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Back when the Fed started its first QE program, I thought it was a pretty risky bet. I felt that all QEs have gone far beyond providing emergency liquidity, and

by kolbe 12y ago

Back when the Fed started its first QE program, I thought it was a pretty risky bet. I felt that all QEs have gone far beyond providing emergency liquidity, and instead conceded that asset prices were/are unsustainably high. But one thing that would bail out an overpriced market for assets was to have a domestic economic revolution that rivaled WW2 rebuilding or the tech revolution. So, their reaction was to actually continue to prop up asset prices. Forget the Taylor Rule and whatever. The Fed wanted to give asset prices a floor. By attempting to give asset prices a floor, it was simply buying us time to have a solid economic revival that goes beyond juicing GDP with credit and entitlements. That was over five years ago. We chose to invest this capital in three routes. One is domestic oil production. It may be a little early to tell, but it looks like all that money will have been wasted. So, net effect on the economy may end up being that we wasted time, money and natural resources in building useless machines in the middle of nowhere that added an unfathomable amount of carbon to our atmosphere. The other is Silicon Valley tech and biotech. So far, that has not been a bust, but I'm not sure it's playing out quite as well as we need it to. SV has a strange dynamic where the efficiencies and labor displacements that it has been bringing about may actually be harming our economy. Biotech sounds cool, but it may just be a new rent seeking industry that sucks off the teat of inefficiencies of socialized medicine. Needless to say, I don't think any of these industries are anywhere near the level of revolution they need to be to actually justify asset price levels. They can be good, but I doubt that good. So, regarding 'potential dangers' in asset price overvaluations. Umm, no shit?

protomyth 12y ago
"One is domestic oil production. It may be a little early to tell, but it looks like all that money will have been wasted. So, net effect on the economy may end up being that we wasted time, money and natural resources in building useless machines in the middle of nowhere that added an unfathomable amount of carbon to our atmosphere." How is the money wasted given the large production and downward price pressure on energy? This shift in price of gas at the pump has done quite a lot for the working poor in terms of cash on hand. Also, "middle of nowhere" as a description is a bit insulting and I don't think most people in a city would like to have oil wells next door. Some things happen away from the coasts.
- throwaway9011 12y ago
  We are mixing up a few things here. 1) Has the oil boom benefited anybody? Yes it has. 2) Has the oil boom benefited morally/politically sympathetic groups, such as the American poor? Yes it has. 3) Will the oil boom benefit humanity as a whole, over the medium to long term? The jury is still out on this one, and the answer may in fact be no. It is perfectly possible to do things that are beneficial in the short run but ruinous in the long run.
  - cryoshon 12y ago
    Excellent points. Your comment does a great job of parsing the topics at hand while correctly identifying the core problems. Numbers 1 and 2 are pretty easy to see, because they've already happened. Number 3 is where you will face stiff resistance from capitalists because of their insistence bought via fake science that climate change isn't real or the consequences of fossil fuel use are ambiguous.
  - maxxxxx 12y ago
    The housing bubble was beneficial for a lot of people until 2008 :-)
- kolbe 12y ago
  The downward pressure on oil may not have actually been caused by US oil production (though it may have). I think the bigger influence on oil prices is that gulf nations have maybe a 100 year supply of oil at their current output rates, but world reliance on fossil fuels doesn't look like it will last that long. Though, domestic production may have influenced this too. I'll grant you that as a real possibility. One thing this machinery does offer us that I didn't mention is the option to produce domestically if prices ever do rise to the point of that being profitable again. And that option isn't necessarily worthless. "Middle of nowhere" was intended to elicit imagery, not insult. Various places that are in the middle of nowhere are actually my favorite ones in the world.
  - protomyth 12y ago
    "The downward pressure on oil may not have actually been caused by US oil production" Trouble economy and US production are the primary reasons for the decline. This has several sources in the media. "if prices ever do rise to the point of that being profitable again" The ND formations are profitable for existing wells down to $36 (multiple sources in earlier messages on HN). Further exploration won't happen until it goes about $50 or $60. The Canada oil sands are not profitable at the low end, but either is Russia or Venezuela. "but world reliance on fossil fuels doesn't look like it will last that long" It will last for a while yet, since we are still waiting on the breakthrough in energy storage to make batteries as convenient as gas at the pump.
mason240 12y ago
>It may be a little early to tell, but it looks like all that money will have been wasted. So, net effect on the economy may end up being that we wasted time, money and natural resources in building useless machines in the middle of nowhere that added an unfathomable amount of carbon to our atmosphere. This is entirely predicated on the assumption that cheap solar energy will be available within the next ten years.
- kolbe 12y ago
  Or a breakthrough in battery tech, or fusion, or any number of the pie-in-the-sky ideas that get floated every so often.
deleted 12y ago
[deleted]
eli_gottlieb 12y ago
>Biotech sounds cool, but it may just be a new rent seeking industry that sucks off the teat of inefficiencies of socialized medicine. Uhhhh... what socialized medicine? In the USA we just plain don't have socialized medicine.

by kolbe 12y ago

protomyth 12y ago

"One is domestic oil production. It may be a little early to tell, but it looks like all that money will have been wasted. So, net effect on the economy may end up being that we wasted time, money and natural resources in building useless machines in the middle of nowhere that added an unfathomable amount of carbon to our atmosphere." How is the money wasted given the large production and downward price pressure on energy? This shift in price of gas at the pump has done quite a lot for the working poor in terms of cash on hand. Also, "middle of nowhere" as a description is a bit insulting and I don't think most people in a city would like to have oil wells next door. Some things happen away from the coasts.

throwaway9011 12y ago
We are mixing up a few things here. 1) Has the oil boom benefited anybody? Yes it has. 2) Has the oil boom benefited morally/politically sympathetic groups, such as the American poor? Yes it has. 3) Will the oil boom benefit humanity as a whole, over the medium to long term? The jury is still out on this one, and the answer may in fact be no. It is perfectly possible to do things that are beneficial in the short run but ruinous in the long run.
- cryoshon 12y ago
  Excellent points. Your comment does a great job of parsing the topics at hand while correctly identifying the core problems. Numbers 1 and 2 are pretty easy to see, because they've already happened. Number 3 is where you will face stiff resistance from capitalists because of their insistence bought via fake science that climate change isn't real or the consequences of fossil fuel use are ambiguous.
- maxxxxx 12y ago
  The housing bubble was beneficial for a lot of people until 2008 :-)
kolbe 12y ago
The downward pressure on oil may not have actually been caused by US oil production (though it may have). I think the bigger influence on oil prices is that gulf nations have maybe a 100 year supply of oil at their current output rates, but world reliance on fossil fuels doesn't look like it will last that long. Though, domestic production may have influenced this too. I'll grant you that as a real possibility. One thing this machinery does offer us that I didn't mention is the option to produce domestically if prices ever do rise to the point of that being profitable again. And that option isn't necessarily worthless. "Middle of nowhere" was intended to elicit imagery, not insult. Various places that are in the middle of nowhere are actually my favorite ones in the world.
- protomyth 12y ago
  "The downward pressure on oil may not have actually been caused by US oil production" Trouble economy and US production are the primary reasons for the decline. This has several sources in the media. "if prices ever do rise to the point of that being profitable again" The ND formations are profitable for existing wells down to $36 (multiple sources in earlier messages on HN). Further exploration won't happen until it goes about $50 or $60. The Canada oil sands are not profitable at the low end, but either is Russia or Venezuela. "but world reliance on fossil fuels doesn't look like it will last that long" It will last for a while yet, since we are still waiting on the breakthrough in energy storage to make batteries as convenient as gas at the pump.

mason240 12y ago

>It may be a little early to tell, but it looks like all that money will have been wasted. So, net effect on the economy may end up being that we wasted time, money and natural resources in building useless machines in the middle of nowhere that added an unfathomable amount of carbon to our atmosphere. This is entirely predicated on the assumption that cheap solar energy will be available within the next ten years.

kolbe 12y ago
Or a breakthrough in battery tech, or fusion, or any number of the pie-in-the-sky ideas that get floated every so often.

deleted 12y ago

[deleted]

eli_gottlieb 12y ago

>Biotech sounds cool, but it may just be a new rent seeking industry that sucks off the teat of inefficiencies of socialized medicine. Uhhhh... what socialized medicine? In the USA we just plain don't have socialized medicine.