If we don’t use it….they will

Audio –

09:24 min.

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  • CSArichardo

    Maybe all the talk about war is really about helping to keep oil prices and inflation alittle higher than they would otherwise be.  So more war talk with Iran is as good as QE3 ?

  • NascentMind

    The war is set in stone it’s just a matter of how we play the game.
    Russia has told the west it will not accept a direct strike.
    Russia will not allow Israel-US attack on Iran and Syria
    http://www.youtube.com/watch?v=bM0hGffexQU 

    So the west has agreed a new approach.
    (2011) Turkish Military Power
    http://www.youtube.com/watch?v=yPk6VZDLGe4&feature=related 
    Arab problem Arab solution.

    Welcome to the Club: Turkish president still keen on EU

    http://www.bbc.co.uk/news/uk-15809306 

    • Slough of Demand

      Can you imagine if the Ottomans held onto their vast land empire until the Age of Oil blossomed in the 1930’s.  They would have been incredibly wealthy and powerful.  The Turks only missed it by about 10 years.  Timing is everything. 
      The good old Empire days.  Only the Americans are keeping that dream alive now. 
      Most Euorpean nations/regions enjoyed more autonomy under the Holy Roman Empire, than they do under the modern, un-elected EU Parliament.

  • Slough of Demand

    There has been a great deal of demand destruction for oil in America in the past year, particularly in the past few months.

    -Automobiles, SUV’s, trucks and diesel locomotives have all benefited from engine energy efficiency upgrades over the past year or so, which has led to higher m.p.g.’s for the various transport vehicles.  Ford’s eco-boost engine is a prime example of this trend.  It delviers the same output of a massive V8, but achieves a 20% savings in fuel.  Also, newer cars get better mpg’s than the older vehicles (Cash for Clunkers?).
    -Rail freight has captured some of the truck freight market.  Rail is a more oil efficient delivery system.  Even river barge traffic, the most efficient system, is coming online again.
    -Unemployed commuters are not driving to their jobs.
    -A Mild Northeastern (NY, NJ, CT, MA) winter has drastically cut the the demand for home heating oil (essentially diesel).  Many older homes and shops still use fuel oil for heating.
    -American surburban familes do not drive for vacations in the winter, except to ski reports hundreds of miles away.  Again, a mild winter, so no skiing.  Also, the surburban soccer moms are not carting their kiddies to/fro practice and games in the winter like they must in the spring and fall seasons.  Millions of kids are driven millions of miles for soccer, football, baseball and lacrosse fields to different towns.
    -Agricultural activity drastically slows down from the fall to the spring destroying the oil demand for fertlizers, persticides and farm equipment.
    -Many oil-fired power plants are being replaced by natural gas plants.
    -The general industrial malaise has destroyed demand for oil based industrial agents; lubricants, plastics, etc.
    -Many towns/counties/states are cutting their road paving budgets, causing a decline in asphalt purchasing.

    Oil demand in America will increase in the next few months, peaking during the August vacation driving season.  This demand increase will occur as oil prices are rising worldwide. 
    I don’t expect the Iran saber-rattling to end any time soon.  Their aggressive talk is feathering their beds with increased oil profits.  Even the Russians are benefiting, since their Urals Oil has a similar chemicall composition to Iran’s oil.  It must be refined at the same plants.  If the Iranian oil flow is cut due to embargo, those oil refineries will have to purchase the Russian Urals to meet their production quotas.  I don’t think Putin would mind some tidy oil revenue profits.   
    The double whammy of price and demand rise will be a disaster for Obama’s re-election campaign going into the fall season.
    Obama must be praying that the Chinese housing bubble bursts and causes a recession (demand destruction) in China soon.  China has been the real driver behind oil demand for the last 2 years.

  • Mzagar

    Do you really blame them ? Killing and kidnapping Iranian scientists, spy and assault drones flying on the Iranian territory, industrial sabotage, trade blockades, melding and falsifying statements, spreading half truths . . . Yes, it is a sad story, but we know about it. What about the thousands of prisoners in the American / Nato prisons we do not even know about. Even here in Finland we had these “black” planes, transporting “Something”, but for some reason they where not checked. It is so convenient to push these “Iran is suppressive” stories, in order to justify an attack on Iran.

    There is a lot of talk about the oil prices, but what about demand ? A huge number of unemployed I would imply that the demand is decreasing, therefore the price should be decreasing. Is there something else that is pushing up the price, like perhaps the FEXEROX.

    • Slough of Despond

      Are you actually defending the Mullahs of Iran?  That is like defending Hitler, Stalin, or Pol Pot!  Are you insane?  Do you have any clue what incredible assholes these fucking men are?  Do you have any idea what they do to their own people, on a daily basis? 
      Go take a suana and beat yourself over the head with a birch stick; preferably a large one!
        
      By the way, what the fuck is the FEXEROX?

  • Windcutter

    Words of wisdom from Asia:

    http://www.bbc.co.uk/news/business-16918000
    “Europe… has lost a lot of money and therefore you must be poor now relative to the past,” he reasons in an interview with BBC World Service’s Business Daily.”

    “Dr Mahathir believes European leaders are in a state of denial. “You refuse to acknowledge you have lost money and therefore you are poor,” he says.”

    “In particular, he believes Europe and the West must begin the long slow process of restructuring their economies to reduce their dependence on the financial sector.
    “I think you should go back to doing what I call real business – producing goods, providing services, trading – not just moving figures in bank books, which is what you are doing.”
    His big bugbear is still currency trading, which he believes did huge damage to the Malaysian economy during the financial crisis that hit Asia in the late 1990s.
    “Currency is not a commodity”, he says.
    “You sell coffee. Coffee… can be ground and made into a cup of coffee.
    “But currency, you cannot grind it and make it into anything. It is just figures in the books of the banks and you can trade with figures in the books of banks only.
    “There must be something solid to trade, then you can legitimately make money.”
    I cannot argue against that straight forward logic, can you?

    “There must be something solid to trade, then you can legitimately make money.” 

    • http://overthepeak.com/wordpress/ Mystic

       Mahathir is not my best friend (but I should get over that).

      No, I can’t for the moment……..he’s a git~!

      • Windcutter

        But he does have a point; can all the digits shooting around in financial computer systems provide real wealth and feed the populations, or do we need to get back to producing real stuff?

        • http://overthepeak.com/wordpress/ Mystic

           I have been giving this a lot of thought.
          I think (maybe) as long as you export enough to cover your imports, the rest of the economy can be hairdressers hairdressing other hairdressers…..(maybe~?)~?

          • Windcutter

            I’ve been trying to get to grips with the idea for a while now, what is wealth, and where does it come from.

            Looking at a local economy, such as where I live, where there is a thriving agriculture based on rubber trees, palm oil and shrimp production, supplemented by a lively tourist industry. Both of these together bring a lot of money into the area, which manifests itself as Mercedes, big houses , large construction projects, shopping malls, even an international airport, almost all of which has arrived over the last decade.

            All this money flowing inwards into the local economy results in a considerable rise in the average living standard. But what is on the other side of the coin? My understanding of money creation is that all this inwardly flowing cash is a debt somewhere else. All the Brits, Germans, Scandinavians bringing money across for their holidays are slowly but surely creating an imbalance as debt accrues in Europe and is spent in Asia. In the past, as Europe was phenomenally wealthier than Asia (due largely to theft), the imbalance was not noticeable to the Europeans, now it is….

            Also all the the agricultural produce “exported” out of the local area to wherever it goes, brings far more money in than is needed to spend on “imports” from outside the local economy. Further increasing the local wealth at the expense of those buying the stuff.

            Hmm, there are now even more thoughts whizzing around my brain about how this is balanced. So I’ll leave it there.

            But where does the financial lot sit around the real production? What on earth do these guys actually produce to deserve the massive salaries and bonuses?

            • http://overthepeak.com/wordpress/ Mystic

              I think you will have to dial in currency exchange rates somehow.
              The Western money is still very powerful (because of history) and the local currencies are still pissy weak. 
              A Westerner can earn lots of shrimps per hour (a local, not so many). 

              • Windcutter

                Inside of a country there will be a migration towards the more affluent areas, in Asia, where there is little or no state welfare, the kids then send money back home to support the parents, so there is a steady flow out to the poorer areas. This doesn’t balance out things, but does go a little in that direction. Intra-country or intra-Europe the balance cannot take place over the currency. This is to a large extent the ‘Greek’ problem.

                If the currency markets were moved by real trade, as was the case way back when, then yes, the balancing would ensue over the exchange rates. Nowadays currency exchange rates are largely governed by the yield/safe haven/speculation angles. International currency flows due to trade are in single figure percentages, all the rest is speculation. Forex gamblers operate at up to 900% leverage and overwhelm the real trade currency flows.

                The USD is sitting there as pivot pin for all currencies, and as such gains more support than it probably deserves.

                Interestingly enough in the last 24 hours or so the GBP has fallen 2%, not due to international trade but due to speculators.

                On the “shrimp scale”, in terms of buying the local produce here and buying the exported goods with the “up-pricing” of the European importers, I suspect that there is not a huge difference in the shrimp purchasing power.

                On the same topic, in your latest you showed a graph showing how the percentages in the world’s gdp had changed. I wonder how they filtered out the exchange and inflation rates? What is the reference? Just thinking about that makes my head whirl.

                • http://overthepeak.com/wordpress/ Mystic

                   The gold standard did a good job balancing out trade.  It did keep it real.
                  It is impossible to know what is real now….no datum….all relative. 
                  It still seems to work, but I’ve not a clue how~!?

  • Windcutter

    The iphone economy

    http://www.nytimes.com/interactive/2012/01/20/business/the-iphone-economy.html
    “A look at the largest employers shows how America’s economy has changed. Over the last 50 years, the country has shifted from creating goods to providing services. Today, about a tenth of Americans work in manufacturing, while service providers and retailers like Walmart and temp firms like Kelly Services employ about six in seven of the nation’s workers”

    So can the 10% of real wealth producers support the 85% of service sector workers plus the retired and unemployable? I realise that the more I think about this stuff, the less I know, and that certainly 99.99% of the population are in the same boat.

    But, at the end of the day, if you are not producing real stuff, exporting stuff or have a financial industry that is not screwing money out of foreign countries (and sooner or later they will get a little pissed off about that too), what is the long term prospect?