Jump to content
House Price Crash Forum
CokeSnortingTory

Definancialisation, Deglobalisation, Relocalisation

Recommended Posts

didn't read the article but 'relocalisation' sounds like a good idea to me

local produce , milk straight from the cow , unflouridated water

of course getting to that stage will be the worst part , "Chav Rampage" is what i'm expecting!

Share this post


Link to post
Share on other sites
I suspect that Orlov is anticipating substantial chav die-off.

I don't know: if Orlov's predicted collapse occurs, chavs may adapt much more easily than the middle class. Being able to fit into a gang and not be too worried about stuff might be handy traits...

Share this post


Link to post
Share on other sites
I don't know: if Orlov's predicted collapse occurs, chavs may adapt much more easily than the middle class. Being able to fit into a gang and not be too worried about stuff might be handy traits...

true but after a while you need to start producing

you can't put an empty tin of beans in the ground and have a new one pop up a couple months later

Share this post


Link to post
Share on other sites
true but after a while you need to start producing

you can't put an empty tin of beans in the ground and have a new one pop up a couple months later

No thats true....but would they just not wait till you bought or had grown your own then take them off you?

Never know a chav to pay for anything. Chavs can be bad...but then you have to think about your neds...now thats a different breed...they will sit back and pounce like vultures on a ad-hoc basis.....killing any hopes of anything.

Edited by Jister1

Share this post


Link to post
Share on other sites
I don't know: if Orlov's predicted collapse occurs, chavs may adapt much more easily than the middle class. Being able to fit into a gang and not be too worried about stuff might be handy traits...

All the mobile phones, ipods and trainers they acquire will be useless to them.

Share this post


Link to post
Share on other sites

Hmmm

The oil price theory is entirely mistaken imo. The recession was baked in from the preceding credit bubble and was well under way with collapsing asset prices before this short lived price spike occured. If anything it was peculiar that oil prices remained as low as they did for so long given the amount of speculative credit available.

He'd have more credence had he stated that it was TARP money used on last ditch speculative punts by investment banks that caused the spike. There is no consensus building on oil price causing this recession, and even the author has no real figures on the relationship, FFS he has already had to adjust the 1/4 of GDP figure to 6% of GDP as the magic figure.

He also forgets that GDP is for all intents and purposes a nominal figure and isn't a convertible measure of energy used, or available energy. i.e. cash itself is not a hard limit in the way he is proposing, only energy itself is. Thus the only time it would take all the real GDP of the world to buy the oil would be when that oil took as much energy to obtain and apply as it yielded and not before.

He admits he knows little about financial mechanisms and talks about the lack of randomness or correlation that models fail to take into account. This may be true, but it ignores the far greater beast in the room that models and the derivatives they spawned created the problem more through the manipulation and obfuscation of risk in a system in total. Effectively squeezing a quart of profits from a pint pot when really there was only a pint of profits to be taken.

This was only achievable by misrepresenting risk over the total lifecycle of the instrument and booking (and cashing out) the profits today based on that falsehood. Of course as time progresses, people stop, stare and wonder where all the money went. It was never there in the first place, any profit margin and then some has already been pocketed and you are left staring at a massive black hole.

The rest of it is mildly diverting, but there's better elsewhere minus the glaring misconceptions.

Share this post


Link to post
Share on other sites
He also forgets that GDP is for all intents and purposes a nominal figure and isn't a convertible measure of energy used, or available energy. i.e. cash itself is not a hard limit in the way he is proposing, only energy itself is. Thus the only time it would take all the real GDP of the world to buy the oil would be when that oil took as much energy to obtain and apply as it yielded and not before.

Yes but GDP isn't a measure of cash or wealth, it's a measure of economic activity (which is why it is so dangerous to confuse it with wealth). As economic activity requires energy I would think there would be at least a correlation between the two, if not a direct causal link.

Share this post


Link to post
Share on other sites
Yes but GDP isn't a measure of cash or wealth, it's a measure of economic activity (which is why it is so dangerous to confuse it with wealth). As economic activity requires energy I would think there would be at least a correlation between the two, if not a direct causal link.

If the last 20 years of GDP was based on a debt bubble, and we then default on our creditors, have we created or destroyed energy by doing so?

If you want to know how much real economic activity is occurring you simply keep an eye on the energy consumption of a country. Certain savvy fund manager types do this with the likes of China because they can't trust any of the "economic stats" the country comes out with. Annoyingly l can't find the original material but both China and India have showed drops in energy consumption and retained positive GDP.

e.g. end 2008, Indian energy consumption cliff dived by about 16% but GDP was over 5% at that point.

You are right however, energy = economic activity. So where does that leave GDP? I treat it as a ponzometer, giving me the latest update in fiat land.

Share this post


Link to post
Share on other sites
If the last 20 years of GDP was based on a debt bubble, and we then default on our creditors, have we created or destroyed energy by doing so?

We have accelerated and decelerated the destruction of energy.

If you want to know how much real economic activity is occurring you simply keep an eye on the energy consumption of a country. Certain savvy fund manager types do this with the likes of China because they can't trust any of the "economic stats" the country comes out with. Annoyingly l can't find the original material but both China and India have showed drops in energy consumption and retained positive GDP.

e.g. end 2008, Indian energy consumption cliff dived by about 16% but GDP was over 5% at that point.

The problem here I think is that energy consumption stats for these countries are also unreliable because the generation is generally controlled by local rather than national officials, and for various reasons these local officials do not report accurate statistics to the centre.

You are right however, energy = economic activity. So where does that leave GDP? I treat it as a ponzometer, giving me the latest update in fiat land.

Well, again we're in semi-opaque macro-world, but I think a nominal correlation between energy usage and GDP is reasonable, with caveats of the type I have given above.

Share this post


Link to post
Share on other sites
He also forgets that GDP is for all intents and purposes a nominal figure and isn't a convertible measure of energy used, or available energy. i.e. cash itself is not a hard limit in the way he is proposing, only energy itself is. Thus the only time it would take all the real GDP of the world to buy the oil would be when that oil took as much energy to obtain and apply as it yielded and not before.

Even then it wouldn't take 100% GDP. Non-oil dependent transactions would still occur.

Share this post


Link to post
Share on other sites
If you want to know how much real economic activity is occurring you simply keep an eye on the energy consumption of a country. Certain savvy fund manager types do this with the likes of China because they can't trust any of the "economic stats" the country comes out with. Annoyingly l can't find the original material but both China and India have showed drops in energy consumption and retained positive GDP.

This is a reasonable proxy for industrial production, which is a large part of the Chinese economy.

It is not a reasonable proxy for the activity creaming off profits from a global ponzi scheme, as the City of London does. This is still economic activity, and there used to be lots of it. Same goes for most other service industries.

Share this post


Link to post
Share on other sites
We have accelerated and decelerated the destruction of energy.

The problem here I think is that energy consumption stats for these countries are also unreliable because the generation is generally controlled by local rather than national officials, and for various reasons these local officials do not report accurate statistics to the centre.

Well, again we're in semi-opaque macro-world, but I think a nominal correlation between energy usage and GDP is reasonable, with caveats of the type I have given above.

I appreciate the link you are making between the credit cycle and how we might be drawing energy use from the future to waste on inefficient activities (that still count as GDP and still use energy granted) however you have sort of dodged the question a bit, if a bank creates a loan from bank credit so you can go buy a 500k house have you just created energy in that GDP measured transaction? No. It is true the bank can expect future labour/energy returns to pay that loan back but that expectation neither creates or consumes energy in itself.

Your second point about energy use measured locally instead of centrally begs the question and has no basis. Most countries, even second world ones have large developed energy grids which transcend this "local official making stuff up business", and in any case countries like China have to import a great deal of "energy resources" allowing external proxy measures to adequately represent overall consumption.

I am agreeing with you that there is a link between energy and economic activity (the real wealth generating kind, not for example the substantial fraction of our GDP that the ephemeral financial sector apparently contributed) but don't hold too tightly onto current measures of GDP, they are flawed.

Here is a simple test: find the % of total energy consumption that oil makes up. This should equal its GDP % contribution based on your assertion. I am happy for you to be more right than l on this if that is the case.

I would like to then factor in the GDP consumed by extraction and processing of this oil but as the original article dodges this by presuming its price could exceed GDP whilst remaining in the ground, l cannot. However l can state that putting a value on something which has no applicable value is self evidently absurd. How much would you pay for something you cannot use? i.e. the value of the oil in the ground is ZERO. It only has potential value IF it can be extracted with net energy gain, so the original article makes an even bigger error by attributing a value to an un-exploitable resource (equalling GDP in this case) when in fact it has no value at all in that context.

Taking on board your position, oil will never equal total GDP in value because that would mean oil = all energy use = all GDP, which COULD ONLY BE TRUE where the energy getting the oil = the energy yielded by the oil leaving no energy for OTHER activities and in fact excluding all other energy creating mechanisms. Apparently we will all just sit round staring wistfully at a patch of sand in the middle east or something.

The attack on the link between GDP and energy use was secondary, so l will freely concede if we can move on to the point l made above or talk about the derivatives/financial model part of my original post which l thought was reasonably eloquent.

Cheers

Share this post


Link to post
Share on other sites
This is a reasonable proxy for industrial production, which is a large part of the Chinese economy.

It is not a reasonable proxy for the activity creaming off profits from a global ponzi scheme, as the City of London does. This is still economic activity, and there used to be lots of it. Same goes for most other service industries.

Yes you are asserting that:

Energy use = classically productive GDP

Energy use =! classically unproductive or ponzi GDP

Therefore:

Total GDP =! all energy use.

Which was my initial stance, but my head hurts now so l'd like to move on. :lol:

Share this post


Link to post
Share on other sites
Yes you are asserting that:

Energy use = classically productive GDP

Energy use =! classically unproductive or ponzi GDP

Therefore:

Total GDP =! all energy use.

Which was my initial stance, but my head hurts now so l'd like to move on. :lol:

Although the world financial system has substantial Ponzi elements, all non-industrial economic activity is by no means Ponzi, or of low value.

Programming and science are examples.

Share this post


Link to post
Share on other sites
Although the world financial system has substantial Ponzi elements, all non-industrial economic activity is by no means Ponzi, or of low value.

Programming and science are examples.

They are measured by GDP and are not ponzi. They are classically unproductive. I am not arguing they have no value, they facilitate and multiply classically productive economic activities which can be summed up as: Digging crap out of the ground be it potatoes or metals.

Share this post


Link to post
Share on other sites
I appreciate the link you are making between the credit cycle and how we might be drawing energy use from the future to waste on inefficient activities (that still count as GDP and still use energy granted) however you have sort of dodged the question a bit, if a bank creates a loan from bank credit so you can go buy a 500k house have you just created energy in that GDP measured transaction? No. It is true the bank can expect future labour/energy returns to pay that loan back but that expectation neither creates or consumes energy in itself.

Your second point about energy use measured locally instead of centrally begs the question and has no basis. Most countries, even second world ones have large developed energy grids which transcend this "local official making stuff up business", and in any case countries like China have to import a great deal of "energy resources" allowing external proxy measures to adequately represent overall consumption.

I am agreeing with you that there is a link between energy and economic activity (the real wealth generating kind, not for example the substantial fraction of our GDP that the ephemeral financial sector apparently contributed) but don't hold too tightly onto current measures of GDP, they are flawed.

Here is a simple test: find the % of total energy consumption that oil makes up. This should equal its GDP % contribution based on your assertion. I am happy for you to be more right than l on this if that is the case.

I would like to then factor in the GDP consumed by extraction and processing of this oil but as the original article dodges this by presuming its price could exceed GDP whilst remaining in the ground, l cannot. However l can state that putting a value on something which has no applicable value is self evidently absurd. How much would you pay for something you cannot use? i.e. the value of the oil in the ground is ZERO. It only has potential value IF it can be extracted with net energy gain, so the original article makes an even bigger error by attributing a value to an un-exploitable resource (equalling GDP in this case) when in fact it has no value at all in that context.

Taking on board your position, oil will never equal total GDP in value because that would mean oil = all energy use = all GDP, which COULD ONLY BE TRUE where the energy getting the oil = the energy yielded by the oil leaving no energy for OTHER activities and in fact excluding all other energy creating mechanisms. Apparently we will all just sit round staring wistfully at a patch of sand in the middle east or something.

The attack on the link between GDP and energy use was secondary, so l will freely concede if we can move on to the point l made above or talk about the derivatives/financial model part of my original post which l thought was reasonably eloquent.

Cheers

I think we may be talking slightly at cross purposes here as I originally suggested the relationship between GDP and energy was correlated and not causal. Again I didn't suggest that this correlation tracked - just that as energy usage rises so would GDP - I wouldn't expect the trends to oppose each other. In your example of the 500k house, the explosion in Ponzi loans would be correlated with energy-consuming speculative house-building, auto-production etc.

As regards the examples of India and China, I can only say that this is what has been suggested in various articles I have read about those countries (especially China) - that they are opaque economies, and that measuring their true output via power consumption is not without risk or error. Even with measuring resource inputs, it not clear that much of China's current imports may not be speculative. See: http://globaleconomicanalysis.blogspot.com...s-not-mean.html

As to your last point, I'm not sure where it opposes Orlov's point that at a certain juncture oil becomes not worthwhile extracting - even if you think that his method of measuring it as a percentage of GDP is technically invalid. Also, with regards to your assertion that the crash was the result of Ponzi finance, I think there is then the question of what provoked the rise of this kind of activity - and this brings us back to the economic fundamentals of labour, resource, energy, declining profits etc.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   287 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.