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"There Is A Special Species Of Idiot At Large In The Financial Markets"
Submitted by Howard Kunstler via Kunstler.com,
There is a special species of idiot at large in the financial media space who believe absolutely in the desperate and tragic public relations bullshit that this society churns out to convince itself that the techno-industrial high life can continue indefinitely, despite the mandates of reality - in particular, the fairy tales about oil: we’re cruising to energy independence… the shale oil “miracle” will keep us driving to WalMart forever… our wells doth overflow as if this were Saudi America… don’t worry, be happy…!
Such a true believer is John Mauldin, the investment hustler and writer of the newsletter Thoughts From the Frontline, who called me out for obloquy in his latest edition. After dissing me, he said:
“I have written for years that Peak Oil is nonsense. Longtime readers know that I’m a believer in ever-accelerating technological transformation, but I have to admit I did not see the exponential transformation of the drilling business as it is currently unfolding. The changes are truly breathtaking and have gone largely unnoticed.”
Mauldin is going to be very disappointed when he discovers that the vaunted efficiencies in shale drilling and fracking he’s hyping will only accelerate the depletion of wells which, at best, produce a few hundred barrels of oil a day, and only for the first year, after which they deplete by at least half that rate, and after four years are little better than “stripper” wells. The PR shills at Cambridge Energy Research (Dan Yergin’s propaganda mill for the oil industry) must have pumped a five-gallon jug of Kool-Aid down poor John’s craw. He believes every whopper they spin out — e.g. that “Right now, some US shale operators can break even at $10/barrel.”
The truth is the shale oil industry couldn’t make a profit at $100/barrel. The drilling and fracking boom that began around 2005 was paid for with high-risk, high-yield junk bond financing and other sketchy, poorly collateralized financing. Most of the earnings in the early years of shale oil came from flipping land leases to greater fools. Now that the price of oil has fallen by more than 50 percent in the past year, the prospect dims for that junk financing to be repaid. Since that was “bottom-of-the-barrel” financing, the odds are that the shale producers will have a very hard time finding more borrowed money to keep up the relentless pace of drilling needed to stay ahead of the short depletion rates. They are also running out “sweet spots” that are worth drilling.
We will look back on the shale oil frenzy of 2005 to 2015 as a very interesting industrial stunt borne of desperation. It gave a floundering industry something to do with all its equipment and its trained personnel, and it gave wishful hucksters something to wish for, but it never penciled-out economically. Shale oil production turned down in 2015 and the money will not be there to get the production back to where it was before the price crash. Ever.
Some additional uncomfortable truths should temper the manic fantasies of hypsters like Mauldin. One is that we are no longer in the cheap oil age. All the new oil available now is expensive oil — whether it’s Bakken shale or deep water or arctic oil — and it costs too much for our techno-industrial society to run on. That is why the world financial system is imploding: we can’t borrow enough money from the future to keep this game going, and we can’t pay back the money we’ve already borrowed. We have to get another game going, one consistent with contraction and with much lower energy use. But that is not an acceptable option to the people running things. They are determined to keep the current matrix of rackets going at all costs, and the certain result will be very messy collapse of economies and governments.
Industrial economies face a fatal predicament: Oil above $75/barrel crushes economies; under $75/barrel it crushes oil companies. We’ve oscillated back and forth between those conditions since 2005. The net effect in the USA is that the middle class is rapidly going broke. All the financial shenanigans aimed at propping up Wall Street and Potemkin stock markets was carried out at the expense of the middle class, now deprived of jobs, incomes, vocations, stability, and prospects. They may already be at the point where they can’t afford oil at any price. That “energy deflation” dynamic, in the words of Steve Ludlum at the Economic Undertow blog, is a self-reinforcing feedback loop that beats a path straight to epochal paradigm shift: get smaller, get local, get real, or get out.
The hypsters and hucksters won’t believe this until it jumps up and bites them on the lips. These are the same idiots who believe we are going to continue Happy Motoring by other means — self-driving, all-electric cars — and who think there is some reason for human beings to travel to other planets when we haven’t even demonstrated that we can plausibly continue life on this one.
As I averred last week, America is at the bottom of a self-knowledge low cycle in which we are incapable of constructing a coherent story about what is happening to us. The techno-industrial fiesta was such a special experience that we can’t believe it might be coming to an end. So, one option is to believe stories that have no basis in reality. As Tom McGuane wrote some forty years ago: “Life in the old USA gizzard had changed and only a clown could fail to notice. So being a clown was a possibility.”
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Shitty author, LOL @ "The truth is the shale oil industry couldn’t make a profit at $100/barrel. "
Kunstler is a Peak Oil shill. He is entertaining to read and sometimes makes some valid points, however.
Perhaps the "t" should precede the "s" in his name.
^^^^ Fucking hipster idiots
^^^^ Fucking headbangin' GENIUS!!! LOL
It was for the clown, YOU, not so much.
As always, Kunstler is quite the special class of idiot himself.
Gawd I wish ZH would quit publishing his childlike views.
I think if Kunstler had his way, the masses would all be packed into high density urban housing like chickens, having to ride trains everywhere - Very Agenda 21'ish.
He of course (and other special, chosen people), would still be allowed to continue to live comfortably in any way they so chose.
The perks of privilege, real elite statist privilege, not that phoney "white privilege" doled out to satiate the feral communities.
You should read rather than assume.
Kunstler is one of the few willing to call for a new back to land movement, rebuilding local and regional economies, focus on skilled trades, provide opportunities - he mentions farm labor and apprenticeships - for the unskilled, establish local currencies, kill banking, and abandon most forms of credit.
You fail to understand his position on trains. One of his major theses, and one of the reasons I respect his work, is that cars must and will go, they are a dead loss economically and completely uneconomical (ZH's coverage of the subprime auto bubble is merely the latest confirmation). Trains are incomparably more thermodynamically efficient and without the need for all the ugly, expensive, toxic, inefficient, unmaintable, and community-destroying roads. It is not "having to ride trains everywhere" but "being lucky enough to have any kind of functioning transit network" which will mostly be used for logistics because, no, sorry, the future does not include 1 hour daily commutes as gasoline will be out of reach of 99% of humanity.
Your normalcy bias is showing. This is the future, if we're lucky, whether you like it or not.
Take a look at reality. A farming community has to have roads. The US had a lot of roads in the 1800s. Not paved and not superhighways but we had roads. The trains are useless without local roads. You and Kunstler can see that change is coming but anyone who thinks they have the perfect solution to all the future problems is the clown.
Peak oil is old news. It will never completely peak because demand is fucking dead and will not return. The ponzi is blowing up.
The highest rate of conventional extraction is the peak by definition. It passed us by in 2005 give or take.
Neither party is right but neither is wrong. We are in a game where BS rules.......
Im probably over-simplifying it here but: all products are made from oil. Lots of folks are making lots of money selling products. I don't see why this demand would ever stop, despite the rising cost, unless we literally ran out of oil.
The gov, tax-payers and banks can just continue to subsidize. We can keep stomping around the world stealing others oil.
The demand won't stop until some other form of energy becomes less expensive or it costs more in energy terms to extract the oil than the energy it provides.
What will happen, though, is that fewer and fewer people will be able to afford it, or they will only be able to use it for priority activities -- running a chain saw to provide wood heat for a house previously heated by oil or electricity from a fossil fuel power plant, for example.
This is classic supply and demand. As the resource becomes more scarce and expensive to extract, the price will rise and the demand will fall, thus keeping the rise in price moderate. But due to the primacy of oil in the functioning of the economy, as demand falls, so does economic activity -- a vicious cycle.
Kunstler sees this as leading to social breakdown. I'm not so sure. The future has a habit of throwing curve balls, with unexpected ramifications. At any rate, I think the process is going to take a long time to play out -- possibly as long as it has taken from the beginning of the oil age until now.
Duplicate post edited out
Thought the article was referring to this felon:
http://www.armstrongeconomics.com/archives/36026
Press play and have a listen. Apparently, the ability exists to create a supercomputer that:
1) Has a database of words equivalent to the entire English language (ok, that's not too tough)
but....
2) Has the ability to know the meaning of each word, and know the sequence of words that it must use to create a coherent string of words culminating in a sentence that arrives at a conclusion and has meaning.
3) Has the ability to forecast, thereby attributing an imagination to the computer.
The more Armstrong publishes his "free blog posts to help the public", the more he divulges his supreme mental disorder. Fraud has no bounds these days.
EDIT: LMAO, apparently his computer has self awareness too.
QUESTION: You are a legend in programming that you seem not to be aware of. The debate has been did your computer achieve self-consciousness?
ANSWER: No. It achieved self-awareness. It immediately knew the government was trying to take it to its secret computer lab in WTC building 7 that mysterious collapsed even though nothing struck the building. They were angry when they realized it had self-destructed. It was aware of its surroundings and it took all but 7 seconds to self-destruct overwriting all code 7 times and shifting around so they could never un-erase and put him back together again.
http://armstrongeconomics.com/2013/06/20/self-aware-artificial-intelligence/
Very few humans would pass the Turing Test.
Indeed....."Lucy " ....
Gödel Proved "Why" Long Ago:
Perception Cannot be Quantified - Much Less the Reaction to Perception, two Distinct Matters:
All the "Black Boxes", Models, "SOCRATES",et al., ad infinitum, that Purport to Quantify the Former, Much Less the Latter, and Perforce, Correctly Quantify the Two in Interaction for a Precise Result, is indeed Pure Fraud, Powered by Ignorance, Arrogance and Extraordinary Popular Delusion.
As I have said, the reason this is so is because of Human Nature:
People Want to Believe that the Answers are in Math, So they Can Push that Magic Button and Out Comes Money.
At the "Real Bottom", Marty Armstrong and Jim Simons will Share the Same Fate......
Upton Sinclair
That explains the universal ignorance in the land of the free. And a corrupt, criminal, captured media.
Media, gvt, corps.
"Industrial economies face a fatal predicament: Oil above $75/barrel crushes economies; under $75/barrel it crushes oil companies. We’ve oscillated back and forth between those conditions since 2005. The net effect in the USA is that the middle class is rapidly going broke."
based on a dollar worth what on a given day? a dollar today is a dollar in 2005? a dollar of what, gold?
Mauldin isn't picking the best example, but overall he is much closer to the truth than Kunstler and all the fellow Club of Rome doomers.
Had to look up averred, this is the sentence example provided:
tr.v. a·verred, a·ver·ring, a·vers
1. To affirm positively; declare: "Liberal politicians ... found it necessary to aver that they were in favor of rigid economy in public spending too" Comical and an odd choice.>The truth is the shale oil industry couldn’t make a profit at $100/barrel
Based on what?
There is indeed a special idiot at large in our financial markets, Howie, so be careful when you walk past the mirror, he might leap out and getcha.
The Shale Oil boom was enabled by the Wall Street CON Market. The biggest criminals in the world are on Wall Street flaunting their crimes and I'll-gotten wealth. The Wall Street CON Market can only exist with the collusion of all of the POSE* Democrats, Republicans, so-called Federal Law Enforcement Officers and Regulatory Officers. When the collapse leaves a desperate population gunning for them I'm going to sit back and check names off of The List, as they end up violently dead, while I ROTFLMAO**.
*POSE—Pile Of Stinkin' Excrement
**ROTFLMAO—Roll On The Floor Laughing My Ass Off
Bankers
We thought Japanese bankers were the stupidest in the world when they created the mother of all real estate bubbles that burst in 1989.
Japan has not recovered since.
But Wall Street was determined to outdo them in the stupidity stakes using derivatives and complex financial instruments to magnify up the losses from a housing boom. The bubble burst in 2008 and the global economy hasn’t recovered since.
James Rickards in Currency Wars gives some figures for the loss magnification of complex financial instruments/derivatives in 2008.
Losses from sub-prime - less than $300 billion
With derivative amplification - over $6 trillion
"It’s nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" (pg 404, “All the Presidents Bankers”, Nomi Prins)
Japan only managed to cripple its own economy through crazy lending into real estate, Wall Street crippled the global economy.
Perhaps Chinese bankers are now looking to steal Wall Street's crown?
The competition is fierce with European bank lending into Greece as another contender.
A merit award for Spanish and Irish bankers who have destroyed their nations finances with unconditional state bailouts after reckless lending into real estate.
The real problem, bankers don't understand their product, debt.
“What is wrong with lending more money into the Chinese stock market?” Chinese banker before last month
“What is wrong with lending more money into real estate?” Chinese banker last year
"What is wrong with lending more money to Greece?" European banker pre-2010
"What is wrong with a NINA (no income no asset) mortgage?" US banker pre-2008
“What is wrong with lending more money into real estate?” US banker pre-2008
"What is wrong with lending more money into real estate?" Irish banker pre-2008
"What is wrong with lending more money into real estate?" Spanish banker pre-2008
"What is wrong with lending more money into real estate?" Japanese banker pre-1989
"What is wrong with lending more money into real estate?" UK banker pre-1989
“What is wrong with lending more money into the US stock market?” US banker pre-1929
We need to teach bankers the lost art of prudent lending and the importance of fundamentals, eg. ratio of mortgage size to income.
the lost art of prudent lending doesnt let a bank make money hand over fist over knuckle over everyone's bent over asses like the current fraudulent scheme, that's why
Dirivatives, baby - it's what's for dinner.
How can you expand the economy if you don't eat your dirivatives. If you don't eat your dirivatives, you can't have your pudding.
Dirivatives, baby . . .
It's "Derivatives" . . . spell check baby! Common Core comes to the fore!
I don't see Kanada on that list. Quick, jump into the real-estate market in Vancouver before the market goes tits up.
Also idiocy is rehypothecated.
Peak idiocy at all levels.
Indeed......
Jim Cramer of CNBC.
https://www.deepcapture.com/tag/jim-cramer/
I don't think this will go on forever, but i think i might qualify as a special species of idiot
Aren't you exceptional.
"....these humanoids, constructed in a special facility in Tel Aviv, have been let loose to wreak havoc."
For years I have studied the North Dakota state governments reports on fracked oil well productivity. To make calculations easier and being a little too optimistic a fracked oil well exhibits a 50% year-over-over year production rate. To put that into perspective look at the productivity of a well that began production at the beginning of year 1 at 1,000 barrels per day (bed):
Beginning......Inital Year......End of Year
Of Year..........Production.....Production
1....................1,000............500
2.......................500............250
3.......................250............125
4.......................125..............62.5
5.........................62.5...........31.25
6.........................31.25.........15.6
7........................ 15.6.............7.8
8...........................7.8.............3.9
9...........................3.9.............1.9
10.........................1.9.............0.9
That's highly optimistic and the well is probably uneconomical to operate and service by end of year 8, if not well before. In contrast, it's speculated that a well in the massive Saudi Ghawar field has an estimated production decline rate of maybe as much as 1% per year. But, that's informed speculation because Saudi ARAMCO doesn't release that data. But, it's a fact that Saudi Arabia can pump more than 10,000,000 barrels per day from less than 400 total oil wells. Whereas the United States requires a little under 400,000 wells to pump comparable amounts of oil.
It's a fact that the Shale Oil fracking boom was entirely a massive Wall Street-engineered CON job with the connivance and conclusion of POSE* Democrats, Republicans, so-called Federal Law Enforcement and Regulatory Officers and the Federal Reserve System. The Gang of Evil Incarnate!
*POSE—Pile Of Stinkin' Excrement
Now here's the big question: How much does it cost to purchase the lease, and then drill, equip, and maintain the well throughout its useful life?
I'm disapointed, no mention of Tattoos
There was the idea at the old (RIP) Oil Drum that one day crude might just be priced very low in dollars (one might say cheap), but even then a vast majority of people still could not afford it - for all of the reasons stated above wrt to middle class destruction, jobs, wage defaltion.
We as end consumers do not buy crude, but we buy the products that are made from crude and while gasoline (as one example) costs less than it did a year or more ago it is still prerry expensive IMHO when compared to the price of crude and darn expensive as an "essential" to me given deflated income.
In fact, it was also said that both deflation and inflation could exits at the same time - as I could argue it does now - and the idea of cheap but unaffrodabe applies to more than just crude and in fact does apply oo many essentials goods and services.
PS
Like Kunstler or not, you must admit there are idiots in the financial markets.
"Peak Oil" is complete bullshit and is just another control mechanism used by TPTB. Consider the information below copied from a piece from Principia Scientific - the entire article can be found here:
http://www.principia-scientific.org/russians-nasa-discredit-fossil-fuel-...
There is tons of other confirming information along the lines of that posted below - if one chooses to ignore more "settled science" along these lines and take in some information that the Club doesn't want people to consider as fact . . . .
From Principia-Scientific.Org
. . . . For decades Russian scientists have known that the fossil fuel theory is bogus and have compellingly demonstrated that petroleum is derived from highly compressed mineral deposits deep beneath the surface. But the most startling consequence to these findings is that oil is a constant renewable regenerating in nature.
Since the Middle East oil crisis of the 1970’s gasoline suppliers have stoked media fears that our planet’s reserves are fast in decline. The term ‘peak oil’ was coined and we were told ‘fossil fuels’ would have to become increasingly more expensive as our insatiable appetite drank this ‘finite’ liquid energy source dry. Are we talking conspiracy theory or well-intentioned, but misguided group think that limits to our industrial expansion were essential if we were to tackle 'peak oil' and fears over man-made global warming (which has been stalled for a generation).
Let's be in no doubt, the emergence of group think about our 'carbon footprint' (dare we call it, propaganda) suited the long-term interests of the oil industry and western governments. 'Big Oil' has benefited from being told by academics that their resource was precious and limited (putting upward pressure on prices). Tax-raising governments are being increasingly taken to task for encouraging (through generous research grants) sympathetic academics to get on board to build a consensus on these inter-related but evidentially weak scientific theories.
Repositioning Theory as Fact
For decades the terms ‘peak oil’ and ‘fossil fuels’ have been synonymous. They imply we are inexorably faced with diminishing natural resources and the days of cheap carbon-based energy are gone. Supplanted in the public consciousness as real we grew to accept the inevitable coming of ever-higher energy prices as a consequence of our energy-reliant, consumer lifestyle.
Journalists gleaned their own ‘evidence’ for such an apocalyptic narrative from bleak books such as James Howard Kunstler’s ‘The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century’ and Richard Heinberg’s ‘The Party’s Over: Oil, War and the Fate of Industrial Societies’ among others and the public were sold on the fears.
Constantly fed a diet of this garbage our collective unconsciousness unwittingly allowed the repositioning of Hubbert's Theory of Peak Oil into fossil fuel fact.
As a consequence, in 2005, Congressional Representative Roscoe G. Bartlett, Republican of Maryland, and Senator Tom Udall, a New Mexico Democrat created the Congressional Peak Oil Caucus and at a stroke turned attention to debunking such 'limits to growth' fallacies.
Scientists who dissented from the (peer-reviewed) groupspeak were vilified or ignored. In the 1980’s distinguished British scientist, Sir Fred Hoyle FRS was one who tried and failed to expose the chicanery of proponents of the fossil fuel theory and diminishing world oil reserves. Hoyle, without the benefit of the worldwide web tried repeatedly to expose this flimflam,
"The suggestion that petroleum might have arisen from some transformation of squashed fish or biological detritus is surely the silliest notion to have been entertained by substantial numbers of persons over an extended period of time."
The English professor valiantly argued that oil is abiogenic (i.e. from mineral deposition) and cannot be a biotic (from fossils). Yet despite his eminent stature Hoyle’s sage insight gained him no media platform.
Along with Hoyle other western scientists refused to toe the politically correct line as evidenced in an increasing number of articles to redress the balance about petroleum economics. While several papers by Professor Michael C. Lynch of the Massachusetts Institute of Technology also exposed the myth of "oil exhaustion" and demonstrating the high-pressure genesis of petroleum. No media voice for them either. . . . . .
Even if Hoyle and co are right and oil is produced by abiotic processes, there is no doubt whatsoever that we are tapping sources that have been either in place or accumulationg through eons of geologic time. Similar to an heir that is blowing through his generous inheritance, he, and we, will eventually have to live on present income. Unless he dies first, of course.
".......Even if....oil is produced by abiotic processes, there is no doubt whatsoever that we are tapping sources that have been either in place or accumulationg through eons of geologic time.............................
Indeed.......
The "Source" of Hydrocarbons is wholly irrelevant to the Vital Equation:
EROEI.
It's Corollary in Societal Terms:
Energy Per Capita = Proper Measurement of the Trajectory of Civilization, Past, Present and Future........
I always say the Most Important Thing a Man Can Know is What He Doesn't Know........
All of the Work on Both Sides of this issue, including the Original work of the Russians, establishes only One Certain Thing:
The Question Has Yet to Be Decisively Answered.......
And unless that "Answer" can materially alter the "Vital Equation" it will be "Academic" as they say.......
So you're telling me that the oil industry is prone to booms and busts? Why was I not told this before?
BeLIEve the gubbermint and cheerleading parrots in the corporate media cartel? Ahahaha!