BP Data Suggests We Are Reaching Peak Energy Demand

Some people talk about peak energy (or oil) supply. They expect high prices and more demand than supply. Other people talk about energy demand hitting a peak many years from now, perhaps when most of us have electric cars.

Neither of these views is correct. The real situation is that we right now seem to be reaching peak energy demand through low commodity prices. I see evidence of this in the historical energy data recently updated by BP (BP Statistical Review of World Energy 2015).

Growth in world energy consumption is clearly slowing. In fact, growth in energy consumption was only 0.9% in 2014. This is far below the 2.3% growth we would expect, based on recent past patterns. In fact, energy consumption in 2012 and 2013 also grew at lower than the expected 2.3% growth rate (2012 – 1.4%; 2013 – 1.8%).

Figure 1- Resource consumption by part of the world. Canada etc. grouping also includes Norway, Australia, and South Africa. Based on BP Statistical Review of World Energy 2015 data.

Figure 1- Resource consumption by part of the world. Canada etc. grouping also includes Norway, Australia, and South Africa. F Soviet Union means Former Soviet Union. Middle East excludes Israel. Based on BP Statistical Review of World Energy 2015 data.

Recently, I wrote that economic growth eventually runs into limits. The symptoms we should expect are similar to the patterns we have been seeing recently (Why We Have an Oversupply of Almost Everything (Oil, labor, capital, etc.)). It seems to me that the patterns in BP’s new data are also of the kind that we would expect to be seeing, if we are hitting limits that are causing low commodity prices.

One of our underlying problems is that energy costs have risen faster than most workers’ wages since 2000. Another underlying problem has to do with globalization. Globalization provides a temporary benefit. In the last 20 years, we greatly ramped up globalization, but we are now losing the temporary benefit globalization brings. We find we again need to deal with the limits of a finite world and the constraints such a world places on growth.

Energy Consumption is Slowing in Many Parts of the World 

Many parts of the world are seeing slowing growth in energy consumption. One major example is China.

Figure 2. China's energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.

Figure 2. China’s energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.

Based on recent patterns in China, we would expect fuel consumption to be increasing by about 7.5% per year. Instead, energy consumption has slowed, with growth amounting to 4.3% in 2012; 3.7% in 2013; and 2.6% in 2014. If China was recently the growth engine of the world, it is now sputtering.

Part of China’s problem is that some of the would-be buyers of its products are not growing. Europe is a well-known example of an area with economic problems. Its consumption of energy products has been slumping since 2006.

Figure 3. European Union Energy Consumption based on BP Statistical Review of World Energy 2015 Data.

Figure 3. European Union Energy Consumption based on BP Statistical Review of World Energy 2015 Data.

I have used the same scale (maximum = 3.5 billion metric tons of oil equivalent) on Figure 3 as I used on Figure 2 so that readers can easily compare the European’s Union’s energy consumption to that of China. When China was added to the World Trade Organization in December 2001, it used only about 60% as much energy as the European Union. In 2014, it used close to twice as much energy (1.85 times as much) as the European Union.

Another area with slumping energy demand is Japan. It consumption has been slumping since 2005. It was already well into a slump before its nuclear problems added to its other problems.

Figure 4. Japan energy consumption by fuel, based on BP Statistical Review of World Energy 2015.

Figure 4. Japan energy consumption by fuel, based on BP Statistical Review of World Energy 2015.

A third area with slumping demand is the Former Soviet Union (FSU). The two major countries within the FSU with slumping demand are Russia and Ukraine.

Figure 5. Former Soviet Union energy consumption by source, based on BP Statistical Review of World Energy Data 2015.

Figure 5. Former Soviet Union energy consumption by source, based on BP Statistical Review of World Energy Data 2015.

Of course, some of the recent slumping demand of Ukraine and Russia are intended–this is what US sanctions are about. Also, low oil prices hurt the buying power of Russia. This also contributes to its declining demand, and thus its consumption.

The United States is often portrayed as the bright ray of sunshine in a world with problems. Its energy consumption is not growing very briskly either.

Figure 6. United States energy consumption by fuel, based on BP Statistical Review of World Energy 2014.

Figure 6. United States energy consumption by fuel, based on BP Statistical Review of World Energy 2014.

To a significant extent, the US’s slowing energy consumption is intended–more fuel-efficient cars, more fuel-efficient lighting, and better insulation. But part of this reduction in the growth in energy consumption comes from outsourcing a portion of manufacturing to countries around the world, including China. Regardless of cause, and whether the result was intentional or not, the United States’ consumption is not growing very briskly. Figure 6 shows a small uptick in the US’s energy consumption since 2012. This doesn’t do much to offset slowing growth or outright declines in many other countries around the world.

Slowing Growth in Demand for Almost All Fuels

We can also look at world energy consumption by type of energy product. Here we find that growth in consumption slowed in 2014 for nearly all types of energy.

Figure 7. World energy consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Figure 7. World energy consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Looking at oil separately (Figure 8), the data indicates that for the world in total, oil consumption grew by 0.8% in 2014. This is lower than in the previous three years (1.1%, 1.2%, and 1.1% growth rates).

Figure 8. Oil consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Figure 8. Oil consumption by part of the world, based on BP Statistical Review of World Energy 2015.

If oil producers had planned for 2014 oil consumption based on the recent past growth in oil consumption growth, they would have overshot by about 1,484 million tons of oil equivalent (MTOE), or about 324,000 barrels per day. If this entire drop in oil consumption came in the second half of 2014, the overshoot would have been about 648,000 barrels per day during that period. Thus, the mismatch we have recently been seeing between oil consumption and supply appears to be partly related to falling demand, based on BP’s data.

(Note: The “oil” being discussed is inclusive of biofuels and natural gas liquids. I am using MTOE because MTOE puts all fuels on an energy equivalent basis. A barrel is a volume measure. Growth in barrels will be slightly different from that in MTOE because of the changing mix of liquid fuels.)

We can also look at oil consumption for the US, EU, and Japan, compared to all of the rest of the world.

Figure 9. Oil consumption divided between the (a) US, EU, and Japan, and (b) Rest of the World.

Figure 9. Oil consumption divided between the (a) US, EU, and Japan, and (b) Rest of the World.

While the rest of the world is still increasing its growth in oil consumption, its rate of increase is falling–from 2.3% in 2012, to 1.6% in 2013, to 1.3% in 2014.

Figure 10 showing world coal consumption is truly amazing. Huge growth in coal use took place as globalization spread. Carbon taxes in some countries (but not others) further tended to push manufacturing to coal-intensive manufacturing locations, such as China and India.

Figure 10. World coal consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Figure 10. World coal consumption by part of the world, based on BP Statistical Review of World Energy 2015.

Looking at the two parts of the world separately (Figure 11), we see that in the last three years, growth in coal consumption outside of US, EU, and Japan, has tapered down. This is similar to the result for world consumption of coal in total (Figure 10).

Figure 10. Coal consumption for the US, EU, and Japan separately from the Rest of the World, based on BP Statistical Review of World Energy data.

Figure 11. Coal consumption for the US, EU, and Japan separately from the Rest of the World, based on BP Statistical Review of World Energy data.

Another way of looking at fuels is in a chart that compares consumption of the various fuels side by side (Figure 12).

Figure 8. World energy consumption by fuel, showing each fuel separately, based on BP Statistical Review of World Energy 2015.

Figure 12. World energy consumption by fuel, showing each fuel separately, based on BP Statistical Review of World Energy 2015.

Consumption of oil, coal and natural gas are all moving on tracks that are in some sense parallel. In fact, coal and natural gas consumption have recently tapered more than oil consumption. World oil consumption grew by 0.8% in 2014; coal and natural gas consumption each grew by 0.4% in 2014.

The other three fuels are smaller. Hydroelectric had relatively slow growth in 2014. Its growth was only 2.0%, compared to a recent average of as much as 3.5%. Even with this slow growth, it raised hydroelectric energy consumption to 6.8% of world energy supply.

Nuclear electricity grew by 1.8%. This is actually a fairly large percentage gain compared to the recent shrinkage that has been taking place.

Other renewables continued to grow, but not as rapidly as in the past. The growth rate of this grouping was 12.0%, (compared to 22.4% in 2011, 18.1% in 2012, 16.5% in 2013). With the falling percentage growth rate, growth is more or less “linear”–similar amounts were added each year, rather than similar percentages. With recent growth, other renewables amounted to 2.5% of total world energy consumption in 2014.

Falling Consumption Is What We Would Expect with Lower Inflation-Adjusted Prices

People buy goods that they want or need, with one caveat: they don’t buy what they cannot afford. To a significant extent affordability is based on wages (or income levels for governments or businesses). It can also reflect the availability of credit.

We know that commodity prices of many kinds (energy, food, metals of many kinds) have generally been falling, on an inflation adjusted basis, for the past four years. Figure 13 shows a graph prepared by the International Monetary Fund of trends in commodity prices.

Figure 9. Charts prepared by the IMF showing trends in indices of primary commodity prices.

Figure 13. Charts prepared by the IMF showing trends in indices of primary commodity prices.

It stands to reason that if prices of commodities are low, while the general trend in the cost of producing these commodities is upward, there will be erosion in the amount of these products that can be profitably produced, and hence, that can be purchased. (This occurs because prices are falling relative to the cost of producing the goods.) If, prior to the drop in prices, consumption of the commodity had been growing rapidly, lower prices are likely to lead to a slower rate of consumption growth. If prices drop further or stay depressed, an absolute drop in consumption may occur.

It seems to me that the lower commodity prices we have been seeing over the past four years (with a recent sharper drop for oil), likely reflect an affordability problem. This affordability problem arises because for most people, wages did not rise when energy prices rose, and the prices of commodities in general rose in the early 2000s.

For a while, the lack of affordability could be masked with a variety of programs: economic stimulus, increasing debt and Quantitative Easing. Eventually these programs reach their limits, and prices begin falling in inflation-adjusted terms. Now we are at a point where prices of oil, coal, natural gas, and uranium are all low in inflation-adjusted terms, discouraging further investment.

Commodity Exporters–Will They Be Next to Be Hit with Lower Consumption?

If the price of a commodity, say oil, is low, this is a problem for a country that exports the commodity. The big issue is likely to be tax revenue. Governments very often get a major share of their tax revenue from taxing the profits of the companies that sell the commodities, such as oil. If the price of oil or other commodity that is exported drops, then it will be difficult for the government to collect enough tax revenue. There may be other effects as well. The company producing the commodity may cut back its production. If this happens, the exporting country is faced with another problem–laid-off workers without jobs. This adds a second need for revenue: to pay benefits to laid-off workers.

Many oil exporters currently subsidize energy and food products for their citizens. If tax revenue is low, the amount of these subsidies is likely to be reduced. With lower subsidies, citizens will buy less, reducing world demand. This reduction in demand will tend to reduce world oil (or other commodity) prices.

Even if subsidies are not involved, lower tax revenue will very often affect the projects an oil exporter can undertake. These projects might include building roads, schools, or hospitals. With fewer projects, world demand for oil and other commodities tends to drop.

The concern I have now is that with low oil prices, and low prices of other commodities, a number of countries will have to cut back their programs, in order to balance government budgets. If this happens, the effect on the world economy could be quite large. To get an idea how large it might be, let’s look again at Figure 1, recopied below.

Notice that the three “layers” in the middle are all countries whose economies are fairly closely tied to commodity exports. Arguably I could have included more countries in this category–for example, other OPEC countries could be included in this grouping. These countries are now in the “Rest of the World” category. Adding more countries to this category would make the portion of world consumption tied to countries depending on commodity exports even greater.

Figure 1- Resource consumption by part of the world. Canada etc. grouping also includes Norway, Australia, and South Africa. Based on BP Statistical Review of World Energy 2015 data.

Figure 1- Resource consumption by part of the world. Canada etc. groupng also includes Norway, Australia, and South Africa. F Soviet Union means Former Soviet Union. Middle East excludes Israel. Based on BP Statistical Review of World Energy 2015 data.

My concern is that low commodity prices will prove to be self-perpetuating, because low commodity prices will adversely affect commodity exporters. As these countries try to fix their own problems, their own demand for commodities will drop, and this will affect world commodity prices. The total amount of commodities used by exporters is quite large. It is even larger when oil is considered by itself (see Figure 8 above).

In my view, the collapse of the Soviet Union in 1991 occurred indirectly as a result of low oil prices in the late 1980s. A person can see from Figure 1 how much the energy consumption of the Former Soviet Union fell after 1991. Of course, in such a situation exports may fall more than consumption, leading to a rise in oil prices. Ultimately, the issue becomes whether a world economy can adapt to falling oil supply, caused by the collapse of some oil exporters.

Our World Economy Has No Reverse Gear

None of the issues I raise would be a problem, if our economy had a reverse gear–in other words, if it could shrink as well as grow. There are a number of things that go wrong if an economy tries to shrink:

  • Businesses find themselves with more factories than they need. They need to lay off workers and sell buildings. Profits are likely to fall. Loan covenants may be breached. There is little incentive to invest in new factories or stores.
  • There are fewer jobs available, in comparison to the number of available workers. Many drop out of the labor force or become unemployed. Wages of non-elite workers tend to stagnate, reflecting the oversupply situation.
  • The government finds it necessary to pay more benefits to the unemployed. At the same time, the government’s ability to collect taxes falls, because of the poor condition of businesses and workers.
  • Businesses in poor financial condition and workers who have been laid off tend to default on loans. This tends to put banks into poor financial condition.
  • The number of elderly and disabled tends to grow, even as the working population stagnates or falls, making the funding of pensions increasingly difficult.
  • Resale prices of homes tend to drop because there are not enough buyers.

Many have focused on a single problem area–for example, the requirement that interest be paid on debt–as being the problem preventing the economy from shrinking. It seems to me that this is not the only issue. The problem is much more fundamental. We live in a networked economy; a networked economy has only two directions available to it: (1) growth and (2) recession, which can lead to collapse.


What we seem to be seeing is an end to the boost that globalization gave to the world economy. Thus, world economic growth is slowing, and because of this slowed economic growth, demand for energy products is slowing. This globalization was encouraged by the Kyoto Protocol (1997). The protocol aimed to reduce carbon emissions, but because it inadvertently encouraged globalization, it tended to have the opposite effect. Adding China to the World Trade Organization in 2001 further encouraged globalization. CO2 emissions tended to grow more rapidly after those dates.

Figure 14. World CO2 emissions from fossil fuels, based on data from BP Statistical Review of World Energy 2015.

Figure 14. World CO2 emissions from fossil fuels, based on data from BP Statistical Review of World Energy 2015.

Now growth in fuel use is slowing around the world. Virtually all types of fuel are affected, as are many parts of the world. The slowing growth is associated with low fuel prices, and thus slowing demand for fuel. This is what we would expect, if the world is running into affordability problems, ultimately related to fuel prices rising faster than wages.

Globalization brings huge advantages, in the form of access to cheap energy products still in the ground. From the point of view of businesses, there is also the possibility of access to cheap labor and access to new markets for selling their goods. For long-industrialized countries, globalization also represents a workaround to inadequate local energy supplies.

The one problem with globalization is that it is not a permanent solution. This happens for several reasons:

  • A great deal of debt is needed for the new operations. At some point, this debt starts reaching limits.
  • Diminishing returns leads to higher cost of energy products. For example, later coal may need to come from more distant locations, adding to costs.
  • Wages in the newly globalized area tend to rise, negating some of the initial benefit of low wages.
  • Wages of workers in the area developed prior to globalization tend to fall because of competition with workers from parts of the world getting lower pay.
  • Pollution becomes an increasing problem in the newly globalized part of the world. China is especially concerned about this problem.
  • Eventually, more than enough factory space is built, and more than enough housing is built.
  • Demand for energy products (in terms of what workers around the world can afford) cannot keep up with production, in part because wages of many workers lag thanks to competition with low-paid workers in less-advanced countries.

It seems to me that we are reaching the limits of globalization now. This is why prices of commodities have fallen. With falling prices comes lower production and hence lower total consumption. Many economies are gradually moving into recession–this is what the low prices and falling rates of energy growth really mean.

It is quite possible that at some point in the not too distant future, demand (and prices) will fall further. We then will be dealing with severe worldwide recession.

In my view, low prices and low demand for commodities are what we should expect, as we reach limits of a finite world. There is widespread belief that as we reach limits, prices will rise, and energy products will become scarce. I don’t think that this combination can happen for very long in a networked economy. High energy prices tend to lead to recession, bringing down prices. Low wages and slow growth in debt also tend to bring down prices. A networked economy can work in ways that does not match our intuition; this is why many researchers fail to see understand the nature of the problem we are facing.

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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1,227 Responses to BP Data Suggests We Are Reaching Peak Energy Demand

  1. Don Stewart says:

    Dear Gail and Finite Worlders
    Two items. First, here is a link to a ‘professionally produced’ copy of Jeffrey Bland’s talk in Austin:

    You will get a small screen on which you click the play button, then you get a Vimeo screen and you need to click the ‘enlarge button’ on the lower right of Vimeo control bar. You will be looking at a small window showing the speaker and a larger window showing the slides he was using. If you want to look closely at data rich slides, you may be disappointed at the resolution. But this is far better than just looking at a camera pointed at the speaker.

    Second, I call your attention to Dr. Bland’s emphasis on ‘wellness’. Rather than sift through genes looking for risk factors, the focus becomes analyzing patterns of genetic expression which promote health, essentially drowning out the effects of any genes which create vulnerabilities for us. In short, if the patients and the medical profession focus on wellness, then most of the chronic disease cases go away. I want to call your attention to the commonalities between Bland’s message and Elaine Ingham’s message. If we focus our horticultural attention on creating healthy soil, then we will have healthy plants. NOT because we have poisoned all the potential creators of disease, but because the disease creating organisms are overwhelmed by the health creating organisms. Fertility comes from the soil microbiome…not industrial sources.

    I would like you to note that creating healthy humans and healthy plants requires far less fossil fuel work than we use today. Both, I am pretty sure, are going to require more human work, which is solar powered and knowledge intensive. Healthier humans are not only NOT a drag on the productive economy, we may be looking at Bland’s ‘Century of Vitality’. Humans are healthy for a hundred years and then they rapidly age and die. But healthy soil and healthy humans takes direct shots at activities which today generate lots of GDP.

    Don Stewart

  2. Fast Eddy says:

    With so many shares suspended or halted because down by daily limit, just 11% of stocks in China (300 of 2776) are actually tradable now.

    The Economist

    • John Doyle says:

      The Chinese government can spend it’s way clear of this downturn. Since no one really knows the value of the economy the authorities will have no compunction to buy its way out. They may see it as a bargain, considering the alternatives.

      • Rodster says:

        “Since no one really knows the value of the economy the authorities will have no compunction to buy its way out”

        Sort of like Chinese ghost cities and factories. 🙂

        • John Doyle says:

          You got it!! I bet they could pull down the empty cities and build them again, to keep people working, keep the party safe.

        • Fast Eddy says:

          “The Chinese government can spend it’s way clear of this downturn”

          I am sure that will work…. (sarc)

    • Maybe they’ll just permanently halt trading and let people use their stocks at their current value as assets to borrow money. Or just shut down the markets and pay everyone a price to buyout all the shares.

      Or maybe they’ll mismanage it and melt down their whole economy.

      • Fast Eddy says:

        If you shut down the entire stock market completely for a significant period of time the economy of China will collapse.

        This would have a similar impact as a complete nationalization of all listed companies.

        There is no returning to the era of Mao (or Cuba)— because China is the lynchpin in the global supply chain — China goes — the global economy stops.

        • Why do shares need to trade for a company to keep operating? Equity is probably the least important market. Credit and Commodities seem much more vital. I guess we’ll find out pretty soon, this seems to be a pretty fast moving story.

          • Fast Eddy says:

            We’re kinda in uncharted territory here — I cannot recall a situation where a major economy basically shut down it’s stock market…

            But I suppose… on an individual basis a company can of course continue operating — half of the companies on the China market have stopped trading…. and they continue to operate.

            China has also frozen all IPO’s and new stock sales — which obviously destroys growth — as companies are starved of capital…

            So on the macro level I think you end up with stagnation in the economy, endless recession then collapse…

            Grow or wither and die…. and to grow there needs to be functioning markets.

            I suspect that there would also be an impact on the corporate bond market if a company stopped trading for an extended period …. borrowing rates would likely spike due to the uncertainty… this would also hurt growth

            Anyone else have any thoughts on this?

  3. Fast Eddy says:


    As China’s steepest market drop in decades continues, almost half (link in Chinese) of all listed companies in China voluntarily suspended trading of their shares on July 8, and over 800 others had their stocks automatically halted after reaching their daily drop limit. The benchmark Shanghai Composite Index closed down 5.9%. The CSI 300 was also down, by 6.8%.

    That left only a handful—just 22%, according to our calculations, of all listed stocks on the Chinese stock market trading on Wednesday. Dozens of stocks in Hong Kong also voluntarily suspended trading, as the spill-over from China’s market dragged down Hong Kong’s Hang Seng Index, which tumbled as much as 8.6%, its biggest intraday fall since the financial crisis, to close 5.8% lower.

    • This doesn’t sound good at all. What can they do–quit and start over?

      • Fast Eddy says:

        The Chinese markets (and all markets) are based not based on any viable activity — unless of course money printing and stimulus can be considered viable activities…

        Thus I think what is happening in China is the expected outcome…. the emperor has no clothes — and the idiocracy who bought into the lie have realized that now — and they are running for the exits.

        I don’t see how you restart again when essentially the market, since 2008, was based on nothing in the first place…

        If the Chinese did not charge into ghost towns and other pointless infrastructure projects then they and we would have collapsed in 2008…

        All they did was delay the inevitable —- and quite possibly the inevitable is here….

        I am not sure if this is our Black Swan or not — I am still wondering if the PBOC can just throw money at this and buy the market up…

        If they do that then that completely exposes this as a farce — the CONfidence game — which is already wearing thin as people including the financial community — are recognizing that there are no fundamentals — there is only massive amounts of stimulus and manipulation….

        And when CONfidence goes…. as we are seeing in China…. it seems the central banks are no longer able to maintain the illusion…


  4. Fast Eddy says:

    7 out of 10 on the amusing scale:

    I can’t help it that I’m an observer. I observe businesses, vehicles, street signs, clothing choices, and the people wandering the vast swaths of ‘Murrica. Liberals, progressives, Obama lovers, and control freaks have a problem with my observations because they don’t believe any behavior, clothing choice, or life choice should be judged, scorned or ridiculed.

    What we have here is a failure to communicate. I see ignorant, stupid, obese people who make bad life choices every day. They reveal themselves by their actions and their appearance. They stand out like a sore obese thumb in Wildwood.


  5. Fast Eddy says:

    China’s benchmark stock index tumbled to a three-month low as another round of government support measures failed to allay concern that margin trades will keep unwinding at a record pace.

    The Shanghai Composite Index slid 5.9 percent to 3,507.19 at the close. With at least 1,331 companies halted on mainland exchanges and another 747 down by the 10 percent daily limit, sellers were locked out of 72 percent of the Chinese market.

    They turned to government bonds and Hong Kong shares to raise cash, sending China’s 10-year notes to their biggest drop in a month and sparking a 5.8 percent loss in the Hang Seng Index.


    • VPK says:

      Now the Communist party faces the frightening prospect of the very opposite effect; as savings vanish into thin air, millions of investors are simultaneously tightening their belts with potentially chilling impacts for the Chinese economy and beyond.
      For now, it is only the late arrivals to China’s stock market binge that have been burned, with the recent, sharp depreciation in value still comfortably outweighed by longer term gains going back a year and more.
      But the slew of measures the authorities have unleashed in the past few days are part of an attempt – perhaps futile – to stop things getting any worse.
      Though some feel it is no big deal
      Politics not economics
      Some analysts dismiss the fear that a full blown stock market collapse could precipitate a wider economic shock.
      “The stock market is too small, too tiny, completely irrelevant,” Chen Long, China economist at Gavekal Dragonomics tells me. “It accounts for just 5% of Chinese household wealth and anyway the market is still up on where it was last year.”
      Much more could yet be wiped off the value of Chinese shares, it would follow, before anyone needs to panic, least of all the government. So perhaps, if this view is correct, Beijing’s actions are motivated by the need to contain the political fallout, rather than the economic

      • Fast Eddy says:

        “The stock market is too small, too tiny, completely irrelevant,” Chen Long, China economist at Gavekal Dragonomics tells me. “It accounts for just 5% of Chinese household wealth and anyway the market is still up on where it was last year.”

        Everyone has their version of Koombaya…. including the BBC and Chen Long….

        My questions for these clowns is:

        The market is down 30% or so.

        What do they think would happen to the market if the PBOC were not stepping in as the buyer of last resort (via acknowledged intermediaries)? What would happen if a huge number of companies on the exchange had not halted trading of the stocks?

        80% of the market is owned by individuals (100m or so people) — most of whom are trading on margin — therefore they are probably bankrupt based on a 30% drop. Now imagine what would happen if the PBOC were not stepping in ….

        And my final question would be — interventions in complex financial systems never end well — how does the PBOC exit its role as buyer of last resort — and how do companies start trading again — without completely collapsing the markets…. and quite likely the Chinese economy (which is based 100% on government stimulus)

  6. Fast Eddy says:

    940 Chinese Firms Halt Trading; China Allows Houses as Margin, Bans Use of Term “Equity Disaster”; Two Rules, Two Questions

    Two Rules

    Every bubble eventually bursts
    The bigger the bubble the bigger the bust

    Central banks globally have blown the biggest bubble ever in the wake of the 2008 crash. We have only just begun to see the carnage that is coming.

    That carnage started in China and it’s going to spread.

    Two Questions

    How fast?
    Where Next?

    Read more at http://globaleconomicanalysis.blogspot.com/2015/07/940-chinese-firms-halt-trading-china.html#7GtV0ZDxicmGL9hf.99

  7. alturium says:

    Hullo fellow Gail-ites or Tverbergians…

    John Perkins wrote a great book “Confessions of an Economic Hit Man”. Here is an interview from 11 September 2014, talking about Greece, the Euro, Iceland, other relevant topics.


    Some quotes:

    John Perkins: Essentially, my job was to identify countries that had resources that our corporations want, and that could be things like oil – or it could be markets – it could be transportation systems. There’re so many different things. Once we identified these countries, we arranged huge loans to them, but the money would never actually go to the countries; instead it would go to our own corporations to build infrastructure projects in those countries, things like power plants and highways that benefitted a few wealthy people as well as our own corporations, but not the majority of people who couldn’t afford to buy into these things, and yet they were left holding a huge debt, very much like what Greece has today, a phenomenal debt.

    And once [they were] bound by that debt, we would go back, usually in the form of the IMF – and in the case of Greece today, it’s the IMF and the EU [European Union] – and make tremendous demands on the country: increase taxes, cut back on spending, sell public sector utilities to private companies, things like power companies and water systems, transportation systems, privatize those, and basically become a slave to us, to the corporations, to the IMF, in your case to the EU, and basically, organizations like the World Bank, the IMF, the EU, are tools of the big corporations, what I call the “corporatocracy.”

    on the topic of Greece:

    I’ve been following Greece for a long time. I was on Greek television. A Greek film company did a documentary called “Apology of an Economic Hit Man,” and I also spent a lot of time in Iceland and in Ireland. I was invited to Iceland to help encourage the people there to vote on a referendum not to repay their debts, and I did that and encouraged them not to, and they did vote no, and as a result, Iceland is doing quite well now economically compared to the rest of Europe. Ireland, on the other hand: I tried to do the same thing there, but the Irish people apparently voted against the referendum, though there’s been many reports that there was a lot of corruption.

    In the case of Greece, my reaction was that “Greece is being hit.” There’s no question about it. Sure, Greece made mistakes, your leaders made some mistakes, but the people didn’t really make the mistakes, and now the people are being asked to pay for the mistakes made by their leaders, often in cahoots with the big banks. So, people make tremendous amounts of money off of these so-called “mistakes,” and now, the people who didn’t make the mistakes are being asked to pay the price. That’s consistent around the world: We’ve seen it in Latin America. We’ve seen it in Asia. We’ve seen it in so many places around the world.

    And he says more about Greece, see the link above.

    I agree with all of his statements.

    • Fast Eddy says:

      John Perkins was a key person in busting open the matrix….

      However I have outgrown his silly views of the world… I fully support my team leaders in appointing puppets who hand over their resources …. I am totally ok with crushing democracy everywhere ….

      Perkins is a fool for trying to stop this from happening because a) he will never win and b) if he were to win then the tables would be turned and he’d be living like an Iraqi or Somalian

      Because this is the way things work:

      – The luckiest, fittest, smartest, with the capability for ruthlessness survive – always have – always will

      – Resources are finite and therefore ownership is a zero sum game

      – The strong always take from the weak – if they do not then that is a sign of weakness and a competitor will take from the weak and will usurp the formerly strong dropping them into weakling status

      – Humans tend to group by clan or on a broader basis by nationality (strength in numbers bonded by culture) and they compete with others for resources

      – Competition always exist (I want it all!) but it becomes fiercer when resources are not sufficient to support competing clans or nations

      – Tribal societies understand these dynamics because they cannot go to the grocery store for their food – so they are intimately aware of the daily battle to feed themselves and the competition for scare land and resources

      – Modern affluent societies do not recognize this dynamic because for them resources are not scarce – they have more than enough.

      – One of the main reasons that resources are not scarce in affluent societies is because they won the battle of the fittest (I would argue that luck is the precursor to all other advantages – affluent societies did not get that way because they started out smarter — rather they were lucky – and they parlayed that luck into advances in technology… including better war machines)

      – As we have observed throughout history the strong always trample the weak. Always. History has always been a battle to take more in the zero sum game. The goal is to take all if possible (if you end up in the gutter eating grass the response has been – better you than me – because I know you’d do the same to me)

      – And history demonstrates that the weak – given the opportunity – would turn the tables on the strong in a heartbeat. If they could they would beat the strong into submission and leave them bleeding in the streets and starving. As we see empire after empire after empire gets overthrown and a new power takes over. Was the US happy to share with Russia and vice versa? What about France and England? Nope. They wanted it all.

      – Many of us (including me) in the cushy western world appear not to understand what a villager in Somalia does – that our cushy lives are only possible because our leaders have recognized that the world is not a fair place — Koobaya Syndrome has no place in this world — Koombaya will get you a bullet in the back — or a one way trip to the slum.

      – Religious movements have attempted to change the course of human nature — telling us to share and get along — they have failed 100% – as expected. By rights we should be living in communes — Jesus was a communist was he not? We all know that this would never work. Because we want more. We want it all.

      – But in spite of our hypocrisy, we still have this mythical belief that mankind is capable of good – that we make mistakes along the way (a few genocides here, a few there… in order to steal the resources of an entire content so we can live the lives we live) — ultimately we believe we are flawed but decent. We are not. Absolutely not.

      – But our leaders — who see through this matrix of bullshit — realize that our cushy lives are based on us getting as much of the zero sum game as possible. That if they gave in to this wishy washy Koombaya BS we would all be living like Somalians.

      – Of course they cannot tell us what I am explaining here — that we must act ruthlessly because if we don’t someone else will — and that will be the end of our cushy lives. Because we are ‘moral’ — we believe we are decent – that if we could all get along and share and sing Koombaya the world would be wonderful. We do not accept their evil premises.

      – So they must lie to us. They must use propaganda to get us onside when they commit their acts of ruthlessness.

      – They cannot say: we are going to invade Iraq to ensure their oil is available so as to keep BAU operating (BAU which is our platform for global domination). The masses would rise against that making things difficult for the PTB who are only trying their best to ensure the hypocrites have their cushy lives and 3 buck gas (and of course so that the PTB continue to be able to afford their caviar and champagne) …. Because they know if the hypocrites had to pay more or took at lifestyle hit – they’d be seriously pissed off (and nobody wants to be a Somalian)

      – Which raises the question — are we fools for attacking the PTB when they attempt to throw out Putin and put in a stooge who will be willing to screw the Russian people so that we can continue to live large? When we know full well that Putin would do the same to us — and if not him someone more ruthless would come along and we’d be Somalians.

      – Should we be protesting and making it more difficult for our leaders to make sure we get to continue to lead our cushy lives? Or should we be following the example of the Spartans https://www.youtube.com/watch?v=eZeYVIWz99I

      – In a nutshell are our interests as part of the western culture not completely in line with those of our leaders – i.e. if they fail we fail – if they succeed we succeed.

      – Lee Kuan Yew is famous for saying ‘yes I will eat very well but if I do so will you’ Why bite the hand that whips the weak to make sure you eat well…. If you bite it too hard it cannot whip the weak — making you the weak — meaning you get to feel the whip….

      – Nation… clan … individual…. The zero sum game plays out amongst nations first … but as resources become more scarce the battle comes closer to home with clans battling for what remains…. Eventually it is brother against brother ….

      – As the PTB run out of outsiders to whip and rob…. They turn on their own…. As we are seeing they have no problem with destroying the middle class because it means more for them… and when the weak rise against them they have no problem at all deploying the violent tactics that they have used against the weak across the world who have attempted to resist them

      – Eventually of course they will turn against each other…. Henry Kissinger and Maddy Albright bashing each other over the head with hammers fighting over a can of spam – how precious!

      • abraxis says:

        ” Was the US happy to share with Russia and vice versa? What about France and England? Nope. They wanted it all.”

        The USSR was built by the US. – Sutton.

  8. Fast Eddy says:

    Thinking about the China markets…. seeing as the PBOC has unlimited fire power…. I cannot see how the market can run out of control….

    The PBOC surely can stop this anytime they want … all they need to do is blast a few hundred billion or even a trillion at this and the market will charge higher… the idiocracy will see that and sentiment will turn on a dime … and back into the bull fantasy we go?

    Could it be that they are just going to step this market down a few points per day until they feel it is at a reasonable level… then start the whole game over again?

    • They seem to have recently opened up short selling in China, which was previously limited to a few firms since ~2009. People can make money on the way up, and on the way down. Unless, of course, there is a short selling ban or trading is halted.

      China is like 19th century London, on a much bigger scale. This will probably be their South Sea Bubble, but at 100 / 1000 times the scale. Will be interesting to see what they do to maintain order.

      • Rodster says:

        The entire global financial/banking/economic system is nothing more than three card monte.

  9. Don Stewart says:

    Dear Gail and Finite Worlders
    This post from BW Hill:
    ‘A barrel of conventional crude in 2015 is delivering 70% of the energy that it was delivering in 2000. That is, it is taking 1.1 million more BTU per barrel to extract, process, and distribute it. Production has increased over the same period by 6.5%. Even including non conventional, which are mostly at best energy neutral, the energy delivered to the economy from liquid hydrocarbons is declining, and the economy is reflecting that fact. World debt increased 40% between 2008 and 2014. The surprising aspect is that the situation isn’t worse than it is?’

    My point is that referring to a ‘peak demand’ in terms of barrels of oil is probably misleading. If the net energy per barrel is declining as BW Hill claims it is, then the peak happened some time ago. The financial distress is a symptom of an underlying physical problem.

    What I see happening in the world tells me that Hill is more right than wrong.

    Don Stewart

  10. Fast Eddy says:

    China’s Stocks Plunge as State Intervention Fails to Stop Rout

    China’s Shanghai Composite Index plunged amid concern a raft of measures to stabilize equities is failing to stop the bear-market rout as traders unwind margin bets at a record pace.

    The Shanghai Composite tumbled as much as 8.2 percent, the most since 2007, before paring losses to 4.8 percent to trade at 3,549.92 at 9:56 a.m. local time. There were four gainers among the 1,106 stocks that trade on the benchmark gauge, which has slumped 28 percent since the June peak. PetroChina Co., the biggest stock, tumbled 4.9 percent as nine out of 10 industry gauges dropped at least 4 percent in the CSI 300 Index.

    In the latest attempts to stem losses, the government raised margin requirements for CSI 500 Index futures, while the China Securities Finance Corp. will buy more shares of smaller companies. About 43 percent of the stock market is frozen after more than a thousand companies suspended their shares.

    “Greed and fear,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. “If you hadn’t been greedy you’d have nothing to fear now. We are heading to 2,500.”

    More http://www.bloomberg.com/news/articles/2015-07-08/china-stock-futures-plunge-amid-trading-halts-margin-debt-drop

    • Margin must make it tough to contain. Think about it, if people put in $1 trillion and leverage that 50 times, then you need $50 trillion to buy all the stocks without margin from all the people that are trying to sell.

      Asian cultures seem to have a weak spot when it comes to gambling. Sure-fire way to get them broke, is to lure them into a casino.

    • Stefeun says:

      I know nothing about stock markets (and am not interested in this parasitic gambling activity), but what’s going on in China sounds strange to me.

      If we consider that, first, the market has more than doubled in size since January, which is absurd and unsustainable, especially with a stagnating or declining real economy, and second, the Chinese economy needs a restructuration, with less of heavy industry and building capacity, and more of quality-oriented manufacturing and services,

      can we imagine that the PBoC is attempting to control the burst (they may even have triggered it..?), in order to acheive both goals, ie:
      – lower the financial risk, bringing back the stock-market to a more reasonable size,
      – get rid of their over-capacity in “obsolete” sectors of their industry?

      Just my 2 cents, suggested by your comments and this article http://www.bloomberg.com/news/articles/2015-07-07/behind-china-s-stocks-bailout-a-need-to-salvage-new-economy

  11. Fast Eddy says:

    Just in from the paddock where the BAU fueled digging machine is doing the work of 50 men tearing out barbary bushes and massive trees that I have felled with my trusty BAU chainsaw (which would have taken weeks to bring down)….. prior to hauling up some 30,000 litre water tanks made from BAU petroleum…. and on and on and on….

    And thought I would check on how the Titanic is doing….

    Shanghai is off 6% on the open…. taking on water fast…. and I can smell the pumps staring to burn….

  12. Don Stewart says:

    Dear Gail and Finite Worlders
    If you found Jeffrey Bland’s talk in Austin interesting, you might be interested in signing up for this series of talks:

    I believe this is free, and you don’t have to join anything. They will want your email address. You will get invited to attend a lot of medical events.

    Don Stewart

  13. Fast Eddy says:

    Peak Oil China:

    China’s crude oil output has stagnated for the past two years despite intense drilling activity on land and offshore. In late 2014, CNPC essentially threw in the towel on its workhorse field, Daqing, announcing that it would allow the field to essentially enter a phase of managed decline over the next five years. Under this new approach, the field’s oil production will fall from 800,000 barrels per day (kbd) in 2014 to 640 kbd by 2020: a 20 percent decrease. To highlight the importance of PetroChina’s decision, consider that Daqing currently accounts for approximately one in every five barrels of oil currently pumped in China – on par with the role Alaska’s massive Prudhoe Bay field has played in U.S. oil production.

    While Daqing’s output has thus far declined less steeply than Prudhoe Bay’s, the Prudhoe experience shows that for even a massive field, once the steep stage of the terminal decline output phase begins, there is generally no turning back (Exhibit 1).


    More http://thediplomat.com/2015/07/china-peak-oil-2015-is-the-year/

    • Exactly why they have built man-made islands in the Spratly Islands group, to get offshore oil – they need it, badly. Deals with Russia, Iran. Anything to keep the oil flowing and try to maintain social order. China has a long history of bloody revolutions and civil wars.

  14. Fast Eddy says:

    Goldman Sachs Says There’s No China Stock Bubble, Sees 27% Rally


    I wonder how much money the PBOC has to hand over to money managers who will use it to buy the market — to get a 27% up tick?

    Don’t fight the Fed — or the ECB — or the BOJ — or the PBOC… because they always have deeper pockets because they own the printer….

    And they will most definitely use it.

    However … if the China punters continue to fight and unload their positions … and the PBOC

    Want to sell $1 trillion of stocks — no problem — the PBOC will buy it all and more…. sell 2T … can do just run the presses a little longer today…

    That is the message being delivered by OOTF…. now everyone get on board and let’s make some money!

  15. Don Stewart says:

    For All You Doubting Thomases
    Don’t believe any of that BS from the Functional Medicine guy? Take 2 minutes to look:

    Don Stewart

  16. edpell says:

    In analyzing Greece no one, outside of OFW, considers the lack of indigenous energy resources.

    Gail, I would love to see a scatter plot of GDP versus indigenous energy production per year for the nation of the EU and near neighbors.

  17. Stefeun says:

    About European adult children iving with their parents,
    here’s the map:


    and the link to the ZH aticle:

    Thanks Don!

    • eARTH says:

      S, we see an old ethnic and religious grouping there. Basically the north sea protestant Germanic countries are ahead, with the USA, and likely other countries that were originally set up by Britain, kind of grouping with NW Europe. Scandinavia is actually head and shoulders ahead while NW, Celtic catholic Ireland has an ambiguous grouping while catholic France (named after a Germanic tribe) groups with the north sea. Interestingly the east Baltic kind of groups with Catholic Spain and Austria while Portugal and Italy slide into the eastern, Slavic orthodox grouping. It is an interesting take on more long term historical tendencies and possibly quite informative as a snap shot of who is who in Europe.

      I would hesitate to draw a correlation with the extent of Protestantization but there may well be one, among others. Scandinavia, the last to adopt Christianity and thorough in their protestant reforms are followed by other protestant countries, followed by Catholics and then Orthodox – generally speaking. This may also correlate as a snap shot of the historical extent of liberalism, toleration and freedom of speech.

      There are also linguistic, ethnic and geographic correlations. It could be summed up as north-south and north west to south-east clines. It has a longitudinal correlation but with a west-east cline. Also, Germanic – Celtic – Slavic. I wonder whether it also correlates with average physical stature and average national IQ.

      • eARTH says:

        * Sorry, I meant latitudinal (north-south) not “longitudinal”.

      • xabier says:

        I suggest the extent of social security systems have some part to play in this map, too. Again,energy/wealth related.

      • eARTH says:

        The map well sums up a fourfold correlation, and one should obviously add neolithic med into the correlations, but I am not saying that the map obviously captures all of the important details. For instance, one country in NW Europe has a very similar figure for stay-at-homes as a certain country in central Europe, yet the one are mindless hooligans, ready to fight anyone and yet narrow minded yobbos for it, while the other is the most cultured and human country in Europe, warm, musical and thoroughly decent. Both are Catholic.

    • MG says:

      I would interpret this map as reflecting the fact that the energy hub of the Europe is situated in the North Sea where the oil is being extracted. The North Sea is Europe’s most important energy hub. The energy poor South and East of Europe, located further from it, require children staying home.

    • xabier says:

      Of course, male adult children have traditionally stayed at home in Spain until marriage in the late 20’s early 30’s: from Mamma Mk 1 to Mamma Mk 2 (and she’d better cook the same as !) as it were.

      The real trend since 2008 is those who have left home returning to save money. There have been some amusing court cases involving adults trying to force their parents to pay for them and take them in again!

      • MG says:

        “There have been some amusing court cases involving adults trying to force their parents to pay for them and take them in again!”: this is really remarkable and interesting…

        What does it mean to be an adult now? When the energy flow towrads a person is cut off, he or she becomes helpless child.

        • xabier says:


          The court claims against parents have been based on the fact that the claimants have done their very best to gain employment and survive on their own, but that the economy has defeated them. Some judges say this applies whatever the age of the child, others have given different judgements.

          This is related to the legal principal in most regions of Spain that no child can be disinherited, except for neglect of a parent or an attempt made on their life (!), the so-called ‘forced heir’ principle: family is family, like it or loathe it, so pay up.

          Parents who have fallen out with their children hate this(, or who are selfish misers),and move to our region in the North, where disinheriting is possible.

          One is also supposed to take in one’s parent, feed them, etc,on the same reasoning, however awful and feckless they might be. Ah, happy families…..

  18. Don Stewart says:

    Stefeun and Xabier
    Here is a short commercial, with about 2 minutes of Mark Hyman, MD, talking about his comment in Davos:


    If you watched Jeffrey Bland’s video, and heard him describe how the mind of a doctor and his subsequent behavior gets changed by real time feedback in ways that medical school and professional journals do not change behavior…do you think that it might possibly be true that information and sensing technology can disrupt the ruinously expensive chronic disease treatment behemoth?

    If Reverse Engineer asked me to think of something hopeful, do you think I might point in that direction?

    Don Stewart

    • Stefeun says:

      Don, please…
      how can you consider as hopeful that a bunch of private individuals have full access to everybody’s life, and know more about you than yourself?

      Information is power, they can take full control of your life, you have no more rights.
      Isn’t that the very definition of enslavement?

  19. Don Stewart says:

    Stefeun and Xabier
    One more thing about the Jeffrey Bland talk. Last night it was late and I was tired and the server war horribly overloaded, so I may have this a little screwed up.

    Late in his talk Dr. Bland described wearing some ‘Google Contact Lenses’. I think they were measuring the glycation products in the tears. These are called Advanced Glycation End Products in the trade: AGEs. Which pretty well describes the awful things they do to you. You can get them by eating a candy bar. I learned about 10 years ago that a doctor can feed you candy and then watch your eyes as the glycation products appear.

    So now, apparently, Google has a technology which can continuously monitor the glycation products you are making, and give you near real time feedback.

    (I repeat that I was tired and it was late…so check it out for yourself.)

    The ability of information technology to disrupt BAU is generally underrated on this site.

    Don Stewart

  20. Fast Eddy says:

    Here’s a novel way to delay a crash:

    Chinese Trading Suspensions Freeze $1.4 Trillion of Shares Amid Rout – That’s 21% of China’s Market Cap….

    Chinese companies have found a guaranteed way to prevent investors from selling their shares: suspend trading.

    Almost 200 stocks halted trading after the close on Monday, bringing the total number of suspensions to 745, or 26 percent of listed firms on mainland exchanges, according to data compiled by Bloomberg. Most of the halts are by companies listed in Shenzhen, which is dominated by smaller businesses.


    • Wow! I am afraid this will not end well.

      • Fast Eddy says:

        I think this demonstrates the fact that the central banks are not omnipotent….

        In spite of locking down trading on nearly half the companies in the index… and the PBOC flinging what must be obscene amounts of cash at this …. the market continues to bleed…

        Will all shares be suspended and we wait in some sort of state of purgatory?

        I cannot see how you can just suspend the market indefinitely …

        What happens to other markets if they see this happening in China — do the wheels come off of BAU?

        If China does not turn around soon we are going to get a shocker of an ‘event’….

        My only question is — should I be heading to Wally’s World for that last massive truckload of food supplies tomorrow…

  21. Fast Eddy says:

    PBOC plunge protection is working…. market down only 1% now….

    Live to fight another day!

  22. Fast Eddy says:


    If I fail to respond to any posts directed to me — it is not because I agree — it is because your post makes no sense and is not worth responding to (in keeping with my new policy of not engaging with The Idiocracy — because it only encourages more of the same).

  23. Fast Eddy says:



    Further evidence of the unwinding of the global economy as a deflationary death spiral grabs hold of it by the throat….

  24. Fast Eddy says:

    Over 700 firms listed in Shanghai and Shenzhen – equivalent to around a quarter of the firms on the two exchanges – have issued requests to suspend trading or extend trading halts since a June 12 peak, according to an analysis of company filings.


    The market can’t drop if nobody is allowed to sell — or if trading is suspended.

    Such an elegant solution….


  25. Fast Eddy says:

    Wondering … might we yet see false reporting of stock market numbers?

    We have most certainly been seeing bs jobs and gdp numbers…

    So why not just tell people the markets are up — even if they are down?

    If China were to report that the Shanghai market was up 6% today – instead of down 3% — then the punters would rush back into the club to drop some more E and crank back a few more lines of blow….


  26. Fast Eddy says:

    China stocks tumble again despite support measures

    Chinese stocks opened down on Tuesday, taking no comfort from a slew of support measures unleashed by Beijing in recent days, and unnerved by Chinese Premier Li Keqiang’s failure to mention the market chaos in a statement on the economy.

    Before the market opened, Li said in comments on a government website that China had the confidence and ability to deal with challenges faced by its economy, but had nothing to say on the three-week plunge that has knocked around 30 percent off Chinese shares since mid-June.

    After a brief pause to the slide on Monday, the CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen fell 4.8 percent in early trading on Tuesday, while the Shanghai Composite Index .SSEC shed 3.4 percent. [.SS]

    The ChiNext growth board .CHINEXTC, home to some of China’s giddiest small-cap valuations, fell 5.1 percent.

    Traders are increasingly unnerved by the unusually large number of Chinese companies asking for their shares to be suspended from trading, fearing that many of them are looking for excuses to sit out the market turmoil.

    About a quarter of the roughly 2,800 companies listed in Shanghai and Shenzhen had filed for a trading halt by the close on Monday, and on Tuesday the Securities Times said another 200 had announced a suspension.

    More http://www.reuters.com/article/2015/07/07/us-china-markets-idUSKCN0PH08Q20150707

    The dead horse seems to be not responding to the injections of speed,crack, meth, coke, heroin, HGH, steroids, electric shocks, kicks to the teeth … he is not even flinching anymore….

    So how long do we have until the tanks roll into the streets…. and the electricity goes off?


  27. Fast Eddy says:

    Unable to stop the bleeding …. China is now down 4%+

  28. Fast Eddy says:

    China down hard on the open…. off 2%….

    As China Intervenes to Prop Up Stocks, Foreigners Head for Exits

    “It’s coming to a point where you’re covering one bad policy with another,” said Tai Hui, the Hong Kong-based chief Asia market strategist at JPMorgan Asset Management, which oversees about $1.7 trillion. “A lot of investors are still concerned about another correction.”

    “The more resources authorities commit to propping up the stock market, the more they ratchet up the potential fall-out risks should the market continue to collapse,” said Andrew Wood, an analyst at BMI Research. “This could give rise to a crisis of confidence in the authorities’ ability to support both the stock market and the real economy.”


    Classic pushing on a string scenario — the harder you push — the more it doesn’t move…

  29. Don Stewart says:

    Dear Gail and Finite Worlders
    Someone recently said that ‘energy is the source of wealth’, and I responded that, at the present time, it seems to be the world of information that is minting the billionaires.

    If you want to understand better how information is transforming health care, please take a look at this video:

    The first 3 or 4 minutes is a travelogue for Austin, but then pay particular attention to the first 10 minutes or so of Jeffrey Bland’s. talk. Please note the applause from the audience when he states that the authorities will not be able to prevent the information from getting to the public.

    What Bland is talking about is bringing a focus on health into the medical world. This is a revolution in the making. It is coming from people who understand information.

    Let me pose a question which I do not know the answer to. Why would Coca Cola sponsor the Ellen MacArthur foundation work in Europe? A recommendation for promoting AgroEcology and ‘natural foods’ is not exactly something you associate with Coca Cola. I have heard Mark Hyman talk several times about the anguish in the Pepsico corporation. Are these giants of the old ways of doing things beginning to fear the consequences of vastly expanded information going directly to the public?

    Don Stewart

    • Stefeun says:

      my answer to your question about the reason why Coca-Cola is sponsoring Ellen Mc Arthur (and all other similar examples one can notice every day) is: Corporate Capture.

      Those big corporations don’t fear anything, they’re already controlling all our institutions. Now they just want to take over all the non-govt organizations and private initiatives, especially the “green” ones, to turn them into cash-machines.

      I found a very good explanation of the mechanisms in the Art of Annihiltion website. I paste here an excerpt of the prologue, but highly recommend you to dig deeper into it:

      “It is somewhat ironic that anti-REDD climate activists, organizations (legitimate grassroots organizations do exist) and self-proclaimed environmentalists, who consider themselves progressive, while speaking out against the commodification of nature’s natural resources also simultaneously promote the divestment campaign. It’s ironic because the divestment campaign will result (succeed) in a colossal injection of money shifting over to the very portfolios heavily invested in, thus dependent upon, the intense commodification and privatization of Earth’s last remaining forests (via REDD), water, etc. (environmental “markets“). This tour de force will be executed with cunning precision under the guise of environmental stewardship and “internalising negative externalities through appropriate pricing.” Thus, ironically (if in appearances only), the greatest surge in the ultimate corporate capture of Earth’s final remaining resources is being led, and will be accomplished, by the very environmentalists and environmental groups that claim to oppose such corporate domination and capture.

      Beyond shelling out billions of (tax-exempt) dollars (i.e., investments) to those most accommodating in the non-profit industrial complex (via their foundations), the corporations need not lift a finger; the feat is being carried out by both the legitimate and the faux environmentalists in tandem with an unsuspecting public … a public with almost no comprehension of 1. the magnitude of our ecological crisis, 2. the root causes of the planetary crisis, or 3. the non-profit industrial complex as an instrument of hegemony. (…)”


      • Don Stewart says:

        Did you watch all of the video I linked to? Near the end the doctor describes the changes in his mind when his watch is giving him real time feedback on things like blood sugar.

        It is pretty clear that the ‘Information’ people are in charge of this fundamental change. It is not Pepsico and Coca Cola. The doctor thinks we are looking at a classic ‘disruptive technology’.

        In a recent talk, Mark Hyman describes the dilemma facing Pepsico. Several years ago they announced with some fanfare that there were going to become a ‘health food company’. They bought Quaker Oats, and, for a while, started quoting the growth statistics for their ‘healthy’ part of the business. But as Hyman described it, every day they are taking in tons of cash by selling junk food. What do they do? Could the Apple Watch put them out of business?

        So, yes, I agree that giving a few thousand dollars to the Ellen MacArthur Foundation is just a blip in their budget. I suspect that, at the Board level, they are trying to keep a toe in that water to see if they can spot any systemic threats to their business model, and likewise if they can spot any overwhelmingly attractive opportunities. I think some corporations are smart enough to see that the current system is stretched to the breaking point.

        Gail worries a great deal about downsizing. ‘People will be out of jobs. Governments will have to cut back. Etc.’ I think the vast majority of corporations simply don’t think that way anymore. Once upon a time, some corporations tried not to cut employment and wages in the face of stress. Now, I think the dominant paradigm is ‘disruptive change’…do it to others before they do it to you.

        As far as the recycling goes, what makes sense for Renault is to get good at it and then use political muscle to turn it into the law…disadvantaging other car companies who have not gotten good at it. A car company has no incentive to keep buying more and more raw materials. Unlike Henry Ford’s Ford Motor Company, they are not integrated all the way back to the iron ore mines.

        Just as an item of interest, we got the fall catalog from the Penland School yesterday. (A hundred year old craft school in the North Carolina mountains.) They are offering a residential session this fall on reclaiming metals from the dumps and turning it into useful and beautiful objects. Such activities were, of course, on of the key elements in the economy in one of Kunstler’s novels.

        Don Stewart

        • Stefeun says:

          now I watched a little bit of the IFM video.
          It really seemed to me that the revolution they’re talking about is in the frame/trend of the “Uberization” of the society and businesses: direct access by the customer (notice I don’t say “citizen”), and very light -if any- infrastructure, both allowed by highly automated information system.

          Of course, compared to the traditional solution, it can -and has to- bring some benefit to the end customer, even a potentially big one if coupled with scientific breakthrough as in case of medical diagnosis, but
          1) it’s corporate controlled all the way, and the relationship is between a big corporation, most of the time represented by some impersonal machine, and a powerless individual who moreover holds most of the responsibility in the transactions,
          2) the high degree of automation leads to a very low number of employees in these companies, which means the pattern is not scalable, or the policy-makers should urgently find alternative ways to provide some income to the people, so that they can be customers of those new businesses.

          I’d like to add that information is a form of energy, and processing it is quite energy-guzzling (as is recycling of metals, by the way).
          Excuse me if I didn’t get your point correctly, I think I just wanted to rant after corporate power.

          • Don Stewart says:

            Humans have had problems with power ever since God commanded Eve to obey Adam (at least according to the male chauvinist pig history I studied and ardently believe to be true), and Eve went off with that damned serpent anyway.

            Here’s what Capra and Luisi have to say on the subject (page 311):
            ‘The Origins of Power
            The essential role of power in social organization is linked to inevitable conflicts of interest. Because of our ability to affirm preferences and make choices accordingly, conflicts of interest will appear in any human community, and power is the means by which these conflicts are resolved’.

            They then discuss the kinds of power that John Kenneth Galbraith identified a couple of decades ago: coercive power, compensatory power (rewards); and conditional power (changing beliefs through persuasion or education). They add on the power of networks, which is currently highlighted by the phenomenon of social networks operating on the Internet. A sociologist named Castell ‘argues that the paramount form of power in the network society is the power to constitute networks–to connect individuals and institutions to these networks, or to exclude them, and to interconnect different networks.’

            Moises Naim has written a book titled The End of Power. It’s not really about the end of power as Capra and Luisi define the term, but it is about the end of coercive power and the power of traditional organizations. Bill Clinton contributes a blurb: ‘The End of Power will change the way you read the news, the way you think about politics, and the way you look at the world.’ The usual suspects (George Soros, Francis Fukuyams, Arianna Huffington, General Martin Dempsey, Jeff Immelt, and the Wall Street Journal) suggest reading it.

            I posted a Permaculture session in Costa Rica where the young woman advised first getting to understand the distribution of power and how it works. She thinks that consensus (trying to manage without power) is an exercise in futility.

            Capra and Luisi review the efforts of corporate management to ‘reinvent’ their organizations to take account of the new landscape, but find that ‘the overall track record seems to be very poor’. Which leads rather naturally to the Silicon Valley notion of disruptive change…do it to them before they do it to you.

            Consider the automobile. When it became possible for teenagers to cruise around in the US in automobiles and to lovingly tend their automobiles and when the majority of a couple’s first children were conceived in automobiles, a lot of things changed in the United States. Most people perceived the automobile as ‘new freedom’. Which accounts, I think, for the hostility of Republicans to all promotion of mass transit or bicycle lanes or sidewalks. Yet the teenagers were entirely dependent on the auto companies and the oil companies. In addition, but hidden from view, the teenagers were dependent on a society living on an abundance of surplus energy which could be applied very wastefully to do the work necessary if one wants to impregnate or become pregnant in an automobile. Compare to the hay loft, which was part of growing up in my antediluvian childhood. Part of the disruptive influence of the data in the Ellen MacArthur report is its identification of just how wasteful the auto-centric culture really is. Combined with the BW Hill analysis of just how wasteful the production side of oil is (waste in thermodynamic terms), the end result is devastating.

            So a ‘feeling of independence’ is not the same thing as ‘no dependence on corporations’, and it is certainly not consistent with the laws of thermodynamics.

            Similarly, the elephant in the room in terms of chronic disease is diet. Exercise and the lack thereof and the ingestion of toxins and dealing with stress are baby elephants in the room. The technology of sensing devices and the development of information technologies and the discoveries in science and the potential for near real time feedback may have the power to change behavior for billions of people. Out of 7 billion, let’s assume a billion would be willing to change, when confronted with the awful truth about their habits (just as Jeffry Bland changed his behavior when he participated in the pilot project). Now if the governments are all broke, and these disruptive changes are offered by the information companies independently of the medical establishment, what do you think the governments will do? My guess is that they will cut the medical establishment loose to sink into the ooze.

            This raises the same old problems that Gail always talks about: all those medical personnel may be doing useless things, but they are at least employed! True enough, but if I read the thermodynamic tea leaves correctly, that model simply can’t survive. Some clever financial engineering might kick the debt can down the road, but thermodynamic problems can’t be kicked very far.

            Consequently, as a society we have little choice but to move forward with efforts which reduce the amount of work which is required to sustain us. If that means that 6 billion will die prematurely from chronic diseases which we can no longer afford to treat and which they are unwilling to address with lifestyle changes…’nobody ever said life was fair’ (John F. Kennedy).

            This stuff is interesting to me right now because in September I am participating in a ‘local economy’ meeting. I am thinking that the ‘local economy’ needs to operate without debt and with a big reduction in work and even more emphasis on information and feedback as a means to reduce work.

            Don Stewart

        • Reclaiming metals from the dump and changing it into useful objects takes energy, too, unfortunately. Perhaps metal shears can be used for some applications, but heat is likely to be a problem.

          • Don Stewart says:

            If you are looking for ways that humans might survive with zero energy, you can forget it. Nothing that lives can survive without energy and the ability to do work.

            The relevant question is ‘how can humans survive with a lot less fossil fuel energy and renewed interest in solar energy?’ The Penland School was one of the institutions which began to promote traditional blacksmithing about 2 decades ago. From a dying art form, blacksmithing is now a vibrant art and also business model. Blacksmithing, as taught at Penland, is dependent on wood.

            Here is the description of the course I referred to:
            ‘This class will focus on mining materials from the scrap heap, second-hand shops, and other sources. We’ll study and solve the technical challenges that come with each material and the concepts that are evoked when we work with found objects. How is it different to work with materials that have a history? Each student will explore the ideas conveyed by the objects, images, and materials they are drawn to, and how those ideas can be incorporated into their work, which may be jewelry, sculpture, or functional objects. We’ll cover sawing, many soldering techniques, cold connections, forging, raising, sheet fabrication, and more.’

            I’m not a metals artist, but I expect that any heat will be supplied by wood, and that quite a bit of cold working will be involved. Just as Will Bonsall cold-forged a new part for his antique wheelhoe.

            Don Stewart

          • Fast Eddy says:

            Tough to be a blacksmith when there are no trees to heat the forge….

            Deforestation was already a problem in Europe hundreds of years ago when there were not a lot of people (and they were starting with massive forests… which have not been replanted)


      • Interesting point! Commodifying and privatizing existing resources is not a solution at all.

      • alturium says:

        Stefeun! Awesome…makes my comment of “scam” make me look like I’m using a pea-shooter! 🙂

  30. Don Stewart says:

    Relative to earlier discussion on social cultures.

    Here is an interesting talk from a relatively young woman from Costa Rica:

    Few points to note:
    *The audience all agrees that governments are corrupt
    *Young woman notes the dysfunctional families which have emerged in Costa Rica
    *Difficulties in establishing a culture from scratch
    *Rigid nature of many traditional cultures

    Don Stewart

    • MG says:

      Dear Don Stewart,

      the implosion of the system puts the state into hands of mafia groups, i.e. certain clans that parasite on others. They serve the majority of the population with the low intellectual levels to rob the minority that still has some assets, while they get their share. This is hard to prevent when the majority of the population believes in various conspiracies and views the rich as those who are responsible for its poverty…

      They do not understand that the wealth is the result of energy flows organized and led by the persons with higher intellectual skills. When they destroy these leading persons and the corresonding energy networks and flows, they are often more poor than before.

  31. Demand has to be destroyed first so the world could move into this stage.


    That’s how the world is heading to.

    Not too many people will get to enjoy all the goodies – however that will save the world’s resources for the bigger and better things.

  32. Fast Eddy says:

    ECB To Keep Greece On Hold Until Wednesday When Balyasny Sees Rioting Begin

    What was news is his estimation of what happens in the next few days: “We now have another 48 hours of calm before things really start happening”, and the punchline: “situation could then break down as banks stay closed, ATMs will run out of cash Tuesday or Wednesday, uncertainty grows and rioting possible.”


    This is truly fascinating — we may get a glimpse into what a total global collapse looks like

    I wonder if OOTF will completely cut the Greeks off — no oil — no medical supplies — no spare parts for the grid — no coal to fire up the power plants —- no food imports…. no fertilizers or pesticides…. From modern functioning civilization to _____ —- almost over night!

    Yes of course this glimpse would be at the expense of millions of Greeks — but before anyone gets to upset about that — remember — what happens in Greece .. ain’t gonna stay in Greece…

    You may get a look at your future over the next week or so….

    And for those who think collapse will be an adventure — I see that the weather forecast for Santorini is all sun and high 20’s for the next week —- why not jump a plane and enjoy an adventure vacation — in the failing state of Greece.

    • “I wonder if OOTF will completely cut the Greeks off — no oil — no medical supplies — no spare parts for the grid — no coal to fire up the power plants —- no food imports…. no fertilizers or pesticides…. From modern functioning civilization to _____ —- almost over night!”

      If they do, Russia / China will probably aid them. We’re going to start seeing what it is like to be on the losing side of The Great Game.

      • Fast Eddy says:

        They may try — however OOTF still runs the world — and if they want to put Greece on the rack to demonstrate to other wavering EU nations…. then I suspect the Russians and Chinese will sit back and watch the Greeks fry….

        Because I very much doubt NATO would allow supply ships or aircraft to land in Greece with AID…

        We won’t get WW3 over Greece…

        • Stefeun says:

          I agree Eddy,
          they may let them die*, but they won’t let them go.

          *: that’s a bit what they’re doing right now, as they didn’t release the payment systems. Greek banks are still closed, until -at least- tomorrow Wednesday. That’s terrible in a country that imports 80%. Sounds like a punishment for not having strictly walked the line. And a warning for Spain & the others.
          There’s a rumor about a German banker who’d have said: “We’re torturing the Greeks so that the Italians can hear them scream out in pain”…

          • xabier says:


            Italy, certainly.

            But even more so, Spain: the anti-austerity sector (new and old radical left, old liberal/radical nationalists) made fantastic gains in the recent regional elections, holding the balance of power in many places, and the conservative ex-Francoist ruling party (and their socialist associates who also support EU austerity) are very apprehensive about national elections not long from now.

            They need a narrative that says Syriza screwed up Greece even more than was necessary, so don’t vote for radicals or your pension and medical care will disappear.

            An important factor in these countries is the crucial role of pensions in supporting families, above all with such excruciatingly high youth unemployment: and if the young find jobs, they are mostly very poorly paid and are still in need of some support from families.

            Until now, Spanish pensions have been remarkably protected, but everyone fears Greek-style cuts.

            • Stefeun says:

              that was my impression too, and I found this March 2009 paper (with seemingly 2007 figures) that thus describes the situation right after the 2008 GFC.

              “Our results also demonstrate that country-specific transfer patterns follow the typology of welfare regimes. Transfers from parents to children are less frequent but more intense in the Southern European countries than in the Nordic ones, with the Continental European countries being somewhere in between the two.”

              One can bet that, after 6 years of hard austerity policies in southern countries, the importance of intergenerational support has increased a lot.

            • Don Stewart says:

              Stefeun and Xabier
              Zero Hedge published a map of Europe showing the percentages of children living with their parents. It varied from 5 percent or less in Scandanavia to more than 50 percent in some places in southern Europe.

              Don Stewart
              If you are interested, I imagine a search will locate it.

            • I presume you are talking about young adult children living with their parents. The percentage is up a lot here as well. Lack of jobs/energy leads to more living with parents.

          • doomphd says:

            They learned that trick from the Roman Dictator Sulla. Very powerful psychological tool.


      • Interesting point! Of course, if the wheels start coming off in China, and Russia has problems too, then it is not clear how things come out.

  33. Fast Eddy says:

    Peak Desperation: China Bans Selling Of Stocks By Pension Funds

    What do you do when two policy rate cuts, $19 billion in committed support from a hastily contrived broker consortium, and a promise of central bank funding for the expansion of margin lending all fail to quell extreme volatility in a collapsing equity market?

    Well, you can simply ban selling, which is apparently the next step for China.

    According to Caijing, the country’s national social security fund is now forbidden from selling (but is welcome to buy). Here’s more, via Caijing (Google translated):

    Social Security informed the public fund social security portfolio not only buy sell stock

    “Financial” reporter learned that the Social Security Council on Monday (July 6) Call each raised funds, social security portfolio is not allowed to sell their holdings of stock.

    Sources said that Social Security Council has just informed all social security portfolio can only buy stocks can not sell the stock; and it is not defined as the net selling, but completely unable to sell the stock.

    And a bit more from FT:

    Financial magazine Caijing reported on Monday that the National Social Security Fund had told its external fund managers they could buy stocks but were not permitted to sell them.

    Central Huijin, a unit of China’s sovereign wealth fund, also said on Sunday it was supporting the market by buying blue-chip exchange traded funds.


    Well it’s good to know there was such a simple solution

    Head of the PBOC to 6 year old son: Son – we have a little problem — the stock market is imploding….

    Son: oh papa that sounds like a bad thing

    Father: yes it is son — everyone is selling all their stocks and we are not going to be able to eat if this continues

    Son: but papa why don’t you just stop them from selling the stocks

    Father: damn it son — that is a brilliant idea!!!

  34. Don Stewart says:

    Dear Gail and Finite Worlders
    If you have followed George Mobus’ sad assessment of university life today, you may be interested in this short quote from an article in today’s Resilience.org:


    ‘The truth is that the university is a brothel, where knowledge and technology are prostituted.’

    Also, I have referred to Capra and Luisi many times recently, mostly because I have been working my way through the big textbook and find a lot of it to be provocatively relevant to the topics discussed here. You might wonder what George Mobus thinks of it, and the answer would be:

    ‘Fritjof Capra and Pier Luigi Luisi (2014), The Systems View of Life: A Unifying Vision, Cambridge University Press. I highly recommend it – after, of course, you read my book!!!’

    Don Stewart

  35. Daniel Hood says:

    Fast Eddy, just observing two previous pages alone out of the 1,000 or so total comments, your on about 40 posts. It’s therefore plausible you account for nearly 10% of the total comments section. That’s some going, 100 out of 1,000 comments.

    Let’s focus on Gail’s analysis, she’s taken the time out to do the work for the public good, but we should also allow others to share thoughts without it entering into a zero-sum debate, war of attrition.

    Just the number of posts you make is enough to frighten people away, I think you’ve even said that’s your stated aim. As for renewables, it may very well prove to be anything but a panacea in the long run, but it’s better than nothing. I’m sure we’ve debated this before. The alternative is a much faster, decline than would otherwise be the case.

    Take your foot off the pedal a little and allow others some breathing space.

    As for the financial system, peak debt, it’s clear Greece is where the world is heading. All eyes on Greece as the 1st advanced, supposedly developed ecomomy and how they pull this houdini off over the next week. I honestly admit I don’t have a clue as to what’s about to happen.

    It’s official, I’m lost!

    • B9K9 says:

      In many ways, Paul serves as a pseudo-guest blogger hosted by Gail. He’s one of the few who gets the entire big picture and spends time & effort explaining – with citations – why the game is over. Where we differ is whether the system blows up and we move immediately to internecine warfare, or whether the PTB can artfully manage a relatively soft landing to a future neo-feudalism.

      If people cannot handle the truth, or feel intimidated by the logic, does this necessarily lead to a decline in readership? I think the answer is no; rather, I would think Gail is enjoying increased page views expressly because the amount of information and nature of discussion.

      What people really have to deal with is moving beyond the bargaining stage, try & skip the anger (at the system, etc – see Don’s link to Monbiot below*), and reconcile oneself with depression before waking up and seeing reality for what it is. I know it’s difficult to shake off a lifetime of brainwashing, but once you realize the entire system is one, huge predatory arena, then it becomes easy to see why a hoax like self-government was erected, and why so-called political leaders have nothing but the most visceral contempt for the great mass of men.

      * We can add people like Terence McKenna to this list, who has expressed “alienation” by forgoing the game and standing outside as observer & critic. Essentially you have two options once you figure it out: by like Terence or be like Hillary, et al. If justice & morality are simply artificially constructs built to assuage those with no stomach, then what is the virtue they are nothing more than belief functions no different that religion?

    • Fast Eddy says:

      I thought I was focusing on Gail’s work… while others ignore here work and spew drivel…. most of what I am posting is a rehash of things that I have learned from previous articles and from research I have done on my own (most of which lines up lock step with Gail’s conclusions)

      “As for renewables, it may very well prove to be anything but a panacea in the long run, but it’s better than nothing. I’m sure we’ve debated this before. The alternative is a much faster, decline than would otherwise be the case.

      I will assume you have missed earlier commentary on this …. but I will repeat again.

      Renewables do not slow collapse — they accelerate the decline … take for instance a solar panel … it does not grow on a tree … rather it is manufactured using a great deal of coal and oil … in fact the amount of energy that goes into one of these things is roughly the same as what you get out over the life of it….

      So let’s say you get 20 years of energy out of the panel…. you have to use up that energy up front in the manufacturing of it … call that a 100% front end load…

      A solar panel is like an inefficient battery … (I’d take a container load of batteries over a solar panel any day — because they work rain or shine…)

      I trust you can recognize how this accelerates the depletion of fossil fuels?

      You could take the pile of coal that would be burned in a short period of time to smelt the ores that go into make the solar panel… or you could shovel it in slowly to a coal fired plant using it up over a 20 year period to generate electricity…

      If we want to buy a little more time renewable energy projects should all be shuttered immediately.

      • You obviously do not understand Gail’s articles. We need demand for coal and oil, to keep the price up. People “wasting” coal by buying solar panels, helps keep the price up, so producers can produce. If we don’t buy the solar panels, the coal stays in the ground forever and the global financial system collapses sooner.

        Of course, if you are worried about AGW, then not burning the coal is the better option.

        As for the solar panels, I have linked Gail’s article multiple times which clearly cites research showing that a Solar PV system returns around 7:1 EROEI over its lifetime. It is only if you add batteries that the EROEI goes below 1.

        Even if a Solar PV system returns 1:2 EROEI, it is still better for those of us in the West to get one, since we cannot burn coal. I cannot buy coal and use it to heat or cool my house or power anything. It is verboten. I can trade digits on a ledger to a Chinese company, and they can burn coal and give me the solar panel.

        How come all of a sudden you are saying that the electric grid can last 20 years? You now believe that the financial system will crash, but oil will still power mining equipment to dig up coal to burn in a power plant to deliver electricity to your house for the next 20+ years? But somehow the spent fuel ponds will not be taken care of, but the grid stays up?

        • I have absolutely no use for EROEI calculations, especially when used in the way you are using them. I expect that we, in fact, need energy resources with an EROEI of 50 and above to run our economy. All of the nonsense about using existing resources to create devices that won’t power the grid very long is just plain silliness. At best these devices might power an individual person’s homestead, but then it is sort of like a squirrel trying to hide acorns. Here, the homeowner is trying to store up coal power for his or her individual use. Subsidizing this effort seems crazy to me. It does pump up coal use, and contribute to higher coal prices, true, but it seems like there would be better uses for our money–ones that don’t ramp up so much debt in the process, for example.

          • ” but it seems like there would be better uses for our money–ones that don’t ramp up so much debt in the process, for example.”

            Isn’t growth in total outstanding debt required to maintain the current financial system? Isn’t buying non-grid tied, battery-less solar PV the rational thing for an individual to do, if that person is confident the financial system and grid are going to inevitably collapse?

            Using the solar PV returns 7 times as much energy over its lifetime as was consumed in oil and coal making it – how is that not a useful thing to know, to make sure an actual net gain is being achieved?

            For many reasons you have posted in several articles, the system will collapse no matter what any of us do. What actions can / should a person take, if they are confident this is going to occur? Or is this entire site supposed to be devoid of actionable information? Is it purely intellectual exercise?

            • doomphd says:

              “Using the solar PV returns 7 times as much energy over its lifetime as was consumed in oil and coal making it – how is that not a useful thing to know, to make sure an actual net gain is being achieved?”

              This 7X return does not jive with a 100% energy return over a 20-year solar panel lifetime quoted by FE and also commonly stated for PV . Do you have a reference or link for the 7X return? Doesn’t this also depend upon panel efficiency?

              Also, you are taking FE too literally in your reply above. He was using a hypothetical to prove his point and I’m sure he still stands by his fast financial collapse scenario.

            • Fast Eddy says:

              Matthew — 7x? Can you point to the link on ww.koombaya.com or http://www.greenfairyworld.com that you are referencing for that.

              Because what I am seeing is that solar panels just recently started to return slightly more energy than they use http://news.stanford.edu/news/2013/april/pv-net-energy-040213.html

              Keep in mind of course that this slight return is only realized when you don’t involve batteries to store the energy — and you kinda need batteries if you want your gadgets to work when the sun isn’t shining….

              Of course the poster children that the Green Groupies keep hidden in the closet with the gimp are:

              The German Solar Disaster: 21 Billion Euros Burned

              Spain’s disastrous attempt to replace fossil fuels with Solar Photovoltaics

              Oh but… but … but… if… if … if….

              No buts – no ifs… solar has been tried on a massive scale … and failed horribly ….

            • https://gailtheactuary.files.wordpress.com/2014/11/solar-pv-eroei-graham-palmer.png

              The Stanford article you posted says that world solar PV energy produced is now probably greater than all of the energy being used to manufacture new panels. So, if we treat all energy as fully fungible, that means we can continue making solar panels without any net drain on available world energy. That is completely different from the EROEI on a particular solar PV setup.

              Of course, utilities will lose money with net metering and other schemes. Of course, we already know that solar power, especially if made dispatchable, costs much more than burning coal or natural gas or hydro-electric.

              Other than a few Utopians, there are very very few posters talking about continuing BAU. Maybe Pete EV or whatever his name is; otherwise, we agree that the current financial system will collapse, and the system cannot afford the higher price for solar and wind.

              The terrifying thing is that nuclear power was so badly mispriced, and now countries may not have the resources to properly decommission them.

            • From: Eight Pitfalls in Evaluating Green Energy Solutions


              Actually shows 9.4:1 and 1.3:1, not the 7 and sub 1:1 I misquoted from memory.

              FE says we should save the coal and not buy solar PV, but he has also said he is considering buying solar PV for his own irrigation systems. He says it would be better to save the coal for power plants, but also says the grid is going down. He says using coal will bring the system down faster, but Gail’s articles seem to be saying that declining demand for commodities is what is bringing the system down; therefore, consuming more commodities seems like it would (ever so incrementally) delay collapse.

            • Fast Eddy says:

              Gail has indicated on numerous occasions … that she is taking no action whatsoever…. I assume because she believes that any action is likely to be futile…

              I share those sentiments…. I’ve my small valley farm with a shed full of tools… the water guys are just now pulling in to install 2 30,000 litre tanks up the hill to hook up to the spring + a ram that is going into the stream … I’ve got months of canned and dry food stored… loads of firewood… a wet back stove for hot water and to cook on… and so on…

              But who am I kidding… this is putting a band-aid on a chopped off arm… and I am living in a place with very few people most of whom are farmers…

              If China unravels today and BAU starts to unravel… I am screwed… we are all screwed….

              Resistance is futile…

            • “there is nothing to be done. I am doing nothing to prepare for this at all. I mean, I moved to New Zealand, bought a farm in the middle of nowhere, am stockpiling tools and investing in grid-less infrastructure, but nope not doing anything at all to prepare for collapse”.

              Kind of sounds like you did quite a lot, while telling everyone else not to do anything.

            • Fast Eddy says:

              You have misread what I have posted.

              I am not saying to do nothing (and I do not think Gail has ever said that either) — what I am saying is that no matter what you do it is almost certainly futile.

              What I am doing is almost certainly a waste of money and time — and I have said that many times on this forum.

              I am doing what I am doing partly because I enjoy the work involved — partly because doing something makes me feel better than doing nothing — and partly because I enjoy the adventure of living in a new place.

              I am beyond believing that there is any viable hedge against what is coming our way

              Although if you asked me 2 years ago if what I am doing is a good hedge I would have said yes — so you see — I am quite open changing my mind when there are facts involved.

            • alturium says:


              I’ve read solar PV is about 3 and with storage it will be… 1.2? EROEI for oil is measured at the well-head and has a boundary problem. I don’t know exactly how they calculate the numbers but to me the boundary problem includes answer such questions as: Do we include the oil the workers used to drive to work? Do we include the oil used to produce their trucks? Do we include the energy that went into making their healthcare? And how do separate the “cost” of the workers for just that oil well-head. Let’s go beyond the well-head and start including transportation costs (on roads that need maintenance) and into a product, which is used to make another product. Lots of dynamic feedback mechanisms. The point is that you need to have a different model to perform the type of analysis that would answer the statements you make, and it doesn’t exist.

              Also, the use of abundant coal and cheap labor in China is most-likely a one-time event! There will never be another event like it, where we both geographically co-located! Chinese wages will probably keep rising and the cheap easy-to-extract coal will run out soon (another 15-20 years to peak?).

              Also consider the cost of subsidization for putting solar on a home. And, even with that subsidy, it still takes up to 15 years to pay it off! (I am basing these numbers on memory and a conversation with a co-worker who did install solar). Something is wrong here, I don’t think we are going to achieve the economies of scale that they everybody is praying for.

              Just my two cents…

            • “the cheap easy-to-extract coal will run out soon (another 15-20 years to peak?)”
              “it still takes up to 15 years to pay it off!”

              What price do you think coal powered electricity will be, when production peaks? When you are pricing things out 15 and 30 years, you should not assume the coal powered electricity prices will remain the same over that whole time; what kind of volatility do you price in? If the grid goes down, and you can at least use the solar PV for your own use, how much value does that add?

          • Daniel Hood says:

            Gail, I can see a biblical global debt jubilee coming, or some sort of global Marshall plan. If the problem we face is peak debt rather than peak energy, the solution is there, it’s a man made problem that can be solved.

            Looks like the Iran deal is not that far away, which means a further collapse of oil prices as Iran aggressively fights for market share. China is slowing down now so who’s remains in business to prop this whole thing up?

            I bet right now without even looking chatter is increasing on the net under the terms “Global Debt Jubilee” “Global Debt Writedowns” & “Global Marshall Plan”

            Suspect that day is getting closer. If the majority agree to that, you can all pack up and go home, peak debt has been solved by a few global handshakes, global catastrophe averted for a few more decades as pressure is released.

            We have plenty of oil by the looks of things.

            • Fast Eddy says:

              We do have plenty of oil — but it is too expensive to extract:

              HOW HIGH OIL PRICES WILL PERMANENTLY CAP ECONOMIC GROWTH For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies. http://www.bloomberg.com/news/articles/2012-09-23/how-high-oil-prices-will-permanently-cap-economic-growth

              BUT WE NEED HIGH OIL PRICES: Marginal oil production costs are heading towards $100/barrel http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

              HIGH PRICED OIL DESTROYS GROWTH According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. http://www.iea.org/textbase/npsum/high_oil04sum.pdf

              I fail to see how a debt jubilee would help.

              We had a mini debt jubilee when Lehman went bankrupt (and make no mistake — a global debt jubilee = a mass bankruptcy) — and we saw what happened then… the global economy ground to a halt….

              This problem is not one of money or debt — it is one of energy — cheap to extract energy — and we are not finding anymore of that.

              THE PERFECT STORM (see p. 59 onwards)

              The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy.

              But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.


            • Daniel Hood says:

              So my answer to that, maintaining focus, applying logic to my central point is precisely (on two accounts).

              Firstly, it’s probably more “irrelevant” what it costs to extract. What is probably highly relevant, is what people can afford. Gail has peppered her analysis with this notion time and time again. (**They**) can’t afford right now because the world is saturated in debt, which is placing a giant deceleration effect on growth (**Govt, business and the consumer**) Given forces of globalization and the interconnectivity of so many systems, peak debt has now reached the point whereby it’s globally “systemic”.

              Secondly, you admit the problem is peak debt, (“We do have plenty of oil — but it is too expensive to extract”) therefore we’ll likely see some kind of agreed upon Debt Jubilee, Debt Writedowns, then Global Marshall Plan, or the alternative is extremism and/or WW3.

              WW3 will likely lead to nuclear war so given billions of people enjoy their lives it’s more than likely we’ll see unpredented debt writedowns, or some kind of debt jubilee.

              When nations feel threatened politically (was is a continuation of politics) then it will likely reach the point where creditors and debtors decide enough is enough.

              Greece being the proverbial bellwether this Thursday when EU leaders round table to discuss what happens next.

              You fail to see how a debt jubilee could help alliviate the pressure because you’re desperate for collapse in your mind to prove your points. I have to say anyone that wishes for collapse has serious issues to contend with.

              Money is debt and debt is money, the world is awash with debt, so the financial system needs a reset. Either with war or better still, without war.

              You’re contradicting yourself Paul, Fast Eddy, B52, however many other names you’ve posted under to get enforce your points.

            • Fast Eddy says:

              You’ve typed a lot and said basically nothing. i.e. you have failed to explain how a debt jubilee would be possible — particularly in light of the fact that the last micro debt jubilee involving Lehman Brothers nearly blew up the world.

              Money is not debt — debt is not money — rather they are representations of fossil fuel energy.

              Can you give me specifics of where I have contradicted myself — if you post something that I consider worthy of responding to I will address your comments.

            • ” particularly in light of the fact that the last micro debt jubilee involving Lehman Brothers nearly blew up the world.”

              You think the bailouts are what caused the financial system to freeze up? The system froze up because no one trusted anyone else to lend credit. The “debt jubilee” of QE and bailouts is what got the system going again.

              There is a huge difference between a creditor waving a debt, and a borrower suddenly defaulting and leaving the creditor out to dry. Only a government or central bank can eliminate a debt (under the current system) without being destroyed in the process.

            • Fast Eddy says:

              Matthew – thanks for restating my point.

              Again — when Lehman was NOT bailed out as in Lehman collapsed into bankruptcy …. that was an example of what a debt jubilee looks like — the parties that Lehman owed money to were left holding bags of air….

              And because the financial system is so complex and so intertwined — the result was the complete seizure of the global economy because nobody knew who was solvent.

              The central banks stepped in to guarantee all institutions — and that restarted BAU and we have limped along for 7 years now….

              Lehman was a single relatively small institution.

              There is no way there can be a general debt jubilee.

              BAU would end and it could not be restarted.

            • Daniel Hood says:

              “You’ve typed a lot and said basically nothing.”

              Not surprised in your head, I’m forced to sit and read your posts all day long so you’re rubbing off (**Paul, Fast Eddy, B52…???**)

              Firstly, let’s breakdown and translate your reply step by step and I’ll guide you on target.

              “You have failed to explain how a debt jubilee would be possible — particularly in light of the fact that the last micro debt jubilee involving Lehman Brothers nearly blew up the world.”

              Well done you’re learning to debate, this is your way of saying “great let’s open debate maybe I’ll actually learn something from a different point of view.” because I’m not really sure what you mean here. Most people would engage politely and ask…

              Unfortunately where you then regress back to your lowest common denominator, is the fact you then somehow manage to equate “Lehman Bros” which was a “disorderly bankruptcy” taking most of the world by complete and utter surprise. Let me help you (**Paul, Fast Eddy, B52…???**) that was NOTHING like an agreed upon, negotiated, ordered Global Debt Jubilee/Writedown, followed by an agreed upon, negotiated, ordered Global Marshall Plan. Quite how you pick LBros out of the ether region is beyond me. For micro-evidence of what a GDJ & GMP may look like, watch what happens to Greece over the next few days, particularly Thursday where EU leaders all gather, sit round their round table to discuss what needs to happen, likley with IMF backing. The EU project is political rather than economic for the war reason I mentioned previously, so let’s see how EU leaders both creditors and debtors deal with this. No one it seems wishes to leave the Euro given the political investment and negative consequences leaving may bring, Merkel doesn’t want it, Washington doesn’t want it, the Greeks don’t want it. Again, plucking Lehmans out of thin air shows your lack of knowledge here unfortunately.

              “Money is not debt — debt is not money — rather they are representations of fossil fuel energy.”

              This statement is complete twaddle designed to obfuscate, deflect and show complete disrespect to my central point. So once again I’ll embellish…money is debt and debt is money, and even more, money/debt is an indirect form of energy enabling/empowering/motivating others to do work. If you don’t get paid, you don’t do much work, that applies to most of us in the economy. MiD & DiM means, if everyone paid off their debts in society (Govt/Business/Private) there’d be no money in circulation, therefore money is actually debt and debt is actually money. This is finance 101, something Gail has mentioned over and over. We live pumped up on cheap easy access debt (money) and cheap easy access energy. Aka the debt/carbon bubble. You’ve already admitted in your previous posts peak energy isn’t the problem, peak debt is, hence the reason why I said you’re all over the place.

              “Can you give me specifics of where I have contradicted myself — if you post something that I consider worthy of responding to I will address your comments”.

              I couldn’t care less whether you consider my response worthy of your comments.

              Now back to the NEED for an agreed upon Global Debt Jubilee, Global Marshall Plan, for more info before we discuss further read the following

              “Global Debt Is MORE THAN TWICE AS BIG As the Entire World Economy … What Does It Mean?” http://www.washingtonsblog.com/2015/03/debt.html

              As for both theory and practice, read here:


              I’m warning you, be nice, be civil and I’ll respond in kind as we explore this interesting stuff.

            • Fast Eddy says:

              Do you really believe that Lehman was not a thought through event?

              You are aware that banks were engaging knowingly in making loans that they themselves called ‘Liar Loans’ i.e. large loans to people with minimal incomes and bad credit histories.

              You are aware of what the term sub-prime loan means?

              The housing bubble was orchestrated just as the current bubbles are orchestrated… they are the toxic side-effects of trying to offset the impacts of expensive to extract energy.

              Letting Lehman go created the fear situation that allowed OOTF to do whatever it wanted without approval from the taxpayer.

              How exactly do you plan and prepare to allow the entire world — every country, every company, every person — to declare bankruptcy?

              You need to think that through — how many tens of millions of people collect pensions around the world? A debt jubilee means those obligations are wiped out — so what happens to these people — what do they eat — what impact does them having no income have on the global economy?

              It’s all fine to say we can plan this — as we know — a market economy is a very massive and complex thing — it does not respond well to central planning — rather it collapses.

              In any even the problem is not debt — it is not money.

              Those are simply representations of energy — nothing else. If they were anything but that then Ethiopia could buy a printing press and churn out money and they’d become a powerhouse.

              Debt does not matter — the US is many trillions in hock — that does not matter.

              The issue at hand is that the fundamental building block of BAU — which is not money – it is not gold …

              It is cheap oil.

              And as Gail has explained — we need increasing amounts of cheap oil to keep the system operating — and we most definitely are not finding any more cheap oil — production costs are approaching $100 per barrel.

              Even if it were possible to wipe the slate clean in terms of debt I fail to see how that addresses the core problem which is that we are out of cheap oil.

              Assuming you agree that cheap oil is the problem then over to you (and if you do not think the dearth of cheap oil is the core problem then you are on the wrong blog… and this debate is over… because I am long past believing this crisis is related to anything but the end of cheap oil)

            • Fast Eddy says:

              As for AEP… I am very familiar with his half-assed journalism which is peppered with phrases such as ‘the US recovery…’

              He mostly gets it and from time to time he does have some good insights — but because he is writing for an MSM outlet he has to do the bidding of the corporatocracy and OOTF — he is a presstitute regurgitating edicts from the Ministry of Truth… and he gets called out on that constantly in the comments section

              I have mostly stopped reading him because of this…

              If I want business news without the propaganda integrated… there is only one source … Zero Hedge (selectively) — what I like about Zero Hedge is they will take an MSM story — emphasize the components that are actually accurate — and then tear to pieces the parts that are spin…

              That’s pretty much what I am doing when I read any MSM —but because ZH has insiders ghost writing a lot of their stuff — I get broader/different perspectives and insights

            • Fast Eddy says:

              Daniel — I’ve just finished Gail’s latest article —

              This puts every financial journalist with all their training and all their research departments to shame :


              Gotta love the punchline: “Most people don’t understand that our world economy runs on cheap energy.”

  36. Fast Eddy says:

    Another comment re the China market:

    “After the market continued to fall despite myriad support measures, the government reached peak panic mode and must have worried that investors would not only lose confidence in the markets, but in the government itself,” he said.

    Needless to say … this is an extremely dangerous situation…. are we approaching a situation where confidence collapses completely…. and the only buyer is effectively the PBOC?

    This feels like a potential end game situation.

    • “This feels like a potential end game situation.”

      Or the government bails everyone out by buying up all their debts and stocks, and effectively nationalizes everything. This effectively returns them to communism, which the common people embrace, feeling that free markets are too volatile and unfair for the common Chinese person.

      • Artleads says:

        Having no more understanding than “the common Chinese person,” I too feel a sense of relief by the vision you pose.

      • Fast Eddy says:

        And the entire world collapses into a deflationary death spiral because China and its ghost cities have been the main driver of the commodity boom and global growth in the past 6 years.

        And we all live happily every after. Koombaya My Lord. Koombaya My Lord. Amen!

      • Artleads says:

        If the Chinese revert to communism, it will be because they see that as the best of the choices they have? I’m guessing they know better than outsiders what will keep their civilization from rapid implosion? I doubt that they’re too concerned about what happens to the rest of us.

        • Fast Eddy says:

          China will not be reverting to communism any more than the United States and EU will…. communism is simply capitalism light — it still relies on cheap energy.

          Think about what the central banks are doing here — they are printing money — loaning it out a basically zero interest — on the condition that it be used to drive the stock market higher…

          The more the peasants start to unload stocks — the more the central banks print in an effort to fight them…

          The central banks are basically the stock market now — without these policies the game is over.

          There is no longer any pretense — I don’t think many in finance believes these are anything but desperate measures (although many believe they are smart and will come out the other end smelling like roses)

          This will not result in communism — this will result in the total implosion of the global economy.

          If there were a Plan B that could give us a different result then where is it?

          All I see is more jet fuel being splashed onto the already towering inferno.

          There is no second act here — the central banks know it — and they are demonstrating that by their actions

          • “The central banks are basically the stock market now — without these policies the game is over.”
            “This will not result in communism — this will result in the total implosion of the global economy.”

            If the State, via its’ Central Bank, owns all of the publicly traded corporations’ equity and debt, how is that not communism?

            Of course the economy will shrink; the question is, will it outright collapse into chaos and everyone eating each other’s faces and leaving the spent fuel ponds to melt, or will it lead to authoritarian governments and much lower standards of living?

            • Artleads says:

              The US (and its satellites) present a picture of such hellish corruption, mindlessness and disarray, that I don’t see how it’s not leading to nuclear meltdown just the way it is.

  37. Fast Eddy says:

    We take a break from send in the clowns-ville to touch base with reality….

    Chinese stocks rose on Monday after Beijing unleashed an unprecedented series of support measures over the weekend to stave off the prospect of a full-blown crash that was threatening to destabilize the world’s second-biggest economy.

    In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.


    So the stock market should collapse …. but the PBOC won’t have it …. so they loan massive amounts of money to any entity on the one condition — the money be used to buy more stocks.

    I can smell desperation in the air…. it smells like burning flesh…..

    • This is a very worrisome situation.

      • richard says:

        We are nowhere near your prediction of $20 oil. Why worry?

        • Fast Eddy says:

          Perhaps because when China blows its top we go screaming past $20 oil to where there is no oil….because China triggers the end game…

          Another good article on this:


          This is really no different than what the Fed has been doing — they are printing trillions and handing it to companies who do the buying….

          In America there is still confidence that the Fed can prop the market up so big money follows the Fed money… ‘don’t fight the Fed’

          In China they are not buying in — so far — so the PBOC is having to take ever more desperate measures to send the message ‘do not short this market – do not sell this market — we will punish you’

          The fact that they are not allowing pension funds to sell stocks says to me the PBOC may be on the verge of losing control.

          When the final battle is lost and the Chinese stock market crashes — I suspect this would set up a global deflationary death spiral…

          That’s what you get when you pump trillions of dollars into creating a false economy built on ghost cities… you walk yourself so high up the cliff than when you fall off … the pieces are so shattered they cannot be put back together again.

    • Rodster says:

      One of these days none of their ideas will work.

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