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Jeremy Grantham Goes Malthus: It's "Time to Wake Up" Or The Great Paradigm Shift From Declining Prices To Rising Prices

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Mon, 04/25/2011 - 15:29 | 1204812 Bazooka
Bazooka's picture

All of these talking heads were calling for peak oil in 2008 before oil crashed to under $35...

It ALL seems deja vu to me these months....oil up, gold up, silver up, corn up, dollar down, house prices setting new lows.....A CRASH IS IMMINENT!

Mon, 04/25/2011 - 15:28 | 1204821 tmosley
tmosley's picture

Remember, no QE last time.

BIG difference.

Mon, 04/25/2011 - 15:43 | 1204864 66Sexy
66Sexy's picture

It has everything to do with market fundamentals. Supply demand. Dollars are being traded for physical commodities. Now a new flux of federal reserve notes are entering the market from asia with no buyers, but the federal reserve itself.

 

Mon, 04/25/2011 - 16:04 | 1204910 Quixotic_Not
Quixotic_Not's picture

Obama to 'MeriKa; "Let them eat shit and die":

http://disruptthenarrative.files.wordpress.com/2011/04/obamagasprices.jpg

Mon, 04/25/2011 - 16:26 | 1205095 the mad hatter
the mad hatter's picture

Paradigm shift is right. Here is the new normal:

  • No more permagrowth
  • The overall trend is deflation but mad money printing and wreckless fiscal policy will cause inflation
  • Inflation causes consumers to consume less which crashes economy (demand destruction)
  • Leaders and banksters will again try to force permagrowth down our throats with more money-printing and "stimulus spending" which leads to inflation again
  • Rinse, repeat, trade, and profit.

Somewhere within this new normal lies the absolute destruction of your purchasing power. There will be a point where everyone gives up on the dollar after politcians and Bernanke destroy the dollar's reserve currency status.

So cross your fingers like I am and hope that we can harness fusion power and have food replicators a-la Star Trek soon.

Mon, 04/25/2011 - 19:12 | 1205678 avonaltendorf
avonaltendorf's picture

EPA kills exploration of Beaufort Sea

Shell has spent five years and nearly $4 billion dollars on plans to explore for oil in the Beaufort and Chukchi Seas. The leases alone cost $2.2 billion. Shell Vice President Pete Slaiby says obtaining similar air permits for a drilling operation in the Gulf of Mexico would take about 45 days. He’s especially frustrated over the appeal board’s suggestion that the Arctic drill would somehow be hazardous for the people who live in the area. "We think the issues were really not major," Slaiby said, "and clearly not impactful for the communities we work in."

The closest village to where Shell proposed to drill is Kaktovik, Alaska. It is one of the most remote places in the United States. According to the latest census, the population is 245 and nearly all of the residents are Alaska natives. The village, which is 1 square mile, sits right along the shores of the Beaufort Sea, 70 miles away from the proposed off-shore drill site.

The EPA’s appeals board ruled that Shell had not taken into consideration emissions from an ice-breaking vessel when calculating overall greenhouse gas emissions from the project.

At stake is an estimated 27 billion barrels of oil. That’s how much the U. S. Geological Survey believes is in the U.S. portion of the Arctic Ocean. For perspective, that represents two and a half times more oil than has flowed down the Trans Alaska pipeline throughout its 30-year history. That pipeline is getting dangerously low on oil. At 660,000 barrels a day, it’s carrying only one-third its capacity.

Production on the North Slope of Alaska is declining at a rate of about 7 percent a year. If the volume gets much lower, pipeline officials say they will have to shut it down.

[Fox News a few minutes ago]

Mon, 04/25/2011 - 19:17 | 1205688 Flakmeister
Flakmeister's picture

Read very carefully what the USGS said...27 billion is OOIP, now factor in 30% recovery. Also read up on what they define as p5, p50, p95  probabilities. Basically, there is some oil, but otherwise it is a crapshoot.

Mon, 04/25/2011 - 20:37 | 1206106 Bananamerican
Bananamerican's picture

There is, in fact, a "Paradigm Shift"

http://vaughntrapp.bandcamp.com/track/paradigm-shift

Mon, 04/25/2011 - 16:39 | 1205111 the mad hatter
the mad hatter's picture

DP, shitty internets fail

Mon, 04/25/2011 - 20:29 | 1206075 Fox Moulder
Fox Moulder's picture

Let them eat Soylent Green.

Mon, 04/25/2011 - 16:24 | 1205075 A Man without Q...
A Man without Qualities's picture

"Now a new flux of federal reserve notes are entering the market from asia with no buyers, but the federal reserve itself."

Ok, so the question is, what is the Fed giving them in exchange for these FRNs?

Mon, 04/25/2011 - 15:34 | 1204835 SheepDog-One
SheepDog-One's picture

Except this time there probably wont be a 'crash', we'll just suddenly find ourselves in a WW3, getting 'terrorist attacks' markets wont matter when youre listening in to the 1 radio channel broadcasting where its safe to go to get away from the radiation or biological weapon cloud. Of course that will be a FEMA bus terminal, but whatever.

Sun, 05/01/2011 - 11:58 | 1225511 Seer
Seer's picture

Yeah, for TPTB this really starts to sound like the only real option.  I'd love to hear from the folks who junked you as to why they feel your post is junk-worthy...

Mon, 04/25/2011 - 15:37 | 1204843 Misthos
Misthos's picture

Are you familiar with the concept "demand destruction?"

Peak Oil does not mean forever rising prices.  The rising price of oil acts as a brake on the economy.  Oil price spikes, economy crashes, oil price crashes, economy resumes....

wash, rinse, repeat....

Peak Oil isn't an overnight process either.  It's a gradual process.  We likely have already peaked in terms of conventional oil.  It's the type of thing you don't get a clear picture of until a decade or so later.  You see it in the rear view mirror, so to speak.

Mon, 04/25/2011 - 15:47 | 1204892 66Sexy
66Sexy's picture

Rising oil prices brake the economy but justify QE 3.

NET? Exactly what we have now, main street / wall street disconnect.

What we are seeing now are the initial stages of international dollar hyperinflation. The rush out of the dollar by the international community is happening now.

This means the dollars are coming home to roost, in the form of higher prices across the board, prices being buffered by corporate earnings that will eventually suffer.

QE3 is assured, the question is how will the game be played. The problem with a pause in QE is TPTB will still be buying so there wont be a deep correction, just the same as before... BTFD economics. 

Mon, 04/25/2011 - 15:52 | 1204904 SheepDog-One
SheepDog-One's picture

Uh huh sure, its all supply and demand. Well except for the invisible hand in the iron glove BATS canceling trades, printing money, manipluating stocks and bonds...other than that just normal central bankster owned unfettered free markets.

Mon, 04/25/2011 - 15:52 | 1204922 Quixotic_Not
Quixotic_Not's picture

The proper term is "Divide & Conquer"...

Mon, 04/25/2011 - 15:59 | 1204957 Misthos
Misthos's picture

I agree - It's not all supply and demand.  Obviously speculation occurs, especially in a ZIRP (QE) world. But that speculation also exaggerates price swings on the way up, and on the way down.

We live in a complex world.  Many factors enter the equation.  But on a macro, long term level, Peak Oil is happening right now.

Forget economics...  just look at how the world powers are carving up Africa right now. Why do nations engage in resource wars?  

Scarcity.

Mon, 04/25/2011 - 16:08 | 1204974 Quixotic_Not
Quixotic_Not's picture

We live in a complex world.

 

Not really -- The banksters only established "The U.S. Treasury Direct-to-PD" looting model in 2008...

Things aren't really all that complicated, unless you need them to be  ;-)

Mon, 04/25/2011 - 16:10 | 1205018 SheepDog-One
SheepDog-One's picture

Not complex, just iron fisted banker market control. 84 stocks flash crash? No problem, delete the trades by time machine. Oil from $35 to $148 to $30, thats 'demand'...funny I didnt see everyone riding bicycles back then, demand for oil only fluctuates a few % at most.

Mon, 04/25/2011 - 16:20 | 1205054 Misthos
Misthos's picture

I said I agree, speculation is part of the problem.  But demand is growing globally.

How many people were riding bicycles in China 20 years ago?  How many drive cars instead today?

Why are we increasingly seeking unconventional and more expensive to produce oil like tar sands and offshore?  Because the cheap easy stuff is either running out or not enough for the world economy.

Hey, I'm no fan of the banking cartel either...  but there is more to it.

It is complex.

Sun, 05/01/2011 - 12:07 | 1225527 Seer
Seer's picture

The  fundamentals aren't complex, but what we do them ARE.

Sigh... sadly people will still pick windmills to tilt at lest they have to confront the realities that their iPod, SUV-driving ways can't be sustained.  It's like declaring gravity bad because one tripped and fell- gravity, it's a conspiracy don't ya know! (NOTE: I DO believe that conspiracies exist -duh!-, but some calculate out at such low probabilities as to be near improbable (hence not worth spending time speculating over).

Mon, 04/25/2011 - 16:41 | 1205138 Peak Everything
Peak Everything's picture

"It's a gradual process."

Maybe. Maybe not. 1) Technology currently used to enhance oil recovery will result in a steeper decline curve. Think adding more straws to the same drink. 2) Politics in exporting countries may accelerate export reduction once it becomes clear we are on the downslope. "Let's save some for our kids". 3) Producing countries generate wealth which increases internal consumption of energy thus reducing the remainder available to export. Google "Export Land Model" for more information. 4) High energy prices will temporarily collapse demand and prices thus disrupting the long term investment capital needed to maintain current supply. 5) Higher energy costs and/or lower net energy supplies will reduce surplus wealth (aka savings) in society thus reducing our ability to invest in new energy production resulting in a swift positive feedback collapse of civilization. 6) Wars initiated to fight over the remaining resources will burn more of the resources being fought over thus accelerating the collapse.

Sun, 05/01/2011 - 12:11 | 1225539 Seer
Seer's picture

Pure facts/logic!

I'd summarize the difficulties as that of the reversal of economies of scale.  And with energy this affects EVERYTHING.  Decrease gas sales and you increase the cost of shipping: trucking will incur more of the costs for road maintenance (POVs help subsidize trucking); price of goods have to be pushed up (relative to income), resulting in less sales in these other goods, which then pushes trucking costs up, which...

Mon, 04/25/2011 - 16:10 | 1205019 Popo
Popo's picture

This crash is going to be one for the history books...

Mon, 04/25/2011 - 16:20 | 1205052 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Saudi oil production peaked, as reported by such mainstream news vehicles as cnbc, in '09.  If they were the swing producer, what does that mean for oil production?  Russia is the world's second largest producer of oil.  Russian production peaked in '89.  Once again, what does that mean for production?

Mon, 04/25/2011 - 17:36 | 1205364 Diogenes
Diogenes's picture

All of these talking heads were calling for $100 a barrel oil in 1979 before oil crashed to under $35 in 1981 and eventually fell to $11.

I can also show you similar predictions from 1947 and 1913.

Sun, 05/01/2011 - 12:20 | 1225553 Seer
Seer's picture

OK, show us!

Oh, and please explain how we could NOT run out of oil given that this is a finite planet.  Do you re-fill your fuel tank?  Why?  Why doesn't it magically re-fill on its own?  Also, how come people who go through their entire lives w/o cancer GET cancer?

Because something was once false (based on incomplete/false data) does not mean that it will always be false.  But, go ahead, continue to believe in unicorns and skittles; just don't ask me to fund your wars for what you believe is abundant.

Mon, 04/25/2011 - 18:28 | 1205548 trendybull459
trendybull459's picture

Absolutly agree!

Mon, 04/25/2011 - 18:28 | 1205551 trendybull459
trendybull459's picture

Absolutly agree!

Mon, 04/25/2011 - 18:28 | 1205560 trendybull459
trendybull459's picture

agree 100%

Mon, 04/25/2011 - 22:58 | 1206472 gabeh73
gabeh73's picture

I have read and enjoyed Grantham's letters over the years, but this is crap. Prices for commodities aren't rising because of the ideas of malthus and his more recent retreads like Ehrlich"population bomb".

 

The money printers caused rising prices. Now when prices rise the people who favor a stronger and more centralized government will use the "resource scarcity" peak everything meme to gain control.

 

of course they will also blame "speculators", "hoarders" and "greedy" people who are scared of their families starving due to a totally corrupt government!...but the "peak everything" meme is the one that worries me the most because that is one theme that I see many here at ZH falling for. Sure we are all now aware that unallocated inventories and secure vault storage fees at JP Morgans finest facilities in London is a scam...but seriously people don't fall for this shit.

Read about the history of the peakers predictions. The peak energy guys are always shifting the definition of "conventional easy to find". One guy thought soceity would collapse when the caves in south america ran out of bat dung...then it was whale oil...then iit was a peak pennslyvannia oil...then texas...then saudi Arabia...the last 5 years has seen shale gas drilling know how improve so much that our nat gas resource base more than double from 50 year supply to 100 year supply...and that shit is all over the world but much of the world is still flaring natty so people don't even bother looking.

Sun, 05/01/2011 - 12:31 | 1225566 Seer
Seer's picture

Are you saying that the costs of oil extraction are still the same (even if inflation is factored in)?

I'd suggest that extraction costs ARE going up, and it's got less to do with inflation than with the degree of difficulty encountered.

"the last 5 years has seen shale gas drilling know how improve so much that our nat gas resource base more than double from 50 year supply to 100 year supply"

This is absolute rubbish!  It's MEANINGLESS!  What kinds of consumption levels are you talking about?  50 year, 100 year "resource base" means WHAT?  Is it enough such that if I were to switch EVERYTHING over to this energy source that it would still last 100 years?

Nothing like shallow thinking to land one in a shallow grave.  Best of luck to you! (but again I have to remind folks not to pick my pockets in order to continue feeding your addiction- no spilling the blood of my kin/loved ones for your failure to understand simple math).

Tue, 04/26/2011 - 02:21 | 1206477 gabeh73
gabeh73's picture

I have read and enjoyed Grantham's letters over the years, but this is crap. Prices for commodities aren't rising because of the ideas of malthus and his more recent retreads like Ehrlich"population bomb".

 

The money printers caused rising prices. Now when prices rise the people who favor a stronger and more centralized government will use the "resource scarcity" peak everything meme to gain control.

 

Of course they will also blame "speculators", "hoarders" and "greedy" people who are scared of their families starving due to a totally corrupt government!...but the "peak everything" meme is the one that worries me the most because that is one theme that I see many here at ZH falling for. Sure we are all now aware that unallocated inventories and secure vault storage fees at JP Morgans finest facilities in London is a scam...but seriously people don't fall for this shit.

Read about the history of the peakers predictions. The peak energy guys are always shifting the definition of "conventional easy to find". One guy thought society would collapse when the caves in south america ran out of bat dung...then it was whale oil...then it was a peak pennslyvannia oil...then texas...then saudi Arabia...the last 5 years has seen shale gas drilling know-how improve so much that our nat gas resource base more than doubled from a 50 year supply to 100 year supply...and that shit is all over the world but much of the world is still flaring natty so people don't even bother looking.

Mon, 04/25/2011 - 15:30 | 1204817 tmosley
tmosley's picture

Yeah, it's clearly caused by demand, because we are all running around buying more, driving more, wasting more, now that everything costs more.

All followers of Malthus should kill themselves and save us the annoyance.

Mon, 04/25/2011 - 15:31 | 1204827 SheepDog-One
SheepDog-One's picture

Thats what I tell all the depopulation pushers...go set the example jump off a bridge.

Mon, 04/25/2011 - 15:50 | 1204894 A Lunatic
A Lunatic's picture

Well if the Darwinists actually believed what they say then they would stop trying to save the ignorant effing sloths that suck up every damned thing they can get their hands on. Do you realize that my chainsaw came with a warning to not attempt to stop the blade with your hands? I say if someone is that effing stupid then by all means use your hands, better yet stop it with your neck. And speaking of chainsaws, it's time we took a few thousand of them to the public trough and gut this hypocritical and corrupt system.

Mon, 04/25/2011 - 16:14 | 1205023 SheepDog-One
SheepDog-One's picture

They should in fact put a label on to stop the blade with their face. If they werent a bunch of hypocrite communists at heart.

Mon, 04/25/2011 - 15:36 | 1204848 SWRichmond
SWRichmond's picture

OMG!  Peak Stuff!  AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!!!!!!!!!!!!!!!!!!!!!!!!!

There, I feel better.

Mon, 04/25/2011 - 15:46 | 1204884 Manthong
Manthong's picture

It's peak Jack Daniels you have to watch out for.

Mon, 04/25/2011 - 16:02 | 1204948 Quixotic_Not
Quixotic_Not's picture

Nah, peak JD will be when times are still good  ;-)

It's peak .308 FMJ that you have to dread...

Mon, 04/25/2011 - 16:07 | 1205000 LFMayor
LFMayor's picture

+168g bthp.

Mon, 04/25/2011 - 17:03 | 1205250 rocker
rocker's picture

How did you know that's my favorite caliber. Have plenty. Even with Silver tips.

Mon, 04/25/2011 - 17:44 | 1205404 Pchelar
Pchelar's picture

I've thought a lot about this, and unless you already live in a defensible place (in otherwords nowhere urban or suurban...), there is little point in having more ammunition than you could reasonably carry in case you had to leave a bad place on foot in the dead of night.  Unless you can get all that ammo to a safe place BEFORE things get real bad it is not going to do you much good.  YMMV of course...

Mon, 04/25/2011 - 19:09 | 1205670 Flakmeister
Flakmeister's picture

All followers of Malthus should kill themselves and save us the annoyance.

 

Hey Tmosley, why don't you just go fuck yourself....

I mean everytime you open your mouth on resource matters you get put in your place by people that actually have a clue what they are talking about...

Tue, 04/26/2011 - 10:32 | 1207697 Lower Class Elite
Lower Class Elite's picture

Come on, Flak.  Didn't you know that there are thousands, nay, millions of giant Jed Clampett-style lakes of light sweet crude just waiting to be pumped directly into your Yukon Denali?  If only those evil enviro-commies/Middle Easterners/African villagers/space lizards would stop cock-blocking those poor, defenseless energy corporations and their governement/financial industry friends, we'd be swimming in oil.  SWIMMING, I tell ya!  

Tue, 04/26/2011 - 11:04 | 1207835 Flakmeister
Flakmeister's picture

 Yeah, it's all rosy.... Why Donald Trump just said that all we have to do is comandeer the Iraqi oil fields and tell OPEC to lower prices because they owe us....

http://blogs.forbes.com/williampentland/2011/04/23/dumbest-guy-in-the-room-donald-trumps-energy-policy/

We just gotta shoot a few oil speculators and drill our way outta this. If it wasn't for that communist vegan conspiracy in Texas that sucessfully shut in production in 1970 everyone would still be driving big-block V8s....  

Tue, 04/26/2011 - 12:13 | 1208090 gabeh73
gabeh73's picture

The big powerful energy companies have a long history of putting together groups to convince the government to put up limits to supply that can brought online. Read a couple of books about JD Rockefeller...even those that are authorized by the Rockefelelr family and favorable to him. It will make this dynamic a little more. From the organization of the Texas RRC to OPEC...this ain't a conspiracy theory.

Tue, 04/26/2011 - 14:11 | 1208469 Flakmeister
Flakmeister's picture

The state of the world oil industry has little relation to that which existed in the time of Rockefeller... The Texas RRC released all restrictions back in 1970... What fraction of world supply is controlled by the 7 sisters? What fraction of world reserves are controlled by them? Did you not find it curious that Exxon cannot replace it's oil reserves?

So, pray tell, where is all this oil that can be brought to market that is being suppressed?

Did it ever occur to you that the US lives and dies through cheap oil?

Mon, 04/25/2011 - 19:45 | 1205840 trendybull459
trendybull459's picture

I do not use more or spend more,I'm saver.Die,if you crazy using everything you wish,I use things people throw and make from it nice garden-not  buying anything,all from the street-earth,boxes.Seeds i grow myself,same to every one,if he is just brainless money spender-go on!We do not need all those things really,we are overconsump,because....USA advertising

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