Daily Digest

Daily Digest 10/29 - Signs Hyperinflation is Arriving, Global Food Crisis Forecast, Solar Power Projects Face Hurdles

Friday, October 29, 2010, 10:57 AM
 
  • Fed Asks Dealers to Estimate Size, Impact of Debt Purchases
  • Signs Hyperinflation Is Arriving
  • Solar Power Projects Face Hurdles
  • Subsidies Seen Endangering OPEC Prosperity
  • Surging Price Of Oil Forces U.S. Military To Seek Alternative Energy Sources
  • U.S. Navy Completes Successful Test On Boat Powered By Algae
  • Global Food Crisis Forecast As Prices Reach Record Highs

Learn how to protect your wealth against the Three E forces using our 'What Should I Do?' guide

Economy

Fed Asks Dealers to Estimate Size, Impact of Debt Purchases (cmartenson)

The Federal Reserve asked bond dealers and investors for projections of central bank asset purchases over the next six months, along with the likely effect on yields, as it seeks to gauge the possible impact of new efforts to spur growth.

The New York Fed survey, obtained by Bloomberg News, asks about expectations for the initial size of any new program of debt purchases and the time over which it would be completed. It also asks firms how often they anticipate the Fed will re- evaluate the program, and to estimate its ultimate size.

Signs Hyperinflation Is Arriving (Johnny Oxygen)

Back in late August, I argued that hyperinflation would be triggered by a run on Treasury bonds. I described how such a run might happen, and argued that if Treasuries were no longer considered safe, then commodities would become the store of value.

The two key commodities that have been rising as of late are oil and grains, specifically wheat, corn and livestock feed. The BLS report on Producer Price Index of commodities is here.


Energy

Subsidies Seen Endangering OPEC Prosperity (cmartenson)

Member countries of the Organization of Petroleum Exporting Countries are thriving on oil export revenue but, in many cases, eroding their export capacities by subsidizing domestic consumption, warns the Centre for Global Energy Studies, London.

“Unless OPEC’s citizens are weaned off oil subsidies, the organization will hit a barrier beyond which it will not be able to push the price of oil without harming its oil export revenues,” it says. “As things stand today, that barrier is still some way off, but it is out there somewhere, and OPEC should take heed.”

Surging Price Of Oil Forces U.S. Military To Seek Alternative Energy Sources (cmartenson)

It's a secret just how much oil the US military uses, but estimates range from around 400,000 barrels a day in peacetime – almost as much as Greece – to 800,000 barrels a day at the height of the Iraq war.This puts a single nation's armed forces near Australia as an oil consumer and among the top 25 countries in the world today. Either way it is by far the world's largest single buyer of oil and the last thing any admiral, general or under secretary of defence has had to be been concerned about is whether there's gas in the tanks or that the navy's carbon emissions are a bit extravagant.

U.S. Navy Completes Successful Test On Boat Powered By Algae (cmartenson)

It looked like a pretty ordinary day on the water at the US naval base in Norfolk, Virginia: a few short bursts of speed, a nice tail wind, some test manoeuvres against an enemy boat.

But the 49ft gunboat had algae-based fuel in the tank in a test hailed by the navy yesterday as a milestone in its creation of a new, energy-saving strike force. The experimental boat, intended for use in rivers and marshes and eventually destined for oil installations in the Middle East, operated on a 50/50 mix of algae-based fuel and diesel. "It ran just fine," said Rear Admiral Philip Cullom, who directs the navy's sustainability division.

Solar Power Projects Face Hurdles (joemanc)

The Ivanpah plant is the first of nine multibillion-dollar solar farms in California and Arizona that are expected to begin construction before the end of the year as developers race to qualify for tens of billions of dollars in federal grants and loan guarantees that are about to expire. The new plants will generate nearly 4,000 megawatts of electricity if built — enough to power three million homes.

But this first wave may very well be the last for a long time, according to industry executives. Without continued government incentives that vastly reduce the risks to investors, solar companies planning another dozen or so plants say they may not be able to raise enough capital to proceed.

Environment

Global Food Crisis Forecast As Prices Reach Record Highs (cmartenson)

Rising food prices and shortages could cause instability in many countries as the cost of staple foods and vegetables reached their highest levels in two years, with scientists predicting further widespread droughts and floods. Although food stocks are generally good despite much of this year's harvests being wiped out in Pakistan and Russia, sugar and rice remain at a record price.

Global wheat and maize prices recently jumped nearly 30% in a few weeks while meat prices are at 20-year highs, according to the key Reuters-Jefferies commodity price indicator. Last week, the US predicted that global wheat harvests would be 30m tonnes lower than last year, a 5.5% fall. Meanwhile, the price of tomatoes in Egypt, garlic in China and bread in Pakistan are at near-record levels.

Article suggestions for the Daily Digest can be sent to dd@PeakProsperity.com. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

10 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Online)
Joined: Jul 30 2009
Posts: 2679
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

"Goldman Sachs Group Inc., one of the 18 primary dealers that trade with the Federal Reserve, said a resumption of asset purchases by policy makers next week would likely include 30-year Treasury bonds.

Traders have speculated that the Fed would focus on buying U.S. government debt maturing in 10 years and less as part of a policy known as quantitative easing to sustain the economic recovery by keeping borrowing costs low. Ten-year Treasury notes serve as a benchmark for loans ranging from corporate debt to mortgages. Policy makers conclude their two-day meeting Nov. 3."

  • Other news, headlines and opinion:

IMF says dollar 'overvalued'

Gold Will Outlive Dollar Once Slaughter Comes: John Hathaway

Ireland, Greece Deficit Woes Halt Europe's Sovereign Default Swaps Rally

European Central Bank Purchased Irish Government Bonds Today, Traders Say

Irish bond yields top 7% as deficit contagion fuels fears

Japan Output Slide, Deepening Deflation Point to Economic Slump

Japan Needs 100 Trillion-Yen `Helicopter' Drop, Citigroup Economists Say

Treasury to Issue $387 Billion This Quarter, Survey of Bond Dealers Shows

European High Yield Bond Supply Hits Record In October

Europe's Pension Deficits May Provoke Investor Scorn

Governor to lay off 2000 more state workers (New York)

Mortgage delinquencies are in 'serious trouble,' says LPS analyst (Notice the graph)

San Diego fire chief foresees more station brownouts

'IMF bailout extra burden for Greeks' (PressTV Video)

Eurozone jobless total rises above 10%

Retirement Crisis In Alabama! Part One

Poland Rating May Be Downgraded by Fitch If No Action Is Taken on Deficit

Misguided Love Affair with China; China's Massive Monetary Expansion and Crackup Boom (Mish)

John Embry Sees Hyperinflation If Fed Continues On QE Path, Expects Silver At $50 (zerohedge)

Nate's picture
Nate
Status: Gold Member (Offline)
Joined: May 6 2009
Posts: 461
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

Saxplayer

Many thanks for all your efforts!

cmartenson's picture
cmartenson
Status: Diamond Member (Online)
Joined: Jun 7 2007
Posts: 3434
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

Silver closes at a 30 year weekly high.

Just saying...

bluestone's picture
bluestone
Status: Gold Member (Offline)
Joined: Dec 29 2008
Posts: 263
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

Chris

Do you think silver is trying push back up to its traditional ratio of value to gold? 

Brian

targetbuster's picture
targetbuster
Status: Bronze Member (Offline)
Joined: Jun 1 2009
Posts: 27
Re: Peter Schiff

If you haven't listened to Peter Schiff's latest blog....please do.

http://www.youtube.com/user/SchiffReport

This is the most reasonable and rational explanation for QE2 that I've heard yet. A simple yet elegant plan to deceive the markets. 5 years ago, I'd have probably called this conspiratorial thinking. Now, well.....I don't.

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1025
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

The post above Signs Hyperinflation Is Arriving  seems to look at inflation in terms of price increases, and commodities are used for example.    In contrast, read the recent Mish post here where he defines inflation as an expansion of money supply and credit.   

Prices can change for many reasons besides money right?  - supply and demand, adverse weather, changes in consumer sentiment, etc.

I'm not necessarily a "deflationist", but I think Mish does a much better job of explaining why hyperinflation is not a significant risk in the near term. 

guardia's picture
guardia
Status: Platinum Member (Offline)
Joined: Jul 26 2009
Posts: 592
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

Woodman wrote:

The post above Signs Hyperinflation Is Arriving  seems to look at inflation in terms of price increases, and commodities are used for example.    In contrast, read the recent Mish post here where he defines inflation as an expansion of money supply and credit.   

Prices can change for many reasons besides money right?  - supply and demand, adverse weather, changes in consumer sentiment, etc.

I'm not necessarily a "deflationist", but I think Mish does a much better job of explaining why hyperinflation is not a significant risk in the near term. 

Hum, one word: volatility :) Will be watching the VIX next week just for kicks...

Samuel

Global87's picture
Global87
Status: Member (Offline)
Joined: Oct 12 2010
Posts: 3
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

Hello Everyone,

I am new here from central Europe.

I enjoy reading Chris' blogs and the discussions of this communitiy in general. It helps me to get familiar with another perspective that I have been unaware of unitl 2 weeks ago.

Here are some news regarding Peak Oil.

Brazil deepwater well hits huge oil reserve

The ANP, the industry regulator, said the Libra field contained between 3.7bn and 15bn barrels of oil, with 7.9bn being the best estimate according to a study commissioned from Gaffney, Cline and Associates, an advisory firm.

But people in the industry say it could contain 100bn barrels or more, enough by some measures to put Brazil on a par with Kuwait or Russia among oil producers.

7.9bn barrels should be partly offsetting the reduced reserves in Alaska (9.7 barrels) and postpone Peak Oil a bit. The numbers aren't big but it will help to reduce the perception regarding an urgency. It's all about perception anyways as Chris has pointed out well.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

Hi Global 87, welcome to the fray..

Here's my take on this...

Analysts believe that the delay is partly due to the ongoing Deepwater Horizon disaster in the Gulf of Mexico, where BP's Macondo well has been leaking for two months. The huge environmental and economic damage caused by this spill means oil companies could face tougher safety measures when they attempt to extract oil at such depths. This disaster also potentially makes Brazil's reserves even more valuable, as America and the oil industry lock horns over President Obama's attempt to ban new deepwater drilling in the Gulf.

The first of Brazil's massive pre-salt oil fields, Tupi, was discovered in 2007. It contains between 5bn and 8bn barrels of oil, triggering fevered speculation that the country had suddenly become a major player in the world energy market. Other fields have since been discovered, pushing up the total estimates size of the reserves to around 30bn barrels – roughly the entire world oil consumption in 2010.

But environmental activists are deeply concerned that extracting the oil will be dangerous, as it is even deeper than BP's Macondo field.

Last week the Global Renewable Fuels Alliance (GRFA) named Brazil's Tupi field as one of the 10 most dangerous offshore sites in the world.

LogansRun's picture
LogansRun
Status: Diamond Member (Offline)
Joined: Mar 18 2009
Posts: 1372
Re: Daily Digest 10/29 - Signs Hyperinflation is Arriving, ...

Welcome to the site!

9.7 bnbbl's isn't even 3 years worth at todays consumption rate.  And more than likely, the EROEI is going to be very low.

Oil isn't the answer to peak oil, it's preparing for lack of oil.

I'll be interested to see some news clippings from your local/national news!  Getting proper news in the US without it being re-bundled as propaganda is almost impossible!

Global87 wrote:

Hello Everyone,

I am new here from central Europe.

I enjoy reading Chris' blogs and the discussions of this communitiy in general. It helps me to get familiar with another perspective that I have been unaware of unitl 2 weeks ago.

Here are some news regarding Peak Oil.

Brazil deepwater well hits huge oil reserve

The ANP, the industry regulator, said the Libra field contained between 3.7bn and 15bn barrels of oil, with 7.9bn being the best estimate according to a study commissioned from Gaffney, Cline and Associates, an advisory firm.

But people in the industry say it could contain 100bn barrels or more, enough by some measures to put Brazil on a par with Kuwait or Russia among oil producers.

7.9bn barrels should be partly offsetting the reduced reserves in Alaska (9.7 barrels) and postpone Peak Oil a bit. The numbers aren't big but it will help to reduce the perception regarding an urgency. It's all about perception anyways as Chris has pointed out well.

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