Energy and the Economy – Twelve Basic Principles

There is a standard view of energy and the economy that can briefly be summarized as follows: Economic growth can continue forever; we will learn to use less energy supplies; energy prices will rise; and the world will adapt. My view of how energy and the economy fit together is very different. It is based on the principle of reaching limits in a finite world. Let me explain the issues as I see them.

Twelve Basic Principles of Energy and the Economy

1. Economic models are no longer valid, as we start getting close to limits.

We live in a finite world. Because of this, the extraction of energy resources and of resources in general operates in a way that is not at all intuitive as we approach limits. Economists have put together models of how the economy can be expected to act based on how the economy acts when it is distant from limits. Unfortunately, these economic models are worse than useless as limits approach because modeled relationships no longer hold. For example:

(a) The assumption that oil prices will rise as the cost of extraction rises is not necessarily true. Instead, a finite world creates feedback loops that tend to keep oil prices too low because of its tight inter-connections with wages. We see this happening right now. The Telegraph reported recently, “Oil and gas company debt soars to danger levels to cover shortfall in cash.”

(b) The assumption that greater investment will lead to greater output becomes less and less true, as the easy to extract resources (including oil) become more depleted.

(c) The assumption that higher prices will lead to higher wages no longer holds, as the easy to extract resources (including oil) become more depleted.

(d) The assumption that substitution will be possible when there are shortages becomes less and less appropriate because of interconnections with the rest of the system. Particular problems include the huge investment required for such substitution, impacts on the financial system, and shortages developing simultaneously in many areas (oil, metals such as copper, rare earth metals, and fresh water, for example).

More information is available from my post, Why Standard Economic Models Don’t Work–Our Economy is a Network.

2. Energy and other physical resources are integral to the economy.

In order to make any type of goods suitable for human use, it takes resources of various sorts (often soil, water, wood, stones, metals, and/or petrochemicals), plus one or more forms of energy (human energy, animal energy, wind power, energy from flowing water, solar energy, burned wood or fossil fuels, and/or electricity).

Figure 1. Energy of various types is used to transform raw materials (that is resources) into finished products.

Figure 1. Energy of various types is used to transform raw materials (that is resources) into finished products.

3. As we approach limits, diminishing returns leads to growing inefficiency in production, rather than growing efficiency.

As we use resources of any sort, we use the easiest (and cheapest) to extract first. This leads to a situation of diminishing returns. In other words, as more resources are extracted, extraction becomes increasingly expensive in terms of resources required, including human and other energy requirements. These diminishing returns do not diminish in a continuous slow way. Instead, there tends to be a steep rise in costs after a long period of slowly increasing costs, as limits are approached.

Figure 2. The way we would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete.

Figure 2. The way we would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete.

One example of such steeply rising costs is the sharply rising cost of oil extraction since 2000 (about 12% per year for “upstream costs”). Another is the steep rise in costs that occurs when a community finds it must use desalination to obtain fresh water because deeper wells no longer work. Another example involves metals extraction. As the quality of the metal ore drops, the amount of waste material rises slowly at first, and then rapidly escalates as metal concentrations approaches 0%, as in Figure 2.

The sharp shift in the cost of extraction wreaks havoc with economic models based on a long period of very slowly rising costs. In a period of slowly rising costs, technological advances can easily offset the underlying rise in extraction costs, leading to falling total costs. Once limits are approached, technological advances can no longer completely offset underlying cost increases. The inflation-adjusted cost of extraction starts rising. The economy, in effect, starts becoming less and less efficient. This is in sharp contrast to lower costs and thus apparently greater efficiency experienced in earlier periods.

4. Energy consumption is integral to “holding our own” against other species.

All species reproduce in greater numbers than need to replace their parents. Natural selection determines which ones survive. Humans are part of this competition as well.

In the past 100,000 years, humans have been able to “win” this competition by harnessing external energy of various types–first burned biomass to cook food and keep warm, later trained dogs to help in hunting. The amount of energy harnessed by humans has grown over the years. The types of energy harnessed include human slaves, energy from animals of various sorts, solar energy, wind energy, water energy, burned wood and fossil fuels, and electricity from various sources.

Human population has soared, especially since the time fossil fuels began to be used, about 1800.

Figure 3. World population based on data from "Atlas of World History," McEvedy and Jones, Penguin Reference Books, 1978  and Wikipedia-World Population.

Figure 3. World population based on data from “Atlas of World History,” McEvedy and Jones, Penguin Reference Books, 1978 and Wikipedia-World Population.

Even now, human population continues to grow (Figure 4), although the percentage rate of growth has slowed.

Figure 4. World population split between US, EU-27, and Japan, and the Rest of the World.

Figure 4. World population split between US, EU-27, and Japan, and the Rest of the World.

Because the world is finite, the greater use of resources by humans leads to lesser availability of resources by other species. There is evidence that the Sixth Mass Extinction of species started back in the days of hunter-gatherers, as their ability to use of fire to burn biomass and ability to train dogs to assist them in the hunt for food gave them an advantage over other species.

Also, because of the tight coupling of human population with growing energy consumption historically, even back to hunter-gatherer days, it is doubtful that decoupling of energy consumption and population growth can fully take place. Energy consumption is needed for such diverse tasks as growing food, producing fresh water, controlling microbes, and transporting goods.

5. We depend on a fragile self-organized economy that cannot be easily replaced. 

Individual humans acting on their own have very limited ability to extract and control resources, including energy resources. The only way such control can happen is through a self-organized economy that allows people, businesses, and governments to work together on common endeavors. Development of a self-organized economy started very early, as bands of hunter-gatherers learned to work together, perhaps over shared meals of cooked food. More complex economies grew up as additional functions were added. These economies have gradually merged together to form the huge international economy we have today, including international trade and international finance.

This networked economy has a tendency to grow, in part because human population tends to grow (Item 4 above), and in part because greater complexity is required to solve problems, as an economy grows. This networked economy gradually adds more businesses and consumers, each one making choices based on prices and regulations in place at the particular time.

Figure 5. Dome constructed using Leonardo Sticks

Figure 5. Dome constructed using Leonardo Sticks

This networked economy is fragile. It can grow, but it cannot easily shrink, because the economy is constantly optimized for the circumstances at the time. As new products are developed (such as cars), support for prior approaches (such as horses, buggies and buggy whips) disappears. Systems designed for the current level of usage, such as oil pipelines or Internet infrastructure, cannot easily be changed to accommodate a much lower level of usage. This is the reason why the economy is illustrated as interconnected but hollow inside.

Another reason that the economy cannot shrink is because of the large amount of debt in place. If the economy shrinks, the number of debt defaults will soar, and many banks and insurance companies will find themselves in financial difficulty. Lack of banking and insurance services will adversely affect both local and international trade.

6. Limits of a finite world exert many pressures simultaneously on an economy. 

There are a number of ways an economy can reach a situation of inadequate resources for its population. While all of these may not happen at once, the combination makes the result worse than it otherwise would be.

a. Diminishing returns (that is, rising production costs as depletion sets in) for resources such as fresh water, metals, and fossil fuels.

b. Declining soil quality due to erosion, loss of mineral content, or increased soil salinity due to poor irrigation practices.

c. Rising population relative to the amount of arable land, fresh water, forest resources, mineral resources, and other resources available.

d. A need to use an increasing share of resources to combat pollution, related to resource extraction and use.

e. A need to use an increasing share of resources to maintain built infrastructure, such as roads, pipelines, electric grids, and schools.

f. A need to use an increasing share of resources to support government activities to support an increasingly complex society.

g. Declining availability of food that is traditionally hunted (such as fish, monkeys, and elephants), because an increase in human population leads to over-hunting and loss of habitat for other species.

7. Our current problems are worryingly similar to the problems experienced by earlier civilizations before they collapsed.

In the past, there have been civilizations that were confined to a limited area that grew for a while, and then collapsed once resource availability declined or population outgrew resources. Such issues led to a situation of diminishing returns, similar to the problems we are experiencing today. We know from studies of these prior civilizations how diminishing returns manifested themselves. These include:

(a) Reduced job availability and lower wages, especially for new workers joining the workforce.

(b) Spiking food costs.

(c) Growing demands on governments for services, because of (a) and (b).

(d) Greater disparities in wealth, as newer workers find it hard to get good-paying jobs.

(e) Declining ability of governments to collect sufficient taxes from common workers who are producing less and less (because of diminishing returns) and because of this, receiving lower wages.

(f) Increased reliance on debt.

(g) Increased likelihood of resource wars, as a group with inadequate resources tries to take resources from other groups.

(h) Eventual population decline. This occurred for two reasons: As wages dropped and needed taxes rose, workers found it increasingly difficult to obtain an adequate diet. As a result, they become more susceptible to epidemics and diseases. Greater involvement in resource wars also led to higher death rates.

When collapse came, it did not come all at once. Rather a long period of growth was succeeded by a period of stagnation, before a crisis period of several years took place.

Figure 6. Shape of typical Secular Cycle, based on work of Peter Turchin and Sergey Nefedov in Secular Cycles.

Figure 6. Shape of typical Secular Cycle, based on work of Peter Turchin and Sergey Nefedov in Secular Cycles.

We began an economic growth cycle back when we began using fossil fuels to a significant extent, starting about 1800. We began a stagflation period, at least in the industrialized economies, when oil prices began to spike in the 1970s. Less industrialized countries have been able to continue growth their growth pattern longer. Our situation is likely to differ from that of early civilizations, because early civilizations were not dependent on fossil fuels. Pre-collapse skills tended to be useful post-collapse, because there was no real change in energy sources. Loss of fossil fuels would considerably change the dynamic of the outcome, because most jobs would become obsolete.

Most models put together by economists assume that the conditions of the growth period, or the growth plus stagflation period, will continue forever. Such models miss turning points.

8. Modeling underlying the book Limits to Growth shows why depletion can be expected to lead to declining economic growth. It also shows why extracting all of the resources that seem to be available is likely to be impossible.

We also know from the analysis underlying the book The Limits to Growth (by Donella Meadows and others, published in 1972) that growing demand for resources because of Items listed as 6a to 6g above will take an increasingly large share of resources produced. This dynamic makes it very difficult to produce enough additional resources so that economic growth can continue. The authors report that the behavior mode of the modeled system is overshoot and collapse.

The 1972 analysis does not model the financial system, including debt and the repayment of debt with interest. The closest it comes to economic modeling is modeling industrial capital, which it describes as factories, machines, and other physical “stuff” needed to extract resources and produce goods. It finds that inability to produce enough industrial capital is likely to be a bottleneck far before resources in the ground are exhausted.

As an example in today’s world, there seems to be a huge amount of very heavy oil that can be steamed out of the ground in many places including Canada and Venezuela. (The existence of such heavy oil is one reason the ratio of oil reserves to oil production is high.) To actually get this oil out of the ground quickly would require a huge physical investment in a very short time frame. As a practical matter, we cannot ramp up all of the physical infrastructure needed (pipelines, steaming equipment, refining equipment) without badly cutting into the resources needed to “grow” the rest of the economy. A similar problem is likely to exist if we try to ramp up world oil and gas supply using fracking.

9. Our real concern should be collapse caused by reaching limits in many ways, not the slow decline reflected in a Hubbert Curve.

One reason for being concerned about collapse is the similarity of the problems our current economy is experiencing to those of prior economies that collapsed, as discussed in Item 7. Another reason for this concern is based on the observation from physics that an economy is a dissipative structure, just as a hurricanes is, and just as a human being is. Such dissipative structures have a finite lifetime.

Concern about future collapse is very different from concern that one or another resource will decline in a symmetric Hubbert curve. The view that resources such as oil will gradually decrease in availability once 50% of the resources have been extracted reflects a best-case scenario, where a perfect replacement (both cheap and abundant) replaces the item that is depleting, so that the economy is not affected. Hubbert illustrated the kind of situation he was envisioning with the following graphic:

Figure 7. Figure from Hubbert's 1956 paper, Nuclear Energy and the Fossil Fuels.

Figure 7. Figure from Hubbert’s 1956 paper, Nuclear Energy and the Fossil Fuels.

10. There is a tight link between both oil consumption and total energy consumption and world economic growth. 

This tight link is evident from historical data:

Figure 8. Comparison of three-year average growth in world real GDP (based on USDA values in 2005$), oil supply and energy supply. Oil and energy supply are from BP Statistical Review of World Energy, 2014.

Figure 8. Comparison of three-year average growth in world real GDP (based on USDA values in 2005$), oil supply and energy supply. Oil and energy supply are from BP Statistical Review of World Energy, 2014.

The link between energy and the economy comes both from the supply side and the demand side.

With respect to supply, it takes energy of many types to make goods and services of all types. This is discussed in Item 2 above.

With respect to demand,

(a) People who earn good wages (indirectly through the making of goods and services with energy products) can afford to buy products using energy.

(b) Because consumers pay taxes and buy goods and services, growth in demand from adequate wages flows through to governments and businesses as well.

(c) Higher wages enable higher debt, and higher debt also acts to increase demand.

(d) Increased demand increases the price of the resources needed to make the product with higher demand, making more of such resources economic to extract.

11. We need a growing supply of cheap energy to maintain economic growth.

This can be seen several ways.

(a) Today, all countries compete in a world economy. If a country’s economy uses an expensive source of energy (say high-priced oil or renewables) it must compete with other countries that use cheaper fuel sources (such as coal). The high price of energy puts the country with high-cost energy at a severe competitive disadvantage, pushing the economy toward economic contraction.

(b) Part of the world’s energy consumption comes from “free” energy from the sun. This solar energy is not evenly distributed: the warm areas of the world get considerably more than the cold areas of the world. The cold areas of the world are forced to compensate for this lack of free solar energy by building more substantial buildings and heating them more. They are also more inclined to use “closed in” transportation vehicles that are more costly than say, walking or using a bicycle.

Back in pre-fossil fuel days, the warm areas of the world predominated in economic development. The cold areas of the world “surged ahead” when their own forests ran short of the wood needed to provide the heat-energy they needed, and they learned to use coal instead. The knowledge they gained about using coal for home-heating quickly transferred to the ability to use coal to provide heat for industrial purposes. Since the warm areas of the world were not yet industrialized, the coal-using countries of the North were able to surge ahead economically. The advantage of the cold industrialized countries grew as they learned to use oil and natural gas. But once oil and natural gas became expensive, and industrialization spread around the world, the warm countries regained their advantage.

(c) Wages, (non-human) energy costs, and financing costs are all major contributors to the cost of producing goods and services. When energy costs rise, the rise in energy costs puts pressure both on wages and on interest rates (since interest rates determine financing costs), because businesses need to keep the total cost of goods and services close to “flat,” if consumers are to afford them. This occurs because wages do not rise as energy prices rise. In fact, pressure to keep the total cost of goods low creates pressure to reduce wages when oil prices are high (perhaps by sending manufacturing to a lower-cost country), just as it adds pressure to keep interest rates low.

(d) If we look at historical US data, wages have tended to rise strongly (in inflation-adjusted terms) when oil prices were less than $40 to $50 barrel, but have tended to stagnate above that oil price range.

Figure 9. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.

Figure 9. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.

12. Oil prices that are too low for producers should be a serious concern. Such low prices occur because oil becomes unaffordable. In the language of economists, oil demand drops too low. 

A common belief is that our concern should be oil prices that are too high, and thus strangle the economy. A much bigger concern should be that oil prices will fall too low, discouraging investment. Such low oil prices also encourage civil unrest in oil exporting nations, because the governments of these nations depend on tax revenue that is available when oil prices are high to balance their budgets.

It can easily be seen that high oil prices strangle the economies of oil importers. The salaries of consumers go “less far” in buying basics such as food (which is raised and transported using oil) and transportation to work. Higher costs for basics causes consumers cut back on discretionary expenditures, such as buying new more expensive homes, buying new cars, and going out to restaurants. These cutbacks by consumers lead to job layoffs in discretionary sectors and to falling home prices. Debt defaults are likely to rise as well, because laid-off workers have difficulty paying their loans. Our experience in the 2007-2009 period shows that these impacts quickly lead to severe recession and a drop in oil prices.

The issue we are now seeing is the reverse–too low oil prices for oil producers, including oil exporters. These low oil prices are contributing to the unrest we see in the Middle East. Low oil prices also contribute to Russia’s belligerence, since it needs high oil revenues to maintain its budget.


We seem now to be at risk in many ways of entering into the collapse scenario experienced by many civilizations before us.

One of areas of risk is that interest rates will rise, as the Quantitative Easing and Zero Interest Rate Policies held in place since 2008 erode. These ultra-low interest rates are needed to keep products affordable, since the high cost of oil (relative to consumer salaries) has not really gone away.

Another area of risk is an increase in debt defaults. One example occurs when student loan borrowers find it impossible to repay these loans on their meager wages. Another example is China with the financing of its big recent expansion by debt. A third example is the possibility that businesses extracting resources will find it impossible to repay loans with today’s (relatively) low commodity prices.

Another area of risk is natural disasters. It takes surpluses to deal with these disasters. As we reach limits, it becomes harder to mitigate the effects of a major hurricane or earthquake.

Clearly loss of oil production because of conflict in the Middle East or in other oil producing countries is a concern.

This list is by no means exhaustive. Many economies are “near the edge” now. Recent news is that Germany has slipped into recession as well as Japan. One economy failing is likely to pull others with it.

962 thoughts on “Energy and the Economy – Twelve Basic Principles

  1. It should be repeated here, by the way, that if you argue for bailouts you are not arguing for capitalism, you are arguing for socialism.

    So those of us who say no bailouts are the true capitalists, and those who say yes to bailouts are the true socialists. Just to put that on the record and get the terms straight.

    And I’m no free market fundamentalist, but it’s important that we don’t let the bailout crowd confuse the issue, and say they are in favor of free markets, and price discovery, because they aren’t. They are in favor of government intervention and socialized costs.

    Don’t let them take the high ground!

    • Dolph

      Quite bizarre your view on socialism. I’ve always thought socialists rather hated banks, I can’t imagine Lenin saving Lehmans…

      As I see it, what you call socialism is the real capitalism, and what you call capitalism had never existed, just perhaps in some books

    • Capitalism? No such thing.

      Free markets? No such thing.

      You can take the high road and argue against bail outs – QE ZIRP etc…. but you will be in the ditch eating dog food warmed over plastic bags the moment these policies stop.

      The only thing that is keeping us from a massive deflationary spiral is stimulus spending — ghost cities in china – subprime auto loans in the US — property boosts in the US and UK — etc etc etc….

      Not only the wealthy are benefiting from this stimulus — we all are… because this is the only ‘growth’ that is happening — take away stimulus — and we are done

      • Besides myself, you seem to truly be the only other person who really “gets it”.

        However, the primary difference between you and I is that you, for some reason, associate yourself with the commoners, the losers. Why is that? What have these people done to deserve your respect, sympathy & support?

        The winners are always ahead of the curve. Millions of disenfranchised tenants advocating for land reform? Why, turn them all into “owners” via loans created by banks controlled by the vast land barons.

        Peak oil dooming the 150-200 year run of an economic system (which they created based on opportunities afforded to replace force majeure) dependent on perpetual growth? Why, begin a nascent full spectrum surveillance system, combined with 24/7 propaganda, delivered by the ability to (temporarily) print money out of thin air.

        What does it gain you repeatedly pointing out the obvious? Does it inflate your ego helping others who are just stumbling into the harsh light of reality? Perhaps you’re just a stage away from full acceptance. As for me, I smile to myself at every turn of the screw, saying to myself: “well played, well played”.

        The real intrigue is to correctly predict each event, whether it’s the false flag that allows US/NATO to use all available means to topple Russia, implement the next restriction of civil liberties, or finally begin the process of informing the retards that the jig is up, and that rationing, price controls, etc are just the beginning of the new world order.

        • BK…. I am interested in only in truths…. in understanding what is really going on … kinda like doing Sudoku … or Rubic’s Cube … or Chess…

          As you can see it irritates me to see people mouthing CNN talking points particularly because I come to this site to understand the nature of the problem we are facing — and the commentary on that issue is generally very high level.

          Funny how people can see through the spin on the energy level but they can still believe America is the good guy….

          I am not searching for the good guy … there is no good guy … only interests…

          I do not admire those who ‘turn the screws’ —- rather when I see what is really happening it reinforces my conclusion is that we are a vile species…

          And that the sooner we extinct ourselves — the better.

        • B9K9

          When you think that you are about the only one to get it, then I would suggest it’s time to reflect and show a little humility.

          I remember a chap at art school who insisted on placing his easel next to mine: his work was dreadful. But that didn’t stop him leaning across and whispering ‘These others are useless: only you and I can paint!’

  2. Growth is always limited. The limits of a finite world impose themselves. If we do nothing, if we never plan, never think about it the physics of the situation will take acre of limiting growth. We can use thoughtful and well planned means like permaculture/biology based sustenance production, sustainable energy forms of whatever level of usefulness but this can only change the maximum number of people sustainable.

    NOTHING we do can allow infinite growth. Even at 2% growth per generation the mass of humans even if a solid sphere would have to expand faster than the speed of light to accommodate the growth after only 60,000 years.

    Our choices are what mechanism will be used to limit the human population to a fixed number.

    1) do nothing and accept the four horsemen
    2) limit the number conceived by allowing only two per couple
    3) limit the number conceived by allowing only some to reproduce
    4) a mixture of #2 and #3

    We also have the choice of using one of the above in some geographic areas and a different one in other geographic areas. Likewise one of the above applied to some economic, religious, political, self promotion group and different ones applied to different groups.

    I go for the some sane country applying the following.
    1) close borders
    2) every citizen can have two children
    3) welfare money is given only to citizen who agree to have themselves and their under aged children irreversibly sterilized
    4) as this will not produce enough children to maintain the population (some will choose not to have kids, some will get run over by a bus before having kids, etc) some set of standards be developed based on health and intelligence. If one passes the test then one is entered, if one wishes, into a lottery. The lottery (random chance) selects enough couples to reach the need replacement level. Winner may have up to four children total and receive some modest level of social support for the extra kids.
    5) maintain a strong national technical means to stop any outside group that
    a) seeks to take the land and water of nation
    b) pollutes in a way that damages the nation (i.e. common air, common oceans).

  3. Natural resources depletion everywhere you look. Wonder what will happen when every countries in the world will become a net importer of oil.

    I like that last sentence .

    While the profit results were in line with the company’s previous forecasts, it has moved to further reduce costs after already slashing hundreds of jobs by shutting down its Kurnell oil refinery in Sydney and turning it into an import terminal.

    Caltex to cut 350 jobs amid tepid profit growth

    Petroleum company Caltex has announced it is axing 350 jobs to cut costs amid tepid profit growth.

    Caltex says the majority of the jobs will be shed in the next 12 months, in response to a company-wide review of costs and efficiency.

    Without specifying specific areas or locations, the fuel company says the job cuts will affect operational and support positions.

    The cuts have been revealed at the same time as Caltex has reported a fall in first-half profit.

    Caltex has posted a net profit after tax of $163 million for the six months to June, down from $195 million in the prior year.

    The firm’s preferred measure (“replacement cost of sales operating profit”), which adjusts for inventory changes, rose 1 per cent to $173 million.

    While the profit results were in line with the company’s previous forecasts, it has moved to further reduce costs after already slashing hundreds of jobs by shutting down its Kurnell oil refinery in Sydney and turning it into an import terminal.

  4. While Texan oil production seems to be on a roll for now, the Bakken appears to be headed for a peak in 2016.  However, outside the U.S., things do not look so rosy.  The Mohammedanist forces are anything but on the run;  Libya, Syria and Iraq are in chaos, all caused ultimately by contorted U.S. interventionism.  Egypt’s economy is flat on its back.  Ukraine is threatened by partial takeover by the new Tsarist state of Russia.  Meanwhile the current U.S. regime is mainly interested in inventing excuses as to why it is in a stalemating stupor but should nonetheless be re-elected in the next two elections — all as it makes ample use of the race card to distract from its failures.  Afghanistan, as things look now, will quickly revert to Taliban control after American troops have left at the end of this year.  That will be followed by another wave of a million or so refugees seeking asylum in the U.S. and Europe.  If Israel and/or the U.S. destroy Iranian nuclear facilities, Tehran will instantly close the Strait of Hormuz (anciently, of Ahura Mazda, the “Wise Lord”), bringing the world economy to a screeching halt.  Never mind BRIC attempts to create an alternative to the dollar as the world’s reserve currency.

    Of all of this the average American is blissfully unaware.  But it will only take a single one of the above-mentioned (among many other) factors to break some or other weakest link in the chain (Liebig’s law) of the world economy, and Humpty Dumpty will have a great fall.

  5. Dear Gail and All

    Here is another angle on the question of the value of gardening. The first article reports on a recent scientific paper speculating that a significant part of human eating behavior is, in fact, strongly influenced by our gut bacteria. The second article is an excerpt from George Mateljan’s weekly bulletin on food, and explains how the artificial environments industrial agriculture creates result in less nutritious food.

    I have made the point that we eat for two broadly different reasons. First, of course, we simply need calories for energy. Most people in the world today get an excess of calories from staple crops such as the grains which supply 80 percent of the world’s calories. Excess weight is now a greater problem, worldwide, than too few calories. The second reason is health…and this is where the products of gardening are spotlighted. If you want a healthy gut biome then you have to eat plenty of low-calorie density plants, and if you want your body proper to be able to mount effective defenses against disease, you have to eat plenty of low-calorie density plants.

    Furthermore, the plants need to be bred and grown under conditions conducive to the development of their own protective capabilities…as opposed to the hot house pampering that produces cosmetically beautiful tomatoes with lots of water content.

    And, most recently, we are relearning the lesson that the gut bacteria are, in some senses, in charge. I remember a joke from 40 years ago: We don’t have to worry about the future of the human race, so long as the bacteria find us useful.

    My conclusion is that those who have learned how to garden high nutrient density plants are likely to be better off in a collapse than those who are dependent on industrial agriculture’s cosmetic, but nutrient challenged, wonders.

    Don Stewart
    PS Nutrient density is also related to the question of cooking. Some plants become more nutrient dense for humans when cooked, but others are best eaten raw. Some doctors recommend that half your veggies be cooked, and half eaten raw. If your veggies are coming from your own garden which is managed for low inputs, and if you are only cooking half of them for the briefest period of time, then you are minimizing cooking fuel. Geoff Lawton grows a variety of sweet potatoes which cook quickly to conserve cooking fuel…which may be just slightly over the line into obsession.
    (This article appears also in the New York Times, but the NYT has a paywall)

    From George Mateljan:
    Recent studies, however, are finding even more significant results when measuring nutrients such as beneficial flavonoids in organically grown produce. Such was the case in a recent study by researchers at the University of California-Davis and the University of Minnesota, who analyzed the levels of two highly beneficial flavonoid-type antioxidants – quercetin and kaempferol – in dried tomatoes (Mitchell AE et al 2007). Flavonoids are polyphenols with not only antioxidant, but anti-viral, anti-inflammatory, anti-cancer, anti-diabetic, anti-allergy, anti-anxiety, anti-osteoporotic, and cardioprotective effects . They occur in virtually all plant foods and are associated, as one would expect from all their beneficial actions, with a range of preventive health benefits. Mitchell et al. found that certified organic tomatoes contained 79% more quercitin and 97% morekaempferol, compared with tomatoes grown by conventional methods!

    The reasons explaining these results may at first seem counter-intuitive. Conventional farming practices have long used pesticides to protect plants from pests and have heavily doused them with inorganic nitrogen-rich fertilizers to enhance growth. The irony is that over-protection of the plants prevents them from producing their own natural protection against pests and infections, and inorganic fertilizers do not replenish trace minerals, which become depleted in our soils. Flavonoids are plants’ own internally produced protection system against pests. While we think of them as a healthy addition to our meals to help protect us against disease, we don’t often remember that they actually do the same thing for the plants that supply them for us.

    Researchers have found that levels of flavonoids in the organically grown plants actually increased over time as soil levels of nitrogen compounds decreased – when they became in a sense, more nutrient-deficient!

    Researchers at Kansas State University reported similar results in 2005 when organic farming produced higher levels of flavonoid antioxidants as a result of the crops. increased vulnerability to insect attack. The over use of conventional fertilizers, which are high in nitrogen content, also results in a greater uptake of water and has been hypothesized to dilute the flavor of conventionally grown produce as well.

  6. Chris Hedges with a wake up call for the America lovers….

    How the Brutalized Become Brutal

    The horrific pictures of the beheading of American reporter James Foley, the images of executions of alleged collaborators in Gaza and the bullet-ridden bodies left behind in Iraq by the Islamic State of Iraq and the Levant are the end of a story, not the beginning. They are the result of years, at times decades, of the random violence, brutal repression and collective humiliation the United States has inflicted on others.

    Our terror is delivered to the wretched of the earth with industrial weapons. It is, to us, invisible. We do not stand over the decapitated and eviscerated bodies left behind on city and village streets by our missiles, drones and fighter jets. We do not listen to the wails and shrieks of parents embracing the shattered bodies of their children. We do not see the survivors of air attacks bury their mothers, fathers, brothers and sisters. We are not conscious of the long night of collective humiliation, repression and powerlessness that characterizes existence in Israel’s occupied territories, Iraq and Afghanistan. We do not see the boiling anger that war and injustice turn into a caldron of hate over time. We are not aware of the very natural lust for revenge against those who carry out or symbolize this oppression. We see only the final pyrotechnics of terror, the shocking moment when the rage erupts into an inchoate fury and the murder of innocents. And, willfully ignorant, we do not understand our own complicity. We self-righteously condemn the killers as subhuman savages who deserve more of the violence that created them. This is a recipe for endless terror.

    Chaim Engel, who took part in the uprising at the Nazis’ Sobibor death camp in Poland, described what happened when he obtained a knife and confronted a German in an office. The act he carried out was no less brutal than the beheading of Foley or the executions in Gaza. Isolated from the reality he and the other inmates endured at the camp, his act was savage. Set against the backdrop of the extermination camp it was understandable.

    “It’s not a decision,” Engel said. “You just react, instinctively you react to that, and I figured, ‘Let us to do, and go and do it.’ And I went. I went with the man in the office, and we killed this German. With every jab, I said, ‘That is for my father, for my mother, for all these people, all the Jews you killed.’ ”

    Any good cop, like any good reporter, knows that every criminal has a story. No one, except for perhaps a few psychopaths, wakes up wanting to cut off another person’s head. Murder and other violent crimes almost always grow out of years of abuse of some kind suffered by the perpetrator. Even the most “civilized” among us are not immune to dehumanization.

    The enemies on the modern battlefield seem elusive because death is usually delivered by industrial weapons such as aerial drones or fighter jets that are impersonal, or by insurgent forces that leave behind roadside bombs or booby traps or carry out hit-and-run ambushes. This elusiveness is the curse of modern warfare. The inability of Sunni fighters in Iraq to strike back at jets and drones has resulted in their striking a captured journalist and Shiite and Kurdish civilians.

    U.S. soldiers and Marines in the occupations of Iraq and Afghanistan, and Israeli soldiers in assaults on Gaza, have been among those who committed senseless acts of murder. They routinely have gunned down unarmed civilians to revenge killings of members of their units. This is a reaction I saw in several wars. It is not rational. Those murdered were not responsible, even indirectly, for the deaths of their killers’ comrades, just as Foley and the Shiites and Kurds executed in Iraq were not responsible for the deaths of Sunni militants hit by the U.S. Air Force.

    J. Glenn Gray, who fought in World War II, wrote about the peculiar nature of vengeance in “The Warriors: Reflections on Men in Battle”:

    When the soldier has lost a comrade to this enemy or possibly had his family destroyed by them through bombings or through political atrocities, so frequently the case in World War II, his anger and resentment deepen into hatred. Then the war for him takes on the character of a vendetta. Until he has himself destroyed as many of the enemy as possible, his lust for vengeance can hardly be appeased. I have known soldiers who were avid to exterminate every last one of the enemy, so fierce was their hatred. Such soldiers took great delight in hearing or reading of mass destruction through bombings. Anyone who has known or been a soldier of this kind is aware of how hatred penetrates every fiber of his being. His reason for living is to seek revenge; not an eye for an eye and a tooth for a tooth, but a tenfold retaliation.

    Those killed are not, to the killers, human beings but representations of what they fear and hate. The veneer of the victim’s humanity, they believe, is only a mask for an evil force. The drive for vengeance, for “tenfold retaliation,” among those who are deformed by violence cannot be satiated without rivers of blood—even innocent blood. And Americans do as much of this type of revenge killing as those we fight. Our instruments of war allow us to kill from a distance. We therefore often lack any real consciousness of killing. But this does not make us any less depraved.

    Read the rest here

    • Keep in mind when reading this, Chris Hedges is an American…. and he is a Pulitzer Prize winning war correspondent who worked for the NY Times for years….

      He is not some armchair QB sitting in Alaska or wherever else — watching CNN — and buying the John Wayne PR spin — and telling us about how good America is…. he has been there — he has seen the carnage that his country visits on the world…

    • To some extent very true: but also, utter tosh, it all depends on the exact circumstances: the ‘outraged Muslim’ who murdered poor Foley in such a cowardly way was not brought up under the heel of US oppression, with drones taking out his kith and kin, but in dreary old, damp, London with welfare to keep him if needed. The ETA murderers in Spain like to call themselves ‘avengers of oppression’ – it makes them feel good, but it is a lie.

      • Of course we can never know what the motives of each individual are….

        However the fact of the matter is — and I have traveled extensively and discussed this issue with many Muslims — the US is reviled across the board.

        Even in Malaysia — a very moderate modern country – I put this question to some very educated business people and the comments I summarize as follows:

        “No of course we would never engage in acts of violence against the US — but we completely understand why many Muslims do”

        Time after time after time after time I have heard the same sentiments from Egypt to Bahrain to Yemen….

        Now could it be as Bush said ‘they hate us for our way of life’ — or could it be as Hedges says ‘they hate us for what we do to them’

        Note that Foley also blames America for his own death.

  7. For those having trouble with food budgets — we got pink slime…. but now we have something even better — real meat fresh from the fields and no doubt sewers of Cambodia… I hear that KFC will soon be introducing a value pack meal — the KFR Meal

    Cambodian rat meat: A growing export market

    A unique harvest is under way in the rice fields of Cambodia where tens of thousands of wild rats are being trapped alive each day to feed a growing export market for the meat of rural rodents.

    • I stopped eating at restaurants and fast food joints a long time ago. Too unsanitary and suspect food quality.

      • Rodster

        In Britain one can dine out with confidence, because we reserve our most suspect food ingredients for the right places: schools and hospitals (where patients are known to die of thirst and malnutrition)!

  8. Paul, think about why now and why are specific regional blocks considering some form of autarchy. Specifically, non US/EU dependent electronic payment system within their countries and internationally (China has it already, Russia is working on it), also and more importantely why are scheming up those various barter like agreements for int trade in energy and industrial goods. That’s for me a clear sign, the old system is dying. I’m not sure what the new one will look like, how soon and long will be viable and able to operate, perhaps is ought to collapse soon afterwards. In any case let this image of rapidly changing todays world sink in. PS yes the reshuffle won’t be painless, especially in the “leisure” department be it cheap gas for individual motoring, cushy government jobs, and obscure entertainment, overflowing supermarkets with food and stuff. I guess the coming “autarchy project” can get few more decades out of this civilization, it will likely stink in the odours of cheap forced egalitarianism of the past, but people will be happy for a while, think about Diocletian reforms..

    • EPS won’t exist without BAU — energy is everything… and the low hanging fruit is gone.

      They PTB will of course try to maintain their positions — I think they are delusional — just as delusional as those who think driving a Tesla will save the world.

      Even smart and wealthy people often believe in god — because god = hope…..

      So even smart and wealthy people are capable of believing that some sort of system can be developed that will soft land this sucker.

      I say no way jose…. there is no soft landing — we are so far beyond soft landing this it isnt even worth talking about.

      It is clearly obvious billions have to go — that is going to be a very mess landing…. and not even the powerful can assure they come out the back end of that alive…. and even if they do — if they think what comes next remotely resembles the now — I think they are dreaming.

  9. I’ve been through so many “triage” like situations in my life, despite my comfort, so I suppose I’m not as nervous about the inevitable collapse.

    Rerun to the financial crisis. Suppose the central banks didn’t intervene. What would happen?

    Alright, we face a massive deflationary depression. 50% or more of banks shut down, world trade stops, energy production drops 50%. ATMs are closed, people can’t access their accounts. Stock and bond markets close. Governments are doing whatever they can to maintain order.

    Now, think through this for a second. Do you really think this is the end of humanity? That we all give up? I don’t think so. Anymore then it is the end if electricity stops or if a natural disaster comes through.

    What would happen on the ground is this:
    -Essential services like food, electricity, sewage would begin to operate on a command basis, or the government would just begin to directly employ people; yes there might be blackouts and long lines, but people would still line up for bread and water rather than starve
    -You might lose your job and ability to travel, but then jobs would be organized on a neighborhood by neighborhood level, with, again, essentials taking top priority
    -Meanwhile the public is restless to the politicians have to do something, so they begin to sort through the accounts of the banks and it’s discovered just how corrupt the system is; so lots of bankers are sent to jail or commit suicide or whatever; order has to be returned to the financial system, so most likely debt would be defaulted on, most everyone would take a substantial haircut on wealth; rather than creating new debt money, the government can just print money outright and distribute it on the basis of work, and then begin to guarantee the accounts of the remaining banks; after a few months the stock and debt markets can reopen, at much lower level and with higher interest rates
    -Big industries like finance, military, healthcare, entertainment etc. face heavy losses; bankers, actors, and soldiers have to find real jobs (the horror)
    -Yes there would be political dysfunction and chaos and war, but that’s true anyway
    -Once we drop a few rungs down, things begin to stabilize and people once again begin to find employment, but with less income; at least they have basic shelter because they haven’t been foreclosed on, and the criminals are either worm food or safely behind bars

    But you didn’t want that, right, you didn’t want to rip off the band aid. So instead you simply defer the pain to your children, the next generation.

    Ask anyone in chaotic, dysfunctional third world countries and they will tell you the lengths that people will go to survive. And the rising populations even in these countries proves the point that perfect, machine like operation simply isn’t needed for humanity to go on.

    • Here’s a slightly more nuanced take on what might happen (see p. 56 onwards) if the global economy collapses — they use the EU as an example — however you could plug in any major economy and the result would be similar due to globalization

      A command economy does not work without energy… in fact nothing except a very primitive economy will exist without energy sources that extend beyond animals pulling carts and plows

    • I wish it was so simple. I really wish.

      The problem is that our system is working, because several subsystems work: agriculture, finance (currency is a part of this one), trade, telecommunication, transport, etc. Your scenario is based on the assumption, that all subsystems still work, but with decreased efficiency. I’m afraid this isn’t the case. Without oil all subsystems are hurt until they stop operating. Without currency people/companies don’t trade, without telecommunication government doesn’t administrate. This is like domino falling… one subsystem fails, all other follow.

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