Global 'Oil Shock' Rattles World Stock Markets

Cleaning up the mess that Mr Greenspan left behind was never going to be easy. Banks and brokers around the world face more than half-trillion dollars in write-offs as a consequence of the US sub-prime mortgage crisis, which is spreading from the US property market and roiling global stock markets. It’s toppled the US economy into a recession and the tremors are also rattling Asian stock markets.

Roughly $7 trillion has been wiped from world stock markets since the beginning of the year amid fears of a severe US economic recession and financial institutions reporting more mega losses. “The market crisis will preoccupy us well into 2008,” he said German Finance Minister Peer Steinbrueck on Feb 15^th. “The financial risks securitized by banks contained packaged explosives,” and he accused rating agencies of having a conflict of interest in the role they played in the process.

So far, the Bernanke Federal Reserve has pumped more than half-a-trillion dollars into the markets with open market operations and special emergency lending schemes, to help cushion the blow to the US economy and stock markets. However, there’s evidence that the Fed’s prescription for dealing with the sub-prime debt crisis, is actually making matters much worse and is leading to “Stagflation.”

As the Fed’s rate cuts and massive money injections filter through the financial system, it weighs heavily on the US dollar, and in turn, a weaker dollar inflates huge bubbles in the global commodities markets. Fund managers have already poured an estimated $200 billion into commodities across the board, as a hedge against the explosive growth of the world’s money supply, competitive currency devaluations, and the negative interest rates engineered by central banks.

The price of crude oil was trading near $70 a barrel as recently as last August, when the Fed suddenly jolted the markets by lowering its discount rate to 5.75% on Aug 17^th, timed to squeeze short sellers in the stock market on options expiration day. The Fed’s abrupt shift towards easy money fueled a 1,500-point rally for the Dow Jones Industrials over the next two months to a record high of 14,100.

But the stock market’s “irrational exuberance” didn’t last long, once the unintended consequences of the Fed’s rate cuts - global “oil shock” – began to settle in. In trying to rescue the Dow Jones Industrials from the claws of a grizzly bear market, the Fed has sacrificed the US dollar, and in turn ignited a powerful surge in the price of crude oil to $110 /barrel. And most US recessions in the post-World War II era were preceded by sudden spikes in oil prices.

On Feb 15^th, Fed chief Ben Bernanke played down the threat of spiraling energy and food prices, saying “inflation expectations remain reasonably well anchored,” then signaled another rate cut in March, as an “insurance policy to head off an economic recession.” Since then, the price of crude oil has surged $17 /barrel, and is wrecking havoc on Wall Street and other major stock markets around the globe.

Global investors are plowing money into crude oil because the longer-term fundamentals are bullish. The International Energy Agency is predicting that global oil demand will rise 2% this year to a record 87.5 million barrels per day. And a growing number of oil investors subscribe to the “Peak Oil” theory that holds to the belief that the global oil supply has already maxed out at 85 million per day.

The “Peak Oil” theory refers to the inevitability of a peak in global oil production. Oil is a finite, non-renewable resource, and once half of the original reserves are depleted, oil production is likely to stop growing and then begin a terminal decline. Of the 65 largest oil producing countries in the world, 54 are past their “Peak Oil” production and are now in decline, including the USA, down 11% since 1971, and the UK’s North Sea, down 27% since peaking in 1999.

Other big oil producers in decline include Australia, down 26% since 2001, and Norway, down 13% since 2001. The Cantarell oil field, Mexico’s largest, has also peaked with its output falling to 1.7 million bpd in 2007, down from its peak output of 2.1 million bpd. Thus, global oil demand is expected to exceed supply in the second half of this year, and the oil deficit will only grow wider in 2009 unless the global economy sinks into a sharp recession.

It’s increasingly obvious that the Fed is targeting the stock market and is trying to put an artificial floor under the Dow Jones Industrials at the 11,650 level, similar to central bank intervention in the foreign exchange market. “We have the tools,” said Fed deputy Donald Kohn on Feb 26^th. “As Chairman Bernanke often emphasizes, we will do what is needed, to respond to difficult times,” he said.

But former US Treasury secretary Robert Rubin was once asked by his boss, Bill Clinton, if he could be re-incarnated, what would he like to be? Rubin replied, “The bond market, because it controls everything.” Nowadays, the “bond vigilantes” are asleep in a coma, and unlikely to be resurrected anytime soon. Emerging in their place however, are the “crude oil vigilantes” who jack up the price of “black gold,” whenever the Bernanke Fed turns up the printing presses.

Thus, attempts by the Bernanke Fed to jig up the stock market with a money injections, are short-circuited, by the “crude oil vigilantes”. And the OPEC cartel recognizes the Fed’s sleight of hand and wants to be compensated for a weaker US dollar, with higher oil prices. “The oil market will stay above $100 during the current financial year,” said OPEC chief Chakib Khelil on March 10^th. “The factors driving the market include speculation, geopolitical tensions, particularly the Iranian nuclear affair, and the crisis between Venezuela and Exxon-Mobil,” he said. However, “oil prices could retreat in 2009 with a recovery of the US dollar in foreign exchange markets and the election of a new US president.”

Shanghai Red-Chips Rattled by “Peak Oil”

China emerged as an economic superpower amid the fastest industrial revolution the world has ever seen. China’s economy has grown at 10% or more a year since the 1990s, and is expected to surpass Germany to become the world’s biggest exporter, after sales of $1.2 trillion abroad in 2007, and reaping a staggering $262 billion trade surplus. China alone contributed 20% of the world’s economic growth last year.

It only took the Shanghai red-chips slightly more than 2-years to gain 500% from below 1,000 in June 2005 to above 6,000, while the Nasdaq bubble returned 240% in less than two years to reach the record of 5,000 in March 2000. The Shanghai index reached a P/E ratio of 68, identical to the Nasdaq’s P/E, right before the tech-bubble burst. The combined market capitalization of the Shenzen and Shanghai exchanges hit a high of $3 trillion dollars, or 115% of China’s $2.6 trillion GDP.

Chinese exports to the US have been a key driver behind the highly volatile Shanghai red-chip market. Exports to the US peaked at a record $21.7 billion last November, but then tumbled to $15.5 billion in February. Chinese exports typically fall sharply in February, during the New Year holiday, when factories close for at least two weeks. But for the first time this decade, Chinese exports to the US were 5% lower on a year-over-year basis, indicating that an economic recession in the United States is beginning to chip away at demand for Chinese exports.

But China’s Achilles heel is its voracious appetite for oil. China accounted for half the rise in global oil use this decade. Its industrial revolution led by construction and manufacturing, is highly energy-intensive, and a major reason why crude oil is above $100 a barrel. But with crude oil and other commodity prices spiraling higher, its mammoth trade surplus is narrowing, exporter profit margins are shrinking, and China’s economic output is descending into single digits.

China ranks as the world’s #2 oil consumer after the US, and demand is expected to grow 500,000 bpd annually in coming years, driven by industrial growth and consumer demand as incomes rise. China imported 1.1 billion barrels in 2007, up 12.3% from the previous year. China supplied its fuel needs for decades from domestic fields but rising demand made the country a net importer in the late 1990’s. Imports now account for 50% of consumption.

India and China are two Asian giants that consume only a third as much oil as the US today. But if the Chinese and Indians consumed as much oil per capita as Americans do, the world’s oil demand would be closer to 200 million bpd, instead of 85 million barrels today. And with the world running on a limited cushion of Saudi spare capacity, any interruption in supplies from Mexico, Nigeria, or hurricanes, and talk of armed conflict with Iran, causes oil prices to spike higher.

While China’s more affluent classes are nervously watching their savings erode in the stock market, the rest of the population is watching its purchasing power erode from soaring food prices. China’s annual consumer price inflation surged to 8.7% in February, the highest since May 1996, from 7.1% in January. Food prices, which make up a third of the consumer basket, were 23.3% higher in February from a year earlier, compared with an increase of 18.2% in the 12-months to January.

Beijing is in a quandary on how best to fight inflation, since a tighter monetary policy won’t produce an extra grain of rice nor an extra bushel of corn. Yet if food inflation stays too high for too long, it could ignite non-food inflation and social unrest, since the average Chinese household spends 37% of its disposable income on food.

For now, Beijing is allowing the yuan climb at a faster rate against the US to hold down import prices, and is aggressively draining excess cash from the Shanghai money markets through open market operations. Still, the Bernanke Fed is fueling higher oil prices around the world with its cheap dollar policy, and the Global “Oil Shock” is rattling Shanghai red-chips.

South Korea Stuck in “Stagflation” Trap

High prices of crude oil and raw materials are posing a serious threat to resource-deficient South Korea, with slowing growth raising the specter of “Stagflation,” a toxic combination of stagnation and inflation. Local manufacturers are striving to secure raw materials amid soaring prices, but troubles may worsen, putting a heavy burden on the nation’s import-dependent economy.

With high-flying prices of crude oil, iron ore, and coal, South Korean imports of raw materials, which stood at $79 billion in 2000, last year hit $201.7 billion, up 16% from $173.9 billion recorded a year earlier, and more than half of the nation’s total imports. Higher oil prices could swing the external current account to a deficit of -$7 billion this year, the biggest gap since 1997, from a surplus of +$5.9 billion in 2007, the Finance Ministry said.

But Korea is also the world’s fourth-largest crude oil buyer and depends entirely on imports to meet its oil needs. A doubling of oil prices from a year ago has already contributed to a 20% slide in the Kospi blue chips. South Korean import prices were 21.2% higher in January from a year earlier, the most in more than 9-years, adding to inflation pressures, even as the economy is set to run out of steam. The surge in import prices were led by a whopping 48.7% gain for raw materials.

To help the local economy and stock market cope with the doubling in crude oil prices to 110,000-won /barrel, the Bank of Korea, (BoK) is rapidly inflating its money supply, - morphine to ease the pain of the global “oil shock.” Korea imported 80 million barrels of crude in January, up 12.3% from a year earlier, but its bill soared 78% to $7.3 billion. The average price of imported Dubai crude stood at $89.6 per barrel in January, up from $56.6 in the same month last year.

The clandestine practice of “monetizing” higher oil prices is back-firing, since it simply fuels even higher prices for energy, food and other key commodities. On March 7^th, Bank of Korea warned that chances have increased for inflation to exceed its previous forecast.

You may think the slowing global economy would help to ease inflation pressures, but there are no signs in sight that the high pace of growth in crude oil and grains prices will turn around soon.

BoK chief Lee indicated that South Korea is sliding into the “Stagflation” trap.

Chances have increased both for economic growth to fall and price growth to get higher. International prices of crude oil and grains are now growing faster than we had forecast several months ago. Whether the BOK will move as markets expect depends on the future consumer price and economic trends. I can say clearly is that we manage the rate policy in the belief that rate increases will slow money growth and that rate cuts will boost money growth.

Global Oil Shock Rattles Tokyo, as Dollar Hits 100-Yen

For most of this decade, Japan’s ministry of finance has worked tirelessly to defend the US dollar against the yen, to support exports overseas and artificially inflate multi-national income earned in the US. Exports drive almost 20% of Japan’s economy. Half of Japan’s shipments overseas are settled in US dollars, even though China and Hong Kong overtook the US as Japan’s largest export market in 2007.

In the past, Tokyo usually intervened in the market to defend the dollar at 106-yen, which is the average break-even level for most Japanese exporters. The Bank of Japan, acting on behalf of the MoF, sold a record 20.4 trillion yen ($199 billion) in 2003 and 14.8 trillion yen in the first quarter of 2004, when the yen traded as high as 103.42 per dollar, the biggest intervention stint in history. The dollar also fell towards 100-yen in 1999, 2000, and again in 2003, prompting Japan’s central bank to massively sell the yen each time.

But Fujio Mitarai, chairman of the Japan Business Federation (Keidanren), told a news conference on March 10^th, that Japanese exporters should be able to cope with dollar/yen exchange rate around 105-yen. “I don’t think we will call for intervention for a while, as long as exchange rates stay around present levels,” Mitarai said. Then, on March 13^th, Japanese finance chief Fukushiro Nukaga didn’t threaten to intervene on behalf of the dollar as it fell to 101-yen, prompting nervous traders to quickly dump the greenback to the psychological 100-yen level.

Japan imports almost all of its oil and is the world’s third-largest oil consumer after the United States and China. Tokyo has striven in vain for decades to reduce its dependence on oil from the volatile Middle East and thereby insure stable supplies by diversifying oil sources. But in 2006, Japan imported 4.2 million bpd, with 88.6% originating from the Middle East. Japan also imports 65% of its food consumption.

Traders are wondering whether Tokyo has adopted a new stance on the dollar /yen exchange rate, and is ready to live with a stronger yen to hold down the costs of imported food and oil. On Feb 22^nd, BoJ chief a Toshihiko Fukui said he was paying close attention to how rising food and gasoline prices could affect personal consumption, which makes up roughly half of Japan’s economy. “A stronger yen will ease any negative effect from rising costs of crude oil and commodities,” he said.

“The yen’s rise, a decline in the dollar, and rises in oil prices are beginning to have a negative effect on corporate profits,” warned Japanese Economics Minister Hiroko Ota on march 11^th. The dollar slid as low as 99.77 yen, breaking below the 100 level for the first time since November 1995. Already this year, the dollar has tumbled 10% against the yen, and is fast approaching the point at which many Japanese exporters say they won’t be profitable.

The negative impact from a weaker dollar has already knocked the Nikkei-225 index 20% lower to a 2-year low. “The factors we must monitor with utmost caution in guiding monetary policy are stock and exchange rate movements,” said Bank of Japan member Atsushi Mizuno on Feb 28^th. "If such high volatility continues, it could hurt the real economy through worsening corporate and consumer sentiment. Given that Japan’s recovery is an external-demand-led one backed by exports, downside risks are heightening on mounting risks to US growth."

Comments

[WFlorid:]

Very nice overview of macro trends. Thanks!

2008 Mar 14 09:10 AM

[seriously ?:]

wow. One of the best articles I have read here.

Synopsis of what I think is the "elephant in the room" when many economists speak of the current "crisis" . No one seems to disagree that we are running out of oil, but then no one wants to discuss the major implications for the global economy.

Tons of trading ideas in here as well, longs and shorts.

I think nuclear power is the only way out of this mess.

2008 Mar 14 09:15 AM

[Jason Rines...:]

Very concise article. We are not going to avoid short-term painful recession, but we can actually create policy to fix the long-term. How?

Global investors figured out in a mere 48 hours the true impact of the $200 B stimilus provided to the Central Banks. I took me all of five minutes and I have a feeling I am not alone :) Want to fix the economy? Dump $100 B into subsidizing offshore drilling, ANWR, biodeisel and nuke plants. President Bush could sign an executive order declaring a national emergency to allow these things to occur. Further, from a political stand-point he will help the GOP (although I am not a big McCain fan I would rather have GOP then Socialists) this election. He would be viewed as a hero, rather then the goat of this economy.

Then have treasury dump $100 B into the SBA and provide small business loans through commercial banks that demonstrated fiscal responsibility over the last two years. The SBA guarantees the loans which means the $100 B is only touched if a business fails, rather then bailing out the Central Banks whom are only using the short-term liquidity injection to fix their own balance sheets.

Plus, the SBA is great at providing consultative services on writing business plans, connecting angels with small businesses, etc. Does anybody consider 80% of the U.S. economy is small business nowadays? Nope, guess not if your the Fed or this Administration. Entrepenuars/small business owners asses are on the line every day of the week, unlike Central Bank CEO’s whom are STILL getting millions per year despite actions that should put them behind bars, if not fired at the least.

Instead, the Fed bails out pieces of *hit CEO’s that are accountable in creating much of this mortage meltdown spreading destructively across our entire economy. President Bush’s/Greenspan’s policy of lowering the dollar did have some positive effect after 911 by dropping rates. But this devalue dollar policy should have had an about face in 2005 when the economy was humming along.

I had two calls in two days from private equity firms asking if I need money. Consider I am in tech/consume healthcare which are still posting double digit gains. Energy is the biggest of the double digit gains (of course) of the top three mentioned. Why do I mention this? Because if the steps taken above were taken, oil would begin drop, the dollar would begin to recover and it would create MILLIONS of jobs. Then, we will give the global customer what they need as a major exporter, energy. Global customer needs our food, steel and raw materials, but you also need energy to delivery it!

What's really going on? Leaderships has become totally selfish. Try educating a spoiled brat of an executive in your own business! I just simply fire them but how do you fire politicians whom colluded with Fed and Goldman types? You can't. You either have to elect good leadership or have a revolution. I believe the best scenerio for consumers and politicians alike is job creation through energy independance and eventual export. Will we do it in time? God, I hope so but I don't see much facing of reality out there these days.

2008 Mar 14 10:39 AM

[cynic69:]

Please read "The Long Emergency". Kunstler says that its too late to prevent peak oil chaos by implementing nuclear (or any other alternative). Its very entertaining to listen to the stock brokers on CNBC calling the bottom everyday. The killer is that the effects of $100 dollar oil has not been reflected in the price of consumer goods. When it is the "business as usual" guys are going to find out how serious this mess really is.

2008 Mar 14 10:43 AM

[TheDrugsDon...:]

My word you are a cheery chappy aren’t you. Are we being a mite polemic here?

For every loser there is also a winner. Yes several country/sectors are loosing at the moment but there will be winners elsewhere. Are you able to give a range of winners and try to be more upbeat (it can’t be good for your blood pressure worrying about half the world and it’s problems).

2008 Mar 14 10:54 AM

[poet1:]

GREAT article. Thanks for putting in the time to write it. Everyone has known about peak oil for years, surely they have plan B in place, ready to go?

2008 Mar 14 10:56 AM

[300mph:]

The purveyors of the "Peak Oil Theory" have been wrong for years and are still wrong. The fact is that known reserves have increased faster than usage and continue to due so. The production graph says it all. From 1900 through the present it predicts that production would decelerate while in actuality production has accelerated. The prediction line is almost the mirror image of the production line. How much more wrong can you get?

2008 Mar 14 11:37 AM

[User 142738:]

I normally have no opinion about the "peak oil" theory, but the chart shown in the article clearly shows production, not proven reserves. The "peak" was considered to be at 1981 in 1979. Now it's predicted to be at 2010 in 2008.

I'm also incredibly skeptical about numbers coming out of China about oil consumption (as well as any other number). The Chinese Communist Party's motto should be: "If at first we don't succeed, lower the standards." The worldwide poverty line is set, rather arbitrarily, at living on less than $1 (adjusted for purchasing parity) per day. The Party defines their poverty line at living on less than $0.70 per day. I contrast this with poverty lines defined by individual first-world governments that go up to $33 a day!

Considering how notorious the "big four" emerging markets are for putting price ceilings on commodities like cooking oil and gasoline, I'd predict 1970's-style shortages and rations, not to mention riots in the streets of Peking and Bombay.

2008 Mar 14 12:27 PM

[Purple Neon...:]

Great article.

Energy is real.

Currency is a man-made representation of energy.

Currency can masquerade as a primary energy source until the real energy (oil, human ingenuity and will power, etc.) begins to seriously wane.

Countires think that by printing money, they are printing energy. To some extent printing money does create energy in that it can jump start human energy and will power (like FDR giving people work by printing money).

However, printing money as a substitute for generating actual energy is doomed to failure. Global inflation will be the result -- without a commensurate growth in output (i.e. stagflation).

When the white man came to America, they were privy to one of the greatest windfalls of "energy" in the form of staggering amounts of resources untapped and unfettered by the visegrip of political entitites. (The Indians were easily overcome.) America had explosive growth.

To me, the New World of energy is nuclear.

Period.

If we want to "print" energy and "print" prosperity, an executive order to pour hundreds of billions immediately into nuclear energy creation would be an awesome start.

This is not widely understood:

Nulcear is the ONLY viable answer to baseload energy requirements for mankind.

Solar is no good because it only works when the sun shines.

The other alternative energies are only ancillary. Wind, geothermal, etc, cannot satisfy the massive baseload, minute-to-minute, 24/7/365 needs of mankind.

Nuclear can charge the batteries for cars.

Nuclear is clean and safe, but that is not widely enough understood.

A well-built nuclear plant can sustain a direct hit from a fully fuel loaded 747 (think 9/11) and not meltdown.

You get more radiation exposure sleeping next to your significant other than you do standing next to a well-built nuclear plant.

Spent nuclear rods lose significant damaging potency within 40 years or so, not 10,000 years or more which is the standard-issue old wives' tale.

Furthermore, nuclear rods can be recycled. Japan does this.

France generates somewhere from 70-90% of their energy from nuclear (which Germany quietly buys - quietly! - because their rank and file pooh-poohs nuclear as "not green.")

California is massively hypocritical, talking about being green while throwing huge amounts of money at buying and developing coal-fired energy generated in other states. But what is the leadership to do when the populace is hugely undereducated about how incredibly safe modern nuclear generation is? What is it to do when shrill eco-illiterate blowhards run big organizations like the Sierra Club?

Chernobyl was a ricketly old nuclear plant, something along the lines of a broken-down bi-wing plane, that had its safety systems TURNED OFF.

To compare Chernobyl to any modern nuclear facililty is like comparing a drunk driving a World War One plane "jalopy" to a pilot flying a modern jetliner.

The US can rock civilization to its toenials for the good by pouring massive resources into modern clean safe perpetual nuclear energy generation.

What is holding us back is ignorance.

What dissolves ignorance is speaking up when you see it.

The first candidate that promises to divert a big cut of the military budget to nuclear energy production (and I promise you, that would do wonders for promoting world peace. so it would do what the military should do) will get my vote.

2008 Mar 14 12:54 PM

[Skjellifetti:]

It was James Carville who wanted to be reincarnated as the bond market, not Robert Rubin. It is a notoriously well known quote. When an author can't be bothered to fact check the attribution of simple quotes, it throws all the rest of the analysis into doubt.

2008 Mar 14 02:49 PM

[James Seaberg:]

A scarce resource like crude oil can go up even in a fixed exchange rate system. We need only the concerted efforts of the major central banks to inflate the money supply. This unbelievable money supply growth which we are experiencing presently together with the prospect of peak oil will assure much higher oil prices even if the US falls into a recession. Solution: Buy USO (an ETF).

2008 Mar 14 05:06 PM

[Windwood Tr...:]

I am nowhere nearly as conversant as the author on the subjects of which he speaks. I look beyond the stated problems and the rhetoric to possible solutions. China and India are just whetting their appetites for the black gold while US consumption marches ever higher.

It hasn't been since Don Quixotic Jimmy Carter that US leadership attempted to lead the country in a lesser oil dependency mode. I will never forget one of his speeches as he, with his engineering degree in nuclear engineering said that people should look to atomic powered sea vessels- Especially submarines where hundreds of sailors for months at a time live and work a few feet from the atomic power-pile moving the ship without any ill effect on the crew. Further, he said that expanding nuclear power had the capacity to freeze our imported need of foreign oil indefinitely.

The oil industry successfully defeated any effort on the part of Jimmy Carter towards nuclear energy and Carter's successor Ronald let expire all the incentives towards alternative energy. Now our esteemed president is giving lip service to "reducing our dependence on oil."

Where are the hydrogen fuel cell powered vehicles? Where are the wind and solar development initiatives? Where is the disincentive to use gasoline? I guess it's the prices.

Where is the leadership this country needs? I don't see it among the contenders.

2008 Mar 15 10:37 AM

[Is All Well?:]

If the USA is ever to have a trustworthy nuclear energy program we will have to have a paradigm shift in order for the public to have confidence in such a venture. Let’s get with it.

Purple Neon Lights (see discussion above) states that

“France generates somewhere from 70-90% of their energy from nuclear (which Germany quietly buys - quietly! - because their rank and file pooh-poohs nuclear as "not green.")”..,…“What is holding us back is ignorance.”

The operation of nuclear energy in France is indeed a remarkable testimony to France’s ingenuity and integrity to its populace. Imagine! France can have a different approach to life, one that works.

As I understand it, the design of all nuclear power plants in France is based on one design that was adopted by a team of eminent scientists as the concensus best approach to safe nuclear practice. Because a standard, agreed upon design permeates the industry, the staff at one plant, say in the Alps, can immediately fill in for someone at any other plant in the country, perhaps in Brittany, without losing a step, if need be like a flu epidemic. One nuclear plant can call another and discuss any issue knowing that the console and works are identical in design and operation. Is this conceivable in our hyper-capitalist approach to energy? How many manufacturers of nuclear power plants have we in the US had?

The US still currently has the world’s largest cadre of innovative scientific and engineering minds. The National Academy of Sciences (NAS) is as close to a body of principled men and women of integrity That we possess. They would be genuinely pleased to evaluate and recommend a design framework upon which we can develop a nuclear power industry that people might be willing to support. To be certain, these NAS members are only human and susceptible to human foibles, but I would dare say that they are probably more trustworthy than politicians and businesses who are servants to the profit motive.

Perhaps we could have a leader who says that reasonably-priced energy is an inalienable right that every US citizen deserves and advocatesthe use of the NAS to promote the development of a nuclear power industry for the common good. One that is not there to make money but to provide the nation’s people and businesses a resource to grow by. The power provided would not be free, and even could be a moderately profit making enterprise…the profits of which would go into social security and medical care needs that are needed to have a truly productive society. This approach certainly does not preclude using the considerable expertise available in industry’s employ. Essentially, this would be a “Manhattan Project”-like venture where every resource inside the country can be tapped for the country’s survival.

I, for one, would vote for a candidate of such broad vision. I suspect that the entrenched powers(aka parties)-that-be would go ballistic at such an idea. In my opinion, greed and incompetence will continue to undermine our nation’s economy until we take some steps to restore accountability (different than regulation) to our country. And I don’t mean the currently fashionable “I accept responsibility” statement which is uttered by every politician who finds himself/herself in an uncomfortable place. Accountability is not a media mea culpa.

Hopefully all will be well one day.

2008 Mar 15 01:57 PM

[User 162922:]

Unfortunately not only does it take at least 10 years to get a nuclear plant built, but infrastructurally speaking, it is impossible to produce that many nuclear plants quickly.

www.bloomberg.com/apps...

2008 Mar 15 06:31 PM

[semuren:]

Though I tend to find your articles interesting and thought provoking, I agree with Skjellifetti above: "When an author can't be bothered to fact check the attribution of simple quotes, it throws all the rest of the analysis into doubt." This is not just the case with mis-attributing the Carville quote to Rubin, and getting the wording a little off -- Carville said he wanted to come back as the bond market because it "can intimidate everybody.” You also keep calling the Shanghai market the “Red Chip” market. When you did this in an earlier post, in December 2007, I pointed out that Red Chip and H shares trade in Hong Kong, and A and B shares trade in Shanghai. That is a pretty basic terminological fact, and making those sort of errors just undermines your overall credibility.

In a sense it may not be that important since I know what you mean when you write the Shanghai Red Chip market [Shanghai A shares], but maybe not everyone does. It seems to me that that sort of error is one the editors at Seeking Alpha might what to comment on/correct.

2008 Mar 16 03:40 AM

[Ezzyme:]

Speaking of mistakes, is it just me or was the fed funds peak 5.25%, not the 6.25% implied in the article? One problem at Seeking Alpha, which I have commented on in the past, is that once posted you are not allowed to edit your comments. I can only surmise it's the same for articles.....

2008 Mar 16 04:15 PM

[ViewFar:]

1) Gold is not consumed. You can always say I have my gold right here, stashed under my pillow, when you go to bed, you can't say the same of Oil or any of the other currently high flying commodities.
2) Its odd that Bond vigilantes are asleep and in a coma. They will arise with full vigor shortly.
3) Commodities traders beware, there's only so much the world can take. Don't drive the rest of the world into a recession as well. Demand is directly linked to the price at which it can be consumed.

What does this article tell me ? A Global Recession is on the way and its going to be bad, its going to last longer than anyone expects and there are going to be very few safe havens. They will be the usual, Gold and Cash.

2008 Mar 17 07:44 AM

[PurpleNeonL...:]

Quote from earlier poster

"Unfortunately not only does it take at least 10 years to get a nuclear plant built, but infrastructurally speaking, it is impossible to produce that many nuclear plants quickly."

If it takes 10 years, so be it. 10 years will be here before we know it. We are something along the lines of 5 years or so into the Iraq war, halfway to ten. Ten years is nothing.

The real impediment, to me,is the ignorance infrastructure. Alas, blasting through that may be much harder. Also, the entrenched establishment infrastructure is tough. People want to protect their existing jobs and long-held cherished points of view.

2008 Mar 19 11:20 AM