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In Search of a White Swan

Friday, April 8, 2011, 8:57 AM
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The term "black swan," as coined by Nassim Taleb, refers to an unusual event that nobody was expecting because such an event had never happened before. Until a black swan has been seen, they simply don't exist; their probability is zero.

We are now in the midst of exactly what we might predict would happen when a world accustomed to sufficient net energy to drive its processes runs short of that surplus. This is our ultimate black swan.

Trained and raised in a world of ethereal numbers and ideas, today's economists simply lack the proper framework to understand that all of the 'rules' they learned about monetary theory, interest rates, debt accumulation and all the rest, were not actually rules, they were temporary conditions permitted by abundant net free energy.

Brent crude oil at $124/bbl is telling us something. While the unrest in the MENA region is certainly driving some of the price gain, it is important to note that the price of Brent crude has been climbing more or less steadily since July of 2010, when it was at ~$80/bbl.

Saudi Arabia has said many times that it has lots of spare capacity and can easily fill the gap left by Libya's temporary (or perhaps prolonged) departure. There are two problems with this view.

 

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