http://www.economic-undertow.com/2012/06....

Hat tip Christiangustafson. Occasionally CG links to this blog in his tech thread and I think it's time I add this one to my regular rotation. It is a must read.

In truth, this is the same thing I have been reading at Automatic Earth from Stoneliegh since 2008. That access to energy is based on credit, and that in a deflation, the nominal cost of oil may fall precipitously, but you might not be able to afford it, or be able to afford to extract it, because of the reduction in purchasing power and lack of access to credit.

However, Steve's delivery of this in the context of current events and the fall of Europe is terrifying. No words for this. This guarantees we are going to see an epic resource war between major powers in the near future, after all of the weaker players are picked off one by one by the bond market. As the trends converge the economies that import the most share of their energy begin to collapse. After the lines converge we all go down.

Bull****.

Quote:

That access to energy is based on credit

I imagine you could write a whole book based on that statement right there.

How accurate are the quick assumptions proposed in the definitions of those baselines though? The lower trend would fall as well if/when deflation occurs. These folks were crying that supply was a constraining problem back around 2003-2008, which isn't so true any more.

I think you could look at the relative cost of energy in countries without the overuse of credit to find an analogous example for what we might be looking at. Cuba might be a pretty good example. Or Burma.