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back to the financials of energy

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  • back to the financials of energy

    Let's not dicuss the laws of Thermodynamics, let's focus on the pricing of energy, a scarce good throughout history: It looks cheap.
    Summary: Why didn't oilprices rise steadily over the past 10(?) years? It would be my guess because of systemic perverse financial system errors. These same errors will cause the price of oil to rise even higher, oil can also be seen as a liquid equivalent of gold whose market is free to enter for everyone. The financial markets know they are stretched to the max.

    The costs of the war in Iraq, 1-2T$, the debts of the USA, its dependence on third parties, etc. make the US-$ non-attractive. Proof: The DOW is more or less stable (ref. other stock indices like HSENG, or DAX, FT100), and the US-$ has depreciated by appr. 40% already.

    It doesn't take any law of Thermodynamics to expect the US-$ to sink another 40%, the DOW to finally halve to say 600 to come to some sort of equilibrium.

    The same moment the oil-price goes down in the world-economy, it will even appreciate in US-$ terms. The gold will go up fast for the same reason in US-$ terms in every scenario.

    For people inside the USA, this is bad news. The only thing they can do, is invest in non-US-$-items, and ride the inflation. For people outside the USA it gives an opportunity to ride the US-economy.

    The international economy is just as competitive as any environment, Instead of Profit & Loss they call it current account Surplus & Deficit. The competitive position, how much can you grab, defines who is King and who is playing the Slave's role. The financial system is just a system and in itself can deliver wealth. However, as with any system, it can get too big. Imagine a relative poor family, where the father buys and sells stocks & options to get an extra $ 100 per week in income. He can do this for years, until one day he has to pay $ 100 and cannot. The same moment he is broke. Between countries it works the same. Imagine China saying to Bush, give us Taiwan, or we dump your treasury bills.Taiwan is gone because Bush is broke. Another example: The transfer of money to oil-owning countries is a drain on the US-economy. Do the arithmetic yourself. When does the US-economy stop paying .... or stop consuming ....

    How come we have made it possible that we end of in such problems: Because greed, short term profits, is dominant in every decision. In the long term profits can be a very good instrument to tell you where to invest. In the short term there can be a lot of system errors, friction, transaction costs, etc. that give you the wrong idea of the profit. The current system is a perverse one because it has replaced the means as the end. Our money-based system is still just a system, not a power or a law as such, like gravitation of a thermodynamic law (take the one on entropy p.e. hihi). Today's financial markets are fluid, the underlying assets and people however are not. These differences inside the same system make it vulnerable, at least meta-stable. Over time the system will change, read: The financial sector will stop collecting all the profits that are available. Just by shuffling other peoples assets they reap most of the profits. The next phase is that people owning the assets will not allow others to walk away with the profits. Read: I own oil, you pay me.
    We have come to the end of the current financial system and need to go back to the drawing board.

  • #2
    Well, I hate to be holding oil after the democrats take over the congress / senate. I can't imagine they'll be too supportive of big oil companies as much as Bush has been.