Hope and Fear – Part I: Year of Promise - Eric Janszen

[c1ue]

Re: Income taxes, Opportunity, and Laffer

Instead of putting more taxes on the few remaining enjoyments for the little people (beer/liquor, junk food, sugar) and instead of punishing people for successfully learning to play the financial game as the government has it set up, how about if we try something really radical and actually give free market competition a chance? It seems to work pretty damned well in the few areas where the government allows it, such as computers and electronics. The few places in the world that really give free markets a shot seem (Singapore and Hong Kong come to mind) seem to do pretty well.

Let's get the federal government entirely out of:

• mortgages
• banking ('too big to fail')
• student loans
• health care
• education
• agriculture
• automakers

Then you'll see some real standard of living improvements. Raising taxes even more, to feed the government beast an even larger share of the economy, is not going to fix anything.

I agree raising taxes is not automatically a fix, but removing government isn't an automatic fix either.

A lot of FIRE arose because of deregulation.

[shiny!]

Re: Income taxes, Opportunity, and Laffer

Let's get the federal government entirely out of:

• mortgages
• banking ('too big to fail')
• student loans
• health care
• education
• agriculture
• automakers

I agree raising taxes is not automatically a fix, but removing government isn't an automatic fix either.

A lot of FIRE arose because of deregulation.

There is perhaps a middle ground here:

Keep government supervision and regulation in these areas where appropriate and beneficial, but remove government financial involvement such as loans, subsidies, tax deductions, etc.

EDIT: Although I would prefer that, as much as possible, regulation of these things be done at the State level, as the Constitution authorizes.

[Polish_Silver]

FIRE and "De-regulation"

I agree raising taxes is not automatically a fix, but removing government isn't an automatic fix either.

A lot of FIRE arose because of deregulation.

The financial deregulation of the 80's and 90's was utterly unlike the deregulation of the airline and truck industries. There is no one to bailout United Airlines or Atlas Van. If they cannot meet their obligations, they go bust. And they do so without threatening the transportation system of the world.

Bank deposits are back stopped by the FICA and Federal reserve. Thus, they gamble on the basis of a public policy cartel. In true "deregulation" there would be no FICA and no fed "over night" loans. Market forces would determine risk levels, and many of these institutions would collapse within days. The surviving ones would have to have much more conservative practices, to avoid bank runs.

It's interesting that the FED never discloses which banks seek out emergency loans. If they did, the banks creditors would demand thier money back, precipitating a bank run.

On the other hand, if banks were run according to "The chicago plan", there would be no risk of a bank run, no need for FDIC, and no need for complex regulatory oversight.

Airline regulation today is just safety, not economic. Bank regulation should just be to prevent counterfeiting and fraud, not to manage risk. (The system should be set up so that banks cannot put the depository and payment system at risk).

This is not complex or untried. It's just that the bankers do everything possible to avoid discussion of it.

[Jay]

Re: Hope and Fear – Part I: Year of Promise - Eric Janszen

The Fed has the power to control the bond market until it doesnt.

A better way to make my point, is to say that I have difficulty seeing rates rise slowly over time when we are still in an output gap. If the Fed loses power to set rates, that to me looks like KaPoom, not a consistent gradual rise in rates.

The only way a gradual rise in rates makes sense to me is through some extraordinary productivity gains, including market solutions in the way the world uses oil and fixed energy sources. And I don't rule that occurrence out; price increases have historically meant lower commodity costs in the long run. How much easier is it to buy a pound of copper today vs. 100 years ago or even 1000 years ago? While PCO makes sense to me on many levels, these types of theories always make sense until a market under stress figures out something that hasn't been thought of before. Looking at the only data set we have, the cost of all commodities through history, it shows that chances are good that the market will do it again, with a period of difficulty in between. In some ways, I think we are discussing how difficult this period will be, how long it will be, and whether difficult oil acquisition hurdles and/or fundamental restructuring of the liquid hydrocarbon economy can't be overcome and the doomers are right.

I just think that billions of human minds have a way of figuring things out.

[Slimprofits]

Re: debt graph legend needs fixing!

production costs:

http://www.ft.com/cms/s/0/ec3bb622-c...44feab7de.html

May 29, 2013 7:02 am
Costs rise for ‘technological barrels’ of oil

By Javier Blas, Commodities Editor


US shale oil is increasing the marginal cost of production

Sanford C. Bernstein, the Wall Street research company, calls the rapid increase in production costs “the dark side of the golden age of shale”. In a recent analysis, it estimates that non-Opec marginal cost of production rose last year to $104.5 a barrel, up more than 13 per cent from $92.3 a barrel in 2011.

[..]

At the epicentre of the shale revolution is the US, and it represents a paradigm of the cost of technology. Sanford C. Bernstein found an “unprecedented” spike in the US oil marginal cost last year, jumping to $114 a barrel, up from $89 in 2011.

Christophe de Margerie, chief executive of Total, the French oil producer, last month warned that technology is not reducing marginal costs in the oil industry. Instead, he said: “What we call technological barrels are day after day more expensive.”

Bullhorn:

http://www.cnbc.com/id/100825469

A Few Voices Warn of US Energy Revolution 'Hype'

Published: Tuesday, 18 Jun 2013 | 1:37 PM ET
By: Javier E. David | Special to CNBC.com

Caution is emanating from some unlikely quarters. At an event organized by Columbia University last week, BP's chief economist Christof Ruehl tried to temper some of the exuberance surrounding the U.S. energy story.

"There is a lot of hype" about U.S. production estimates, Ruehl said, adding that "every time I open the newspaper," there appears to be a new story heralding the American energy boom. He cautioned that analysts would do well to be more "conservative" in their forecasts.

"From that standpoint, caution is always advised," Ruehl added.

Others are increasingly skeptical of claims that the U.S. could be on the cusp of ending its dependence on foreign oil. Data suggest a sharp decline in shale ouput takes place after wells' first year in operation—in the case of North Dakota's Bakken Formation, oil harvests at some wells have fallen by as much as 69 percent. In addition, many say the shale extraction process that makes production tougher and more expensive than conventional crude.

Robert Ayres, a scientist and professor at the Paris-based INSEAD business school, wrote recently that a "mini-bubble" is being inflated by shale gas enthusiasts.

"Drilling for oil in the U.S. in 2012 was at the rate of 25,000 new wells per year, just to keep output at the same level as it was in the year 2000, when only 5,000 wells were drilled," Ayers noted in an article on Forbes.com.

Based on those estimates, U.S. producers would have to continually drill new wells—an expensive proposition given that the production cost for a barrel of shale oil can be as high as $95 per barrel. Some argue that shale gas and oil are less suitable for use as an energy source than crude and distillates.

[..]


"Look at what you're pulling out of the ground. It isn't conventional oil," said Timothy J. Gramatovich, the chief investment officer of Peritus Asset Management. "Only a percentage of what you're pulling out of these wells would be considered oil."

For that reason, Gramatovich dismissed the U.S. energy renaissance as all but a fantasy.

"Reserves and production are two different animals. There isn't as much conventional oil floating around as there once was." he said. Given the depletion factor, "at what price point [does it still make sense] to continue to drill wells?"

[Polish_Silver]

Oil not economical at $100/barrel !

production costs:

Oil is selling for $100/barrel, meaning these new developments are not economical.

http://oil-price.net/dashboard.php

That would also seem to mean the clock is ticking on the next increase in crude prices!

[verdo]

Re: Oil not economical at $100/barrel !

Considering how much the dollar has gone up over the last year or so, and how much commodities prices have fallen + this apparent U.S. oil glut...oil prices seem stubbornly high to me. Not a great omen for when these temporary factors start reversing

[lektrode]

Re: Oil not economical at $100/barrel !

Considering how much the dollar has gone up over the last year or so, and how much commodities prices have fallen + this apparent U.S. oil glut...oil prices seem stubbornly high to me. Not a great omen for when these temporary factors start reversing

+1
grg sez: exports are keeping WTI prices up