HydroLuver said:
$this->bbcode_second_pass_quote('', 'T')his could also significantly reduce demand for oil in the coming years.
PeakOil is You
Deleveraging the world economy
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Re: Deleveraging the world economy
by shortonoil » Fri 16 Nov 2007, 14:05:02
I have been saying for several years that a decline in economic activity would come before a decline in oil production. That is because the energy contribution of oil after Peak, falls faster than production falls. We might again some day see $30 oil, of course, the average American household would be making the equivalent of $500 per year.
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Re: Deleveraging the world economy
by pup55 » Fri 16 Nov 2007, 21:57:28
$this->bbcode_second_pass_quote('', 'W')hat it all comes down to is that Joe Six-Pack has been taking equity out of his house and supporting the U.S. economy
I guess I do not need to tell all of the doomers here about the seriousness of this financial stuff, and how once the crap starts to flow, it is going to tend to build up steam, as it were.
My favorite example of this is the case of Walgreens, an annoying US pharmacy chain. We have talked about this somewhat before.
Walgreens does not actually physically own its stores. They lease them from someone who is in that business. Right now, according to their latest 10Q:
Walgreens filing
they have leases that will amount to $1.5 billion next year. They have long term leases, amounting to $25 billion over the next several years. They are in the "grow or die" strategy: their whole business depends on their ability to continuously open new stores, thus growing their "top line".
Who do they owe this money to? People like GE Capital:
GE Financials
These guys have about $700 billion in "assets", defined as the value of all of these leases, and about $600 billion in long and short term debt: in other words, 90% of their business is borrowed. They are in the business of borrowing money, building a walgreens, and leasing it back to them. It's a far cry from making light bulbs, which is what they used to be good at.
Iff the money dries up, and GE can't borrow any more so that Walgreens can't build any more stores, Walgreens will not be able to keep the game going on the basis of selling aspirin at 4AM.
So the people to keep an eye on is the big providers of capital, such as GE. If they start having problems getting money, the whole system really is going to come to a screeching halt.
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Re: Deleveraging the world economy
by Twilight » Fri 16 Nov 2007, 22:09:40
$this->bbcode_second_pass_quote('pup55', 'S')o the people to keep an eye on is the big providers of capital, such as GE. If they start having problems getting money, the whole system really is going to come to a screeching halt.
I have a bad feeling about GE Money, something about a logo you associate with heavy machinery displayed on the front of a bank (close enough) doesn't sit right.
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Re: Deleveraging the world economy
by shortonoil » Fri 16 Nov 2007, 22:35:18
$this->bbcode_second_pass_quote('', 'Q')uote:
What it all comes down to is that Joe Six-Pack has been taking equity out of his house and supporting the U.S. economy
What it all comes down to is that Joe Six-Pack has been taking equity out of his house and supporting the U.S. economy
It’s called the current account deficit, and yes “Joe Six-Pack”, you are spending far more than you make, ever will make or ever could hope to make. You are flat-assed, butt-less, beer-less, gas-less - broke.
Could he become a problem, “ye think”?
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