Diminishing Returns, Energy Return on Energy Invested, and Collapse

What do diminishing returns, energy return on energy invested (EROI or EROEI), and collapse have to do with each other? Let me start by explaining the connection between Diminishing Returns and Collapse.

Diminishing Returns and Collapse

We know that historically, many economies that have collapsed were ones that have hit “diminishing returns” with respect to human labor–that is, new workers added less production than existing workers were producing (on average). For example, in an agricultural economy, available land might already have as many farmers as the land can optimally use. Adding more farmers might add a little more production–perhaps the new workers would keep weeds down a bit better. But the amount of additional food the new workers would produce would be less than what earlier workers were producing, on average. If new workers were paid on the basis of their additional food production, they would find that their wages dropped relative to those of the original farmers.

Lack of good paying jobs for everyone leads to a need for workarounds of various kinds. For example, swamp land might be drained to add more farmland, or irrigation ditches might be added to increase the amount produced per acre. Or the government might hire a larger army might to conquer more territory. Joseph Tainter (1990) talks about this need for workarounds as a need for greater “complexity.” In many cases, greater complexity translates to a need for more government services to handle the problems at hand.

Turchin and Nefedof (2009) in Secular Cycles took Tainter’s analysis a step further,  analyzing financial data relating to historical collapses of eight agricultural societies in operation between the years 30 B.C. E. and 1922 C. E.. Figure 1 shows my summary of the pattern they describe.

Figure 1. Shape of typical Secular Cycle, based on work of Peter Turkin and Sergey Nefedov.

Figure 1. Shape of typical Secular Cycle, based on work of Peter Turkin and Sergey Nefedov.

Typically, a civilization developed a new resource which increased food availability, such as clearing a large plot of land of trees so that crops could be planted, or irrigating an  existing plot of land. The economy tended to expand for well over 100 years, as the population grew in size to match the potential output of the new resource. Wages were relatively high.

Eventually, the civilization hit a period of stagflation, typically lasting 50 or 60 years, as the population hit the carrying capacity of the land, and as additional workers did not add proportionately more output. When this happened, the wages of common workers tended to stagnate or decrease, resulting in increased wage disparity. The price of food tended to spike. To counter these problems, the amount of government services rose, as did the amount of debt.

Ultimately, what brought the civilizations down was the inability of governments to collect enough taxes for expanded government services from the increasingly impoverished citizens. Other factors played a role as well–more resource wars, leading to more deaths; impoverished common workers not being able to afford an adequate diet, so plagues were more able to spread; overthrown or collapsing governments; and debt defaults. Populations tended to die off.  Such collapses took place over a long period, typically 20 to 50 years.

For those who are familiar with economic theory, the shape of the curve in Figure 1 is very similar to the production function mentioned in Two Views of our Current Economic and Energy Crisis. In fact, the three main phases are the same as well. The issue in both cases is diminishing returns ultimately leading to collapse.

There seems to be a parallel to the current world situation. The energy resource that we learned to develop this time is fossil fuels, starting with coal about 1800. World population was able to expand greatly because of additional food production permitted by fossil fuels and because of improvements in hygiene. A period of stagflation began in the 1970s, when we first encountered problems with US oil production and spiking oil prices.  Now, the question is whether we are approaching the Crisis Stage as described by Turchin and Nefedov.

Why Might an Economy Collapse?

Let’s think about how an economy operates. It is built up from many parts, over time. It includes one or more governments, together with the laws and regulations they pass and together with their financial systems. It includes businesses and consumers. It includes built infrastructure, such as roads and electricity transmission lines. It even includes traditions and customs, such as whether savings are held in gold jewelry or in banks, and whether farms are inherited by the oldest son. As each new business is formed, the owners make decisions based on the business environment at that time, including competing businesses, supporting businesses, and the number of customers available. Customers also make decisions on which product to buy, based on the choices available and the prices of these products.

Over time, the economy gradually changes. Some parts of the economy gradually wither and are replaced by new parts of the system. For example, as the economy moved from using horses to cars for transportation, the number of buggy whip manufacturers decreased, as did the number of businesses raising horses for use as draft animals. Customs and laws gradually changed, to reflect the availability of automobiles rather than horses for transportation. In some cases, governments changed over time, as increased wealth allowed more generous social programs and wider alliances, such as the European Union and the World Trade Organization.

In the academic field of systems science, an economy can be described as a complex adaptive system. Other examples of complex adaptive systems include ecosystems, the biosphere, and all living organisms, including humans. Because of the way the economy is knit together, changes in one part of the system tend to affect other parts of the system. Also, because of the way the system is knit together, the system has certain requirements–requirements which are gradually changing over time–to keep the economy operating. If these requirements are not met, the economy may collapse, just as the eight economies studied by Turchin and Nefedov collapsed. In many ways such a collapse is analogous to an animal dying, or climate changing, when conditions are not right for the complex adaptive systems that they are part of.

Clearly one of the requirements that an economy has, is that it needs to be wealthy enough to afford the government services that it has agreed to. Scaling back those government services is one option, but when these services are really needed because citizens are getting poorer and finding it harder to find a good-paying job, this is hard to do. The other option, unfortunately, seems to be collapse.

The wealth of an economy is very much tied to the availability of cheap energy. A huge uplift is added to an economy when the (value added to society) by an energy resource such as oil greatly exceeds its (cost of production). Over time, the cost of production tends to rise, something measured by declining EROI. The uplift added by the difference between (value added to society) and (cost of production) is gradually lost. Some would hypothesize that the falling gap between (value added to society) and the (cost of production) can be compensated for by technology changes and improvements in energy efficiency, but this has not been proven.

Our Economy is Already in a Precarious Position

As I indicated in my most recent post, if a person computes average wages by dividing total US wages by total US population (not just those employed), the average wage has flattened in recent years as oil prices rose. Median wages (not shown on Figure 2) have actually fallen. This is the same phenomenon observed in the 1970s, when oil prices rose. This is precisely the phenomenon that is expected when there are diminishing returns to human labor, as described above.

Figure 2. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

Figure 2. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

The reason for the flattening wages is too complicated to describe fully in this post, so I will only mention a couple of points. When consumers are forced to spend more for oil for commuting and food, they have less to spend on discretionary spending. The result is layoffs in discretionary sectors, leading to lower wage growth. Also, goods produced with high-priced oil are less competitive in the world market, if sellers try to recoup their higher costs of production. As a result, fewer of the products are sold, leading to layoffs and thus lower average wages for the economy.

In the last section, I mentioned that the economy is a complex adaptive system. Because of this, the economy acts as if there are hidden laws underlying the system, parallel to the laws of thermodynamics underlying physical systems. If oil supplies are excessively high-priced, very few new jobs are formed, and those that are created don’t pay very well. The economy doesn’t grow much, but it does stay in balance with the high-priced oil that is available.

The Government’s Role in Fixing Low Wages and Slow Economic Growth

The government ends up being the part of the economy most affected by slow economic growth and low job formation. This happens because tax revenue is reduced at the same time that government programs to help the poor and unemployed need to grow. The current approach to fixing the economy is (1) deficit spending and (2) interest rates that are kept artificially low, partly through Quantitative Easing.

The problem with Quantitative Easing is that it is a temporary “band-aid.” Once it is stopped, interest rates are likely to rise disproportionately. (See the recent Wall Street Journal editorial,” Janet Yellen’s Greatest Challenge.”) Once this happens, the economy is likely to fall into severe recession. This happens because higher interest rates lead to higher monthly payments for such diverse items as cars, homes, and factories, leading to a cutback in demand. Oil production may fall, because the cost of production will rise (because of higher interest rates), while the amount consumers have to spend on oil will fall–quite possibly reducing oil prices.  If interest rates rise, the amount the government will need to collect in taxes will also rise, because interest on government debt will also rise.

So we are already sitting on the edge, waiting for something to push the economy over. The Affordable Care Act (“Obamacare”) may provide a push in that direction. Inability to pass a federal budget could provide a push as well.  So could a European Union collapse. Debt defaults are another potential problem because debt defaults are likely to increase dramatically, as economic growth shrinks, as discussed in the next section.

Debt is Major Part of our Current Precarious Financial Situation

If an economy is growing, it is easy to add debt. People find it easy to find and keep jobs, so they can pay back debt. Businesses and governments find that their operations are growing, so borrowing from the future, even with interest, “makes sense.”

It is as also easy to add debt if the economy is not growing, but there is an ample supply of cheap oil that can be extracted if increasing debt can be used to ramp up demand. For example, after World War II, it was possible to ramp up demand for automobiles and trucks by allowing purchasers to use debt to finance their purchases. When this increased debt led to increased oil consumption, it greatly benefited the economy, because the (value to society) was much greater than the (cost of extraction). Governments were able to tax oil extraction heavily, and were also able to build new roads  and other infrastructure with the cheap oil. The combination of new cars, trucks, and roads helped enable economic growth. With the economic growth that was enabled, paying back debt with interest was relatively easy.

The situation we are facing now is different. High oil prices–even in the $100 barrel range–tend to push the economy toward contraction, making debt hard to pay back. (This happens because we are borrowing from the future, and the amount available to repay debt in the future will be less rather than more.) The problem can be temporarily covered up with deficit spending and Quantitative Easing, but is not a long-term solution. If interest rates rise, there is likely to be a large increase in debt defaults.

The Role of Energy Return on Energy Invested (EROI or EROEI)

EROI is the ratio of energy output over energy input, a measure that was developed by Professor Charles Hall. To calculate this ratio, one takes all of the identifiable energy inputs at the well-head (or where the energy product is produced) and converts them to a common basis. EROI is then the ratio of the gross energy output to total energy inputs. Hall and his associates have shown that EROI of oil extraction has decreased in recent years (for example, Murphy 2013), meaning that we are using increasing amounts of energy of various kinds to produce oil.

In previous sections, I have been discussing diminishing returns with respect to human labor. Oil and other energy products are forms of energy that we humans use to leverage our own human energy. So indirectly, diminishing returns with respect to the extraction of oil and other energy products, as measured by declining EROI, will be one portion of the diminishing returns with respect to human labor. In fact, declining EROI may be the single largest contributor to diminishing returns with respect to human labor. This will happen if, in fact, low EROI correlates with high oil price, and high oil prices leads to diminished wages (Figure 2). This may be the case, because David Murphy (2013) indicates that the relationship between EROI and the price of oil is in fact inverse, with oil prices rising rapidly at low EROI levels.

Contributors to Declining Return on Human Labor

Human labor is the most basic form of energy. We humans supplement our own energy with energy from many other sources. It is this combination of energy from many sources that is reflected in the productivity of humans. For example, we take it for granted that we will have tools made using fossil fuels and that we will have electricity to power computers. Before fossil fuels, humans supplemented their energy with energy from animals, burned biomass, wind, and flowing water.

What besides declining EROI of fossil fuels would lead to diminishing returns with respect to human labor? Clearly, the same problems that were problems years ago continue to be problems. For example, growing world population tends to lead to diminishing returns with respect to human labor, because resources such as arable land and fresh water are close to fixed. Greater world population means that on average, each gets person less. Oil production is not rising as rapidly as world population, so the quantity available per person tends to drop as world population rises.

Soil degradation is another issue, according to David Montgomery, in Dirt: The Erosion of Civilizations (2007). Declining quality of ores for metals is another issue. The ores that are cheapest to extract are extracted first. We later move on to poorer quality ores, and ores in less accessible locations. These require more oil and other fossil fuels for extraction, leaving less for other purposes.

There are other more-modern issues as well. Growing populations in areas where water is scarce lead to the need for desalination plants. These desalination plants use huge amounts of fossil fuel resources (oil in the case of Saudi Arabia) (Lee 2010), leaving less energy resources for other purposes.

Globalization is another issue. As the developing world uses more oil, less oil is available for the part of the world that historically has used more oil per capita. The countries with falling oil consumption tend to be the ones that recently have had the most problems with recession and job loss.

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

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

An indirect part of diminishing returns with respect to human labor has to do with what proportion of the citizens is actually able to find full-time work in the paid labor force, and whether the jobs available are actually using their training and abilities. The Bureau of Labor Statistics calculates increases in output per hour of paid labor. I would argue that this is not a broad enough measure. We really need a measure of output per available full-time worker.

Obviously, there are potential offsets. We hear much about technology improvements and increased efficiency offsetting whatever other problems may occur. To me, the real test of whether there is diminishing returns with respect to human labor is how wages are trending, especially median wages. If these are not keeping up with inflation, there is a problem.

Conclusion

We don’t often think about the return on human labor, and how the return on human labor could reach diminishing returns. In fact, human labor is the most basic source of energy we have. Stagnating wages and higher unemployment of the type experienced recently by the United States, much of Europe, and Japan look distressingly like diminishing returns to human labor.

Stagnation of wages is happening despite attempts by governments to prop up the economy using deficit spending, artificially low interest rates, and Quantitative Easing. Without these interventions, the results would likely be even worse. If QE is removed, or if interest rates rise on their own, there seems to be a distinct possibility that these countries will be reaching the “crisis” phase as described by Turchin and Nefedov.

Historical experience suggests that a major danger of diminishing returns to human labor is that governments costs will rise so high, and wages will drop so low, that it will be impossible for the government to collect enough taxes from wage-earners. In fact, there seems to be evidence we are already headed in this direction. Figure 4 (below) shows that  the US ratio of government spending to wages has been rising since 1929. Government receipts have leveled off in recent years.

Figure 4. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.

Figure 4. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.

Adding more health care services under the Affordable Care Act will only increase this trend toward growing government expenditures.

One issue is how the financial benefit of human labor (together with the energy sources leveraging this labor) is split among businesses, governments, and humans. Businesses have the most control in this. If an endeavor is not profitable, they can discontinue it. If cheaper labor is available elsewhere, they can cut hold down wages in countries with higher wages. They also have the option of increased mechanization. Humans and governments both tend to get shortchanged. As the overall return of the system reaches limits, wages of humans tend to stagnate. Governments find themselves with greater and greater costs, and more and more difficulty collecting funds from increasingly impoverished citizens.

Most authors of academic articles assume that the challenge we are facing is one that can be solved over the next, say, fifty years. They also seem to believe that the fixes required are simply small adjustments to our current economy. This assumption seems optimistic, if we are really approaching financial collapse.

If we are in fact near the crisis stage described by Turchin and Nefedov, we will need to do something much closer to “start over”. We need to build a new economy that will work, rather than just “tweak” the current one. New (or radically changed) government and financial systems will likely be needed–ones that are much less expensive for taxpayers to fund. We are also likely to need to cut back on basic services, including maintaining paved roads and repairing long-distance electricity transmission lines.

Because of these changes, whole new ways of doing things will be needed. EROI analyses that have been to date represent analyses of how our current system operates. If major changes are needed, their indications may no longer be relevant. We cannot simply go backward, because methods that worked in the past, such as using draft horses and buggy whips, will no longer be available without a long development period. We are truly facing an unprecedented situation–one that is very hard to prepare for.

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 inadequate supply.
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491 Responses to Diminishing Returns, Energy Return on Energy Invested, and Collapse

  1. wredwards says:

    Interesting thought sequence. Perhaps in your next post you will outlying remedial steps you might suggest.

    • Thanks for the suggestion. I wish there were an easy solution.

      • Gerry Hiles says:

        I cannot suggest a solution, but I do know what are not solutions, i.e. the whole array of “alternative energy” projects from solar, to wind, to tidal and so on.

        All suffer the same defect of relying on oil to mine, transport, refine and turn the refined minerals into such manufactured products as solar arrays and wind turbines … all of which comes back to diminishing returns on (conventional) energy inputs and probably compounding the problem further by China manufacturing solar arrays, for instance, at the cost of what could be local jobs.

        But at the core is the impossible expectation of infinite growth on our finite planet.

        • I agree with you. It is hard to get a lot of folks to see this.

        • I think the main problem with infinite growth is mainly the name: Growth. This is wrong. It should be: Acceleration. GDP/year . the /year is mostly forgotton. Compare it with speed. If we could see the economy as something that is accelerating, everyone would consider more speed as more dangerous and more unstable. A train that goes too fast. A car, a runner,.. When you go fast, and all of a sudden you’re on a curved path, accidents must happen. I also believe the energy consumption (labour and energy) is increased exponentially with a linear increase of speed if the same technology is used. That is why all the working people tend to have more and more stress and burnout, and why we consume more and more energy. A theory to explore.
          Kind Regards,
          Koen

    • Leo Smith says:

      There is ‘A’ solution.

      I wrote it up, but it is contingent on people recognising that it IS a solution, and that may prove impossible.

      http://www.templar.co.uk/downloads/Beyond_Fossil_Fuels.pdf

      • Jan Steinman says:

        From his link, Leo Smith writes: “Whilst all the arguments against renewable energy are valid, deep and intrinsically insoluble, all the arguments against nuclear power are superficial, emotional and not founded in fact… there is only one technology, or suite of technologies capable of mostly replacing fossil fuel as a primary energy source and that is nuclear power of one sort or another.”

        Yawn. Move along folks. Nothing new here.

        Leo, while I appreciate the time and effort you put into crafting that paper, I invite you to explore the works of William Catton, Joseph Tainter, and Howard Odum, et. al. who teach us that complexity is the problem, not the solution.

        Nuclear energy is astoundingly complex. Complexity requires large amounts of energy to maintain.

        Nuclear could easily replace coal, but it doesn’t travel well. Perhaps I missed it, but how will nuclear power drive our transportation industry? Will you bring all the materials needed to build a nuclear plant to the site using battery-powered vehicles? Will you remove and sequester the dangerous waste the same way? (Oh, never mind. We’ll just store the waste on-site, 30 metres up in the air.)

        • Gerry Hiles says:

          To add to your correct comments Jan, it is worth noting that nuclear power plants depend on conventional power plants to feed electricity in to run cooling systems … something I did not know until the Fukushima disaster and coverage by Enenews soon after.

          I recommend anyone to Enenews, if they have a desire to know what’s really going on with the “permanent radio-active volcano” which IS Fukushima.

          My only claim to fame is I was apparently the first to coin that phrase and amongst the first to know that Fukushima is an ongoing “global extinction event”, though only because I paid attention throughout the 1950s of both civilian and military expansion, whilst most people of my age (70) and older and younger were, and are, obsessed with the “idiot box” purveying the present version of Roman “bread and circus”.

      • I’m afraid nuclear requires fossil fuels, also.

  2. Lindon says:

    Gail, I eagerly await each of your new posts, but this is the first time that I’ve been able to be (one of) the first to post a comment. I was checking my email at work, received your automated notification (that I signed up to receive), and thus my Friday afternoon was “made”.

    As usual, your posts stir many thoughts in my mind. But here’s one that I would like to comment on, to start with. You write:

    “Most authors of academic articles assume that the challenge we are facing is one that can be solved over the next, say, the next fifty years. They also seem to believe that the fixes required are simply small adjustments to our current economy”

    I can’t remember exactly where, but I read a great article that explored the question of why so many academics and scientists and beaurocrats take public stances and produce written opinions that totally ignore or purposely attempt to debunk the possibility of economic collapse. To those legions of us who look at the evidence and wonder how the current system manages to creak along from day to day, much less how it will keep providing BAU well into the future, we find ourselves in a somewhat surreal world when the supposed “experts” and “leaders” are denying a reality that so clearly exists.

    The reason, I believe, is because the powers that be simply MUST keep BAU going, at least until they can no longer do so. The academics and the scientists and the beaurocrats MUST “bye in” to this doctrine — the doctrine of “lying one’s ass off to deny reality” — because to do otherwise would bring immediate ridicule and a “mini-collapse” of their own privileged position in society (in other words, they would lose their job and income, most likely). So, what we get is a “leadership” and a mass media that very actively promotes one “reality”, while denying or downplaying any possibility that collapse or breakdown is imminent, or anywhere on the horizen.

    It is a strange and surreal world that we live in these days, when we know that we are being lied to daily, and when we know that our current way of life is hanging on a thread, duct-taped and bubble-gummed together, destined to fail tomorrow or the next day or maybe a little further down the road. But fail it will. And then what?

    Thanks for being one of those strong and clear voices of reason who help people like me cut through the lies and propaganda, and who validate my perception of what reality REALLY is.

    • Thanks for your thoughts. I agree that the situation is surreal. It seems like someone needs to put in words what is happening. I hope to get some of these posts put together into a book sometime in early 2014. But even if that doesn’t happen, I want people to be able to read at least one reasonable opinion as to what is happening.

      • sheilach2 says:

        I’ll be looking forward to your new book Gail!
        Trying to find someone who has the facts & evidence to support is & isn’t afraid to spread it to us is so rare these days.
        So many people believe the lies the corporate controlled media tells them & too many also believe in impossible ancient belief systems.
        How are we to prepare for our down sliding future is we don’t know the truth?
        But on the other hand, the more the “sheeple” are kept in the dark, the more resources will be left for the knowledgeable who have prepared for the worse.
        Let the praying “sheeple” get shorn!

    • Isaac says:

      Excellent point. A good example is the lack of honesty from policy makers on health care spending. We obviously need strict rationing of government purchased (subsidized) health care, since we simply can’t afford everything for everyone.
      But it would be political suicide to be so clear on the need for strict limitations.
      I can hear the AARP knocking on my door right now…..

      • sheilach2 says:

        The AARP doesn’t really represent the retired people, their main interest is selling insurance. Your right, we shouldn’t be wasting $$ on the terminally ill, those will horrible birth defects or the very old who will soon die anyway.
        I have seen teens with horrible birth defects who only exist because of extraordinary care giving, meds, & health care. What a waste of time & effort.
        I’ve seen infants born very defective who would be better off euthanized, there is no way we can “fix” them to live even a halfway “normal” life. Their existence will be painful & short.
        How many billions of $$ are wasted each year warehousing these unfortunate defectives?

        • Brad says:

          I think that Nick Vujicic is a perfect counter example to your argument. He was born with no arms and no legs, and he is the most inspirational person that I have ever seen. He has travelled to almost every country in the world speaking and engaging with huge crowds everywhere.
          I don’t think that any of that money is ‘wasted’. Anything that helps us to be a more caring society is generally a good thing.

          • sheilach2 says:

            The people I was referring to are also severely mentally defective. They lie in their beds motionless in their own filth.
            Those like the person you referenced is not one of these, he is able to respond to others & act in his own limited way. But in our future, even those who are awake but helpless could still be neglected because of lack of resources.

            We will exist in a Darwinian world but even so, I know that even the Neanderthals took care of their crippled.
            Let’s hope that only the severely disabled & unaware will be euthanized.
            Let’s also hope we don’t have another Stalin or Hitler, he murdered even those who’s only “problem” was being old, sick, Polish, Jewish, Russian, crippled, defective or just not wanted by the Nazis.

        • I was talking today to someone today who was told me about how wonderful a friend of theirs thought pet insurance was. With pet insurance, the friend was able to pay for all kinds of expensive surgery and even physical therapy for their dog. I can understand wanting surgery for a child with a problem, but spending huge resources (in this example) to mitigate hip dysplasia and epilepsy in a dog seems ridiculous to me–with or without insurance. How about finding a different dog?

          • Paul says:

            Humans are becoming too sensitive, a sign that we’re distancing too much from nature and having life too easy. This idiocy is but one ramification.

            I don’t like this way of life because it’s clear by now that it’s destroying what I most treasure in life. I’m a pessimist, and peak oil interests me for this reason.

          • sheilach2 says:

            Right on Gail! Hip dysplasia, & epilepsy is genetic & such dogs should be excluded from breeding. Irresponsible breeders don’t seem to care about the welfare of their dogs, only profit.
            Such dogs should be painlessly euthanized if they show pain or have epilepsy, spending so much $$ on a pet seems rather irresponsible but I suppose if your rich, cost is of no consequence.
            I have a fundie friend who kept taking her cat to the vet every week for all kinds of treatments for it’s kidney failure.
            It finally managed to escape her to die alone in the bushes. Those treatments were only prolonging it’s suffering.
            I told her it would be kinder to put it to sleep, but she was too tied to it because it belonged to her dead male friend & she didn’t want to let it go.

            I felt sorry for that poor cat, I would have put it to sleep a long time ago when it showed signs of pain.
            But then I’m not a “believer”.

            • In this case, the approach was to buy pet insurance when these problems were suspected, but before they had been formally diagnosed. Then the insurance company got to pay for all of these procedures. Clearly the owner should be certain that this dog is not parenting any puppies. But the whole process raises questions about what seems to me to be a huge waste of resources, and is worsening the gene pool of dogs. Of course, I am not a pet lover. If I were, I might be arguing that we need universal pet health insurance.

          • Lindon says:

            My mother, bless her heart, has been in a nursing intensive rest home for five years now. She lies around all day, longing for death, longing to escape her pain. But “the system” keeps her alive, at taxpayer expense. I visit her, and the nursing home is filled with hollow-eyed shells of humanity, all of them miserable to the core wishing to move on, but either too afraid to take their own life, or unable to contemplate their end. In a better world, people are brave and unafraid of death, they accept their natural end and reject expensive remedies intended only to keep the heart beating, even though the ability to BE HUMAN has long ago passed. It is the insurance companies, the doctors and the entire “for profit” medical system that has so perverted our system. Keeping people alive long past their “due date” is exceedingly profitable — that’s why they do it. But that is all coming to an end, soon, I hope.

    • Lindon says:

      I read somewhere that Hitler and the Nazi party members surrounding him continued to pretend as if not only was defeat entirely avoidable, but victory was still possible, even as the Russians advanced. There were plenty of Nazis, including military and civilian, that knew very well what doom lay in store and not in the too-distant future, but they were obligated by regimen and by threat of punishment to PRETEND as if everything was going just fine. They went about their daily lives as best they could, plotting military counter-strikes with soldiers and equipment that didn’t exist and never would, themselves living in a surreal world of fake reality and actual reality, taking advantage of the calm before the storm to plot their escape routes.

      I don’t want to compare the current powers that be (and their minions) to Nazis in any other way except for one: Many if not most of them KNOW what is happening, what is coming, but they are not going to voice their fears in a public forum for pretty much the exact same reason the Nazis wouldn’t as described above. Nothing to gain, everything to lose.

      Besides, those “in the know” need BAU to continue, for the masses to remain calm, in order that preparations and strategic plans can be put in place so that WHEN TSHTF, they will be ready. We are in that calm before the storm period, and we better be making preparations — mental and/or physical — to deal with the coming storm.

      • Philip Backus says:

        You are spot on historically. Within days of the end Robert Ley{Minister of Labor} asked Albert Speer(Minister of Armaments) when Hitler would be unleashing the new wunderwaffe (secret weapons) at a gathering of higher ups. Speer being an in the know rational thinker replied to Ley (a notoriously delusional alcoholic) that one should not place too much hope in such things,and that the situation was dire. Minister Ley moved on to socialize with more optimistic guests. The root cause of this war was insufficient resources as was the root cause of defeat.

        • xabier says:

          Albert Speer was fantastically good at spinning out things until the very last. I propose him for patron saint of our current ‘leaders’.

          The eventual loss of the war was clear to most informed Germans by 1941 at the latest.

          We shouldn’t underestimate for how long the fragile plates can be kept spinning.

          I should say the lies which we of the general public are expected to swallow on the economy, on a daily basis, makes a direct comparison to the Nazis quite appropriate.

          • dashui says:

            I went to hitler’s greenhouse up in the alps. Towards the end of the war it was destroyed by allied bombing, but Hitler’s associates went to great lengths to procure glass to rebuild it.
            Im not afraid to admit I cried.
            But I know he’s in a better place now.

      • I think you are right–now is the calm before the storm. Many don’t understand how bad things really are.

  3. dashui says:

    I was recently surprised at how fast the productivity per worker was dropping in american coal mines.
    How good is this type of metric if applied to oil extraction?

    • I am not aware of what industry statistics are available.

      I know it takes a lot more wells to extract the oil that now is being extracted. There are a lot more workers in extraction as well.

      • Kathy Brown says:

        Hi Gail,
        Check out James Hamilton’s blog http://www.econbrowser.com , the December 17th post on lower oil prices. Near the bottom of the thread is a reply by Jeffry Brown that has a lot of industry data that confirms your thesis on diminishing returns.

        • Kathy Brown says:

          Sorry about that. The date of that post was November 17th.

          • I think you are referring to the post of Jeffrey Brown summarizing some of the things Steve Kopits reported on in a presentation recently. Thanks! Steve sent me a copy of that presentation.

        • I am not sure if I was looking at this right. It isn’t December 17 yet, so I was looking at December 07. Did you mean December 17, 2012?

          • Kathy Brown says:

            Hi Gail,
            It was the Nov. 17th, 2013 post, and it was the summary of Steven Kopits presentation. I read your Dec. 9 comment on econbrowser right next to Jeffery’s post on the natural gas situation. Those numbers are do not look good.

  4. James says:

    It is optimistic to suggest that we will have a “start over” moment with a new financial system that benefits the taxpayer. Last I checked, the Dodd-Frank act was 9000 pages, and “less than a third” finished. It outlines among other things what happens in a doomsday financial meltdown. To be sure, the taxpayers get the short end of the stick and have even less control over the matter. Fear tends to suppress smaller voices and amplify authorities’.

    Human labor is quickly becoming the most costly expense for businesses (that, and debt maintenance). After a financial “reset” with presumably overwhelming unemployment, I doubt we will have a “middle class” at all. There will be too much supply of expensive human labor for the demand. While you and I can see societal trouble with paying less than a living wage, businesses don’t have the same scruples and planners have seen the same thing. With cheap, ubiquitous drones overhead in the next few years it will be more cost effective to “manage” the unemployed population than to appease them.

    • A person wonders how these things will work out–whether the 9,000 pages will be followed, or whether there will be a break-up. I suppose we could follow one approach for a while, and eventually move to another. Historical systems seemed to be a lot simpler than today though–tribal leader or king, for example.

    • Jan Steinman says:

      “While you and I can see societal trouble with paying less than a living wage, businesses don’t have the same scruples and planners have seen the same thing.”

      And yet, if customer/consumers can no longer afford to buy products, the businesses will suffer, no? Or is this the “greater fool” theory, in that there will always be someone willing to buy cheap plastic crap from China?

      • St. Roy says:

        Jan
        The more stuff people don’t buy because they don’t have a job the fewer workers that are needed make the stuff who in turn will also then not have the money to buy stuff. Isn’t it a vicious ciycle downward to where only the farmers and gardners are left? After that it is just starvation and death.

        • Jan Steinman says:

          “Isn’t it a vicious ciycle downward to where only the farmers and gardners are left?”

          Thank you for sparing me.

          As long as I can produce food, I’m thinking someone will want to keep me around.

        • St.Roy. Nearly right. It is a VIRTUOUS circle upward to where farmers, gardeners, labourers doctors, nurses, some new teachers, the army, armed police, bus drivers, (add your own categories) are left. Jan, please – the farmers will prevent starvation, and nobody will prevent death.

        • The question is whether the farmers and gardeners can support themselves. In a much poorer world–which is where we are headed–we end up with mostly farmers and gardeners. Or a world of hunter-gatherers (really gatherers, with a little hunting added), which is closer to sustainable.

          • Dirt Dweller says:

            At anywhere close to current population levels there are not enough animals or plant resources to sustain a “hunter-gatherer” world. It is only through modern farming techniques that we are able to feed today’s numbers.

            • I agree. It seems like a reasonable guess as to world population with a hunter-gatherer lifestyle would be 5 million or less. The fact that resources are degraded from the original (for example, fish stocks down, large animals mostly killed off by earlier hunter-gatherers, mercury polluting lakes and rivers) may make the carrying capacity less than it otherwise would be.

      • Jan, a great point. The ‘plastic crap’ is where oil and energy are still going – because the fools who buy it are still making a profit for the greedy animals who produce and market it. However , if business spends as much effort promoting a better life of less consumption, as it did promoting consumption at any cost to the consumer’s health, and if the government will start promoting the truth (alongside Gail and others) the future need not be so dreadful. Technology will not disappear, people are mostly much smarter than ever before, but cannot expect to be allowed to vote in the kind of liars who promise ‘business as usual’

        • Technology largely depends on oil and electricity. It may not disappear overnight, but we can expect it to be pretty much gone in 50 years.

          • Hi Gail! Great post as always. I agree with your comment that oil extraction/use inte the economy in 50 years will be pretty much gone (in my eyes probably much earlier). Yet in terms of electricity I wonder how you come to the same conclucsion (if that is what you meant). I am aware that 40 % of the electricity in the world is generated by coal, and coal indeed is finite. Prof. Kjell Aleklett and the researchers at Uppsala University in Sweden has estimated to world coal production will peak in 2030 (China coal prod to peak already in 2020). I am also aware that coal has much lower EROI than oil and that today´s coal has a decreasing EROI because of lower quality (lower energy density).

            But my point is that solar energy for electric generation, today (and for the forseeeable future) with a much lower EROI than oil and fossil fuels, is only in its infancy in terms of our understanding of how to make use of the photosynthesis. After all, our whole planet runs on solar energy. Elon Musk (founder and CEO of both Tesla Motors and SpaceX) often mentions that 70-90 % of the solar energy that reaches earth´s surface can potentially be harnessed.

            I am by no means talking about giant solar parks in the dessert of Sahara, transporting energy long distances to be used for use in the energy intensive world we live in today (this is a mediahype). Rather, I am thinking of solar panels used locally but improved in material and used even in countries up North, like here in Sweden where I live.

            Solar vacuum tubes for heating (This Swedish guy built one from old beer cans-see: http://www.brunzell.com/projekt/solfangare/index.httm) and solar panels, moving with the sun or in an optimal 45 degrees angle in combination with small wind mills is very promising. (I will experiment with this on my mothers farm soon). I don´t see this a an universal solution to peak oil or the financial crisis but my point is that we very well may see solar energy solutions that are either totally produced/transported without fossil fuels and capable of supplying local communities with enough electricity/heat to make life quite manageable.

            Maybe Hyperloop and Mars is stopped by financial collapse and energy crisis but I am quite convinced that electricity will survice much longer than the oil age, in fact I think it can be used in many more ways (sustainably) than what is convetional/possible today.

            What are your thoughts?

            /Johan

            • The problem is that we are dealing with a complex adaptive system. You can’t assume that one system, such as coal or wind turbines, will continue to work, when the rest of the system dies. It is in some ways like assuming that one human system, say hearing, can continue to work, after a patient dies of blood loss.

              Coal as it is extracted today requires machinery made from metals, using oil in their contraction and transport. The coal, once it is extracted, needs to be transported using some method, nearly always using oil–certainly for track or road maintenance, if nothing else. Once electricity is created using coal or wind, it needs to be transported to via long distance transmission lines. These require oil for maintenance. The whole system needs to be balanced using computers. Building and maintaining computers requires a system of international trade, which is dependent on cheap oil.

              Actually, the most vulnerable part of the whole system is probably the political system. It fails as the economy fails to generate enough tax revenue to pay for the promises that have been made. The international financial system and international trade system are tied in with the political system.

              Suppose the US governmental system fails, in the same way the Former Soviet Union’s governmental system failed. Then it would suddenly be “every state for itself.” Some states might band together, but there would suddenly be a need for a whole lot of different new currencies, and different new international treaties. Some states themselves might fail, leading to smaller grouping yet–say Northern California vs Southern California. The European Union could go away as well. In such a changed political landscape, trade would suddenly become more difficult–it would depend on, for example, Texas setting up a trade agreement with Louisiana. It could very well be this kind of problem that brings an end to electrical system, among many other things.

          • Jan Steinman says:

            “Technology largely depends on oil and electricity. It may not disappear overnight, but we can expect it to be pretty much gone in 50 years.”

            That’s a pretty broad brush, Gail!

            I agree heartily that technology will be simplified, but “gone?”

            I’m hoping locally-fueled diesel engines can last for my lifetime, and I expect the wheel, fire use, and written language will probably be around as long as there are humans.

            Or are you implying that you believe humans will be “gone in 50 years?” 🙂

            As long as there are humans, there will be technology. The question is, how much technology will we be able to afford with our energy budget? Human numbers will be reduced, and “appropriate technology” should be available to those who remain, no?

            • Perhaps we will be able to make rope out of hemp, by hand, and use those ropes to leverage our human strength. I suppose this would be a use of technology.

              All of our systems are so intertwined, it is very hard for me to see them continuing for 20 years, much less 50. As I indicated in my response to Johan Landgren, we are dealing with a complex adaptive system. The political system is way up at the top in terms of what is likely to fail. When it fails, and all transactions are much more local, it will be difficult to make systems like trains even operate. There will need to be treaties among local governments to cover them.

              One reason I see little point in building systems like long distance trains is because we will not build them in a way that can be maintained for a long period, say 50 years, with only local materials. If we build trains, we want them to be as simple and as easy to maintain as possible–not with fancy doors, imported from around the world, and air conditioning, and high-tech engines that use as little fuel as possible. We instead want them as low tech as possible. Parts need to be replaceable with parts made locally, using charcoal and local iron deposits, or recycled metal that is mixed with impurities. They need to be able to burn wood as fuel, if need be–I think biodiesel will be beyond our capabilities in any quantity–it requires too much of current technology.

            • Jan Steinman says:

              I largely agree, but as a student and fan of “appropriate technology,” I see a possible path to “a prosperous way down,” as HT Odum put it.

              “biodiesel will be beyond our capabilities in any quantity–it requires too much of current technology.”

              It is actually quite simple! It requires no semiconductors, for one thing — I agree that anything that requires chips won’t survive long.

              The basic ingredients: vegetable oil or animal fat, methanol, and lye, are all attainable at the village level. It requires fairly imprecise and unregulated heat — you could brew biodiesel over a wood fire — and agitation (wooden paddle!), and some means of moving fluids, which could be a simple Archimedean Screw pump, carved from wood with stone tools, if necessary.

              Oil can be extracted from vegetable seeds via a simple crusher, made from stones, if necessary.

              Lye is fairly simple to come up with from wood ash.

              Methanol is the hardest one, one I don’t fully understand. It is produced by steam reformation of methane gas (currently, from natural gas), which is easily produced from anaerobic fermentation. That suggests some moderate control of temperature and perhaps some metal piping and perhaps a catalyst.

              I highly recommend the “Foxfire” series of books to anyone planning to do any of these things in the future.

              I’m not set on having diesel engines for ever and ever. There are other nuts to crack, like lubrication oils, rubber parts, etc. But I think non-computerized diesel power run from local sources is the best chance for “a prosperous way down.”

            • Making the engines that use biodiesel and keeping them repaired without fossil fuels will be a huge challenge. Also, keeping roads in repair is likely to be a huge challenge without fossil fuels. If we can work around those two difficulties, than perhaps some biodiesel can be used for fuel for those vehicles that can be kept in repair and don’t have much need for roads.

            • Jan Steinman says:

              Yes, roads and manufacturing are a huge challenge.

              I’m mainly thinking about keeping the current fleet running, for some agricultural mechanization and food delivery.

              I think manufacturing of new engines will go away long before the old engines are unable to be maintained. Perhaps what manufacturing resources that remain functional will re-tool to supply spare parts — I think fixing things will be a growing market, as embedded energy becomes more dear and labour becomes more plentiful and cheap.

              Again, this is not a “business as usual” fantasy, with highway trucks hauling 80,000 pounds of food over the Interstate highway system. I’m thinking more of farmers taking their 4WD vehicles into the local market — more of a decentralized model. A decent 4WD can cover roads that would challenge an ox cart.

        • sheilach2 says:

          I think our preindustrial ancestors were smarter because the stupid didn’t live very long but today, even the very defective & stupid not only survive, they reproduce. I think the average smarts has declined on average, I’ve just seen too many people do such stupid things & too many of them DRIVE!
          I think the approaching collapse will sort things out.

  5. dolph says:

    We live in a topsy turvy world. Everybody insists that “growth” is the solution, but in fact it is the problem.

    You see, the problem is too deep now. The all conquering private capital system defeated all resistance, whether it was from indigenous peoples, nazis, communists, unions, religious fundamentalists, environmentalists, and even national governments themselves.

    Its success is its downfall, because there is nobody left to place a check, to oppose it. The whole world must be commoditized, and all of the fossil fuels must be burnt. The system does not stop until it burns itself out. It doesn’t recognize any limits, it never has and never will. In fact the idea of limits is the existential threat to it. Private capital must expand everywhere…it must dig up everything from the earth, pave over the globe, and move into the solar system and beyond.

    There are times when it expends considerable effort (great depression, current financial crisis) to survive, but it always does, because there is always more out there to exploit. This system is perfectly adapted to humans as biological and cultural creatures with the urge for life and expansion.

    Is it starting to dawn on people that we won’t even write the history of our own demise, because all 7 billion of us are connected to and captured by the system? Is it starting to dawn on you that a ragtag group of human survivors 500 years from now, living in the ruins, will have to place together a narrative of what happened?

    • James says:

      Since “growth” is an absolute requirement of our current system, expect to see warping of what constitutes growth. The last few years’ growth has been in financial magic. That is likely to continue but I expect things like intellectual property to become a larger share of the “growth”, as well as systematically converting commons like fresh water into institutions that can convert either quantity or price of drinking water into “growth”. Things that were free or assumed were common for all will be “priced”, leading to more “growth”.

    • In fact, it is not even growth that is the problem, from the point of fossil fuel resources. Simply extracting the same amount of resources years after year would be a problem, because total supply is limited. Population at current levels also seems to be too high for resources, excluding fossil fuels.

      I think you are right–we may not even be able to write the story of our own demise. The few survivors 500 years from now may have to piece together the story.

      • St. Roy says:

        As Paul Chefurka and George Mobus discussed earlier this week, will some evolved hominin get through the bottleneck or will it be extinction of the genus? I rather think that the story will not be written.

      • No Gail – several rich people will have computers and satellites and stuff, and your very own words will tell part of the story.

        • Those computers and the electrical system that operates the satellites will not operate for very long (perhaps a few years, but 50 or 100). Today’s rich people will be poor as well. My words on the Internet will disappear, because the Internet will disappear.

      • When simple tools (but only the best available) cost $1000 each, and jeans $400, you will preoccupied with getting them – not having a vast choice of styles! Will you be unhappier? No.

        Choice HAS to be removed – nobody will suffer. Rubbish HAS to be removed from the inventory of consumables, and good stuff must cost a fortune. Nothing wrong with that. You will be proud of your tools and your strength to use them. You will be admired for contributing to the reputation of the local area. Liars and cheats will be KNOWN, and they will not prosper.

        If cities figure in this scenario, they will NOT be so densely populated, but will be a natural environment for the brainy as opposed to the brawny – designing and making the tools – making and servicing the computers – redefining and constructing the government. Shame will become more manageable.

        • I question whether we will be able to make jeans at all, in a collapsing world. Putting together supply chains based on local materials will be difficult. We will likely mostly be trading in used clothing.

          Our choices will be much less than you even can imagine–probably not tomorrow, but 20 or 50 years from now.

          • Danny says:

            20 to 50 years? How do you extrapolate that? If there is going to be a crash like that; we would start to see collapse happening right now…a fall so to speak. I see a lot of people talking about financial collapse happening first and if that is the case won’t that draw out the peak oil crash…I guess we are all in agreement of the crash all that is left is to see how long this is drawn out. I think we are all and will be surprised at how far it can be drawn out. Too bad we can’t mathematically figure it out. I personally find it so hard to have one foot in the present world pretending everything is fine and the future world where a mad crash might happen. sometimes I think ignorance is bliss because there is really nothing we can do…..Danny

            • madronehill1 says:

              Hello, Well – Danny, I think we have some time before things really fall apart…. But our kids and their kids may be witness to the new depression and experience shortages, also we will likely see it, as my wife and I already pay almost twice what we paid in food along with several children just in the 1990’s. We also could likely see this next year or so young and old.

              They say inflation is tame but all of us know we are paying big bucks for food these days. I have been saying this for awhile now, I see a slow decline unless something happens to escalate things.

              The threat of nuclear war seems to wane as — The good news I see lately is that the situation in the Middle East seems to be calming for now — so let us try to look at some positive news, as the rest of the news only worries us. Hopefully things will continue and limp along for a generation or so before severe trouble sets in. So for now lets hope things calm for a time and the current system status will prevail as we are not prepared yet to change over to a new system.

              Scott

            • If you understand the financial situation, you would be more worried. All it takes is rising interest rates to mess up the current situation.

            • I don’t go out of my way to tell young people about the problems. They have enough problems already, with the job situation they are facing.

          • sheilach2 says:

            Once the obstructionist federal government has fallen, I expect people will be growing hemp all over the country. Good sturdy pants, shirts & gowns can be made from hemp as can strong ropes & sails, it all depends upon how closely you grow the plants. We won’t be stuck with just used clothing although for a while that may be true until things get sorted out.
            Hemp has many uses, medicine, clothing, rope, food, oils, even plastics & recreation & it’s sustainable as it doesn’t require chemical fertilizers or pesticides.

            Cotton can still be grown in the steamy south but everywhere else, HEMP will be KING!

      • sheilach2 says:

        I think the survivors will be too busy trying to survive to care much about how we messed up. The digital library will be unreadable, the paper libraries will be burned for fuel & the old who might have remembers will have long died off.

      • yt75 says:

        “In fact, it is not even growth that is the problem”
        Yes, that is a point that is often over looked, the key problem is the use of non renewable resources for our current “society”, growth or not.
        And a steady state economy in the current set up just means burning the same amount of barrels per year (and building the same amount of cars, houses, etc).

        To me this is also linked to the “fashion” of externalities in economics, which could be summarized as :
        – Ok using this thing pollutes, let’s just compute the “cost” of this pollution, and take it into account.

        But nowhere the “internalities” approach is taken :
        – How much does it costs to use that amount of this non renewable resource stock ?. what should be its price ?

        Which is quite understandable, as if you had to define a cost or price for the above, and staying in an “optimistic progress mindset” doing it, then it means that what you leave to future generations is at least as good as what you now have, which for non renewable resources (and especially when used as fuel), would mean putting an infinite price tag on it.
        Otherwise you end up with things like “it is reasonable to use that amount per year”, but why not “that amount”/2 or “that amount”*2.

        • I hadn’t thought of the fashion to compute externalities as being part of reason economists can support the idea of a steady state economy. I have complained about a steady state economy being ridiculous, unless we can get our resource use down to zero, which we can’t. Not being an economist myself, it is hard for me to think in their terms.

          • yt75 says:

            I think you –should– consider yourself as an economist Gail 🙂
            Even if one, more in the “reality based” Malthus or Jaevons tradition (or maybe even the physiocrats before), than in the current kind of “compulsory wonderful world ahead” dogma.

          • donsailorman says:

            At least some economists agree with many of your main points regarding the end of economic growth. In today’s “Wall Street Journal” on the Opinion page is an article by William A. Galston that discusses recent papers by economist Robert J. Gordon. The gist of Gordon’s thinking is that there are at least six “headwinds” that will tend to reduce long term economic growth in the U.S. The original papers by Robert J. Gordon are highly readable and easy to find with Google. One of Gordon’s main points is that we face diminishing marginal returns to innovations in technology–one of your main points.

            Robert J. Gordon is a mainstream economist of impeccable credentials. When he writes, other economists take notice. I also find it quite interesting that the “Wall Street Journal,” a mainstream conservative publication, would put Gaston’s short article on its Op Ed page.

            I don’t know of any mainstream economist who emphasizes your point that increasing debt (or any debt for that matter) is hard to service in a no-growth economy, but this lack probably reflects my ignorance of what is current in economic thought. Simple arithmetic is all the math you need to show that large quantities of debt are untenable without economic growth. Small amounts of debt can be serviced in no-growth economies such as those in Europe of the Dark Ages, but increasing debt requires economic growth–or the result will be default of some kind. Typically, governments use increased rates of inflation to repudiate national debts, but some governments (e.g. several in Latin America, or the Soviet Union after the overthrow of the czarist regime) directly repudiate national debts.

  6. Denis Frith says:

    This article is an insightful view of the demand situation. However, the continuing irreversible supply of natural material sources from the limited crustal stock is the bottom line. That is an unsustainable process whatever decisions are made by society or the processes that use this stock.

    • I am afraid I don’t understand. Without our society economy sticking together in something close to our current form, the vast majority of the fossil fuel resources and uranium resources that now seem to be left will stay right where they are–in the ground. Extraction will fall, far more quickly than the most ardent climate change advocate would ever hope. Whether this will make a difference is not entirely clear–but if most of us aren’t around to find out, perhaps it won’t matter. The world is set up to cycle from state to state, with different climates and different species that are dominant. The earth will recover, with or without humans.

      • St. Roy says:

        YEP. I have been pondering which one of the social insects will next be the Earth’s dominant life form. Higher intelligence, as E. Mayr asserted some time ago, is a lethal mutation.

      • Denis Frith says:

        The stock of natural material resources is running out because systems of civilization are irreversibly using them. That is what is happening. Mentioning that fossil fuels will remain in the ground is a hypothetical future situation. I was commenting on the reality of what is happening now and is likely to continue while the systems of civilization (cities and the like can continue to operate)

        • It is as if the blood supply of civilization is running out. The possibility that the fossil fuels will remain in the ground is not really a hypothetical future civilization, any more than saying that a patient that it quickly losing its life blood will die. Our civilization as it is formed today cannot exist without cheap fossil fuels. The oil that is essential is already risen to such a high price that governments of countries that use much of it need Quantitative Easing to hide its problems. QE is only a temporary band-aid. The economy acts like a complex adaptive system, so If doesn’t take much foresight to figure out that it will collapse, in the not too distant future. There are so many different things that could crash the system (removal of QE being one of them) that is it hard to see precisely what will bring the whole system down. But without our current high tech system, the vast majority of our fossil fuel supply cannot be extracted.

          • Denis Frith says:

            The technological systems of civilization (the cities, roads, factories, etc) are what consumes most of the natural resources, including the fossil fuels, The population has become very dependent on the goods and services provided by this aging infrastructure. Operating and maintaining this infrastructure with the declining stock of natural resources is an unsustainable process. It is this tangible infrastructure that will inevitably collapse. Society will have to cope with the loss of the goods and services as best they can with intangible money having an impact obn the decisions being made.

            • Dennis–You are right. It is the technological systems of civilization (the cities, roads, factories, etc.) that consume most of the natural resources.

              There are a couple of related issues. EROI calculations don’t really look directly at these systems, yet these are the systems that we lack the “wealth” in terms of resources to maintain. This is why the minimum EROI has to be very high–probably 11 or more. This minimum EROI keeps increasing, as population rises and other problems continue to make our current system less able to handle the situation.

              Also, we can’t have solar panels and wind turbines without the cities, roads, factories, and schools we have now, and we can’t build the cities, roads, factories and schools we need with wind turbines and solar PV. Thus, these ideas are a dead-end from the point of view of keeping society going. It is an open question as to how much they can do for individuals, on a local basis.

      • Small pox was eradicated despite some who wanted to keep a live supply – just because. The future is green and bright, and the human equivalent of small pox – the greedy, ambitious, hyper-active, ignorant youth now taking over everywhere, will be eradicated. The US is preparing, and perhaps the Chinese will join forces. Not exactly ‘close to our current form’ Gail, but I was a bit surprised to hear you stating this a possibility. My father was a farmer, born at the end of the 19th century. Green fields – unlocked doors – policeman on bike – phone number, South Molton 64…….

  7. davekimble2 says:

    > We cannot simply go backward, because methods that worked in the past, such as using draft horses and buggy whips, will no longer be available without a long development period.

    Yes, but also this means spending MORE money and energy on infrastructure and labour that produces a LESS efficient outcome. Any society that values efficiency over resilience will NEVER take the political decision to go down that road, wise though it may be in the face of imminent collapse.

    One might imagine a society that sensibly values resilience over efficiency, the “powerdown society”, but this threatens so much of the current paradigm that it won’t happen without a bloody revolution – the 1% will not allow it. It won’t have escaped your notice that that is precisely what the 1% is preparing to confront – mass spying on the population, censorship and repression of dissent and whistleblowers, stockpiling of bullets, equipping and training the police with ever-greater weapons of mass control, building interment camps.

    Despite all this the 1% will fail, so we are condemned to a financial/industrial implosion, with the 1% still trying to accelerate the bus as it approaches the cliff. Once that implosion has played out, with efficent supermarket food shortages leading to mass starvation, a point will be reached where that inefficient, but resilient, society that was shunned before the collapse, will look like an IMPROVEMENT to the survivors, and maybe we can begin again with the new paradigm.

    This kind of societal change will be played out over a time period of decades, if not centuries. So there is little that we do, or even plan for, at this stage except how to survive the early stages of the collapse. Mad Max scenarios look increasingly likely.

    • I suppose if we were smart, we would decide what kinds of metal tools would be most helpful and last longest, and work on making them. But governments are in such poor condition, they could not finance such an effort. Or permaculture advocates might have a different idea of what investment might be most helpful for the longest time.

      As a practical matter, I expect whatever investment is made will need to be made by individuals. These individuals will have different ideas. Some of them may work for a while. Things like metal tools and clothing will last for a while, so not all problems will need to be solved immediately.

      • xabier says:

        Gail

        All governments are Soviet now, backing the wrong horses with massive expenditure of money they don’t have and lying about the results or prospects.

        The British Government, for instance, is concentrating on creating a ‘high-speed’ (it won’t be really) railway to some economically insignificant regions with poorly-educated populations. The population of the UK be so glad of that in 100 years time! And importing vast numbers of low-grade ‘workers’ from Asia, Africa and Eastern Europe (admittedly some skilled workers from the latter region.) Whilst proclaiming that Growth (Oh Allah, or whatever God you may choose, I think a Voodoo deity is appropriate now) be praised!) is back and making the UK the envy of the developed world!

        One watches in amazement……..

        • Paul says:

          It’s sad to watch euroskeptics attacking immigration from Eastern Europe. Not that I don’t agree with them on the need to leave the EU. In fact, I want it abolished. But when they pick on these Eastern Europeans in order to attack mass immigration (which the majority of citizens resent), they show themselves to be complete cowards. it’s harder to be accused of racism when you attack fellow Europeans. If not these Eastern European immigrants, then who do you think the government will import?

          Europe will either go down on history, slowly but steadily (unlikely if the economy continues to go downhill) or it will burst into flames and new leaders will surge and reform the entire continent, and the current political and social views will disappear.

          What’s your bet?

          • xabier says:

            Paul

            No, I’m not a closet racist as you imply. Freedom of movement in the EU has profoundly de-stabilised the British employment market, and played into the hands of exploitative capitalists who just love cheap and desperate labour, above all semi-skilled. Not to mention the movement and spread of professional and very brutal criminal gangs from that region.

        • dolph says:

          The UK in particular is in complete denial. But you can’t blame them, it’s all they have left.

          I wouldn’t be surprised to see it eventually break apart.

  8. Comparison with previous societies going back to pre-christian times tell us little about our present situation. As the saying goes: “This time is different.” But — it really is different in a really differnent way: The societies of the past that are referenced were all based on agriculture for which the fundamental resource is fertile land. For us the fundamental resources are a constellation of NON-renewable commodaties. For agracural society, each inter-cycle will end. For us, the inter-cycle may very well last forever.

  9. The observed response of the financial community to Quantative Easing seems to be to accept the money from the Fed — and, figuratively speaking, stash in under the mattress. Why? Perhaps those who have really good information about various proposed investment opportunities have run the numbers and found them wanting. The numbers don’t indicate that the proposal will yield a return for the investors, whatever is the return for the entreprenure. Why no good investment opportunities? Maybe there is no resource base that can be exploited with current technology in a way that will yield sufficient return. Conclusion: BAU will never return, no matter what the Fed does.

    • This article from Zerohedge seems to suggest that the excess reserves are being used as a basis for speculation. According to the article:

      1. Excess reserves (assets) are represented as cash deposits (liability)
      2. The excess cash is then used as collateral for margined securities – futures, swaps, options, and any other derivatives – that express a risky position, such as IG9 (long or short), or for that matter any security that simply needs initial margin, and better yet, allows massive leverage. For example the ES, aka E-mini contract, which as everyone knows is the main driver of market risk in the US capital markets, and which allows for constant resetting of risk-levels higher (in alignment with the Fed’s primary directive).

      This is a little out of my area of expertise, though.

      • Excess reserves cannot appear outside the central bank reserve account unless there is a corresponding shrinking of private sector banking liabilities. Reserves are never ‘new money’, the arguments of certain archaic economists suggest that they are … for political reasons.

        What sort of private sector shrinkage? A severe bank run.

        During a bank run the balance sheet of the bank collapses. The bank closes before it is able to return its depositors’ funds. The bank will ALWAYS run out of reserves before it can meet all the claims of the depositors.

        Zero Hedge has tried since the crisis began to promote the idea that central banks create new money (‘money printing’) thereby causing hyperinflation. This is completely wrong and Zero Hedge knows it.

  10. DaShui says:

    I work in a bank and the government just mandated that 6% of our employees must be veterans. we already have 10 or so and we must hire 40 more. Sounds like the government knows it can’t afford veterans benefits and wants to avoid another bonus army by pushing the cost on to private business.

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