The Oil Employment Link – Part 2 – Looking at more detail underlying History Channel’s “Prophets of Doom” story

In Part 1, I talked about how there is a close tie between the amount of oil consumed and the number of people employed. US oil imports have been dropping, and there are strong indications that they may continue dropping–world supply is flat, and China, India, and oil exporter are taking a larger share of the total. It appears to be almost impossible to ramp up US oil production by a very large amount, so with smaller and smaller imports, it is likely that US oil consumption will continue to decline, and with it the number of people employed in the US.

The problem is that our financial system cannot stand a very high unemployment rate–perhaps double today’s unemployment rate, or greater. If there is very high unemployment, people will default on their debt, and banks and insurance companies will fail. There appears to be a very high probability that the financial system as a whole may fail.

Some of you may have seen the show Prophets of Doom on the History Channel (Wednesday, Jan. 4). What I am talking about is very much related to the collapse scenarios discussed on that show, although I would not necessarily describe things exactly the same way that participants on that show described things. Also, the ideas I am presenting are my own. Presenters on that program would likely have somewhat different ideas.

Let’s go back to the last chart I showed in Part 1, showing my idea of how I expect employment to change in the future.

Slide 18

In this slide, I show my estimate of job counts divided by population, based partly on relationships I develop in Part 1, and partly on my view of how things might work out. The number of people with non-farm jobs drops as a percentage of the population, until it reaches an equilibrium low level, in about 2030.  I would expect that virtually no fossil fuels would be used at that time, nor would uranium be used. Society would exist without electricity, and without the conveniences we are used to today. Local farming jobs and goods produced by local craft jobs would grow, but would not be included in these employment counts.

The reason my forecast is so dire is the fact that all of our systems are highly networked – our transportation system, our financial system, our international trade system, our internet system, our electrical system, our food system, our federal, state and local governments, and many other systems. If one system fails, it is likely to bring down other systems as well, and eventually the overall system. This is very much related to the point I made in Part 1, that if oil use declines, the use of other fuels is likely to decline as well (as it did in 2009) because the decline in oil use causes recession and decline in demand for other fuels.

A big question is to what extent our financial system fails and cannot immediately be replaced. If there are huge amounts of unpaid debts (say 20% of mortgages, and 20% of municipal bonds, and 20% of commercial loans), it will become apparent that many countries will be unlikely to pay their international debts. The International Monetary Fund will likely be overwhelmed by the size of the problem, and trust in the whole system may rapidly decline.

One question is whether banks and insurance companies can be propped up. We have seen how banks and insurance companies could be propped up in 2008, and I expect that countries will try to do more of the same. But eventually, major cracks are going to develop in the system. Interest rates are likely to rise to 20% or more, because of the high default rates on loans. The value of some currencies is likely to drop to close to $0 for use in international trade, if prospective sellers don’t think they have sufficient chance of getting adequate goods in return for the goods (perhaps oil) that they are selling.

The problem is a likely to be a growing mismatch between what money is supposedly worth, and the amount of goods and services the economy is actually producing. The purported value of money will rise over time, as money is loaned into existence, and borrowers at least try to pay pack their loans, plus interest. (In Prophets of Doom, Nate Hagens refers to this growing monetary amount as a “Ponzi Scheme”.) But the real value of goods and services made is likely to decline in the future, as the amount of oil and other inputs declines. How fast this occurs is not entirely clear, but Slide 18 gives an idea. As the amount of oil consumed falls, the number of people with jobs declines, and the amount of goods those employees can make or obtain through trade with other economies declines. Eventually, the amount of goods and services the world can support with only natural inputs will drop to a much lower level than what we are producing today.

With this mismatch between the purported value of money and much lower value of goods and services actually being produced, the financial system will run into all kinds of issues. As mentioned previously, there will be many debt defaults. There is likely to be a question as to who gets collateral on defaulted loans. Those selling internationally may be hesitant to sell to those with poor credit. With fewer people employed, governments will have more and more difficulty collecting taxes, and more and more trouble providing promised services.

It seems to me that to some extent the unraveling of the financial system (and related systems like food and transportation) will be gradual. We saw the beginning of this unravelling in 2008, and we can expect to see more over time. Most of the unsustainablity of our current system has been temporarily hidden by stimulus payments that federal governments around the world are making, but are not collecting adequate taxes for. As legislatures refuse to authorize more spending and as taxes are raised, the real problems will become more apparent–more people will be laid off from work, and nations will sink further and further into recession. I showed in Is it possible to raise taxes enough to fix the deficit? that it appears that taxes would need to be raised by about 40% to match current spending levels–something that seems highly unlikely. It seems to me that big cuts in programs will be needed to bring spending down to what the country can afford.

Getting back to Slide 18, above, it seems to me that we will see a slide in conventional employment over a period of years, which I have shown as about 20 years. Part of what will hold things up is the fact that we currently have homes and cars and computers and machinery for planting corn and other crops, and much other built infrastructure. Even if we start getting some interferences with trade, we can still use the machinery that we already have. But over a period of time, this ability is likely to seriously deteriorate. I estimate it will be about 20 years before the deterioration we will be so great that we will need to transition to a new system without fossil fuels, if we are to continue producing things. I see the biggest problems in making high tech equipment, like computers and wind turbine gear boxes, because they require materials meeting very stringent specifications. We will likely be able to make low tech equipment (like wheelbarrows) out of recycled material from cars and buildings for many years.

In my view, the maintenance of almost universal electricity is extremely important. This, too, is likely to unravel, partly from lack of replacement parts, and partly because of financial problems of the electric utilities (because their customers cannot pay their bills). There may be other issues as well–lack of ability to maintain the transmission lines, and lack of internet access for functions associated with transmission regulation. Lack of fuel may play a role as well, if transportation systems are in poor repair, or banks are closed, and cannot facilitate transactions (buying coal from Wyoming for use in Georgia, for example). I expect wind turbines will stop functioning about the same time as everything else–perhaps sooner, if getting replacement parts is a problem.

In Slide 18, I show the first three or four years as perhaps the period when there is a pretense that this is just a temporary aberration, with most believing that Business as Usual is just around the corner. Most people will believe that the world will soon return to growth, and all that needs to happen is for lenders to extend the terms of loans a bit, and maybe raise interest rates a bit.

But as more and more countries default on their debt, and the situation gets worse and worse, this belief in an underlying BAU situation will be less and less tenable. It is possible that quite a few governments will be overthrown, country boundaries will be redrawn, and new leaders will step in. There may be both international and local fighting for resources.  All of this will tend to speed up the rate of economic decline.

I suppose that this might theoretically be prevented, if it is possible to invent–quickly–a new financial system that will contract as the amount of goods and services available contracts, and that will allow trade to go on as usual. The problem I see, though, is that many potential buyers of goods really will have little to trade in return; changing the financial system does not change this reality, and the decline in raw materials will tend to make the situation worse and worse over time. It will be only the parts of the world that are able to continue to grow food or manufacture goods or extract minerals that will have much to trade.

Eventually, as electricity is completely lost, and as world trade deteriorates to a much lower level, I expect that the world will return to a situation where most of the population will make a living by local agriculture or by local crafts. This is the equilibrium stage that I show being reached around 2030. I see this rapid deterioration because I do not see substitution as being very possible in the short-term, and because I see the various systems (oil, financial, food, etc.) as so closely linked.

Slide 19

Most of these things I mentioned above. I should point out that if we lose electricity, we lose a lot of other things. Our fresh water systems depends on electricity. Our sewage treatment plants run on electricity. Nearly all of our medical treatments require electricity, and more and more of our health records are stored online. Gasoline pumps use electricity, and most heating systems use electricity at some point in their operation. If heating systems allow homes to drop below freezing, pipes will freeze, and severe damage is likely to take place.

One thing I didn’t mention previously is the fact that the death rate is likely to rise, as problems start occurring with food, water, health care, and other services. It is not clear how quickly this will happen. It will really depend on how well we can keep systems for essential services (food, fresh water, cooking fuel) in place. If the current system stops functioning, we will need to be able to transition to a replacement system using only local inputs quickly.

Slide 20

The big issue I see is we have very little time for mitigation, because our major financial problems seem to be coming very soon. I say two or three years in the slide, but we have so many hidden debt problems already in existence that we may see major financial problems much sooner–say six months.

Slide 21

This is my summary of the major steps I see needed. I have a separate slide on each.

Slide 22

As I discussed above, our current financial system needs to be replaced. It may be that we really need two systems–a rapidly contracting one for the downslide period, which I have hypothesized to be 20 years, followed by a much simpler one for that equilibrium period that follows. It is possible that a metal coin system will work for the equilibrium period, since by then, even making paper money may be difficult.

Slide 23

Population is really the number one problem we are facing. Without fossil fuels, the world will only be able to support a much lower population than what we have today, because our current systems for growing and transporting food are heavily dependent on fossil fuels. We can look at past population levels to get an idea of the population that perhaps can be supported. If we can develop sustainable farming without fossil fuels, then perhaps the drop in world population can be stopped at, say, a level of 1 billion, compared to today’s population of 6.9 billion. But if we can’t figure sustainable farming out, population could drop even further–theoretically to the level of the population of hunters and gatherers in times past–maybe less than 100 million.

I suggest encouraging smaller families, but this is likely to make only the tiniest dent in the problem. Our increasing population will make the problem worse.

There are a number of people who talk about “steady state” or “no growth” economies. I see these economies as only possible with a population that is very much lower than the world’s population today. I do not think most current transition agriculture (using organic methods or permaculture) is sustainable at today’s yield levels without oil and electricity. Current approaches get indirect help from our fossil fuel system–transportation of soil amendments to the farm, refrigeration for produce (so less is lost after harvest), electric fences, oil to run tractors, electricity for water pumps. Once help from fossil fuel is lost, farming methods will need to be simplified even further, resulting in lower food production per acre and per farmer.

Slide 24

I don’t see that many of the proposed add ons to the current system (such as wind turbines, solar PV, and electric cars) will do much to sustain the economy for the long term, so it seems to me that we need to at least hold off the collapse as best we can in the near term, and try to keep things together. It is popular to bash the oil and gas industry, but we really very much need them, if we are to keep our systems together, for even the very near term. As I noted in Part 1, our oil imports are likely to keep dropping because world oil supplies are at best level, and countries like China and India are outbidding us on the demand side. If we do not want our total oil consumption to drop too dramatically, we need to maintain US production as best we can.

There are people who talk romantically about being about to “walk away from fossil fuels” or voluntarily do without. I don’t see this as possible or useful. If some countries voluntarily reduce consumption, it will increase oil available to other countries, and help them live better, but I don’t think it will have any impact on the long term. To the extent that a voluntary reduction in fuel use disrupts current systems (for example, causes utility companies to go bankrupt), it is possible that it will bring earlier collapse to the system, and a steeper overall decline, both in employment and population.

Everything I see suggests that population and oil and other fossil fuel consumption will drop very quickly, regardless of what we do. So trying to hold up oil production in the short term will have little impact on long term CO2 levels. In the scenario I envision in Slide 18, the amount of new manmade CO2 emitted will drop very rapidly, effectively reaching zero by 2030, whether or not we try to keep US oil production up in the near term. This drop to effectively zero by 2030 is a much more rapid reduction than climate change activists are asking for.

Slide 25

I think we need to get started preparing for a post fossil-fuel era right now, because it is such a huge undertaking. Even if I am wrong as to the speed with which fossil fuels will leave us, and we can continue fossil fuel consumption until say, 2050 or 2080, instead of 2030, I still think we need to start preparing for the change now.

I list several transition needs in my list. Some of these are law changes. There are many others. For example, economics theory will need to be completely rethought. Political systems will likely need to change greatly as well.

Slide 26

I see inexpensive fixes as being the ones to pursue–partly because they are the ones that are most likely to be sustainable for the long run, and partly because they will be most easy to finance with our current financial problems.

Slide 27

I see most of the high priced fixes that are being touted today as being simply add-ons to our current fossil fuel powered system. Without fossil fuels, we will not be able to manufacture any more wind turbines, or solar PV panels, or electric cars, and we won’t be able to service the ones we have. Bio-digesters will have much less fuel, and will be difficult to keep in repair. So I don’t see much point in building more of them–especially if doing so requires a subsidy, or if their usefulness depends on maintenance of the electrical grid. There may be some that are temporarily helpful though–solar panels to power irrigation equipment, or wind to power ammonia generation.

Slide 28

I mentioned most of these issues before, but I think they bear repeating. Even voluntary reduction of fossil fuels is likely to result in more and more job loss. With less and less in the way of government safety nets, marginalized people will find themselves unable to maintain even basic food supply. So what sounds good in theory in saving CO2 is not likely to work out well in practice.

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About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.

59 thoughts on “The Oil Employment Link – Part 2 – Looking at more detail underlying History Channel’s “Prophets of Doom” story

  1. I have to admit that this post confuses me as I can’t tell whether the critique is what you think will happen or the worst case scenario. I also can’t tell whether you believe it is an outcome that would be socially driven (we don’t respond to the challenges and instead squabble while things fall apart) or fundamentally driven (it is a surety due to basic laws of energy and the environment). If it is the latter then this is way too pessimistic as there are many adjustments that can be made to make sure we have enough energy for basic transportation, refrigeration, important industry, medical care and the like. I do worry about social feedbacks causing such fast collapse that we don’t see it coming until it’s too late to transition though.

  2. Thanks for these excellent articles Gail. I think it is fantastic that you are making this effort to discuss our predicament in the context of the entire system, including energy, economic and environmental.

    Unfortunately far too many people will dismiss it as “doom mongering”. Even those who have some understanding will far too often get fixated on just one aspect of it, peak oil as just an energy problem for example, and fail to see it in the greater context of our global ecological overshoot.

    From that ecological perspective it’s not all that hard to understand what’s happening in the world, any system that overshoots the long term carrying capacity of its environment is unsustainable by definition and will eventually experience some level of collapse. The greater the overshoot the more likely that carrying capacity will be degraded resulting in a lower population or lower standard of living (or both) than might have other wise been possible.

    The financial system is very much a part of that dynamic, when debt based money makes too great a demand on real physical wealth then those debts must eventually be repudiated. Something we have seen repeatedly in the various “bubbles” over the last decade. An excellent discussion here:

    The Financial Crisis Is the Environmental Crisis
    http://steadystate.org/the-financial-crisis-is-the-environmental-crisis/

    Keep up the great work!

    • Thanks for your comments. I was looking at The Financial Crisis Is the Environmental Crisisand it starts out very well. Near the end, it gets to the 100% money system, and suggests that it would solve our problems. I am not so sure about this.

      For one thing, our problem now is the huge amount of debt outstanding. What would become of all that debt, if we go to a system (the proposed 100% system) with much less debt? That is the big problem, no matter what the new monetary system.

      A second issue is that most of the “investment” done today is financed by debt. Pretty clearly investment would drop to very rapidly, except where prices are high enough to generate adequate margins to facility reinvestment. Prices for many things (oil, gas, coal, food, etc) would have to rise to facilitate this, and standards of living would be cut back greatly to facility this. (Our overshoot in this area would be identified.) It is not clear that we would able to afford the oil and gas that are being drilled today, for example.

      The third issue I see is that the supply of goods and services is likely to be dropping over the next several years. It will be very difficult for borrowers to pay back debt with interest, even on the small amount of loans that would be possible under the proposed system.

      A fourth issue is that as I see the future, the amount of money supply should be declining. I don’t see how that would be built into the system.

      So I don’t think the change is really feasible, because of all of our problems, which are already “baked into the cake”.

      • I read Eric Zencey’s article on “The Financial Crisis is the Environmental Crisis” referenced above. My impression is that he is not suggesting 100% reserve requirements in itself would solve all problems but is a necessary condition of a sustainable economy. How we get there is basically a political question.

        Eric also says (and I believe this is a necessary corollary) that the government should have seigniorage, that is, the right to print money and benefit from the proceeds. Let’s suppose that you put into effect 100% reserve requirement. My guess is that the effect will be massive defaults, and there will be a lot of debtors who are bankrupt and a lot of lenders who will be left holding a mostly empty bag. It would be sort of like the 2008 crisis being allowed to play itself out without government intervention. With seigniorage, the government itself won’t be out of business (not due to finances anyway!).

        The government could print money and save those elements of the economy that were most essential to U. S. citizens — I’d suggest food, clothing, and shelter. There are other policies which would be put into place as well, like a minimum and maximum income level, progressive income tax, etc.

        There is a political problem with this, though. It’s obviously not going to work in the current political environment. If Obama were to implement a 100% reserve requirement tomorrow (I don’t think he has the authority to do this, but suppose that he did) we’d instantly be thrown into a Great Depression. He would be blamed for the results and would be defeated in 2012 (if, in fact, he weren’t impeached first).

        It would be politically smarter, in the current environment, to let the system fail of its own accord later, when (hopefully) someone else is in office. Of course, the results would be somewhat messier and people might still believe a return to business as usual was possible. This experience might need to be repeated several times before they would understand “our finite world.”

        These kinds of calculations, though, are political, not financial. I think that in principle a 100% reserve requirement could be implemented tomorrow. To do it right we would need the next steps carefully planned out — what elements of the economy are we going to save? How do we insure that everyone has adequate food, clothing, and shelter? (Other questions would need to be addressed too.)

        If this were politically possible — that is, if everyone understood the environmental problems facing the U. S. and were willing to cooperate — then 100% reserve requirement would be a good policy.

        Keith

        • I think it would be a lot more feasible to implement if the United States were the only country in the world. If we were to implement it, and others didn’t, we would be in terrible shape. We would probably lose imports.

          One of the things we really need besides food and clothing is sufficient funds to invest in energy sources. I think the use of financing for most of our investments today has been hiding the fact that our current system is not giving a high enough true return to make this investment possible. I am afraid once we decided to implement it, we would discover we were really farther along on a limits to growth curve than most people realized.

        • Letting something fail and restructuring requires leadership that is hard to generate inside the political class, one has to go outside of the class. Hence, in my mind the current governor of NJ.

          As an engineer I’d like to take large subsystems offline and do some PM, or do a complete replacement of the subsystem (i’m not an anarchist so i’m a little concerned with “complete failure”). Let’s take pensions at the state and local level in IL.

          The legislature last year passed a law that has to be implemented such that Chicago must increase their local taxes by 75% to meet pension requirements. They are very unhappy. And according to the press the state for its overall budget is now talking about a 75% increase in state taxes (pensions are a large part of this, but not all).

          For the state this is just simply business as usual, no PM here, in fact they are simply going to increase the pressure of the system. I guess they are assuming that their system has no feedback loop. No one is going to leave the state, individual or business, no one is going to reconsider risking their capital to start a new hot dog stand, or modem company (dating myself). But the state continues to be lead by members of the political class, so what should one suspect.

          Here in PA, with a flip flop from democrats to republicans, but all still from the political class, maybe there is a chance to fix the pension subsystem. I’m somewhat skeptical.

          I think radical change requires leadership outside of the political classes, O’bama was part of the political class and will operate within its rule base. I am very skeptical about the US’s ability to change, I suspect that some form of dieoff is the more realistic scenario.

  3. There is indeed a fundamental problem with money, a problem which goes beyond the usual objections against debt based money created out of thin air and the fractional reserve banking system.

    That problem has to do with thermodynamics. Money is the compensation for work. The amount of the money received roughly corresponds to the value of the product created or service provided. The problem is that these products and services decay in time: A car even if not used at all will become obsolete in time due to technical progress, change in fashion, aging of materials (rubber and plastics decay in time even if not used) etc etc. Houses if not constantly maintained fall apart within less than 50 years due to the effects of weather. Food, even if properly stored, will expire in time. Even gasoline, if not used within a few months will change chemically and become unusable. This disintegration of products is simply the consequence of the second law of thermodynamics. But even services become obsolete in time. Take research efforts. These efforts become obsolete in time either by being disproved or made obsolete by further scientific progress.

    Now take a look at the money earned by producing these products and services. That money does not expire in time. To the contrary, if invested properly, it grows in value over time. The fundamental question is: why should the money earned last forever while the product for which the money was paid for disintegrates within a few years?

    Thinking along these lines, one arrives at the conclusion that a precondition for a sustainable monetary system is the feature that money like everything else in the economy must have an expiration time. In other words, each Dollar circulating in the economy must decay in value every year. That decay could be linear, say 2% every year such that the Dollar would be worthless after 50 years. One benefit of such a monetary system would be that debts would expire worthless within 50 years without the debtor having to repay the loan. Moreover, the accumulation of large amounts of money for the purpose of financial speculation would be made extremely difficult. Such a financial system would give preference to the real economy versus the financial industry which prospers from the fact that money is exempt from the laws of thermodynamics while everything is subject to the laws of entropy.

    Historically, money was commodity based (coins and paper notes). Today, money is in essence a piece of data in a computer. Since storing information on a computer system comes essentially at a zero cost, the nominal amount of money can therefore be easily made to be a function of time. Every day, the balance on a checking account would fall be a tiny fraction of a percent. Money would be something which nobody wants to hoard and everybody wants to spend. In such a system, the real economy would be on a equal footing as the virtual economy (financial service industry).

    Unfortunately, the chances of introducing such a monetary system are almost zero. The public simply does not understand arguments based on thermodynamics. Moreover, the most outspoken and influential parts of society are those who could be classified as “parasites”. The truth is that the present monetary system does promote the spreading of parasites.

    In human history, periodic societal collapses are necessary in order to get rid of too many parasites. It is not necessarily the lack of resources which leads to a collapse. Societies need to collapse occasionally in order to get rid of societal parasites. Examples: The French revolution in 1848 and the Russian revolution in 1917. The great American revolution of 20??.

    • That is an interesting observation.

      It seems to me that the idea that the idea of growth must have come because, in the aggregate, the amount of goods and services produced each year was growing. So the expectation was that money stored up would buy more of those goods and services. Also, even if individual items are decaying, enough new product is being added each year to hopefully offset the decline, so that the accumulated amount for society as well.

      But this is changing, with reduced resources. If we start producing less and less goods and services in the aggregate, because of declining inputs, then the financial system will be dividing up less and less goods. We will either have to have inflation, or a different way of reducing the value of money, like you say. So one way or another we get to a system like you are proposing.

  4. Addendum to the previous post: The argument given explains why inflation is a necessary feature of every monetary system. It also explains why a gold standard would not solve our financial problems. Society can survive long term only if it lives in harmony with the laws of thermodynamics. Our monetary system is condemned to collapse because its design contradicts the laws of thermodynamics.

  5. Thank you, Ms Tverberg, for two fascinating (albeit disturbing) essays.

    Back in the late 1950’s, I was sailing with my parents and two kid brothers aboard a 46′ schooner in northern Lake Huron, in moderately heavy weather. We hit an unmarked rocky reef (turned out it was on the chart; we had neglected to notice that). We got off the reef via unimaginable heroics; we made it to a boatyard, through more heroics. My dear Mom kept my Dad and me supplied with tobacco-filled pipes and coffee through that cloudless, sunny and horrifying afternoon. What most I remember was our conversation: things seldom work out as well as they might (as we wish they would) or as badly as they might (as we fear they might)… although they might well go to either extreme.

    Most of all this is conjecture, based on experience, study, and attitude. And I have a visceral suspicion that Ms Tverberg’s musings lie more toward the pessimistic end. Their undeniable value lies in the naming and describing of the fearsome monsters that await us, not in specifying the shoe sizes of said monsters.

    One observation on how the unexpected happens. Think of fluid flow emerging from a smooth-bore pipe. As the Reynolds number rises, approaching ≈2000, the fluid emerges smooth, glassy: laminar flow. At some point around 2000, there is a shock, like everything got hit hard by Thor’s hammer. The fluid flow rate immediately drops spectacularly, the fluid emerges all rough and burbly: turbulent flow. Or think of leaning on a yardstick, pressing harder and harder. All fine, until all of a sudden, it bows and snaps.

    Both the yardstick and the pipe flow illustrate the end of a stable condition. In general, that’s the way stability ends, not with a whimper but a bang. Myself, I fear the bang… and I fear there will be several of them, in Ms Tverberg’s scenario.

    • There are a lot of things we don’t know. It seems to me that some scenarios we see are way too short (store up food for a few months, and it will get you through the crisis), and some are way too long. I think the general belief is that the downslide will be very, very long–oil production goes down by a few percent a year, and we more or less adapt. I have a hard time believing this, because there are too many pieces of our current system that are likely to “break” – in particular the financial system, and those breaks will tend to give rise to Liebig’s Law of the Minimum situations–if we don’t have electricity, or fresh water, or some other essential item, then systems we would normally expect to work won’t. Hopefully, I ‘m wrong, but we seem to run into something of this type, every time a big hurricane comes through.

      In a way, we would be better off if some plague came through, and reduced population early on. Then the remaining population would have a reasonable chance of establishing a decent life for themselves. But we don’t know how it will really turn out. Perhaps that is for the best.

      • We have two ways to respond to financial collapse–markets and governmental action. During the Great Depression, for example, there was a great increase in governmental action to deal with the financial and economic crises; most of this action was constructive. There was a breakdown in international trade during the Great Depression, and markets responded quickly to much lower levels of imports and exports. I suspect that the U.S. would survive a collapse in international finance and international trade better than would most countries. We have large supluses of grain that we could barter for oil. We have many thousands of small businesses that could rapidly gear up and ramp up to make spare parts that might not be available from overseas anymore. Much of what the U.S. imports is luxury consumer goods–items that we can do without or manufacture again in the U.S. For example, we import huge quantities of cheap shoes from China, but we can live without these, and if necessary make more expensive (and much better) shoes in the U.S.

        In regard to the system of electrical generation and distribution, the only thing we really have to import is copper. Spare parts for transformers, for example, could all be manufactured in the U.S. within a matter of months if they became unavailable from abroad. The market will not solve all our problems, but I do think it can and will solve almost all problems relating to spare parts. We import uranium only because it is cheaper to do so than to mine uranium in the U.S. The same is true for rare earths: In case of necessity the mining of rare earths could be ramped up in the U.S. quite quickly, in a matter of months, if we could no longer import cheap rare earths from China.

        Note that during World War II we could not import rubber, so the government imposed gasoline rationing and made synthetic rubber for the military–all done in a matter of months. Civilians had to go without tires, but the military and other essential government functions rolled on synthetic rubber, which had been a miniscule industry in the U.S. prior to Peral Harbor.

        • I wish I understood the WWII situation better. I suspect things have changed a fair amount since then.

          It would seem like processes now have more computerized controls, require more specific materials and have closer tolerances. It seems like setting things back up would be that a fair amount more complex than in WWII. The pre WWII processes had used mostly US inputs; now more changes would be required. And of course, oil would be required in quite a bit of this, and it can be expected to be in short supply.

          When it comes to things like uranium, there is a fairly long time-line with getting a mine up and running. If we are dealing with locally produced goods made with local materials, it will be longer still.

  6. The big difference, as I see it, between now and the US during the Great Depression is that we had enormous amounts of yet untapped natural resources. Mountains of coal and lakes of oil have been extracted and squandered over the decades. Without these resources, stabilizing the domestic economy is going to be, um, difficult. I wonder what the energy return is on a trade of wheat for oil. With regards to domestic rare earth minerals, my guess is that these will be prioritized for the US military applications and not for hybrid cars. Hybrid APCs maybe.

    I was listening to an interview with Colin Campbell on Puplava today for the second time. In it, he mentions the oil derivitives market. I think Steve Ludlum has also talked about this on his blog. Anyway, I started to wonder if this is like the silver market which is paper leveraged 100:1. Would discovering the truth about the supply and price of oil would bring the whole house of cards down in a flash? How many jobs would disappear overnight?

  7. Hi Gail,

    Thanks for the time and study you put into this essay. As you probably recall, my concern is with the definition of the problem and the potential for the general acceptance of this definition. Let’s look at one of your key predictions:

    about 2030……. Society would exist without electricity

    Whether the date is 2030 or 2060, I believe it is safe to say that you expect general household electricity, at its current level of availability, to be greatly reduced during this timeframe. And, I think we can agree, such a substantially reduced level of such electricity would have profound effects on Life-As-We-Know-It here in the USA.

    I’ll wager that only a tiny fraction of the US population would agree with you – and please note that I’m not suggesting that I disagree with you. If I’m correct, then this begs two questions: why is your view considered so extremely pessimistic and what (if anything) would change the general perception of what is most likely to happen in the next 20-50 years?

    When I was a business consultant, there were two popular litmus tests for any innovative proposal: The elevator test and the grandmother test. Could you convey the essential, compelling aspects of the proposal to a CEO if you had his/her attention on a 20 floor elevator ride? If the proposal was technical in nature, could you explain the most basic concepts to your grandmother before she lost all interest? Obviously, not all problems/opportunities can be dealt with in such simplistic terms. However, when you suggest that the average person will need to adapt, in 20 years of so, to a life with little availability of electricity, then it seems that the essence of this prediction needs to be distilled into this kind of messaging.

    It seems to me that there are a few fundamental components of this argument that need refinement for any kind of general acceptance:

    – The rate of depletion of fossil fuels, especially liquid fuels, needs both clarification of the most likely depletion rates (coupled with consumption rates) and to be presented with unquestionable authenticity. Right now, I don’t see that IEA/EIA either support your prediction nor do they have the necessary credibility even if they did. Organizations such as the ASPO are too marginalized to fulfill this need.

    – The potential for technology (renewables, nuclear, nano, etc) to ramp up and replace fossil fuels as they deplete, needs to have its limitations clearly demonstrated. Gail, I know that you personally make compelling arguments in this regard. But, I don’t see your arguments alone as being sufficient to sway the general public. Again, some highly credible and visible entity needs to champion the scientific realities of trying to replace today’s liquid fuels with alternatives. I see no evidence of such an entity today.

    – Political champions are desperately needed to address a wide variety of partisan/self-serving interests and biases. Currently, I see precious few notables that serve this need.

    In coffee shop conversations, I often float the idea that the average person might suffer a significant reduction of home electricity supply in 20 years. I find it very difficult to provide the kind of credible evidence needed to support this prediction. Indeed, most people seem more inclined to accept the prediction that, in 20 years, automobile accidents will be a thing of the past because cars will all be automated with artificial intelligence and “smart” roadways – we will just sit back and enjoy the view as we zip around in safety and luxury. Sound nuts? I just listened to an hour long program on Wisconsin Public Radio that espoused this vision – no one questioned the issue of where the energy will come from to support this nonsense.

    I appreciate your insight, but I wish your thoughts could, somehow, work their way into the greater public consciousness.

    • I will have to write some more on the subject.

      The difference between my views and those of quite a few others is that I think Lieblig’s Law of the Minimum will be what defines the future, while others think that we can go sailing along, even if this and that and the other thing have problems – the financial system, international trade, the Internet, the political system, electricity, etc.

      If each one makes projections, assuming BAU except for their own sector, they are almost certain to be wrong, in my opinion. We are facing a very unusual situation, where we cannot assume substitution will solve all problems.

    • Bicycle Dave-

      The dire implications of exponential growth in a finite world with finite resources have been obvious for many decades. I am not surprised that the political system did not properly prepare us for overshoot, but I am surprised that there has not been much more attention payed by academia and non-profit research institutions. Where are the detailed contingency plans from these folks? And I find it hard to believe that economists wouldn’t be intrigued enough by the concept of resource limitations forcing de-growth to create a whole panoply of de-growth theory. Maybe these plans and theories do exist, but if so, they are quite well hidden.

      • I believe people are better off to read “collapse” fiction rather than waiting for academics to come up with proposals. I certainly grant that some are totally off the wall. On the other hand, they present an intellectual jumping off point – right now. The good ones present realistic scenarios, even if extreme in some cases. There are many, many available on the Internet.

        Todd

      • I get the impression that academia just builds on each other’s articles. An idea started by one is cited by others, and floats around endlessly. I am sure you have run into CASSE, Center for the Advancement of a Steady State Economy. There are plenty of smart folks involved, who should have thought through what they are saying. If you have exponential growth in a finite world, how are you going to continue to extract a constant amount of resources each year? Or perhaps they are imaging that somehow the economy can continue at a steady state, even though resources decline.

        I think a big issue is grant money. I know Charlie Hall quite well. He complains about lack of funding for what he is doing, and it is mostly energy return on energy invested.

        Another issue is publication. University professors have to “publish or perish”. Nobody wants an article that differs too much from what has been published before. Even web sites mostly don’t like gloomy stories. They would like happy stories, that folks would like to talk to their friends about.

  8. Shouldn’t the word “Chanel” in “History Chanel” have two n’s? “History Channel”? Or are we talking perfume here? Sorry, couldn’t resist.

    • Spelling isn’t my strong point. I guess I should fix that.

      I realized that the misspelling is in the title link, so I may be stuck with it in the title.

  9. Chilling articles, Gail; and equally chilling conversation following.

    I am curious what you think about preparation for this scenario on an individual level–specifically, whether and/or how one might take steps to preserve one’s financial reserves. Your story includes, I suspect, non-functioning banks or at least long bank holidays and perhaps the loss of savings kept in traditional bank accounts. Where would you want your cash reserves to be when the financial system implodes? If your scenario plays out and this is immanent (2-5 years), it would seem now is a good time to be asking this question and making appropriate moves.

    Thanks for your work.

    Brad

    • I am not entirely certain that one can protect one’s financial reserves, especially if they are paper. If you diversify, you are at least no worse off than others. Gold coins and silver coins may make sense, but we really don’t know. You can’t eat coins.

      Hand tools and knowledge are probably good investments.

      To some extent, helping other people here and now with the resources you have may not be a bad idea. If you can’t take it with you, you might be better off spending at least some of it. I am sure that there are charities that need help. But there may also be family members who need help now, but who may be helpful to you later.

      • Gail, I couldn’t agree with you more. Creating networks by helping others is a great step, through church/synagogue/etc. and clubs (Lions,VFW,etc) or just one by one. And there is nothing better than helping them by doing (more than donating), building networks through splitting wood together, making hooch in the basement, gardening together, fixing things, whatever. Last year when people came to my house I’d say let’s go to my garden, and told them to pick arugala, beets, tomatos, (all heirloom organic) and take them home for their table.

        You definitely can’t eat silver and gold coins, but they just might be useful for trade, who knows. I’d also like to believe being highly skilled in more simple crafts is useful.

        There was an amazing insight made by a design group in Africa last year – universally there is enough knowledge everywhere to keep cars going so what can you build out of car components?

  10. Folks curious about some of the issues involved in planning for emergency degrowth at the state level may be interested in my attempt to sketch out such a plan in Maine. The discussion thus far on this thread has given me much to think about as I move forward.

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