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Why Is Per Capita Energy Consumption at Recession Levels After Six Years of Recovery?
Why Is Per Capita Energy Consumption at Recession Levels After Six Years of Recovery?
Per capita energy consumption remains at recession levels.
One way to verify rosy official data–GDP growth, low unemployment, etc.–is to compare it with data that is less easily gamed: for example, energy consumption.Those seeking a realistic snapshot of the Chinese economy routinely turn to energy consumption and rail traffic data for this reason: at least until recently, these data sets were more reflective of real economic activity than the glowing official numbers.
So let’s try the same analysis on the U.S. economy. Courtesy of Market Daily Briefing, here are four charts of per capita (per person) energy consumption.By using per capita data, we eliminate population growth as a variable.
If total energy consumption remains steady as population rises, the per capita energy consumption will drop.
As vehicles, appliances, etc. become more energy-efficient, we would expect per capita energy consumption to decline. For example, as mileage/unit of fuel of vehicles rise, the fuel needed to drive the same number of miles per year declines.
offsetting this gradual decline due to increasing efficiency is an overall rise in the standard of living, which in a consumerist society means owning and operating more vehicles, appliances, etc., taking more vacations, etc.–all of which tend to push per capita energy consumption higher.
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The One Chart You Need to Predict the Future
The One Chart You Need to Predict the Future
We are witnessing a profound secular sea-change: the failure of expanding debt and leverage to lift the real economy of wages and household income.
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Global Debt Is MORE THAN TWICE AS BIG As the Entire World Economy … What Does It Mean?
Global Debt Is MORE THAN TWICE AS BIG As the Entire World Economy … What Does It Mean?
The Guardian reports that global debt has grown by $57 trillion dollars – to $199 trillion dollars – since the 2008 financial crisis.
How much is that? It’s a big number … but what does it actually mean?
The Guardian notes that global debt is now more than twice the size of the entire global economy:
Total debt as a share of GDP stood at 286% in the second quarter of 2014 compared with 269% in the fourth quarter of 2007.
(That’s more than 2.8 times the size of the world economy).
And it will only keep getting worse:
Government debt-to-GDP ratios will to continue to rise over the next five years in a number of countries including Japan, the US and most European countries ….
While the mainstream press talks about “deleveraging”, the fact is that many households are going deeper into debt:
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Role of Wages of the Common Worker in Oil Prices, Collapse
Role of Wages of the Common Worker in Oil Prices, Collapse
In their book Secular Cycles, Peter Turchin and Surgey Nefedof point out the important role falling wages of the common workers played in early collapses. I got to thinking that this might be an issue with our current situation as well, including the low level of oil prices.
I explain this in two presentations. The first one is called “Overview of a Networked Economy“. The second one is called, “Economic Growth and Diminishing Returns.”
A couple of (amateurish) slides that need explanation are the following ones:
The cloud above my representation of the economy is supposed to represent the cloud of goods and services that the economy makes. Many people would like us to believe that as long as this cloud is growing, everything is fine.
What Peter Turchin discovered is that there is a smaller cloud that really needs to be growing, as well.
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Equity Valuations, Recessions and Stock Market Declines
Equity Valuations, Recessions and Stock Market Declines
Last week I had a fascinating conversation with Neile Wolfe, of Wells Fargo Advisors, LLC. Based on the underlying data in the chart above, Neile made some cogent observations about the historical relationships between equity valuations, recessions and market prices:
- High valuations lead to large stock market declines during recessions.
- During secular bull markets, modest overvaluation does not produce large stock market declines.
- During secular bear markets, modest overvaluation still produces large stock market declines.
Here is a table that highlights some of the key points. The rows are sorted by the valuation column.
Beginning with the market peak before the epic Crash of 1929, there have been fourteen recessions as defined by the National Bureau of Economic Research (NBER). The table above lists the recessions, the recession lengths, the valuation (as documented in the chart illustration above), the peak-to-trough changes in market price and GDP. The market price is based on the S&P Composite, an academic splicing of the S&P 500, which dates from 1957 and the S&P 90 for the earlier years (more on that splice here).
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Briefing For A Descent Into Hell
Briefing For A Descent Into Hell
Oh well, some are more equal than others. One day after Eurogroup head Dijsselbloem says France won’t get any more lenience …
France Must Respect EU Budget Rules
France must meet EU budget targets or risk damaging the bloc’s entire framework for policing countries’ spending plans, the head of the Eurogroup said on Tuesday. “I don’t think small or larger countries should be treated differently … It is crucial for the credibility of the whole fiscal framework that also France commits to it, both in fiscal terms and in reform terms,” Jeroen Dijsselbloem, who chair meetings of eurozone finance ministers, told the European Parliament. “I think that the Commission has allowed itself and France more time to scrutinise the figures but also to take more measures and prepare more proposals. The Commission will assess them first and then report to us at the beginning of March.”
… the EC overrules him. Just like he overruled them a few days ago on the proposal for Greece that EC head Juncker had prepared for Varoufakis, but which Dijsselbloem swept off the table. A tit for tat battle of the peacocks? Talking with one voice it ain’t.
France Gets More Time to Meet EU Budget Rules
European Union officials on Wednesday gave France until 2017 to bring its government finances in line with the bloc’s budget rules, despite the country’s continued failure to adhere to them. The European Commission said it was recommending that France be given what amounted to a two-year extension to cut its deficit, which is expected to come in at around 4.1% of GDP this year and next, well above the 3% ceiling for the bloc. The commission, the executive arm of the European Union, is charged with signing off on member states’ budgets to ensure they comply with Union rules.
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Global Cooling Alert: Brazil Headed For Worst Economy Since 1930-1931
Global Cooling Alert: Brazil Headed For Worst Economy Since 1930-1931
For all the debt crises, hyperinflation and boom-and-bust cycles Brazil’s economy has suffered in recent decades, the country hasn’t posted two consecutive years of contraction since the Great Depression.
But if 2014’s fourth quarter was as bad as many economists think and their expectations for this year hold true, Brazil will repeat that feat for the first time since 1930-31.
On Monday, economists polled weekly by Brazil’s central bank downgraded their consensus 2015 forecast to a 0.5% fall in gross domestic product.
And the central bank’s preliminary indicator this month revealed a 0.12% drop in economic activity in 2014, though the Brazilian Institute of Geography and Statistics won’t release official GDP figures for the year until next month.
Finance Minister Joaquim Levy recognized the possibility of a 2014 decline at an event in the New York last week. “We’ve been in a slow patch more recently and we all [feel] that growth has slowed down,” Mr. Levy said in a Feb. 18 presentation to the Americas Society/Council of the Americas. “Maybe last year it was even negative.”
Several factors are weighing on Brazil’s once-dynamic economy.
Growth in China, Brazil’s largest trading partner, has slowed, damaging demand for Brazilian iron ore, soybeans and other commodities and weakening the currency.
…click on the above link to read the rest of the article…
This Is The Biggest Problem Facing The World Today: 9 Countries Have Debt-To-GDP Over 300%
This Is The Biggest Problem Facing The World Today: 9 Countries Have Debt-To-GDP Over 300%
If anyone has stopped to ask just why global central banks are in such a rush to create inflation (but only controlled inflation, not runaway hyperinflation… of course when they fail with the “controlled” part the money paradrop is only a matter of time) over the past 5 years, and have printed over $12 trillion in credit-money since Lehman, the bulk of which has ended up in the stock market, and which for the first time ever are about to monetize all global sovereign debt issuance in 2015, the answer is simple, and can be seen on the chart below.
It also shows the biggest problem facing the world today, namely that at least 9 countries have debt/GDP above 300%, and that a whopping 39% countries have debt-to-GDP of over 100%!
We have written on this topic on countless occasions in the past, so we will be brief: either the Fed inflates this debt away, or one can kiss any hope of economic growth goodbye, even if that means even more central bank rate cuts, more QEs everywhere, and stock markets trading at +? while the middle class around the globe disappears and only the 0.001% is left standing.
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Whatever Became of Economists and the American economy
Whatever Became of Economists and the American economy
According to the official economic fairy tale, the US economy has been in recovery since June 2009.
This fairy tale supports America’s image as the safe haven, an image that keeps the dollar up, the stock market up, and interest rates down. It is an image that causes the massive numbers of unemployed Americans to blame themselves and not the mishandled economy.
This fairy tale survives despite the fact that there is no economic information whatsoever that supports it.
Real median household income has not grown for years and is below the levels of the early 1970s.
There has been no growth in real retail sales for six years.
How does an economy dependent on consumer demand grow when real consumer incomes and real retail sales do not grow?
Not from business investment. Why invest when there is no sales growth? Industrial production, properly deflated, remains well below the pre-recession level.
Not from construction. The real value of total construction put in place declined sharply from 2006 through 2011 and has bounced around the 2011 bottom for the past three years.
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If Oil Prices Are Surprising, Then That Can Only Mean Demand
If Oil Prices Are Surprising, Then That Can Only Mean Demand
Crude oil futures have been quite volatile of late, particularly in the front months where even the slightest changes in expectations of whatever factor (rig counts, CEO comments, etc.) send WTI surging or tumbling by turn. Despite that, however, the outer years on the curve have seen not just more stability but a steady downward pressure of late. I think a lot of that has to do with futures investors reconciling actual contango options with the idea that demand is far more of not just a problem, but a longer-term problem.
At the front end, rig counts have gained most attention but only as they relate to the surge in inventory. The US is overflowing with oil and production remains at a record high, but the two of those factors together don’t actually count as much in terms of price as is made out by most commentary. It is far too difficult for many to discount the entire economics professions’ complete dedication to the US “booming” economy in order to see a huge demand problem in oil prices; far easier to simply repeat the words “record supply” and leave it at that.
If you actually view the futures curve of late, the curves of recent days has crossed in the outer years. In other words, where prices have moved around at the shorter end, out at the long end the curve has shifted significantly downward regardless of short term pricing. That relates to both contango, as noted above, but also I believe growing recognition that supply is overwrought and demand is what may be impaired – perhaps more permanently than anyone thought possible only a few months ago.
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This Week In Energy: ExxonMobil On The Hunt
This Week In Energy: ExxonMobil On The Hunt
Oil prices continued to pick up steam for the week ending on February 13. Brent crude traded above $60 per barrel for the first time in 2015, a psychological threshold that caught the markets by surprise and points to a potential price rebound quicker than many had previously thought.
The price surge is underpinned by a continued pull back by the industry. There were also several catalysts this week that pushed oil higher. Apache Corporation (NYSE: APA) reported its fourth quarter earnings this week, and announced a significant draw down in its drilling plans for the year. One of the biggest drillers in Texas, and in the Permian basin in particular, Apache plans on reducing its drilling fleet by 70%, and revised its estimated production growth down to essentially zero.
Also, Royal Dutch Shell’s (NYSE: RDS.A) CEO Ben van Beurden warned investorsabout the potential for prices to spike in the next two years or so. Echoing prior comments from OPEC officials, van Buerden said that severe cutbacks in investment and drilling could result in a supply shortage, not necessarily in 2015, but in the coming years.
Several other background indicators supported oil prices, including positive news coming out of Europe. German GDP figures beat estimates, reducing fears of a European-wide recession. The markets also raised hopes that a resolution to the Greek debt situation would be less intractable than previously thought. Greek officials are meeting with international creditors on February 13. Moreover, the U.S. dollar weakened a bit this week. Retail sales in the U.S. disappointed, falling 0.8% in January from a month earlier. That contributed to a 1% decline in the dollar index. Since oil is priced in U.S. dollars, the depreciation helped push up oil prices.
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What ‘Escape Velocity’? December Business Sales And Inventories Repudiate The Money Printers’ Myth
What ‘Escape Velocity’? December Business Sales And Inventories Repudiate The Money Printers’ Myth
It is plain as day that massive central bank money printing and perpetual ZIRP do not rejuvenate the main street economy under conditions of “peak debt”. And the reason is so obvious that only Keynesian economists can’t grasp it.
To wit, if the balance sheets of households and businesses are tapped out—–then artificially suppressing interest rates cannot induce them to borrow even more money. Accordingly, spending is constrained to what can be funded from current income and cash flow after any set aside for new savings. In contrast to the four decades of the great credit expansion between 1970 and 2008, therefore, GDP can no longer be stimulated by incremental outlays derived from hocking household and business balance sheets.
The graph below of the long-term trend of household leverage—measured as total mortgage, credit card and other consumer debt compared to wage and salary income—–demonstrates the new normal. During the long period of credit expansion, the Fed’s resort to low interest rates to stimulate borrowing and spending worked because households started the period with relatively clean balance sheets. As a result, central bank monetary stimulus caused leverage ratios to be ratcheted higher and higher in response to each round of rate cutting.
Self-evidently that ratcheting process has stopped, and household leverage ratios have fallen, albeit to levels which are still aberrantly high by historical standards. What this means is that after the peak debt inflection point was reached, the constraint on borrowing would not be the interest rate, as had been the case during the great credit inflation, but the availability of income to leverage.
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Empire of Lies
Empire of Lies
We are living in an era where a single statement of truth will drive a pin into the global bubble of phantom assets and debts, and the lies spewed to justify those bubbles.
How many nations are blessed with political and financial leaders who routinely state the unvarnished truth in public?
Only two come immediately to mind: Greece and Bhutan: Greece, where the new leadership repeatedly states the nation is bankrupt and extend-and-pretend policies are finished, and Bhutan, which explicitly rejects worshipping the false god of growth as measured by GDP (gross domestic product).
Bhutan has opted to measure well-being not by bogus “growth” (digging holes and filling them, and other Keynesian Cargo Cult nonsense), but by Gross Domestic Happiness: It’s Time to Retire Gross Domestic Product (GDP) as a Measure of Prosperity (April 18, 2014)
In other words, with remarkably few exceptions, the global Status Quo is a vast Empire of Lies.
Empire of Lies, Kingdom of Magical Thinking (October 30, 2007)I have used the phrase empire of liessince 2007:
Empire of Debt, Empire of Lies (August 6, 2008)
Ron Paul used the phrase in his book The Revolution: A Manifesto which was first issued in January, 2008, which means he probably drafted it many months or even years before.
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Cheaper oil will not boost global growth, says Moody’s
Cheaper oil will not boost global growth, says Moody’s
Lower oil prices will fail to give a “significant boost” to global growth in the next two years, Moody’s has said.
The ratings agency said any boost from cheaper oil would be offset by the eurozone’s economic woes as well as slowdowns in China, Japan and Russia.
As a result, Moody’s said it would not be revising its growth forecasts for the G20 countries.
“For the G20 economies, we expect GDP growth of just under 3% each year in 2015 and 2016.”
This was unchanged from 2014 and from its previous forecast, Moody’s said.
Marie Diron, the author of the report, said: “Lower oil prices should, in principle, give a significant boost to global growth.
“However, a range of factors will offset the windfall income gains from cheaper energy.
“In the euro area, the fall in oil prices takes place in an unfavourable economic climate, with high unemployment, low or negative inflation and resurgent political uncertainty in some countries.”
…click on the above link to read the rest of the article…
EU Energy Union May Be Biting Off More Than It Can Chew
EU Energy Union May Be Biting Off More Than It Can Chew
With oil and gas still flooding the scene it’s a buyer’s market. For some however, picking isn’t easy. For the European Union specifically, an abundance of choice comes with its own set of logistical and geopolitical problems.
February 4 marked the launch of the EU’s Energy Union – an ambitious project that will establish a long-term plan for European energy and climate policy and set the politico-economic union on the path towards decarbonization. The doubters are many, but EU Commissioner for Climate Action and Energy Miguel Arias Canete confirmed the plan “will contain concrete measures” as well as “full and proper enforcement.” The framework strategy – still very much under discussion – is due for adoption on February 25.
Among the goals of the Union are enhanced energy efficiency, diversification and flexibility, in addition to increased deployment of renewable energy. More specifically, the EU is targeting electricity interconnection of 10-15 percent, a renewable share of 50 percent, as well as emissions reductions of more than 30 percent by 2050 – initiatives that will cost approximately $3 trillion, or nearly 15 percent of the current EU GDP. Addressing these goals will require massive infrastructure overhauls and timely investment, not to mention cooperation among the 28 vastly different member nations. In the early goings, that last bit is proving tough.
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