[CAMWEST-discuss] Federal stimulus rescue package
danny_hannan at yahoo.com
Wed Feb 4 10:00:07 UTC 2009
It is now eight years since I put my first article together on the world’s coming energy crisis: “Why Are We Still Building Roads?”
This quote from that article explains in, simplest terms possible, what has caused our current economic mess.
There is an oil price shock coming later this decade, followed by an oil supply crunch some few years later that will have devastating effects on both the Australian and world economies.
The level of debt in western countries and around the world is high. The USA is the prime example requiring 20% of its GDP to service its debt. Escalating oil and energy prices will cause economic downturns and recessions as is current in 2001. As the price of oil and energy increase through this decade it will cause further economic recession, the burden of debt will increase. As the GDP reduces due to recession, the percentage of GDP required to service that debt will increase. Companies and individuals will start to go bankrupt under the burden of debt. These collapses will have effects on other companies and individuals and will eventually cause a domino collapse leading to a depression. I believe some time 2011-2015 but very possibly much sooner.
That was before September 11 2001 and the invasions of Afghanistan and Iraq. With the invasions and protracted occupations of Afghanistan and Iraq the debt levels of particularly the major partners of the “Coalition Of The Willing”, the USA and Great Brittan grew rapidly; exacerbating both the national deficits and the demand on commodities, particularly oil/energy. This coupled with unethical lending practices by financial institutions and the development and sale of “Credit Default Swaps” caused the global recession to hit earlier than I originally expected.
The two main causes of this recession are the exponentially increasing debt levels and the inability of the supply of commodities particularly energy to meet the rapidly increasing demand.
Since July 2008 with both the effects of lower commodity prices and much tighter credit conditions, over 100 billion US dollars worth of oil production projects have been delayed, shelved or cancelled and there is more to come. At US$40/barrel many oil fields are actually producing oil at a loss and so oil production is being reduced. With both production reductions, delayed future production and the International Energy Agency’s estimate of a 9% decline in production of the worlds 800 largest fields, it is very likely that 2006 was our “Peak Oil Production Year”. With oil production likely to have peaked in 2006 and natural gas peaking around 2015 and coal around 2025, the global peak of energy production cannot be more than a decade away. “The Great Energy Depression of the Twenty First Century”.
The financial stimulus packages around the globe including those in Australia are adding to one of the original causes of this recession; unsustainable debt. Any stimulus package that is targeted at increasing consumption will only exacerbate both of the causes of this recession, demand on scarce commodities, especially energy commodities and increasing debt levels.
The whole world community needs to work diligently on reducing debt, reducing consumption especially energy, and reducing population growth to a negative number, if we don’t our future is bleak. There does need to be stimulus but it must be very carefully targeted to future infrastructure needs or it will be wasted. Any stimulus needs to be focused on: Increasing energy efficiency; future renewable energy production or building fuel efficient transport (rail, shipping or human powered).
Lets all get to work to fix this problem now!
Write to your local federal member of parliament now!
danny_hannan at yahoo.com
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