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.

Conclusion

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

  1. 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.

  2. 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.

    http://www.truth-out.org/news/item/26112-an-economic-hit-man-speaks-out-john-perkins-on-how-greece-has-fallen-victim-to-economic-hit-men

    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.

  3. 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

  4. 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.

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

    • 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
      http://www.bbc.com/news/business-33425353

      • 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)

  5. 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.

    http://www.theburningplatform.com/2015/07/07/moron-madness/

  6. Fast Eddy says:

    http://qz.com/447630/chinas-plunging-stock-market-has-virtually-shut-down/

    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…

  7. 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?

  8. 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:
    https://functionalmedicine.org/What_is_Functional_Medicine/AboutFM/Genomics/July/?utm_source=Omics+Series+Launch+to+Actives&utm_campaign=7.7.15+Omics+Launch+to+Actives&utm_medium=email

    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

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