Mish's Global Economic Trend Analysis |
- Another Round of California IOUs On the Way; Democratic Politicians and Unions (Not a Majority of Voters) Support Tax Hikes
- Open Revolt Against Trichet: German Politicians Demand "Private Creditor Involvement"; Finland Support for Bailout Vanishes
- Baseline Rail Traffic in Contraction: Oil Consumption vs. Production Revisited
- Head of Saudi Electric Company Says "Oil Runs Out in 2030 if Current Consumption Maintained"
Posted: 10 Jun 2011 05:14 PM PDT California is about to run out of money again. Here is the backdrop. Republicans who were against sending tax hike measures to the voters now are OK with it. What changed? Attitudes, that's what. Polls show voters are against tax hikes. That's not the only thing that changed. Because of those polls, Democrats want tax hikes now, and a vote later. That absurd idea is headed for defeat in the California House and Senate because Democrats are 2 votes shy in each chamber of ramrodding a tax hike through the state assembly that voters do not want. Why do politicians want a tax hike if the voters don't? Because California public unions want them and politicians want public union campaign contributions. California Republicans Block Brown's Deficit Plan Thank heavens for 2 votes because by that measure California Republicans Block Brown's Deficit Plan California's Senate Republicans blocked Governor Jerry Brown's plan to erase a $10 billion deficit as closed-door talks remain snagged on his demand for higher taxes as a deadline to pass a budget looms.I would agree to an extension in tax hikes if I got something major in return. By major I specifically mean:
If I was in the California state assembly those would be my terms. Indeed, I would gladly take those terms. The benefits would be so huge such that no discussion of another tax hike extension would come for a long time. Brown says he doesn't want to raise taxes without voter support. He also calls for "no gimmicks". He is a liar on both counts. Voters do not want tax hikes, only politicians and unions want them. If Brown does not want gimmicks, then why does he ask for them? If he wants to do something for the state instead of for the unions he can adopt my six-point proposal above. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 10 Jun 2011 12:52 PM PDT The feud between ECB president Jean-Claude Trichet and German finance Minister Wolfgang Schaeuble escalated in a major way today with members of German Parliament siding with Schaeuble and against the wishes of the ECB. German Politicians Demand Private Creditors Participate Please consider Germany MPs discuss resolution on Greece aid German members of parliament are discussing on Thursday a joint motion for a resolution demanding the fair participation of private creditors in future aid to Greece, a draft of the paper obtained by Reuters said.Merkel in No-Win Position Chancellor Angela Merkel better get behind her party before what's left of it splinters to smithereens. She made a huge mistake and I called her on it at the time, by giving into Trichet. She may not have a choice now and may be in a "heads she loses, tails she loses situation". Trichet Throws Another Hissy-Fit As expected from the above details, Trichet went into another hissy-fit, insisting that he, not the markets, not voters, not the German parliament knows what's best for the EU. Please consider Trichet Escalates Greece Clash as ECB Puts Onus on Governments for Rescue Germany stepped up demands that investors share the cost of a second Greek rescue after Jean- Claude Trichet rejected direct involvement by the European Central Bank.Credit Markets – A Gathering Storm" Trichet says haircuts are OK as long as private participation is "voluntary". Does the construct "voluntary" participation even exist? Pater Tenebrarum on the Acting Man blog tackles that question and much more in his post Credit Markets – A Gathering Storm Note the French demand that any participation of private creditors has to be 'voluntary'. How is such 'voluntary participation' going to be negotiated before the looming deadline on June 20? It is simply impossible. As we have noted before, Moody's and Fitch both have already let it be known that they will not consider such an agreement to be 'voluntary' – and that creates a considerable stumbling block, as the ECB likewise insists that any haircut to private creditors arrived at by compulsion will be deemed unacceptable.Another Court Challenge Coming Up With thanks to Acting Man please consider this translation of Karlsruhe verhandelt über Klage gegen EU-Rettungsschirm "The federal constitutional court will hear oral arguments in the challenges against the euro 'rescue umbrella' as well as the aid to Greece on July 5. This was announced by the court on Thursday. The federal government will have to explain to the court how the measures to stabilize the euro currency accord with the constitution and European law. Originally the second senate considered a trial in camera [a non-public trial, ed.]. However, this view appears to have changed in the course of recent deliberations. One must expect a fundamental decision, for instance regarding the budgetary rights of parliament. Plaintiff is a group around the euro-skeptic Joachim Starbatty. In Starbatty's view, the aid program is not compatible with the EU treaties [he's right, ed.]. The plaintiffs fear that the EU is going to develop into a fiscal and transfer union in the long term [right again, ed.]. In the framework of the rescue package, Germany can issue credit guarantees for euro area member nations in the amount of up to € 148 billion. Overall, the size of the rescue package amounts to € 750 billion. It is designed to dissuade financial markets for further speculation on national bankruptcies within the euro area [hasn't worked so far, ed.]."Finland Support for Bailout in Jeopardy Also via Acting Man, please consider Katainen Turns to Euro-Skeptics Amid Impasse Finland's inability to form a government almost two months after elections is forcing the head of coalition talks to return to bailout-skeptic parties as he approaches a June 10 deadline for reaching an agreement.Greek Prime Minister May Face Revolt The Irish Times reports Greek prime minister may face revolt Greek prime minister George Papandreou will tomorrow strive to stem an outbreak of unrest in his party over the social cost of a new bailout after data laid bare the depth of the country's economic crisis.Open Revolt Against Trichet The actions in Germany by finance minister Schaeuble and the German parliament, and in Finland by the Social Democrats and the True Finns constitute an open revolt against Trichet. Note too that Greek Prime Minister George Papandreou is another one who insists there will be no haircuts on Greek Bonds. The reason is Greek pension plans are stuffed to the gills with them. Tough luck says Finland, the German finance minister, and now the German Parliament. How will that fly with Greek unions and Papandreou. German courts will be icing on the cake, assuming this whole deal does not come flying apart before the German courts rule on it. Next week may be a disaster unless there is a major "mind meld" over the weekend. Don't count on it. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Baseline Rail Traffic in Contraction: Oil Consumption vs. Production Revisited Posted: 10 Jun 2011 09:43 AM PDT Inquiring minds are looking at the Railfax Charts for data through June 4, 2011. Rail Traffic 13 Week Moving Averages - Percent Change From Year Ago Note that baseline traffic is now in contraction with intermodal and cyclical traffic soon to follow if the current trend holds. The above charts go back 1.5 years. It helps to steps back and look at the bigger picture. The recovery appears pronounced on the above charts but it isn't. Rail Carload Traffic Since 2006 Intermodal traffic, containers and piggyback service, actually has stronger cyclical tendencies than so-called cyclical traffic. Compared to the same month a year ago, intermodal is right where it was in 2006, 2007, and 2008. Baseline traffic is below and cyclical traffic is well below levels in the same month in 2006, 2007, and 2008. Thus total traffic is below levels in the same month in 2006, 2007, and 2008. The recovery looks good only in comparison to the 2009 trough. What is Railshare? Railshare is a comprehensive database of North American rail traffic. The data are provided each Thursday by the Association of American Railroads. Each week's report covers the seven day period ending the preceding Saturday. Rail traffic is disaggregated between carload (traffic moving in traditional freight cars such as box cars, tank cars and hoppers) and intermodal traffic (containers and piggyback service).The above Railshare explanation from Railfax. Note that commodity detail for intermodal traffic is unavailable. The charts show a highly cyclical nature. Oil Consumption vs. Production Revisited In Head of Saudi Electric Company Says "Oil Runs Out in 2030 if Current Consumption Maintained" I displayed a chart from BP that shows oil consumption exceeds production. The Economist made an ominous sounding post out of it. This morning, I was informed that the production numbers in the BP chart do not include biofuels or coal liquefaction, but consumption does. Here is the chart: Oil Consumption vs. Production Possible Explanations (from my article)
The biofuel explanation falls under point number 3 above "another source of production not shown". Thus, the ominous shortfall as suggested by The Economist is not really a shortfall at all, nor does it represent a huge drawdown in oil stocks. Instead biofuel production increased to make up the difference in demand. As I said, it simply is not possible for oil consumption to grow faster than production for years on end. Logically, any increase in biofuel production will appear as a reduction in normal oil drilling production because of the mathematical truism consumption = production. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Head of Saudi Electric Company Says "Oil Runs Out in 2030 if Current Consumption Maintained" Posted: 10 Jun 2011 03:27 AM PDT In light of Saudi Arabia wanting to step up production only to be rebuffed by the rest of OPEC, this story from elEconomista.es is rather interesting. Courtesy of Google Translate please consider Saudi Arabia fears that the oil runs out in 2030 if current consumption is maintained Note: I am rewording some awkward translations so they read better. The electricity company of Saudi Arabia warns that oil in this country could be depleted by 2030 if left unchecked domestic consumption. According to a report of Saudi Electric, domestic consumption is estimated to be between 2.5 and 3.4 million barrels a day.Oil Running Dry The Economist says Oil production fails to keep up with demand CRUDE-OIL prices shot up on June 8th—Brent crude to a one-month high of $118.59 per barrel—after OPEC representatives meeting in Vienna were unable to reach an agreement on production quotas. Many had expected an increase in quotas as members with spare production capacity, led by Saudi Arabia, pushed to avoid a price spike that may dampen long-term demand. As figures released in BP's "Statistical Review of World Energy" show, global oil production has struggled to keep up with increased demand recently, particularly from Asia. In China alone consumption has risen by over 4m barrels per day in the past decade, accounting for two-fifths of the global rise. In 2010 consumption exceeded production by over 5m barrels per day for the first year ever, as world oil stocks were run down.Oil Consumption vs. Production click on chart for sharper image The above chart, referenced above by The Economist is from BP Statistical Review of World Energy June 2011 After falling for two consecutive years, global oil consumption grew by 2.7 million barrels per day (b/d), or 3.1%, to reach a record level of 87.4 million b/d. This was the largest percentage increase since 2004 but still the weakest global growth rate among fossil fuels.Consumption = Production Long-term consumption cannot exceed production. Even in shorter time frames, consumption can only exceed production if there is sufficient production in storage. To cover 5 million barrels per day of excess consumption for a year, global oil stocks would have had to drop by 1.825 billion barrels. If that did not happen, we need another explanation. Possible Explanations
Regardless, it simply is not possible for oil consumption to grow faster than production for years on end. Addendum: I have been informed that the production numbers in the BP chart do not include biofuels or coal liquefaction, but consumption does. The biofuel explanation falls under point number 3 above "another source of production not shown". Thus, the ominous shortfall as suggested by The Economist is not really a shortfall at all, nor does it represent a huge drawdown in oil stocks. Instead biofuel production increased to make up the difference in demand. As I said, it simply is not possible for oil consumption to grow faster than production for years on end. Logically, any increase in biofuel production will appear as a reduction in normal oil drilling production because of the mathematical truism consumption = production. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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