Credit Problems are a Very Current Issue
In the past several years, the engine of world’s growth has been China. China’s growth has been fueled by debt. China now seems to be running into difficulties with its industrial growth, and its difficulty with industrial growth indirectly leads to debt problems. A Platt’s video talks about China’s demand for oil increasing by only 2.5% in 2013, but this increase being driven by rising gasoline demand. Diesel use, which tracks with industrial use, seems to be approximately flat.
The UK Telegraph reports, “Markets hold breath as China’s shadow banking grinds to a halt.” According to that article,
A slew of shockingly weak data from China and Japan has led to a sharp sell-off in Asian stock markets and the biggest one-day crash in iron ore prices since the Lehman crisis, calling into question the strength of the global recovery.
The Shanghai Composite index of stocks fell below the key level of 2,000 after investors reacted with shock to an 18pc slump in Chinese exports in February and to signs that credit is wilting again. Iron ore fell 8.3pc.
Fresh loans in China’s shadow banking system evaporated to almost nothing from $160bn in January, suggesting the clampdown on the $8 trillion sector is biting hard.
Many recent reports have talked about the huge growth in China’s debt in recent years, much of it outside usual banking channels. One such report is this video called How China Fooled the World with Robert Peston.
Why Promises (and Debt) are Critical to the Economy
Without promises, it is hard to get anyone to do anything that they really don’t want to do. Think about training your dog. The way you usually do this training is with “doggie treats” to reward good behavior. Rewards for desired behavior are equally critical to the economy. An employer pays wages to an employee (a promise of pay for work performed).
It is possible to build a house or a store, stick by stick, as a person accumulates enough funds from other endeavors, but the process is very slow. Usually, if this approach is used, those building homes or stores will provide all of the labor themselves, to try to match outgo with income. If debt were used, it might be possible to use skilled craftsmen. It might even be possible to take advantage of economies of scale and build several homes together in the same neighborhood, and sell them to individuals who could buy the homes using debt.
Adding debt has many advantages to an economy. With debt, a person can buy a new car or house without needing to save up funds. These purchases lead to additional workers being employed in building these new cars and homes, adding jobs. The value of existing homes tends to rise, if other people are available to afford them, thanks to cheap debt availability. Rising home prices allow citizens to take out home equity loans and buy something else, adding further possibility of more jobs. Availability of cheap debt also tends to make business activity that would otherwise be barely profitable, more profitable, encouraging more investment. GDP measures business activity, not whether the activity is paid for with debt, so rising debt levels tend to lead to more GDP.
Webs of Promises and Debt
As economies expand, they add more and more promises, and more and more formal debt. In high tech industries, supply lines using materials from around the world are needed. The promise made, formally or informally, is that if more of a supply is needed, it will be available, at the same or a similar price, in the quantity needed and in the timeframe needed. In order for this to happen, each supplier needs to have made many promises to many employees and many suppliers, so as to meet its commitments.
Governments are part of this web of promises and debt. Some of the promises made by governments constitute formal debt; some of the promises are guarantees relating to debt of other parties (such as nuclear power plants), or of the finances of banks or pensions plans. Some of a government’s promises are only implied promises, yet people depend on these implied promises. For example, there is an expectation that the government will continue to provide paved roads, and that it will continue to provide programs such as Social Security and Medicare. Because of the latter programs, citizens assume that they don’t need to save very much or have many children–the government will provide funding sufficient for their basic needs in later years, without additional action on their part.
What is the Limit to Debt?
While our system of debt has gone on for a very long time, we can’t expect it to continue in its current form forever. One thing that we don’t often think about is that our system or promises isn’t really backed by the way natural system we live in works. Our system of promises has a hidden agenda of growth. Nature doesn’t have a similar agenda of growth. In the natural order, the amount of fresh water stays pretty much the same. In fact, aquifers may deplete if we over-use them. The amount of topsoil stays pretty much the same, unless we damage it or make it subject to erosion. The amount of wood available stays pretty constant, unless we over-use it.
Nature, instead of having an agenda of growth, operates with an agenda of diminishing returns with respect to many types of resources. As we attempt to produce more of a resource, the cost tends to rise. For example, we can extract more fresh water, if we will go to the expense of drilling deeper wells or using desalination, either of which is more expensive. We can extract more metals, if we use as our source lower grade ores, perhaps with more surface material covering the ore. We can get extract more oil, if we will go to the expense of digging deeper wells is less hospitable parts of the world. We can even use substitution, but that will likely be more expensive yet.
A major issue that most economists have missed is the fact that wages don’t rise in response to this higher cost of resource extraction. (I have shown a chart illustrating that this is true for oil prices.) If the higher cost simply arises from the fact that nature is putting more obstacles in our way, we end up spending more for, say, desalinated water than water from a local well, or more for gasoline than previously. Much of the cost goes into fuel that is burned, or building special purpose equipment (such as a desalination plant or offshore drilling rigs) that will degrade over time. Our system is, in effect, becoming less and less efficient, as it takes more resources and more of people’s time, to produce the same end product, measured in terms of barrels of oil or gallons of water. Even if there are additional salaries, they are often in a different country, around the globe.
At some point, the amount of products we can actually produce starts shrinking, because workers cannot afford the ever-more-expensive products or because some essential “ingredient” (such as fresh water, or oil, or an imported metal) is not available. Since we live in a finite world, we know that at some point such a situation must occur, even if the shrinkage isn’t as soon as I show it in Figure 2 below.
The “catch” with debt is that we are in effect borrowing from the future. It is much easier to pay back debt with interest when the economy is growing than when the economy is shrinking. When the economy is shrinking, there is less in the future to begin with. Repaying debt from this shrinking amount becomes a problem. Even promises that aren’t formally debt, such as most Social Security payments, Medicare, and future road maintenance become a problem. With fewer goods available in total, citizens on average become poorer.
Governments depend on tax revenue from citizens, so they become poorer as well–perhaps even more quickly than the individual citizens who live in their country. It is in situations like this that richer parts of countries decide to secede, leading to country break-ups. Or the central government may fail, as in the Former Soviet Union.
Which Promises are Least Affected?
Some promises are very close in time; others involve many years of delay. For example, if I bring food I grew to a farmers’ market, and the operator of the market gives me credit that allows me to take home some other goods that someone else has brought, there are some aspects of credit involved, but it is very short term credit. I am being allowed to “run a tab” with credit for things I brought, and this payment is being used to purchase other goods, or perhaps even services. Perhaps someone else would offer some of their labor in putting together the farmers’ market, or in working in a garden, in return for getting some of the produce.
As I see it, such short term promises are not really a problem. Such credit arrangements have been used for thousands of years (Graeber, 2012). They don’t depend on long supply lines, around the world, that are subject to disruption. They also don’t depend on future events–for example, they don’t depend on buyers being available to purchase goods from a factory five or ten years from now. Thus, local supply chains among people in close proximity seem likely to be available for the long term.
Long-Term Debt is Harder to Maintain
Debt which is long-term in nature, or provides promises extending into the future (even if they aren’t formally debt) are much harder to maintain. For example, if governments are poorer, they may need to cut back on programs citizens expect, such as paving roads, and funding for Social Security and Medicare.
Governments and economies are already being affected by the difficulty in maintaining long term debt. This is a big reasons why Quantitative Easing (QE) is being used to keep interest rates artificially low in the United States, Europe (including the UK and Switzerland), and Japan. If interest rates should rise, it seems likely that there would be far more defaults on bonds, and far more programs would need to be cut. Even with these measures, some borrowers near the bottom are already being adversely affected–for example, subprime loans were problems during the Great Recession. Also, many of the poorer countries, for example, Greece, Egypt, and the Ukraine, are already having debt problems.
Indirect Casualties of the Long-Term Debt Implosion
The problem with debt defaults is that they tend to spread. If one major country has difficulty, banks of many other countries are likely be to affected, because many banks will hold the debt of the defaulting country. (This may not be as true with China, but there are no doubt indirect links to other economies.) Banks are thinly capitalized. If a government tries to prop up the banks in its country, it is likely to be drawn into the debt default mess. Insurance companies and pension plans may also be affected by the debt defaults.
In such a situation of debt defaults spreading from country to country, interest rates can be expected to shift suddenly, causing financial difficulty for those issuing derivatives. There may also be liquidity problems in dealing with these sudden changes. As a result, banks issuing derivatives may need to be bailed out.
There may also be a sudden loss of credit availability, or much higher interest rates, as banks issuing loans become more cautious. In fact, if problems are severe enough, some banks may be closed altogether.
With less credit available, prices of commodities can be expected to drop dramatically. For example, during the credit crisis in the second half of 2008, oil prices dropped to the low $30s per barrel. It was not until after QE was started in November 2008 that oil prices started to rise again. This time, central banks are already using QE to try to fix the situation. It is not clear that they can do much more, so the situation would seem to have the potential to spiral out of control.
Without credit availability, the prices of most stocks are likely to drop dramatically. In part, this is because without credit availability, it is not clear that the companies listed in the stock market can actually produce very much. Even if the particular company does not need credit, it is likely that some of the businesses on which it depends for supplies will have credit problems, and not be able to provide needed supplies. Also, with less credit availability, potential buyers of shares of stock may not be about to get the credit they need to purchase shares of stock. As a result of the credit problems in 2008, the Dow Jones Industrial Average dropped to $6,547 on March 9, 2009.
Furthermore, lack of credit availability tends to lead to low selling prices for commodities, making production of these commodities unprofitable. Production of these commodities may not drop off immediately, but will in time unless the credit situation is quickly turned around.
Can’t governments simply declare a debt jubilee for all debt, and start over again?
Not that I can see. Declaring a debt jubilee is, in effect, saying, “We have decided to renege on our past promises. In fact, we are letting others renege on their promises as well.” This means that insurance companies, pension plans, and banks will all be in very poor financial situation. Many who depend on pensions will find their monthly checks cut off as well. In fact, businesses without credit availability are likely to lay off workers.
If it is possible to start over, it will need to be on a much more restricted basis. Everyone will be poorer, so there won’t be much of a market for expensive new cars and homes. Instead, most demand will be for will be the basics–food, water, clothing, and fuel for heat. Unfortunately, it is doubtful that prices will be high enough, or the chains of supply robust enough, to again produce fossil fuels in quantity. Without fossil fuels, what we think of as renewables will disappear from availability quickly as well. For example, hydroelectric, wind and solar PV all work as parts of a system. If the billing system is unavailable because banks are closed, or if the transmission system is in need of repair because lines are down and the diesel fuel needed to make repairs is unavailable, electricity may not be available.
As indicated above, demand will be primarily for basics such as food, water, clothing, and fuel for cooking and heating. It will still be possible to use local supply chains, even if long distance supply chains don’t really work well. The challenge will be trying to shift modes of production to new approaches in which goods can be made locally. A major challenge will be training potential farmers, getting needed equipment for them, and transferring land ownership in ways that will allow food to be produced in ways that do not depend on fossil fuels.
Belief in credit will be severely damaged by a debt jubilee. The place where credit will be easy to reestablish will be in places where everyone knows everyone else, and supply lines are short. Debt will mostly be of the nature of “running a tab” when one type of good is exchanged for another. Over time, there may be some long-term trade re-established, but it is likely to be much more limited in scope than what we know today.
Long-term debt tends to work much better in a period of economic growth, than in a period of contraction. Reinhart and Rogoff unexpectedly discovered this point in their 2008 paper “This Time is Different: A Panoramic View of Eight Centuries of Financial Crises.” They remark “It is notable that the non-defaulters, by and large, are all hugely successful growth stories.”
Slowing growth in China is likely to mean that world economic growth is slowing. This will add to stresses, making failure of the system more likely than it otherwise would be. We can cross our fingers and hope that Janet Yellen and other central bankers can figure out yet other ways to keep the system together for a while longer.
Our Finite World noted on Daily Kos here, Daily Kos is a heavily trafficked and influential left wing blog.
Thanks! I hadn’t seen that.
OK for all those who _need_ no. 20.
B side, what other?
I fancy that I can post Mozart somewhere tonight without getting banned,
The Germans (and the Italians) showing everyone how it is done!
Suicides in the financial industry:
Is there something going on?
“Is there something going on?” I believe so. I suspect as more and more people realize the world is not what the thought it was, the suicide rate will go up, first in the industries/institutions where it is easiest to see what is really going on, then in the wider public.
Suicides are popping up outside the financial industry. The French telecommunication company Orange has experienced a recent spate, so perhaps there are more factors at work and not just bank fraud, embezzlement and theft.
What about insolvency? What if your world as you perceive it collapses and you no longer think you are sane?
I am not sure if it is in the industries/institutions were it is easies to see what is going on. I think just as likely it is among the most marginalized. We know that alcoholism has gone up in Russia among those who no longer can find good jobs. “Not taking care of oneself” seems to be part of what happens.
It is my understanding that Belgium — a country with a GDP of 483B http://www.tradingeconomics.com/belgium/gdp has recently purchased a massive amount of US debt: “Meanwhile, Belgium is now the third-largest foreign holder of Treasury debt, after increasing its buying by $52.5bn to $310.3bn in January. The country has steadily grown its Treasury portfolio from $167bn in August, but purchases may be on behalf of other countries using Belgium as a financial centre. ”
I am not quite sure what this means but it sure does seem strange… is the Fed actually NOT tapering and instead continuing to buy US debt via proxy? And if so are they buying far MORE than what they were on record of buying before the taper was announced?
Is the Fed also buying equities using proxies? i.e. are they handing cash over to their mates at the big banks under condition they buy equities to prop up the market? It is well known that institutions including Blackrock have been using Fed ZIRP cash to buy foreclosed properties giving the appearance of a ‘recovery’
One thing I do know is that every time since 2008 the Fed’s tapering has approached the end of its run – the stock market has started to tank – and every time the Fed has quickly announced an extension of QE ZIRP.
But this time – as they slash 10B at every meeting — the stock market hits new highs.
What’s with that?
“is the Fed actually NOT tapering and instead continuing to buy US debt via proxy?”
“Is the Fed also buying equities using proxies?”
I consider it highly likely it is doing both. I would honestly be shocked if they weren’t. They will use whatever bullets they can find. The Fed’s number one job is to control our collective psychology about the economy.
Indeed – remember LTRO – 1.5 trillion dollars forked over to shore up the EU banking system end 2012. Then of course Bloomberg took the gov’t to court and won – disclosing that the Fed had bailed out most of the big banks in the EU in 2008. A US institution bailing out EU banks…. hmmmm…
That is clear evidence that they will do absolutely anything including lie – to try to keep the Titanic afloat for a few more hours.
Oil and Gas: At what price?
Oil and Gas: At what price?
Regional power shifts and how they affect the supplies of gas and oil central to 21st Century life.
Inside Story Last updated: 20 Mar 2014 18:57
It keeps the lights on, our transport systems running and businesses on track – without it modern life would simply not function.
Energy is at the centre of our lives and – as recent events have shown a key influence in the cause and consequences of conflicts around the globe.
Unrest in Ukraine has highlighted Europe’s reliance on Russia for its energy supplies. And it is not alone.
Libya, Iraq, scratch beneath the surface and energy will play some, if not the major role in the approach, negotiation and final outcome of a conflict.
So how has the once tightly controlled energy industry become such a bargaining chip?
Presenter: Mike Hanna
In any group of people you have a full spectrum of IQs….intellectuals all the way down to blockheads. Anthony Wiener with his adolescent behavior likely knows not or cares not about the implications of energy depletion but a John McCain type does and is savvy enough to claim that the current Eurasian fiasco is ideologically driven geopolitics. It serves no purpose to alarm the servants or frighten the horses.
Politicians discussing global warming http://imgur.com/r/pics/Lnbd1Yp
Starting to hit the semi-MSM http://theweek.com/article/index/258375/what-if-economic-growth-is-no-longer-possible-in-the-21st-century
Lots of good links in the article
I thought that was a relatively fluffy article … ‘save the middle class’ …. really?
The author needs to refer to ourfiniteworld to get a reality check on what we are up against here… well — maybe not ‘up against’ because that assumes there is hope that we can overcome or change our ways — so I suppose better to say ‘to understand what is coming our way imminently’.
Well, any progress on this situation is probably to the good. Guy McPherson has said that everyone has the right to know what is going on. We all share the same world, each of us born into this system that none of us has created, some deceived by it, others awake, but all of us in the same boat.
“Indeed, if we cannot grow our way to broadly shared prosperity again, redistribution is the only way to save the middle class.”
Interesting linked article, Interguru. Do you see what is being suggested by these people in the above quote? It just amazes me how people are so good at not seeing the truth, but instead their brains act like bumpers in a pinball machine, seamlessly deflecting truth for some other perceived possible positive direction. In this case the new direction will be ‘REDISTRIBUTION’. Well, let’s look at what that idea really means, which is instead of the fat cats sucking up billions, it gets smoothed out to the middle class masses leaving the billionaires making the same as or close to the rest of us?! But isn’t that communism? And who in their right mind is going to bother to make billions if they only end up with the same as everybody else? That’s why communism didn’t work because it failed to provide motivation to do any more than the minimum.
But that’s not even the worse of it. With rapidly declining net energy, what’s left to smooth out like frosting to the masses will continue to decline and at some point cause an economic collapse anyway. Oops, we didn’t think in terms of the pie shrinking leading to collapse, just ‘REDISTRIBUTION’. See what I mean by the brain solving problems with untenable ideas?
This thread is getting stale. We need a new peak oil injection. I wonder what big picture view Gail is processing for us as this virtual ink dries?
As for an injection of peak oil thinking: Check out the bit I posted a little way up on this page from PeakOilProof.com. Its a bit long but toward the bottom the author suggests some near term gasoline price ceilings that will trigger the next round of demand destruction and recession.
I see George Soros this morning is suggesting the US punish Putin by releasing strategic reserves onto the market to force oil prices below $100.
I am sure Exxon and Chevron who have cut capex because they can’t make money at $100+ wouldjust love that.
Oh and I see that Russia is no longer offering Ukraine discounted gas — prices are set to go up 40%. Isn’t it awesome to be under the EU/US sphere!
No doubt the US will help (enslave) already insolvent Ukraine by bailing them out —- well — loaning them money — with the conditions that they reform their ag policies i.e. allow western big ag to buy farmland at pennies on the dollar. Of course the taxpayers of the Ukraine will end up yoked to the wheel of free market capitalism forever.
All in a days work for Mr Obama as a minion of the Deep State
IMF austerity conditions also require a 40% reduction in pensions.
Putin need do nothing at all. The Ukrainian gold is gone. Rumor is the Scythian gold is gone. When the US and its hegemonic institutions have helped Ukraine the people will beg to join Russia in some kind of a positive relationship.
“I see George Soros this morning is suggesting the US punish Putin by releasing strategic reserves onto the market to force oil prices below $100. I am sure Exxon and Chevron who have cut capex because they can’t make money at $100+ wouldjust love that.”
Some of these politicians should spend a whole lot more time reading up on important 21st century topics like peak oil, etc., so they would know that any reduction in oil price at this juncture will reduce not only oil majors capex (as you mentioned, Paul), but also greatly reduce non-conventional sources (requiring high prices). Today’s price seems high for those not in the know, I’m sure, however the price will actually lead to lower future supply. And if for some reason Alaska is right via his peakoilproof.com link regarding higher fuel price reducing demand further, and in turn lowering oil price, then we’re going to end up just blowing through the giant old fields that are infilling with horizontals, oh why do I bother going on, we all know where it’s going…but just try to penetrate the diamond hard density of those lug nuts on capitol hill living in a world long since past their understanding. I bet many of them have a big box of 8 track tapes in the back seat. “Hand me the Burl Ives Christmas tape will ya whipper snapper”, LMAO!
I wonder if George’s sweety has taught the intricacies of Twitter and Facebook? In return he shows her how to use his gramaphone.
Wow, the power of big bucks!
The idea of the US loaning money to anyone is laughable if it weren’t so sad.
Last fall, September 2013, China reportedly purchased / took out a long term lease on 3 million hectacres of Ukrainian farmland. The Chinese have also purchased large plots in Africa and South America. You might want to google it. It appears that as the Chinese continue to turn their rural areas into urban and industrial use, the impact on food production is growing.
Cheers, Chris Johnson
Yeah GTA, we want our free shit!
Next article please!
Paul, I’m assuming you’re not a US citizen for a couple of reasons:
1. The Jungle is (used to be) required reading for high school students. It’s famous not for its depiction of social/working conditions in the Chicago stockyards at the turn of the last century, but the effect it had on consumption of meat products. In fact, there was such an outcry of surprise & horror from the general public, that the federal Food & Drug Administration (FDA) was created in attempt to establish basic sanitary conditions. This result prompted the author to famously state “I aimed for the heart (ie sympathy) and hit the stomach”.
2. At the risk of referencing pop culture, the main protagonist of the American series of ‘House of Card’s has a habit of breaking the 4th wall – that is, speaking directly to the audience via camera. In an early episode last year, in order to establish the character’s frame of mind, he speaks to the audience about a former aid, who he disdainfully dismisses with the line of “he pursued money rather than power”.
Like you, I came from the financial world, but I think you might be in error considering the wealthy as the main driver of the PTB. Rather, and we’re starting to see more awareness of this concept, the “deep state” aka “the Establishment” is the true power behind the throne.
So, when I say one should be prepared to play the game at the level it’s being executed, I am not referring to the banking shenanigans like QE, ZIRP4EVA, etc taking place amongst the respective major commercial money center and central banks.
From a historical perspective, this isn’t really that novel or insightful. Throughout the ages, when the pressure became too much, Kings were finally forced to act against the banking sectors if they wanted to keep their own heads. Call it what you want: expulsion, pogroms, jubilee, etc, they all serve the same purpose – to reset the slate.
However, due to the incredible disruption these tactics had on commerce & social conditions, these events were inevitably introduced along with “special” measures to enforce public safety/order and other kinds of punishing enhancements to keep the lid on the pot.
This is what I mean. Of course you’re absolutely correct in identifying the lack of any cohesive plan with respect to the destructive policies currently being engaged. Those who benefit today from the existing system are indeed running scared. You can even search my original comments @ ZH from 5 years ago to get the same descriptive analysis. That is, it was obvious long ago they were praying for a miracle that never appeared.
But here we are today – we’ve entered into the latter stages of the contest, where the set up for the end game is slowly but surely being established. Ukraine & Syria are the two obvious examples; the pace will accelerate as more truth leaks out as to the real nature of humanity’s problem with respect to the 3 E’s.
You are correct – I am Canadian but have not lived there for nearly two decades…
I know of Upton Sinclair only via his quote regarding the futility of trying to convince someone of something when their paycheck depends on that something… Have not read anything by him – Jungle will be the first.
House of Cards – one of the few things I download and watch on the laptop… one of the few pop culture shows worth time.
I’m not from the finance world (although I was offered a trading job at US bank many years ago) – nothing against that but I preferred to go the route of the entrepreneur — and with a few more months of knowledge under my belt I will reclassify myself as beginner farmer – definitely my favourite job to date.
Deep State — in action : http://www.youtube.com/watch?v=NR3RqMMIwD4
I’ve communicated with Paul Roberts on this (former Reagan senior guy – Wall St Journal editor) and asked him in an email who ‘they’ are (he often refers to they in his newsletters) — his response:
“They are (1) the military-security complex, which includes various secret black op groups, (2)Wall Street and the financial sector, (3) the Israel Lobby, (4) Agribusiness, (5) energy, mining, and timber. Influential families can be found in all of these areas. However, individual families have no Navy SEALs, black-op assassins, drones, prosecutors, and cannot match the financial power of Wall St.
Some believe that the Rothchilds control the world. No doubt the Rothchilds like to think that they do, but it would be easy for the CIA to take them out.”
I think he would know because he was at one point as close as one might get to the Deep State
The Deep State is definitely running scared — perhaps for the first time in history they are check-mated …. all their billions — all their assets — their armies — are of no use to them — even their money printing machines will ultimately be like a pop-gun against an elephant…
And they know that.
These people are going to soon find out what it’s like to star in an Oxfam commerical – as in they will be in the gutter starving with everyone else….
“The Cacophony Of Fed Confusion,” David Stockman Warns Will Lead To “Economic Calamity”
“We never should have painted ourselves so deep in this QE corner in the first place,” chides David Stockman, “because the whole predicate [of Fed policy] is false.” The author of The Great Deformation holds nothing back in this brief 3-minute primer of everything is wrong with the American economic system (and the CNBC anchors definitely did not want to hear). “We are already at peak debt and forcing more into the economy didn’t work,” and won’t work as is merely funds Wall Street’s latest carry trade to nowhere and fiscal irresponsibility in Washington. Simply put, “the private credit channel of monetary transmission is busted,” so the Fed is exploiting the only channel it has left – “the bubble channel.”
Stockman is almost there — what he is failing to ask is ‘Why would they commit suicide?’
Yes all of these policies are madness — they will 1000000% lead to the collapse of the global economy and civilization — EVEN if we were not out of cheap oil doing what they were doing would be disastrous at some point.
These guys are not dummies — surely they must eventually conclude that the masters of the universe are not suicidal — nor are they stupid…. Why Why Why Why?????
The only answer can be that they fear something that is worth keeping in the cage for as long as possible. And the conclusion has to be that those in the know — know that the car is out of gas.
I suppose the banker types are unable to catalyze this because it would mean accepting what is right before their eyes means their entire world is over — their work meaningless — better to plunge into the depths of denial.
I pick up a fair number of finance newsletters each day and from time to time communicate with the authors by email — I have passed along some of this info but not one of them will pick up on it
One of the more prominent guys responded with ‘higher priced oil is good — because it encourages more exploration’ — then when the Exxon and Chevron articles came out about them not being able to make money at $110 so they cut capex I touched base with that bit of info (which of course completely collapsed the guys narrative) — nothing back.
Again, many of these guys make money off of their newsletters – no sense in telling subscribers that the world is about to end — better off to dance while the music plays.
“These guys are not dummies — surely they must eventually conclude that the masters of the universe are not suicidal — nor are they stupid…. Why Why Why Why?????”
Forgive me if I’ve posted this here before, but Bird & Fortune know the answer. Be sure to watch all three!
Yes I’ve seen … very amusing 🙂
For those who haven’t http://www.youtube.com/watch?v=mzJmTCYmo9g
This is very funny.
“This is very funny.”
In a profoundly sad sort of way.
“In a profoundly sad sort of way.”
There is not a whole lot to laugh about regarding this entire subject, so we might as well enjoy those lighter moments as they present themselves.
I’m agree with you Paul but I wonder if the QE tappering could finish one day. Do you think the reduce of $10 billions per month could go on until the end ($0) ? I’m sincerly doubteful about that, and I think it could be stopped before the end due to the crash market or something else…
Central banks go to the limits of systems and will die with him.
QE wont stop, it’s impossible. Unconventional energy production’s operating at breakneck speed and every day pressures/costs grow just to extract the same as we did a few years ago. EROEI is nosediving.
Since 2006 total global liquid fuel production plateaued. Conventional has been declining by about 6% pa. Western Oil majors are in panic mode issuing the mother of profit warnings one after the other.
Interest rates are at their lowest for centuries and are at their lowest for damn good reasons.
2015-2020 the mother of energy deflationary forces commences and to offset that, the elite’s instincts will be to order central banks around the world to print on a scale never seen, even more so than they’ve been doing. They have no choice or the elite will face massive global civil unrest. It’s going to happen anyway but they’ll desperately try to convince the world there’s lots of room left for growth when it’s obvious energy deflation is decreasing aggregate economic activity.
Lots of energy, lots of activity, some energy, some activity, declining energy, declining activity, no energy, no activity of any kind. It’s all so simple when you think about it from a realists perspective.
Why do you think we’re setting up Agritech Media. Food Security will become our greatest challenge.
In the end we’re all stuffed.
Peak Oil Proof Your Portfolio
Psychological Trigger Points For Crude Oil Demand Destruction
Posted: 18 Mar 2014 10:50 AM PDT
I’ve talked about demand destruction before in this blog. Demand destruction occurs when the marginal benefit of using more crude oil exceeds the marginal cost for people. Essentially, when oil prices go too high, people use less oil. On a personal level, this means that people may drive fewer miles by staying closer to home on the weekends, they might postpone a long-distance vacation, or they might start taking the bus or work from home instead of commuting by car. The Economist wrote a nice article on this phenomenon last year where they stated “in the rich world oil demand has already peaked: it has fallen since 2005.”
While demand destruction occurs across every price up the ladder, there are certain psychological trigger points where people “wake up” to the fact that oil has gotten very expensive. Gas stations post their prices on the street and people notice when prices pass certain thresholds. In the United States, we price our fuel in dollars per gallon, and people definitely notice when regular gasoline passes $4 per gallon. In fact, when we look at the average US street price of regular gasoline, we see it bounces off a ceiling of $4 per gallon:
When Americans see $4 a gallon on their neighborhood gas station’s sign, the price of oil immediately becomes front-of-mind and they start changing their behavior. Already, there are signs that motorization in the US has peaked. We can imagine that if gasoline prices rose past $5 per gallon, people would dramatically cut back on their gasoline consumption.
In Europe, gasoline is priced in Euros per Liter. The EIA keeps a summary of current prices in Europe here. In Germany, the largest economy in Europe, 48% of cars are diesel, so the price of diesel is more important than the price of gasoline. Looking at historic diesel prices in Germany we also see a ceiling, but it is at €1.5/liter:
We can imagine that the next threshold in Germany is €2/liter, at which point Germans would almost certainly cut back significantly on their fuel consumption.
In China, gasoline and diesel is priced in yuan/liter. Current prices are ¥1.77/liter for diesel in Beijing. In Chinese culture, many numbers have strong physiological associations. Seven a lucky number associated with “togetherness” – so today’s price of ¥1.77/liter might be welcomed by people. Four is considered an unlucky number. In fact, many buildings in china don’t have a 4th floor (similar to how many buildings in the west don’t have a 13th floor). So while ¥2/liter is likely the next physiological threshold in China, we can imagine that if prices rose to ¥2.44/liter, they would be front-of-mind for people.
Converting Crude Oil Prices to Gasoline Prices
We can convert the price of crude oil to the price of gasoline by looking at the historical difference between these two prices. There are 42 gallons in a crude oil barrel, so a $100 crude oil price is $2.38 per gallon of crude oil. Obviously crude oil is the largest input cost for gasoline, but when you buy a gallon of gasoline you’re also paying for taxes, marketing, distribution and refining costs. The EIA has created a nice graphic showing what you pay for in a gallon of gasoline:
Over time, the price of crude oil has become a larger percent of the overall cost of gasoline:
Today crude oil accounts for about 75% of the cost of gasoline in the United States and for about 35% of the cost of diesel in Germany (where taxes are far higher). Using historical data we can come up with a few simple rules of thumb for converting crude oil prices to local gasoline prices for the US, Europe and China:
United States: Crude Oil ($/bbl) / 31.5 = Gasoline Price ($/gallon)
Europe: Crude Oil ($/bbl) / 80 = Diesel Price (€/liter)
China: Crude Oil ($/bbl) / 61.5 = (¥/liter)
For the record, there are more accurate ways of doing this – like calculating the refinery yield for each product and adding on top of that the taxes and distribution cost for each region – but for this blog post some rules of thumb will suffice.
Demand Destruction Thresholds
Going back to our psychological demand destruction thresholds, we can use our rules of thumb to convert them to crude oil prices:
€1.5/liter in Europe: $120
¥2/liter in China: $123
$4/gallon in the US: $126
¥2.44/liter in China: $150
$5/gallon in the US: $157
€2/liter in Europe: $160
So looking at future prices, if crude oil hits $120-$125 per barrel, we will likely see demand destruction as certain psychological triggers are hit around the world. The next threshold appears to be $150-$160 per barrel, at which point demand destruction could be quite severe.
This is a post from a website: peakoilproof.com
‘Pay Our Pensions Or We’ll Throw You In Jail: The Legalization Of Looting’
“First up: privatizing the collection of traffic fines and probation to create a modernized debtor’s prison.
Next up: illegal search and seizure under the pretext of traffic violations. As if “driving while black” isn’t bad enough, now “driving with cash” is pretext enough to be stripped of your rights and your property stolen by local government:
Exhibit # 3: guilty until proven innocent: State of California seizes cash from “suspected” tax evaders with no evidence, no court action, no recourse.”
This will get much, much worse in the future as Fed, State and local governments conjure up ever more creative ways to extract money from the people to pay for shortfalls in revenue. As we continue down the net energy ladder I think it will reach the point of setting up conditions for increasing conflict between The People and their governments. We will have to fight tooth and nail to have enough after taxes and penalties to pay the bills vs. their fight to get it as much from us as possible to keep what will become an obsolete institution up and running. Obsolete, because at some juncture of net energy decline there won’t be enough to support a huge overseeing institution. But the situation will not solve itself quietly as governments have the authority of rule, so push will have to come to shove.
4 new coal plants per week in India and China….
The Toxins That Threaten Our Brains
Leading scientists recently identified a dozen chemicals as being responsible for widespread behavioral and cognitive problems. But the scope of the chemical dangers in our environment is likely even greater. Why children and the poor are most susceptible to neurotoxic exposure that may be costing the U.S. billions of dollars and immeasurable peace of mind.
Maybe this loss of IQ is why the human race is collectively too stupid to think a way out of its own extinction event!
Did anybody already come across the article “Nasa-funded study: industrial civilisation headed for ‘irreversible collapse’?”, http://www.theguardian.com/environment/earth-insight/2014/mar/14/nasa-civilisation-irreversible-collapse-study-scientists . Very, very interesting; a must-read!
I think many of us have already read that one. Thanks.
The only link I found to the original study http://www.atmos.umd.edu/~ekalnay/pubs/handy-paper-for-submission-2.pdf is dead!! Can anyone else find one?
Great post.Really thank you! Amazing.
Life has always been a terrible struggle.
There have always been teachers and students working in the chaos, even in ‘collapsing’ societies.
How else did Europe rise to such great heights from its Dark Age?
This one won’t be like those others, I’m afraid. That is why ‘m chuckingly at some who want to hide in Bail or AK and think it’s safe. So funny.
Persian proverb: ‘You are avoiding Death in Samarkand, but he waits for you in Bokhara’.
Looking for a safe haven might seem amusing or futile, and indeed the catastrophe might be so great that it will be, but it is what your ancestors did – or you wouldn’t be here.
Are we to sit around and vegetate waiting for ‘authorities’ to save us, or do something?
Inaction is death.
That may be true, but with climate change and all the other issues 90% of us are gone and the other 10% will probably wish they were too. As pointed out India and China are burning cast amounts of coal and the USA is selling them all it can. So, permaculture/organic garden all you want, but it will be of no use with the new EAARTH that is created by our dumb folly.
My mind says you are right – what is the point — but my DNA is urging me to act. And anyway – there’s something meaningful about working the earth and growing food – and the challenge of learning permaculture skills – I don’t find it a chore at all.
I’m not saying you shouldn’t do it. From what I see it’s been an oversell
I’m not hiding in Alaska (well, not intentionally to escape Armageddon, at least). I moved up here along time ago to live a free and simpler life. With regard to surviving the immediate effects of a collapse scenario, its just a lucky coincidence that it is really far from large population centers, has lots of water, wood and wildlife. It has its flaws though, too. For example, when global trade collapses, it will be a complete shutdown up here. This type of isolation means there is no reasonable or meaningful local source for trading with other groups. We will be completely alone. Farming, although achievable, is still marginal. The second flaw is that catastrophic climate change is most likely to affect the arctic regions first. If you follow Guy McPherson, he posits that most of the survivable landscape left on earth will be in the southern hemisphere. Thus the wealthy retreats being set up in places like Paraguay. Oh, well.
MJ – I lived in Hong Kong for over 10 years before moving to Bali – the reason I moved was because of the pollution problems in Hong Kong — I am able to work remotely but must remain in the apec region as I must still go to Hong Kong regularly – but by no means did I come here to ‘hide away’
When I moved here 6+ years ago I believed that the financial crisis was not going to be resolved and that we’d eventually crash — but I believed that we’d recover from that. Only recently have I become aware of the fact that the financial crisis is related to the end of cheap oil — and that when we crash there will be no reset, no recovery.
So my choices are:
Bali: my home — great climate — fertile with year round growing — strong village community — small island – villages could survive without being plugged into the global economy (if the grocery stores closed they would not likely starve) – also they had a dry run after the first bali bombing when tourism collapsed for a couple of years … very hard times but people survived
BC Canada (we have a small shack in a very remote part of the rockies) – have only visited in summers – cold – one growing season – not familiar with ag techniques or plants there – small community nearby – 4 hours from nearest small city
Hong Kong – not under consideration – for obvious reasons.
None of the above 3 allow ownership of AK 47’s – in fact in Bali and Hong Kong one cannot own any sort of firearm.
When you finish chuckling perhaps you might help me decide which is the best option.
Okay, Paul. Now you’re making me jealous. Even though I love my set up in Alaska, it would be nice to have a longer growing season and some fruit! As to firearms, up here if you don’t have one, you’re suspect. I myself have 6-7 (I lose track) and I’m the liberal one in the area! How about inviting one pale, pasty-white Alaskan to Bali for some R&R?
Somewhere I read the Bush family has large estates in Paraguay, just in case the North American rabble come with their pitchforks.
by a lot of small incremental stages—not least of which was the eventual shaking off of superstition and dogma. and the invention of the printing press.
we didnt really leave the dark ages until the invention of the viable steam engine—-which gave us temporary leave of it.
Compare life in what became England c. 570 AD, and life in 1750: I think most would agree that the latter was not part of the Dark Ages.
The definition implied in what you say is, surely far too wide. Did the Dark Ages really only end with industrial society and the advent of atheist materialism? Materialism is a dogma too – see Soviet Union.
Myself, I’m inclined to date their end with the resumption of large-scale dressed-stone architecture in the 11th century in western Europe, which was a very considerable civilized achievement. Before that, only rubble and timber walls on a small scale were made.
And of course, civilization had flourished in China and the Near East without interruption while Europe was in its Dark Age, and they seem to have lacked the steam engine and had all kinds of beliefs which you would find suspect.
“civilization had flourished in China and the Near East without interruption”
I think Joseph Tainter would say “civilizations” flourished “with interruptions”
But I get your point, and agree. I don’t know much about the Renaissance. I wonder about the energetic reasons for it, though.
The standard story is that we rediscovered the literature and art of classical Greece and Rome, partly via the Arabs, esp. Aristotle, Plato, Cicero et al. We began to “get over” Christian otherworldly asceticism and Western civilization recommenced. No doubt there were a lot of other social factors in play. “Renaissance” is literally the “rebirth” or return of classical pagan Western civilization. Thus the “Middle Ages” are middle between classical civilization and its “renaissance”. Arguably the renaissance is still working its way out in modern secularism. We are yet to fully “overcome” Christianity.
* Sadly we do not know the music of the ancient Greeks and Romans because written music notation was not invented until the middle ages — even the Pythagoreans did not leave us any pieces. The term “classical” is applied in music to German music from about 1750-1820. It is the outstanding cultural use of the term to anything remotely modern.
Lets just make sure that we preserve classical culture in these coming times.
I hope some of you had a chance to read my little extracts from Linton and Watson on the relationship between biological productivity, recycling, and photosynthetic energy. Today brings a couple of items that illustrate some of the repercussions in the real world (or the fantasy we perceive as the real world.)
I will be referring to two articles presented today on Richard Heinberg’s website. 🙂
The first article talks about the effort to ‘restore ecosystems’ in urban settings. Fundamentally, they have been expensive failures.
‘This patchwork movement to rebuild the natural world ought to be good news. Such projects are, moreover, likely to become far more common as the world rapidly urbanizes and as cities, new and old, turn to green infrastructure to address problems like climate change, flood control, and pollution of nearby waterways. But hardly anyone does a proper job of measuring the results, and when they do, it generally turns out that ecological restorations seldom function as intended.
A 2012 study in PLOS Biology, for instance, looked at 621 wetland projects and found most had failed to deliver promised results, or match the performance of natural systems, even decades after completion. Likewise, an upcoming study by Margaret A. Palmer at the University of Maryland reports that more than 75 percent of river and stream restorations failed to meet their own minimal performance targets. “They may be pretty projects,” says Palmer, “but they don’t provide ecological benefits.”
“Adaptive management,” the idea of continually monitoring environmental projects and making steady improvements over time — or “learning by doing” — has also been around in ecological circles since the 1970s. But a recent survey in Biological Conservation found “surprisingly few practical, on-ground examples of adaptive management.” In part, that’s because “long-term investigations are notoriously difficult to establish and maintain.”
The result, Qiaoyuan Wetland Park, opened in 2008, with none of the great lawns and formal plantings seen in conventional Chinese parks. Instead, Yu’s design features a naturalized landscape of ponds, grasses, and reeds, with walkways and viewing platforms for local residents.
Traditional landscape design in China is “based on art and form,” says Yu. “My practice is to find a scientific basis.” The park features a terraced system of 21 ponds, designed to filter urban runoff as it moves through the site. Yu calls it “peasant” landscaping, based on traditional rice farms. But the ponds are of different sizes and depths, with the aim of monitoring how each microhabitat affects water quality, PH values, and the character of the evolving plant community. ‘
My comments. Note that the big project in China is trying to replicate peasant landscaping…but without peasants. And the constant surveillance and mid-course corrections required by Adaptive Management are dependent on universities and students and continued funding. Now suppose that they just found some real life peasants and brought them in and gave them the land to grow rice…. The peasants would engage in Adaptive Management every day, every time they walked through or worked in their fields. It might help to give the peasants a hands-on course with some Biological Farming expert, who would perhaps enlarge their vision of what is possible with their new land. It may also help to give some modest monetary incentives to encourage the sorts of behaviors that the nearby city dwellers will find useful. The point, however, is that trying to recreate a wilderness in a city is likely not to work. Recreating ecologically sound farms seems much more achievable. I’ll also point out that a human managed landscape does not stand still. The natural forces ebb and flow and the human constantly makes course corrections. Therefore, the usual methods of controlled scientific experiments don’t work very well. When life is at stake, we do what we think we need to do, and to hell with the protocol.
The second article is the excellent interview with David Korowicz:
‘a. That said, we might not notice oil constraints initially (energy prices may fall significantly although it may be less affordable) because a depression and even a potentially catastrophic financial shock will have shattered the global economy’s capacity to use energy and resources. And if this happens there’ll be no going back, we’ll have entered a new phase of forced localization and huge new challenges.
b. Our predicament and the tragedy of attempting change is: given time and resource constraints and the reality that we depend upon a de-localized networked system without central control, how do we change the system while ensuring we do not collapse its essential functions.
c. For all sorts of reasons the possibility of a controlled orchestrated de-growth to some viable steady-state position is probably deluded in the extreme. I’ll just point to one thing, such a view tends to embody the confusion that because the globalised economy is human-made it is therefore designed, understandable and controllable – humans can do this in niches, but the emergent structure of multiple niches interacting on many scales over time is not.
d. I’m pretty sure there will people living good, meaningful and ecologically responsible lives long into the future.
e. It would be more resilient if we were to put renewable energy into localized networks, adaptive to variability, resilient to supply-chain breaks, and used to protect something critical for collective welfare such as sanitation. Such an investment would make no economic sense at present, it’s completely inefficient.
f. As the global economic situation deteriorates and our adaptive capacity (savings, credit for investment, government tax receipts, inventories) becomes strained we (as individuals, businesses, countries) effectively have to stay in the game to avoid having to drop out and suffering much greater immediate consequences.
g. We desire, achieve new levels of comfort and security, habituate to them, feel the anxiety of status or become aware of some new gnawing lack before the cycle of desire returns again. Some 2400 years ago the Greek philosopher Epicurus said:
So long as the object of our craving is unattained it seems more precious than anything besides. Once it is ours we crave for something else. So an unquenchable thirst for life keeps us always on the grasp.
h. Such an observation is contained within the Four Noble Truths of Buddhism written at roughly the same time in Asia. It is part of our evolutionary heritage, our instincts honed by scarcity and risk which existed long before the advertising industry learned to exploit it. However once we have habituated to something its very hard to lose. Access to a hot shower, a washing machine, surgery, even a television are now considered almost a necessity in developed countries. We barely notice what we take for granted.’
Excerpts a and b point to localization and essential functions. I think that those two points are best addressed by biological gardening and farming with a local focus. Food, water, shelter, and community are the biggies in the ‘essential’ category. Strong community gives us some security.
Excerpts c and d point to the ability of sub-cultures to survive the collapse of the larger culture
Excerpts e and f point to the need for anyone in one of the sub-cultures to also keep one foot in the dominant culture. Anytime a biological farmer uses a cell phone, a chorus of people rise up and label them hypocrites. Such labeling completely misses Korowicz’ point. A biological farmer uses the cell phone because they have to remain competitive TODAY. But the biological farmer can get along without the cell phone in the future…it is not an essential in his production process. An industrial farmer cannot get along without fossil fuels and their products.
Excerpts g and h point to human characteristics as the ultimate source of many of our problems. So dust off your ‘basic Buddhism’ book and get unhitched from craving!
In summary, I suggest that everyone who finds the Lenton and Watson arguments strange or mysterious should buy that book and study it. Nature has built an extraordinarily complex adaptive system. Humans are part of that system. We would be advised to strive to build beautiful farms and gardens rather than strive to recreate wilderness in cities.
Second, I suggest that unhitching agriculture and gardening from fossil fuels is a matter of urgency. Whether the larger society is up to the challenge remains to be seen. Korowicz marshalls many reasons why the larger society will fail. So becoming part of a sub-culture which designs for financial viability in today’s world plus survival in a much reduced world makes a lot of sense.
Third, I suggest that any subculture needs to pay a lot of attention to the humanities: psychology, sociology, hormones, immune system, etc. Sub-cultures have a way of destroying themselves from inside. If you find a good one, hang onto it.
All nicely worded and thought out. We will see who teaches th children all these topics when we are struggling just to survive.
Please keep them coming.
Excellent antidotes to self-induced and debilitating pessimism and fatalism.
Very interesting. Thanks.
Paul, many I suggest that responding with rationale facts & analyses to constant propaganda efforts is similar to sparring with a punching bag? That is, it always bounces back – you’ll just end up tired & frustrated.
The smart & savvy have historically feasted on the weak, dumb & gullible. The major networks and news agencies are part of a combined media campaign to help further enrich those with a clue at the expense of those who share an affinity with Rudkus & Boxer:
Note I referenced seminal characters from both free market & state capitalist societies. That’s not a mistake; each are scams perpetrated against the less able.
The game here, as I see it, is to play at the level to which it’s being executed. That means, how is the PTB going to attempt to ride this sucker out to the end? Endlessly debating where we’re truly at, etc is just a redirect – it’s nothing more than a rear-guard action designed to let the perps get on with the next stage of the game.
Hear the music, not the noise.
Thanks for the book recommendation – will pick up the Jungle.
Agree – trying to get people to see the truth when the MSM does not want them to is a losing game.
” play at the level to which it’s being executed”
I don’t actually see a plan being executed this time — what I see is total confusion and panic on the part of the global Deep State.
Why do I believe that?
Because they are violating every rule of economics in a futile effort to keep their game going. Printing money — encouraging infinite moral hazard by bailing out everything — zirp forever — turning a blind eye to massive corruption — purposely inflating bubbles — you name — they are doing it.
If you would have suggested to any economist in 1995 that we’d be engaging in the above within a few short years they’d have said no way – those policies are economic suicide.
Decision-makers at the highest levels are aware of what the end of cheap oil means.
And just as we have never been able to grow food crops in -30 weather or on bare rock — so too are they aware that there is no solution to this problem. They know that nothing can be done to maintain this world that they lord over.
WW1 and 2 were nothing by comparison — this is a total game changer.
And they are scared – because they know that their billions – their castle estates – their power – their connections — will almost certainly be of no value when the SHTF. They know there is no likely hedge against what is coming — there is no viable game plan.
They know that this will be a democratizing event — survival of the fittest — and they know that having spent years being waited on hand and foot by their entourages has left them bereft of the skill sets necessary in the paradigm that is coming – perhaps they know that they are already dead?
I remember watching the financial news in 2008 — the ashen faces of the presenters — Jack Welch(the ultimate jack ass yet hero to the sycophants of big business) being trotted out on CNBs screaming encouragement — berating anyone who expressed negativity
He was definitely scared – he knew what the stakes were.
I believe that only if you were aware of this would you engage in the most draconian of policies – printing trillions of dollars – building ghost towns by the dozens – offering ‘Liar Loans’ to anyone etc etc etc
You would do this only if you felt that it kept the reaper at bay for a few more years or months.
The game is up for them – for everyone – no point in trying to play at their level any longer — been there done that — I know play at the level that I think might allow me to survive when the SHTF.
I no longer think in terms of returns on investments – or planning for the future in the traditional economic sense – or playing ‘the game’ – that is over. Instead I am focused on investments in self-sustainability and how I will adapt to the post SHTF world – a world where bonds, cash, stocks, condos and likely even gold and silver will be worthless….
And when I wake up each morning and scan the horizon and see that no black swan has landed in the pond overnight – I count that as one more day that I get to enjoy this life.
Despite my earlier comment that business execs tend to see the world through hard reality because the success of their business model depends upon it, there is no business executive more “out to lunch” and unable to see the big picture than Jack Welch.
Let me elaborate on Jack Ass — otherwise known as Jack Welch.
He was heralded as a business genius because he increased the profits of GE many times over — supposedly it was all about innovative ways that he implemented during his tenure there.
But if you look into it, his biggest accomplishment was related to getting involved in the finance side of things with GE Capital – and of course all know what happened to that company – for those who don’t it was given a massive bail out package.
Funny – Jack Ass never mentions that this when he appears on TV – nor does he write a new book about it. Nope – Jack is a hero – the mid-management big business cultists chant ‘I wanna be like Jack – how can I be like Jack – what are Jack’s habits’
When you say he hasn’t got a clue — I saw one interview with him where he said there were absolutely no limits to growth – that the whole concept was nonsense – that technology will always find a way.
Like you said… clueless… delusional … infatuated with a system with an automatic, built-in suicide function
Yep, that about sums him up. I saw that interview, too, about “no limits to growth…” If he’s not delusional, he’s senile.
That is my morning routine as well. Make a cup of coffee, look out the back window for the Black Swan. If no, Black Swan, finish coffee and then happily proceed with continued preps and BAU.
Sounds familiar. Usually have boot to shovel by 0630….
“Because they are violating every rule of economics in a futile effort to keep their game going. Printing money — encouraging infinite moral hazard by bailing out everything — zirp forever — turning a blind eye to massive corruption — purposely inflating bubbles — you name — they are doing it.”
The rest of the post was a great rant too, Paul! That’s some truth serum.
Speaking of black swan’s etc., I noticed a lot of blog consternation regarding how Yellen handled questions today. Maybe she hasn’t learned the fine art of talking until people want to doze off, like when Greenspan or Bernanke would spin such a yarn of rambling non-sensical rhetoric no one would dare question what was said for fear of looking dumb. Instead she just blurts out interest rates will begin rising six months after QE tapers to zero. The after market response was not good. We will see if that carries over to tomorrow’s trading.
But it also begs the question as to what happens when QE is no longer (although I’ll believe it when it actually makes it to zero) and 6 mo’s later rates go up. That’s really expecting a lot from this so called recovery, which has been more of a greed-fest for those in a position to take advantage of 0-.25 interest rate QE greenbacks to play with.
Yellen needs to pop some chemical laced instant popcorn — grab a super-sized coke from the fridge — a watch this movie 3x http://www.youtube.com/watch?v=FcPQ9gww_qc
Then she will be ready to chair the Fed.
The first line of this says it all “India is facing a dilemma – it needs to boost economic growth but expensive energy is keeping it at the coal face”
Hello once again Gail,
Well it seems that while the rest of the world is in turmoil, you are all enjoying the good life over there in the USA! At least according to this story, everything is lovely, and the future is so bright in the USA that you will all have to put on sunglasses. http://www.abc.net.au/news/2014-03-19/oecd-warns-of-rising-poverty-in-australia-as-gfc-fallout-contin
According to this news report, ‘the outlook for Europe, Australia and emerging economies in Asia is in stark contrast to the United States which is showing signs of a recovery that appears to be widespread and sustainable’.
So how much truth is there in this report? Are all your worries over? Should young Aussies be trying to get those green cards? I haven’t seen the actual report because you have to pay for it, and I am a war pensioner. I would like to get your comments on how close they are to reality.
50 million on food stamps… shadow stats says real unemployment is over 20%…
The Consumer IS the US economy — and the consumer is Tapped Out:
You can’t get blood out of a rock. Traditionally the United States has had a consumer-driven economy, but now years of declining incomes and rising debts are really starting to catch up with us. In order to have an economy that is dependent on consumer spending, you need to have a large middle class. Unfortunately, the U.S. middle class is steadily shrinking, and unless that trend is reversed we are going to see massive economic changes in this country.
For example, in poor neighborhoods all over America we are seeing bank branches, car dealerships and retail stores close down at an alarming rate. If you didn’t know better, you might be tempted to think that “Space Available” was the hottest new retailer in some areas of the nation. On the other hand, if you live in San Francisco, New York City or Washington D.C., things are pretty good for the moment. But as a whole, the condition of the U.S. consumer continues to decline. Incomes are going down, the cost of living is going up, and debts are skyrocketing. The following are 19 signs that the U.S. consumer is tapped out…
#1 Real disposable income per capita continues to fall. In the fourth quarter of 2012, it was sitting at $37,265. By the time that the fourth quarter of 2013 had come around, it had dropped to $36,941. That means that average Americans have less money to go shopping with than they did previously.
#2 In January, real disposable income in the U.S. experienced the largest year over year decline that we have seen since 1974.
#3 As disposable income decreases, major retailers are closing thousands of stores all over the country. Some are even calling this “a retail apocalypse”.
#4 From September 2013 to January 2014, the personal saving rate in the United States dropped by a staggering 16 percent.
#5 During the fourth quarter of 2013, we witnessed the largest increase in consumer debt in this country that we have seen since 2007.
#6 Fewer Americans are applying for mortgages these days. In fact, the MBA Purchase Applications Index is now the lowest that it has been since 1995.
#7 Overall, the rate of homeownership in the United States has fallen for eight years in a row.
#8 Many Americans are finding it increasingly difficult to afford a new car or truck. The following comes from a recent CNBC article…
A new study shows the average household in 24 of America’s 25 largest metropolitan areas cannot afford to pay for the average priced new car or truck.
“Just because you can manage the monthly payment doesn’t mean you should let a $30,000 or $40,000 ride gobble up such a huge share of your paycheck,” said Mike Sante, managing editor of Interest.com. “Many people are spending money on a car payment that they could be saving.”
#9 Incredibly, 56 percent of all Americans now have “subprime credit” at this point.
#10 Total consumer credit has risen by a whopping 22 percent over the past three years.
#11 In the third quarter of 2007, the student loan delinquency rate was 7.6 percent. Today, it is up to 11.5 percent.
#12 Overall, U.S. consumers are $11,360,000,000,000 in debt.
#13 While Barack Obama has been in the White House, median household income in the United States has fallen for five years in a row.
#14 U.S. workers are taking home the smallest share of the income pie that has ever been recorded.
#15 One recent study found that about 60 percent of the jobs that have been “created” since the end of the last recession pay $13.83 or less an hour.
#16 Middle-wage jobs accounted for 60 percent of the jobs lost during the last recession, but they have accounted for only 22 percent of the jobs created since then.
#17 According to one recent survey, only 35 percent of all Americans say that they are better off financially than they were a year ago.
#18 In 2008, 25 percent of all Americans in the 18 to 29-year-old age bracket considered themselves to be “lower class”. In 2014, an astounding 49 percent of them do.
#19 The poverty rate in America has been at 15 percent or above for 3 consecutive years. That is the first time that has happened since 1965.
Despite what the mainstream media keeps telling them, most Americans know on a gut level that there is something fundamentally wrong with our economy.
According to Gallup, “Unemployment/Jobs” is the number one issue that Americans care about these days and the “Economy in general” is the number three issue that Americans care about these days.
Most people just want to work hard, make a decent living and take care of their families.
Sadly, that is becoming increasingly difficult to do.
And the numbers that I have shared above only tell part of the story. For a more personal side to all of this, I encourage you to read my previous article entitled “10 Stories From The Cold, Hard Streets Of America That Will Break Your Heart” if you have not done so already.
The really bad news is that this is about as good as things are going to get for the U.S. economy. The long-term trends that are eating away at our economy like cancer are intensifying, and our “leaders” just continue to act as if “business as usual” will somehow get the job done.
Most of them don’t even realize that time is running out.
As I discussed yesterday, there is a lot of evidence that the massive financial bubble that the Federal Reserve has inflated is getting ready to burst.
When the next great financial crisis does strike, it is going to be absolutely disastrous. We are in far worse financial shape than we were back then, and this next round of financial trauma could truly be the “knockout blow” for the U.S. economy.
Let us hope for the best, but let us also prepare for the worst.
Its quite the sticky wicket. A layer or two down it is is clear that free market pricing mechanism is broken. As infinite growth ends wages decline. The cost of housing historically being a multiple of earnings should also decline. If house prices declines it is the end of our financial system, a hard drive crash with no reboot so the government has done a superglue fix with QE. People cant afford housing, food or education so the government does a superglue fix on that. Every superglue fix creates multiple distortions in the free market pricing and these distortions are not healthy for the financial system. The disease is killing the patent. The medicine is killing the patient. As many here I have come to regard these superglue fixes as a very good thing at least personally. Its amazing that they have been able to keep it going as the feedback loop is very very sluggish to their control inputs now- really a incredible job keeping a patient in ICU alive. Efficient free market pricing, a hallmark achievement of our society is left broken by the wayside. Many layers down it becomes clear that everything of value has come from fossil fuels so free market pricing mechanism has a unnatural unsustainable premise from the start. Even before fossil fuels free market pricing mechanism had exponential growth in its roots. Unraveling the ball of twine reveals omost every paradigm to be structurally compromised so we roll it back up and let the cat play with it a bit longer.
Oh – did I forget to mention that subprime car loans are back with a vengeance – that boosts GDP numbers of course and on the surface might point to some sort of recovery – but it all that is more of pre-2008:
Subprime Car Buyers Lift Sales http://www.bloomberg.com/news/2013-11-08/good-job-is-good-enough-as-subprime-car-buyers-lift-sales.html
Americans Go Back to School Just to Get Cheap Student Loans http://www.newsmax.com/US/student-loan-abuse-school/2014/03/03/id/555710/
The US is not recovering – it will not recovery – the disease is the end of cheap oil – and there is no cure for it — QE and ZIRP are palliatives that only serve to delay the inevitable.
Yeah, But Warren Buffet says there will be another financial crisis, but not too soon!
Also, the US is tapping into its strategic oil reserve, that will help the economy.
So there is nothinf to worry about.
Young, and many older folks, are leaving the US. Quietly, for the most part.
You are correct, though. People look at the world through a lens honed by past experience. The Chinese still think the US is a land of opportunity. We are getting both in and out migration. At the moment there’s a net outflow of Hispanics.
The biggest problem is where to go. I am looking at South America.
Turmoil is largely in the mind. Europe still lives WW2. It’s catatonic with fear, largely because the US has exploited fear for over 70 years. Where’s the shock and awe? Putin is a masterful strategist.
The US is consumed by fear – of Putin and Russia, FEMA death camps, rising unemployment, Obamacare death panels, foreclosures, uncertainty over taxes, seizures and forfeitures, even the banter of “police state”…. People are not thinking clearly, and the media propaganda is ludicrous. Russia “swallowed” Crimea? An assault on a Ukrainian military establishment with pictures that look like the 2008 protests we did for Ron Paul? Painful, but ludicrous.
Banish fear and look for places where others have banished fear.
Reality outside begins inside your own mind. Create a mental picture of what you want. Go there.
Dear edpell and others interested
You commented about calculations of inputs and outputs as limiting to biological agricultural and gardening solutions. Let me give you a quote from Lenton and Watson’s book Revolutions That Made the Earth, page 126 in the paperback version. Let me preface this with the observation that the authors are going through a thought experiment of trying to construct a planet which self-regulates in the habitable zone of the solar system…making a Gaia. In your toolkit are all the species of living creatures which populate the Earth. But you cannot resort to magic, violating the laws of science.
‘To construct a healthy Gaia you need to ensure that the elements essential to life are either in abundant supply in a biologically accessible form (ultimately from the planet’s crust and interior). If they are not being supplied fast enough, you need to get recycling loops to establish for them. But in your experiments at seeding the planet thus far you have ignored nutrient recycling. In fact, if you introduce only primary producers to the planet (such as those in the desert crust), in the absence of recycling, their spread will most likely soon be chronically limited by a lack of nutrients. The formation of recycling loops is a key example of by-products (quite literally, waste products) becoming an essential part of a thriving planet with life. Their importance for making a Gaia has been emphasized by Tyler Volk.
A recycling loop is in essence a form of positive feedback loop based entirely on the cycling of material. Let’s say your world contains compounds A and B. If you put just one type of organism on your planet which eats compound A and leave only their waste product–compound B–unable to do anything about it. However, if you can find a second type of organism that eats compound B and excretes compound A then they recycle the food for the first type of life, and vice versa. If there are gradual inputs of A and B, say from volcanoes, then neither type of life would starve on their own, but their population would be constrained by these inputs. IN THE PRESENCE OF RECYCLING THE POPULATIONS CAN GROW IN EXCESS OF THESE INPUTS.’
The all caps emphasis is from me. The authors then state that the geophysical evidence strongly supports the notion that the abundance of life we can observe around us is due to exactly this recycling.
Now industrial agriculture is based on the notion of manufacturing or mining or moving nutrients A and B and all the others so that they are available to meet Liebig’s minimums. But industrial agriculture does not consider recycling, and in fact does a lot of things to discourage it. So industrial agriculture will ‘work’ only so long as we are able to keep the manufacturing, mining, and moving ahead of the depletion and declining marginal returns phenomenon that are frequent subjects of discussion here.
Biological agriculture and gardening, in contrast, seek to utilize the inherent ability of living things to recycle nutrients and thus increase production beyond what could be sustained absent recycling. Biological agriculture and gardening seek to nudge Nature in the direction of favoring humans. That is, produce more food for humans and less crabgrass, for example. Biological agriculture and gardening also seek to maximize the free energy from photosynthesis through things like architectural design and water management…more free energy means more recycling.
So the basic difference between industrial agriculture and its focus on Liebig style nutrient supply and biological agriculture and gardening is the latter’s reliance on the multiplier effect of recycling.
How many people can biological agriculture and gardening feed? First, I am not a biological expert. Second, any estimate depends heavily on assumptions about the environment. For example, are most people going to be living on small farms and in nearby villages or does the food have to transported to distant places under difficult circumstances? So, for example, Geoff Lawton can grow 30,000 meals per year for his teaching farm, almost entirely on the farm with the labor supplied by the students and Geoff’s family. But if Geoff were trying to grow on his farm in Australia 30,000 meals for people living in London, you have a completely different situation. The biological considerations on the farm are the same in both circumstances, but what happens beyond the farm is very different.
Similarly, when Geoff feeds his kitchen waste to the chickens, the chickens very efficiently turn the waste into very good compost, which is a few feet from the vegetable garden. If the kitchen waste were coming from New York City to Geoff’s farm, the situation would be very different.
I hope this helps clarity the inputs and outputs question…Don Stewart
The idea of sudden debt jubilee would be like Japan admitting that their system of state finances, based on exploitation of pension savings, does not work anymore. The current system of pensions is based on exploitation of younger (or still working) generations, as they have less and less energy in comparison with what their parents had. It would be like telling them: you are just slaves, who are trying harder and harder, but you get nothing, when you are old. There will be nobody to care for you when you are old.
The pension systems are a Ponzi scheme that worked, when the population was rising and new and new working people were added at the base of the pyramid to fund the minority of the top few old people.
I am seeing the smart young folks create a new/off-grid economy for themselves. This is outside of the cities. Maybe the same in the cities I just do not have exposure to that life. As the baby boomers leave work the government will find there is no economy for it to tax. Suppose you have a government that no longer governs anything?
Diminishing returns, as Gail writes, is what is behind the debt. I do not think that it matters whether you are off-grid or on-grid. You are still dependent on fossil fuel energy and its products, services, e.g. physicians, dentists etc. In what state would be your body without the modern medicine and society, its protective measures against the spread of diseases via air, insects etc.?
It is illusionary to think that somebody on this earth is off-grid and living a comfortable life. Those, who are off-grid, cannot survive. The grid is something that makes possible our high-tech civilization and modern states, „the energy highways“ in the form of roads, railways, electrical grids, internet. “Off-grid” means “no communication”. Exactly, as Gail writes, we need abundant and cheap quality energy to lead quality lifestyles.
That is why the population decline starts from the remote areas to the energy hubs (cities and towns). People are like any other animals as regards their survival: they gather around the communication lines, electric lines, roads, pipelines… Not the opposite way:
No Sex Please, We’re Japanese – (Documentary)
The last remnants of our modern civilization will be situated in the places where the last remnants of cheap and abundant energy are. The rest will look like this (what we already have in Slovakia in some postindustrial places):
No jobs, no young people. I expect this is also a high heating cost location. Japan has zero local energy. Maybe we can give some credit for nuclear but even that is done in a half assed way.
Sounds like excellent job prospects for gigolos.
“Will Work For Food”
““Off-grid” means “no communication”.”
I think the vernacular is a bit more flexible than that!
What state would our bodies be in? There was a medical study recently which showed that the post-WW2 generation now retiring have on average at least 2 or 3 out of 5 life-terminating conditions.
This surprised the researchers, as it was a study of people who had received modern health care and ‘good nutrition’ (sorry Don, we know that’s nonsense but it’s what they said, let’s just say they’d been able to stuff themselves whenever they liked) for the whole of their lives. They had expected their subjects to be in much better shape. Of course, they had lived to that age, when until recently many would have died somewhat earlier or not have survived infancy.
Let’s compare them to the famous Austrian late -Neolithic ‘Iceman’, dug out of a glacier. His teeth were very bad, worn down by his diet, but he most probably was fit, lean, muscular and strong, but not bulky, -like the rural men of, for instance, the Pyrenees today – and had survived broken ribs earlier in his life. Not only that, but he was apparently making a new bow and arrows for himself when death over-took him, and could repair his own clothes and source tools and medicines from the woods and animals. So he was fit and within his own world pretty much omni-competent, although he wouldn’t have had the specialist skills of the smith who made his axe.
Not so bad at all.
This is the trap: the definition of ‘quality lifestyle’ promoted by the modern industrial and financial complex. They’ve put a comfort blanket in our hands and told us we’ll die without it, and so we cry for it.
Let’s compare two peasant families from the 19th century: the Polish or Russian peasants living in a wretched hut, vermin-ridden with land too poor and small to support them, (general conditions in Poland and Russia used to shock travellers coming from wealthier regions) and the Swiss or German peasants, living in large farmhouses, scrupulously clean and healthy and in their own context wealthy – general conditions there were not so shocking to observers.
I am of course simplifying the contrast, there were awful parts of Germany and nicer parts of Poland, but even as late as the end of WW2, Russian troops were amazed to see the neatness and prosperity of German villages.
Both labouring very hard, of course, in very tough societies, and both worn out by their late-40’s to 50’s, but leading ‘off-grid’ rural lives starkly different in substance: one wretched -leading to the massive emigration to the USA of the 19th and 20th centuries – and the other quite decent: better than life on welfare on a housing project in a declining society at any rate.
As Malthus pointed out, you get a man to labour for more than he needs to be healthy and happy by getting him addicted to luxuries…….
I would say Poland in your description was on the perfifery of the old Europe. The center (energy hubs) are rich, the perifery is poor. There is advantageous climate, bounty of natural resources, good roads etc. which are preconditions of centers of civilizations. That is why we do not have big cities in Sibera in Russia, but in milder climates, where resources are transported from such harsh conditions and can be used in the most efficient way.
Im sure that the members of that government- being leaders of the highest moral and ethical standard-would say ; It is clear that the planets needs are that of decentralization. This governments original purpouse no longer provides service to the planet as we now understand it therefore all government employees such as myself should proceed to find some way to provide value in this government free planet in order to sustain ourselves.
It will go feudal if we are VERY lucky. I hope that we can evolve to a better system but my guess would be decentralization to the feudal/tribal citystate which is a extremely favorable outcome considering our circumstances if it allows the planet to survive. If some portion of the species on the planet survive and find sustainability I would consider that a HUGE win. That would allow the possibility of evolution of our species ( or perhaps a new species) to achieve balance. Sorry to be a one hit wonder but in order for that to happen the nukes have to be ended and contained NOW. Nuclear energy/weapons and the fossil fuels that allowed their creation is the worst thing to occur to the species of our planet- at least within my comprehension of time. I believe our species is capable of a pupouse greater than consuming everything that we encounter as a junkie with a energy needle in our arm. I guess that makes me a optimist! 🙂
Some people have chosen to cast stones at Richard Heinberg. If you are interested in taking a look at this horrible man and his equally horrible wife, I suggest that you take a peak at these two videos from Janaia Donaldson. The first is a 30 minute interview in 2008, while the second are before and after pictures of the Heinberg’s suburban type lot in an older section of Santa, Rosa, California.
Note expecially at the 25 minute mark in the first video where Richard tells Janaia that we need to identify the human qualities which make us worthy to survive the catastrophe, practice them…and then we win no matter what happens. Also his emphasis on action, doing things. Compare his words with the pictures.
From June, 2008
As I indicated I agreed with what he said in that presentation – up to the 60 minute mark.
Where I have a problem is where he says we need to build more energy efficient houses and that the organic movement is ‘the hot new trend’ so that bodes well for the post oil and gas world.
I am not commenting on anything beyond the above.
To cut him some slack it just occurred to me that perhaps he made those statements because the truth would just bring people down — and what would be the point in telling them they are really already dead — when there is probably nothing they can do to change that
That would make sense.
Come back and talk to me when you have significantly improved the energy efficiency of your house, grow a lot of food in your yard, and have spent 10 mostly fruitless years trying to get people to pay attention.
PS Then we can sing kumbaya together.
Beyond the “trying to get others to understand” I’ve done all of those things for more than 10 years. I’m not up for singing kumbaya and find the “miracle” solutions painful to listen to. As far as organic farming or permaculture helping some small sub-set of humans to survive through the great contraction – well that is realistic but only to a point.
Calist, I agree and I think that those that survive the Great Contraction will be as much a product of random luck as they will be on whatever preparations they make. Unfortunatley, there will be so many variables on where you live, how old you are, how many friends you have, what preps you have made, how mentally tough you are and the amount of hell you are willing to pass through, how many people you’re willing to kill in order to survive. All of these things will be just as important as their permaculture skills. As the saying goes, “better to be lucky than good.”
Perhaps the lucky ones will be the ones who perish quickly….
Don – we are about 6 months from being food self-sufficient — our house is as energy efficient as is possible — no AC no heating — in fact we don’t even have walls — it is completely open to the elements (other than rain blinds)
We are way past the point of it mattering if anyone pays attention.
If I were to be honest with myself I’d admit that the planet would be far better off without humans — we are murdering, torturing, greedy, petty, vile beings – we enslave millions of animals — we create weapons that can annihilate our planet — if you think about it we are worst than the worst alien nightmare out of Hollywood.
The only reason I bother with any of this survival bs is because it’s baked into my (our) DNA.
You were always going to die eventually anyway, why the sudden fatalistic viewpoint?
You can always die every moment, any day. Do you lie down because “it’s not worth trying”, or do you hope for the best and plan for the worst?
I do the latter. Just like I would have done if we didn’t have peak oil, or a problem with the limits of growth.
This is the standard politician line. Sugar sells, nobody wants vinegar.
If you are out giving a show be it politics, book tour, eco facts, whatever you have no choice. The interesting point is Gail manages to buck this trend. She tells the truth.
When Heinberg says ‘we can’t avoid the catastrophe’ in the 2008 interview with Janaia, are you saying that that is the standard political line?
No, in the later talk about organic saving the world he is “selling”. In the earlier talk “we can’t avoid catastrophe” he is telling the truth. Did he have a book and/or lecture series to sell at the 2008 date?
I know nothing about this guy and do not really care. Nothing negative I just have limited bandwidth.
It could be he tried the truth and nobody wanted to listen. Now he tries organic which gets people thinking about inputs and outputs and may lead them to conclude for themselves “we can’t avoid catastrophe”. It also puts them in a slightly better position when the catastrophe does come.
That is precisely my point. Richard has been talking about this issue for a long time. While some people, like Jan Steinman, have done something with their lives in response, the society as a whole has done nothing. Just as politicians can only lead to destinations where people are willing to be led (as Steven Spielberg made clear in the move Lincoln), anyone advocating for change eventually has to couch their message in terms that people actually react to. That is why I included the phrase ‘work for change for 10 years’ in one of my earlier responses.
I am not a dear friend of Richard, so I don’t know…or really care very much…if there is a difference between 2008 and 2014. Perhaps he has seen what biological farming and gardening systems can accomplish and is now much more confident about them (the United Nations has issued some very confidenct pronouncements about them that they would not have issued back in 2008). Or perhaps he is just trying to adopt the Ellen Langer approach of ‘thinking makes it so’.
I doubt very seriously that he is just trying to sell a book. If you have been following the financial situation in Puerto Rico, you know that the island is either bankrupt or seriously in trouble. Richard went down there and told them that small farms were about as good as they were going to do. That takes guts. I doubt you get a fat retainer afterwards.
“The interesting point is Gail manages to buck this trend. She tells the truth.”
I’ve mentioned it before an I’ll do so again, Bravo Gail!
If you behave like this at the dinner party – you don’t get invited back http://www.youtube.com/watch?v=LV5M9dXWOKQ
Surely Mr Heinberg is aware of that.
Yes, that is probably true and I’m sure he crafts his message to the audience he is speaking too, not to be dishonest, but so that he can get his primary message out. He’s already sold a lot of books and is a practiced speaker, so he can change the thrust of his message so that people hear at least the important elements of what he has to say. Hey, a guy’s gotta eat.
I like Mr. Heinberg, he has the right attitude, but he’s not ignoring reality either. And he’s a fellow anthropologist! In my opinion, and having studied cultural and social anthropology for over a year now, it should be an obligatory subject in school. For politicians especially.
De-globalization is something we understand will happen as net energy declines, but it’s starting to take shape a little differently than I expected. I figured trade and international politics would wane as domestic policies took on greater importance. A sort of peaceful separation into regionalism then localization. However what we are seeing are examples of super powers pushing their weight around, starting to not care what less capable countries think. The US invaded Iraq on false premises to free up Iraqi oil. China laid claim to the South Seas for oil and gas discovery and extraction. And now Russia has annexed Crimea in part for it’s oil/gas pipelines into the EU, but also because it acts as a buffer zone between Russia and the EU (should things get worse). When the Russian version of Glenn Beck spouted off about Russia having the capability to turn the US into ashes, it further signified that de-globalization involves not caring what other countries think.
As an analogy, suppose there is one cooked breast of chicken left for four people. You know it’s the last of the protein and you also know you have the only weapon. You now have to make a moral choice about whether to share that last piece of food or eat it all yourself. Different people will decide differently, but the fact is there will be more people in that type of situation that keep it to themselves, not caring what the others think, than when there is plenty to go around. Ok, that’s a pretty easy analogy that shows it’s not much of a leap to understand the same will happen between different countries.
The question becomes how much will they not care? Will they not care enough to bomb damns for fresh water to pour down their rivers instead of a neighboring country. Will a country with freezing citizens confiscate compressed NG shipments? The possibilities are too many to list, but we are definitely entering an era in which greater force will be exercised to get what is needed. We can probably expect countries to not care what other countries think, then the same will occur regionally, then locally, until we don’t care what our neighbors think. I know that’s a sick progression but what else can we expect? I’m starting to wonder if the one’s that make it through the bottleneck will have to in effect sell their souls.
“The US invaded Iraq on false premises to free up Iraqi oil.”
FAILURE! China is getting the oil
Free it up for whom? The goal was to get it on the global market and keep the party going a little longer by offsetting declines in global exports. The oil doesn’t need to go to the US for the effort to be considered successful. China will do just fine.
I didn’t say free up Iraqi oil for the US, just freed up (as in for the highest bidder). As long as the oil makes it into the world markets, China or wherever, it helps the world economy. This is presuming more will get exported post Saddam than during his rule, and also remember Iraqi oil extraction is still increasing. Also note, China’s economy affects the world economy via all the everyday products they export and via foreign investment in China, so how they do influences our economy as well.
I must have been writing my post while you were too Jim, but anyway we both see it the same way. Alright, high five!
Iraq was producing 2.5 mb/d before we invaded it, more than it is now, so I’m not sure what exactly needed “freeing up”.
Interview with Helen Caldicott- an optimist
Watching the Heinberg presentation posted earlier http://www.youtube.com/watch?v=OIAFRzaHnb4 but shut it down at about 60 minutes because it went into the realm of ridiculous…
He states that we will run into a serious oil supply problem within two years as fracking peaks and conventional oil continues to decline – I agree with that.
Then he says ‘what can we do’ – and starts to spew on about building energy efficient homes and focusing on renewables.
Sorry Richard – but NONE of the above happen without cheap oil and gas inputs.
But the coup de grace was when he said the hot trend was organic farming. What an utter and total load of bunk. Yes yuppies are shopping at Whole Foods but as was posted the other day on this site only 2% of the world’s ag land is used for organic farming.
Not quite hot enough to feed 7.2 Billion people though Richard… (in the presentation Heinberg acknowledges that industrial farming ends because it requires oil and gas inputs on a colossal scale)
I decided to save my bandwidth and shut him down but I am sure he went on to spout more pie in the sky nonsense.
Surely Heinberg is aware that what he is saying is nonsense – he knows full well that if oil and gas are not available in the next year or two billions will starve?
Me thinks Richard is trying to sell some books and get a taste of champagne and caviar before the curtain falls. If you make the ending too dire then nobody will go to the cinema…
End of Growth will be the first and last Heinberg book I read.
You’re judging Heinberg too harshly.
I don’t believe he ever says anything is going to save 7,200,000,000 people. What he writes about are things that might save some of us.
I agree, Jan. He was one of the first and loudest voices to start calling out what is to come and he has championed a way for our civilization to power down. I forgive him if he gets a little soft and hopeful about what could have been if only we had taken his advice and acted on it 20 years ago.
Well – he certainly mentions nothing about that – if you fast forward to around the 60 minute mark he certainly sounds like he thinks the organic farming movement is going to save us all – and we are all going to live in energy efficient houses to boot.
I didn’t continue because I thought he was going to start singing koombaya…..
Have a watch then for yourself – no mention whatsoever of billions dying. He gives the impression that he thinks everything will be just fine.
Do you really want him to gloat over billions dying? He’s right in the presentation: if we only shout gloom, and with no solution (there aren’t any easy solutions), nobody will listen. That’s human nature.
He’s doing what he can. If it makes you feel better (and I too sometimes get a perverse satisfaction by imagining the terrible future coming – which I am not proud of doing), then preach about the 7 billion that will die.
It’s by no means a certainty, and will only be a certainty if nobody tries. He is trying.
I think everyone is getting confused here. There is a difference between not being able to stand the pablum being offered and dis-respecting someone. If you’re trying to hold it together and look for a better future with some hard and fast realities to cope with listening to cuddles and fluffy bunnies is only disheartening. I switched it off because I have a similar reaction to my local “transition” movement. There is lots of talk about how we ‘need to get so and so and everyone to change’ but they’ve not actually assessed what that looks like for themselves nor attempted to take any action themselves but everyone else should. This is what I listen to at my local transition meetings. Personally most don’t know how much water they use, how much water needs to be collected and that maybe talking to our local government about changing the zoning and incentives for water use would be a more productive goal that everyone can focus upon. Maybe changing some of the zoning rules about harvesting too old laying hens would help. Maybe working towards specific goals with concrete outcomes would get me involved but I check out on a local level because the people I listen to moan and groan and want someone else to come along and “fix” the system for them. Unfortunately, while Heinberg is smart, right and fighting for the right things, and there is no disrespect meant by this, the utter and compete lack of concrete actions today that can and should be taken make me have the reaction of checking out. I’ve been growing and canning my own food my whole life, apart from a stint or two overseas, I know what a composting toilet is, how to build, care for and use one. I’ve no problems with that. Installing a greywater system, done. Capturing my own rainwater for both gardening and washing, done. Etc. etc. etc. Unless someone can talk to me about really concrete actions I struggle to continue to listen. No disrespect mentioned. I am a person who is very goal oriented. I need concrete things to try. I’m willing to try and fail, but listening to fluffy bunnies. Nope. Not for me. No disrespect meant.
I hear what you’re saying and I even agree (mostly). But there are just as many unrealistic fantasies in these comments. Look for all the suggestions of “debt jubilies” and farming solutions etc.. They all completely ignore political reality and human nature. They will never happen. Are you going to just check out and hole up in a cave?
It’s your choice. I have the same temptation myself, and I actually just want to hide away in a corner of the world. When I have to hear the same talk of “well I’ll just buy an electric car” or “I prefer to be optimistic, you’re just being pessimistic” I feel like giving up too. More than 99% of the people I talk to are like this, willfully blind.
But it’s better to try, than do nothing. We shouldn’t stop just because it’s really really hard.
Once again, there is a difference between being willing to spend time listening to pablum and not trying. I’ve got so many projects and “trying” on my hands that I’ve not time for listening to such. That is a very very different thing than holing up in a cave. I’ve gardening classes to teach, seed saving classes to teach, turning the garden over for planting, seeds to start. I’m just unwilling to listen to stuff that is not concrete. My time is precious and wasting it with fluff is not worth the time. Cooking our food from scratch and from the pantry takes time and planning. I still maintain a facade in the “real” world and global economy to pay my debts and so I value my time greatly.
I met Heinberg and had a brief conversation with him in 2005 at the Yellow Springs, OH “Community Solution” conference, and appeared with him in the Movie “Escape from Suburbia.” He is not at all a “we can save the world” type.
We need to be careful about who we deprecate. It’s going to be tough enough going for those of us who are aware and preparing; why would we want to put down a potential ally?
There is going to be a broad range of local coping strategies. I’m in the process of converting a vehicle to electricity, not because I think electric cars are the wave of the future, but because it’s part of a bet-hedging strategy to diversify my energy sources. I also have a straight vegoil vehicle and a biodiesel processor, and am playing with alcohol-vegoil mixtures for chain saws, not because I think this will “save the world,” but because it may make one little corner of it survivable, perhaps even with a bit of grace.
I don’t mean this to turn into a boast session; I just want there to be some respect for those who are trying different approaches, even if they seem hopeless. You wanna rag on someone? Try the Koch Brothers, or Rupert Murdoch, or similar.
If they ain’t agin’ ya, they just might be for ya.
Exactly. It’s all about hedging bets. We’re all possibly heading to a Ragnarok of some kind, but in the meantime Mr Heinberg has made a lovely productive little garden which many might be glad to have made for themselves when the supermarkets shut their doors. After all, we’re not looking for Total Solutions are we?
Dear Xabier, Jan and anyone else who will listen
The Harvard psychologist Ellen Langer did some experiments a couple of decades ago focusing on the issue of doing nothing versus doing something. For example, she took people in nursing homes who had a plant on a windowsill, which plant was tended by a caretaker, and the inmates were told not to touch it. She then switched half the people to ‘caring for your plant’. Guess what? The ‘caring’ half did a lot better physically than the ‘cared for’ half. Similarly she did an extraordinary experiment with elderly men. She rented an out of season resort in the Catskills, decked it out in the style which was popular when these elderly men were in their twenties, and took the men there. The men had to become physically active, from carrying their own bag up the steps to get into the hotel. From the moment they entered, they had to behave as if they were in their twenties. Langer even hired young women in their twenties to staff the hotel. Guess what? The elderly men’s physical medical measurements all improved tremendously.
The moral of the story is that anyone who is doing something is far better off than someone who has given up. We don’t all have to agree on precisely what the ‘doing something’ is. In a well functioning world, we would all be doing different things, some of which will work better than others. Only those who delude themselves that they have 20/20 foresight will indulge in name calling against those who are making a solid effort.
You are right, of course. Doing something is a comfort even if it is futile, and perhaps that is Heinberg’s message. I plan on organic farming until the tidal wave washes over my head or someone shoots me for my zucchini.
I completely agree. Besides, life has always been like this: it’s a struggle, and eventually you die. If we all know we are going to die eventually, why not just give up now and get out that rusty knife somewhere, save ourselves 50 more years of struggle.
We don’t do that I hope because we want to make the most of our limited time, to try to better ourselves and the lives around us, and now I hope in a small way, the planet. Just because the collapse is so much more serious, is no reason to suddenly throw in the towel.
Personally, even if I knew what I do is 100% futile, I’d do it anyway. It’s the journey, not the destination, that’s what is important in life, as it has always been. Everything helps and everything you do affects everyone forever. That is what’s important.
I watched Escape from Suburbia a couple of years ago. Will have to rent it again just to “see” who you are.
Escape From Suburbia seems to be available for free download.
What I see is a man who knows exactly how bad it is going to get, and how hopeless and “Don Quixote” his mission is. But he wants to go down swinging: if we’re going to go into decline and even death, we can do it fighting for what is right. I respect that. A chance is still a chance, and even if it’s hopeless, so what. We should all spread the message and try to help the planet.
Reading between the lines, it seemed like a video from circa 2009.
As Jan Steinman says, you are judging him too harshly. I don’t think he’s stupid, he knows exactly what is going to happen, and how bad it is going to get. He has just decided to go down swinging: that’s not fighting or stealing, but trying to lead people to help themselves and eachother.
I know it’s very Don Quixote, and with little chance of success. But I admire his goals, and attitude. It’s no more fantastic and fanciful than many of the solutions in these comments: basically each person’s fantasy that completely ignores the group mentality and political realities of the world.
If we’re going down, I’m going down fighting to live and create something better with this world. If that’s a lost cause, I died trying to help. I die more satisfied that while most others died destroying, I died fighting back and creating. I don’t agree with him, but I respect him.
Better to lead by example and be discovered even if too late than not to lead at all.
I’m with you there. Everything you do affects everyone forever. So we should choose what we do carefully, because nothing is wasted. Life was always a struggle, and then you eventually die. Nothing has changed individually. I plan on doing what I always was going to: fight for each day, and aim to find a little corner of the world to live in and help that community.
I took this from the post.
People that understand that the collapse is more than money, oil will understand why I put this quote in here. The biological survival instinct of the young man might have kick in way before the collapse. The survival instinct of humain is probably ahead of the conscience part of human liffe.
I’m not sure if you support the theory of Darwinian Evolution. I do and I believe what we’re seeing here is some form of natural selection in action. I think Richard Dawkins author of the “Selfish Gene” was spot on. Later he confessed that he should have called his book the ‘Eternal Gene’ but I’m not so sure. Japan has flagged up on my radar and in the context of Darwinian natural selection the “Japanese Herbivore Effect” is an incredibly interesting phenomenon. Smart young males (or their selfish genes) completely in tune with their environment are actively recognising the threats they face not just in the short term, but also in the long run. I believe the “Japanese Herbivore Effect” is a new effective self-preservation mechanism/trait proving the “Selfish Gene” theory Dawkins wrote all those years ago.
My take is why would a smart young male in today’s overpopulated society with rapidly depleting resources and a system that poses a direct threat to their very survival wish to compound those threats with expensive consuming girlfriends, wives and then kids locking them into unimaginable pressures in a world with declining/no/low growth rates? The Japanese economy is a bellwether for the West and political/elitist bulls know it.
Young females are the herbivore “cows” incited emotionally by the political/elitist male bulls and young males are of course the target. Political/elitist bulls desperate to ensnare/enslave young male bulls leading to economic slavery and eventual oblivion are finding out that young smart bulls are “evolving” given the new environment. “The Japanese Herbivore Effect” is a defensive trait for self-preservation. This is Darwinian natural selection and the theory of the Selfish Gene in action. Smart young bull’s instincts are to survive anyway they can. This is one way to do it. In today’s society we know that smart people have less children, this is a fact. Idiots today enticed and lured by the State reproduce without due diligence. There will come a time when it collapses and the smart ones will be flexible enough to survive, the idiots with debt and baggage will not. The smart young bulls still in the game can then take up the slack if the whole thing crashes. It’s all about survival of the fittest and in today’s world that means the one that is flexible enough to adapt to rapid change. Without question rapid change is coming, this is what smart young bulls that mimic “Japanese Herbivore” traits are sensing. I would not want to be locked into marriage with kids when it comes. The pressures will be horrific.
Self preservation without reproduction is just death/extinction. Which is a fine choice if enough people take it living condition could return to livable eventually. If the borders are closed. Otherwise it just makes room for folks from places that are growing.
Don’t believe somebody will massively move to Japan
Right now it seems that any limits in reproduction chosen by a individual are offset by others who choose to produce large families. Unlimited reproduction; the ultimate entitlement in a unlimited growth paradigm. Japan is seeing the the horror of unlimited growth, environmentally, and economically. The Japanese people have always had a keen appreciation of the beauty of nature, it is no wonder that they instinctively know that it is appropriate to lower reproduction rates.
I understand your concept, but I disagree that only idiots are locked into a marriage with kids. I have a 20 year old marriage and three strong, young, male “bulls” who are now paying back the investment that I made in them by working for me (i’m 50 now) on the farm hauling wood, working in the garden, hunting our food. They will provide for and protect my wife and I, after we are too old to fend for ourselves. Eventually, I hope, they will also bring home wives and then more children will come. When the world is collapsing around us, this will provide immense emotional support and some comfort. There are many ways to select for the “selfish gene.”
You seem well set up to follow the old German rural custom of ‘retiring’ with your wife to a guaranteed room and 3 meals a day for life, and the second-best bed and best eiderdown, when your sons can take over the heavy work and one of them take the best bed and breed for the future….
In your situation, as of old, your strapping sons are an asset. Compare this to an urban couple, highly indebted with a small child unable to contribute: then one would feel apprehensive……
Time, place, people.
Yes, I agree. That is why I left the city when I was 28, never to return. Cities mean vulnerability and dependency on others. Location is important. II can’t imagine the stress of living in debt in a big city (even with big strong boys around) at this point in history. As to retiring in the old German rural style to the second best bed, I sure hope so. But although I boast that my boys are loyal and will grow up to live nearby, they are still only boys and once they become adults I will have no claim over their lives. If they choose to stay with us, I will be happy, but there are no guarantees!
I’m sure at least one will find their way back to the country life, the odds are good.
Thanks, xabier. I hope so. I think the deeper our world goes into crisis, the more appealing the simple, country life will be for young people. I think young people are naturally curious about where their food comes from, where their energy comes from, how their housing is constructed. As they get older they lose that curiousness and take things for granted When kids help build their own house, cut their own firewood, work in the garden, and go hunting or fishing in their backyard for food, they learn early how important (and tenuous) those connections really are. In urban areas, all of those connections are hidden by layers of complexity and specializaation. Kids grow up not even able to see how the big civilization puzzle fits together. That we can’t see the problem is a big part of the problem.
In third world countries this is a much stronger motive than in the first world. No children-no survivability in old age- hence larger third world population growth. In the end survivability is exponentially reduced for both young and old when population exceeds resources.
One historical example of population exceeding resources and the consequences is what occurs when your culture follows the law of primogeniture and when it does not.
Where farms were broken up and distributed among the male children everyone starved. Where the oldest male inherited the farm intact the other siblings went their ways, migrated to cities to America, to South America, etc.
Also, in biology again and again you see populations first grow exponentially when they discover a new source of food. Then they exceed the regenerative carrying capacity of the resource and the population crashes. There are known instances where the crashed population never recovers.
There’s nothing extraordinary about this. Just this time we are the species that’s exceeded its regenerative resource base.
Or you can have a much more enjoyable situation, speaking as a woman. I get two or three husbands, usually all brothers and my children will inherit the land together. All three brothers farm the same land and all lay claim to my children. 😉 Most men aren’t capable of sharing a woman tho… ego or something.
I’d certainly share a wife with my brothers: we each have very different qualities, so she wouldn’t get bored. And we could each of us, legitimately turn a deaf ear a third of the time. (And, of course, any woman is certainly a match for three men in argument.) Perfectly balanced.
Quite a few social insects enjoy multiple, competitive matings. The female saves the sperm is a uniquely designed receptacle and uses it as needed. That way she’s got ready access to the best and the brightest.
Isn’t it awesome the possibilities Nature provides?
“The female saves the sperm is a uniquely designed receptacle and uses it as needed. That way she’s got ready access to the best and the brightest.”
I think I dated her in the ’70s… 🙂
I certainly see the advantages of your proposal. Would you verbally convince 66% of the worlds women to never have children or would it be thunderdome – three women enter one women leaves? 🙂
Nope, different families make different arrangements depending upon how much productive land needs conservation within the family line. Say three brothers see that the land cannot split and support each of them with two children for a total of 6 children then they take the option of a single wife and have two children, hoping for one boy and one girl as the boy would singly inherit the land. If a society uses this overall you’ll see a more stable population. 😉
Dang it! Now we’re going off topic again. Gail, please forgive…
Well, Alaska is a bit like a thrid world country, so I’ll take the blame for adding to the overshoot. But, hey, someone has to replicate the genome, might as well be me.
A really good presentation by Richard Heinberg on the exact same things that Gail Tverberg has been discussing. It’s intresting to see different anthropologists/geologists/economists coming to the same conclusions as Gail, and drawing the same conclusions about the timeline we are facing. Maybe Gail has been in contact with Richard Heinberg?
This discussion, with us whistling in wind, reminds me of Senator Wayne Morse, who was a very early and vociferous critic of the Vietnam war, one of the two Senators that voted against the Gulf of Tonkin resolution ( which launched the war on on lie .. does that sound familiar? ) Even as his predictions came true he eventually lost his seat. His crime “Being Prematurely Correct”
The saddest thing about this presentation is the tiny audience. I feel like I’m on the outside looking in on humanity: we are part of a species that doesn’t care about itself, constantly votes against itself and idolizes meaningless toys and pursuits. It’s not very scientific, but it says a lot: I looked on Facebook for the number of “likes” for Beyonce – she gets over 58 million; peak oil gets 1,500. If I try to gently mention and introduce peak oil or how the we’re coming to a tipping point in a few years, the limits of growth as Gail says, I only get catatonic stares. Then they immediately return to telling me about their coming holiday, just *whoosh* over their heads and completely forgotten. If I ask the next day, they don’t remember anything.
What should I do?
The answers one get depend on the questions one asks.
We have become complacent. Our education system discourages questions and does not even address how to ask them because questions challenge whatever authority prevails.
To change the way you think one of the most important steps you can take is to ask yourself, and others, questions. What if …? Why is that ….? What if that is not so?
I have found myself being very preocupied by all this, even moreso, for the last few months. I discovered “peak oil” back in 2004, and it came as a complete shock to me then, and I was very troubled for several months. It’s been on my mind ever since.
10 years of knowing, and I’ve told a few friends, relatives. All I get are catatonic stares. I feel like I’m basically saying goodbye to my friends and family. They won’t change or move or do anything to prepare. They won’t even accept. It’s like a weird psychosis: they don’t even remember me telling them.
I’m making limited plans for myself, as best I can, but the earliest I can make my move is summer next year. I’m hoping (praying?) that things hold together until then. I may have to make the move alone, and I have very few resources. I’m trying to save a little cash, and when I arrive I’ll get emergency supplies (a couple of bags of stuff, just enough that I could carry around, I’m working on that list over these months, trying to second guess what would help). I have some luck in that I have no debt, property or a family of my own to worry about. At least that gives me some limited mobility. But I have no land or farm, which I would love to have in some out of the way place. Planning on spending this summer reading as many useful books as possible: survival, basic medicine, sewing, shoemaking, farming, carpentry, hunting etc.. Then I’ll spend a year saving and hopefully working a bit with a friend who has a farm just outside the city. Get a little experience. Maybe when I make my big move I’ll sign up for an apprenticeship, learn a useful skill: plumbing or carpentry for example. I’d like to become part of a community, make myself useful.
I don’t know if I’m overreacting, or completely missing what I should be doing. Riding the metro everyday is surreal, it puts me back to sleep because you automatically think “well, there’s obviously nothing wrong, must be my imagination”. So if you have any tips, feel free to suggest them.
Learn how to build ferrocement, make a slow sand filter, learn how to butcher- really well and most people don’t want this job. If you can do that and learn a bit of husbandry you’ll be useful to most farms that need real knowledge of animal raising instead of a confinement farm like we have now.
Thanks, I’ll add those to my list. I’m a fast learner, but I’m under no illusions about how serious and unromantic this could all become very quickly.
Grant Williams – one of the best analysts out there – explains the situation in the Ukraine/Crimea:
If you want to understand how the gold market is fixed read through his previous newsletters – he has a very readable style for a financial analyst http://www.mauldineconomics.com/ttmygh
I’ve emailed his team suggesting they address the peak cheap oil situation in the past – perhaps that’s too hot to touch…..
Paul, have you seen The Lord of War? Remember the white contour of Ukraine and selling out soviet stuff?
I seldom watch anything out of Hollywood (and I haven’t had a TV for years) – so have not seen that. Fill me in on the relevance?
Not so much relevant… But a good movie