Cuba: Figuring Out Pieces of the Puzzle (Full Text)

Cuba is an unusual country for quite a few reasons:

  • The United States has had an embargo against Cuba since 1960, but there has recently been an announcement that the US will begin to normalize diplomatic relations.
  • The leader of Cuba between 1959 and 2008 was Fidel Castro. Fidel Castro is a controversial figure, with some viewing him as a dictator who nationalized property of foreign citizens without compensation. Citizens of Cuba seem to view him as more of as a Robin Hood figure, who helped the poor by bringing healthcare and education to all, equalizing wages, and building many concrete block homes for people who had only lived in shacks previously.
  • If we compare Cuba to its nearest neighbors Haiti and Dominican Republic (both were also former sugar growing colonies of European countries), we find that Cuba is doing substantially better than the other two. In per capita CPI in Purchasing Power Parity, in 2011, Cuba’s average was $18,796, while Haiti’s was $1,578, and the Dominican Republic’s was $11,263. In terms of the Human Development Index (which measures such things as life expectancy and literacy), in 2013, Cuba received a rating of .815, which is considered “very high”. Dominican Republic received a rating of .700, which is considered “High.” Haiti received a rating of .471, which is considered “Low.”
  • Cuba is known for its permaculture programs (a form of organic gardening), which helped increase Cuba’s production of fruit and vegetables in the 1990s and early 2000s.
  • In spite of all of these apparently good outcomes of Cuba’s experimentation with equal sharing of wealth, in recent years Cuba seems to be moving away from the planned economy model. Instead, it is moving to more of a “mixed economy,” with more entrepreneurship encouraged.
  • Since 1993, Cuba has had a two currency system. The goods that the common people could buy were in one set of stores, and were traded in one currency. Other goods were internationally traded, or were available to foreigners visiting Cuba. They traded in another currency. This system is being phased out. Goods are now being marked in both currencies and limitations on where Cubans can shop are being removed.

I don’t have explanations for all of the things that are going on, but I have a few insights on what is happening, based on several sources:

  • My recent visit to Cuba. This was a “people to people” educational program permitted by the US government;
  • My previous work on resource depletion, and the impacts it is having on economies elsewhere;
  • Other published data about Cuba.

The following are a few of my observations.

1. Many island nations, including Cuba, are having financial problems related to dependence on oil. 

Dependence on oil for electricity is one of the big issues affecting Cuba today. Island nations, including Cuba, very often use oil to produce much of their electricity supply, because it is easy to transport and can be used in relatively small installations. As long as the price of oil was low (under $20 barrel or so), the use of oil for electricity was not a problem.

Figure 1. Cuba's energy consumption by source, based on EIA data.

Figure 1. Cuba’s energy consumption by source, based on EIA data.

Once the price of oil becomes high, the high cost of electricity makes it difficult to produce goods for export, because goods made with high-priced electricity tend not to be competitive with goods made where the cost of electricity is cheaper. Also, once the cost of oil rises, the price of imported food tends to rise, leading to a need for more foreign exchange funds for imports. In addition, the cost of vacation travel becomes more expensive, driving away potential vacationers. The combination of these effects tends to lead to financial problems for island nations.

If we look at current Standard and Poor’s credit ratings of island nations, we see a pattern of low credit ratings:

  • Cuba – Caa2
  • Dominican Republic – B1
  • Haiti – Not Rated
  • Jamaica – Caa3
  • Puerto Rico – Caa1

None of these ratings is investment grade. Cuba’s rating is the same as Greece’s.

Cuba’s credit problem arises from the fact that there is an imbalance between the goods and services which it is able to sell for export and the goods and services that it needs to import. As with most other island nations, this problem has gotten worse in recent years, because of high oil prices. Even with the recent drop in oil prices, the price of oil still isn’t really low, so there is still a problem.

Figure 2. Cuba balance of trade. Chart by Trading Economics.

Figure 2. Cuba balance of trade. (In US $. 000,000s omitted) Chart by Trading Economics.

2. Cuba has a low-cost arrangement for buying oil from Venezuela, but this can’t be depended upon.  

Venezuela is Cuba’s largest supplier of imported oil. The recent drop in oil prices creates a problem for Venezuela, because Venezuela needs high oil prices to profitably extract its oil and leave enough to fund its government programs. Because of these issues, Venezuela is having serious financial difficulties. Its financial rating is Caa3, which is even lower than Cuba’s rating. Cuba uses its excellent education system to provide physicians for Venezuela, and because of this gets a bargain price for oil. But it can’t count on this arrangement continuing, if Venezuela’s financial situation gets worse.

3. Neither high nor low oil prices are likely to solve Cuba’s financial problems; the real problem is diminishing returns (that is, rising cost of oil extraction).

Cuba finds itself in a dilemma similar to that that the rest of the world is experiencing–only worse because it is an island nation. The rising cost of oil extraction is pushing the world economy toward lower economic growth, because the higher cost of oil extraction is in effect making the world’s production of goods and services less efficient (the opposite of growing efficiency, needed for economic growth). The extra effort needed to extract oil from deep beneath the sea, or used in fracking, makes it more expensive to produce a barrel of oil, and indirectly, the many things that a barrel of oil goes to produce, such as a bushel of wheat that Cuba must import.

Figure 3. Cuba's oil consumption, separated between oil produced by Cuba itself and imported oil, based on EIA data.

Figure 3. Cuba’s oil consumption, separated between oil produced by Cuba itself and imported oil, based on EIA data.

If the price of oil is low, Venezuela’s financial problems will become worse, increasing the likelihood that Venezuela will need to cut back on its low-priced oil exports to Cuba.

Also, if the price of oil remains low, it is unlikely that Cuba will be able to increase its own oil extraction (Figure 3). The recent decline in US oil rigs and production indicates that shale extraction in the US (requiring fracking) is not economic at current prices. Cuba’s onshore resources also seem to be of the type that requires fracking. Thus, the likelihood of extracting Cuba’s onshore oil seems low, unless prices are much higher. Offshore, none of the test wells to date have proven economic at today’s prices.

Conversely, if the price of oil is high enough to enable profitability of oil extraction in Venezuela and Cuba, say $150 per barrel, then airline tickets will be very expensive, cutting back tourism greatly. The cost of imported food is likely to be very high as well.

4. One way Cuba’s problems are manifesting themselves is in cutbacks to entitlements.

Back in the early 1960s, Fidel Castro’s plan for the economy was one of perfect communism–the government would own all businesses; every worker would receive the same wages; a large share of what workers receive would come in the form of entitlements. What has been happening recently is that these entitlements are being cut back, without wages being raised.

Wages for all government workers are extremely low–the equivalent of $20 per month in US currency. This was not a problem when workers received essentially everything they needed through a very low-priced ration program and other direct gifts, but they become a problem when entitlements are cut back.

Each year, each Cuban family receives a ration booklet listing each member of the family, each person’s age, and the quantity of subsidized food of various types that that person is entitled to, based on the person’s age. Other items besides food, such as light bulbs, may be included as well.

Figure 4. Ration booklet being explained by one of tour leaders.

Figure 4. Ration booklet being explained by one of tour leaders.

The store providing the subsidized food keeps a list of foods available and prices on a blackboard.

Figure 5. Ration price list on wall of store we visited.

Figure 5. Ration price list on wall of store we visited.

One way that the standard of living of Cubans is being reduced because of Cuba’s financial problems is by cutbacks in the types of goods being subsidized. Also the quantities and prices are being affected, but the average wage of $20 per month remains unchanged.

5. Another way Cuba’s financial problems are manifesting themselves is as higher prices charged to Cubans for goods not available through the ration program.

Since 1993, Cuba has had a two currency program. Cubans were able to purchase goods only in stores intended for Cuban residents using Cuban pesos. (This situation is similar to a company store program, in which a business issues pay in a currency which can only be used on goods available in the company story.) A second currency, Cuban Convertible Pesos (“CUCs”), pegged 1:1 with the US dollar, has been used for the tourist trade, and for international purchases. Cubans were not allowed to purchase goods in businesses offering goods in CUCs.

Now the situation is changing. Goods in stores for Cubans are marked in both currencies, and Cubans are permitted to purchase goods in more (or all?) types of businesses.

The change that seems to be occurring in the process of marking goods to both currencies is that goods as priced in Cuban pesos are becoming much more expensive for Cubans. Cubans are finding that their $20 per month paychecks are going less and less far. This is more or less equivalent to value of the Cuban peso falling relative to the US dollar. This decrease is difficult for international agencies to measure, because the prices Cubans were paying were not previously convertible to the US dollar. The big impact would occur in 2015, so is too recent to be included in most inflation data.

6. Another way Cuba’s problems are manifesting themselves is through low traffic on roads.

How much gasoline would you expect a person earning $20 per month to buy, if gasoline costs about $5 gallon? Not a lot, I expect. Not surprisingly, we found traffic other than buses and taxis to be very low, especially outside Havana. Figure 6 shows one fairly extreme example. The three-wheeled bicycle in front is a popular form of taxi.

Figure 6. Example of low traffic on road. This road was not far from Havana.

Figure 6. Example of low traffic on road. This road was not far from Havana.

If a person travels away from the Havana area, transport by horse and buggy is fairly common.

 7. As a workaround for Cuba’s falling inflation-adjusted wages of government workers, Cuba is permitting more entrepreneurship.

Certain workers, such as musicians and artists, have always been able to earn more than the average wage, through programs that allowed these workers to sell their wares and keep the vast majority of the sales price.

Now, individuals are able to form businesses and hire workers. These businesses generally pay wages higher than those offered by the government. Many of these businesses are private restaurants and gift shops, serving the tourist trade.

In addition, many individual citizens try to figure out small things that they can do (such as sell peanuts, pose for photos, or sing songs) to earn tips from foreigners. The amounts they earn act to supplement the wages they earn working for the government.

Other new businesses are in the food production sector. We met one farmer who was growing rice, with the help of twenty workers he had hired. The farmer used land that he had leased for $0 per year from the government. He dried his rice on an underutilized two-lane public road. The rice covered one lane for many miles.

Figure 7. Rice laid on road to dry.

Figure 7. Rice laid on road to dry.

The farmer sold most of his rice to the government, at prices it had set in advance. The farmer was able to pay his workers $80 per month, which is equal to four times the average government wage.

8. Cuban citizens and its government are concerned about the country’s financial problems and are finding other solutions in addition to entrepreneurship.

Cuban citizens are concerned, because with only $20 month of spendable income and higher prices on almost everything, they are being “pushed into a corner.” The vast majority of jobs are still government jobs, paying only an average of $20 month. There aren’t very many ways out.

In order to make ends meet, it is very tempting to steal goods from employers, and resell them at below market prices to others. We were warned to be very careful about changing money, because it is very common to be shortchanged, or to receive Cuban pesos (which are worth about 1/24th of a CUC) in change for goods purchased in CUCs.

One legitimate way of increasing the wealth of Cuban citizens is to increase remittances from relatives living in the US. Legislation making this possible has already been implemented. Estimates of remittances from the US to Cuba range from $2 billion to $3.5 billion per year, prior to the change.

Another way of increasing Cuban revenue is to increase tourism. Selling services abroad, such as sending a Cuban choir to perform for US audiences, also acts to increase Cuba’s revenue. Getting rid of the US embargo would help expand both tourism and the sale of Cuban services abroad. This is no doubt part of the reason why Cuba, under the leadership of Raul Castro (Fidel’s brother), is interested in re-establishing relationships with the United States.

9. Most of Cuba’s accumulated wealth from the past is depleting wealth that requires continuing energy inputs to maintain.

Cuba has many fine old buildings that are a product of its past glory days (sugar exports, tobacco sales, casino operations). These buildings need to be maintained or they fall apart with age. In other words, they need the addition of new building materials (requiring energy products to create and transport), if they are to continue to be used for their intended purpose.

Cuba now has a severe problem with old buildings falling apart from decay. I was told that three buildings per day collapse in Havana. With a chronic shortage of energy supplies, Cuba has been able to use these buildings from past days to give themselves a higher standard of living than otherwise would be possible, but this dividend is slowly coming to an end.

Likewise, fields used for growing sugar or tobacco are assets requiring continued energy investment. If the Cuban government were to stop plowing fields and adding fertilizer to restore lost nutrients,1 nature would take care of the problem in its own way–acacia (a type of nitrogen-fixing shrub/tree) would overtake the land, making it difficult to replant. The fact that the Cuban government did not keep adding energy products to some of the fields is a major reason why the Cuban government is now leasing land for $0 an acre. Quite a bit of the land formerly used for sugar cane needs to be cleared of acacia before crops can be grown on it.

Even Cuba’s famed 1950s vintage autos are a depleting asset. Replacement parts are frequently needed to keep them operating.

The illusion that Cuba could afford to pay owners for the value of property appropriated by the Cuban government in 1959 is just that–an illusion. The wealth that was available was temporary wealth that could not be packaged and sent elsewhere. Sugar cane and tobacco had been grown in ways that depleted the soil. Furthermore, most workers had been paid very low wages. The buyers of these products had reaped the benefits of these bad practices in the form of low prices for sugar and tobacco products. It is doubtful whether Cuba could ever have paid the former owners for the land and businesses it appropriated, except with debt payable by future generations. It certainly cannot now.

10. I wasn’t able to find out much about the permaculture situation in Cuba, but my impression is that the outcome is likely to be determined by financial considerations.

Subsidies can work reasonably well, as long as the economy as a whole is producing a surplus. Such a surplus tends to occur when the cost of energy production is low, because then it is easy for a growing supply of low-priced energy to boost human productivity.

Now that Cuba’s economy is not faring as well, the government is finding it necessary to start evaluating whether the approaches they are taking are really cost effective. More emphasis is placed on entrepreneurs producing goods at prices that are affordable by customers. Thus, an entrepreneur might operate a permaculture garden. My impression is that permaculture will do well, if it can produce goods at prices that consumers can afford, but not otherwise. Consumers who are starved for money are likely to cut back to the very basics (rice and beans?), making this a difficult requirement to meet.

11. Cuba has done better on keeping population down than many other countries. 

If we look at the population growth trends since 1970, Cuba has done better than its nearby neighbors in keeping population down.

Figure 8. Cuba population compared to 1970 estimates, based on USDA population estimates.

Figure 8. Cuba population compared to 1970 estimates, along with those of selected other countries, based on USDA population estimates.

In fact, Cuba’s 2014 population per square kilometer is low compared to its neighbors, as well.

Figure 8. Population for Cuba and several nearby areas expressed in population per square kilometer.

Figure 8. Population for Cuba and several nearby areas expressed in population per square kilometer.

One thing that many people would point to in the low population growth statistics is the high education of women in Cuba. This is definitely the result of Fidel Castro’s policies.

It seems to me that housing issues play a role as well. Cuba has added very little housing stock in recent years, even though the population has grown. This means that either multiple generations must live together, or new homes must be built. Cuba hasn’t provided a way for doing this (financing, etc). Under these circumstances, most families will keep the number of children low. There is simply no more room for another person in state-provided housing. No one would consider building a shack with local materials, without electricity and water supply, as a workaround.

Also, US policies have allowed Cuban citizens who reach the United States to obtain citizenship more easily than say, residents of the Dominican Republic or Haiti. This has offered another workaround for growing population.

12. In many ways, Cuba is better prepared for a fall in standard of living than most countries, but a change in its standard of living is still likely to be problematic.

As we traveled through Cuba, we saw a huge amount of land that either was currently planted in crops, or that could fairly easily be planted as crops. We also saw many acres over-run by acacia, but that still could support some feeding by animals. Cuba is not very mountainous, and generally gets a reasonable amount of water for at least part of the year. These are factors that are helpful for supporting a fairly large population, if crops are chosen to match the available rainfall.

The Cuban population is also well educated and used to working together. Neighbors tend to know each other, and work to support each other through community associations called Committees for the Defense of the Revolution.

The problem, though, is that the changes needed to live sustainably, without huge annual balance of payment deficits, are likely to be quite large. Sugar production in Cuba began  in the early 1800s. Since that time, Cuba’s economy has been organized as if it were part of a much larger system. Cuba has grown large amounts of certain products (sugar cane and tobacco), and much less of products that its population eats regularly (wheat, rice, beans, corn, and chicken). Residents have gotten used to eating imported foods, rather than foods that grow locally. According to this document, the government of Cuba reported importing 60% to 70% of its “food and agricultural products,” amounting to $2 billion dollars, in 2014. Regardless of whether or not this percentage is calculated correctly, there is at least a $2 billion per year gap in revenue caused by eating non-local foods that needs to be closed.

In theory, Cuba can produce enough food for all of its current population, even without fossil fuels. Doing so would require changes to what Cubans eat. The diet would need to be revised to include greater proportions of foods that can be grown easily in Cuba (plantain, yucca, bread plant, etc.) and fewer foods that can’t. Many people would likely need to move to locations where they can help in the growing and distribution of these foods. Given the current lack of funding, most of these new homes and businesses would likely need to be built by residents using local materials. Thus, they would likely need to look like the shacks (without electricity or running water) that Fidel Castro was able to do away with as a result of his 1959 Revolution.

There might also need to be a reduction to the amount of healthcare and education available to all. This would also be a big let down, because people have gotten used to the current plan of free education and free modern medical care for all. Education and health care no doubt account for a big share of Cuba’s high GDP today, but Cuba may also need to bring down these costs down to an affordable level, if it is to have a sustainable economy.

Note:

[1] Alternatively, better practices might be used that involve crop rotation and permaculture practices. The effect would still have been the same–some type of energy, including a combination of human energy and other kinds of energy, would be needed to keep fields producing some kind of useful crop.

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 inadequate supply.
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844 Responses to Cuba: Figuring Out Pieces of the Puzzle (Full Text)

  1. Don Stewart says:

    Dear Gail and Finite Worlders

    I am going to shamelessly steal from Charles Hugh Smith’s weekend message to his subscribers. My justification to myself is that perhaps I will motivate a few people to subscribe.

    One of the reasons I post this is because it is so very much in the same style of thinking as Capra and Luisi and Azby Brown…everything works as a system. Changing one part, thinking you are very clever, may very well bite you in the ass. A healthy gut biome is not hard…we evolved to have a healthy gut. Fossil fuels have enabled us to create unhealthy guts. Ponder what Capra and Luisi are telling you, what Azby Brown is explaining, and what Scientific American laid before you.

    Don Stewart

    Why Working in your Garden Might Make You Healthier, and Other Mysteries of the Microbiome

    Like me, you probably probably associate “garden” and “health” through the positive psychological effects of nurturing and harvesting plants, or the positive nutritional effects of eating organic veggies and fruits you’ve grown yourself.

    But recent research on the human microbiome–the vast complex of microbes that live within us that help digest our food–suggests a much more intimate connection between our well-being and the health of our microbiome.

    The importance of the microbiome reached the public three years ago in a spate of articles such as Your Microbiome Community Brings New Meaning to “We the People.”

    Advances in our understanding since then were summarized in 10 short articles in the March 2015 edition of Scientific American magazine. I recommend reading the entire series. (Hopefully your public library has a copy, or you can buy a digital copy for $5.99.)

    It is now apparent that our microbiome affects not only our digestion but our immune system and response, our mental health and auto-immune diseases such as food allergies and asthma. What struck me as revolutionary is the synergistic feedback between our mind and body and our microbiome.

    It is increasingly clear that many of the lifestyle (non-communicable) diseases that plague the modern world (heart disease, diabesity, etc.) are directly connected to the poor health of our microbiome.

    Unsurprisingly, the more diverse the microbiome, the healthier it tends to be. Equally unsurprising, diets confined to a narrow spectrum of processed foods low in fiber result in an equally narrow spectrum of “good” microbes.

    In effect, the modern diet of low-fiber processed foods and carbohydrates starves our microbe to the point that it can no longer provide the immune protection it supplied us when we ate a wider variety of unprocessed foods.

    Our exposure to potentially beneficial microbes is also important–hence the health benefits of working with soil. Children who grow up on small farms where they are in close contact with soil and animals have a strikingly low rate of asthma and other auto-immune diseases compared to city-dwelling children who stay indoors most of their lives. This strongly suggests that exposure to soils and the outside world are critical in assembling a diverse, healthy microbiome.

    Our microbiome changes with what we eat and where and how we live. Unfortunately, once our microbiome falls into a funk (as a result of a diet stripped of fiber and diverse nutrients), it is difficult to re-establish a healthy microbiome.

    Fortunately, it is never too late to boost the diversity and health of one’s microbiome. Eating a diet rich in fiber helps, as does exposure to healthy soils and the outside natural world that harbors a wealth of beneficial microbes.

    It is thus no overstatement to say that the health of the soils we live with and nurture have a direct connection with our own health–not just nutritionally, but in our susceptibility to auto-immune disorders and digestive ailments as well as a host of other inflammation responses that characterize auto-immune diseases.

    The many links between the microbiome our our complex immune system were especially revelatory, and they reminded me of the strong connection between exercise and our immune system and diabesity. When we exercise to exhaustion, even in short bursts, that work signals the body’s immune system to rebuild tissues and reduce inflammation in positive ways.

    In auto-immune disorders and lifestyle illnesses, the body’s chronic inflammation is never reduced; the feedback provided by exercise and the microbiome are missing, and so the inflammation persists, deranging the immune response and degrading the organs and our well-being.

    The research into exercise and the microbiome are filling in the blanks as to why exercise, exposure to a variety of soils and outdoor life, and a healthy, diverse diet rich in fiber are all essential to health–not just of the body, but of the mind as well.

    Microbes in the Gut Are Essential to Our Well-Being

    Among Trillions of Microbes in the Gut, a Few Are Special

    Mental Health May Depend on Creatures in the Gut

    Dietary effects on human gut microbiome diversity

    • “It is now apparent that our microbiome affects not only our digestion but our immune system and response, our mental health and auto-immune diseases such as food allergies and asthma. What struck me as revolutionary is the synergistic feedback between our mind and body and our microbiome.”

      There is also now evidence that the lymphatic system connects directly into the brain, rather than ending at the neck as previously believed:
      http://www.businessinsider.com/brain-immune-system-connection-lymphatic-vessel-2015-6
      Linked at many other sites as well.

    • Jan Steinman says:

      Children who grow up on small farms where they are in close contact with soil and animals have a strikingly low rate of asthma and other auto-immune diseases compared to city-dwelling children who stay indoors most of their lives.

      In particular, the GABRIELA study shows that children who consume raw dairy products have a 50% lower incidence of asthma and allergies.

      To those lucky enough to have the right forebears, raw milk provides a large number of health benefits. Even those who have experienced problems with industrially-assembeled milk-like products may find organic raw dairy products from grazed animals (particularly goats) may be compatible with their system. (True “lactose intolerance” is fairly rare.)

      The “milk problem” begins with grain-fed dairy. Grains are not good for ruminants, who normally get a small amount of seed protein from grasses and trees. It can cause boat and inflammation, which contributes to mastitis, laminitis, and other ailments. The resulting milk may actually have significant amounts of blood and pus, plus high levels of stress hormones.

      Contrast this with grass- and browse-fed dairy, which is high in beneficial conjugated linoleic acids (CLAs) and beneficial omega-3 fatty acids, needed by your neural system to maintain myelin, the insulating sheath surrounding nerve cells.

      Confined Animal Feedlot Operation (CAFO) dairy has cows standing on concrete all day, which contributes to laminitis, which leads to inflammation and a build-up of stress hormones.

      Newer, high-output cow breeds produce a milk with A1 casein, which causes the build-up of bovine casmophorin-7 (BCM-7), which is correlated with numerous health ailments, such as irritable bowel syndrome, mucous response, and even memory loss and “mental fog.” Almost all commercial milk comes from Holsteins, the principle A1 breed. Choose milk from heritage cattle breeds, or goat milk, which have essentially no BCM-7.

      Milkfat is in the form of small packets, or globules, of fatty acids, which surround volumes of fluid milk. This is inconvenient for the shipment and storage of industrial milk, so processors “homogenize,” by stripping the milk of its fat, and forcing the fat through tiny pores, which break up the globules into individual fatty acid molecules. These are much more readily absorbed in the gut, and tend to provoke a mucous response and inflammation, as well as more serious problems like irritable bowel and diarrhea in susceptible individuals. Goat milk is better than cow milk in this regard, having globules than are 1/5th the size, and thus, more easily digested.

      Finally, industrial milk is heated to some 65°C (150°F) for some period, which totally destroys pathogenic bacteria — as well as beneficial bacteria and some 20+ enzymes. Some of these, such as lactoferrin and phosphatase, are potent antibiotics, while others, such as lipase, help the body digest milk fat without causing inflammation. It is ironic that one common test for pasteurization — ostensibly an antibiotic process — is to ensure than no lactoferrin (a potent antibiotic) is present.

      The myth is that pasteurization extends shelf life, but the reality is that it allows sloppy dairy practices, and carefully obtained and stored raw milk has a shelf life twice as long as industrial milk-like product. We routinely consume four-week-old raw milk, which would have been dumped down the drain two weeks ago, had it been industrial swill. And when raw milk “goes bad,” you make bread or pancakes out of it, rather than pour it down the drain. Raw milk ferments; pasteurized milk rots.

      We’ve all heard the vegan line that we should not be feeding domestic animals, but should rather consume food from the land directly. And yet, my four-legged friends go out on land that is unsuitable for agriculture, and gather current sunlight for me, while aerating the soil and sequestering carbon. Sounds like a “win-win-win” to me — good for the goats, good for me, good for the Earth.

      To come full-circle back to Don’s posting, raw milk is one of those things that builds and maintains a healthy microbiome. Most people who claim they are “lactose intolerant” are really “industrial dairy intolerant,” and could probably enjoy raw milk, particularly raw goat milk, and if one is truly lactose intolerant, one could still benefit from raw yogurt or kefir, in which all lactose has been consumed by beneficial bacteria — a component of a healthy microbiome.

      I recommend the fascinating tale, The Untold Story of Milk, by Ron Schmid, ND, for those who wish to learn more about this wonderful food, which is ideally suited to a post-carbon world.

      • Don Stewart says:

        Jan and Others
        I want to tag onto the notion that animals can graze land and produce products where row crops would only be a disaster. When F.H. King visited eastern Asia around the turn of the 20th century, he found that animals routinely grazed in cemeteries. These people, who revered their ancestors, weren’t going to plow those cemeteries, but gladly grazed them.

        A steep hillside is meant for grazing, not for plowing. If the need for arable land is desperate, then terraces constructed by hand may grow crops, but for many of us it makes more sense to let ruminants eat the grass. Domesticated animals have the great advantage that they can walk, and so can be harvested at home…as opposed to a bear which must be shot in the wild and lugged on the shoulders.

        When tables like the one posted by Albert Bates show very low energy return from animals, they are talking about animals which are treated as most Americans treat animals…not the way it makes sense to treat animals.

        Around here, you can go to jail for treating animals sensibly.

        Don Stewart

        • Jan Steinman says:

          Around here, you can go to jail for treating animals sensibly.

          Around here, too.😦

        • Artleads says:

          I’ve been friends with animal rights advocates who will go to the ends of the earth to help a single animal, but who express much less interest in action that would save thousands. It is the individual animal, and not systems dynamics (like land use), that gets their attention. Despite preferring a different emphasis, I’ve learned a lot from those friends. Rather than try to prove them wrong, I try to incorporate their individualist concerns into my systemic ones. Or maybe it’s more like easily switching between the two modes. Undoubtedly, there are issues that bring out serious conflict between the modes, but I haven’t experienced any that affect what I’m working on.

          We need to get everybody on the same page, despite huge differences in opinion…

        • I think the energy return we need to be looking at is return on human energy invested. Perhaps also return on arable land invested as well. If fossil fuels are leaving us, then return on fossil fuel use, as currently produced in the US, is essentially irrelevant. Animals come out very high on my metric, because they don’t use a lot of human energy. They also don’t use any arable land, except to fertilize it, unless they are horses and need to be fed grain.

          Another issue is storage, and energy and upkeep required for storage. Animals are “self-storing”. Grains are long-lasting. These are reasons they work well. Root vegetables work especially well where they can be grown year around, but it is also possible to store them, if a person can figure out a way to provide the right environment for storage (without fossil fuels–root cellar, most likely, or store the food dried).

          • Jan Steinman says:

            unless they are horses and need to be fed grain.

            Horses don’t require grain, but their digestive system is less efficient than ruminants, and they require more pasture for the same energy output. So working horses generally get grain to get more work out of them. Don’t want to grain them? Don’t work them so hard!

            Root vegetables work especially well… if a person can figure out a way to provide the right environment for storage

            That’s where “root cellar” got its name!

            Root crops need controlled temperature and humidity, of about 12°C and under 50% relative humidity. We use “sand beds” and underground storage. We make a table-like structure with shallow sides of 10-15 cm. We fill that with beach sand, and cover the root crops in the sand. The whole contraption goes into underground storage, to keep the temperature around 12°-14°C.

            A new concrete septic tank, bermed with soil, can make a suitable “underground” root cellar in areas with high water tables.

          • Artleads says:

            Cuba seems to be at the crossroads of many issues that divide and puzzle us:

            – Using animals for the economic/energy/environmental advantages GT describes
            – Animal rights
            – Anarchy vs Rulers
            – First world intervention
            – Impracticality of PV solar (and other “renewables”)
            – Economy
            – Conservation/preservation/innovation
            – European (vs Third World) identity
            – Systems
            – Philosophy/Culture
            – Food

            These are just a few issues that come readily to mind. There could be far more pertinent ones. But I wonder if we could even gain consensus for what are the “main issues for Cuba and beyond?” Much less come to consensus over what to do about them. So unless the point is forming debating clubs just for the mental exercise, some way to get everybody onto the same page could be considered.

  2. “Quest to Mine Seawater for Lithium Advances
    “Predicted lithium shortages are leading to novel technologies for recovering the element, now found mostly in salt lakes in South America.
    “… Benchmark’s tracking of lithium prices shows a steady rise over the last few years, and Moores doesn’t foresee prices falling anytime soon. That is fueling R&D at the most basic level, as with Hoshino’s work, and it’s driving new investment in salt lakes that could produce lithium—particularly in Nevada, where Tesla is building the Gigafactory. (See “Tesla’s Massive Nevada Factory Will Need Massive Results to Pay Off.”)

    “Vancouver-based Dajin Resources recently released lithium assay results from its Alkali Lake property in Esmeralda County, Nevada, showing promising concentrations of lithium. The company also owns acreage in the Teels Marsh region, in Mineral County. Dajin plans to recover the lithium using conventional methods, says president Brian Findlay.

    “`There are a number of different and interesting technologies, but they all start with high-concentration brine,’ says Findlay. `And the simplest proven technology is evaporation.’ Indeed, it’s hard to compete with a natural process.”
    http://www.technologyreview.com/news/538036/quest-to-mine-seawater-for-lithium-advances/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20150608

    — Can we count on selling prices for lithium, etc., staying up, to support rising extraction costs?

  3. Siobhan says:

    Tumbling food prices:
    PracticalDad Price Index – June 2015: Crashing
    http://practicaldad.com/index.php/article/757/

    • Fast Eddy says:

      Thanks for the article — I’ve been following the cut throat competition in UK supermarkets (which is of course recovering …) and this explains very well what is going on.

      I suspect this also is an indication of why McDonald’s is coming apart … it is not that people have suddenly turned to healthy alternatives…

      They simply have no money to spend and they are buying the lowest cost options from the grocery stores.

      Deflation is a worthy adversary for the central banks — and it will eventually win out and take down BAU

      • Yep the deflation in food production is here, again. At least in Europe, partly because those stupid sanctions against Russia, so their imports switched to S. America etc. But the huge effect is also the recent (multidecade) growth in productivity, where one working adult (or small family) can now run a relatively huge farm operation thanks to leverage in printed money turned “efficiency” in gargantuan machines and processing on site. This situation will stay here as long TPTB will be able to paper over these problems and physical boundaries don’t apply (temporarily). In two or three decades there might be a shock, reversal, disruption as the capital stock and operatin model is obsolete and can’t be cheapily renewed.

        • kesar0 says:

          Between Guy McPherson and Greer is a lot of space. I would love to buy this idea of slow collapse, because we – at the keyboards are without the doubt beneficiaries of BAU. These people around the world are hurt – Syria, Jemen, Ukraine, refugees from North Africa and thousands of ghettos around the world. The problem with this scenario has two setbacks.
          First is the global political situation. Too many tensions – US-Russia-China-Europe. All these military actions cost – in $, in people, in intelligency power (NSA, CIA, etc.). BAU is becoming too costly to control. There are many symptoms, that the system is becoming unstable.
          The masses (electorate) is becoming also very angry. All those bottom-top parties, populists, fascists, alter-globalists, etc. are becoming also a risk. At some point they will have access to real power. And it’s easy to make some desperate moves.

  4. Don Stewart says:

    Dear Gail and Finite Worlders
    Please see Charles Hugh Smith’s essay about China and chronic disease.
    http://www.oftwominds.com/blogjune15/China-disease6-15.html

    It is ironic that it wasn’t that long ago that T. Colin Campbell went to China to study cancer and heart disease and wrote The China Study. Both diseases were rare in China, but one of China’s leaders was stricken with cancer and funded the study. There was an entire province which had never had a reported case of heart disease. As late as 1920 few American doctors had seen a case of heart disease.

    Very few countries have been able to combine industrial growth with good health. Very poor countries such as Cuba which have put their resources into infant health have greatly decreased infant mortality at relatively little expense. But when industrialization reaches the stage where industrial food replaces real food, then the chronic diseases become epidemics.

    Yet the desire to believe that everything is going to turn out OK is very strong. Recently I read somewhere that ‘advances in biotechnology’ will soon free us from any dependence on nature for our food. And the MD Anderson Cancer Center regularly invites me to believe that we know how to eliminate cancer.

    Don Stewart

    • “Recently I read somewhere that ‘advances in biotechnology’ will soon free us from any dependence on nature for our food.”

      Some Japanese have gone the opposite direction of permaculture, and made indoor farms that have no bacteria or other living organisms in them at all. The workers have to wear sealed suits, so they don’t contaminate the operation. Supposedly several times more efficient than conventional industrial farming:

      http://ecowatch.com/2015/01/28/worlds-largest-indoor-farm/

      Within a few years, the humans will be replaced with robots.

  5. Fast Eddy says:

    It really sucks to be a black person in America …. the action really gets going at the 3 minute mark https://www.youtube.com/watch?t=199&v=R46-XTqXkzE

    It’s awesome to be white (so far…) https://www.youtube.com/watch?v=BKGZnB41_e4

    What surprises me is that with so many guns in America … there are not more random revenge attacks against the police.

    • Siobhan says:

      This tells a very different story about the kids at the pool,
      http://www.dailykos.com/story/2015/06/08/1391513/–McKinney-Pool-Fight-was-started-by-White-Neighbors-who-racially-slurred-attacked-Black-Kids

      Austin police incident (censored version)

      • Fast Eddy says:

        Wow — that’s nasty stuff!

        Let’s go Big Picture here….

        When the SHTF …. the gloves will come off … and this is going to turn very ugly … not that the cops are a whole lot of use now (they frequently make things worse) …

        When BAU unravels — Conrad’s ‘veneer of civilization’ is going to be ripped off like the top layer on a cheap laminated counter top…. and we will see the true nature of the human beast…

        We truly are 3 meals from barbarism…

        7 billion people — grocery stores shuttered — that will be interesting… to say the least.

    • ktos says:

      “It really sucks to be a black person in America”
      Yes, it’s better to be a black person in their homeland – Africa. Such a wonderful place. Blacks just don’t fit to white made countries. They fit to African countries.

      • Fast Eddy says:

        Not clear why you bring up Africa.

        Are the people in the video from Africa?

        They sound like Americans to me… with rights just like uh-hum — white Americans… but yes of course… they are black so they are not REAL Americans are they….

        And of course their ancestors hail from Africa — and we all know that they joyfully volunteered to be shackled into the holds of the Mayflower in their shit, piss, vomit and disease on a cruise to the land of opportunity where they were promptly auctioned off to the highest bidder who beat/whipped/raped/murdered them with impunity…

        So yes, their ancestors chose to come to America so they can bloody well put up or shut up — and get on the next refugee ship back to Africa.

        The cops in the video were in fact too kind…. can’t have those uppity Africans having pool parties … like America kids do …. the ought to be out in the fields bringing in the cane …

        By rights those cops should have laid down the lash on these Africans. And for those who spoke back to the massah well — I saw plenty of trees in that neighbourhood that would be excellent for lynching…

        I see where you are coming from. Thank you for opening Fast’s eyes.

        See you at the next Knights Party! https://www.kkk.com/

        • Artleads says:

          Great rant! But that might only get us to the next town. The reality is that most whites seeing the video see it the way the cops (and Ktos) do, and talk about rights and justice do little to change that. Even if those whites keep silent out of PC.

          Blacks–well, poor blacks, especially–don’t fit into America’s vision of itself. TPTB manage fine having the country so divided.

          If young Blacks grow up not knowing that their presence–especially in exuberant “oversupply” (like here) reserved only for Whites–is an offense and threat to Whites, then their education has failed them. Like Black kids not knowing they are forbidden to play with toy guns the way White kids can.

          BTW, the huge White guy in the jeans shorts keeping the kids at bay to enable the police punishment I found to be more gruesomely cruel than the police, who acted just the way the system prescribes.

          But if you don’t subscribe to Kumbaya, you might as well just twiddle your thumbs and look the other way.

          • Fast Eddy says:

            The reason I posted that is to provide a reality check for the Koombaya Krowd… that demonstrates our true nature… with fossil fuels providing the thin veneer of civilization that keeps extreme behaviour under wraps.

            The veneer is about to be stripped off. See Rwanda for what happens then….

            On a related note, I was listening to a radio programme on bullying … a problem that is of course widespread in all schools.

            My take on this is that bullying a human trait… a default position … you watch small kids and they engage in bullying…

            And how do we stop this behaviour? We educate them both in schools and using religion — we try to drive this behaviour out of children. We enact laws against this. Sometimes this fails and in the worst cases the offenders end up in prison.

            But in all people the beast is lurking in the background — and given the right circumstances we are all capable of extreme violence.

            3 meals from anarchy as they say…

            Throw a bone in the midst of a pack of starving dogs and they will rip each other apart… we would act no differently… the strongest would go at it … and the weak would stand to the side and hope for a few scraps….

            • Brunswickian says:

              The reason I posted that is to provide a reality check for the Koombaya Krowd

              I thought up a new term: “Edo frolickers”

              hahaha

            • Artleads says:

              “But in all people the beast is lurking in the background — and given the right circumstances we are all capable of extreme violence.”

              Sorry, FE, this is fairly obvious. But there obviously is some cooperation, stoicism and decency at work as well, since long before the advent of fossil fuels.

              While I hope I can avoid the situation where I’d have to prove it, I don’t in the least bit think I’d behave as you describe. Merely staying alive is not that important to me. And while I have often behaved like a “beast,” I’m now convinced that I behaved (behave) that way because of not thinking straight or connecting the dots.

              But this is a pointless discussion. I doubt that either of us will change our outlook. I’m looking for ways to be constructive. Whatever the outcome, or lack thereof, I see no harm in being constructive. I tell my children that there is no hope, but that it’s important to do the right thing. I don’t believe I’m spreading false hope. What I don’t understand is what is your purpose. Is it to say that there is no such thing as cooperation, stoicism and decency? That humans aren’t capable of contrary behaviors? AFAIK, simple common sense would say something different.

              And I don’t agree that the behaviors your videos describe are simple human responses. I see them as manifestations of a carefully nurtured system. This case is not based on scarcity, but on unconscious adherence to a set of values. Lynching was happening during the heyday of fossil fuels…

            • Fast Eddy says:

              I have no doubt that you’d not act violently.

              I will assume that for some reason you have determined acting violently would result in a quick death for you because you do not have the mindset or physical attributes to win such a battle.

              People tend to realize this rather quickly in life.

              It does not mean they are not capable — it means that they know they are unable to compete — that if they confront those who do have the mindset and/or physical presence that they will end up dead.

              Of course in our civilized world of plenty this competition does not manifest itself overtly in violence – that is not allowed – nor is it necessary when all the dogs get bones — some more than others.

              But it is there…

              Take pro sports for instance. I assume you do not attend a walk-on camp for the Dallas Cowboys because you know what would happen if you did…. there is no Koombaya in the sports world — and there are very few bones to go around — so we fight like wild animals for one of the bones…

              Let’s shift to the business world. Again — a limited number of bones. It is a world of uncertainty, and fierce competition — koombaya = bankruptcy (a lot of people I know in business played at a reasonably competitive level of sport — and the killer instinct serves them well)

              That is not for everyone — most people choose not to start a business because they do not have the mindset and/or they believe they cannot compete — not much different to why most people would not attend a Dallas Cowboys try out… they know they are not up to it.

              One of the best examples is banking — cut throat… And this carries across every profession ….

              It might work to adopt a pacifist non-competitive stance in a world of plenty — if one chooses not to compete at a high level for whatever reason — there is still a place for most people… a person has been able to get by… not so much these days as there are very few good jobs being created…

              If you choose not to compete at all you end up as a pizza delivery man — or in the worst case you end up on welfare…

              However post collapse there will be very few bones to go around…. and those ultra-competitive people will be coming after whatever is available including the ‘pizza delivery man’ opportunities…

              The meek will trampled by the stampede of the aggressive, strong — and quite possibly chained to a yoke and enslaved…

  6. Artleads says:

    I don’t believe this is how the entire world has to work, but I remain open to learning.

    Economics of Housing in San Francisco

    http://www.planetizen.com/node/77801/san-franciscos-proposed-housing-moratorium-bad-idea

    The author says little or nothing about the environmental effects of new development, or of the sense-of-place issues either. And it was the absence of those issue that usually set me at odds with the affordable housing advocates (with whom I shared much else).

    The author makes valid points based on affordability and the real economic system. It’s as if he might have the WHAT covered, while leaving out the HOW.

  7. Fast Eddy says:

    It could be that Chinese stock market participants have no idea that there is something wrong beneath the officially rosy covers. Or they might already know in granular unofficial detail, and fearing the worst, they’re wagering everything they have, plus some, on stocks to get rich quick while they still can. They’re opening up brokerage accounts at record pace and borrowing on margin to ride the wave. If the limits in China get in the way, they head to Hong Kong to set up trading accounts and borrow even more.

    It has worked so far. The Shanghai Composite Index jumped 8.9% this week and 146% over the past 12 months. It closed above 5,000 for the first time since 2008. The valuation of companies with a primary listing in China skyrocketed by $4.7 trillion this year. People are feeling flush and are hoping for a another governmental tsunami of money to bail them out. What transpired in other countries over the past six years is now transpiring in China in condensed form. And the countdown for the crash has started [read… The Dumbest Man in China].

    One thing the Chinese authorities cannot do is crank up the global economy and demand for Chinese goods. These goods are shipped by container to the rest of the world. But containerized freight rates from China have totally collapsed.

    The China Containerized Freight Index (CCFI), operated by the Shanghai Shipping Exchange and sponsored by the Chinese Ministry of Communications, has not been put through the beautification wringer that other more publicly visible statistics, such as GDP growth, are subject to. It tracks spot and contractual rates for all Chinese container ports. And it plunged 3.2% this week to a multi-year low of 862, down 20% from February.

    The trajectory of this terrible 3-month plunge:

    More http://wolfstreet.com/2015/06/05/china-containerized-freight-index-ccfi-collapses-shanghai-containerized-freight-index-scfi/

    • Interesting, there is indeed potential for yet another market dislocation around the corner, however don’t be naive, any potential crises to disrupt the core of the system will be papered over, again. The inertia of the system is there as TPTB control everything now, public is beyond docile and self crippled to react or self organize. We must bang into very hard limits first, which is not scheduled for now, perhaps 2020-25 when the y/y depletion of crude vs. fracking will be more evident on one hand and people finally being squeezed out of most easy options (savings, jobs, pensions, involuntary deconsumerism.. ) by then. The fall of Roman empire dragged for many many decades even at the crisis peak in those last two centuries, it’s a slow burn, rott and decay if you will.. while some technogadgets are still being innovated and put forward to marvel about (e.g. Tesla, and the internets today).

      • Artleads says:

        This sounds very intuitive to me. I think that we face the rolling out of what already exists, what we are conditioned not to look at minutely, everywhere around us.

      • ktos says:

        “, any potential crises to disrupt the core of the system will be papered over, again.”
        Global debt has to rise by 6-7% per year (double every 10-12 years). Last year it stood at 200 trillion dollars. So 7% of 200 is 14. So the CBs would have to print over 1000 bn dollars a month, if private and government sectors fail to grow theirs indebetness.

        • You make it sound like creating a trillion dollars out of thin air is difficult or even impossible. I don’t see any signs that the world needs real growth, just nominal growth, to keep the financial system going. We may be able to have de-growth with bigger numbers, so that the economy is nominally growing while physically shrinking.

          • Artleads says:

            VERY appealing vision. Growing, almost imperceptibly, in the cities. Degrowth in auto industry, etc.

          • Bingo. And that’s why even some of us learning about “finite world/peakoil” issues “early on” in late 1990s or 2000s were dead wrong for the near/midterm, which means at least two decades off, perhaps more. Not exactly small portion of human life and if you extend it to more generations in family, clearly huge opportunity for transition lost.

            I’ve had a great conversation on these topics with my former coworker, we both agreed on the general trajectory and debated likely future milestones (most spot on), but disagreed strongly on the timing and sequencing order, I was perhaps too stupid to be under the “guiding influence” of studies like made by prof. Hirsch, i.e. 2014-2015 visible total crash at the latest..

            Instead my former coworker saddled the tigger of housing bubble, then the QE stock bubble via TSLA, it was all quite obvious then. He scored ten-bagger and almost twenty-bagger for the latter one, I guess in aggregate it was roughly a dozen thousands percent profit in less than a decade for a guy with neither gambling or prior investing urges, just common sense and true “survival urge”. He found nice 250acres few years ago and can still afford to plan buy more, while very slowly building non conventional agricultural base there. Obviously, I’m not pushing this to be a prefered model how to return to land, but that guy is not a snob, he just leap frogged the brainwashed majority all around us, so they in a way deserve the final outcome. In contrast, I’ll be lucky to eventually escape as a mere tiny dirt poor homesteader, we had both the same info available at roughly the same time junction, but somehow in the end “nature” picks the real winners, it’s time to man up and face consequences of past bad decisions. Anyway, I’m very glad to have some knowledge of these finate world processes, but again it’s a long long race.. I’m just openly saying and admitting it is a bit silly to be marginalized even after the first easy round..
            PS Ugo Bardi recently posted nice links about the late roman empire elites escape to provinces as the world crumbled around them, some successes and failures..

          • Fast Eddy says:

            Without real growth you get no real jobs. As we are seeing… (although the Ministry of Truth is telling us there are plenty of jobs)

            And when you have no real jobs vs pretend jobs — what you get is deflation because when you only have a pretend job you don’t buy much — which means people who have real jobs providing goods and services get laid off…. and even if they pretend to have a real job (say mowing someone’s lawn one hour per week and claiming to be employed) — they buy very little as well…

            Which leads to more layoffs…

            Also keep in mind the population continues to grow — every day more people are entering the labour force…. no real growth means they won’t find much to do …

            And of course… as we saw in Grapes of Wrath… when too many people chase too few jobs… salaries stagnate then drop off… creating more deflationary pressures…

            In a nutshell — BAU needs growth — real growth … otherwise it fails.

            A rising stock market in an environment of no real growth is like the mirage of an oasis in the desert…. when you dip your cup into the pool … you find yourself spitting out a mouthful of sand

            • Soon enough, people will be kept busy growing their own food. Hopefully, when the next crisis hits some competent leaders will emerge, able to sell a vision to the people and get what needs to be done, done.

            • Fast Eddy says:

              So you think BAU can continue if billions of people are engaged only in attempting to life a self-sustaining existence farming a plot of land?

              You seriously have not a clue if you think that is possible.

              And of course they can try to grow their own food — but I am not sure where they will grow it because most soil will not support a crop — and even if it did what would people eat while they wait for the crop to grow?

              You are living in a fairy land of wishful thinking… like most people on this blog… you really need to think things through because when you do — you find that your initial expectations are silly … or in other words… you are living in a Joan Baez video

            • “So you think BAU can continue if billions of people are engaged only in attempting to life a self-sustaining existence farming a plot of land?

              You seriously have not a clue if you think that is possible.”

              Not BAU as we know it, as I said – like North Korea. Most people will probably be on 1100 calories a day, or maybe a bit more. The goal is to avoid catastrophic collapse. People will choose some food and security, over no food and chaos. People sit around in refuge camps and IDP camps all the time.

              Heck, a good portion of the population is already on bread, circuses and pharmaceuticals. People stayed home from work to hear Beyonce’s amazing announcement (she’s promoting vegan diet as a way to lose weight). The hard part will be the sudden psychological transition from “The American Dream” to reality.

              The real danger is that the people will revolt and install horrifically incompetent communists or theocrats or some other stupid ideologues that promise them they can bring back the “good old days”. Well, the real danger after global thermonuclear war.

              If you think millions of cops and soldiers are all just going to turn into The Last Man On Earth, rather than work to secure their towns and nations into absolute police states, I think maybe you don’t understand people very well.

            • Fast Eddy says:

              But earlier you said that BAU could continue with nominal growth and no real growth.

              So you are changing your mind?

              As for North Korea — you are aware that North Korea is plugged into BAU — they do have electricity and oil and cars and roads and fertilizers and tools made from metals which are mined using machinery and smelted using fossil fuels…

              And yet in spite of this the people of Korea sometimes eat bark and grass…

              So North Korea is not a good reference point (nor is Cuba) for what collapse looks like.

              If North Korea could someone remain in its current state when the global economy collapses..the survivors would be clamoring to get a ‘green card’ to North Korea…. it would be an oasis of prosperity in a sea of misery and suffering.

            • You seem to be changing what you mean by “BAU”.

              I’m talking about steadily falling quality of life, and a fairly rapid – one to three decade – drop in per capita energy by ~90% for those of us enjoying the developed Western lifestyle. So, continued exponential growth, nominally yes, but physically, no. Electricity and running water, for the most part yes, although outlying areas will probably be abandoned or scavenged to maintain core regions. Personal automobiles, self driving electric cars, no. Horse and buggy, bicycles for the masses, limousines and private jets for the elites, yes.

              So, not BAU and not collapse, but a slow, grinding decline downwards, hopefully without an abundance of nuclear incidents. Maybe even some dry casking and nuclear plant decommissioning.

      • Artleads says:

        “The inertia of the system is there as TPTB control everything now, public is beyond docile and self crippled to react or self organize.”

        Which lends itself to “going with the flow.” Some parts of the business sector–like the tiny house or slow-food industries, etc.–seem to be changing the system in small ways.

        So maybe not. Maybe the public isn’t as crippled as all that. But I still maintain that going with the flow (working around the glaring dysfunctions where possible)–subtlety–may be the model for our time.

      • Fast Eddy says:

        Some things are too big to be papered over.

        The central banks can prop up the bond and stock markets — but if there is no growth then there are no jobs being created…

        And you end up with a deflationary death spiral that cannot be papered over.

        That is why China has been busy building ghost and:

        Clearly the Chinese government understand the limitations of such policies… you can only build so many empty buildings before you collapse your economy…

        If there were no limits then the Chinese government would be busy building even more projects that generate zero returns (leaving massive insolvencies in their wake).

        I suspect China is approaching the end of its rope — the mother of all stimulus programmes has hit the wall — and exports are deteriorating.

        People make the assumption that the central banks are all powerful.

        They are not.

        • The Central Banks are not allowed to directly pay people to do manual labour; the main problem right now is politics. I think the Chinese are better able to employ 100 million men with picks, shovels and wheelbarrows on mega projects, than the west. When a crisis hits, the demand for “shovel-ready jobs” will change the tunes of the legislators.

          Deflation can most certainly be overcome, by simply giving everyone $100 every day, and another $100 if they work on a government project. If this was done with digital money, taxes could be remitted instantly on purchases made with the money, so the same pool could flow around and around through the economy without needing to continually print more.

          Replacing all taxes with a flat 10% transaction fee would greatly streamline the system. That way, we don’t care if it was a sale or income or investment, the flat tax is instantly charged by the system. No need to employ armies of accountants and lawyers.

          This would also alleviate the need for minimum wage. People could choose to work at another job for less than $100 per day, if they felt they could learn skills that would benefit them more in the future. If their current job pays too low or has too few hours, they could just leave and go work on the public works project for the $100.

          The biggest barrier is psychological; there would have to be a big shock and panic, to force open the minds of the masses to accept, embrace and push for such massive changes.

          • Fast Eddy says:

            “Deflation can most certainly be overcome, by simply giving everyone $100 every day, and another $100 if they work on a government project”

            I will frame that and hang it on my wall. Because this is what is known as a perpetual economic motion machine. Prosperity unlimited.

            Do you mind if I borrow this idea and flog it to third world nations? I am thinking I will structure it as follows:

            I give them the printing press and the ideas for free. But I get 25% of every dollar they print (similar to the Nespresso model….)

            I also get 25% of all increases in GDP that result from the implementation of my (your…) plan.

            I will be like a mini Federal Reserve…

            • You know that it is energy, not money, that makes wealth. However, Universal Basic Income is a much more efficient system than having social security, welfare, disability, etc all these programs with government employees and paperwork and restrictions. The additional efficiency of replacing all taxation with the 10% transaction fee and remitting taxes in real-time means that if the velocity of money is high enough, you’d only need a month’s worth of money to do it.

              For the USA, for example, it may only need ~$1 trillion – which is less than current federal social programs cost every year. You can try to get someone to pay you for the idea, but it is available for free.

    • Jan Steinman says:

      containerized freight rates from China have totally collapsed.

      Your chart implies a “collapse” through graphical trickery of starting the y-axis at 850, rather than zero. This is one of my pet peeves about how people deceive with graphs and charts

      The drop has been more like 15% (low point on the graph of about 900, divided by the recent mean of about 1050) — which I agree, is bad enough.

      But when someone dramatizes a graph by offsetting the y-axis, I begin to wonder what else they’re dramatizing.

  8. Don Stewart says:

    Dear Gail and Finite Worlders
    When we look at Cuba, and try to think about what sort of behavior might make sense for them, we are confronted with some forks in the road. Similarly, if we examine the social and economic systems in Edo Japan, the differences between our current BAU and the strange way things were done back then come into focus. And as we try to read the tea leaves in terms of our own future, and decide what makes sense to do right now, we have to drop back to some very basic questions. I suggest the following as useful landmarks.

    First, listen to as much of this interview with Skip Laitner as you wish. The second link is a video presentation he made a couple of years ago. I will also give you my summary of some of his points:

    Don Stewart’s summary:
    *The US economy is about 15 percent efficient in converting energy sources into useful work.
    *In 1900, the US economy was only 2 or 3 percent efficient, in 1950 about 8 percent efficient, and now about 15 percent efficient.
    *Tracking only commodity production of energy (barrels, kwH, etc.) misses the major points. We need to track useful work.
    *Economic vitality requires understanding energy as work, not commodities
    *The keys to improved vitality are:
    #Better flow of information
    #Using energy efficiently in light of the information

    Now let me interject a few comments of my own. First, the focus on useful work is reminiscent of the models by BW Hill. However, second, I am not sure that BW Hill models the increased energy efficiency which we have achieved over the last hundred and fifteen years. Third, BC provided this comment in response to George Mobus’ essay on the futility of education:
    ‘Over half of equivalent GDP is in the sectors that are now a net cost (no longer productive) to the rest of the economy, ‘

    (You can find George’s essay here, and also look at the comments:
    http://questioneverything.typepad.com/question_everything/2015/06/time-to-retire-from-education.html#comments)

    At this point, simply looking at the experience of BAU in the industrial world, we have need of a model which is considerably more complicated than anyone usually talks about:
    *We have the raw production of commercial energy (excludes free sunlight) and the issues of resource depletion;
    *We have the question of how much commercial energy is required to produce commercial energy;
    *We have BW Hill’s ‘multiplier’ effect, where a one unit increase in the energy spent producing energy requires a 5X reduction in work in the general economy, and perhaps BW Hill’s number should really be 8X to reflect Laitner’s comprehensive studies (because we waste 85 percent);
    *We have the fact that nobody is really tracking work instead of commodity production, and then we have the question of whether all the activities BC identifies really count as ‘useful work’;
    *We have the question as to why energy efficiency in the US has multiplied by 5 to 7 times since 1900, and what the prospects are for increasing efficiency in the future using better communications tools.

    The most profound challenges to our current way of thinking come, I believe, from close examination of societies which were living on solar energy. The best documented case is Edo Japan (so far as I know about). Azby Brown’s book has a bibliography with 120 entries, so there is abundant scholarly work, plus surviving artifacts, to give us a pretty good idea how that society functioned.

    It would take me into far too much detail to consider all the facets of Edo that are in Azby’s book, much less the scholarly literature. So I will simply pick a few things to look at which focus on energy and food.

    http://www.japanfocus.org/-Eiichiro-Ochiai/2346/article.html
    Japan in the Edo Period: Global Implications of a Model of Sustainability

    ‘First, in respect of rice production, the basis of the economy, Ishikawa made the following assumptions. On average three persons working full time for about a half year (183 days) produced 2.4 tons of rice on one hectare of land. Assuming the energy required for one day’s work to be about 1,000 kcal/person, the total energy input is 5.5 x 105 kcal, and since the energy value of rice is about 3,400 kcal/kg, the total energy output is 8.2 x 106 kcal.Therefore, the energy efficiency of rice production in the Edo period can be estimated to be about 1,500 per cent, i.e., 15 times.

    How about modern rice production? The Science and Technology Agency of the Japanese government estimated that the production of 1 kg of rice requires about 2,300 kcal of energy, indicating that the energy efficiency is about 150 per cent or one tenth of the Edo period. About half of this energy is required to manufacture and use the various agricultural mechanical devices, and about one quarter for the production of chemical fertilizers, pesticides, etc. The issue of fertilizer in the Edo period will be discussed later. Suffice to say that the energy requirement for fertilizer in Edo was negligible.

    The major difference in these two situations is human labor. Farming was very hard work in Edo and is much less so today. In other words, an enormous amount of energy has reduced the human labor in farming in terms of both farmers’ work and the number of farmers. This is economically possible only because of the availability of relatively cheap energy source, i.e., fossil fuel.

    The energy efficiency of fishing in the Edo period attained a similar value: the energy value of fish obtained/the energy input (human labor) was 1,000-2,000 per cent. Fishing could be done only in lakes, rivers and the sea not too far offshore since fishing boats could only be operated by human and wind power. By contrast, the energy efficiency in today’s mechanized fishing industry seems to be about 50 per cent.

    Until quite recently, Japanese houses had no “space-heating”. Since Japan is located in a mild climate region, the severity of cold in winter is not extreme except in the North. Hence no very elaborate heating system was used in most regions. This is an advantage afforded by geography. In summer, however it is very warm and humid. The traditional houses and buildings were hence built in such a way to provide as much comfort as possible during the summer. The building material was and still is mainly wood. Because of earthquakes, brick and stone are not suitable for building, and wood also happens to be a better thermal insulator than brick and stone. The structure of the traditional Japanese houses is not suitable for space heating, being too porous and open. The traditional heating devices include “hibachi” and “kotatsu” (a foot warming device) which heat only locally those sitting nearby. People wore more clothes when cold. The other device, called “irori” (hearth) was a kind of fireplace, but it was used mainly in farmhouses. These devices may not have been as comfortable as contemporary space heating, but were very frugal in terms of energy use.’

    When we are trying to answer BC’s question about what is really valuable work, do we include the work of producing rice the industrial way, which is only one tenth as productive as the human labor of the Edo period? Do we include the space heating, which Edo never used? Do we include the pesticides and herbicides which are damaging to human health and the broader ecology?

    SUMMARY

    I think I have demonstrated that many current models of energy and work and the economy are woefully inadequate. Once we admit that more barrels and more GDP and more debt are not necessarily good for anything, the foundations of the models we are using dissolve under our feet. I don’t have any very clever suggestions about how to get people, and especially the politicians, to actually pay attention to the fragility of current assumptions. What I do suggest, as I have in the past, is that if you expect that BAU will collapse, you can do a lot worse than take some time to look closely at Edo. Azby Brown’s book is a wealth of information, presented as a ‘day in the life’ story.

    Don Stewart

    • Kulm says:

      Ochiai does not seem to be aware about the two major famines and the host of smaller famines during the Edo period,

      and he also does not seem to know Mr. Konyo Aoki, who introduced potato by leading books written in Holland and learning how to raise it, to Japan around 1735 which probably saved the Shognuate from destruction.

      • Don Stewart says:

        Kulm

        Perhaps you can’t read:
        ‘In a sense, Japan embarked on a large-scale survival experiment, based on the material and energy available on the four islands and the surrounding sea, which provided some food and other resources such as salt and also means of transportation. While living standards were far from low by Asian and even European standards at the time, many poor farmers barely subsisted, and some faced starvation when crop failures hit them, which happened often ( Pomeranz, 2003; Chapter 12, Totman, 1993).’

        And, yes, white potatoes may have come from South America via the Netherlands, but the sweet potato came from east Asia. And the interest in them was stoked by official support of innovative agriculture.

        https://books.google.com/books?id=rn6V_lYziy4C&pg=PA66&lpg=PA66&dq=edo+potatoes&source=bl&ots=RB7g7rFtfT&sig=la-iK944OEQ1Olyegcus8iJJ4a8&hl=en&sa=X&ved=0CD0Q6AEwBWoVChMI-_yE7O6FxgIVhNKACh2HfQAQ#v=onepage&q=edo%20potatoes&f=false

        see end of page 66 and beginning of page 67. I would say that potatoes planted inside the Edo Castle grounds and later distributed around the country counts for official patronage. Also note the concern about ‘people far from town and on the islands’. As Gail’s trip to Cuba illustrates, islands still have problems with food security.

        Don Stewart

  9. Fast Eddy says:

    U.S. oil output will peak at a 43-year high in 2015 as producers work through a backlog of uncompleted wells before trailing off in the second half of the year.

    http://www.bloomberg.com/news/articles/2015-06-09/u-s-boosts-oil-output-estimate-to-43-year-high-on-well-backlog

    Conventional oil peaked a decade ago http://www.csmonitor.com/Environment/Energy-Voices/2013/0412/The-decline-of-the-world-s-major-oil-fields

    And there you have it …

    Frackers went hell bent to sink as many holes while the price of oil was maintained at a high price (with the help of QE ZIRP)….

    Unless there is another fracking-type miracle to buy us more years… this is an admission that peak oil will be with us later this year.

    Will 2016 go down as the year civilization ended and the worldwide famine and die-off began?

    Is 2016 the year that the doomsday groupies realize that doomsday is not quite what they expected – that rather than peaceful beatnik Edo-types dancing about the fire eating organic porridge and thumping on drums made from organically raised cows that died natural deaths…

    They instead get Samurai warrior-types (Mad Max version) kicking down their doors, chaining them like dogs and sending them out to the work the fields…

    Is 2016 the year that we find out that sticking a garden hose into the spent fuel ponds doesn’t keep them cooled — least of all because the pumps that push water through the garden hoses do not work because there is no electricity

    • No.

      The financial system may take some shocks, but we probably are not even at the point of nationalizing all the banks yet. Oil consumption will go down, while the price goes up, and nominal growth and inflation will paper over the shrinking economy.

      Worst case scenario is most of the developed world becomes made in the image of North Korea. The masses will rally around charismatic strong men, and most people will do what they are told. Even most of the radicals, when faced with the reality of the situation, will probably not cause too much trouble, or the masses will fully support the government dealing with them harshly.

      The potentially huge caveat to all that is if some other major shock happens, like mass starvation and die off in California, or WW3, or Saudi Arabia being full on invaded.

      I don’t understand why you are so worried about the spent fuel ponds, and not the reactors themselves. The reactors need ~5 years to burn through their fuel and be shutdown, and the fuel moved into the spent fuel ponds. They are the major, immediate threat. They must be actively cooled with electricity, or they will meltdown / melt through and/or explode.

      The spent fuel ponds, if not emptied and the fuel dry casked, will probably leak out into the environment within 50 to 100 years. Unless some idiots worried about losing face or liability trap hydrogen gas and then the roof blows off and the rods are damaged. Reactors and spent fuel ponds are all near rivers and lakes, barely above water level. Siphoning in fresh water is not a big deal. You’re the one who showed us Sellefield, where the spent fuel ponds sat basically without anyone maintaining the facility for ~40 years, and nothing bad happened. The ponds were kept topped up just by rain water.

      • Fast Eddy says:

        So rain water will keep the fuel ponds cooled… we just rip the roofs open and let the sun and rain in and all will be fine…

        Such an elegant solution … you should hire yourself out to TEPCO.

        • Is that not exactly what happened at Sellefield? Of course, within another 50 years without clean up and dry casking, it would have certainly leaked, poisoning the entire Irish Sea and causing the evacuation of the entire east coast of Ireland, and most of the west coast of Great Britain.

          TEPCO continually has a problem, where they choose to allow the tritium to build up and cause fires and explosions, rather than venting or flaring it off. If they did that in the first place, the reactors would not have blown up, the pools would not have drained and there would not be any meltdowns / melt throughs.

          Sure, flooding the air and sea with tritiated water is bad, but not nearly as bad as all the cesium, iodine, strontium, plutonium. Sometimes, you have to choose the least bad of two choices, when there is no good choice.

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