[QUOTE=cheesehead;250811]I'd be more impressed if Paul Chefurka's fuel figures had excluded non-food-related uses.

Including fuel for transporting food is okay, but fuel for shipping clothes to department stores, or for transporting Packer fans to Dallas ahead of next weekend, is not. If he wanted to make the argument that the proportion of food-related fossil-fuel use was relatively constant, then he should have made that argument .. but he didn't, and I don't know if it would be valid.

Both his "World Oil Production" and "World Net Oil Exports" charts show the effect of the oil price speculation spike and then the recent world recession at their upper right corners. They prove nothing about production capacity, which is what Peak Oil is about.

As for his "World Grain Production vs. Fossil Fuel Use", first note that it's about only [I]grain[/I], not all food. The flatness is [I]not[/I] evidence of "a constant amount of fossil fuel to produce a ton of grain", either. Correlation isn't causation, and I wonder if the graph would be as flat if [I]all[/I] food were represented.

As an example of non-causation: what if a decline in amount of fossil fuel used to grow a unit of grain were approximately offset by a rise in the proportion of grain that is shipped internationally (using fossil fuel to do the transport)? Inclusion of the transport fuel could confuse the issue of cultivation efficiency -- and that would be _if_ the fossil fuel use figures were restricted to only food-related uses (which they're not). How about a rise or fall in the proportion of shipped grain that is lost or spoiled before use? What about a rise/fall in the proportion of grain on which fossil fuel is expended to cultivate, but which is not harvested successfully because of weather losses?

Sloppy reasoning and presentation there. I'm not surprised that his graphs have been widely copied -- there's not a large proportion of critical thinking out there.[/QUOTE]I meant to expand my opinion that the source had a bias that should be taken with a grain of salt. The link to that article was added as an afterthought and was previously a link to a couple of other places that used the chart; each time I changed it, dissatisfied (one had a somewhat interesting calculation of oil used per pound of beef, but each source had problems some sort). Eventually I changed it to this originating reference. I wanted to embed the chart (his liberal permissions allowed any use with or without attribution) but couldn't figure out how to do it in the post message edit window. Then I decided that the article had some value but needed some caveats but I ran out of edit time. The sentence as I finally left it wasn't at all intended to be a final thought -- I threw it in as a bit of a placeholder. I didn't really intend to have any peak oil direction to the thoughts of my message (ugly too: standpoint/viewpoint). Clearly I would have been better off without including the link at all. My original intent was more on the order of saying that we can't ignore oil while we consider other things. Certainly it has been an elephant in the room all along.

I just love to read the spin doctored twisted distorted screwed up "all good news" unemployment reports.

[url]http://news.yahoo.com/s/ap/20110204/ap_on_bi_go_ec_fi/us_economy[/url]

[QUOTE]WASHINGTON – The unemployment rate dropped sharply last month to 9 percent, based on a government survey that found that more than a half-million people found work.

A separate survey of company payrolls showed a scant increase of 36,000 net jobs as snowstorms likely hampered hiring. That survey doesn't count the self-employed.

Harsh snowstorms last month cut into construction employment, which fell by 32,000, the most since May. Transportation and warehousing was also likely affected and fell by 38,000 — the most in a year.

"The thumbprints of the weather were all over this report," said Neil Dutta, an economist at Bank of America Merrill Lynch. Hiring was suppressed last month and will likely rebound in February, he said.

In one bright spot, manufacturing added 49,000 jobs, the most since August 1998. And retailers added 28,000 jobs, the largest number in a year.

The unemployment rate has fallen by eight-tenths of a percentage point in the past two months. That's the steepest two-month drop in nearly 53 years.

But part of that drop has occurred as many of those out of work gave up on their job searches. When unemployed people stop looking for jobs, the government no longer counts them as unemployed.

The number of people unemployed fell by more than 600,000 in January to 13.9 million. That's still about double the total that were out of work before the recession began in December 2007.

The January jobs report also includes the government's annual revisions to the employment data, which showed that fewer jobs were created in 2010 than previously thought. All told, about 950,000 net new jobs were added last year, down from a previous estimate of 1.1 million. The economy lost about 8 million jobs in 2008 and 2009.

In the past three months, the economy generated an average of 83,000 net jobs per month. That's not enough to keep up with population growth.

The weakness in hiring was widespread. Restaurants and hotels cut 2,200 jobs. Governments shed 14,000 positions. And temporary help agencies eliminated 11,000 jobs. Financial services lost 10,000 positions.

Education and health care services, one of the few steady job generators through the downturn, added 13,000 jobs, the fewest in almost two years. Financial services lost 10,000 jobs.[/QUOTE]

Now lets figure out what is really important in the above. The first key statement is 3/4 of the way down and starts "But part of that drop". Lets face the reality. @500,000 people gave up job hunting and/or were forced off of unemployment rolls. They did NOT disappear and they still have BILLS TO PAY and no MONEY coming in. The second significant statement is 83,000 net jobs created per month which is NOT ENOUGH to keep up with population growth. Now go back to the top of the article.
[QUOTE]based on a government survey that found that more than a half-million people found work.[/QUOTE]

We have a growing population, a moribund job market, and a series of bald faced lies published about our jobs market. This article is NOT upbeat, it sounds more like a funeral dirge. Take a look at today's Dilbert, it is very apropos. [url]http://www.dilbert.com/fast[/url]

DarJones

What Republicans can't help revealing when they keep lying about their motives:

"GOP budget cuts: Deficit hawkery as farce"

[URL]http://www.economist.com/blogs/democracyinamerica/2011/02/gop_budget_cuts[/URL]

[quote]I'M HAVING trouble writing about the GOP effort to reach a compromise over whether to cut $100 billion out of the 2011 budget, or just $50-60 billion. My problem is that I can't really write about the advantages or disadvantages of one or another version of the cuts when the entire enterprise appears completely senseless to me. The notion, apparently, is that continuing unemployment and slow growth in America are caused by the federal budget deficit. So shrinking the deficit by $50-60 billion will presumably lead to faster economic growth and renewed hiring. Yet exactly one month ago, these same Republican leaders eagerly agreed to a tax-cut package that [URL="http://motherjones.com/kevin-drum/2011/01/cbos-crystal-ball"]raised the federal deficit for 2011[/URL] by [URL="http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf"]over $400 billion[/URL]. Even if there were a plausible argument that unemployment and lethargic growth today stem from the current budget deficit, any impact congressional leaders hope to see from their spending cuts will add up to no more than noise around the edges of their tax cuts.

Even more confusingly, there is no plausible argument that current unemployment or slow growth stem from the federal budget deficit. The mechanism through which budget deficits can lead to unemployment and slow growth is the bond market: government borrowing raises interest rates, which makes credit more expensive for businesses. But the 5-year treasury bond is under 2%, and [URL="http://online.wsj.com/article/BT-CO-20110126-712051.html"]the most recent auction[/URL] had a bid cover of almost 3 times. Unsurprisingly, with interest rates low, the cost of credit ranks low on the list of businesses' chief concerns. Those who acknowledge that deficits don't seem to be driving up the cost of credit, but still want to blame deficits for the poor economy, have pointed to business uncertainty over potential future tax increases to cover government debt. But how does enacting an $800 billion two-year tax cut and then cutting $50 billion or even $100 billion in spending assuage business uncertainty about future debt? In any case, the main reason businesses are not expanding is that they are worried about lack of demand from consumers and other businesses, who are still deleveraging from the debts they built up during the 2000s and the collapse in their asset values during the financial crisis. [URL="http://modeledbehavior.com/2011/01/27/yeah-big-borrower/"]Karl Smith noted[/URL] last week that the public-debt and private-debt figures are largely mirror-images of each other, and that government budget deficits are healthy in a deleveraging economy because government is essentially taking on private debt and paying lower interest rates on it. But even if you find fault with that perspective, how can you argue that cutting government spending this year will raise demand or growth, or lower unemployment, within the next year or two?

The idea that cutting several tens of billions of dollars out of the federal budget right now will improve the economy makes no sense. There are no doubt some government programmes that aren't worth what we're spending on them. It's always a good idea to cut programmes that aren't worthwhile. Such cuts have nothing to do with the current state of the economy, one way or the other. America faces a long-term debt problem on the order of trillions of dollars, mainly as a result of rising health-care costs and their impact on the Medicare and Medicaid budgets. Rising Social Security obligations and huge defence expenses also play a role. And a very large role is played by the fact that federal taxes in the United States are set at a level that consistently, throughout the business cycle, brings in less revenue than the government spends, by somewhere over 2% of GDP. To ensure the long-term health of the economy and the government, Congress will need to begin to demonstrate that it can enact and stick to long-term spending limits and tax hikes that will close the budget gap on those kinds of scales. I simply don't understand what GOP leaders are trying to accomplish by frantically trying to slash a few tens of billions of dollars out of this year's budget at the last minute, just after they've cheerily approved a whopping tax cut. Bond markets are not worried about the creditworthiness of the American government right now; to the extent that they may get worried, it will be because of trillion-dollar Medicare obligations and $800 billion defence budgets. They won't be reassured because Republicans manage to cut a few hundred million dollars out of the Corporation for Public Broadcasting. If Republicans want to convince people they know how to close the budget deficit, they need to propose major long-term cuts in some mixture of Medicare, Medicaid, Social Security, and defence, as well as major tax increases.

. . .[/quote]Conservative Republicans' real goal is "Starve the Beast", no matter what else they say. Pushing the deficit higher is a means to that end.

[QUOTE=Fusion_power;251271]I just love to read the spin doctored twisted distorted screwed up "all good news" unemployment reports.

[url]http://news.yahoo.com/s/ap/20110204/ap_on_bi_go_ec_fi/us_economy[/url][/QUOTE]

ZeroHedge has several notes about today's report, here is the main one:

[url=http://www.zerohedge.com/article/labor-force-participations-plunges-fresh-26-year-low]Labor Force Participation Plunges to fresh 26-Year Low[/url]
[quote]At 64.2%, the labor force participation rate (as a percentage of the total civilian non-institutional population) is now at a fresh 26 year low, the lowest since March 1984, and is the only reason why the unemployment rate dropped to 9% (labor force declined from 153,690 to 153,186). Those not in the Labor Force has increased from 83.9 million to 86.2 million, or 2.2 million in one year! As for the numerator in the fraction, the number of unemployed, it has plunged from 15 million to 13.9 million in two months! The only reason for this is due to the increasing disenchantment of those who completely fall off the BLS rolls and no longer even try to look for a job. Lastly, we won't even show what the labor force is as a percentage of total population. It is a vertical plunge. [/quote]
Mish is similarly unimpressed by the "Unemployment drops from 9.4% to 9.0%" headlines:

[url=http://globaleconomicanalysis.blogspot.com/2011/02/labor-force-and-unemployment.html]Labor Force and Unemployment Statistical BS[/url]
[quote]I knew huge revisions and methodology changes were coming this month would make gaming the report a crap-shoot. However, the amazing thing in the jobs report was not the number of jobs, but the statistical sleight-of-hand in the unemployment rate.

Statistical BS

The unemployment rate (based on the household survey), unexpectedly fell from 9.4% to 9.0%. How did that happen?

Based on population growth, the labor force should have been expanding over the course of a year by about 125,000 workers a month, a total of 1.5 million workers. Instead, (for the entire year) the BLS reports that the civilian labor force fell by 167,000. Those not in the labor force rose by 2,094,000. In January alone, a whopping 319,000 people dropped out of the workforce.

To get the unemployment rate down from 9.8% to 9.0%, you simply do not count two million workers. Look on the bright side, at this rate we will be back to full employment in no time.[/quote]
[i]My Comment:[/i] The 2 main things which helped disguise the ever-increasing rot in the middle-class wage base over the past half-century or so years were these:

1. Large numbers of women entered the workforce, i.e. the percentage of the labor force constituted by women increased steadily throughout that period. While some of those women were of course single, the fraction of 2-earner households nonetheless increased, as did the total contribution to GDP from the increased labor force participation rate;

2. Consumers leveraged up to an unprecedented degree, i.e. kept borrowing an ever-larger fraction of their "personal GDP" in order to fund "the American dream" lifestyle without wages actually keeping up.

Both of these trends have now peaked, and especially [2] is reversing hard, as it must for private-sector borrowing to get back to a not-completely-insane level. As ZH notes, the labor force participation rate began dropping long before the current recession hit; the peak in LFPR occurred a few years into the recovery from the deep 1981-82 recession (when Paul Volcker's high-interest-rate policy as then-head of the Fed put an end to the stagflation which began around the oil shock in the mid-70s). Note that Volcker's then-highly-controversial policy triggered a deep recession, but had the desired effect of halting inflation in its tracks, and rapidly wringing all manner of credit excesses and capital misallocation out of the economy, thus setting the stage for a robust economic recovery. It is no accident that that recovery was the last one we had where there was a real accompanying surge in job creation. Since then the neo-Keynesian trickle-down-istats have held sway, and the results are strikingly clear to all but them, apparently.

Now, the government is filling the drop in GDP resulting from household deleveraging and debt-defaulting with its own surge in borrowing, and lying about the true state of the economy (that is, then non-borrowed economy). This will not end well, but until it does, expect the cheerleading by the financial-sector crooks and their lapdogs in the MSM (do you think it an accident that so many major TV networks and newspapers are owned by the likes of GE and Newscorp?) to continue in full force.

[QUOTE=Fusion_power;251271]The unemployment rate dropped sharply last month to 9 percent[/QUOTE]
The drop in unemployment can be caused by a whole bunch of factors (not all of which are good), but it's about time that the rate declines. What goes up must come down!

Oddball, I would submit that having half a million people drop off the rear end of unemployment is NOT a good reason for the rate to drop.

Did anyone notice that credit card debt increased slightly in December? Reports are on most major news services that an uptick in credit card use helped increase overall consumer borrowing by 3%. Now the question is: Did people borrow more because they feel the underlying economy is better? or did they borrow more because they DON'T HAVE ENOUGH MONEY to pay their bills?

DarJones

[QUOTE=Fusion_power;251714]Oddball, I would submit that having half a million people drop off the rear end of unemployment is NOT a good reason for the rate to drop.[/quote]
David Rosenberg has more to say on this subject:

[url=http://www.zerohedge.com/article/just-how-ugly-truth-americas-unemployment-david-rosenberg-explains]Just How Ugly Is The Truth Of America's Unemployment: David Rosenberg Explains[/url]:
[quote]It is laughable that everyone believes the labour market in the U.S.A. is improving. Lost in the debate over the weather impact was the benchmark revision to 2010 — overstated by 215k or 24%. The U.S. economy generated 909k jobs last year, which works out to just under 76k per month. That is insignificant considering that the population grew around 160k per month. The level of U.S. employment today stands at 130.265 million, which is where it was in January 2003.

The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months.

These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support.[/quote]


[quote]Did anyone notice that credit card debt increased slightly in December? Reports are on most major news services that an uptick in credit card use helped increase overall consumer borrowing by 3%. Now the question is: Did people borrow more because they feel the underlying economy is better? or did they borrow more because they DON'T HAVE ENOUGH MONEY to pay their bills?[/QUOTE]
...and Karl Denninger covers that:

[url=http://market-ticker.org/akcs-www?post=179407]Consumer Credit: Can "Reporters" Read Beyond Headlines?[/url]:
[quote]Well there you go. In graphical form you have material growth in two places: people buying cars they can't afford and Student Loans. Neither of which, incidentally, is a good idea.[/quote]

But, market up again today! So all must be well.

Prices of durable goods are still pretty close to where they were a year ago but food prices are increasing dramatically in some areas. I chat with a guy in China who reports that food prices have quadrupled in the last 2 years. Here where I live, food is up about 20% over the last year. Is this inflation? Nope, not according to the U.S. Govt. Why? Because their measure of inflation measures things they call durable goods. (cars, washing machines, domestic items) The logic is that food and energy are highly volatile and therefore measuring inflation in those areas is not likely to result in useful information. I beg to differ. The greatest impact of inflation is from increasing the cost of food because every one has to eat. The less money you have to provide basic necessities, the greater the bite taken by inflation.

But even this is old news. What really is the next shoe to drop?

The two biggest items for me are cost of shipping (up an average of 25% this year) and the cost of supplies to run my business (up an average of 18%). This implies that manufacturers are being squeezed severely by a sour economy on one hand which reduces sales and increasing cost of materials on the other hand. The net effect would seem to point to an unprecedented number of businesses folding over the nest 2 years.

DarJones

The BLS reports 'core inflation', which does not include food and energy; but financial vehicles 'indexed to inflation' use the CPI-U, which does.

[url="http://www.bogleheads.org/forum/viewtopic.php?t=68396"]More details here[/url]

Irish Banks Print Billions, Lend To Themselves
 

Jason is correct about indexing to inflation using CPI-U, but even CPI-U includes all sorts of questionable fudges: hedonics, imputations, OER in place of home prices, etc. There is an obvious and powerful motive for government to consistently understate CPI-U.

The government also has a rather curious definition of "volatile"....typical dictionary [url=http://www.thefreedictionary.com/volatile]definition[/url] is
[quote]a. Tending to vary often or widely, as in price: [i]the ups and downs of volatile stocks.[/i]
b. Inconstant; fickle: [i]a flirt's volatile affections.[/i][/quote]
Notice the emphasis on ups *and* downs ... nowhere is "steadily rising or falling" mentioned. Also, even if you accept that e.g. gasoline prices swing fairly widely over timescales on the order of a year (the past few years have showed a more-or-less steady uptrend superimposed on the typical annual "driving cycle", plus the huge boom-and-bust episode of 2008), it's not rocket science to deal with that: just moving-average it over a reasonable timeframe.

---------------------------------

[url=http://www.zerohedge.com/article/paddy-meet-ponzi-irish-banks-lend-billions-each-other-use-ecb-collateral]Paddy Meet Ponzi: Irish Banks Lend Billions To Themselves For Use As ECB Collateral[/url]
[quote]When about six months ago we noted that the European ponzi is in full force, courtesy of banks using any toxic assets as collateral to the ECB, little did we know just to what heights this scheme would reach. Today we get our answer. The Irish Times writes that Irish Banks are issuing billions in bonds to themselves:
[i]
"under the Government guarantee to borrow cheaply from the European Central Bank and to avoid drawing more heavily on emergency lending from the Irish Central Bank. Four banks issued bonds worth €17 billion to themselves last month under the Government’s extended guarantee, the Eligible Liabilities Guarantee, to use as collateral to borrow from the ECB. 'What you have here is micro-quantitative easing, or money printing,' said Cathal O’Leary, head of fixed-income sales at NCB Stockbrokers. 'The banks are issuing unsecured loans to themselves.'"
[/i]
And since this is happening in Ireland, it is most certainly happening everywhere in Europe. And yes - this is the pinnacle of a pyramid scheme - this is about a thousand times worse than what US banks did when they purchased CDO tranches from each other, as the risk in the Irish case is ultimately borne by the European taxpayer. But such is life when the entire financial system continues to be massively insolvent, and only openly Ponzi schemes of this nature allow the system to continue operating on a day to day basis. [/quote]
[i]My Comment:[/i] Mish has a nice summary of European debt-spread trends [url=http://globaleconomicanalysis.blogspot.com/2011/02/european-sovereign-debt-crisis-in.html]in a posting today[/url] - it would appear that the next round of the pan-European debt-crisis soap opera is fast approaching. But if the EU is allowing Irish banks to create Euro-denominated bonds out of thin air and lwend them to themselves, then surely Portugal can simply lend itself whatever amount of money it needs to fill its budget hole.

[QUOTE=ewmayer;252860][i]My Comment:[/i] Mish has a nice summary of European debt-spread trends [url=http://globaleconomicanalysis.blogspot.com/2011/02/european-sovereign-debt-crisis-in.html]in a posting today[/url] - it would appear that the next round of the pan-European debt-crisis soap opera is fast approaching. But if the EU is allowing Irish banks to create Euro-denominated bonds out of thin air and lwend them to themselves, then surely Portugal can simply lend itself whatever amount of money it needs to fill its budget hole.[/QUOTE]So looking ahead, two big regulatory forces are Dodd-Frank and Basel III. [URL="http://blogs.reuters.com/felix-salmon/2011/01/20/dodd-frank-vs-basel-iii/"]Dodd-Frank vs Basel III[/URL] [QUOTE]When the big financial-overhaul bill was working its way through Congress, Treasury persuaded legislators to avoid passing rules on bank capital or liquidity. Leave all that to Basel, they said, so that there could be a global, unified system. And that’s what happened. But if two huge new systems are passed by two highly complex bureaucracies, there are bound to be conflicts. And Melvyn Westlake has a great story in Global Risk Regulator on one of those conflicts: the role of the ratings agencies.

Under Dodd-Frank, the official role of ratings agencies was severely curtailed: regulators are not allowed to use credit ratings when promulgating rules. Under Basel III, however, regulators have to measure the riskiness of bond portfolios somehow, in order to work out how much capital banks should be required to hold against them. Credit ratings are particularly central, under the Basel regime, when it comes to securitizations and measuring both liquidity and counterparty risk.

Squaring this circle, it turns out, is very hard indeed[/QUOTE]In talking about risk metrics, Felix Salmon refers to an 2 year old article of his published in Wired Magazine: [URL="http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all"]Recipe for Disaster: The Formula That Killed Wall Street[/URL]. It is about the "Gaussian Copula Function" that was popular before the current situation and is worth reading again.

Mish thinks that US banks are using short-term funds to make longer term loans directly to cities and other municipalities instead of the traditional letter of credit backing on bond issues. [URL="http://globaleconomicanalysis.blogspot.com/2011/02/next-borrow-short-lend-long-guaranteed.html"]The Next Borrow-Short Lend-Long Guaranteed to Blow Up Bank Lending Scheme[/URL]. This next link: [URL="http://www.efinancialnews.com/story/2011-02-10/basel-iii-mayer-brown-leveraged-finance-high-yield-bond"]Basel III could force buyout firms to use junk bonds[/URL] tells me that Basel III doesn't allow such a lending term mismatch: [QUOTE]The introduction of a net stable funding ratio measure under Basel III, which effectively requires long term assets to be matched by long term funding, may also mean that banks are less willing to commit to long term leveraged finance loans, which usually carry a maturity of around six years.[/QUOTE] I wonder how much of Basel III applies to the US and expect it will lead to the usual investment activity scurrying to avoid scrutiny. Danish regulators want to use mortgage backed bonds to meet some of their liquidity requirements: [URL="http://www.risk.net/risk-magazine/news/2020021/danish-regulators-push-flexible-basel-iii-liquidity-rules"]Danish regulators push for more flexible Basel III liquidity rules[/URL]. Mortgages are "safe as houses" right? Frank-Dodd liquidity requirements seem to be the driver in reorganizing some foreign bank assets in the US: [URL="http://online.wsj.com/article/SB10001424052748704657704576150443241518166.html"]Banks Find Loophole on Capital Rule[/URL][QUOTE]In November, Barclays PLC quietly changed the legal classification of the U.K. bank's main subsidiary in the U.S. so that the unit would no longer be subject to federal bank-capital requirements. Several other banks based outside the U.S. are considering similar moves, according to people familiar with the matter.[/QUOTE]