=sharing

Chart below has World C+C output in Mb/d on left axis and annual decline rate (dashed line) on right axis. It is assumed in this scenario that a nuclear war in the middle east does not occur.

TechGuy, 04/08/2016 at 3:07 pm
Hi DC,

I expect than when the Oil column dips some where between 10 feet and 3 feet, Production is going to collapse at a much faster rate than 3% per year, Perhaps as high 10 to 20% per year. I think as the remaining Oil column shrinks its going to be much harder to extract oil since it will be difficult to steer laterals to follow the uneven remaining oil column. The water cut will grow increasing problematic, and drilling will need to increase to keep laterals on near the top of the oil column.

My understanding average large fields are declining at a rate of 5% to 7% per year. Horizontal and other advance drilling\extraction tech has prevented significant production declines so far, but this trend isn't sustainable. At some point I believe we will see shocking decline rates no matter what tech is developed, or how much the Price of Oil increases into.

That said I don't have a crystal ball or a time machine that shows me what is going to happen.

George Kaplan Asked:

"Do you think there is a significant risk of internal disruption"

Yes. But I think KSA would likely go to war first as a diversion to internal unrest. Ron Patternson would be a better source than me, since I never visited or worked in KSA. Ron has. So far KSA is using brutal tactics to prevent protests and uprisings.

Saudis unveil radical austerity programme

https://next.ft.com/content/a5f89f36-ad7e-11e5-b955-1a1d298b6250

Clueless asked:

"Based upon your thoughts, what do you think that the average cost per barrel is for KSA oil?"

I don't have a clue. I would imagine production costs are constantly rising.

Rune rhetorically asked:

"What happens as the "old" big fields that provided decades of oil comes to an end of their economic life, shortened by the collapse in the oil price and the lasting low oil price?

yes, that was the point I was leading to. That said: Will economic and social problems become a crisis before Oil production collapses begin? Lots of nations are downing in debt, have aging population with no or inadequate retirement savings, and younger labor pools unequipped (educated/skilled) to meet the needs of businesses. I can't image that the global economy can be sustained for much longer (EU, Asia & South America in recession & the US teetering on the end of another recession). Since when in history have major industrial powers have negative interest rates?

Dave P asked:

"I know this is probably an impossible question but how long do you think it will take to deplete the remaining oil column?"

I don't' have a clue. I believe the most of the Ghawar formation has a profile where its narrow at the bottom and much wider at the top. There is more volume at the top of the formation than at the bottom. So the decline in oil column depth is not linear.

Perhaps this article will provide you a guess (probably some time after 2018)
Saudi Arabia to Sell Stake in Parent of State Oil Giant by 2018
http://www.bloomberg.com/news/articles/2016-04-01/saudi-arabia-to-sell-stake-in-parent-of-state-oil-giant-by-2018

George Kaplan, 04/09/2016 at 5:52 am
TechGuy

What is being seen is consistent with previous predictions concerning giant fields, summarized here:

http://resourceinsights.blogspot.co.uk/2013/04/aging-giant-oil-fields-not-new.html

For example:

"The 2009 study focused on 331 giant oil fields from a database previously created for the groundbreaking work of Robelius mentioned above. Of those, 261 or 79 percent are considered past their peak and in decline." "The average annual production decline for those 261 fields has been 6.5 percent. "

"Now, here's the key insight from the study. An evaluation of giant fields by date of peak shows that new technologies applied to those fields have kept their production higher for longer only to lead to more rapid declines later. As the world's giant fields continue to age and more start to decline, we can therefore expect the annual decline in their rate of production to worsen. Land-based and offshore giants that went into decline in the last decade showed annual production declines on average above 10 percent."

The increased use of in-fill drilling (e.g. moving horizontal producers up dip) and IOR/EOR techniques was foreseen with it's effect on prolonging the plateau, we are yet to see if the sudden collapse that was also predicted. The thing that was missed in the predictions around 2009 to 2013 was a flood of free money and with it the ability of the oil industry to ramp up non-conventional production, and I'd also say for Iraq.

Doug Leighton, 04/09/2016 at 9:09 am
Great post George: an excellent summary of PO describing rapid ongoing production decline from most key fields that has been temporarily deferred by enormous pulse of infill drilling and EOR paid for via free money leading to current situation. What else do we need to know?
Dave P, 04/09/2016 at 2:01 pm
When the music will stop?
Ron Patterson , 04/08/2016 at 6:47 pm
Dennis, Ghawar is not one oil field, it is five. That is not even counting Fazran. There are Ain Dar, Shedgum, Uthmaniyah,
Hawiyah, and Haradh. Four of the five Gahwar fields are in decline and the fifth, Haradh, is on a plateau.

To even suggest that Ghawar "might" begin to decline shows an astonishing ignorance of Saudi oil production capabilities.

As I have repeated many times on this blog, Saudi has been able to mask the decline of its old giant oil fields by bringing old oil previously mothballed fields back on line. These fields are Shaybah, Khurais and Manifa.

Dennis, for God's sake, to even suggest that Ghawar might go into decline is preposterous. Ghawar has long been into decline. I am shocked that you are ignorant of that fact.

I have no idea what Ghawar's current production numbers are because it is a Saudi state secret. But I would guess somewhere in the neighborhood of 3 million barrels per day. But if it were not a state secret and Saudi were proud of the numbers, then it would be in the neighborhood of 5 million barrels per day.

But it is a state secret and it is not, in my estimation, anywhere near 5 million barrels per day.

AlexS, 04/08/2016 at 8:38 pm
Ron,

Below is a table from the EIA's Saudi Arabia country analysis (as of September 2014).
http://www.eia.gov/beta/international/analysis.cfm?iso=SAU
The original sources of the data are Saudi Aramco and "Arab Oil and Gas Journal"

From the EIA report:

"Although Saudi Arabia has about 100 major oil and gas fields, more than half of its oil reserves are contained in eight fields in the northeast portion of the country…The Ghawar field has estimated remaining proved oil reserves of 75 billion barrels"

The EIA estimates Saudi Arabia's oil production capacity (ex NGLs) at around 12 mb/d, including ~300kb/d in the Saudi part of the Neutral zone.
The latest estimate by the IEA is 12.26 mb/d

Ron Patterson , 04/08/2016 at 9:02 pm
more than half of its oil reserves are contained in eight fields in the northeast portion of the country

More than half no less. Well hell, I cannot argue with that.

Alex, all your listed fields come to 11.75 million barrels per day. And that is more than half. Wow! Alex, do you really believe that shit?

That does not include Berri? How could they not count Berri? Or Safah? Or any of the other fields that would be giant fields in any other country? If you add them all up it would likely come to at least 15 to 20 million barrels per day. Which is a joke of course. Saudi is now producing flat out.

Alex, Ghawar can in no way produce anywhere near 5.8 million barrels per day. But then if you believe anything that is printed on the internet then…..

If 11.75 is more than half then they likely figure around 20 million barrels per day is possible. Yeah right!

Incidentally, the EIA agrees with Saudi Arabia on their proven reserves of 266 billion barrels. Which says nothing other than "We take Saudi's word for everything.

AlexS, 04/08/2016 at 9:18 pm
Ron, I am actually rather skeptical about EIA's international statistics. Obviously, I'm not saying that those numbers are correct.
Do you think they may have included NGLs (given that KSA produces more than 2 mb/d of NGLs)?
Ron Patterson , 04/08/2016 at 10:01 pm
Alex, the EIA does have a tendency to include NGLs in their estimates. That is likely here since Saudi is producing nowhere near what they say their their major fields are capable of.

But no one has any idea what each individual field in Saudi is producing. They have only Saudi's word for it. Which is worth about the same as a bucket of warm spit.

AlexS, 04/08/2016 at 9:32 pm
BTW,

The recent increase in Saudi Arabia's oil production was largely due to higher utilization of production capacity. The last large increase in capacity was in 2009, when Khurais field capacity was increased to 1.2 mb/d. The start of the Manifa field in 2013 and its ramp-up in 2014 largely offset declining production at the mature fields.

Saudi Arabia's oil production and capacity (mb/d)
source: IEA (capacity), JODI (production)

Dennis Coyne , 04/09/2016 at 11:01 am
Hi Ron,

I do not know the output of Ghawar, nor it's decline rate as we have no data. If the output is 3 Mb/d, it is less of a factor than if output was 5 Mb/d. Yes there are several fields that are grouped together and called Ghawar. All fields will decline eventually, the "might" is only about when those declines occur. The simple illustrative model is to show what happens when all fields don't start their decline at one moment in time. The 5 Mb/d was chosen simply because at one time "Ghawar" supposedly produced 5 Mb/d in 2009 (according to the Wikipedia article). What is your source for your 3 Mb/d estimate?

If we assume a 6.5% annual decline rate since 2009 we would be at 3.4 Mb/d in 2015. At some point Saudi Arabia as a whole will begin to decline, when this will happen I do not know. Just as in the US where there has been extensive infill drilling and secondary, tertiary recovery methods employed and decline rates have remained under a 3% annual rate, the same is likely to be true of other large producing nations with a combination of on shore and offshore projects.

A lower URR oil shock model (3000 Gb including 500 Gb oil sands) still has an annual decline rate under 2%/year.

George Kaplan, 04/09/2016 at 1:57 pm
Dennis,

Your analogy of the USA with Ghawar is not applicable. Aggregates of differently aged individuals do not behave like an oversized average of those individuals. A country does not represent a basin, a basin does not represent a field and a field does not represent an individual well.

The best analogy for Ghawar is probably Cantarell, they have both been developed with the best available secondary and tertiary recovery methods. Cantarell production dropped like a stone once those techniques were exhausted (about 15% per year in 2006 to 2008). My guess is Ghawar will go (or is going) even faster as the IOR/EOR techniques and software models available for its development are more advanced and it is onshore, making their application easier. Daqing might go the same way. Samotlor has been declining at around 5%.

Burgan is probably the best placed of the super giants as it has natural water drive and didn't use secondary recovery until 2010, and still not much, so there is a lot of potential to accelerate production and arrest the decline (at the expense of rapid decline later of course). Note however that wiki indicates 14% decline there, but with no citation so maybe just a guess.

Dennis Coyne , 04/09/2016 at 2:43 pm
Hi George,

I am comparing US with Saudi Arabia. I expect when Saudi Arabia begins to decline the annual rate of decline will be 3% per year or less.

Cantarell was pushed much harder than Ghawar, relative to reserves and is an exceptional case. In any case I do not know what will happen to the fields that make up Ghawar, I don't have any data so I will not speculate any further. World output will be determined by the output of all fields, Ghawar is important, but if Ron's estimate is correct, it is 4% of World output.

The 3000 Gb scenario above with 2500 Gb of C+C less oil sands (or extra heavy oil) and 500 Gb of extra heavy (XH) oil is based on Jean Laherrere's 2013 estimate of XH oil and a Hubbert Linearization of C+C-XH from 1993 to 2015 in chart below.

George Kaplan, 04/10/2016 at 1:00 pm
Dennis – you state "For simplicity we will assume Ghawar produces about 5 Mb/d and that it will decline at 3%/ year (similar to US before LTO production started from 1985-2004)", and then say "I am comparing US with Saudi Arabia. I expect when Saudi Arabia begins to decline the annual rate of decline will be 3% per year or less.". Which one is it, because they aren't both correct?

"Cantarell was pushed much harder than Ghawar" Please provide details of how you know this.

Dave P, 04/08/2016 at 1:04 pm
Thanks Techguy, that was an interesting post. I know this is probably an impossible question but how long do you think it will take to deplete the remaining oil column? If it is correct that it took 10 years to drop from 100 to 25 feet (assuming this is correct too) then that doesn't bode well for future production from Ghawar over the next decade.
Cracker, 04/08/2016 at 3:20 pm
Dave P

Much as I love Dennis' charts, I just don't see his 3% continuing very long, if Ghawar is indeed down to a thin layer of oil over water. There could just be a clunk as the field is shut down after a short period of steeper decline.

The next five years should tell a lot if the oil column is now that thin. 5 mbopd can't continue forever, nor can 3% decline in a permeable reservoir under water flood. When the water mostly reaches the top, the oil stained water becomes too expensive to separate out and production stops at greater than a 3% rate.

Jim

Dennis Coyne , 04/09/2016 at 11:08 am
Hi Cracker,

There will be fields that decline more than 3% and fields that will decline less, the average will roughly match the US decline (the most mature large oil producing nation) from 1986 to 2004 which was less than 3% per year.

Ghawar is several fields, Tech Guy's comments probably do not apply to all the fields of Ghawar.

People also seem to forget that new fields will continue to be developed and infill drilling and EOR will continue in many fields. These factors will reduce the rate of decline for overall World C+C output.

Toolpush, 04/08/2016 at 8:43 pm
Techguy,

Your point #5 intrigues me.

5. KSA is the primary driver into the turmoil in Syria. KSA is sitting on vast NatGas fields underneath their oil fields. However, producing NatGas from these fields would cause severe Oil production issues,

I assume you are referring to the Kluff nat gas field under lying the Ghawar oil field. I know the Kluff field was being produced, but not sure if it was near its potential or very restricted flow. I remember a discussion with some Exxon reservoir people, on the liquids being produced, and how to define them. Oil or condensate. The Saudis chose condensate as they were not counted in the export quotas at the time.

Are you saying that Kluff is in communication the Ghawar? If they were surely there would be pressure issues in the upper field.

I believe there is communication in the water table between Burgan and Safaniya, but that is a different issue.

It is hard to see where the production of an under lying gas field would affect an over lying oilfield, apart from a few drilling issues of under pressure thief zones, which can be dealt with by casing design, mud properties, and maybe even a little managed pressure drilling if required.

TechGuy, 04/10/2016 at 1:20 am
Toolpush asked:

"Are you saying that Kluff is in communication the Ghawar? If they were surely there would be pressure issues in the upper field."

I was just referred to what I read in Saudi Americo's tech articles. If I recall, correctly, several fields in KSA had NatGas reserves. The article(s) I recall reading referred to delaying production of NatGas to avoid impacting Oil production. I don't recall the exact details, and I don't believe that the article(s) mention which fields they are delaying NatGas Production. These Saudi Americo tech articles do not disclose which fields they are about.

Toolpush wrote:

"It is hard to see where the production of an under lying gas field would affect an over lying oilfield, apart from a few drilling issues of under pressure thief zones"

I would image drawing down the NatGas would alter the levels were the Oil is located. Since most of the Oil is now extracted via horizontal wells. I am speculating on how it impacts production. Perhaps there are more details in the articles than I recall. You can read them as the are publicly available on SA's website.

Toolpush, 04/10/2016 at 1:53 am
Techguy,

Thanks for the feedback. Do you have a link to where these reports are located?

As for gas communication. If the reservoir has a gas cap, then this gas cap can't be drawn down without effecting the pressure in the reservoir, and therefore oil production. The fact that most if not all the fields have water injection to maintain well bore pressure, we can assume pressure maintenance is at a premium.
Now if as you described and I know the Kluff field conforms to this line. The gas is in a separate trap, separated by it's own cap rock from the oil, then there can't be any communication. If there was, the gas would ride to the high oil reservoir, and as the gas in at a greater depth than the oil, is will also have a pressure. If this higher pressure was allowed to communicate with the upper reservoir, then the upper reservoir would become over pressured, and this over pressure would have been discovered in the exploration wells.

So I will be very interested to read their explanation to gas production being held back from under lying gas reserves, rather than any gas bubbles sitting on top of the oil currently being produced.

PS I think I found it

http://www.saudiaramco.com/en/home/news-media/publications/saudi-aramco-journal-of-technology.html

TechGuy, 04/10/2016 at 9:45 pm
Regarding ToolPush Question about NatGas reserves in Oil Fields:

Yes, you have the correct link. I don't recall which article had discuss delaying natGas production from their oil fields, I read through over a dozen their Tech Publications.

Toolpush, 04/11/2016 at 4:53 am
Thanks Techguy,

I have found where Kluff has been widely discussed, but not other gas fields, though I have only scratched the surface. I can see I have a lot of reading to do, but I know I will learn a lot by the time i am finished.

One little point I noticed. The unconventional gas they talk about, seems to be in carbonates! Yet to see any shale mentioned, but i will keep going. Closer to Austin Chalk than Eagle Ford.

[Apr 10, 2016] Possibility of Seneca cliff in oil production

Notable quotes:
"... I don't get Dennis' contention that only an outside event such as a world war can create a Seneca cliff. Of course, a definition of what comprises a Seneca cliff would be useful. Let's get away from that and just talk about what rate of decline in oil production would be sufficient to throw the world into a tizzy. I think something as low as 3% annually would be enough. After a few years at that rate we would be in a bad situation. Doesn't require a huge drop. ..."
"... I believe we have entered the end game. ..."
"... Geology – drillers need prospects and as more and more fields go dry they aren't going to drill them again. It took $100 oil to get Bakken going, I think it will take even more than that as sweet spots are tapped out. And once oil gets to that level, the economy will push demand back down. ..."
"... It's hard for me to imagine money flowing back into drilling the way it did in the past few years. Wall Street follows fads and the tight oil fad has run its course. There will still be money for selected investments, but the terms will be tougher, the scrutiny will be greater, and the opportunities fewer. ..."
"... Exactly. "Carpet drilling" can't return without return of "loan abundance" regime. And the latter is gone for good. The trend in production is not their friend anymore. As Arthur Berman said "EIA forecasts that [natural] gas prices will increase to $3.31 by the end of 2017 but that is overly conservative because it assumes an immediate and improbable return to production growth once the supply deficit and higher prices are established. " ..."
"... The same thinking is applicable to subprime oil. ..."
peakoilbarrel.com

Silicon Valley Observer, 04/08/2016 at 1:33 pm

How low can you go can you get?

Also, I don't get Dennis' contention that only an outside event such as a world war can create a Seneca cliff. Of course, a definition of what comprises a Seneca cliff would be useful. Let's get away from that and just talk about what rate of decline in oil production would be sufficient to throw the world into a tizzy. I think something as low as 3% annually would be enough. After a few years at that rate we would be in a bad situation. Doesn't require a huge drop.

And with rig counts declining as fast as they are, I could imagine such a drop. And furthermore, I don't see the rigs coming back as quickly as they are being dropped even if prices do recover to the $100 level.

I believe we have entered the end game.

Oldfarmermac , 04/08/2016 at 2:23 pm
I can't see any compelling that drilling wouldn't pick up quickly again if oil went back to a hundred bucks and supplies got chancy with inventories declining fast.

The biggest two problems would be the hands on guys retiring, but enough money will entice them to work again, if not actually pulling levers and turning wrenches, then standing over trainees, one on one if necessary. The other thing would be the money. In a real pinch, governments will provide emergency financing or loan guarantees to drillers and steam roller some environmental regs.

But I do think peak oil is either here now, or will be here within the next two or three years.

It might take a while for exploratory drilling to pick up again, I am thinking about new wells in producing fields and fields already explored but not yet well developed.

Silicon Valley Observer , 04/08/2016 at 2:34 pm
Drilling will increase at higher prices, no argument there. But I don't see rig counts going up as fast as they are now coming down. Two reasons:

1. Geology – drillers need prospects and as more and more fields go dry they aren't going to drill them again. It took $100 oil to get Bakken going, I think it will take even more than that as sweet spots are tapped out. And once oil gets to that level, the economy will push demand back down.

2. Finances – It's hard for me to imagine money flowing back into drilling the way it did in the past few years. Wall Street follows fads and the tight oil fad has run its course. There will still be money for selected investments, but the terms will be tougher, the scrutiny will be greater, and the opportunities fewer.

likbez , 04/08/2016 at 9:22 pm
Silicon Valley Observer,

There will still be money for selected investments, but the terms will be tougher, the scrutiny will be greater, and the opportunities fewer.

Exactly. "Carpet drilling" can't return without return of "loan abundance" regime. And the latter is gone for good. The trend in production is not their friend anymore. As Arthur Berman said "EIA forecasts that [natural] gas prices will increase to $3.31 by the end of 2017 but that is overly conservative because it assumes an immediate and improbable return to production growth once the supply deficit and higher prices are established. "

The same thinking is applicable to subprime oil.

[Apr 10, 2016] Saudi Oil Gambit Moves to Phase Two

Bloomberg

There are too few new projects being sanctioned by non-state oil companies to offset the inevitable decline in output from existing fields and to meet additional demand. This is expected to increase by 1.2 million barrels a day each year for the rest of the decade. New fields due to start producing this year and next are the result of investment decisions taken when oil was about $100 and expected to stay there.

The collapse in company spending is illustrated perfectly by the level of drilling activity. After all, if you don't drill, you can't get the oil out of the ground.

Baker Hughes updated its monthly international drilling statistics last week. Unsurprisingly, they showed another steep drop in rigs drilling for oil, a 12 percent decline between February and March. There were 1,551 rigs active last month in the countries covered by Baker Hughes, the least since September 1999 and down nearly 60 percent in little more than a year.

[Apr 09, 2016] Looks like China is importing a lot of oil

Notable quotes:
"... Looks like China is importing a lot of oil as there is also a traffic jam in Qingdao, China. ..."
"... A surge in oil buying by China's newest crude importers has created delays of up to a month for vessels to offload cargoes at Qingdao port, imposing costly fees and complicating efforts to sell to the world's hottest new buyers. ..."
"... China's independent refiners, freed of government constraints after securing permission to import just last year, have gorged on plentiful low-cost crude in 2016. This has created delays for tankers that have quadrupled to between 20 to 30 days at Qingdao port in Shandong province, the key import hub for the plants, known as teapots, according to port agents and ship-tracking data. ..."
peakoilbarrel.com
daniel , 04/07/2016 at 12:53 pm
Am i just too dumb or does this article make no sense at all? http://oilprice.com/Energy/Crude-Oil/Shocking-Photo-Nearly-30-Oil-Tankers-in-Traffic-Jam-Off-Iraqi-Coast.html

If everybody is overproducing why tie up your tankers like this. I could understand this jam in an offloadingpoint, but not at a loading point

aws. , 04/07/2016 at 9:09 pm
Contango
Heinrich Leopold , 04/08/2016 at 4:39 am
Daniel,

Looks like China is importing a lot of oil as there is also a traffic jam in Qingdao, China.

http://oilpro.com/links/detail/30965/photo-nearly-30-oil-tankers-traffic-jam-off-iraqi-coast

This is very good news for the Chinese and World economy.

Daniel , 04/08/2016 at 6:34 am
Indeed good news and a tanker jam which I can understand :-)
AlexS , 04/08/2016 at 8:30 am
China has recently allowed imports of crude oil by small independent "teapot" refineries. So tanker jams do not necessarily mean an increase in final demand.

From Reuters:

China teapot refiner oil buying spree creates tanker jam at Qingdao

Thu Apr 7, 2016
http://www.reuters.com/article/us-china-oil-tanker-traffic-idUSKCN0X419L

A surge in oil buying by China's newest crude importers has created delays of up to a month for vessels to offload cargoes at Qingdao port, imposing costly fees and complicating efforts to sell to the world's hottest new buyers.

China's independent refiners, freed of government constraints after securing permission to import just last year, have gorged on plentiful low-cost crude in 2016. This has created delays for tankers that have quadrupled to between 20 to 30 days at Qingdao port in Shandong province, the key import hub for the plants, known as teapots, according to port agents and ship-tracking data.

[Apr 08, 2016] Secular stagnation The long view

This is weak. The energy factor is completely missing from the discussion. Also the crisis of neoliberalism due to redistribution of wealth up, which suppress the growth is never mentioned. But what you can expect from a such a stalwart neoliberal publication as Economist.
Notable quotes:
"... the record of industrial countries over the last 15 years is profoundly discouraging as to the prospect of maintaining substantial growth with financial stability ..."
"... Why have so many bubbles built up recently? One key factor seems to be the decline in the level of real interest rates (this is the focus of the Summers essay); lower real rates have encouraged investment in financial assets for all sorts of reasons. ..."
www.economist.com

here has been much talk in recent months of "secular stagnation" after the former Treasury secretary Larry Summers made a speech on the issue in February. As you can see the problem for the developed world has not arisen overnight. The chart shows the rolling 10-year growth rate for leading economies in both real and nominal terms. This smooths out the effect of the economic cycle. Either way, the trend is clear; nominal GDP growth has slowed below 4% a year, real GDP growth below 2% (in Italy, it is negative).

There are many potential explanations for this shift, but the most plausible relates to demography. Growth was rapid in the aftermath of the Second World War, as Europe was reconstructed, and some of the benefits of pre-war technological change filtered through to the economy; then from the mid-1960s onwards, the baby boomers joined the workforce. But the birth rate fell and the baby boomers are retiring. Below are the numbers from the OECD for the old age support ratio, the number of workers aged 20-64 relative to those aged over 65. 

                                          1950             1980           2010        2050 (projected)
   US                                     6.97              5.04          4.59         2.53 
   UK                                     5.58              3.74          3.59         2.14 
   Germany                                6.26              3.68          2.91         1.54 
   France                                 5.13              3.96          3.50         2.04 
   Italy                                  6.99              4.21          3.00         1.46 
   Japan                                  9.98              6.67          2.57         1.27

As you can see, things are going to get a lot worse, rather than better. Why is old age dependency a problem? After all, a lower birth rate means there are fewer dependent children. Yes, but the cost to society of old people is greater, once you factor in pensions, healthcare, nursing home care and increased longevity (a 65 year old can expect to live for 20 years or more).

Crucially, the workforce is no longer growing; indeed it is expected to shrink in Italy, Germany and Japan. The EU is set to lose 40m workers over the next 40 years; without immigration, that would be a 96m decline.

Economic growth consists of having more workers and making them work more efficiently (productivity). Even if one is not as pessimistic as Robert Gordon about technological change, one can see that productivity will have to work very hard indeed to offset demography.

What about the other factors? Larry Summers noted that those periods which tended to have rapid economic growth were also marked by the build-up of debt and asset bubbles, or as he put it

the record of industrial countries over the last 15 years is profoundly discouraging as to the prospect of maintaining substantial growth with financial stability

Sometimes bubbles can have positive economic impacts; the railways and canals were built in a flurry of speculation in the 19th century. Many investors lost money but the economy gained from the increased capacity and lower transport costs. The economic benefits of property booms are not as great, especially if the effect is to create derelict apartments and houses (eg Ireland and Spain).

Why have so many bubbles built up recently? One key factor seems to be the decline in the level of real interest rates (this is the focus of the Summers essay); lower real rates have encouraged investment in financial assets for all sorts of reasons.*

Summers argues that a number of factors have pushed down real rates: companies have reduced demand for debt, in part because the new breed of tech companies has less need for capital investment; slower population growth is associated with lower real rates; wider inequality means more income in the hands of the rich, who save more than the poor and central banks have also accumulated vast reserves (a greater supply of savings means a lower real rate, other things being equal).

... .... ...

[Apr 03, 2016] Norwegian oil fields average annual decline rate is about 11 percent

Notable quotes:
"... Thanks for the analysis and forecast of Norwegian crude oil production. Figure 01 shows that combined output of the currently producing fields will drop from 1.57mb/d in 2015 to around 250 kb/d in 2030. That implies an average annual decline rate of 11.5%. ..."
"... Looking at the total production from fields started as of 2004 and 2012 these had a year over year decline of more than 15% from 2014 to 2015. ..."
"... This illustrates how many smaller fields with short plateaus and steep declines influences the total decline rate and until Johan Sverdrup starts to flow, these smaller fields' portion of total extraction will grow. ..."
"... The low oil price recently caused the Vette development to be scrapped. All things equal this makes for a steeper decline in total extraction than what is now reflected in my forecast. ..."
"... I am [and have for some years been] firmly in the camp that think it will take a loooooong time before we again see a sustained $100+/b [$2016], even as the present supply overhang from whatever reasons comes to an end. ..."
peakoilbarrel.com

AlexS , 03/31/2016 at 6:29 pm

Rune,

Thanks for the analysis and forecast of Norwegian crude oil production. Figure 01 shows that combined output of the currently producing fields will drop from 1.57mb/d in 2015 to around 250 kb/d in 2030. That implies an average annual decline rate of 11.5%.

Decline for the fields that were producing in 2001 during the period to 2013 was about 9% per year. Is this projected acceleration due to the rising share of the small deepwater fields with higher decline rates? What are combined decline rates for the old mature fields?

What are your oil price assumptions? Do you think that potential sharp increase in oil prices after 2020 may slow production decline, like in 2014-15?

Rune Likvern , 03/31/2016 at 11:46 pm
AlexS, thanks.

For several of the mature fields that still contributes meaningfully, the developments of discoveries within their business areas (like Gullfaks, Oseberg) and infill drilling [made commercial/profitable from a higher oil price] makes it now difficult to pull out/estimate their [call it "underlying"] decline rates [from data in the public domain] post these developments.
The reserves added from these developments and infill drilling are reported within the business areas [reserve growth].

For all fields started before 2002;
From 2012 to 2013 the decline slowed to 2 %/a.
From 2013 to 2014 extraction grew about 3%/a.
From 2014 to 2015 extraction grew about 2%/a.
Several of the decisions that led to this reversal was made while the oil price was high and thus funding available.

Looking at the total production from fields started as of 2004 and 2012 these had a year over year decline of more than 15% from 2014 to 2015. (Grane [reserves 900+Mb] started in 2003 and saw a slowdown in its decline in 2015.) This illustrates how many smaller fields with short plateaus and steep declines influences the total decline rate and until Johan Sverdrup starts to flow, these smaller fields' portion of total extraction will grow.

As alluded to in the text I have not made any oil price assumptions for the forecast [which is based on sanctioned developments]. Presently, several fields are planned plugged and abandoned (P&A) as the lasting, low oil price has shortened their economic life. Plans now call for Jette, Varg, Volve to be P&A later this year.
More will follow according to various sources.

The low oil price recently caused the Vette development to be scrapped. All things equal this makes for a steeper decline in total extraction than what is now reflected in my forecast.

I am [and have for some years been] firmly in the camp that think it will take a loooooong time before we again see a sustained $100+/b [$2016], even as the present supply overhang from whatever reasons comes to an end.

[Apr 02, 2016] Unemployment Rate Edges Higher as Prime-Age Workers Reenter Labor Market

Notable quotes:
"... Self-employment has risen substantially since the ACA took effect. ..."
"... One of the desired outcomes from the ACA was that it would free people from dependence on their employer for health care insurance, allowing them to work part-time or start a business if they so choose and get insurance through the exchanges. ..."
"... Yes labor force participation has increased but it still is only 63%. Yes the employment to population ratio is now 59.9% but it should be 62%. Slow progress with a long way to go. ..."
"... But the negatives, especially among the series that lead, are beginning to outweigh the positives. Revisions were mixed. The manufacturing workweek declined, and manufacturing jobs are now down YoY. Although temporary jobs rose this month, they have failed to top their December peak for the last 3 months. Short term unemployment has continued to rise slightly. A coincident indicator, aggregate hours, also failed to exceed its January high. ..."
April 01, 2016 | Economist's View
Dean Baker:
Unemployment Rate Edges Higher as Prime-Age Workers Re-enter Labor Market : Self-employment has risen substantially since the ACA took effect.

The economy added 215,000 jobs in March, with the unemployment rate rounding up to 5.0 percent from February's 4.9 percent. However, the modest increase in unemployment was largely good news, since it was the result of another 396,000 people entering the labor force. There has been a large increase in the labor force over the last six months, especially among prime-age workers. Since September, the labor force participation rate for prime-age workers has increased by 0.8 percentage points. This seems to support the view that the people who left the labor market during the downturn will come back if they see jobs available. However, even with this recent rise, the employment-to-population ratio for prime-age workers is still down by more than two full percentage points from its pre-recession peak. Another positive item in the household survey was a large jump in the percentage of unemployment due to voluntary quits. This sign of confidence in the labor market rose to 10.5 percent, the highest level in the recovery to date, although it's still more than a percentage point below the pre-recession peaks and almost five percentage points below the peak reached in 2000.

Other items in the household survey were mixed. The number of people involuntarily working part-time rose by 135,000, reversing several months of declines. However, involuntary part-time work is still down by 550,000 from year-ago levels. The number of people voluntarily working part-time fell in March, but it is still 654,000 above its year-ago level.

One of the desired outcomes from the ACA was that it would free people from dependence on their employer for health care insurance, allowing them to work part-time or start a business if they so choose and get insurance through the exchanges. There has been a substantial rise in self-employment since the exchanges began operating in 2014. In the first quarter of 2016, incorporated self-employment was up by more than 400,000 (7.8 percent) from the same quarter of 2013. Unincorporated self-employment was also up by almost 360,000 (3.9 percent).

While the employment growth in the establishment survey was in line with expectations, average weekly hours remained at 34.4, down from 34.6 in January. This indicates that February's drop in hours was not just a result of bad weather. As a result, the index of aggregate hours worked is down by 0.2 percent from the January level. This could be a sign of slower job growth in future months. ...

The average hourly wage rose modestly in March after a reported decline in February. There is zero evidence of any acceleration in wage growth. The average for the last three months increased at an annualized rate of 2.3 percent compared with the average of the prior three months. This is virtually identical to the increase over the last year.

On the whole this is a positive report, both because the economy continues to create jobs at a healthy pace and even more importantly because it indicates that people are returning to the labor market. The continuing weakness in wage growth is discouraging, but also should signal to the Fed that there is little reason to raise interest rates.

PPaine :

The job markets are coming alive

But is the punch bowl headed for the kitchen sink ?


We need to set much higher target ratios for E to P

We need 15 million more jobs in short order
To get near vickrey zone conditions on job markets


Obviously we won't go there
But just how far will we go
Before the bastards turkey wire the system ?

PPaine -> PPaine ...
We need the quit rate to go up another 30% at least
PPaine -> PPaine ...
I mean on top of the 50% rise to match the high water mark of the Clinton miracle
anne -> PPaine ...
https://research.stlouisfed.org/fred2/graph/?g=3Ppz

January 30, 2016

Total nonfarm quits, 2000-2016

[ The quits rate only needs to climb 15% to get back to the Clinton level. ]

anne -> PPaine ...
Never ever explain what "Vickrey zone conditions" are, as long as there is no concern with being understood.
RC AKA Darryl, Ron -> anne...
[Google William Vickrey. Highlights of Wikipedia:]

...Vickrey's economic philosophy was influenced by John Maynard Keynes and Henry George. He was sharply critical of the Chicago school of economics and was vocal in opposing the political focus on achieving balanced budgets and fighting inflation, especially in times of high unemployment...
Selected works[edit]

"Counterspeculation, Auctions, and Competitive Sealed Tenders", Journal of Finance, 1961. The paper originated auction theory, a subfield of game theory.
"Fifteen Fatal Fallacies of Financial Fundamentalism: A Disquisition on Demand Side Economics". October 5, 1996.

Arrow, Kenneth Joseph; Arnott, Richard J.; Atkinson, Anthony A.; Drčze, Jacques (editors) (1997). Public Economics: Selected Papers by William Vickrey. Cambridge, UK: Cambridge University Press. ISBN 0-521-59763-3.

Warner, Aaron W.; Forstater, Mathew; Rosen, Sumner M. (editors) (2000). Commitment to Full Employment: The Economics and Social Policy of William S. Vickrey. Armonk, N.Y: M.E. Sharpe. ISBN 0-7656-0633-X.

Pavlina R. Tcherneva; Forstater, Mathew (2004). Full Employment and Price Stability: The Macroeconomic Vision of William S. Vickrey. Edward Elgar Publishing. ISBN 1-84376-409-1.

[Paine repeatedly references William Vickrey because of his substantial commitment to full employment policy as sound economics (as if human well being for the masses actually mattered).]

RC AKA Darryl, Ron -> RC AKA Darryl, Ron...
And Anne repeatedly asks "What does this reference to Vickrey mean?" Maybe Anne's battery is almost dead and working memory gets reset each time the solar generator powers down. The programming still functions because it is stored in non-volatile memory on the hard drive, but volatile RAM is wiped each time that the sunsets after the battery storage is exhausted.
anne -> PPaine ...
We need 15 million more jobs in short order. To get near Vickrey zone conditions on job markets

[ Where did the 15 million number come from, and I still have no idea what Vickrey zone conditions are? ]

pgl :
Yes labor force participation has increased but it still is only 63%. Yes the employment to population ratio is now 59.9% but it should be 62%. Slow progress with a long way to go.
pgl -> pgl...
I may be setting the bar too low with my call for a 62% employment to population ratio. Brad DeLong puts it north of 62.5%:

http://www.bradford-delong.com/2016/04/must-read-the-federal-reserve-is-looking-at-the-past-six-months-and-seeing-significant-improvement-in-the-labor-market.html

New Deal democrat :
But the negatives, especially among the series that lead, are beginning to outweigh the positives. Revisions were mixed. The manufacturing workweek declined, and manufacturing jobs are now down YoY. Although temporary jobs rose this month, they have failed to top their December peak for the last 3 months. Short term unemployment has continued to rise slightly. A coincident indicator, aggregate hours, also failed to exceed its January high.

So while we can cheer yet another month of jobs added to the economy, and the jump in participation, this report just adds to my concern about next year.

pgl -> New Deal democrat...
I won't cheer until the employment to population ratio reaches 62% and real wages actually rise on a consistent basis.
sanjait -> New Deal democrat...
Don't look at peaks in monthly data, look at rolling average trends.

Also, while manufacturing specific data can be meaningful ... these days the dynamics in those data are largely dominated by swings in O&G, which is in a historic funk.

sanjait :
In general, the trends look good. The working age E/P number is, to me, the most meaningful single indicator we have, and it appears to be continuing to rise and at an accelerating rate. That's a very good sign. It's very arguable that things could and should be improving at a faster rate, but when this stat is rising things are indeed improving.

Baker's note about ACA and self-employment is also an important one. One important aspect of ACA is that it is GREAT for entrepreneurship. People are more free to leave jobs and start companies when their ability to get health insurance isn't predicated on their working for a large company with a group plan.

The GOP makes a lot of noise about how ACA supposedly kills jobs and stifles industry, but the reality is that tomorrow's tech leaders, and major employers, are getting a boost today from ACA.

Ben Groves :
It is not sustainable and will reverse in April imo. Driving unemployment down.

[Apr 02, 2016] Where are new oil deposits even at 120 dollars per barrel

Notable quotes:
"... The last few years have shown declining oil discoveries since 2010. What has been found is more often than not deep water and relatively small. Such fields generally have short plateaus and steep decline rates (not much better of those seen in LTO for fields less than about 150 million barrels). The larger basins found offshore have been in the 5 to 10 mmboe range rather than around 50 found in the earlier days. ..."
"... There has been a noticeable reduction in development times for projects in GoM and North Sea in recent years from around 7 years down to as low as 3. That to me indicates a dearth of good, large projects to choose from. ..."
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George Kaplan , 03/31/2016 at 2:08 pm

In terms of a C&C peak pushed out for 10 years my question would be "Where's the oil?" even at $120 per barrel.

Apologies that the following is too long, with no charts for many (or any) to read all the way but some parts may be of interest.

The last few years have shown declining oil discoveries since 2010. What has been found is more often than not deep water and relatively small. Such fields generally have short plateaus and steep decline rates (not much better of those seen in LTO for fields less than about 150 million barrels). The larger basins found offshore have been in the 5 to 10 mmboe range rather than around 50 found in the earlier days.

I don't have access to IHS or Rystad databases but picking amongst recent press releases I'd say 2013 was about eight billion, 2014 nine or so and 2015 four or five. This year maybe only three discoveries with a significant amount of oil – Kuwait might be significant. More gas than oil is being found

http://www.oilandgasinternational.com/directories/exploration_discoveries.aspx

There has been a noticeable reduction in development times for projects in GoM and North Sea in recent years from around 7 years down to as low as 3. That to me indicates a dearth of good, large projects to choose from.

Of some of the main producers:

https://www.eia.gov/beta/international/analysis.cfm?iso=CHN

http://fractionalflow.com/2016/03/29/norwegian-crude-oil-reserves-and-extraction-per-2015/

http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/northsea-ep-decline-coming-to-an-end

http://www.OilVoice.com/n/United-Kingdom-increases-oil-production-in-2015-but-new-field-development-declines/39dbcb23d382.aspx

http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/breakeven-ncs-new-fields

The seven largest oil majors have shown declining reserves of 1 and then 2 billion barrel equivalent over the last two years – this may be purely price related, but I'm not so sure especially with BP, Shell and Chevron looking to sell assets, also I don't have the figures but I'd guess that they have lost more in oil reserves as some of their big finds have been for gas.

To ramp up of production is going to be dependent on a work force which was aging and retiring in 2014 and now has been decimated by layoffs and recruitment cut backs. Increasing prominence of environmental issues may hinder both future recruitment efforts and the pace at which projects can be developed. Significant new oil, including reserve growth, has to come from deep water – those rigs are complicated and very expensive to run, a lot are currently being stacked.

Ramp up also needs the main stakeholders to regain their acceptance of financial risk, which is currently as low as I can remember, and significantly higher sustained prices. The other side to the equation for prices is demand. The world economy doesn't look great to me, we're due a recession based on approximate 8 year cycles, TPTB have chucked everything but the kitchen sink at it and industrial output is definitely in decline or growing only slowly (I don't know how energy use is split for service versus manufacturing but I'd guess it's of smaller relative importance in the service sector). A relatively small oil price increase might be enough to kick a recession off properly.

Dennis Coyne , 03/31/2016 at 7:07 pm
Hi George,

Hubbert Linearization of C+C less oil sands suggests about 2500 Gb for a URR, in the past this method has tended to underestimate the URR, we have produced about half of this so far. There is also about 600 Gb of URR in the oil sands of Canada and Venezuela. The USGS estimates TRR of C+C less oil sands at about 3100 Gb, I use the average of the HL estimate and USGS estimate with a URR of 2800 for C+C less oil sands and oil sands URR of 600 Gb. Total C+C URR is 3400 Gb in my medium scenario. If extraction rates continue to grow at the rate of the past 6 years and then level off we get the scenario below.
Model based on Webhubbletelescope's Oil Shock Model.

See http://peakoilbarrel.com/oil-shock-models-with-different-ultimately-recoverable-resources-of-crude-plus-condensate-3100-gb-to-3700-gb/

[Mar 30, 2016] Investors see shale production falling and demand continuing to rise

The collapse in oil prices has demolished investment in new projects, the results of which will be felt in the 2018 to 2021 timeframe, due to multiyear lead times
www.yahoo.com
Oil prices have hovered at $40 per barrel for much of the last week, as the markets try to avoid falling back after the strong rally since February.

Investors see shale production falling and demand continuing to rise, which point to the ongoing oil market balancing.

But it is unclear at this point if the rally from $27 per barrel in February to today's price just below $40 per barrel is here to stay. Fundamentals, while trending in the right direction, are still weak.

[Mar 30, 2016] India consumed 4.2 million barrels per day in 2016, overtaking Japan as the world's third largest oil consumer

www.bloomberg.com

India consumed 4.2 million barrels per day (mb/d) in 2016, overtaking Japan as the world's third largest oil consumer. The Indian government is hoping to incentivize domestic oil production to help meet rising demand.

[Mar 20, 2016] Some forecast just dont pan out as expected.

peakoilbarrel.com

Ron Patterson , 03/20/2016 at 7:49 am

Some forecast just don't pan out as expected. The Unexpected Threat To Our Economic Growth System

photo IMF Forecast_zps0jdul34w.jpg

marmico , 03/20/2016 at 8:32 am
Some forecast just don't pan out as expected

Pot.Kettle.Black

[Mar 14, 2016] Theres Only One Buyer Keeping S P 500s Bull Market Alive

Resurgence of voodoo science is typical during crisis periods. "Deficits does not matter" voodoo does not work in a world were there are strong economic competitors to the USA and where euro and Yuan exists. The idea of deficit spending which Michelle Jamrisko discusses actually came from Keynesian economics, not from MMT.
Notable quotes:
"... Bridgewater's Ray Dalio, head of the world's biggest hedge fund, and Janus Capital's Bill Gross say policy makers are cornered and will have to resort to bigger deficits. ..."
"... "I have no problem with deficit spending," said Aneta Markowska, chief U.S. economist at Societe Generale in New York. "But this idea of the government printing money -- unlimited amounts of money -- and running unlimited, infinite deficits, that could become unhinged pretty quickly." ..."
"... Many more agree that it's precisely when households are cutting back that governments should do the opposite, to prevent a slump in demand. ..."
"... Most economists don't expect an imminent U.S. recession. But financial-market turmoil and America's political upheaval have added to a sense that nobody has figured out a cure for the economy's malaise. ..."
March 13, 2016 | Bloomberg Business

In an American election season that's turned into a bonfire of the orthodoxies, one taboo survives pretty much intact: Budget deficits are dangerous. A school of dissident economists wants to toss that one onto the flames, too.

It's a propitious time to make the case, and not just in the U.S. Whether it's negative interest rates, or

Calls for governments to take over the relief effort are growing louder. Plenty of economists have joined in, and so have top money managers. Bridgewater's Ray Dalio, head of the world's biggest hedge fund, and Janus Capital's Bill Gross say policy makers are cornered and will have to resort to bigger deficits.

"There's an acknowledgment, even in the investor community, that monetary policy is kind of running out of ammo," said Thomas Costerg, economist at Standard Chartered Bank in New York. "The focus is now shifting to fiscal policy."

Currency Monopoly

That's where it should have been all along, according to Modern Money Theory. The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency.

Such countries, the MMTers argue, face no risk of fiscal crisis. They may owe debts in, say, dollars or yen -- but they're also the monopoly creators of dollars or yen, so can always meet their obligations. For the same reason, they don't need to finance spending by collecting taxes, or even selling bonds.

The long-run implication of that approach has many economists worried.

"I have no problem with deficit spending," said Aneta Markowska, chief U.S. economist at Societe Generale in New York. "But this idea of the government printing money -- unlimited amounts of money -- and running unlimited, infinite deficits, that could become unhinged pretty quickly."

To which MMT replies: No one's saying there are no limits. Real resources can be a constraint -- how much labor is available to build that road? Taxes are an essential tool, to ensure demand for the currency and cool the economy if it overheats. But the MMTers argue there's plenty of room to spend without triggering inflation.

The U.S. did dramatically loosen the purse strings after the 2008 crisis, posting a deficit of more than 10 percent of gross domestic product the next year. That's since been trimmed to 2.6 percent of GDP, or $439 billion, last year.

... ... ...

Tighten Belts?

Those who push back sometimes argue that money-printing puts countries on a path that eventually leads, in a worst-case scenario, to Zimbabwe -- where money-printing debased the currency so badly that all the zeros could barely fit on banknotes. Or Venezuela, whose spending spree helped push inflation to 180 percent last year. Japan's a more mixed picture: years of deficits haven't scared off borrowers or unleashed inflation, but haven't produced much growth, either.

There's also a peculiarly American enthusiasm for balanced budgets, according to Jim Savage, a political science professor at the University of Virginia. He's traced it to the earliest days of the U.S., rooted in a "longstanding fear of centralized political power, going back to England."

Wray says there are episodes in American history when a different understanding prevailed. During World War II, he says, U.S. authorities learned a lesson that's since been forgotten -- that "we've always got unemployed resources, including labor, and so we can put them to work."

Savage says Americans have historically tended to conflate household and government debts. That category error is alive and well.

"Small businesses and families are tightening their belts," President Barack Obama said in 2010 as he announced a pay freeze for government workers. "Their government should, too."

It's not just MMT economists who winced at the comment. Many more agree that it's precisely when households are cutting back that governments should do the opposite, to prevent a slump in demand.

That argument doesn't carry much sway in Congress, though. That's one reason the Fed has had to shoulder so much of the burden of keeping the recovery alive, Societe Generale's Markowska says.

"When it comes to deciding on monetary easing, it's a handful of people in the room," she said. "It's going to take more pain to build that political consensus around the fiscal stimulus."

Wray says he'd expected attitudes to start shifting after the last downturn, just as the Great Depression gave rise to Keynesian economics and the New Deal, but "it really didn't change anything, as far as the policy makers go."

"I think it did change things as far as the population goes," he said, citing the anti-establishment campaigns of Sanders and Republican Donald Trump. It might take another crash to change minds, Wray says.

'Strange Period'

Most economists don't expect an imminent U.S. recession. But financial-market turmoil and America's political upheaval have added to a sense that nobody has figured out a cure for the economy's malaise.

Bill Hoagland, a Republican who's senior vice president of the Bipartisan Policy Center, has helped shape U.S. fiscal policy over four decades at the Congressional Budget Office and Senate Budget Committee.

He says a farm upbringing in Indiana helped him understand why "it's engrained in a number of Americans outside the Beltway that you equate your expenditures with your revenue." He also acknowledges that government deficits are different, and could be larger now to support demand, so long as there's balance in the longer term.

Most of all, Hoagland says he sees profound change under way. The "catastrophic event" of the 2008 crash may be reshaping American politics in a way that's only happened a handful of times before. And economic orthodoxy has taken a hit too.

"We're going through a very strange period where all economic theories are being tested," he said.

[Mar 03, 2016] Barriers to Productivity Growth

economistsview.typepad.com
Chris Dillow:
Barriers to productivity growth : "The limits to productivity growth are set only by the limits to human inventiveness" says John Kay. This understates the problem. There are other limits. I'd mention two which I think are under-rated.
One is competition. Of course, this tends to increase productivity in many ways. But it has a downside. The fear of competition from future new technologies can inhibit investment today: no firm will spend Ł10m on robots if they fear a rival will buy better ones for Ł5m soon afterwards. ...
The second is that, as Brynjolfsson and MacAfee say , "significant organizational innovation is required to capture the full benefit of…technologies."
For example, Paul David has described (pdf) how the introduction of electricity into American factories did not immediately raise productivity much, simply because it merely replaced steam engines. It was only when bosses realized that electric motors allowed factories to be reorganized – dispensing with the need for machines to be close to a central power source – that productivity soared, as workflow improved and new cheaper buildings could be used. This took many years.
It's not just organizational change that's needed, though..., I suspect that if IT is to have (further?) productivity-enhancing effects, they require socio-organizational change. ...
However, there are always obstacles to the social and organizational change necessary for technical change to lead to productivity gains. These might be cognitive – such as the Frankenstein syndrome or "not invented here " mentality. Or they can be material. Socio-technical change is a process of creative destruction, the losers from which kick up a stink; think of taxi-drivers protesting against Uber.
Worse still, these losers aren't always politically weak Ludditites. They can be well-connected bosses of incumbent firms, or managers seeking to maintain their power base. ...
The big question facing us is, therefore: do we have the right set of institutions to foster the socio-organizational change that beget productivity growth? These require a mix of healthy markets, to maximize ecological diversity; a financial system which backs risky new-comers; property rights which incentivise innovation; and state intervention that facilitates all these whilst not being captured by Luddites. If our politics weren't so imbecilic, this question would be getting a lot more attention than it is.

Related: How concerned should we be about business investment and productivity growth? - Nick Bunker .

Posted by Mark Thoma on Thursday, March 3, 2016 at 10:51 AM in Economics , Productivity | Permalink Comments (97)

[Mar 02, 2016] Four Common-Sense Ideas for Economic Growth

economistsview.typepad.com
Larry Summers:
Four common-sense ideas for economic growth : Let me begin with two facts that I think should be cause for concern. First, since the summer of 2009, the US economy has grown at about 2 percent. Two percent isn't a very good growth rate. Second, the 10-year interest rate at the end of trading today ... was just a bit below 1.8 percent. ...

What's the way to think about these two facts together? I believe that we are dealing with a situation that goes beyond the usual cyclical issues associated with recession-and for many years the policy debate has been confounded by that. The Fed has been substantially too optimistic in its one-year-ahead forecast every year for the last six, and its forecasts are pretty close to the consensus forecasts. The prevailing expectation in markets has always been that significant tightening will take place in nine months. That's been true for the last six years. It has not happened yet.

If you accept all of this, what should be done? I would suggest four things at a minimum. First, there is an overwhelming case in the United States for expanded public infrastructure investment. ... It's hard to imagine a better time for expanded infrastructure investment, yet the rate of infrastructure investment is lower now than it's been anytime since 1947. ...

Second, we should increase support for private investment in infrastructure. ...

Third, we should grow our effective labor force. ...

Fourth, our financial system requires continuing attention. ...

I would say to you that whatever you care about, if all you care about is that we've got an excessive federal debt, the most important determinant of the debt-to-GDP ratio in 2030 is how rapidly the economy grows between now and then. If what you care about is American national security, the most important determinant of how much we are respected and how much influence we have in the world is how well our economy performs. If what you care about is inequality and poverty, the most important determinant of the employment prospects of the poor is how rapidly the economy is growing.

I would suggest to you that there is no more important question for the American prospect than accelerating the rate of economic growth. It seems to me, whether you're a demand sider or a supply sider, a Democrat or a Republican, there's a great deal of common sense that should lead you to support increased economic growth.

[There is quite a bit of discussion of each point in the full post.]

Posted by Mark Thoma on Wednesday, March 2, 2016 at 09:57 AM in Economics , Fiscal Policy , Monetary Policy | Permalink Comments (68)

[Feb 29, 2016] Based on old data of 2007 we use close to half of oil for passenger travel, and only 2 percent of oil for farm use

Notable quotes:
"... In the USA we use crude for various purposes. Based on old data of 2007 we use close to half for passenger travel, and only 2% for on farm use, for example. Probably hasn't changed much. How much of the passenger travel is important to GDP, or is "productive" vs "frivolous"? ..."
"... An even better question is how much of GDP itself is "productive" or "frivolous"? ..."
"... Households spent $306 billion on gasoline in 2015 which is ~1.7% of ~$18 trillion of GDP. If 2016 gasoline prices average $1.98 per gallon (EIA February STEO report), household spending on gasoline relative to total household spending will be the lowest in the 69 year history of the data set. ..."
"... Gasoline on its own it is pretty much useless unless you want just to start camp fire for marshmallows. If you want to include the true cost of using gasoline in the household you have to include the cost of vehicles that have never been higher in the history, you have to include the cost of insurance that is also marching higher every year. And let's not even go into ever increasing cost of building and maintaining each mile of highway network. So you have to look at built in price inflation in today's monetary system to realize the true costs. And anyway example that you provide for 2016 that "gasoline relative to total household spending will be the lowest in the 69 year history" is anomaly. Do you understand why it is anomaly? It is anomaly because at that price nobody in oil industry makes any profit. So you won't have this anomaly for very long. ..."
peakoilbarrel.com
Hickory, 02/28/2016 at 11:47 am
In the USA we use crude for various purposes. Based on old data of 2007 we use close to half for passenger travel, and only 2% for on farm use, for example. Probably hasn't changed much. How much of the passenger travel is important to GDP, or is "productive" vs "frivolous"?

Here is the source article for this analysis

https://grist.files.wordpress.com/2010/06/newoilage.pdf

and an article which provides the data in pie chart form-
http://grist.org/article/how-we-can-end-our-addiction-to-oil/

Patrick R , 02/28/2016 at 8:16 pm
Thanks hickory, nice work.
likbez, 02/29/2016 at 12:07 am
Hickory,

An even better question is how much of GDP itself is "productive" or "frivolous"?

See http://www.softpanorama.org/Skeptics/Financial_skeptic/Casino_capitalism/Number_racket/gdp_is_a_questionable_measure_of_economic_growth.shtml

marmico, 02/29/2016 at 4:47 am
Households spent $306 billion on gasoline in 2015 which is ~1.7% of ~$18 trillion of GDP. If 2016 gasoline prices average $1.98 per gallon (EIA February STEO report), household spending on gasoline relative to total household spending will be the lowest in the 69 year history of the data set.

https://research.stlouisfed.org/fred2/graph/?g=3CRQ

Ves, 02/29/2016 at 9:04 am
Gasoline on its own it is pretty much useless unless you want just to start camp fire for marshmallows. If you want to include the true cost of using gasoline in the household you have to include the cost of vehicles that have never been higher in the history, you have to include the cost of insurance that is also marching higher every year. And let's not even go into ever increasing cost of building and maintaining each mile of highway network. So you have to look at built in price inflation in today's monetary system to realize the true costs. And anyway example that you provide for 2016 that "gasoline relative to total household spending will be the lowest in the 69 year history" is anomaly. Do you understand why it is anomaly? It is anomaly because at that price nobody in oil industry makes any profit. So you won't have this anomaly for very long.

[Feb 27, 2016] The End of Normal by James Galbraith

peakoilbarrel.com
Silicon Valley Observer, 02/26/2016 at 11:12 pm
Lots of talk about economy and growth. Anyone interested would do well to read "The End of Normal" by James Galbraith. Galbraith is saying basically the same thing John Michael Greer has been saying for a long time, but as a respected mainstream economist, Galbraith's message is all the more meaningful.

http://www.amazon.com/The-End-Normal-Crisis-Future/dp/1451644922

[Feb 25, 2016] The oil industry could barely overcome decline rates for conventional oil the last several year

Notable quotes:
"... My level of knowledge in the oil world is too low, but from what I have seen in this blog we might be seeing a loss of 1 to 1.5 mbpd in 2016, depending on how much Iran is able to increase production. ..."
"... I guess then between 1 and 2 mbpd defines the possible loss of oil production in 2016. Is this a reasonable estimate? ..."
"... If Oil prices remain low 2015 will be the peak. I doubt oil prices will remain low after 2018. ..."
"... Not just discovery shortages, but the oil industry will have a severally compromised development capacity. It could barely overcome decline rates for conventional oil over the past 10 years, the LTO got developed at a loss, and about 30 to 40% of the industry is currently being laid off or shut down. ..."
"... I would love to see your rational for this. Who will return to 2015 output levels or higher? Obviously not everyone because so many nations have already peaked and are in decline. So for production to return to 2015 levels, and higher since you are not predicting peak oil until a decade or so from now, who will increase their production to well above 2015 levels? We know this will have to happen, for your scenario to be correct, because post peak nations will continue to decline regardless of price. ..."
peakoilbarrel.com
Javier , 02/25/2016 at 11:23 am
Yes, OFM, I also shared Ron's opinion by late 2014 that 2015 was going to be the year of Peak Oil.

But this is now a fact. Summer of 2015 (July for C+C, August for all liquids) is a peak oil for everybody for as long as production doesn't start increasing again. Since nobody is predicting an increase in production for 2016, the most fundamental issue in the oil world right now is how fast is production going to fall and for how long.

My level of knowledge in the oil world is too low, but from what I have seen in this blog we might be seeing a loss of 1 to 1.5 mbpd in 2016, depending on how much Iran is able to increase production.

On the other hand people usually talk about a level of annual depletion of around 6%. That's about 4.5 mbpd for the entire world, so if only half of the world depletes at those rates we are talking upwards of a fall of 2 mbpd.

I guess then between 1 and 2 mbpd defines the possible loss of oil production in 2016. Is this a reasonable estimate?

Dennis Coyne, 02/25/2016 at 10:30 am
If Oil prices remain low 2015 will be the peak. I doubt oil prices will remain low after 2018.

When the oil price rises we will return to 2015 output levels or higher by 2022 to 2025.

Final peak between 2020 and 2030.

Rune Likvern, 02/25/2016 at 11:05 am
"When the oil price rises we will return to 2015 output levels or higher by 2022 to 2025."

What oil price will that require?

"Final peak between 2020 and 2030."

And where are the discoveries that will allow for that?

Ron Patterson, 02/25/2016 at 11:47 am
I think this is just Dennis's gut feeling. :-)
George Kaplan, 02/25/2016 at 1:51 pm
Not just discovery shortages, but the oil industry will have a severally compromised development capacity. It could barely overcome decline rates for conventional oil over the past 10 years, the LTO got developed at a loss, and about 30 to 40% of the industry is currently being laid off or shut down. There is no way it will be able to ramp up to about 150% of the capacity it had say in 2013 to overcome accelerating decline rates and add production on what will be ever more complex new fields (i.e. small, heavy, deep water etc.)
Ron Patterson, 02/25/2016 at 11:46 am
When the oil price rises we will return to 2015 output levels or higher by 2022 to 2025.

I would love to see your rational for this. Who will return to 2015 output levels or higher? Obviously not everyone because so many nations have already peaked and are in decline. So for production to return to 2015 levels, and higher since you are not predicting peak oil until a decade or so from now, who will increase their production to well above 2015 levels? We know this will have to happen, for your scenario to be correct, because post peak nations will continue to decline regardless of price.

So who will it be Dennis? Where will all this new production come from?

[Feb 16, 2016] Those damned NGO's (charities) that see it as their first mission to buy Toyota Landcruisers to ensure their pompous leaders can be carried in perfect comfort from one five star conference to another

peakoilbarrel.com
Sydney Mike, 02/14/2016 at 3:28 am
This is the sad part Old Farmer Mac. You will not even consider going forward to horses and mules.
I spend a lot of time in Ethiopia, Africa. Humanity and coffee originated here. A large part of their agriculture is still done with oxen plowing the fields. A public taxi in a rural town can still be horse and cart. Donkeys carry cement to many building sites side by side with modern trucks. Those animals are very frugal in their food and water consumption.
And then there are the do-gooders. Those damned NGO's (charities) that see it as their first mission to buy Toyota Landcruisers to ensure their pompous leaders can be carried in perfect comfort from one five star conference to another to discuss some project in the way waste societies do business. These people are completely blind to the fact that they are destroying what are in all likelihood man's oldest civilization. Ethiopians are not the ones who build the biggest castles or created the most exquisite art. But they have been around the longest. The skeleton of Lucy is dated at over 3 Million years . That means they know a thing or two about survival.
So you might be forgiven for assuming that people come here to LEARN and see how we could live sustainably. Instead, they introduce "development". That is of course another term for burning fossil fuels.
Whatever "un-developed" pockets of humanity manage to survive will be among the leaders when oil man finally goes extinct.
Synapsid, 02/14/2016 at 6:42 pm
Sidney Mike,

I would suggest that whatever Lucy has to say, it applies to all of us, not just to the inhabitants of the Horn of Africa.

I agree with you about the NGOers. How they can act as they do is beyond my comprehension.

Javier, 02/14/2016 at 7:31 pm
Nobody can tell if Australopithecus afarensis was an ancestor species to Homo or not, but in any case we share common ancestors with all Ethiopians since at least the emergence of anatomically modern humans at around "only" 50,000 years ago. We have evolved the same, we have survived the same, our ancestors have probably traveled more and picked some gene varieties from Neanderthals that Ethiopians don't have, while they retain a bigger share of old sapiens varieties that didn't make it out of Africa.

[Feb 12, 2016] An Interview with Larry Summers

Notable quotes:
"... Theres another aspect of the connection between secular stagnation and inequality that bears emphasis. Experience suggests that in an economy where there are more workers seeking jobs than there are jobs seeking workers, the power is on the employer side, and workers do much less well. A tight economy, where employers are seeking workers, shifts the balance of power toward workers and leads to higher pay and better benefits. That, in turn, leads to more spending being injected into the economy, which supports further economic growth. ..."
"... But I also believe there are many areas in which its possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources. ..."
"... Right, in a democracy, the elected leaders must view the voters as idiots and execute to the total opposite of the expressed policies of the candidates who won. ..."
"... Paul Krugman and Larry Summers both have very good columns this morning noting the economys continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are overly pessimistic about the Feds scope for action if the economy weakens. ..."
"... While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative easing, the buying of long-term debt, it has another tool at its disposal that it chose not to use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could have targeted a longer term interest rate. ..."
"... For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury note, committing itself to buy more notes to push up the price, and push down the interest rate to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes. ..."
"... This is an idea that Joe Gagnon at the Peterson Institute for International Economics put forward at the depth of the recession, but for some reason there was little interest in policy circles. The only obvious risk of going the interest rate targeting route is that it could be inflationary if it led to too rapid an expansion, but excessively high inflation will not be our problem if the economy were to again weaken. Furthermore, if it turned out that targeting was prompting too much growth, the Fed could quickly reverse course and let the interest rate rise back to the market level. ..."
"... Amazing how unconventional monetary is always the go-to option. Pessimism about the effectiveness of the Feds policy options is well warranted. You only need to look at the results of the last seven years. ..."
economistsview.typepad.com

Part of an interview of Larry Summers at Equitable Growth :

... When I went to graduate school in the 1970s, the prevailing view among economists, captured by Art Okun's book "Equality Versus Efficiency: The Big Tradeoff," was that equality and efficiency were both desirable, but they were likely to trade off-that more progressive taxation would achieve more equality but would inevitably in some way distort economic choices and, so, reduce efficiency, for example.

I believe there are still many areas in which one does have to trade off equality versus efficiency. But I also believe there are many areas in which it's possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources.

Recall that I defined secular stagnation as having at its essence an excess of savings over investment, desired saving over desired investment. There are many reasons for that. Some of them have to do, for example, with reduced investment demand because so much more capital can be purchased with fewer dollars. I think of the fact that my iPad has more computing power than a Cray supercomputer did when Bill Clinton came into office in 1993.

One aspect of that excess in saving over investments is that rising inequality has operated to reduce spending. We are fairly confident that what economists call the "marginal propensity to consume" of those with high incomes is less than the marginal propensity to consume of those with middle incomes.

And so the combination of rising inequality in the distribution of income across income levels and a shift in inequality toward the higher profit share slows economic growth. In normal times, such a change might be offset by easier monetary policy. But in the current environment, where interest rates are very close to the zero lower bound, the capacity for that kind of offset is greatly attenuated.

There's another aspect of the connection between secular stagnation and inequality that bears emphasis. Experience suggests that in an economy where there are more workers seeking jobs than there are jobs seeking workers, the power is on the employer side, and workers do much less well. A tight economy, where employers are seeking workers, shifts the balance of power toward workers and leads to higher pay and better benefits. That, in turn, leads to more spending being injected into the economy, which supports further economic growth.

And so, as Keynes recognized when he wrote to FDR in the late 1930s urging the importance of wage increases, measures that strengthen workers' capacity to earn income by increasing spending power can promote both equality and strengthen the economic performance of the country. ...

pgl :

Excellent interview with this as a key sentence:

"But I also believe there are many areas in which it's possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources."

Summers makes two arguments with respect to promoting aggregate demand:

(1) his case for more infrastructure investment; and
(2) his defense of the expansionary monetary measures taken by the FED from 2008 until recently.

He does note that Obama started talking about "belt tightening" after Summers left the White House and to Summers regret.

mulp -> pgl...
Right, in a democracy, the elected leaders must view the voters as idiots and execute to the total opposite of the expressed policies of the candidates who won.

Or do you think the voters were calling for massive explosions of debt and massive increases in jobs forced by government policies to force exploding labor costs which would necessarily result in exploding consumer prices when they voted Democrats out and Republicans in?

Perhaps you think Bernie Sanders got far more leftist laws passed by being a radical leftist socialist in Congress able to lead a revolution in Congress to redistribute wealth?

The Republican Party is divided by Obama highly divisive politeral tactics which played Republicans against Republicans, doing a far better job dealing with Republicans than Clinton's "triangulation" which implemented massive austerity tempered by government dictates that were highly profitable to crony capitalists in the computer industry. Bush-Cheney served a different set of crony capitalists leading to an implosion in the tech sector dragging down pretty much everything good for the American people. Obama has since created incentives with rewards to both sets of crony capitalists, that has now imploded for the Bush-Cheney crony capitalists (fossil fuels) but still reward the Elon Musk, Bezos, google, hollywood, Ellison, Apple sector.

Neither Clinton nor Obama were allowed to help the bottom 50% of workers because voters demanded austerity by voting for Republican control of Congress in 1994, 1996, 1998, 2000, 2002, 2004, 2010, 2012, 2014, and if Sanders is the Democratic nominee in 2016, then Republican control of Congress in 2016, 2018, and probably 2020 and 2022. And only a Republican president will end the austerity, but it will lead to slower growth, high unemployment, likely severe recession, but wars. Just like the end of austerity of Bush-Cheney.

pgl said in reply to mulp ...
WTF this has to do with what Summers wrote??? Never mind. So much babbling, so little time.
JohnH :
"One aspect of that excess in saving over investments is that rising inequality has operated to reduce spending. We are fairly confident that what economists call the "marginal propensity to consume" of those with high incomes is less than the marginal propensity to consume of those with middle incomes.

And so the combination of rising inequality in the distribution of income across income levels and a shift in inequality toward the higher profit share slows economic growth."

Hate to say this, but Summers is making a lot of sense.

The way to address the problem of slow economic growth is to tax the wealthy, who have a low propensity to consume, and use the funds for government programs (infrastructure, education, healthcare) and redistribution to the poor...exactly as I have been arguing.

JohnH said in reply to JohnH...
pgl should take up his fight with Larry Summers, not me.

But Summers is fairly confident...as pgl just can't accept that a) increasing inequality reduces consumption and economic growth and that b) addressing inequality by taxing high incomes and wealth would lead to increased consumption and economic growth if it was spent on social programs and redistribution to those with a high propensity to consume (the poor).

It appears the we now have two pgls here--one that support high top tax brackets and another who opposes taxing the wealthy.

Or maybe we just have a single, very confused dude!

BenIsNotYoda -> JohnH...
pgl's solution is - give them a rate cut. always. grandmother is ill - give her a rate cut
pgl said in reply to JohnH...
You do know BINY is cheating on you. Good luck getting back with granny.
BenIsNotYoda -> JohnH...
he is not happy because his cheap stocks are getting cheaper.
JohnH said in reply to BenIsNotYoda...
I already called him on demanding QE4, which he advocated as soon as stocks went into correction territory back in August.

It was the same lousy economy. But as soon as stocks started to correct, and pgl's portfolio was getting hurt, he jumped right into action!

lower middle class -> pgl...
I'm trying to avoid being confused.

We hold the folowing as true, correct?

MPC is less than one.

"Income" refers to "disposable income"

As wealth and income rise, consumption also rises.

Falls in income do not lead to reductions in consumption because people reduce savings to stabilize consumption. (the poor get poorer by consuming wealth; wealth inequality accelerates?)

Increases in income do not lead to increases in consumption because people add to savings to stabilize consumption.
(high income people increase wealth faster the low income people while consumption increases; wealth inequality decelerates?)

JohnH said in reply to lower middle class...
General propensity to consume depends on income. Wealthy people tend to save a good chunk of their incomes...and become wealthier. Most people save a very small part of their incomes (middle class) or nothing at all (poor). Obviously there are exceptions to this generalization, as pgl is quick to point out with his tearful evocations of the plight of the 'hand to mouth' rich. But the general pattern is as I have described.

Marginal propensity to spend is a little more complicated, and a lot depends on whether the additional money is seen as a windfall or not. For people who do not generally save much, windfalls may be saved for a while or go to pay off debt, or be spend on durable goods or just spent.

Peter K. :
"In normal times, such a change might be offset by easier monetary policy. But in the current environment, where interest rates are very close to the zero lower bound, the capacity for that kind of offset is greatly attenuated."

Larry Summers agrees with the obnoxious trolls like JohnH and BINY. Monetary policy doesn't help.

I agree with Dean Baker and Bernie Sanders. (This is not to say fiscal policy doesn't work better. Funny how the trolls always toss out red herrings.)

http://cepr.net/blogs/beat-the-press/paul-krugman-larry-summers-and-the-fed-s-unused-ammunition

Paul Krugman, Larry Summers, and the Fed's Unused Ammunition by Dean Baker

Paul Krugman and Larry Summers both have very good columns this morning noting the economy's continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are overly pessimistic about the Fed's scope for action if the economy weakens.

While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative easing, the buying of long-term debt, it has another tool at its disposal that it chose not to use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could have targeted a longer term interest rate.

For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury note, committing itself to buy more notes to push up the price, and push down the interest rate to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes.

This is an idea that Joe Gagnon at the Peterson Institute for International Economics put forward at the depth of the recession, but for some reason there was little interest in policy circles. The only obvious risk of going the interest rate targeting route is that it could be inflationary if it led to too rapid an expansion, but excessively high inflation will not be our problem if the economy were to again weaken. Furthermore, if it turned out that targeting was prompting too much growth, the Fed could quickly reverse course and let the interest rate rise back to the market level.

Of course, it would be best if we could count on fiscal policy to play a role in getting us back to full employment (lowering supply through reduced workweeks and work years should also be on the agenda), but the Fed does have more ammunition buried away in the basement and we should be pressing them to use it if the need arises.

Paine said in reply to Peter K....
Excellent

Despite a finessed genuflex to inflation

JohnH said in reply to Peter K....
"Larry Summers agrees with the obnoxious trolls like JohnH and BINY. Monetary policy doesn't help."

Amazing, isn't it?

Agreed: "Of course, it would be best if we could count on fiscal policy to play a role in getting us back to full employment." And the best course is higher taxes on the wealthy, who have more than what they know with to do with.

Taxes on the wealthy directly tackles inequality, increased debt doesn't.

JohnH said in reply to Peter K....
Amazing how unconventional monetary is always the go-to option. Pessimism about the effectiveness of the Fed's policy options is well warranted. You only need to look at the results of the last seven years.

So why not advocate unconventional fiscal policy...which at this point would include taxing the wealthy to fund stimulus? Why constantly flog the debt option, which does nothing to directly tackle inequality?

pgl said in reply to JohnH...
You need to shut up and go read that Ando-Modigliani paper on consumption. Once again you got everything exactly backwards. But then you are the dumbest troll ever.
JohnH said in reply to BenIsNotYoda...
pgl was against tax increases on the wealthy... before he was for tax increases on the wealthy...before he was against tax increases on the wealthy...

but he has always been for lots more debt...

PPaine :
" one persons rent may be another persons incentive "

That relies on a muddled use of the term rent

Which by construction
Means
non supply regulating revenue or income

But still a point lies under that mud dimness of articulation

Separating rents from incentives ain't easy

But in the last analysis
Very often it's very doable

Take my specialty
Ground rent
There are clever ways to tease out the rent

[Jan 13, 2016] Three Ways to Help the Working Class

Notable quotes:
"... Yes. The ratio of population to jobs needs to change dramatically. Bust out of the old cycle where the ratio thru out the cycle remains bad. Yes even at the peak of employment -- We need a far higher sustained rate of spending on domestically produced goods and services ..."
"... One problem with MMTers is they talk about very common ideas, like deficit financed spending, and pretend like they just invented something radically new, while completely failing to acknowledge or address the rest of the conversation that others have been having for years. ..."
"... Oh no! Whatever you do, cried Brer Rabbit, Dont throw me into the briar patch! ..."
"... ...So long as business interests dominate the political process, it will be hard to reverse the trend toward increasing inequality. ..."
"... Mark and most of his ilk support an open door for corporations to import smart, hard working and desperate workers from around the world...impact of that at the margins for wages(along with many other things) have been a disaster for the bottom 80% over the past 30 years. ..."
economistsview.typepad.com
I have a new column:
Three Ways to Help the Working Class : ... In graduate school, I was once told that "people don't have marginal products, jobs do." What does this mean? ...

I wish I would have connected the last part to the Supreme Court case on public unions.

RGC :

"If you took 100 dogs and you buried 95 bones in a field and you told the dogs their job was to go out and find a bone, what's the very best case scenario? The best you can possibly hope for is that 95 dogs come back with bones. Five dogs can't get bones. More likely, some dogs will get lucky; they'll stumble across a few extras. Some may have better skills; they'll find three or four. So, the number of dogs that come back without bones may be ten or fifteen.

(c. 9:38) "The conventional economist would gather the dogs together, the ones that had no bones, and train them to sniff out bones more effectively. Then they would send those hundred dogs back out into the field and tell them to go come back with a bone. And, again, the best you can get is 95 dogs with bones. What's wrong is that there aren't enough bones. There's nothing wrong with the dogs. The bones are the jobs. There's nothing wrong with the unemployed. There simply aren't enough jobs.

- Stephanie Kelton at the Summit on Modern Money Theory in Rimini, Italy. She is Creator and Editor of New Economic Perspectives. Her research expertise is in Federal Reserve operations, fiscal policy, social security, healthcare, international finance, and employment policy.

PPaine -> RGC...
Yes. The ratio of population to jobs needs to change dramatically. Bust out of the old cycle where the ratio thru out the cycle remains bad. Yes even at the peak of employment -- We need a far higher sustained rate of spending on domestically produced goods and services
sanjait -> RGC...
The very conventional new Keynesian response to a shortfall in demand is expansionary demand management policies.

One problem with MMTers is they talk about very common ideas, like deficit financed spending, and pretend like they just invented something radically new, while completely failing to acknowledge or address the rest of the conversation that others have been having for years.

RGC -> sanjait...
It's cute the way you make obviously ignorant assertions with such apparent confidence.
PPaine -> RGC...
Don't be too harsh. He very often makes good points. Why he's so hard on MMTers escapes me

Has he read kalecki Lerner and Vickrey ?
The young James Meade
The young Lawrence Klein

The Post war macro left
These are not MMTers

anne -> PPaine ...
http://www.nytimes.com/2013/10/22/business/economy/lawrence-r-klein-economist-who-forecast-global-trends-dies-at-93.html

October 21, 2013

Lawrence R. Klein, Economic Theorist
By GLENN RIFKIN

Lawrence R. Klein, who predicted America's economic boom after World War II and was awarded the 1980 Nobel in economic science for developing statistical models that are used to analyze and predict global economic trends, died on Sunday at his home in Gladwyne, Pa. He was 93.

His daughter Hannah Klein confirmed the death.

As World War II was ending, Professor Klein, widely regarded as a brilliant theorist, disputed the conventional wisdom that the postwar period would drive the American economy back into a long depression.

Using his econometric models based on mathematical equations, he predicted correctly that the pent-up demand for consumer goods and housing after the war, coupled with the purchasing power of the returning soldiers, would result not in economic crisis but in a surge in spending and a flourishing economy.

Though he often testified before federal bodies and served as an economic adviser to Jimmy Carter during his 1976 presidential campaign, Professor Klein chose to remain in academia - he taught economics at the University of Pennsylvania for 33 years - and rejected an offer to join the Carter administration.

"I am just an academic giving advice," he told People magazine in 1976. "If you are a technician and are asked for help, it is a social obligation of citizenship to give it."

Professor Klein's use of vast survey data to build statistical economic models for the United States and several other countries has been adopted by economists around the world. "Few, if any, research workers in the empirical field of economic science have had so many successors and such a large impact as Lawrence Klein," the Nobel committee wrote in awarding him the Nobel Memorial Prize in Economic Science....

anne -> PPaine ...
Where is a reference? Repeated name-dropping, with no references is widly inconsiderate. Since you use the names repeatedly, why not just have a set of references to put down?

What should a person read of Lawrence Klein?

anne -> PPaine ...
http://mrzine.monthlyreview.org/2010/kalecki220510.html

1942

Political Aspects of Full Employment
By Michal Kalecki

http://works.bepress.com/cgi/viewcontent.cgi?article=1027&context=timothy_canova

March, 1997

The Macroeconomics of William Vickrey
By Timothy A. Canova

http://crookedtimber.org/2015/12/17/piketty-meade-and-predistribution/

December 17, 2015

Piketty, Meade and Predistribution
By MARTIN O'NEILL

anne -> PPaine ...
http://community.middlebury.edu/~colander/books/map.html

1980

MAP: A Market Anti-Inflation Plan
By David Colander and Abba Lerner

Preface

This is a small book about a big topic. This is not the usual book on inflation, simplified- or oversimplified- to make accepted doctrines intelligible to the layman. It presents a new plan- MAP (Market Anti-inflation Plan)- that makes it possible to succeed in curing our inflation. The ideas in it are not easily absorbed. They form a radical new framework- a new way of looking at inflation, and indeed at all macroeconomics, which is at the same time only a synthesis of many divergent old trains of thought. As Albert Einstein said, "Ideas should be expressed as simply as possible, but not more so." We think we have made the book intelligible to nonspecialists, even though its ideas are challenging for all readers, and perhaps even more so for advanced economists.

We approach inflation as an economic problem, but we make allowances for political realities in designing MAP. Although we believe MAP should be adopted in some form, the book is not written from an advocatory position. We try to consider all arguments, both pro and con, and do not attempt to minimize potential difficulties.

The methodology is realytic - an unusual word that indicates a contrast with analytic. This means that we are primarily concerned with solving real problems. We believe that the book also contributes importantly to extending theoretical understanding, but it does this only where necessary to solve the problem at hand. *

* http://www.britannica.com/EBchecked/topic/1085393/Abba-P-Lerner#ref849102

Sandwichman -> RGC...
Ah-ha the lump of bones fallacy! Dogs looking for bones will create a supply of bones as a consequence of their demand for bones.

Dog gets no bone.
Dog starves.
Vultures (capitalists) eat meat off dead dog.
Bones!

anne :
http://www.nytimes.com/2016/01/12/us/politics/at-supreme-court-public-unions-face-possible-major-setback.html

January 11, 2016

Supreme Court Seems Poised to Deal Unions a Major Setback
By ADAM LIPTAK

WASHINGTON - The Supreme Court seemed poised on Monday to deliver a severe blow to organized labor.

In a closely watched case brought by 10 California teachers, the court's conservative majority seemed ready to say that forcing public workers to support unions they have declined to join violates the First Amendment.

A ruling in the teachers' favor would affect millions of government workers and culminate a political and legal campaign by a group of prominent conservative foundations aimed at weakening public-sector unions. Those unions stand to lose fees from both workers who object to the positions the unions take and those who simply choose not to join while benefiting from the unions' efforts on their behalf.

Under California law, public employees who choose not to join unions must pay a "fair share service fee," also known as an "agency fee," typically equivalent to members' dues. The fees, the law says, are meant to pay for collective bargaining activities, including "the cost of lobbying activities." More than 20 states have similar laws.

Government workers who are not members of unions have long been able to obtain refunds for the political activities of unions like campaign spending. Monday's case, Friedrichs v. California Teachers Association, No. 14-915, asks whether such workers must continue to pay for any union activities, including negotiating for better wages and benefits. A majority of the justices seemed inclined to say no.

Collective bargaining, Justice Anthony M. Kennedy said, is inherently political when the government is the employer. "Many critical points are matters of public concern," he said, mentioning issues like tenure, merit pay, promotions and classroom size.

The best hope for a victory for the unions had rested with Justice Antonin Scalia, who has written and said things sympathetic to their position. But he was consistently hostile on Monday.

"The problem is that everything that is collectively bargained with the government is within the political sphere, almost by definition," he said.

The court's four liberal members were on the defensive, asking whether there was good reason to overturn a 1977 decision by the court that allowed the fees....

anne -> anne...
http://www.nytimes.com/2016/01/09/us/politics/union-fees-friedrichs-v-california-teachers-association.html

January 8, 2016

Mandatory Union Fees Getting Hard Look by Supreme Court
By ADAM LIPTAK

The justices have already voiced skepticism about making people give money to public unions. They may now be ready to rule that it's unconstitutional.

PPaine -> anne...
The unins have no choice but to attack on all fronts

Public sector insulation from savage attacks ended long ago
This is just a after dinner beltch by the union eaters

Peter K. :
One way to increase worker bargaining power is to employ aggressive macro (fiscal, monetary, currency/trade) policy so that labor markets are tight and businesses are fighting over workers.

In the late 90s, labor shared in productivity gains as unemployment fell below 4 percent. This ended with the tech stock bubble which morphed into the housing bubble.

As DeLong recently wrote:

"What we need now is 1) debt relief to unwind the overhang and 2) much tighter financial regulation to prevent the growth of new fragilities. And if those prove inconsistent with full recovery, then we need massive government spending on infrastructure and other investments financed by money printing until full employment is reattained."

It could be that achieving aggressive macro policy is as difficult politically as making the environment more favorable towards unions.

If we look at the post-war social democratic years, both helped raise living standards. Also the financial system was much smaller and much more regulated.

Peter K. -> Peter K....
http://www.huffingtonpost.com/brad-delong/global-economic-depression_b_8924596.html?1452263364

DeLong's quote

Peter K. -> Peter K....
Other ideas include work-sharing during downturns, and shorter hours.
Sandwichman -> Peter K....
"Oh no! Whatever you do," cried Brer Rabbit, "Don't throw me into the briar patch!"
pgl :
Point #2: "We also need to do a better job of providing the educational resources people need to reach their full potential."

I can see conservative economists echoing this but what specifically do they want policy to do to make this happen? More Pell Grants No - they want to cut that kind of support. Now Greg Mankiw will tell you that you will get a great education if you manage to get into Harvard and pay $300 for his textbook!

mulp -> pgl...
If getting a Harvard PhD for every worker means that the California farm worker cutting broccoli and lettuce, or changing bed pans for the bedridden in nursing homes, gets paid $120,000 per year, then I'm all for eliminating poverty by education.

My guess is education is not the path to eliminating poverty.

If you think education is the solution, explain why it takes a college degree to pay farm workers, home care workers, child care workers, cleaning people who scrub toilet, middle class wages, instead of simply paying them middle class wages right now.

RC AKA Darryl, Ron :
"...So long as business interests dominate the political process, it will be hard to reverse the trend toward increasing inequality."

[Actually it is the interest of management and the capital owning class that are dominating the political process. Businesses would do just fine if wages were higher, rent seeking - not so much.]

Peter K. :
https://www.jacobinmag.com/2016/01/yanis-varoufakis-interview-jeremy-corbyn-greece-eurozone-tsipras/

The Man Who Knew Too Much

An illustrated interview with former Greek finance minister Yanis Varoufakis.

g :
Mark and most of his ilk support an open door for corporations to import smart, hard working and desperate workers from around the world...impact of that at the margins for wages(along with many other things) have been a disaster for the bottom 80% over the past 30 years.
PPaine -> Paine...
Even the great dani rodick and joe Stigilitz could push tis harder
But they are one worlders

An honorable club but... Perhaps we need bordered areas to heal themselves first with national policies of true full employment and balance trade forex

Denis Drew :
That's right ... You cannot make the retail clerk any more productive. That's talking about the people I care about: bus drivers (taxi drivers -- me :-]), home carers, janitors, etc. But, you can make the economy they inhabit more productive -- and then the economy can pay them more (not less every year!): why barbers in France get paid more than barbers in Poland (classic example).

US per capita income in 1968, $15,000. In 2016, $30,000.

Minimum wage nearly $4 an hour below what it was in 1968 (adjusted). Ditto for the price of US labor across the mid-to-lower board.

US mid-to-low labor price so extraordinarily low that half (HALF! -- 100,000!) of Chicago's gang age, minority males would rather join a street gang. Then there's my gang, Chicago's old (mostly retired) American born taxi drivers. Wouldn't get us into that job today for $500, if lucky, for 60 grueling hours.
http://www.cbsnews.com/news/gang-wars-at-the-root-of-chicagos-high-murder-rate/

The core American trouble isn't wages not keeping up with productivity per se (though that parallels); the core labor sickness is wages not even remotely approaching what the consumer (not the boss) might be very willing to pay.

We do not need to attract businesses that provide good jobs -- the jobs cannot be good if the pay is miserly. High wage opportunities don't happen -- they are made (ask Jimmy Hoffa).

Educational resources are not needed to help retail clerks reach their full potential. Good pay for retail clerks is needed to help Detroit's schools reach their full potential. Nationwide: poverty area schools don't work because students (and teachers!) don't feel it worth making the effort -- given the job market doesn't promise anything remunerative enough to strive for when it's time for them to go to work.
http://www.amazon.com/gp/product/B00332EXDM/ref=dp-kindle-redirect?ie=UTF8&btkr=1

"I believe this is mainly due to differences in bargaining power." Which is mainly due to absurdly unenforceable labor laws in this country which -- uniquely in all markets -- allows one side in the labor market to bully the other side out of being able to meaningfully bargain. Simple enough solution: make union busting a felony (like every other kind of market warping -- try to take a movie in the movies and telling them you were only kidding).

The labor laws enabling collective bargaining have long been in place; the need for collective barraging presumably settled. So when are progressive states going to begin -- one state at a time; forget Congress -- to make these laws enforceable? Federal preemption means individual states cannot subtract from national law, but states may add. In Maryland for one, Democrats have a 33-17 edge in the State Senate and a 91-50 edge in the House. WA, OR, CA, IL, NY, anybody listening?

IS ANYBODY, ANYWHERE LISTENING?! Retail clerks (and their hungry families) desperately want to know.

PPaine -> PPaine ...
Criminalize anti union activity
mulp -> Denis Drew ...
Conservatives want lower gdp growth.

Or else they believe in free lunch economics:

Step 1. Cut wages to increase profits
Step 2. Produce more and price it twice as high
Step 3. Demand government allow workers to borrow at high interest rates to buy twice as much as before their wages were cut in half
Step 4. Blame government, and especially Obama when the math does not work out.

If you want faster gdp growth, you must pay workers, who are after all 99% of the consumers, more and increase their pay faster.

Economies are zero sum.

It is possible to time shift, say by exporting more than imported and taking the difference and saving it by buying debt, or stored labor, in other countries, but at some point, the process is reversed. For the US, savings has flowed into the US blocking exports and increasing imports. At some point, that will need to reverse. Someone will need to work more and consume less. That will need to be the 1% because for decades, most US workers have worked more and consumed less, unless they got to borrow and consume so they will need to work more and consume less.

Unless there is a massive redistribution of wealth, either war, or bankruptcy. Trying to tax wealth to redistribute will only destroy the wealth. After all, 99% of the wealth in the US was not built by labor, but inflated into existence by pump and dump asset churn or by high rents inflating decaying scarce assets in price.

[Jan 04, 2016] Dollar Dominance Deconstructing the Myths and Untangling the Web

Notable quotes:
"... The US empire is one of Multi-National corporations and International Trade Deals. ..."
"... Im intrigued by that assertion, especially if this comes from a more libertarian perspective and an author who actually mentions NATO. Of course corporate welfare in various forms is a key part of what is happening, but the core issue is a literal military empire, not some vague commercial facsimile of one. ..."
"... The direct imperial threats include economic warfare, as displayed by the IMF and ECB. As demonstrated in Greece, Ukraine, and before Greece Ireland. ..."
"... By 1978, US inflation had risen to 9% while inflation in the rest of the world slowed dramatically by comparison. Both the Carter administration and the Fed did everything in their power to control dollar devaluation, but it was clear by this time that without the assistance from foreign governments the dollar would not be able to survive . … Over the course of the next six years the dollar experienced a meteoric rise in value. ..."
Jan 04, 2016 | naked capitalism

washunate , January 4, 2016 at 10:43 am

The US empire is one of Multi-National corporations and International Trade Deals.

I'm intrigued by that assertion, especially if this comes from a more libertarian perspective and an author who actually mentions NATO. Of course corporate welfare in various forms is a key part of what is happening, but the core issue is a literal military empire, not some vague commercial facsimile of one. One of the most successful Big Lies in our domestic political discourse is to blame convenient corporate villains instead of the public officials who are responsible for decision-making and implementation.

This isn't the 1980s anymore. The global financial system (post Bretton Woods) collapsed somewhere there in the 1990s. Today, things are held together by direct imperial threats, not corporate board rooms.

Synoia , January 4, 2016 at 10:50 am

The direct imperial threats include economic warfare, as displayed by the IMF and ECB. As demonstrated in Greece, Ukraine, and before Greece Ireland.

Synoia , January 4, 2016 at 10:47 am

It is not dollar hegemony that rules the world, but the global financial system which gives the dollar its place of privilege.

Syllogism? What came first the chicken or the egg?

Where to begin – one could suggest the author read Chapter 1 of Wray's MMT and rewrite considering sector balances and fiat currencies, and present the different line of argument which would arise.

MyLessThanPrimeBeef , January 4, 2016 at 1:18 pm

Unless you entice, seduce, leave no other option for the workers but to borrow, at ever lower rates, thank God.

Then, you can export jobs overseas. Wait, that's how we have managed so far…that, and renting out rooms/beds/bathrooms in your apartment.

Left in Wisconsin , January 4, 2016 at 1:29 pm

"By 1978, US inflation had risen to 9% while inflation in the rest of the world slowed dramatically by comparison. Both the Carter administration and the Fed did everything in their power to control dollar devaluation, but it was clear by this time that without the assistance from foreign governments the dollar would not be able to survive ." … "Over the course of the next six years the dollar experienced a meteoric rise in value."

Maybe not central to the main argument but I found this claim (in bold) implausible.

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[Nov 29, 2017] Michael Hudson: The Wall Street Economy is Draining the Real Economy

[Nov 29, 2017] Positive Feedback Loops, Financial Instability, The Blind Spot Of Policymakers

[Nov 29, 2017] Attack on Sanders Economic Plan By Former Chairs of the Council of Economic Advisors Irresponsible

[Oct 10, 2017] The US Economy: Explaining Stagnation and Why It Will Persist by Thomas I. Palley

[Jul 17, 2017] Tucker Carlson Goes to War Against the Neocons by Curt Mills

[Jul 12, 2017] Stephen Cohens Remarks on Tucker Carlson Last Night Were Extraordinary

[Dec 22, 2018] British Security Service Infiltration, the Integrity Initiative and the Institute for Statecraft by Craig Murray

[Dec 16, 2018] Neoliberalism has had its day. So what happens next (The death of neoliberalism and the crisis in western politics) by Martin Jacques

[Dec 09, 2018] Neoliberalism is more like modern feudalism - an authoritarian system where the lords (bankers, energy companies and their large and inefficient attendant bureaucracies), keep us peasants in thrall through life long debt-slavery simply to buy a house or exploit us as a captured market in the case of the energy sector.

[Nov 27, 2018] The political fraud of Alexandria Ocasio-Cortez's "Green New Deal"

[Nov 27, 2018] American capitalism could afford to make concessions assiciated with The New Deal because of its economic dominance. The past forty years have been characterized by the continued decline of American capitalism on a world stage relative to its major rivals. The ruling class has responded to this crisis with a neoliberal counterrevolution to claw back all gains won by workers. This policy has been carried out under both Democratic and Republican administrations and with the assistance of the trade unions.

[Sep 27, 2018] The power elites goal is to change its appearance to look like something new and innovative to stay ahead of an electorate who are increasingly skeptical of the neoliberalism and globalism that enrich the elite at their expense.

[Aug 19, 2018] End of "classic neoliberalism": to an extent hardly imaginable in 2008, all the world's leading economies are locked in a perpetually escalating cycle of economic warfare.

[Jul 22, 2018] Tucker Carlson SLAMS Intelligence Community On Russia

[Jun 17, 2018] The Necessity of a Trump-Putin Summit by Stephen F. Cohen

[Apr 21, 2018] Amazingly BBC newsnight just started preparing viewers for the possibility that there was no sarin attack, and the missile strikes might just have been for show

[Apr 21, 2018] It s a tough old world and we are certainly capable of a Salisbury set-up and god knows what else in Syria.

[Apr 15, 2018] The Trump Regime Is Insane by Paul Craig Roberts

[Mar 02, 2018] Fatal Delusions of Western Man by Pat Buchanan

[Nov 24, 2019] Despair is a very powerful factor in the resurgence of far right forces. Far right populism probably will be the decisive factor in 2020 elections.

[Nov 14, 2019] Neoliberalism Paved the Way for Authoritarian Right-Wing Populism by Henry A. Giroux

[Nov 13, 2019] The End of Neoliberalism and the Rebirth of History by Joseph E. Stiglitz

[Oct 28, 2019] National Neolibralism destroyed the World Trade Organisation by John Quiggin

[Oct 23, 2019] Neoconservatism Is An Omnicidal Death Cult, And It Must Be Stopped by Caitlin Johnstone

[Oct 10, 2019] Trump, Impeachment Forgetting What Brought Him to the White House by Andrew J. Bacevich

[Oct 09, 2019] Ukrainegate as the textbook example of how the neoliberal elite manipulates the MSM and the narrative for purposes of misdirecting attention and perception of their true intentions and objectives -- distracting the electorate from real issues

[Sep 22, 2019] Neoliberalism Political Success, Economic Failure Portside by Robert Kuttner

[Sep 22, 2019] It was neoliberalism that won the cold war

[Sep 10, 2019] Neoliberal Capitalism at a Dead End by Utsa Patnaik and Prabhat Patnaik

[Sep 10, 2019] It s all about Gene Sharp and seeping neoliberal regime change using Western logistical support, money, NGO and intelligence agencies and MSM as the leverage

[Sep 09, 2019] What's the True Unemployment Rate in the US? by Jack Rasmus

[Sep 02, 2019] Where is Margaret Thatcher now?

[Sep 02, 2019] Is it Cynical to Believe the System is Corrupt by Bill Black

[Aug 21, 2019] Trump's Deficit Economy is bonanza for large coporation but not for the US workers. Fiscal stimulus now is just pushing on the string

[Aug 20, 2019] Trump Promised Massive Infrastructure Projects -- Instead We ve Gotten Nothing>

[Aug 20, 2019] Trump is about the agony. The agony of the US centered global neoliberal empire.

[Aug 04, 2019] Neoliberalism Political Success, Economic Failure

[Jul 30, 2019] The main task of Democratic Party is preventing social movements from undertaking independent political activity to their left and killing such social movements

[Jul 26, 2019] Tucker What should happen to those who lied about Russian collusion

[Jul 25, 2019] The destiny of the USA is now tied to the destiny of neoliberalism (much like the USSR and Bolshevism)

[Jul 24, 2019] Elizabeth Warren Seeks to Cut Private Equity Down to Size

[Jul 15, 2019] Elizabeth Warren Has Made Her Story America's Story

[Jul 05, 2019] Who Won the Debate? Tulsi Gabbard let the anti-war genie out of the bottle by Philip Giraldi

[Jul 05, 2019] The UK public finally realized that the Globalist/Open Frontiers/ Neoliberal crowd are not their friends

[Jul 05, 2019] The World Bank and IMF 2019 by Michael Hudson and Bonnie Faulkner

[Jun 27, 2019] The Ongoing Restructuring of the Greater Middle East by C.J. Hopkins

[Jun 25, 2019] Tucker US came within minutes of war with Iran

[Jun 23, 2019] The return of fundamentalist nationalism is arguably a radicalized form of neoliberalism

[Jun 19, 2019] America s Suicide Epidemic

[Jun 09, 2019] The looming 100-year US-China conflict by Martin Wolf

[May 25, 2019] The Belligerence Of Empire by Kenn Orphan

[May 13, 2019] Angry Bear Senate Democratic Jackasses and Elmer Fudd

[May 13, 2019] US Foreign Policy as Bellicose as Ever by Serge Halimi

[Apr 03, 2019] What We Can Learn From 1920s Germany by Brian E. Fogarty

[Mar 30, 2019] The US desperately needs Venezuelan oil

[Mar 25, 2019] Russiagate was never about substance, it was about who gets to image-manage the decline of a turbo-charged, self-harming neoliberal capitalism by Jonathan Cook

[Mar 25, 2019] The Mass Psychology of Trumpism by Eli Zaretsky

[Mar 15, 2019] Will Democrats Go Full Hawk by Jack Hunter

[Feb 26, 2019] THE CRISIS OF NEOLIBERALISM by Julie A. Wilson

[Feb 19, 2019] Tulsi Gabbard kills New World Order bloodbath in thirty seconds

[Feb 19, 2019] Warmongers in their ivory towers - YouTube

[Feb 15, 2019] Consumption of liquid fuels grows over the next decade, before broadly plateauing in the 2030s

[Feb 13, 2019] Stephen Cohen on War with Russia and Soviet-style Censorship in the US by Russell Mokhiber

[Feb 10, 2019] Neoliberalism is dead. Now let's repair our democratic institutions by Richard Denniss

[Feb 03, 2019] Neoliberalism and Christianity

[Jan 29, 2019] These 2020 hopefuls are courting Wall Street. Don t be fooled by their progressive veneer by Bhaskar Sunkara

[Jan 29, 2019] A State of Neoliberalism by Kevin "Rashid" Johnson (New African Black Panther Party)

[Jan 29, 2019] The Religious Fanaticism of Silicon Valley Elites by Paul Ingrassia

[Jan 26, 2019] Can the current US neoliberal/neoconservative elite be considered suicidal?

[Jan 24, 2019] No One Said Rich People Were Very Sharp Davos Tries to Combat Populism by Dean Baker

[Jan 23, 2019] When neoliberalism became the object of jokes, it is clear that its time has passed

[Jan 23, 2019] We need political mobilization to fight neoliberalism

[Jan 22, 2019] The French Anti-Neoliberal Revolution. On the conditions for its success by Dimitris Konstantakopoulos

[Jan 14, 2019] Nanci Pelosi and company at the helm of the the ship the Imperial USA

[Jan 13, 2019] Catherine Austin Fitts – Federal Government Running Secret Open Bailout

[Jan 13, 2019] Tucker Carlson Routs Conservatism Inc. On Unrestrained Capitalism -- And Immigration by Washington Watcher

[Jan 12, 2019] Tucker Carlson Mitt Romney supports the status quo. But for everyone else, it's infuriating Fox News

[Jan 12, 2019] Tucker Carlson has sparked the most interesting debate in conservative politics by Jane Coaston

[Jan 11, 2019] Blowback from the neoliberal policy is coming

Sites

Secular Stagnation under Neoliberalism

Etc

Society

Groupthink : Two Party System as Polyarchy : Corruption of Regulators : Bureaucracies : Understanding Micromanagers and Control Freaks : Toxic Managers :   Harvard Mafia : Diplomatic Communication : Surviving a Bad Performance Review : Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime : PseudoScience : Who Rules America : Neoliberalism  : The Iron Law of Oligarchy : Libertarian Philosophy

Quotes

War and Peace : Skeptical Finance : John Kenneth Galbraith :Talleyrand : Oscar Wilde : Otto Von Bismarck : Keynes : George Carlin : Skeptics : Propaganda  : SE quotes : Language Design and Programming Quotes : Random IT-related quotes :  Somerset Maugham : Marcus Aurelius : Kurt Vonnegut : Eric Hoffer : Winston Churchill : Napoleon Bonaparte : Ambrose Bierce :  Bernard Shaw : Mark Twain Quotes

Bulletin:

Vol 25, No.12 (December, 2013) Rational Fools vs. Efficient Crooks The efficient markets hypothesis : Political Skeptic Bulletin, 2013 : Unemployment Bulletin, 2010 :  Vol 23, No.10 (October, 2011) An observation about corporate security departments : Slightly Skeptical Euromaydan Chronicles, June 2014 : Greenspan legacy bulletin, 2008 : Vol 25, No.10 (October, 2013) Cryptolocker Trojan (Win32/Crilock.A) : Vol 25, No.08 (August, 2013) Cloud providers as intelligence collection hubs : Financial Humor Bulletin, 2010 : Inequality Bulletin, 2009 : Financial Humor Bulletin, 2008 : Copyleft Problems Bulletin, 2004 : Financial Humor Bulletin, 2011 : Energy Bulletin, 2010 : Malware Protection Bulletin, 2010 : Vol 26, No.1 (January, 2013) Object-Oriented Cult : Political Skeptic Bulletin, 2011 : Vol 23, No.11 (November, 2011) Softpanorama classification of sysadmin horror stories : Vol 25, No.05 (May, 2013) Corporate bullshit as a communication method  : Vol 25, No.06 (June, 2013) A Note on the Relationship of Brooks Law and Conway Law

History:

Fifty glorious years (1950-2000): the triumph of the US computer engineering : Donald Knuth : TAoCP and its Influence of Computer Science : Richard Stallman : Linus Torvalds  : Larry Wall  : John K. Ousterhout : CTSS : Multix OS Unix History : Unix shell history : VI editor : History of pipes concept : Solaris : MS DOS :  Programming Languages History : PL/1 : Simula 67 : C : History of GCC development :  Scripting Languages : Perl history   : OS History : Mail : DNS : SSH : CPU Instruction Sets : SPARC systems 1987-2006 : Norton Commander : Norton Utilities : Norton Ghost : Frontpage history : Malware Defense History : GNU Screen : OSS early history

Classic books:

The Peter Principle : Parkinson Law : 1984 : The Mythical Man-Month :  How to Solve It by George Polya : The Art of Computer Programming : The Elements of Programming Style : The Unix Hater’s Handbook : The Jargon file : The True Believer : Programming Pearls : The Good Soldier Svejk : The Power Elite

Most popular humor pages:

Manifest of the Softpanorama IT Slacker Society : Ten Commandments of the IT Slackers Society : Computer Humor Collection : BSD Logo Story : The Cuckoo's Egg : IT Slang : C++ Humor : ARE YOU A BBS ADDICT? : The Perl Purity Test : Object oriented programmers of all nations : Financial Humor : Financial Humor Bulletin, 2008 : Financial Humor Bulletin, 2010 : The Most Comprehensive Collection of Editor-related Humor : Programming Language Humor : Goldman Sachs related humor : Greenspan humor : C Humor : Scripting Humor : Real Programmers Humor : Web Humor : GPL-related Humor : OFM Humor : Politically Incorrect Humor : IDS Humor : "Linux Sucks" Humor : Russian Musical Humor : Best Russian Programmer Humor : Microsoft plans to buy Catholic Church : Richard Stallman Related Humor : Admin Humor : Perl-related Humor : Linus Torvalds Related humor : PseudoScience Related Humor : Networking Humor : Shell Humor : Financial Humor Bulletin, 2011 : Financial Humor Bulletin, 2012 : Financial Humor Bulletin, 2013 : Java Humor : Software Engineering Humor : Sun Solaris Related Humor : Education Humor : IBM Humor : Assembler-related Humor : VIM Humor : Computer Viruses Humor : Bright tomorrow is rescheduled to a day after tomorrow : Classic Computer Humor

The Last but not Least Technology is dominated by two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt. Ph.D

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Last modified: March, 12, 2020