What is really wrong with our energy system, particularly as it relates to electricity and natural gas? Are there any mitigations available? I have been asked to give a talk at an Electricity/Natural Gas conference that includes both producers and industrial users of electricity and natural gas.
In this presentation, I suggest that the standard diagnosis of the problems facing the energy system is incomplete. While climate change may be a problem, there is another urgent problem that attendees at the conference should be aware of as well–affordability, and the severe near-term impact affordability can be expected to have on the system.
My written summary of this talk is fairly brief. I have not tried to repeat the information shown on the slides. This is a link to a copy of my presentation: Our Electricity Problem: Getting the Diagnosis Right
Slide 2
A finite world is one that is subject to limits. Its economy cannot grow forever for many reasons.
Slide 3
Let’s look at some examples (Slide 4) of how limits work in finite systems. Often there seems to be a change of direction.
Slide 4
The standard story that we hear says that energy prices can rise and rise, indefinitely. But as I look at the data, this doesn’t seem to be true in practice. At some point, there is a problem with affordability, because wages don’t rise as the price of energy products grows.
Slide 5
In many ways, the problems that overtake the economy are similar to ailments that beset a human being. A person can have multiple ailments, some of which grow in severity over the years. The catch, of course, is that if an early ailment becomes severe, it may kill the patient, eliminating the need to fix the later ailments.
The way I see the economy, there are many hurdles that have the potential to inflict severe damage on the economy. Slide 6 shows a few of them. Some examples of other issues include lack of fresh water and erosion of topsoil.
In my view, we are right now reaching an affordability crisis. One way it manifests itself is as high commodity prices that fall and thus become low commodity prices. Falling commodity prices are likely to cause debt-related problems because of all of the debt incurred in their production. We may find financial problems, much worse than those experienced in 2008, back again.
Slide 6
Many others have focused on climate change. In their view, we can extract pretty much all of the fossil fuels that are in the ground, because prices will rise higher and higher, allowing this to be done.
If, in fact, prices fall after a point, then there is a good chance that we must leave most of them in the ground because of affordability issues. If this is the case, the situation may be very different: we may lose fossil fuel production in not many years because of disruptions caused by low prices.
We often think of affordability in terms of what a gallon of oil costs or in terms of how much a kilowatt-hour of electricity sells for. While these costs are one part of the problem, a big part of the affordability problem relates to big-ticket items, as listed in Slide 7. If customers cannot afford these big-ticket items, such as homes and cars, the economy loses both (a) the energy use that would be required to make these big-ticket items, and (b) the later energy use that these big items would require.
Slide 7
If we look at the data, we find that inflation-adjusted median income for families has been falling.
Slide 8
Part of this lower family income involves a smaller share of the population working.
Slide 9
When a person looks at the labor force growth split between men and women, there is a very different pattern. Men show a small downward trend over time; women increasingly joined the labor force, but this trend topped out in 1999, and became a decline since 2008.
Slide 10
Something we all are aware of:
Slide 11
Many fewer homes are now being built in the United States.
Slide 12
There has been a very different trend in auto purchases in the United States, Europe, and Japan compared to the rest of the world. In the developed areas, interest rates have been very low, and lenders have increasingly offered loans to subprime buyers. An increasing number of the loans are 7-year loans, and the loan to value ratio is often 125%. We seem to be creating a new subprime auto bubble. Based on our experience with subprime housing loans, this is not a sustainable pattern.
Slide 13
I am convinced that most economists have missed a basic principle regarding how economic growth takes place (Slide 14). I define efficiency in terms of what it takes in terms of human labor and resources to produce finished output, such as a barrel of oil or a kilowatt-hour of electricity. Are these finished goods becoming cheaper or more expensive in inflation-adjusted terms?
On Slide 18, note the change in the size of the output boxes, compared to the input boxes. Increased efficiency produces more output compared to the resources used; increased inefficiency produces less output compared to the resources used.
If an economy is becoming increasingly efficient, a given number of workers and a given amount of resources can produce more and more goods. This is good for economic growth. Growing inefficiency is a problem, because it quickly uses up both available worker-time and available resources. Many economists never seem to have gotten past the idea, “We pay each other’s wages.” Yes, we do, but if those wages are being used to encourage the use of increasingly inefficient processes, we go backwards in terms of economic growth.
Slide 14
If we look back historically, we can see a growing efficiency pattern with electricity, in the 1900 to 1998 period. As the price dropped, both consumers and businesses could afford more of it (illustrated with rising black “demand” curve). Part of the lower cost came from increased efficiency of electricity generation during this period.
Slide 15
If we look at the oil sector, since about 1999 we have had exactly the opposite pattern taking place. The cost of oil “exploration and production capital expenditures” has been rising at a rapid rate. This is an issue of diminishing returns. We have already extracted the easy-to-extract oil, and as a result, we need to move on to more difficult (and expensive) to extract oil. Thus we are becoming increasingly inefficient, in terms of the cost of producing the end product, oil.
Slide 16
As we move on to more expensive oil, the higher cost tends to squeeze budgets. The thing that is important is the fact that wages don’t rise sufficiently to cover the cost increase; in fact, the images I showed earlier seem to suggest that in the recent era of high prices, we have seen unusually slow growth in wages. The amount of wages is represented by the size of the circles in Figure 17. The wage circles don’t grow.
Slide 17 shows that as workers need to spend more for oil, and for the things that oil is used to make, such as food, the discretionary portion of their budgets (“everything else”) is squeezed. This shift in discretionary spending is what tends to lead to recession. The same principle works if consumers suddenly find themselves with higher electricity bills–discretionary spending is again squeezed.
Slide 17
The problem that squeezes all commodities at the same time is falling discretionary income. The amount of debt that can be borrowed also tends to fall as discretionary income falls. The combination leads to falling affordability for expensive goods, like new autos and new homes.
The price patterns for commodities of many types move together, reflecting a combination of rising cost of oil (because of higher extraction costs) and falling ability of consumers to afford the high prices of these goods. I have not included food on Figure 18, but many food prices have recently fallen as well.
Of course, the costs for producers creating these commodities have not fallen proportionately, and many have huge amounts of outstanding debt. Repayment of debt becomes difficult, as prices remain low.
Slide 18
Back at Slide 14, I talked about increased efficiency leading to economic growth, and increased inefficiency causing economic contraction. Because our leaders have not looked at things this way, they have encouraged increased inefficiency in many areas, as I describe on Slide 19. To some extent, this increased inefficiency is required. For example, as population grows in areas with low water supplies, the need for desalination grows. Also, pollution problems increase as we use lower qualities of coal and oil.
Slide 19
What are the expected impacts on the electricity industry and on natural gas? Are there any workarounds?
Let’s look at a few implications of the problems we now see.
In my view, low oil and natural gas prices are likely to be a huge problem for the natural gas industry, leading to the bankruptcy of many natural gas suppliers.
We cannot expect natural gas supply to grow. In fact, we cannot expect a coal to natural gas transition because the natural gas price won’t rise high enough, for long enough.
Slide 21
If we look at the history of US natural gas prices (using Henry Hub data), we see that prices have tended to stay low, after the 2008 spike. This was a great disappointment to those who built new natural gas extraction capability. They expected prices to rise, to justify their new higher costs. In my view, the continued low natural gas prices to some extent already reflect affordability issues.
Slide 22
The Marcellus Shale was perhaps the most successful of the new natural gas production, but it seems to now be topping out because of low prices (Slide 23).
Many producers will have their lending terms reevaluated using September 30, 2015 data. This reevaluation is likely to lead to bankruptcy of some producers, and cutbacks of production of other producers.
Slide 23
Coal use has been declining, as shown in Slide 24. Coal has some of the same problems as natural gas, as I will explain on Slide 25.
Slide 24
The basic issue is that coal prices are too low for most producers. Even if a particular producer has low extraction costs, this benefit is not enough to keep producers from bankruptcy. The problem that occurs is that coal companies are locked into high cost structures because of patterns that continue to persist from when prices were high. Lease costs are high; taxes and royalties are high; often debt was entered into, assuming that revenue would remain high in the future. Now revenue is lower, and there is no way to fix the “hole” that results from low prices. Production stays high, because each producer must produce as much as possible, to try to avoid bankruptcy for as long as possible.
Slide 25
Coal is in a sense ahead of natural gas, in terms of bankruptcies, with big bankruptcies already starting.
With prices as low as they are, there is little chance for a new producer to come in, buy the production facilities at a low price, and restart operations. A big issue is ongoing costs such as royalty payments that cannot be eliminated. Another is debt availability to support the new operations.
Slide 26
Bankruptcies are likely to interrupt supply chains as well. Part of the problem may simply be the excessively high cost of credit, for those members of the supply chain with poor credit ratings. Once a supply chain breaks, replacements parts may not be available. Other services that a company contracts for with outside suppliers may disappear as well.
As I note on Slide 27, customers may have financial difficulties. Those who remain in business will tend to buy less, so demand is likely to be lower, rather than higher. Companies producing electricity should not be misled by the rosy forecasts of the EIA and IEA regarding future demand amounts.
Slide 27
Slide 28 shows that industrial consumption of energy products has been falling since the 1970s, as industrial production has moved overseas. Now the dollar is high relative to other currencies, encouraging more of this trend. On a per capita basis, residential energy consumption is down, and commercial energy consumption is level. It is hard to see that this mix will provide very much of an upward trend in natural gas and electricity consumption in the future. (Note: Slide 28 shows energy of all types combined, including both electricity and fuels burned directly. This approach is used because there has been a shift over time to the use of electricity. This method shows the overall trend in energy use better than, say, an electricity-only analysis.)
Slide 28
The major ways subsidies for wind and solar PV are available are through greater government debt or through higher costs passed on to customers. There are now getting to be pushbacks in both of these areas.
Slide 29
In Europe, the cost of intermittent electricity tends to be passed on to consumers. Dr. Euan Mearns put together the chart shown in Slide 30 comparing price of electricity with the per capita wind and solar PV generation installed for European countries. There is a striking correlation. Countries with more installed wind and solar PV tend to have higher electricity prices for the consumer.
Slide 30
Given the problem with commodity producers not being able to collect high enough prices for their products, and the large number of resulting bankruptcies, a person comes to the rather startling conclusion that the ideal structure for electricity providers in today’s economy is that of a vertically integrated utility. In other words, an electric utility should directly own its suppliers, as well as transmission lines and everything else needed to produce and distribute electricity.
Utilities have traditionally had the ability to price on a cost-plus basis. With vertical integration, the utility can use its pricing ability to keep prices for fuel producers from falling too low, and thus sidestep the problem of bankruptcies. To the extent that the required price for electricity keeps rising, it will tend to pressure discretionary spending. (See Slide 17.) But at least grid electricity will be among the last to “go” under this structure.
Slide 31
Black Hills Corporation lists the many electricity-generating facilities it owns (coal and natural gas), and the places it has arrangements to sell this electricity as a utility. The Black Hills Corporation indicates it has had 45 years of dividend increases. This increase in dividends is in stark contrast to the many coal and natural gas producers that are currently near bankruptcy, as a result of low coal and natural gas prices.
Slide 32
How does one resolve the conflict between industrial companies wanting to generate their own electricity (for a variety of reasons) and the need to have an electric grid for everyone else? It seems to me that we have to keep in mind that having an operating electric grid for everyone else is absolutely essential. Without the electric grid, gasoline stations would stop pumping gasoline and diesel. Transportation would stop. Electric elevators would stop. Treatment of fresh water and sewage would stop. Companies everywhere would lose their consumers. The economy would quickly come to a halt.
With our current affordability problems, we are in danger of losing the electric grid. That is why it is essential that those who opt out not be given too large a credit for providing some or nearly all of their own electricity. The credit given to industrial companies should reflect the savings to the system, no more.
Slide 33
One concern is the bankruptcy of peaker plants, if their use is significantly reduced by, for example, the use of solar PV. If these peaker plants continue to be needed for balancing purposes, this may be a problem. Another concern is the rising cost of grid transmission for those who continue to get their electricity from the grid.
Slide 34
To sum up, the story we read from most sources is so climate-change focused, a person wonders if there aren’t other issues that are important as well. Most observers have overlooked the importance of low commodity prices, and the impact that they can have on coal and natural gas producers’ ability to produce the fuels that are needed by electric utilities.
Too much faith is being placed in natural gas, as the fuel of the future. And too much faith is being placed on intermittent renewables, without fully understanding their costs and limitations.
I haven’t tried to address the many indirect problems arising from many bankruptcies. These may be severe.
Slide 35
Dear Finite Worlders
Rob Hopkins writes today about ‘dial down the talk about climate change’. Get out of reactive and start moving forward.
http://www.resilience.org/stories/2015-11-03/the-transition-story-time-to-stop-talking-about-climate-change
On a similar note, Nathan Crane has put together some wide-ranging interviews on the subject of resilience. He interviewed one of my favorite people, Marjorie Wildcraft. For a very short time, this link will probably work for you:
http://theselfreliancesummit.com/the-search-for-sustainability-episode-2/?inf_contact_key=e5ff19306be5174b337a1d5bc1068d584d43d4839c084522c7e353bf7776dc04
Look at the 10 minute and the 30 minute points. Less than a minute on the first and about 2 minutes on the second point.
‘I have left gloom and doom way behind. This is the kind of lifestyle you have been looking for.’
‘If you grow half your own food, you will immediately begin to notice the benefits. You will be healthier and less stressed.’
Don Stewart
We called that revelation China’s “neutron bomb” but it turns out we may have jumped the gun.
According to Hong Kong-based “Autonomous Research”, the real figure may be closer to 21% when one takes into account the aforementioned shadow banking sector. Here’s more from Bloomberg:
http://www.zerohedge.com/news/2015-11-02/one-analyst-says-chinas-banking-sector-sitting-3-trillion-neutron-bomb
The helicopters are roaring in China …. the way it works is the PBOC loaned trillions to companies who built/invested in stuff that was not needed…
Of course these companies are unable to repay the loans because when the built it — nobody came … so there is no ROI….
So these entities are insolvent…. it appears 21% of them… at least…
Of course if the PBOC allows all of these entities to default on their loans the banking system would implode…
So the PBOC extends even more credit to these insolvent entities just enough to allow them to make payments on loans they will never pay back…
Think of all the jobs created by those loans — jobs that would have never been….
They are not literally flying choppers out full of cash …. their helicopters are virtual ones… controlled by key boards….
But make no mistake — this is helicopter money —- both the initial loans — and the subsequent loans…
The virtual helicopters are in action across the world …. they have been for years now…
They won’t be for a whole lot longer….
For the brave (crazy) ones, why to short the chinese retail now (certainly before 2025):
http://econimica.blogspot.com/2015/10/explosion-of-china-shopping-centers-for.html
The commenters focusing on EROEI, inflation/deflation, NIRP/ZIRP, the role of money, etc, etc, etc are all missing the point. The challenge for the PTB is how to transition to a system that is no longer wed to the finance/consumption model.
After all, the current model has only been in place for 200+- years, and was born as a function of both central banking, steam/combustion engines and fossil fuels. Take away FFs, and you lose the two other dimensions. But why should that be of any concern to the PTB, which merely utilized these factors to design and implement a more subtle control system in the form of a democratic, taxable political state?
The answer is a new order won’t need any sophisticated economic rationale, but will simply revert to traditional power interests that enforce master/slave relationships. The key to this strategy is to reduce the will to fight among the commoners. This can be achieved by successive reductions in quality of life, but even more effective will be simply eliminating any who have a collective memory of the welfare state or sense of entitlement/expectations.
That’s part of the game with the 3rd world invasion. If Syrians, Libyans, et al who have lived very poorly under a strong man their entire life, why would living very poorly under a strong man in Europe be any different? The only ones who would complain are the current (soon to be former) inhabitants of those regions, which is why they are rapidly being replaced.
This is all so obvious I have to wonder why it isn’t being discussed. The current growth model is dead, dead, dead – we all know that. But some, like Paul, seem to think that also means the current control systems are also impaired. Wrong, wrong, wrong. Just get rid of the people who enjoyed the spoils, bring in poor draft animals, radically reduce consumer consumption (in fact, kill the system), have the brutes perform manual labor, and allow the upper 1% to continue devoting their lives to science, art, technology, etc.
The game then for anyone interested in playing is how to play the transition away from the current consumption model. That means first erasing the debt overhang – or simply ignoring it by no longer pretending to even service the “loans” – so that money simply becomes he dictate in which to pay the security service to keep the ants/cattle working hard enough to keep the power plants going to run the super-computers at the research centers.
B9K9, yes. TPTB are smart and flexible and they employ lots and lots of thugs with guns.
I don’t dispute your conclusion.
But is third world immigration really a nefarious plan by TPTB? Couldn’t it just be merely what it is – population explosion in primitive Arab and African desert and jungle areas racked by war, and pathological altruism if not outright self-hatred on the part of aging Europeans?
Here in America, however, I am fairly convinced that the TPTB are using Mexican and Asian immigrants as working fodder for the empire. What they don’t envision, however, is the empire itself going away.
Also, why do they devote so much money and resources to healthcare? Wouldn’t it make sense to, as you say, let those entitled elderly merely pass away?
I just don’t know. Things are confusing these days.
I am unsure what the purpose of allowing this immigration is … but when I see images like this on the MSM I am certain that the Elders have decided it is in their interests to allow these boats to continue to dump people onto the EU shores
http://i.imgur.com/pxfwj8T.jpg?1
If the Elders did not want this to happen it would be a very simple matter of ordering a naval blockade of the ships — and sending them back to where they came from.
Since the Elders control the MSM it would be a simple matter to paint these people as hordes who will bring down European economies if allowed to land … and the sheeple would be quite happy to support the naval blockade.
Nothing of any significance in the world happens without the approval of the Elders.
“pathological altruism” is a good description on what is going on. I can see this in Sweden which is the very center of this in Europe. We are receiving at least twice as many migrants per capita as Germany. There was and there still is a broad public will for doing this. The usual arguments are “We are rich and we have to help” and “we cant speak of any limit on the volume of migrants coming here, its inhuman.” and so on. The situation is gradually becoming more and more uncontrolled since there is actually no homes or jobs for the people coming and the welfare systems can’t really cope with the situation. Society is, for each day more clearly, split in two parts those that oppose migration and those that don’t. Very often the word rasist or similar words are used if you oppose. But people are at least gradually realising that this is not a good idea since they see what is happening.
The problem is that people here don’t realize the limitations of the state. Perhaps they were spoilt by the welfare state and started to believe that the resources of the state is infinite. People also believe they are rich because we have had a soaring house prize bubble (never even failed to keep rising during the last financial crisis) and people also have plenty of pension assets (which probably will prove worthless in the end).
I will play the game of pretending an extinction event is not imminent (because nobody has adequately addressed the food and spent fuel pond issues) as one might play a game of chess, or monopoly… or snakes and ladders…
i.e. I will make believe there is a Koombaya World
“have the brutes perform manual labor, and allow the upper 1% to continue devoting their lives to science, art, technology, etc.”
So the elites will have iphones — tee vee — cars — Starbucks Frapuccinos — Wholefoods — private jets etc?
If so how would this happen without energy?
Just or fun “Peak Population” causing deflation!
So funny
Global annual population growth peaked in 1988 and is decelerating.
Global annual population growth is estimated to be back to 1950 levels by 2050 but the bulk of “growth” will be among 65+ year olds living longer…not greater births.
Substituting lower interest rates and encouraging more debt for declining population growth (consumption) was and is a tragic error by our central bankers.
The idea that global population growth will perpetually drive increasing demand for food, natural resources, real estate, consumer goods, and global trade is a common theme. This idea of ever greater demand drives most investors thinking and actions. The premise the world currently operates under is that demand (consumption) will grow driven by population increases coupled with wage increases and be magnified by access to credit. The resultant growth will allow rapidly growing debt to be serviced / paid by even more rapidly growing global trade. But actually, this is mostly wrong now…and eventually entirely wrong. Why???
Global Population Growth Decelerating
http://seekingalpha.com/article/3556596-forget-peak-oil-its-all-about-peak-population-growth
Conclusion
Global young and core population growth is rapidly decelerating and growth of 65+yr/old populations is rapidly increasing. In individual nations (US chart below), as core growth decelerates or goes negative and is replaced by growth among the old, oil consumption declines and economic activity decelerates…this link outlines the phenomenon nation by nation
This is very interesting and I could go on and on but I’ll be brief.
Basically you have aging populations in developed world (birth control, abortion, combined with healthcare for the elderly), and young populations in the poor world (no birth control, traditional mores, no healthcare for elderly).
I don’t think this combination has ever been seen before, and it’s taking everybody by surprise when it really shouldn’t. You’ve been tricked into “feeding the world” So you fed the world, and well, they bred, and the children are coming to your countries to take over.
http://www.ft.com/intl/reports/energy
I’m not talking about currency creation solving anything. Please don’t misunderstand. I’m just talking about what they will do. We know with absolute certainty that they will print. It’s a given.
How much longer do we have? Who knows but I think, I think (and it’s just a hunch) that we have another cycle or two, and by the end of this decade/early 2020s we will have major dislocations, and our system is pretty much going to be done for by the mid to late 2030s.
This isn’t that long people. We are the same distance from 2035 as we are from 1995. We are indeed running out of time.
We all know printing money does not make cheap energy. What is does is alter resource allocation within the society. If one helicopters enough cash on the oil extraction industry it will pull resources out of the nail salon business, the golf course business, the auto sales business, the medical business,… If you offer a doctor 10 million per year to drill oil versus the 300,000 he currently makes he will move. The government can out bid everyone because by printing it effectively steals the value of the competing bidder until it wins. Having lots of oil in the newly contorted economy will not bring back the whole of BAU but it can keep the military flying, the cops patrolling, the rich flying to their island homes. Will it help the little worker bees? No. But that is never the goal of government.
It’s possible something could happen in 2020-25 but the trend is going in the opposite direction. We had a major bubble crash in 2000 followed by the collapse in 2008. And 208 wasn’t a crash but a collapse and that’s using the words of Bernanke and Henry Paulson.
I don’t think the global financial system can handle the pressures all the way out to 2020 that have been placed on it by propping it up since 2008
China’s Manufacturing Misses; Nonmanufacturing Worst Since 2008 Despite Unprecedented $1 Trillion “Debt Injection”
http://www.zerohedge.com/news/2015-11-01/chinas-manufacturingmisses-nonmanufacturing-worst-2008-despite-unprecedented-1-trill
Word association …. string, push, collapse, deflation, dolph….
There is no deflation. Everything, from housing to education, to healthcare, to food, to high end goods, you name it, is 2-3x more expensive than just 10 years ago. There is only one area in which prices remain relatively stable and that’s in mass produced low end consumer goods, and even there there is still some inflation if you look closely, takes the form of decreased content, lower quality of manufacturing/planned obsolescence etc. Even the once secure American middle class is feeling the effect.
Deflation is like a big lie. Repeat it often enough and people start to believe it. All of the debts of the world could go into default and no deflation would occur, because governments have a tool called fiat currency, which can be created in infinite quantities.
If asset prices fall that’s not deflation. It’s a temporary pullback after an inflationary cycle. They can only fall so far before they are acquired on the cheap, and then the rebound occurs. Again, look closely and the inflation is still there, measured on a long enough timeline. I’m not talking about centuries, I’m talking about decades. How long can these cycles continue? Forever under our present system. Don’t blame me that you didn’t have the connections or gumption to get into the financial services industry and take advantage of these cycles even as the real economy is hollowed out. But there’s the catch, our present system is not going to last.
The inflation/hyperinflation debate is interesting, personally speaking I’m agnostic on this. I think at some point in the not too distant future we are going to have a reset. But that’s not deflation.
You could add the big mac index as an example of inflation:
http://auminabox.com/why-the-big-macs-rising-prices-are-more-alarming-than-its-fat-content/
This index is rising steeper than the cpi.Particular since 2007. Underestimating cpi has the effect of overestimating growth. Since governments are heavily indebted an underestimated cpi also reduces the debt problem.
Look Dolt, growth is required to sustain businesses. They are packaging smaller, companies are merging and sacking staff. All sorts of synergies are taking place to become more efficient because the consumer is at the end of its tether. Raising prices will send a business broke because the consumer….THE CONSUMER drives inflation and deflation for that matter. Governments are not printing, they are just taking over debt to save banks and corporations and that inflates the stock market and the shares of companies that are essentially bankrupt but it keeps them producing and selling.
Governments pretend they can make good on the debt and the minions either believe them, pretend to believe them or remain blissfully ignorant. You have to understand that businesses remain viable by selling stuff. The consumer buys the stuff, the consumer earns money by working for the businesses that sell stuff. If the businesses are not selling enough or more stuff they reduce overheads and that includes wages and salaries. The consumer needs wages to inflate to have disposable income to buy useless stuff and take vacations.
Wage inflation requires, cheap, abundant energy. You need wage inflating to drive price inflation. We have real wage deflation, DEFLATION. It’s a race to the bottom. If business pay lower wages the consumer buys less, pays less tax and governments go further into debt. Governments and businesses are milking the consumer until they can give no more. Then a switch will be made to barter. To hell with fiat.
Hopeless. Believe what you want.
‘Believing’ is what people do who do not deal in facts. Who resent fact-base arguments. Who generally resort to insults when faced with fact-based arguments.
Not an option for some of us here….
It’s true, we have inflation in all the things that people need, like food, housing and energy. But deflation for all the stuff we want but don’t necessarily need, like cars, microwaves and smartphones.
There is most certainly deflation — where it matters — in commodities…
When prices collapse like they have — in spite of trillions of dollars of ongoing stimulus — then commodity producers cut expenses by laying off staff — and slashing capex (i.e. they stop looking for new sources of things like oil…)
If commodity prices do not reinflate —and I fail to see how they can given the central banks are pouring on stimulus — and it is having almost no effect….
Then commodity producers will collapse into bankruptcy — massive companies like Glencore will default on their debts — and the banking system will implode. And the Holocaust beings….
Do you not agree that this demonstrates extreme deflation?
https://staticseekingalpha.a.ssl.fastly.net/uploads/2015/10/26/saupload_Bloomberg-commodity-index-chart.jpg
FE your post sums up our situation in a couple of paragraphs! If the commodity index doesn’t show an upward trend by next spring or early summer I think we are in the last year or 2 of years of BAU. These big commodity companies are all international players so it will be interesting to see who’s central banks step up with the cash to keep them going.
How much longer can reality be suspended for? Seems the gears have been screeching very loudly for some time now, but paradoxically the final collapse hasn’t happened yet. Don’t get me wrong, I don’t believe it can be postponed indefinitely, but it would be nice for a few more years before all hell breaks loose.
We’re defying gravity — no doubt about that…
Check this out
http://wolfstreet.com/wp-content/uploads/2015/11/US-manufacturing-regional-Fed-indices-average-2001-2015.png
http://wolfstreet.com/2015/11/03/sky-is-falling-on-california-manufacturing-inland-empire-pmi/
Trying to salvage cold dark places like Germany and the northern US makes no sense. We need to salvage on a global scale. We need to secure nice places that are not too hot and not too cold. That have water and near by sun. The northern coast of Africa, much of the west coast of North America, some of the coast of Australia, others(?).
PV is not high tech. It does not require a large global industrial society. A small regional society will work fine.
“We need to secure nice places that are not too hot and not too cold.”
Do you mean wipe out the people that are there and colonize it ourselves?
“PV is not high tech. It does not require a large global industrial society.”
You make solar panels in your backyard using local materials, do you?
On the first point I was thinking from a species point of view it would be nice to save some humans. They would be the indigenous population. But you are right the rats fleeing the failed nations of the north may decide to kill the indigenous population.
On the second point, well yes. Here in New York State we makes 1GW of solar. Do we use local sand? My guess is no. Could we use local sand my guess is yes. As to the one part per million dopant element boron, phosphorous again I would guess no but again I would guess it could be sources within the state. The tough one is are they using silver for the contacts. Are there silver mines in New York? Don’t know. Can substitute copper or aluminum if need be.
Ya I am sure we could make solar panels post collapse — very simple — here check out How it’s Made:
https://www.youtube.com/watch?v=BKrOZ6OogmQ
They’ve left out the part where all the materials that are featured in there — like the metals — are mined using heavy machinery …. are smelted using massive amounts of electricity…
And the discussion is ‘could we use local sand’….
I’ll be kind … and just post this song….
Reminds me of when Mao decided that every village should make its own steel. Pretty simple, especially if you are just recycling and not processing new ore. It is just iron with a bit of carbon, every village of 100 people should be able to easily make surgical steel on their own.
And yet, it did not work out so good, so they stuck with having a city specialize in making steel. A whole city, with probably millions of people.
LOL! good one!
“PV is not high tech. It does not require a large global industrial society. A small regional society will work fine.”
I am uncertain how to quantify this statement. My background is EE and I roughly understand the supply chain leading up to PV connected to the current power grid. Just the PV surface itself takes a substantial supply chain to make high purity silicon.
Particularly, the main purification step is fractional distillation of SiCl4. That takes a distillation column similar to those used in sorting out oil for gasoline.
There are probably ways to scale this down, but it’s not obvious how large a population it would take to keep up a PV making industry over a long time.
Many fear deflation. How about the federal government buys income producing assets and pays the rents to all US citizens over 18 at the rate of $1000 per month. Where you might ask does the capital come from? Either 99% tax on wealth over 10 million and/or the printing press. I prefer the former.
This would create buyers of goods and services.
A good article, by Christopher Ketcham:
http://www.counterpunch.org/2015/10/30/extinction-the-new-environmentalism-and-the-cancer-in-the-wilderness/
Just a short quote, that summarizes it all: “Consider that the president and CEO of the Nature Conservancy today, Mark Tercek, is a former managing director and partner at Goldman Sachs.”
Yes, the owning class deals only with the owning class peasants need not apply.
Here in the Hudson River Valley the rich do not like to pay property tax so they give the 500 acres surround their house to the land conservancy with the understanding it will no be used or developed. They still have their beautiful woodland estate and they do not have to pay tax on it.
Another turned his whole land plus house into a not for profit he of course as director of the not for profit lives in the house. He pays zero tax. I think it is called the Institute for Symbolic Studies. Once or twice a year they give horse back rides to some group of under privileged youths and so they are covered, no tax.
There is the owning class and the slaves (working class).
I have some working class relatives who I suspect are trying to make supplemental income faking car starts at signals and then suddenly stopping, causing the driver in the rear to hit them. The unsuspecting driver is guilty because the law states that the driver must be in control of the vehicle at all times. They then get their insurance companies to pay for claims on exaggerated injuries that are difficult to disprove, like chronic back and neck pain. How is this activity different from the owning class manuvers mentioned above? Both are unethical and immoral manipulations of the law for personal gain.
I’d suggest they try this in the Wall St area….
China’s Economy Even Worse than Suspected?
t’s always good to have a plan. So China has a new five-year plan, its 13th. And the plan is to dial down China’s formerly white-hot economy to a target of “medium-high economic growth” for the five years starting in 2016.
“The country will promote greater sophistication in its industrial sector and significantly raise the contribution of consumption to economic growth,” according to the Global Times, a tabloid under the People’s Daily, which is the official propaganda organ of the Communist Party. The goal is to double 2010 GDP and per-capita income by 2020 and create “a moderately prosperous society.”
That’s all exciting stuff for the future. Meanwhile, there’s today.
And today, the Chinese economy isn’t exactly hopping, despite the official GDP growth rate of 6.9% that no one believes, especially not the Chinese leadership. So the People’s Bank of China cut its benchmark interest rates a week ago – the sixth cut since November – to the lowest level in the data going back two decades.
The leadership is trying to reform and restructure the economy away from low-value cheap-labor manufacturing to the miraculous powers of consumerism, implemented decades ago with such glorious success in the US and elsewhere. So exports and imports have been plunging. But no big deal because retail and services are going to make up for it. Other problems are cropping up….
“China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu Jimin, deputy head of the China Iron & Steel Association, explained on Wednesday, according to Bloomberg. Demand for steel, which is used in everything from buildings to cars, has dropped by 8.7% in September from a year ago. Prices have crashed. And steel mills are buckling under their debts even as they’re producing tons of red ink in an ocean of overcapacity.
Car and truck sales, which have propelled China to the largest auto market in the world with double-digit annual growth rates, started to skid this year and actually declined over the summer, year-over-year.
Auto manufacturing, sales, and service are big employers. Manufacturing plants and dealerships are still being constructed at breath-taking pace, at a time when “overcapacity” has become the dark cloud over the industry.
To keep the boom from imploding, the frazzled government flooded the market with incentives. It worked in halting the slide for now: in September, sales picked up a little. But when government incentives are required to keep sales from plunging, it’s going to get tough.
And suddenly there’s another data point…. The Wall Street Journal:
The country’s two biggest oil companies offered a bleak picture of demand from the world’s marginal consumer of the commodity in its latest quarterly results, out Thursday. At Sinopec, the country’s biggest refiner, officially known as China Petroleum & Chemical, total sales of refined products in the third quarter dropped 3.4% in volume from a year before. That’s a marked change from their 5.3% rise during the first half of the year.
Yet this dismal figure is bloated by Sinopec’s increasing exports of refined products, a symptom of China’s excess refining capacity. Strip those out and Sinopec’s domestic sales of gasoline, diesel and more were down 4.2% in the September quarter. At PetroChina, the nation’s second-largest refiner, product sales fell about 2% last quarter.
These are declines in volume, not revenues. They’re not a reflection of any decline in prices. They’re a pure measure of demand for the fuel that makes the vaunted consumer economy tick.
And oil bulls, desperately hoping that miraculously booming demand for oil in China would somehow pull the world out of the oil bust, might have to rejigger their scenarios.
Diesel, used mostly by trucks in China, is a gauge of transportation of goods. Demand for diesel has been weak for the last two years – despite protestations by the government of solid economic growth. Numerous reasons have been cited for low shopping mall traffic, among them booming internet sales. But all retail sales, wherever they occur, entail the transportation of goods. And this should stimulate demand for diesel, you’d think.
And now demand for gasoline has started dropping too in September – and perhaps even more indicative, so has demand for jet fuel!
OK, there is always the argument that vehicles and planes are getting more efficient and require less fuel. But that plays out very slowly over many years or decades, as old vehicles or planes are replaced by new ones. It has no visible impact on a monthly or quarterly basis.
What remains is the notion that activity is declining, that demand for transporting goods is falling, that people apparently are driving less. And now they’re also flying less? This would be a drastic change in an economy that soared at mind-boggling speeds year after year but now is in serious hard-landing mode, with the pilots flailing about to keep it from crashing.
More http://wolfstreet.com/2015/10/30/is-chinas-economy-even-worse-than-suspected/
Max Keiser says China is switching to a consumer based eCONomy and the Yuan will be the defacto currency, so they will avoid the coming pain that’s in store for the rest of the world. 🤕
/sarc
Max Keiser looks like a clown —- too….
The next pope from Asia?
https://svetkrestanstva.postoj.sk/6722/halloweenske-vecierky-nahradzaju-party-vsetkych-svaetych
Many people predicted that the successor of Ratzinger would be from Africa. No, it was from the Argentina, seriously affected by the financial collapse (https://en.wikipedia.org/wiki/Economic_history_of_Argentina). My prediction is, that, in line with the population and economic changes, the next pope is going to be from Asia. I do not know, if it will be this man, but he has good chances…
“Tagle has become involved in many social issues in the Philippines with emphasis on helping the poor and the needy while maintaining opposition against practical atheism,[4] abortion,[5] contraception,[6] and the Reproductive Health Bill,[3] although he took a more moderate stance on the bill than other Philippine bishops, refusing to excommunicate politicians who supported it and to distribute posters condemning it in Manila parishes.[7] At the same time, Cardinal Tagle has repeatedly expressed his openness to allowing divorced and remarried Catholics receive communion, has criticized the Catholic Church for using “harsh language” to describe LGBT and divorced and remarried Catholics,[8] and is often considered to be a representative of the Church’s progressive wing.[9][10][11][12]”
Source: https://en.wikipedia.org/wiki/Luis_Antonio_Tagle
The first link is not correct, it should be this one:
https://svetkrestanstva.postoj.sk/6606/hviezda-filipinskeho-jana-pavla-stupa-nahor
https://www.youtube.com/watch?v=DltDXOXtuRc
Yes Ozzy…. I would…. en empire of evil if ever there was one….
As a Roman Catholic I take the Vatican with a good measure of leeway and grain of salt.
Out of touch doctrine and non reality of the actual. Current Pope is providing better leadership. Here in the US, one can witness the growth of Hispanics that will no doubt keep this sect from dying.
Like how I provide sponsorship to little South American children to enable them to get an education, from families with 6 or more siblings.
What is ironic, is the fact coworkers are from the same countries and bring their families and in turn breed. One such man divorced his wife at age 60 and married a younger woman and now has two more children!
So, as far as “solutions” are concerned, need not dwell too much on that topic.
China just scrapped their one child policy, the rich in the country was ignoring it anyway.
Something has to give. Hoping we can patch things for another 10-15 years.
When the SHTF, it will be amusing to see what the Vatican’s reaction….must be because we didn’t listen to the Pope!
I heard a joke the other day… it goes like this….
What’s the difference between Jesus and Solar Jesus?
Jesus wants you to dip into your pocket to fund travesties like the Vatican (preying particularly upon the poor – by telling them not to fret about their condition — just make sure to give and you will inherit the earth)
Solar Jesus wants governments to use hundreds of billions of dollars of tax dollars to erect monuments to him on roof tops.
Or maybe the key for the country of the pope origin is the collapse:
Italy, as the centre of the collapsed Roman Empire, was almost an exclusive place of origin of the popes until 1970s.
Poland collapsed shortly after John Paul 2nd became the pope. Germany (East Germany) collapsed in the end of the 80s – it was Ratzinger from Germany who followed. Argentina collapsed in the end of the 90s and the pope Francis is the pope now. The next pope could also come from the USA, that practically collapsed in 2008.
Africa and Asia still seem to be quite lively regions. The gerontocracy is connected with the collapsing countries and regions…
Undoubtedly, the most amusing this about the prospect of more easing from the ECB (as telegraphed by Mario Draghi last week) and the BoJ (where Haruhiko Kuroda just jeopardized his status as monetary madman par excellence by failing to expand stimulus) is that both Europe and Japan both recently slid back into deflation despite trillions in central bank asset purchases.
http://www.zerohedge.com/news/2015-10-31/mario-draghi-admits-global-qe-has-failed-slowdown-probably-not-temporary
Proof of Peak Oil
http://seekingalpha.com/article/3575296-mexico-and-brazil-oil-auction-failures-are-further-proof-of-peak-oil-at-current-prices
Summary
Mexico’s first attempt to open up its oil industry to foreign companies was a failure. Its auction only attracted $2.6 billion in potential investments, compared to $17 billion maximum potential.
Brazil had a similar failure more recently, with only 10% of its blocks being auctioned receiving viable bids.
These latest failed auctions, coupled with other facts point to a permanent peak in oil production at current prices, which is unfolding presently, which will only reverse once prices rise.
You doomers are interesting. You are very intelligent, yet you also have trouble understanding some basic concepts. No offense, this is common among the intelligent especially in our hyperspecialized world.
I keep telling you governments can print any amount of currency that they want, yet you don’t believe me. You just argue and argue. Like we are still arguing whether the earth is round or flat.
If you don’t believe fiat money can be created in infinite quantities and allocated where they want, I quite frankly can’t waste any more time with you. It’s not worth it. Continue with arguing how many angels can dance on a head of a pin, it’s not going to get you anywhere, and all it does is demonstrate how thoroughly you misunderstand what’s actually coming.
You’ll be sitting there in the dark, with your stash of bills, or looking at your bank account, and just chant “deflation! deflation! deflation!” and pray to some diety that the currency keeps gaining in value and somewhere along the line, with 1 dollar, you’ll be able to buy a meal, and with 10 dollars you’ll buy a tank of gas, and with 10,000 dollars buy a nice home, etc. etc. You’ll keep hoping until the very last moment that you were right, you were the correct ones to save currency, and everybody else who accumulated assets and goods must surely be losing now, and the debtors must surely be losing now, because nobody has any currency but you.
And as this is happening, the government will just print and print more of it, and hand it to whom they want to. They will hand it to the banks, to the businesses. They will hand to the welfare spongers. They will hand it to the debtors. They will keep doing this, endlessly, and as this happens you will continue to cling to your currency, believing, until the very end, that nobody else out there has it but you. And then you’ll be old, still clinging to your stash, when you realize that not only does everybody else have a bigger stash, but they have alot of stuff too because they went out and bought it, or used debt to acquire it.
Hopeless.
“When the situation is hopeless, there is nothing to worry about.”-Edward Abbey
Dolph9 I almost agree with you but currency or lack thereof and debt are only 2 parts of the triple whammy that’s about to hit . If you look at the area of the planet referred to as MENA you’ll see that climate change poses problems that no amount of cash can fix. What started this refugee migration was climate change pure and simple, the governments of the various regions simply could not keep their populations supplied with the necessities of life. No amount of money printing can solve these issues.
Do you sincerely think a printing press can postpone or halt the disaster that’s headed our way?
Hmm, and here I thought it was the USA who started the refugee crisis by destabilizing MENA with it’s proxy wars, fifth columns, NGO’s, coups and assassinations of government leaders.
The reason MENA is exploding is mainly unsustainable populations growth. These countries are to unfertile to feed that amount of people even using moderna agriculture.
Not to worry — we can print our way out of that
Money talks, BS walks…
So far, so good
Risk has been rising for 7 years straight. Deflationary risk, unemployment risk, insolvency risk, inequality risk, lowest global growth risk since 2001 etc, etc. Nothing has been fixed since 2008. The only thing working is the “printing press”.
Syria lost something like 80 percent of its farmland and livestock due to a severe drought starting around 2006.
They already had around 1.5 million refugees from Operation Iraqi Freedom in Syria.
Convergence of population growth, severe drought, and being next door to a country being liberated and given the gift of democracy via air strikes.
Yoo hoo Dolph…. just in case you missed my earlier post (made prior to seeing the above comments)
Mario Draghi Admits Global QE Has Failed: “The Slowdown Is Probably Not Temporary”
Undoubtedly, the most amusing this about the prospect of more easing from the ECB (as telegraphed by Mario Draghi last week) and the BoJ (where Haruhiko Kuroda just jeopardized his status as monetary madman par excellence by failing to expand stimulus) is that both Europe and Japan both recently slid back into deflation despite trillions in central bank asset purchases.
http://www.zerohedge.com/news/2015-10-31/mario-draghi-admits-global-qe-has-failed-slowdown-probably-not-temporary
They keep printing moar money …. see poster child Japan…. yet they still keep falling back into deflation …
Tens of trillions of dollars have been printed since 2008 — yet commodity prices have collapsed into a deflationary death spiral with massive commodity companies facing bankruptcy
Oh I know — let’s fix this by printing moar money!
How about we go for 500 trillion? 1000 trillion? 1,000,000 trillion?
How about we cut down every last tree on earth and turn them into dollars …. and fling them out of choppers…
Do you think this would help?
Of course it won’t — all it will do is accelerate the deflationary collapse that is gathering momentum by the month.
The kind of QE that’s been in use has not been working very well for some time. Helicopter money is something different. It has potential to decrease the affordability problem we are seeing. You just have to spread money by helicopter quicker than inflation. If you get hyper inflation I think the race is over. But at least it could buy some time.
Furthermore, if you use QE to bail out important companies (to important to fail) you could possibly postpone a crash as well. The central bankers is no doubt before their biggest challenge ever. Some of them may be clever but I guess that most of them are as vain, stupid and inflexible in their way of thinking as human beings in general. The likelyhood of success is probably less than that of failure.
Some reading about the bernanke:
http://globaleconomicanalysis.blogspot.se/2015/10/courage-to-act-reflections-on-fed.html
The fact that governments can print an unlimited amount of money is not enough to make me feel certain that a collapse can be postponed. It’s how the money printing is used that will determine the outcome. This is unchartered terrain. Not even the most experienced central banker will now much about effects of the new methods they will start to use. Remember that already the QE we have been seeing have been a disappointment.They expected much more out of it. It seems uncertain that the same guys suddenly would prove themself to be geniuses in the art of money printing.
I fail to be even close to 100% sure the methods of the central bankers will work out for more than a shorter period. But I admit that there is a possibility.
We’ve already had a taste of helicopter money…
Anyone with a pulse can get helicopter money — a student loan, a no money down mortgage, an automobile…. trillions have been handed out already ….
China has pumped literally trillions of dollars into their economy — this has effectively been handed out to the people (no it was not put directly into their accounts but it did get into their pockets one way or the other)
Yet we have deflation
Now let’s say the Fed were to drop money into the accounts of every America — say $5000. We might get a burst of spending … very short lived…. or people might just hoard that money and use it to pay down their credit card bills…. or buy something other than pink slime for food…
Also — the central banks have gone to great lengths to convince the sheeple that recovery is around the corner…. that interest rates will go up ‘next month’ because things are getting better…
Will the sheeple not see a direct deposit from the government into their accounts as a wolf in the kitchen? Would that not cause panic – fear – perhaps a run on canned foods at the grocery stores?
I don’t see helicopter money as having much of an impact — we’ve had gargantuan amounts of helicopter money surging through the global economy since 2008 — and yet we have deflation.
A trillion more or two will do nothing.
China just dumped another trillion into their economy yet http://www.zerohedge.com/news/2015-11-01/chinas-manufacturingmisses-nonmanufacturing-worst-2008-despite-unprecedented-1-trill
It’s a huge difference between dropping 5000$ to each citizen and offering the possibility to lend money at no interest rate, student loans and the other things you mention. It could work for a while. The 5000$ has probably to dropped frequently at a higher and higher frequency until we reach hyper inflation. Thats the end. As you correctly remark som people will become sucpicious. Most people however will not and will gladly consume the money..
In previous decades if the central banks would have done what they have done over the past 7 years we’d have blown the lid off the economy with hyperinflation …
But I reckon that has not happened because this time is different — money is cheap energy — there is no more cheap energy so printing more of it does not induce hyperinflation…
What you call deflation can also be a “normal” mop up of over production capacity that has been created by the helicopter money in the fist place.
I think all central bankers too have that vision and they think that the engine will just start again if you use the choke long enough.
The 1 Mio Dollar question is, when will people come to grasp that the engine is dead ?
What is the usual time frame for such a “recession”. If you look at the GDP graphs at 2008 you see that it went down whoopie but it also went up again whoopie!
This is like peakoil a question that can only be answered in the rear window. I do not yet see terminal deflation around….
If robots do most of the work and 90% of humanity is unemployed and impoverished, but the price of things keeps going up, credit continues to expand, is there a problem?
If the core companies that our civilization relies on go bankrupt and cease operations, but the price of things keeps going up, is there a problem?
If you are talking about deflation as either a decline in CPI or a decline in total outstanding debt, I have doubts as to how useful those metrics are.
The thing is…
It’s not as if QE has resulted in hyper growth …. resulting in a massive oversupply of commodities…
Global growth since 2008 has been tepid at best — and it is mostly been fueled by building stuff that nobody needs or can afford to pay for (see no ROI on China projects for example)
However we MUST have growth — doesn’t matter if it is phony growth — if we don’t expand then we contract and we collapse.
So the fundamental problem here is not that we have had a cycle of over-expansion (as has happened in the past) — and now we cut the diseased meat off and get back on track.
No. This time is different.
What we have now is a frankenmonster…
Growth ended when the cost of oil production surged towards $100 per barrel in 2008.
Central banks launched massive stimulus programmes to try to fight what effectively was the beginning of the end of civilization (and likely an extinction event).
They have fought the good fight — but anyone with half a brain could see that printing money would eventually stop working.
There will be no rationalization of the commodity industries because the only way that demand for commodities can grow is if we have global growth.
Global growth cannot happen because oil production costs are too high — and stimulus is no longer having any impact.
You are not going to see other companies buying up these failing companies — because with commodities at these levels — ALL of these companies are against the wall.
What we are seeing is companies shedding employees — closing mining operations — cutting capex…
That is the logical reaction to a world where there are no growth prospects — the boards of these companies are well aware that growth since 2008 has been ephemeral — they will know of Chinese ghost towns — subprime autos — trillions upon trillions of stimulus…
They will see that the stimulus is not only not working — but that it has turned toxic as companies breach debt covenants because they borrowed so much to buy back shares — they will understand that massive companies are in huge trouble – the profits of the largest global companies have been falling dramatically for a couple of quarters now — some such as CAT – for nearly 3 years straight…
They will understand that this crash in commodities is not an opportunity for M&A … they will realize this is a global death watch.
This is as good as it gets. The deflationary death spiral is underway.
I cannot see how anything can stop it.
Even stuffing cash into people’s mail boxes will at best slow the collapse slightly — or it could set off a panic whereby people pull in their oars and spend even less.
OMG! The deflationary death spiral is coming! Run for cover!!!
“Furthermore, if you use QE to bail out important companies (to important to fail) you could possibly postpone a crash as well.”
Already being done on a MASSIVE scale… see corporate buy-backs…
Central banks print money — failing corporations like IBM CAT etc…. tap that cash at zirp … buy back shares which prevents them from collapsing and the stock market from collapsing…
This has been going on for some years already …
It has it’s limits — too much debt eventually junks your bond status increasing debt servicing costs…
http://www.zerohedge.com/news/2015-10-29/goldman-finds-buybacks-no-longer-work-boost-stock-prices-two-reasons-why
I am talking about central banks buying corporate debt at a low interest rate in order to support companies For instance giving debt to glencore if they are threatened by bankruptcy or to much layoffs. The complicated thing is that this has to be coordinated by the central banks. Glencore is a multinational company. This is not the same as corporate buy-backs or conventional zirp. I admit that this is a difficult task and it will most likely not succed for very long. But its worth a try. Rather than giving up and let everything collapse.
I suspect that is already happening…. we are just not being told about it.
“You’ll keep hoping until the very last moment that you were right, you were the correct ones to save currency”
Who is the ‘you’ you are referring to here… did anyone here say they were stuffing their mattresses with cash?
I certainly am not — I have been on a bucket list extravaganza since 2008 pissing cash away as fast as I can — my motto is ‘when BAU blows up cash will be useful only to start the cooking fire’ (I prefer old newspapers….)
In fact I would recommend that people go heavily into debt — because guess what — nobody will be collecting post collapse!
I do have a few gold coins stashed away …. only because I reckon that PM will be the last man standing… (actually the last, last man land standing will be food… )
@Dolph9 – here ist the explanation why Governments cannot keep on printing money:
Nobody explains the role of money more precisely than Tim Morgan. Here a crucial
excerpt taken from his article The Perfect Storm:
Tim Morgan: http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
the subservient role of money
Though economists, policymakers, investors and the general public
customarily think in terms of money, this conventional thinking
is profoundly mistaken because, ultimately, the economy is a physical
rather than a financial construct.
Rather than being in any sense fundamental, money serves to tokenise
output into a convenient form. After all, the world economy has survived
the demise of an estimated 3,800 different paper currencies.
The roles of money can be defined as a medium of exchange, a unit of account
and a store of value. The development of money paralleled the emergence of
agriculture, the role of money being to tokenise the output of the economy
into a convenient form. Obviously, the creation of money was a secondary
stage in the economic process, as there was no point in having money
unless there were things that could be purchased with it, and the physical
economy formalised by money was, as we have seen, an energy dynamic of
inputs and outputs.
It is important to note that, in the agrarian age, anything that could
be purchased with money was the product of human (or animal) labour,
be that labour past, present or future. Purchasing, say, a plough amounted
to paying for a product of past labour. Employing someone to plant a field
involved payment for current labour. Commissioning someone to build an
item of furniture meant paying for future labour.
As we have seen, however, the terms ‘labour’ and ‘energy’ are coterminous
through the commonality of energy, so anything which could be purchased
with money was the product of energy, past, present or future.
With the broader term ‘energy’ replacing ‘labour’, exactly the
same relationship prevails in the industrial societies of today, except
that exogenous energy inputs (overwhelmingly dominated by fossil
fuels) now provide the vast majority of the energy used in the economy. So
overwhelming is this preponderance that, in Britain today, human labour
probably accounts for less than 0.5% of the aggregate human-plus-inputs
energy used in the economy. In other words, all goods and services on which
money can be spent are the products of energy inputs either past, present
or future.
The appreciation of the true nature of money as a tokenisation of energy
also enables us to put debt into its proper context. Fundamentally, debt
can be defined as ‘a claim on future money’. However, since we have seen
that money is a tokenisation of energy, it becomes apparent that debt really
amounts to ‘a claim on future energy’.
Our ability, or otherwise, to meet existing debt commitments depends
upon whether the real (energy) economy of the future will be big
enough to make this possible.
Tim Morgan wrote a very good description of money, but it didn’t involve the limits of society made by the energy sources EROEI. With decreasing density of energy sources, decreasing EROEI, the density of energy consumers also decreases, there isn’t enough energy to sustain our complex society.
>
>
Correct +10
EROI it explains everything. Call it by a million other names but declining EROI is at the heart of everything that is occurring. We are a snake eating its tail, the surpluses are gone, we are now eating the equivalent of our young and it’s deflation on a monumental scale, which can’t be arrested by any other means than a massive new insertion of cheap, abundant and useful energy.
If there was proposed “a massive new insertion of cheap, abundant and useful energy,” would you be interested in understanding the details?
LOL here we go
What is the top secret plan for cheap energy that will save the world:
a) thorium
b) titanium pipe to the sun to tap heat
c) one trillion dollars of solar panels
d) methane trapped in ice in deep seas
e) capture of key strokes of clowns who post secret plans for cheap energy on internet blogs
And the ANSWER IS…. (drum roll)
e)!!!!!!!!!! Yes E — if we could capture all that wasted energy we could power 3000 earths…
This calls for music…
Before you post this revelation — ask yourself — would you mortgage your home to invest in this idea?
Let’s hear him out… 🙂
Absolutely correct.
Ok, the first thing we do, when colonizing planet mars is to establish a printing press!
This will make possible, to buy everything we will need to live there.
By the way. How will you manage to inflate a further increase, when everything is already inflated. After breathing out follows breathing in!
What I don’t understand is that if it costs $100 per barrel to continue to get oil out of the ground we just don’t nationalize the oil companies… and central banks take over and print money and use that to extract the oil…
After all…. the central banks can print unlimited amounts of money … which means they can extract the very last drop of oil in the ground … surely we have a few decades of oil remaining down there … even with exponential population growth…
Time to take FW off the air…. problem solved — money printing is the panacea…. 🙂
“I keep telling you governments can print any amount of currency that they want, yet you don’t believe me.”
Who said we don’t believe you?
I am on record as stating that the central banks will print money until the very last moment — they will use that money to buy back stocks — the stock markets will break new records moments before BAU collapses….
You also lie, regularly.
How do you define “lie”?
Printing money doesn’t make the energy flow or the EROEI bigger, it just makes it less energy dense, more money is required to buy the same amount of energy, it doesn’t decrease the amount of energy used to manufacture an item or to provide a service.
FE’s sometimes offensive writing, is backed by an understanding that our economy is based on cheap energy, not money by itself. MMT, and as it seems, you, lack the fundamental understanding of that it is the flow of energy, that transferable cheap energy, that our economy rests on. Money is a token for cheap energy, but it is also a lubricant in economy.
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Hej Göran!
I think you simplify things. First, there is no sharp line between cheap energy and not cheap energy. The energy has probably been not cheap for quite some while but society has not collasped. The reason is of course that increasing debt levels and increasing money supply have made this possible. I think money is more flexible than you think. Energi is just setting the boandaries for this flexibility. Money as a token of energy is just a rough correllation. It could be possible to press further into the realm of non cheap energy by central bank tricks and increasing money supply. At some point this has of course to end. Maybe its soon, maybe not. I’m not wise enough to know.
Are you preparing for a collapse? Do you have a particular solution adapted for scandinavia ?
Hälsningar Christopher
Can’t prepare for this. Once society cracks, earth’s temperature will rise from the shutting down of coal plants. Then we’ll eat each other, and then we’ll die. Don’t bother preparing, just party now till things collapse, after that, well that’s your choice.
liam
I don’t think so: I can barely stand looking at my neighbours, let alone eat them!
Eating zombies would be quite difficult – not much meat on bones…
Global sales of industrial robots are moving relentlessly upwards
http://en.ofweek.com/news/Industrial-robot-sales-set-to-double-to-400-000-by-2018-34818
China calls for “industrial robot revolution”
http://www.therobotreport.com/news/chinas-president-calls-for-an-industrial-robot-revolution
North Sea Oil first loss in 40 yyears
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11948246/North-Sea-oil-makes-first-loss-in-40-years.html
But she argued that the Scottish Government must be “transparent” about the sector “rather than trying to avoid talking about a serious issue because it’s politically inconvenient.” Nicola Sturgeon told voters during last year’s referendum that Scotland was on the verge of a second oil boom.
SNP ministers have continued to demand full fiscal autonomy – all domestic public spending funded exclusively from taxes raised north of the Border – despite economists warning this would punch an £8 billion hole in Scotland’s finances.
The official figures from HM Revenue and Customs (HMRC) are thought to show the first loss recorded by a six-month period since North Sea oil started production 40 years ago.
Although the Treasury collected £248 million in corporation tax and petroleum revenue tax (PRT) in the first half of this year, it paid out £287 million in rebates to producers
Getting a little bit crazier every day… http://wolfstreet.com/2015/10/29/time-to-keep-your-cash-in-the-microwave/
I note the S&P is up 8.5% the past month … might as well buy the Vanguard S&P 500…. because the Fed will not allow the markets to fall ….. they will rise… right to the bitter end….
We probably will not know for sure for a few months, but it’s possible that someone has already solved the problems involved with energy–at least 1480 years ago.
Keith, we are deep into wordpress breakdown territory with over 1500 posts. Your post is orphaned. Please tell me what is this energy solution from the year 535.
That’s how long ago light left KIC 8462852.
I have worked on the design of large structures in space since 1975.
http://en.wikipedia.org/wiki/L5_Society,
https://www.hackcanada.com/blackcrawl/elctrnic/megascal.txt
to the present:
http://spacejournal.ohio.edu/issue18/thermalpower.html
One of the odd things about KIC 8462852 is the lack of IR from whatever is intercepting the light. Dust won’t act like this, you would see a lot of IR.
A rationally designed thermal type power satellites radiates the IR north and south of the ecliptic (to keep sunlight off the low temperature radiators). Telescopes a good fraction of the size of the star are another possible megastructure, and again, they would reflect light north and south to keep it cool and we would not see the IR.
It’s hardly proof, but a continuing failure to detect excess IR would be consistent with megascale structures. We should know in a few months, maybe only a few weeks.
Of course, even if it is alien megastructures, seeing someone else do it doesn’t mean we can.
Did you ever attend the Space Studies Institute conferences?
A complete guide to Chinese data-doctoring
Gwynn Guilford draws on her long experience of interpreting Chinese economic data to offer a rundown on all the ways the government fudges the figures, including ditching datasets, mixing up the methodology, faking numbers they think no-one’s watching, and just stopping publishing inconvenient stats.
You’ll never look at a PMI the same way again.
http://qz.com/530096/china-data-tricks/
The Fed would not be far behind….
The dog is the child of the 21st century, 54 % of todays people who have pet dogs are young people between 18 – 25 years old (in Slovak):
http://style.hnonline.sk/dizajn-133/pes-ako-dieta-21storocia-mlada-generacia-namiesto-dietata-siaha-po-alternative-955083
Who say the todays people who have pet dogs? We do not want marry… first we need to stabilize our financial situation…
Love and companionship at an affordable price “a dog”.
The younger generations have only two options: stay home or take mortgage. Both of the options mean that the system can function a bit longer. Until they die. Because of exhaustion or lack of care. If there is not enough care given to the older generations, they will die sooner, too.
This lack of energy for maintenance of human resources causes population decline. Including inefficiencies from maintanance and operation of big houses, big institutions etc., which is sucking the energy out of the working force. The low debt levels allow population explosion, the increasing debt causes population implosion. (The debt here is meant to be the debt caused by the lack of the cheap resources and energy, not just any financial debt that can be erased easily.)
The enslavement of high numbers of the people in the Soviet block helped the system to grow. The rejection and elimination of the dying institutions helped the system functioning a bit longer, too, i.e. that is why the institutional atheism prevails before the collapse, although the personal beliefs remain. The elimination of the religious life in the Soviet block was made exactly because of this. But the system collapsed anyway. But not because of the atheism, but because of the lack of the resources, especially the cheap energy. Then, again, the capital was called to rescue the region.
But what is the capital? Not just an injection of energy into the body so that it can live a bit longer? The story of capitalism is the story of energy injection into the resource-depleted regions of the world.
Now we have the world where there is nobody responsible for ever growing debt levels. The debt is owned by everybody. In the end, everybody is the biggest debtor to himself/herself, as he/she can not support his/her existence.
O come, our Redeemer, come…
I would say that the developed human population decline, is due to an abundance of cheap energy. Not having to struggle to survive and living in the artificial world effectively keeping nature out, make people stay in adolescence and loose understanding for life’s sole purpose, to keep living.
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“make people stay in adolescence and loose understanding for life’s sole purpose, to keep living.”
Or, frees us to pursue other purposes beyond toiling in seat and tears and blood just to stay alive one more day. Our big brains give us the ability to create purpose beyond simple survival, and excess energy enables us to pursue those purposes.
Which is exactly what I mean.
People focus on their own wants and perceived needs, thinking they might do whatever they fancy without regard to others, without realising their lifes is utterly dependent on others, doing their part to keep our advanced system of labour division working. This focus of self, me me me, is in my view the core of adolescence. As people no longer are forced by meager circumstances to mature, to realise we’re dependent on others, they stay in adolescence.
People who live in poorer circumstances, are very aware of the conditions of life. People living a materially abundant life, like ourselves, tend to loose this understanding, it becomes beyond imagination, or perhaps behind, as we focus on even “better” days. Because our advanced division of work, we have lost sight of the realities of life as part of nature, we’ve become blinded by our own success.
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The pressure on the dam wall builds…. when does the first crack start?
http://www.counterpunch.org/2015/09/23/waiting-for-collapse-usa-debt-bombs-bursting/
Just think if interest rates rose on all that outstanding debt!