We all know generally how today’s economy works:
Figure 1
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.
Figure 2. Dome constructed using Leonardo Sticks
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.
Figure 3. Overview of our economic predicament
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:
Figure 4
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.
Figure 5
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:
Figure 6
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.
Figure 7. Wages per worker in units of oil produced, corresponding to amounts shown in Figure 6.
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.
Figure 8
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.
Figure 9
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.
Figure 10
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 $100 can buy 50 gallons.
In recent years, with the high prices of energy products, world growth in energy consumption has lagged. It should not be surprising that world economic growth seems to be lagging during the same period.
Figure 11. Three year average growth rate in world energy consumption and in GDP. World energy consumption based on BP Review of World Energy, 2015 data; real GDP from USDA in 2010$.
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.
Figure 12 by Euan Means. Installed capacity is in Watts (W) per capita.
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.
Japan’s economy shrinks again as ‘Abenomics’ stimulus called into question
World’s third largest economy stumbles back into contraction as consumer spending and exports suffer
http://www.telegraph.co.uk/finance/economics/11806927/Japans-economy-shrinks-again-as-Abenomics-stimulus-called-into-question.html
This time it’s Different:
BoJ Minutes: Japan’s Economic Recovery Still On Track
board believe that the country’s economic recovery continues on pace, minutes from the bank’s meeting on July 14 and 15 revealed on Wednesday.
At the meeting, the policy board decided to maintain its target of raising the monetary base at an annual pace of about JPY 80 trillion.
It also kept its benchmark lending rate on hold at 0.10 percent.
“Japan’s economy has continued to recover moderately. Overseas economies have been recovering, albeit with a lackluster performance still seen in part. In this situation, exports and industrial production have been picking up, albeit with some fluctuations,” the minutes said. Inflation is forecast to be about zero percent for the time being, due to the effects of the decline in energy prices. The inflation estimate for fiscal 2015 was lowered marginally to 0.7 percent from 0.8 percent. Likewise, the outlook for fiscal 2016 was trimmed to 1.9 percent from 2 percent.
It is amazing how people treat each country in isolation, as if Japan is the only country that has a shrinking economy and blaming it on Abenomics, instead of seeing that the entire world is shrinking. Cognitive Dissonance, maybe.
Japan’s shrinkage has been going on longer than almost anywhere else. It also has more government debt than almost anywhere else, relative to GDP. The rest of the world’s problems are more recent.
Or perhaps Japan was merely the canary in the coal mine?
Shanghai market plunging again – down 6%+ http://www.bloomberg.com/quote/SHCOMP:IND
This time it’s Different, I promise…really….and yes, Janet will RAISE interest rates!
China says it will stabilise stock market ‘for number of years’
China’s market regulator said it would continue to stabilise the stock market for “a number of years”.
It said the role of the state-backed China Securities Finance Corp to stabilise the market would not change.
However, it added that it would allow market forces to play a bigger role in setting stock prices.
The comments come after wild swings on the stock market earlier this month, which saw the main index slump 8.5% in one day.
“With market fluctuations gradually shifting to normal, from wild and abnormal, we should let the market exercise its function of self-adjustment,” the China Securities Regulatory Commission told a news conference in Beijing
It is hard to imagine how raising interest rates will help. Perhaps some of the impetus is belief that banks will fare better financially and there will be less investment in non-profitmaking enterprise. Clearly total investment will be down, and even the belief that banks will fare better is questionable–the debt default risk will rise.
The only purpose of raising interest rates by FED would be to bankrupt the rest of the world to keep US position as hegemon. There is $9 trillion international (non-US) debt. Even 2% will anihilate many corporations and consumers. It will kill employment, GDP figures and governments all over the world.
US will use this as a “last resort” tool in emergency scenarios IMHO.
The idea of raising interest rates seems crazy to me as well, but I am not sure how aware the FED is of what the adverse effects really would be. (They don’t understand how important QE was, either.) Instead, the decision makers tend to hear a lot from banks who think that an increase in interest rates will increase their profits. They believe it will also do away with ridiculous uses for debt, which have virtually no hope of ever making a profit.
I agree that Fed officials are intoxicated with “classical economics” paradigm. On the other hand I have no doubt there are intelligent people working there and they undrestand the mechanics of currency system globally. They are aware of world-wide deflation and devaluation contagion. This is 1930s repetition. What is probably missing in their analyses is the oil/energy problem we are facing and you Gail so wonderfully explain on your blog. I think they will use this option (raising interest rates) at some point. It won’t be pretty, though. Next stage of collapse for sure will be game over for peace and prosperity.
I am afraid you are right about the next stage of collapse being game over for peace and prosperity.
I agree as well. No economic theory addresses such issue and that includes MMT.
Or just plain game over…. the beast is going to kick over the table … rip up the cards… toss them in the fire… then bludgeon the 7.3B players…. roast them on spits… and feed them to the dogs…
We are getting very very close to the endgame — panic is in the air….
Where is Ben Bernanke to wave the magic wand again….
Here’s an entertaining and well written blog on Monetary Sovereignty which explains a great deal about our money mechanics;
http://mythfighter.com/2015/08/21/the-recession-is-coming-the-recession-is-coming-when-exactly/
Fast Eddy,
“Or just plain game over…. the beast is going to kick over the table … rip up the cards… toss them in the fire… then bludgeon the 7.3B players…. roast them on spits… and feed them to the dogs…”
I am going to save this little gem of yours (among others) and wave it in your face next year, when we are still sitting around jawing on this blog. You are way too alarmist. Chill out and get some perspective. Get outside and breathe the air. The collapse may be coming but get your head out of the Hollywood scriptbook for all of our sakes. Thanks.
Just finished planting 3 dozen fruit trees — and I was up on the ski fields Saturday and Sunday — so getting plenty of air — thanks…
At the moment I am watching the China stock market unravel — already off nearly 9% this morning — in spite of massive government intervention…
Like Fred Sanford used to say ‘this is the big one…’ And this could be it
Sure we may still be around yacking about this next year — but at some point it will bust — and when that happens — the result will be like nothing Hollywood writes could dream up….
When this tears it will be fast — there is no soft landing…
If China keeps tanking — and the European and US markets follow — we will be back in 2008 in literally a matter of days…
The central banks are out of bullets — there is nothing they can do to fend off a deflationary explosion….
Not so good. A person wonders what the index would do if the Chinese were not supporting stocks.
David Stockman’s Just Wrong, So Buy Stocks
This just in…Just for laughs
David Stockman’s Just Wrong, So Buy Stocks
“I think it’s pretty obvious the top is in.” So said David Stockman yesterday in an appearance on CNBC.
I am now more bullish than ever.
No, seriously, who listens to David Stockman anymore? Stockman, of course, was Ronald Reagan’s budget director until he was summarily fired for publically worrying about deficits. (Republicans, you see, are not really concerned with deficits.)
For a long time, Stockman went away and we didn’t hear from him. However, about four years ago he turned up again and started hitting all the media outlets, talking about the coming end of the world or, I guess you can say, end of America and its economy.
Stockman has been wrong about everything. He’s been wrong about interest rates and wrong about debt and wrong about so-called “money printing” and inflation and market crashes, and just wrong.
The link to the above
http://realmoney.thestreet.com/articles/08/07/2015/david-stockmans-just-wrong-so-buy-stocks
Your logic is lacking.
Logic? The author used pretzel logic
Kuntsler: http://kunstler.com/clusterfuck-nation/true-believers/
Doomsday clock for global market crash strikes one minute to midnight as central banks lose control
China currency devaluation signals endgame leaving equity markets free to collapse under the weight of impossible expectations
http://www.telegraph.co.uk/finance/11805523/Doomsday-clock-for-global-market-crash-strikes-one-minute-to-midnight-as-central-banks-lose-control.html
World shipping slump deepens as China retreats
Ports across the world suffer worst hit since the Lehman crisis as emerging markets wilt, but trade may not matter so much to global GDP any longer
http://www.telegraph.co.uk/finance/economics/11808488/World-shipping-slump-deepens-as-China-retreats.html
Gail
See this discussion about how long the current oil production system can continue to operate. Particularly, near the end, shortonoil quantifies how much additional debt the world would have to take on to keep the oil industry operating. But, given the fragility of the financial system, he thinks it unlikely.
http://peakoil.com/forums/the-oil-shock-model-simplified-t71085-20.html
Don Stewart
Extreme heat waves this summer in Central Europe:
http://spectator.sme.sk/c/20059397/heat-waves-create-records-in-slovakia.html
Slovakia may finish like California (in Slovak):
http://www.sme.sk/c/7968403/zmena-klimy-ohrozuje-aj-slovensko-moze-skoncit-ako-kalifornia.html?ref=trz
In Poland we have drought. Our biggest river, the Vistula, have reached the lowest water level since recordkeeping began in 18-th century.
John Doyle
Here, from Peak Oil News, is BW Hill’s advice to the worried. One other commenter lays out his homesteading adventures. BC talks about the general decline in the ability of the economy to generate real jobs. Hill comes back and says that a key prep is to have a shotgun…to fend off the wild dogs. I hadn’t really thought of that. Dogs will go feral as their masters starve. Probably good advice.
Don Stewart
I would think that the first thing is to understand what a deflationary depression entails. It is marked by a situation where prices decline, but incomes declines even faster. Therefore, debt becomes an ever tightening noose. First, and foremost is get the hell out of debt; it very well may kill you! If you have to sell your house to do it, sell it. If you have to sell your car, get rid of it. Make your moves now while you can, next year may very well be too late.
The timing of the collapse is very important. It is the primary reason we put the effort into developing the Model that we did. We are looking at up to a decade, which will be punctuated by one crisis after another. Prepare for it, and don’t be surprised when things begin to disappear. Your favorite beer may be off the self tomorrow; Scotch tape may be completely gone. There is no way of knowing in what order this will happen, but it will happen.
Make sure that your home can be turned into a factory. Many of the things that you now take for granted will have to be made by you. Food preparation, food storage, socks, a sweater, a rope, a new handle for your knife, and thousands of other things that you haven’t yet thought about. Your home will no longer be a status symbol of Middle American prosperity, so get used to it. It will become a fortress for your survival; a place to keep you alive when others are losing that battle.
Knowing what to expect, and then not collapsing when it arrives is essential. “Fore warned is to be fore armed”.
Survival Mom .com has plenty on that too.
Thanks Don!
Can kicking big time again, place your bets?
This article claims based on Potus and Kerry’s public pronoucements that the current Iran vs. the World deal might seriously derail the status of USD in global finance if not pushed through Congress shortly. So, this is a great opportunity for a little can kicking observation.. Not following in detail the forces at play inside Congress momentarily I doubt there will be majority to rock the boat by not signing onto it, but who knows..
http://www.zerohedge.com/news/2015-08-16/deal-or-war-doomed-dollar-really-behind-obamas-iran-warning
That is an interesting perspective about the potential loss of the US dollar as the world’s reserve currency, indirectly because of the unraveling of the agreement the Iran agreement. If it should happen, it would indeed be a problem. But a further drop in oil prices by itself would be a problem, as oil extraction will soon exceed storage capacity–made worse by adding Iran’s additional oil.
Fighting for the tourist dollar — UK relaxes visa requirements for Chinese…
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11803723/Spending-spree-by-Chinese-fails-to-lift-UK-high-street-gloom.html
According to Zero Hedge, currency problems continue in China and Japan is also in trouble, again. So the East is starting their week on the wrong foot.
Is that an invitation to join survival moms????
Can I ask them how they will rape-proof their daughters when the bad men show up at the gate demanding the organic veggies and more?
Easy Eddy, they will beat them over the head with their drumming sticks.
Survival Mom is one hell of a website and super tips to make it past the bottleneck. Also, gives us a gage on what others are doing and thinking. Great feedback, hope to be there soon myself.
Maybe you can tame down a bit and join in on what you are doing in NZ?
“With real median household income at 1989 levels, real unemployment north of 15%, a massive level of under-employment, young people unable to buy a home – saddled with $1 trillion of student loan debt, middle aged parents struggling to take care of their aging parents and struggling children, and Boomers who never saved for their retirement, the mood of the country is decidedly dark and getting darker by the day. The rise of Trump and Sanders in the polls is an indication of this dissatisfaction with the existing social order.”
That was pasted from an article on Zero hedge. The reason it caught my eye is because of the last sentence, which is exactly what I’ve been thinking about lately, i.e. the dramatic polarization of voters to radical positions. It’s a strong indication of their desperate state of mind to seek out unusual political positions with the idea it will somehow yank the country back into profitable coherence. But as we all know here they can vote for whomever they want and it won’t make a hell of beans difference to the net energy decline that is occurring, down shifting the world economy into more desperate fiscal states. This is how Hitler and Mussolini got elected. Now people are liking a fascist like Trump or a more pure socialist like Sanders. How different is Trump from Mussolini in his mannerisms or Sanders from McGovern (who ran against Nixon). McGovern got one state but Sanders could win the whole shebang in this day and age of diminishing returns.
We are on the cusp of monumental changes politically and environmentally. Like the quoted section at top of this post says, enjoy eating out while you can.
I do not think Sanders and Trump are different. They are both New York City born and raised. They both have strong connections to the Jewish community of NYC. They are both pragmatists. They both have more courage and backbone than most in politics. They both know the workers are being robbed. They both only want incremental changes.
And they are both given their marching orders by the men who own the Fed.
Anyone in America who continues to follow this charade (other than for the entertainment value) is a stooge and an absolute fool.
You’d have thought after seeing what Mr Hope and Change has done that the Idiocracy would have woken up and realized that it does not matter who is in the Oval office….
That person has ZERO power. That person is an actor/employee…
He does what he is told. If he balks he is sat down and made to watch this:
https://www.youtube.com/watch?v=iU83R7rpXQY
I would love to see Trump win — it would be even better if he resurrected Palin as VP.
That would be the greatest comedy act since The Larry David Show….
Yes, I agree about Trump. With him we see an unvarnished spokesman for the Right’s real levels of hypocrisy, which they have in spades.
You completely missed the point Fast Eddy. Whether or not it is entertainment to you is irrelevant. You must have missed history classes or maybe you don’t see the direction things are headed.
If you really understood we are headed for collapse and things are getting worse for the middle class you’d also understand they are going to be more likely to vote for the person that is more radical than the mainstream, middle of the road candidates.
And no, Trump and Sanders are not the same. Try listening to their positions next time.
I understand what you are saying …. but their positions do not matter.
They are stooges.. actors… the Fed runs the show … if one of them wins the Fed will decide their positions… just as the Fed decides Obama’s positions…
And when the Fed collapses … it will not matter what their positions are…. because there will be utter chaos… there will be no centralized government
Stilgar
Polarization is an interesting and dangerous phenomenon.
But there is also switching between nominally opposed radical ideologies: it’s often over-looked that many of the most enthusiastic Nazis among the workers started as Communists in Depression Germany.
It is the political trends that cause me most unease at the moment: I can face poverty, and even starvation and death from natural causes, it is after all our fate, but totalitarian regimes and neo-fascism?
A waking nightmare.
You got it xabier. No one else did but you got the gist of what I was driving at regarding as you put it, “opposed radical ideologies.” And yes, I agree it will get much more dangerous as voters move towards more radical candidates. It’s a sign of the times and certainly very worrisome but also a reflection of the direction we are headed; collapse.
Stilgar
Sometimes, I rather wish I didn’t get it…
But when your grandfather had to hide from blue-shirted (the colour of the modern ‘centrist’ conservative party in Spain, get the connection?!) fascists and fanatical Catholic assassins in a cellar in 1936 Pamplona, it’s hard not to be aware.
wild card is deflation. Wholesale prices have fallen for 40 consecutive months, with the decline accelerating in July. Falling global commodity prices are largely to blame for Chinese deflation, but that is cold comfort for indebted companies whose nominal cash flows are in decline, even as the debt they owe remains fixed.
In an illustration deflation is undermining deleveraging efforts, China’s debt-to-GDP ratio has continued to rise this year, even as new borrowing fell 21 per cent in the first seven months from the year-earlier period. That is because disinflation has caused nominal GDP to slow even more sharply than outstanding debt.
Tao Wang, chief China economist at UBS, said: “Clearly, the overwhelming problem for China remains one of rising deflationary pressures.”
http://www.ft.com/intl/cms/s/0/1ea8c24a-4267-11e5-9abe-5b335da3a90e.html
ticking to that pledge means enduring the pain of an investment slowdown, as smokestack industries that thrived under the old model gradually give way to emerging industries such as healthcare, education, tourism, and information technology.
So far the government has employed targeted stimulus in the form of fiscal spending on infrastructure, while resisting pressure to unleash a wave of lending from commercial banks to the manufacturing sector, as in 2008. That stimulus plan led to a quadrupling of China’s economy-wide debt from $7tn in 2007 to $28tn by mid-2014, equivalent to 282 per cent of GDP. But if the job market continues to worsen, pressure for drastic measures will increase.
Education and health care are not true industries. They don’t actually create wealth they just help people get ready to work. Tourism is a money sink that only creates memories for the travelers.
Renewables and muscle power can’t supply enough energy to produce much wealth. People may be smart and informed but they wont have much money or be very healthy. Almost one sixth of our economy is health care. If we return to an agrarian economy there wont be much money for health-care.
Thanks1 Deflation is indeed a huge problem. In fact, it seems likely to grow as a problem, as oil prices continue to drop and as oversupply of steel and other goods becomes more of a problem. Some debt is likely to start defaulting, and this will cause banks problems. I don’t think governments are in a good place to fix the problem this time around, except by “haircutting” deposits–something else that adds to deflation. Thus, once it starts, it is likely to get worse and worse.
Who puts together an index showing that wholesale prices have fallen for 40 consecutive months? I realize the Financial Times article probably has that information, but I am sure I am over my allotment of free articles from them now.
Gail
While it is true that BW Hill does not start out with a credit money model, he gets to the same place.
Don Stewart
http://peakoil.com/business/approaching-a-global-deflationary-crisis/comment-page-1#comment-157000
Anyone with any sense for global economic trends ought to be worried. The signs are everywhere of a serious deflationary crisis.
A deflationary crisis is now baked into the cake. One look at the petroleum industry confirms it. Determining how the industry, or any oil producer is fairing is quit simple. You take their profit that was generated during the last high priced year (such as 2013) and divide by the number of barrels produced. That gives profit per barrel for that year. Then subtract the difference in per barrel price between now, and then. That gives present profit, or loss per barrel. The present spread in prices is now about $55. If you find a producer that was making $55/ barrel in 2013, they were making a 43% profit on their gross sales. The industry has historically turned a 5 to 10% profit on gross sales.
The Etp Model, which is a best case scenario, projects a downward trend in petroleum prices from 2012 forward:
http://www.thehillsgroup.org/depletion2_022.htm
Unlike economic models the Etp Model is constrained by physical limits imposed by the laws of physics. It eliminates the magical “IF” word so beloved by economists who want to present a “things aren’t that bad” story line. Common sense, and the Etp Model informs us that the petroleum industry is now in dire straits in the present price environment. The Etp Model also informs us that production must fall significantly in the near future as producers who are losing money on their production will soon be shutting in high cost production, or going out of business.
When producers run out of credit lines to finance their now money losing operations they will be shut in. It is not likely that can be escaped for many years. When it happens turmoil will ensue in petroleum producing regions. It is not likely that anywhere will escape turmoil for many years. Petroleum is the irreplaceable commodity that powers modern civilization!
What are you calling a credit money model? Curious to know!
John Doyle
Just responding to Gail who said that BW Hill would have something different if he had based his model on money (which is credit) rather than on the thermodynamics of oil.
BW Hill thinks (as I understand him), that the physical is more basic than the financial. When the physical goes bad, then the financial will also tend to go bad. The physical sets some limit on what we can achieve with financial maneuvers…so it is a ‘best case’. We can make things a lot worse with poor financial and political and military and social responses to the physical reality, but we can’t make it better than the physical limitations permit.
I pretty much agree with Hill. Money is not an independent factor. Ideally, we look at a model which contains a ‘theory of everything’. But theories of everything are very hard to construct and contain so many imponderables that they can easily become unwieldy. A good model of the physical is a good place to start.
Don Stewart
Don, I understand the limitations that just have to be adopted in theorising, and also that the final arbiter will be physical realities. However there are lots of choices in the run up to the physical limits. Will oil be the one of choice? Maybe not. What about the credit overhang, probably not either as it can be largely resolved with, for example, a debt jubilee. What we are certain of as Al Bartlett explained, is that there are finite limits to growth, so can we manage decline then? how about No. There are ,or seem not to be, any plans to manage our civilization’s decline and fall.
Once the rot sets in there will be a growing spate of problems that without a plan of management will rapidly spiral into chaos. A plan of management has to be done by the government who can commandeer resources and services to keep chaos at bay. The government can continue to pay wages to everyone needing money to buy food, and rations to control hoarding etc. Does anyone know of a plan, secret or not? It’s surefire curtains without a plan, a Wile e Coyote moment all at once for everyone!
John Doyle
Please remember that I am not claiming that the Hill model is accurate. However, if one considers that it might be pretty accurate, then it lays out a daunting scenario for any government or corporation thinking they can ‘manage’ things. Hill predicts falling prices for oil. The dominant reaction to that is ‘glut’, which must mean that the oil industry propaganda about ‘decades more oil’ and ‘a hundred years of gas’ MUST be right. Lots of blather about Econ 101 supply and demand curves. When Hill says that those Econ 101 supply and demand curves have never applied to oil, people can’t hear him and can’t understand him.
When Hill claims that the thermodynamic efficiency with which we produce oil is declining, and that, over the past century, the GDP that we produce from a barrel of oil has fallen dramatically, people can’t figure out what he is talking about. They have been thoroughly indoctrinated by statistics about all those ‘energy slaves’. What they fail to realize is that most people are now slaves of their energy slaves. As the energy slaves begin to diminish, there is no easy way to go quickly back down a curve we have spent the last 150 years climbing up. Yet Hill’s analysis says we need to be rapidly adjusting to the new reality RIGHT NOW. Imagine trying to tell Congress that we have an oil problem RIGHT NOW….and also that nobody has any pat solutions.
Hill uses cumulative oil production in some of his equations: the GDP we can produce with a barrel of oil today is partly dependent on how many barrels we have ever produced. For example, I may buy a car and drive it on a vacation, which generates some GDP. But the automobile factory and the knowledge of how to build the machines and the highway system and the resort I drive to and a host of other things are infrastructure that was built with the historical oil. If Hill’s equations are correct and our ability to produce oil is declining very rapidly, then much of that infrastructure will deteriorate or just be useless. So not only will wealth disappear, so will our ability to generate current GDP.
It is interesting to observe how oil professionals hear his story. If he is correct, then a career in the oil business is deeply threatened. So resistance is natural. Most oil people are simply unwilling or incapable of thinking that oil scarcity and low oil prices can go together. However, I have noticed that some people are beginning to contemplate that awful scenario.
If that is what is happening to our major primary energy source (excluding warmth from the sun and photosynthesis), then you can predict many repercussions in terms of money, politics, family life, social customs, mortality, business, etc..
Don Stewart
Do you think, however difficult it is to know the future, that there should be a plan to take over when the SHTF moment becomes reality?
Dear John Doyle
‘should there be a plan?’
Have you looked at Nicole Foss’ now three part series on the future?
http://peakoil.com/generalideas/the-boundaries-and-future-of-solution-space
One of Nicole’s predictions is a collapse of the ‘trust horizon’. Nobody is going to trust people they cannot reach out and touch. BW Hill and Nicole are probably in about the same camp in terms of the future of oil over the next decade. Nicole, for example, saying that the EROEI of oil is now only marginally supporting our complex society, while BW thinks we witnessed a sea change in 2012. I just listened to an interview with Robert Rapier, and he is confidently predicting an increase in the price of oil, just as soon as the screwy psychology on Wall Street gets straightened out. If you put Rapier on one side and Nicole and BW on the other, it is clear that Nicole and BW have only minor differences…same thing is true relative to Gail, although she usually emphasizes her differences from BW and Nicole.
Nicole says that ‘we need to get started now, building local connections’…or something to that effect. That is where I come out also. I just have no idea how one does that in Manhattan. I have an idea how to do it where I live, and I participate in localization efforts here. I view anything from the federal government with suspicion. They have been the prime movers in the militarization of the local police, and I suspect that anything they put together would, likewise, involve tanks and armored personnel carriers. I am afraid that I would look at federal efforts as involving both a lot of graft by the well-connected and repression of the population.
I am sorry to be so negative….Don Stewart
I haven’t caught up with Nicole’s blogs lately, so thanks for the link.
It’s likely true that trust will be in short supply. However if a government is seen to be working for the common good, then trust may survive. If on the other hand the trust we don’t have in government stays dominant, then it WILL all end up as chaos. So I’m not surprised at your negativity. Being aware, which we are, is seeing big issues in our future.
I really am doubtful that the BW Hill model is right. I have not gone through all of the details of the model, but what I have seen does not convince me it is correct.
One of the issues is confusion between marginal cost of production and average cost of production (and marginal net energy vs average net energy). Price is set on the marginal cost of production. The US tends to be the world’s high-cost oil producer, and BW Hill tends to use US costs in his analyses. His E sub N is Net Energy of Conventional Oil for the high cost producer, namely the US. I can see how his analysis would point to the US having to drop out as the high cost conventional oil producer, but I am not sure what else this shows. Perhaps production from Iran and Iraq would take its place in conventional oil production.
The world is filled with producers with different costs of production–Saudi Arabia, Iran, and Iraq would all tend to be lower cost producers, with higher EROEIs. The vast majority of net energy given to society always comes from the low-cost producers, not the high-cost producers. Net energy is where most of the tax revenue comes from that is used to support governments around the world. This varies greatly. I have posted the world “Government Take” graph by Barry Rodgers previously. Tax rates are as high as 90% of what is left after the direct costs of oil extraction. Countries with low tax rates tend to be countries with low oil EROEIs.
In my view, Net Energy also flows through to importing nations when the price of imported oil is low enough. Once the price of oil rises too high, this benefit is lost to importing nations. The current low prices seem to reflect an attempt by our self-organized economy to get this imported net energy back–whether it really is there for import or not.
I am also skeptical that the price of crude oil has a sinusoidal character, with a period of 26.8 years. BW Hill claims this to be true, based on Graph 13 of the model.
I didn’t notice much treatment of unconventional oil and all of the types of oil substitutes, such as natural gas liquids. BW Hill’s curve fitting was done to 1999 and prior data, to avoid the problem of including other than conventional oil. This has been the growing part of oil supply.
In my recent post How Economic Growth Fails, I tried to lay out how the energy system really works, as connected to the economy. One of my major points is that there is an overhead portion that keeps growing. Part of that overhead needs to go to paying back debt with interest. Another issue is the need to pay for growing government services. It is the fact that the growth in oil supply is not high enough that tends to bring the system down. Admittedly, the growth in oil supply on a net energy basis is lower than on a gross basis, but either way, we are hitting limits right now. The BW Hill model doesn’t look at the issue of growing overhead (apart from energy to make energy of the marginal oil producer, namely the US).
There no doubt are some parts of the BW Hill model that are right. The difficulty is in figuring out which parts those are.
Gail
I hope Mr. Hill will answer your questions, rather than me. But here is my best shot.
Whatever may be the average or marginal cost of producing a barrel of oil in various places in the world, they no longer control the price (according to Hill’s model). The control of price passed to the ability of the global economic system to generate GDP with the use of a barrel of oil, in the year 2012. Hill quantifies the ‘ability to pay’ but he does not really analyze it. For example, could we, if we wanted to, revert to a simpler economy which used less oil but generated the same or more GDP? Hill assumes that the economy is what it is, and probably won’t change in the near future…unless there is a collapse, in which case the price of oil will probably plummet in a Nicole Foss deflationary scenario. Hill has very recently hinted that we are now in a deflationary scenario.
As for the difference between marginal and average cost of production. Hill’s model assigns most of the cost of producing oil to the operation of the economic system which supports the production and distribution of oil. His model is very definitely NOT an EROEI study. EROEI estimates can be derived from the model, but he does NOT build up a marginal cost from looking at engineering studies of oil fields. Therefore, the cost has lots of ‘current cost’ in it, such as the cost of the economy and cost of lifting water.
The way he develops the cost also takes into account whatever governments take. If a government has been able to skim 50 percent historically, that skimming resulted in a higher world price and that higher price will appear in his curves. He does not study the scenario where oil price and the government collapse together, and a new government skimming far less takes its place.
As for the issue of using US data. As I remember, he uses the average well depth from the US (where, he notes, more than half of the global wells have been drilled) In another place he uses data from the US, Norway, and Great Britain. In both cases he is using the only reliable data available. I doubt that the world average is going to diverge enough from the data he does have to make much difference. But you might want to ask him about it.
The sinusoidal curve is another case where he needs some data to complete his model (which is dictated by thermodynamics) and he uses the best data available. Again, I doubt that some other data would make much difference in the grand scheme of things.
By stopping the model in 1999, Hill avoids dealing with the cost of unconventional oil in the core model. Separately, he has said many times that tar sands oil and shale oil are not reasonably priced sources of transportation fuel. IF tar sands oil and shale oil WERE lower priced sources of transportation fuel, THEN he would have to do serious work on his model. But he has separately marshaled some evidence that it is the cost of conventional oil (prior to 2012) that is controlling price, and that since 2012 it is the ability to pay that is controlling price. For example, he has labeled shale oil as ‘only suitable for feedstock’. It does not make good transportation fuels. The use of the term ‘total liquids’ tries to obscure the fact that much of the additional liquids being produced are not good sources of transportation fuel. In short, a liquid is not equal to every other liquid. Transportation fuels are best derived from some specific API crude oils.
The ‘overhead’ you refer to is in his computation of how much it costs to run the society which produces and distributes the oil. His top down method is a way around the intractable problem of figuring out how much of the University of Texas Petroleum Engineering school should be charged to a barrel of oil. He just lets the data speak for themselves as he estimates the parameters in his equations.
Again, I hope he will answer you directly.
Don Stewart
The US has an incredible number of small wells, compared with many other parts of the world.
Gail
The metric he gets for his equations is the average depth….5000 feet, as I remember. He has to plug in some number, the US has the only reliable data, so he uses 5000 feet. The other characteristics of the wells are irrelevant. At least that is what I gather from reading his description.
Don Stewart
The problem is that an oil company needs a much bigger “gross profit” on oil sales as the cost of extraction rises, to cover its now much higher exploration and production costs. Companies started getting into trouble a while ago, as I wrote about in February 2014 http://ourfiniteworld.com/2014/02/25/beginning-of-the-end-oil-companies-cut-back-on-spending/
The economy really works on an energy flow/cash flow basis, so the problems described in the above post started in the 2012-2013 era (or much earlier, back to the 1999 “bend” in the cost of extraction). All of the lending at low interest rates based on models of what might be produced in the future covered up the problems. Companies started substituting model future returns, for actual current returns. The cash flow of companies started turning negative, instead of positive, but this was deemed “OK” thanks to the models and the ultra low interest rates.
I have no idea how or if this is reflected in the Etp model.
Gail
If you look at Graph #21 you get the picture from the oil companies perspective. Their costs escalate and by the year 2031 they need $555 per barrel.
But if you calculate how much GDP the barrels are capable of generating, which gives you the ability of the economy to pay, you get Graph #31, with the ability to pay replacing cost of production as the determining factor in 2012. Ability to pay declines to zero about 2020.
The actual decline process would likely be messier, involving, on the one hand, the potential for WWIII, and at the other extreme the careful husbanding of stripper wells.
But you can see the central conclusion which spells doom for the financial future of oil companies: production is likely to remain relatively high while the price sinks and so full cycle costs are not recovered over the next decade or so. If and when Wall Street figures this out, everything will change.
The other possibility is that we magically transform the economy back into one which produced a lot of GDP with less oil, which would make expensive oil more supportable. But such an event is pure speculation, and as my very recent discussion with John Doyle makes clear, there are reasons to think that decision makers would consider you insane if you talked to them in this language. Also, converting to 10 or 20 percent less oil to generate a given amount of GDP wouldn’t help for very long, as the cost curve continues to rise relentlessly.
Don Stewart
The GDP will actually improve. We are investing in technology. For instance if we switch to electric cars, the 200-400B/yr we spend on foreign oil, gets spent locally on electric which is produced here which creates jobs here. Every dollar that was going straight out of the country for oil, is being spent here now at least once before possibly leaving the country for other goods.
It is like a built-in stimulus package, instead of coming out in one huge chunk like the Bush 1+T rebate program. It is coming back at a much slower pace, but it is a sustainable, more permanent effect.
The GDP boost actually comes from the fact we still have the money in our economy to spend again instead of leaving for other countries, where it can’t contribute to the GDP.
The side effect of this is we lowered the price of energy, by increasing the competition, so even if we don’t switch away from oil today, we drove the price down. Instead of spending 100/barrel, we are spending 40-50/barrel, which has a similar effect.
Instead of a 300 dollar check from the government as a rebate, the investment in alternatives saves you 20 dollars at the pump every time you fill up. It is a much harder concept for a lot of people to grasp since it doesn’t come directly from the government in a large lump sum.
Dear madflower69
I am no expert on electric vehicles. I’ll refer you to Gail, on that one.
Don Stewart
“For instance if we switch to electric cars”
Ok, let’s look at electric vehicles. The United States currently consumes about 19 million barrels of oil per day:
http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6
Of which about 70% is transportation:
http://alternativeenergy.procon.org/view.resource.php?resourceID=001797
Of which about 65% is light vehicles, AKA cars, pickup trucks, minivans, SUVs. I cannot locate a source at the moment for that; if you want to argue this number, that’s fine.
So, 65% of 70% of 19 million is about 8.6 million barrels per day. Let’s be generous and say that electric vehicles, full life cycle, including battery replacement, will use half as much energy as internal combustion engine cars, so you only need 4.3 million barrels of oil equivalent. Feel free to provide (preferably sourced) alternative numbers.
We’ll say one Barrel of Oil is 5.8 million BTU:
http://peakoil.com/generalideas/how-much-energy-is-there-in-a-barrel-of-oil
Which is about 1700 kWh:
http://www.rapidtables.com/convert/energy/BTU_to_kWh.htm
So, to power personal vehicles in the United States of America, you will need 1700 * 4,300,000 = 7,310,000,000 kWH per day.
How much renewable energy would that take? For a real-world example, let’s look at Ivanpah. 1600 hectares (10,000 square meters per hectare = 16 million square meters, or 16 square kilometers). Cost $2.2 Billion. Expected to produce 1.04 TwH per year, it is actually producing closer to 400 Gigawatt-hours.
https://en.wikipedia.org/wiki/Ivanpah_Solar_Power_Facility#Performance
So, you need 7310 Gigawatt hours per day, times 365 days = 2,668,150 GwH per year to power your fleet of electric vehicles. Ivanpah produces about 400 GwH per year. You need 6670 Ivanpahs to meet this need. Only $15 trillion dollars, so not too bad. 106,720 square kilometers = about one-sixth of the surface area of Texas. I’m surprised the numbers come out to something at least in the realm of possibility. Even at double, $30 trillion and say 250,000 square kilometers, it is at least plausible.
I will address one issue — where to get the space for the solar panels. Within a 100 feet of my house in Maryland are two rooftop solar installations. We can get a significant amount of energy from rooftop solar installations. I will pick out a wild-assed number of 100 million buildings with 10 square meters of solar panels each. 1 billion (US) square meters, or 1000 square kilometers. Not enough to make too much of a dent on the required 100,000 square kilometers.
“I will address one issue — where to get the space for the solar panels.”
I’m referring to thermal solar plants, preferably along the sun belt. I don’t think continuing American Car Culture is a worthy goal, nor continuing pursuit of exponential GDP growth. I was originally doing it to show how ridiculous it was, but the numbers fell inside an actual plausible range.
A really good way to envisage the vast numbers involved in our energy use is the concept of Cubic Miles of Oil, CMO. We use now a bit over 1 CMO annually [1CMO =316 days] and including coal, gas and renewables it totals nearly 3CMO equivalent. To produce the equivalent electrical energy is estimated to require 200 Three gorges dams, 2,600 Nuclear Power plants, 5,200 coal fired plants, 1,640,000 wind turbines and 4.6 Billion solar panels. And that’s just the oil equivalent. The Wikipedia entry discusses this concept.
It make obvious the whole system we have cannot have a substitute. We can nibble around the edges, but thats just a nibble, nothing paradigm shifting.
Don’tt forget the charging stations on the highways and public places, that if you want to toake your car out of town.
“Don’tt forget the charging stations on the highways and public places, that if you want to toake your car out of town.”
The UK is testing on the road wireless charging.. you wouldn’t even have to stop, unless the loo called.
http://www.springwise.com/uk-motorways-provide-in-road-ev-charging/
“How much renewable energy would that take? For a real-world example, let’s look at Ivanpah.
…You need 6670 Ivanpahs to meet this need. Only $15 trillion dollars, so not too bad. 106,720 square kilometers = about one-sixth of the surface area of Texas. I’m surprised the numbers come out to something at least in the realm of possibility. Even at double, $30 trillion and say 250,000 square kilometers, it is at least plausible. ”
Ivanpah is a bad example. It doesn’t include storage, and there were significant cost overruns.
Plus it also uses natural gas. In fact, Im not sure the firm that was in charge of it wasn’t just trying to bilk US investors, but that is another topic.
The 15T is within the realm of possibilities, but realistically we don’t want to pay that much. We would like to drive the costs down further. In fact Solar PV does drive the costs down further.
There is a problem with solar and we do need storage. I don’t think you are fully understanding the storage situation.
If you read:
http://www.greentechmedia.com/articles/read/10-ways-to-solve-the-renewable-duck-curve
You see they identified the “duck curve” chart
I wish they had data from like 2000 on the graph so you can see the full extent of what solar is can replace right in the middle of peak hours, which is the most costly time of day.
Really what we need is short term storage for a few hours to peak shave the big hump on the right. The one on the left you can peak shave with the extra FF/nuclear/hydro capacity overnight which is significantly cheaper then using peaker plants for generation, and in fact, you have overcapacity available so when you do need to run the peaker plants, it isn’t “just in case” it is because you actually need the extra capacity (which is a -huge- cost savings by itself, it is where Germany ran into problems)
You really want something like what Imergy or ViZn has which in theory is infinite cycling. The efficiency even at 75% gets rid of a huge problem. The regular cell batteries can also be used, Tesla is selling out and making news, but LiFePO4 has 6x longer lifetime. ABB is using them and a few other companies.
The storage market is being driven by California mandates right now for storage. And the prices will dramatically fall.
For most of the rest of the US, there isn’t a duck curve and you can see how much energy we can save -without- storage.
I am not at all convinced that we are dealing with a built-in stimulus package, and a rebate every time we fill up.
For one thing, we are dealing with a lot of large front-ended costs: costs of renewables, costs of storage for renewable electricity, and the cost of electric cars. These can only be paid for by lots and lots of debt. This creates huge problems, because the whole debt level of the economy must rise to accommodate the structure. This tends to push economies over the edge–the interest payments become unacceptably high, and total amount of debt becomes unmanageable. Many poor workers can never afford the price of an electric car (or the garage needed for recharging such a car).
A related issue is that building such a system creates years and years of where the whole system is cash flow negative–outgo exceeds income. This doesn’t leave funds for repaying debt with interest. We end up with a system that looks like the cash flow of the shale companies. Something else must make up the difference. Where does this come from?
I would also point out that there is likely going to be a lot of foreign input with any of these solutions–solar panels are often made in China; parts of wind turbines are often from China; computer controls for any of these things are likely from China; electric vehicles (and the batteries from electric vehicles) will likely be foreign.
Also, when we try to make anything in large quantity, we start running into diminishing returns. For example, the cost of lithium extraction is likely to rise, as it becomes necessary to use lithium from mines with lower quality ores.
We also lose sight of the fact that the “package” that is put together has to be affordable for workers making the median wage, and below the median wage. It doesn’t matter that other solutions would be “even worse.”
Dear Gail and Finite Worlders
I wrote months ago about universities and rape cases. Universities all across the country starting setting up quasi-judicial processes for trying rape allegations involving two students. The universities also got involved with cases where students allegedly raped a non student. I have been following three local cases.
The first is the alleged rape of a strip tease dancer by the Duke Lacrosse team. After lots of huffing and puffing, the case has been dismissed and the prosecutor in the case has just been disbarred for conduct unbecoming an attorney.
The second case is an alleged rape by a male Chapel Hill native who was attending college in Tennessee. An administrative law judge reviewed the evidence and found that there were insufficient grounds for a finding that the man was guilty. There was a hue and cry and the University apparently gave some orders and the Administrative Law Judge changed her mind and decided that the man had to prove he was not guilty. It went to court, and the court ruled that the man is ‘innocent until proven guilty’, and that the university hasn’t got the right to change the burden of proof requirement. Meanwhile, the man’s father has been fired as wrestling coach at the University of North Carolina, apparently because of his blogging about the kangaroo court aspects of the ‘trial’ in Tennessee. While the family ‘won’ their case, it cost them $40,000 and the father lost his job.
The third case was an alleged rape of a Duke freshman woman by a senior male after a fraternity party. This made headlines early in 2015. The fraternity was banned from the campus, and the student was denied his diploma.
About a month ago the district attorney issued this statement:
‘No charges will be filed in the case of a Duke University fraternity where a woman claimed she was raped, Durham district attorney Roger Echols said Thursday.
A Duke coed told police she was taken to a home next to the party before blacking out, according to a search warrant.
The Alpha Delta Phi fraternity was suspended after the student said she was drugged and sexually assaulted on Jan. 8 at an off-campus house being rented to members of the fraternity.
Echols, in a statement Thursday, said, “Based on our careful review of witness statements, investigating officers’ notes, results of tests and examinations, applicable statutes, case law and the standard of proof, I have decided not to seek an indictment charging any subject of the investigation with a criminal offense.”
I had read in one newspaper account that the case might turn on the question of whether the female was significantly drunker than the male. In North Carolina, rape is considered to include sex with someone who is deemed incapable of giving consent because of alcohol or other drugs.
The male student still has a lawsuit pending against Duke. Duke has been ordered to cease and desist from using the investigator they hired to gather evidence, because the person they hired has no license to practice. I also read that the Duke lawyers were refusing to share evidence with the plaintiff.
Duke may want to claim that it is a private institution, and can do any damn thing it wants to. But if the judge finds that there is an implied contract between Duke and the male student, and if the Tennessee ruling on burden of proof stands, then Duke may end up with egg on its face and paying a lot of money to the Australian native they refused to give the diploma to, after taking a hundred thousand dollars or so of his money.
These extra-judicial boondoggles by the Universities strike me as insane. Are these universities our ‘best and brightest’?
Don Stewart
Rape is a crime. Society has a whole system devoted to dealing with crime. Why any victim of rape would choose not to use the full force of the law is beyond me.
I do understand the idea that universities want to protect their rich clients from any criminal charges. This model is a better fit when the victim is a townie and the rapist is a rich boy customer.
I would expect any victim that chooses not to use the police and courts is think “I have no case by the standards of the sane world but I want blood so I’ll go with the administrator that see me as a rich customer and are scared by political correctness and so called micro-aggressions.”
#57. Storm Front – part 2
THE CRISIS LOOMS – CHINA, CANUTE AND THE “WINDOW OF RISK”
In my previous article, I raised the possibility that China might be heading for a financial crisis, something which must – given the sheer scale both of the Chinese economy and of Chinese debt – pose a globally-systemic threat. Here, I take up the China story again, but also look into the global implications of what I think is happening.
I also set out some thoughts about the “when?” of all this. For a “non-Keynesian”, I am rather fond of quoting Keynes’ observation that “the market can remain irrational longer than you can remain solvent”. This I take as a warning against trying to predict the day when seemingly-obvious imbalances (like China’s debt) result in their logical consequences.
https://surplusenergyeconomics.wordpress.com/
Thanks! Your link is to the latest Tim Morgan post. He seems to think that a “window of risk” will open in September. I would think that would mean a time when we could start seeing a big step down, when loans from shale start defaulting and filling oil storage becomes more of a problem. Also a remote possibility of US interest rates going up.
Maybe time to join a Trappist Monastery, now that is a solution to the crisis we are facing
Trappism? Not allowed to speak, wash, eating porridge and beans, sleeping on bare planks with no blanket and for fun whipping oneself every now and then, perpetual penance for sins of everyone? !
Now, suggest a Benedictine monastery and we are talking; good wine, books, proper beds…….
Now, now, Thomas Merton was a Trappist and a self described “Hippie Monk” at that who said his fellow monks lived like millionaires and really didn’t have too many cares.
These chaps usually live to be a very ripe old age and not like the old days, with modern comforts. My post was a half joke…no need to worry about overpopulation in their enclosures. I went on a retreat to Merton’s abbey and gave my supply of razors and shaving cream to one aged monk with the remark, “Must be hard to get a good shave around here”, after seeing him cull threw the waste basket for an old used razor.
Yes, I got to admit the hours are difficult, but ever “job” has its drawbacks.
The nearest comparable example of a cost that enters into the production of all goods and services is interest rates. Virtually all individuals and companies must borrow so the interest rate enters into the cost of all production and into many everyday living expenses too. You can argue therefore that the real reason that interest rates have been driven down so low by central bankers is that energy costs have been so high. It is has not been possible for the economy to sustain BOTH high interest rates AND the higher energy prices. This is the reason for the stagnation.
According to Kopits most of the oil companies require an oil price of at least $100 for new investment in conventional oil production to be profitable. High prices are needed in the unconventional sector too and most of the fracking companies in the USA have not been making money for several years. In the last year the price has fallen even lower.
So how come that they are still around? How come they have not gone bust? There are several kinds of reply to this.
http://www.zerohedge.com/news/2015-08-15/approaching-global-deflationary-crisis
China, Australia, Brazil, Canada, Sweden – it is beyond us how anyone can declare the crisis isn’t spreading.
Be prepared – there are going to be lots of opportunities to both make and lose money.
But first, you have to recognize what is happening.
http://www.zerohedge.com/news/2015-08-15/crisis-spreading-china-australia-brazil-canada-sweden
This fella hasn’t the slightest clue what is happening if he thinks there is money to made when this blows….
I hadn’t heard about the problem in Sweden.
A lot of Sweeds has come to Norway for work the last few years. Few/no available jobs in Sweeden and Norwegians not willing to do a lot of service work is the situation. Guess they will be heading home in the near future, because our service sector sure will have to shrink.
I think Brian Davey has been reading some of my things, judging by his graphs. He talks about failing mechanisms to recycle purchasing power and energy limits, besides showing some of the same graphs. I will have to agree that there are other mechanisms to recycle purchasing power besides high enough wages to buy things, and these may be failing too.
Gail, with only 433 posts wordpress is randomly placing new posts!
Don, I am thinking about building a house in California. My first thoughts were how do I install french drains to keep the water off the property. It flows across from the high side on the north to the low side on the south and has caused two gullies. After watching the perma culture video above maybe a better idea is a food forest to use and retain the water. Do you know anybody doing perma culture design in the Sonora California general area?
Ed Pell
Toby Hemenway lives in Sonoma County. He is doing some demonstration projects on the property (which he does not own). I am sure there are other people there doing worthwhile things. I think Toby is in Sebastopol.
As I imagine you are aware, the rainfall in California is quite seasonal. Wet winters and dry summers and falls. Storing every drop you can in the ground is essential. My sister who lives in LA hired a permaculture redesign of her yard a few years ago. She has been very pleased. She isn’t interested in growing much food, beyond the occasional tomato, but she is an avid birder and the bird population has multiplied by several times.
Toby is in the process of redesigning his web site. Here is the link to the new one:
http://tobyhemenway.com
Don Stewart
Thanks Don.
Early Bingiman (who): health and sorrow.
“This is the end of society.” That claim could be explained in various ways but for rastafari in 20th century that was always obvious. “Here we are.” Well spotted.
The sound could be played so that the bass rocks hard. Rewind whenever you feel like it.
Anyone else notice you can’t reply a post – instead it pops up somewhere over the rainbow.
“Ok, where’d that one go?”
Yes. I was going to mention it too.
You may have hit a “depth” limit on comments. If there isn’t a depth limit, the comments get too narrow to read. In fact, they already are hard to read on phones.
Gail, I think it is more than that. I am pretty sure I have replied as the first and only and been post in random place on the same page. Just this article never before. Maybe wordpress updated something.
If I figure out something, I will let you know.
Dear Gail and Finite Worlders
In response to one or two requests to give an actual, final statement, here are some final thoughts on thermodynamics as a limitation on the work we can do to rearrange the world to suit our proclivities, and the notion of abundant living. (I think Jesus said he was bringing ‘more abundant life’…which didn’t mean internal combustion engines.)
If we ignore the latest from MIT on desktop fusion machines and consider BW Hill’s thermodynamically based equations as indicative of our future, then humans are headed back to one of three broad social and economic patterns:
Agriculture
Horticulture
Hunting and Gathering
Let’s begin with some recent research on hunters and gatherers:
http://www.americanscientist.org/bookshelf/pub/at-the-cutting-edge-of-human-adaptation
Groups are larger in the dry season and smaller in the rainy season. They are basically egalitarian—any attempts at domination fail, because people gain others’ support or simply leave the group if someone tries to boss them around. There is no role specialization except the division of labor by sex, and male domination is minimal. There are no clans or rules of inheritance passing through one sex, but groups are made up mainly of various kinds of kin. Violence can erupt between two men over a woman, and this is a main cause of homicide.
Discussing the reasons for sharing, Marlowe considers nepotism (kin selection), mate provisioning (courtship investment), not-in-kind exchange (meat for honey, say), in-kind delayed reciprocity, costly signaling (to demonstrate foraging ability), and tolerated scrounging. Even with his excellent data, he can’t rule out any of them. Clearly, the impulse of pure generosity explains little; in anonymous games such as the prisoner’s dilemma, the ultimatum game, and the dictator game, the Hadza were among the least generous people ever tested, despite being among the most generous in their culturally sanctioned everyday life.
But ultimately, for her, a rule like “feed the thinnest child” affects almost everyone. The fitness benefit to the recipient is an important predictor of altruism under Hamilton’s rule (which states that an altruistic act should be performed when the cost to the actor is less than the benefit to the recipient multiplied by the degree of relatedness between the two individuals). So, given all the factors affecting sharing in !Kung culture, it may be that Howell’s feed-the-thinnest-child rule is the most refined that natural selection could come up with.
My notes:
*Genetics are not driving ALL of day to day to day behavior. The hunters and gatherers can be selfish in artificial laboratory experiments, but extremely generous in the real world. Human culture makes a difference. Genes provide the raw materials, but cognition drives the ship.
*Violence is mostly between males, and about mates. There are no slaves. In fact, the limitations posed by the necessity of a positive calorie balance pretty much preclude slavery. How do you get the benefits of a grandmother through slavery?
*’Feed the thinnest child’ is a simple rule which works pretty well. We can expect simple rules which work pretty well to be important in our fossil-fueless future.
I’d like to jump to Agriculture…such as was practiced in the Nile delta and in the (then) Fertile Crescent. Such societies were producing enough caloric surplus to support kings and armies and slaves and nation-states. I don’t think it is plausible that 21st century humans in the OECD countries can transition to an Agricultural society…and turn agriculture which is currently deeply in energy deficit into a strongly energy positive undertaking. I do not think Permaculture or Agroecology or any other form of biology based agriculture will be successful in restoring ancient Egypt. It might have worked in the 1970s, but we are now too far down the resource curve. Studying Edo Japan is still useful, but I rather doubt that we can stabilize at that level in our downward trajectory. (I might be unduly pessimistic on that.)
Which leaves us with the possibility of Horticulture. Here is where Toby Hemenway’s classic talk at Duke becomes relevant:
https://www.youtube.com/watch?v=8nLKHYHmPbo
Permaculture can save the humans, but not civilization.
In a question and answer after his talk, Toby said that his estimate of the global population in a Horticultural society was somewhere between 500 million and 2 billion. I don’t have any better estimates, except to observe that the faster we drive the ship of industrial agriculture toward the rocks, the lower will be the number of survivors after the rocks win.
There are now a number of examples of ‘permaculture food forests’ which have the potential to be energy positive. The latest example to cross my desk is from Australia:
http://www.foodforest.com.au/shop/movies-dvds/design-for-life/
I do not personally think that the energy surplus created by ‘permaculture food forests’ will support large cities in the immediate future. As our descendants figure it all out, urban places like Gobekli Tepe may arise.
In summary, my guess in terms of the physical environment where food production MUST be energy positive, we are likely to be in either the Hunter-Gatherer mode or the Horticulture mode. Horticulture can produce more energy surplus per acre (or hectare) of land than can hunting and gathering, but it also requires more work from humans, as well as more skill and knowledge. At the present time, few humans in the OECD countries have the skill and knowledge to pursue either mode of production.
Shifting gears to that ‘Abundant Living’ that Jesus promised us. Since I rarely think genuinely new thoughts, I have to turn to exogenous inspiration…Jane Hirshfield in Ten Windows: How Great Poems Transform the World. I will particularly use the second chapter in her book as a thought provoker.
‘Drop a leaf into water and it will simply be taken, sliding swiftly between rocks and away. But that small fish in the creek, living, both darts at will through the current and resists it.’
There are many voices here advising us to aspire to be a leaf, with few advising us to aspire to be a fish, and even fewer offering any ideas about how one might become a fish. For example, how to take a society which worships nuclear weapons and teach them to cooperate in the ways that the hunter gatherers know how to do. Or how to form an extended family which is energy positive.
‘The existence of pleasure is as strong in art that addresses darkness as in that which unfolds by light, as present in the simple as in the complex.’ Jane mentions Shaker cupboards and tables and the cave paintings from 30,000 years ago. She also gives us the beautiful image of a weed breaking through pavement:
‘It may feel as if we have done nothing, only given a little time and space of attention; but some hairline-narrow crack opens in the self’s sense of purpose, and there art, there beauty, is.’
I will pose two questions for you:
*Do you think the cave painters with their primitive materials were being just as artistic as the tecno-geeks with expensive materials making animated movies in Hollywood in 2015?
*Do you think that a Hadza family feels like it is ‘making art’ when everyone is fed and satisfied?
Jane opens the chapter with the notion that humans engage in two fundamental activities. We form an image of the world, and we make some statement in response to the image. The image is not what a camera sees, it is instead a complex cognitive process in which we use everything we have learned about the world in the moment of perception. The statement we make in response involves art: as in music and drawing and reasoning. The art is not about escaping from reality…we make art using everything we know to give shape to our experience and to communicate that with others.
Now suppose you are thinking about a fossil fuel poor world, and how you might go about making art…achieving a ‘more abundant life’. I suggest that one good step is to reduce everything to the bare bones. We have known for centuries that art arises out of restriction…not out of technological wizardry. So walk around in the world with a notebook and pencil and begin to draw what you see. Organize little local festivals to celebrate events. Make every evening meal with the extended family into a celebration. And so forth and so on. Untether yourself from the machine of technology. Make some sand paintings, as the Navajo or the Buddhists create perishable beauty.
Study the Shakers. They achieved beauty not through a few inspired artists, but with unskilled laborers making useful artifacts according to certain patterns. Compare with the beauty of a flock of birds flying and wheeling…none of them graduates of an art school.
The formation of the image is a result of our genetic heritage and our experience of the world. The genetic heritage gives us raw capabilities, but the experience of the world brings the cognitive response. Neither is effective without the other. The ‘statement of response’ is about survival, but also about pleasure. Some statements are consistent with ‘abundant living’, and some reflect a scarcity mentality (advertising is all about scarcity). In any event, the ‘statements of response’ in a fossil fueless world will be sharply limited by thermodynamic realities. That is, thermodynamics will define an outer bound, but our actual experiences are more likely to be limited by our failure to be good artists and good technicians and to live amicably with the rest of our tribe.
Any solutions will inevitably involve several layers: the individual, the extended family, the village, and the relationship with those beyond the village, as well as with the natural world. In any event, if someone from the ‘advanced’ 21st century appears in your village, behaves badly, and blames it on their genes…cast them into ‘outer darkness’.
Don Stewart
Great post Don! My rather “nativist,” probably more aptly termed stupidist response is this:
As your post exemplifies, we’ve (humans) reached peak abstraction in the past few decades – to our detriment. We’re about to realize the stupidity of our ways rather suddenly and to quite uncomfortable results.
In the end, all of our efforts to intellectually justify our greed and cruelty toward one another, never mind our fellow species with whom we foolishly imagine that we are intellectually and/or morally justified in dominating, will be revealed as just so much self- serving pontificating bullshit, epitomized by our very religions themselves.
So, in the end, what are we as individuals of the accused species to make of this while we’re still breathing air and have an actual say in the matter, limited though it might be? That is indeed the question my brother, and one I ruminate on almost every second of everyday. And one I ask everyone I know to consider as well.
James
He says “the McDonald’s model is the only model of industrial society.” I could not agree LESS. I can agree that one model is in use today but an infinite number of system are possible. Al the “sustainable” version have a means of limiting the population. There are many fair and humane ways to control the number of humans. The fact that the current system insanely is not sustainable is not proof of the evil of technology.
There are many fair and humane ways to control the number of humans. The fact that the current system insanely is not sustainable is not proof of the evil of technology.
True that. The same arguments were (and are) made for socialism and every other manner of human hierarchical organization. Should that not then be the same standard used for capitalism?
But regardless, we don’t get “do overs” in this physical reality we’ve constructed. We get the proof that we’ve got from the reality that we’ve constructed, and the early returns are not good. What do we do with that from here on out? That is the only question remaining to be answered, whether it involves human devised technology or not.
But my guess is that it doesn’t.
Industrial, agricultural, permacultural, hunter gatherer are all unsustainable with 10 billion humans. My guesses on how any humans we can have a be sustainable with each
industrial 100 million
agricultural 100 million
permacultural 200 million
hunter gatherer 25 million
Fun Exercise!
Almost besides the point, as the top one or two give way inevitably to the exponential growth paradigm, while the bottom two would never bother counting their numbers in the first place. Most would argue that permacultural is simply a way point along the way to agricultural as well, which seems out of line in the figures quoted. Whatever our actual “sustainable” numbers might be these days, it’s safe to say it’s a fraction of whatever we here in the west think it is.
My better guesses?
Industrial: NOT SUSTAINABLE under any circumstances
Agricultural: <1B
Permacultural: <.5B
Hunterer Gatherer: <.25B
As I said, these are nothing more than WAG speculative guesses on my part, which is probably the best anyone can do in any case, and as I said, below the 'agricultural' level, who's going to be keeping count anyway?
This is from Wikipedia, The population figure for Indigenous peoples in the Americas before the 1492 voyage of Christopher Columbus has proven difficult to establish. Scholars rely on archaeological data and written records from settlers from the Old World. Most scholars writing at the end of the 19th century estimated the pre-Columbian population at about 10 million; by the end of the 20th century the scholarly consensus had shifted to about 50 million, with some arguing for 100 million or more.[1] Contact with the New World led to the European colonization of the Americas, in which millions of immigrants from the Old World eventually settled in the New World.
So how many would be sustainable now?
“So how many would be sustainable now?”
The past calculated populations have such huge ranges. On top of that, sustainable under what climate?
There were supposedly 1 million Mayans in Belize around 900 AD. Then the climate changed, it got something like 15% drier, and suddenly by ~1200 AD there was less than one-tenth as many people, and they lost all their advanced culture and went back to living in small tribal villages.
What do you personally mean when you say sustainable? As far as I can tell, it is a word with no specific defined meaning. Renewable, for example, has a specific definition that the resource can be replaced in equal quality and quantity within a human life time, considered 65 years. Sustainable for a thousand years? A million years? A billion years? Nothing lasts forever.
Good points. Sustainable is itself a WAG at some point too. But certainly beyond a century or two, which is the current duration of the industrial age. I’m guessing it’s at least defined as something that doesn’t disrupt or preclude any definable “age” that might follow it. How about that?
If billions die in a very short span of time, what kind of diseases would break out? Especially in large cities. It just depressing to think how far in overshoot we are.
“If billions die in a very short span of time, what kind of diseases would break out?”
Cholera, and various other diarrhea causing diseases in the water supply. When BAU goes down, I recommend not relying on city water.
Scurvy, and other malnutrition diseases, which in turn make people far more susceptible and affected by other common diseases, such as flu.
I don’t think it will be rare and exotic diseases, but these common and (under BAU) easily treated illnesses that will be the most severe.
I have European medical statistics going back to the early 17th century, from hospitals : dysentery was the biggest killer at all ages, in the towns.
Town death-rate was at least 4 times that of isolated villages.
The doctors killed a lot with their prescriptions and primitive surgery, too.
In case anyone needs to know, the recommended treatment is simply to drink clean water with sugar and salt added, to stay hydrated. Eating food rich in fibre helps, as it will scrub the bacteria out of the colon. Don’t stop eating. This applies to dysentery in general, as well as specifically to cholera.
For sure, stockpiling chlorine and carbon filters is a good prep plan. In the long run, building a sand and charcoal filter and maintaining it will be key to maintaining health. Also, keep sewage separate from drinking water.
Dirty water and mosquitoes are the biggest killers of humans over humanities brief existence.
Apparently, dental infections were the leading cause of death in Europe and American in the 1700s. Sugar was becoming available to the masses and there was no technology to counter it. People died of encephalitis from infections of the jaw.
As for caries & tooth decay, I recently heard (French TV documentary) a scientist who said that our ancesters hunter-gatherers had nearly none.
According to him, it started to appear 10,000 years ago when we started to eat grain in much bigger proportion. The rate remained stable until the 1850’s, then skyrocketed, matching with widespread availability of refined flours and sugars.
This seems to be directly connected to a mismatch between our oral microbiota (inherited from the Evolution) and a rapid change of our diets, that no longer provided us the “good” microbes.
This goes along with Don’s statement that the best pesticide is biodiversity.
Found a short article related to this topic: “The recent roots of dental disease”
http://evolution.berkeley.edu/evolibrary/news/130301_plaque
I own the book, Pandora’s Seed by Spencer Wells. It talks about the tooth decay issue starting 10,000 years ago. It also talks about farmers being very much shorter than hunter-gatherers–as much as 6 inches shorter.
For current first world, think current third world. For current third world, imagine middle ages after the current magic stuff runs out (and it will run out quickly). On the plus side, there will be more than enough opportunities to end your suffering quickly if you so desire.
http://thehullabaloo.com/science-27/our-share-of-2015-natural-resources-already-used-up-952.html
Seems like we are using more than the Earth has to offer, sometimes known as overshoot. I guess most people were not aware of that so they wrote an article.
Gotta love that “our share” part.
A very good article by Pritchard — however he continues to not understand the disease…
He needs to step back and ask the question: ‘Why are the PTB engaging in suicidal policies’
http://www.telegraph.co.uk/finance/economics/11799504/China-cannot-risk-the-global-chaos-of-currency-devaluation.html
Agreed!
That’s the “rational” take anyway. But I always wonder what the “shadow states” are thinking, realizing that we’re approaching an endgame with respect to cheap fossil fuel availability.
Granted, there’s long since no longer any doubt that US interests are attuned to the game at hand, but I think it’s purely pseudo-western hubris that doesn’t allow for the fact that the Russians and Chinese have long since been playing along equally as well too.
But guess what? They still exercise “geographical hegemony” over a resource that is still primarily physical (as opposed to digital or virtual) in nature. Oops! Reality interrupts again!
Reality is terrible thing to face.
Dear Gail and Finite Worlders
I came out of hibernation to comment on how a couple of pieces fit together in my mind. One of those pieces is the ETP model and the associated demand model developed by BW Hill. Here is a post on Peak Oil News by Hill. The first part is another post he is responding to:
“Demand destruction, dysfunction, abandonment, and the irrational are creeping into all facets of the modern global system.”
As previously mentioned the Etp Model projects that the world will never again be able to consume all the oil that is produced. It now requires more energy to produce petroleum, and its products than is delivered to the economy. The energy balance equation is weighted heavier on the producer side than on the consumer side. One unit of production will never again be able to drive one unit of demand. That is the bases of this graph:
http://www.thehillsgroup.org/depletion2_022.htm
Petroleum accounts directly for 38% of world GDP. As the industry itself contracts so also will the remainder of that economy. The ongoing growth in world inventories is testament to the declining impact that oil is having. The Laws of Physics informs us that situation is not going to be changing. The declining ability of petroleum to power the world is putting it into a deflationary spiral from which there is no escape.
Back to me. I particularly call your attention to two statements:
*One unit of production will never again be able to drive one unit of demand.
*Petroleum accounts directly for 38% of world GDP.
The model turns the energy produced into GDP, which is then equated to the demand for oil. But as the production process is increasingly expensive, less is coming out. That does NOT mean that the EROEI is less than 1. In fact, EROEI, as calculated from the ETP model, is currently around 9. It is the cost of running the economy which makes petroleum a loser…not an EROEI of less than 1.
The second point is the 38%. I have seen Hill quote that number several times. It is not from the model, but is ancillary data, I think. I assume he has added up things like petroleum production, automobile production, road construction, shipping transportation, and the like. Petroleum production alone would not be anywhere near 38%. Automobiles and trucks, however, are a very significant part of GDP. So, in round numbers, if petroleum disappeared tomorrow, GDP would drop around 40 percent, plus any knock-on effects in the rest of the economy. You can make up your own speculation about whether governments and Wall Street and Main Street and civil society would survive that shock. An additional complication is that almost everything involves some petroleum product somewhere.
Hill’s model does not dictate that a crash, overnight or decadal, will occur. His model simply states that there are thermodynamic limits which will reduce the maximum capacity of the economy to function.
Don Stewart
PS You should, of course, beware of my interpretation of Hill’s model results. Those should speak for themselves, rather than through me. This is mostly a ‘heads up’ from me.
If a person observes that all of the output of the world’s economy is indirectly the result of oil, coal, or natural gas use, then would stand to reason that petroleum accounts for something like 38% of GDP, since the other fuels would then support the development of the rest of the world’s economy. Less oil would lead to less GDP. I certainly wouldn’t disagree with this.
If BW Hill were trying to model financial limits, he would likely say that they would come quite quickly, because of the difficulty in repaying debt with interest when GDP is contracting. He is not using this approach, though.
Hey Don! Perhaps you should just can this whole hibernation shtick now and be done with it?
You’re a valuable and valued member on this board who obviously receives value in return by posting here as well. Let’s just leave it at that, OK?
James
http://www.bloomberg.com/news/articles/2015-08-14/euro-area-fragility-shown-as-germany-france-fall-short-on-gdp
You’ve got to see the bar graph on the above linked article. European countries GDP is now being tallied in the less than 1% range. Doesn’t it make you wonder if these numbers are falsely tweaked a tad high as propaganda to keep the mood positive to generate new business and home loans to perpetuate BAU just a tad longer? It just seems too convenient for every one of these countries to have a GDP just barely above 0.
Actually none listed are above .4%, that’s 4/10th’s of 1%! Keep in mind Italy at .2% now includes an estimated amount in their GDP for illegal transactions on the street, i.e. prostitution and drugs.
As does the UK.
I think this is also one reason why the UK media and government are obsessed with rising house prices. Higher prices year on year adds more and more to the GDP figures.
It doesn’t really mean the population is getting any richer though as this is all just paper wealth. Also the people who don’t yet own houses and aren’t on the property ladder, buying even their first ‘starter’ home gets further and further out of reach.
To encourage more hookers and blow consumption the government should offer tax deductions !!! &%$#@….!!!
Isn’t it incredible that the numbers always come in just a tad above 0….
Need to keep the masses believing the recovery is just around the corner… next quarter things will get better — or next year….
“Need to keep the masses believing the recovery is just around the corner… next quarter things will get better — or next year….”
Exactly – Nicole Foss says economies feed on optimism or pessimism, expansion or contraction. So although contraction for most people is what is happening via stagnant wages against higher water & power costs, goods & services, the phony baloney twisted slanted conjured up GDP numbers to project a propaganda perspective of getting people to take out yet more loans to keep the can being kicked down the road just a little longer for the .01ers to load up their golden parachutes to even grander self absorbed aggrandizement continues.
The GDP numbers are as real as the virtual money that creates it.
You are probably right–growth is tweaked to be barely above zero. Also, Greece’s woes have indirectly helped the rest of Europe, because how high the Euro trades relative to other currencies relates to the full eurozone output. If Greece were to drop out, and their currency fall, the other currencies would rise, making them less able to function as exporters. Germany would especially be affected.
The germans really understand that and it has coloured their response to the Greek tragedy.
Missing Fast Eddy. I suppose he is busy doing his work thing in HK but…
I have this image of FE being chased down the streets of HK by a little old lady with a big meat cleaver screaming “Fast Eddy it’s what’s for dinner”.
Three days of devaluation!!!! and no comment!!!!
I have skipped out of the blazing heat of Hong Kong to spend a few days with friends in Bali —- August weather is the best of the year here — heading back down to NZ end of next week…
> heading back down to NZ end of next week
With any luck, you might be in time to catch Don’s final farewell concert. 🙂
Dear Gail,
Great article as always. One thing is missing, though. The globalisation / interconnectedness part.
US gov. and Obama are definately trying to unite Western influence zone by two partly confidential agreements – Transatlantic Trade and Investment Partnership (US + EU) and Asia-Pacific Trade Agreement (Americas + several Asian countries). His visit in Africa is another move to make world one entity and US-Cuban relations also show that. I guess the secret part is concerning the currency peg to the USD. 100k of US dollars is the prize for revealing this secret text, LOL!
Many of your charts describes US data. Yet US is still the world hegemon. In the BAU dynamics US position and how it manages all these energy/finance issues is crucial to analyze current situation.
Globalization has put off the inevitable collapse. We found we were able to use China and India’s coal resources, when oil resources started growing too slowly, thanks to diminishing returns.
Sorry I couldn’t add too much about the world to this post. More trade can’t really fix our problems now, unless somehow a ramp up using some cheap energy source in Africa can somehow temporarily fix things, with lots more debt. Of course, if workers in Africa are only paid $21 month, they will add practically nothing to demand, making even the new bubble collapse quickly.
Well, we’ll see how it unravels. We both agree about general direction. Race to the bottom. The only difference is the timing. My guts tell me, that the BAU will be maintained in ever decreasing First World for another 10-15 years. The TTIP and APTA are ways to prolong the inevitable for another few years. The other 2nd and 3rd worlds are going down first. It happens before our eyes. The Arab Spring, current exodus to EU, Middle East Syria, Yemen, Ukraine, Greece, etc. are good signals. PTB will somehow manage to prolong the inevitable.
Your energy consumption forecast says it will be rather 3-5 years. Again – we will see it happening.
I’m siding with Gail, with significant disruptions along the way at any time. I think we’ve already entered the “anything goes” period of history where volatility is too much to predict based on precipitating factors that are themselves too many and too varied to predict. Which is right in line with the US Security apparatus and its focus on max faux “security.” Expect more and more volatility paired with more and more government provided “security” in the coming years and you won’t be disappointed.
I agree we are heading to fascist states. In my opinion it will give us a few more years.
I also agree that the volatility is very high and rising. I also see that many countries military expenditures are in decline. You don’t decrease this part of your budget if you’re seeing war ahead. And the main players’ intelligence agencies are not sleeping. They are chewing all this stuff 24/7/365. It means we have a few more years of shaky sailing.
I too believe we are heading toward a destabilization period in our just in time economic system. Lots of volatility ahead lots of countries will fall off the wagon. Grow or die. Seems to be no middle ground. There is a hail Mary attempt going on globally to make the system appear more robust than it actually is. That veneer is wearing very thin. As we’ve seen lately in China the desperation is completely apparent.
True. The ammunition bank is almost empty. We are entering the “negative interest rate” terra incognita. We’ll see how it goes. 3-5 years is just too short for my feelings, but maybe I’m too optimistic, which is quite hilarious. Especially considering my position and comparing it to the mainstream narratives.
I guess one thing is the quantity of energy to be consumed globally, but another is who consumes it. If some countries drop out of the globalization train, the rest may consume a little longer. This is the logic we are seeing now.
Ed Pell
Just a couple more thought provokers on the issue of ‘how much is human labor actually worth?’
Many expert systems now perform very credibly in some occupations we think of as ‘highly educated’. For example, my eye doctor now sheepishly says that the machines are getting pretty good. On a bad day, he worries about what he is really adding to the machine diagnoses. We all know that most weather forecasts are now generated by machines. The cop directing traffic was long ago removed in favor of traffic lights, and now the traffic lights are controlled by computers using methods we stole from the study of bird flock motion which speed traffic right along better than any human cop could do.
So, here is my question: Do you think that an expert system can now be devised which excels at taking multiple choice tests, such as are required by No Child Left Behind? And if a machine can do it better than any human being, then why are we training children, at great expense, to learn to take multiple choice tests? Why does Hillary Clinton think that spending more money teaching children to take multiple choice tests is a really good idea?
If we humans must sheepishly admit that much of what we considered to be human intellectual work is actually done better by machines, what sort of education IS appropriate? Is Google right, and whatever it is that formal education is doing is irrelevant to the real workplace? Has Charles Hugh Smith correctly identified the only skills which still have value (last few days of his blog)? How many humans are actually capable of doing those things?
Wednesday evening some neighbors and my wife and i went to a musical performance at Duke. We ate dinner in a new restaurant. It operates like the Carnegie Deli…you go in, the menu is on the wall, you give your order, sit down, and the food is brought to you. I had a big salad bowl, which these kinds of restaurants excel at preparing. Probably 20 ingredients in the salad, far more than I would be able to use at home. Also, very labor not-intensive as much of it was chopped using machines. Bus the tables ourselves.
The big job additions since the trough in 2009 are wait-staff and bartenders. But the entrepreneurs are busy with the Constructal Law and are steadily reducing the labor content in restaurants. These kinds of restaurants also need a constant supply of a uniform product. Small farmers are not a feasible part of their supply chain. This is the factory model applied to a restaurant.
A young man I know makes his living as a carpenter. I was grumbling to him about the loss of skills as machines replace everything. He told me that just in his few years, he has seen factory assemblies replace most things that were formerly built on site. He says that carpentry is becoming ‘deskilled’.
I have a fear (for my grandchildren) that ‘this time really is different’.
Don Stewart
Ed Pell
Also, think about the altos that trade stocks.
Don Stewart
Don, population density and enclosure are the issues.
First we, humans, wondered around and found food. Life was good.
Then population density increased to the point where all the good wondering around land was taken. We then bumped into other groups in our wondering and told them this is our wondering around place leave or we will hurt you. This was the beginning of enclosure.
Now enclosure is near complete. All resources needed to keep a human alive and happy are owned by someone. Coupled with this we have the fantasy that the free market will feed, clothe, shelter everyone. This is just not true for the free market or any market, social, economic, political system. The truth is the owners will allow non-owners participation only if it makes the owners happy. The participation may be at wages below those needed to feed ones self, see the Pullman Car strikes of the late 19th century.
In merry old England the sheriff would kill anyone who violated the king’s property rights, in say his hunting forest. In merry America we are seeing the sheriff do the same to protect property rights against have little peasants. When the U.S. will go all the way and stop food subsidies to those who offer no value to the owners is an important question. As it is in many nations KSA comes to mind.
As you say how many artists and researchers do we need and what fraction of the population has the native abilities for these niches? I would say few and both counts. But there are still roles for house slaves, or rather servants. People like to be waited on by people. It may be soon that robots can do the job of servant but it will be a long time before they cross the uncanny divide and have equal appeal to humans as fellow humans. On the other hand gardeners, grounds keepers, handymen, can be robots now they do not have face time with their masters.
To the question of what education I say most are not needed or wanted and education will not save them/us. Now do we feel the owner acquired their ownership in a just way and we should lie down and die to honor their wishes? Hell no! I and mine have as much “right” to live as they and theirs. [FBI, NSA, DHS, Mossad I would never violate the property rights of the owning class]
There used to be common lands that all could use. Use to hunt, gather, graze stock, fish, etc.. Now the only resource that are not enclosed as private property are the ocean fishing rights beyond 200 miles and the atmosphere. In international law even the moon and all heavenly bodies are enclosed not open to use by anybody.
The oceans and the atmosphere are suffering the tragedy of the commons over use and destructive use for short term gain. I expect international standards will be developed for the use of ocean and air. At that point national and UN troops will be used to enforce the enclosure. To stop or punish or kill the violators.
The process is far-advanced. Some time ago I spoke to the in-house stone mason at the university art gallery and museum here, a splendid Grecian building created out of coal-wealth a 150 years ago.
He had just carved, and installed, a very fine limestone inscription for one of the galleries. A German, he complained that masonry had been de-skilled there by the ever-expanding use of machines, making his hand skills redundant: he was utterly depressed by it all.
Restoration is perhaps one of the few areas where the subtlety of human hand and eye will be required, not construction.
I just want to say THANK YOU to Don Stewart and Ed Pell for this exchange. SO MANY great and relevant points made here!
There is another interpretation for Figure 12.
Part of this has to do with the fact that Denmark and Germany were innovators in developing the modern wind industry, and Germany was an innovator in developing the modern PV industry. I would not be surprised to see the costs depicted in the chart (good for one moment in time) showing lower costs in the future.
Moreover, countries like Germany had a spike in costs with the closure of several nuclear plants, but this too should be a temporary process.
Today the current cost for wind or solar energy is at the lowest point it has ever been. The current cost per kWh of large scale wind energy is between 2 and 3 cents of a dollar, and the current cost of large scale solar energy is between 5 and 6 cents of a dollar.
These energy costs can compete successfully in many places and various situations with coal.
If you are looking for a cheap, long lasting source of energy this is it. However, I suspect Gail of having ties to the oil industry since I am sure she is aware of these costs.
“I suspect Gail of having ties to the oil industry since I am sure she is aware of these costs.”
I need to change my diapers and stuff my entrails back in through the gaping hole in my side that burst open due to hysterical laughter that resulted from reading the above comment.
Feel free to ignore the following:
The German Solar Disaster: 21 Billion Euros Burned
http://www.thegwpf.com/german-solar-disaster-21-billion-euros-burned/
Spain’s disastrous attempt to replace fossil fuels with Solar Photovoltaics
http://energyskeptic.com/2013/tilting-at-windmills-spains-solar-pv/
Here’s John Mauldine’s take on new oil. He points out, quite reasonably, how much the shale oil has improved it’s recovery rate etc;
http://www.mauldineconomics.com/frontlinethoughts/?utm_source=newsletter&utm_medium=email&utm_campaign=frontline
Rune Likvern talks about how these numbers can be temporarily made to look better than they really are. I am not sure to what extent he has written about this on his blog yet. This story seems to be somewhat related. http://fractionalflow.com/2015/08/03/are-the-light-tight-oil-lto-companies-trying-to-outsmart-mother-nature-with-their-financial-balance-sheets/
He may have another post on the subject in the not-too-distant future.
The real cost of wind and solar includes a lot of long distance transmission and balancing that is not reflected in most calculations. Furthermore, a large share of the resources are used at the front end. Because of these issues, by ramping up solar and wind, we use our fossil fuels more quickly. We pull down the “battery” of fossil fuels that we were given more quickly.
We need to be looking at energy flows on a calendar year basis, to see what truly happens with “renewables”–whether there is any chance at all of pulling down our energy battery more slowly.
The comparisons using leveled cost are deceptive, partly because they miss many costs, and partly because they miss the problem with front-ended use of resources. Wind and solar PV mostly replace fuels (coal and natural gas), not electricity, because we pretty much need the whole system, and just add them on, in a way that helps offset fossil fuel use.
Alternative energy production is another attempt of kicking the growth can a bit father down the road.
Solar panels and wind turbines did not build nor do they maintain the electric grid. They did not pave the roads or build the bridges. They did not extract any of the raw materials they are built from One cannot simply disregard all the energy that is used to create and maintain an environment where wind turbines and solar panels can be useful. Without fossil fuels, solar panels and wind turbines are utterly useless for maintaining any semblance of modernity.
Exactly.
“Without fossil fuels, solar panels and wind turbines are utterly useless for maintaining any semblance of modernity.”
If you are trying to maintain the modern American lifestyle, using any means, your pursuit is useless. If you are trying to maintain exponential growth indefinitely, your pursuit is utterly insane.
Asking whether renewables can maintain BAU is asking a completely wrong question, in my opinion.
Well actually it’s the right question to ask. But what do we do with that conclusion. Do we totally denounce renewables altogether, as some seem to suggest.
What is the place for low scale solar panel production for a scaled down society that tries to live within its means? The alternative is just to keep burning coal and oil. Or to totally ramp up supply and try to keep the growth edifice going with nuclear? Pretty soon we’d find that energy supply was just one limit that we are up against and the rest will come crowding in.
What is the place for low scale solar panel production for a scaled down society that tries to live within its means?
Such a society – a fraction of the current 7B human oxygen suckers currently alive – has not yet been contemplated, never mind proposed, so we simply don’t know.
The better question IMO is, can fossil fuel enabled renewables support any society that the current fossil fuel enabled society is reasonably likely to devolve into? And my answer is: I can’t imagine how.
I agree. Alternative energy allows us to pull coal and natural gas and metals out of the ground quicker, in the hope that we can keep the system together a little longer. It really doesn’t work though.
Labor is in the same situation as oil. The consumers can not pay for it. China seeks to devalue to take the last scraps of labor sales from the globe. Which might work if there were standing customers in the world. Time for everyone to hold our breathe, hope to see you on the other side in 2025.
Ed Pell
I said pretty much the same thing in my note to BW Hill. I put it in the language of thermodynamics. The ‘universal’ law of thermodynamics is that heat dissipates. However, we discovered almost 50 years ago that islands of structure can emerge in which are stable ‘far from equilibrium’. In cosmology, these islands could not emerge in the very hot universe right after the big bang. But the cooling of the universe left more room for interesting structures like galaxies and suns and planets and bacteria and humans to evolve.
We are used to the notion that humans have ‘energy slaves’. But is a human destined to be valued the same as an energy slave? Will a human and a drop of oil whcih have the same ability to do work be paid the same? Perfect information and perfect robotics and completely free trade (meaning unfettered global financial capitalism) take us in that direction. Since humans have the characteristic that they breed themselves without requiring any payment or work by the corporations, then there will be a plentiful supply of labor. One logical outcome is that humans and machines approach an equilibrium which provides very low wages for humans.
BW Hill recollected an old friend of his who worked on a hybrid analog/ digital computer in the early days at General Electric. The friend said ‘I hope we are never stupid enough to make one of these which doesn’t have a plug we can pull to stop it’. I extend that to the thought that we have built one (the globalized, profit maximizing, unrestricted economy) and we now find we cannot unplug it. The global machine destroys the ‘far from equilibrium’ structures which enable humans to earn more money than the machines.
Don Stewart
Don, excellent point. Without our energy slaves we are left with what we can do by ourselves. In other words no much.
So we can look forward to using real human slaves again. What a turnaround!
Never stop improving!
Good stuff Don. Humans not only replace their own labor with cheap energy enabled mechanized/computerized equivalents, but drive down the price for remaining human labor in the process. Somewhat intuitive and seemingly obvious, but important nonetheless.
Which leads to the larger question. If we were truly all that smart, why didn’t we see all this coming in the first place? It was certainly foreseeable, as more than few Sci-Fi futurist writers did. And therein lies the rub.
Myself, I’m much less interested in speculating on where we go from here, and much more on analyzing on how it was that we got here in the first place.
Ed
The ‘other side’ might well be the Next World……
Oh well, good company!
On the question of whether or not it was ever different, it is in my opinion too cynical to say that it’s the same as it ever was. I have noticed a very steep decline in my lifetime, from the 80s to our present day.
Now we are no longer even pretending, no longer even giving prudence or honesty a second thought. There was once a time when lip service was paid, and small efforts were made. No more. We are full steam ahead into infinite growth, using everything we can as fast as possible, depleting every single resource we can in order to make a few people obscenely rich beyond all imagining. Gordon Gekko is a model of humility compared to what’s going on now. Pornographers of the past would blush with embarrassment at mainstream tv and movies now.
But, where I will agree is this is where the obvious evolution of our system has taken us. We were never going to take our feet off the pedal for the greater good, for our children, or other such nonsense.
All of the work of the past, everything we have discovered and built and produced, has led to this moment…where a small number of rapacious people feast on it all. Consider the IT infrastructure, for example. The end result is a few traders on Wall Street using HFTs to make billions trading everything under the sun in milliseconds, while the rest of us consume endless trivial entertainments.
It’s too late! See that’s the key, that’s why heroism has to be utterly rejected in all of its forms. Every day gets us closer and closer to the end, the heroes will end up broke, drowning in alcohol and holding tin cups at the side of the street. Or, of course, drafted into the military where they can pretend to be manly and get blown up for the benefit of the banks and corporations. Don’t let it happen to you.
Well put! Heroism – right along with its twin brother patriotism, is indeed the last refuge of fools and scoundrels.
The difference between now and say 200 years ago is there was still room to grow. We are running out of room to grow. The only growth that we can do is destructive growth like legalizing drugs and adding them to GDP. Printing money. High frequency trading. Pollution galore. Ad nauseam.
I reckon that because the system must grow or die… what we are experiencing is expected …
It’s kinda like an engine red lining … it’s whining and screaming … and we keep hammering on the gas pedal… but the lubricant pump is failing … and soon the engine will seize and burn out…
But the car will hit it’s fastest speed just before the engine blows….
Why has no nation decided that it is a zero sum game and killing the outsiders is a winning strategy? Well other than half assed efforts of the U.S. and KSA and Indonesia and various groups in Africa and Germany twice and …. oh never mind.
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If China really is trying to drive down its currency in any meaningful way to gain trade advantage, the world faces an extremely dangerous moment.
Such desperate behaviour would send a deflationary shock through a global economy already reeling from near recession earlier this year, and would risk a repeat of East Asia’s currency crisis in 1998 on a larger planetary scale.
China’s fixed investment reached $5 trillion last year, matching the whole of Europe and North America combined. This is the root cause of chronic overcapacity worldwide, from shipping, to steel, chemicals and solar panels.
A Chinese devaluation would export yet more of this excess supply to the rest of us. It is one thing to do this when global trade is expanding: it amounts to beggar-thy-neighbour currency warfare to do so in a zero-sum world with no growth at all in shipping volumes this year.
More http://www.telegraph.co.uk/finance/economics/11799504/China-cannot-risk-the-global-chaos-of-currency-devaluation.html
I think the world is facing an extremely dangerous moment.
I concur!
Ambrose Evans-Pritchard says, “One day China will pull the lever and nothing will happen. We are not there yet.” I hope he is right.
One of the issues with the devaluation is that it makes external debt harder to repay.
Perhaps not …. but we are close… the grim reaper is now alert… and watching…
http://img1.wikia.nocookie.net/__cb20140704202542/villains/images/e/ec/Cemetery-man-grim-reaper.jpg
Kind of like paying a mortgage on a 500k note and the house isn’t worth 200k. And to add insult to injury the house is garbage thrown together with cheap materials built on infertile worthless land right next to more of the same. The parallels of this to what’s coming is striking.
@ JD says “Since when are lying and cheating false concepts? Since 2008? since forever? Just now? False they are not. Evil and ugly they are always.”
I can categorically state that anyone who holds those beliefs: (a) has had a difficult life; and (b) will continue to have a difficult life. It’s your choice to either accept or reject lies. Accepting lies is the easy way out; you just have to passively submit without inquiry.
Rejection requires intelligence, resources, time & effort to study history, politics, economics, religion, psychology, and a host of other disciplines. But the rewards are potentially great: one can achieve sufficient financial security to free themselves from the mundane existence of those trapped in the system.
You can tell I came from peasant stock – along with everyone else except for around 500 extended families – so it’s my natural inclination to try and help others. However, I can see myself definitely slipping over to the other side. If people cannot clearly see reality, why should I bother attempting to help them? It’s to my advantage to help obfuscate the issues, creating more separation between me and potential competitors.
You wouldn’t be on this blog if you thought the lies didn’t matter.It’s not your a] or b] options. It’s because we see lies and misinformation all around us we are on this blog. Yes, it does take an enquiring mind to be willing to find out what is really happening. I reject your hypothesis.
You strike me as still utterly conflicted B9K9. Perhaps you’re a younger, alternative version of me?
Evil and ugly is indeed ascendant these days, but it doesn’t have to consume you. Hint: your personal death won’t be the end of the universe, the world, or you. You will neither be missed or miss it in the end, as both you and it will simply move on.
There is no “winning” in this world, in spite of all your capitalist masters have told you. There is only the eternal now as long as we are physically able to perceive it, and the joy or torment of sharing it with your fellow travelers on this journey. And in the end that is our only choice. Is it joy, or is it torment?
http://www.nbcnews.com/news/weather/el-nino-could-be-among-strongest-record-raising-risk-floods-n409376
‘El Niño Could Be Among Strongest on Record, Raising Risk of Floods’
The phenomenon known as El Niño is brewing in the Pacific Ocean — and it could be one of the strongest on record, raising the risk of floods and mudslides this winter in Southern California, forecasters said Thursday.
“It could rival the most powerful El Niño since records were first kept in 1950, experts from the government’s Climate Prediction Center said. That was during the winter of 1997-98, when Southern California was drenched with twice its normal rainfall.
It also generally suppresses hurricane activity in the Atlantic Ocean — and this has been an extremely quiet Atlantic hurricane season.
This year’s ocean warming could make for what some climatologists are calling a Super El Niño. One went so far as to tell the Los Angeles Times that it “has the potential of being the Godzilla El Niño.” And a NOAA blogger cheekily suggested naming it Bruce Lee.”
Here’s an interesting sideline to the above potential scenario; The 1906 Earthquake followed 1905’s record setting snowfall which has never been beaten. A train got engulfed with snow and they were stuck there for two weeks. The idea being all that weight on the crust will cause flex and that could release a major earthquake. So it could be a double whammy with torrential, flooding rains followed the next year with an earthquake. Hollywood can film it from right there in Hollywood.
Here’s another climatic potential; Forecasts for climate change include the possibility of hugely increased storms, on the order of hundreds of inches in a rainy season. But we will never know when the first such storm hits, but the circumstances will have the same Super El Nino occurring. Could this be the one? Stay tuned…
http://www.dailymail.co.uk/news/article-3196963/Is-GODZILLA-El-Ni-o-coming-California-winter-Latest-forecast-suggest-weather-event-hit-West-coast-biggest-records-began.html
There’s a better link for the Super El Nino – this one compares satellite footage the 97 El Nino vs. the one now. This one looks bigger!
Oil is now lower than it was after the 2008 financial crash. WTI is right at $42/bbl today. The last time WTI was that low was in 2003. http://www.macrotrends.net/1369/crude-oil-price-history-chart
Oil is now lower than it was after the 2008 financial crash. WTI is right at $42/bbl today. The last time WTI was that low was in 2003. http://www.macrotrends.net/1369/crude-oil-price-history-chart
Some months ago I posted that if the price of oil was crashing it was because the PTB wanted it to crash — the rationale being that the economy could no longer handle expensive oil — the fracked wells were sunk — so better to allow prices to drop and get a last gasp of growth by putting money in people’s pockets through low oil prices.
Either my theory was wrong — or it was correct but the drop in oil has not resulted in the anticipated spending surge…
If the latter is correct then we are in very dangerous territory….
The latter is likely correct. And yes, we’re in very dangerous territory now.
I concur!
By making the dollar stronger, it devalues the yen. Thus in part fixes part of the trade deficit we have with China, because our dollar can buy more, and the deficit is reduced.
It has the effect of also making our goods more expensive overseas, so we have to find products we can sell overseas and still make money on them, or figure out how to manufacture products here, for a lower cost so we don’t import them.
Because we tanked the price of oil with a stronger dollar, Iran is having to pump a lot more oil. This is especially true if they negotiated with China to trade in Yen’s which also were devalued compared to the dollar. So they are having to pump a lot of oil to try and maintain their economic viability, which lowers the commodity prices further.
I don’t think so. Daily spot prices for WTI went down to $31.10 in December 2008. There are quite a few days in December 2008 and January 2009 when prices are below $42/barre.
I guess the 10 year chart on the macrotrends site is showing something different: http://www.macrotrends.net/1369/crude-oil-price-history-chart ?
The $42 price is monthly, as opposed to the spot price low at any given moment. Not sure if averaged by volume over the course of a month, or what.
Oil’s Worst-Ever Summer Signals Price Rout Is Nowhere Near Done
Gary Shilling says crude is headed for $10 to $20 a barrel.
http://www.bloomberg.com/news/articles/2015-08-14/oil-s-worst-ever-summer-signals-price-rout-is-nowhere-near-done
There is no driver of the global economy so I see no reason why commodities would not continue to slide in price….
The deflationary explosion cannot be far off….
Central Banks fear the word deflation which is the reason why they are frantically trying to create inflation.
Good quote from the article:
The chart shows monthly inflation adjusted data. The inflation adjustment doesn’t make a big difference, but the monthly averaging tends to miss low points.
It looks like after the 2008 oil price crash prices rebounded pretty quickly. This time around it appears the downturn in oil prices will last considerably longer. Very unnerving since each day of low oil prices will add another day to the amount of time it will take to spin up production again.
THe 2008 rebound was enabled by quantitative easing by the US and lots of debt issuance around the world, especially China. At this point, we are running out of tools to get the price back up. As I have said, I don’t expect the price to get very high, for very long.
@James say “You’re right, it’s no longer about right or wrong.”
I think you’re making a mistake with the ‘no longer’ qualifier. Could you – or anyone else – please point me to any period in time where invented concepts like right or wrong were determining factors?
Like all cultural constructs, morality can be grouped with other canards like law, justice, equality, etc ad infinitum. These methods of social control are excellent tools to induce a paralyzing state of cognitive dissonance among unwitting subjects who can can’t seem to reconcile fact from fiction.
Once you break free of the lies taught to you since childhood, it actually becomes quite trivial to see how the game plays out. I keep telling everyone that devaluations are the only way out, and what do I get in response? Some rote lecture on econ 101.
But if you understand human nature, then it doesn’t matter what social invention du jour is currently popular. Rather, the power principle simply asserts itself for all to see; that is, those who understand what is occurring. As usual, the masses will once again believe unicorn explanations.
Let’s go through a simple review to see where we’re at:
– population overshoot
– resource depletion
– environmental degradation
What form/type of artificial construct will be able to effective manage any/all of these very real physical constraints? Answer: none. Therefore, any logical conclusion would be: party on like a mofo.
But to party on like a mofo, you need ‘da cash’; how you gonna get it? Simple – know how the mechanisms will respond to limits. Finance is fake, built on a house of cards. The only possible solution is to deflate the debt overhang. Once you know that, then you know devals are coming. It’s not hard to understand once you put all the pieces together.
Agreed. Or in egg-head economists’ terms, the closer we get to the end the more our rational incentives will flip from conservation toward use it while we got it and from altruism toward every man for himself. I think we’re pretty much there right now.
“I keep telling everyone that devaluations are the only way out, and what do I get in response? Some rote lecture on econ 101.”
How do you devalue out of this?
http://www.usfunds.com/media/images/investor-alert/_2015/2015-08-07/COMM-have-commodities-hit-a-bottom-08072015-lg.png
Ok, I’ll play. Destroy/abolish the currency and create another at suitably lower valuation levels? It’s all relative, as some guy said.
Right.
I don’t see how a devaluation would solve the core problem — which is that we are out of cheap to extract resources.
Which means that we have fewer barrels of ‘free’ oil to do the things that we used to i.e. to produce economic growth.
If someone can explain how devaluation solves or even delays the end game associated with that problem — I will award them with the Fast Eddy Medal of Genius and Glory.
http://assets-s3.usmagazine.com/uploads/assets/articles/55018-flashback-friday-bruce-jenner-wins-gold-medal-at-1976-olympic-games/1344626706_bruce-medal-467.jpg
Good point. So let me clarify: although it won’t solve anything, devaluation will allow us to kick the can down the road apiece, which is all it was ever designed to do in the first place. But that’s a given, as we’re currently in the death throes of western society as we know it.
I don’t think it needs that, although Special Drawing Rights are being considered as the future world currency I read [somewhere].
What will first probably have to happen, and you were v critical of me when I first suggested it last year, is a debt jubilee. More and more people are coming around to seeing that it is the only option. David Graeber, reluctantly, writes in “Debt- The First 5000 years” it is the only way out.
Blogger Bix Weir says it will change all debtors into asset holders [the banks will have to let that happen now – especially because they have sold off their mortgage portfolios [he says]. Steve Keen says all private loans on housing will be paid off via the CB cancelling the debt.
Banks will have to stop all derivatives trading [suggested by Richard Werner] and only lend for productive purposes.
Kunstler puts it cogently: “The whole Zirp and QE game can be boiled down to a basic wish to get something for nothing, that is, prosperity where nothing of value is created”
Well, the banks have a reckoning overdue. but no way will it be a voluntary exercise. It will take a desperate government to reset the rules, and one day soon, desperate is what will define them!
I think that will be when we get to the Minsky Moment [the point in debt inflation where the cash generated by assets is insufficient to service the debt taken on to acquire the asset] Right now credit based currency is buying less and less value every day, called declining marginal utility, or declining debt productivity.
This is what Gail’s blog is about. The downward slope of the graph [I can’t post a pdf, but its in Nate Hagen’s blogs] shows it touches bottom in 2015. It hardly sounds good!
This link is for Gail and Don Stewart
Fast Eddy I implore you NOT to go there and poison their message!
You do enough here already.
Survival Mom
http://thesurvivalmom.com
From the web pages…one beginning of a post
Prepping works best when an entire community is doing it together, but this is extremely rare and not easy to achieve This is especially true when our neighbors, family, or friends aren’t at all interested. Yet. Still, we care about them and want to see them able to care for themselves in the event of an emergency, power outage, or natural disaster. Here are a few ways to get your preparedness missionary mojo in motion and get those non-preppers on board.
Best to be prepared
The problem with discussing prepping with neighbours is that youll never convince 100% of them.
Unfortunately the ones not convinced will be converted overnight when the shtf—which leaves the ones who have taken precautions in a very difficult and vulnerable position.
I find its best to say nothing at all to anyone
End
Too true.
I once asked a canny old diplomat for his best advice for Life (I was but a strippling); he came out with the old chestnut, much roasted but always delicious:
‘See all, hear all, know all; say……. very little.’
Or the Spanish:
‘No flies in a closed mouth’.
But don’t They plan to get us all eating insects as a source of protein? 🙂
Dear Jeremy
Thank you very much for the link. It will come in handy for me.
By happenstance, I was sitting in the coffee shop this morning doing some thinking about an upcoming Southeastern Slow Money meeting in early September. I am trying to collect my thoughts, and work on my delivery so I am part of the solution rather than being part of the problem…or just AWOL. I usually think better when I focus on something a smart person is saying, but which isn’t about my direct problem. This morning I chose some things that Jane Hirshfield, the poet, discusses in Ten Windows: How Great Poems Transform the World.
A serious poem sets out to both change the perceptions of the poet, and also the perceptions of the readers. Even when the poem is about how unrewarding it is to write poetry, the first sentence still holds true.
To start with something positive, consider Hirshfield’s reference to the first Buddhist Truth: Dissatisfaction is at the root of unease. Hirshfield thinks that someone who was totally at ease would never struggle to write a poem. And, segueing over to Kelly McGonigal’s book The Upside of Stress, we know that people who struggle to do productive things are actually happier and healthier and live longer. So the first point is that imagining being on a ‘total relaxation’ cruise or beach visit might be OK for a little while, but it is no recipe for a good life.
We also know from Sendhil Mullainathan’s book Scarcity: Why Having Too Little Means So Much, that the perception of scarcity narrows our mind and prevents us from doing the innovative things which might relieve our discomfort. So if we are going to try to be artistic about persuading our neighbors to cooperate in terms of things like localization of the economy or prepping for collapses of various kinds, we need to both recognize the discomfort that people are feeling, and offer some glimpses of how things might be better, and try not to let a gloom of scarcity settle over everything.
I began by making a 2X2 matrix of the situation according to me.
FROM:
Steadily increasing capacity to do work
More money
Specialized jobs
Big cities
TO:
Decline in work capacity
Deflation of money supply (loans scarce)
Most jobs are close to primary production
Villages
and
FROM:
Gambling based on growth psychology
Individualism
Socially driven consumption patterns
TO:
The psychology of Safety. see
http://www.resilience.org/stories/2015-08-13/austerity-and-degrowth-dealing-with-the-economic-crisis-and-the-ecological-crisis-together
Pleasure in group work and personal performance
Traditional hedonism
Jane Hirshfield: ‘when a work of art is unable to move us—because of some failure in its conception or clumsiness of execution, or because we are too far from its originating circumstances to understand what request it makes of the senses, heart, and mind—that work itself becomes inert, becomes noise, deafened to meaning and feeling.’
So I think that whatever I have to say should probably not include a lecture on the ‘thermodynamic death of an oil field’. Instead, I have to start from where people are…the Buddhist Dissatisfaction which may possibly motivate them to do something different.
Hirshfield has a beautiful image: ‘but some hairline-narrow crack opens in the self’s sense of purpose, and there art, there beauty, is. The result is as irresistible as eros, as voracious as the new green weeds in the crack of a sidewalk. Art’s limitlessness awakens in us the sense of the psyche’s own limitless rooms. It is how the inner world grows continually new.’
Then I began to think about potential resources I could use to try to open people’s minds and defuse the scarcity blockade. I’ll keep thinking about it, but one film crossed my mind. The French moviemaker Agnes Varda made a biographical film about her husband Jacques Demy just before he died. The title is Jacquot de Nantes, and it recounts his childhood experiences and how he used those experiences in his own films that he made as an adult. His father ran a garage in the city of Nantes. When WWII broke out, his father was mobilized, but was sent to work in a munitions factory nearby and came home in the evenings. The war, of course, severely cut the ration of gasoline, so the garage didn’t do much business. Then the Germans broke through in Belgium and a stream of refugees passed through Nantes on their way south. For some time, Jackques went to live on a farm. He returned to Nantes when things calmed down, but returned to the farm again, after the Americans bombed the city in 1943. He came back to Nantes about the time it was liberated.
What interests me about the story and the film is that Jacques was moving between two worlds. Nantes had been a reasonably prosperous and peaceful place, but was upended by the war. The farm was in a different world entirely. There was no electricity and the farm was pretty much self-sufficient. The farmer made clogs by carving blocks of wood to sell to the neighbors. Jacques becomes a reasonably good clog maker. The farm wife remark to Jacques parents when they drop him off: ‘We don’t see the war here’. Jacques learns about sex from an experienced local farm girl in the barn. He is smitten with movies, and begins to make his own movies by drawing with grease pencil on film stock and running the drawings through a makeshift projector. He finds an ancient hand cranked camera, and acquires it by shrewd trading. And so begins the career in film of a child who would grow up to cast Catherine Deneuve in his movies.
The war intersects with Jacques four times. He is sent to the farm the first time. Then he is bombed back in Nantes and goes to the farm a second time. The farm family is having a big family dinner outside when a lost German soldier stumbles on them and asks which way the Allemagne have gone. The family points, the soldier steals a bicycle and off he goes to search for the friendlies. The final time is when he is back in Nantes right near the liberation and the German commander is killed by partisans and the Germans execute 50 people in reprisal.
My point is that one can either focus on the war, or on the tremendous growth that Jacques experienced during the trials imposed by the war. Perhaps more of us need to learn to make clogs, and movies with scavenged materials.
Thanks again for the reference…Don Stewart
Survival Mom . com is an amazing website with multiple helpful articles, sources, links, ect that will aid anyone facing collapse. You belong there, Don, and am sure will contribute much to their online community.
As far as “work”, humans are perhaps the only creature that works, others live.
All notable religious figures have rejected the notion of external riches, and we are so poverty stricken inwardly that we reach outside to feel worthy.
Interesting discourse concerning the film, too bad we expend so much energy/resources concentrating on conflict/disorder (war), seems to keep one awake.
Major entertainment is violence…
I agree writing poetry will be an appropriate avenue of release.
Perhaps a different golden age of Greece will come about…one can only hope.
Kudos Don!
Glad to have you back again. I always read your posts with the utmost of interest, as you seem to be such a study in contrasts.
In the above, you start off with a personal anecdote, segue seamlessly into a folksy/academic analysis/discussion or two of points raised by the anecdote, take that a step further into a fully fleshed out two dimensional mental model complete with references, seamlessly walk that back to non-technical expert support, and then relate that back to your own possibly even more relevant personal observations, while finally closing with a two sentence summation that is both pithy and directly on point.
Whatever else you are or however much some posters on this board might disagree with you from time to time, you… and forgive me here for slipping into the common vernacular of the day for just a moment… FUCKING ROCK OLD MAN!!!
James
For a guy that is nearing 60 friggin years cold yourself…I would clam up a bit.
Ah – another site like http://www.peakprosperity.com — perfect!
I would like to invite the Koombaya Groupies to venture into the mom survival world — I absolutely GUARANTEE that I will not show up there posting the Koombya song….
Fast Eddy, Best you don’t knock it, Brother. I, myself, know of a man that is living collapse right now, no heat, no frig, no running water, a prefab mobile home that is infested with fire ants. Perhaps if he prepared as laid out in Survival Mom, may have lived the rest of his days in reasonable comfort.
You certainly are a smug, wise guy, know it all. Hope you remember all this when YOUR back is against the wall.
Please do NOT visit that website…you deserve NOT to be helped.
I for one appreciate Fast Eddy and the perspective he brings: stark realism.
I will prepare a little, but that’s all. I have no intention of being a survivalist as my wealth is slowly but surely drained by inflation and taxation to transfer to the bankers and their corporate and welfare minions.
I will not be the sucker. I’m enjoying what I can out of this show, making as much as I can and consuming as much as I can, and then saying goodbye.
Fast Eddy Fan Club…yep the end is near…LOL
We wouldn’t be complete without Eddy
I’m just stuffing my guts back in through the hole that busted open from laughing so hard at this intro… (I didn’t actually read the whole thing…)
A fable from FT.com appearing on the Browser….
Are you ready to feel good? I can’t HEAR you!!!
Are you ready to feel GOOD!!!! That’s better….
Population: End Of The Malthusian Nightmare
Global population growth is slowing, and may stop around 2100. “Falling fertility is sometimes seen as evidence of decline – a sign our most dynamic days are past. But it opens the prospect of a new stage in human existence, one with a limit on our numbers and greater control of our own destiny. The goal should be simple: to let every human on this planet choose how many children they can love and care for”
https://thebrowser.com/articles/population-malthus-nightmare/
“The goal should be simple: to let every human on this planet choose how many children they can love and care for”
Let us sing:
I read your lead in and thought nothing can live up to this but then I red the title. lmao and then you signed it with Joan.
Chalk it up to whistling past the graveyard, and/or being a paid shill for the “progress” project. We 21st century humans are enamored with our own specialness, which will no doubt be our epitaph if anyone ever actually reads it.
The Archdruid’s latest post ridicules the faux “change” being offered up for our consumption in 2016. Hopefully we’ll set records for voter apathy in response instead. Now that might represent change we could honestly believe in.
http://thearchdruidreport.blogspot.com/2015/08/the-war-against-change.html
JMG seems to be doing an about face. He sold books and written blogs on the premise that we are done as a global industrial civilization and now he’s entertaining the thought that there could be a way out if the right people were put in power. Ain’t gonna happen.
I think he still subscribes to a possible “soft landing” scenario, or perhaps he’s just being positive due to his religious leanings. I’m no expert, but I don’t see in any evidence for either.
Hmm, i’ve read his blogs quite a bit and my take was not a soft landing. Maybe he’s changed his tune but that just confuses his loyal readers.
That was my attribution, but in any case, his latest post ain’t supportive of any of the current PTB in the least. It’s pretty much a ridicule of the current establishment as just more of the same. Which they are. And how could they not be?
JMG does not believe in a soft landing for the human race. Rather, he predicts “catabolic collapse.” In other words, the fall of techno-industrial civilization will not be some big, gory, Hollywood mad max scenario. Rather, there will be fits and drops to the decline. It will be slow and relentless with moments of recovery followed by longer declines, until we reach a new steady state, followed by yet more descents to lower states of complexity. He often uses the 200 year decline and fall of the Roman Empire for inspiration.
The question is if/when fossil fuels become too expensive to extract could permaculture feed a population approaching 11 billion by 2100? Many on here can’t see it feeding 1 billion let alone another 10 billion on top.
These commentators and ‘predictors’ of the future never seem to think of any ‘finite world’ issues do they?
For instance – how the hell do they think Africa can sustain a population from 3 billion to 5.6 billion by 2100 when they still have many millions of malnourished people there now?
Fast Eddy, you seem to be a follower of China. How many one time only devaluations can we expect?
I am currently in China (Hong Kong actually) — I can gaze across the polluted harbour air and kinda make out the Chinese border over there (where all the smog is pouring in…)
But my crystal ball is about as clear as my view….
Who knows how far China will go — one thing is for certain — they are really really really desperate…
I will be very happy when I get on the plane back to NZ next week…. I don’t feel very comfortable sitting on top of a gigantic powder keg.
The principles described seem to me very right and true. Looking to alternative energy and price it should not be forgotten though that the countries with the highest energy costs and largest amout of alternative energy also produce the highest GDP. Because they have a high GDP they can afford alternative energy, for which high prices are the basis. While I generally agree to Gails thesises it should be mentioned that there is space enough for energy savings enhancing productivity. The saved fossile energy could be used for other needings. Think of the development of the passive house or the trend to use bikes instead of cars. The existing economy needs to get prepared for low energy use and high energy prices – that will create a technological lead on the world market. It is correct that governments tend to spend too much money, especially for bank rescues and handling refugees instead of enhancing live conditions in their home countries. But if you look to countries like the western balkan or Russia where labour force and energy both are cheap, these are not where people want to invest. It seems as if regulated societies are trusted better. On the long run we will need an economy that can deal with high energy prices and use substitutes wherever possible (e.g. compost instead of chemical fertilizers). We should start a regime of calculating energy use and distinguish between fossile and free energy to base our decisions on. The CO2-regime could also help. From my point of view the industry will have to learn to manage with energy prices lets say three times the current level – that should be efficient enough to use alternative substitutes of fossile fuel. There is a large “but” – although there are plenty of fossiles still and substitutes seem within reach it has to be considered that also alternative energy is limited. So Gails economical approach, there is no unlimited growth with limited resources, is also valid for alternative energy. We will have to find an economical answer to that. We need a system that can handle declines and deflations.
The trouble with Passive Hauses and Bikes is that they are dependent on our infrastructure as well. Bikes need replacement tires and various other things. They work better on roads than in the grass. Passive Hauses depend on us wanting to live in the area where the houses are built. I expect most of these have been built in cities, not out in the country. Also, they depend on replacement windows, when one breaks.
Gail is right, in the long term bikes and passive houses require replacement parts and a working infrastructure. Adoptng them decades ago would have given us an extension on cheap oil.
Nontheless I believe at some point we will try to adopt them just as Cuba simply because we have no other option.
The problem is the longer we wait to adopt a less consuming behaviour the harder it gets for previous solutions to work as expected.
For instance If our predecesors treated oil as a rare material we would have been bound by the limits of energy provided by renewables. Sadly less energy available means less scientific advances as well. For instance with less energy use we would be probably just deploying the hardware required to support internet and possibly it would still be just available for few and for very important matters. We would not be reading this blog I suspect.
As Gail has explained with her model about economy, going backwards following our previous steps is not what our economy is designed for.
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Dear Gail and Finite Worlders
My retirement was short, but I will issue only a relatively brief statement and then go right back into hibernation.
The large questions that I see confronting us at the moment are fairly simple. The subsets of those few large questions are extraordinarily complicated. Our situation is somewhat similar to the issues facing modern physics: How to reduce a mind-boggling array of particular events into the movement of a handful of elementary particles under the influence of a few forces. And, alternatively, to expand the fundamental particles and forces into the mind-boggling array of particular events. In other words, our explanations need to work both ways.
Jane Hirshfield, the poet, reminds us that ‘to stare requires a stillness of both subject and object: we must be able to look both deeply and long.’ I would add to Jane’s word-bound perspective that of mathematics. To stare at the dynamics of the world, we need equations and graphs. Frank Wilczek, the physicist, uses a lot of projective geometry in his book A Beautiful Question…we are invited to stare. Now the world of fact has many dimensions, with a myriad of interrelationships causing changes over time periods both short and very long. Any time we choose to graph some particular subset of the changes, we inevitably leave out other factors which are also changing. In fact, there may be no way to ‘graph everything all at once’, as Wilczek observes that Complementarity is a fundamental of Quantum Physics…as in waves and particles at the root of reality. With our current level of knowledge, and with the probable limitations on ever overcoming the problems posed by Complementarity, we need to analyze the changes we believe to be important, with Hirshfield’s admonition to speak with ‘the voice, respectful of other presences, that we use in a library, church, or museum—the voice used when we feel we are in the company of something more important than ourselves.’
So I propose that we first consider the question of why the world has stopped growing in physical terms. The most important clue is, I think, the increasing depletion of work capacity in the fossil fuel industries, and particularly in oil. I pretty much accept two studies: BW Hill’s ETP model of the cost of production and the Ellen MacArthur Foundation study of the overwhelming inefficiency of moving humans with automobiles. Hill’s model projects that the GDP supported by oil will peak in 2017 and then decline. The GDP powered by petroleum climbed rapidly through the latter half of the 20th century. Hill’s decline scenario should not be followed too literally, since his model uses cumulative oil production to account for the amassing of capital goods which can be used to produce GDP. But, as Gail has pointed out, in a world of petroleum decline, much of what we have built will be of little use. A better way to look, in my opinion, is to observe that Hill is projecting a maximum GDP production for the world economy right about now, with growth slowing to a crawl and then declining.
The next thing to do is to look at the financial implications, using the lenses provide both by Gail and also by Nicole Foss. I particularly like Nicole’s use of the ‘musical chairs’ analogy. We can only find out how much real wealth there is when the music stops and the grab for chairs begins and we see who is sitting and who is standing. Another way of saying that all the derivatives have to collapse. The derivatives can collapse in one bad week, but then we have to sort through the real value in a post-petroleum world of things like skyscrapers and iron mines and the value of tar sands ‘proven’ reserves.
But, taking a clue from Jane Hirshfield and Frank Wilczek, we also need to look more closely at the bottom up process. Why is it that we can produce things which many people cannot afford to buy? Why do the Central Banks keep pushing more credit into the system trying to stimulate ‘Final Demand’?
Someone taught me decades ago that a business must accomplish three fundamental objectives:
*It must create value for the customers
*It must communicate the potential value to the customers
*It must capture some of the value created
I speculate that our ‘bottom up’ processes are no longer working…and part of what is not working is that many employees are not capturing very much of the value they create. What I have to say on that subject is best described by a note I sent to BW Hill, which I will quote from:
Second, there is continued confusion among commenters on the issue of supply and demand curves. Are you familiar with the Constructal Law of Adrian Bejan. Bejan teaches Mechanical Engineering at Duke, and is the author of many textbooks, including several on thermodynamics.
The Constructal Law says that anything that moves will evolve, over time, in the direction of easier flow. So, as a plateau is uplifted by geological forces, a river basin forms to move the water more easily, with predictable patterns. Heat, flowing to a sink, will follow predictable paths.
Now let’s suppose that humans are getting some work done, but the work is slow and difficult. Then, fossil fuels appear on the scene. Slowly, the humans will figure out what to do with the fossil fuels to make the work easier. Instead of walking or riding a horse, they will take a canal boat, a train, a bus, a private car, and an airplane. They will travel faster and using less energy (astonishingly to me, airplanes are quite efficient).
The humans will also figure out how to get the fossil fuels out of the ground more easily.
So what we have is a ratchet up. The new capability enables more work to be done. Does the additional work equate to more GDP? Put that question on the side for a moment.
Change gears to information. I used to work for Bell Telephone. In 1920, when Bell reverted to private ownership after being nationalized in WWI, the investment per circuit mile in nominal dollars was $80. By the time Bell was broken up in 1982, that investment number had declined to $8 and was headed asymptotically toward zero. The decline in cost to cover distance opened up many different communications possibilities, some of which we are still discovering. In addition, during WWII, an actress invented and patented the basic ideas behind cell phones. Those were held up a long time by disputes in Washington, but the log jam was broken around 1980, and you see what has become of cellular service.
We can ask whether the companies founded to take advantage of the information economy are making any money with the information. They may be making money with big data, which helps companies target potential consumers more precisely, but it is hard to make money as an author or musician creating original content. For one thing, copying is too easy.
I have this not very well formed opinion that fossil energy tended to create small ‘far from equilibrium’ structures which could extract some of the value they were creating by driving a truck or a tractor or operating a power machine or steering a ship or flying a plane. Those ‘far from equilibrium’ structures may now be threatened by robots. At any rate, up until very recently, fossil energy both enabled a Bejan like evolution of work quality and volume, and also generated the income for those who supervised the machines so that the money economy functioned pretty well with a circular flow of money as measured by GDP.
It is not clear to me whether the Information Age will have the same outcomes. Or even if the Machine Age may be drawing to a close, done in my robots. What may be happening is that we are capable of producing a lot which gives little benefit to the median wage earner because the median wage earner cannot create a ‘far from equilibrium’ structure for his employment.
These are just thoughts. At any rate, as you make very clear, Econ 101 supply and demand curves haven’t had much to do with it.
Back to me and my conclusions:
First: We will get more clever at doing work with petroleum…Bejan’s Constructal Law will continue to function. HOWEVER, it seems to me that the evidence strongly supports Hill’s model to the effect that GDP supported by oil is now peaking. Depletion is winning…work capacity is declining.
Second: We can think of ways to reconfigure the economy to make better use of a declining amount of oil. However, it would probably take both a Government and a Market collaboration on a scale we have never experienced. Since very few understand what is wrong, we cannot expect much in the way of targeted responses.
Third: BW Hill reports that the price of crude oil yesterday was at the largest deviation from his model (77 dollars in his model) since the oil embargo days. But the oil embargo was a plus deviation, while the current price is a negative deviation. The explanation for the negative deviation is probably a combination of business cycle events, a write down of debt due to instantaneous revaluation (a la Nicole Foss), the need for the sellers to generate cash flow at all costs, and the continued willingness of investors to gamble on anything that seems to promise yield.
Don Stewart
> I will issue only a relatively brief statement
Glad to see you back Don!
Don, these are “interesting” times and your posts are more elevating than most.
Please keep posting as you see fit. Thank you for the latest recap, most helpful to those, like myself, that fail to se ethe big picture.
Don,
I hope that the returns from hibernation continue; as i have said before, I ALWAYS read what you have to offer, and always appreciate the thought and constructive intent therein.
Don Stewart-
Please stay out of retirement/ hibernation. Looking forward to seeing more or your thoughtful commentary.
Thanks for your thoughts!
One analysis I saw said that an airplane was about twice as efficient as an automobile taking a single traveler a long distance. This agrees with what you said.
I think we are approaching a sharp downturn. It is hard for me to see that we will get more clever doing work with petroleum–the system will simply be too broken. We won’t be using petroleum for much of anything.
I have a hard time seeing a point in reconfiguring the economy to make better use of a declining amount of oil. This is basically the view of the peak oil movement, when they believed what Hubbert said, without realizing that he was talking about a situation where we were transitioning to another fuel that would replace fossil fuels, well in advance. It takes a long time to reconfigure the economy. It is hard to see that we have very much time. Perhaps a few well to do people can attempt to fix the situation for themselves and their families, but that is it. Perhaps that is what you mean.
I am not sure what “BW Hill reports that the price of crude oil yesterday was at the largest deviation from his model (77 dollars in his model) since the oil embargo days,” indicates, other than that his model needs some adjustment.
I read that people buying oil have 6 months contracts and may be paying 70$ from that contract until it ends (hedging). For the time being the fracking companies can sell at a cost for extraction. The party with the missing chairs will start when these contracts run out. So the price IS high for the buyers as BW Hill explains. When producers go out of business because of the next price adjustments the price will go up again. But in the end, it will not leave this year with 75$ median as BW Hill explains. So I agree that the model needs adjusting buit that looks like an adjustment even further down.
I also suggest the price also reflects some power aspects. Who has the power to enforce low prices from the saudis against the russians…
Gail
Only fools think they can build models which cover everything.
When Hill excluded the early 1980s from his data points when estimating his equations, he did so for a reason. To try to model the behavior of the Saudi government during that period of time would have taken him too far afield, and away from his area of expertise.
As I have stated here separately, I do not think that Hill’s model is tremendously useful as a guide to the decline. I think he has accurately assessed the peak of GDP supported by cumulative oil production. Other people can take that peaking result and turn it into various scenarios involving political and monetary phenomena…which is not included in Hill’s primary area of expertise. What Hill brings to the party is a focus not on barrels, but on work performed by the barrels. That is the entropic issue that is central to his model.
Thermodynamics has been a prime driver up until this point. In the future, it will set limits on our ability to do work, but for the next decades we are more likely to be limited by political and social conflict and our sheer inability to turn the Titanic away from the iceberg, than by the raw thermodynamic limits (IMHO).
Hill does have a lot of data which is not directly used in his primary model. Quite a bit of that data gives us clues as to how the oil companies (including the NOCs), are likely to behave over the next few years.
Don Stewart
welcome back Mate!
China’s currency devaluation could spark ‘tidal wave of deflation’
Western central banks advised to resist raising interest rates and told to prepare to ward off deflationary slump in face of cheaper Chinese exports
whatever the reasons behind it, Beijing’s economic gear shift will have far-reaching effects. Not everyone is as apocalyptic as Edwards; but he believes the new wave of deflation emanating from China could “overwhelm already struggling corporate profitability and take us back into outright recession”.
“As investors realise yet another recession beckons, without any normalisation of either interest rates or fiscal imbalances in this cycle, expect a financial market rout every bit as large as 2008
whatever the reasons behind it, Beijing’s economic gear shift will have far-reaching effects. Not everyone is as apocalyptic as Edwards; but he believes the new wave of deflation emanating from China could “overwhelm already struggling corporate profitability and take us back into outright recession.
http://www.theguardian.com/business/2015/aug/12/chinas-currency-devaluation-could-spark-tidal-wave-of-deflation
I agree with Edwards–devaluing the yuan tends to lead to more deflation.
Gail,
You wrote a nice article, but you didn’t address the balance of trade, or what I like to use is the current account deficit. I think it is really important. It is 400-600B/yr lost out of our economy each year as debt to other countries for goods we buy, but they just keep the money. To address this, part of the goals of the energy plan is to create new products, and increase the ability to manufacture goods, and provide services to -other- countries to attempt to even it out.
For instance we can cut our consumption of foreign oil to zero which is like ~33% and gain energy independence again, we can keep 100s of billions of dollars in our economy. We are also trying to get to gen4 manufacturing, which is more inventory control, and robotics, to help lower our prices as well as stabilize energy prices. All of which creates jobs here, and raises the tax base, and the money starts flowing without a need for economic stimulus. It is money we save or earn, with a balanced economy.
A very simple explanation is you are trying to save money for your kid to go to college, and you pay their college fund 20 dollars every time they mow your lawn instead of paying a lawn service 25 bucks. You still spend the 20 dollars, but it is now put in the college savings instead of the bills column. The part we are currently struggling with is we didn’t have a lawnmower, or even know how to mow a lawn, and the kid doesn’t really want to do it. You just spent the 200 dollars, he thought you could buy him an iPhone with on a lawnmower and he is upset. Now after a bunch of nagging, he gets the hang of mowing your lawn. You convince your neighbour you owe a large sum of money to, to let him mow his lawn for 20 bucks in exchange for forgiving 20 dollars of your debt, so you give you kid 20 bucks for going over to mow his lawn, he forgives 20 dollars of the money you owe him, and you give your kid 20 dollars towards buying an iPhone. For the same money you would have spent, you have 5 dollars towards your lawnmower cost, you have 20 dollars into the college fund, you are shedding 20 dollars of debt, your kid gets 20 dollars towards an iPhone and your neighbor is not only being repaid, but saving 5 dollars. The lawn service is mad. They tell everyone your kid is spending the money on drugs because he is a psychopath so he doesn’t take any more of their business. They raise their prices to other customers and blame your kid, all while extolling what a great job they do even though that is how they got started in the business, and they cost more.
You also have a neighbor down the street, whom you owe money to, but they won’t do the deal. They are like China, and you just keep running up a tab with them with no real way to repay.
It is really more complicated then that, but that is another aspect of what is going on.
Do you realise that imports are a benefit to the nation and exports are a cost? That is not the usual handle on “balance of trade” discussions. I’ve explained this before; Take Saudi Arabia [or China or whoever has a trade surplus with the US] The day will come when the Saudis will have send every last drop of petroleum off shore leaving their country an empty shell while the US goes on producing dollars. Who has the better deal?
When we have a trade deficit we receive goods and services that may be in short supply at home and in exchange the US sends dollars which are available in infinite numbers. Using the term “trade deficit” is a misnomer, it’s really a trade surplus and is beneficial to the US economy.
Saudi’s problem is that they export a third of their oil (About 10mbd) to support their ridiculous lifestyle. The other two thirds is thus available for sale. As that third begins to drop, the lifestyle will drop with it.I’ve tried to show how vulnerable the Saudis are in my article :http://collapseofindustrialcivilization.com/2015/07/29/and-you-thought-greece-had-a-problem/
But the saudis now know no other way of living and Saudi land wont feed them. Saudi won’t be left an empty shell. Long before all the oil as gone, Saidi will look like Syria on steroids
I’m pretty sure your 1/3 export, 2/3 consume is incorrect for Saudi Arabia. 9.7 mbpd produced, 7.1 mbpd exported crude, 2.2 mbpd exported refined, according to OPEC:
http://www.opec.org/opec_web/en/about_us/169.htm
I admit to making a misleading error above, it should have read USE a third of their oil to support their lifestyle.
The sentence is obviously in error, because it appears to say they EXPORT three thirds, which is of course nonsense.
I was summing up in round figures for the sake of general discussion, and statistics vary a bit between sources.
however, Saudi itself uses a lot more than 0.4 mbd to keep itself afloat
http://www.indexmundi.com/energy.aspx?country=sa&product=oil&graph=consumption
http://www.energyandcapital.com/articles/saudi-oil-consumption-could-drain-their-massive-supply/4922
http://www.wsj.com/articles/as-saudis-keep-pumping-thirst-for-domestic-oil-swells-1435786552
I took the wrong line item in my numbers. I see claims that Saudi Arabia uses 3 million barrels per day:
https://en.wikipedia.org/wiki/Energy_in_Saudi_Arabia#Consumption
The OPEC page shows demand at 3163 kbpd, with domestic refining 2202 kbpd and 988 kbpd exported, so they must provide 1.2 mbpd of refined products for themselves, and import around 2 mbpd worth of refined oil products.
Oh I get it! You are saying: Instead of fixing the unemployment problem and making energy cheaper, and creating a higher quality life for americans, it is better to sit on our butts and wait for an economic collapse akin to the Greeks, but by the time that happens, you will be dead and have collected every dime from social security you can so it doesn’t matter!
I totally understand what you are saying. It is the Republican Mantra, “Sit on your butts, and don’t do anything positive!”
Do you really get it? Sounds like your world is upside down from reality. Your remarks are utter nonsense
Your remarks lack substance, and don’t dignify a response.
Clueless to the end!
I think you have it backward. Because of the balance of payment deficit, US citizens are able to have a standard of living that is higher than it really should be. We pay for the extra by more and more IOUs. This is part of the reason the standard of living in the US is as high as it is.
No. The overvalue of the US Dollar is because we are the world currency and most international trade contracts use US Dollars. Printing more money by increasing the debt means more fluidity of the currency, which devalues it. Tightening of the monetary supply increases the value of it. All countries pretty much have to stockpile US Dollars for trade, as well as people and businesses which tightens the monetary supply and inflates the value of the dollar, when they start stockpiling it, it means the currency is no longer fluid, it tightens up the money supply.
The trade deficit is actually us buying goods on an IOUs which means we have to repay those. We aren’t trading, we just keep begging for more money as other countries are stockpiling the currency, and it is no longer fluid. It is kind of like we are dealing with crack dealers, they give us some stuff, and we get addicted, and now we are whoring ourselves out for money.
How do you fix that? Adding to the problem with more IOUs doesn’t fix it, it just pushes the problem down the road. In otherwords, by saying that you are just admitting ignorance because you have no idea how to address the problem. It isn’t an -easy- problem to fix. It is -extremely- hard for -bright- people to wrap their head around it. If you are talking about someone with less then average intelligence, they just can’t do it. Quick snippets like saying “You have it backwards” actually demonstrates ignorance.
You have to convince wealthy people(not just the US but globally) holding onto their money, not just to invest it, but invest it in new technology which can create new opportunities and jobs, save/make them money, and creates jobs here.
If you cut back on the amount imported goods of say oil at the same time, it does something similar. You actually increase the amount of money available in our country which gives a longer lasting economic boom. It is really paid for with a reduction in imports. I pay my neighbor so he can pay his taxes. It is literally the ethanol program, we took a commodity product we couldn’t sell, turned it into something we could sell, the price dropped, and the agriculture industry makes all the money we used to send to Qatar for MTBE and we don’t have the added expense of price support, we created jobs, etc. It costs less then what we were doing.
Transportation fuel is an easier target, it is just hard to hit. ethanol took 20 years to start seeing price dips and technological improvements. If you can get reliably from point A to point B, it starts to become irrelevant what fuel you use. The trick is to get the price lower, which means people have to be working on it, and it will take time. Simply cutting imports saves our economy 100s of billions of dollars, creates jobs, and it will end up costing nothing. Plus we can tap into a multi-trillion dollar world market.
There just isn’t an “easy button” for this. It is a lot of hard work. But there is a lot of money to be made and saved by everyone in our country, and we are only talking about a 30% reduction in oil consumption.
Well, well, let me tell you you are very muddled in your reasoning, at best a curates egg.
A few examples. Trade; A trade deficit, i.e., imports over exports sales is actually BENEFICIAL to the importing nation. The importer gets the benefits of the exporter’s expertise, materials and know how [which it may not have] and in return just gives out dollars, which are in infinite supply, to store up in the exporters reserve accounts held in the Central bank. The importer wins.. That should be obvious.
All moneys are IOU’s. Thus the Central bank can only create money to pay toward something for sale. Just like banks can only create money if there are customers wanting loans.
The Gov’t cannot create money as a storage item. It cannot borrow it’s own currency, and should avoid, like the plague, borrowing in foreign currencies. It can store them in foreign traders’ accounts at the Fed, but it’s not borrowed money. let me repeat, you have it backward, or more crudely, arse about.
Your arguments about cutting back on oil show you haven’t understood the point of this blog. Gail points out, and most all the others, that cutting back oil consumption is dangerous for an economy as it runs into the quandary of too cheap – meaning oil companies go broke and too dear – which means it’s too expensive for customers. Here’s Kunstler on that today:
http://kunstler.com/clusterfuck-nation/true-believers/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+clusterfucknation+%28Clusterfuck+Nation%29
You are right about not being an “easy button” but 30% saving is oil consumption is not feasible without a major deflation, or depression to drive it.
” cutting back oil consumption is dangerous for an economy as it runs into the quandary of too cheap”
“You are right about not being an “easy button” but 30% saving is oil consumption is not feasible without a major deflation, or depression to drive it.”
It seems to me that the rational solution, which is contrary to most ideals, would be a global fossil fuel cartel. This would control supply and price, to ensure stability. The producers would make more money selling less. Customers would get clearer price signals, to make better decisions. Rather than swinging from SUVs to electric cars back to buying SUVs as soon as the price plummets from $140 to $40.
I agree, Matthew. You are the first correspondent here, so far as I know, to suggest what IMO will be essential in our future world in decline,- Rationing.
Everything essential will have to be rationed. Mind you that assumes we still have functional governments and administrations.
Rationing is not possible — because rationing means de-growth.
De-growth = endless recession = deflationary collapse.
In real terms if we were to ration ‘stuff’ then people would consume less ‘stuff’ which would mean layoffs which would mean even less ‘stuff’ is consumed … more layoffs … less consumption …
Death spiral
This is in contrast to having an oversupply of everything right now. (a) How do you expect functional governments to continue, and (b) How are governments going to be able to afford to buy what their individual citizens cannot? Just issue more debt, that someone will take?
Gail, Please let me point you in the direction of Modern Monetary Theory. Itt actually is not a treory, in spite of the name. It is a description of what actually happens with modern macroeconomic finance.;
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
There are many more sites with talks but this booklet is the best start.
Once you “get” it it opens up a whole new world of possibilities. So I can answer your reply above simply by saying the [sovereign] government can pay for whatever it needs to address to buy. It can’t just “print money” so forget that old cop out excuse. Money is IOU’s so it requires money to be for something to purchase, never for just savings. The resulting debt is not on anyones shoulders. No taxpayers are burdened. The only limit is what the economy and resources can bear and the economy today completely ignores that and to our peril. In the meantime we still have to carry on and so we just use inflation as our guide to spending limits.
But do read this book. “The Seven deadly Innocent flaws of Economic theory” by Warren Mosler.
What MMT doesn’t take into account is the fact that we are running into limits on economic growth. This changes the way a person looks at things. For example:
1. The government must raise funds through taxation or borrowing in order to spend. In other words, government spending is limited by its ability to tax or borrow.
Government spending is limited by the output of its workers and businesses. The government, workers and businesses must all share the physical output of the economy in any given calendar year. As long as the economy is growing, it is possible to “borrow from the future”– something that raises prices of commodities, and because of this, raises total output. But once economic growth slows excessively, this approach doesn’t work. Government can only take a share of what is produced. Government cannot take more from workers than they need to live on. It must also leave businesses enough to run their businesses. The result is likely to be a “squeeze” on government “take” when the world economy shrinks–something MMT doesn’t consider.
–If the economy would always grow, I might agree with MMT. If the economy shrinks, MMT makes no sense, because debt ceases to make sense.
You are just guessing Gail, or you wouldn’t write howlers like your point 1. The very first point in MMT in that booklet is that Government does NOT raise money through taxation or borrowing.
Why would a government borrow its own money? Surely you can see that’s an absurdity. Government is NO WAY limited by its ability to tax or borrow. Governments [federal governments] can never go broke in their own currency. You must read the booklet!
Remember that MMT is an explanation of what governments can do now. It’s just a description of the way finance works, instead of the fantasy ideas you repeat which are mainstream economics.
Governments also must deficit spend. It’s not borrowing from the future its to give the economy the money it needs to function. Budget surpluses [like what Greece is supposed to live by just causes austerity and recession.] drain spending power out of the economy.
The limit is the inflation risk, but usually there is plenty of room for an economy to grow without excess inflation. Full employment raises GDP therefore full employment pays for itself. In the USA there is a spare trillion dollars available for debt without inflation. So lets pay living wages etc.
You have made little effort to understand MMT, and that is a shame.
If MMT proposes that the main source of new money is government deficits, that seems to be completely incorrect.
Governments can run surpluses (through cut spending, not just like in the Clinton years by the economy growing faster than expected) while the money supply still grows. Bank loans also increase the money supply, so as long as corporate and private debt increase in a total amount greater than the decrease in public debt, there is still inflation in the money supply.
Sorry Matthew, you are wrong. If the government doesn’t deficit spend money is driven out of the private sector to pay for the government surplus. It’s an accounting identity, that government surplus matches exactly the non government deficit, and vice versa.
The Clinton surplus was an utter disaster;
http://www.businessinsider.com.au/how-bill-clintons-balanced-budget-destroyed-the-economy-2012-9
John,
With full respect, I’ve been studying economics for almost 30 years. I studied probably all the classical and alternative schools of economical thought and I am with Gail on this issue. MMT doesn’t make sense in situation we’re in. If you just consider simple thing, that the currency is just denomination of all basic materials required to run modern economy – energy, metals, wood, water and all other stuff. Increasing the monetary base works to some extent only when it allows more extraction/production/consumption. If it doesn’t we have inflation and currency crisis. Monetary system is limited by the material extraction system. They both are interconnected. This is what Gail is writing on her blog.
Sorry, Kesar0 your 30 years of economics is a handicap very hard to overcome. You would have been inducted into classical economics which is , as often described, a fantasy world. The REAL world has evolved without them but is distorted by the Austrian school and the Chicago school etc.
looking for complexity where none exists. MMT first seems to have come to attention in 1963 in a publication, Modern Monetary Mechanics, published by the Reserve Bank of Chicago. It’s not new and not a theory. It is descriptive of real world economic management.
I suggest you read Warren Moslers book I mentioned to Gail. A seminal work!
Please believe me I did read all the required books and articles of MMT. It was one of my stages in maturing my world-view on economics. Fortunately I grew up from this point. It is no answer to any of our current problems. You probably heard about the Reinhart-Rogoff publication, which made much noise in economic circles. They were right about the historical research of deficit spending even when I don’t support their point of view on economics in general. Physics wins over artificial science of economics. Sorry. Our world is finite.
So you don’t believe for example that taxation funds government expenditure? That a budget surplus is better than a budget deficit? Let’s see you nail your colours to the mast. Post some examples like these.
Taxation funding government expenditures – what not to believe? It is just reality. Are there any other options? Please explain.
Budget surplus – Holy Grail of economics – actually this is where I agree to some extent with MMT. Budget surplus is unsustainable in the long run and doesn’t make sense. Monetary base must increase in order to grow the economy and it is done purely by issuing debt. Money is like lubricant for modern economy machine, which requires the right balance – too much lubricant the machine stops, not enough machine stops as well. This is the eternal battle between hawks and doves in central banks.
The Owles – like the MMTers like to call themeselves – believe they found the cure for our problems. They just don’t get one simple thing. When you issue too much debt – say 100-130% of GDP for example – the creditors start charging the debtor with risk premium interest (bond insurance securities), which increases your debt costs and the state goes into debt spiral. Your currency is devalued (if you have one) and suddenly all your import costs (like oil) goes through the roof and inflation starts. This is the case of Greece right now with one exception – they don’t have their own sovereign currency, so they can’t have any devaluation. This is the main reason for their problems. They just can’t find the new balance with overvalued €.
Did I answer your questions?
You failed at the first hurdle. Now tell me where MMT says we have to issue too much debt?
Hint: It doesn’t . They say the debt limit is excessive inflation. Keep below that. AND government debt is government wealth so that debt worry is not up to MMT to answer because the Banks issue credit there. All money is in the private sector. All new money is paid into the private sector. The reserve bank has no money – of its own. It stores lots of other people’s money though, $18Trillion today in the US federal reserve and any so called debt has its asset equivalent in place as well.
Oh please, John.
quote: “any so called debt has its asset equivalent in place as well”
So this $1.2 Quadrillion in derivatives also have asset equivalents?
And all these loans all over the world as well?
I expected much more from you. If you confirm the above, I propose that we both stay with our opinions.
EOT
I’m not going to be unhappy confirming the truth,Mr K. especially just to please someone who doesn’t understand modern money mechanics, even if you have made an attempt.
So yes the repayment notion is built into the way treasury securities are structured. Treasury securities are debt instruments but they are NOT spent. The funds never leave the CB. To repay the loans it’s only a matter of reversing the accounting steps.
It doesn’t apply to private sector bonds, municipal bonds since that loan money does get spent.
Fair enough. Everyone believes what he/she wants to believe.
Just to conclude the MMT. This school is based solely on US economy observation as a model for the rest of other countries. MMTers just can’t comprehend the simple idea that Amercian consumptionism is based purely on oil-denominated reserve currency of last resort supported by a huge military spending and global diplomatic/military/black ops activities.
I hope you take a look at what Rodger Mitchell writes! I’m sure you will gain understanding.
MMT is not based entirely on US experience, but it is the source of most of the available Data, simply because it has many people writing about it and data transparent for the most part.
MMT is pretty generally applied across all fiat currency economies, but things like reserve requirements differ among them, without compromising the basic set up..
Economics is largely a belief system as keeps getting said, but it’s not fact free. MMT describes the facts. The fanciful stuff is what mostly makes up mainstream economics. And yes, no theory seems to take into account the loss of resources which will bring everything undone. Just the same we might as well get the narrative down right because getting it wrong will lead decision makers into catastrophic mistakes that will make the crises worse, fatal even.
It has zero relevance to American oil based consumption and military expenditure. That’s an issue on its own.
John, you need to read Economic Undertow. Its is the explanation of how economics works globally.
http://www.economic-undertow.com/
Thanks for that link. I saved it to read later. As I said in an earlier reply I’m just a messenger and not a creator of this monetary mechanics world. It’s quite counterintuitive, like debts which are actually savings accounts. It’s still a work in progress!
Here’s a man whose blogs are really easy to grasp, unlike some;
http://mythfighter.com/2012/10/23/what-is-the-federal-debt-a-primer-for-politicians/
Modern Money Mechanics describes how money is created in a Fractional Reserve Banking System. Back then, that is how banks worked. Now, banks act as originators of credit. See the Bank of England website for more information.
No that system is out of date and the one today is Credit Creation. A lot of literature still talks about FRB but MMT has moved on.
John,
I understand MMT perfectly well. The problem with MMT is that it is an idea whose time has come and has departed. It only works if there is everlasting growth. We are coming to the end of economic growth, which is why MMT loses its validity. Debt stops “working” in a contracting economy, because it becomes impossible to repay debt with interest.
Governments can only borrow if there is economic growth. If there is not economic growth, the whole system collapses, because it becomes impossible to repay the loans, especially if interest needs to be paid on the loans. That is the way the debt for governments is limited. It is not a problem we have run into in the past.
I agree that historically, debt has been terribly important. Governments couldn’t get along without it. Debt acts like a suction, that allows us to pull energy products out of the ground. It has historically increased demand for energy products, raising their prices, by allowing more people to afford products made with them. Without a functioning debt system, the world economy is very likely to collapse. That is a big problem.
The whole issue of inflation is related to the issue I was talking about of dividing up the actual goods and services produced in a calendar year. If there is too much money, relative to actual goods and services produced, then it is quite possible to get inflation. Of course, if the “money” only sits in the bank accounts of the wealthy, and is not actually used to buy physical goods, then the inflation effect is slim or none. You end up with the huge money supply we have now, with little inflation.
But Gail, if you understood MMT how could you possibly have said that tax funds government expenditure??? It just cannot be true. Lets examine some assumptions; Tax revenue is designed to fund expenditure. Why is that a sensible idea? How does that address the issues you raise about loans and debt?
Then the utter non sequitur that governments must borrow their own money to fund expenditure! How ridiculous is that!! Heaven forbid that money should be borrowed in a foreign currency!. That’s how the World Bank and IMF etc beggar third world economies. So why go there?
Governments don’t have to borrow if they are sovereign. Greece, which gave up its sovereignty, a BIG mistake, is being driven down to a third world country. It cannot devalue to retain competitiveness.
MMT does not change the necessity to run a government and the economy mindful of resources and the citizens welfare. The current system is making a hash of it, so your defence of classical economics is just bizarre.
“Debt acts like a suction, that allows us to pull energy products out of the ground” Good!
The solutions all involve more and better coordinated government all all levels. Valid to ask whether humans have the capacity to endure this shift. But Notice!: the societies with the least institutional capacity are suffering the worst right now.
By the way, institutional capacity is somewhat independent of technological/energy consumption status. There are varied ways of “surviving what is ahead”.
So do not judge all quadrants by the same conceits. That said, the main problem in North America is our legacy, and recently inflamed, distrust of government. Granted there are reasons for distrust. But an unchecked flood of ill will, whether directed at corporate, partisan or other factors, is the main problem to be dealt with. Solutions can be dreamt of all day here. But only our capacity to govern and be governed matters in the end.
“It seems to me that the rational solution, which is contrary to most ideals, would be a global fossil fuel cartel. This would control supply and price, to ensure stability. The producers would make more money selling less. Customers would get clearer price signals, to make better decisions.”
You mean like OPEC that ran up the price on oil that became a built-in global tax to everyone? No thanks!
I would rather put my money towards a more diversified portfolio and have to do cost averaging.
“You mean like OPEC that ran up the price on oil that became a built-in global tax to everyone? No thanks!”
Do you think that high oil prices lead people to conserve more and invest more in renewable energy, or lead to people relying more on fossil fuels? Do you think low oil prices help or hurt increasing efficiency and diversifying energy production?
Stable, high prices give the best signals for people to invest in diversifying and using less.
At this point, it really does not matter; the whole system could collapse any day now; this is all just a mental exercise.
If a cartel were used, prices would need to go up, with whatever pricing scene was used. The result would be recessionary, no matter what method was used, and would bring down our current debt-based system. So the economy would collapse, regardless.
In a sense, the proposed cartel is like our current “utility” way of pricing electricity. Utilities take whatever mandated mix of electrical sources they need to take, and pass on the higher costs, plus a profit margin. This system has in some sense “worked” better than the pricing system for fossil fuels, but it still will lead to cutbacks in they buying of discretionary items, and ultimately to collapse.
I should probably elaborate:
“I would rather put my money towards a more diversified portfolio and have to do cost averaging.”
Investment in alternatives diversifies our portfolio and unravels some of the tight coupling between FF and our economy. The protects me in case the “worldwide FF cartel” tries to “tax” me to the point of economic collapse. I get taxed enough by our government. I don’t need someone else adding more.
With the diversification, and commercialization of alternatives, the lower price of solar panels makes it easy for me to provide my own energy. If the “FF cartel” decides to triple prices, I have a weapon against them. I can buy solar panels, and an electric car. Then I have very little need for their products. 10 years ago, about the best I could do was grow corn to make ethanol. Which is a lot more work and more time consuming, but lower start up cost.
I should note, solar panels are not the only option nor the cheapest. There are probably 100 ways to generate electric, but they are about the easiest. Solid state, no moving parts, last for 30+ years. low maintenance, and easy if you can wash a window.
Electric cars are similarly easy to maintain.
So yes I am willing to pay for the investment to help drive down the cost of alternatives, and use a cost averaging technique to justify the cost. I would rather do that then pay some unwritten tax to some whacko world FF organization which I have no say in, and probably sponsors crime around the world.
“The greatest insult is to be ignored” Fast Eddyism 8/21/2015
One issue is “driving down the cost of alternatives.” Diminishing returns is a problem, even for so-called renewables.
There are several kinds of diminishing returns. One has to do with placement of renewables. Wind turbines are put in the windiest, most accessible locations first. Geothermal is put in place where the temperature gradient is greatest, and the distance to potential users is lowest, first.
Another type of diminishing returns has to do with the material used to make renewalbes and electric cars. High quality ores of any type are in limited supply, so any material used in quantity is likely to become higher priced with greater use, after a point. The cost curve is therefore likely to be bathtub shaped, rather than straight down.
Ultimately, a major issue is that alternatives that are used by the grid cannot last longer than the grid itself. There is no point in adding huge amounts of alternatives that will simply pollute the place where they are located, as the need for them disappears. No matter how many electric cars we make, we still need fossil fuels to make and maintain roads. Electric cars aren’t very helpful without roads.
“I expect bank holidays, closed markets when the next financial crisis pops up – I think pretty good odds before Christmas 2015.”
Why do you say before christmas 2015?
A growing number of people are of the opinion the next crisis could hit anytime, with a good chance before the end of the year. Here’s a good start:
http://www.zerohedge.com/news/2015-08-20/why-are-so-many-people-freaking-out-about-stock-market-crash-fall-2015
“Sorry Matthew, you are wrong. If the government doesn’t deficit spend money is driven out of the private sector to pay for the government surplus. It’s an accounting identity, that government surplus matches exactly the non government deficit, and vice versa.”
It is correct for an isolated system or if you include the whole rest of the world as the “private sector” OR if you have a 0 sum (or very close to) trade balance. IMHO our biggest problem is we take out debt to essentially cover the trade deficit because other countries are sitting on our money. We have nothing to sell them except IOUs.
Each nation has it’s separate accounts, So the non government sector is that nation’s private sector.
“One issue is “driving down the cost of alternatives.” Diminishing returns is a problem, even for so-called renewables.”
yes. very true at some point. The key difference is, when compared to fossil fuels, renewables are a very new immature technology. They have a LOT of room for improvement, and you still get a significant return. Compare that to the FF industry, and it is really affected by diminishing returns because it is a very mature industry.
Renewables haven’t even scaled yet to anything resembling the size of the oil industry.
They also aren’t benefitting from depreciated factory costs. It is all too new. The FF industry is mostly depreciated.
I do agree with the placement arguments, however the efficiency is also improving so even though the best spots were used first, the increased efficiency makes up for the difference. For instance, wind turbines are now bigger and taller, with electronic controls, and can actually be very competitive more areas. And I should mention all the best spots aren’t actually taken.
Materials are an issue. If materials weren’t an issue we would be putting up solar farms with 50% efficient panels, rather the 20% today.. 🙂 It is a known issue and being worked on. In fact there are people working on organic solar panels without any rare metals and fully recyclable. They just made an improvement to them by using a dye created from like cows blood. The new volt uses fewer rare earth magnets, then its predecessor, etc. As we find out more things we can get by with less. The vanadium for the imergy’s flow batteries is coming from waste of the oil industry.
The grid isn’t going anywhere anytime soon. The business models need to change though or else it will because people will leave the grid. The landline is disappearing in favor of cell phones. Solar just beat NG for a new utility scale generation contract based on price so off-grid plus batteries is to look more feasible which doesn’t bode well for the grid.
As far as roads, we will still have asphalt for quite a while, although someone is trying to make solar roads and sidewalks. Someone wants to incorporate wireless electric car charging into the road, and relative to the amount of oil we use asphalt isn’t very much of that total. Worst case scenario we use wood tar. But we won’t be going back to oak planks I promise. 🙂
This is a 30 year plan. cars in the US have an average age of 11 years. The utilities have 30-40year lifecycles for equipment. Whatever we end up with, it takes a long time to deploy. and the technology is changing rather quickly.
“All moneys are IOU’s. Thus the Central bank can only create money to pay toward something for sale.”
That IS what we did! We invested the money! But we aimed directly and indirectly at the oil business since that keeps tanking the economy as you point out here:
“Gail points out, and most all the others, that cutting back oil consumption is dangerous for an economy as it runs into the quandary of too cheap – meaning oil companies go broke and too dear – which means it’s too expensive for customers. ”
It was absolutely true 10 years ago, however, every year since then, it has become further from the truth.
We capped the price of energy with alternatives. If oil companies go broke and prices rise like you say, we have technology that can replace it at a reasonable cost without tanking the economy in -all- sectors.
In turn, it has driven the cost of oil down, and so it is a win-win for the economy. Not only are we more protected on the upside, we also gaining back all the money we spent to do it with the lower prices of traditional fossil fuels, and we are reducing our imports which adds money to our GDP.
Because you know, oil will skyrocket again, I would highly recommend buying an electric car. I would suggest the 2016 Volt, or the Tesla SD.
Not true about oil being cheap seen as a benefit. It’s too cheap now, in the US, for oil companies to stay solvent. You cannot just switch to electricity from oil. The costs involved would only make worse the use of resources, not to mention the waste of redundant resources. The planet cannot afford us for much longer. Electric cars are no solution, even if they make some environmental improvements, it’s at an unaffordable cost. Part of our worst enemy, the consumer imperative.
“Not true about oil being cheap seen as a benefit. It’s too cheap now, in the US, for oil companies to stay solvent. You cannot just switch to electricity from oil. The costs involved would only make worse the use of resources, not to mention the waste of redundant resources. The planet cannot afford us for much longer. Electric cars are no solution, even if they make some environmental improvements, it’s at an unaffordable cost. Part of our worst enemy, the consumer imperative.”
That is the funniest thing I have read on this blog so far!!
The US Oil companies can’t compete on the world market, and can’t provide enough oil to meet demand, that recorded record profits, while taking subsidies, and only paying like 1% taxes on their profits, while our economy tanked causing major unemployment, whose only answer to the solution was “we can’t do anything! It is a free market!” are going bankrupt!
Since they couldn’t figure out how to do anything while they took our money, our jobs and laughed their way to the bank, we decided to attack the problem by opening up the market.
Electric motors are 90+% efficient vs an ICE which is like 30% efficient. You aren’t even in the same ballpark for resource utilization. You might as well give up on transportation and focus on industrial chemicals, which can make products to support the economy. Using oil to get from point A to point B is an expensive waste of resources. Did you decide on the Tesla or the Volt?
We already have to pay to support the electric grid, and most grid operators have been amiable.
So you are right, not wasting our money on redundancy to unnecessary resources like oil/gas infrastructure is pretty much true especially when companies like BP seem to spill oil all over, and can’t figure out how to distill oil. The pipeline operators for 30 years haven’t figured out how to ship ethanol down the pipeline.
The lobbying efforts against trying to move country away from oil dependence and more stable alternatives are over 100M/yr, which cost the US taxpayers and businesses -TRILLIONS- of dollars. A large portion of our national debt can be attributed directly to the downturns in the economy caused by the rise in oil prices which created a need for stimulus packages.
In otherwords, we can save trillions of dollars even if we have to pay slightly more for more stable prices. The cost will continue to drop for renewables, so not only is it sustainable, it will end up to be less expensive energy. In fact, alternatives are already less expensive then fossil fuels in some places. Ironically enough, we really haven’t even scaled much of the technology to industrial size.
What a comedian! Fail! Your logic is a true ride into fantasy land. Gail’s whole article we are blogging on here has demonstrated that we are in an oil bind and your ranting is simply a sign you are drinking the Kool-ade set out by the MSM. It’s just too much nonsense for one day! Why don’t you read through all the commentary here and get up to speed? There are all the links you need to understand what is actually happening in the oil industry, how US shale is surviving on hedging and when that finishes the party will be over.
I’ll second that…. the purpose of this blog (I think…) is to educate people…. to help them understand the situation…
Yet there are people who insist on flooding the comments with the very same MSM bullshit that most of us are here to avoid…
And no matter the facts — they refuse to learn…
That is a symptom of stupidity.
“Electric motors are 90+% efficient vs an ICE which is like 30% efficient. You aren’t even in the same ballpark for resource utilization. ”
Go mine some electricity then. No, that’s not how that works? Oh, you have to produce the electricity, store it, transmit it, charge the electric car batteries, then discharge the batteries, to get to the 90% efficient electric motor. If you have very efficient conversions, but you have a lot of them, the losses can be pretty great (but not good).
Our economy is very interconnected. If we lose oil companies, we are likely to lose electricity as well, because of the interconnections. The electric grid requires oil for lubrication and for maintenance.
There are also interconnection through the debt system. If oil and gas companies have financial problems, their debt defaults are likely to lead to banking problems. We are told that this time around, the powers that be plan to solve banking problems by haircuts to bondholder’s and depositor’s funds. With less funds available, the price available for electricity will drop. The quantity demanded will drop as well. The lack of demand will tend to cause the electricity industry to collapse, the same way the oil industry is collapsing right now.
” If we lose oil companies, we are likely to lose electricity as well, because of the interconnections. The electric grid requires oil for lubrication and for maintenance.”
Coming this October, TARP for Big Oil. QE it to NIRP. Can kicked.
This move definately wouldn’t kick the can. With it every investor would know the game is over soon. It would trigger panic on the markets, bank runs, bankruptcies and riots. You know the rest.
” It would trigger panic on the markets, bank runs, bankruptcies and riots.”
I expect bank holidays, closed markets when the next financial crisis pops up – I think pretty good odds before Christmas 2015.
Oh the Idiocracy will LOVE these days off….
The whole family can sit around eating 3 for 1 pizza and giant bottles of cola while watching reruns of Dancing with Stars and American Idol.
To see the looks on their faces when the TV goes dead… and the direct line to the pizza man goes dead…. would be priceless….
“There are all the links you need to understand what is actually happening in the oil industry, how US shale is surviving on hedging and when that finishes the party will be over.”
I am trying to figure out where we disagree.
I believe we agree on all those points:
The shale industry is losing money and going bankrupt.
The US Oil industry can’t provide enough oil to support demand.
The low price of oil is temporary.
The current economy runs on oil.
What we don’t agree on, is what do we do after the glut and prices rise again.
The only thing you have stated is to subsidize the oil industry to keep them in business.
Or we need to raise prices, which is another form of subsidy.
We could just tax oil say at 60 dollars a barrel that could work. That would raise oil prices to 100/barrel, to make oil companies happy!
I am asking. Why should we bother to subsidize them? We already know even with all the “advanced” oil extraction techniques, we can’t produce enough oil in the US to meet demand. It just isn’t there. To me is sounds like a bad investment.
What is the solution we need in place to protect our economy when prices do start to go up? .
You have offered no solution. Not even a single alternative to mitigate the issue.
“I’ll second that…. the purpose “of this blog (I think…) is to educate people…. to help them understand the situation…”
I understand the situation. What are you suggesting to circumvent the situation?
“What are you suggesting to circumvent the situation?”
The general suggestion is that we are in a predicament, not a situation. There are no solutions, only outcomes. Very fatalistic, some people.
“I am asking. Why should we bother to subsidize them? ”
The vast portion of our energy comes from fossil fuels. We will never make any noticeable renewable energy production if our fossil fuels suddenly stop flowing. It would take decades to get anything meaningful going. Then, they would probably all wear out and be worthless a few decades later. At least we might kick the can 50 years down the road.
I don’t think the price of oil is temporary. The last time oil price dropped, it was brought back up by a combination of quantitative easing stimulus by the US (and other countries) and the huge debt-financed growth of China. We don’t have these options to pull us out of the nose dive this time around. So this nose dive is likely to lead to a permanent downturn in the world economy. See my post, http://ourfiniteworld.com/2015/07/22/nine-reasons-why-low-oil-prices-may-morph-into-something-much-worse/
Your queries have been taken up by others, so I don’t have to add much. Read my bit on CMO’s elsewhere for a shot of just how big is the problem, because you are not factoring in the enormity of our energy use.
There is NO solution, which is why you can’t find a realistic one. All solutions so far are just nibbling at the margins, and Gail points out how interlocked we are with our energy needs and how expensive it would be to institute new energy sources, expensive enough to make any cost equation just a nonsense, like having to build 200 dams each as big as the 3 Gorges dam. It also flies in the face we need oil as well as electricity.
My suggestion is to start making plans to manage the fall. The more our political misadventures demonise governments in citizens minds the more likely plans will be also demonised. So if that doesn’t change,Welcome to Chaos. Chaos is easy! getting back out is the Hard part!
And if we wanted to take more than a little snip….
Replacement of oil by alternative sources
While oil has many other important uses (lubrication, plastics, roadways, roofing) this section considers only its use as an energy source. The CMO is a powerful means of understanding the difficulty of replacing oil energy by other sources. SRI International chemist Ripudaman Malhotra, working with Crane and colleague Ed Kinderman, used it to describe the looming energy crisis in sobering terms.[13] Malhotra illustrates the problem of producing one CMO energy that we currently derive from oil each year from five different alternative sources. Installing capacity to produce 1 CMO per year requires long and significant development.
Allowing fifty years to develop the requisite capacity, 1 CMO of energy per year could be produced by any one of these developments:
4 Three Gorges Dams,[14] developed each year for 50 years, or
52 nuclear power plants,[15] developed each year for 50 years, or
104 coal-fired power plants,[16] developed each year for 50 years, or
32,850 wind turbines,[17][18] developed each year for 50 years, or
91,250,000 rooftop solar photovoltaic panels[19] developed each year for 50 years
http://en.wikipedia.org/wiki/Cubic_mile_of_oil
“Go mine some electricity then. No, that’s not how that works?”
Technically geothermal can be combined with mining if that is what you are trying to point out.
“Oh, you have to produce the electricity, store it, transmit it, charge the electric car batteries, then discharge the batteries, to get to the 90% efficient electric motor. If you have very efficient conversions, but you have a lot of them, the losses can be pretty great (but not good).”
You get 90+% efficiency from the lion batteries, inverters are up to 98%. Line losses are always a problem, but locally generated electric from solar doesn’t have much for line losses. You might lose 10% for storage if your car isn’t there during the day.
The new coal plants are 40% efficient, unlike the older designed plants like they use in Germany and the southeast US, which are 30% efficient. The US 30% efficient plants are actually what are on the chopping blocks and are mostly unused. The newer plants will still be around for a while.
“There is NO solution, which is why you can’t find a realistic one. All solutions so far are just nibbling at the margins, and Gail points out how interlocked we are with our energy needs and how expensive it would be to institute new energy sources, expensive enough to make any cost equation just a nonsense, like having to build 200 dams each as big as the 3 Gorges dam. ”
I agree it is just small nibbles. It is really all you can do. Energy is a multi-trillion dollar business.
http://evobsession.com/electric-car-sales-to-hit-1-million-in-september/
Only 1 million cars globally, but that is a nibble.
Big Oil is Featuring the Tesla Model S on their magazine cover now
http://www.hybridcars.com/why-big-oil-is-worried-about-ev-batteries-and-tesla/
And, even with a major shift towards electrification, LeVine said that the oil industry wouldn’t completely vanish.
“Demand for oil isn’t going to disappear,” he said. “It’s going to be with us. It’s such a convenient and powerful and dense store of energy – even if every car on the planet was an electric car, for example, using fuel in jets is much more efficient than batteries will ever be. There’s going to be liquid fuel for a long time.
“But the demand for it could plunge. It could really plunge.”
—
Apparently he doesn’t know about both Fedex and Southwest have contracts for 3 million gallons of bio-based jetfuel each. Which isn’t much, just a little nibble.
http://www.latimes.com/business/la-fi-fedex-fuel-20150721-story.html
Explain how you plan to get the price of oil and all other commodities up to a price that will permit their continued extraction. Magic? Handing out money to workers around the world, so they can afford new cars and nicer homes? We don’t have a way of fixing our current situation. Without a fix, we cannot make roads for all of your electric cars, and we can’t maintain the electric grid. These get to be huge problems.
“Explain how you plan to get the price of oil and all other commodities up to a price that will permit their continued extraction. Magic?”
Artificially raising the price of oil to keep the US/Canada oil business alive is pretty stupid policy when you are unfairly taxing Americans to the point of joblessness and bankruptcy. We get nothing out of the money. You end up having working poor and high unemployment rates which you have to pay even more money for.
Wait, that is -exactly- what happened under Bush and we went into a recession.
The new plan is to -prevent- future recessions caused by overtaxation of the oil industry on the average american.
The US oil industry is extremely good at what they do. The biggest indicator is most of our products are banned or have high tariffs in other countries. The lubricant, gas, etc. It is the same thing as cereal grains and corn. We just kick ass so we get banned because we run their industries out. However, we are out of oil. And our imports aren’t being used for export products or at least to the similar scale.
Embrace the new technology.
Other commodities, please specify.
—
“Handing out money to workers around the world, so they can afford new cars and nicer homes? We don’t have a way of fixing our current situation.”
The Republican Mantra is outsource everything. We have been doing it since at least the 60s with Nixen. The 80s is got worse, now we have not a whole lot to outsource, so we have no source of income.
How do you fix that problem? Try to sell subsidized oil at a loss on the world market?
Boner is trying to lift the US oil export ban. You have to wait until we can produce more oil then we need. Which means he needs to get off his ass and sell electric cars as does the Pea Party and the Republicans, christian right, Amish, homeless, BigFoot, etc. instead of lusting for big block v8s and tube tvs.
The current situation is -fixable- but you have to embrace the new technology.
Embracing the new technology it literally is the ONLY way out.
–The saudi’s can still pump oil for <10 dollars a barrel.
–The lowest number I have heard for US producers is 30, and shale it climbs to around 45.
–the last -9- presidents we need to reduce our dependence on foreign oil.
–We don't even have enough oil to supply ourselves and haven't since the 70s.
–We run a 500B dollar trade deficit every year because we don't make anything because the Republican Mantra is "outsource, outsource, outsource".
The ONLY thing we can do is EMBRACE the new technology, even if it -isn't- perfect. We are creating new manufacturing that can compete on a global scale. Improving our manufacturing can have a ripple effect to other industries as well.
–The solar industry alone has created over 100k jobs. We are at 1% solar.
–We actually are competitive on the world market in the solar PV, wind and storage and EV industries.
I am not saying we don't need oil at all, but we do need to cut our losses. And have replacements ready for the next "oil crisis". Which is -exactly- what we are doing.
—
"Without a fix, we cannot make roads for all of your electric cars, and we can’t maintain the electric grid. These get to be huge problems."
YOUR EV will be just fine on the roads, the oil isn't going to die although the market will shrink and we can maintain the grid. The electric grid is probably in the best shape it has been in 30 years. Even if the renewables didn't pan out, we got new wires run, and expanded the grid and improved reliability and redundancy. The overall cost the utilities wanted for grid upgrades under the Bush administration was around 6T and it is down to like 2T. We are actually in the process of reworking some of the grid technology as well to improve efficiency of the whole electrical system, which will lower the overall cost. Adding renewables and distributed generation will lower the costs even more because you will have better utilization of the wire. You can defer or eliminate costly upgrades to substations and lines. IE if you can add power/storage below the substation, you don't need to upgrade the substation, and the wires.
I won't say we are 100% there but we actually got a lot further technologically, then I thought we would get back in 2008. It is seriously impressive. We have more tech coming online, especially in the storage sector with the Gigafactory. GM, Ford, and Tesla are making some -seriously- impressive vehicles. All three have new/upgraded contenders in the halo car catagory, which blow out the best of the beloved big block v8s, and sip fuel to boot. Ford's manufacturing of the F150 is a phenomenal work of engineering. There is a huge list.
I don't think I have witnessed this much new tech since the tech boom and most of that was software which is really easy to push out. Most of the current stuff carries significant price tags. New cars aren't cheap, nor are solar arrays, or windfarms, etc.
Even the FF industry made efficiency improvements, although their foot dragging has probably cost them quite a bit of money. For two years worth of lobbying money, they could build one of these:
http://fortune.com/2015/08/20/comanche-solar-project/
by the way the American solar roads are fake the Dutch ones are genuine, although I recognize it is very smart of Americans to use shreeded tires in the asphalt mix for american roads.
I thought the Dutch only had the solar sidewalk. The American ones have to go through quite a bit of bureaucracy to get installed. The people who were doing it only did a parking lot, i know there was some interest in Japan for it. We had a similar situation back in the 80s when Phillips petro invented a synthetic road. They had a hard time convincing anyone to test it, then when they finally did. The workers who installed it, intentionally screwed it up so it didn’t work right. It was a synthetic material designed to last like a decade. I think they finally did get it tested correctly and it didn’t last up to their expectations, and it was hard to do repairs to pipe and such underneath it.
(Population explosion update)
The UN now forecasts that the global human population will rise by over 2 billion during the next 30 years and that it will pass 11 billion this century. The biggest rise will be in Africa, expected to rise from over a billion today to possibly over 5 billion. And you thought that 7.3 billion alone would trash the planet if BAU continued?
Clearly the UN and the entire world order is totally, clearly not up to the job of managing the planet and the human population. Sadly all that they care about is money and a nonsense morality of “equality” and liberal “human rights”, exactly the kind of stuff that is guaranteed to explode the population and to crash the planet. “The road to hell is paved with ‘good’ intentions.”
This calamity could have been avoided only with radically different population and economic policies that put the long-term common good before individual “human rights”, with something akin to eco-fascism. We should have adopted eugenic policies as the only way to control and indeed to improve the human population. We could have achieved so much.
It seems that the UN forecast is redundant now anyway, we are headed for a population crash. I hope that the UN will be happy with the outcome of their capitalist and liberal egalitarian nonsense. Who will they find to blame if not themselves and every government on the planet? Liberals always blame everyone else for the results of their policies, never themselves. They are the “good and righteous”, everyone else is always “the bad guy”. The liberal egalitarians have destroyed _everything_.
“Mega fail”
http://www.express.co.uk/news/world/597296/World-s-population-to-reach-11-billion-2100-africans-half
World’s population will hit 11 BILLION by 2100 and Africans will make up half, says UN
By mid-century the number of people will increase from 7.3 billion to 9.7 billion by mid century and reach a staggering 11.2 billion by 2100.
Africa’s current population of 1.2 billion is expected to explode to between 3.4 billion and 5.6 billion by the end of this century.
[…]
All true, but I’m not sure it’s just a “liberal” problem. No government system other than a radically authoritarian state can ever keep a lid on population as long as the means to to increase our numbers – however meager in some cases – exists. And remember, African societies are still labor intensive, many still agrarian, with high premature death turnover rates. Imposing strict population controls on such societies would likely spell their doom. Look at resource use per capita instead and you get an entirely different answer. The US “effective population” in that case is many times more than the currently stated ~350M. Not that any of that lets Africa, China, or India off the hook either, of course, but they’re just trying – almost certainly in vain – to do the same thing we did in the 20th century: industrialize and enjoy “the good life.”
You could be right. Its not just liberalism but a serious and profound human tendency to expand beyond what is sustainable, whether it be agrarian Africans, western liberals, Bolshevik Russians or whatever.
Still, as you say, egalitarian liberalism certainly is in that same camp. The west has exported industrial capitalism and its technology all around the world, boosting numbers from Africa to China.
Western liberals clearly caused, or at least hastened the massive global population exposion. The policy of economic globalisation and the establishment of the UN after WWII must go down as possibly the worst mistake in the history of mankind. “United we fall.”
Perhaps the rational thing to do (or rather, to have done) would be to hammer down the human population to about 100 million in an homogenous coherent nation, able to co-operate, totally ruthless in population control and with the world at its disposal and care.
It starts to make the Germans look quite rational and sensible. Maybe WWII was the last chance that our species had to radically thin its numbers and to reconstitute civilization on a rational basis that took account of natural finite limits and of the need for force to control population growth, rather than on the basis of moralistic nonsense that guaranteed our demise.
Then the victory of the Liberals and the Bolsheviks, far from the great triumph of the 20th century, was actually the final death knell of civilization, perhaps of the eco-system as it is. We stigmatised force and militarism, when that was the last thing that could have saved us. Now its just too late. Nature does not accept excuses for failure, it rewards and punishes “justly”.
I think you’re right about “well intentioned liberalism/liberals” in general, and I’ve also long thought that hiding underneath Hitler’s more insane and objectionable policies, that there was a core rationalism that indeed make sense, and which we’re seeing expressed on the world stage yet again today by all sorts of political groups. But nearly all such calls are currently limited to the politically salable idea of “immigration reform.” Even mention the idea of actual population control, especially among first world countries and people, is a political death sentence. And thus, once again, liberal democracy reveals one of its strongest vulnerabilities. Dealing with exigent problems that don’t have popular support. All of which Catton addressed as how populations (of all species) behave increasingly erratically and irrationally once they come under pressure from over population. It literally drives us insane!
Hello there,
I think we’ve read fast Eddie’s take on DNA being the driver here; I agree with him. “totally ruthless in population control” goes not just against our instinct, but against something even more fundamental that I can’t actually articulate. I don’t believe this is something we know or feel (my father was appalled when I suggested DNA is in control, and we are simply the vessels carrying it), but it directs us by use of “feelings” and emotions. So, we don’t think, we must keep on reproducing. It just happens until the DNA is satisfied it has enough vessels to continue. If it is a conscious thought, we can’t really explain it.
“I really want to have another child… ” “Why?” “Oh, I won’t feel complete…” Ask someone to explain this, and it comes down to deep and sincere feelings, emotional needs.
I think this idea, theory, can explain a lot. For example, Hitler had no qualms about killing lots of Jews – there was no DNA crossover. All sorts of Gentiles in many countries killed Jews before the Nazis arrived. To an extent, it’s us (our DNA) or them (their DNA), played out large. If you go into a busy student pub, people are often self-selecting on racial lines. We tend to like our fellow DNAers (even if only potential fellow) better than complete outsiders.
Matricide and patricide are bad, fractricide happens (read Shakespeare) but infanticide is obscene. A parent killing a child is chilling.
Our DNA doesn’t necessarily have the long view. It doesn’t think 3 generations out, so some of its directives are suicidal. So, breed, breed, breed! Eat, drink, dig, build… Ooops!
What do you think? Possible, or total Cloud Cuckooland?
Lizzy
“Our DNA doesn’t necessarily have the long view. It doesn’t think 3 generations out, so some of its directives are suicidal. So, breed, breed, breed! Eat, drink, dig, build… Ooops!”
On the contrary, our DNA wants us to continue to thin out the population of people with less similar DNA, to ensure the continuation of our DNA. It is our culture, which is a construct made to repress our DNA programming, that tries to force us not to wipe out other DNA lines.
This would go a long way to explain why Jewish people may be driven by DNA to strive to program the culture, and thus repress the DNA, of non-Jewish people. Religion, psychology, Hollywood, all methods of attempting to repress DNA, to protect the DNA of a minority group from the surrounding majority.
I think it is almost certain that as the collapse accelerates, racism and xenophobia will increase.
Hello Lizzy, the only solution if our species is to survive is for us to “sublimate” or refine the “will to life” with rationality, to plan ahead. Liberal egalitarian “morality” is just BS that is going to take us all down. Not all of us are capable of rational sublimation but this forum and the people on it give me some “faith” that some of us, if not enough of us are capable of hard rational decisions.
The “general intelligence” or “g factor” in the UK has plummeted by 15 IQ points over the last century and we are less capable of rational or aesthetic sublimation than we ever were. Capitalism has bred a mass urban lower class population from the worst elements of the peasantry of old and that is basically thick.
http://www.dailymail.co.uk/sciencetech/article-2323944/Were-Victorians-cleverer-Research-indicates-decline-brainpower-reflex-speed.html
Sadly it is probably too late for any rational solution now. Demise is now inevitable. WWII was our last chance to set things right. Everything since then has been has been shallow moralistic foolishness. Maybe one day things will be better.
“The “general intelligence” or “g factor” in the UK has plummeted by 15 IQ points over the last century and we are less capable of rational or aesthetic sublimation than we ever were.”
There are many factors that can easily change that. Half the population is infected with Toxoplasma Gondii, so treating that alone will reduce schizophrenia and other ailments, and raise intelligence by 5 points – 10 points for half the population. There is a virus that likewise affects about half the population and reduces their intelligence by around 10 points, so vaccinating against it should raise intelligence another 5. Stress, poor nutrition and lack of sleep are also significant factors.
Simply alleviating these conditions could raise general intelligence around 20 points. After that, humans have shown to have some level of neuroplasticity. With daily training, the general populace could gain another 10 to 20 points.
I doubt it will happen, but making the entire population significantly smarter is technically possible.
“The “general intelligence” or “g factor” in the UK has plummeted by 15 IQ points over the last century and we are less capable of rational or aesthetic sublimation than we ever were.”
‘What we overcome only makes us stronger’, however whatever makes things easier also means less is required from us including brain power. It’s simply not being exercised to the same extent as it once was. Here’s a perfect example; My father was a mechanical engineer doing the drawings by hand, but later in his career the cad-cam replaced hand drawings. All calculations once had to be done by hand, or at least with an abacus or a slide rule, but now calculators do the work. They even let kids in school use them on tests. If there was no collapse and society kept improving technology there will be even lower IQ in years to come.
Not only are brains less capable, but bodies are less capable as well. They did a study of 1 mile run times for high school students in 1970 vs. just a few years ago, and in 1970 the average kid ran the mile in 90 seconds less. Not 9 seconds or .9 or .09, but a minute and a half faster. That should be a red flag to get kids back into physical education classes but society is so busy coddling kids they don’t expect anything from them anymore. Love has become synonymous with little or nothing expected.
I think that’s a very plausible explanation, or at least a factor in a larger explanation. I definitely agree that the urge to reproduce is largely instinctual, and thus probably impossible to control. But even if it weren’t, government imposed control measures would always legitimately come down to the question of which groups would be controlled, and they would therefore be resisted at all costs by those groups (at the least).
Hence “Oryx & Crake” by Margaret Atwood.
Reproductive barriers drive speciation. However, in sentient humans (is that a spectrum disorder?) cultural factors by convention are treated as non-instinctive barriers. Instead we might use the euphimism “eugenics” to refer to cultural breeding programs. But whether it is latent or vestigial “instinct” is fertile ground for debate. Can we evolve a sustainable homo sapien sapiens culture or is it homo furcation time?
“… and Africans will make up half, says UN”
That alone, without fossil fuels depletion, would make our civilisation collapse.
Its never going to happen in Africa or anywhere else. The UN number’s are just a joke really.
I read that Yemen’s population was going to soar as well. How can this be when they have a severe water shortage, rapidly depleting oil reserves and a population that is rebelling? It won’t of course. I don’t know if they base these numbers on countries like Yemen getting outside help with subsiding these expanding populations but if other countries are facing similar problems where is all this imported food, energy, etc going to come from?
I guess the UN thinks the world will be powered by ‘renewable’ energy 100% by 2100 and solar and wind will be mankind’s saviour. I’m not sure how food production will cope though as I doubt fossil fuels will be plentiful by then.
Yemen was forecast to achieve a population of over 60 million in a couple of generations. That’s the same as the UK or France, two very fertile lands. So it’s a sick joke. Egypt has 98 million people with just 2% of its land being arable. Saudi Arabia is famous for it’s Empty Quarter and with over 31 million now has soon nowhere to go. These are all disasters in waiting, with horrendous consequences.
There is no effort whatsoever to reduce human population, only lip service provided to give the appearance of concern. There are some things that cannot be talked about for sociological reasons and they are potential economic collapse and population control.
Population control would result in economic collapse, since pensions, taxes, etc require ever increasing numbers of contributors. That’s why “illegal immigration” is allowed to continue, in my opinion. All attempts to reduce birth and immigration rates are lip service, since effective action would be self-destructive.
It seems to me that the current financial and economic system must collapse before change can occur. However, will the resources remain to be able to implement changes when that happens? Or, will the collapse be apocalyptic, with radiation bathing the Earth as a result? I guess we’ll find out.
Yes we’ve been out of control for a long time. And I am the hated one for pointing it out.
See, again that’s a point that I must make to the moral minded. Any attempt to change anything, and you become the crucified one. If you actually say anything in this world that makes sense, notice how everybody proceeds to shut you up, and they in fact begin to hurl insults at you, accuse you of being something you are not, and take your point completely out of context. Try it, online or in real life. There is no political center and there is no free discussion. Let me repeat, that if you are level headed, objective, logical, consistent, then you are the hated one in the world today.
The things we are talking about here can quite literally get you banned from internet forums, and abandoned by friends.
So, I don’t care, at all. I’ve removed myself from the discussion. I am not going to be the Christ figure as the world implodes. I will leave that to the survivors.
Mr DNA does not like being told what to do….
I think human occupation of the planet is doomed to ultimately fail under any scenario. We are naturally on an upward trajectory, because of our use of supplemental energy besides food. Our population eventually would outgrow the number that could be supported by hunter-gathering, so we added other ways of getting more energy products. Part of this meant that other species got less of the plant and animals we could use for food. Eventually, we had to move on to fossil fusel.
We could have made our use of fossil fuels last longer, if we had held down the growth of credit. Communism tended to do this. Holding down population would be helpful as well. Again, it seems like communist or totalitarian countries have been more successful at this. China has done well recently. Cuba has done very well. The population of Russia and other FSU countries are either down or growing very little.
In regards to population growth is easy to make assumptions with only part of the Data.
Since 2000 we have sort of reached peak child, although the birth rate has not decreased, the population will keep growing. (this peak is not like peak oil). without taking into account the increasing levels on life expectancy the number of people will grow up to 9, 10 or 11 billion.
Simply because those 2 billion children will grow old and every 10 years they will be repleaced with another 2 billion and so on till they die. There is no explosion, there is a fill up.
Whereas in developed countries the birth rate is around 2.1 childs per couple aprox, in some poor countries it is 5 or 6, Particularly in those with a high child mortality rate, there are some excepctions like Bangladesh for instance.
In order to get an effective peak in children number the birth rate and child mortality rate must be halved , that is a one child policy for most if not all countries at least for 10 years and then stabilize the numbers accordingly to each country’s demographic situation.
The implications for such challenge goes beyond funding retirement funds, it would also affect migration and the whole economy as it would be require to rise those in extreme poverty at least to a level where the number of children is not relevant to the household income but expenditure, as well as health care and education for an effective birth control rate. neverthless the task is cumbersome and is certainly not a period of time for epidemics.
There is an interesting research done by Hans Rosling in regards to population using statistcs as perspective which I recommend.