George Friedman writes:  The real question is whether a declining population matters. Assume that there is a smooth downward curve of population, with it decreasing by 20 percent. If the downward curve in gross domestic product matched the downward curve in population, per capita GDP would be unchanged. By this simplest measure, the only way there would be a problem is if GDP fell more than population, or fell completely out of sync with the population, creating negative and positive bubbles. That would be destabilizing.

But there is no reason to think that GDP would fall along with population. The capital base of society, its productive plant as broadly understood, will not dissolve as population declines. Moreover, assume that population fell but GDP fell less – or even grew. Per capita GDP would rise and, by that measure, the population would be more prosperous than before.

One of the key variables mitigating the problem of decreasing population would be continuing advances in technology to increase productivity. We can call this automation or robotics, but growths in individual working productivity have been occurring in all productive environments from the beginning of industrialization, and the rate of growth has been intensifying. Given the smooth and predictable decline in population, there is no reason to believe, at the very least, that GDP would not fall less than population. In other words, with a declining population in advanced industrial societies, even leaving immigration out as a factor, per capita GDP would be expected to grow.

A. Gary Shilling writes:  A cartel gathers together to control production and pricing.  In the past, smaller nations in the OPEC group have cheated Saudi Arabia and other big, wealthy producers.  Now Saudi Arabia, backed by Kuwait, the UAE, and Qatar are keeping production up, and prices down.

What is the price at which major producers chicken out and slash output? Whatever that price is, it is much lower than the $125 a barrel Venezuela needs to support its mismanaged economy. The same goes for Ecuador, Algeria, Nigeria, Iraq, Iran and Angola.

Saudi Arabia requires a price of more than $90 to fund its budget. But it has $726 billion in foreign currency reserves and is betting it can survive for two years with prices of less than $40 a barrel.

Furthermore, the price when producers chicken out isn’t necessarily the average cost of production, which for 80 percent of new U.S. shale oil production this year will be $50 to $69 a barrel, according to Daniel Yergin of energy consultant IHS Cambridge Energy Research Associates. Instead, the chicken-out point is the marginal cost of production, or the additional costs after the wells are drilled and the pipes are laid. Another way to think of it: It’s the price at which cash flow for an additional barrel falls to zero.

Of 2,222 oil fields surveyed worldwide, only 1.6 percent would have negative cash flow at $40 a barrel. That suggests there won’t be a lot of chickening out at $40. Keep in mind that the marginal cost for efficient U.S. shale-oil producers is about $10 to $20 a barrel in the Permian Basin in Texas and about the same for oil produced in the Persian Gulf.

Also consider the conundrum financially troubled countries such as Russia and Venezuela find themselves in: They desperately need the revenue from oil exports to service foreign debts and fund imports.

With new discoveries, stability in parts of the Middle East and increasing drilling efficiency, global oil output will no doubt rise in the next several years, adding to pressure on prices. U.S. crude oil production is forecast to rise by 300,000 barrels a day during the next year from 9.1 million now.   Inefficient rigs that are being idled, not the horizontal rigs that are the backbone of the fracking industry. Consider also Iraq’s recent deal with the Kurds, meaning that another 550,000 barrels a day will enter the market.

While supply climbs, demand is weakening. OPEC forecasts demand for its oil at a 14-year low of 28.2 million barrels a day in 2017, 600,000 less than its forecast a year ago and down from current output of 30.7 million.

In the US consumers during the past few years have bought the most efficient blend of cars and trucks ever. At the same time, slowing growth in China and the shift away from energy-intensive manufactured exports and infrastructure to consumer services is depressing oil demand. China accounted for two-thirds of the growth in demand for oil in the past decade.

Yanis Varousfakis writes:  Game theorists analyze negotiations as if they were split-a-pie games involving selfish players. Because I spent many years during my previous life as an academic researching game theory, some commentators rushed to presume that as Greece’s new finance minister I was busily devising bluffs, stratagems and outside  struggling to improve upon a weak hand. Nothing could be further from the truth.

If anything, my game-theory background convinced me that it would be pure folly to think of the current deliberations between Greece and our partners as a bargaining game to be won or lost via bluffs and tactical subterfuge.

The trouble with game theory  is that it takes for granted the players’ motives. To fashion a fresh mind-set that transcends national divides, dissolves the creditor-debtor distinction in favor of a pan-European perspective, and places the common European good above petty politics, dogma that proves toxic if universalized, and an us-versus-them mind-set.

As finance minister of a small, fiscally stressed nation lacking its own central bank and seen by many of our partners as a problem debtor, I am convinced that we have one option only: to shun any temptation to treat this pivotal moment as an experiment in strategizing and, instead, to present honestly the facts concerning Greece’s social economy, table our proposals for regrowing Greece, explain why these are in Europe’s interest, and reveal the red lines beyond which logic and duty prevent us from going.

We are determined to clash with mighty vested interests in order to reboot Greece and gain our partners’ trust. We are also determined not to be treated as a debt colony that should suffer what it must.

What if the only way you can secure funding is to cross your red lines and accept measures that you consider to be part of the problem, rather than of its solution.

Against such cynicism the new Greek government will innovate. We shall desist, whatever the consequences, from deals that are wrong for Greece and wrong for Europe. The “extend and pretend” game that began after Greece’s public debt became unserviceable in 2010 will end. No more loans — not until we have a credible plan for growing the economy in order to repay those loans, help the middle class get back on its feet and address the hideous humanitarian crisis. No more “reform” programs that target poor pensioners and family-owned pharmacies while leaving large-scale corruption untouched.

Our government is not asking our partners for a way out of repaying our debts. We are asking for a few months of financial stability that will allow us to embark upon the task of reforms that the broad Greek population can own and support, so we can bring back growth and end our inability to pay our dues.

We know by looking into the eyes of the hungry in the streets of our cities or contemplating our stressed middle class, or considering the interests of hard-working people in every European village and city within our monetary union. After all, Europe will only regain its soul when it regains the people’s trust by putting their interests center-stage.

Cigarettes are not good for your health, but what happens when governments try to make the point but taxing products they disapprove?

Tobacco consumption in America has declined consistently since the surgeon general’s office published its first report in 1965. However, more than 18% of adults still identified as smokers in 2013, and in many states, demand for tobacco is high enough to justify large-scale smuggling operations. In New York, a nation-leading 58% of the cigarette market was smuggled in 2013. The share is so high that it hardly fits the description of an underground market.

Cigarette taxes vary greatly between states, and therefore, so do cigarette prices. According to the recent Tax Foundation report, “Cigarette Taxes and Cigarette Smuggling by State, 2013,” this creates arbitrage opportunities for smugglers — that is, the profiting from asset price differences. For our purposes, cigarette smuggling is defined broadly as an avoidance of cigarette taxes.

A state’s cigarette tax is the largest contributor to the smuggling rate. The tax rate on cigarettes in all but two of the nine states where smuggling is most common exceeded the national average rate of $1.44 per pack. In New York, the tax rate is $4.35 per pack, the highest in the nation. Neighboring Vermont, Pennsylvania, as well as nearby New Hampshire, all had much lower tax rates, as well as net outflows of contraband tobacco.

In states that have much higher taxes than other states, and not very much separation geographically, the likelihood of smuggling increases dramatically.

In addition to the high tax rate variance between states, there is the added opportunity for smugglers to buy cigarettes in Indian reservations where tobacco is often far less expensive. New York, New Mexico, Arizona, Wisconsin, and Washington are all near Indian reservations that likely influence the smuggling rate considerably.

While smuggling cigarettes was extremely lucrative for many smugglers, large-scale or small, smoking cigarettes was relatively uncommon in all of these states. The percentage of adults who identified as smokers in 2013 exceeded the national smoking rate of 18.2% in only two of the nine states reviewed.

Levying such so-called “sin taxes” is extremely problematic. Long term planning is almost impossible.  For the Tax Foundation, a positive percentage is a measure of inflow, while a negative percentage indicates an outflow of smuggled cigarettes. Tax rates, smuggling rates from 2006, and percentage point change data also came from the Tax Foundation. Local tax rates, state and local tax revenue figures, and tax burdens are from the Tax Policy Center and are as of the most recent period available. The percent of adults who smoked in 2013 is from the Kaiser Foundation. Rainy-day funds, or reserves as a percentage of general fund expenditures in fiscal year 2014 were provided by Pew Charitable Trusts.