The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

[EJ]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Thanks for this, EJ.

Care to share any insights as to the next Fed chair?

As the Obama administration has already embarrassed itself by aligning with Summers and casting doubts on Yellen, they may propose as a second candidate Don Khon who, unlike Yellen, is a banker's man and a Greenspan crony.

[shiny!]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

As the Obama administration has already embarrassed itself by aligning with Summers and casting doubts on Yellen, they may propose as a second candidate Don Khon who, unlike Yellen, is a banker's man and a Greenspan crony.

Thanks, EJ. It seems like no matter who gets the job, Main St. is well and truly screwed.

[bill]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Thanks, EJ. It seems like no matter who gets the job, Main St. is well and truly screwed.

Dodd-Frank how it might work. Don Kohn as head of Fed.

http://www.economist.com/blogs/freee...ing-regulation
After the dust settled, Congress set to work devising new banking rules designed to ensure that in the future too-big-to-fail banks could be allowed to fail. The resulting law has come to be known as Dodd-Frank. And one day, perhaps sooner than we'd prefer, the machinery of Dodd-Frank will be put to the test.
To demonstrate how that might work, The Economist convened an all-star cast—including Larry Summers as Treasury secretary and Donald Kohn as head of the Federal Reserve—to participate in a simulation of a banking crisis, held at last week's Buttonwood Gathering in New York. A hypothetical large bank is on the brink of failure, and the invited experts are tasked with playing out the crisis' resolution within the constraints of the new regulatory framework. The simulation makes for fascinating, and instructive, watching. It is long, about two hours all told, but I cannot recommend it highly enough. The first clip is below, and remaining clips are below the jump.

[Chomsky]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Dodd-Frank how it might work. Don Kohn as head of Fed.

http://www.economist.com/blogs/freee...ing-regulation
After the dust settled, Congress set to work devising new banking rules designed to ensure that in the future too-big-to-fail banks could be allowed to fail. The resulting law has come to be known as Dodd-Frank. And one day, perhaps sooner than we'd prefer, the machinery of Dodd-Frank will be put to the test.
To demonstrate how that might work, The Economist convened an all-star cast—including Larry Summers as Treasury secretary and Donald Kohn as head of the Federal Reserve—to participate in a simulation of a banking crisis, held at last week's Buttonwood Gathering in New York. A hypothetical large bank is on the brink of failure, and the invited experts are tasked with playing out the crisis' resolution within the constraints of the new regulatory framework. The simulation makes for fascinating, and instructive, watching. It is long, about two hours all told, but I cannot recommend it highly enough. The first clip is below, and remaining clips are below the jump.

Bernanke, the historian of the Great Depression, is named Fed Chairman just before the present Financial Crisis began. Awfully convenient.

So could Kohn, test-driver of Dodd-Frank, also conveniently be named as Chairman just in time to liquidate a failing major bank. (Or two. Or more.)

Fascinating.

[bill]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Bernanke, the historian of the Great Depression, is named Fed Chairman just before the present Financial Crisis began. Awfully convenient.

So could Kohn, test-driver of Dodd-Frank, also conveniently be named as Chairman just in time to liquidate a failing major bank. (Or two. Or more.)

Fascinating.

Don Kohn member FPC Bank of England.
http://www.bankofengland.co.uk/about...hies/kohn.aspx


BOE Mark Carney chair of FSB.
http://www.financialstabilityboard.o...t/overview.htm

FSB and Dodd-Frank policy as I said back in 2010.
http://www.itulip.com/forums/showthr...81284#poststop


I'm sure they have a plan for the 70.
http://www.itulip.com/forums/showthr...135#post266135

[think365]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

As the Obama administration has already embarrassed itself by aligning with Summers and casting doubts on Yellen, they may propose as a second candidate Don Khon who, unlike Yellen, is a banker's man and a Greenspan crony.

Isn't this the classic administrative case of floating one "trial balloon" after another, monitoring domestic and global response, reshuffling, renegotiating political horse-trades and deals, then float another trial balloon, repeat, and so on. At some point everyone becomes desensitized (and fatigued by the process) and ready to accept the inevitable. No matter who is selected as the FED water-boy/girl (i.e., who will be the best "spoon full of sugar to make the medicine go down"), the agenda will not change and the result will be the same. The trick is to figure out what that result will be, not who will implement it. The rest is drama.

[c1ue]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

The simulation makes for fascinating, and instructive, watching. It is long, about two hours all told, but I cannot recommend it highly enough. The first clip is below, and remaining clips are below the jump.

Does the simulation also take into account the machinations of Fed/US government officials who are former Goldman Sachs and other large bank/investment firms, on behalf of their former and future employers?

If so, then it is purely an academic exercise with no basis on reality whatsoever.

[mkeplinger]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Then over-investment in U.S. oil production increased the operating onshore and offshore rig count seven-fold from 200 to 1400 between 2009 and 2012.

The U.S. hasn’t produced this much oil since 1996, but it’s taking more than three times as many rigs now as it took back then to do it.

By the end of 2011, the one-two punch of lower demand and rising output cut U.S. net oil imports in half, to 5 million barrels per day from 10 million in 2006. For the first time on record the WTI (domestic) oil price diverged from the Brent (International) price. As oil imports declined the U.S. oil trade deficit fell with it.

But it won't last. Most of this intense oil production activity in the U.S. rather than adding to supply that was not accessible previously instead largely brings future production forward. New technology is producing some additional oil that was not formerly recoverable, but the ratio of previously recoverable old oil brought forward to new additional supply is estimated at about 80/20. That means the U.S. is using up its oil supply faster and at a lower price than if older production technologies had been used over a longer time period.

Could There be another, albeit not completely contradictory, explanation to your assessment that would explain the rapid drop off in Oil Production Per Rig in your chart above?


Is there data on how long it takes a new rig in production to get to optimal production numbers? The rapid increase in new rigs could be seriously distorting the "average" production per rig.

For example, if (hypothetically) there was a production curve like this, then it would greatly affect your chart, and potentially skew the meaning of your observation.



Thoughts?

[think365]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Does the simulation also take into account the machinations of Fed/US government officials who are former Goldman Sachs and other large bank/investment firms, on behalf of their former and future employers?

If so, then it is purely an academic exercise with no basis on reality whatsoever.

I have to agree with c1ue about simulations being an academic exercise with limited, if any, value.

While they may be entertaining, simulations have inherit limitations that make it impossible to take into consideration all the important variables. Accordingly, certain variables are selected (with bias) for consideration by the simulation organizers while other important/critical variables are left out of the simulation (which creates a fatal bias). The so-called "results" and related conclusions from those results are necessarily flawed with agenda bias.

When I was in grad school, we all had to participate in a so-called "real world" simulation of running a publicly traded manufacturing company (not an easy task) in direct competition with each other. We were divided into groups of approx. 5 students per company and from there we were assigned roles (CEO, CFO, CTO, Gen. Counsel, etc.) each with specific duties and responsibilities. We had one week to prepare our strategies before the simulation commenced. The simulation was set up on an intra-net where routine data inputs for each company would be received at regularly scheduled times, while other data inputs were injected by the professors at random and unexpected times, also via the intranet. The random data inputs usually consisted of a crisis of some form or another. All together, there were 20 companies in the simulation, all connected to the intranet in separate, self-contained "facilities". Any communication between the companies had to be channeled through the professor group via the intra-net and would be either approved or denied without explanation. No direct, ad-hoc communication between the separate companies was allowed.

Once started, the simulation lasted 3 continuous days (72 hours without interruption), during which we took turns sleeping on the floor and eating whenever we could fit it in. During the 3 days, we processed 12 months of business activity and dealt with the crises that were always injected at the worst possible times (e.g., when you only had 5 minutes left to close your books and report earnings (or get penalized), you would receive a notice via the intranet that a labor strike was imminent that required a wage increase decision within 2 minutes, which would then change your margin projections, etc.). These types of things would usually occur between 2 a.m. and 5 a.m.

At the end of the simulation, a "winner" was declared by the professors based on the total accumulated points earned. Without going into the details, we quickly figured out that some companies received preferential treatment if they pandered to the professor's political biases; making decisions they would "approve" of, versus decisions that made the most business sense. If you were alert enough to evaluate the result of each decision you made, it became clear that such pandering was more "profitable" (through special price concessions or unexpected subsidies) than actually running the company for profit.

Those who figured this out early in the game got high scores as they winked and quietly smiled at each other. Those of us who tried to make prudent business decisions that thwarted the will of the professors, were penalized via impossible operational "difficulties" and "fires drills" and ended up with low scores.

Lessons learned: "Never fight a land war in Asia..." and "Never participate in a rigged simulation (which includes all of them)"

[aaron]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

think365 , your simulation sounds much closer to the real world. Your professors taught the class a good lesson.

[think365]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

think365 , your simulation sounds much closer to the real world. Your professors taught the class a good lesson.

In many respects your are quite right, aaron. I learned a lot on multiple levels from that experience and I don't mean to downplay that. Nevertheless, simulations are very easily manipulated, particularly by government agencies looking to support a bias they already have in mind. Caveat emptor with regards to any reports, studies, findings or conclusions that purport to come out of a simulation.

[EJ]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Why does the production curve factor matter more since 2009 than before?

[think365]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

This may help:


Elliptical Research Contribution 2008.5 - supplemental:

Accounting for the Time Delay Between Oil Drilling and Production Supplement to Why “Drill, Baby, Drill!” is Not a National Energy Policy Timothy D. Kailing Elliptical Research September 2008

As stated in the main article, empirically, for United States oil production there is a 4-6 year lag in the
relationship between oil drilling and oil production. We can account for this by using the methods in the main
article but adding a lag to the production.


More here: http://www.ellipticalresearch.com/ti...roduction.html

[Chris Coles]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Why does the production curve factor matter more since 2009 than before?

If we start to answer with my understanding, then we might get at the core debate. As I see it, the oil industry has changed from:

Drilling for oil as a commodity where they take time to seek and find a reservoir, raise funding, purchase the use of an oil rig and drill, ending with success that requires the creation of fixed logistics to extract and transport the oil to market from one general location. In which case, everything is carried out within a relatively small area and the drilling and delivery transportation logistics are thus a minimal, one off..

To:

Setting out to extract mainly shale gas plus some oil from a shale formation that in turn covers in comparison; a very large area, perhaps thousands of square miles, in turn requiring drilling as many as 5 new holes per square mile, (yes, now changing to drilling many holes from one location in a radial pattern), but still as many per unit of area. In which case the logistics have changed dramatically and we see this with many more rigs in operation and not so obvious, a massive logistics operation to pipe, (or otherwise transport), the commodity to market where, particularly, the process of transformation of the shale gas to Liquefied Petroleum Gas, LPG, has to be produced with a large investment into the compression facilities and associated gas transfer logistics.

Ergo; a much greater logistics cost that, instead of as originally, once set up, remained set into place, requiring only ongoing maintenance; now requires continuous and substantial ongoing investment as the drill rigs move across country. And just to add to the mix; first, the production curve of each drilled hole falls away very rapidly, (in comparison to previous oil reservoirs), and secondly, we believe that now the full production costs are in excess of the market value of the commodity.

The true nature of the production curve is crucial to understanding the long term viability of this new form of production of energy.

[Slimprofits]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

The story is here. In the It's-a-small-world category of connections, Michael Hudson had a role in the prosecution.

Despite this Summers was a serious contender for the Fed Chairman position.

No wonder the stock market rallied on the news that he'd withdrawn.

also From 1998: The Harvard Boys Do Russia


http://www.thenation.com/article/harvard-boys-do-russia