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Tuesday, January 5, 2016

fire sale 2 of 4


FIRE SALE? 2
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We just covered current retail practices which negate the possibility of fire sales.  Will anything change so that the dynamics differ?  Again, no.  We can look forward to more inflation, especially once the Petro-Dollar takes a few more hits.  Unemployment will continue to increase.  Purchasing power to continue to dip.  Even if oil prices stay down, transportation costs will increase so even less inventory will be on hand.  In short, this ain’t your daddy’s economy and our consumer based economy is on the way out ( to be replaced by die-off and subsistence farming ).  Consumerism was nothing more than a profit and employment substitution for an industrial economy and since we were consuming petroleum ( in the form of plastics, energy to form silicone and energy to extract the last of the diffuse ores ), once oil started to contract in supply, so does our economy.  If we were still running factories the same would have happened ( now, look at China.  Global demand destruction is idling factory production.  Do you see fire sales?  Of course not.  Every mark-up in the food chain is razor thin and everyone is financed to the max.  There isn’t any discounts in price if you would be selling below cost ) as they are also energy dependent.  Factories, retailers, they are all at the same petro teat which is drying up.

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( fracking oil was at most a 50% boost in our production.  From five million barrels a day to seven and a half.  We were importing 20 a day, then down to 18 after the ‘08 crash.  18 minus our production, which is continental conventional-Texas and Oklahoma production, stripper wells in California [ which used to be our #2 producer, but that was almost a hundred years ago ] and everything else in the lower 48- AND Alaska [ which is so far down in production from its peak there was danger to the actual pipeline from lack of volume ], AND Gulf Of Mexico deep well production AND fracking all combined was STILL leaving the need to import 60% of our daily petroleum use.  Yet, globally, over half of the producers are in decline and most producing nations are seeing more domestic production going to a growing population which means less for export.  AND, global production has already peaked and started to decline, if we take delivered BTU’s rather than total production- 70 mbpd, verses the reported 85.  Prior to Peak 2005, we were at 75 mbpd globally.   If you go by net energy, the figures are even worse ).

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Our PetroDollar monopoly, getting Saudi Arabia to only accept US Dollars for oil, which at the time pressured OPEC to do the same, is clearly on its last legs.  More and more countries are trading for Anything Other than Dollars ( AOD’s, my cute twist on IUD’s ).  Countries we can’t invade to send a message to the others to tow the line, like China and Russia.  It worked in Iraq, except then it didn’t work as instead of being fearful everyone started to fixate on getting out of the US orbit.  The US drove most countries into the eastern axis, giving Chinese and Russian the geopolitical power they didn’t have yet.  We shot ourselves in the foot, an easy thing to do when you run a country for profit rather than power ( such as when you piss away your petroleum on suburbs and vacations and bankers growth.  Russia still has enough reserves to ensure military security, despite pissing a lot of it away for operating capital.  They pissed away a lot less.  Even their version of Vietnam used far less resources than our long distance failed war ).  The Petro-dollar is doomed, and that is baked into the cake.  Timing is the only question.  Without the world subsidizing our economy by holding Treasuries ( which are used for petrol purchases, NOT as investment bonds ), inflation is going to get a lot worse.  Even if you were to see fire sales, as improbable as that is, your stashed dollars for such an event will be inflated away to nothing.

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12 comments:

  1. Interesting tidbit you gave about the Alaskan pipeline. I saw a story a couple days ago about Alaska passing an income tax for the first time ever, but the reason given was low oil prices, not production. Failed to pass the smell test with me at the time, now it makes more sense. Fox news had it among a few others if you care.

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    1. Hawking high oil prices as good, rather than the bad its been for decades, is just more fracking pimping. Makes me ill to hear the moronic utterings, but thanks anyhow.

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  2. 'negotiable instruments' aka something people will easily use as an item of intrinsic and mostly stable value that you can exchange towards goods, services, and paying your extortion/taxes...
    Used to be precious metals, currently it is paper cash or plastic credit/debt.
    Where will it be on the downhill slide of the crash, and at what point, and how much do you need???????????

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    1. Last sentence, million dollar question.

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    2. "Where will it be on the downhill slide of the crash, and at what point, and how much do you need?"

      Negotiable cabbages, sacks of nuts, goats, potatoes, vintage retort-packed (CIN-PAC!) disaster meals, pre-Fukishima tinned fish, coupons for local services like battery charging (cell phone battery, AAA/AA flashlight battery, or 12v salvaged car battery) for fuel-less/grid-less/panel-less people, like in Africa.
      I have a Motorola F3 cell fone from Brazil with a very-thrifty OLED screen (like Kindle Paperwhite) that has many days of standby (not Airplane mode) when on but not talking, which is perfect for 3rd world rural use. Cellular fone "money" is a big deal in African markets (backed by Yuan?).

      US Dollar paper currency will be briefly KING, then usable for maybe months, then wallpaper/kindling. Credit will break down, breaking the supply system unless it becomes militarized, to get Diesel & drivers safely into trucks. Hunker down or Be Gone (to somewhere nicer, with Tribe), since Biz As Usual is over.

      Non-PM coins may have "some" value by the pound.

      "Dies The Fire" gives nice Portland Metro food scenario. Eaters gotta eat. Die-off/kill-off, then labor shortage/knowledge shortage a couple winters later. Trick is to live through being considered "better dead" by those who would be "in charge".

      The smallest denomination of real money will be a pre-1965 silver dime, and this will be pinched until Franks leg braces buckle. $1.50 now, soon an hour hard-labor wage, maybe more.

      Electronic money allegedly backed by PM's will be immediately possible, maybe even with bitcoins relating directly to vaulted audited serialized PM bars. VISA? Cartel company-store credits? Speculative fiction authors writing dystopian stories have explored a bunch of possibilities concerning trade/money.

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    3. The new added twist is most folks have nothing of value as everything owned is Oil Age dependent. And way too many people at that. We are at the stage we are on a mountain of junk selling it to each other.

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  3. “Unemployment will continue to increase.”

    There was a fellow on the late night radio program coast to coast am last night James, and this is what he had to say:

    “AI, and robotics are moving toward making many "good jobs" obsolete”

    "The group of jobs that's really reserved for people is getting smaller and smaller...as the machines are getting capable of doing more and more, and that is something I would really expect to accelerate over the next decade or two."

    I don't think folks understand just how incredibly bleak the future is going to be? The guest speaker went on to say that even jobs that currently require a humans input, such as programming jobs, will eventually be taken over by AI. Add in the low cost HB-1 visa holders, and the fact that our population is increasing, while the amount of jobs are decreasing, to better understand just how royally screwed we are.

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    1. Yes, it sounds scary ( and, I just finished a book on this subject a few weeks ago ). But it also seems to be too much of a techno-wonder future for us to worry about. Things should fall apart prior to AI advancing sufficiently ( remember fusion always being 50 years ahead? It seems AI is the same. Moores Law can't duplicate biology ).

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    2. Fair points James. Tough to say how it will pan out? The tech would probably be limited to the few that can afford it as well as make the best use of it; the elites running the corporations, and that's enough to eliminate most human positions in the short term. The question that was also posed was:

      “With the elimination of so many jobs, how could there remain enough of a consumer economy to continue?”

      I believe the answer was that there would have to be some sort of stipend to those whose jobs had been eliminated? Of course, I think we're pretty much screwed alone on the fact that we have more people than jobs as it is in our current economy, and it's only going to get worse.


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    3. Here was the book:
      http://www.amazon.com/gp/product/B00VU1DM6C?keywords=the%20second%20intelligent%20species&qid=1452119536&ref_=sr_1_1&s=digital-text&sr=1-1
      I can't say it isn't possible, just that it seems unlikely. The Wrathful American might finally be awoken if this started playing out.

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  4. "AOD’s, my cute twist on IUD’s"

    Did you mean "IEDs" in that they blow up economies, not just vehicles?

    If you did mean "IUD", did you hear the one about the dyslexic police officer that arrested a drunk female driver for IUD?

    P.S. - Nice hair, and yes, I already bought this month's newsletter - it was great! The other minions don't know what they're missing if they haven't purchased it. Very sage advice regarding guns and money. Well worth the nominal cost.

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    1. Oops! Yes, IED. Makes you wonder where my mind was dwelling. Thanks for being an outstanding minion. :)

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