Reader Mail: Oil, Energy, Growth, Future of the Planet and More

Dear Dan.

Your answer (June 7) to the subscriber who questioned the need for rampant growth, is just appalling and quite mad. It is blazingly obvious that we are right now at the limits of growth, especially population growth, and even if we were not, it is obvious that that day would come.

My family for four generations has only numerically replaced itself. No numerical growth, and we are certainly nothing like dead. QED, and end of discussion?

Best wishes, Trevor B.

Hi Dan,

In relation to comments on "growth" in this issue, you and readers may be interested in a presentation by Dr. Albert Bartlett: "Arithmetic, Population and Energy"

Transcript: http://globalpublicmedia.com/transcripts/645

Video on YouTube: - http://www.youtube.com/watch?v=F-QA2rkpBSY

Yours,

CH

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Hi DR,

I felt I had to say a few word, despite knowing, like nearly all words, they are completely wasted. At least I suppose you will have a chuckle at yet another lumpin - investors ignorant opinions, much as I chuckle at yours! In response to the reader query about growth:

"Growth? What else can we do as human beings but grow? The alternative is what? Zero growth? Death? Death is natural too."

This is not a logical statement. Zero growth does not equal death. It is the sort of statement used when trying to lead another to an opinion without factual basis. I am a sales person and use this sort of non-logic frequently. I would hope you would aspire to loftier standards.

I wondered if you saw the irony of your opinion about population and economic growth (although I see on a second read you have cleverly worded it avoid a definite statement while giving the impression you have). If the use of resources used by humans exceeds the ability of the earth to replace them (the current situation I believe), then at some stage the earth will call in its debts. It will be our descendants who have to repay.

This seems to be exactly the same concept as most developed countries borrowing from future generations you have referred to in the past. In both cases we had better hope our children are very clever indeed because nature is absolutely ruthless when left to her own devices.

Keep up the good work.

Aidan

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Hi Guys,

I like your reports. I wish I had of followed them and not let emotion get in the way.

When I was a young audit clerk (a month or two ago) one of my assignments was to audit a firm called T M Burke - real estate agents/property developers. This firm was started in the 1800's. In their foyer there was a picture of a property they sold in the Melbourne CBD in the 1890's during the height of the gold rush. The caption on this picture stated that it took until 1955 for a property in the CBD to sell for the same price per square foot in actually monetary terms, not allowing for inflation.

Kind regards,

Greg P.

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DR,

Really is it the cost of land demand (population pressure) that cause house inflation? But then you see human nature being is it is everybody wants a slice, the builders, government(s) realty industry, and of course the developers and other speckies there are the mainstay of costs so I suppose when you reduce demand then the cost of land should go down (text book), and then everybody decides to take less a cut?

It is a fact though that builders can reduce their profit margins, and government can too but they pork barrel with a policy shift to make out that they were not profiteering in the first place i.e. stealing from the people. Developers who simply cannot get enough government land when things are ripe then hold onto land and wait for the next bubble.

The realty sector is special. Cartel capitalism in Australia is particularly bad with respect of the realty industry because every time there is any slack in the domestic economy the real estate industry is there to take up any loose capital that could be use to build factories and everyone else just enjoys the bubble, guilt by association me included.

But the whole process is driven by credit, not by value adding the economy in fact we in Aus have gone to great lengths to value add other world economies at the expense of our own. Aus is a sun worshipping economy devaluing is the mainstay until the bitter end.

So what do we say to our youth vying for a block of land that originally use to be distributed by the government by ballot, sewered, powered, the roads curbed and guttered, schools built and so on by the government, before the leaches got into the process? They wait for the biggest credit meltdown in history.

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Hi Dan,

Regarding yesterday's letter on the topic of house prices. I disagree with is the "X times wages" measure of housing affordability. While I'm no expert, I assume it refers to the median wage and the median house price.

I think the 'medians' in this case take into consideration people who are not in the housing market, i.e., pensioners and students. Therefore, people who aren't in the market are being included in the equation for "how affordable is a $500k house?".

Further to that point, an average schmo like me on $50k would never entertain the idea of a $500k house/loan. 10x my earnings, crazy talk. However with my wife's earnings (these days 2 incomes per household is the norm not the exception) the equation falls to 5x. Not quite as bad and probably a far more accurate example of what is happening in the market. In fact we bought our house for 3.2 times our household earnings just before the credit crunch. It's no mansion but its freestanding and 3.5 ks from Adelaide city. Also we'll be upgrading in under ten years. So, while houses aren't cheap, I wouldn't say they are unaffordable.

When it comes to comparing the US market with Australia, I was led to believe that if a person walks away from their house in the US, it's the banks problem from there. Whereas in Australia, if the sale of the house doesn't cover the mortgage, the bank wants your car, and whatever else you have until they've recovered their money. Is this true? If it is then no-wonder people are abandoning their houses in droves in the US, exacerbating the problem. And no-wonder it isn't happening here. Please set us straight on this issue.

Thankyou

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Dan,

You really need to look at the costs of enriching uranium into fuel. Lots of electric centrifuges etc. And the cost of decommissioning and removing a spent nuclear power station.

As mentioned earlier, the cost of producing nuclear bombs was so expensive, power generation was an attempt to at least get some return from all the effort. Nuclear power is a by product of the nuclear arms race…the nuclear defence industry. Countries with those programs build n power stations or force them on colonies. Why is Israel afraid of Iran building a N-power station - because they should know!

You need to check that out, get some facts before you go out on the limb further.

Actually - the proof is in the present … in the 1960's the forecast was made that nuclear power was going to be so cheap that it would power all industry, homes, etc and run most vehicles. These are widespread claims made by the gov and captains of industry for 10 yrs or more (see Atoms for Peace Program etc) then…… things started to go quiet.

If nuclear power actually was more efficient etc we would have converted. Don't even think green issues had anything to do with its demise. They had no more power that the ban the bomb groups stopping the hydrogen bomb tests.

(Unsolicited gratis advice)

Regards,

Bill and Tina

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Dear Daily Reckoning Australia:

I couldn't agree with you more on your take that when first time homebuyers cannot afford to buy a house unless they have Greenspan's creative financing, then no one else can move up the housing chain either.

It was perfectly obvious that that had happened in the US over the past few years. Pundit types keep fretting about higher rates, but it's not the rate, it's the house price, that kills the market. We paid rates from 9 to 12 percent over the 70's- 90's in Canada, when mortgages had to be renewed every 5 years. US homebuyers don't know how lucky they are to have 15 and 30 year mortgages at a set (and low) rate.

We have apparently become less inventive since WW II, when individuals under necessity and with brains working did things like convert their cars to wood-burning cars in France, and (looking at a picture in a book on the UK during the war), use petrol substitutes (surely coal or something similar?) to operate London buses. In the pic, there is an appendage with a tank like a small tractor hooked on to a bus. I wonder what this was?

L.C. Blaine, WA, USA

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Gents,

Hi there, "Peak Man" advocate here again (BTW I have patented that particular name as I still think it will be relevant in times to come). I have been reviewing some of your recent articles that consider that the price of oil is a little too bubble like at the moment and that prices will in the long run settle to around $100/barrel and that we as consumers will have to get used to higher oil prices in the long term.

Similar articles I have read talk about the global oil demand today of 82mbpd and state that production will need to increase at approx 2mbpd p/a to keep up with future demand from here (I am paraphrasing the stats somewhat but you get the gist). This while acknowledging that there is no way that we can keep up with even today's demand in the long term based on current known oilfield capacity. Just because a statistic points to what will need to be consumed in 10 years time does not mean it can be achieved and yet I find it difficult to fathom why we keep moving in this direction like sheep.

What if we suppose for a second that global peak oil is about to be, or has already been, reached? Perhaps the supply price now is starting to factor in this bottleneck in it's very early stages and what we are experiencing now is nothing compared to what we will see in the coming months and years. Even if we are not at peak supply yet and a few more mbpd can be eked out of mother earth it will not be sufficient to meet future demand from China and India alone so to coin a phrase a "rose by any other name."

I hate to say it but this again is a function of 'Peak Man' at the very root of the issue as essentially all of the other "Peaks" are derived as a function of this human coefficient.

The issue is not how attractive oil may be to some speculators at the moment

but what do we do to wean ourselves off the black gold now (certainly at least from a domestic transport perspective) to ensure that we have sufficient time to explore other alternatives with what remaining oil supplies we have left.

I do not think that the traditional rules of supply and demand (in that an increase in price leads to lower demand leads to lower prices) can be applied to this particular commodity as quite simply we cannot do without it. If we were to sever our reliance on oil overnight then we would be thrown back to the dark ages.

Sorry to sound a bit negative,

Allan W.

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Hi Guys,

My earlier email got me thinking a bit more and although I don't want to fix the world, I do want understanding so that I can mange my life as best as I can.

So....one of the characteristics which seem to have become entrenched in our society is one of wanting to be popular. Now this is great, and I certainly do not want to be unpopular, but popularity seems to have given ground to doing what is best. In short, if making a necessary correction is unpopular, then it's mostly not done. It therefore follows that error continues to some point where it becomes unsustainable and rectifying it is so necessary that popularity is not compromised. The pain of the mistake is untenable.

The price of too little action too late is very high. I felt that governments in Australia were more responsible before the Whitlam years (maybe I did not know what was happening) but it seems to me that Whitlam made people dependent on handouts to buy votes.

Around this time parental responsibility was eroded. Discipline became unpopular so parents raised free range kids. Society now pays the price, not the parents. Our current economy is a popular one. Not a correct one.

From bringing up children, to the work place, to the costs of living the impression is given that it's easy. There are no hard decisions. It's a fascinating myth and far from what works.

What works is seeing the problems before they are there and making corrections to avoid them. It is a necessary part of good guidance that those who have knowledge and experience are heeded.

Yet everywhere I look, I see people with very limited understanding in power and calling the shots. No foresight, no responsibility for the consequences, often rewarded for their mistakes, seldom called to account. This pervades today's society. Government, business. and private lives.

This is the age is irresponsible popularity but it has run its course. In fact, irresponsible popularity is going to become so unpopular it will not rear its head again in our time. Next we will see correction and like all correction it will demand change. Pain causes change.

The change will be back to personal responsibility. Let's watch that play out in the markets of the world. These are fascinating times we live in.

Cheers again,

Brian

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