Archive for February 2010
There is no question Governements are addicted to debt. Give people access to a huge credit card limit, and they will spend. Behavioral psychology manifest at a high-level.
Apparently heroin addicts can become so drug dependent their bodies cannot withstand the shock of withdrawal, and failure to continue taking the drug triggers multiple organ failures. I just wonder how apt that analogy is to our governments? debt dependency today. As long as governments think that taking these difficult decisions to end the addiction will be easier in the future than it is today, they will never take the decision “today.” At the very least, there will have to be a sufficiently large bond market “event” to force the issue.
"Off-balance sheet" liabilities include other government promises such as social security, medicare, currency swaps, derivatives, etc.
source:
http://www.zerohedge.com/article/just-how-ugly-sovereign-default-truth-how-self-delusions-prevent-recognition-reality?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
You hear the term “peak oil” a lot. Certainly not as much as a few years back when Oil was over $130 a barrel, but it’s still a large portion of American’s expenses, and it’s still an issue of national and personal security.
‘Peak oil’ refers to world-wide petroleum production (supply) reaching a maximum level, then entering terminal decline. For some background on the subject:
Discussions about ‘peak oil’ tend to grind to a halt over two factors:
(a) What ‘type’ of oil in the ground is under discussion, and
(b) What role does oil play in the economy.
In general discussion ‘oil in the ground’ covers a range of things (various grades of heavy to light, easily recovered to difficult to recover, natural to oil sand or shale, sweet to sulfur laden, shallow-on-shore to deep-off-shore, located in politically friendly or secure places to located in more questionable locals etc.). Clearly, oil in the ground in some form will be available for the indefinite future in whatever quantities justify its extraction. Equally clearly, the financial cost, technical difficulty, ecological cost and political difficulties will grow as the world moves from reliance on ‘conventional oil’ (sweet, large pool, close to the surface, on land close to cheap and convenient transportation links in politically secure locations and at locations which don’t pose ecological or other problems) to reliance on oil without an increasing list of these advantages. In this context, “peak” is the threshold at which oil having a particular favourable array of these ‘conventional oil’ advantages falls into declining production and the market must rely on a less advantageous array.
The role of oil extends well beyond transportation and energy issues. It is a major raw material for the production of plastics and other key materials and of fertilizer. Control of the supply of economically affordable oil is the source of economic and political power.
In short, the world faces an ever increasing passing of one peak of oil after another (as more advantageous arrays become unavailable in sufficient volume to meet demand) and this will cause major shifts of political and economic power.
We aren’t running out of oil anytime soon, but we are running out of ‘cheap’ oil.
How does this effect my investments and my commute? Remember, supply is only one side of the equation that is price. Signs show that U.S. oil consumption likely peaked in 2006-2007. Worldwide demand continues to grow, albeit at a slow pace, due to worldwide economic conditions. The short-term picture continues to remain cloudy, but expect a price floor around $60-$65 per barrel. Many unconventional fields aren’t economically feasible under this price, and OPEC-nations have stated that the $60 range is where they will cut output.
