By: perceptions_now
14/08/2009
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The Elephant in the RoomLet us introduce you to the
elephant in the room:
derivatives.
According to our calculations, the total nominal value of this "elephant" is quickly approaching one quadrillion dollars. That's one thousand trillion. We arrive at this number through the total value of notional global Over-The-Counter (OTC) derivative markets published by the Bank for International Settlements ($683.725 trillion) combined with the current notional exchange traded derivatives ($59.797 trillion), for a grand total of USD $743 trillion. For perspective, $743 trillion is equivalent to more than 11 years of everything the world produces. It is far and away the largest asset market the world has ever known.
Link -
http://www.sprott.com/Docs/MarketsataGlance/April_ 2009.pdf
================
That's right, derivatives now $743 Trillion!
And, subject to proper regulations, right?
Well, actually, no, subject to "smoke & mirrors"! |
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By: perceptions_now
14/08/2009
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"Thanks for the info perceptions.'
pansi,
My pleasure! |
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By: pansi1951
14/08/2009
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<<is quickly approaching one quadrillion dollars.>>
......................... .......................
Give me a break, I'm still coming to terms with the trillion dollar stuff! |
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By: nedwin05
14/08/2009
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An interested interpretation of the causes of the current downturn and what may facilitate further economic decline.
http://www.theoildrum.com/node/5638 |
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By: perceptions_now
14/08/2009
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"An interested interpretation of the causes of the current downturn and what may facilitate further economic decline."
Ned,
Yes, well written!!!
You may also find a few interesting bits in the comments at the end of the following article.
http://www.theoildrum.com/node/5582 |
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By: slr2007mclaren
14/08/2009
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For further perspectives on Peak Oil,
====
its an academic theory! |
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By: lkarnd99
14/08/2009
11:42 pm Yahoo! Profile:
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The players are well back into the market, relying on what? The slightest hint that figures are not what they're made out to be.
How long can governments and their dealers keep pumping the markets, as debt grows to catastrophic proportions?
====
Thursday, August 13, 2009
RBS Chief Credit Strategist: Markets Have Priced in a V-Shape Recovery ... Markets Will Crash When Data Shows That Type of Recovery Isn't Happening
http://www.washingtonsblog.com/2009/08/royal-bank- of-scotlands-chief-credit.html
Royal Bank of Scotland's chief credit strategist - Bob Janjuah - after predicting a big "relief rally" over the early summer, is advising clients to sell out of global equity and commodity markets and prepare for another crash as winter nears.
As the Telegraph writes:
"I expect this risk rally to continue into - and maybe through - a large part of August. What happens after that?
The next ugly leg of the bear market begins as we get into the July through September 'tipping zone', driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets."
The key indicators to watch are business spending on equipment (Capex), incomes, jobs, and profits. Only a "surge higher" in these gauges can justify current asset prices. Results that are merely "less bad" will not suffice...
While media headlines have played up the short-term bounce of corporate earnings, Mr Janjuah said this is a statistical illusion.
Profits were in reality down 20pc in the second quarter from the year before. They cannot rise much as the West slowly purges debt and adjusts to record over-capacity.
"Investors are again being sucked back into the game where 'markets make opinions', where 'excess liquidity' is the driving investment rationale.
..cont |
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By: lkarnd99
14/08/2009
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cont...
Janjuah's advice is German bonds:
Mr Janjuah advises investors to seek safety in 10-year German bonds in late August or early September.
Janjuah thinks that the crash can be delayed a year:
Governments might put off the day of reckoning into the middle of next year if they resort to another shot of stimulus, but that would store yet further problems.
"If what I fear plays out then I will have to concede that the lunatics who ran the asylum pretty much into the ground last year are back in control."
Why would that create more problems? Because, says Janjuah:
The elephant in the room is the spiralling public debt as private losses are shifted on to the taxpayer, especially in Britain and America. "Ask yourself this: who bails out Government after they have bailed out everyone?"
===
Meanwhile the U.S. Debt Clock keeps on ticking
http://www.usdebtclock.org |
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By: perceptions_now
15/08/2009
12:02 am Yahoo! Profile:
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"its an academic theory!"
slr,
You should try doing some research of your own, you may learn a few things!
Try the following, for a start -
http://www.theoildrum.com/node/5638 |
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By: pansi1951
15/08/2009
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From the previous article posted by perceptions.
"the transition will spell an end to economic growth in the conventional sense. And that transition appears to have begun."
I agree, the end of the growth fairy is nigh. Someone should tell the chief of the Reserve Bank. |
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By: perceptions_now
15/08/2009
8:21 am Yahoo! Profile:
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"the transition will spell an end to economic growth in the conventional sense. And that transition appears to have begun."
"Someone should tell the chief of the Reserve Bank."
pansi,
I think they and a few others, already know and have for some time! |
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By: perceptions_now
15/08/2009
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"The elephant in the room is the spiralling public debt as private losses are shifted on to the taxpayer, especially in Britain and America. "Ask yourself this: who bails out Government after they have bailed out everyone?" "
lkarnd99,
If you throw in derivatives & the eventual deleveraging, it's more like a dinosaur, which will again be extinct, soon.
That said, governments are not bailing out these businesses, we are.
I'm sure that these governments think it's great economics, but it's a lot like pissing down your leg? It seems hot to them, but not to the rest of us? |
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By: perceptions_now
15/08/2009
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BB&T Takes Over Colonial After Biggest U.S. Failure Since WaMu
Aug. 14 (Bloomberg) -- Colonial BancGroup Inc., the Alabama lender facing a criminal probe, had its banking operations closed by regulators and taken over by BB&T Corp. in the biggest bank failure since Washington Mutual Inc. collapsed last year.
The collapse pushed the number of failures to 74 this year, as regulators close banks at the fastest pace in 17 years amid real-estate losses in the worst housing crisis since the Great Depression.
Colonial's failure will deplete the FDIC's deposit insurance fund by $2.8 billion, the agency said.
The $2.8 billion estimated cost to the deposit insurance fund compares with an expected $5 billion hit from the failure of BankUnited Financial Corp., a smaller Florida-based thrift acquired in May by private-equity groups led by billionaire Wilbur Ross. BankUnited was focused almost exclusively on home loans, while Colonial has a mix of commercial and consumer loans, Thomas said.
Bloomberg link -
http://www.bloomberg.com/apps/news?pid=20601087&si d=av1XOaDfSAXU
====================
Only two banks gone today, but one was quite substantial, along the lines of WAMA last year.
FDIC link -
http://www.fdic.gov/bank/individual/failed/banklis t.html |
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By: perceptions_now
15/08/2009
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Temporary Recession or the End of Growth?
Energy is the ultimate enabler of growth (again, this is axiomatic: physics and biology both tell us that without energy nothing happens). Industrial expansion throughout the past two centuries has in every instance been based on increased energy consumption. (5) More specifically, industrialism has been inextricably tied to the availability and consumption of cheap energy from coal and oil (and more recently, natural gas). However, fossil fuels are by their very nature depleting, non-renewable resources. Therefore (according to the Peak Oil thesis), the eventual inability to continue increasing supplies of cheap fossil energy will likely lead to a cessation of economic growth in general, unless alternative energy sources and efficiency of energy use can be deployed rapidly and to a sufficient degree. (6)
Of the three conventional fossil fuels, oil is arguably the most economically vital, since it supplies 95 percent of all transport energy. Further, petroleum is the fuel with which we are likely to encounter supply problems soonest, because global petroleum discoveries have been declining for decades, and most oil producing countries are already seeing production declines. (7)
So, by this logic, the end of economic growth (as conventionally defined) is inevitable, and Peak Oil is the likely trigger.
In effect we have borrowed from future generations so that we could gamble away their capital today.
Link -
http://www.theoildrum.com/node/5638 |
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By: perceptions_now
15/08/2009
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Why Did Oil Prices Fall? And Why Didn't Lower Oil Prices Lead to a Quick Recovery?
The Peak Oil thesis predicts that, as world oil production reaches its maximum level and begins to decline, the price of oil will rise dramatically. But it also forecasts a dramatic increase in the volatility of prices.
The argument goes as follows. As oil becomes scarce, its price will rise until it begins to undermine economic activity in general. Economic contraction will then result in substantially reduced demand for oil, which will in turn cause its price to fall temporarily. Then one of two things will happen: either (a) the economy will begin to recover, stoking renewed oil demand, leading again to high prices which will again undermine economic activity; or (b), if the economy does not quickly recover, petroleum production will gradually fall due to depletion until spare production capacity (created by lower demand) is wiped out, leading again to higher prices and even more economic contraction. In both cases, oil prices remain volatile and the economy contracts.
One way or another, growth will be highly problematic if not unachievable.
Link -
http://www.theoildrum.com/node/5638 |
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By: slr2007mclaren
15/08/2009
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You should try doing some research of your own, you may learn a few things!
====
PN
I understand the oil industry more than you
I also understand the "Peak" theory
Academically speaking the theory is sound because every resource is finite...even the Sun has a finite life therefore Peak Sun is also a sound theory
but those links do not show you the relative context of the argument
if you want to perpetuate this panic then I am happy to provide the balancing view whenever I see it come up
. |
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By: slr2007mclaren
15/08/2009
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btw
I've looked into the Peak Oil theory
plenty of fundamental flaws in its figures and assumptions |
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By: perceptions_now
15/08/2009
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Big Picture Diagnosis: Continuing the Trail of Logic
Thus the Peak Oil crisis is really just the leading edge of a broader Peak Everything dilemma.
In essence, humanity faces an entirely predictable peril: our population has been growing dramatically for the past 200 years (expanding from under one billion to nearly seven billion), while our per-capita consumption of resources has also grown.
If we step back and look at the industrial period from a broad historical perspective that is informed by an appreciation of ecological limits, it is hard to avoid the conclusion that we are today living at the end of a relatively brief pulse-a 200-year rapid expansionary phase enabled by a temporary energy subsidy (in the form of cheap fossil fuels) that will inevitably be followed by an even more rapid and dramatic contraction as those fuels deplete.
The winding down of this historic growth-contraction pulse doesn't necessarily mean the end of the world, but it does mean the end of a certain kind of economy. One way or another, humanity must return to a more normal pattern of existence characterized by reliance on immediate solar income (via crops, wind, or the direct conversion of sunlight to electricity) rather than stored ancient sunlight.
This is not to say that the remainder of the 21st century must consist of a collapse of industrialism, a die-off of most of the human population, and a return by the survivors to a way of life essentially identical to that of 16th century peasants or indigenous hunter-gatherers. It is possible instead to imagine acceptable and even inviting ways in which humanity could adapt to ecological limits while further developing cultural richness, scientific understanding, and quality of life (more of this below).
But however it is negotiated, the transition will spell an end to economic growth in the conventional sense. And that transition appears to have begun.
Link -
http://www.theoildrum.com/node/5638 |
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By: perceptions_now
15/08/2009
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"if you want to perpetuate this panic then I am happy to provide the balancing view whenever I see it come up"
slr,
Then I suggest you do so!
You say theory, I am of the opinion it is now historical fact! |
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By: perceptions_now
15/08/2009
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Whom should we believe?
Could the Alternative Diagnosis be altogether wrong? That is, might conventional economists be right in thinking that growth can continue forever? It is often said that anything is possible, but some things are clearly much more possible than others. The perpetual growth of human population and consumption within the confines of a finite planet seems like a very long shot indeed, especially since warning signs are everywhere apparent that ecological limits are already being reached and surpassed.
What Not to Do: Prescribe Punishingly Expensive Placebos
If the physical scientists who warn about limits to growth are right, confronting the global economic meltdown implies far more than merely getting the banks and mortgage lenders back on their feet. Indeed, in that case we face a fundamental change in our economy as significant as the advent of the industrial revolution. We are at a historic inflection point-the ending of decades of expansion and the beginning of an inevitable period of contraction that will continue until humanity is once again living within the limits of Earth's regenerative systems.
Other nations, including Britain, China, and Germany have committed to paying for stimulus packages and bailouts that, while much smaller in absolute terms, represent an impressive (or should we say frightful?) share of national GDP.
If the Alternative Diagnosis is valid, none of this will work in the end, because existing financial institutions-with their basis in debt and interest and their requirements for constant expansion-cannot be made to function in a context where energy and resource constraints impose effective caps on manufacturing and transport.
What is required but is still utterly lacking is a fundamental recognition that circumstances have changed: what worked decades ago will not work now.
Link -
http://www.theoildrum.com/node/5638 |
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By: perceptions_now
15/08/2009
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What To Do: Adapt to the New Reality
If the Alternative Diagnosis is correct, there will be no easy fix for the current economic breakdown. Some illnesses are not curable; they require that we simply adapt and make the best of our new situation.
If humanity has indeed embarked upon the contraction phase of the industrial pulse, we should assume that ahead of us lie much lower average income levels (for nearly everyone in the wealthy nations, and for high wage earners in poorer nations); different employment opportunities (fewer jobs in sales, marketing, and finance; more in basic production); and more costly energy, transport, and food. Further, we should assume that key aspects of our economic system that are inextricably tied to the need for future growth will cease to work in this new context.
Link -
http://www.theoildrum.com/node/5638 |
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By: perceptions_now
15/08/2009
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What can we do to adapt most rapidly and successfully?
Rather than attempting to prop up banks and insurance companies with trillions in bailouts, it would probably be better simply to let them fail, however nasty the short-term consequences, since they will fail anyway sooner or later. The sooner they are replaced with institutions that serve essential functions within a contracting economy, the better off we will all be.
Without cheap energy, global trade cannot increase. This doesn't mean that trade will disappear, only that economic incentives will inexorably shift as transport costs rise, favoring local production for local consumption.
Without cheap fuel for agriculture, farm production will plummet and farmers will go bankrupt-unless proactive efforts are undertaken to reform agriculture to reduce its reliance on fossil fuels.
With oil becoming increasingly expensive in real terms, we will need more efficient ways of getting people and goods around.
However contentious, the population question must be addressed. All problems that have to do with resources are harder to solve when there are more people needing those resources.
But those in charge need to understand that looking on the bright side doesn't mean promising what can't be delivered-such as a return to the days of growth and thoughtless consumption. |
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By: slr2007mclaren
15/08/2009
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You say theory, I am of the opinion it is now historical fact!
=====
historical facts were used to back this thesis
and these historical facts are applicable to the limited knowledge at the time
out dated!!
. |
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By: perceptions_now
15/08/2009
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Can We? Will We?
It is important to state the implications of all this as plainly as possible. If the Alternative Diagnosis is correct, there will be no full economic "recovery"-not this year, or the next, or five or ten years from now. There may be temporary rebounds that take us back to some fraction of peak economic activity, but these will be only brief respites.
We have entered a new economic era in which the former rules no longer apply. Low interest rates and government spending no longer translate to incentives for borrowing and job production. Cheap energy won't appear just because there is demand for it. Substitutes for essential resources will in most cases not be found. Over all, the economy will continue to shrink in fits and starts until it can be maintained by the energy and material resources that Earth can supply on ongoing basis.
Link -
http://www.theoildrum.com/node/5638 |
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By: pedrofromspain
15/08/2009
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All that remains is the un-answered question of what happens with the massive personal and national debts of worlds leading nations?
China has lent the US billions and passed it's own laws enabling foreclosure in minute detail. |
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