Daily Digest

Daily Digest 4/5 - The Villan, 21st Century Global Oil Risks, Pakistan And India To War Over Water?

Thursday, April 5, 2012, 10:54 AM
  • More Evidence of Fraud: MF Global's Inscrutable Accounting Error - Who Shot Jon?
  • Race to Debase - 2012 Q1 - Fiat Currencies vs Gold & Silver
  • Global Oil Risks in the Early 21st Century
  • You Ain't Seen Nothing Yet - Part Three
  • A Response To Ben Bernanke’s ‘Misunderstanding’ About The Gold Standard
  • Next Great Depression? MIT researchers predict ‘global economic collapse’ by 2030
  • The Villan
  • Self-Sustaining Solar Reactor Creates Clean Hydrogen Fuel
  • Pakistan And India To Go To War Over Water?

Our 'What Should I Do?' guide has steps to cook, see & stay warm in times of power outage

Economy

More Evidence of Fraud: MF Global's Inscrutable Accounting Error - Who Shot Jon? (June C.)

I wonder if there were CDS and stock options that paid off with their bankruptcy. Who benefited from the failure of one of the larger clearing brokers serving the retail customer? Who held the other side of MF Global's trades?

Besides Edith O'Brien and Jon Corzine, the parties with the greatest insight into MF Global's positions and financial structure were JP Morgan and Goldman Sachs based on the reports that I have read. As Francine McKenna has said, JPM knew MF Global 'all too well.'

Race to Debase - 2012 Q1 - Fiat Currencies vs Gold & Silver (adam)

Closing the first quarter of lap 2012, we are again tracking the performance of gold and silver bullion versus 75 different fiat currencies being debased around the world.

Global Oil Risks in the Early 21st Century (June C.)

An economy needs energy to produce goods and deliver services and the size of an economy is highly correlated with how much energy it uses (Brown et al., 2010a, Warr and Ayers, 2010). Oil has been a key element of the growing economy. Since 1845, oil production has increased from virtually nothing to approximately 86 million barrels per day (Mb/d) today (IEA, 2010), which has permitted living standards to increase around the world. In 2004 oil production growth stopped while energy hungry and growing countries like China and India continued increasing their demand. A global price spike was the result, which was closely followed by a price crash. Since 2004 world oil production has remained within 5% of its peak despite historically high prices.

You Ain't Seen Nothing Yet - Part Three (JimQ)

I agree with Neil Howe that the country’s reaction to an adverse financial event will be the likely regeneracy moment. The explosive mixture of the five D’s will provide the spark for the next phase: Debt; Derivatives; Default; Devaluation; and ultimately Depression. There is no way to deny the $15.6 trillion of debt this country has accumulated, with $10 trillion of it added since 2000. The debt ceiling of $16.4 trillion will be breached in October 2012 at the current rate of extreme spending. This should set up an interesting dynamic just prior to the November elections. A replay of the August 2011 showdown could be disastrous for Obama if the stock market were to crater again.

A Response To Ben Bernanke’s ‘Misunderstanding’ About The Gold Standard (David B.)

Before I get into your specious claims, I want to point out two of important facts. First, the gold standard exists when people are free to choose what they wish to use for money. Gold has won this market competition over thousands of years. When people are not forced to use government-issued scrip they choose gold. And, Mr. Bernanke, the shabby little secret of your irredeemable paper money is that you have a money monopoly (legal tender laws) and can force creditors to accept it. Why won’t you let people be “free to choose”?

Next Great Depression? MIT researchers predict ‘global economic collapse’ by 2030 (Jeff B.)

The Smithsonian notes that several experts strongly objected to "The Limit of Growth's" findings, including the late Yale economist Henry Wallich, who for 12 years served as a governor of the Federal Research Board and was its chief international economics expert. At the time, Wallich said attempting to regulate economic growth would be equal to "consigning billions to permanent poverty."

Turner says that perhaps the most startling find from the study is that the results of the computer scenarios were nearly identical to those predicted in similar computer scenarios used as the basis for "The Limits to Growth."

The Villan (Dana T.)

Bernanke’s unconventional programs have been implemented in two phases. During the financial crisis of 2007–09, he bailed out a handful of large banks and devised a series of innovative lending operations to disperse credit to banks, small businesses, and consumers (virtually all of these loans have been repaid at a profit to taxpayers). He also lowered short-term interest rates to nearly zero and made private banks run a gantlet of stress tests to ensure some minimal level of solvency going forward. Although fierce anger against the bailouts persists, there is little argument that this first stage was a success. However untidily the rescue was managed, the financial crisis is over

Self-Sustaining Solar Reactor Creates Clean Hydrogen Fuel (Jason C.)

The testing will prove how good (or bad) the reactor is when concentrated light equal to 10,000 suns is fed into it. The important things to prove include how reliable the reactor is, and whether the amount of hydrogen produced is significant enough to warrant taking the project beyond the prototype stage.

Pakistan And India To Go To War Over Water? (James S.)

Lahore’s “The Nation’ newspaper on Sunday published an editorial entitled, “War with India inevitable: Nizami,” the newspaper’s Editor-in-Chief and Nazaria-i-Pakistan Trust Chairman, Majid Nizami, asked his fellow citizens to prepare for a war with India over water issues. Nizami told those attending the “Pakistan-India relations; Our rulers- new wishes” session at Aiwan-e-Karkunan Tehrik-e-Pakistan, which he chaired, “Indian hostilities and conspiracies against the country will never end until she is taught a lesson.”

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."

14 Comments

saxplayer00o1's picture
saxplayer00o1
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DurangoKid
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Where does escaped hydrogen go?

Just a thought.  If the economy does scale up hydrogen production, presumably a fraction of that will be lost to leaks.  How much of that hydrogen will leak off to space and never be recoverable?  Over geologic time, all the free hydrogen on Earth has been lost.  Only that which is bound up with oxygen or something else remains.  One might hope that with free oxygen in the atomosphere, UV light might cause the hydrogen to combine?  For something to be called sustainable, one would hope that it would be part of a materially closed system.

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phecksel
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MIT Researchers

Predict total global collapse by 2030?

MIT, considered one of the top schools in the entire world, and that's what they come up with?

SMH!

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Time2help
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MIT Researchers

I really wish I had taken the blue pill instead.

Time2help's picture
Time2help
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MIT Researchers

I really wish I had taken the blue pill instead.

saxplayer00o1's picture
saxplayer00o1
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World food prices rise further, raising fears of unrest

"Global food prices rose in March for a third straight month with more hikes to come, the UN's food agency said on Thursday, adding to fears of hunger and a new wave of social unrest in poor countries.

Record high prices for staple foods last year were one of the main factors that contributed to the Arab Spring uprisings in the Middle East and North Africa, as well as bread riots in other parts of the world.

The cost of food has risen again this year after coming down from a February 2011 record peak.

The FAO index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 215.9 points in March, up from a revised 215.4 points in February, the United Nations' Food and Agriculture Organisation (FAO) said.

Although below the February 2011 peak of 237.9, the index is still higher than during a food price crisis in 2007-08 that raised global alarm."

"Spain is facing severe economic challenges, calling for a "sustained" reform effort by the government in Madrid, an International Monetary Fund spokesman said Thursday.

IMF spokesman Gerry Rice said the fund was still assessing the details of Madrid's new budget proposal.

"But we would point to the need to ensure compliance with the new target, not just at the central, but also the regional government level," Rice told reporters in a regular press conference." 

"The Italian state has racked up bills with commercial creditors equivalent to 4 percent of economic output that it is under increasing pressure to pay, but it may turn to alternative solutions to keep its debt-reduction programme on track.

Italian public authorities have one of Europe's worst track records for paying creditors, and in all they owe companies 60 billion euros - money the government can ill-afford to part with as it struggles to cut the budget deficit while the economy contracts. "
 

Mark Cochrane's picture
Mark Cochrane
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MIT got it right - reporter got it wrong

The report refers to the MIT-related Limits to Growth report from 1972. The article refers to this article in Smithsonian (link) in which an Australian researcher Graham Turner comments on the 40 year old study that has been villified for a suggesting that resources are ultimately limiting. He finds that the research still stands up. So, if we don't screw things up before then we hit very hard limits by 2030.

The article from today's daily digest link now states:

Correction: This post has been edited to reflect that MIT has not updated its research from the original 1972 study.

saxplayer00o1's picture
saxplayer00o1
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US companies using debt to cover pension shortfalls

"Faced with ballooning deficits in their pension funds, US companies are increasingly turning to the bond market to help plug the gap, taking advantage of super-low borrowing costs.

The 100 biggest US pension funds had a combined deficit of $326.8bn last year, pushing up charges to earnings to an all-time high of $38.3bn, according to consulting firm Milliman.

That figure is expected to rise to as much as $54bn in 2012, Milliman said.

To address their pension liabilities, companies are set to make record contributions into pension funds this year -- and many are turning to the debt capital markets to raise the cash."

"THE GOVERNMENT’S drive to restructure some of its banking debt faces a major roadblock as Germany hardens its resistance to the use of the euro zone bailout fund for that purpose.

The German finance ministry is understood to be arguing in talks on the plan that an arrangement involving euro zone bailout funds is not politically feasible for the authorities in Berlin."

""We have not asked for it, it's not on the table ... it would be the worst possible outcome, it would be the last resort. Spain cannot lose its autonomy with respect to economic policy," he said."

Pento Says Treasuries in `Biggest Bubble in History'

Egan-Jones Cuts US Credit Rating to 'AA,' Citing Debt

Arthur Robey's picture
Arthur Robey
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Someone rang my bell? (The limits to Growth)

How many people have read Darwin's "Origin of the Species"? How many people have strong views about the theory of evolution? What value is their opinion if they have not read the book?

How many people have strong opinions about the Limits to Growth report (2000 update)? How many have read it?

I blame the educators. They have taught their students to think for themselves and then not taught them How to be critical. We have a cohort of people out there (you know who you are) who think being critical requires no research and is an excercise in mudslinging.

And if an Economist leads the charge against The Report, enough is said.

In a fit of embarassment I offer the graph to you again.

Observe the deaths line from 1900 to 1945. See that wiggle? That is the effect of the 1st and 2nd world wars, the Spanish flu, Stalin's efforts and sundry other disasters. Are you shocked and appalled by the masive waste of life during those years?

But look at the magnitude of the wiggle. Compare it with what confronts us about 2030. You might have the luxury of paralysis but I have the most beautiful grandchildren in the world to look after.

Paralysis is not an option.

Damnthematrix's picture
Damnthematrix
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Paralysis is not an option.

Well said Arthur......  for a very long time I have tried to put the future "correction" in context with what''s coming.  If you think of the global population around the time of WWII as roughly 2.5bn (2,500 million), and think of the 100 million who died because of the war, it's a bit like putting 2,500 people in a large town square, then removing 100.  If you were standing somewhere high looking down on this imaginary square, would you notice they were gone....?

As much as those deaths were a catastrophe, in terms of the coming cull, they are virtually meaningless.  It will get very ugly......

I'm luckier than Arthur.  I don't have grand children, and my children are not planning to produce us any either....  they've been well trained.

Mike

Arthur Robey's picture
Arthur Robey
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Where does escaped hydrogen go?

Proff James Lovelock argues that Life maintains the Oceans. (Did you think it was the other way round?)

Hot metal is a catalyst. Nickel is the second most powerful catalyst after platinum, but it requires an alkaline environment. Nickel is a major component of the Magma that oozes out of the ring of fire. The heat of the Magma and the nickel catalyst are enough to disassociate water into hydrogen and oxygen. There are organisms that use the exothermic recombination of H and O as a fuel.

If it was not for them we would not have water.

And then some Nong comes along and genetically modifies an organism to use sulight to disassociate hydrogen so that he can use it to impress the girls with his clever new motor car.

Can you see the problem?

Mark Cochrane's picture
Mark Cochrane
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Well said!

Arthur,

Dare I say you have a critical insight into our situation.

I've read Origin of Species and Limits to Growth (The 30-Year Update) sits on the shelf next to my copy of The Crash Course in fact! I strongly encourage that everyone also read Garret Hardin's Tragedy of the Commons. It's six little pages that will make you rethink what you think you know regardless of your ideological inclinations.

I am an educator who teaches students to read and think critically. However, my students are already in grad school. I don't teach evolution but the legislators where I live have passed a law that may yet lead me to my own version of the Scopes Monkey Trial. We need to have critical thinking instilled much earlier in our children. Note, critical thinking means questioning assumptions, not blindly asserting contrarian points of view. My daughter is both joy and terror to her teachers at her middle school!

Thank you for reminding me that paralysis is not an option. Though it often seems I am tilting at windmills, there is too much riding on our choices to treat things lightly. I have not yet been blessed with grandchildren but I am doing the best I can to see that my one child has that option when she's ready (hopefully many years from now!).

Mark

Arthur Robey's picture
Arthur Robey
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The State governments find Gold and Silver.

For your amusement and gratification,

Even state politicians are catching on. South Carolina's state legislature requested a report from the treasurer on the advisability of investing in gold and silver.

In response, State Treasurer Curtis M. Loftis, Jr. prepared a six-page report indicating among other things that:

"Similar to other commodities, the value of gold and silver is determined by supply and demand, as well as speculation. The Federal Reserve, The London Bullion Market Association, JP Morgan Chase, and HSBC Holdings have practiced fractional-reserve banking and engaged in naked short selling causing artificial price suppression."

From Money Morning.

Damnthematrix's picture
Damnthematrix
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Krugman ‘knocked out of neoclassical orbit’ by Steve Keen

Krugman ‘knocked out of neoclassical orbit’ by Steve Keen’s meteoric rise!

 

­The internet has been abuzz over the blogosphere boxing match between the Nobel Laureate and NYT columnist, Paul Krugman, and debunker of economic conventional wisdom and superhero economist, Steve Keen. We'll break it down round by round. Next, JPMorgan Chase agreed to pay a $20m fine to settle allegations that the bank mishandled Lehman Brothers’ customer funds for roughly two years before the broker filed for bankruptcy court protection.

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