Daily Digest

Gorner Glacier, Image by Zanthia, Flickr Creative Commons

Daily Digest 7/19 - A "Much Bigger Collapse" Imminent, The Servant Economy

Thursday, July 19, 2012, 11:18 AM

Economy

Calpers Pension Plan Reports 1% Return; Stunning "What If" Charts at Various Compound Annualized Rates-of-Return Going Forward (Phil H.)

“The California Public Employees’ Retirement System (CalPERS) is the biggest public pension in the country. It is also deeply underfunded. Depending on the measure used, they have just 55-75% of money needed for future expenses while 80% is considered the minimum to be safe. Their return is currently less than 99% of big pension funds.

On March 12, CalPERS voted to lower their expected return from 7.75% to 7.5%, ignoring the advice of their own chief actuary that it should be 7.25%. More than a few investment professionals consider a projected rate of 7.75% to be unrealistically high in these times and question whether 7.25% is realistic."

Study Proves Natural Gas Can Bridge the Gap to a Clean Energy Economy (OPA)

“From a greenhouse point of view, it would be better to replace coal electrical facilities with nuclear plants, wind farms, and solar panels, but replacing them with natural gas stations will be faster, cheaper, and achieve 40 percent of the low-carbon-fast benefit,” Cathles writes in the study. “Gas is a natural transition fuel that could represent the biggest stabilization wedge available to us.”

Jeff Faux: "The Servant Economy" (woodman)

An economist describes the financial decline of the middle class and why he believes neither political party will stop it.

Jeff Faux of the Economic Policy Institute argues Americans are in denial. Everyone knows, he says, but no one faces up to the fact that the United States can no longer afford to have subsidized unregulated markets, be the world’s global power and provide a steadily rising standard of living. One of these is possible, maybe two, but not all three, according to Faux. No group -- and certainly no politician of either party -- is addressing this new reality, he contends. Despite public posturing to the contrary, it’s America's middle class that will be sacrificed on this current path. Please join us for a conversation with Jeff Faux on why he believes we’re moving from a service to a servant economy.

Peter Schiff: A Much Bigger Collapse Is Coming (David B.)

As the Fed responds with more aggressive QE to prop up banks, in addition to maintaining historically record low debt carrying costs to Treasury, investors will most likely come to realize that the Fed has become powerless to affect any positive outcome to the crisis. More jobs will be lost, tax revenue to the Treasury will fall, and deficits will soar even higher than the $1.5 trillion deficit expected for fiscal 2013.

Energy Dept. 'Unable to Locate' $500,000 in Equipment Bought With Stimulus Money (Thomas C.)

“In the absence of detailed inventory records, we attempted to locate property using information contained in invoices," the audit states. “However, despite the assistance of recipient officials familiar with the premises and knowledgeable about the purchases made, we were unable to locate 20 of the 37 equipment items sampled.

“The missing items were valued at approximately $500,000,” the audit states.

What the Future Holds for Saudi Arabia's Oil (OPA)

In earlier production practices, where companies “stepped out” production wells away from the original producers, and in this way gradually extended the knowledge of the size of the field, reserve growth over time was a normal development. However, with the large size of the fields in Saudi Arabia, and the need to maintain operational pressure during production, Aramco (as JoulesBurn has clearly shown) rings their fields with water injection wells that drive oil to the central high point of the reservoir and slowly migrates the producing and injection wells towards that centre as the field is drawn down. This practice precludes the incremental increase in reserves over time, since the field boundaries are constrained and as the wells reach the central part of the reservoir (the crest of the anticline) a clear definition of the closing days of the field becomes more evident.

Glacier in north Greenland breaks off huge iceberg (dons)

Many of Greenland's southern glaciers have been melting at an unusually rapid pace. The Petermann break brings large ice loss much farther north than in the past, said Ted Scambos, lead scientist at the National Snow and Ice Data Center in Boulder, Colo.

If it continues, and more of the Petermann is lost, the melting would push up sea levels, he said. The ice lost so far was already floating, so the breaks don't add to global sea 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."

2 Comments

saxplayer00o1's picture
saxplayer00o1
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Tall's picture
Tall
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Evidence that Oil Limits are Leading to Limits to GDP Growth

The usual assumption that economists, financial planners, and actuaries make is that future real GDP growth can be expected to be fairly similar to the average past growth rate for some historical time period. This assumption can take a number of forms–how much a portfolio can be expected to yield in a future period, or how high real (that is, net of inflation considerations) interest rates can be expected to be in the future, or what percentage of GDP the government of a country can safely borrow.

But what if this assumption is wrong, and expected growth in real GDP is really declining over time? Then pension funding estimates will prove to be too low, amounts financial planners are telling their clients that invested funds can expect to build to will be too high, and estimates of the amounts that governments of countries can safely borrow will be too high. Other statements may be off as well–such as how much it will cost to mitigate climate change, as a percentage of GDP–since these estimates too depend on GDP growth assumptions.

If we graph historical data, there is significant evidence that growth rates in real GDP are gradually decreasing. In Europe and the United States, expected GDP growth rates appear to be trending toward expected contraction, rather than growth.

http://www.theoildrum.com/node/9343#more

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