Why We Have an Oversupply of Almost Everything (Oil, labor, capital, etc.)

The Wall Street Journal recently ran an article called, Glut of Capital and Labor Challenge Policy Makers: Global oversupply extends beyond commodities, elevating deflation risk. To me, this is a very serious issue, quite likely signaling that we are reaching what has been called Limits to Growth, a situation modeled in 1972 in a book by that name.

What happens is that economic growth eventually runs into limits. Many people have assumed that these limits would be marked by high prices and excessive demand for goods. In my view, the issue is precisely the opposite one: Limits to growth are instead marked by low prices and inadequate demand. Common workers can no longer afford to buy the goods and services that the economy produces, because of inadequate wage growth. The price of all commodities drops, because of lower demand by workers. Furthermore, investors can no longer find investments that provide an adequate return on capital, because prices for finished goods are pulled down by the low demand of workers with inadequate wages.

Evidence Regarding the Connection Between Energy Consumption and GDP Growth

We can see the close connection between world energy consumption and world GDP using historical data.

Figure 1. World GDP in 2010$ compared (from USDA) compared to World Consumption of Energy (from BP Statistical Review of World Energy 2014).

This chart gives a clue regarding what is wrong with the economy. The slope of the line implies that adding one percentage point of growth in energy usage tends to add less and less GDP growth over time, as I have shown in Figure 2. This means that if we want to have, for example, a constant 4% growth in world GDP for the period 1969 to 2013, we would need to gradually increase the rate of growth in energy consumption from about 1.8% = (4.0% – 2.2%) growth in energy consumption in 1969 to 2.8% = (4.0% – 1.2%) growth in energy consumption in 2013. This need for more and more growth in energy use to produce the same amount of economic growth is taking place despite all of our efforts toward efficiency, and despite all of our efforts toward becoming more of a “service” economy, using less energy products!

Figure 2. Expected change in GDP growth corresponding to 1% growth in total energy, based on Figure 1 fitted line.

To make matters worse, growth in world energy supply is generally trending downward as well. (This is not just oil supply whose growth is trending downward; this is oil plus everything else, including “renewables”.)

Figure 3. Three-year average percent change in world energy consumption, based on BP Statistical Review of World Energy 2014 data.

There would be no problem, if economic growth were something that we could simply walk away from with no harmful consequences. Unfortunately, we live in a world where there are only two options–win or lose. We can win in our contest against other species (especially microbes), or we can lose. Winning looks like economic growth; losing looks like financial collapse with huge loss of human population, perhaps to epidemics, because we cannot maintain our current economic system.

The symptoms of losing the game are the symptoms we are seeing today–low commodity prices (temporarily higher, but nowhere nearly high enough to maintain production), not enough jobs that pay well for common workers, and a lack of investment opportunities, because workers cannot afford the high prices of goods that would be required to provide adequate return on investment.

How We Have Won in Our Contest with Other Species–Early Efforts 

The “secret formula” humans have had for winning in our competition against other species has been the use of supplemental energy, adding to the energy we get from food. There is a physics reason why this approach works: total population by all species is limited by available energy supply. Providing our own external energy supply was (and still is) a great work-around for this limitation. Even in the days of hunter-gatherers, humans used three times as much energy as could be obtained through food alone (Figure 4).

Figure 4

Earliest supplementation of food energy came by burning sticks and other biomass, starting one million years ago. Using this approach, humans were able to gain an advantage over other species in several ways:

  1. We were able to cook some of our food. This made a wider range of plants and animals suitable for food and made the nutrients from these foods more easily available to our bodies.
  2. Because less energy was needed for chewing and digesting, our bodies could put energy into growing a larger brain, thus giving us an advantage over other animals.
  3. The use of cooked food freed up time for such activities as hunting and making clothes, because less time was needed for chewing.
  4. Heat from burning plant material could be used to keep warm in cold areas, thereby extending our range and increasing the total human population that could be supported.
  5. Fire could be used to chase off predatory animals and hunt prey animals.

Our bodies are now adapted to the need for supplemental energy. Our teeth are smaller, and our jaws and digestive apparatus have shrunk in size, as our brain has grown. The large population of humans that are alive today could not survive without supplemental energy for many purposes, such as cooking food, heating homes, and fighting illnesses that spread when humans are in as close proximity as they are today.

Our Modern Formula For Winning the Battle Against Other Species

In my view, the formula that has allowed humans to keep winning the battle against other species is the following:

  1. Use increasing amounts of inexpensive supplemental energy to leverage human energy so that finished goods and services produced per worker rises each year.
  2. Pay for this system with debt, because (if supplemental energy costs are cheap enough), it is possible to repay the debt, plus the interest on the debt, with the additional goods and services made possible by the cheap additional energy.
  3. This system gradually becomes more complex to deal with problems that come with rising population and growing use of resources. However, if the output of goods per worker is growing rapidly enough, it should be possible to pay for the costs associated with this increased complexity, in addition to interest costs.
  4. The whole system “works” as long as the total quantity of finished goods and services rises rapidly enough that it can fund all of the following: (a) a rising standard of living for common workers so that they can afford increasing amounts of debt to buy more goods, (b) debt repayment, and interest on the debt of the system, and (c) an increasing amount of “overhead” in the form of government services, medical care, educational services, and salaries of high paid officials (in business as well as government). This overhead is needed to deal with the increasing complexity that comes with growth.

The formula for a growing economy is now failing. The rate of economic growth is falling, partly because energy supply is slowing (Figure 3), and partly because we need more and more growth of energy supply to produce a given amount of economic growth (Figure 2). With this lowered world economic growth, the amount of goods and services being produced is not rising fast enough to support all of the functions that it needs to cover: interest payments, growing wages of common workers, and growing “overhead” of a more complex society.

Some Reasons the Economic Growth Cycle is Now Failing

Let’s look at a few areas where we are reaching obstacles to this continued growth in final goods and services. An overarching problem is diminishing returns, which is reflected in increasingly higher prices of production.

1. Energy supplies are becoming more expensive to extract.

We extract the easiest to extract energy supplies first, and as these deplete, need to use the more expensive to extract energy supplies. We hear much about “growing efficiency” but, in fact, we are becoming less efficient in the production of energy supplies.

In the US, EIA data shows that we are becoming less efficient at coal production, in terms of coal production per worker hour (Figure 5).

Figure 5. US coal production per worker, on a Btu basis based on EIA data.

With oil, growing inefficiency is shown by the steeply rising cost of oil exploration and production since 1999 (Figure 6).

Figure 6. Figure by Steve Kopits of Douglas-Westwood showing trends in world oil exploration and production costs per barrel.

Thus, it is for a fairly recent period, namely the period since about 2000, that we have been encountering rising costs both for US coal and for worldwide oil extraction.

The extra workers and extra costs required for producing the same amount of energy  counteract the tendency toward growth in the rest of the economy. This occurs because the rest of the economy must produce finished products with fewer workers and smaller quantities of resources as a result of the extra demands on these resources by the energy sector.

2. Other materials, besides energy products, are experiencing diminishing returns. 

Other resources, such as metals and other minerals and fresh water, are also becoming increasingly expensive to extract. The issue with mineral ores is similar to that with fossil fuels. We start with a fixed amount of ores in good locations and with high mineral percentages. As we move to less desirable ores, both human labor and more energy products are required, making the extraction process less efficient.

With fresh water, the issue is likely to be a need for desalination or long distance transport, to satisfy the needs of a growing population. Workarounds again involve more human labor and more resource use, making the production of fresh water less efficient.

In both of these cases, growing inefficiency leaves the rest of the economy with less human energy and a smaller quantity of energy products to produce the finished goods and services that the economy needs.

3. Growing pollution is taking its toll.

Instead of just producing end products, we are increasingly finding ourselves fighting pollution. While this is a benefit to society, it really is only offsetting what would otherwise be a negative. Thus, it acts like an item of overhead, rather than producing economic growth.

From the point of view of workers having to pay for higher cost energy in order to fight pollution (say, substitution of a higher cost energy source, or paying for more pollution controls), the additional cost acts like a tax. Workers need to cut back on other expenditures to afford the pollution control workarounds. The effect is thus recessionary.

4. The amount of “overhead” to the world economy has been growing rapidly in recent years, for a number of reasons: 

  • The amount of overhead is growing because we are reaching natural barriers. For example, population per acre of arable land is growing, so we need more intensity of development to produce food for a rising population.
  • With greater population density and increased bacterial antibiotic resistance, disease transmission becomes more of a problem.
  • Increasing education is being encouraged, whether or not there are jobs available that will make use of that education. Education that cannot be used in a productive way to produce more goods and services can be considered a type of overhead for the economy. Educational expenses are frequently financed by debt. Repayment of this debt leads to a decrease in demand for other goods, such as new homes and vehicles.
  • We have more elderly to whom we have promised benefits, because with the benefit of better nutrition and medical care, more people are living longer.

5. We are reaching debt limits.

As economic growth has slowed, we have been adding more and more debt, to try to mitigate the problem. This additional debt becomes a problem in many ways: (a) without cheap energy to leverage human labor, there are not many productive investments that can be made; (b) the addition of more debt leads to a need for more interest payments; and (c) at some point debt ratios become overwhelmingly high.

At least part of the slowdown in economic growth that we are seeing today is coming from a slowdown in the growth of debt. Without debt growth, it is hard to keep commodity prices high enough. Investment in new manufacturing plants is also affected by low growth in debt.

Reasons for Confusion in Understanding Our Current Predicament

1. Not understanding that all of the symptoms we are seeing today are manifestations of the same underlying “illness”. 

Most analysts think that the economy has stubbed its toe and has a headache, rather than recognizing that it has a serious underlying illness.

2. Academia is focused way too narrowly, and tied too closely to what has been written before. 

Academics, because of their need to write papers, focus on what previous papers have said. Unfortunately, previous papers have not understood the nature of our problem. Academics have developed models based on our situation when we were away from limits. The issues we are facing cover such diverse subjects as physics, geology, and finance. It is hard for academics to become knowledgeable in many areas at once.

3. Models that seemed to work before are no longer appropriate.

We take models like the familiar supply and demand model of economists and assume that they represent everlasting truths.

Figure 7. (Source Wikipedia). The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

Unfortunately, as we get close to limits, things change. Both wage levels and debt levels have an impact on demand; the quantity of goods available is also affected by diminishing returns. The model that worked in the past may be totally inappropriate now.

Even a complex model like the climate change model being used by the IPCC is likely to be affected by financial limits. If near-term financial limits are to be expected, IPCC’s estimate of future carbon from fuels is likely to be too high. At a minimum, the findings of the IPCC need to be framed differently: climate change may be one of a number of problems facing those people who manage to survive a financial crash.

4. Too much wishful thinking.

Everyone would like to present a positive result, especially when grants are being given for academic research that will support some favorable finding.

A favorite form of wishful thinking is believing that higher costs of energy products will not be a problem. Higher cost energy products, whether they are renewable or not, are a problem for many reasons:

  • They represent growing inefficiency in the economy. With growing inefficiency, we produce fewer finished goods and services per worker, not more.
  • Countries using more of the higher cost types of energy become less competitive in the world market, and because of this, may develop financial problems. The countries most affected by the Great Recession were countries using a high percentage of oil in their energy mix.
  • The amount workers have available to spend is limited. If a worker has $100 to spend on energy supply, he can buy 100 times as much in energy supplies priced at $1 as he can energy supplies priced at $100. This same principle works even if the cost difference is much lower–say $3.50 gallon vs. $3.00 gallon.

5. Too much faith in, “We pay each other’s wages.”

There is a common belief that growing inefficiency is OK; the wages we pay for unneeded education will work its way through the system as more wages for other workers.

Unfortunately, the real secret to economic growth is not paying each other’s wages; it is growing output of finished products per worker through increased use of cheap energy (and perhaps technology, to make this cheap energy useful).

Increased overhead for the system is not helpful.

6.  An “upside down” peak oil story.

Most people in the peak oil community believe what economists say about supply and demand–namely, that oil prices will rise if there is a supply problem. They have not realized that in a networked economy, wages and prices are tightly linked. The way limits apply is not necessarily the way we expect. Limits may come through a lack of jobs that pay well, and because of this lack of jobs, inability to purchase products containing oil.

The connection between energy and jobs is clear. Good jobs require the use of energy, such as electricity and oil; lack of good-paying jobs is likely to be a manifestation of an inadequate supply of cheap energy. Also, high paying jobs are what allow rising buying power, and thus keep demand high. Thus, oil limits may appear as a demand problem, with low oil prices, rather than as a high oil price problem.

In my opinion, what we are seeing now is a manifestation of peak oil. It is just happening in an upside down way relative to what most were expecting.

Conclusion

One way of viewing our problem today is as a crisis of affordability. Young people cannot afford to start families or buy new homes because of a combination of the high cost of higher education (leading to debt), the high cost of fuel-efficient new cars (again leading to debt), the high cost of resale homes, and the relatively low wages paid to young workers. Even older workers often have an affordability problem. Many have found their wages stagnating or falling at the same time that the cost of healthcare, cars, electricity, and (until recently) oil rises. A recent Gallop Survey showed an increasing share of workers categorize themselves as “working class” rather than “middle class.”

It is this affordability crisis that is bringing the system down. Without adequate wages, the amount of debt that can be added to the system lags as well. It becomes impossible to keep prices of commodities up at a high enough level to encourage production of these commodities. Return on investment tends to be low for the same reason. Most researchers have not recognized these problems, because they are narrowly focused and assume that models that worked in the past will continue to work today.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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1,002 Responses to Why We Have an Oversupply of Almost Everything (Oil, labor, capital, etc.)

  1. Fast Eddy says:

    America takes pause on a big holiday weekend requiring little in the way of real devotions beyond the barbeque deck with two profoundly stupid movie entertainments that epitomize our estrangement from the troubles of the present day.

    First there’s Mad Max: Fury Road, which depicts the collapse of civilization as a monster car rally. They managed to get it exactly wrong. The present is the monster car show. Houston. Los Angeles. New Jersey, Beijing, Mumbai, etc. In the future, there will be no cars, gasoline-powered, electric, driverless, or otherwise. Mad Max: Fury Road is actually a perverse exercise in nostalgia, as if we’re going to miss being a nation of savages in the driver’s seat, acting out an endless and pointless competition for our little place on the highway.

    More http://kunstler.com/clusterfuck-nation/yesterdays-tomorrowland/

  2. Fast Eddy says:

    “A single corn kernel coated with a neonicotinoid can kill a song bird.” As a long time environmental lawyer and campaigner, I should not have been stunned by that fact but I was. Shaking my head in dismay, I read on, “Even a tiny grain of wheat or canola treated with the …neonicotinoid… can fatally poison a bird.”

    http://www.zerohedge.com/news/2015-05-25/birds-bees-suicide-pesticide

    Aren’t we clever beasts!

  3. Fast Eddy says:

    I continue to see attacks on QE in the comments section of the MSM… and this just occurred to me:

    You are driving across a desert and you are running out of fuel … the last gas station you come across is closed …

    But you rummage around and find five large cans of gasoline that is tainted with water….

    You can try running the car by putting that in the tank knowing it is going to seize up your engine at some point … or you can lie down and die on the spot.

    The car has continued to run for nearly 7 years… so QE was most definitely the right decision

    • project wis.dom
      kesar says:

      Most rational decision from my perspective. It kicked the can down for these years. I rather wonder whether they have any other ammunition left. The “Big bazooka” in words of Hank Paulson worked. What they need this time? A-bomb?

      • VPK says:

        I would have the whole house of cards fall then and there. The bastardss should have been strung up with pitchforks and tossed in the compost heap!

  4. Don Stewart says:

    Dear Gail and Finite Worlders

    I want to comment on a particular concept in Capra and Luisi’s book, The Systems View of Life. I also want to tentatively contrast it with the description of the same phenomenon in Mobus and Kalton.

    The issue is the ‘hierarchy’ of relationships. For example, the cell is part of the organ which is part of the human which is part of the society. And a computer program is written in pieces which are parts of the whole, and various machines are parts of a factory. Mobus and Kalton, to my recollection, do not make a clear distinction between the natural hierarchy and the humanly constructed hierarchy.

    But Capra and Luisi do make a distinction. The discussion can be found on and around page 65:

    ‘Since the early days of organismic biology, these multi-leveled structures of systems within systems have been called hierarchies. However, this term can be misleading, since it is derived from human hierarchies, which are fairly rigid structures of domination and control, quite unlike the multi-leveled order found in nature.’

    And on page 68:
    ‘The view of living systems as networks provides a novel perspective on the so-called ‘hierarchies’ of nature. Since living systems at all levels are networks, we must visualize the web of life as living systems (networks) interacting in network fashion with other systems (networks). For example, we can picture an ecosystem schematically as a network with a few nodes. Each node represents an organism, which means that each node, when magnified, appears itself as a network. Each node in the new network may represent an organ, which in turn will appear as a network when magnified, and so on.

    In other words, the web of life consists of networks within networks. At each scale, under closer scrutiny, the nodes of the network reveal themselves as smaller networks. We tend to arrange these systems, all nesting within larger systems, in a hierarchical scheme by placing the larger systems above the smaller ones in pyramid fashion. But this is a human projection. In nature, there is no ‘above’ or ‘below’, and there are no hierarchies. There are only networks nesting within other networks.’

    To bring this down to a practical problem, consider the question of Social Security as the population of working age decreases. To the humanly constructed notions of hierarchy, this is a big problem. There is a vast network of laws and transfers of money which is resistant to change. But if the government were to disappear tomorrow, then humans would resolve the matter in humanistic terms. (Resolve doesn’t mean everyone will be happy.) Classically, the old people take care of the children to earn their keep…they do not retire to Florida to play golf. And the old people are not suffering for decades with chronic diseases brought about by consuming the fruits of the fossil fuel age and thus requiring vast expenditures on ‘health care’. Family and clan ties work reasonably well to adjust to the inevitable cycles of birth, maturity, and age and death. However, those ties cannot be legislated, nor can family disputes be adjudicated by the Supreme Court.

    The root problem exposed by the Social Security issue is that humanly constructed hierarchies are rigid and resist adaptation to reality. Natural networks are vastly more adaptable and, therefore, resilient.

    One might speculate that the root cause of the crisis in Greece is a clash between the humanly constructed hierarchies: a government in Athens and the governments in the EU counties plus the IMF. Absent those human constructs which enter into borrowing and lending arrangements which are legal, but not natural, arrangements, there would be no problems. Varoufakis has commented that he tries to talk about economics, while the EU ministers want to talk about the law. Varoufakis has his fingers on part of the fundamental problem.

    In short, I believe that the distinction that Capra and Luisi make is crucial to understanding the nature of the problems adapting to peak everything, and the potential (but staunchly resisted) solutions.

    Don Stewart
    PS Also compare Tim Garrett’s view of value as arising from network connections.

  5. VPK says:

    Just as Gail has stated many times, without a functioning financial system, things fall apart very rapidly.
    And “whatever some analysts might be saying”, Greeks are now suffering mightily, as the €22 million per day hit to the economy has now bankrupted the country’s hospitals which have reportedly run out of painkillers and sheets. Here’s The Independent:
    Greek hospitals have run out of supplies such as painkillers, scissors and sheets as budget cuts have left the health service unable to provide even basic provisions for operations and medical procedures…
    Huge cuts to the healthcare budget, amid the economic turmoil which made millions unemployed, have left than 2.5m Greeks uninsured, up from 500,000 in 2008..
    healthcare spending has fallen by 25 per cent since 2009, creating shortages of the most basic surgical equipment and leaving too little money to pay nurses’ salaries.
    Reports have surfaced of patients being turned away from hospital because there was no meter to measure their high blood pressure, while others have had to do without painkillers during medical procedures. One patient was even asked to bring their own sheets to hospital.
    A trainee surgeon at KAT, a respected state hospital in Athens, said the situation was at “breaking point”.
    “There is no money to repair medical equipment, no money for ambulances to use for petrol, no money to hire nurses and no money to buy modern surgical supplies
    http://www.zerohedge.com/news/2015-05-24/grexit-disaster-looms-greek-hospitals-run-out-sheets-painkillers

    • Stefeun says:

      What the EU rulers are doing to Greece is utter shame.
      At least, Syriza is still standing, and Podemos just won a poll in Spain:
      “Spain’s Establishment Hurt by Graft as Podemos Gathers Force”
      http://www.bloomberg.com/news/articles/2015-05-24/podemos-may-win-madrid-barcelona-city-halls-exit-polls

      In almost all other EU countries, people are looking towards far-right parties, though. Probably due to lack of recent experience (while in Greece and Spain, many people still remember).

      • Fast Eddy says:

        I don’t see it that way.

        If Greece is allowed to walk away from their debt then so will Spain, Italy, France, UK etc… because nobody can pay back what they owe.

        If Greece goes then the global financial system goes — and the global economy goes — and the lights and heat go off… the grocery stores empty … the famine begins http://www.toptenz.net/top-10-historic-famines-caused-cannibalism.php

        And the situation the Greeks are enduring at the moment…. will look like a paradise.

        • Stefeun says:

          Eddy,
          No discussion about the final outcome, but we’re not there yet; maybe soon, but not yet.

          I don’t think that Greece itself is of any threat for the financial system; they’ve been hedging against greek default in 2010 (iirc) when they transferred the main part of the debt from private (the banks) to public (the EU states). It’s a political problem, no longer a financial one. And it’s being held by the Troïka, which is a financial construction, not a political one (at least, not a democratic one). Does the US Federal State let the people of Alabama (or another) starve to death?

          So the real problem is -as you say- to avoid the contagion to Spain and others if some formal public solution is found to alleviate this burden off the greek shoulders. Hey, don’t tell me there isn’t some way around that! No, they prefer to remain inflexible and not move a comma in the rules of this Germany-takes-all institution.
          But on the other hand, this rigidity is more and more threatened by nearly all the peoples of Europe, and the EU construction is doomed anyway. The rulers won’t be able to keep their privileges for very long.

          We’re telling them “You must suffer and give up hope so that we can maintain our lifestyle” (in fact, so that a tiny bunch of jetset banksters can suck ever more money). I know that’s what we’ve been doing to our colonies* and are continuing to do to so-called emerging countries, but Greece is different, it’s a part of our Union, which they sold us as an ideal of Democracy (a greek invention!). Disgusting hypocrisy.

          *: I think it’s Pepe Escobar who coined the formula “IMF colonies” for over-indebted countries. I find the image very true and explicit.

          • Fast Eddy says:

            Greece is no doubt the whipping boy of the ECB… and I suppose the ECB wants to be able to point to them and say to Spain etc… don’t even think about it… and that makes sense…

            But where do you draw the line… how far down do you grind the Greeks…

            I suspect the ECB reckons we are all completely screwed at some point — the Greeks are just screwed a little sooner. And at the end of the day Greece is still not in such a bad spot — there are literally dozens of countries that are far worse of than Greece — and nobody does anything about that

            I wonder if the ECB has sat down with Tsipras and explained the Big Picture to him — that the fight goes beyond the financial crisis — that the end of civilization is at stake? And that although things are bad in Greece – they will get a whole lot worse (for everyone) if Greece detonates the default bomb. Has he been told he must ‘take one for the team’

            The reason I suggest this is because Tsipras has backed down on his election promises big time — and the left within his party are not happy.

            As for the ECB (which is a franchise of the Fed which is owned by the men who control the world aka the PTB) knowing the Big Picture (some seem unsure of that) keep in mind it is the central banks that made what is not a viable enterprise – shale oil – viable by a) instructing their MSM minions to invent the ‘100 years of oil myth and b) making the funding available via QE ZIRP.

    • Jan Steinman
      Jan Steinman says:

      without a functioning financial system, things fall apart very rapidly.

      These “things” than “fall apart very rapidly” are things that humans have done without for some 199,800 years of existence. Those who have become totally dependent on them will suffer while others manage to get by.

      • VPK says:

        Yep, sounds like that we humans just get by and survive and forget about living a life.
        Please, don’t be smug and reply that it may be a wonderful adventure. Just because you have all your bases covered (seemingly), doesn’t mean you will escape, especially at 70.

        • Jan Steinman
          Jan Steinman says:

          I wouldn’t at all claim to “have all the bases covered.” Not by a long shot! But we have gone to some care to cover some of the most important ones.

          Two hikers were out in the woods when a bear charged them.

          “C’mon, let’s run!” said the first hiker.

          “We can’t outrun that bear!” said the second hiker.

          The first hiker replied, “No, but I can outrun you!

          It’s all a game, anyway. You can improve your odds, but that faster hiker might trip on a hidden root in the path.

          Ain’t none of gonna “escape,” anyway. So you might as well be determined to enjoy the trip, no? Some here are planning through hedonism and filling their “bucket list.” I prefer to enjoy the process of learning to live in a low-energy manner.

          And if that’s an attitude you call “smug,” then you’d best adopt it, pronto, because research shows that optimists live longer and do better in a crisis.

          Or just join the wailing and gnashing of teeth that seems prevalent in these comments. “WE’RE ALL GONNA DIE!” Well, yea — what’s your point?

          • VPK says:

            It’s a good day to die!

          • Fast Eddy says:

            I have a hybrid plan — bucket list + small farm.

            I also support the extinction event theory — because when I take out my scale and weigh the facts — that’s the conclusion I come to.

            What’s the point of the we are all gonna die conversation?

            1. It can be useful to some to understand what we are facing so they don’t waste their time on folly (oh my folly – buying a place in a remote place with long winters — thinking there would still be electricity — because the power came from hydro in that area of the country!!! Oh my foolishness — I wish I had know about Finite World before I did that — I could have spent what I lost selling on some wonderful hedonistic adventures!)

            2. Because we won’t be able to compare outcomes after the fact so they need to be debated and discussed now

      • John Doyle – Seeker of truth in a world of falsehoods
        John Doyle says:

        Has anyone reading this blog read; “Abundance-The future is better than you think”?
        by Diamandis and Kotler.
        I was wondering whether its message is realistic?

        • Gail Tverberg – My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
          Gail Tverberg says:

          Abundance–The Future is Better than You Think has a huge number of reviews, with most people giving it high ratings. Of course, high ratings only show that you are providing people with what they like to hear. One popular review says:

          In their new book `Abundance: The Future Is Better Than You Think’, Peter Diamandis and Steven Kotler argue that, despite the problems that our technology has recently created (including dwindling resources, global warming, and a population explosion that threatens to confound [and in some cases already does confound] our advances in agricultural production and medicine), we needn’t discard our techno-optimism after all. Indeed, according to Diamandis, the world is on the precipice of another explosion in technology that will soon bring refuge from many of our current problems, and abundance to our doorstep. Not content to let the goal or the timeline remain vague, Diamandis is happy to hang a more precise definition on each. When it comes to abundance, Diamandis defines it as “a world of nine billion people with clean water, nutritious food, affordable housing, personalized education, top-tier medical care, and non-polluting, ubiquitous energy” (loc. 317), and, to top it all off, the freedom to pursue their goals and aspirations unhindered by political repression. With regards to the timeline, Diamandis claims that it “should be achievable within twenty-five years, with noticeable change possible within the next decade” (loc. 580).

          In an attempt to convince us that this goal is achievable (and convincing he is), Diamandis takes us through the latest technological developments (and those that will soon be coming down the pipe) in numerous fields such as water filtration and sanitation (including advancements in water desalination, nano-filtering, sewage recycling, and the smart-water-grid); food production (including the next generation of genetically modified foods, vertical farming, in-vitro meat, and agroecology); education (including personalized education, the OLPC [One Laptop Per Child program], AI education programs, and advancements in educational games, video-games and computer programs); energy (including solar and wind power, the next generation of nuclear energy and algal biofuel, the smart-energy-grid, and battery-encapsulated energy storage); healthcare (including stem cell therapy and organ creation, robotic medical care-givers and surgeons, genomic medicine [based on your individual genome], and Lab-on-a-Chip technology [a diagnostic tool compatible with your cell phone that can instantly analyze samples of saliva, urine and blood]), and many, many more.

          According to Diamandis, the technological innovations mentioned above are being spurred on by 3 forces in particular these days that are likely to bring us to a state of abundance even quicker than we might otherwise expect, and one that extends to all parts of the world. The 3 forces are (in reverse order as to how they are presented), 1) the rise of the bottom billion–which consists in the fact that the world’s poorest have recently begun plugging into the world economy in a very substantial way, both as a consumer and as a producer of goods (largely as a result of the communications revolution, and the fact that cell phones are now spreading even to the world’s poorest populations); 2) the rising phenomenon of the tech-philanthropists–a new breed of wealthy individuals who are more philanthropic than ever, and who are applying their efforts to global solutions (and particularly in the developing world); and 3) the rising phenomenon of DIY innovation–which includes the ability of small organizations, and even individuals to make contributions even in the most advanced technological domains (such as computing, biotechnology, and even space travel).

          I would say that this outcome is not likely at all. We are running into financial problems caused by diminishing returns right now. This doesn’t seem to be factored into the analysis in this book.

    • Fast Eddy says:

      That is an excellent example of a) how quickly things can collapse and b) how so many things we take for granted will disappear when global collapse kicks off.

      Keep in mind Greece is still plugged into BAU — they have electricity and oil…. the shops remain open…. so this is a relatively prosperous country relative to what is coming…

  6. Fast Eddy says:

    California Is the World’s Eighth Largest Economy http://www.lao.ca.gov/LAOEconTax/Article/Detail/1

    http://www.lao.ca.gov/Blog/Media/Image/1

    When the water runs out in California and the state’s economy collapses… the game is over… everywhere.

    You simply cannot unplug such a massive part component of the US economy — and not have dire consequences.

    Heck — we can’t even let a major auto maker or insurer (e.g. GM, AIG)) go under without dire consequences (hence the massive bailouts in 2008)

    • John Doyle – Seeker of truth in a world of falsehoods
      John Doyle says:

      What happened?
      California used to be the 6th largest economy?
      Are they going downhill already?

  7. Fast Eddy says:

    HSBC fears world recession with no lifeboats left

    The world authorities have run out of ammunition as rates remain stuck at zero. They have no margin for error as the global economy falters.

    Stephen King from HSCB warns that the global authorities have alarmingly few tools to combat the next crunch, given that interest rates are already zero across most of the developed world, debts levels are at or near record highs, and there is little scope for fiscal stimulus.

    “The world economy is sailing across the ocean without any lifeboats to use in case of emergency,” he said.

    http://www.telegraph.co.uk/finance/economics/11625098/HSBC-fears-world-recession-with-no-lifeboats-left.html

    http://i.telegraph.co.uk/multimedia/archive/01962/titanic-painting_1962453b.jpg

  8. Don Stewart says:

    Dear Gail, Finite Worlders, and especially Stefeun
    I have blathered on about the Microbiome. Here is an elegant essay from Albert Bates :
    http://peaksurfer.blogspot.com/2015/05/microbiome-verschrankung.html

    Please click through on the ‘superposition’ link to see that some microbes even have the ability to turn things on and off. Apparently microbes have the ability to stop using the most efficient methods when they are not needed? Might they realize that bigger bombs are not always better? Could that be where Mobus’ missing Sapience has been hiding? (Put your tongue firmly in your cheek when asking that question.)

    Also note that ‘all your thoughts may not be yours…they may be the thoughts of your gut microbes’. Has Chefurka intuited this, or is he exceptionally well informed about the bugs in the gut?

    Don Stewart

  9. Daniel Hood
    Daniel Hood says:

    Started to sense a few linking events/statements that raises eyebrows across the food, energy, water security nexus, particularly this up and coming Jade Helm military exercise some are worried about including the State Governor who’s ordered the Texas National Guard to “observe”.

    I have a theory, these exercises could very well be part of the Pentagon’s strategy of some kind of “normalization process” given the South West faces unprecedented converging challenges for resources. If water runs down, or worse out, to the point whereby it directly challenges survival, this is a major problem for enormous cities where tens of millions live. It’s understandable precautions are being taken in preparation for “black swan” risks no matter how improbable. Personally I think the odds of some “black swan” event are increasing, this is my sense.

    NASA has already put California on 12 months notice recently warning water was rapidly running down, it seems the drought is getting worse. In some parts of Cali aquifers are being depleted so fast ground levels are falling by as much as a foot per year, and this is clearly unsustainable. It’s a simple truth to state society can not function without water for long. We’re also seeing tensions, trade-offs, interdependencies between the food, energy, water nexus in these areas. So big Ag is being accused by the cities of overconsuming water. Other states are warning they will not share their water with Cali, I remember reading an article a few months ago, the governor of another state saying get lost to Cali. We’re even seeing signs of tensions between Mexico and the US over water.

    More recently, Obama has warned ominously that “climate deniers” which tend to be those on the right of the political spectrum are becoming a “national security threat” and it seems Texas is leading the charge in this regard. Could it be the Pentagon under direct Federal orders is preparing for mass civil breakdown? I think so because I remember reading an article I dredged up last year about it.

    May 2015: “Obama Warns Climate Deniers They’re National Security Threats” http://thehill.com/homenews/ad

    June 2014: “Pentagon Prepares For Mass Civil Breakdown” http://www.theguardian.com/environment/earth-insight/2014/jun/12/pentagon-mass-civil-breakdown

    In addition, we have a UN expert warning people may have to be “migrated” out of California if the drought continues. Question is, where will they migrate in huge numbers and what impact will that have on house prices and thus the wider US economy given vulnerabilities post 2008?

    Aug 2014: “UN Expert Warns America” http://www.businessinsider.com

    May make sense that a number of Walmart stores are being closed as a security precaution, prepared as emergency distribution hubs in advance in case 75% water restrictions are enacted as warned by the governor of Cali next year if the drought doesn’t subside. Check out the regions where WMs have been closed, all in “weather event” locations.

    April 2015: “Wal-Mart Mysteriously Closed 5 Stores” http://www.businessinsider.com/wal-mart-and-jade-helm-conspiracy-theory-2015-4

    Interesting times indeed because Cali has a population of 40 million, Texas circa 27 million. These are huge numbers to get into trouble all at once re: food, energy, water security.

    No one can live long without water for very long. Civilization and anarchy are only seven meals apart as the Spanish proverb warns.

    Hope these linking events don’t come to pass, hope I’m wrong, tinfoil hat kind of thinking, but what seemed absolutely crazy not so long ago, doesn’t seem so far fetched now as and when we see events, statements, reports, warnings, media pieces etc. over time unfolding, connecting the dots, it’s becoming ‘super-obvious’ (as Elon Musk would say) 2008 was simply a warning shot across the bow of civilization about things to come.

    * Very real, devastating South West drought with no signs of reversing.
    * NASA’s dire, apocalyptic warnings, 12 months and counting.
    * UN Expert warning of mass US civil migration if things get worse.
    * Obama warning of “climate change” attacking “climate deniers” as “national security threats” – link up and coming Jade Helm ops to these statements he’s making.
    * Walmart mysterious sudden closures in weather related regions – If resources run down looting will start out of panic. We know what happens when people don’t have FEW, they go into crazy survival mode out of desperation.
    * Jade Helm, live military training/preparation in ‘vulnerable’ social, economic, political SW regions.
    * Tensions mounting between environmentalists, Big Ag, the cities, States, political groups et al.

    Even legendary investor Jim Rogers is now starting to pick up on the problems in Cali and he’s known for getting things right most of the time.

    May 2015: “Jim Rogers Warns There Will Be Wars Over Water, Oil” http://www.newsmax.com/Finance

    Let me know what you think…

    • Fast Eddy says:

      Good post.

      Some great examples of what happens when societies because extremely complex…

      As you point out, if there is a mass exodus from California the impact on the housing market alone could tip the entire global economy over — there would be tens of millions of personal and corporate bankruptcies — add to this the impact of unplugging California farms from the US/global food supply chain…

      And the the supreme irony — we idolize Galileo, Newton, Watt, the Wright Brothers, Ford, Borlaug, Oppenheimer, Gates, Musk, Jobs etc… — we worship technological advancements …

      And it is quite likely we will pay the ultimate price — extinction of our species — due to their ‘achievements’

      • Daniel Hood
        Daniel Hood says:

        Thanks FE, just checked the links some are busted! If you scan under those header links on Google, when you find them they make for an interesting read indeed. It’s amazing what data you can pull over time. I keep saying but to my mind Cali is ground zero.

        I know it’s never a great thing to go searching for evidence to support your conclusions, however red flag warning signs are flashing all over the place and FEW nexus is a game I’m heavily involved in, that and energy cyber security. Intelligence gathering as an analyst is my field. I just hope I’m horribly, stupidly wrong on this. What’s interesting is that I’m now starting to pick up on some events long before contrarians like Jim Rogers do. Used to be the other way around.

        The war is on between the forces of innovation/efficiency & debt/energy deflation. Looks like we’re losing this war as the middle class gets wiped out.

        • Fast Eddy says:

          Lots of black swans but yes I can see how California might usurp Greece of Japan or China as the one that is the feather than snaps the camel’s spine.

          Primarily because you can’t print water. When those deep bores go dry there is nothing that can be done.

          I understand that agriculture uses 80% or more of all fresh water in California — so if people stop watering their lawns that will no help much.

          If the farms stop producing I could see that setting off a catastrophic chain of events that smash the fragile global economy to pieces.

          it looks likely that martial law will be the reaction from the PTB. That could hold for perhaps weeks or a few months — but as we know, it is impossible to manage the complexities of our interconnected economy… the sticks in the diagram uses will start to fall very quickly if you pull even one out.

    • Gail Tverberg – My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
      Gail Tverberg says:

      It seems like now would be a good time for people to leave California, if they are in a drought prone area and have a way to relocate.

      I am not sure how wars over water work, other than wars about the usage of water from a particular river, or about usage of runoff of rain from roofs. I suppose these could also be wars about use of water from underground reservoirs.

      Other than desalination, it is hard to see a way to create fresh water.

      • Daniel Hood
        Daniel Hood says:

        Welcome back Gail. Think some of my links were broken for some reason, here’s the article again for those who wish to save time!

        http://www.newsmax.com/Finance/StreetTalk/jim-rogers-water-oil-wars/2015/05/18/id/645266/

        Someone has clearly seen what I see and wrote in the comments section…

        (“Water wars between countries..more like water wars between US states !!!!”)

        The solution is pray for rain, reduce useage, build desal plants which we know is hugely energy intensive and time consuming, build water pipelines as they do with oil & gas. Not sure about the locations, numbers, economics of it all etc.

        That whole SW region seems shaky to me across many dimensions.

        • Fast Eddy says:

          The thing is…. they don’t seem to be doing any of these things… they are making no attempt to try to kick this can a little further…

          Perhaps the PTB have concluded that California can hang on for a few more years — so it comes very low on the priorities in terms of fighting fires…. perhaps they know that there is some other beast lurking that they cannot fend off and that will hit well before California… making California moot.

          I’d like to see the research that is submitted to the central End of the World crisis room from the various think tanks working on this … and see how they are prioritized … how does China rank in terms of threat… what about Greece…. or the EU….

          It must be very stressful for those who are tasked with dealing with all of this. You would know the threats but you would also know the likely outcomes.

          And clearly the outcomes are a nightmare — otherwise why would your bosses not be attempting to implement policies that might result in less catastrophic landing…

          Instead they are intent on running to the top of Everest with the raw egg…

        • Artleads says:

          [i]In addition, we have a UN expert warning people may have to be “migrated” out of California if the drought continues. Question is, where will they migrate in huge numbers and what impact will that have on house prices and thus the wider US economy given vulnerabilities post 2008?

          Aug 2014: “UN Expert Warns America” http://www.businessinsider.com…[/i%5D

          My state has traditionally been seeing a large influx from CA. Now it can expect a flood. It is ranked 33 among states for natural-disaster expectancy, so we are an inviting location, despite also experiencing drought. We are not ready for this flood. I doubt that other states are either.

      • Daniel Hood
        Daniel Hood says:

        Another reason linking food, energy, water security together. This is exactly what I mean when I say food, energy, water security, tensions trade-offs, interrelations, interdependencies in relation to technology, economy & environmental change.

        Dec 2014: “Is the oil crash about to snuff out the ‘Texas miracle’?”

        http://www.latimes.com/business/hiltzik/la-fi-mh-is-the-oil-crash-about-to-snuff-out-the-texas-miracle-20141222-column.html

        We’re seeing the butterfly effect accelerated and negative feedback loops.

    • Ed – I am interested in energy issues.
      edpell says:

      Cali farming may die but there is plenty of water for people to drink, bath and wash clothes.

      • Fast Eddy says:

        That’s a rather simplistic view.

        If there is no water for farming then you see massive numbers of bankruptcies … you would see massive numbers of layoffs (think of all the people who work in businesses that support industrial farming operations and the transportation of food)…

        Those are just local impacts.

        See the Big Picture — expensive food — like expensive oil — is a HUGE problem.

        When you spend more of your cash on food — and your income is not rising — you buy less ‘stuff’

        And buying less stuff leads to a deflationary death spiral.

        The C-Free Diet: If we didn’t have California, what would we eat?

        Food scientists at Cornell University have produced a strain of broccoli that thrives in hot environments, which may make it possible for states with stiflingly hot summers to grow the vegetable. California, where cool coastal fog is perfect for growing standard broccoli, currently produces more than 90 percent of the broccoli grown in the United States. If California were to disappear, what would the American diet be like?

        Expensive and grainy. California produces a sizable majority of many American fruits, vegetables, and nuts: 99 percent of artichokes, 99 percent of walnuts, 97 percent of kiwis, 97 percent of plums, 95 percent of celery, 95 percent of garlic, 89 percent of cauliflower, 71 percent of spinach, and 69 percent of carrots (and the list goes on and on). Some of this is due to climate and soil. No other state, or even a combination of states, can match California’s output per acre. Lemon yields in California, for example, are more than 50 percent higher than in Arizona. California spinach yield per acre is 60 percent higher than the national average. Without California, supply of all these products in the United States and abroad would dip, and in the first few years, a few might be nearly impossible to find. Orchard-based products in particular, such as nuts and some fruits, would take many years to spring back.

        Price surges would eventually become the larger issue. Rising prices would force Americans to consume more grains, which are locked in a complicated price-dependent relationship with fresh fruits, vegetables, and meats. When the price of produce increases, people eat more grain. When the price of grain drops, people eat more fruits and vegetables. (In fact, in some parts of the world, wheat and rice are the only proven “Giffen goods”—a product in which decreasing prices lead to decreasing demand.) Young people and the poor in America, more than others, eat less fresh food when prices rise.

        http://www.slate.com/articles/health_and_science/explainer/2013/07/california_grows_all_of_our_fruits_and_vegetables_what_would_we_eat_without.html

        • Daddio7 says:

          Here in north Florida land that has lain fallow for decades or was planted in sod is being plowed and planted into vegetables. Last winter WP Rawl planted hundreds of acres of kale in Flagler county. Other East coast produce firms are expanding operations into the area. Planting starts in September and it is cool enough for these types of vegetables until early May.

          Farmers here can triple crop. Growing vegetables September-December, fresh table market and chip potatoes January-May, corn June-August. We get plenty of rain and have a deep aquifer.

          If there is money to be made East coast farmers can take up the slack. We can’t grow crops that need low humidity but something is better than nothing. Insects and blights have to be controlled but as long as pesticides remain available nutritious (sort of) food can be grown.

          • Artleads says:

            Sounds like the ideal place to focus on food growing. Ideally, alternatives to chemical pesticides will be found for the bugs. I hope permaculture, bio-intensive horticulture and a variety of other alternatives will supplement your program.

  10. Stefeun says:

    For those of us who are thinking of some kind of transcendance out of (or through) the cul-de-sac in which we are (NB: I’m not talking of any techno-fix or absurdity alike), I’d like to mention here the experience and point of view of Paul Chefurka,, with an excerpt from his blog, and then a link to an interview he gave 1 month ago.

    He talks of 2 paths, non mutually exclusive: the outer path (permaculture, “Lifeboat”, …), and the inner path he has chosen and thus develops more in detail (and unfortunately remains opaque to me)

    From “Approaching the Limits to Growth”, in his article “Climbing the Ladder of Awareness”
    http://www.paulchefurka.ca
    “(stage) 5 – Awareness that the predicament encompasses all aspects of life. This includes everything we do, how we do it, our relationships with each other, as well as our treatment of the rest of the biosphere and the physical planet. With this realization, the floodgates open, and no problem is exempt from consideration or acceptance. The very concept of a “Solution” is seen through, and cast aside as a waste of effort.
    For those who arrive at Stage 5 there is a real risk that depression will set in. After all, we’ve learned throughout our lives that our hope for tomorrow lies in our ability to solve problems today. When no amount of human cleverness appears able to solve our predicament the possibility of hope can vanish like a the light of a candle flame, to be replaced by the suffocating darkness of despair.

    How people cope with despair is of course deeply personal, but it seems to me there are two general routes people take to reconcile themselves with the situation. These are not mutually exclusive, and most of us will operate out of some mix of the two. I identify them here as general tendencies, because people seem to be drawn more to one or the other. I call them the outer path and the inner path.

    If one is inclined to choose the outer path, concerns about adaptation and local resilience move into the foreground, as exemplified by the Transition Network and Permaculture Movement. To those on the outer path, community-building and local sustainability initiatives will have great appeal. Organized party politics seems to be less attractive to people at this stage, however. Perhaps politics is seen as part of the problem, or perhaps it’s just seen as a waste of effort when the real action will take place at the local level.

    If one is disinclined to choose the outer path either because of temperament or circumstance, the inner path offers its own set of attractions.

    Choosing the inner path involves re-framing the whole thing in terms of consciousness, self-awareness and/or some form of transcendent perception. For someone on this path it is seen as an attempt to manifest Gandhi’s message, “Become the change you wish to see in the world,” on the most profoundly personal level. This message is similarly expressed in the ancient Hermetic saying, “As above, so below.” Or in plain language, “In order to heal the world, first begin by healing yourself.” ”

    More details about this “inner path” in the interview he gave to Adrastia:
    http://adrastia.org/paul-chefurka-interview-adrastia/
    a few quotes:
    “My study of self-organizing complex systems, non-equilibrium thermodynamics, cybernetics, evolutionary psychology and neuroscience have convinced me that a large number of factors will keep the system of global civilization locked into its current trajectory for the foreseeable future. I give the eventual disruption and decline of global techno-industrial civilization a very high probability, though when and how that might happen is unknowable.
    The philosophy that supports my life today is based on the wisdom streams I mentioned previously.
    (…)
    When the stories were set aside, it was a short step to seeing through the illusion of the Self altogether.
    Realizing that the Self is an idea-construct rather than a concrete thing inevitably changed my perception of the universe. It went from being a place of collapse and fear to a place full of possibilities that unfold moment by moment. The collapse-tales we tell each other and the streams of anger, fear, outrage and blame that flow through the veins of our society like poison, seem to be little but stories as well, though stories that are grounded in the consensus reality represented by modern science and human nature. Seeing them as stories allows room for other stories to come in and balance them – for me those are mostly stories of deep personal meaning, experiences that happen in the moment, and of course stories of caring, nurturing and love.”
    (the very last rungs seem to be missing, on my personal ladder…)

    • Don Stewart says:

      Dear Stefeun
      I recommend as parallel reading the section on ‘bottom-up and top down’ in Capra and Luisi.

      I’ll butcher and distort their message a little here for the sake of brevity. Consider something small, a cell or a gene or a microbe. Then consider something large, an organism or an ecosystem or the global economy or the universe. The very small thing is not independent of the very large things, and the very large things cannot function with the cooperation of the very small things. The causation runs both ways. To think that some little hard, round atom called ‘me’ can be independent is a delusion. (I will leave aside the question of whether there is anything called ‘me’…takes one far afield.)

      Therefore, a lifeboat has to be constructed from both the bottom up and the top down. Which leads one to intentional communities or religion based clans or vibrant local economies (Transition Towns) and the like. The need for a Lifeboat arises out of the notion from Thermodynamics that the Global Economy cannot survive a reduction in energy and material throughput, and something simpler will have to replace it. Careful observers like David Holmgren and John Michael Greer, who thought 40 years ago that there were alternative paths that the Global Economy might take to simplify itself, have become pessimistic about anything except a head first dive into an empty swimming pool. Also check out George Mobus’ current blog, and look for the link down in the comments to Tim Garrett’s newly published article with a thermodynamic model of the economy:
      http://questioneverything.typepad.com
      Note that Garrett’s modeling suggests that an economy which has been living very high on the energy and material hog will crash the hardest.

      If one thinks that the dive into the empty swimming pool is a pretty good metaphor, then the need to construct a ‘bottom up plus top down’ solution which depends on far smaller throughputs of energy and material, and which integrates from the very small building blocks (DNA, cells, microbes, etc.) up to perhaps a tribe becomes relevant.

      Don Stewart

      • Don Stewart says:

        sorry, should read ‘CANNOT function without the cooperation of the very small things’

        Don Stewart

      • Stefeun says:

        Thanks Don,
        it’s actually interesting to think in terms of micro- and macro- needing each other. It’s the various interactions that hold everything together, nothing exists by itself.

        Along this “vertical” (top-down & bottom-up) axis one can add several more intermediate levels (e.g. the gene < the cell < the body < the family < the tribe < …) and make similar conclusions about interdependance. Then arises the question of the boundaries separating each level, their permeabilities and the kinds of differential pressures they have to withstand.
        We can also consider the "horizontal" dimension, i.e. look at the flows of matter/energy/information at a given level between "likes" and through boundaries that evolve along the time. It get to be very complex very quickly, and I just wonder if there's a simple concept that could help visualize it better. OK just wild thoughts.

        The direct link to Tim Garrett's paper: http://onlinelibrary.wiley.com/doi/10.1002/2013EF000171/full
        I had a very quick look at it (and skipped the hard maths!) and hadn't the impression of anything really new compared to his previous publications. A very formal confirmation of what we already know, that is we're in real dire straits.
        Also, as already discussed with Gail, his message makes large room for climate change and CO2 levels, which, combined to economics, makes it less clear. And probably not really adapted to the situation we're facing (I copy Xraymike79's summary): "Only a precipitous crash of the economy can avoid a disastrous warming of up to 5°C by 2100". If it's a wish, it's likely to be granted soon, like it or not (as Nicole Foss uses to say). And then…?
        NB: I don't mean to be sarcastic, nor arrogant; Tim Garrett makes a great job, but unfortunately I don't think it's a very big help to us, else than add to the theoretical strength of our predicament.

        • Gail Tverberg – My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
          Gail Tverberg says:

          Tim Garrett does not understand that “all fossil fuel reserves are not equal”. He thinks we will and can burn all reserves available.

          Another thing that occurs to me is that our wealth is in fact temporary. If our ability to keep up the energy to keep the whole system going ceases (drops below his 7.1), much of the wealth we have today becomes “stranded wealth”. An automobile is not of much value if the person owning it cannot afford gasoline and repair parts for it. A city is not of much value, if we cannot get food and water to it. A bond that we have in our portfolio does not have much value, if the debtor cannot repay it. Our bank account doesn’t have much value, if the bank permanently loses its electricity supply.

          I see little way of transitioning down to a lower level of economy. Even a country like India is likely to have a problem.

          • Fast Eddy says:

            The ultimate schadenfreude for those who are offended by the Banker Gods who continue to line up for the big bonuses…

            Enjoy the champagne and caviar — and the yachts and private jets — because we all end up in the gutter when the SHFT.

          • Don Stewart says:

            Gail
            Regarding your statement that Tim Garrett doesn’t understand the difference between reserves and resources…

            From his paper:
            ‘With respect to the rate and shape coefficients α and k, energy economists distinguish between energy “resources” and energy “reserves” [Höök et al., 2010]. Resources represent what is potentially available to be exploited. Reserves represent what is currently accessible given existing technological, physical, and political considerations. The presumption that is made here is that ΔHR represents reserves not resources. Variability in α and k would represent more efficient access of resources. If α and k are fixed, the variability is manifested instead in changes in the statistics for what civilization considers to be reserves.’

            Don Stewart

      • Gail Tverberg – My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
        Gail Tverberg says:

        I don’t think I figured out the link to Garrett article on the thermodynamic model of the economy. This is a recent one, but I don’t think it is correct. http://www.earth-syst-dynam-discuss.net/6/655/2015/esdd-6-655-2015-print.pdf

        • Don Stewart says:

          Gail
          Use this link, and then click on ‘read rest of article’

          http://onlinelibrary.wiley.com/doi/10.1002/2013EF000171/abstract

          Note George Mobus’ comment about it. As your point to Stefeun about the obsolescence of stuff which cannot be maintained. If you study the article closely, you will see that he relates it to inflation. For example, if we have degrading wheat fields, then the cost and price of wheat will tend to increase. One could discuss that for a long time. As, for example, BW Hill’s prediction that oil will simply become obsolete and the price will sink to effectively zero as we go into a post oil world.

          Don Stewart

          Mobus’ Comment:

          Good stuff to be sure. Downloaded the full paper and will be going over it. But either he has been reading my biophysical econ blogs (with my science papers in them) or, more likely, he too has seen the clear relationship between energy and wealth production (e.g. we both use a decay factor to show the decline of wealth as energy inputs decline). Thanks for the links.

    • Don Stewart says:

      Dear Stefeun
      Adding to my previous note about George Mobus and the link to Tim Garrett’s paper. The linchpin of Garrett’s argument is that 7.1 watts per thousand dollars of economic output is a fixed coefficient. We can use that fixed coefficient as the definition of ‘the global financial capitalism economy’. An economy which was able to operate on, let’s say, 3 watts, would be a DIFFERENT economy. An economy which was able to operate on 1 watt would be DIFFERENT from the 3 watt economy. An economy which was able to operate strictly with natural solar energy (photosynthesis and passive solar) would be DIFFERENT YET.

      The question is whether the current 7.1 watt economy can ‘transition’ to a 3 watt economy, or must instead do what we call ‘collapse’, with the 3 watt economy being born out of the ashes. Or whether some group of people (say, Jan on his island) who are already operating with about a 1 watt economy will survive while most other people die.

      When David Holmgren formulated his ‘energy descent’ plans a long time ago, he had in mind a devolution from 7 to 6 to 5 to 4 to 3 watts. David probably lives on about 3 watts, himself, so it isn’t impossible. But David has come to the conclusion that our 7.1 watt system does not have the sapience (to use Mobus’ phrase) to voluntarily live on 3 watts. So David currently thinks (or at least I think he thinks) that we have a ‘brown tech plus collapse’ in our future.

      Don Stewart

      • Stefeun says:

        Don,
        be careful the 7.1 is a resulting value given in Watts per thousand $, ie the power necessary to generate 1 k$ of GWP. So I’m not sure this measure is appropriate to your comment (which I think I understood, though).

        I agree with Holmgren, Mobus, Meadows and many other deep thinkers (Hi Gail!) that a smooth transition to a lower energy society (ie all together) is not an option. I think we’re going through an K to r abrupt transition, which means that the old big structure has to collapse, because of the modified environment (change being due to its very action, mostly), so that seeds of a new type can thrive and become the new norm.
        Jan on his island is one of these seeds; just hope that the multiple winds caused by the collapse won’t be too strong.

        • Don Stewart says:

          Dear Stefeun

          IF we transition to something that is not a mere modification of Global Financial Capitalism which requires 7.1 watts per thousand dollars….

          We can think in terms of double entry bookkeeping, or similar analogy. Money is something that is more or less real (conceptually, it is a bunch of dollar bills or Euros or some other money). But it also has the meaning of ‘something that is required in order to live in a society’. For example, someone recently calculated how many hours someone has to work at the minimum wage to afford the rent on a one bedroom apartment. In some states in the US, the number of hours is up in the 90s. So one way of looking at the problem is ‘how much do we have to raise the minimum wage to keep people afloat?’ The other way to approach the problem is by examining what sort of societal changes are required when a significant number of people are making far less money than is required to afford a one bedroom apartment. And then we begin to imagine a different kind of society. We think about tiny houses on wheels, and walkable communities which don’t require cars, and old fashioned ways to stay warm in the winter without external heat, and growing some of one’s own food, and so forth. In that sort of alternative society, how much money would be required to live a decent life? And the answer comes out to be quite a bit less. One of the points Tim Garrett makes is that the more infrastructure (wealth) we have, the more current income we have to have to maintain it. But reduce the infrastructure and government radically, and the requirement for current income goes down.

          Which is to agree with you that I can’t just take the 7.1 watts and arbitrarily reduce it to 3, and claim that I have made a truly significant statement. Unfortunately, what is required is to have a Systems based model where everything is connected to everything else. I don’t know of such a model which is described in the professional literature. I see some people LIVING such a model.

          Back in 2008 we were on our way to finding out what such a model looked like. The banks were failing and ‘radical homemaking’ had a brief vogue. But the Central Banks and the Governments were unwilling to let any radically different model emerge. (Just a statement of fact, not an accusation.) So we put off the discovery of what such a model would look like on a large scale for going on 8 years now.

          I used the 7.1 to 3 to 1 to zero merely to give some ‘poetic’ notion of what is involved. If the watts per capita decline, then the society must change in the direction of greater simplicity, which implies more self-sufficiency and less ‘buying stuff’ and so less need for money.

          Don Stewart

          • Gail Tverberg – My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
            Gail Tverberg says:

            Actually, I think the change means less government. It also means failing banks.

            It is convenient to think that “greater simplicity” is the answer, but it is really a different kind of simplicity than what we personally can achieve. It involves parts of the system we depend on falling apart.

            • Don Stewart says:

              Gail
              One can think of the Titanic. The ‘normal’ environment was champagne cocktails and dancing in formal attire. The ‘new normal’ became floating in lifeboats on the icy Atlantic. And no, there were not enough lifeboats. And yes, those who found lifeboats rowed them away from those jumping into the icy waters as the ship sank so that they themselves did not founder.

              Just how ‘primitive’ a lifeboat has to be in order to be functional post-collapse is still to be revealed. In the Soviet Union, Orlov has shown that certain skills and relationships were functional, while others were not. An extremist position is that NOTHING will be functional. But I think that sort of nihilism is self-defeating.

              Don Stewart

            • Fast Eddy says:

              The analogy is interesting — but not complete.

              Those who made it to the lifeboats from the Titanic had somewhere to row to. They had BAU in the form of large vessels with steaming mugs of coffee and soup… and blankets… and heaters… and comfortable beds… and medical care to offer to those on the life boats.

              None of that will be available post-collapse… those on life boats will be afloat in a sea of starvation and violence… essentially bounding about in one endless North Atlantic ocean of misery with no safe ports anywhere.

              In fact one would likely survive longer in a lifeboat in the North Atlantic than in the metaphorical life boat I have described.

              Because in the North Atlantic, there will not be billions of zombies (ah – i mean hungry desperate people) trying to clamber into your boat to steal your blanket and emergency rations and throwing you overboard.

            • Artleads says:

              Because of how people are conditioned, great savagery might ensue during and post collapse. I believe this would be due to the gross immaturity of our species. With universally rational behavior (a utopian ideal), it would be avoided. So it is late indeed to work for utopia. It certainly mightn’t constitute a potential personal lifeboat. But neither do I see what’s to lose in trying for it. It is likely to be helpful somewhere in the system, even if not to oneself.

              To make a sweeping claim, I say there is nothing about our built environment that can’t be transformed through creativity. Rain falls and sun shines on the city and countryside alike. Cities need not be more outside-dependent than the countryside to meet their needs. The fact that they don’t meet their needs now is due to a system of thought and behavior. And that system of thought and behavior.can be changed (I don’t say *will* be changed).

              Hypothesis: For an undetermined window of time (maybe very brief), an urban-transformation program *ought* to be consistent with a “functioning” global economic order (where the Leonardo dome remains intact.) Maybe it would be a matter of robbing Peter to pay Paul, for the materials and workings of the system-under-capitalism must wreak ecological and social havoc somewhere in order to survive.

              I’m assuming that the role of government/big business is to work itself out of the job it currently has. If so, the early phases might not bring the economy down (although I understand that other things might). if people have food and water, and can keep warm, govern their small units and network among such units, they ought in theory to survive on that basis if no other.This is entirely utopian. I can easily see how it wouldn’t work. I don’t believe such dreams ever quite materialize. But attempting to attain them seems to beat the heck out of doing nothing.

            • Fast Eddy says:

              “Because of how people are conditioned, great savagery might ensue during and post collapse. I believe this would be due to the gross immaturity of our species”

              Throw a bone into a pack of hungry dogs….

              We are no different than the dogs other than our big brains have allowed us to devise far more innovative ways of killing each other.

              The other ideas I a filing under K (Koombaya)

          • Kulm says:

            The population will have to contract to an equilibrium point to make the 3 watt world possible.

        • Jan Steinman
          Jan Steinman says:

          just hope that the multiple winds caused by the collapse won’t be too strong.

          Heh, getting to collapse is enough of a challenge. We need additional people (either with skills or money, hopefully, both) or we ain’t gonna last that long.

      • Fast Eddy says:

        This smacks of those in the ivory tower fiddling with formulas and models — that will have absolutely no relevance when people are starving and dying by the billion.

    • Gail Tverberg – My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
      Gail Tverberg says:

      It sounds to me like Paul Chefurka has been thinking about collapse a little too long and too intently. He has been writing about collapse for a very long time. I remember his posts on The Oil Drum years ago.

    • Kulm says:

      Permaculture can support much fewer people, but that ‘fewer’ would probably be the top 2-3% who own more than 90% of the world’s wealth.
      They will retain enough servants to keep the permaculture going, until they develop Cat 1 civilization and to say so long to Earth (and leave the servants to their fate).

      Japan did achieve Zero Population Growth from 1720 to 1853, when Commodore Matthew Perry felt like having sushi for dinner. ZPG is sustainable if the ruling elite can turn a blind eye to the lesser privileged starve (which Japan’s elites did during the famines of 1783 and 1833, which killed a few million (about 20% of total pop) each time but hardly merited a line in the official history.)

  11. Kulm says:

    There will be no famine for those who do matter.

    If 90% of the people die off, the remaining grain storages will be enough to feed the remainders, who tend to be the richer ones.

    During the siege of Paris and the Paris Commune, those who were in charge of Napoleon III’s gold successfully hid the keys of the vault while the people were starving, and were rewarded 50,000 francs ($10,000, about 1 million today) for their troubles by the bourgeois-elected President Thiers.

    The guards at the granaries will do the same, and will be allowed to live, which is reward enough in post-famine days.

    • Gail Tverberg – My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
      Gail Tverberg says:

      Aren’t famine and lack of adequate water supplies something that we are likely to face over and over again, certainly year after year, but perhaps more frequently? Those with access to the grain supplies also need some way to fix it (bake or fry it), and need water as well. The situation becomes more complicated than you suggest.

      • Kulm says:

        Not so if the population is about 10% of what it used to be.

        All the ‘difficult’ problems suddenly become quite easy after depopulation.

        It is argued that Black Death actually helped civilization by leaving healthier survivors who were paid higher wages to cover labor shortfalls, which in turn increased the intelligence of the general population (culling the weak did help too).

        • Jan Steinman
          Jan Steinman says:

          It is argued that Black Death actually helped civilization

          I recently read (sorry, can’t find the attribution) that about 50% of people of European ancestry have a latent resistance to Bubonic Plague.

          A “bottleneck event” is generally beneficial to a population, although primarily to descendants of the survivors.

        • Fast Eddy says:

          Mr Kulm… you continue to demonstrate a rather weak understanding of the issues we are facing.

          I suggest you read through the dozens of earlier articles on these topics if you would like to improve your mark in this course.

  12. Pingback: Why We Have an Oversupply of Almost Everything (Oil, labor, capital, etc.) | Dewayne-Net Archives

  13. Fast Eddy says:

    I don’t know how anyone can trust the statistical bullshit emanating from our government reporting agencies, or the legacy news organizations that report them. Yet the meme has remained firmly fixed in the popular imagination: the US economy has recovered! GDP grows 5 percent in Q3! Manufacturing renaissance! Energy independence! Cleanest shirt in the laundry basket! Best-looking house in a bad neighborhood…!

    This is simply the power of wishful thinking on display. No one — with the exception of a few “doomer” cranks — wants to believe that industrial civilization is in trouble deep. The staggering credulity this represents would be a fascinating case study in itself if there were not so many other things that demand our attention right now. Let’s just write this phenomenon off as the diminishing returns of career log-rolling in politics, finance, media, and academia.

    All the professional “thought-leaders” pitch in to support the “hologram” of eternal progress that issues their paychecks and bonuses. This culture of pervasive racketeering that we’ve engineered has made us obtuse. The particular brand of stupidity on display also points to another signal vanity of our time: the conviction that if you measure things enough, you can control them.

    http://kunstler.com/forecast/forecast-2015/

    “All the professional “thought-leaders” pitch in to support the “hologram” of eternal progress that issues their paychecks and bonuses”

    Nobody wants to peak behind this curtain … for these reasons… the demon that lurks behind there threatens our very survival…

  14. Fast Eddy says:

    THE OLDUVAI THEORY

    The Olduvai theory has been called unthinkable, preposterous, absurd, dangerous, self-fulfilling, and self-defeating.

    I offer it, however, as an inductive theory based on world energy and population data and on what I’ve seen during the past 30 years in some 50 nations on all continents except Antarctica.

    It is also based on my experience in electrical engineering and energy management systems, my hobbies of anthropology and archaeology, and a lifetime of reading in various fields.

    The theory is defined by the ratio of world energy production (use) and world population. The details are worked out. The theory is easy. It states that the life expectancy of Industrial Civilization is less than or equal to 100 years: 1930-2030.

    World energy production per capita from 1945 to 1973 grew at a breakneck speed of 3.45%/year. Next from 1973 to the all-time peak in 1979, it slowed to a sluggish 0.64%/year.

    Then suddenly —and for the first time in history — energy production per capita took a long-term decline of 0.33%/year from 1979 to 1999. The Olduvai theory explains the 1979 peak and the subsequent decline. More to the point, it says that energy production per capita will fall to its 1930 value by 2030, thus giving Industrial Civilization a lifetime of less than or equal to 100 years.

    Should this occur, any number of factors could be cited as the ’causes’ of collapse.

    I believe, however, that the collapse will be strongly correlated with an ‘epidemic’ of permanent blackouts of high-voltage electric power networks — worldwide.

    Briefly explained: “When the electricity goes out, you are back in the Dark Age.

    And the Stone Age is just around the corner.”

    http://www.oilcrisis.com/duncan/olduvai2000.htm

    This sounds about right… just a little of on the timing at the back end… we ain’t gonna make 2020 never mind 2030….

    • Gail Tverberg – My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
      Gail Tverberg says:

      I think Duncan missed out on the impact of Globalization and the growth in China and India. That saved us from the early decline he forecast.

    • Kulm says:

      He did not consider the effects of the people’s inertia. They want to keep business as usual, much longer than it is no longer usual.

      The Roman Empire lingered about 3 centuries more its height and 150 years after it became largely irrelevant. The Holy Roman Empire, which was effectively over by the 13th century, stayed on until 1805.

      Right now all the money is assembling to safe havens in America and England, and where the money is, the prosperity and food will be.

  15. Ed – I am interested in energy issues.
    edpell says:

    Why is the president telling the military that global warming is a national security issue? Does he mean to imply that bombing China back to the stone age will be a good step in reducing global warming?

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