Drought Threatens Syria Economy as Refugees Flee Parched Farms: Daniel Williams, Bloomberg.com.

Bad weather and uncertainty hit construction sector recovery: Phillip Inman, Guardian.co.uk.

U.K. Teeters on the Brink of Its Own Greek Debt Tragedy: Landon Thomas Jr., The New York Times.

A Game of Tag Breaks Out Between London’s Graffiti Elite: Gabriele Steinhauser, Wall Street Journal Europe.

The Economist’s New Clothes: Adam Curtis, BBC Blogs.

Don’t go wobbly on us now, Ben Bernanke: Ambrose Evans-Pritchard, Telegraph.co.uk.

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-Gregor

PHOTOS: Taking a shine to the Owens Valley’s sun:  Brian Vander Brug, The Los Angeles Times.

Paying Zero for Public Services (Zero Rupee Notes):Fumiko Nagano, blogs.worldbank.org.

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On Proliferation, Climate, and Oil: Solving for Pattern: Amory Lovins, Foreign Policy.

Free – Adventures on the Margins of a Wasteful Society: review of Katherine Hibbert’s new book, GreenFudge.org.

The Day the World Turned from Brown to Green: Chris Nelder, GetRealList.com.

-Gregor

Photo: Saguaro National Monument, by Ansel Adams courtesy The US National Archives on flickr

Just about every asset class including gold and silver remains on edge in the wake of the Dubai event, which I marked not as a trigger, but the start of the recognition phase to the problem of sovereign debt. Comically, Greece and Spain–hit hard this week by the ratings agencies–are small problems compared to the US, Japan, and the United Kingdom. But that’s precisely how relativity plays out in the world of rogue finance. There’s no sense in trying to gang up on the majors, when you can take down the juniors first.

Indeed, it will take time and courage before the world is ready to maul the sovereign debt of Japan, the US, and the UK. But perhaps less time, and less courage as we proceed into 2010. The US Dollar Index has still not made it to my target…(this article continues for subscribers through the membership gateway, on the right side of this page)

There are three types of opposition to peak oil theory. The first comes through the most basic misunderstanding of the concept itself. Peak oil means peak flows, not peak quantity of oil in the ground. Probably 70-80% of the people who open their mouths to speak about peak oil do not make it past this first, crucial hurdle. I have found almost no correlation at all among those who fall down at this threshold. Here, there is everyone from the most cavalier TV blatherer to the person who loves to greet all new concepts with the word “nonsense.” There’s also a fair chunk of the journalist class here as well. They tip themselves off everytime with some form of the phrase “running out of oil.” Sigh. I used to think those who wrote for newspapers actually liked to learn new things.

So to get past the first hurdle, one needs to understand peak flows because it’s central to understanding the data of the last 10 years. When I say data, I don’t mean a small amount of data either, but all world data not only on oil but also on coal and other primary energy consumption, and data on projects costs and project completion timelines. Production, Consumption, Exports, Net Exports, Substitution, Timelines, and Costs. This brings me to the second type of opposition to peak oil. There are a fair quantity of industry people and others who are well acquainted with data but it’s largely post-war data up until the start of this decade. Among this group the spare capacity/OPEC control era made the greatest impression on their careers. Also here are those who have made a career out of (what I call) the 90 day oil market–that is making calls on supply and demand over the next 90 days. What binds this type of opposition together is good, solid understanding of a world of oil production that no longer exists. They just don’t believe anything changed after 1999-2000.

Finally there is the philosophical and historical opposition to peak oil. Here we find the benign transitionists and other believers in the magical nature of self-organizing systems. Most here grant that peak oil will eventually become a reality, but whether its a reality now or later, it won’t matter. Technologists, inventors and optimists are prominent here. However, what’s not addressed in this group are the twin issues of Scale, and, previous energy transitions. Thus, the first type of opposition never really gets into the game. The second type of opposition only sees part of the problem (but with clarity), and the third type believes in a grand theory that’s not so well supported historically. For example, the previous two energy transitions, from Wood to Coal and then Coal to Oil, were notable in that humanity was moving from lower to higher density energy sources each time. Finally, it’s odd to me how many persons with math and science degrees avoid the issue of Scale. Didn’t they watch the old (Charles and Ray Eames) Powers of Ten video in first year Physics?

So why does any of this matter? Let’s say oil has peaked and the transition is going to be rough. Really rough. Well, what I’d like to address today is how this might effect what we commonly refer to as money. (this article continues for subscribers through the membership gateway, on the right side of this page)

Excuse me but I’ll need to check your bag

The second group are the brittle deflationists, who see 60% of our current, sorry situation with ice-cold clarity but refuse even now to acknowledge the country’s currency as the governor to our ultimate outcome. In my own work I actually read a great deal of the analysis of many of these deflationists, because their articulation of the problem is so correct, so spot-on, so finely crenelated, if you will, that to ignore them would be a great error. And then, having paid their fine work the respect it deserves, I then move on to the other 40% of the problem to see the full picture. I don’t mind at all they they cherry-pick year-over-year inflation data from July of 2008 to July 2009, knowing full well they will silently ignore that same data series when the January 2008 – January 2009 data is published. That’s OK. Their long form treatment of dead shopping malls, permanent unemployment, and grands sweeps of history are well worth my time.

I have many questions for both these groups of people, but, as we head into next week’s gargantuan debt auctions, the most pressing one is this: what are you going to do about your Treasuries? And then further to this, what are you going to do with all your other assets should Treasuries start to run into trouble? You may not have noticed this week, but the recoiling in global equities did very little to improve the position of either Treasuries, or the US Dollar. It is wise to note such action. For a number of years I have gladly joined others in the dark joke of the Four Horsemen: Equities down, Treasuries down, Dollar down, Gold up. Did we see hints of the Four Horsemen this week? (this article continues for subscribers through the membership gateway, on the right side of this page.)

Peter Maass: “Crude World” (Knopf), The Dianne Rehm Show WAMU Radio.

Los Angeles: Provisional Civilization, James Kunstler on KunstlerCast Radio.

Inflation/Deflation, Or Both? Michael Hampton, Commodity Watch Radio.

Michael Hudson: Dress Rehearsal For Debt Peonage, KPFA Guns and Butter Radio.

Natural Gas: Advances in natural gas drilling techniques, The Dianne Rehm Show WAMU Radio.

-Gregor

Photo: Camera Girl, From the Black and White Photo blog of Billy Gray: Billy is Gray