Gregor Macdonald
“The task of the real intellectual consists of analyzing illusions in order to discover their causes.” ~ Arthur Miller
How the Coming Decline Will Play Out
by Gregor Macdonald, contributing editor
Thursday, October 27, 2011
Executive Summary
- Understanding The Economics Driving Energy Transition
- California Is Serving As The Canary in the Coal Mine
- Why The Middle Class is Getting So Squeezed While Corporations Are Flush With Cash
- Why America Won’t Change Course Until The Status Quo Becomes Too Painful Not To
- Predictions on How The Coming Decline Will Play Out (Until We Get Our Act Together)
Part I – The Great American False Dilemma: Austerity vs. Stimulus
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II – How The Coming Decline with Play Out
Understanding The Economics Driving Energy Transition
Robert Allen of Oxford University has done some of the best work on the Industrial Revolution but he has also helped us understand the historic energy transition from Wood to Coal, in England. Along with the work of Vaclav Smil, Allen has shown that energy transitions are long, drawn out affairs that do not comport with the faith in efficiency that defines contemporary economic theory. This chart of BTU prices shows that natural gas is being offered each day in the bargain bin to the economy, but the economy is so inextricably tied to oil (liquids) that its existing infrastructure cannot take advantage of the opportunity.
How The Coming Decline Will Play Out
PREVIEWHow the Coming Decline Will Play Out
by Gregor Macdonald, contributing editor
Thursday, October 27, 2011
Executive Summary
- Understanding The Economics Driving Energy Transition
- California Is Serving As The Canary in the Coal Mine
- Why The Middle Class is Getting So Squeezed While Corporations Are Flush With Cash
- Why America Won’t Change Course Until The Status Quo Becomes Too Painful Not To
- Predictions on How The Coming Decline Will Play Out (Until We Get Our Act Together)
Part I – The Great American False Dilemma: Austerity vs. Stimulus
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II – How The Coming Decline with Play Out
Understanding The Economics Driving Energy Transition
Robert Allen of Oxford University has done some of the best work on the Industrial Revolution but he has also helped us understand the historic energy transition from Wood to Coal, in England. Along with the work of Vaclav Smil, Allen has shown that energy transitions are long, drawn out affairs that do not comport with the faith in efficiency that defines contemporary economic theory. This chart of BTU prices shows that natural gas is being offered each day in the bargain bin to the economy, but the economy is so inextricably tied to oil (liquids) that its existing infrastructure cannot take advantage of the opportunity.
What to Expect for Gold in 2012
by Gregor Macdonald
Monday, October 17, 2011
Executive Summary
- Why economic concerns incent miners to produce less gold
- Why gold is set to dramatically appreciate further vs. the stock market
- How the West has sown its discontent by using increasing debt to mask the decline of real wages
- Predicting the gold price vs. the S&P next year
Part I – Gold and Economic Decline
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II – What to Expect for Gold in 2012
As I covered in Part I of this report, Dr. Krugman uses Hotelling rather creatively to explain the strength of gold from an investor’s point of view. I actually think Krugman is also applying a kind of traditional, discounting method of valuation. In essence, he is arguing that because interest rates are so low, the penalty normally associated with holding a non-income-producing asset, like gold or even cash, has evaporated. Indeed, this is the deflationist view, that cash is king because its purchasing power is increasing while the price of goods and services is falling. However, for those of us who prefer gold to cash, we are asking that gold provide additional services by offering protection against instability in the system and maintaining purchasing power more completely over all prices produced by economists and governments, not just price indexes.
But what about gold from the producer’s point of view? Remember, Hotelling says there’s a declining incentive for producers to extract and market their natural resources if the price appreciation taking place in situ (in the ground) is greater than the capital they could earn after having turned those resources into cash. Let’s take a look at more than a century of global gold production, updated with the latest data from the USGS.
What to Expect for Gold in 2012
PREVIEWWhat to Expect for Gold in 2012
by Gregor Macdonald
Monday, October 17, 2011
Executive Summary
- Why economic concerns incent miners to produce less gold
- Why gold is set to dramatically appreciate further vs. the stock market
- How the West has sown its discontent by using increasing debt to mask the decline of real wages
- Predicting the gold price vs. the S&P next year
Part I – Gold and Economic Decline
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II – What to Expect for Gold in 2012
As I covered in Part I of this report, Dr. Krugman uses Hotelling rather creatively to explain the strength of gold from an investor’s point of view. I actually think Krugman is also applying a kind of traditional, discounting method of valuation. In essence, he is arguing that because interest rates are so low, the penalty normally associated with holding a non-income-producing asset, like gold or even cash, has evaporated. Indeed, this is the deflationist view, that cash is king because its purchasing power is increasing while the price of goods and services is falling. However, for those of us who prefer gold to cash, we are asking that gold provide additional services by offering protection against instability in the system and maintaining purchasing power more completely over all prices produced by economists and governments, not just price indexes.
But what about gold from the producer’s point of view? Remember, Hotelling says there’s a declining incentive for producers to extract and market their natural resources if the price appreciation taking place in situ (in the ground) is greater than the capital they could earn after having turned those resources into cash. Let’s take a look at more than a century of global gold production, updated with the latest data from the USGS.
Reminiscent of the media’s coverage of oil in the 2000-2008 period, gold has produced a multi-year stream of thoughtless op-eds and repetitive storytelling. If readers can recall how many times the bull market in oil was dubbed “over” leading up to the crisis of 2008, then gold has been in a “bubble” for at least as many years, if not longer.
The seminal piece to this genre was Willem Buiter’s November 2009 Financial Times of London essay, Gold – A Six Thousand Year Bubble. That piece would be used as a template by other, lesser writers in the two years that followed. Consider this 2010 tracker-chart of opinion, emanating this time from New York:
Gold and Economic Decline
Reminiscent of the media’s coverage of oil in the 2000-2008 period, gold has produced a multi-year stream of thoughtless op-eds and repetitive storytelling. If readers can recall how many times the bull market in oil was dubbed “over” leading up to the crisis of 2008, then gold has been in a “bubble” for at least as many years, if not longer.
The seminal piece to this genre was Willem Buiter’s November 2009 Financial Times of London essay, Gold – A Six Thousand Year Bubble. That piece would be used as a template by other, lesser writers in the two years that followed. Consider this 2010 tracker-chart of opinion, emanating this time from New York:
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