Monday, November 9, 2009


In a sign (to me) that despite what the algos and taxpayer-financed banksters that are helping drive this rally higher think, mass social mood is decidedly negative and becoming darker every day.

That someone with Mike Ruppert's history could get so much favorable press and that this documentary could score as well as it did in Toronto screams out that something big is coming.

There is a growing audience out there is ready for ugly truths, for hard times, for disaster, for a Collapse.

Congrats to Mike.


David said...

Hi Mike, I reach the same conclusions as you regarding the reception of this film, but I ask you (as one who does not understand the "Paul Erlich-ness" of peak oil), how is it that petroleum-based energy sources, even if the supply were to shrink (which there seem to be credible arguments over), will not be supplied literally forever while being managed by the price system? Supply decreases, price rises, alternatives become economically viable, technology moves on. I don't discount the likelihood of supply disruptions, but those are political limits, not resource-scarcity ones. I may be missing an important point, but it seems to me that the faux economy of credit-from-nowhere that led to massive overinvestment of people and capital into unproductive activities will alone account for the coming collapse, and that deflating demand, not resource scarcity, will control the price and availability of petroleum-based energy. I'm open to new data on this, of course.

Flagg707 said...

@David: I personally think you are more correct regarding the initial collapse.

The price mechanism will of course "work" in the sense that it will allocate the resources. I think the real issue is once the price mechanism does its job (assuming we don't do something like rationing/price controls) the pass-through costs could shatter the system of transportation and distribution that has been in place for roughly 70 years.

I believe there will wild gyrations in price and, as the scarcity drives prices higher, a move away from petroleum based products.

Problem is, vast amounts of the current infrastructure - exurbs, suburbs, interstate highways, just-in-time inventory systems based on trucking, petroleum fuels for farming and pesticides, etc. will have to be junked and/or repurposed. The transition period is what I fear - those decades we spend moving to whatever new paradigm is next.

Ag is my biggest concern - we basically farm oil. Feeding everyone could be a big, big challenge and it brings along all the potential social chaos that hunger and joblessness creates.

I still think Peak Oil will serve as a great socionomic "excuse" for the anger and despair that the model predicts is coming our way. We shall see.

David said...

Hi Mike,
I just finished reading

and really now can see how Elliott Wave International's long-term wave count for oil forecasts what it forecasts.

As you and I know, commodity prices reflect both real supply/demand oscillations and the Elliott Waves of mass psychology. In dollar terms, we recently hit the forecasted top of the century-long rally tracked by EWI, a price peak we can attribute to 1) peaking social mood & its attendant credit bubble dynamics and 2) a *perception* of oil as a finite and peaking resource.

After reading all of Dave McGowan's long column on this, complete with the 5 decade history of Russian/Ukrainian theory and practice of abiotic oil, I'd say Occam's Razor requires me to expect the fossil fuel/scare resource paradigm to be the one that is peaking. Oil below $10/bl no longer seems the least bit unlikely. Given this, McGowan's additional characterization of "Collapse"'s premises as setting the stage for war take on new meaning for those who understand what a Grand Supercycle bear market really means.

Flagg707 said...

@David: Well, you are definitely hitting the key questions.

My opinion is that the massive disruptions will come from the nature of the system. It is not just that high prices will crowd out some uses of petroleum, it is that everything that makes the current system "go" relies on cheap and abundant petroleum. There are entire portions of the economy that cannot function after a certain price point - some being long-haul trucking, the globe-spanning military presence of the U.S., the food distribution system that makes cheap food available all over the continent, plastics, pesticides, etc.

Yes, higher prices will force very necessary changes in things like energy use and transportation - but, in my opinion, at some point portions of the system break down and cease to function.

This can mean that petroleum prices drop, possibly signficantly - for those that can still access it, but it also means entire geographic regions could collapse to a much lower level of complex activity while a new paradigm is forming.

I think there will be huge amounts of oil available for a very long time - just not enough to keep up with the 2% - 5% YOY demand growth. New sources will be found, but the trillions of dollars in infrastructure investment will be marked down significantly.

I mainly worry about the fact that in this coming era of negative mood that the price mechanism will be distorted even more than it is today and thus not be allowed to do its work. Rationing, state seizure of production facilities, environmental challenges to new petroleum sources, environmental challenges to new energy sources, etc. are going to wreak havoc during this transition.

Plus, we have zero plan in place to make a transition from petroleum to something else - and that willful blindness is what will cause the biggest problems, in my opinion. It is a faith-based religion that oil will always be available in larger and larger amounts.

The political chaos of trying to basically say only the privileged can drive a car and forcing more people to go back to agriculture to replace petroleum inputs with human inputs will also be messy. I fear a massive die-off during this time.

As for abiotic oil, I am agnostic on this point. I believe there is ample evidence that some classes of hydrocarbons are produced by geologic processes. All of the oil? I am not so sure as there is also chemical evidence that shows a biological origin for much of the conventional oil (not just biological "stuff" found with oil, but the nature of the "handedness" of the petroleum molecules). That said, even if it is all abiotic, the rate of production has not been shown, to date, to be able to keep up with the exponential demand increases.

David said...

Totally, I'm with you on how political idiocy threatens the hydrocarbon based economy regardless of how much gas and goo is available in the ground. Mass starvation has occurred nowhere on the planet except where political evil caused it (Stalin, Mao, Pol Pot etc.).

We have a finely tuned economic system running production of all necessities of life. Its resilience is entirely due to the degree to which the market participants are free to adjust to changes, a freedom that always exists under threat from political control. The hegemony of a political elite over all production is a guarantee of collapsing living standards, and Western Civilization fast approaches this sort of phase change.

Like sheep farmers sharing a common pasture, political managers collectively don't want to "overgraze" the members of their societies but individually their greed and need for campaign contributions from grasping factions within their societies guarantee a "tragedy of the commons" where the common pasture is inevitably stripped bare and destroyed by those trying to share it and farm it.

Democracy, far from being benign, is the political system that most guarantees the strip mining of a society's wealth and prosperity, while destroying its morality and soul. What a paradox.

Mike said...

This market sure is wild from day to day. But I think that until the government wakes up (or is woken up by enough voters) and realizes that the basic foundation of our financial system and economy need to be rebuilt so that we aren't trying to solve a debt crisis by creating more debt (just like giving a drug addict more drugs to cure the problem), we will not have a sustainable recovery. So for most people I think they should remain mostly in cash, as well as some exposure to the gold sector, through the gold price and gold mining companies. The government's all out war on deflation is supporting the gold price because of all the money printing they are doing, and I don't think this trend is going to end anytime soon. I recently came across several good articles at on a gold miner that I particularly like, Aura Minerals. It just recently announced earnings and gold production data from a gold mine that it acquired from Yamana Gold when the gold price was considerably lower. Going forward I think it will continue to offer leverage to the gold price for investors. And as for the government's misguided policies, there are many unintended consequences that I feel have yet to rear their heads. I would much prefer to have a more positive view on the future, but unfortunately this is the way I see things when I analyze our current situation.