Nicole Foss

 
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  • in reply to: Jeff Rubin and Oil Prices Revisited #4720
    Nicole Foss
    Moderator

    Jerry McManus,

    I think Michael Hudson is great.

    in reply to: Jeff Rubin and Oil Prices Revisited #4719
    Nicole Foss
    Moderator

    TheTrivium4TW,

    There is a risk with treasury direct, as with everything else. It is one of the least worst options at this point, but that doesn’t in any way mean risk free, or a long term bet. The point is that it is liquid, and that you could extract it fairly quickly if risks increase. Warning signs will be evident in advance if you know what to look for. Keep your eyes open for rising interest rates on short term US debt, because when those yields start to go parabolic, it’s the endgame.

    Short term treasuries and cash under your own control are both means of preserving capital as liquidity. Each option has its own risks. In the case of short term government debt, the risk is that at some point the government will probably convert short term debt to long term then default on it later. I would argue that we are nowhere near that point right now, hence in the relatively short term the risks are lower than for most other things. be careful though, because risks will be everywhere no matter what you do.

    As for gurus, they generate herding behaviour. This means that people jump uncritically on to their bandwagon, which then picks up momentum. Of course it always ends up over the cliff, like all swings of positive feedback. I want people to think about the foundations of everything and how it all fits together. Ideally they would read all the primary sources and make up their own minds, but few have time. I offer my view from a position of having done that over many years. People are free to accept it or not, or evaluate it themselves with more research of their own. There are no bandwagons here.

    Also, as you say, there is more to life than knowledge – there is humanity and all the values that come along with it. At the end of the day, people will not care how much you know until they know how much you care.

    in reply to: Jeff Rubin and Oil Prices Revisited #4718
    Nicole Foss
    Moderator

    Viscount St Albans,

    You misremember what I said back then. Look it up if you like. I said that I would be surprised if the Dow was above that level by that time, and I said nothing about the S&P. I have been surprised before, as all of us have no doubt. Market timing is probabilistic, so predictions are made on the balance of probabilities. When I talk about timing, I am looking at the ebb and flow of liquidity, and everything else flows from that because markets are not independent. They are all moving with the ebb and flow of confidence and therefore liquidity. I did not expect the counter-trend bounce to last as long as it did (into a rolling topping process across all markets beginning in May 2011). The fact that confidence held up for a little longer than I expected, and that other trends therefore continued their former trajectory for longer before reversing, is entirely immaterial to the outcome. It does nothing to invalidate the model of where we are going and why, and that is far more important than short term timing.

    Notice, if you read what I wrote carefully, that I am not criticizing Rubin for his timing. If the issue was a minor one of timing, I would not have written this article at all. I do not nitpick. My point about his position goes far deeper. I am saying that his view of the world is fundamentally mistaken in almost every way. His model is wrong, his understanding of drivers is wrong, he extrapolates trends forward with no means of anticipating trend changes, he has no idea of large scale economic cycles or the role of credit and debt, he doesn’t understand collective psychology or geopolitics, and has no idea of the broader context, including ecological overshoot. He has a highly simplistic drum that he bangs again and again. When it conspicuously fails, he papers over the cracks with superficial justifications that do nothing to improve the predictive power of the model, even in terms of its one-dimensional task of predicting oil prices.

    His abilities as a communicator are obscuring huge flaws in what he actually says. People like simple explanations and soundbites. They can relate to those far more easily than to nuanced complexity, and the resulting memes can be very catching. They can become entrenched very easily and are then very difficult to shift, despite multiple failures to explain important outcomes. Mr Rubin is very good at implanting incorrect memes into the public imagination, and is very handsomely rewarded for it. To each his own. I’ll stick with complexity in all its glory.

    in reply to: Jeff Rubin and Oil Prices Revisited #4703
    Nicole Foss
    Moderator

    When I spoke to him at ASPO he didn’t think debt was an issue (or the money supply, or the velocity of money). Neoclassical economists typically hold that view. Their model is fundamentally wrong, so it’s no wonder they can’t anticipate trend changes.

    And as for gurus. I agree. Why anyone would want to be considered one is beyond me. Guruhood seems to come with ideas that are far too simplistic, which is why they catch on so readily. I prefer complexity and nuance. It’s more intellectual honest for one thing. The challenge is to embrace complexity, but to make it comprehensible. Gurus do soundbites. I never will.

    in reply to: Libor was a criminal conspiracy from the start #4574
    Nicole Foss
    Moderator

    People ignore fraud so long as it’s keeping a ponzi expansion going, because that floats enough boats to keep people from questioning its foundations. So long as there’s something in it for them , even if its a very minor share, they don’t ask where it comes from. When the pie is shrinking, however, it becomes a very different story. People start looking for, and finding, fraud all over the place, because that’s what ponzi schemes are built upon. The herd is about to get very angry, and that is very dangerous for conspicuous beneficiaries of the fraudulent system, whether or not they were actively involved in fraud themselves.

    Of course getting caught up in revenge-seeking is pointless. It won’t punish anyone who truly deserves it, nor will it bring back the good times. It’s more likely to result in taking out the anger on a few hapless minions while consuming people’s limited energy and resources and handing a political mandate to some ghastly extremists. Far better to turn one’s back on the whole unedifying spectacle and focus on the things that really matter, like building self-sufficiency and resilience.

    in reply to: Peak Oil: A Dialogue with George Monbiot #4530
    Nicole Foss
    Moderator

    drbob,

    I am generally with Ugo Bardi on this debate, in that I see decline unfolding much more quickly that expansion did, although I don’t see us falling all the way to the bottom in one episode. My view is that we will see various stages of collapse, like going over a series of cliffs, with intervening periods of partial recovery (with considerable variation between places depending on local circumstances).

    The socioeconomic complexity that has developed during the bubble era, largely as a result of high EROEI conventional fossil fuels, cannot be maintained once those are no longer available. Although they are not going to disappear overnight, access to them could be compromised quickly given that access relies on a functioning economy. When bubbles burst, finance become the key driver to the downside, since changes in the financial sphere unfold so much more quickly than changes in supply and demand in the real world.

    We are on an accelerating treadmill with regard to energy and would have to run faster and faster just to avoid being flung off the back. If EROEI falls by a factor of ten, production would have to rise by a factor of ten just to keep supplying the same demand (ie to stand still). This would require our ponzi financial system to go on expanding in order to keep the necessary liquidity flowing, and this is not going to be possible. Of course the complicating factor is that demand will change as well. Supply and demand for energy in the real world will interact in complex, non-linear ways with the dynamics of the financial world and collective human psychology (ie herding behaviour). The psychology of contraction is a very powerful force leading to self-fulfilling prophecies to the downside. Trust evaporates and people pull away from each other, disabling larger scale endeavours.

    Financial collapse (cascading system failure as our JIT systems unravel) will drive simplification, depriving us of the ability to get back on the treadmill at a later date. That’s not to say we wouldn’t be able to achieve anything, but that we will not be able to achieve anything like what we were used to. What energy we do have access to will be considered much more valuable than it is today (when it is taken for granted).

    As you say, for the relatively few people lucky enough to maintain access to liquidity, the falling prices deflation will bring about will mean things will become more affordable. (Of course if the lucky people do nothing to prepare for the next stage they are going to be in for a shock down the line.) For the majority, who will lose access to liquidity, things will become less affordable even as prices fall, because their purchasing power will be falling faster than prices. This is why I tell people to hold liquidity if at all possible. Even a small amount could make a very big difference in a future where the money supply has collapsed. Liquidity represents freedom of action.

    In the future we are going to realize how truly exceptional our period of history has been. Everything we thought was normal was the result of a huge energy subsidy amplified by the largest financial bubble in human history. We are going to have to adjust to a radically different new normal in the relatively near future, and we are not going to like it. There’s nothing so addictive as freedom, and the loss of access to money and energy is going to deprive us of much of that.

    in reply to: Unconventional Oil is NOT a Game Changer #4438
    Nicole Foss
    Moderator

    Renewables represent a drop in the bucket of global supply. They are having no effect whatsoever on fossil fuel prices. They are more expensive than fossil fuels because of their very low EROEI and very large fossil fuel dependency. In fact renewables is a minomer. The sun will continue to shine and the wind to blow, but steel is not renewable and neither are many other essential components.

    The demand and price collapse will kill much of renewable development, especially at a large scale. You cannot run an industrial society on intermittent energy sources with low EROEI. Feed in tariffs are already being cut worldwide, and without them renewable power is not competitive. Since we cannot run this society on renewables, our society will have to change. We will have to learn to live within our means.

    This article was not about poisoned aquifers. I have written about that before though. I cannot cover everything in every article or there would be no focus. Of course fracking is obscene, the environmental risks are huge and a few well connected individuals are making a killing from the ponzi scheme. The price collapse will eventually prevent it, just not right now when there is still money to be made. The numbers are bad even with externalities excluded, and are of course much worse with them. Some of these things are very difficult to quantify, and over-quantification doesn’t really help anyway.

    This is real politik – the way the world really works. It’s about money and power. The expansion phase of the bubble concealed that for a while by floating many boats temporarily. I wish that wasn’t the way it worked, but it does, whether we like it or not. All we can do is to understand our situation and make the best of it.

    in reply to: Unconventional Oil is NOT a Game Changer #4434
    Nicole Foss
    Moderator
    in reply to: Unconventional Oil is NOT a Game Changer #4433
    Nicole Foss
    Moderator

    Westexas (Jeffrey Brown) over at TOD has a good data set on oil prices in the Great Depression:

    “The Thirties Analogue:

    Annual nominal US crude oil prices* 1929 to 1939

    1929: $3.67
    1930: 2.38
    1931: 1.79
    1932: 1.82
    1933: 1.78
    1934: 2.39
    1935: 2.13
    1936: 2.43
    1937: 2.69
    1938: 1.90
    1939: 2.06

    *Data Source: Global Financial Data

    It appears that global crude oil consumption declined in 1930, 1931 and 1932, and then started increasing in 1933:

    https://www.oilposter.org/posterlarge.html

    I obtained the Global Financial Data from Mark Perry, who had the following blog post, which shows 1930’s (inflation/deflation adjusted) monthly oil prices in constant 2008 dollars:

    https://mjperry.blogspot.com/2008/11/oil-shock-of-1930s.html

    Note that both adjusted prices and nominal oil prices rose after 1933, with the 1938 decline still being above the 1933 price level.”

    This is my response:

    I am expecting oil to bottom relatively early in this depression, as it did in the last one. My guess would be a bottom within the next 5 years at the most, and quite possibly sooner. Economic contraction and collapsing purchasing power should push prices down a long way (a temporary $20/barrel would not surprise me), but military demand will probably start to pick up as countries chase after their share of the liquid hegemonic power. I am expecting resource wars and internal conflict within resource rich countries to take supply off the market. I am also expecting production and distribution infrastructure decay and deliberate damage. In addition, trade collapses in depressions, meaning that we would see oil cease to be fungible. Price could vary substantially both in time and between places. The overall picture is likely to be a very complex blend of technology, finance, geopolitics and many other factors.

    Even if prices are low in nominal terms, that does not equate to greater affordablity. Purchasing power for most people will have fallen much further than the oil price, making oil considerably more expensive in real terms, even as prices are bottoming. As the next price cycle begins, and prices rise substantially, affordability will get drastically worse. We could see a new high in nominal terms, but real terms matter more anyway.

    in reply to: Cuckoo in the Coal Mine #4383
    Nicole Foss
    Moderator

    My father and brother-in-law think I’m crazy as well, and I don’t even try to talk to some of my friends in Canada about this anymore. Their eyes glaze over the minute I open my mouth, and I know they’re not listening. It’s very sad. I can’t help people there, so I spend my time where I can help people, anywhere in the world where people are prepared to listen.

    in reply to: Shale Gas Reality Begins to Dawn #4299
    Nicole Foss
    Moderator

    David Hughes is the expert on EROEI for natural gas. I believe several of his ASPO presentations are available online, as is a major paper of his (the name of which currently escapes me). Also, I highly recommend Art Berman’s work at The Oil Drum. There are links to both in my shale gas primer (linked to at the beginning of this piece).

    in reply to: Shale Gas Reality Begins to Dawn #4298
    Nicole Foss
    Moderator

    Karpatok: I am considerably bemused that anyone who has read our work here could possibly come to the conclusion that we represent a proselytizing christian evangelical perspective. Suffice it to say that we do not. Also, the last thing we would wish to do is to fan the flames of fear. We are warning people that collective fear is coming, what effects that will have on society, and how to prepare psychologically so as not to be caught up in it. As always, on the way up people are not nearly concerned enough, so that warnings sound like fear-mongering. On the way down people panic, and trying to keep them calm and focused under those circumstances is even more difficult. In a year or so people will be calling my Pollyanna, because I’ll be telling them it’s not the end of the world, and that they can still keep putting one foot in front of the other if they don’t lose their heads. Such is life for contrarians. Because one is always out of step with received wisdom and collective mood, credibility suffers when it matters most. People are more comfortable being wrong all together than right alone.

    Golden Oxen: TAE is a company. It is a full time job for Ilargi and me and we have to eat, as you say. As for touring, we simply go where we are asked to go. A packed tour schedule reflects a lot of local interest. When travelling a long way, one might as well be as useful as possible. We stay with local people and ask for far less than anyone else doing this work. We would make more money if we flipped burgers for a living.

    The received wisdom on natural gas simply reflects the hype uncritically. Never take hype at face value. Most so called analysis just extrapolates forward a combination of PR and previous trends, with no attempt to anticipate trend changes. We typically disagree with mainstream opinion as it has very little value (except to the few who are helped to feather their nests at everyone else’s expense as the herd is encouraged to stay invested on the ponzi scheme).

    Agelbert: I consider everything from a broad perspective, and I have no argument with Vandana Shiva. Energy profits are frequently claimed where none exist.

    in reply to: Shale Gas Reality Begins to Dawn #4262
    Nicole Foss
    Moderator

    This one was by me rather than Ashvin. I’m more interested in EROEI than ROI. EROEI is disastrous for shale gas, and shale oil as well for that matter. Companies that stake their future in this sector are destined to go out of business, hopefully before fracking occurs anywhere else.

    Nicole Foss
    Moderator

    mbp8081,

    Why do you say we were wrong in spring 2009? We forecast a major rally, at the same time as most people were forecasting imminent demise of the banking system. We were right that there would be a rally, although we underestimated its duration. Now that rally is over. Various asset classes have topped at different times over the last few months, with the major trend change dating to May 2011. All of them, including the holdouts, have topped now. The next phase of the credit crunch has begun. Watch out below….

    Nicole

Viewing 14 posts - 201 through 214 (of 214 total)