I haven’t been tracking the financial stuff too much lately because… well honestly because it’s getting boring, we’re in the waiting period now before the next major bubble disruption occurs, which will be government debt/currency inflation.

But I’ve found some good articles lately anyway.

The financial system is fundamentally unsound because it depends critically on large connected financial institutions who have scaled up in a way that magnifies any localized financial problem into a systemic problem.
Edward Harrison, Why I’m Now Less Optimistic About Credit Crisis (SeekingAlpha.com)

This is a good read, well linked to other sources, one of the more interesting ones being The recession is over but the depression has just begun. I’d say that’s fairly self-explanatory. I liked this guy enough to add him to my links just on the basis of those two articles.

Then moving over to the old standby, PrudentBear.com, there was a slightly odd article, basically about how capitalism has to be controlled, regulated, and in some sectors, largely dismantled (finance for example). Weird stuff.

1. Disabuse the bankrupt economic theories that neglect the importance and limitations of our resources, environment, and quality of life while lionizing economic growth.
…
2. Throw out the notion that “free markets” will solve our energy and environmental problems.
…
5. Demand the fundamental democratic principle of majority rule is re-established.
…
6. Stop the influence of business and other special interest groups in elections and legislation.
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7. Demand that all energy production, including food (the source of our energy) disclose the EROEI, resource cost, and environmental impact.
…
11. Raise Taxes.
Part 4: A course of action

This in a financial site. A notably coherent financial site, but still, this isn’t the kind of thing you expect to see as a featured commentary.

Or another notably non-extremist site, abcnews, has this: Economists: Another Financial Crisis on the Way

And you may not want to miss this latest from Joseph Stiglitz – The Great American Bank Robbery. That’s an excerpt from his new book, Freefall: America, Free Markets, and the Sinking of the World Economy (Joseph Stiglitz, a Nobel laureate, is a professor of economics at Columbia University).

So things are rolling along, slower than expected by those who don’t really know what they are talking about in the end, about the speed expected by those who do.

But this story I found even more interesting, Exclusive: Famed NYT reporter tells Michael Moore capitalism driving humanity’s downfall. I don’t know about you, but I consider the New York Times to be about as centrist / establishment as they come, so to hear such words from a reporter, and a famous one at that, I don’t know, something is up here in Oz and I don’t think you’re going to like it.

“All sorts of people who have spent their lives studying climate change, from Bill McKibben on down, have warned us that we don’t have a lot of time left,” Hedges said. “So it’s not just that capitalism has destroyed our economic system and hijacked our political system, but it literally is extinguishing the system that sustains life. If that’s not thwarted soon…then we will begin to see massive dislocations, environmental refugees, further depleting of natural resources. Overpopulation is also an issue. The UN estimates that by 2050 the size of the planet will double.”

Read that one again, let it sink in. He’s right, of course, though in a sense it’s not just capitalism, it’s raw unfettered industrialism, which is really just stealing from the earth and not wanting to pay the price. Can you say ‘cancer’? Cancer, in case you’ve never thought about it, is the only organism or life form that tries to grow without limit, and which kills the host in the process.

And if you haven’t read this yet, make sure to read Barack Hoover Obama—By Ken Silverstein (Harper’s Magazine). Anyone who thinks you can’t learn from history clearly hasn’t been studying their history. Silverstein did. If you have any illusions lingering about what Obama can achieve (forgetting the poisonous neo-conservative obstructionism for the moment) with his current real world power base needs to read, and understand, this article. We’ve been here before, and the rules and players haven’t changed at all.

There’s a nice localized example, Saint-Nazaire, in Brittany, France: Requiem for a dying city. Poignant reminder that we really do not have a plan B in the works for a growthless economic system….

The only question is : when will locals will accept, and begin to constructively adapt to the inevitable, instead clinging to a failing model, and sinking with it ?

As with the peak oil questions, it looks like the best course of action if you want to understand this stuff is to listen to the people who have been consistently right, and who generally have been working in the industries they are describing, whether they be finance or oil. But outsiders as well.

Taking a longer view, it looks like roughly the period of 2008-2012 will be the peak of global oil production, though to even make it to 2012 at current production levels will require adding roughly the equivalent of 1 new Saudi Arabia’s worth of new oil every 2 years (and it should be noted, this estimate was just raised by Mr. Gabrielli, the CEO of Petrobras, from every 3 years in the space of about 12 months). This would of course require adding resources that we have unfortunately not even discovered yet, so you can see there’s a problem here.

(First: January 2009)
According to the company’s projections, production from existing fields will fall from a little over 80 million barrels a day to maybe half of that even if new techniques are used to slow their rate of decline. So just keeping global production flat is going to require lots of new fields and requires the world to replace one Saudi Arabia per three years.

(and then: December 2009, already the estimate down a year)
Gabrielli states in his presentation that the world needs oil volumes the equivalent of one Saudi Arabia every two years to offset future world oil decline rates.

These aren’t radicals I’m quoting here, these are major industry insiders, commentators, etc.

For the uninitiated, there aren’t new Saudi Arabia’s of oil, especially cheap, easy to drill and pump oil, being discovered every year (see Peak Oil Primer for more info on this problem, especially note that oil must be discovered before it can be produced…). In fact, there aren’t any being discovered at all. What is being discovered is very expensive, very hard to get to (30,000 feet down hard to get in deep seas, to be precise), or is incredibly poor quality, like Canadian or Venezuelan heavy tar sand oil, which also has the added benefit of being incredibly polluting to mine and process, as well as massively resource intensive, which is a feature of new energy sources covered quite well by Chris Nelder below (see: Peak Oil Demand Is Coming…, EROI). Oh, and did I mention expensive?

Why drift off into oil now during this financial overview? Because focusing on financial stuff is pointless as far as I’m concerned, judging from what I’ve seen at some other blogs that I used to like, focusing too much on what is essentially only a cipher for control over power relations in a culture starts to make you think those ciphers are real and that reality, ie, things like oil production that runs the real world parts of our systems, is secondary. Ilargi from the automatic earth is getting increasingly prone to such nonsense, for example, as is the Arch Druid (please, dump the name, you’re not a druid, give me a break…).

Here’s an unusually in-depth overview of our current situation, Peak Oil Demand Is Coming, But Here’s Why It’s Not Good News re oil production and the economy. Yes, I know, these guys are promoting positions they try to profit from, but the research there is pretty solid.

We spent the last several decades offshoring the fundamental value-adding sectors like energy production and manufacturing, and now our FIRE economy — finance, insurance, and real estate — rests entirely on real value created elsewhere.

The reason is simple: Energy is the only real currency.

Every dollar of fiat currency or GDP was ultimately derived from cheap energy. Trying to print your way out of energy decline is like prescribing ever-higher doses of aspirin for a headache caused by a brain tumor. Yet those at the levers of monetary policy are, by all appearances, completely ignorant (or in willful denial) of this fundamental fact.

This is I think why I’m going back to the real experts, biased as they are, but the ones that have a proven track record, like Doug Noland from PrudentBear.com.

So this is just a check-in on some of the more interesting sources and stories I’ve come across in recent weeks, not an actual definitive statement (as if such a thing can be made). I’d say the planet’s financial system is in uncharted waters now, and the floating of various currencies is getting increasingly surreal to behold.

So keep a hold on your jobs and keep your living expenses down to a minimum, we’re heading for very rocky waters, and not everyone is going to make it, that’s just how it is.

I’ve just finished some pretty large non-related projects, so I might be posting a bit more here, I’ll see how it goes.

This entry was posted on Wednesday, March 10th, 2010 at 22:28 and is filed under Our World. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.