The Problem of Debt as We Reach Oil Limits

(This is Part 3 of my series – A New Theory of Energy and the Economy. These are links to Part 1 and Part 2.)

Many readers have asked me to explain debt. They also wonder, “Why can’t we just cancel debt and start over?” if we are reaching oil limits, and these limits threaten to destabilize the system. To answer these questions, I need to talk about the subject of promises in general, not just what we would call debt.

In some sense, debt and other promises are what hold together our networked economy. Debt and other promises allow division of labor, because each person can “pay” the others in the group for their labor with a promise of some sort, rather than with an immediate payment in goods. The existence of debt allows us to have many convenient forms of payment, such as dollar bills, credit cards, and checks. Indirectly, the many convenient forms of payment allow trade and even international trade.

Figure 1. Dome constructed using Leonardo Sticks

Figure 1. Dome constructed using Leonardo Sticks

Each debt, and in fact each promise of any sort, involves two parties. From the point of view of one party, the commitment is to pay a certain amount (or certain amount plus interest). From the point of view of the other party, it is a future benefit–an amount available in a bank account, or a paycheck, or a commitment from a government to pay unemployment benefits. The two parties are in a sense bound together by these commitments, in a way similar to the way atoms are bound together into molecules. We can’t get rid of debt without getting rid of the benefits that debt provides–something that is a huge problem.

There has been much written about past debt bubbles and collapses. The situation we are facing today is different. In the past, the world economy was growing, even if a particular area was reaching limits, such as too much population relative to agricultural land. Even if a local area collapsed, the rest of the world could go on without them. Now, the world economy is much more networked, so a collapse in one area affects other areas as well. There is much more danger of a widespread collapse.

Our economy is built on economic growth. If the amount of goods and services produced each year starts falling, then we have a huge problem. Repaying loans becomes much more difficult.

Figure 2. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Figure 2. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

In fact, in an economic contraction, promises that aren’t debt, such as promises to pay pensions and medical costs of the elderly as part of our taxes, become harder to pay as well. The amount we have left over for discretionary expenditures becomes much less. These pressures tend to push an economy further toward contraction, and make new promises even harder to repay.

The Nature of Debt

In a broad sense, debt is a promise of something of value in the future. With this broad definition, it is clear that a $10 bill is a form of debt, because it is a promise that at some point in the future you, or the person you pass the $10 bill on to, will be able to exchange the $10 bill for something of value. In a sense, even gold coins are a promise of value in the future. This is not necessarily a promise we can count on though. At times in the past, gold coins have been confiscated. Derivatives and other financial products have characteristics of debt as well.

To understand how important debt is, we need to think about an economy without debt. Such an economy might have a central market where everyone brings goods to exchange. But even in such an economy, there will be a problem if there is not a precise matching of needs. If I bring apples and you bring potatoes, we could exchange with each other (“barter”). But what if I don’t have a need for potatoes? Then we might need to bring a third person into the ring, so each of us can receive what we want. Because barter is so cumbersome, barter was never widely used for everyday transactions within communities.

An approach that seemed to work better is one mentioned in David Graeber’s book, Debt: The First 5,000 Years. With this system, a temple would operate a market. The operator of the market would provide a “price” for each object, in terms of a common unit, such as “bushels of wheat.” Each person could bring goods to the market (and perhaps even services–I will work for a day in your vineyard), and have them exchanged with others based on value. No “money” was really needed because the operator would take a clay tablet and on it make a calculation of the value in “bushels of wheat” of what a person brought in goods, The operator would also calculate the value in “bushels of wheat” that the same person was receiving in return, and make certain that the two matched.

Of course, as soon as we start allowing “a day’s worth of labor ” to be exchanged in this way, we get back to the problem of future promises, and making certain that they really happen. Also, if we allow a person to carry over a balance from one day to another–for example, bringing in a large quantity of goods that cannot be sold in one day–then we get into the area of future promises. Or if we allow a farmer to buy seed on credit, with a promise to pay it back when harvest comes in a few months, we again get into the area of future promises. So even in this simple situation, we need to be able to handle the issue of future promises.

Future Promises Even Before Debt

Whenever there is division of labor, there needs to be some agreement as to how that division will take place–what are the responsibilities of each participant. In the simplest case, we have hunters and gatherers. If there is a decision that the men will do the hunting and the women will do the gathering and care for children, then there needs to be an agreement as to how the arrangement will work. The usual approach seems to have been some sort of “gift economy.” In such an economy, everyone would share whatever they were able to obtain with others, and would gain status by the amount they could offer to share.

Instead of a formal debt being involved, there was an understanding that if people were to participate in the group, they had to follow the rules that the particular culture dictated, including, very often, sharing everything. People who didn’t follow the rules would be thrown out. Because of the difficulty in living in such an environment alone, such people would likely die. Thus, participants were in some sense bound together by the customs that underlay gift economies.

At some point, as more of an economy was built up, there would be a need for one or more leaders, as well as some way of financially supporting those leaders. Thus, there would need to be some sort of taxation. While taxation to support the leader would not be considered debt, it has many of the same characteristics as debt. It is an ongoing payment obligation. The leader and the other members of the group plan their lives as if this situation is going to continue. In a way, the governmental services and the resulting taxation help bind the economy together.

Benefits of Debt

The benefits of debt are truly great, including the following:

  1. Debt allows transactions to take place that are not precisely at the same time and place. I can order goods and have them delivered to my home. An employer can pay me for a month’s work with a check, rather than needing to give me food or some other barter item corresponding to each hour I work. There is no need to have billions of gold coins (or other agreed up metal currency) to facilitate each and every transaction, and to transport around. We can each have bank accounts. From the bank’s perspective, the amount in a bank account is a liability (debt) owed to the depositor.
  2. Additional debt gives additional purchasing power to individuals, governments or businesses. The additional funds available can be spent immediately. Very often, repayment (with interest) is spread over several years, making goods that would not be affordable, affordable. Thus debt raises “demand” for goods and also for the commodities used to create these goods.
  3. Because debt makes goods more affordable, additional debt tends to “pump up” the price of commodities. These higher prices make it worthwhile for businesses to extract more minerals (including fossil fuels) from the earth, and make it worthwhile to plant more acres of food. Debt, particularly cheap debt, makes building new factories and opening new mines more affordable for businesses.
  4. Debt allows a steep step-up in standard of living, such as that obtained by adding coal or oil to an economy. Debt allows goods to be purchased that will substantially change a person’s future, such as transit to a new country, or purchase of a college education, or purchase of a delivery vehicle that can be used to start a business. Without debt, it is unlikely that fossil fuels could ever have been extracted; consumers would never have been able to afford the goods provided by fossil fuels, and businesses would have had difficulty financing the many new factories required to make goods using these fuels. See my post, Why Malthus Got His Forecast Wrong.
  5. Adding debt is self-reinforcing. Suppose a considerable amount of debt is added for what is deemed a good purpose, such as extracting oil in North Dakota. Oil companies will use the debt they receive for many different purposes–including paying employees, paying royalties to land owners, and paying taxes to the state. Employees will buy new houses and cars, taking out loans in the process. North Dakota residents who receive royalty payments may decide to take out home improvement loans to fix up their homes, expecting that the royalties will continue. The state may fix its roads with its revenue, giving additional income (which may lead to more debt) to road workers. A grocery chain may decide to build a new store (borrowing money to do so), further pushing the chain along. What happens is that indirectly, the new oil company debt makes a lot of people at least temporarily wealthier. These temporarily wealthier individuals can then “qualify” for more in loans than would otherwise be the case, giving them more to spend, and allowing yet others to qualify for loans.
  6. Arrangements that are not debt, but more of the nature of contingent debt, make people feel more confident of the current system. There are insurance programs for pension programs and for bank accounts, up to a selected balance per account. These insurance programs generally don’t have very much money in them, relative to what they are insuring. But they make people feel good, especially if there is a government that might come in and take over, beyond the actual funding of the insurance program.

What Goes Wrong with Debt and Other Financial Promises

1. As mentioned at the beginning of the post, debt works very badly if the economy is contracting.

It becomes impossible to repay debt with interest, without reducing discretionary income. Government programs, such as health care for the elderly, become more expensive relative to current incomes as well.

2. Interest payments on debt tend to transfer wealth from the poorer members of society to the richer members of society.

Economists have tended to ignore debt, because it represents a more or less balanced transaction between two individuals. The fact remains, though, that the poorer members of society find themselves especially in need of debt, and many pay very high interest rates. The ones lending money tend to be richer. Because of this arrangement, over time, interest payments tend to increase wealth disparities.

3. All too often, the payment stream upon which debt depends proves unsustainable.

In the example given above, everyone thinks the North Dakota oil will continue for a while, so takes out loans as if this is the case. If it doesn’t, then this is an “Oops” situation.

In the case of US student loans, many students are never able to get jobs with high enough wages to pay back the loans they were given.

4. Governments tend to put programs into place that are more expensive than they really can afford, for the long term.

As an economy gets wealthier (because of more fossil fuel use), there is a tendency to add more programs. Representative government is used instead of a monarch. Medical care and pensions for the elderly are added, as are unemployment benefits, and more advanced levels of schools.

Unfortunately, it is hard to properly estimate what long-run cost of these programs will be. Also, even if the programs were affordable with a high level of fossil fuels, they almost certainly will not be affordable if energy availability declines. It is virtually impossible to roll programs back, even if they are not guaranteed, once people plan their lives on the new programs.

Figure 3 shows a graph of US government spending (all levels) compared to wages (including amounts paid to proprietors, including farmers). I use this base, rather than GDP, because wages have not been keeping up with GDP in recent years. The amounts shown include programs such as Social Security and Medicare for the elderly, in addition to spending on things such as schools, roads, and unemployment insurance.

Figure 3. Comparison of US Government spending and receipts (all levels combined) based on US Bureau of Economic Research Data.

Figure 3. Comparison of US Government spending and receipts (all levels combined) based on US Bureau of Economic Research Data.

Clearly, government spending has been rising much faster than wages. I would expect this to be true in many countries.

5. There is no real tie between amounts of debt issued and what will actually be produced in the future. 

We are told that money is a store of value, and that it transfers purchasing power from the present to the future. In other words, we can count on balances in our bank accounts, and in fact, in all of the paper securities that are outstanding.

This story is only true if the economy can continue to create an increasing amount of goods and services forever. If, in fact, the production of goods and services drops off dramatically (most likely because prices cannot rise high enough to encourage enough extraction of commodities), then we have a major problem.

In any year, all we have available is the actual amount of resources that can be pulled out of the ground, plus the actual amount of food that can be grown. Together, these amounts determine how many goods and services are available. Money acts to distribute the goods that are available. Presumably, the people who work at extraction and production of these goods and services need to be paid first, or the whole process will stop. This basically leaves the “leftovers” to be shared among those who are now being supported by tax revenue and by those who hold paper securities of some sort or other. It is hard to see that anyone other than the workers producing the goods and services will get very much, if we lose the use of fossil fuels. Workers will become less efficient, and production will drop by too much.

6. Derivatives and other financial products expose the financial system to significant risks.

Certain large banks have found that they can earn considerable revenue by selling derivatives and other financial products, allowing people or businesses to essentially gamble on certain outcomes–such as the price of oil falling below a certain price, or interest rates rising very rapidly, or a certain company failing. As long as everything goes well, there is not a huge problem. The concern now is that with rapidly changing commodity prices, and rapidly changing levels of currencies, companies may fail and there may be major payouts triggered.

In theory, some of these payments may be offsetting–money owed by one client may offset money owed to another client. But even if this is the case, these defaults can sometimes take years to settle. There may also be issues with one of the parties’ ability to pay.

One particular problem with many of the products is the use of the Black-Scholes Pricing Model. This model is applicable when events are independent and normally distributed. This is not the case, when we are approaching oil limits and other limits of a finite world.

 7. Governments tend to be badly affected by a shrinking economy, so may be of little assistance when we need them most.

As noted previously, payments to governments act very much like debt. As an economy shrinks, programs that seemed affordable in the past become less affordable and badly need to be cut. Thus, governments tend to have problems at the exactly same time that banks and other lenders do.

Governments of “advanced” countries now have debt levels that are high by historical standards. If there is another major financial crisis, the plan seems to be to use Cyprus-like bail-ins of banks, instead of bailing out banks using government debt. In a bail-in, bank deposits are exchanged for equity in the failing bank. For example, in Cyprus, 37.5% of deposits in excess of 100,000 euros were converted to Class A shares in the bank.

This approach has a lot of difficulties. Businesses have a need for their funds, for purposes such as paying employees and building new factories. If their funds are taken in a bail-in, the ability of the business to continue may be damaged. Individual consumers depend on their bank balances as well. As noted above, deposit insurance is theoretically available, but the actual amount of funds for this purpose is very low relative to the amount potentially at risk. So we get back to the issue of whether governments can and will be able to bail out banks and other failing financial institutions.

8. More debt is needed to hide the lack of economic growth in an ailing world economy. This debt becomes increasingly difficult to obtain, as wages stagnate because of diminishing returns. 

If wages are rising fast enough, wages by themselves might be used to pump demand for commodities, and thus raise their prices. Our wages are close to flatmedian wages have been falling in the US. If wages aren’t rising sufficiently, increasing debt must be used to raise demand. Debt is growing slowly in the household sector, according to figures compiled by McKinsey Global Institute. Household debt has grown by only 2.8% per year between Q4 2007 and Q4 2014, compared to 8.5% per year in the period between Q4 2000 and Q4 2007.

Even with business demand included, debt isn’t rising rapidly enough to keep commodity prices up. This lack of sufficient growth in debt (and lack of growth in demand apart from growing debt) seems to be a major reason for the drop in prices since 2011 in many commodity prices.

9. Differing policies with respect to interest rates and quantitative easing seem to have the possibility of tearing the world financial system apart.

In a networked economy, not moving too far from the status quo is a definite advantage. If the US’s policies have the effect of raising the value of the dollar, and the policies of other countries have the tendency to lower their currencies, the net effect is to make debt held in other countries but denominated in US dollars unpayable. It also makes goods sold by American companies unaffordable.

The economy, as it exists today, has been made possible by countries working together. With sanctions against Iran and Russia, we are already moving away from this situation. Low oil prices are now putting the economies of oil exporters at risk. As countries try different approaches on interest rates, this adds yet another force, pulling economies apart.

10. The economy begins to act very strangely when too much of current income is locked up in debt and debt-like instruments.

Economic models suggest that if oil prices drop, demand for oil will grow robustly and supply will drop off quickly. If oil producers are protected by futures contracts that lock in a high price, they may not respond in the manner expected. In fact, if they are obligated to make debt payments, they may continue drilling even when it may not otherwise make financial sense to do so.

Likewise, consumers are also affected by prior commitments. If much of consumers’  income is tied up with condominium payments, auto payments, and payment of taxes, they may not have much ability to respond to lower oil prices. Instead of increasing discretionary spending, consumers may pay off some of their debt with their newfound income.


If the current economic system crashes and it becomes necessary to create a new one, the new system will have to deal with having an ever-smaller amount of goods and services available for a fairly long transition time. This is one chart I have shown in the past of how the growth in energy products, and thus growth in goods and services, might look.

Figure 4. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.

Figure 4. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.

Because of this, the new system will have to be very different from the current one. Most promises will need to be of short duration.  Transfers among people living in a particular area might still be facilitated by a financial system, but it would be hard to have long-term or long-distance contracts. As a result, the new economy will likely need to be much simpler than our current economy. It is doubtful it could include fossil fuels.

Many people ask why we can’t just cancel all debt, and start over again. To do so would probably mean canceling all bank accounts as well. Most of our current jobs would probably disappear. We would probably be without grid electricity and without oil for cars. It would be very difficult to start over from such a situation. We would truly have to start over from scratch.

I have not talked about a distinction between “borrowed funds” and “accumulated equity”. Such a distinction is important in terms of the rate of return investors expect, but it is not as important in a crash situation. Similarly, the difference between stocks, bonds, pension plans, and insurance contracts becomes less important as well. If there are real problems, anything that is not physical ends up in the general category of “paper wealth”.

We cannot count on paper wealth (or for that matter, any wealth) for the long term. Each year, the amount of goods and services the economy can produce is limited by how the economy is performing, given limits we are reaching. If the quantity of these goods and services starts falling rapidly, governments may fail in addition to our problems with debts defaulting. Those holding paper wealth can’t count on getting very much. Workers producing whatever goods and services are actually being produced will likely need to be paid first.


506 thoughts on “The Problem of Debt as We Reach Oil Limits

  1. Pingback: » The Problem of Debt as We Reach Oil Limits

  2. Any asset, Gold Coin or otherwise can be STOLEN or Confiscated. Pensions, accounts etc.
    And yet specie is part of the way to de-fang the horrible beast that once honest debt has morphed into. Confiscation and theft are immoral and illegal, mal insensia, so it is a threat to EVERY ASSET.

  3. Gail: I’ve got to say I’m a bit underwhelmed by your treatment, though it’s attempting to address a question that’s been bothering me for quite a while. I’m someone who has gone through the economics education “brainwashing” process, as you call it (I largely agree with that description), but finance and debt have long been impenetrable to me.

    I think Matthew Krajcik really hits a few major points that you would have done well to include:

    Debt can be written down or written off, and is all the time. This is a point that much of the discussion from you, Chris Martenson, Richard Heinberg, James Kunstler, et al, which I’m increasingly unsatisfied with. I could be wrong, but somehow the story you’re telling doesn’t quite add up. Introducing the elements of debt write-off: forgiveness, bankruptcy, default, etc., would help this piece greatly.

    As Krajcik correctly notes, “government issued pieces of paper are poor stores of value, but useful in the short term as a medium of exchange”. In fact most currencies are poor long-term stores of value. Joseph Tainter details in depth te devaluation of the Roman denarius from 3.8g @ 98.99% pure silver to 1% or less over a period of about 260 years. Adam Smith writes of the devaluation of the tri-metallic standard of English currency (copper pennies, silver pounds, and gold guineas). The problem isn’t that fiat currencies inflate, it’s that all currencies inflate. Especially where the sovereign incurs debts it cannot pay.

    There are alternatives to a one-time jubilee. Steve Keen addresses a few of these, though I need to revisit his work in more detail. Among them: a government grant. For debtors, it would have to go to paying down debt, for those without debts, it would be effectively a free and unrestricted grant. In effect it is a transfer of wealth from those with large money holdings to those without.

    A currency reissue would accomplish much the same. Old financial debts wiped out, new currency issued, game starts over.

    A tax on loans combined with expenditures would be another reallocation mechanism.

    Putting a sunset date on all loans, after which they are considered no longer collectable, would mean that loans would age out over time. What debt is, in effect, is a projection of future wealth, and faulty predictions in this scenario would be penalized. This is similar to some proposals for student loans reform in the U.S.

    Tying debts to income or wealth would be another option. Setting a maximum repayment schedule (both amount per year and years per loan) would again set limits on total indebtedness.

    Another factor that I’ve been mulling over: that money is more like insulin or adrenaline than blood or transport. It isn’t energy itself but rather a signalling mechanism that mobilizes energy (or other resources). In that sense, you can increase or decrease the amount of signalling. But what’s most important is that 1) the signalling data circulate and that 2) not too much accumulates in any one area. That’s an idea in progress, so yes, it’s a tad sketchy.

    • What I am trying to describe is a financial system that is about to fail, because of mismatch between the underlying situation we face and the nature of the promises that have been made. I probably need some more diagrams. In particular, I need to show resources available as in this chart:

      Estimate of future energy production

      If the amount of actual goods and services falls precipitously, then the nature of the system–borrowing from the future, and paying back at least as much as we borrowed, simply doesn’t work, because we are moving from a time period with a positive slope to one with a steeply negative slope.

      The problem is really a cheap energy problem–there is not enough cheap energy to fill all of the promises that have been made, and in fact, to keep the whole system going. We can write down how much energy each of the past debts is worth, and re-issue a new currency that is worth less. That sort of works, if we are to the left of the time period when the energy cliff takes place. In fact, that is why it worked in the past.

      If we do it now, the new currency will still have problems, because of the continued steep downslope. In fact, it will need to be replaced almost yearly or the system done away with altogether. That is why today’s situation is different, and why I didn’t suggest the solution you proposed.

      Obviously, I am not describing the situation sufficiently well, because other commenters are also confused. They keep talking about inherent deficiencies of the fractional reserve banking system, which I am not talking about. The fractional reserve banking system has “hung around” for quite awhile, despite changes in currencies.

      • Gail,

        It is difficult to talk about debt and not have fractional reserve banking pop into one’s mind simply because debt is inherent in modern fractional reserve banking. Debt *must* continue to grow in our current system, else loans don’t get repaid, shadow banking goes kaput and the financial system comes to a grinding halt. Get rid of fractional reserve lending and other possible schemes like it, and it can drastically change the nature of how debt is issued and repaid. If you are talking about a very strict gold and/or silver standard where you have coins of a high purity, then paying debts back that have interest attached involve doing something to increase the money velocity enough to give you a chance to make the principal plus interest back. Under such a system, coin that you lend somebody would not be available to you until it is paid back. There would not be much debt in such a system, and I suspect that the relative values of goods and services would look very different from what they are today. The other option is to debase the currency, which has happened countless times in history.

        But much of that is academic, because as I stated, we have a fractional reserve system that requires growth, else it will come collapsing down upon itself. It is a pyramid scheme. We are reaching the limits of growth, but all of those interest payments are still there.

        • No, we don’t have a FRS now. Richard Werner writes about this as one of 3 theories about money creation;
          1] Financial Intermediary Theory; banks collect deposits which are then lent out.
          2] Fractional Reserve Lending; individual banks are mere financial intermediaries that cannot create money, but collectively they end up creating money through systemic interaction.
          3] Credit Creation Theory; Each individual bank has the power to create money “fairy dust” by extending credit.
          3 is the accepted way , endorsed by the BoE.
          Banks don’t lend their deposits. They may park deposits in the Central bank if having such reserves is required [not in Australia since 1988]
          Oddly enough there is no law, statute or regulation which explicitly grants the right to create and allocate the money supply. Yet is an amazingly powerful instrument of the money supply and the banking industry!

        • Agreed. Currencies have been devalued many times to fix the problem for another 30 or 40 years. Even if this is still a problem, I don’t think that the standard fix, fixes the problem we have now.

      • Re this: “The problem is really a cheap energy problem–there is not enough cheap energy to fill all of the promises that have been made, and in fact, to keep the whole system going. We can write down how much energy each of the past debts is worth, and re-issue a new currency that is worth less. That sort of works, if we are to the left of the time period when the energy cliff takes place. In fact, that is why it worked in the past.”

        That plays into my comment on debt above: that it’s a _forecast_ and _prediction_ about the future. And that the bet, in general, is on growth.

        I get the part about energy not being there. Very much so. That’s not the question.

        Instead, it’s how to unwind those predictions which are proving false — who takes the hit for the unwarranted optimism?

        There’s a related but distinct question of how to accomplish finance in the future. Debt-based finance worked for a growing economy, it’s … at the very least … problematic in a steady-state or shrinking economy. Though it seems to me that there should be some historical precedent to help us here. Discussion of steady-state economic systems goes back (for modern economics) to John Stuart Mill (cited by Herman Daly). And I’d think there’ve got to be cases of civilizations which have ebbed and flowed without collapsing. Tainter describes the Byzantine empire as managing to pull of a slow fade, and that might prove to be a useful model to look at. You’ve got the Maddison dataset you’ve used in a number of posts which might also show similar periods of interest.

        One risk of a financial economy is that as things slow it exhibits a liquidity crunch. I’ve been going over the history of this as regards the Great Depression (Galbraith’s book is a highly useful study). In some regards it is a reflection of the present: a period of rapid and exuberant growth — arguably from the 1890s through the 1920s — coming to a sudden end. Precipitated among other things by uncertainty over the future of petroleum. The early finds in Pennsylvania were playing out, and the big strikes — the East Texas oilfield — weren’t made until after the Depression had hit. There was also a problem of oil _overextraction_ that wasn’t resolved until after the Oklahoma and Texas governors mobilized their respective National Guards, and the Texas Rangers, to seize at gunpoint oil wells, ultimately creating an extraction quota system under the Texas Railroad Commission that persisted until 1972. See Chapter 13 of Yergin’s The Prize.

        And while we face future energy uncertainty — possibly in a few years, though I think it may yet be a decade off — that’s not fully the problem now. Instead it’s dysfunctions within the financial system itself.

        As to what to do about it…. That’s where I have to shrug. I’m not sure. I’m well aware that there are many who claim we’ve got to raise the entire world out of poverty. I don’t see that as possible. The alternatives aren’t particularly good though. And the question becomes: when and how do we make decisions and allow what’s going to happen happen.

        But those debts? They’re going to fail one way or the other.

        • “I’m well aware that there are many who claim we’ve got to raise the entire world out of poverty. I don’t see that as possible. ”

          For every 100 million people living on $100 per day, we could instead with the same amount of wealth have $1 billion people living on $10 per day. The bottom 2 billion or so live on $1 or $2 per day, which is extreme poverty. I don’t see 4 billion more people getting over $50 per day as being probable with currently available resources.

        • As a clue as to who gets left out, who is going to pay for all of the people who are currently retired? Governments likely aren’t going to be able to do it. Pension plans are filled with defaulting bonds and stocks that won’t be any good. I have been told that “intergenerational debt” was a problem in prior collapses–I expect that will be a problem here as well.

  4. The Australian situation:

    Paying $30m a day in interest: Abbott warns of ‘second rate’ risk if budget measures fail
    Prime Minister Tony Abbott yesterday said Australia was at risk of becoming a “second-rate country” if budget saving measures were not passed to ease the out of ­control debt, with annual ­interest payments adding up to nearly $11 billion.

    It is interesting that this news paper complains: “The national debt is enough to build the WestConnex [a road tunnel] more than 20 times.”

    The unpopular budget saving measures cost the Australian Prime Minster almost his job

    Abbott survives vote [61:39] but put on notice
    Tony Abbott has six months at the most to turn around the coalition’s political fortunes and listen more to his MPs after surviving a leadership spill motion.

    The prime minister is understood to have told colleagues after surviving the vote it was a “big shot across my bow” and a “near-death experience”, and he would take the message on board.

    All this cannot stop the Federal and State governments to waste AU$ 800 million as subsidy to a private toll-road operator, Transurban, which also runs Pocahontas 895 and 495 Express Lanes in the US. Research from my website:

    NorthConnex road tunnel contract signed only days after USD 150-200 oil price warnings in Davos

    • Abbott has become a figure of ridicule. What you are saying here just confirms his arrogant incompetence. Unfortunately as PM he can do a lot of damage to the Country.

    • Rising governmental debt is a problem pretty much everywhere. It is a major reason interest rates can’t rise, because governments can’t pay their debt, if interest rates are too high.

      • Yes they can, unless they were idiotic enough to not have all debts in their own currency.

        • Printing money to pay debts is the same as creditors taking a haircut. Seigniorage is the word for that. Do it too much, and you will eventually destroy your own currency, though, how much it will take to do that is going to vary widely from currency to currency.

          • “Printing money to pay debts is the same as creditors taking a haircut. ”

            Similar, but not the same. If I owe you $100, would you rather I pay you $50, or pay you $100 that now has the purchasing power of only $90?

            It is not just the creditors, but all savers and workers that pay into inflation. Plus it can be done more gently over time, rather than the sudden shock of a debt write down or write off. As well, since the nominal amount is paid, you can in turn pay your creditors, whereas if I only pay you $50, suddenly you cannot pay your creditors and it causes a chain-reaction of destruction.

            • If I owe you $100, would you rather I pay you $90, or would you rather me pay you $100 in nominal terms that is worth $90 when I took out the loan? Using $50 for one and $90 for the other is comparing apples and oranges. On top of that, there have been instances where 100 units of money have come to be worth zero from the time of loan origination to the time that the loan was to be repaid. During those instances, shelves went bare and people went hungry.

            • “Using $50 for one and $90 for the other is comparing apples and oranges. ”

              This is the choice we have now, and the choice made each time has been quantitative easing, paying the nominal amount with reduced purchasing power. The other alternative was maybe the $50, or maybe $0. Just ask how much money MF Global or Lehman or Bear Stearns creditors got, compared to AIG’s creditors. Without the bailout, you might only get pennies on the dollar, never mind a 50% haircut.

              Even if it was $90 cash or $100 nominal with only $90 purchasing power, if I only take the $90, I’d have to pass on the losses to my creditors, which could cause more blow-ups along the way. If that missing $10 was leveraged 20:1, that’s a $200 loss for someone.

            • Yet history is clear: Turning to the printing presses to fund chronic deficits does not end well for the currency.

            • Then why the insistence on using $90 and $50 when you know that printing money and trying to inflate your way out of debt only works short to medium term?

            • “Then why the insistence on using $90 and $50 when you know that printing money and trying to inflate your way out of debt only works short to medium term?”

              It has been working for over a hundred years, what do you define as medium term? No system made by humans really has lasted more than a couple thousand years, and I don’t think having a Pharaoh rule as god-king over all of us is really something most people would go for.

          • No, that’s wrong too,
            Seigniorage is the profit from printing notes and coins face value over the production expenses.
            It’s piddling sum, relatively speaking, since notes etc are less than 3% of the money supply. It certainly doesn’t pay debts. The CB sorts that out directly. Creditors are in no danger as long as transactions were all in the local currency. In fact with QE they gain as the banks are rid of drags on the accounts.

            • That is a very limited definition of seigniorage and not at all consistent with today’s monetary system because it is not consistent with how the monetary system actually works. The Fed’s open market operations and then remitting the interest back to the treasury is seigniorage. They are, in fact, expanding the money supply when they do this, and the government gets to spend this money first.

              And actually creditors are in danger because of QE. It has removed so many USTs from the markets that they have very little “high quality” collateral to pledge in their rehypothication shadow banking schemes. This is why the Fed has enormous (i.e. several hundred billion dollars worth) reverse repo operations on the last day of any given quarter. It’s so that the banks can shore up their poor balance sheets and report good things to investors and regulators.

  5. There is much confusion around money and debt. This is my take.

    Money is a digital (or paper) proxy for physical wealth and consists of cash plus credit. There are two types of monetary systems: full reserve and fractional reserve.

    In a full reserve system, the total value of money approximately equals the total value of physical wealth in existence. It is possible to have debt with this system, however every loan to a borrower transfers an equal amount from savers.

    In a fractional reserve system, the total value of money is greater than the total value of physical wealth in existence. When you obtain a loan the bank creates new money out of thin air on the understanding that you will repay the loan plus interest from future surplus income. The total value of money in a fractional reserve system therefore equals the total value of all physical wealth that exists today PLUS the total value of physical wealth that will be created in the future equal to the total debt plus interest.

    Every country in the world uses a fractional reserve system because:
    – It permits us to spend now, what we expect to create in the future, and therefore enables a much higher standard of living.
    – Consumers can borrow money to purchase homes and cars and other things now rather than waiting until they have accumulated enough savings.
    – Politicians can get elected by promising more benefits than current tax revenue permits.
    – Citizens receive more government benefits than the taxes they pay.
    – Businesses can be created and/or grow more quickly because more credit is available for investment.
    – Banks are more profitable because they can make more loans than there are savings.
    – When the total pie is growing, everyone can have more stuff, and the rich don’t have to sacrifice to help the poor.

    The mathematics are such that a fractional reserve system works well provided we produce more physical stuff next year than this year, or in other words, provided that the economy grows exponentially.

    Starting around 1980, the physical world began struggling to keep up with our population and consumption growth demands. We papered over this reality and pretended we were getting richer by increasing the amount of debt.

    Today physical growth has hit the immovable wall of high and still increasing costs of producing energy. It takes energy to make and/or maintain almost everything we value. Lest you lust for thorium, other immovable objects lurk on the other side of this wall including water, minerals, soil, climate, and pollution.

    It is now clear that the unavailability of future affordable energy will make it impossible to create the physical wealth that is required to repay our current debts. This means there are three possible outcomes.

    The first possible outcome is deflation: debts default, which means paper wealth vaporizes, which means there is less money for everyone. Feedback loops in this scenario could cause the global system to collapse very quickly.

    The second possible outcome is inflation: money is loaned at zero or negative interest, which permits current debts to be serviced with less physical wealth production, which increases the ratio of money to physical wealth, which makes money worth less. Our governments prefer inflation because it reduces the chance of social unrest and guillotines. This is why they are all using quantitative easing. A problem with inflation is that it tends to increase the wealth gap between rich and poor. So the guillotines may appear regardless. Another problem is that extreme debt levels cause a system to become unstable and hard to control. Think house of cards and random breezes. So it remains to be seen if governments can engineer a smooth reduction in our standard of living, or if we will collapse to poverty quickly.

    The third possible outcome is a combination of deflation and inflation. In this scenario some random event (think Greece) triggers a series of debt defaults which panics governments into borrowing and spending or distributing new money that everyone now clearly understands cannot be repaid, which causes people to exchange their money for physical stuff, which cause the value of money to collapse. I vote for this scenario.

    In summary, there is much more money than the current plus future physical wealth required to support it, and therefore one way or the other, we will be a lot poorer soon.

    Note that it is not necessary to assume evil people or conspiracies to explain our predicament. Almost everyone was complicit in wanting the benefits of a fractional reserve system. Unfortunately, a fractional reserve system, by design, must blow up on a finite planet.

    • Thank you, Rob M – I agree with almost all of your post. With one exception.

      If all debts were cancelled, we would (collectively) be no less poor than we are now: all the real wealth in the world would still exist. However, the distribution would change. For instance, fiat money creates a false claim on wealth. If that money is then used to buy real wealth, then in effect the system is transferring wealth from those who produce it to those who produce no wealth, but only money. In my book, the destruction of such a system would be a public good, and if the banksters ended up either dirt poor or headless, so much the better.

      It seems to me that Samuel Smiles’ “Thrift” is as true now as it was in 1875.

      • Real wealth exists as stocks and flows. We need both.

        You are right that if all debts defaulted then the stocks would still exist. That would include farmland, homes, cars, tools, etc. However, in the absence of credit, most long distance flows would decrease or stop. That would include food, medicine, fertilizer, spare parts, electricity, diesel, gasoline, natural gas, telecommunications, internet, etc.

        So you might own a small acreage producing food for your community but because you can’t buy diesel for your efficient walk behind tractor, and gas for your irrigation pump, and fertilizer for your crop, your total production drops, and the price per pound you get also drops because your customers are poor, so you may not earn enough surplus to pay your property taxes, so you may lose your “self-sufficient” property.

        Or you might have a nice home but because you can’t get natural gas to keep the pipes from freezing, nor replacement plumbing parts made in China, nor roof shingles made in another state, it quickly becomes run down and loses most of its value.

    • I agree mostly with your view. I would add a fourth possible outcome to your list, which is government failure. A related one might be disappearance of a currency completely, perhaps because of a lack of central grid electricity.

      What makes it hard to replace our current system with another one like it is the likelihood that we are changing from an upward slope in energy production to a steep downward slope in energy production because of diminishing returns, and the way those diminishing returns feed through the system.

      Gail Tverberg Future energy production

  6. Hi Gail, thanks for another good read. Just a couple quibbles and a question/comment.

    You say, “The two parties are in a sense bound together by these commitments, in a way similar to the way atoms are bound together into molecules. ”

    Not really accurate. Atoms abide by the laws of nature–even if we don’t fully understand those laws. Commitments, including debts, are a sociocultural notion, based on values and norms that can change at any time, and vary across cultures. Even debt, for example, isn’t a financial concept in origin. You mentioned Graeber’s book, which spends a good deal of time in early chapters discussing the concept of debt as a one type of the larger category of social obligation.

    Later, you say this, “Economists have tended to ignore debt, because it represents a more or less balanced transaction between two individuals.”

    Also not really quite true, not when banks are involved. Steve Keen had a long-running debate with Krugman over this last year, which Keen ‘won’ (the Bank of England even issued an explanation supporting Keen’s position). In fact, Keen just posted about it recently. Keen notes that debts do not balance out when banks are involved.

    Keen’s post, which includes links to the debate with Krugman, as well as the BOE release.

    Lastly, a comment, connected to my first quibble. You seem to assume some sort of clockwork financial system, one operating based on fixed rules and without Marxian power dynamics. I enjoy your posts, but they remind me of the Peak Oilers 15 years ago who could only see the world through the lens of geology. They’re right, of course, directionally, but fixated too much on one factor, and missed the others, such as technology, finance, and political expediency. Many have since modified and improved their arguments via the experience. I think maybe your lens is too narrowly focused on finance. However, I’ll stop there as I’ve posted on this before and don’t want to eat up more of your time on it.

    Thanks again for your hard work and contributions. Really enjoy the blog.

    • I completely agree with Graeber on debt being a social obligation. I tried to bring in this issue as well. I think all of these things to a significant extent merge together.

      I don’t know if you read Part 1 of this series. In it, I tried to explain that the way our economy behaves is very much like a physical system behaves. Our economy is a complex adaptive system and a dissipative structure–it grows as additional energy is added. Whether or not we think of the cultural commitments in the same way we think ties that bind physical structures, at a given point in time, there is a lot of similarity.

      I am not quite sure what you mean by Marxian power dynamic, other than perhaps the tendency of the wealthy to accumulate an increasing share of the wealth. In fact, what seems to be happening now is the bigger corporations are accumulating ever more of the wealth in a similar manner to the way some individuals are accumulating wealth. Thus, we end up with whatever wealth is available increasingly concentrated in the hands of a few individuals and businesses. International oil companies have always been among the very largest companies. Some of the largest ones (like Saudi Aramco) are not traded, so often get missed in comparison of company sizes. If we lose the big oil companies, the whole system likely goes down. Other very large companies (Wal-Mart, Volkswegon Group, Toyota, Samsung, Apple, Daimler, GM) are very dependent on oil as well.

      I expect that some of the wealth of the very rich individuals comes from the wealth of the very large corporations, so there would be a tie involved.

  7. Pingback: The Problem Of Debt As We Reach Oil Limits | What I An Reading

  8. If you want to understand this a bit more (and get even more depressed) read “Perfect Storm”. A research paper by London based financing firm Tullet Prebon. They cover pretty much all the bases.

  9. Several people above have commented that part of the solution should be to redistribute wealth from the rich to the poor.

    It is counterintuitive but this policy would probably make things worse.

    Most of the wealth owned by rich people is sitting idle. If this wealth was redistributed to the poor it would be immediately spent. This would increase the demand for energy which would increase it’s cost and the cost of almost everything else (since you need energy to make almost everything).

    Wealth redistribution would therefore more rapidly deplete non-renewable resources that should be saved, for example, to maintain water systems and to build community food processing facilities, and inflation would return the poor to their original state.

    On the other hand, confiscating the wealth of the rich and burying it, would help a lot.

    Credit to Nate Hagens for introducing me to this troubling idea.

    • That’s known as Jevon’s paradox, or very similar to it. As efficiency improves one uses more of it.

    • I agree that most of the wealth of the rich exists in “promises” that won’t ever be spent. Burying this wealth in theory might help.

      A large share of wealth is in pension funds and IRAs. A person could make the same argument about them, except that a lot of the owners are fairly poor, apart from these funds. They would be quite unhappy about the funds being taken away.

    • Presumably most of the wealth of the very rich sits in banks and gets lent out to other people and businesses which helps the economy. The rest of it gets spent by the rich which stimulates demand, jobs, growth etc. It is best to leave things as they are. 😉

      • I agree. It’s morning in America and we can count on trickle down plus broken windows plus Twitter growth to rebuild the economy and restore everyone’s god given right to fly to Disneyland once a year. 🙂

          • I think a “new poverty” would be worth considering. Zero material aggrandizement, but allowing dignity regardless of level of possessions. Also would include leaving people in Africa, rural China, India alone. Just as if they didn’t exist. They made it this far without help. So why go messing with them?

            • Yes that seems to be a case of where good is evil. We maintain third world populations which then expand and deplete more resources, add further pollution, wipe out more species etc.

              Clearly we need a more sophisticated ethics than simpleton humanitarianism but the plan seems to be to incorporate more and more people into the global economy so that they can maintain the profit/ debt system.

              Our “leaders” send off foreign aid, our media encourage us to donate to charities, and all the time they suggest that they care about people and that we should too. Really all they care about is money and arguably capitalism forces them to think like that. Charity is an investment in global economic growth.

              It is obvious that society manipulates our perception of the world, our thoughts, feelings and “conscience” to keep the system going. All societies do that, from medieval Christianity to atheist Russia, it is all the same. “Imitate Christ! Be a good worker! Ahh, look at the babies crying in Africa, phone your card through now.”

              I like to think that I have a fairly independent perception of reality and I am content to say that I really don’t care when people starve to death. All human values are an illusion. Just don’t let the herd find out what you think because they wont like it!

            • From a post on Nature Bats Last today:

              Satish Musunuru Says:
              February 13th, 2015 at 3:05 am
              Complaints with 3 things that Paul Ehrlich said:

              Not including the fact that he talked too much and didn’t let Guy add his bits.

              1. Grameen bank and World Bank: Paul actually “approves of” these institutions except that they don’t work, which he acknowledges. Fact is they actually work quite well for what they are designed to do: throw millions of rural farmers and others into debt peonage and coerce them into the money economy. Paul must not have read John Perkins and other economic hitmen and he seems to misunderstand the role of banking institutions. I often hear people saying (including the Chief Economist at Google) “we got to take care of those poor people, you know, those who are living on less than two dollars a day, blah blah…” They are either ignorant or lying. For those of us who live on dollars and other modern currencies, the poor people’s situation sounds pitiable. The fact is they don’t need dollars or pounds. They meet most of their subsistence needs in their communities, trading and exchanging with each other in informal ways, before the long hand of the market starts interfering with their lives and puts a value on everything they do. And when that starts, of course, they are living on less than two dollars a day. It’s like we go to a tribal person and say he must be poor and starving because he doesn’t make any money. No, thank you, the forest provides his family everything they need, including the best tasting sweetest honey civilized city dwellers could only dream of. And 200 different types of foods. Talk about a wholesome diet. McDonalds, anyone? Imagine an Asian upon finding out that people in the West don’t eat much rice exclaiming, “what? you eat less than a cup of rice a week? you must be poor? we must do something… let’s send you some rice”. Money is not part of their lives. We impose it on them.

              That’s what imperialism and development aid are about: take away local subsistence sources of people in the “third world” and the “global south” and force them to work for money. Force them to replace their food crops with cash crops that will fetch a “market rate” in the “free market”. Oh, here’s a cellphone that will help you find the best price for your palm oil and soy that we will buy and burn in our cars and feed to our pigs, respectively. Come join the party! The prices we decide for your products in our glass-walled skyscrapers in Chicago and London should take care of you. What? Your kids are starving? You can always move to the city and sleep on the sidewalks until you find a “job”. This is what the Grameen bank and the World Bank are about. You can do better, Paul.

          • Quitollis,

            Finally. Someone speaking in terms I can understand! Maybe I wouldn’t say I don’t care if people starve. I don’t see the starving as the essential issue, and I would caution against opening oneself up to the charge of callousness. What I see as important is OUR need to stop meddling in things that don’t concern us. We have brought the entire creation to the brink of extinction (through meddling with and exploiting everything.) That is infinitely more atrocious than distant people somewhere starving. WE are the problem. We need to sit down and keep our damn selves quiet, and live within our means. Just my 2 cents.

            • “At the end of it all, defenders of the status quo are not defending life, they are defending lifestyle. Proponents of the dominant culture and its myths of progress are really arguing for their own comfort, of both body and mind. Changing nothing presents no difficult ethical questions or messy physical conflicts.” (Quote from latest NBL article)

              I’m not sure change has to be mostly based on conflict and incrimination. (Not saying there aren’t extremely bad actors out there to be dealt with.) But as an old person who for decades has been a voice in the wilderness, I see signs of change that I could never have anticipated.

              I’ll list just one. I’ve long been interested in the Tiny House movement, in how it can save money, and how it can save space by using it more creatively. Twenty years ago, I came across a book–Tiny, Tiny Houses I think was the name–but I doubt there was a great deal of small house promotion then, apart from a very few books like that. Now, without even searching, I can watch a great quantity of small-house projects on TV.

              Today it was Small House Builders. The head honcho (very much in charge) was close to the age of my grandchildren. The depth and diversity of his knowledge was astonishing. He knew all about regular house construction, while being able to apply that knowledge to small-houses. True, he and his cohorts were considerably more rah rah (sp) than I would have liked, but I was able to get past that. Everybody used power tools. Not to my liking, but I could overlook that. What struck me as profound was the coming together of mainstream godawful industrial technology with a change-consciousness that respected (significantly) pristine surroundings, including the towering trees to which their tiny house was tethered.

              They knew how to stagger the connecting bolts so that the trees could move as needed. A bunch of different-size antique windows, which the boss guy picked out and had assembled, comprised an entire wall of the under 200 square foot house. An antique metal milk crate functioned as a chandelier. Old hinges were preserved. A glass panel was installed to allow a floor view of the creek the house was suspended over. Here was somebody with a great eye and sensibility; yet he was 100 percent hip with the Home Depot way of doing things. An ordinary electric heater served as the fireplace (I didn’t see what powered it or anything else–there was a compost toilet, however) which was framed by a commercial faux rock wall as light as a feather. I wondered about the ghastly processes that produce such thing. And I made the balancing assumption that combining things industrial in minute quantities with scavenged material, like in a favela, might well be near-term sustainable. It struck me as a case of selectivity, practicality, technology, preservation, environment coming together. The emphasis might be on distributing small amounts of “good” and “bad” in smart combinations so as to end up with the most good and the least bad.

              This isn’t to promote interfering with third world people who are managing quite OK by their own terms. It doesn’t mean trying to keep everyone alive everywhere. But it might be indicative of options yet to play out for mainstream industrial society.

      • No, I disagree. Their money may be in banks, but for almost every member of the 0.1% that money is unproductive money. Money gained from speculation, derivative wagers, property speculation etc. Or from consumption. Neither way is anything but wasted resources.

      • An awfully lot of the wealth is in pension funds and in IRAs. If it is not there, it is in Endowment Funds and in the hands of the very rich. If I remember correctly, 50% of securities are in pension funds alone.

    • Your argument seems to hinge on that it would expend more resources if the poor had more money. So why not bury the wealth of the poor instead? That way there would be fewer poor and they would consume less and there would be more left. If the argument is counterintuitive, the conclusion is plain dumb. What have you got against the rich anyway?

      • I have nothing against the rich.
        I am looking for solutions that might reduce unnecessary suffering and wars.
        My favorites are a global one child policy plus government policies to drive down consumption of non-renewable resources faster than their depletion rate.

        • Suffering and war are a part of life, we need to get over that. Every species evolved through competition within its own species and against others through the survival of the fittest. There would be no life without suffering and war, no new faculty without selection and death, no good that does not depend on evil. In that sense evil is good, suffering the cause of every joy.

          All higher civilization has depended on exploitation and appropriation for its growth. Britain had slave islands in the Caribbean with millions of African slaves for centuries. Nearly everyone was a slave in Greece and Rome yet they laid the foundation of our civilization with its art, music, poetry, science, drama, philosophy, law, etc.

          Every civilization comes to an end. It would crash the entire economic system if governments enforced a reduction in consumption and billions would then die. Collapse is coming soon enough anyway, so why hasten it? Like you said, enjoy life while you can! I see the rich in the same way, if a few of us can live without the stress and indignity of everyday life then why deny it to them?

          I agree with you though that we should think about protecting the forests as our final retreat when the collapse happens and the starving urban masses flood out of the cities and devour all in their path like a plague of locust. The state may have to then aerial bomb the cities, like they did to Dresden, as damage control. And yes, hopefully we can learn some useful lessons from this period, reduce the human quantity, increase its biological quality to something sustainable.

          I feel inspired to a song, The Beautiful Western Woods, if our friend Paul with forgive my ‘koombya’. (Paul where are you?)

          • Lyrics:

            Today we want to march
            To try out a new march
            In the lovely Westerwald
            Yes, there the wind whistles so cold

            Oh, you lovely Westerwald
            Over your heights the wind whistles so cold
            However, the smallest sunshine
            Thrusts deep into the heart

            And Gretel and Hans
            Gladly go dancing on Sunday
            Because dancing makes joy
            And the heart in the body laughs

            When the dancing is over
            There is mostly fighting
            And the lad whom that does not please
            Is accused of having no grit

            Oh, you lovely Westerwald
            Are known far and wide
            True people of nature
            Of falsehood no trace

          • I wouldn’t worry over much about the masses flooding out of the cities. They would mostly begin preying on each other before they made it a few miles and what few survived the feeding frenzy would be devoured by the vastness that is rural America. Your average urban American can’t walk five miles on a pleasant day with a paved road. They would lay down and starve to death long before they got out to 90% of the rural areas.

          • Greetings Quitollis….

            I am on the South Island of New Zealand in a remote farming region enjoying the superb climate, the traffic-free roads and the incredibly welcoming community.

            Around here many people have what are referred to as ‘honesty shops’ — people put fruit, veg, eggs etc… from their farms on tables out front of their homes with prices… and a tin can… you take what you need and drop your coins into the can… I am told that almost never is there any sort of theft…

            I suppose that is a result of a very low population density + an abundance of food…

            I remain pessimistic regarding the future … but if there is any place that might come out of this in reasonable shape I suspect this will be it.

            And regardless of the outcome … without a doubt it was an outstanding decision to come to this part of the world… in some respects it feels frozen in time… a better time…

            It is so far away from the troubles of the world that I have mostly detached … I have a peek at zero hedge and read the Gail’s articles…. but the few times I browse the comments I do not feel compelled to participate…

            It looks as though the journey and the adventure will end here… not a bad result I suppose….

            • Welcome back. I am headed for China on March 13, and will be there for a month. I know I won’t be able to post from China–Wordpress is blocked. Right now I am busy getting ready for the trip, so I may not have as much time to post as before.

            • Ahhh!!!…to be part of the rich elite and going to New Zealand to “hide out” and be holier than thou..I first saw this movement when Nicole Foss mentioned it on Automatic Earth for only $367,000 you can buy in…….makes me sick….people with money and power propagate a system for as long as they can profit from it then they run off to Islands trying to hold on to their precious lives. How do you expect the stop the invasion of starving people heading your way…

              Oh well same song different verse…. when the peasants starve it eventually spills into the rich elites…enjoy while you can!!

Comments are closed.