Sophia was just reading an article about the Strategic Petroleum Reserve of the United States (and a proposal to double it) and while I knew how much oil was being stored I had no idea about how it was stored, very very cool (from Wikipedia):
The Strategic Petroleum Reserve (SPR) is an emergency fuel store of oil maintained by the United States Department of Energy.
The US SPR is the largest emergency supply in the world with the current capacity to hold up to 727 million barrels (1.156E+8 m3). The second largest emergency supply of oil is Japan’s with a 2003 reported capacity of 579 million barrels (9.21E+7 m3).
The reserve is stored at four sites on the Gulf of Mexico, each located near a major center of petrochemical refining and processing. Each site contains a number of artificial caverns created in salt domes below the surface.
Individual caverns within a site can be up to 1000 m below the surface, average dimensions are 60 m wide and 600 m deep, and capacity ranges from 6 to 37 million barrels (1 to 4.3 million m³). Almost $4 billion was spent on the facilities. The decision to store in caverns was taken to reduce costs; the Dept. of Energy claims it is roughly 10 times cheaper to store oil below surface with the added advantages of no leaks and a constant natural churn of the oil due to a temperature gradient in the caverns. The caverns were created by drilling down and then dissolving the salt with water.
Here’s a great article on the problems with unlimited deposit insurance from Alan Blinder and Glenn Hubbard (via Greg Mankiw’s ‘More Commentary on the Financial Mess‘). One of the interesting parts was about increasingly broad deposit insurance might be one of the reasons that the dollar is rising as savers in other countries with less favorable schemes move their money to the US to keep it secure. This would normally be expected anyway as spooked investors move their money to the more stable US but in this case financial insecurity is spreading from the US to the rest of the world but legislation like this might be one of the factors that money is still pouring into the US:
Third, an unlimited deposit guarantee in the U.S. would pull funds out of other countries, just as Ireland’s guarantee led to an inflow of money into Irish bank offices in the United Kingdom. The Irish-British deposit flow happened on a small scale; but the U.S. is the 800-pound gorilla of the world market. Even amidst all this chaos, money has been flocking to our shores.
Thus we might wind up worsening an odd sort of beggar-thy-neighbor game, causing a “giant sucking sound” as deposits fled other countries for the sanctuary of the U.S. and its FDIC. The implications for our international friends could be enormous. In a misguided attempt to create financial security at home, we might inadvertently make the world a significantly more dangerous place to live.
I’ve been writing a lot about the financial crisis because its a current issue and it’s really exposing some of the underwork of the world financial system but with everyone talking about that and the upcoming US election there is less focus on long term issues. One of these is global warming/environmental destruction, and I just read a BBC article about the newly released Living Planet Report by the WWF (which uses Apture on its site) and about how they are comparing it to the current financial crisis by calling it an ecological credit crunch:
The Living Planet Report is the work of WWF, the Zoological Society of London and the Global Footprint Network.
It says that more than three quarters of the world’s population lives in countries where consumption levels are outstripping environmental renewal. This makes them “ecological debtors”, meaning that they are drawing – and often overdrawing – on the agricultural land, forests, seas and resources of other countries to sustain them.
He said the more than $2 trillion (£1.2 trillion) lost on stocks and shares was dwarfed by the up to $4.5 trillion worth of resources destroyed forever each year. The report’s Living Planet Index, which is an attempt to measure the health of worldwide biodiversity, showed an average decline of about 30% from 1970 to 2005 in 3,309 populations of 1,235 species.
Really great and timely marketing. And also an important thing to keep in mind and to put things into perspective.
Paul Krugman makes a great argument that the Fed shouldn’t worry too much about stockmarket bubbles because their bursting doesn’t cause the same excessive supply as bubbles in the real economy.
The thing to understand is that a stock market boom is not like a boom in physical investment–say, a boom in condominium construction. That kind of boom depresses future spending because it leaves behind a landscape littered with unsellable condos. But that isn’t quite what happens when stocks surge: When the market value of Croesus.com doubles, that doesn’t mean there will be an overhang of vacant dotcoms weighing down rental rates two years from now. It’s paper gains today, paper losses tomorrow; who cares?
One thing that might potentially be an issue is indirect effects of stock markets on other parts of the economy but that’s for future investigation. One other bit about the article that I found particularly interesting (and amusing) was the following mention of the dangers of excessive indebtedness:
Ah, they say, but what about debt? Shouldn’t Greenspan act to counter the defaults that could accompany a market crash? If consumers go deeply into debt to buy stock or to buy consumer goods because their market gains make them feel rich, this could depress spending later on. But really bad debt overhangs come when businesses (especially real estate developers) overborrow, which is not, as far as I can tell, a big problem in America right now.
Incredible as this sounds now, it wasn’t actually a lack of foresight because the article was written in early 1999 when levels of indebtedness had not yet reached the highs they did over the last 5 years.
A very short and interesting article by Paul Krugman on why having your currency be a Reserve Currency might not be too big of a deal:
What about our ability to borrow in dollars, to sell dollar- denominated bonds to foreigners? Hey, other countries do that too. But our debts are in our own currency! So? We still pay interest on them. True, we could inflate away our foreign debt. But we won’t–and if investors thought we would, they would demand higher interest rates.
P.s. If you feel like you’ve been seeing a lot about Paul Krugman recently you are absolutely right: I like to learn by reading a lot by the same person at a time so I’m slowly making my way through his writings and academic work. The key thing is to know when you start seeing diminishing returns and read other things and to make sure to pick smart people.