Not long ago, I wrote Ten Reasons Why High Oil Prices are a Problem. If high oil prices can be a problem, how can low oil prices also be a problem? In particular, how can the steep drop in oil prices we have recently been experiencing also be a problem?
Let me explain some of the issues:
Issue 1. If the price of oil is too low, it will simply be left in the ground.
The world badly needs oil for many purposes: to power its cars, to plant it fields, to operate its oil-powered irrigation pumps, and to act as a raw material for making many kinds of products, including medicines and fabrics.
If the price of oil is too low, it will be left in the ground. With low oil prices, production may drop off rapidly. High price encourages more production and more substitutes; low price leads to a whole series of secondary effects (debt defaults resulting from deflation, job loss, collapse of oil exporters, loss of letters of credit needed for exports, bank failures) that indirectly lead to a much quicker decline in oil production.
The view is sometimes expressed that once 50% of oil is extracted, the amount of oil we can extract will gradually begin to decline, for geological reasons. This view is only true if high prices prevail, as we hit limits. If our problem is low oil prices because of debt problems or other issues, then the decline is likely to be far more rapid. With low oil prices, even what we consider to be proved oil reserves today may be left in the ground.
Issue 2. The drop in oil prices is already having an impact on shale extraction and offshore drilling.
While many claims have been made that US shale drilling can be profitable at low prices, actions speak louder than words. (The problem may be a cash flow problem rather than profitability, but either problem cuts off drilling.) Reuters indicates that new oil and gas well permits tumbled by 40% in November.
Offshore drilling is also being affected. Transocean, the owner of the biggest fleet of deep water drilling rigs, recently took a $2.76 billion charge, among a “drilling rig glut.”
3. Shale operations have a huge impact on US employment.
Zero Hedge posted the following chart of employment growth, in states with and without current drilling from shale formations:
Figure 1. Jobs in States with and without Shale Formations, from Zero Hedge.
Clearly, the shale states are doing much better, job-wise. According to the article, since December 2007, shale states have added 1.36 million jobs, while non-shale states have lost 424,000 jobs. The growth in jobs includes all types of employment, including jobs only indirectly related to oil and gas production, such as jobs involved with the construction of a new supermarket to serve the growing population.
It might be noted that even the “Non-Shale” states have benefited to some extent from shale drilling. Some support jobs related to shale extraction, such as extraction of sand used in fracking, college courses to educate new engineers, and manufacturing of parts for drilling equipment, are in states other than those with shale formations. Also, all states benefit from the lower oil imports required.
Issue 4. Low oil prices tend to cause debt defaults that have wide ranging consequences. If defaults become widespread, they could affect bank deposits and international trade.
With low oil prices, it becomes much more difficult for shale drillers to pay back the loans they have taken out. Cash flow is much lower, and interest rates on new loans are likely much higher. The huge amount of debt that shale drillers have taken on suddenly becomes at-risk. Energy debt currently accounts for 16% of the US junk bond market, so the amount at risk is substantial.
Dropping oil prices affect international debt as well. The value of Venezuelan bonds recently fell to 51 cents on the dollar, because of the high default risk with low oil prices. Russia’s Rosneft is also reported to be having difficulty with its loans.
There are many ways banks might be adversely affected by defaults, including
- Directly by defaults on loans held by a bank
- Indirectly, by defaults on securities the bank owns that relate to loans elsewhere
- By derivative defaults made more likely by sharp changes in interest rates or in currency levels
- By liquidity problems, relating to the need to quickly sell or buy securities related to ETFs
After the many bank bailouts in 2008, there has been discussion of changing the system so that there is no longer a need to bail out “too big to fail” banks. One proposal that has been discussed is to force bank depositors and pension funds to cover part of the losses, using Cyprus-style bail-ins. According to some reports, such an approach has been approved by the G20 at a meeting the weekend of November 16, 2014. If this is true, our bank accounts and pension plans could already be at risk.1
Another bank-related issue if debt defaults become widespread, is the possibility that junk bonds and Letters of Credit2 will become outrageously expensive for companies that have poor credit ratings. Supply chains often include some businesses with poor credit ratings. Thus, even businesses with good credit ratings may find their supply chains broken by companies that can no longer afford high-priced credit. This was one of the issues in the 2008 credit crisis.
Issue 5. Low oil prices can lead to collapses of oil exporters, and loss of virtually all of the oil they export.
The collapse of the Former Soviet Union in 1991 seems to be related to a drop in oil prices.
Figure 2. Oil production and price of the Former Soviet Union, based on BP Statistical Review of World Energy 2013.
Oil prices dropped dramatically in the 1980s after the issues that gave rise to the earlier spike were mitigated. The Soviet Union was dependent on oil for its export revenue. With low oil prices, its ability to invest in new production was impaired, and its export revenue dried up. The Soviet Union collapsed for a number of reasons, some of them financial, in late 1991, after several years of low oil prices had had a chance to affect its economy.
Many oil-exporting countries are at risk of collapse if oil prices stay very low very long. Venezuela is a clear risk, with its big debt problem. Nigeria’s economy is reported to be “tanking.” Russia even has a possibility of collapse, although probably not in the near future.
Even apart from collapse, there is the possibility of increased unrest in the Middle East, as oil-exporting nations find it necessary to cut back on their food and oil subsidies. There is also more possibility of warfare among groups, including new groups such as ISIL. When everyone is prosperous, there is little reason to fight, but when oil-related funds dry up, fighting among neighbors increases, as does unrest among those with lower subsidies.
Issue 6. The benefits to consumers of a drop in oil prices are likely to be much smaller than the adverse impact on consumers of an oil price rise.
When oil prices rose, businesses were quick to add fuel surcharges. They are less quick to offer fuel rebates when oil prices go down. They will try to keep the benefit of the oil price drop for themselves for as long as possible.
Airlines seem to be more interested in adding flights than reducing ticket prices in response to lower oil prices, perhaps because additional planes are already available. Their intent is to increase profits, through an increase in ticket sales, not to give consumers the benefit of lower prices.
In some cases, governments will take advantage of the lower oil prices to increase their revenue. China recently raised its oil products consumption tax, so that the government gets part of the benefit of lower prices. Malaysia is using the low oil prices as a time to reduce oil subsidies.
Most businesses recognize that the oil price drop is at most a temporary situation, since the cost of extraction continues to rise (because we are getting oil from more difficult-to-extract locations). Because this price drop is only temporary, few business people are saying to themselves, “Wow, oil is cheap again! I am going to invest a huge amount of money in a new road building company [or other business that depends on cheap oil].” Instead, they are cautious, making changes that require little capital investment and that can easily be reversed. While there may be some jobs added, those added will tend to be ones that can easily be dropped if oil prices rise again.
Issue 7. Hoped for crude and LNG sales abroad are likely to disappear, with low oil prices.
There has been a great deal of publicity about the desire of US oil and gas producers to sell both crude oil and LNG abroad, so as to be able to take advantage of higher oil and gas prices outside the US. With a big drop in oil prices, these hopes are likely to be dashed. Already, we are seeing the story, Asia stops buying US crude oil. According to this story, “There’s so much oversupply that Middle East crudes are now trading at discounts and it is not economical to bring over crudes from the US anymore.”
LNG prices tend to drop if oil prices drop. (Some LNG prices are linked to oil prices, but even those that are not directly linked are likely to be affected by the lower demand for energy products.) At these lower prices, the financial incentive to export LNG becomes much less. Even fluctuating LNG prices become a problem for those considering investment in infrastructure such as ships to transport LNG.
Issue 8. Hoped-for increases in renewables will become more difficult, if oil prices are low.
Many people believe that renewables can eventually take over the role of fossil fuels. (I am not of the view that this is possible.) For those with this view, low oil prices are a problem, because they discourage the hoped-for transition to renewables.
Despite all of the statements made about renewables, they don’t really substitute for oil. Biofuels come closest, but they are simply oil-extenders. We add ethanol made from corn to gasoline to extend its quantity. But it still takes oil to operate the farm equipment to grow the corn, and oil to transport the corn to the ethanol plant. If oil isn’t around, the biofuel production system comes to a screeching halt.
Issue 9. A major drop in oil prices tends to lead to deflation, and because of this, difficulty in repaying debts.
If oil prices rise, so do food prices, and the price of making most goods. Thus rising oil prices contribute to inflation. The reverse of this is true as well. Falling oil prices tend to lead to a lower price for growing food and a lower price for making most goods. The net result can be deflation. Not all countries are affected equally; some experience this result to a greater extent than others.
Those countries experiencing deflation are likely to eventually have problems with debt defaults, because it will become more difficult for workers to repay loans, if wages are drifting downward. These same countries are likely to experience an outflow of investment funds because investors realize that funds invested these countries will not earn an adequate return. This outflow of funds will tend to push their currencies down, relative to other currencies. This is at least part of what has been happening in recent months.
The value of the dollar has been rising rapidly, relative to many other currencies. Debt repayment is likely to especially be a problem for those countries where substantial debt is denominated in US dollars, but whose local currency has recently fallen in value relative to the US dollar.
Figure 3. US Dollar Index from Intercontinental Exchange
The big increase in the US dollar index came since June 2014 (Figure 3), which coincides with the drop in oil prices. Those countries with low currency prices, including Japan, Europe, Brazil, Argentina, and South Africa, find it expensive to import goods of all kinds, including those made with oil products. This is part of what reduces demand for oil products.
China’s yuan is relatively closely tied to the dollar. The collapse of other currencies relative to the US dollar makes Chinese exports more expensive, and is part of the reason why the Chinese economy has been doing less well recently. There are no doubt other reasons why China’s growth is lower recently, and thus its growth in debt. China is now trying to lower the level of its currency.
Issue 10. The drop in oil prices seems to reflect a basic underlying problem: the world is reaching the limits of its debt expansion.
There is a natural limit to the amount of debt that a government, or business, or individual can borrow. At some point, interest payments become so high, that it becomes difficult to cover other needed expenses. The obvious way around this problem is to lower interest rates to practically zero, through Quantitative Easing (QE) and other techniques.
(Increasing debt is a big part of what pumps up “demand” for oil, and because of this, oil prices. If this is confusing, think of buying a car. It is much easier to buy a car with a loan than without one. So adding debt allows goods to be more affordable. Reducing debt levels has the opposite effect.)
QE doesn’t work as a long-term technique, because it tends to create bubbles in asset prices, such as stock market prices and prices of farmland. It also tends to encourage investment in enterprises that have questionable chance of success. Arguably, investment in shale oil and gas operations are in this category.
As it turns out, it looks very much as if the presence or absence of QE may have an impact on oil prices as well (Figure 4), providing the “uplift” needed to keep oil prices high enough to cover production costs.
Figure 4. World “liquids production” (that is oil and oil substitutes) based on EIA data, plus OPEC estimates and judgment of author for August to October 2014. Oil price is monthly average Brent oil spot price, based on EIA data.
The sharp drop in price in 2008 was credit-related, and was only solved when the US initiated its program of QE started in late November 2008. Oil prices began to rise in December 2008. The US has had three periods of QE, with the last of these, QE3, finally tapering down and ending in October 2014. Since QE seems to have been part of the solution that stopped the drop in oil prices in 2008, we should not be surprised if discontinuing QE is contributing to the drop in oil prices now.
Part of the problem seems to be the differential effect that happens when other countries are continuing to use QE, but the US not. The US dollar tends to rise, relative to other currencies. This situation contributes to the situation shown in Figure 3.
QE allows more borrowing from the future than would be possible if market interest rates really had to be paid. This allows financiers to temporarily disguise a growing problem of un-affordability of oil and other commodities.
The problem we have is that, because we live in a finite world, we reach a point where it becomes more expensive to produce commodities of many kinds: oil (deeper wells, fracking), coal (farther from markets, so more transport costs), metals (poorer ore quality), fresh water (desalination needed), and food (more irrigation needed). Wages don’t rise correspondingly, because more and more labor is needed to provide less and less actual benefit, in terms of the commodities produced and goods made from those commodities. Thus, workers find themselves becoming poorer and poorer, in terms of what they can afford to purchase.
QE allows financiers to disguise a growing mismatch between what it costs to produce commodities, and what customers can really afford. Thus, QE allows commodity prices to rise to levels that are unaffordable by customers, unless customers’ lack of income is disguised by a continued growth in debt.
Once commodity prices (including oil prices) fall to levels that are affordable based on the incomes of customers, they fall to levels that cut out a large share of production of these commodities. As commodity production drops to levels that can be produced at affordable prices, so does the world’s ability to make goods and services. Unfortunately, the goods whose production is likely to be cut back if commodity production is cut back are those of every kind, including houses, cars, food, and electrical transmission equipment.
Conclusion
There are really two different problems that a person can be concerned about:
- Peak oil: the possibility that oil prices will rise, and because of this production will fall in a rounded curve. Substitutes that are possible because of high prices will perhaps take over.
- Debt related collapse: oil limits will play out in a very different way than most have imagined, through lower oil prices as limits to growth in debt are reached, and thus a collapse in oil “demand” (really affordability). The collapse in production, when it comes, will be sharper and will affect the entire economy, not just oil.
In my view, a rapid drop in oil prices is likely a symptom that we are approaching a debt-related collapse–in other words, the second of these two problems. Underlying this debt-related collapse is the fact that we seem to be reaching the limits of a finite world. There is a growing mismatch between what workers in oil importing countries can afford, and the rising real costs of extraction, including associated governmental costs. This has been covered up to date by rising debt, but at some point, it will not be possible to keep increasing the debt sufficiently.
The timing of collapse may not be immediate. Low oil prices take a while to work their way through the system. It is also possible that the world’s financiers will put off a major collapse for a while longer, through more QE, or more programs related to QE. For example, actually getting money into the hands of customers would seem to be temporarily helpful.
At some point the debt situation will eventually reach a breaking point. One way this could happen is through an increase in interest rates. If this happens, world economic growth is likely to slow greatly. Oil and commodity prices will fall further. Debt defaults will skyrocket. Not only will oil production drop, but production of many other commodities will drop, including natural gas and coal. In such a scenario, the downslope of all energy use is likely to be quite steep, perhaps similar to what is shown in the following chart.
Figure 5. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.
Related Articles:
Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?
WSJ Gets it Wrong on “Why Peak Oil Predictions Haven’t Come True”
Eight Pieces of Our Oil Price Predicament
Notes:
[1] There is of course insurance by the FDIC and the PBGC, but the actual funding for these two insurance programs is tiny in relationship to the kind of risk that would occur if there were widespread debt defaults and derivative defaults affecting many banks and many pension plans at once. While depositors and pension holders might try to collect this insurance, there wouldn’t be enough money to actually cover these demands. This problem would be similar to the issue that arose in Iceland in 2008. Insurance would seem to be available, but in practice, would not pay out much.
Also, I learned after writing this post that bail-ins were mandated for US banks by the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010. In the language of the summary, bank depositors are “unsecured creditors,” and are thus among those to whom the burden of loss is transferred. The FDIC is not allowed to borrow extra funds, beyond bank funds, to cover this loss.
[2] LOCs are required when goods are shipped internationally, before payment has actually been made. They offer a guarantee that a buyer will be able to “make good” on his promise to pay for goods when they arrive.
We are now in a depression and very soon it will be obvious to everyone that if want the system to continue we have to kept adding more debt.. Governments around the world will implement a minimum guarantee income like Switzerland is looking at. Once government around the world start understand that it is essential to maintain the supply chain alive. ( natural resource extraction, manufacturing and distribution) more debt (minimum guarantee income) will be created and people will go along with it. We can create much more debt that one can imagine before the collapse happen.
I am more worry about shortage that lower price can create and social chaos following shortage. Debt will be give to people to avoid shortage and chaos. way before social chaos.
There has to be a plausible correlation between currencies and the physical resource-base they are supposed to represent or at a certain point trust in the system will evaporate. We are ridiculously undercapitalized now and the ever expanding ratio of paper wealth to real wealth will soon be exposed by cascading defaults. Once that happens, trade and banking will be paralysed by panic and there won’t be much governments can do about it.
Somehow, I expect minimum guaranteed income will not work very well for very long, no matter how much debt is behind it. Minimum incomes can run through an awfully lot of money.
Then you’re going to have biblical civil disorder and/or war. Good luck telling millions upon millions of citizens “you’re on your own” as we try defend the status quo as the environment violently changes. If for 200 years we’ve experienced nothing but sustained growth and we’re now teetering on the brink of the downturn, the rules of the game will have to change. I can’t see capitalism as the dominant player in a “powerdown” economy. It’s impossible, it’s zero-sum.
Think about it Gail, who’s simply going to sit there and starve without at least putting up a fight against real/perceived enemies?
Yes. Economical science is not real science. Economics science is more like voodoo science. The rules can be changed because they have been invented by man and money is not real anyway. It does not matter if you run through a lot of money. Money are only digits on a computer. You don’t go forward by holding on to old economical model that don’t work. Progress goes forward by trying something different. Yes, it can fail but you never know what might come out of it. This could save us some time and help readjust with less social violence.
People get quite lethargic after a day or so without food. So maybe the protests and violence will be over quickly and people will just lay down and die.
“People get quite lethargic after a day or so without food.”
I agree that no food is not a problem.
However, not enough food is a huge problem. Bloody revolutions throughout history have happened because of scarcity, as opposed to absence.
I have a hard time imagining that we will have a “no food” situation any time soon. Chronic shortages are a more likely scenario.
Humanity will go out with a whimper, not a bang.
Jan, I already told you that you’re freaking me out!
The problem is not enough to go around.
We have already been creating much more debt than one can imagine for a while now. Go look at global debt levels between 2008 and now. Governments don’t realize that supply chains will be broken per se, but they do know that a lot of people depend on government services, so they’re going to maintain those services at all costs, until they can’t. They don’t realize that those services are wholly unsustainable. Neither do the people depending on them.
Just picked this up today:
http://www.hellenicshippingnews.com/plunging-oil-prices-will-starve-the-world-of-its-economic-fuel/
I love the phrase “Germany, France and the Netherlands are all at stall speed.” That paints an image in my mind of those three countries about to spiral into an uncontrolled dive, with others to follow shortly after.
Thanks! That looks like an excerpt from Chris Martenson’s Peak Prosperity post: http://www.peakprosperity.com/blog/89380/oil-and-global-slowdown
The impression a person gets from the post is that the need for growth in loans is just to keep the banks from collapsing. I see the need for growth in loans as being related to the need to keep economic growth high enough to keep oil prices up.
Martenson: So when the crisis came, which was rooted in too much debt, there were no sane voices in the central banks or halls of government power saying, hey you know what? That wasn’t such a good idea. Perhaps we should pay off our past debts and then take on new credit at a pace no faster than our growth in income.
Or maybe they felt they had no choice. That other factors forced their hand on this?
Are you kidding? The economy’s built on debt which mearly masks the physical finite nature of the world we live in. If the banks stop lending it’s back to the stone ages. By saying “perhaps we should pay off our past debts” etc. forget it, no chance, if the US tried that then you’d have armageddon.
The lives of 7.2 billion people have been mortgaged off the back of cheap easy access fossil fuels and a fiat debt based fractional reserve system that tied to the sterling then then the petrodollar.
It’s way too late to stop now, they’ll fire up QE next year until the chickens come home to roost as they did in 2008 right up until currency destruction.
Yessir, if we start paying off our debts, we get the dreaded deflation. Why is deflation bad? Because dollars are backed by debt, and there is a lot of debt out there that would be defaulted on in the event of deflation. Since that is unthinkable to those who don’t see the writing on the wall with regards to resources, which is most people, we must have deficit spending, QE, helicopter drops, etc… If not, this thing we call society comes to a screeching halt.
More QE to come
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/CB%20future_0.jpg
http://www.zerohedge.com/news/2014-12-10/these-are-astonishing-figures-evidence-1930s-style-depression
China can do some things that mess up the total.
http://www.telegraph.co.uk/finance/china-business/11281346/Chinas-stock-mania-decouples-from-economic-reality.html
Also, you may have seen the recent story:
http://www.platts.com/latest-news/oil/singapore/asias-top-4-oil-users-record-slowest-demand-growth-27922037
Economic growth seems to be slowing a lot more quickly than being reported.
Unfortunately, everything I can see says that we need a growth in debt to keep the price of oil rising enough to be able to continue extracting anywhere near the current amount. Once we hit “peak debt,” “peak oil” and “peak commodities” in general hit.
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End of the Fracking Fallacy
From Nature
http://www.nature.com/news/natural-gas-the-fracking-fallacy-1.16430
Thanks for the link. Yes, I did see that. If prices stay low, fracking will stop even sooner. One way or another, we are likely to lose oil obtained through fracking pretty quickly.
Gail, I can’t see why you didn’t mentioned the end of petrodollar, given it seems to be the most important consequence of actual low oil price. Now oil exporters are sucking dollars from the financial system rather than offering them to it, and so there are less dollars to be offered to other businesses/countries/consumers. Or I am wrong? So, this will hurt world growth as well.
Besides, as you say the end of QE is the mother of the situation but Shoronoil’s idea of diminishing EROI expressing as diminishing capacity of oil to move other sectors of the economy is very attractive (and you have expressed it as well, though in another way). The question is why QE was terminated, which can bring us to the question if it can ever be resumed. Speculating:
1- It was terminated because it was calculculated QE was about to finally escape the financial system, get the streets and launch hyperinflation
2- It was terminated because it was calculated the corresponding oil price drop will affect Russia and force it to devaluate and enter the USD credit system
A final point is that, putting a limit to the USD credit system (in case Russia avoids entering on it), the end of petrodollar is likely to put increasing pressure in the system and at some point oil should be traded in another currency (such as SDR) to avoid (or rather to postpone) global systemic collapse. Or USD credit system should resume growing through another round of QE or santa Fed, as you have said.
I did think about the end of the petrodollar, but I wasn’t looking for more difficult subjects to bring into the post. It was already getting too long and complicated as it was.
Petrodollar recycling means that money spent elsewhere on imports comes back to the US, usually as governmental debt purchases, helping to keep US interest rates low. Now that the price of oil is way down, this effect pretty much disappears. In one way, petrodollar recycling acts somewhat like QE, and could be added to that discussion. The petrodollar recycling issue is also related to the problems we are having keeping the dollar from rising too high.
Toward the end of my post, I say:
There first of these two paragraphs is closely related to the declining EROI issue. I don’t use the declining EROI terminology, because to me, EROI has a very specific, narrow meaning that isn’t really the correct description of the problem. The boundaries of the EROI analysis are too narrow, and the terminology only relates to energy, not other resources. Also, the EROI discussion doesn’t really get the idea across that there are two different groups of people that might benefit from the energy and other commodity extraction–those producing the commodities, and those using the end products (this is related to the net energy discussion that goes with EROI). I see the issue as a competition issue, not a “net energy” issue. QE is a way of making commodities more affordable–an issue that wouldn’t be necessary if we didn’t have the EROI-like problem.
I am not sure that the Federal Reserve folks realize that QE might have an impact on oil prices. I don’t think they thought it was doing very much, period, so it was safe to terminate it.
Big oil is starting to really slash capex: http://uk.businessinsider.com/conocophillips-bp-cut-costs-2014-12?r=US
Thanks! I saw that. I also saw that Chevron is waiting until 2015 to decide on its Capex.
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The United States is too young of a country to have a genuine historical memory of limits, decline or collapse. Except for the minor blip of the Civil War, we have basically grown and expanded, become more wealthy and powerful, everything was always on the increase. And when a decline in growth was threatened starting in the 1970s by a decline in birthrate of white Americans and domestic peak oil, the powers that be decided to go all-in with Latin American and Asian immigration, and energy imports, which is basically just a means to continue the growth of the system, standard of living or ethnic considerations secondary.
Because we are the world power, the rest of the world has followed our lead.
If we are indeed at the beginning of the end game, and all indications suggest we are, then the global system is going to collapse and be reworked. Leadership will transfer inwards, in a resource constrained world, to Europe, Russia, and China, where it will reside for a long time, and they will divide up amongst themselves the remaining energy reserves of central asia/middle east.
Exactly, globalization and the era of the US mega corporates are coming to an end. We will see a return to localization again free from other nation state’s interference.
It’s simple physics of things
There are many problems I see with that scenario. First and foremost the world has never had the destructive technology at hand than it currently has in the “cheap oil” era. One can take spent fuel rods out of the equation. Countries have gone to wars over resources which the world is now facing limits. If a global war ensues, could Nations knowing they are up against a wall, go nuclear?
The entire world is hitting resource limits and unprecedented pollution levels. Many are calling our current era, the sixth mass extinction. Just watch Chris Martenson’s Chapter 24 on the environment to see the mess humans have created.
China is down to 40% of it’s clean water supply. In the future mankind’s survival maybe down to as basic resources which are being depleted at a rapid rate to keep BAU in the “infinite growth economic growth at all cost”.
As Gail has explain on many of her blog posts that the world’s economy is too complex to remove one key player and continue functioning without major disruptions or total collapse.
If we were living prior to the industrial revolution without the just in time delivery networked system or the highly complex and networked “financial, banking and economic system”, then I might tend to agree that the world could do without certain key players.
I just don’t see how that is possible at this time.
There may be some group that can continue for a while, but I am skeptical that Europe will be part of it. Maybe parts of Africa and Asia, even Russia can last for a while. America may hold on somewhat longer than Europe. We at least internally have quite a bit of our own energy.
Well in Europe you will not find weapons in every house, water is not a problem and the land fertility allowed the european civilization flourished in the past and leading most of the world for 1000 years almost. The only problem is that overpopulated areas in the vicinity (North Africa and Middle East) where the water is insufficient and the soil is eroded are more reliant on oil and gas for their survival….I fear of the reenactment of the wars of the Dark Ages……But as long as Europe has a military alliance and nuclear weapons, as well as the technology to produce weapons might have its chance to hold invasions. And I have to mention that europeans are using less energy and at least they have a pot and a fry pan in every house, also the east europeans are more resilient to austerity and experienced equalitarian societies in their recent past….with food ratios and leveled poverty…..I`ll put my bet on Europe.
Dolph,
“The United States is too young of a country to have a genuine historical memory of limits, decline or collapse. Except for the minor blip of the Civil War,…”
I think that the generation of people who lived through the Great Depression of the 1930s would disagree with you.
The madness in Washington continues. http://www.globalresearch.ca/america-is-on-a-hot-war-footing-house-legislation-paves-the-way-for-war-with-russia/5418035
Washington knows that civil unrest is growing, we see it across America and so does the world, of course they’re going to start more wars given the opportunity. Rome will not collapse quitely, they’ll drag the world down too.
I can’t agree with you that “civil unrest is growing, we see it across America…” I don’t see that at all. I see some racial divisions erupting as they seem to around here every 10 years or so. It seems like the sheep are pretty docile to me.
Oh, good grief! It seems like whenever there is a problem, starting a war is a “solution.” It gives a way to hire young people, borrow more money, and divert attention away from other problems. In a round-about way, it stimulates other industries, like making aircraft. It gives justification to having the full staff for the Pentagon.
Keep your eye on Syria, seems talk of “no-fly zones” grows louder by the day. The Russians and Iranians will clearly have something to say on that.
The problem is, we don’t have the resources to fight a conventional war over in Russia. Not that it would stop us from trying, but in today’s age, when conventional forces fail against a nation-state what’s left?
Anybody who truly wants to start a war against Russia deserves a noose and a tall lamp post. I am adamantly against mushroom clouds. I know for a fact that there is a target close enough to me that, while I won’t get vaporized, I will have to worry about what direction(s) the winds are blowing at various altitudes. I fully expect (near) ground bursts on the target in mind, and that means a lot of fallout.
I live near a lot of nuclear weapons.
There is not going to be a war, conventional or otherwise, with Russia. There will be proxy wars in smaller regional conflicts, but no Dr. Strangelove any time soon. Remember, both sides are rational actors moving chess pieces of national interest around a global chess board. Direct war with Russia is in nobody’s interest. Nobody pushed the red button during 40 years of Cold War and if not then, why would it happen now?
Because the US is becoming less and less a rational actor. It is losing its prominence on the world stage. The US Dollar is at risk of losing its world reserve currency status, and Russia is helping it along, and the neocons in our government could very well be insane. On top of that, very few people have a real, living memory of what nuclear weapons actually do, so just how scary they actually are is going to be lost on a lot of people, because we’re talking about energies that are unfathomable to a lot of people without direct experience. Add to all of that our so called leaders aren’t very good at understanding the concept of unintended consequences, and I think that we should all accept the idea that it could happen. The weapons exist, and we’re in a state of decline. We could become a desperate dying animal that is unpredictable.
Agreed that the US is becoming more unpredictable, but what can you expect in a multi-polar world. If the world rejects US leadership, they can’t have it both ways. But there is no way in hell that the USD will lose reserve currency status, as there is nothing capable of replacing it. I disagree also that we don’t have a pretty good idea of what a nuclear weapon would do if deployed. That’s in the cultural zeitgeist. I agree that our leadership seems a bit blind to unintended consequences. Nevertheless, the US remains a rational actor as does Russia, China and Europe. If you’re looking for non-rational actors I’d focus on nuclear North Korea, Syria, Afghanistan, and nuclear Pakistan. Agreed that we are in decline, but its not advanced decline and we haven’t yet reached the stage of desperate dying animal.
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Pleased to read a post by Gail that is so clear and succinct. Her posts have allowed me to explore and challenge my beliefs about peak oil and energy. Now to be the skunk at the picnic… She usually writes in a way that makes Alan Greenspan and Leo Strauss seem straight-forward and to the point. I feel like she holds back on much of her writing, and does not develop her statements very well. Does she use a nebulous style intentionally due to the dour nature of what would be told?
I think she is intentionally a bit nebulous, but I’ll come right out and say it. Civilization is a cancer and you’re all gonna die. There, now that what needs to be said has been said, let’s get back to the play-by-play.
I am not sure that we are all going to die. Maybe we will find ourselves in a new dimension.
The situation we are finding ourselves in is unique. We are caught up by a force outside ourselves that leads us to “dissipate energy”–use energy products that are at our disposal. We don’t really have a way to fix this problem, although many would like to think we do. We need some external energy, although probably not quite as much as we are using today. I think that it is possible that a Higher Power is behind the Big Bang, and is behind all of the laws of nature. If so, the Higher Power may have other plans for us. We can’t know for certain. If not, we will reach the fate of all humans, perhaps a little sooner than we would have otherwise. Worrying about it really doesn’t help a whole lot.
Well said, Gail. As my favorite songwriter Jimmy Buffet wrote in one of his songs: “in a hundred years this all won’t matter”.
Agreed, Gail. Who knows? One thing I certainly don’t begin to understand is: where did we all come from?
I ran across this article yesterday:
https://www.quantamagazine.org/20140122-a-new-physics-theory-of-life/
Dear Gail
I think this is also related to The Constructal Law, proposed by Adrian Bejan of Duke in his book Design in Nature.
‘Everything that flows and moves generates designs that evolve to survive (to live).’ Bejan stated that his law subsumed Darwinian selection as a special case.
We traded some information about Bejan a couple of years ago.
Don Stewart
Yep, possibly. That’s genius thinking. Still, where did the molecules and atoms come from?
There has to be a plan behind this whole thing. Molecules and atoms and self-organizing systems and adaptation to new surroundings through natural selection are all pretty miraculous. Maybe civilization is coming to an end, or maybe we are turning a corner to something new.
Moderation is intentionally light. I didn’t see any foul language or name-calling.
If you think someone is a troll, let them say their piece, then ignore them. Attention is their oxygen. Take it away, and they go away.
I did hide a few comments just now. I didn’t think they added anything.
Speaking of comments, Gail, I noticed that your last article (Eight Pitfalls in Evaluating Green Energy Solutions) attracted nearly 1,300! This might in part be due to the somewhat controversial subject matter, sacred cows of the green variety being particularly averse to entering the slaughterhouse of reason, but does it also indicate increasing web-traffic? I recall you saying there was an ongoing upward trend a few months ago, and there is so much news coverage of crashing commodity prices. Perhaps more people are cottoning on?
As a German I am able to understand Gails articles very well, even though my english knowledge is limited.
All of us fluent English speakers should keep in mind that many readers have English as a 2nd language and should avoid a complex writing style.
Thanks for your kind encouragement, btw. I’d like to see your spelling and typing abilities at 38.5°C ish condition. As the great admirers of life itself we should appreciate these somewhat delirious visions reflecting on current events as the most revealing..
“All of us fluent English speakers should keep in mind that many readers have English as a 2nd language and should avoid a complex writing style.”
Most important: Avoid fancy words as much as possible.
Readership on Our Finite World keeps setting new records, and there are more sites carrying my posts. As I mentioned elsewhere, Seeking Alpha is now copying my posts as well as other sites.
Exactly. Getting mad at somebody who is anonymously typing at a keyboard in a comments section and who is probably 1000 or more miles away? Troll the troll if it’s the wild west of the internet and have fun doing it, or ignore them. Trolling the troll is not appropriate here, so just ignore them. At the most, a troll deserves one response here:
“Troll.”
I also felt that this article was especially well structured. It is a complex topic, sometimes you have to simplify, and sometimes you have to go into detail. And the mind doesn’t like limits, it prefers “solutions”.
I know because I tried (and gave up) to explain it to friends.
Everybody c the Korean language pingback?
It seems to put this blog into spoken English, for Koreans to study speaking.
I can see some Korean college student, not a care in the world, put his earphones on then, “Holy shit! Were all gonna die!”
There are a number of different sites that repost my articles in different ways.
In addition, I have been putting up PDFs of my posts, hosted on a university site, because China censors everything with “WordPress” in the URL. That means my images are not available there, so this is a work-around.
Agreed, but we can police the site ourselves and immediately censor those who are a little too illogical for their own good, then seek to enforce that upon others.
“we can police the site ourselves and immediately censor those”
“Troll ignortion” works.
Here’s how it works:
1: Someone posts something that you find idiotic, rude, insulting, or inflammatory.
2: “I’ll show him!” you think to yourself as you begin furiously typing.
3: Close the window and go enjoy a nice cup of tea for at least 20 minutes. Do not re-read the despised posting for at least three days. By that time, the offender will have either moved on, or successfully engaged someone who is less enraged.
(Now, if I could only take my own advice…)
Yes.
Dear Gail, I don’t know if you’re aware of some work done by Robert Gordon, but I so recommend this paper he has written; it is just full of brilliant insights into the problem. I would love to know what you make of it.
Seems that there more to the end of growth than just resource constraints
IS U.S. ECONOMIC GROWTH OVER? FALTERING INNOVATION CONFRONTS
THE SIX HEADWINDS
Robert J. Gordon
Working Paper 18315 http://www.nber.org/papers/w18315
NATIONAL BUREA
Innovation goes with resource availability. All of the innovations listed in the abstract of the paper are dependent on fossil fuels.
I agree that we have not been adding nearly as much innovations recently, but this is the result of not having anything more to work with. As prices go higher for resources, I expect that we will have more and more trouble just trying to keep the innovations we have. Urbanization was a spin off of having fossil fuels to handle the drudgery of work on the farm. As we lose fossil fuels, we will lose the benefit of these innovations. They seem great, but they are temporary.
Are we going back down to $30 per barrel?
Shortonoil has been trying to get the message out for some time. There is every likelyhood that the folllowing will take place. He has done the math and Gail agrees with him. http://www.thehillsgroup.org/depletion2_022.htm
This is briliant, falls in line with our assessments 2015-2020 we face the mother of civilizational powerdowns. This is it, this is the big one
I don’t know. In one survey that was sent around, I checked the range “Decline to below $30.” If oil prices declined from $147 to $34 before, and this time (a) oil prices started out lower and (b)we probably don’t have as good way of stopping the decline (bailing out banks and remembering to use QE), the end point could be lower.
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I always enjoy your analyses. I have one question on this one: how do falling oil prices directly lead to deflationary debt-collapses in non energy industry-related companies? I see how indirectly, lower oil prices lead to oil-industry business failures, increased unemployment, and thus lower economic demand and generally lower revenues and profit for all businesses in aggregate.
But for your food example in example 9, if I’m a fruit seller, and I can sell an apple for a dollar and it costs me 75c, and then my energy costs drop so that my apple costs me 60c and I sell it for 90c, I’m just as able to pay any debts since my absolute level of profit is the same, even if my revenue is lower – and profit levels are what determine whether debts can be paid, not revenue.
I’m not disputing any of your conclusions, just trying to clarify one of your points.
We are dealing with a situation where some parts of the economy get better, while others get worse. It is only after a long chain of events that the economy collapses, as the negative events overwhelm the positive ones.
In the example you give, the farmer would come out ahead, with falling oil prices. In fact, he might have extra discretionary income. This is why the outcome is not particularly obvious.
Many people believe that the overall economic outcome will be better. As a result, they can (for example) let up on QE, and raise interest rates. Doing these things are precisely the things that will bring the economy down. So by misinterpreting the outcome, they make the result worse.
One kind of thing that can happen is that banks will lose money on loans relating to shale. Because of this, they may raise interest rates on all subprime loans. This might affect some farmers, when they take out loans to buy seed and fertilizer.
A worse kind of thing that could happen is that derivative positions could cause some of the big banks to fail. Because of the new “Bail-in” procedures, all accounts (or perhaps all balances over a certain amount) in those banks may be given a haircut, or eliminated all together. This might mean that businesses cannot pay their employees, or that they cannot order new merchandise. Because of this, some businesses might be forced to close. In this example, it might be farm equipment dealers, that the farmer depends on for spare parts.
What we are dealing with is a chain reaction, with the individual pieces uncertain, and each step taking some time. The initial problems may be easy to work around–say buy replacement parts elsewhere. But as the banking problems spread, say to the electric utility serving the farmer, the outcome could become more severe. The farmer could find himself without electricity, because the electric utility was forced to close because of its bank’s problems.
As the disorganized noise in the discussions becomes larger, I find it difficult to follow new posts. Thus I post to check “Notify”. Will mention a an excellent new book by Jonathan Eig titled Birth of the Pill (How Four Characters Reinvented Sex and Launched a Revolution)
http://www.nytimes.com/2014/10/12/books/review/jonathan-eig-the-birth-of-the-pill-review.html?_r=0
There was actually a time when it was possible to talk about the problem of too much population and too many children, not too long after birth control pills were invented. Once the US and Europe’s birth rates went down, it became difficult to talk about how people in less developed countries should reduce their birth rates. So the subject became unpopular again.
That and the discussion brings up images of eugenics and whatnot in some people’s minds. A common retort to “we’re overpopulated” is “you first, kill yourself if you think it’s real!” People don’t want to hear it.
I find point #10 unclear. The limit to debt is the willingness of the player to believe in the system. The worker bees are clueless and keep on keeping on by rote. Who is it that will step off?
I guess we could say the BRICS, SCO, Turkey, Iran, Argentine are all stepping off. But does that have to mean the end of the debt balloon for US, EU, KSA, Abu Dhabi, Venezuela, Canada? I see the worst case as a need to shift capital investment from the military to the energy sector. As long as both are owned by the same people no issue.
“I find point #10 unclear. The limit to debt is the willingness of the player to believe in the system.”
My interpretation is that it requires “FAITH” not only in the BAU system but also in the Fiat currency which in it of itself is worthless. If the population believes that a $5 bill is actually worth $5, the system continues to operate. If the population continues to believe that the BAU system will always be around for them and their families, they will continue to invest in the system, i.e. willing to take on more debt. So the system continues to move forward.
As soon as that FAITH or TRUST is either questioned or broken then the system spirals out of control. It’s how the Wiemar Republic experienced hyperinflation. Once the people lost faith in the govt and currency then all bets were off.
While willingness to believe in the system has a bearing on how many people will be willing to purchase bonds, or banks are willing to give loans to people, I think that the networked way the system works makes the inability of the system to work show up in a totally different way–namely, too low commodity prices. People involved with central banks don’t recognize the symptom, and say–Oops! We need a whole lot more quantitative easing or debt or other funds added to the system. These folks don’t stop adding money because they have lost faith in the system; they stop increasing debt because they don’t recognize how badly it is needed.
There is a hard limit to debt, and that is when the costs required to service that debt equal your net income. Of course, that limit is never reached, but as Japan is showing, one can get closer than people would expect. But once that limit is reached, faith or no, your monetary system is doomed. Fiat is valuable because we say it is (faith,) but it still acts as a claim on resources which are finite. Faith in a currency has its limits because of this.
“Once commodity prices (including oil prices) fall to levels that are affordable based on the incomes of customers, they fall to levels that cut out a large share of production of these commodities.”
Great article, Gail! The above is exactly what I’ve been trying to tell people who think these low oil prices are great – that low oil prices risks future supply. We are in effect being cut off from our beloved supply of oil by way of declining net energy. It’s not something that can be averted when relying on a finite resource in which crude oil extraction has not risen much since 05. Other oils have gone up to help continue growth but they are oil extenders only as Gail points out at a high price.
Next stop, Palukaville with “Debt related collapse: oil limits will play out in a very different way than most have imagined, through lower oil prices as limits to growth in debt are reached, and thus a collapse in oil “demand” (really affordability). The collapse in production, when it comes, will be sharper and will affect the entire economy, not just oil.”
We are quickly approaching collapse. I don’t know the exact timing, but each of these events that take place, like the recent oil price drop are indicative of peak oil. It’s happening, it’s just not collapsed yet.
Thanks! It would be nice if there would be a happy ever after ending that a person could add to the ending.
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Dear Gail and All
The ever interesting shortonoil posted this at a discussion on how OPEC is showing the US tight oil guys who is the boss…Don Stewart
PS For the record, I am a passivist along with Jan Steinman, and so do not advocate horse-whipping anyone.
‘OPEC is not doing one dam thing that it wasn’t doing 3 years ago. LTO isn’t even competition for OPEC because at least half of it doesn’t produce transportation fuels, half of it is a feed stock material. These writers pushing the Bogey Man theme should be horse whipped. LTO is failing because it never was worth very much, and still isn’t. It is an net energy dead man walking.’
“I am a passivist along with Jan Steinman”
Was that a typo?
I am not a “passivist,” although I might be called a “pacifist,” but more likely, a “pacifist-activist.” 🙂
I think the best defense is being a small target. And that’s getting easier and easier to do!
Jan
Sorry. What I meant is what you say, with a little bit of tongue in cheek about the hyperbole I am responding to.
Don Stewart
I do think, however, that the current production numbers from OPEC, as displayed on Ron Patterson’s site, should give everyone pause. I don’t see any huge increase in OPEC production.
I think Gail should formulate a ‘peak propaganda’ theory. Alain deBotton has a new book out on ‘what the news is really telling you’. And very little of what they are telling you is relevant facts.
Thanks Don for quoting Shortonoil. I think in the same quote he called LTO camel piss.
Full quote from Shortonoil; “Now the world’s economy is dying from the camel Pea they are pedaling off as oil. Half of it is nothing more than a precursor to a piece of plastic pipe. The value of oil is falling because it isn’t able to power it’s own extraction, to say nothing of the world economy.” Gail has told us in the past, growth in GDP requires cheap energy. The world’s cheap energy is gone.
I think someone else on here made some brilliant points, essentially it’s all zero-sum from this point forth.
Producers need high prices for energy but that triggers numerous interconnected crisis for consumers, demand destruction etc and consumers need low prices (where we’re at now) but that triggers numerous interconnected crisis for producers where the focus is on now.
The US and the Western hemisphere is both a producer and consumer fully laden with toxic debt.
So we’ll see this undulating spike in energy prices as the global economy gets obliterated and numerous families are wiped out.
Those with huge obligations will be hit the hardest.
This is it, this is the big one we’ve all been waiting for. 2015 the real collapse is starting and we’ll never recover.
The final graph that Gail has showing the decline off the plateau starting 2015 is looking more and more accurate.
The questions now is what will collapse look like? How fast will it be? What are the consequences? Where, when and how will it manifest? We’ll probably see some surprising non-linear stuff until the problem of overpopulation on a finite planet is solved, until we find some kind of equilibrium.
“2015 the real collapse is starting and we’ll never recover.”
I guess it depends on how you define “collapse.” 2008 was a collapse, of sorts, and billions of people didn’t die. There wasn’t rioting in the streets. (Well, not much.) Governments didn’t fall. (Well, not many.)
So I expect the next “collapse” to be similar, but more severe. More rioting. More governments falling. But the strong ones (and the ones that still have inexpensive oil) will stick around for a while longer. (I’m not certain that includes the US and Canada, though!)
Richard Heinberg’s prognosis makes the most sense to me. That’s a stair-step decline. Strong governments will remain in power, weak ones will dissolve and re-assemble, probably as smaller, regional entities. Proper nutrition will decline, as will longevity. Baby boomers may lose a decade or less. It’s their kids I’d worry about!
Humanity will go out with a whimper, not a bang.
@Jan
How do you want to define collapse? Since US oil production peaked? We came off of a quasi-gold standard then, and almost hit hyperinflation until Volker raised interest rates to insane levels. That is also when private debt levels really started to rise. Lagging that by a few years was more and more people entering the workforce to keep up with the Joneses. There were some good times during that period, but the employment:population ratio started to decline around ~2000, Or how about post Lehman? The employment:population ratio dropped and hasn’t come back up.
Where do you define the start of collapse? Is it the local peaking of a key resource? The beginning of the removal of legal financial limits? The need to borrow more and work more just to keep up? When that starts to break down? Or the “OMG! I never saw it coming” downturn that was driven by expensive resources and ponzinomics? You can make an argument for any of those. Me personally, I’ll stick to the point when the employment:population ratio started to decline as a marker. By that, we’ve been in a state of slow collapse for almost 15 years. We’ve had good years during that, but we were in a state of collapse nonetheless.
I expect the slow, grinding to collapse to continue and to be punctuated with horrific events. I expect that one will eventually mark the end of our current system. I’m not optimistic that the next big economic/geopolitical event won’t be the big one. We are so fragile now that we can only deal with one or two major issues at a time, and we may be faced with multiple issues at once during the next crisis.
“How do you want to define collapse? … I’ll stick to the point when the employment:population ratio started to decline as a marker… we’ve been in a state of slow collapse for almost 15 years.”
I try to be precise about words, so according to the dictionary, a fifteen-year process is not really a “collapse.”
Of course, the dictionary does not specify what “suddenly” means, and a future geologist will probably note a “collapse” that took several hundred years to complete, while a quantum physicist talks of a “collapse of the wave function” that happens as instantaneously as we can measure.
On human time scales, most would agree that the stock market collapse was the beginning of the Great Depression, yet there was a long, slow decline before and after that.
I think of “collapse” as an event, rather than a process. When you talk about a 15-year “collapse,” that sounds like a process, rather than an event. Processes can be explained through logical cause-and-effect analysis. A collapse is more of a “straw that broke the camel’s back” sort of non-predictable (even in hindsight), stochastic event.
But I’m probably just waxing pedantic. Call it what you will, with the caution that if you make up your own definitions, it is harder to communicate with others.
The United States had peak employment as a percentage of the population about 2000.
The peak in employment corresponded pretty close to the low in world inflation-adjusted oil price. Now, more folks are finding that the pay is so low, it doesn’t make sense to work, when a person considers the costs involved: commuting, child care, elder care, clothing
Jan,
“Humanity will go out with a whimper, not a bang.” Ok Jan and Daniel Hood, stop it already, you’re freaking me out! I’m going to Costco to buy another bag of rice now…bye.
“I’m going to Costco to buy another bag of rice now…bye.”
Yea, rice grows pretty good there in Alaska, no? Does Costco fly that stuff in, or what? 🙂
Sorry for the “holier than thou” attitude. I’ve got no reason to act that way. I’m having trouble keeping goats alive this winter, seemingly due to a combination of resistant intestinal parasites and a poor quality hay harvest. I depend on share-cropping with my neighbour to get the hay up, and he took his sweet time this year. I’ll bet it’s only 6% protein, when it should be 11%. I have a “Lazarus” kid in the laundry room (easily cleaned floor) that I’ve found flat three times, and nursed back with cheese curds and black oil sunflower seeds. I’ve got an adult down in the shed that I’m feeding peanut butter and BOSS four times a day. I’ve got at least five or six others that are on the skinny side of healthy that I’m keeping an eye on, feeding three lean kids BOSS and beet pulp in addition to that no-good hay.
So one can boast about “pasture-fed milk,” until someone screws up. And this was with diesel-powered haying machinery! (I guess if you were scything and shooking, you’d make damn sure you cut at the right time, just before flowering of seed heads. But when you’ve got diesel-powered supply chains, just go down to the feed store and stock up on BOSS, beet pulp, and grain.)
@Jan
And I view the collapse of civilizations as a process, not an event. I think that process will be marked by events, but you have to remember that the English language, and all natural languages are inherently imprecise. If you look at the dictionary, you’ll notice various definitions for the world collapse, and you’ll also notice various vague definitions for worlds like “sudden.” For the most part, they don’t deal specifically with civilizations, so it is out of necessity that people start using their own definitions that don’t quite line up with normal use of the words. On top of that, not all definitions use “sudden” as a qualifier.
However you want to play it with semantics, it was around 2000 that the data started becoming available that we should be decreasing the complexity of our civilization, yet we’ve increased it. A lot of that complexity, which is driven by keeping up with the Joneses cannot be sustained, and thus is going to go away. If you equate our complex civilization to a physical structure, you can think of what’s going on as being akin to somebody taking an ax and hacking away one piece of the foundation at a time, while others are going to the hacked parts of the foundation and trying to repair the damage done with sub-par materials. Eventually, something is going to give away.
“it was around 2000 that the data started becoming available that we should be decreasing the complexity of our civilization, yet we’ve increased it.”
Oh. I thought it was about 1970. 🙂
Around 2000 (slightly before, actually) was when we hit the lowest price of oil, and the highest percentage of the population employed. It has gone downhill from there.
“Oh. I thought it was about 1970. :-)”
I’m not going to argue that that is wrong. US oil production peaked and we started transitioning to a financial economy rather than a productive one a year later. Picking the most important points out is indeed a fuzzy idea. I picked the decline in employment:population ratio as a point because it marks the point where the standard of living inevitability started to decline in developed countries. Oil had only peaked in the US, but not worldwide, and we figured out how to get as much as we needed. I’m living it, I’m watching it, and I bet that, should enough documentation survive, future historians who have the benefit of hindsight will be arguing over this. When did the decline really start? I see two things: The decline of the US because that is where I reside and the decline of the global economy, because we have, for worse, become globalized.
“future historians who have the benefit of hindsight will be arguing over this”
The real question is, will those “future historians” be hominoid? Or perhaps some canid will develop opposable thumbs?
“History” sits pretty far up Maslow’s Hierarchy. I wonder if there’ll be much time and energy for things other than food and shelter, and perhaps a bit of song or poetry.
I’ve never heard of the website “shortonoil”.
It is http://www.thehillsgroup.com, shortonoil is his username.He has a very interesting approach to the model used to predict oil prices.
Hmm, that takes me to a site that sells mortgage?
I almost nuked it as spam, but it’s a .org, not .com: http://www.thehillsgroup.org .
OK, that’s better. Thanks Jan !
Dear Gail,
Your analysis is always of great interest. The general conclusion that you have reached in your present paper are correct. However, they fail to take into account the recent “development” with Russia.
Why are you ignoring the fact that an all out “economic war” is on-going between the US led Occidental World and Russia since the beginning of 2014?
Why are you ignoring that one of the main economic weapons currently being used against Russia is the downward “oil price” pressure essentially generated by the same alliance between the US and Saudi Arabia that took down the USSR – after almost 10 years of efforts – in 1991 ?
The key questions that one should be asking is “how long” can the US and Saudi Arabia continue to maintain oil prices so low and how far can they take that price down ?
Another interesting question is “how can the US continue to maintain its tight oil production in the present economic war context” ?
Finally, it should be clear to any keen observer that the present economic conflict with Russia has for objective to effect a “regime change” in that country and to find a way to transfer effective control over its strategic resources (including oil & gas reserves) to the US led Occidental World.
Of course, if the US led Occidental World was to lose the current economic war, in particular by exhausting its key domestic oil reserve or by imploding its financial system before Vlad is removed by a spontaneous “coup d’état”, then the consequences for the living standard of Occidental World citizens might become quite dramatic…
The US fancies Vlad and Russia as the proverbial “next greatest fools.” So far Vlad at least has been able to refute that proposition, although the Russian people themselves might ultimately reject him as well. But I wouldn’t count on that. There’s certainly no signs that they’re so inclined so far, and Americans are gravely mistaken if they think Russians are as easily bought off as they are.
I am afraid I am not into speculating on the outcome of the conflict with Russia. A world economy grows a lot better than one splintered into smaller parts. Thus, the fight tends to push us toward collapse quicker, unless somehow someone can magically take over Russia–something I don’t see happening very soon. If nothing else, they still have nuclear weapons.
Agree. If anything, Russia is positioned to come out of the current situation even stronger in my mind. If I were biased politically, I’d be much more worried about the long term prospects of the US.
To add, capitalism as we know it, to my mind at least, is in its death throes.
Yet, in 1991 very few people considered the possibility that the USSR would “peacefully” disintegrate as it then did…
Which means that there were very good reasons why that happened and not the contrary… and, if it can be done once, why not twice… Key people were then “bought” and given access to the full spectrum of “pleasures” available when you have a nice and discrete account in an Occidental World bank. Those people decided that this was better than nuclear war… and most of those people are still alive today…
The “prize” of such a “deal” is of course huge i.e. access by Occidental World corporations to the vast Russian strategic mineral base, and in particular to its oil & gas reserves.
Of course failure to effect a “regime change” in Russia as a result of an economic attrition war may result in an exhaustion of Occidental World’s critical oil reserves or, even before that, may result in the implosion of its financial system…
In any case Gail, my point is that the current economic war between the US led Occidental World and Russia (and its Iranian and Venezuelan allies – China has not yet fully committed itself to support Russia) cannot be ignored when you analyze the current oil price fluctuations.
These oil price fluctuations are currently not the simple end result of the market’s “invisible hand” but also the consequence of deliberate war guided strategic decisions.
“Issue 10. The drop in oil prices seems to reflect a basic underlying problem: the world is reaching the limits of its debt expansion.”
This really all sums it up, in a nice little bow and IS at the heart of the matter. The entire system is designed to expand exponentially (see Chris Martenson) and without exponential growth the system contracts. Which is NOT allowed to happen or you arrive at debt defaults.
The consumption and pricing of fossil fuels is also based on the same debt based system so the consumption and price needs to rise exponentially with other debt levels. There are two problems with this system.
1) Wages need to keep up with ever expanding debt levels
2) Consumers need to consume at exponential rates to keep up with all and future debt levels.
3) Wages are in contraction because of globalization.
4) Consumers are tapped out and CAN’T afford more debt because they don’t have the money.
It’s like watching a hamster in a wheel constantly running as fast as it can only to watch the operate constantly increasing the speed until the hamster dies from exhaustion. That is where this ENTIRE debt based system is heading and we are well on our way. 😉
From the book by Dan Wakefield “Kurt Vonnegut: Letters”
“These were the last words of advice Vonnegut wrote to be delivered to an audience:
“And how should we behave during the Apocalypse? We should be unusually kind to one another, certainly. But we should also stop being so serious. Jokes help a lot. And get a dog, if you don’t already have one….I’m out of here.”
Thank you Gail for your overview of the real deal.
All is bright and sunny here in Philadelphia!
http://www.youtube.com/watch?v=ieu8wVTmNbQ
Hope you like the joke…now to adopt a puppy
Right! At one point, I thought about putting this first, but decided the point was too difficult for most readers.
I might add a few fine points to your list. Wages are partly in contraction because of globalization (and thus competition with coal, which is much cheaper to produce, and other differences, such as willingness to ignore pollution issues). Wages are also in contraction because the value oil adds, over and above the energy cost of extraction, is falling–something that is related to its lack of competitiveness with coal.
“While many claims have been made that US shale drilling can be profitable at low prices, actions speak louder than words.”
If ever truer words were spoken.
This is the “sub-prime energy crisis” warned about, it’s upon us. It’s obvious that like the sub-prime banking crisis in 2008, the Fed will almost certainly subsidize/backstop the entire US fracking industry, it’s just too strategic to US interests to see the bubble burst. I can’t see how they’ll allow this stratetic sector succumb to free market forces.
I promise you, central govt, the Fed & those struggling unprofitable small operators will find a way to suspend free market capitalism. Remember when the banks suspended “mark to market valuations” switching to a few men in smoke filled room instead?
No way will they let this industry dive. They’ll “claim” US drillers are still profitable and find Enron style ways to keep the industry alive, the same way they did with the banks.
100% guaranteed. It’s either that or America would face the mother of deflationary depressions dragging down the entire Western hemisphere.
In other news, China is now the worlds largest economy, so long America you were so 20th century, now it’s China’s turn.
Look at how much food, water and oil China has to import. Their day in the sun will be short with all of those people and not enough local resources to support them. There is a reason that I’m happy that I live in a poor state with a low population density.
As for calling this a “subprime energy crisis,” I think that it may be better to call it a “zero sum energy crisis.” We need more, but we’re not going to get more. That means that every joule that you get is a joule that somebody else won’t get. The supply is limited.
Agreed read the following
http://www.marketoracle.co.uk/Article45144.html
I have a really hard time reading the tea leaves as to what the government would do. My guess is that they won’t hold up the US shale drilling operation. They won’t understand what is happening well enough. Right now, most people think things are great, even though cracks are already starting to appear in the system. China is finding it difficult to live with the Yuan so high, relative to other countries. But as China tries to lower the Yuan, it becomes very difficult to repay the Yuan. Changes have been made to makes some forms of Chinese debt more difficult. http://www.bloomberg.com/news/2014-12-09/china-s-rate-swaps-surge-most-since-june-2013-as-bonds-tumble.html As a result, interest rates are spiking and the stock market is tumbling. http://www.bloomberg.com/news/2014-12-09/china-s-stock-index-futures-fall-as-rate-swaps-jump-most-in-year.html
Hi Wheaton:
Here is the lady I love! She is so smart and connects very complicated issues in a holistic framework that few, if any, economists, scientists, government leaders and industry folks do or even can do. She “sees” holistically so that her information is deeper than all the other reporting I hear on these issues.
I would love it if you would read this posting and let me know what you think.
Thanks! Bean
1. With regard to bail-in (i.e. mandatory debt-for-equity swaps) of banks, unsecured creditors include holders of long-term unsecured bonds, and not just depositors. The first to be bailed in will be the holders of bonds. Mandatory debt-for-equity swaps are not a bad thing, and large bank salaries plus all bonuses should be paid in long-term unsecured bonds, and not in cash.
2. Debt expansion is still possible: billions of humans are living outside the banking system. They are living on land to which they have no title, but since no government -unless such government were led by a Hitler or a Stalin- would dare evict them, the squatters might as well be given legal title to the land they are occupying. But eventually, when every human has mortgage debt plus credit card debt, further debt expansion becomes less sustainable, and debt collapse harder to avoid.
3. There is no evidence that certain Opec countries, including allies of the US (KSA, UAE, Kuwait, Qatar), are keeping oil prices low so as to hurt Russia. The low prices are a consequence of 10 years of high oil prices, during which various oil and gas projects, notably US tight oil, were developed, and Opec’s consequent decision to defend market share, not price. The question is whether the recent supply-side boost is sustainable. Low prices may be a temporary phenomenon, for as Gail notes, renewables are far from being a substitute for fossil fuel.
Except that the Saudis increased production, and during the last OPEC meeting they basically said “We’re not cutting. Isn’t the US a huge producer? Why can’t they cut production?”
Yes, it seems that there are a couple of things going on.
Oil production may be as much as 1 million barrels greater than demand right now. Most of this appears to be from OPEC members producing in excess of their quota. The Saudis seem to be trying to achieve two goals:
1. Get America to set production limits, effectively joining the cartel
2. Whip other OPEC members into compliance with their agreed upon production levels
Whether they will succeed, and set a new price around $150 / barrel, or whether the whole system comes apart at the seems, we get to find out as it happens.
Either outcome is bad for our economy. $150/bbl and many Americans won’t be able to both afford food and buy gas to go to work. It will cost more to ship cheap Chinese crap to stores so that already cash strapped people won’t be able to buy as much. Subsidies will mean more government debt, which will ultimately mean more QE or some other form of monetizing the debt. Oil companies going out of business means that there is less oil to ship food, clothing and cheap Chinese crap to consumers. Both of those options are what you would do if you were trying to sustain an unsustainable status quo.
“Either outcome is bad for our economy. $150/bbl and many Americans won’t be able to both afford food and buy gas to go to work.”
The money will have to come from somewhere else – likely housing. Mortgage defaults and downsizing.
“It will cost more to ship cheap Chinese crap to stores so that already cash strapped people won’t be able to buy as much.”
It doesn’t matter how much STUFF people buy, it matters the total PRICE of the things they buy. If people buy half as much stuff at twice the price, tax revenues and GDP remain the same.
The problem is zero jobs. Om a salary of zero, it doesn’t matter whether oil is $40 barrel or $100 barrel, would-be workers can’t buy it.
Regarding 1, I expect the writer of the Dodd-Frank Act and other bail-in legislation didn’t think about how bad a predicament we could get ourselves into. If it is just a small predicament, affecting at most a handful of banks, and perhaps a share funds that can be covered by long-term unsecured bonds plus bank salaries and other sources of revenue, then perhaps this approach works. But if it is a systemwide problem, related to a crash in commodity prices and eventually production, then the approach just spreads the problem to banks, and eventually to every business everywhere. Admittedly, governments theoretically still stay in business, but I am not sure that that is necessarily sufficient to keep the economy going. I expect governments will be overthrown quickly, once citizens figure out how they have been treated.
Regarding 2, you really need a cheap source of energy supply to fuel economic growth. China was able to arrange economic growth for a while, by ramping up its coal production at the same time it ramped up debt (by doing something similar to what you suggest–selling workers their own condos, with a mortgage, after living for years in “free” un-fancy housing that comes with employment. Once the cheap source of energy depletes, or pollution effects become too great, or some other limits is hit (such as working age population starts to fall because of one-child family), then the model falls apart. Part of Africa have been mentioned as substitutes for China, but they are lacking for suitable cheap energy sources.
Regarding 3. I don’t see how we can have high prices for other than a very brief period. Wages need to rise, and ability to repay debt with interest must happen. With diminishing returns, this isn’t happening.
They are living on land to which they have no title, but since no government -unless such government were led by a Hitler or a Stalin- would dare evict them, the squatters might as well be given legal title to the land they are occupying.
How very western of you. In the end, what are titles anyway? Government decrees that so and so “owns” a piece of earth. Authentic Native Americans and other native peoples everywhere would scoff at the idea.
Indians killed each other for hundreds of years over ‘title’. It is not an arbitrary idea. Population control? Maybe.
Indians fought and killed among themselves for territory, not title. And they never practiced genocide or lasting subjugation and reprogramming of those they conquered. It’s a uniquely western proposition to hold title, aka “dominion,” over natural resources, which of course will all go out the window with the collapse of our current system. Population control? Yeah, it’s gonna be arriving pretty darn soon, I expect. But not in a form any of us are gonna like.
“Indians fought and killed among themselves for territory, not title. And they never practiced genocide or lasting subjugation and reprogramming of those they conquered. ”
If you’re talking about American Indians, the Aztec and Anasazi certainly did those things. Out here on the west coast, the Haida tried to genocide and/or enslave the other tribes. Humans are not so different from one another, no matter what continent they live on.
James, think you missed my point. You did raise a point that I haven’t thought about in this collapse meme. That being ‘what are property rights anyway’. As you likely know, next door neighbors can come to blows over a property line, and these grudges can grow to murder. It doesn’t take much. In a sharp decline, enforcement of property rights is likely to get ultra messy, with state courts swamped with claims and counter claims at the same time revenue for court operations is dramatically cut back.
I’d hate to see an environment where possession is the rule of the day, and it could happen. My current neighborhood is terrible for folks getting called out or reported for minor property issues. Taking this starting point, and adding an extent of lawlessness due to lax enforcement, and things could tumble out of control within neighborhoods. Another unhappy reality.
The native American held slaves.
Dear edpell and others
I think it is generally unproductive to try to characterize some particular group of people as ‘evil’ or ‘virtuous’. For example, Andrew Jackson got along very well with certain tribes of Native Americans when he was allied with them fighting other Native Americans, but when gold was discovered in the American South, it was clear that ‘God intended the white race to have that gold’. And so the Native Americans were forcibly moved to Oklahoma. Where several of the tribes held black African slaves.
I think that the only way we make progress in understanding is to examine the details. Exactly how did the tribes in upstate New York avoid warfare? What circumstances led the Cherokee to develop a written language? How did the Maya collapse as an empire, but thrive as small communities afterwards? How did the Japanese go about eliminating guns during the Edo period? What factors led them to rediscover guns and ‘engage in wholesale slaughter in Manchuria’ after the Restoration? How can we explain why the torturers at Guantanamo are heroes to so many Americans? Why isn’t Dick Cheyney in jail?
Don Stewart
We discussed the Oil Price drop in detail today on the Diner, unfortunately Gail could not make this one. Ugo Bardi from Resource Limits, Ron Patterson from Peak Oil Barrel and Steve Ludlum from Economic Undertow made the show though.
https://www.youtube.com/watch?v=o65-kZu2Owg
Also you folks might be interested in The Dimming Bulb, a look at how the electrical grid is contracting.
http://www.doomsteaddiner.net/blog/2014/12/07/the-dimming-bulb/
RE
For those of you interested in the psychological and sociological manifestations of Collapse, I just got up an Interview we did on the Collapse Cafe with Mark Garavan from FEASTA.
Psychology & Sociology of Collapse: Interview with Mark Garavan
RE
Regarding the planet ever going dark, I would point out that the planet has never been dark for the last million years, which represents much of the evolutionary time of humans. In early days, humans burned biomass or perhaps fat from animals. In more recent years, we have used lights powered by electricity. I suppose in Alaska, this burning of animal fats may have taken place in igloos, so it wasn’t very apparent from space.
Humans can’t be expected to do very well, for very long, without some external source of energy, even if it is only burned blubber from animals.
I hate to say it but, or the burned blubber from each other. We Americans, in particular, have a whole lot of thermal energy units bound up in our waistlines.
“We Americans, in particular, have a whole lot of thermal energy units bound up in our waistlines.”
What a waste! Solyent Green is people!
I maintain that such gallows humor is healthy and will continue to laugh at it. I’m laughing at both James’s and Jan’s posts.
Dear Gail and Reverse Engineer
First, thanks for doing the FEASTA interview. It is relevant and timely.
Second, I suggest that people might want to do three things. First, rent a copy of Ingmar Bergman’s 1963 movie Winter Light about a minister who loses his faith. He concludes that there either is no God or else that God exists but is a malignant spider, creating senseless suffering in the world. The minister delivers a doomer speech to one of his church members, who then kills himself.
Second, buy the slim little book 7 Ways to Think Differently by Looby Macnamara. All about positive responses to challenges, and how we look at the question largely defines whether we will be able to find a solution.
Third, contemplate Vanessa Woods’ book Bonobo Handshake. How do our closest relatives navigate the sociological and psychological waters without benefit of fossil fuels or complex societies? They have the same hormonal systems we have.
As a very simple example of thinking differently. Suppose the default sex act is non-procreative, such as oral sex. The bonobos seem to like it. Is there any limit on how much oral sex a couple can engage in? What sort of hormones are released? How does that relate to life satisfaction, stress relief, and what we learned from the FEASTA interview? How does it impact population growth? Are global corporations involved in oral sex? How much oil needs to be pumped to enable oral sex? Do we need Congress to tell us it is OK (well,,.I will admit they are probably working on it).
Don Stewart
Great info as always Don. If I can only buy one item should it be a Looby Macnamara book or a Kelly McGonagal audio CD/MP3?
Dear FrY10cK
I imagine you can pick up a copy of Looby’s book, used, for a couple of bucks. I don’t know about Kelly’s DVD as used. If you compare them, you will find that both meld together current neuroscience and what we might call the Buddhist tradition of introspection and the Yoga mind/body connection…although other wisdom traditions have come to similar conclusions. Either will serve you well. Try to find a soul-mate. You buy one, they buy the other, and you pool resources.
Don Stewart
Have you been taking hormone therapy Don!
“Regarding the planet ever going dark, I would point out that the planet has never been dark for the last million years, which represents much of the evolutionary time of humans.”-Gail
To be visible from space at this resolution, you need a LOT more lumens than you get from burning whale blubber Gail. In fact, small forest fires aren’t even visible, you need to burn on a scale of Bakken to got those bright bulbs visible from Space.
http://www.doomsteaddiner.net/blog/2014/12/07/the-dimming-bulb/
As long as the biosphere remains operational, there will always be what to burn, the trick is not to burn it faster than it grows. That is living sustainably, and we did it for 10s of 1000s of years, cooking food mainly. FYI, you don’t heat Igloos burning anything except the food you eat, they get plenty warm with 3 guys and a dozen dogs sleeping in them, I can tell you that from personal experience.
We only started burning it faster than it grows with the development of metallurgy and ceramics, and then exacerbated the problem by denuding the landscape for Agriculture. You get rid of Ag, Metallurgy and Ceramics, and there is no shortage of what to burn for cooking purposes. It takes remarkably little energy to cook food, you can do it easily in a simple Solar Oven. You can burn dried sedge grass or dried dung in a rocket stove. Not to mention the mountains of Plastic in Landfills around the world.
Homo Sapiens has no problem adapting to most of the Earth environment with very little in the way of external energy input besides the food you eat. Obviously not at the current population level, but that will take care of itself in no time.
RE
Gail,
The Inupiat People of the northern coast would burn seal oil in stone lamps inside their igloos all winter. It provided light and kept the temperature inside somewhere just above freezing. Seal oil was traded all over the Arctic, stored in water proof bladders of marine mammals.
Peak Customers: The Final Liquidation Sale
now UP on the Diner Blog!
My definitive conclusion to the Hyperinflation vs. Deflation Argument.
RE
Of course, when we get to the end, there will be virtually nothing to buy, if international trade disappears. On the way down, I agree it seems likely to be deflation all the way.
Governments will collapse, leading to much smaller governed areas. Once governments collapse, we will have new currencies with which to buy whatever can be made locally, which is not much.
We here are focused in oil, but other commedities such as iron ore ( http://ycharts.com/indicators/iron_ore_spot_price_any_origin ), coal ( http://www.infomine.com/investment/metal-prices/coal/) , and copper ( http://www.kitcometals.com/charts/copper_historical_large.html ) have dropped recently.
I suspect a lot of that has to do with China. Between credit issues, and the recent discoveries that vast amounts of commodities pledged as collateral for loans either did not exist or had multiple pledges against them, there is a lot less demand for pieces of paper claiming to represent a physical commodity.
It will take a while for the dust to clear, and when it does, we’ll see if there is any growth left to have, or if it is collapse time.
The drop in oil prices is simply part of a world situation where debt-growth is slowing as income growth is slowing. Citizens (including governments and businesses) are becoming less able to afford goods made with commodities of all types. This is felt as dropping commodity prices.
I felt like I had to mostly leave this subject out of this post, if I was to focus it on the topic a lot of people are worried about today, namely falling oil prices. But I agree, the problems are probably as bad on a lot of other commodities.
As usual I agree with you Gail, but you seem to have left out the fact that low oil prices are part of the economic sanctions against Russia.
Sure all sanctions will probably back fire, but it should not be forgotten that the belief in Washington is that anything that harms Russia must be good, even if it harms frackers temporarily.
It is the ideology of the Cold War, when the bet was on that the US could afford an arms race longer than the USSR (which it could), only this time around there have been major game changes, symbolized by Putin.
Only the US has squandered trillions on a continued arms race (against who?) whilst Russia has won the “energy race” without doing much at all, except be a reliable supplier of oil and gas.
Thanks to US sanctions there is now a deal with China and thanks to US/EU sanctions South Stream has now been cancelled, in favour of the much cheaper Turk Stream, with the icing on the cake being Putin telling Erdogan, “Back off from Syria, or no deal.”
Putin has been playing chess and has made a mockery of Ziggy-inspired US foreign policy, if you know what I mean, as you should if you are reasonably informed.
Where it could all go horribly wrong is if the dying Empire of Chaos takes the Samsn Option of nuclear war to take all of us down.
It’s not sanctions that have reduced the oil price. It is unaffordability. I ride a bicycle thousands of miles a year, and the absence of autos on the roads is massive. Also, take a look at closed gasoline stations, everywhere. I have a friend in the bottom of the oil barrel business, and his customers are dying out. They cannot make money on the fuel sales, and customers don’t buy the newspapers, soda, beer, etc in the amounts seen 15 years ago. Just look at the per capita income decline as calculated by Shadow Government Stats using the 1990 deflator. Unbelievable. And there is nothing to stop this decline short of a debt collapse.
To keep economic growth “going,” we badly need the global economy working together to produce goods and services. Sanctions against Russia or Iran or North Korea or whoever are simply counterproductive. The fact that we did something voluntarily doesn’t make it any less counterproductive.
On the other hand, economic growth cannot continue very long. As this becomes apparent, it will become obvious that there is not enough to go around. If there is not enough to go around, the classic answer is to fight with neighbors for what is available. The sanctions against Russia may be an early part of this process.
Gail, you are right. In a competitive economic system, in order for there to be winners, there have to be losers. Its a zero sum game. But in a networked economy bumping up against hard limits, working cooperatively may be the best answer for extending that system.
And by co-operating, do you mean fixing the supply and price of oil, as a global cartel?
“And by co-operating, do you mean fixing the supply and price of oil…”
Sure, using the Rimini Protocol.
This is what Wikipedia says about the Rimini Protocol:
The intent seems to be to (1) Stabilize oil production for producers and (2) Stabilize oil imports or importer, with the hope of “keeping world prices in reasonable relationship to actual production costs and let Third World countries afford their oil imports”.
Somehow, this doesn’t all add up to me. In a world of diminishing returns, “stabilizing oil production,” means that the cost of production can be expected to rise year after year. Thus, oil producers will need a higher and higher price, to maintain their production. Oil producers will need a larger and larger share of the oil produced as well, as input for their production. So there will be less oil to export.
Stabilizing oil imports, in a period of ever-higher prices and ever falling supply hardly seems helpful.
And of course, now oil prices are low. The issue is low prices rather than high.
The Rimini Protocol protocol, if adopted 100 years ago, might have slowed growth in oil usage. It doesn’t seem very helpful now to me.
Yes, I believe that fixing the price of oil would be good cooperation. Just like fixing the price of gold.
What we are doing now in pushing back globalization. That isn’t working co-operatively.
“Issue 10. The drop in oil prices seems to reflect a basic underlying problem: the world is reaching the limits of its debt expansion.”
…
“In my view, a rapid drop in oil prices is likely a symptom that we are approaching a debt-related collapse …. Underlying this debt-related collapse is the fact that we seem to be reaching the limits of a finite world. There is a growing mismatch between what workers in oil-importing countries can afford, and the rising real costs of extraction, including associated governmental costs. This has been covered up to date by rising debt, but at some point, it will not be possible to keep increasing the debt sufficiently.”
What Gail is saying is based primarily on the closing jaws of economic and financial conditions. It does not even include the many other problems that mankind’s “footprint” has caused. When these other factors are stirred into the mix, it amazes one that we have been able to follow Wile E. Coyote as far off of the cliff as we have. How long until we are all “Cyprusized”? — to say the least.
I move that this article of Gail’s be headlined on the first page of the New York Times, and that she replace Krugman on its Op-Ed pages. Alas, the NYT has other priorities.
In my view you are correct about Gail, including that she will never make the NYT.
Thanks for the compliment.
I am doubtful that even having a popular column in a major newspaper would be enough to change people’s way of thinking. We live in a world where everything we read revolves around the belief that we are in charge. What we do can make a difference. If in fact Nature is in charge and we are running headlong toward a profound change that we have little control over, then the situation is very different. Perhaps I should be telling people to attend the church or synagog or mosque or other religious group of their choice. Or if you are not religious, use your money to have a good time today. Changing investment strategy or buying an electric car is not likely to fix our problems. They are much more severe and immediate than most people can comprehend. Producing food locally may have some limited possibility, but it is hard to see that this will be a solution for 7.2 billion people.
“…Producing food locally may have some limited possibility, but it is hard to see that this will be a solution for 7.2 billion people.”
It won’t be a solution for 7.2 billion people, but it will be one of the few solutions for those who make it through the bottleneck.
“buying an electric car is not likely to fix our problems”
In general, I agree, but it might help fix one’s problems, no?
In many ways, it’s borrowing from the future as surely as debt is. And yet, if done as part of a re-localization effort, an electric vehicle (along with local electric power) could help create a “local bubble” of sufficiency.
I think it’s important to divorce what could be a reasonable strategy for an individual, family, or community from what will work for 7,200,000,000 people — we all know there are no solutions in the latter case!
David Holmgren notes (in Permaculture Principles) that one can justify using a non-renewable resource if it is used to provide a capital basis for sustainability. Earthworks is often cited: use diesel excavators to create ponds and a water management system that will be useful for as long as they are maintained with human labour.
It seems to me an electric vehicle could be similar. I agree that going down to your dealer and buying a new one is probably not the best approach, but as a businessperson, I see converting a utility vehicle to electricity as using current non-renewable resources in order to enable sustainable food production in the future.
Dear Gail and Jan
Rather than talk about ‘us’ saving 7.2 billion, I prefer to estimate the fraction of the 7.2 billion who will actually do what they need to do to survive. It’s just my guess, but I would say something south of a billion.
Don Stewart
“Rather than talk about ‘us’ saving 7.2 billion, I prefer to estimate the fraction of the 7.2 billion who will actually do what they need to do to survive.”
I don’t disagree with you at all. But it does seem that a lot of things that might be practical for individuals or small groups of people get dismissed because they won’t scale to 7,200,000,000.
That sort of thinking is what got us where we are! 7.2 billion, all dependent on one thing, all in lock-step. No matter the colour of your skin, the language you speak, what part of the Earth you live on, or what religion you profess, we all pretty much worship at the Church of Growth through fossil sunlight. It’s time for some real diversity.
The only one who can help us now is Xavier Onasis.
And Elon Musk!
And there are a couple of ironies in there.
1) The places where people are dirt poor and they use more traditional agricultural practices than our industrial system will probably fare the best.
2) Even if the non-industrial carrying capacity for the planet is 3 billion, a lot of people who could have otherwise survived will not, because they lack the requisite skills to survive. Too many people have NO ideas about where their food comes from other than the supermarket or a restaurant. They don’t even consider the idea that the corn in their food had to be grown somewhere. If the supply chain breaks down, a lot of these people are going to be in big trouble, even if the land to grow their own food was available to them. I’ve literally seen the argument “But hunting is cruel! Why don’t you just buy your meat at the grocery store instead of killing an animal!” I think that being so disconnected from the natural world that we are part of is a travesty.
Dear garand555
I suggest Irony #3 is that most Americans might consider rioting as a solution to the problems.
Don Stewart
Yes, just look at what happened when the EBT system had a glitch that put it offline for several hours in a few states. Now, imagine what would happen if 50 million EBT cards suddenly stopped working permanently, or simply did not provide very much in the event that food costs tripled and benefits remained the same. And consider the soccer moms who show up to the store and find the shelves empty should price controls, rationing and general supply chain breakages occur. Most people refuse to believe that it can happen here, so they will not be mentally prepared for such a break, and quite a few will become irrational. Very few of us have ever known true scarcity.
Dear garand555
One more thought for you. People who are dirt poor farmers don’t necessarily know much about ecological farming or nutrition. David Kennedy, who has worked for decades in the South with very poor people, recounts that he was standing in someone’s front yard under a moringa tree trying to explain why they should eat leafy greens. They complained that they didn’t have the money to buy them. (Moringa leaves are among the most nutritious foods on the planet.)
Here is George Mateljan’s advice to holiday eaters in the West: pay attention to your immune system. A weak immune system opens one up to all sorts of infections and chronic disease. So people not only have to know something about growing food, they have to be knowledgable about what mixes of food they really need to eat. Western Science has done some good things.
Don Stewart
That’s why this is the time of year it is particularly important to include immune-boosting foods as part of your Healthiest Way of Eating. Included among these foods are those fish rich in omega-3 fatty acids (such as wild salmon and sardines), which help reduce inflammation, increasing airflow and protecting lungs from colds and respiratory infections. Fruits and vegetables rich in vitamins C, E and pro-vitamin A (such as spinach), and vegetables like onions, provide antibiotic protection and serve as anti-inflammatory agents. The selenium and zinc found in nuts and seeds are also supportive of immune function by assisting in the production and function of white blood cells that help ward off illnesses and infections.
The flip side to eating healthy foods to build a healthy immune system is avoiding foods that detract from immune function. At the top of this list are sugar and refined grains. Did you know that based on USDA estimates, the average American consumes 12 teaspoons of sugar a day, which equates to about TWO TONS of sugar during a lifetime! And one 12 oz. can of soda contains 8 tablespoons of sugar. Refined grains, while not directly delivering sugar, provide few nutrients for the calories they contain and are quickly converted into sugars in the body. Refined grains also contain little of the natural fiber of the whole grain from which they came; fiber helps remove toxins from the body that would otherwise need attention from your immune system.
“The places where people are dirt poor and they use more traditional agricultural practices than our industrial system will probably fare the best.”
So that’s what Jesus had in mind! :-0
garand555
I found this statement very telling:
The first European settlers to North America mostly died of starvation, with (according to some historians) a side order of stupidity. They picked unnecessary fights with Native Americans, sought gold and silver rather than planting food or fishing, and drank foul water.
As Charles Mann points out in his fascinating book 1493: Uncovering the New World Columbus Created, one-third of the first three waves of colonists were gentlemen, meaning their status was defined by not having to perform manual labor. During the winter of 1609–10, aka “the starving time,” almost everyone died; those who survived engaged in cannibalism.
http://www.slate.com/articles/health_and_science/science_of_longevity/2013/09/life_expectancy_history_public_health_and_medical_advances_that_lead_to.html
Jan,
Do you really believe in that “lamb of God” stuff? Meek and Mild. Turn the other cheek. When have the meek ever inherited anything but the sword?
Dear Gail:
You said:
“There is a growing mismatch between what workers in oil importing countries can afford, and the rising real costs of extraction, including associated governmental costs. This has been covered up to date by rising debt, but at some point, it will not be possible to keep increasing the debt sufficiently.”
My question is WHY?
Debt is an artificial concept. Debt can be avoided printing more money (there is no real limit) or by default (many little defaults or a big one). That creates winners and losers, but avoids the collapse. Doesn´t it?
Thanks for your articles
Debt is only an artificial concept if you are a borrower. It is most certainly not an artificial concept if you are a lender. Have you ever lent money to someone? Did that hard earned money you handed away feel artificial?
Humans have a very difficult time with the concept of money, because we repeatedly try to put it into a box as something that we have artificially created, the presumption being that because we created it on a whim, we can also therefore change it on a whim. In many ways, money is like words. Words are an arbitrary human creation, but the things they stand for are not arbitrary human creations. Changing the word does not change the underlying reality, rather we just end up confusing each other. Similarly, printing money does not change the underlying reality — it just misleads us as to the underlying reality, such that we make bad choices that we would not make if we really understood the true state of supply and demand.
Money is a physical commodity. Money that is not worth something of its own accord outside of its role as denominator leads us to a situation where we are unsure of what the denominator is because we have lost this external reference. How can you know what your numerator is referring to if you don’t know what the denominator is? Printing money represents the process of changing the denominator, which of course will have dramatic effects on the numerator that the money in your pocket denotes.
Thank you for younr answer Gwiss
The problem is that Central Banks seems to print money thinking that money worths something. And they can continue going futher. We all knw that there is a limit, but nobody knows where this limit is. Doesn´t it?
If your debt is in the form of student loans it does not feel intangible. Not when the government can garnish your wages, keep your taxes from your tax return, or go after your children or estate after your death.
I found David Graeber’s (sp?) exploration of the meaning of debt much more useful. He looks at the moral underpinnings of debt and the origins of it as an “obligation” in other words a formalization of the small community relationships. A pleasurable read or listen as it is available online for a listen for free if you wish.
Running to the printing presses to service debt has historically had consequences. Most people don’t analyze the situation enough to really understand what is going on, but they notice the effect of more dollars chasing the same amount of goods. Prices go up in nominal terms. This leads to the necessity of either allowing deflation to force defaults or more money being printed. Very often, more printing will occur, which raises nominal prices even more. Eventually, people lose confidence in the currency, and they decide they’re going to spend their money before prices raise even more. This increases the money velocity, which raises prices and empties shelves. This is a loss in confidence in the currency. It is hyperinflation. While the limits to printing money are very fuzzy, they do indeed exist, and using money printing as a method of dealing with debt is, at best, a method of pushing the collapse back several years, but that collapse will come when the money becomes worthless.
Printing money only has consequences if users have alternatives. So, put yourself in the position of bankers who needed to design & deploy a monetary system that both prevents/eliminates competition and suppresses inflationary effects. What would you do? Would you:
a. make your currency the only available choice for critical resource inputs?
b. create a tight inter-payment system where only your and allied currencies could be exchanged?
c. sequester reserves in reliable public and black pools to limit inflation to chosen markets?
d. fund and finance a military machine that so dwarfed all others combined in order to enforce a & b?
Do you see how easy this is? Do you see it’s the very world each of us live in, and has been this way since WWII? There were some remarks upstream about denial; perhaps the greatest denial is coming to accept that we live in a post constitutional, post republican society.
The inability to understand – or refusal to accept – that markets no longer exist, that economic activity is directed and controlled to achieve certain targeted goals, creates tremendous resistance to rationale thought. It may even lead one to conclude that real (ie finite resources) deflationary trends could overwhelm economic policy decisions.
I’m sorry, but even limited war-time measures would quickly resolve such a minor issue. We are nowhere close to having real, honest to doG rationing, limits on assembly/free-speech, price controls, travel restrictions, universal conscription (for important “national energy programs”), etc. But when these programs are ultimately implemented (oh, you think they don’t know what Gail is writing about?), then all the academic explanations she so patiently lays out will become become just so much ether in wind.
Such policies lead to the enrichment of a select few at the expense of the middle class. The average person may not fully understand the dynamics, but they’ll eventually understand that having a boot on their throat and being poor so that some schmuck can fly around the world in a private jet is no good for them. With an oil shortage, there will be hard choices to make. Security, or food? If security is picked, it will be against a bunch of people who are hungry and were used to just being able to go to McDonalds or the grocery store to get food. That’s a whole different ballgame when it comes to motivation from what we are used to. The “elites” really aren’t all that smart, they just have control over resources that aren’t going to be there in the future. This is the stuff that The Reign of Terror is made of.
I see that your handle is named after the single most important class of tools that allowed general emancipation. So you’ll have no difficulty recognizing the time period spanning the English, US & French revolutions (1650-1800) wasn’t a coincidence. Rather, it was the single point in time where commoners were able to both possess & bear military grade armaments equal to government forces.
For 10, 20, 50 thousand years before that, the average man had precisely -0- chance against select, well fed, trained & directed force. The gun is what made men equal, but laws eventually got the upper hand by limiting the most powerful to arbitrary legal monopolies on violence.
The People will take the boot and be happy for it, as long as they are fed and have their diversions. Don’t mistake a unique point in time as a basis for rationale opposition.
Without oil, the people will be hungry and the government won’t be able to bring its slick weapons to bear. Once the government starts to collapse, you’ll find that my Garand is military grade. The logistics for running F22s will be breaking down. On top of that, even the mighty US military has had a hard time winning against guerrilla forces. I agree that so long as the people are fed and provided with entertainment, they’ll do nothing and sit there in a slumber, but those conditions are not permanent.
And it wasn’t the gun that made men equal. With or without an armed populace, you can have tyranny. If you go back to the period immediately before firearms were introduced into Europe for warfare, the Brits did very well with their longbows. The longbowmen were somewhere between the equivalent of machine gunners, riflemen and artillery men. Brittan had passed laws that required all men between certain ages to practice with their bows on every Sunday, implying that they were all armed with effective military grade weapons. At 10m-20m, an English longbow with a bodkin point would puncture the armor of the time. This requirement was so important that the monarchy passed laws banning certain leisure activities on Sundays, because it cut into practice time. The British people were logistically capable of overthrowing their government during this period, but they didn’t. They were fed and content to be British. There have been various cultures that had a citizen-militia model for defense throughout the ages.
garand555
“People will take the boot” on their necks and interpret it as massage.
When the people start going hungry, then your scenario (social collapse) will happen.
But before that you will see financial, commerce, education, power grid and infrastructures collapses.
Long-term debt is making promises about “paying back in the future.” As such, it is not an artificial concept. If long-term debt is to be paid back with interest, it requires having more available in the future than is available today. In effect, then, long-term debt requires economic growth.
Unfortunately, in a finite world, economic growth cannot go on forever. In fact, it has been slowing significantly. When this happens, our ability to pay back debt with interest becomes problematic. Governments can attempt to fix this with Quantitative Easing, which tends to lower interest rates.
The danger now is that governments will stop printing, because they think QE is no longer needed, as oil prices drop. In fact, the dropping oil prices are a sign of not enough QE.
Call me idealistic! What if there was no “growth” of economies but simply better distribution of resources so that eveyone had enough within a stable economy – would that not be a practical solution. We don’t need shopping as recreation, the majority in the first world are drowning in unnecessary goods. Everyday life today is what luxury was only 150 years ago. Life is about more than consumerism – surely our ethics and culture have been dumbed down enough by now. I think we will go through great pain until we relearn why we are here. As Solzenhitsyn indicated after looking at both sides of the economic equation, all these problems boil down to a consciousness problem (he was a green/nationalist at heart) and we have to change our ‘needy attitudes’ or binge on our limited resources until we die the death of a thousand ‘cuts’.
The problem is that the global economy works as a totality or it barely works at all. All systems are optimized for their current level of delivery and become reliant on the latest technological advances. We cannot regress to a simpler paradigm.
http://ourfiniteworld.com/2013/05/15/what-would-it-take-to-get-to-a-steady-state-economy/
If you have travelled you will have seen that in reality behind the facade of diplomacy much of Africa is barely out of the iron age, while many parts of Asia are still in the middle ages economically and are far from reliant on the latest technology – we can easily regress to a simpler paradigm.
As Gail says in the article you refer to.
“If our civilization does collapse to a lower level, but not all the way back to zero, it seems likely that humans will again repeat the pattern they have experienced, over and over. They will again increase population and resource use, if resources are available. This pattern seems to be an instinct for all species, which is why it is virtually impossible to eliminate. Humans will then again collapse back to a more sustainable level.”
I don’t fully agree with this. I hope that we attempt to find a way to create a sustainable system within these cycles of growth and decline. Egypt did it for 2 thousand years based on a core ideology probably Gnostic, plus endless soil fertility brought down by the flooding Nile. China had a sustainable system for 4000 years based on total soil management and a core ideology Daoism, which they then exchanged 70 years ago for state controlled slavery with total pollution, to make shiny junk for the West. I could go on.
It is unfortunate that the most stupid way of living is in the hands of those who control most of the world’s resources – that is what could change to get in line with the rest of the world, who are living in as you put it ‘a simpler paradigm’.
The global economy is a self-organising entity, adhering as it must to the laws of thermodynamics. Its function when viewed from this perspective is the ever faster dissipation of useful energy, with the principle of maximum entropy production expressing itself as the profit motive. In other words, humanity as a collective entity has no choice but to hoover up resources at an increasingly rapid rate until the structures it has built to accomplish this keel over due to insufficient inputs. It is pointless to characterise an entropic force as stupid or greedy even though such traits may be observable within it.
None of the civilizations you mention were truly sustainable. No human civilization has ever voluntarily pursued degrowth. It is not in their nature to do this.
We will regress to a simpler paradigm. Unfortunately it will not be by choice. The rapid failure of supply-chains and just-in-time connections will mean death and misery on an unimaginable scale. Very few people, even in Africa and Asia, live in truly self-sufficient fashion. There will be plenty of suffering there, too.
“None of the civilizations you mention were truly sustainable.”
Please explain your definition of sustainable. In perpetuity? On a long enough timeline, the Sun will go out, nothing in the Universe, or even the Universe itself, is eternal.
4000+ years seems like a pretty good run to me. Too bad they decided to build their heavy industry right on top of their fertile deltas. I don’t think they’ll be able to easily go back to rice paddies, with all the pollution, cement, asphalt and slums built over top.
Matthew, I was taking issue with John Burman’s use of the word sustainable in relation to China and ancient Egypt, the implication being that man had been living in a state of harmony with nature for millenia in those civilizations.
What we actually see is a constant war of attrition between population growth and resource constraints with what Joseph Tainter called ‘the diminishing marginal returns of investment in social complexity’ always tipping the balance in favour of the latter.
I agree that China and ancient Egypt had a problem with resource limits. Egypt was somewhat helped along by getting more soil with Nile flooding every year, though.
Harry, I agree with you that the global economy is a self-organizing entity, adhering to the laws of thermodynamics.
We can talk about how awful it is that some people are so wasteful of energy, but this is what the system is made to do. We really can’t fix it, no matter what we do. We take our wages and spend them on goods and services, all of which require energy.
In fact, the economy is sometimes referred to as a dissipative structure. Other dissipative structures include hurricanes and plants and animals. All of these have finite lives before they collapse. Unfortunately, this is a basic problem we cannot fix.
I would only add that the exponential growth economy also enabled and demanded a likewise exponential growth in the human population to service it. And that’s a problem if you’re one of the current 7.2B people alive and only sustained by an exponential growth cheap energy economy that’s in its death throes. When the cheap energy, which is to say the cheap money, which is to say the growth – exponential or not goes away, so does a large portion of that 7.2B population.
Fortunately for most of us reading here, thanks to the first world Military Industrial Complex, developed to protect our betters but protecting us as all well, that won’t necessarily include us, immediately at least. But rest assured, it’s a bottoms up process, and it will get to us all eventually.
China did not have 4000 years of sustainability (nor did Egypt), but a succession of cycles of creative/destructive periods, that perfectly reflect on its historical demographic population as bumps. Each of the down periods must have been accompanied by a lot of suffering and death from the peasants as the irrigation structures were destroyed by turmoil and had to be rebuilt several times. To a certain extent the cycles match the dynasties. Some authors defend that this repetitive creation/destruction in the chinese history might be one of the reasons that they fell behind Europe, where after the Middle Ages no similar downfall took place, despite the big lead of an earlier start.
So sorry, but no historic precedent for sustainability in complex civilisations, only in simple organised small populations and not always. In general only when checked by resource constrains.
Europe sustained itself and grew powerful after the Middle Ages with superiour weapons and ships. By colonisation and stripping out the assets of South America, Africa, Asia etc. then enslaving their populations in the Roman model, destroying these very civilisations in some cases – a model for survival that is probably why we are in the mess we are in now. You are wrong in your last comment – go read ancient history and you will see that large populations were self sustained for thousands of years. Of course there were ups and downs and wars and revolutions within those systems – anyway nobody is talking about forever, that is silly.
We can do better than raping the world in a few hundred years, depleting all the resources in exchange for junk. All those civilizations had core values which endured, even until today in some cases – we have Disneyland. Consciousness is what needs to change. I agree it will probably be by the painful method if we are incapable of acting rationally. This discussion could go on forever and its interesting to hear other opinions, go well all of you.
He who burns most energy wins.
(as long as there’s enough left to burn)
“China did not have 4000 years of sustainability”
When you say sustainable, do you mean a perfect steady-state in which population is perfectly level for thousands of years?
In reality, for many reasons, I’m confident sustainable systems look more like sine waves than flat lines.
They did not deplete their soil nutrients; that is the important sustainable part I am referring to. Granted, they received vast amounts of nutrients from seasonal flooding, so they basically were fertilizing with potash. The only difference is they did not need to mine the potash, erosion and gravity supplied them with it with little to no effort on their part.
What I mean is that they collapsed pretty regularly every several centuries. I don’t think collapses enter into anybody’s idea of sustainability.
“I don’t think collapses enter into anybody’s idea of sustainability.”
Anybody who thinks that an economy needs to “breath” to get rid of the malinvestment thinks that partial collapses are part of sustainability. Granted, most of them probably don’t think of collapses based on a shortage of a keystone resource, but there are people who, so as long as it’s not complete Mad Max style collapse, will say “let it burn.”
To paraphrase Mr. Burman:
“All the problems caused by humanity would disappear if suddenly homo sapiens was a different species.”
Is that it? Come on, give us your vision of the future. As a philosophy professor said recently, “these days the problem is not in finding people whose views are contrary to yours but in finding people who have any opinion at all”.
OK, I’ll bite. I give you my vision of the future.
There is no stopping the current decline as too many people have too much of a vested interest to keep it going. So we will see it going down, as going down it must.
The decline will be accompanied by ever slowing growth with evermore prolonged periods of deep recessions and ever higher taxes. Social tensions will flare ever higher and people will choose evermore radical political opinions. We will see a resurgence of communist and fascist leanings. We will also see evermore geopolitical strife, particularly in the Middle East (Israel vs. Arab countries, growth of ISIS or its successor), in Europe (between US/EU/ NATO vs. Russia), and Asia (China vs. US, Japan and other ASEAN nations). Africa will also get its share (East African countries vs. Egypt struggling over water from the Blue Nile).
Sooner or later these tensions will erupt into full blown civil and international (possibly global) wars. Along will come pandemics of multiresistant strains of infections and illnesses we thought overcome, and widespread hunger. Hungry and desperate hordes will appear when the current nation states will gasp their last breath. They will pillage, rape and plunder, first in the cities and afterwards in the countryside where Farmers may still have some seed corns or living livestock left.
If we are really lucky, the great killing will be over in a few years and the world will return to a state of much lower complexity. If not, it will drag on for a couple of decades.
In Europe we are very likely to see the return of monarchies and, after a fashion, the reappearance of indentured farmers. Slavery will return to regions where it was extremely common (Middle East). For the US, I anticipate a breakup into three or more states.
The whole world will experience something akin to the dark Middle Ages after the breakup of the Roman Empire. This period will last for a very long time. In some places and regional pockets a living style akin to the 18th century will manifest itself. Mostly though, the level of complexity will fall much further.
The regions best prepared to weathering the storm are sub-Saharan Africa and, if it does not go up in flames due to a major war with the US/NATO, Russia.
Eventually, after a period of stabilization, we will see the return of sailing ships and the reemergence of trade through old trade routes such as the Silk Road. Hopefully, our descendents will not have forgotten to prepare for the scourge of scurvy.
Who will look after the nuclear waste?
Who will tend the Sarcophagus, if there is collapse?
After the initial die-offs in a collapse, the big question is, will the planet be irradiated, or will humans be able to tend the 500+ reactors and 200,000+ tons of waste?
If the collapse and the aftermath play out in any way that is remotely comparable to what I have written, humanity will forget about nuclear waste and irradiation pretty quickly.
If you take Chernobyl as worst case, people living there in the next centuries will have abnormally high sickness rates, deformed children unable to survive, and so forth.
In the first 50 to 150 years, they will probably regard the regions as cursed by the gods. Then, they will forget entirely and not know any better.
I don’t even think that the majority will even be able to read and write. It will take a long time before they have the leisure to relearn it on a wider scale.
In short, they will just deal with it and pray to their ancestors or their gods to bless the unborn child. Perhaps they will restart witch-hunts, because a strange person/woman gave the pregnant mother-to-be the “evil eye”.
How will humans grow food when the weather is so unstable that the plants freeze in July one year and boil away in July the next year, with no way to transport food from one area to another? How will humans survive without any food from the oceans? What will happen when hydrogen sulfide has turned the seas purple and the clouds of gas drift over the shores? Bacteria that are resistant to all antibiotics will ravage domesticated animals and humans alike. Devastating floods, super droughts that last decades, storms that rip the land down to bedrock and scatter it in the mountains, heat that kills millions at a time, disappearing or polluted fresh water; all of these happening all over the world, continuously. Greenland and Antarctica melt away and raise the levels of the seas by dozens of metres. Even people who are surviving in a primitive way off the land will lose their food supplies of plants and animals to storms, disease, floods, heat, drought and over hunting. They will try to migrate (this is already happening) but will be denied passage or killed by those who live nearby. Trees succumb to surface ozone and pollution. Agricultural pests, immune to all treatments, spread quickly.
I know Gail does not like the comment section to bring up climate change because her expertise is in financial matters. However, the growing consensus among climate researchers parallels her work on finance in concluding that the turning point has been passed. It’s over. We’re done. I don’t know what will strike first, but the combination of financial collapse, disease, dead oceans, polluted fresh water and unstable climate will wipe humans off the planet, along with many other species, ranging from all of them to most of them, according to how soon the collapse begins. Some bacterial or viral extremophiles may survive, deep in the rocks. I wish them success. In another few million years they might evolve to fill niches that don’t even exist today.
Species go extinct. Humans now exhibit every quality of those species that extinguished themselves, even while knowing the process in excruciating scientific detail, we can’t stop. We’ve eaten or otherwise consumed or polluted every resource in our entire ecosystem, which is the whole planet.
Say good night, Gracie.
All comments here consist of people thrashing around trying to come to grips with the inevitable, trying to put it into words they can understand, processes they can see, beliefs they have held for generations. Don’t worry, it will all become clear to you as time passes. Just keep talking to one another. The pieces fall into place as you keep reading sites like this one. We’re all gonna die, but you knew that before. As for me, I want to watch the process unfold for a bit longer. I’ll train some young people in the ways of this farm, hopefully First Nations people, and when I’m ready, I’ll walk away, into the flaming Douglas fir and Ponderosa pine.
C’mon, Ann — tell us how you really feel! 🙂
You seem to be channelling Guy Mcpherson. I don’t disagree with your prognosis, but I say, “What’s the point?”
Live in the moment. Do what’s right in the moment. Care for others. Hold relationships dear. Don’t let despair keep you from doing these things.
And yes, read stuff like this blog to best understand what you can do. But I don’t find wallowing in “doomer porn” useful. It is as much a fixation with the future as “hopium” is, as dreams of a prosperous green future for all is.
I had a dentist once who had a poster on his ceiling. It showed a cowboy caught in the instant of getting thrown from a rodeo bronco. And it said, “Hope for the best, prepare for the worst, and take what comes.” That about sums up how I look at things.
Gotta go tend to a sick goat. She’s a “downer,” but I managed to move her next to a feed bin and I bring her water every few hours. Just spent $24.95 on 10 kg of black oil sunflower seeds for her. I’m also giving her precious homemade yogurt to get her rumen up and running again.
Or I could spend the day wallowing in despair. I think I’d rather tend to a sick goat.
“Gotta go tend to a sick goat. She’s a “downer,” but I managed to move her next to a feed bin and I bring her water every few hours. Just spent $24.95 on 10 kg of black oil sunflower seeds for her. I’m also giving her precious homemade yogurt to get her rumen up and running again.”
Good to hear, Jan!
@Ann
I do not share this full on extinction outlook. Even McPherson has the opinion that a collapse of industrialized society will stave off the scenario you have painted. That’s what he wrote the last time I visited his site.
As far as I am concerned, I see climate prognoses as faulty because most of them expect a BAU until 2050 or longer. We *know* that this is not going to happen.
Unfortunately I forgot the presenter of the model, but this group of analysts calculated that oil would hit an EROEI of 1 between 2030 and 2035. That’s where the buck stops, at the very, very latest. Given the interactions with our economies and our debt driven financing imperatives, the collapse will be likely to occur much sooner.
So what does that mean for us and living conditions on earth? I expect temperatures to rise, and some parts of the earth to become less hospitable or even inhabitable. What we will not see is the scenario you described, simply because our output of CO2 and other pollutants will be reduced so drastically that it will not matter anymore.
It will take at least a couple of decades before we will be able to attain the output of the 1750s. In the meantime, earth and climate will have recovered and reached a new equilibrium. Hopefully.
What does Guy suggest we do about all of the spent fuel ponds that need sophisticated systems to be managed for many decades?
It is all fine and dandy to say one doesn’t think this is an extermination situation. But let’s have the explanation.
I would like to be a point guard in the NBA because I would like to. But I cannot explain how that would be possible.
There is a huge amount of time spent on discussing post-collapse scenarios but it is all really just pie-in-the-sky stuff that does not pass any of the litmus tests.
Some of the obvious ones are:
– the nuclear ponds
– the dead soil
– the starving hordes coming after the permaculture farmers
– the likelihood of criminal elements showing up with weapons and taking what they want
– endemic diseases that are surely going to ravage the planet
Nobody has put forward any concrete solutions to any of the above.
From what I gather the sentiment is that most are shoving those bad thoughts into a dark corner of the mind and just hoping for the best outcome.
Therefore I believe Ann holds the high ground in this argument.
But it is a good thing that hope, even if it is only a thin ray, wins the day. Because once that light is extinguished, the darkness to come would be more than most could deal with.
Hey Ann,
A wise Buddhist once told me that there is no such thing as the future, it doesn’t exist. And the past is dead and gone. The only moments we ever really have are the now. Living right now is the only thing we have to do. So, like Jan said, live for now, hold your friendships dear, do what you want and what you think is right. There is a time to live and so live right, and when it comes time to die, you will die well. Many native American societies, in fact societies throughout the world (the Vikings, the Samurai, the Romans), did not mind dying as long as it was a “good death.” Take care.
I wouldn’t take Chernobyl anywhere close to a worst case. Chernobyl had something like 190 tons of fuel, and it is estimated over 90% is contained in the sarcophagus (temporary: a permanent one is needed). There is maybe 1 or 2 percent of the radiation from 190 tons in the Exclusion Zone.
In comparison, around 200,000 tons without the industrial capacity to build even temporary sarcophagi would be left to burn for decades, leaving very few areas of the Earth with livable contamination. 1000 times the waste with 100 times the exposure, like 10,000 Chernobyls spread across the Earth. Prevailing winds and currents from current reactor and spent fuel locations leave few areas unexposed.
For God`s sake please end this “Paul like” lamentation about the spent fuel ponds…..as long this are sources of heat people will use them for district heat or fuel for gen IV+ reactors.
The waste of today can become the resource of tomorrow…
I think that the real challenge of our today humanity is to find a way to reduce the population and resource waste with peaceful means and consensus. One child policy + simplified hospital care + reducing the complexity of our existence is the only solution that we have. Humanity can exist without personal vehicles, oversized houses, stock market and cheap flights…..Perhaps this will be the world that will stay after the financial hoax will be turned in pieces by the infinite growth paradigm.
NGeorge:
“I think that the real challenge of our today humanity is to find a way to reduce the population and resource waste with peaceful means and consensus. ”
How much time do you think there is? Gail’s projection shows collapse around 2016. Your proposal would take generations of cooperation to achieve.
I think that you’ll find that a vast majority of that 200,000 tons doesn’t go up in flames and irradiate the world. A lot of those rods have been sitting in those pools not because they need to be there, but because people say “NIMBY” when it comes to storing them. Think yucca mountain. On top of that, evidence of natural nuclear reactors shows that the waste tended to not travel that far. Look up Oklo for that.
Unfortunately, the way the world “works” is that there is competition among species. Humans compete with germs, for example, as well as the wild animals that we have mostly killed off. Population of a species either grows or contract (or follows sort of a wave form, as its population grows and contracts among other species).
The way humans are different from most other species is that we learned to harness external energy for our use. This started with learning to control burning of biomass over 1,000,000 years ago. This allowed us many advantages over other species:
(1) We could cook some of our food, making more nutrients available; making plants that might not be suitable as food, suitable; cutting back time needed for chewing, allowing more time for crafts, such as making clothes; and allowing the human brain to grow in size, as the size of teeth and digestive apparatus shrunk.
(2) We could expand our territory, living in colder climates.
(3) We could use fire in scaring away predators and in catching those we wanted to eat.
Gradually we added other types of energy use. We learned to train dogs to help in hunting. We learned to make primitive sails to put on small boats to catch the wind. With the advent of agriculture, we learned to control both plant and animal species to our advantage, cross breeding to enhance desirable characteristics. The use of fossil fuels is simply an extension of the many types of energy we have used over the ages. We needed something that was available in greater quantity, with causing deforestation, and coal became the fuel of choice–starting very early, but ramping up in the 1800s.
Unfortunately, we are up against limits of a finite world. We are not doing well on stopping population growth (although developed countries look at their own native born population, and make claims in that direction). Using less isn’t good enough, because population growth soon overwhelms savings. Also, we are dealing with limits on fossil fuels and minerals of many kinds. Using less still means we are running through our supply, but perhaps a little less quickly. It is not really enough to fix the problem.
The way our economy is hooked together, we cannot “go backward”. We have a networked system. It can only grow, as more population is added. The existence of debt makes this especially the case. It is an illusion that we can better distribute resources, and come out with a stable economy. Without fossil fuels, there are nowhere near enough resources to go around. Before coal use become widespread, world population was less than 1 billion, and Malthus was writing about the limits the world was hitting then. Now population is something like 7.2 billion.
We have to use fossil fuels to keep up our current system. Substitutability among fuels takes changes in infrastructure and is expensive. In many cases, we have no ways of doing it. For example, electric airplanes are not very feasible. Also, even the materials we are using as substitutes are limited–so at best all we do in using substitutes is put off our limits problems a bit.
Recently in the Peak Oil site, ROCKMAN had looked at how much US consumers paid for car fuels yearly, and (EIA data…) the money used had about halved in 2008…2013 period or so. Hmm. No money left?
Oil is embedded in the system in many other ways besides private passenger vehicle operation. For example, building cars, building roads, transporting goods. I suggest you read my article, Oil Supply Limits and the Continuing Financial Crisis.
The market is trying to find an oil price that will satisfy both producers and consumers. Alas due to rising costs of production and a much lesser increase in the profit (benefit) that can be extracted by an economy from a barrel of oil, that price no longer exists. As you point out, when producers price dominates due to satisfactory demand, we get a set of problems, and when consumers price dominates due to reduced demand, we get a different set of problems.
The main prediction would be that the business cycle will result in an alternate of periods of demand destruction (economic crisis) and periods of production destruction with the price of oil being the transmission chain. There will be no good times, only transition times between both periods, as the one we have enjoyed, for as long as our economies continue to depend on oil.
No, high oil prices were not there to stay and no, current “low” oil prices are not here to stay either. What are here to stay are destructive economic cycles that will be played at the same time as flocks of black swans come home to rooster. Impossible to predict the path, but very easy to predict the outcome.
Dear Javier
For some related data and models, see Ugo Bardi’s current article
http://cassandralegacy.blogspot.com/2014/12/fossil-fuels-are-we-on-edge-of-seneca.html
Don Stewart
Good article. This is the first time I understand why a Seneca peak shape. If one just works through a resource you get the Hubbert bell curve. If one uses the resource to speed up the working through you get the Seneca curve.
Thank you Don,
I already read the original Seneca cliff articles by Ugo. This last article is a simple model on how to get there through higher production costs. Not very different from Tom Murphy’s Energy Trap model and the same basis. If you add Jeffrey Brown’s Export Land Model, what you get is a truly scary picture.
But you have to add cycles. There are cycles everywhere, specially in complex systems. Economic cycles will likely play a role. The result could very well be similar to the step descent suggested by John Michael Greer, rather than a linear descent.
Javier
Thanks for the link. Bardi talks about “reinvesting a constant percentage of profits of resource extraction,” but it seems to me that this is based on an idealized model of profit, similar to that used in the by the modelers behind the book Limits to Growth, rather than the real situation.
In the real world, there is debt involved, and interest on that debt. In fact, everything I can see says that this debt is necessary to the process–perhaps not for those drilling the wells, but for consumers and for businesses selling products to consumers.
Real world profits are determined by a number of different considerations including (1) the amount of goods and services that can be produced by oil, compared to the inputs required to produce those goods and services [Bardi’s profit?], (2) the share of what remains that must be used to service debt, and (3) the selling price of oil, which is indirectly determined by what consumers can afford, based on the incomes they earn. These incomes are influenced by the true benefit oil is adding to the economy. So the financial real profit is related to what Bardi is talking about, but it probably falls off considerably faster.
Gail
I am not sure I follow Ugo’s logic. But I think it is related to falling EROEI or declining marginal returns. That is, the same amount of profit invested begins to return less future oil and therefore less profit, which starts a spiral downward. We can see this currently as companies cut capital expenditures in an effort to arrest the decline in profitability.
As for the debt question. I think that Charles Hugh Smith has it right: Risk can be transferred from one person to another, but it cannot be erased. Consider the fact that most new businesses fail. If you are about to start a business, you can:
a. Pay for it with your own funds
b. Borrow some money, in the form of bonds or notes
c. Take in some partners (e.g., sell stock)
d. Some mixture of a, b, and c
If you go to school and study finance, it used to be largely about (d)….now I think it is mostly about financial fraud and speculation. At any rate, if you build with bricks and mortar, you have to pay for the materials and you have to pay the workmen. That money has to be current money, and the materials and work will be current work.
In the absence of banks, if you follow (b) or (c) or (d), then you are pledging future profits to repay the initial investors plus some return. With fractional reserve banking and the Federal Reserve, the banks loaning the money just loan the money into existence. They don’t have to give you money out of accumulated savings. The only deterrent to the banks is the risk that your business will fail and they will never get the money back.
As I understand monetary policy history in the US, the frontier interests (such as Andrew Jackson) saw an enormous continent just waiting for exploitation, and didn’t want to have to convince Eastern or European investors to loan them money. They favored a variety of moves which would make the creation of new money easier. To the extent that the frontier actually did pay off, the easy money gamble was a good bet. However, there were decade long depressions during this period and vast numbers of banks failed, along with most of the railroads which were started with borrowed money.
Academic studies say that the 3rd Industrial Revolution (20th century) paid off the gambles which were made. The 4th Industrial Revolution (21st Century) hasn’t really paid off for society…although it has generated some billionaires. The 4th Industrial Revolution has involved relatively modest amounts of debt. I don’t think Facebook or Ali Baba had much debt when they went public.
One could visualize a 5th Industrial Revolution which converted society to Renewable Energies such as solar and wind and nuclear. I think you would be the first to say that these will never pay off. Suppose that the Federal Reserve simply prints an awful lot of money and puts it into circulation to fund the 5th Revolution. But the 5th Revolution sputters out and produces little to nothing. Then we have the classic case of too much money chasing too few goods (assuming that companies figure out fairly quickly that things aren’t working).
I outlined a little model for thinking previously. I posed the question of what would happen if a couple of super-giant oil fields were discovered a couple of thousand feet beneath the Sahara. I think it is safe to say that those fields could be exploited with money from accumulated savings. However, the Finance people in the exploiting companies would actually use strategy (d), and maybe even some of the fraud and speculation. But I think it is a mistake to say that exploiting those two super-giants is impossible without debt. It may very well be true that the hypothetical 5th Revolution can’t happen without debt, because many people think the same way you do. Therefore, the search for deep pockets and going into debts which can be defaulted, all the while paying handsome executive salaries.
Don Stewart
Don,
Thanks for your thoughts.
The problem that arises with diminishing returns is that you start out with extracting resources where you need practically no accumulated savings or debt. This is the oil that is barely below the surface, practically in your back yard. Or the cheap Saudi oil that you mention.
You gradually move to worse and worse quality resource. These require more and more front end investment, in order to hopefully obtain the oil or other energy product we desire. So we gradually move the system to more and more debt. (This issue gets missed in EROI studies, because “time of investment relative to time when output is produced” is ignored. Getting oil out immediately is no different from producing a 30 year battery that needs to be set in the sun to work.)
If we could wind the clock back 100+ years, to where diminishing returns had not run its course so badly, I would agree with you that energy investment without debt would be possible. Now, though, it becomes an impossibility.
There is also the issue of affordability of goods by buyers. As wages erode, they have greater debt needs to buy, for example, more fuel efficient cars that cost more.
Gail
‘A fuel efficient car’ may be a motor scooter. I see many more of them on the road. I doubt very many of them are financed. There are also a lot more bicycles, and I doubt that any of those are financed. Instead of ‘fuel efficient cars’, think ‘transporation’ and things open up.
I get constant advertisements from a guy wearing a white hat inviting me to be part of ‘the shale revolution’. That would just take money out of my pocket and put it in the pocket of the shale driller. I assume that what they are selling is shares, as opposed to getting a loan. It may be companies that are so ‘sub-prime’ that they can’t even sell junk bonds…and so need to find suckers.
My point is simply that any actual drilling and laying of pipelines and hauling of water that happens is a current expense, and has to be paid for with current money. Whether that money is raised through retained earnings, through new equity, or through various types of debt instruments is a matter for the Finance officer. There may be subtle reasons why debt works better than retained earnings, but I think the fundamentals remain. (Fraud, for example, is a lot easier with debt than with retained earnings.)
Don Stewart
The question is the extent to which bounces back and forth in prices can really happen, before the “system” breaks.
I consider that the system is already broken, Gail. It was a system built on continuous growth and growth has stopped. What we are experiencing could be analogue to the tail spins of a plane falling. Wether we destroy demand or production, we will lose oil use. As we lose altitude we will be gaining speed.
Not a good outcome!
That’s it! A whipsaw of destruction on the way down to match the whipsaw of growth we experienced, albeit completely took for granted, on the way up. Another well noted human foible: we take our good fortune for granted and our bad fortune to heart. We’re about to take a whole lot of the latter to heart.
Renewables are independent of oil: They do not make any difference to oil consumption by and large since overwhelmingly they still need oil type products to ensure continuity and supply. And the minuscule amount of power they generate is offset almost 1:1 by he increased losses they push onto fossil based plant.
Renewables are merely a green cosmetic lipstick applied to what must always be a fossil or nuclear based grid, for stability. Only where there is a low populations density and high hydro, do they signifgicantly reduce the need for fossil fuelled power stations. Or fossil fuel itself.
As I like to say, renewables are only as renewable as the equipment used to harvest the energy.
Good way of putting the problem.
And they waste time, money, resources, and human brain power on trying to perfect a non-solution solution. But really, renewables are mostly about inflating a “green” financial bubble in the wake of a deflating carbon energy based bubble(s), which is of course a fool’s errand, but likewise of course, desperate times do call for desperate measures, now don’t they?
But the larger point is that all these various and sundry green solutions in net probably use more fossil fuel energy in their total production and consumption cycles than they ever saved in the first place. Just like bio-fuels, another net energy loser that was only made to seem attractive in the first place by misguided government subsidies.
Bingo.
Good way of putting it!
Reblogged this on gerryhiles.
The graphs below “tell me a story” that “something different” is happening now:
WTI Crude Oil
http://oil-price.net/5y_small.gif
Brent Crude Oil
http://oil-price.net/BRENT/5y_small.gif
http://crudeoilpeak.info/wp-content/uploads/2014/11/Crude_oil_production_Jan2001_Jul2014_tight_oil.jpg
And what, pray tell, is the story?
Deffeyes is famous for predicting conventional crude oil production would peak in 2005. Basically, he was right until 2008 and then again in 2011 according to the above chart. After that, any increases in crude oil production have been made up by US tight oil. If no new and massive conventional oil production is created, the above chart would indicate that the date of conventional peak oil production is 2011.
It could be that world conventional and unconventional crude oil production could peak before US tight oil peaks. But looking at the graph, it would not make much difference.
I have seen other graphs that show we still have massive amount of coal. Will we convert that coal to gasoline and diesel using the Fishcer-Tropsch process? At what price for a barrel of oil would the Fishcer-Tropsche process become economical? I am looking at this from a pure economical point of view without considering any environmental, etc. costs. I see this as the next area of “growth”. Any thoughts??
I think financial problems will put an end to all of these issues at the same time.
If we could actually do something (which I really doubt), I would keep an eye on coal gasification. http://www.bbc.com/news/business-26921145
Hi Gail,
I visit your posts frequently, but this is my first comment.
Although it may seem unorthodox (and perhaps a bit arrogant, one might argue – certainly not my intention!), I would like using my first comment to advise you on a certain matter regarding the manner in/with which you convey your reasoning and ultimately, conclusions.
In the recent posts related to oil/price/production/extraction/reserves/etc,/etc.-even though the very nature of the things/facts you are trying to explain/convey is often a vicious circle/reinforcing positive feed-back loop – you frequently present yourself and your thoughts as repetitive, redundant, cluttered and “quagmired”. It is my opinion/belief that this stands in opposition with your reasoning/thinking which seems to be quite liquid and logical.
The fluidity of what you are trying to express seems to be, shall I say: “churned” and “whirlpooled” by the way you write.
Absolutely no harm done to the integrity of the “picture” you are trying to present, but perhaps you would not mind me suggesting a “redress” of the way you write, or perhaps even a professional editor’s help, would you?
I believe that it (the above suggestion) will greatly increase the “wholeness” of your posts.
Be well!
Wholeheartedly and sincerely,
Petro
Much better than attacking Gail T. as a “deranged crank” (as I saw in the comments to a piece in MIT’s Technology Review), but — rather than vague criticism — why not deal substantively with what she’s saying?
…perhaps I failed to present my point correctly, or you failed to understand/read my comment and/or both. Please, do allow me (at the risk of being redundant) to quote part of what I wrote:
“…The fluidity of what you are trying to express seems to be, shall I say: “churned” and “whirlpooled” by the way you write. Absolutely no harm done to the integrity of the “picture” you are trying to present…”.
Let me be simpler and more direct for you to understand: I was not criticizing and/or attacking Gail; I was suggesting something which: “…will greatly increase the “wholeness” of your posts…”.
-With regard to what you so articulately stated: “why not deal substantively with what she’s saying?”, I think Gail is “dealing substantially” with it. I agree with her and I have nothing to add at the moment.
In conclusion, allow me to ask you something dear Mr. Cooper:
are we americans(or people in general) brainwashed and indoctrinated to the point that everything must be either “praise” or “attack”; “patriot” or “traitor”; “democrat” or “republican”; “with us” or “with russians/Putin”; “peak oil”-er, or “peak shale”-er; etc, etc, etc,?
Sad “state of the union” indeed!
Be well,
Petro
I didn’t mean that you were “attacking” anyone — there are so many ways of expressing ideas & concepts, & it’s so easy to be critical of how someone else does it — so, “Do it yourself”.
Personally, I like her style. Kind of like a hammer relentlessly hammering the nails – in this case, in our society’s coffin – home. You can make the same points countless different ways, and likewise, you can ignore them no matter how they’re presented too, but the point is that someone’s making them and someone’s listening!
Thank you for trying to offer a helpful comment.
I really like that you offer up the facts without a lot of hyperbole Gail. It’s easy to get spun up about all this stuff as you discuss it – and god knows I’m as guilty as anyone in that regard – but if you’re actually trying to convince people who might be on the fence about all this (the hard core deniers won’t read or listen anyway, and the true believers by definition already are) then you have to present the facts in an even-handed manner without a lot of overblown rhetoric and hyperbole. You’re absolutely one of the best out there in that regard IMHO. Good work and keep it up!
I agree. I really like the lack of drama. The facts are themselves sufficiently dramatic. No one can follow a lengthy chain of cause and effect through a complex system and then make that comprehensible to a layman quite like Gail can.
It seems to me he was rather positive. He complemented her ideas but just thought there was better ways for her to express them.
I find Gail’s language and logic to be adequate to very good getting tough points across. if one doesn’t like Gail’s logic, go read David Stockman for a few weeks. Personally, I find these articles on the reserved side, where one has to pause and piece together all the moving parts in their minds. She can say fire! fire! fire! or run like hell, but we’ve all already heard that.
I’d say given the complexities we face (congress at odds, weak executive leadership, focus on short term objectives, and the massive bad debt in the system, et al) that Gail’s posts are a bit of fresh air to heavyweight issues surrounding us. It’s real easy to say there’s no way out, but to present that in detail is an art form.
Ed Park
Dear Mr.Park,
The:
“…I find Gail’s language and logic to be adequate to very good getting tough points across. if one doesn’t like Gail’s logic, go read David Stockman for a few weeks. Personally, I find these articles on the reserved side, where one has to pause and piece together all the moving parts in their minds….”
reply of yours would have been a nice one IF I’d asked : “How did you, dear Mr. Parker, find Gail’s language?”
-I didn’t!
There are simple “languaged” people out there (i.e.: you) and there are articulate, thorough and better phrased ones (i.e.: Mr. Stockman and I).
Lord has its ways in doing things…or people. It is what it is. I understand.
I do, indeed.
Be well,
Petro
I have to admit that I cannot share your assessment of your own writings. The extreme amount of slashes, quotation marks, and the lack of properly spaced paragraphs make it arduous for me to read your comments.
Personally, I like Gail’s style quite a lot. Everything is structured, mostly with numbered headings, paragraphs are used to convey a single point, and the writing style is devoid of too much emotionality. Graphs, tables and pictures are presented to support or enrich the point made.
So yes, I think her style is quite appropriate for the fundamental issues of humanity’s quandary she is blogging on.
I also like any critique, in general, to be useful. In order for it to be useful examples are a great tool to make critique accessible.
+1 🙂
*2 😉
+3
It’s a sign of a few issues psychologically I think. Understandable, this is hard for those who get quite emotional over the whole issue. “Growth as we know it is about to end and civilization faces systemic possibly rapid collapse”
Ouch!
Petro, I do agree with your point: it is not the message, it is about how it is presented. Gail is very eloquent but she is two dimensional or her postings: she shows nice graphics and suporting material however they are biased. Gail needs to place all the plays and players on stage. There are too many coincidences going on around the world and yet she sticks with the same rhetoric over and over.
I think you may be rather missing some points here.
1. Gail is pretty clear about what she is prepared/able to address here. It’s HER blog, and I’m very appreciative of the work she puts into it.
2. It is not quite the same rhetoric over and over. Yes, there is repetition of some key themes – BECAUSE THEY NEED REPEATING. Very few people have taken on the “collapse” message, and are fully engaged in getting ready for collapse – however it plays out. Even less seem to appreciate the complex adaptive system paradigm which she uses – and which is a remarkably powerful conceptual tool for appreciating what is happening.
3. Further, I find that she does well in repeating those key messages in a nuanced way – which is helping me for one to have a more rounded, fuller and real appreciation of what is happening.
Gail has to be somewhat repetitive in her message in order to reach out to new readers. Those of us who are following her over the long haul have heard it before, but many others are just discovering her now for the first time. We can’t expect them to go back into archives and “catch up.” Nice work, Gail!
IMO, Gail’s message serves two general purposes:
– new information to those just recently being exposed
– known information to those already up to speed
The known information is actually pretty critical for regulars, because we live in a dynamic political environment that is constantly changing and reacting to ‘facts on the ground’. We can see, in real time, how decisions and actions are based on the factual analyses presented by think tanks & research institutions which she mirrors so accurately.
So, for example, her most recent report either explains market reactions to real physical properties OR indirectly identifies the motivation & justification for major global strategic intervention. Take your pick; it doesn’t really matter.
What matters most is what you described from your recent visit to DC. Here was the perfect description of an apex predator acting upon the situation as it stands. If it didn’t, how would the masses who were completely engrossed in their artificial lives possibly thrive, let alone survive without USD reserve status? They couldn’t, so they have no choice but to engage with every resource at their disposal.
All we have to do as outsiders is watch the ant farm and invest accordingly.
B9,
You’re right and its important that we patiently carry along the new reader’s to Gail’s site so that we don’t alienate them and keep this blog open to new and fresh perspectives. I don’t mind the repetition because it is a complex topic and it allows me the chance to remember things that I’ve forgotten along the way. I just hope that we aren’t the ants.
I seem to be getting a lot of new readers, both here and on new sites. (I understand Seeking Alpha is now copying my posts as well.) These new readers don’t know what I said previously. I have also discovered that a lot of existing readers only barely understood the first time. I need to repeat the message in new contexts.
Coming on here, discussing with the “global” community over the last few years is better than any therapy session! Just the simple fact of trying to make sense of it all, discuss with citizens who also see the writing on the wall and learning to appreciate life that little bit more.
Well done Gail, if you vanished I’d have a nervous breakdown 🙂
It’s actually quite simple to understand the reaction of the PTB. Like us, they are receiving the unadulterated facts. Unlike us, for some reason a mass of retards has vested in them – through pure faith – supernatural, moralistic qualities to help lead & guide them through these troubled times. LOL
Anyway, upon receipt of the cold analytical report(s), their reaction is identical to ours: “we are so fvked”. However, unlike us, they are expected to ‘do something about it’. So, like any good students of our state of affairs (carefully guide by aids possessing IQs significantly higher than theirs), they know the Ponzi can only be extended if there are new, hard assets that can introduced into the global reserve system.
So, while “Paul” wails that the end is nigh, that collapse can occur overnight, the PTB understand the (temporary) solution to our problems: here exists a state currently occupying 1/6 of the earth’s land mass, which is occupied, as Hitler remarked:
“It’s inconceivable that a higher people should painfully exist on a soil too narrow for it, whilst amorphous masses, which contribute nothing to civilisation, occupy infinite tracts of a soil that is one of the richest in the world. We painfully wrest a few metres from the sea, we torment ourselves cultivating marshes and in the Ukraine an inexhaustibly fertile soil, with a thickness, in places, often metres of humus, lies waiting for us. We must create conditions for our people that favour its multiplication, and we must at the same time build a dike against the Russian flood. If this war had not taken place, the Reich would scarcely have increased its population during the next ten years, but the Russian population would have grown vigorously.”
The result is the state of affairs we currently find ourselves. If nothing else, it’s revealing that the situation is quite dire, if the West is willing to temp nuclear war to keep the game alive. This tells us that it’s essentially a zero sum game: we have a nuclear exchange or the system collapses. For the PTB, the outcomes are equivalent.
“we have a nuclear exchange or the system collapses. For the PTB, the outcomes are equivalent.”
In the words of @InAlaska, “Now you’re freaking me out!”
All the work that goes into small-scale defensive armament won’t be worth crap in the face of a mushroom cloud, will it? Think I’ll stick to being a good neighbour, and hope Our Leaders don’t press the wrong button.
B9-
Respectfully, that line of reasoning just doesn’t make sense to me. The doctrine of mutual assured destruction is still in place. You don’t “tempt” nuclear war, when it happens, its all over. That is a true zero sum game and there is no percentage in such a war as all sides lose. Please explain how the West would ever come to the conclusion that it would be better to die in a nuclear apocalypse when the outcome of collapse is uncertain in regards to timing and degree of severity.
Heart attack or cancer: which do you prefer if the end is the same?
Tell me, how does DC/NY/LA/SF continue in its current state of bliss – which you witnessed firsthand – without USD reserve status? If our Russian gambit fails, then systemic collapse is in the cards. As you say, the center cannot hold. So, what is the alternative?
Hitler brought ruin to Germany; the same is true for Tojo. Both countries were grabbing for the brass ring. They had no other alternative – each was locked out of the resource game. Now it’s our turn. We either prevail or suffer the consequences.
Personally, I’m all in. Right now, the Dow is @ 17.5k. If Putin is disposed and it’s announced the IMF has accepted Russia as a full partner, the Dow could go to 25k. Add a 10:1 devaluation that would then be possible to execute, and it’s at 250k.
@B9K9
While what you say makes perfect sense, I do not believe that this power-play is going to go according to plans.
Currently, regime change is nowhere in sight. Putin enjoys approval rates of 80%+. In addition, many Russians vividly remember the 90`s, which most of them associate with Western dominance. Very few would like to return to that situation.
Russia also has a very long tradition of being an empire. Under the leadership of Putin many regained a sense of national pride and purpose. It is likely that they are unwilling to give that up. Their rearmament, with a special focus on submarines and nuclear weapons, is a testament to that.
Similarly, Russia has quite a lot of liquid funds to withstand western pressure. Possibly longer than the West, the US in particular, can uphold it.
So, if I were you I would not put all of your chips on this development.
Russia is far more likely to engage in war, even nuclear. rather than subject to the financial and economical dictate of the US.
HnH,
even financially, Russia could be doing not so bad, as ruble is dropping at same speed as oil:
“While Russia’s plunging currency is becoming a growing concern for policy makers in Moscow, the benefits for the Treasury are swelling as it receives more and more rubles for each dollar of oil export revenue.”
http://www.bloomberg.com/news/2014-12-11/ruble-consolation-gets-putin-record-oil-income-chart-of-the-day.html
I know Dmitry Orlov has also commented on this–the declining ruble being helpful offsetting the drop in price. The one issue is dollar denominated debt held by Russian companies, including oil companies. It will be harder or impossible to pay this.
In 1965, the USA was comprised as a mono culture, and yet, an immigration act was implemented that set into motion the demographic results we see today. How does a nation commit suicide if not by coercion?
Bernays was 100% correct; opinions can be shaped and directed. One day a society is based on merit, the next, “affirmative action”. One day marriage is based on a traditional dating back 10s of thousands of years, the next, a new, completely new and contemporary meaning.
These cultural changes came about due to purposeful programming motivated by the promise of control and wealth. And the proof of the pudding is in the taste: they worked beyond everyone’s expectations.
The Russian gambit is a long haul play. On the one hand, we have short-term military/financial pressure applied to key strategic choke points. But in the background, we have the real play, which is to change peoples’ thinking. This is achieved simply by changing definitions and managing the resulting public opprobrium or applause.
Again, I ask, how does one counter an appeal to patriotic duty, the inculcated belief that the whole is greater than the individual? You cast doubt about leadership, and plant ideas regarding alternatives. This is necessarily difficult, it just takes time.
The West has no choice. We either pull this off or suffer the consequences. Dating to Greece, then Rome, then Europe, then the USA, the West has a 2,500 year history of successful conquest. Russia has lost 5 (major) wars in the last 100 years: Japan (1905), Germany (1917), Bolsheviks (1918), USA (1989), Oligarchs (1990s). Their two victories in 200 years where both initially defensive: Napoleon (1812), Nazi (1945).
Any student understands these facts. The strategic plans are thus developed to attack the weaknesses and not repeat the mistakes. We shall see as it plays out, but I’d say the West has a very good chance at turning the Bear.
LOL. The russian winter wins every time…maybe the Mongols had the best chances.
Yes father winter loves mother Russia.
Was at a talk by a West Point graduate the other day. He said wars are won by the side with the most losses. That is the side willing to take the most losses. The Russian took 50 million dead to win the war against Germany. How much is U.S. willing to loose? In this case in dollars.
You couldn’t get me to touch the stock market if a gun was at my head.
I’m all in physical gold outside of the system. With each dip I buy more, and I never run out of ammo, because the central banks conjure it out of nothing.
B9
I wish I had an answer for you, but I don’t see the juggernaut of American materialistic, consumerism coming to a close anytime soon. Even in our weakness and dotage, we are very, very strong. I’m about to make another jaunt to the east coast where I will visit both DC and NY, and am girding myself to see all of the tawdry excess of commercial Christmas in full-swing. People are eating and drinking and buying and playing like there is no debt limit and now tomorrow (perhaps there isn’t). The Dow took a big hit last week and we’ll see if that continues next week. If it does, it could put a turd in the punch bowl at the Christmas party. I continue to believe that our government is far too incompetent to pull off any type of regime change in Russia and you should be skeptical, too. If it couldn’t manage to properly do the job in Afghanistan, Iraq, Syria etc. etc., how is it even conceivable for it to happen with a hard target like Russia? I think what we are witnessing in Eastern Europe has more to do with haplessness than it does with strategic calculation.
In terms of keeping the world economy going, the US-Russia conflict is decidedly detrimental. Each on cuts back trade, and it tends to push the world economy down. It is one of the factors behind falling oil prices.
US-Russia trade is tiny, it’s about old and new dominions. Russia increased the well being of its commoners by a factor of almost 10x in recent decade and something, that’s rather unprecedent not only in their history. Russia was able to perform some cunning action on the int. scene, e.g.like defusing the chemical weapons issue of Syrian regime and thus able to block imminent direct NATO strike, however ground level civil/proxy war goes on in Syria, nobody is a clear winner there, the place and large part of the region is in ruins. Russia was able to speed up process of “reformed global system” alliance grouping (via BRICS), however each of these players still needs several more years to complete their favorite domestic projects, e.g. China has not finished internationalization of their currency yet and has not finished strategic petroleum reserves infrustructure and other important projects. Simply, Russia was exactly ripe for a leasson to be sent back to its place and prolong the status quo a bit more.
From the TPTB perspective with “unlimited” resources from their +300 yrs of global seigniorage pillaging the world, what you do is obviously with varied success rate perform regular job of meddling in just every oponents life each day, coups, financial market attacks etc. For several reasons, namely less open system, they can’t attack China as directly, and Brazil/India are somewhat not junior nor fully systemic partners. Hence the best effect realized today is in attacking Russia on markets, while they as good pupils are still trapped inside the system (SWIFT, western futures markets, ..), including calling in action usefull idiots inside the EU (blocking southstream project) etc. The tone has changed profoundly in Russia in recent weeks though, they will simply not play cooperative soft ball anymore. Therefore, no paymanet = freezing Ukraine or parts of EU, ok your decision, enjoy the consequences, go and feed them on your own; Air France or Lufthansa flight to asia over siberia? sorry guys – our sky open only for asian companies from now on, have a nice day etc.
In summary, to me this seems as very slow motion dance of postponing the resolution, can kicking olympics, the build up of negative energy in these tectonic plates is increasing, the final release will be horrific and once the day comes it will likely take place rather quickly in the span of years rather than in decades of slow series of adjustments.
Some peoply believe rather naively, the system reset will be more or less orderly act of high level burreaucracy and diplomacy, I doubt that, we have gone too far on so many fronts, but perhaps a half/single full decade could be achieved by ramming through another temporary reform. But interesting read anyway http://philosophyofmetrics.com/
The article you linked to is interesting. It sounds like the IMF would like to increase its funding and power. To do this, the US congress would have to approve something called the IMF’s 2010 Quota and Governance Reforms, upping the amount of money the US would lend to the IMF, among other things. http://www.imf.org/external/np/sec/pr/2014/pr14568.htm Christine Lagarde is not at all happy about the situation and proposed alternative arrangements. http://blogs.piie.com/realtime/?p=4273&utm_source=feedburner&utm_medium=%24{feed}&utm_campaign=Feed%3A+%24{RealTime}+%28%24{RealTime}%29
I am wondering if the IMF, like many other international organizations, is on its way downhill in terms of what it can do. It will be less able to backstop big problems around the globe.
Yep, and the IMF’s 2010 quota deal is largely about voting % and veto powers, US doesn’t want to yield equal powers to 3rd world newcommers (BRICs), while the deal is 5years overdue! The author reads the situation as the IMF being the chief int. organization, which in its role applies the “metrics” of the owners of the system on the individual local players (countries). However, buried deep in comments on his blog from May or somewhere on Opec, he is personally of the opinion, the IMF won’t hold it together working much longer after that, say 5-15yrs max, then chaos, regional autarky attempts etc.
Now with the fall of Russia watching live, it’s clear enough, that the west has gotten some needed breathing space, China will have to silently postpone some of its actions, and actively help keep the system running for the time being, while preparing on the side.
It’s the same old, the Western Roman Empire survived numerous clinical deaths before collapsing for good after certain threshold, it’s nature, the sloshing momentum of roughly 1700s – to present day of exponential growth and same lineage of institutional framework simply doesn’t wants to die yet. It’s a beast bigger than few human generations and older than few 4th turnings.
http://theeconomiccollapseblog.com/archives/junk-bonds-going-tell-us-stock-market-heading-2015
That is very interesting if not down right alarming. I wish I had a lazy billion or three to “bet”.
The same author wrote an earlier article as well.
http://theeconomiccollapseblog.com/archives/near-perfect-indicator-precedes-almost-every-stock-market-correction-flashing-warning-signal
B9 and others,
IMO, Putin will not be “deposed.” Even during this ruble free-fall his popularity is as high as ever. His billionaire buddies exist at his convenience as he moves all of the levers of power and influence. With currency crisis and sanctions creating its “boundaries” Russia will slip into chronic recession, but then pull out of it when oil spikes back up once it is priced lower than its value. Ultimately, we will have is a subdued Russia, but not a beaten one. Geopolitics will go back to “normal” and we will have an uneasy truce as all sides begin to learn the post-cheap oil lesson that cooperation is better than conflict in an era of scarcity. As I’ve said, ad nauseum, all sides in this game are ultimately rational actors.
Not so much, they can surrender to SDR and survive for a while. Some PTB are not against SDR, remember they have not much national foundations. For “them” you are not a part of “us”, don’t forget it
“Well done Gail, if you vanished I’d have a nervous breakdown :)”
Me too, Gail – me too…
I would just as soon you stay well. Thanks for the compliment.
“I have also discovered that a lot of existing readers only barely understood the first time.”
I understand, Gail, as trying to communicate information can be very frustrating. Most people filter information, altering it to fit their predisposed perspective. All you can really do is put it out there and let it fall where it lands.
Your blog definately needs some kind of wiki where new readers could find relevant information explaining popular myths about renewables, economy, financial system, energy sources extraction, etc. Without it a lot of people are lost and can’t comprehend your predictions.
So far Paul has been converting/educating them and quoted past articles. As I see it the same questions from ‘newbies’ arrive below each post and this is very inefficient – over and over the same arguments.
“Your blog definately needs some kind of wiki”
I’d be willing to set one up, but I don’t have time to take the lead on content.
I’ve done a lot of MediaWiki work. That’s the open-source software behind Wikipedia.
Thanks for the offer. I definitely don’t know anything about wiki software.
You are right. That is what I need. I am probably not the best person to do it though–I get distracted with other things.
It is possible to get to articles by searching, but people don’t know where to search.
I’ll set up a wiki, if someone else will take the lead on organizing content.
Our co-op website is a wiki. I also set one up for my vegetable-oil-powered step van. I did another for intentional community organizer Diana Leafe Christian’s ecovillages newsletter. (This one required a lot of changes, and was a lot of work to get it to look that way.)
Anyone want to volunteer to organize content? If the words “markup language” don’t scare you, you can learn MediaWiki fairly easily — easier than BBCode or HTML — and I’ll consult with questions and problems.
Obviously, Gail has to think this is a good idea. But that might happen if a cadre of volunteers raise their hands… 🙂
Jan Steinman wrote:
“I’ll set up a wiki, if someone else will take the lead on organizing content.”
I can lend a hand…
Thanks! We need to figure exactly what we are doing, early on.
I’d thought about pointing a TextMining application at the site, but
a) the app I am adapting is still a work in progress, and
b) it needs some method of breaking up the posts (maybe by identifying authors, and
c) there would still be a massive amount of work to flag each post appropriately,
unless it was carried out automatically.
Emails are easier because the format is already defined.
Just saying …
Speaking of Seeking Alpha:
Report: Sony Pictures suspends film shoots
Dec 14 2014, 07:59 ET
About: Sony Corporation (SNE)
By: Yoel Minkoff, SA News Editor
Sony Pictures (NYSE:SNE) has cancelled the production of several films due to the cyber attack which has left it unable to process payments, The Times of London reports.
Yesterday, hackers released a seventh cache of files leaked from the studio, along with a promise of a “Christmas gift” that would “put Sony Pictures into the worst state.”
The cyber attack has so far revealed four films, countless email threads and salary details of Hollywood stars.
It looks like the North Koreans are hard at work.
Preventing a ‘cyber Pearl Harbor’ will require innovative thinking from the military
http://www.washingtonpost.com/blogs/innovations/wp/2014/12/10/preventing-a-cyber-pearl-harbor-will-require-innovative-thinking-from-the-military/
– full frontal attack from a known assailant: OK
– diffuse (or even localized) terrorism: ahem…
– shadowy digital adversaries: ???
“Preventing a ‘cyber Pearl Harbor’ will require innovative thinking from the military”
Good luck with that, it is really something that should have been dealt with 20 years ago. Besides, I’m not sure what authority the military has over infrastructure prior to an attack occurring.
It would be informative if they did this for the top 1000 corporations in the world.
You’re completely wrong there, Petro. Gail may have a lot of typos in her articles but the reason they are so good, and why she always receives hundreds of comments in response, is that she explains a highly complex situation with the utmost clarity. Just imagine how much you would have to know and understand in order to be able to write what Gail writes, and to do so in a way that most people can understand and learn from. This makes her a very gifted writer. Your comment, in comparison, is convoluted and bordering on the nonsensical. Try again, try harder. Or as Samuel Beckett put it: “Try Again. Fail again. Fail better.”
I think that the basic problem is that this is difficult material to explain.
Dear Ms. Tverberg,
I do indeed agree with your “…this is difficult material to explain…” thesis.
I do however, differ from you regarding its meaning.
I work in energy investment banking and among other things, that enabled me to thoroughly discuss (as well as influence decision making process on energy-financial matters) “stuff” that you have articulated here and other forums in the last 5-7 years with people like: Dr. Campbell, Mr. LaHerrere and the late Mr.Simmons since the mid ’90s. The privilege and honor of working and learning from those men allowed me the luxury of comprehending a few things.
One of them encompasses the “…this is difficult material to explain…” thesis of yours.
I learned that “this material” is not intrinsically difficult – at least not for the “grey matter” organisational level of you and I.
You have embarqued on the path of explaining “this material” to Bill Hulston-s, Daniel Hood-s and Rodster: +1 crowd and THAT is what makes “this material” difficult.
Precisely for THAT I suggested you reconsider your phrase/sentence “brewing” capabilities/abilities!
There are more of them nowadays, but the manner in which one can identify them has not changed: one takes words like “shill” and “troll” out of their vocabulary and they shall result to profanities in describing alternative views from their own, for that is indeed the extend of their lexicon.
We both know we shall crush and burn Ms. Tverberg, but not because of what you narrate in this respectable blog – that will be a “cool” bonus/consequence!
We shall crush and burn as a result of the answer to the following question:
when modestly intelligent (one would assume they went to school a few days here and there!) subjects like Bill -s, David-s, Rodster-s, yt75-s and numerous others on this forum react like they did regarding an alternative proposition, can you imagine how the millions of overweight “zombies” who roam around malls of this country this time of year sipping slurpees and swiping plastic to buy more plastic shall react when what you write about converges to a terminal point?
-Heaven save us all!
I respect what you write! I have the luxury of reading it for fun, for frankly, I do not expect to learn anything new here. My career enables me plenty of that in far more detail! But I am always open to the “…one never knows…” part of the equation. One of those “..found first US edition release of the Stones vinyl discs in a garage sale…” type of stories frequently intrigues me and that is why I roam around sites like this one.
I made only a sincere suggestion.
Thank you for your time.
Be well.
Petro
Now there’s a good suggestion! And my guess is that it won’t. Stylistically, especially for a mixed audience of believers/non-believers and experts/novices, simpler is better. Gail’s message is not primarily conveyed by style anyway. It’s a constant drumbeat of fully supported uncomfortable facts and data, facts and data, and more facts and data. I can read Kunstler for style (which he does quite well, by the way!) and John Michael Greer for the Theosophical view (ditto). I read Gail for her actuarial point of view, which, as far as I know, is the only one like it out there. And it’s a good read, stylistic or otherwise.
I have found the regulars on this site do not want or take any criticism or willing look at at any ideas in which they disagree. Gale has been flamed on her own site for her beliefs on climate change and her possible beliefs in a higher power. They are certain they are right. Like John Mauldin once said ” One can be certain of something which is wrong”
My 2 cents
John Mauldin would know as he is mostly wrong on most things including his take on fracking.
Petro – your comments would be better received if you had offered a simple restatement of Gail’s thoughts and asked if you were understanding it clearly and if that might not be a better method of getting it across to some of the people you work with that need a different method of explanation. This is used in law for teaching purposes and clarification purposes.
This approach would be more useful and constructive than the method you have chosen.
Thank you Calista!
“…if you had offered a simple restatement of Gail’s thoughts and…”
– I did consider what you kindly suggest, dear Calista!
However, fearing that:
a). “restating” Ms. Tverberg’s thoughts (on her own forum of all places!) would be arrogant and disrespectful to her and this forum – both of whom/which I do respect;
and
b). “restating” Ms. Tverberg’s thoughts (as you suggest) would generate the exact same reaction which it in fact did;
I suggested what I did, in the manner which I actually did as an alternative.
-Obviously and evidently I miscalculated!
This is a “comments free for all” type of forum, if I am not mistaken, therefore wording akin to that of a Judicial/Law setting with ALL its intricate and often verdict/outcome altering sophistry would have been clearly misused and inappropriate, as well as would have indeed exceeded comprehension capabilities of most (if not all) of the commentators on this forum.
“Taking the fire” from the person whom my principal comment was addressed to (Ms. Tverberg) is one thing, but being attacked by the +1, +2 crowd who indeed feel the need to “defend” the good guy (Ms. Tverberg) from the evil “shill” attacker (i.e: I), and who arrogantly believe they have the knowledge and intellect to “add” something useful to the discussion of this gravely important topic because they stumbled upon this blog while searching the Web for Kardashian’s derriere, and “learned” a few things – is quite an unpleasant other one!
Unfortunately, that reaction is perhaps the most accurate gauge as to how the “informed” and “initiated” members of our society will react when indeed what Ms. Tverberg and people I have had the privilege to learn from warned us about, shall become reality.
How about the GED and the “No child left behind” crowd who constitute the majority? Can one even begin to comprehend how they will react when there is a blackout and no way to swipe the plastic and pump gas for the ‘5″ lifted truck with chrome wheels’? How about our “bravest” with their armored monsters we so stupidly allowed them to have (to protect us and our children, of course!)?
Pray, dear Calista. We ALL shall need to!
Thank you again for the pleasantly suggested idea!
I regret we diverge on our thoughts regarding it.
Be well and enjoy the Season.
Petro
P.S.: “This is used in law for teaching purposes and clarification purposes.” … I have quite an interesting approach regarding “teaching” and “clarification” purposes of the modern judiciary sophistry/lexicon – as I have been lucky enough to financially and intellectually “win” against it, but that is for another time…
I would like to please ask that we not have any more comments telling Petro what he should or should not do. Criticism of well-intended behavior of others is definitely not necessary.
My greatest apologies. I did not mean to criticize. I maybe wrote things a bit wrong and I apologize for that. I had hopes that Petro, who kindly denied and with good reasoning, would actually restate or rephrase some of the reasoning. I read here and read the comments, very very far behind due to an ill family member taking up a great deal of my spare time, specifically to find other ways of explaining what is happening to those around me. Finding those different words, a slightly different phrasing is often what helps me get through to those around me. My closest friends and family struggle to understand the what, why, wherefore, of the events and changes on the horizon and sometimes see that what I’m saying make sense but still don’t seem to grasp the whole picture. I keep trying and there are some very fruitful conversations when a commenter here says something just ever so slightly differently it gives me better words to explain. This is why I read the comments and maybe what I should have said to Petro is that “Please do rephrase, I, for one, would very much like to hear another voice as it helps both me understand and me explain to my friends and family”
My apologies, I meant no offense and was, poorly, trying to encourage rather than criticize.
Enough already!!
I have a little difficulty with the if oil prices “go higher / go lower ” we have a problem. I don’t see how you can have it both ways.
It’s simple. If prices go up high enough to cover production costs, not enough people will be able to afford oil to support the industry. If it drops down to where it is affordable for most people, it won’t cover production costs. It’s a catch-22. Oil demand – and by demand, I mean what it is needed for goods to be shipped across the country and globe, plus sending people to work, mining minerals, etc… – is somewhat inelastic given how today’s economy works. If you live 20 miles from work, you’re not going to walk. Running megafarms requires oil. Shipping food and clothing requires oil. Unless we return to local economies, we are going to rely on oil for the basic necessities of life. It is getting more expensive to produce oil while the middle class is being destroyed. As the gap between what it costs to produce oil and ensure future production and what the people depending on the goods and services can afford increases, the more of a catch-22 this becomes.
Just remember, oil is the most convenient form of energy for ensuring mobility, and energy is what gets things done.
Perhaps I just reason things out a little differently. Low oil prices will have mixed results. They will hit the fracking industry hard with job layoffs, etc.. On the other hand they will leave more money in the hands of consumers and we have a consumption based economy. This may help the economy short term depending on whether the savings increase spending or just slow down the rising debt level. Probably a little of both. This may be a wash in the U.S.A. But a plus for Japan. Eventually oil prices will be forced up once again by the cost of production.
I believe the 2007/2008 partial collapse was caused by the debt bubble in the form of subprime mortgages with a heathy assist from oil prices and that the larger collapse to come will once again be caused by the debt bubble. The production cost of oil will play a part in one manner or another.
“Eventually oil prices will be forced up once again by the cost of production.”
If it were so simple, we wouldn’t have to worry about collapse any time soon, would we? Unfortunately, no mechanism exists to ensure that commodity prices stay high enough to cover the cost of production. That is our entire predicament in a nutshell, as I see it. Of course, scarcity caused by too high production costs will tend to drive up prices, but not beyond what the market can pay. Which still might not cover production costs. I guess we will find out when there is an actual shortage if we are there yet.
I was wondering the other day how best to encapsulate our predicament in a nutshell. The best I could come up with was: “The law of diminishing returns (vis a vis our physical resource-base) is trying to express itself through a financial system predicated on growth. Systemic failure will result.”
Do any other FiniteWorlders want to have a stab at coming up with something a bit snappier, now that the Christmas drinks party season is upon us and such conversational gambits are at a premium?
Hi Harry, Here is a link to a “short elevator talk” that Interguru posted previously:
“Our system is very fragile, the problems that caused 2008 — high oil prices and impossible-to-pay debt are still with us. The next breakdown may be too big to bail out.”
http://ourfiniteworld.com/2014/05/29/converging-energy-crises-and-how-our-current-situation-differs-from-the-past/#comment-34607
Thank you, Siobhan!
Think of the world economy as a contest between commodity producers and the rest of the world economy. Commodities include oil, natural gas, coal, minerals of every kind, and fresh water. Commodity producers need more and more of total commodity output because of diminishing returns, so the rest of the economy necessarily gets less and less. This leads to an end to economic growth for the rest of the economy.
Without economic growth, our debt-based economic system fails. Unfortunately, long-term debt is necessary to “move forward” profits that will be available, only after the benefits of commodities become available to the population through improved goods and services–otherwise the price of the commodities will not be high enough to justify their cost of extraction. Once the debt-based system to extract commodities fails, we are out of luck. The remaining commodities must be left in the ground.
Put another way, if the average American cannot maintain their current lifestyle if oil costs more than $70/bbl, yet the break even price for a quarter of the oil industry is $100/bbl or more, either your average American accepts a lower standard of living, or oil production goes offline. If oil production goes offline, there is less oil to ship goods and drive to work, so even at cheaper prices, there is a reduction in mobility, i.e. a reduction in living standards. At the higher prices, oil companies would be pumping more than the average American can afford, and there would be a supply glut. All of this is happening in a financial system where growth is required in order for current and future debt obligations to be met. In the US alone, there is $60 trillion in debt, both public and private, and the M2 money supply is is around $11 trillion. How to pay that debt off? Create more money, but without growth, it just winds up being more dollars chasing the same amount of goods. The engine of that growth is fueled by oil. It takes oil to move goods around and to move people from A to B to provide services. With less oil, we move less goods around and with expensive oil, we cannot afford to purchase the goods that would be moved. It is a catch-22. Expect some crazy whipsaws in the price of oil because of this as the price jumps back and forth between brake even prices and prices that people can afford.
“Price” is actually just a relative value. Stop thinking about money in terms of it being the ultimate arbiter, the thing in which everything else is denominated. Thinking like that is what leads to thinking that increasing the number of money units is somehow beneficial for an economy.
Instead, recognize that money is just another commodity. And what is difficult for any complex system to navigate is dramatic shifts in the availability or perceived value of any commodity that other things are dependent on, because this disturbs equilibrium. This is why both deflation and inflation are bad for an economy. Similarly, dramatic shifts in oil prices are difficult for an economy because so many things are related to them or dependent on them, and up is no better than down. What we want is flat and stable — that’s a base that bigger and more complex problem solving can be built on. Churn and volatility, on the other hand, cause us to abandon more complex problem solving because uncertainty is a doping agent that poisons long term planning.
Put another way, the price of crude is swinging between the upper limit of what economies around the globe can afford to pay and the lower limit of what U.S. shale drillers and off-shore producers need to stay in business. Steve Ludlum calls it the Triangle of Doom.
Our economy is more complicated than most people (including most economists) understand. When we start reaching limits of oil extraction, prices start behaving in a bizarre manner. There are really two different problems going on at the same time:
(1) Rising cost of extraction.
(2) Falling ability of consumers to pay for the oil. This first affects wages, but later affects the amount of debt that can be paid back with those falling wages.
So we have a fight between
(a) Whether the price of oil goes high enough for the producer, or
(b) Whether the price of oil falls low enough for the consumer to afford (including wages plus affordable debt).
These amounts ((a) and (b)) are getting farther and farther apart, so we know the system has to break some time. If the oil price goes too high, consumers feel the pain–hence the problems with high oil prices. If it goes too low, producers feel the pain, and ultimately the debt-based financial system collapses. My bets are with low oil prices being the way to “peak oil” + peak lots of other things.
Gail, An I understanding you correctly? My bets are with low oil prices being the way to “peak oil” + peak lots of other things. Do you feel as I do that oil nay slide much farther down thereby shutting in the most expensive unconventional s first and marching it’s way down the hill until all that’s left are what’s left of the cheaper legacy fields and then a climb again to prices that (probably quickly) become unaffordable to most only to start the cycle down again until the floor of production costs and the ceiling of affordability narrow increasingly with each cycle? If so transport fuel will become first a luxury and eventually a boutique item beyond any absolute useful need. WTI and Brent both dropped each about three dollars today so far. Tick…Tock
I am not sure how much oil prices will really bounce back up, after they fall. It is not clear to me what all will be cut off for production–it could be virtually all new production. All that will stand is legacy production. But even this legacy production will see a decline, faster than we might expect from so called “decline rates” as exporters find their economies imploding from low oil prices. I know that I have seen an article about Venezuela losing its oil industry engineers and other workers because its salaries are no longer competitive, given the drop in the Venezuelan currency. It is hard to keep production going without workers.
It should be mentioned that oil price volatility is partly as a result of the capitalist system of auctioning – the so-called “free market”, which enables the rich to get all they want, and forcing the poor to drop out of the bidding (demand destruction). In a internationally planned economy, these damaging price fluctuations would not be allowed to happen. OPEC (mostly Saudi Arabia) acting as swing producers to maintain price stability has been an attempt to achieve this less painfully.
In the 2008 crash, the peak of $147 /barrel was followed by the trough of $34 /b only six months later. That gives a rough approximation of how long it takes any major shock to work its way through the system. The time lost, and overshoot/undershoot experienced, while waiting for the feedback mechanisms to kick in causes the price to fluctuate between the “too high” limit and the “too low” limit. We’ve had the bumpy plateau phase, and we are now entering the bumpy decline phase.
We are running out of cheap oil. We are screwed. How that manifests its bad effects differs depending on whether the price is high or the price is low. It will also manifest even if it stay nice and steady in the middle. Each case will have its unique signature.
Riding the Rails,
If you’ve followed Peak Oil Theory for any length of time, you’ll come to the concept of the “undulating plateau.” That is: once oil has peaked globally, we will have a series of peaks and troughs as oil prices rise (due to scarcity and world demand) and oil prices fall (due to demand destruction, caused by the high price). The undulating plateau of rising and falling oil prices will see-saw between the high cost of production destroying the demand and the scarcity of an oil resource in a world that badly needs it for economic growth. Eventually, though, hard limits assert themselves and the the undulating plateau will end in a terminal decline as oil becomes too expensive to produce and the economic system collapses under the contradiction.
We are in the undulating plateau phase of Peak Oil Theory right now. Nobody can predict how long it can go on or how robust the system really is, or to what extremes institutions will go to draw the plateau out as long as possible.
A very balanced article, connecting many dots. Thank you!
Thanks! It took me a while to put it together, gathering the various pieces.
Gail, a couple of things:
On the bail-in, that’s already planned for the US and the UK according to the FDIC:
“In the U.S., the strategy has been developed in the context of the powers provided by the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Such a strategy
would apply a single receivership at the top-tier holding company, assign losses to
shareholders and unsecured creditors of the holding company, and transfer sound operating
subsidiaries to a new solvent entity or entities.”
https://www.fdic.gov/about/srac/2012/gsifi.pdf
If you read through the document, it will use the term ‘bail in’ in a place or two, but when it says “unsecured creditors,” it means people who have deposited money in the bank. For those who don’t know, when you deposit money in a bank, you are lending it to the bank to do whatever it wants to do with it, and you obviously don’t get any collateral in return.
Also, to add another layer of complexity, I think that it should be pointed out that oil is highly financialized.
http://eoddata.com/stockquote/NYMEX/CL.htm
If you look at the volumes for WTI contracts, it becomes clear that far more paper is flying around than there is oil. Each contract is for 1,000 barrels of oil, which means that it is common to have over 500,000,000 “barrels” of oil traded each day just for WTI crude. That’s only one subset of world production, and the world consumes, what? 85,000,000 barrels per day, give or take? It stinks. It is also just one more way that the financial system is exposed to oil.
If oil prices don’t come back up soon, we’re going to be in a heap of trouble, but unfortunately, I think that, should this trend continue, we will wind up with several Enron style scandals with mark-to-unicorn accounting, and the reaction will send oil prices to the moon, which is just as bad.
http://www.thehillsgroup.org/depletion2_022.htm
Thanks for the tip about the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 being the source of Bail-Ins for the US. I found this summary of the act. It never uses the term bail-ins. Instead, it says:
Of course, “unsecured creditors” means those with deposits in banks. The summary also says:
Thus the government stays “whole,” depositors remain on the hook. The FDIC can’t bail out banks either, other than with the little bit it already has collected in premiums for coverage.
I presume that those writing the legislation were aware that if it needed to be implemented, it would likely be needed to be used on many large banks simultaneously. Businesses that lose their balances will be in very tough shape–probably end up laying off a lot of workers, or closing completely. The economy would be badly affected, just in a different way than with the governmental bailout used in 2008.
I don’t remember that the press talked much about these issues. I should have been aware of this earlier. The recent G20 agreement I mentioned in the post presumably (1) extended similar provisions to Pension Plans and (2) extended the agreement to the entire G20.
Gail, there is another disturbing fact that you should be aware of. You obviously know about OTC, derivatives, but I’m not sure if you are aware of where those OTC derivatives are parked.
http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/derivatives-quarterly-report.html
At that link, you can see trends with them, but if you keep on scrolling down on just about any one of the reports, you’ll see that a lot of the institutions that have stupid nominal amounts of exposure ($50 trillion in exposure is pretty stupid) have things like NA and National Association at the end of their titles. Of the biggest four in terms of exposure, three have this. Citi, JPM and BofA. One of the things that the NA at the end of the titles means is that these bank holding companies are stuffing their derivatives into their FDIC insured deposit taking subsidiaries. If that isn’t bad enough, there is a bill working its way through congress that would ensure that taxpayers are on the hook if the derivatives market goes BOOM!
Of course, people say “But if this starts to unwind, Citi will owe $25 billion but be owed $26 billion, so the risk to the financial system is only $1 billion!” They never take into account what happens if one of the counter parties cannot afford to pay and goes under. That wrecks the unwinding process in its entirety, and that’s almost what happened in 2008 with AIG, and what led to the bailouts and QE with Lehman.
Thanks for the link!
I think one take-away is that if there is any chance of a Cyprus-style bail-in, a person doesn’t want their money in Bank of America, J P Morgan, Citibank, or Goldman Sachs. Of course, it is hard to do anything about where the company you work for has its money, or where your city government has its money tied up, or where the annuities and pension products you are depending on have their money tied up. So it is hard to get away from the exposure, even if what looks like your own personal direct exposure is low.
Hi Gail
#6 is worded:
“Issue 6. The benefits to consumers of a drop in oil prices are likely to be much smaller than the adverse impact on consumers of an oil price rise. ”
I believe you should reword this because it does not make sense given the current syntax you are using. Do you mean to say:
“The benefits to consumers of a drop in oil prices are likely to be much smaller in proportion to the adverse impact on consumers of an oil price rise.”?
Otherwise, great post as usual 😉
For clarification: The reason the sentence does not follow is because you use the term ‘smaller’ to refer to both a loss and a gain in the same sentence, without changing the object that is either small or large to which you are referring. You must differentiate between gains and losses, otherwise “smaller” is a nebulous word in context.
I am talking about “the benefits to consumers” of a drop in oil prices vs. “the adverse impact on consumers” of an oil price rise.
I am talking absolute benefits or adverse impacts–say of oil price rising from $70 to $10- vs falling from $100 to $70. The number of dollars of additional revenue available to consumers to spend as oil falls from $100 to $70 is fewer than the number of dollars lost to consumer as oil rises from $70 to $100. The number of jobs created with respect to oil falling from $100 to $70 is fewer than the number of jobs lost, as oil prices rise from $70 to 100.
Per capita, the economy hasn’t been growing much since 2008, so I don’t see “proportion” being an important idea.
Gail
It seems to me that a simple model may assist thinking and explaining. Imagine 3 boxes, labeled Humans, Petroleum Industry, and Finance. Imagine double headed arrows connecting all the boxes.
The Petroleum Industry is dependent on the humans to earn the money to pay them for the work they do to produce the petroleum products, and it is dependent on Finance to loan them the money they need to acquire the resources needed to do the work. The Humans are dependent on the Petroleum Industry to provide the concentrated energy, without which the economic world as we know it cannot continue and humans would not have paying jobs, and on Finance to provide a medium of exchange, a store of value, and also to provide money in the form of debt. The Finance sector is dependent on the Humans to make deposits and take out loans, and to purchase Petroleum Industry products so that lots of mergers and acquisitions and bond issuance and derivatives and all that sort of stuff happens and generates fees. The Finance sector has, recently, become considerably more dependent on the Petroleum Industry to sell junk bonds.
If you look at these linkages, and try to figure out which one’s are the most vulnerable to a shock in terms of lower oil prices, then you have a method to make an educated guess about what may collapse and cause severe repercussions in the other links. Alternatively, one could imagine that several supergiant oil fields are discovered lurking just a couple of thousand feed beneath the sands of the Sahara, and try to figure out how that would ripple through the connections. Finally, one can play games with ‘high cost oil’ and ‘low cost oil’. Instead of the supergiant fields beneath the Sahara, we take the real world finding by the joint Exxon/Rosneft drilling in the Arctic which found the first of what may well be a string of very large oil fields. However, the Arctic fields will not produce cheap oil. How do the benefits of ‘more expensive oil’ stack up in terms of the benefits to the various linkages?
It might be that the junk bond issue is the most fragile link. My suspicion is that the Central Banks think they know what to do about that…print more money. Whether that will work, I don’t know.
It may also be instructive to consider the current effort to launch a hostile takeover of BP. I have read that BP can be bought for considerably less than the value of their reserves. Would the breakup of BP in a hostile takeover have any harmful effects? Might it have some positive effects?
Don Stewart
Actually, I don’t think that the Central Banks are sufficiently aware of what is happening to realize that they need to print more money. Their lack of understanding of our predicament is part of the problem.
If Russia collapses they have the advantage of their Dacha villages outside the cities, which already produce a significant portion of Russian food. Most city dwellers can simply move to their Dachas if the economy collapses. This is why Russia has a much better security net than f. exs. Norway, or the priced Scandinavian “welfare model”.
http://www.reclaimgrowsustain.com/content/russians-proving-small-scale-organic-gardening-can-feed-world
Based on the 1999 “Private Household Farming in Russia” Gosmkostat (State Committee for Statistics) statistics, these Dacha families produced:
38% of Russia’s total agricultural output
41% of the livestock
82% of the honey
79% of the sold cattle
65% of the sold sheep and goats
59% of the milk
31% of the sold poultry
28% of the eggs
91% of the potatoes
76% of the vegetables
79% of the fruits
These numbers were from back in 1999. I wonder if they still hold today. Also, maintaining train transport to reach these Dachas was an essential part of the plan. Without it, the plan wouldn’t work.
When I visited Russia in 2012, I know I saw a lot of gardens. Moscow has rich black soil and fairly abundant rainfall. This combination is helpful. I am not sure whether other cities around the world could do as well.
As expert chess players, all Russia is really aiming for is a stalemate, a continuation of the current state of affairs. If they are honest with themselves – and I think they are – it’s not like Russia has any possible means of creating a USD reserve alternative. Their game is defense, which is much easier to execute than the Western strategic offensive game-plan.
Still, a stalemate would have a certain bleed-out effect on the West. In that kind of environment, who knows how long Russia could hold out? With their strong mono culture, limited welfare dependencies and expansive subsistence farming, today could actually be a model for 20, 30, 50 years down the line. Compare those policies to the West, were authorities would essentially have to nationalize entire economies in order to achieve mandated consumption levels.
But the real big play is the possibility of a Western victory. With that in hand, the PTB could simultaneously effect a 10:1 devaluation, while opening up the investment & immigration spigot into Russia. They too could play the American & European game of real estate leverage by allowing 10s (100s) of millions of Africans, Indians and Asians to populate the empty steppes.
All the native Russians would have to do at that point would be to shop. Imagine, no more hard work, no more insistence that everyone toe the line with regard to cultural uniformity & conformity. If Russia yields to Western dominance, the DOW could literally hit 250,000 with a fairly short-term.
The last, great consumption orgy before the effects of living on a finite planet were felt would be one for the ages.
A ‘reserve currency’ is only important for international transactions. If your only aim is to be a self-contained national or regional power, as Russia is well positioned to be more than any of the other actors on the world stage today, then having a global reserve currency is likely not a factor. I think a lot of the western paradigms that the US shamelessly parrots at every opportunity are about to be exposed as just so much rubbish. The US is little more than a paper giant now, and worthless paper at that!
Excellent analysis as usual.
While some have attributed the Saudi price cuts to “a secret deal” with the US to “get Russia”, there doesn’t seem to be any evidence behind it. On the contrary, the price differential between North American and European/Asian markets would seem to indicate the price cuts were specifically targeted at the US and Canada. The US has seen the biggest rise in output, and no doubt Saudi is tired of being the world’s swing producer, while the US is stuck in “drill, baby, drill” mode. It should also be noted that Saudi officials met with Russian officials immediately before the latest OPEC meeting, so Russia was able to co-ordinate its announcement of “no cuts”.
Of course this price war will affect ALL producers, but I would have thought the unconventional producers (shale, tar sands, super-heavy, offshore Arctic, offshore super-deep) would be hit long before Iran would. How do people justify saying Iran has the most expensive production in the world, when presumably they have already shuttered their most expensive wells, and curtailled further exploration, due to sanctions? Wishful thinking, I suspect.
The impact on US producers should be seen first through the high yield bond market in the energy sector. The oil majors have already left the market, so the minors are all there is. If one should default, the risk premium required for all the sector’s players would go through the roof, leading to a prompt shut-down of further development. Whether they can ever restart again is an interesting question.
Hi davekimble3,
…you seem to have quite a few things/concepts backwards…Allow me to explain and help, please.
1). “…While some have attributed the Saudi price cuts to “a secret deal” with the US to “get Russia”, there doesn’t seem to be any evidence behind it…” – That is why it is “…secret…”, for there is NO evidence to back it up- just logic and common sense and history (assuming one knows it, as well as understands it! – Assumptions are the mother of all F**K-ups…I know)
2).”…the price differential between North American and European/Asian markets would seem to indicate the price cuts were specifically targeted at the US and Canada…”
-Incorrect! Europe (for reasons which explanation far exceeds the space and purpose of/for this reply – therefore I am not going there) Always has had higher oil/gas energy prices than N.’Merica.
3).-“…How do people justify saying Iran has the most expensive production in the world, when presumably they have already shuttered their most expensive wells, and curtailled further exploration, due to sanctions? Wishful thinking, I suspect.”
– Incorrect! Iran has one of the lowest oil production costs in the world, comparable to/with other area producers (i.e.: u.a.e; S.A.; qataar; etc) What the people you read failed to explain, or you failed to understand from their writings, and/or both – is that Irans’ budget (therefore ALL their domestic economy!) is BALANCED assuming oil price will be $145+ or so and THAT is why low oil price is a problem for them (among other probs)
The USA/S.A./ow oil price strategy worked very well in collapsing soviet union in the late ’80s early ’90s….this time things ARE/WILL be different…very different!
There have been way TOO many billions of barrels pumped out of GHAWAR since then and there is a new sheriff in town(moskow!) today.
Our leaders are too prickly arrogant and too blissfully ignorant to know/admit that fact!
…and arrogance and ignorance are ALWAYS an explosive mixture.
Hope I helped!
Be well,
Petro
Everything Gail writes about is 100% spot on; it’s the things she doesn’t write about that are left for readers to discern for themselves. There is only one possible way to ameliorate the effects of what she is describing and further extend the Ponzi for some indeterminable amount of time: Ceterum censeo Russia esse delendam.
With Russia incorporated into the USD reserve system, new $trillions of hard assets can be lent, leveraged, re-hypothecated, and otherwise churned into the pool of global derivatives that keep the game afoot. Without Russia as a vassal state, the US/EU will be forced to move more aggressively into mandating specific targeted growth and sector expenditures to keep the debt balloon expanding.
Once you understand these basic principles of how the world actually works, then it’s quite easy – trivial actually – to piece the puzzle together. With an undeclared war, all possible resources are brought to bear, including any advantages the West possesses in military, diplomatic, financial and media.
We know of the first three, but I would be literally astounded if we weren’t incredibly active in trying to persuade young Russians to give up the fight and join the consumption party. Think of the deal they could cut to have first priority on newly printed reserves: just like Americans & Europeans, they would no longer have to work, but could spend their days shopping with endless credit card balances for products built by Chinese & India (virtual) slaves.
But there’s a downside as well, and that is that current Russian leadership isn’t going to stand idly around. They too will attack Western weaknesses and exploit the lack of mono culture, strong family networks and huge welfare dependencies. A reverse ‘fast & furious’ gun running scheme to funnel military grade weapons to inner cities would be obvious.
But the real great danger is for Americans to oppose these actions. In war, civil liberties are curtailed/suspended; those publicly admiring Putin and criticizing US war efforts will rue the day they so stupidly sided with the wrong team.
So you’re saying we should support the US’s shameless attempt to exploit Russia by bringing them into the consumerist fold knowing full well that even that is just another version of extend and pretend? In a word, bullshit! The financial cancer that is now eating the US alive from within needs to be contained and eradicated. The fact that US citizens will be devastated in the process is our own fault for ever getting in bed with this unholy beast in the first place.
Those in America are desperate to believe Obama had this all planned with the Saudis, so you’ll get many desperate to try to convince you “it’s all part of the plan”.
Remember the joker in Dark Knight where he talks about chaos/order?
“I just did what I do best. I took your little plan and I turned it on itself. Look what I did to this city with a few drums of gas and a couple of bullets. Hmmm? You know… You know what I’ve noticed? Nobody panics when things go “according to plan.” Even if the plan is horrifying! If, tomorrow, I tell the press that, like, a gang banger will get shot, or a truckload of soldiers will be blown up, nobody panics, because it’s all “part of the plan”. But when I say that one little old mayor will die, well then everyone loses their minds!”
So because “it’s all part of the plan” in their minds, it makes them feel better.
“Natural human tendency is to suffer wishful thinking” Elon Musk
Wishful thinking, yes. The first step is understanding that it can happen here. We can collapse. If we had real leaders, they would be acknowledging this, then coming up with a plan do deal with this, and thus all of the bad things that happen would be according to plan. Part of the plan would have to be teaching people to improvise. But as it stands, people don’t even want to contemplate what could happen, much less prepare for it. It’s too scary and there is too much money to be made off of the current system by a select few.
I think we can assume that our leaders are smart enough to know we are facing a collapse of some kind. If we can see it, they with all their experts can see it. What you see them doing currently IS their response to the crisis – beefing up the police to miltary standards, total surveillance of (and ability to censor) the internet, lining up Russia and Islamic extremists as bogeymen, taking a stronger military position in eastern Europe, the Middle East and around China, throwing masses of fiat money at markets to ensure they keep functioning for a little longer, and ramping up the propaganda about how lucky we are we have Freedom and Democracy.
Powering down and teaching the people how to improvise to get them through difficult times is simply not on the agenda. The 99% are on their own. Proof, if more were needed, that democracy doesn’t work and is just a con.
Agree 100%.
Around 2006 or so, a buddy of mine was asked by the government to figure out what the national security implications of higher priced oil were. He was given resources from Lawerence Livermore to do this, so it was serious business. When they were hashing out the details, they had to decide what oil price they’d be figuring out the implications on national security for. He threw out $100/bbl. The government officials contracting this told him that the idea that oil could get up to $100/bbl was preposterous. The government is just as dumb as everybody else on this. There is no plan.
Another way of looking at it is all of the lobbying and regulation that goes into food production. Food regulations are not a one size fits all. Only big producers and small specialty farms that are exempt from the regulations can get by. (Compare regulations on butchering rabbits for commercial sale vs butchering chickens for an example of being exempt.) Small local farms that don’t specialize in something not heavily regulated? Tough luck. The costs of following the regulations crush them. But if you’re in the industrial agriculture business, you can either afford to follow the regulations, or you can afford to pay the fines when you don’t follow them. All of this depends on cheap oil, and I don’t care how high your position is in the government, I don’t care how much of an “elite” you are, you still have to eat. Without cheap oil, this system becomes fragile. When it breaks, food doesn’t go to NY where Wall Street is. It doesn’t go to Washington DC.
The government is incompetent. I know it may look like there is some grand plan, and there may very well be, but because everything we do depends on cheap oil, any such grand plans will fail. All of the might and force that can be brought to bear by the government requires oil. Feeding DHS personnel requires oil. Equipping DHS personnel requires oil. Running Bearcats and MRAPs requires oil. Making body armor requires oil. Making ammunition and rifles takes oil. There may be a brief period of clamping down when things go sideways, but it will be unsustainable, and that which cannot be sustained will not be. Eventually, if they want to maintain control they’ll have to move to a system that is much like the Encomienda system that the Spaniards used against the Indians until the pueblo revolt and the subsequent declaration by the Pope that Indians were, indeed, human beings. They’ll be viewed as parasites and killed if they do this.
Garand555, thank you for that dose of sanity.
I guarantee that there is no plan. No plan. There is a term called “span of control.” No person, group of PTB, government, or “the deep state”, etc. has the ability to control more than a few factors at any one time. Events are too random to control. Chaos and incompetence rule the day. As was said here recently, people want to believe that there is a plan, that someone is in control. Only marginally. Leadership and vision and the ability to implement is always lacking. Here is a bit from Harvard Business Review.
“Unsurprisingly, the mythical image of a “leader” embodies many of the characteristics commonly found in personality disorders, such as narcissism (Steve Jobs or Vladimir Putin), psychopathy (fill in the name of your favorite despot here), histrionic (Richard Branson or Steve Ballmer) or Machiavellian (nearly any federal-level politician) personalities. The sad thing is not that these mythical figures are unrepresentative of the average manager, but that the average manager will fail precisely for having these characteristics.
In fact, most leaders — whether in politics or business — fail. That has always been the case: the majority of nations, companies, societies and organizations are poorly managed, as indicated by their longevity, revenues, and approval ratings, or by the effects they have on their citizens, employees, subordinates or members. Good leadership has always been the exception, not the norm.”
There is considerable evidence that the Saudis were actually targeting US tight oil from shale formations, rather than Russia. http://www.reuters.com/article/2014/11/28/us-opec-meeting-shale-idUSKCN0JC1GK20141128
The issue with Iran has to do with the ratio (Dollars needed for Iran’s budget)/ (Export Barrels). This ratio becomes high, when the number of export barrels is unusually low. If Iran’s quantity of oil exported were to rise to pre-sanction levels, the necessary dollars per barrel would drop.
I think so too. The Saudis have beef with the entire US fracking industry, (I remember clearly the propaganda outlets boasting about US energy independence). The Saudis certainly have massive beef with the Obama admininstration, with Iran, with Russia over the growing Syrian conflict. Note how Obama’s reluctant to take on Assad much to the anger of Turkey and the Saudis. In the Saudi’s eyes, he’s also stalling on the nuclear issue with Iran allowing it to go on indefinitely. Then of course we have Russia also in the firing line.
It’s basically the start of the energy wars we’ve heard about.
Why would SA assume that the bubble of very expensive and very low EROEI shale oil was a threat?
SA was producing flat out prior to the price drop and they continue to produce flat out. If the world’s economy was growing the price of oil would naturally increase, there would be a demand increase. If there is a glut where is the oil being stored, is it China, is it in ships….where is it. A lot of countries are producing less each year due to reasons of economics, depletion, sanctions and war.
There was never going to be oil independence for the USA, SA would not fall for that media drivel, allow them a modicum of intelligence. What the oil producers and the world is experiencing is plain and simple demand destruction, a deflationary spiral to oblivion. It is not just oil experiencing the demand destruction, it’s flowing through to manufacturing, mining, retail, tourism and real estate. I don’t think I have ever seen retailers so desperate.
The past exuberance for a future of being better off than our parents is fast evaporating. College students fear for their future, burdened with debt and meaningful jobs at an absolute premium. Even those with jobs fear for their future. Fear curtails spending and spending is what is required but as Japan has discovered over the past 25 years, battling deflation is nigh impossible nowadays.
Expect from now, companies trying to stay afloat, there will be mergers, takeovers, rationalization, share buy backs and a flurry of job losses. That of course feeds on itself, more people out of work spend less, consume less, pay less tax, need welfare and provide a feedback loop onto the very organizations trying to keep their share holders pacified.
I don’t know. High AND low oil prices is taken as a sign of a immanent collapse. That theory was fitting in 2007/2008 when super high oil prices was one of the causes of a debt related collapse that cut demand for oil drastically. But we haven’t seen that this time, demand for oil has not fallen as far as I understand (?).
Is there any evidence that the lower oil price could be debt related? Has the level of credit given gone down recently?
Interest rates are going up on the junk bonds that they’re selling to finance their operations. If the credit being issued hasn’t decreased, it will.
Take my advice, when you have some down time go hunt down & read Dr Tim Morgan’s 2013 report “Perfect Storm – Energy, Finance & the End of Growth” you can find on google. I promise you, once you start you wont stop reading.
He’s the Global Head of Research at Tullett Prebon in London.
He outlines the 4 factors which are bringing the curtains down on growth as we know it.
“The economy as we know it is facing a lethal confluence of four critical factors – the fall-out from the biggest debt bubble in history; a disastrous experiment with globalisation; the massaging of data to the point where economic trends are obscured; and, most important of all, the approach of an energy-returns cliff-edge.”
Daniel, thanks for the invite over here.
I’ll read that report you suggested. I literally had a similar conversation with someone last night about it. These are the things I commonly talk about. That and the precious metals.
Needless to say, I’m a lonely person! LOL
Hi Finn,
Welcome to the community, you’re alone no longer!
What is of interest is the rate of increase in debt. The US has federal government has stopped borrowing as much money as it did, starting in the midst of the 2008 bail outs. http://www.cbo.gov/publication/45229 Other governments around the world have been decreasing the rate of growth of their debt, particularly in Europe. This is an article talking about the cut-back in Quantitative Easing around the world. http://www.telegraph.co.uk/finance/economics/11170635/One-simple-reason-why-global-stock-markets-are-reeling.html
Slower growth in debt in China seems to be part of the problem as well. Chinese debt was growing very rapidly prior to 2014, and was a major part of the reason China was growing so rapidly. This article shows a chart of China’s debt growth. http://www.telegraph.co.uk/finance/economics/11226558/Spreading-deflation-across-East-Asia-threatens-fresh-debt-crisis.html We know that China has been tightening, particularly in the housing markets, and perhaps elsewhere as well. Home prices have been falling since April, as a result of this tightening. http://www.reuters.com/article/2014/11/18/us-china-property-prices-idUSKCN0J204U20141118 (Remember what happened when US housing prices dropped! US mortgage debt dropped, and defaults rose.) China has also been seeing a cut back in factory demand, leading to less need for debt.http://finance.yahoo.com/news/china-august-factory-output-6-054810972.html?l=1
Thanks for the links and information Gail. However, unlike 2008 there are no signs that a too high oil price brought down demand and thus caused a falling oil price. This time falling oil prices then seem to be an indicator of a slowing economy. So in that case, oil has nothing to do with it, the oil price just reflects the economy?
The continued high oil price (and because of this, inability to compete with countries using lower priced fuels like coal) led to stagnating employment and wages that did not keep up with inflation for most workers. These lower wages led to an inability for debt to keep growing very rapidly, and because of this, reduced economic growth (which is to a large extent a reflection of debt growth). Thus, through a long circuitous route, continued high oil prices led to difficulty in keeping oil prices up. The problem came to a head, when US QE slowed and stopped, and the US dollar rose relative to other currencies.
I would say the continued high oil price was behind our problems. QE hid the problem for a while, but once US QE went away, the price of oil tanked.
What an incredibly insightful comment! Thank you.
By the way, I have mine in an envelope, not a bank.
But don’t target me, because there’s not very much in that envelope… like a tropical biome, almost all my assets are in the form of biomass. 🙂
LOL, The First Mattress Bank. Wise man. I’ve been investing in myself, learning new skills. Food production, making things, etc. My latest project is making a bow for the first time. When I get a chance, I’m going to go up to the Jemez, find some obsidian and teach myself how to knap the stuff. (Youtube will undoubtedly be very helpful with my learning.) When this pig starts to come apart, I want one of the layers of protection not be just that I am more self sufficient than our current system would require, but also that I’m not the guy to kill or rob because I’m the guy who knows things. Eventually, nobody will care about that envelope of yours, but they might come to take your knowledge.
I’m a guy that did a lot more than you seem to be intent on doing – back in the 60s-80s – but then I turned fifty and arthritis started to set in + three lots of cancer, so that the whole “self-sufficiency” thing got confronted with reality, at roughly the same time that I realized that our whole way of existence in in terminal “old age”, about 300 years after the start of the Industrial Revolution, e.g. postulating infinite growth on a finite planet.
“Self-sufficiency” and Libertarianism (for instance) are bizarre ideological products of “Easy Oil” and every other depleting resource (now). They made life too easy for a while, but only for a Western World minority for a few decades after WW2.
“Easy Gold” ended a century ago, but there are still “gold bugs” who imagine that if only they can amass enough gold, they will survive the coming crash, whereas no one will.
You may be blessed with “lucky genes” which keep you fit and healthy into your 90s, but both you and the World at large will eventually face terminal collapse.
Gerry, you sir are a wise man indeed. I turned 56 in October and for the last 5 years I woke up and came to the same conclusion. I’ve said to soooooo many people that it gets tiring. “You ain’t taking it with you”, unless if you’re Whitney Houston. The entire financial and banking system is designed to pillage and consume the earth at exponential rates (see Chris Martenson).
Those that think gold will save them? I have my doubts because when the global system comes to a screeching halt, it COULD look a lot like the 2009 movie, “The Road”.
But isn’t that the way it’s always been? You have the lucky genes, or you don’t? You are lucky or you aren’t, regardless of genes? We are all lucky to have lived during the most prosperous time humans have ever experienced. I’ve had people ask me if I would be happier living in the 1800s. My response was “yes, but with modern medical care.” You can say “I did all of that, then I got arthritis,” and my retort is “I’m not going to have a choice, I’m going to have to live with diminished energy supplies. I won’t have a choice.” If I get arthritis, I’ll have to live through it. If I get cancer, I’ll either have to figure out a cure, like burning skin cancers off myself for the more simple cases, or I will die. Without an alternative to oil, we are going to revert to the mean of human existence, arthritis or not.
Regarding cancer, arthritis, etc., one of the finest things we’ve “forgotten” is natural remedies.
Such things pop up continuously, and your body fights it continuously — until it doesn’t. I’m not at all claiming anyone with arthritis or cancer deserved that fate, or that they brought it on themselves, but a nutritious, organic diet over the years is often lacking in such cases.
And unless you know an Ayurvedic or traditional chinese physician, forget about western medicine for dealing with such things. Western medicine is great for trauma — I wouldn’t go to a TCM practitioner after a car accident. But neither would I go to a western physician for chronic health problems borne of the industrial age.
Gotta go fix some tulsi tea in preparation for a stressful situation arising today. Control of stress hormones is important for avoiding auto-immune disorders.
Jan,
My wife was a marathoner and a vegetarian and she died ten years ago from kidney cancer. She seemed to do everything right but I feel pollution is so pervasive in our industrialized world that no one is completely immune. I think our generation( I’m close to seventy) are the real guinea pigs. I know way too many people who have died of cancer over the last 20 years.
“My wife was a marathoner and a vegetarian and she died ten years ago from kidney cancer.”
I’m sorry to hear that, Steve.
Did you wife eat organic? Did she take care to get a good share of cancer-fighting things, like anthocyanins and anti-oxidants? Did she live in the countryside, with clean air and water? Even if so, life’s a crap-shoot.
But certainly, one improves the odds of not getting cancer if one avoids industrial food, and eats a wide variety of foods, no?
“I’m not the guy to kill or rob because I’m the guy who knows things. Eventually, nobody will care about that envelope of yours, but they might come to take your knowledge.”
Exactly! And knowledge is something that can’t be forcibly taken from you, at least, not very easily.
I just silently chuckle at those who build armed camps. I study Druidry, and “like attracts like.” So those who like weapons are going to go after the ones with weapons caches.
Perhaps you and I will attract people who like knowledge. Tough job, but someone’s gotta do it… 🙂
I’ve had some very personal experiences that have taught me that having weapons is not something that you want to ignore. I’ve been in situations where other people have instigated confrontations that I tried to avoid that would have ended badly if I had not been armed. Fortunately, the realization that I was not an easy victim was all that it took, and having that ability to respond in kind and better than they could played a role. It’s not always like attracts like. One of the guys had scars on his neck from cigarette burns that went nicely with his gang tats. I have no gang tats, do not want them, and I was 1/4 mile from million dollar homes in that particular instance. Sometimes prejudices or greed come into play, and if food is in short supply, survival instinct will be governing the decision making process.
I am a proponent of having weapons, knowing how to use them, knowing when to use them, and then seeking to avoid using them. Try to use reason to avoid the conflict. Swallow your pride to avoid the conflict. If that doesn’t work, be ready to end the conflict. I have done this, and it works.
Yea, I think that’s a reasonable strategy for the US and other places with lots of weapons.
That’s part of the reason I cleared outa there.
“Be careful out there among the English.” — final line in The Witness, in which a bunch of unarmed Amish kept several heavily armed thugs from killing Harrison Ford.
I know I’m not going to change anyone’s mind who believes weaponry solves some problem. I just choose not to have that complexity in my life, and the simpler you can make it, the better off you may be.
While the aftermath and motives of violence aren’t always so simple, violence itself is very simple. You do harm to another person. When times are good, look at the people who would resort to violence as a first resort. Many of them have a very simplistic outlook on life. If times are desperate and people are worried about necessities such as food, people may be relegated to simplistic views of the world and resort to violence sooner rather than a last resort.
Sometimes somebody is just itching for a fight, and you cannot avoid it, but until then, I’d rather garner good will by helping people learn how to live in a world with less energy.
Most plants and animals have defenses and some have weapons. Some weapons are claw and fang, some are poison and thorn, some are sharpened steel blades and slug throwers. Weapons are not inherently evil or complex. They serve a role, but they need not be glamorized or worshipped.
“Most plants and animals have defenses…”
Some are camouflage, and some are just being distasteful.
I still prefer being a small target and a good neighbour as my main strategy. Just helped the guy across the street evaluate a tractor he’s thinking of buying, and it looks like he wants to go in on repairs for my biodiesel processor.
I’ve been moving money to a safe.
We are moving money into tangible assets – a chicken house, spare parts (can you imagine making an inner tube?), spare pump for the well, spare inverters, etc.. Having it in a mattress is better than a bank, but not much.
Of course, we are the privileged since we have some money to worry about.
Money = handsaws, axes, bows and arrows, fertile seeds, garden tools = wealth.
I started on a practice stave on Sunday to try my hand at bow making. I’ve already made several mistakes by having the draw knife cut deeper than I intended, but I left a better part (I hope) of the log for another blank. I’m going to continue with this stave and may or may not get a working bow, then take what I learn and apply it to the better piece of wood. IMO, the ability to make my own bow and arrows will make me more wealthy than just having a bow and some arrows.
At the risk of repeating myself, I am investing in, 1. Relationships (God, Family, Church, and Community in that order), 2. Essential skills (Skills that keep food on the table and a roof over the table), 3. Essential tools, and well-watered arable land.
I retired at age 55 to devote my attention to preparing my family for the pending inevitable economic collapse. I moved my family to a small rural community situated in a very productive river valley. That was 26 years ago and we have made considerable progress.
I put my relationship with God at the top of my investment priorities because I hold to the principle embodied in the question “What does it profit a man if he wins the world and looses his soul?”
Family comes next in my priorities. I am the leader of the family. My definition of leadership is “ The ability to influence others in such a way as to earn their understanding, cooperation, participation, and ultimately their allegiance. I hold that the foundation principle of effective leadership is placing the interest of those I lead over my own interest. I once heard a Marine Corp general say to a group of 2nd Lts.,”We do not want you unless you are willing to take a bullet in the gut rather than one you lead take that bullet”. I am the only member of the family that does not have a commercial job so I run the farm (beef cattle) and keep the garden and orchard.
I know the people in my Church better than I know those in the community. I k now who I can trust and those not so much. I am an Elder in my Church and at the present time I am the preacher (not the Pastor).
When the economy collapses, I need the help of my community and they need me. I try to prepare them through the Church, the Grange, letters to the editor of the local news paper and regular calls to the local daily radio talk program.
Wherever you are, whatever your circumstances invest in relationships; you are gonna needum!
Jan,
Biomass at least may have some value as you can burn it to stay warm.
“Biomass at least may have some value as you can burn it to stay warm.”
No! Please don’t burn my goats! 🙂
Oops! Wrong biomass. Sorry about those goats. It would smell terrible!
“If defaults become widespread, they could affect bank deposits…”
That’s the “800 pound gorilla” sitting in the corner of the room.
Don’t forget that, if you have money in the bank, you think you’re a creditor, but you’ve recently been converted to an investor. The US banks have been “Cyprusized.”
Before, if a bank went under creditors (depositors, primarily) got paid before investors. But no more. Taxes get paid, employees get paid, the electric company will get paid, the company leasing the bank business equipment gets paid, the landlord of their property gets paid… and then, if anything is left, the depositors and investors will divvy it up.
I am afraid that is right. It is hard to figure out a way to fix “too large to fail” banks, except by using the Cyprus approach to cut back deposits. Once you start doing that, businesses fail and people lose their jobs. So even small deposits, which perhaps might not be hit by the Cyprus approach, will be affected indirectly because people lose their jobs.
Why not have the Federal Reserve simply create money equal to the destroyed money, but rather than bailing out the failed bank, simply put the deposits at a brand new bank, and then just tell all the customers they are now customers at the new bank, since the old bank went bust?
Obviously, everyone invested in the collapsed bank will do anything they can to get a bailout, and politicians seem to be easily scared and manipulated into doing these sorts of things.
That would be in your face proof that dollars have no intrinsic value. The value that they have now have to do with oil, reserve status, and the fact that you know people who are in debt and those dollars are legal tender to pay that debt off, so you know that they will accept your dollars. Doing what you state would be the equivalent of stating loudly that debts need not be repaid.
What do you think happens with Quantitative Easing? This is not something new and radical. Plus, since it is only replacing money that has been vapourized, it should not be inflationary. If the FDIC was properly capitalized, then all accounts up to the insured limit would be fine already.
But obviously you can’t just keep doing that over and over again. We did it once already in 2008. An exponentially larger bailout less than a decade later would be an open admission that the system was fraudulent. And it is.
But you have to remember that is such a situation the two choices remaining would be ‘debts need not be paid and will be made good by legislative fiat’ or ‘debts cannot be repaid and will thus be defaulted’ on. Neither is a good option and both are tacit admissions that the underlying system has failed, so pick your poison. But you’re right, doing the former without enacting reforms to prevent it from happening again would be to promote morale hazard to the extreme, kind of like… 2008 all over again!
This is not what the government has in store for us. The government wants to get out of the business of creating money for failed banks, even if that might be the best of bad options.
No Gail. The Government, at least here in the US, is owned by the TBTF international banks. The Government, or, in actuality, Goldman’s Paulson (the Paulson Plan), gave us a few hundred billion in Government backed TARP money to look at, while the Fed was secretly making $16 trillion, in one year according to the Paul/Sanders audit, and $8.3 trillion in the next year, according the the Bloomberg audit, available to the huge network of international banks. In other words, Gail, it is not the Federal Government that creates money for the TBTF banks, it is the private Federal Reserve Bank.
The “Government” allowed many small banks to fail, and then allowed the big banks to take them over using near 0% money borrowed from the Fed. Now, as the small frackers fail, the largest international oil companies will take them over using pretty much the same course of conduct that the big banks used. We will continue to see further consolidation in both banking and energy, as the top 10% of the top 1% grows richer, and the the bottom 80% grows poorer. It’s called social darwinism.
I wasn’t trying to make fine distinctions–using the term “government” broadly. It is really the Federal Reserve doing much of what gets done.
“The government wants to get out of the business of creating money for failed banks, even if that might be the best of bad options.”
The big omnibus spending bill just passed including a part that seems to mean the federal government now explicitly backstops derivatives. That’ll be something, to see them backstop hundreds of trillions in case of a systemic collapse in the financial system.
I will have to look at what actually passes/ passed. I understand the House passed a bill, and the Senate is expected to pass a similar one this evening.
Are you saying FDIC insurance is not what I think it is? That my money on deposit is not 100% secure?
The 1% have savings, the rest of us have debt. Any funds deposited are immediately used to pay hopefully not over due bills. The days of a blue collar worker, and most white collar workers, having savings are long gone.
FDIC is a coverage that collects a small percentage of bank deposits from all banks, and uses that to intervene in insolvencies (as well as getting bigger banks to take over sampler banks and other such techniques). This approach works fine, if there is only an occasional small insolvency.
The approach doesn’t work well when there is a systemic problem because the small percentage collected does not generate nearly enough money to pay all of the claims. The Pension Benefit Guaranty Corporation uses a similar funding approach for pension guarantees, and now is running into trouble because there is no way that the collected funds will meet promises. One article in today’s WSJ is titled, Pension Bill Seen as Model for Further Cuts: Measure Permits Multiemployer Funds to Reduce Benefits, Which Could Open Door to Moves in Other Troubled Programs.
According to that article:
Obviously, the FDIC is different. But the amount of goods and services made in a given is pretty much limited by the amount of energy resources and other commodities extracted in that year. If the amount of goods created starts going down, there is no way that today’s deposits can be paid back in a way that will allow them to buy as much goods as in the past. Either there has to be an explicit haircut made to deposits, or the government starts doing funny things (like not letting you have access to your money), or you lose the benefit of your money in some other way–sudden inflation, or a sharp reduction of goods available to buy, because imports have dropped off. Anything paper is a promise to buy future goods. If the goods aren’t there, you can’t buy them.
Hi Gail,
Charlierose.com featured a good interview with Naomi Klein today (12/16/14). Very coherent, I thought, with perhaps slight bearing on what I have to say. However, I’m coming from a different place.
Due to naivete and lack of knowledge, I often run afoul of practical people who do not have these shortcomings. So I’m likely to come off as some sort of New Age dreamer of the worst kind. Sill, this is how I am, and I see no way to change that.
After hearing Guy McPherson’s latest radio interview, the notion of directly addressing climate change in even the smallest ways grew in appeal for me. With highly potent CH4 bubbling up so ubiquitously in the oceans, even the slightest of reductions in GHG emissions strikes me as worthwhile. Nothing that will save us, but better than nothing.
Two quick concepts, that may or may not warrant developing later:
1) Put Land First:
– Includes major emphasis on slowing or stopping the growth of deforestation. You can’t emit harmful GHG’s unless you burn, chainsaw, mine, or build emitting infrastructure on the land.
– In international climate deals, focus on how to slow or stop depredation of natural ecologies (the land).
– Ask what stands in the way of the above, and list these obstacles and their possible solutions systematically. (There needn’t be solutions; we just need to start thinking like a whole planet with its ecological needs, which is not the case now.)
1) Reduce Emissions Within the Mainstream as Feasible; E.g.:
– Religious groups (and other mass organizations) around the globe refuse to fly at selected times.
– The more advantaged voluntarily attempt to compensate those that such reductions would hurt most.
– Scale up a host of known emissions-reducing projects such as urban forestries throughout the world (paying the poor for their efforts).
Considering that 400,000 people marched for the climate in NY recently, there is sufficient public will to act in ways that are not limited to governmental or business action. And of course, if the people lead, the leaders will follow. I agree that the real-life obstacles to any of this are daunting; I just think it helps, in ways hard to define, if we can get together on a single, coherent, global vision that only requires human will to enact. So it requires a lot of stitching together of the millions of movements out there into a single tapestry, but what better is there to do?
The suggestions put forward by Klein would mean that economic growth would reverse leading to a depression then collapse of the economy.
If anyone welcomes this scenario, remember what happened the last time this happened. We refer to that event as the Great Depression.
That was bad enough, but this would be exponentially worse because a very high percentage of people worked in agriculture at that time.
And, our world is globalized, and complex. Supply chains and finance are fragile. Such a collapse would almost certainly break the global economy and we would not be able to put it back together again.
If Klein and others think that is a good idea then good on them. I think it is a terrible idea and I think that they do not understand the consequences of the actions they are promoting.
Unfortunately the only option we have in order to fend off collapse is to do not only more of what we have been doing i.e. flying, eating, buying, burning, breeding but in fact we must do even more.
Because we cannot stand still because our system requires every greater amounts of consumption otherwise it implodes.
Klein’s intentions are good. But she really does not “get it”
“The suggestions put forward by Klein would mean that economic growth would reverse leading to a depression then collapse of the economy.”
Sounds like the plan I’ve been following for the past decade or so!
“Unfortunately the only option we have in order to fend off collapse is to do not only more of what we have been doing i.e. flying, eating, buying, burning, breeding but in fact we must do even more. Because we cannot stand still because our system requires every greater amounts of consumption otherwise it implodes. Klein’s intentions are good. But she really does not “get it””
Huh? Do you seriously think we can go on as we have been, “flying, eating, buying, burning, breeding,” etc. — except “even more” — forever? Have you even read the title of this blog?
It seems to me that you are the one who doesn’t “get it.”
No, I get it completely.
If we stop consuming we collapse.
Will collapse save us? And should we be hoping for it to arrive?
What is collapse? A difficult concept for us to understand.
The Great Depression was not a collapse. It was a temporary very bad economic situation. Growth resumed a few short years afterwards. Electricity and gasoline were available throughout. The majority were still employed.
But it was pretty darn bad. Times were desperate for many.
The collapse we are facing is wholly different because the cause is the end of cheap energy i.e. it will be devastating and it will be final.
But what does that mean?
– governments will not exist
– there will be no jobs
– there will be no shops selling anything
– there will be no electricity or petrol
– there will be no possible way to feed 7 billion people
– the 7 billion will eat everything that moves including wild animals, grass, and other people no doubt
– there will be no security and there will be violent, desperate men who will stop at nothing to take what they want
– there will be nuclear facilities pouring cesium and all sorts of other poisons into the air
– diseases will spread rapidly and there will be no way to stop them
– pharmaceutical drugs will no longer be produced and medical care will be rudimentary
And last but not least, if you are unfortunate enough to survive in this hell-hole of a world, this is what you have to look forward to for the rest of your short existence. Because things are most definitely not going to improve in our life times.
This is going to be your life.
The odds of me being one of the few who may survive this collapse are remote. And even if I were unfortunate enough to survive, I have to think ‘do I really want to be alive in a world like that?’
Do I want to remain alive just to say I am alive?
Maybe. Or maybe I take the wife’s way out in The Road. Only time will tell.
But in the meantime, I agree with the elites, gun this engine hard. Keep it going as long as possible. The alternative is far worse.
We’ve already ruined the planet 10 times over so what difference does it make if the consumption goes on a little longer?
In terms of the environment, collapse will actually have a much greater impact because we will kill everything that remains for food, we will burn every tree that remains to keep warm and cook food, and our nuclear legacy will leave us with hundreds of Fukushimas endlessly pumping death into the air and seas.
It is a sad state of affairs.
This is your view of what will happen. I don’t know that we know this is what will happen. I don’t see a transition to a long term sustainable future, but there are other outcomes possible. One is an epidemic; another is lack of clean water leading to a rapid rise in death rates; another is some type of intervention by the Force that led to the Big Bang. Spending time enumerating all of the terrible things that could happen doesn’t seem to me to be productive.
“But in the meantime, I agree with the elites, gun this engine hard. Keep it going as long as possible. The alternative is far worse.”
We’ll have to agree to disagree, then.
The first rule of hole digging: when you find yourself stuck in a hole, stop digging!
We may have gone too far for what many would prefer to see as a “soft landing,” but surely, the longer we “gun this engine hard,” the more difficult it will be for the survivors, no?
If we continue to consume for another year or we collapse tomorrow, I fail to see how this would make a difference in the event that anyone survives.
So we use up a bit more of the resources that are going to stay in the ground post-collapse anyway.
Yes, but the discussion is with respect to fending off collapse. Collapse must occur. The only way to temporarily fend it off is doing more of what we have been doing.
Wee Willy Winky
OK so far. I’m an agnostic where Klein’s recommendations are concerned. Same with breeding and much consumption. But here’s where I don’t negotiate (for all the good it will do): The web of life trumps everything for me. So if you can tell me how to do the things you suggest without killing species and removing forests, I’m all ears.
What we could have done was continued to live like animals hunting and gathering. That was sustainable.
And up until recently we had the option of collapsing back to that sort of an existence.
But not any longer because of ‘progress’ there are many billions too many of us. When we were animals we did not want to live like animals. We wanted to be like the chimp in the funny picture dressed in clothes and smoking a ciggy, and we still do!
I fear that when the tipping point comes we will ravage the planet of whatever easy to obtain resources remain including trees and animals. We will scorch the earth in a desperate attempt to survive.
Even if some of us were to survive, hunters and gatherers would have great difficulty with the nuclear facilities we bequeathed them.
The world’s brightest minds are aware of what is happening and what the consequences are. And they would have been desperately seeking solutions for decades now.
And what has their answer been?
They have definitely concluded that we must continue to grow no matter what because all other options would have disastrous results. This is obvious as evidenced by their policies since the collapse really got into high gear in 2008.
Unfortunately, I am left with no choice but to agree with them. The options are: grow, or die.
This will not end well.
Hunting and gathering was only sustainable as long as we left the use of fire out of it. Once we added fire (for cooking food, hunting down animals, keeping warm) we were able to grow far more rapidly than other species. Thus, our approach became unsustainable even as hunter-gatherers. Unfortunately, we evolved to require the use of fire, especially if we are to cover as much of the earth as we do today. Arguably, a handful of hunter-gatherers could live on raw fish and a few other things, but our population would be down by 99%, and would be limited in the future to the small amount of the world where a non-fire existence would be possible. How the use of fire would be prohibited is a big question, however, since it clearly would be beneficial to humans, even if unsustainable otherwise.
Thanks, Jan. I agree.
It would be pleasant to think that mild contraction might work, but with all of the debt outstanding, it tends to pull the system down. Forgiving the debt doesn’t really work for many reasons, one of which is the fact that we need even more debt going forward, to keep the system going. And unfortunately, I think you are right:
Deforestation is continuing at a high rate, and much of it seems to be related to attempts to grow biofuels, allegedly to help the planet (but I am skeptical of any help this provides). Perhaps reduced price of oil and other commodities will inadvertently help the deforestation problem by reducing the profit motive for cutting down forests. I am less optimistic than you that other approaches will be helpful.
I have an extreme inability to understand debt. It is probably so inherently unnatural that no young child could grasp it. And my understanding of it is that of a four-year old. If I can be made to understand debt, I’m confident that anyone else, however uneducated and simple, could too.
.So while I can see the need to keep the system going, I don’t see why debt is the big obstacle to doing a better job at “industry” that it is.
I’m with those who say we need more, not less, industrial activity. I can conceive of borrowing, debt, and all that good stuff being applied to economic activity that does not increasingly destroy the web of life (what I believe is called the biosphere).
Building Development:
The Status Quo: Right now, the prevailing model is to build on flat, near-urban rural landscape. Speculation developments that bring money to banks and developers. These developments are mostly geared to the middle class. (Caution: I don’t really know the ins and outs of the economics; I’m going on what I see from the road as I drive by, and the few people I’ve met who live in them.) The developments for the upper middle class feature very large houses, golf courses, fountains, etc. I can imagine another form of development that was less destructive to the biosphere.
Densify cities instead. As I drive around the nearby city, I see many opportunities for well built, contextually appropriate second stories. Malls already have the parking space to accommodate this. The political and cultural readjustment would be awesome, but that is a human problem, and one that can be resolved through education and will. Instead of golf courses, we’d have more bistros, gyms and art cinemas for the upscale folks. More book stores. If those don’t move the economy, find something that does, that more people want. Developments will occur in hubs that provide most services, enabling people to walk to where they need to go. More enlightened city development, while leaving the rural space for wilderness, for small farms, for B&Bs, does not seem to rule out an adequate level of economic development.
Air Traffic:
Virgin Airlines was experimenting with cleaner fuel. Maybe that will yield results. But based on the post-9/11 hiatus of air travel, we see the dramatic difference flying makes to the atmosphere. So, continuing air traffic as usual is suicidal (given the big environmental picture). Since climate disruption, terrorism, pandemic (consider ebola) could increasingly jeopardize air travel anyway, why not find ways to fly less? Could there be an alternative use for the fuel?
Developing Nations:
Climate. enormous amount of climate mitigation/adaptation/whatever is required throughout the planet. That uses energy and provides employment.
Food. Geoff Lawton may be the world expert on Permaculture. Oddly enough, he believes the planet could support 10 billion people (Presumably, if they were all engaged in Permaculture). This would be a way to live outside the sphere of major reliance on IC. So, Lawton’s vision is hampered less by absolute limits than by the absence of appropriate education and will.
Appropriate Technology. There are huge economic opportunities for manufacturing wheelbarrows, water pumps, micro windmills, etc., etc.. Why is that not a suitable alternative to much of the senseless economic activity elsewhere?
Conclusion:
More than enough pipe dreaming for one day, although I could go on… My proposal (for I know so little of economics or oil) is that it’s not what is being done, but how. I don’t see why economic activity can’t escalate dramatically (in the near term) without destroying life on earth. Air travel could be substituted for by intense urban (re)development and appropriate third world development. Some losses in industrial activity (if any) could be compensated for by Permaculture-type self-sufficiency.
Economic activity today is defined by crudeness, thoughtlessness and insensitivity. Does it have to be this way to keep the system going?
Densifying cities would require more energy–moving people farther away from where the food is grown, and making people more dependent on electricity and other forms of energy. If the issue is keeping the current system from collapsing, I agree that using more energy is (very temporarily) the answer.
The problem is that the current system seems likely to collapse, in the very near term. If it does, it will not support dense populations in large cities very well. Adding more density just makes the problem worse after collapse.
I would have said that Havana locally grows 80% of Cuban-produced food it consumes. And Geoff Lawton insists that a cornucopia of food can be grown in urban niches My neighbor on less than an acre can grow nearly all (or all) of his food. I wouldn’t rule out the potential to grow urban food so sweepingly. But that isn’t in line with our public culture, and very early economic collapse won’t remotely allow time for adjustment. Although it would provide the incentive for it…
I’m not sure why densifying cities (hands down) requires more energy. There’s no need for new roads and the energy to build them, or for so much energy required to get around. Heating and cooling? I’ll look into that.
Poorer cities are much more dense. If we can get people to give up their dishwashers, computers, multiple sets of clothes, and all kinds of “stuff,” we can pack a large number of people into a small space–perhaps three people per room. Somehow, selling this to the American people, or even European people, seems unlikely.
Two excellent examples:
http://www.psychologytoday.com/blog/animal-emotions/201412/unearthing-ted-turner-last-stand-is-fascinating-read
http://morrisberman.blogspot.co.uk/2014/11/the-american-sage.html
Village Homes, Davis, CA
http://en.wikipedia.org/wiki/Village_Homes
https://www.youtube.com/watch?v=QmFVxPjG2JI