The housing collapse heard round the world


[Source]

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

Housing bubble Real estate agent Andrea Gaus knew the market was out of whack when the price of a typical four-bedroom house near good schools in the leafy Maryland suburbs of Washington shot past the $1-million (U.S.) mark.

“It got to the point where appreciation was so high that it priced people out of the market,” Ms. Gaus said.

But the peak has passed, and the consequences of the deflating bubble are buffeting the housing market, in Washington and across the United States.

What sold in a weekend here last year is taking months to unload. And increasingly nervous home sellers are slashing prices to get rid of properties before their value sinks even further. One buyer recently threatened to walk away from a signed contract on a $1.6-million house unless the seller took $100,000 off the price to reflect the drop in value since the deal was struck. The seller quickly buckled, fearing the house might be worth even less if put back on the market today.

Click here to read the rest of the article.

Read more!

CRUDE OIL: THE DAY AFTER TOMORROW by A.M. Samsam Bakhtiari


[Source]

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

samsamAugust 2006

INTRODUCTION

Crude oil is a commodity unlike any other: it is simultaneously a strategic raw material, a unique industrial feedstock and the most essential of fuels. It also is

"the most conveniently and widely traded form
of energy... and therefore the swing element
in the world's energy mix" [1]

At present, worldwide consumption of all liquid hydrocarbons stands at around 81 million b/d (give or take one million b/d). Thus, the oil business turnover stands at roughly $6bn on every single day with double that being traded (so-called 'paper barrels') on the exchanges of NYMEX (New York) and IPE (London).
Another salient characteristic of crude oil is that, to the contrary of other commodities which have free markets,

"there is no free market in oil" [2]

But crude oil is much more than sum of its parts: it is the main pillar upon which the roof of our present global economy rests. No wonder its price is the most important figure quoted daily by the media.
For the better part of the 20th century, however, crude oil was taken as granted as any other commodity. It was always priced relatively cheaply and made readily available at any given location. Generation after generation simply got addicted to using its derivatives without further ado. Seemingly there was nothing special about crude oil...


TODAY
Worldwide crude oil production has now peaked. In order to ascertain this fact, suffice it to add up total depletion from all existing oil fields (chalking up their negative impact on global supply) and then add up all the incoming crude from new oil fields coming on stream (with their positive influx) in order to obtain the final impact on global oil supply by adding up the two. Under the most plausible simulations and scenarios, the final sum-up is always negative, thereby pointing to a declining supply.

Thus, a century and a half after the inception of the modern oil industry in 1859, the world is entering a brand-new era --- that of irreversibly declining worldwide crude oil production.
According to my 'World Oil Production Capacity' [WOCAP] model, today's global output of some 81 million b/d should steadily decline to reach some 55 mb/d by 2020 [3]. Curiously enough, a group of Italian academics working under Prof. Renato Guseo did reach the very same conclusion of 55 mb/d for 2020 using a totally different model which was based upon 'Non Linear Least Squares'methods [4].
Therefore, successive declines will occur over a number of 'transitions' --- the first of which is 'Transition One' ['T1'], followed by 'T2', 'T3' and 'T4' [5]. The very rough timeframe for each transition being between three to five years --- with an average of four years per transition.
Today we stand at the very onset of 'T1'; even at this initial point of inception, everything has already changed, because our old 'Pre-Peak' rules do not apply anymore, and we are still at a loss over the new 'Post-Peak' rules. Suffice it to mention that 'Business As Usual' is no longer a viable scenario as nothing is 'usual' anymore…


TOMORROW
With the gradual preponderance of Supply over Demand achieved during 'T1', both oil prices and price volatility are bound to rise. The poor will be the first to be hit by these skyrocketing prices --- whether among nations or individuals. Hardest hit will be those at the bottom of the pile. As for the resulting small dent in demand, the slack will readily be taken up in stride by the richest consumers.
In between poor and rich, the middle classes will begin to have to adapt to circumstances and to the fresh rules of the energy game. This will not occur without social tensions over-spilling into the political realm and leading to domestic sparks that might create serious problems on the national stage.
Internationally, nations competing for ever diminishing oil resources will enter strong-arm rivalries. It will not be anything akin to any 'New Great Game'; but rather deadly duels between masterminds trying their best to give their own nation-states the better of a poor deal.
Those countries which used the 'Pre-Peak' era (and also 'T1') to get prepared for the coming 'Post-Peak' shocks will naturally fare much better than those who have wasted their time and let their golden opportunities pass by.
Of course, that very special region known as the Middle East will come to focus both geopolitical ambitions and global energetic questions. That might lead to an even more chaotic situation than the present one. But, for those players willy-nilly keeping an iron in the fire, future rewards might prove worthwhile after flashpoints and hot-heads have eventually cooled down…


THE DAY AFTER TOMORROW
It should always be borne in mind that the four Transitions outlined above are but an overall theoretical framework for distinct phases of the global oil output decline. It almost goes without saying that, in practice, things will not develop as smoothly as outlined theoretically because the transitions themselves will come to impact on policies, strategies and events.
Even the rather benign 'T1' might come to witness unexpected developments --- as the masterminds having correctly read their 'tea leaves' will endeavor to preempt moves being planned by theirrivals. And, if not unduly influenced by 'T1', events will inevitably be precipitated by the far-less benign 'T2'. It is therefore difficult to imagine that the critical Middle Eastern applecart will not be upset some time during these first two Transitions.
After having attempted to optimize oil demand by price for as long as possible, the 'powers that be' will have to come to terms with the inescapable fact that there is simply not enough oil for all of those still willing to pay stratospheric prices. Then, they will have to turn to national and regional quotas in order to foreclose chaos.
The inevitably ensuing power struggles and deadly conflicts might well decide of not only our 21st century's outcome but also about the very predicament of Mankind [6]. In this 'Post-Peak' era, even the winners might turn out to be losers as well.
In a world which still has the possibility to destroy itself, utmost restraint will have to be shown not to tip the planet over the brink into the abyss. It is to be hoped that the major Powers will carry on with their deterrent games as they have over the past fifty years or so [7], and won't allow minor newcomers to spoil their broth.


CONCLUSION
After a century and a half of addiction to oil and its myriad derivatives, the world is suddenly facing the brand-new situation of having to cope with a declining oil supply.
In theory, the initial decline should occur over four major transition periods of roughly four years each. In practice, events triggered by the tense 'Post-Peak' era might come to upset these orderly transitions, leading to explosive outbursts which seemed to have been the rule rather then the exception during the long History of Oil.
In any event, oil prices and their volatility are bound to set fresh records with every passing year. At some point, even optimizing by price will prove futile and availability will have to become the fresh yardstick.
Rivalries, struggles and conflicts will become the order of the day between societies and nation-states pressed to provide whatever oil they can put their hands on to try quench the insatiable thirst of their citizens for that magical black liquid.
It is to be hoped that the planet does survive the momentous shock-waves unleashed by the 'Post-Peak' era and its ineluctable Transitions. But, as Lord Tennyson wondered in his sublime poem'Locksley Hall Sixty Years After':

"Who can tell how all will end?"







ACKNOWLEDGEMENT
I take this opportunity to thank my dear friend Mr. ABDOL REZA KHAMNEIPUR for providing me, over the years, thousands of relevant articles and other pertinent information --- some of which were used in compiling the present paper.


REFERENCES
'The Politics of Middle East Oil', edited by Paul Tempest, 'Royaumont Group' (London: Graham & Trotman, 1993) p.249.

Silvan Robinson, 'Real cost base of oil isn't what you think', in 'Petroleum Intelligence Weekly' (April 3, 1989) pp.6-7.

A.M.Samsam Bakhtiari, 'The World Oil Capacity Production [WOCAP] model' (December 2003) see website at

R.Guseo et al., 'World Oil Depletion Models: Price Effects Compared with Strategic or Technological Intervention', paper presented at the 'Italian Society of Statistics'conference (Bari, Italy - June 2004).

On 'Transitions' see the excellent paper by Byron W. King in www.EnergyBulletin.net dated August 27, 2006.


For a rather grim view of 'Post-Peak', see Richard C. Duncan: 'The Olduvai Theory: sliding towards the post-industrial stone age' (Seattle: The Institute of Energy and Man, 1996).

Although nowadays 'deterrence' is not what it used to be as outlined by Gabriel Kolko in 'The Death of Deterrence', on AsiaTimesOnline, August 30, 2006.


Read more!

ROUBINI PREDICTS LONG DEEP RECESSION


[Source]

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

Nouriel RoubiniWASHINGTON (MarketWatch) -- The United States is headed for a recession that will be "much nastier, deeper and more protracted" than the 2001 recession, says Nouriel Roubini, president of Roubini Global Economics.

Writing on his blog Wednesday, Roubini repeated his call that the U.S. would be in recession in 2007, arguing that the collapse of housing would bring down the rest of the economy.

Roubini wrote after the National Association of Realtors reported Wednesday that sales of existing homes fell 4.1% in July, while inventories soared to a 13-year high and prices flattened out on a year-over-year basis.

Click here to read the rest of the article.

Read more!

Dollar Declines on Concern Interest-Rate Advantage Has Peaked


[Source]

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

dollarSept. 4 (Bloomberg) -- The dollar declined for a second day against the euro on speculation the gap between interest rates in the U.S. and those in the euro region won't widen this year.

The difference between U.S. and German two-year government bond yields narrowed to the smallest in almost 17 months before a Federal Reserve report on Sept. 6 that may indicate slowing consumer spending and a sagging housing market. The yen gained the most in five weeks after a government report showed Japanese capital spending accelerated in the second quarter.

``With the rate differential peaking, it removes a big support for the U.S. dollar,'' said Harvinder Kalirai, head of research in Sydney at State Street Corp., which serves as a custodian for $10.7 trillion of assets. ``The yield advantage of the dollar is expected to decline.''

Click here to read the rest of the article.

Read more!

The hungry planet By Geoffrey Lean


[Source]

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

hungry planet As stocks run out and harvests fail, the world faces its worst crisis for 30 years.

Food supplies are shrinking alarmingly around the globe, plunging the world into its greatest crisis for more than 30 years. New figures show that this year's harvest will fail to produce enough to feed everyone on Earth, for the sixth time in the past seven years. Humanity has so far managed by eating its way through stockpiles built up in better times - but these have now fallen below the danger level.

Food prices have already started to rise as a result, and threaten to soar out of reach of many of the 4.2 billion people who live in the world's most vulnerable countries. And the new "green" drive to get cars to run on biofuels threatens to make food even scarcer and more expensive.

The UN's Food and Agriculture Organisation (FAO) and the US Department of Agriculture (USDA), which produce the world's two main forecasts of the global crop production, both estimate that this year's grain harvest will fall for the second successive year.

The FAO is still compiling its latest crop forecast - due to be published next month - but told The Independent on Sunday late last week that it looked like barely exceeding 2 billion tons, down from 2.38 billion last year, and 2.68 billion in 2004, although the world's appetite has continued to grow as its population rises.

The USDA estimates it will be even lower - 1.984 billion tons. This would mean that it would fall 58 million tons short of what the world's people are expected to consume this year: 10 years ago, by contrast, farmers grew 64 million tons more than was consumed. The world's food stocks have shrunk from enough to feed the world for 116 days in 1999 to a predicted 57 days at the end of this season, well below the official safety level. Prices have already risen by up to 20 per cent this year.

The gathering crisis has been largely unnoticed because, for once, the harvests have failed in rich countries such as the United States and Australia, which normally export food, rather than in the world's hungriest ones. So it has not immediately resulted in mass starvation in Africa or Asia.

Instead, it will have a delayed effect as poor people become increasingly unable to afford expensive food and find that there is not enough in store to help them when their own crops fail.

The lack of world attention contrasts with the last great food crisis, in the mid-1970s. Then Henry Kissinger - at the height of his powers as Richard Nixon's Secretary of State - called a World Food Conference, in which governments solemnly resolved that never again would they allow humanity to run short of sustenance. The conference, in Rome, resolved to eradicate hunger by the mid-1980s. Kissinger himself pledged that "within a decade, no child should go hungry to bed".

Yet, a generation later, more than 800 million people worldwide are still constantly hungry. Every day, some 16,000 young children die, at least partly because they do not get enough food. And the new food crisis threatens to be even worse than the last one. In the seven years running up to the Rome conference grain production fell below consumption only three times, compared to six now.

It was at the conference that I first met Lester Brown, who has, ever since, been the principal prophet of the coming scarcity, repeatedly warning of the new crisis which is now upon us.

Brown - who now heads the Earth Policy Institute, a respected Washington-based think tank - gleaned his first insights into the world's predicament as a tomato tycoon when he was a teenager. Back in the early 1950s, when he was just 14, he and his brother bought an old tractor for $200 (£105), rented a couple of fields near their home in southern New Jersey and started growing the vegetables after school.

Soon the brothers were among the top 1 per cent of tomato growers in the United States. They easily qualified for the Ten-Ton Tomato Club - "the Phi Beta Kappa of tomato growers" - which is open to those who harvested that amount per acre.

Then Campbell's Soups, trying to lower costs, threw money into research to increase yields. Within a few years, the club had to change its name to the Twenty-Ton Tomato Club. But the pace of improvement could not be sustained. Despite decades of more research growth of yields slowed dramatically; by the mid- 1990s the best growers were getting about 30 tons of tomatoes per acre.

That, says Brown, is what has been happening to the world's harvests as a whole. Between 1950 and 1990 grain yields more than doubled, but they have grown much more slowly since. Production rose from around 630 million tons to 1.78 billion tons, but has only edged up in the past 15 years, to around 2 billion tons.

"The near-tripling of the harvest by the world's farmers was a remarkable performance," says Brown. "In a single generation they increased grain production by twice as much as had been achieved during the preceding 11,000 years, since agriculture began. But now the world has suffered a dramatic loss of momentum."

Apart from increasing yields, there has always been one other way of boosting production - putting more land under the plough. But this, too, has been running into the buffers. As population grows and farmland is used for building roads and cities - and becomes exhausted by overuse - the amount available for each person on Earth has fallen by more than half.

There are more than five people on Earth today for every two living in the middle of the last century. Yet enough is produced worldwide to feed everyone well, if it is evenly distributed.

It is not just that people in rich countries eat too much, and those in poor ones eat too little. Enormous quantities of the world's increasingly scarce grain now goes to feed cows - and, indirectly, cars.

The cows are longstanding targets of Brown's, who founded the prestigious Worldwatch Institute immediately after the 1974 conference, partly to draw attention to the precariousness of food supplies. As people become better-off, they eat more meat, the animals that are slaughtered often being fed on grain. It takes 14kg of grain to produce 2kg of beef, and 8kg of grain for 2kg of pork. More than a third of the world's harvest goes to fatten animals in this way.

Cars are a new concern, the worry arising from the present drive to produce green fuels to fight global warming. A "corn rush" has erupted in the United States, using the crop to produce the biofuel, ethanol - strongly supported by subsidies from the Bush administration to divert criticism of its failure to ratify the Kyoto Protocol.

Just a single fill of ethanol for a four-wheel drive SUV, says Brown, uses enough grain to feed one person for an entire year. This year the amount of US corn going to make the fuel will equal what it sells abroad; traditionally its exports have helped feed 100 - mostly poor - countries.

From next year, the amount used to run American cars will exceed exports, and soon it is likely to reduce what is available to help feed poor people overseas. The number of ethanol plants built or planned in the corn-belt state of Iowa will use virtually all the state's crop.

This will not only cut food supplies, but drive up the process of grain, making hungry people compete with the owners of gas-guzzlers. Already spending 70 per cent of their meagre incomes on food, they simply cannot afford to do so.

Brown expects the food crisis to get much worse as more and more land becomes exhausted, soil erodes, water becomes scarcer, and global warming cuts harvests.

Making cars more fuel-efficient, and eating less meat would help but the only long-term solution is to enable poor countries - and especially their poorest people - to grow more food. And the best way to do that, studies show, is to encourage small farmers to grow crops in environmentally friendly ways. Research at Essex University shows that this can double yields.

But the world needs a new sense of urgency. "We are living very close to the edge," says Brown. "History judges leaders by whether they respond to great issues. For our generation, the issue may well be food security."


Read more!

Britain's new top soldier: 'Can the military cope? I say - just' by Richard Norton-Taylor


[Source]

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.


military

Britain's new top soldier: 'Can the military cope? I say - just'


Troops 'running hot and at limit' as alarm grows over 14 deaths in Afghanistan

The ensign flies at half mast over RAF Kinloss, base for 12 of the 14 British service personnel who died when a Nimrod reconnaissance aircraft crashed in southern Afghanistan. Photograph: Simon Price/PA

The new head of the British army has told the Guardian that his soldiers are fighting at the limit of their capacity and can only just cope with the demands placed on them by the government. Sir Richard Dannatt, who took over from Sir Mike Jackson last week, called for a national debate about what resources the armed forces should be given, and what value society should place on them.
In his first interview since taking up his post as chief of the general staff, General Dannatt warned: "We are running hot, certainly running hot." He added: "Can we cope? I pause. I say 'just'."

Click here to read the rest of the article.

Read more!