Economists have put together models of how an economy works, but these models were developed years ago, when the world economy was far from limits. These models may have been reasonably adequate when they were developed, but there is increasing evidence that they don’t work in an economy that is reaching limits. For example, my most recent post, “Why ‘supply and demand’ doesn’t work for oil,” showed that when the world is facing the rising cost of oil extraction, “supply and demand” doesn’t work in the expected way.
In order to figure out what really does happen, we need to consider findings from a variety of different fields, including biology, physics, systems analysis, finance, and the study of past economic collapses. Since I started studying the situation in 2005, I have had the privilege of meeting many people who work in areas related to this problem.
My own background is in mathematics and actuarial science. Actuarial projections, such as those that underlie pensions and long term care policies, are one place where historical assumptions are not likely to be accurate, if an economy is reaching limits. Because of this connection to actuarial work, I have a particular interest in the problem.
How Other Species Grow
We know that other species don’t amass wealth in the way humans do. However, the number of plants or animals of a given type can grow, at least within a range. Techniques that seem to be helpful for increasing the number of a given species include:
- Natural selection. With natural selection, all species have more offspring than needed to reproduce the parent. A species is able to continuously adapt to the changing environment because the best-adapted offspring tend to live.
- Cooperation. Individual cells within an organism cooperate in terms of the functions they perform. Cooperation also occurs among members of the same species, and among different species (symbiosis, parasites, hosts). In some cases, division of labor may occur (for example, bees, other social insects).
- Use of tools. Animals frequently use tools. Sometimes items such as rocks or logs are used directly. At other times, animals craft tools with their forepaws or beaks.
All species have specific needs of various kinds, including energy needs, water needs, mineral needs, and lack of pollution. They are in constant competition with both other members of the same species and with members of other species to meet these needs. It is individuals who can out-compete others in the resource battle that survive. In some cases, animals find hierarchical behavior helpful in the competition for resources.
There are various feedbacks that regulate the growth of a biological system. For example, a person or animal eats, and later becomes hungry. Likewise, an animal drinks, and later becomes thirsty. Over the longer term, animals have a reserve of fat for times when food is scarce, and a small reserve of water. If they are not able to eat and drink within the required timeframe, they will die. Another feedback within the system regulates overuse of resources: if any kind of animal eats all of a type of plant or animal that it requires for food, it will not have food in the future.
Energy needs are one of the limiting factors, both for individual biological members of an ecosystem, and for the overall ecosystem. Energy systems need greater power (energy use per period of time) to out-compete one another. The Maximum Power Principle by Howard Odum says that biological systems will organize to increase power whenever system constraints allow.
Another way of viewing energy needs comes from the work of Ilya Prigogine, who studied how ordered structures, such as biological systems, can develop from disorder in a thermodynamically open system. Prigogine has called these ordered structures dissipative systems. These systems can temporarily exist as long as the system is held far from equilibrium by a continual flow of energy through the system. If the flow energy disappears, the biological system will die.
Using either Odum’s or Prigogine’s view, energy of the right type is essential for the growth of an overall ecosystem as well as for the continued health of its individual members.
How Humans Separated Themselves from Other Animals
Animals generally get energy from food. It stands to reason that if an animal has a unique way of obtaining additional energy to supplement the energy it gets from food, it will have an advantage over other animals. In fact, this approach seems to have been the secret to the growth of human populations.
Human population, plus the domesticated plants and animals of humans, now dominate the globe. Humans’ path toward population growth seems to have started when early members of the species learned how to burn biomass in a controlled way. The burning of biomass had many benefits, including being able to keep warm, cook food and ward off predators. Cooking food was especially beneficial, because it allowed humans to use a wider range of foodstuffs. It also allowed bodies of humans to more easily get nutrition from food that was eaten. As a result, stomachs, jaws, and teeth could become smaller, and brains could become bigger, enabling more intelligence. The use of cooked food began long enough ago that our bodies are now adapted to the use of some cooked food.
With the use of fire to burn biomass, humans could better “win” in the competition against other species, allowing the number of humans to increase. In this way, humans could, to some extent, circumvent natural selection. From the point of the individual who could live longer, or whose children could live to maturity, this was a benefit. Unfortunately, it had at least two drawbacks:
- While animal populations tended to become increasingly adapted to a changing environment through natural selection, humans tend not to become better adapted, because of the high survival rate that results from more adequate food supplies and better healthcare. Humans might eventually find themselves becoming less well adapted: more overweight, or having more physical disabilities, or having more of a tendency toward diabetes.
- Without a natural limit to population, the quantity of resources per person tends to decline over time. For example, such a tendency tends to lead to less farmland per person. This would be a problem if techniques remained the same. Thus, rising population tends to lead to constant pressure to raise output (more food per arable acre or technological advancements that allow the economy to “do more with less”).
How Humans Have Been Able to Meet the Challenge of Rising Population Relative to Resources
Humans were able to meet the challenge of rising population by taking the techniques many animals use, as described above, and raising them to new levels. The fact that humans figured out how to burn biomass, and later would learn to harness other kinds of energy, gave humans many capabilities that other animals did not have.
- Co-operation with other humans became possible, through a variety of mechanisms (learning of language with our bigger brains, development of financial systems to facilitate trade). Even as hunter-gatherers, researchers have found that economies of scale (enabled by co-operation) allowed greater food gathering per hectare. Division of labor allowed some specialization, even in very early days (gathering, fishing, hunting).
- Humans have been able to domesticate many kinds of plants and animals. Generally, the relationship with other species is a symbiotic relationship–the animals gain the benefit of a steady food supply and protection from predators, so their population can increase. Chosen plants have little competition from “weeds,” thanks to the protection humans provide. As a result, they can flourish whether or not they would be competitive with other plants and predators in the wild.
- Humans have been able to take the idea of making and using tools to an extreme level. Humans first started by using fire to sharpen rocks. With the sharpened rocks, they could make new devices such as boats, and they could make spears to help kill animals for food. Tools could be used for planting the seeds they wanted to grow, so they did not have to live with the mixture of plants nature provided. We don’t think of roads, pipelines, and lines for transmitting electricity as tools, but as a practical matter, they also provide functions similar to those of tools. The many chemicals humans use, such as herbicides, insecticides, and antibiotics, also act in way similar to tools. The many objects that humans create to make life “better” (houses, cars, dishwashers, prepared foods, cosmetics) might in some very broad sense be considered tools as well. Some tools might be considered “capital,” when used to create additional goods and services.
- Humans created businesses and governments to enable better organization, including division of labor and hierarchical behavior. A single person can create a simple tool, just as an animal can. But there are economies of scale, such as when many devices of a particular kind can be made, or when some individuals learn specialized skills that enable them to perform particular tasks better. As mentioned previously, even in the days of hunter-gatherers, there were economies of scale, if a larger group of workers could be organized so that specialization could take place.
- Financial systems and changing systems of laws and regulations provide additional structure to the system, telling businesses and customers how much of a given product is required at a given time, and at what prices. In animals, appetite and thirst determine how important obtaining food and water are at a given point in time. Financial systems provide a somewhat similar role for an economy, but the financial system doesn’t operate within as constrained a system as hunger and thirst. As a result, the financial system can give strange signals, including prices that at times fall below the cost of extraction.
- Humans have tended to put resources of many kinds (arable land, land for homes and businesses, fresh water, mineral resources) under the control of governments. Governments then authorize particular individuals and business to use this land, under various arrangements (“ownership,” leases, or authorized temporary usage). Governments often collect taxes for use of the resources. The practice is in some ways similar to the use of territoriality by animals, but it can have the opposite result. With animals, territoriality is used to prevent crowding, and can act to prevent overuse of shared resources. With human economies, ownership or temporary use permits can lead to a government sanctioned way of depleting resources, and thus, over time, can lead to a higher cost of resource extraction.
Physicist François Roddier has described individual human economies as another type of dissipative structure, not too different from biological systems, such as plants, animals, and ecosystems. If this is true, an adequate supply of energy is absolutely essential for the growth of the world economy.
We know that there is a very close tie between energy use and the growth of the world economy. Energy consumption has recently been dropping (Figure 1), suggesting that the world is heading into recession again. The Wall Street Journal indicates that a junk bond selloff also points in the direction of a likely recession in the not-too-distant future.
Figure 1. Three year average growth rate in world energy consumption and in GDP. World energy consumption based on BP Review of World Energy, 2015 data; real GDP from USDA in 2010$.
What Goes Wrong as Economic Growth Approaches Limits?
We know that in the past, many economies have collapsed. In fact, if Roddier is correct about economies being dissipative structures, then we know that economies cannot be expected to last forever. Economies will tend to run into energy limits, and these energy limits will ultimately bring them down.
The symptoms that occur when economies run into energy limits are not intuitively obvious. The following are some of the things that generally go wrong:
Item 1. A slowdown in economic growth.
Research by Turchin and Nefedov regarding historical collapses shows that growth tended to start in an economy when a group of people discovered a new energy-related resource. For example, a piece of land might be cleared to allow more arable land, or existing arable land might be irrigated. At first, these new resources allowed economies to grow rapidly for many years. Once the population grew to match the new carrying capacity of the land, economies tended to hit a period of “stagflation” for another period, say 50 or 60 years. Eventually “collapse” occurred, typically over a period of 20 or more years.
Today’s world economy seems to be following a similar pattern. The world started using coal in quantity in the early 1800s. This helped ramp up economic growth above a baseline of less than 1% per year. A second larger ramp up in economic growth occurred about the time of World War II, as oil began to be put to greater use (Figure 2).
Figure 2. World GDP growth compared to world energy consumption growth for selected time periods since 1820. World real GDP trends for 1975 to present are based on USDA real GDP data in 2010$ for 1975 and subsequent. (Estimated by author for 2015.) GDP estimates for prior to 1975 are based on Maddison project updates as of 2013. Growth in the use of energy products is based on a combination of data from Appendix A data from Vaclav Smil’s Energy Transitions: History, Requirements and Prospects together with BP Statistical Review of World Energy 2015 for 1965 and subsequent.
Worldwide, the economic growth rate hit a high point in the 1950 to 1965 period, and since then has trended downward. Figure 2 indicates that in all periods analyzed, the increase in energy consumption accounts for the majority of economic growth.
Since 2001, when China joined the World Trade Organization, world economic growth has been supported by economic growth in China. This growth was made possible by China’s rapid growth in coal consumption (Figure 3).
Figure 3. China’s energy consumption by fuel, based on data of BP Statistical Review of World Energy 2015.
China’s growth in energy consumption, particularly coal consumption, is now slowing. Its economy is slowing at the same time, so its leadership in world economic growth is now being lost. There is no new major source of cheap energy coming online. This is a major reason why world economic growth is slowing.
Item 2. Increased use of debt, with less and less productivity of that debt in terms of increased goods and services produced.
Another finding of Turchin and Nefedov is that the use of debt tended to increase in the stagflation period. Since growth was lower in this period, it is clear that the use of debt was becoming less productive.
If we look at the world situation today, we find a similar situation. More and more debt is being used, but that debt is becoming less productive in terms of the amount of GDP being provided. In fact, this pattern of falling productivity of debt seems to have been taking place since the early 1970s, when the price of oil rose above $20 per barrel (in 2014$). It is doubtful that that economic growth can occur if the price of oil is above $20 per barrel, without debt spiraling ever upward as a percentage of GDP. It is supplemental energy that allows the economy to function. If the price of energy is too high, it becomes unaffordable, and economic growth slows.
Figure 4. Worldwide average inflation-adjusted annual growth rates in debt and GDP, for selected time periods. See author’s post on debt for explanation of methodology.
China has been using debt to fund its recent expansion. There is evidence that it, too, is encountering falling productivity of additional debt.
We mentioned that appetite controls how much an animal eats. Debt helps control demand for energy products, and in fact, for products of all kinds in the economy. Appetite is different from debt as a regulator of demand. For one thing, debt can be used for an almost unlimited number of purposes, whether or not these purposes have any real possibility of adding GDP to the economy. (This is especially true if interest rates are close to 0%, or even negative.) There are few controls on debt. Governments have discovered that in some instances, debt stimulates an economy. Because of this, governments have tended to be very liberal in encouraging growth in debt. Often, when a debtor is near default, this problem is hidden by extending the term of the loan and pretending that no problem exists.
With respect to biological organisms, energy is often stored up as fat and used later when there is a shortfall of energy. This is the opposite of the way financing for human “tools” generally works. Here financing is often obtained when a tool is put into operation, with the hope that the new tool will pay back its worth, plus interest, over the life of the tool. Much debt doesn’t even have such a purpose; sometimes it is used simply to make an expensive object easier to purchase, or to give a young person (perhaps with poor grades) an opportunity to attend college. When debt has such poor regulation, we cannot expect it to work as reliably as biological mechanisms in feeding back information regarding true “demand” through the price system.
Item 3. Increased disparity of wages; non-elite workers earning less.
Item 3 is another problem that Turchin and Nefedov encountered in reviewing economies that collapsed. One of the reasons for the increased disparity of wages is the increased need for hierarchical relationships if an economy wants to work around a shortfall in goods and services by adding new “tools”. Businesses and governments need to grow larger if they are to accommodate these more complex processes. In such a case, the natural tendency is for these organizations to become more hierarchical in nature. Also, if there is growth, followed by a temporary need to shrink back, the cutbacks are likely to come disproportionately from the lower ranks of workers, reinforcing the hierarchical structure.
Figure 5. Chart by Pavlina Tscherneva, in Reorienting Fiscal Policy, as reprinted by the Washington Post.
Funding arrangements for the new “tools” to work around shortages add to the hierarchical behavior. Typically, businesses must expand to fund the development of the new tools. This expansion may be funded by debt, or by stock programs. Regardless of which approach is used for funding, the programs tend to funnel an increasing share of the wealth of the economy to the wealthier members of the economy. This happens because interest payments and dividend payments both go disproportionately to benefit those who are already high up on the wealth hierarchy.
Furthermore, the inherent problem of fewer resources per person is not really solved, so an increasingly large share of jobs become “service” jobs, using only a small quantity of energy products, but also providing little true benefit to the economy. The wages for these jobs are thus low. The addition of these low-paid jobs to the economy further reinforces the hierarchical nature of the system.
In a sense, what is happening is that the economy as a whole is growing very little in output of goods and services. An ever-larger share of the output is going to the wealthier members of the economy, because of increased hierarchical behavior and because of growth in debt and dividend payments. Non-elite members of the economy find their wages falling in inflation adjusted terms, because, in a sense, the productivity of their labor as leveraged by a falling amount of energy resources is gradually contracting, rather than increasing. It becomes increasingly difficult for the low-paid members of the economy to “pay the wages” of the high-paid members of the economy, so overall demand for goods and services tends to contract. As a result, the increasingly hierarchical behavior of the economy pushes the economy even more toward contraction.
Item 4. Increased difficulty in obtaining adequate funding for government programs.
Governments operate on the surpluses of an economy. As an economy finds itself in a squeeze (job loss, more workers with lower wages, fewer goods and services being produced), governments find themselves increasingly called upon to deal with these problems. Governments may need larger armies to try to obtain resources elsewhere, or they may be needed to build a public works project (like a dam, to get more water and hydroelectric power), or they may need to make transfer payments to displaced workers. Here again, Turchin and Nefedov found governmental funding to be one of the problems of economies reaching limits.
Energy products are unique in that their value to society can be quite different from their cost of extraction. A third value, which may be different from either of the first two values, is the selling price of the energy product. When the cost of producing energy products is low, the wide difference between the value to society and the cost of extraction can be used to fund government programs and to raise the wages of workers. In fact, this difference seems to be a primary reason why economic growth occurs. (This difference is not recognized by most economists.)
As the cost of extraction of energy products rises, the difference between the value to society and the cost of extraction falls, because the value to society is pretty close to fixed (except for changes taking place because of energy efficiency changes), based on how far a barrel of oil can move a truck or how many British thermal units of energy it can provide. As the cost of energy extraction rises, it becomes increasingly difficult to obtain enough tax revenue, either from taxing energy products directly, or from taxing wages. Wages tend to reflect the energy consumption required to support each job because supplemental energy acts to leverage the abilities of workers, and thus improves their productivity.
Energy selling prices may behave in a strange manner, as an economy increasingly reaches limits. Falling prices redistribute what gain is available, so that energy importers get more, while energy exporters get less. Of course, the problem we are now seeing is that oil exporting countries are having difficulty obtaining sufficient revenue for their programs.
Debt is different this time
This time truly is different. We should have learned from past experience that debt tends not to be very permanent; it often defaults. We should therefore expect huge periods of debt defaults, and we should expect to need frequent debt jubilees. Economist Michael Hudson reports that the structure of debt was very different in the past (Killing the Host or excerpt). In early times, he found that by far the major creditors were the temples and palaces of Bronze Age Mesopotamia, not private individuals acting on their own. Because of the top-down nature of the debt, it was easy for the temples and palaces to forgive debt and restore balance to the social structure.
Now, especially since World War II, there is a new belief in the permanency of debt, and about its suitability for funding insurance companies, banks, and pension plans. The rise in economic growth after World War II was important in this new belief in permanency, because without economic growth, it is extremely difficult to pay back debt with interest, unless debt is used for a truly productive purpose. (See also Figures 2 and 4, above)
Figure 6. Ngram showing frequency of words over a period of years, by Google searches of a large number of books. Words searched from top to bottom are “economic growth, IRA, financial services, MBA, and pension plans.”
The Ngram chart above, showing the frequency of word searches for “economic growth, IRA (Individual Retirement Accounts), financial services, MBA (Master of Business Administration), and pension plans” indicates that economic growth was essentially a new concept after World War II. Once it became clear that the economy could grow, financial services began to grow, as did the training of MBAs. Pension plans grew at first, but once companies with pension programs found that it was difficult to keep them adequately funded, there was a shift to IRAs. With IRAs, employees are expected to fund their own retirements, generally using a combination of stock and debt purchases.
Now that debt is “reused” and integrated into the economy, it becomes much more difficult to forgive. We have a situation where insurance companies, banks, and pension plans are all tied together. They all depend on the current economic growth paradigm, including use of debt with interest, continued dividend plans, and rising stock market prices. We have a major problem if widespread debt defaults start.
Demographic Bubble
The other problem we are up against, making government funding even more difficult than it would otherwise be, is the retirement of the baby boomers, born soon after World War II. This by itself would be a problem for maintaining adequate government funding. When it is added to multiple other problems, including bailing out banks, insurance companies, and pension plans if there are debt defaults, the demographic bubble leaves us in much worse shape than economies that reached limits in the past.
Note that High Energy Prices Are Not on the List of Expected Problems
The idea that as we approach limits, we should expect ever-higher energy prices, is simply not true. It should be viewed as a superstition, or as an erroneous understanding of our current situation, based on a poor model of energy supply and demand. Turchin and Nefedov found evidence of spiking food prices, perhaps similar to the spiking we saw in energy prices as we approached the peak in prices in 2008. But with wages of non-elite workers falling too low, especially on an after-tax basis, it was hard for prices to continue to spike.
The idea that collapse can come from low prices, rather than high, is something that is not obvious, unless a person thinks through the situation carefully. Prices seem to be primarily influenced by two factors:
(1) Wages of non-elite workers. These wages are important because there is such a large number of them. If their wages are high enough, they buy homes, cars, and other products that are big users of commodities, both when they are made, and as they are operated.
(2) Increases or decreases in the amount of debt outstanding. If debt defaults start to rise, it is very easy for growth in the quantity of debt outstanding to slow, or even to fall. In such a case, low commodity prices, rather than high, become a problem. As economic growth slows, we should expect more debt defaults, not fewer. There is also a limit to how high Debt/GDP ratios can rise before many suspect that the world economy functions much like a Ponzi Scheme.
Mark Twain wrote, “It ain’t what you know that gets you in trouble. It’s what you know for sure, that just ain’t so.” This is especially a problem for academic researchers who depend on the precedents of past academic papers. A researcher may have come to a conclusion years ago, based on a narrow set of research that didn’t cover today’s conditions. The belief can get carried forward endlessly, even though it isn’t really true in today’s situation.
If we are going to figure out the real answer to how the economy operates, we need to look closely at indications from many areas of research. Such an approach can allow us to see the situation in a broader context and thus “weed out” firmly held beliefs that aren’t really true.
Glencore Plans Bigger Debt Reduction as Commodity Prices Slide
http://www.bloomberg.com/news/articles/2015-12-10/glencore-says-to-accelerate-cuts-to-debt-capital-expenditure
Interpretation: We are getting really desperate.
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http://www.zerohedge.com/news/2015-12-09/glencore-cds-are-soaring-again-default-risk-rises-above-50
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/12/GLEN%20CDS%20wides.jpg
Maybe we should start taking bets on the date when they will file for bankruptcy. Perhaps January or February?
I think we are entering a more dangerous phase of this crisis — problems are accelerating … and we are seeing no response from the central banks…
We need to see some sort of macro policy that works like QE — that lifts all ships…
One has to wonder if they are out of options to push this much further out… It’s almost as if we are just waiting for the first domino now….
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Thank you for, once again, “connecting the dots” in a multi-disciplinary way that few others seem to be looking at.
Because my time is limited and the demands of me are many, I’m not subscribing to commentary, but please know that I do read your stuff, and pass it on to others.
In particular, many people don’t understand how both low prices and high prices are “a problem.” You give me the words to use when I would fall back on my own intuition instead.
Thanks for writing. We hadn’t seen you around for a while. Glad to hear you are OK.
Gail, could we think about making a model that *did* model the situation correctly? It would be enormously complex, but not as impossible as one thinks.
There is a pair of math professors from James Madison who developed a way of solving large systems of equations (differential and otherwise) for population dynamics modeling: Ed Parker and Jim Sochacki. This development was probably the fourth time it happened, but this time it got published. The modelling method is called the Parker-Sochacki solution to the picard iteration.
http://arxiv.org/ftp/arxiv/papers/1007/1007.1677.pdf
My thought is that if one pursued setting up equations to model the system as well as possible, and then finding the failures, and modifying the equation sets according to what seemed to cause the failure, then it might be possible to figure out where we’re headed with ever increasing accuracy.
Thanks for your suggestion.
I don’t think we (or at least I) know enough about the system to set up the equations with the accuracy to do this. How the system generally works is, in a sense, obvious. How soon banks start failing, and what regulators will do to prevent banks from failing is less obvious. It is hard to model regulators’ behavior.
You also need real data (how much oil is there in Saudi Arabia), and it generally is not available to the unwashed, and it is certainly not available if you want to do science. It brings to mind the singularitarians …
So, one day perhaps soon, there is a great big computer built, and it is connected to the internet, and started with full AI running. The Kurzweil crowd would have it design a bunch of robots, and explain exactly how to build a utopia.
What if it says, “Gail was right.”
Michael, I am a big fan of computer modeling. I hope someone does this. It is a lot of work. Trying to figure out the components of an entire human civilization is a huge amount of work. What I hope a model can give is information on the time scale. Gail is right once the model goes out of bounds there is no telling what government might do.
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Systems change! If systems did not change, we would all be speaking Latin, or using the British pound, or fighting the Soviets, etc. etc.
When systems change, you cannot use the assumptions of the current system (dollar pricing of everything, American empire, growth, etc.) to understand the next system.
Gail’s analysis is spot on, but it is still within the confines of the current system. If you continue to look at it in this way, you will think “the sky is falling” without understanding the means by which the next system actually starts to form.
Ask yourself a question:
1) Is oil valuable?
If the answer to that question is yes, then there are two assumptions which you can immediately make:
1) it will continue to be produced
2) it will be traded in some form
Guaranteed. Doesn’t matter what the dollar price is, or even if it’s priced in dollars, or what rate it is produced at. Oil production will not be shut in. By definition resources in the ground have no realized value, only potential value. For the potential value to materialize, they have to be extracted and used.
Therefore, all that is needed is how to settle the remaining debt claims, which represent multiple claims on a finite amount of physical wealth, both above and below ground. Settling debt claims is not painless, but the mechanism is known:
1) pay down the debt
2) default on the debt
3) inflate away the debt
Alright. Number one is unlikely except in a few limited circumstanced. Number two is likelier, but painful. Number three is easiest, since it spreads the pain across the most number of people.
In fact, number three is so easy, that it represents the chosen path of every single imperial/systemic implosion in all of recorded history.
So if you understand the above, you can begin to make educated guesses about what the next system looks like, and the transition is already underway. Is it relevant? Of course, because everyone here, and our children, will witness the transition, though perhaps only our grandchildren will live to see the coalescing of the next system.
much wisdom here
Don Stewart
When previously has debt been “inflated away”?
What has “oil will be continued to be produced” got to do with anything?
Do you not understand we are at peak oil since 2005. Oil “continued to be produced” has not prevented anything. What is the use of producing oil if it cannot be sold. There is an inflection point of too high for consumers and too low for producers. We are at that now.
Your “different system” contention is without any basis in reality. A new system can’t change the systemic problem of over population, declining EROI, resource depletion and environmental destruction. Communism, socialism, capitalism, mixed, gift, barter you name it or dream it up, they all have to deal with the inherent problems we are suffering from right now.
Ask yourself a question:
1) Is oil valuable?
If it takes as much or more energy to find, extract and refine the oil — and to cover exploration costs… taxes… and pay a dividend…. then it is worthless.
Oil is not like a diamond or a Renoir painting … it is not like a Gucci bag….
The only reason we bother to extract is because we get enough nett energy out the other end for it to make sense to extract it.
So no — oil at the current break even point of over $100/barrel is no longer of much value.
It’s why the oil age is on its last legs.
When BAU collapses that does not magically change the situation so that oil suddenly becomes a valuable commodity.
Analogy time:
Curiosity is bumping along over the surface of Mars…. and it suddenly — let’s say tomorrow — it arrives at what appears to be an ocean 1000x larger than the Pacific Ocean…. it sticks a probe into the liquid and rips a packet of data through space to mission control…. mission control determines that the ocean has the following structure:
http://3.bp.blogspot.com/-K5GcSkeQ0Fc/VRgzfvsk3jI/AAAAAAAAADA/zMbjcLQ31M8/s1600/image006.gif
Should Gail shut her blog down when CNN reports this discovery? Yes – No.
It would truly be a great and profound discovery, for Martians.
Next step for them would be to find the oxygen, to burn all that…
No problem Stef, we could send some to them… if we save enough trees
Yes Christian,
but the Martians should first try to convince us that we should stop destroying our real capital like mad.
Good luck to them!
From an article last August by Mac10 of PonziWorld:
“The majors have a potential capital spend of $548 billion (328 billion pounds) over the period 2014-2025 on projects that require a market price of $95/barrel,” CTI said, adding that $357 billion of this is earmarked for as yet undeveloped, high-cost ventures. (Cancellation or deferral) is becoming increasingly necessary as near term cash flows are not sufficient to maintain both dividends and capital expenditure plans.”
Low Prices = $95 per barrel? DONE. The remaining oil may as well be on Mars…
http://ponziworld.blogspot.co.uk/2014/03/the-devils-pitchfork-globalization-peak.html
Incredible.
How do these companies remain solvent? Come to think of it — how does Glencore remain solvent?
I am still struggling to understand how Anglo American can slash 85,000 jobs and sell off assets into a plunging commodities market — and remain in business?
They are carrying nett debt of 13.5 billion dollars…. http://www.angloamerican.com/investors/financial-results-centre
If you sell off most of your business in a fire sale — the debt does not disappear — how do you pay that down/service what remains of it….
None of this makes sense. The central banks have to be standing behind these businesses….
http://www.macrobusiness.com.au/wp-content/uploads/2012/12/Leak.jpg
Liquidation…
Selling off assets does give cash flow for a while.
Ya I guess even if you fire sale an asset it allows you to make the payments for a few more months…
Given the stakes and ‘whatever it takes’ I suspect the central banks are helping out…
Surely Glencore and Noble Group (and others) should have been junked by now —- if the central banks can change the mark to market accounting rules — they can most definitely order the ratings agencies not to downgrade such companies…
As they should. We are well past the point of playing by any rules….
It doesn’t take those folks in the middle east $100 to get it out of the ground. They can get it out of the ground for around $15 to $30. They want $100 to run their overpopulated regions but they ain’t gonna get it. And people wonder why the major powers are all converging on the middle east.
As you say, Middle Eastern governments need $100 p/b if they are going to continue pacifying their turbulent populaces… I see in the news today that ConocoPhillips and Chevron are both slashing their capex by roughly a quarter for 2016.
http://www.wsj.com/articles/chevron-to-reduce-capital-spending-by-24-next-year-1449703982
Even if the financial system by some miracle holds together we are looking at a whopping oil supply crunch a few years hence.
If oil companies are not growing their reserves it is game over….
I am left wondering how the oil industry is not completely imploding…. given what is at stake and the comment ‘whatever it takes’ —- might I suggest that the central banks are involved in keeping these companies alive….
The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth. http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/
Think of the actual costs involved in making a coffee cup in China…. maybe 20 cents?
Can you buy a coffee cup for 10 cents?
And the sale price of a coffee cup does not need to reflect the hundreds of billions of dollars of welfare payments to the citizens of your country to keep them from tearing your head off…
To Stave Off Arab Spring Revolts, Saudi Arabia and Fellow Gulf Countries Spend $150 Billion
http://knowledge.wharton.upenn.edu/article/to-stave-off-arab-spring-revolts-saudi-arabia-and-fellow-gulf-countries-spend-150-billion/
http://www.zerohedge.com/news/2015-12-09/imf-just-entered-cold-war-forgives-ukraines-debt-russia
Or 4) Forgive the debt, just as the IMF just did as explained in the article above whisking away Ukraine’s debt to Russia.
Zip, zingo, fast as a flash, something that seemed like an impending disaster transitions into ‘No Problemo!’ Dolph911 is right, systems change. Humankind is great at changing the rules and in a sense we can think of the entire global economy as a shape shifting set of rules. They get changed as need arises to keep things going. That idea is not much different than a person changing strategies during their life. With humans nothing is set in concrete. Look at what happened in 09. On the surface it might have initially seemed like collapse was imminent, but even in that case rules changed, payoffs occurred, money borrowed & printed, special programs, hands greased, backroom deals, white collar crimes forgiven, whatever was needed from day to day to rectify the situation and here we are 6 years later. Trying to pin humankind down to a system with a set of rules is like trying to hold a greased ball bearing with the tip of a pin. It keeps moving just as our system keep changing as needed.
Who says it’s no problem.
What if Russia responds with ‘You don’t want to pay us for the energy we delivered — then we’ll shut off the tap – see how you like winter without heat’
http://cdn3.spiegel.de/images/image-643172-galleryV9-sxlv-643172.jpg
You’re wasting your breath…pollyannas like him are a dime a dozen, and they all seem to sing from the same hymnbook, have you noticed? Whatever is topical or threatens to expose the whole rotten system, or needs hosing down to pacify the situation in the minds of the unknowing, or undecided, it’s their job to muddy the waters. That’s how BAU thrives, so the bagman can take off with the loot, until the day the light switch stops working. Then, pollyannas, bagmen and doomers alike will be eating the same rat meat.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Its actually not that bad, rat meat. You will learn to like it just as I have. The alternative is even less savory.
I’ve eaten dog meat — in Sulawesi …
I’ve probably had rat meat at some point without knowing … likely passed off as chicken….
Then there is the Filippino delicacy known as balut — taken with a touch of vinegar…. I’ve never been able to bring myself to try it – they say it improves virility….
https://en.wikipedia.org/wiki/Balut_%28food%29
http://kyspeaks.com/photos3/balut_from_philippines.jpg
Looking forward to it! 😉
Hm, sorry to pierce your bubble, but in the mid term, western Ukraine is going back mostly under Polish and perhaps partly even Hungarian rule, center might remain for some time an enclave of psychos, and the east goes to Russia. And in the long term Russia gets at least 2/3 of the Ukraine back anyways. So, there are now active external stakeholders who will support at least some “minimal pulse” standards in Ukraine, and afterwhile it will be just parcled directly out to “new” owners. Perhaps you should instead of doomerism look at the map and scout for some good plots of land to be acquired. It’s open game now, US-NATO-EU claims it’s no longer bound by the results of WWII (which was in fact WWI ver2.0)? Do you really understand what that declaration means in practice?
I haven’t the slightest clue what you are trying to say.
As for my doomerism — if you don’t like it — then why are you on this site — because in case you hadn’t noticed — every article on this site is dedicated to Mr Doom.
Perhaps Peak Prosperity.com would put you in touch with like-minded people….
Translation for the “special one” here, it was informative reply to your previous shouting how Russia (or any powerbroker in the region) is going to let Ukraine freeze in the winter.
Please consider the topics you can talk about at least with basic credibility..
Russia’s Gazprom Cuts Off Gas Supplies to Ukraine
Russia’s state-controlled gas company is halting supplies to Ukraine, its chief executive said Wednesday, less than two months after the two countries struck an EU-sponsored deal.
Gazprom’s CEO Alexei Miller said Russia sent the last shipment to Ukraine at 10 a.m. local time on Wednesday and send no more because Ukraine has not paid in advance for future supplies.
Russia resumed gas shipments to Ukraine less than two months ago after the two countries signed an EU-brokered deal ensuring supplies through March.
http://www.nbcnews.com/news/world/russias-gazprom-cuts-gas-supplies-ukraine-n469351
Now I wonder what Russia will do if the Elders try to enforce their decision to allow Ukraine off the hook for non USD denominated debt.
Also worth noting:
http://www.lngworldnews.com/wp-content/uploads/2014/01/Gazprom-Export-Sets-Record-in-2013-Gas-Deliveries1.jpg
I am not sure about color images. I know that color photos have had a lot of problem fading. I suppose if I converted images to black and white, this would be less of a problem. The new technology is not necessarily as robust, besides being awfully expensive (when printed on paper).
Only works in top down situations. Doesn’t work when the creditor is your mother’s pension fund.
Spot on, the overfocusing on the past legacy leg of history seems to blindfolding some people. In fact there are several path forwards coming into view (not exclusively listed and not in any probability order):
Option one: World simply abandons the US/western system, it’s not needed when all the technologies, manuf. base, capital have already moved to wider-Asia, this new system can run on the remaining in situ resources (oil, natgas, coal, uranium, african-russian soil) of China, Russia, Iran-Iraq, perhaps rest of the Gulfies can switch alliance as well. Most part of the US and EU desintegrates and falls into poverty, some of their city states and block of countries soldier on and slowly start to cooperate/integrate with the new hegemon/power center.
Option two: World muddles through along the current path, i.e. increasingly crazier patching efforts allow securing upto 2-3more decades before radical snap into new impoverished and regionalized normal, there are no relative winners at all.
Option three: FE/Gail’s world just stops on a dime for financial freezeout, end of history.
Option four: some form of black swan event – fast devastation takes place be it partial or full scale thermo/nuclear/bio war, severe climate wierdness like snap into ice age within a decade etc.
And many others..
It´s going to be a really really bad Q1 for shale. The reckoning is coming in the next few months, when the companies report 2015 figures.
Billions of Barrels of Oil Vanish in a Puff of Accounting Smoke. In an instant, Chesapeake Energy Corp. will erase the equivalent of 1.1 billion barrels of oil from its books. http://www.bloomberg.com/news/articles/2015-12-10/billions-of-barrels-of-oil-vanish-in-a-puff-of-accounting-smoke
Not good, not good at all.
“It´s going to be a really really bad Q1 for shale.”
True enough Van Kent. The oil market share war being waged will definitely force chapter 11 or 13 on many companies involved in US shale due to low oil price. In fact, 18 have already filed. That’s business. Some make it some don’t, but there are always those willing, able and ready to jump back in when profits beckon and they will later when the glut gets used up, and price rises again. The oil business has had many cycles of boom and bust, with the latest being just another one. For example my stepbrother lost his job out of Oxnard in the 80’s due to low oil price, and although many workers were laid off and businesses filed for bankruptcy protection, other companies took their place later. Greed has a way of always quickly bringing in new personnel and excitement for those seeking the mighty greenback.
I agree. I think that there are still people around who don’t realize that it is both the amount of reserves and the $ amount per barrel that are reduced, so that the cut-back in debt amount permitted drops greatly.
So:
Option one: is a political solution to a problem that no one here has ever claimed is a political problem. The sillyness becomes manifest with the statement, “… new system can run on the remaining in situ resources (oil, natgas, coal, uranium, african-russian soil)”. If those resources were available, there would be no crisis, and no need for a any change. So, option one will not happen.
Option two: Show us why and how there are several years left, much less decades.
Option three: Condescending much?
Option four: Yes, finally something that is different. There are black swans and there is climate weirdness. In fact, it would not surprise me to see a methane clathrate eruption of 20 – 100 gigatonnes next summer. But that doesn’t support Mr. Greers thesis does it?
To be a true disciple of the slow collapse theory, you have to imagine a way to support BAU for a long time, many decades. Mr. Greer does not need to provide any plausible mechanism to do that because he never ventures outside his little kingdom. Since you are here, shouldn’t you provide at least some evidence to support your ideas?
“To be a true disciple of the slow collapse theory, you have to imagine a way to support BAU for a long time, many decades”
The only people who think of BAU for decades believe we will be saved, by either renewables, thorium, fusion, breeder reactors, cold fusion, etc.
The only plausible solution I see is collapse in stages. First is financial, with bank holiday, like September / October 2008 but bigger. Afterwards, rapid general decline.
Next leg down, probably rationing and price controls, with long lines for fuel, or it is masked creatively, the way Wal-Mart hides away what would otherwise be bread lines much longer than in the Great Depression. At that point, US etc is down to consuming half as much oil and coal.
Depending on how they manage it, that stage could last years or decades, before the inevitable full on martial law, travel restrictions, curfews, etc. Again, depending on how they handle it, could last only months or could last decades. At that point, maybe 25% energy consumption compared to today.
Matthew, in your initial phase of financial collapse how do we work around the fact that we don´t have international trade, long distance trade, a currency, a government, workplaces to go to, products, services or food to consume?
Sorry, you lost me at the first stage.
To have some sort of command economy and stages of lower complexity we would need a strong central authority that divides available property, resources and labour. Do we have such competence anywhere? Remember economists are useless and so are your basic managers, directors, industrialists, bureaucrats and politicians. Without a strong central authority that can make WWII type of; cars one week the following week tanks and airplanes, turnaround. And finally, all work requires capital of some sort, where would a strong central authority get the capital without a currency?
Korowicz has done a stellar job in explaining what you have posted in much more detail…
Yet people continue to insist there can be BAU lite. They will just ignore reality. They will ignore the facts.
Because acknowledging the facts leaves them in deep despair — if not for themselves then for their offspring.
It is understandable that people do not want to acknowledge their children and grandchildren starving to death….
“Matthew, in your initial phase of financial collapse how do we work around the fact that we don´t have international trade, long distance trade, a currency, a government, workplaces to go to, products, services or food to consume?”
That is your assumption. I am confident that at the next financial crisis moment, governments will take some action and prevent full collapse. Trade will go down, but there will still be the globalization supply chain. I don’t expect that to go away until the third leg down. The final leg is chaos, no more grid, no more oil production and refining.
what Don said.
what Steven said.
I would be interested in what you think happens to banks, insurance companies and pension plans, in this whole process.
Also, oil is not valuable, unless it is part of a system that can use oil. We are increasingly finding that we cannot maintain the whole system needed to extract and use oil. In particular, wages of non-elite workers are dropping too much to afford goods like houses and cars that use oil. Thus, oil is losing its usefulness. This is why prices are falling.
Gail, this seems to be a rhetorical question to remind us of what we already know. The banks and insurance companies will go bankrupt. The pensions will not be honored. The only pension in town will be federal government social security or none at all.
Social Security will only be as much as the economy then can afford–which may not be a lot.
This was a very powerful article. It’s a great privilege to have this blog to come to…where we can improve our understanding of the global situation, and even struggle to clarify sticking points.
“When debt has such poor regulation, we cannot expect it to work as reliably as biological mechanisms in feeding back information regarding true “demand” through the price system.”
Responsible government would therefore do a better (more dictatorial) job of regulating debt? Use it for emergencies and not luxuries?
“(T)he increasingly hierarchical behavior of the economy pushes the economy even more toward contraction.”
Responsible government would tax the rich, and pay the poor, more?
I think everyone is starting to understand. We use government to do the things that markets cannot. I believe most do not want chaos. Misery breeds more misery. thus we need to use government to alleviate misery, and for as long as possible, to keep us above chaos. Thus essentials such as food and healthcare, water, management of the public trust resources should be job 1 of government. If you have a moon shot or other new idea that nominally ranks as non essential, then submit your idea to the wizards at the unseen university over in Disc World, negotiate your price and see what sticks. Otherwise join the convivium to discover new avenues in need of exploration. Necessity is the mother of invention and we will be in sore need until we find the new equilibrium.
Makes sense to me. Could that entail a three step process?
1) Regulate BAU better, using the relative plenty to preclude the need for cars, etc
2) Regulate the new society of scarcity to supply your (minimal) basics to all
3) Evolve toward a new equilibrium.
That makes so much sense that it is sure to be shot down by those who need to keep the fear level at maximum.
Regulation is a dirty word, just like taxes. When IT companies or Tesla and others charge incredible prices for their products we don’t mind paying even though their riduculous margins are little more than a tax supporting further R&D for successive prototypes for which we will pay more R&D taxes and so on infinitum.
We hate seeing depletion and over-reach, but dare we ask that such waste of the public trust be regulated?
Increasing population density necessitates regulation. It is a territorial response. More are being asked to share less or the same resources. I submit that the culture of entitlement in the US is more about maintaining upper class lifestyles and acoutrements than about food stamps for working families. The guaranteed minimum you refer too is no longer about free riders – it is about maintaining the illusion that their is a labor market. We need people participating in the work force even if it does not pencil out, otherwise corporate margins (private taxation that supports upper class free riders) will not be met.
It grows or dies. There is no in-between fairy land….
It dies. The question is whether the kids are at the bedside, or who gets the will. You help by making the choices clearer.
Thanks. I reread this and it came across clearer the second time. 🙂
Communist governments historically have not used as much debt. They also have tried to make everyone more equal. Such a system tends to leave resources in the ground longer. In a sense, they have been more responsible. That is why we still have some Russian and Chinese resources to use now. The rest of the world has benefitted from their thrift.
Outside communist countries, once governments figured out that they could use debt to grow the economy, they have been using it as fast as they can for that purpose.
I was just reading an article about green energy, and its problem with a need for more advanced funding than fossil fuels http://ftalphaville.ft.com/2015/12/03/2146411/financial-engineering-to-save-the-planet/ Now the talk is about “financial engineering” so that green companies can “reuse” the capital for new green projects, before the existing project is paid for. This is recycling of debt “on steroids.” This way, a country’s debt/GDP ratio can be pumped up even higher, if lots of green energy is used. I am sure some think this is what governments should be doing, to help the environment.
This is profound. Debt infers a promise to repay, usually with interest. Use debt to build a Green infrastructural. If this does not produce enough money to repay the debt so what, you have the infrastructure you wanted and someone else funded it. Genius.
That reminds me of the concept of “Energy Cannibalism” such as explained in this paper by JM Pearce (& taken up in France by Benoît Thévard):
“Energy cannibalism refers to an effect where rapid growth of an entire energy producing (or conserving) technology industry creates a need for energy that uses (or cannibalizes) the energy of existing power plants or devices. For the deployment of renewable energy and energy efficiency technologies to grow while remaining net greenhouse gas emission mitigators, they must grow at a rate slower than the inverse of their energy payback time. This constraint exposes a current market failure that significantly undervalues the physical reality of embodied energy in products or processes deployed to mitigate GHG emissions and indicates potential solutions.”
http://www.mse.mtu.edu/~pearce/papers/2009%20Canada%20Climate%20Conf.pdf
For example, if the calculated payback time of a given technology is 8 years, the growth rate of this technology shouldn’t exceed 1/8 = 12.5%.
The techonology is an energy sink as long as its growth rate remains above this value.
NB: the concept is derived from EROEI calculations, and is therefore subject to all the flaws and missing parts inherent to EROEI. It nevertheless has the virtue of quickly giving a rough idea, and of taking into account the embodied energy (often forgotten in discussions about ‘green’ stuff). One should also consider that in this calculation there’s no net energy left for society, as all of it is reinvested in the production of new devices.
We immediately see that with this ‘recycling of debt’, the result is burning much more fossil fuels than otherwise necessary (and delaying as much the -hypothetical- break even date).
Even worse, if we consider that real payback time of say PV panels is around 25 years, which means that the max growth rate of their production should be 4% p.a.
The way I see the issue, this has to do with the fact that the world acts on an energy flow basis. (We eat food of the current year, etc.) Renewables have a favorable energy return if viewed on a “model” basis, but not on an energy flow basis, unless the growth rate is very low. With rapid growth, they just suck up more and more resources, each year. (Also, add more and more debt, to our debt-overloaded economy.)
http://www.zerohedge.com/news/2015-12-09/credit-card-data-reveals-first-core-retail-sales-decline-recession
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/12/nominal%20retail%20sales%20card_0.jpg
It becomes hard to compare numbers, when we are used to inflation and now have deflation. Of course, we need inflation for the debt-based system to work correctly.
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Dear Finite Worlders
There is always speculation about what might happen if governments collapsed. For a very light-hearted version, you might like to read two articles. First is an obituary for an elderly resident of Ponca City, OK, who was born in Balko OK 99 years ago:
http://www.poncacitynews.com/obits/Anna-Katherine-Wilson
Balko is now unincorporated with a population around 600. It has a truck stop selling untaxed diesel fuel, a post office, and a diner.
However, just before the elderly woman from Ponca City was born, Balko had been Beer City, serving the illicit needs of people from the puritan state of Kansas (you may remember Carrie Nation).
http://ndepth.newsok.com/beer-city
Please note that moderate extortion works, at least for a while. But painful extortion tends to get you filled with lead from many guns, and nobody is ever prosecuted for your death.
Don Stewart
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Folks at peakoildrum.com making fun of “permabears” Gail and TAE..
http://peakoilbarrel.com/eia-says-shale-continues-to-decline/
Life is cruel and some sort of fiat goosed plateau or even smallish market upturn before really visible and serious crude+natgas supply drop likely around 2025 would make many people scratch their heads here. The early peakers missed the global peak and its effects by two decades, sure nothing to brag about in historical cycles, however that can’t be said about lifespan on an individual.
One of the better comments out there:
http://peakoilbarrel.com/eia-says-shale-continues-to-decline/comment-page-1/#comment-549987
oldfarmermac says:
12/09/2015 at 12:07 am
Individuals and and industries buy the things that are essential to short term survival no matter the price . You buy groceries even if you quit making the house payment. You feel starvation after twelve hours but eviction takes weeks to months.
We can definitely adapt to using less oil.
But WILL we adapt faster than LEGACY oil production depletes ? This is the sixty four dollar question, because new production sufficient to replace legacy production will not materialize at current prices.
Price wars always come to an end when somebody runs out of cash and credit and has to say uncle.
Legacy production that is yielding cash will still come to market even if it is losing money over all, but new production will not, once the industry has time to adjust.
I personally do not think the world wide economy IS going downhill faster than legacy oil production, or that it WILL go downhill faster than legacy oil production anytime SOON. I don’t think we WILL adapt to more expensive oil FASTER than legacy production declines, although it is probably technically possible that we COULD do so.
Somebody will pay for the production of every last new barrel that IS produced. It will not be produced at a loss, except by miscalculation on the part of oil company management.
IS the economy going downhill faster than legacy oil production?
I just don’t see it.
Oil will go up, because the world must have it and CAN afford to pay more for it, and the ONLY way it will be produced is at a profit.
Arguing about subsidies keeping prices down is a bullshit waste of time. A subsidy is a welfare benefit, no more and no less. It can be paid directly to a producer, or paid by the end user with welfare money. Same thing.
If the profit comes in the form of a forty dollar subsidy on top of a forty dollar ” price” , the REAL price is still eighty bucks.
The industry, except for tight oil, moves like molasses in January, and it will take a while to scale back and sell out the large stock on hand, but the industry IS scaling back. I guess it will take a year or two , but oil is going up again, barring the world wide economy crashing HARD within that same year or two.
Hopefully Stilgar Wilcox and Javier can find their doses of hopium.
As for market manipulation someone over there mentioned, its happening and its huge, there is no such thing as a free market anymore, there are gold silver and commodities futures that are massive (silver futures larger than silver that can be delivered) such deals don´t make any sense.. And as for the bondmarket manipulation, we still don´t know who the mystery buyer from Belgium is. The markets are currently manipulated every possible way, sadly it doesn’t make a difference.
Despite unprecedented market manipulation, Enron style corporate profit margin manipulation doesn´t last long. So, the real world comes knocking anyway.
It´s not a matter of theory, opinion or lack of imagination, we need large, fat, corporate profits and we need them fast. And unless we get some fat cows to milk profits from, its SHTF.
And since we have real world constraints on profits, we are fast approaching the last phases of this ponzi scheme. Its big fat profits or SHTF, sorry.
“Hopefully Stilgar Wilcox and Javier can find their doses of hopium.”
Not sure how I got slotted in there with Javier, because we don’t often agree, and not sure what doses of hopium I need. Some economic indicators simply show we may be headed into a recession. That’s happened before and doesn’t mean collapse is imminent.
Right now China has had to back off of the rampant expansion via construction they were hell bent on, and the result has been a lot of commodity manufacturers are in the painful process of scaling back. From what I can gather it’s just the usual economic ebb and flow process.
I really don’t know how some people do it here on this site, i.e. perched on a razor’s edge of imminent and expectant economic calamity. I imagine that would be a rather stressful state to maintain. After watching this situation unfold since 05 with full knowledge of peak oil, what continues to strike me is how things just keep on going and really don’t seem much different than 5, 10 years ago.
I think something that did the ‘peak oil watch’ a disfavor was the 08//09 mortgage meltdown, because many blame high oil prices for what occurred, when in reality it was plain old corruption leading to a super hot real estate market, that in turn heated up the entire global economy from A-Z. When it went red hot and then water got doused on the flames of greed, all hell started to break loose, but instead of full collapse, enough taxpayer borrowed money thrown at the super fat cats kicked the can down the road a bunch more miles.
I caution against a state of mind palpitating with every tick of the clock like something huge is soon to happen. This process of peak oil is longer than most on the message boards ever thought and that really shouldn’t be a surprise due to the fact it took 150 years of the oil age to get here, so it just goes to figure it will take some more time to fall apart. Go about your lives like it’s never going to happen and if it does, well then it’s out of your control anyway, so roll with the punches at that point. But don’t miss out on a regular life while you can enjoy the experience.
There will be a lot of 18 month oil futures contracts expiring in January, February and March. Expect a default tsunami of unconventional oil by April and May. Wall Street and London including Deutsche Bank will be taking serious hits and their ability to invest in emerging markets will diminish seriously by August. Emerging market default tsunami by the end of the year.
Yup, agreed, nothing huge, just the end of BAU. Relax, everything is firmly out of control and enjoy the experience.
Will 2016 go down as Year Zero….
https://en.wikipedia.org/wiki/Year_Zero_%28political_notion%29
http://41.media.tumblr.com/fdb89d4cb0cf6af84cd7036e7eaca21c/tumblr_n383mkuQlf1rwjpnyo4_1280.jpg
Sorry, End of the World betting is not currently available. http://www.sportsbet.com.au/betting/novelty-bets/end-of-the-world
Perhaps so. Perhaps you could make some money setting up betting on the subject.
Wait and see Van Kent, you’ll see those short term time periods will pass with zero fanfare, BAU in tact.
I’d like to think that…
However we just had one of the biggest mining companies on the planet implode…. with more to come….
QE ZIRP was effectively a macro bail out of the global economy… and now it’s pushing on a string…
I wonder if we are here… I hope not….
http://1.bp.blogspot.com/-rjSdqKeM72g/TawISEmCbUI/AAAAAAAAAIg/Z9_LpCA1jzs/s1600/wile-e-coyote.jpg
Stilgar, yes, for the masses it will look like BAU intact – BAU intact – BAU intact, then one day, in the not too distant future, no more BAU. On Monday BAU and on Tuesday no more BAU. That is precisely how the global financial markets work.
‘Some economic indicators simply show we may be headed into a recession. That’s happened before and doesn’t mean collapse is imminent.’
This time is different.
Normally stimulus is applied to escape recession – interest rates drop … debt loads are ramped up… etc…
Interest rates are at zero or lower already — stimulus has been roaring out of the furnace for 7 years….
So if we drop into recession now — how do we get out of it?
The reason I know that when recession strikes that it is time to make that last massive run to Food Land and Wally’s World is because I am observing the draconian efforts that the central banks are rolling out trying to prevent recession…. they obviously dread that outcome….
This time really is different. The official GDP stats of individual nations are worthy of our contempt. Globally we are investing less, trading less and, certainly in the case of US companies, making less profit. Energy demand is peaking and manufacturing is flat. Deflationary forces are building. Vast swathes of the commodity extraction industries are operating at a loss – more than 65% of the world’s coal industries, for example:
http://www.smh.com.au/business/mining-and-resources/wood-mackenzie-estimates-that-65pc-of-world-coal-output-is-lossmaking-20151209-gljxj4.html
Meanwhile, stocks, bonds and real estate are still hopelessly out of step with economic reality. The mother of all corrections is pending and we are too debt-saturated and materially impoverished to grow our way out if it. Nations like Brazil and Venezuela are early casualties of a global implosion that will be coming soon to a neighbourhood near you.
Thanks for that article…. this is particularly troubling….
Production cuts not helping
Miners around the world have started reducing production, with RBC estimating that at least 34 million tonnes of coking coal production has been shuttered over the past 21 months.
Glencore has cut 15 million tonnes of Australian coal this year alone, with much of that thermal coal.
Indonesian coal output is also tipped to fall. Indonesian Coal Mining Association chair Pandu Sjahrir warned last month that production from the nation would likely fall below 300 million tonnes in 2016, after being between 330 million tonnes and 360 million tonnes in 2015.
But despite those efforts, Bloomberg Intelligence analysts recently pointed to the fact that coal production cuts had not stopped prices from falling.
“Producers have exercised supply restraint; it hasn’t been enough to support prices as demand has dropped even more,” they said in a note.
Read more: http://www.smh.com.au/business/mining-and-resources/wood-mackenzie-estimates-that-65pc-of-world-coal-output-is-lossmaking-20151209-gljxj4.html#ixzz3tzGGUU86
Thanks for the link. I missed that one. I think what happens is that no matter what kind of hydrocarbon we are talking about, it is not possible for a reduction in price to take place. (It is a “Networked economy can’t shrink” problem.) As prices rise, 100% of the revenue is absorbed by someone–those collecting taxes, fees for land usage, wages, pension contributions, debts for new investment for higher output, and even a little bit for energy to extract the energy. When the price goes down, it is the business owner who gets squeezed. Fess for land usage are set by contract, and probably reflect old higher total prices; taxes may go down a bit, but may not go down by much. The debt is permanent, unless discharged by bankruptcy.
After bankruptcy, the new owner tries to cut pensions to zero and wages as much as possible.
“…it was plain old corruption leading to a super hot real estate market…”
The bubble was blown by corruption but was popped by high oil prices. But it was popped by oil price.
The pin prick came when the Fed raised interest rates. They quoted rising oil prices in their justification for that rate increase.
Stilgar,
“This process of peak oil is longer than most on the message boards ever thought…”
I think that this elongated process of peaking oil has much to do with the fact that we are on the “Undulating Plateau” of the curve that seems little understood or discussed. It used to be a topic much discussed on the peak oil websites, but seems to have fallen out of disfavor. I believe that we are currently in the long, drawn out phase of high price— leading to demand destruction– leading to production cuts– leading to price shocks– leading AGAIN to demand destruction. Each iteration of this cycle will get weaker and weaker until we have the plunge down the steep side of the peak.
I am afraid you are right. Raising the interest rate doesn’t make these profits appear, either. It just makes the hurdle for taking out a loan a bit higher.
WorldOf, how much can society afford? I can see society affording $50/barrel not much more. Compared to $37 there is room to move up.
Also take into consideration the “quality of society” we are talking about, see the video linked bellow on participation rate. The working pool is shrinking, the speed of this process will increase as the babyboomers are leaving the workforce now and also for other structural reason as there is no viable work inside and for this system anyway, that’s all ultra deflationary.
In the light of the above one might bet the house on that the “basic citizen income” idea will spread like a wildfire around the globe. Increasingly it will be a privilege to have a salaried work, in two-three decades real labor force participation rate might go as low as 20-35% ! I don’t have to imagine what sort of crazy gov structures this trend would have to produce, it would dystopic nightmare forever (before another crash-transformation on even lower floor, perhaps full scale feudalism-slavery).
‘We can definitely adapt to using less oil.’
Impossible.
As we are seeing — when demand for commodities drops industries collapse.
e.g Anglo American’s massive restructuring involving 85,000 layoffs shows miners bracing for prolonged downturn
http://business.financialpost.com/news/mining/anglo-american-to-cut-85000-workers-sell-60-of-its-assets-and-suspend-dividend
If resource prices stay at current levels — the resources that are in the ground — will remain in the ground… because there will be no companies left to extract them… they will all be out of business…
There are hundreds of more Anglo Americans hanging from threads…
‘We can definitely adapt to using less oil.’
We can no more do that than I can shrink myself back to sixteen-years-old by going on a diet.
“Real economic growth is not just a change in quantity or scale, but a self-organizing change in structure. Complexity growth and the Maximum Power Principle mean new structures and inter-dependencies become established and dependent upon new and higher minimums of energy and material flows. Some of those established dependencies are critical and irreversible, as is the economy as a whole. ALL SELF-ORGANISING SYSTEMS ARE IRREVERSIBLE, except economists!”
David Korowicz (caps are mine)
Exactly!
Put that way, I suggest that maybe subsidy, welfare, rationing and other market interventions are just the first signs of command economy. Because as you point out you feel the hunger pangs before you feel a whiff of angst about missing the car payment. Most can ride their bike or walk to the bread line. But my larger point is that we will all gladly sign up for command governments in times of crisis. It is even “patriaotic” to do so – if we retain half a brain after going through the initial stress of loss. This last is what we see occuring in the popularity of Donald Trump. His supporters suffer PTSD from seeing white christian amurica descending to a forgotten dream. They react to the resource bottleneck with superstition and desperate hope in a fearless leader. Not my idea of patriotism, but understandable from their off kilter perspective. Perhaps the half brain remark is a little too cruel…all the same; that unexamined unresolved anxiety is dangerous. It is hard to introduce new information when the chemistry of stress runs interference. If anything, it is this chemistry, that affects us all, that will determine how we transition, whether we build stable economies and societies within the shell of the decadent institutions we see succumbing to gravity.
The USSR was a command economy — and they had massive amounts of cheap to extract oil and other resources…
That didn’t work out so well did it…
And now it is being suggested we can transition to a global command economy — in an era when cheap to extract oil is a thing of the past….
People seem to have tremendous faith in governments — as if they are all powerful — as if they will rescue you —- bail out the situation ….
They are not all powerful. They are 100% reliant on cheap to extract energy. When that goes they go….. they will do nothing to help you …. they won’t even be able to help themselves.
Most people seem to have a very difficult time understanding what is coming – chalk that up to normalcy bias.
Most people appear to understand that the power is going to go off… but don’t seem to grasp what that means.
Don’t forget that they’re also completely reliant on financialisation for their tax revenues. Blow a bubble, more money comes into government coffers. Which is another reason they are always so eager to blow more. So when the markets crash, epically, this time, so will governments. There won’t be anyone left to pick up the phone afterwards.
“So when the markets crash, epically, this time, so will governments. There won’t be anyone left to pick up the phone afterwards.”
Unless they simply do not allow the markets to crash, by simply printing out new money and buying all the stocks and bonds, CDS and other derivatives.
Perpetual economic motion machine alert….
Someone needs to step up and accept the Nobel Prize for Economics…..
In case you hadn’t noticed — they are already doing a fair bit of what you suggest… and it is not working…
“In case you hadn’t noticed — they are already doing a fair bit of what you suggest… and it is not working…”
The economy is not growing, but on the other hand the grid is still operating, so I’d say it has been at least a partial success.
The economy has been growing since 2008 — it is likely contracting now —- if that continues — the grid will no longer be operational
F#ck they’ve already done that, where have you been the past 7 years…Jesus…Besides, it’s about the oil anyway, or the climate. Buying up every thing that isn’t nailed down isn’t going to conjure up more cheap oil, or reset the planet’s thermostat…reply to me when you have something sensible to say, otherwise don’t. Ok?
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Crying out loud- the US is a command economy!! What’s that they say? “Corrupt chrony pseudo-capitalism (communism) for the rich, real Hobbsian cutthroat capitalism (dog eat dog) for everybody else.” (?)
command economy
Word Origin
noun
a socialist economic system in which production and distribution of goods and services are controlled by the government and industry is mostly publicly owned.
an economy in which business activities and the allocation of resources are determined by government order rather than market forces Also called planned economy
While the US has never been a free market economy — there has never that I am aware of been a free market economy and if anyone tried it would eat itself alive…
But the US is most definitely not a command economy in the true nature of the beast — there is no committee stating ‘though shall manufacture 10 million black cars in 2016’ — most corporations in the US are not owned by the government.
Just so happens I remember the 1950’s Amurica. As I read this post I thought whoever wrote it must want open borders and the destruction of my America. Then I look at who wrote it and thought, “Oh my God, I guess he does.” People like me may get defeated but no way are we going to go down without a fight.
First let me apologize for putting people in the white christian amurica box. That was snarky and an example of me at my most cynical and least articulate. I obviously offended you and now regret the choice of words.
I nonetheless stand by the general point that I was making: that change is hard and even dangerous when we give in to fear (and inarticulate cynicism).
I hope you can forgive your own reactionary response to my lapse in judgement. While I admit to more than a little abrasion at your implication of my supposed alien or immigrant status, I nonetheless must pardon the slip for my part in the exchange.
To clarify and perhaps provide a sobering splash of cold water on your assumptions: I am blue eyed lily-white, half Spaniard and half British Isles mutt. My mother’s side dates to pre-revolutionary war North Carolina. So, daddio, be careful about calling people out on their names. Most of us are inbred from way back in our history. All peoples have been slaves, had their countries overrun, emigrated or immigrated and died. Nothing special about fighting. Just be sure you die well and live for truth. And why hide behind anonymous tags when you speak your truth?
Who knows that we won’t one day fight side by side?(though I am a little old for battle duty) I do not disagree with everything Trump says. But neither do I think he should be President. I hope it is still OK to disagree in the fundamentally American spirit of political debate.
Apology accepted. I myself am Scotch-Irish with a Scottish surname (there is a clan castle in Scotland). Far too many Americans want policies that favor one ethnic group over another. This change you speak of is being forced on Americans. It took centuries for Catholics and Protestants to peacefully live together. Importing hundreds of thousands of Muslims will lead to similar problems. The same with millions of semi literate people from south of the border.
As individually these people do just want a better life. You say your family and mine were immigrants so how can we deny others who want only what we have. I can only say I don’t want what happened to the original peoples who were here to happen to my descendants. Immigration control is very important.
I’m glad you two decided that you could have a civil debate.
You are not far off on the ‘half-brain’ remark.
When I was facing fore-closure and very cold (no heating at all in winter) and a little bit hungry, and feeling rather hopeless, my brain did not function at all well (well, worse than usual).
I look back at decisions and reactions of that time and it is like viewing another -and very dumb – person, half-brained indeed!
Whereas now, fairly secure for the time being with all basic needs met fully, the level of stress I experience in contemplating our situation and likely future actually seems to sharpen my thinking and is if anything stimulating.
Stressed populations will certainly accept anything that offers to get them out of the mess, we should not deceive ourselves about that. Critical thinking skills will go out of the window.
“Price wars always come to an end when somebody runs out of cash and credit and has to say uncle.”
Not really. If the bank goes bankrupt, and there is no way of fixing your problem, then there is a problem. If the problem is too low wages (too low EROEI, but related to human wages), this is not really fixable.
In the same vein, I also found it preposterous as Bardi now openly claims there must be single prevalent element to force a collapse upon civilization, parallel nature causality to be banned, hah. No this is not joke, he has got the audacity to claim he personally found and identified these “single stressors” both for the Roman crash (supposedly PM mining depletion) and bronze-tin for the previous big crash.
http://cassandralegacy.blogspot.it/2015/12/the-fall-of-mediterranean-society.html
It seems to me the message has now become so convoluted one has to expect total chaos in the public space as we go forward..
WorldOf, if 75% of the population does not have a job I expect “total chaos in the public space”.
Yep, but always look at the context and that changes a lot through times.
If participation in labor force goes bellow gradually 50%, 40% in 2-3decades i.e. inveresly “unemployment” going higher towards ~75%, it’s a different world from our todays perspective, but also not analogue to much distant previous periods of physical starvation. No real job doesn’t mean starvation if you are on citizen allowance, you don’t have “unrealistic” needs, you don’t have property, you don’t have kids,.. Simply this strange and TEMPORARY condition would eventually all burn down but we are not there yet.
No job, no property… Sounds like hunter gatherers; or the lyrics to a John lennon song….?
If 75% of the population has no job — then in short order nobody will have a job…. that’s the end result of a deflationary death spiral….
I don’t think this is Bardi’s best post. One of the stressors in almost every situation is rising population, so that there is less agricultural land per capita (and falling wages of farmers, if farms are becoming smaller in size). This is an important point Bardi missed. There are always a combination of factors, with rising population being a major one.
Labor participation rate clock going backwards..
So guess how much energy and stuff will be needed along the way, yep much less..
In practice, more poverty, less “non systemic” infrustructure maintanance, less healthcare and effective education, so the crude/natgas/coal/uranium/.. would go longer miles to speak. Simply expect prolonged stagnation or slightly negative levitation, punctuated by crisis here and there. This civilization is like a mad centipede, there are dozens of shoes yet to drop, one by one, the collapse will be a mutlidecade project.
GTLong+CHSmith https://www.youtube.com/watch?v=yOAr84Ofg84
People who can see the financial connection to our problem have a different view of it than those who assume that it is “only” a geological problem. Somehow, they think finances will take care of themselves.
Between commodity-backed financing deals and the centrally-planned mal-investment boom-driven excess capacity, China has a lot of ‘liquidation’ to do to normalize from a credit-fueled smoke-and-mirrors world to a painful reality.
As Bloomberg notes, there’s no let-up in the onslaught of commodities from China.
While the country’s total exports are slowing in dollar terms (as we noted last night), shipments of steel, oil products and aluminum are reaching for new highs, flooding the world with unwanted inventories. China’s de-glutting is now the rest of the world’s problem as the deflationary tsunami grows ever higher.
Chinese trade data was ugly with exports down 5 straight months…
http://www.zerohedge.com/news/2015-12-08/behold-deflationary-wave-china-flooding-world-its-unwanted-commodities
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/12/20151207_cny2_0.jpg
Wow, Gail. With this post you have cemented your reputation as the clearest writing person on energy and the economy alive. Your value rests upon your ability to think as a systems analyst showing the interconnections of a myriad of factors and thinkers and disciplines somehow pulling it all together using clear examples and potent and pertinent data and graphs. For example I am familiar with the work of Odum(Max Power Principle) and Prigogine(Dissipative structures) and Turchin et al’s work, but linking them together and tying them into energy use, debt use, historical trends, societal wealth creation and explaining how low commodity prices can crash a society instead of high prices pretty much blew me away and I am grateful for the lucidity of this post. I put some of your posts in a folder and this one definitely will be number one to be savored and reread and I will try to find flaws in your reasoning which generally has been a fools errand for me at least. There are so many talking heads out there blathering about this or that factor causing this or that consequence to the economy. Most of them seem to work for Bloomberg, the WSD or the NYT but most of it is so much white noise and oversimplistic babble. HL Mehken put it well(as have many others): “For Every complex problem there is an answer that is clear, simple and wrong.”
I am currently reading Michael Grant’s book”The Fall of the Roman Empire” which includes a listing of factors contributing to its fall , many of which you have mentioned. FYI.
Thanks again, Gail.
Thanks for your very nice review of my article. I was working on it for several days, and for a while thought I should set it aside, because I needed to get a post up more quickly, and had ideas of easier posts to write. But I decided to give it another day, and get it all together. I have met quite a number of authors whom I referred to. I looked up one of the Hunter-Gatherer articles, and realized I knew two of the authors, for example, because they had invited me to give a lecture at their university. I have not met Roddier in person, but I have corresponded with him quite a bit. I have eaten in the home (in Stockholm) of Craig Dilworth, author of “Too Smart for Our Own Good: The Ecological Predicament of Mankind.” Many of these folks “found me,” or a reader linked us up. A lot of this just more less happened on its own.
“A lot of this just more less happened on its own.”
It is interesting that you say this, Gail, especially in light of some of your thoughts on order in the universe and the possibility of some cosmic plan operating behind what at first glance is a ghastly predicament for our species, cruel in its inevitability.
I come from a humanities background and work in a field related to healthcare. Economics, engineering and the world of finance have for most of my life been matters of supreme indifference to me. It was by pure chance that I happened upon one of your posts in The Oil Drum days and could immediately see the basic logic behind what you were saying. That sucked me into the ‘doomosphere’ and I have spent the past few years honing my understanding of our situation, its causes and the likely outcomes (h/t David Korowicz).
I have also relocated with my family to an island in The Hebrides in the hope of, if not weathering the coming storm, at least mitigating its initial impact. So, in the space of three short years virtually every polarity in my head has been reversed, my cosy assumptions about the future torpedoed, and my living circumstances radically altered – and all of these things have seemed to happen outside the orbit of my control. Even the decision to leave mainland England was as good as made for me. I am not religious but it has felt at times like there is an unseen hand that guides me, and consequently my trust in the universal intelligence has deepened.
Thanks for your thoughts. Many of my posts seem to come together, almost by themselves, as well. There is a lot of work to getting them (sort of) understandable to an audience, but the ideas seem to come by themselves–or they are things that are somehow intuitively obvious.
As somebody who has studied biology (Masters in Cell Biology), business (MBA), Prigogine’s dissipative structures, systems theory and epistemology (how do we know that we know) in the context of a PhD on venture capital, I absolutely love the way you have put this together.
You have produced many very fine posts, but i believe this to be the best, most far-reaching and fundamental of the lot.
Thank you!
Thanks very much for the compliment. I expect it will not be an easy post for readers with a limited background to read, however.
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This is an incredible read, have you ever read Sex At Dawn? It’s about early human nature, properly fascinating stuff.
I double checked, and this is legitimate. My first reaction was, “Perhaps my spam filter is not working well.”
Sex at Dawn: The Prehistoric Origins of Modern Sexuality is a book dealing with the evolution of monogamy in humans and human mating systems. First published in 2010, it was co-authored by Christopher Ryan, PhD and Cacilda Jethá, MD (Portuguese pronunciation: [kɐˈsiɫðɐ ʒɨˈta]). In opposition to what the authors see as the ‘standard narrative’ of human sexual evolution, they contend having multiple sexual partners was common and accepted in the environment of evolutionary adaptedness. Mobile self-contained groups of hunter gatherers are posited as the human norm before agriculture led to high population density. According to the authors, before agriculture, sex was relatively promiscuous, and paternity was not a concern, in a similar way to the mating system of Bonobos. According to the book, sexual interactions strengthened the bond of trust in the groups; far from causing jealousy, social equilibrium and reciprocal obligation was strengthened by playful sexual interactions.
The book generated a great deal of publicity in the popular press, where it was met with generally positive reviews. A number of scholars from related academic disciplines such as anthropology, evolutionary psychology, primatology, biology, and sexology have commented on the book; many have been critical of the book’s methodology and some of its conclusions, although some academics have praised the book.
https://en.wikipedia.org/wiki/Sex_at_Dawn
Thanks! Interesting!
When Glencore meets with shareholders next week, one big question on the minds of investors will be how long the company’s credit rating can withstand an ongoing slide in commodity prices.
Copper is 20% below the price used by Standard & Poor’s to assess its BBB rating for Glencore, one of the largest commodity traders.
While S&P says below-estimate prices don’t mean a downgrade is imminent, the gap highlights how quickly metals prices have fallen and the headache it brings for producers with lots of debt.
http://www.gulf-times.com/eco.-bus.%20news/256/details/465611/glencore%E2%80%99s-rating-seen-strained-if-ongoing-copper-rout-continues
No … of course not … if the Fed orders them not to downgrade Glencore — they don’t downgrade…
Because a downgrade means Glencore would be unable to service their debt and they would collapse… and that puts BAU at risk….
Can’t have that…
The article reports:
There is an article in the New York times which comes from a different direction — “What if we stopped all growth to arrest climate change?
http://www.nytimes.com/2015/12/02/business/economy/imagining-a-world-without-growth.html?_r=0
I read this article last week, too. The last sentence is telling “civilization as we know it.” The writer from his/her perspective simply cannot imagine such a world. In fact, why would we want such a corrupt system to survive? But that doesn’t mean that civilization of some form won’t survive and perhaps be more worthwhile.
There’s nothing worthwhile in civilisation. It’s brought nothing but misery to countless people and other species and will soon make the planet unfit for habitation if it continues for much longer. Thankfully, economic collapse is coming to save what’s left of the biosphere, but you and I may not want to live in the world as it will be thereafter. Assuming we survive the bottleneck.
Collapse may just be a failure of imagination. we are either so certain our conceits (dead ideas) will destroy new ideas, or creatively constrained that we are paralyzed. I fear this blog may be trapped in its own headlights at times. but I am seeing signs of new light.
In the periods referenced… there were not 7.5B people who ate crude oil… typical NYT Pravda to even suggest this….
“Limiting growth to zero, he found, had a modest impact on carbon spewed into the air. Only the “de-growth” situation — in which Canadians’ income per person shrank to its level in 1976 and the average working hours of employed Canadians declined by 75 percent — managed to slash emissions in a big way.”
That’s amazing. If you could figure out how we can have half our current income and living standards, in exchange for only working 10 hours per week, count me in.
Humans have overused resources, as long as we have been on earth. We lived on the edge of starvation, cut down forests, and killed large wild animals. The whole idea being proposed is complete nonsense. We are unable to keep the economy at its current level–that is our big problem. Our problem is preventing collapse, not preventing growth that would lead to more carbon use.
Gail, and All, all living creates are almost always pushing the limits of resources. That is why population numbers are stable. Once in a while for brief periods of time this can be broken. As in the examples of a ship wrecked grain transport or a dropped bag of grain or humans discovering coal and oil.
It is immensely saddening that humans are not more able to plan reproduction any better than mice or rats.
Imagine a society that controlled its reproduction so no one ever died of starvation. So that the general health of the population is always good. I propose every couple is allow one child. Every couple that is in the top 66% in terms of some combined index of
physical health
mental health
intelligence
energy level
disease immunity
are allowed a second child. Some number are allowed a third child based on being in the top 10% of the combined index. A number that hits the desired population goal. Would such a society have an evolutionary advantage?
Stein’s Law: ” Things that can’t go on forever eventually stop”
Two lemmas ( mine — Interguru’s Lemmas )
1) They go on a lot longer than you think they can.
2) They stop suddenly without warning. Even those who see it coming have no idea when.
[repost]
Thanks for your repost. Unfortunately, it is true.
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“A number that hits the desired population goal. Would such a society have an evolutionary advantage?”
Within the same world as a population that reproduces as fast as possible, the group with the controlled population would probably be overwhelmed, unless they were also willing and able to genocide the outsiders.
Comparing imaginary parallel worlds, sure, the world with the controlled breeding and controlled consumption might have BAU for longer, until they too ran out of hydrocarbons. They could theoretically create a plateau, instead of a peak, in terms of total wealth, wealth per capita, oil extraction, population, etc.
I think this is the stark reality we confront. China has already asked two generations to make a similar sacrifice, though they are easing up a bit now. Certainly there is nothing like what you have proposed being implemented by a state. too invasive of individual privacy. But, were we able to manage greater self-restraint it would make perfect sense. The key to this self restraint would arise if all shared the same appreciation that quality of life (the indexes you refer too) was entirely dependent upon fairly rigid adherence to the reproductive framework. It is obviously possible since China has done it. But attaining the social cohesion is the trick. More study of chinese culture might yield insights. They lived with (struggled and sacrificed) overpopulation for generations. that is the consequense of high efficiency nature based economics. and they did most of it without fossil feuls!
“They lived with (struggled and sacrificed) overpopulation for generations. that is the consequense of high efficiency nature based economics. and they did most of it without fossil feuls!”
I think the Chinese rapidly increased their population, as part of Chairman Mao’s plan for how to win global thermonuclear war. The idea was, if you have six times as many people, then you should have six times as many survivors.
Wow, if these charts are correct, it is pretty interesting. The Ming maintained near zero population growth, and then from around 1650 onwards the population began rising rapidly:
http://www.china-profile.com/data/fig_pop_0-2050.htm
Actually, looking at world population, it seems like the human population all over started soaring around 1650, well before most of the world had access to fossil fuels. It is almost as if the world suddenly started getting warmer and milder and easier to live and thrive on.
Interesting! I can understand the interest in a recent one-child policy.
Europe was practically a cesspool prior to the “discovery” of the New World. The resulting trade, immigration and exploitation of the new resources along with slave labour greatly aided population growth but the population explosion didn’t take hold until the third quarter of the 19th century.
That was when the industrial revolution, steam technology and fast overland and sea transport assisted the resource exploitation, which of course included the land itself. The widespread use of oil literally stoked the already out of control population growth. Malthus saw the problems before oil arrived. Without the oil the population of the world could not have risen at such breakneck speed but we still would have run into problems.
Oil allowed us to exploit coal seams not possible previously, it allowed us to burn it in unprecedented amounts, it allowed for large populations to live in inhospitable locations and climates, like The ME, Alaska, Canada, Siberia, Greenland etc.
for those not trapped in normality bias, they can see what FF’s enabled and they can see what the lack of FF’s will disable. For those that are trapped they see, a “new system”, they see a new technology, a world of Shangri La, peaceful cooperation, a world where global warming is a conspiracy and environmental destruction a myth to be ignored.
“but the population explosion didn’t take hold until the third quarter of the 19th century.”
Other than the dip from the plague, Europe’s population contnued on a fairly steady growth curve from around 600 onwards:
http://www.lasalle.edu/~mcinneshin/wk12/images/EURvsCHIpopN1-1500.jpg
https://c2.staticflickr.com/4/3513/3202553051_1196f2d84e_z.jpg?zz=1
https://epikfails.files.wordpress.com/2012/11/popdips2.gif
I don’t see any sources anywhere showing a flat population for hundreds of years followed by a sudden increase around 1900.
I think more interesting is the fact that since biblical times the population was in the tens of millions, 60 million being the number used in that summary you linked to. That means some pretty successful strategies for permanent settlement. What they say about “farmers of forty centuries”….
The improved healthcare had bigger impact on population growth than increased food production. Increasing healthcare (which includes also better pest control, housing etc., i. e. living conditions in general) is also much more costly than the pure food production. The food production needed only new means of food storage and prolonging its shelf life, transportation to distant places.
First you need improved healthcare, then you can cultivate additional land. Cultivating additional land without the improved healthcare has no meaning, unless you cultivate the products that make you healthier. The improved healthcare means more human resources at the disposal that could cultivate the land and were not dependent on the care of others, i.e. higher numbers of healthier individuals.
If you are ill or weak, you are dependent on those who can provide you food and protection against natural forces. If you are ill or weak, you do not think about cultivating additional land, but about getting the energy to cultivate the additional land. As the human population deteriorated and the living conditions worsened the people were forced to find different ways of survival. Something better than slavery (slave=half-animal), as the slavery was a step back. The fossil fuels were a handy additional source of energy.
That is why enhancing the quality of life causes population decline: decreased need for reproduction. But the genome of the human race deteriorates.
Today, when somebody neglects the child care, he or she is put in jail. The system does not allow you to create your own standards of healthcare and experiment with the survival of your offsprings. You must accept the standards of the society. The child rights, the right to have a pension when you are retired, the right to social benefits, the right to healthcare etc. consitute the increasing number of promises that will bring the system down, i.e. they increase the standard of living of the individuals today, but destroy the future of the human race as a whole.
I think improved hygiene plays a very big role–perhaps bigger than medicine.
So many things we just take for granted…. including sewage treatment and disposal…
No possible without electricity (pumps) and chemicals….
Let’s have a look at what the situation looked like back in the day of The Great Stink https://en.wikipedia.org/wiki/Great_Stink
The scientist Michael Faraday described the situation in a letter to The Times in July 1855: shocked at the state of the Thames, he dropped pieces of white paper into the river to “test the degree of opacity”. His conclusion was that “Near the bridges the feculence rolled up in clouds so dense that they were visible at the surface, even in water of this kind. … The smell was very bad, and common to the whole of the water; it was the same as that which now comes up from the gully-holes in the streets; the whole river was for the time a real sewer.”[6] The smell from the river was so bad that in 1857 the government poured chalk lime, chloride of lime and carbolic acid into the waterway to ease the stench.[7][8]
The prevailing thought in Victorian healthcare concerning the transmission of contagious diseases was the miasma theory, which held that most communicable diseases were caused by the inhalation of contaminated air. This contamination could take the form of the odour of rotting corpses or sewage, but also rotting vegetation, or the exhaled breath of someone already diseased.[9] Miasma was believed by most to be the vector of transmission of cholera, which was on the rise in 19th-century Europe. The disease was deeply feared by all, because of the speed with which it could spread, and its high fatality rates.[10]
London’s first major cholera epidemic struck in 1831, when the disease claimed 6,536 victims. In 1848–49 there was a second outbreak in which 14,137 London residents died, and this was followed by a further outbreak in 1853–54 in which 10,738 died. During the second outbreak, John Snow, a London-based physician, noticed that the rates of death were higher in those areas supplied by the Lambeth and the Southwark and Vauxhall water companies. In 1849 he published a paper, On the Mode of Communication of Cholera, which posited the theory of the water-borne transmission of disease, rather than the miasma theory; little attention was paid to the paper.[11][12] Following the third cholera outbreak in 1854, Snow published an update to his treatise, after he focused on the effects in Broad Street, Soho.[12] Snow had removed the handle from the local water pump, thus preventing access to the contaminated water, with a resulting fall in deaths. It was later established that the well from which the water was drawn had a leaking sewer running nearby.[12]
“The improved healthcare had bigger impact on population growth than increased food production.”
Yes, the Qing Dynasty is known worldwide for the fantastic, affordable universal healthcare programs it had.
One problem is that intelligence seems to be counterproductive, in terms of keeping the system operating. So I am not sure your selection criteria are really right, in that way.
The evolutionary advantage, if there is one, would only come if there are enough energy products. Once the energy products become too expensive, then the system tends to come to a halt.
I am working on a theory that token based economics restrict information flow, information being hoarded or used strategically as an economic or military weapon in the service of political domination (markets tend to be corrupted to concentrate political capital). There are many examples of information being used to improve human quality of life. So the statement that “information is the only resource that improves the more it is used” should not be too controversial a place to start the rewind. Thus I would be searching for an argument that counters the assertion that we are “too smart for our own good”. Too compulsive or unrestrained in our appetities for our own good? Now there is a rich vein to mine the precious ore of transition! Da Vinci did not give a dead rat about patents, after all. The problem of resource distribution and storage and the problem of innovation and information management have important similarities. Neither require proprietary controls in an absolute sense. more later
Steven, if I told you how to make hemp in to clothes, or how to make a odorless composting toilet or how to make potash and soda. “One of the most crucial classes of chemicals throughout history has been alkalis like potash (potassium carbonate) and soda (sodium carbonate), as these are needed in making glass, paper and soap. Potash can be simply extracted from the ashes of a wood fire by soaking water through them. Discard the insoluble minerals that settle on the bottom, and then recover the dissolved potash by evaporating away the water. Soda is made in the same way, from burning seaweed” would you do anything with that information?
Information is like having a chain of keys and a locks. If you can use a specific information, that opens a specific lock and to then you need again a specific key etc. etc.
We all may have heard of a Persian Waterwheel, but at the moment we would actually need one, or remember that one exists, its uncertain we do. Thats why we need experts to plan and build things.
I could tell you that you need limestone and clay to make cement, but at the moment when your life depended on knowing that information, would you?
In general, we have absolutely brilliant information available to us all the time. But we don´t use it. We need somebody with a big title and big diplomas on the wall, so that we believe the brilliant information that is actually available all the time. I have not found one business, industry or company with perfect information. When benchmarking the competition, there are always surprises. So, absolutely brilliant information is available all the time, we just choose to ignore most of it.
That’s assuming you’re skilled enough to catch some rats to boil…
This collapse is going to be good in some ways. That’s another one of my messages.
Humanity is about to be pummeled. Absolutely pummeled senseless. How great is that! Now, you guys know what I mean. I’m not a monster. What I’m talking about is hubris. The hubris that allows us all to think we are special, we count, we are going to be rich and famous and live forever in a wonderland of infinite growth and energy. It is going to be really, really satisfying watching this belief die. Yes, I’m a misanthrope. I suppose that’s why I’m not as scared of this collapse as some people here.
But…you have to figure out how to get out of the way of the masses and the bullets. Easier said then done, a lot of luck is involved.
“Strategic withdrawal”. That’s my game plan. Look, life isn’t ideal, our system is over and we know it. We get to live through the transition. It’s our privilege to live at the end of the world. Interesting, isn’t it.
I must admit …. there will be a certain schadenfreude in seeing the silver spoon types who are stressed that that they have to drive a 3 year old Ferrari because the trust fund only pays 1M per year in the gutter eating boiled rats….
A friend is head of trusts at a back in Hong Kong …. she was regaling us with tales of such people… one clown was 40+… never worked a day in his life … and was asking her — the gatekeeper — for USD100,000 for a 5 day yoga retreat!!!
And he pouted like a 6 yr old when she told him that’s wasn’t allowable…
You know the type… very pleased with themselves…. who can’t understand how people can fly anything but business class…
http://i.kinja-img.com/gawker-media/image/upload/s–8PSg9NPU–/18k1sfxhi6dr5jpg.jpg
Boiled rat meat…. a precious moment…
http://www.heapsoffun.com/pictures/20110720/boiled_rat_m1001.jpg
dolph911,
I believe that the basic keys to avoiding the masses and the bullets is to “strategically withdraw” to areas of very low human density, and to find a place that will benefit from global warming. This season, I grew enough potatoes in my cold and sterile soil to feed a family for a year. I have no neighbors. Look North to the future. But get started soon.
Then there is the, probably anecdotal, story of a gentleman in the 30s who correctly foresaw the catastrophe that was going to enfold in Germany, and moved his family to the most remote place he could, Guadalcanal.
“Then there is the, probably anecdotal, story of a gentleman in the 30s who correctly foresaw the catastrophe that was going to enfold in Germany, and moved his family to the most remote place he could, Guadalcanal.”
Or the guy in the early 1980s that extensively studied weather, earthquakes, etc and determined that the Falklands were the safest possible place to move. Arrived a couple months before the war.
Another great piece Gail. Unfortunately, it is too difficult for the majority to understand.
This was my second good read for the day. Here is the first. Since it relates to energy and debt, I thought you might be interested.
Cheers.
“And then there is one factor not present JBLR, [Just Before the Last Recession] that threatens to make this round much worse: the tanking of the US oil industry. What was being touted as a revolution that would restore the country to energy independence has turned out to be just another Ponzi scheme that is unwinding with breathtaking consequences, adding to the financial carnage that is piling up bodies in all the marketplaces of the world.”
http://www.dailyimpact.net/2015/12/07/the-search-for-the-crash-of-2015/
I beg to differ….
The grocery stores remain open … the electricity is still on …. the toilets work… the water comes out of the tap….there are no riots… there is no global famine….
This is not collapse — nothing of the sort — not even for the poorest people on the planet…
Relative to what is coming — we are living very large right now.
Whoever wrote that article is in for a might big surprise …
Maybe the surprise is just around the corner? Hat tip to Dave Cohen at DOTE:
Presenting the October 2015 IMF World Economic Outlook, Maurice Obstfeld (2015) identified the fall of commodity prices as one of the powerful forces shaping the outlook for the world economy. The strength of this force, however, is underestimated by the official forecasts in the IMF’s flagship publication.
As illustrated in Figure 1 the IMF world economic outlook database reports a reduction of Gross Planet Product (GPP) for the year 2015 by -3,8 trillion dollar (-4.9%). A nominal reduction of GPP of this size has occurred only once since 1980 (the starting year of the IMF database), namely at the start of the Great Recession when GPP contracted by -5.3%.
http://peakwatch.typepad.com/.a/6a00d83452403c69e201b7c7f70e2f970b-pi
Figure 1. Gross Planet Product at current prices (trillions of dollars, 1980 – 2015). Source: IMF World Economic Outlook Database, October 2015
http://peakwatch.typepad.com/.a/6a00d83452403c69e201bb089b4754970d-pi
Table 1. Years with nominal contractions of GPP (1980-2015). Same source as above
And yet you say that the “ball is unraveling rather quickly…” ?
Unraveling is what happens in the run up to collapse
We are very obviously not there yet — when you flick the light switch and nothing happens — think of Fast Eddy … that is my definition of collapse
Somethings gotta give…
http://www.theautomaticearth.com/wp-content/uploads/2015/12/CopperSurplus.jpg
Shows copper supply and demand.
no good… no good…. danger danger danger
All the Federal Reserve needs to do is has the US Mint strike pennies with copper instead of copper plated zinc….by the.e Zillions!….More QE…..sarcasm
Thanks for the link to the article. It is a good summary of the things facing us know. The Federal Reserve doesn’t seem to have caught on, however.
You are right about the article being too difficult for the majority to understand. I hope to write some simpler ones in the near future. Also, I am hoping that the title of this will be clear enough that the article will have some “lasting power” for those who want to understand what is happening, and choose to look up the article on Google. It is a difficult topic.
If you have friends who might understand it, share it with them.
Use Randell Munroe’s Thing Explainer : Complicated Stuff in Simple Words as a model. He uses only the 1000 most common words in English.
World’s Fifth Largest Miner Announces Massive Layoffs, Suspends Dividend, Sells 60% Of Portfolio
If you’re in the commodities business, this is “not the time for courage” (to borrow a classic Gartman-ism). In the latest example of just how bad things have gotten, Anglo American – the world’s fifth largest miner – just kitchen sink-ed it, announcing a sweeping restructuring, a massive round of layoffs, and a dividend cut.
The company will reduce its assets by some 60% while headcount will be cut by a whopping 85,000 or, nearly two thirds.
http://www.zerohedge.com/news/2015-12-08/worlds-fifth-largest-miner-announces-massive-layoffs-suspends-dividend-sells-60-port
Like I was saying… if you’ve anything left in the gas tank…. now’s the time to bring it fellas…
The ball is unraveling rather quickly….
Wow!
“Like I was saying… if you’ve anything left in the gas tank…. now’s the time to bring it fellas…”
If your Elders have any sort of capabilities, they will bring forth a war. Now.
A WWIII (without nukes) has the good point it socializes everything instantly. Central planning for everything and emergency measures for everything. It is as close as we can get to a controlled collapse, as far as I can calculate.
When Putin says things like this https://www.youtube.com/watch?v=9QxWYIAtCMU#action=share it wouldn´t be too difficult to start WWIII.
One lesson from military history is that once mobilization for war begins, it takes on a momentum of its own and is uncontrollable. This might be what is occuring unrecognized before our eyes right now.
We heard the story reported on NPR, they interviewed several experts that said that the company was going thru a (minor) restructuring that would make it more competitive in the future and that the companies that were buying the mines being dumped were in a great profit potential, etc. etc.
Then, I saw the actual facts as presented by zerohedge – holy crap!
More interesting than the fact of the collapse of that company is that the main news outlets are lying, and lying with no indication that they have a conscience.
– or is it that they simply don’t have any clue what is really happening?
Its the question that bugs me a lot, “Is there a malevolent force in the world making correspondents lie, governments do stupid things, etc.; or is it rampant stupidity?”
I always try to come down on the side of stupidity, its simpler, and it avoids the slippery slope that conspiracy theories. Conspiracy theories always lead to bizarre conclusions, while just observing the stupidity that is rampant in the world leave one free to think logically.
“Never attribute to malice that which is adequately explained by stupidity.”
I’m in that camp too. It’s just that real villains can thrive and easily take leadership (for a while). Which doesn’t mean they’re smarter, we have many examples of successful dumb sociopaths.
I thought slowing the rate of extraction and depletion was a good thing…Redirecting supply chains to recylced or other alternatives. Was this operation an indication of overreach, overconsumption?
Crude Crashes To $36 Handle – Down 15% Since OPEC
How many times were we told that an OPEC decision was “priced in” – well it wasn’t. WTI is now down 15% from pre-OPEC and has crashed through the $37 level for the first time since Feb 2009… time to catch a falling knife (again), or fold on all those ‘recovery’ bets?
http://www.zerohedge.com/news/2015-12-08/crude-crashes-36-handle-down-15-opec
Umm… about that helicopter money…. you wouldn’t want to see it left too late….
Here’s a nice way to launch the programme without spooking the sheeple… Lagarde can go on the teevee and say ‘all you people have had a really tough year … so we’ve decided that everyone deserves a break — here’s $2500 for your Christmas gift … ‘
That sets a great precedent — the same can be done for Muslims during Ramadan… why stop there… hand out moar for Valentines Day … Mother’s Day … Father’s Day … give everyone $5000 on their birthday….
This could be referred to as the nouveau normal … I like it!!!
What’s not to like about it — a world full of semi-rock stars.
This is a perfect idea and I would add to it “hand out 25.000 for a homestead solar heating and electricity system”. The problem with that it undermines the societal drive of “competition” and it was purposely distroyed in Libya where you got money when you married, free hospitals and free education and many more. Libya had to be destroyed as communism had to because we do not want no “other”. The people must not look at other governments and claim “look what they are doing, I demand it from my government”. But, as this time it is different, we never know, because “we’ll do what it takes…”
Wonderful article thank you. I sense a little bit of a lack of clarity in your analysis around this part of the article “individuals who can out-compete others in the resource battle” when you get to the tricky topic of competition verses cooperation and how that plays out between individuals compared to species. I think the point is not to over emphasize competition or cooperation. The ideology we live in today over emphasizes competition for example.
I thank you for introducing a new idea for me in this article, possible reasons why humans are slowing down and even reversing their own evolution.
Could you do an article Gail on your views on a future planned economy? I have read you for a long time but even after all this time I still am not clear about your views on that. After the big financial reset, and after a lot of chaos and suffering, can government-corporation-bank partnerships at a global scale revert to a globalized command economy using fiat money and brute force which the trends seem to be indicating are happening? Can they shrink down the use of resources in a controlled ordered process extending the life of civilization for another couple of hundred years or more by drawing down even more on environmental and social capital beyond what we think is currently possible? Can we create a brutally efficient civilization that is able to downscale without need for concepts such as justice? Or is there something in energy/debt/complexity theory that fundamentally prohibits that? I realise that a global government defies geographic scale but I can imagine a scenario where it is held together through hyper efficient use of communication technology and ideology working in tandem with globalised networks of focused city states that become even more concentrated ideological-political entities that are able to keep control of supply chains.
What do you or anyone think on that? I realise it is a very old record I’m playing, but it is persistent story about the future I’m finding difficult to shake off!
Cheers all the best
Harry, I think you have posed a fascinating question. Often when the concept of some sort of command economy is proposed as a way out, it is denounced as impossible because you can’t force people to work if its not economical to do so. However, perhaps it is possible to create a new type of socio-economic structure that is a hybrid of corporate, military and socialist model aided and abetted by high technology and hyper efficient communications. Why not? Ultimately, without additional worlds to plunder, we will eventually draw down the natural planetary capital to near zero, but its better than starving to death today.
I don’t think a future planned economy is possible. It simply takes too much energy to keep governments going. They will not exist in anything like their current form.
Regarding cooperation/competition, it is really both that are important. There is more “power” if humans can put their labor together with the labor of others, for example by rowing together in a boat. A similar principle works if they can divide their labor, and thus produce more. They need to compete for resources, jobs, and other things. We think in terms of doing things more cheaply. Jobs go to the country that can produce goods most cheaply–lowest labor costs, least concern about pollution, lowest return on investment. Not good for the future of the world!
The reasoning you give is very logical Gail and has helped me a lot thanks! I just think that the continuing melding of technology and ideology into a networked global city state power regime is worth analysis. What we need is analysis of the energy economics of the continued expansion of the internet and virtual technology. Can this technology be supplied an energy environment to continue its rapid evolution and can it be deployed to a billion city state residents for another hundred years? That is the question to me. Humans have stopped evolving. Our genetic similarity is so close to 100%. Our vulnerability to technological evolution and ideological control has enormous potential. I think activists need to know what they are up against otherwise we will be trying to shoot at an invisible target. If it can be proven that the technological-ideological combination is physically impossible to sustain the concentration of global power even in a de-growth economy, then I can just fall back to simple activism strategies knowing that my efforts are not making things worse. For example, I consider the current climate change campaigns and the greening of the city campaigns as green-wash and social-wash until proven otherwise.
I think it is possible to assume that the Internet and virtual technology can do more for us than they really can. Our big issues have to do with eating, getting enough clean water, keeping warm enough, keeping free from predators such as harmful bacteria, and keeping safe from pollution. The Internet and virtual technology do very little, except transmit knowledge, in those areas. We have to have roads and electric transmission lines, if we are going to keep electricity going sufficiently to have banks and other things we need. It ends up that we need pretty much everything that we have today, plus more on top, as population grows. There really isn’t a simple technological solution to our problem that I can see.
Between reading you Gail and JM Greer, there are the “theories” that emerge from my understanding:
1. Institutional power to control can only concentrate by increasing complexity
2. Complexity can only increase with increasing low cost energy supply
3. As complexity increases, negative externalities exceed positive externalities
4. Historically, technological advancement always increases overall complexity and there is no reason to think that will change going forward.
The reason why I include the sociological variable of ideology is because I think that these laws are valid:
5. Institutional power concentrates via ideological penetration
6. Ideological penetration expands via ongoing improvements in technology
7. Institutional control is increased by decreasing cultural complexity.
So institutional power is dependent on technology (6), but technology always increases complexity (4) which increases the proportion of negative externalities (3) and energy constraints (2). The only option that institutional power has is to fight increasing complexity and maintain control is by decreasing cultural complexity (7), but this is a contradiction because it needs technology to accomplish it (6) but technology is vulnerable to (1), (2), (3) because of (4).
A tentative conclusion from this is:
The historical notion of pre-emptive social revolution to overcome power was relevant when ideological control was incomplete and vulnerable. In today’s world with almost total ideological penetration, pre-emptive social revolution is ineffective. However there are automatic processes in complexity, externalities and energy supply that act as a substitute to pre-emptive social revolution to breakdown institutional power.
The way I see it, this conclusion is only true if technological advancement is constrained by either cheap energy supply and/or by the proportion of negative externalities. For technology to be able to sustain the concentration of institutional power in a hypothetical reality, it would require both the ability to get access to more and more affordable energy and to reverse the proportion of negative externalities. To achieve both does seem unlikely to me despite heavy and ongoing ideological pressure.
When I imagined the degrowth of civilization into a network of city states that act as sites of pure ideology, I think I was seeing the possibility of them getting access to sufficient energy, but not appreciating the full extent of negative externalities that act on them.
Dear Gail,
As a result of this situation, how long do you expect it will take until we begin to see the global human population begin to decline?
My crystal ball is a little cloudy. It depends on how long current debt can be held together, and how things crash. We could perhaps see a population decline in the next five years. Or perhaps something will happen that we don’t understand at all–something that religious groups talk about. These things are so extraordinary that we don’t know for sure how they will turn out.
“things are so extraordinary” it does seem to me that leaders and governments are trashing about with no clear ideas.
I suspect they are beginning to run out of ideas….
China just authorized a second child. response to decline or evidence of a resurgence?
Probably a response to actuaries who told them that there was no way that they could fund retirement incomes for so many old people with so few young people.
Great time to be job hunting (and gathering?) in China?
Wages in China are now too high relative to the competition in places like Viet Nam. Even with the slack in population growth, high wages cause a problem for a manufacturing economy.
“Wages in China are now too high relative to the competition in places like Viet Nam. ”
Sure, but can the Vietnamese uncut the robots? FoxConn is working on replacing hundreds of thousands of workers with robots, since not only do they cost less per hour, they work continuously and make far fewer mistakes.
Even if we had unlimited oil at $20 per barrel, we would be facing mass unemployment from robots and algorithms being better at nearly every job than a human worker. I would bet that if we had cheap energy and no GFC, we would be further along the road to automation than we are.
Automation is a big problem. Then we end up with huge numbers unemployed, and only a few people who make and maintain robots with jobs. Businesses have done such a good job of dodging taxation that there is no way that enough taxes could be collected to pay benefits to the large number of unemployed workers.
There is no way a government can tax automation sufficiently
Black Friday Disaster
Just as we warned, based on credit card data, this holiday spending period is a disaster. Following disappointing sales over the Black Friday to Cyber Monday weekend, there has been absolutely no follow-through momentum as is usually seen. Chain Store same-store-sales crashed 6.3% week-over-week…
More http://www.zerohedge.com/news/2015-12-08/chain-store-sales-collapse-following-already-disappointing-black-friday
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/12/20151208_comp_0.jpg
‘Now that debt is “reused” and integrated into the economy, it becomes much more difficult to forgive. We have a situation where insurance companies, banks, and pension plans are all tied together. They all depend on the current economic growth paradigm, including use of debt with interest, continued dividend plans, and rising stock market prices. We have a major problem if widespread debts defaults start.’
So do not expect a debt jubilee ….
“So do not expect a debt jubilee ….”
The debts only need to be nominally paid. If we go through hyperinflation and end up with $1,000,000 per hour minimum wage, all the debts will easily be paid.
How do you get hyperinflation when trillions of dollars have been pumped out and there is deflation….
“How do you get hyperinflation when trillions of dollars have been pumped out and there is deflation….”
Just keep printing. Start off with the $1000 per month Universal Basic Income, throw in some negative interest rate mortgages, eventually, people will panic and cause a currency collapse. Or just devalue the currency and print twice as money and let it into the supply every couple months.
I don’t think negative bank rates help, since that simply encourages people to have no money in their checking accounts – AKA bank runs.
We’ve printed trillions already — what’s the magic number 500 million trillion?
We will never see hyperinflation — we are pushing on a string — if they just hold down the key on the Fed computer what will happen is the system will just implode….
We don’t see inflation, because banks get the money, not ordinary people. Give 10k to each citizen, and you will get inflation. But that won’t help, because when you make inflation, commodities extracion costs will rise as well.
“But that won’t help, because when you make inflation, commodities extracion costs will rise as well.”
It most certainly will. The primary reason to seek inflation is to ensure debts are serviced. Otherwise, you have rolling defaults that spread as contagion throughout the system, shutting down everything.
The current financial system, which controls our electricity, food production and delivery, oil, etc must keep functioning, or it all shuts down.
I think a debt jubilee is our only way out of this, in terms of kicking the can down the road farther. You can get a jubilee by devaluing the currency to fractions of its current value. It is a reset button that will still cause mass haircuts, economic dislocation, general chaos, but its the best idea that I’ve heard.
Do you expect to have governments operating, in such a scenario?
“Do you expect to have governments operating, in such a scenario?”
(RE: hyperinflation)
Well, lots of governments have continued operating through hyperinflation in the past. Sometimes, the currency is reformed and keeps going, sometimes the currency dies and the country has to use another nation’s currency.
Weimar Germany, 1950s Hungary, Zimbabwe. They all kept going. Just because people lose faith in the currency, doesn’t make the government’s guns and authority suddenly cease existing.
They outgrew the old definition of money and were better off for it.
There were some others too including Argentina. But have you not heard of globalisation? Do you not understand the connectedness of the world now, how it was made that way to keep the hamster running in the wheel. Citing past events of hyperinflation and extrapolating them to the present is nothing short of ridiculous.
When hyperinflation struck countries previously there was still more……..more debt and more resources and more people to come along, they could be bailed out by “selling the farm” literally. If banks could smell a profit they came with all they could give and more they couldn’t give but did. Now we are at PEAK EVERYTHING. There are no new resources to plunder, not enough buyers for bonds that have no chance of delivering a return…………and the world is adding 80 million people annually that want a piece of the DECLINING resources…………Cheap, plentiful, easy to produce resources, gone the way of the dodo.
A debt jubilee is complete nonsence and only the naive even think it a possibility. Printing money will not simply add to the money supply without consequences. Interest rates would rise to compensate. Governments are all over any attempt to inflate, if there is the slightest hint that the consumer could pay off their mortgage with a weeks pay, the hope would be extinguished by government controls. Governments are barely holding deflation in check as it is, hyperinflation is a pipe dream of the uninformed. Governments would obviously understand that there is no longer a way back from hyperinflation, it would bring them down, along with life as we know it.
Money can become worthless without hyperinflation. It is not so much the actual printing that caused the various countries to contend with inflation but the unstable governments. Loss of trust in the government and the currency guaranteed by it, is as dangerous as any frivolous money printing. So at the moment what is holding things together is the average Joe, the average Joe that still has trust in the system. While the Joes think there is still a future to plan for and hope that “things” will get better, governments can go on. When the trust goes, anything is possible but nothing good.
++++++++++++++
Right!
I think you might enjoy this blog. The blogger addresses several issues you raise and, if you can forgive the sometimes scathing tone, makes thought-provoking assertions. I am trying to sort out whether he is onto something with reference to his theories about the practical relationship between monetary sovereignty, austerity and human nature. I found his thread the same way I found yours, following a trail of search results produced by a search of the phrase “new feudalism. ” His sight can be found at http://www.mythfighter.com.
Thanks for the suggestion. I am not sure–at least on the first page, he doesn’t explain what he would do without all of the tax money, or where he would get money for all of his new programs.
I was playing with some numbers today based on a hypothetical world with an infinite oil supply but with a 2% growth rate in the cost of energy extraction. I went over a period from 1900 to 2015, started with a cost rate of 1.0% (or a EROEI of 100:1) and it climbed to 9.8% (EROEI of 10:1). This, I think, is a slower cost growth rate than history has shown us. (Even at this lower cost growth rate we only have 233 years until EROEI hits 1:1, so that’s a hard limit that says we are already limited in time to grow even with the infinite amount of oil underground assumption.)
I then assumed a constant 1% population growth rate and a constant GDP growth rate of 3% (GDP per capita thus grows at a constant 2% rate). This is an ideal world with ever-growing standards of living. I make the assumption that the total oil extraction needs to go up at the same rate of GDP growth (3%). Dividing the oil extraction value in a given year by the product of EROEI and population I get the per-capita cost of energy extraction.
If I say that exactly one unit of oil was extracted in 1900 and the per-capita oil consumption was also one unit of per-capita consumption, then I can quantify this per-capita cost is exactly 1.0% in that year. I make the assumption that the number of people dedicated to the oil extraction, refinement, distribution, etc. industries is equal to this value, or that 1 in every 100 people in 1900 are employed by the energy industries.
In order to support this growth rate, more than half the population needs to be employed by energy industries by 2000, and in 2015, 93% of us are busy trying to extract the amount of oil required to keep things growing. I think there has got to be a practical limit here that is less than 50%, right? What would it mean if more than half the population was doing nothing but energy (primarily oil)? I’m thinking that even in this ideal case, as soon as you hit some percentage dedicated to oil extraction, because more and more of the population is doing more and more work just to sustain GDP growth, the rewards of that productivity cannot be evenly distributed. The people working long hours, for example, would be at a minimum time-limited in the sense that even if they are paid in some fair proportion to the productivity they represent, they cannot enjoy the rising quality of life that is in-principle affordable because of their rising salaries.
The numbers are probably all wrong but the point is this: even in this theoretically infinite world there are limits to growth if there is growth in the cost of extraction that goes up exponentially over time. (I might even throw in an accelerator where cost of extraction goes up with every barrel extracted rather than simply time, which seems closer to what we are seeing today.)
Even infinite worlds have limits, just like our finite world. 😉
It is the fact that you need to use more people and more other resources to extract the oil over time that is the problem–not that the quantity of oil is finite. Usually, rising costs are associated with a finite resource base.
“In order to support this growth rate, more than half the population needs to be employed by energy industries by 2000, and in 2015, 93% of us are busy trying to extract the amount of oil required to keep things growing.”
Well, there’s your flaw. In reality, the workers leverage the oil to do more work, i.e. the workers are more productive, since one worker can do the work of 100 people, by consuming oil. Of course, in terms of total energy this is inefficient; one person doing 100 units of work consumes oil energy probably equal to the food rations of 10,000 workers. In this way, 1 percent of the population can produce the energy, instead of needing >90%.
With finite oil, however, the leveraging of oil doesn’t really work, and we really do have to employ more and more people–to operating trucks for fracking, and for doing many other steps that were not needed before. This is why oil costs rise so much. If you could really leverage your way out of the problem, we wouldn’t have the rising oil extraction problem.
“With finite oil, however, the leveraging of oil doesn’t really work, and we really do have to employ more and more people”
190,000 out of 350,000,000 people seems fairly insignificant:
http://www.bls.gov/iag/tgs/iag211.htm
Of course, now, as we run into limits, affordability, etc, things are different. However, looking at the original poster’s model for an economy with infinite oil, we can see that we are here at 2015 with less than 0.1% of the population directly working on extracting oil and gas. Just as we have gone from 90% of the population producing food, to less than 1%.
We have changed the trend around the wrong direction.
We are pushing in the direction of lower return on human labor, and thus lower wages.
You are focusing a bit too much on O&G extraction, this wouldn’t include refinement and distribution to transportation consumers. Every barrel extracted creates either a need for a barrel worth of storage or a barrel’s worth of refined petroleum products. I would add to this the path towards using these O&G fuels for electricity production and then the transmission and distribution of electric power, as well I would add in all other non-O&G fueled electricity production because of the fact that it is primarily the net usable fuel produced by the extraction/refinement/distribution processes that produces the temporary excess energy that can be used to build wind farms, solar PV sites, nuclear power, etc.
Also, in order to continually increase net oil extraction exponentially, the rise in extraction requires more trucks to be built and maintained, new roads need to be built and rebuilt because of increases wear and tear on existing roads… I could go on for a bit to show how many people are involved, and how many more in the future will have to become involved if we wish to continue exponential growth in extraction. Note that extraction isn’t enough to increase GDP and standard of living, you need growth in consumption as well. Assuming EROEI remains above 1:1 (which it has to or everything comes to a screeching halt), an exponential increase in extraction means that there will be a corresponding exponential increase in consumption in things that have nothing to do with the extraction/production/distribution of power and energy. I would go further and state that even if we don’t hit above 50% of the people in the energy industry, simply moving the percentage of people away from non-energy businesses and into energy businesses constitutes an ouroboros effect and we will start to see limits to growth coming to a head in that way as well — improvements to quality of life derived from GDP per capita growth cannot come from simply growing the energy industry at the expense of non-energy endeavors.
I can’t yet justify that last sentence with anything other than it’s my opinion. One day, perhaps, I’ll have something better.
Look, Bruce, your model is wrong. Oil extraction did grow exponentially, and yet 93% of the population are not working in the energy sector.
More oil is clearly used to produce more oil as time goes on. They started with men and picks and horses, and now they use large machines and pipelines.
Actually, let us take this a few steps further.
How much of your body is dedicated to harvesting and distributing energy? Most of the torso is entirely about extracting oxygen from the air and sugar from food, and getting rid of waste. All the veins, arteries and capillaries are for transporting and distributing that sugar and oxygen to the other cells. Even inside all of the other cells, some portion is dedicated to processing energy and discarding the waste products.
Throughout most of human history, most of the population was dedicated primarily to harvesting, storing, transporting, and processing energy in the form of food. Prior to the industrial revolution, as much as 90 percent of working age humans – with much lower and higher ages considered suitable as workers than today – worked as generalized labour harvesting food and wood. Only 10 percent were freed up to be specialists in towns and cities.
If there was an infinite amount of oil, and no pollution to worry about, I’m sure there would be some reasonable limit to how much of the population, and how many hours per worker, would be tied up in extracting energy.
Gail
One more thing I forgot to mention. Relative to Prigogine and Dissipative Structures. Prigogine thought that physical structures were largely happenstance. Adrian Bejan rejected that notion, and formulated his Constructal Law. The Constructal Law states that structures which are facilitating flow evolve in the direction of more efficiency in terms of the flow. The ‘efficiency’ can take the form of either more volume of flow or less use of energy to move a given volume or weight.
The Constructal Law operates in opposition to decay cycles such as diminishing returns. As a very simple example, we might think of legal research. Originally, I suppose lawyers tried to remember previous decisions. Then law books were published, and lawyers looked in them for guidance. Then paralegals were hired to do the research. Now Google does much of the research.
The Constructal Law is not limited to human oriented activities. It also governs structures such as trees and river basins.
In terms of the agricultural recycling example I previously described, the science has been discovered only in the last 30 years. The Mayans may have done many things right, but they did not have the scientific understanding we have today. So, in terms of understanding energy and nutrient and tissue flows and how to use them to our advantage, the information certainly flows more easily now than it did 50 years ago (omitting those smart Mayans).
Don Stewart
“Humans might eventually find themselves becoming less well adapted: more overweight, or having more physical disabilities, or having more of a tendency toward diabetes.”
Much of these problems happen far after a person’s prime breeding age, once their grandchildren are born (or would be born, if people bred as soon as they could). As such, they don’t really affect viability of offspring. In fact, being prone to dying off at 45 would probably give one group an advantage over other groups that tend to die at 75, since less resources would be consumed by those who are no longer needed for continuation of the group.
Besides, Type I diabetes and born physical disabilities are still fairly uncommon.
If you consider ADHD and autism “physical disabilities,” they seem to be pretty common. The number of folks taking antidepressants seems to be very high as well.
“If you consider ADHD and autism “physical disabilities,” they seem to be pretty common. The number of folks taking antidepressants seems to be very high as well.”
I suspect there may be excessive diagnoses and prescription of meds by the for-profit manufacturers of these drugs, and the doctors that work for them.
Not to mention ADHD is mostly a Feminist creation to help them oppress young males more than anything else.
I read somewhere that cutting edge research have started to connect the dots:
– Excessive chemicals (you know the E numbers in Coca Cola and chemicals floating around modern materials such as furniture and rugs) and an empty carbohydrates diet that screwes up the microflora in the gut
Lead to:
– Higher probability (if genetic susceptibility) of brain chemistry dysfunctions such as ADD, ADHD etc. etc. learning disabilities
– Allergies, asthma, rheumatism, the so called autoimmune dysfunctions, where the body starts attacking itself.
– Diabetes, and blood pressure etc. cardiovascular diseases
– Brain chemistry dysfunctions like clinical depression or a bipolar disorder
Seems reasonable, empirical evidence shows that if you have a refugee family from rural Africa moving to Europe, it takes about five or six years and then allergies, asthma and rheumatism start to manifest, where none were before.
Any link to the paper(s)?
would be nice to counter AgroBiz propaganda.
Not a word about cancer rates?
I have most of those problems. When I was 56 seven years ago I could no longer work. I had been the pesticide applicator on our family farm but we lost that 20 years ago. I did tech and mechanic jobs after that. My brother and father were unaffected. My dad continued farm work until he was 80 and at 85 still mows his lawn with a push mower. My brother is 62 and plans to work four more years at his aircraft factory job. I sit at home.
Maybe I was just more susceptible? I don’t think living like a rural African will appeal to most people. The African sure don’t like it.
Daddi07, some recommendations most European Departments can agree upon, first make sure there isn´t mold or fungi at home, now, to make things worse. If possible, start cleaning with baking soda only to minimize chemical exposure around the house. If living near a chemical industry, an airport or a fracking industry, move. Being socially active is important, the brain regulates all sort of things and active social life is good for you. The body requires hours of strenuous activity, strong leg muscles prevent all sorts of bodily dysfunctions. Raised beds in the garden does the trick quite nicely. Feeling tired is good for you. Lactic acid in the leg muscles is equivalent to a fountain of youth. Stop all sugar intake, that includes alcohols. If possible, limit calorie intake every once in a while, feeling hungry a couple of times a week is good for you. Start the morning with porridges, add berries if possible. Add nuts, seeds, fish, organic eggs, beans and organic canola oil to diet. If organic eggs are possible, then avoid eating meat. Set a goal for the future, something that excites you and makes you jump out of bed in the mornings, screw everybody else, the goal is just for you. And don´t worry, everything is firmly out of control.
Stefeun, the research is hinted in several European Departments of Food and Environmental Hygiene and Toxicology Research Groups (gastrointestinal disturbances, metabolic disorders etc. etc.). I´ll dig up some suitable links for you.
Carcinogenic effects, sure, but proving something as a direct causal effect, thats difficult.
The core findings are surprisingly simple, the microflora in the gut is what keeps you healthy (please eat organic, clean, porridges often). And toxins and chemicals make you ill. Simple, yet the science involved is complicated as hell.
Thanks Van Kent,
better if you can find all info in one single -and simple!- paper.
As for simple principles and awfully complicated underlying science, that reminds me of a research I made about the retrovirus that inhibits the immune system of the pregnant mother in order to avoid it attacking the foetus.
Simple question, but the documents I found were sooo complicated that after having painfully gone through a couple of them, I still didn’t have my answer, and had almost forgotten what I was looking for!
Organic Canola oil in your diet? For hydraulic use only , check out it’s fatty acid profile. Works great in my hydraulic lifts but I sure wouldn’t think about eating it!
Jarvis, somehow our digestion has evolved to a point where if we would only eat unheated, raw foods, we would starve within six months or so. Not getting all the nutrients we need no matter how much we would eat. A strange thing indeed. A second strange thing is that our digestion works better with fats, so, its either meatfats, butter, olive oil or canola oil in cooking. When you have limited food supplies, cooking and adding some fats makes your body able to make use of the nutrients more efficiently. And efficient nutrient intake also makes your body more balanced, able to fight off diseases and so forth. Potatoes, carrots and onions (plus whatever you can find) soups and porridges (oats, rye, spelt) cooked with some fats included, would seem to be the basic common meals we should be eating. As for the use of Canola Oil to hydraulics only, I don´t know the canola oils you use, I get my canola oil directly from the our co-owned organic farm bakery/food preparation facility, seems to have extremely good nutritional values and amounts of Omega acids. I have no idea what an industrially produced canola oil would actually have in it, so can´t make any recommendations outside of the European basic recommendations.
Stefeun, I´ll be going to lunch with a nice beautiful doctor who I was discussing these things with, maybe she can help me with just the one paper that includes all of those findings. I´ll have to return to you on that.
Merci, et Bon Appétit!
They have very real problems, however (spoken as a mother of one son with autism and another with ADHD).
Gail
A few notes on your excellent article.
How Humans so-operated and used division of labor and hierarchical behavior to achieve results different from other animals….I would note the importance of transportation and communications technology which enabled these. Without transportation, division of labor can only be rudimentary. In your previous post, I left a comment about Adam Smith’s famous example of the pin factory. But the pin factory is absolutely dependent on a sophisticated logistical system to get the raw materials to the factory, and to move the finished goods to retail outlets. It is impossible to imagine a cottage industry of pin manufacturers, such as described by Smith, operating at the village level.
Railroads were perhaps the first examples of large companies which were vitally dependent on communications. For example, ‘railroad time’ became standard, replacing the very haphazard systems of telling time which had been used previously. I believe that the telegraph was an enabling technology which enabled the railroads to stick to timetables. Communications technologies also enabled the railroad management to finely direct the movement of rail cars in a complex system. Railroads were, I think, much more complex networks than stage lines.
Prior to railroads and later roads for cars and trucks, geographic places far from water were very isolated due to the difficulties of transportation. For example, the people in the Blue Ridge of North Carolina sent one wagon per year to the head of navigation on the Savannah River. The lack of ability to import goods into the Blue Ridge or to export finished products almost guaranteed that most of the people would be poor in terms of material wealth.
Second, humans have been able to circumvent the laws of recycling, at least for a little while. This is the classic graph in Limits to Growth where the pollution line follows the production line up, and then the production line crashes as pollution takes its toll. Humans have mostly adopted a ‘use once and discard’ strategy, particularly over the last hundred years. The result has been pollution which is now taking its toll.
I will try to illustrate a pollution story using agriculture as an example. Humans can use fossil fuels to power heavy farm machinery to do work previously done by hand by farm laborers. But the machinery compacts the soil. In addition, plowing creates a ‘ plow pan’ under the plow. The soil compaction prevents oxygen and water from getting down into the soil, and creates an anaerobic layer. Which guarantees shallow roots and exposure to drought, pests, weeds, and disease. In order to cultivate with machinery, the rows between the beds are left bare, which exposes the soil to compaction from raindrops. And, very typically, soils are left bare in the winter, which results in more rain compaction.
Let me sketch an alternative. A basic rule is no continuing use of tillage. Likewise no continued use of herbicides or fertilizers with salts or soil amendments with salts. All of the soil should always be covered with plants. There should be at least two layers of plants; a ground cover and a cash crop. There may be more layers in a complex arrangement such as a Mayan food forest. The food forest design will be the most efficient in terms of collecting solar energy and turning it into sugars via photosynthesis.
Fertilizer is contained mostly in the bodies of bacteria and fungi. Plants access the fertilizer when arthropods and other creatures in the soil food web eat the bacteria and fungi. The plants move carbohydrates from photosynthesis to their root zone to attract the bacteria and fungi, so when they are eaten, the surplus nutrients are released in a soluble form to the plant. However, there is never very much free nutrients floating around, which would simply be leached away by the rain. You cannot create the ‘ dead zones’ at the mouths of rivers with this system. It is a sort of ‘just in time’ delivery of fertilizer.
In terms of clay, the system uses calcium and fungi to effect the flocculation of clay. The bacteria emit sticky films which bind the flocculated clay into micro aggregates, and fungi tie everything together into macro aggregates. The macro aggregates create channels far under the surface to permit oxygen and water to circulate. Roots can penetrate very deeply for water and nutrients.
Humans can utilize the ‘recycling dense/ nutrient efficient/ energy efficient’ system, but it does not lend itself to the massive scale of industrial farms. It also requires more human labor. It does not generate the pollution characteristic of industrial agriculture, and sequesters carbon in the ground rather than put carbon into the air.
Whether we define industrial agriculture as ‘more productive’ or ‘generating growth’ depends on the context we assume. In terms of the long term survival of the ecosphere, including humans, it is disastrous.
How the alternative agricultural system would fare in feeding 10 billion people is an interesting question. Many people have concluded that it could feed 10 billion if people were fed according to their needs rather than their whims…particularly in regard to meet and milk. But, clearly, it does have some finite capacity which is dependent on sunshine and rainfall and temperature.
Don Stewart
Recycling nutrients is fairly different from recycling metals, for example, as used in your computer. Yes, there are definitely system that might do it better than we are doing it today. Such methods no doubt “cost more,” in some ways–particularly in human labor. That is usually the biggest expense of any kind of production. A method that can reduce human labor makes the process much less expensive.
One of our big problems now is “going backwards.” Even if some economy could be maintained on the hopefully better system, the likely fact that we now have economy that is too big to be maintained on it becomes a problem. What happens to those losers, when there is not enough to go around? Who wants to volunteer to be a loser? No politician will ever vote for such a system.
Gail
We’ve been around this tree before. Chris Martenson’s current post points out, once again, that the claims on future production now far exceed any likely production. Therefore, ‘losers’ are already baked into the cake. If you don’t like Martenson, you can use Automatic Earth’s metaphor of musical chairs, but with way fewer chairs than people looking for one.
Nothing is going to save the current financial system. Once you get over that you start looking for solutions. The system I described is not metal intensive, once it is in place. It DOES take some industrial materials to get it in place….more if the land is severely degraded. For example, I just invested in a Penetrometer to locate places of soil compaction, so I can target my remediation efforts. But, as compared to something like ‘clean coal’ or ‘kites in the sky’, biological remediation is chicken feed.
Elaine Ingham described good soil as ‘something you can put your hand into’. No metals need apply…which is a little overstatement for dramatic effect,
The Exxon propaganda in the slides from Albert Bates talk in Paris
http://peaksurfer.blogspot.com/2015/12/taking-our-carrots-to-paris.html
are a good illustration. Exxon says we need powerful tractors so we can turn over recalcitrant heavy clay. Elaine Ingham says ‘ BS’. Instead, take a look at what Albert is actually using: a small, bio-diesel driven tractor on The Farm. And he is growing a meter of topsoil per decade, sequestering tons of carbon. Whining that Albert isn’t saving the financial system with his frugality is silly.
Don Stewart
Your sources are cherry picking their data and frankly in some cases flat out lying. Keyline plowing costs in excess of $280.00 an acre when being done with large efficient tractors in the proper 8 to 10 swath manner. BIO diesel and the inherent cost of maintaining machinery running that corrosive of a fuel is off the charts as well and the smaller your machinery the more those costs will rise and more importantly the more actual energy is used overall since you now need 10 smaller tractors to every 1 large one. Rachel Gelker (another soil biologist) teamed up with the university of Vermont and showed absolutely no top soil increase after plowing fields with Yeoman or Keyline plows.
In point of fact you can create a much richer and more stable field using regular subsoilers and discs along with metric tons of animal manure broadcast with a traditional spreader. Of course the problem then in eco-freak land is we still need livestock production for the manure and people will want to eat them. Which leads us to the next item of cherry picking data that even suggests consuming meat is less efficient and more polluting overall than vegetable matter. The data can be presented as factual until you begin looking at organic matter that can actually be digested by humans and tons per acre grown. In many places it is in fact more efficient and less polluting to go with hay or other animal feed production and pasture than to attempt to grow grains or other crops for human consumption.
All that being said I do not disagree with your more sustainable and smaller agricultural outlook/theory as the wave of the future. I disagree that the answer can be found in current climate change/eco-freak dreams that quite simply refuses to look at all the data and other connected and high energy use issues. The answer lies more in the past than in any high tech future.
Pioneer Preppy
First, in terms of the ‘feeding 10 billion’ issue and the amount of agricultural land devoted to meat and milk. There have been two careful studies done in Britain. Both concluded that, if Britain is going to feed itself, it needs to reduce meat and milk. The most detailed statistics come from Simon Fairlie in his book Meat: A Benign Extravagance. Albert Bates has recently reduced his personal meat and milk consumption. Neither of these guys are religious Vegans by any stretch.
As to the advantages of the system that Albert implemented in the particular field at The Farm several years ago. It combines breaking up a compaction layer with a key line plow, creating the key lines to put more water in the soil, and using bio-char to increase the population of the soil food web while also sequestering carbon for the very long term. I have been curious about how it would work out. Apparently, pretty good. I don’t think Albert would lie about it.
Elaine Ingham is a fan of the Alan Savory school of using grazing to both put more carbon in the soil and also provide meat and milk for humans. Albert Bates has said, not in his current post, that Alan Savory’s methods may be the only way to put carbon back in some circumstances.
‘Eco-freak’ isn’t a word I would associate with any of them.
Don Stewart
I know little to nothing about Agriculture in England however I am pretty sure it is an entirely different animal from the Midwest and Plains states I am familiar with. I can tell you the hardpacked clay or hardpan level in my neck of the woods is well below plow depth and contrary to popular belief spread by city eco-freak doomers who have never seen a corn field up close in their lives, the land is not sterile or dead. As the old timers die off and family in fighting happens I have witnessed plenty of fields go fallow and it takes very little time for them to become over grown. Farmers are not stupid and they have been saving their top soil for generations with berms, organic spreading, crop rotations, cover crops, filling erosion ditches and reduced plowing and tilling since long before I was born. A keyline or Yeoman plow does nothing more or less than a simple subsoiler or any other plow/disc combination around here.
As for livestock another tradition that has fallen by the wayside was using wide scale small ruminant grazing in the actual field rotations. Sadly as prices fell and costs rose this is something few if any do any longer and as smaller farms continue to disappear it becomes even more rare. Yet history shows us livestock has a place and can be used in the agriculture rotations. Sheep especially are almost naturally designed for this type of use and have the added benefit of needing no cooling off period for manure waste to be usable.
I can only imagine that sheep were and more than likely still are a big part of English agriculture since they pretty much invented it.
My point is that the same results have been done in the past and do not require any PHD in soil biology nor the usual environmental hysteria those types scream about. It ain’t rocket science and it doesn’t require the common war on livestock I see thrown about either. It does require a return to older methods and smaller farms however. Less input, whether that is 500K tractors and sprayers or so called experts repeating basic knowledge that the public invested 200K into their education to get. Both are huge resource drains for and hidden cost modifiers with little return on the investment.
Pioneer Preppy
Why are you telling me this? I am the guy who published on this web site the results of the years long trial in Iowa which showed that the traditional integrated row crops and pastures rotations made more money and had comparable yields to anything we consider ‘modern’.
As for the differences between the Yeomans plow and an ordinary subsoiler…I don’t have any religious preference for one or the other. I do know that one of Albert Bates neighbors bought a Yeomans plow with the intention of renting it out to other farmers who were interested in key line. I am pretty sure it is that plow that Albert used. A friend of mine at a local agricultural college uses a plain subsoiler, but he follows key line principles. Both seem to work.
As for the ‘nobility’ of midwesterners. I grew up in the Midwest. But what is evident now from satellite photos as well as measurements of soil degradation and water pollution is that much of the Midwest has been abused. The contour plowing and shelter belts of my childhood have largely disappeared. The dead zone in the Gulf has to come from somewhere.
I do not know the details of the field that Albert has worked on. I have met Albert twice since he originally key lined it and added the biochar and compost extract. Both times I asked him about the field, but we had very little time to talk and what Albert said was vague. I guess that he has gone back and done some careful measurements now and determined that he is adding topsoil at the rate of a meter a decade. Albert was a lawyer until recently and usually gets detail right.
I just came back from taking a soil core in an area where I planted some intermediate wheat grass. That is the grass that Wes Jackson is trying to commercialize as a perennial wheat. Wes shows hanging scrolls depicting roots going down 15 or 20 feet into the soil. Christine Jones in Australia calls these sorts of grasses ‘liquid carbon pathways’. I can tell you that a core drawn from an area which has been in wheat grass for two years yields a sample which is brown all the way down. A sample drawn nearby, but with wood chip mulch and no wheatgrass, yields about 3 inches of brown and the rest is yellow clay. There are also roots all the way down in the wheatgrass sample. What this tells me is that carbon is being put deeply into the soil.
Which is exactly Albert’s point.
Don Stewart
The point of “grains for human consumption” has historically evolved as socio economic phenomenon wherby you harvest the grains, lock it up in guarded place, and later distribute and exchange it among the upper and lower classes as necessary given particular political, social, and quasi economic paradigms of the time period. That’s simply the way how human domestication evolved so far.
Intensive grazing and other methods work very well, however “it’s unclear” if their full scale adoption would also not demand differet arrangement in the human affairs, most likely this shift would present rather dramatic reshuffle, I’d argue society and people currently are not ready for it, so perhaps there is a chance the upcoming global economic reset and less complex world could present opportunity for this new approach to take root for the wide application and the long haul. It is simply one of the possible outcomes.
worldof – Well I would say certain land especially in the plains states would naturally produce more meat per acre than any grains or other type if irrigation was eliminated from the mix. Certainly the further West one seems to go the more this is a factor.
I would also say your point about agriculture being socioeconomic in scope is still played out today although now a lot of what is grown goes for wasteful biofuels.
Actually I have no qualm about agreeing that current agriculture has reached it’s limits and something is going to have to give. What I take exception with is the claims made all too often by so-called experts that they have found solutions that are too good to be true. It’s like the solar power crowd. They claim this and that but when you really look at it and follow each input to it’s end you find out their grand claims are really just someone else paying that they didn’t count. Usually it’s the taxpayer.
I was going to comment about flocculation of clay in your earlier post and note that the bulk density of clay soils is half that of younger (most commonly considered agricultural soils.) mechanically friable soils are actually more dense and therefore heavy than clay soils. Clay soils are very fertile, but hard to work outside of a narrow moisture range. The Exxon comment about heavy clay reveals a lot about our problem with problem solving. Hard to get the right answers if first assumptions are incorrect.
“And he is growing a meter of topsoil per decade, sequestering tons of carbon.”
So, after the first decade, he is walking down 3 feet to get into the barn. After 2 decades, he has to put in berms to protect his buildings from runoff since they are now 2 meters below ground level. Really?
No.
He must mean that he is taking stuff that is not soil (regolith?) and turning it into soil. After 20 years, how will he get more carbon into that soil?
Your friend is lying. My guess is that he is lying to himself as much as to you.
I called the sawmill this fall and had 20 cubic yards of wood chips delivered (20cubic yards is colloquially referred to as a shitton). The trees that were chopped down, cut into boards, and ground up into the chips that I congratulate myself about owning came from old growth forest that was “harvested”. The soil in the forest was greatly degraded, and eroded as a consequence of that harvesting, so that now I can have nice organic rich soil in my garden. Is my soil more important than the soil that is being washed away because of the lumber and wood chip harvesting operation?
So, imagine that you farm 5000 acres in Iowa. You plow the cornstalks back into the soil every year, and every year tons of soil are washed away, and every year there is less organic material in the soil. (If corn and wheat were perineal crops, that wouldn’t happen since the roots would never be disturbed, but they are not and never will be because there is no incentive for a seed producer to breed (or engineer) a crop that doesn’t need to be replanted every year.)
What does that farmer do to get more carbon in his soil? Remember, this is the real world where wood chips come from the forest (a forest 1000 miles away). Does he farm somewhere else to grow plants that he then grinds up, and works into his corn fields? What about the soil that is growing that crop?
Pintada
The carbon is put into the soil by the plants which take carbon from the air to make exudates down in the soil to lure the microbes into the root zone where the microbes are eaten by predators which releases nitrogen and carbon. The plants take up all the nitrogen, but the carbon remains in the soil.
Search on ‘liquid carbon pathway Christine Jones’ and you will find some you tubes. Albert is NOT hauling in wood chips.
I have planted some grass with deep roots and it has put some amazing carbon into the ground. I know that from looking at soil cores.
Tilling in cover crops does not have the same effect as the liquid carbon pathway. In this neighborhood, growing a massive amount of cover crop and tilling it in has no long term effect on carbon in the soil.
Don Stewart
” Is my soil more important than the soil that is being washed away because of the lumber and wood chip harvesting operation?”
The forest is not being cut down to make your topsoil, it is being cut down to make lumber. If you did not make use of the wood chips, it would be a bigger waste.
” You plow the cornstalks back into the soil every year, and every year tons of soil are washed away, and every year there is less organic material in the soil.”
Who says that, just because that is how it is done, it is how it should be done? I don’t think you can practically have a one-man farm of 5000 acres with permaculture.
“What does that farmer do to get more carbon in his soil? ”
Don’t till. The carbon comes from the air, and goes into the ground. Unless we accidentally remove too much carbon dioxide from the air, it really should never be a problem.
There are so many ways things could be done better, better being from the overall view, which tends to be less good on the individual economic level, unfortunately. The forest could be selectively logged instead of clear cut, thus reducing the erosion.
“After 20 years, how will he get more carbon into that soil?”
If farms all over the world built up their soil to 2 meters of organic matter, we would probably have negative levels of carbon dioxide – that is to say, probably impossible. There is probably a practical limit to how much organic material you can store, short of burying the organic material somehow without mixing in oxygen. Like everything else, this likely has diminishing returns, so it probably slows down after the first 6 to 12 inches of soil has been built up over 6% organic matter.
Some people compare the efficiency of photovoltaics against photosynthesis and claim that technology performs much better and in the far future robots will take care of all our needs.
My thesis about that is that we already have a self replicating machinery operating on this planet being the nature that evolved before us. The only size of possible long term machinery on this planet available to humans is what nature has brought about because it has been adapting for more than 2 Billion years (horses, oxen, chicken etc). In the long run “not living aparatuses” will disappear again from this planet. The only thing we have now in advance of this system is scientific knowledge of soil nutrients and other stuff like keeping the water safe for drinking etc.
Gail, have you had the opportunity to speak with the Ehrlichs? http://mahb.stanford.edu/blog/faith-based-economics/ Paul Ehrlich and his Stanford MAHB seem lost without you Gail.
I am afraid I haven’t run into the Ehrlicks. They may run in a little different circles than I do.
Another home run post, Gail. Regarding Mr. Ehrlich: In the Population Bomb, Ehrlich incorrectly predicted mass starvation in the 1970s. Although, ultimately he will be proven correct, he made the mistake of underestimating the resilience of the world system, particularly where it comes to the production of food. This underestimation of the robustness of the system is something that I also believe occurs quite regularly on this site. People who routinely crow that the sky is falling, that doom is just around the corner, and that we’re only 2 years out from catastrophe I think fail to take into account just how strongly the foundations of the our current civilization were built. Networked, or not, the world economy has many layers to it. Fragile as the “just in time” delivery system is, there is also a great ability for people to adapt and find work-arounds. As unstable as the climate is becoming, there are also many natural tendancies toward dynamic stability. I think it is important for all of us on this sight to maintain a healthy skepticism toward our own echo chamber, to avoid succumbing to wish fulfillment, and to keep our minds open to a variety of outcomes that are not predictable.
What you are talking about sounds nice but has no base in reality. The outcome has been predicted in 1972 by the limits of growth. That you do not yet feel the limits in the US compared to the people in Syria is in fact a sign of inertia of a big system but the ice berg hit the ship a long time ago, at least 1972 so to say and of the problems that have to be adressed, none has been so far. Yes, for sure we can solve all problems at once in the next 15 years. But for that to happen every single person of the 7 Billiion living now has to quit his Job and work 24/7 without payment only on these issues for at least 15 years. This can happen, sure, maybe you start a blog or a facebook page right now?
“Yes, for sure we can solve all problems at once in the next 15 years. But for that to happen every single person of the 7 Billiion living now has to quit his Job and work 24/7 without payment only on these issues for at least 15 years.”
Can you provide a source or at least some math to show how that would work?
Not exactly, but a start could be made from here:
https://en.wikipedia.org/wiki/Cubic_mile_of_oil:
Allowing fifty years to develop the requisite capacity, 1 CMO of energy per year could be produced by any one of these developments:
4 Three Gorges Dams,[14] developed each year for 50 years, or
52 nuclear power plants,[15] developed each year for 50 years, or
104 coal-fired power plants,[16] developed each year for 50 years, or
32,850 wind turbines,[17][18] developed each year for 50 years, or
91,250,000 rooftop solar photovoltaic panels[19] developed each year for 50 years
That is only ONE and we consume 3 of Oil only and this is 50 years and we do not have 50. 15 is my maximum guess. Additional labour is required for reforrestation (16 Mio acres lost this year alone in Alaska and Canada) and switching to organic farming, cleaning up the oceans, taking care of produced radioactive waste etc pp. Ok, maybe I exaggerated a bit but the work required is astronomical
And of course do not create a lot of debt with it 😉
All those farm subsidizes that people hate are responsible for the lack of famines. Do away with those programs and let the market place allocate food supplies they say. We have seen how much people will pay for a cancer drug. Do you want the same corporate mentality pricing your food? Western governments have created these food surpluses. Put the corporations in charge and people will starve.
I answered someone an hour or two ago that my crystal ball is sort of cloudy on some things. How this unfolds is not obvious.
probably due for its 10000 forecast service
Don’t be so afraid. World isn’t that bad.
A new article 🙂 Thanks!
ND, TX, and LA economic indicators:
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2R6J
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2Ln6
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2R7N
Employment:
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2R7T
This is not unlike during the beginning of the previous energy bust in 1985-86. However, trend real GDP was growing twice today’s rate.
The 3- and 5-year prices (real 2015US$) of WTI were $35-$45 vs. $90-$100 today.
There was a demographic tailwind gale force from peak Boomers.
Debt to wages and GDP was much lower.
US oil production per capita was at a secondary peak and had yet to begin its inexorable depletion regime, falling 45% since 1970.
Deindustrialization, financialization, and feminization of the economy had yet to begin in earnest, reducing goods-producing employment and real wages.
Labor share of GDP was 10% higher than today.
Long interest rates were 7% vs. 2% today, creating conditions for a sizable reflationary effect from falling nominal interest rates.
Health care was 9-10% of GDP.
Inequality was not at the current extreme.
Men and women had big hair and only sailors, rappers, and prostitutes had tattoos. 😀
That’s the short list of reasons why “it’s different this time”.
Moreover, the oil/commodity cycle is turning negative as it did in 1986 and the early 1960s. The 1960s were the beginning of an inflationary regime of the Long Wave and the 1980s were a reflationary regime, whereas today we are in a deflationary regime as in the 1930s-40s (save for WW II-related spikes in inflation), 1890s, and 1830s-40s, and in Japan since the late 1990s.
Thanks for the graphs. I am afraid you are right.
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Increasing socio-economic complexity amounts to greater interdependence but also greater removal from (necessarily?) the non-human evolutionary substrate. Your diabetes example is somewhat skewed. Diabetes is actually the result of long-term human evolution favoring low carb diets. As we (if we?) continue to feed upon human evolutionary substrate (carbohydrates) we may adapt. However this conceit is also flawed since reproduction is also hovering above the non-human selection pressures – type 2 diabetes does not often strike at child bearing age.
Humans are not actually controlling nature, unless by that you mean destroying or reducing native ecosystems. Accordingly, what we actually observe in terms of human evolution is an increasing adaptation to human controlled substrates and systems. Evolutionarily speaking we are becoming “specialists” in the human environment. Thus questions of sustainability, risk and energy investment will naturally depend upon the quality and relative spacio-termporal adaptive advantage of the human system.
Finance and the other operational components of the system in Gail’s analysis may be interchangeable with other methods of directing resources to maintain human systems for the most durable (and appropriately scaled?) benefits. In fact, adapting human systems to more efficient, benign and globally appropriate scales may require substantial alteration of current resource direction institutions. Along this divide, the Koch brothers model of buying governments contrasts with the latest addition of Zuckerburg fortune to efforts of Buffet and Gates to fund socio-economic and human welfare breakthroughs. Both use the proceeds of financial legerdemain (tip to Charles Hugh Smith). But the latter veer towards this new method of directing funding.
This last divide also points to the question that comes up often, of, what is money? Like finance, money is also merely an operational component of the human substrate. This is not to say that “Economics” with respect to resource and energy availability is irrelevant in either the human or native global systems. Trophic drivers of population in all robust systems circulate at the local temporal scale and extend helically in the long term as the components evolve according to novel introductions (new specialties). “Economics” is a constant in this pattern. Is this economics in the native ecosystem driven by the Lions need to feed upon grazers, the grazers who feed upon the grass, the parasite in the grass that enters the Lions brain, the insects that feed upon the predator brain, the rodents underground that fed upon the insect larva, or the amphibians underground that feed upon the inscects feeding on rodent scat?
So, how can we say that finance is really driving us towards collapse? Maybe we can say that fossil fuel energy will change the way we live. Can we also say that changing energy availability will change the way human systems direct resources? Must we also say that this change will result in collapse? What ever happned to the idea of creative destruction?
I implore those of us addicted to the collapse trope to lift your elbows from off the panic button. We are moving, fast it seems, away from the old forms to a new form of economics, of understanding the human condition. Lets try to think constructively, even as some destruction is inevitable.
‘We are moving, fast it seems, away from the old forms to a new form of economics’
Are you trying to say that we have invented a perpetual economic motion machine?
As much as I would like to believe prosperity could come out of a money printing machine…. some laws are immutable …. like 1+1 = 2… like an apple will fall to the ground if you throw it in the air…. like civilization as we know it runs on cheap to extract energy — not printed money — and we are out of cheap to extract energy….
That’s the first thing you learn in Doomed101….
NO perpetual motion assumption here.
I am saying that the financial force and or mechanism is an operationally defined concept. It depends on how you slice the economic onion. It is possible to imagine different financial structures (different operational boundaries) such as those that do not rely upon compound interest.
History does not repeat. If Rome falls again it will not be the same Rome or the same fall. Humanity moves through the economic dimension because we are resources moving through the resource substrate. The bits of the onion we imagine to be fixed principles, such as compound interest or the financial industry, are just compartments that we have created in order to hold and direct resources.
After collapse we are free to re-define similar operations that direct resources. but why wait for collapse to happen first?
I should point out that finance was not necessarily created to destroy communities. All humans are indebted to each other. That is what it means to be social animal. The financial analogs of mutual indebtedness are well recognized in the investment first principles. We are merely overwhelmed by the imperfections in the system and in our selves. the other way to say this is that “we have outgrown” finance and the monetary systems as currently defined.
Steven, take a look at our just in time global economy http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf and without growth we collapse.
Exactly what, with whom, are we able to re-define after collapse?
The rolling warehouse idea is expendable, replaceable. Redefine what you ask. The operational components of resource distribution. The lmitations of free markets. The bbehavior of enterprise and the social context of mutual debt.
I’m having difficulty understanding your point…
I second the motion to have a read of this:
THE PERFECT STORM (see p. 58 onwards)
The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy.
But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.
http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
(repost)
The question of when?
JPMorgan economists Michael Feroli, Daniel Silver, Jesse Edgerton, and Robert Mellman have a chart of when recession starts. I think they have it about right. Except that its not mere recession they are mapping, its actually SHTF collapse.
Figure 8 shows that probabilities of recession within 1, 2, and 3 years predicted by models moved up to 23%, 48%, and 76%, respectively. Within 4-5 years 95%. http://uk.businessinsider.com/jp-morgan-76-chance-recession-probability-2015-12?r=US&IR=T
“The particularly sharp moves in predicted recession probabilities since mid-2014 have been driven most prominently by our measure of the decline in margins,”
As we know, the margins have been tanking during recent months, so recession probabilities are even higher, so that chart is actually a SHTF collapse of modern civilization chart.
If our economy is built on the continued existence of a Ponzi System, how can we say something other than “Finance is driving us toward collapse?” It is hard to see another outcome.
Hard,yes. But only because our eyes have grown weak from staring at the screens that distract us from more active and gainful pursuits. No one really works for aliving in the sense that they would stop if the money changed over night. Example: when was the last time you balaced a checkbook? Zuck does not work for money.why should we? We are over cocerned about the free rider problem. Things would become very clear if there was, for lack of abetter term, a guarenteed income. Free riders hold out in all sorts of occupations. Time to let go of our conceipts about who is worthy or no. Time tofree up the emterprise of families and individuals.
Steven, sorry but you must check historical evidence against your beliefs. The basic income meme is more than 30 years old, has it happened ? not on a large scale. The financial investors could have allocated all their money for 50 years in renewables. Has it happened ? nope. The investors could have invested in organic farming for the world, since 50 years has it happened ? nope. Anyody can create a business and dispense all the revenues directly to the workers. Has it happened on a large scale ? nope. The wars in the middle east could have been prevented/stopped (still) when we finish our addiction to oil. Has it happened ? nope.
There is absolutely no historical evidence that what is wise to happen actually happens. You are dreaming of a better world, thats ok, everybody does it. Evidence simply shows that it does not happen.
In my country there exists a party that wants to establish the basic income, guess how many votes they got ? 0,54 % . So enjoy your life beeing one of the 0,54% dreaming of a better future !
We are moving particularly fast to eliminate rainforests and other species beside our own. It’s a little more destruction than I care for.
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Wealth disparity is a reflection of Power disparity. Wealth is derived from control and ownership over resources, upon which debt can then be issued. Before you can have any working money, you have to have control over resources to buy with that money. All money really is is a means to distribute surplus resources. If you have no surplus, you have no working money. in order to keep surplus in some locations when there is an overall deficit, the weakest are traiged off first. This then gives rise to Terrorism.
Take the Terrorism Survey and drop in your opinions on this problem.
RE
You raise good points. There were a lot of things that I thought about saying, but didn’t have a chance to say. The post was getting very long as it was.
I don’t think any of us have trouble with long posts Gail. lol. You could always write a full version for OFW and then a “Reader’s Digest” version to submit to Biz Insider or any of the other rags that want 1500 Words. 🙂
RE
I should think about this. I have to work through the long version first. I discover things I had never thought of, as I go along.
It’s understandable Gail that you need to keep it focused. There are so many factors and variables, if you kept digressing whenever some new bit of information got added you could easily write a book or at least a thick pamphlet.
I wrote a very basic introduction to our systemic problems, based on Gail’s work and Gail was sweet enough to proof-read it for me. I sent it out to a few friends in the hope of sounding the alarm and it was either ignored or picked apart on the basis of generalisations I had necessarily made. So, I re-wrote it to address the criticisms and provide more data to back up my assertions and it is now a sprawling opus magnus that looks like the product of a deranged mind, lol. My point is that, once you get beyond saying that you can’t run an infinite growth paradigm on a finite planet, explaining the situation succinctly is not as easy as Gail makes it look.
Thanks Gail for another excellent post, covering quite a lot of groundS.
I like the analogy between “Bad Debt” (i.e. that not for productive purposes) and “Bad Fat”.
I totally agree, Gail, that we need to bring in the perspectives of various fields of study to get a clearer picture of how an economy works; that being said, I don’t know if we will ever totally understand it (it’s just far too complex), or, even if we do, be able to use the information to do anything about slowing/halting the collapse of industrial civilization. It seems the more we intervene in complex systems (believing that we understand how complex systems operate and thus can ‘control’ them and all possible outcomes), such as economics, the more we create the environment for Black Swan events and end up speeding up the collapse…
I don’t think we can intervene, either. We can simply see that all of the debt looks a whole lot like a Ponzi Scheme, with no way to get out, unless we can continue to grow.
I couldn’t agree more that it is looking more and more like a gargantuan Ponzi scheme held together by credit expansion, complicit banks/governments, hope, and intentional denial.
Ok So here’s my question about intervention. You mention Hudson’s structural theory but aren’t the various central banks in truth the major holders of the government debt by proxy today? And aren’t they in a sense acting like those ancient institutions did? What is to stop say the Fed Reserve from simply eating debt like there is no tomorrow and thereby not only keeping the government debt levels manageable but also keeping a lid on inflation as the FIAT cash simply doesn’t trickle down. There are many out there that claim this has already been happening.
If this is happening it is still a stopgap measure from an energy to economy aspect but does tend to drag things out for years perhaps even long enough to remedy the current Babyboomer retirement issue. In the end what would break a system like that down?
There is a lot more debt than government debt. I am doubtful that the central banks are even the major holders of long term government debt (I haven’t looked). Stocks crash at the same time as debt does. Pensions plans tend to be the big holders of both stocks and bonds.
Yours is an astute observation. Energy and resources are immutable principles in state trend relationship to humanity. The problems of energy and resources are understood by humans in terms of the current form of the manipulables we have inhereted. These are not, however, discreet factors that allow us to control energy and resources in any but the most Brownian sense. The monetary and financial “factors” are more like operationaly defined constants such as the ideal gas constant. These constructs help us to understand the physical world. But these are not the only ways of understanding and thus operating in the world.
However, it may be that the solutions, regardless of our starting assumptions and equations are all the same. Thus, the population decline may be a necessary and sufficient condition of any solution, regardless of the solution approach taken. However, it may be easier to envision solutions by abandoning prior frameworks of observation and analysis for novel, or pioneering methods.
You can’t win, you can’t break even and you can’t get out of the game.
Nor can you hedge or short it…. a lose lose lose lose lose situation….
Great stuff, Gail. I was surprised by the VERY close correlation of energy consumption growth and GDP growth. One would expect some correlation, but the closeness of the fit was a surprise. So much for decoupling! (Unless the energy drop of the past few years continues without a commensurate drop in growth. Then we can start eating our hats).
Was also surprised to see that growth in world GDP peaked in the period 1950-’65; would never have thought it happened so early.
I’ll be honest, though; the bit about dissipative systems went waaay over my head 🙂
On a world basis, there is a close correlation between energy consumption and GDP growth. Politicians have figured out, however, that on an individual country basis, it is possible to get some difference, especially if industry is sent overseas. Economists insist on using country by country models, ignoring the total. They also seem to believe that “demand” causes energy consumption, and not that the use of energy leads to economic growth. (Actually, the “causality” is both ways, at the same time.)
The combination of all of these strange approaches is behind the belief that somehow, the world economy can continue to grow, without energy supplies.
“the bit about dissipative systems went waaay over my head”
Short version: in presence of an energy flow, the matter tends to organize itself in order to facilitate the energy flow, aka dissipation (e.g. think convection movements in boiling water).
This in turn means that any organized structure, wether inert or living, was created and is maintained by an energy flow. Hence the term “dissipative structures”.
When the energy flow increases, the structure complexifies itself tto be able to dissipate more. When the energy flow decreases, the structure oscillates and eventually collapses; new dissipative structures appear, adapted to the new energy level (because created by it).
Living systems have proven high efficiency in dissipating energy, because they (we) are able to replicate our structures through DNA (and even make adaptations through sexual reproduction).
This theory works very well in many domains, from astrophysics to biology, and François Roddier thinks we can also apply it to human societies and their economy, with energy dissipation increased by an order of magnitude, due to the use of information as replicating method (genes for DNA, memes for culture and knowledge).
I think this theory is a very powerful and simple tool to better understand what’s happening.
I also like the way that a thermodynamic analysis of our predicament obviates the need for blame. There may be plenty of hubristic and greedy humans but human greed and hubris are not the primary drivers here, and arguably these qualities are inevitable expressions of thermodynamic law.
The correlation is good because it reflects a physical dependency: energy drives the physical economy and economic growth. No work happens without an expenditure of energy, and only few per cent of the work done in the world economy comes from human muscle power; all the rest is from oil, coal and gas, plus a bit of nuclear and renewables. (I’m equating “work” in the physics sense with its everyday meaning- it’s pretty close.) Add the second law of thermodynamics to this picture, and you see how the term “dissipative system” fits. No real, irreversible action takes place without a transformation of energy, and in every transformation, some energy is dissipated as heat. Gasoline engines and electric motors give off heat, the friction of gears and conveyor belts yields heat, likewise the friction of tires on pavement and steel wheels on railroad tracks, etc., etc.
Yes Norwegianprepper, that graph which Gail has posted before is a telling one. What I would like her to do is to modify the graph to reflect” honest” GDP growth by which I mean “real” wealth creation such as production of goods. If for example you look at her graph in the 50’s-60’s , you need to remember that goods production(manufacturing) was a huge portion of the economy, probably over 50%, where as now it is under 10% and financial “services”( debt creation) now is about 50%. It would be useful for Gail to try to construct a graph reflecting this structural change in the economy since the 50’s. Intuitively it would lift that 50-‘s-60’s portion of the graph even higher.
So no one in Government planned for all of us boomers to retire?
That reminds me of an old lady in the UK, complaining about the switch to decimal currency, after using pounds, shillings and pence for so long. “They should have waited until all the old people died!” she moaned. 🙂
Politicians have never figured out that the real world functions on an “eat what you grow this year, buy the cars you make this year, use oil that you pump this year” basis.
Actuaries have always known that the economy functions on the output of the current year. This is why they tend to look at number of retired/disabled workers to be supported in a given year, compared to working population in that year.
When actuaries saw the baby boom coming, there was an attempt to pre fund it, at least somewhat. This attempt didn’t (and in fact, couldn’t) work because the US economy, (and probably all other governments) operate on a cash flow basis. If one department, such as Social Security, collects extra funds, it gets spent by another department (often for war efforts). The net result is that whatever gets collected in pre funding gets spent elsewhere. The US government then uses a special kind of non-marketable debt as a placeholder for the funds that they should have, but don’t. This is what is used in calculations that suggest that Social Security will have enough funds until XXXX (based on models that assume economic growth will continue, so that contributions will contribute to the program as in the past). The Social Security non-marketable debt is a big part of the difference between the two debt figures you often see for the US government.
Apart from this liability, there is never any liability on the balance sheet for promised benefits. Actuaries and others are quick to point out that the benefits can be changed, whenever needed, so that the amount paid to beneficiaries is in balance with what workers can afford. In a sense, this makes Social Security “safer” than pension plans, because in theory, beneficiaries will always get at least small amounts.
One day I took the time to calculate the return if my SS contribution had been invested in a Dow index fund each year. It came to almost $700,000. Most of my working life I made less than $30,000 a year. I also calculated buying gold each year. 435 oz.
Instead my government invested my contributions in bombs and bullets.
The ROI has been pretty good though….
http://www.justthinking.us/sites/default/files/image/Charts%20and%20Stuff/World%20Oil%20consumption-as-percentage-of-world-total.jpg
Oof — that was a good comeback. Blood for oil apparently has a decent exchange rate…
Right. That is the way it works.
Brilliant posting thank you Gail
Thanks for the compliment!
“Politicians have never figured out …”
Politicians aren’t statesmen; rather, they’re salesmen. They are focused primarily on selling themselves during re-election, especially Congressional representatives who are on a 2 year cycle. It takes a powerful predisposition towards faith to believe they don’t know understand the actual circumstances of the programs they’re extolling. Like any salesman, they are very well aware of product/service quality, yet their job depends on getting you, the public, to buy “it” regardless of truth.
Life can be hard for those who do not understand the basic principles of human behavior: all is self-interest, even seeming displays of altruism. All is competition, even seeming displays of co-operation among clan/social groups.
The Kunstler school of “they don’t know what they’re doing” is nothing more than an undergraduate study in basic socio-political economic operations. To thrive, to have a “good life” earning well above average income requires leaving fairy tales behind and dealing with reality as it actually exists.
SS was always a scam, a ponzi from the very first day of operation. It has always been know to be a scam, a ponzi by anyone even remote acquainted with the issues. 1, 2, 3% “growth”, all dependent on population increase and economic activity driven by FFs with a healthy dosage of monetary expansion (aka “money printing”). Only dupes & dopes believe that story – anyone with a clue has been playing the facts to their advantage all along.
Actually, a similar system is used in other countries too. The idea of “pre funding” a program doesn’t really work, because you can’t store up barns of food, cars, houses, etc.
You can’t? storing the surplus is how this all got started….Now, laying claim to the surplus because you believe you single handedly created it without a debt to the rest of your community, that certainly won’t work in the long run.
We complain about politicians lying, but the ones that tell the truth do not get elected.
Good point!
I have yet to hear a politician say we’re screwed. That the global money and infinite growth system we created doesn’t work and is destined to collapse and that we’ve been boxed into that system and domesticated by Mommy and Daddy Government and there is no way out. When I hear that, i’ll know a politician is telling the truth. Most just message the truth.
Carter told the truth …
Carter did warn about oil but I don’t remember him saying much if anything at all about our Ponzi Scheme banking system which in my view is at the root cause of our problems.
“Carter did warn about oil but I don’t remember him saying much if anything at all about our Ponzi Scheme banking system which in my view is at the root cause of our problems.”
While Carter seems to have wanted to use solar thermal heating to more efficiently heat spaces, it seems he was also a huge proponent of coal, and using fuel synthesized from coal as replacement for oil. I guess you can only try to change people’s minds so much.
There are no solutions therefore Carter is irrelevant.
It is not our Ponzi Scheme banking system, per se. It is the fact that we need our Ponzi Scheme banking system to get fossil fuels out of the ground (Especially to pay for the products that are made with fossil fuels and enable the future use of fossil fuels, such as houses, cars, and roads).
Creating modern renewables seems to be even worse, in terms of debt requirements. We need lots of debt to pay for them, plus then we need to pay for enhanced transmission systems plus pay for new products that use the electricity with credit. In the end, their debt needs seem to be even greater than those of fossil fuels. For example, it takes lots of debt for solar panels and wind turbines. It also takes more debt to buy an electric car than a cheaper car with an ICE.
!!
Gail, RE also requires lots of expensive storage.
Right. Of course, if you restrict the boundaries of your analysis sufficiently, and model what might happen in the future (best case, continued fossil fuels etc), the results can still look good.
When they finally admit we are screwed, will that mean that its time to celebrate? Wouldn’t that mean that we really are not screwed by the logic of reverse barometry?
Rodster, there is no up side from them to tell the truth. So they never will.
++++
Most would complain if the MSM were to tell us the real story re oil and the economy…. most people can’t handle the truth….
So Sad…I envy the masses that are unaware
https://m.youtube.com/watch?v=nWXbKOAHANQ
As far as I have been able to discern from the so called planning of the governments, Gail is right. The pensions or IRAs were planned to be paid as we go, as long as we had economic growth of 2-3% annually, ad infinitum.
And if a temporary decline in economic growth, then debt stimulus as Keynes instructed.
The things Gail are writing about, nope, not seen such real world considerations in government planning.
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