Weather Report: The Economy Now-and-To-Be, Oil, Water, Food and Agriculture

THE ECONOMY:NOW AND TO-BE: In a 10/14/08 interview with Charlie Rose, NYU professor Nouriel Roubini responded to Mr. Rose’s question, “ Where are we now ? (concerning the current economic crisis) by saying that we had run through all of the 12 steps he had previously established as precursors to a systemic financial meltdown. We are/were just one action away from financial catastrophe but that had been avoided by the recent government intervention. We are, he went on to say, facing a 24 month recession at least and there is as yet no bottom. Our situation is the result of no market discipline, no rules or regulations of substance, coupled with huge conflicts of interest ( i.e., rating companies paid by the very companies that they were rating).

In commenting on our future, Professor Roubini indicated that not enough has been done, more will need to be done and that it will cost us about twice as much as we’ve spent so far. We’ll need to spend an additional $300 billion dollars or so on stimulating growth in our economy through a program of infrastructure rebuilding in the face of falling consumer demand and declining corporate investment.

Nouriel Roubini (the NYU Professor that predicted our current financial crisis in 2006) speaking in the context of a Bloomberg interview on 10/14/08 at rgemonitor.com, offered the view that the severity of the U.S. recession will surpass our expectations and last 18- 24 months. He also indicated that it would further depress home prices while pushing unemployment to 9%.

OIL: Energy Bulletin (@ energybulletin.net) on 10/15/08 presented an article from The Economist via Boomers Bank indicating that “the high priest of “peak oil” thinks world oil output can only decline.” The “high priest” referenced is Matthew Simmons, an investment banker of some 40 years, with a huge reputation in the analysis of the worlds oil reserves. Mr. Simmons believes that most of the oil analysts in the world are far too optimistic about the longevity of long existing oil fields and about technology’s ability to both prolong the lives of these fields as well as to discover new ones. He notes that by the U.S.’s own numbers, “the world’s oil output has been more or less flat since 2005.”

WATER :

“…to produce 1 gallon of diesel fuel, up to 9,000 gallons of water are required. Up to 4,000 gallons are needed to produce enough corn for the same amount of ethanol.”

Also,

“Seventy percent of all water withdrawal is already used in agriculture…”

These quotes are even more chilling in the face of an understanding that fresh water is an “ irreplaceable and finite natural resource.” The forgoing information is perhaps the essence of the 10/12/08 article from Energy Bulletin (@ energy bulletin.com) entitled “Biofuels and a dwindling water supply” by Peter Brabeck-Letmathe, Boston Globe

FOOD AND AGRICULTURE: On 10/13/08, the Food and agriculture-Oct 13 portion of Energy Bulletin produced, by staff, an article entitled, “Farmer in Chief” by Michael Pollan, New York Times (magazine). The article notes that “the era of cheap and abundant food appears to be drawing to a close.” and that there is a growing sense within the public that the industrial food system is broken.

Mr. Pollan says, “…the 20th -century industrialization of agriculture … transformed a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy that it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food.” The forgoing is presented by Mr. Pollan in the context of, “…the health of a nation’s food system is a critical issue of national security. “

We’d like to talk more about our families and food security next week. Until then, keep your eyes on the horizon.