By Stephen Wellman
I am starting off this report with a warning. Where the US government is headed, as well as most other global government, has nothing to do with kindness or generosity or even fairness. It is only about retaining their power by whatever means are needed. Get ready for an unprecedented “whatever”!
“Nothing is more unpopular today than the free market economy, ie capitalism. Everything that is considered unsatisfactory in present-day conditions is charged to capitalism.” – The Failure of Interventionism, Chapter One, PLANNED CHAOS- Ludwig Von Mises, 1947
You may think that the US government and even the governments of Europe and Asia will never effect your daily life here in Main Street, USA, but you could not be more wrong in that assumption. Those who would want to manage your life through a central planning agency often look to foreign markets to test theory and determinations. The financial and banking system is tied together worldwide like a net of dominoes using derivatives and futures markets to move monetary policy approved by elite political and monetary authorities. The world is run by elite monopolies that want nothing more than to increase their power. It’s all been tried before …
“On a more modest scale Augustus adopted an easy-money policy. The policy promoted an inflationary boom followed by deflationary hard times and the panic of 33AD.” – The New Deal in Old Rome, HJ Haskell, 1939
I am convinced that the repetition of history makes fools of technology and government and social gurus. You may be reading this on your Kindle or your Apple IPad, but rest assured your “human condition” is intact and no different than the Romans who lived in 33AD or the Germans who suffered through fascism in 1939. Life is suffering because the human condition is. We suffer by repetitious ignorance …
Any time you read bad news and see scandals in the back of your mind you are telling yourself, “This is 2014 and we’re a very advanced society so there will never be any Dark Ages or medieval hard times”. Besides this is America not that stupid British Empire … we have no Caesar! We’re a democracy for Christ sakes! I have “rights”! But we do have an empire … we have worse! We have a “central bank”! A central bank makes Caesar look like Santa Claus!! Why are people in such suspended animation? Besides who really like “bad news” any way? So long as the “bad” is happening to other people in lesser countries we pretty much just say … “nahhhh”! In the end there is always “bread and circus” …
What’s different now is accessibility. With internet and social media there is a whole new market for gurus of all types. Almost any idiot can broadcast from their living room and actually find followers … devotees.
You can listen to numerous “new age” internet prognosticators of new paradigms of kindness advocating loving transitions into a higher world of peace and tranquility where all humans are one with the planet. A new world where we will achieve oneness life free from the current follies of materialism and religion. It is said to be the coming ethereal shift of human consciousness into a higher spiritual mode of being ONE on the Earth. You see these ‘gurus” vying for Gurudom on all the social media. Before the internet social media you never heard of these people, but thanks to technology gurus can broadcast live from their living room or remote locations. We’re all on info-overload!
These are the “occupiest” types who want you to “Occupy This”. These are the Facebook gurus with the heartwarming sayings with 65,372 likes and 9 comments. These are the “commune economists” and “climate environmentalists” who guilt you for not being them. They put shame on you for not thinking their thoughts or taking their actions or following their footsteps. They race against each other to garner the most “likes” and the biggest social following across a wide array of social media. Like heroin addicts fingering needles, their fingers fester on smoldering keyboards pounding the keys as if they were BF Skinner’s rats on acid demanding food pellets for their crazed repetitious efforts to “convert” the world!
With “them” you are never good enough as you are and that is exactly how your elected representatives have looked down on you from Washington DC. You are not good enough or smart enough, but “they” are! Yet with all their ivy league degrees and lawyering and private jets the best they could do is what we have now. Virtual global youth unemployment at 50% and riots all over Europe with government that has its eyes and hands in every daily action you perform. Police and military units are almost indistinguishable and George Orwell has to be laughing hysterically from his grave!
Let’s text – not talk … 🙂 OMG … WTF??? YOLO BF!
You can easily starve to death on a steady diet of “likes”!
BF Skinner would marvel at Facebook and our addiction to “likes”. Freud would infer the ego into the social mafia equation … uh … I mean “media” … “social media” equation! And my pal Orwell would not be the least surprised that a guy named Snowden unwrapped the true meaning of the internet and is now Public Enemy #1 for all his efforts! Welcome to 1984!
In the long run, if any of these “gurus” are selling you something it’s probably not worth buying. If you’ve wasted your life ardently supporting one political party to the exclusion of all others then BF Skinner wants to shake your paw! You’ve been the perfect political rat you were designed to be …
Whatever it is you “like” now, you will not “like” later. “Later” meaning “in the future” when this mother of all political and monetary dictatorship collapses. Things are not as they seem! This is not normal! It’s all BULLSHIT and after peak oil kills peak consumption and peak government we get peak riots and then the human condition reverts back to antiquity with peak war. There is always a reversion to the “MEAN” …
That little voice in your head telling you something is wrong … is right! The only thing real any more is that the sun rises in the East and sets in the West. And I am sorry to report that there is no amount of refining or technology or magic kindness pills that makes the “human condition” any less predictable.
Instead of that old saying … “Can’t we all just get along?” I think we should just say “Just quit selling me shit!” There are trillions and trillions of dollars’ worth of pure “shit” being sold to unsuspecting buyers out there in the world and we will discover that the American Dream we bought isn’t worth the paper it was printed on!
Okay, not much of what I have typed so far is about economics or money, but who cares …
Ah, but wait … it is! Economics and money operate off the “Greater Fool Theory” (GFT). You don’t want to be the “last fool” to be holding a US Dollar nor the “last fool” to buy a house with a 60yr variable rate mortgage! You don’t even want to be the “last fool” to buy call options on the QQQ! The GFT states that if you are human then your human condition will rule your foolish choices no matter how many animate and inanimate objects you can blame for your foolishness. Best to get a second opinion so …
“The Greater Fool Theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants. A price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price. Or one may rationally have the expectation that the item can be resold to a “greater fool” later.” – Wikipedia
Speaking of “greater fools” … it is time to look at the US Treasury numbers. This time we will venture back in history some …
OUTLAYS BY NUMBERS
For July 10th total gross outlays at the US Treasury was $8.69TRIL. Here …
Imagine having to track invoices and spend up $11TRIL+ every year. Even with computers can it be done efficiently? But the most troubling question is whose pockets does most of these outlays end up in? And how, when and who determined what pockets are the best use of those taxpayer funds? Certainly if you have no lobby in Washington DC or made no substantial political contributions you can cross your name off the WHO GETS IT list!
Now, if you deduct our debt redemptions of some $5.37TRIL you end up with net outlays of $3.31TRIL as of July 10th. The 2014FY is not over yet either so even more outlays(spending) will happen, probably well over $4TRIL! But if you believe the accumulated debt will get paid back then it is really spent in the form of future principle and interest.
Congress is spending, or transacting, at the gross rate of $46.2BIL per working day or $31BIL per calendar day. Any way you slice it that takes an awful lot of accounting power to even track those dollars much less print up checks. Is the money accurately accounted for? Is it efficiently spent? Do we get the most bang for our bucks or is this just the craps table at the Bellagio?
Historically government has not been efficient and their track record on accounting is not top notch either. Money goes missing or misplaced or just plain old “squandered” on political bribes to unions and corporations and foreign and domestic banks and finance entities.
Hmmm … okay look below here … The chart below only reflects up to 2010, but you get the historical perspective. Once again look at the year 1971, the year Nixon closed the gold standard as the catalyst.
Obviously the US population has not had the same parabolic increase as evidenced by the declining growth rate chart below based on historical US Census data going back to the 1950s.
So I ask why must government spending rates increase in a parabolic scale when the US population growth rate is declining. In fact some 70 million baby boomers are set to expire within the next ten years. I am one of them! In fact I am already seeing my friends die off.
The only viable solution to control spending is to have less government with less access to revenues and debt issuances. This was the basis of the US Constitution, limiting the powers of government. The view is that we are too “modern” now and technology has rendered all the Old World ways and documents irrelevant.
Let’s go back in time now and see how much outlays have changed. We’re not even going back that far and I think you will agree with me that a lot of billions and trillions have come and gone, but there is not a whole lot to show for it. Going back to the US Treasury FY1998 I have selected just five line items out of some 33.
All the above numbers are for 3rd quarter fiscal year on June 12th. Some years the exact day varied, but these numbers do not reflect the entire fiscal year, only about three quarters out of four.
As you can see the trend for outlays(spending) is up. Clearly only Unemployment Benefits have been the most volatile series of numbers, going from $14.4BIL in 1998 to $101.7BIL in 2010 and back down to $33.1BIL in 2014. Still though since 1998 the trend is up!
What is staggering is the numbers for Social Security and Medicare. It clearly shows the baby boomers are taking their toll on government spending and clearly make the budget unstable. In FY2014 the numbers for Social Security, Medicare and Medicaid practically wipe out all net tax revenues, making debt issuances rise to fill the revenue gap for the rest of the government expenditures like Defense and the cost to service the US Debt.
Let’s look at those Federal Employee costs. Those costs have risen even as the total number of Federal Employees has not. It only means inflation is causing the rise. Clearly government unions have “negotiated” increases every year possible and a large part of that is healthcare and pensions.
WHAT IS THIS?
It looks ominous even though it has nothing in it but a bunch of $0 … This Table V came into existence this fiscal year and replaced a prior Table V.
First off “Short Term” is generally known as one year or less. Is that what “Term” means here?
What is a “Special Direct Investment” and why does Congress and the US Treasury get involved in such investments? Is it that the US Treasury did so well on their GM “investment” that they now believe they should start stock trading? Central banks are moving into equities why not the US Treasury?
Term Investment and Repo Investment are typically central bank instruments. Will this Table V be the final destination for all that QE MBS that the US Fed bought over the past four years?
Table V seems to be a premonition of less than stellar economic and monetary policy. We get this now …
RECOVER THIS!!
Notice how the 53 years from 1879 to 1932, in the dark red box, had a much shorter average recovery rate of 21 months, even with WW1 included. Those years are the prime gold standard era whereby we had no real central bank during the majority of that time. The average for the era outside the red box, when the US Fed and the US government have ramped up spending and debt, averages a recovery rate of 59 months. The modern era with central planning and central dominance over markets by central banks and government has suffered much longer recovery rates and thereby being much more costly to repair the damage. There is debate as to whether some of the damage is repairable, kind of like the 9th Ward in New Orleans after Katrina …
WHAT GOT SAVED?
Okay, I have been on this planet over five decades and as near as I can tell “globalization” has globalized mainly “debt” and “misery”. Am I being too harsh?
It amazes me that somehow over the past eight years or so this term “globalization” has become very popular to describe the “new function of macroeconomics” when in terms of the word “trade” the world has been trading globally for hundreds of years. In fact the Marine’s Hymn is about “trade” …
From the Halls of Montezuma
To the shores of Tripoli;
We fight our country’s battles
In the air, on land, and sea;
First to fight for right and freedom
And to keep our honor clean;
We are proud to claim the title
Of United States Marine.
What was the “shores of Tripoli” other than a trade dispute? This was the First Barbary War fought in 1801 which was a trade dispute whereby the USA was being forced to pay high tributes and when the tributes were not paid US ships were taken as hostages for ransom. It was the first declared war the USA fought on foreign land and sea. Ever since our appetite for foreign wars has increased exponentially and so have the costs, both human and in treasury. It appears we as a Nation are addicted to warfare if you go purely by our actions. My mother told me “actions speak louder than words”!
Incredibly the most “globalized” entity by far has been Wall Street Fraud! This has taken the form of derivatives and derivative byproducts rehypothecating themselves to the forefront of modern fraud. I will not bore you with a rant about how this huge globalized fraud has resulted in no real limitations or jail sentences for the largest bank execs, but I will bore you with the derivatives details.
As Krugman notes below in 2002, all these bubbles need is more and more debt to make us all feel rich! The sad part of the debt component is that after the collapse the debt is all that’s left. As anyone knows if you have debt the bank owns you. You can’t borrow at the discount window at 0.75% like the Fed member banks can! Isn’t that civil discrimination? Or is it just military backed usury?
TWO CHARTS
I find these two charts very telling … What’s the saying? When the times are tough the tough get going?
FORE-E-E!!!!
“It’s something that’s associated with boom times,” he said. “Most of society’s not moving up, and golf is associated with moving up.” – Paul Swinand analyst MorningStar Chicago
“In Asia, golf is growing just fine!” – Casey Alexander Gilford Securities NYC
I will have to say I played golf a long time ago, but not anymore. Still golf has this reputation as an elitist sport where deals are made by big time CEOs. A place where the monied go to mingle! A place where minorities were once excluded except to caddy bags or serve drinks to the wealthy whites.
One would think that if we had an economy that was truly recovering then we would still see the golf industry doing well. If you can use golf as an indicator then the data on golf courses and golfing equipment sales prove that there is no recovery.
I present two golf industry articles from Bloomberg. One from Jan 2014 and one more recent. Both point out the huge number of golf course closings and they both mention sales are down. It is my contention that the municipal courses were forced to close due to falling tax revenues and/or increasing green fees. In the article below public golf courses made up 97% of all golf course closures.
U.S. Golf Course Closures Exceed Openings for Eighth Year
By Michael Buteau Jan 16, 2014 7:00 PM
Of the closings, 66 percent charged less than $40 for greens fees during peak times. The closings decreased the total number of U.S. golf courses to 14,564.5, the Foundation said. Public courses made up 97 percent (151.5) of the closures, with private courses accounting for 4 percent (6). A total of 8.5 public courses opened last year, compared with 5.5 new private courses.
Since 2006, 643 18-hole courses have closed, the organization said. The decline has followed a 40 percent growth from 1986 through 2005, a period with more than 4,500 courses opening, according the foundation data.
Golf Market Stuck in Bunker as Thousands Leave the Sport
By Lindsey Rupp and Lauren Coleman-Lochner May 22, 2014 6:01 PM
About 400,000 players left the sport last year, according to the National Golf Foundation. While almost 260,000 women took up golf, some 650,000 men quit.
“Golf is in a bit of a drought,” said Allen Adamson, managing director at brand consulting firm Landor Associates in New York. “It’s a pretty high-price sport, and leisure time is getting crunched.”
“We anticipate a heavy promotional environment while the industry works through excess inventory,” Callaway CEO Chip Brewer said on a conference call in April. The company hasn’t reported an annual profit since 2008.
The sport is suffering the biggest decline from younger players, according to the National Golf Foundation, with 200,000 players under 35 abandoning the game last year.
Okay …
If golfing and golf courses define high economic stability then what does this say about the recovery.
On the other hand to me it is doubtful that the youth today will carry on this grand tradition once the baby boomers have left planet Earth. I don’t know any Millinies that golf!
But take a look below at who does …
It looks like George Bush is the only Republican in the group, but I like their little American flag lapel pins that all the political sell-outs wear. What were there 100 Secret Service men in on this photo-op? They certainly have lots to laugh about …
Meanwhile as the four stooges who all have a history of meddling in the Middle East we get this …
MISSION NOT ACCOMPLISHED!
MEET THE NEW OSAMA … SAME AS THE OLD OSAMA!
Just like the Who song about the “new boss” … same as the “old boss”! When does our State Dept learn? What has Hillary or anyone there in charge of Foreign Policy done to foresee this and act accordingly, like not sell weapons to terrorists! Even better … not hand over military hardware to US puppet regimes. As history dictates sooner or later the US puppet gets his strings cut!
Abu Bakr al Baghdadi, leader of ISIS, clad in fighting gear.
He and his well-funded army recently took over a branch of the Iraq Central Bank in Mosul and was rewarded with $430MIL in cash. Now the terrorists have their own central bank, which makes me wonder how long before the IMF forces them to take a loan and the ECB force austerity onto their new Nation of Islam …
FATCA HAVENS
Where is my FATCA haven? So the FATCA deadline was July 1st for US citizens who look off shore for economic advantages, but none of that matters to US C Corps as they get their tax havens anywhere they choose. Is a corporation a person? If it is as they claim then why not put these buyout deals under the 30% withholding?
Below the US corporation raised its big for this UK firm, Shire, by $31BIL to grab the that legal tax scam. What say FATC to that $31BIL loss?
In reality as I have been prognosticating here for years no amount of tax revenues will save the US government from itself. The laws of “human nature” have doomed democracy and Karl Marx has had his last laugh!
Of course the solution to all this is less government, no income tax on citizens and business, consumption tax and excise taxes only and stand back and watch the next industrial revolution! Clearly “real” solutions are not what those in power want, especially if those solutions disempower the elite political and monetary structure and empower small business and the masses.
The elite prefer another lesson in EMPIRE 101 …
More and more all government levels will seek to extract as much tax revenue from its citizens as is possible short of starting a riot! You have no guarantees that tax rates will stay the same as economies and currencies falter. In fact you have a 100% guarantee that taxes will rise when governments falter. It is a historical fact.
In the chart below from Martin Armstrong, it seems that around 60% has been the historical average of the top income tax rates. Why wouldn’t there at least be a reversion to the mean?
Martin Armstrong Congressional testimony July 18, 1996:
http://armstrongeconomics.com/1113-2/july-18-1996-testimony-of-martin-armstrong-before-house-ways-means-committee/
If the purpose of this Committee is to fairly reflect upon how our tax code can be used to attract jobs and stimulate economic growth rather than employ gimmicks such as currency manipulation, special one-off tax deals or deny the damage that Marxism has created in the postwar world, then it is clear from our ” experience that there can be several important conclusions.
1) End the discrimination against long-term investment by at least allowing capital gains to be indexed to inflation retroactively.
2) Promote honest reform of the Social Security System whereas contributions made should be privately managed as is the case in many other nations. The Postal Savings System in Japan actually has on deposit in real funds nearly $10 trillion which is then managed by the private sector under the watchful eye of government. This will help reduce the cost of labor in the US, create jobs through increased savings, and result in lower payroll tax contributions for business over the long-term.
3) Eliminate the taxation on government bonds.
4) Eliminate the personal income tax and replace it with a national sales tax of 10%.
5) Reduce the corporate tax rate to 15% matching Hong Kong. Allow interest paid to be deducted as a part of the cost of doing business.
Mr. Chairman, members of the Committee:
This is a brief overview of our experience in dealing around the world on a first-hand observation basis. We strongly believe that the replacement of the current income tax system on individuals with a national sales tax in combination with a corporate tax rate of 15% will prove not merely to be revenue neutral, but also a major economic stimulus that will help our domestic economy grow while forcing major economic change around the world restoring the beacon of hope and liberty by our example.
“Like an improvident spendthrift, whose pressing occasions will not allow him to wait for the regular payment of his revenue, the state is in the constant practice of borrowing of its own factors and agents, and of paying interest for the use of its own money.” – Adam Smith, Wealth of Nations, 1776
For as long as I have been writing about the US Treasury(Issue #74) I have been pointing out that the net tax revenues only cover outlays for four line items on the US Treasury Statement out of 33. For decades the US Treasury has suffered a growing revenue gap. There are only three way to fill the gap.
1-Issue more debt
2-Cut spending
3-Increase all tax rates
Those in power will choose #1 and #3 until we reach total capitulation. As you read this make note that there has been no debt limit for a year and there is no plan to limit debt issuances until March 2015.
WRAPOLA
Where to from here? If you are a baby boomer then you have a gauntlet to run. If you’re not a baby boomer then you have a gauntlet to run. The gauntlet is government and power and greed.
If that’s not enough then consider the cold hard numbers of baby boomers and their inheritance. We are owed, but will we really get paid?
BOOMER GAUNTLET
Once you’re on a “fixed income” you’re dead with the current monetary system we are forced to worship. Fixed is fixed, but what isn’t fixed is everything else you need to survive. I know we all hear that we need to save for a rainy day, but with a central bank it is raining all the time!
The CPI has numerous versions, but here are two that diverge. That can and will cause trouble for millions of retiring baby boomers who are forced to retire on a fixed income. Usually the only real asset they have is their residence. As anyone knows owning a house is not cheap and the costs to own a house continue even after the mortgage is paid off. One trouble spot is property tax. More “gauntlet” please-e-e …
The daily online price index of MIT’s ‘Billion Prices’ Project has begun to diverge strongly from CPI.
Still a lot of baby boomers are expecting that their inheritance will save them. If the stats below hold true then there is not a lot of safety net there either. More gauntlet …
The data below shows that somewhere around 32% of inherited assets are in stock and bonds, roughly the same as in real estate. Can retiring baby boomers afford another 2008? I would say not. Yet it is coming whether no matter what baby boomers want. Perhaps it would be fitting for us to go out protesting our government like we did in the 1960s. Still like Neil Young says, “… the damage done …” maybe he will live long enough to change the lyrics to one of his songs … Rockin’ in the Debt World!
Like my father-in-law tells me … “Getting old isn’t for sissies!”
Where does it all end? Now when … but where? What sort of America will exist in ten years?
Let’s get one thing straight!
No rich man will ever want to garage his Lamborghini because the last time he parked it at Starbucks it was stoned! No rich man will ever want to stay home at the mansion compound because it is too dangerous to go to the opera. No rich man will want to fly coach so he doesn’t get beat up when he disembarks. No rich man will want to stop playing golf because of snipers. There’s a breaking point …
Truly the destruction of the Middle Class is a huge mistake. Without a Middle Class there will have to be a reckoning of sorts whereby rich and poor can exist in some sort of harmony, but at the current rate of class warfare what does that look like? Or will castles come into vogue again where the rich will have to hire armies to escort them from castle to castle? How boring would that be? Expensive too … and still no less dangerous.
Consider the way it was not too long ago in the 1968:
Minimum wage $1.60
Hotel $7 per week
Gasoline $0.34 regular/gallon
New home $26,400
Food for a week $20
A minimum wage earner gross pay – $256 per month; $3,072 per year
Monthly costs:
Hotel – $28
Food – $80
Clothes – $15
Gas – $4
Beer-$6
TOTAL – $133.00
Those are the basics … food, water, clothes and shelter … with a little beer! Even with a combined withholding of 15% for fed and state add in social security and med, the net pay would be $202.24. You could bank a little less than $70 per month or around 21% of gross pay. What can you bank now? Even a minimum wage earner could get by quite well in 1968 and even save money if prudent.
My own experience working in the early 1970s was that it was easy to get by. Even as a college student I only worked three days a week, 24 hours, and made enough to go to school and surf the rest of the time. I had a roommate at a two bedroom all utilities paid apartment for $200 per month. We each paid $100 per month. It was a high end apartment in Southern California with a pool and gym. We could walk to campus. I never knew anyone in college on a student loan.
In actuality I never knew anyone who was out of college and still working for minimum wage even if they only had a high school diploma. Plus it was pretty easy to get two jobs if you wanted.
What has changed? Why does it take so much more effort to live on a minimum wage and bank 21% of your gross pay? Why do so many struggle?
Mainly it’s about debt. Debt is pervasive, whereas in the 1960s it was not. I did not know anyone my age, early 20s, with credit cards. I paid cash for cars. I did not finance my first car until 1980 and that car loan was at 17%. Luckily my new Chevy truck was only $6,500. Imagine paying 17% on a new truck today!
We are now competing against a government that has a blank check machine. Go back to the top where I was talking about gross US Treasury outlays of $8.69TRIL. If GDP is $17TRIL and 70% of that is consumers then a lot of people funded by the US Treasury are buying a lot of scarce resources. Not only are we paying income tax to the US Treasury but the US Treasury turns around and redistributes those tax revenues to entities and select people to compete against taxpayers for goods and services. It’s a double whammy!
In 1968 there was no “blank check machine” yet. Even with the Vietnam War raging there was a semblance of price stability. That ended in 1971.
Why can’t we reinstate a more honest monetary system now? Think about it …
Last but not least is this …
I grew up in a family dedicated to the exploration of crude oil. My father was a top geophysicist with Chevron Oil for some 35 years and we were sent to all the big oil hot spots. We were living in Maracaibo, Venezuela during the early days of the Lake Maracaibo oil field. We were in New Orleans, Louisiana during the early days of the Gulf. We were in Perth, Western Australia in the early days of Barrow Island and we were in Southern California during the days of the Channel Islands offshore rigs.
I have lived in an era where a gallon of gas was $0.25 to today here in Hawaii where a gallon of gasoline is $4.19. That’s some 45 years of being a gasoline consumer. The only resource I have been consuming longer is food and water!
In the days of cheap oil in the 1960s and 1970s my father used to rightfully tell me that I should not complain about how much I pay at the pump for a gallon of gas when I blindly pay five times that for a gallon of orange juice at Safeway! I would retort that I don’t need orange juice to get to work and I consume less orange juice than gasoline on a daily basis. We were both right in a sense, but in retrospect if gasoline would have cost as much as orange juice in the 1960s then perhaps we would not be seeing the end of cheap oil now. Maybe higher gasoline costs would have forced Americans to conserve more back then, but it didn’t and we got the Cadillac DeVille and the blown hemis and Shelby Mustang 2+2s to prove it! I however chugged through that era in 1968 VW bug … German engineering at its finest! Still I even caught crap for driving a VW and got lectured on the whole patriotic duty to drive Made in Detroit.
Moving from nostalgia to the present reality clearly gasoline prices in the USA are too low, even at $4.19 a gallon. It seems gasoline prices are too low all over the world as well. Why do I say that?
I say that because too many major global oil companies including Exxon, Chevron and Shell are making big cuts to the barometer of gasoline prices …CAPEX! What’s that? Well, it is known as “CAPital EXpenditure” in the biz. I grew up on CAPEX and our family lived a good life for a long time based on CAPEX. Without CAPEX my father would have been out of a job.
The oil companies have drilled and discovered most of the cheap oil fields already. What’s left is the not so cheap stuff. If oil companies cannot make a good profit off production then they cut expenditures.
Here we see some charts to show what is happening …
First we look at historical oil production that compares the rise of the west with the rise of the east.
So the growth in oil production is not there to keep Asia in a growth state like the west was back in the 1960s. Probably not news, but still without a growing China and India how long can those governments retain power? Once people get used to eating steaks and sipping imported wine it is hard to convince them to go back to insects and water. Empires are like that …
Next is one of the most telling charts and the diversion is stunning. Price and Product will need to readjust sometime soon. Prepare to complain more and prepare to see many news stories on TV and the internet about the greedy oil companies. Yet somehow we never hear about the greedy gasoline consumers who wouldn’t conserve a drop of gasoline if their lives depended on it. Want lower gasoline prices then stop driving!
The above chart combines data from all the major oil companies operating globally so this is not just US oil companies in the USA. That grey line is not looking healthy! Never mind climate change …
This next chart shows oil companies spending a ton of money, but mostly outside the USA and Canada.
Now we see the brakes being applied. Kind of reminds you of gold production when the gold price is too low. Its supply and demand, but with massive government regulation on top of it.
http://ourfiniteworld.com/2014/02/25/beginning-of-the-end-oil-companies-cut-back-on-spending/
You see a number of oil companies talking “costs” and they use that other word with it … “escalating”! Not only do citizens need gasoline and oil products to work every day, but no modern empire army travels on its stomach any more … it travels on fuel! The US military consumes an ungodly amount of fuel every year in its efforts to police the world and keep democracy safe! Here see …
So we lost more Americans in fuel convoys in Iraq than we lost at 9-11 WTC …
In the end shale gas is not the solution. The problem is depletion rates. In the Haynesville Shale region, one of the first, royalty checks go from $50,000 per month down to $5,000 in about 16 months. Yes, wells do suffer depletion over time and it seems shale gas is highly depletable. Solar and electric cars? Both oil products! Typically human we trusted government to solve all our problems and believe me politicians love it when we trust them because that makes them and their power indispensable. But history knows, better otherwise we’d be on Caesar XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXV right now!!!
Back to the human condition. It seems to vacillate between fear and greed. You see that played out in the stock markets and the job markets almost every day. Without cheap oil and government subsidies to lower gasoline prices and handouts to citizens to afford gasoline you can kiss the kindness and loving goodbye once the “fear” kicks in! It’s just the human cycle … It’s inevitable and it’s history! The American Empire has run on the petro-dollar and cheap oil since Bretton Woods. We’re not out of the “Woods” yet, but we can’t see the forest either. What happens is we do what all good Empires do in the end … give up! Where are the gurus for that?
Like Keynes said … yeah … we all make that trip into the Great Unknown alone, so in the end what good is Empire and cheap gas? Just live life simply with as few regrets as possible and then move on! We’re all different by choice. We’re only human …
“Don’t go around saying the world owes you a living. The world owes you nothing. It was here first.” – Mark Twain
“Property is not the sacred right. When a rich man becomes poor it is a misfortune, it is not a moral evil. When a poor man becomes destitute, it is a moral evil, teeming with consequences and injurious to society and morality.” – Lord Acton
“I think everybody should get rich and famous and do everything they ever dreamed of so they can see that it’s not the answer.” – Jim Carrey
“All of the religions are looking after the poor. At least leave me alone to look after the rich. I am the rich man’s guru.” – Rajneesh
“I hang out with my guru in my heart. And I love everything in the universe. That’s all I do all day.” – Ram Dass
“It is what it is!” – Kaimu
“The price of anything is the amount of life you exchange for it.” – Henry David Thoreau