Iran: Brain Drain, Drug Addiction, Capital Flight, . . .

In ... the latest available data, Iran was losing more than 150,000 of its educated and skilled citizens annually, according to the IMF. – Reuters _Iran Unemployment and Brain Drain

...heroin use is now at a global high in Afghanistan and Iran, where opium and poppies are grown, while it has dropped in Western Europe. _Drug Use Spiking

Educated young people and professionals are getting out whenever they can:

Following the controversial 2009 presidential elections, a wave Iranians left the country because of the widespread government crackdown on protesters.

Meanwhile, the brain drain has been a longstanding issue facing the country as many students leave Iran to continue their studies and often end up settling abroad and not returning to Iran. _EurasiaReview

The Iranian government is attempting to put a brave face on a developing disaster:

Oil production has shrunk to 800,000 barrels a day, a level not seen since the 1980s, during the war with Iraq (who bombed Iranian oil fields and tankers). Inflation is making items like meat, medicine, and imported goods too expensive for most Iranians. Inflation is out of control and the value of the rial (Iranian currency) against the dollar and other foreign currency continues to decline. It costs nearly three times as much to buy dollars with rials versus a year ago. Even with more currency being printed, the government cannot get everyone paid on time. _Economic Collapse

As the defiant Iranian government rushes ahead in an attempt to develop nuclear weapons, the tactics taken by nations opposed to a nuclear Iran continue to evolve:

Iran recently reported that security troops outside a new underground nuclear enrichment plant went to investigate a suspicious looking rock and the rock exploded. Later investigation revealed that the rock was, indeed, not a real rock but an electronic device that was apparently monitoring activity around the nuclear facility (that enriched uranium sufficiently for use in a bomb) and transmitting it, via satellite, back to somewhere. The rock was also rigged to self-destruct if anyone got close.

The usual suspects for such a ploy were the Americans (who have been using the fake rocks thing for decades) and the Israelis (who also use fake rocks, and use them quite a lot in Lebanon). The Iranians are not only upset with the exploding rocks, but also with how someone was blowing up electrical transmission towers and cutting off electricity of the underground nuclear facility. This happened twice last month. On top of all these explosions, Iran is also alarmed at the unending attacks by Cyber War weapons. _Smart Exploding Rocks

Iran's military is being forced to contract maintenance work on advanced imported weapons systems with local contractors, in an attempt to save money and to maintain control of the systems within Iran. But that may mean that formerly sophisticated systems are losing some of their sophistication, stealth, and reliability:

Iran recently put one of its three Kilo class submarines back into service after a period of refurbishment by an Iranian shipyard. Russia insists that refurbishment and upgrades of its Kilo class subs be done in Russian shipyards. But the Iranians believed the Russians were charging too much and feared the Russians would not return the sub.

So the Iranians did it themselves, even though the Russians would not provide the technical data normally needed for such an upgrade. According to the Iranian press release, Iranian technicians fabricated replacement parts for internal (pumps, compressors, engines, and the like) and external (sound absorbent tiles, control surfaces) components and installed them. While some of the technology needed here (pneumatic, engines, electronics) is pretty common stuff, other items are not. So it's unknown how adequate the Iranian replacement parts were.

...The new Iranian components have probably made these boats louder and easier to find. U.S. and allied anti-submarine forces will be keen to play with the refurbished Kilo when it ventures out into international waters (which it may avoid doing to prevent anyone from "hearing" how this Kilo has changed). _Klunkification of Kilo Submarines

Iran is paying a high price for its determination to build and maintain its own nuclear weapons arsenal. More specifically, the people of Iran are paying a high price for the determination of Iran's wealthy religious and secular elite to possess a nuclear weapons threat.

The ongoing covert war against Iran may serve as a test case for the future treatment of militant powers which wish to wield massively destructive weapons systems. Certainly no modern nation can afford very many military actions along the line of the 2003 US invasion and occupation of Iraq.

Obama: A Whimsical Destructor You Couldn't Make Up If You Tried

Obama does not live in the same world as everyone else. Obama is constantly inventing his world, every moment of every day. You couldn't invent Obama or Obama's world. No one could, no one but Obama.

"When I came into office, I inherited the biggest deficit in our history.1 And over the last four years, the deficit has gone up, but 90% of that is as a consequence of two wars that weren't paid for,2 as a consequence of tax cuts that weren't paid for,3 a prescription drug plan that was not paid for,4 and then the worst economic crisis since the Great Depression.5 "Now we took some emergency actions, but that accounts for about 10% of this increase in the deficit,6 and we have actually seen the federal government grow at a slower pace than at any time since Dwight Eisenhower, in fact, substantially lower than the federal government grew under either Ronald Reagan or George Bush.7" ***

Footnote No. 1: Either Mr. Obama inherited the largest deficit in American history or he won the 1944 election, but both can't be true. The biggest annual deficit the modern government has ever run was in 1943, equal to 30.3% of the economy, to mobilize for World War II. The next biggest years were the following two, at 22.7% and 21.5%, to win it. The deficit in fiscal 2008 was a mere 3.2% of GDP. The deficit in fiscal 2009, which began on October 1, 2008 and ran through September 2009, soared to 10.1%, the highest since 1945. Mr. Obama wants to blame all of that on his predecessor, and no doubt the recession that began in December 2007 reduced revenues and increased automatic spending "stabilizers" like jobless insurance. But Mr. Obama conveniently forgets a little event in February 2009 known as the "stimulus" that increased spending by a mere $830 billion above the normal baseline. The recession ended in June 2009, but spending has still kept rising. The President has presided over four years in a row of deficits in excess of $1 trillion, and the spending baseline going forward into his second term is nearly $1.1 trillion more than in fiscal 2007. Federal spending as a share of GDP will average 24.1% over his first term including 2013. Even if you throw out fiscal 2009 and blame that entirely on Mr. Bush, the Obama spending average will be 23.8% of GDP. That compares to a post-WWII average of a little under 20%. Spending under Mr. Bush averaged 20.1% including 2009, and 19.6% if that year is left out.

Footnotes No. 2 through 4: [Obama continues] to claim that the main causes of the current fiscal mess are tax rates established in, er, 2001 and 2003 and the post-9/11 wars on terror. But by 2006 and 2007, those tax rates were producing revenue of 18.2% and 18.5% of GDP, near historic norms. Another quandary for Mr. Obama's apologists is that he has endorsed nearly all of these policies. The 2003 Medicare drug benefit wasn't offset by tax hikes or spending cuts, but Democrats expanded the program as part of ObamaCare. The President also extended all the Bush tax rates in 2010 for two more years in the name of helping the economy, and he now wants to continue them for people earning under $200,000, which is where 71% of their "cost" resides. The Iraq campaign was won and beginning to be wound down when he took office, and he himself surged more troops in Afghanistan.

Footnote No. 5: Mr. Obama keeps dining out on the excuse of the recession, but that ended halfway through his first year. The main deficit problems since 2009 are a permanently higher spending base (see Footnote No. 1) and the slowest economic recovery in modern history. Revenues have remained below 16% of the economy, compared to 18% to 19% in a normal expansion.

The 2008 crisis is long over. The crisis now is Mr. Obama's non-recovery.

Footnote No. 6: Even at face value, Mr. Obama's suggestion that he is "only" responsible for 10% of what the government does is ludicrous. Note that in addition to his stimulus, what he calls "emergency actions" include his new health-care entitlement that will cost taxpayers $200 billion per year when fully implemented and grow annually at 8%, even using low-ball assumptions.

But the larger point concerns executive leadership. Every President "inherits" a government that was built over generations, which he chooses to change, or not to change, to suit his priorities. Mr. Obama chose to see the government he inherited and grow it faster than any President since LBJ.

The pre-eminent political question now is whether to reform the government we have to make it affordable going forward, or to keep growing the government and raise taxes to finance it, if that is even possible. Mr. Obama favors the second option, though he pretends he can merely tax the rich to do it. Nobody who has looked honestly at the numbers believes that—not his own Simpson-Bowles commission and not the Congressional "super committee" he sanctioned but then worked to undermine. At every turn he has demagogued the Romney-Ryan proposals to modernize the entitlement state so it is affordable, and he personally blew up the "grand bargain" House Speaker John Boehner was willing to strike last summer.

Footnote No. 7: Mr. Obama's posture as the tightest skinflint since Eisenhower is a tutorial in how to dissemble with statistics. The growth rate seems low because he's measuring from the end of fiscal 2009, after a one-year spending increase of $535 billion. That is the year of his stimulus and thus spending is growing off a much higher base. The real annual pace of government growth is closer to 5%, and that doesn't count ObamaCare.

*** In another news-making bit with "60 Minutes," which the program decided not to air, Mr. Obama conceded that "Do we see sometimes us going overboard in our campaign, mistakes that are made, areas where there's no doubt that somebody could dispute how we are presenting things, that happens in politics."

Note the passive voice, as if the President's re-election campaign is disembodied from the President. If Mr. Obama's campaign seems dishonest enough that even Mr. Obama is forced to admit it, this is because it's coming from the top. _WSJ

President Obama is more than a bit surreal. He may be the first fractal president, the first complete presidential construct. But as long as he is in the running against anyone outside the "progressive coalition," expect the US news media to cover up his mistakes, to obscure his obvious deceptions and self-deceptions, and to promote him as a gift from the heavens to an undeserving planet and nation.

This level of whimsical dissembling slathered over a reign of blatant destruction and stagnation, will have consequences down the road.

Hope for the best. Prepare for the worst.

You Didn't Build That: Obama-Style Tough Love Parenting

Obama's approach to tough love parenting is illustrated below, in an average American family setting. Observe, and learn.

And just to reinforce that you will not be building anything in the future -- and that everything will be built by replicators -- this Wired feature spotlights The Replicator 2 by Makerbot.

Imagine children learning to program such 3D printers to create all kinds of objects and machines. As children grow older, the "toys" they create can grow more sophisticated -- and more dangerous.

As replicating "inks" grow more varied and more capable, the limits on types of objects which can be created will retreat into the horizon. From weapons to vehicles to adventure toys to shelters and more, the list of things "you didn't build" is apt to grow very, very long.

From Monkeys to Muslims: Evolving Primate Excitability

Previously published at Al Fin blog


The differences between the minds of monkeys and the minds of men are differences of a graded evolutionary nature. Natural selection follows a forked and winding pathway, diverging and converging unpredictably. The range of primate emotions is remarkably similar from monkeys to humans. All primates -- from monkeys to higher species -- are excitable to a greater or lesser degree.

Monkeys Attacking Automobile

Monkeys are excitable, like all primates. Monkeys experience rage reactions -- like apes and humans -- but they do not typically organise in up close and personal group attacks like common chimps and people are wont to do. When they flock together, it is more likely in search of food or out of curiosity.

Evolving Apes on Rampage

In an evolutionary sense, apes are much closer to humans, and ape behaviour has many more parallels with human behaviour. Apes have been known to carry out sustained genocidal wars against competing groups of apes. The superior size and organisation of the ape brain makes it capable of organising and sustaining rage for longer periods of time on a larger scale.

Excitable Muslims

The human brain is larger yet, and formed in such a way to allow for even more complex levels of societal organisation than is found in ape societies. Human groups have been aroused to violence and warfare for as long as there is recorded history.

Human excitability -- particularly in groups -- can be a serious problem for human societies, and for the ability of humans to get along in non-violent ways. Religious excitability and violence has been a problem ever since disparate human tribes began to assert the superiority and dominance of their particular tribal gods over the gods of rival tribes.

Some forms of relgion - instigated rage appear indistinguishable from caricatures of rage as portrayed in feature films such as "28 Days Later." In that film, a "rage virus" escaped from the lab to infest human populations, leading to cataclysmic violence.

Human rage will often build in normal circumstances -- as in "road rage," "computer rage," and other common situations where other humans may act to frustrate or oppose the wishes of a protagonist (that would be you).

Opinions vary widely, as to what should be done to manage human excitability and rage, to prevent out-of-control violence. Would it be better -- for example -- to release one's anger in a real life "fight club?" Or is it better to salve one's anger in meditation, yoga, or even a "laughter club?"

One interesting suggestion is the creation of "rage clubs," as a means to purge the inevitable anger and rage that tend to build over time.

This is how they would work. People first gather together in a large open space (a barn or warehouse type area – incidentally, no alcohol would be allowed), then several passionate speakers incite the crowd with stories of injustice and exploitation inter-cut with biased news reports (there could even be a standard canon of examples; Bhopal, Gaza, The Crusades, Big tobacco. For ‘light hearted rage’ the subjects could be narrowed down to, poor user interface or badly designed electronic equipment or non existent customer service). The speakers would then lead the crowd into demonstrating their wrath and frustration with screams, tears and rending of shirts (bought specifically for the event from charity shops). A percussion ensemble or rock band will create a throbbing soundtrack of primitive trance like rhythms building in volume. The crowd will simultaneously produce various implements of noise making capability and commence to create a cacophony of sound so powerful it would even make Lemmy from Motorhead stop his ears.

Areas will be set aside where crockery seconds can be hurled furiously at a brick wall. Effigies of slippery political criminals will be stuck on poles and aggrieved victims given fifteen minutes with a baseball bat to put their point across to them (this is contentious I know, but it is meant to be purely symbolic. The signal sent out will be that such behaviour will only be tolerated at the Rage Club but at the same time it will also be a reminder to the authorities and multinationals: “we people know of our power, so don’t screw with us and ignore us at your peril.”)

Ultimately, an energy of pure rage will be created and each individual will experience a catharsis which will lead to exhaustion, reflection and a reasoned course of action to methodically change those things which enrage them. _Rage Club

Would this work? Consider that some of the most spectacular rage displays put on by groups of Muslims often occur immediately after Friday noon prayer at the mosque. Religious clerics often learn to work a crowd into a righteous frenzy. If the group is then released directly onto the streets in the form of a mob, the results can sometimes be quite photogenic.

But what if these excitable primates were steered into a rage club instead? Allowed to vent their rage in a controlled and relatively private manner, such frenzied zealots might gradually ease into a more controlled mental state. Their internal rages may even be satisfied -- at least until next week's Friday noon prayer at the mosque.

It is something to think about.

Necessary Forerunners to the Obama Nightmare

A disastrous presidency such as the Obama regime could not have come out of nowhere. A lot of people worked very hard to make it possible for such a president to be elected.

Across the US, universities, media organisations, foundations, and large lobbies, activist groups, Federal Courts, and politically connected organisations were largely taken over by persons of collectivist and anti- US Bill of Rights perspective. It has gotten so bad that in many places of employment in media, academia, or anywhere with political connections, a person cannot express pro liberty (as per the US Constitution) points of view without being shunned -- or sometimes dismissed.

It is into that increasingly monolithic, collectivist milieu that unknown politician Barack Obama made his triumphal march from obscurity to domination -- without ever once having been thoroughly examined for the benefit of the voting public.

Here is a short glimpse into part of the decades-long preparation that went into making such a debacle possible. Keep in mind that the term "conservative" is used to cover a broad range of anti-leftist POVs including libertarian -- and the term "liberal" is used to refer to leftists, collectivists, "progressives", and the broad range of ideology that opposes the individual liberties as expressed in the US Bill of Rights and Constitution.

Recent studies have confirmed that American universities have become bigoted and biased against the expression of conservative views. One new study documents bias against the expression of conservative views among social and personality psychologists, including those at universities:

We find that respondents significantly underestimate the proportion of conservatives among their colleagues. … that conservatives fear negative consequences of revealing their political beliefs to their colleagues. Finally, we find that conservatives are right to do so. In decisions ranging from paper reviews to hiring, many social and personality psychologists admit that they would discriminate against openly conservative colleagues. The more liberal respondents are, the more willing they are to discriminate.

Also note this passage, from the 2009 book The Politically Correct University:

Substantial anecdotal and quantitative evidence indicates that there is a decided leftist bent to colleges and universities, particularly the most prestigious institutions … Moreover, as several of the following contributions discuss, this political imbalance likely stems from practices within the academy that discourage conservatives from pursuing academic careers. … We maintain that the relative absence of conservative, libertarian, and neoliberal thinkers and thought from the academy is in part caused by discriminatory academic personnel practices.

And read this passage from “A Crisis of Competence,” a 2012 report for the Regents of the University of California by the California Association of Scholars:

This report is concerned with the corruption of the University of California by activist politics. … The condition we investigate is now a well-documented pathology of the modern university. … According to a recent (2007) Zogby poll, a majority (58%) of the public now believes that the problem of faculty political bias is a very serious one.

These are the very institutions that were to promote freedom of speech. How were they taken control of in the first place, to the point where the documented intolerance could be permitted?

Professor David Gelernter’s new book America-Lite: How Imperial Academia Dismantled Our Culture (and Ushered in the Obamacrats) addresses the history behind the transformation of many universities to a system biased in favor of liberal views. He describes how leftist intellectuals were brought into the universities, and how the previous guardians of conservatism in these places bowed out. Gelernter observes that such views spread elsewhere from their new home in the university, including to the mainstream media.

Gelernter believes that the old conservative guard voluntarily stepped aside:

Intellectuals didn’t conspire to make the cultural revolution happen. They could not have forced the Great Reform if they had tried, because the WASP elite colleges were private institutions in the age before massive federal grants let the government sink its teeth in permanently. The reform happened because the WASP elite stepped aside. It was a remarkable event — either a heroic, self-effacing embrace of justice for its own sake, or an act of exhaustion.

But perhaps he is being too kind to the intellectuals. Is it possible that indeed there was a mechanism by which leftists forced out those who didn’t agree with them?

I propose that there may indeed be such a mechanism, and will make this case beginning with a quote from Gelernter himself:

Among intellectuals, the left-liberal religious faithful are often not merely pious but zealous, even fanatic. To conservatives, they seem irrational and intellectually unserious, unable to hold their own in political argument, often unwilling even to try — all too apt, when pressed, to slouch off in a sulk or flare up like a burnt-out lightbulb with no more watts to spare on you. There is a frazzled flash, a silence, then “let’s talk about something else.” Many conservatives have had the experience.

Gelernter is, perhaps, understating the case. Many conservatives have found that expressing their political views around friends and family can lead to harsh insults, to loss of friendships, and even to a weakening of family ties.

Here are two recent examples from my own experience. I have an email list of 50 close friends and relatives that had previously been used by another member of the list (not myself) for expression of political views. I sent out some pro-conservative viewpoints to this list. One response came back from a dear, life-long friend:

I figure that, at best, this [a view I had expressed] reflects a desperate wish that the economy and life are that simple. A more damning explanation — intellectual laziness. Worse than that — willful intent to distort for political gain.

This friend later emailed me to make sure we continued on terms of strong friendship — and I replied that indeed we do. On Facebook I have posted a number of views critical of Obama but devoid of insulting language. A friend of more than a decade responded:

Your posts and commentary are literally making me sick.

He has since “unfriended” me and failed to reply to a recent sociable email I sent him on a non-political subject. I would gladly continue to be on good terms with him, and have reached out to him with a friendly email as noted. The behavior exemplified by these two events is not generally the behavior of conservatives: conservatives believe in a free exchange of views; conservatives believe in public debate. This Alinsky-style behavior appears to be primarily in use among liberals.

Take this kind of behavior that conservatives encounter so often in our daily lives, the sudden rudeness and hostility from friends and even family in response to an expression of conservative views, and imagine that in the context of academia or a media organization –won’t the effect be to drive out those who have conservative views?

Perhaps conservatives have failed to realize that this hostility of liberals is not limited to the sphere of public debate. Conservatives, believing in a free exchange of views and in public debate, welcomed liberals into the universities, the media, and into other organizations as well. Liberals, hostile to a free exchange of views and hostile to public debate, then drove conservatives out.

This appears to explain how our universities and media first became not merely inclusive of liberal views, but also subsequently exclusive of conservative views.

While conservatives have been treating liberals’ insults and hostility as a mere inconvenience to public debate, it has also been a tool used by liberals to drive conservatives out of their places of business, their chosen professions. As Professor Gelernter recently observed on Powerline:

While conservatives worry about debt and taxes and huge problems abroad, the left is busy pulling the whole country out from under them. While conservatives fiddle around on the roof, robbers are rifling the house and stealing the children.

The rightful goal of the media is to permit the public to be aware of all facts relevant to public debate, including facts supportive of liberal views, conservative views, and any and all other views. When things have reached the point where, as Roger L. Simon points out, reporters are afraid of being fired should they report facts supportive of conservative views, then we have a “Zombie Media,” one no longer serving its rightful function. It has been taken over by a hostile organization, shows merely the semblance of life, and is in fact supporting a purpose inimical to that which it is properly expected to perform.

If we now understand how our media and universities first became bigoted and biased against conservatives, we can at long last begin to consider steps intended to affect a turning of the tide.

_Collective Zombies of the Media, Academia, Etc.

Malthusian Doomers Appear Totally Ignorant of Basic Economics

Two recent articles in the economic blogosphere point out the basic ignorance in economics of Malthusian doomers:

The neo-Malthusian extrapolation in doom-laden pieces like “Welcome to Dystopia” never ceases to amaze me (I sometimes think such articles can be best understood by applying psychology rather than economics. Most – including Grantham’s latest – could be productively revised through the author asking themselves the simple question: ”Why is the lamp by which I am writing this not lit by whale oil?”).

For starters, Grantham has never heard the warning of a former a British Chancellor of the Exchequer, “Beware of extrapolation: it can make you go blind” (even though he quotes Kenneth Boulding to the same effect at the start of the article). Again and again, Grantham holds one item constant, and draws a straight line to chaos, doom, starvation and war.

Like many business leaders today, Grantham is also not afraid to release his Inner Authoritarian, writing that the only people who seem to understand what is going to happen to future commodity prices (Up! Up! Up!) and the world economy (Down! Down! Down! – though how that squares with Up! Up! Up! is not explained), are the Chinese Government and the military forces of the US and UK. I know that fear sells, and this is an investment newsletter, but Wow! – for a man who’s made millions, Grantham sure lacks faith in the price mechanism. (Grantham also fails to recognize the limits of developmental autocracy in China, but he’s hardly alone there).

Truly, “Welcome to Dystopia” is a catalog of self-contradiction and error. Like many “The world is running out of X” pieces, Grantham cites Leading Authorities about dwindling supplies of various essential commodities, and paints dire straight lines between present trends and doom. He fails to explain convincingly, however, why this time innovation, spurred by price, won’t drive substitutes and solutions. Hasn’t he heard of the Simon and Ehrlich bet? Oh. I forgot: ”This time is different”. I suppose he gives fair warning by using the terms “paradigm shift” and “phase change” right off the bat.

As close friend pointed out to me a few years ago, “When you buy commodities, you’re selling human ingenuity.” I may not be as wildly optimistic as some, but I certainly don’t think Grantham makes a persuasive – or even logically consistent – case for a coming commodity dystopia. _Strategy, Surprise, and Disruption

Much more with informative price trend graphics at the link above. The concept of the "price signal," and the effect it has on future behaviour of people in the marketplace appears to have escaped most doomers.

Interestingly, the author of the piece above has challenged doomer Jeremy Grantham to a 10 year bet on future trends in commodities prices, a la the famous Julian Simon : Paul Ehrlich wager. Another article pointing out the lack of economic savvy among doomers looks specifically at peak oil doomerism:

Every few years, another author comes out and says that we just reached peak oil and should begin preparing for the onslaught that will be starting to occur -- then, of course, it doesn't occur, mostly for the following 3 reasons.

Problem 1: Innovation Changes Economically Recoverable Oil Supply

When economists begin formulating theories, they often make one of the most critical mistakes possible -- something, thankfully, the Austrian school doesn't do. They begin assuming that economics involves static numbers.

George Soros's theory of reflexivity is probably one of the most important concepts investors should learn to understand. It's the notion that people react to people and change their actions, and the other people react to the changes, creating an endless feedback loop.

This feedback loop is why it's impossible to assume that trends are constant when they are about society. This includes economics, innovation, demand for certain goods and services, and other things.

Peak oil might make sense if we were stuck with a set amount of oil, people were not going to begin shifting away from oil consumption 'in time', if innovation didn't exist, and if economically unrecoverable oil couldn't become recoverable with higher prices.

Of course, all of the above aren't true. In fact, this is one reason researchers at Harvard are making the opposite predictions of the oil-peakers.

From Harvard's Kennedy School website on June 26th:

"Oil production capacity is surging in the United States and several other countries at such a fast pace that global oil output capacity is likely to grow by nearly 20 percent by 2020, which could prompt a plunge or even a collapse in oil prices, according to a new study by a researcher at the Harvard Kennedy School...

Contrary to some predictions that world oil production has peaked or will soon do so, Maugeri projects that output should grow from the current 93 million barrels per day to 110 million barrels per day by 2020, the biggest jump in any decade since the 1980s. What's more, this increase represents less than 40 percent of the new oil production under development globally: more than 60 percent of the new production will likely reach the market after 2020."

Far from reaching peak oil and seeing prices increase forever, we're seeing a very real possibility of the opposite. Innovation exists. Oil supply can increase. Not forever, of course, but certainly long enough for society to transition to another energy source altogether, like electric or something else.

Companies like Exxon (XOM), Chevron (CVX), and BP (BP) are dedicating huge amounts of money to make sure that innovation and exploration get better every year -- not static.

Problem 2: Higher Prices Change Economically Recoverable Oil Supply

Innovation makes some oil sources economically recoverable that used to not be recoverable. For example, according to the Economist last year, we were seeing demand outstrip supply. But that doesn't mean we were seeing peak oil. Even with increased demand, we were seeing a boost in production.

When demand begins to outstrip supply, this has an important impact on the market. It makes some oil that wasn't economically recoverable suddenly more recoverable because of the higher prices.

Just look at shale oil. As prices begin to increase, as well as technology, more and more oil is suddenly recoverable and can be put on the market. Apparently, supply and demand still work.

Problem 3: Higher Prices Automatically Cut Demand For Oil Products

This is probably the most important concept we need to understand. Higher oil prices make non-oil based fuels more economical. This means electric cars or something else entirely. We're decades away from even needing electric cars, but if there are long-term trends of oil price growth, then we'll see people transition to fuels that are cheaper. It's the way the market works.

This is one reason having higher fuel standards on cars actually is an economically destructive thing, because higher gas bills for consumers can end up pushing billions toward developing new fuels, allowing us to move to more economically friendly fuels decades earlier than with higher fuel standards.

Once again, government action misses the point of "higher prices" in the first place. Governments often miss the fact that ignoring prices with policy is economically destructive. _Shaun Connell

The author of the second piece above likewise points out the importance of the "price signal" in changing economic behaviour.

If a person cannot even comprehend the most basic concepts of economics and economic behaviour, their prognostications about the future are unlikely to reflect what will actually occur.