Oil Limits Reduce GDP Growth; Unwinding QE a Problem

We know the world economic pattern we have been used to in years past–world population grows, resource usage grows (including energy resources), and debt increases. The economy grows fast enough that paying an interest rate a little higher than the inflation rate “works”  for both lenders and borrowers. Borrowers are able to handle the required interest rate, because their wages are rising fast enough to buy homes and cars at prevailing interest rates. Unemployment is not too much of a problem because jobs grow with population and resource usage. Governments do fairly well, too, because they can tax the growing wages of the population sufficiently to get enough taxes to pay the benefits they have promised to constituents.

This model “works” fairly well, as long as the economy is growing fast enough–population continues to grow and resource extraction continues to grow as planned. In a finite world, we know that this model cannot work forever. At some point, we can expect to start reaching limits.

What do these limits look like?  I would argue that in the case of resource extraction, these limits look like increasingly high cost of extraction. We need to extract resources from increasingly deep locations, in increasingly out-of-the way places, using increasingly more energy intensive techniques. For a while, improved technology is sufficient to keep costs down, but eventually the cost of extraction begins to rise. Some of the rising cost may even be taxes, because the country where the extraction is located needs higher taxes to keep a growing population properly fed and housed, so they do not rebel and disrupt production.

When the cost of extraction begins to rise, it is as if we are pouring more manpower and more resources of many types (steel, fracking fluid, jet fuel, electricity, diesel fuel) into a deep pit, never to be used again. When we put more resources in, we get the same amount of resource out, or even less than in the past. If we want to continue to increase the amount we extract, we have to further increase the quantity of resources used in extraction. I have referred to this issue as the Investment Sinkhole problem. Obviously, if we put more manpower and other resources into this pit, we have less for other purposes.

A recent example of resources hitting limits is oil. World oil prices started increasing about 2004 (Figure 1). Analysts say that these rising prices are related to rapidly increasing production costs. Oil company presidents say that we extracted the cheap to extract oil first, and most of it is now gone. Recent reports of major oil companies say profits are dropping, despite high oil prices.

Figure 1. World crude oil production and Brent spot oil price, both based on EIA data.

Figure 1. World crude oil production and Brent spot oil price, both based on EIA data.

Oil is an important commodity because it represents about 33% of the world’s energy supply. It is the world’s primary transportation fuel. It is a very important fuel in agriculture, operating farm equipment, transporting fertilizer, running diesel irrigation pumps, making herbicides and pesticides, and transporting goods to market. Therefore, if oil prices rise, food prices are likely to rise well. In fact, since nearly all goods are transported, an oil price rise affects nearly all goods and quite a few services.

There are really two issues when the cost of oil extraction rises:

1. If the sales price of oil rises, to what extent will this increase adversely affect the economic growth oil importing economies? Rising oil prices mean that the salaries of workers do not go as far, so they must cut back on discretionary goods. Profits of companies will also fall, because it is hard to raise prices of goods, without reducing the quantity sold. In my view, the run-up in oil prices since 2004 explains pretty much all of the “Great Recession’s” impact on oil importing economies. See my article Oil Supply Limits and the Continuing Financial Crisis. In the next section, I show evidence that oil price increases have had a very adverse impact on GDP growth of oil importers.

2.  While the cost of oil extraction is expected to continue to rise, can the sales price of oil really increase to match this higher extraction cost? If oil price can’t rise because of affordability issues (low salary growth, low growth in debt, or cutbacks in government transfer payments), then there is likely to be a crisis of a different kind. Oil exporters will find that oil prices are not high enough to cover their costs, and will cut back drilling to what is profitable. In fact, countries that are producing oil mostly for themselves, such as the US, are also likely to see their oil production drop, because prices will not be high enough to justify new investment. In such a situation, both oil importers and oil exporters are much worse off, because most of our systems are dependent on oil, and less oil will be available.

The Federal Reserve now is discussing the possibility of stopping quantitative easing. If this is done, I expect it will have a very adverse economic effect: long-term interest rates will rise and asset prices are likely to fall. If commodity prices fall as well, then we could find ourselves in the scenario outlined in the preceding paragraph, in which oil prices drop lower than the cost of production for many producers.

Relationship between Oil Consumption Growth and GDP Growth

If we look at a history of growth in energy consumption and world economic growth, it is clear that energy growth, and for that matter oil growth, tend to move together.

Figure 2. Growth in world GDP, compared to growth in world of oil consumption and energy consumption, based on 3 year averages. Data from BP 2013 Statistical Review of World Energy and USDA compilation of World Real GDP.

Figure 2. Growth in world GDP, compared to growth in world of oil consumption and energy consumption, based on 3 year averages. Data from BP 2013 Statistical Review of World Energy and USDA compilation of World Real GDP.

In fact, agencies such as the International Energy Agency use projected GDP growth in estimating future demand for energy products, including oil. Energy supplies don’t grow quite as rapidly as GDP, partly because of efficiency gains, and partly because the world economy is becoming more service oriented. In general, new services don’t require as much energy as new manufacturing.

Growth in oil usage would also be expected to mirror GDP growth, but at a slightly lower rate of increase than growth of energy use in general. This is the case because oil is the most expensive of the major energy products. Consequently, there is a strong incentive to switch to cheaper energy products or to increase efficiency.

Effect of High Oil Prices on GDP of Oil Importers

If we look at the data, it is striking how handicapping high oil prices are to oil-importing countries (Figure 3). Consumption by countries that have historically been the biggest importers of oil, (US, EU-27, and Japan) started dropping about same time oil prices were started to rise.

Figure 3. Oil consumption based on BP's 2013 Statistical Review of World Energy.

Figure 3. Oil consumption by part of the world, based on BP’s 2013 Statistical Review of World Energy.

At least part of the reason for this drop is because oil is an expensive energy product. With  the run-up in prices, goods made using oil products became increasingly high cost to make and transport. With these higher costs, goods became less affordable to the country’s own citizens as well as less competitive in the world marketplace.

During the same period, annual growth in inflation adjusted (“real”) GDP for the EU, US, and Japan combined dropped significantly below the rest of the world (Figure 4, below).

Figure 4. Annual percent change in Real GDP by part of the world, based on data of the USDA.

Figure 4. Annual percent change in Real GDP by part of the world, based data of the USDA.

In fact, if we look at groupings of countries as shown in Figures 5 – 7, we can see a dose-related response, with countries deriving the highest percentages of their energy consumption from oil having the poorest economic results.

Figure 5 shows the percentage of energy consumption coming from oil in 2004, for several country groupings. (2004 is about the time that the oil price run-up started.) Figure 5 indicates the PIIGS1 and Japan had the highest percentage of their energy supply from oil, and China had the lowest percentage. The US, the EU-27 minus PIIGS, and India were in between.

Figure 5. Percent energy consumption from oil in 2004, for selected countries and country groups, based on BP 2013 Statistical Review of World Energy. (EU - PIIGS means "EU-27 minus PIIGS')

Figure 5. Percent energy consumption from oil in 2004, for selected countries and country groups, based on BP 2013 Statistical Review of World Energy. (EU – PIIGS means “EU-27 minus PIIGS’)

We can also look at economic growth for the same groups of countries. The countries with the lowest proportion of oil use, and thus least affected by the run-up in oil costs since 2004, have had the greatest GDP growth in the 2005 to 2011 period. In fact, the GDP growth percentages for the period 2005-2011 (shown in Figure 6 below) follow exactly the reverse pattern shown in Figure 4.

Figure 6. Percent growth in real GDP between 2005 and 2011, based on USDA GDP data in 2005 US$.

Figure 6. Percent growth in real GDP between 2005 and 2011, based on USDA GDP data in 2005 US$.

In Figure 6, part of the high growth in India and China relates to increased globalization. Countries around the world compete on wage and benefit levels as well as on the price of energy. China and India have lower wages than the developed countries, so could increase their share of manufacturing for this reason as well. More liberal treatment of pollution control may also be a factor in their increases.

Not too surprisingly, growth in oil usage follows the pattern of economic growth (Figure 7, below).

Figure 7. Percent consumption growth between 2004 and 2011, based on BP's 2013 Statistical Review of World Energy.

Figure 7. Percent consumption growth between 2004 and 2011, based on BP’s 2013 Statistical Review of World Energy.

It should be noted, too, that for the PIIGS, it is not just one large country with a high percentage of oil consumption in 2004 that is dominating the group result in Figure 5. All of the PIIGS had high oil consumption percentages in 2004: Greece, 62%; Portugal, 61%; Ireland, 61%; Spain, 52%; Italy, 49%. In fact, the country with the worst problems (Greece) had the highest oil consumption percentage in 2004.

I might also mention that economist James Hamilton found that 10 out of 11 United States recessions since World War II were associated with oil price spikes of 25% or more.

What Goes Wrong in the Expected Model, When Oil Prices Remain High?

In the first paragraph of this post, I outlined an expected model of how the world might operate, if economic growth remains high. Slower economic growth would be expected, if resource limits start having an impact on economic growth.

What happens if oil prices remain high? I think the answers is fairly different for businesses, compared to consumers. Businesses can mostly shake off the impact of higher oil prices, by cutting back on the amount produced (and thus cutting the number employed), or by shipping production to a lower cost part of the world (again cutting back the number of US workers employed), but workers don’t have the benefit of making changes of these types. They can drop out of the workforce and apply for government benefits, but this does not really fix their lack of jobs, and the low growth in wages for those who do have jobs.

Because wages of workers are still adversely affected, even years after an oil price rise, and because the cost of goods now reflects the higher price of oil, consumers continue to find that their budgets are stretched. Some can afford to purchase a higher-mileage automobile, but most cannot–their budgets are still stretched, and some have dropped out of the work-force completely. The government can try to cover up this situation with artificially low interest rates for homes and cars, and with higher transfer payments using deficit spending. Unfortunately, the government programs don’t really fix the underlying problem, namely a lower percentage of the population with jobs, and wages of those with jobs not rebounding by much. Because there is no real fix for the underlying problem, the economy doesn’t really bounce back.

Quantitative Easing, and the Unwinding of Quantitative Easing

One way the government hides our current financial problems is with quantitative easing (QE). QE lowers longer-term interest rates, such as those that affect the price of mortgages. QE also lowers the interest rate the government pays on its own debt, helping to government to have closer to a balanced budget. The lower interest rates tend to increase stock market prices, and to raise prices of homes2 and farms, because investors seek investments that provide better yields than the absurdly low rates available on bonds. This doesn’t really fix the underlying problem, either.

The government can also try to induce banks to lend more money out, but if buyers don’t have high-paying jobs, it becomes increasingly difficult to actually get the money available for lending into the hands of potential buyers. Waiting for several years doesn’t really fix the situation either–the accumulated deficit just gets worse, and the bubbles blown by QE become larger. None of this fixes the underlying problem of high oil prices.

If the government tries to back off from QE, we will see longer term interest rates rise. This will make mortgage rates rise, and cut back on the number of buyers of homes. Rising interest rates are likely to bring back the problem of falling home prices, and reduce the number of new homes built. Car sales may also fall, as interest rates on loans for new cars rise.

The suddenly higher interest rates are likely to make the stock market fall, because with higher yields, bonds will become more attractive investments in comparison to stocks. As interest rates rise, the value of bonds can be expected to drop as well, because this is the way bonds are priced–the higher the available interest rate, the lower the resale price of the bond.

The declining values of stocks and bonds, and for that matter, houses, is likely to be a problem for citizens, because they will realize that their savings are worth less. The “wealth effect” will work backwards. People will realize that they are poorer than they were before, and spend less.

The decline in the value of stocks and bonds is likely to be a problem for banks, pension plans, and insurers–and for that matter, any kind of institution holding large amounts of stocks and bonds. The exact impact will depend on the accounting rules for the particular institution. If market value is used for stocks and bonds, institutions holding them will show large capital losses, perhaps putting them below regulatory limits.

Part of the capital losses may be covered up by special accounting rules, such as allowing bonds to be valued at amortized cost rather than market value. But there may still be an adverse impact on capital, possibly putting some institutions below regulatory limits. Also, if an institution needs to sell a bond or stock that is valued on its balance sheet for more than it is really worth, it will incur a loss.

The removal of QE will also mean that the interest rates the government pays on its own debt will rise. This is will push up needed tax rates, putting further pressure on the consumer.

With lower asset values and higher tax rates, debt defaults are likely to become more of a problem again. Banks may cut back in lending as well, especially if their capital ratios fall too low.

The Effect on Oil Prices

With values of most investments dropping lower and tax rates rising, my concern is that the sales price of oil will drop lower, causing a severe cutback in world oil production. This issue is really one of affordability of oil. Economists would call this inadequate “demand” for oil. Of course, people will still need to eat food and need oil for commuting, but this doesn’t come into economists’ definition of demand–demand is only how much people can afford, not what they need.

So we really are in a quandary. If oil prices stay high, recessionary effects can expect to continue for oil importers. In addition, China, India, and other developing countries are increasingly becoming oil importers, so they themselves can increasingly expect to be affected by high oil prices. Furthermore, these same countries find demand for their manufactured goods is reduced because of economic problems of the Eurozone, Japan, and possibly the US.

If oil prices drop, they will be too low for oil companies to make new high-cost investments. A drop in oil production will take place gradually, as existing wells continue to produce, but new ones are not added. The impact of this lower oil production may be quite severe. The collapse of the Former Soviet Union in 1991 seems to have been caused by too low oil prices, as I showed in How Oil Exporters Reach Financial Collapse. I also talked about the low price issue in Low Oil Prices Lead to Economic Peak Oil. All countries are likely to be affected by this drop in production–importers because the lack of availability of oil for import, and exporters because of the lack of revenue from oil exports.

Even if we sail through our current set of problems, we can count on meeting them again in a few years, because the cost of oil extraction can be expected to keep increasing. If oil prices rise again, oil importers are likely to see a large increase in unemployment, and a squeeze on profit margins of businesses. Banks may again fail. Government will face a new round of problems, similar to those in 2008, or even worse, without having fixed their previous set of problems.


[1] Acronym for Portugal, Italy, Ireland, Greece, and Spain, the countries in Europe with the most financial problems in the past few years.

[2] Many of the buyers for houses are institutional investors, planning to rent the houses out.

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About Gail Tverberg

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

267 thoughts on “Oil Limits Reduce GDP Growth; Unwinding QE a Problem

  1. Dear Gail and Others

    I referred to a new study which looked at gene expression under conditions of stress and also under conditions of mindless entertainment and also under conditions of purposefulness. Only the ‘purposeful’ state results in healthy gene expression.

    There followed some discussion about ‘what is purpose?’, wherein we considered the ‘purpose’ of suicide bombers or people who are resigned to their fate and other mental states and whether we can consider them ‘purposeful’.

    Here is an interesting passage from Dmitry Orlov’s current post on the Hutterites:

    ‘It may be interesting to ask whether the Hutterites are happier than the rest. Their way of living provides ample opportunities for hard, rather monotonous work, little opportunity for personal growth or recreation, little room for expression of individuality, and a large burden of responsibility before others. Yet they seem to have virtually no substance abuse, violence, depression or suicide, few psychiatric ailments, and generally seem content with their lot in life. It probably helps to understand what they see as their goal: it is not personal success or self-realization but harmony within the commune and living out one’s allotted days in accordance with what they see as God’s will.’

    I will now add an observation of my own. By submitting to what they perceive as God’s Will, they do gain some material benefits. A colony in South Dakota needs only 45 acres to support themselves (a third to half an acre per person) and they retire at around the age of 50. The article I took the information from ascribed these results to ‘the lack of material needs’. If one is ‘keeping up with the Joneses’, or ‘becoming the Alpha Male or Female’, then one never has enough and has to continue to struggle for more. We might say that continual struggle until the day one dies is ‘the American way’. Gail observes that our economy ‘cannot run in reverse’. The Hutterites and, in my experience, the Amish are able to run their economies in a steady state (up until retirement) and then in reverse (in retirement) because they perceive that what they are doing is in accordance with The Will of God.

    I hope this sheds some more light on the ‘purposefulness’ issue.

    Don Stewart

    • but the hutterites are still living under the protective umbrella of the rest of us
      Question 1—if they have serious illness needing acute medical care…do they DIY it, or quietly die
      Q2.. if a crime is committed against them do they forgive the perpetrator or call the police.
      q3, the taxation we pay covers their defence whether the agree to it or not.
      Other than that—its a great life
      There was a similar group in the UK near me, the Bruderhof. I seem to recall they were persecuted under Hitler like all other ‘peaceful’ sects

      • Dear End of More
        You will have to consult a person or resource with more knowledge than I have if you want details. But what I have learned with some cursory reading:
        1. They do use doctors. They earn enough money selling organic vegetables to pay their doctor bills.
        2. I assume they call the sheriff. They pay property taxes like everyone else.
        3. If you actually look at ‘defense spending’, it is mostly about ‘maintenance and extension of the Empire’. I doubt they feel any guilt whatsoever for not partaking in that folly.

        Don Stewart

    • Don

      There’s nothing more embarrassing -to me – than watching the hungry acquisitive impulse of old men or women, in their 70’s and 80’s, and rich, but still trying to get more, their eyes sparkling with childish glee at the thought of gain from the system which prevails now – and to what end?

      The Hutterite attitude – a time to labour and then a time to rest (coinciding with the decline in physical capacity for really hard long hours of agricultural labour at about 50) – is undoubtedly a sane one.

      It would have been self-evident to everyone before the fossil-fuel age: a fact of life. Like the tombs from the Middle Ages which one can still see, the lord bishop richly dressed on top, and below the festering grinning corpse, naked.

      Modern consumerism inculcates perpetual narcissistic juvenile greed, and tries to tidy away the disquieting fact of Death.

      The Hutterites might be wiped out by an environmental catastrophe or plague at any moment. I, likewise, like every other human being, can have no assurance that I will be alive even 5 minutes after typing this, but I have the power to ensure that my intention on rising every morning is to live as sanely as possible.

      I look forward to the times of skilled labour, and times of rest and reflection, in my day, much more than to gain (although it is nice to be very well paid, which I am).

    • It seems like every religious group finds something different to emphasize–even when they are supposedly using the same book as a base.

      There are quite a few religious groups that supposedly downplay the importance of material goods, but the Hutterites seem to do better at actually getting people to go along with their beliefs than others. I ran into some in an airport lounge–they seem to take conveyances that use oil if someone else is driving them. I wonder how complete the analysis of living on 1/3 or 1/2 an acre is.

      Not being concerned about material goods certainly relieves stress on the system. I am not sure it solves the whole problem though–we still have depleting resources, pollution, and rising population.

      • Gail

        Well, it’s certainly no solution, and creates problems in the economic structure we have: my declining to be a fervent consumerist and to contract more debt, just puts someone, somewhere, probably a few thousand miles away, out of a job, or on a zero-hours contract, doesn’t it?

        If we all decided to stay at home, whittle sticks for fun in the evenings and play music on jam jars and skittle boards, and read aloud from the Classics, – economic collapse!

        And as you would no doubt rightly point out: what I fail to consume, someone else will……..

        • Exactly. Our economic system needs us to keep consuming. This is what supports the current number of jobs. If we cut back on consuming, we cut back on jobs. We would need a whole new system, without paying jobs (and without the things paying jobs support, like electricity), to make the system work.

          • Hi Gail,

            I am wondering what your opinion is on whether bitcoin might help at least delay economic collapse? It seems the problem is that long before we run into physical limits, you fear international trade will collapse because countries won’t trusts each other’s fiat money anymore due to the shenanigans of the bankers, correct? So what we need is an honest, inflation-proof global currency. This currency already exists, and it is called bitcoin. There can never be more than 21 million bitcoin in existence, but these can be infinitely subdivided, so they should be able to facilitate any kind of trade at any scale, indefinitely. Of course, the Internet needs to stay up if we are going to use bitcoin, and I am afraid you are right the electric grid could collapse eventually, but might not bitcoin help to preserve trust in the system for a while? While it would not be smooth, I think it could be possible to transition to bitcoin without total collapse, at least for some vital trade needed to keep civilization running. Most people would never be able to obtain much bitcoin, but poverty is common already without civilization collapsing.

            I for one already trust bitcoin more than I trust any traditional currency or even gold. If I had any savings, I would prefer to keep it in bitcoin, because I feel bitcoin is a lot less likely to lose its value than the dollar or any other fiat money. The bitcoin economy is already worth over a billion dollars, yet it remains secure, so I don’t think it is vulnerable to attacks or other flaws. If I were the bankers and governments I would try to buy bitcoin for all the assets that could be sold (probably not much), then abandon the rest of their broken system including all debts and proceed to trade in bitcoin from there. But perhaps I am naive.

            Eivind Berge

            • I suppose bitcoin could play a role, but I don’t think it will really fix the problem.

              Part of the issue is countries that want to buy more than they have goods to trade for. For example, Greece right now has little to sell, in comparison to the amount of oil and gas it would like to buy. At some point, doesn’t this imbalance have to end? Egypt right now has nothing to buy oil and natural gas with, but is getting some natural gas free from Qatar. Dave Summers (Heading Out) wrote about this recently.

              When it become clear that the United States really can’t pay its bills either, or the United States breaks up into smaller units, and it looks like those pieces can’t pay their bills either, other countries will not want to ship valuable goods, unless they have a good reason to believe that they will get paid for them. I don’t think bitcoin will help.

              A variation on this is when the value of a currency is dropping so quickly that no one wants to sell a country any goods, for fear that the currency that goods are being bought in will be worth much less, by the time the goods are produced and delivered.

              Also, you are right that bitcoin depends on the Internet. If trading gets badly disturbed, the Internet is likely to be one of the things we lose.

  2. Hi Gail I have a quick question , I think…..Since the U.S is having a shale bonanza right now we are not signing long term contracts with as many other oil producing countries. I believe that Indian and China are buying up these oil contracts…when oil shale does not produce as much and we have to come back to these old markets how will we budge in line and retake these old contracts back? I say this with tongue in cheek…

    • Hello, Yes that worries me too Dan, foreign countries buying up our resources especially shale. Our largest Pig Farm in the US was just bought buy a Chinese company too. I think many of us think that this may change soon and borders may start closing in regards to exports as things get tighter.


      • Scott:

        A buddy in Washington State told me the Chinese are now trying to get the global corner on apples. See Xabier’s condemnation above!

        • Hello Chris, that is the reality of a global market, other countries buying up resources, especially countries holding money that needs to be spent before the value may drop.

          One thing I noticed about moving out far into the country is that we depend on mail more and stuff coming in boxes being mail ordered or UPS. I think folks will work pretty hard to keep this supply line in order, but I see higher costs for fuel and just a slow squeeze, but economic collapse can be sudden if something happens, these so called “Black Swans” could emerge fast especially these days. I could probably list 50 things that are threats and could become black swans and most of us could think of some too, but for now things are muddling ahead. But deck chairs are being rearranged on the Titanic for us eventually.


          • Right you are, Scott. One of the benefits of living way out in the country is that you don’t have to put up with city stuff. But sometimes it’s not as convenient. Your mention of ‘Black Swan’ and talking about food reminded me of one of my true favorites: balut (or balot). Does your wife occasionally spoil you with such treats?

            • Hi Chris, just for group, since you asked about “Balut” it is a partially grown duck egg that is boiled and salted and is a favorite in the Philippines.

              I married in the Philippines 20 years ago and my wife eats Balut among some other strange things, but there are some things that I have not gotten a taste for, perhaps because I was never bold enough to try, this is one of them along with few other dishes made with blood and meat. But she does really make some great food sometimes, but we choose to eat what we like and sometimes cook separate meals which we have just gotten used to.

              I when I first visited the Philippines I got my first taste of raw fish and have been an avid sushi eater ever since, I will eat almost any kind of sushi and also since I worked town that has really authentic Mexican foods I like those too.

              A trip to China will show anyone that no part of the chicken goes un-eaton. I suppose if one can get past what they were eating sometime by perhaps eating something they do not know what it is, they will like it and start craving it no matter how weird it is. Just think of Hot dogs!


        • Christopher

          They can make an offer on my totally organic apples if they like, but frankly they are beyond price!

          I was reading that the Argentines have decreased beef production and increased soya production to satisfy the demand from the Chinese factory workers. It is hinted that this won’t do them much good, as the Argentines are spraying like crazy to maximise crop yields: what chemical sauce do you want with your soya, sir?

          I suspect that food sourced from higher-quality, less toxin-laden, providers may well become fashionable among wealthier Chinese, as they realise the full extent of their industrial self-poisoning. It is said to be noticeable that the rich already remove their families to what they deem to be healthier environments………..

          Small Spanish olive growers are being undermined by Chinese industrial olive production.

          Ever-accelerating cycles of trade and consumption with insanely long supply chains. It must break up: but when?

          • Sir: Do you or the Spanish and (one must presume, other Mediterranean) olive growers have any idea how competitive the Chines can be in this stuff. They play by Sicilian Rules, although most people don’t know that. Perhaps part of the challenge is that about half of all farmland in China is toxic or poisoned, so they’ve been forced to diversify production and acquisition from overseas suppliers — including buying farms in Africa, etc. — and in their naturally greedy way they’re now looking to make a profit on it. Well, please tell your Spanish buddies to watch out! They should set up very stringent quality control rules to prevent potentially polluted products, etc. Remember, these guys will produce government audited papers for anything; that’s easy to do in China, as every government official is on the take.

      • Gail,
        Was your tongue firmly in cheek when you wrote that? Does that mean we should all renew our credit cards and get ready to spend, spend, spend?
        The last I saw, the only places that shale oil was yielding any significant product was Bakken and Eagle Ford. Some gas works okay, too…

        • There is no way to fix our current predicament. We are trapped by limited oil supply, but cutting back on oil (and other energy use) really doesn’t fix our problem. The major effect of conserving oil is that it causes people to lose their jobs, and shifts oil consumption to other parts of the world. So in a way, what our leaders are telling us is right. We need to spend–spend–spend to keep the current economy from collapsing.

          But even if we try this approach, it doesn’t really work. Wages aren’t rising enough to do this. Debt can’t keep increasing. Resources of all types are becoming more expensive to pull from the earth. Collapse is pretty much inevitable, no matter what one tries.

          Perhaps there is some way of putting together some different economic system that will work for the long term, but we haven’t figured out a way so far. New local currencies are not enough to fix our problems.

  3. Are there any calculations or estimations of how long QE can go on. Can if go on FOR another 3, 10 or 100 years?

    • Shakespeare said it best:
      Life’s but a walking shadow, a poor player
      That struts and frets his hour upon the stage
      And then is heard no more: it is a tale
      Told by an idiot, full of sound and fury,
      Signifying nothing.

      We’ll all be dead, just like our everyone, ever.

      We are such stuff
      As dreams are made on,
      and our little life is rounded with a sleep.

      • This is still pretty true. Family ties and religions and the untruths advertisers try to spread give one kind of meaning, so it isn’t completely true. But from the perspective of another universe, or looking back one million years, it is.

    • I don’t think we know for sure, but it certainly isn’t for 100 years, and probably not for 10 or even 3 years.

      Pensions need high interest rates to pay out as planned. With QE, stocks held in pension plans do well, but bond yields are too low. So, there will be pension problems sooner rather than later. These may take the form of bankruptcies by cities, like Detroit.

      Banks need rates that are lower short term than long term in order to be able to make loans and earn profits on making the loans. If long-term interest rates are too low relative to short term rates, banks don’t have much incentive to make loans. So banks may not make loans, even if it looks like they could, and the rates would be acceptable for buyers. Large businesses can issue bonds, so this isn’t too much of a problem for them. It is more of a problem for smaller businesses. They are having trouble getting loans, even though conditions in many respects look favorable. Lack of loans for small businesses adds to employment problems, since traditionally small businesses are the ones who have added employment.

      Also, QE creates asset bubbles. It makes the price of stocks high. It makes the price of houses high. It makes the price of bonds high. At some point, sooner rather than later, these bubbles burst, because buyers who are desperate for yield make unwise investments. They buy houses to fix up and rent out, but really can’t make a profit on this enterprise. People by shares of stocks, but eventually they become so overpriced relative to earnings and dividends, that no one really wants to buy them. Low bond rates make less and less sense, as Detroit and other cities declare bankruptcy.

      Any of these things would seem to create an end to QE within three years.

    • Patrik:

      There have been some articles recently implying that QE might end if unemployment continues dropping. You can query ‘ending QE’. Some senior Fed managers are keener than others to stop it. They tend to fear the longer term effects on the rest of the economy.

  4. Is It True?
    I saw an article awhile back that claimed Saudi Arabia’s oil addiction was so strong that when the kingdom’s residents all turn on their air conditioners, the use more power than the entire USSR (ooops, Russia) produces. Is this true? Any thoughts? Is that not a potential market for non-petroleum based electricity?
    In a broader view, how many ‘old wives tales’ are passed along day to day. Or is combating MSM propaganda worth the effort?
    Cheers, Chris

    • Hello, I am sure they must use a huge amount of electricity. I call them “Oil Cities” these huge decorated modern cities that have risen out of the desert where they do not belong. I have heard that Desalination that use to take make fresh water from the sea uses huge amounts of electricity.

      Aside from Dubai and Saudi etc, there are also places in the USA like Phoenix and Las Vegas and many other cities in the South and they are cities that would unbearable if not for air conditioning.

      • whenever the topic of saudi cities crops up, I am always reminded of Shelley’s immortal words:
        I met a traveller from an antique land
        Who said: “Two vast and trunkless legs of stone
        Stand in the desert. Near them on the sand,
        Half sunk, a shattered visage lies, whose frown
        And wrinkled lip and sneer of cold command
        Tell that its sculptor well those passions read
        Which yet survive, stamped on these lifeless things,
        The hand that mocked them and the heart that fed.
        And on the pedestal these words appear:
        `My name is Ozymandias, King of Kings:
        Look on my works, ye mighty, and despair!’
        Nothing beside remains. Round the decay
        Of that colossal wreck, boundless and bare,
        The lone and level sands stretch far away”.
        the same thinking applies to Phoenix and Vegas, and a thousand other places—but as yet few really admit to that.

    • The population of Saudi Arabia is 27 million; the population of Russia is 146 million. Saudi Arabia probably has 5 times as many air conditioners per capita, because Russia is a poor country in generally a cold climate. They don’t need air conditioners. So it is possible that this is true. Russia uses a lot more electricity in general than Saudi Arabia though, based on EIA data.

  5. Dear Gail and Others

    Relative to the chances for achieving a sustainable economy, there are a number of factors to put into your Mix-Master:
    1. A number of people have figured out that diets don’t work, and that humans are going to do what their hormones tell them to do over the long term. There is also increasing realization that chronic stress hormones are very bad for us. Artificial sweeteners, for example, have no calories but do stimulate stress hormones, which results in insulin resistance and diabetes (as well as cancer). So the best brains in the business are figuring out that the ‘thermodynamics model’ isn’t applicable when we are thinking about human eating behavior and chronic disease. Instead, we need to think about eliminating stress, whether that stress come from unresolved childhood traumas, from eating junk food, from social stress, or wherever.

    2. DOING is important. Being waited on hand and foot is not important:

    ‘Another experiment found that watching someone perform a ritual, say removing the wrapping on a wine bottle and uncorking it, does not heighten a spectator’s relish of their glass of zinfandel — only the pleasure of the bottle uncorker is enhanced. For the study, researchers had people mix lemonade and found that the act enhanced enjoyment for a drink mixer. But people who watched someone else prepare lemonade did not find the drink as flavorful.’

    3. Travis Beck of the New York Botanical Garden recently published Principles of Ecological Landscape Design. Briefly, humans have degraded the natural world and now we need to get about restoring it. We don’t restore it by building more Central Parks (which involved the destruction of what was there and the construction of an artist’s conception of the English countryside by blasting rocks, hauling rocks, half a million cubic yards of New Jersey topsoil, etc.). Instead, we have to adopt more modest methods which leverage natural forces. Beck’s concluding chapter is on the daunting task of adapting to climate change by accelerating the natural ability of ecosystems to move over time. But humans have erected very large barriers to movement in the form of urban areas and vast agricultural areas.

    4. Sepp Holzer, the Austrian permaculturist, has published Desert or Paradise: Restoring Endangered Landscapes Using Water Management. Sepp uses heavy construction equipment to reshape the landscape. Most permaculture practioners use fairly modest methods to reshape the landscape to manage water. Sepp says that ‘big damage calls for big remediation projects’. Sepp over the course of his adult life reshaped the ancestral farm high in the Alps until its assessed tax valuation is many multiples of the surrounding farms. Now his son operates the family farm, and Sepp goes to places like Spain and Portugal and does large projects centered on water. One of his points is that even in the relatively dry Iberian peninsula, there is usually plenty of water, provided it is managed well. And managing it well means constructing things like dams, deep holes (so there is always some cool water in the lake), and terraces for growing crops. A terrace near a lake can produce vastly more food than a dry Iberian slope. Holzer thinks that Earth can feed 20 billion people if it is properly managed.

    5. Gary Nabhan has published Desert Terroir. Gary is of Middle Eastern origins, but was born in the US and now lives in Arizona. This slim little book is a celebration of the intense flavors that the desert imparts to foods that grow there. The book is very much in the ‘doing’ mode. While the book is overwhelmingly joyous, there are clouds: the destruction of the Rio Grande village economies by the Border Patrol, the horrors of commercial fishing and the destruction of the fisheries in the Sea of Cortez by the big dams, and the uncertainties introduced by climate change.

    For the past few hundred years the world has pursued ‘more money’, a mechanistic definition of ‘the good life’, using fossil fuels to destroy the natural world, a blinkered understanding of human behavior, and the notion that agricultural technology can feed us through the magic of chemistry. SOME people now understand that all these pursuits are destructive.

    You can read and think and draw your own conclusions. I am not optimistic about reforming society. I think the Federal Reserve will continue to pour money into McMansions and nothing at all into Beck or Holzer style restoration. I am more optimistic about a few people ‘getting it’ and trading in some paper wealth for the real wealth of good health, happiness by doing, and by investing in the land and its capacity for production. Even for the people who ‘get it’, there is the necessity to form extended families and simple economies. To say that most current attempts along those lines are failures is an understatement. I do think it is important to understand the real issues:
    1. The primary production capacity of a well managed Earth is enormous. The problem is undoing our previous assumptions and reforming the political and economic and social structures which have arisen to perpetuate the status quo.
    2. Happiness and health happen when we behave with purpose and avoid stress. The problem is that the ‘consumption economy’ tells us quite a different story. As before, the problems are political and economic and social structures which perpetuate the status quo.
    3. We are going to have to pay a price for the pollution we have created: heavy metals, climate change, poisons, dysfunctional governments, dysfunctional societies, dysfunctional families. Each of us have to figure out whether we want, like Bill McKibben, to ‘save the world’, or else ‘join with a few people who have some ideas about how to survive’. At my age, one can also aspire to become ‘very high quality compost’.

    Don Stewart

    • When I think about reforming land, or doing any other kind of long-term upgrade–say adding a water pump with solar panels, that upgrade will last for some period of time, and then nature will undo it. The water pump will fail, or the solar panels will fail, or the reformed land will again be reformed by nature, or my family and I will have to move, and will not personally get the benefit of all the work that went into the upgrade.

      So reforming and all of these things make things better for a while, but make the shape of the future downslope worse–there are more things to fall apart. This may be OK if we personally are not going to live very long, but it gets to be problematic for the next generation. If land can now support, say, two children, but over the long term can support only one, will people be smart enough to figure out that they need to scale back, to one child, in the planning process? In fact, there probably will be more falling apart, in the next generation.

      You talk about the world supporting 20 billion people. The number of humans right now is way out of balance with other plants and animals. Humans can have more resources, only by taking them away from other plants and animals. So even if it looks possible to do, I do not think it in any sense makes sense to do.

      • Gail
        Two points in response. Well made earth works last for centuries. And the kinds of terraces Sepp Holzer builds are frequently just a few feet above the level of the lake. When the solar pump expires, people can use foot operated water lifting mechanisms such as are still used in India.

        Second point is about the carrying capacity of the land and the connection to water and having to steal from other species. If we look at the Amazon rain forest, it’s productivity isn’t so much about the quantity of water available to the Amazon, it is the fact that it is recycled continuously and lots of plants and animals use it and reuse it. In that sense, it is similar to the soil food web where energy input does end up near zero, but it feeds an awful lot of critters on the way down. Sepp Holzer advocates building water systems which are closer to the Amazon rainforest than to a sprinkler system operating in the Arizona desert. The point is that evolution by Nature or, just not quite so elegantly, design by humans can increase the biological activity possible on a given acre of land. I don’t wish to defend Holzer’s 20 billion number…you can read his book, look at his case studies, ponder the big increases in biological activity, and come to your own conclusions. But it is definitely no a zero sum game.

        Don Stewart

        • Yes, Hi Don and others, I guess our back up plan on water is to carry buckets from the river, pond or lake if you are close to water. Water will really be a problem as it takes power to pump it and move it through all those millions of miles of pipelines.

          I do have a hand pump acessable within walking distance at next door neighbor, but we are lucky for that as few do, but many live along some kind of lake, stream or river or even a pond.

          What worries me that the masses in the cities have no back up plans like that.


          • I think the most interesting take on water supply was that of the Romans
            As long as they had the means to feed energy into (food) and extract energy out of (muscle power) armies of slaves, then they could construct truly colossal aqueduct systems to keep their cities alive.
            A city can only really grow and thrive so long as the means to get water in and wastes out doesn’t depend on day to day muscle power.
            Being restricted to that confines any town to relatively small size

            • Hello, You know imagine after collapse, once again those special places with springs, rivers and water will once again be sought after places for survivors of this coming collapse. It sounds like a nice world again, once again the game and buffalo will roam the lands. The Oceans will once again team with fish. I bet this would only take 10-50 years to see these ecosystems restoring fast, but that is only – if most of us were gone.

              It almost sounds like pushing the reset button, but it seems that is coming as we are getting pretty crowded here on the planet as a whole. I wish there was another way to make this happen other than the sudden die off that we see out there. No hurry to see this happen and hoping it is after my lifetime, but I do think some day the Mother Earth will push the reset button!


      • Gail
        I forgot one thing about the Amazon. Scientists are concerned that by messing around with the ecology of the Amazon, humans may turn it into a desert. It will still have the same winds blowing moist air from the ocean over it. But it won’t have the riot of biological activity that it keeping it green today.

        Holzer’s project is to take degraded land that is near desert today, and turn it into a lush place closer to the Amazon…without importing water from far away. Just using what falls on the land.

        Beck describes a classic study of the Hubbard Brook ecosystem in New Hampshire. There are parallel streams coming down the mountain. Along one of the streams the scientists performed a clear cut. The results:
        1. Much more water ran off and down the creek
        2. The water temperature was much higher
        3. Dissolved inorganic nutrients levels were much higher
        4. Nitrate nitrogen was more than 40 times higher
        ‘In sum, viewed macroscopically, the forested and deforested ecosystems had remarkably different levels of function.’

        If you or a farmer or a State does restoration work, they significantly increast the ability of the land in question to support biological activity. Treating it as a zero-sum game misses the whole point.

        Don Stewart

        • Don:
          Please pardon the intrusion. Your dialogue with Gail has been most interesting, especially the last tidbit about the minor difference in the New Hampshire stream causing unexpectedly major changes in ecological impact. I’m not smart enough to figure out the implications of that, but they appear to be potentially phenomenal, especially as this badly overcrowded planet has to deal with decreasing availability of clean water.
          I was surprised to find that within a few miles of the Amazon, in Northeast Brazil, is a major desert with sand dunes. Not sure if they resulted from deforestation or over-farming, but they are most definitely there.
          Cheers, Chris

      • Hello, That is interesting Gail, my thinking on that is if we can do something that will last twenty years or more and perhaps our children will be able to repair it and keep it going, wells, solar etc. It is a worthwhile project. Although most do not have the money to undertake these projects at this time due to the economy. The government here in the US is too busy making student loans and no substantial solar projects have been undertaken, you know some have been built but a major undertaking on like like a military scale has not yet been undertaken. Which makes us wonder what is next.

        Kind Regards,


    • Any big projects in the recent past that reformed land invariably used big oil to do it.
      It seems to follow then that to reform the land to how it was would take equal or more energy input.
      We can get that energy in two ways–hydrocarbon energy input, or animal/slave labour
      Anything else is wish-engineering, to fit alongside wish-politics and wish-economics.
      Usually prefaced by the collective terms–we should do–we must do–why arent we doing. and so on
      I particularly like ‘accelerating the natural movement of ecosystems—one of the best yet! Something we’ve been doing for 200 years—so let’s do more of the same, and repeal the 2nd law of thermodynamics while we’re at it.
      To adapt Oliver Hardy’s immortal line —This is another fine mess you’ve gotten me into.

      • Dear End of More
        The need to accelerate, and how to accelerate, the natural migration of ecosystems is currently a topic for debate. Albert Bates observes that only one significant tree species in Tennessee has historically been able to migrate as rapidly as climate zones are currently migrating. So the question arises about planting trees in anticipation of the movement of climate zones. Gary Nabhan is doing that at his place at 4000 feet elevation in Arizona. Instead of grassland, he anticipates Sonoran desert in the future.

        I don’t think the science is yet settled. For example, studies show that spring ephemerals should only be able to migrate about 30 feet each year. Which doesn’t leave them enough time to migrate from the Gulf at the end of the last ice age to southern Ontario where they now appear. Studies implicate white tail deer in facilitating their movement. White tail deer can easily travel up to 100 miles per year.

        Its an interesting question…can we outrun our headlights?

        Don Stewart

        • Don,
          With all humility I propose the question is less whether we can outrun our headlights, but whether or not we’re even seeing all that the headlights are capable of illuminating, and whether our ‘current understanding’ of the material, its energy and properties and characteristics — including its ability to morph under various circumstances — far exceed the current levels of science to provide reliable answers.
          When I say — tongue in cheek — that ‘science is always wrong’ , it is with great respect for the skills and dedication of the scientists, and even greater awe at the tasks they undertake. It’s impossible to ‘get it right’ the first time or the second, and after that we find the scientists continually upgrading their opinions and views. It’s never-ending.

          Cheers, Chris

  6. Dear Gail
    Relative to the choices for a New Hampshire mountain area. Here is a short passage from Principles of Ecological Landscape Design. He is reacting to a recent study which showed that fire had been used in Horse Cove in the Blue Ridge mountains of North Carolina for 8000 years.

    ‘Delcourt and Delcourt concluded that Native Americans in the area made selective use of fire, burning dry areas to encourage the growth of useful fire-adapted species, without creating fires of such intensity that they would impinge on wetter areas and north-facing slopes. In effect, Native Americans were using an intermediate disturbance regime to create a patchy landscape with high levels of vegetational diversity.’

    So we have choices between very low disturbance such as simply gathering dead, fallen branches to make fires through intermediate disturbance methods such as the Native Americans in Horse Cove practiced through high disturbance such as a Midwestern Prairie turned into a field of GMO corn up to total destruction such as Fukushima. On the Restoration side of the equation, we can use very simple methods such as chop and drop plant maintenance up through intermediate methods such as building swales with hand tools and the use of fire as Native Americans used it all the way up to the really heavy lifting done by Sepp Holzer. The end result of a Holzer style restoration is the patchy landscape with high plant and animal diversity which is friendly to humans that the Native Americans achieved in Horse Cover. It is also possible, of course, to be a Fundamentalist and aim at some version of what Mother Nature would create without any human intervention. That outcome is likely to be considerably less friendly to humans than a patchy, diverse system.

    Given all the uncertainties surrounding fossil fuels and climate change and economic collapse, how can anyone know what to aim for? As it turns out, I am going to a book reading today by Lyle Estill, author of Small Stories, Big Changes. The stories are mostly about people around here, with a few foreigners like The Mother Earth News crowd and Albert Bates.

    A few quotes from the chapter by Rebekah Hren, a woman of many talents who makes her living with solar electricity.

    ‘This chapter leans more towards a crisis of faith, towards doubters in need of companionship, towards the weary and wondering….At 15 I started to doubt the world. At 20 I gazed with a mix of excitement and trepidation at my very own 10 acres tucked in the woods….I spent my days learning to plumb and reading about self-sufficiency. At 27 I graduated to scraping lead pain from endless yards of salvaged wood in fits and starts of house restoration projects, learning to wire solar panels, proselytizing about peak oil. At 30 I moved on to writing DIY sustainability books and hooking up illegal greywater tanks in the city. Edging closer to 40 now, I wonder why: why I feel so damn guilty leaving the refrigerator open one second longer than absolutely necessary (or having a fridge at all); why I long for a thermostat on the wall; why I save nearly every piece of plastic that crosses my path; why I can’t in good conscience buy strawberries in January.

    Don’t get me wrong, these words are not a lament or regret for paths chosen; rather its a desire to understand…that something wasn’t quite right with the way the world goes about its business. The more I learned, the more this feeling was confirmed. As the years went by, the choice became stark: retreat inwards, wall myself off, and live with the growing despair that comes with feeling ineffectual and powerless, or divert my actions and gaze outwards and try to become an agent of change….I learned that taking action in the face of seemingly insurmountable problems makes you feel great. Taking actions can build stronger communities and networks, even if it doesn’t move you much closer toward solutions to problems of global scale. And strong communities are rare, sweet, and still all-too-easily dissoluble.’

    Back to me. None of us know for a certainty what we ought to be doing. There are just too many variables and feedback loops. But I think that the words that Rebekah and others have written in this book have some nuggests of wisdom.

    Don Stewart

          • Dear Gail, End of More, and Others
            For a different view, also represented in Lyle’s book, see this interview yesterday with Tim Toben. As a very recent, non-volunteer to the Simplicity approach to life, Toben offers a different perspective on how good lack of money can actually feel.


            To me, a critical dividing line is between those who want to save the world and those who want to sit on the front porch with Toben and have a nice, long talk, or join him for a communal lunch on Sunday, or learn to make kim-chee in a class. I think that the early converts (Rebekah Hren, Albert Bates, Lyle Estill) are realizing that there probably isn’t anything anyone can do to save Financial Capitalism and its greedy children. Greening doesn’t work. Greenwashing makes things worse.

            The refreshing option that Dmitry Orlov and Gail offer is Collapse. (Gail will say that this is a gross misrepresentation of her views. Sorry, Gail, but thoughts have wings and roost in strange attics.) The insanity is going to fail and then it will go away and things may get better. Maybe more of us will be sitting on the front porch with Tim Toben, or trading work by helping each other with our gardens.

            One of the panelists yesterday was remembering his father, who ‘was the last person I knew who lived most of his life in a non-cash economy’. I would recommend that you have a long talk with him also to get some hints, but he is a preacher in one of his professions and sermons aren’t my cup of tea.

            Don Stewart

      • Don
        That was an interesting link
        But he still makes the classic error of using Cuba as an example. Cuba is a tropical island, run as a socialist dictatorship
        pretty much anything grows there all year round—and it is not a variable climate continent run as a free democracy.
        Also Iceland is an anomaly, they have more thermal heat than they know what to do with.
        There is an overall disregard of the fact that humankind evolved as a tropical species, All our ancient civilisations are to be found in the region influenced by the tropic of cancer, where you have landmass and reliable heat.
        we we able to move out of our tropical/sub tropical homelands only by burning fuel to keep us warm. Which is why the great civilisations grew around the fertile crescent, and on the shores of the Mediterranean..India and China etc, not Canada and Siberia. There just wasn’t enough food/fuel to carry vast numbers of people other than at a bare subsistence level
        Sufficient heat is the key—however we choose to use it, either by eating it or using it to keep warm. If there isn’t enough, we die. It really is that simple.

        • Dear End of More
          Things are never simple. Humans are able to create technologies. For example, we have invented rocket stoves which burn twigs which fall from trees and create heat high enough to do blacksmithing. Edo Japan forbade the cutting of trees for firewood, they’re not in the tropics, and they didn’t freeze in the dark.

          I won’t deny that there has been a great deal of stupid cutting of trees. But put the blame where it belongs–on the stupidity. Humans can survive without deforesting the planet. Get behind Albert Bates work on eliminating the ‘three rock cookstove’, if you want to make a difference. Or promote fermentation for the preparation of food. Study how people who lived in fuel poor, cold climates adapted.

          As for Cuba, I am no expert. But what I hear from people who have visited is that they are dealing with very poor soils. If you have depleted your soil with industrial agriculture (which they did), then fertilizers disappear suddenly (which they did), and you try to build soil fertility while also producing the maximum amount of food, you are going to have a lot of problems.

          Don Stewart

          • On the heat question, I meant to infer that powerful civilisations evolved from countries where keeping warm wasnt an overiding problem, Greece, Eygpt, Persia and so on
            As i understand it, Japan was pretty much a medieval society until the 1860s. They adopted a western industrialised lifestyle, but had to invade Asia to support it within 70 years because they had no resources of their own
            I would contend that without heat engines, most of the civilisation in the northern hemisphere is now unsupportable on the scale we are used to

            • Dear End of More
              We are coming from such different places that I am not sure we have much to discuss. As I understand your position, if it isn’t an industrial society, it was worthless. The Japanese living in the Edo period thought they had a pretty high civilization. They were mostly not miserable people (there will be some miserable people living in palaces). Kris DeDecker’s post today is about mechanical machines run with falling water. A modest population living in favorable places can get some of the heavy work done without fossil fuels. And, as I said, the rocket stove can reach quite high temperatures without exhausting the forests and enable blacksmithing..

              I agree with you that an industrial society cannot be sustained without the energy sources we have today. The question is whether that is the end of the matter. If there are ways to live well without an industrial society, then, in my opinion, it is not the end of the matter.

              Another dead end in the discussion is the matter of ‘feeding the 7 billion’. As I have explained, I just don’t think there will be 7 billion in a few years. Most people in the industrialized countries have no idea how to live without all their helpers. So my base case is a very much smaller population in what are currently the industrialized countries. But, if they take a page from Edo Japan, they may be living pretty good lives. It all depends on how they rise to the challenges.

              There are many other dead ends. Two of them are the availability of metals and the exhaustion of soils. I think the metal ores are a real problem for humans in the long run…but we will live on salvage for a long time. Soils will come back as soon as we stop poisoning the soil food web and provided we don’t start plowing again.

              I have speculated that humans may revert back to hunting and gathering. The Plains Indians abandoned agriculture once their numbers were reduced by European diseases and they got horses from the Spanish. How our descendents will deal with those matters is speculation. But I don’s see it as a reason for despair to keep us from doing today what we need to be about.

              Don Stewart

            • Hello, Interesting Don. I wonder what your thoughts are on the timeline for Peak Oil to be on the National News and thus the begging of our Long Emergency? You mentioned a few years, I would kind of go along with you, but I think perhaps as long as ten or twenty years.

              I also agree there will be groups of survivors, unless we have an all out nuclear war some areas will fare better than others. It may be like the old frontier again the border towns, but this time they will not be fighting Indians. Perhaps instead invaders from the cities.


            • Scott
              I think we are in Peak Oil right now. The peak of global oil consumption per capita is pretty clearly in the rear view mirror. Oil exports also seem to be in the rear view mirror. I tend to agree pretty much with Gail and Korowicz about the implications of reductions in the ability of people and corporations to earn the money to repay debts, and governments to tax to pay down public debts.

              Another perceptive voice is offered by Charles Hugh Smith. Smith sees oil as a lesser problem, with corruption in the form of monopolies and cartels and government behavior and also the hollowing out of jobs from the assembly line to white collar and professional work by computers and the internet. Smith thinks that Karl Marx had it right all those years ago when he said that mechanization would simultaneously drive down the cost of mass produced products while simultaneously reducing the ability of the workers to buy those products. Smith thinks that we are in a crisis now where jobs and careers are disappearing. I tend to agree with Smith on a lot of things.

              To your specific question about 10 or 20 years to Peak Oil. What I think will happen is what is already happening: we will substitute to try to avoid the high price of oil. Back in the 50s there was a lot of aimless driving around because gasoline was cheap and maybe you could pick up a girl. Spielberg’s American Graffiti captured that moment in time. I think that cruising is now totally dead. Young people find non-oil dependent ways to find each other. When it comes to things like moving boulders with oil powered equipment, I think that will last a long time. Gail might be right that it will all collapse very suddenly. I see that as a distinct possibility, but think the most likely course is a continuous decline in some of the things we have taken for granted. I suspect that we will have some monetary event which will wipe out paper assets. It might be hyperinflation, just steady theft by the government (which is what is happening now), or a collapse by many corporations and insurance companies and the like. I expect the Federal Reserve to continue to not have a clue and to continue to make things worse.

              I would like to pose a question: Why do people buy such fancy cars to commute in? When I was in a car pool back in the 70s, the cars were all very plain. One of the cars was an elderly post-war Volkswagon from Germany which had a hole rusted in the floorboard. Nobody had air conditioning. Now people drive to work in mobile palaces. My theory is that back in the 70s we were pretty secure with pretty good jobs and didn’t need the luxury and ostentation that people seem to need now. Now, there is so much stress and things are so awful at work that they compensate with chariots to go to work in.

              Sorry to be so cheerful…Don Stewart

            • Thanks Don, I agree and was just wondering when it will be a headline news item on the nightly news which it is not now. Not something that many want to talk about right now. I did hear that they are not building anymore refineries to speak of since the oil guys know that they will not be well supplied.

              End of More is right, that about says it all!


          • Hi Don
            no I’m not saying that a non-industrial society is worthless—quite the opposite
            what i am saying is that industrial society and large populations are co-supportive, co-productive but ultimately unsustainable
            You use the term ‘modest population’ which is key to it all
            Populations, when given free rein, demand more of their environment.
            When the Japanese saw the possibities in complex machines, they used their talents to create military machines in order to get hold of more. We did the same during the last century. Europeans carved out a dozen empires between them. This is fundamental human nature.
            I agree we wont reach 8-9 billion, what I try to put over is the manner by which we will fail to get there. Their mothers are alive right now, and are not going to forgo their inclination to breed. That means a very messy clash of reality against genetics,
            we won’t have volunteers, so we must expect the more unpleasant side of human disposal

            • Dear End of More
              I think it is worthwhile for people to contemplate the Big Red One going to North Africa to fight the Germans in 1942 or 3. Sam Fuller, the moviemaker, landed in North Africa and ended up in Berlin. In an interview when he was an old man in Paris, he said that 98 percent of the people who landed in North Africa with him did not make it to Berlin. The odds must have been much worse for the Germans.

              So…you’re a young guy about to land in North Africa and you realize that you have a 2 percent chance of making it. But you understand that your own actions will have some bearing on whether you make it or not. There is a large element of chance, but it’s not all just chance. Do you give up in despair?

              So I think that Sam’s secrets were threefold:
              1. Understand the reality of the situation
              2. Take the self-protection measures that you can
              3. Be lucky
              But so many people nowadays say ‘well…it’s hopeless…so I won’t do anything’. Then they sit around the internet campfire and think up things which might happen which might kill those who are taking proactive steps. Lots of things COULD happen…but most of them won’t. Ugo Bardi in his second interview said that in Greece and Italy the populations are suffering quietly. We know that the Irish died quietly. Those who assume that violence is a foregone conclusion are, I think, wrong. It might happen…but maybe not.

              Just to rehash some Irish history. Some Irish heard that the British officer had some food. So they went down to his office and asked for food. He said he had no food, but they should go to the next town. They began to walk to the next town and many died along the way. When they got to the next town they were told that there was no food, and to go back to where they came from. So they began to walk back and many more died along the road.

              In my limited experience, this is the way that starving and homeless and helpless people act. Not at all like in the movies.

              so, yes…I see the end of industrial civilization and I see a lot of starvation in countries with complex supply chains. But, like Sam Fuller, I expect some minority to make it through. And at the other end, if you are lucky, will be the girl you left behind.

              Don Stewart

          • Don and Scott
            So I think that Sam’s secrets were threefold:
            1. Understand the reality of the situation
            2. Take the self-protection measures that you can
            3. Be lucky

            To cover those three critical points
            I began to understand 10 years ago
            I started taking certain self protection measures about 7 years ago, (felt like an idiot then–now I don’t) Started writing my book about it all 3 years ago.
            Looking back on my life, I think I’ve been incredibly lucky.(No debts, sane kids etc) but of course I am a product of the cheap oil era, that’s where my job and prosperity, and present security came from. Some hard work maybe, but facilitated by oil that underpinned my (40 yr self employed) workbase. My grandchildren will not have that oil-support no matter how hard they work.
            As to a few other points above, people die quietly when they have no other option. Ireland was controlled by British military, starving people were unarmed. Had they been armed they would have acted differently. The famine was in certain areas, the rest were reasonably OK for that period.
            Metals depletion will be problem, as to living on salvage, that conveniently ignores the fact that to make anything you need heat, and that means burning finite resources again.
            Soil depletion will go on until we reach a balance between taking from the soil and returning stuff to it. Nature functions in a recycling loop. Mankind broke that loop, we are now paying nature’s price.
            On the point of ‘fancy cars’..that applies to everything we consume. We prefer to live in nice homes with heating etc, rather than a pile of burning logs in the middle of the floor with a hole in the roof. Cars are produced with the same intentions, buyers prefer them, and thousands have jobs making them. I lusted after a 60 year old classic car–till I drove one last year—it seriously frightened me by not stopping when I told it to! It must remain as eye candy.
            You are sitting facing an oil-based computer screen. You are not an ascetic who has chosen to forgo the trappings of the civilisation we all belong to.
            As to ”back in the 70s” that again drops us back in the era of cheap plentiful oil. If you have cheap oil you have cheap everything. You also had only half the current world population demanding a share of it.
            No matter what idiot was in power back then—as long as the oil flowed, most people were OK. As soon as oil got tight, like now, our politicians continue to act like their predecessors , ignoring that critical oil ingredient. (elect me and I can promise you growth is the ultimate classic).
            In 1970 the USA moved into oil deficit, which meant they were faced with the same problem as the Japanese in the late 30s. Either reduce their industrial standard of living, or secure supplies from elsewhere.. The move to aggressive ‘oil politics’ was inevitable. World oil had to kept flowing at all costs.
            Right now, the industrial west is in a state of denial over energy, which is why you read comments like ‘gentle downsizing’ or ‘readjustment’ or ‘alternative energy’ and suchlike, and the craziest of all—‘sustainable growth’–the ultimate politics of the flat earth society

            • Dear End of More
              Late in WWII Ancel Keys, a scientist in Minnesota, studied the effects of semi-starvation. His subjects were reduced to around 1200 calories per day and kept there for several weeks. He monitored their condition with a variety of observations and measurements. Below is a link to a recent article describing Keys study, and an excerpt from the article. Today, the principal interest in the study is the ‘rebound effect’ when people stop starving themselves after trying to lose weight.

              But if we look at it from the standpoint of the 3 Day Food Supply and financial collapse and the collapse of food supply chains, it may give us a clue as to the usual behavior we might expect. It doesn’t sound like testosterone pumped rampaging mobs to me. Some of the subjects mutilated themselves.

              Don Stewart


              During the experiment, Keys’ subjects became totally preoccupied with food. They would often dawdle for hours over their meal, and they developed “striking changes” both physically and mentally. The men became depressed, listless, unable to concentrate, socially withdrawn, and apathetic. They also began to neglect their personal appearance: they no longer brushed their teeth, combed their hair, or shaved. And they lost all interest in sex. Keys called the syndrome “semi-starvation neurosis.” Incidentally, some researchers more recently believe that hunger causes cognitive changes in people such that those who go on “hunger strikes” have serious mental changes that result in impaired decision-making skills.

          • hi again Don
            you make some valid points about those experiments, but it is important to remember they were just that—experiments
            the people involved knew they were taking part in an experiment and i assume they could call a halt to it. and it only covered food
            I try to deal in the reality where it won’t be an experiment, and there will be no support in any respect from anywhere.
            Our politicians try to steer us into the future by looking at the wake of our past, (in fairness they have nothing else to go on) it is important not do the same thing and base any concepts of that future on what we have experienced already

          • To pur forward another relevant point, if there’s a sudden breakdown in food supply chain, anyone able to do so will know what it means, and react while they sill have the strength. they won’t wait around to get listless in a semi starvation state

            • Dear End of More
              All this is, of course, speculation. It’s not what I have chosen to prepare for. But if everything collapsed in a week or less, food and fuel and water and sanitation would quickly disappear. It seems to me that the great bulk of the people would be in shock and sink into a listless state and die rather quickly. I previously guesstimated that perhaps one percent of the population in the US might survive such a scenario. I based that guess on the fact that in my area about 2 percent of the food is supplied with a very simple supply chain. Assuming that some bad things happen, a 1 percent survival rate doesn’t sound outrageous. If almost everyone is dead in 30 days, then we have to think differently about what the problems are for the survivors.

              I have heard repeatedly during the course of my life that the poor people are going to attack the rich suburbs, that homeless people commit many violent crimes, etc. Those ideas are mostly just wrong. I’m not saying it will never happen, but it hasn’t been the pattern.

              Sewage is another issue. If there is a sudden collapse, people will have to defecate and then they will be empty. If there is a 3 day food supply, they need to defecate for 4 days. It’s not like everyone will be drowning in sewage. Urine is not a problem.

              I have emphasized the role of hormones in motivating human behavior. When a person is starving, preservation hormones take over…not the aggressive hormones.

              Just because it might be the rational thing to do to get as far away from the city as possible doesn’t mean that people will do so. The rational thing to do now is to wean ourselves off fossil fuels, and very few people are doing that. If a government of any kind survives the initial collapse, it will certainly be putting out the word that ‘food and water will arrive tomorrow’. And people will believe that for a few days and by then it will be too late to take any aggressive, energy costly, action.

              It’s quite possible to spin an endless array of other scenarios. It would be easy to make up a thousand different scenarios, each with its own appropriate action today. I don’t find that a particularly rewarding thing to do. I assume that providing for ones own water and as much food as practical with a simple supply chain and some tools is worthwhile, and that things may get very quiet real fast as people die. But I don’t claim any special powers of prophecy.

              Don Stewart

            • Even if the collapse is “sudden, straight down,” I really doubt it will be a week or less. There are built in surpluses in the system–stores with food, homes and restaurants with inventories, hot water tanks with water in them, trucks with tanks full of gas. Things seem to take time–more than I could imagine when I first heard about the issue.

            • Dear End of More
              Traditionally, armies lived off the pillage of the land. The soldiers were relatively well fed because they could steal what they wanted. If they began to run short, then they got busy and did some more pillaging.

              The US Army is very well fed and I imagine has a month or so of food stashed away in mahy locales around the country. When that begins to run out, I can see that hungry military personnel may be the biggest threat to any homesteaders.

              Don Stewart

  7. Dear Gail and Others and Chris Johnson
    Dear Gail and Others
    Here is an amateur’s attempt to explain what Permaculturists who form the landscape, from those who leave piles of rocks to provide habitat up to Sepp Holzer with his bulldozers. I will use Principles of Ecological Landscape Design as my source.

    1. A plant delivers multiple ecosystem services. One service, for example, is yield. Another service is resilience in the face of stress. No single plant can maximize both functions. Ecologists have identified the various functions we can expect plants and plant communities to perform. The findings are that ‘far more plots with 8 and 16 species were able to perform two, three, and four ecosystem functions’. Increasing the number of species to, say, 50 does not have a large effect on the ability to perform ecosystem functions. In short, the 20/80 rule is working. We can garden effectively.
    2. Ecologists identify alpha, beta, and gamma diversity. Alpha diversity is within a particular ecosystem. Beta diversity is between any particular ecosystem and a neighboring ecosystem…as, for example, between a dry prairie and a seasonal wetland. Gamma diversity is diversity over a large piece of terrain. As, for example, a terrain that included dry prairie, fire adapted trees, north slope trees, seasonal wetlands, and beaver ponds.

    Now what Permaculturists may be thought of as doing, first, is choosing a limited palette of plants (and animals and insects and microbes and birds) which will perform many functions, with particular attention to human needs. Second, Permaculturists are trying to create many different ecosystems in a given piece of terrain. They sometimes call this ‘stacking functions’. So Sepp Holzer will use his bulldozers to manage water and gradients such that seasonally wet and permanently flooded areas exist along with well drained areas. In the permanently flooded areas, he will have deep water which remains cool in the summer and warm in the winter as well as surface water which responds much more to air temperature. In the selection of plants, he will have sunflowers planted on the south side (northern hemisphere) of leafy greens to provide needed shade in hot summers. He will include shelter for amphibians and snakes and birds which eat problem insects.

    Nature has made a few such blessed spots, but if we want more of them we are going to have to create them. And, of course, stop the destruction of those that Nature created. Evolution is a wondrous mechanism, but there are some things it cannot do without humans. Nature has not, so far, evolved the doughnut hole. The purpose of the doughnut hole is even cooking throughout a mass a dough. It isn’t clear why evolution couldn’t discover such a useful mechanism until humans came along…but it didn’t. Maybe humans were invented so that the world could have doughnut holes?

    If we go back and consider point 1, we find that the biological activity is more than the sum of the contributions of the individual plants. That is, plants and animals and insects and microbes are synergistic. So far, humans have mostly been destructive. We have reduced biological activity pursuing some single purpose. A field of GMO, fertilized, irrigated corn is a good example. It produces biomass but fails miserably at all other functions.

    Here is the concluding paragraph on page 123:
    ‘Creating landscapes that harbor diverse plant, animal, and microscopic life is not merely a matter of acting responsibly. Ecologists have proven that ecosystem function is tied to biodiversity. Even functions as basic as productivity and retaining nutrients—growing well and not needing constant fertilization–are improved in more diverse plantings. If we are to ask our built landscapes to provide more and more of the ecosystem services formerly provided by the natural environment, that is, to perform multiple functions consistently over time, we will need to build them in diverse ecosystems. The biodiversity of an ecological landscape is not a virtue but a necessity.’

    And so the best permaculturists try to build alpha, beta, and gamma diversity on each and every plot while choosing the inhabitants to provide a rich web of life which serves human needs. If humans persist with the bare ground planted with GMO corn, heavily fertilized, and irrigated, then we are a noxious weed which is choking biological life.

    Don Stewart
    PS to Chris
    Making the job harder is the fact that climate is changing. When a landscape designer sits down with, let’s say, a piece of land in Spain which is rapidly turning into desert, WHAT does he try to visualize? The way the land might look today with the application of good ecological design principles? The way it needs to look in 20 years with a different climate? The way it needs to look in 50 years? To some extent, people try to smooth this conundrum over by saying that we have to plant and then let the system evolve. The system will evolve (in a stable climate) whether we want it to or not, unless we apply brute force to stop it from changing. If the systems are capable of adjusting to climate change simply because migrating birds drop seeds from neighboring climate zones, then maybe everything works OK. Maybe we have the ‘spring ephemeral’ phenomenon and the white tailed deer are going to save us. But big trees, which are in many ways the anchors of the humid zone ecosystem, are more of a question. At least as I understand it.

    • Thanks Don,
      That’s pervasive. Deforestation and reforestaton are critical. The Sahara is said to be moving south at about 35 miles per year. A 10mile by 10 mile square of African forest is consumed each week — for firewood to cook the daily meal.
      Maybe we can put up a pistachio plantation in Iberia. With their local climates swinging around — but mostly drier — that could be a good bet. Wonder what Xabier would say?

      BTW, here’s a NYT article by Thomas Friedman about these subject as related to Kansas and other places. He writes about Wes Jackson of The Land Institute who is determined to return the prairie to a diverse wilderness with complex ecosystems that include perennials with deep roots. I thought you might find it interesting.
      Cheers, Chris

  8. Don’s reference to Sam Fuller’s experience in WW2 illustrates what I mean by a ‘soldierly’ attitude to the challenges we face, rather than despairing, or just trying to scrape by, or hoping it will all go away.

    Ordinary soldiers facing great danger can’t afford not to face reality (only Hitler’s chiefs-of-staff got to indulge in that luxury, far from the front line. One might well say the same for our indulged and corrupt politicians today).

    Despite hard training and excellent equipment, you might still get unlucky,or the idiot decision of a general might even deliberately ‘sacrifice’ you (as the Russian generals were careless of their men’s lives in WW2) but there is no excuse for not training and not doing your best to survive.

    And training is a group activity, not solitary: in our context, if people are interested in adapting to what we face, one’s duty is to pass the information on and help them.

    Small actions (the 20 to 80 principle) can make the difference between survival and death – an illustration from history: reading the autobiography of a Syrian Knight who fought the crusaders 800 years ago, I’ve noted that a common cause of death among these brave, very well trained and heavily armoured men was often something as simple as the main saddle strap breaking or having been badly fastened by the groom, or the horse just stumbling on a rock or into a crevice. Badly fastened strap: carelessness in a small detail leads straight to death. A little rock: just plain bad luck, completely random. Without these small accidents, the chances of surviving even a pitched battle were quite high (as is well known most killing was done of prisoners after the battles were over, rather different to the two world wars when armaments were more destructive.) This knight ended every tale with the reflection that each man has his own fate, and it is the Will of Allah to which we must bow.

    The moral, if you are a scared 21st century citizen and not a medieval knight ? Get yourself the equivalent of ‘armour’ if you can. If others can’t, don’t fret over it, what can you do for them after all? One can’t help the bad luck, but one can try to avoid the carelessness. And perhaps keep alert look out for the rocks even if one can’t hope to spot all of them………

    Only the other day, I avoided what would have been a head-on collision with a car at a blind corner while riding my bike, because my ears and experience told me that the car I could hear approaching from round the corner was being driven carelessly by a young idiot who would probably cut the corner completely at speed thinking the quiet back road was empty. So I got on the pavement, just in time to avoid him. If I’d had earphones on like so many do while riding, or had been day -dreaming and not alert, I wouldn’t be writing this, I’d just be another back road fatal accident statistic. Probably kicking myself at St. Peter’s Gates for being a damn fool who let myself be killed by another damn fool! I would have sealed my own fate through carelessness.

  9. Dear End of More and Others

    Dmitry Orlov says today:
    ‘The central problem with community organizing is that the sort of community that stands a chance post-collapse is simply unacceptable pre-collapse: it is illegal, it is uncomfortable, and it is unsafe.’

    I participated in a pretty big Permaculture webinar a couple of days ago. Repeatedly, the discussion included doing things which are illegal. People living in illegal housing (such as shipping containers or houses that cost a couple of hundred dollars) and not using a ‘proper’ sewage system and keeping animals which are not legal and capturing rainwater for drinking and recycling greywater.

    We actually do have people who are doing many of the things which will be necessary during a collapse. They are endlessly persecuted by the various levels of government. That is why I sometimes opine that collapse of governments is a key to survival.

    How things will play out between the relatively peaceful souls who just want to get about securing their food and water and shelter and the criminals, I don’t know. I doubt that governments are going to be much help…and they are certainly an obstacle today.

    Don Stewart

    • Don

      Such terrible ‘criminals’: capturing rainwater, not living in MacMansions – quite right, the authorities ought to do something!

      It makes one despair: hyper-regulation by nobodies in government employ is a great obstacle.

      As for dealing with criminals: a love of fresh vegetables is not inconsistent with martial arts, and other means of self-defence……

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