[MonteQuest]

Monte, you were gone from the board for a long time. You didn't feel the need to have a "critical conversation about PO" during your absence. You came back why?

It was a cold rainy day and I was bored. Dropped in the see what the chatter was. Made a few comments.

What's different this time is that we have drunk the water used to prime the pump.

[peripato]

Monte, you were gone from the board for a long time. You didn't feel the need to have a "critical conversation about PO" during your absence. You came back why?

It was a cold rainy day and I was bored. Dropped in the see what the chatter was. Made a few comments.

What's different this time is that we have drunk the water used to prime the pump.

Looks like you're pissing off the right people...

[ennui2]

What's different this time is that we have drunk the water used to prime the pump.

Enough of the analogies and metaphors. This isn't Darmok and Jalad at Tanagra

Are you here to make a prediction or not?

[Revi]

Monte, you were gone from the board for a long time. You didn't feel the need to have a "critical conversation about PO" during your absence. You came back why?

It was a cold rainy day and I was bored. Dropped in the see what the chatter was. Made a few comments.

What's different this time is that we have drunk the water used to prime the pump.

I am glad to see Montequest back after all this time. He might want to read the book that was written about us entitled Peak Oil and Apocalyptic Environmentalism. It's like an anthropological study of us "peakists". There's another thread about it on here.

Basically a lot of us have come to the same conclusion. We are all seeing that nothing is getting done to save ourselves, so as a culture we're doomed. Having tried to tell people what's going on for many years most of us are just watching the show nowadays. And what a show it is.

[MonteQuest]

You have to decide whether to make a formal prediction, and if you do, then explain why it's "different this time"(TM).

Predictions? Like Yogi said, predictions are hard, especially about the future. So, let me paint a picture instead. The latest data shows that total world debt is running above 313 percent of annual GDP. To put this into perspective the US meltdown occurred when household debt reached about 120 percent total debt to annual GDP. There are a dozen or more nations that are currently facing a full-blown debt crisis, and there are more that are rapidly heading toward one. Interest rates are at zero. No help there.

In fact, the rock-bottom interest rates across major economies, which have been a key response to the last crisis, have prompted governments and consumers to go on a new borrowing binge, blowing the debt balloon, or bomb, even bigger. Sure, some that borrowed money has been invested wisely, but most of it, not so much. Cornfields were plowed under to make way for 2.35 billion square feet of public storage space to store all the crap we bought on credit. What seems to have escaped the attention of many people was that we were digging an even bigger hole by using cheap money as a shovel.

The FED has already kicked up interest rates, so we are confronted with the prospect of the flood of cheap money being turned off. The only “solution” under our current system is to kick the can down the road with even more debt. But, as I have said earlier, were are at debt saturation, sometimes to the point of lowering GDP with more debt, rather than spurring growth. The world is going bankrupt. That’s not a prediction, that’s reality. This time it won’t be a U.S. domestic mortgage crisis that goes global, it will be a global debt crisis that goes local. For the first time, the US economy may well be pulled into recession by external forces, as most of world GDP is now in emerging markets. How bad will things ultimately get once this global debt crisis finally spins totally out of control? Your guess is as good as mine.

Then comes oil production. Low prices are not only inhibiting new LTO production, but EOR of existing fields. And we’re not just deferring exploration; we’re deferring development of proven reserves. As this chart shows, that’s where the largess of new oil is going to come from.



What debt and fossil fuels have in common is that they provide a short term gain by using our future as the collateral.

Doom? Come on. There is no pony in the horse shit. Everyone knows that this is not going to end well.

[onlooker]

Great clear, thorough and cogent analysis of where we stand Monte, thanks.

[MonteQuest]

Then when we look at natural gas liquids, the other big source, we see NG from shale has peaked for now.



NG prices are also getting crushed because of the rising levels of natural gas being diverted into storage. Just as many analysts are watching crude oil storage levels as a sign of oversupply, natural gas inventories are also building up.

[Outcast_Searcher]

Doom? Come on. There is no pony in the horse shit. Everyone knows that this is not going to end well.

I first became aware of the seriousness of major systemic debt 30 years ago, when I read a (doomer) financial newsletter about the unsustainability of US debt.

At the time it was so scary to me that I (literally) threw up, and bought about a hundred one ounce gold coins over the next decade to "prepare" for the dollar being inflated away.

And yet somehow about a deceade later, I noticed that the real money I was accumulating was in the stock market -- not precious metals. I checked, and big picture, that was a very solid long term trend.

And here we are, still "panicking" over the unsustainable debt, and listing lots of reasons everything is so bad and why the whole system must crash, real soon now.

So feel free to prognosticate and try to spread FUD. Meanwhile, I see nothing to indicate that we can be confident that the timing is right THIS time, if we'll just believe the doomers, especially compared to the financial sh*tstorms we saw in the late 90's and late 00's.

And just because BAU will certainly fail SOME day, you have no idea whether it will crash suddenly or the end will be a slow capitulation -- and if the end is several decades away then what? Do we waste our lives worrying about it, or live the best we can and make good solid financial decisions about our capital allocation and avoiding debt?

[MonteQuest]

And here we are, still "panicking" over the unsustainable debt, and listing lots of reasons everything is so bad and why the whole system must crash, real soon now.

The panic isn't over the unsustainable debt; it's over the fact that we don't have any means left to control, mitigate,reduce it, or roll it over. We drank the water we use to prime the pump.

What mechanism do you offer to bail us out this time around?

PS And I made no predictions about "when" the unwinding would occur. I just showed how tight the spring is wound.

You didn't refute my analysis, you just hand-waved it away.

[Revi]

I think the thing to do is to diversify. That way everything can't go down. Put some effort and money into getting prepared, some PM's and even stocks, which represent a bet on the current system being around long enough to cash them in when the time comes. The two best things in my humble opinion are cast iron frying pans and hand tools. You can't lose with them. Whatever happens you can always fry up some food in a fry pan, and use a handsaw to cut wood for the fire.

[onlooker]

And here is where it get tricky to some, in so far as the notion that these amounts of money are just some abstraction, bytes /pixels on the computer screen. The problem is that their are expectations just like in contracts, IOU's as well as appraisals and valuations. When all this unwinds , the world economy will be like the Emperor without clothes. It is in the price discovery and transparency phase of the unwinding that assets, equity, investments and capital itself will lose meaning and become pretty much worthless and all confidence/faith in the money and economy will be lost.

[MonteQuest]

US debt to GDP has risen to 103% of GDP
China’s debt to GDP has risen to 282% of GDP
Japan’s debt to GDP has risen to 250% of GDP
These countries, and many others, have a growth in debt to GDP chart like this one since 2008. Some have opined that when debt in advanced economies exceeds 90 percent of GDP there is an associated dramatic worsening of growth outcomes. Although this isn't carved in stone....."I see nothing to indicate that we can be confident that the timing is right THIS time."

Naw, that chart just looks swell and promising.

[ennui2]

I have to concede that Monte is on a roll on this one. I hit the snooze bar a few years ago when the sky didn't fall, but it is definitely worth paying attention to the economic trend-lines around now. I also agree that there's a big difference between being less than and over 100% debt to GDP ratio.

[peripato]

And here we are, still "panicking" over the unsustainable debt, and listing lots of reasons everything is so bad and why the whole system must crash, real soon now.

The panic isn't over the unsustainable debt; it's over the fact that we don't have any means left to control, mitigate,reduce it, or roll it over. We drank the water we use to prime the pump.

What mechanism do you offer to bail us out this time around?

PS And I made no predictions about "when" the unwinding would occur. I just showed how tight the spring is wound.

You didn't refute my analysis, you just hand-waved it away.

Up to the moment of total collapse, I fully expect governments' will just steal and commit whatever fraud they can in a desperate attempt to keep BAU and by extension themselves alive before they disappear up their own backsides.

[MonteQuest]

I have to concede that Monte is on a roll on this one. I hit the snooze bar a few years ago when the sky didn't fall, but it is definitely worth paying attention to the economic trend-lines around now. I also agree that there's a big difference between being less than and over 100% debt to GDP ratio.

My big question is what are TPTB going to try do about it? Can't roll it over. Inflate it away via Weimar hyperinflation?
Forgive the debt and cancel the world's wealth? Cross their fingers? Demand dollars instead of dimes from the tooth fairy?

[MonteQuest]

You don't get to become a doomer that easy. You need to prove your creds with gun-talk and gold lol

Now, that's just funny, Pete. LOL

[ennui2]

My big question is what are TPTB going to try do about it? Can't roll it over. Inflate it away via Weimar hyperinflation?
Forgive the debt and cancel the world's wealth? Cross their fingers? Demand dollars instead of dimes from the tooth fairy?

The party owed the most money, in theory, has the most leverage. If the US owes X to China and China owes X to the US, then it's only the difference in debt that matters. An equal amount of debt going both ways cancels itself out. Simple algebra. I'm sure there's a lot more to it than that, but I don't see how everyone can owe money to everyone else equally. It makes no sense to me.

[MonteQuest]

The party owed the most money, in theory, has the most leverage. I'm sure there's a lot more to it than that, but I don't see how everyone can owe money to everyone else equally. It makes no sense to me.

Not if it's worthless. Remember, one person's debt is another's wealth. Literally.

[ennui2]

Not if it's worthless. Remember, one person's debt is another's wealth. Literally.

But what makes a country insolvent is when they can't pay back their debt. That doesn't necessarily mean they have no GDP, just that all of it is soaked up in paying their debt. But if their payments are to another country that is in the same exact boat, then there really is effectively no debt and both parties are just letting numbers accumulate compound interest for no reason.

I don't think this is the actual situation, though, so that's why I asked who is holding all the paper here. The problem with the credit crisis was that the debt itself was packaged up as a commodity (CDOs) and in some cases sovereign wealth funds gambled on these. The ever more exotic financial products that get us further and further away from natural capital are a big problem, I know.