A Drop of Rain

Is he right, is he wrong? I’m guessing more right than wrong, sadly, since pretty much everything he’s saying in this interview is true.

The fake “recovery” was nice while it lasted, says famous apocalyptic forecaster Gerald Celente, founder of the Trends Research Institute. But now the fun’s over, and we’re headed for what Celente describes as the “Greatest Depression.” Specifically, the always startling Celente says the country is headed for rising unemployment, poverty, and violent class warfare as the government efforts to keep the economy going begin to fail.

The crux of the problem, Celente argues, is that the middle class has been wiped out. America used to be a land of opportunity for all, where hard-working people could build their own small businesses in their own communities and live prosperous and fulfilling lives.

But now a collusion of state and corporate interests that Celente describes as “fascism” have conspired to help only the biggest companies and the richest Americans. This has put a shocking amount of the country’s wealth in the hands of a privileged few and left the rest of the country to subsist on chicken-feed wages and low job satisfaction as Wal-Mart “associates” — or worse.

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There’s a lot of stuff going on right now in the economy, I’ll post some more soon, but for now let’s take a listen to one of the few coherent voices out there, William Black.

The Obama Administration says the recently signed Dodd-Frank Law, the biggest bank overhaul in decades, will ensure against another financial crisis.  William Black Associate Professor of Economics and Law at the University of Missouri-Kansas City couldn’t disagree more.

“They haven’t dealt with any of the fundamental perverse incentive structures that cause these recurrent, intensifying crises,” he tells Tech Ticker. In other words, the incentive to take excessive short-term risk in exchange for a multi-million dollar bonus is still very much intact. “Your pay should be based on long term performance instead of short term results which are easy to gimmick through accounting,” he says. 

Excessive pay on Wall Street, which Black says is the biggest culprit of the financial crisis, is just one reason we’re likely to witness another crisis in the not so distant future. Financial regulation reform also fails to deal with the “professional compensation” structure, says Black, a former federal regulator during the Savings & Loan Scandal. By that, he means the continued reliance on lawyers, appraisers, rating agencies and auditors ensures these professionals will remain the “most valuable allies to the frauds.”

We’re also no safer with the Dodd-Frank law than without it simply because, as a whole, the financial system doesn’t believe in regulation, Black observes. “It’s the ideology [which says] ‘you can never regulate effectively’, so why bother to try.” Finally, Black says, the law fails to end ‘Too Big to Fail’. As long as this policy exists we’re guaranteed to face more bailouts. “Why would we allow these systemically dangerous institutions to continue?,” he wonders.
Wall Street’s “Perverse Incentive Structures” Guarantee Another Crisis, Says Bill Black
by Peter Gorenstein – Yahoo

I’m just going to quote this in-depth. Even though the person being interviewed is promoting his own interests, nothing he is saying as far as i can tell is inaccurate, and I’ve read the same thing elsewhere, repeatedly.

See:

• URANIUM RESOURCES AND NUCLEAR ENERGY – Energy Watch Group 2006
• theoildrum.com Uranium Depletion and Nuclear Power: Are We at Peak Uranium? March 21, 2007

So without further ado, here’s part of an interview with Bill Powers (please note that this appears to be an automatically generated transcription, ie, it’s not very accurate):

Interviewer: A whole lot of newsletters cover oil and gas, but you picked uranium, which hardly anyone was covering until recently?

Bill Powers: I feel the uranium market right now could be the world’s most unbalanced commodity market. Inside a sense, the planet, by means of the nuclear power industry, consumes approximately 172 million pounds of uranium per year, as well as the planet only produces about 92 million pounds of uranium per year. The supply deficit is produced up through above-ground inventories, which are becoming worked down pretty quickly. Individuals numbers were supplied by Uranium Info Center. A great deal of my information arrives through the U.S. Department of Energy (DOE) or the Nuclear Regulatory Commission. For example, I discovered from them that the U.S. made, through the 1980s, about 43.seven million pounds of uranium. And by 2002, the U.S. only created about 2.34 million pounds of uranium.

Interviewer: Exactly where is uranium being created in the United States?

Bill Powers: Wyoming. There’s also a uranium facility in Nebraska. I think there are two in-situ leach plants in Wyoming and an additional 1 in Nebraska. There are a couple of phosphate farmers in Florida who generate uranium. I believe there can be a facility in Texas that also produces uranium. For that most part, the uranium business in New Mexico has just about been wiped out. The extremely low rates that we’ve seen, for about twenty years, have pretty a lot wiped out the entire U.S. uranium market. To go from over 43 million pounds to less than 2.five million pounds, it has truly only allowed the most productive, highest margin and most efficient mines in the nation to continue operating in that environment.
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If you follow energy matters, you might have heard about the new shale gas extraction methods.

Allegedly the near cornucopia of free energy, the new methods, asides from using extremely toxic liquid materials to fracture the rock formations to let the gas slip out to the well bore, for extraction, have been promoted by people like T. Boone Pickens as the source for future US energy needs in the transport sector. The latter by switching the truck/heavy equipment fleet to natural gas power.

This is supposed to be a good idea because it’s supposedly a 100 year’s supply. As usual, sadly, with such rosy predictions, the real numbers, when re-examined in the light of non-delusional, somewhat sane, thinking, simply do not hold up.

A current theoildrum.com posting highlights this issue.

Arthur Berman talks about Shale Gas

If you investigate the origin of this supposed 100-year supply of natural gas…where does this come from? If you go back to the Potential Gas Committee’s [PGC] report, which is where I believe it comes from, and if you look at the magnitude of the technically recoverable resource they describe and you divide it by annual US consumption, you come up with 90 years, not 100. Some would say that’s splitting hairs, yet 10% is 10%. But if you go on and you actually read the report, they say that the probable number-I think they call it the P-2 number-is closer to 450 Tcf as opposed to roughly 1800 Tcf. What they’re saying is that if you pin this thing down where there have actually been some wells drilled that have actually produced some gas, the technically recoverable resource is closer to 450. And if you divide that by three, which is the component that is shale gas, you get about 150 Tcf and that’s about 7 year’s worth of US supply from shale. I happen to think that that’s a pretty darn realistic estimate. And remember that that’s a resource number, not a reserve number; it has nothing to do with commercial extractability. So the gross resource from shale is probably about 7 years worth of supply.

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Recently I read a response to a fairly typical corporate type apologist in theoildrum.com comment thread. If you don’t follow theoildrum.com, it has a real problem, as do many US based forums/blogs that cater to any industry, with libertarian neo-conservative ant-government/deregulation notions among some, luckily not all, of its members.

This is about the most concise, accurate, rebuttal of the deregulation position I’ve ever seen.

syncro on July 13, 2010 – 8:53pm
Obeying regs is not going to provide a defense. But I am more interested in your point that

“BP’s response plan was filed and APPROVED by MMS as good enough. It wasn’t but that’s not BP’s fault…”

What catches my interest is that a lot of the conservative politicians argue that we should have less regulation. Some even say no regulation. Throw in the problem of the undue influence of corporate lobbyists and political cash. You wind up with a weak regulatory body that is instructed by the president to basically act as a force for promoting drilling. The new head cuts back funding for enforcement. Regs. are loosely enforced if at all. In other words, it is an ideal regulatory body from the point of view of the politicians who preach against regulation. And then when the corporate citizen causes a disaster through reckless conduct, you blame the hollowed-out regulatory body and let the corp. off the hook entirely.

It’s a bit hypocritical, no?

While the comment ends there, it’s worth looking at the question a bit more. The essence, as far as I can tell of all libertarian thinking is NOT, repeat, not, a true desire to achieve freedom for all. No, it’s rather the desire to achieve freedom to achieve wealth/power using whatever means necessary.
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Just the facts:

Oil in the Gulf, two months later – June 21 2010 – Oil spill photo gallery, disturbing shots, check it out. A picture is really worth a thousand words, and since they have a lot of them, I’ll save the words.

Gulf oil spill: BP accused of lying to Congress – June 20, 2010

BP has been accused by a senior US politician of lying to Congress to reduce its liabilities, after an internal company document showed that the oil giant’s own worst-case assessment of the size of the oil leak in the Gulf of Mexico was 20 times its public estimate.

In the document, BP attempts to put a figure on the rate of oil spewing into the ocean. It notes that if the condition of the well bore deteriorates to the extent that crucial parts fall off, the rate could reach 100,000 barrels a day.

Deepwater Horizon worker claims oil rig leaking weeks before explosion – June 21 2010

An oil worker who survived the BP Deepwater Horizon explosion has claimed that the oil rig’s safety equipment was leaking several weeks before it exploded, triggering the huge spill in the Gulf of Mexico.

Tyrone Benton says that he spotted a leak on the rig’s Blowout Preventer (BOP), the device that is meant to shut the well down if there is an accident. He told the BBC’s Panorama programme that both BP and Transocean, who owned the rig, were informed of the leak, and the faulty part – a control pod – was switched off rather than being repaired.

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Update on Anadarko liability in the BP Gulf Oil Spill (read part I of the Anadarko liability thread here). Things are speeding up significantly now that the full scope of the spill is being exposed. As the size increases, so too does the potential for liabilities so high that they could break most smaller companies.

Already hitting the media now Bloomberg, Anadarko Says BP Should Pay After Being Reckless :

June 19 (Bloomberg) — Anadarko Petroleum Corp., the Texas oil company that owns 25 percent of the damaged well pouring crude into the Gulf of Mexico, said BP Plc, the project’s operator, should pay the costs from the spill because it acted recklessly and unsafely at the drilling site.

BP didn’t monitor or react to warning signs as the Macondo well was drilled, Chief Executive Officer Jim Hackett said yesterday in a statement. BP is responsible for damages under such conditions, Anadarko said.

“BP’s behavior and actions likely represent gross negligence or willful misconduct and thus affect the obligations of the parties under the operating agreement,” Hackett said in the statement.

This discussion re Anadarko just occurred on theOilDrum.com’s daily discussion thread, and it’s well worth reading if you want to get further understanding of the legal games that are about to get started in earnest. The comments also explain the significance of Anaradko’s public statement if you’re not clear on what’s actually going on. (Read only subthread).

ROCKMAN on June 19, 2010 – 1:15pm Permalink | Subthread | Comments top

FOR ALL

Given the recent headlines re: Anadarko a quick primer on offshore drilling partnerships. Anadarko owns 25% of the well with a Japanese company owning 10%. BP owns the balance. BP’s partners may have been in the deal from the original lease sale or bought in later. Between the lease bonus and seismic/overhead costs the partnership could have been $50 -$100 million in the red before the first well was spudded.

THE JOA
Such drilling partnerships are governed by a very sophisticated and court tested contract: the joint operating agreement. These can be well over 100 pages long with enough detailed legalize to choke a football stadium full of attorneys. Covers virtually all possible scenarios of what might happen while drilling a well. Obligations, authorities, mandates, restrictions, etc. More later on one of THE critical aspects as to who pays for the accident.

THE AFE
When the operator (in this case BP) proposes to drill a well they prepare a rather detailed cost estimate for the project. This Authorization For Expenditure is another legal document like the JOA. The partners can sign the AFE or not. Don’t sign it and the JOA covers very specific penalties for not doing so. The AFE process follows hundreds of hours of joint meetings between the partners to work out the details. And there are always tech disagreement. And with very few exceptions the operator wins these debates. At most all the partners can do is not participate and be penalized as per the JOA.

ANADARKO: BP’S WORSE NIGHTMARE
Since I don’t have access to the history I can only speculate on the details. But to some degree these generalities are correct. BP has been criticized for making various tech decisions on the well design. Anadarko may have a long and well documented paper trail showing they had disagreed with every choice BP has made. Or to some lesser number of choices. But to whatever degree the documentation wasn’t casual. It’s done by every partners in every joint venture as a negotiation tool. By signing the AFE the partners agree to pay their share of the ultimate actual cost. But it often doesn’t go just like that. The operator (Company A)plans to do the X Procedure. Partner B strongly disagrees and says doing X is risky and could waste money/lose the well/cause a blow out. But the operator almost always wins these debates and drills the well and does X. And surprise…it was a mistake to do X and it runs the well costs up $16 million. When the well is finished the operator mails out the bill to the partners. Company’s B share (25%) is $4 million. But B sends a note back to A and says we need to chat. They get together and B hands them the documentation of how they strong disagreed with doing X so let’s just deduct our $4 million (or some lesser amount)share of that “mistake” from the final bill. This is a very common situation in all joint ventures. That’s why I’m certain Anadarko had a well documented list of potential “ammo” long before the blow out occurred. They might have had their own personnel onboard for short periods of time to document such potential screw ups. As a consultant I’ve been sent out tasked with that exact job. It is exactly as it sounds: a very serious “gotcha” game.
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