Reader Thoughts & Comments on “The Old Economics of Devonian Water” By JC Collins
gustavsaure>>>> Thank you for yet another insightful article.
But human ingenuity hasn’t changed the fact that the rate of production of liquid fuels has clearly plateaued when it needs to increase by 6-8% a year. Where will the energy come from to accommodate into the middle class 500 million to 1 billion Asians over the next 10 years?
What does this zero-sum energy game mean for the US when a 5% reduction in oil consumption translates into a 36-year low in labor participation (otherwise known as “unemployment”)? Every calorie going to Asia will come from the West (read: US).
gustavsaure continues >>>> The infrastructure of the US was built on an EROI of 100:1. EROI is now more like 10:1. Oil sands are 6:1. A hundred years ago the bankers were fighting over the Middle East because of how much oil was there. Today they fight because of how little remains.
But it is high-EROI, which may speak volumes about how high the EROI needs to be for industrialized economies, given that everywhere else it is collapsing.
Especially economies built on the internal combustion engine. I mean, how can we talk about technology and ingenuity saving us when the primary means of transportation is the same bloody engine that was used when the telegraph was the primary means of communication?
Clearly the bankers see control of energy as a means to expand debt and thereby enslave people. Which is why there’s no way private debt will be restructured.
Which is why however the resource wars work out, Asia will get the oil, not the West, as there are three generations over there yet to enslave.
If the problem was only debt and they could roll over the paper without disruption, then one must ask, “Why now?” Because economies don’t run on debt they run on energy.
I would submit that the bankers realized by 2007 that liquid fuel production peaked in 2005.
Within a year the BIS collapsed the system running up oil even more quickly and choking the leverage with “mark to market” etc. The shalegasm buys them time to get their ducks in a row, just like QE.
Perhaps the extraction of such low-EROI liquid fuels is only possible with a high price of oil and low cost of money. And now we are seeing the resource wars break out in earnest.
As Tainter has shown brilliantly, there is a diminishing marginal utility on each additional unit of complexity, which requires more and more energy to maintain.
Humans have never transitioned from a more concentrated energy source to a less concentrated one. Are there any metafuels on the horizon to accompany our metamaterials? If not, it is collapse, not consolidation. Hope I’m wrong.
cramley >>> The peak oil meme is a technocrat scam. Check out Hubbert’s connections to technocracy. The oil sector goes thru capex cycles.
Gustavsaure>>> It’s not about capex. It’s not about money. It’s about EROI and rate of production. It is indisputable that liquid fuel production has plateaued. Because it needs to grow at 6-8%, that means net-net it is declining. Not conspiracy. Just math.
gustavsaure>> Fascinating stuff cramley, but I’m still at a loss as to how this affects rate of production. Incidentally, the earth has plenty of methane itself.
And it is thanking the human race for all of its carbon emissions by releasing it into the atmosphere via the Laptev Sea. Mitgation efforts to reduce the effects of a greenhouse gas 100x worse than CO2 could be quite interesting:
It’s above my pay grade to know precisely how serious this apparently psychopathic effort is. But I couldn’t ask more informed and intelligent readers to take a look.
Danielbradford>>> Why is there no Middle Eastern representation in the SDR basket?
Is it possible that oil could be added to the basket at a later point in time?
Danielbradford>> Let’s say that a handful of the more stable mid-eastern countries wanted to add oil…similar to the Euro..,?
JC Collins>>> I don’t see oil itself being added. And a regional diner currency would likely not be added for another 5 years, if not longer.
matt (@speedspirit42)>>> So lets see if I got this straight in layman terms.
The CIA created the IMF. The Bankers are the manifestation of the greed mass consciousness of humanity who rule the world by pillaging countries the latest being the United States.
China got its Gold back so they are happy for now. These BRIC’s countries know the USA and London have enjoyed “exorbitant privileges” but are willing to set up a more equilateral system with the “bully with the steel marbles.” Knowing full well that its probably a terrible plan but for survival purposes its the only plan?
JC Collins>>>> The powers that created the IMF also created the CIA. All countries follow the mandates of the BIS through their central banks. And we need to focus on who provides the marbles. All roads lead back to the BIS.
nanook73>>> JC Said, “All roads lead back to the BIS.”
Banks are powerful institutions. BIS is located in Switzerland. Such things can cause the mind to wander like a pinball through the halls of history.
An elderly Israeli friend of mine has a strong dislike for the Swiss. He says they are worse than the Germans (think long term memory type stuff).
I disagree… my ancestors were Swiss and I turned out ok :-) . They were good at minding their own business. Why that is may be more complex than we are lead to believe however. Just say’n.
Ever wonder why?
and here: http://en.wikipedia.org/wiki/Switzerland_during_the_World_Wars
and here: http://www.bis.org/about/history.htm
It’s a good model for self _defence_ but one has to admit…. also an anomaly in any western country in this day and age. Every wonder why it has been _allowed_ to continue?
Of course Swiss military structure and “neutrality” go back further than this and they have had some interesting alliances (not as seemingly neutral as they appear) and so it sort of makes one wonder does it not? http://en.wikipedia.org/wiki/Swiss_Guard#Pontifical_Swiss_Guard
Reverse engineering history a bit here but we can see the micro become the macro here if we look close enough.
“All roads lead back to the BIS.” says JC. And it would seem they lead even further back of course. But this is a matter for someone with more time and expertise than me. I’m no expert…. just a person with a lot of questions.
Just dot connecting of course. The flip side is it could all just be a coincidence. Nanook
chuc1997>>> Look at who Chairman of the board of the BIS is – Christian Noyer.
Look at what Wim Duisenberg called Noyer at the press conference rolling out the Euro in 1999 in response to a question about the Euro’s gold reserves, marked-to-market quarterly: “Christian, you take this question – you’re the gold man!”
SDR/IMF is US govt…BIS controls global central banks. Head of BIS Noyer has already helped build one currency (Euro) and he was a key voice encouraging adding physical gold at a 15% weighting at the time (but which is now >50% of ECB reserves by value), strengthening that currency against the one commodity that the EU can’t produce on its own: oil.
The inclusion of gold, marked to market, makes the euro an unsinkable currency. In extremis, the ECB can print euros and bid for physical gold in the open market and thereby strengthen their currency as the existing gold reserves would rise by more than the dilution from printing euros.
deejj87>>> With further consolidation then, there would be global zones of currencies like a common South American currency, North American Currency, GCC Dinar, African currency etc. as the next step for consolidation (funded by liquidity of the new SDR method of liquidity control, debt consolidation, and bond allocation) until there is one common currency globally for trade (perhaps the SDR will have regional currencies in the basket rather than individual countries)… Along with a further deeper linking of IMF, UN, BIS and WB…
Just a thought how further consolidation is possible.
makanda62958>>> As Schenk asks, in what currency would gold be valued? xau/usd has been falling xau/eur has been rising for the past year. Shanghai perhaps has no futures, since delivery is taken, tying physical to paper?
As an aside to earlier comments, Peugeot has developed an engine providing 100 km for 2 liters of gas available in 2 years. Electric cars are now available. EROI is adjusted by market.
Not all infrastructure is American. There are plastics to harvest. I gave up my car 7 years ago to be healthier and happier. Evolution is possible. Paradigms change.
irrelevant111>>> Don’t look down… Icarus Ascending: http://youtu.be/Bu0opE8-MvE
cramley>>> Ah, the Swissies. Check out this channel. https://www.youtube.com/user/chatzefratz
Very interesting stuff. The Swiss always in the background, neutral and above the fray. Why is that?
Roger Parness>>> The SDR mutation has the same likelihood of functioning in the long run as the frozen lake machination. None.
“Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.” ― Albert Einstein
Cramley>>> Something puzzles me. From FY 2002 thru FY 2014 we have run an accumulated deficit of 8.411 Trillion. Yet the total public debt outstanding rose by 12.017 T in that time frame. An extra 3.6 T. The interest payments go into the annual deficit numbers so it can’t be that.
There was one year that was odd, FY2013. The deficit was 680B matching the increase in total debt (672B). That was during latest debt ceiling impasse.
Things went back to normal in 2014. Deficit of 492B, but debt increase of 1.086T.
mag51>>> This link; http://www.gold.org/sites/default/files/documents/gold-investment-research/gold_renminbi_multi-currency_reserve_system.pdf is to an OMFIF 2013 paper “Gold, the renminbi and the multi-currency reserve system” posted on the World Gold Council website which reinforces much of what JC has written. It’s long, but in my opinion worth the read.
chuc1997>>> JC- If the only export you had was cheap oil, and you knew the cheapest marginal source of oil was the tar sands you described above, why would you ever consider selling your cheap remaining oil for SDR’s when your article guarantees me that my cheap oil will remain more valuable in SDR terms for the longer I left it underground?
JC Collins>>> Oil underground has not been mined, produced, refined, or brought to market. SDR’s will act as a means of exchange. Canadian oil, when mined and brought to market, will be exchanged for SDR’s. Those SDR’s will then be exchanged back into Canadian dollars.
That’s how reserve currencies work. Oil is a consumable commodity and is not a stable store of wealth. Oil is not, and can never play a role as money. There still needs to be a means of exchange for oil and other commodities, such as rice, wheat, wood, etc..
The world is not going to implement a straight barter system. So all this talk of oil being added to the SDR basket, or acting as a store of wealth are non-starters.
chuc1997>>> Oil won’t be added to SDR, I agree.
But what is wealth? SDR’s? Stocks? Government bonds/fiat?
What is the value of those “wealth assets” without oil?
The answer is “close to $0.” So the new reserve asset will be what oil says it is, not what western oil consumers say it is.
Witness the push for us to export oil – it is a desperate attempt to maintain a seat at the table
Cramley>>> The OMFIF piece on the Gold,Renminbi, and the Multi-Currency Reserve System emphasized the line the Chinese monetary authorities between promoting gold ownership and deepening the renminbi market.
A gold mania would hamper internationalization of the renminbi. So that leaves the options of a manged gold rise while the RMB matures or a massive overnight revaluation and plateau.
If they chose a gentle bull market, it will be important that gold doesn’t rise more than the yield on RMB/SDR bonds, otherwise confidence will be lost. But if the world is to ever delever then this debt load will need a negative real rate in order to be serviceable.
Again confidence will lost in bonds failing to keep up with increases in general price level. It would only make sense to lever up, buy a boatload, and flip them to a QE agent for a cap gain. That’s what we have now, macroprudential policy, aka financial repression–keep real rates negative and the gold klaxon from blaring.
However if they chose a one-time revaluation to a higher equilibrium price and allow gold to extinguish a lot of this debt, then the delevering is over.
Now currencies can get up to interest rate velocities, cavitating a bubble of real income ahead of them–a positive real rate, taking over the store of value function from gold as the world leaves debt deflation behind.
This quote on page 27 was insightful:
” On the other hand, any overt Chinese declaration on the central role of gold would automatically damp Chinese people’s faith in fiat currencies and could promote an unhealthy over-interest in the metal, with negative effects on the country’s stability. For these rather complex reasons, the Chinese government’s official gold stance is likely to remain rather non-committal.”
Roger Parness>>> Brother can you spare an SDR?
Comments may be made at the end of Part 2 Thank You