We all know generally how today’s economy works:
Our economy is a networked system. I have illustrated it as being similar to a child’s building toy. Ever-larger structures can be built by adding more businesses and consumers, and by using resources of various kinds to produce an increasing quantity of goods and services.
There is no overall direction to the system, so the system is said to be “self-organizing.”
The economy operates within a finite world, so at some point, a problem of diminishing returns develops. In other words, it takes more and more effort (human labor and use of resources) to produce a given quantity of oil or food, or fresh water, or other desirable products. The problem of slowing economic growth is very closely related to the question: How can the limits we are reaching be expected to play out in a finite world? Many people imagine that we will “run out” of some necessary resource, such as oil, but I see the situation differently. Let me explain a few issues that may not be obvious.
1. Our economy is like a pump that works increasingly slowly over time, as diminishing returns and other adverse influences affect its operation. Eventually, it is likely to stop.
As nearly as I can tell, the way economic growth occurs (and stops taking place) is as summarized in Figure 3.
As long as (a) energy and other resources are cheap, (b) debt is readily available, and (c) “overhead” in the form of payments for government services, business overhead, and interest payments on debt are low, the pump can continue working as normal. As various parts of the pump “gum up,” the economic growth pump slows down. It is likely to eventually stop, once it becomes too difficult to repay debt with interest with the meager level of economic growth achieved.
Commodity prices are also likely to drop too low. This happens because the wages of workers drop so low that they cannot afford to buy expensive products such as cars and new homes. Growing purchases of products such as these are a big part of what keep the economic pump operating.
Let me explain some of the pieces of the problem that give rise to the slowing economic growth pump, and the difficulties it encounters as it slows down.
2. “Promises,” such as government pension programs for the elderly, and promises to repair existing roads, tend to get bigger and bigger over time.
We can understand how promises tend to grow by looking at an example I constructed:
Suppose a pension program begins in 2010 and gradually adds more retirees. Or suppose a road repair program starts out in 2010 with more roads gradually being added.
The payments made each calendar year, whether for the pensions or the road repairs, are the totals at the bottom of the column. These totals keep growing, even if each retiree gets the same amount each year, and even if each road costs the same amount to repair each year. Admittedly, using 100 for all amounts is unrealistic–this is done to keep the math simple–but regardless of what numbers are used, the sum of the payments each calendar year tends to rise.
If we look at US government expenditures as a percentage of wages, the pattern is as we might expect: government spending rises significantly faster than wages.
3. At least partly because of growing “promises,” it is very difficult for an economy to shrink in size without collapsing.
We can think of many kinds of promises in addition to pensions and road repairs. One such promise is the promise by banks that they will allow depositors to withdraw funds held on deposit in the bank. Another kind of promise is the promise of debtors to repay debt with interest. All of these promises tend to grow in total quantity over time, at least in part because population grows.
If an economy shrinks, all of these promises become very difficult to fulfill. This is the problem that Greece and other countries in financial difficulty are encountering. There is a need to reduce some program or to sell something so that the calendar year payments are not too high, relative to revenue for the year. These payments really represent a flow of goods and services to the individuals to whom the promises were made. “Printing money” does not really substitute for goods and services: pensioners expect that they will be able to buy food, medicine and housing with their pensions; those withdrawing money from a bank expect that the money will actually buy goods and services needed to live on.
If there is a major problem with “making good” on promises, it is difficult to have an economy. It is hard to operate an economy without functioning bank accounts. Even cutting off pensions or road repairs becomes a problem.
4. The over-arching problem as we reach diminishing returns is that workers become less and less efficient at producing desired end products.
When an economy starts hitting diminishing returns, we find that the economy produces goods less and less efficiently. It takes more worker-hours and more resources of various kinds (for example, fracking sand and deep sea drilling equipment) to produce a barrel of oil, causing the cost of producing a barrel of oil to rise. Usually this trend is expressed as a rising cost of oil production:
Looked at a different way, the number of barrels of oil produced per worker starts decreasing (Figure 7). It is as if the worker is becoming less efficient. His wages should be reduced, based on his new lack of productivity.
There are many types of diminishing returns. They tend to lead to a smaller quantity of end product per worker. For example, if the population of a country increases, but arable land stays the same, adding more and more farmers to a plot of arable land eventually leads to less food produced on average per farmer. (Some might say that each additional farmer adds less marginal production.) Similarly, mining ores of lower and lower concentration leads to a need to separate more and more waste material from the desired mineral, leading to less mineral production per worker.
As another example, if a community finds itself short of fresh water, it may need to begin using desalination to produce water, instead of simply using relatively inexpensive wells. The result is a steep rise in the cost of water produced, not too different from the steep rise in the cost of oil in Figure 6. Viewed in terms of the amount of fresh water produced by each worker, the return per worker falls, as happens in Figure 7.
If workers get paid for their work, the logical result of diminishing returns is that after a point, workers should get paid less, because what they are producing as an end product is diminishing in quantity. Workers may be making more intermediate products (such as desalination plants or fracking sand), but these are not the end products people want (such as fresh water, electricity, or oil).
In some sense, fighting pollution leads to another form of diminishing returns with respect to human labor. In this case, increasing human effort and other resources are used to produce pollution control equipment and to produce workarounds, such as alternative higher-priced fuels. Again, wages per worker are expected to decline. This happens because, on average, each worker produces less of the desired end product, such as electricity.
Admittedly, less pollution, such as less smog, is desired as well. However, if it is necessary to pay extra for this service, the effect is recessionary because workers must cut back on purchasing discretionary goods and services in order to have sufficient funds available to purchase the higher-priced electricity. Thus, fighting pollution using approaches that raise the price of end products is part of what slows the world’s economic growth pump.
5. When civilizations collapsed in the past, a major cause was diminishing returns leading to declining wages for non-elite workers.
We know how diminishing returns played out in a number of past civilizations based on the analysis conducted by Peter Turchin and Surgey Nefedov for their book Secular Cycles. They found that typically a period of rapid population growth took place after some change occurred that increased the total amount of food an economy could provide. Perhaps trees were cut down on a large plot of land, or irrigation was introduced, or a war led to the availability of land previously farmed by others. When the original small population encountered the newly available arable land, rapid growth became possible for a while–very often, for well over 100 years.
At some point, the carrying capacity of the land was reached. Then the familiar problem of diminishing returns on human labor occurred: adding more farmers to the plot of land didn’t increase food production proportionately. Instead, the arable land needed to be subdivided into smaller plots to accommodate more farmers. Or the new farmers could only be “assistants,” without ownership of land, and received much lower wages, or went to work for the church, again at low wages. The net result was that at least part of the workers started receiving much lower wages.
One contributing factor to collapses was the fact that required tax levels tended to grow over time. Some reasons for this growth in tax levels are described in Items (2) and (3) above. Furthermore, the pressure of growing population meant that groups needed access to more arable land–a problem that might be overcome by a larger army. Paying for such an army would require higher taxes. Joseph Tainter in The Collapse of Complex Societies writes about the problem of “growing complexity,” with rising population. This, too, might give rise to the need for more government services.
Raising taxes became a problem when wages for much of the population were stagnating or falling because of diminishing returns. If taxes were raised too much, low-paid workers found themselves unable to buy enough food. In their weakened condition, they tended to succumb to epidemics. If taxes couldn’t be raised enough, governments had different problems, such as not being able to support a large enough army to fend off attacks by neighboring armies.
6. The United States now has a problem with declining wages of non-elite workers, not too different from the problem experienced by civilizations that collapsed in the past.
Figure 8 shows that on an inflation-adjusted basis, US Median Family Income has been falling in recent years. In fact, the latest value is between the 1996 and 1997 value. In a sense, this represents diminishing returns on human labor, just as has occurred with agricultural civilizations that collapsed.
Wages have been falling to a much greater extent among young people in the United States. Figure 9 from a report by Dettling and Hsu in the Federal Reserve Bank of St. Louis Review shows that median wages have dropped dramatically since 1989, both for young people living with parents and for young people living independently. To make matters worse, the report also indicates that the share of young people living with parents has risen during the same period.
In some sense, the loss of efficiency of the economy (or diminishing returns) outlined in Item 4 is making its way through to wages. The wages of young people are especially affected.
7. Demand for goods and services comes from what workers can afford. If their wages are low, demand for goods of many kinds, including commodities, is likely to fall.
There are many rich people in the world, but most of their wealth sits around in bank accounts, or in ownership of shares of stock, or in ownership of land, or in other kinds of investments. They use only a small share of their wealth to buy food, cars, and homes. Their wealth has relatively little impact on commodity prices. In contrast, the many non-elite workers in the world tend to spend a much larger share of their incomes on food, homes, and cars. When non-elite workers cut back on major purchases, it is likely to affect total purchases of goods like homes and cars. Other related goods, such as gasoline, home heating fuel, and the building of new roads, are likely to be affected as well.
When the demand for finished goods falls, the demand for the commodities to produce these finished goods falls. Because of these issues, when the wages of non-elite workers fall, we should expect downward pressure on commodity prices. Commodity prices may fall back to a more affordable range, after they have spent several years at higher levels, as has happened recently.
There is a common belief that as we approach limits, the price of oil and other commodities will spike. I doubt that this can happen for any extended period. Instead, the low wages of non-elite workers will tend to hold commodity prices down. Because of this issue, we should expect predominately low oil prices ahead, despite the continuing pressure of rising costs of production because of diminishing returns.
The mismatch between the rising cost of commodity production and continued low commodity prices is likely to lead to a sharp drop in the supply of many types of commodities. Thus, the slowing operation of our economic growth “pump” is likely to lead to a situation where the production of commodities, including oil, falls because of low prices, not high prices.
8. What is needed to raise the productivity of workers is a rising quantity of energy to leverage human labor. Such energy supplies are affordable only if the price of energy products is very low.
The amount a person can produce reflects a combination of his own labor and the resource he has to work with. If energy products are available, they act like energy slaves. With their assistance, humans can do things that they could not do otherwise–move goods long distances, quickly; operate machines (including computers) that can help a worker do tasks better and more quickly; and communicate long distance by means of the telephone or Internet. While technology plays a major role in making energy products useful, the ultimate benefit comes from the energy products themselves.
We have been using a rising amount of energy products since our hunter-gatherer days (Figure 10). In fact, the use of energy products seems to distinguish humans from other animals.
Clearly, cheaper is better when it comes to the affordability of energy products since available money goes further. If gasoline costs $5 per gallon, a worker with $100 can buy 20 gallons. If gasoline costs $2 per gallon, a worker with $100 can buy 50 gallons.
In recent years, with the high prices of energy products, world growth in energy consumption has lagged. It should not be surprising that world economic growth seems to be lagging during the same period.
In fact, Figure 11 seems to indicate that changes in energy consumption precede changes in world economic growth, strongly suggesting that growth in energy consumption is instrumental in raising economic growth. The recent steep drop in energy consumption suggests that the world is approaching another major recession, but this has not yet been recognized in international data.
9. One way of describing our current problem is by saying that the economy cannot live with the high commodity prices we have been experiencing in recent years and is resetting to a lower level that is affordable. This reset is related to low net energy production.
If oil and other commodities could be produced more cheaply, they would be more affordable. We would not have the economic problems we have today. Energy use in Figure 11 could be rising more quickly, and that would help GDP grow faster. If GDP were growing faster, we would have more funds available for many purposes, including funding government programs, repaying debt with interest, and paying the wages of non-elite workers. We perhaps would not have the problem of falling wages of non-elite workers.
The current “fad” for solving our energy problem is to mandate the use of intermittent renewables, such as wind and solar PV. A major problem with this approach is that such renewables make the cost of electricity production rise even faster, exacerbating our problems, instead of making them better.
To make matters worse:
- The way our economy works, energy flows in a given year (not on a net present value basis) are what are important, because this is the way we use energy to make goods such as foods, metals, and homes. The energy flows of renewables are very much front ended. Thus, the disparity in energy use on an energy flow basis is likely to be greater than reflected in Figure 12.
- What we really need from energy products is the ability to stimulate the economy in a way that adds tax revenue. Either the energy products must produce high tax revenue directly, or they must indirectly produce high tax revenue by stimulating demand for new cheaper goods, produced with the new inexpensive form of energy. This is what I think of as “adding net energy”. Wind and solar PV clearly do the opposite. Thus, they behave like “energy sinks,” rather than as products that add net energy.
- Modern renewables that are connected to the grid can be expected to stop working when the grid stops working. This may not be too far in the future because we need oil to operate the trucks and helicopters that maintain the electric grid. If this problem were considered in the pricing of electricity from wind and solar PV, their required prices would be higher.
As I see it, one of the major roles of energy products is to support the growing overhead of our economy; this is what the discussion about the need for “net energy” is about. Thus, we need energy products that are cheap enough that they can be taxed heavily now, and still produce an adequate profit for those producing the energy products. If we find ourselves mostly with energy products that are producing cash flow losses for their producers, as seems to be the case today, this is an indication that we have a problem. We don’t have enough “net energy” to run our current economy.
10. Debt and other paper assets are likely to “have a problem” as the economic growth pump falters and stops.
Debt is absolutely essential to making an economy work because it allows businesses to “bring forward” future profits, so that they don’t have to accumulate a high level of savings prior to building a new factory or opening a new mine. Debt also allows potential buyers of expensive products such as homes, cars, and factories to pay for them on an affordable monthly payment plan. Because more buyers can afford finished goods with the use of debt, debt raises the demand for goods, and indirectly raises the prices of commodities. With these higher prices, a greater quantity of commodity extraction is encouraged.
At some point, it becomes very difficult to support the very large amount of debt outstanding. In part, this happens because of the large accumulated amount of debt. Falling inflation-adjusted wages of rank and file workers add to the problem. In such a situation, interest rates need to be kept very low, or it becomes impossible to repay debt with interest. Even with continued low rates, defaults can eventually be expected.
Once debt defaults begin, commodity prices are likely to drop even further. Such a drop is likely to lead to even more loan defaults, especially by commodity producers (such as oil companies) and commodity exporters. Prices of equities can be expected to drop as well, because the problems of the debt system will affect businesses of all kinds.
Once debtors start defaulting, it will become very difficult to keep financial institutions from collapsing. International trade is likely to become a problem because financial institutions are needed to provide debt-based financial guarantees for long-distance transactions.
Other Information on this Subject
I have written previously and talked about some of the issues raised in this post.
An academic article I wrote that is directly related is Oil Supply Limits and the Continuing Financial Crisis. It was published in the journal Energy in 2012. Scopus shows 30 articles citing this paper.
A series of talks and videos that I conducted in China are now available on this website. These are some links to my presentations:
1. Overview of Energy Modeling Problem
3 Overview of a Networked Economy
4 Economic Growth – Diminishing Returns
6. Competition and Resource Exhaustion
7. Twelve Principles of Energy and the Economy
Videos of these presentations are also available on my Presentations/Podcasts page.
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This one is especially for Gail and Paul in recognition of all of their exceptional works. Sweet leaf.
Not sure where this originated. Probably here!
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The oil industry is in dire straits…. (along with all commodity producers…)
More from the BBC article:
Yes but all those countries can pump oil for less then 25/barrel.
China’s economic slowdown has finally left its imprint on global stock markets. But the impact has been discernible in the oil market for many months and it has gone further in the last few days.
The reason: China is the world’s biggest importer of crude oil.
It took top spot in April this year and even before that was behind only the United Sates.
Slower economic growth in China means less demand for oil than there would otherwise have been.
Of course there are other factors behind the oil price collapse of the last year, some of them leading to abundant supplies. The rise of shale oil in the United States and Saudi Arabia’s unwillingness to respond by curbing its own output have also put pressure on the oil price.
But demand is an important element.
And just look at what the impact of all these factors has been.
China is also trying to put 500k electric vehicles on the road, they have wind energy and solar power.. I am not saying their economy hasn’t slowed down, but the cost equivalent (BOE–barrel of oil equivalent) of 42.5 dollar oil is electric at 2.5c/kwh which is what american wind farms are doing. That is using BTU as a conversion, which is really a screwy way to do it since it is based on heat, not work, but it is the accepted standard.
Thanks! A linked article http://www.ft.com/intl/cms/s/0/342b3a2e-f5a7-11e4-bc6d-00144feab7de.html?siteedition=intl#axzz3k2uMIIac talks more about the China passing the US in crude oil imports. It says that China’s imports are not expected to consistently surpass this of the US until the second half of 2015.
Of course, this probably depends on the continuation of recent trends, and these may change.
I saw FE invite rational debate on his individual theses and I then saw people queue up to impugn his personal virtue and to try to bully him by likening him to historical figures. Round one to FE by a default I should say.
FE is obviously right because he does not start off from moralistic fantasies or petty personal self-delusions, but from the world as it is and from man’s place within the world.
There seems to be a delusion among some people that they are “good” people if they favour co-operation over competition. They are not. As FE explained, co-operation is simply a competitive survival strategy in a finite world, nothing more. It does not make them a “saint” or “holy”, it is just one way of trying to survive and to procreate and to enjoy life, exactly the same as all competition.
All that is really happening is the evolution of the species through the struggle of the survival of the fittest, everything else is an illusion. That is all that has ever been happening and it is all that will ever happen. There is no good or evil, just different strategies. The strategies are not different in essense, only in their measure of success.
Co-operation never cancels out competition. Too much false “co-operation” or “charity” within a group just weakens it, it breeds a degenerate, weak, effeminate population that a stronger, healthier and more natural group will simply wipe away or enslave. Indeed the strong will co-operate in order to secure their own interest. The “barbarians” will co-operate to conquer. Militaries are the most disciplined, co-operative forces around. Co-operation implies hierarchy, status and rank, where everyone knows their place, the line of command, their job and the penalties if they fail to do it. Every successful business is structures in the same way.
Nietzsche speaks of the two moralities. The weak naturally want to “co-operate” and to have charity, because that favours their own survival chances (or so they think). When they speak of co-operation, they mean kindness and patience toward themselves, they mean safety in the peaceful herd. Thus certain sections of the lower-classes naturally want “socialism” and “co-operation” because that suits them. It is all code for weakening the moneyed and for getting their money off them. It is an aggressive strategy dressed up as “moral virtue”. A population that promotes those values weakens itself and eventually gets enslaved by more vigorous populations. It is a slave morality.
The other morality is not based on moralistic rubbish about good and evil, or saints and holiness. It is based on natural virtue, something real that advances one’s interests through one’s natural qualities, like intelligence, foresight, creativity, self-discipline, braveness, hardiness, even ruthlessness. To be healthy, clever, handsome, industrious, circumspect, courageous etc is good; to be dense, slow, lazy, undisciplined, ugly, weak and scared is bad. Because the one leads to survival and progress while the other just tries to impugn others, to weaken them and to sponge off them. That is what natural “virtue” really means; the moralistic nonsense about “virtue” is simply a falsification, an attempt to negate genuine virtue.
The naturally virtuous are naturally the masters of the naturally bad, of the “supernaturally virtuous” and they set them to work. Thus it is termed a master morality. (The lefties generally work for the conservatives, as long as they do what they are told while they are at work otherwise they get the shove.)
So what I see is a rebellion against Nature, a slave revolt that is posing itself as a “moral” critique of FE. FE was the only participant who even tried to rationally understand the world, to understand man, the different types of men and their place in the world. At bottom, it is not a “debate”, it is different sorts of men expressing themselves.
The slaves want the masters to stop being masters and to be slaves like them, to “co-operate”. The masters might express themselves but they have no interest in trying to turn slaves into masters. The slave is the master’s natural complement, an aspect of his own being. You cant have a boss without a worker. It is only natural that the masters should co-operate and organise in order to establish and to maintain that natural status quo.
The end of modern industrial civilization will bring these distinctions into clearer relief. Evolution works best when resources are scarce and people have to struggle, to organise and to compete in order to survive and to prosper. There is no time for moralistic fantasies when life is on the line.
This is music to Fast’s ears … a glorious symphony…. drowning out the sickening sounds of Joan Baez and the drum thumpers dancing about the fire eating organic granola….
“Evolution works best when …”
Evolution, as I understand it, only works with populations in isolation so that they can breed and compete to keep new mutations dominant. If there is too large of a pool of potential partners, any new adaptations will get watered down, so no new species will arise.
This will only happen if the world becomes pockets of civilization, separated by ice or radioactive wastelands or something.
People can choose selective breeding in lieu of natural selection, and in doing so, try to create a new species.
Alternatively, when energy is abundant, we can use technology instead of trying to rely on biological adaptation. That is, we can adapt our environment to us, instead of adapting to our environment.
Fast also lies. He has said on at least two occasions that he has been here for years. After noticing inconsistencies, I checked and, indeed, Paul from Bali showed up Nov-Dec 2013, check for yourself.
The best disinfo is 95+% accurate so you can be given a “friendly steer” (non sequitur) at appropriate moments – like Russia and China are just as bad as the USA SO IT IS NO BIG DEAL TO SCREW THEM OVER.
“We are essentially wild dogs — that need to be kept under control.”
So says Fast.
See what I mean?
” I checked and, indeed, Paul from Bali showed up Nov-Dec 2013, check for yourself.”
Did you check for previous nicknames? Going by writing style is probably a better way to go.
2013, 2014, 2015 = years — no?
Oh and BTW — if you were the person suggesting I was not in New Zealand… you will pleased to note this came in the email today:
1. Immigration New Zealand (INZ) has approved your application for New Zealand residence in
principle. A copy of the INZ letter of 22 August 2015 is enclosed.
2. Please accept our sincere congratulations on the approval.
etc etc etc…
New Zealand? Why bother, things will play out the same way there, including marauding gangs.
“New Zealand? Why bother, things will play out the same way there, including marauding gangs.”
Based on ocean and air currents, the radiation might get there last. Also, less gangs than many more densely populated places. Not a bad climate to live in without electricity, too.
If it weren’t for my wife’s resistance… I would have purchased a sail boat and a barge … filled that up with enough food and water to last as long as possible …. then — when things became hairy … jumped onto that and floated about waiting till the mass die off was finished….
Maybe because they are already at 38% overall renewables.
And they have plenty of sheep. err sheeples i think they call them in NZ. The are pretty easy to teach to eat grass and live sustainably.
No doubt there will be marauding gangs in NZ (I am reading up on Genghis Khan war lord strategies…)
However the south island does have very few people — a great many of whom are growing things…so it’s as good a place as any….
It’s also as good a place as any to spend one’s last days…. we are quite enjoying it down under down under…
Better skiing than Bali? Better wine than Bali? I wanted to be closer to Shania Twain?
I’ve got it all thought through and mapped out — on the back of a napkin….
I tend to agree with you. We have been through a special period of history–a period of time when energy availability is high. This kind of period favors cooperation above other approaches.
It is easy to think that cooperation is the only way. The successful approaches may be different when there are clearly too many people for resources.
“It is easy to think that cooperation is the only way. The successful approaches may be different when there are clearly too many people for resources.”
Cooperation is always the best way. If we can convince people to cooperate and depopulate themselves, it will be a lot better than having to compete with them for dwindling resources.
Most definitely … the age of fossil fuels has created abundance… ‘enough’ for a large portion of the population… which has meant we have been more cooperative (of course we have cooperated to kill, pillage and impoverish much of the world…. )
I’ve been reading a 3 part series on the history of the world and basically it was one big Game of Thrones — endless warfare — someone always trying to take you out….
And the methods were beyond brutal – blinding young children — boiling people in pots — torture limited only by the imaginations of men….
I reckon we behaved like this not because we were less civilized than what we currently are — rather we were reaching the limits of the earth’s carrying capacity…. farmland was scarce — most people were living in very harsh circumstances — famines were a constant….
Because most people fail to recognize that oil is responsible for ‘civilizing’ us (10 calories of oil in every calorie of food…) we tend to believe we are superior to those that came before us. That we are improving…. better…
Remove oil from the equation — which will tear down the green revolution and leave 7.3B people with a global famine ….
And we will see how superior we were to our ancestors…..
Off road trials for “electric highways” technology
From:Highways England and Andrew Jones MP First published:11 August 2015Part of:Road network and traffic
Off road trials of the technology needed to power electric and hybrid vehicles on England’s major roads are due to take place later this year.
World trade suffers biggest fall in 6 years
According to the FT article, the first quarter of 2015 trade has been revised to a 1.5% contraction, relative to the prior quarter. The volume of trade fell an additional 0.5% in the quarter ended June, making YTD figures terrible. The slowdown is attributed to halting recovery in Europe besides China’s problems.
The trouble is that it’s not inconceivable Trump could get elected. Farfetched, perhaps, but not out of the question. The USA is heading for a very rough patch of history — as those of you with your eyes on the stock indexes lately may suspect.
The country stands an excellent chance of waking up some morning soon to discover it is broke and broken. When that happens, all the anxiety and animus will be focused on looking for scapegoats, and they are likely to be the wrong ones. World leaders considered Hitler a clown in the early going, too, you know. But the Germans were wild about him. He pushed a lot of the right buttons under the circumstances.
Trump is worse than Hitler.
And the American people, alas, are now surely a worse lot of ignorant, raging, tattooed slobs than the German people were in 1933.
Be very afraid.
These ones as well on Trump;
And as I argue, at least three of the five largest iron ore producers will go bust. And “at least” one of the big four banks will either go bust, be nationalized, or bailed out before the end of 2017.
The mining sector is already in dire straits. In order for miners such as Fortescue to survive, they must continue to increase output to keep their extraction costs low; and the spot price of iron ore must not fall any further. This is not sustainable. Unfortunately, only a small handful of us over the last year or two were warning about this scenario taking place. And today it is.
That’s how you end up with a rapid collapse of the global economy….
Maybe that is what Australia gets for electing someone who said they wanted to focus the economy on coal. There is a big difference economical in the states between states that implemented renewables and the ones who didn’t. The ones who did are doing fairly well. The ones who didn’t are sitting towards the bottom of the pile.
It is amazing how we can have problems in so many sectors at once. The WSJ was reporting this morning that incomes of farmers are down 36% relative to a year ago. This is the lowest level in nine years. http://www.wsj.com/articles/u-s-farm-income-to-fall-to-lowest-level-in-nine-years-1440521337
What is also amazing is that the bankruptcies have not hit — nor the mass layoffs…..
I can see how the central banks can prop up the stock markets …. but I am not clear how entire industries are not completely collapsing…
Eye of the storm?
Buy this book FE. It’s only $12 It’s by Michael Hudson, “Killing the Host” all about parasites and their misdeeds. You can get it through this website;
Thanks – I am familiar with Hudson — if this is the same guy (professor in the US).
It sounds like yet another rant about how corrupt bankers wrecked the world… and that if we were to have chosen another path … the world would not be about to explode into famine and suffering….
I can read about that stuff all day and night long on Zero Hedge, Paul Craig Roberts, David Stockman etc… etc… etc….
The thing is…
I disagree with the premise (assuming I have the premise correct)
I do not believe there has every been choice in any of this —- Mr DNA has simply reacted to the hand of cards that were given to him….
In fact I believe the actions (medicines) taken by the central banks have allowed us to extend BAU by nearly a decade…by rights we should have imploded in 2008.
The problem with all the men listed above is that not a single one of them understand the disease — they are very good at identifying the symptoms and tonics …. but they are unable to see that the problem is that we are not finding any oil that can be cheaply extracted….
Of course if they were to accept that — they’d be far less critical of the bankers…. in fact I suspect they’d be cheering them on — hoping they are able to come up with additional innovative ways to keep the hamster running longer….
I haven’t finished reading it but as with all economic theories there are no plans in place to manage economies in deflation since expanding credit is so central to the current workings of the world’s economies.
But, besides that, it is a good explanation of how it came about, and, referring to your DNA observations, how it uses the innate DNA to do what humans can do . In that sense it is the law of the jungle.
So I recommend it!
I’m half way through listening to Tolstoy’s Resurrection — then have Pandora’s Seed tee’d up on Audible next… (on Gail’s recommendation)
Saving my hard copy library for post collapse — in the event I am still alive and looking for entertainment…
It takes a while for the bad financial results to flow through to financial statements. China was growing so fast that it was short of job applicants, especially with the 1 child family policy kicking in. So China hasn’t had job layoffs. Even in North Dakota, there was a lot delayed infrastructure work. The ND state tax revenues had been good, so they have ramped up hiring. Many workers could get jobs with the state, if not with the oil industry. So it is the eye of the storm, so to speak.
Believe it or not Eddy the general thinking in the Australian mining industry is that India is the next big thing ready to pick up the mantle as the worlds next big growth engine.
Can’t make this s… up.
If they get Thorium reactors working before everything falls apart, India has some of the largest and most accessible deposits as far as I know. If that happens, they have a good chance of having a growth bubble.
India is going to have a growth bubble whether they have thorium or not. They are going to put in 10GW of solar parks over the next 5 years, and they are electrifying parts of their country that had no electric. They are using a lot of distributed solar and microgrids along with traditional sources of power.
South America is also going to have a growth from solar, if this is any indication. Brazil is already short on power because of their growth, and the lack of rainfall to fill up their hydro reservoirs.
They sound like they are doing something similar to India with distributed generation and microgrids and solar to bring people electric. They might not be in quite as good of shape as India financially right now though.
The big fella is the central bank/plunge protection team — the little fella is the short seller….
The drift away from the political centre continues in Europe, although Podemus in Spain are down in polls following the Syriza debacle.
The latest poll shows that the previously fringe Sweden Democrats have gone from basically 0% in 2008 to now the leading party with 25%.
Sweden long had a reputation as the most liberal and tolerant country in Europe but they seem to have had enough.
The policy of the mainstream liberal governments will continue the same toward both left and right, they will just totally ignore them and continue on regardless.
Interesting times ahead in Europe when the fan hits? TPTB seem intent on making the situation as bad as it could possibly be.
Elections are meaningless — as we recently saw in Greece — the PTB will at best ignore political parties who oppose them (including any referenda they might introduce)…
As well they should because there are no solutions to the problems we face — and radical political parties with populist policies threaten to tip the game board over….
If the Greek people escalate matters — I have no doubt that the PTB will shoot them like dogs in the streets…
Because they are looking at the bigger picture… the Greeks may be suffering but if they do bust up the EU the financial system collapses and what the Greeks are experiencing now will look like heaven on earth compared to a post-collapse situation…
We are hanging by the fingernails of one hand from a massive cliff — the last thing we needs is for someone to stomp on that hand and send us to the rocks below…
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Plunge Protection in Action – with MSM support
“Fundamentals aren’t as bad as the headlines would suggest”
Whoever wrote that is either a total moron — or is busting a gut laughing and just waiting for the end of the month to pick up a pay cheque.
“Whoever wrote that is either a total moron”
I wouldn’t say moron. These people are in a position where they have to lie. It’s no different than calling our current global economic state, a depression since 2008. That’s why the repeated mantra of the Great Recession took hold. People don’t want to hear the truth and would panic if they knew we were in a depression.
Yes of course — the writer is busting a gut having pumped out those words… he doesn’t believe it but most readers will (thankfully)
This is how you get a very rapid collapse — as deflation grabs hold there will be mass layoffs across the globe — and the end will be at hand:
In July, 157,905 jobs were eliminated in Brazil, compared to the creation of 11,796 positions in July 2014, according to data from CAGED, Brazil’s employment register. Year-to-date, 547,738 job positions have been eliminated (versus the creation of 504,914 jobs in the same period of 2014). In seasonally adjusted terms, today’s print is compatible with 140,939 job eliminations, pretty close to the historical low of -154,355 in June (Figure 1).
Sector-wise, the industrial and retail sectors accumulate the largest job eliminations, which together sums up to 454k. The construction sector follows with a job destruction of 152k, and the only positive highlight is the agricultural sector, which created 99k formal jobs (Figure 2).
The magnitude of the deterioration of the labor market continues to surprise in Brazil. This week the unemployment rate rose by the fastest pace in the historical series, with the data showing that even more people are looking for job positions, however without finding them (see Brazil unemployment rate: Increased pace of deterioration).
The consequence of this is an even more prolonged recession, as disposable income falls and household consumption contracts. Coupled with business confidence indexes for August showing further drops to minimum-lows, this suggests that the worst in terms of growth is still ahead of us.
China down 7% …
Tokyo’s Nikkei 225 index was 1.7 percent higher and Hong Kong’s Hang Seng index was up 1.2 percent in morning trade.
And even with the dip, China’s stock market is still not at a 52-week low. Solely looking at the graph, it looks like it was significantly overvalued to begin with.
The DOW actually had a late sell off or else it would have only been a few hundred points off. It still isn’t panic button time unless you are over leveraged on your shorts.
Very deep and insightful… thanks for the tips!
And that means, in turn, that the chain of income multipliers which has inflated profits, wages and bonuses all over the world in the capital goods industries will now violently reverse direction. That not only means that the Chinese and Korean shipyards will soon be bankrupt and that Australia and Brazil are heading for depression, but also that the upstream waves will make a mockery of the US “de-coupling” myth peddled by Wall Street. CAT is as good a short as is China and the European luxury brands which have thrived on Beijing’s Red Ponzi.
So now comes the era of gluts, shrinking profits and a drastic deflation of the giant financial bubble that the world’s central banks have so foolishly generated. And this time they will be powerless to stop the carnage.
I wouldn’t take much notice of Mr Stockman’s stuff. He knows very little about how money works and seems quite comfy in that fetal position. You have to read the comments to see how many take him to task, but he perseveres.
Yes John… I’ll get my financial info from experts like you…. thanks for that
Just like you get you social philosophy, what is it called again? Social Darwinism, I believe.
Next time, Fast Eddy, just put those two words down instead.
Reminds me of another fellow in Germany who thought the same, look where he ended up.
This is not a philosophy at all.
As far as I am concerned Social Darwinism and all other philosophies are bullshit — they are much ado about nothing … they are verbal diarrhea … they are attempts to make what is actually a very simple issue — complicated….
My little bullet point essay is simply a series of fact-based observations of the human race.
Mr DNA runs the show — it really is that simple.
All these ivory tower philosophers can bend down and kiss Mr DNA’s ass … because unless they recognize that Mr DNA is all that matters then they are all completely wrong — every last one of them….
If you want to dispute any of it feel free. I am standing by….
Of course you will not because you cannot because I am 100% dead on the money with every single one of those points.
But feel free to have a got at any one of them …. like I said… I am standing by
“Of course you will not because you cannot because I am 100% dead on the money with every single one of those points.”
Not a good idea at all to reach a point in which one is 100% sure of situations wrought with multiple variables, Fast Eddy or should I call you by your previous moniker, Paul. By the way you seem to have changed. Originally you were an excited, humble, interesting poster I use to enjoy having exchanges with. Now you seem to have taken a baddest monkey in the forest attitude. It’s an illusion.
Got to say, I agree with most of what you say Fast Eddy (almost against my better self), but I have to agree with Stilgar and others that you’re perhaps a little too sure of yourself. Just not good form, if nothing else.
I stand by my assertion (which just recently became glaringly obvious — like I was shot by a diamond bullet) — everything — and I do mean everything — that each and every one of us does in our lives — is directed by one thing — our DNA.
Hypothesizing about morals … noble savages … and all that other crap that is spewed out on millions of wasted trees and labeled philosophy in all its grand verbosity ….. is utter clap trap.
Because it starts off with garbage in … and therefore it results in garbage out…. unless one starts on the premise that DNA is the driver then one is destined to reach conclusions that are most definitely false.
Like I said — if anyone disagrees with that little essay — rather than saying this is bad form… (or insulting me as some will) …. feel free to challenge the facts…
Jjust because most people do not like to think of humans as being driven by the same thing as a dog, or a goat, or a swine…. or bacteria… or a virus….
Just because most want to believe that humans are ‘superior’ — ‘moral’ —- ‘kind’ — or whatever bogus theories we have dreamed up about ourselves (in spite of facts that fly in the face of this nonsense like a gale force wind)…
Well that does not make it so….
You certainly make for good entertainment for the blog and just as good a foil for others here to balance their more rational arguments. It is always wise to be skeptical of people who purport to have 100% certitude.
Eddy, I agree with James and InAlaska here.
The Selfish Gene Theory is certainly very powerful and attractive, but it’s only one particular way of looking at things, and by no means any kind of representation of “The Whole Truth”.
For instance, one can also consider that the Selfish Gene has a Social Life, as explained in detail in this quite good article (I already linked to before):
By switching points of view or enlarging the frame, we can draw different conclusions from one same given situation, sometimes very different.
It looks like the expression of the genes depends a lot on its environment and conditions. Considering that the conditions ahead of us are more than likely to be harsh, I’m afraid we can’t expect the expression of the best part of our genes. In that I -mostly- agree with your views, unfortunately, but that doesn’t make up the only way of being.
(sorry if I’m sounding pompous, it’s not the goal)
I have addressed the ‘cooperation’ issue — but will do it again.
An individual has not a chance in hell when a large group arrives and attempts to pillage his farm — rape his wife and daughter — and steal his land.
That is why humans formed tribes — then nations.
We cooperate – we are social – because cooperation means Mr DNA is able to compete and survive
Strength in numbers. A very simple concept.
Also it is far easier to cooperate when there is enough to go around
> Put 50 dogs in a cage and don’t feed them for a week – then throw in 500 pounds of meat.
> Put 50 dogs in a cage and don’t feed them for a week – then throw in 5 pounds of meat
> Put 50 people in a cage and don’t feed them for a week – then order in 500 pizzas
> Put 50 people in a cage and don’t feed them for a week – then order in 5 pizzas
Of course, in order to maintain a nation one needs cooperation — without it the nation tears itself apart — weakens itself — and would be pillaged by other nations that have a higher degree of cooperation.
Mr DNA knows that. Therefore he generally seeks out cooperation.
Yet even within a nation the members are constantly attempting to pillage one another — that is why we have laws — that is why we have police — that is why we have prisons — that is also why we have religion and the 10 Commandments.
Revisiting the ‘enough’ theme — look at how the US is sinking into a pit of epic corruption at all levels — of militarized police — I would argue that rule of law goes out the door the moment there is no longer enough i.e. the pie begins to shrink….
The wonderful cooperative spirit (that allowed America to pillage the world – thus creating fertile ground for a wonderful cooperative spirit that was initially built upon pillaging the natives of America and taking their land and resources) quickly recedes….
And I guarantee you — when the American economy tears — that cooperative spirit will completely disappear and be replaced by extreme violence — because Mr DNA will recognize cooperation on a national scale is no longer to his benefit… it does not help him survive…
Cooperation will revert to being part of a localized armed gang (kinda like what we see in other failed states like Somalia, Libya, Afghanistan, Yemen, etc…)
We are essentially wild dogs — that need to be kept under control.
Of course the liberals in the audience will disagree with that …. because they believe that man is inherently good, different, better than a wild dog — because Jesus told them that… or they read it in some liberal philosophy book…
That is all bullshit.
Imagine what would happen in a country that no longer had any police — any courts — any prisons….
Yes I know — you cannot imagine that…. or if you can you believe that we’d just do the right thing — that the police exist just to eat donuts, drink coffee and hand our speeding tickets…
When in reality they are there to put us in prisons like dangerous animals — which we are — when we get out of hand.
You can tame a tiger too – you can also beat him if he breaks the rules …. but like a human he is still a vicious beast — capable of extreme violence.
As Joseph Conrad correctly observed in Heart of Darkness… a primitive savagery lies beneath the skin of every ‘civilized’ individual.
Again, I mostly agree with your vision of our present and near future situation,
but I do not subscribe to the Veneer Theory (ie that morality and kindness -and civilization- is just a thin veneer over an otherwise nasty, selfish and brutish nature).
OTOH, it does absolutely not mean that human being is “inherently good” (or superior or empowered by some god, or whatnot stupid narrative). See for example:
I don’t think that good/bad is the right method to look at that, things are never 100% black or white, and there’s plenty of room between those two extremes.
Even if sometimes the rapidly worsening conditions lead to an overwhelming expression of the immediate survival “skills”…
The law of selection justifies this incessant struggle, by allowing the survival of the fittest. Christianity is a rebellion against natural law, a protest against nature. Taken to its logical extreme, Christianity would mean the systematic cultivation of the human failure.”
– Norman Cameron and R.H. Stevens, trans., (Oxford) Hitler “Table Talks”
“The earth continues to go round, whether it’s the man who kills the tiger or the tiger who eats the man. The stronger asserts his will, it’s the law of nature. The world doesn’t change; its laws are eternal.”
– Norman Cameron and R.H. Stevens, trans., (Oxford, 1953)
Yes, we are barbarians. We want to be barbarians, it is an honored title to us. We shall rejuvenate the world. This world is near its end.”
– Rauschning, Hitler Speaks, p. 87
Watch what you think, Fast Eddy,
It goes without saying that the the bullet points from The Way the World Works have been expressed to some extent and in some form by others throughout history…. because there are few things that have not been thought of before…
Yes, indeed, mien Fuheur, repeat and rinse.
What a sensible fellow you are!;-)