Anti-Austerity Update
Andre Willers
22 Apr 2013
Synopsis:
Opposition to austerity programs due to the Reinhart-Rogoff
Excel depression debacle is rapidly mounting to the ignition point for a full
blown Hysterical Focus .
Discussion :
1.See Appendix A . If the European Unity is to be preserved
, discredited debt theories will be quite decisively , if not violently ,
rejected .
2.Japanese quantitive easing (anti-austerity)
Open-ended stimulus was promised , starting with $520 bn .
The G20 endorsed this , in effect scuttling the whole EU austerity program .
"Japan
not only escaped criticism, but on the contrary won praise as a country that
was fulfilling its global obligations," IronFX global forex strategy head
Marshall Gittler said.
3.
US quantitive easing (anti-austerity) is well known ,
4.
This leaves the EU politicians and bankers out on a rather slender limb , after
their theoretical support of the Reinhart-Rogoff 90% debt ceiling was kicked
away by Herndon . They are already furiously back-pedalling (see appendix A) .
5.Will
this save them ?
I
doubt it . About 400 million Europeans are really , really pissed off . And
most have cellphones , twitter and facebook . In democracies .
See
Appendix B .
6.
To add insult to injury : The falling cost of energy due to fracking and
clathrates will in any case lead to a huge pulse of wealth .
See
Appendix C
The Japanese stimulus must be seen in this light . They
expect cheap energy by the end of 2014 .
7. The nation or group of nations that does not invest in
the new low-cost energy sources will be left high-and-dry .
The austerity cost then becomes the opportunity cost of
losing out on at least a fourfold economic boom .
They have to invest , even if they have to print the money .
8. A full-blown hysterical Focus will not be kind to the
Austerians . Last seen somewhere in the Oort
Cloud .
Interesting times .
Andre
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Appendix A
Last updated: April 21, 2013 1:52 pm
Eurozone
anti-austerity camp on the rise
By Peter Spiegel in Brussels and Peter Ehrlich
in Berlin
Flaws found last week
in an academic treatise on the effect of high public debt on
economic growth have heaped pressure on governments to relax austerity, above
all in crisis-stricken Europe, long seen as an incubator for austerity-driven
policies.
But even before the
arguments among economists over the merits of expansionary fiscal contraction
reached a new pitch, policy makers in the eurozone had begun to ease up – with
the tacit approval of disciplinarian Germany.
·
ON THIS TOPIC
As many as six
eurozone countries have received or are seeking waivers on tough EU-mandated
deficit targets when they come up for review next month, a move that has thus
far met little objection from Berlin – an unexpected acquiescence that has led many
to believe the anti-austerity camp is suddenly in ascendance in Brussels, at
least for now.
“The speed of
consolidation is certainly going to be lower now,” said Guntram Wolff, an
economist at the influential Brussels-based think-tank Bruegel. “The European Commission has agreed
on that already.”
Olli Rehn, the
commission’s top economic official, has frequently cited the central finding of
the now-disputed study – co-authored by Harvard economists Carmen Reinhart and
Kenneth Rogoff – that economic growth falls drastically in countries when
sovereign debt rises above 90 per cent of gross domestic product.
In an interview, Mr
Rehn – who is responsible for deciding whether eurozone countries will be
allowed to miss their deficit targets – said that while he has “cited this
study in the past as illustrative”, he insisted that his office does not set
its policy on “any single piece of research”.
“We design our
policies on the basis of a holistic assessment drawing on a wealth of studies –
but also of course on our own analyses,” Mr Rehn said.
Indeed, Mr Rehn
himself has frequently been in the vanguard of EU officials insisting that
blindly sticking to headline deficit targets is counter-productive, arguing
instead that countries should be judged more on reform programmes to liberalise their
economies.
Mr Rehn’s push, which
has backing of the International Monetary Fund, has already gained traction in
bailout countries, where Greece has been given two more years to reduce its deficit below the
EU-mandated 3 per cent of GDP and Portugal last month was granted a second year’s leniency.
Elsewhere in the
eurozone periphery, Spain was given a pass this year and is expected to get a
further waiver in May. And Italy,
where nervous markets are watching the political turmoil closely, was given the
green light to spend an extra €40bn in unpaid government bills despite the risk
of breaching its 3 per cent barrier.
But the weakening
economic picture is also wreaking havoc on “core” eurozone countries, with
both France and
the Netherlands publicly
acknowledging they, too, will miss their 3 per cent targets this year.
Such leniency has
been resisted by senior German central bankers, but it has been met with
resignation by the German government, which instead has signalled it will mount
more resistance in 2014, after this year’s national election. Chancellor Angela
Merkel last week sought to play down the issue, saying France’s impending
breach was “not new” to her, telling reporters she would leave it up to Mr Rehn
to decide.
Instead, she insisted
Paris had to present measures to keep its deficit in line with EU rules next
year – a clear sign Berlin would accept a 3.7 per cent French deficit this year
but would put pressure on Paris to deepen economic reforms.
“It would be good for
France to start structural reforms immediately because the positive impacts of
reforms take time”, Michael Meister, the financial affairs spokesman for Ms
Merkel’s Christian Democrats in the Bundestag, told the Financial Times.
Wolfgang Schäuble,
the German finance minister, backed last year’s easing in Spain, Portugal and
Greece, and government officials said he would not risk a big fight with France
as long as the eurozone remained economically fragile.
In a further sign of
growing acceptance in Berlin, during Thursday’s Bundestag debate over the €10bn Cypriot
bailout – which the German parliament passed overwhelmingly – Mr Schäuble took
the unusual step of expressing concern for the economic upheaval in the
eurozone’s periphery.
“The people in
Greece, Spain, Italy, Portugal and now Cyprus are living in hard times,” he
said, before adding: “They have to suffer during the reforms to have the chance
of a better future.” Ms Merkel has struck a similar position in recent
interviews, telling Bild newspaper that southern Europe “more or less have
started the reforms they need”.
It could be a
difficult balance for Ms Merkel to strike in an election year. Even as she
shows empathy with the economic difficulties of southern eurozone countries,
she cannot be seen to ally herself with French President François Hollande’s increasingly
vocal crusade against austerity.
“There is nowadays
much talk about austerity”, Ms Merkel told reporters last week. While the
Reinhart-Rogoff findings may be in doubt, Ms Merkel said she felt debt in the
eurozone was still too high. “That is of course not good in the long run”.
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Appendix B
The Excel Depression
Andre Willers
19 Apr 2013
“Quantitive easing was right after
all !” AW
The theoretical economic
justification for austerity measures have been proved to be due mainly to an
Excel spreadsheet error . This will have major political ramifications ,
especially if an Hysterical Focus forms .
Discussion :
1.Broad summary :
Two respected academic economists
(Reinhart and Rogoff) purportedly showed that GDP fell over a cliff if debt
exceeded 90% of GDP
This formed the basis of austerity
policies , especially in the EU . When subjected to the scientific requirement
for replication , it was found to be in error . See Appendices A , B ,C .
2. There will be major repercussions
.
2.1 The EU will nearly certainly
switch to the Quantitive Easing US model .
2.2 This will preserve the EU .
2.3 Stockmarkets will boom .
2.4 The present EU recessions will
ease to minor growth at first .
2.5 Everybody will blame Reinhart
and Rogoff . Convenient scapegoats for bad governance .
3.Hysterical Focus :
See Appendix D
An Hysterical Focus of major
proportions will form , especially if attempts are made to continue with
austerity programs .
This news just broke , so it is
still percolating down the information strata . Democratic politicians will
have to change tack sharply if they wish to remain in office (German elections
due in September) .
This will be an ugly Hysterical
Focus .
Millions of people have been hungry
, had careers ruined , been fired , etc . All because of an Excel blunder and
governance gullibility
Remember , one of the defining
characteristics of a big Hysterical Focus is that it does not go away .
Examples are the phone hacking in UK or pedophiliacs .
4. Misery Index .
Economists are becoming rivals to
religious fundamentalists and conquerors in the sheer human misery their
half-baked ideas have caused . Adam Smith (“Invisible hand”) or Karl Marx
(“Communism”) or others . Remember conglomerates ?
5. The way out : Ostrum Systems .
6. Legal recourse :
The Granddaddy of all class-action
suits.
Negligence by academe and
governments caused the mess . So sue them .
Perry Mason , where are you when the
ministers need you ?
Andre
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Appendix A
Finally, Ms. Reinhart and Mr. Rogoff allowed researchers
at the University of Massachusetts to look at their
original spreadsheet — and the
mystery of the irreproducible results was solved. First,
they omitted some data; second, they used unusual and highly questionable
statistical procedures; and finally, yes, they made an Excel coding error.
Correct these oddities and errors, and you get what other
researchers have found: some correlation between
high debt and slow growth, with no indication of which is causing which, but no
sign at all of that 90 percent “threshold.”
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Appendix B
|
Does High Public Debt Consistently Stifle Economic Growth? A
Critique of Reinhart and Rogo
ff
Abstract:
Herndon, Ash and Pollin replicate Reinhart and Rogoff and find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period. They find that when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0:1 percent as published in Reinhart and Rogo ff. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower.
The authors also show how the relationship between public debt
and GDP growth varies significantly by time period and country. Overall, the
evidence we review contradicts Reinhart and Rogoff
's claim to have identified an important stylized fact, that public debt loads greater than 90 percent of GDP consistently reduce GDP growth.
>> Download
the paper here1
>> Download the data and code files upon which the results are based >> Download a text document that describes the files in the code and data archive >> Download Robert Pollin and Michael Ash's op ed in the Financial Times
1 The current version of this paper was updated at 1:35 pm
on April 17, with the following corrections:
(1) The notes to Table 3: "Spreadsheet refers to the
spreadsheet error that excluded Australia, Austria, Canada, and Denmark from
the analysis." is corrected to read: "Spreadsheet refers to the
spreadsheet error that excluded Australia, Austria, Belgium, Canada, and
Denmark from the analysis."
(2) Page 13: “Thus, in the highest, above-90-percent public
debt/GDP, GDP growth of 4.1 percent per year in the 1950-2009 sample declines
to only 2.5 percent per year in the 1980-2009 sample” is corrected to read
"Thus, in the lowest, 0–30-percent public debt/GDP, GDP growth of 4.1
percent per year in the 1950–2009 sample declines to only 2.5 percent per
year in the 1980–2009 sample."
|
SEARCH PERI
>>>>>>>>>>>>>>>
|
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Appendix C
Who did it ?
The Econ
Student Who Challenged Reinhart-Rogoff on Debt
April 18, 2013
When Thomas Herndon, a student at the University of Massachusetts
Amherst's doctoral program in economics, spotted possible errors made by two
eminent Harvard economists in an influential research paper, he called his
girlfriend over for a second look.
As they pored over the spreadsheets Herndon had requested from
Harvard's Carmen Reinhart and Kenneth Rogoff, which formed the basis for a
widely quoted 2010 study, they spotted what they believed were glaring errors.
"I almost didn't believe my eyes when I saw just the basic
spreadsheet error," said Herndon, 28. "I was like, am I just looking
at this wrong? There has to be some other explanation. So I asked my
girlfriend, 'Am I seeing this wrong?'"
His girlfriend, Kyla Walters, replied: "I don't think so,
Thomas."
In the world of economic luminaries, it doesn't get much bigger
than Reinhart and Rogoff, whose work has had enormous influence in one of the
biggest economic policy debates of the age. Both have served at the
International Monetary Fund. Reinhart was a chief economist at investment bank
Bear Stearns in the 1980s, while Rogoff worked at the Federal Reserve, passing
through Yale and MIT before landing at Harvard.
Their study, which found economic growth slows dramatically when
a government's
debt exceeds 90 percent of a country's annual
economic output, has been cited by policymakers around the world as
justification for slashing spending.
Former U.S. vice presidential candidate Paul Ryan, a
Republican congressman from Wisconsin, is one influential politician who has
cited the report to justify a budget slashing agenda.
Using the two professors' data, Herndon found that instead of a
dramatic fall in growth, the decline was much milder, slowing to about 2.2
percent, instead of the slump to minus 0.1 percent that Reinhart and Rogoff
predicted.
Things tend to move at a glacial pace in the world of academic
research papers, but within 24 hours Herndon and his two teachers, who
co-authored the report, Michael Ash and Robert Pollin, found themselves swept
up in a global debate. Herndon's paper began life as a replication exercise for
a term paper in a graduate econometrics class. He expected to replicate
Reinhart and Rogoff's results, then challenge the idea that high public debt
caused growth to slow.
Bottom of Form
But he never got that far. Repeated failures to replicate the
results roused his interest. Pollin and Ash encouraged him to pursue it after
he convinced them he was onto something. "At first, I didn't believe him.
I thought, 'OK he's a student, he's got to be wrong. These are eminent
economists and he's a graduate student,'" Pollin said. "So we pushed
him and pushed him and pushed him, and after about a month of pushing him I
said, 'Goddamn it, he's right.'"
Herndon approached Reinhart and Rogoff earlier this year for the
spreadsheets they used in their paper. The two professors provided them at the
start of April, unlocking the mysteries of the data that had stumped Herndon.
Herndon said only 15 of the 20 countries in the report had been
used in the average. He also said Reinhart and Rogoff used only one year of
data for New Zealand, 1951, when growth was minus 7.6 percent, significantly
skewing the results.
Reinhart and Rogoff have admitted to a "coding error" in
the spreadsheet that meant some countries were omitted from their calculations.
But the economists denied they selectively omitted data or that they used a
questionable methodology.
For Ash, the findings mean the claim that high public debt causes
growth to stall no longer holds water. "Their central thesis has been
substantially weakened," he said.
Reinhart and Rogoff, however, say their conclusion that there is a
correlation between high debt and slow growth still holds. "It is sobering
that such an error slipped into one of our papers despite our best efforts to
be consistently careful," they said in a joint statement. "We do not,
however, believe this regrettable slip affects in any significant way the
central message of the paper or that in our subsequent work."
Now that Herndon has ably crossed swords with some of the most
eminent figures in his field, he is thinking about expanding his work into a
Ph.D. thesis.
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Appendix
D
Inside the
Ignition of an Hysterical Focus.
Andre
Willers
28 Jun 2010
Synopsis :
The
spontaneous formation of order into a random set of 40 million diverse humans
grew out of at most 50 humans , but the tinder was dry .
Discussion :
I was
privileged to follow the ignition process . I never thought I would experience
this rather rare phenomenon .
I was
listening to CapeTalk 567 , a talk radio program in the Western Cape .
At about
10h00 on 4th June 2010, they reported receiving numerous SMS ,
emails , twitter and calls about delays in the issuing of tickets .
I expected
the whole thing to die down , as disgruntled citizens just gave up on it as
another example of incompetence . (Sepp Blatter's nephew was in charge)
The opposite
happened .
Really
amazing !
The small
group interaction of the queuer's via twitter , SMS, emails , cellphone was
amplified by the inrush of new connectors because of long-range network
information systems like CapeTalk radio .
By 11h00 the
tone had been set . Note network theory . The long-range network elements like
Twitter and TalkRadio had spread and the resultant inpour of messages escalated
the system into a runaway positive feedback system .
By 12h00 the
system had lurched into the present benign mode of "Foreigners with
money-good , foreigners like Zimbabweans , Somalis – bad : get them later
."
This will
get externalised as wars .
The sheer
speed of it was amazing . By the afternoon , I was living in an entirely new
society .
This is
typical of an Hysterical Focus .
A seemingly
trivial matter precipitates a phase change , focusing large-scale frustrations
into a Focus . The Focus then fractures the society in totally unforeseen ways
. When the breaks anneal , you have a new , more competitive society (cf French
Revolution) .
Has it
happened before ?
Yes , but
they had to work hard at it . Newspaper owners in the USA , UK (Like Hearst)
thought they could ignite Hysterical Foci . They could , but only with months
of saturation propaganda .
Barack Obama
got elected mainly because of a minor ignition of the effect via Facebook .
Can it
happen again ?
Of course .
It is every marketer's wet dream . A small , controllable group influencing
millions of other people .
Why Twitter
?
The
interesting point here is that this is first hint of a workable system to break
the 150 person tribal ceiling . This ceiling is hard-wired in by genetic ,
epigenetic and meme systems . Twitter paradoxically bypasses this by the
limitation on number of characters allowed (140 , amusingly near the tribal
ceiling . Not surprising) .
The right of
reply and fairness .
Fairness is
hardwired in humans . Abuse of Right of reply leads directly to systems like
Twitter , where there is no reply . 140 characters cannot give sufficient data-space
The lack of
fairness can only be compensated for by large numbers of twitters of various
other persuasions . The totality sums .
We can
actually put some numbers on this :
See http://andreswhy.blogspot.com
"Inside of zero " and others . We need only 26 different centers of
uniqueness to describe any particular Universum .
This
translates into a minimum necessary sufficient of 27 individuals to ignite a
Hysterical Focus .
Notice that
26=27-1
This is
known as God's Mercy .
Infinite
descent is possible .
The cocktail
party .How many guests to invite .At last we can put a minimum number to it .
And it is 27 .
Bagh. I am
sick and tired of it .
Andre
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Appendix C
etroleum Price and Clathrates
Andre Willers
17 Apr 2013
Synopsis:
A fierce price-war between Clathrate
and Fracking energy production will drive the Petroleum price down to the
$36-$72 per barrel range much sooner than previously estimated .
Discussion :
1.Natural gas production by fracking
is already a boom industry . Natural gas prices in the US is about 25% of that
in Japan or China .
2.Japan is totally dependant on
imported energy , except nuclear . And that is being scaled down . But it has
large clathrate reserves .So no wonder it has force-developed the technology to
extract methane from clathrates . See Appendix A .
2.They estimate large-scale
production by 2018 , but they are in a race , both price-wise and strategically
with shale-gas produced by fracking . Humans can actually get a move on in
situations like these .
So , expect production within about
1/3 x(2018 – 2013) = 1.6 years ie 2014.
3.This is reflected in the
inexorable fall in the petroleum price (+- $100 Brent today) . See Appendix B .
4. It might easily fall below $36
per barrel if large scale gas-to-gasoline plants like Sasol’s Lousiana plant is
extended to clathrates .
5.Powershift :
The present civilization is a
high-energy society , and relative power shifts with the energy costs and availability
.
See Appendix C .
The availability of gas from shale
or clathrates is assured for at least a 100 years . These deposits are in every
country , not just a fortunate few . The only other real factor is then cost .
6.Expect ferocious competition , especially
in respect of subsidization . Nation states like Japan will subsidise clathrate
production .
7.Economic activity : they will be
able to afford it because the cost of energy is the basal input in a
high-energy civilization .
The fall in energy prices will
trigger an economic boom . A sort of inverse 1972 oil-shock , only a bigger
boom because of higher technological levels . The fiat-money being created by
the various fiscal stimuli will overhauled by real wealth creation .
8. The quick quadrupling of wealth
only happened once before : See Appendix D . Jethro Tull’s little invention
quadrupled wealth in Europe within 2-3 years . The effects were far reaching .
We are still living through them .
9.Now , we will have something
similar . Let’s hope this will also birth a new age of Reason .
10. An interesting aside :
Note from the general argument (see
Appendix B) , that if the petroleum price falls much below $36 pb , the whole
petroleum industry will probably implode . This is because the heavy cost of
the old infrastructure can no longer be supported . Also , capital will flow to
the gas technologies , where there is a higher rate of return and government
subsidy .
You will not be able to give a
barrel of oil away . Would actually have to pay somebody to remove the
pollutant .
What irony ! All those huge
stockpiles of petroleum becoming a liability .
Not to mention the whole Middle East
.
11.How long ?
The gas production : fracking is
already being done . Clathrates , 2014-2015 . Infrastructures will take a bit
longer . But there are incredible profits to be made . Positive feedback
systems result . Read up about what happened to inventions after 1700 AD .
12.Stock markets : these discount
the future . Expect a huge stock-market boom .
13. Environment :
13.1 Global warming is happening ,
regardless of the cause . This threatens clathrate burps , causing
unpredictable , large-scale releases of methane . This is a real baddie for so
many reasons that you will need a hole in the ozone to illuminate it .Utilizing
the clathrates smooths this process .
13.2 The economic boom , combined
with large capital flows and a new intellectual Age of Adventurism should be
able to fix most of the planet’s problems .
14. Best of all : it is happening
NOW !
Not after some conference , summit ,
meeting of talking heads or similar command performances .
This process is driven from the
bottom up by profit principles . And everybody can share via the Internet and
Cellphones .
Many people in the USA went from
near-homeless to rich in fracking states like Dakota , Lousiana , etc.
This will be dwarfed by clathrates .
15. Ostrum principles :
It will be interesting to see how
Ostrum Principles treat the communal ownership of shale-gas and especially
clathrates .
Both touches other human communal
resources like water tables , fishing grounds , fishing or aquatic farms , etc
.
Big companies should not repeat the
mistakes of Shell in the Niger delta .
Note that many clathrate deposits
are slap-bang in the middle of powerful political communities , all connected .
16 .There is still hope for your
Grandchildren !
Nil Carborundum .
Andre .
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Appendix A
Japan extracts 'fire
ice' energy resource from its seabed in 'world first'
It looks like Japan
may have a reprieve in its energy plight, after claiming it's the first country to extract methane hydrate
"fire ice" from its seabed. Officials say the plan is to have viable production
technologies in place by 2018/19.
The state-run Japan
Oil, Gas and Metals National Corporation (Jogmec) made the announcement 11
March, revealing that a year-long expedition to the watery depths had finally
paid off.
"It is the
world's first offshore experiment producing gas from methane hydrate," an
economy, trade and industry ministry officialsaid to AFP, though other tests have been carried out before. Jogmec began drilling the
seabed in January, and has just begun a so far successful two-week long
extraction and production experiment to prove that the tricky substance's
potential can be tapped into. The methane hydrate has been extracted from
depths of about 300 metres below the seabed, with the team lowering the
naturally high pressure present at those depths to separate the gas from its
icy surrounds. The free gas was then piped to the surface.
The successful extraction
has massive potential for Japan.
It's estimated that 1.1 trillion cubic metres
of natural gas are trapped
within the methane hydrate off Shikoku island. To separate methane from the
icy, solid clathrate that forms under the sea is to release an estimated
11-year's worth of gas supply for Japan, which has been struggling under the
pressure of soaring energy prices since the 2011 Fukushima disaster. After the
event, most of the nation's nuclear reactors were forced to shutdown until July
2012. Public support for the nuclear power sector plummeted in the interim, and
the government made the announcement in September 2012 that it would shift to other fuel sources by 2040, closing all 50 functioning nuclear reactors.
But what it intended on replacing that energy source with remained vague.
Until March 2011, a
third of Japan's energy supply came from its nuclear reactors -- only two of
which are now currently in operation -- and it had planned to increase that
ratio to 50 percent. Its reliance on importing gas since the 2011 meltdown has
been a financial strain; it is already the world's largest buyer of liquid
natural gas and the second largest importer of coal. A few weeks ago, Prime
Minister Shinzo Abe appealed to Obama to allow exports of its
shale gas to the
fuel-hungry country. So turning methane hydrate extraction into a viable
business could mean independence for Japan -- "Japan could finally have an
energy source to call its own," Takami Kawamoto of Jogmec said. But why
then, hasn't anyone done it before?
Methane hydrate was
first discovered in the 1800s, and by the 30s it was still known only as that
annoying ice that clogs up pipelines in the cold. It was only when the substance
was discovered to occur naturally in Siberia that energy scientsits realised it
was not something to consider an irritant, but an opportunity. Large deposits
have since been found in Alaska, Canada and the Nankai Trough off Japan.
According to William Dillon of the US Geological Survey organic carbon present
in gas hydrates is about twice as much as in all other fossil fuels, and the
methane present is 3,000 times as much as is in the atmosphere (one cubic metre of methane hydrate
equals about 160 to 170 cubic metres of gas).
But conducting
extraction experiments on a substance that resides a kilometre below sea level
was never going to be easy. Once there, deposits are still usually uncovered
hundreds of metres below the seabed and found in areas where the seabed
begins to drop away from the shelf, making it difficult to line pipes up.
Making matters more difficult is the fact that the methane has to be separated
from the clathrate at the point of extraction -- otherwise, the gas is likely
to escape when brought to the surface as the pressure changes.
Jogmec also needs to
confirm it can achieve stable extraction, not just production. Removing large
surface areas from the seabed could cause a shift in sediments where the
substance is trapped. The worse case scenario would be if removal caused anunderwater landslide that triggered a tsunami. In a piece warning about the dangers of
methane hydrate extraction, professor of civil and environmental engineering at
Lehigh University Tae Sup Yun also warned that accidentally releasing methane into
the atmosphere could be a huge danger, considering its aforementioned
concentration in gas hydrates.
Like any new
extraction process, it's likely to take plenty of time before the full go-ahead
is given. Fracking continues to cause controversybut has been embraced, a fact economy, trade and industry minister
Toshimitsu Motegi pointed to at a press conference. "Shale gas was
considered technologically difficult to extract but is now produced on a large
scale," the New York Times reports him as saying. "By tackling
these challenges one by one, we could soon start tapping the resources that
surround Japan."
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Appendix B
Fracking
and the Oil price
Andre
Willers
4
May 2012
Synopsis
:
The
Oil price will permanently (100 years) be lower to a new sustainable level . We
try to calculate the boundaries of this price from basic principles .
Discussion
:
Fair
price : what the price should be taking into consideration profits , reserves
and exploration reserves . There is an extra value , which represents the
present value of future demand (ie speculation) . This collapses to zero as
fracking becomes commonplace .
See
Appendix I
On
recalculation (allowing for 5% pa inflation over 5 years) , the costs become :
Oil per barrel at the well-head : $6
Transport per barrel anywhere on-planet : about $6
Total cost per barrel at refinery : $12 =(6+6)
Markup factor about 200% : cost per barrel about $36=
(12+2*12) .
This is the historical markup . Also the optimal
markup . See http://andreswhy.blogspot.com "Optimal Markups"
To pay for the infrastructure of refineries , garages
, etc
The argument goes that adding provision for reserves
and the optimal markup on these reserves gave a fair price as long as petroleum
was the only source .
Logically speaking , this gives a lower boundary of
about $36 .per barrel . The upper boundary would be the optimal markup (200%)
ie $72 per barrel .
Fracking reserves are well known and accessable .
Removing them from the cost reserve structure results
in a much lower oil price per barrel .
Exeunt America from the Middle East .
The probability (95%+) is that the oil price will
fluctuate between $36-$72 per barrel , with competition driving it to the lower
levels ,
Environmental concerns will take a very back seat .
The USA will become a net exporter of energy
(surprise!) .
Global warming :
This technology will exploit the methane clathrates on
the seafloor . Preventing the dreaded cataclysmic methane surges .
Let one problem solve another one .
Andre
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Appendix
I
This
model held up fairly well . See other posts .
Basic ab-initio Cost Estimate of Petroleum Prices at
30 Nov 2008 .
Oil per barrel at the well-head : $5
Transport per barrel anywhere on-planet : about $5
Total cost per barrel at refinery : $10 =(5+5)
Markup factor about 200% : cost per barrel about $30=
(10+2*10) . This is the historical markup . Also the optimal markup . See http://andreswhy.blogspot.com "Optimal
Markups"
To pay for the infrastructure of refineries , garages
, etc
The system needs reserves if it is not to die on us .
There are two schools of thought :
1. General Reserves of about 1/3 of this gives cost
per barrel about $40 = (30*1/3+30)
2. But we need reserves for exploration , which is
expensive .
We use the optimal markup factor of 200% on $30 to $40
.
This gives us price boundaries of $60 to $80
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Appendix
C
US Fed : Republican End-Run
Andre
Willers
21
Feb 2013
Synopsis:
US
Conservatives have by-passed Congress and focussed on the Federal Reserve
Governors. Dissent here destabilizes the Quantitive Easing effects on Stock
Markets . It shuts the taps on the bubble . Exactly what they want .
Discussion
:
“As stipulated by the
Banking Act of 1935, the President appoints the seven members of the Board of
Governors of the Federal Reserve System; they must then be confirmed by
the Senate and serve for 14 years.[2] Once appointed, Governors may not be removed from office for
their policy opinions. “
“Bernanke's second term ends
on January 31, 2014.”
The current members of the Board of Governors are as follows:[8]
At least three are Conservatively inclined .
Look at expiry dates .
Only one swing vote is required . (Note
fluctuation of E.A.Duke .Her absence disturbed the balance of power.)
Commissioner
|
Entered office[9]
|
Term expires
|
February 1, 2006
|
January 31, 2020
January 31, 2014 (as Chairman) |
|
October 4, 2010
|
January 31, 2024
October 4, 2014 (as Vice Chairman) |
|
May 30, 2012
|
January 31, 2018
|
|
August 5, 2008
|
January 31, 2012
|
|
January 28, 2009
|
January 31, 2022
|
|
October 4, 2010
|
January 31, 2016
|
|
May, 2012
|
January 31, 2014
|
3.What
is going on ?
Somebody
really smart has done an Oblique Approach attack .
He
yielded on the Congress flank (granting Credit-Ceiling extension ) , then
hammered on the institutional flank (The Fed) actually doing the printing of
money (Quantitive Easing) . Complete surprise was achieved . The risk-averse
panic and flee . The flanks are rolled up and the pursuit ensues .
Few
prisoners are taken .
This
is happening now (05h14 2013/02/21 GMT) .
Stock
markets are sharply correcting as that future income stream of $84Bn per month
Quantitive Easing becomes much more uncertain .
This
is enough to make the faint-hearted flee.
4.Some
did get uneasy :
The
Germans are still hypersensitive to hyper-inflation .
5.
I got suckered , too .
I
expected another bruising battle on the Congress front .
So
, the correction is occurring , but not in the way I thought .
6.
How does it work ?
All
they have to is induce an uncertainty > 28%
Look
at the Seven Governor voting decision table below .
1/7
= 14.3%
2/7=
28.6%
3/7=
42.9%
4/7=
57.7%
5/7=
71.4%
6/7=
85.7%
7/7=
100%
To
destabilise the system , all you need are 2/7 supporters and one maybe . This
exceeds reserves .
Since
this system determines the Quantitive Easing , ($84Bn/per month) , any
uncertainty here gets magnified as all those little computer programs in the
futures markets get busy discounting .
But
notice , this uncertainty is not Beth(0) (ie like flipping a coin) .
What
is happening is that a lot of traders went out on a limb using computer systems
they do not understand .
The
uncertainty shift is from 28.6% to 42.9% . Black-Scholes systems cannot handle
this abrupt discontinuity .
They
might not lose their shirts , but the male bra might make an abrupt
reappearance .
7.Strategic
Surprise .
This
was a major strategic surprise .
DARPA
mission statement : “To create or prevent strategic surprise”
DARPA
seems to have decided that the USA does not need to subsidise all the planet’s
fat cats .
See
“Fracking” , “Reshoring” , etc .
Expect
more strategic surprises .
(Fracking
was a DARPA project . )
Why
should DARPA suddenly play a more active role ?
Because
they have come into competition with those sincerest of admirers , competitors
.
To
maintain their mission statement , they have to start intervening in internal
USA affairs .
The
clunky and gridlocked US state needs a swift kick on the behind if they do not
want to end up speaking Chinese .
And
stopping funding your main competitors is high on this list .
8.
What does all this yakkity-yak mean ?
The
USA intends to restore it’s energy , manufacturing and financial bases .
8.1
Energy : Fracking .
8.2
Manufacturing : Reshoring
8.3
Financial : Happening as we speak . Stop funding losers .
DARPA
is only one of it’s agencies .
It
is a large , smart system going into the singularity .
I
cannot compete . Apart from the large databases , there are ripple-effects of
workable mind-computer interfaces .
And
persons who are as smart or smarter than I am .
9.
So what is a poor small investor to do ?
Cash
, or US Treasuries . Shares and properties are about to go into a prolonged
period of instability . You can’t win , but at least you will lose the least
possible .
10
.Societies :
There
are only degrees of winners . But there are definite losers . The societies
being propped up by the USA will lose heavily .
This
is most of Europe , China , India , Korea . All the US clients will find their
markets drying up and capital being withdrawn .
Big
mark-ups will disappear to about 2%-3% . Actually , below the wealth-growth
rate . Competition . This is happening now.
11.Growth
rates slow to match reduced population growth rates .
12.Corollary
: There is more resources for Blue-Sky research . The system gets richer much
faster than population decreases .
Cf
Chinese One-child system .
Interesting
times .
Andre
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Appendix
D
Jethro Tull
– Super Hero
In 1701 an
Englishman called Jethro Tull invented the seed drill . By quickly and reliably
planting seeds at the optimal spacing and depth , this invention enabled about
a fourfold increase in yield within one season .
This invention
created the largest pulse of wealth in history . Bigger than the invention of
fire . Bigger than the invention of agriculture . Bigger than the invention of
the internal combustion engine or transistor .
It
kick-started the Industrial Revolution .
The reasons:
Most wealth
was agricultural.
The increase
in wealth was within one season . Malthusian population growth would take about
2 to 3 generations to catch up . Imagine getting a 400% raise in your salary in
one year without inflation . This was the effect . This pulse of wealth
propagated onwards , giving leisure and incentive to inventors . (ref Baby
Boomer Pulse)
The result
was a pulse of wealth stimulating other individuals to make similar inventions
. The Age of Reason was born . The problem was the massive increase in
population made possible by the efficient mechanized systems .
The large
number of surplus males and the means to support large armies led to the First
Large War (Napoleontic) . This gave the Age of Reason a knock (Nationalism),
but you could still state unpopular beliefs without being killed for it . The
Second Large War (WWI) destroyed the Age of Reason and ushered in the
ideologies (Communism , Marxism , Fascism , Capitalism ). If you stated an
unpopular belief , you stood a good chance of being heavily penalized for it .
The demise of ideologies collapsed the system back to Religious Fundamentalism
, where you can be killed for stating an unpopular belief . The Age of Reason
is finally dead . This is the state at circa 2006 AD .
The Age of
Reason only lasted a century , but gave rise to our present wealth .
When
evaluating ideas like that of Huebner ( see “Waiting for the lights to go out” in Sunday Times of Oct 16 2005 ) , it is
important to remember that changes come in pulses . Things might seem to be
going to hell in a hand-basket (cf horse-poop in New York circa 1890’s) , but
discontinuities generate pulses of change and wealth . You might as well try to
explain a transistor using Newtonian mechanics . In other words , analyzing
pulses of change as simple statistics of numbers of people over time is garbage
.
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