Tag Archives: Peak oil

‘Happy Fourth of July to the world’s worst economist — Paul Krugman

Stocks closed at record highs Wednesday as traders bet on a potential rate cut from the Federal Reserve later this month after the release of weaker-than-expected economic data.The Dow gained 179 points, notching intraday and closing all-time highs. The Nasdaq advanced 0.75%.The S&P 500 also rose 0.75% as the real estate and consumer sectors powered the broad index to record levels. Tech boosted the index, rising 0.7% to a record high. The S&P 500 closed just 0.1% below 3,000.

 

 

 

 

 

 

Here is Paul Krugman Nobel Laureate in Economics writing in the New York Times 9 November 2016, the day after Trump was elected

“It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?

Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.

Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.

Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news. What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, eight years after the great financial crisis.

It’s true that we’ve been adding jobs at a pretty good pace and are quite close to full employment. But we’ve been doing O.K. only thanks to extremely low interest rates. There’s nothing wrong with that per se. But what if something bad happens and the economy needs a boost? The Fed and its counterparts abroad basically have very little room for further rate cuts, and therefore very little ability to respond to adverse events.

Now comes the mother of all adverse effects — and what it brings with it is a regime that will be ignorant of economic policy (Luysii — praise be to God) and hostile to any effort to make it work. Effective fiscal support for the Fed? Not a chance. In fact, you can bet that the Fed will lose its independence, and be bullied by cranks.

So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened.”

If that wasn’t enough here’s Krugman in 2010 writing about ‘peak oil

“Oil is back above $90 a barrel. Copper and cotton have hit record highs. Wheat and corn prices are way up. Over all, world commodity prices have risen by a quarter in the past six months.

So what’s the meaning of this surge?

Is it speculation run amok? Is it the result of excessive money creation, a harbinger of runaway inflation just around the corner? No and no.

What the commodity markets are telling us is that we’re living in a finite world, in which the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices. And America is, for the most part, just a bystander in this story.

Some background: The last time the prices of oil and other commodities were this high, two and a half years ago, many commentators dismissed the price spike as an aberration driven by speculators. And they claimed vindication when commodity prices plunged in the second half of 2008.

But that price collapse coincided with a severe global recession, which led to a sharp fall in demand for raw materials. The big test would come when the world economy recovered. Would raw materials once again become expensive?

Well, it still feels like a recession in America. But thanks to growth in developing nations, world industrial production recently passed its previous peak — and, sure enough, commodity prices are surging again.

This doesn’t necessarily mean that speculation played no role in 2007-2008. Nor should we reject the notion that speculation is playing some role in current prices; for example, who is that mystery investor who has bought up much of the world’s copper supply? But the fact that world economic recovery has also brought a recovery in commodity prices strongly suggests that recent price fluctuations mainly reflect fundamental factors.

What about commodity prices as a harbinger of inflation? Many commentators on the right have been predicting for years that the Federal Reserve, by printing lots of money — it’s not actually doing that, but that’s the accusation — is setting us up for severe inflation. Stagflation is coming, declared Representative Paul Ryan in February 2009; Glenn Beck has been warning about imminent hyperinflation since 2008.

Yet inflation has remained low. What’s an inflation worrier to do?

One response has been a proliferation of conspiracy theories, of claims that the government is suppressing the truth about rising prices. But lately many on the right have seized on rising commodity prices as proof that they were right all along, as a sign of high overall inflation just around the corner.

You do have to wonder what these people were thinking two years ago, when raw material prices were plunging. If the commodity-price rise of the past six months heralds runaway inflation, why didn’t the 50 percent decline in the second half of 2008 herald runaway deflation?

Inconsistency aside, however, the big problem with those blaming the Fed for rising commodity prices is that they’re suffering from delusions of U.S. economic grandeur. For commodity prices are set globally, and what America does just isn’t that important a factor.

In particular, today, as in 2007-2008, the primary driving force behind rising commodity prices isn’t demand from the United States. It’s demand from China and other emerging economies. As more and more people in formerly poor nations are entering the global middle class, they’re beginning to drive cars and eat meat, placing growing pressure on world oil and food supplies.

And those supplies aren’t keeping pace. Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived. True, alternative sources, like oil from Canada’s tar sands, have continued to grow. But these alternative sources come at relatively high cost, both monetary and environmental.

Also, over the past year, extreme weather — especially severe heat and drought in some important agricultural regions — played an important role in driving up food prices. And, yes, there’s every reason to believe that climate change is making such weather episodes more common.

So what are the implications of the recent rise in commodity prices? It is, as I said, a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding. This won’t bring an end to economic growth, let alone a descent into Mad Max-style collapse. It will require that we gradually change the way we live, adapting our economy and our lifestyles to the reality of more expensive resources.

But that’s for the future. Right now, rising commodity prices are basically the result of global recovery. They have no bearing, one way or another, on U.S. monetary policy. For this is a global story; at a fundamental level, it’s not about us.  ”

Nonetheless Krugman can currently be found on the editorial pages of the New York Times authoritatively pronouncing on matters political

For the world’s second worse economist please see https://luysii.wordpress.com/2019/07/04/happy-4th-of-july-to-the-worlds-second-worst-economist-larry-summers/

Saepe falsus, sed numquam dubitans

Saepe falsus, sed numquam dubitans — “Sometimes wrong but never in doubt” should be on the Heraldic crest of Paul Krugman. He certainty came to mind at around noon today 20 Jan ’16 with oil breaking $27/barrel and the Dow down 550.

Here are two direct quotes from him as he held forth on the Opinion pages of the New York Times back in 2010.

“Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived.”

“So what are the implications of the recent rise in commodity prices? It is, as I said, a sign that we’re living in a finite world, one in which resource constraints are becoming increasingly binding.”

Name a commodity price that’s been rising.

He is, after all, a Nobel laureate in economics, a tenured Princeton professor, blah, blah, blah. You should take everything he writes with much salt even though, despite all this, he’s as certain as ever. It seems with such a disastrous track record that the Times could find someone better.

Here is a link to the entire column — see for yourself. http://www.nytimes.com/2010/12/27/opinion/27krugman.html?_r=0

A thank you to my niece Ruth Loop for providing the translation

Addendum 20 Jan ’16 — An unenviable economic prediction from the laureate in economics

https://en.wikiquote.org/wiki/Paul_Krugman

    • “Ricardo’s Difficult Idea,” in G. Cook (ed.), Freedom and Trade: The Economics and Politics of International Trade, Volume 2 (1998)
  • By 2005 or so, it will become clear that the Internet‘s impact on the economy has been no greater than the fax machine’s

Thanks Joe