The world has many ideas for solving our energy shortfall, but they all seem to involve investment:
- Drill for more oil and gas;
- Develop alternative energy sources;
- Build more efficient gas-powered cars or electric cars;
- Fix homes and offices so they are more energy efficient.
I thought I would check through government data to see if we really have a chance of being able to invest enough money to solve our problems.
What I found was more than a little disturbing. United States’ “Net Savings,” as a percentage of Gross National Income has dropped greatly and is now below zero. This is a situation one website described as implying an “unsustainable path”.
Back in the 1950s and 1960s, when the Interstate Expressway System was built and the electric grid that we are still using today was built, Net Savings averaged close to 10% of Gross National Income. It has dropped since then, and is now negative.
Let me explain “Net Savings” by showing a second graph.
In the United States, investment is made in many kinds of long-lasting goods, including everything from buildings, to roads, to oil and gas drilling, to pipelines, to wind turbines, to equipment for factories. Gross Domestic Investment (blue) is the total of such investment made in a given year, shown as a percentage of Gross National Income.
Some of this Gross Domestic Investment comes from an increase in debt; some of it comes from savings. Gross Savings (red) is the portion that comes from savings (foregone consumption), rather than an increase in debt.
Each year, some long-term assets wear out or are destroyed. Net Savings (green) is what is left, after subtracting the portion that relates to these assets which are lost (“Consumption of Fixed Assets”). So basically Net Savings is the amount of investment during a given year in long-lasting goods that was not financed by an increase in debt, and is not simply a replacement for something that has worn out. If Net Savings is negative (as it is today), we are not even replacing things that wear out, except through the use of more borrowed money.
Quarterly data shows that Net Savings is still negative in 2011.
When Does High Net Savings Occur?
High Net Savings occurs when companies in general are quite profitable–in other words, when invested capital can be expected to yield a high rate of return. In such an environment, most companies will be earning enough profit that they can invest in additional plant and equipment, if desired. In such an environment, real wages are likely to rise. Governments will have little difficulty obtaining enough taxes for schools and roads, and other governmental investment.
The term “bankable project” is sometimes used to describe a project with an expected high rate of return, since this is something that a bank might be willing to lend money on, if asked. An economy with high Net Savings will have many bankable projects.
Why would Net Savings Decline?
I can think of four reasons for the decline:
1. Declining EROI. Much of the infrastructure of the United States was built in the day when oil was cheap because the Energy Return on Energy Invested (EROI) was very high. Over time, EROI has dropped, and as a result, the price of oil has risen. When the price of oil was inexpensive, new infrastructure could be added cheaply. Oil and gas companies made good returns, even with low oil prices. Now oil costs have risen but wages have not risen correspondingly, creating a mis-match. With the relatively lower wages now, it is harder for workers to afford oil-based products and goods manufacturers make.
2. Human Labor Has Been Mostly Replaced. At one point, it was possible to create substantial efficiency gains simply by replacing human labor by fossil fuel labor. For example, a ditch digger could be replaced by a machine that dug ditches, and the cost of digging ditches would go down quickly, creating a profit for the entrepreneur buying the machines and the company making the ditch digging machines. The biggest opportunities for efficiency gains have already been taken.
3. Decline in Protectionism / Rise of World Market. In the early days, domestic industries were protected with tariffs. As tariffs were lifted and world trade increased, there was increased competition from areas with lower wages. Capital was attracted to parts of the world where returns on capital appeared to be better, leading to a loss of investment in the US.
4. Limits to Growth. As we reach Limits to Growth (of the type described in the 1972 book by that name), completing claims for limited resources can be expected to raise costs for basic materials relative to wages. As a result, bankable investment projects can be expected to become less numerous. Herman Daly talks about a lack of bankable projects, not only in the US, but around the world, in this recent post. In his view, the low returns on projects today may be related to ecological limits to growth.
Will There be Enough Funds for the Investments that will be Required to Solve our Energy Shortfall?
It is difficult to see that there will be enough funds available for such investment.
At this point, we need increasing debt just to stay even in terms of replacing infrastructure. We cannot expect ever rising debt to continue, however. Instead, we should expect reduced debt, as I described in my post The Link Between Peak Oil and Peak Debt – Part 1. Private debt is already declining and is under further pressure, because of European banking problems and Basel III rules reducing the amounts European banks are able to lend. The US Government keeps increasing its debt level, but this continued growth in debt is unsustainable, and is the reason behind threatened governmental shut-downs.
With reduced debt levels in the future, Gross Domestic Investment will drop below Gross Savings in Figure 2, above, leaving even a smaller amount of funds available for investment than we have today. We may very well, in the aggregate, reach the point where we are not able to maintain current infrastructure with the funds that are available for investment. This means that will need to make choices on which things we maintain–schools or roads or oil distribution pipelines or electric grid or our housing stock. If we suddenly want to spend a lot more on new oil and gas drilling, or on an upgraded electrical grid and more wind turbines, this would seem to reduce funds available for investment in other things, which are also quite necessary.
If we think of investment as requiring the use of resources such as oil, steel, copper, and fresh water, it would stand to reason that there is an upper limit on how much we can invest each year. If we are in fact reaching “Limits to Growth,” or even “Peak Oil,” the total amount of these resources available in world markets will be declining. Even if the amount of resources extracted each year does not decline, but stays close to flat, the share of these resources that the US is able to obtain and use for infrastructure building is likely to decline, because of more-rapid growth of emerging market nations.
The Way Forward
The only way around this difficulty that I can see is adding high EROI, quick payback, energy projects such as oil wells from the 1930s. Unfortunately, there aren’t any of these left (and of course, they have environmental issues as well).
We have deluded ourselves into thinking that projects that require government subsidies and that theoretically will produce an adequate return over a long period (20 to 60 years) are an acceptable way of replacing high EROI, fast payback projects. This might be true, if we still lived in a world in which fossil fuels would provide enough of a subsidy to the system that we could live without favorable cash flow returns from other investments.
The problem is that now, even fossil fuel investments require a lot of up front funding (think oil sands extraction in Canada, and fracking of oil and gas wells in the US), and don’t necessarily have all that good a long-term return, regardless. This is especially the case if the government needs to take an increasingly large share of this return, in order to fund its infrastructure requirements.
And increased debt is less and less of a solution.
Somehow, we need to be looking at the overall picture. How can we get enough profitable cash flow to get the cash we need to buy the resources needed to maintain essential parts of infrastructure? If we are looking at energy-related investments, what do they really provide in terms of cash flow? They may supposedly have a high EROI, if viewed over a long enough period, but this in itself is not all that helpful, if cash flow is not positive in a fairly short time-period–probably seven years or less.
My expectation is that the majority of energy investments will be terrible in terms of cash flow, and thus make our “Net Savings” (and Gross Domestic Investment) even lower over time. Installation of wind turbines and solar panels is likely to fail in terms of providing quick cash returns.
In fact, anything that requires a subsidy is likely to have serious cash flow issues. But even new nuclear power plants and new coal-fired power plants will have such issues. Adding scrubbers to coal-fired power plants without them is a great idea from an environmental point of view, but further adds to the need for additional infrastructure investment, without ever generating additional cash.
Perhaps we need to be figuring out which infrastructure investments we can eliminate, that won’t bring down the whole system. Which roads do we turn from asphalt to gravel? Can we eliminate purchase of military jets? Do we stop building and upgrading schools and universities? Do we stop building new homes and office parks?
I will admit I do not fully understand this whole issue. If we could suddenly convince the world that US has more opportunities for profitable investments than anywhere else in the world, theoretically our problem could be solved. But I don’t see this happening. Some have claimed that the recent improvements in oil and gas drilling make the US a more attractive place for investment, but I am doubtful that this is a true solution. Many of the assessments seem to be based on very optimistic estimates of future oil and gas production from “fracked” wells. And the amount of the effect is likely small.
I am afraid that the lack of cash flow funding for investment in infrastructure is what will eventually bring the system down. This is not an issue that researchers have looked at much, to my knowledge. This connection has the potential to pull the whole system down quite quickly–I would guess in 20 years or less.
Perhaps we need to be thinking more about what infrastructure investments can truly last beyond the system itself. The names “Renewables” were given to our current high-tech wind turbines and solar PV to give us the impression that they can last beyond the system themselves, but I am doubtful that this is really the case, since they depend on the availability of the electric grid and other support systems. Perhaps we need to be focusing more on lower tech applications that can be repaired with local materials and will truly provide lasting benefit.
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there’s a fifth reason why net investment might be less than zero: technological change.
It might be the case that the new assets now being created are a lot cheaper than than the old ones wearing out. For instance a cheap laptop, a (good) web camera and Skype could replace a car for some uses. Maybe $500 of assets replacing $5,000. Some entrepreneurs boast of operating out of Starbucks or the municipal library: they have no office at all. $0 of assets replacing maybe $20,000 of office space.
Established businesses are starting to rely on their employees working from home part of the time. As a result they are moving into smaller premises, with only enough desks for 90 percent or 80 percent of their employees. It remains to be seen how far this trend can go.
In manufacturing, modern industrial machines using active microprocessor control are often much smaller and cheaper than the machines they replace, and often one new machine can do the jobs of several older ones. Factories can be smaller because the more automated machines need fewer workers, and there is less work in progress and final stock because with computer-to-computer automated ordering, factories can make to order. Stocks are counted as assets, as are the buildings needed to store them, and both are shrinking in relative terms.
The microprocessor, and improved communications made possible by the internet, have meant that we no longer need as much capital (especially buildings) as we did before, for the same level of output or even more. So we might be replacing $1000 of worn-out assets with $800 or $500 of new assets. Of course this decrease in investment acts against demand and therefore employment; and the now-unemployed people need less office and factory space also, multiplying the effect.
I don’t want to suggest that this is the whole story, but I think that it’s part of it.
We have seen this before. In the 1920s and 1930s electric motors replaced steam power and water power in manufacturing. A few electric motors could do the work of a steam power plant and belt-driven power train costing twenty times as much. In the home, vacuum cleaners, washing machines, and refrigerators replaced domestic servants, decreasing the size of the housing needed for a family and increasing unemployment.
The analogy isn’t perfect, though. In the 20s, and 30s there was pent-up demand for all the things factories produced, once they became cheap enough; that demand became visible in the 40s and 50s after the government massively boosted employment. Nowadays? Maybe there is pent-up demand for something, but I don’t know what it might be, except healthcare. And I doubt there will be any massive boosts to employment.
Thanks for your thoughts. This effect may be part of the explanation, but I am not sure how much it plays a role. I think lower costs have been part of the situation all along. Cheap oil in the 1950s no doubt allowed building infrastructure of all kinds very cheaply, because oil could be substituted for higher-priced labor. Now we have to contend with new roads and pipelines costing much more, because of the higher cost of oil.
I wish I understood better what is behind the way the numbers shown are calculated. I presume the calculation is based on information shown on forms submitted for income tax purposes regarding depreciation, at least for for-profit companies. I don’t know where the information would come from for governments and not-for-profits, and for that matter, for private citizens (since they own homes that depreciate, as well).
The devil is often in the details. I just wish I understood the details a bit better.
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Cheap and abundant energy is a catalyst for advances in other areas. For example, if water is growing scarce, using cheap electricity to desalinize sea water becomes a viable method for creating clean water. Besides the example I mentioned for creating cheap electricity in the future, we have the possibility of space-based solar energy, where the sun shines continuously and the energy density is 10 times as high as at ground level (much solar energy is absorbed passing through the atmosphere). The key to space-based solar power is bringing launch costs down and there we have, for example, SpaceX which is planning to bring per kilogram payload costs down to just 3% of current costs within the next five years. And, they are also working on creating fully-reusable rockets, which will further reduce costs by at least two orders of magnitude.
Earlier, I had mentioned breakthrough alternative energy which will be coming online in the near future. But, let’s assume we don’t get a breakthrough (unlikely in my opinion). Even in that case, there is abundant geothermal energy just waiting to be tapped. According to a study by SMU funded by Google, there are ten times as much energy available in geothermal resources in the US compared to coal. See http://thinkprogress.org/romm/2011/11/06/359699/google-geothermal-supply-chu/ for more information. Of course, as the referenced article points out, “Securing capital for projects from the still-tight financial markets has also been tough for companies. And in next-generation EGS, drilling technologies and power plant designs are still in pre-commercial phase. This isn’t an industry that can deploy projects very rapidly.” Thus, it comes down to allocating investment capital. Still, it’s not like we are going to be constrained to lower levels of available energy as so many seem to assume, even if no breakthroughs are coming.
Just to clarify what I am saying. I think there is plenty of ‘funny money’ floating around to do quite a lot in terms of things like solar panels. If everyone has solar panels, then there is most likely a follow on effect in terms of electric bicycles and automobiles. Whether there are resource constraints which will prevent us from doing that is something that I am not qualified to talk about.
Just to take your example of simple windmills. You can still buy old style windmills of the type that used to dot the plains where I grew up. However, 7 decades of water pumping have changed the circumstances. The county where I live now, on the East Coast, has seen some wells drilled almost a thousand feet without hitting an aquifer. Even in the East, aquifers are becoming depleted. Which means old style pumps can’t lift the water from the depths which we may now have to go to. I am not a pump expert, but I imagine a finely machined device, with an electrically or diesel driven motor, which is capable of lifting water a thousand feet. We may not have the capacity to make such a machine in the future. Which would mean that irrigation will not be nearly as common. Which means that one of the ways we might count on to cope with Global Warming will not, in fact, work.
One of my points is that when one starts to actually put together a technological solution, then Liebig’s Law of the Minimum becomes constraining. If one essential component is missing or very expensive, then the technological solution tends to fail. Humanity has been running down its natural resources with a vengeance, especially since WWII. Which of these resources will turn out to be limiting factors is something I don’t know, but I expect we will find a surprising number of them. Peak Oil and Climate Change and Peak Phosphate Rock are just some of the big factors that all of us are aware of. There are likely to be many more such as our inability to irrigate from aquifers.
My own opinion about solar PV panels is that they are probably a good idea. I am perhaps slightly less pessimistic than you, but I tend to think that people should be looking at a non-grid tied system which basically works when the sun shines and powers essential electrical apparatus. Heating and air conditioning are probably not on the agenda.
Several years ago, I went to a presentation on Global Warming at the University. One of the professors gave a talk about achieving zero carbon emissions. He pointed out that we have the technology to warm human bodies without warming the air. It involved some sort of radiation (like a microwave oven, I suppose.) The trick was that you have to be naked. So…in the future we may get naked to get warm. Stranger things have happened. My guess is that the radiation solution will never actually come to pass and we will use traditional solutions like long underwear and cold houses.
My real objection is to the use of aggregate National Account data to draw conclusions. Sometimes aggregate data work, but frequently they don’t. For example, consider this article referenced in The Energy Bulletin:
Energy costs hit low-income families especially hard, taking about 20% of their incomes. At the $50,000 income level the burden is closer to 12%, as generally agreed upon by the Bureau of Labor Statistics, the Coalition for Clean Coal Electricity, the Department of Housing and Urban Development, and the American Gas Association.
So we learn several things. First, if you read the article, you find that the poorest half of Americans don’t have enough money to buy a car. But they do have cars (most of them), so we can conclude that they are going into debt. We learn that energy costs are regressive, in that the poorest people pay more of their income for energy than the richer people. That simple fact calls into question all sorts of nostrums which are popular in various camps. It calls into question the notion that we just require energy companies to convert to higher cost energy (ethanol, solar, wind, CC&S, etc.) and pass the costs along to the consumer. It calls into question the notion that most people are ever going to invest in solar PV panels (they can’t even afford a car or insurance). It calls into question Joseph Steiglitz’ recent claim that the US can prosper without manufacturing by simply focusing on services (poor people just do without services). It tells us that the ‘conservative’ camp is highly resistant to facts. I could go on and on about all the things the disaggregated data tells us. Suffice it to say that my little exercise in showing that there is plenty of funny money around to fund some significant conversion to solar PV and hot water is just that: an exercise. It uses aggregate data when what we really need is to look under the hood and and get specific. When we take just a simple glance under the hood of the income data and the expenditures on energy, I think we have reason to suspect that there aren’t going to be any solutions which are actually adopted and implemented.
Thanks for mentioning the Law of the Minimum. In a world with very cheap fuel (and therefore very cheap transportation), it became a little less meaningful because of our ability to move resources around (at a price, of course).
In a world which is becoming larger, it starts to matter again – a lot – because the area which is required to provide all of our necessities is smaller. So your example of the dry wells becomes scarier.
BTW: I’m an East-Coaster myself (northeast NJ) who is looking around for a place to set up shop in my old age (northeast NJ does not look very promising). Water is a one of the 9 or 10 big deals, and I’m wondering if you’d mind telling me where these dry holes were. Fuzzy is ok (Catskills or Adirondacks, for example) – it gives one a starting point for web surfing.
Hey Stu, check out our “doomstead.” If water is the next oil, we’re sitting on Saudia Arabia here, with two streams, a 50 megalitre reservoir, and buried plumbing. Plus it’s in a country that is a net energy exporter. Click on my name to get to EcoReality, then use the contact form on that website.
I live in the Piedmont in North Carolina. Just an anecdote. We have had a multi-year drought. Not as severe as Texas, but persistent. I was visiting a farm a couple of months ago. The farmer was explaining her irrigation system. She has a pond with an electric pump and a filtering system to remove stuff in the pond water which would foul up the pump–something that city folks probably don’t think about. The pond was quite low. She remarked that she needs 24 inches of rain this winter to fill up the pond. And she added that things don’t look good with the La Nina reforming in the Pacific, which tends to give us dry winters. She can use her well if the pond goes dry, but ‘who knows how long the aquifer will hold out’.
So if you look at the threats in this story, you have to include climate change and it’s attendant irregular rainfall and higher temperatures which means more evaporation and transpiration, the possibility that electrical power may become unreliable, the difficulty of farming with expensive fossil fuels, the difficulty of marketing with expensive fossil fuels, the potential that her customers may be poorer because of widespread financial distress, the possibility that she will have to change the crops she grows, possible inability to get replacement parts for the pump, and so on and so forth. Which leads me back to Liebig’s Law of the Minimum. The closer you look, the more potential problems you can see.
Let’s try to do a ‘Tom Murphy, Do The Math’ exercise to see if there is enough money and/or productive capacity to invest in alternative energy. If you follow Tom’s masterful exercises on The Energy Bulletin, you will know what I am striving to do.
The world’s governments are currently 44 trillion dollars in debt.
That number excludes unfunded future liabilities such as pensions and Medicare and Social Security. The numbers I have seen show roughly a similar amount of private debt. So let’s round it all off to 100 trillion dollars of debt. We also know that the Elites (The Forbes 400, the One Percent, whatever) control that debt. The rest of the world is in debt to the Elites. Now the Elites don’t have 100 trillion in economically productive assets. What they have are promises to pay. But let’s assume for the moment that all the ‘signed on the dotted line’ debts will be repaid, even if it means that all the unfunded future liabilities are reneged on. So we are not considering, for now, Steve Keen style ‘debt Jubilees’.
Debt is repaid with both return of principle and also interest. Let’s assume that the total of those two is ten percent per year. Then the Elites should be getting around 10 trillion dollars per year from the debtors.
There are 7 billion people in the world. I will assume there are 3 billion households. So the Elites cash flow from debt is 10 trillion divided by 3 billion households which gives us roughly 1500 dollars per year per household. I believe that a basic solar PV plus solar hot water system can be installed for perhaps 20,000. If we take the 10 trillion and divide by 20,000, we find that the Elites could convert 500 million households per year to solar. Let’s suppose, for the sake of argument, that the Elites believe that solar is at least as good as any other investment. Then the Elites would start a Solar Finance Company which would loan the households the money to install solar. This would simply recycle the debt into a supposedly productive and critically important use (and away from financing vacations to Las Vegas and other frippery.) From both a Peak Oil and a Climate Change perspective, converting 500 million households per year to solar would have an enormous impact.
If we want to convert even more people to solar, even faster, we can begin to mine wasted consumer expenditures. I have suggested military and medical as low hanging fruit. For example, Dr. Joel Fuhrman’s book Super Immunity promises on the cover ‘No Shots, No Drugs, No Sick Days’. If Dr. Fuhrman’s promises can be met (and my experience is that they can be), then we stop the waste of enormous resources and we can divert that money into solar.
What about the factories? Let’s leave the factories operating on the electricity they are currently getting. What about issues like solar storage. My answer: people go back to living by natural light and go to sleep when it gets dark. They will be healthier for the change. My objective here is not to provide a ‘road map to sustainability’, but simply to demonstrate that there is a lot of money which could, theoretically, be mobilized. Of course, it may not be a smart thing to mobilize it in the direction I have indicated. My purpose is not to promote solar.
Now lets relax our ‘no defaults’ assumption and assume some sort of Steve Keen debt Jubilee. If the debts are written down 50 percent, that would restrict our annual conversion to 250 million households per year–which is still pretty impressive.
I have started from money. Someone else will have to start from resources. Does the earth have enough resources to produce all those solar PV panels? I hear that Kjell Akelett and his students are finding that there is, indeed, not enough resources. I am not capable of arguing that one way or the other.
What this tells me is that living on a frugal energy budget is the sanest strategy:
1. Governments are feckless.
2. Consumers are easily tempted into overwhelming debts
3. The Elites aren’t interested in any ‘Solar Finance Company’
4. Our ancestors lived with a high level of civilization on a solar budget. We can do it also. Population will most likely fall–get used to it. Get started building skills now.
This is about as well as I can do this exercise. I am sure Tom Murphy would do it a lot better. Perhaps some of you can do it better. And if anyone can start from resources, then that would give us a valuable perspective.
I think resources are a major issue. The other is timing. If we are dealing with a short time-period, like a year or two, then resources become even more of an issue.
BC… I was being ironic when I said “Y’all”. No matter…
As to being conservative – I haven’t always been, but unfortunately the best educator is life experience. I learned too late in life, that the trouble with socialism is that sooner or later, you run out of other people’s money, and unfortunately I’m a baby boomer. Born in the midst of the boom, and most of my economic education has come in the last ten years.
I’m one of those without a pension plan due to having never held a position for more than a couple of years, before the company I was with had either finished the project I was on, or went bust.
BUT, I’m also widely read, and know that there are too many who leave school with just the most basic of educations, and unfortunately, there are 2 kinds of jobs in the west at the moment – either highly skilled and highly paid, or totally unskilled save for the most basic of abilities. Most of the mechanical jobs – engineering trades – fitters, turners, mill-wrights, vertical borers, have been exported so that we can now assemble the parts shipped back in containers with finished goods to be assembled in car-plants paid for with Chinese capital after trades unions dig their heels in and refuse to adapt to the globalized marketplace. (Germany excepted which still educates its menfolk largely in ways that have changed little since the end of the war)
We suffer too in Great Britain due in large part to our low land-mass relative to population size, and land is concentrated in too few hands (4/5ths is owned by one of five groups – the Monarchy, The Church (Established of course) The MOD, The Forestry Commission, The National Trust)
The rest is dominated by the large retailers and other corporations, and that keeps land prices artificially high making starting a business difficult due to high fixed costs.
Despite my post-graduate education, trying to secure a well-paid permanent position that lasts for more than a few years in the private sector as the one-per-cent off load their production to the relatively low paid east, is a little harder than many assume. And outside the security of the Government jobs market, the pay has reduced over the last 30 years. It is time those in the public sector felt the cold blast of economic reality too.
But mass immigration has been the most failed policy of the last government. Mass migration has been caused by the failed political systems from some of the less well advanced countries of the world have.
Here in the West we’ve had a thousand years of slow sometimes painful social development, and we in our thirst for resources pillaged countries with social systems a thousand years behind us. And we expect them to adapt in less than a hundred years. The military has barely left Iraq, and 14 bombs explode. WHY? Largely because one group of muslims poisoned the meat of another group of muslims 1350 years ago…and they’re still fighting over the oil-wealth because they hardly manufactured a thing for themselves and have to buy everything that their country needs, because their education system wastes too much time on religious rhetoric rather than on engineering principles..
And I thought the Irish and the Baltics, had long memories…
Sorry I missed the irony – some of us northern folks are a bit sensitive to being lumped in with the part of country that loved George Bush.
Actually, I’m not overly keen about labels like conservative and liberal. Most people would consider me to be a liberal. However, if I were elected god and supreme commander of the planet, I would greatly annoy most persons with liberal inclinations. You mention issues of immigration, globalization, and religion.
My guiding principle for immigration is to ask the question: what is the right population number if we want long term sustainability based 90% on local resources as fossil fuel resources decline along with the degradation of most other natural resources? The answer to this question (assume answered honestly) should drive a whole range of policies besides just immigration (family planning, myriad environmental regulations, land use, transportation, housing, etc). Most of my specific godly “commandments” would annoy almost everyone.
Globalization is all about allowing a privileged few to exploit human and natural resources strictly for their own benefit. The world has seen various experiments in socialism, capitalism, communism, fascism, dictatorships, etc. This all started 13,000 years ago with the introduction of agriculture – which allowed for large villages and methods of organizing people into specialties. Shamans, royalties and full time warriors happened to have emerged in this process as particularly nasty specialties. I think blaming socialism, unions, etc is missing the point – these are just protests against the way homo sapiens have evolved their basic cultures over the past 10K years or so. As god and supreme commander I would engineer (humanely) a return to a global population of around 1B and prohibit any village from growing beyond a size where all decisions couldn’t be managed democratically in a “town hall”.
I would have no shamans, royalty, or professional warriors. No religions, no large corporations, no central banks, no professional politicians. Nothing resembling the bureaucracy and elitism of Russian communism.
Of course, all of the above appears to be silly nonsense, totally impractical and will never happen. Hardly anyone even likes the idea even if it could happen. However, perhaps these thoughts will seem less silly on the other side of a “bottleneck” if that should happen. Currently, we have so many dysfunctional and irrational cultural systems that it is really hard to see how we can implement many of the otherwise excellent suggestions that pop up on this forum.
I agree with Louis Snorkel above: people are corrupt. I have worked in law, the government in Sac, private business, etc. I have found corruption and low morals at all these places. This society is dying.
Gail, as a fellow admirer of Hall, your screen shots from his presentation speak volumes to me.
And yet, @Don Stewart has a point that I wonder if you could specifically address?
Like me, you tend to see the situation in terms of gross investment availability (in terms of energy), whereas Don seems to see it in terms of class differences.
So, are the 1% different than the rest of us in their investing? Or does Hall’s graphs automagically correct for any social component of the problem, given the 1% swamp the gross figures in 1970 like they do in 2030?
I think that, recent social upheavals aside, the 1% is a very different group in 1970 than they are now. Ordinary people didn’t have stock portfolios in 1970, and mutual funds were only getting started. Nowadays, everyone’s 401k or Keogh holds stock investments, and reletively few people have “arms-length” investments (like defined benefit plans) any more. If my assumption is correct, then “We have met the enemy, and they are us,” in the immortal words of Walt Kelley.
It can be argued that with more people directly holding stocks and mutual funds than they did in the ’70s, the investment situation these days is more democratic than in the days when most people’s biggest exposure to stocks was the professional management of their defined-benefit retirement plan, no?
Don, how is “the 1%” going to behave differently than the rest of us, when they are us?
Gail, if the sort of investment upheaval that Don envisions take place — if every bomb factory started cranking out windmills and solar panels — how would things change?
I tend to think, “Crawl into your cave and scratch the earth for sustenance,” but what would happen if everyone who was tempted to “save the earth” by changing their light bulbs and buying a Prius, instead simplified their lives and poured their retirement plans into solar cell and wind turbine factories?
What would happen if our leaders could inspire us as they did in WWII, when people were exhorted to plant “victory gardens,” ration fuel, and buy savings bonds? I could see significant portions of the economy “switching over” to more productive use in an emergency effort.
Just as you’ll never see a 1942 automobile in the US (the entire industrial output of the automobile industry was consumed by government for the war effort) or a person of age 18 in Cuba (after the fall of the Soviet Union, Castro asked women to stop having babies because they were cut off from cheap energy), we could perhaps achieve Don’s vision through an intense effort.
Is there anyone out there who could rally such an effort?
Very important question. But, I’ve not seen any organization, group or individual that might perform this feat. I’m in the camp that feels that there are potential solutions to our predicament. But, I agree with Gail that homo sapiens are not very likely to fix our problems in any type of graceful manner. With no really effective catalyst for your proposed “rally” it is hard to understand how we change our trajectory.
I think part of my problem with Don’s suggestion is that I really don’t see good investment opportunities of the types most people are looking at–for example, solar PV and wind, to supplement the electric grid. I think that they are basically not all that helpful.
Our big problem now is high priced liquid fuels, and electricity is not all that helpful as a substitute. Electricity (intermittent or otherwise) won’t run all of the cars, trucks, airplanes, trains, etc on the road today. I don’t think we have the time or the investment capacity to change everything to electric. Wind and solar PV can act to extend our natural gas supply, if natural gas is a limiting factor on electricity production, but I am doubtful that it is. If your main concern is CO2, wind and solar PV can delay the burning of natural gas a little, so may be a bit helpful. (But if the same amount of NG is burned regardless, it may just put off the problem a bit.)
I think that our investment needs to be at a “lower level.” We need simple, cheap items that can be repaired with local materials. If we build windmills, they should be simple wooden devices, that pump water for people and animals. Solar thermal hot water heaters (that act like metal bottles, set out in the sun) may be helpful. Solar PV panels for pumping water might be sort of OK, but they are a temporary “fix”–a better, longer-lasting solution would be a wooden windmills that can be repaired locally.
I whole-heartedly agree that our investment needs to be at a lower energy level. And yet, the possibility exists for a graceful energy descent. One might even call it an “inevitability,” rather than a possibility. So let’s not go from grid-powered deep well pumps to wooden windmills in one fell swoop!
Humans have been working with metal long before fossil sunlight came on the scene. Yes, it requires mining and transporting ores across long distances, but only if dealing with virgin material. Luckily (or perhaps unconsciously presciently), every community of any size has for a century or so been stockpiling such raw materials. Anyone can go to one of these stockpiles and find stainless steel, copper wire, brass pipe fittings, and more. I’m talking about the local dump.
When I need to repair something, the dump is often my third visit, after searching through my personal stockpile, then going to the hardware store to see what a new part will cost. Perhaps the near-term future will only mean eliminating the trip to the hardware store and going directly to the dump.
Yes, I know “landfill mining” is not sustainable. But it’s a reasonable transition strategy, so we can maintain artifacts for perhaps some 50 years or more before resorting to re-creating artifacts from wood. (And how are we going to work the wood if we have no metal tools, anyway?)
This isn’t going to work for everyone. I have no doubt that many will not be able to cope. But surely, there’s room for a growing “artisan class” of tinkers who can maintain artifacts, no?
You are right that dumps will likely be our source of metals in the future. To me, this means that we will not be able to make high-tech goods, because they demand precise alloys and machining to strict tolerances. We will be able to make goods like wheel barrows and shovels, but not high tech wind turbines or computers. This means we will have to have to have a much different society than today.
I agree that super-high-tech will be going away, probably starting with the computer industry. But a lot can be done with available materials. I’ve made simple wind turbines out of stuff from the dump.
Any technology that can be sufficiently de-compexified can probably survive for a long time. I plan on maintaining a ham radio station — with hand-blown vacuum tubes, if necessary! (Although there are LOTS of salvageable semiconductors in the dump, as well.)
Here are my thoughts on the ‘cash for the innovations has to come from reducing spending for replacements of current infrastructure. This is not going to be an easy sell.’
If we look at the total figures for the US, savings rates are quite low. Several Asian countries and some European countries have high savings rates. In principle, if there is savings anywhere in the world, it could be invested in new infrastructure in the US, if the investment seems as if it will be profitable. So the US Savings Rate should not be the deciding factor in whether, for example, solar and electricity will replace oil and internal combustion engines.
In addition, if we look under the hood of the US numbers, we find that all the wealth belongs to the top one percent (or ten percent, if you prefer) and all the debts are held by the rest of us. The top One Percent have plenty of money to invest IF they want to invest it.
There are two ways to get the assets of the One Percent invested in solar and electricity (if that is our goal). First, we can simply tax them and take their money and invest it on behalf of the citizens. Second, we can try to make the solar and electricity solution MORE attractive than the fossil fuel alternatives. Rich people mostly got rich by figuring out ways to sell more product by lowering cost. So we get things like the Big Box stores displacing neighborhood, family owned shopping. Which makes very rich people of the Walton family and the founder of Home Depot.
So IF solar and electricity struck the One Percent as more profitable than fossil fuels, then the One Percent are quite capable of diverting huge streams of money into solar and electricity. The fact that the One Percent are making only token moves in the direction of solar and electricity as transport solutions should tell us something important.
In short, the Ninety Nine Percent have a problem because they have little in the way of savings and what they do have is being steadily eroded by the Zero Interest Rate policies of the Federal Reserve with the purpose of shoring up the big banks. The underlying problem the Ninety Nine Percent have is that they are easily misled. For example, when taxpayer money is diverted to the financial sector, markets go up. Markets represent the interests of the financial sector–not the taxpayers. If there was a market reflecting the well being of the taxpayers, it would have declined. But there is no such market, and the Ninety Nine Percent hear that ‘markets are up’ and assume everything is well. The One Percent MAY have a problem in that their investment opportunities are shrinking. The Big Box Store and globalization and increased leverage movements which created so much wealth for the One Percent over the last 40 years seem to be mostly over. Some efforts such as controlling water supplies have met a strong backlash. The One Percent’s forays into gambling with derivatives may well crash and burn (Marc Faber predicts within 3 years).
But I think that it finally all gets back to engineering and economics. Investment in alternative sources of transport by the One Percent will only happen if:
1. Heavily leveraged OECD countries go out on a limb with even more leverage and obligate their taxpayers (or utility bill payers) to fund the alternatives either through subsidies or direct investment.
2. There really is a technological fix which attracts voluntary investment by the One Percent.
Over the long term, we could also envision:
3. Fossil fuels increase steadily in price and, finally, alternative sources do indeed become cheaper and the One Percent invest in them. By that time, the real standard of living will be quite a lot lower than it is today. Population may well be quite a bit smaller. In short, all those Long Decline scenarios.
4. By the time the Long Decline is over, we will no longer have the technological capacity to do many of the things that we now think might be technically feasible. And so the world will enter some sort of stable, low energy economy.
I think that there are some “real” energy-related reasons why we are not investing as much that will be difficult to overcome. Charlie Hall often refers to his Cheese Slicer model of energy use. In it, the amount of energy available for discretionary use shrinks over time.
The first and fourth reasons I gave in the post for declining Net Savings (declining EROI and Limits to Growth) are related to this declining energy output.
Quite a bit of savings will be by businesses, themselves, without subsidies, if the businesses are earning enough. If solar and wind were earning high rates of returns without subsidies, they would be reinvesting in themselves. Oil and gas companies are even encountering difficulties in investment. They cannot find any oil projects that will provide a decent return, so they invest in natural gas projects, so that they can at least “replace their reserves”. But these natural gas projects can’t possibly make a decent return at current prices. If prices rise a lot higher, they we will have other problems–consumers will suddenly be hit with higher prices for heat and electricity.
I do not think that there is any reasonable way of getting the 1% to invest in low-return projects, because raising taxes to get the money away from the 1% is likely not feasible, and they will not invest in low-return investments on their own. I find it hard to believe that the government in its poor financial state will continue to subsidize these projects either.
I think the problems are more pervasive than you seem to believe, based on your comment, so I don’t see an easy way (or perhaps any way) of fixing the problem.
‘I think the problems are more pervasive than you seem to believe’. I assume that is referring to me, Don Stewart. As I say, the fact that the One Percent, who own the vast majority of net assets in the US, are not heavily investing in alternatives to oil ‘should tell us something’. That is, they don’t think that such investments are more attractive than gambling in derivatives. The Koch brothers are spending a lot of their own money to stymie investments in solar and wind for a reason. My guess is that they think that the steady decline of oil supplies, coupled with steadily increasing prices, will yield the maximum profit to them. If they thought that investments in solar and wind could make them more money, then they would stop funding the Climate Deniers.
I don’t pretend to have a crystal ball relative to the profit potential of solar and wind. I just point out that the rich and powerful don’t seem convinced. I also point out that they have plenty of money to invest if they so choose.
As a person with some net money, seven decades of life behind me and some unknown number of years or months in front of me, I think that the right strategy for me is to assume that SNAFU will rule, no official body will help, most official bodies will make things worse, and the best strategy is to live a good life with simple means. Stay a little ahead of the downward slope of energy availability by steadily reducing one’s personal reliance on fossil energy–particularly for transport. In terms of my social role, I just try to show people what is possible by living well with less.
But, as you and I have discussed once or twice, I find that country by country analyses frequently miss the point. It isn’t the US or Germany or China which will invest in solar and wind. It is specific investors or companies controlled by them. And if we look at who those people are, we give them labels like The Fortune 400 or The One Percent. In this globalized world, they can invest their money anywhere they see a potential. As, currently, many are buying up resources such as farmland in East Africa. The particulars of the savings rate in Kenya may be tangentially relevant to their project, but certainly don’t play the major role. Similarly, I don’t think the savings rate in the US is the major determinant of whether The Fortune 400 or The One Percent will choose to invest in wind and solar on a massive scale in the US.
My guess–and I emphasize the word guess–is that wind and solar will be useful for a completely different kind of economy. Gone will be the 24/7 factories and the instantaneous global communications with everybody wired together all the time. Replacing it will be an economy functioning much more like the economy I was born into 7 decades ago. That doesn’t worry me. It was a kinder and gentler place. At 5pm, people will go home, be with their families, and go to sleep shortly after the sun sets. Whether we will be able to manufacture solar panels and windmills is something I don’t know. If not, we’ll just live on natural sunshine–and that works for me, too. We will rediscover long underwear to keep us warm and we’ll all be thinner which will help us stay cool. Not a bad world.
You didn’t include the most important factor: innovation/invention. This is something you can’t put a price on. We will develop alternative energy and it will obsolete fossil fuels. If you look through the patent database, you’ll see that there are many innovations possible. The only thing stopping them from coming to market right now is investment cash. If only a few of these innovative alternatives receive funding, our energy problems will be solved. It’s very hard for inventors to receive funding, but if just one is able to do so, our problems are solved.
My point is that the cash for the innovations has to come from reducing spending for replacements of current infrastructure. This is not going to be an easy sell. It is also difficult to run society, when current infrastructure is deteriorating–whether or not there is new innovation.
It’s an excellent point. I’ve been involved with trying to raise capital (from the DOE and from private sources) in order to develop our discovery (patent 7,816,601) which makes thermoelectric conversion of heat to electricity extremely efficient and basically gave up last year after spending hundreds of hours of effort. Fortunately, we have since allied ourselves with some excellent fund-raising talent and have high hopes of bringing our alternative to market in the next year. My conclusion after this experience is that the only thing holding our economy down is a lack of capital.
In my view, the key problem in developing any kind of productive asset lies in the broken nature of modern financial capital itself, which tends to be either bank-created debt or shares in a limited liability corporation, the inaptly named ‘equity’.
I advocate the issue of units of ‘Stock’, which is – and has been for getting on for a thousand years
the creation and issue of credit redeemable in payment for value.
These units of ‘stock’ are issued by a corporate ‘custodian’ member of a quasi-partnership such as a US LLC or UK LLP.
During the high risk development financing phase Stock units are issued at a discount, and the riskier the investment the higher the discount. So a $1.00 Unit issued at 50c gives a 100% return, but the question is if and when the units can ever be returned for redemption against value.
The phrase ‘rate of return’ relates to the rate at which such stock units can be returned to the issuer.
Once the asset is complete, then in the low risk funding phase risk averse investors will buy Stock units in an existing revenue stream at a much lower discount, which enables the risk takers to exit at a profit. And of course any investor will always be able to sell Stock to users of the productive asset at a price less than $1.00.
This presentation at Sheffield University
covered the mechanism.
Essentially Stock units enable asset production to be sold forward: or a loan to the asset rather than the owner.
HI y’all (I believe that’s how you Americans greet one another)
I’m from the UK, and stumbled on this site…So forgive me for butting in on this self-flagellation…
I can’t believe we have PhD’s writing on this board and there is so much pessimism.
I agree the future appears bleak from here, and I hear we are passed Peak “Everything” never mind just Peak OIl, but the energy that falls on this planet is FREE (i.e. the sun) and the plants, animals, fish, fowl, insects and ameoba ALL one way or another derive their life force from that sun…
OIL, created by dead plants and animals millions of years ago soaked up that sun, created lipids, and then died. WE are just harvesting the energy stored there.
We as a species are so much more than the sum of our parts. The skills and abilities to breed plants and animals to grow lipids are already being explored by scientists so that they can “Milk” them like Cows, for oil. Nuclear Physicists are using Beryllium to make Nuclear reactors absolutely 100% fail-safe, so we can have more of them, without the associated melt-down risks. Solar and Thermal energy from the earth’s core can be used to provide electricity to heat our homes. Solar Energy efficiency is growing in leaps and bounds to convert more of the earth’s sunlight to electricity.
We have to stop looking at what nature provides, and we have to replicate the systems that nature provides, and grow food and energy in what are almost identical and sustainable ways. (Fish Farmers – not fishermen, Lumber Farmers – not foresters) and we have to re-cycle every thing we use – metallic/minerals etc.) And we probably have to mine the moon – process it there, and then deliver the processed metals to the earth. (Of course only the U.S. can really do that given that they planted their flag first – assuming they REALLY did of course). I agree that might be 50-100years hence, but doable with human co-operation. We have to stop silo mentality to enrich all our lives, and we have to discipline our kids (a little more like Lane’s mother in the Gilmore girls – Kids only really know 2 things… What they like and what they don’t. Life is too complex for them to be given decision making rights without knowing the full weight of their decisions)
I’m coming to energy: The Russians have already talked about launching mirrors into space to bring light to darkness in Siberian winters. Mirrors on satellites can collect the sun’s energy, use that to create heat, be computer controlled to put that light/heat where it’s needed or to generate electricity and radiate that energy to where it’s needed. (Tesla proved it was possible; almost, if not more than, a century ago). People can live in more sustainable ways only if the chores (work) are shared more equally. Malthus was right, he just didn’t allow for technological and energy consumption growth.
We have to do several things… STOP paying people to have babies, and we have to stop trying to save people from themselves… However, If people want to eat themselves into an early grave. The Human thing to do is to help them, but in a world of 9billion+ (by 2035) we have to be like a parent who says to their wayward teenage daughter… This far and no further… You have to look after yourself. STOP expecting us to pick up the pieces of your sloth/greed/gluttony/emotional insecurities. And we have to bring the population down to around the 6 billion mark or we’re all doomed.
I agree this all sounds expensive and far-fetched, and yes maybe we WILL have to take a haircut on our lives so that we live in more sustainable ways, but don’t lets all just give up and start walking silently into that good night… RAGE, RAGE, against the dying of the light.
I certainly agree with your thoughts on population. Perhaps some of your technology solutions are debatable. However, good ideas or not, I just don’t see how your “we have to…” suggestions are actually going to materialize in a useful time frame. How do you envision arriving at the political will to take these actions? How do you envision overcoming religious beliefs in areas like population planning? In the USA, our current political mood seems to be against any kind of government intervention in anything related to the environment. You sound pretty conservative and yet it is hard to see how many of your ideas could be accomplished without more government intervention – I observe most so called free-market strategies as being even more destructive to the planet. BTW, only a part of the US says “y’all” – no native from around here greets in that fashion
There is going to be a decline, there is almost definitely going to be a collapse and a long depression. Probably, many people will die. All of the proposed ‘solutions’ would require an act of God to deploy because, as we all know, our ‘public servants’ are only acting in their own interests.
I think your post is a rhetorical question and for that I’m grateful. Thanks for asking the impossible questions, so that we might prepare ourselves for the inevitable breakdown crisis to come.
As usual, Gail’s analysis is very thoughtful and the comments are sincere. But, I just can’t relate to all the comments-discussion about sustainable farming and other sustainable strategies. I wish I could. I wish I could be motivated to adopt many of the strategies and tactics suggested in the comments. Perhaps these are good suggestions for healthy young and middle aged folks living in secluded rural areas far removed from any metropolitan area. Maybe this is good stuff to pass onto people surviving a hundred years from now.
According to the organization “Population Connection”, we currently need 1.5 planet earths to support our existing 7B humans. A quick Wiki survey of metropolitan population statistics will reveal the large number of 10 to 20 million concentrated areas of human inhabitation (LA, Chicago, NY, Paris, Tokyo, New Deli, Mexico City, Mumbai, Sao Paulo, etc) – the majority of which rely upon massive daily FF inputs for their most basic operation. Assuming, as most of us here do, that energy supplies in the next 10 or 20 years will decline and shortages will occur, then I seriously question how these masses of humans will satisfy even their first level of Maslow’s hierarchy of needs – it is hard to envision a “back to the land” movement to satisfy these needs that is achieved smoothly. And, exactly what land would that be?
In my view, there are no practical solutions until a critical mass of people recognize that there actually is a problem with PO and a host of other natural resources scarcities. I’m highly skeptical of the effectiveness of individual actions unless you happen to live in the wilds of Alaska or Canada. Living in rural Kentucky or Wisconsin (where I live) with lots of guns might work for awhile – but, I doubt it. Some of us in the PO space have advocated commissioning the National Academy Sciences to perform a full-blown study of this problem. Much to my amazement, almost no heavyweight in this area (Gail included) has evidenced much support for this idea. It seems that we really don’t want to understand this problem or have lost all trust in any government institution.
Currently, the world’s collective passion is to find a way for “more growth” – more people, more cars, more houses, more roads/bridges, more everything. Here in the US, suggesting less growth, more birth control, more abortions, less cars, less roads, etc would be almost as bad as saying that our Founding Fathers were not religious fundamentalists (sarcasm intended). Outside of a few fringe elements, I see near zero recognition of the “limits to growth” problem.
I’m currently reading ” the humans who went extinct – why Neanderthals died out and we survived”. It gives one a broader perspective. Perhaps all this fussing about PO and such is a futile exercise. Like all other species, perhaps we will exploit our environment until we are seriously challenged – then most will die and some may survive in a new paradigm. Of course, the really sad thing is that humans are the first and only species that actually has the capability to recognize its relationship to its environment and take conscious actions to mold its future – but our various delusions seem to preclude doing that.
Brilliant analysis once again. I have been following you sometime now from my home country Ghana and your analysis makes the future very scary.
From your expertise, what will be your advice for a new oil producing country like Ghana.
My comment has to do with the discussion of things like using plastic pipe in low energy farming. My experience is twofold. One is working on a small farm which uses organic growing practices but also uses tractors and plastic hoop houses and plastic drip irrigation techniques. It also sells at farmer’s markets and has a CSA where people drive to the farm to pick up their shares. The second experience is some exposure to Permaculture practices, including things like sequestering water in the soil with swales and also things like recycling nutrients by using worms as composting devices and using urine for fertilizer.
My observation is that everyone should read Christopher Alexander’s book The Timeless Way of Building. In it, he takes the position that our dwellings should be built by hand, little by little. Among the many benefits are that we build only what we actually need and that we adapt the building to our changing circumstances. Nobody has a mortgage. You can find contemporary Intentional Communities where this practice is common.
What’s that got to do with low energy farming? The fact is that everyone who is operating in an Economy has to stay solvent in the short run. It does little good to be on the side of Virtue on a scale of centuries, and go bankrupt in 2012. So you do a little here and little there and you keep an eye on what is happening and what you can reasonably predict and you don’t get too far out on limbs (just like Alexander’s heroes and heroines). You study Hunter/ Gatherer Economics (as in Limited Wants, Unlimited Means: Hunter- Gatherer Economics and the Environment). You study Permaculture (from many current sources). You study the organic movement. And particularly you study with a wide variety of farmers and foragers who are actually using less energy than most people.
My own observation (backed up by experienced local farmers) is that the cost of land has become the biggest obstacle to sustainable agriculture. If you have to pay 15,000 dollars per acre for poor land (as you do where I live), then in order to pay the mortgage you are going to have to resort to practices you know are not sustainable. People who have farmed here for 30 years tell me that labor used to be the constraining factor. Now it is the cost of land. Why does poor land cost so much? Because the developers and speculators believe they can put housing developments on it and make a lot more money than anyone can make growing food. If the worldwide economy actually crashes and burns irretrievably, then the developers and speculators may be ruined and the cost of land may decline. But we all know Bernanke will ruin the US taxpayer before he will permit such a thing to happen.
I will also note that people I respect who have looked into the question think that low energy farming will support perhaps a billion people. So…we are in overshoot. You have to adjust your thinking to get, if not comfortable, then into some state of mind that lets you get on about your business.
Good to meet another Alexander fan! I’ve been using his book A Pattern Language for nearly 30 years — not so much for architecture, but rather as a template for making new pattern languages, first in software, then in systems, and most recently, in Permaculture.
I think there exists somewhere yet undefined a pattern language for low-energy living. The Ringing Cedars series is perhaps close, but it is still too specific and prescriptive to be considered a pattern. The Transition Town movement comes closer, but is still fairly prescriptive. Permaculture as a whole is perhaps too broad to be considered a pattern language; it’s more of a meta-pattern.
I agree that farmland is too expensive. There are two ways to correct this, and I wish my crystal ball weren’t so foggy on which way is coming. Perhaps it will be a combination.
The way that it looks like it is going is that deflation is making farmland cheaper. I know someone who got a mortgage based on a $300,000 appraisal who are looking at an $85,000 current market value. This way is destructive, as the people who know the land best and have been making good use of it will be forced off it. I also know enlightened, peak-aware, good people who are waiting like wolves for the farmland market to decline so they can take advantage of someone else’s misfortune. Finally, general deflation seems to be correlated with reduction in wages and income, which still doesn’t help get young people on the land.
There is another way farmland may become affordable: through general inflation. If the cost of fossil sunlight drives everything except farmland up — including income — then more people can afford to buy land, while not destroying the lives of those who have chosen to get into land when the market was high. If the price of goat milk doubles, we can easily handle our mortgage!
It is currently looking like deflation dominates, and a lot of smart people (like Stoneleigh at The Automatic Earth) seem to be banking on that.
And yet, unless other events cause massive attrition in human numbers, I don’t see the true value of productive farmland as declining. Perhaps it’s hope over logic (since we’re in a debt situation), but I see $100/barrel oil causing food, and by extension, food-producing land, to stabilize in value as everything remotely energy-dependent around it increases in value. This means existing mortgages will inflate away and people who are on the land and know it well can remain another day, while perhaps taking in others to learn and earn a place.
So, apologies to Gail for hijacking this thread a bit, and I’ll try to bring it back around to the topic: I still feel that we might be able to “invest our way out of an energy shortfall” by investing in future sunlight, rather than past sunlight. And unless you believe that solar-cell factories fill that bill, the answer is productive farmland.
Jan, always a pleasure to read your comments. Excellent thread, everyone.
Nice essay. It looks like you’re looking for a way to use money as a proxy for resource shortages plus feedbacks. No one has succeeded in doing this in a general way (though many special cases have been presented), but your angle is new – at least to me – and deserves to be taken seriously.
Either through resource analysis or a money “proxy”, it seems to me (as it probably seems to most of us) that once energy availability has peaked, the only way to invest in any ameliorations will involve driving down everyone’s standard of living. (Since the energy (aka “money”) has to come from somewhere.) This would be politically difficult even in a society with a lot of cultural cohesion (where??? Scandanavia??), but in an artificial hodge-podge culture like the USA I’m afraid it will be impossible – too much distrust. Perhaps some of the smaller states can achieve it, but I’d be hard-pressed to say which ones have a sufficient sense of “national identity” to do so. (Wisconsin? South Dakota? Utah?)
The comments on your blog are very high quality. In general, the comments on the peak oil blogosphere having been getting much better the past couple of years. I believe that we’re all thinking a lot harder than we were before that 🙂
In a way, one of the issues I am looking at is the timing gap between investment and return on that investment. Somehow, the use of that investment has to be financed, with the energy output and other resources from previous extraction (or other sources of energy).
When gathering fuel was cheap and easy, this was not much of an issue, because there was little front-end investment, and little timing delay. A tree could be cut down with an ax and burned, or perhaps stacked for a while and then burned. Oil could be extracted cheaply, and then burned. But now all types of fuels have more front-end costs and delay involved.
My Figure 1 seems to show that we seem to have no Net Savings left over, for investing in new things. And, as you say, we will have take it from others, and lower their standard of living.
By the way, I am of Scandinavian background (Norwegian). I grew up in Wisconsin, and graduated from college in Minnesota (St. Olaf).
Yes – the timing gap. Now I remember that is what struck me as being original – I had not read an author bringing that in as an important part of a query before. (I’m one of those morons who reads all of the other comments before making one, which ensures that I’ve forgotten at least one important detail when writing a comment.)
BTW: Your alma mater is legendary in music circles. I’ve heard many recordings of the St. Olaf choir(s).
When there are physical limits to available energy, one cannot get around them. However, in such a situation, investments can be used to directly generate energy by taking them in the smallest denomination bills and burning them.
It might work better than investing in Solyndra.
Unemployment is a theme running through many comments. There is an excellent interview with Professor Joseph Tainter on the Energy Bulletin today:
Justin Ritchie & Seth Moser-Katz, The Extraenvironmentalist
The interview is really long, sorry. But I will give you my understanding of one of Tainter’s points. Societies have characteristic ways of solving problems. Some societies rely on more complexity: pass more laws, build new technologies, establish new organizations, etc. But, like all things, complexity is subject to diminishing returns. And increased complexity doesn’t pay off the way it used to in our society. Thus, as one symptom, people feel harried at the end of the day and not in control of their time. As a second symptom, we don’t want to pay our taxes to support the government bureaucrats who administer all those laws we have enacted. Corporations think they are simplifying things when they outsource technical support to India, but all they are really doing is creating yet another interface layer which adds to the complexity.
Now, consider the problem of boredom. If people have some free time, they risk boredom. Our society has chosen to try to solve the ‘boredom problem’ with a huge industry devoted to entertainment. Yet there is a counter-culture movement to spend time in monasteries. Monasteries have no entertainment at all. Guess which approach will leave you feeling that you are in charge of your own life. But guess which approach provides lots of employment opportunities.
I am not sure what Dmitry Orlov is thinking when he says that ‘in the future, there will be plenty of work, but not many jobs.’ But I would say that the difference between what people do in monasteries (other than the religious faithful) and the round-the-clock entertainment spoon feeding the masses is illustrative. People in monasteries support themselves with the necessities of life, make do with little, have plenty of time, and no job. People trying to participate in the pop culture have no time, need money, and better have a paying job.
There are some examples of peoples who have simplified their lives. I believe Albert Bates talks about some of the Central American natives who just walked away from complexity. The Plains Indians in the US walked away from farming and returned to hunting and gathering. Some of the things going on in intentional communities in the US may point us in that direction.
At any rate, complexity’s days are probably numbered as we run short of oil and other resources.
I agree that complexity’s days are probably numbered. I look forward to listening to Joe Tainter’s interview. I am a fan of his.
While i agree on the long term perspectives of your analysis, i think that short term wise 5-10yrs, investing in certain useful infrastructure such as wind and solar are much more useful and critical to the “survivors” of a financial collapse rather than letting the savings go to bailing out the banks when the derivatives market crashes in the next 2-5 yrs. Long term wise of course the suburban culture and wastefulness and unsustainable lifestyle cannot be sustained based on your analysis but at least the survivors can emerge with some basic power and water and hopefully food to rebuild towards a eco-technic future proposed by JMG.
We are already hitting limits hard. The Euro crisis is one manifestation of these limits. The US federal debt crisis is another manifestation. A lot of other problems are lurking behind these crises.
I don’t think that we really have 5-10 years for investing in anything. We need an “overhang” of fossil fuel energy, and that overhang is already gone, because we are now using oil and gas using techniques which require more up front investment (oil sands techniques, or “fracking,” or deepwater extraction, or polar extraction). Governments are increasingly needy, and need to tax oil and gas companies, to cover the governmental debt. If taxes are raised, this will make oil and gas less profitable to extract, and tend to bring down oil supply more quickly.
The initial consideration of your post was whether it was possible to find the monetary resources to replace enough fossil fuel derived energy so that some semblance of business as usual can be maintained. As a life long user, researcher and developer of renewable energy projects, it saddens me to admit that neither the monetary nor physical resources now available will allow such a thing to happen. Maybe twenty or thirty years ago, but not now that we are at peak oil.
I think you are also absolutely right when you suggest that when total energy available is declining, it will be difficult to maintain the capital assets we now rely on to support our “civilization”, much less create a brand new energy supply based on renewables. Tom Murphy’s post The Energy Trap explains the difficulties in detail.
But it could still be possible to ease our decent to a much lower energy future by taking concrete steps now to support the reorganization of our culture to that end. That means moving people closer to those lower-energy-intensity resources that will still be available after the oil is gone. It also means providing them with the skills and tools to use those resources. It means they need to learn how to grow food.
We could start with providing the long term unemployed with heavily subsidized jobs in rural areas. The subsidies would entice ranchers and farmers to use their free labor. The new farm workers would gain valuable skills that they will soon need.
Those who already have farming or ranching skills, but no land of their own, could participate in new government supported “homesteading” programs.
To those who already have rural skills and monetary resources; don’t wait, get yourself “back to the land” as soon as possible. As Mark Twain said, “Buy land, they’re not making it anymore”. No matter what the amount of energy availability, but especially now, that is still the best investment advice ever.
“We could start with providing the long term unemployed with heavily subsidized jobs in rural areas. The subsidies would entice ranchers and farmers to use their free labor. The new farm workers would gain valuable skills that they will soon need.”
It’s already happening, in the form of WWOOFing, work-exchangers, interns, apprentices, and volunteers. The “subsidy” is a small one, but huge in impact: freedom from the bureaucracy involved in having employees. (Your first employee costs you two paycheques — the second goes to the bookkeeper/accountant/lawyer.)
We generally have one volunteer around 90% of the time, with more during the busy summer months. Anyone interested in helping out?
One of the things I am concerned about is that we, to a significant extent, do not know how to farm without fossil fuels any more. Ideally, we should choose the right crops for our area, and rotate them among fields, probably with some nitrogen fixers mixed in. We will need to use drought resistant crops, because we probably will not be able to water the fields. If we plan to use human labor, it will be very difficult work. Many societies have used animal labor, but animals need to be housed and fed. Sharon Astyk suggested that we should be looking at root crops as a solution in some parts of the country, but this is not something too many have considered.
Another issue is that we really will not have enough energy to heat homes in the way people are accustomed, without cutting down all of the forests. If we continue to live in our current homes, and still have running water, pipes will freeze. Somehow a way must be found around this difficulty. I expect we will need to forget public water systems and sewer systems, and develop recycling systems that can be used for nutrients.
These are just two issues that make the transition difficult.
Gail, there are lots of people who “know how to farm without fossil fuels:” those who study and practice Permaculture.
Many existing systems can be adapted to a low-energy future. Wells can be pumped with wind once more — the technology is extremely simple. Reservoirs can use siphon gravity feed, rather than pumps.
Widespread use of humanure is not that far in the past. My father told me they collected it in post-WWII Germany.
That’s not to say there aren’t going to be a lot of casualties, nor that transition will be simple on a massive scale, but I think it’s safe to say people will be much more involved with obtaining their food in the future.
Transition is actually not all that hard on a personal scale, and if everyone reading this just made it so for themselves and their families, it could be the necessary critical mass!
Yes and no, on the knowing how to farm without fossil fuels. I have had at least a little exposure to some doing it, and they depended on being able to drive to town, to get the supplies they needed. One family had a solar operated water pump, and plastic piping taking it to where the water would be used. While this is sort of sustainable, it is only sustainable until the plastic piping wears out.
So it really depends on how much they are depending on helps that won’t continue for very long from the fossil fuel based system. It also depends on how well prepare they are prepared to handle contingencies that people in ancient times had to deal with (insect infestations, droughts, flooding, blights, injuries to the farmer)
I think it is important to view this as a transition, rather than an event.
That’s why a certain amount of plastic pipe doesn’t bother me as much as the machinery that puts water into that pipe. With minimal care, plastic lasts a long time! That’s why I rescue old diesels that don’t depend on electronics — they also last a long time, and I will eventually be growing their fuel.
Will people be using plastic pipe and diesel engines in 100 years? Quite possibly not. But if they’ll work for another 25 or 50, that may be enough so people will then be able to transition to an even lower energy state, like excited electrons shedding photons and collapsing to an inner shell to arrive at a ground state.
I actually think this is a great time to be alive for those who are creative and who can see a return to sanity through all this mess. When I was a boy, I wanted to be a pioneer, and mourned that there was no frontier left. But now we’ve got a new frontier!
I agree with you.
I think we are going through a phase transition to a knowledge/intellect economy, and experiencing turbulence.
The non-rivalrous nature of knowledge – and the fact that the Internet treats rentiers (whether Public=State or Private=Shareholder or Landlord) as Damage and routes around them- means that the old rules no longer apply.
I think we will see a Flight to Quality, and to Simplicity. An asset-based and collaborative economy operating ‘not for loss’ will out-compete the existing moribund deficit-based economy operating ‘for profit’
We will see the rise of a Play Ethic and the fall of the Work Ethic.
We will see the Abolition of Labour; Property and the State, and their replacement by new networked institutions/agreements
We will see a ‘reality-based’ political economy, where the Policy creates the Party, rather than the Party creating the Policy.
We will achieve all this quite simply because we CAN, and because Ethical is in fact Optimal.
I totally agree that certain remnants of our present industrial culture, like plastic pipe, will last through and past the transition. Buried PVC water pipe has a useful life of well over 100 years.
My extended family has a fairly solid 50-year plan to ease through the transition with a few “luxuries” intact. This will make it easier on my wife and I and our children, but it will probably not matter to their children or grandchildren, because they will live most of their lives in a low-energy world.
Since we live in Hawaii, we have a head start on staying warm in winter, but keeping an off-grid homestead electrical supply going for 50 years is going to be hard – doable, but challenging. We pretty much have water, food, and shelter covered, but keeping our 24VDC lights on will always require batteries. We can do without an inverter if we have to, but we need something to store the output of our PV modules.
It should be possible to craft-build a battery at home, but I have never done it. If anyone out there has actually made a lead-acid battery with pure-lead Plante plates, please let me know.
Regarding the number of people who have the skills and knowledge to practice manual agriculture: only relative numbers count. There may be many people with these skills in absolute terms in the US, but consider a large US metropolitan area – what percentage of people would be able to feed themselves and their families by practicing subsistence agriculture? China is a good comparison. My wife is from China and I lived in her home town for 1 1/2 years, so I have some understanding of typical Chinese people. Many people who work in offices now, came from rural backgrounds, and the people who are middle aged or older are likely to have some experience with subsistence agriculture. Younger people might not have direct experience with subsistence agriculture, but most have vicarious experience through parents and grandparents. China might have a huge population, but many Chinese possess the skills necessary to deal with a societal decline precipitated by declining energy availability. This cannot be said of the US or Canada.
I think that is a good point.
There are some people in this country with skills at non fossil fuel farming, but they are few and far between, because we made such big changes in getting away from non-fossil fuel agriculture. Countries that are closer to the old ways may be better prepared.
I think population density relative to land area may make a difference, too, though. At least the population in the US is not as dense as in many places, which may be somewhat helpful. Even if the “only” change is adding a lot of fertilizer and irrigation, the amount of food produced may decline significantly, it these are lost.
The durability of physical artifacts can be considerably more than we often think. For instance, sailing ships of good quality were often well-maintained; the smallest of the three ships of the first transatlantic voyage of Columbus, the «Niña» (of Moorish construction), was last seen several centuries later. When a plank went punky, it was replaced. In like manner, components of modern military airframes (the C130 «Hercules» first saw service in the 1950’s and some of those old birds are still in use) are kept flightworthy by replacing deteriorating components via a technology known by the misleading name of «Damage Tolerance Assessment». It’s a pity DTA is not used much on civil airframes! Vehicles of all kinds hold up far better if roads are maintained (as the Romans of old knew well). The once-common economies that these examples represent could be ignored in recent times of abundant, cheap energy (plus other resources); they could once again be precious.
The future need not be so bleak. Neither «Earth Abides» by George R Stewart, nor «The Road» by Cormac McCarthy, nor «Garden of Earthly Delights» by Hieronymus Bosch has to provide a model of what awaits us. Although they well might…
Perhaps we can figure some of these things out.
We have reached the point now where auto repair shops want to replace whole packages of components at the same time. I visit Target, and it is hard to find one bib for an infant, or one pair of socks for an infant. Instead, everything comes packaged several to a package.
I vaguely know how to darn socks, but I can’t remember doing anything other than throwing out socks with holes. The adage long ago was, “Waste Not, Want Not”.
There are many examples of long working life for aircraft. For example there are still some DC3s operating commercially (I think the last one was built in 1945), B52s are still flying (85 still in active service) and the last one was built in 1962, and there are probably thousands of Piper Cubs still flying, even though the last one was built in 1947.
Other long-lasting manufactured goods exist. My brother drives a Landrover 25 years old with over 500,000km on it. He also uses a Chamberlain tractor built in about 1955. These are both working machines used for everyday farm and road purposes.
In more modern materials, most fiberglass boats have an extremely long life. I skippered a 1973 boat in a parade two weeks ago. It is used by a youth organization year round. The hull, interior, sails and rigging are mainly original. The motor was replaced about four years ago when the original Atomic 4 developed major problems for which spare parts were not available.
But they really don’t make them like they used to. Many modern artifacts are so complex that even minor repairs are impractical. A colleague currently has his Mercedes Benz SUV in the shop to replace a parking light bulb. It will cost about $250. Maintainability and repairability are simply not important in modern industrial design.
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‘I do understand your point though. Theoretically, things could be done differently. The catch is the difficulty in getting from Point A to Point B. I think people who assume that we will be able to add all kinds of new equipment (wind turbines, solar panels, electric cars, many more wells, etc) to keep our current system operating for many more years will be proven wrong.’
Referring again to Life Rules by Ellen LaConte. She recounts how all living things today are descendants of bacteria, and how bacteria recovered several times from catastrophic overshoot. After all, they are just single celled creatures with no brains and no foresight. It is worthwhile reading her chapter describing the amazing innovations (such as learning to use solar power and to split water to get hydrogen) these creatures developed. Ellen’s conclusion (pg 154):
‘No small group of bacterial intellectuals or revolutionaries gathered in the microbial equivalents of a Philadelphia tavern, Paris cafe or St. Petersburg cellar to hammer out a survival plan to deal with global economic collapse. There was no top from which direction could come down to them. Our tiny, desperate predecessors had no choice but to sort it out for themselves. And, since they couldn’t sort it out effectively as individuals–one group’s success meant another’s failure and competition to the death–they had no choice but to do it together. And they did without brains, history, consciousness or conscience.’
So, yes, I think things will be tough and many will not survive. If ANY of us survive to leave descendants, it will likely be because small groups make it work. Inevitably, that means a much simpler life with far more direct dependence on other living creatures and the sun and falling water. But, viewed over the long term, perhaps the result will be humans not nearly so destructive of life as the current crop.
In terms of Medical, specifically. My belief is that a poisonous lifestyle yields chronic disease. It is futile to tax everyone to pay for the inevitable outcome of living in a way Mother Nature did not intend. Sure, we can keep people alive for a little while at great expense, but those expenses are bankrupting us. Tinkering around the edges of the system by screwing around with hospital reimbursements or all the failed attempts to control referrals just add complexity, overhead, and frustration. People should just reap the results of what they sow. That is the kindest policy for humankind in total. Again, I am looking at it with a long lens. If I personally have a heart attack, I want the US to spend its last dollar on me. As a citizen, that would be foolish.
Systems in the world are self-organizing. I would agree that if there is survival, it will be by small groups of people that work out solutions that work. I have a hard time seeing a government program doing much.
I recall reading somewhere recently – might have been Rockman over at the Oil Drum who was discussing investment for oil plays… but whatever, I recall a clear distinction was proposed between EROI and EROEI. Generally, the terms are seen as interchangable in the Peak Oil discussion community, but precise use and separation of the terms might be important, especially in the context of this thread. EROI being energy return on investment (ie, financial) and EROEI describing net energy gain (or loss, if it’s ethanol… ;-).) I think your argument holds – we always hit negative EROI before EROEI, which means even more marginal sources of energy will become locked in, stranded assets…? Does that accelerate the Export Land Model decline too…?
I really meant EROEI here, but was too lazy to type the extra letter. You are right that there is also an energy return on investment. I haven’t really thought through how the EROI implications differ from the EROI implications.
I think stranded assets are going to be a problem. In fact, I was wondering how all of the empty McDonalds and empty homes in cities around the country are being handled in government data. I would presume that they are not being treated as depreciated, unless they have passed their normal lives, or are actually torn down.
I expect Export-Land will accelerate, because of Arab Spring type issues, as countries find themselves past peak. It is hard to keep the peace, once oil supply starts declining, and the standard of living starts to fall.
“my favorite solution is to just plain use less”
Now that’s just down right unamerican and soon might just get you locked up for being an economic terrorist. Seriously, I think you are spot on. I’m a true believer that most have no idea how much waste is involved in their life. Others will follow your solution. Not by their own free will, but by the market place when they are economically forced to give up BAU.
Less can be more, Embrace it !
Personally, I have stopped looking at data from government sources, academia or private enterprises as I believe them all to be of a corrupt mindset of survival at any cost at this point in history and will cover up anything in data that does not fit with their personal or group agendas. Peak Oil, limits to growth, whatever you want to call our resource problems are definitely the physical problem…in my opinion the CULTURE and VALUES of the Western world has completely degraded. That goes for liberals, conservatives, independents, all age groups, and all races and/or sexual orientations. I think you have to be lying to yourself to say that humanity is at a high point in terms of honesty, decency, empathy, hard-working values. Nope…we are coming of the peak of that as well.
I am not convinced everyone is corrupt. I think there are a lot of people thinking in “silos” because of all of the specialization, and a lot of people who never are exposed to any ideas other than those they see on television. Because of their narrow vantage points, a lot of people make bad choices.
There are other issues too. The food system is messed up. People who have not figured out how to get around its problems end up with a lot of health problems that make them chronically feel bad. This contributes to a negative mindset.
It seems to me that one of the problems with using National Accounts type data is a critical assumption which underlies such data: that every dollar spent is equal in value to every other dollar. Investors and consumers are assumed to behave rationally in terms of some sort of hedonic calculus. I simply don’t think that assumption stands up, and it obscures the question ‘Do we have enough money for Project X?’
Ellen LaConte, in Life Rules, pg 82-3, provides a succinct list of the ways we are manipulated to buy things we don’t need. In short, marketing, broadly defined, has distorted our perceptions. I won’t elaborate on this, but just assume, for the sake of argument, that Ellen is right.
Then ask yourself where we, as a country, are spending money unwisely. The two truly huge wastes that jump out at me are Medical and Military. We could very easily cut 20 percent of our GDP by reducing spending on these items. The money freed up could be used for worthwhile projects such as reducing debt (or eliminating deficits) and investing in needed infrastructure. We do not make such commonsense moves because of our dysfunctional political system.
A more interesting question is whether I (or anyone else) would entrust the 20 extra cents on the dollar to the clowns in Washington. My answer is a resounding NO!. I have zero confidence in the political system to deliver any sort of rational investment program. Neither do I have any confidence in purely private enterprise to deliver anything rational–if we include the common good in our definition of rational.
I am afraid that any solutions are going to come from families and groups akin to the clans which were the traditional units of human life. Several people mention intentional communities–which are a current equivalent to a clan.
In fact, my favorite solution is to just plain use less. Which requires very little investment: a broadfork here and a solar drier there and perhaps a root cellar. Wear old clothes until they disintegrate. Throw nothing away and recyle all organic waste into your own garden. These are not big ticket items. You do have to fight clueless suburban neighborhood associations, but nobody ever said life was easy.
I agree that medical and the military include huge a huge amount of waste, but it difficult to untangle these systems from the rest of the economy.
For example, my personal use of the medical system has been close to $0, except for dental and a broken arm or two, but my life circumstances depend very much on the existence of the heath care system:
So, as bad as our current system is, it still had positive benefits for me. Unravelling the medical and military systems will leave a whole lot of unemployed people, so won’t be done voluntarily. Someone has said that cutting waste, no matter how ridiculous, cuts someone’s job.
I do understand your point though. Theoretically, things could be done differently. The catch is the difficulty in getting from Point A to Point B. I think people who assume that we will be able to add all kinds of new equipment (wind turbines, solar panels, electric cars, many more wells, etc) to keep our current system operating for many more years will be proven wrong.
I think many people miss the point you make here that waste is someone’s job. I remember an oildrum story talking about how an EROI of 8:1 or some number close to that is some kind of cut off for energy return to run society. The problem is that the economy is leveraged to whatever EROI our current energy supply allows. We are seeing “banks” fail everywhere that are leveraged 40-20:1 and not the 20-10:1 that they are supposed to be. I just wonder how many jobs lie in going from an EROI of 40:1 to 8:1. It also raises if it is better currently to be highly energy leveraged like the US or Canada or less energy leveraged like Europe. The US and Canada could trim the fat if need be, but Europe is already slim. Does it pay to be a little over weight when the hard times come?
I am suspicious that part of the reason Europe is in such tough shape now is because they were already slimmed down, energetically. Europe is even more dependent on oil imports than the US, so has been cutting back. They don’t really have a sustainable lifestyle though. One of Europe’s problems is that there is a huge amount of debt that needs to be paid back with interest, and this is very difficult to do in a flat economy.
Thanks again Gail, you have a way of illuminating the things lurking in the back of my mind!
Consider the apparent lifespans of our infrastructure, 100 years ago many public projects could last 100 years, dams, waterworks, railroads even schoolhouses and skyscrapers, today we have buildings and infrastructure designed to last maybe 30 years – extra schoolrooms are “portable” meaning disposable.
We have perfected the “Walton Way”, which, simply put is: the cheaper the better. I understand your point that declining eROI makes investing harder but the kicker is we’ve also convinced ourselves that more is better than better.
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Ooops…that’s cjenscookATgooglemail.com of course
Gail’s work is excellent and her logic impeccable, on the basis of the assumption that the existing deficit-based dollar paradigm continues.
My view is that this paradigm broke down irretrievably in October 2008, and that we are already three years into the transition to a new ‘asset-based’ paradigm.
The key to achieving this transition is to monetise the flows of value created by productive assets, such as land rentals, and different forms of energy, through the simple expedient of issuing credits redeemable in payment for value such as rentals and energy.
This recent presentation in Scotland….
……sets out a ‘community partnership’ model, implementable without any change in the law, which could equally be applied – using Canadian legal tools – in Saltspring Island, where inhabitants of course are already accustomed to complementary currency.
An island is a great place for a prototype because it is easier to involve all the stakeholders, eg through a private wire/grid.
If you are interested – and I am already working with a couple of eco-villages – please e-mail me
I am afraid with things breaking down as they are, the idea of monetizing flows of much of anything is more complex than our system will be handle in the future. If we could really create an immediate transition, and continue to use computers and cars indefinitely, and electricity would work indefinitely, then maybe your idea (or someone else’s) might work. I am afraid that things are moving too quickly, however. Whether these flows will really continue depends on the continuation of basics services, like police to keep order, and adequate food supply for workers. Thus, they are not as dependable as one would like.
It’s not my idea, Gail. I’m simply observing what people are doing already.
What I am proposing has now become the ‘adjacent possible’, and is easily and straightforwardly achievable.as a complement to the existing system.
I’m afraid I don’t understand it well enough to see that it would work.
I fail to see how what you are aiming to do is ANY different than what is currently called money. Economics will FORCE the normalization of value of truly productive assets, such as land, energy.. And the relative value of everything else will drop drastically, as we are no longer able to afford it. We will first pillage every last drop of abundance out of the system, but no matter what your proposal, or anyone else’s.. That is what we were going to do anyways..
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Brilliant analysis as usual, Gail. No one connects the dots like you do!
In face of these investment questions, I fall back on fundamentals — and I don’t mean profit-loss or debt-equity ratios. I mean the real, physical fundamentals of human existence; the base of Maslow’s Hierarchy. Clean air, clean water, comfortable shelter, nutritious food. That is what one should invest in, no? Because as long as there are people, there will be those basic human needs.
Maslow argued that only through fulfilling such basic needs can higher needs — such as security, belonging, esteem, creativity, etc. — be fulfilled. Modern economists and marketers seem to think the base of this hierarchy comes from something called “jobs” and “economy,” which are human constructs. (Check to see how many birds and small rodents in your neighbourhood are “unemployed.”)
So I think that when making long-term investments, one should consider this very strongly, and invest in productive farmland with easy access to good water, and if it doesn’t already have suitable shelter, start using local natural materials to construct a long-lived shelter.
(Disclosure: we are working on such a project that ultimately will involve many others, and we could use some help!)
Investments in fundamentals would seem to work, as long as there is not a conflict over too many people trying to make use of these developed resources. Our problems would be much less, if there were many fewer people in the world.
There are also the people who speculate on fundamentals. So in addition to all what has been said, which i agree on, we need to outlaw the hedge funds and other investors who push up prices of fundamentals which pushes up prices of food energy etc. Speculation on these markets and the financial gambling which is going on will errode any advantage made if we do not stop it, but alas these institutions along with puppet governments will not stop this happening.
If there is not enough oil to go around, either prices will rise to attract more development or the economy will crash, bringing oil prices down. It is hard to completely separate out speculation. Buyers who purchase oil for their own use have the option of buying now, and storing for later, or buying later. Even these players can affect prices. But with oil in as short supply as it is, I am not sure that speculation plays a big role. The price is limited by what the economy can afford, a problem we are rapidly reaching.
You can’t outlaw speculation without outlawing hedging. With no way to hedge a position, the entire market-based system collapses. They are two sides of the same coin. However, you can put position limits on speculators and increase margin requirements to minimize speculators’ impact on market prices.
I agree that farmland and timber may be the best long term investment one can make. Throughout the ages, those of wealth were land owners. Even if the arable land market declines, land will not lose its value like a stock market decline would. The only fear would be land redistribution when fiat wealth vanishes.
I do see the possibility of economic loss in farmland if food needs decline — which might happen in a “worst case de-population” situation that some people obsess over. Reduce the number of mouths to be fed, and the value of farmland goes down.
And of course, there’s always the possibility of re-appropriation, bolstered by “eminent domain” laws. One city council in Connecticut actually condemned and appropriated a row of rent-controlled town houses on the grounds that they could make more tax money if they were turned over to a developer to make into yuppy condos! (I believe the US Supreme Court backed up this dubious claim.) I could see such an argument being used to take farmland away from subsistence farmers and put it into the hands of Big Agribusiness, on the grounds that it would feed more people that way.
But the good news is that, as fossil sunlight declines, so will complexity, according to HT Odum, et. al. This means government won’t be able to have so many layers of bureaucracy. But it also means that, given today’s trends, government may simply elect to out-source eviction services to those who will benefit — Federally-imposed feudalism.
Interesting times ahead, for sure!
You are a racist!
Typical Liberal says: “You are a racist!”
In re-reading the comment your refer to, I didn’t see anything racist there, but it wouldn’t be the first time someone was blind to their own racism.
Would you care to elaborate on those four words?
The man who owned Mickey would have to acquire, keep said mouse by gun.
Most valuable possession would be the breath of life.
Land valuation would be soo last century.
Farmland can decline in value, even become worthless, if climate change makes it impossible to grow crops on it. Don’t forget that the entire Southwest US will become a desert over the next 50 years and there will be many other areas which currently produce crops that will be affected by severe climate change.
Good point, Bob.
Certainly, one must perform “due diligence” with farmland as one would with any investment.
And water availability was certainly top of my list. According to the best scientific guesstimates that were available in 2004, we picked a region that should continue to have water security. Then in 2008, we picked a site that has two year-round streams and a large reservoir.
A bigger problem for us is “season shifting” that makes it difficult to plan. Last spring and early summer was much cooler and wetter than usual, meaning growing had a late start. This winter is a relative drought, meaning possible well failures next August, but we have a 50 megalitre reservoir nearly full, something that made this particular site so attractive. It can buffer us against several seasons of low rainfall.
As oil goes away, I think water may well become the “next oil.” As we adjust to each Leibig’s Minimum, another will surely come along…