Oil and other commodity prices have recently been dropping. Is this good news, or bad?
Figure 1. Trend in Commodity Prices since January 2011. Brent spot oil price from EIA; Australian Coal from World Bank Prink Sheet; Food from UN’s FAO.
I would argue that falling commodity prices are bad news. It likely means that the debt bubble which has been holding up the world economy for a very long time–since World War II, at least–is failing to expand sufficiently. If the debt bubble collapses, we will be in huge difficulty.
Many people have the impression that falling oil prices mean that the cost of production is falling, and thus that the feared “peak oil” is far in the distance. This is not the correct interpretation, especially when many types of commodities are decreasing in price at the same time. When prices are set in a world market, the big issue is affordability. Even if food, oil and coal are close to necessities, consumers can’t pay more than they can afford.
A person can tell from Figure 1 that since the first part of 2011, the prices of Brent oil, Australian coal, and food have been trending downward. This drop in prices continues into September. For example, as I write this, Brent oil price is $97.70, while the average price for the latest month shown (August) is $105.27. It is this steeper, recent drop, which many are concerned about.
We are dealing with several confusing issues. Let me try to explain some of them.
Issue #1: Over the short term, commodity prices don’t reflect the cost of extraction; they reflect what buyers can afford.
Oil prices are set on a worldwide basis. The cost of extraction varies around the world. So it is clear that oil prices will not match the cost of extraction, or the cost of extraction plus a reasonable profit, for any particular producer.
If oil prices drop, there is a temptation to believe that this is because the cost of production has dropped. Over a long enough period, a drop in the cost of production might be expected to lead to lower oil prices. But we know that many oil producers are finding current oil prices too low. For example, the Wall Street Journal recently reported, “Royal Dutch Shell CEO: Can’t deny returns are too low. Ben van Beurden prepared to shrink company in order to boost returns, profitability.” I wrote about this issue in my post, Beginning of the End? Oil Companies Cut Back on Spending.
In the short term, low prices are likely to signal that less of the commodity can be sold on the world market. Commodities such as oil and food are very desirable products. Why would less be needed? The issue, unfortunately, is affordability. Affordability depends largely on (1) wages and (2) debt. Wages tend to be fairly stable. The likely culprit, if affordability is leading to lower demand for desirable products like oil and food, is less growth in debt.
Issue #2: Economic growth tends to produce a debt bubble.
Many economists believe that technological innovation is the key to economic growth. In my view, economies need a combination of the following to have economic growth of the type experienced in the last 100 years:1
(Increase in debt) + (cheap-to-extract fossil fuels) + (cheap-to-use non-fossil fuel resources) + (technological innovation)
In such a case, debt keeps increasing as an economy grows. Unfortunately, this economic growth is only temporary, because resources tend to become more expensive to use over time, making the “cheap” resources required for economic growth disappear.
The problem underlying the rising cost of resources (both for fossil fuels and others) is that we tend to use the cheapest-to-extract resources first. Technological innovation continues to occur, but as diminishing returns hit both fossil fuels and other resources, there are larger and larger demands on technology to keep costs in line with what workers can afford. Eventually, the cost of resources (net of technological improvements) rises too much, and economic growth is cut off. By this time, a huge mountain of debt has been built up.
Let me explain further how this happens. Without fossil fuels, the world is pretty much stuck with the goods that can be made with wood, or from other basic resources such as animal skins, cotton, flax, or clay. A small quantity of metal and glass goods can be made, but deforestation quickly becomes a problem if an attempt is made to “scale up” the quantity of goods that require heat in their production.2
Once inexpensive coal became available, its availability opened the door to technological innovation, because it provided heat in quantity that had not been available previously. While ideas such as the steam engine had been around for a long time, the availability of inexpensive coal made the production of metals needed for the steam engine, plus train tracks and railroad cars, available at reasonable cost.
With the ability to make steel and concrete in quantity (both requiring heat) came the ability to make hydroelectric dams and electrical transmission lines, thus enabling electricity for public consumption. Oil, as a liquid fuel, paved the way for widespread use of additional innovations, such as private passenger automobiles, mechanized farm equipment, and airplanes. Between coal and oil, many workers could leave farming and begin jobs in other sectors of the economy.
The transformation that took place was huge: from wooden tools and human or animal labor to a modern industrial society. How could such a big change take place? Before the change, the ability to generate a profit that might be used for future capital investment was very limited. Also, the would-be purchasers of products made in an industrial economy were very poor. I would argue that the only way of bridging this gap was debt. See my earlier posts, Why Malthus Got His Forecast Wrong and The United States’ 65-Year Debt Bubble.
The use of debt has several advantages:
- It allows the consumer to buy the end product made with the new resources, assuming the end product isn’t too expensive relative to the consumer’s earnings.
- It gives resource-extracting businesses the money they need to buy equipment and to hire workers, prior to the time they have earned profits from resource extraction.
- It gives the companies the ability to build factories, before they have accumulated profits to pay for the factories.
- It allows governments to fund needed infrastructure, such as roads and bridges, before having the tax revenue available to pay for such infrastructure.
- Most importantly, the “demand” generated by (1), (2), (3) and (4) raises the price of resources sufficiently that it makes it profitable for companies in the business to extract those resources.
Because of these issues, debt and cheap fossil fuels have a symbiotic relationship.
(1) The combination of debt, inexpensive fossil fuels, and inexpensive resources of other kinds allows the production of affordable goods that raise the standard of living of those using them. The result is what we think of as “economic growth.”
(2) The economic growth provides the additional income needed to pay back the debt with interest. The way this happens is indirectly, through what is sometimes described as “greater productivity of workers.” This greater productivity is really human productivity enhanced with devices made possible by fossil fuels, such as sewing machines, electric milking machines, and computers that allow workers to become more productive. Indirectly, the higher productivity of workers benefits both businesses and governments, through higher sales of goods to consumers and through higher taxes. In this way, businesses and governments can also repay debt with interest.
Higher-priced resources are a problem. Higher-priced resources of any kind tend to “gum up the works” of this payback cycle. Higher-priced oil in particular is a problem. In the United States, when oil prices rise above about $40 or $50 barrel, growth in wages stops.
Figure 2. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided by total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
With higher oil prices, the rise in the standard of living stops for most workers, and good-paying jobs become difficult to find. There are a couple of reasons we would expect wages to stagnate with higher oil prices:
(1) Competition with cheaper energy sources. When oil prices rose, countries using a very high percentage of oil in their energy mix (such as the PIIGS in Europe, Japan, and United States) became less competitive in the world economy. They tended to fall behind China and India, countries that use much more coal (which is cheaper) in their energy mix.
Figure 3. Average percent growth in real GDP between 2005 and 2011, based on USDA GDP data in 2005 US$.
(2) Need to keep the price of goods flat. Businesses need to keep the total price of their products close to “flat” despite rising oil prices, if they are to continue to sell as much of their product after the oil price increase as previously. Oil is one major cost of production; wages are another. An obvious way to offset rising oil prices is to reduce wages. This can be done in several ways: outsourcing work to a lower cost country, greater automation, or caps on wages. Any of these approaches will tend to produce the flattening in wages observed in Figure 2.
Based on Figure 2, an oil price above $40 or $50 per barrel seems to put a cap on wages, and indirectly leads to much less economic growth. Even if we didn’t hit this oil price limit–for example, if we had discovered a liquid fuel that could be produced in quantity for less than $40 barrel–we would eventually hit some kind of growth limit. For example, the limit might be climate change or too much population for food production capability. Even too much debt can be a limit, if citizens’ incomes don’t rise in a corresponding manner. At some point, it becomes impossible even to make interest payments if the debt level is too high. Indirectly, citizens wages even support business and government debt, because business revenues and tax revenues depend indirectly on wages.
Issue #3: Repaying debt is very difficult in a flat or declining economy.
Once growth stops (or slows down too much), the debt bubble tends to crash, because it is much more difficult to repay debt with interest in a shrinking economy than in a growing one.
Figure 4. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.
The government can hide this issue for a very long time by rolling over old debt with new debt and by reducing interest rates to practically zero. At some point, however, the system seems certain to fail.
Not all debt is equivalent. Debt that simply blows bubbles in stock market prices has little impact on commodity prices. In order to keep commodity prices high enough for producers to want to continue to produce them, the debt really has to get back into the hands of the potential buyers of the commodities.
Also, any changes that tend to reduce world trade push the world economy toward contraction, and make it harder to repay debt with interest. Thus, sanctions against Russia, and Russia’s sanctions against the US and Europe, tend to push the world toward debt collapse more quickly.
Issue #4: Rising oil and other commodity prices are a problem, especially for countries that are importers of those commodities.
Most of us are already aware of this issue. If oil prices rise, or if food prices rise, our salaries do not rise by a corresponding amount. We end up cutting back on discretionary purchases. This cutback in discretionary purchases leads to layoffs in these sectors. We end up with the scenario we had in the 2007-2009 recession: falling home prices (since higher-priced homes are discretionary purchases), failing banks, and many without jobs. See my article Oil Supply Limits and the Continuing Financial Crisis.
The reason that low oil and other commodity prices are welcomed by many people now is because the opposite–high oil and other commodity prices–are so terrible.
Issue #5: Falling oil and other commodity prices are a problem, if the cost of production is not dropping correspondingly.
If commodity prices drop for any reason–even if it is because a debt bubble is popping–it is going to affect how much companies are willing to produce. There is going to be a tendency to cut back in new production. If prices drop too far, it is even possible that some companies will leave the market altogether.
Even if it doesn’t look like a country “needs” the current high oil price, there may still be a problem. Oil exporters depend on the high taxes that they are able to obtain when oil prices are high. If they cannot collect these taxes, they may need to cut back on programs such as food subsidies and new desalination plants. Without these programs, civil disorder may lead to cutbacks in oil production.
Issue #6: The growth in oil sales to China and to other emerging markets has been fueled by debt growth. This debt growth now seems to be stalling.
Growth in oil consumption has mostly been outside of the United States, the European Union, and Japan, in the recent past. China and other emerging market countries kept demand for oil high.
Figure 5. Oil consumption by part of the world updated through 2013, based on BP Statistical Review of World Energy 2014 data.
Ambrose Evans-Pritchard reports, China’s terrifying debt ratios poised to breeze past US levels. He shows the following chart of China’s growth in debt from all sources, including shadow banking:
Figure 6. China’s total debt, based on chart displayed in Ambrose Evans-Pritchard article.
This rise in debt now seems to be slowing, based on a Wall Street Journal report. A person wonders whether this stalling debt growth is affecting world oil and other commodity prices.
Figure 7. Figure from WSJ article PBOC Struggles as Chinese Borrowers Hold Back.
Other emerging markets also seem to be experiencing cutbacks. Since 2008, the United States, Europe, and Japan have had very easy money policies. Some of the money available at low interest rates was invested in emerging markets. Now the WSJ reports, Fed Dims Emerging Markets’ Allure. According to the article investors, investors are taking a more cautious stance on new investment because of fear of rising US interest rates.
Of course, other issues affect debt and world commodity demand as well. If interest rates rise, they many have a tendency to shrink new lending, in general, because loans become less affordable. Sanctions of one country against another, such as the US against Russia, and vice versa, also tend to reduce demand.
Issue #7: Debt bubbles have been a problem in past collapses.
According to Jesse Colombo, the Depression was to a significant result the result of debt bubbles that built up during the roaring twenties. Another, longer-term cause would seem to be the loss of farm jobs that occurred when coal allowed tasks that were previously done by farm workers to be done by either electricity or by horses pulling metal plows. The combination of a debt bubble and loss of jobs seems to have parallels to our current situation.
Many believe the subprime housing bubble crash contributed to the Great Recession. The oil price spike of 2007 and 2008 played a major role as well.
Issue #8: If we are facing the collapse of a debt bubble, it is quite possible that prices of many commodities will fall. This could possibly lead to a collapse in the supply of many types of energy products, more or less simultaneously.
Figure 8, shown below, is a very rough estimate of the kind of decline in energy use we could be facing if a debt collapse leads to very low prices of many types of fuels simultaneously. Prices of many commodities crashed in 2008, and it was only with massive intervention that prices were propped up to 2011 levels. After the beginning of 2011, prices began sinking again, as shown in Figure 1.
Figure 8. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.
Clearly governments will try to prevent another sharp crash in commodity prices. The question is whether they will be successful in propping up commodity prices, and for how long they will be successful. In a finite world, fossil fuel energy production eventually must decline, but we don’t know very precisely what timeframe.
Issue #9: My steep decline contrasts with the “best case” forecast of future oil consumption given by M. King Hubbert.
M. King Hubbert wrote about a scenario where another type of fuel completely takes over, before oil and other fossil fuels are phased out. He even discusses the possibility of making liquid fuels using very cheap nuclear energy. The way he represents the situation is the following:
Figure 9. Figure from Hubbert’s 1956 paper, Nuclear Energy and the Fossil Fuels.
In such a scenario, it is possible that oil supply will begin to decline when approximately 50% of resources are exhausted, and the down slope of the curve will follow a symmetric “Hubbert curve.” This situation seems to represent a best possible case; it doesn’t seem to represent the case we are facing today. If a debt collapse occurs, much of the remaining fuel is likely to stay in the ground.
Issue #10: Our economy is a networked system. Increasing debt is what keeps the economy inflated. If wages fail to keep pace with debt growth, the system seems likely to eventually crash.
In previous posts, I have represented the economy as a self-organized networked system, consisting of businesses, consumers, governments (with laws, regulations, and taxes), financial system, and international trade.
Figure 10. Dome constructed using Leonardo Sticks
One reason the economy is represented as hollow is because the economy loses its capability to make goods that are no longer needed–such as buggy whips and rotary dial phones. Another reason why it might be represented as hollow is because debt is used to “puff it up” to its current size. Once the amount of debt starts shrinking, it makes it very difficult for the economy to maintain its stability.
Many “peak oilers” believe that if we have a problem with the financial system, all we have to do is start over with a new one–perhaps without debt. Everything I can see says that debt is an essential part of the current system. We could not extract fossil fuels in any significant quantity, without an ever-rising quantity of debt. The problem we are encountering now is that once resource costs get too high, the debt-based system no longer works. A new debt-based financial system likely won’t work any better than the old one.
If we try to build a new system without fossil fuels, we will be really starting over, because even today’s “renewables” are part of the fossil fuel system.3 We will have to go back to things that can be made directly from wood and other natural products without large amounts of heat, to have truly renewable resources.
Notes:
[1] This is really a simplification of the real issues. As world population grows, it is necessary to obtain an increasing amount of food from the same arable land. Thus, it is necessary to find new processes to increase food production, at the same time that soil is quite possibly degrading. Soil is in a sense a “resource other than fossil fuels,” but I have not mentioned this issue specifically.
Growing pollution problems are in some sense an indirect cost of extracting fossil fuels and other resources. These represent another growing cost that I have not specifically identified. Furthermore, there are indirect expenses that do not fit neatly into any category, such as required desalination plants to handle growing populations in areas where water is scarce. We may need to consider mitigation expenses of all types as part of the “cost of resource extraction.”
My point is that it becomes increasingly difficult to offset these many cost increases with technological innovations. Furthermore, if no changes are made, a larger and larger share of both the workforce and resources are required for maintaining the status quo, leaving fewer workers and a smaller quantity of resources to “grow” the economy.
[2] Wind and water are additional sources of energy, but they are sources of mechanical energy, not heat energy, so are not helpful unless they can be converted first to electricity, and then to heat. In quantity, they never were very large in pre-fossil fuel days.
Figure 11. Annual energy consumption per head (megajoules) in England and Wales 1561-70 to 1850-9 and in Italy 1861-70. Figure by Tony Wrigley from Opening Pandora’s Box. Figure originally from Energy and the English Industrial Revolution, also by Tony Wrigley.
[3] Of course, any existing “renewable” will continue to work until it needs repairs that are unavailable. Other parts of the system (such as electric transmission lines, batteries, inverters, and attached devices such as pumps) may fail more quickly than the renewables themselves.
Reblogged this on petrolio e low carbon economy.
Dear Gail and All
I think Gail’s current post and the abundance of previous posts shows very convincingly that the current system cannot continue. Which leaves us with at least four interesting questions:
A Will the Powers That Be succeed for another x decades in propping up a failing system?
B. If the Powers That Be fail in the propping up department, will the ecosystem…including the humans…survive in some different form?
C. As the ecosystem reorganizes, what is likely to happen to me and my descendants?
D. Are there any steps which an individual or family or small group might take to make themselves more adaptable to the likely changes?
Providing answers to all those questions is far beyond my feeble powers. And there isn’t enough space to discuss it all anyway. So let’s consider just a keystone thought and one example. The keystone thought is the knife-edge on which complex systems are balanced (just inside the chaos boundary) and the fact that bifurcations happens as individuals (and perhaps small groups) respond to their immediate environment. The example I will use is water and sewage.
As homework, I ask that you read just what I have extracted from the description of the book immediately below, the quotation from Scott Camazine, one of the authors off the book which I quote below, and the excellent article on water and sewage which appears today at Resilience.
Scott Camazine quotation: A striking feature off self-organized systems is the occurrence of a bifurcation—a sudden transition from one pattern to another following even a small change in a parameter of the system….[Such systems] characteristically show bifurcations…[This] can have important evolutionary consequences for self-organized systems. We have shown how a small change in a system parameter can result in a large change in the overall behavior of the system. Is it possible that such properties could provide self-organized systems with adaptive, flexible responses to changing conditions in the environment and to changing needs of the system?
The Feasta article clearly describes the knife-edge on which our current water and sewage systems rest. The article also discusses alternatives, both at the individual level and at the community level. Now consider a simple social change: every family must supply their own drinking water and take care of their own sewage. (I recognize the complexities of dealing with industrial water use and agriculture in irrigated deserts, but let’s keep it simple. Suddenly, everything would change. Each family and community would experience a bifurcation in their behavior and their worldview.
I submit that we have had enough hand wringing over the inevitable doom which will descend upon us when the current system fails. Its long past time to get about coming up with simple environmental changes which will motivate individuals and small groups to change their behaviors.
I also need to address the ‘suddenly back to the Stone Age’ argument. For example, a composting toilet frequently uses a plastic bucket. Stone Agers didn’t have plastic buckets. Today, they are ubiquitous. Do we demand composting toilets which do not use plastic buckets, and throw up our hands in despair if such do not exist? The facts are, as indicated by the description of the textbook, that biologically alive creatures respond to their felt environment. Anything more than that would require sapience, which George Mobus looks for, mostly in vain. However, there have been examples of political changes which were ‘wiser’ than the aggregate of individual behavior…such as environmental laws and civil rights laws. Consequently, the best we can do is to make simple rules (e.g., no more pumping sewage up hills to plants which dump it in rivers) which change the environment the individuals and small groups experience so that they change their behavior.
Don Stewart
http://press.princeton.edu/titles/7104.html
Self-Organization in Biological Systems
Self-organization refers to diverse pattern formation processes in the physical and biological world, from sand grains assembling into rippled dunes to cells combining to create highly structured tissues to individual insects working to create sophisticated societies. What these diverse systems hold in common is the proximate means by which they acquire order and structure. In self-organizing systems, pattern at the global level emerges solely from interactions among lower-level components. Remarkably, even very complex structures result from the iteration of surprisingly simple behaviors performed by individuals relying on only local information. This striking conclusion suggests important lines of inquiry: To what degree is environmental rather than individual complexity responsible for group complexity? To what extent have widely differing organisms adopted similar, convergent strategies of pattern formation? How, specifically, has natural selection determined the rules governing interactions within biological systems?
http://www.resilience.org/stories/2014-09-23/how-do-we-make-our-water-supply-sustainable
In the example of each person taking care of his fresh water and human waste problems, the first thing that becomes clear is that population cannot be very dense. High rise buildings wouldn’t work. In fact, families would have to be quite spread out, so as to have roofs for water collection, space for a large cistern to keep water in between rain, and space for composting toilets. Composting toilets require wood shavings or sawdust–these would need to be available as well.
With this requirement alone, I expect that we would need to lose our cities of 50,000 or more. Smaller cities would need to be much more spread out. I expect total world population would need to be much lower, because we could not maintain world manufacturing capability.
Wow … I’m glad I finally made it through to the end of the comments. Great comments, BTW. What can I add?
Something very difficult to convey … the _fear_ of being in debt that living through the 1930’s brought. That means not taking on a mortgage, and certainly not one at 95%LTV. The need for _real_ money – silver and gold coins. Think that cannot reappear? What about slavery – you think that is gone forever – watch and learn.
To put financial thinking into context: imagine a scale 0-10, where 10 is an existential threat; climate change is perhaps 7 or 8, peak oil is 5 or 6; and people begin to die in numbers around 2. Finance is perhaps 3. It is manmade, and can be fixed, if we can all agree to do it, but we will not agree. And if we will not fix a level 3 event, there is little chance of the will to tackle anything above that.
I may be a fool … but I have no fear of incurring debt — because I think it will all be moot when the SHTF…
Debt goes together with BAU — and I firmly believe BAU is over. No banks. No computers holding info on what owe. Whatever I have bought on credit will be essentially worthless by BAU standards.
Case in point. I buy a farm for say 500k – financed. When billions are dead who is going to be knocking on my door to pay for mortgage? Also with billions farmland will be plentiful — so it will be essentially worthless by today’s standards … everything will be worthless – railways – cities and apartments – bonds – stocks – cash etc etc etc…
I do not see debt as a major issue. That said, if I had the means to buy the farm using cash I’d do that…
“but I have no fear of incurring debt”
Read Graeber “DEBT – the first 5000 years”? What if the price of your debt is your child in “indentured service” until the debt is extinguised? But that misses the point I was trying to make. Ever played ‘Monopoly’ where everybody won? Thought not 😉
I have no children.
Primarily because my wife and I have had no desire to bring a child into the hell storm that everyone should have known was coming – and is now imminent (most people know infinite growth on a finite planet would end badly – they chose to ignore it).
Even if I did have children I very much doubt they would be indentured over a debt I incurred now.
When BAU ends civilization ends. Banking as we know it ends. The economy ends. Basically the world as we know it ends.
I very much doubt anyone is going to be concerned about who owed who what pre-collapse.
You will have a situation where nobody will be able to pay anybody — assuming anybody is alive….
Every person with a mortgage defaults – because they will have no means to pay – there will be no jobs — every credit card debt defaults – every student loan – every auto loan —- every corporate bond defaults – because there will be no corporations — every government bond will default – governments will collapse… they will have no revenues.
Even if there was someone there to pick up the pieces, that person would need to indenture just about everyone remaining alive… because most people would have pre-collapse debt.
I think people are vastly underestimating what is headed our way.
I am not *entirely* sure of the point at issue here, Hmmm :
* History suggests that at times of economic collapse, slavery increases.
* This time may be different – heat engines are the new slaves.
* This time may not be different – if the collapse is really bad the heat engines will have no fuel – would be consistent with your view of the future?
* If employment collapses, food prices may fall and still be unaffordable.
* Small independent farms will compete with large estates for markets, and because large estates can “hire” cheaper labour, they can undercut the smaller farms.
* Land and property prices fall, to the point where independent small farmers and households are in negative equity. At which point Banks, et al, demand that more collateral be provided by “Tuesday”.
I will stop there – my point is that the typical homeowner worried more about not being “approved” than having any concern or ireal fear about being in debt.
This time is different – when this collapse happens it will be world wide – and permanent
Whoops. I just made a post on slavery before I read this one.
You just don’t get it do you? At which point Banks, et al, demand that more collateral be provided by “Tuesday”. We will barley if at all be able to power an army let alone banks!! I know so many people have been holding on to the stay out of debt mantra but this time it is different….go back and play a collapse in your head…I think you will find that it is very difficult to collect on debt…..but don’t worry probably we will have ww3 before all this happens and then it won’t matter either….
Finance is manmade, but the real issue is underlying, and cannot be fixed. So what looks like finance, is really an inadequacy of the system to provide an adequate return to keep the whole system operating. It is really an illusion that it can be fixed.
I didn’t live through the 30s, so don’t understand the fear of debt that took over then. People are much more willing to take on debt now than years ago.
On fixing finance – Two issues
* I see conracts as “engines”, with finance as the reward/governing controller. Hence if rewards are (mis)directed to the financial sector then capital becomes unavailable for productive investment, Some refer to this as the interest rate apartheit.
* The logic of competitive capitalism is for one winner. At some point that system fails.
I have no good suggestions on a fix, but yes, debt is a symptom not the disease.
“capital becomes unavailable for productive investment”
Richard, Steve Ludlum (Economic Undertow) is the only person I have come across who is currently pointing out the truth that all “production” is consumption. That there is no such thing as a “productive investment”, just an investment that extracts and wastes energy and raw materials faster than previously. Added bonus points if it grows human population, of course!
This is the death spiral that we won’t shake ourselves out of: we want to consume, we have to consume, but our very consumption is killing us. Fancy financing and economic theories are all built on top of this basic physical mechanism, and (probably intentionally) obfuscate it.
“Steve Ludlum (Economic Undertow) is the only person I have come across who is currently pointing out the truth that all “production” is consumption.”
Some ten years ago, Jay Hanson (dieoff.org) noted: “Our present economic system is… little more than a well-organized method for converting natural resources into garbage.” Which seems close to what Ludlum says.
“just an investment that extracts and wastes energy and raw materials faster than previously”
And capitalism has proved to be the most efficient system at accomplishing the above… anyone who studies for an MBA is essentially studying how to most quickly blow through the earth’s resources … if one is really good at burning up the earth one gets rewarded handsomely
I bet MBA holders would disagree with that 🙂
Let them try!
Steve Ludlum makes a good point. With respect to
I think the issue is that we can’t shake ourselves out of it. Consumption is necessary to our very existence. There are many other parts of the system that are tightly interlinked.
You’re right that we can’t/won’t stop consuming. Capitalism and debt-money are a brick on the accelerator, though, imposing consumption above and beyond the amount necessary for well-being. Only in a capitalist world could it “make sense” to bottle water in country A and ship it to country B, at the same time bottling water in country B and shipping it to country A. Take away money, and most modern activities reveal their inherent pointlessness, destruction, and insane waste.
[Sorry if a copy of this ended up in the wrong reply place…]
Pingback: 전세계의 최신 영어뉴스 듣기 - 보이스뉴스 잉글리쉬
Pingback: Lower Oil Prices: Good News Or Bad News? | What I An Reading
Great post, Gail. Just one minor comment: technological innnovation and scientific research are both also constrained by diminishing returns.
You are right. We tend to invent the most productive applications early on. Later, we add little bits and pieces at great cost.
The current fad is for every junior college to become a senior college, and every senior college to become a university. Somewhere along the way, faculty are expect to change their focus from teaching to research. University staffs grow greatly, so that each faculty member can teach less, so as to have time for research. A whole new layer of administrators is needed as well, to help with grant applications and to otherwise supervise research. Educational costs balloon, funded by more and more student debt.
What tends to happen is that the research tends to be channeled into the areas where grants are available, no matter how ridiculous the purpose. (There is a lot more research on whether a new pill will work, than how to cure a disease through lifestyle changes, for example.) Research tends to reiterate the mistakes of the past. Research tends to be very “silo-ed,” because writing across subject areas is difficult, and reviewers are not likely to be knowledgeable across subject areas. And research is written so that the outcome will be acceptable to both the peer reviewers and the ones offering the grants. Both peer reviewers and those offering grants would like happy outcomes. So would academic book publishers. The result is a lot of published research that shows apparently happy endings, but that has close to zero value in terms of real understanding of our problems.
Instead of fire and the steam engine we get Twitter and Facebook…
Pingback: Lavere oliepriser - godt eller dårligt signal? - Økonomisk Ugebrev Flash NEWS!
Pingback: Lower Oil Prices: Good News Or Bad News? | WP1 TCTimes presents The REAL News
Pingback: Lower Oil Prices: Good News Or Bad News? | Golden Gate Daily
A taste of off the grid….
The power is off up here in the village — not sure the story — perhaps upgrading some gear….
Rather than immediately flip over to the LPG generator I thought I’d remind myself of what it’s like to have no electricity… my phone ran out of credit so I have been truly ‘off the grid’ the last few hours… (oooh 3 whole hours!!!)
1. Work stops – on a dime. No internet = no work for me.
2. We are getting into the hottest muggiest time of year here. Most people run AC – we don’t – instead we have a single fan. I laid back to read and nodded off waking up 20 minutes later sweltering because of course the fan was not working.
3. Wanted to refresh under the shower. Water pump is not working so no water.
4. Decided to have a coffee. That would involve starting a fire… couldn’t be bothered (cuz I know I can flip on the gen set and have a fresh ground cup later)
5. Lunch … hmmmm… some cold leftovers in the fridge… good thing the fridge stays cool for some time without the food going off… otherwise I’d have to go up to the garden and pull something out, start a fire and cook it… or just eat a papaya off the tree…
6. Speaking of the garden —we have had rain only once in 3 weeks. We are pulling from a bore to water the vegetables — a few hours of down time is not a problem — but although we have water stored in ponds and a subsurface tank — I am not sure we could last 3 weeks… we might lose everything (note to self – get the solar pump in place)
3 hours off grid is of course not the end of the world —- but pull out that power plug and you can see that things very quickly change radically — existence immediately becomes more difficult … ordinary tasks become time consuming… food supply is immediately precarious…
Medical/dental support would be non-existent if this continued… then of course there are the people who are unable to produce food … they might be knocking at my door.
For those who think living completely off the grid is not a big deal… but are still running electricity, using petrol, buying stuff in the town shops… using medical and dental care…. I would suggest that this is like dipping a toe into the Arctic Ocean and saying ‘doesn’t seem THAT cold….’
Jumping in is a whole different ball game — from my one experience doing that it literally takes your breath away.
I challenge anyone — turn off the power for a month — or even a weekend.
What a wonderful feeling to flip the on button on the gen set and feel the cool breeze from the fan… to knock out a cup of hot coffee…. BAU is truly wonderful…. I hope to enjoy as long as possible — and I will miss it when it is gone!
And anyone who says they can’t wait till it collapses — all I can say is be careful what you wish for.
Paul,
saying “of the grid” is so easy for a lot of people, doing it is really something *quite* different…
Absolutely true.
I doubt there are more than a handful of people in America truly living off the grid — as in they refuse all medical care and medicines – have zero access to electricity and petrol — do not sell anything to BAU — eat only what they produce — never ever buy a single thing not even a chocolate bar – not a bar of soap – not a bandaid from a shop…
Most off the grid types are cheating… big time
You seem to have a unique idea of what “off the grid” means.
It seems to be a moving target, such that whenever someone mentions a success story, you answer with a “Yeabut!”
Why not instead choose to celebrate those who are 20%, 40%, 80% off-grid? Aren’t they that much closer to being able to thrive in a true off-grid scenario?
Let’s face it: it seems your idea of “off-grid” is circling the earth in a spacesuit — and even then, you’d say, “But what about the space suit!”
If being “off-grid” means giving up on community relationships, if it means not being able to visit a local herbalist when ill, if it means not enjoying the products of what Mike Nickerson calls “mutual provision” by trading with others via some proxy, whether fiat paper currency, or precious metal — if “off grid” means these things to you, then I want no part of it!
Your interactions might go smoother if you offer others the possibility of being “right” sometimes, rather than reserving “right” for your ideas only.
Here’s my definition of off the grid:
– you cannot use grid electricity – ever – if you have purchased solar panels and storage that is acceptable – but you can never purchase new batteries or panels after the fact
– you do not use gasoline – LPG or any other form of energy that requires BAU
– you can use coal but you would have to dig it out of the ground yourself – it cannot be delivered by a truck or picked up in your truck
– you can make your own gasoline or diesel but it must be made from locally available inputs — with nothing coming from BAU
– you can never buy any part for any vehicle you are powering with home made gasoline – if the transmission goes you have to fix it- you can use tools that you already have but you cannot purchase new tools
– you cannot pump water unless you are using a solar powered system purchased before going off the grid – you cannot purchase spare parts if anything breaks on that system
– you cannot buy any food whatsoever – you eat only what you produce
– you cannot purchase anything from a shop – no canning jars – no vinegar for pickling – nothing – unless you already have it then you go without – if it breaks unless you can fix it you go without
– you cannot sell anything you produce to a farmers market or shop – you can barter it with neighbours
– you can never visit a doctor – you cannot buy medicine – you can use whatever you previously stockpiled
– you can never visit a dentist – if you have a problem you fix the tooth yourself – or get a neighbour to help you.
– if a thieve comes over the fence and tries to rob you then you cannot call the police – you can ask your neighbours to help or fight the person off yourself
– your cannot go into town and work – you cannot accept a pension – you survive off of nothing other than what you produce on your land
I am sure there are many thousands of people who believe they are living ‘off the grid’ – they have the solar contraptions set up – they chop wood – the grow food — but I doubt there are more than a handful of people adhering to the definition above — maybe nobody (other than people in very poor regions of the world — and even then most still have some connection with BAU)
Most off the grid people are faux … as Gail mentioned — they still need their cookie mix (or if not that they are still participating in some way in BAU). They make a big hoo ha about ‘being off the grid’ but really they remain closely tied in to the economy… they are simply picking and choosing which parts suit them.
Do you know of anyone who is living in the way I have described?
Better still – would you enjoy living like this?
I would not. I have seen it – in Papua – in Ethiopia — trust me – it sucks. You are not living – you are surviving.
By comparison to the true off the grid living that I describe ….what most self-styled ‘off gridders’ in the west are doing could be referred to as ‘Yuppie Off Gridders’
But make no mistake — when the oil stops coming out of the ground — and the refineries shut — this is what is coming. There will be no picking and choosing which parts of BAU to unplug – because there will be no BAU.
We become the spacemen floating in space — with very few external support systems to tap into.
I note that Gail has indicated that she has no special plans for the end game — I see her as the wisest of the wise — and I will let her comment on that further if she likes — but I assume that she has decided that resistance is futile…. that is it best just to focus on enjoying the final days/months/years in the company of family and friends….
If that is the case then I suspect she is correct.
I have this little farm – yet I am under no illusion that when BAU ends that I will be running Little House on the Prairie up here — it will be brutal — and I may wish I perished in a city with my mates at the get go…
I keep on mainly because it feels better than doing nothing — my DNA says do something — I enjoy the tranquility of the garden — and I like fresh food.
If I were to spend all my time preparing for the end, I would have little time to write posts. I am not convinced that it would do a whole lot of good, either. I have done a little bit–enough to perhaps get over the first little bumps in the road, and a garden that won’t possibly feed my family, but that is about it. Perhaps age has something to do with it as well. If I were a young person, with a young spouse, I might be willing to do more. My husband and I are both over 60. We can count on some more good years (my mother is in good health), but whether we are up to producing all of our own food and water and fighting with others over resources is not clear.
“”saying “of the grid” is so easy for a lot of people”
how true we are all “of the grid” 🙂
Sorry, English is my second language. How’s your Norwegian?
Jarle, you are from Norway. I want to ask you how do you feel is the mood among Norwegians lately. Is the society feeling tensions around the local peak-oil? Any xenophobia around? Especially after the Breivik’s case. If Norway goes with the usual trend there is no exit for all others in Europe.
I get the impression that most people think that we are just seeing a short dip, that oil will soon be back. It just a matter of opening up all over northern Norway, and then it’s party time again.
Regarding xenophobia: http://www.pst.no/media/pressemeldinger/terror-threat-against-norway/
The optimism bias, in a different form.
Jarle, my Norwegian is nonexistent so your accomplishments as a polyglot do indeed trump mine. My comment was intended to be humorous by noting a keystroke error that reflected reality. Hence the smiley face :).While you are on the line I also would like to know whether you feel Norway will unite as a tribe when SHTF. I would guess that Norway would be pretty good in terms of establishing a tribe with mutual interests and things in common.
“Hence the smiley face :).”
Sorry, I stopped paying attention to “smiley faces” when people started putting them after anything.
“While you are on the line I also would like to know whether you feel Norway will unite as a tribe when SHTF.”
We’re a country surrounded by sea and Sweden, so I think the chances are good this will happen. But here’s a lot of space to only five million people, so we might end up as several tribes divided by mountains or distance – just like we used to live before fossil fuel.
Pingback: Lower Oil Prices: Good News Or Bad News? - UNCLE - UNCLE
Trying to post the image not sure it will be successful.
http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=L7p
I tried to make the image display. I wasn’t successful either. I think I would need to first upload it to WordPress. Readers can see it by clicking on the link.
Dear Ms. Tverberg,
On one hand you state that debt is the glue that holds our economy together and on the other hand you state that if wages do not keep up with debt expansion, then the economy will collapse.
Within the context of fractional reserve banking, wages cannot keep up with debt expansion. This is an arithmetical reality thus it is a certainty. Fractional reserve banking guarantees that debt is perpetual thus interest is a compounding dynamic.
As interest compounds, the cost of living increases inexorably but arithmetically and wages cannot, once again, arithmetically, keep up with the increase in the cost of living.
Debt conforms to the law of diminishing marginal utility so that what you state is an arithmetical impossibility within the context of Fractional Reserve Banking.
http://research.stlouisfed.org/fred2/graph/?g=L7p
Actually that would be lending at interest, not the particular case of “fractional reserve banking”:
https://qrc.depaul.edu/StudyGuide2009/Notes/Savings%20Accounts/Compound%20Interest.htm
A grows exponentially, but only P exists in the real world.
The formula applies to any type of lending at interest (“teh” hated bankerz), and to all profit-based activities in general (“teh” adored producerz). As mentioned, being arithmetic, it is an absolute certainty.
Fractional Reserve Banking (FRB) is inherently at interest.
That not withstanding however, all loans are at interest. Interest is not the problem. The problem of this variety of FRB in particular, is that economic entities do not have legal possession of the money.
Possession is the key or the problem depending on whom you are.
Effectively, in accepting this variety of money we exchange something we own (our skills and our ideas) for something we do not own and have no control over.
This gives rise to a skewed purchasing power advantage in favour of the owner of the currency whom gradually but arithmetically absorbs all profits of the productive economy. From an arithmetical point of view therefore, regardless of whether the economy is contracting or expanding, the more activity is generated the more and the quicker the profit is transferred thus the quicker wealth is transferred.
The corollary to this monetary system therefore is two fold:
On one hand, the production and consumption cycles are compressed in time
On the other hand, excess production and consumption are guaranteed because induced
From there, you have a constantly increasing cost of living (regardless the persuasion of incumbent governments of all colours and stripes), thus the raising of barriers to entry in business and commerce and the constant expansion of credit markets which lead inevitably to two arithmetical outcomes
1 government gradually becomes the largest actor in the economy
2 business and commerce are gradually monopolised
….
You can work the rest out for yourselves.
We have certainly tended in this direction. Globalization forces more built productive capacity and more production, and lower utilization of that capacity. But bigger entities seem to do better.
There are too many potential workers for jobs available, all competing with very low wage countries. This tends to pull consumer consumption down.
You don’t seem to answer guido’s question above…..you have only addressed it with general assumptions….but his thoughts are contrary to your ” we are heading to the stone age” philosphy….
This whole discussion of Fractional Reserve Banking is only a small part of the problem we currently are encountering. The payment of interest does indeed tend to concentrate payments upward.
I guess I don’t have patience to discuss the whole predicament that we are part of, over again. Our predicament began way back in the hunter-gatherer era, when we began burning wood and other biomass, so we could cook our food and capture animals more efficiently (by burning their habitat). We have gradually expanded our entire economy, by gradually adding the use of more fuel, enabling more types of inventions, and higher standards of living.
The way that we expanded our economy most recently involved fossil fuels. And to get those fossil fuels out at a reasonably rapid speed, we needed debt. The need for this debt included at least the first two of the following reasons, and perhaps all three:
(1) So the consumer could buy the finished product–say a vehicle or a refrigerator. Without debt, the expensive product would have been expensive to afford.
(2) For the would-be factory owner. It is much easier to build a factory with debt, than if a person or company needs to accumulate capital from non-fossil fuel activities.
(3) Possibly (but not necessarily) to extract the fossil fuel itself. If the payback period is sufficiently quick, this can quite often be done with “boot-strapping”–the cash flow from an earlier period, paying for a later period.
Another possible use for debt would be to enable government construction of infrastructure such as roads and bridges, before profits from fossil fuels are actually available.
As I see it, all of the discussion about Fractional Reserve Banking is a diversion. We need debt in some form, especially since 1945, to enable rapid ramp-up of fossil fuel extraction. One of the adverse consequences of all of this debt is concentration of wealth to the rentier class. And arguably, there are distortions related to the money supply. But this is not our basic problem. Our basic problem is diminishing returns with respect to oil extraction, which is making it more expensive to extract oil. It is also slowing down the extraction of oil, and slowing economic growth, making it harder to repay debt with interest. This slowing economic growth is likely behind slowing growth in debt and the low oil prices now.
Dozens of civilizations have flourished and collapsed without Fractional Reserve Banking , or any modern banking for that matter.
The problem is diminishing returns with respect to the fossil fuels that hold up today’s economy. They cause both the Fractionally Reserve Banking system to collapse and our way of extracting oil and other fossil fuels to collapse. The collapse of FRB is simply part of a wider system collapse.
Earlier systems collapsed because of diminishing returns as well, based on all of the research. We are no different. We just have FRB now, as well.
Excellent observations. FRB is only a particular catch-phrase which appeared when the debt has actually reached worrying levels, but it is only the continuation of lending at interest for a longer time-frame, not a separate phenomenon.
Producing requires increasing of the money supply, which can only be met by “debt for everyone” (i.e. democratic capitalism, the present cultural parlance catch-phrase) or by literal slavery with inflation (reducing the quantity of gold in the circulating tokens) in past imperial cultures. The adored producers of “value, wealth” are in fact the drivers of lending at interest and inflation in either money, credit, or both. And the root cause is still the activity of producing seeds for food, which led to the emergence of the first “grains of gold”.
I disagree that producing requires an increase in the money supply. What happens is that the exchange value of money increases or decreases according to the preference of individuals to spend or save. This, in turn, is the natural driver of interest rates. If banks are flushed with savings, interest rates decline and vice-versa.
In FRB, interest rates can only decline artificially. This is the reason, eventually, that the cost of living rises, production is off shored and manufacturing capacity becomes excessive.
I agree that in a healthy economy the money stock could be increased occasionally provided it is done by agreement with civil society. What matters is the following:
The increase in money supply must enter the economy simultaneously at all levels
Individuals must have full legal property of the medium of exchange
I reiterate that possession is the key here.
In a natural value based monetary system, increasing the money stock requires that human and capital resources are employed to prospect, extract and distribute whatever vehicle is chosen to lend value to the money. In so doing, expanding the monetary base feeds the economy.
In FRB, money is simply created thus giving rise to an asymmetrical purchasing power advantage to the entities that have first access to new money and credit.
*sigh*
All of this paper money and other type of securities gives the impression that those who have control over it are very rich, both now and in the future. The problem is that because the debt is not repayable, this view is really an illusion. So the transferred profit does not necessarily have long-term benefit.
I will have to admit that this is not a subject I have studied. I think the situation is more complicated than you say, however, because if businesses borrow money, and invest it in productive ways, they can perhaps have enough additional earnings to repay the debt with interest. While a loan doesn’t create the funds for the interest, by the time the debt comes due, there may very well be enough funds to repay the loan with interest, thanks to the miracle of cheap fossil fuels and cheap resources of other kinds. Debt will be created to help the buyers of the goods the company is selling afford the goods, allowing more debt (and money) to be created. Debt will also help make more jobs. If some of the productivity created by cheap fossil fuels and technology is transferred back to workers, their higher wages will help them buy more goods and services.
One thing that confuses me about this discussion is the focus on the fractional reserve banking system. Debt is pervasive throughout our economy. It is not just the fractional reserve banking system; it is bonds issued by all kinds of organizations, governmental and otherwise. Taxes create a kind of debt as well. There would never seem to be funds created to pay interest, in advance of the time the interest is due.
When a loan is taken out, it can be used for any number of purposes. A popular recent purpose has been to buy back shares of a company’s stock. This increases earnings per share, and indirectly what buyers are willing to pay for individual shares. Loans that are used to buy land tend to bid up the price of the land; loans used for used cars tend to bid up the price of used cars. Student loans place a demand on future earnings of the former student, making the former student less likely to buy a home. So student loans act in the direction of holding down housing prices. Because of these relationships, loans taken out affect prices of assets of all kinds, financial and otherwise. Loans also affect wages and corporate profits. If fossil fuels are cheap, the productivity gains of fossil fuels will tend to funnel back to wages, helping keep wages up. (This is how the use of debt got a good reputation.) The big drawback of debt is that it tends to funnel interest up to the “rentier” class. It also tends to inflate asset prices and create claims on the future that are not really backed by productive capacity, thanks to the effect of diminishing returns.
I will agree that more and more debt has been created. But I am not convinced that this is a deficiency of the fractional reserve banking system, per se.
“fractional reserve banking”?
*cough* that thing I was taught in school? Where the Central Bank imposes limits to retail bank lending via a ratio of deposits to loans?
Even the Bank of England will tell you that limitation was removed many years ago.
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf
” in normal times the Bank does not restrict the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits. “
“I think the situation is more complicated than you say, however, because if businesses borrow money, and invest it in productive ways, they can perhaps have enough additional earnings to repay the debt with interest.”… […] … “It is not just the fractional reserve banking system; it is bonds issued by all kinds of organizations, governmental and otherwise.”
Your most important observation however:
“The big drawback of debt is that it tends to funnel interest up to the “rentier” class. It also tends to inflate asset prices and create claims on the future that are not really backed by productive capacity, thanks to the effect of diminishing returns.”
***
Imagine a world where nobody owns anything and nothing is produced thus nothing is exchanged because people simply live by harvesting what is provided by nature and everyone has access to exactly the same thing in the same quantity as everyone else.
In this world, money would not exist. If nothing is owned then nothing has been produced thus no exchange can take place.
The two immediate arithmetical truths are therefore that:
1 Money cannot exist prior to there being something to exchange
2 Money cannot precede production
In the reality of our context, from the legal point of view, the money sanctioned by the sovereign belongs to the entity that is bestowed the privilege to create it. In other words, the sovereign forces upon society a type of money that is created and legally owned by the central bank.
So, in this construct, the fundamental problem is that all individuals that interact with each other as they must, exchange something they own in the form of ideas or skills, for something they do not own, in the form of money. This is the crux of the entire problem.
POSSESSION IS KEY
This simple truth, results in myriad ramifications that take us to our current impasse.
From this point, the dynamic is subtle.
Since the central bank is the legal owner of the money it creates, the money is therefore only lent to society. In lending money out to individuals and corporations, the central bank demands interest be paid.
In this first instance, you should be able to see the problem. In this construct, unless money creation is perpetual there would never be enough money to pay the interest on the sum that was lent out at the outset. Thus the money creation dynamic must be ongoing.
That being the case, the second immediate truth is that each new unit of currency will arithmetically devalue each unit that precedes it.
More importantly by accepting this money, INDIVIDUALS BECOME INHERENTLY DEBTORS.
This simple truth, guarantees that, under this monetary regime, the money creation dynamic is not only perpetual but it is also unrestrained. The monetary dynamic therefore is the single and ultimate cause of the constant increase in the cost of living.
In this context, bonds and derivatives are merely multiplier vehicles that facilitate and amplify the expansion of the monetary base. This is what is known as “the financialization of the economy” – i.e. driving nominal value away from intrinsic value to support the FRB dynamic.
Because of the arithmetically inevitable diminishing marginal utility of debt, a rise in the cost of living is inevitable. And because of the diminishing marginal utility of debt, the finaicalization of the economy is a foregone conclusion. Thus, in this context, bonds and derivatives are merely vehicles that inflate the GDP figure in order to counteract the diminishing marginal utility of debt (see the graph I posted earlier).
As this is a compounding dynamic, the diminishing marginal utility of debt must also inherently, arithmetically and inevitably result in both the state and the owner of the money to gradually intervene in the economy at ever greater and deeper degrees. This happens via progressively increased legislation and augmented fiscal burden. In turn, this dynamic guarantees that barriers to entry in the economy are raised thus guaranteeing the emergence of large corporations and the concomitant stifling of the productive economy.
This not only guarantees your off shoring of manufacturing. But it also guarantees (as you stated in your observation) that profit gradually migrates towards the owner of the currency and the entities that gravitate around it. As profit concentrates, ownership of the productive capital of the economy concentrates too.
These three Swiss analysts have stumbled on a reality they do not understand:
http://www.newscientist.com/article/mg21228354.500-revealed–the-capitalist-network-that-runs-the-world.html
FRB can only be sustained provided GDP can expand at the same rate or faster. As you approach a 1:1 ratio than you have a problem.
Hence the reason that today we are torturing GDP by trying to include black economy activities like prostitution or the drug trade.
Hence the reason the IMF is suggesting the confiscation of pension funds
Hence the reason you money market funds are yielding nothing and they are now actually costing you money.
Hence the reason nobody today could truly be “independent” and we are all, materially, physically and intellectually, captured.
Cheap oil? Expensive oil? Leftist politics vs politics of the right? Democracy? These are all proximate causes. The one inescapable and inevitable dynamic is the monetary system. And successive governments of the left, the right or the centre have always and everywhere brought about an increase in the cost of living through deficit spending and debt issuance.
By imposing this money upon society, the central bank has drawn a boundary around all social and economic dynamics. There is nothing upstream of the monetary system. Everything evolves within the framework of the monetary architecture.
A monetary system nobody voted for. A central bank the necessity or utility of that was never discussed or debated but simply imposed.
Oil, cheap or otherwise, may have lubricated the workings of the system, but even oil cannot and does not escape the monetary straight jacket.
We did have a system that was tied to gold, back before the Bretton Woods conference terminated the convertibility of the US dollar to gold in 1971. In recent years, debt has been able to escalate and escalate. At this point, there doesn’t seem to be a way out, as you say.
Pingback: Lower Oil Prices: Good News Or Bad News? « Financial Survival Network
The land of the free… and the home of the brave … and the beacon of free speech and democracy…
Dozens arrested in Wall St protests
Protestors fill Broadway in lower Manhattan as a giant inflated ‘carbon bubble’ is passed overhead during a rally and protest called ‘Flood Wall Street’.
Demonstrators led away in handcuffs after police disperse climate change protesters with pepper spray
http://www.theguardian.com/environment/2014/sep/22/flood-wall-street-protest-arrest-police-climate-change-new-york
I bet they were terrorists — a bit of time on the water board should sort them out!
Pingback: Gail Tverberg on Collapsing Oil Prices: Sign of Debt Bubble Collapse, Leading to End of Oil Supply? » Plan B Economics
The current debt bubble predates WWII by a long shot, it really began in the Medici era with the Venice-China trade and grew exponentially during the colonial era. The last 100 years with the exploitation of the Oil resource was just the icing on the cake.
As Steve from Virginia points out in our Vidcast yesterday, the enterprises which were funded by this debt never could pay for themselves, if they had been able to do that there would be no need to keep issuing out more debt.
https://www.youtube.com/watch?feature=player_embedded&v=DL65z3ikol8
Steve shows up about 10 minutes in. The beginning is me and Roamer talking about drilling out in the Bakken.
RE
Yep, that’s what I mentioned here couple of times already, the current version of the debt system goes quite far back at least to early-mid renaissance, which squares nicely with the ever steeper exponential growth pattern since then anyway. Therefore any sort of substantial reversal or rerouting of this odd 600yrs path dependancy is going to rock the world on its head in every domain possible incl. spiritual and material.
Thanks! I knew debt bubbles had started much earlier, but didn’t have the data to support my point.
I would not be surprised if enterprises that are funded by debt could never fund themselves. Humans seem to be ever-optimistic. When a person puts together the effect of inflation with the likelihood that some investments will come out well, there always seems to be room for optimism.
I think that successful businesses generally don’t need debt. They can start with small savings, and then “bootstrap,” by using the cash flow from the current operations to invest in new operations. It is the businesses that are chronically cash-flow negative that need to borrow. With fossil fuels, the need for debt rises as EROEI falls. Modern renewables are very cash flow negative–always require considerable debt that will be paid back over time, assuming the device will actually works over the payback period, and government programs continue in place.
Civilizations have been growing and collapsing long before modern banking ( or any banking ? ) existed.
Yes, it is the underlying diminishing returns problem that causes the issue. One way it manifests itself is in collapsing financial systems. But this is just a manifestation of the real underlying problem.
Pingback: Edito | Blog de Yoananda
And yet, our mortgage got bumped 20 basis points in August (up to 4.45%), at a time when many banks in Canada were announcing reductions on mortgages! (to as low as 2.75%)
When I inquired why, I was told the credit union lending committee said, “Increased risk.” This, at a time when we are experiencing growth in both revenue and retained earnings! Perhaps what they meant was, “Increased risk of our total portfolio, and we know we got you by the balls, so you’re going to cough it up.” (Because we are organized as a co-op, no other lender has been willing to lend us any money.)
I know those with money in the bank are feeling the squeeze, too. We have a term deposit earning 1.5%, and our chequing balance nets an astounding 0.25%.
Anyone out there want to make 3.75%, secured on-title for a $1.7M property?
“… debt and cheap fossil fuels have a symbiotic relationship.”
Ah, another pithy one for my quotes collection! 🙂
Anyone interested in bubbles must spend 91 minutes on hulu watching the brilliant ‘CNBC Originals’ documentary by David Faber entitled, ‘House of Cards’. Try
http://www.hulu.com/watch/59026
It starts off a bit slow because the CNBC viewers are generally upper income people, so they need a bit of an education about middle and lower income folks. But stay tuned. Truth IS stranger than fiction. If you haven’t seen it, and are interested in economics, find time to watch it.
“We’re sorry, currently our video library can only be streamed within the United States.”
Oh well. Guess I get back the ten minutes of my life I was planning to spend on that video — another advantage to being an ex-pat!
Jan
You place too much comfort in being up there in Canada. As many commenters have noted, wars are the best way to keep the masses distracted from the real business.
I have it on good authority that the ’54-40 or Fight’ platform from 150 years ago is about to be resurrected in the next US election cycle. Having been unable to solve any of our other problems with our wonderful democracy, we are going to fall back on the tried and true ‘invade Canada’ program.
Deserters can expect to be dealt with harshly.
Don Stewart
“You place too much comfort in being up there in Canada.”
What? How do you get from not being able to see videos to “comfort?”
You’re right that we can’t/won’t stop consuming. Capitalism and debt-money are a brick on the accelerator, though, imposing consumption above and beyond the amount necessary for well-being. Only in a capitalist world could it “make sense” to bottle water in country A and ship it to country B, at the same time bottling water in country B and shipping it to country A. Take away money, and most modern activities reveal their inherent pointlessness, destruction, and insane waste.
Thanks! Sounds interesting. I know that my personal contacts are mostly with the better off and more educated.
Another explanation:
Economist are right and Gail has no idea what she is talking about.
Over time people are finding substitutes to oil and demand(compared to world GDP) is down with the market flooded in oil. Life is good here in Sunny California at the beach. How is that horse and plow doing Paul ?
Owner of a Nissan Leaf and solar panels
You may be correct. If so, then why so little analysis or logic in your post? If so, why the reliance on personal attacks? Again, you may be correct, a better constructed comment might shed some light on why you are correct.
I’ve been reading this blog since Gail restarted it up after TOD pretty much stopped posting her. She has been predicting financial collapse any time soon for years and the economy continues to recover from the real estate financial fiasco of 2004 to 2008. It takes a decides for supply and demand of oil to adjust (It takes 3 to 5 year to engineer & redesign a car and 10 to 15 to wear it out. Also, it takes years to convince oil companies that the price of oil has changed. They don’t just start drilling of $60 to $80 oil because it reached it once or twice for a season). We are still in the process and at the moment the world has excess oil on the market for it’s current price.
Gail has made it very clear over the years she doesn’t believe in economist and economics. She just can’t admit she has been wrong for the last 3 to 4 years. There are substitutes for oil. Economist never said the market place would be kind. Her desirer for cheep oil is like a teenager who doesn’t want to work and wants to keep living off mom and dad. With the improvement in fuel economy and inflation, gasoline prices are cheaper today than the 1980’s.
There is more than enough fossil fuel to make mother earth uninhabitable for humans. The information is out there. I don’t need to your work for you. The world is changing, don’t get left behind on the farm.
When water goes from $.01 for 10 gallons to $1 for a gallon. You will learn to take shorter showers and eat food that doesn’t demand lots of water. People do learn how to live in the desert. It’s just not as much fun.
You know what the IMF is right?
You know that it is staffed by top economists from around the world right?
Enjoy:
http://www.zerohedge.com/news/2014-04-08/comedy-forecast-errors-here-are-imfs-latest-projections-economic-growth
http://www.zerohedge.com/news/2013-10-08/hilarious-charts-day-imfs-growth-forecasts-over-time
http://www.zerohedge.com/news/2014-01-21/comedy-imf-forecasting-errors-global-trade-tumbles-more-50-imfs-2012-prediction
The catch when the cost of oil extraction goes up is that it means more and more of the world’s resources go into resource extraction. More and more people make their living, directly or indirectly from oil extraction. The growth in the cost of a necessity like oil (and water, and metals, at the same time) leads to a situation where instead of humans becoming more productive, they are becoming less productive. (They are chasing after more difficult to extract resources, so it costs more.) Measured in terms of end product, oil per worker, or coal per worker, or refined metal per worker, output goes down.
An economy that was growing, as humans became more productive (with the help of cheap fossil fuels) gradually switches to a slower growing economy, and then to a shrinking economy. As it switches, it has a very adverse impact on outstanding debt. It also has a very adverse effect on government funding (because governments depend on the surpluses of an economy). Governments borrow more and more, to try to fix their problems, and the problems of their constituents. But in a shrinking (or even slowly growing economy) this debt becomes very hard to repay.
It is very clear that this whole scenario will end badly. Exactly in what time frame it will end badly is less clear.
As I have stated elsewhere, economists have based their models on the way the economy behaves away from limits. They don’t understand that how the economy behaves changes, as we approach limits. Thus, there models become wrong, even if they worked previously. See my post Why Standard Economic Models Don’t Work–Our Economy is a Network.
“It is very clear that this whole scenario will end badly. Exactly in what time frame it will end badly is less clear.”
First of all Gail, the day you were born. It was guaranteed to end badly. But, your parents didn’t have a funeral. They had a birthday party. They worked hard to care for you and to see that you got the best education available. There was food in your stomach and clothes on your back. They didn’t walk around hoping for a higher power that would take care of you.
Second, your statement below:
“The catch when the cost of oil extraction goes up is that it means more and more of the world’s resources go into resource extraction. More and more people make their living, directly or indirectly from oil extraction. The growth in the cost of a necessity like oil (and water, and metals, at the same time) leads to a situation where instead of humans becoming more productive, they are becoming less productive. (They are chasing after more difficult to extract resources, so it costs more.) Measured in terms of end product, oil per worker, or coal per worker, or refined metal per worker, output goes down.”
Was true 100 years ago the same as it is today. It would have been true 1000 years ago also except one would need to replace the word “oil” with something like “gold”. But here we are today in 2014 at recorded world oil production and consumption. With an economy which has a world wide internet, shoots rockets to other planets, phones with more power than the Apollo space craft had to go to the moon and fewer horse & buggies.
There has never been a guarantee that tomorrow is going to be better than today. You just once believed it to be the norm and have now come to the realization it’s not sustainable for ever. The true is, we are evolving and changing. Nothing is sustainable or stays the same. What we need to do as humans is plan for the best out come we can manage.
Third, this statement below is just incorrect,
“As I have stated elsewhere, economists have based their models on the way the economy behaves away from limits.”
This statement shows how little you understand about economics, supply curves, demand curves and how they intersect. In addition, your view of debt is that of an over extended credit card abuser or 2006 home mortgage borrower with no money down. Debt used and underwritten properly to increase productivity will not collapse the system. Of course banking without regulations is like playing with gasoline and smoking at the same time. This was the main cause of the 2008 financial crisis, not oil. The easy mortgage money policy of pre 2008 had the biggest effect on the demand curve crossing the supply curve reaching $147 a barrel.
Gail, if you really want to do some good. I would love to read your next post titled. “The 10 Things we need to Change”.
Make it a better Tomorrow
The problem with your position is that oil is one of the things on this planet for which there is no substitute.
And of course high priced oil was the ultimate cause of the collapse:
High energy prices = less consumption because everything including the fuel in your tank costs more = layoffs = less tax revenue = government cutbacks, layoffs and debt increases = less consumption = more layoffs = less taxes ===== economic death spiral.
Compounding the problem is the fact that a weak labour market means real wages drop – as they are across the world right now – that means everything is more expensive and your buying power is dropping at the same time.
Governments recognize this and are trying to offset with debt, easy lending (they are purposely inflating bubbles), lower interest rates and money printing.
This all started in 2002 when oil went from $12 a barrel to nearly $40 (and of course has never looked back)
Of course they will fail – because the disease is expensive oil. And there is no substitute
The economic death spiral will accelerate when the QE and ZIRP no longer have any effect and the confidence game collapses.
This moment will be known as the end of the industrial revolution by the few who survive.
This is not a Hollywood movie where the hero saves the day. This is the reality we are facing.
THE SMOKING GUN:
HIGH PRICED OIL DESTROYS GROWTH
According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.
http://www.iea.org/textbase/npsum/high_oil04sum.pdf
(work out the impact of $147 oil on GDP)
Paul, your statement below is false and shows you lack of knowledge of economics:
“The problem with your position is that oil is one of the things on this planet for which there is no substitute.”
1. Concrete is a substitute of Asphalt
2. Electric car is a substitute of gasoline
3. Hybrid car is a substitute of gasoline
4. CNG is a substitute of Diesel in HD trucks and Cars
5. Metal roofs are a substitute of Asphalt shingles
6. Bicycle is a substitute gasoline powered car
7. Electric Trains is a substitute of planes
8. Water based paint is a substitute of oil based paint
9. Driving slower on the highway is a substitute of gasoline
10. Fairings are a substitute of gasoline or diesel
There are endless substitute.
You need to spend more time away from this site and ZeroHedge. Here learn something about the real world:
http://www.greencarcongress.com/
You missed on. What substitutes for oil?
It must do all the things oil does e.g. power aircraft, lubricate an irrigation pump, make plastic and fertilizer…
And it must be cheaper than oil.
We are running short on fresh water. Desalinated water is a substitute, but it is terribly expensive. People’s wages don’t go up to pay for it. Living standards drop.
Ores containing low percentages of metals are substitutes for those with high percentages of metals. Much more waste product must be dug up at the same time. There is more labor involved, more fuel involved, and more cost involved. The cost of extracting these metals goes up, but wages don’t go up enough to offset. (In fact, more wages are involved here, taking away from other, productive enterprises.) Citizen’s standards of living drop.
The substitutes we are being forced to use are reducing standards of living. They are effectively shrinking the economy. This is what causes great problems to the financial system, and in fact the whole plan of “borrowing from the future” to finance to day’s costs.
Exactly…. the reason we substitute for something is because the price is too high — substituting with something that costs even more is pointless… you only do it when you have absolutely no other choice… you absolutely do not want to substitute fresh water with desalinated water… for obvious reasons
Oil is different – there is no substitute — at any price.
“Debt used and underwritten properly to increase productivity”
This is exactly the problem. Debt exacerbates “productivity”.. PRODUCTIVITY IS CONSUMPTION, which consumption we can no longer afford. Gaaaaah!
Your wish list is all made up of things that require resources We No Longer Have. It doesn’t matter if a car is 10% more efficient if 250k new people are born each day wanting carz.
Instead of telling other to get with reality, I urge to take your own advice. Read up on Jevon’s Paradox, too, while you are at it.
The fantastic internet, etc. means that now to get my mom’s OTC laxative, instead of walking down to the corner pharmacy, it gets shipped to me FedEx to Vermont from New Jersey via Atlanta, 15 pills at a time. This jacks up GDP, which seems to be everyone’s insane goal, but I really don’t think we can help ourselves.. there is an innate imperative to burn, baby, burn… break down those energy gradients… Funny that with your moniker you don’t recognize it.
Seventeen, It’s not a wish list. It’s a list of alternatives to using more oil or to use less oil. Paul was at error to believe there were none. Economist never said you are going to like the substitute.
“It doesn’t matter if a car is 10% more efficient if 250k new people are born each day wanting carz.”
So now you have defined another totally different problem of population and maybe the core problem to your lack of resources statement. What would be the minimums that could be done to solve it ? And would it be best to implement the minimum to save humans from the dark ages ?
Has anyone stopped you from walking to get your laxatives?
Population is pretty much THE only issue, yet it’s the issue everyone is afraid to talk about—I’m not sure why. I don’t have kids and never intend/intended to.
The laxatives came automatically once my mom was put on hospice. Paid for by Medicare, the private hospice org. got over $5k/month to “care” for her (1x/week nurse visit of 1/2/hr.). I was doing all the work, the diaper changes and what have you.. and what we got from them was access to morphine. With morphine comes the Rx for laxatives. The private hospice deal is a huge scam along the lines of defense contractors, private prisons, and privatized elementary schools, in that you pay twice as much for shittier service. They nickled and dimed my mom, leaving us short of morphine, thank you very much. You can imagine the hell that was to go through. And then when they finally agreed to call in a local scrip, they tried to gyp us out of her prescribed dosage because it would have cost them a couple dollars more! Penny-wise and pound-foolish because they hastened her death: they coulda kept billing Medicare their per diem for weeks at least, if they only woulda sprung for overnight FedEx vs. 2-day air. I gave them several days’ notice we were running out. Ever tried getting morphine out of the local pharmacy w/o an Rx? Good luck, you friggin’ idiot. I wanted to switch hospice companies, but they all use the same pharmacy (Enclara) and the same just-in-time business model that sends the meds to your door.
Economists don’t consider our current situation. They base their ideas on past outcomes, away from limits.
The world has seen diminishing returns for a long time, but the situation is quantitatively different now than it was in the past. Depleting resources deplete very slowly at first, then more or less “turn the corner”–become much harder to extract.
This sudden shift toward more difficult extraction is the situation we have been encountering since the early 2000s. Prior to that time, the efficiency gains could offset depletion. Now, depletion is occurring so rapidly that efficiency gains can’t keep up. The cost of production keeps rising, but people’s wages don’t. Because people’s wages aren’t rising, it is hard to get the price to increase enough. More debt would help, but this doesn’t seem to be keeping up either–especially from China. The price of oil drops below the cost of extraction, and new development drops off. This situation cannot end well.
“Life is good here in Sunny California at the beach”
I consume therefore I am. It is a omost universal paradigm, overriding all other political, religious or cultural paradigms.
“Owner of a Nissan Leaf and solar panels” This is a extrapolation upon I consume therefore I am. -the belief that social goals, political support or unlimited energy (and unlimited consumption) are created by particular personal consumption choices.
OK, but please don’t call me ordinary. There is always a better way. You don’t have a vehicle and aren’t connected to the grid because you don’t consume. Did you buy that computer your typing on ?
Oh gosh… I am moved to tears… it’s time for a song… and how appropriate that the artist worked so hard and making the world a better place… an apostle for anti-consumerism and disgusting behaviour (sarc tag)
http://www.youtube.com/watch?v=BWf-eARnf6U
Encore!!! Encore!!!!
“OK, but please don’t call me ordinary.”
With 7 billion humans on the planet we are all quite ordinary. Omost all of our achievements are not from creativity or being special but from fossil fuel. Humans are capable of love and beauty but this is generally lost in the competition and status of consumerism. The capability of love and beauty that humans can achieve is not ordinary. Equating this capability with consumerism is a great slander of human potential. Once again a argument for your consumption model. Im special I deserve it.
“There is always a better way”.
I find this to be one of the primary delusions. It spawns the following delusions. Things will always improve growth will always continue and consumption is infinite. Ideas are worth more than energy. Once again a argument for your consumption model
“You don’t have a vehicle and aren’t connected to the grid because you don’t consume”
You attempt to establish my collusion with your consumption model. Yes I consume I am not immune. I can assure you my consumption is much less than average “life is good in sunny California” I can quantify it for you; under $5000 a year consumed. I consider that to be a excessive amount of consumption considering our situation as a species and compared to resources consumed by other humans outside the developed world. No I am not immune. I still consider myself living the good life. A very good life. I meet homeless people all the time that have dropped out. Intelligent, worked hard, living in camps. They are living a good life too. They still breathe the sweet smells of summer feel the cold precipitation of winter. I consider those people more moral than I their path more appropriate to our situation as a species than mine.
In contrast their are people outside the developed world that genuinely suffer from lack of basic consumption. Would you call them the “ordinary” people that you so disdain?
Well Joe,
I would hope as far as this blog is concerned, you will not think of me as ordinary. I will tell you “I think Gail analyst of the current world energy situation is completely wrong”. I don’t think you will find that ordinary here at OurFiniteWorld (great title by the way).
I’m sorry you got the idea I have disdain for people. That’s not true at all. I want the best for everyone, not just some. The route of the problem is there are just to many humans on earth. Which I find religion as part of the problem. Just more differences between Gail and myself.
It’s not about how much we consume. It’s about how much damage we do.
“The route of the problem is there are just to many humans on earth. ”
Agree.
‘Which I find religion as part of the problem.’
Agree.
“Just more differences between Gail and myself.’
Belief in higher power is far from religion.
“It’s not about how much we consume. It’s about how much damage we do.”
Hogwash. The damage we do and the amount of damage is fundamentally caused by consumption and the amount of consumption. . The reason overpopulation is a problem is that more humans = more consumption. The two examples you gave regarding what I feel confident you would regard as methods to reduce the “damage we do” the leaf and PV are both directly linked to energy consumption. Consuming in order to reduce consumption is not without merit in some actions, say adding insulation to a house. Usually the most efficient way to reduce consumption does not require further consumption. The most efficient way to reduce consumption is to just reduce the consumption not consume a additional large ticket item. That a group of consumer items have been created that are marketed as consumption reducers, that actually represent a large consumption of resources seems quite warped to me.
I do agree with you that too many people is a huge part of our problem.
How do I know that Gail is likely correct and economists wrong?
1. Economists, central banks and governments default to lying on just about every issue related to the economy.
2. Europe is sinking deeper into deflation and toying with the nuclear option – outright printing
3. Japan is cratered – Abenomics is as expected a total failure
4. The US remains a basket case
5. China is faking its numbers (as usual) and is running out of ideas on what other pointless mega projects to build.
6. I have not seen any indication that the overall supply of oil is changing significantly
7. I have seen information that the projected demand for oil is much lower than expected.
Therefore if one were capable of working out that 1+1 = 2…. then one would surely be able to come to the conclusion that the price of oil is dropping because growth is cratering globally.
And if one were really clever – let’s say capable of calculating that 2 x 2 = 4… then one would understand that this is not a very good situation — because big oil was cutting capex with oil priced at $110….
So if oil continues to drop – say to $80…. that would mean that we are closer to the moment where what oil is in the ground will remain in the ground — because it cannot be extracted profitably…
How do I know that Gail is likely correct and economists wrong?
Gail isn’t correct, I put my money on the people who got this world into this mess everyday. Not the naysayers.
Do you want to add a sarc tag to that?
“4. The US remains a basket case”
This comment is so clueless. I need not say more.
Oh please do say more … show us how the US is in full on recovery mode … I wait with baited breath….
“I wait with baited breath”
Eeewww! Yuk! Nite crawlers? Crickets? Minnows? Are you changing your diet in preparation for the overnight end of BAU? 🙂
I think the term you are struggling for is “bated breath.”
Ah what the heck … let’s lay it out for you:
#1 The homeownership rate in the United States has dropped to the lowest level in 19 years.
#2 Consumer spending for durable goods has dropped by 3.23 percent since November. This is a clear sign that an economic slowdown is ahead.
#3 Major retailers are closing stores at the fastest pace that we have seen since the collapse of Lehman Brothers.
#4 According to the Bureau of Labor Statistics, 20 percent of all families in the United States do not have a single member that is employed. That means that one out of every five families in the entire country is completely unemployed.
#5 There are 1.3 million fewer jobs in the U.S. economy than when the last recession began in December 2007. Meanwhile, our population has continued to grow steadily since that time.
#6 According to a new report from the National Employment Law Project, the quality of the jobs that have been “created” since the end of the last recession does not match the quality of the jobs lost during the last recession…
Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.
Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.
Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.
#7 After adjusting for inflation, men who work full-time in America today make less money than men who worked full-time in America 40 years ago.
#8 It is hard to believe, but 62 percent of all Americans make $20 or less an hour at this point.
#9 Nine of the top ten occupations in the U.S. pay an average wage of less than $35,000 a year.
#10 The middle class in Canada now makes more money than the middle class in the United States does.
#11 According to one recent study, 40 percent of all Americans could not come up with $2000 right now even if there was a major emergency.
#12 Less than one out of every four Americans has enough money put away to cover six months of expenses if there was a job loss or major emergency.
#13 An astounding 56 percent of all Americans have subprime credit in 2014.
#14 As I wrote about the other day, there are now 49 million Americans that are dealing with food insecurity.
#15 Ten years ago, the number of women in the U.S. that had jobs outnumbered the number of women in the U.S. on food stamps by more than a 2 to 1 margin. But now the number of women in the U.S. on food stamps actually exceeds the number of women that have jobs.
#16 69 percent of the federal budget is spent either on entitlements or on welfare programs.
#17 The number of Americans receiving benefits from the federal government each month exceeds the number of full-time workers in the private sector by more than 60 million.
http://www.zerohedge.com/news/2014-04-30/17-facts-show-anyone-still-believes-us-economy-just-fine
Too much to copy so I will let you enlighten yourself on your own — you know how to right click right?
http://www.zerohedge.com/news/2013-12-09/37-reasons-why-economic-recovery-2013-giant-lie
Paul,
You need to pull your head out of the right wing ZeroHedge Website. It’s full of misleading representations. Here is just one simple example from your link reference.
“#22 As 2003 began, the average price of a gallon of regular gasoline was about $1.30. When Barack Obama took office, the average price of a gallon of regular gasoline was $1.85. Today, it is $3.26.”
We all know the price of gasoline was $4.50 six months before it was $1.85 at the worst of the 2008 financial collapse. Which lead to the country to lose 750,000 a month. The price of gasoline has been steady in the $3 to $4 range for 5 years now. In addition, the country has increased it oil production from 5 million barrels a day to 8.5 million. This is the largest increase on record. A far cry from a “basket case”.
Garbage in is garbage out. You need to work on your sources.
I suppose I should get my facts from CNBs?
Are disputing any of the facts stated on ZH?
If so please take them one by one and explain how they are wrong… with evidence demonstrating that they are wrong…
I think there were 17 in total…. we are waiting
DBD m BBB,
You may be right. You may be right that chronically negative cash flow from oil extraction can continue forever. Or maybe not.
Sounds suspiciously like a perpetual motion machine….
Kind of like the Alaska pipeline. Putting out less than 25% of it’s peak volume, but 40 years later still pumping out more cash than ever. The oil business is a extremely heavy up front capital equipment investment model. We all love what old pipes can do to profits. That’s what Gail calls cheap oil today. It wasn’t so cheap to build in the 70’s. We have been here before.
You must have at least a little faith in me. You seem to come back, at least to ask questions.
Now is a good time to post this video from the Lego movie since everything is awesome here in Ventura!
I was hypnotized by this fatamorgana of ‘infinite resources world’ for quite long time as well. No wonder that the next generation hasn’t got a clue about what’s going on, considering level of indoctrination in our pop-culture.
Drill Baby Drill means Burn Baby Burn wrote:
“Over time people are finding substitutes to oil and demand(compared to world GDP) is down with the market flooded in oil. Life is good here in Sunny California at the beach. How is that horse and plow doing Paul?
Owner of a Nissan Leaf and solar panels”
Over time people are finding substitutes to oil? You troll, you!
In the future your Leaf can be used as… hm… anchor, and your solar panels as roofing.
I recall when the Leaf car was about to be launched, there were published several detailed technical analysis why this is going to be rushed to market piece of crap in comparison to other EVs and or plugin hybrids. No proper thermal management for the battery, wrong depletion/deep cycling for the battery etc. Obviously it was spot on, the company and internet troll fan boys had to first go into vitriolic denial, then damage control and lastly capitualte, redesign a bit the product and so on.
If you are rich, and buy or lease new cars for your business on almost annual basis, EVs and solar is apparently the way to go, you get nice comfy but temporary effect of resiliency out of this setup. However, if you are in the prudent camp with the same car for a decade or more it’s just unreliable waste of money. Or alternatively if you are technicaly savy to judge problems on your own let the first adopter fools eat the upfront costs and go second hand on both car and panels.
Ah, but the sense of entitlement is awesome. I am entitled and I win because I am entitled.
By the way, I did put together an article explaining some of the ways in which economists are wrong: Why Standard Economic Models Don’t Work–Our Economy is a Network. Economists put together models, assuming that the economy is a long way from limits. In such a case, energy is not very important, and substitution works pretty well. But things fall apart as we reach limits. Economists assume those limits are infinitely off in the future. They are not.
Another post that talks a little about how badly economic assumptions work is Climate Change: The Standard Fixes Don’t Work.
I would not be surprised if you have above average income, and expect that you expect these devices will help you personally have a better life, if oil supply becomes scarce. You also recognize that the government, using tax money collected from everyone, including the poor, will subsidize these devices. Somehow, I find this approach distasteful–having the poor subsidize the rich, buying the rich what are mostly high-priced toys now, so that the rich have a better chance at the future. Both solar panels and electric cars represent huge accumulations of fossil fuel energy, stored to help in the future.
Pingback: Amateur psychotherapy is not an appropriate response to hard energy limits | Steady State College
We are in depression cycle. People have no money and looking for alternative that save money. Nothing illustrated this better that alibaba and his sister aliexpress. Just recently alibaba, that is a copy of eBay, has been launched into the NewYork stock exchange. While reading reviews about alibaba, I found one review about fake condom from aliexpress. Because I am an old man and don’t care much about sex , I google fake condom to learn that I was one year behind this scandal.
If you are willing to order condom from China just to save a few dollars, it means that you have no money. I suspect that the deflationary spiral is way bigger then we can imagine. So the lower price on oil just reflect that.
Look how careful china has duplicated the name of the company and the logo and colour. Do you think you get quality food from china if they don’t care about quality of condoms. So Now we have send all our manufacturing to china and we are dependent on a countrie with low moral values, corrupted and no regulation. We are dependent on a country where everything is acceptable include lying.
http://www.youtube.com/watch?v=Y4aumesj8VU
The website below belong to alibaba you know the big IPO that everybody talks about. This website is a copy of eBay
and they are selling fake junk and low quality crap. Just read the review on aliexpress and alibaba.
http://www.aliexpress.com/item/900-condoms-lot-durex-condoms-fast-shipping-big-condoms/1857299171.html
I just though I share that with older man like me. That are out of fashion.
When I wrote you a few days back suggestng that a recap of your predictions and explanations for falling oil (& commodity) prices might be called for (based on recent price declines), I should have known you had such a post in the works. You read my mind. Great and timely work here.
Thanks! I was afraid it was too much repetition for regular readers, but sometimes repetition is necessary to bring a number of ideas together.
A bit off topic perhaps, but I’d really like someone of Gail Tverberg’s expertise to analyze and critique Paul Krugman’s column at http://www.nytimes.com/2014/09/19/opinion/paul-krugman-could-fighting-global-warming-be-cheap-and-free.html?_r=0
Taking off from the recently released New Climate Economy report (http://newclimateeconomy.report/), Krugman addresses “growth” but doesn’t define it, and seems to be saying alternative energy sources can delink GDP/consumerism from “economic growth” and allow us to continue with BAU basically unchanged except for the source of energy. But he never defines “growth” or address energy issues in any depth. Instead he summarily dismisses “anti-growth environmentalism” which “is a marginal position even on the left” without naming any names other than the European based “degrowth movement” and the Post Carbon Institute.
Krugman is a well-known liberal (neo-liberal?) and has a large audience. I find it odd that he doesn’t seem to read or understand much about the basics of energy flow and economics. A well reasoned rebuttal on a well-read blog would help a lot…
Herman Daly, apparently one of the fringe economists Krugman finds not worth directly addressing, does clearly define the difference between unsustainable growth (capitalist, debt driven BAU) and sustainable development, a worthy concept at least since the Bruntlandt report. See http://www.citizenrenaissance.com/the-book/part-three-where-are-we-heading/chapter-seven-the-rise-of-ecological-economics/growth-vs-development/)
And a reference: Published as chapter 8 in the recent book “Is the Planet Full” (Goldin, Ed. 2014) a paper by Yadvinder Malhi is a great summary of the energy flows needed (metabolism) to sustain different levels of human organizational complexity, from hunter gatherer through current industrial. http://www.yadvindermalhi.org/uploads/1/8/7/6/18767612/malhi_2014_metabolism_of_a_human_dominated_planet.pdf This is a well studied area, and I am surprised at Krugman’s apparent ignorance of it, if not willful ignoring.
p.s. And I want to follow Oji’s comment: ofw.com is where I refer people for knowledge about Peak Oil and related subjects. It’s the best! Hopefully your web traffic analytics are showing an uptick in Seattle area IP visitors.
steve keen, one of the few economists to forecast the economic crisis and be peak oil aware, took krugman to task on these issues. as i recall krugman didn’t take much notice as he is grounded in classical economics as regards the importanance of energy.
Thanks; I had seen the cover of “Debunking Economics” pop up on the dreaded Amazon. Now I’ll take a look.
It’s a good book, showing many inconsistencies in the “science” called economics. Nevertheless, Steve Keen underlines the issues with ‘debt-driven’ economy, but I believe he still doesn’t comprehend the whole picture with energy and our predicament in this matter.
Or maybe perhaps one should say, Krugmann views are grounded in the classical economics’ assumed “lack of importance of energy.”
My web traffic analytics are showing a big uptick in readership. The three days since I put up this post look likely to be the three best days ever. And I know Zerohedge had the post up, and is reporting 23,000 views. There are several other sites with the post up as well, with a variety of titles.
With respect to Paul Krugmann’s article, it is ridiculous. I know that Richard Heinberg wrote a rebuttal for the Post Carbon Institute. Heinberg lists the following points, which he elaborates on
1. He mistakes post-growth realism for anti-growth activism.
2. He misrepresents his sources. (Or perhaps, Krugmann doesn’t really understand the reports he is reading. He makes claims that the reports themselves do not make.)
3. He assumes that wind and solar can substitute for all uses of fossil fuels.
4. He claims it is easy to slash carbon emissions.
5. He assumes that a meaningful price on carbon would only impact direct energy prices. (In other words, he assumes that carbon price would not affect economic growth, or for that matter, the financial system and the number of jobs.)
With respect to omissions, Heinberg mentions:
1. He omits mentioning what rate of greenhouse gas emissions reduction he thinks is necessary.
2. He omits mention of constraints to fossil fuel supplies.
3. He omits mention of energy returned on energy invested, or EROEI.
As you point out, we Mahli’s book chapter points out that we need greater and greater energy flows, if we are to continue to grow and urbanize. Doing this will be a huge challenge, given that we are likely running up against limits.
I tend to disagree with Herman Daley. As far as I am concerned, sustainable development is an oxymoron. A fossil fuel based economy, given its reliance on debt, can only grow or collapse. There is no pleasant steady state economy, even if the idea sounds appealing. Any economy that uses modern “renewables” needs to be a fossil fuel economy, because it takes fossil fuels to make “renewables,” and to repair the systems that they are part of, such as the electrical transmission system.
“I tend to disagree with Herman Daley. As far as I am concerned, sustainable development is an oxymoron… There is no pleasant steady state economy, even if the idea sounds appealing.”
I keep coming back to HT Odum, who in Chapter 5 of A Prosperous Way Down, convinced me that there is no such thing as “steady-state,” that the steadiest state we are likely to encounter is a steady stream of smallish pulses. (If we’re unlucky, it will be chaotic, huge swings at random intervals.)
Look at nature. Look at the “logistics equation” that describes hare-lynx numbers. Nature abhors a steady-state! Nothing is constant but change!
The trick to life (as I see it) is to accept that fact and to be resilient and prepared for change, rather than whine and moan about it.
“Any economy that uses modern “renewables” needs to be a fossil fuel economy, because it takes fossil fuels to make “renewables,” and to repair the systems that they are part of, such as the electrical transmission system.”
I hear you, and yet I think (again, influenced by Odum) that we can manage to have a “prosperous way down,” during which we can “amplify” the remaining accessible fossil sunlight through the use of renewables, using appropriate technology. (I’m hoping we’ll have semiconductors for some time, but preparing to be without them.)
Pingback: 2014-09-21 Lesson in economic system, Gail Tvyberg. Resource prices falling in system built on debt. What does it mean? Energy supplies and renewables. » The Battles
The level and trend of the Energy mix average EROEI of a country will provide a clue as to when “something big” is likely to break. No complex high tech society is likely to be able to survive if that EROEI falls below 10. Contrary to economics, physics does not lie…
Comparing that EROEI data on a country by country basis might provide additional interesting clues…
JD; Yes, KSA is still likely extracting old oil from Ghawar at 20:1 but declining, where ND is probably getting 3:1 on new fracked oil and very soon to end. It would be interesting to see the field to field numbers.
A field by field comparative analysis would indeed reveal interesting results.
A country by country, average EROEI (for the complete energy mix) comparative analysis would also be very interesting.
What is that average EROEI for China, Russia, US, Germany, Japan, etc.
Who had the edge? What are the trends? Who is closer to the brink?
That might say a lot about what might be there next moves because you can bet that they very likely know where they are currently standing and where they are heading.
The big players know that it is a zero-sum game as far as energy and key other strategic resources are concerned.
Hungry or wounded tigers are very dangerous creatures…
P.S: EROEI is indeed a moving target as is the purchasing power of any paper currency or the value of a given asset. However, if properly measured EROEI is a critical indicator essentially based on physics: a much more precise science than economics…
If there were good substitutability among the different fuels, EROEI would tell us more than it does. As it is, the shortage of any one fuel is a problem, regardless of what EROEI calculations show.
St. Roy,
That is interesting. I look at Bakken and see chronically negative cash flow. Anyone have a link to dissuade me of that notion?
You are correct.
INDEPENDENT US OIL PRODUCERS SPEND $1.50 DRILLING FOR EVERY $1.00 THEY GET BACK
http://www.bloomberg.com/news/2014-02-27/dream-of-u-s-oil-independence-slams-against-shale-costs.html
If you look at my list of things needed for growth, it is
(Increase in debt) + (cheap-to-extract fossil fuels) + (cheap-to-use non-fossil fuel resources) + (technological innovation)
The only one of these terms that directly is related to EROEI is (cheap to extract fossil fuels).
When I say, “cheap to extract fossil fuels,” I mean an EROEI of a lot more than 10, probably more like 40 or 50. I think some people have been assuming that oil’s EROEI is OK when it is about 20–but I don’t think that is the case. I showed that oil badly affects economies, when its price is over $40 or $50, which is equivalent to a higher EROEI than 20.
The (cheap-to-use non fossil-fuel resources) doesn’t really depend on EROEI. These resources (such as soil, fresh water, metal ores) just keep degrading and degrading, and the level of population relative to resources keeps rising. This means that we need to get more food per acre. Thus, we need more and more energy, net of energy for extraction, over time. As I see it, EROEI is a moving target. It needs to rise over time, in order to prevent collapse.
I think EROEI analyses have been used to give a very broad boxes around the energy problem. When researchers say, “at least 5,” they should perhaps be saying “at least 20,” they just don’t have the tools to draw the box very tightly. EROEI is a tool to illustrate the nature of our problem, but it is a somewhat blunt tool.
Countries with cheap fuels (high EROEIs) have a decided advantage. But they can blow big debt bubbles too–China has just shown us that. So I am not sure that the EROEI comparison by country tells us too much, except that the countries with low average EROEIs (for example, countries that use much oil in their mix) tend to be non-competitive in the world market. For this reason, they are pushed toward collapse, even if they don’t blow debt bubbles.
I think that EROEI per country would give false image of the situation. There are two types of countries – net energy producers and net energy importers. The second type countries can afford the expensive fuels by having energy conversion capacity – industrial, intelectual, entertainment, military, etc.
Both types are heavily interconnected and interdependent. First ones cannot extract resources without advanced technology of the second type states. You can have 20 Ghawar fields with EROEI 50 or more, but these fields are dead (unrecoverable) without technology from the OECD countries, which are oil importers. The same goes with Russia right now and their imports of oil-rigs equipment. Without interdependency factor EROEI says nothing.
Excellent points
Agreed.
What happens to those hight tech complex societies when there is not enough oil available for export to sustain all these net oil importers?
Does the net oil exporter get to make a choice and impose his conditions?
Do the net importers fight between themselves to decide who gets the oil?
Does the invisible hand of the market ration the available oil to all of those net importers who need it until their societies collapse in an order way?
P.S: The Financial Times of today publishes an interesting editorial saying that ‘the dismal science of economics should be grounded in reality to stay relevant’…
The warning signals continue to flash red and have picked up speed. The-powers-that-be continue to tell us everything is fine and that hope is preferable to despair while they push the very things that are leading us further into trouble.
I live in what was once a small town on the edge of Toronto but has witnessed 10% growth or more for the past half a dozen years or more (making it amongst the fastest growing in Canada), cheered on by politicians and businesses alike, while limited agricultural land is paved over for more suburban homes and roads.
The momentum of this change is such that it appears unstoppable; although I’ve attempted to highlight some of the issues through letters to the editor and guest editorials in our local paper.
We have a municipal election only a few weeks away and every candidate is making more and more promises of growth as if it will bring wealth and prosperity to the town (while ignoring/discounting the negative aspects) and will continue forever.
I truly believe that until we can flip the ‘growth culture’ that consumes our ‘leaders’ (business, political, financial, etc.), we are lost. We are all hurdling towards the cliff directly in front of us.
It would appear that only a crisis will set things straight….or will it? Will it just end in the-powers-that-be pushing even harder just as the world’s central banks have pushed ever harder to loosen monetary policies and nudge the system in what could be considered the false belief that more of what is essentially killing us will make us stronger?
Or, as history has repeatedly shown, will the-powers-that-be lead us into some geopolitical clash to distract us from a floundering economy? Will they, as Charles Hugh-Smith writes, be unrelenting in their attempts to keep the status quo from sinking and quicken our pace towards the cliff?
Gail, thank you for your insights in this exceedingly complex world that can’t seem to get its act together in time to prevent the worst of the coming consequences.
“Will the-powers-that-be lead us into some geopolitical clash to distract us from a floundering economy?”
Um, yes, except it’s not a future tense; it’s right here, right now. In fact, it’s always been this way – while you, I and all the other serfs were being indoctrinated about democratic values, the PTB, who of course are schooled separately, never get exposed to such nonsense.
The system was created by them for them. The biggest clues are land grant records from the earliest colonial days. Vast tracts amounting to the size of small states were divided up and controlled by cabals linked to the ruling families back in Europe.
People who run the show have to actually deal with the very issues Gail continues to expose. They too know there’s no way out, so the best thing to do is continue the game as if there aren’t any problems lying ahead. When the jig is up, the defaults will roll, and a new series of policy initiatives be introduced in attempt to maintain control.
An absolute fundamental part of statecraft is the technique of massaging a consensus, to position the state as the unifying force in people’s lives. There is no better means of achieving this objective than to frighten people with both external and internal threats to their safety.
When you get good at identifying the respective “tells”, it becomes more enjoyable watching events as they unfold, rather than becoming emotionally upset as a result of shedding years of intentional programming in reaction to what seems to be violations of every principle you were taught.
I’d agree, the issue is which kind of theatrics will be chosen this time. It’s very unlikely to have wide conventional warfare of major players directly at each others throat again. The public has been overfed with so much crap, violence and blood over the years in various msm forms, that the cynicism over defending homeland for the elites agenda is a dead avenue for good, simply you can’t mobilize the masses nowadays anymore at least in the west, and have my doubts about the latest generation conscripts in chinese army too.
What we see today is rehash of “limited” proxy-cold war (still millions of displaced and killed locals though) on various middle ground hotspots, e.g. nato-gulfies vs. russia-syria-iran etc. Moreover, some powerfull concepts of recent past haven been made null and void, like long distance global power projecting naval carrier battle groups which are defence less against “short distance” hypersonic rocketery for pennies etc.
So instead I guess the next round might feature something more like domestic version Mr. Yatsenuk or perhaps Mrs. Yatsenuk-Clinton goes to Washington, simply meaning the economic deteoriation will produce yet new level of delusional craziness inside the circles of governments, point at which the puppets of elites go completely unhinged loco, bit similar stuff happened in ancient times and in other instances, implosion from within, regions separate away from the rotten core etc. Basically the Orlov and Kunstler spiel..
“enjoyable” I don’t imagine it will be enjoyable watching the world unravel and billions die…. including quite possibly one’s family and oneself….
Morbidly fascinating perhaps? Or shocking, horrifying…
I am not convinced that there really is a solution, unless we get some help from a Higher Power.
Growth may be bad, and lead nowhere, but shrinkage, or even staying the same, doesn’t work either in an economy that must repay debt with interest. As far as I can tell we really need a debt-based system to get the high-priced (low EROI) oil out. We have to keep up demand, or the debt bubble that is holding things up collapses. I wish I had a solution. Our leaders attempt to keep growth going, regardless of how impossible this may be, is, in some sense, the only way to keep from collapsing. Even this approach won’t continue for very long.
Our intuition tells us that if we would grow less, that would be helpful. If we had tried (and maintained) that approach, starting 50 or 100 years ago, it would have delayed the date of collapse, but not prevented it–collapse would simply have taken place later. An approach with less debt would have slowed growth, for example. Now that we are so close to the edge, it is hard to see that attempting to slow growth will really work anymore.
Gail, in a previous comment you mentioned that “fractional reserve banking” doesn’t appear to be the problem but based on this statement you made it appears to be the case.
“Growth may be bad, and lead nowhere, but shrinkage, or even staying the same, doesn’t work either in an economy that must repay debt with interest.”
Some people claim that if we just get rid of fractional reserve banking, our problems will be over. I don’t see it that way.
The way a fossil fuel powered economy is set up, growing debt and growing fossil fuel use have a symbiotic relationship. Thus, in order to get the fuels out of the ground, we need some way of adding debt. The fractional reserve banking system is one such approach. I suppose corporations issuing a lot of bonds would work as well.
If the current system fails, I don’t see any possibility of a system without debt working. We can’t get fossil fuels out of the ground. A system with debt won’t get fossil fuels out of the ground fast enough to get the economic growth needed to keep the current system going, either. We thus end up with a system without fossil fuels. We end up going back to wood, and animal labor. We have no way of making metals in quantity, so are very limited in any attempt to industrialize.
“in this exceedingly complex world that can’t seem to get its act together in time to prevent the worst of the coming consequences.”
I don’t see anything the world can do that will have any effect. Pretty much all of the suggestions I have seen – if implemented – would accelerate the collapse
Excellent post as usual. The analysis and forecast takes us as far as markets and central bank behavior allow, but does not take into account the sort of taxation schemes (aimed at raising wages by taxing wealth) proposed by Thomas Piketty among others – the sort of state mandated redistribution of capital into wages required (in his view) in periods of no growth or slow growth – the modal situation for the last 300 years. That and the forced production possible with state expropriation of productive capacity ( however packaged) in the energy sector. These may not be desirable but they are real alternatives to collapse
The problem is that we have peaked on cheaply extractable oil. I fail to see how taxing the rich create more easily extractable oil…. it might keep the hamster running a bit longer … but it won’t cure the disease…
This disease is fatal – for civilization as we know it
Gail’s point is about demand, and insufficient demand given high extraction costs and stagnant wages. If you push wages up by taxing wealth ( the rich are not people in mansions but corporate entities) then you have the possibility of increasing demand. This is already the case in N Europe which has very high retail energy costs and much higher wages than US. .
This may be keeping the wheel running for the hamsters, indeed, but it is an alternative to collapse, and a plausible outcome given past historical experience. I’m not advocating it, I am pointing to it as a real possibility
I am wondering how long the European model will work, in Europe. (Trying to get people to try it here will be a challenge.) Doesn’t the European model quickly run into inadequate tax revenue for all of the planned programs, and shrinking economic growth, if fossil fuel prices are high? Subsidizing renewables seems to add new problems to the mix.
Is Europe really succeeding in taxing corporate entities? I haven’t looked at this. I know that news stories in the US always claim that US companies are taxed at a very high rate, compared to corporations elsewhere. I also know that actual amount of taxes paid by corporations in the US is low, and falling. The impression we get from US papers is that the corporate tax rate must be lowered, so US companies won’t keep moving their corporate headquarters to lower-tax countries. I thought Ireland was a tax haven for corporations, for example.
There are several issues with the Piketty proposal:
Governments exist on the surpluses of an economy. When oil was cheap, there were a lot of surpluses; when oil is expensive, those surpluses disappear. Thus, I expect governments are especially going to be squeezed. Trying to simply maintain very basic programs is going to be a challenge, in the face of baby boomers retiring and a likely decline in tax revenue, as the world economy shrinks.
The “assets” of the wealthy are mostly an illusion, unfortunately. Their paper wealth isn’t really worth much–it doesn’t add square meters of arable land, or food, or fuel for cooking or transportation. The wealthy eat a little more than others, but not a lot more. We can do as those in the Soviet Union did, and break up large houses into apartments for several families, but does that get us anywhere? To save heating fuel, we would want people in apartments, in central cities. But will there really be any jobs there? What do we manufacture in central cities today?
Won’t we want people working the land, in smaller plots? If we do this, we would need a huge amount of training for would-be farmers, and homes near the small plots. In our rush to create huge farms, we have knocked many of these down.
There is always a concern about what we mean by a solution to a problem. I agree that the disappearance of fossil fuels is something that will break the frame of analysis we have used for a long time. In the meantime, demand for fuel with rising prices will mean some redistribution schemes will become popularover the next decade and more
The UN has just this week admitted in Science that it’s popuulation estimates for 2100 are anywhere from 2 to 5 billion people too small, that sub-saharan Africa shows no sign of a demographic trnasition.
Most discussion of resources is limited to the numerator (resources themselves), and we are going to soon have to face the denominator – population, and a means to live within our means – population control, probably including before too terribly long forced sterilization and euthanasia. No one is prepared for these realities or the dscussions leading up to them anymore than the rest of the picture.
We also have to face that the die off that is probably coming will not be averaged across the planet. India, Africa, parts of Asia sooner than North and South America. This is a hard time coming, and at 70 I feel like i’m going to be getting out just in time.
Consult the Limits to Growth model and study, also fits ecology in general, simply population overshoot usually goes delayed in comparison to parameters such resourse depletion, industrial output, waste, at the end, there is sort of optical illusion during crashing as population is still somewhat couple of decades sort of freewheeling.. That’s another important factoid about decoding the sequencing of events if possible.
As illustrated by Wile E. Coyote running off a cliff. ( https://www.youtube.com/watch?v=Gq_bjaI0NTo ).
The model that is used in “Limits to Growth” does not include the financial system, debt, or international trade. It also doesn’t include such details as what loss of electricity would do to an economy. The downslope of resource use is modeled in manner similar to a symmetric Hubbert’s curve, not reflecting the effect of multiple low prices caused by lack of debt.
In my view, the bias in the model is toward showing the down slope occurring more slowly than is likely the case.
There is huge misunderstanding with respect to prices. You say
“Demand” is not what people would “like.” It is what they can afford. The problem is lack of affordability. The whole scheme that we have put together that makes oil affordable is failing. At this point, debt is most of what is holding it together.
Economists haven’t figured out what happens in a finite world. Geologists, and people looking at the situation from a “peak oil” perspective haven’t figured this out either. They keep saying prices will go up, but what do people who don’t have jobs pay with? At some point, the printing money approach (used to cover up this problem since 2008) starts failing. You might read my post The Connection Between Oil Prices, Debt Levels, and Interest Rates.
Welcome to Socialistic States of Amarica. At last. Didn’t you learn on historical examples? Bolshevik’s revolution, French Revolution, etc. Don’t you know how it ends?
John Michael Greer has nice piece about this scenario
http://thearchdruidreport.blogspot.com/2014/02/fascism-and-future-part-one-up-from.html
It’s called fascism with equality and solidarity on the banners.
Is US society mentally ready for this kind of solutions?
The future transition from our system based on growth to a system that ensure the general surviving is inevitable. People will accept sacrificing their freedom and their prosperity and will accept to share. The transition to an Steady State Economy is directly related to an equalitarian system. Do you know why? Because the fear of chaos will be strong enough for them to accept even a dictatorship of any kind, only to have a chance in surviving. But this is a model that can be applied countries like Norway or Switzerland rather than Congo or Yemen. Keeping some infrastructure alive by renewable energy as some railways, an electricity network and dams or nuclear plants requires efforts at national levels not tribal or regional…Check Cuba for example….and make a honest comparison to Venezuela. In Cuba you will not get killed by a 12 years old boy with a gun for the watch that you wear….where you would like o live in from the two? In some genuine poor equalitarian country or some dissolute state ruled by criminal gangs?
I did not mean, that dictatorship of any kind is worse than anything else. There are many much worse, like war or total anarchy (MadMax style).
I was asking about the mental readiness of US citizens to accept this form of government. US is the land of “the brave and the free” (however true it is) and has no history of hard dictatorship. Many citizens have deep values of individualism, lack of confidence in central administration, very high incarceration ratios and easy access to weapons. Keeping it together as one organism will be very hard. Considering low-density population outside the main cities, long distances between local capitals and energy costs required to manage/administrate this almost half of continent, not mentioning very deep racial/ethnic/material status divisions within the US society I would even say it is impossible.
Steady State is a myth and I am tired explaining why. I did it serveral times before.
There is No Steady State Economy (except at a very basic level)
http://ourfiniteworld.com/2011/02/21/there-is-no-steady-state-economy-except-at-a-very-basic-level/
What Would it Take to Get to a Steady State Economy?
http://ourfiniteworld.com/2013/05/15/what-would-it-take-to-get-to-a-steady-state-economy/
For the Steady State Economy it whould take sources that have a la EROI >15, and use recyclable materials and renewable source as fast reactors with complete uranium cycle (please search for IFR) hydroelectricity, wind power and thin film solar (CdTe), wood, non fertilisers agriculture , cotton, vegetable oils, animal leather, latex and glass. All this with reduced population numbers that will come naturally with one child policy, lack of complicated medicines and reduced medical capability, together with a strong dictatorship that can lead the transition to a Steady State that provides basic needs such as small food ratios, potable water, some heat during wintertime , security and basic education it is possible to implement. I grew up as a child in a communist dictatorship of Eastern Europe with rationalised food, long lines at the food stores without owning a car in our family, intermitent electricity and 20 deg C in our houses during wintertime, only because our dictator wanted to pay the contry’s external debt to IMF nomather how big was the price paid by the population. But we survived afterall, people were getting a good education, were reading more books and went tho theaters more often than today. The public tv was only broadcasting 2 hours of politycal propaganda every day. I think that the people of USA will accept to pay the price of the transition with their freedom because of the culture of patriotism that is bombarding intensively the MSM. Afterall 60% of the movies finish with the US flag rising victorious above the battlefield…maybe this is the way of prepearing the people to accept their sacrifice…
If there weren’t so many humans on the earth, I would agree that you at least for a time, an equalitarian system might be better–like chimpanzees have, each collecting and eating their own food, or closer to that of the hunter gatherers.
But the way we got to be where were are today had to do with the use of external energy, starting as early as hunter-gatherer days when we learned to burn biomass to cook our food and to move animals from one location to another. Humans, like all other species, reproduce in greater numbers than needed to replace our parents. The use of external energy thus allowed more to survive. We are now adapted to the better nutrition we get by eating at least some cooked food–thus we need external energy now to survive.
If you look back, there really has never been a Steady State economy. We are in competition with other species. We either win or we lose. With the help of external energy, we have been the winners to date. Because of diminishing returns, we need a larger and larger amount of external energy just to stay even–this requires growth in resource use just to stay even–something that Steady State folks never thought of.
Renewables are greatly over-hyped. They only exist inside a fossil-fuel based economy. They don’t repair electricity transmission lines, for example.
At best, all I see is general survival for some subset of today’s population. We don’t know exactly how many that will be.
I just don’t get this thesis. Seems a bit exaggerated at the very least. Especially Figure 8 showing energy production (and therefore use) getting cut by 80%.
Guess you are predicting mass starvation as well – all because of accounting entries??
Let’s look at value. A gallon of gasoline will move a car 30 miles down the road – the equivalent of a week’s worth of human labor for just $3.50. That is value – people will continue to need AND demand energy…and food…and all the other basics.
Sure with all the debt, we could see an 80% fall back in iPod and 50″ tv sales, move to online education….but not on food and energy – not with 7B+ and ramping consumption in every corner of the globe.
Take debt out of the equation for a second and just think about needs – how will our needs change so much in 2015? Debt is an accounting entry. You think it will not be addressed? You think it will stop people from needing/consuming? You think the holders/the ‘deep state’/whomever will not find a way to forgive some of the debt or do a reset or whatever in order to keep the wheels of consumption moving? The world rarely ends, Gail.
More likely, we keep muddling along with this debt overhang and experience stagflation with food and energy taking a larger percentage of our paychecks.
In the US, demand will increase for our cheapest (relatively) clean source of energy: natgas. Natgas is priced on an energy content ratio at about 1/4th the price of oil. That should be the subject and conclusion of your article – the pressures of higher energy costs (esp. oil) and wage pressures will drive faster adoption and implementation of natgas in our transportation sector.
Have a read of this – from p. 59.
Keep in mind the company behind this provides information on the energy situation to investment and commercial banks…
The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy.
But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.
http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
Paul, I am familiar with the concept. Ran a website for 7 years which addressed this issue, but no one seems to care. Why are pick up trucks and SUVs outselling cars in the US? Why does Jimmy Fallon brag on the tonite show that he bought a pick-up truck (when he obviously does not need it for work). His #1 goal in life is for people to like him/watch him. In any country with half a clue – his actions would be seen as wasteful/selfish. There is a great deal of conservation/low hanging fruit to be achieved in the US.
No doubt, we should get off our rears and start conserving. That also applies to population and immigration issues – which are even more important, but few want to discuss. Even the so-called environmental orgs like Sierra Club, etc. won’t because it will hurt membership. So, leave it to the next enviro org, Enviro Def. Fund. Oh wait, they won’t discuss because….
—-
Shannon, most believe the world’s Central Banks will continue to devalue to try to help address the onerous debt – kind of a slow motion debt Jubilee.
Therefore, you are best going with the most undervalued real asset out there that will do well in a stagflationary environment (usually just food and energy – prices, not the stocks since rising interest rates will hurt the stock market…and shale exploration which is heavily in debt.)
I’m guessing the most undervalued real asset is US natural gas…not now, but after about 5 more years in order to give demand a chance to ramp and all these cash-flow negative producers to go bankrupt.
I believe the only way you participate in this idea is natural gas futures. Not to trade or try to guess the weather. Just buy and hold contracts in 2019 or so and just wait. Just like you would gold except that gold is a faith-based asset. Natgas in 2019 is trading for 1/4th the price of oil.
Do you think oil is valuable? Well, what does that imply for natgas – esp. if all these end of the world due to high energy costs forecasters are right.
Again, I do not believe these hyperbolic forecasts. I do believe 2019 natgas is a good place to hold your wealth. I went long those future contracts and then shorted an equivalent dollar about of euros (back when the euro was $1.36) so I am effectively long natgas in euros.
Hoping I have the cheapest real asset in the numerator and the most quickly depreciating OECD paper currency in the denominator. The bonus is – if we don’t just putz along with the US slightly outperforming other OECD countries and we do have a major fall back, the USD should go up in value anyway helping reduce losses on the real asset.
Wrote an article about this in August:
http://seekingalpha.com/article/2436385-natural-gas-2019-is-the-sweet-spot
By the way, I took down my website (ArrestIndustrialDisease.org) for now. Spending my ‘free’ time doing volunteer teaching.
Feel like I am serving drinks on the deck of the Titanic vs. doing the real work – but it’s more fun and people actually appreciate you more; people think of you as a ‘good’ person vs. the scorn you receive when addressing the problems of our time.
Conserving energy means growth slows — because it means people buy less stuff – which means layoffs — which means less tax revenues — which means cuts in services and more layoffs — which means less consumption …. this also causes deflation which is a disaster for a debt based world….
As you can see this quickly leads to an economic death spiral.
When Bush urged people to shop – as much as I have distaste for that mindset — I have to admit — those who told him to say that — were right
If we stop shopping we wither and die.
Let’s think about this. Oil prices are too low for producers. The way to fix this is more demand for oil. The way we can increase demand for oil is by stopping selling small cars, and encouraging everyone to drive SUVs or pick ups. They won’t be able to drive them for long, but it will ramp up demand (and prices) for a very short time. Just like my chart.
You can see why the problem is such a difficult one to solve. The obvious solution–conserve–actually makes the “demand” problem worse.
There are a lot of details that don’t work out right.
You remember in the Depression in the 1930s, there was massive deflation, because prices were too low. My concern is that something similar might happen again. Of course, Ben Bernanke has said he would drop money from helicopters, before he let that happen, and in fact, the Quantitative Easing he did was pretty close to dropping money from helicopters. Janet Yellen is aiming for a very “accommodative stance” as well. But if interest rates go up,(something that is being talked about for early 2015), we are in a heap of trouble. Monthly payments for both homes and cars will tend to go up–certainly on new transactions, even if current interest rates are locked in. This will leave buyers with less money to spend on other goods. Oil and natural gas prices can be expected to drop further. Any increase in taxes will also tend to reduce spendable income.
There was a debt collapse in 2008, and oil and other commodity prices dropped very low then. It has taken a lot of coordinated effort of central banks since then with ultra low interest rates to raise oil prices. See my post, http://ourfiniteworld.com/2014/05/21/the-connection-between-oil-prices-debt-levels-and-interest-rates/
The big problem that US natural gas suppliers have had is that after they did all of the fracking, the price of natural gas is not as high as they would would like it (even with interest rates very low, for borrowing). That is the reason that they are talking about exporting natural gas–to try to get the price up. See my post, The Absurdity of US Natural Gas Exports. If interest rates go up (as mentioned in the previous paragraph), natural gas prices are likely to drop further, because buyers will be able to afford less. “Demand” is a measure of affordability, not buyers’ pleasant thoughts about a product.
You talk about accounting entries not seeming to be very important. We have huge amount of “paper assets” today–balances in our bank accounts; the value of stock we own; the value of pension plans; the amount we have paid in on insurance policies, and expect to be paid, for example, if our house burns down. There are also “sort of” promises–the expectation that Social Security and Medicare will be available to provide income and health care in the future. What these promises are backed by is very flimsy. They depend on our current system continuing (and our current system depends on debt and accounting entries).
In the popular imagination, our current system will continue. It is hard to see how this will happen, because debt is needed to support the long supply chains that are needed to support international trade. (As I told another commenter, “You can’t just pay all of the suppliers in potatoes, in advance.”) If long supply chains disappear, so will the world’s ability to make computers, cell phones, robots for manufacturing. Without these, our ability to make all of the high tech goods we depend on today, including modern factories and modern airplanes will disappear.
“Ben Bernanke has said he would drop money from helicopters, before he let that happen, and in fact, the Quantitative Easing he did was pretty close to dropping money from helicopters.”
Except the helicopter was flying over Wall Street at the time.
I don’t recall any money falling on our property during QE.
Yes, indeed, the helicopter was flying over Wall Street. But I understand it has also helped keep property prices up. Maybe QE is helping you get the loan you have today–if the debt amount were way more than the value of the property, I expect that no bank would touch the deal.
it has also kept the stock market up — if you have a pension then you have tremendously benefited from QE
“Janet Yellen is aiming for a very “accommodative stance” as well. But if interest rates go up,(something that is being talked about for early 2015), we are in a heap of trouble.”
The dow lost 117 pts. today the 23rd just on rumors of rates rising. Heap of trouble is right – I’m wondering where the bottom will be.
I really don’t see how interest rates can shift upwards. That would be economic suicide.
How does one invest in an environment like this? Gold, Bonds, Stocks, Oil, Land, food water? What does one do?
I stopped investing in conventional assets some time ago — I mostly piled into gold and productive remote property…
Depends on your situation though — the hamster could keep running for some time — so you might prefer to dance while the music plays…
I suppose if I were to continue dancing I’d have been in the stock market — it is fixed by the Fed and the Fed needs it not to crash — it will of course collapse at some point because the fix cannot work forever — but when the Fed’s medicine stops working and it does collapse — I expect the collapse will be final…. so at that point it won’t really matter what you did in the run up … and it won’t really matter if you go out before the collapse…
I hold gold without a lot of confidence that it will be of much help — food will be the no gold in a world without oil…. but in the interim gold might come in handy. It has always been the last man standing.
This is a very difficult situation. Sorry that I can’t provide a better answer.
One strategy is to spend the money now. If money isn’t going to be around in the future, and perhaps you aren’t either, then make charitable contributions to the organizations you like to support now. Go on trips. Help out your children with their college expense. Or spend money on learning skills that might help yourself in the future.
Another strategy is to buy “stuff” that somehow might help you live longer term. I think food and water are critical–water even more than food. Stockpiling is a very temporary approach, though–you almost have to be able to grow your own, without outside soil amendments and sprays for insects.
People who are dependent on medicine might want to stockpile a supply, especially for temporary unavailability.
Given that the down-cycle might take longer than we think, diversification is not a bad strategy either. If one strategy works, then you are somewhat better off than otherwise.
Our co-op will pay you 3.75% on $350,000, secured on-title. Banks won’t do it, and the only credit union who would touch us just bumped us 20 basis points.
We’ll even write into the contract that if property prices and rent (our source of payments) crash, you can convert the loan to Class A Investment Shares, and come here and grow your own food. 🙂 (Pitching that on its own hasn’t been working…)
Gail, do you consider productivity and efficiency gains as part of “technological innovation”?
In my short-hand way of describing things here, productivity and efficiency gains are part of technological innovation. Much of the efficiency gains comes from technology for more efficient devices, such as cars that get better mileage. Productivity gains very often come from improved or new devices that allow workers to accomplish more in less time–computers that do some of the work for us, for example, or robots doing part of the work of assembling some product. We talk about efficiency gains being something that workers do, but most of the efficiency gains come from supplemental devices that aid the worker.
That’s right, e.g. look at hypermodern farms in the wider german speaking/influenced alps, roughly spaning belt area from eastern france, swiss, northern italy, southern germany, austria and slovenia.. It used to be domain of large poor families with many children working 24/365 to run these with little tradable surplus, nowadays the output is way bigger while workload has been reduced by orders of magnitude to almost “office hours” regime of one adult (spouses often run only the accomodation branch and children do study away from home), but the capital intensification of this model is crazy, it’s almost in millions of EURs of shiny equipment needed for that (price of land is astronomical above that), obviously paid in large part by eu/state level agri subsidies. Not sure those fancy machines, parts and fuels will be available in decades to come, but it’s something to be seen in comparison to 3rd world practices with armies of sweat laborers deployed per similar acreage.
Robotization (automation) is most definitely an issue:
What Jobs Will the Robots Take?
Nearly half of American jobs today could be automated in “a decade or two,” according to new research. The question is: Which half?
DEREK THOMPSON JAN 23 2014, 8:01 AM ET
http://www.theatlantic.com/business/archive/2014/01/what-jobs-will-the-robots-take/283239/
Dozens of similar articles can be easily found, all made from this 72 pages report:
THE FUTURE OF EMPLOYMENT: HOW SUSCEPTIBLE ARE JOBS TO
COMPUTERISATION?∗ Carl Benedikt Frey† and Michael A. Osborne‡
September 17, 2013
http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf
Of course, our economists will claim that new jobs will arise from somewhere, as we all find some way of providing an energy-free service to others. So far, this hasn’t been happening, though.
Reblogged this on expressi ab initio.
And here we have the definition of futility — an obscene paradox… and a rather sad situation…
As protests build we see we are burning ever more fossil fuels… including record amounts of coal (a lot of filthy lignite)…. so the protests have no effect…
And if the protests did somehow slow the burning of fossil fuels … that would destroy growth … and bring the global economy crashing down…
Like I said… this is a very sad situation… lose – lose….
http://upload.wikimedia.org/wikipedia/en/archive/f/f4/20100830193250!The_Scream.jpg
China’s total C02 emissions outstrip those of both the EU and the US combined, scientists reported.
The news emerged as thousands of people took to the streets around the world on Sunday to demand more action on climate change.
The biggest rally was in New York, where organisers said they were expecting as many as 100,000 people to take part in what could be one of the biggest global climate protests ever staged.
http://www.ft.com/intl/cms/s/0/51d2dd20-4170-11e4-b98f-00144feabdc0.html?siteedition=intl#slide0
Paul, there were at least 300,000 people that marched in NYC. USA Today featured a front page picture and story. So the MSM covered it there and proclaimed that USA Corporations are “on board” to cut emissions. No problem, it will be done, of course, on a voluntary basis. See, no need to be upset, it is all worked out already.
Hey, if you believe the above I got a nice “Little House” in NZ to sell you that has organic raised beds, a forest fruit orchard, and lovely cute furry animals grazing out the window.
Same story in China … was chatting with one of these ‘princelings’ (kids of highly connected parents in China) — he ‘assists’ foreign environmental companies with ‘access’ in Beijing (I am thinking what a cool job that is! I get paid to introduce you to my parents friends!)…. again everything is on a voluntary basis… as in nothing is going to happen because of course nothing can happen.
We dug our grave long ago.
Thanks Gail. You write the most amazingly detailed posts on this subject that I have ever seen. I love to read them! Please keep the great information and opinions coming…
Thanks Gail very good article. The issue is that a span of individual human life is relatively short, therefore it means a lot about sequencing events during such massive phase shift and how they play out. Unfortunately, this is almost unpredictable, however I’d venture to say that the recent trend towards authoritarian rule in former “liberal democracies of the west” and their inspiration in the ways of sino-russian East is more than apparent as of now. So, there will be “forces of human hierarchies” to pickup something out of the rubble of the shock from debt deflating globalized economies. Look at it as rerouting core priorities, needs, and approaches. For instance the “public space” will be abandoned first, immediate stop to reparing tangetial infrustructure (non artery highways, roads, rail lines, city infrustructure, cultural institutions, ..), resources will be poured into keeping the basics on. I gather from past conversations here, it is somewhat hard to see grasp it, especially for people from the affluent north/west, but societies-economies can be gutted into tiny fractions of their past affluence pretty hard and fast, yet life goes on. In short the next calamity will be only actual calamity for the previous order of things, people likely in fewer numbers and with less stuff will adjust. It will take decades and centuries to completely wipe out the current arrangement, however that doesn’t conflict with the likely fact that realities as soon as of 2025, 2040 and beyond will be very much unrecognizable from todays prevalent perspectives. The combination of Seneca Cliff with staircase down driven collapse is the general scenario to expect here and people on the gorund and as well in the places of governemnts (also incl. commander tents of warlords) will fill in the day to day details.
I think as long as electricity, water, sewer, food transport, and some oil is available, life can go on not too differently than in the past for some share of the population. The question is how soon there is interruption in the basics.
Yes I agree.
Life has already changed in meaningful ways. People aren’t driving as much, they are staying at home and there are still plenty of things to occupy their mind and time. Young and old people are moving in with middle aged. Childbearing is down.
Next up I expect an end to just in time delivery and tourism, healthcare, food industries. But with this decline people will adapt. They will reuse and take care of what they already have. They will get in shape, they will do local rather than national activities.
Now, mind you I am very much a pessimist in all of this. I expect civil wars and epidemics. But the decline is going to seem so achingly slow that you might as well just find a few things that interest you, do those things, and forget about the world situation, which will neither heal nor collapse instantly either.
By the way, debt is not an issue as long as it is time limited. Systemic debt can stay the same or decrease, and there are many instances of this happening in the past. You only need debt increasing with a waste based economy. Once you move to a husbandry economy, you just need to pay people to maintain the existing infrastructure, not expand it.
Our problem now is diminishing returns. That means it take more and more effort to get the same amount out. This is happening in oil, fresh water, and several kinds of metals. In terms of food, have growing world population, so we need to get more and more food per arable acre. This is another form of diminishing returns.
You talk about rising debt only being required in a waste-based economy. I would argue that rising debt is needed because of diminishing returns. Costs keep rising for the same thing, but wages do not. Of course, more debt with flat of falling wages doesn’t work either.
Note that we still have this issue if we are dealing with an agricultural economy, supporting itself with forest products. There is a need to keep increasing food production per acre, if population keeps rising. All types of animals reproduce in more than numbers needed to replace their parents. This is true for humans as well. Our “problem” is that with the use of external energy, we have been able to allow more of our offspring to live. The fact that this situation tends to continue leads to a need for more and more food production per acre.
“I would argue that rising debt is needed because of diminishing returns.”
So you are arguing that we need to take on MORE debt to cure a state where the world is already overly indebted? Gimme another one. . . .
Brad – we have no choice.
We got on this train long long ago — and it is a train that you never get off of — you ride it all the way to the wall – and it picks up speed as it goes along.
If you try to stop or even slow it – the train derails into a 1000 ft canyon.
Is this good? Of course not – it is insanity. But it is what it is. There are no other options.
We keep piling on debt or we collapse.
I have been listening to Ben Bernanke and Janet Yellen!
Wages aren’t keeping up. What else do we have, but more debt! I know more debt can’t work for very long, but in the short term, more debt is all we have. More wages aren’t possible–the value that workers are producing is now dropping because of diminishing returns. This is why wages are tending to fall. The logical outcome of this is a contracting economy and lots of debt defaults and eventually a collapsing economy. The only hope for pushing this collapse off a bit further is more debt.
Sometimes I think that if we start to live again as in the ’50-ies, the age of my grandparents, we could reduce our energy consumption with 90% and have a reasonable life quality.
As has been discussed on this site in the past – it is not possible to reduce energy consumption by 90%.
In fact it is not possible to reduce energy consumption at all.
Energy must continue to increase because energy consumption is very tightly correlated to economic growth.
If it drops that means growth drops — and if growth drops — as this article (and others on the site) explain, that means a deflationary death spiral.
The global economy must have eternal growth – or it cracks up completely.
A deflationary death spiral means the complex system that is required to ensure that oil and other energy resources get extracted will break — which means the oil that is in the ground remains in the ground.
Which means that you either have what you have now — a complex global economy that consumes massive amounts of energy — or you have a very primitive economy — with likely the only energy source being trees.
Unfortunately we must race along at an every increasing speed — or we hit the wall and are abruptly at 0….
There can be no middle ground.
I don’t know if that applies on the whole world. Russia, for instance, has huge conventional reserves of natural gas. That gas will keep flowing for a while at a modest rate with not too many investments.
I don’t think KSA’s Ghawar is “empty” too.
So some conventional fossils will be available at moderate investment costs, but not at the rate that a growing economy needs.
But it may be very difficult for a chaotic world to deal with this.
Even if Saudi Arabia, Russia, and others have reserves that can be extracted at fairly low direct cost, they still have a real need for the tax dollars that high prices make possible. Without those tax dollars, government programs will need to shrink dramatically. Saudi Arabia has an investment fund that could delay the day of reckoning considerably (at least until the investments in the fund drop), but other countries could face internal disruption if they are forced to cut programs. Russia could (and is) becoming more belligerent. Even if Saudi Arabia can hold out a while longer, unhappy militants from elsewhere in the Middle East can fairly easily move from country to country, if their own country cannot keep up programs, such as food subsidies.
Some countries, not necessarily in the Middle East, such as Venezuela, look to be fairly close to collapse. If countries such as Venezuela do collapse, their exports could disappear completely.
Not all of us share Paul’s pessimism. I live on about 10% of the energy I used in the middle-90s.
Jan – for every person like you there are 10 million who are increasing energy consumption … If those tens of millions reduced energy consumption we would collapse in a heap of rubble.
It is not pessimism — it is reality.
And many people appear unwilling to face reality because it is dire.
Even if no – one increased energy consumption…. There are 200-250k new people being born EACH DAY. Even if they only get 2000 daily calories, those need to come from somewhere. No amount of energy conservation can counter exponential population growth. Why everyone was aware of this back in the 1970s, and then collectively decided it didn’t matter, I’ll never know.
Regarding one possible reason we forgot the population concerns of the 1970s: Perhaps business got a bigger role in political decisions. Cutting back population growth cuts back potential markets for products.
Change for the better will come. Necessity is the mother of invention. We won’t change or fight until our collective backs are up against the wall. Our primate wiring hampers our ability to act until the perceived threat is right in front of us. Unfortunately, this will be too late for meaningful action to prevent some catastrophies, but just because some people think the end is nigh doesn’t make it so for all people in all places all of the time. The natural and social worlds are both so complex and nuanced that any model is bound to be too simplistic. There are wheels within wheels and feedback loops inside of feedback loops. Reducing your energy by 90% is a good thing and it doesn’t matter if not everybody does it because it is the sum of individual acts occurring over long periods of time that matter. The fact that we may not have time, has not been proven. I do not deny any of the predicaments that we are in, but I say that we should choose to fight for our planet and our survival until the outcome is completely known.
I expect that you are talking about direct energy use. You still depend on roads, doctors, quite possibly electric transmission lines, police departments, and a huge number of other back-up services whose energy use has gone up, rather than down. You also depend on the embedded energy in your house, vehicles, and metal objects of all kinds. Even an old vehicle has embedded energy in it. Your clothes do as well. Now that many things are made in China, costs are lower, but embedded energy is still there–usually using coal instead of oil.
Excellent points…
Just for entertainment I’d be curious how we’d amortize the embedded energy in the average home built in Italy in 1800 versus the average in the US in 1900 versus one built today. I think this could easily be a master’s thesis. yes, one would have to take into account the upgrades in insulation, electrical lines, light fixtures, plumbing etc.
200 years ago almost all of the cost of a building was in the structure, which could be maintained. Now almost all of the cost of a building ( or at least a commercial one ) is in the systems, plumbing, HVAC, electrical, data. When they wear out it is cheaper to tear down the whole building and start again. Most commercial buildings have a 30-50 year design life.
I see quite a few buildings that are newer than 30 years old that are being torn down. They are simply the wrong building for the location. Or no building is needed any more. An awfully lot of perfectly good houses and other structures on farms have been torn down, so that today’s big planting and harvesting machines would have more available acres to plant. Fences have been removed as well.
“I expect that you are talking about direct energy use.”
Yes, but I’ve lowered my emergy footprint, as well. I live in an older house and drive an older vehicle (only about 2-3 times a week). I’ve already mentioned my eight-year-old computer — about 150 human-equivalent years! I shop for most things in thrift stores or CraigsList (or similar).
The newest thing I own is a screwdriver set. With a lot of people coming and going, we suffer from “tool entropy” here, so my karma feels good with those new screwdrivers, knowing someone, somewhere is using one of my old ones. Perhaps in the near future, even hand tools will have to be locked up and signed out for use.
Now to some of the “on-off” thinkers, I’m still part of “the grid,” but I’m much closer to being off it than perhaps 99% of people in industrialized countries.
It’s like the two backpackers who were charged by a bear. “RUN!” shouts the first one. The second one replies, “You can’t outrun that bear!” To which the first one says, “No, but I can outrun YOU!”
You don’t have to be 100% off-grid to be fairly well prepared. You just need to be more prepared than the next guy. Rather than “survival of the fittest,” natural selection should more properly be thought of as non-survival of the least fit.
Thank you for a small sliver of hope.
“Thank you for a small sliver of hope.”
Don’t hope! Do something! No matter how small. Then do something else. Lather, rinse, repeat.
I do, I do, I do. More than anyone around me and sometimes am judged harshly for taking the time away from “work” to garden etc. Your statement gives me a bit of hope I’m doing something right.
Actually if I ran from the bear and your stood still the bear is likely to ignore you and chase me — because bears have this thing for chasing down things… at least that was what my hunting course instructor told me..
Haven’t thought about if that has any relevance whatsoever in terms of low and high energy footprints …
“You don’t have to be 100% off-grid to be fairly well prepared. You just need to be more prepared than the next guy.”
Indeed. By doing so, at least you inspire him (the next guy) also to copy your behaviour. Maybe not immediately, but we can be sure they will start thinking about this.
“you inspire him (the next guy) also to copy your behaviour.”
Thanks. That’s so much nicer and humane than my bear analogy!
Unfortunately, we can’t go backwards. To give one example, consider local schools. The local community schools that kids could walk to are gone. There are huge numbers of folks who make their livings as bus drivers for schools and administrators for schools, who would lose their jobs. The schools got along without all kinds of audio visuals. (I know the school I went to did not have electrical outlets in the class rooms–just lights in the ceilings!) The folks making audio visuals would lose their jobs as well. Teachers didn’t have as many advanced degrees as today. The university system would need fewer teachers, and would need to teach fewer students.
There would have to be bigger changes in farming. But in many areas, the houses that used to be farm houses are no longer there. The one room schools for Grades 1 – 8 that a lot of kids attended would be gone. No one would know how to teach in one room schools anymore, either.
Maybe “poorer” countries, e.g. eastern Europe, still may have some local economic structure and country-life. Now they are outcompeted, but once the collapse starts, they may stand longer than the tech-dependent world. Some families there grow one cow, one pig and some poeltry in one household. They grow their own vegetables, and some guys of the village collect the cows in the morning, to let them graze in the meadows around the village. Besides that, they all have smartphones and 4G mobile internet.
In this system, most people can survive. That may be a relatively stable base to start over again.
Most of our tech-stuff may no longer be mass-produced, but the knowledge to make some technology remains (instantly) available. It was not available 60 years ago.
An what if we repaired some cars instead of replacing them. Just repair them to minimal functionality, not with genuine parts, but with some basic, standard industrial (computer) devices. As a technician, I could do that.
The car may no longer be used for tourism, but to bring the vegetables and meat to the market in the cities.
We must not forget that a car is faster and more efficient than a horse or a camel…. if you have at least a little petrol, or some natural gas.
And the kids: let them eat and sleep at school, and only come home for the weekend.
It is a bit the same way that religious communities are living. They have fairly everything, but by sharing the resources, they live very efficient.
Excuse me for my Englisch, which is more some kind of Anglo-flemisch 😉
Good points. Many Westerners tend to forget there are many ways of doing things that existed before the advent of regulations and government interventions fueled by debt. Any collapse of the “system” is going to bring with it severe population decreases and hotspots of violence but will also leave isolated areas almost untouched or already adapted as well. Most who comment here have no qualms about admitting the interconnection of all energy and financial systems but rarely touch on the other connection issues of control and cultural systems that are in complete disarray right now due to cheap energy availability and central governments able to force their will everywhere.
As energy use declines the world get’s a whole lot bigger once again and social/government control begins to recede from the edges. These edges then adapt on their own long before the center does. We are already seeing rural areas having pavement chewed up into gravel for the roads, rural towns combining fire departments and other institutions together and in areas where the government isn’t forcing constantly increasing education levels for teachers the “Continuing education” demand is falling.
Long before the center falls the edges will be dealing with these things in their own way once again.
Another good example that fits your narrative about automobiles. Ten years ago any rural dweller who attempted to put a non-licensed or approved vehicle on a rural road stood a high chance of being caught and fined. These days with budget cuts the enforcers rarely come out and if they do they have larger issues to worry about, therefore once again we are seeing individuals using vehicles that fit their needs but are not necessarily legal with impunity and no fear of getting caught. Moving stock animals is another area I see the control receding. Ten years ago they repealed many range laws and made it illegal to move livestock on foot along roadways, you had to load them into trailers and it was enforced. Just last week I saw a neighbor moving over 50 head of cattle on foot with a four wheeler without a care of getting caught.
Thanks for your ideas. It is possible that “poorer” countries, who are doing things more simply, may be the ones who succeed longer, as you say.
I know when I visited China, we were told that young people who went to high school often stayed for the week at the school.
In a school I visited in China, there were over 50 children to a classroom. They were very well behaved. The children shared books–there were not enough to go around. Some of these things might need to be re-instituted in countries that are richer now, as well.
I expect that we will have many different models tried around the world, to see what works.
It strikes me that there is a great deal of discussion of maintenance costs of the current infrastructure. I realize that it is, in some ways, too late to think this through and implement but one wonders if building infrastructure for lower maintenance costs would equate to a longer civilization? If it would make for slower growth overall or if we’d still get the yeasty population hangover? [Pun intended: also meant by yeasty= yeast style exponential growth in a system with abundant but finite, eventually, food] If maybe this civilization would have stretched a bit longer a bit farther if we didn’t build toasters, roads, electronics for replacement not repair.
I also wonder the likelihood of at least some countries taking the route of complete bankruptcy with an attempt at a restart? I understand the interconnection between debt and retirement funds, etc. but I suspect that there are some states that have more to gain than lose when push comes to shove.
The thing that equates to longer civilization is a slower growth trajectory, and thus slower use of resources. China was on this lower growth trajectory, until we added them to the World Trade Organization at the end of 2001. Their resource use “took off” the next year.
Keeping births low helps as well, so that natural population increase is as small as possible.
Building roads, houses, pipelines, electric transmission lines, etc more robustly probably means higher energy cost early on, so these are less affordable. This indirectly would mean less of them. But degrading will still take place, and sometimes repair costs will be just as high or higher. For example, underground wiring is not as subject to damage from windstorms, but when it does need to be repaired (perhaps because of flooding) it is a real problem to get to. Roads can be made somewhat better, but nature with its freezing and thawing breaks up any kind of road. Today’s huge trucks could not have been anticipated back when many roads were originally built. Devices such as wind turbines require massive trucks to haul them. They are another problem for roads and bridges.
I see a somewhat different scenario than some of you.
1. Human civilizations have collapsed before. We haven’t had a straight growth trajectory. So it isn’t inconceivable, looking at all of human history, that modern life will disappear, but some basic functioning would continue.
2. The predictions about climate change don’t necessarily say all of human life will disappear. So even if much of humanity died off, perhaps a few people will be able to continue to grow enough food and have access to enough resources to survive.
3. Even if climate change killed off most of life on this planet, Earth has come back from that before, too. So climate change might send us back to some sort of early life beginnings, and then the whole process starts at some sort of low level again and takes a very long time to reach anything remotely near what we have now.
We may have systems in place to allow us to live as we do now, but if all of those disappeared, something would likely survive on the planet.
re: 3. I cannot see how it ever returns to something even remotely similar to what we have now – the reason is that we have used up all the easy to extract resources… and they do not replenish.
No, we can’t go back; can’t ever go back now. Start over – that’s the only option at this point. And it’s going to be a tough act to pull off without any readily available resources.
Another great article, well worth reading. So much conflicting contradictory information out there about energy and the economy. You seem to simplify it and really separate the wheat from the chaff! Well done.
I know there is a lot of repetition in the article for frequent readers, but it is hard to know how else to try to tell the story, to the less frequent readers.
I think more links to previous select articles would be quite helpful. Those who are new and who enjoyed this article are very lucky — you have a whole heap of wisdom and knowledge waiting for you in the archives.
It’s kinda like when you find out about a really good series — and it’s already in season 6 🙂
What I probably need to do is create lists of article in certain categories. The whole idea that the economy can crash, because of what seems like accounting entries is particularly hard for folks to understand.
Pingback: News update | Peak Oil India | Exploring the coming energy crisis and the way forward
I have stopped following the comments posted after Gail’s excellent articles for two reasons.
1) Repetition. Even when the points are good ( which they usually are ) there is a limit to how much we can say. 900+ comments after some postings goes way over the limits. It is like drilling more holes in a depleted oil field — more effort gets less and less results
2) I don’t want to hear it. It have just became a grandfather and for the sake of my sanity I prefer to join the vast majority and keep my head in the sand. Ignoring these writings here is only partially successful. I keep imagining how my area ( suburban Washington DC ) will look in 100 years. Not pleasant — but more pleasant than thinking what the intervening 100 years will look like.
Side note: At a social function I meet the head of a major environmental organization. When I described Gail’s thesis, he did not disagree but said sadly “We have to stay optimistic in our business” and proceeded to pick up his toddler.
“I keep imagining how my area ( suburban Washington DC ) will look in 100 years. Not pleasant — but more pleasant than thinking what the intervening 100 years will look like.”
That’s one of the more powerful insights I have ever seen on this site.
I think the need for optimism is basically the issue. Any goofy story is palatable to the public. Even academic textbooks require an optimism bias.
Realism is a form of mental disorder (along with virtually the entirety of the human condition by now) today. If one is not “optimistic”, then one is “pessimistic” and unworthy of anyone’s time.
A sane person in an insane world is non-compliant, unmutual, and a troublemaker. What right does such a person have to require sanity of others so that a person can actualize sanity of being?
Trying to behave sanely while feigning insanity with one’s fellows is hard work, however.
Most of us are socialized to find out what is to be done, reward us with financial compensation for doing it, and then leave us alone to escape into our private social or inner lives for some downtime in order to recreate our capacity to do what we have to do.
Agreed. We are living in a bizarre situation, where nearly everything a person reads in the press is wrong–no matter which “side” is saying it. The situation is complicated, but most people don’t want to understand. They just want a happy ending–any happy ending.
The “need for optimism” is indeed a mental health issue, no?
There’s a difference between belief in one’s own abilities, and a belief that someone will come along and fix things for you, no?
I choose to define “optimism” in the first sense, that barring getting hit by a truck or coming down with Ebola, I have some control over my own destiny. I choose to be optimistic because it (and a dropper full of tulsi tincture) is the only thing that gets me through the day.
I do agree that those who are “optimistic” that “someone will do something about this” should more rightly be called “delusional.” But I felt the need to speak up for what I’d call “healthy optimism.”
A person who is optimistic even when the facts to not support an optimistic could be considered pollyannish…
Another phrase that comes to mind is whistling past the grave yard…. (To attempt to stay cheerful in a dire situation; to proceed with a task, ignoring an upcoming hazard, hoping for a good outcome.)
You’re making stuff up, Paul.
No one said anything about “ignoring an upcoming hazard” or “hoping for a good outcome.”
In particular, I find “hope” a particularly useless conceit. Hope is an obsession about the future, generally to the exclusion of the present. I’m too busy with the now to have hopes about the future.
I just find I’m better able to deal with upcoming hazards, and more able to create a good outcome, if I’m upbeat and positive about it.
Yea, the world’s going to hell in a handbasket. Neither of us can do much about that in the large sense, but we can do something about it in our daily actions. That’s where optimism comes in.
Yes we can — and we both do.
Even though I grow food as do you — we both remain plugged into BAU
When I imagine what it would be like to completely unplug that does not leave me feeling optimistic… for lack of a better word it makes me feel frightened… something as simple as a dental problem would result in a great deal of suffering… a crop failure likely means death…
I can understand why many people even if they knew what was coming – would take no advance action whatsoever – we all will die sooner or later — maybe some people prefer an quick death rather than years suffering trying to grind out a harsh subsistence living…
I will do it — but am I optimistic — or will I be joyful as IA suggest he will be — not in the slightest.
I will endure. Nothing more.
“Yes we can — and we both do.”
Please don’t speak for me. You do not speak for me. We have diametrically opposed world views.
So you do not grow your own food? Apologies for the misunderstanding….
Jan,
My very intelligent and optimistic wife is frequently telling me to maintain a positive mental attitude, in spite of the odds that are rapidly stacking up against a good outcome. The alternative to being positive is pretty rough. We teach are children to be positive, to have a good attitude, to “have hope without hope.” In our opinion, this is the courageous thing to do. To show grace, courage, and yes hope, in the face of insurmountable odds often brings out the best in our species.
Hope: a feeling of expectation and desire for a certain thing to happen.
Have hope without hope? As in I know that what I want is impossible yet I still have hope that it is….
That sounds like denial to me.
But hey … if that helps some people deal with this situation I am all for it.
I am unable to perform that mental maneuver … I suppose that comes with being an atheist… Finalities do not bother me.
Interguru, while I respect your decision to remain silent, your comments are insightful and appreciated.
Thank you for the complement. If find your comments insightful too. I obviously have started following them again, but I reserve the option to stop.
Pingback: Low Oil Prices: Sign of a Debt Bubble Collapse,...
Reblogged this on Stephen Hinton Consulting.
Wondering whether the Credit Bubble has anything to do with the Baby Boomer cycle passing through.
I think the Baby Boomer cycle has something to do with it as well. There was a big bulge of workers going through the job market at the same time. They added to demand. Now, as baby boomers reach retirement, they want to sell their big homes, and move to something smaller. There aren’t necessarily as many buyers for big homes as there were in the past–young folks have lots of debt, and can’t afford such big homes. At some point, they want to liquidate their retirement portfolio too, adding further downward pressure.
Another issue is that the government needs higher taxes to pay all of the Social Security for the baby boomers. If tax levels are raised, this gets to be a problem as well. (Cutting benefits is a huge problem also.)
In the September 25, 2014 New York Review of Books, Jeff Madrick reviews the recently released “FOMC: Transcripts and Other Historical Materials, 2008”, which Madrick says shows that the Fed economists had no clue about the coming recession and once the collapse began had no clue as to how bad it would get. “The recently published set of 2008 FOMC transcripts and Greenbooks amounts to a classic account, unrivaled by any book that I’ve read, of how little economists knew about what was happening during the Great Recession.”
I find that difficult to fathom.
The Fed not only knew – they created the situation.
At the turn of the century – the writing was on the wall – 20 buck oil was over. The Fed would have known this:
HIGH PRICED OIL DESTROYS GROWTH: According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. http://www.iea.org/textbase/npsum/high_oil04sum.pdf
And they would of course not have sat still and watched a deflationary collapse play out.
So they did what they had to to keep the hamster running – slash rates — and pour easy money into the economy — that of course caused the housing fiasco —- but they did that on purpose –because they have no choice…
How do I know they did it on purpose? Because they started to do the exact same things — but on an exponentially greater level after 2008…
They dropped rates to 0 — and they printed 10’s of trillions of dollars which of course is resulting in across the board bubbles.
Do they not hear the wails of despair and anger — and warnings that this will end in tears?
Of course they do. But they have no choice.
They know EXACTLY what they are doing. They are trying to delay the total collapse of BAU and civilization as we know it.
They are trying to delay a multi-billion person die-off… a possible extinction event.
Fail to act in 2008 and we would not be here now. Fail to continue to act now and listen to the warnings — we collapse overnight.
At one point I was singing with the chorus — asking why are they doing these seemingly insane things….. but then I realized why….
I might even start a Fed Fan Club — few people would join though because most think the above theory is outrageous — and the rest are welcoming the collapse because they think they are going back to Little House on the Prairie… or the Waltons….
I on the other hand understand what this collapse means — and I want it held off for as long as humanly possible — and by any means….
I should have cited the IEA link–but this was getting too long as it was.
I think you’re underestimating the number of people who understand what the Fed is doing. Simply take a look at the number of posters who no longer comment @ ZH. At some point, everyone of these people probably came to the same conclusion as you – including myself.
You can search their archives and see some of my comments from 5+ years ago posting that the Fed was on a suicide mission driven by the single hope of finding some kind of new energy store. If the project failed, then who would care? Get another few years of BAU, or let it collapse then – what would be the point of not buying some more time if there was no longer any system to hold judgment?
Once you understand this game, you basically have two options: (a) try to teach others; and/or (b) try to work the system. I think the majority of the former posters @ ZH got up to speed on how things really work, dispelling their former faith in open markets, and went to work dealing with reality operating with this newly established knowledge.
I bet a lot of those on ZH who stuffed cash under mattresses regret not heeding the advice ‘don’t fight the Fed’ — if they’d piled into the stock market they’d be way up …. that said if one was prescient enough and bought gold around the crash — even with the subsequent drop that remains a good decision.
That said, from comments I read around the web, there are still many people who believe there will be a real recovery at some point.
Faith in the omnipotence of the PTB reamins strong.
This time — is of course – different. Collapse will be complete — and there will be no recovery to anything remotely resembling BAU
I totally agree with you Fed analysis. Fan Club of one.
No eCONomist is paid to anticipate recessions, and certainly not predict them. Central tendency forecasts for econometric models are backward-looking regressions and thus are virtually incapable of detecting non-linear regime changes, if you will. Besides, in a perfect world of private banker central planning, recessions only occur because of “unexpected exogenous shocks” that allegedly no one could anticipate nor model.
Neither are eCONomists paid to see bubbles because the bankers for whom most work directly or rely upon for funding academic research make their money from creating, enabling, and further inflating bubbles that no one ever sees and that inevitably burst, requiring the central bank to print reserves to restore the primary dealer TBTE banks’ balance sheets about once every 7-10 years.
The fractional reserved banking system is a legalized private banking Ponzi scheme that has left much of the world’s labor product, non-financial business profits, and gov’t receipts as net debt service obligations to the top 0.01-0.1% rentier caste who own virtually everything of economic value that can be monetized, as well as owning the gov’ts charged with protecting the wealth, income, status, and power of the rentier elite.
Paul, I hold you in utter contempt.
I thought you were a doctor – not a judge….
On what grounds I am in contempt good sir?
Thanks for the information. Back a few years ago Steve Ludlum (aka “Steve from Virginia”) looked through the FOMC minutes, and figured out that the FOMC raised target interest rates, after housing prices had already started to fall (IIRC). See this post by Steve.
“My position remains we end up with an ‘economy’ somewhere between a cave man and Mad Max. ” Yeah well if that is what you believe you are a fool to think that you can waltz around in Indonesia as if you are there deity….white man…
Yes of course that has occurred to me
However if I choose to stay here I would suggest that I am most likely better off here than being in America — or most other urbanized areas…. one cannot own a gun here — most people are already living rather deprived lives — they are already living on farms for the most part…. I have a very good relationship with my village — the weather is warm — I can grow 3 crops a year — there is plenty of rain where I am — and multiple rivers – the soil is excellent.
When people are hungry they kill their children — they kill their brothers (see earlier research posted on this site)
You think if you are white in the US that is going to save you from another white guy who shows up at your farm with an assault rifle and wants your food — wants you wife?
That said – there are 4M people here — many are from other islands so would likely return when things go badly…. but still — too many people…
So I am looking at various options… in fact I am http://www.youtube.com/watch?v=f4hsC0nRvZM later this week to have a scout around the remoter parts of the wonderful islands of New Zealand…
If I think that is a better option then I will pick up my laptop and make the shift…
If I don’t think that is a better option then I will make my stand here (although I suspect I will regret not choosing door number 3 and heading up to Laos to sit in the jungle smoking opium and floating away…. with a solar powered stereo to play classic 60’s tunes …)
Hey, good for you, Paul. You will be our barometer of how such places are doing. Here where we are in northern CA is an urban development in a rural setting. I fully expect this quiet place to get quite violent.
I am afraid that if I take the Laos option I may not be in any state to provide much in the way of meaningful feedback…. but if you don’t hear from me assume it is all good — that my poppy field is producing well …. (and consider jumping a flight to the east if things start to turn wherever you are… just ask for the Canadian guy living in the jungle in the camper trailer when you get to Luang Prabang… )
Been running around getting stuff done – just got back to this site. I’ll mark it down. Some day I want to go to Tailand, and if so maybe Laos too. I’ll mark down that locale in Laos and inquire at the bar if I make it to Luang Prang. Sounds fun but never tried the stuff – is it good?
I tried on a trek in northern thailand once … just a puff or two for a photo op (apparently it can make you vomit at first — so not ideal when trying to hike up and down hills) …. I understand it has a floating effect… as in all worries float off in a haze of sweet smelling smoke….
A camper trailer? Jeez, Paul, you ruined my image of you sitting in a jungle mountain redoubt made of stone. Cool on the inside, warm outside, perhaps some terraces and waterfalls, too.
Maybe I just find an opium den and recline in the dark… not sure if those still exist though
I moved to NZ from the US 2 years ago. Nice to hear you mentioning NZ. NZ has lots of problems & potential problems, but still maybe a person could survive better here in the future in the event of major world and US problems. Climate problems are affecting NZ like everywhere else. I keep looking for confirmation that i made the right decision to move here. Up to now everything points to NZ as one of the better places to escape to in the event of catastrophic collapses of some sort. My opinion is that NZ is not a good place to retire to unless you are somewhat wealthy and can make a nice place for yourself, for someone like myself it is only good for escaping or distancing yourself from some potential severe life threatening situation. There are Americans living here who are not wealthy, who have regular jobs and live in regular housing. Rich people are attracted to NZ, but there is a surprising number of average Americans living here also. It is my understanding that the west coast of the south island is the least populated and i would like to visit it someday. This one guy moved somewhere on the west coast of south island
See his homemade cabin: http://www.odt.co.nz/news/galleries/gallery/general/109339/life-bush-family
I think he still lives there with his wife. This was some years ago, it would be interesting to find out if a person could still do this type of bush living nowadays. Right now i am living up on the North Island in a warmer area.
Thanks for the insights.
I have done quite a bit of research and it seems most organic hobby farmers I am in touch with prefer the north part of the south island given the choice – some have also mentioned the west part of the SI — as the ideal place to live.
The problem is that in those areas there are not a lot of job opportunities. So most people of this mindset are living and commuting to cities such as Wellington, Auckland, Christchurch.
As long as I have internet I am sorted in terms of work… interesting what the fellow is doing — but difficult for me to do that as I doubt I could get a reliable connection
Another issue with that set up is my wife would leave me if I were to shift her into the middle of nowhere like that….
I suppose the difficulty is finding a place that is relatively remote/not heavily populated — but not too remote as one wants some sort of community… I think there are quite a few options on the South Island – as well as the North Island…
I am sure it will be an interesting few weeks when we visit….
Australia and no exist as Anglo dominated countries at the sufference of the US navy which patrols the area and it’s trade routes.
Once the collapse gets into high gear the navy will be neutralized and exposed to takeover by the Chinese and their tender ministrations. No, these places are not the ones for waiting it out. Maybe nowhere is.
No=nz
You’re Right. Even now heavy chinese presence in NZ. It would not surprise me if sometime in the future the chinese took over NZ, i mean after some sort of worldwide and/or US collapse.
It would be a long way to swim though…
Paul
You should stay where you are — where you seem to have a good social network. Just as studies have shown that the size of your social network has a stronger correlation with you health and longevity than other obvious factors such as obesity or smoking, * I suspect that your strong social network will give you a better chance of survival in chaos.
If you move to NZ, you will have to rebuild this network — and both the low density of settlement and the modernity of their society will make that difficult.
Both of my adult children have a strong network, but they are scattered all over the world. If you want to build a strong network in a modern society I suggest a religious or quasi-religious ( e.g. the Ethical Society ) group.
* http://content.time.com/time/health/article/0,8599,2006938,00.html
We have considered that…. however we are concerned about safety issues in a place with so many people… Both of us have moved many times for work and are used to establishing new networks… so that does not much weigh ton us…. at the moment we are non-committal on a move out of Bali but keeping the options open.
Given the odds of survival — we have often wondered if we just go back to where most of our long term friends are — Hong Kong — and go down with that ship.
Appreciate the advice.
A while back, an actuary wrote an article in an actuarial magazine saying that data shows the life expectancy of married men is quite a bit longer than for single men. I expect part of the issue is a “selection bias.” Women don’t marry men who are terribly sick, or drunk all of the time. But there seemed to be more than that to the difference.
The wife will have poisoned him to death with his second meal. She’ll take another husband who does less damage in this world. 😉
“Many “peak oilers” believe that if we have a problem with the financial system, all we have to do is start over with a new one–perhaps without debt. Everything I can see says that debt is an essential part of the current system. We could not extract fossil fuels in any significant quantity, without an ever-rising quantity of debt. The problem we are encountering now is that once resource costs get too high, the debt-based system no longer works. A new debt-based financial system likely won’t work any better than the old one.”
That’s the same conclusion that John Michael Greer came to as well. He calls it “technological superstitions”. He asserts that many decades ago we were promised all kinds of technologies that would replace fossil fuels and we would have flying cars. None of that has happened, why? MONEY and the lack thereof !
http://thearchdruidreport.blogspot.com/2014/09/technological-superstitions.html
Thanks! I think it is part of the, “If you don’t understand it, it must not be too important,” view of things. If the important thing is digging minerals out, why worry about a financial system? There has been a belief for a long time that the fractional reserve banking system is the problem. I don’t see it as the problem, though. It is our need to move the profits of cheap energy use forward to the time when we need them.
While I perfectly agree with physical limits, I have and never will regard fiat money in its current form the limiting factor (ie no intrinsic value). A person with a shovel can dig out potatoes just as fast no matter if he is paid nothing or does it for $100 an hour. The same really goes for oil or any other resource. What matters is the amount of energy that goes into extraction – as long as the energy used is below that you gain, you are good. Now its true that it takes way more energy now than before as we dip into unconventional sources, and that is the main problem. We might be about to reach the limits of what returns we get from the planet with regards to our input – mainly because we consume such insane amounts of energy. It would have been perfectly possible to consume way less, but it requires a shift in mindset and how we regard this idea of “growth” and free market. As long as we have politics and government systems that hail consumption as the pinnacle of human existence we will get nowhere very fast. So it might very well be the end of consumption civilization as we know it – but it doesn’t necessary mean the end of energy and resource extraction as a needed and useful commodity. We just choose to not go there deliberately and instead play lottery with the wall street suits hoping that they will figure it out (which they wont, as money is not an energy source unless you actually burn the paper from which its printed on, which btw uses more energy than you get from burning it).
I wonder if someone might dig up a link to an old article explaining how what has been suggested above is absolutely not possible…. at least not without collapsing the global economy.
Without money, it is virtually impossible to have long supply chains. The digging potatoes example works, but not getting fertilizer for your potato plot, or getting oil out of the ground. Both of those require long supply chains.
How do you get your supply chains to work, without some type of credit/debt arrangement? Or perhaps suppliers will be paid in potatoes, in advance–does this work?
Yes, Gail, and our “money” is private debt-money issued by private banks at a compounding interest at an effective infinite term. Consequently, total annual net flows to the financial sector since 2008-09 exceed annual growth of nominal GDP. IOW, all incremental reported value-added US output is already claimed by the financial sector in perpetuity.
Then combine household debt service, total gov’t spending, and private health care and education costs, and the total is equivalent to 56% of GDP. The economy cannot grow unless there is an increase in indebtedness, illness, aging, and death, gov’t spending on war, food stamps, Medicaid, and unemployment payments, and student loan growth to fund prohibitively costly post-secondary credentials. But the rest of the economy cannot grow if these sectors grow given the sectors’ proportion of GDP.
Catch-22 and LTG from Peak Oil and excessive debt to wages, profits, and GDP.
Thanks! You probably have more numbers on these than I do. (I had put as many charts as I dared in the post otherwise, so didn’t try to add more.)
Of course, I am really not talking about how globalization has been constructed in a way that makes it very unsustainable – thats really just economy trying to optimize the system for resource extraction and consumption at higher speeds so that the numbers can show growth (and indeed keep up with population growth). I am just saying that its the physical constraints that make the system fall and not the virtual “playmoney” world – although they are very effective at concealing the real physical limits.
I was reacting to this line in Rodster post: “He asserts that many decades ago we were promised all kinds of technologies that would replace fossil fuels and we would have flying cars. None of that has happened, why? MONEY and the lack thereof !”
Money does not create technology – people do, and can do it more efficiently when they have energy slaves operating machinery to assist them. This is why I mean that motivation to do real creativity and innovation does not necessary come from the money carrot, although we are taught that is why we are supposed to be smart (so we can become rich and live like kings). A society can work very well without money, but they way we have put globalization together means fiat money works as as middle man for trade. The problem is that the money is no longer linked to real physical assets but are conjured out of thin air and hence you can easily create systems that conceal the real state of the physical system by making it appear “affordable” or worth investing in.
Thanks! I agree with you. The real issue is real physical limits. The financial system is only covering up the issue with real physical limits.
“The real issue is physical limits.” It’s possible to have a debt crisis without it being indicative of physical constraints on energy. The flattening petroleum consumption in the developed countries is mostly because of offshoring our energy consumption to Asia. So long as the total world energy consumption is increasing (which it is) there is no reason that a giant debt crisis portends the end of civilization. The recent drop in commodity prices may just be discounting a coming debt crisis in China, or a perception of oversupply, or…
We have many interlinked economies. It is not clear to me how many of them can fail, before the whole system fails. Japan is clearly close to the edge. In fact, if interest rates should rise, pretty much the whole world is close to the edge.
With respect to world energy consumption rising, the question is, “Is world energy consumption rising enough?” According to BP, world energy consumption rose by a shade less than 2.0% in 2013. This is the lowest percentage increase in world energy consumption since 2008 and 2009. We don’t know what the 2014 increase in energy consumption is–it quite likely is even lower than 2.0%.
Growth in energy use doesn’t have to turn negative to be a problem–just a slowdown in use tends to go with a slowdown in economic growth, and makes debt harder to repay. China’s rate of growth in energy consumption is as follows:
2002 6.0%
2003 16.0%
2004 17.8%
2005 9.2%
2006 10.4%
2007 6.3%
2008 4.9%
2009 6.7%
2010 11.2%
2011 8.8%
2012 7.3%
2013 4.4%
Thus, China’s growth in energy consumption is the lowest it has been since it joined the World Trade Organization at the end of 2001. Its growth in energy consumption is even lower than during the 2007-2009 recession.
Also, even if world energy consumption is growing, there will be individual countries with shrinkage of consumption. This shrinkage may represent “offshoring of energy consumption,” but it also represents offshoring of jobs. People without jobs can’t repay debt, or take out new loans. Some countries with shrinking energy consumption in 2013 include Japan, Australia, Egypt, Ukraine, Turkmenistan, Uzbekistan, Greece, Hungary, Romania, and Lithuania.
It is the money, or lack thereof, which causes apparent physical limits. Excepting phosphorus, there are no physical limits to supporting 10 billion people at U.S standards for many centuries, because we already have an energy technology available with which to power everything needed by modern society. Electricity to clean fuels via machine, ammonia from non fossil electricity, air and water and an even more efficient approach, electricity to batteries for electric cars (but cars are NOT efficient).
It’s nuclear or bust. If a person does not want nuclear, that person must accept entry down into the abyss of another dark age.
If we do not use what’s left of our fossil store wisely (as envisioned by Alvin Weinberg), we will certainly prove all the peak oilers correct!
I ask, why create debt for stupid and silly things when we should be creating debt for the real important things, like good ole industrialism, but this time, based on advanced nuclear. At least that would keep the economy going until the world is fully developed upon which, it would be the discussion of the descendants to figure out the next step – the (currently still impossible) steady state.
Gail –
I’ve been reading here for a long time, but finally might have a piece to chip in. When you say long supply chains, you seem to be overlooking the kind of trade that moved from China into Europe during the Middle Ages and Renaissance – I’m no expert, but I know that many resources wove their way back and forth… just not quickly, and not in the quantities we’re used to. But long chains of trade have been around for centuries. What would you say the difference is between Middle Ages spices to England and our current oil from Middle East to US?
The obvious difference is that spices were carried on sailing ships and on pack animals in small amounts — whereas oil is carried in massive tankers in large amounts.
Not only could the oil not be transported — there is also the problem of extraction and refining it — hugely complicated processes reliant on technology…
The same would go for all resources… we were only able to extract and refine because we had cheap energy.
I could imagine that some small scale trade may exist when the dust settles — but what we refer to as BAU — that is not going to return in any way shape or form — because that was only made possible by easy to extract resources… the easy stuff is gone.
The thing to keep in mind is that 1000 years ago there were a lot of minerals that could be plucked off the surface or from just below ground — those are all gone + even much of the really difficult stuff has been extracted because we have had the power of BAU and cheap energy allowing us to do so…
I suppose that doesn’t matter so much because there will be so much scrap metal etc around — the issue will be finding the energy to work it — if many billions die then not such a big deal – there will be a lot of excess hammers and shovels lying around for the taking. It’s not as if anyone is going to be trying to cast a new Tesla drive train….
“long chains of trade have been around for centuries. What would you say the difference is between Middle Ages spices to England and our current oil from Middle East to US?”
I’m not trying to speak for Gail, but the obvious difference is magnitude.
In the Middle Ages, I’m guessing the market for such things was a few tens of thousands of noblemen — a “middle class” didn’t exist to any great extent, and the vast masses of peasants could not afford anything that came from outside their immediate village.
Today, we probably have four or five orders of magnitude more demand for global shipping — at least a billion people are able to seek out and pay for manufactured goods from around the world.
Perhaps the world will go back to shipping by camel train and clipper ship. But not for a billion people!
For one thing, quantities were much smaller. For another, the payment system was something like gold coins. The items that were purchased were items that the area had been growing or making for trade for a long time.
When a company needs a very particular product, say, paints of a particular kind to coat cars, or special batteries to run in electric cars, or parts for wind turbines, then there is a need for special factories to be built, and long-term contracts to be in place. The company making the item that is being contracted for in turn will need to set up supply lines to get the materials it needs. At this point, gold is not a recognized method of paying for goods. There also isn’t enough of it. There needs to be some currency used, and some guarantee that the company contracting for all of these goods will really be able to make good on its promises. The nature of the contract requires much more long term financial guarantee.
Ms. Tverberg,
In my opinion, you are putting the cart before the horse.
It is not the availability of cheap oil that allows us to repay debt.
Our money IS debt. Thus, as illustrated previously, it is arithmetically impossible to repay the debt regardless of whether oil is cheap, expensive, abundant or, indeed, scarce.
The arithmetical implication of this monetary system is that the compounding nature of interest guarantees that the more economic activity is generated, the faster wealth is eroded due to the accumulation of the debt in the hands of the creditors. This is what drives the cost of living, thus the monopolisation of the economy, thus off shoring of manufacturing, thus the dependency of society and the full capture of civic and political institutions.
It is the fact that the economy is able to grow (because cheap oil allows us to make goods and services cheaply) that gives us some chance of repaying debt with interest. Once the cost of oil extraction is higher, it is hard to get the economy to grow. If oil prices rise to match the higher cost of extraction, the economy goes into recession, and growth stops.
Gail, sorry, no. There is never a chance to repay debt with interest, in the aggregate. From the first penny, debt is never repayable, essentially by definition. What we think of as interest always has to come from outside the debt accounting system: that is the sleight of hand perpetuated since the game of capitalism began: acquiring resources from outside the system and pretending that they came from within the system, or were ‘generated’ by it, the way one used to assume flies were generated spontaneously by rotting meat.
In this monetary system, interest is a COMPOUNDING dynamic.
Society does not own the money it makes use of. Not only is society therefore in perpetual debt but debt will always expand REGARDLESS OF WHETHER THE ECONOMY IS EXPANDING OR CONTRACTING.
Despite the fact that our monetary system has quantifiable socio/economic ramifications in our choices IT IS NOT AFFECTED BY said choices. Our monetary system evolves according to a set of arithmetical realities in complete isolation from anything else that is going on.
Oil, or anything else for that matter, has no bearing whatever on our ability to repay the debt. An ability that is precluded a priori anyway because this type of debt can only expand.
In this monetary system, THERE ARE NO CIRCUMSTANCES POSSIBLE THAT MIGHT INDUCE A DECREASE IN OUTSTANDING DEBT
This is not conjecture or opinion. This is an arithmetical reality.
Here’s a critical arithmetic reality:
HIGH PRICED OIL DESTROYS GROWTH
According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. http://www.iea.org/textbase/npsum/high_oil04sum.pdf
Thought experiment.
Imagine a sovereign that decides one day to return the entirety of all the money and credit back to the central bank.
That done, the sovereign would still be out of pocket of the interest owed on the amount that was just returned.
But all the money has been returned so that there is no money in circulation anymore.
So how is the interest to be paid then?
This monetary system guarantees the constant expansion of debt. This is a compounding dynamic that must, as you well know, become exponential and we are living it today.
The following articel of the Sydney Morning Herald has a nice graph on iron ore prices:
Price drop signals the end of the iron ore age
…..But China’s seemingly endless appetite for iron ore has been finally been shown to have limits, and the iron ore price has been driven lower by the ever-increasing volumes of iron ore leaving Australia and Brazil.
Only now, as the price for Australia’s top export commodity slumps at a five-year low, does there appear to be a consensus that iron ore, and mining generally, was helping to prop up government revenues and sections of the economy far away from the rocky gorges of the Pilbara.
The recent corporate reporting season was littered with companies that named weakness in the mining sector as a factor in their own underperformance.
The trend went far beyond the traditional mining services crowd and was seen in airlines, media publishers and even clothing manufacturers who have noticed demand for their workwear products to be lower than in the past.
http://www.smh.com.au/business/price-drop-signals-the-end-of-the-iron-ore-age-20140912-10fxr7.html
Re airlines from my website:
8/9/2014
Qantas growing passenger numbers don’t increase revenue
http://crudeoilpeak.info/qantas-growing-passenger-numbers-dont-increase-revenue
US shale oil contributes to US oil imports falling, depressing global oil prices. I think oil markets believe in the shale oil “energy revolution”. That will not last long and there will be surprises.
From my website:
15/9/2014
US shale oil growth covers up production drop in rest-of-world
http://crudeoilpeak.info/us-shale-oil-growth-covers-up-production-drop-in-rest-of-world
China has been stockpiling massive amounts of materials including iron ore… http://www.bloomberg.com/news/2014-04-28/china-s-iron-ore-inventory-rises-to-record-on-output-financing.html
No doubt this is a coordinated effort — along with building massive amounts of not needed apartments, ghost cities and infrastructure — to keep resource prices from collapsing.
As usual the only place one can get the full story is http://www.zerohedge.com/news/2014-02-17/chinese-iron-ore-stockpiles-rise-record-end-demand-plummets
You can only build so much stuff that nobody needs and stockpile so much before you run up against the wall…
Thanks for all of your links. I know that Australia with its mining industries has been particularly hard hit by China’s slowdown. Iron ore is a good example of a commodity whose price has been dropping as well. Oil costs affect mining costs, but the drop is more extreme than one would expect.
An excellent article – as usual.
“Prices of many commodities crashed in 2008, and it was only with massive intervention that prices were propped up to 2011 levels.”
That’s one of the hamsters we need to keep running on the wheel.
Looking at prices at the moment are the central banks losing control — or are they playing a game — do not intervene when the prices increase with the purpose being to encourage investment — but this of course destroys growth — so do they phase it down purposely — to prevent a collapse of the economy …. then phase it back up again before oil producers shut down….
Hopefully it is the latter — because if prices keep dropping and stay low — we have a problem.
I think the latter is more likely because otherwise we surely would see some sort of reaction out of the central banks to offset this drop — the reaction may find it is pushing on a string — but none the less — I can’t imagine that they would sit idly by and let oil tumble out of control…
Of course all of these measures are stop gap – there is no solution … at some point it all unravels and that is the end of oil and most other resources — they will simply remain in the ground
My position remains we end up with an ‘economy’ somewhere between a cave man and Mad Max.
Food will surely be the issue – not trying to tape together the detritus of a collapsed civilization and trying to keep vehicles on the road…
If Gail’s article is correct, we will be separated from non-conventional oil sources first as they become unaffordable, on down the line until we are mostly reliant on conventional oil which is already being taken out of the ground via horizontal super straws at an alarming rate of depletion.
At this point I’m very interested to see if oil price does go back up and how much, and for how long. There seem to be two peak oil camps; those that think oil price can go up to $130-200 a barrel and those that think the price is currently residing at the affordability ceiling, which is the camp I am in. Recently there was an article about the Saudi’s plan to cut back on oil production to get price back up, which should prove interesting to see if that works or not.
Stilgar – I think it was posted on this site something to the effect that oil over $50 is not really affordable… that the economy can only tolerate that for so long…
I think this all ties back to this:
HIGH PRICED OIL DESTROYS GROWTH According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. http://www.iea.org/textbase/npsum/high_oil04sum.pdf
If that is the case then even $50 oil would be putting a significant drag on the economy …
I think to even stay afloat with 90 oil massive offsets must remain in place (stimulus, QE, ZIRP …) — of course these offsets cannot hold back the tsunami forever…
I really don’t think any of the numbers we are seeing are doable — and of course we can’t go back to 20 or even 50… because that the cost to pull much of the oil of the ground is well beyond that number…
Really a very bad situation… I remain amazed that they are able to hold this together…
If there is a price spike, I am expecting it will be a brief one.
BBC this morning: “Rockefellers to switch investments to ‘clean energy'”
“Heirs to the Rockefeller family, which made its vast fortune from oil, are to sell investments in fossil fuels and reinvest in clean energy, reports say.
The Rockefeller Brothers Fund is joining a coalition of philanthropists pledging to rid themselves of more than $50 bn (£31 bn) in fossil fuel assets…..”
http://www.bbc.com/news/world-us-canada-29310475
One wonders if this level of dis-investment will start a cascade of dis-investment resulting in an oil price spike-cum-crash, ala 2008. I speculated over at peakoil.com that this, on the surface, looks like a good thing for the growth of ‘green energy’ and the climate, but there may well be another side to this; disaster capitalism at its best. If the Rockefellers can spur an exit from fossil fuel investment on much of a scale, all hell could break lose in the oil markets as investors follow the ‘smart money’ out. As we’ve seen, major oil players are already selling assets to keep up profits and dividends. Of course, if you’re the Rockefellers and can risk a few $billion loading up on credit default swaps, etc., and position yourselves to buy back the peices, all-the-while investing heavily in alternatives, just the movie rights could be worth billions.
Nothing wrong with having a little fun with this stuff, eh?
I suppose that there may be some clean energy investment that sort of works–for example, geothermal in the right location. But there is an awfully lot that has no chance of being cost effective, and makes the electric grid less resilient. Such investment takes money away from where investment does (sort of) still work. It makes people feel like they are doing something useful, but it just makes the crash come sooner, as far as I can see.
I think this is a smart mover on the Rockefellers’ part. I was reading where in one of GM’s Labs they are getting their gray matter wrapped around the Lithium Sulphur battery technology and it appears that they have a battery in the lab that can store 1,000 wh/kg. This is about 10 times the energy density of Lithium Iron Phosphate batteries of the same weight. They showed a graph where there was very little capacity loss after 600 cycles. In other words, an EV pack with a 100 mile range is likely to be replaced with a pack of a 1,000 mile range. This, if there are no “side effects” (e.g., it’s not volatile, has a wide operating temperature range, long shelf life, long cycle life, etc.), is a real game changer.
The other game changer would be if there were economical photovoltaics with an efficiency of greater than say 45%. I wonder if they have gotten wind of something?
We sometimes look at something like this and say how wonderful life will be if this comes to pass. For some it will be. It always is. This will at least cut our fossil fuel usage out the tail pipe and maybe out the smoke stack.
I wonder if this is what some of the people who fought carbon capture were seeing: No one giving up their cars and hot showers but having them fueled by solar with excess solar energy stored in batteries.
I wonder what life would look like under a solar/battery epoch? What would we really need coal, oil, and natural gas for? What could not be done by energy stored in high energy batteries?
Even if this worked out it is not a game changer – see Things Made from Oil http://www-tc.pbs.org/independentlens/classroom/wwo/petroleum.pdf
We need oil. Easy to extract oil. Unless someone comes up with something that is cheap and can do what oil does — then the discussion is not worth having
Hi Paul,
I read through your referenced list under Automotive. Gasoline was listed and EVs do not use gasoline.
If the fleet turnover is once every 16 years, then at the end of 16 years, there will be very little gasoline used. Also EVs do not use antifreeze, coolant ( not sure if this is redundant with antifreeze), motor oil, oil filters, fan belts, etc.). The amount of petroleum used in battery cases, bearing grease, traffic cones, brake fluid, windshield wipers, visors, etc. might be supplied from Colonel Drake’s original well either because the material does not wear out such as battery cases or the amount used is so minimal such as less than a teaspoon of grease every100+K miles, to the point we could be supplied with grease for an extremely long time.
After 16 years, the body of cars that used to use gasoline would be using electricity that could be supplied solar, wind, and hydro with excess stored in those batteries. Is that not a game changer? If the USA uses 180 million gallons of gasoline per day, that’s 10 million barrels of oil per day that are not used. Is that not a game changer??? We decrease oil usage to the point of becoming “energy independent”. Is that not a game changer???
The only ones I saw that might be a problem are asphalt and tires. The question back to you is how much asphalt do we use a year in barrels of oil? What substitutes could we use instead?
How many barrels of oil are used per day to make tires? What can be used as a substitute? When I posed this situation to my son, he said there are alternatives and he is in the tire business.
I see EVs in the form of cars and trucks as buying us a lot of time to find substitutes to make the adjustments we need. This is **not** BAU but an evolution into the next era. There may be less cars and more bicycles but then that is part of the evolution.
The discussion we need to have is what do we do with the remaining oil given our current infrastructure, resources, and our attitudes? We don’t need to be blinded by list of things that might disappear but to find substitute(s) or alternatives for those things. There are a lot of smart people out there who have solved problems and there are those that have said that man will never fly so why try. There have been a lot of people who have seen this coming and are finding and suggesting ways forward.
It isn’t direct use of fossil sunlight that counts, it’s the pyramid-effect.
A modern, computer-controlled, high-tech EV essentially requires all of current human civilization in order to exist.
I think older EV technology could last for some time, but next to fossil sunlight, I think our biggest addiction is to “human exceptionalism,” the thought that our brains and our technology can get us past the basic laws of physics.
I would absolutely love it if some brave, daring individual would produce EVs using no technology that didn’t exist in 1950. That’s going to be the only way EVs can continue past the decline of fossil sunlight.
I’m currently working on a Vanagon re-powering, using flooded-cell NiCd batteries and a series-wound DC motor. That may have a chance of surviving a couple decades, but the sealed Curtis controller can’t be repaired if the semiconductor industry falters.
What will be present in the future is hard to say. I can see the military trying to keep some facilities open to produce electronics. The spill over would be to produce controllers for various vehicles. Greer mentioned a stair step down scenario and I think I would agree. We may even go back to a Henney Kilowatt controller.
However, we are still producing and have access to FF of various types. We recycle CPUs and other electronic parts. Not sure of all that we can retrieve.
BTW, good luck with your Vanagon!!
“I can see the military trying to keep some facilities open to produce electronics.”
Factories are not closed systems … they require inputs from BAU in order to produce electronics…
So to keep a factory operating you would also need to keep the mines open that supply the copper … the smelters open that smelt that refine the copper … you need mining equipment, spare parts etc… so you have to keep the factories that produce all of that open … you also need to transport stuff from one place to another etc…. etc…. etc… etc….
Basically if you want to keep even one electronics factory producing – you need a fully functioning global economy.
They are called contracts and the Gov’t will increase debt to pay for them. During the great depression, FDR created a number of civic projects and paid people to work them. It was not BAU but it was a way to prime the pump
If energy is represented by money and energy dwindles, then money dwindles. It is one of the reasons that the Gov’t has tax incentives on home owner solar energy projects. In the summer, I am basically energy neutral and can recharge an EV while others burn gasoline.
I am experimenting with growing a hybrid type of tree …. if I get this right these trees will produce mature solar panels within the next year or so…. hopefully I will have my orchard in full production in time to save the world and be declared the King of Earth….
I have patented the trees and implanted a self-destruct code in the DNA that only I can trigger or stop (just in case Obama or Putin decide they want to take my throne) so in addition to being the King – I will also be the first trillionaire..
We need to keep the whole system operating. This means that we have to keep demand for oil high enough that the price stays (or rather, rises) high enough that we can actually get it out of the ground. Getting rid of all automotive uses is not necessarily helpful.
‘Even if this worked out it is not a game changer’ I disagree. If the kind of battery advances he is talking about come to fruition then electrical vehicles become feasible. PV home systems become feasible. An army of segways. Sure the copper for the motors still has to be mined with fossil fuels. Sure the tractors and farm equipment will not be converted or replaced with electric. Batteries like he is talking about could extend BAU for a long time however. Thats a game changer in my book.
Even if these could be invented tomorrow, we are talking a minimum 20 year change-over time period, because current cars need to wear out before they are replaced. (We cannot afford the loss of value on existing cars.) We need to keep oil demand and oil prices high during that period, so that oil is available for other uses where it is still needed. We have to find ways to continue to produce electricity as coal is phased out and nuclear wears out. We need to maintain electrical transmission lines, or we won’t have electricity for recharging all of these vehicles.
We would need coal, oil and natural gas as before. In fact, we would need rising prices for these products, to make it worthwhile for producers to continue to extract them. Without fossil fuels, we could not make the cars or the new batteries or the new PVs.
There are many calculations of the electric grid investment required to make that transition.
One of them (link below) says about $500 billion a year till 2050 across the globe. Other say even about $900 billion.
http://books.google.pl/books?id=MZ3DklIQuT0C&pg=PA1255&lpg=PA1255&dq=US+electric+grid+investment+2050&source=bl&ots=5Jn7h_I_1q&sig=tvl3aGBXvDcgJxiGcukaV-mVjgM&hl=pl&sa=X&ei=kn8kVKW9CoKd7gbj_IHgDQ&ved=0CCoQ6AEwAQ#v=onepage&q=US%20electric%20grid%20investment%202050&f=false
How any one could expect that humanity is able to raise all these investment projects in such long period of time? Stable economy is needed for once. And I do not even mention the money. There are resources (steel, copper, oil, coal and full Mendeleev’s periodic table considering current material/technological needs) behind all of these works. Where are we going to find and peacefully extract them? On Venus, Mars, Jupiter or Saturn? And the energy for that task comes from which natural resource? And please add the results of demographic bomb we are sitting on.
Oil is gone. Liebig’s LotM. The humanity will follow. Sorry.
“we are talking a minimum 20 year change-over time period, because current cars need to wear out before they are replaced.”
Older vehicles with sound body, brakes, steering, etc. could be retrofitted to electric drive fairly simply.
I haven’t gone through a full emergy analysis, but I suspect that an electric drive retrofit would have less embedded energy than the original internal combustion engine. Plus, electric drive is simpler, and easier to maintain.
The rub is batteries. There are rumblings about “peak lithium,” should electric cars really take off. Lithium batteries require a lot of technology, too, and long supply lines.
I’m using NiCd, but they are horribly expensive, even though they have a very long life, compared to the lowest common denominator, lead-acid batteries, which are heavy and need to be replaced every few years — but they can be rebuilt using simple technology at the disposal of a large village or small town.
This situation isn’t going to change much. There are rumblings of better battery technology available Any Day Now™, but any highly advanced technology will require much of today’s civilization to maintain it. My vote is that lead-acid will be around for the long term.
That battery thing is interesting. I do know that it takes about half the energy that a lead acid will ever store, just to make, that is energy stored on investment, ESOI, and that certain li-ions can achieve an ESOI of up to 10. However, I’m not sure if that includes the average of whatever gains gathered with recycling. So, imagine a solar panel with an EROEI of about 7 coupled with the lead acid. We need to store about 4/5ths of the energy for “later” (and for making more batteries and solar panels). Just not happening, because the battery eats fully half the energy (in this extreme case). Also not happening because we humans are just a little too impatient for all that, as we are used to extracting and consuming “instantly”.
O the other hand, imagine a (somewhat) clean source that doesn’t require 4/5ths storage, and a form of storage that has an ESOI of over 100. Also imagine the source itself having an EROEI of that of windpower or higher (>20). That would be nuclear, because the power of fission by far offsets the energy intensive process of mining and enrichment. Efficiency in energy gathering and storage (and usage) is key to surviving peak oil. What we need to do is make nuclear itself far more efficient. We do that by chemically reprocessing spent fuel. This voids the negative inputs to EROEI caused by both mining and enrichment. It also voids the need to mine for any extra uranium (or thorium) for many centuries!
Given a civilization powered almost completely by fission (and then fusion), there would be plenty of hydrocarbons for tires and roads, etc. 😉
The battery is just part of the way we can store energy. There are other ways.
When I took a solar energy course many many moons ago, there was a rule of thumb where you take the square footage of the structure you want to heat and divide it by 3. This gives you the size of a heat storage bin in **cubic** feet for storing the output from a solar thermal collector. The storage bin contained fist size rocks. Nowadays, liquid transfer tanks are used. Still, if the idea of trying to make something last, then using rocks instead of a liquid might be better. The liquid method is supposedly more efficient.
I am doing a study to add solar thermal to our house here in the SE USA. I figure I can heat about 80% of it by solar thermal. December and January are down quite a bit at 54 and 77%. This does not include making up the rest with PV and solar hot water. I figured I could supply about 95% of my energy needs using solar.
It takes a lot of money to fund these projects. I know this country has neither the discipline nor the financial wherewithal to try this in parts of the country where it might be a “no-brainer”. There are people likely to be waiting for TPTB to say through the main stream media to say that solar is the way to go and cause a stampede toward these technologies. Also, the efficiency rate for PV could be higher and there are signs that we are making progress. Still, solar is viable even if the payback is many years down the road.
Ten Reasons Intermittent Renewables (Wind and Solar PV) are a Problem
http://ourfiniteworld.com/2014/01/21/ten-reasons-intermittent-renewables-wind-and-solar-pv-are-a-problem/
Solar – After Hundreds of Billions of Dollars of Subsidies and R&D and this is what we get?
http://reneweconomy.com.au/wp-content/uploads/2014/04/bernstein-energy-supply.jpg
The German Solar Disaster: 21 Billion Euros Burned
http://www.thegwpf.com/german-solar-disaster-21-billion-euros-burned/
Spain’s disastrous attempt to replace fossil fuels with Solar Photovoltaics
http://energyskeptic.com/2013/tilting-at-windmills-spains-solar-pv/
I read your links and I find them to have holes. I invite you to go back and reread some of the numbers I crunched for you with regard to the first article. Some of the things cited are just picky ” wind turbines kill birds”. True. But the neighborhood cats kill even more and by a very large percentage.
Some of the others cited poor planning as the reason for failure.
Paul, I work the numbers to see if a project will work for me. I invite others to do the same.
Can you point out the holes?
Did Germany and Spain not kill their solar projects after losing billions?
Is the solar energy supply actually more than is indicated in that graph – as in not even close to half a percent?
Is Gail wrong in her assessment?
If you want to have this out then state the facts — you cannot just sing tra la la la la — koombaya — we can all live happily ever after basking under solar panels
Show me where I am wrong — and don’t tell me your driving a Prius is the evidence.
Solar does NOT work — it is a joke — for every unit of energy put into making a panel you barely getting more energy out….
Guess what — if you bred 50,000 buffalo and made them walk round and round cranking a turbine you’d get a better return than you would on solar panels
That is FACT
“I do know that it takes about half the energy that a lead acid will ever store, just to make”
Can you provide some documentation for that claim?
To my knowledge, lead-acid batteries have tiny emergy inputs. They are perhaps the #1 recycled product, with perhaps 95% of all discards being recycled. The recycling process is very simple and low-tech: basically heating, casting, and filtering with large tolerances. I’ve done it in my garage. So I am truly interested in your dissenting evidence.
Over at one of the nuclear sites…
http://bravenewclimate.com/2014/08/22/catch-22-of-energy-storage/
I suggested that it seems like pumped hydro would have less energy stored on investment than batteries because of all the heavy equipment compared to mass production of batteries. Somehow, they convinced me that it was the otherway around and somehow (I forget) I found this link…
http://www.sciencedaily.com/releases/2013/03/130308111310.htm.
Right now, I searched “ESOI batteries” and the google page has a lot of links, but I have yet to find out if the reduced energy inputs of recycling was even at all included (I doubt it!). A certain percentage of recycled batteries required lots of gasoline for the people to go out of their way to recycle, however, in an utility scale storage, the lesser embodied energy from recycling would surely be optimized.
I believe a lifepo4 battery is better because they last about 4 times longer, and that there is already newer batteries that last even longer than that (but they are finicky, requiring battery management PCBs and such) . As long as the energy source itself has a rather high EROEI (and is relatively dependable), the ESOI shouldn’t matter much. But if most of the primary energy has to be stored, such as would be the case for solar in a non fossil fueled world, that storage would have to be of high ESOI (and of high efficiency). Clean fuels and heat storage to electricity would have an ESOI of much less than 1, but will be required anyways for heavy equipment and nuclear load shifting after the phaseout of hydrocarbons. Of course heat storage is efficient if generated by solar thermal and higher temp nuclear (but solar thermal has all those moving parts and is subject to sand storms).
I don’t believe in accelerating today’s LWR nuclear, either, because it’s just not sound to mix water and solid fuel. Only the best possible meltdown proof nuclear should be considered for transitioning from hydrocarbons.
I also wanted to add that it appears that only 2% of the world’s energy is required to make the fertilizer required to keep much of us fed. So, even though it is easily tech possible to make the ammonia from just water and air (and solar, wind and nuclear power), natural gas reserves would suffice (without causing too much excess CO2) as they are used today in the Haber Bosch process. Thus, natural gas should be reserved mainly for providing for the world’s fertilizer (and not merely burned). However, there is a way to circumvent the methane process and the multiple water splitting to hydrogen steps, too!
http://arstechnica.com/science/2014/08/fertilizer-raw-material-made-with-water-air-and-sunlight/
China makes nitrogen fertilizer using coal, rather than natural gas. It is a major supplier of nitrogen fertilizer. There are a lot of other soil supplements needed besides nitrogen fertilizer, if we want to imitate nature, rather than let nature do the work for us. All of this takes a growing use of fossil fuels.
Oh, here’s a link backing the “batteries only have an ESOI of 2 to 10” statement…
http://www.sciencedaily.com/releases/2013/03/130308111310.htm
Notice how favorable pumped storage is.
Here’s a link (albeit, just a possibility which could be stranded by excessive non-scientific regulations imposed by the anti-nuclear opposition).
http://www.extremetech.com/extreme/187917-startup-gets-funding-for-its-molten-salt-nuclear-reactor-that-eats-radioactive-waste
Anything that eats wastes would have a very high EROEI. Exactly what we need to survive past post peak, and especially “peak CO2”. The tech was proven but the learning curve, killed, by former peanut brained U.S presidents.
Hi Fire,
Your ESOI link is very interesting. The Sanford University study has Lithium Ion up there at a 10 for 6,000 cycles. If the energy density increases by a factor of 5 to 8, the ESOI should follow suit (e.g.,50 to 80?) just because the total energy saved would increase by a factor of 5 to 8. If the batteries use cheaper materials, I assume the ESOI would increase again.
Lithium Ion has a range of energy densities and cycle lives. I’m not sure what their 10 is based on. Pumped storage is at 210. I think this bodes well for the GM batteries; provided there are no hiccups with respect to safety, operating temperature range, cycle life, etc.. Thanks for the link.
Thanks.
Even Alvin (the nuclear engineer) liked the idea of solar and helped to start the EIA (but suggested that it may never be cheap enough to replace hydrocarbons or nuclear).
Stilgar,
It seems that I am in the other camp. I believe that we have now completely entered the “bumpy plateau” of the peak oil story. There will be a series of sharp increases and declines in the price of oil caused by scarcity and then demand destruction. There will be an opportunity to make a lot of money in oil stocks if you buy the dips and sell the highs. This should give you the small fortune you will need to buy solar panels to install on your mountainside doomstead. Do it quickly though, because the bumpy plateau will probably be short-lived and money will shortly thereafter be worthless.
Gail, just wanted to (finally!) thank you for all the hard work you put into this blog. I really appreciate it. Look forward to every post!
Also, in reference to a previous post, on climate change scenarios, I wonder if you’ve seen James Hansen’s recent work on the effects of shutting down fossil fuel use? The study estimates up to a .6C warming as a result of the reduced pollution. Combine this with the 30-yr lag between emissions and warming effects, and it seems 2.5 C might already– or soon will be– in the pipeline. It may seem a minor point, but 2.5 C does move us into the IPCC’s danger zone, even with your economically-driven oil production collapse scenario.
Thanks for pointing out James Hansen’s work on this. It seems like we are in a, “Damned if you do; damned if you don’t scenario.” We basically can’t win, no matter what. With or without Hansen’s work on the subject, I am not convinced that we really know precisely how things will turn out; the system is more complex than modeled. In 30 years, a lot of things will likely have changed, including climate.
Do I detect someone’s tongue in someone’s cheek?
And?
The overriding fallacy of modern economic theory ( least until 2008 ) is what I call “physics envy”. The idea that economic theories can work as well as physics ones. It does not work. Economics is a soft science, where you have to take into account difficult-to-measure social and emotional issues as well as easily modeled numerical ones.
Examples abound, such as Rodger Cohen’s experience selling his house in France (http://www.nytimes.com/2014/09/23/opinion/roger-cohen-truths-of-a-french-village.html ) where his real estate agent, against her economic interest ( and minimization of her energy ), urged him not to sell for sentimental reasons. You can’t put that into a physical-mathematical model.
Let’s agree to disagree.
I suppose one would expect a countdown, relative to the Big Bang. But hopefully that is still a long way off.
But from our little place in the Universe, we are still in a “open system” in terms of energy, with the sun providing us energy from an outside source. This is why not everything goes downhill on earth. “Dissipative structures” such as humans, animals, and hurricanes can be formed in an open energetic system. These temporarily have life, and then very often are replaced by new similar dissipative structures.
1) “I suppose one would expect a countdown, relative to the Big Bang. But hopefully that is still a long way off.”
Here you are: http://2012wiki.com/index.php?title=Image:PPTCountdowntoSingularityLinear.jpg As you can see, the time to next event has shrunk, so there is no “way off” left.
2) “But from our little place in the Universe”
All good things come in small packages! I define the continuum’s gravitational potential as the gradient of its matter waves’ constructive interference/organized complexity.
The human brain has the highest organizedly complexity in the known universe. Therefore, the brain of the most imaginative human is the absolute gravitational centre of the entire universe.
Any POTENTIAL is a unicentric gradient:
“From Maxwell equations (6.20) it follows that the electric field is potential: E(r) = −gradφ(r).”
That is why gravitoelectrically and electrically, the universe has a single centre, also known as God.
The universe’s begins its gravitational life cycle from a purely gravitomagnetic (i.e., rotationally decohered and quantized) state. A gravitomagnetic quantum is a portion of the universe’s continuous gravitoelectric field looped on itself. Therefore, the universe’s gravitoelectric field (God) is initially disguised in the form of disjunct gravitomagnetic quanta (Nature). The goal is to reveal God by reunion (i.e., religion, from the Latin re-ligare, to reunite) of Nature’s quanta. The exponentially accelerating reunion of Nature’s quanta culminates in the emergence of the psychokinetic Lord of the Quanta in the end of 2014 AD.
Didn’t we already pass that end of world thing — I thought it was predicted for last year?
What gives you this timing?
Is that you, Deepak?
I’m still awaiting enlightenment for the 3 grand I sent you.
Paul says:
“Didn’t we already pass that end of world thing — I thought it was predicted for last year?”
In the biblical tradition, maintained by Judaism and by the Seventh-day Adventist Church, God is expected to comes to Earth on Saturn’s day (Saturday) in the solar month of Saturn (Capricorn, beginning about December 22) in a septennial year of Saturn (2014 AD):
http://2012wiki.com/index.php?title=Novelty_theory#Year_of_Antichrist's_coming
I was referring to that Mayan calendar thing …
Who all is involved in putting together this Wiki? Is this your work and the work of a few of your friends?
The Mayans did not predict that the world would end in 2012 AD.
Terence McKenna added the “devilish” number of 66 (this number frequently occurs in apocalyptic books and films) to his birth date (16 November 1946 AD) and arived at 16 November 2012 AD as the date of the Eschaton. He then understood that appointing the end of the world on his birthday could be used to discredit his teaching as subjective and shifted the end date from 16 November 2012 to 22 December 2012.
Do not be so gullible, Paul. 🙂
I suppose I should have added a sarc tag there…. I don’t believe in magic crystals, gods destroying the world, heaven, hell… and I certainly don’t believe in the Mayan calendar and other nonsense. I prefer facts.
From a special I saw on TV, my understanding of the Mayan date in 2012 was this time period would be marked by the need for a great transition (change), and the alignment date would be one in which we were judged by the black hole or whatever term they used for what is at the center of the galaxy, to see if we were far enough along in that transition. If we were not it would mean great upheaval would soon occur. Not death to all, but instead civilization collapse.
This could be viewed as a period requiring a need to transition away from burning FF, which of course we are not since we keep burning more oil, coal and NG every year.
Regardless of what people think of the Mayan prediction, it is endlessly fascinating they knew the alignment date with the center of the galaxy in their time. We know they were correct, but our technology is far advanced of theirs. So how did they know?
I think that the Mayan calender thing has to do with the procession of the equinox; a 24,000 year cycle.
Paul says:
I don’t believe in magic crystals, gods destroying the world, heaven, hell… and I certainly don’t believe in the Mayan calendar and other nonsense. I prefer facts.
If you believe in disjunct facts but ignore the noumenal (i.e., nonfactual, holistic, nonanalizable) ties between them, then your thinking is abstract, not concrete. Being the most primitive type of thinking, abstract thinking is characteristic of children: https://www.marxists.org/reference/archive/hegel/works/se/abstract.htm
Your mind is a just a collection of disjunct “facts”. Such a divided mind is the mind of a slave (“divide and rule”).
I think you are coming back to what I could intuitively see–the way the universe is constructed, there has to be a Higher Power.
Gail Tverberg says: “What gives you this timing?”
The universe’s matter waves are swirling down the gradient of their synergetic constructive interference. Due to the presence of life, the planet Earth is in the vanguard of this cosmic vortex.
On the one hand, as the infalling matter waves become bound by mutual constructive interference, their gravitation towards the common barycentre increases in accordance with the inverse square law.
On the other hand, as the infalling matter waves become bound by mutual constructive interference, the thermal pressure of the released binding energy counteracts the collapse.
The collapse begins at the breakeven point between the growth of collapse-causing gravity and the growth of the collapse-inhibiting thermal pressure. Said otherwise, the collapse begins on the peak of synergetic binding, such as
http://2012wiki.com/index.php?title=Novelty_theory#Peak_Debt
http://2012wiki.com/index.php?title=Novelty_theory#Peak_Energy
http://2012wiki.com/index.php?title=Novelty_theory#Peak_Urbanization
http://2012wiki.com/index.php?title=Novelty_theory#Peak_Internet
That’s fascinating, symmetryb.
This is going over our heads. Perhaps you could explain more simply.
Gail Tverberg says: “Who all is involved in putting together this Wiki? Is this your work and the work of a few of your friends?”
This work is mine and no one else’s.
That’s totally funny. I’m replying about your arrogant, but still childish approach to Paul (bty, what disjunct about scientific facts). You’re thinking full of fairytales. I can, however, agree with you about the fact that everything is not concrete (but the world will not end this year, that’s just totally silly, just as it didn’t end in any other “predicted” time). Ancient text says “only God knows”. Eventually we may discover how to manipulate the laws of physics within the quantum realm (and invent a time machine)… but first, we need to stick to the subject at hand… how to power that time machine!
Paul is concerned about our future by thinking we will not have the resources to displace coal and oil. I am concerned about our future because of excess CO2 (we do have enough fossil fuels to change this planet into hell!). So why are we not developing nuclear? The “fact” is, money. Each energy level transcends the previous just as evolution causes positive change to occur for those which seek to survive within their environment.
My environment is the world I was brought up in, thus it is my responsibility to promote that next phase in humanity’s energy supply, which is totally unlimited CO2 free energy bounded ONLY by the amount of wastes we can, as a tech species, deal with.
While this is not something I have run into before, I can understand the siphon principle. Growing debt is what is allowing us to extract oil, but this growing debt is losing its ability to produce the hoped-for economic growth, so we are in deep trouble.
This sounds bizarre to me.
It does and Gail I did not read that line from Randy Udall’s article, “When will the Joyride End?”
This one, though, caught my attention:
“Emblazoned in large letters on the side was a question: WE’VE SHOT ALL THE BUFFALO NOW WHAT DO WE DO? In 1872 there were 15 million bison roaming the Great Plains. A decade later only a thousand were left. Pelt hunters had ruthlessly slaughtered the rest. The heedless waste, the bloodthirsty savagery seems criminal today. I wonder if future generations will view our pell-mell liquidation of oil, arguably Earth’s most valuable resource, as equally senseless, shortsighted, and greedy. If there were a ready substitute that would be one thing. But there isn’t. In fact, there is no substitute for oil in the ways and volumes in which we use it today. Petroleum is a gift of geology, a one-time windfall—and we’re spending it like there’s no tomorrow. “
Right or wrong, the predominant reason they killed off the majority of Buffalos, is because the train system would not work with 10’s of thousands of buffalo standing on the tracks. So the train company paid a certain amount per pelt. And of course they got carried away and almost caused their extinction.
Maybe they wanted to eliminate the food source of the folks impeding western expansion by European white settlers, the native American Indians. Take away their food you control the people…right Paul? Spoken by the Master Henry Kissenger
So, there are other “reasons” than what was taught to you in the classroom.
http://www.legendsofamerica.com/we-buffalohunters.html
The Indians watched in dismay as buffalo hunting took on an almost a carnival atmosphere when railroads began to advertise “hunting by rail.” This occurred when trains sometimes encountered large herds of buffalo crossing the tracks. Seeing a way to capitalize on the problem, the advertising flooded the newspapers and in no time, sporting men with rifles were shooting buffalo by the hundreds just for fun. Those animals shot from the train were simply left where they died.
This, all occurring in a time that the economy was depressed after the Civil War, led many a tough man to earn his living as a buffalo hunter. Armed with powerful, long-range rifles, individual hunters could kill as many as 250 buffalo a day. Tanneries paid as much as $3.00 per hide and 25¢ for each tongue, which made a nice living for hundreds of men, including the likes of Wyatt Earp, Bat Masterson, Pat Garrett, Wild Bill Hickok, and William F. Cody, just to name a few. Unfortunately, once these hides and tongues were taken from the carcasses, the edible buffalo meat was often left to rot on the Plains. By the 1880s, over 5,000 hunters and skinners were involved in the trade.
So evidently it was the tanneries that paid for hides. Don’t get me wrong, I certainly do not agree with sport shooting of Buffalo from a train, but it is part of history now.
Stilgar, generally I am sympathetic to the what I call the Liberty movement and I interpret your description of the frontier times as a being also sympathetic. The frontier times were simpler times with simpler lifestyles and my belief is that our species would be well served by movement back to simpler lifestyles, and less consumption. Many in what I describe as the liberty movement believe that if simpler lifestyles were to return infinite consumption could continue albeit on that level. I disagree strongly with that belief.
At some point our species must come to terms with its seemingly insatiable need to expand its consumption. Every act that any individual or group ever chose to participate in can be classified as “part of history now”. The extinction of the buffalo did not just happen. Every single person who participated in their slaughter and extinction did so by choice. Their are many individual and group actions in the past that are painful to look at. There are many actions that humans have participated in that clearly were inappropriate to sustainability. They are in the past. Does being in the past justify those acts?
The native cultures neither destroyed the buffalo nor expanded their population so as to destroy it. While there are certainly aspects of the native cultures that I could judge negatively in light of sustainability it seems clear to me the ‘uncivilized” manner in which they lived was vastly more sustainable than human life in the industrial age. Why is acknowledging the sustainability of their actions characterized as adversarial to those of non native heritage? We are indoctrinated in to pride as frontier conquerors. We are indoctrinated into us versus them a concept that inherently embraces infinite consumption. As we sit on the cusp of possible extinction should we not try to support actions that embrace sustainability? As part of supporting sustainable actions would it not seem self evident that actions that were particularly damaging to sustainability and done to further infinite expansion and consumption should be honestly described as catastrophes rather than to try the lessen the pain of our forefathers actions by cloaking them in “it is part of history”.
We are indoctrinated in to pride as frontier conquerors. I see a lot of beautiful children running around. They deserve a shot. IMHO The only pride that thats justifiable is pride generated from actions supporting sustainability.
No where in my post was any kind of sympathy for the liberty movement. I’m a naturalist and go out of my way to view and help protect nature. I even got in a big brouhaha with my neighbor over their cutting a small forest of unusually large, gorgeous Manzanita trees (that many birds and squirrels used) to the point of almost being taken away by the Sheriff. I stopped traffic once to let a tarantula make it safely across and the other driver’s thought I was crazy. I was simply explaining how the Buffalo were slaughtered via a link about historical information. I didn’t live that time period, nor do I take any responsibility for those that did the carnage, nor do I view it now in any positive manner. Ok, so let’s not make something into what it isn’t.
http://www.amazon.com/They-Came-Bronx-Buffalo-Extinction/dp/1563978911
Do you guys just make crap up as you go along? Pretty soon you’ll have me shooting the Buffalo from an 1880 train – LOL. The near extinct Buffalo was found in the Bronx, you know NEW YORK as in the US. Please get informed on history. Go to the link.
http://www.thebuffaloguys.com
What’s the matter with you? You still don’t get it do you?
Who cares, the Buffalo were wiped out in ten years for whatever reason(s), are we going to bring back the oil wells we wiped out in the past hundred years?
I suppose you’ll justify that too, right Stig?
VPK, please quote the sentence in which I justified the slaughter of the Buffalo, cause I don’t recall any.
Oh, It was done just to clear the way for the new train rails, LOL. Boy they had to slaughter all 15 million of those suckers.
Yep and we burned 200 millions years of oil to move our fat butts around from here to there. Sure, that makes more sense. See ya!
VPK, you’re not reading the replies. If you had you would know it was both the trains and tanneries. Go back up the thread, you’re in danger of failing the quiz.
What is your logic in transitioning from Buffalo to Oil? – now that’s LOL! VPK says buffalo, oil, buffalo, oil, buff, buff, Tatonka!
Stig, why don’t you read the link to Randy’s article?….BYE!
My mistake. I salute you.
Would it not be tragically ironic if, after all our chatter about peak oil and financial collapse, what finally reduces the population to an ecologically sustainable number is Ebola or something similar. A disease driven depopulation could save the climate from further deterioration and stabilize civilization enough to avert total collapse. This may be the relatively humane way of meeting the troubles ahead. Nature giving us a nicer break than we deserve.
Even if ebola wiped out 6 billion people or so — society would still collapse — because all resources left in the ground — would remain in the ground — because BAU is required to extract them — and billions dying would unravel BAU in short order
In prior collapses, it was often diseases that reduced population. A weakened population is more susceptible to begin with.
Gail wrote:
“In prior collapses, it was often diseases that reduced population. A weakened population is more susceptible to begin with.”
… and less health services won’t help.
InAlaska
Yes, most ironic, and one can only agree: we have over- bred, and need to be reduced very drastically indeed. Time for the ‘Cosmic Surgeon’ to get the scalpel out!
xabier
I think that the “cosmic surgeon” will make a deeper cut than a cosmetic surgeon would and we won’t look as nice after the surgery is over.
No problem, ordinaryjoe. It’s a message board, stuff happens.
My understanding was that the buffalo herds were purposely wiped out to starve the plains Indians… making it easier to carry out the American genocidal policies…
Paul, NOTHING has changed at all…
Read about it all in a “journalistic” magazine that is NOT afraid to reveal the TRUTH about those in power and no giving a RATS TAIL about anything or ANYONE but the God Almighty DOLLAR:
Under the nearly five-decade reign of CEO Charles Koch, the company has paid out record civil and criminal environmental penalties. And in 1999, a jury handed down to Koch’s pipeline company what was then the largest wrongful-death judgment of its type in U.S. history, resulting from the explosion of a defective pipeline that incinerated a pair of Texas teenagers.
The volume of Koch Industries’ toxic output is staggering. According to the University of Massachusetts Amherst’s Political Economy Research Institute, only three companies rank among the top 30 polluters of America’s air, water and climate: ExxonMobil, American Electric Power and Koch Industries. Thanks in part to its 2005 purchase of paper-mill giant Georgia-Pacific, Koch Industries dumps more pollutants into the nation’s waterways than General Electric and International Paper combined. The company ranks 13th in the nation for toxic air pollution. Koch’s climate pollution, meanwhile, outpaces oil giants including Valero, Chevron and Shell. Across its businesses, Koch generates 24 million metric tons of greenhouse gases a year.
Read more: http://www.rollingstone.com/politics/news/inside-the-koch-brothers-toxic-empire-20140924#ixzz3F1QtQJUL
Follow us: @rollingstone on Twitter | RollingStone on Facebook
God Bless America!
Stig,
I don’t think you got the point
The BUFFULO were all but KILLED OFF in the United States
That was Randy’s message….
If it were not for herds in Canada, perhaps we would be only seeing stuffed one now.
Boy, get me outta here, good night.