Thursday, November 13, 2008

Turning the world upside down

Hey whitey! I imagine no one bothered to tell you, but it´s Pachakuti. Huh?
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Well, for instance. There used to be a time when big "developed" countries in the north would pass up their noses at the domestic handeling of "backward" economies in small countries of the south, like Bolivia. They´d send their best and brighest "Chicago Boys" to help these poor wretches into shape with an "austerity" diet. But now somethings different. The "developed" countries are... shrinking, and Latin America... has cash to spare. Little ol´ Bolivia is running a surplus and massively expanding its budget and infrastructure spending (a must link!) on a flying wiphala to the future. Uncle Sam... not so much. Basically best start learning Aymara and pack up the old Okie truck because its an upside down world!
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Update

8 comments:

dv said...

yea, and Obama wants more stimulus and bailouts.

I hope Obama studies the situation and turns away from the Bush-Bernecke bail the bums to avoid a recession nonsense. Taxpayers can make the lenders whole after they make bad loans, but they are unlikely to do it again, like the fed wants. The reason the Fed lowers interest rates and starts these bailouts is so that the banks lend again like they did before. They are not going to do that stupidity again. Everyone who qualifies for a loan has one (and many who dont qualify) so who is to loan to?

If Obama raises interest rates to around 5% and stops the bailouts, people will build savings and we will be ok in a 3-5 years. On the negative side for Chavez and pals, oil is going down to the $30 a barrel range. They need to make major cutbacks in spending now to ride out this period. In a few years the prices will be back up, unless they are unlucky and Obama goes to 10-20% alternative fuels.

Otto Rock said...

dv,

you funny

Bina said...

I concur with Otto. $30 a barrel? Put the Kool-Aid down and step away. It ain't never going there again, even if the US succeeds in invading Cuba and stealing its offshore fields (which it won't). Look up the Hubbert Peak if you don't believe me.

dv said...

Its at $56 a barrel already from $145. Based on your article, do you think that the developed world's economies are coming back in the next few months? Its all about demand. Peak oil theory does not talk about a sharp drop off in production right away, but that production wont be able to keep up with steady growing demand. Because there are not any new sources. In a few years, when the developed economies recover, the price will go back up of course, how much depends on how alternative fuels are developed.

And its not just oil, most commodities are effected in this way to different extents.

Kool-aid? After that Cuba comment, I wouldnt throw stones.... :)

Bina said...

Well, then, keep drinkin' that stuff, buster, but unlike you, I know whereof I speak. Cuba DOES have oil--gobs of it, just recently discovered. Where have you been hiding that you don't know about it?

As for the so-called "law" of supply and demand, guess what--CAPITALISM BROKE it. Long ago, in fact, long before this crisis started being called one. The only supply and demand that matters to Big Oil is that of PROFIT, not RESOURCES. You think they're gonna give up on that, just because consumers don't want to spend? They still have them over a barrel--virtually everybody has to drive because our cities are just laid out that way, and winter's coming up here in the northern hemisphere. That means houses to heat. Heating oil is NEVER cheap then.

Plus, there's the li'l ol' fact that OPEC is cutting production in response to the economic crisis. That oil price isn't going anywhere near the floor.

The days of cheap oil are over for good, any which way you care to slice it.

dv said...

I was unclear: I was expressing my disbelief that you would think a 20 billion barrel find supports your belief that the price of oil would go up.

It would be great if this oil was real - whoever buys it would leave more oil for the rest of us. And and result in lower prices. Why? Peak oil causes higher prices because producers realize that you have no other choices.When oil went to $148 a barrel the only country with real excess capacity was Saudi Arabia. Thats not a good bargaining position. With US consumption down 5.4% this year, we have more choices in who we buy from and so prices are down. Consumption is expected to drop again next year.

I have never said that I think the price wont go back up, but precisely the opposite. I said when the recovery happens the price will go back up.At what time the recovery happens, is a good question but I figure the downturn is going to get worse so that makes me think we wont get the get back up above $100 for several years( During the winter price per barrel may get into the $30's). Hopefully we adopt alternatives like wind and in combination with electric cars, the price wont have to go too high.

To your comments on suppy/demand being dead:
1 What was your point about heating oil based on then?
2 As far a OPEC - they cut production by 2 million barrels. if supply/demand does not matter like you say, then why cut production?
3. I just filled up with $1.87 a gallon gas today when a few months ago I spent over $4.

Bina said...

You are the one who's unclear here, yes--glad you could admit it. It takes at least ten years between an oil discovery and actual delivery of product to consumers. Didn't you hear of that? And in the meantime, you know what that means: Investment, investment, INVESTMENT. That means yes, a price rise is not only possible, but inevitable. Where did you think the money for the heavy equipment comes from? Offshore oil platforms don't drop from heaven, you know. And since investors expect a handsome return on their investment in said rigs, plus refinery installations, tankers, pipelines, etc.--guess where THAT money comes from?

Access to more oil doesn't mean it automatically gets cheaper. Anyone who thinks it does, isn't living in the real world. Has the US occupation of Iraq made oil cheaper? Even though oil companies now have untrammelled access to the stuff? Check how the price per barrel has risen since "Mission Accomplished", and you have your answer.

The whole supply/demand system you've been sold is, pun intended, snake oil--the reality is, as long as profit is involved, and conflicts are stirred in the name of jacking profits through the roof, well--cheap oil is, pun intended, a pipe dream.

dv said...

Bina Iraq production has been down since the invasion. They are hoping to finally get in up to pre-war levels by the end of this year.

You can reduce price either by increasing supply or by reducing demand. A recession in all the largest consuming nations has already done that. World wide demand is down, the US, the largest consumer of oil by far is down 5.4% this year.