Global freezing, an inconvenient truth and Bill Gross
Posted on 11 January 2010 with no comments from readers
Global energy prices are soaring as the world is in the grip of the coldest winter seen in fifty years, so much for global warming and the recent deliberations of the Copenhagen conference. It is an inconvenient truth, the reasons behind climate change are far from proven.
Except that we know the biggest factor: solar radiation. Erratic emissions of sunshine are the main factor behind climate change, not pollution from factories in China, although you would think the nouveau riche in that country might want clean air.
Oil prices up
What does this cold snap mean for financial markets? The most obvious impact is on energy prices. Oil prices have topped $83 a barrel. Good for the Gulf States’ coffers, not helpful to a world inching its way out of the biggest slump in trade and industrial output since the 1930s.
Cold weather could raise current oil demand by 1.5 million barrels a day as well as reducing heating stocks and increasing the pressure on refineries. However, it is difficult to separate the weather from the global economic upturn as a reason for rising oil demand.
Will the weather do anything to affect the global economic recovery, fragile and small as it is? Well, it can hardly help. High oil prices are bad. The movement of goods is delayed. Factories are struggling with worker absences rising. And financial markets are largely dormant.
Could this be the wake-up call that reminds everybody that much of the damage done by the recession has yet to be put right? Then again it might persuade governments to extend the life-support systems of the stimulus packages a bit longer.
Bill Gross
But as bond market mastermind Bill Gross has reminded investors it is the stimulus packages alone that are supporting the global economy, with China an obvious and unsustainable debt bubble. And what goes up will have to come down again.
Interest rates cannot stay at ground zero forever. That means overvalued asset classes will have another correction, and melt away like the snow of winter.
Could this thaw occur in March as the thoughtful Mr. Gross suggests in his latest newsletter to his clients? That is after all when the snow will go.
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Not too many years ago I watched a TV program about the Vikings. (No, not the epic with Kirk Douglas, although that was a cool film.) Some scientist was walking among the ruins of a Viking settlement in Greenland. She went on to describe how the Vikings established colonies in Greenland about 800, or so, years ago, when the climate of Greenland was much warmer than today. It was kind of sad listening to her describe how the climate gradually got colder and colder on the settlers. She told how the Vikings tried to adapt, as best they could, to the cooling climate by doing things like building shelters for their animals to try and keep them alive during the increasingly harsh winters. As the cold got worse, their animals couldn’t find enough food, and starved or froze during the extreme winter cold. The type of cold that, unless you have experienced it, you can’t really grasp. Gradually, even the sea began to freeze over around their tiny, isolated settlements, limiting the Viking’s mobility. Since they were a seafaring culture, once their supplies were cut off by sea ice, they were doomed. Most eventually starved, despite being a tough and resourceful people. No one knows how many were able to make it back to their homeland in Scandinavia. Only the scattered stone ruins of their lonely Greenland outposts remain today, studied by an occasional scientist during the brief Greenland summer.
As I recall, the Vikings had a form of representative government which was unique back then. Their raids helped force the formation of early governments in a few places as a defense.
So before we expend a vast amount scarce resources trying to manipulate the Earth’s climate, we might want to remember what happened to the Vikings in Greenland. I wonder how many of the delegates at the Copenhagen conference know the history of the Greenland Vikings? I’ll bet more saw the movie.