Definancialisation, Deglobalisation, Relocalisation
June 19, 2009 6:32 AM Subscribe
posted by symbollocks (41 comments total)
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In a talk titled Definancialisation, Deglobalisation, Relocalisation
given at The New Emergency Conference
, Peak Oil activist and writer Dmitry Orlov (previously 1 2 3
) shows how he has come to the conclusion that the oil price spike of summer 2008 was the trigger for the financial collapse that occurred later on in the fall. He goes on to summarize (from his point of view) pretty much everything that has been happening in the past year or so, and what he thinks is coming up next.
This is a long one, so here are some quotes:
"Now that the reality of Peak Oil has started to sink in, one commonly hears that "The age of cheap oil is over". But does that mean that the age of expensive oil is upon us? Not necessarily. We now know (or should have learnt by now) that once oil rises to over 25% of global GDP, the world's industrial economy stalls out, and as soon as that happens, oil ceases to be particularly valuable, so much so that investment in maintaining oil production is curtailed. The next time industry tries to stage a comeback (if it ever does) it hits the wall much sooner and stalls again. I doubt that it would take more than just a couple of cycles of this market whiplash for all the participants to have two realisations: that they cannot get enough oil no matter how much they pay for it, and that nobody wants to take their money even for the oil they do have."
"One person I would like to have a close encounter with the brick wall is this fellow, Myron Scholes, the Nobel Prise-winning co-author of the Black-Scholes method of pricing derivatives, the man behind the crash of Long Term Capital Management. He is the inspiration behind much of the current financial debacle. Recently, he has been quoted as saying the following: "Most of the time, your risk management works. With a systemic event such as the recent shocks following the collapse of Lehman Brothers, obviously the risk-management system of any one bank appears, after the fact, to be incomplete." Now, imagine a structural engineer saying something along those lines: "Most of the time our structural analysis works, but if there is a strong gust of wind, then, for any given structure, it is incomplete." Or a nuclear engineer: "Our calculations of the strength of nuclear reactor containment vessels work quite well much of the time. Of course, if there is an earthquake, then any given containment vessel might fail." In these other disciplines, if you just don't know the answer, then you just don't bother showing up for work, because what would be the point?"