The traditional understanding of supply and demand works in some limited cases–will a manufacturer make red dresses or blue dresses? The manufacturer’s choice doesn’t make much difference to the economic system as a whole, except perhaps in the amount of red and blue dye sold, so it is easy to accommodate.
Figure 1. From Wikipedia: The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.
A gradual switch in consumer preferences from beef to chicken is also fairly easy to accommodate within the system, as more chicken producers are added and the number of beef producers is reduced. The transition is generally helped by the fact that it takes fewer resources to produce a pound of chicken meat than a pound of beef, so that the spendable income of consumers tends to go farther. Thus, while supply and demand are not independent in this example, a rising percentage of chicken consumption tends to be helpful in increasing the “quantity demanded,” because chicken is more affordable than beef. The lack of independence between supply and demand is in the “helpful” direction. It would be different if chicken were a lot more expensive to produce than beef. Then the quantity demanded would tend to decrease as the shift was increasingly made, putting a fairly quick end to the transition to the higher-priced substitute.
A gradual switch to higher-cost energy products, in a sense, works in the opposite direction to a switch from beef to chicken. Instead of taking fewer resources, it takes more resources, because we extracted the cheapest-to-extract energy products first. It takes more and more humans working in these industries to produce a given number of barrels of oil equivalent, or Btus of energy. The workers are becoming less efficient, but not because of any fault of their own. It is really the processes that are being used that are becoming less efficient–deeper wells, locations in the Arctic and other inhospitable climates, use of new procedures like hydraulic fracturing, use of chemicals for extraction that wouldn’t have been used in the past. The workers may be becoming more efficient at drilling one foot of pipe used for extraction; the problem is that so many more feet need to be drilled for extraction to take place. In addition, so many other steps need to take place that the overall process is becoming less efficient. The return on any kind of investment (human labor, US dollars of investment, steel invested, energy invested) is falling.
For a time, these increasing inefficiencies can be hidden from the system, and the prices of commodities can rise. At some point, however, the price rise becomes too great, and the system can no longer accommodate it. This is the situation we have been running into, most severely since mid-2014 for oil, but also for other commodities, dating back to 2011.
Figure 2. Bloomberg Commodity Index from Bloomberg, reflecting a combination of 22 ETFs in Energy (35%), Agriculture (29%), Industrial Metal (15%), Precious Metals (16%) and Livestock (5%)
The higher cost of producing oil and other energy products affects the economy more than a shift from chicken to beef.
The economy is in a sense more dependent on energy products than it is on our decision whether to eat chicken or beef. If the cost of producing oil rises, and that higher cost is carried through to prices, it affects the prices of many things. It affects the cost of food production because oil is used in the production and transport of food. The higher cost of oil also affects nearly all transported goods, since oil is our primary transportation fuel.
Some of the impacts of higher oil prices are clearly adverse for the economy.
If higher oil costs are passed on to consumers as higher prices, these higher prices make goods less affordable for consumers. As a result, they cut back on purchases, often leading to layoffs in discretionary sectors, and recession.
The higher cost of oil products (or of other energy products) also tends to reduce profits for businesses, unless they can find workarounds to keep costs down. Otherwise, businesses find themselves in a situation where customers cut back on purchasing their products. As we will discuss in a later section, this tends to lead to reduced wages.
Some of the impacts of higher oil prices are somewhat positive.
Rising oil prices clearly encourage rising oil production. With this, more jobs are added, both in the United States and elsewhere. More debt is added to extract this oil, and more equipment is purchased, thus stimulating industries that support oil production. The value of oil leases and oil properties tends to rise.
As noted previously, the cost of food supply depends on oil prices. The cost of producing metals also depends on oil prices, because oil is used in extracting metal ores. As the prices of metals and foods rise, these industries are stimulated as well. Values of mines rise, as do values of agricultural land. More debt is taken out, and more workers are hired. More equipment is purchased for producing these products, adding yet more stimulation to the economy.
The higher price of oil also favorably affects the many countries that extract oil. Part of this effect comes from the wages that the workers receive, and the impact these wages have, as they cycle through the economy. For example, workers will often want new homes, and the purchase of these new homes will add jobs as well. Part of the effect comes through taxes on oil production. Oil production tends to be very highly taxed, especially in parts of the world where oil extraction can be performed cheaply. This tax money can be put to work in public works programs, providing better schools and hospitals, and more jobs for citizens.
It is inevitable that the price of oil must stop rising at some point because of the adverse impact on spendable income of consumers.
The adverse impact of higher oil prices on the spendable income of consumers comes in many ways. Perhaps one of the biggest impacts, but the least obvious, is the “push” the higher cost of oil gives to moving manufacturing to locations with lower costs (cheaper fuel, such as coal, and lower wages), because without such a change, higher oil prices tend to lead to lower profits for many makers of goods and services, as mentioned previously.
The competition with lower-wage areas tends to reduce wages in the US and parts of Europe. This push is especially great for jobs that are easily transferred to other countries, such as jobs in manufacturing, “call-centers,” and computer tech support.
Another way businesses can maintain their profit levels, despite higher oil costs, is through greater automation. This automation reduces the number of jobs directly. Automation may use some oil, but because the cost of human labor is so high, it still reduces costs overall.
All of these effects lead to fewer jobs and lower wages, especially in the traditionally higher-wage countries. In a sense, what we are seeing is lower productivity of human labor feeding back as lower wages, if we think of the distribution of wages as being a worldwide wage distribution, including workers in places such as China and India.
Normally, greater productivity feeds back as higher wages, and higher wages help stimulate higher economic growth. Lower wages unfortunately seem to feed back in the reverse direction–less demand for goods that use energy in their production, such as new homes and cars. Ultimately, this seems to lead to economic contraction, and lower commodity prices. This is especially the case in the countries with the most wage loss.
The drop in oil prices doesn’t do very much to stop oil production.
Oil exporting countries typically have relatively low costs of production, but very high taxes. These taxes are necessary, because governments of oil exporters tend to be very dependent on oil companies for tax revenue. If the price of oil drops, the most adverse impact may be on tax revenue. As long as the price is high enough that it leads to the collection of some tax revenue, production will take place–in fact, production may even be increased. The government desperately needs the tax revenue.
Even oil companies in oil-importing countries have a need for revenue to pay back debt and to continue to pay their trained workers. Thus, these companies will continue to extract oil to the best of their ability. They will aim for the “sweet spots”–places that have better than average prospects for production. In some cases, companies will have derivative contracts that assure them of a high oil price for several months after the price drops, so there is no need to reduce production very quickly.
The drop in oil prices, and of commodity prices in general, makes debt harder to repay and discourages adding new debt.
We earlier noted that a rise in the price of commodities tends to make asset prices rise, making it easier to take out more debt, and thus stimulates the economy. A drop in the price of oil or other commodities does the opposite: it reduces asset prices, such as the price of the property containing the oil, or the farmland now producing less-expensive food. The amount of outstanding debt does not decline. Because of this mismatch, companies quickly find themselves with debt problems, especially if they need to take out additional loans for production to continue.
Another part of the problem is that on the way up, rising prices of oil and other commodities helped lift inflation rates, making debt easier to repay. On the way down, we get exactly the opposite effect–falling oil and other commodity prices lead to falling inflation rates, making debt more difficult to repay. Commodity prices in general have been falling since early 2011, leading to the situation where interest rates are now negative in some European countries.
The costs of producing commodities continue to rise, as a result of diminishing returns, so this fall in prices is clearly a problem. Low prices make future production unprofitable; it also leads to an increasing number of debt defaults. There are many examples of companies in financial difficulty; Chesapeake Energy is an example in the oil and gas industry.
Where oil supply and demand goes from here
The traditional view of the impact of low oil prices seems to be, “It is just another cycle.” Or, “The cure for low prices is low prices.”
I am doubtful that either of these views is right. Falling prices have been a problem for a wide range of commodities since 2011 (Figure 2, above). The Wall Street Journal reported that as early as 2013, when oil prices were still above $100 per barrel, none of the world’s “super major” oil companies covered its dividends with cash flow. Thus, if prices are to be sufficiently high that oil companies don’t need to keep going deeper into debt, a price of well over $100 per barrel is needed. We would need an oil price close to triple its current level. This would be a major challenge, especially if prices of other commodities also need to rise because production costs are higher than current prices.
We are familiar with illnesses: sometimes people bounce back; sometimes they don’t. Instead of expecting oil prices to bounce back, we should think of the current cycle as being different from past cycles because it relates to diminishing returns–in other words, the rising cost of production, because we extracted the cheapest-to-extract oil first. Trying to substitute oil that is high in cost to produce, for oil that is low in cost to produce, seems to bring on a fatal illness for the economy.
Because of the differing underlying cause compared to prior low-price cycles, we should expect oil prices to fall, perhaps to $20 per barrel or below, without much of a price recovery. We are now encountering the feared “Peak Oil,” because much of the cheap oil has already been extracted. Peak Oil doesn’t behave the way most people expected, though. The economy is a networked system, with high oil prices adversely affecting both wages and economic growth. Because of this, the symptoms of Peak Oil are the opposite of what most people have imagined: they are falling demand and prices below the cost of production.
If low prices don’t rise sufficiently, they can cut off oil production quite quickly–more quickly than high prices. The strategy of selling assets at depressed prices to new operators will have limited success, because much higher prices are needed to allow new operators to be successful.
Perhaps the most serious near-term problem from continued low prices is the likelihood of rising debt defaults. These debt defaults can be expected to have a very adverse impact on banks, pension plans, and insurance companies. Governments would likely have little ability to bail out these organizations because of the widespread nature of the problem and also because of their own high debt levels. As a result, the losses incurred by financial institutions seem likely be passed on to businesses and individual citizens, in one way or another.
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Deere and Co. reports its earnings. The agricultural equipment producer is expected to post lower sales than last year by almost $2 billion, as the industry closes in on its worst sales year since 2009.
Investors will be looking to its 2016 forecast, a bellwether for the sector
http://www.wsj.com/articles/deere-earnings-what-to-watch-1448389584
This is a duplicate post but the first didn’t post correctly. You know I had a revelation today. I realized this collapse is going to be really slow. Painfully slow. In historical terms, fast, but in our terms, slow.
Does it depress me? You bet it does. I’m as excited about collapse as anybody, there are many aspects of this modern world that I despise. But I realized that they won…modern man won. We have been absolutely obliterated by the world of play, images, media and fantasy. The world of the screen. And of government and corporate propaganda. Reality and those of us who deal with reality have lost.
It’s a bit like growing into an old curmudgeon and looking back on missed opportunities, or, say, always being the bridesmaid, never the bride. I just sort of realized today that it’s all BS. Everything. Truth doesn’t matter. Nothing we are talking about at this blog matters. I guarantee nobody will ever be interested in what we have to say. And the thing about BS is…it never runs out. The human capacity to produce and live with BS is infinite. By a long distance, the major economic activity the world over is the endless production and consumption of meaningless, repetitive BS.
You think this is going to change now? Guess again! It all can be produced at lower levels and endlessly recycled.
Whatever truth is, people despise it. They just aren’t interested, not now, not 50 years from now. All everybody wants is food, sex, and entertainment, to be “social” and share the details of their pathetic lives with each other. That’s it. That’s all industrial civilization needs to provide. We don’t need any more expansion, exploration, or discovery. We don’t need to reach for the stars, we don’t need growth. We need just enough fuels to provide food and distractions to people.
And you and I are the ones that made this possible. We did the right thing, we worked, we were honest, we were solid and dependable. And we did this for “humanity” and the “children” etc. We believed in America, we believed in the world, we payed our taxes, we swallowed this hook line and sinker. And guess what, now the children are all grown up and they are looking to kill us off and enjoy what we once did. They are mad as hell and they aren’t going to take it anymore! They want their 15 minutes of fame and they will get it. That’s what all this “black lives matter” nonsense in America is about, for example. They don’t want dignity, or work, or to be left alone by cops. They want money and fame. They want to be seen, even if it’s with their clothes off. Same with the Donald Trump clowns. Same with virtually everybody who works in the media. Everybody wants the same thing…look at me, I exist! Point the video cameras at me and post it on the internet! I count, I’m precious, I’m a star! What I look like, and whatever drivel comes out of my mouth, is important! And this is true even as the actual importance of people has never been lower.
It’s too late to change this, this has occurred by the very development of our systems. And it wasn’t going to end any other way, was it? I mean, think clearly on this. The end result of all human activity was always going to be the saturation of trivia and BS. It wasn’t going to be truth, or beauty, or science, or art, or erudition, or peace, or humility, or sustainability, or any of that nonsense. Let’s be honest, those things never had a chance.
And let’s be honest…everybody here is wishing for collapse and I don’t blame you. I understand where it comes from. You want to be rid of the BS. But it’s not going to happen, might as well accept it.
Yes, painfully slow. Yes, no one will care what we say. But we are enjoying the social conversation.
Amen brother!
http://www.zerohedge.com/news/2015-11-24/trump-waterboarding-you-bet-your-ass-id-approve-it-even-if-it-doesnt-work
I mentioned in an earlier post people were desperate and that could be seen in the interest in Trump, which I described as a fascist. Well the article above certifies that description as accurate. Trump in an interview today said he would reinstate waterboarding and would use it even if it didn’t work because those kind of people deserve it. Does anyone know what waterboarding is? They force someone on to their back, hold down their arm and legs, put a wet rag in their mouth then pour water on to the rag. That initiates a gag response that keeps happening until the water stops being poured. It’s torture. Anyone who has ever gagged on something they ate, we all know the feeling. Imagine hours of that feeling. That’s waterboarding. Any political candidate advocating such a tactic is a fascist. Should be an interesting election.
I would call them sadists.
As push comes to shove, we need to beware the charismatic charlatans who promise a return to the golden days. JMG over at Archdruid Report has a few posts on this topic.
Agreed Ed, sadists.
jphsd, no doubt, as history is replete with examples of people voting in the like’s of Mussolini/Hitler when things are not as good as they once were. What they don’t realize is things can get a lot worse in a hurry with the wrong leader.
trump-waterboarding-you-bet-your-ass-id-approve-it-even-if-it-doesnt-work…..
That’s actually pretty funny (if you don’t think about the implications)….
I am all for a Trump presidency — in times like this we need a court jester…. if he does win it’s because the Elders concur — they want to be entertained as we sink into the morass…
For those of you aghast that I would vote for Trump if I were American — don’t fret — it’s not as if the presidency has any power…. he’s a stooge… these are the types calling the shots
http://awdnews.com/images/1447161052kissinger_globalist_slug.jpg
http://d35brb9zkkbdsd.cloudfront.net/wp-content/uploads/2012/05/sheldon-adelson.jpg
Who is the waxwork dummy below Kissinger?
Sheldon Adelson … casino magnate…
I actually think he has been dead for years … but his estate is funding a never-ending Weekend at Bernie’s thingy….
A bit like the FED and the world eCONomy?
++++++++++++++++++
Pretty much
And low and behold, just a day or so after posting an opinion post about Trump being a fascist, here’s an article today on the very subject:
http://www.csmonitor.com/USA/Politics/Decoder/2015/1125/Is-Donald-Trump-really-a-fascist
“Is Donald Trump really a ‘fascist?’
Some in the GOP are beginning to use the term – evocative of the dictatorships of World War II – to describe the billionaire presidential hopeful.
That’s the (loaded) word some in the GOP are beginning to use to describe the billionaire presidential hopeful. It seems his recent nativist statements – including his apparent endorsement of a national registry for Muslims in the US, and support for the surveillance of mosques – have pushed Republicans who think Trump is unelectable over the edge.”
After Bush the angry proles wanted change…. the Elders gave them Obama…. after Obama they appear to want a fascist…. if that is correct then the Elders will give them Trump.
Don Draper takes the pulse —- and reports back to his masters….
What caught my attention was the historical significance of a fascist candidate. Hitler and Mussolini were voted in when things were going bad for both of those countries, much like many Americans now feel things are going bad for them. What these people don’t realize is it’s diminishing returns that is giving them that indigestion of the monetary type.
Is a fascist candidate simply a sign of the times? Are the people becoming frustrated and angry, thus seeking a fascist to play out their feelings? Will war follow? It did in WWII. A lot of people have predicted hard times due to peak oil would lead to war. We shall see if Trump gets elected and what follows during his presidency.
Also, both Mussolini and Hitler were viewed in the context of being “clowns”, not to be taken too seriously and of extreme views that would provide stability and “order”, in a world of danger and uncertainty. Trump is looked in the same manner, and fascinating how History is repeating itself.
I suppose the rationale is the Congress will “control” him if elected with the Supreme Court if needed.
I personally believe he is just a prop to open the way for another similar figure to step in those shoes.
It is just a manner of time. Democracy only fictions in a society of asic abundance and educated citizens, both lacking.
You may be right.
Donald Trump has never polled higher than 25% among Republican primary voters. That is less than 10% of the total American voting public. He will never win a general election. Your “Elders” are a fantasy.
The following is a condensed version of Ron’s latest post:
http://peakoilbarrel.com/a-surprising-look-at-oil-consumption/#more-10261
He writes that oil consumption up thru 2014 (no 2015 data yet) by country gives us an indication of economic activity. The higher the consumption, the greater the economic activity. Here is a summary of the different parts of the world and their consumption patterns:
Middle East: UP & still going up
China: UP historically by 6.5% per annum, but leveled off recently
Russia: Up slightly, but FSU (formers soviet union countries) leveled off
Europe: DOWN sharply
US: Down from historical high, but up slightly recently (not as affected by recession as the EU)
Mexico: Down
Japan: Down
The following is his summation:
“My comment: The recent decline in oil prices had at least as much to do with falling consumption as it did rising production. We don’t yet have consumption numbers for 2015 yet but from the build in inventories it does not look like that consumption has improved significantly.
With China’s economic growth slowing it looks like world oil consumption will get worse before it gets better. This is one reason I expect oil prices to stay low for quite a while longer.”
That’s an interesting look at the world economy from a standpoint of oil consumption. His comment that “oil prices had at least as much to do with falling consumption as it did rising production”, is noteworthy as we can see what parts of the world have falling consumption and their resultant effect on price.
Yesterday I predicted once over supply depletes price will rise once again to 70-80 a barrel. I still hold to that because in 2015 dollars 40 something for a barrel of oil is relatively low, and given some more time for that lower price to influence economic activity positively, I think world GDP will rise and with it consumption and the price of oil. But we shall see what happens…
https://research.stlouisfed.org/fred2/series/M12MTVUSM227NFWA
That’s a graph showing US miles driven rising sharply since 2011. So apparently US consumption is UP. But that’s not a surprise to me as everywhere we go on the roads lately (at least in CA) the traffic density is way up. People get out and about when fuel is less and spend more.
As an example of this, my wife and I have been going on long day trips because of the low price of fuel. Apparently others are doing the same.
I am always suspicious that the agencies don’t have a good split between the current production-demand problem. My view is similar to Ron’s– a big piece of the problem is demand. BP does give oil consumption growth for 2014 for several countries/ groups that Ron didn’t show (for 2014).
It shows Mexico -5.0% (2014 vs 2013 for oil consumption)
Former Soviet Union 0.3% (I wonder what 2015 % change looks like-a lot lower, I would expect)
China +3.3% (down from 4.3% prior year; 4.9% two years prior) And I am sure 2015% change is lower yet
Total Africa is +4.2% –It is hard to imagine the increase is as great in 2015, if commodity prices are down
Equador +4.7% for 2014 over 2013. Has to be lower this year.
Ecuador’s situation has rather flown under my radar, especially with Brazil garnering all the headlines, but I came across this interesting little interview today:
“After a year of record-low oil prices, Ecuador’s government has lost close to 50 percent of its revenue… For Ecuadorians, all of this anxiety over the future is particularly distressing because until recently, things were pretty good here. Ecuador was a beacon of stability compared to some of its other oil-rich neighbors like Venezuela. Billions were spent on new airports, schools, hospitals and an impressive new highway system crisscrossing the Andes. Analysts now say the one thing Ecuador forgot to do was save money for the bust.”
http://www.npr.org/2015/11/25/457415531/ecuadors-oil-bust-draws-parallels-to-1990s-financial-crisis
I visited Ecuador a few years ago, to see the shakedown that the government was attempting of Chevron–they were having financial problems early on. I became aware of the situation then. More recently, Ecuador has been getting oil related loans from China, just as Venezuela. The leaders of Ecuador and Venezuela have been friends in the recent past. Many people don’t connect the problems of the two countries.
Wonder how they service these debts…
This raises the question of what are the central banks doing behind the scenes — are we seeing only the tip of the iceberg in terms of how much funding it being dished out to prevent the first domino from falling?
What about companies like Glencore and Noble Group — how are they not imploding? How are they not being downgraded to junk status?
I suspect the invisible hand is everywhere….
https://theselittleinsights.files.wordpress.com/2013/03/4665525451_ba24cf9507_z.jpg
Some version of “extend and pretend”? Or throw government money at any kind of project that might help these companies out for a bit? Or something else?
How interesting …. inflation appears to be dead…. the pig gets another coat of Mabelline…
That pig is startin to look real perty to Joe Sixpack down there in the basement with no money to take Jenny Sue out to dinner….
http://www.bloomberg.com/news/articles/2015-11-24/go-ahead-sell-the-peso-mexico-doesn-t-care-what-you-do-anymore
“inflation appears to be dead”
Please tell our homeowners association that (9% increase), water/sewer (up 50%), food bill up 14%, property tax up, county up with a new separate annual bill of 242. for fire protection, electricity up 15%, healthcare up 18% all in 2015.
Even though commodities may be down, we the consumer are not feeling it except maybe at the fuel pump or when we get a tank full of propane. Those are cheaper but they do not make up for the increases noted above.
One thing you can be sure of in this world, most people and their businesses are doing everything they can to become millionaires/billionaires.
Economists should forget about money and prices.
This is not economics, only mere chrematistics (https://en.m.wikipedia.org/wiki/Chrematistics), and certainly not a science.
Real economy is about physical flows, and about the way/speed at which we’re using/depleting/destroying our resources, both renewable and non-renewable ones.
Debt increase and other Ponzis are only slightly delaying the outcome.
Yes but the smoke and mirrors really does lull the vast majority of proles into believing that the metrics which they live their lives by are very real and based on solid science. Electricity was discovered and is now a normal thing that is to be expected without question in every home. Smart phones will always get smarter every year (and the people that use them, dumber?). Once a road is made 8 lanes wide it will never need to be rebuilt and it will permanently solve traffic congestion. Oil just re-creates itself like magic as we burn it; the cost of oil should therefore never rise. Technology has increased exponentially and will continue to do so forever. Taking ones daughters to ballet and their son to soccer practice is “normal” and the Lexus SUV is the way to do it as a sign of success. Going to college and getting a degree will bring one a good income and stable life filled with stuff that’s valuable. Computers will always be more powerful every year (it is a law of nature). Cars will always get better mileage every year (it is a law of nature). Green energy is here and everything is looking so bright. Cars are normal, natural things that will always be. Buying a home with trans-generational architectural cues on the facade is a sign of wealth. Buying a home with granite counter tops, towel warmers and exotic stone tile floors is a worthy goal because you saw it on TV show in HD no less. That homes will always appreciate in value in the long term. A Lexus is better than a Chevrolet for status. A Chevrolet is better than a horse. Things will always just get better if we can continue to study and understand this thing we call Economics. Perhaps the next step is Quantum-Economics. That should bridge the gap between Theoretical Economics and Relative Economics (sounds so real doesn’t it).
Like a Scientology that would have succeeded.
LOL!!!!!
“Once a road is made 8 lanes wide it will never need to be rebuilt and it will permanently solve traffic congestion.”
They’ll continue to get wider by annexing the bordering land–eminent domain–and/or will be augmented by new roads. And roads will keep being added indefinitely, since the planet is large and perhaps even infinite…
But, seriously, this article about shrinkage could mean some awakening–not much–to scarcity. Maybe it’s a version of using the current economic system to make things better so as to be prepared for when they get worse. A strange dance.
http://www.kcrg.com/subject/news/iowa-dot-director-says-transportation-system-will-shrink-20151123
This link works better for me. http://www.thegazette.com/iowa-dot-director-road-system-will-shrink-20150713
I have seen similar stories in other farming states. Population keeps moving to cities. There is less use for roads in farm areas.
Global debt defaults near milestone http://www.ft.com/cms/s/0/40146b80-91bf-11e5-94e6-c5413829caa5.html
“Global debt markets are on the cusp of an unwelcome development with the number of companies defaulting on their obligations set to reach the century mark, driven largely by struggling US shale gas providers.
Currently, 99 global companies have defaulted since the year began, the second greatest tally in more than a decade and only exceeded by the financial crisis which saw 222 defaults in 2009, according to Standard & Poor’s. US companies account for 62 of this year’s defaults.”
We need a website to keep track of number of major companies defaulting. I usually find FT behind a paywall.
This was posted on Matt Drudge’s website and the entire article was view able at the time. I should have copied and pasted the entire article but thought against it, my bad. It appears FT put it behind their paywall after so many hits.
One way around the paywall is to do a search for the article title on Google and clicking on the link from there, they don’t appear to want to lose traffic from Google by putting behind a paywall so try https://www.google.com/?gws_rd=ssl#q=Global+debt+defaults+near+milestone
Thanks! That link works.
Thanks Gail, another thoughtful article.
I can maybe add a couple of points: Your last paragraph mentions the knock on effects. I recently listened to a young woman working in the pensions industry. She has no expectation that the financail services industry will provide her with a viable pension when she retires. That is a potential huge hole for government credibility.
The second point is that much of your focus is the oil price in dollars. Some resource economies are doing well enough because their currency is devalued in reference to the dollar. Just sayin’
“Some resource economies are doing well enough because their currency is devalued in reference to the dollar.”
Would you kindly provide some examples of resource economies that are doing well?
I expect Richard meant, “less badly,” not really well.
When I was in consulting, before I started writing about these issues, I worked for a consulting business with a big pension business. (I wasn’t in pensions myself, but could easily see the problem.) I decided I needed to leave my employer if I was going to write about these issues.
Also noticed today that Walter Energy –a coal producer reorganizing after bankruptcy–wants to cut wages and eliminate pensions for retirees. http://www.reuters.com/article/2015/11/24/walter-energy-bankruptcy-idUSL1N13J2JV20151124#Ydve7cAUJqr3ZvvL.97
We can expect more of this.
Dear Finite Worlders
A thoughtful article by a small farmer in Britain, who has appointed himself God for a day and redesigned British Agriculture.
http://www.resilience.org/stories/2015-11-24/of-pigs-peasants-and-pastoralists
In Gail’s previous post, I noted that Albert Bates now thinks the world can feed itself ‘organically’, but part of his optimism arises from the fact that he has gotten meat and dairy almost completely out of his diet. You will see that this author reduces the meat allotment per person in Britain by about 90 percent. He also multiplies the number of farmers by 10.
Since one of Gail’s dominant motifs is that ‘we can’t get from here to there’, I’ll spend a little time on that subject. I agree with the author that quite a bit of the ‘grass fed beef’ business is made up of rich people wanting to eat food that doesn’t poison them. However, taking Joel Salatin’s farm as an example: Fifty years ago it was a worn out piece of land with huge gullies which wouldn’t support much of anything agricultural, and there is no doubt that his methods which used animals to restore fertility were effective. So one thought to keep in mind is that animals may be quite useful as a transition mechanism. Once we again have fertile land, we can decide whether the land needs to continue with animals or may be converted to lower on the food chain human crops. By ‘we deciding’, I mean that the particular farmer will respond to market signals. If potatoes pay better than cows, then the farmer will grow potatoes. If governments want more potatoes and less beef, then they may need to intervene in the market.
The author also supports the notion that crops should be grown without herbicides and pesticides and with minimal tillage. My ideas are somewhat different. I worry a great deal about the efficiency of using small farms to grow garden crops. The author makes a joke about the city condominium dwellers being responsible for their own transportation. I think the thing that makes sense is that most garden crops are grown in gardens. So transportation of perishables and refrigeration are minimized. But several things will have to happen to make gardens the default solution. First, people are going to have to come to the conclusion that growing their garden veggies, or buying from a local gardener, is a lot more sensible than driving somewhere to buy them…or eating a steady diet of junk food. Hard times have a way of changing minds..
Second, some NGOs need to make a serious effort in terms of gardening. See this link:
http://www.groundswellinternational.org/sustainable-development/western-north-carolina/growing-food-where-people-live-in-polk-county-nc/
Take a look at the pictures and you see so much that must seem inexplicable to someone in Haiti…where this organization also works. The housing in this ‘slum’ must look unbelievably luxurious to someone who has a dirt floor. Yet this is one of the poorest counties in North Carolina, with poor health and welfare indicators. You will see the excavator making the garden near the street. This program has been successful beyond the expectations of the NGO, perhaps because the NGO has a person responsible for follow up. Many of these gardens have been started and abandoned in other places.
Third, governments will have to realize that there is no alternative (I hope Maggie Thatcher is turning in her grave!). That it’s best to use the excavators now while we still have them. That soil takes some time and work to regain fertility and Monsanto and company have zero to contribute to that project. That many of the boosters which help soil begin to recover are the products of industrial civilization, and things will get harder and the regenerative cycle longer if that industrial civilization falters. So rather than measure GDP, our governments need to measure soil and water quality and carbon sequestration.
Fourth, that debts cannot be allowed to determine the course of productive activity. I saw a recent guesstimate that one third of the debts in the world cannot be repaid. The other two thirds also cannot all be repaid, I think, without warping what we are doing economically. So we need to get to a regenerative agriculture, and we need to get debt driven decisions out of that process. It is hard enough from a purely physical and biological standpoint, without having the bankers and the bankruptcy court involved. I see no alternative except for government intervention….or the collapse of governments. Government collapse brings its own problems. We can look with horror at Syria and Yemen and other places the West has ‘improved’.
I could write much more on this subject, but I think this is enough to suggest some of the issues. If the suggestions for government initiatives seem hopelessly naive, then Lifeboats are the only alternative I can think of.
Don Stewart
All life on this planet has existed in somewhat of a steady state form of existence plus evolution for millions of years, the peaks and troughs due to population growth within species aside.
On the whole, all other species do not consume more resources than they need for their basic survival. Human beings are an anomaly. Our bigger brains lead to greed and over-consumption and that will be the cause of our downfall.
Even if we carrried out a life or death push for radical downsizing across developed nations, it would still result in massive population decline. There appears to be no way around the crunch.
And I highly doubt that govts will be managing any such endeavour because they’ll be too busy keeping up appearances to the bitter end. And by then, it’ll be too late to reorganise into anything useful. When it comes to it they will hoard what they can for themselves. They should have started down this road many years ago. Instead, they continue to go to war over resources.
But I like the idea of a baseline steady state way of life with a greater focus and allocation of resources to rational development. The only problem is that this would require a level of dictatorship that people are not comfortable with. You would have to invest heavily in indoctrination (North Korea style) for a baseline fair distribution to be established. A few billion could eke out a life with minimum standard of living. Surplus resources dedicated to technological advances, but something tells me this is not the way optimal progress happens. Probably invloves messy dynamics, black swans, serendipity more than strictly organised systems.
And even then, instinct would rear its ugly head as some members of the commune deem themselves more worthy than others. This is the problem with gift economies too. You’d be back to capitalistic inequality in a heartbeat because… humans.
Your post reminded me of a situation in which a government forced a nation back to a primitive state…. a 100% agrarian state… with little or no technology … where anyone exhibiting modernity including wearing eye glasses… was shot dead.
Let’s take a glimpse into one possible future — not one where populations are denied technology … one where it is simply not available because there will be no energy….
Or perhaps a future where anyone who dares to pursue any form of progress is put to death — because progress is known to have resulted in the Apocalypse.
Forget The Road….
I give you … Year Zero – Kampuchea:
Concept:
The idea behind Year Zero is that all culture and traditions within a society must be completely destroyed or discarded and a new revolutionary culture must replace it, starting from scratch. All history of a nation or people before Year Zero is deemed largely irrelevant, as it will ideally be purged and replaced from the ground up.
In Cambodia, so-called New People – teachers, artists, and intellectuals were especially singled out and executed during the purges accompanying Year Zero.
https://en.wikipedia.org/wiki/Year_Zero_%28political_notion%29
http://peteralanlloyd.com/wp-content/uploads/2015/09/peter-alan-lloyd-BACK-vietnam-war-novel-backpackers-in-danger-khmer-rouge-abduction-haing-ngor-murder-killing-field-khmer-rouge-torture-survivor-murdered-in-los-angeles-khmer-rouge-murder-mystery-8.jpg
http://www.rockin4tabitha.ca/userfiles/khmer_rouge_03%281%29.jpg
http://si.wsj.net/public/resources/images/ED-AL927_glovie_G_20100726172533.jpg
Do we need some revision on Pol Pot?
Was he the only leader who saw the future and was attempting to prepare his people for a world without oil?
I hate to admit it but I believe the only way forward with any chance of survival is under a dictatorship. Too much free will creates aspirations, friction, greed and all the other human nasties that cause problems. Freedom sounds good and works (somewhat) when energy and resources are abundant. But, freedom falls on its face when resources and energy become scarce. When there is scarcity, someone has to be in a position of ultimate power to make the tough decisions of who lives, who works and who dies so society as a whole has a chance for survival. It seems barbaric but, so goes life in the real world.
If progress is designated public enemy number one….
Then why not have an IQ test at the age of 5 … anyone scoring over 85 gets sent to the gladiator ring to fight other high IQ individuals
What a great way to eliminate all bankers and lawyers — I am sure I could get elected as King of Idiot World on that platform 🙂
Or they get a wack in the head with a shovel as many times as necessary to knock them down to the desired IQ level…
Whatever it takes.
“Or they get a wack in the head with a shovel as many times as necessary to knock them down to the desired IQ level…
Whatever it takes.”
In Aldous Huxley’s Brave New World, they dosed the babies with alcohol in order to create the desired number of infants at each desired intelligence level. But then, they made the babies in labs and controlled population as well.
So, North Korea leads the way. They live within their means and when they do not they starve the poor while maintaining the political and military.
unfortunately a dictatorship requires a dictator
dictators need help
In 1933 Hitler promised dictatorship–and that’s what the Germans got—another ponzi scheme. He created the SS to do his dirty work—as far as i know, Hitler never went near a concentration camp. there’s never a shortage of willing help in that respect.
The German elite lived well–the rest of Europe–particularly eastern Europe did not.
I fear that a future dictatorships, particularly in the USA will be theo-fascist. In a country in which half the people believe the world is 6000 years old are highly likely to vote into office a godbothering nutcase (check current candidates) who promises a return of the American dream (cue the 1000 year Reich)—it’s all happened before folks.
Yes it is very depressing how cult-ish, ignorant and gullible people can be. We are social creatures but it seems (if we are left to our own devices) we tend to form some barbaric and primitive social structures. Periods we see as dark ages seem to more the norm than the exception.
“Yes it is very depressing how cult-ish, ignorant and gullible people can be. ”
There are 100 men in a room. The air supply is suddenly reduced so that only 60 men may live. What happens? What should happen? Should they draw lots, have a vote? Is there time? Or do they divide into two groups and fight until there are only 60 men? Does the fighting reduce the air supply so that only 50 men may live? Do they divide based on skin color, language, religion, or whether they are wearing red or blue clothes? Is the religion or skin color the cause of the conflict, or merely the justification for why one group killed the other?
Hierarchical behavior seems to be the way that humans and other species determine who will live. The ones at bottom are most likely to catch illnesses if nothing else. There is research about this kind of thing–Craig Dilworth in “Too Smart for Our Own Good: The Ecological Predicament of Mankind.”
I talk somewhat about this in Human Population Overshoot–What Went Wrong.
You may have a point. The population doesn’t really understand what the issues are—just want it better. If there are cheap energy resources to make things better, that works, but not otherwise.
Tribal cultures were humankinds greatest achievment but a benevolent king is not far behind.
I eat very little meat myself. I perhaps could have used beef => chicken => vegetables in my article. People who don’t eat a lot of meat seem to live longer–but I am not sure that that is necessarily helpful.
Here’s a healthy recipe. Take an onion pita pocket bought at the bakery dept. in the store and warm it up, then put in some fat free cream cheese, sliced red onion, avocado, soy based phony hamburger meat, and put in some 50/50 organic lettuce. It’s quite tasty and very healthy.
I eat meat very sparingly too. When I find a deer by the side of the road thats still warm. Thats about 6 months worth for me. I often do hard physical labor. I cant seem to keep the strength needed without a bit of meat.
There are differences in people’s energy consumption–also probably in what men need to eat versus women.
I eat quite a bit of nuts. Also milk, eggs, cheese. Where you are, those things may be less available.
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Turks just downed russian SU-24 bomber!
To their credit they have been shooting down iranian-syrian-russian drons since this summer and repeatedly warned about strict airspace border lines. Again we are notch closer to nuclear war, because Russia can’t take on them all (Turkey+EU NATO+US), tick-tock..
From RT, Putin not pleased, “serious consequences” for Turkey will follow.
RT TV newsroom heads and expert guests saying ~10minutes of air traffic conversation took place, so the Turkish F16 shoot down orders were likely NATO command center authorized! Lolz, it’s exactly just like 3minutes into nuclear war movie script, so is it going to be contained or in few weeks time we have sunken carrier groups and flying KT nukes?
What a timing !
In other news, few days ago “brave” ukraine nationalists took down by explosives high power lines from mainland Ukraine bound to Crimean peninsula, as a result two of their own nuclear powerplants went into automatic shutdown, Ukraine army just visiting and inspecting the place doing nothing as the nationalist guerilla blocks possible repairs, which are not coming anyway. Ukraine, the shining beacon of democracy and freedoms, what an EU membership candidate, lolz! Russia considering full stop to coal exports to Ukraine and perhaps debt relieve programme offered recently as well. Meantime in Crimea they are running on fraction of the grid, Russian airlift of generators launched, new long distance power cable still under construction. Temperatures around Black Sea seems clubmed-ish so far, but winter could make it much worse. It’s all coincidence, move along..
If Putin is reading FW …
Mrs Fast-Eddy would ask that you wait until late January to start WW3…. it would mess up the Fast-Eddy’s plan to check out the sites and sounds of eastern Europe….
FYI – our travel dates are December 15 – January 14.
After that feel free launch all the missiles you like….
In the meantime …. should you feel the need to retaliate with a tit for tat taking down a western airliner or two …. might I ask you avoid all Cathay Pacific flights….
I am liking this version of Fast-Eddy … Mr Fast-Eddy …. it has a public school ring to it no?
The queen summons Mr Fast-Eddy for his knighthood…. Sir Fast-Eddy would you care for another cuppa tea says the Queen … I don’t mind if I do Liz….
Sir Fast-Eddy…. does it come with a sword?
It could prove useful post SHTF.
It all boils down to where sad old Europe wants to buy their gas from to keep sad old Europeans warm in winter, doesn’t it?
Good old Russia (they did win WW2 didn’t they?) or Washington DC and London backed ME interests appear to be the options.
WW3 has been ramping up for some time now and is setting the stage for a major fireworks display. Some obviously still believe that going to war will increase profits and pull the economy out of the doldrums if not mask the problems for a while. Fears of chemical attacks are being bandied about (as usual) to prime the gears. It doesn’t matter what the catalyst will be, but any excuse will do. Then the sparks will fly.
I’m still very doubtful that nukes will be used (other than depleted uranium rounds and small tactical nukes) because retribution would devastate the planet. No sane military leaders (forget presidents) would attack Russia directly. Even a preemptive strike would result in Russian subs launching full payloads at all enemy targets. Bye bye upper hemisphere.
So the battle will be fought in the field i.e. MENA. The only thing that will spill over into Europe and possibly the US is small scale terrrorist activity.
The thing is the deterrent only works if all parties believe that all the players are willing to use it as a last resort. Most military brass are fully aware that the whole nuclear deterrent thing is a sham because they understand that even limited use would create a nuclear winter event. The notion of nuclear exhange is suicidal and will be avoided at all cost.
The real issue here is who gets to supply Europe with gas. It’s my belief that Russia has staked its claim and will continue to do so just as all other parties will eventually back down. Unless of course, the other parties call Russia’s bluff and blow the whole nuclear deterrent sham wide open i.e. they all know Russia can’t really use its nukes or even rattle them much because… suicidal.
Nukes have really changed this whole idea that you can punish a rogue nation for their hubris. These days it’s probably wiser to crash their economy using other methods.
Good post.
However, I’d be very cautious about this old european attitude just glazing over it, along the lines such as “it won’t affect us, they will duke it on their own somewhere out in the MENA, it’s far away problem” etc..
Simply, it’s different this time. From Russian perspective the signed treaties resulting from WWII were clearly broken by the west on several instances, they feel cornered not disimilar to western intervention after WWI have broken the Czarist empire into civil war and torn away some provinces incl. their russian minorities inside. Today, the last drop was obviously the coup in Ukraine where openly neonazi elements were utilized by the west to launch a civil war in the eastern part, mind you this is all taking place very deeply inside the Russian sphere of domestic influence. We are not talking about only global aspirations and stuff.
Unlike the situation upto early-mid 1980s now the current consolidated national russian elite feels bold enough to press the button “on moral grounds” – they know few hundred thousands russians will survive anyway somewhere in the sheer landmass – and the western elite is idiotic enough to escalate it near/past all these thresholds to make it happen otherwise loosing the power and money for good.
Also, lets be cautious even for some limited conventional scenarios. The former rulers of western Ukraine, namely Poland and Hungary would gladly take these provinces back under some future not that much crazy scenario, the voices for it are now in the obscure minority, but this could change rapidly. After that you can kiss the current structure of the EU good by anyway as Turkey-Ottomans would AGAIN reoccupy most of clubmed, Greece, Balkan, perhaps parts of Austria and Bavaria..
What about Italy and Spain. Remember the Moors were in Spain longer than the English have been in England.
Will it be the Catholics or the Muslims that take the southern territory in the Americas?
The EU might bear in mind that it is *much* closer to MENA than the US, as evidenced by the current refugee crisis.
Oh sure, if the beasts of the field want to lock horns in a blood letting ritual then it shall happen, and there’s nothing we can do about it. And Europe will be at the center of things once again.
I like what you’re saying, but where I differ is on who the players really are and what is at stake. I feel that nation states long ago ceded their role to supranational military-industrial-corporations and institutions that will readily sacrifice nation states in the pursuit of higher goals.
Lets just say that the goal always has been global domination. What does the winner do with all that power once global dominance has been achieved? There are those that upon reaching such lofty heights would use their status to “pull the plug” on humanity. And they would do this without batting an eyelid – in fact, they would sit back and watch the world burn on closed circuit tv while sipping the finest of wines.
We know that such individuals and groups exist and that they have infiltrated the halls of power in every nation over many centuries. Why then, did their kind not pull the plug sooner and be done with it? Why wait until the masses can surf the web and rise up to counter such nonsense?
Well, in order to carry out a ritual, first you must build the altar. And it had better be a good one lest your chosen deity deem it unworthy. There is nothing worse in a cult follower’s mind than not meeting their master’s expectations. So… reverential preparation that culminates in the biggest possible “release of energy” and the patience that that requires very much form a part of the overall ritual. And that’s why you have to build humanity up first – even through substantial philanthropic gestures – before the final hammer is dropped.
It’s my belief that 9-11 was such a ritual carried out to enable the final stage in the overall push for dominance, very carefully adhering to freemasonic numerology and symbolism all the while. The twin towers are a very old masonic symbol as is the statue of liberty that looked on that day. The destroyed towers have been mockingly replaced with the Freedom Tower just as America descends into police state tyranny. Chaos and destruction in modern day Babylon and the holy lands followed with a strong leader from the north moving to play the role of antagonist. You couldn’t make this stuff up. It’s all in the ancient texts if you dare to look.
So, just as you wouldn’t choose to demolish a building after only a few bricks had been laid, the global ritualists are patiently contructing the biggest bonfire they possibly can before setting it alight. A damp squib would not please their master at all.
What greater irony than that of our species reaching for the stars, furiously innovating, speculating on the greatness to come, only to have it snatched away before reaching the zenith?
If it pleases you, the above scenario does indeed have a high probablity of being fulfilled, complete with nuclear fireworks as the four horsemen stand atop the ridge admiring their handiwork. But, there are others that do everything they can to prevent this from happening and may be successful to some extent.
In the end, the affairs of man are but a mere reflection of natural law and the cycles that rule this universe. We are not in charge and lost the plot a long time ago. The ritualists may be granted their wish and civilisation may fall, but the remnants of mankind will live out their days for many years until they too must return to the source as all things eventually do.
Thanks for this post. It shines a bit more of light on you misunderstanding of supply and demand.
I had to read this various times to carefully identify where you are mistaking supply with extraction and demand with consumption. I am note sure I identified all the , but this post really provides important insight on your thinking. Usually your posts become rapidly illogical with the amalgamate and interchange of economics concepts.
A real effort is required to avoid the required modernisation of economics being captured by this kind of twisted thinking. The innovation that net energy can still introduce in economics can not possibly be let to waste like this.
Cheers.
?????????????????????
Her analysis of supply and demand is spot on. When the cost of maintaining oil supply goes up too far the demand for that expensive oil has to throw in the towel like we are seeing now. An economy build on 20 dollar oil simply doesn’t operate on 110 dollar oil.. the problem is that the price of extracting new oil is at or above 110 dollar.
There are only three possibilities for the ceation of a post like this…
1. Spam
2. Google translate did its best but once again failed to decipher the original message
3. What Stefeun said…
For those who are wondering, Luis is Luis de Sousa from The Oil Drum. He has been telling me for many years that I am terribly wrong.
Apparently Charles Hall has different views from Luis. He has invited me to be on the Editorial Board for his new Journal, BioPhysical Economics and Resource Quality.
I usually ignore post like that anyways. I always question an individuals motives, thinking they are looking for attention as they could express themselves on their own website if they had the traffic.
I didn’t have time to read the post in all details.
But for me there is no contradiction between the “law of supply and demand” and what is happening right now.
By this I mean :
– the market is (“more or less”) ruled by supply and demand, but this is true at a given time (and the curves have to be considered different at each instant)
– the feed backs of the limits to growth constraints bring evolutions that could be seen as contradictory, but it is not the case, at a given time the price evolution is still driven by supply and demand.
“Usually your posts become rapidly illogical with the amalgamate and interchange of economics concepts.”
WTF does that mean in plain English?
You wouldn’t happen to be an economist by training would you?
And finally … do you have any solutions to permanently killing gorse without spraying it with chemicals or goats?
“And finally … do you have any solutions to permanently killing gorse without spraying it with chemicals or goats?”
Try putting down some fabric or tarp or something, preferably black, for a couple weeks in summer. The heat will sterilize the soil and all seeds and roots in it. Then, put in the stuff you want to live there. Probably do small sections at a time so the microbes can migrate into the dead zones easier.
If you can get lots of wood chips, you can try putting that down between your crops, as if you were doing conventional urban landscaping. The eco-landscaping people around here suggest putting down cardboard, it is supposed to kill stuff and help retain moisture. Otherwise, landscaping cloth works, but you have to replace it every few years or weeds will just root into the fabric from above.
You could scrape away the topsoil and get new topsoil (from manure or sea soil) that is not full of weeds, and then just make sure nothing unwanted ever gets established.
Or you could just live with the gorse. Find new ways to enjoy it. Perhaps it’s eatable, Obviously goats like it (but they like everything, including can labels). Mow it and make gorse lawns. Perhaps hedges. Maybe you can smoke the buds or make clothes and rope from it. Just about all green stuff makes a sorta tea. Then there’s fermentation and vodka/gin production.
Interestingly gorse was introduced by the Brits to be used as hedges… but due to the moderate climate … it has run amok…. you can see entire hillsides covered in the yellow flowered thorny nightmare…
I’ve had the same thoughts as you on this — it’s a bit presumptuous to walk into a country and think that there must be a solution to the problem that nobody has yet though of…
The only solutions I have heard are: burn it (not allowed) – spray it (not an option post BAU) — initiate eternal war with it
In that respect is’s kind of like ISIS….
“The only solutions I have heard are: burn it (not allowed) – spray it (not an option post BAU) — initiate eternal war with it”
From what I read about it, Gorse seems quite useful. It is alkali, and can be used to make soap. The seeds can be used to make flea repellant. The flowers are edible, and can be used to make tea and wine. The plant was somehow used in collecting gold dust – I guess you just burn it after and the dust stays in the ashes? Your neighbours sheep should be able to eat the young plants in spring, and thus prevent them from expanding to new areas, while a hedge of them can keep animals in or out of places.
Cuba has a problem with a large amount of overgrowth with an unwanted shrub. In fact, IIRC potential farmers can get the land for essentially free, it they will take the effort to get rid of the shrub.
Or just go for no till. Pile up weeds–seeds and all–atop the ground. Intersperse various kids of organic matter–food scraps, cardboard, horse manure, unfinished bags of topsoil, worm castings (on top), dirt from the yard. Pile more weeds on top of it, pile stuff as high as you like. Weeds can’t grow through this pile, and the growing medium you stick in the pile will get the plants started till the roots grow down to submerged nutrients. Well anyway, that’s what I tried this season. The Jerusalem artichokes did very well. Eggplants so so. Kale was tentative, but they are still going in sub zero temps. And no weeds.
Thanks.
I am told that gorse seeds will survive fire… so the only way to disable them is to immerse them in water….
Also other than twitch there are not many weeds in the fenced off garden area…
The problem is the other 4 hectares of paddock…. in one large area there are masses of established gorse and barberry … the previous owner must have kept them under control with spray…. it is quite impossible to get rid of all of that… Br’er Rabbit would love it!
Then there are the various thistles that need to be managed or they will seed and spread throughout….
I’ve got one of the commercial growers coming by today for a few hours to help finish up the glass house…. will run these ideas past him…
In any event – I am just trying to shine a bit of light on how difficult it will be to grow food without all the BAU conveniences we have at our finger tips….
It all sounds so romantic in the movies… in reality it is an endless battle….
No wonder BAU was so appealing to farmers of old….
Combine that with a 4 C climate and you’re not growing anything, tin cans or other humans will be our food source post collapse, but we’ll only last a few months
There’s an invasive here–Siberian Elm–a tree that grows like a weed and has super long roots that suck up scarce water. Everybody wants to cut them down and kill them, but I only remove the tiny shoots than can still be rooted out by hand. And then only if they’re growing where they get in the way. Otherwise, I let them grow, and cut off the branches of the young trees to use for ground cover. I’d probably do the same with kudzo, which I hear grows so fast that you can see it growing. There isn’t enough brush for ground cover around here.
It would be nice just to let wilderness return and do as it pleases, but neither the neighbors nor many spouses want to see that happen. It would also be nice to carve out the absolute minimum you can live with for human habitation, leaving the rest wild. It’s very hard not to be overwhelmed by the surrounding wildness, but maybe the smaller the space “carved out,” the easier. I’m not the one to talk though. Everybody tells me to mow and tame the little leach field I want to grow wild. I put wood at the edge to make it neater. It helps a lot, but not enough to remove criticism of general untidiness in the yard.
“to remove criticism of general untidiness in the yard”
This is exactly the advice I received from a former Department of Conservation worker yesterday — worry about the areas that are important F…. the rest … if there are thistles and other stuff there that’s nature … just leave it be… otherwise your entire day will be spent fighting a war…. that’s what he’s done at his place — and yes — his neighbours tell him it looks ‘messy’
The insects (like bees) depend on the wild flowers growing. Part of our problem will loss of pollinators is too much concern about everything looking “neat.” The fields that bloom are with a single type of flower, blooming for a short time. This doesn’t work for keeping pollinators supplied with their need for food.
Dig it out, and or cut it back, then massively oversow with grass, or overplant with the trees you want.
It would take an army to dig out all the barberry… a better bet would be an excavator… we had one up the hill when we installed water tanks and he did rip a lot of the barberry out …. but some areas were too steep for him so we could not get at it…. the BAU solution is to cut it down to stumps then paint the stumps with Tordon….
Most of the nasty stuff is on a steep slope behind the property so we’ve decided not to clear it … the compromise will be to focus on the garden areas and keep it from spreading to those paddocks… we’ll just keep it at bay as best possible.
BTW – the Koombaya music seemed to only make it all grow faster…
English is Luis’ second or third language, so don’t be too hard on him. He was a grad student in economics, I believe–I don’t remember hearing if he finished.
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Let’s observe how the ‘Harmless’ commodity crash is not affecting companies….
“I would say there’s more than a 50 percent chance that Noble will be downgraded to junk,” Trung Nguyen, a Singapore-based credit analyst at Lucror Analytics Pte, said on Tuesday. “That will definitely affect their credit line and access to capital.”
http://www.bloomberg.com/news/articles/2015-11-24/noble-group-slumps-as-s-p-may-cut-company-to-junk-on-liquidity
Death watch…..
Glencore can’t be far behind…. and how many hundreds of other resource companies that are insolvent with commodity prices at these levels…
The dominoes are lining up….
Only the printing press separates us from total DOOM.
Harmless commodity crash accelerates as dollar soars
‘Dr Copper should be struck off the list. He is telling us a lot about over-supply in China, but little about the world economy,’ says Capital Economics
http://www.telegraph.co.uk/finance/commodities/12012704/Harmless-commodity-crash-accelerates-as-dollar-soars.html
The presstitutes are really pouring on the soothing spin…. an indication that things are worsening…
Their paymasters must be sh#tting in their pants to be getting them to print this sort of drivel.
AEP is one of the best financial journalists in the MSM space…. he must be holding his nose when he writes this garbage….
I am surprised the DT doesn’t pull the comments section off like Bloomberg did a few months ago…
These articles take a heavy pounding from people calling them out…. and that undermines the purpose for writing the lies… ah… I mean analysis….
Fortunately the masses cannot read more than 140 characters …. so all that matters is the headline… they’ll see the word ‘harmless’ … and go back to munching on grass… or Facebooking… or watching Dancing with Stars… or whatever else Sheeple do
All we need is growing M1 supply to save us! Big recovery around the corner.
They know the score. Hopium or blackball. Its just the way it is when you work for minitrue. Gail could be making $$ if she just took the blue pill.
Attended a gathering earlier in the week and met a retired CTV broadbast journalist from Canada…
She wanted to talk about Justin Trudeau and asked what I thought of him…
My inclination was to tell her that he does not matter because he – like Harper – will take orders from the Elders… but then she’d have thought I was crazy so I didn’t say that…
Instead I said I don’t really follow politics… don’t really look at the MSM much …. generally I get my news from Zero Hedge…
Of course she said ‘what’s that?’
How bout them Blue Jays! Almost made the World Series this year eh….
Journalists… economists… they are all taking the red pill….
Surely you meant the blue pill…?
“The red pill and its opposite, the blue pill, are popular culture symbols representing the choice between embracing the sometimes painful truth of reality (red pill) and the blissful ignorance of illusion (blue pill).”
Yes you are correct….
Ecology 101
Take a few yeast cells in a bowl of water. They will just float around. Now put a cup of sugar in. Suddenly the yeast have an energy source, and they multiply many times over. Finally the sugar runs out, and the bowl is contaminated with their waste products ( alcohol in this case ). The yeast population crashes.
Now take a few hundred million humans. Introduce a new energy source — fossil fuels. Suddenly our population multiplies and their waste products accumulate. …. need I say more?
[ repost ]
I forgot to check the email box – now I did
This analogy needs to be posted on a regular basis. It is the perfect analogy.
It’s a slightly old analogy… which is NOT to say it’s not appropriate.
Richard Heinberg presented this analogy many times before, always asking after the presentation, “Are we smarter than yeast?”
I desperately want to believe we are… I really want to… 🙁
We are smarter then yeast. Or at least we think we are. Legends in our own minds I guess.
We write poetry and think it’s pretty cool, but birds and whales sing sonnets to their loved ones, bees perform dances before an audience to convey a message, bacterial cells talk to their buddies to work things out, and even trees communicate with their brethren.
So, are we smarter than yeast? When we build bridges and skyscrapers and make microchips and perform heart transplants, I guess we are being smart, but all that kind of stuff takes place at the microscopic level too. The smarts are not coming from where you think they are.
We are smarter than yeast only in that we figure out ways to get more cups of sugar…. we get buckets of sugar… we have sugar orgies… we have so much sugar we are frothing over the top of the beaker…
However the end result is the same…. peak sugar….
Metaphor time:
http://images.techtimes.com/data/images/full/17676/obese-man.jpg
Dear lord. Is that what we have collectively become as a society?
And the only solution is to keep finding more sugar?
Why it is taking so long for a group to form with the idea, if we cooperate we can take the sugar from the other unorganized people, is beyond me. In a resource constrained world this seem obvious. The Vikings understood this.
I am not sure we are smarter than yeast.
Individually we are, collectively we are not. Individual Intelligence is not the same as Collective Intelligence of the Network, and the Network is only as smart as its dumbest node. Insert your favorite politician into the Dumb Node point and you can see what I mean here.
RE
Good point. It’s everyone or no one, it seems.
I assume yeast has been around a lot longer than we have? And will be around long after we are gone….
It all depends on how you define smart I suppose…. when being smart leads to extinction of one’s species… many might consider that stupidity….
Smart is an illusion. Are ants being smart when they form a colony and defend it? Where are the smarts coming from? Exactly the same thing is happening with us. Our brains trick us into beleiving something else because… survival and other evolutionary pressures.
Everything in our culture forms part of that process – even an appreciation of aesthetics. These traits are outgrowths of whatever impulse lies beneath. Whether that impulse has purpose or not, I don’t know.
Perfect analogy. A mammalian one sometimes helps: a farmer is driving his grain to the barn, a bag falls off on the corner of the field. That fall and winter hundreds and then thousands of mice explode on the scene. By spring, all the grain is gone, and the mice. Where did they go? What happened to them in their travels to find a better world? Did they receive “humanitarian aid” from a compassionate country along the way? Are they living with auntie Freida and her stockpile of food in the barn?
There’s also the Rat Island scenario that was mentioned here some years ago…
10 rats on an island… ship of grain washes up… rats have Charlie Sheen caliber party … gorging on the grain… endless orgies… swapping wives, daughters, sons?… anything and everything goes at a Charlie Sheen-themed rat party
And rats being no different than humans do not throttle back…. they just let rip hitting ever high bacchanalian heights…. moar moar moar (how do you like it… moar moar moar… how do you like it how do you like it….)
And then one day all the grain is gone…
And there are 7.5 billion rats on the island…. and no source of food.
And then there are no rats on the island.
Does sound like what has happened.
You know I had a revelation today. I realized this collapse is going to be really slow. Painfully slow. In historical terms, fast, but in our terms, slow.
Does it depress me? You bet it does. I’m as excited about collapse as anybody, there are many aspects of this modern world that I despise. But I realized that they won…modern man won. We have been absolutely obliterated by the world of play, images, media and fantasy. The world of the screen. And of government and corporate propaganda. Reality and those of us who deal with reality have lost.
It’s a bit like growing into an old curmudgeon and looking back on missed opportunities, or, say, always being the bridesmaid, never the bride. I just sort of realized today that it’s all BS. Everything. Truth doesn’t matter. Nothing we are talking about at this blog matters. I guarantee nobody will ever be interested in what we have to say. And the thing about BS is…it never runs out. The human capacity to produce and live with BS is infinite. By a long distance, the major economic activity the world over is the endless production and consumption of meaningless, repetitive BS.
You think this is going to change now? Guess again! It all can be produced at lower levels and endlessly recycled. We can have 100 movies a year instead of 500. 200 cable channels instead of 500. We can have nfl and nascar seasons every other year instead of every year. Etc.
Whatever truth is, people despise it. They just aren’t interested, not now, not 50 years from now. All everybody wants is food, sex, and entertainment, to be “social” and share the details of their pathetic lives with each other. That’s it. That’s all industrial civilization needs to provide. We don’t need any more expansion, exploration, or discovery. We don’t need to reach for the stars, we don’t need growth. We need just enough fuels to provide food and distractions to people.
And you and I are the ones that made this possible. We did the right thing, we worked, we were honest, we were solid and dependable. And we did this for “humanity” and the “children” etc. We believed in America, we believed in the world, we payed our taxes, we swallowed this hook line and sinker. And guess what, now the children are all grown up and they are looking to kill us off and enjoy what we once did. They are mad as hell and they aren’t going to take it anymore! They want their 15 minutes of fame and they will get it. That’s what all this “black lives matter” nonsense in America is about, for example. They don’t want dignity, or work, or to be left alone by cops. They want money and fame. They want to be seen, even if it’s with their clothes off. Same with the Donald Trump clowns. Same with virtually everybody who works in the media. Everybody wants the same thing…look at me, I exist! Point the video cameras at me and post it on the internet! I count, I’m precious, I’m a star! What I look like, and whatever drivel comes out of my mouth, is important! And this is true even as the actual importance of people has never been lower.
It’s too late to change this, this has occurred by the very development of our systems. And it wasn’t going to end any other way, was it? I mean, think clearly on this. The end result of all human activity was always going to be the saturation of trivia and BS. It wasn’t going to be truth, or beauty, or science, or art, or erudition, or peace, or humility, or sustainability, or any of that nonsense. Let’s be honest, those things never had a chance.
“I’m as excited about collapse as anybody, there are many aspects of this modern world that I despise.”
I stopped there…
The thing is….
All the things you despise will indeed disappear when collapse hits … and all the things you like will disappear as well… I assume you like food… and a warm home… the security of a police department and courts and prisons…. not having to spend half your day pulling weeds…
Be careful what you wish for. I doubt you will be very ‘excited’ when the electricity stops… unless you mean excited as is frightened excited…
Long Live BAU. BAU forever. Hail BAU.
You said it FE.
I wish I could the recall the writer, an American I think, but to paraphrase… ‘the world is made up of two types of people, the smart and the stupid and although I’m an optimist, the stupid have the numbers’.
Dear Dolph
They (art, beauty, etc) did once have a chance, but not after industrialisation and the harnessing of fossil fuels: here in Europe, I would say that over 50% of everything beautiful or even just pleasant that one can encounter -art, music, architecture, the landscape -pre-dates the Oil/Coal Age, and that is with all the immense losses incurred as a result of industrialisation and world wars. As is often said in Britain, Hitler’s bombs did a lot of damage, but developers did more….
The disadvantage of the American environment is that from the first it was a society devoted solely to getting on and making money, (early travellers from Europe observed that it was the only topic of conversation in America), rising to great wealth and power at a time when architecture had been totally debased, without a true aristocracy (they started as barbarians in the 5th century, but the church and the clever men it attracted tamed them, they were quite decent by the 13th century or so: really 1250 in Europe was pretty good!).
Well, you have reached Peak Cynicism, (seeing the BS for what it is) as many of us have, and next comes -probably – complete mental breakdown, and then…..life becomes really good, because there is still so much to do and the Good Life, as defined by the ancient philosophers (integrity, honour, reverence for wisdom,friendship, neighbourliness, a sense of decency and love of true beauty, and suicide or exile rather than live a dishonoured life) is still possible for us. Every human interaction we have each day makes the living of a philosophical life possible.
Even in the Soviet Union, which ensured people were fed and housed but denied them so much else, people kept the flag of human decency flying in the face of a cruel totalitarian machine of oppression designed to crush all the old humane values and individual relationships.
“They (art, beauty, etc) did once have a chance, but not after industrialisation and the harnessing of fossil fuels: here in Europe, I would say that over 50% of everything beautiful or even just pleasant that one can encounter -art, music, architecture, the landscape -pre-dates the Oil/Coal Age, and that is with all the immense losses incurred as a result of industrialisation and world wars. As is often said in Britain, Hitler’s bombs did a lot of damage, but developers did more….”
Xavier,
I like this, and much else of what you posted. I’m not quite sure how you got back to the resurgence of decency, but I’ve been thinking that things had to get this bad for that resurgence to happen. And the two blogs that have helped me to see the path are Gail’s and McPherson’s. It’s the near total hopelessness of the situation that opens the door (for the first time in my experience) to real change. “My way” appears to significantly be “your way” too: (integrity, honour, reverence for wisdom,friendship, neighbourliness, a sense of decency and love of true beauty, and suicide or exile rather than live a dishonoured life)
So I say to TPTB: Do it my way or die. For the first time ever, there is no other choice. And for the first time that I know of, the arts and philosophy have clear practical value.
Yes, something happened when fossile fuels entered the stage. The more fossile fuels we used the uglier buildings, lesser truths and imbeciller art we got.
A very interesting and well written book is “Decline of the west” by Oswald Spengler. The book describes what happened and many other tings. I recommend everyone to read at least a compilation of the best parts.
As a teaser I found some good Spengler quotes:
“Optimism is cowardice.”
“Through money, democracy becomes its own destroyer, after money has destroyed intellect.”
“What is truth? For the multitude, that which it continually reads and hears.”
“One day the last portrait of Rembrandt and the last bar of Mozart will have ceased to be — though possibly a colored canvas and a sheet of notes will remain — because the last eye and the last ear accessible to their message will have gone.”
Thanks. I’ll repost this one.
I especially like:
People tend to believe the continual nonsense they read in the popular press. It doesn’t help that the Economics profession doesn’t understand what is going on, and no publisher is willing to explain the real truth of the situation.
Tell a lie enough times and people will eventually believe it ….
That really is true.
Latest vidcast with guests Gail, Nicole Foss, Steve Ludlum, & Norman Pagett, me and Monsta hosting.
https://www.youtube.com/watch?v=EhjmB99HX78
I have an Audio Only version available for mp3 download on Diner Soundcloud as well if you want to listen while driving or gardening. 🙂
RE
I need a hat like that! Very haute doom 🙂
.
.
YOU CANNOT CUT OFF OIL PRODUCTION AND SALE
WHEN YOUR ENTIRE ECONOMY IS BASED ON OIL PRODUCTION AND SALE
Saudi to Argentina – They Must Produce MORE Not less as price decreases.
Until they are able to cut back on Government benefits they will continue to produce.
But that will not come quickly.
Eg: Argentina is already broken, but they will not stop production
that will only make the problem grow.
.
.
Agreed!
I am King of Hats! 🙂
This one is from BC Hats out of Oz if you want to order one. I bought it at the Alaska State Fair 2 years ago. I have the same model in brown for the last decade. It’s about midway between a Western Cowboy hat and a Fedora far as the brim goes. Good rain protection, very durable leather construction.
First time I bought it ran me $50. Most recent one (this one) $70.
RE
Very enjoyable show. I don’t think Steve needs to worry about “getting rid of all cars” – they’ll probably be left in sitiu when there’s nothing left to put in them. I found the glaring lack of solutions coming from the panel to be refreshingly honest. After all, honesty is the best policy, is it not?
Basically because the only solution is quite unpalatable, though Norman did bring it up at the end, which is there are just too many PEOPLE. This will of course resolve itself as time goes by.
https://www.youtube.com/watch?v=QUYKSWQmkrg
RE
Absolutely. Posted about it under Norman’s comment below.
Of course, govts don’t have to follow the honesty rule. That wouldn’t be like them at all. Their policy appears to be to keep up appearances – keep the bread and circuses flowing – while simultaneously positioning themselves for escalating global conflict. Which handily provides a huge distraction for the economic woes.
I’m not overly convinced that this time central banks can magically finance all parties in a world war as they have done in the past. The last time, they expected to recoup a fair amount of the debt that they created out of thin air. Now the whole world is drowning in debt, there’s no way they would get anything back.
With or without global conflict, we’re facing imminent implosion of BAU. So yes, population problem solved.
on the show we all struggled with the ‘solutions’ part I’m afraid, because ultimately there isn’t one, at least not in the sense of one that will be of our own choosing or organisation.
There’s lots of reasons for that, but maybe the ultimate one is that we all cherish free will. We are not termites. (though termites will probably outlive us).
I threw in the comment about people, because with 80 million new ones showing up every year, all demanding to be fed and watered, all other “solutions” are ultimately unworkable.
Check out every nature documentary. The most powerful force is the drive to reproduce oneself, and maintaining the right to do so. I like to think of my life as having had a ‘purpose’ but ultimately the final pleasure is seeing kids and grandkids safe and successful, knowing there is a part of me in them. For their part–I’m seen as either ‘cool’ or crazy–take your pick. But That is one of the few respects in which humankind is unique.
We are all individuals, I guard my right to stay warm and safe in my own home, drive a car where I want, to eat what I want when I want to, earn as much money as I can in order to ensure my survival, and the survival of my offspring. Those statements might appear selfish, and as an individual I might behave differently from time to time, but over my lifetime I will act and think collectively in that way. Luckily I’ve never had to engage in physical violence to assert those rights, for the moment “civilisation” allows me not to.
I have no choice in that respect unless I choose the ascetic lifestyle of a monk or hermit—and even then, I must rely on the generosity of others in order to survive. Choosing such a life might preclude reproducing myself, but that is the only factor setting me apart from the herd. Nature intends that I act in a certain way; I, and 7 billion others, can only pretend otherwise by listening to priests or politicians and voting for salvation and/or infinite prosperity, or engaging in warfare or cyber-rants on here or any of the other hobbies we have devised for our entertainment.
All that is window dressing to make our lives appear different and somehow special on our own terms. We are a bipedal ape species that got lucky with fire, nothing more.
When our population peaks (the rear view mirror of history will show when that was) it will be because growth became unsustainable. But of course we will remain in denial of that and fight over what’s left because nature intends that only the fittest of us should survive.
If none of us survives, then the termites will have the place to themselves.
Nature is cruelly indifferent
Great post! You reveal much of what goes on in all of our minds, I’m sure, although many would not dare to admit it – that requires courage and wisdom.
I’m not so sure about free will. Experiments have shown that the impulse of thoughts emerge before we perceive them as such in our conscious minds. Some say that we exercise free will after this happens by being able to shut down the subsequent actions, but I feel this is also part of the illusion. Our impulses are guided by genetics and environment. What goes on in our mind happens after the event. It’s like a narrative overlay or the voice-over to our life’s movie.
And you’re not selfish, just part of nature’s grand spectacle. Guilt, as a control mechanism, has been used to great affect by religion and parents alike.
I would say we’re not that different to termites either. They build tall towers with air conditioning sytems and so do we! Ants fight wars against rival factions using chemical warfare. They build bridges and co-operate to bring down prey much larger than any individual. They have queens, police, hierarchy, resource management and mass migration. They run a vastly more efficient operation than we do too.
Humans have more complex minds and so are able to stuff them with all manner of creative excuses that inflate our egos more than anything. Ants will probably be here long after we’ve watched our last reality tv show!
About the people problem – about half of people live in poverty. If they remain in poverty then I don’t see how they contribute to many of the problems talked about here. They don’t use many resources at all. They just burn wood. And remember, not everyone has kids, and those that do could stick to low numbers by educating poor women about contraception. Mortality rates are also much higher in this group.
No, the problems are caused by the affluent populations in developed countries and the wars that they finance to feed their resource habit. Some here talk about living more frugally and so on, but this group is a tiny minority. With about 3 billion people living the consumer lifestyle, they are the ones that should be “targeted”, if you know what I mean. The poor tending to their vegetable patches are saints compared to the gas guzzler owning show offs in the “developed world”.
So while numbers may be an issue, seven billion living very simple lives would be an easier problem to solve than what we’re actually dealing with. And the 3 billion well off are not about to give up their privildged lifestyles, are they? Unless….
This – the collapse of the financial system along with industrial farming, energy, water supplies and transportation help a little in getting those population reduction targets met!
I would add that while most of us do not get our hands dirty fighting competing factions over oil and gas, our taxes pay for others to do so in our name – hired thugs, if you will. And most people don’t have a problem with it. Perks of being born in the right place and all that. But I guess that lucky streak is about to run out for many unsuspecting citizens.
Darwin did also talk a lot about co-operation. I expect this to remain a decisive factor in times to come. I wonder how long governments can hold together under these circumstances? What about a strong military leader that replaces a govt? And then the resources dwindle and another type of co-operation rises to fill the void. Priorities will change drastically, that’s for sure.
Very good points, Javier.
Especially about free-will and consciousness. Most people attach great importance to it and consider it’s the ultimate and unouchable core of the self, while (afaik) all the studies and experiments seem to show it’s an evolutionary tool that operates “after the battle”.
For example, Steven Walker (“The Physics of Consciousness”, 2000) says “the human brain processes 400 billion bits of information a second, though we are only aware of 2000 of those. Every aspect of your life that you can consciously call upon is only an extremely small fraction of what you have stored and processed.”
Before that, the experiments made by Benjamin Libet in the 1960s already evidenced a time-gap of around half a second between a given event and its conscious perception, and in recent years the rapidly improving neuro-sciences and imagery have confirmed and detailed such results.
What it means is that we are emotional beings, much more than the rational thinkers we pretend to be. We’re also a social animal, which helps us perceive the choices as rational decisions.
But neither individuals nor governments are willing to acknowledge it, since it would question many of the foundations of our modern societies, such as individual responsibility, liberty, democracy, …
Each of us likes to think she/he is autonomous and endowed with freewill, and governments find it very convenient to maintain this illusion.
The poor folks living on part-time minimum wage jobs find their free-will options very limited.
That’s a really good summary of where we’re at. As I like to say… we’re not in charge. We may think we are. But we’re not.
May the illusion continue for some time yet. I’ve grown quite fond of it.
As president Roosevelt said “necessitous men are not free men”.
I meant to infer that while I act with apparent ”free will” in the short term–today or this week–over the long term, years and my lifetime, the big picture will show that I acted more or less in a collective ‘herd’ fashion. There doesn’t seem to be any choice in that.
Yes some are complete mavericks but they are very much the exception to the common rule.
So here’s a question for finite worldsters—I have a grandson who is a very successful architect–a chip off the old creative block–he builds lovely, expensive things for folks with more money than sense, I get a great deal of pleasure watching him succeed, but at the same time he his consuming natural resources like crazy.
Do I go on encouraging him–or try to warn him of what he’s doing is ultimately a dead end?
The conundrum is of course—selfish for the immediate good of my offspring, or unselfish for the greater good of the world at large.
You should encourage your grandson to carry on doing what he is doing. Life is a competition for resources. If he does not facilitate the use of the resources somebody else will. Being unselfish would only hurt him whilst doing zero good for the world at large.
Unfortunately, there is a fair amount of truth to your statement.
And if we really did, for example, reduce our demand for oil, it would simply crash the prices further, leading to debt defaults. The system is made to operate in exactly one way.
That’s the conclusion I’ve already reached Yorchican. I threw it in here to get reaction. in any event–he knows I write all this stuff (though not on this site) and ignores it all and just carries on. he has no real choice in the matter
Life is a competition as you say—not a lot we can do about it
” I get a great deal of pleasure watching him succeed, but at the same time he his consuming natural resources like crazy.”
Are you assuming that if those resources were not used by his projects, they would never be used? Or that if he did not do the job, that no one else would? Might as well try to make some nice looking ruins for any future people to uncover. Maybe encourage him to make his creations durable, so they at least last a few thousand years.
lol Matthew—he’s not building pyramids!!
Of course those resources would be used—that is the essence of our civilisation in the context that we have created it. We are forced to drive forward into tomorrow because of the commitments (debts) we have incurred today. He has a mortgage like many people his age, he is committed to paying it off so he’s doing what he does best
As to free will, I inferred that I only appear to have free will–over a lifetime I followed the herd in general terms.–as most of us do. My free will–such as it is— has been bought with cheap fuel. My grandparents certainly didn’t have much free will other than to raise lots of kids, either as factory or mine fodder, or cannon fodder.
But I do agree that those on minimum wage or no wage at all cannot exercise any free will . The future of income stability (or even availability) scares me for future generations, one cannot help but think about that. One cannot but be affected by the growth in numbers of the homeless, knowing the underlying cause of it.
Overall we seem to be shifting back to pre-industrial times where run of the mill employment was obtained on an ad hoc basis.
The hiring fair comes to mind, and as I see it, that’s little different to a zero hours contract. Employers want maximum work for minimum real involvement. (pensions, sickpay etc)
Personally I see nothing to prevent society slipping back to serfdom in the long run, where those who have the means to produce energy (land and food) hire those who do not as basic muscle power. We are barely 2 centuries removed from that. (our ‘normal’ is nothing of the kind; seen in historical terms–our lifestyle is an anomaly)
Without hydrocarbon energy input to drive what we have now, what is there to stop a reversion to what used to be? Already landholdings are amalgamating into bigger and bigger areas, owned by corporations, not farmers. A change of circumstance and those corporations could morph into something quite different. Wealth might appear to be a big bank account, real wealth is the availability of energy and the control and use of it—particularly in adversity. Money is just an energy token.
When you have no guarantee of employment, you have no guarantee of anything else, food and housing and a stable environment. Here in the UK landlords are screwing tenants for every penny for the minimum level of accommodation, particularly in cities, because the market is uncontrolled and market forces are driving property values sky high.
That to me is (again) taking us back to Dickensian times or worse, if it goes unchecked.
We have built our society on the premise that there must always be more (of everything) because we know no other way now.
My book The End of More is an attempt to explain why there isn’t any more.
this seems to be the interim period where we are shifting from ‘plenty’ into ‘denial’. the next stage must be ‘reality’ followed by conflict and chaos.
I would be delighted to be proved wrong.
Absolutely, he should do what he was born to do. There is no right or wrong in this situation. Even the people with more money than sense are an expression of nature’s intelligence. Who are we to judge how nature allocates its resources or which members of whatever species succeeds and for how long?
The pyramids are a great example. Imagine the admin today ridiculing even the thought of wasting valuable resources in this way. And yet, there they stand. And how much value they have added to our existence over the years – and head scratching. Absolutely worth it in every way.
Perhaps they were a way of keeping people working in the off-season, so that they did not simply have more babies to use up the surpluses of the system. Every system needs to be able to accumulate surpluses in some way, so as to have some resilience in time of bad weather or other temporary problem. The pyramids may have been related to this.
OR maybe…
your grand-son knowing what’s coming could start building post-collapse architecture, being rich and have successful and meaningful life at the same time?
Like Mike Reynolds.
[youtube http://www.youtube.com/watch?v=tmy_QipSQhc&w=560&h=315%5D
He understood these thing long before we did or at least I did.
He just preceded the right moment.
kesaro—no one would buy post apocalyptic structures. People want shiny pretty things now, as a reflection of status.
Apocalyptic structures will not be built until post apocalypse
“no one would buy post apocalyptic structures”
I disagree with this statement. There are more and more people realizing that current situation is resembling 1930’s in Europe. They are looking for solutions. Some of them are migrating, some are building autonomous houses, some others are trying to grow their own food.
Autonomous architecture is the avantgarde of modern building. And you know why.
Not sharing your knowledge with your grand-son is a mistake in my opinion. We, I mean older generations, are responsible for sharing our experience and wisdom with younger people. Even when they do not accept it instantly. They will internalize it and hopefully use it one day. This is family continuity. It is duty, when someone values the idea of family.
Just my two cents.
Mike Reynolds is living his dream in an empty space—the majority of us don’t live in empty spaces. you cannot sustain life en masse in a desrt—that’s why people were never there in the first place
Brilliant documentary though–thanks
“he builds lovely, expensive things for folks with more money than sense”
That brings to mind a response from an official in Shanghai to the effect that poor building insulation was easily rectified by building another coal-fired power station.
Some of this is simply the latest fashion, but these problem buildings are designed to be there for a very long time – in Shanghai even partly built skyscrapers are torn down to build greater. It takes a long time for the plebs to get wise to the appearance of an efficient building. For now, they think an inefficient building looks “Modern” while in my eyes it looks cheap.
And I’d be happy to have that quoted to your grandson.
Kesaro
grandson knows all this, but just gets on with his life anyway—he has no choice. He can’t miss it, irrespective of my ramblings.
As far as he’s concerned, he’s happy if it keeps grandad out of the sunshine home for bewildered doomsters—a fate to look forward to I might add—-because then I will be oblivious to all this!!
Watching the Mike Reynolds video at length—fascinating stuff—but a fantasy on his part.
He’s living “out there” free of the trappings of civilised constraints and so on
er—where did the 6 x 4 sheets of plate glass come from??
Then there’s the trivial matter of a thumping great SUV–doing maybe 10mpg–where did that come from??
At the moment he and his wife enjoy good health—and long may it last. The moment there’s a problem, he’ll jump in that SUV and race to the nearest (industry supported) hospital.
That man isn’t living free of society, society is supporting him in his endeavour.
It’s interesting, but let’s not lose sight of what it really is.
If your grandson is aware of the situation it’s fine. I just thought that you can’t decide whether to share OFW issues at all. This was my dillema 2 years ago with my kids. The result is the same: message received, changes to their lifestyle – none. Their lives, their choices.
Mike Reynolds is ahead of his times. He is the pioneer of post-collapse architecture. Nonetheless I am not encouraging anyone to adopt his lifestyle. On the contrary – let’s use BAU to the last drop, as long as it lasts.
Very well stated!
In this case, I think I would have better enjoyed five separate interviews more than a six-way discussion, or perhaps with pairs of interviewees. Nearly all of the podcasts or talk radio that I faithfully listen to is long-format interviews between a single interviewer and interviewee. But that’s not to say that the discussion wasn’t interesting.
We have done individual podcasts with everyone who participated in the most recent discussion.
The nice thing about bringing people together is you all bounce ideas off each other, which sometimes reveals new epiphanies. You can of course go overboard with this, as I did prior to my surgery when I got as many collapse blogger friends as I could together for a potential ” Last Discussion” before buying my ticket to the Great Beyond. Just about maxed out the Google Hangouts system for that one, and it went on four hours. lol.
So I’m keeping it to 4 or less guests now to keep it reasonable and allow everyone a chance to make a significant contribution. Still not EZ though to do this stuff live, no edits. It’s like Herding Cats. lol.
RE
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Bandits 101 – couldn’t reply to your comment so posting the end here…
“That’s roughly how I envisioned events unfolding. Every year I thought, that will be the last US Masters or Olympics or Superbowl. I thought all I had to do was store some food and when the bear began to chase, I only had to outrun the other person.
To this day whenever Christmas comes around or there is big sporting event, I wonder if it will be the last. I’ve been wrong for over seven years now. For how much longer can I continue being wrong. I know collapse is coming but now I realise I can’t assume anything, the timeline, how events will unfold and what tricks the PTB can pull out of the proverbial hat.”
The thing is…
It has become clear to me (primarily from reading Gail’s articles) … that oil itself will not be the trigger…. as has been demonstrated ‘whatever it takes’ is the policy — every possible trick will be used to keep the oil coming out of the ground…
Hence the line of reasoning that the trigger will be related to the toxic side-effects of ‘whatever it takes’
It is the pushing on a string problem that concerns me …. the point where the stimulus no longer has any effect…. corporate profits drop …. layoffs start…. and bankruptcies follow….
Those are the components of the deflationary nightmare Bernanke envisioned…. and they are in play now…
It has been suggested that now is the time for helicopter money – not literally dropped from helicopters rather tax reductions or some other subtle methods of putting money into the pockets of the masses…
I am skeptical of this — I believe the choppers have already made their drop — trillions of dollars have been dropped…… massive infrastructure in China … stock market prop ups the world over — low interest rates — easy money for cars and homes…
This programme has been absolutely massive — and it has most definitely put money in the pockets of the masses…. imagine how many jobs have been created — imagine how many pensions have remained solvent ….
A tax break or other cash back plan would pale in comparison to what the central banks have done the past 7 years.
The central banks would literally need to air drop trillions into people’s accounts to have any sort of impact — they’ve gone to great lengths to send the message that all is well… recovery is imminent…
A new direct stimulus package of this size would send out a message of desperation… not exactly what we need right at the moment.
“A new direct stimulus package of this size would send out a message of desperation… not exactly what we need right at the moment.”
I think the next step is cashless society, so that banks no longer have reserve ratios. Then, it would be possible to implement stimulus credits directly to people’s accounts. Sales taxes could be remitted in real-time.
The bigger problem is that between physical limits and all the global warming mindset being pushed, there isn’t much room to increase total energy consumption. There is little to no growth left, it is just a matter of how long things can hold together.
I suppose direct control over bank accounts would give maximum control, until the whole system fails. Then there would be zero control, and no replacement system in place.
Maybe there could be more money put into people’s pockets. $/£5000 a piece to spend within a certain amount of time? Maybe they will implement totally confiscatory policies and forcibly redistribute wealth from the ‘rich’ who don’t spend their surplus to the many who are living paycheque to paycheque.
It doesn’t solve the problem however as Gail has said, more money doesn’t magically create more resources – there is only so much created in any given year and would producers ramp up production and hire more workers when they know this stimulus will be short-lived? Money is just a claim on production and the products that come from that production, which are always limited. Inflation will undoubtedly occur and more problems would emerge quickly.
There is just too many people worldwide and not enough to go around. The cost of living is only going one way – up. Even with these low oil and commodity costs it isn’t really impacting in any beneficial way on economies that are the importers of these cheaper energy products/commodities.
Thanks for this great article Gail!
I find it is increasingly harder to put things easy to understand, talking in regards to the beef and chicken example. From a not so educated point of view Energy and economy work as the fuel required to take a space shuttle into orbit, you need the necesary fuel to take the rocket out but you also need some fuel to grant some movement in space to the shuttle besides the equipment for any task you want to perform, if you want to take more equipment and more fuel for space travel you make the rocket heavier therfore you need more fuel to put the shuttle into orbit. Kind of an example of EROEI. With the economy happens something similar, you want to make it grow you need more energy, to get more energy you need to dedicate more energy to the extraction process. Capital is burnt along with the energy we use to put it somehow, reaching a point where we burn more capital than we are able to get and debt is the key financial tool to keep things working a bit longer till it gets its peak. I think that is how in the process we end up with less affordability each recession.
The reduction in affordability may come from a lack of jobs. Or if banks are closed, we could have almost everyone lose their job at once.
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And some people will read this latest analysis …. and still believe BAU lite can happen…. that there will still be oil extraction and refining happening … on a limited basis…
Kinda like believing 1+1=5….
Gail, thank you for another view of the topic.
Saw this article you may wish to read….as well as, others hoping for a retirement
http://www.startribune.com/retiree-benefits-are-facing-many-threats/346267152/
etirees face a less secure future due to decisions soon to come from the U.S. Supreme Court, due to changes to Social Security and Medicare, and due to the enactment of the Kline-Miller Multiemployer Pension Reform Act. They deserve full disclosure and the truth.
Retirees face a less secure future due to decisions soon to come from the U.S. Supreme Court, due to changes to Social Security and Medicare, and due to the enactment of the Kline-Miller Multiemployer Pension Reform Act. They deserve full disclosure and the truth.
Spokeo Inc. vs. Robins, a case argued before the Supreme Court on Nov. 2, seeks to limit lawsuits. The publication “Pensions & Investments” reports that advocates say a ruling could “severely restrict retirement plan participants from accessing federal courts …” Other cases being heard at the high court could restrict who can participate in class-action lawsuits.
The U.S. House Ways and Means Committee states on its website: “Without action to address the fiscal and structural challenges facing Social Security, seniors will see a 23 percent cut to their benefits, beginning in 2033.” Yet, the just-passed bipartisan budget agreement, which increases both domestic and military spending, does not provide money to prevent a 20 percent cut in Social Security disability benefits in 2016.
It is hard to see how very many of us will get much for retirement from pensions or Social Security. There have been recent precedents on retirees being asked to take less, if there is not enough money in pension funding.
Social Security “funding” (other than what comes in from annual contributions) comes from government debt. All of the estimated payments are based on a model, with respect to how the economy will be growing and how collections will increase. Things could change a lot between now and 2033.
Metals prices fall to multiyear lows
Metals prices suffered a broad sell-off on Monday that sent prices to their lowest levels in years, intensifying the pressure on miners from Chile to China to cut production.
Copper fell to a new six-year low of $4,443.5 a tonne on the London Metal Exchange, while nickel dropped 5 per cent to its lowest level since 2003.
Commodities from metals to oil have fallen more than 23 per cent this year amid increasing concern about slowing growth in China, according to the Bloomberg Commodity Index, which tracks 22 raw materials. That has been exacerbated by the prospect of interest rate increases by the Federal Reserve and a strengthening US dollar, which makes commodities priced in the currency more expensive.
The price falls are putting more pressure on miners to hold back production and reduce supply as cuts announced so far have failed to stem the rout. A group of 10 Chinese zinc smelters said last week they would cut output in the face of low prices. But zinc, used to galvanise steel, fell on Monday to its lowest level since 2009.
“The macro headwinds remain strong and thus the impact of these latest cuts are likely to be fleeting,” Daniel Hynes, senior commodity strategist at ANZ, said.
More http://www.ft.com/intl/cms/s/0/1329bbc0-91d3-11e5-94e6-c5413829caa5.html#axzz3sN2b9BYe
Reducing supply is not working … prices continue to fall…
Enjoy the turkey next month — 2016 it will be rat…
S&P Just Warned Asia’s Largest Commodity Trader It May Be Junked
As usual, S&P was late, but just over three months after our explicit warning, the rating agency finally came out with the catalyst we have been expecting when moments ago it said that it had “placed its ‘BBB-‘ long-term corporate credit rating on Hong Kong-based supply-chain management service provider Noble Group Ltd. and the ‘BBB-‘ issue rating on the company’s senior unsecured notes on CreditWatch with negative implications.” In other words, Asia’s Glencore is about to be junked.
http://www.zerohedge.com/news/2015-11-23/sp-just-warned-asias-largest-commodity-trader-it-may-be-downgraded-junk
Wonder how Glencore is doing….
Sounds worrying! Interest costs will be high. If it defaults, I am sure there will be a lot of ripples around the world. Or maybe it can just sell off assets, and prevent a shortfall on debt repayment. But profits will be very negative, with the high interest rates.
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Thanks for insightful post as usual, Gail. I especially appreciate your attention to debt. If you Google something like ‘oil debt’ or similar, you see interesting things now like Petrobras having debt it can’t pay, and astoundingly, Saudi intentions to raise their debt to 50% GDP in 5 years (Forbes, Financial Times). Who would have thought? The pain is setting in.
As a technologist interested in global warming solutions, I think the key to a non-Mad Max future is cheaper energy, wherever it comes from. My choice is solar in all its forms, since the supply is free, less capex and opex for any given method. So, directly in the form of PVs and solar thermal, indirectly in the form of wind (heat -> kinetic energy), and plant-based (solar energy embodied by photosynthesis into sugar), my favorite because it has the potential to replace oil. My reading suggests that the entering wedge is through industrial chemicals like MEG and BDO for bioplastics rather than fuels, though ethanol is actually quite a good fuel when it’s not made from corn. Your assumption that alternatives must be higher cost than oil is, I believe, wrong, or at least something that will get better as technology improves. What’s holding things back now is a lack of investment in new technologies by governments and VCs chasing the next Facebook rather than going after this very real problem.
I thought we put an end to this nonsense about solar energy?
It is not cheap –it cannot exist without oil and gas inputs — it cannot power the world.
The world runs on oil — no cheap to extract oil — no civilization – no BAU. Period
If you continue to bang the Solar Jesus drum and pollute this site … this will swing in your direction:
http://cdn1.evike.com/images/large/gr-madmax-6801-3.jpg
Holy f#ck not again. “Punish him for me, Errol”.
Like Tuko says in ‘The Good, The Bad & The Ugly’, “When you gotta shoot, shoot, don’t talk.”
What sort of “technologist”? The very term screams someone that assumes there is a technological fix for everything..
Of course thinking we can engineer ourselves out of a predicament brought about by that very same engineering is IMO delusional.
Humans have been engineering since time immemorial. It has got us to where we are now…….depleted resources of all sorts, resources that are finite and environmental destruction combined with an unprecedented population explosion. Hard to imagine a technological fix for that.
Just few day ago we discussed it here, that for “low impact” seed oil plantings you need something like upto ~25% oil content only (this is deemed crazy uneconomic already) and all that within rotation scheme, so getting those seeds only after 4years. Obviously you can run several plots at different cycle to harvest oil each year from the entire farm. But after all this effort (imagine draft animals mostly) this operation yields only dozens of liters per acre. And it’s still “low impact” certainly not “no impact” so you are at best slowly destroying the topsoil anyway. So it does work, but for mid 19th century lifestyle, provided you burn lot of coal and wood in addition or rather as base source for heating/hot water as well.
Yes, it’s a pickle, no way out..
I’ll try to find a video of some villagers high up in the Andes that only burn dung from their livestock as their only heat/fuel source. They are on very poor land, at high altitude. Compared to them, fairly flat grazing land near sea level has quite an abundance.
True, but the abundance would not power megacities, global parasitic jet set class, todays level of frivolous consumerism etc. Therefore people are against it. Sadly, we have to firstly fall down deep, and perhaps recover some..
Everything I can see says that part of our problem now is that energy costs are much more front-ended today than they were in the past. (CO2 production is also more front-ended.) As long as it was mostly a hand process of digging out coal, or an oil process that didn’t require much investment, then benefits came through as wages, and the workers could spend the wages. “Demand” tended to stay high, if the population didn’t get too high, and the problems with coal didn’t become too great.
Now, we are replacing a system which is in some sense sustainable, because the money spent comes back as wages, to one where we need more and more capital spending, with huge debt to support what is now a capital spending approach. The amount of debt needed to support the system tends to spiral out of control. A smaller share of the benefits go to the workers–more go to the businesses who own the capital goods, and to those collecting interest on the debt. For this reason by itself, solar doesn’t seem like a good choice.
I have a hard time seeing solar doing very much. Within electrical systems, it is mostly replacing coal, and compared to the cost of coal, it is still very expensive. Solar is perhaps a good choice for running desalination plants, if the other choice is burning oil. With desalination, plants can operate while the sun in shining, with no backup batteries.
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Great Post as usual Gail!!!
One question I would ask kinda along the same lines is a point I have seen many anti-peak oil commenters make lately. They conclude that the actual price of oil when adjusted for inflation and balanced out against all other costs has not in fact increased by any measurable amount in proportion of spending. Another words we are not spending any more today than we did 50 years ago on oil or gas except in the overall amounts used not the price per unit.
What do you think of that claim?
PP, Who posted that claim? Was it on this website or another? Who are the anti-peak oil commenters?
I have seen it on several sites and blogs but only ever in comments. .I wish I could go back and find one in particular to copy and paste it. Generally speaking the run down goes that oil and therefore the refined end product gasoline has not increased in price any more or any less than any/all other commodities when inflationary adjustments are added in average not taking into account price spikes etc. just yearly averages. The final premise being that the price average of say .30 per gallon that I remember from the early 70’s is in ratio about equal to paying say the $1.98 per gallon price it is going for in my neck of the woods today. Therefore their claim being that oil and be proxy gasoline isn’t any more expensive today than it has ever been since at least the 70’s.
They do not deny we are buying more fossil fuels just claiming the base price has remained constant compared to other commodities.
I am sure this claim cannot be true but for the life of me I cannot find the numbers to prove it is false.
In 1964 Joe Sixpack (production and non-supervisory worker) earned $2.53 per hour, leaded gasoline cost ~$0.31 per gallon and the average fuel efficiency (AFE) of a light duty vehicle (short wheel base) was ~14 miles per gallon (mpg). Joe could travel ~115 miles per hour of work.
Fifty years later in 2014 Joe earned $20.60 per hour, unleaded gasoline cost ~$3.50 per gallon and the AFE was ~24 mpg. Joe could travel ~140 miles per hour of work.
Gasoline was more affordable per vehicle mile in 2014 than in 1964. In 2015 Joe will be able to travel ~200 miles per hour of work.
https://research.stlouisfed.org/fred2/series/AHETPI
http://energy.gov/eere/vehicles/fact-835-august-25-average-historical-annual-gasoline-pump-price-1929-2013
http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_04_23.html
THE OIL NON- AFFORDABILITY MEME IS GROSSLY DISTORTED..
7.25 USD per hour : minimum wage in America.
That’s what university grads — with 100k in debt on graduation – are pulling down slinging coffee are earning.
Meanwhile…. Joe Sixpack lost his construction job and is living in his parents basement surfing porn day and night.
FE, undo your zipper, pull out your plutonium rod, and spray the thistles.
If Joe purchased a 2015 model year AFE automobile, he would be able to travel ~300 miles per hour worked.
THE OIL NON- AFFORDABILITY MEME IS GROSSLY DISTORTED.
64 million dollar question:
When the spent fuel ponds explode post collapse …. will the toxins kill gorse and barberry?
Death to you!
http://www.mooseyscountrygarden.com/new-zealand/gorse-peninsula.jpg
http://www-saps.plantsci.cam.ac.uk/trees/images/leaves/78.jpg
There are several issues involved. The economy is gradually self-organizing to use what energy is available. In 1968, distances traveled were shorter, homes were smaller, etc. A big problem is increases in costs per barrel, and their adverse impact on the economy. This happened in 1975-1982 and in 2003 – 2012. The economy must change to accommodate higher prices. In 1975-1982, there really was a big drop in oil consumption for a number of reasons (home heating off of oil, cars getting better miles per gallon using already-available changes by Japanese, electricity off of oil). At the same it was possible to start getting more oil online, not terribly expensively (but still with more debt than in the past). This time, we haven’t been able to “fix” the problem, except with more and more debt, at ultra low interest rates. Also, manufacturing has shifted to lower wage/more coal use/less concern about polluting countries. It still needs a fix–low prices seem to be the fix.
A big part of the problem is all of the debt outstanding. Low commodity prices likely mean defaults on commodity related debt.
The problem is that the economy is not good at shrinking without “breaking,” when the price rises, even if was perfectly able to accommodate that price in the past. We can find example of how the economy worked with horse and buggy, but we can’t go back there, either.
In 1968, distances traveled were shorter, homes were smaller, etc
Precisely. That translates to greater not lesser affordability. And in 2014 the cost of household energy spending relative to total household spending was below average relative to the last ~55 years.
https://research.stlouisfed.org/fred2/graph/?g=2FYe
Anyone who views that chart and concludes that debt was taken on starting in 1980 to offset or compensate for declining household energy spending is misinformed.
THE OIL NON- AFFORDABILITY MEME IS GROSSLY DISTORTED.
No it’s not.
http://www.newyorker.com/wp-content/uploads/2015/01/Cassidy-Chart-January-2015-2-690.jpg
And in 2000 to 2014, jobs were going abroad, because we live in a competitive world. The percentage of the US population with jobs was dropping. Jobs were being added where costs are lower–less concern about pollution, more use of coal, lower wages.
I am not a person that concludes, “. . debt was taken on starting in 1980 to offset or compensate for declining household energy spending.” It is more complicated than that.
Oil was $11.91 a barrel in 1998.
In July 2008 it was $145.
Price of Big Mac 1998 $250
Price of Big Mac 2008 $3.57
Of course the price of oil has cratered recently …. but the thing is… people were able to afford oil at $147 only because they were running up massive amounts of debt …. money printing and other stimulus policies kept the hamster running post 2008….
And now we are pushing on a string — people are tapped out — they have no jobs or low paying jobs — so they are unable to afford oil at $40 … never mind the $120 or so required to keep the oil companies in business…
Eddy please see my comment above. The argument as I remember reading it doesn’t take in the spikes but the overall average and focuses more on the average price per gallon of gasoline to make their point. Which comes down to we on average still spend about same for gasoline per unit but simply purchase more and more of it.
As I said I don’t think the claim is correct but cannot find the data to really disprove it.
If gas was the same price in adjusted $$ as of old then the Fed would not now need to resort to printing stupendous amounts of money to keep the insolvent oil industry afloat.
Difficult to find accurate info because inflation numbers are a lie….
But I suppose the thing is…. $40 is not really relevant … what is relevant is the break even on a barrel ….
Gail indicates that number is around $120….
The break even point in 1998 was definitely not $120…. I doubt it was anywhere near that number….
We got away with high priced oil for a number of years…. but now we are paying the price…. we gutted the economy and now it seems it does not matter how low the price goes…. it is not spurring growth….
B/E on a barrel of oil back in 1998 was about a buck and a half on average.
Wow….
There are exhibits such as this one: http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb0105
Energy consumption (In dollars) per dollar of GDP is down, but that is because we have mostly stopped manufacturing, and become a service economy.
Hardly. Real manufacturing output has almost doubled since 1987.
https://research.stlouisfed.org/fred2/series/OUTMS
We now manufacture hamburgers and packaged crackers.
We now manufacture hamburgers and packaged crackers.
Too funny!. Epic fail. I am certain that packaging crackers in the $220 billion annual food, beverage and tobacco product processing sector is an out sized component of the U.S. $1.9 trillion annual manufacturing output. 🙂
http://www.bea.gov/industry/gdpbyind_data.htm
First, I am not sure that this is the way to look at the problem. If oil is high priced relative to other fuels, then economies that don’t use much oil in their energy mixes will be much more competitive. This is what creates a major share of the problem. Manufacturing leaves the high-cost locations, and goes to the low-cost locations, regardless of what percentage oil is of the mix.
In fact, the fact that oil was cheap probably was what allowed us to burn a lot of oil for electricity that was used for manufacturing. Once oil became expensive, our economy switched to a service industry model. We used a lot less energy in total, and certainly less oil in running our industry.
Thank you Gail for this article 🙂
I bet we are currently exactly in a Wile E Coyote moment. You mention commodities prices fell from 2011. So please check out this article on the automatic earth :
http://www.theautomaticearth.com/2015/11/the-great-fall-of-china-started-at-least-4-years-ago/
This describes that the world was out of buying power in 2011 and only the chinese bubble kept the system afloat. The people ask “will there be a recovery”? I bet if there was cheap oil maybe, there are gazillions of items in the world that need to be connected to the internet! But if there is no more purchasing power available, there is no more grip and we are not “around the next corner is a thriving economy” but much more “threre is no more corner as we have left the road”
One comment says it all: “If the chinese debt is internal, we do not have to worry. If the debt is external, we have to worry.” Either way: Nobody except China purchased any “big ticket items” since 2011. Seems like we have a pretty far view in the rear window …
I agree that purchasing power for the proletariats is probably gone forever. But remember how the game works. There are always movers and strivers in this world, who will step over anyone to increase their share of the pie.
Much of it depends on what the system managers plan to do. Believe it or not I actually think they are doing a poor job, unless they really do want to boil humanity to death.
China really has been a big manufacturer of goods of all sorts. So even if the demand that is being cut back is indirectly coming from Europe, Japan, and the US, China ends up cutting back its imports, and that brings down prices. There is of course the big demand that came from China, with all of their new homes and skyscraper commercial buildings. That growth could not continue; it is a big reason for the drop in commodity prices since 2011, I expect.
Thanks Gail for keeping the articles coming and the interaction of posters to look at and scrutinize the issues pertinent to the topic of peak oil. If I ask questions or support a different idea, just take it as constructive debate.
The question at hand is; Did oil price drop due to reduced capability of the consumer from diminishing returns or oversupply? Iraq, Canada, Russia and the US increased their oil production greatly once oil increased to over a hundred a barrel. Even though price recently has been more than halved, Iraq is still pumping more, Iran is now coming back on board, the Saudi’s have not decreased production – adding up to a market share war. No producer seems willing to reduce production except by way of being forced to by way of lower prices.
Once over-supply is drained sometime presumably in 2016, price will begin to rise again. Even if it does not reach the level it did before due to reduced consumer affordability, a price of $70-80 a barrel will insure future supply for several years.
No doubt peak oil is real and we are in the throes of diminishing returns, but my observation after watching this situation since 05, is it’s a longer process than many originally thought. A good analogy I think is the tides. The situation ebbs and flows, as oil price spikes, then drops, while production rises, then descends, boom-bust swings, with diminishing returns in full view, and just when it seems like the tide has gone out (flow), it ebbs back in some manner to kick the can down the road for a while longer.
Reverse that; flows in and ebbs out.
Tides, nice analogy to visualize it.
Also I think it was a bit unfortunate that many of the PO/finite world/LTG people made relatively solid case and arguments, but dropped the ball when added cold faced annoucement of ~2014 as almost the end of the world as these effects kicking in. That’s how a good valuable message has been lost by association with unrealistic timing speculations.
Simply, the dying superorganism doesn’t have sudden stroke, instead and rather in zombie like fashion is still walking around the room, kicking into the furniture, to the horror of family bystanders.
Lol, that’s an interesting image.
This is also what makes America such a frustrating place.
In America my overwhelming thought when dealing with people is “give it a rest already” but they won’t. They just go on and on, as if on autopilot.
It’s also why Americans are obsessed with the apocalypse. We subconsciously need to see this whole thing shut down, because in real life it never does.
Part of the story is free money or rather zero interest rate money. If frackers had to calculate the risk of paying a loan at 6% they would have been slowed down from their irrational build out of a system that can only supply expensive oil/gas.
Stil…… I really think it’s a mistake to think that the supply of oil increased with unconventional oil such as fracking. Prior to full scale fracking taking off, the price of oil had been steadily rising, those higher prices allowed for the parasites to feed off the dying carcass. There was in increase in supply of VERY EXPENSIVE oil, made possible by debt. The oil being produced though had a low and lower EROI ratio. The oil that was produced was being added to the overall production amount but energy required to produce the oil was/is not accounted for.
Similar to growing potatoes, if after I consumed what I needed then accounting for preparation, harvesting and marking there was only the small and half rotten left to sell…… Well you get the point. With higher prices and loans maybe I could produce more but it would still require higher inputs of energy. The problem with oil though and especially fracked oil, the wells flow high for a short period and deplete quickly……the red queen syndrome rears its ugly head.
So what we needed more of was inexpensive oil, we got the opposite. Business needs to offset high costs with higher prices, that drives away discretionary consumers. Businesses could depend on rising populations to deliver more consumers to buy latte’s and useless stuff. Rising populations consumed more energy though and the cheap energy we, by far mostly use is of a finite nature and we naturally used the easy, cheap resources first.
Yeah, I agree Bandit, the cheap stuff got used first and the cheap stuff is what made life easy at one time. I remember it wasn’t that difficult to earn enough to live in the 60’s, 70’s even the 80’s, but now a person really needs to kick butt along with his wife to live good. There was a time I had a studio apt. in Sausalito that included utilities for 250 a month. Those utilities included tv cable, water, sewer, garbage & electricity. That was in 1980. I had so much left over each month it got stuffed into a savings account at 5.6% interest. I was actually getting somewhere quickly as opposed to today in which that same place would cost 1750. a month and not include utilities.
Nonetheless, when the current glut of lower eroei oil descends, the price will rise along with incentive to produce more expensive oil. That will kick the can down the road for several years. In other words, we know the dynamics of peak oil at this point pretty good, but what is the timing of the long descent? I’m just saying the oil business will ebb & flow right along with the economy for some time to come. My original notion of a sudden collapse has been replaced by an idea of a slower, erratic, very harsh for the disenfranchised, descent, while those still in the game go on with their lives. Those that can will. Those that can’t will watch and wait.
Something I see taking place out of this harsh descent arising from diminishing returns is people are getting angry and desperate. How else can we account for such an interest in someone like Trump who seems like he would be a fascist. It doesn’t seem like he could get elected, but those kind of people do get elected when people get frustrated.
Adolf Hitler got elected on the promise that he would become a dictator
Germany in 1933 was in such a chaotic and desperate state that Hitler’s politics were welcomed as the only solution. He did exactly what he said he would do.
All he needed was a group of like minded thugs to do his dirty work in the first few weeks/months after he was elected, after that the majority of Germans fell into line behind him and cheered him on. After all–he solved the unemployment problem and put everyone back to work
It was just another Ponzi scheme though, and collapsed after 12 years.
It may not be Trump this time around, but by 2020 or 24, with the economy tanking, a real lunatic will get elected. All it takes after that is (again) a few hundred thugs to do some dirty work and you have a fascist state again.
I think the big uncertainty is when and how the financial system gets drawn into our current problems. It doesn’t necessarily give us much advance warning.
“a price of $70-80 a barrel will insure future supply for several years”
I don’t see this happening when break even for most is well over $100 per barrel…
Also — given that corporate profits are being hammered with oil at $40 — any increase would act as a further drag on an already weak consumer… accelerating the deflationary death spiral….
Back in 2014 the breakeven slated for future projects started at $99 and topped out at $167 per barrel. This is before the wheels fell off the caboose. These are/were the hardest of the hard of oil plays meant to replace the stupendously difficult ones already in existence in shale, tar sands and ultra-deepwater, at the right edge of our technological expertise.
“a price of $70-80 a barrel will insure future supply for several years”
I don’t see this happening when break even for most is well over $100 per barrel…”
The plea for $100 dollar oil from producing countries and corps is their claimed need publicly but I suspect on closer examination behind closed doors with their accountants, 70-80 will do just fine. Some countries won’t get all their spend wish list completed, but they will do just fine at that price.
So let’s just put it out there that we have different expectations and let’s see what happens. I’m not going anywhere and from how much you post, you’re not going anywhere – lol. However, I don’t expect a price move for a few months more. Should be fascinating going forward especially with a planned interest rate hike in Dec.
Ok, let’s see how well we all do on 40mbs p/d which is the production that is viable below the $70-80 threshold. The rest will be underwater:
https://www.rt.com/files/news/33/37/b0/00/opec1.jpg
With so many producers of oil having (1) low cost of direct production and (2) governments desperately needing tax money, even if it is more barrels at less per barrel, a lot of exporter actually ramp up production with low prices. Some of the US and Canada get squeezed out, and a lot of Norway’s potential additional production is eliminated. Investment in unconventional in China gets squeezed out, as it does here. So we lose the high cost oil, but ramp up the low-cost oil more, unless prices drop really low. Governments of oil exporters become less and less stable, with the lower tax revenue. Banks in the US and Europe become more subject to loans defaults.
How this all balances is out is not as obvious as it might be. I am still guessing oil prices (as well as other commodity prices) drop lower.
If interest rates are raised, it will be a push toward lower prices. Also, some of the new banking requirements that phase in at the end of the year seem to keep down lending, relative to capital available, so tend to push toward lower prices as well.
It’s not just oil that’s suffering from falling productivity. The following interesting talk is concerned with mining.
https://www.youtube.com/watch?v=TFyTSiCXWEE
It would be interesting to know what fraction of the gross world product that corresponds to the cost of natural resources? I guess that fossile fuels is something like 90% of that cost, but it’s just a guess. It would be interesting to have a time series on this fraction of GWP. It has decreased from 1800 up until maybe 1990-2000. From there on my guess is that this fraction has increased. If anyone know of research in this field I would be happy to have a link.
In the talk I linked to above the speaker claims that 10% of the global energy consumtion is used to produce raw materials. It’s not clear if smelting for instance iron ore to steel and producing cement from lime stone is included or if it’s only the production and shipping of iron ore and lime that is included.
You need to factor in all the indirect oil burned in the process… workers driving to the mines… the oil used to manufacture their cars … the petrol in the engines… then carry this across to every activity that supports the extraction and refining of oil and other resources… the list quickly becomes enormous….
We would have to look at how gross world product breaks out, but I would expect human labor to be a good-sized piece. Payments for debt and dividends to stockholders are part of the cost of doing business, but seem to get left out of analyses.
Mining is very energy intensive, so a big sure of its cost is really a fossil fuel energy cost, I would think. Of course, fossil fuels are minerals as well.
Be patient. Give Figure 1. time. As we have discussed previously, in nature die-off can be a market mechanism. Are we not part of nature?
Die offs do reduce demand. Supply and demand balance at zero! Not terribly wonderful.
I’m putting this here because I realised the other comment thread was closed after I hit publish!
“Kurt says:
November 21, 2015 at 8:17 pm
Slow collapse? All right, I’ll take a crack at it. First, the history of the human race when you get right down to it is “I’m going to kill you and take your stuff.” It has been some time since we have faced that gritty truth given MAD. We are actually in the midst of a slow collapse. The emerging nations are being jettisoned and are going back to extreme poverty — South America, Africa, and soon to be India. The demand for oil will continue to decrease bringing the price down so that Fast Eddy’s favorite scenario, BAU can continue in the developed nations for quite some time.
Any nation that has a problem with that will be slowly eliminated. Wake up!!! This isn’t about the failure of a financial system and this isn’t Rome. This is hardball. Eventually, USA, Russia, Europe, China, Japan and a few other nations will be living pretty much as we do now. Everyone else will be starving. But, when I was growing up, that was BAU and I don’t think the developed countries will be morally conflicted in the least.”
You make a good point. We have the upper bracket of BAU dwellers and the lower bracket and all the nodes in between. Upper middle class with BMWs and hedge funds on the one hand and Indian children swimming through cess pools of waste to earn a few pennies on the other.
One of these brackets throws a hissy fit if they have to take a small hit in living standards. The other would probably welcome a change of scenery away from their particular flavor of BAU.
What you suggest sounds more like a dramatic movie scene to me – a climactic decision – one where the handsome lead (developed nations) has to make a tough call and cut the rope to lose some “dead weight” (third world). The rest of the group are stunned but it was the righteous thing to do given the circumstances. The survival of the lead protagonists is paramount. All secondary role players are expendable!
Great movie plot. I can picture the “winning” nations defending against wave after wave of refugee ships entering their ports, scaling the walls of their cities a la World War Z. Something tells me that the preferred movie plot outcome will not make the final cut…
The vast hordes of poor will continue to be poor only no more toxic sludge dumped on their coast by the BMW owners abroad, possibly freeing them up to get back to subsistence farming, climate allowing.
Either way, I predict more wailing and gnashing of teeth from the well-heeled brigade than the other crowd. And you’re quite right, in their hour of darkness, they may decide to do something rash. Not that it will help them in the end, but sore losers have a way of ruining everybody’s game.
what the ‘gentle downsizers’ fail to grasp is the humankind has taken about 80k generations to evolve to where we are now.
evolution has meant survival of the fittest—and you can add whatever unpleasant flavour you like to that. it means that those of us here now, and arguing about all this exist because all those ancestors fought to put us here by surviving to reproduction age.
the refugees crossing the med are doing the same thing–risking all for a chance to survive agains all odds to make sure their kids have at least a chance of a future.
those who suggest we are entering a period of benign downsizing into a gentle bucolic lifestyle, are, in effect saying that we should reverse 80k’s worth of genetic selection within a single generation (which is all the time we have left) and start being nice to one another.
this article from Time magazine shows what can happen in a 24 hour powere outage.Imagine what will happen in a permanent one
http://time.com/3949986/1977-blackout-new-york-history/
I am not a “Gentle Downsizer” to use your term but I am certainly not a complete doomer and forecaster of the “Mad Max” Scenario either. I don’t necessarily even think Mankind has any real interest other than self preservation. At best I think maybe 2% or less actually care for their fellow man when the rubber meets the road….
BUT.
History has proven time after time cooperation and community trumps chaos, violence and looting and therefore equals a greater chance of individual survival and most will come around and realize that. Certainly there will be hot spots of complete violence and death but ultimately it will be those areas that escape the violence that will rebuild and eventually take over.
Conquering and attacking one’s neighbors takes a lot of resources and will be just as handicapped with a decline as everything else. In fact from a simple logistics stand point that type of activity will take an even harder hit and become almost impossible without the above mentioned cooperation and supply/chain of command. In fact it would need to develop a society before it could do much more than prey on itself.
That is a superb example of what will happen the moment the electricity goes off — forever.
There’s another article attached:
THE BLACKOUT: NIGHT OF TERROR
But what shocked the city, and much of the world, was that tens of thousands of blacks and Hispanics poured from their tenements and barrios—in 16 areas—to produce an orgy of looting. In Brooklyn’s Bedford-Stuyvesant ghetto, in Manhattan’s Harlem, in the South Bronx, the violence and plundering approached the levels of the 1968 riots after the assassination of Martin Luther King Jr. The cry echoed through the ghettos: “It’s Christmastime, it’s Christmastime!” But to Abe Beame, and countless other New Yorkers of all races, it was “a night of terror.”
Roving bands of determined men, women and even little children wrenched steel shutters and grilles from storefronts with crowbars, shattered plate-glass windows, scooped up everything they could carry, and destroyed what they could not. First they went for clothing, TV sets, jewelry, liquor; when that was cleaned out, they picked up food, furniture and drugs. Said Frank Ross, a black police officer in Bedford-Stuyvesant: “It’s like a fever struck them. They were out there with trucks, vans, trailers, everything that could roll.”
Looters looked on anything movable as desirable boodle. Police caught one man in Bedford-Stuyvesant with 300 sink stoppers and another with a case of clothespins. Two young boys were spotted carrying away an end table. “Where’d you get that thing?” a cop shouted. “My momma give it to me—you can have it,” said one of the kids as they dropped their loot and dashed into a crowd that was happily watching a blazing furniture store.
At Hearn’s department store in Brooklyn, youths stripped clothing from window mannequins, broke their limbs and scattered them on the floor. Said Miguel Ten, a Viet Nam veteran who stood guarding Arnet’s Children’s Wear store: “This reminds me of Pleiku in 1966. There was a war out here. And the mannequins remind me of the dead people I saw in Nam without legs and arms.”
At the Ace Pontiac showroom in The Bronx, looters smashed through a steel door and stole 50 new cars, valued at $250,000; they put the ignition wires together and drove off.
Young men roamed East 14th Street in Manhattan, snatching women’s purses.
Adults toted shopping bags stuffed with steaks and roasts from a meat market on 125th Street in Harlem.
At an appliance store on 105th Street, two boys about ten years old staggered along with a TV set, while a woman strolled by with three radios. “It’s the night of the animals,” said Police Sergeant Robert Murphy, who wore a Day-Glo blue riot helmet.
“You grab four or five, and a hundred take their place. We come to a scene, and people who aren’t looting whistle to warn the others. All we can do is chase people away from a store, and they just run to the next block, to the next store.”
9 pages describing more mayhem: http://content.time.com/time/subscriber/article/0,33009,919089,00.html
http://izquotes.com/quotes-pictures/quote-civilization-a-thin-veneer-over-barbarianism-john-m-shanahan-292904.jpg
Now that’s one Zombie movie I WOULD like to watch…
Just flip on the Tee Vee this Friday night for the warm up…
http://i.dailymail.co.uk/i/pix/2014/11/28/2390E7EB00000578-2852585-Scrum_down_Customers_push_each_other_out_of_the_way_as_the_crowd-72_1417213372623.jpg
The HORROR…
The sink-stopper thief (330!?) has the mark of greatness on him: the vision of Alexander, the decisiveness of Napoleon, the ruthlesness of Genghiz! We should track his progress….
Ftom Time Magazine:
“The ’77 blackout presented a rare opportunity for the powerless minority to suddenly seize power, TIME concluded, quoting the head of the National Urban League as saying, [The underclass] in a crisis feels no compulsion to abide by the rules of the game because they find that the normal rules do not apply to them.”
Joe Sixpack will see the collapse as an opportunity to get out of his parent’s basement and live large (as a looter) … collapse will empower Joe …. it will give him meaning…. to ‘be all that he can be’
Lock n Load Joe…. your time has come … you are ready for greatness….
Right now, it’s the rich in every country vs. the general populace of their own countries. That’s the way it works currently.
May be changing soon. History shows that when breakdowns occur, humans reorganize geographically and tribally. It’s already happening in America, on the ground the blacks/whites/mexicans, conservatives/liberals, religions/nonreligious etc. are coalescing around their own, no matter what the media wants to portray. This is not just divide and conquer, people actually do prefer to be around their own kind in times of uncertainty and decay.
Some of the immigrants may be local–say water immigrants from California. I am not sure that the will be any more warmly welcomed.
As the effort to get a unit of energy increases society grow poorer. The amount of effort needed to get one unit of product (food, cloths, cars, houses) increases. Since there is a limit to how much one person or family can work there is a decline in the amount of stuff they can buy. Less buy cars, less buy houses.
I have read article that propose the young live in apartments 250 sq ft in size with a little common area because it will be fun (meaning that is all they can afford and the developer plans to make a profit). Being urban they can walk to work and the grocery store.
Having your own apartment is BAU even if it’s 250 sq ft IMO. Walking to work is probably something that <1% can do today. Bike to work would be more realistic but today we're far from bikeable communities in the USA. Denmark and Holland lead there.
Having a job and a grocery store is definitely BAU.
As Gail pointed out, the big risk is that ROI on human labor goes to 0. That's when unemployment truly goes bananas. Lots of bridges to nowhere will be needed to dampen the fall, but even such projects require energy.
I recently went to a guys house to check out some salvage building materials. He was about to demolish his 3500 sq ft house overlooking a lake in a very desirable neighborhood. IMO the house was lavish. A bit dated, but new carpets and paint job would have done wonders. No the house was to go down.
A woman stopped by to pick up a mattress. At $20, she had the same feelings as I had. Mis-allocation of capital. Rich too rich. Poor too poor.
Another approach seems to be several young people sharing an apartment. If one person moves out, they place an ad in the paper and interview for replacements. The people in the apartment have sign-up lists for when they want to use the living room. There are assignments for who cleans what when. The various people aren’t particularly friends, and don’t share meals together. Each on is assigned certain shelves in the cabinets and spaces in the refrigerator.
I think that efficiency is good for the economy only if it leads to more energy consumption worldwide. If efficiency is reducing permanently energy consumption worldwide, than it is bad for the economy, because there won’t be enough buyers for the products of more efficiency. For example, if the USA reduces it’s energy consumption, and it won’t lead to more energy consumption somewhere else, then it would be bad for the world economy. In other words I mean, than the economy is about growing energy consumption worldwide. More production with worldwide energy consumption drop would still lead to collapse, because there wouldn’t be enough demand for the products. That’s why world economy can’t grow without energy consumption increase. Energy consumption (worlwide) IS the economy. (sorry about repeating “worldwide”, but it’s very important :)).
Efficiency is helpful, in that it allows higher priced energy sources to be used, but it doesn’t seem to be keeping prices up now.
I agree with you that energy consumption pretty much IS the economy.
I know with coal, prices are very low, and many companies are near bankruptcy. The problem is the switch to natural gas, not even efficiency. The world economy does not contract well.
“Efficiency is helpful, in that it allows higher priced energy sources to be used”
Yes, but sole efficiency can’t grow world economy. Energy consumption increase must happen also. That’s what many “renewables” and alike people don’t understand.
A lot of people got as far as the Second Law of Thermodynamics, and decided it determined everything. If that is all you understand, then all processes seem to tend toward dissipation or equilibrium, since the view is that we are more or less in a closed system (except for the sun–a minor detail).
In fact, we live in a thermodynamically open system, thanks to the energy we receive from the sun. In an open system, there are temporarily dissipative systems that grow. But these dissipative systems need a rising amount of energy if there are to continue growing, and not collapse. The economy is one of those dissipative systems. So we can’t get along on less and less.
I’ve been pondering this of late. I had previously (and erroneously) believed that the Law of Maximum Entropy production, which states that, “A system will select the path or assemblage of paths out of available paths that maximizes the entropy at the fastest rate given the constraints,” was a universal guiding principal that ‘explained’ the global economy’s infinite growth mandate and the human excesses that overlay it.
An expert on the subject set me straight:
It’s [the law of MEP] a hold over from classical thermodynamics, in particular stemming from a confusing set of treatises by Alfred Lotka in the early 20th century about maximum v minimum entropy production. Dorion Sagan and Erik Schneider address this issue repeatedly and well in their book Into the Cool: Energy Flow, Thermodynamics & Life, about the “new” thermodynamics, NET (non-equilibrium thermodynamics). Here’s a choice snippet for your consideration.
“The desire to provide generalizations has boggled thermodynamics, leading different authors to suggest that far-from-equilibrium systems produce maximum or minimum entropy. But things are not so simple. Subjected to continuous flow of energy and matter, no system can come to equilibrium. As Ilya Prigogine and his collaborator Isabelle Stengers put it (1984), ‘When the boundary conditions prevent the system from going to equilibrium, it does the next best thing: it goes to a state of minimum entropy production — that is, to a state as close to equilibrium as possible.’
Think of it this way. A flame or an explosion is about maximum entropy production. But living systems are neither flames nor explosions. If they maximize entropy production, they flame out — literally. The problem is, humans — especially modern societies — have not understood this, and they’re too often still ruled by the incorrect principle of max production.
SO [back to me now] although it seems to me intuitively correct that species and civilizations will always seek to expand as quickly as they can, just as the majority of cars in traffic are going to seek the quickest route to their destinations, there is not a universal guiding principal behind this, as far as I can tell. Individual life forms reach adulthood and then plateau in terms of the energy they use; stars and flames achieve for a while a state of equilibrium, as my friend has pointed out.
Of course none of this actually changes anything. The global economy is growth dependent regardless of thermodynamic theory, and a steady-state is not possible with a growing population and shrinking resource base, as Gail has pointed out many times. Interesting though.
Harry,
thanks for your comment.
I see things slightly differently, though: what makes the big difference beetween living systems, biodiversity, and our human economy is the ENERGY INPUT, which can be considered as constant for the former, and increased at will for the latter (so far..).
With a constant energy input (from the sun), living systems have taken advantage of any niche and tiniest steps of energy dissipation to create new forms and structures, filling all available void and therefore lessening the amount of primary energy to be directly lost as waste heat.
No need to explain what happens when the energy input increases, and is expected to do so forever, as it’s the case for all human civilisations, but is also valid for natural living systems (think yeast & sugar, reindeers of St Matthews island, etc…).
As a corollary, when energy input increases rapidly, a huge part of it is directly lost as waste heat, as the ecosystems (technological ecosystem, in our case) don’t have sufficient time to adapt, to regulate the flow and prevent overshoots.
So maybe the MEP principle (Max Entropy Prod) doesn’t explain everything, but in my view it remains as universally valid as any physical law.
Thanks for your thoughts on the subject. The answer is not simple, unfortunately.
We are dealing with ecosystems that include many organisms that work together, just as we are working with an economy that works together. How the overall system works is not exactly the same as individual organisms. We know that for many mammals, those individual who eat less tend to live longer.
I switched to a different comment order–I am not certain it has yet taken effect.
It should go back to leaving comments in the order in which they are made, but show the last page of comments first. This way comments will “stay put” in ordering, but you will generally see the most recent ones.
last page first is wonderful it become quite and effort to get to the end when we get to 800 posts.
Glad you like it!
Thanks Gail. That sounds like it should make it a bit easier for regular visitors to keep up with new comments.
One reply puts all new comments into my email. Keeps me occupied reading them all.
That works really well, thanks!
“As a result, the losses incurred by financial institutions seem likely be passed on to businesses and individual citizens, in one way or another”
Is there another way than hyperinflation?
I guess you could also take peoples money via bail ins.
But in the end purchase power has to go down, simply because we run out of things to purchase. But how is it implemented. And what can people do to extend their prospects?
I think this ties directly into bubbles. If there was a way to guard yourself and everybody did it, it would create a bubble. Stocks, real estate, land, …
Dolph?
I have no connection whatsoever to money or power. But I can think like those guys do. All I know is that they will transition to a command style economy to triage the remaining resources, and it isn’t going to be pretty.
I guess I sort of believe that, if you don’t already have it, it’s too late. Not much we can do at this stage but prepare in our own way.
Maybe you can train to become an undertaker, or manufacture small arms and bullets. Plenty of opportunities ahead.
About the way to guard yourself, naturally most of the “new rich” are pirates, they are risk takers at least in the first generations, they are not hermits, the correlation to doomerism is miniscule to null. On the other hand, old money and “hermitism” there is a good match often times, the learned goal is to work on transcendental wealth and power. While the first group populates the cover pages of Fortune and their names are buzzword, you will hear very few specifics to nothing about the current generation of the latter. While the former often lives in obnoxious pseudo modern metropolis settings, the latter group tends to hide in “smallish” estates on lake fronts of Switzerland not far away from private nuclear bunker/art storage in the Alpine moutain.
In the coming shift to more command style economy, mind you not necessarily in the commune meaning of shared resources, one has to pre-gauge the usefullness, unpleasant jobs might indeed be in high regard. Perhaps undertaker is culture aspect long gone by as of today in many places, but in similar vein something like drinking water filtration or food preservation expert via own travel show/marketing or vermin exterminator could be very good job.
Everyone one’s gotta eat folks, get to know your local farmers.
I am looking for slaves to work on my 5 hectare farm here in New Zealand.
It is a tough slog dealing with the gorse, barberry, twitch, and various thistle weeds — so I need people to dig and cut those out — we do not use any sprays because we are getting ready for the post spray world — so it’s hard going.
The thing is….
People here think I am nuts trying to farm without Round Up and Tordon…. even most of the permaculture people I know who live ‘sustainably’ use this stuff — I suppose it is more convenient than the drudgery of war with Medusa…
When Wally’s World closes… the weeds are going return — with a vengeance…. just as disease is going to spread like wildfire when antibiotics are no longer available
Who wants to volunteer for a life of slavery?
3 simple healthy meals per day (provided we don’t have a crop failure…)
No thanks. I’ll be booking my ticket for the great beyond…
That makes sense…
One of my last acts will be to fill the 4 x 4 with diesel before the pumps go offline — then I will pop the air bags with a gentle roll into a post — then hack them out with a knife….
I am keeping an eye out for a good rock cut that has a nice straight stretch so that when the time comes I can get some nice acceleration….
Live by BAU – die by BAU.
That’s funny, permaculturists with Round Up.
Have you considered using cardboard, lumber wrap, or something similar to kill off the vegetation without using poison?
We used cardboard on the beds and surrounding areas — also put down 6 inches of bark mulch around the beds… the beds are a manageable problem….
The bigger problem is in the large paddocks surrounding the gardens — roughly 4 hectares of land — we have a range of bad stuff coming up now that spraying is not happening… not possible to suppress with any of the methods suggested….
Some of the thistle can be dug out by the roots and will not regenerate … but other types are impossible to remove permanently …. there are so many of these thistles that I have filled up about eight 45-gallon barrels (filled with water to kill them) — it’s a never-ending battle that takes a couple of hours per day just to stay ahead…
This is a heads up to anyone looking to set up a self sufficient food operation….
Weeds are one thing but I am dreading what would be involved when I no longer have petrol for the lawnmower/chainsaw/weedhacker….. what if I only had a single wheelbarrow and it broke…. what if I only had a single shovel, rake etc…. what if I did not have a gravity fed water supply backed by a solar powered pump supply…..
Anyone ever try chopping down a tree with an axe — then cutting it into short pieces and splitting it? Give it a go if you want a whiff of what’s to come…
And to top it off… what if at the end of a very long day … one headed up to the house … and the electricity was no longer available….
Topping it off… what happens when the neighbours show up desperate and hungry….
Word association: futile, overwhelming, grim, putrid, struggle, brutal….
Long Live BAU!
I’ll give you a hint, how do you think our ancestors dealt with similar issue, there is a natural remedy for it, cheap, renewable, dual-triple or even more uses too, it’s bigger than poodle dog and smaller than a cow..
I asked an old time farmer up the road what they did before ‘spray’ to get rid of gorse and barberry — the answer ‘we burned it’
Can’t exactly set the hillside on fire these days….
Can’t run goats as I have commitments to a neighbour on sheep — he allows me to connect to a spring so I reciprocate with grass…
I have spoken to a number of certified organic farmers — decades at this game — there are no easy solutions if spray is not involved…. for certain thistles you just have to dig them out by the roots and if they are seeding toss them in a barrel of water to kill all… some thistle you cannot get rid of … just have to keep whacking it back…. same story with barberry and gorse… the battle never ends…
The ‘permaculturists’ compromise — they use Round Up on the paddocks to keep the demons at bay —- but do not spray the areas where they grow…. apparently they prefer not to spend their days ripping out weeds and thistle…
When I tell them what I am doing they chuckle…. kinda like they are thinking about ‘mad dogs and Englishmen going out in the midday sun’ …. but applied to newbies trying to grow without spray….
I can imagine there is a bet in the neighbourhood about how long until I call in the Monsanto Choppers….
I am not really complaining (well… actually … I am… ) rather I am providing a whiff of what the future looks like ….. anyone ‘excited’ about it?
When I was young my dad had a ground driven sickle bar mower he used to cut the ditch banks on our farm. He used a small tractor but horse could pull it if that was all you had. It would cut any annual growth. Attacking ditch-bank growth with a bush-hook in August is not for the feint of heart.
“I’ll give you a hint, how do you think our ancestors dealt with similar issue, there is a natural remedy for it, cheap, renewable, dual-triple or even more uses too, it’s bigger than poodle dog and smaller than a cow..”
Careful, I can envisage the mother in law joke.
Yes, it’s good to look at how the ancestors did. Actually the answer is not smaller than a cow, it is a cow. They turn grass into milk and meat (and manure). Nothing beats a cow. Not as stupid as a sheep and from what I understand helthier than a sheep. They also eat gras less agressive than a sheep. The smaller landraces are better to use. They don’t depend on modern agriculture. New Zealand has a long grass growing season compared to other countries where it either is to cold half the year (north europe) or to dry half the year (south europe) for grass to grow.
Not good enough answer, dear pupils so far.
It’s neither your family relative nor a cow, but you are getting closer.
Agent Orange?
http://mediad.publicbroadcasting.net/p/wvtf/files/201410/agent_orange%281%29.jpg
I meant that he should stop fighting against nature. Meadows are great for cows. You don’t have to work as hard to keep the meadow good as you have to keep the garden beds free from weeds. The cows fix the meadow. Ok, you will have to do some scything to get hay for the non grass-growing season.
If I let nature have its way there won’t be any meadow… gorse and barberry will cover the entire property if left unchecked….
Fast Eddy.
Enjoy your posts.
Have you thought of using a goat for the thistles?
Also, I have a suggestion for a way to pump your water uphill without electricity. It’s called a hydraulic ram pump. The tech is a couple hundred years old and can be built with parts sourced from a home improvement type store for fairly cheap or you can buy one from a dealer for a bit more.
I had been asking around about a goat…. but was told a horse might be the best bet in terms of chomping on the thistles… we had a horse when we lived in Bali and they require a fair bit of upkeep compared to other animals though…. have also been told they can be hard on the land.. I must also consider my good neighbour who is a sheep farmer and relies on me to let his sheep feed on the 4 hectares of open paddock that surround the orchard and gardens
Am aware of rams — the solar pump can push much greater volumes of water up the hill so we went with that.
I am thinking to the future — the one with no electricity where people down the hill from us will be needing water for their crops…..
I am having a crown made this week — and a throne — I have chosen the moniker ‘Water King’ … all below will need to send me a single able bodies person to perform the task of Pulling the Weeds.
Well, of course some little exercise now and then with the billhook clearing land is just good for you! You can’t let to cow do all the job.
Maybe I remember wrong, but I think I read somewhere that the costs of having dairy cattle is lowest on New Zealand. The reason was the climate which gives growing grass almost the entire year. In europe ireland is best suited because of the long grass growing season on 9 months/year if I recall correct.
I have decided to invest in some large wireless speakers …. with the intention of blasting those weeds and thistles with Koombaya day and night….
If that doesn’t work … I will pray… I just have to decide which god to pray to… is there a religion that offers heaven in the form of the eradication of weeds?
” is there a religion that offers heaven in the form of the eradication of weeds?”
I’m pretty sure that religion is “Better Living Through Chemistry”
LOL!
Eddy, Try and load up on aviation fuel , it has a 5 year life which should be enough to get you through the bottleneck. I plan on buying some electric mowers, chainsaws etc and if my solar system is still working I should be good for another 5 years by then my grandsons will be strong enough to do those jobs by hand with my scythes, buck saws, and axes I have stashed away.
Back up plan = removing air bags and having just enough fuel to be able to achieve terminal velocity prior to the rock cut…
In many ways, preferable to slow starvation. And life without coffee….
I noticed this for sale http://www.zerohedge.com/news/2015-11-20/sale-apocalypse-bunker-can-withstand-20-kiloton-nuclear-blast-furnished-asking-17500
The thing is…
If you had that sort of cash … the thing is…
There is an assumption with all preppers regardless of their level of affluence …. that all one needs to do is survive for __ months …. and if you come out the other there will be some sort of reset… that things will improve…
There won’t be a reset… and if things ever do improve from ‘The Road’ then that is highly unlikely to happen in the short term… things are never going to return to anything remotely resembling BAU because we’ve used up all the cheap to extract resources…
So you emerge from that bunker a year after the SHTF… then what?
Maybe they can re-establish Wall St. Then ALL will be well….
That’s a very idiotic type of bunker, no wonder they have problem to sell it.
It’s probably close to some mil targets so chancses of bigger blast or robbery-brake in are high, moreover it’s designed to house multiple families as in some kind of hotel setting by civil defense.
On the contrary the real bunker is for single family and few personrel only, cattle, horses, container trees, container topsoil, machinery, fuel, water,.. Obviously you won’t see public advertisements of these perhaps till the very close encounter with KT/MT situation..
http://www.privateislandsonline.com/
LOL! Maybe you can set up a market, where folks can come to trade what they have. Someone can be in charge of valuing each type of good in some metric–bushels of wheat or ounces of silver or US$. The market can perhaps keep a percent or two off the top (in goods) to pay for its services. No actual money is needed–just clay tablets and a stylus, to keep track of balances for each individual. Services can be traded this way as well. As long as no distance is involved, this seems to be the approach to use.
I suppose you could lose electricity. All of the financial institutions would close and forget who had what accounts.
Or you could nominally have the same amount in the account, you just could;t withdraw more than $50 per day.
One thing that strikes me is that if goods are made, the people who actually work at making those goods should be “first in line” to get them, so that they are rewarded for their efforts. If there are not enough to go around, those with “savings” should be left out.
I think this forecast is wrong, I don’t expect oil prices to fall in any meaningful way.
We are at the peak now. At peak, there is oversupply, and thus the price falls. What faces us going forward is the vision of undersupply, and ever increasing, or steady demand. Permanently. We are at the head fake moment currently. It doesn’t matter if demand comes from you or me. You or I could never burn a gallon of gas ever again, doesn’t matter. The potential demand coming from 7.3 billion people all breeding like rabbits and looking to be mobile and rich, is almost infinite.
Here is the trick to understanding why real prices will remain high
-the dollar, like all currencies worldwide, is a fiat currency; it’s value is arbitrary and determined by committee; this sets a lower bound on the price of everything that trades in the global economy; in theory, there is no upper bound, but in practice some demand is killed if the price is high enough
-oil producers need a high price; oil producers always get what they want, without exception (remember how in 2008, the big banks went to congress and said, give us 700 billion dollars or we shut down the atm’s? it will work the same way; big oil will go to the government and say, this is the price of oil we need, make it so or we shut down all production, and the threat will work)
Expect the real price of oil to be high, and supported artificially, even if the artificially supported price kills off tranches of former demand, such as auto/airline/tourism industries. The middle classes will also realize it’s not the end of the world if they are stuck in place and can’t drive 500 miles to visit uncle or grandma for thanksgiving or christmas.
But oil producers will get the price they need…100% guaranteed.
Oh Dolphin I thought you had seen the light, I guess it’s true about the dolphin (or is that leopard) not being able to change its spots. By the way what is the difference between expensive oil and inexpensive oil, if you cannot afford either. You contradict yourself though when you say the oil companies “will get the price they need” even though “price kills off former tranches of demand”. You are completely confused if you think oil is only needed to drive to see grandma.
You miss my point, which is typical.
It matters not whether you, I, or the American middle classes can afford to burn a certain quantity of oil. What matters is:
1) oil producers
2) global demand.
Those will win out, guaranteed. Oil is going to stay high.
Oil is $40 again and is soon to be heading towards $20 or less. This is not high.
Stay high? It is high now? Global demand is low. Debt is very important in demand, but so is the ability to repay debt.
You are in danger of becoming the new Pete EV… or Madflower….
The potential demand from 7.3 billion people depends on them having jobs and some way of “paying for” the oil. If the banks don’t stay open, the whole system doesn’t work.
If I’m not mistaken banks don’t show particularly stressed out with current situation upto ~600% overal indebtness of particular countries, perhaps a bit less (300-400%) for the more important ones. Hundreds of millions people of the west/north pay for their elevated debt based consumerism via banking cartel-gov naked printing not by “jobs”. It’s a nice system if you can run it for a while, as always we probably differ here on the timing, remainig longevity of this congame is unknown.
All Ponzie schemes end badly… And when it involves the world’s reserve currency, all the more so.
There’s no way out folks, we are all tied to oil, the US dollar, and the “connectedness” of globalization. Like it or not, we’re all on the same elevator, and having peaked out, we’re all going down, only question is, how far, how hard, and how many survive…
“If I’m not mistaken banks don’t show particularly stressed out with current situation”
The problem is low reserves to total deposits, plus negative rates on deposits. So you only have $1 in your vault for every $300 you owe depositors, and you are charging your customers 1% per year just for the privilege of storing their money with you, instead of paying them 4%. The banks need the government to ban/restrict capital flight and withdrawals to prevent the banks from going under, or move to a cashless society so reserves don’t matter.
Some banks could care less whether they have customers or whether those customers withdraw their deposits. These banks have enough equity, and have allegedly risk-free income from their government via the effects of quantative easing that is paid from interest on government paper.
You can do a lot when money costs nothing, or indeed, when you are paid to be in debt.
It will not end well.
“But oil producers will get the price they need…100% guaranteed.”
The price produces need to get is in excess of USD100 per barrel – which as explained above — destroys demand for goods and services…
Perhaps Gail needs to make these articles even simpler?
According to Putin, Russia seeks to increase its gas output by 40 percent by 2035, reaching 885 billion cubic meters. One of the biggest tasks ahead of Russia is to boost the supplies of gas to China, India and other Asian countries from the current 6 percent to 30 percent, said Putin. Kremlin also intends to triple the LNG supplies. He added that Russia would be able to deal with all these tasks.
from https://www.rt.com/business/323123-putin-gas-demand-world/
Anybody have an opinion on natural gas?
I don’t know if those China numbers are correct because I had read a few articles sometime ago on ZH that Russia’s supply to China were being cut due to the slowdown of the Chinese economy.
Export slowdown based on coal doesn’t negates push for domestic quality substitution, namely clear skyes. That you can get by importing russian/iranian/gulfies natgas and/or build more nuclear power. It’s done deal, it’s all underway..
Natgas will have huge influence for the profile and duration of the current “BAU cankicking” and following step down of “BAU compost” afyer the ELM effects of ~2025-2035. With miniscule investment you can run industrial agriculture on natgas/lpg as well as trucking, trains on yet unelectrified legs of the network etc. These are the decades of prolonged industrial society for some, not globally, again it’s a triage, many “misfortunates” will fall under the table. Simply natgas is a big midterm bridge (likely to nowhere longterm) that’s why the current events in the ME, i.e. fighting about the sphere of influence over the future pipeline routes (and revenue share/tax) from Iran and/or Gulfies.
Yes, this forecast is worthless since we will reach peak natural gas sometime in the next 10 years and the wheels will have come off the latest iteration of BAU by then too.
An additional udea/issue is currently discussed at the German peakoil blog ‘peak-oil.com’ in the comment section: That of EROEI subsidy from coal.
It may be clear to many reader here that our global society requires a minimum (and location depended) EROEI to function. Which number that is – is still open, as it also depends of how the EROEI is calculated. Some offer numbers around 7-9.
The discussion is, that coal with a very high EROEI subsidizes low-EROEI endeavors live PV, but also am more important low-EROEI oil plays (e.g. tar-sand). This game works, since oil is much more valuable per BTU as coal, since it is more energy-dense and has much more versatile applications (e.g. one may think of planes and car that are powered by coal-engines). Note: In case of France – they use mostly written off nuclear for their base power instead of coal.
It is argued, that countries that use coal for the bigger part of their electricity production are more competitive (e.g. PV production in China – cheap labor, cheap energy from coal) and that if the combined EROEI of all the electricity/power producing energy resources falls below the minimum-EROEI that systems may degrade in an accelerated mode.
But some countries/regions don’t have as much coal per capita as Germany/China/Russia.
That’s the case of France, by scaling up nuclear they reached several goals, entered the big boys club of nuclear armed sovereigns, leveraged vertically integrated system such as electrified railways and supported other industries by the techno knowhow buildup. And it all wouldn’t work without their post colonial influence on Africa were they can continue to steal uranium ores. They work less and enjoy life more than most, before another cycle burst.
On the other hand Germany faces its old problem as always, no resource colonies, the workaround has been hard work and specilalized export industries and also recently acquiring colonies in Eastern Europe via EU enlargement, which serve as source for cheap labor for even larger aggregate industrial input. However, the demographics in Germany is the world’s second worst following Japan, most of the hard earned surplus has been stored in virtual paper assets, it is increasingly hated on the continent for sneaking yet another reich regime over Europe, and it can’t decide as to whether to switch alliance with the FarEast or continue to be US puppet enclave. The result of these severe stresses is that the current leadership went finaly completely bananas, opening borders for undocumented illegal migrants on unprecedented scale. So, nowadays there is no German leadership in the EU anymore, the path downhill is set including the end of EUR and brake up/big reshuffle of the union as well. Frankly, we have been through this cycle with “Germany” during past 1000yrs several times already, so it’s just yet another rehash on old themes dictated by geography, demographics, etnic characteristics-pecularities etc. Now the big change is there are billions of asians with money, knowhow and industrial base on their own, so any larger European crises means it won’t be able to catch up the rest of the global runners, dark ages again here we come.
This comment is awsome! In Germany the people are really discussing stupid things at the moment but your few lines nail it all down. Thank you 🙂
As German I can only agree with you short analysis / summary – as unfortunate that is, as it leads Germany and the EU as whole even quicker in more unstable regions.
It seems to me that the economy uses a blend of different types of energy, starting at the top with human energy, then oil, coal, and perhaps natural gas. The highest priced energy–human energy–tends to get squeezed out if the cost of the other energy supplies rise. I think the main issue is rising cost, which should sort of equate to falling EROEI. The economy kicks out human energy to keep the overall mix sufficiently low in cost.
That’s very true and key observation on your part and reason why as long there is surplus energy available on regional/block basis (at least next 2-4decades) and given the current maniacal rush for robotics at all industrials, expect as normal 40-60-80% levels of real unemployment.. so after that the final leg down will be very drastic as most people won’t have any basic skills remaining to perform anything of substance in the small last pockets of the natural world.. that’s when and where FE finally gets his proper total doom, but it’s certainly not today..
Human energy? We are eating oil: http://permaculturenews.org/2009/02/12/eating-fossil-fuels/
The automatization and robotization are good examples of this process.
Virtualization of money is another example – material money transfer is very costly, electrons are cheaper. So far at least.
What I like about Gail’s articles is that the information presented is easy to understand. It’s easy to see how prices affect the overall health of the global economy. It’s also pretty evident that we are in a terminal phase of the global economy because it was built on cheap and affordable oil. The producers need higher prices to maintain and increase production but when that happens it also creates higher prices to the consumer. At that point consumption will be affected to the negative side and it creates a feedback loop to the producers and finally the health of the economy.
I would hope my article is easy enough for economists to understand. Unfortunately, a person doesn’t necessarily understand what he is paid not to understand.
For those that haven’t read it, this is a great white paper on what can happen once we start over the falls… (Which is prolly happening now for the past decade, since peak oil). http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf. And Gail, don’t worry about the economists, they know EVERYTHING! so it will all be OK!
Curt – I am aware of that analysis — and it is without question the most comprehensive explanation of how collapse –once it begins in earnest — will happen very quickly.
It is a long document — for those who don’t want to read the entire text I believe p. 58 onward gives an example of what happens when a major ‘hub’ breaks.
Sobering reading…
I’ve read that sometime ago. Back in 2008 when the system temporarily (everything in the system failed at once) collapsed before Helicopter Ben was called into action, Hank Paulson knew how it would play out if the 5 TBTF Banks were allowed to default. We were staring at a global economic meltdown and martial law in the US.
Yep, we’d either be pulling up or pushing up the daisies by now. Depending on your luck. Next time it will be more pushing than pulling since everything is so much worse.
I reckon the helicopter money drop happened in 2008 … and has never stopped… we are drowning in fiat currencies…
The helicopter drop was meant to be the last weapon in the fight against a deflationary collapse… if that is so…. then the Elders are romping about naked on the beach about now….
I’d have to agree, the money spigots have been running full bore since 2008. Every CB of note is gaming the process for all they can, trying to kick the can down the road. They’ve done remarkably well in forestalling collapse for these past 7 years, but the deflationary tendencies in the global economy are becoming stronger and stronger with each passing day. I wonder what tricks are left up their sleeves, better hope they have some and they work, or we are toast.
Glencore’s Zambia copper mining unit lays off 4,300 workers
Zambian unit has laid off 4,300 workers, union and company sources said on Tuesday, as the mining and trading company deepens cuts in copper output to support flagging prices.
http://uk.reuters.com/article/2015/11/24/uk-glencore-zambia-idUKKBN0TD0XN20151124
In a nutshell this explains what is starting to happen globally …
Companies reduce output in a desperate attempt to force prices up on their goods and services to avoid being junked by the ratings agencies and heading into insolvency…. this results in layoffs… which further dampens demand for their goods and services…. and so on….
It doesn’t take a Pee eh Dee to understand that we are on the:
Once lack of demand starts (from not enough wages, or failure of debt to keep increasing, or from oil prices rising but wages not rising enough), it seems to keep cycling through the system in slightly different forms. More debt at ultra-low interest rates sort of fixes the problem, but then banks find themselves in difficulty.
Good old “Demand Destruction” is pretty easy to understand. Unfortunately, they don’t want to understand because it leads to catastrophic flaws in the standard economic model.
Makes one’s life study and work completely irrelevant when the Bigger Picture is applied…
Thanks for the latest article!
Worryingly prescient as usual Gail. At an individual level I can see this happening all over the place with young people who want to be able to buy houses (and all the other things that go with that) still stuck at home with their parents. They may have jobs, but they’re not sufficient to be able to purchase the bigger goods that the economy needs.
You are writing about substitutability, not directly about the how price is related to the supply and demand of a single product. The title gives a bit of a wrong impression.
People think of high-priced oil and low-priced oil as being a single product, so in a sense, I am writing about a single product. If high priced oil truly were a substitute for low priced oil, we would have no problem.
I am writing about how price does not necessarily follow cost (among other things). This seems to be a concept that has been missed by a lot of people, economists and otherwise. I am also talking about why low prices don’t reduce supply, which is definitely part of supply and demand.
According to Wikipedia, https://en.wikipedia.org/wiki/Supply_and_demand “At least two assumptions are necessary for the validity of the standard model: first, that supply and demand are independent; second, that supply is “constrained by a fixed resource”.”
I only wanted to comment on the title of your blog entry as it related to the supply and demand graphs, that you provided. The quote you provided from the Wikipedia section gives two conditions that must be satisfied for the supply – demand curves to have meaning. Oil is certainly a finite resource so the second condition is satisfied. Are the supply and demand independent? I would say that they are from the point of view of economists. That is, how much oil is used to produce a given barrel of oil. EROI is not the best measure for this because oil production can use energy from coal, nuclear, and natural gas in addition to oil itself. Hence I would say that the independence condition is also still satisfied. At some point in the future it will not be as EROI diminishes.
This point notwithstanding I am agreement with your overall thesis, but the analysis relates to macroeconomics. There we encounter analyses that hinge on the production function and the factors of production. That energy is not chosen as one of the production functions is a great flaw in economic thinking. Only capital and labor are included. But labor can be replaced by energy, which economist lump into capital (cost of robots and other machinery in factories and computers in service industry) and ignore the energy costs. They claim that the energy cost is still too low to matter. They may well be right as energy costs are still quite low in running of computers in an economy that is based on services. Hence energy they ignore energy. I wonder when will they begin to take it into account.
I agree that the fact that energy is not part of the production function is a big problem, but that was not an issue I was trying to address–at least not directly.
The fact that economists would only consider a lack of independence to take place if oil is actually used in the production of oil, shows to me that economists have no idea how the whole system is put together. The economy is a self-organized networked system. From a mathematically point of view, there is a lack of independence, even though in the very flawed model of economists, it would be necessary for oil companies to burn oil directly in order to affect independence.
Even if the EROI of oil goes to 1:1 or below, I would not expect much oil to be burned. Natural gas is so much cheaper, it is what any reasonable company working in oil extraction would use. Oil and natural gas are generally co-produced. The cost of the natural gas at the well-head is close to zero (and with the low price, the profit they would get from selling it is probably zero). Drilling rigs in the ocean are normally operated on co-produced natural gas. This would be used instead of oil, indefinitely.
Gail, thanks for another great article. It is good to revisit the basics of Peak Oil and also to point out that Peak Oil is a valid concern and still does exist, but the outcome is opposite to what early theorists believed. Instead of persistently high oil prices and hyper inflation, we are experiencing consistently low prices and deflation. In the end, the world may end in a whimper rather than a bang. These are important points to make. Peak-Cheap-Oil is the disease and the symptom is collapse. Unfortunately, I don’t see a miracle cure on the horizon. Do you?
I wish I did see a cure. At best, we get a little kicking the can down the road, by extending and pretending on loans and perhaps some other funny business with respect to lending.
The world economy is dying in a way analogous to an old person dies–with a whimper. There are’t many folks to even attend the funeral. No point to–nothing to be accomplished by doing so.`