[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[Rich Toscano]

Thanks again TG.. you are too kind! That video was really cool, and I too am very excited about and (long-term) hopeful for alternative energy. But we’ve got a very long way to go there. Last year, (per the BP Statistical Review, as helpful summarized by Gregor Macdonald here: http://gregor.us/solar/global-energy-use-by-source-in-2010/ ) alternative energy accounted for 1.3% of global energy use. That was up 36% from the prior year, which is great… but it was up from an incredibly small share to begin with, and remains quite small. Even if a profitable alt energy source could be developed, it would take quite some time to develop it to get to the SCALE at which it is producing a significant enough amount of global power usage that it is significantly impacting demand for fossil fuels. In the meantime, global oil production has been flat for 5-6 years as global demand has remained in a steady uptrend outside the 08-09 recession.

So I share your optimism on the future of alt energy but the key word there is “future.” In the meantime we are facing a situation of constrained supply and growing demand for oil… imho, this (along with the nominal tailwind provided by currency debasement) provides fundamental justification for high (compared to what we’re used to) oil prices.

[Rich Toscano]

[quote=briansd1]

Shiller is talking about real prices (vs nominal prices).

[/quote]

Brian, that’s the crucial issue — over 20 years there is a giant different between a fall in real vs. nominal terms.

However, while he was talking about real prices in his 10-25% drop prediction, he didn’t mention real prices when he said they could drop for 20 years. He just said home prices. And he used Japan (where they fell in nominal terms) as a justification for that prediction. So, I think his 20 year decline scenario was in nominal terms.

As pri_dk pointed out, Shiller seemed to be throwing that out as one of many possible scenarios, and probably not the most likely one, so the title of the interview is sensationalist.

Like TG I am a big Shiller fan (btw, thanks TG for the nice shout out). However, I think the idea that prices will drop for 20 years in NOMINAL terms is completely absurd.

Let’s just say that home prices don’t even fall for 20 years — let’s say that they stay the same. At 3% annual inflation compounding for 20 years, that would mean that after 20 years, the REAL value of housing had falling by 75%. To say that prices are actually declining for 20 years, take whatever that 20 year nominal decline is and add it to 75%, and that’s your real decline. That is exceedingly unlikely, to say the least.

The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).

[Rich Toscano]

[quote=briansd1]

Shiller is talking about real prices (vs nominal prices).

[/quote]

Brian, that’s the crucial issue — over 20 years there is a giant different between a fall in real vs. nominal terms.

However, while he was talking about real prices in his 10-25% drop prediction, he didn’t mention real prices when he said they could drop for 20 years. He just said home prices. And he used Japan (where they fell in nominal terms) as a justification for that prediction. So, I think his 20 year decline scenario was in nominal terms.

As pri_dk pointed out, Shiller seemed to be throwing that out as one of many possible scenarios, and probably not the most likely one, so the title of the interview is sensationalist.

Like TG I am a big Shiller fan (btw, thanks TG for the nice shout out). However, I think the idea that prices will drop for 20 years in NOMINAL terms is completely absurd.

Let’s just say that home prices don’t even fall for 20 years — let’s say that they stay the same. At 3% annual inflation compounding for 20 years, that would mean that after 20 years, the REAL value of housing had falling by 75%. To say that prices are actually declining for 20 years, take whatever that 20 year nominal decline is and add it to 75%, and that’s your real decline. That is exceedingly unlikely, to say the least.

The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).

[Rich Toscano]

[quote=briansd1]

Shiller is talking about real prices (vs nominal prices).

[/quote]

Brian, that’s the crucial issue — over 20 years there is a giant different between a fall in real vs. nominal terms.

However, while he was talking about real prices in his 10-25% drop prediction, he didn’t mention real prices when he said they could drop for 20 years. He just said home prices. And he used Japan (where they fell in nominal terms) as a justification for that prediction. So, I think his 20 year decline scenario was in nominal terms.

As pri_dk pointed out, Shiller seemed to be throwing that out as one of many possible scenarios, and probably not the most likely one, so the title of the interview is sensationalist.

Like TG I am a big Shiller fan (btw, thanks TG for the nice shout out). However, I think the idea that prices will drop for 20 years in NOMINAL terms is completely absurd.

Let’s just say that home prices don’t even fall for 20 years — let’s say that they stay the same. At 3% annual inflation compounding for 20 years, that would mean that after 20 years, the REAL value of housing had falling by 75%. To say that prices are actually declining for 20 years, take whatever that 20 year nominal decline is and add it to 75%, and that’s your real decline. That is exceedingly unlikely, to say the least.

The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).

[Rich Toscano]

[quote=briansd1]

Shiller is talking about real prices (vs nominal prices).

[/quote]

Brian, that’s the crucial issue — over 20 years there is a giant different between a fall in real vs. nominal terms.

However, while he was talking about real prices in his 10-25% drop prediction, he didn’t mention real prices when he said they could drop for 20 years. He just said home prices. And he used Japan (where they fell in nominal terms) as a justification for that prediction. So, I think his 20 year decline scenario was in nominal terms.

As pri_dk pointed out, Shiller seemed to be throwing that out as one of many possible scenarios, and probably not the most likely one, so the title of the interview is sensationalist.

Like TG I am a big Shiller fan (btw, thanks TG for the nice shout out). However, I think the idea that prices will drop for 20 years in NOMINAL terms is completely absurd.

Let’s just say that home prices don’t even fall for 20 years — let’s say that they stay the same. At 3% annual inflation compounding for 20 years, that would mean that after 20 years, the REAL value of housing had falling by 75%. To say that prices are actually declining for 20 years, take whatever that 20 year nominal decline is and add it to 75%, and that’s your real decline. That is exceedingly unlikely, to say the least.

The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).

[Rich Toscano]

[quote=briansd1]

Shiller is talking about real prices (vs nominal prices).

[/quote]

Brian, that’s the crucial issue — over 20 years there is a giant different between a fall in real vs. nominal terms.

However, while he was talking about real prices in his 10-25% drop prediction, he didn’t mention real prices when he said they could drop for 20 years. He just said home prices. And he used Japan (where they fell in nominal terms) as a justification for that prediction. So, I think his 20 year decline scenario was in nominal terms.

As pri_dk pointed out, Shiller seemed to be throwing that out as one of many possible scenarios, and probably not the most likely one, so the title of the interview is sensationalist.

Like TG I am a big Shiller fan (btw, thanks TG for the nice shout out). However, I think the idea that prices will drop for 20 years in NOMINAL terms is completely absurd.

Let’s just say that home prices don’t even fall for 20 years — let’s say that they stay the same. At 3% annual inflation compounding for 20 years, that would mean that after 20 years, the REAL value of housing had falling by 75%. To say that prices are actually declining for 20 years, take whatever that 20 year nominal decline is and add it to 75%, and that’s your real decline. That is exceedingly unlikely, to say the least.

The counterargument would be that Japan was in deflation and we too could go into a 20 year deflation, but for reasons I have discussed many times and in great depth, there is no chance that this will happen. No chance. And I think the 3% inflation figure used in the above calculation will almost certainly prove to be significantly low.

Shiller has done some excellent and important work on the topic of valuations and of market booms and busts, but he has his areas he focuses on and areas he doesn’t. Notably, he pays virtually no attention to the imbalances caused by our coming-apart-at-the-seams monetary system (except inasmuch as they have influenced the historical CPI, which to his credit he accounts for). Only by ignoring that topic could he predict a 20 year decline in the nominal price of housing. This blind spot is also imho why he is seeing bubbles where there are none (oil and gold) while ignoring the actual bubble (Treasuries — not really a greed-driven bubble in the traditional sense, but worlds closer to being an actual bubble than oil or gold).

[Rich Toscano]

[quote=jficquette]High gas prices only mattered when Bush was in office. Ok now with Obama.[/quote]

http://piggington.com/threadjackers_will_be_persecuted_maybe_even_prosecuted

[Rich Toscano]

[quote=jficquette]High gas prices only mattered when Bush was in office. Ok now with Obama.[/quote]

http://piggington.com/threadjackers_will_be_persecuted_maybe_even_prosecuted

[Rich Toscano]

[quote=jficquette]High gas prices only mattered when Bush was in office. Ok now with Obama.[/quote]

http://piggington.com/threadjackers_will_be_persecuted_maybe_even_prosecuted

[Rich Toscano]

[quote=jficquette]High gas prices only mattered when Bush was in office. Ok now with Obama.[/quote]

http://piggington.com/threadjackers_will_be_persecuted_maybe_even_prosecuted

[Rich Toscano]

[quote=jficquette]High gas prices only mattered when Bush was in office. Ok now with Obama.[/quote]

http://piggington.com/threadjackers_will_be_persecuted_maybe_even_prosecuted

[Rich Toscano]

Can’t disagree with you, CAR. I certainly agree that this volatility is harmful.

I just bring up the point because a lot of people want to put high oil prices entirely on the shoulders of speculators. Unfortunately, this includes virtually all politicians (that I’ve heard anyway). So instead of formulating an energy policy that would address the root cause, but would require sacrifice, they just take the easy way out and pretend it would be $2 gas now and forever if it weren’t for those pesky speculators.

[Author]

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